UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the
quarterly period ended
September
30, 2006
or
[
]
TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the
transition period from _______ to _______
|
|
Exact
name of registrant as specified in its charter,
|
|
|
Commission
|
|
state
of incorporation, address of principal
|
|
I.R.S.
Employer
|
File
Number
|
|
executive
offices and telephone number
|
|
Identification
Number
|
|
|
|
|
|
001-32206
|
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
43-1916803
|
|
|
(A
Missouri Corporation)
|
|
|
|
|
1201
Walnut Street
|
|
|
|
|
Kansas
City, Missouri 64106
|
|
|
|
|
(816)
556-2200
|
|
|
|
|
www.greatplainsenergy.com
|
|
|
|
|
|
|
|
000-51873
|
|
KANSAS
CITY POWER & LIGHT COMPANY
|
|
44-0308720
|
|
|
(A
Missouri Corporation)
|
|
|
|
|
1201
Walnut Street
|
|
|
|
|
Kansas
City, Missouri 64106
|
|
|
|
|
(816)
556-2200
|
|
|
|
|
www.kcpl.com
|
|
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to
be filed by Section 13 or 15(d) of the
|
Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter
period that the registrant was required to
|
file
such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
|
Great
Plains Energy Incorporated
|
Yes
|
|
No
|
X
|
|
Kansas
City Power & Light Company
|
Yes
|
|
No
|
X
|
|
|
|
Indicate
by check mark whether the registrant is a large accelerated
filer, an
accelerated filer, or a non-accelerated filer. See
|
definition
of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act.
|
Great
Plains Energy Incorporated
|
Large
accelerated filer
|
X
|
Accelerated
filer
|
_
|
Non-accelerated
filer
|
_
|
Kansas
City Power & Light Company
|
Large
accelerated filer
|
_
|
Accelerated
filer
|
_
|
Non-accelerated
filer
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicate
by check mark whether the registrant is a shell company (as
defined in
Rule 12b-2 of the Exchange Act).
|
Great
Plains Energy Incorporated
|
Yes
|
_
|
No
|
X
|
|
Kansas
City Power & Light Company
|
Yes
|
_
|
No
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On November
1, 2006, Great Plains Energy Incorporated had 80,303,446
shares of common
stock outstanding.
|
On November
1, 2006, Kansas City Power & Light Company had one share of common
stock outstanding, which was held by
|
Great
Plains Energy Incorporated.
|
Great
Plains Energy Incorporated and Kansas City Power & Light Company (KCP&L)
separately file this combined Quarterly Report on Form 10-Q. Information
contained herein relating to an individual registrant and its subsidiaries
is
filed by such registrant on its own behalf. Each registrant makes
representations only as to information relating to itself and its
subsidiaries.
In
March
2006, KCP&L filed a registration statement to register its common stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended
(Exchange
Act). This registration statement became effective in April 2006 and
KCP&L
is now required to file reports, including quarterly reports on Form
10-Q, under
Section 13(a) of the Exchange Act.
This
report should be read in its entirety. No one section of the report
deals with
all aspects of the subject matter. It should be read in conjunction
with the
consolidated financial statements and related notes and with the management’s
discussion and analysis included in the companies’ 2005 Form 10-K.
CAUTIONARY
STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION
Statements
made in this report that are not based on historical facts are forward-looking,
may involve risks and uncertainties, and are intended to be as of the
date when
made. Forward-looking statements include, but are not limited to, statements
regarding projected delivered volumes and margins, the outcome of regulatory
proceedings, cost estimates of the comprehensive energy plan and other
matters
affecting future operations. In connection with the safe harbor provisions
of
the Private Securities Litigation Reform Act of 1995, the registrants
are
providing a number of important factors that could cause actual results
to
differ materially from the provided forward-looking information. These
important
factors include: future economic conditions in the regional, national
and
international markets, including but not limited to regional and national
wholesale electricity markets; market perception of the energy industry
and
Great Plains Energy; changes in business strategy, operations or development
plans; effects of current or proposed state and federal legislative
and
regulatory actions or developments, including, but not limited to,
deregulation,
re-regulation and restructuring of the electric utility industry; decisions
of
regulators regarding rates KCP&L can charge for electricity; adverse changes
in applicable laws, regulations, rules, principles or practices governing
tax,
accounting and environmental matters including, but not limited to,
air and
water quality; financial market conditions and performance including,
but not
limited to, changes in interest rates and in availability and cost
of capital
and the effects on pension plan assets and costs; credit ratings; inflation
rates; effectiveness of risk management policies and procedures and
the ability
of counterparties to satisfy their contractual commitments; impact
of terrorist
acts; increased competition including, but not limited to, retail choice
in the
electric utility industry and the entry of new competitors; ability
to carry out
marketing and sales plans; weather conditions including weather-related
damage;
cost, availability, quality and deliverability of fuel; ability to
achieve
generation planning goals and the occurrence and duration of unplanned
generation outages; delays in the anticipated in-service dates and
cost
increases of additional generating capacity; nuclear operations; ability
to
enter new markets successfully and capitalize on growth opportunities
in
non-regulated businesses and the effects of competition; application
of critical
accounting policies, including, but not limited to, those related to
derivatives
and pension liabilities; workforce risks including compensation and
benefits
costs; performance of projects undertaken by non-regulated businesses
and the
success of efforts to invest in and develop new opportunities and other
risks
and uncertainties.
This
list
of factors is not all-inclusive because it is not possible to predict
all
factors. Part II Item 1A. Risk Factors included in this report together
with the
risk factors included in the companies’ 2005 Form 10-K under Part I Item 1A,
should be carefully read for further understanding of potential risks
to the
companies. Other sections of this report and other periodic reports
filed by the
companies with the Securities and Exchange Commission (SEC) should
also be read
for more information regarding risk factors.
GLOSSARY
OF TERMS
The
following is a glossary of frequently used abbreviations or acronyms
that are
found throughout this report.
Abbreviation
or Acronym
|
|
Definition
|
|
|
|
BART
|
|
Best
available retrofit technology
|
CAIR
|
|
Clean
Air Interstate Rule
|
CAMR
|
|
Clean
Air Mercury Rule
|
CO
2
|
|
Carbon
Dioxide
|
Company
|
|
Great
Plains Energy Incorporated and its subsidiaries
|
Consolidated
KCP&L
|
|
KCP&L
and its wholly owned subsidiaries
|
DOE
|
|
Department
of Energy
|
DTI
|
|
DTI
Holdings, Inc. and its subsidiaries, Digital Teleport, Inc.
and
Digital Teleport of Virginia, Inc.
|
EBITDA
|
|
Earnings
before interest, income taxes, depreciation and
amortization
|
EEI
|
|
Edison
Electric Institute
|
EIRR
|
|
Environmental
Improvement Revenue Refunding
|
EPA
|
|
Environmental
Protection Agency
|
EPS
|
|
Earnings
per common share
|
FASB
|
|
Financial
Accounting Standards Board
|
FELINE
PRIDES
SM
|
|
Flexible
Equity Linked Preferred Increased Dividend Equity Securities,
|
|
|
a
service mark of Merrill Lynch & Co., Inc.
|
FERC
|
|
The
Federal Energy Regulatory Commission
|
FIN
|
|
Financial
Accounting Standards Board Interpretation
|
FSS
|
|
Forward
Starting Swaps
|
GAAP
|
|
Generally
Accepted Accounting Principles
|
Great
Plains Energy
|
|
Great
Plains Energy Incorporated and its subsidiaries
|
HSS
|
|
Home
Service Solutions Inc., a wholly owned subsidiary of KCP&L
|
IEC
|
|
Innovative
Energy Consultants Inc., a wholly owned subsidiary
of
Great Plains Energy
|
ISO
|
|
Independent
System Operator
|
KCC
|
|
The
State Corporation Commission of the State of Kansas
|
KCP&L
|
|
Kansas
City Power & Light Company, a wholly owned subsidiary
of
Great Plains Energy
|
KLT
Gas
|
|
KLT
Gas Inc., a wholly owned subsidiary of KLT Inc.
|
KLT
Inc.
|
|
KLT
Inc., a wholly owned subsidiary of Great Plains Energy
|
KLT
Investments
|
|
KLT
Investments Inc., a wholly owned subsidiary of KLT Inc.
|
KLT
Telecom
|
|
KLT
Telecom Inc., a wholly owned subsidiary of KLT Inc.
|
KW
|
|
Kilowatt
|
kWh
|
|
Kilowatt
hour
|
MAC
|
|
Material
Adverse Change
|
MD&A
|
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
|
Results
of Operations
|
MISO
|
|
Midwest
Independent Transmission System Operator, Inc.
|
MPSC
|
|
Public
Service Commission of the State of Missouri
|
MW
|
|
Megawatt
|
Abbreviation
or Acronym
|
|
Definition
|
|
|
|
MWh
|
|
Megawatt
hour
|
NEIL
|
|
Nuclear
Electric Insurance Limited
|
NO
x
|
|
Nitrogen
Oxide
|
NPNS
|
|
Normal
Purchases and Normal Sales
|
NRC
|
|
Nuclear
Regulatory Commission
|
OCI
|
|
Other
Comprehensive Income
|
PJM
|
|
PJM
Interconnection
|
PRB
|
|
Powder
River Basin
|
Receivables
Company
|
|
Kansas
City Power & Light Receivables Company, a wholly owned
subsidiary
of KCP&L
|
RTO
|
|
Regional
Transmission Organization
|
SEC
|
|
Securities
and Exchange Commission
|
SECA
|
|
Seams
Elimination Charge Adjustment
|
SE
Holdings
|
|
SE
Holdings, L.L.C.
|
Services
|
|
Great
Plains Energy Services Incorporated
|
SFAS
|
|
Statement
of Financial Accounting Standards
|
SIP
|
|
State
Implementation Plan
|
SO
2
|
|
Sulfur
Dioxide
|
SPP
|
|
Southwest
Power Pool, Inc.
|
STB
|
|
Surface
Transportation Board
|
Strategic
Energy
|
|
Strategic
Energy, L.L.C., a subsidiary of KLT Energy Services
|
T
- Locks
|
|
Treasury
Locks
|
Union
Pacific
|
|
Union
Pacific Railroad Company
|
WCNOC
|
|
Wolf
Creek Nuclear Operating Corporation
|
Wolf
Creek
|
|
Wolf
Creek Generating Station
|
Worry
Free
|
|
Worry
Free Service, Inc., a wholly owned subsidiary of
HSS
|
PART
I - FINANCIAL INFORMATION
ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
GREAT
PLAINS ENERGY
|
Consolidated
Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
|
|
|
September
30
|
|
December
31
|
|
|
|
2006
|
|
2005
|
|
ASSETS
|
|
(thousands)
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
59,259
|
|
$
|
103,068
|
|
Restricted
cash
|
|
|
-
|
|
|
1,900
|
|
Receivables,
net
|
|
|
355,508
|
|
|
259,043
|
|
Fuel
inventories, at average cost
|
|
|
25,269
|
|
|
17,073
|
|
Materials
and supplies, at average cost
|
|
|
59,414
|
|
|
57,017
|
|
Deferred
income taxes
|
|
|
46,329
|
|
|
-
|
|
Assets
of discontinued operations
|
|
|
-
|
|
|
627
|
|
Derivative
instruments
|
|
|
5,485
|
|
|
39,189
|
|
Other
|
|
|
14,189
|
|
|
13,001
|
|
Total
|
|
|
565,453
|
|
|
490,918
|
|
Nonutility
Property and Investments
|
|
|
|
|
|
|
|
Affordable
housing limited partnerships
|
|
|
24,475
|
|
|
28,214
|
|
Nuclear
decommissioning trust fund
|
|
|
98,975
|
|
|
91,802
|
|
Other
|
|
|
14,718
|
|
|
17,291
|
|
Total
|
|
|
138,168
|
|
|
137,307
|
|
Utility
Plant, at Original Cost
|
|
|
|
|
|
|
|
Electric
|
|
|
5,224,095
|
|
|
4,959,539
|
|
Less-accumulated
depreciation
|
|
|
2,423,708
|
|
|
2,322,813
|
|
Net
utility plant in service
|
|
|
2,800,387
|
|
|
2,636,726
|
|
Construction
work in progress
|
|
|
160,058
|
|
|
100,952
|
|
Nuclear
fuel, net of amortization of $127,029 and $115,240
|
|
|
37,703
|
|
|
27,966
|
|
Total
|
|
|
2,998,148
|
|
|
2,765,644
|
|
Deferred
Charges and Other Assets
|
|
|
|
|
|
|
|
Regulatory
assets
|
|
|
207,453
|
|
|
179,922
|
|
Prepaid
pension costs
|
|
|
70,806
|
|
|
98,295
|
|
Goodwill
|
|
|
88,139
|
|
|
87,624
|
|
Derivative
instruments
|
|
|
2,507
|
|
|
21,812
|
|
Other
|
|
|
43,973
|
|
|
52,204
|
|
Total
|
|
|
412,878
|
|
|
439,857
|
|
Total
|
|
$
|
4,114,647
|
|
$
|
3,833,726
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements are
an integral
part of these statements.
|
GREAT
PLAINS ENERGY
|
Consolidated
Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
|
|
|
September
30
|
|
December
31
|
|
|
|
2006
|
|
2005
|
|
LIABILITIES
AND CAPITALIZATION
|
|
(thousands)
|
Current
Liabilities
|
|
|
|
|
|
|
|
Notes
payable
|
|
$
|
-
|
|
$
|
6,000
|
|
Commercial
paper
|
|
|
80,600
|
|
|
31,900
|
|
Current
maturities of long-term debt
|
|
|
389,902
|
|
|
1,675
|
|
Accounts
payable
|
|
|
260,663
|
|
|
231,496
|
|
Accrued
taxes
|
|
|
97,403
|
|
|
37,140
|
|
Accrued
interest
|
|
|
13,515
|
|
|
13,329
|
|
Accrued
payroll and vacations
|
|
|
32,356
|
|
|
36,024
|
|
Accrued
refueling outage costs
|
|
|
15,707
|
|
|
8,974
|
|
Deferred
income taxes
|
|
|
-
|
|
|
1,351
|
|
Supplier
collateral
|
|
|
-
|
|
|
1,900
|
|
Liabilities
of discontinued operations
|
|
|
-
|
|
|
64
|
|
Derivative
instruments
|
|
|
81,641
|
|
|
7,411
|
|
Other
|
|
|
24,459
|
|
|
25,658
|
|
Total
|
|
|
996,246
|
|
|
402,922
|
|
Deferred
Credits and Other Liabilities
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
582,904
|
|
|
621,359
|
|
Deferred
investment tax credits
|
|
|
27,413
|
|
|
29,698
|
|
Asset
retirement obligations
|
|
|
91,072
|
|
|
145,907
|
|
Pension
liability
|
|
|
89,812
|
|
|
87,355
|
|
Regulatory
liabilities
|
|
|
107,500
|
|
|
69,641
|
|
Derivative
instruments
|
|
|
72,318
|
|
|
7,750
|
|
Other
|
|
|
63,846
|
|
|
65,787
|
|
Total
|
|
|
1,034,865
|
|
|
1,027,497
|
|
Capitalization
|
|
|
|
|
|
|
|
Common
shareholders' equity
|
|
|
|
|
|
|
|
Common
stock-150,000,000 shares authorized without par value
|
|
|
|
|
|
|
|
80,341,419
and 74,783,824 shares issued, stated value
|
|
|
893,850
|
|
|
744,457
|
|
Retained
earnings
|
|
|
479,609
|
|
|
488,001
|
|
Treasury
stock-45,680 and 43,376 shares, at cost
|
|
|
(1,367
|
)
|
|
(1,304
|
)
|
Accumulated
other comprehensive loss
|
|
|
(79,863
|
)
|
|
(7,727
|
)
|
Total
|
|
|
1,292,229
|
|
|
1,223,427
|
|
Cumulative
preferred stock $100 par value
|
|
|
|
|
|
|
|
3.80%
- 100,000 shares issued
|
|
|
10,000
|
|
|
10,000
|
|
4.50%
- 100,000 shares issued
|
|
|
10,000
|
|
|
10,000
|
|
4.20%
- 70,000 shares issued
|
|
|
7,000
|
|
|
7,000
|
|
4.35%
- 120,000 shares issued
|
|
|
12,000
|
|
|
12,000
|
|
Total
|
|
|
39,000
|
|
|
39,000
|
|
Long-term
debt (Note 8)
|
|
|
752,307
|
|
|
1,140,880
|
|
Total
|
|
|
2,083,536
|
|
|
2,403,307
|
|
Commitments
and Contingencies (Note 14)
|
|
|
|
|
|
Total
|
|
$
|
4,114,647
|
|
$
|
3,833,726
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements
are an integral
part of these statements.
|
GREAT
PLAINS ENERGY
|
Consolidated
Statements of Income
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Operating
Revenues
|
|
|
(thousands,
except per share amounts)
|
Electric
revenues - KCP&L
|
|
$
|
359,270
|
|
$
|
352,974
|
|
$
|
890,551
|
|
$
|
858,272
|
|
Electric
revenues - Strategic Energy
|
|
|
458,538
|
|
|
429,407
|
|
|
1,127,056
|
|
|
1,099,895
|
|
Other
revenues
|
|
|
730
|
|
|
446
|
|
|
2,220
|
|
|
1,495
|
|
Total
|
|
|
818,538
|
|
|
782,827
|
|
|
2,019,827
|
|
|
1,959,662
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
77,154
|
|
|
73,935
|
|
|
180,751
|
|
|
160,228
|
|
Purchased
power - KCP&L
|
|
|
5,157
|
|
|
28,303
|
|
|
18,844
|
|
|
56,590
|
|
Purchased
power - Strategic Energy
|
|
|
462,299
|
|
|
386,499
|
|
|
1,117,404
|
|
|
1,003,201
|
|
Skill
set realignment costs (Note 9)
|
|
|
1,389
|
|
|
-
|
|
|
15,905
|
|
|
-
|
|
Other
|
|
|
88,145
|
|
|
76,358
|
|
|
244,030
|
|
|
240,628
|
|
Maintenance
|
|
|
19,746
|
|
|
19,230
|
|
|
67,235
|
|
|
69,140
|
|
Depreciation
and amortization
|
|
|
40,422
|
|
|
38,382
|
|
|
118,618
|
|
|
114,485
|
|
General
taxes
|
|
|
31,826
|
|
|
31,197
|
|
|
87,234
|
|
|
83,619
|
|
(Gain)
loss on property
|
|
|
28
|
|
|
3,419
|
|
|
(569
|
)
|
|
1,906
|
|
Total
|
|
|
726,166
|
|
|
657,323
|
|
|
1,849,452
|
|
|
1,729,797
|
|
Operating
income
|
|
|
92,372
|
|
|
125,504
|
|
|
170,375
|
|
|
229,865
|
|
Non-operating
income
|
|
|
9,852
|
|
|
3,563
|
|
|
16,741
|
|
|
15,334
|
|
Non-operating
expenses
|
|
|
(2,141
|
)
|
|
(4,699
|
)
|
|
(5,593
|
)
|
|
(15,671
|
)
|
Interest
charges
|
|
|
(17,974
|
)
|
|
(17,904
|
)
|
|
(53,113
|
)
|
|
(53,777
|
)
|
Income
from continuing operations before income taxes,
|
|
|
|
|
|
|
|
|
|
|
|
|
minority
interest in subsidiaries and loss from equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investments
|
|
|
82,109
|
|
|
106,464
|
|
|
128,410
|
|
|
175,751
|
|
Income
taxes
|
|
|
(26,482
|
)
|
|
(17,300
|
)
|
|
(36,683
|
)
|
|
(32,396
|
)
|
Minority
interest in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,805
|
)
|
Loss
from equity investments, net of income taxes
|
|
|
(468
|
)
|
|
(69
|
)
|
|
(1,047
|
)
|
|
(758
|
)
|
Income
from continuing operations
|
|
|
55,159
|
|
|
89,095
|
|
|
90,680
|
|
|
134,792
|
|
Discontinued
operations, net of income taxes (Note 12)
|
|
|
-
|
|
|
1,780
|
|
|
-
|
|
|
(1,826
|
)
|
Net
income
|
|
|
55,159
|
|
|
90,875
|
|
|
90,680
|
|
|
132,966
|
|
Preferred
stock dividend requirements
|
|
|
411
|
|
|
412
|
|
|
1,234
|
|
|
1,235
|
|
Earnings
available for common shareholders
|
|
$
|
54,748
|
|
$
|
90,463
|
|
$
|
89,446
|
|
$
|
131,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
number of common shares outstanding
|
|
|
80,081
|
|
|
74,653
|
|
|
77,266
|
|
|
74,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.68
|
|
$
|
1.19
|
|
$
|
1.16
|
|
$
|
1.79
|
|
Discontinued
operations
|
|
|
-
|
|
|
0.02
|
|
|
-
|
|
|
(0.02
|
)
|
Basic
and diluted earnings per common share
|
|
$
|
0.68
|
|
$
|
1.21
|
|
$
|
1.16
|
|
$
|
1.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per common share
|
|
$
|
0.415
|
|
$
|
0.415
|
|
$
|
1.245
|
|
$
|
1.245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements
are an integral
part of these statements.
|
GREAT
PLAINS ENERGY
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
Revised
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
Cash
Flows from Operating Activities
|
|
|
(thousands)
|
|
Net
income
|
|
$
|
90,680
|
|
$
|
132,966
|
|
Adjustments
to reconcile income to net cash from operating
activities:
|
Depreciation
and amortization
|
|
|
118,618
|
|
|
114,485
|
|
Amortization
of:
|
|
|
|
|
|
|
|
Nuclear
fuel
|
|
|
11,789
|
|
|
9,396
|
|
Other
|
|
|
6,965
|
|
|
8,035
|
|
Deferred
income taxes, net
|
|
|
(32,930
|
)
|
|
(15,736
|
)
|
Investment
tax credit amortization
|
|
|
(2,285
|
)
|
|
(2,917
|
)
|
Loss
from equity investments, net of income taxes
|
|
|
1,047
|
|
|
758
|
|
(Gain)
loss on property
|
|
|
(569
|
)
|
|
1,658
|
|
Minority
interest in subsidiaries
|
|
|
-
|
|
|
7,805
|
|
Fair
value impacts from energy contracts
|
|
|
64,507
|
|
|
(26,032
|
)
|
Other
operating activities (Note 4)
|
|
|
(18,829
|
)
|
|
59,867
|
|
Net
cash from operating activities
|
|
|
238,993
|
|
|
290,285
|
|
Cash
Flows from Investing Activities
|
|
|
|
Utility
capital expenditures
|
|
|
(371,056
|
)
|
|
(260,589
|
)
|
Allowance
for borrowed funds used during construction
|
|
|
(4,060
|
)
|
|
(1,174
|
)
|
Purchases
of investments
|
|
|
(700
|
)
|
|
(14,976
|
)
|
Purchases
of nonutility property
|
|
|
(3,518
|
)
|
|
(4,822
|
)
|
Proceeds
from sale of assets and investments
|
|
|
319
|
|
|
17,123
|
|
Purchases
of nuclear decommissioning trust investments
|
|
|
(37,333
|
)
|
|
(22,811
|
)
|
Proceeds
from nuclear decommissioning trust investments
|
|
|
34,596
|
|
|
20,147
|
|
Hawthorn
No. 5 partial insurance recovery
|
|
|
-
|
|
|
10,000
|
|
Hawthorn
No. 5 partial litigation recoveries
|
|
|
15,829
|
|
|
-
|
|
Other
investing activities
|
|
|
(852
|
)
|
|
(679
|
)
|
Net
cash from investing activities
|
|
|
(366,775
|
)
|
|
(257,781
|
)
|
Cash
Flows from Financing Activities
|
|
|
|
Issuance
of common stock
|
|
|
151,624
|
|
|
7,462
|
|
Issuance
fees
|
|
|
(6,144
|
)
|
|
(2,031
|
)
|
Issuance
of long-term debt
|
|
|
-
|
|
|
85,922
|
|
Repayment
of long-term debt
|
|
|
(872
|
)
|
|
(88,417
|
)
|
Net
change in short-term borrowings
|
|
|
42,700
|
|
|
(6,400
|
)
|
Dividends
paid
|
|
|
(98,913
|
)
|
|
(94,071
|
)
|
Other
financing activities
|
|
|
(4,422
|
)
|
|
(4,244
|
)
|
Net
cash from financing activities
|
|
|
83,973
|
|
|
(101,779
|
)
|
Net
Change in Cash and Cash Equivalents
|
|
|
(43,809
|
)
|
|
(69,275
|
)
|
Less:
Net Change in Cash and Cash Equivalents from
|
Discontinued
Operations
|
|
|
-
|
|
|
(560
|
)
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
103,068
|
|
|
127,129
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
59,259
|
|
$
|
58,414
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements
are an integral
part of these statements.
|
GREAT
PLAINS ENERGY
|
Consolidated
Statements of Common Shareholders' Equity
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Common
Stock
|
|
|
(thousands,
except share amounts)
|
Beginning
balance
|
|
|
74,783,824
|
|
$
|
744,457
|
|
|
74,394,423
|
|
$
|
731,977
|
|
Issuance
of common stock
|
|
|
5,510,769
|
|
|
151,624
|
|
|
257,222
|
|
|
7,745
|
|
Issuance
of restricted common stock
|
|
|
46,826
|
|
|
1,320
|
|
|
76,375
|
|
|
2,334
|
|
Common
stock issuance fees
|
|
|
|
|
|
(5,194
|
)
|
|
|
|
|
-
|
|
Equity
compensation expense
|
|
|
|
|
|
1,929
|
|
|
|
|
|
1,360
|
|
Unearned
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of restricted common stock
|
|
|
|
|
|
(1,355
|
)
|
|
|
|
|
(2,334
|
)
|
Forfeiture
of restricted common stock
|
|
56
|
|
|
|
|
|
188
|
|
Compensation
expense recognized
|
|
|
|
|
|
982
|
|
|
|
|
|
1,143
|
|
Other
|
|
|
|
|
31
|
|
|
|
|
|
(99
|
)
|
Ending
balance
|
|
|
80,341,419
|
|
|
893,850
|
|
|
74,728,020
|
|
|
742,314
|
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
|
|
|
|
488,001
|
|
|
|
|
|
451,491
|
|
Net
income
|
|
|
|
|
|
90,680
|
|
|
|
|
|
132,966
|
|
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
|
|
|
(97,631
|
)
|
|
|
|
|
(92,836
|
)
|
Preferred
stock - at required rates
|
|
|
|
|
|
(1,234
|
)
|
|
|
|
|
(1,235
|
)
|
Performance
shares
|
|
|
|
|
|
(207
|
)
|
|
|
|
|
-
|
|
Ending
balance
|
|
|
|
|
479,609
|
|
|
|
|
490,386
|
|
Treasury
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
|
(43,376
|
)
|
|
(1,304
|
)
|
|
(28,488
|
)
|
|
(856
|
)
|
Treasury
shares acquired
|
|
|
(3,519
|
)
|
|
(99
|
)
|
|
(6,380
|
)
|
|
(193
|
)
|
Treasury
shares reissued
|
|
|
1,215
|
|
|
36
|
|
|
-
|
|
|
-
|
|
Ending
balance
|
|
|
(45,680
|
)
|
|
(1,367
|
)
|
|
(34,868
|
)
|
|
(1,049
|
)
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
Beginning
balance
|
|
|
|
|
|
(7,727
|
)
|
|
|
|
|
(41,018
|
)
|
Derivative
hedging activity, net of tax
|
|
|
|
|
|
(72,136
|
)
|
|
|
|
|
41,996
|
|
Minimum
pension obligation, net of tax
|
|
-
|
|
|
|
|
|
(585
|
)
|
Ending
balance
|
|
|
|
|
(79,863
|
)
|
|
|
|
393
|
|
Total
Common Shareholders' Equity
|
$
|
1,292,229
|
|
|
|
$
|
1,232,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements
are an integral
part of these statements.
|
GREAT
PLAINS ENERGY
|
Consolidated
Statements of Comprehensive Income
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(thousands)
|
|
Net
income
|
|
$
|
55,159
|
|
$
|
90,875
|
|
$
|
90,680
|
|
$
|
132,966
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on derivative hedging instruments
|
|
|
(75,050
|
)
|
|
80,317
|
|
|
(152,214
|
)
|
|
99,540
|
|
Income
taxes
|
|
|
30,631
|
|
|
(33,097
|
)
|
|
62,966
|
|
|
(41,468
|
)
|
Net
gain on derivative hedging instruments
|
|
|
(44,419
|
)
|
|
47,220
|
|
|
(89,248
|
)
|
|
58,072
|
|
Reclassification
to expenses, net of tax
|
|
|
7,576
|
|
|
(12,571
|
)
|
|
17,112
|
|
|
(16,076
|
)
|
Derivative
hedging activity, net of tax
|
|
|
(36,843
|
)
|
|
34,649
|
|
|
(72,136
|
)
|
|
41,996
|
|
Change
in minimum pension obligation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(60
|
)
|
Income
taxes
|
|
|
-
|
|
|
(548
|
)
|
|
-
|
|
|
(525
|
)
|
Net
change in minimum pension obligation
|
|
|
-
|
|
|
(548
|
)
|
|
-
|
|
|
(585
|
)
|
Comprehensive
income
|
|
$
|
18,316
|
|
$
|
124,976
|
|
$
|
18,544
|
|
$
|
174,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements
are an integral
part of these statements.
|
KANSAS
CITY POWER & LIGHT COMPANY
|
Consolidated
Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
|
|
|
September
30
|
|
December
31
|
|
|
|
2006
|
|
2005
|
|
ASSETS
|
|
|
(thousands)
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
400
|
|
$
|
2,961
|
|
Receivables,
net
|
|
|
122,293
|
|
|
70,264
|
|
Fuel
inventories, at average cost
|
|
|
25,269
|
|
|
17,073
|
|
Materials
and supplies, at average cost
|
|
|
59,414
|
|
|
57,017
|
|
Deferred
income taxes
|
|
|
11,282
|
|
|
8,944
|
|
Prepaid
expenses
|
|
|
8,072
|
|
|
11,292
|
|
Total
|
|
|
226,730
|
|
|
167,551
|
|
Nonutility
Property and Investments
|
|
|
|
|
|
|
|
Nuclear
decommissioning trust fund
|
|
|
98,975
|
|
|
91,802
|
|
Other
|
|
|
5,351
|
|
|
7,694
|
|
Total
|
|
|
104,326
|
|
|
99,496
|
|
Utility
Plant, at Original Cost
|
|
|
|
|
|
|
|
Electric
|
|
|
5,224,095
|
|
|
4,959,539
|
|
Less-accumulated
depreciation
|
|
|
2,423,708
|
|
|
2,322,813
|
|
Net
utility plant in service
|
|
|
2,800,387
|
|
|
2,636,726
|
|
Construction
work in progress
|
|
|
160,058
|
|
|
100,952
|
|
Nuclear
fuel, net of amortization of $127,029 and $115,240
|
|
|
37,703
|
|
|
27,966
|
|
Total
|
|
|
2,998,148
|
|
|
2,765,644
|
|
Deferred
Charges and Other Assets
|
|
|
|
|
|
|
|
Regulatory
assets
|
|
|
207,453
|
|
|
179,922
|
|
Prepaid
pension costs
|
|
|
70,806
|
|
|
98,002
|
|
Other
|
|
|
29,752
|
|
|
27,905
|
|
Total
|
|
|
308,011
|
|
|
305,829
|
|
Total
|
|
$
|
3,637,215
|
|
$
|
3,338,520
|
|
|
|
|
|
|
|
|
|
The
disclosures regarding consolidated KCP&L included in the accompanying
Notes to Consolidated Financial
|
Statements
are an integral part of these
statements.
|
KANSAS
CITY POWER & LIGHT COMPANY
|
Consolidated
Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
|
|
|
September
30
|
|
December
31
|
|
|
|
2006
|
|
2005
|
|
LIABILITIES
AND CAPITALIZATION
|
|
(thousands)
|
Current
Liabilities
|
|
|
|
|
|
|
|
Notes
payable to Great Plains Energy
|
|
$
|
550
|
|
$
|
500
|
|
Commercial
paper
|
|
|
80,600
|
|
|
31,900
|
|
Current
maturities of long-term debt
|
|
|
225,500
|
|
|
-
|
|
Accounts
payable
|
|
|
119,616
|
|
|
106,040
|
|
Accrued
taxes
|
|
|
99,342
|
|
|
27,448
|
|
Accrued
interest
|
|
|
11,783
|
|
|
11,549
|
|
Accrued
payroll and vacations
|
|
|
25,158
|
|
|
27,520
|
|
Accrued
refueling outage costs
|
|
|
15,707
|
|
|
8,974
|
|
Derivative
instruments
|
|
|
812
|
|
|
-
|
|
Other
|
|
|
8,694
|
|
|
8,600
|
|
Total
|
|
|
587,762
|
|
|
222,531
|
|
Deferred
Credits and Other Liabilities
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
623,531
|
|
|
627,048
|
|
Deferred
investment tax credits
|
|
|
27,413
|
|
|
29,698
|
|
Asset
retirement obligations
|
|
|
91,072
|
|
|
145,907
|
|
Pension
liability
|
|
|
85,848
|
|
|
85,301
|
|
Regulatory
liabilities
|
|
|
107,500
|
|
|
69,641
|
|
Derivative
instruments
|
|
|
2,196
|
|
|
2,601
|
|
Other
|
|
|
42,981
|
|
|
38,387
|
|
Total
|
|
|
980,541
|
|
|
998,583
|
|
Capitalization
|
|
|
|
|
|
|
|
Common
shareholder's equity
|
|
|
|
|
|
|
|
Common
stock-1,000 shares authorized without par value
|
|
|
|
|
|
|
|
1
share issued, stated value
|
|
|
1,021,656
|
|
|
887,041
|
|
Retained
earnings
|
|
|
326,408
|
|
|
283,850
|
|
Accumulated
other comprehensive loss
|
|
|
(30,602
|
)
|
|
(29,909
|
)
|
Total
|
|
|
1,317,462
|
|
|
1,140,982
|
|
Long-term
debt (Note 8)
|
|
|
751,450
|
|
|
976,424
|
|
Total
|
|
|
2,068,912
|
|
|
2,117,406
|
|
Commitments
and Contingencies (Note 14)
|
|
|
|
|
|
Total
|
|
$
|
3,637,215
|
|
$
|
3,338,520
|
|
|
|
|
|
|
|
|
|
The
disclosures regarding consolidated KCP&L included in the accompanying
Notes to Consolidated Financial
|
Statements
are an integral part of these
statements.
|
KANSAS
CITY POWER & LIGHT COMPANY
|
Consolidated
Statements of Income
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
September
30
|
|
September
30
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Operating
Revenues
|
|
|
(thousands)
|
Electric
revenues
|
|
$
|
359,270
|
|
$
|
352,974
|
|
$
|
890,551
|
|
$
|
858,272
|
|
Other
revenues
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
113
|
|
Total
|
|
|
359,270
|
|
|
352,974
|
|
|
890,551
|
|
|
858,385
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
77,154
|
|
|
73,935
|
|
|
180,751
|
|
|
160,228
|
|
Purchased
power
|
|
|
5,157
|
|
|
28,303
|
|
|
18,844
|
|
|
56,590
|
|
Skill
set realignment costs (Note 9)
|
|
|
1,330
|
|
|
-
|
|
|
15,560
|
|
|
-
|
|
Other
|
|
|
69,326
|
|
|
60,912
|
|
|
196,692
|
|
|
195,738
|
|
Maintenance
|
|
|
19,745
|
|
|
19,225
|
|
|
67,223
|
|
|
69,111
|
|
Depreciation
and amortization
|
|
|
38,451
|
|
|
36,776
|
|
|
112,797
|
|
|
109,836
|
|
General
taxes
|
|
|
30,894
|
|
|
30,091
|
|
|
84,058
|
|
|
80,100
|
|
(Gain)
loss on property
|
|
|
26
|
|
|
3,602
|
|
|
(572
|
)
|
|
3,089
|
|
Total
|
|
|
242,083
|
|
|
252,844
|
|
|
675,353
|
|
|
674,692
|
|
Operating
income
|
|
|
117,187
|
|
|
100,130
|
|
|
215,198
|
|
|
183,693
|
|
Non-operating
income
|
|
|
8,586
|
|
|
2,822
|
|
|
13,121
|
|
|
13,665
|
|
Non-operating
expenses
|
|
|
(2,049
|
)
|
|
(2,477
|
)
|
|
(4,341
|
)
|
|
(4,257
|
)
|
Interest
charges
|
|
|
(15,569
|
)
|
|
(15,015
|
)
|
|
(45,473
|
)
|
|
(45,116
|
)
|
Income
before income taxes and minority
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest
in subsidiaries
|
|
|
108,155
|
|
|
85,460
|
|
|
178,505
|
|
|
147,985
|
|
Income
taxes
|
|
|
(39,393
|
)
|
|
(16,512
|
)
|
|
(61,946
|
)
|
|
(31,943
|
)
|
Minority
interest in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,805
|
)
|
Net
income
|
|
$
|
68,762
|
|
$
|
68,948
|
|
$
|
116,559
|
|
$
|
108,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
disclosures regarding consolidated KCP&L included in the accompanying
Notes to Consolidated Financial
|
Statements
are an integral part of these
statements.
|
KANSAS
CITY POWER & LIGHT COMPANY
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
Cash
Flows from Operating Activities
|
|
(thousands)
|
Net
income
|
|
$
|
116,559
|
|
$
|
108,237
|
|
Adjustments
to reconcile income to net cash from operating
activities:
|
Depreciation
and amortization
|
|
|
112,797
|
|
|
109,836
|
|
Amortization
of:
|
|
|
|
|
|
|
|
Nuclear
fuel
|
|
|
11,789
|
|
|
9,396
|
|
Other
|
|
|
4,955
|
|
|
5,850
|
|
Deferred
income taxes, net
|
|
|
(3,089
|
)
|
|
(32,575
|
)
|
Investment
tax credit amortization
|
|
|
(2,285
|
)
|
|
(2,917
|
)
|
(Gain)
loss on property
|
|
|
(572
|
)
|
|
3,089
|
|
Minority
interest in subsidiaries
|
|
|
-
|
|
|
7,805
|
|
Other
operating activities (Note 4)
|
|
|
11,015
|
|
|
81,378
|
|
Net
cash from operating activities
|
|
|
251,169
|
|
|
290,099
|
|
Cash
Flows from Investing Activities
|
|
|
|
Utility
capital expenditures
|
|
|
(371,056
|
)
|
|
(265,361
|
)
|
Allowance
for borrowed funds used during construction
|
|
|
(4,060
|
)
|
|
(1,174
|
)
|
Purchases
of nonutility property
|
|
|
(51
|
)
|
|
(113
|
)
|
Proceeds
from sale of assets
|
|
|
319
|
|
|
224
|
|
Purchases
of nuclear decommissioning trust investments
|
|
|
(37,333
|
)
|
|
(22,811
|
)
|
Proceeds
from nuclear decommissioning trust investments
|
|
|
34,596
|
|
|
20,147
|
|
Hawthorn
No. 5 partial insurance recovery
|
|
|
-
|
|
|
10,000
|
|
Hawthorn
No. 5 partial litigation recoveries
|
|
|
15,829
|
|
|
-
|
|
Other
investing activities
|
|
|
(852
|
)
|
|
(679
|
)
|
Net
cash from investing activities
|
|
|
(362,608
|
)
|
|
(259,767
|
)
|
Cash
Flows from Financing Activities
|
|
|
|
Issuance
of long-term debt
|
|
|
-
|
|
|
85,922
|
|
Repayment
of long-term debt
|
|
|
-
|
|
|
(85,922
|
)
|
Net
change in short-term borrowings
|
|
|
48,750
|
|
|
13,576
|
|
Dividends
paid to Great Plains Energy
|
|
|
(74,001
|
)
|
|
(92,700
|
)
|
Equity
contribution from Great Plains Energy
|
|
|
134,615
|
|
|
-
|
|
Issuance
fees
|
|
|
(486
|
)
|
|
(2,031
|
)
|
Net
cash from financing activities
|
|
|
108,878
|
|
|
(81,155
|
)
|
Net
Change in Cash and Cash Equivalents
|
|
|
(2,561
|
)
|
|
(50,823
|
)
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
2,961
|
|
|
51,619
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
400
|
|
$
|
796
|
|
|
|
|
|
|
|
|
|
The
disclosures regarding consolidated KCP&L included in the accompanying
Notes to Consolidated Financial
|
Statements
are an integral part of these
statements.
|
KANSAS
CITY POWER & LIGHT COMPANY
|
Consolidated
Statements of Common Shareholder's Equity
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Common
Stock
|
|
(thousands,
except share amounts)
|
Beginning
balance
|
|
|
1
|
|
$
|
887,041
|
|
|
1
|
|
$
|
887,041
|
|
Equity
contribution from Great Plains Energy
|
|
|
-
|
|
|
134,615
|
|
|
-
|
|
|
-
|
|
Ending
balance
|
|
|
1
|
|
|
1,021,656
|
|
|
1
|
|
|
887,041
|
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
|
|
|
|
283,850
|
|
|
|
|
|
252,893
|
|
Net
income
|
|
|
|
|
|
116,559
|
|
|
|
|
|
108,237
|
|
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock held by Great Plains Energy
|
|
|
|
|
|
(74,001
|
)
|
|
|
|
|
(92,700
|
)
|
Ending
balance
|
|
|
|
|
326,408
|
|
|
|
|
268,430
|
|
Accumulated
Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
|
|
|
|
(29,909
|
)
|
|
|
|
|
(40,334
|
)
|
Derivative
hedging activity, net of tax
|
|
|
|
|
|
(693
|
)
|
|
|
|
|
4,015
|
|
Minimum
pension obligation, net of tax
|
|
|
|
|
|
-
|
|
|
|
|
|
(2,538
|
)
|
Ending
balance
|
|
|
|
|
(30,602
|
)
|
|
|
|
(38,857
|
)
|
Total
Common Shareholder's Equity
|
|
|
|
$
|
1,317,462
|
|
|
|
$
|
1,116,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
disclosures regarding consolidated KCP&L included in the accompanying
Notes to Consolidated Financial
|
Statements
are an integral part of these
statements.
|
KANSAS
CITY POWER & LIGHT COMPANY
|
Consolidated
Statements of Comprehensive Income
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(thousands)
|
Net
income
|
|
$
|
68,762
|
|
$
|
68,948
|
|
$
|
116,559
|
|
$
|
108,237
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on derivative hedging instruments
|
|
|
(6,105
|
)
|
|
9,193
|
|
|
(812
|
)
|
|
6,902
|
|
Income
taxes
|
|
|
2,295
|
|
|
(3,478
|
)
|
|
305
|
|
|
(2,598
|
)
|
Net
gain on derivative hedging instruments
|
|
|
(3,810
|
)
|
|
5,715
|
|
|
(507
|
)
|
|
4,304
|
|
Reclassification
to expenses, net of tax
|
|
|
(61
|
)
|
|
(286
|
)
|
|
(186
|
)
|
|
(289
|
)
|
Derivative
hedging activity, net of tax
|
|
|
(3,871
|
)
|
|
5,429
|
|
|
(693
|
)
|
|
4,015
|
|
Change
in minimum pension obligation
|
|
|
-
|
|
|
(3,170
|
)
|
|
-
|
|
|
(3,230
|
)
|
Income
taxes
|
|
|
-
|
|
|
669
|
|
|
-
|
|
|
692
|
|
Net
change in minimum pension obligation
|
|
|
-
|
|
|
(2,501
|
)
|
|
-
|
|
|
(2,538
|
)
|
Comprehensive
income
|
|
$
|
64,891
|
|
$
|
71,876
|
|
$
|
115,866
|
|
$
|
109,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
disclosures regarding consolidated KCP&L included in the accompanying
Notes to Consolidated Financial Statements
|
are
an integral part of these
statements.
|
GREAT
PLAINS ENERGY INCORPORATED
KANSAS
CITY POWER & LIGHT COMPANY
Notes
to Unaudited Consolidated Financial Statements
The
notes
to unaudited consolidated financial statements that follow are a combined
presentation for Great Plains Energy Incorporated and Kansas City Power
&
Light Company, both registrants under this filing. The terms “Great Plains
Energy,” “Company,” “KCP&L” and “consolidated KCP&L” are used throughout
this report. “Great Plains Energy” and the “Company” refer to Great Plains
Energy Incorporated and its consolidated subsidiaries, unless otherwise
indicated. “KCP&L” refers to Kansas City Power & Light Company, and
“consolidated KCP&L” refers to KCP&L and its consolidated
subsidiaries.
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Organization
Great
Plains Energy, a Missouri corporation incorporated in 2001, is a public
utility
holding company and does not own or operate any significant assets
other than
the stock of its subsidiaries. Great Plains Energy has four direct
subsidiaries
with operations or active subsidiaries:
·
|
KCP&L
is an integrated, regulated electric utility that provides
electricity to
customers primarily in the states of Missouri and Kansas. KCP&L has
two wholly owned subsidiaries, Kansas City Power & Light Receivables
Company (Receivables Company) and Home Service Solutions Inc.
(HSS). HSS
has no active operations.
|
·
|
KLT
Inc. is an intermediate holding company that primarily holds
indirect
interests in Strategic Energy, L.L.C. (Strategic Energy), which
provides
competitive retail electricity supply services in several electricity
markets offering retail choice, and investments in affordable
housing
limited partnerships. KLT Inc. also wholly owns KLT Gas Inc.
(KLT Gas),
which has no active operations in 2006.
|
·
|
Innovative
Energy Consultants Inc. (IEC) is an intermediate holding company
that
holds an indirect interest in Strategic Energy. IEC does not
own or
operate any assets other than its indirect interest in Strategic
Energy.
When combined with KLT Inc.’s indirect interest in Strategic Energy, the
Company indirectly owns 100% of Strategic
Energy.
|
·
|
Great
Plains Energy Services Incorporated (Services) provides services
at cost
to Great Plains Energy and its subsidiaries, including consolidated
KCP&L.
|
The
operations of Great Plains Energy and its subsidiaries are divided
into two
reportable segments, KCP&L and Strategic Energy. Great Plains Energy’s legal
structure differs from the functional management and financial reporting
of its
reportable segments. Other activities not considered a reportable segment
include HSS, Services, all KLT Inc. activity other than Strategic Energy,
and
holding company operations.
2.
|
BASIC
AND DILUTED EARNINGS PER COMMON SHARE
CALCULATION
|
There
was
no significant dilutive effect on Great Plains Energy’s EPS from other
securities for the three months ended and year to date September 30,
2006 and
2005. To determine basic EPS, preferred stock dividend requirements
are deducted
from income from continuing operations and net income before dividing
by the
average number of common shares outstanding. The earnings (loss) per
share
impact of discontinued operations, net of income taxes, is determined
by
dividing discontinued operations, net of income taxes, by the average
number of
common shares outstanding. The effect of dilutive securities, calculated
using
the treasury stock method, assumes the issuance of common shares applicable
to
stock options, performance shares, restricted stock, a forward sale
agreement
and FELINE PRIDES
SM
.
The
following table
reconciles
Great Plains Energy’s basic and diluted EPS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
Year
to Date
|
|
|
September
30
|
|
|
September
30
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|
2006
|
|
|
2005
|
|
Income
|
|
|
(millions,
except per share amounts
)
|
Income
from continuing operations
|
|
$
|
55.2
|
|
$
|
89.1
|
|
|
|
$
|
90.7
|
|
$
|
134.8
|
|
Less:
preferred stock dividend requirements
|
|
|
0.5
|
|
|
0.5
|
|
|
|
|
1.3
|
|
|
1.3
|
|
Income
available to common shareholders
|
|
$
|
54.7
|
|
$
|
88.6
|
|
|
|
$
|
89.4
|
|
$
|
133.5
|
|
Common
Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
number of common shares outstanding
|
|
|
80.1
|
|
|
74.7
|
|
|
|
|
77.3
|
|
|
74.6
|
|
Add:
effect of dilutive securities
|
|
|
0.2
|
|
|
-
|
|
|
|
|
0.1
|
|
|
-
|
|
Diluted
average number of common shares outstanding
|
|
|
80.3
|
|
|
74.7
|
|
|
|
|
77.4
|
|
|
74.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted EPS from continuing operations
|
|
$
|
0.68
|
|
$
|
1.19
|
|
|
|
$
|
1.16
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
computation of diluted EPS excludes anti-dilutive shares for the three
months
ended and year to date September 30, 2006, of 105,198 and 106,706
performance shares and 99,838 and 116,468 restricted stock shares,
respectively.
Additionally, for the three months ended and year to date September
30, 2006,
6.5 million of anti-dilutive FELINE PRIDES were excluded from the computation
of
diluted EPS and there were no anti-dilutive shares applicable to stock
options
or a forward sale agreement. For the three months ended and year to
date
September 30, 2005, there were no significant anti-dilutive shares
applicable to
stock options, performance shares, restricted stock or FELINE PRIDES.
In
October 2006, the Board of Directors
declared
a quarterly dividend of $0.415 per share on Great Plains Energy’s common stock.
The common dividend is payable December 20, 2006, to shareholders of
record as
of November 29, 2006. The Board of Directors also declared regular
dividends on
Great Plains Energy’s preferred stock, payable March 1, 2007, to shareholders of
record as of February 7, 2007.
Cash
and Cash Equivalents
Cash
equivalents consist of highly liquid investments with maturities of
three months
or less at acquisition. For Great Plains Energy, this includes Strategic
Energy’s cash held in trust of $11.2 million
and
$21.9 million
at
September 30, 2006 and December 31, 2005, respectively.
Strategic
Energy has entered into collateral arrangements with selected electricity
power
suppliers that require selected customers to remit payment to lockboxes that
are
held in trust and managed by a Trustee. As part of the trust administration,
the
Trustee remits payment to the supplier of electricity purchased by
Strategic
Energy. On a monthly basis, any remittances into the lockboxes in excess
of
disbursements to the supplier are remitted back to Strategic Energy.
Restricted
Cash
Strategic
Energy has entered into Master Power Purchase and Sale Agreements with
its power
suppliers. Certain of these agreements contain provisions whereby,
to the extent
Strategic Energy has a net exposure to the purchased power supplier,
collateral
requirements are to be maintained. Collateral posted in the form of
cash to
Strategic Energy is restricted by agreement, but would become unrestricted
in
the event of a default by the purchased power supplier. Strategic Energy
held no
restricted
cash
collateral at September 30, 2006, and $1.9 million
at
December 31, 2005.
4.
SUPPLEMENTAL CASH FLOW INFORMATION
Great
Plains Energy Other Operating Activities
|
|
|
|
|
|
|
|
|
|
Revised
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
Cash
flows affected by changes in:
|
|
(millions
)
|
Receivables
|
|
$
|
(96.2
|
)
|
$
|
(43.9
|
)
|
Fuel
inventories
|
|
|
(8.2
|
)
|
|
2.3
|
|
Materials
and supplies
|
|
|
(2.4
|
)
|
|
(2.5
|
)
|
Accounts
payable
|
|
|
6.9
|
|
|
12.3
|
|
Accrued
taxes
|
|
|
60.6
|
|
|
51.1
|
|
Accrued
interest
|
|
|
0.2
|
|
|
1.2
|
|
Deposits
with suppliers
|
|
|
(4.4
|
)
|
|
0.1
|
|
Accrued
refueling outage costs
|
|
|
6.7
|
|
|
(7.7
|
)
|
Pension
and postretirement benefit assets and obligations
|
|
|
10.8
|
|
|
6.0
|
|
Allowance
for equity funds used during construction
|
|
|
(3.7
|
)
|
|
(1.1
|
)
|
Proceeds
from the sale of SO
2
emission allowances
|
|
|
0.8
|
|
|
31.0
|
|
Other
|
|
|
10.1
|
|
|
11.1
|
|
Total
other operating activities
|
|
$
|
(18.8
|
)
|
$
|
59.9
|
|
Cash
paid during the period:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
50.9
|
|
$
|
54.3
|
|
Income
taxes
|
|
$
|
39.9
|
|
$
|
24.1
|
|
Non-cash
investing activities:
|
|
|
|
|
|
|
|
Liabilities
assumed for capital expenditures
|
|
$
|
34.7
|
|
$
|
4.1
|
|
|
|
|
|
|
|
|
|
Consolidated
KCP&L Other Operating Activities
|
|
|
|
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
Cash
flows affected by changes in:
|
|
(millions
)
|
Receivables
|
|
$
|
(52.1
|
)
|
$
|
(20.4
|
)
|
Fuel
inventories
|
|
|
(8.2
|
)
|
|
2.3
|
|
Materials
and supplies
|
|
|
(2.4
|
)
|
|
(2.5
|
)
|
Accounts
payable
|
|
|
(9.2
|
)
|
|
(2.7
|
)
|
Accrued
taxes
|
|
|
71.9
|
|
|
66.9
|
|
Accrued
interest
|
|
|
0.2
|
|
|
1.2
|
|
Accrued
refueling outage costs
|
|
|
6.7
|
|
|
(7.7
|
)
|
Pension
and postretirement benefit assets and obligations
|
|
|
8.3
|
|
|
2.3
|
|
Allowance
for equity funds used during construction
|
|
|
(3.7
|
)
|
|
(1.1
|
)
|
Proceeds
from the sale of SO
2
emission allowances
|
|
|
0.8
|
|
|
31.0
|
|
Other
|
|
|
(1.3
|
)
|
|
12.1
|
|
Total
other operating activities
|
|
$
|
11.0
|
|
$
|
81.4
|
|
Cash
paid during the period:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
43.6
|
|
$
|
42.1
|
|
Income
taxes
|
|
$
|
29.1
|
|
$
|
32.4
|
|
Non-cash
investing activities:
|
|
|
|
|
|
|
|
Liabilities
assumed for capital expenditures
|
|
$
|
34.4
|
|
$
|
3.5
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations and Proceeds From Sale of SO
2
Emission Allowances Presentation
In
the
fourth quarter of 2005, the Company changed the presentation of its
consolidated
statements of cash flows to include the cash flows from operating,
investing and
financing activities of discontinued operations within the respective
categories
of operating, investing and financing activities as well as to reflect
proceeds
from the sale of SO
2
emission
allowances by consolidated KCP&L as operating
activities
rather than investing activities
and
retroactively revised the consolidated statement of cash flows year
to date
September 30, 2005, to be consistent with this presentation. Great
Plains
Energy’s net cash flows from operating activities year to date September 30,
2005, increased $30.2 million due to a $31.0 million increase for KCP&L’s
proceeds from the sale of SO
2
emission
allowances and a $0.8 million decrease for discontinued operations
operating activities from amounts previously reported. Net cash flows
from
investing activities decreased $30.7 million due to a $31.0 million
decrease for
KCP&L’s proceeds from the sale of SO
2
emission
allowances and a $0.3 million increase from discontinued operations
from amounts
previously reported.
Significant
Non-Cash Items
In
the
third quarter of 2006, Wolf Creek Nuclear Operating Corporation (WCNOC)
submitted an application to the Nuclear Regulatory Commission (NRC)
for a new
operating license for Wolf Creek Generating Station (Wolf Creek), which
would
extend Wolf Creek’s operating period to 2045. KCP&L recorded a $65.0 million
decrease in the asset retirement obligation (ARO) to decommission Wolf
Creek
with a $25.8 million net decrease in property and equipment. The regulatory
asset for ARO decreased $8.2 million and a $31.0 million regulatory
liability
was established to recognize current funding of the related decommissioning
trust at September 30, 2006, in excess of the ARO due to the extended
operating
period. This activity had no impact to Great Plains Energy’s or consolidated
KCP&L’s cash flows year to date September 30, 2006. See Note 17 for
additional information.
The
Company’s receivables are detailed in the following table
.
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
December
31
|
|
|
|
|
2006
|
2005
|
Consolidated
KCP&L
|
|
(millions)
|
Customer
accounts receivable
(a)
|
|
|
|
|
$
|
58.4
|
|
$
|
34.0
|
|
Allowance
for doubtful accounts
|
|
|
|
|
|
(1.8
|
)
|
|
(1.0
|
)
|
Other
receivables
|
|
|
|
|
|
65.7
|
|
|
37.3
|
|
Consolidated
KCP&L receivables
|
|
|
|
|
|
122.3
|
|
|
70.3
|
|
Other
Great Plains Energy
|
|
|
|
|
|
|
Other
receivables
|
|
|
|
|
|
237.7
|
|
|
193.0
|
|
Allowance
for doubtful accounts
|
|
|
|
|
|
(4.5
|
)
|
|
(4.3
|
)
|
Great
Plains Energy receivables
|
|
|
|
|
$
|
355.5
|
|
$
|
259.0
|
|
(a)
Customer
accounts receivable included unbilled receivables of $36.4
million
|
and
$31.4 million at September 30, 2006 and December 31, 2005,
respectively.
|
Consolidated
KCP&L’s other receivables
at
September 30, 2006 and December 31, 2005, consisted primarily of receivables
from partners in jointly owned electric utility plants and wholesale
sales
receivables. Great Plains Energy’s other receivables at September 30, 2006 and
December 31, 2005, consisted primarily of accounts receivable held
by Strategic
Energy, including unbilled receivables of $112.0 million
and
$99.9 million
,
respectively.
KCP&L
sells all of its retail electric accounts receivable to its wholly
owned
subsidiary, Receivables Company, which in turn sells an undivided percentage
ownership interest in the accounts receivable to Victory Receivables
Corporation, an independent outside investor. KCP&L sells its receivables at
a fixed price based upon the expected cost of funds and charge-offs.
These costs
comprise KCP&L’s loss on the sale of accounts receivable. KCP&L services
the receivables and receives an annual servicing fee of 2.5% of the
outstanding
principal amount of the receivables sold to Receivables Company. KCP&L does
not recognize a servicing asset or liability because management determined
the
collection agent fee earned by KCP&L approximates market value.
Information
regarding KCP&L’s sale of accounts receivable to Receivables Company is
reflected in the following tables
.
|
|
|
|
|
|
Receivables
|
|
Consolidated
|
|
Three
Months Ended September 30, 2006
|
|
KCP&L
|
Company
|
|
KCP&L
|
|
|
|
(millions)
|
Receivables
(sold) purchased
|
|
$
|
(325.5
|
)
|
$
|
325.5
|
|
$
|
-
|
|
Gain
(loss) on sale of accounts receivable
(a)
|
|
|
(3.3
|
)
|
|
3.3
|
|
|
-
|
|
Servicing
fees
|
|
|
1.0
|
|
|
(1.0)
|
|
|
-
|
|
Fees
to outside investor
|
|
|
-
|
|
|
(1.0)
|
|
|
(1.0
|
)
|
Cash
flows during the period
|
|
|
|
|
|
|
|
|
|
|
Cash
from customers transferred to
|
|
|
|
|
|
|
|
|
|
|
Receivables
Company
|
|
|
(323.0
|
)
|
|
323.0
|
|
|
-
|
|
Cash
paid to KCP&L for receivables purchased
|
|
|
323.6
|
|
|
(323.6)
|
|
|
-
|
|
Servicing
fees
|
|
|
1.0
|
|
|
(1.0)
|
|
|
-
|
|
Interest
on intercompany note
|
|
|
1.1
|
|
|
(1.1)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
Consolidated
|
|
Year
to Date September 30, 2006
|
|
KCP&L
|
Company
|
|
KCP&L
|
|
|
|
(millions)
|
Receivables
(sold) purchased
|
|
$
|
(774.8
|
)
|
$
|
774.8
|
|
$
|
-
|
|
Gain
(loss) on sale of accounts receivable
(a)
|
|
|
(7.8
|
)
|
|
7.6
|
|
|
(0.2
|
)
|
Servicing
fees
|
|
|
2.2
|
|
|
(2.2)
|
|
|
-
|
|
Fees
to outside investor
|
|
|
-
|
|
|
(2.8)
|
|
|
(2.8
|
)
|
Cash
flows during the period
|
|
|
|
|
|
|
|
|
|
|
Cash
from customers transferred to
|
|
|
|
|
|
|
|
|
|
|
Receivables
Company
|
|
|
(754.0
|
)
|
|
754.0
|
|
|
-
|
|
Cash
paid to KCP&L for receivables purchased
|
|
|
750.3
|
|
|
(750.3)
|
|
|
-
|
|
Servicing
fees
|
|
|
2.2
|
|
|
(2.2)
|
|
|
-
|
|
Interest
on intercompany note
|
|
|
1.9
|
|
|
(1.9)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Three
Months Ended and
|
|
|
|
Receivables
|
|
Consolidated
|
|
Year
to Date September 30, 2006
|
|
KCP&L
|
Company
|
|
KCP&L
|
|
|
|
(millions)
|
Receivables
(sold) purchased
|
|
$
|
(396.7
|
)
|
$
|
396.7
|
|
$
|
-
|
|
Gain
(loss) on sale of accounts receivable
(a)
|
|
|
(4.0
|
)
|
|
2.7
|
|
|
(1.3
|
)
|
Servicing
fees
|
|
|
0.7
|
|
|
(0.7)
|
|
|
-
|
|
Fees
to outside investor
|
|
|
-
|
|
|
(0.7)
|
|
|
(0.7
|
)
|
Cash
flows during the period
|
|
|
|
|
|
|
|
|
|
|
Cash
from customers transferred to
|
|
|
|
|
|
|
|
|
|
|
Receivables
Company
|
|
|
(273.7
|
)
|
|
273.7
|
|
|
-
|
|
Cash
paid to KCP&L for receivables purchased
|
|
|
(271.0
|
)
|
|
271.0
|
|
|
-
|
|
Servicing
fees
|
|
|
0.7
|
|
|
(0.7)
|
|
|
-
|
|
Funds
from outside investors
(b)
|
|
|
70.0
|
|
|
-
|
|
|
70.0
|
|
Interest
on intercompany note
|
|
|
0.6
|
|
|
(0.6)
|
|
|
-
|
|
(a)
|
Any
net gain (loss) is the result of the timing difference inherent
in
collecting receivables and
|
|
over
the life of the agreement will net to zero.
|
(b)
|
During
the third quarter of 2005, Receivables Company received $70
million cash
from the
|
|
outside
investor for the sale of accounts receivable, which was then
forwarded to
KCP&L for
|
|
consideration
of its sale.
|
KCP&L
owns 47% of WCNOC, the operating company for Wolf Creek, its only
nuclear
generating unit. Wolf Creek is regulated by the NRC, with respect
to licensing,
operations and safety-related requirements.
Spent
Nuclear Fuel and Radioactive Waste
Under
the
Nuclear Waste Policy Act of 1982, the Department of Energy (DOE)
is responsible
for the permanent disposal of spent nuclear fuel. KCP&L pays the DOE a
quarterly fee of one-tenth of a cent for each kilowatt-hour of net
nuclear
generation delivered and sold for the future disposal of spent nuclear
fuel.
These disposal costs are charged to fuel expense. In 2002, the U.S.
Senate
approved Yucca Mountain, Nevada as a long-term geologic repository.
In July
2006, the DOE announced plans to submit a license application to
the NRC for a
nuclear waste repository at Yucca Mountain, Nevada, not later that
June 30,
2008. The DOE also announced if requested legislative changes are
enacted, the
repository would be able to accept spent nuclear fuel and high-level
waste
starting in early 2017. Management cannot predict when this site
may be
available for Wolf Creek. Under current DOE policy, once a permanent
site is
available, the DOE will accept spent nuclear fuel first from the
owners with the
older spent fuel. Wolf Creek has completed an on-site storage facility
designed
to hold all spent fuel generated at the plant through the end of
its current
40-year licensed life in 2025. If the DOE meets its revised timetable
for
accepting spent fuel for disposal by 2017, management expects that
the DOE would
begin accepting some of Wolf Creek’s spent fuel by 2025. Management will
continue to monitor this activity. See Note 15 for a related legal
proceeding.
Nuclear
Liability and Insurance
The
owners of Wolf Creek (Owners) maintain nuclear insurance for Wolf
Creek in four
areas: liability, worker radiation, property and accidental outage.
These
policies contain certain industry standard exclusions, including,
but not
limited to, ordinary wear and tear, and war. Both the nuclear liability
and
property insurance programs subscribed to by members of the nuclear
power
generating industry include industry aggregate limits for non-certified
acts of
terrorism and related losses, as defined by the Terrorism Risk Insurance
Act,
including replacement power costs. An industry aggregate limit of
$0.3 billion
exists for liability claims, regardless of the number of non-certified
acts
affecting Wolf Creek or any other nuclear energy liability policy
or the number
of policies in place. An industry aggregate limit of $3.2 billion
plus any
reinsurance recoverable by Nuclear Electric Insurance Limited (NEIL),
the
Owners’ insurance provider, exists for property claims, including accidental
outage power costs for acts of terrorism affecting Wolf Creek or
any other
nuclear energy facility property policy within twelve months from
the date of
the first act. These limits are the maximum amount to be paid to
members who
sustain losses or damages from these types of terrorist acts. For
certified acts
of terrorism, the individual policy limits apply. In addition, industry-wide
retrospective assessment programs (discussed below) can apply once
these
insurance programs have been exhausted.
Liability
Insurance
Pursuant
to the Price-Anderson Act, which was reauthorized through December
31, 2025, by
the Energy Policy Act of 2005, the Owners are required to insure
against public
liability claims resulting from nuclear incidents to the full limit
of public
liability, which is currently $10.8 billion. This limit of liability
consists of
the maximum available commercial insurance of $0.3 billion, and the
remaining
$10.5 billion is provided through an industry-wide retrospective
assessment
program mandated by law, known as the Secondary Financial Protection
(SFP)
program. Under the SFP program, the Owners can be assessed up to
$100.6 million
($47.3 million, KCP&L’s 47% share) per incident at any commercial reactor in
the country, payable at no more than $15 million ($7.1 million, KCP&L’s 47%
share) per incident per year. This assessment is subject to an inflation
adjustment based on the Consumer Price Index and applicable premium
taxes. This
assessment also applies to worker
radiation
claims insurance. In addition, the U.S. Congress could impose additional
revenue-raising measures to pay claims.
Property,
Decontamination, Premature Decommissioning and Extra Expense Insurance
The
Owners carry decontamination liability, premature decommissioning
liability and
property damage insurance for Wolf Creek totaling approximately $2.8
billion
($1.3 billion, KCP&L's 47% share). NEIL provides this insurance.
In
the
event of an accident, insurance proceeds must first be used for reactor
stabilization and site decontamination in accordance with a plan
mandated by the
NRC. KCP&L’s share of any remaining proceeds can be used for further
decontamination, property damage restoration and premature decommissioning
costs. Premature decommissioning coverage applies only if an accident
at Wolf
Creek exceeds $500 million in property damage and decontamination
expenses, and
only after trust funds have been exhausted.
Accidental
Nuclear Outage Insurance
The
Owners also carry additional insurance from NEIL to cover costs of
replacement
power and other extra expenses incurred in the event of a prolonged
outage
resulting from accidental property damage at Wolf Creek.
Under
all
NEIL policies, the Owners are subject to retrospective assessments
if NEIL
losses, for each policy year, exceed the accumulated funds available
to the
insurer under that policy. The estimated maximum amount of retrospective
assessments under the current policies could total approximately
$26.1 million ($12.3 million, KCP&L’s 47% share) per policy
year.
In
the
event of a catastrophic loss at Wolf Creek, the insurance coverage
may not be
adequate to cover property damage and extra expenses incurred. Uninsured
losses,
to the extent not recovered through rates, would be assumed by KCP&L and the
other owners and could have a material adverse effect on KCP&L’s results of
operations, financial position and cash flows.
Low-Level
Waste
The
Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated
that the
various states, individually or through interstate compacts, develop
alternative
low-level radioactive waste disposal facilities. The states of Kansas,
Nebraska,
Arkansas, Louisiana and Oklahoma formed the Central Interstate Low-Level
Radioactive Waste Compact (Compact) and selected a site in northern
Nebraska to
locate a disposal facility. WCNOC and the owners of the other five
nuclear units
in the Compact provided most of the pre-construction financing for
this project.
After
many years of effort, Nebraska regulators denied the facility developer’s
license application in December 1998, a prolonged lawsuit ensued,
and Nebraska
eventually settled the case by paying the Compact Commission $145.8
million in
damages. The Compact Commission then paid out pro rata portions of
the
settlement money to the various parties who originally funded the
project. To
date, WCNOC has received refunds totaling $21.3 million (KCP&L’s 47% share
being $10 million), including $1.7 million ($0.8 million, KCP&L’s 47% share)
received in 2006. The Commission continues to explore alternative
long-term
waste disposal capability and has retained an insignificant portion
of the
settlement money. In April 2006, WCNOC and other affected generators
filed a
lawsuit in Federal District Court in Nebraska seeking to preserve
their ability
to continue to pursue their claim for their share of the retained
amount plus
interest. The parties took the case to mediation in October 2006.
Accrued
Refueling Outage Costs
KCP&L
accrues anticipated incremental costs to be incurred during scheduled
Wolf Creek
refueling outages monthly over the unit's operating cycle, normally
the 18
months preceding the outage.
Estimated
incremental costs, which include operating, maintenance and replacement
power
expenses, are based on anticipated outage costs and the estimated
outage
duration. Changes to or variances from those estimates are recorded
when known
or are probable. In September 2006, the Financial Accounting Standards
Board
(FASB) issued FASB Staff Position (FSP) No. AUG AIR-1, “Accounting for Planned
Major Maintenance Activities.” FSP No. AUG AIR-1 prohibits the use of the
accrue-in-advance method of accounting for planned major maintenance
activities.
Great Plains Energy and consolidated KCP&L are required to adopt the
provisions of FSP No. AUG AIR-1 for periods beginning after December
15, 2006.
The guidance in FSP No. AUG AIR-1 will be applied retrospectively.
Management
has determined that KCP&L will adopt the deferral method allowed under the
FSP and has not yet determined the impact on Great Plains Energy
and
consolidated KCP&L’s consolidated financial statements.
KCP&L’s
Comprehensive Energy Plan
KCP&L
continues to make progress in implementing its comprehensive energy
plan under
orders received from the MPSC and KCC in 2005. The Sierra Club and
Concerned
Citizens of Platte County have appealed the MPSC order, and the Sierra
Club has
appealed the KCC order. In March 2006, the Circuit Court of Cole
County,
Missouri, affirmed the MPSC Order and the Sierra Club has appealed
the decision
to the Missouri Court of Appeals. The Kansas District Court denied
the Sierra
Club’s appeal in May 2006 and the Sierra Club has appealed to the Kansas
Court
of Appeals. Although subject to the appeals, the MPSC and KCC orders
remain in
effect pending the applicable court’s decision.
Although
control budgets and workflow scheduling are not complete, developing
market
conditions indicate overall cost estimates of the comprehensive energy
plan are
currently expected to be about 20% above the estimate in the 2005
Form 10-K. The
primary driver of the increased cost of the comprehensive energy
plan is the
environmental retrofit of selected existing coal-fired plants. The
demand for
environmental projects has increased substantially with many utilities
in the
United States starting similar projects to address changing environmental
regulations. This demand has constrained labor and material resources
resulting
in a significant escalation in the cost and completion times for
environmental
retrofits. The first phase of environmental upgrades at LaCygne No.
1,
installation of SCR equipment, began in late 2005 and is expected
to be
in-service for the summer of 2007. KCP&L has approximately 88% of the total
estimated cost for the first phase under firm contract as of September
30, 2006.
The second phase of environmental upgrades at LaCygne No. 1 is currently
in the
planning stage, and the market conditions noted above could impact
the scope and
timing. Iatan No. 1 environmental upgrades are on schedule with approximately
80% of the total estimated costs under firm contract as of September
30,
2006.
The
construction projects contemplated in the comprehensive energy plan
rely upon
the supply of a significant percentage of materials from overseas
sources. This
global procurement subjects the delivery of procured material to
issues beyond
what would be expected if such material were supplied from sources
within the
United States. These risks include, but are not limited to, delays
in clearing
customs, ocean transportation and potential civil unrest in sourcing
countries,
among others. Additionally, as with any major construction program,
inadequate
availability of qualified craft labor may have an adverse impact
on both the
estimated cost and completion date of the projects.
Over
the
last several months, KCP&L has finalized contracts and received bids for the
largest cost components of the construction of Iatan No. 2. The estimated
costs
for Iatan No. 2 have also increased due to the constrained labor
and material
resources discussed above; however, the Iatan No. 2 estimated costs
have not
been as impacted as the estimated costs of the environmental retrofits.
KCP&L has approximately 60% of the total estimated cost of Iatan No.
2 under
firm contract as of September 30, 2006, and has started construction
activities
at the site. An owners’ engineer has been
hired
and
the engineering design for Iatan Station is approximately 25% complete,
which is
on schedule with the targeted project completion in summer 2010.
During the
second quarter of 2006, KCP&L finalized Iatan No. 2 co-ownership agreements
with Aquila Inc., The Empire District Electric Company, Kansas Electric
Power
Cooperative and Missouri Joint Municipal Electric Utility Commission.
KCP&L
will own 54.71% or approximately 465 MW of the new unit. In the first
quarter of
2006, KCP&L received the air permit and a water quality certification from
the Missouri Department of Natural Resources relating to Iatan Station.
The
Sierra Club is appealing the air permit. In the third quarter of
2006, the
Sierra Club filed a motion requesting that construction on Iatan
No. 2 be stayed
pending the outcome of its appeal. This motion was denied. KCP&L has
received the remaining permits necessary to begin construction at
Iatan Station,
which included the wetlands permit and a permit for the construction
of a
temporary barge slip and collector wells from the U.S. Army Corps
of Engineers
(Corps). The Corps also executed an Environmental Assessment with
a Finding of
No Significant Impact.
Construction
and commissioning of the 67 turbines at KCP&L’s Spearville Wind Energy
Facility, a 100.5 MW
wind
project in western Kansas, was completed during the third quarter
of 2006
in-line with cost estimates reported in the 2005 Form 10-K. Additional
transmission construction to enhance KCP&L’s ability to carry power from the
facility to its service territory is expected to be completed in
the first half
of 2007, and is reflected in the current cost estimates provided
above.
KCP&L
has implemented nine pilot affordability, energy efficiency and demand
response
programs in Missouri and four in Kansas. Initial results from the
implemented
pilot programs are beginning to demonstrate an ability to manage
KCP&L’s
customers’ retail load requirements and are on target with management's goal
to
achieve a potential 40MW reduction in retail load requirements by
the end of
2006. These early results are evidenced by the success of KCP&L’s
residential air conditioning cycling program, Energy Optimizer, which
has
experienced strong early participation with over 8,200 installations
year to
date September 30, 2006. Additionally, in September 2006, KCC initiated
a
generic investigation into energy efficiency. The general issues
that KCC is
investigating relate to when and how utilities should promote energy
efficiency
by their customers and what ratemaking treatment, including special
mechanisms,
is appropriate or desirable. This investigation provides a significant
opportunity for the continued development of energy efficiency policy
regulation
in Kansas.
KCP&L
Regulatory Proceedings
In
February 2006
,
KCP&L filed requests with the MPSC and KCC for annual rate increases
of
$55.8 million or 11.5% and $42.3 million or 10.5%, respectively. The
requested rate increases reflect recovery of increasing operating
costs
including fuel, transportation and pensions as well as investments
in wind
generation and customer programs and compensation for wholesale sales
volatility
and construction risks. The request is based on a return on equity
of 11.5% and
an adjusted equity ratio of 53.8%.
KCP&L
reached a negotiated settlement with certain parties to the Kansas
rate
proceeding and filed an unopposed Stipulation and Agreement (Agreement)
with KCC
in the third quarter of 2006. The Agreement stipulates a $29 million
increase in
annual revenues effective January 1, 2007, including $4 million of
accelerated
depreciation to maintain cash flow levels as contemplated in the
stipulation and
agreement approved by KCC in 2005. The Agreement does not propose
an energy cost
adjustment (ECA) clause; however, KCP&L agreed to propose an ECA clause in
its next rate case to be filed no later than March 1, 2007. The Agreement
recommends various accounting and other provisions, including but
not limited
to, establishing annual pension costs beginning January 1, 2007,
at
approximately $43 million through the creation of a regulatory asset
or
liability, and establishing a regulatory asset or liability, effective
January
1, 2006, for costs arising from defined benefit plan settlements
and
curtailments to be amortized over a five-year period beginning with
the
effective date of rates approved in KCP&L’s next rate case. The Agreement is
subject to KCC approval, and is voidable
if
not
approved in its entirety. KCP&L expects KCC to act on the Agreement before
the end of the year with any rate changes being effective on January
1,
2007.
In
August
2006, the MPSC Staff filed its case regarding KCP&L’s rate request. In its
filing, the Staff asserted that KCP&L’s annual revenues should be decreased
by between $4.3 million and $5.1 million, before adjustments resulting
from the
September 30, 2006, true-up of test year information. The Staff’s filing assumed
adjustments resulting from this true-up would increase revenue requirements
by
approximately $20 million, resulting in a net required increase in
annual
revenues of between $14.9 million and $15.7 million, which reflected
approximately $75 million in accelerated depreciation, which the
Staff asserted
will maintain certain KCP&L credit ratios at investment-grade levels as
provided for in the stipulation and agreement approved by the MPSC
in 2005. The
Staff’s position was revised in the hearings that were held in October
2006. The
Staff’s current position is that KCP&L’s annual revenues should be increased
by approximately $52 million (reflecting approximately $86 million
in
accelerated depreciation), before adjustments resulting from the
September 30,
2006, true-up. A decision by the MPSC is expected before the end
of the year
with any rate changes being effective on January 1, 2007.
Regulatory
Assets and Liabilities
KCP&L
is subject to the provisions of Statement of Financial Accounting
Standards
(SFAS) No. 71, “Accounting for the Effects of Certain Types of Regulation” and
has recorded assets and liabilities on its balance sheet resulting
from the
effects of the ratemaking process, which would not be recorded under
GAAP for
non-regulated entities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
September 30
|
|
December
31
|
|
|
|
ending
period
|
|
|
2006
|
|
2005
|
Regulatory
Assets
|
|
|
|
|
|
|
|
|
Taxes
recoverable through future rates
|
|
|
|
|
|
|
$
|
83.3
|
$
|
85.7
|
|
Decommission
and decontaminate federal uranium
|
|
|
|
|
|
|
|
|
|
|
|
enrichment
facilities
|
|
|
|
|
2007
|
|
|
0.8
|
|
1.3
|
|
Loss
on reacquired debt
|
|
|
|
|
2037
|
|
|
6.6
|
|
7.1
|
|
January
2002 incremental ice storm costs (Missouri)
|
|
|
|
|
2007
|
|
|
1.5
|
|
4.9
|
|
Change
in depreciable life of Wolf Creek
|
|
|
|
|
2045
|
|
|
40.9
|
|
27.4
|
|
Cost
of removal
|
|
|
|
|
|
|
|
9.4
|
|
9.3
|
|
Asset
retirement obligations
|
|
|
|
|
|
|
|
16.6
|
|
23.6
|
|
Pension
accounting method difference
|
|
|
|
|
(a)
|
|
|
6.5
|
|
-
|
|
Future
recovery of pension costs
|
|
|
|
|
(a)
|
|
|
31.0
|
|
15.6
|
|
Other
|
|
|
|
|
Various
|
|
|
10.9
|
|
5.0
|
|
Total
Regulatory Assets
|
|
|
|
|
$
|
207.5
|
$
|
179.9
|
|
Regulatory
Liabilities
|
|
|
|
|
|
|
|
|
Emission
allowances
|
|
|
|
|
(a)
|
|
$
|
64.5
|
$
|
64.3
|
|
Pension
accounting method difference
|
|
|
|
|
(a)
|
|
|
-
|
|
1.0
|
|
Asset
retirement obligations
|
|
|
|
|
|
|
|
31.0
|
|
-
|
|
Additional
Wolf Creek amortization (Missouri)
|
|
|
|
|
(a)
|
|
|
12.0
|
|
4.3
|
|
Total
Regulatory Liabilities
|
|
|
|
|
$
|
107.5
|
$
|
69.6
|
|
(a) Will
be amortized in accordance with future rate cases.
|
|
|
|
|
|
|
|
|
|
|
|
Except
as
noted below, regulatory assets for which costs have been
incurred have been
included (or are expected to be included, for costs incurred
subsequent to the
most recently approved rate case) in KCP&L’s rate base, thereby providing a
return on invested costs when included in rate base. Certain
regulatory assets
do not result from cash expenditures and therefore do not
represent investments
included in rate base or have offsetting liabilities that
reduce rate base. The
pension accounting
method
difference (which may be either a regulatory asset or liability)
and certain
insignificant items in other regulatory assets are not
included in rate
base.
Southwest
Power Pool
Regional
Transmission Organization
KCP&L
is a member of the Southwest Power Pool (SPP), which is
a Federal Energy
Regulatory Commission (FERC) approved Regional Transmission
Organization (RTO).
In July 2006, KCC granted interim approval for KCP&L to take SPP network
integration transmission service for its retail customers.
During 2006, KCC and
MPSC both issued orders approving KCP&L’s participation in the SPP RTO,
which also made final the previously granted KCC interim
approval. In May 2006,
SPP made a compliance filing in response to a previously
issued FERC order on
the SPP energy imbalance service market. In July 2006,
FERC issued an order on
the compliance filing accepting in part, as modified, and
rejecting in part the
filing, permitting the start of the SPP energy imbalance
service market no
earlier than October 1, 2006, and required SPP to make
additional filings. The
SPP Board met in October 2006 and delayed SPP’s readiness filing to FERC and
plans to meet again in December 2006 to reassess SPP’s readiness for a February
1, 2007, energy imbalance service market start. KCP&L is continuing
preparation for this new start-up date.
Revenue
Sufficiency Guarantee
Since
the
April 2005 implementation of Midwest Independent Transmission
System Operator
Inc. (MISO) market operations, MISO’s business practice manuals and other
instructions to market participants have stated that Revenue
Sufficiency
Guarantee (RSG) charges will not be imposed on day-ahead
virtual offers to
supply power not supported by actual generation. RSG charges
are collected by
MISO in order to compensate generators that are standing
by to supply
electricity when called upon by MISO. In April 2006, FERC
issued an order
regarding MISO RSG charges. In its order, FERC interpreted
MISO's tariff to
require that virtual supply offers be included in the calculation
of RSG charges
and that to the extent that MISO did not charge market
participants RSG charges
on virtual supply offers, MISO violated its tariff. The
FERC order required MISO
to recalculate RSG rates back to April 1, 2005, and make
refunds to customers
who paid RSG charges on imbalances, with interest, reflecting
the recalculated
charges. In order to make such refunds, RSG charges could
have been
retroactively imposed on market participants who submitted
virtual supply offers
during the recalculation period.
Strategic
Energy is among the MISO participants that paid RSG charges
on imbalances and
could have received a refund as a result of the order.
Strategic Energy could
also have been subject to a retroactive assessment from
MISO for RSG charges on
virtual supply offers it submitted during the recalculation
period. Consistent
with MISO’s business practice manuals, management does not believe
Strategic
Energy should be assessed RSG charges retroactively or
prospectively on its
virtual supply offers.
Numerous
requests for rehearing were filed and in October 2006,
FERC entered an order
granting requests for rehearing of the FERC’s decision to require MISO to
retroactively recalculate RSG charges and provide refunds
to customers that paid
RSG charges on imbalances. As a result, MISO will not assess
RSG charges
retroactively on virtual supply offers, but RSG charges
will apply prospectively
on certain virtual supply offers. Parties may appeal the
FERC Order. Management
is unable to predict the outcome of any appeals.
Seams
Elimination Charge Adjustment
Seams
Elimination Charge Adjustment (SECA) is a transitional
pricing mechanism
authorized by FERC and intended to compensate transmission
owners for the
revenue lost as a result of FERC’s elimination of regional through and out rates
between PJM Interconnection (PJM) and MISO during a 16-month
transition period
from December 1, 2004 through March 31, 2006. Each relevant PJM and MISO
zone and the load-serving entities within that zone were
allocated a portion of
SECA based on transmission
services
provided to that zone during 2002 and 2003. Strategic Energy
did not record any
significant SECA activity for the three months ended September
30, 2006. Year to
date September 30, 2006, Strategic Energy recorded a reduction
of purchased
power expense of $2.4 million for SECA recoveries from
suppliers, which offset
$2.7 million of expense recorded in the first quarter.
Strategic Energy recorded
purchased power expenses totaling $3.3 million and $10.5
million
for the three months ended and year to date September 30,
2005, for SECA
transition charges. Strategic Energy recovered $1.3 million
year to date
September 30, 2006, of its SECA costs through billings
to its retail customers.
No further billings are anticipated pending the outcome
of proceedings discussed
below.
There
are
several unresolved matters and legal challenges related
to SECA that are pending
before FERC on rehearing. FERC established a schedule for
resolution of certain
SECA issues, including the issue of shifting SECA allocations
to the shipper.
The shipper in Strategic Energy’s situation is the wholesale supplier, which,
through a contract with Strategic Energy, delivered power
to various zones in
which Strategic Energy was supplying retail customers.
In most instances, the
shipper was the purchaser of through and out transmission
service and therefore
included the cost of the through and out rate in its energy
price.
In
mid-2006, FERC held hearings on the justness and reasonableness
of the SECA rate
and on attempts by suppliers to shift SECA to wholesale
counterparties. In
August 2006, a favorable initial decision was extended
by an administrative law
judge, which could potentially result in a refund of
prior SECA payments.
Management is awaiting FERC action and is unable to predict
the outcome of legal
and regulatory challenges to the SECA mechanism.
Great
Plains Energy and consolidated KCP&L’s long-term debt is detailed in the
following table
.
|
|
|
|
|
September
30
|
December
31
|
|
|
|
Year
Due
|
|
|
2006
|
|
2005
|
|
Consolidated
KCP&L
|
|
|
|
|
(millions)
|
General
Mortgage Bonds
|
|
|
|
|
|
|
|
|
|
|
7.95%
Medium-Term Notes
|
|
|
2007
|
|
$
|
0.5
|
|
$
|
0.5
|
|
3.73%*
EIRR bonds
|
|
|
2012-2035
|
|
|
158.8
|
|
|
158.8
|
|
Senior
Notes
|
|
|
|
|
|
|
|
|
|
|
6.00%
|
|
|
2007
|
|
|
225.0
|
|
|
225.0
|
|
6.50%
|
|
|
2011
|
|
|
150.0
|
|
|
150.0
|
|
6.05%
|
|
|
2035
|
|
|
250.0
|
|
|
250.0
|
|
Unamortized
discount
|
|
|
|
|
|
(1.7
|
)
|
|
(1.8
|
)
|
EIRR
bonds
|
|
|
|
|
|
|
|
|
|
|
4.75%
Series A & B
|
|
|
2015
|
|
|
104.9
|
|
|
104.6
|
|
4.75%
Series D
|
|
|
2017
|
|
|
39.4
|
|
|
39.3
|
|
4.65%
Series 2005
|
|
|
2035
|
|
|
50.0
|
|
|
50.0
|
|
Current
maturities
|
|
|
|
|
|
(225.5
|
)
|
|
-
|
|
Total
consolidated KCP&L excluding current maturities
|
|
|
|
|
|
751.4
|
|
|
976.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
7.74%
Affordable Housing Notes
|
|
|
2006-2008
|
|
|
1.7
|
|
|
2.6
|
|
4.25%
FELINE PRIDES Senior Notes
|
|
|
2009
|
|
|
163.6
|
|
|
163.6
|
|
Current
maturities **
|
|
(164.4
|
)
|
|
(1.7
|
)
|
Total
consolidated Great Plains Energy excluding current
maturities
|
$
|
752.3
|
|
$
|
1,140.9
|
|
*
Weighted-average interest rates at September 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
**
Includes $163.6 million of FELINE PRIDES Senior Notes scheduled
to mature
in 2009 that must be
|
remarketed between August 16, 2006 and February 16, 2007.
|
|
|
|
|
|
|
Effective
Interest Rates on KCP&L’s Unsecured Notes at September 30,
2006
Interest
rate swaps on KCP&L’s Series A, B and D EIRR bonds resulted in an effective
interest rate of 6.27%.
As
a
result of amortizing the gain recognized in other comprehensive income
(OCI) on
KCP&L’s 2005 Treasury Locks (T-Locks), the effective interest rate on
KCP&L’s $250.0 million of 6.05% Senior Notes that were issued via a private
placement during 2005 is 5.78
%.
In the
second quarter of 2006, KCP&L completed an exchange of these privately
placed notes for $250.0 million of registered 6.05% unsecured senior
notes
maturing in 2035 to fulfill its obligations under a 2005 registration
rights
agreement.
Amortization
of Debt Expense
Great
Plains Energy’s and consolidated KCP&L’s amortization of debt expense is
detailed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
September
30
|
September
30
|
|
|
2006
|
2005
|
2006
|
2005
|
|
|
(millions)
|
|
Consolidated
KCP&L
|
|
$
|
0.5
|
|
$
|
0.6
|
|
$
|
1.5
|
|
$
|
1.7
|
|
Other
Great Plains Energy
|
|
|
0.2
|
|
|
0.1
|
|
|
0.5
|
|
|
0.5
|
|
Total
Great Plains Energy
|
|
$
|
0.7
|
|
$
|
0.7
|
|
$
|
2.0
|
|
$
|
2.2
|
|
Forward
Starting Swaps
During
2006, KCP&L entered into two Forward Starting Swaps (FSS) with a combined
notional principal amount of $225.0 million
to
hedge
interest rate volatility on the anticipated refinancing of KCP&L’s $225.0
million senior notes that mature in March 2007. See Note 18 for additional
information.
Short-Term
Borrowings and Short-Term Bank Lines of Credit
During
May 2006, Great Plains Energy entered into a five-year $600 million
revolving
credit facility with a group of banks. The facility replaced a $550
million
revolving credit facility with a group of banks. A default by Great
Plains
Energy or any of its significant subsidiaries on other indebtedness
totaling
more than $25.0 million is a default under the facility. Under the
terms of this
agreement, Great Plains Energy is required to maintain a consolidated
indebtedness to consolidated capitalization ratio, as defined in the
agreement,
not greater than 0.65 to 1.00 at all times. At September 30, 2006,
the Company
was in compliance with this covenant. At September 30, 2006, Great
Plains Energy
had no cash borrowings and had issued letters of credit totaling
$125.5 million
under
the
credit facility as credit support for Strategic Energy. At December
31,
2005
,
Great
Plains Energy had $6.0 million of outstanding borrowings with an interest
rate
of 4.98% and had issued letters of credit totaling $38.5 million under the
credit facility as credit support for Strategic Energy.
During
May 2006, KCP&L entered into a five-year $400 million revolving credit
facility with a group of banks to provide support for its issuance
of commercial
paper and other general corporate purposes. Great Plains Energy and
KCP&L
may transfer and re-transfer up to $200 million of unused lender commitments
between Great Plains Energy’s and KCP&L’s facilities, so long as the
aggregate lender commitments under either facility does not exceed
$600 million
and the aggregate lender commitments under both facilities does not
exceed $1
billion. The facility replaced a $250 million revolving credit facility
with a
group of banks. A default by KCP&L on other indebtedness totaling more than
$25.0 million is a default under the facility. Under the terms of the
agreement,
KCP&L is required to maintain a consolidated indebtedness to consolidated
capitalization ratio, as defined in the agreement, not greater than
0.65 to 1.00
at all times. At September 30, 2006, KCP&L was in compliance with this
covenant. At September 30, 2006, KCP&L had $80.6 million
of
commercial paper outstanding, at a weighted-average interest rate of
5.48%
and
no
cash borrowings under the facility. At December 31, 2005,
KCP&L
had $31.9 million of commercial paper outstanding, at a weighted-average
interest rate of 4.35% and no cash borrowings under the facility.
Strategic
Energy has a $135 million revolving credit facility with a group of
banks that
expires in June 2009. So long as Strategic Energy is in compliance
with the
agreement, it may increase this amount by up to $15 million by increasing
the
commitment of one or more lenders that have agreed to such increase,
or by
adding one or more lenders with the consent of the administrative agent.
In
October 2006, Great Plains Energy, as permitted by the terms of the
agreement,
requested and received a reduction in its guarantee of this facility
to a
maximum amount of $12.5 million and has guaranteed the $12.5 million.
A default
by Strategic Energy on other indebtedness, as defined in the facility,
totaling
more than $7.5 million is a default under the facility. Under the terms
of this
agreement, Strategic Energy is required to maintain a minimum net worth
of $75.0
million, a minimum fixed charge coverage ratio of at least 1.05 to
1.00 and a
minimum debt service coverage ratio of at least 4.00 to 1.00, as those
terms are
defined in the agreement. In addition, under the terms of this agreement,
Strategic Energy is required to maintain a maximum funded indebtedness
to EBITDA
ratio, as defined in the agreement, of 3.00 to 1.00, on a quarterly
basis
through June 30, 2007, and 2.75 to 1.00 thereafter. In the event of a
breach of one or more of these four covenants, so long as no other
default has
occurred, Great Plains Energy may cure the breach through a cash infusion,
a
guarantee increase or a combination of the two. At September 30, 2006,
Strategic
Energy was in compliance with these covenants. At September 30, 2006,
$70.9 million
in
letters of credit had been issued and there were no cash borrowings
under the
agreement. At December 31, 2005
,
$75.2
million in letters of credit had been issued and there were no cash
borrowings
under the agreement.
Common
Shareholders’ Equity
Great
Plains Energy filed a shelf registration statement with the Securities
and
Exchange Commission (SEC) in May 2006 relating to
Senior
Debt Securities, Subordinated Debt Securities, shares of Common Stock,
Warrants,
Stock Purchase Contracts and Stock Purchase Units. In May 2006, Great
Plains
Energy issued 5.2
million
shares of common stock at $27.50 per share under this registration
statement
with $144.3 million in gross proceeds and issuance costs of $5.2
million.
In
May
2006, Great Plains Energy also entered into a forward sale agreement
with
Merrill Lynch Financial Markets, Inc. (forward purchaser) for 1.8 million
shares
of Great Plains Energy common stock. The forward purchaser borrowed
and sold the
same number of shares of Great Plains Energy’s common stock to hedge its
obligations under the forward sale agreement. Great Plains Energy did
not
initially receive any proceeds from the sale of common stock shares
by the
forward purchaser. The forward sale agreement provides for a settlement
date or
dates to be specified at Great Plains Energy’s discretion, subject to certain
exceptions, no later than May 23, 2007. Subject to the provisions of
the forward
sale agreement, Great Plains Energy will receive an amount equal to
$26.6062 per
share, plus interest based on the federal funds rate less a spread
and less
certain scheduled decreases if Great Plains Energy elects to physically
settle
the forward sale agreement by delivering solely shares of common stock.
In most
circumstances, Great Plains Energy also has the right, in lieu of physical
settlement, to elect cash or net physical settlement.
In
May
2006, Great Plains Energy registered an additional 1.0 million shares
of common
stock with the SEC for its Dividend Reinvestment and Direct Stock Purchase
Plan,
bringing the total number of shares registered under this plan to 4.0
million.
The plan allows for the purchase of common shares by reinvesting dividends
or
making optional cash payments.
In
March
2006, Great Plains Energy registered an additional 1.0 million shares
of common
stock with the SEC for a defined contribution savings plan, bringing
the total
number of shares registered under this plan to 10.3 million. Shares
issued under
the plans may be either newly issued shares or shares purchased in
the open
market.
9.
|
PENSION
PLANS AND OTHER EMPLOYEE BENEFITS
|
The
Company maintains defined benefit pension plans for substantially all
employees,
including officers, of KCP&L, Services and WCNOC. Pension benefits under
these plans reflect the employees’ compensation, years of service and age at
retirement.
The
MPSC
and KCC issued orders in 2005 establishing KCP&L’s annual pension costs at
$22 million for the years 2005 and 2006 through the creation of regulatory
assets and liabilities for future recovery from or refund to customers,
as
appropriate. During the third quarter of 2005, KCP&L implemented these
orders retroactive to January 1, 2005.
In
addition to providing pension benefits, the Company provides certain
postretirement health care and life insurance benefits for substantially
all
retired employees of KCP&L, Services and WCNOC. The cost of postretirement
benefits charged to KCP&L are accrued during an employee's years of service
and recovered through rates.
The
following tables provide the components of net periodic benefit costs
prior to
the effects of capitalization and sharing with joint-owners of power
plants.
Included in net periodic benefit costs are settlement charges related
to the
workforce realignment, discussed below. The total amount of 2006 pension
settlement charges related to the workforce realignments and other
retirements
will be determined in the fourth quarter after the year-end of the
pension
plans.
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Other
Benefits
|
|
Three
Months Ended September 30
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Components
of net periodic benefit cost
|
|
(millions)
|
Service
cost
|
|
$
|
4.7
|
|
$
|
4.4
|
|
$
|
0.3
|
|
$
|
0.2
|
|
Interest
cost
|
|
|
7.8
|
|
|
7.5
|
|
|
0.7
|
|
|
0.7
|
|
Expected
return on plan assets
|
|
|
(8.1
|
)
|
|
(8.2
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
Amortization
of prior service cost
|
|
|
1.0
|
|
|
1.1
|
|
|
-
|
|
|
0.1
|
|
Recognized
net actuarial loss
|
|
|
7.9
|
|
|
4.7
|
|
|
0.2
|
|
|
0.2
|
|
Transition
obligation
|
|
|
-
|
|
|
-
|
|
|
0.3
|
|
|
0.3
|
|
Settlement
charges
|
|
|
2.0
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
periodic benefit cost before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
regulatory
adjustment
|
|
|
15.3
|
|
|
9.5
|
|
|
1.4
|
|
|
1.3
|
|
Regulatory
adjustment
|
|
|
(7.6
|
)
|
|
(10.8
|
)
|
|
-
|
|
|
-
|
|
Net
periodic benefit cost
|
|
$
|
7.7
|
|
$
|
(1.3
|
)
|
$
|
1.4
|
|
$
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Other
Benefits
|
|
Year
to Date September 30
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Components
of net periodic benefit cost
|
|
(millions)
|
Service
cost
|
|
$
|
14.1
|
|
$
|
13.0
|
|
$
|
0.7
|
|
$
|
0.7
|
|
Interest
cost
|
|
|
23.2
|
|
|
22.4
|
|
|
2.2
|
|
|
2.1
|
|
Expected
return on plan assets
|
|
|
(24.5
|
)
|
|
(24.3
|
)
|
|
(0.4
|
)
|
|
(0.5
|
)
|
Amortization
of prior service cost
|
|
|
3.2
|
|
|
3.2
|
|
|
0.1
|
|
|
0.2
|
|
Recognized
net actuarial loss
|
|
|
23.9
|
|
|
14.0
|
|
|
0.6
|
|
|
0.4
|
|
Transition
obligation
|
|
|
-
|
|
|
-
|
|
|
0.9
|
|
|
0.9
|
|
Settlement
charges
|
|
|
9.5
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
periodic benefit cost before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
regulatory
adjustment
|
|
|
49.4
|
|
|
28.3
|
|
|
4.1
|
|
|
3.8
|
|
Regulatory
adjustment
|
|
|
(22.9
|
)
|
|
(10.8
|
)
|
|
-
|
|
|
-
|
|
Net
periodic benefit cost
|
|
$
|
26.5
|
|
$
|
17.5
|
|
$
|
4.1
|
|
$
|
3.8
|
|
During
September 2006, the FASB issued Statement of SFAS No. 158, “Employers’
Accounting for Defined Pension and Other Postretirement Plans.” SFAS No. 158
addresses balance sheet measurements and reporting requirements and
will require
the Company to recognize the funded status of the pension and postretirement
plans on the balance sheet in the fourth quarter of 2006. SFAS No.
158 will be
applied prospectively. Prior to the adoption of SFAS No. 158, the
funded status
of the pension and postretirement plans was only disclosed in the
notes to
consolidated financial statements. Management is currently evaluating
the impact
of SFAS No. 158.
Skill
Set Realignment and Pension Settlement Charges
In
2005
and early 2006, management undertook a process to assess, improve
and reposition
the skill sets of employees for implementation of the comprehensive
energy plan.
KCP&L recorded $9.4 million
year
to
date September 30, 2006, related to this workforce realignment process
reflecting severance, benefits and related payroll taxes provided
by KCP&L
to employees. Management has been filling positions with the specific
skill sets
and talent needed to achieve KCP&L’s goals. Management believes that the
realignment allows for optimization of employee levels and avoids
future
additional
expense.
F
or
the
three months ended and year to date September 30, 2006, KCP&L incurred $2.0
million and $9.3 million of pension settlement charges associated
with the
realignment resulting in $1.4 million
and $6.2
million, respectively, of expense recorded after amounts capitalized
and billed
to joint owners of power plants. The pension settlement charges were
a result of
the number of employees retiring and selecting the lump-sum payment
option.
KCP&L
anticipates recording additional expense related to pension settlement
charges
after amounts capitalized and billed to joint owners of power plants
of
approximately $8 million
during
the fourth quarter of 2006 associated with its management and union
pension
plans as a result of additional employees retiring and selecting
the lump-sum
payment option. The total amount of 2006 pension settlement charges
related to
the workforce realignments and other retirements will be determined
in the
fourth quarter after the year-end of the pension plans. In the second
quarter of
2006, KCP&L requested regulatory accounting treatment from MPSC and KCC to
defer pension settlement charges, effective from January 1, 2006,
and amortize
the deferred amount over a five-year period to be established in
the rate
proceeding following the current 2006 proceedings. In the third quarter
of 2006,
KCP&L reached a negotiated settlement with certain parties in the Kansas
rate proceeding and filed a Stipulation and Agreement with KCC that
includes
this requested regulatory treatment for pension costs. At September
30, 2006, no
amounts have been deferred pending the outcome of these requests.
As
of
January 1, 2006, the Company adopted SFAS No. 123 (revised 2004),
“Share-Based
Payment” using the modified prospective application method. The adoption of
SFAS
No. 123R had an insignificant effect on the companies’ consolidated statements
of income and cash flows for the three months ended and year to date
September
30, 2006.
The
Company’s Long-Term Incentive Plan is an equity compensation plan approved
by
its shareholders. KCP&L does not have an equity compensation plan; however,
KCP&L officers participate in Great Plains Energy’s Long-Term Incentive
Plan. The Long-Term Incentive Plan permits the grant of restricted
stock, stock
options, limited stock appreciation rights and performance shares
to officers of
the Company and its subsidiaries. The maximum number of shares of
Great Plains
Energy common stock that can be issued under the plan is 3.0 million.
Common
stock shares delivered by the Company under the Long-Term Incentive
Plan may be
authorized but unissued, held in the treasury or purchased on the
open market
(including private purchases) in accordance with applicable security
laws. The
Company
has
a
policy of delivering newly issued shares, or shares surrendered by
Plan
participants on account of withholding taxes and held in treasury,
or both, to
satisfy share option exercises and does not expect to repurchase
common shares
during 2006 to satisfy stock option exercises for the period.
SFAS
No.
123R requires forfeitures to be estimated. Forfeiture rates are based
on
historical forfeitures and future expectations and will be reevaluated
annually.
The following table summarizes Great Plains Energy’s and KCP&L’s equity
compensation expense and income tax benefits.
|
|
|
|
Year
to Date
|
|
|
September
30
|
September
30
|
|
|
2006
|
|
2005
|
|
|
|
2006
|
|
2005
|
|
Compensation
expense
|
|
(millions
)
|
Great
Plains Energy
|
|
$
|
1.2
|
|
$
|
0.9
|
|
|
|
|
$
|
2.9
|
|
$
|
2.5
|
|
KCP&L
|
|
|
0.7
|
|
|
0.6
|
|
|
|
|
|
1.8
|
|
|
1.4
|
|
Income
tax benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great
Plains Energy
|
|
|
0.4
|
|
|
0.3
|
|
|
|
|
|
0.8
|
|
|
0.9
|
|
KCP&L
|
|
|
0.2
|
|
|
0.2
|
|
|
|
|
0.5
|
|
|
0.5
|
|
Stock
Options Granted 2001 - 2003
Stock
options were granted under the plan at market value of the shares on
the grant
date. The options vest three years after the grant date and expire
in ten years
if not exercised. The fair value for the stock options granted in 2001
- 2003
was estimated at the date of grant using the Black-Scholes option-pricing
model.
Compensation expense and accrued dividends related to stock options
are
recognized over the stated vesting period. Exercise prices
range
from $24.90 to $27.73 and all stock options are fully vested at September
30,
2006. All stock option activity year to date September 30, 2006, is
summarized
in the following table.
|
|
|
|
|
|
|
|
|
|
Exercise
|
Stock
Options
|
|
Shares
|
|
Price*
|
Beginning
balance
|
|
|
111,455
|
|
$
|
25.56
|
|
Forfeited
or expired
|
|
|
(1,983
|
)
|
|
27.73
|
|
Exercisable
at September 30
|
|
|
109,472
|
|
|
25.52
|
|
*
weighted-average
|
|
|
|
|
|
|
|
At
September 30, 2006, the remaining weighted-average contractual term
was 5.2
years
.
The
total fair value of stock options vested was insignificant for the
three months
ended and year to date September 30, 2006 and 2005.
Performance
Shares
The
payment of performance shares is contingent upon achievement of specific
performance goals over a stated period of time as approved by the Compensation
and Development Committee of the Company’s Board of Directors. The number of
performance shares ultimately paid can vary from the number of shares
initially
granted depending on Company performance, based on internal and external
measures, over stated performance periods. Performance shares have
a value equal
to the market value of the shares on the grant date with accruing dividends.
Compensation expense, calculated by multiplying shares by the related
grant-date
fair value less the present value of dividends, and accrued dividends
related to
performance shares are recognized over the stated period.
Performance
share activity year to date September 30, 2006, is summarized in the
following
table.
|
|
|
|
|
|
|
|
|
|
Grant
Date
|
Performance
|
|
Shares
|
|
Fair
Value*
|
Beginning
balance
|
|
|
172,761
|
|
$
|
30.17
|
|
Performance
adjustment
|
|
|
(2,650
|
)
|
|
|
|
Granted
|
|
|
94,159
|
|
|
28.20
|
|
Issued
|
|
|
(9,499
|
)
|
|
27.73
|
|
Ending
balance
|
|
|
254,771
|
|
|
29.56
|
|
*
weighted-average
|
|
|
|
|
|
|
|
At
September 30, 2006, the remaining weighted-average contractual term
was 1.4
years
.
There
was no activity for performance shares during the three months ended
and the
weighted-average grant-date fair value for shares granted was $28.20
and $30.34
year
to
date September 30, 2006 and 2005, respectively. At September 30, 2006,
there was $3.1 million
of
total
unrecognized compensation expense, net of forfeiture rates, related
to
performance shares granted under the Plan, which will be recognized
over the
remaining weighted-average contractual term. The total fair value of
shares vested was insignificant during the three months ended and
year to date
September 30, 2006 and 2005.
Restricted
Stock
Restricted
stock cannot be sold or otherwise transferred by the recipient prior
to vesting
and has a value equal to the fair market value of the shares on the
issue date.
Restricted stock shares vest over a stated period of time with accruing
reinvested dividends. Compensation expense, calculated by multiplying
shares by
the related grant-date fair value less the present value of dividends,
and
accrued dividends related to restricted stock are recognized over
the stated
vesting period. Restricted stock activity year to date September
30, 2006, is
summarized in the following table.
|
|
|
Nonvested
|
|
|
|
Grant
Date
|
Restricted
stock
|
|
Shares
|
|
Fair
Value*
|
Beginning
balance
|
|
|
119,966
|
|
$
|
30.50
|
|
Issued
|
|
|
48,041
|
|
|
28.22
|
|
Forfeited
|
|
|
(2,000
|
)
|
|
28.20
|
|
Ending
balance
|
|
|
166,007
|
|
|
29.86
|
|
*
weighted-average
|
|
|
|
|
|
|
|
At
September 30, 2006, the remaining weighted-average contractual term
was 1.4
years
.
There
was no activity for restricted shares during the three months ended
and the
weighted-average grant-date fair value of shares granted was $28.22
and $30.56
year
to
date September 30, 2006 and 2005, respectively. At September 30, 2006,
there was
$1.7 million
of
total
unrecognized compensation expense, net of forfeiture rates, related
to nonvested
restricted stock granted under the Plan, which will be recognized over
the
remaining weighted-average contractual term. No shares vested during the
three months ended and year to date September 30, 2006 and 2005.
Components
of income taxes are detailed in the following tables.
|
|
|
|
|
|
|
|
September
30
|
September
30
|
|
Great
Plains Energy
|
|
2006
|
2005
|
2006
|
2005
|
Current
income taxes
|
|
(millions
)
|
|
Federal
|
|
$
|
38.3
|
|
$
|
39.4
|
|
$
|
67.6
|
|
$
|
49.9
|
|
State
|
|
|
2.9
|
|
|
0.7
|
|
|
4.3
|
|
|
0.1
|
|
Total
|
|
|
41.2
|
|
|
40.1
|
|
|
71.9
|
|
|
50.0
|
|
Deferred
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(12.0
|
)
|
|
(2.4
|
)
|
|
(26.7
|
)
|
|
0.1
|
|
State
|
|
|
(1.9
|
)
|
|
(18.0
|
)
|
|
(6.2
|
)
|
|
(15.8
|
)
|
Total
|
|
|
(13.9
|
)
|
|
(20.4
|
)
|
|
(32.9
|
)
|
|
(15.7
|
)
|
Investment
tax credit amortization
|
|
|
(0.8
|
)
|
|
(1.0
|
)
|
|
(2.3
|
)
|
|
(2.9
|
)
|
Total
income tax expense
|
|
|
26.5
|
|
|
18.7
|
|
|
36.7
|
|
|
31.4
|
|
Less:
taxes on discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
tax (benefit) expense
|
|
|
-
|
|
|
1.4
|
|
|
-
|
|
|
(1.0
|
)
|
Income
taxes on continuing operations
|
|
$
|
26.5
|
|
$
|
17.3
|
|
$
|
36.7
|
|
$
|
32.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
|
September
30
|
|
Consolidated
KCP&L
|
|
2006
|
2005
|
2006
|
2005
|
Current
income taxes
|
|
|
(millions
)
|
|
Federal
|
|
$
|
36.5
|
|
$
|
45.1
|
|
$
|
60.0
|
|
$
|
63.2
|
|
State
|
|
|
4.6
|
|
|
1.6
|
|
|
7.3
|
|
|
4.2
|
|
Total
|
|
|
41.1
|
|
|
46.7
|
|
|
67.3
|
|
|
67.4
|
|
Deferred
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(0.9
|
)
|
|
(10.6
|
)
|
|
(2.8
|
)
|
|
(13.7
|
)
|
State
|
|
|
(0.1
|
)
|
|
(18.5
|
)
|
|
(0.3
|
)
|
|
(18.8
|
)
|
Total
|
|
|
(1.0
|
)
|
|
(29.1
|
)
|
|
(3.1
|
)
|
|
(32.5
|
)
|
Investment
tax credit amortization
|
|
|
(0.8
|
)
|
|
(1.0
|
)
|
|
(2.3
|
)
|
|
(2.9
|
)
|
Total
|
|
$
|
39.3
|
|
$
|
16.6
|
|
$
|
61.9
|
|
$
|
32.0
|
|
Income
Tax Expense and Effective Income Tax Rates
Income
tax expense and the effective income tax rates reflected in continuing
operations in the financial statements and the reasons for their
differences
from the statutory federal rates are detailed in the following
tables
.
Great
Plains Energy
|
|
|
Income
Tax Expense
|
Income
Tax Rate
|
|
Three
Month Ended September 30
|
|
2006
|
2005
|
2006
|
2005
|
Federal
statutory income tax
|
|
$
|
28.6
|
|
$
|
37.3
|
|
|
35.0
|
%
|
|
35.0
|
%
|
Differences
between book and tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation
not normalized
|
|
|
0.2
|
|
|
1.2
|
|
|
0.2
|
|
|
1.2
|
|
Amortization
of investment tax credits
|
|
|
(0.8
|
)
|
|
(1.0
|
)
|
|
(0.9
|
)
|
|
(0.9
|
)
|
Federal
income tax credits
|
|
|
(2.1
|
)
|
|
(2.2
|
)
|
|
(2.5
|
)
|
|
(2.1
|
)
|
State
income taxes
|
|
|
0.9
|
|
|
2.5
|
|
|
1.0
|
|
|
2.4
|
|
Changes
in uncertain tax positions, net
|
|
|
0.2
|
|
|
(7.8
|
)
|
|
0.2
|
|
|
(7.3
|
)
|
Rate
change on deferred taxes
|
|
|
-
|
|
|
(11.7
|
)
|
|
-
|
|
|
(11.0
|
)
|
Other
|
|
|
(0.5
|
)
|
|
(1.0
|
)
|
|
(0.6
|
)
|
|
(1.0
|
)
|
Total
|
|
$
|
26.5
|
|
$
|
17.3
|
|
|
32.4
|
%
|
|
16.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
Income
Tax Rate
|
Year
to Date September 30
|
|
2006
|
2005
|
2006
|
2005
|
Federal
statutory income tax
|
|
$
|
44.6
|
|
$
|
58.5
|
|
|
35.0
|
%
|
|
35.0
|
%
|
Differences
between book and tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation
not normalized
|
|
|
0.9
|
|
|
2.1
|
|
|
0.7
|
|
|
1.2
|
|
Amortization
of investment tax credits
|
|
|
(2.3
|
)
|
|
(2.9
|
)
|
|
(1.8
|
)
|
|
(1.7
|
)
|
Federal
income tax credits
|
|
|
(4.5
|
)
|
|
(7.4
|
)
|
|
(3.5
|
)
|
|
(4.4
|
)
|
State
income taxes
|
|
|
-
|
|
|
2.9
|
|
|
(0.1
|
)
|
|
1.8
|
|
Changes
in uncertain tax positions, net
|
|
|
0.2
|
|
|
(6.8
|
)
|
|
0.1
|
|
|
(4.1
|
)
|
Rate
change on deferred taxes
|
|
|
-
|
|
|
(11.7
|
)
|
|
-
|
|
|
(7.0
|
)
|
Other
|
|
|
(2.2
|
)
|
|
(2.3
|
)
|
|
(1.6
|
)
|
|
(1.4
|
)
|
Total
|
|
$
|
36.7
|
|
$
|
32.4
|
|
|
28.8
|
%
|
|
19.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
Income
Tax Rate
|
Three
Month Ended September 30
|
|
2006
|
2005
|
2006
|
2005
|
Federal
statutory income tax
|
|
$
|
37.9
|
|
$
|
29.9
|
|
|
35.0
|
%
|
|
35.0
|
%
|
Differences
between book and tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation
not normalized
|
|
|
0.2
|
|
|
1.2
|
|
|
0.2
|
|
|
1.4
|
|
Federal
income tax credits
|
|
|
(0.9
|
)
|
|
-
|
|
|
(0.8
|
)
|
|
-
|
|
Amortization
of investment tax credits
|
|
|
(0.8
|
)
|
|
(1.0
|
)
|
|
(0.7
|
)
|
|
(1.1
|
)
|
State
income taxes
|
|
|
3.0
|
|
|
2.0
|
|
|
2.8
|
|
|
2.3
|
|
Changes
in uncertain tax positions, net
|
|
|
0.1
|
|
|
(1.9
|
)
|
|
0.1
|
|
|
(2.2
|
)
|
Parent
company tax benefits
|
|
|
(1.1
|
)
|
|
(1.7
|
)
|
|
(1.0
|
)
|
|
(2.0
|
)
|
Rate
change on deferred taxes
|
|
|
-
|
|
|
(11.7
|
)
|
|
-
|
|
|
(13.7
|
)
|
Other
|
|
|
0.9
|
|
|
(0.2
|
)
|
|
0.8
|
|
|
(0.4
|
)
|
Total
|
|
$
|
39.3
|
|
$
|
16.6
|
|
|
36.4
|
%
|
|
19.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
Income
Tax Rate
|
Year
to Date September 30
|
|
2006
|
2005
|
2006
|
2005
|
Federal
statutory income tax
|
|
$
|
62.5
|
|
$
|
49.1
|
|
|
35.0
|
%
|
|
35.0
|
%
|
Differences
between book and tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation
not normalized
|
|
|
0.9
|
|
|
2.1
|
|
|
0.5
|
|
|
1.5
|
|
Federal
income tax credits
|
|
|
(0.9
|
)
|
|
-
|
|
|
(0.5
|
)
|
|
-
|
|
Amortization
of investment tax credits
|
|
|
(2.3
|
)
|
|
(2.9
|
)
|
|
(1.3
|
)
|
|
(2.1
|
)
|
State
income taxes
|
|
|
4.7
|
|
|
3.2
|
|
|
2.7
|
|
|
2.3
|
|
Changes
in uncertain tax positions, net
|
|
|
0.6
|
|
|
(1.2
|
)
|
|
0.3
|
|
|
(0.8
|
)
|
Parent
company tax benefits
|
|
|
(3.3
|
)
|
|
(4.5
|
)
|
|
(1.9
|
)
|
|
(3.2
|
)
|
Rate
change on deferred taxes
|
|
|
-
|
|
|
(11.7
|
)
|
|
-
|
|
|
(8.4
|
)
|
Other
|
|
|
(0.3
|
)
|
|
(2.1
|
)
|
|
(0.1
|
)
|
|
(1.5
|
)
|
Total
|
|
$
|
61.9
|
|
$
|
32.0
|
|
|
34.7
|
%
|
|
22.8
|
%
|
For
the
three months ended and year to date September 30, 2005, Great Plains
Energy’s
and consolidated KCP&L’s income taxes were reduced by $11
.7
million reflecting a reduction of KCP&L’s deferred tax balances as a result
of a reduction in the companies’ composite tax rate due to the favorable impact
of sustained audit positions. SFAS No. 109, “Accounting for Income Taxes”
required the companies to adjust deferred tax balances to reflect tax
rates that
are anticipated to be in effect when the differences reverse. Great
Plains
Energy’s income tax expense was also reduced in 2005 by $5.7
million
due to events during the three months ended September 30, 2005, that
strengthened the probability of sustaining tax deductions taken on
previously
filed tax returns.
Deferred
Income Taxes
Great
Plains Energy’s combined deferred income taxes - current assets and deferred
income taxes - current liabilities changed from a liability of $1.3
million at
December 31, 2005, to an asset of $46.3 million. The change in the
fair value of
Strategic Energy’s energy-related derivative instruments increased the asset
$39.0
million.
Uncertain
Tax Positions
In
July
2006, the FASB issued FASB Interpretation (FIN) No. 48, “Accounting for
Uncertainty in Income Taxes,” an interpretation of SFAS No. 109, “Accounting for
Income Taxes”. FIN No. 48 clarifies how companies calculate and disclose
uncertain tax positions. Great Plains Energy and consolidated KCP&L are
required to adopt the provisions of FIN No. 48 for periods beginning
in 2007,
although earlier adoption is permitted. Management is currently evaluating
the
impact of FIN No. 48 and has not yet determined the impact on Great
Plains
Energy and consolidated KCP&L’s consolidated financial statements.
Management evaluates and records tax liabilities for uncertain tax
positions
based on the probability of ultimately sustaining the tax deductions
or income
positions. Management assesses the probabilities of successfully defending
the
tax deductions or income positions based upon statutory, judicial or
administrative authority.
At
September 30, 2006 and December 31, 2005, the Company had $4.8 million
and
$4.6 million
,
respectively, of liabilities for uncertain tax positions related to
tax
deductions or income positions taken on the Company’s tax returns. Consolidated
KCP&L had liabilities for uncertain tax positions of $1.8 million
and
$1.2 million
at
September 30, 2006 and December 31, 2005, respectively. Management believes
the tax deductions or income positions are properly treated on such
tax returns
but has recorded reserves based upon its assessment of the probabilities
that
certain deductions or income positions may not be sustained when the
returns are
audited. The tax returns containing these tax deductions or income
positions are
currently under audit or will likely be audited. The timing of the
resolution of
these audits is uncertain. If the positions are ultimately sustained,
the
companies will reverse these tax provisions to net income. If the positions
are
not ultimately sustained, the companies
may
be
required to make cash payments plus interest and/or utilize the companies’
federal and state credit carryforwards.
12.
|
KLT
GAS DISCONTINUED OPERATIONS
|
The
KLT
Gas natural gas properties (KLT Gas portfolio) was reported as discontinued
operations in accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” after the 2004 Board of Directors approval to
sell the KLT Gas portfolio and discontinue the gas business. During
2004 and
2005, KLT Gas completed sales of the KLT Gas portfolio and in 2006
KLT Gas has
no active operations.
13.
|
RELATED
PARTY TRANSACTIONS AND RELATIONSHIPS
|
Consolidated
KCP&L receives various support and administrative services from Services.
These services are billed to consolidated KCP&L at cost, based on payroll
and other expenses, incurred by Services for the benefit of consolidated
KCP&L. These costs totaled $4.6 million
and
$14.1
million
for the
three months ended and year to date September 30, 2006, respectively,
and $7.0
million
and
$37.9 million
for the
same periods in 2005. These costs consisted primarily of employee compensation,
benefits and fees associated with various professional services. At
September
30, 2006, and December 31, 2005, consolidated KCP&L had a net
intercompany payable to Services of $2.6 million
and
$3.5
million
,
respectively. In the third quarter of 2005,
approximately
80% of Services’ employees were transferred to KCP&L to better align
resources with the operating business.
At
September 30, 2006, and December 31, 2005, consolidated KCP&L’s balance
sheets reflect a note payable from HSS to Great Plains Energy of $0.6
million.
14.
|
COMMITMENTS
AND CONTINGENCIES
|
Environmental
Matters
The
Company is subject to regulation by federal, state and local authorities
with
regard to air and other environmental matters primarily through KCP&L’s
operations. The generation, transmission and distribution of electricity
produces and requires disposal of certain hazardous products that are
subject to
these laws and regulations. In addition to imposing continuing compliance
obligations, these laws and regulations authorize the imposition of
substantial
penalties for noncompliance, including fines, injunctive relief and
other
sanctions. Failure to comply with these laws and regulations could
have a
material adverse effect on consolidated KCP&L and Great Plains
Energy.
KCP&L
operates in an environmentally responsible manner and seeks to use
current
technology to avoid and treat contamination. KCP&L regularly conducts
environmental audits designed to ensure compliance with governmental
regulations
and to detect contamination. At September 30, 2006, and December 31, 2005,
KCP&L had $0.3 million
accrued
for environmental remediation expenses for water monitoring at one
site. The
amounts accrued were established on an undiscounted basis and KCP&L does not
currently have an estimated time frame over which the accrued amounts
may be
paid out.
Environmental-related
legislation is regularly introduced. Such legislation typically includes
various
compliance dates and compliance limits. Such legislation, including,
but not
limited to, potential carbon tax legislation, could have the potential
for a
significant financial impact on KCP&L, including the installation of new
pollution control equipment to achieve compliance. However, KCP&L’s
expectation is that any required environmental expenditures will be
recovered
through rates. KCP&L will continue to monitor proposed
legislation.
The
following table
contains
current estimates of expenditures to comply with environmental laws
and
regulations described below. The range of estimated expenditures has
increased
significantly from the range reported in the companies’ June 30, 2006, Form
10-Q. The demand for environmental projects has increased substantially
with
many utilities in the United States starting similar projects to address
changing environmental regulations. This demand has constrained labor
and
material resources resulting in a significant escalation in the cost
and
completion times for environmental retrofits. KCP&L continues to refine its
cost estimates detailed in the table below and explore alternatives.
The
allocation between states is based on location of the facilities and
has no
bearing as to recovery in jurisdictional rates.
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Air Estimated Required
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
Environmental
Expenditures
|
|
Missouri
|
Kansas
|
Total
|
Timetable
|
|
|
(millions)
|
|
CAIR
|
|
$375
|
-
|
993
|
$
|
-
|
|
$375
|
-
|
993
|
2006
- 2015
|
Incremental
BART
|
|
|
-
|
|
272
|
-
|
527
|
272
|
-
|
527
|
2006
- 2017
|
Incremental
CAMR
|
|
11
|
-
|
15
|
5
|
-
|
6
|
16
|
-
|
21
|
2010
- 2018
|
Estimated
required environmental expenditures
|
|
$386
|
-
|
1,008
|
$277
|
-
|
533
|
$633
|
-
|
1,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure
estimates provided in the table above include, but are not limited
to, the
accelerated environmental upgrade expenditures included in KCP&L’s
comprehensive energy plan. See Note 7 for additional information regarding
the
status of environmental upgrade expenditures under KCP&L’s comprehensive
energy plan. These expenditures are expected to reduce SO
2
,
NO
x
,
mercury
and air particulate matter emissions.
Clean
Air Interstate Rule
The
Environmental Protection Agency (EPA) Clean Air Interstate Rule (CAIR)
requires
reductions in SO
2
and
NO
x
emissions in 28 states, including Missouri. The reduction in both SO
2
and
NO
x
emissions will be accomplished through establishment of permanent statewide
caps
for NO
x
effective January 1, 2009, and SO
2
effective January 1, 2010. More restrictive caps will be effective
January 1, 2015. KCP&L’s fossil fuel-fired plants located in Missouri
are subject to CAIR, while its fossil fuel-fired plants in Kansas are
not.
KCP&L
expects to meet the emissions reductions required by CAIR at its Missouri
plants
through a combination of pollution control capital projects and the
purchase of
emission allowances in the open market as needed. The final CAIR rule
establishes a market-based cap-and-trade program. Missouri has developed
State
Implementation Plan (SIP) rules, which include an emission allowance
allocation
mechanism, and has currently accepted comments on these preliminary
rules in
development. The SIP proposed rules will next be published for additional
comment. Facilities will demonstrate compliance with CAIR by holding
sufficient
allowances for each ton of SO
2
and
NO
x
emitted
in any given year with SO
2
emission
allowances transferable among all regulated facilities nationwide and
NO
x
emission
allowances transferable among all regulated facilities within the 28
CAIR
states. KCP&L will also be allowed to utilize unused SO
2
emission
allowances that it has accumulated during previous years of the Acid
Rain
Program to meet the more stringent CAIR requirements. At September
30, 2006,
KCP&L had accumulated unused SO
2
emission
allowances sufficient to support just under 120,000 tons of SO
2
emission
under the provisions of the Acid Rain program, which are recorded in
inventory
at zero cost. KCP&L is permitted to sell excess SO
2
emission
allowances in accordance with KCP&L’s comprehensive energy plan as approved
by the MPSC and KCC.
Analysis
of the final CAIR rule indicates that selective catalytic reduction
technology
for NO
x
control
and scrubbers for SO
2
control
will likely be required for KCP&L’s Montrose Station in Missouri, in
addition to the environmental upgrades at Iatan No. 1 included in the
comprehensive energy plan. The timing of
the
installation of such control equipment is currently being developed.
As
discussed below, certain of the control technology for SO
2
and
NO
x
will
also aid in the control of mercury.
Best
Available Retrofit Technology Rule
The
EPA
best available retrofit technology rule (BART) directs state air quality
agencies to identify whether visibility-reducing emissions from sources
subject
to BART are below limits set by the state or whether retrofit measures
are
needed to reduce emissions. BART applies to specific eligible facilities
including LaCygne Nos. 1 and 2 in Kansas and Iatan No. 1 and Montrose
No. 3 in
Missouri. The CAIR suggests that states that meet the CAIR requirements
may also
meet BART requirements for individual sources. Missouri has included
this
understanding as part of the proposed CAIR SIP. Kansas is not a CAIR
state and
therefore BART will likely impact LaCygne Nos. 1 and 2. Kansas is in
the process
of completing modeling associated with the rule. States must submit
a BART
implementation plan in 2007 with required emission controls. The BART
emission
control equipment must be compliant within five years after the SIP
is approved
by the EPA.
If
emission controls to comply with BART are required at LaCygne Nos.
1 and 2,
additional capital expenditures will be required above comprehensive
energy plan
upgrades. The ultimate cost of these regulations could be significantly
different from the amounts estimated.
Mercury
Emissions
The
EPA
Clean Air Mercury Rule (CAMR) regulates mercury emissions from coal-fired
power
plants located in 48 states, including Kansas and Missouri, under the
New Source
Performance Standards of the Clean Air Act. The rule established a
market-based
cap-and-trade program that will reduce nationwide utility emissions
of mercury
in two phases. The first phase cap is effective January 1, 2010, and will
establish a permanent nationwide cap of 38 tons of mercury for coal-fired
power
plants. Management anticipates meeting the first phase cap by taking
advantage
of KCP&L’s mercury reductions achieved through capital expenditures to
comply with CAIR and BART. The second phase is effective January 1,
2018, and
will establish a permanent nationwide cap of 15 tons of mercury for
coal-fired
power plants. When fully implemented, the rule will reduce utility
emissions of
mercury by nearly 70% from current emissions of 48 tons per year.
Facilities
will demonstrate compliance with the standard by holding allowances
for each
ounce of mercury emitted in any given year and allowances will be readily
transferable among all regulated facilities nationwide. Under the cap-and-trade
program, KCP&L will be able to purchase mercury allowances or elect to
install pollution control equipment to achieve compliance. While it
is expected
that mercury allowances will be available in sufficient quantities
for purchase
in the 2010-2018 timeframe, the significant reduction in the nationwide
cap in
2018 may hamper KCP&L’s ability to obtain reasonably priced allowances
beyond 2018. Management expects capital expenditures will be required
to install
additional pollution control equipment to meet the second phase cap.
During the
ensuing years, management will closely monitor advances in technology
for
removal of mercury from Powder River Basin (PRB) coal and expects to
make
decisions regarding second phase removal based on then available technology
to
meet the 2018 compliance date. KCP&L participated in the Department of
Energy (DOE) National Energy Technology Laboratory project to investigate
control technology options for mercury removal from coal-fired plants
burning
sub-bituminous coal.
Carbon
Dioxide
The
Clear
Skies Initiative includes a climate change policy, which is a voluntary
program
that relies heavily on incentives to encourage industry to voluntarily
limit
emissions. The strategy includes tax credits, energy conservation programs,
funding for research into new technologies, and a plan to encourage
companies to
track and report their emissions so that companies could gain credits
for use in
any future emissions trading program. The greenhouse strategy links
growth in
emissions of greenhouse gases to economic output and is intended to
reduce the
greenhouse gas intensity of the U.S. economy 18% by 2012. Greenhouse
gas
intensity measures the ratio of greenhouse gas
emissions
to economic output as measured by Gross Domestic Product (GDP). Under
this plan,
as the economy grows, greenhouse gases also would continue to grow,
although at
a slower rate than they would have without these policies in place.
When viewed
per unit of economic output, the rate of emissions would drop. The
plan projects
that the U.S. would lower its rate of greenhouse gas emissions from
an estimated
183 metric tons per $1 million of GDP in 2002 to 151 metric tons per
$1 million of GDP by 2012.
KCP&L
is a member of the Power Partners through Edison Electric Institute
(EEI). Power
Partners is a voluntary program with the DOE under which utilities
commit to
undertake measures to reduce, avoid or sequester CO
2
emissions. Power Partners entered into a cooperative umbrella memorandum
of
understanding (MOU) with the DOE. This MOU contains supply and demand-side
actions as well as offset projects that will be undertaken to reduce
the power
sector’s CO
2
emissions per kWh generated (carbon intensity), consistent with the
EEI’s 2003
commitment of a 3% to 5% reduction over the next decade.
Air
Particulate Matter and Ozone
The
EPA
standards for ozone and particulate matter air quality include an eight-hour
ozone standard and a standard for particulate matter less than 2.5
microns
(PM-2.5) in diameter. The EPA has designated the Kansas City area as
attainment
with respect to the PM-2.5 National Ambient Air Quality Standards (NAAQS).
Additionally, the EPA designated Jackson, Platte, Clay and Cass counties
in
Missouri and Johnson, Linn, Miami and Wyandotte counties in Kansas
as attainment
with respect to the eight-hour ozone NAAQS.
In
September 2006, the EPA announced the new NAAQS for both fine (PM-2.5)
and
coarse (PM-10) particulate matter. The new standards for PM-2.5 are
35
micrograms per cubic meter on a 24-hour basis and 15 micrograms per
cubic meter
on an annual basis. The EPA retained the 24-hour standard of 150 micrograms
per
cubic meter for PM-10 and revoked the annual PM-10 standard as unnecessary.
The
new 24-hour standard for PM-2.5 will increase the number of counties
in
non-attainment, but the Kansas City metro area will remain in attainment
based
on recent emission data.
In
September 2006, the Missouri Department of Natural Resources and the
Kansas
Department of Health and Environment conducted a stakeholder meeting
to discuss
issues related to the development of the Missouri and Kansas Maintenance
Plans
for the Control of Ozone for the Kansas City area. The EPA will require
Missouri
and Kansas to submit these SIPs by June 2007. As part of the SIP requirements,
contingency control measures must be included. These measures would
go into
effect only if associated triggers (such as a violation of the eight-hour
ozone
standard) occur. Although it is anticipated the proposed controls for
CAIR and
BART will provide the contingency control measures at KCP&L generation
facilities, management will continue to be involved and monitor the
SIP
development.
Water
Use Regulations
The
EPA
Clean Water Act established standards for cooling water intake structures.
This
regulation applies to certain existing power producing facilities that
employ
cooling water intake structures that withdraw 50 million gallons or
more per day
from lakes and rivers and use 25% or more of that water for cooling
purposes.
The regulation is designed to protect aquatic life from being killed
or injured
by cooling water intake structures. KCP&L is required to complete a
comprehensive demonstration study on each of its generating facilities’ intake
structures by the end of 2007. The studies are expected to cost a total
of $1.2
million to $2.0 million. Depending on the outcome of the comprehensive
demonstration studies, facilities may be required to implement technological,
operational or restoration measures to achieve compliance. Compliance
with this
regulation is expected to be achieved between 2011 and 2014. Until
the
comprehensive demonstration studies are completed, the impact of this
regulation
cannot be quantified.
KCP&L
holds a permit from the Missouri Department of Natural Resources covering
water
discharge from its Hawthorn Station. The permit authorizes KCP&L, among
other things, to withdraw water from the Missouri river for cooling
purposes and
return the heated water to the Missouri river. KCP&L has applied for a
renewal of this permit and the EPA has submitted an interim objection
letter
regarding the allowable amount of heat that can be contained in the
returned
water. Until this matter is resolved, KCP&L continues to operate under its
current permit. KCP&L cannot predict the outcome of this matter; however,
while less significant outcomes are possible, this matter may require
KCP&L
to reduce its generation at Hawthorn Station, install cooling towers
or both,
any of which could adversely affect KCP&L. The outcome could also affect the
terms of water permit renewals at KCP&L’s Iatan and Montrose
Stations.
Contractual
Obligations
The
following table is an update to selected items from the contractual
obligations
in the 2005 Form
10-K
to
reflect significant changes.
Great
Plains Energy Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
due by period
|
|
of
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
After
2010
|
|
Total
|
|
Purchase
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
$
|
86.6
|
|
$
|
98.5
|
|
$
|
107.1
|
|
$
|
43.3
|
|
$
|
43.0
|
|
$
|
84.5
|
|
$
|
463.0
|
|
Purchased
power
|
|
|
184.5
|
|
|
526.4
|
|
|
195.3
|
|
|
113.2
|
|
|
94.7
|
|
|
48.7
|
|
|
1,162.8
|
|
Comprehensive
energy plan
|
|
|
118.5
|
|
|
281.1
|
|
|
321.8
|
|
|
139.2
|
|
|
12.0
|
|
|
-
|
|
|
872.6
|
|
Total
contractual obligations
|
|
$
|
389.6
|
|
$
|
906.0
|
|
$
|
624.2
|
|
$
|
295.7
|
|
$
|
149.7
|
|
$
|
133.2
|
|
$
|
2,498.4
|
|
Consolidated
KCP&L Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
due by period
|
|
of
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
After
2010
|
|
Total
|
|
Purchase
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
$
|
86.6
|
|
$
|
98.5
|
|
$
|
107.1
|
|
$
|
43.3
|
|
$
|
43.0
|
|
$
|
84.5
|
|
$
|
463.0
|
|
Comprehensive
energy plan
|
|
|
118.5
|
|
|
281.1
|
|
|
321.8
|
|
|
139.2
|
|
|
12.0
|
|
|
-
|
|
|
872.6
|
|
Total
contractual obligations
|
|
$
|
205.1
|
|
$
|
379.6
|
|
$
|
428.9
|
|
$
|
182.5
|
|
$
|
55.0
|
|
$
|
84.5
|
|
$
|
1,335.6
|
|
Fuel
represents KCP&L’s 47% share of Wolf Creek nuclear fuel commitments,
KCP&L’s share of coal purchase commitments based on estimated prices to
supply coal for generating plants and KCP&L’s share of rail transportation
commitments for moving coal to KCP&L’s generating units. Purchased power
represents Strategic Energy’s agreements to purchase electricity at various
fixed prices to meet estimated supply requirements. Comprehensive energy
plan
represents KCP&L’s contractual commitments for projects contemplated by its
comprehensive energy plan.
Union
Pacific
In
2005,
KCP&L filed a rate complaint case with the Surface Transportation Board
(STB) charging that Union Pacific Railroad Company’s (Union Pacific) rates for
transporting coal from the PRB in Wyoming to KCP&L’s Montrose Station are
unreasonably high. Prior to the end of 2005, the rates were established
under a
contract with Union Pacific. Efforts to extend the term of the contract
were
unsuccessful and Union Pacific is the only service for coal transportation
from
the PRB to Montrose Station. KCP&L charged that Union Pacific possesses
market dominance over the traffic and requested the STB prescribe maximum
reasonable rates. In February 2006, the STB announced a rulemaking
proceeding to
address certain issues associated with the calculation of stand-alone
costs in
rate complaint cases. Proceedings in KCP&L’s rate complaint case have been
suspended pending the outcome of this rulemaking. In the third quarter
of 2006,
the STB raised a question regarding
jurisdiction
of the rate complaint. KCP&L and Union Pacific filed comments regarding the
jurisdictional issue. If STB finds it does have jurisdiction, it will
issue a
new procedural schedule. Management currently expects a decision in
the case in
2008. Until the STB case is decided, KCP&L is paying the higher tariff rates
subject to refund.
Framatome
In
2005,
WCNOC filed a lawsuit on behalf of itself, KCP&L and the other two Wolf
Creek owners against Framatome ANP, Inc., and Framatome ANP Richland,
Inc.
(Framatome) in the District Court of Coffey County, Kansas. The suit
alleged
various claims against Framatome related to the proposed design, licensing
and
installation of a digital control system. The suit sought recovery
of
approximately $16 million in damages from Framatome. Framatome filed
a
counterclaim against the three Wolf Creek owners seeking recovery of
damages
alleged to be in excess of $20 million. In May 2006, the parties settled
this
case. The settlement had no significant impact on KCP&L’s results of
operations or financial position.
Hawthorn
No. 5 Subrogation Litigation
KCP&L
filed suit in 2001, in Jackson County, Missouri Circuit Court against
multiple
defendants who are alleged to have responsibility for the 1999 Hawthorn
No. 5
boiler explosion. KCP&L and National Union Fire Insurance Company of
Pittsburgh, Pennsylvania (National Union) have entered into a subrogation
allocation agreement under which recoveries in this suit are generally
allocated
55% to National Union and 45% to KCP&L. Certain defendants were dismissed
from the suit and various defendants settled, with KCP&L receiving a total
of $38.2 million, of which $18.5 million
was
recorded as a recovery of capital expenditures. Trial of this case
with the one
remaining defendant resulted in a March 2004 jury verdict finding KCP&L’s
damages as a result of the explosion were $452 million. In May 2004,
the trial
judge reduced the award against the defendant to $0.2 million. Both
KCP&L
and the defendant appealed this case to the Court of Appeals for the
Western
District of Missouri, and in May 2006, the Court of Appeals ordered
the Circuit
Court to enter judgment in KCP&L’s favor in accordance with the jury
verdict. The defendant filed a motion for transfer of this case to
the Missouri
Supreme Court, which was denied. After deduction of amounts received
from
pre-trail settlements with other defendants and an amount for KCP&L’s
comparative fault (as determined by the jury), KCP&L received proceeds of
$38.9 million in 2006 pursuant to the subrogation allocation agreement
after
payment of attorney’s fees. The proceeds reduced purchased power expense by
$10.8 million and fuel expense by $3.7 million. The proceeds also increased
wholesale revenues by $2.5 million and included $6.1 million of interest
that
increased non-operating income. The remaining $15.8 million of proceeds
were
recorded as a recovery of capital expenditures.
KCP&L
previously received reimbursement for Hawthorn No. 5 damages under
a property
damage insurance policy with Travelers Property Casualty Company of
America
(Travelers). Travelers filed suit in the Federal District Court for
the Eastern
District of Missouri in November 2005, against National Union, and
KCP&L was
added as a defendant in June 2006. Travelers seeks recovery of $10
million that
KCP&L recovered in the April 2001 lawsuit described in the preceding
paragraph. Management is unable to predict the outcome of this
litigation.
Emergis
Technologies, Inc.
In
March
2006, Emergis Technologies, Inc. f/k/a BCE Emergis Technologies, Inc.
(Emergis)
filed suit against KCP&L in Federal District Court for the Western District
of Missouri, alleging infringement of a patent, entitled “Electronic Invoicing
and Payment System.” This patent relates to automated electronic bill
presentment and payment systems, particularly those involving Internet
billing
and collection. In March 2006, KCP&L filed a response and denied infringing
the patent. KCP&L counterclaimed for a declaration that the patent is
invalid and not infringed. Emergis responded to KCP&L’s counterclaims in
April 2006. Court ordered mediation occurred in July 2006, but the
case was not
resolved.
Management
does not expect the outcome of this litigation to have a material impact
on
Great Plains Energy's or consolidated KCP&L's results of operations and
financial position.
Spent
Nuclear Fuel and Radioactive Waste
In
2004,
KCP&L and the other two Wolf Creek owners filed suit against the United
States in the U.S. Court of Federal Claims seeking an unspecified amount
of
monetary damages resulting from the government’s failure to begin accepting
spent fuel for disposal in January 1998, as the government was required
to do by
the Nuclear Waste Policy Act of 1982. Approximately sixty other similar
cases
are pending before that court. A handful of the cases have received
damages
awards, most of which are on appeal now. The Wolf Creek case, previously
on a
court-ordered stay until October 2006 to allow for some of the earlier
cases to
be decided first, recently received an extension of the stay to January
2007.
Another federal court already has determined that the government breached
its
obligation to begin accepting spent fuel for disposal. The questions
now before
the court in the pending cases are whether and to what extent the utilities
are
entitled to monetary damages for that breach. KCP&L management cannot
predict the outcome of this Wolf Creek case.
Class
Action Complaint
In
2005,
a class action complaint for breach of contract was filed against Strategic
Energy in the Court of Common Pleas of Allegheny County, Pennsylvania.
The
plaintiffs purportedly represent the interests of certain customers
in
Pennsylvania who entered into
Power
Supply Coordination Service Agreements (Agreements) for a certain product
in
Pennsylvania. The complaint seeks monetary damages, attorney fees and
costs and
a declaration that the customers may terminate their Agreements with
Strategic
Energy. In response to Strategic Energy’s preliminary objections, plaintiffs
have filed an amended complaint that management is evaluating. The
plaintiffs
have granted Strategic Energy an indefinite extension of time to answer
the
complaint. Management is unable to predict the outcome of this
litigation.
Texas
Customer Dispute
In
February 2006, a customer in Texas that procures electricity for schools
notified Strategic Energy that it had selected another provider for
its school
members during the time it was under contract with Strategic Energy.
Strategic
Energy exercised it rights under the agreement for breach. In June
2006,
Strategic Energy received a notice of demand for arbitration from the
customer
pursuant to the agreement. Management is evaluating the merits of the
customer’s
alleged damages and the parties are in the process of selecting an
arbitrator.
Management believes the ultimate outcome of this matter will not have
a material
impact on the Company’s financial position or results of
operations.
Haberstroh
In
2004,
Robert C. Haberstroh filed suit for breach of employment contract and
violation
of the Pennsylvania Wage Payment Collection Act against Strategic Energy
Partners, Ltd. (Partners), SE Holdings, L.L.C. (SE Holdings) and Strategic
Energy in the Court of Common Pleas of Allegheny County, Pennsylvania.
In the
first quarter of 2006, the suit was settled and as part of the settlement,
Great
Plains Energy acquired the remaining indirect interest in Strategic
Energy for
an insignificant amount.
Weinstein
v. KLT Telecom
Richard
D. Weinstein (Weinstein) filed suit against KLT Telecom Inc. (KLT Telecom)
in
September 2003 in the St. Louis County, Missouri Circuit Court. KLT
Telecom
acquired a controlling interest in DTI Holdings, Inc. (Holdings) in
February
2001 through the purchase of approximately two-thirds of the Holdings
stock held
by Weinstein. In connection with that purchase, KLT Telecom entered
into a put
option in favor of Weinstein, which granted Weinstein an option to
sell to KLT
Telecom his remaining shares of Holdings stock. The put option provided
for an
aggregate exercise price for the remaining shares equal to their fair
market
value with an aggregate floor amount of $15 million and was
exercisable
between September 1, 2003, and August 31, 2005. In June 2003, the stock
of
Holdings was cancelled and extinguished pursuant to the joint Chapter
11 plan
confirmed by the Bankruptcy Court. In September 2003, Weinstein delivered
a
notice of exercise of his claimed rights under the put option. KLT
Telecom
rejected the notice of exercise, and Weinstein filed suit, alleging
breach of
contract. Weinstein sought damages of at least $15 million, plus statutory
interest. In April 2005, summary judgment was granted in favor of KLT
Telecom,
and Weinstein appealed this judgment to the Missouri Court of Appeals
for the
Eastern District. In May 2006, the Court of Appeals affirmed the judgment.
During July 2006, Weinstein filed an application for transfer of this
case to
the Missouri Supreme Court, which was granted. Oral arguments are scheduled
for
December 2006. The $15 million reserve has not been reversed pending
the outcome
of the appeal process.
16.
|
SEGMENT
AND RELATED INFORMATION
|
Great
Plains Energy
Great
Plains Energy has two reportable segments based on its method of internal
reporting, which generally segregates the reportable segments based
on products
and services, management responsibility and regulation. The two reportable
business segments are KCP&L, an integrated, regulated electric utility, and
Strategic Energy, a competitive electricity supplier. Other includes
the
operations of HSS, Services, all KLT Inc. operations other than Strategic
Energy, unallocated corporate charges, consolidating entries and intercompany
eliminations. Intercompany eliminations include insignificant amounts
of
intercompany financing-related activities. The summary of significant
accounting
policies applies to all of the reportable segments. For segment reporting,
each
segment’s income taxes include the effects of allocating holding company tax
benefits. Segment performance is evaluated based on net income.
The
following tables
reflect
summarized financial information concerning Great Plains Energy’s reportable
segments.
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
Strategic
|
|
|
Great
Plains
|
September
30, 2006
|
|
KCP&L
|
Energy
|
Other
|
Energy
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
359.3
|
|
$
|
459.2
|
|
$
|
-
|
|
$
|
818.5
|
|
Depreciation
and amortization
|
|
|
(38.5
|
)
|
|
(1.9
|
)
|
|
-
|
|
|
(40.4
|
)
|
Interest
charges
|
|
|
(15.5
|
)
|
|
(0.6
|
)
|
|
(1.9
|
)
|
|
(18.0
|
)
|
Income
taxes
|
|
|
(39.5
|
)
|
|
10.2
|
|
|
2.8
|
|
|
(26.5
|
)
|
Loss
from equity investments
|
|
|
-
|
|
|
-
|
|
|
(0.4
|
)
|
|
(0.4
|
)
|
Net
income (loss)
|
|
|
70.0
|
|
|
(10.9
|
)
|
|
(3.9
|
)
|
|
55.2
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
Strategic
|
|
|
Great
Plains
|
September
30, 2005
|
|
KCP&L
|
Energy
|
Other
|
Energy
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
353.0
|
|
$
|
429.9
|
|
$
|
-
|
|
$
|
782.9
|
|
Depreciation
and amortization
|
|
|
(36.7
|
)
|
|
(1.6
|
)
|
|
(0.1
|
)
|
|
(38.4
|
)
|
Interest
charges
|
|
|
(15.0
|
)
|
|
(0.7
|
)
|
|
(2.2
|
)
|
|
(17.9
|
)
|
Income
taxes
|
|
|
(16.4
|
)
|
|
(9.4
|
)
|
|
8.5
|
|
|
(17.3
|
)
|
Loss
from equity investments
|
|
|
-
|
|
|
-
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Discontinued
operations
|
|
|
-
|
|
|
-
|
|
|
1.8
|
|
|
1.8
|
|
Net
income
|
|
|
69.1
|
|
|
18.1
|
|
|
3.7
|
|
|
90.9
|
|
|
|
|
|
|
|
|
|
|
|
Year
to Date
|
|
|
|
Strategic
|
|
|
Great
Plains
|
September
30, 2006
|
|
KCP&L
|
Energy
|
Other
|
Energy
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
890.6
|
|
$
|
1,129.2
|
|
$
|
-
|
|
$
|
2,019.8
|
|
Depreciation
and amortization
|
|
|
(112.8
|
)
|
|
(5.8
|
)
|
|
-
|
|
|
(118.6
|
)
|
Interest
charges
|
|
|
(45.4
|
)
|
|
(1.5
|
)
|
|
(6.2
|
)
|
|
(53.1
|
)
|
Income
taxes
|
|
|
(62.1
|
)
|
|
17.4
|
|
|
8.0
|
|
|
(36.7
|
)
|
Loss
from equity investments
|
|
|
-
|
|
|
-
|
|
|
(1.0
|
)
|
|
(1.0
|
)
|
Net
income (loss)
|
|
|
117.8
|
|
|
(17.6
|
)
|
|
(9.5
|
)
|
|
90.7
|
|
|
|
|
|
|
|
|
|
|
|
Year
to Date
|
|
|
|
Strategic
|
|
|
Great
Plains
|
September
30, 2005
|
|
KCP&L
|
Energy
|
Other
|
Energy
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
858.3
|
|
$
|
1,101.3
|
|
$
|
0.1
|
|
$
|
1,959.7
|
|
Depreciation
and amortization
|
|
|
(109.7
|
)
|
|
(4.6
|
)
|
|
(0.2
|
)
|
|
(114.5
|
)
|
Interest
charges
|
|
|
(45.1
|
)
|
|
(2.2
|
)
|
|
(6.5
|
)
|
|
(53.8
|
)
|
Income
taxes
|
|
|
(32.4
|
)
|
|
(20.9
|
)
|
|
20.9
|
|
|
(32.4
|
)
|
Loss
from equity investments
|
|
|
-
|
|
|
-
|
|
|
(0.8
|
)
|
|
(0.8
|
)
|
Discontinued
operations
|
|
|
-
|
|
|
-
|
|
|
(1.8
|
)
|
|
(1.8
|
)
|
Net
income (loss)
|
|
|
109.0
|
|
|
34.6
|
|
|
(10.6
|
)
|
|
133.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
|
|
|
|
Great
Plains
|
|
|
KCP&L
|
|
Energy
|
|
Other
|
|
Energy
|
September
30, 2006
|
|
(millions)
|
Assets
|
|
$
|
3,633.8
|
|
$
|
450.9
|
|
$
|
29.9
|
|
$
|
4,114.6
|
|
Capital
expenditures
(a)
|
|
|
371.1
|
|
|
3.2
|
|
|
0.3
|
|
|
374.6
|
|
December
31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
3,334.6
|
|
$
|
441.8
|
|
$
|
57.3
|
|
$
|
3,833.7
|
|
Capital
expenditures
(a)
|
|
|
332.2
|
|
|
6.6
|
|
|
(4.7
|
)
|
|
334.1
|
|
(a)
Capital
expenditures reflect year to date amounts for the periods
presented.
|
Consolidated
KCP&L
The
following tables
reflect
summarized financial information concerning consolidated KCP&L’s reportable
segment. Other includes the operations of HSS and intercompany eliminations.
Intercompany eliminations include insignificant amounts of intercompany
financing-related activities.
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
Consolidated
|
September
30, 2006
|
|
KCP&L
|
Other
|
KCP&L
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
359.3
|
|
$
|
-
|
|
$
|
359.3
|
|
Depreciation
and amortization
|
|
|
(38.5
|
)
|
|
-
|
|
|
(38.5
|
)
|
Interest
charges
|
|
|
(15.5
|
)
|
|
(0.1
|
)
|
|
(15.6
|
)
|
Income
taxes
|
|
|
(39.5
|
)
|
|
0.2
|
|
|
(39.3
|
)
|
Net
income (loss)
|
|
|
70.0
|
|
|
(1.2
|
)
|
|
68.8
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
Consolidated
|
September
30, 2005
|
|
KCP&L
|
Other
|
KCP&L
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
353.0
|
|
$
|
-
|
|
$
|
353.0
|
|
Depreciation
and amortization
|
|
|
(36.7
|
)
|
|
-
|
|
|
(36.7
|
)
|
Interest
charges
|
|
|
(15.0
|
)
|
|
-
|
|
|
(15.0
|
)
|
Income
taxes
|
|
|
(16.4
|
)
|
|
(0.2
|
)
|
|
(16.6
|
)
|
Net
income (loss)
|
|
|
69.1
|
|
|
(0.2
|
)
|
|
68.9
|
|
|
|
|
|
|
|
|
|
Year
to Date
|
|
|
|
|
|
Consolidated
|
September
30, 2006
|
|
KCP&L
|
Other
|
KCP&L
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
890.6
|
|
$
|
-
|
|
$
|
890.6
|
|
Depreciation
and amortization
|
|
|
(112.8
|
)
|
|
-
|
|
|
(112.8
|
)
|
Interest
charges
|
|
|
(45.4
|
)
|
|
(0.1
|
)
|
|
(45.5
|
)
|
Income
taxes
|
|
|
(62.1
|
)
|
|
0.2
|
|
|
(61.9
|
)
|
Net
income (loss)
|
|
|
117.8
|
|
|
(1.2
|
)
|
|
116.6
|
|
|
|
|
|
|
|
|
|
Year
to Date
|
|
|
|
|
|
Consolidated
|
September
30, 2005
|
|
KCP&L
|
Other
|
KCP&L
|
|
|
(millions)
|
Operating
revenues
|
|
$
|
858.3
|
|
$
|
0.1
|
|
$
|
858.4
|
|
Depreciation
and amortization
|
|
|
(109.7
|
)
|
|
(0.1
|
)
|
|
(109.8
|
)
|
Interest
charges
|
|
|
(45.1
|
)
|
|
-
|
|
|
(45.1
|
)
|
Income
taxes
|
|
|
(32.4
|
)
|
|
0.4
|
|
|
(32.0
|
)
|
Net
income (loss)
|
|
|
109.0
|
|
|
(0.8
|
)
|
|
108.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
KCP&L
|
Other
|
KCP&L
|
September
30, 2006
|
|
(millions)
|
|
Assets
|
|
$
|
3,633.8
|
|
$
|
3.4
|
|
$
|
3,637.2
|
|
Capital
expenditures
(a)
|
|
|
371.1
|
|
|
-
|
|
|
371.1
|
|
December
31, 2005
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
3,334.6
|
|
$
|
3.9
|
|
$
|
3,338.5
|
|
Capital
expenditures
(a)
|
|
|
332.2
|
|
|
-
|
|
|
332.2
|
|
(a)
Capital
expenditures reflect year to date amounts for the periods
presented.
|
17.
|
ASSET
RETIREMENT OBLIGATIONS
|
Asset
retirement obligations associated with tangible long-lived assets
are those for
which a legal obligation exists under enacted laws, statutes and
written or oral
contracts, including obligations arising under the doctrine of
promissory
estoppel. These liabilities are recognized at estimated fair value
as incurred
and capitalized as part of the cost of the related long-lived assets
and
depreciated over their useful lives. Accretion of the liabilities
due to the
passage of time is recorded as an operating expense. Changes in
the estimated
fair values of the liabilities are recognized when known.
In
the
second quarter of 2006, KCP&L incurred an ARO related to decommissioning and
site remediation associated with its Spearville Wind Energy Facility,
a 100.5 MW
wind project in western Kansas. KCP&L is obligated to remove the wind
turbine towers and perform site remediation within 12 months after
the end of
the associated 30-year land lease agreements. The ARO was derived
from a third
party estimate of decommissioning and remediation costs. To estimate
the ARO,
KCP&L used a
credit-adjusted
risk free discount rate of 6.68%. This rate was based on the rate
at which
KCP&L could issue 30-year bonds. KCP&L recorded a $3.1 million ARO for
the decommissioning and site remediation and increased property
and equipment by
$3.1 million.
In
the
third quarter of 2006, WCNOC submitted an application for a new
operating
license for Wolf Creek with the NRC, which would extend Wolf Creek’s operating
period to 2045. Management has determined the fair value of KCP&L’s ARO for
nuclear decommissioning should reflect the change in timing in
the undiscounted
estimated cash flows to decommission Wolf Creek as a result of
the extended
operating period. Management calculated an ARO revision based on
KCP&L’s
most recent cost estimates to decommission Wolf Creek. To estimate
the ARO layer
attributable to the change in timing, KCP&L used a credit-adjusted risk free
discount rate of 6.26%. The rate was based on the rate at which
KCP&L could
issue 40-year bonds. KCP&L recorded a $65.0 million decrease in the ARO to
decommission Wolf Creek with a $25.8 million net decrease in property
and
equipment. The regulatory asset for ARO decreased $8.2 million
and a $31.0
million regulatory liability for ARO was established to recognize
current
funding of the related decommissioning trust at September 30, 2006,
in excess of
the ARO due to the extended operating period.
KCP&L
is a regulated utility subject to the provisions of SFAS No. 71
and management
believes it is probable that any differences between expenses under
FIN No. 47,
“Accounting for Conditional Asset Retirement Obligations” or SFAS No. 143,
“Accounting for Asset Retirement Obligation,” and expense recovered currently in
rates will be recoverable in future rates. The following table
summarizes the
change in Great Plains Energy’s and consolidated KCP&L’s
AROs.
|
|
|
|
|
|
|
|
September
30
|
December
31
|
|
|
2006
|
2005
|
|
|
(millions)
|
|
Beginning
balance
|
|
$
|
145.9
|
|
$
|
113.7
|
|
Additions
|
|
|
3.1
|
|
|
26.7
|
|
Extension
of Wolf Creek life
|
|
|
(65.0
|
)
|
|
-
|
|
Settlements
|
|
|
-
|
|
|
(2.0
|
)
|
Accretion
|
|
|
7.1
|
|
|
7.5
|
|
Ending
balance
|
|
$
|
91.1
|
|
$
|
145.9
|
|
18.
|
DERIVATIVE
INSTRUMENTS
|
The
companies are exposed to a variety of market risks including interest
rates and
commodity prices. Management has established risk management policies
and
strategies to reduce the potentially adverse effects that the volatility
of the
markets may have on the companies’ operating results. The risk management
activities, including the use of derivative instruments, are subject
to the
management, direction and control of internal risk management committees.
Management’s interest rate risk management strategy uses derivative instruments
to adjust the companies’ liability portfolio to optimize the mix of fixed and
floating rate debt within an established range. In addition, management uses
derivative instruments to hedge against future interest rate fluctuations
on
anticipated debt issuances. Management maintains commodity-price risk
management
strategies that use derivative instruments to reduce the effects of
fluctuations
in fuel and purchased power expense caused by commodity price volatility.
Counterparties to commodity derivatives and interest rate swap agreements
expose
the companies to credit loss in the event of nonperformance. This credit
loss is
limited to the cost of replacing these contracts at current market
rates less
the application of counterparty collateral held and contract-based
netting of
credit exposures against payable balances. Derivative instruments,
excluding
those instruments that qualify for the Normal Purchases and Normal
Sales (NPNS)
election, which are accounted for by accrual accounting, are recorded
on the
balance sheet at fair value as an asset or
liability.
Changes in the fair value are recognized currently in net income unless
specific
hedge accounting criteria are met.
Fair
Value Hedges - Interest Rate Risk Management
In
2002,
KCP&L remarketed its 1998 Series A, B and D EIRR bonds totaling $146.5
million to a five-year fixed interest rate of 4.75% ending October
1, 2007.
Simultaneously with the remarketing, KCP&L entered into an interest rate
swap for the $146.5 million based on the London Interbank Offered Rate
(LIBOR)
to effectively create a floating interest rate obligation. The transaction
is a
fair value hedge with no ineffectiveness. Changes in the fair market
value of
the swap are recorded on the balance sheet as an asset or liability
with an
offsetting entry to the respective debt balances with no net impact
on net
income.
Cash
Flow Hedges - Forward Starting Swaps
In
the
first quarter of 2006, KCP&L entered into two Forward Starting Swaps to
hedge against interest rate fluctuations on the long-term debt that
KCP&L
plans to issue before the end of the first quarter of 2007. The FSS
will be
settled simultaneously with the issuance of the long-term fixed rate
debt. The
FSS effectively removes most of the interest rate and credit spread
uncertainty
with respect to the debt to be issued, thereby enabling KCP&L to predict
with greater assurance what its future interest costs on that debt
will be. The
FSS is accounted for as a cash flow hedge and the fair value is recorded
as a
current asset or liability with an offsetting entry to OCI, to the
extent the
hedge is effective, until the forecasted transaction occurs. No ineffectiveness
has been recorded on the FSS. The pre-tax gain or loss on the FSS recorded
to
OCI will be reclassified to interest expense over the life of the future
debt
issuance.
Cash
Flow Hedges - Commodity Risk Management
KCP&L’s
risk management policy is to use derivative instruments to mitigate
its exposure
to market price fluctuations on a portion of its projected natural
gas purchases
to meet generation requirements for retail and firm wholesale sales.
As of
September 30, 2006, KCP&L had hedged 22% and 7% of its 2007 and 2008
projected natural gas usage for retail load and firm MWh sales, respectively,
primarily by utilizing fixed forward physical contracts. The fair values
of
these instruments are recorded as current assets or current liabilities
with an
offsetting entry to OCI for the effective portion of the hedge. To
the extent
the hedges are not effective, the ineffective portion of the change
in fair
market value is recorded currently in fuel expense. KCP&L did not record any
gains or losses due to ineffectiveness during the three months ended
and year to
date September 30, 2006 and 2005, respectively.
Strategic
Energy maintains a commodity-price risk management strategy that uses
forward
physical energy purchases and other derivative instruments to reduce
the effects
of fluctuations in purchased power expense caused by commodity-price
volatility.
Derivative instruments are used to limit the unfavorable effect that
price
increases will have on electricity purchases, effectively fixing the
future
purchase price of electricity for the applicable forecasted usage and
protecting
Strategic Energy from significant price volatility. The maximum term
over which
Strategic Energy hedged its exposure and variability of future cash
flows was
approximately five years at September 30, 2006 and December 31,
2005.
Certain
forward fixed price purchases and swap agreements are designated as
cash flow
hedges. The fair values of these instruments are recorded as assets
or
liabilities with an offsetting entry to OCI for the effective portion
of the
hedge. To the extent the hedges are not effective, the ineffective
portion of
the change in fair market value is recorded currently in purchased
power. When
the forecasted purchase is completed, the amounts in OCI are reclassified
to
purchased power. Purchased power expense for the three months ended
and year to
date September 30, 2006, includes a $13.1 million and $27.1 million loss,
respectively, due to ineffectiveness of the cash flow hedges. Strategic
Energy
recorded
an $8.3 million and $10.4 million gain for the three months ended and
year to
date September 30, 2005, respectively, due to ineffectiveness of the
cash flow
hedges.
As
part
of its commodity-price risk management strategy, Strategic Energy also
enters
into economic hedges (non-hedging derivatives) that do not qualify
for cash flow
hedge accounting. The changes in the fair value of these derivative
instruments
recorded to purchased power expense were a $13.5 million loss and $9.9
million
gain for the three months ended September 30, 2006 and 2005, respectively,
and a
$37.4 million loss and $15.6 million gain year to date September 30,
2006 and
2005, respectively.
The
fair
value of non-hedging derivatives at September 30, 2006, also includes
certain
forward contracts at Strategic Energy that were amended during 2005.
Prior to
being amended, the contracts were accounted for under the NPNS election
in
accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities.” As a result of being amended, the contracts no longer qualify for
NPNS exceptions or cash flow hedge accounting and are now accounted
for as
non-hedging derivatives with the fair value at amendment being recorded
as a
deferred liability that will be reclassified to net income as the contracts
settle. For the three months ended and year to date September 30, 2006,
Strategic Energy amortized $0.4 million and $5.0 million, respectively,
of the
deferred liability to purchased power expense related to the delivery
of power
under the contracts. Strategic Energy will amortize the remaining deferred
liability over the remaining original contract lengths, which end in
the first
quarter of 2008. After the amendment, Strategic Energy is recording
the change
in fair value of these contracts to purchased power expense.
The
notional and recorded fair values of the companies’ derivative instruments are
summarized in the following table. The fair values of these derivatives
are
recorded on the consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
|
December
31
|
|
|
|
2006
|
|
2005
|
|
|
|
Notional
|
|
|
Notional
|
|
|
|
|
Contract
|
Fair
|
Contract
|
Fair
|
|
|
Amount
|
Value
|
Amount
|
Value
|
Great
Plains Energy
|
|
(millions)
|
Swap
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
$
|
323.7
|
|
$
|
(47.6
|
)
|
$
|
164.7
|
|
$
|
23.8
|
|
Non-hedging
derivatives
|
|
|
43.2
|
|
|
(8.8
|
)
|
|
35.5
|
|
|
-
|
|
Forward
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
577.2
|
|
|
(56.6
|
)
|
|
121.9
|
|
|
21.0
|
|
Non-hedging
derivatives
|
|
|
214.1
|
|
|
(30.1
|
)
|
|
178.3
|
|
|
3.6
|
|
Forward
starting swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
225.0
|
|
|
(0.8
|
)
|
|
-
|
|
|
-
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges
|
|
|
146.5
|
|
|
(2.2
|
)
|
|
146.5
|
|
|
(2.6
|
)
|
Consolidated
KCP&L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
5.2
|
|
|
(0.1
|
)
|
|
-
|
|
|
-
|
|
Forward
starting swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
225.0
|
|
|
(0.8
|
)
|
|
-
|
|
|
-
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges
|
|
|
146.5
|
|
|
(2.2
|
)
|
|
146.5
|
|
|
(2.6
|
)
|
The
amounts recorded in accumulated OCI related to the cash flow hedges
are
summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
Great
Plains Energy
|
Consolidated
KCP&L
|
|
|
September
30
|
December
31
|
September
30
|
December
31
|
|
|
2006
|
2005
|
2006
|
2005
|
|
|
(millions)
|
Current
assets
|
|
$
|
10.4
|
|
$
|
35.8
|
|
$
|
11.6
|
|
$
|
11.9
|
|
Other
deferred charges
|
|
|
-
|
|
|
11.8
|
|
|
(0.8
|
)
|
|
-
|
|
Other
current liabilities
|
|
|
(44.2
|
)
|
|
1.6
|
|
|
-
|
|
|
-
|
|
Deferred
income taxes
|
|
|
30.3
|
|
|
(20.5
|
)
|
|
(4.1
|
)
|
|
(4.5
|
)
|
Other
deferred credits
|
|
|
(39.0
|
)
|
|
1.0
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
(42.5
|
)
|
$
|
29.7
|
|
$
|
6.7
|
|
$
|
7.4
|
|
Great
Plains Energy’s accumulated OCI includes $44.3 million that is expected to be
reclassified to expense over the next twelve months. Consolidated KCP&L’s
accumulated OCI includes an insignificant amount that is expected to
be
reclassified to expense over the next twelve months.
The
amounts reclassified to expenses are summarized in the following
table.
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
Year
to Date
|
|
|
September
30
|
September
30
|
|
|
2006
|
2005
|
2006
|
2005
|
Great
Plains Energy
|
|
(millions)
|
Fuel
expense
|
|
$
|
-
|
|
$
|
(0.5
|
)
|
$
|
-
|
|
$
|
(0.5
|
)
|
Purchased
power expense
|
|
|
13.0
|
|
|
(21.1
|
)
|
|
29.6
|
|
|
(27.2
|
)
|
Interest
expense
|
|
|
(0.1
|
)
|
|
-
|
|
|
(0.3
|
)
|
|
-
|
|
Income
taxes
|
|
|
(5.3
|
)
|
|
8.9
|
|
|
(12.2
|
)
|
|
11.6
|
|
OCI
|
|
$
|
7.6
|
|
$
|
(12.7
|
)
|
$
|
17.1
|
|
$
|
(16.1
|
)
|
Consolidated
KCP&L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
expense
|
|
$
|
-
|
|
$
|
(0.5
|
)
|
$
|
-
|
|
$
|
(0.5
|
)
|
Interest
expense
|
|
|
(0.1
|
)
|
|
-
|
|
|
(0.3
|
)
|
|
-
|
|
Income
taxes
|
|
|
-
|
|
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
OCI
|
|
$
|
(0.1
|
)
|
$
|
(0.3
|
)
|
$
|
(0.2
|
)
|
$
|
(0.3
|
)
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
MD&A that follows is a combined presentation for Great Plains Energy and
consolidated KCP&L, both registrants under this filing. The discussion and
analysis by management focuses on those factors that had a material effect
on
the financial condition and results of operations of the registrants during
the
periods presented.
Great
Plains Energy is a public utility holding company and does not own or operate
any significant assets other than the stock of its subsidiaries. Great
Plains
Energy’s direct subsidiaries with operations or active subsidiaries are
KCP&L, KLT Inc., IEC and Services. As a diversified energy company, Great
Plains Energy’s reportable business segments include KCP&L and Strategic
Energy.
EXECUTING
ON STRATEGIC INTENT
KCP&L’s
Comprehensive Energy Plan
KCP&L
continues to make progress in implementing its comprehensive energy plan
under
orders received from the MPSC and KCC in 2005. The Sierra Club and Concerned
Citizens of Platte County have appealed the MPSC order, and the Sierra
Club has
appealed the KCC order. In March 2006, the Circuit Court of Cole County,
Missouri, affirmed the MPSC Order and the Sierra Club has appealed the
decision
to the Missouri Court of Appeals. The Kansas District Court denied the
Sierra
Club’s appeal in May 2006 and the Sierra Club has appealed to the Kansas Court
of Appeals. Although subject to the appeals, the MPSC and KCC orders remain
in
effect pending the applicable court’s decision.
Although
control budgets and workflow scheduling are not complete, developing market
conditions indicate overall cost estimates of the comprehensive energy
plan are
currently expected to be about 20% above the estimate in the 2005 Form
10-K. The
primary driver of the increased cost of the comprehensive energy plan is
the
environmental retrofit of selected existing coal-fired plants. The demand
for
environmental projects has increased substantially with many utilities
in the
United States starting similar projects to address changing environmental
regulations. This demand has constrained labor and material resources resulting
in a significant escalation in the cost and completion times for environmental
retrofits. The first phase of environmental upgrades at LaCygne No. 1,
installation of SCR equipment, began in late 2005 and is expected to be
in-service for the summer of 2007. KCP&L has approximately 88% of the total
estimated cost for the first phase under firm contract as of September
30, 2006.
The second phase of environmental upgrades at LaCygne No. 1 is currently
in the
planning stage, and the market conditions noted above could impact the
scope and
timing. Iatan No. 1 environmental upgrades are on schedule with approximately
80% of the total estimated costs under firm contract as of September 30,
2006.
The
construction projects contemplated in the comprehensive energy plan rely
upon
the supply of a significant percentage of materials from overseas sources.
This
global procurement subjects the delivery of procured material to issues
beyond
what would be expected if such material were supplied from sources within
the
United States. These risks include, but are not limited to, delays in clearing
customs, ocean transportation and potential civil unrest in sourcing countries,
among others. Additionally, as with any major construction program, inadequate
availability of qualified craft labor may have an adverse impact on both
the
estimated cost and completion date of the projects.
Over
the
last several months, KCP&L has finalized contracts and received bids for the
largest cost components of the construction of Iatan No. 2. The estimated
costs
for Iatan No. 2 have also increased due to the constrained labor and material
resources discussed above; however, the Iatan No. 2 estimated costs have
not
been as impacted as the estimated costs of the environmental retrofits.
KCP&L has approximately 60% of the total estimated cost of Iatan No. 2 under
firm contract as of September 30, 2006, and has started construction activities
at the site. An owners’ engineer has been
hired
and
the engineering design for Iatan Station is approximately 25% complete,
which is
on schedule with the targeted project completion in summer 2010. During
the
second quarter of 2006, KCP&L finalized Iatan No. 2 co-ownership agreements
with Aquila Inc., The Empire District Electric Company, Kansas Electric
Power
Cooperative and Missouri Joint Municipal Electric Utility Commission. KCP&L
will own 54.71% or approximately 465 MW of the new unit. In the first quarter
of
2006, KCP&L received the air permit and a water quality certification from
the Missouri Department of Natural Resources relating to Iatan Station.
The
Sierra Club is appealing the air permit. In the third quarter of 2006,
the
Sierra Club filed a motion requesting that construction on Iatan No. 2
be stayed
pending the outcome of its appeal. This motion was denied. KCP&L has
received the remaining permits necessary to begin construction at Iatan
Station,
which included the wetlands permit and a permit for the construction of
a
temporary barge slip and collector wells from the U.S. Army Corps of Engineers
(Corps). The Corps also executed an Environmental Assessment with a Finding
of
No Significant Impact.
Construction
and commissioning of the 67 turbines at KCP&L’s Spearville Wind Energy
Facility, a 100.5 MW wind project in western Kansas, was completed during
the
third quarter of 2006 in-line with cost estimates reported in the 2005
Form
10-K. Additional transmission construction to enhance KCP&L’s ability to
carry power from the facility to its service territory is expected to be
completed in the first half of 2007, and is reflected in the current cost
estimates provided above.
KCP&L
has implemented nine pilot affordability, energy efficiency and demand
response
programs in Missouri and four in Kansas. Initial results from the implemented
pilot programs are beginning to demonstrate an ability to manage KCP&L’s
customers’ retail load requirements and are on target with management's goal to
achieve a potential 40MW reduction in retail load requirements by the end
of
2006. These early results are evidenced by the success of KCP&L’s
residential air conditioning cycling program, Energy Optimizer, which has
experienced strong early participation with over 8,200 installations year
to
date September 30, 2006. Additionally, in September 2006, KCC initiated
a
generic investigation into energy efficiency. The general issues that KCC
is
investigating relate to when and how utilities should promote energy efficiency
by their customers and what ratemaking treatment, including special mechanisms,
is appropriate or desirable. This investigation provides a significant
opportunity for the continued development of energy efficiency policy regulation
in Kansas.
KCP&L
Regulatory Proceedings
In
February 2006, KCP&L filed requests with the MPSC and KCC for annual rate
increases of $55.8 million or 11.5% and $42.3 million or 10.5%,
respectively. The requested rate increases reflect recovery of increasing
operating costs including fuel, transportation and pensions as well as
investments in wind generation and customer programs and compensation for
wholesale sales volatility and construction risks. The request is based
on a
return on equity of 11.5% and an adjusted equity ratio of 53.8%.
KCP&L
reached a negotiated settlement with certain parties to the Kansas rate
proceeding and filed an unopposed Stipulation and Agreement (Agreement)
with KCC
in the third quarter of 2006. The Agreement stipulates a $29 million increase
in
annual revenues effective January 1, 2007, including $4 million of accelerated
depreciation to maintain cash flow levels as contemplated in the stipulation
and
agreement approved by KCC in 2005. The Agreement does not propose an energy
cost
adjustment (ECA) clause; however, KCP&L agreed to propose an ECA clause in
its next rate case to be filed no later than March 1, 2007. The Agreement
recommends various accounting and other provisions, including but not limited
to, establishing annual pension costs beginning January 1, 2007, at
approximately $43 million through the creation of a regulatory asset or
liability, and establishing a regulatory asset or liability, effective
January
1, 2006, for costs arising from defined benefit plan settlements and
curtailments to be amortized over a five-year period beginning with the
effective date of rates approved in KCP&L’s next rate case. The Agreement is
subject to KCC approval, and is voidable
if
not
approved in its entirety. KCP&L expects KCC to act on the Agreement before
the end of the year with any rate changes being effective on January 1,
2007.
In
August
2006, the MPSC Staff filed its case regarding KCP&L’s rate request. In its
filing, the Staff asserted that KCP&L’s annual revenues should be decreased
by between $4.3 million and $5.1 million, before adjustments resulting
from the
September 30, 2006, true-up of test year information. The Staff’s filing assumed
adjustments resulting from this true-up would increase revenue requirements
by
approximately $20 million, resulting in a net required increase in annual
revenues of between $14.9 million and $15.7 million, which reflected
approximately $75 million in accelerated depreciation, which the Staff
asserted
will maintain certain KCP&L credit ratios at investment-grade levels as
provided for in the stipulation and agreement approved by the MPSC in 2005.
The
Staff’s position was revised in the hearings that were held in October 2006.
The
Staff’s current position is that KCP&L’s annual revenues should be increased
by approximately $52 million (reflecting approximately $86 million in
accelerated depreciation), before adjustments resulting from the September
30,
2006, true-up. A decision by the MPSC is expected before the end of the
year
with any rate changes being effective on January 1, 2007.
KCP&L
BUSINESS OVERVIEW
KCP&L
is an integrated, regulated electric utility that engages in the generation,
transmission, distribution and sale of electricity. KCP&L has over 4,000 MWs
of generating capacity and has transmission and distribution facilities
that
provide electricity to slightly over 500,000 customers in the states of
Missouri
and Kansas. KCP&L has continued to experience modest load growth. Load
growth consists of higher usage per customer and the addition of new customers.
Retail electricity rates are below the national average.
KCP&L’s
residential customers’ usage is significantly affected by weather. Bulk power
sales, the major component of wholesale sales, vary with system requirements,
generating unit and purchased power availability, fuel costs and requirements
of
other electric systems. Less than 1% of revenues include an automatic fuel
adjustment provision. KCP&L’s coal base load equivalent availability factor
was 88% for the three months ended and 82% year to date September 30, 2006,
compared to 82% and 80% for the same periods in 2005.
KCP&L’s
nuclear unit, Wolf Creek, accounts for approximately 20% of its base load
capacity. In the third quarter of 2006, WCNOC submitted an application
for a new
operating license for Wolf Creek with the NRC, which would extend Wolf
Creek’s
operating period to 2045. Wolf Creek’s latest refueling outage began in early
October 2006 and is currently expected to last approximately 30 days. The
next
refueling outage is scheduled to begin in March 2008.
The
owners of Wolf Creek have on hand or under contract all of the uranium
and
conversion services needed to operate Wolf Creek through March 2011 and
approximately 75% after that date through September 2018. The owners also
have
under contract 100% of the uranium enrichment required to operate Wolf
Creek
through March 2008. A non-binding letter of intent has been issued with
a
supplier for a substantial portion of Wolf Creek’s uranium enrichment
requirements extending through at least 2024. Fabrication requirements
are under
contract through 2024. Management expects its cost of nuclear fuel to remain
relatively stable through 2009 because of contracts in place. Between 2010
and
2018, management anticipates the cost of nuclear fuel to increase approximately
30% to 50% due to higher contracted prices and market conditions. Even
with this
anticipated increase, management expects nuclear fuel cost per MWh generated
to
remain less than the cost of other fuel sources.
The
fuel
cost per MWh generated and the purchased power cost per MWh has a significant
impact on the results of operations for KCP&L. Generation fuel mix can
substantially change the fuel cost per MWh generated. Nuclear fuel cost
per MWh
generated is substantially less than the cost of coal per
MWh
generated, which is significantly lower than the cost of natural gas and
oil per
MWh generated. The cost per MWh for purchased power is significantly higher
than
the cost per MWh of coal and nuclear generation. KCP&L continually evaluates
its system requirements, the availability of generating units, availability
and
cost of fuel supply and purchased power, and the requirements of other
electric
systems to provide reliable power economically.
Rail
companies have experienced longer cycle times for coal deliveries to utilities
across the country since 2004. Approximately 98% of KCP&L’s coal
requirements come from the PRB and originate on the Burlington Northern
Santa Fe
and the Union Pacific railroads, both of which have been affected by the
current
rail situation. Maintenance to repair significant sections of track on
this rail
line began in 2005 and is expected to be completed by the end of 2006.
These
repairs must be completed before normal train operations from the PRB can
resume, which affects all users of PRB coal. Year to date coal shipments
have
improved significantly compared to deliveries experienced in 2005 and as
a
result, inventory levels have improved. KCP&L has suspended its coal
conservation measures, implemented in 2005, of reducing coal generation.
Management is monitoring the situation closely and steps will be taken,
as
necessary, to maintain an adequate energy supply for KCP&L’s retail load and
firm MWh sales. However, an inability to obtain timely delivery of coal
to meet
generation requirements in the future could materially impact KCP&L’s
results of operations by increasing its cost to serve its retail customers
and/or reducing wholesale MWh sales.
STRATEGIC
ENERGY BUSINESS OVERVIEW
Great
Plains Energy indirectly owns 100% of Strategic Energy. Strategic Energy
does
not own any generation, transmission or distribution facilities. Strategic
Energy provides competitive retail electricity supply services by entering
into
power supply contracts to supply electricity to its end-use customers.
Of the
states that offer retail choice, Strategic Energy operates in California,
Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania
and
Texas. Strategic Energy has begun expansion into Illinois, as well as additional
utility territories in New York. Deliveries in Illinois are expected to
begin in
December 2006.
In
addition to competitive retail electricity supply services, Strategic Energy
also provides strategic planning, consulting and billing and scheduling
services
in the natural gas and electricity markets. The cost of supplying electric
service to retail customers can vary widely by geographic market. This
variability can be affected by many factors, including, but not limited
to,
geographic differences in the cost per MWh of purchased power, renewable
energy
requirements and capacity charges due to regional purchased power availability
and requirements of other electricity providers and differences in transmission
charges.
Strategic
Energy provides services to approximately 70,400 commercial, institutional
and
small manufacturing accounts for approximately 20,900 customers including
numerous Fortune 500 companies, smaller companies and governmental entities.
Strategic Energy offers an array of products, including fixed price, index-based
and month-to-month renewal products, designed to meet the various requirements
of a diverse customer base. Strategic Energy’s volume-based customer retention
rate, excluding month-to-month customers on market-based rates, was 58%
for the
three months ended and 53% year to date September 30, 2006. The corresponding
volume-based customer retention rates including month-to-month customers
on
market-based rates were 80% and 66%, respectively. Retention rates year
to date
September 30, 2006, are lower than Strategic Energy has experienced. The
decline
is attributable to customer contract expirations in midwestern states where
the
savings competitive suppliers can offer to customers are reduced or in
some
cases unavailable due to host utility default rates that are not aligned
with
market prices for power. In these states, customers can receive lower rates
from
the host utility and are choosing to return to host utility service as
their
contracts with Strategic Energy expire. Management expects to have continued
difficulty competing in
these
states until more competitive market-driven pricing mechanisms are in place
or
market prices for power decrease below host utility rates.
Management
has repositioned sales and marketing efforts to focus on states that currently
provide a more competitive pricing environment in relation to host utility
default rates. In these states, Strategic Energy continues to experience
improvement in certain key metrics, including strong forecasted future
MWh
commitments (backlog) growth and longer contract durations. As a result,
total
backlog grew to 28.4 million at September 30, 2006, compared to 15.2
million at September 30, 2005, and average contract durations grew to 17
months from 13 months, respectively. Based solely on expected usage under
current signed contracts, Strategic Energy has backlog of 4.1 million for
the
remainder of 2006, 11.2 million and 6.4 million for the years 2007 and
2008,
respectively, and 6.7 million for 2009 through 2012. The combination of
MWhs
delivered through September 30, 2006, and backlog for the remainder of
the year
is 16.5 million, which is within the previously projected range for 2006
total
MWhs delivered of 16 to 18 million. Strategic Energy expects to deliver
additional MWhs above amounts currently in backlog through new and renewed
term
contracts and MWh deliveries to month-to-month customers.
The
average retail gross margin per MWh (retail revenues less retail purchased
power
divided by retail MWhs delivered) reflected in the 11.2 million MWhs of
2007
backlog is projected to be in the range of $4.50 to $5.50. This range excludes
unrealized changes in fair value of non-hedging energy contracts and from
hedge
ineffectiveness because management does not predict the future impact of
these
unrealized changes. This range is higher than the retail gross margin per
MWh
for new customer contracts discussed below primarily due to more favorable
customer and product mix.
Management
continues to expect Strategic Energy’s retail gross margin per MWh on new
customer contracts entered into in 2006 to average from $3.00 to $4.00,
excluding unrealized changes in fair value of non-hedging energy contracts
and
from hedge ineffectiveness. Management expects to realize additional retail
gross margin on fixed price contracts of up to $0.50 per MWh over the life
of
the contracts. The additional expected margin is derived from management
of the
retail portfolio load requirements. These activities include benefits from
financial transmission rights and auction revenue rights, short-term load
balancing activities, short-term arbitrage activities and identifying and
utilizing favorable transmission paths. Actual retail gross margin per
MWh may
differ from these estimates.
GREAT
PLAINS ENERGY RESULTS OF OPERATIONS
The
following table summarizes Great Plains Energy’s comparative results of
operations.
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(millions)
|
|
Operating
revenues
|
|
$
|
818.5
|
|
$
|
782.9
|
|
$
|
2,019.8
|
|
$
|
1,959.7
|
|
Fuel
|
|
|
(77.2
|
)
|
|
(73.9
|
)
|
|
(180.8
|
)
|
|
(160.2
|
)
|
Purchased
power
|
|
|
(467.4
|
)
|
|
(414.8
|
)
|
|
(1,136.2
|
)
|
|
(1,059.8
|
)
|
Skill
set realignment costs
|
|
|
(1.4
|
)
|
|
-
|
|
|
(15.9
|
)
|
|
-
|
|
Other
operating expenses
|
|
|
(139.7
|
)
|
|
(126.9
|
)
|
|
(398.5
|
)
|
|
(393.4
|
)
|
Depreciation
and amortization
|
|
|
(40.4
|
)
|
|
(38.4
|
)
|
|
(118.6
|
)
|
|
(114.5
|
)
|
Gain
(loss) on property
|
|
|
-
|
|
|
(3.4
|
)
|
|
0.6
|
|
|
(1.9
|
)
|
Operating
income
|
|
|
92.4
|
|
|
125.5
|
|
|
170.4
|
|
|
229.9
|
|
Non-operating
income (expenses)
|
|
|
7.7
|
|
|
(1.1
|
)
|
|
11.1
|
|
|
(0.3
|
)
|
Interest
charges
|
|
|
(18.0
|
)
|
|
(17.9
|
)
|
|
(53.1
|
)
|
|
(53.8
|
)
|
Income
taxes
|
|
|
(26.5
|
)
|
|
(17.3
|
)
|
|
(36.7
|
)
|
|
(32.4
|
)
|
Minority
interest in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7.8
|
)
|
Loss
from equity investments
|
|
|
(0.4
|
)
|
|
(0.1
|
)
|
|
(1.0
|
)
|
|
(0.8
|
)
|
Income
from continuing operations
|
|
|
55.2
|
|
|
89.1
|
|
|
90.7
|
|
|
134.8
|
|
Discontinued
operations
|
|
|
-
|
|
|
1.8
|
|
|
-
|
|
|
(1.8
|
)
|
Net
income
|
|
|
55.2
|
|
|
90.9
|
|
|
90.7
|
|
|
133.0
|
|
Preferred
dividends
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|
(1.3
|
)
|
|
(1.3
|
)
|
Earnings
available for common shareholders
|
|
$
|
54.7
|
|
$
|
90.4
|
|
$
|
89.4
|
|
$
|
131.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great
Plains Energy’s earnings for the three months ended September 30, 2006,
decreased to $54.7 million, or $0.68 per share, from $90.4 million, or $1.21
per
share, in the same period of 2005. Earnings year to date September 30,
2006, decreased to $89.4 million, or $1.16 per share, from $131.7 million,
or
$1.77 per share, compared to the same period of 2005.
Consolidated
KCP&L’s net income was consistent for the three months ended and increased
$8.4 million year to date September 30, 2006, compared to the same periods
in 2005. Three months ended and year to date September 30, 2006, was
favorably impacted by lower purchased power expense and year to date was
favorably impacted by higher wholesale revenues. The year to date increase
was
partially offset by costs related to skill set realignments and increased
fuel
expense. Both three months ended and year to date September 30, 2006, reflect
higher income taxes due to higher pre-tax income in 2006 and a decrease in
2005
income taxes reflecting a reduction in KCP&L’s deferred tax balances as a
result of a reduction in KCP&L’s composite tax rate.
Strategic
Energy had a net loss of $10.9 million for the three months ended and $17.6
million year to date September 30, 2006, compared to net income of $18.1
million
and $34.6 million for the same periods in 2005, respectively. The net loss
was
primarily the result of the impact of $26.6 million and $64.5 million,
respectively, in changes in fair value related to non-hedging energy contracts
and from cash flow hedge ineffectiveness.
CONSOLIDATED
KCP&L RESULTS OF OPERATIONS
The
following discussion of consolidated KCP&L results of operations includes
KCP&L, an integrated, regulated electric utility and HSS, an unregulated
subsidiary of KCP&L. References to KCP&L, in the
discussion
that follows, reflect only the operations of the utility. The following table
summarizes consolidated KCP&L's comparative results of
operations.
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(millions)
|
|
Operating
revenues
|
|
$
|
359.3
|
|
$
|
353.0
|
|
$
|
890.6
|
|
$
|
858.4
|
|
Fuel
|
|
|
(77.2
|
)
|
|
(73.9
|
)
|
|
(180.8
|
)
|
|
(160.2
|
)
|
Purchased
power
|
|
|
(5.1
|
)
|
|
(28.3
|
)
|
|
(18.8
|
)
|
|
(56.6
|
)
|
Skill
set realignment costs
|
|
|
(1.4
|
)
|
|
-
|
|
|
(15.6
|
)
|
|
-
|
|
Other
operating expenses
|
|
|
(119.9
|
)
|
|
(110.4
|
)
|
|
(348.0
|
)
|
|
(345.0
|
)
|
Depreciation
and amortization
|
|
|
(38.5
|
)
|
|
(36.7
|
)
|
|
(112.8
|
)
|
|
(109.8
|
)
|
Gain
(loss) on property
|
|
|
-
|
|
|
(3.6
|
)
|
|
0.6
|
|
|
(3.1
|
)
|
Operating
income
|
|
|
117.2
|
|
|
100.1
|
|
|
215.2
|
|
|
183.7
|
|
Non-operating
income (expenses)
|
|
|
6.5
|
|
|
0.4
|
|
|
8.8
|
|
|
9.4
|
|
Interest
charges
|
|
|
(15.6
|
)
|
|
(15.0
|
)
|
|
(45.5
|
)
|
|
(45.1
|
)
|
Income
taxes
|
|
|
(39.3
|
)
|
|
(16.6
|
)
|
|
(61.9
|
)
|
|
(32.0
|
)
|
Minority
interest in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7.8
|
)
|
Net
income
|
|
$
|
68.8
|
|
$
|
68.9
|
|
$
|
116.6
|
|
$
|
108.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
KCP&L Sales Revenues and MWh Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
Year
to Date
|
|
|
|
|
September
30
|
|
%
|
|
September
30
|
|
%
|
|
|
2006
|
2005
|
|
Change
|
|
2006
|
|
2005
|
|
Change
|
|
Retail
revenues
|
(millions
)
|
|
|
|
|
(millions
)
|
|
|
|
|
Residential
|
|
$
|
140.2
|
|
$
|
139.6
|
|
|
1
|
|
$
|
310.4
|
|
$
|
304.6
|
|
|
2
|
|
Commercial
|
|
|
140.2
|
|
|
138.3
|
|
|
1
|
|
|
347.7
|
|
|
341.3
|
|
|
2
|
|
Industrial
|
|
|
28.7
|
|
|
29.6
|
|
|
(3)
|
|
|
77.6
|
|
|
78.7
|
|
|
(1)
|
|
Other
retail revenues
|
|
|
2.3
|
|
|
2.0
|
|
|
3
|
|
|
6.7
|
|
|
6.3
|
|
|
3
|
|
Total
retail
|
|
|
311.4
|
|
|
309.5
|
|
|
1
|
|
|
742.4
|
|
|
730.9
|
|
|
2
|
|
Wholesale
revenues
|
|
|
43.7
|
|
|
39.3
|
|
|
11
|
|
|
137.4
|
|
|
115.7
|
|
|
19
|
|
Other
revenues
|
|
|
4.2
|
|
|
4.2
|
|
|
5
|
|
|
10.8
|
|
|
11.7
|
|
|
(7)
|
|
KCP&L
electric revenues
|
|
|
359.3
|
|
|
353.0
|
|
|
2
|
|
|
890.6
|
|
|
858.3
|
|
|
4
|
|
Subsidiary
revenues
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.1
|
|
|
NM
|
|
Consolidated
KCP&L revenues
|
|
$
|
359.3
|
|
$
|
353.0
|
|
|
2
|
|
$
|
890.6
|
|
$
|
858.4
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
Year
to Date
|
|
|
|
|
September
30
|
|
%
|
|
September
30
|
|
%
|
|
|
2006
|
2005
|
|
Change
|
|
2006
|
|
2005
|
|
Change
|
|
Retail
MWh sales
|
(thousands
)
|
|
|
|
|
(thousands
)
|
|
|
|
|
Residential
|
|
|
1,769
|
|
|
1,770
|
|
|
-
|
|
|
4,232
|
|
|
4,173
|
|
|
1
|
|
Commercial
|
|
|
2,117
|
|
|
2,116
|
|
|
-
|
|
|
5,654
|
|
|
5,577
|
|
|
1
|
|
Industrial
|
|
|
579
|
|
|
602
|
|
|
(4)
|
|
|
1,643
|
|
|
1,660
|
|
|
(1)
|
|
Other
retail MWh sales
|
|
|
21
|
|
|
20
|
|
|
5
|
|
|
63
|
|
|
60
|
|
|
5
|
|
Total
retail
|
|
|
4,486
|
|
|
4,508
|
|
|
(1)
|
|
|
11,592
|
|
|
11,470
|
|
|
1
|
|
Wholesale
MWh Sales
|
|
|
1,058
|
|
|
918
|
|
|
15
|
|
|
3,240
|
|
|
3,166
|
|
|
2
|
|
KCP&L
electric revenues
|
|
|
5,544
|
|
|
5,426
|
|
|
2
|
|
|
14,832
|
|
|
14,636
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
revenues increased $1.9 million for the three months ended and $11.5 million
year to date September 30, 2006, compared to the same periods in 2005. The
year to date increase was primarily due to load growth, which consists of
higher
usage per customer and the addition of new customers.
Wholesale
revenues increased $4.4 million for the three months ended September 30,
2006, compared to the same period in 2005 due to a 15% increase in wholesale
MWh
sales primarily due to greater plant availability. KCP&L’s coal base load
equivalent availability factor increased to 88% for the three months ended
compared to 82% for the same period in 2005. This increase in wholesale MWh
sales was partially offset by a 25% decrease in the average market price
per MWh
to $37.99. Wholesale revenues increased $21.7 million year to date September
30,
2006, compared to the same period in 2005 primarily due to a 12% increase
in the
average market price per MWh to $45.09. Additionally, wholesale revenues
for the
three months ended and year to date September 30, 2006, include $2.5 million
in
litigation recoveries for the loss of use of Hawthorn No. 5 from a 1999 boiler
explosion.
Consolidated
KCP&L Fuel and Purchased Power
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
Year
to Date
|
|
|
|
|
September
30
|
%
|
|
September
30
|
|
%
|
|
|
|
2006
|
|
2005
|
|
Change
|
|
2006
|
|
2005
|
|
Change
|
|
Net
MWhs Generated by Fuel Type
|
|
(thousands
)
|
|
|
|
(thousands)
|
|
|
|
Coal
|
|
|
4,067
|
|
|
3,760
|
|
|
8
|
|
|
10,945
|
|
|
11,177
|
|
|
(2)
|
|
Nuclear
|
|
|
1,216
|
|
|
1,216
|
|
|
-
|
|
|
3,641
|
|
|
2,910
|
|
|
25
|
|
Natural
gas and oil
|
|
|
346
|
|
|
356
|
|
|
(3)
|
|
|
522
|
|
|
456
|
|
|
15
|
|
Wind
|
|
|
24
|
|
|
-
|
|
|
-
|
|
|
24
|
|
|
-
|
|
|
-
|
|
Total
Generation
|
|
|
5,653
|
|
|
5,332
|
|
|
6
|
|
|
15,132
|
|
|
14,543
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
expense increased $3.3 million for the three months ended and $20.6 million
year
to date September 30, 2006, compared to the same periods in 2005 due to the
6% and 4% increases, respectively, in MWhs generated and increased coal and
coal
transportation costs offset by $3.7 million in Hawthorn No. 5 litigation
recoveries. KCP&L’s current coal and coal transportation contracts,
including higher tariff rates being charged by Union Pacific, were entered
into
at higher average prices than related contracts in the same periods of 2005.
KCP&L has filed a rate case complaint against Union Pacific with the STB and
until the case is finalized, KCP&L is paying the tariff rates subject to
refund. See Note 15 to the consolidated financial statements for more
information.
Purchased
power expense decreased $23.2 million for the three months ended and $37.8
million year to date September 30, 2006, compared to the same periods in
2005.
The decreases were primarily due to recording $10.8 million in Hawthorn No.
5
litigation recoveries as a reduction in purchased power expense and a greater
than 50% reduction in MWhs purchased during both periods. The reduction in
MWhs
purchased was due to uneconomical purchased power prices and increased net
MWhs
generated. In addition, capacity payments decreased $5.7 million year to
date
September 30, 2006, due to the expiration of two large contracts in the second
quarter of 2005. KCP&L entered into new capacity contracts in June
2006.
In
August
2005, Hawthorn No. 5’s generator step-up transformer (GSU) failed. A spare GSU
was installed in September 2005; however, the size of the spare GSU limited
the
net capacity of the unit to 500 MW. During June 2006, a new GSU was installed
at
Hawthorn No. 5 returning its net capacity to 563 MW. The outage for the
installation lasted 14 days.
Consolidated
KCP&L Other Operating Expenses
(including other
operating, maintenance and general taxes)
Consolidated
KCP&L's other operating expenses increased $9.5 million for the three months
ended September 30, 2006, compared to the same period in 2005. This increase
reflects a decrease in other operating expenses in the three months ended
September 30, 2005, due to the regulatory accounting treatment of pension
costs
effective January 1, 2005, which reduced pension expense by $5.6 million
related
to the first six months of 2005.
Consolidated
KCP&L Skill Set Realignment and Pension Settlement
Charges
In
2005
and early 2006, management undertook a process to assess, improve and reposition
the skill sets of employees for implementation of the comprehensive energy
plan.
KCP&L recorded $9.4 million year to date September 30, 2006, related to
this workforce realignment process reflecting severance, benefits and related
payroll taxes provided by KCP&L to employees. Management has been filling
positions with the specific skill sets and talent needed to achieve KCP&L’s
goals. Management believes that the realignment allows for optimization of
employee levels and avoids future additional expense.
For
the
three months ended and year to date September 30, 2006, KCP&L incurred $2.0
million and $9.3 million of pension settlement charges associated with the
realignment resulting in $1.4 million and $6.2 million, respectively, of
expense
recorded after amounts capitalized and billed to joint owners of power plants.
The pension settlement charges were a result of the number of employees retiring
and selecting the lump-sum payment option.
KCP&L
anticipates recording additional expense related to pension settlement charges
after amounts capitalized and billed to joint owners of power plants of
approximately $8 million during the fourth quarter of 2006 associated with
its
management and union pension plans as a result of additional employees retiring
and selecting the lump-sum payment option. The total amount of 2006 pension
settlement charges related to the workforce realignments and other retirements
will be determined in the fourth quarter after the year-end of the pension
plans. In the second quarter of 2006, KCP&L requested regulatory accounting
treatment from MPSC and KCC to defer pension settlement charges, effective
from
January 1, 2006, and amortize the deferred amount over a five-year period
to be
established in the rate proceeding following the current 2006 proceedings.
In
the third quarter of 2006, KCP&L reached a negotiated settlement with
certain parties in the Kansas rate proceeding and filed a Stipulation and
Agreement with KCC that includes this requested regulatory treatment for
pension
costs. At September 30, 2006, no amounts have been deferred pending the outcome
of these requests.
Potential
Future Pension Settlement Charges
Through
2010, approximately 21% of KCP&L’s current employees are eligible to retire
with full pension benefits. The timing and number of employees retiring and
selecting the lump-sum payment option could result in additional settlement
charges that could materially affect KCP&L’s results of operations after
2006. If KCP&L receives its requested regulatory treatment, pension
settlement charges would be deferred and amortized over five years beginning
with the effective date of rates approved in KCP&L’s next rate
case.
Consolidated
KCP&L Income Taxes
Consolidated
KCP&L's income taxes increased $22.7 million for the three months ended and
$29.9 million year to date September 30, 2006, compared to the same periods
of 2005 due to an increase in pre-tax income in 2006 and a decrease in 2005
of
$11.7 million due to the impact of a lower composite tax rate on KCP&L’s
deferred tax balances resulting from the favorable impact of sustained audit
positions.
STRATEGIC
ENERGY RESULTS OF OPERATIONS
The
following table summarizes Strategic Energy's comparative results of
operations.
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(millions)
|
|
Operating
revenues
|
|
$
|
459.2
|
|
$
|
429.9
|
|
$
|
1,129.2
|
|
$
|
1,101.3
|
|
Purchased
power
|
|
|
(462.3
|
)
|
|
(386.5
|
)
|
|
(1,117.4
|
)
|
|
(1,003.2
|
)
|
Other
operating expenses
|
|
|
(16.6
|
)
|
|
(14.3
|
)
|
|
(42.5
|
)
|
|
(37.6
|
)
|
Depreciation
and amortization
|
|
|
(1.9
|
)
|
|
(1.6
|
)
|
|
(5.8
|
)
|
|
(4.6
|
)
|
Operating
income (loss)
|
|
|
(21.6
|
)
|
|
27.5
|
|
|
(36.5
|
)
|
|
55.9
|
|
Non-operating
income (expenses)
|
|
|
1.1
|
|
|
0.7
|
|
|
3.0
|
|
|
1.8
|
|
Interest
charges
|
|
|
(0.6
|
)
|
|
(0.7
|
)
|
|
(1.5
|
)
|
|
(2.2
|
)
|
Income
taxes
|
|
|
10.2
|
|
|
(9.4
|
)
|
|
17.4
|
|
|
(20.9
|
)
|
Net
income (loss)
|
|
$
|
(10.9
|
)
|
$
|
18.1
|
|
$
|
(17.6
|
)
|
$
|
34.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
MWhs delivered decreased 12% to 4.8 million for the three months ended
and 18%
to 12.4 million year to date September 30, 2006, compared to the same
periods in 2005 due to the effect of market conditions in midwestern states
and
competition in other markets where Strategic Energy serves customers. The
average retail gross margin per MWh declined to $(0.79) for the three months
ended and $0.78 year to date September 30, 2006, compared to $7.84 and
$6.29 for the same periods in 2005. The decline in the average retail gross
margin per MWh for the three months ended and year to date was primarily
due to
the impact of $26.6 million and $64.5 million, respectively, in changes
in fair
value related to non-hedging energy contracts and from cash flow hedge
ineffectiveness.
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
to Date
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Average
retail gross margin per MWh
|
|
$
|
(0.79)
|
|
$
|
7.84
|
|
$
|
0.78
|
|
$
|
6.29
|
|
Change
in fair value related to non-hedging energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
contracts
and from cash flow hedge ineffectiveness
|
|
|
5.60
|
|
|
(3.36)
|
|
|
5.21
|
|
|
(1.71)
|
|
Average
retail gross margin per MWh without
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fair
value impacts
|
|
$
|
4.81
|
|
$
|
4.48
|
|
$
|
5.99
|
|
$
|
4.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
retail gross margin per MWh without fair value impacts is a non-GAAP financial
measure that differs from GAAP because it excludes the impact of unrealized
fair
value gains or losses. Management and the Board of Directors use this as
a
measurement of Strategic Energy’s realized retail gross margin per delivered
MWh, which are settled upon delivery at contracted prices. Fair value impacts
result from changes in fair value of non-hedging energy contracts and from
hedge
ineffectiveness associated with MWhs under contract but not yet delivered.
Due
to their non-cash nature and volatility during periods prior to delivery,
management believes excluding these fair value impacts results in a measure
of
retail gross margin per MWh that is more representative of contracted
prices.
As
detailed in the table above, average retail gross margin per MWh without
the
impact of unrealized fair value gains and losses increased to $4.81 for
the
three months ended and $5.99 year to date September 30, 2006, compared to
$4.48 and $4.58 for the same periods in 2005. The increases for the three
months
ended and year to date September 30, 2006, were primarily due to the
net impact
of SECA recoveries and charges as compared to the same periods of 2005.
The net
SECA impact was
insignificant
for the three months ended and increased average retail gross margin
per MWh
year to date September 30, 2006, by $0.08. During 2005, the net SECA
impact
decreased average retail gross margin per MWh by $0.18 and $0.54, respectively.
Strategic Energy recorded SECA charges in excess of recoveries of $1.0
million
for the three months ended and $8.2 million year to date September 30,
2005. Additional impacts to the average retail gross margin per MWh included
increases primarily due to the management of retail portfolio load requirements,
favorable product mix and settlements of supplier contracts. The increases
were
partially offset by higher customer acquisition costs in 2006. Additionally,
the
year to date increase was partially offset by a $1.2 million reduction
of a
gross receipts tax contingency in the first quarter of 2005.
Strategic
Energy Purchased Power
Purchased
power is the cost component of Strategic Energy’s average retail gross margin.
Strategic Energy purchases electricity from power suppliers based on
forecasted
peak demand for its retail customers. Actual customer demand does not
always
equate to the volume purchased based on forecasted peak demand. Consequently,
Strategic Energy makes short-term power purchases in the wholesale market
when
necessary to meet actual customer requirements. Strategic Energy also
sells any
excess retail electricity supply over actual customer requirements back
into the
wholesale market. These sales occur on many contracts, are usually short-term
power sales (day ahead) and typically settle within the reporting period.
Excess
retail electricity supply sales also include long-term and short-term
forward
physical sales to wholesale counterparties, which are accounted for on
a
mark-to-market basis. Strategic Energy typically executes these transactions
to
manage basis and credit risks. The proceeds from excess retail supply
sales are
recorded as a reduction of purchased power, as they do not represent
the
quantity of electricity consumed by Strategic Energy’s customers. The amount of
excess retail supply sales that reduced purchased power was $1.6 million
for the
three months ended and $67.0 million year to date September 30, 2006,
compared to $48.1 million and $91.8 million for the same periods of 2005.
Additionally, in certain markets, load-serving entities are required
to sell to
and purchase power from a RTO/ISO rather than directly transact with
suppliers
and end use customers. The sale and purchase activity related to these
certain
RTO/ISO markets is reflected on a net basis in Strategic Energy’s purchased
power.
Strategic
Energy utilizes derivative instruments, including forward physical delivery
contracts, in the procurement of electricity. Purchased power is also
impacted
by the net change in fair value related to non-hedging energy contracts
and from
cash flow hedge ineffectiveness. Net changes in fair value increased
purchased
power expenses by $26.6 million for the three months ended and $64.5
million
year to date September 30, 2006, compared to reductions of $18.2 million
and $26.0 million for the same periods in 2005. The increase in purchased
power
expense for the three months ended and year to date September 30, 2006,
is a
result of decreases in the forward market prices for power combined with
Strategic Energy designating more derivative instruments as cash flow
hedges
that no longer quality for the NPNS election. See Note 18 to the consolidated
financial statements for more information.
OTHER
NON-REGULATED ACTIVITIES
Other
non-regulated activities include the impact of investments in affordable
housing
limited partnerships discussed below. Additionally, other non-regulated
net loss
from continuing operations increased $5.1 million for the three months
ended and
$1.6 million year to date September 30, 2006, compared to the same periods
in
2005. The three months ended and year to date September 30, 2005, net
loss was
favorably impacted by a $5.0 million net release of tax contingency reserves.
This 2005 favorable impact was mostly offset year to date September 30,
2006,
due to lower operating expenses as a result of Services transferring
approximately 80% of its employees to KCP&L in the third quarter of 2005 to
better align resources with the operating business.
Investment
in Affordable Housing Limited Partnerships - KLT
Investments
KLT
Investments Inc.’s (KLT Investments) net income for the three months ended
September 30, 2006, totaled $1.2 million (including no after-tax reduction
in its affordable housing investment) compared to net income of $1.9
million for
the three months ended September 30, 2005 (including an after tax reduction
of $0.9 million in its affordable housing investment). KLT Investments’ net
income included accrued tax credits related to its investments in affordable
housing limited partnerships of $2.2 million and $3.7 million for the
three
months ended September 30, 2006 and 2005, respectively. Net income year to
date September 30, 2006, totaled $3.3 million (including an after tax
reduction of $0.7 million in its affordable housing investment) compared
to net
income of $2.4 million year to date September 30, 2005 (including an after
tax reduction of $6.2 million in its affordable housing investment).
KLT
Investments’ net income included accrued tax credits of $6.8 million and $11.5
million year to date September 30, 2006 and 2005,
respectively.
At
September 30, 2006, KLT Investments had $24.5 million in affordable housing
limited partnerships. Approximately 63% of these investments were recorded
at
cost; the equity method was used for the remainder. Tax expense is reduced
in
the year tax credits are generated. The investments generate future cash
flows
from tax credits and tax losses of the partnerships. The investments
also
generate cash flows from sales of the properties. For most investments,
tax
credits are received over ten years. A change in accounting principle
relating
to investments made after May 19, 1995, requires the use of the equity
method when a company owns more than 5% in a limited partnership investment.
Of
the investments recorded at cost, $15.1 million exceed this 5% level
but were
made before May 19, 1995. Management does not anticipate making
additional investments in affordable housing limited partnerships at
this
time.
On
a
quarterly basis, KLT Investments compares the cost of properties accounted
for
by the cost method to the total of projected residual value of the properties
and remaining tax credits to be received. Based on the latest comparison,
KLT
Investments did not reduce its investments in affordable housing limited
partnerships for the three months ended and recorded a $1.2 million reduction
year to date September 30, 2006, compared to $1.4 million and $10.0 million
for the three months ended and year to date September 30, 2005. Pre-tax
reductions in affordable housing investments are estimated to be insignificant
for the remainder of 2006 and $2 million for 2007. These projections
are based
on the latest information available but the ultimate amount and timing
of actual
reductions could be significantly different from the above estimates.
Even after
these estimated reductions, net income from the investments in affordable
housing is expected to be positive for 2006 through 2008. The properties
underlying the partnership investment are subject to certain risks inherent
in
real estate ownership and management.
GREAT
PLAINS ENERGY AND CONSOLIDATED KCP&L
Significant Balance
Sheet Changes
(September 30, 2006 compared to December 31,
2005)
·
|
Great
Plains Energy’s and consolidated KCP&L’s receivables increased $96.5
million and $52.0 million, respectively. KCP&L’s receivables increased
$23.6 million due to seasonal increases from higher summer tariff
rates
and usage and $22.4 million due to additional receivables from
joint
owners of comprehensive energy plan projects. Strategic Energy’s
receivables increased $47.0 million due to seasonal increases
in MWh
deliveries and more customers billed on higher index-based
rates.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s fuel inventories increased
$8.2 million primarily due to a $7.8 million increase in coal
inventory as
a result of planned plant outages, improved railroad performance
in
delivering coal and an increase in coal and coal transportation
costs.
|
·
|
Great
Plains Energy’s combined deferred income taxes - current assets and
deferred income taxes - current liabilities changed from a liability
of
$1.3 million at December 31, 2005, to an asset of $46.3 million.
The
temporary differences due to the change in the fair value of
Strategic
Energy’s energy-related derivative instruments increased the asset $39.0
million. Consolidated KCP&L’s deferred income taxes - current assets
increased $2.3 million primarily due to the timing of the Wolf
Creek
refueling outage.
|
·
|
Great
Plains Energy’s derivative instruments, including current and deferred
assets and liabilities, decreased $191.8 million from a net asset
at
December 31, 2005, to a net liability at September 30, 2006,
primarily due
to a $191.4 million decrease in the fair value of Strategic Energy’s
energy-related derivative instruments as a result of decreases
in the
forward market prices for power combined with Strategic Energy
designating
more derivative instruments as cash flow hedges that no longer
quality for
the NPNS election.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s combined electric utility
plant and construction work in progress increased $323.7 million
primarily due to $232.2 million related to KCP&L’s comprehensive
energy plan, including $161.2 million for wind generation, $41.0
million
for environmental upgrades and $30.0 million related to Iatan
No. 2.
Additionally, purchases of automated meter reading equipment
for $13.8
million and rail cars for $23.4 million as well as $10.2 million
in
upgrades to a transmission line increased electric utility
plant.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s regulatory assets increased
$27.5 million primarily due to the regulatory accounting treatment
for pension expense and the change in Wolf Creek depreciable
life for
regulatory purposes in accordance with MPSC and KCC orders, which
combined
increased the asset $35.4 million. This increase was partially
offset by
an $8.2 million reduction in the regulatory asset related to
the asset
retirement obligation for decommissioning of Wolf Creek as a
result of
filing for a new 40-year operating
license.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s prepaid pension costs
decreased $27.5 million and $27.2 million, respectively, due
to 2006
pension expense accruals, including pension settlement charges
of $8.6
million, in excess of contributions.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s commercial paper increased
$48.7 million primarily to support expenditures related to the
comprehensive energy plan.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s accrued taxes increased $60.3
million and $71.9 million, respectively, primarily due to the
timing of
annual property tax payments and income taxes currently payable
due to
year to date September 30, 2006, taxable income, partially offset
by a
third quarter 2006 income tax payment.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s asset retirement obligations
decreased $54.8 million due to a $65.0 million decrease for the
decommissioning of Wolf Creek as a result of filing for a new
operating
license. This decrease was partially offset by a $3.1 million
addition for
the Spearville Wind Energy Facility and $7.1 million for
accretion.
|
·
|
Great
Plains Energy’s and consolidated KCP&L’s regulatory liabilities
increased $37.9 million due to a $31.0 million increase in KCP&L’s
regulatory liability related to the asset retirement obligation
for
decommissioning of Wolf Creek as a result of filing for a new
operating
license and amortization of $7.7 million related to the change
in Wolf
Creek depreciable life for regulatory purposes in accordance
with an MPSC
order.
|
·
|
Great
Plains Energy’s accumulated other comprehensive loss increased $72.1
million primarily due to changes in the fair value of Strategic
Energy’s
energy related derivative instruments resulting from decreases
in the
forward market prices for power combined with Strategic Energy
designating
more derivative instruments as cash flow hedges that no longer
quality for
the NPNS election.
|
·
|
Great
Plains Energy’s long-term debt decreased $388.6 million primarily to
reflect FELINE PRIDES Senior Notes and consolidated KCP&L’s $225.0
million 6.00% Senior Notes as current maturities. Current maturities
of
long-term debt for the respective companies increased as a result
of these
classifications.
|
CAPITAL
REQUIREMENTS AND LIQUIDITY
Great
Plains Energy operates through its subsidiaries and has no material assets
other
than the stock of its subsidiaries. Great Plains Energy’s ability to make
payments on its debt securities and its ability to pay dividends is dependent
on
its receipt of dividends or other distributions from its subsidiaries
and
proceeds from the issuance of its securities.
Great
Plains Energy’s capital requirements are principally comprised of KCP&L’s
utility construction and other capital expenditures, debt maturities
and credit
support provided to Strategic Energy. These items as well as additional
cash and
capital requirements for the companies are discussed below.
Great
Plains Energy's liquid resources at September 30, 2006, consisted of
$59.3
million of cash and cash equivalents on hand, including $0.4 million
at
consolidated KCP&L, and $858.0 million of unused bank lines of credit. The
unused lines consisted of $319.4 million from KCP&L's revolving credit
facility, $64.1 million from Strategic Energy’s revolving credit facility and
$474.5 million from Great Plains Energy's revolving credit facility.
See the
Debt Agreements section below for more information on these agreements.
At
October 31, 2006, Great Plains Energy's unused bank lines of credit increased
$35.8 million from the amount at September 30, 2006, due to a $16.2 million
increase at consolidated KCP&L primarily due to the repayment of commercial
paper and a $19.6 million increase due to less letters of credit outstanding.
KCP&L
currently expects to fund its comprehensive energy plan from a combination
of
internal and external sources including, but not limited to, contributions
from
rate increases, capital contributions to KCP&L from Great Plains Energy's
proceeds of equity issuances, including FELINE PRIDES equity to be issued
in
2007, new short and long-term debt financing and internally generated
funds.
KCP&L
expects to meet day-to-day cash flow requirements including interest
payments,
construction requirements (excluding its comprehensive energy plan),
dividends
to Great Plains Energy and pension benefit plan funding requirements,
discussed
below, with internally generated funds. KCP&L might not be able to meet
these requirements with internally generated funds because of the effect
of
inflation on operating expenses, the level of MWh sales, regulatory actions,
compliance with future environmental regulations and the availability
of
generating units. The funds Great Plains Energy and consolidated KCP&L need
to retire maturing debt will be provided from operations, the issuance
of long
and short-term debt and/or the issuance of equity or equity-linked instruments.
In addition, the Company may issue debt, equity and/or equity-linked
instruments
to finance growth or take advantage of new opportunities.
Strategic
Energy expects to meet day-to-day cash flow requirements including interest
payments, credit support fees, capital expenditures and dividends to
Great
Plains Energy with internally generated funds. Strategic Energy might
not be
able to meet these requirements with internally generated funds
because
of the effect of inflation on operating expenses, the level of MWh sales,
seasonal working capital requirements, commodity-price volatility and
the
effects of counterparty non-performance.
Cash
Flows from Operating Activities
Great
Plains Energy and consolidated KCP&L generated positive cash flows from
operating activities for the periods presented. The decrease in cash
flows from
operating activities for Great Plains Energy and consolidated KCP&L year to
date September 30, 2006, compared to the same period in 2005 was primarily
due
to KCP&L’s sales of SO
2
emission allowances during 2005 resulting
in proceeds of $31.0 million. The timing of the Wolf Creek outage affects
the
refueling outage accrual, deferred income taxes and amortization of nuclear
fuel. Other changes in working capital detailed in Note 4 to the consolidated
financial statements also impacted operating cash flows. The individual
components of working capital vary with normal business cycles and operations.
Cash
Flows from Investing Activities
Great
Plains Energy’s and consolidated KCP&L’s cash used for investing activities
varies with the timing of utility capital expenditures and purchases
of
investments and nonutility property. Investing activities are offset
by the
proceeds from the sale of properties and insurance recoveries. Great
Plains
Energy’s and consolidated KCP&L’s utility capital expenditures increased
$110.5 million and $105.7 million, respectively, year to date September
30,
2006, compared to the same period of 2005 primarily due to KCP&L’s cash
utility capital expenditures including $175.1 million related to KCP&L’s
comprehensive energy plan, $10.2 million to upgrade a transmission line,
$13.8
million to purchase automated meter reading equipment and $23.4 million
to
purchase rail cars. KCP&L’s year to date September 30, 2005, capital
expenditures included the exercise of its early termination option in
the
combustion turbine synthetic lease to purchase the leased property for
$154.0
million. Additionally in 2006, KCP&L received $15.8 million of litigation
recoveries related to Hawthorn No. 5, which were partially offset by
$10.0
million of insurance recoveries received in 2005.
Cash
Flows from Financing Activities
The
change in Great Plains Energy’s cash flows from financing activities year to
date September 30, 2006, compared to the same period in 2005 reflects
Great Plains Energy’s May 2006 proceeds of $144.3 million from the issuance of
5.2 million shares of common stock at $27.50 per share. Fees related
to this
issuance were $5.2 million. Great Plains Energy used the proceeds to
make a
$134.6 million equity contribution to KCP&L. Additionally, Great Plains
Energy and consolidated KCP&L’s net cash from financing activities in 2006
increased due to an increase in KCP&L’s commercial paper primarily to
support expenditures related to the comprehensive energy plan. Consolidated
KCP&L’s net cash from financing activities also increased due to an $18.7
million decrease in dividends paid to Great Plains Energy.
Significant
Financing Activities
Great
Plains Energy filed a shelf registration statement with the SEC in May
2006
relating to Senior Debt Securities, Subordinated Debt Securities, shares
of
Common Stock, Warrants, Stock Purchase Contracts and Stock Purchase Units.
In
May 2006, Great Plains Energy issued 5.2 million shares of common stock
at
$27.50 per share under this registration statement with $144.3 million in
gross proceeds and issuance costs of $5.2 million.
In
May
2006, Great Plains Energy also entered into a forward sale agreement
with
Merrill Lynch Financial Markets, Inc. (forward purchaser) for 1.8 million
shares
of Great Plains Energy common stock. The forward purchaser borrowed and
sold the
same number of shares of Great Plains Energy’s common stock to hedge its
obligations under the forward sale agreement. Great Plains Energy did
not
initially receive any proceeds from the sale of common stock shares by
the
forward purchaser. The forward sale agreement provides for a settlement
date or
dates to be specified at Great Plains Energy’s discretion, subject to certain
exceptions, no later than May 23, 2007. Subject to the provisions of
the
forward
sale agreement, Great Plains Energy will receive an amount equal to $26.6062
per
share, plus interest based on the federal funds rate less a spread and
less
certain scheduled decreases if Great Plains Energy elects to physically
settle
the forward sale agreement by delivering solely shares of common stock.
In most
circumstances, Great Plains Energy also has the right, in lieu of physical
settlement, to elect cash or net physical settlement.
Great
Plains Energy’s FELINE PRIDES senior notes must be remarketed by February 16,
2007. During October 2006, Great Plains Energy entered into a T-Lock
to hedge
against interest rate fluctuations on the U.S. Treasury rate component
of $77.6
million of the FELINE PRIDES senior notes. The T-Lock will be settled
simultaneously with the issuance of the long-term fixed rate debt and
is
accounted for as a cash flow hedge.
KCP&L’s
long-term financing activities are subject to the authorization of the
MPSC. In
November 2005, the MPSC authorized KCP&L to issue up to $635.0 million of
long-term debt and to enter into interest rate hedging instruments in
connection
with such debt through December 31, 2009. KCP&L utilized $250.0 million of
this amount with the issuance of its 6.05% unsecured senior notes maturing
in
2035 leaving $385.0 million of authorization remaining. Under stipulations
with
the MPSC and KCC, Great Plains Energy and KCP&L maintain common equity at
not less than 30% and 35%, respectively, of total capitalization.
During
2006, FERC authorized KCP&L to issue up to a total of $600.0 million in
outstanding short-term debt instruments through February 2008. The
authorizations are subject to four restrictions: (i) proceeds of debt
backed by
utility assets must be used for utility purposes; (ii) if any utility
assets
that secure authorized debt are divested or spun off, the debt must follow
the
assets and also be divested or spun off; (iii) if any proceeds of the
authorized
debt are used for non-utility purposes, the debt must follow the non-utility
assets (specifically, if the non-utility assets are divested or spun
off, then a
proportionate share of the debt must follow the divested or spun off
non-utility
assets); and (iv) if utility assets financed by the authorized short-term
debt
are divested or spun off to another entity, a proportionate share of
the debt
must also be divested or spun off.
During
2006, KCP&L entered into two Forward Starting Swaps with a combined notional
principal amount of $225.0 million to effectively remove most of the
interest
rate and credit spread uncertainty with respect to the anticipated refinancing
of KCP&L’s $225.0 million senior notes that mature in March 2007. See Note
18 to the consolidated financial statements for more information.
In
2006,
KCP&L completed an exchange of $250.0 million privately placed notes for
$250.0 million registered 6.05% unsecured senior notes maturing in 2035
to
fulfill its obligations under a 2005 registration rights agreement.
Debt
Agreements
During
2006, Great Plains Energy entered into a five-year $600 million revolving
credit
facility with a group of banks. The facility replaced a $550 million
revolving
credit facility with a group of banks. A default by Great Plains Energy
or any
of its significant subsidiaries on other indebtedness totaling more than
$25.0
million is a default under the facility. Under the terms of this agreement,
Great Plains Energy is required to maintain a consolidated indebtedness
to
consolidated capitalization ratio, as defined in the agreement, not greater
than
0.65 to 1.00 at all times. At September 30, 2006, the Company was in
compliance
with this covenant. At September 30, 2006, Great Plains Energy had no
cash
borrowings and had issued letters of credit totaling $125.5 million under
the credit facility as credit support for Strategic Energy.
During
2006, KCP&L entered into a five-year $400 million revolving credit facility
with a group of banks to provide support for its issuance of commercial
paper
and other general corporate purposes. Great
Plains
Energy and KCP&L may transfer and re-transfer up to $200 million of unused
lender commitments between Great Plains Energy’s and KCP&L’s facilities, so
long as the aggregate lender commitments under either facility does not
exceed
$600 million and the aggregate lender commitments under both facilities
does not
exceed $1 billion. The facility replaced a $250 million revolving credit
facility with a group of banks. A default by KCP&L on other indebtedness
totaling more than $25.0 million is a default under the facility. Under
the
terms of the agreement, KCP&L is required to maintain a consolidated
indebtedness to consolidated capitalization ratio, as defined in the
agreement,
not greater than 0.65 to 1.00 at all times. At September 30, 2006, KCP&L was
in compliance with this covenant. At September 30, 2006, KCP&L had $80.6
million of commercial paper outstanding, at a weighted-average interest
rate of
5.48% and no cash borrowings under the facility.
Strategic
Energy has a $135 million revolving credit facility with a group of banks
that
expires in June 2009. So long as Strategic Energy is in compliance with
the
agreement, it may increase this amount by up to $15 million by increasing
the
commitment of one or more lenders that have agreed to such increase,
or by
adding one or more lenders with the consent of the administrative agent.
In
October 2006, Great Plains Energy, as permitted by the terms of the agreement,
requested and received a reduction in its guarantee of this facility
to a
maximum amount of $12.5 million and has guaranteed the $12.5 million.
The
facility contains a MAC clause that requires Strategic Energy to represent,
prior to receiving funding, that no MAC has occurred. A default by Strategic
Energy on other indebtedness, as defined in the facility, totaling more
than
$7.5 million is a default under the facility. Under the terms of this
agreement,
Strategic Energy is required to maintain a minimum net worth of $75.0
million, a
minimum fixed charge coverage ratio of at least 1.05 to 1.00 and a minimum
debt
service coverage ratio of at least 4.00 to 1.00, as those terms are defined
in
the agreement. In addition, under the terms of this agreement, Strategic
Energy
is required to maintain a maximum funded indebtedness to EBITDA ratio,
as
defined in the agreement, of 3.00 to 1.00, on a quarterly basis through
June 30, 2007, and 2.75 to 1.00 thereafter. In the event of a breach of one
or more of these four covenants, so long as no other default has occurred,
Great
Plains Energy may cure the breach through a cash infusion, a guarantee
increase
or a combination of the two. At September 30, 2006, Strategic Energy
was in
compliance with these covenants. At September 30, 2006, $70.9 million in
letters of credit had been issued and there were no cash borrowings under
the
agreement.
Great
Plains Energy has agreements with KLT Investments associated with notes
KLT
Investments issued to acquire its affordable housing investments. Great
Plains
Energy has agreed not to take certain actions including, but not limited
to,
merging, dissolving or causing the dissolution of KLT Investments, or
withdrawing amounts from KLT Investments if the withdrawals would result
in KLT
Investments not being in compliance with minimum net worth and cash balance
requirements. The agreements also give KLT Investments’ lenders the right to
have KLT Investments repurchase the notes if Great Plains Energy’s senior debt
rating falls below investment grade or if Great Plains Energy ceases
to own at
least 80% of KCP&L’s stock. At September 30, 2006, KLT Investments had
$1.7 million in outstanding notes, including current
maturities.
KCP&L
Projected Utility Capital Expenditures
KCP&L's
utility capital expenditure plan is subject to continual review and change
and
includes utility capital expenditures related to KCP&L's comprehensive
energy plan for environmental investments and new capacity. Although
control
budgets and workflow scheduling are not complete, developing market conditions
indicate overall cost estimates of the comprehensive energy plan are
currently
expected to be about 20% above the estimate in the 2005 Form 10-K. The
primary
drivers are increases in materials and labor costs due to a substantial
increase
in market demand for these materials and services. Actual costs could
be
materially different than the current estimates; however, management
is
confident that project costs will be competitive with other similar projects
built in the same timeframe.
Pensions
The
Company maintains defined benefit plans for substantially all employees
of
KCP&L, Services and WCNOC and incurs significant costs in providing the
plans, with the majority incurred by KCP&L. At a minimum, plans are funded
on an actuarial basis to provide assets sufficient to meet benefits to
be paid
to plan participants consistent with the funding requirements of the
Employee
Retirement Income Security Act of 1974 (ERISA) and further contributions
may be
made when deemed financially advantageous.
Year
to
date September 30, 2006, the Company has contributed $18.6 million to
the plans
and expects to contribute an additional $1.2 million during the remainder
of
2006, all of which will be paid by KCP&L. Management believes the Company
has adequate access to capital resources through cash flows from operations
or
through existing lines of credit to support the funding requirements.
Participants
in the plans may request a lump-sum cash payment upon termination of
their
employment. A change in payment assumptions, including the amount and
timing of
lump-sum distributions, could result in increased cash requirements from
pension
plan assets with the Company being required to accelerate future funding.
Under
the terms of the pension plans, the Company reserves the right to amend
or
terminate the plans, and from time to time benefits have changed.
The
Pension Protection Act of 2006, signed into law on August 17, 2006, alters
the
manner in which pension plan assets and liabilities are valued for purposes
of
calculating required pension contributions and changes the timing in
which
required contributions to underfunded plans are made. The funding rules,
which
become effective in 2008, could significantly affect the Company’s funding
requirements.
Strategic
Energy Supplier Concentration and Credit
Strategic
Energy enters into forward physical contracts with multiple suppliers.
At
September 30, 2006, Strategic Energy’s five largest suppliers under forward
supply contracts represented 70% of the total future dollar committed
purchases.
Four of Strategic Energy’s five largest suppliers, or their guarantors, are
rated investment grade; and the non-investment grade rated supplier
collateralizes its position with Strategic Energy. In the event of supplier
non-delivery or default, Strategic Energy’s results of operations could be
affected to the extent the cost of replacement power exceeded the combination
of
the contracted price with the supplier and the amount of collateral held
by
Strategic Energy to mitigate its credit risk with the supplier. In addition
to
the collateral, if any, that the supplier provides, Strategic Energy’s risk may
be further mitigated by the obligation of the supplier to make a default
payment
equal to the shortfall and to pay liquidated damages in the event of
a failure
to deliver power. There is no assurance that the supplier in such an
instance
would make the default payment and/or pay liquidated damages. Strategic
Energy’s
results of operations and financial position could also be affected,
in a given
period, if it were required to make a payment upon termination of a supplier
contract to the extent the contracted price with the supplier exceeded
the
market value of the contract at the time of termination.
The
following tables provide information on Strategic Energy’s credit exposure to
suppliers, net of collateral, at September 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
Of
|
Net
Exposure Of
|
|
|
|
|
|
|
|
|
Counterparties
|
Counterparties
|
|
|
Exposure
|
|
|
|
|
Greater
Than
|
Greater
Than
|
|
|
Before
Credit
|
Credit
|
|
Net
|
|
10%
Of Net
|
10%
of Net
|
Rating
|
|
Collateral
|
Collateral
|
|
Exposure
|
|
Exposure
|
Exposure
|
External
rating
|
|
|
(millions
)
|
|
|
|
|
|
|
(millions
)
|
Investment
Grade
|
|
$
|
4.2
|
|
$
|
-
|
|
$
|
4.2
|
|
|
3
|
|
$
|
4.2
|
|
Non-Investment
Grade
|
|
|
3.8
|
|
|
3.8
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Internal
rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Grade
|
|
|
0.2
|
|
|
-
|
|
|
0.2
|
|
|
-
|
|
|
-
|
|
Non-Investment
Grade
|
|
|
1.0
|
|
|
0.6
|
|
|
0.4
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
9.2
|
|
$
|
4.4
|
|
$
|
4.8
|
|
|
3
|
|
$
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
Of Credit Risk Exposure Before Credit Collateral
|
|
|
|
Less
Than
|
|
|
|
Total
|
|
Rating
|
|
2
Years
|
|
2
- 5 Years
|
|
Exposure
|
|
External
rating
|
|
(millions)
|
Investment
Grade
|
|
$
|
4.2
|
|
$
|
-
|
|
$
|
4.2
|
|
Non-Investment
Grade
|
|
|
(0.3)
|
|
|
4.1
|
|
|
3.8
|
|
Internal
rating
|
|
|
|
|
|
|
|
|
|
|
Investment
Grade
|
|
|
0.2
|
|
|
-
|
|
|
0.2
|
|
Non-Investment
Grade
|
|
|
(0.3)
|
|
|
1.3
|
|
|
1.0
|
|
Total
|
|
$
|
3.8
|
|
$
|
5.4
|
|
$
|
9.2
|
|
|
|
|
|
|
|
|
|
|
|
|
External
ratings are determined by using publicly available credit ratings of the
counterparty. If a counterparty has provided a guarantee by a higher rated
entity, the determination has been based on the rating of its guarantor.
Internal ratings are determined by, among other things, an analysis of the
counterparty’s financial statements and consideration of publicly available
credit ratings of the counterparty’s parent. Investment grade counterparties are
those with a minimum senior unsecured debt rating of BBB- from Standard &
Poor’s or Baa3 from Moody’s Investors Service. Exposure before credit collateral
has been calculated considering all netting agreements in place, netting
accounts payable and receivable exposure with net mark-to-market exposure.
Exposure before credit collateral, after consideration of all netting
agreements, is impacted significantly by the power supply volume under contract
with a given counterparty and the relationship between current market prices
and
contracted power supply prices. Credit collateral includes the amount of cash
deposits and letters of credit received from counterparties. Net exposure has
only been calculated for those counterparties to which Strategic Energy is
exposed and excludes counterparties exposed to Strategic Energy.
Strategic
Energy’s total exposure before credit collateral at September 30, 2006,
decreased $246.1 million from December 31, 2005, primarily due to lower
wholesale electricity prices. At September 30, 2006, Strategic Energy had
exposure before collateral to non-investment grade counterparties totaling
$4.8
million. In addition, Strategic Energy held collateral totaling $4.4 million
limiting its exposure to these non-investment grade counterparties to $0.4
million.
Strategic
Energy contracts with national and regional counterparties that have direct
supplies and assets in the region of demand. Strategic Energy also manages
its
counterparty portfolio through
disciplined
margining, collateral requirements and contract-based netting of credit
exposures against payable balances.
Supplemental
Capital Requirements and Liquidity Information
The
following table is an update for significant changes to selected items from
the
contractual obligations in the 2005 Form 10-K.
Great
Plains Energy Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
due by period
|
|
of
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
After
2010
|
|
Total
|
|
Purchase
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
$
|
86.6
|
|
$
|
98.5
|
|
$
|
107.1
|
|
$
|
43.3
|
|
$
|
43.0
|
|
$
|
84.5
|
|
$
|
463.0
|
|
Purchased
power
|
|
|
184.5
|
|
|
526.4
|
|
|
195.3
|
|
|
113.2
|
|
|
94.7
|
|
|
48.7
|
|
|
1,162.8
|
|
Comprehensive
energy plan
|
|
|
118.5
|
|
|
281.1
|
|
|
321.8
|
|
|
139.2
|
|
|
12.0
|
|
|
-
|
|
|
872.6
|
|
Total
contractual obligations
|
|
$
|
389.6
|
|
$
|
906.0
|
|
$
|
624.2
|
|
$
|
295.7
|
|
$
|
149.7
|
|
$
|
133.2
|
|
$
|
2,498.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
KCP&L Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
due by period
|
|
of
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
After
2010
|
|
Total
|
|
Purchase
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
$
|
86.6
|
|
$
|
98.5
|
|
$
|
107.1
|
|
$
|
43.3
|
|
$
|
43.0
|
|
$
|
84.5
|
|
$
|
463.0
|
|
Comprehensive
energy plan
|
|
|
118.5
|
|
|
281.1
|
|
|
321.8
|
|
|
139.2
|
|
|
12.0
|
|
|
-
|
|
|
872.6
|
|
Total
contractual obligations
|
|
$
|
205.1
|
|
$
|
379.6
|
|
$
|
428.9
|
|
$
|
182.5
|
|
$
|
55.0
|
|
$
|
84.5
|
|
$
|
1,335.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
represents KCP&L’s 47% share of Wolf Creek nuclear fuel commitments,
KCP&L’s share of coal purchase commitments based on estimated prices to
supply coal for generating plants and KCP&L’s share of rail transportation
commitments for moving coal to KCP&L’s generating units. Purchased power
represents Strategic Energy’s agreements to purchase electricity at various
fixed prices to meet estimated supply requirements. Comprehensive energy
plan
represents KCP&L’ contractual commitments for projects contemplated by its
comprehensive energy plan.
Off-Balance
Sheet Arrangements
In
the
normal course of business, Great Plains Energy and certain of its subsidiaries
enter into various agreements providing financial or performance assurance
to
third parties on behalf of certain subsidiaries. Such agreements include,
for
example, guarantees, stand-by letters of credit and surety bonds. These
agreements are entered into primarily to support or enhance the creditworthiness
otherwise attributed to a subsidiary on a stand-alone basis, thereby
facilitating the extension of sufficient credit to accomplish the subsidiaries’
intended business purposes. Great Plains Energy’s guarantees provided on behalf
of Strategic Energy for its power purchases and regulatory requirements
increased $126.4 million to $248.4 million at September 30, 2006, compared
to
$122.0 million at December 31, 2005. This increase is comprised of $39.4
million in direct guarantees and $87.0 million of letters of credit and is
due
to a combination of higher collateral requirements at Strategic Energy and
more
emphasis on using Great Plains Energy’s facilities for credit support due to its
lower cost. Consolidated KCP&L’s guarantees of $3.9 million at September 30,
2006, were unchanged from December 31, 2005.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Great
Plains Energy and consolidated KCP&L are exposed to market risks associated
with commodity price and supply, interest rates and equity prices. Market
risks
are handled in accordance with established policies, which may include entering
into various derivative transactions. In the normal
course
of
business, Great Plains Energy and consolidated KCP&L also face risks that
are either non-financial or non-quantifiable. Such risks principally include
business, legal, regulatory, operational and credit risks and are discussed
elsewhere in this document as well as in the 2005 Form 10-K and therefore
are
not represented here.
Great
Plains Energy and consolidated KCP&L interim period disclosures about market
risk included in quarterly reports on Form 10-Q address material changes,
if
any, from the most recently filed annual report on Form 10-K. Therefore,
these
interim period disclosures should be read in connection with Item 7A.
Quantitative and Qualitative Disclosures About Market Risk, included in the
companies’ 2005 Form 10-K, incorporated herein by reference. There have been no
material changes in Great Plains Energy’s or consolidated KCP&L’s market
risk since December 31, 2005.
ITEM
4. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
Great
Plains Energy and KCP&L carried out evaluations of their disclosure controls
and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the fiscal quarter ended
September 30, 2006. These evaluations were conducted under the supervision,
and
with the participation, of each company’s management, including the chief
executive officer and chief financial officer of each company and the companies’
disclosure committee.
Based
upon these evaluations, the chief executive officer and chief financial officer
of Great Plains Energy, and the chief executive officer and chief financial
officer of KCP&L, respectively, have concluded as of the end of the period
covered by this report that the disclosure controls and procedures of Great
Plains Energy and KCP&L are functioning effectively to provide reasonable
assurance that: (i) the information required to be disclosed by the respective
companies in the reports that they file or submit under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported
within
the time periods specified in the SEC’s rules and forms, and (ii) the
information required to be disclosed by the respective companies in the reports
that they file or submit under the Securities Exchange Act of 1934, as amended,
is accumulated and communicated to their respective management, including
the
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
Changes
in Internal Control Over Financial Reporting
There
has
been no change in Great Plains Energy’s or KCP&L’s internal control over
financial reporting that occurred during the quarterly period ended September
30, 2006, that has materially affected, or is reasonably likely to materially
affect, those companies’ internal control over financial reporting.
PART
II
-
OTHER
INFORMATION
ITEM
1. LEGAL PROCEEDINGS
KCP&L
Rate Cases
On
February 1, 2006, KCP&L filed retail rates cases with the MPSC and KCC,
requesting annual rate increases effective January 1, 2007, of approximately
$55.8 million (11.5%) and $42.3 million (10.5%), respectively, over current
levels.
On
September 29, 2006, KCP&L filed a stipulation containing a negotiated
settlement of its Kansas request with the KCC Staff and certain other parties.
The stipulation recommends a $29 million increase in annual revenues effective
January 1, 2007, with $4 million of that amount resulting from accelerated
depreciation to help maintain cash flow levels as contemplated in the
stipulation and agreement approved by the KCC (filed as Exhibit 10.2.a to
Form
10-Q for the quarter ended June 30, 2005). The Agreement does not propose
an
energy cost adjustment (ECA) clause; however, KCP&L
has
agreed to propose an ECA clause in its next rate case to be filed no later
than
March 1, 2007. The Agreement recommends various accounting and other provisions,
including but not limited to: (i) establishing for regulatory purposes annual
pension cost for the period beginning January 1, 2007, of approximately $43
million ($19 million on a Kansas jurisdictional basis) through the creation
of a
regulatory asset or liability, as appropriate; (ii) establishing, effective
January 1, 2006, a regulatory asset or liability as appropriate for costs
arising from defined benefit plan settlements and curtailments which will
be
amortized over a five-year period beginning with the effective date of rates
approved in KCP&L’s next rate case; and (iii) setting at 8.5% the equity
rate for the equity component of the allowance for funds used during
construction rate calculation for Iatan 2. The stipulation is subject to
KCC
approval, and is voidable if not approved in its entirety. KCP&L expects the
KCC to act on the stipulation before the end of the year.
In
August
2006, MPSC Staff filed its case regarding KCP&L’s rate request. In its
filing, the Staff asserted that KCP&L’s annual revenues should be decreased
by between $4.3 million and $5.1 million, before adjustments resulting from
the
September 30, 2006, true-up of test year information. The Staff’s filing assumed
that adjustments resulting from this true-up will increase revenue requirements
by approximately $20 million, resulting in a net required increase in annual
revenues of between $14.9 million and $15.7 million, which reflected
approximately $75 million in accelerated depreciation. Staff’s current position
is that KCP&L’s annual revenues should be increased by approximately $52
million (reflecting approximately $86 million in accelerated depreciation)
before adjustments resulting from the September 30, 2006, true-up. A
decision by the MPSC is expected before the end of the year with any rate
changes being effective on January 1, 2007.
Hawthorn
No. 5 Litigation
KCP&L
filed suit on April 3, 2001, in Jackson County, Missouri Circuit Court against
multiple defendants who are alleged to have responsibility for the 1999 boiler
explosion at KCP&L’s Hawthorn No. 5 generating unit, which was subsequently
reconstructed and returned to service. KCP&L and National Union entered into
a subrogation allocation agreement under which recoveries in this suit were
generally allocated 55% to National Union and 45% to KCP&L. Certain
defendants were dismissed from the suit and various defendants settled. Trial
of
this case with the one remaining defendant resulted in a March 2004 jury
verdict
finding KCP&L’s damages as a result of the explosion were $452 million. In
May 2004, the trial judge reduced the award against the defendant to $0.2
million. Both KCP&L and the defendant appealed this case to the Court of
Appeals for the Western District of Missouri and on May 9, 2006, the Court
of
Appeals ordered the Circuit Court to enter judgment in KCP&L’s favor in
accordance with the jury verdict. The defendant filed a motion for transfer
of
this case to the Missouri Supreme Court, which was denied. After deduction
of
amounts received from pre-trial settlements with other defendants and an
amount
for KCP&L’s comparative fault (as determined by the jury), KCP&L
received proceeds of $38.9 million pursuant to the subrogation allocation
agreement after payment of attorney’s fees.
Weinstein
v.
KLT Telecom
Richard
D. Weinstein (Weinstein) filed suit against KLT Telecom Inc. (KLT Telecom)
in
September 2003 in the St. Louis County, Missouri Circuit Court. KLT Telecom
acquired a controlling interest in DTI Holdings, Inc. (Holdings) in February
2001 through the purchase of approximately two-thirds of the Holdings stock
held
by Weinstein. In connection with that purchase, KLT Telecom entered into
a put
option in favor of Weinstein, which granted Weinstein an option to sell to
KLT
Telecom his remaining shares of Holdings stock. The put option provided for
an
aggregate exercise price for the remaining shares equal to their fair market
value with an aggregate floor amount of $15 million and was exercisable between
September 1, 2003, and August 31, 2005. In June 2003, the stock of Holdings
was
cancelled and extinguished pursuant to the joint Chapter 11 plan confirmed
by
the Bankruptcy Court. In September 2003, Weinstein delivered a notice of
exercise of his claimed rights under the put option. KLT Telecom rejected
the
notice of exercise, and Weinstein filed suit alleging breach of
contract.
Weinstein sought damages of at least $15 million, plus statutory interest.
In
April 2005, summary judgment was granted in favor of KLT Telecom, and Weinstein
appealed this judgment to the Missouri Court of Appeals for the Eastern
District. On May 16, 2006, the Court of Appeals affirmed the judgment. Weinstein
filed a motion for transfer of this case to the Missouri Supreme Court, which
was granted. Oral arguments are scheduled for December 2006. The $15 million
reserve has not been reversed pending the outcome of the appeal
process.
Other
Proceedings
The
companies are parties to various other lawsuits and regulatory proceedings
in
the ordinary course of their respective businesses. For information regarding
other lawsuits and proceedings, see Notes 6, 7, 14 and 15 to the consolidated
financial statements. Such descriptions are incorporated herein by
reference.
ITEM
1A. RISK FACTORS
Actual
results in future periods for Great Plains Energy and consolidated KCP&L
could differ materially from historical results and the forward-looking
statements contained in this report. Factors that might cause or contribute
to
such differences include, but are not limited to, those discussed below and
in
Item 1A. Risk Factors included in the companies’ 2005 Form 10-K. The companies’
business is influenced by many factors that are difficult to predict, involve
uncertainties that may materially affect actual results, and are often beyond
the companies’ control. Additional risks and uncertainties not presently known
or that the companies’ management currently believes to be immaterial may also
adversely affect the companies. The information presented below updates the
risk
factors described in the companies’ 2005 Form 10-K. This information, as well as
the other information included in this report and in the other documents
filed
with the SEC, should be carefully considered before making an investment
in the
securities of Great Plains Energy and KCP&L. Risk factors of consolidated
KCP&L are also risk factors for Great Plains Energy.
The
outcome of KCP&L’s pending and future retail rate proceedings could have a
material impact on its business and are largely outside its control.
The
rates
that KCP&L is allowed to charge its customers are the single most important
item influencing its results of operations, financial position and liquidity.
These rates are subject to the determination, in large part, of governmental
entities outside of KCP&L’s control, including the MPSC, KCC and FERC.
Decisions made by these entities could have a material impact on KCP&L’s
business including its results of operations, financial position, or liquidity.
In
February 2006, for the first time in 20 years, KCP&L filed with the MPSC and
KCC requests to increase the rates it is permitted to charge its retail
customers in Missouri and Kansas, respectively. In these initial filings
KCP&L sought an increase in annual rates of $55.8 million in Missouri and
$42.3 million in Kansas. In September 2006, KCP&L, KCC Staff and other
parties reached a negotiated settlement and submitted a stipulation to the
KCC
recommending a $29 million increase in annual rates in Kansas. The stipulation
does not propose an energy cost adjustment (ECA) clause, but KCP&L has
agreed to propose an ECA clause in its next rate case to be filed no later
than
March 1, 2007. Hearings in the Missouri rate proceedings concluded in October
2006. The MPSC Staff’s current position is that KCP&L’s annual revenues
should be increased by approximately $52 million (reflecting approximately
$86
million in accelerated depreciation) before adjustments resulting from a
September 30, 2006, true-up of information. The requested rate increases
are subject to the approval of the MPSC and KCC, which are expected to rule
before the end of 2006. It is possible that the MPSC and/or KCC will authorize
a
lower rate increase than what KCP&L has requested, or no increase or a rate
reduction. Management cannot predict or provide any assurances regarding
the
outcome of these, or any future, rate proceedings. Any rate changes approved
by
the MPSC and KCC in the pending proceedings are expected to take effect on
January 1, 2007.
As
a part
of the Missouri and Kansas stipulations approved by the MPSC and KCC in 2005,
KCP&L undertook to implement a Comprehensive Energy Plan (Plan). Under the
Plan, KCP&L agreed to undertake certain projects, including building and
owning a portion of Iatan No. 2, installing a new wind-powered generating
facility, and installing environmental upgrades to certain existing plants.
A
reduction or rejection by the MPSC or KCC of rate increase requests may result
in increased financing requirements for KCP&L. This could have a material
impact on its results of operations, financial position or liquidity.
In
response to competitive, economic, political, legislative and regulatory
pressures, KCP&L may be subject to rate moratoriums, rate refunds, limits on
rate increases or rate reductions, including phase-in plans. Any or all of
these
could have a significant adverse effect on KCP&L’s results of operations,
financial position or liquidity.
KCP&L
has Construction-Related Risks
KCP&L’s
comprehensive energy plan includes the construction of an estimated 850 MW
coal-fired generating plant, 100.5 MW of wind generation and environmental
retrofits at two existing coal-fired units. KCP&L has not recently managed a
construction program of this magnitude. There are risks that actual costs
may
exceed budget estimates, delays may occur in obtaining permits and materials,
suppliers and contractors may not perform as required under their contracts,
and
other events beyond KCP&L’s control may occur that may materially affect the
schedule, budget and performance of these projects.
The
construction projects contemplated in the comprehensive energy plan rely
upon
the supply of a significant percentage of materials from overseas sources.
This
global procurement subjects the delivery of procured material to issues beyond
what would be expected if such material were supplied from sources within
the
United States. These risks include, but are not limited to, delays in clearing
customs, ocean transportation and potential civil unrest in sourcing countries,
among others. Additionally, as with any major construction program, inadequate
availability of qualified craft labor may have an adverse impact on both
the
estimated cost and completion date of the projects.
Although
control budgets and workflow scheduling are not complete, developing market
conditions indicate overall cost estimates of the comprehensive energy plan
are
currently expected to be about 20% above the estimate in the 2005 Form 10-K.
The
primary driver of the increased cost of the comprehensive energy plan is
the
environmental retrofit of selected existing coal-fired plants. The demand
for
environmental projects has increased substantially with many utilities in
the
United States starting similar projects to address changing environmental
regulations. This demand has constrained labor and material resources resulting
in a significant escalation in the cost and completion times for environmental
retrofits. The second phase of environmental upgrades at LaCygne No. 1 is
currently in the planning stage, and the market conditions noted above could
impact the scope and timing.
Over
the
last several months, KCP&L has finalized contracts and received bids for the
largest cost components of the construction of Iatan No. 2. The estimated
costs
for Iatan No. 2 have also increased due to the constrained labor and material
resources discussed above; however, the Iatan No. 2 estimated costs have
not
been as impacted as the estimated costs of the environmental retrofits.
These
and
other risks may increase the costs of these construction projects, require
KCP&L to purchase additional electricity to supply its retail customers
until the projects are completed, or both, and may materially affect KCP&L’s
results of operations and financial position.
KCP&L
has Retirement-Related Risks
Through
2010, approximately 21% of KCP&L’s current employees will be eligible to
retire with full pension benefits. Failure to hire and adequately train
replacement employees, including the transfer of
significant
internal historical knowledge and expertise to the new employees, may adversely
affect KCP&L’s ability to manage and operate its business.
Substantially
all of KCP&L’s employees participate in defined benefit and postretirement
plans. If KCP&L employees retire when they become eligible for retirement
through 2010, or if KCP&L’s plans experience adverse market returns on their
investments, or if interest rates materially fall, KCP&L’s pension expense
and contributions to the plans could rise substantially over historical levels.
KCP&L expects to recognize additional pension settlement charges in 2006
resulting from employees retiring and electing to receive the pension benefit
lump-sum payment option. The current estimate of additional expense related
to
pension settlement charges, based on retirement-eligible employees who left
the
company through September 2006, is approximately $8 million. The actual pension
settlement charges in 2006 will depend on actual pension plan results during
the
pension plan year and the number of employees retiring throughout the year
who
select the lump-sum payment option. The amount of expense related to pension
settlement charges to be recognized in 2006 may be materially greater than
the
current estimate. The timing and number of employees retiring after 2006
and
selecting the lump-sum payment option could result in further pension settlement
charges that could materially affect KCP&L’s results of operations.
KCP&L has requested regulatory accounting treatment from MPSC and KCC to
defer pension settlement charges, effective from to January 1, 2006, and
amortize the deferred amount over a five-year period to be established in
the
rate proceeding following the current 2006 proceedings. At September 30,
2006,
no amounts were deferred pending the outcome of these requests. In addition,
assumptions related to future costs, returns on investments, interest rates
and
other actuarial assumptions, including projected retirements, have a significant
impact on KCP&L’s results of operations and financial position.
The
Pension Protection Act of 2006, signed into law on August 17, 2006, alters
the
manner in which pension plan assets and liabilities are valued for purposes
of
calculating required pension contributions and changes the timing in which
required contributions to underfunded plans are made. The funding rules,
which
become effective in 2008, could significantly affect the Company’s funding
requirements. During September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 158, “Employers’
Accounting for Defined Pension and Other Postretirement Plans.” SFAS No. 158
addresses balance sheet measurements and reporting requirements and will
require
the Company to recognize the funded status of the pension and postretirement
plans on the balance sheet for in the fourth quarter of 2006. The effects
of
SFAS No. 158 are currently being evaluated. The FASB has a project to reconsider
the accounting for pensions and other post-retirement benefits. This project
may
result in accelerated expense, liability recognition and
contributions.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5. OTHER INFORMATION
Change
of Control Severance Agreement
The
following information was required to be disclosed under Items 1.01 and 1.02
of
Form 8-K but was not reported.
In
connection with the offering of new change of control severance agreements
(new
agreements) described below, Great Plains Energy sent notice on September
1,
2006, to the executive and other officers that their existing change of control
severance agreements (old agreements) would be terminated 120 days after
the
notice was provided to the officers. The forms of the old agreements were
filed
as Exhibit 10-e to Form 10-K for the year ended December 31, 2000, Exhibit
10.1.b to Form 10-Q for the period ended March 31, 2003, and Exhibit 10.1.q
to
Form 10-K for the year ended December 31, 2004.
The
old
agreements were similar to the new agreements. However, among other things
the
old agreements provided for benefits if the officer's employment were terminated
for good reason or otherwise than for cause during the three-year period
after
the first date on which a Change in Control occurs, or if the officer’s
employment was terminated for any reason within a thirty day period starting
one
year after a Change in Control occurred.
Subsequent
to the September 1, 2006, notice, Great Plains Energy entered into new
agreements with the executive and other officers of Great Plains Energy and
its
wholly owned subsidiaries KCP&L and Strategic Energy, L.L.C. (Strategic
Energy). The form of the new agreements with Michael J. Chesser, Chairman
of the
Board and Chief Executive Officer of Great Plains Energy; William H. Downey,
President and Chief Operating Officer of Great Plains Energy and President
and
Chief Executive Officer of KCP&L; John R. Marshall, Senior Vice President -
Delivery of KCP&L; Shahid Malik, Executive Vice President of Great Plains
Energy and President and Chief Executive Officer of Strategic Energy; and
the
other executive officers of Great Plains Energy and KCP&L are attached
hereto as Exhibits 10.1.a, 10.1.b, 10.1.c, 10.1.d and 10.1.e,
respectively.
Under
the
new agreements, an officer would be entitled to receive a lump-sum cash payment
and certain insurance benefits if the officer's employment is terminated
during
the two-year period after the first date on which a Change in Control occurs
(i)
by the Company other than for cause or upon death or disability, or (ii)
by the
officer for good reason (as those terms are defined in the new agreements).
These benefits would also be payable if the officer’s employment is terminated
as described in the preceding sentence during the period beginning when (i)
Great Plains Energy enters into an agreement, the consummation of which would
result in a Change in Control, (ii) Great Plains Energy or any person publicly
announces an intention to take or consider taking actions which if consummated
would constitute a Change in Control; (iii) any person (other than Great
Plains
Energy, its subsidiaries, their respective employee benefit plans, underwriters
temporarily holding securities pursuant to an offering, or a corporation
owned
directly or indirectly by the stockholders of Great Plains Energy in
substantially the same proportions as their ownership of stock of Great Plains
Energy) becomes the beneficial owner of 10% or more of the combined voting
power
of Great Plains Energy’s then outstanding voting securities, or (iv) the Board
or stockholders adopt a resolution approving any of the foregoing or approving
any Change in Control. Such period ends when the Change in Control transaction
is either consummated, abandoned or terminated.
A
Change
in Control is defined as: (i) an acquisition by a person or group (other
than
Great Plains Energy, its subsidiaries, their respective employee benefit
plans,
underwriters temporarily holding securities pursuant to an offering, or a
corporation owned directly or indirectly by the stockholders of Great Plains
Energy in substantially the same proportions as their ownership of stock
of
Great Plains Energy) of 35% or more of the Great Plains Energy common stock
(not
including shares directly acquired from Great Plains Energy or its affiliates
other than in connection with the acquisition by Great Plains Energy or its
affiliates of a business); (ii) a change in a majority of the directors of
the
Board; (iii) a consummation of a merger, consolidation, reorganization or
similar transaction (unless shareholders receive 60% or more of the stock
of the
surviving entity, or unless the transaction is effected to implement a
recapitalization in which no person is or becomes the beneficial owner of
20% or
more of the then outstanding shares); or (iii) the occurrence, or shareholder
approval, of liquidation, dissolution or sale of
substantially
all of Great Plains Energy’s assets (except to an entity in which Great Plains
Energy’s shareholders have at least 60% of the combined voting power in
substantially the same proportions as their ownership of Great Plains Energy
stock immediately prior to the sale). The definition of Change in Control
in Mr.
Malik’s new agreement also includes certain events resulting in changes of 50%
or more in the beneficial ownership of voting power in Strategic Energy.
Upon
a
termination entitling the officer for benefits under the new agreements,
a
lump-sum cash payment will be made to the officer of (i) the officer's base
salary through the date of termination; (ii) a pro-rated bonus based upon
the
average of the bonuses paid to the officer for the last five fiscal years
(or,
if shorter, the years during which the officer was employed by the company);
(iii) any accrued vacation pay; (iv) any compensation previously deferred
by the
officer; (v) two or three times the officer's highest base salary during
the
prior 12 months; (vi) two or three times the average of the bonuses paid
to the
officer for the last five fiscal years (or, if shorter, the years during
which
the officer was employed by the company); (vii) the actuarial equivalent
of the
excess of the officer's accrued pension benefits at age 65 including
supplemental retirement benefits computed without reduction for early retirement
and including two or three additional years of benefit accrual service, over
the
officer's vested accrued pension benefits (with the exception of Messrs.
Chesser
and Marshall, whose compensatory arrangements provide for two years of credited
service for pension calculation purposes for every one year of service,
resulting in additional years of benefit accrual service under their respective
agreements); and (viii) the value of any unvested Great Plains Energy
contributions for the benefit of the officer under the Great Plains Energy
Employee Savings Plus Plan. Mr. Malik’s new agreement also provides, upon a
termination entitling him to the benefits described in the preceding sentence,
for the immediate vesting of all restricted stock previously granted to him,
and
a cash amount equal to the bonus he would have received under applicable
long
term incentive plans with respect to all outstanding grants and assuming
performance at target levels.
In
addition, health, disability and life insurance plan coverage must be provided
to the officer and dependents substantially on the same terms and conditions
that existed immediately prior to the termination for two or three years,
or, if
earlier, until the executive officer is covered by equivalent plan benefits.
Certain "gross-up" payments regarding tax obligations relating to payments
under
the new agreements are required to be made, as well reimbursement of certain
expenses relating to possible disputes that might arise.
The
new
agreements also provide that the officer will not disclose confidential
information, and will not (without consent) either participate in a business
that directly competes with the company, or solicit current employees of
the
company, during the time the officer is an employee of the company and for
six
months thereafter.
The
term
of the new agreements is for an initial period of two years, and the term
will
be automatically extended on each annual anniversary date for an additional
year
unless Great Plains Energy gives at least 60 days prior notice that the term
will not be extended. However, during any period of time when the Board has
knowledge that any person has taken steps reasonably calculated to effect
a
Change in Control, the term shall automatically be extended (and may not
terminate) until, in the opinion of the Board, such person has abandoned
or
terminated its efforts to effect a Change in Control.
The
description of the old agreements and new agreements set forth above is not
complete and is qualified in its entirety by reference to such agreements.
Amendments
to Strategic Energy Annual and Long Term Incentive Plans
The
following information was required to be disclosed under Item 1.01 of Form
8-K
but was not reported.
At its October 31, 2006, meeting, the
independent members of Great Plains Energy’s Board of Directors approved
amendments to the Strategic Energy annual and long-term incentive plans.
The
amendment
to the annual incentive plan goals for 2006 removed the
customer satisfaction metric, and
reallocated
the 10% weighting assigned to that metric equally between the expected
future
margin and MWhs under management metrics. The amendment to the long-term
incentive plans for the periods 2005-2006 and 2005-2007 removed the return
on
average book equity metric and reallocated the 25% weighting assigned to
that
metric equally among the cumulative pre-tax net income, increase in customer
accounts under contract, cumulative reduction in sales, general and
administrative expense per MWh and supply cost reduction
metrics.
ITEM
6. EXHIBITS
Great
Plains Energy Documents
Exhibit
Number
|
|
|
3.1
|
|
Articles
of Incorporation of Great Plains Energy Incorporated dated as of
February
26, 2001, and corrected as of October 13, 2006.
|
10.1.a
|
+
|
Form
of Change of Control Severance Agreement with Michael J.
Chesser.
|
10.1.b
|
+
|
Form
of Change of Control Severance Agreement with William H.
Downey.
|
10.1.c
|
+
|
Form
of Change of Control Severance Agreement with John R.
Marshall.
|
10.1.d
|
+
|
Form
of Change of Control Severance Agreement with Shahid
Malik.
|
10.1.e
|
+
|
Form
of Change of Control Severance Agreement with certain officers
of Great
Plains Energy Incorporated, Kansas City Power &
Light
Company and Strategic Energy, L.L.C.
|
10.1.f
|
|
Amendment
dated as of October 2, 2006, to Amended and Restated Limited Guaranty
dated as of July 2, 2004, by Great Plains Energy Incorporated in
favor of
the lenders under the Amended and Restated Credit Agreement dated
as of
July 2, 2004, among Strategic Energy, L.L.C. and the financial
institutions from time to time parties thereto.
|
10.1.g
|
+
|
Strategic
Energy, L.L.C. Long-Term Incentive Plan Grants 2005, as amended
May 2,
2005 and October 31, 2006.
|
10.1.h
|
+
|
Strategic
Energy, L.L.C. Annual Incentive Plan 2006 goals as amended October
31,
2006.
|
12.1
|
|
Ratio
of Earnings to Fixed Charges.
|
31.1.a
|
|
Rule
13a-14(a)/15d-14(a) Certifications of Michael J. Chesser.
|
31.1.b
|
|
Rule
13a-14(a)/15d-14(a) Certifications of Terry Bassham.
|
32.1
|
|
Section
1350 Certifications.
|
+
Indicates management contract or compensatory plan or arrangement.
Copies
of
any of the exhibits filed with the SEC in connection with this document may
be
obtained from Great Plains Energy upon written request.
Exhibit
Number
|
|
Description
of Document
|
10.2.a
|
|
Contract
between Kansas City Power & Light Company and ALSTOM Power Inc. for
Engineering, Procurement, and Constructions Services for Air Quality
Control
|
|
|
Systems
and Selective Catalytic Reduction Systems at Iatan Generating Station
Units 1 and 2 and the Pulverized Coal-Fired Boiler at Iatan Generating
Station Unit 2, dated as of August 10, 2006.
|
10.2.b
|
|
Stipulation
and Agreement dated as of September 29, 2006, among Kansas City
Power
& Light Company, the Staff of the Kansas Corporation Commission,
the
Citizens’ Utility Ratepayer Board, Wal-Mart Stores Inc. and the
International Brotherhood of Electrical Workers, Local Union Nos.
412,
1464 and 1613.
|
12.2
|
|
Ratio
of Earnings to Fixed Charges.
|
31.2.a
|
|
Rule
13a-14(a)/15d-14(a) Certifications of William H. Downey.
|
31.2.b
|
|
Rule
13a-14(a)/15d-14(a) Certifications of Terry Bassham.
|
32.2
|
|
Section
1350 Certifications.
|
Copies
of
any of the exhibits filed with the SEC in connection with this document may
be
obtained from KCP&L upon written request.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Great Plains
Energy
Incorporated and Kansas City Power & Light Company have duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
|
Dated:
November 7, 2006
|
By:
/s/Michael J. Chesser
|
|
(Michael
J. Chesser)
|
|
(Chief
Executive Officer)
|
|
|
Dated:
November 7, 2006
|
By:
/s/Lori A. Wright
|
|
(Lori
A. Wright)
|
|
(Principal
Accounting Officer)
|
|
KANSAS
CITY POWER & LIGHT COMPANY
|
|
|
Dated:
November 7, 2006
|
By:
/s/William H. Downey
|
|
(William
H. Downey)
|
|
(Chief
Executive Officer)
|
|
|
Dated:
November 7, 2006
|
By:
/s/Lori A. Wright
|
|
(Lori
A. Wright)
|
|
(Principal
Accounting Officer)
|
Exhibit
No. 3.1
ARTICLES
OF INCORPORATION
OF
GREAT
PLAINS ENERGY INCORPORATED
The
undersigned natural person(s) of the age of eighteen years or more for the
purpose of forming a corporation under the General and Business Corporation
Law
of Missouri adopts the following Articles of Incorporation:
ARTICLE
ONE
The
name
of this corporation shall be GREAT PLAINS ENERGY INCORPORATED.
ARTICLE
TWO
The
address, including street and number, if any, of the corporation's initial
registered office in this state is 1201 Walnut, Kansas City, Jackson County,
Missouri 64106, but it shall have power to transact business anywhere in
Missouri, and also in several states of the United States if and when so desired
under the respective laws thereof regarding foreign corporations. The name
of
its initial agent at such address is Jeanie Sell Latz.
ARTICLE
THREE
The
amount of authorized capital stock of the Company is One Hundred Sixty-Two
Million Nine Hundred Sixty-Two Thousand (162,962,000) shares divided into
classes as follows:
|
Three
Hundred Ninety Thousand (390,000) shares of Cumulative Preferred
Stock, of
the par value of One Hundred Dollars ($100) each.
|
|
One
Million Five Hundred Seventy-Two Thousand (1,572,000) shares of Cumulative
No Par Preferred Stock without par value.
|
|
Eleven
Million (11,000,000) shares of Preference Stock without par value.
|
|
One
Hundred Fifty Million (150,000,000) shares of Common Stock without
par
value.
|
The
preferences, qualifications, limitations, restrictions, and special or relative
rights of the Cumulative Preferred Stock, the Cumulative No Par Preferred Stock,
the Preference Stock and the Common Stock shall be as follows:
1
CUMULATIVE
PREFERRED STOCK AND
CUMULATIVE NO PAR PREFERRED STOCK
(i)
Series
and Variations Between Series of Cumulative Preferred Stock. The Cumulative
Preferred Stock may be divided into and issued in series. The Board of Directors
is hereby expressly authorized to cause such shares to be issued from time
to
time in series, and, by resolution adopted prior to the issue of shares of
a
particular series, to fix and determine the following with respect to such
series, as to which matters the shares of a particular series may vary from
those of any or all other series:
|
(a)
|
The
distinctive serial designation of the shares of such series;
|
|
(b)
|
The
dividend rate thereof;
|
|
(c)
|
The
redemption price or prices and the terms of redemption (except as
fixed in
this Division A);
|
|
(d)
|
The
terms and amount of any sinking fund for the purchase or redemption
thereof; and
|
|
(e)
|
The
terms and conditions, if any, under which said shares may be converted.
|
Except
as
the shares of a particular series of Cumulative Preferred Stock may vary from
those of any or all other series in the foregoing respects, all of the shares
of
the Cumulative Preferred Stock, regardless of series, shall in all respects
be
equal and shall have the preferences, rights, privileges and restrictions herein
fixed.
(ii)
Series
and Variations Between Series of Cumulative No Par Preferred Stock. The
Cumulative No Par Preferred Stock may be divided into and issued in series.
The
Board of Directors is hereby expressly authorized to cause such shares to be
issued from time to time in series, and, by resolution adopted prior to the
issue of shares of a particular series, to fix and determine the following
with
respect to such series, as to which matters the shares of a particular series
may vary from those of any or all other series:
|
(a)
|
The
distinctive serial designation of the shares of such series;
|
|
(b)
|
The
dividend rate thereof;
|
|
(c)
|
The
redemption price or prices and the terms of redemption (except as
fixed in
this Division A);
|
|
(d)
|
The
terms and amount of any sinking fund for the purchase or redemption
thereof;
|
|
(e)
|
The
terms and conditions, if any, under which said shares may be converted;
|
|
(f)
|
The
rights of the shares of the series in the event of involun-tary
dissolution or liquidation of the
Company;
|
|
(g)
|
The
consideration to be paid for the shares of such series, and the portion
of
such consideration to be designated as stated value or capital; and
|
|
(h)
|
Any
other powers, preferences and relative, participating, optional or
other
special rights, and qualifications, limita-tions or restrictions
thereof,
of the shares of such series, as the Board of Directors may deem
advisable
and as shall not be inconsistent with the provisions of these Articles
of
Incorporation.
|
Except
as
the shares of a particular series of Cumulative No Par Preferred Stock may
vary
from those of any or all other series in the fore-going respects, all of the
shares of the Cumulative No Par Preferred Stock, regardless of series, shall
in
all respects be equal and shall have the preferences, rights, privileges and
restrictions herein fixed.
(iii)
Dividends. The holders of shares of each series of Cumulative Preferred Stock
and Cumulative No Par Preferred Stock shall be entitled to receive, as and
when
declared payable by the Board of Directors from funds legally available for
the
payment thereof, preferential dividends in lawful money of the United States
of
America at the rate per annum fixed and determined as herein authorized for
the
shares of such series, but no more, payable quarterly on the first day of each
of the months of December, March, June and September (the quarterly dividend
payment dates) in each year with respect to the quarterly period ending on
the
day prior to each such respec-tive dividend payment date. Such dividends shall
be cumulative with respect to each share from and including the quarterly
dividend payment date next preceding the date of issue thereof unless
(a) the date of issue be a quarterly dividend payment date, in which case
dividends shall be cumulative from and including the date of issue,
(b) issued during an interval between a record date for the payment of a
quarterly dividend on shares of such series and the payment date for such
dividend, in which case dividends shall be cumulative from and including such
payment date, or (c) the Board of Directors shall determine that the first
dividend with respect to shares of a particular series issued during an interval
between quarterly dividend payment dates shall be cumulative from and including
a date during such interval, in which event dividends shall be cumulative from
and including such date. No divi-dends shall be declared on shares of any series
of Cumulative Preferred Stock or Cumulative No Par Preferred Stock in respect
of
accumulations for any quarterly dividend period or portion thereof unless
dividends shall likewise be or have been declared with respect to accumulations
on all then outstanding shares of each other series of Cumulative Preferred
Stock and Cumulative No Par Preferred Stock for the same period or portion
thereof; and the ratios of the dividends declared to dividends accumulated
with
respect to any quarterly dividend period on the shares of each series
outstanding shall be identical. Accumulations of dividends shall not bear
interest.
So
long
as any shares of Cumulative Preferred Stock or Cumulative No Par Preferred
Stock
remain outstanding, no dividend shall be paid or declared, or other distribution
made, on shares of junior stock, nor shall any shares of junior stock be
purchased, redeemed, retired or otherwise acquired for a consideration
(a) unless preferential dividends on outstanding shares of Cumulative
Preferred Stock and Cumulative No Par Preferred Stock for the current and all
past quarterly dividend periods shall have been paid, or declared and set apart
for payment, provided, however, that the restrictions of this subparagraph
(a)
shall not apply to the declaration and payment of dividends on shares of junior
stock if payable solely in shares of junior stock, nor to the acquisition of
any
shares of junior stock through applica-tion of proceeds of any shares of junior
stock sold at or about the time of such acquisition, nor shall such restrictions
prevent the transfer of any amount from surplus to stated capital; and
(b) except to the extent of earned surplus, provided, however, that the
restrictions in this subparagraph (b) shall not apply to any of the acts
described in the proviso set forth in subparagraph (a) above and shall not
apply
either to the acquisition of any shares of junior stock issued after
December 1, 1946, to the extent of the proceeds received for the issue of
such shares, or to the payment of any dividend within 60 days after the date
of
declaration thereof, if at said date of declaration said dividend conforms
with
the provisions of this subparagraph (b).
(iv)
Liquidation Preferences. In the event of voluntary dissolution or liquidation
of
the Company, the holders of outstanding shares of each series of Cumulative
Preferred Stock and Cumulative No Par Preferred Stock shall be entitled to
receive out of the assets of the Company an amount per share equal to that
which
such holders would have been entitled to receive had shares held by them been
redeemed (otherwise than through operation of a sinking fund) on the date fixed
for payment, but no more. In the event of involuntary dis-solution or
liquidation of the Company, (a) the holders of shares of Cumulative
Preferred Stock of each series outstanding shall be entitled to receive out
of
the assets of the Company $100 per share, plus preferential dividends at the
rate fixed and determined for such series as herein authorized, accrued, and
unpaid to the date fixed for payment, but no more; and (b) the holders of
shares of Cumulative No Par Preferred Stock of each series shall be entitled
to
receive out of the assets of the Company the amount per share fixed and
determined for such series as herein authorized, plus preferential dividends
at
the rate fixed and determined for such series as herein authorized, accrued
and
unpaid to the date fixed for payment, but no more. Until payment to the holders
of outstanding shares of Cumulative Preferred Stock and Cumulative No Par
Preferred Stock as aforesaid, or until moneys or other assets sufficient for
such payment shall have been set apart for payment by the Company, separate
and
apart from its other funds and assets for the account of such holders, so as
to
be and continue to be available for payment to such holders, no payment or
distribution shall be made to holders of shares of junior stock in connection
with or upon such dissolution or liquidation. If upon any such dissolution
or
liquidation the assets of the Company available for payment and distribution
to
shareholders are insuffi-cient to make payment in full, as hereinabove provided,
to the holders of shares of Cumulative Preferred Stock and Cumulative No Par
Preferred Stock, payment shall be made to such holders ratably in accordance
with the payment each such holder would have been entitled to receive as
hereinabove provided.
4
Neither
a
consolidation nor merger of the Company with or into any other corporation,
nor
a merger of any other corporation into the Company, nor the purchase or
redemption of all or any part of the outstanding shares of any class or classes
of stock of the Company, nor the sale or transfer of the property and business
of the Company as or substantially as an entirety shall be construed to be
a
dissolution or liquidation of the Company within the meaning of the foregoing
provisions.
(v)
Redemption and Repurchase. The Company may, at its option expressed by vote
of
the Board of Directors, at any time or from time to time redeem the whole or
any
part of the Cumulative Preferred Stock, or of any series thereof, or Cumulative
No Par Preferred Stock, or any series thereof, at the redemption price or prices
at the time in effect, any such redemption to be on such redemption date and
at
such place in the City of Kansas City, State of Missouri, or in the City, County
and State of New York, as shall likewise be determined by vote of the Board
of
Directors. Notice of any proposed redemp-tion of shares of Cumulative Preferred
Stock or Cumulative No Par Preferred Stock shall be given by the Company by
mailing a copy of such notice, not more than 60 or less than 30 days prior
to
the redemption date, to the holders of record of the shares to be redeemed,
at
their respective addresses then appearing on the books of the Company; and
by
publishing such notice at least once in each week for four successive weeks
in a
newspaper customarily published at least on each business day, other than
Sundays and holidays, which is printed in the English language and published
and
of general circu-lation in the Borough of Manhattan, City and State of New
York,
and in such a newspaper so printed which is published and of general circulation
in the City of Kansas City, State of Missouri. Publication of such notice shall
be commenced not more than 60 days, and shall be concluded no less than 30
days,
prior to the redemption date, but such notice need not necessarily be published
on the same day of each week or in the same newspaper. In case less than all
of
the shares of any series are to be redeemed, the shares so to be redeemed shall
be determined by lot in such manner as may be prescribed by the Board of
Directors, and the certificates evidencing such shares shall be specified by
number in the notice of such redemption. On the redemption date the Company
shall, and at any time within 60 days prior to such redemption date may, deposit
in trust, for the account of the holders of shares of Cumulative Preferred
Stock
or Cumulative No Par Preferred Stock to be redeemed, funds necessary for such
redemption with a bank or trust company in good standing, organized under the
laws of the United States of America or of the State of Missouri or of the
State
of New York, doing business in the City of Kansas City, Missouri, or in the
City, County and State of New York and having combined capital, surplus and
undivided profits of at least $5,000,000, which shall be designated in such
notice of redemption. Notice of redemption having been duly given, or said
bank
or trust company having been irrevocably authorized by the Company to give
such
notice, and funds necessary for such redemption having been deposited, all
as
aforesaid, all shares of Cumulative Preferred Stock or Cumulative No Par
Preferred Stock with respect to which such deposit shall have been made shall
forthwith, whether or not the date fixed for such redemption shall have occurred
or the certificates for such shares shall have been surrendered for
cancellation, be deemed no longer to be outstanding for any purpose, and all
rights with respect to such shares shall thereupon cease and terminate,
excepting only the right of the holders of the certificates for such shares
to
receive, out of the funds so deposited in trust, on the redemption date (unless
an earlier date is fixed by the Board of Directors), the redemption funds,
without interest, to which they are entitled, and the right to exercise any
privilege of conversion not theretofore expiring, the Company to be entitled
to
the return of any funds deposited for redemption of shares converted pursuant
to
such privilege. At the expiration of six years after the redemption date such
trust shall terminate. Any such moneys then remaining on deposit, together
with
any interest thereon which may be allowed by the bank or trust company with
which the deposit shall have been made, shall be paid by it to the Company,
free
of trust, and thereafter the holders of the certificates for such shares shall
have no claim against such bank or trust company but only claims as unsecured
creditors against the Company for the amounts payable upon redemption thereof,
without interest. Interest, if any, allowed by the bank or trust company as
aforesaid shall belong to the Company.
5
Subject
to applicable law, the Company may from time to time purchase or otherwise
acquire outstanding shares of Cumulative Preferred Stock or Cumula-tive No
Par
Preferred Stock at a price per share not exceeding the amount (inclusive of
any
accrued dividends) then payable in the event of redemption thereof otherwise
than through operation of a sinking fund, if any.
Any
and
all shares of Cumulative Preferred Stock and Cumulative No Par Preferred Stock
which shall at any time have been redeemed or purchased through operation of
any
sinking fund with respect thereto, or which shall have been converted into
or
exchanged for shares of any other class or classes or other securities of the
Company pursuant to a right of conversion or exchange reserved in such
Cumulative Preferred Stock or Cumulative No Par Preferred Stock, shall be
canceled and shall not be reissued, and the Company shall, from time to time,
take such corporate action as may be appropriate or necessary to reduce the
authorized number of shares of Cumulative Preferred Stock or Cumulative No
Par
Preferred Stock accordingly.
(vi)
Voting Rights. So long as any shares of Cumulative Preferred Stock or Cumulative
No Par Preferred Stock are outstanding, the Company shall not, without the
consent (given by vote in person or by proxy at a meeting called for that
purpose) of the holders of at least two-thirds of the outstanding shares of
Cumulative Preferred Stock and at least two-thirds of the outstand-ing shares
of
Cumulative No Par Preferred Stock, voting separately as classes:
|
(a)
|
Increase
the amount of Cumulative Preferred Stock or Cumulative No Par Preferred
Stock at the time authorized;
|
|
(b)
|
Create
or authorize any shares of senior or parity stock, or create or authorize
any obligation or security convertible into any such shares;
|
|
(c)
|
Alter
or change the preferences, priorities, special rights or special
powers of
then outstanding Cumulative Preferred Stock or Cumula-tive No Par
Preferred Stock so as to affect the holders thereof adversely, provided,
however, if any such alteration or change would adversely affect
the
holders of one or more, but not all, of the series of Cumulative
Preferred
Stock or Cumulative No Par Preferred Stock at the time outstanding,
only
the consent of holders of two-thirds of the shares of each series
so
affected shall be required; or
|
|
(d)
|
Issue,
sell or otherwise dispose of shares of Cumulative Preferred Stock
or
Cumulative No Par Preferred Stock or any shares of senior or parity
stock,
or securities convertible into shares of Cumula-tive Preferred Stock,
Cumulative No Par Preferred Stock or senior or parity stock, other
than in
exchange for or in connection with the retirement (by redemption
or
otherwise) of, not less than a like number of shares of Cumulative
Preferred Stock, Cumulative No Par Preferred Stock or senior or parity
stock, or securities convertible into not less than a like number
of such
shares, as the case may be, at the time outstanding, unless
|
6
|
|
Immediately
after such proposed issue, sale or other disposi-tion, the aggregate
of
the capital of the Company applicable to all shares of Common Stock
then
to be outstanding (including premium on all shares of Common Stock)
plus
earned surplus and paid in or capital surplus, shall be at least
equal to
the involuntary liquida-tion preference of all shares of Cumulative
Preferred Stock, Cumulative No Par Preferred Stock and senior or
parity
stock then to be outstanding, provided that until such additional
shares
or securities, as the case may be, or the equivalent thereof (in
terms of
involuntary liquidating preference) in shares of Cumulative Preferred
Stock, Cumulative No Par Preferred Stock or senior or parity stock,
shall
have been retired, earned surplus of the Company used to meet the
requirements of this clause in connection with the issuance of additional
shares of Cumulative Preferred Stock, Cumulative No Par Preferred
Stock or
senior or parity stock or securities convertible into either thereof
shall
not, after the issue of such shares or securities, be available for
dividends or other distribution Common Stock (other than dividends
payable
in Common Stock), except in an amount equal to the cash subsequently
received by the Company as a contribution to its Common Stock capital
or
as consideration for the issuance of additional shares of Common
Stock;
and
|
|
|
The
gross income of the Company for a period of 12 consecutive calendar
months
within the 15 calendar months immediately preceding the issuance,
sale or
other disposition of such shares, determined in accordance with such
system of accounts as may be prescribed by governmental authorities
having
jurisdiction in the premises, or, in the absence thereof, in accordance
with sound accounting practice (but in any event after deducting
the
amount for said period charged by the Company on its books to depreciation
expense and taxes) to be available for the payment of interest, shall
have
been equal to at least one and one-half times the sum of (x) the
interest
charges for one year on all interest bearing indebtedness of the
Company
(plus all amortization of debt discount and expense, and less all
amortization of premium on debt, applicable to the aforesaid 12 months'
period) and (y) the dividend requirements for one year on all
outstanding Cumulative Preferred Stock, Cumulative No Par Preferred
Stock
and senior and parity stock; and for the purpose of both such computations
the shares and any indebtedness then proposed to be issued shall
be
included, and any indebtedness and shares then proposed to be retired
shall be excluded, and in determining such gross income the Board
of
Directors shall make such adjustments, by way of increase or decrease
in
such gross income, as shall in its opinion be necessary to give effect,
for the entire 12 months for which such gross income is determined,
to any
acquisition or dispo-sition of property, the income from which can
be
separately ascertained.
|
7
|
|
So
long as any Cumulative Preferred Stock or any Cumulative No Par Preferred
Stock is outstanding, the Company shall not, without the consent
(given by
vote in person or by proxy at a meeting called for that purpose)
of the
holders of at least a majority of the total number of outstanding
shares
of Cumulative Preferred Stock and Cumulative No Par Preferred Stock,
voting as a single class:
|
|
(e)
|
Merge
or consolidate with or into any other corporation, provided that
this
provision shall not apply to a purchase or other acquisition by the
Company of franchises or assets of another corporation in any manner
which
does not involve a statutory merger or consolidation; or
|
|
(f)
|
Sell,
lease, or exchange all or substantially all of its property and assets,
unless the fair value of the net assets of the Company, after completion
of such transaction, shall at least equal the then involuntary liquidation
value of Cumulative Preferred Stock of all series, Cumulative No
Par
Preferred Stock of all series, and all senior or parity stock, then
outstanding; or
|
|
(g)
|
Intentionally
omitted.
|
8
No
consent of the holders of Cumulative Preferred Stock or Cumulative No Par
Preferred Stock provided for in paragraph (e) or (f) above shall be required
with respect to any consolidation, merger, sale, lease or exchange ordered,
approved or permitted by the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935, or by any successor commission or
regulatory authority of the United States having jurisdiction in the premises.
No consent hereinbefore in this subdivision (vi) provided for shall be required
in the case of the holders of any shares of Cumulative Preferred Stock or
Cumulative No Par Preferred Stock which are to be redeemed at or prior to the
time when an alteration or change is to take effect, or at or prior to the
time
of authorization, issuance, sale or other disposition of any additional
Cumulative Preferred Stock, Cumulative No Par Preferred Stock or shares of
senior or parity stock or convertible securities, or a consolidation or merger
is to take effect, as the case may be.
If
at any
time dividends on any of the outstanding shares of Cumulative Preferred Stock
or
Cumulative No Par Preferred Stock shall be in default in an amount equivalent
to
four or more full quarterly divi-dends, the holders of outstanding shares of
Cumulative Preferred Stock and Cumulative No Par Preferred Stock, voting as
a
single class, shall be entitled to elect the smallest number of Directors
necessary to consti-tute a majority of the full Board of Directors, which right
shall con-tinue in force and effect until all arrears of dividends on
outstanding shares of Cumulative Preferred Stock and Cumulative No Par Preferred
Stock shall have been declared and paid or deposited in trust with a bank or
trust company having the qualifications set forth in subdivision (v) of this
Division A for payment on or before the next succeeding dividend payment date.
When all such arrears have been declared and paid or deposited in trust for
payment as aforesaid, such right to elect a majority of the Board of Directors
shall cease and terminate unless and until the equivalent of four or more full
quarterly dividends shall again be in default on outstanding shares of
Cumulative Preferred Stock or Cumulative No Par Preferred Stock. Such right
to
elect a majority of the Board of Directors is subject to the following terms
and
conditions:
9
|
(h)
|
While
holders of outstanding shares of Cumulative Preferred Stock and
Cumulative
No Par Preferred Stock remain entitled to elect a majority of
the Board of
Directors as aforesaid, the payment of dividends on such stock
including
dividends in arrears, shall not be unreasonably withheld if the
financial
condi-tion of the Company permits payment thereof;
|
|
(i)
|
Such
right to elect a majority of the Board of Directors may be exercised
at
any annual meeting of shareholders, or, within the limitations
herein
provided, at a special meeting of share-holders held for such purpose.
Whenever such right to elect a majority of the Board of Directors
shall
vest, on request signed by any holder of record of shares of Cumulative
Preferred Stock or Cumulative No Par Preferred Stock then outstanding
and
delivered to the Company's principal office not less than 120 days
prior
to the date of the annual meeting next following the date when
such right
vests, the President or a Vice-President of the Company shall call
a
special meeting of shareholders to be held within 30 days after
receipt of
such request for the purpose of electing a new Board of Directors
of which
holders of outstanding shares of Cumulative Preferred Stock and
Cumulative
No Par Preferred Stock shall be entitled to elect the smallest
number
necessary to constitute a majority and holders of outstanding shares
otherwise entitled to vote shall be entitled to elect the remaining
Directors, in each case to serve until the next annual meeting
of
shareholders or until their successors shall be elected and shall
qualify;
|
10
|
(j)
|
Whenever,
under the terms hereof, holders of outstanding shares of Cumulative
Preferred Stock and Cumulative No Par Preferred Stock shall be
divested of
the right to elect a majority of the Board of Directors, upon request
signed by any holders of record of shares otherwise entitled to
vote and
delivered to the Company at its principal office not less than
120 days
prior to the date for the annual meeting next following the date
of such
divesting, the President or a Vice-President of the Company shall
call a
special meeting of the holders of shares otherwise entitled to
vote to be
held within 30 days after receipt of such request for the purpose
of
electing a new Board of Directors to serve until the next annual
meeting
or until their respective successors shall be elected and shall
qualify;
|
|
(k)
|
If,
while holders of outstanding shares of Cumulative Preferred Stock
and
Cumulative No Par Preferred Stock are entitled to elect a majority
of the
Directors, the holders of shares entitled as a class to elect certain
Directors shall fail to elect the full number of Directors which
they are
entitled to elect, either at an annual meeting of shareholders
or a
special meeting thereof held as in this subdivision (vi) provided,
or at
an adjourned session of either thereof held within a period of
90 days
beginning with the date of such meeting, then after the expiration
of such
period holders of outstanding shares of Cumulative Preferred Stock
and
Cumulative No Par Preferred Stock and holders of outstanding shares
otherwise entitled to vote, voting as a single class, shall be
entitled to
elect such number of Directors as shall not have been elected during
such
period by holders of outstanding shares of the class or classes
then
entitled to elect the same, to serve until the next annual meeting
of
shareholders or until their successors shall be elected and shall
qualify.
The term of office of all Directors in office immediately prior
to the
date of such annual or special meeting shall terminate as and when
a full
Board of Directors shall have been elected at such meeting or a
later
meeting of shareholders for the election of Directors, or an adjourned
session of either thereof;
|
11
|
(l)
|
At
any annual or special meeting of the shareholders or adjournment
thereof,
held for the purpose of electing Directors while the holders of
outstanding shares of Cumulative Preferred Stock and Cumulative
No Par
Preferred Stock shall be entitled to elect a majority of the Board
of
Directors, the presence in person or by proxy of the holders of
a majority
of outstanding shares of Cumulative Preferred Stock and Cumulative
No Par
Preferred Stock, counting all such shares as a single class, shall
be
necessary to constitute a quorum for the election by such class
of a
majority of the Board of Directors and the presence in person or
by proxy
of the holders of a majority of outstanding shares of a class otherwise
entitled to vote shall be necessary to constitute a quorum of such
class
of shares for the election of Directors which holders of such class
of
shares are then entitled to elect. In case of a failure by the
holders of
any class or classes to elect, at such meeting or an adjourned
session
held within said period of 90 days, the number of Directors which
they are
entitled to elect at such meeting, such meeting shall be deemed
ipso facto
to have been adjourned to recon-vene at 11:00 A.M., Central Standard
Time, on the fourth full business day next following the close
of such
90-day period, at which time, or at a subsequent adjourned session
of such
meeting, such number of Directors as shall not have been elected
during
such period by holders of outstanding shares of the class or classes
then
entitled to elect the same, may be elected by holders of outstanding
shares of Cumulative Preferred Stock and Cumulative No Par Preferred
Stock
and holders of outstanding shares otherwise entitled to vote, voting
as a
single class. Subject to the preceding provisions of this subdivision
(vi), a majority of the holders of shares of any class or classes
at the
time present in person or by proxy shall have power to adjourn
such
meeting for the election of Directors by holders of shares of such
class
or classes from time to time without notice other than announcement
at the
meeting;
|
|
(m)
|
At
any election of Directors each holder of outstanding shares of
any class
entitled to vote thereat shall have the right to cast as many votes
in the
aggregate as shall equal the number of shares of such class held
multiplied by the number of Directors to be elected by holders
of shares
of such class, and may cast the whole number of votes, either in
person or
by proxy, for one candi-date, or distribute them among two or more
candidates as such holder shall elect; and
|
12
|
(n)
|
While
the holders of outstanding shares of Cumulative Preferred Stock
and
Cumulative No Par Preferred Stock remain entitled to elect a majority
of
the Board of Directors, any holder of record of outstanding shares
of
Cumulative Preferred Stock or Cumulative No Par Preferred Stock
shall have
the right, during regular business hours, in person or by a duly
authorized represen-tative, to examine the Company's stock records
of
Cumulative Preferred Stock and Cumulative No Par Preferred Stock
for the
purpose of communicating with other holders of shares of such stock
with
respect to the exercise of such right of election, and to make
a list of
such holders.
|
So
long
as any shares of Cumulative Preferred Stock and Cumulative No Par Preferred
Stock are outstanding, the right of the Company, except as otherwise authorized
by the consent (given by vote in person or by proxy at a meeting called for
that
purpose) of the holders of at least two-thirds of the total number of
outstanding shares of Cumulative Preferred Stock and Cumulative No Par Preferred
Stock, voting as a single class, to pay or declare any dividends on its junior
stock (other than dividends payable in junior stock) or to make any distribution
on, or to purchase or otherwise acquire for value, any shares of its junior
stock (each and all of such actions being hereafter embraced collectively
in the
term "dividends on its junior stock" and each thereof being regarded for
purposes hereof as a "dividend"), shall be subject to the following limitations:
13
|
(o)
|
If
and so long as the junior stock equity (as hereinafter defined)
at the end
of the calendar month immediately preceding the date on which a
dividend
on the junior stock is declared is, or as a result of such dividend
would
become less than 20% of total capitalization (as hereinafter defined),
the
Company shall not declare dividends on any of its junior stock
in an
amount which, together with all other dividends on its junior stock
declared within the year ending with but including the date of
such
dividend declaration, exceeds 50% of the net income of the Company
available for dividends on its junior stock for the 12 consecutive
calendar months immediately preceding the month in which such dividend
is
declared; and
|
|
(p)
|
If
and so long as the junior stock equity (as hereinafter defined)
at the end
of the calendar month immediately preceding the date on which a
dividend
on its junior stock is declared is, or as a result of such dividend
would
become less than 25%, but more than 20% of total capitalization
(as
hereinafter defined), the Company shall not declare such dividend
on its
junior stock in an amount which, together with all other dividends
on its
junior stock declared within the year ending with but including
the date
of such dividend declaration, exceeds 75% of the net income of
the Company
available for dividends on its junior stock for the 12 consecutive
calendar months immediately preceding the month in which such dividend
is
declared; and
|
|
(q)
|
Except
to the extent permitted by the preceding sub-paragraphs (o) and
(p) the
Company may not pay dividends on its junior stock which would reduce
the
junior stock equity below 25% of total capitalization. For the
purposes of
subparagraphs (d), (o), (p) and (q) of this subdivision (vi):
|
14
|
|
The
total capitalization of the Company shall be deemed to consist
of the sum
of (x) the principal amount of all outstanding indebtedness of the
Company represented by bonds, notes or other evidences of indebtedness
maturing by their terms one year or more from the date of issue
thereof,
(y) the aggregate amount of par or stated capital represented by all
issued and outstanding capital stock of all classes of the Company
having
preference as to divi-dends or upon liquidation over its junior
stock
(including premiums on stock of such classes), and (z) the junior
stock equity of the Company (as hereinafter defined).
|
|
|
The
junior stock equity of the Company shall be deemed to consist of
the sum
of the amount of par or stated capital repre-sented by all issued
and
outstanding junior stock, including premiums on junior stock, and
the
surplus (including paid-in or capital surplus) of the Company.
|
|
|
The
surplus accounts shall be adjusted to eliminate the amount, if
any, by
which the total (as shown by the Company's books) of amounts expended
by
the Company after November 30, 1946, and up to the end of the latest
calendar month ended prior to the proposed payment of dividends
on its
junior stock for maintenance and repairs to, and of provisions
made by the
Company during such period for depreciation of, the mortgaged property
(as
defined in the Company's Indenture of Mortgage and Deed of Trust,
dated as
of December 1, 1946) is less than the cumulative maintenance and
replacement requirement for the period beginning December 1, 1946,
and ending at the end of the latest calendar month concluded prior
to said
proposed payment, all as determined and calculated as though one
or more
maintenance and replacement certificates covering the entire period
had
been filed pursuant to the Company's Supplemental Indenture dated
as of
December 1, 1946, and otherwise in accordance with the provisions of
said Supplemental Indenture.
|
15
|
|
In
computing gross income and net income available for divi-dends
on the
Company's junior stock for any particular 12 months, operating
expenses,
among other things, shall include the greater of (x) the provision
for depreciation of the mortgaged property (as defined as aforesaid)
as
recorded on the Company's books, or, (y) the amount by which
expenditures by the Company during such period for maintenance
and repairs
of the mortgaged property (as defined as aforesaid) as shown by
the
Company's books is less than the maintenance and replacement requirement
for such period, all as determined and calculated as though a maintenance
certificate for such period had been filed pursuant to said Supplemental
Indenture, and otherwise in accordance with said Supplemental Indenture.
|
|
|
In
addition to the requirements set forth in the two immediately preceding
clauses, net income available for dividends on the Company's junior
stock
and surplus (including paid-in or capital surplus) shall be determined
in
accordance with such system of accounts as may be prescribed by
governmental authorities having jurisdiction in the premises, or,
in the
absence thereof, in accor-dance with sound accounting
practice.
|
Except
as
provided in this subdivision (vi) of this Division A, and as by statute at
the
time mandatorily provided, holders of outstanding shares of Cumulative Preferred
Stock and Cumulative No Par Preferred Stock shall not be entitled to vote;
and
except as by statute at the time mandatorily provided, holders of shares
of
Cumulative Preferred Stock and Cumulative No Par Preferred Stock shall not
be
entitled to receive notice of any meeting of shareholders at which they are
not
entitled to vote or consent.
(vii)
No
Preemptive Rights. No holder of outstanding shares of Cumulative Preferred
Stock or Cumulative No Par Preferred Stock shall have any preemptive right
to
subscribe for or acquire any shares of stock or other securities of any kind
hereafter issued by the Company.
B.
PREFERENCE STOCK
(i)
Series
of
Preference Stock. Shares of Preference Stock may be issued from time to time
in
one or more series as provided herein. Each such series shall be designated
so
as to distinguish the shares thereof from the shares of all other series,
and
shall have such voting powers, full or limited, or no voting powers, and
such
designations, preferences and relative, participating, optional or other
special
rights, and qualifications, limitations or restrictions thereof, as shall
be
stated and expressed in the Articles of Incorporation or any amendment thereto
or in the resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors pursuant to authority expressly vested
in it
by the provisions of this Articles of Incorporation, subject however, to
the
prior rights and preferences of the Cumulative Preferred Stock and the
Cumulative No Par Preferred Stock with respect to dividends, liquidation,
preferences, redemption and repurchase, and voting rights as set forth in
Division A of this ARTICLE THIRD. Any of the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of any
series of Preference Stock may be made dependent upon facts ascertainable
outside these Articles of Incorporation or of any amendment thereto, or outside
the resolution or resolutions providing for the issue of such stock adopted
by
the Board of Directors, provided that the manner in which such facts shall
operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such class of stock is clearly
and expressly set forth in these Articles of Incorporation or in the resolution
or resolutions providing for the issue of such stock adopted by the Board
of
Directors. The shares of Preference Stock of all series shall be of equal
rank,
and all shares of any particular series of Preference Stock shall be identical,
except that, if the dividends, if any, thereon are cumulative, the date or
dates
from which they shall be cumulative may differ. The terms of any series of
Preference Stock may vary from the terms of any other series of Preference
Stock
to the full extent now or hereafter permitted by the Missouri General and
Business Corporation Law, and the terms of each series shall be fixed, prior
to
the issuance thereof, in the manner provided for herein. Without limiting
the
generality of the foregoing, shares of Preference Stock of different series
may,
subject to any applicable provisions of law, vary with respect to the following
terms:
16
|
(a)
|
The
distinctive designation of such series and the number of shares
of such
series;
|
|
(b)
|
The
rate or rates at which shares of such series shall be entitled
to receive
dividends, the conditions upon, and the times of payment of such
dividends, the relationship and preference, if any, of such dividends
to
dividends payable on any other class or classes or any other series
of
stock, and whether such dividends shall be cumulative or noncumulative,
and, if cumulative, the date or dates from which such dividends
shall be
cumulative;
|
|
(c)
|
The
right, if any, to exchange or convert the shares of such series
into
shares of any other class or classes, or of any other series of
the same
or any other class or classes of stock of the Company, and if so
convertible or exchangeable, the conversion price or prices, or
the rates
of exchange, and the adjustments, if any, at which such conversion
or
exchange may be made;
|
|
(d)
|
If
shares of such series are subject to redemption, the time or times
and the
price or prices at which, at the terms and conditions on which,
such
shares shall be redeemable;
|
17
|
(e)
|
The
preference of the shares of such series as to both dividends and
assets in
the event of any voluntary or involuntary liquidation or dissolution
or
winding up or distribution of assets of the
Company;
|
|
(f)
|
The
obligation, if any, of the Company to purchase, redeem or retire
shares of
such series and/or maintain a fund for such purposes, and the amount
or
amounts to be payable from time to time for such purpose or into
such
fund, the number of shares to be purchased, redeemed or retired,
and the
other terms and conditions of any such
obligation;
|
|
(g)
|
The
voting rights, if any, full or limited, to be given the shares
of such
series, including without limiting the generality of the foregoing,
the
right, if any, as a series or in conjunction with other series
or classes,
to elect one or more members of the Board of Directors either generally
or
at certain specified times or under certain circumstances, and
restrictions, if any, on particular corporate acts without a specified
vote or consent of holders of such shares (such as, among others,
restrictions on modifying the terms of such series of Preference
Stock,
authorizing or issuing additional shares of Preference Stock or
creating
any additional shares of Preference Stock or creating any class
of stock
ranking prior to or on a parity with the Preference Stock as to
dividends
or assets); and
|
|
(h)
|
Any
other preferences, and relative, participating, optional or other
special
rights, and qualifications, limitations or restrictions
thereof.
|
(ii)
Authority
for Issuance Granted to Board of Directors. Authority is hereby expressly
granted to and vested in the Board of Directors at any time or from time
to time
to issue the Preference Stock as Preference Stock of any series, and in
connection with the creation of each such series, so far as not inconsistent
with the provisions of this ARTICLE THREE applicable to all series of Preference
Stock, to fix, prior to the issuance thereof, by resolution or resolutions
providing for the issue of shares thereof, the authorized number of shares
of
such series, which number may be increased, unless otherwise provided by
the
Board of Directors in creating such series, or decreased, but not below the
number of shares thereof then outstanding, from time to time by like action
of
the Board of Directors, the voting powers of such series and the designations,
rights, preferences, and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions thereof,
if
any, of such series.
18
C.
COMMON
STOCK
(i)
Dividends.
Subject to the limitations in this ARTICLE THREE set forth, dividends may be
paid on the Common Stock out of any funds legally available for the purpose,
when and as declared by the Board of Directors.
(ii)
Liquidation
Rights. In the event of any liquidation or dissolution of the Company, after
there shall have been paid to or set aside for the holders of outstanding shares
having superior liquidation preferences to Common Stock the full preferential
amounts to which they are respectively entitled, the holders of outstanding
shares of Common Stock shall be entitled to receive pro rata, according to
the
number of shares held by each, the remaining assets of the Company available
for
distribution.
(iii)
Voting
Rights. Except as set forth in this ARTICLE THIRD or as by statute otherwise
mandatorily provided, the holders of the Common Stock shall exclusively possess
full voting powers for the election of Directors and for all other purposes.
D.
GENERAL
(i)
Consideration
for Shares. Subject to applicable law, the shares of the Company, now or
hereafter authorized, may be issued for such consideration as may be fixed
from
time to time by the Board of Directors. Subject to applicable law and to the
provisions of this ARTICLE THREE, shares of the Company issued and thereafter
acquired by the Company may be disposed of by the Company for such consideration
as may be fixed from time to time by the Board of Directors.
(ii)
Crediting Consideration to Capital. The entire consideration hereafter received
upon the issuance of shares of Common Stock without par value shall be credited
to capital, and this requirement may not be eliminated or amended without the
affirmative vote or consent of the holders of two-thirds of the outstanding
Common Stock.
E.
CERTAIN DEFINITIONS
In
this
ARTICLE THREE, and in any resolution of the Board of Directors adopted pursuant
to this ARTICLE THIRD establishing a series of Cumulative Preferred Stock,
a
series of Cumulative No Par Preferred Stock or a series of Preference Stock,
and
fixing the designation, description and terms thereof, the meanings below
assigned shall control:
19
"Senior
stock" shall mean shares of stock of any class ranking prior to shares of
Cumulative Preferred Stock or Cumulative No Par Preferred Stock as to dividends
or upon dissolution or liquidation;
"Parity
stock" shall mean shares of stock of any class ranking on a parity with, but
not
prior to, shares of Cumulative Preferred Stock and Cumulative No Par Preferred
Stock as to dividends or upon dissolution or liquidation;
"Junior
stock" shall mean shares of stock of any class ranking subordinate to shares
of
Cumulative Preferred Stock or Cumulative No Par Preferred Stock as to dividends
and upon dissolution or liquidation; and
Preferential
dividends accrued and unpaid on a share of Cumulative Preferred Stock,
Cumulative No Par Preferred Stock or Preference Stock, to any particular date
shall mean an amount per share at the annual dividend rate applicable to such
share for the period beginning with the date from and including which dividends
on such share are cumulative and concluding on the day prior to such particular
date, less the aggregate of all dividends paid with respect to such share during
such period.
ARTICLE
FOUR
No
holder
of outstanding shares of any class shall have any preemptive right to subscribe
for or acquire shares of stock or any securities of any kind issued by the
Corporation.
ARTICLE
FIVE
The
name
and place of residence of each incorporator is as follows:
Bernard
J. Beaudoin
11439
West 105
th
Street
Overland
Park, Kansas 66214
ARTICLE
SIX
The
number of Directors to constitute the first Board of Directors shall is ten
(10). Thereafter the number of directors shall be fixed by, or in the manner
provided by the By-laws . Any changes in the number will be reported to the
Secretary of State within thirty calendar days of such change.
20
ARTICLE
SEVEN
The
duration of the corporation is perpetual.
ARTICLE
EIGHT
The
corporation is formed for the following purposes:
The
acquisition, construction, maintenance and operation of electric power and
heating plant or plants and distribution systems therefor; the purchase of
electrical current and of steam and of other heating mediums and forms of
energy; distribution and sale thereof; the doing of all things necessary or
incident to carrying on the business aforesaid in the State of Missouri and
elsewhere, and generally the doing of all other things the law may authorize
such a corporation so to do.
ARTICLE
NINE
The
Board
of Directors may make, alter, amend or repeal By-laws of the Company by a
majority vote of the whole Board of Directors at any regular meeting of the
Board or at any special meeting of the Board if notice thereof has been given
in
the notice of such special meeting. Nothing in this ARTICLE NINE shall be
construed to limit the power of the shareholders to make, alter, amend or repeal
By-laws of the Company at any annual or special meeting of shareholders by
a
majority vote of the shareholders present and entitled to vote at such meeting,
provided a quorum is present.
ARTICLE
TEN
At
any
meeting of shareholders, a majority of the out-standing shares entitled to
vote
represented in person or by proxy shall constitute a quorum;
provided
,
that
less than such quorum shall have the right successively to adjourn the meeting
to a specified date not longer than 90 days after such adjournment, and no
notice need be given of such adjournment to shareholders not present at the
meeting.
ARTICLE
ELEVEN
These
Articles of Incorporation may be amended in accordance with and upon the vote
prescribed by the laws of the State of Missouri;
provided
,
that in
no event shall any such amendment be adopted after the date of the adoption
of
this ARTICLE ELEVEN without receiving the affirmative vote of at least a
majority of the outstanding shares of the Company entitled to vote.
21
ARTICLE
TWELVE
In
addition to any affirmative vote required by these Articles of Incorporation
or
By-laws, the affirmative vote of the holders of at least 80% of the outstanding
shares of Common Stock of the Company entitled to vote shall be required for
the
approval or authorization of any Business Combination with an Interested
Shareholder; provided, however, that such 80% voting requirement shall not
be
applicable if:
|
(a)
|
the
Business Combination shall have been approved by a majority of the
Continuing Directors; or
|
|
(b)
|
the
cash or the Fair Market Value of the property, securities or other
consideration to be received per share by holders of the Common Stock
in
such Business Combination is not less than the highest per share
price
paid by or on behalf of the Interested Shareholder for any shares
of
Common Stock during the five-year period preceding the announcement
of
such Business Combination.
|
The
following definitions shall apply for purposes of this ARTICLE
TWELVE:
|
(a)
|
The
term "Business Combination" shall mean: (i) any merger or consolidation
involving the Company or a subsidiary of the Company with or into
an
Interested Shareholder; (ii) any sale, lease, exchange, transfer
or other
disposition (in one transaction or a series) of any Substantial Part
of
the assets of the Company or a subsidiary of the Company to or with
an
Interested Shareholder; (iii) the issuance of any securities of the
Company or a subsidiary of the Company to an Interested Shareholder
other
than the issuance on a pro rata basis to all holders of shares of
the same
class pursuant to a stock split or stock dividend; (iv) any
recapitalization or reclassification or other transaction that would
have
the effect of increasing the proportionate voting power of an Interested
Shareholder; (v) any liquida-tion, spinoff, splitup or dissolution
of the
Company proposed by or on behalf of an Interested Shareholder; or
(vi) any
agreement, contract, arrangement or understanding providing for any
of the
transactions described in this definition of Business
Combination;
|
|
(b)
|
The
term "Interested Shareholder" shall mean and include (i) any
individual, corporation, partnership or other person or entity which,
together with its "Affiliates" or "Associates" (as defined on
March 1, 1986, in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934) "beneficially owns" (as
defined
on March 1, 1986, in Rule 13d-3 of the General Rules and Regulations
under
the Securities Exchange Act of 1934) in the aggregate 5% or more
of the
outstanding shares of the Common Stock of the Company, and (ii) any
Affiliate or Associate of any such Interested
Shareholder;
|
22
|
(c)
|
The
term "Continuing Director" shall mean any member of the Board of
Directors
of the Company who is unaffiliated with the Interested Shareholder
and was
a member of the Board of Directors prior to the time that the Interested
Shareholder became an Interested Shareholder, and any successor of
a
Continuing Director if the successor is unaffiliated with the Interested
Shareholder and is recommended or elected to succeed the Continuing
Director by a majority of Continuing
Directors;
|
|
(d)
|
The
term "Fair Market Value" shall mean: (i) in the case of stock, the
highest
closing sale price during the 30-day period immediately preceding
the date
in question of a share of such stock on the Composite Tape for New
York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on
the
Composite Tape, on the New York Stock Exchange, or, if such stock
is not
listed on such Exchange, on the principal United States securities
exchange registered under the Securities and Exchange Act of 1934
on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share
of
such stock during the 30-day period preceding the date in question
on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any similar system then in use, or, if no such quotations
are
available, the Fair Market Value on the date in question of a share
of
such stock as determined by a majority of the Continuing Directors;
and
(ii) in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as determined
by a
majority of the Continuing Directors;
and
|
|
(e)
|
The
term "Substantial Part" shall mean 10% or more of the Fair Market
Value of
the total assets as reflected on the most recent balance sheet existing
at
the time the shareholders of the Company would be required to approve
or
authorize the Business Combination involving the assets constituting
any
such Substantial Part.
|
23
Notwithstanding
ARTICLE ELEVEN or any other provisions of these Articles of Incorporation or
the
By-laws of the Company (and not withstanding the fact that a lesser percentage
may be specified by law), this ARTICLE TWELVE may not be altered, amended or
repealed except by the affirmative vote of the holders of at least 80% or more
of the outstanding shares of Common Stock of the Company entitled to vote.
ARTICLE
THIRTEEN
|
(a)
|
Right
to Indemnification. Each person who was or is made a party or is
threatened to be made a party to any action, suit or proceeding,
whether
civil, criminal, administrative or investigative, by reason of the
fact
that he or she is or was a Director or officer of the Company or
is or was
an employee of the Company acting within the scope and course of
his or
her employment or is or was serving at the request of the Company
as a
Director, officer, employee or agent of another corporation or of
a
partnership, joint venture, trust or other enterprise, including
service
with respect to employee benefit plans, shall be indemnified and
held
harmless by the Company to the fullest extent authorized by The Missouri
General and Business Corporation Law, as the same exists or may hereafter
be amended, against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid
to or to be paid in settlement) actually and reasonably incurred
by such
person in connection therewith. The Company may in its discretion
by
action of its Board of Directors provide indemnification to agents
of the
Company as provided for in this ARTICLE THIRTEEN. Such indemnification
shall continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators.
|
|
(b)
|
Rights
Not Exclusive. The indemnification and other rights provided by this
ARTICLE THIRTEEN shall not be deemed exclusive of any other rights
to
which a person may be entitled under any applicable law, By-laws
of the
Company, agreement, vote of shareholders or disinterested Directors
or
otherwise, both as to action in such person's official capacity and
as to
action in any other capacity while holding the office of Director
or
officer, and the Company is hereby expressly authorized by the
shareholders of the Company to enter into agreements with its Directors
and officers which provide greater indemnification rights than that
generally provided by The Missouri General and Business Corporation
Law;
provided
,
however, that no such further indemnity shall indemnify any person
from or
on account of such Director's or officer's conduct which was finally
adjudged to have been knowingly fraudulent, deliberately dishonest
or
willful misconduct. Any such agreement providing for further indemnity
entered into pursuant to this ARTICLE THIRTEEN after the date of
approval
of this ARTICLE THIRTEEN by the Company's shareholders need not be
further
approved by the shareholders of the Company in order to be fully
effective
and enforceable.
|
24
Insurance.
The Company may purchase and maintain insurance on behalf of any person who
was
or is a Director, officer, employee or agent of the Company, or was or is
serving at the request of the Company as a Director, officer, employee or agent
of another Company, partnership, joint venture, trust or other enterprise
against any liability asserted against or incurred by such person in any such
capacity, or arising out of his or her status as such, whether or not the
Company would have the power to indemnify such person against such liability
under the provisions of this ARTICLE THIRTEEN.
Amendment.
This ARTICLE THIRTEEN may be hereafter amended or repealed; however, no
amendment or repeal shall reduce, terminate or otherwise adversely affect the
right of a person entitled to obtain indemnification or an advance of expenses
with respect to an action, suit or proceeding that pertains to or arises out
of
actions or omissions that occur prior to the later of (a) the effective date
of
such amendment or repeal; (b) the expiration date of such person's then current
term of office with, or service for, the Company (provided such person has
a
stated term of office or service and completes such term); or (c) the effective
date such person resigns his or her office or terminates his or her service
(provided such person has a stated term of office or service but resigns prior
to the expiration of such term).
25
IN
WITNESS WHEREOF, these Articles of Incorporation have been signed on February
26, 2001.
By:
/s/Bernard
J. Beaudoin
Bernard
J. Beaudoin
Signature
Printed Name
STATE
OF
MISSOURI
)
)
ss
COUNTY
OF
JACKSON
)
I,
Jacquetta L. Hartman, a Notary Public, do hereby certify that on February 26,
2001, personally appeared before me Bernard J. Beaudoin, and being duly
sworn by me, acknowledged that he/she signed as his/her own free act and deed
the foregoing document in the capacity therein set forth and declared that
the
statements therein contained are true.
IN
WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before
written.
/s/Jacquetta
L. Hartman
(Notarial
Seal or Stamp)
Notary
Public: Jacquetta L. Hartman
My
commission expires: April 8, 2004
My
County
of Commission: Ray
26
EXHIBIT
1
3.80%
CUMULATIVE PREFERRED STOCK
(a)
Establishment
of Series and Designation Thereof.
There
shall be and hereby is established a series of Cumulative Preferred Stock,
the
distinctive serial designation of the shares of which shall be, and such shares
shall be known as, 3.80% Cumulative Preferred Stock. Such series shall be a
closed series consisting of One Hundred Thousand (100,000) shares of the
Cumulative Preferred Stock.
(b)
Rate
of Dividend.
The rate
per annum for preferential dividends on the shares of 3.80% Cumulative Preferred
Stock shall be $3.80, which shall be cumulative from and including the date
of
issue thereof.
(c)
Prices
at which Redeemable.
The
shares of 3.80% Cumulative Preferred Stock shall be redeemable at any time
after
the issue thereof for $103.70 per share plus preferential dividends at the
rate
aforesaid accrued and unpaid to the date of redemption.
(d)
No
Sinking Fund.
There
shall be no sinking fund for the purchase or redemption of shares of 3.80%
Cumulative Preferred Stock.
(e)
No
Conversion Privilege.
The
shares of 3.80% Cumulative Preferred Stock shall not be convertible into other
shares or securities of the Company.
27
EXHIBIT
2
4.50%
CUMULATIVE PREFERRED STOCK
(a)
Establishment
of Series and Designation thereof.
There
shall be and hereby is established a second series of Cumulative Preferred
Stock, the distinctive serial designation of the shares of which shall be,
and
the shares of which shall be known as, 4.50% Cumulative Preferred Stock. Such
series shall be a closed series consisting of 100,000 shares of the Cumulative
Preferred Stock.
(b)
Rate
of Dividend.
The rate
per annum for preferential dividends on the shares of 4.50% Cumulative Preferred
Stock shall be $4.50 per share, which shall be cumulative from and including
the
date of issue thereof.
(c)
Prices
at which Redeemable.
The
shares of 4.50% Cumulative Preferred Stock shall be redeemable at any time
after
the issue thereof for $101.00 per share plus preferential dividends at the
rate
aforesaid accrued and unpaid to the date of redemption.
(d)
No
Sinking Fund.
There
shall be no sinking fund for the purchase or redemption of shares of 4.50%
Cumulative Preferred Stock.
(e)
No
Conversion Privilege.
The
shares of 4.50% Cumulative Preferred Stock shall not be convertible into other
shares or securities of the Company.
28
EXHIBIT
3
4.20%
CUMULATIVE PREFERRED STOCK
(a)
Establishment
of Series and Designation thereof.
There
shall be and hereby is established a fourth series of Cumulative Preferred
Stock, the distinctive serial designation of the shares of which shall be,
and
the shares of which shall be known as, 4.20% Cumulative Preferred Stock. Such
series shall be a closed series consisting of 70,000 shares of the Cumulative
Preferred Stock.
(b)
Rate
of Dividend.
The rate
per annum for preferential dividends on the shares of 4.20% Cumulative Preferred
Stock shall be $4.20 per share, which shall be cumulative from and including
the
date of issue thereof.
(c)
Prices
at which Redeemable.
The
shares of 4.20% Cumulative Preferred Stock shall be redeemable at any time
after
the issue thereof for $102.00 per share plus preferential dividends at the
rate
aforesaid accrued and unpaid to the date of redemption.
(d)
No
Sinking Fund.
There
shall be no sinking fund for the purchase or redemption of shares of 4.20%
Cumulative Preferred Stock.
(e)
No
Conversion Privilege.
The
shares of 4.20% Cumulative Preferred Stock shall not be convertible into other
shares or securities of the Company.
29
EXHIBIT
4
4.35%
CUMULATIVE PREFERRED STOCK
(a)
Establishment
of Series and Designation thereof.
There
shall be and hereby is established a fifth series of Cumulative Preferred Stock,
the distinctive serial designation of the shares of which shall be, and the
shares of which shall be known as, 4.35% Cumulative Preferred Stock. Such series
shall be a closed series consisting of 120,000 shares of the Cumulative
Preferred Stock.
(b)
Rate
of Dividend.
The rate
per annum for preferential dividends on the shares of 4.35% Cumulative Preferred
Stock shall be $4.35 per share, which shall be cumulative from and including
the
date of issue thereof.
(c)
Prices
at which Redeemable.
The
shares of 4.35% Cumulative Preferred Stock shall be redeemable at any time
after
the issue thereof for $101.00 per share plus preferential dividends at the
rate
aforesaid accrued and unpaid to the date of redemption.
(d)
No
Sinking Fund.
There
shall be no sinking fund for the purchase or redemption of shares of 4.35%
Cumulative Preferred Stock.
(e)
No
Conversion Privilege.
The
shares of 4.35% Cumulative Preferred Stock shall not be convertible into other
shares or securities of the Company.
30
Exhibit
10.1.a
CHANGE
IN CONTROL SEVERANCE AGREEMENT
THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT is entered into as of the ___ day of
____________, 2006, between Great Plains Energy Incorporated, a Missouri
corporation ("Great Plains Energy"), and Michael J. Chesser
("Executive").
WITNESSETH:
WHEREAS,
Executive is the Chairman of the Board and Chief Executive Officer of Great
Plain Energy and a valued employee of Great Plains Energy or a subsidiary
thereof (the "Company"); and
WHEREAS,
the Board (as defined herein) believes that it is in the best interests of
the
Company and its shareholders (i) to provide assurance that the Company will
have
the continued service of Executive notwithstanding the possibility, threat
or
occurrence of a Change in Control (as defined in Section 1), (ii) to diminish
the distraction to Executive that may arise by virtue of the personal
uncertainties and risks created by such a threatened or pending Change in
Control, and (iii) to encourage Executive's full attention and dedication to
the
Company currently and in the event of a threatened or pending Change in Control;
and
WHEREAS,
the Board and Executive previously entered into a severance agreement dated
October 1, 2003, the "Prior Severance Agreement" whereby Great Plains Energy
agreed to provide Executive with certain compensation and perquisites following
Executive's termination or constructive termination of employment with the
Company in connection with a change in control or potential change in control
of
Great Plains Energy; and
WHEREAS,
the Board and Executive agree that, in connection with both parties entering
into this Agreement, the Prior Severance Agreement shall be terminated, rendered
null and void, and all duties and rights conferred upon the parties thereto
extinguished, and that such Prior Severance Agreement is replaced in its
entirety with the benefits, duties, terms and conditions set forth in this
Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein, the parties hereto agree as follows:
1.
Certain
Definitions
.
As used
in this Agreement, unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following
meanings:
(a)
Agreement
.
"Agreement" means this Change in Control Severance Agreement as amended from
time to time.
(b)
Beneficial
Owner
.
"Beneficial Owner" shall have the same meaning as set forth in Rule 13d-3 of
the
Exchange Act.
(c)
Board
.
"Board"
means the Board of Directors of Great Plains Energy.
(d)
Cause
.
"Cause"
means (i) the material misappropriation of any of the Company's funds,
Confidential Information or property; (ii) the conviction of, or the entering
of
a guilty plea or plea of no contest with respect to, a felony, or the equivalent
thereof; (iii) commission of act of willful damage, willful misrepresentation,
willful dishonesty, or other willful conduct that can reasonably be expected
to
have a material adverse effect on the business, reputation, or financial
situation of the Company; or (iv) gross negligence or willful misconduct in
performance of Executive's duties; provided, however, "cause" shall not exist
under clause (iv), above, with respect to an act or failure to act unless (A)
Executive has been provided written notice describing in sufficient detail
the
acts or failure to act giving rise to the Company's assertion of such gross
negligence or misconduct, (B) been provided a reasonable period to remedy any
such occurrence and (C) failed to sufficiently remedy the
occurrence.
(e)
Change
in Control
.
"Change
in Control" means the occurrence of one of the following events, whether in
a
single transaction or a series of related transactions:
(i)
any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of Great Plains Energy (not including in the securities beneficially owned
by
such Person any securities acquired directly from Great Plains Energy or its
affiliates other than in connection with the acquisition by Great Plains Energy
or its affiliates of a business) representing 35% or more of either the then
outstanding shares of common stock of Great Plains Energy or the combined voting
power of Great Plains Energy's then outstanding securities; or
(ii)
the
following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of Great Plains Energy, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or election
by the Board or nomination for election by Great Plains Energy's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved; or
(iii)
the
consummation of a merger, consolidation, reorganization or similar corporate
transaction of Great Plains Energy, whether or not Great Plains Energy is the
surviving corporation in such transaction, other than (A) a merger,
consolidation, or reorganization that would result in the voting securities
of
Great Plains Energy outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 60% of the combined voting power
of the voting securities of Great Plains Energy or such surviving entity or
any
parent thereof outstanding immediately after such merger, consolidation or
reorganization, or (B) a merger, consolidation or reorganization effected to
implement a recapitalization of Great Plains Energy (or similar transaction)
in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of
securities of Great Plains Energy (not including in the securities Beneficially
Owned by such Person any securities acquired directly from Great Plains Energy
or its affiliates other than in connection with the acquisition by Great Plains
Energy or its affiliates of a business) representing 20% or more of either
the
then outstanding shares of common stock of Great Plains Energy or the combined
voting power of Great Plains Energy's then outstanding securities; or
(iv)
the
occurrence of, or the stockholders of Great Plains Energy approve a plan of,
a
complete liquidation or dissolution of Great Plains Energy or an agreement
for
the sale or disposition by Great Plains Energy of all or substantially all
of
Great Plains Energy's assets, other than a sale or disposition of all or
substantially all of Great Plains Energy's assets to an entity, at least 60%
of
the combined voting power of the voting securities of which are owned by Persons
in substantially the same proportions as their ownership of Great Plains Energy
immediately prior to such sale.
Notwithstanding
the foregoing, no "Change in Control" shall be deemed to have occurred if there
is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of Great Plains Energy
immediately prior to such transaction or series of transactions continue to
have
substantially the same proportionate ownership in an entity which owns all
or
substantially all of the assets of Great Plains Energy immediately following
such transaction or series of transactions.
(f)
Change
in Control Period
.
"Change
in Control Period" means the period commencing on the date hereof and ending
on
the second anniversary of such date; provided, however, that commencing on
a
date one year after the date hereof, and on each annual anniversary of such
date
(such date and each annual anniversary thereof being hereinafter referred to
as
the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at least
60
days prior to the Renewal Date the Company shall give notice to Executive that
the Change in Control Period shall not be so extended; provided, further that
during any period of time when the Board or the governing body of Great Plains
Energy has knowledge that any person has taken steps reasonably calculated
to
effect a Change in Control, the Change in Control Period shall automatically
be
extended (and may not terminate) until, in the opinion of the Board, such person
has abandoned or terminated its efforts to effect a Change in
Control.
(g)
Company
.
"Company" means, except as the context requires otherwise, references to Great
Plains Energy Incorporated, a Missouri corporation, its successors and assigns,
and/or any subsidiary thereof, as applicable.
(h)
Confidential
Information
.
"Confidential Information" means (1) any and all trade secrets concerning the
business and affairs of the Company, product specifications, data, know-how,
formulae, algorithms, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned manufacturing or distribution
methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software
and
programs (including object code and source code), computer software and database
technologies, systems, structures, and architectures; (2) information concerning
the business and affairs of the Company (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials); and (3) notes, analysis,
compilations, studies, summaries, and other material prepared by or for the
Company containing or based, in whole or in part, or any information included
in
the foregoing, whether reduced to writing or not and which has not become
publicly known or made generally available through no wrongful act of Executive
or others who were under confidentiality obligations as to the item or items
involved.
(i)
Date
of Termination
.
"Date
of Termination" means (i) if Executive's employment is terminated by the Company
for Cause, or by Executive for Good Reason, the date of receipt of the Notice
of
Termination or any later date permitted to be specified therein, as the case
may
be, (ii) if Executive's employment is terminated by the Company other than
for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies Executive of such termination, (iii) if Executive's employment
is terminated by reason of death or Disability, the Date of Termination shall
be
the date of death of Executive or the Disability Effective Date (as defined
in
Section 2(a)), as the case may be and (iv) if Executive's employment is
terminated by Executive for other than Good Reason, the Date of Termination
shall be the date on which Executive notifies the Company in writing of such
termination or any later date permitted to be specified therein, as the case
may
be.
(j)
Disability
or Disabled
.
The
term "Disability" or "Disabled" shall mean an individual (i) is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be
expected to last for a continuous period of not less than twelve (12) months
or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than 3 months under a Company
sponsored accident or health plan.
(k)
Effective
Date
.
"Effective Date" means the first date on which a Change in Control occurs during
the Change in Control Period.
(l)
Exchange
Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time.
(m)
Good
Reason
.
"Good
Reason" means, without Executive's written consent any of the
following:
(i)
Any
material and adverse reduction or material and adverse diminution in Executive's
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities held, exercised or assigned at any time
during the 90-day period immediately preceding the commencement of the Pre-CIC
Protected Period;
(ii)
Any
reduction in Executive's annual base salary as in effect immediately preceding
the commencement of the Pre-CIC Protected Period or as the same may be increased
from time to time;
(iii)
Any
reduction in benefits received by Executive under Company Plans (as defined
below) to less than the most favorable benefits provided to Executive by the
Company under Company Plans at any time during the 90-day period immediately
preceding the commencement of the Pre-CIC Protected Period. "Company Plans"
means (1) all incentive, savings and retirement plans, practices, policies
and
programs sponsored or maintained by the Company, (2) all welfare benefit plans,
practices, policies and programs (including medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death
and
travel accident insurance plans and programs) sponsored or maintained by the
Company, (3) expense reimbursement by the Company for all reasonable
out-of-pocket employment expenses incurred by Executive, (4) the provision
of
fringe benefits, and (5) the provision of paid vacation time by the
Company;
(iv)
Executive
being required by the Company to be based at any office or location that is
more
than 70 miles from the location where Executive was employed immediately
preceding the commencement of the Pre-CIC Protected Period; or
(v)
Any
failure by the Company to require any successor (whether direct or indirect,
by
purchase, merger, consolidation or otherwise) to all or substantially all of
the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place, or any failure
by any such successor after ten (10) days notice from Executive to so perform
under this Agreement.
Provided,
however, notwithstanding the occurrence of any of the events set forth above
in
this Section 1(m), Good Reason shall not include for the purpose of this
definition (1) an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by Executive, or (2) if occurring within the Pre-CIC Protected
Period, any reduction in Executive's base annual salary or reduction in benefits
received by Executive where such reduction is in connection with a company-wide
reduction in salaries or benefits.
(n)
Notice
of Termination
.
"Notice
of Termination" means a written notice of termination which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the
provision so indicated and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date (which date
shall
be not more than fifteen (15) days after the giving of such notice), unless
another date is mutually agreed upon between Executive and the
Company.
(o)
Person
.
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (1) Great Plains Energy or any of its subsidiaries, (2) a
trustee or other fiduciary holding securities under an employee benefit plan
of
the Company or any of its subsidiaries, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) a corporation
owned, directly, or indirectly, by the stockholders of Great Plains Energy
in
substantially the same proportions as their ownership of stock of Great Plains
Energy.
(p)
Post-Effective
Period
.
"Post-Effective Period" means the period commencing on the Effective Date and
ending on the earlier of (i) the second anniversary of such date or
(ii) Executive's 70
th
birthday.
(q)
Pre
-CIC
Protected Period
.
"Pre-CIC Protected Period" means the period that is within the Change in Control
Period and begins when (A) Great Plains Energy enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(B)
Great Plains Energy or any Person publicly announces an intention to take or
to
consider taking actions which, if consummated, would constitute a Change in
Control; (C) any Person becomes the Beneficial Owner, directly or indirectly,
of
voting securities of Great Plains Energy representing 10% or more of the
combined voting power of Great Plains Energy's then outstanding voting
securities; or (D) the Board, the members or the stockholders of Great Plains
Energy adopts a resolution approving any of the foregoing or approving any
Change in Control, and ends upon the date the Change in Control transaction
is
either consummated, abandoned or terminated (for this purpose, the Board shall
have the sole and absolute discretion to determine that a proposed transaction
has been abandoned).
2.
Termination
of Employment During the Post-Effective Period
.
(a)
Death
or Disability
.
Executive's employment shall terminate automatically upon Executive's death
or,
with written notice by the Company of its intention to terminate Executive's
employment, upon Executive's Disability. In such event, Executive's employment
with the Company shall terminate effective on the 90th day after receipt of
such
notice by Executive (the "Disability Effective Date"), provided that within
the
90 days after such receipt Executive shall not have returned to full-time
performance of Executive's duties.
(b)
Cause
.
The
Company may terminate Executive's employment at any time for Cause or without
Cause. Notwithstanding the foregoing, Executive shall not be deemed to have
been
terminated for Cause without (i) reasonable notice to Executive setting forth
the reasons for the Company's intention to terminate for Cause, (ii) an
opportunity for Executive, together with his counsel, to be heard before the
Board within fifteen (15) days of such notice, and (iii) delivery to Executive
of a Notice of Termination from the Board finding that, in the good faith
opinion of the Board, that Executive was guilty of conduct set forth in Section
1(d), and specifying the particulars thereof in reasonable detail.
(c)
Executive
Resignation
.
Executive's employment may be terminated at any time by Executive for Good
Reason or without Good Reason.
(d)
Notice
of Termination
.
Any
termination by the Company for Cause, or by Executive for Good Reason, shall
be
communicated by Notice of Termination to the other party hereto. The failure
by
Executive or the Company to set forth in the Notice of Termination any fact
or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive
or
the Company from asserting such fact or circumstance in enforcing Executive's
or
the Company's rights hereunder.
3.
Obligations
of the Company Upon Termination of Employment
.
(a)
Post-Effective
Period Terminations Other Than for Cause, Death or Disability; Post-Effective
Period Executive Resignation
.
If,
during the Post-Effective Period, the Company shall terminate Executive's
employment other than (I) for Cause or (II) on account of Executive's death
or
Disability, or Executive shall terminate employment for Good Reason, the Company
shall pay to Executive, in a lump-sum cash payment made within 30 days following
the Date of Termination, as compensation for services rendered to the Company,
an amount equal to the aggregate of the following amounts set forth below in
Sections 3(a)(i), (ii), (iii), and (iv), and provide to Executive the benefits
provided in Section 3(a)(v).
(i)
A
cash
amount equal to the sum of (A) Executive's full annual base salary from the
Company and its affiliated companies through the Date of Termination, to the
extent not theretofore paid, (B) a bonus in an amount at least equal to the
average annualized incentive awards paid or payable pursuant to any
Company-sponsored annual incentive compensation plan, including by reason of
any
deferral under a Company-sponsored deferred compensation program, to Executive
by the Company and its affiliated companies during the five fiscal years of
the
Company (or if Executive shall have performed services for the Company and
its
affiliated companies for four fiscal years or less, the years during which
Executive performed services) immediately preceding the fiscal year in which
the
Change in Control (or if benefits are payable pursuant to Section 3(c), the
Date
of Termination) occurs, multiplied by a fraction, the numerator of which is
the
number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination and the denominator of which is 365 or 366,
as
applicable, to the extent not theretofore paid, (C) any amount credited to
Executive's CAP Excess Benefits Account pursuant to the Great Plains Energy
Incorporated Nonqualified Deferred Compensation Plan and any other compensation
previously deferred by Executive (together with any interest and earnings
thereon), in each case to the extent not theretofore paid, and (D) any accrued
unpaid vacation pay;
(ii)
a
cash
amount equal to (A) three (3) times Executive's highest annual base salary
from
the Company and its affiliated companies in effect during the twelve (12)-month
period prior to the Date of Termination, plus (B) three (3) times Executive's
average annualized annual incentive compensation awards, paid, or, but for
a
deferral under a Company-sponsored deferred compensation program, would have
been paid, to Executive by the Company and its affiliated companies during
the
five fiscal years of the Company (or if Executive shall have performed services
for the Company and its affiliated companies for four fiscal years or less,
the
years during which Executive performed services) immediately preceding the
fiscal year in which the Change in Control (or if benefits are payable pursuant
to Section 3(c), the Date of Termination) occurs; provided, however, that in
the
event there are fewer than thirty-six (36) whole months remaining from the
Date
of Termination to the date of Executive's 70th birthday, the amount calculated
in accordance with this Section 3(a)(ii) shall be reduced by multiplying such
amount by a fraction the numerator of which is the number of months, including
a
partial month (with a partial month being expressed as a fraction the numerator
of which is the number of days remaining in such month and the denominator
of
which is the number of days in such month), so remaining and the denominator
of
which is thirty-six (36) months; provided further that any amount paid pursuant
to this Section 3(a)(ii) shall be paid in lieu of any other amount of severance
pay to be received by Executive upon termination of employment of Executive
under any severance plan, policy or arrangement of the Company;
(iii)
a
cash
amount equal to the excess of (A) the actuarial equivalent value of the monthly
accrued benefits payable to Executive at age 65 under the Great Plains Energy
Incorporated Management Pension Plan (the "Pension Plan") as in effect on the
date of this Agreement and the benefits provided under the Supplemental
Executive Retirement Plan in respect of the Pension Plan as in effect on the
date of this Agreement, assuming (1) that benefits have accrued thereunder
and
Executive is entitled to such benefits, (2) each such benefit shall be computed
as if Executive had two Years of Credited Service for every one actual Year
of
Credited Service earned under the Pension Plan, plus six additional Years of
Credited Service earned under the Pension Plan and (3) Executive were fully
vested in such hypothetical benefits, over (B) the actuarial equivalent value
of
Executive's vested accrued benefits under the Pension Plan and benefits payable
under the Supplemental Executive Retirement Plan computed as if Executive had
two Years of Credited Service for every one actual Year of Credited Service
earned under the Pension Plan. Such cash amount shall be computed using the
same
actuarial methods and assumptions then in use for purposes of computing benefits
under the Pension Plan, except that the computation shall be made without
actuarial reduction for early retirement and provided that the interest rate
used in such computation shall be the interest rate used on the Date of
Termination by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution pursuant to a plan
termination;
(iv)
if
on the
Date of Termination Executive shall not be fully vested in the matching employer
contributions made on Executive's behalf under the Great Plains Energy
Incorporated Cash or Deferred Arrangement, a cash amount equal to the value
of
the unvested portion of such matching employer contributions;
(v)
for
a
period of three (3) years commencing on the Date of Termination, the Company
shall provide Executive and Executive's dependents with medical, accident,
disability and life insurance coverage upon substantially the same terms and
otherwise substantially to the same extent as such coverage was being provided
to Executive and Executive's dependent(s) immediately prior to the Date of
Termination. At the Company's election, such continuation coverage may be
provided by (A) continuing such coverage under the Company's existing welfare
benefit plans, (B) with respect to any group health care plan and for the
applicable period permitted under Code Section 4980B(f)(2), Executive and/or
Executive's dependent(s) being deemed to have elected to receive such coverage
pursuant to a continuation election under Code Section 4980B with the Company
being obligated to pay for the entire portion of the applicable COBRA premiums,
(C) the Company purchasing an individual policy (to the extent such a policy
is
reasonably available in the marketplace) for Executive and/or Executive's
dependent(s) providing substantially similar coverage as offered under the
Company's plan, or (D) any combination of the forgoing methods under (A), (B)
and (C) of this paragraph. Notwithstanding the foregoing sentence, if any of
the
medical, accident, disability or life insurance plans then in effect generally
with respect to other peer executives of the Company and its affiliated
companies would be more favorable to Executive, such plan coverage shall be
substituted for the analogous plan coverage provided to Executive immediately
prior to the Date of Termination, and the Company and Executive shall share
the
costs of such plan coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. The obligation of the Company
to
continue coverage of Executive and Executive's dependent(s) under such plans
and
in accordance with this paragraph shall cease at such time as Executive and
Executive's dependent(s) obtain comparable coverage under another plan,
including a plan maintained by a new employer. With respect to any Company
group
health care plan, any continuation coverage provided under this paragraph shall
be considered as alternative continuation coverage to any rights Executive
or
Executive's dependent(s) may have with respect to any other group health plan
continuation coverage required by Code Section 4980B or any applicable state
statute mandating health insurance continuation coverage. Except to the extent
required by law, upon termination of the coverage provided for under this
Section 3(a)(v), Executive and/or Executive's dependent(s) shall have no further
right to continuation of coverage under any group health plan maintained by
the
Company or its affiliated companies.
(b)
Termination
for Cause, Disability, Death or Other than for Good Reason
.
If at
any time during the Change in Control Period Executive's employment shall be
terminated for Cause, Executive's employment is terminated due to Executive's
death or Disability, or if Executive terminates employment other than for Good
Reason, this Agreement shall terminate without further obligation of the Company
to Executive other than (i) the obligation to pay to Executive his or her base
salary through the Date of Termination, any incentive bonus and other
compensation, payments and benefits for the most recently completed fiscal
year
and any accrued vacation pay, to the extent theretofore unpaid, which amounts
shall be paid to Executive in a lump sum in cash within thirty (30) days of
the
Date of Termination, and (ii) the obligation to pay to Executive all amounts
or
benefits to which Executive is entitled for the period prior to the Date of
Termination under any plan, program, policy, practice, contract or agreement
of
the Company (excluding amounts otherwise required to be paid under this Section
3(b)), at the time such amounts or benefits are due.
(c)
Certain
Terminations During Pre-CIC Protected Period
.
If,
during the Pre-CIC Protected Period, Executive's employment is terminated by
the
Company other than for Cause or Executive terminates his or her employment
for
Good Reason, then Executive shall be entitled to receive the same benefits
he or
she would be entitled to receive under Section 3(a) if such termination of
employment would have occurred during the Post-Effective Period. Any benefits
or
payments to be paid pursuant to this Section 3(c) shall be paid in a lump-sum
payment and, subject to Section 3(d), within thirty (30) days following the
termination of Executive's employment.
(d)
Payments
to Executive Following Termination
.
If (i)
Executive is a "specified employee," as defined in Code section
409A(a)(1)(B)(i), and (ii) Executive's employment is terminated, either by
Executive or by the Company, due to any reason, other than Executive's death,
then, notwithstanding Sections 3(a) or 3(c) of this Agreement, Executive shall
not receive any payment pursuant to Sections 3(a) or 3(c) until the first
business day after six full months after Executive's Date of Termination.
4.
Section
280G Gross-Up
.
(a)
Except
as
provided for in Section 4(e) below and notwithstanding any other provision
in
this Agreement to the contrary, in the event it shall be determined that any
payment or distribution by the Company or its affiliated companies to or for
the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or
any
interest or penalties are incurred by Executive with respect to such excise
tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay to
Executive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (except for any income tax under Section 409A of the Code), any interest
and penalties imposed with respect thereto, and Excise Tax imposed upon the
Gross-Up Pay
ment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b)
Subject
to the provisions of Section 4(c), all determinations required to be made under
this Section 4, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent registered
public accounting firm selected by the Company that is not also the Company's
then current accounting firm for annual audit purposes (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
Executive within fifteen (15) business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested
by
the Company. In the event that the Accounting Firm is serving as accountant
or
auditor for the individual, entity or group effecting the Change in Control,
Executive shall appoint another nationally recognized public accounting firm
to
make the determinations required hereunder (which accounting firm shall then
be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as
determined pursuant to this Section 4, shall be paid by the Company to Executive
within five (5) days of the receipt of the Accounting Firm's determination,
but
in no event later than the time set forth in Section 4(f), below. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall
furnish Executive with a written opinion that failure to report the Excise
Tax
on Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result
of
the uncertainty in the application of Section 4999 of the Code at the time
of
the initial determination by the Accounting Firm hereunder, it is possible
that
Gross-Up Payments which will not have been made by the Company should have
been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c)
Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after Executive is informed in writing of such
claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. Executive shall not pay such claim prior
to
the expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Company (or such shorter period ending on
the
date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i)
give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii)
take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii)
cooperate
with the Company in good faith in order effectively to contest such claim;
and
(iv)
permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 4(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
such claim and may, at its sole option, either direct Executive to pay the
tax
claimed and sue for a refund or contest the claim in any permissible manner,
and
Executive shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided further, that if
the
Company desires Executive to pay such claim and sue for a refund, the Company
shall, on Executive's behalf, pay such claim and on an after-tax basis reimburse
Executive from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such payment and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested amount
is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the
Internal Revenue Service or any other taxing authority.
(d)
If,
after
payment by the Company pursuant to Section 4(c), Executive becomes entitled
to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
payment of an amount by the Company pursuant to Section 4(c), a determination
is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such payment shall offset, to the extent thereof,
the
amount of Gross-Up Payment required to be paid.
(e)
Notwithstanding
Executive otherwise being eligible for a Gross-Up Payment under this Section
4,
if, excluding any Gross-Up Payment required to be made pursuant to this Section
4, the "parachute payment" made to Executive does not exceed three times
Executive's "base amount" by more than $1,000, then the payments and benefits
to
be paid or provided under this Agreement will be reduced to the minimum extent
necessary so that no portion of any payment or benefit to Executive, as so
reduced, constitutes an "excess parachute payment." For purposes of this Section
4(e), the terms "excess parachute payment," "parachute payment," and "base
amount" will have the meanings assigned to them by Section 280G of the Code.
The
determination of whether any reduction in such payments or benefits to be
provided under this Agreement is required pursuant to the preceding sentence
will be made at the expense of the Company by the Accounting Firm. The fact
that
Executive's right to payments or benefits may be reduced by reason of the
limitations contained in this Section 4(e) will not of itself limit or otherwise
affect any other rights of Executive other than pursuant to this Agreement.
In
the event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this Section 4(e),
Executive will be entitled to designate the payments and/or benefits to be
so
reduced in order to give effect to this Section. The Company will provide
Executive with all information reasonably requested by Executive to permit
Executive to make such designation. In the event that Executive fails to make
such designation within 10 business days of the date of termination of
Executive's employment, the Company may effect such reduction in any manner
it
deems appropriate.
(f)
Any
Gross-Up Payment made to Executive pursuant to this Section 4 shall be exempt
from Code Section 409A pursuant to the short-term deferral exception to Code
Section 409A. Absent further guidance from the United States Treasury
Department, the Internal Revenue Service or any judicial authority relating
to
the application of Section 409A to Section 280G Gross-Up Payments, Gross-Up
Payments pursuant to this Section 4 shall be made as follows:
(i)
With
respect to any Gross-Up Payment that can be reasonably calculated as of the
time
of a Change in Control or shortly thereafter, such Gross-Up Payment shall be
made to Executive no later than March 15th of the calendar year following the
year in which the Change in Control occurs;
(ii)
With
respect to any Gross-Up Payment that results from Executive becoming eligible
for benefits under this Agreement upon Executive's termination of employment,
such Gross-Up Payment shall be made to Executive no later than March 15th of
the
calendar year following the year in which the earlier of (A) the event giving
rise to Executive's Good Reason occurs or (B) Executive's termination of
employment; and
(iii)
With
respect to any Gross-Up Payment that is required to be made to Executive
pursuant to Section 4(c), such Gross-Up Payment shall be made to Executive
no
later than March 15th of the calendar year following the year in which the
alleged obligation of Executive, as reflected by Executive's receipt of a claim
by the Internal Revenue Service, is received by Executive.
5.
Non-exclusivity
of Rights
.
Nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
and for which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that Executive
is otherwise entitled to receive at or subsequent to the Date of Termination
under any plan, policy, practice or program of or any contract or agreement
with
the Company shall be payable in accordance with such plan, policy, practice
or
program or contract or agreement, except as explicitly modified by this
Agreement.
6.
Full
Settlement; Resolution of Disputes
.
(a)
Except
where Executive's employment is terminated for Cause, the Company's obligation
to make any payments provided for in this Agreement and otherwise to perform
its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Executive or others. In no event shall Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not Executive obtains other employment.
Subject to Executive's agreement to repay certain fees and expenses as provided
below in Section 6(b), the Company shall pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses that Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by the Company, Executive or others of the validity or
enforceability of, or the existence of liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at one hundred
twenty percent (120%) of the Federal Mid-Term Rate under Section 1274(d) of
the
Code.
(b)
If
there
shall be any dispute or contest between the Company and Executive (i) in the
event of any termination of Executive's employment by the Company, whether
such
termination was for Cause, or (ii) in the event of any termination of employment
by Executive whether Good Reason existed, then the resolution of such dispute
or
contest shall be finally determined by arbitration, which may be initiated
by
either the Company or Executive, pursuant to the Federal Arbitration Act in
accordance with the rules then in force of the American Arbitration Association.
The arbitration proceedings shall take place in Kansas City, Missouri or such
other location as the parties in dispute hereafter may agree upon; and such
proceedings will be conducted in the English language and shall be governed
by
the laws of the State of Missouri as such laws are applied to agreements between
residents of the State entered into and to be performed entirely within the
State. There shall be one arbitrator, as shall be agreed upon by the parties
in
dispute, who shall be an individual skilled in the legal and business aspects
of
the subject matter of this Agreement and of the dispute. In the absence of
such
agreement, each party in dispute shall select one arbitrator and the arbitrators
so selected shall select a third arbitrator. In the event the arbitrators cannot
agree upon the selection of a third arbitrator, such third arbitrator shall
be
appointed by the American Arbitration Association at the request of any of
the
parties in dispute. The arbitrators shall be individuals skilled in the legal
and business aspects of the subject matter of this Agreement and of the dispute.
The decision rendered by the arbitrator or arbitrators shall be accompanied
by a
written opinion in support thereof. Such decision shall be final and binding
upon the parties in dispute without right of appeal, it being the intent of
the
parties that such decision, and, irrespective of any contrary provision of
the
laws of the State respecting rights of appeal, such decision may not be
appealed. The burden of proving that Executive is not entitled to receive the
amounts and the benefits contemplated by this Agreement shall be on the Company.
(c)
In
the
event of such an arbitration and provided that Executive shall repay the
following amounts, fees and expenses if the final and binding decision of the
arbitrator(s) is that Executive's termination was for Cause or that Good Reason
did not exist for termination of employment by Executive, (i) Great Plains
Energy shall advance to Executive all legal fees and expenses that Executive
may
reasonably incur as a result of any such action, and (ii) if a final and binding
decision of the arbitrator(s) is not obtained by the six-month anniversary
of
the date the Company or Executive first provided notice to the other party
of
the dispute or contest (the "Dispute Notice"), Great Plains Energy shall pay
all
amounts, and provide all benefits, to Executive and/or Executive's family or
other beneficiaries, as the case may be, that Great Plains Energy would be
required to pay or provide pursuant to Sections 3(a) or 3(c) if such termination
were by the Company without Cause or by Executive with Good Reason. If the
final
and binding decision of the arbitrator(s) is that Executive's termination was
not for Cause or that Good Reason did exist for such termination by Executive
then, (I) if such decision is before the six-month anniversary of the receipt
of
the Dispute Notice, Executive shall receive all payments and benefits
contemplated by this Agreement, plus interest on any delayed payment or benefit
at one hundred twenty percent (120%) of the Federal Mid-Term Rate under Section
1274(d) of the Code or (II) if such decision is after the six-month anniversary
of the receipt of the Dispute Notice such that all payments and benefits
contemplated by this Agreement have already been paid, Executive shall receive
interest (calculated in the same manner as set forth above) for the six-month
period the payments and provision of benefits were delayed. In no event may
the
arbitrator or arbitrators award any other damages or award of any kind.
Notwithstanding the foregoing, nothing in this Agreement is intended to, or
shall be construed as, affecting the rights and obligations of Executive and
the
Company to submit any dispute (other than such disputes contemplated by, and
resolved in accordance with Sections 6(b) and 6(c)) to the appropriate dispute
resolution process in accordance with any applicable dispute resolution plan
intended to provide a procedural mechanism, whether exclusive or non-exclusive,
for the resolution of any and all disputes between the Company and its present
or former employees.
7.
Restrictive
Covenants
.
(a)
Nondisclosure
of Confidential Information
.
Executive shall hold in confidence for the benefit of the Company all
Confidential Information. Executive agrees that Executive will not disclose
any
Confidential Information to any person or entity other than the Company and
those designated by it, either during or subsequent to Executive's employment
by
the Company, nor will Executive use any Confidential Information, except (i)
in
the regular course of Executive's employment by the Company, without the prior
written consent of the Company or (ii) as may otherwise be required by law
or
legal process.
(b)
Actions
Upon Termination; Assistance with Claims
.
Upon
Executive's employment termination for whatever reason, Executive shall neither
take or copy nor allow a third party to take or copy, and shall deliver to
the
Company all property of the Company, including, but not limited to, all
Confidential Information regardless of the medium (i.e., hard copy, computer
disk, CD ROM) on which the information is contained. During and after
Executive's employment by the Company, Executive will provide reasonable
assistance to the Company in the defense of any claims or potential claims
that
may be made or threatened to be made against the Company in any action, suit,
or
proceeding, whether civil, criminal, administrative, or investigative
("Proceeding") and will provide reasonable assistance to the Company in the
prosecution of any claims that may be made by the Company in any Proceeding,
to
the extent that such claims may relate to Executive's employment by the Company.
For the avoidance of doubt, reasonable assistance would not include Executive
being required to provide information that could reasonably result in criminal
or civil charges or penalties being assessed or imposed against Executive in
his
individual capacity. Executive shall, unless precluded by law, promptly inform
the Company if Executive is asked to participate (or otherwise become involved)
in any Proceeding involving such claims or potential claims. Executive also
shall, unless precluded by law, promptly inform the Company if Executive is
asked to assist in any investigation (whether governmental or private) of the
Company (or its actions), regardless of whether a lawsuit has then been filed
against the Company with respect to such investigation. The Company shall
reimburse Executive for all of Executive's reasonable out-of-pocket expenses
associated with such assistance, including travel expenses and any attorneys'
fees and shall pay a reasonable per diem fee (equal to 1/250th of Executive's
annual salary rate at Executive's Date of Termination) for Executive's
services.
(c)
Noncompetition
.
Executive agrees that so long as Executive is employed by the Company and for
a
period of six (6) months thereafter, Executive shall not, without the prior
written consent of the Company, which in the case of termination will not be
unreasonably withheld, participate or engage in, directly or indirectly (as
an
owner, partner, employee, officer, director, independent contractor, consultant,
advisor or in any other capacity calling for the rendition of services, advice,
or acts of management, operation or control), any business that, during
Executive's employment, is in direct competition with the business conducted
by
the Company or any of its affiliates within the United States (hereinafter,
the
"Geographic Area"); provided, however, that the foregoing shall not be construed
to preclude Executive from making any investments in any securities to the
extent such securities are traded on a national securities exchange or
over-the-counter market and such investment does not exceed five percent (5%)
of
the issued and outstanding voting securities of such issuer.
(d)
Nonsolicitation
of Employees
.
During
Executive's employment and for a period of six (6) months thereafter, Executive
shall not, without the consent of the Company, directly or indirectly solicit
any current employee of the Company or any of its affiliates, to leave such
employment and join or become affiliated with any business that is in direct
competition with the business conducted by the Company or any of its affiliates
within the Geographic Area.
(e)
Mutual
Non-disparagement
.
Executive shall refrain from making any statements about the Company or its
officers or directors that would disparage, or reflect unfavorably upon the
image or reputation of the Company or any such officer or director. The Company
shall refrain from making any statements about Executive that would disparage,
or reflect unfavorably upon the image or reputation of, Executive.
(f)
Irreparable
Harm
.
Executive acknowledges that: (i) Executive's compliance with this Section 7
is
necessary to preserve and protect the Confidential Information, and the goodwill
of the Company and its affiliates as going concerns; (ii) any failure by
Executive to comply with the provisions of this Section may result in
irreparable and continuing injury for which there may be no adequate remedy
at
law; and (iii) in the event that Executive should fail to comply with the terms
and conditions of this Section, the Company shall be entitled, in addition
to
such other relief as may be proper, to seek all types of equitable relief
(including, but not limited to, the issuance of an injunction and/or temporary
restraining order) as may be necessary to cause Executive to comply with this
Section, to restore to the Company its property, and to make the Company
whole.
(g)
Unenforceability
.
If any
provision(s) of this Section 7 shall be found invalid or unenforceable, in
whole
or in part, then such provision(s) shall be deemed to be modified or restricted
to the extent and in the manner necessary to render the same valid and
enforceable, or shall be deemed excised from this Agreement, as the case may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision(s) had been originally
incorporated herein as so modified or restricted, or as if such provision(s)
had
not been originally incorporated herein, as the case may be.
8.
Successors
.
(a)
This
Agreement is personal to Executive and shall not be assignable by Executive
without the prior written consent of the Company otherwise than by will or
the
laws of descent and distribution. If Executive should die while any amounts
would still be payable to Executive hereunder if she or he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's heirs or
representatives or, if there be no such designee, to Executive's
estate.
(b)
This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns.
(c)
The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to
perform this Agreement by operation of law, or otherwise.
9.
Prohibition
of Payments by Regulatory Agencies
.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be obligated to make any payment to Executive under this
Agreement if the payment would violate any rule, regulation or order of any
regulatory agency having jurisdiction over the Company or any of its
subsidiaries; provided, however, that the Company covenants to Executive that
it
will take all reasonable steps to obtain any regulatory agency approvals that
may be required in order to make payments to Executive as provided herein.
10.
Miscellaneous
.
(a)
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Missouri without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement executed by the parties hereto. This Agreement supersedes
all previous agreements relating to the subject matter of this Agreement,
written or oral, between the parties hereto and contains the entire
understanding of the parties hereto including, but not limited to that Prior
Severance Agreement dated October 1, 2003, between the Board and
Executive.
(b)
All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If
to the Company:
|
|
If
to Executive:
|
|
|
|
Great
Plains Energy Incorporated
|
|
Michael
J. Chesser
|
Attn:
General Counsel
|
|
Great
Plains Energy Incorporated
|
1201
Walnut
|
|
1201
Walnut
|
Kansas
City, Missouri
|
|
Kansas
City, Missouri
|
64106-2124
|
|
64106-2124
|
|
|
|
or
to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(c)
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect.
(d)
This
Agreement is intended to meet the requirements of Section 409A of the Code
and
may be administered in a manner that is intended to meet those requirements
and
shall be construed and interpreted in accordance with such intent. To the extent
that any payment or benefit provided hereunder is subject to Section 409A of
the
Code, such payment or benefit shall be provided in a manner that will meet
the
requirements of Section 409A of the Code, including regulations or other
guidance issued with respect thereto, such that the payment or benefit shall
not
be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail
to
satisfy Section 409A of the Code shall be amended (in a manner that as closely
as practicable achieves the original intent of this Agreement) to comply with
Section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under Section
409A of the Code. In the event additional regulations or other guidance is
issued under Section 409A of the Code or a court of competent jurisdiction
provides additional authority concerning the application of Section 409A with
respect to the payments described in Section 4 of the Agreement, then the
provisions of such Section shall be amended to permit such payments to be made
at the earliest time permitted under such additional regulations, guidance
or
authority that is practicable and achieves the original intent of this
Agreement.
(e)
The
Company may withhold from any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(f)
Executive's
or the Company's failure to insist upon strict compliance with any provision
of
this Agreement or the failure to assert any right Executive or the Company
may
have hereunder, including, without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of
such
provision or right or any other provision or right of this
Agreement.
(g)
Executive
and Great Plains Energy acknowledge that, except as may otherwise be provided
under any other written agreement between Executive and the Company, the
employment of Executive by the Company is "at will" and, may be terminated
by
either Executive or the Company at any time. Except as provided in Section
3(c),
if prior to the Effective Date, Executive's employment with the Company
terminates, then Executive shall have no further rights under this
Agreement.
(h)
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which shall constitute one agreement that
is
binding upon each of the parties hereto, notwithstanding that all parties are
not signatories to the same counterpart.
IN
WITNESS WHEREOF, each of Great Plains Energy and Executives has executed this
Agreement as of the day and year first above written.
|
|
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
|
|
|
EXECUTIVE:
|
|
|
|
By:
|
|
|
Name:
|
|
Michael
J. Chesser
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
10.1.b
CHANGE
IN
CONTROL SEVERANCE AGREEMENT
THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT is entered into as of the ___ day of
_________, 2006, between Great Plains Energy Incorporated, a Missouri
corporation ("Great Plains Energy"), and William H. Downey
("Executive").
WITNESSETH:
WHEREAS,
Executive is a valued employee of Great Plains Energy or a subsidiary thereof
(the "Company"); and
WHEREAS,
the Board (as defined herein) believes that it is in the best interests of
the
Company and its shareholders (i) to provide assurance that the Company will
have
the continued service of Executive notwithstanding the possibility, threat
or
occurrence of a Change in Control (as defined in Section 1), (ii) to diminish
the distraction to Executive that may arise by virtue of the personal
uncertainties and risks created by such a threatened or pending Change in
Control, and (iii) to encourage Executive's full attention and dedication to
the
Company currently and in the event of a threatened or pending Change in Control;
and
WHEREAS,
the Board and Executive previously entered into a severance agreement dated
September 25, 2000, the "Prior Severance Agreement" whereby Great Plains Energy
agreed to provide Executive with certain compensation and perquisites following
Executive's termination or constructive termination of employment with the
Company in connection with a change in control or potential change in control
of
Great Plains Energy; and
WHEREAS,
the Board and Executive agree that, in connection with both parties entering
into this Agreement, the Prior Severance Agreement shall be terminated, rendered
null and void, and all duties and rights conferred upon the parties thereto
extinguished, and that such Prior Severance Agreement is replaced in its
entirety with the benefits, duties, terms and conditions set forth in this
Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein, the parties hereto agree as follows:
1.
Certain
Definitions
.
As used
in this Agreement, unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following
meanings:
(a)
Agreement
.
"Agreement" means this Change in Control Severance Agreement as amended from
time to time.
(b)
Beneficial
Owner
.
"Beneficial Owner" shall have the same meaning as set forth in Rule 13d-3 of
the
Exchange Act.
(c)
Board
.
"Board"
means the Board of Directors of Great Plains Energy.
(d)
Cause
.
"Cause"
means (i) the material misappropriation of any of the Company's funds,
Confidential Information or property; (ii) the conviction of, or the entering
of
a guilty plea or plea of no contest with respect to, a felony, or the equivalent
thereof; (iii) commission of act of willful damage, willful misrepresentation,
willful dishonesty, or other willful conduct that can reasonably be expected
to
have a material adverse effect on the business, reputation, or financial
situation of the Company; or (iv) gross negligence or willful misconduct in
performance of Executive's duties; provided, however, "cause" shall not exist
under clause (iv), above, with respect to an act or failure to act unless (A)
Executive has been provided written notice describing in sufficient detail
the
acts or failure to act giving rise to the Company's assertion of such gross
negligence or misconduct, (B) been provided a reasonable period to remedy any
such occurrence and (C) failed to sufficiently remedy the
occurrence.
(e)
Change
in Control
.
"Change
in Control" means the occurrence of one of the following events, whether
in a
single transaction or a series of related transactions:
(i)
any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of Great Plains Energy (not including in the securities beneficially owned
by
such Person any securities acquired directly from Great Plains Energy or
its
affiliates other than in connection with the acquisition by Great Plains
Energy
or its affiliates of a business) representing 35% or more of either the
then
outstanding shares of common stock of Great Plains Energy or the combined
voting
power of Great Plains Energy's then outstanding securities; or
(ii)
the
following individuals cease for any reason to constitute a majority of
the
number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose
initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the
election of directors of Great Plains Energy, as such terms are used in
Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or election
by the Board or nomination for election by Great Plains Energy's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved; or
(iii)
the
consummation of a merger, consolidation, reorganization or similar corporate
transaction of Great Plains Energy, whether or not Great Plains Energy
is the
surviving corporation in such transaction, other than (A) a merger,
consolidation, or reorganization that would result in the voting securities
of
Great Plains Energy outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with
the ownership of any trustee or other fiduciary holding securities under
an
employee benefit plan of the Company, at least 60% of the combined voting
power
of the voting securities of Great Plains Energy or such surviving entity
or any
parent thereof outstanding immediately after such merger, consolidation
or
reorganization, or (B) a merger, consolidation or reorganization effected
to
implement a recapitalization of Great Plains Energy (or similar transaction)
in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of
securities of Great Plains Energy (not including in the securities Beneficially
Owned by such Person any securities acquired directly from Great Plains
Energy
or its affiliates other than in connection with the acquisition by Great
Plains
Energy or its affiliates of a business) representing 20% or more of either
the
then outstanding shares of common stock of Great Plains Energy or the combined
voting power of Great Plains Energy's then outstanding securities;
or
(iv)
the
occurrence of, or the stockholders of Great Plains Energy approve a plan
of, a
complete liquidation or dissolution of Great Plains Energy or an agreement
for
the sale or disposition by Great Plains Energy of all or substantially
all of
Great Plains Energy's assets, other than a sale or disposition of all or
substantially all of Great Plains Energy's assets to an entity, at least
60% of
the combined voting power of the voting securities of which are owned by
Persons
in substantially the same proportions as their ownership of Great Plains
Energy
immediately prior to such sale.
Notwithstanding
the foregoing, no "Change in Control" shall be deemed to have occurred
if there
is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of Great Plains
Energy
immediately prior to such transaction or series of transactions continue
to have
substantially the same proportionate ownership in an entity which owns
all or
substantially all of the assets of Great Plains Energy immediately following
such transaction or series of transactions.
(f)
Change
in Control Period
.
"Change
in Control Period" means the period commencing on the date hereof and ending
on
the second anniversary of such date; provided, however, that commencing
on a
date one year after the date hereof, and on each annual anniversary of
such date
(such date and each annual anniversary thereof being hereinafter referred
to as
the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at
least 60
days prior to the Renewal Date the Company shall give notice to Executive
that
the Change in Control Period shall not be so extended; provided, further
that
during any period of time when the Board or the governing body of Great
Plains
Energy has knowledge that any person has taken steps reasonably calculated
to
effect a Change in Control, the Change in Control Period shall automatically
be
extended (and may not terminate) until, in the opinion of the Board, such
person
has abandoned or terminated its efforts to effect a Change in
Control.
(g)
Company
.
"Company" means, except as the context requires otherwise, references to
Great
Plains Energy Incorporated, a Missouri corporation, its successors and
assigns,
and/or any subsidiary thereof, as applicable.
(h)
Confidential
Information
.
"Confidential Information" means (1) any and all trade secrets concerning
the
business and affairs of the Company, product specifications, data, know-how,
formulae, algorithms, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned manufacturing or distribution
methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software
and
programs (including object code and source code), computer software and
database
technologies, systems, structures, and architectures; (2) information
concerning
the business and affairs of the Company (which includes historical financial
statements, financial projections and budgets, historical and projected
sales,
capital spending budgets and plans, the names and backgrounds of key
personnel,
personnel training and techniques and materials); and (3) notes, analysis,
compilations, studies, summaries, and other material prepared by or for
the
Company containing or based, in whole or in part, or any information
included in
the foregoing, whether reduced to writing or not and which has not become
publicly known or made generally available through no wrongful act of
Executive
or others who were under confidentiality obligations as to the item or
items
involved.
3
(i)
Date
of Termination
.
"Date
of Termination" means (i) if Executive's employment is terminated
by the Company
for Cause, or by Executive for Good Reason, the date of receipt of
the Notice of
Termination or any later date permitted to be specified therein,
as the case may
be, (ii) if Executive's employment is terminated by the Company other
than for
Cause or Disability, the Date of Termination shall be the date on
which the
Company notifies Executive of such termination, (iii) if Executive's
employment
is terminated by reason of death or Disability, the Date of Termination
shall be
the date of death of Executive or the Disability Effective Date (as
defined in
Section 2(a)), as the case may be and (iv) if Executive's employment
is
terminated by Executive for other than Good Reason, the Date of Termination
shall be the date on which Executive notifies the Company in writing
of such
termination or any later date permitted to be specified therein,
as the case may
be.
(j)
Disability
or Disabled
.
The
term "Disability" or "Disabled" shall mean an individual (i) is
unable to engage
in any substantial gainful activity by reason of any medically
determinable
physical or mental impairment which can be expected to result in
death or can be
expected to last for a continuous period of not less than twelve
(12) months or
(ii) is, by reason of any medically determinable physical or mental
impairment
which can be expected to result in death or can be expected to
last for a
continuous period of not less than twelve (12) months, receiving
income
replacement benefits for a period of not less than 3 months under
a Company
sponsored accident or health plan.
(k)
Effective
Date
.
"Effective Date" means the first date on which a Change in Control
occurs during
the Change in Control Period.
(l)
Exchange
Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time
to time.
(m)
Good
Reason
.
"Good
Reason" means, without Executive's written consent any of the
following:
(i)
Any
material and adverse reduction or material and adverse diminution
in Executive's
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities held, exercised or assigned
at any time
during the 90-day period immediately preceding the commencement
of the Pre-CIC
Protected Period;
(ii)
Any
reduction in Executive's annual base salary as in effect immediately
preceding
the commencement of the Pre-CIC Protected Period or as the same
may be increased
from time to time;
(iii)
Any
reduction in benefits received by Executive under Company Plans
(as defined
below) to less than the most favorable benefits provided to Executive
by the
Company under Company Plans at any time during the 90-day period
immediately
preceding the commencement of the Pre-CIC Protected Period. "Company
Plans"
means (1) all incentive, savings and retirement plans, practices,
policies and
programs sponsored or maintained by the Company, (2) all welfare
benefit plans,
practices, policies and programs (including medical, prescription,
dental,
disability, salary continuance, employee life, group life, accidental
death and
travel accident insurance plans and programs) sponsored or maintained
by the
Company, (3) expense reimbursement by the Company for all reasonable
out-of-pocket employment expenses incurred by Executive, (4) the
provision of
fringe benefits, and (5) the provision of paid vacation time by
the
Company;
4
(iv)
Executive
being required by the Company to be based at any office or location
that is more
than 70 miles from the location where Executive was employed immediately
preceding the commencement of the Pre-CIC Protected Period; or
(v)
Any
failure by the Company to require any successor (whether direct
or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the
business and/or assets of the Company to assume expressly and agree
to perform
this Agreement in the same manner and to the same extent that the
Company would
be required to perform it if no such succession had taken place,
or any failure
by any such successor after ten (10) days notice from Executive
to so perform
under this Agreement.
Provided,
however, notwithstanding the occurrence of any of the events set
forth above in
this Section 1(m), Good Reason shall not include for the purpose
of this
definition (1) an isolated, insubstantial and inadvertent action
not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice
thereof given by Executive, or (2) if occurring within the Pre-CIC
Protected
Period, any reduction in Executive's base annual salary or reduction
in benefits
received by Executive where such reduction is in connection with
a company-wide
reduction in salaries or benefits.
(n)
Notice
of Termination
.
"Notice
of Termination" means a written notice of termination which (i)
indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and
circumstances
claimed to provide a basis for termination of Executive's employment
under the
provision so indicated and (iii) if the Date of Termination is
other than the
date of receipt of such notice, specifies the termination date
(which date shall
be not more than fifteen (15) days after the giving of such notice),
unless
another date is mutually agreed upon between Executive and the
Company.
(o)
Person
.
"Person" has the meaning given in Section 3(a)(9) of the Exchange
Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that
such term
shall not include (1) Great Plains Energy or any of its subsidiaries,
(2) a
trustee or other fiduciary holding securities under an employee
benefit plan of
the Company or any of its subsidiaries, (3) an underwriter temporarily
holding
securities pursuant to an offering of such securities, or (4) a
corporation
owned, directly, or indirectly, by the stockholders of Great Plains
Energy in
substantially the same proportions as their ownership of stock
of Great Plains
Energy.
(p)
Post-Effective
Period
.
"Post-Effective Period" means the period commencing on the Effective
Date and
ending on the earlier of (i) the second anniversary of such date
or
(ii) Executive's 70
th
birthday.
(q)
Pre
-CIC
Protected Period
.
"Pre-CIC Protected Period" means the period that is within the
Change in Control
Period and begins when (A) Great Plains Energy enters into an agreement,
the
consummation of which would result in the occurrence of a Change
in Control; (B)
Great Plains Energy or any Person publicly announces an intention
to take or to
consider taking actions which, if consummated, would constitute
a Change in
Control; (C) any Person becomes the Beneficial Owner, directly
or indirectly, of
voting securities of Great Plains Energy representing 10% or more
of the
combined voting power of Great Plains Energy's then outstanding
voting
securities; or (D) the Board, the members or the stockholders of
Great Plains
Energy adopts a resolution approving any of the foregoing or approving
any
Change in Control, and ends upon the date the Change in Control
transaction is
either consummated, abandoned or terminated (for this purpose,
the Board shall
have the sole and absolute discretion to determine that a proposed
transaction
has been abandoned).
5
2.
Termination
of Employment During the Post-Effective Period
.
(a)
Death
or Disability
.
Executive's employment shall terminate automatically upon Executive's
death or,
with written notice by the Company of its intention to terminate
Executive's
employment, upon Executive's Disability. In such event, Executive's
employment
with the Company shall terminate effective on the 90th day
after receipt of such
notice by Executive (the "Disability Effective Date"), provided
that within the
90 days after such receipt Executive shall not have returned
to full-time
performance of Executive's duties.
(b)
Cause
.
The
Company may terminate Executive's employment at any time for
Cause or without
Cause. Notwithstanding the foregoing, Executive shall not be
deemed to have been
terminated for Cause without (i) reasonable notice to Executive
setting forth
the reasons for the Company's intention to terminate for Cause,
(ii) an
opportunity for Executive, together with his counsel, to be
heard before the
Board within fifteen (15) days of such notice, and (iii) delivery
to Executive
of a Notice of Termination from the Board finding that, in
the good faith
opinion of the Board, that Executive was guilty of conduct
set forth in Section
1(d), and specifying the particulars thereof in reasonable
detail.
(c)
Executive
Resignation
.
Executive's employment may be terminated at any time by Executive
for Good
Reason or without Good Reason.
(d)
Notice
of Termination
.
Any
termination by the Company for Cause, or by Executive for Good
Reason, shall be
communicated by Notice of Termination to the other party hereto.
The failure by
Executive or the Company to set forth in the Notice of Termination
any fact or
circumstance that contributes to a showing of Good Reason or
Cause shall not
waive any right of Executive or the Company hereunder or preclude
Executive or
the Company from asserting such fact or circumstance in enforcing
Executive's or
the Company's rights hereunder.
3.
Obligations
of the Company Upon Termination of Employment
.
(a)
Post-Effective
Period Terminations Other Than for Cause, Death or Disability;
Post-Effective
Period Executive Resignation
.
If,
during the Post-Effective Period, the Company shall terminate
Executive's
employment other than (I) for Cause or (II) on account of Executive's
death or
Disability, or Executive shall terminate employment for Good
Reason, the Company
shall pay to Executive, in a lump-sum cash payment made within
30 days following
the Date of Termination, as compensation for services rendered
to the Company,
an amount equal to the aggregate of the following amounts set
forth below in
Sections 3(a)(i), (ii), (iii), and (iv), and provide to Executive
the benefits
provided in Section 3(a)(v).
6
(i)
A
cash
amount equal to the sum of (A) Executive's full annual base salary from
the
Company and its affiliated companies through the Date of Termination,
to the
extent not theretofore paid, (B) a bonus in an amount at least equal
to the
average annualized incentive awards paid or payable pursuant to any
Company-sponsored annual incentive compensation plan, including by reason
of any
deferral under a Company-sponsored deferred compensation program, to
Executive
by the Company and its affiliated companies during the five fiscal years
of the
Company (or if Executive shall have performed services for the Company
and its
affiliated companies for four fiscal years or less, the years during
which
Executive performed services) immediately preceding the fiscal year in
which the
Change in Control (or if benefits are payable pursuant to Section 3(c),
the Date
of Termination) occurs, multiplied by a fraction, the numerator of which
is the
number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination and the denominator of which is 365 or
366, as
applicable, to the extent not theretofore paid, (C) any amount credited
to
Executive's CAP Excess Benefits Account pursuant to the Great Plains
Energy
Incorporated Nonqualified Deferred Compensation Plan and any other compensation
previously deferred by Executive (together with any interest and earnings
thereon), in each case to the extent not theretofore paid, and (D) any
accrued
unpaid vacation pay;
(ii)
a
cash
amount equal to (A) three (3) times Executive's highest annual base salary
from
the Company and its affiliated companies in effect during the twelve
(12)-month
period prior to the Date of Termination, plus (B) three (3) times Executive's
average annualized annual incentive compensation awards, paid, or, but
for a
deferral under a Company-sponsored deferred compensation program, would
have
been paid, to Executive by the Company and its affiliated companies during
the
five fiscal years of the Company (or if Executive shall have performed
services
for the Company and its affiliated companies for four fiscal years or
less, the
years during which Executive performed services) immediately preceding
the
fiscal year in which the Change in Control (or if benefits are payable
pursuant
to Section 3(c), the Date of Termination) occurs; provided, however,
that in the
event there are fewer than thirty-six (36) whole months remaining from
the Date
of Termination to the date of Executive's 70th birthday, the amount calculated
in accordance with this Section 3(a)(ii) shall be reduced by multiplying
such
amount by a fraction the numerator of which is the number of months,
including a
partial month (with a partial month being expressed as a fraction the
numerator
of which is the number of days remaining in such month and the denominator
of
which is the number of days in such month), so remaining and the denominator
of
which is thirty-six (36) months; provided further that any amount paid
pursuant
to this Section 3(a)(ii) shall be paid in lieu of any other amount of
severance
pay to be received by Executive upon termination of employment of Executive
under any severance plan, policy or arrangement of the Company;
(iii)
a
cash
amount equal to the excess of (A) the actuarial equivalent value of the
monthly
accrued benefits payable to Executive at age 65 under the Great Plains
Energy
Incorporated Management Pension Plan (the "Pension Plan") as in effect
on the
date of this Agreement and the benefits provided under the Supplemental
Executive Retirement Plan in respect of the Pension Plan as in effect
on the
date of this Agreement, assuming (1) that benefits have accrued thereunder
and
Executive is entitled to such benefits, (2) each such benefit shall be
computed
as if Executive had three (3) additional Years of Credited Service earned
under
the Pension Plan and (3) Executive were fully vested in such hypothetical
benefits, over (B) the actuarial equivalent value of Executive's vested
accrued
benefits under the Pension Plan and benefits payable under the Supplemental
Executive Retirement Plan. Such cash amount shall be computed using the
same
actuarial methods and assumptions then in use for purposes of computing
benefits
under the Pension Plan, except that the computation shall be made without
actuarial reduction for early retirement and provided that the interest
rate
used in such computation shall be the interest rate used on the Date
of
Termination by the Pension Benefit Guaranty Corporation for purposes
of
determining the present value of a lump sum distribution pursuant to
a plan
termination;
7
(iv)
if
on the
Date of Termination Executive shall not be fully vested in the matching employer
contributions made on Executive's behalf under the Great Plains Energy
Incorporated Cash or Deferred Arrangement, a cash amount equal to the value
of
the unvested portion of such matching employer contributions;
(v)
for
a
period of three (3) years commencing on the Date of Termination, the Company
shall provide Executive and Executive's dependents with medical, accident,
disability and life insurance coverage upon substantially the same terms and
otherwise substantially to the same extent as such coverage was being provided
to Executive and Executive's dependent(s) immediately prior to the Date of
Termination. At the Company's election, such continuation coverage may be
provided by (A) continuing such coverage under the Company's existing welfare
benefit plans, (B) with respect to any group health care plan and for the
applicable period permitted under Code Section 4980B(f)(2), Executive and/or
Executive's dependent(s) being deemed to have elected to receive such coverage
pursuant to a continuation election under Code Section 4980B with the Company
being obligated to pay for the entire portion of the applicable COBRA premiums,
(C) the Company purchasing an individual policy (to the extent such a policy
is
reasonably available in the marketplace) for Executive and/or Executive's
dependent(s) providing substantially similar coverage as offered under the
Company's plan, or (D) any combination of the forgoing methods under (A), (B)
and (C) of this paragraph. Notwithstanding the foregoing sentence, if any of
the
medical, accident, disability or life insurance plans then in effect generally
with respect to other peer executives of the Company and its affiliated
companies would be more favorable to Executive, such plan coverage shall be
substituted for the analogous plan coverage provided to Executive immediately
prior to the Date of Termination, and the Company and Executive shall share
the
costs of such plan coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. The obligation of the Company
to
continue coverage of Executive and Executive's dependent(s) under such plans
and
in accordance with this paragraph shall cease at such time as Executive and
Executive's dependent(s) obtain comparable coverage under another plan,
including a plan maintained by a new employer. With respect to any Company
group
health care plan, any continuation coverage provided under this paragraph shall
be considered as alternative continuation coverage to any rights Executive
or
Executive's dependent(s) may have with respect to any other group health plan
continuation coverage required by Code Section 4980B or any applicable state
statute mandating health insurance continuation coverage. Except to the extent
required by law, upon termination of the coverage provided for under this
Section 3(a)(v), Executive and/or Executive's dependent(s) shall have no further
right to continuation of coverage under any group health plan maintained by
the
Company or its affiliated companies.
(b)
Termination
for Cause, Disability, Death or Other than for Good Reason
.
If at
any time during the Change in Control Period Executive's employment shall be
terminated for Cause, Executive's employment is terminated due to Executive's
death or Disability, or if Executive terminates employment other than for Good
Reason, this Agreement shall terminate without further obligation of the Company
to Executive other than (i) the obligation to pay to Executive his or her base
salary through the Date of Termination, any incentive bonus and other
compensation, payments and benefits for the most recently completed fiscal
year
and any accrued vacation pay, to the extent theretofore unpaid, which amounts
shall be paid to Executive in a lump sum in cash within thirty (30) days of
the
Date of Termination, and (ii) the obligation to pay to Executive all amounts
or
benefits to which Executive is entitled for the period prior to the Date of
Termination under any plan, program, policy, practice, contract or agreement
of
the Company (excluding amounts otherwise required to be paid under this Section
3(b)), at the time such amounts or benefits are due.
8
(c)
Certain
Terminations During Pre-CIC Protected Period
.
If,
during the Pre-CIC Protected Period, Executive's employment is terminated by
the
Company other than for Cause or Executive terminates his or her employment
for
Good Reason, then Executive shall be entitled to receive the same benefits
he or
she would be entitled to receive under Section 3(a) if such termination of
employment would have occurred during the Post-Effective Period. Any benefits
or
payments to be paid pursuant to this Section 3(c) shall be paid in a lump-sum
payment and, subject to Section 3(d), within thirty (30) days following the
termination of Executive's employment.
(d)
Payments
to Executive Following Termination
.
If (i)
Executive is a "specified employee," as defined in Code section
409A(a)(1)(B)(i), and (ii) Executive's employment is terminated, either by
Executive or by the Company, due to any reason, other than Executive's death,
then, notwithstanding Sections 3(a) or 3(c) of this Agreement, Executive shall
not receive any payment pursuant to Sections 3(a) or 3(c) until the first
business day after six full months after Executive's Date of Termination.
4.
Section
280G Gross-Up
.
(a)
Except
as
provided for in Section 4(e) below and notwithstanding any other provision
in
this Agreement to the contrary, in the event it shall be determined that
any
payment or distribution by the Company or its affiliated companies to or
for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or
any
interest or penalties are incurred by Executive with respect to such excise
tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay
to
Executive an additional payment (a "Gross-Up Payment") in an amount such
that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (except for any income tax under Section 409A of the Code), any interest
and penalties imposed with respect thereto, and Excise Tax imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to
the Excise Tax imposed upon the Payments.
9
(b)
Subject
to the provisions of Section 4(c), all determinations required to be made
under
this Section 4, including whether and when a Gross-Up Payment is required
and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent registered
public accounting firm selected by the Company that is not also the Company's
then current accounting firm for annual audit purposes (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company
and
Executive within fifteen (15) business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested
by
the Company. In the event that the Accounting Firm is serving as accountant
or
auditor for the individual, entity or group effecting the Change in Control,
Executive shall appoint another nationally recognized public accounting firm
to
make the determinations required hereunder (which accounting firm shall then
be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as
determined pursuant to this Section 4, shall be paid by the Company to Executive
within five (5) days of the receipt of the Accounting Firm's determination,
but
in no event later than the time set forth in Section 4(f), below. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall
furnish Executive with a written opinion that failure to report the Excise
Tax
on Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result
of
the uncertainty in the application of Section 4999 of the Code at the time
of
the initial determination by the Accounting Firm hereunder, it is possible
that
Gross-Up Payments which will not have been made by the Company should have
been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c)
Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after Executive is informed in writing of such
claim
and shall apprise the Company of the nature of such claim and the date on
which
such claim is requested to be paid. Executive shall not pay such claim prior
to
the expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Company (or such shorter period ending
on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i)
give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii)
take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii)
cooperate
with the Company in good faith in order effectively to contest such claim;
and
(iv)
permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with
such
contest and shall indemnify and hold Executive harmless, on an after-tax
basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs
and
expenses. Without limitation on the foregoing provisions of this Section
4(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
such claim and may, at its sole option, either direct Executive to pay the
tax
claimed and sue for a refund or contest the claim in any permissible manner,
and
Executive shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more
appellate courts, as the Company shall determine; provided further, that
if the
Company desires Executive to pay such claim and sue for a refund, the Company
shall, on Executive's behalf, pay such claim and on an after-tax basis reimburse
Executive from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such payment and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested amount
is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Company's control of the contest shall be limited to issues with respect
to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the
Internal Revenue Service or any other taxing authority.
10
(d)
If,
after
payment by the Company pursuant to Section 4(c), Executive becomes entitled
to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
payment of an amount by the Company pursuant to Section 4(c), a determination
is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent
to
contest such denial of refund prior to the expiration of thirty (30) days
after
such determination, then such payment shall offset, to the extent thereof,
the
amount of Gross-Up Payment required to be paid.
(e)
Notwithstanding
Executive otherwise being eligible for a Gross-Up Payment under this Section
4,
if, excluding any Gross-Up Payment required to be made pursuant to this Section
4, the "parachute payment" made to Executive does not exceed three times
Executive's "base amount" by more than $1,000, then the payments and benefits
to
be paid or provided under this Agreement will be reduced to the minimum extent
necessary so that no portion of any payment or benefit to Executive, as so
reduced, constitutes an "excess parachute payment." For purposes of this
Section
4(e), the terms "excess parachute payment," "parachute payment," and "base
amount" will have the meanings assigned to them by Section 280G of the Code.
The
determination of whether any reduction in such payments or benefits to be
provided under this Agreement is required pursuant to the preceding sentence
will be made at the expense of the Company by the Accounting Firm. The fact
that
Executive's right to payments or benefits may be reduced by reason of the
limitations contained in this Section 4(e) will not of itself limit or otherwise
affect any other rights of Executive other than pursuant to this Agreement.
In
the event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this Section
4(e),
Executive will be entitled to designate the payments and/or benefits to be
so
reduced in order to give effect to this Section. The Company will provide
Executive with all information reasonably requested by Executive to permit
Executive to make such designation. In the event that Executive fails to
make
such designation within 10 business days of the date of termination of
Executive's employment, the Company may effect such reduction in any manner
it
deems appropriate.
(f)
Any
Gross-Up Payment made to Executive pursuant to this Section 4 shall be exempt
from Code Section 409A pursuant to the short-term deferral exception to Code
Section 409A. Absent further guidance from the United States Treasury
Department, the Internal Revenue Service or any judicial authority relating
to
the application of Section 409A to Section 280G Gross-Up Payments, Gross-Up
Payments pursuant to this Section 4 shall be made as follows:
11
(i)
With
respect to any Gross-Up Payment that can be reasonably calculated as of
the time
of a Change in Control or shortly thereafter, such Gross-Up Payment shall
be
made to Executive no later than March 15th of the calendar year following
the
year in which the Change in Control occurs;
(ii)
With
respect to any Gross-Up Payment that results from Executive becoming eligible
for benefits under this Agreement upon Executive's termination of employment,
such Gross-Up Payment shall be made to Executive no later than March 15th
of the
calendar year following the year in which the earlier of (A) the event
giving
rise to Executive's Good Reason occurs or (B) Executive's termination of
employment; and
(iii)
With
respect to any Gross-Up Payment that is required to be made to Executive
pursuant to Section 4(c), such Gross-Up Payment shall be made to Executive
no
later than March 15th of the calendar year following the year in which
the
alleged obligation of Executive, as reflected by Executive's receipt of
a claim
by the Internal Revenue Service, is received by Executive.
5.
Non-exclusivity
of Rights
.
Nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any plan, program, policy or practice provided by the
Company
and for which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that Executive
is otherwise entitled to receive at or subsequent to the Date of Termination
under any plan, policy, practice or program of or any contract or agreement
with
the Company shall be payable in accordance with such plan, policy, practice
or
program or contract or agreement, except as explicitly modified by this
Agreement.
6.
Full
Settlement; Resolution of Disputes
.
(a)
Except
where Executive's employment is terminated for Cause, the Company's obligation
to make any payments provided for in this Agreement and otherwise to perform
its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have
against Executive or others. In no event shall Executive be obligated to
seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and
such
amounts shall not be reduced whether or not Executive obtains other employment.
Subject to Executive's agreement to repay certain fees and expenses as
provided
below in Section 6(b), the Company shall pay promptly as incurred, to the
full
extent permitted by law, all legal fees and expenses that Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by the Company, Executive or others of the validity or
enforceability of, or the existence of liability under, any provision of
this
Agreement or any guarantee of performance thereof (including as a result
of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at one hundred
twenty percent (120%) of the Federal Mid-Term Rate under Section 1274(d)
of the
Code.
(b)
If
there
shall be any dispute or contest between the Company and Executive (i) in
the
event of any termination of Executive's employment by the Company, whether
such
termination was for Cause, or (ii) in the event of any termination of employment
by Executive whether Good Reason existed, then the resolution of such dispute
or
contest shall be finally determined by arbitration, which may be initiated
by
either the Company or Executive, pursuant to the Federal Arbitration Act
in
accordance with the rules then in force of the American Arbitration Association.
The arbitration proceedings shall take place in Kansas City, Missouri or
such
other location as the parties in dispute hereafter may agree upon; and
such
proceedings will be conducted in the English language and shall be governed
by
the laws of the State of Missouri as such laws are applied to agreements
between
residents of the State entered into and to be performed entirely within
the
State. There shall be one arbitrator, as shall be agreed upon by the parties
in
dispute, who shall be an individual skilled in the legal and business aspects
of
the subject matter of this Agreement and of the dispute. In the absence
of such
agreement, each party in dispute shall select one arbitrator and the arbitrators
so selected shall select a third arbitrator. In the event the arbitrators
cannot
agree upon the selection of a third arbitrator, such third arbitrator shall
be
appointed by the American Arbitration Association at the request of any
of the
parties in dispute. The arbitrators shall be individuals skilled in the
legal
and business aspects of the subject matter of this Agreement and of the
dispute.
The decision rendered by the arbitrator or arbitrators shall be accompanied
by a
written opinion in support thereof. Such decision shall be final and binding
upon the parties in dispute without right of appeal, it being the intent
of the
parties that such decision, and, irrespective of any contrary provision
of the
laws of the State respecting rights of appeal, such decision may not be
appealed. The burden of proving that Executive is not entitled to receive
the
amounts and the benefits contemplated by this Agreement shall be on the
Company.
(c)
In
the
event of such an arbitration and provided that Executive shall repay the
following amounts, fees and expenses if the final and binding decision
of the
arbitrator(s) is that Executive's termination was for Cause or that Good
Reason
did not exist for termination of employment by Executive, (i) Great Plains
Energy shall advance to Executive all legal fees and expenses that Executive
may
reasonably incur as a result of any such action, and (ii) if a final and
binding
decision of the arbitrator(s) is not obtained by the six-month anniversary
of
the date the Company or Executive first provided notice to the other party
of
the dispute or contest (the "Dispute Notice"), Great Plains Energy shall
pay all
amounts, and provide all benefits, to Executive and/or Executive's family
or
other beneficiaries, as the case may be, that Great Plains Energy would
be
required to pay or provide pursuant to Sections 3(a) or 3(c) if such termination
were by the Company without Cause or by Executive with Good Reason. If
the final
and binding decision of the arbitrator(s) is that Executive's termination
was
not for Cause or that Good Reason did exist for such termination by Executive
then, (I) if such decision is before the six-month anniversary of the receipt
of
the Dispute Notice, Executive shall receive all payments and benefits
contemplated by this Agreement, plus interest on any delayed payment or
benefit
at one hundred twenty percent (120%) of the Federal Mid-Term Rate under
Section
1274(d) of the Code or (II) if such decision is after the six-month anniversary
of the receipt of the Dispute Notice such that all payments and benefits
contemplated by this Agreement have already been paid, Executive shall
receive
interest (calculated in the same manner as set forth above) for the six-month
period the payments and provision of benefits were delayed. In no event
may the
arbitrator or arbitrators award any other damages or award of any kind.
Notwithstanding the foregoing, nothing in this Agreement is intended to,
or
shall be construed as, affecting the rights and obligations of Executive
and the
Company to submit any dispute (other than such disputes contemplated by,
and
resolved in accordance with Sections 6(b) and 6(c)) to the appropriate
dispute
resolution process in accordance with any applicable dispute resolution
plan
intended to provide a procedural mechanism, whether exclusive or non-exclusive,
for the resolution of any and all disputes between the Company and its
present
or former employees.
7.
Restrictive
Covenants
.
(a)
Nondisclosure
of Confidential Information
.
Executive shall hold in confidence for the benefit of the Company all
Confidential Information. Executive agrees that Executive will not disclose
any
Confidential Information to any person or entity other than the Company
and
those designated by it, either during or subsequent to Executive's employment
by
the Company, nor will Executive use any Confidential Information, except
(i) in
the regular course of Executive's employment by the Company, without the
prior
written consent of the Company or (ii) as may otherwise be required by
law or
legal process.
(b)
Actions
Upon Termination; Assistance with Claims
.
Upon
Executive's employment termination for whatever reason, Executive shall
neither
take or copy nor allow a third party to take or copy, and shall deliver
to the
Company all property of the Company, including, but not limited to, all
Confidential Information regardless of the medium (i.e., hard copy, computer
disk, CD ROM) on which the information is contained. During and after
Executive's employment by the Company, Executive will provide reasonable
assistance to the Company in the defense of any claims or potential claims
that
may be made or threatened to be made against the Company in any action,
suit, or
proceeding, whether civil, criminal, administrative, or investigative
("Proceeding") and will provide reasonable assistance to the Company in
the
prosecution of any claims that may be made by the Company in any Proceeding,
to
the extent that such claims may relate to Executive's employment by the
Company.
For the avoidance of doubt, reasonable assistance would not include Executive
being required to provide information that could reasonably result in criminal
or civil charges or penalties being assessed or imposed against Executive
in his
individual capacity. Executive shall, unless precluded by law, promptly
inform
the Company if Executive is asked to participate (or otherwise become involved)
in any Proceeding involving such claims or potential claims. Executive
also
shall, unless precluded by law, promptly inform the Company if Executive
is
asked to assist in any investigation (whether governmental or private)
of the
Company (or its actions), regardless of whether a lawsuit has then been
filed
against the Company with respect to such investigation. The Company shall
reimburse Executive for all of Executive's reasonable out-of-pocket expenses
associated with such assistance, including travel expenses and any attorneys'
fees and shall pay a reasonable per diem fee (equal to 1/250th of Executive's
annual salary rate at Executive's Date of Termination) for Executive's
services.
(c)
Noncompetition
.
Executive agrees that so long as Executive is employed by the Company and
for a
period of six (6) months thereafter, Executive shall not, without the prior
written consent of the Company, which in the case of termination will not
be
unreasonably withheld, participate or engage in, directly or indirectly
(as an
owner, partner, employee, officer, director, independent contractor, consultant,
advisor or in any other capacity calling for the rendition of services,
advice,
or acts of management, operation or control), any business that, during
Executive's employment, is in direct competition with the business conducted
by
the Company or any of its affiliates within the United States (hereinafter,
the
"Geographic Area"); provided, however, that the foregoing shall not be
construed
to preclude Executive from making any investments in any securities to
the
extent such securities are traded on a national securities exchange or
over-the-counter market and such investment does not exceed five percent
(5%) of
the issued and outstanding voting securities of such issuer.
(d)
Nonsolicitation
of Employees
.
During
Executive's employment and for a period of six (6) months thereafter, Executive
shall not, without the consent of the Company, directly or indirectly solicit
any current employee of the Company or any of its affiliates, to leave
such
employment and join or become affiliated with any business that is in direct
competition with the business conducted by the Company or any of its affiliates
within the Geographic Area.
(e)
Mutual
Non-disparagement
.
Executive shall refrain from making any statements about the Company or
its
officers or directors that would disparage, or reflect unfavorably upon
the
image or reputation of the Company or any such officer or director. The
Company
shall refrain from making any statements about Executive that would disparage,
or reflect unfavorably upon the image or reputation of, Executive.
(f)
Irreparable
Harm
.
Executive acknowledges that: (i) Executive's compliance with this Section
7 is
necessary to preserve and protect the Confidential Information, and the
goodwill
of the Company and its affiliates as going concerns; (ii) any failure by
Executive to comply with the provisions of this Section may result in
irreparable and continuing injury for which there may be no adequate remedy
at
law; and (iii) in the event that Executive should fail to comply with the
terms
and conditions of this Section, the Company shall be entitled, in addition
to
such other relief as may be proper, to seek all types of equitable relief
(including, but not limited to, the issuance of an injunction and/or temporary
restraining order) as may be necessary to cause Executive to comply with
this
Section, to restore to the Company its property, and to make the Company
whole.
(g)
Unenforceability
.
If any
provision(s) of this Section 7 shall be found invalid or unenforceable,
in whole
or in part, then such provision(s) shall be deemed to be modified or restricted
to the extent and in the manner necessary to render the same valid and
enforceable, or shall be deemed excised from this Agreement, as the case
may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision(s) had been originally
incorporated herein as so modified or restricted, or as if such provision(s)
had
not been originally incorporated herein, as the case may be.
8.
Successors
.
(a)
This
Agreement is personal to Executive and shall not be assignable by Executive
without the prior written consent of the Company otherwise than by will
or the
laws of descent and distribution. If Executive should die while any amounts
would still be payable to Executive hereunder if she or he had continued
to
live, all such amounts, unless otherwise provided herein, shall be paid
in
accordance with the terms of this Agreement to Executive's heirs or
representatives or, if there be no such designee, to Executive's
estate.
(b)
This
Agreement shall inure to the benefit of and be binding upon the Company
and its
successors and assigns.
(c)
The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform it if no such succession had taken place. As used in
this
Agreement, "Company" shall mean the Company as hereinbefore defined and
any
successor to its business and/or assets as aforesaid which assumes and
agrees to
perform this Agreement by operation of law, or otherwise.
9.
Prohibition
of Payments by Regulatory Agencies
.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be obligated to make any payment to Executive under this
Agreement if the payment would violate any rule, regulation or order of
any
regulatory agency having jurisdiction over the Company or any of its
subsidiaries; provided, however, that the Company covenants to Executive
that it
will take all reasonable steps to obtain any regulatory agency approvals
that
may be required in order to make payments to Executive as provided herein.
10.
Miscellaneous
.
(a)
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Missouri without reference to principles of conflict of laws.
The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement executed by the parties hereto. This Agreement supersedes
all previous agreements relating to the subject matter of this Agreement,
written or oral, between the parties hereto and contains the entire
understanding of the parties hereto including, but not limited to that
Prior
Severance Agreement dated September 25, 2000, between the Board and
Executive.
(b)
All
notices and other communications hereunder shall be in writing and shall
be
given by hand delivery to the other party or by registered or certified
mail,
return receipt requested, postage prepaid, addressed as follows:
If
to the Company:
|
|
If
to Executive:
|
|
|
|
Great
Plains Energy Incorporated
|
|
William
H. Downey
|
Attn:
General Counsel
|
|
Great
Plains Energy Incorporated
|
1201
Walnut
|
|
1201
Walnut
|
Kansas
City, Missouri
|
|
Kansas
City, Missouri
|
64106-2124
|
|
64106-2124
|
|
|
|
or
to
such other address as either party shall have furnished to the other in
writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(c)
The
invalidity or unenforceability of any provision of this Agreement shall
not
affect the validity or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect.
(d)
This
Agreement is intended to meet the requirements of Section 409A of the Code
and
may be administered in a manner that is intended to meet those requirements
and
shall be construed and interpreted in accordance with such intent. To the
extent
that any payment or benefit provided hereunder is subject to Section 409A
of the
Code, such payment or benefit shall be provided in a manner that will meet
the
requirements of Section 409A of the Code, including regulations or other
guidance issued with respect thereto, such that the payment or benefit
shall not
be subject to the excise tax applicable under Section 409A of the Code.
Any
provision of this Agreement that would cause any payment or benefit to
fail to
satisfy Section 409A of the Code shall be amended (in a manner that as
closely
as practicable achieves the original intent of this Agreement) to comply
with
Section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under Section
409A of the Code. In the event additional regulations or other guidance
is
issued under Section 409A of the Code or a court of competent jurisdiction
provides additional authority concerning the application of Section 409A
with
respect to the payments described in Section 4 of the Agreement, then the
provisions of such Section shall be amended to permit such payments to
be made
at the earliest time permitted under such additional regulations, guidance
or
authority that is practicable and achieves the original intent of this
Agreement.
(e)
The
Company may withhold from any amounts payable under this Agreement such
federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(f)
Executive's
or the Company's failure to insist upon strict compliance with any provision
of
this Agreement or the failure to assert any right Executive or the Company
may
have hereunder, including, without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver
of such
provision or right or any other provision or right of this
Agreement.
(g)
Executive
and Great Plains Energy acknowledge that, except as may otherwise be provided
under any other written agreement between Executive and the Company, the
employment of Executive by the Company is "at will" and, may be terminated
by
either Executive or the Company at any time. Except as provided in Section
3(c),
if prior to the Effective Date, Executive's employment with the Company
terminates, then Executive shall have no further rights under this
Agreement.
(h)
This
Agreement may be executed in any number of counterparts, each of which
shall be
deemed to be an original and all of which shall constitute one agreement
that is
binding upon each of the parties hereto, notwithstanding that all parties
are
not signatories to the same counterpart.
IN
WITNESS WHEREOF, each of Great Plains Energy and Executives has executed
this
Agreement as of the day and year first above written.
|
|
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
|
|
|
EXECUTIVE:
|
|
|
|
By:
|
|
|
Name:
|
|
William
H. Downey
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
10.1.c
CHANGE
IN CONTROL SEVERANCE AGREEMENT
THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT is entered into as of the ___ day of
____________, 2006, between Great Plains Energy Incorporated, a Missouri
corporation ("Great Plains Energy"), and John Marshall
("Executive").
WITNESSETH:
WHEREAS,
Executive is a valued employee of Great Plains Energy or a subsidiary thereof
(the "Company"); and
WHEREAS,
the Board (as defined herein) believes that it is in the best interests of
the
Company and its shareholders (i) to provide assurance that the Company will
have
the continued service of Executive notwithstanding the possibility, threat
or
occurrence of a Change in Control (as defined in Section 1), (ii) to diminish
the distraction to Executive that may arise by virtue of the personal
uncertainties and risks created by such a threatened or pending Change in
Control, and (iii) to encourage Executive's full attention and dedication
to the
Company currently and in the event of a threatened or pending Change in Control;
and
WHEREAS,
the Board and Executive previously entered into a severance agreement dated
May
25, 2005, the "Prior Severance Agreement" whereby Great Plains Energy agreed
to
provide Executive with certain compensation and perquisites following
Executive's termination or constructive termination of employment with the
Company in connection with a change in control or potential change in control
of
Great Plains Energy; and
WHEREAS,
the Board and Executive agree that, in connection with both parties entering
into this Agreement, the Prior Severance Agreement shall be terminated, rendered
null and void, and all duties and rights conferred upon the parties thereto
extinguished, and that such Prior Severance Agreement is replaced in its
entirety with the benefits, duties, terms and conditions set forth in this
Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein, the parties hereto agree as follows:
1.
Certain
Definitions
.
As used
in this Agreement, unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following
meanings:
(a)
Agreement
.
"Agreement" means this Change in Control Severance Agreement as amended from
time to time.
(b)
Beneficial
Owner
.
"Beneficial Owner" shall have the same meaning as set forth in Rule 13d-3
of the
Exchange Act.
(c)
Board
.
"Board"
means the Board of Directors of Great Plains Energy.
1
(d)
Cause
.
"Cause"
means (i) the material misappropriation of any of the Company's funds,
Confidential Information or property; (ii) the conviction of, or the entering
of
a guilty plea or plea of no contest with respect to, a felony, or the equivalent
thereof; (iii) commission of act of willful damage, willful misrepresentation,
willful dishonesty, or other willful conduct that can reasonably be expected
to
have a material adverse effect on the business, reputation, or financial
situation of the Company; or (iv) gross negligence or willful misconduct
in
performance of Executive's duties; provided, however, "cause" shall not exist
under clause (iv), above, with respect to an act or failure to act unless
(A)
Executive has been provided written notice describing in sufficient detail
the
acts or failure to act giving rise to the Company's assertion of such gross
negligence or misconduct, (B) been provided a reasonable period to remedy
any
such occurrence and (C) failed to sufficiently remedy the
occurrence.
(e)
Change
in Control
.
"Change
in Control" means the occurrence of one of the following events, whether
in a
single transaction or a series of related transactions:
(i)
any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of Great Plains Energy (not including in the securities beneficially owned
by
such Person any securities acquired directly from Great Plains Energy or
its
affiliates other than in connection with the acquisition by Great Plains
Energy
or its affiliates of a business) representing 35% or more of either the then
outstanding shares of common stock of Great Plains Energy or the combined
voting
power of Great Plains Energy's then outstanding securities; or
(ii)
the
following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to
the
election of directors of Great Plains Energy, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or election
by the Board or nomination for election by Great Plains Energy's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved; or
(iii)
the
consummation of a merger, consolidation, reorganization or similar corporate
transaction of Great Plains Energy, whether or not Great Plains Energy is
the
surviving corporation in such transaction, other than (A) a merger,
consolidation, or reorganization that would result in the voting securities
of
Great Plains Energy outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with
the ownership of any trustee or other fiduciary holding securities under
an
employee benefit plan of the Company, at least 60% of the combined voting
power
of the voting securities of Great Plains Energy or such surviving entity
or any
parent thereof outstanding immediately after such merger, consolidation or
reorganization, or (B) a merger, consolidation or reorganization effected
to
implement a recapitalization of Great Plains Energy (or similar transaction)
in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of
securities of Great Plains Energy (not including in the securities Beneficially
Owned by such Person any securities acquired directly from Great Plains Energy
or its affiliates other than in connection with the acquisition by Great
Plains
Energy or its affiliates of a business) representing 20% or more of either
the
then outstanding shares of common stock of Great Plains Energy or the combined
voting power of Great Plains Energy's then outstanding securities; or
(iv)
the
occurrence of, or the stockholders of Great Plains Energy approve a plan
of, a
complete liquidation or dissolution of Great Plains Energy or an agreement
for
the sale or disposition by Great Plains Energy of all or substantially all
of
Great Plains Energy's assets, other than a sale or disposition of all or
substantially all of Great Plains Energy's assets to an entity, at least
60% of
the combined voting power of the voting securities of which are owned by
Persons
in substantially the same proportions as their ownership of Great Plains
Energy
immediately prior to such sale.
Notwithstanding
the foregoing, no "Change in Control" shall be deemed to have occurred if
there
is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of Great Plains Energy
immediately prior to such transaction or series of transactions continue
to have
substantially the same proportionate ownership in an entity which owns all
or
substantially all of the assets of Great Plains Energy immediately following
such transaction or series of transactions.
(f)
Change
in Control Period
.
"Change
in Control Period" means the period commencing on the date hereof and ending
on
the second anniversary of such date; provided, however, that commencing on
a
date one year after the date hereof, and on each annual anniversary of such
date
(such date and each annual anniversary thereof being hereinafter referred
to as
the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at least
60
days prior to the Renewal Date the Company shall give notice to Executive
that
the Change in Control Period shall not be so extended; provided, further
that
during any period of time when the Board or the governing body of Great Plains
Energy has knowledge that any person has taken steps reasonably calculated
to
effect a Change in Control, the Change in Control Period shall automatically
be
extended (and may not terminate) until, in the opinion of the Board, such
person
has abandoned or terminated its efforts to effect a Change in
Control.
(g)
Company
.
"Company" means, except as the context requires otherwise, references to
Great
Plains Energy Incorporated, a Missouri corporation, its successors and assigns,
and/or any subsidiary thereof, as applicable.
(h)
Confidential
Information
.
"Confidential Information" means (1) any and all trade secrets concerning
the
business and affairs of the Company, product specifications, data, know-how,
formulae, algorithms, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned manufacturing or distribution
methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software
and
programs (including object code and source code), computer software and database
technologies, systems, structures, and architectures; (2) information concerning
the business and affairs of the Company (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials); and (3) notes, analysis,
compilations, studies, summaries, and other material prepared by or for the
Company containing or based, in whole or in part, or any information included
in
the foregoing, whether reduced to writing or not and which has not become
publicly known or made generally available through no wrongful act of Executive
or others who were under confidentiality obligations as to the item or items
involved.
(i)
Date
of Termination
.
"Date
of Termination" means (i) if Executive's employment is terminated by the
Company
for Cause, or by Executive for Good Reason, the date of receipt of the Notice
of
Termination or any later date permitted to be specified therein, as the case
may
be, (ii) if Executive's employment is terminated by the Company other than
for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies Executive of such termination, (iii) if Executive's employment
is terminated by reason of death or Disability, the Date of Termination shall
be
the date of death of Executive or the Disability Effective Date (as defined
in
Section 2(a)), as the case may be and (iv) if Executive's employment is
terminated by Executive for other than Good Reason, the Date of Termination
shall be the date on which Executive notifies the Company in writing of such
termination or any later date permitted to be specified therein, as the case
may
be.
(j)
Disability
or Disabled
.
The
term "Disability" or "Disabled" shall mean an individual (i) is unable to
engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
can be
expected to last for a continuous period of not less than twelve (12) months
or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than 3 months under a Company
sponsored accident or health plan.
(k)
Effective
Date
.
"Effective Date" means the first date on which a Change in Control occurs
during
the Change in Control Period.
(l)
Exchange
Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time
to time.
(m)
Good
Reason
.
"Good
Reason" means, without Executive's written consent any of the
following:
(i)
Any
material and adverse reduction or material and adverse diminution in Executive's
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities held, exercised or assigned at any
time
during the 90-day period immediately preceding the commencement of the Pre-CIC
Protected Period;
(ii)
Any
reduction in Executive's annual base salary as in effect immediately preceding
the commencement of the Pre-CIC Protected Period or as the same may be increased
from time to time;
(iii)
Any
reduction in benefits received by Executive under Company Plans (as defined
below) to less than the most favorable benefits provided to Executive by
the
Company under Company Plans at any time during the 90-day period immediately
preceding the commencement of the Pre-CIC Protected Period. "Company Plans"
means (1) all incentive, savings and retirement plans, practices, policies
and
programs sponsored or maintained by the Company, (2) all welfare benefit
plans,
practices, policies and programs (including medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death
and
travel accident insurance plans and programs) sponsored or maintained by
the
Company, (3) expense reimbursement by the Company for all reasonable
out-of-pocket employment expenses incurred by Executive, (4) the provision
of
fringe benefits, and (5) the provision of paid vacation time by the
Company;
(iv)
Executive
being required by the Company to be based at any office or location that
is more
than 70 miles from the location where Executive was employed immediately
preceding the commencement of the Pre-CIC Protected Period; or
(v)
Any
failure by the Company to require any successor (whether direct or indirect,
by
purchase, merger, consolidation or otherwise) to all or substantially all
of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company
would
be required to perform it if no such succession had taken place, or any failure
by any such successor after ten (10) days notice from Executive to so perform
under this Agreement.
Provided,
however, notwithstanding the occurrence of any of the events set forth above
in
this Section 1(m), Good Reason shall not include for the purpose of this
definition (1) an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of
notice
thereof given by Executive, or (2) if occurring within the Pre-CIC Protected
Period, any reduction in Executive's base annual salary or reduction in benefits
received by Executive where such reduction is in connection with a company-wide
reduction in salaries or benefits.
(n)
Notice
of Termination
.
"Notice
of Termination" means a written notice of termination which (i) indicates
the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the
provision so indicated and (iii) if the Date of Termination is other than
the
date of receipt of such notice, specifies the termination date (which date
shall
be not more than fifteen (15) days after the giving of such notice), unless
another date is mutually agreed upon between Executive and the
Company.
(o)
Person
.
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (1) Great Plains Energy or any of its subsidiaries, (2)
a
trustee or other fiduciary holding securities under an employee benefit plan
of
the Company or any of its subsidiaries, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) a corporation
owned, directly, or indirectly, by the stockholders of Great Plains Energy
in
substantially the same proportions as their ownership of stock of Great Plains
Energy.
(p)
Post-Effective
Period
.
"Post-Effective Period" means the period commencing on the Effective Date
and
ending on the earlier of (i) the second anniversary of such date or
(ii) Executive's 70
th
birthday.
(q)
Pre
-CIC
Protected Period
.
"Pre-CIC Protected Period" means the period that is within the Change in
Control
Period and begins when (A) Great Plains Energy enters into an agreement,
the
consummation of which would result in the occurrence of a Change in Control;
(B)
Great Plains Energy or any Person publicly announces an intention to take
or to
consider taking actions which, if consummated, would constitute a Change
in
Control; (C) any Person becomes the Beneficial Owner, directly or indirectly,
of
voting securities of Great Plains Energy representing 10% or more of the
combined voting power of Great Plains Energy's then outstanding voting
securities; or (D) the Board, the members or the stockholders of Great Plains
Energy adopts a resolution approving any of the foregoing or approving any
Change in Control, and ends upon the date the Change in Control transaction
is
either consummated, abandoned or terminated (for this purpose, the Board
shall
have the sole and absolute discretion to determine that a proposed transaction
has been abandoned).
2.
Termination
of Employment During the Post-Effective Period
.
(a)
Death
or Disability
.
Executive's employment shall terminate automatically upon Executive's death
or,
with written notice by the Company of its intention to terminate Executive's
employment, upon Executive's Disability. In such event, Executive's employment
with the Company shall terminate effective on the 90th day after receipt
of such
notice by Executive (the "Disability Effective Date"), provided that within
the
90 days after such receipt Executive shall not have returned to full-time
performance of Executive's duties.
(b)
Cause
.
The
Company may terminate Executive's employment at any time for Cause or without
Cause. Notwithstanding the foregoing, Executive shall not be deemed to have
been
terminated for Cause without (i) reasonable notice to Executive setting forth
the reasons for the Company's intention to terminate for Cause, (ii) an
opportunity for Executive, together with his counsel, to be heard before
the
Board within fifteen (15) days of such notice, and (iii) delivery to Executive
of a Notice of Termination from the Board finding that, in the good faith
opinion of the Board, that Executive was guilty of conduct set forth in Section
1(d), and specifying the particulars thereof in reasonable detail.
(c)
Executive
Resignation
.
Executive's employment may be terminated at any time by Executive for Good
Reason or without Good Reason.
(d)
Notice
of Termination
.
Any
termination by the Company for Cause, or by Executive for Good Reason, shall
be
communicated by Notice of Termination to the other party hereto. The failure
by
Executive or the Company to set forth in the Notice of Termination any fact
or
circumstance that contributes to a showing of Good Reason or Cause shall
not
waive any right of Executive or the Company hereunder or preclude Executive
or
the Company from asserting such fact or circumstance in enforcing Executive's
or
the Company's rights hereunder.
3.
Obligations
of the Company Upon Termination of Employment
.
(a)
Post-Effective
Period Terminations Other Than for Cause, Death or Disability; Post-Effective
Period Executive Resignation
.
If,
during the Post-Effective Period, the Company shall terminate Executive's
employment other than (I) for Cause or (II) on account of Executive's death
or
Disability, or Executive shall terminate employment for Good Reason, the
Company
shall pay to Executive, in a lump-sum cash payment made within 30 days following
the Date of Termination, as compensation for services rendered to the Company,
an amount equal to the aggregate of the following amounts set forth below
in
Sections 3(a)(i), (ii), (iii), and (iv), and provide to Executive the benefits
provided in Section 3(a)(v).
(i)
A
cash
amount equal to the sum of (A) Executive's full annual base salary from the
Company and its affiliated companies through the Date of Termination, to
the
extent not theretofore paid, (B) a bonus in an amount at least equal to the
average annualized incentive awards paid or payable pursuant to any
Company-sponsored annual incentive compensation plan, including by reason
of any
deferral under a Company-sponsored deferred compensation program, to Executive
by the Company and its affiliated companies during the five fiscal years
of the
Company (or if Executive shall have performed services for the Company and
its
affiliated companies for four fiscal years or less, the years during which
Executive performed services) immediately preceding the fiscal year in which
the
Change in Control (or if benefits are payable pursuant to Section 3(c), the
Date
of Termination) occurs, multiplied by a fraction, the numerator of which
is the
number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination and the denominator of which is 365 or 366,
as
applicable, to the extent not theretofore paid, (C) any amount credited to
Executive's CAP Excess Benefits Account pursuant to the Great Plains Energy
Incorporated Nonqualified Deferred Compensation Plan and any other compensation
previously deferred by Executive (together with any interest and earnings
thereon), in each case to the extent not theretofore paid, and (D) any accrued
unpaid vacation pay;
(ii)
a
cash
amount equal to (A) two (2) times Executive's highest annual base salary
from
the Company and its affiliated companies in effect during the twelve (12)-month
period prior to the Date of Termination, plus (B) two (2) times Executive's
average annualized annual incentive compensation awards, paid, or, but for
a
deferral under a Company-sponsored deferred compensation program, would have
been paid, to Executive by the Company and its affiliated companies during
the
five fiscal years of the Company (or if Executive shall have performed services
for the Company and its affiliated companies for four fiscal years or less,
the
years during which Executive performed services) immediately preceding the
fiscal year in which the Change in Control (or if benefits are payable pursuant
to Section 3(c), the Date of Termination) occurs; provided, however, that
in the
event there are fewer than twenty-four (24) whole months remaining from the
Date
of Termination to the date of Executive's 70th birthday, the amount calculated
in accordance with this Section 3(a)(ii) shall be reduced by multiplying
such
amount by a fraction the numerator of which is the number of months, including
a
partial month (with a partial month being expressed as a fraction the numerator
of which is the number of days remaining in such month and the denominator
of
which is the number of days in such month), so remaining and the denominator
of
which is twenty-four (24) months; provided further that any amount paid pursuant
to this Section 3(a)(ii) shall be paid in lieu of any other amount of severance
pay to be received by Executive upon termination of employment of Executive
under any severance plan, policy or arrangement of the Company;
(iii)
a
cash
amount equal to the excess of (A) the actuarial equivalent value of the monthly
accrued benefits payable to Executive at age 65 under the Great Plains Energy
Incorporated Management Pension Plan (the "Pension Plan") as in effect on
the
date of this Agreement and the benefits provided under the Supplemental
Executive Retirement Plan in respect of the Pension Plan as in effect on
the
date of this Agreement, assuming (1) that benefits have accrued thereunder
and
Executive is entitled to such benefits, (2) each such benefit shall be computed
as if Executive had two Years of Credited Service for every one actual Year
of
Credited Service earned under the Pension Plan, plus four additional Years
of
Credited Service earned under the Pension Plan and (3) Executive were fully
vested in such hypothetical benefits, over (B) the actuarial equivalent value
of
Executive's vested accrued benefits under the Pension Plan and benefits payable
under the Supplemental Executive Retirement Plan computed as if Executive
had
two Years of Credited Service for every one actual Year of Credited Service
earned under the Pension Plan. Such cash amount shall be computed using the
same
actuarial methods and assumptions then in use for purposes of computing benefits
under the Pension Plan, except that the computation shall be made without
actuarial reduction for early retirement and provided that the interest rate
used in such computation shall be the interest rate used on the Date of
Termination by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution pursuant to a plan
termination;
(iv)
if
on the
Date of Termination Executive shall not be fully vested in the matching employer
contributions made on Executive's behalf under the Great Plains Energy
Incorporated Cash or Deferred Arrangement, a cash amount equal to the value
of
the unvested portion of such matching employer contributions;
(v)
for
a
period of two (2) years commencing on the Date of Termination, the Company
shall
provide Executive and Executive's dependents with medical, accident, disability
and life insurance coverage upon substantially the same terms and otherwise
substantially to the same extent as such coverage was being provided to
Executive and Executive's dependent(s) immediately prior to the Date of
Termination. At the Company's election, such continuation coverage may be
provided by (A) continuing such coverage under the Company's existing welfare
benefit plans, (B) with respect to any group health care plan and for the
applicable period permitted under Code Section 4980B(f)(2), Executive and/or
Executive's dependent(s) being deemed to have elected to receive such coverage
pursuant to a continuation election under Code Section 4980B with the Company
being obligated to pay for the entire portion of the applicable COBRA premiums,
(C) the Company purchasing an individual policy (to the extent such a policy
is
reasonably available in the marketplace) for Executive and/or Executive's
dependent(s) providing substantially similar coverage as offered under the
Company's plan, or (D) any combination of the forgoing methods under (A),
(B)
and (C) of this paragraph. Notwithstanding the foregoing sentence, if any
of the
medical, accident, disability or life insurance plans then in effect generally
with respect to other peer executives of the Company and its affiliated
companies would be more favorable to Executive, such plan coverage shall
be
substituted for the analogous plan coverage provided to Executive immediately
prior to the Date of Termination, and the Company and Executive shall share
the
costs of such plan coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. The obligation of the Company
to
continue coverage of Executive and Executive's dependent(s) under such plans
and
in accordance with this paragraph shall cease at such time as Executive and
Executive's dependent(s) obtain comparable coverage under another plan,
including a plan maintained by a new employer. With respect to any Company
group
health care plan, any continuation coverage provided under this paragraph
shall
be considered as alternative continuation coverage to any rights Executive
or
Executive's dependent(s) may have with respect to any other group health
plan
continuation coverage required by Code Section 4980B or any applicable state
statute mandating health insurance continuation coverage. Except to the extent
required by law, upon termination of the coverage provided for under this
Section 3(a)(v), Executive and/or Executive's dependent(s) shall have no
further
right to continuation of coverage under any group health plan maintained
by the
Company or its affiliated companies.
(b)
Termination
for Cause, Disability, Death or Other than for Good Reason
.
If at
any time during the Change in Control Period Executive's employment shall
be
terminated for Cause, Executive's employment is terminated due to Executive's
death or Disability, or if Executive terminates employment other than for
Good
Reason, this Agreement shall terminate without further obligation of the
Company
to Executive other than (i) the obligation to pay to Executive his or her
base
salary through the Date of Termination, any incentive bonus and other
compensation, payments and benefits for the most recently completed fiscal
year
and any accrued vacation pay, to the extent theretofore unpaid, which amounts
shall be paid to Executive in a lump sum in cash within thirty (30) days
of the
Date of Termination, and (ii) the obligation to pay to Executive all amounts
or
benefits to which Executive is entitled for the period prior to the Date
of
Termination under any plan, program, policy, practice, contract or agreement
of
the Company (excluding amounts otherwise required to be paid under this Section
3(b)), at the time such amounts or benefits are due.
(c)
Certain
Terminations During Pre-CIC Protected Period
.
If,
during the Pre-CIC Protected Period, Executive's employment is terminated
by the
Company other than for Cause or Executive terminates his or her employment
for
Good Reason, then Executive shall be entitled to receive the same benefits
he or
she would be entitled to receive under Section 3(a) if such termination of
employment would have occurred during the Post-Effective Period. Any benefits
or
payments to be paid pursuant to this Section 3(c) shall be paid in a lump-sum
payment and, subject to Section 3(d), within thirty (30) days following the
termination of Executive's employment.
(d)
Payments
to Executive Following Termination
.
If (i)
Executive is a "specified employee," as defined in Code section
409A(a)(1)(B)(i), and (ii) Executive's employment is terminated, either by
Executive or by the Company, due to any reason, other than Executive's death,
then, notwithstanding Sections 3(a) or 3(c) of this Agreement, Executive
shall
not receive any payment pursuant to Sections 3(a) or 3(c) until the first
business day after six full months after Executive's Date of Termination.
4.
Section
280G Gross-Up
.
(a)
Except
as
provided for in Section 4(e) below and notwithstanding any other provision
in
this Agreement to the contrary, in the event it shall be determined that
any
payment or distribution by the Company or its affiliated companies to or
for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or
any
interest or penalties are incurred by Executive with respect to such excise
tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay
to
Executive an additional payment (a "Gross-Up Payment") in an amount such
that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (except for any income tax under Section 409A of the Code), any interest
and penalties imposed with respect thereto, and Excise Tax imposed upon the
Gross-Up Pay
ment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b)
Subject
to the provisions of Section 4(c), all determinations required to be made
under
this Section 4, including whether and when a Gross-Up Payment is required
and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent registered
public accounting firm selected by the Company that is not also the Company's
then current accounting firm for annual audit purposes (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company
and
Executive within fifteen (15) business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested
by
the Company. In the event that the Accounting Firm is serving as accountant
or
auditor for the individual, entity or group effecting the Change in Control,
Executive shall appoint another nationally recognized public accounting firm
to
make the determinations required hereunder (which accounting firm shall then
be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as
determined pursuant to this Section 4, shall be paid by the Company to Executive
within five (5) days of the receipt of the Accounting Firm's determination,
but
in no event later than the time set forth in Section 4(f), below. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall
furnish Executive with a written opinion that failure to report the Excise
Tax
on Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result
of
the uncertainty in the application of Section 4999 of the Code at the time
of
the initial determination by the Accounting Firm hereunder, it is possible
that
Gross-Up Payments which will not have been made by the Company should have
been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c)
Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after Executive is informed in writing of such
claim
and shall apprise the Company of the nature of such claim and the date on
which
such claim is requested to be paid. Executive shall not pay such claim prior
to
the expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Company (or such shorter period ending
on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i)
give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii)
take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii)
cooperate
with the Company in good faith in order effectively to contest such claim;
and
(iv)
permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with
such
contest and shall indemnify and hold Executive harmless, on an after-tax
basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs
and
expenses. Without limitation on the foregoing provisions of this Section
4(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
such claim and may, at its sole option, either direct Executive to pay the
tax
claimed and sue for a refund or contest the claim in any permissible manner,
and
Executive shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more
appellate courts, as the Company shall determine; provided further, that
if the
Company desires Executive to pay such claim and sue for a refund, the Company
shall, on Executive's behalf, pay such claim and on an after-tax basis reimburse
Executive from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such payment and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested amount
is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Company's control of the contest shall be limited to issues with respect
to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the
Internal Revenue Service or any other taxing authority.
(d)
If,
after
payment by the Company pursuant to Section 4(c), Executive becomes entitled
to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
payment of an amount by the Company pursuant to Section 4(c), a determination
is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent
to
contest such denial of refund prior to the expiration of thirty (30) days
after
such determination, then such payment shall offset, to the extent thereof,
the
amount of Gross-Up Payment required to be paid.
(e)
Notwithstanding
Executive otherwise being eligible for a Gross-Up Payment under this Section
4,
if, excluding any Gross-Up Payment required to be made pursuant to this Section
4, the "parachute payment" made to Executive does not exceed three times
Executive's "base amount" by more than $1,000, then the payments and benefits
to
be paid or provided under this Agreement will be reduced to the minimum extent
necessary so that no portion of any payment or benefit to Executive, as so
reduced, constitutes an "excess parachute payment." For purposes of this
Section
4(e), the terms "excess parachute payment," "parachute payment," and "base
amount" will have the meanings assigned to them by Section 280G of the Code.
The
determination of whether any reduction in such payments or benefits to be
provided under this Agreement is required pursuant to the preceding sentence
will be made at the expense of the Company by the Accounting Firm. The fact
that
Executive's right to payments or benefits may be reduced by reason of the
limitations contained in this Section 4(e) will not of itself limit or otherwise
affect any other rights of Executive other than pursuant to this Agreement.
In
the event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this Section
4(e),
Executive will be entitled to designate the payments and/or benefits to be
so
reduced in order to give effect to this Section. The Company will provide
Executive with all information reasonably requested by Executive to permit
Executive to make such designation. In the event that Executive fails to
make
such designation within 10 business days of the date of termination of
Executive's employment, the Company may effect such reduction in any manner
it
deems appropriate.
(f)
Any
Gross-Up Payment made to Executive pursuant to this Section 4 shall be exempt
from Code Section 409A pursuant to the short-term deferral exception to Code
Section 409A. Absent further guidance from the United States Treasury
Department, the Internal Revenue Service or any judicial authority relating
to
the application of Section 409A to Section 280G Gross-Up Payments, Gross-Up
Payments pursuant to this Section 4 shall be made as follows:
(i)
With
respect to any Gross-Up Payment that can be reasonably calculated as of the
time
of a Change in Control or shortly thereafter, such Gross-Up Payment shall
be
made to Executive no later than March 15th of the calendar year following
the
year in which the Change in Control occurs;
(ii)
With
respect to any Gross-Up Payment that results from Executive becoming eligible
for benefits under this Agreement upon Executive's termination of employment,
such Gross-Up Payment shall be made to Executive no later than March 15th
of the
calendar year following the year in which the earlier of (A) the event giving
rise to Executive's Good Reason occurs or (B) Executive's termination of
employment; and
(iii)
With
respect to any Gross-Up Payment that is required to be made to Executive
pursuant to Section 4(c), such Gross-Up Payment shall be made to Executive
no
later than March 15th of the calendar year following the year in which the
alleged obligation of Executive, as reflected by Executive's receipt of a
claim
by the Internal Revenue Service, is received by Executive.
5.
Non-exclusivity
of Rights
.
Nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
and for which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that Executive
is otherwise entitled to receive at or subsequent to the Date of Termination
under any plan, policy, practice or program of or any contract or agreement
with
the Company shall be payable in accordance with such plan, policy, practice
or
program or contract or agreement, except as explicitly modified by this
Agreement.
6.
Full
Settlement; Resolution of Disputes
.
(a)
Except
where Executive's employment is terminated for Cause, the Company's obligation
to make any payments provided for in this Agreement and otherwise to perform
its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have
against Executive or others. In no event shall Executive be obligated to
seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not Executive obtains other employment.
Subject to Executive's agreement to repay certain fees and expenses as provided
below in Section 6(b), the Company shall pay promptly as incurred, to the
full
extent permitted by law, all legal fees and expenses that Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by the Company, Executive or others of the validity or
enforceability of, or the existence of liability under, any provision of
this
Agreement or any guarantee of performance thereof (including as a result
of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at one hundred
twenty percent (120%) of the Federal Mid-Term Rate under Section 1274(d)
of the
Code.
(b)
If
there
shall be any dispute or contest between the Company and Executive (i) in
the
event of any termination of Executive's employment by the Company, whether
such
termination was for Cause, or (ii) in the event of any termination of employment
by Executive whether Good Reason existed, then the resolution of such dispute
or
contest shall be finally determined by arbitration, which may be initiated
by
either the Company or Executive, pursuant to the Federal Arbitration Act
in
accordance with the rules then in force of the American Arbitration Association.
The arbitration proceedings shall take place in Kansas City, Missouri or
such
other location as the parties in dispute hereafter may agree upon; and such
proceedings will be conducted in the English language and shall be governed
by
the laws of the State of Missouri as such laws are applied to agreements
between
residents of the State entered into and to be performed entirely within the
State. There shall be one arbitrator, as shall be agreed upon by the parties
in
dispute, who shall be an individual skilled in the legal and business aspects
of
the subject matter of this Agreement and of the dispute. In the absence of
such
agreement, each party in dispute shall select one arbitrator and the arbitrators
so selected shall select a third arbitrator. In the event the arbitrators
cannot
agree upon the selection of a third arbitrator, such third arbitrator shall
be
appointed by the American Arbitration Association at the request of any of
the
parties in dispute. The arbitrators shall be individuals skilled in the legal
and business aspects of the subject matter of this Agreement and of the dispute.
The decision rendered by the arbitrator or arbitrators shall be accompanied
by a
written opinion in support thereof. Such decision shall be final and binding
upon the parties in dispute without right of appeal, it being the intent
of the
parties that such decision, and, irrespective of any contrary provision of
the
laws of the State respecting rights of appeal, such decision may not be
appealed. The burden of proving that Executive is not entitled to receive
the
amounts and the benefits contemplated by this Agreement shall be on the Company.
(c)
In
the
event of such an arbitration and provided that Executive shall repay the
following amounts, fees and expenses if the final and binding decision of
the
arbitrator(s) is that Executive's termination was for Cause or that Good
Reason
did not exist for termination of employment by Executive, (i) Great Plains
Energy shall advance to Executive all legal fees and expenses that Executive
may
reasonably incur as a result of any such action, and (ii) if a final and
binding
decision of the arbitrator(s) is not obtained by the six-month anniversary
of
the date the Company or Executive first provided notice to the other party
of
the dispute or contest (the "Dispute Notice"), Great Plains Energy shall
pay all
amounts, and provide all benefits, to Executive and/or Executive's family
or
other beneficiaries, as the case may be, that Great Plains Energy would be
required to pay or provide pursuant to Sections 3(a) or 3(c) if such termination
were by the Company without Cause or by Executive with Good Reason. If the
final
and binding decision of the arbitrator(s) is that Executive's termination
was
not for Cause or that Good Reason did exist for such termination by Executive
then, (I) if such decision is before the six-month anniversary of the receipt
of
the Dispute Notice, Executive shall receive all payments and benefits
contemplated by this Agreement, plus interest on any delayed payment or benefit
at one hundred twenty percent (120%) of the Federal Mid-Term Rate under Section
1274(d) of the Code or (II) if such decision is after the six-month anniversary
of the receipt of the Dispute Notice such that all payments and benefits
contemplated by this Agreement have already been paid, Executive shall receive
interest (calculated in the same manner as set forth above) for the six-month
period the payments and provision of benefits were delayed. In no event may
the
arbitrator or arbitrators award any other damages or award of any kind.
Notwithstanding the foregoing, nothing in this Agreement is intended to,
or
shall be construed as, affecting the rights and obligations of Executive
and the
Company to submit any dispute (other than such disputes contemplated by,
and
resolved in accordance with Sections 6(b) and 6(c)) to the appropriate dispute
resolution process in accordance with any applicable dispute resolution plan
intended to provide a procedural mechanism, whether exclusive or non-exclusive,
for the resolution of any and all disputes between the Company and its present
or former employees.
7.
Restrictive
Covenants
.
(a)
Nondisclosure
of Confidential Information
.
Executive shall hold in confidence for the benefit of the Company all
Confidential Information. Executive agrees that Executive will not disclose
any
Confidential Information to any person or entity other than the Company and
those designated by it, either during or subsequent to Executive's employment
by
the Company, nor will Executive use any Confidential Information, except
(i) in
the regular course of Executive's employment by the Company, without the
prior
written consent of the Company or (ii) as may otherwise be required by law
or
legal process.
(b)
Actions
Upon Termination; Assistance with Claims
.
Upon
Executive's employment termination for whatever reason, Executive shall neither
take or copy nor allow a third party to take or copy, and shall deliver to
the
Company all property of the Company, including, but not limited to, all
Confidential Information regardless of the medium (i.e., hard copy, computer
disk, CD ROM) on which the information is contained. During and after
Executive's employment by the Company, Executive will provide reasonable
assistance to the Company in the defense of any claims or potential claims
that
may be made or threatened to be made against the Company in any action, suit,
or
proceeding, whether civil, criminal, administrative, or investigative
("Proceeding") and will provide reasonable assistance to the Company in the
prosecution of any claims that may be made by the Company in any Proceeding,
to
the extent that such claims may relate to Executive's employment by the Company.
For the avoidance of doubt, reasonable assistance would not include Executive
being required to provide information that could reasonably result in criminal
or civil charges or penalties being assessed or imposed against Executive
in his
individual capacity. Executive shall, unless precluded by law, promptly inform
the Company if Executive is asked to participate (or otherwise become involved)
in any Proceeding involving such claims or potential claims. Executive also
shall, unless precluded by law, promptly inform the Company if Executive
is
asked to assist in any investigation (whether governmental or private) of
the
Company (or its actions), regardless of whether a lawsuit has then been filed
against the Company with respect to such investigation. The Company shall
reimburse Executive for all of Executive's reasonable out-of-pocket expenses
associated with such assistance, including travel expenses and any attorneys'
fees and shall pay a reasonable per diem fee (equal to 1/250th of Executive's
annual salary rate at Executive's Date of Termination) for Executive's
services.
(c)
Noncompetition
.
Executive agrees that so long as Executive is employed by the Company and
for a
period of six (6) months thereafter, Executive shall not, without the prior
written consent of the Company, which in the case of termination will not
be
unreasonably withheld, participate or engage in, directly or indirectly (as
an
owner, partner, employee, officer, director, independent contractor, consultant,
advisor or in any other capacity calling for the rendition of services, advice,
or acts of management, operation or control), any business that, during
Executive's employment, is in direct competition with the business conducted
by
the Company or any of its affiliates within the United States (hereinafter,
the
"Geographic Area"); provided, however, that the foregoing shall not be construed
to preclude Executive from making any investments in any securities to the
extent such securities are traded on a national securities exchange or
over-the-counter market and such investment does not exceed five percent
(5%) of
the issued and outstanding voting securities of such issuer.
(d)
Nonsolicitation
of Employees
.
During
Executive's employment and for a period of six (6) months thereafter, Executive
shall not, without the consent of the Company, directly or indirectly solicit
any current employee of the Company or any of its affiliates, to leave such
employment and join or become affiliated with any business that is in direct
competition with the business conducted by the Company or any of its affiliates
within the Geographic Area.
(e)
Mutual
Non-disparagement
.
Executive shall refrain from making any statements about the Company or its
officers or directors that would disparage, or reflect unfavorably upon the
image or reputation of the Company or any such officer or director. The Company
shall refrain from making any statements about Executive that would disparage,
or reflect unfavorably upon the image or reputation of, Executive.
(f)
Irreparable
Harm
.
Executive acknowledges that: (i) Executive's compliance with this Section
7 is
necessary to preserve and protect the Confidential Information, and the goodwill
of the Company and its affiliates as going concerns; (ii) any failure by
Executive to comply with the provisions of this Section may result in
irreparable and continuing injury for which there may be no adequate remedy
at
law; and (iii) in the event that Executive should fail to comply with the
terms
and conditions of this Section, the Company shall be entitled, in addition
to
such other relief as may be proper, to seek all types of equitable relief
(including, but not limited to, the issuance of an injunction and/or temporary
restraining order) as may be necessary to cause Executive to comply with
this
Section, to restore to the Company its property, and to make the Company
whole.
(g)
Unenforceability
.
If any
provision(s) of this Section 7 shall be found invalid or unenforceable, in
whole
or in part, then such provision(s) shall be deemed to be modified or restricted
to the extent and in the manner necessary to render the same valid and
enforceable, or shall be deemed excised from this Agreement, as the case
may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision(s) had been originally
incorporated herein as so modified or restricted, or as if such provision(s)
had
not been originally incorporated herein, as the case may be.
8.
Successors
.
(a)
This
Agreement is personal to Executive and shall not be assignable by Executive
without the prior written consent of the Company otherwise than by will or
the
laws of descent and distribution. If Executive should die while any amounts
would still be payable to Executive hereunder if she or he had continued
to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's heirs or
representatives or, if there be no such designee, to Executive's
estate.
(b)
This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns.
(c)
The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform it if no such succession had taken place. As used in
this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to
perform this Agreement by operation of law, or otherwise.
9.
Prohibition
of Payments by Regulatory Agencies
.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be obligated to make any payment to Executive under this
Agreement if the payment would violate any rule, regulation or order of any
regulatory agency having jurisdiction over the Company or any of its
subsidiaries; provided, however, that the Company covenants to Executive
that it
will take all reasonable steps to obtain any regulatory agency approvals
that
may be required in order to make payments to Executive as provided herein.
10.
Miscellaneous
.
(a)
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Missouri without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement executed by the parties hereto. This Agreement supersedes
all previous agreements relating to the subject matter of this Agreement,
written or oral, between the parties hereto and contains the entire
understanding of the parties hereto including, but not limited to that Prior
Severance Agreement dated May 25, 2005, between the Board and
Executive.
(b)
All
notices and other communications hereunder shall be in writing and shall
be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If
to the Company:
|
|
If
to Executive:
|
|
|
|
Great
Plains Energy Incorporated
|
|
John
Marshall
|
Attn:
General Counsel
|
|
Great
Plains Energy Incorporated
|
1201
Walnut
|
|
1201
Walnut
|
Kansas
City, Missouri
|
|
Kansas
City, Missouri
|
64106-2124
|
|
64106-2124
|
|
|
|
or
to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(c)
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect.
(d)
This
Agreement is intended to meet the requirements of Section 409A of the Code
and
may be administered in a manner that is intended to meet those requirements
and
shall be construed and interpreted in accordance with such intent. To the
extent
that any payment or benefit provided hereunder is subject to Section 409A
of the
Code, such payment or benefit shall be provided in a manner that will meet
the
requirements of Section 409A of the Code, including regulations or other
guidance issued with respect thereto, such that the payment or benefit shall
not
be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail
to
satisfy Section 409A of the Code shall be amended (in a manner that as closely
as practicable achieves the original intent of this Agreement) to comply
with
Section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under Section
409A of the Code. In the event additional regulations or other guidance is
issued under Section 409A of the Code or a court of competent jurisdiction
provides additional authority concerning the application of Section 409A
with
respect to the payments described in Section 4 of the Agreement, then the
provisions of such Section shall be amended to permit such payments to be
made
at the earliest time permitted under such additional regulations, guidance
or
authority that is practicable and achieves the original intent of this
Agreement.
(e)
The
Company may withhold from any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(f)
Executive's
or the Company's failure to insist upon strict compliance with any provision
of
this Agreement or the failure to assert any right Executive or the Company
may
have hereunder, including, without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver
of such
provision or right or any other provision or right of this
Agreement.
(g)
Executive
and Great Plains Energy acknowledge that, except as may otherwise be provided
under any other written agreement between Executive and the Company, the
employment of Executive by the Company is "at will" and, may be terminated
by
either Executive or the Company at any time. Except as provided in Section
3(c),
if prior to the Effective Date, Executive's employment with the Company
terminates, then Executive shall have no further rights under this
Agreement.
(h)
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which shall constitute one agreement
that is
binding upon each of the parties hereto, notwithstanding that all parties
are
not signatories to the same counterpart.
IN
WITNESS WHEREOF, each of Great Plains Energy and Executives has executed
this
Agreement as of the day and year first above written.
|
|
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
|
|
|
EXECUTIVE:
|
|
|
|
By:
|
|
|
Name:
|
|
John
Marshall
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
10.1.d
CHANGE
IN CONTROL SEVERANCE AGREEMENT
THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT is entered into as of the ___ day of
_________, 2006, among Great Plains Energy Incorporated, a Missouri corporation,
("Great Plains Energy"), Strategic Energy, L.L.C., a Delaware limited liability
company, (the "Company") and Shahid Malik ("Executive").
WITNESSETH:
WHEREAS,
Executive is a valued employee of the Company; and
WHEREAS,
Great Plains Energy and the Company believes that it is in the best interests
of
the Company and its members (i) to provide assurance that the Company will
have
the continued service of Executive notwithstanding the possibility, threat
or
occurrence of a Change in Control (as defined in Section 1) of any Parent
Company (as defined in Section 1) or the Company, (ii) to diminish the
distraction to Executive that may arise by virtue of the personal uncertainties
and risks created by such a threatened or pending Change in Control, and (iii)
to encourage Executive's full attention and dedication to the Company currently
and in the event of a threatened or pending Change in Control; and
WHEREAS,
Great Plains Energy, the Company and Executive previously entered into a
severance agreement dated November 10, 2004, the "Prior Severance Agreement"
whereby the Company agreed to provide Executive with certain compensation and
perquisites following Executive's termination or constructive termination of
employment with the Company in connection with a change in control or potential
change in control of Great Plains Energy or the Company; and
WHEREAS,
Great Plains Energy, the Company and Executive agree that, in connection with
both parties entering into this Agreement, the Prior Severance Agreement shall
be terminated, rendered null and void, and all duties and rights conferred
upon
the parties thereto extinguished, and that such Prior Severance Agreement is
replaced in its entirety with the benefits, duties, terms and conditions set
forth in this Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein, the parties hereto agree as follows:
1.
Certain
Definitions
.
As used
in this Agreement, unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following
meanings:
(a)
Agreement
.
"Agreement" means this Change in Control Severance Agreement as amended from
time to time.
(b)
Beneficial
Owner
.
"Beneficial Owner" shall have the same meaning as set forth in Rule 13d-3 of
the
Exchange Act.
(c)
Board
.
"Board"
means the Board of Directors of Great Plains Energy.
(d)
Cause
.
"Cause"
means (i) the material misappropriation of any of the Company's or any Parent
Company's funds, Confidential Information or property; (ii) the conviction
of,
or the entering of a guilty plea or plea of no contest with respect to, a
felony, or the equivalent thereof; (iii) commission of act of willful damage,
willful misrepresentation, willful dishonesty, or other willful conduct that
can
reasonably be expected to have a material adverse effect on the business,
reputation, or financial situation of the Company or any Parent Company; or
(iv)
gross negligence or willful misconduct in performance of Executive's duties;
provided, however, "cause" shall not exist under clause (iv), above, with
respect to an act or failure to act unless (A) Executive has been provided
written notice describing in sufficient detail the acts or failure to act giving
rise to the Company's assertion of such gross negligence or misconduct, (B)
been
provided a reasonable period to remedy any such occurrence and (C) failed to
sufficiently remedy the occurrence.
(e)
Change
in Control
.
"Change
in Control" means the occurrence of one of the following events, whether in
a
single transaction or a series of related transactions:
(1)
With
respect to the Company:
(i)
any
Person is or becomes the Beneficial Owner, directly or indirectly, of membership
interests of the Company (not including in the membership interests beneficially
owned by such Person any
membership
interests
acquired
directly from the Company or its affiliates other than in connection with the
acquisition by the Company or its affiliates of a business) representing 50%
or
more of the combined voting power of the Company's then outstanding membership
interests; or
(ii)
the
consummation of a merger, consolidation, reorganization or similar corporate
transaction of the Company, whether or not the Company is the surviving entity
in such transaction, other than (A) a merger, consolidation, or reorganization
that would result in the voting interests of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting interests of the surviving entity or any parent
thereof), at least 50% of the combined voting power of the voting interests
of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger, consolidation or reorganization, or (B) a merger,
consolidation or reorganization effected to implement a recapitalization of
the
Company (or similar transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of interests of the Company (not including in
the
interests Beneficially Owned by such Person any interests acquired directly
from
the Company or its affiliates other than in connection with the acquisition
by
the Company or its affiliates of a business) representing 50% or more of the
then combined voting power of the Company's then outstanding membership
interests; or
(iii)
the
members of the Company approve a plan of complete liquidation, a dissolution
of
the Company or an agreement for the sale or disposition by the Company of all
or
substantially all the Company's assets.
Notwithstanding
the foregoing, no "Change in Control" shall be deemed to have occurred with
respect to the Company if there is consummated any transaction or series of
integrated transactions immediately following which the holders of the
membership interests of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of
the
Company immediately following such transaction or series of
transactions.
(2)
With
respect to Great Plains Energy:
(i)
any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of Great Plains Energy (not including in the securities beneficially owned
by
such Person any securities acquired directly from Great Plains Energy or its
affiliates other than in connection with the acquisition by Great Plains Energy
or its affiliates of a business) representing 35% or more of either the then
outstanding shares of common stock of Great Plains Energy or the combined voting
power of Great Plains Energy's then outstanding securities; or
(ii)
the
following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of Great Plains Energy, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or election
by the Board or nomination for election by Great Plains Energy's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved; or
(iii)
the
consummation of a merger, consolidation, reorganization or similar corporate
transaction of Great Plains Energy, whether or not Great Plains Energy is the
surviving corporation in such transaction, other than (A) a merger,
consolidation, or reorganization that would result in the voting securities
of
Great Plains Energy outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 60% of the combined voting power
of the voting securities of Great Plains Energy or such surviving entity or
any
parent thereof outstanding immediately after such merger, consolidation or
reorganization, or (B) a merger, consolidation or reorganization effected to
implement a recapitalization of Great Plains Energy (or similar transaction)
in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of
securities of Great Plains Energy (not including in the securities Beneficially
Owned by such Person any securities acquired directly from Great Plains Energy
or its affiliates other than in connection with the acquisition by Great Plains
Energy or its affiliates of a business) representing 20% or more of either
the
then outstanding shares of common stock of Great Plains Energy or the combined
voting power of Great Plains Energy's then outstanding securities; or
(iv)
the
occurrence of, or the stockholders of Great Plains Energy approve a plan of,
a
complete liquidation or dissolution of Great Plains Energy or an agreement
for
the sale or disposition by Great Plains Energy of all or substantially all
of
Great Plains Energy's assets, other than a sale or disposition by Great Plains
Energy of all or substantially all of Great Plains Energy 's assets to an
entity, at least 60% of the combined voting power of the voting securities
of
which are owned by Persons in substantially the same proportions as their
ownership of Great Plains Energy Company immediately prior to such
sale.
Notwithstanding
the foregoing, no "Change in Control" shall be deemed to have occurred if there
is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of Great Plains Energy
immediately prior to such transaction or series of transactions continue to
have
substantially the same proportionate ownership in an entity which owns all
or
substantially all of the assets of Great Plains Energy immediately following
such transaction or series of transactions.
(f)
Change
in Control Period
.
"Change
in Control Period" means the period commencing on the date hereof and ending
on
the second anniversary of such date; provided, however, that commencing on
a
date one year after the date hereof, and on each annual anniversary of such
date
(such date and each annual anniversary thereof being hereinafter referred to
as
the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at least
60
days prior to the Renewal Date the Company or Great Plains Energy shall give
notice to Executive that the Change in Control Period shall not be so extended;
provided, further that during any period of time when the Board or the governing
body of the Company has knowledge that any person has taken steps reasonably
calculated to effect a Change in Control, the Change in Control Period shall
automatically be extended (and may not terminate) until, in the opinion of
the
Board, such person has abandoned or terminated its efforts to effect a Change
in
Control.
(g)
Company
.
"Company" means Strategic Energy, L.L.C., a Delaware limited liability company,
and its successors and assigns.
(h)
Confidential
Information
.
"Confidential Information" means (1) any and all trade secrets concerning the
business and affairs of
the
Company or any Parent Company
,
product
specifications, data, know-how, formulae, algorithms, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
past, current, and planned research and development, current and planned
manufacturing or distribution methods and processes, customer lists, current
and
anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code and source code), computer
software and database technologies, systems, structures, and architectures;
(2)
information concerning the business and affairs of
the
Company or any Parent Company
(which
includes historical financial statements, financial projections and budgets,
historical and projected sales, capital spending budgets and plans, the names
and backgrounds of key personnel, personnel training and techniques and
materials); and (3) notes, analysis, compilations, studies, summaries, and
other
material prepared by or for
the
Company or any Parent Company
containing or based, in whole or in part, or any information included in the
foregoing, whether reduced to writing or not and which has not become publicly
known or made generally available through no wrongful act of Executive or others
who were under confidentiality obligations as to the item or items
involved.
(i)
Date
of Termination
.
"Date
of Termination" means (i) if Executive's employment is terminated by the Company
or any Parent Company for Cause, or by Executive for Good Reason, the date
of
receipt of the Notice of Termination or any later date permitted to be specified
therein, as the case may be, (ii) if Executive's employment is terminated by
the
Company or any Parent Company other than for Cause or Disability, the Date
of
Termination shall be the date on which the Company notifies Executive of such
termination, (iii) if Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of Executive
or
the Disability Effective Date (as defined in Section 2(a)), as the case may
be
and (iv) if Executive's employment is terminated by Executive for other than
Good Reason, the Date of Termination shall be the date on which Executive
notifies the Company in writing of such termination or any later date permitted
to be specified therein, as the case may be.
(j)
Disability
or Disabled
.
The
term "Disability" or "Disabled" shall mean an individual (i) is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be
expected to last for a continuous period of not less than twelve (12) months
or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than 3 months under an accident
or
health plan sponsored by the Company or any Parent Company.
(k)
Effective
Date
.
"Effective Date" means the first date on which a Change in Control occurs during
the Change in Control Period.
(l)
Exchange
Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time.
(m)
Good
Reason
.
"Good
Reason" means, without Executive's written consent any of the
following:
(i)
Any
material and adverse reduction or material and adverse diminution in Executive's
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities held, exercised or assigned at any time
during the 90-day period immediately preceding the commencement of the Pre-CIC
Protected Period;
(ii)
Any
reduction in Executive's annual base salary as in effect immediately preceding
the commencement of the Pre-CIC Protected Period or as the same may be increased
from time to time;
(iii)
Any
reduction in benefits received by Executive under Company Plans (as defined
below) to less than the most favorable benefits provided to Executive by the
Company under Company Plans at any time during the 90-day period immediately
preceding the commencement of the Pre-CIC Protected Period. "Company Plans"
means, with respect to either the Company or any Parent Company, (1) all
incentive, savings and retirement plans, practices, policies and programs
sponsored or maintained by the Company, any Parent Company, or any affiliate
thereof, (2) all welfare benefit plans, practices, policies and programs
(including medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) sponsored or maintained by the Company, any Parent Company, or
any
affiliate thereof, (3) expense reimbursement by the Company, any Parent Company,
or any affiliate thereof for all reasonable out-of-pocket employment expenses
incurred by Executive, (4) the provision of fringe benefits, and (5) the
provision of paid vacation time by the Company, any Parent Company, or any
affiliate thereof;
(iv)
Executive
being required by the Company to be based at any office or location that is
more
than 35 miles from the location where Executive was employed immediately
preceding the commencement of the Pre-CIC Protected Period; or
(v)
Any
failure by the Company to require any successor (whether direct or indirect,
by
purchase, merger, consolidation or otherwise) to all or substantially all of
the
business and/or assets of the Company or Great Plains Energy to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had
taken
place, or any failure by any such successor after ten (10) days notice from
Executive to so perform under this Agreement.
Provided,
however, notwithstanding the occurrence of any of the events set forth above
in
this Section 1(m), Good Reason shall not include for the purpose of this
definition (1) an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by Executive, or (2) if occurring within the Pre-CIC Protected
Period, any reduction in Executive's base annual salary or reduction in benefits
received by Executive where such reduction is in connection with a company-wide
reduction in salaries or benefits.
(n)
Notice
of Termination
.
"Notice
of Termination" means a written notice of termination which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) if the Date of Termination is other than the date of
receipt of such notice, specifies the termination date (which date shall be
not
more than fifteen (15) days after the giving of such notice), unless another
date is mutually agreed upon between Executive and the Company.
(o)
Parent
Company
.
"Parent
Company" means Great Plains Energy or any other company which is a direct or
indirect parent company of the Company.
(p)
Person
.
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (1)
Great
Plains Energy or any Parent Company
,
(2) a
trustee or other fiduciary holding securities under an employee benefit plan
of
Great
Plains Energy
or
any of
its subsidiaries, (3) an underwriter temporarily holding securities pursuant
to
an offering of such securities, or (4) a corporation owned, directly, or
indirectly, by the stockholders of
Great
Plains Energy or any Parent Company
in
substantially the same proportions as their ownership of stock of
Great
Plains Energy or any Parent Company
.
(q)
Post-Effective
Period
.
"Post-Effective Period" means the period commencing on the Effective Date and
ending on the earlier of (i) the second anniversary of such date or (ii)
Executive's 70
th
birthday.
(r)
Pre-CIC
Protected Period
.
"Pre-CIC Protected Period" means the period that is within the Change in Control
Period and begins when (A) the Company or any Parent Company enters into an
agreement, the consummation of which would result in the occurrence of a Change
in Control; (B) the Company, any Parent Company or any Person publicly announces
an intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control; (C) any Person becomes the Beneficial Owner,
directly or indirectly, of voting securities of the Company or any Parent
Company representing 10% or more of the combined voting power of the Company's
or any Parent Company's then outstanding voting securities; or (D) the Board,
the members or the stockholders of the Company or any Parent Company adopts
a
resolution approving any of the foregoing or approving any Change in Control,
and ends upon the date the Change in Control transaction is either consummated,
abandoned or terminated (for this purpose, the Board shall have the sole and
absolute discretion to determine that a proposed transaction has been
abandoned).
2.
Termination
of Employment During the Post-Effective Period
.
(a)
Death
or Disability
.
Executive's employment shall terminate automatically upon Executive's death
or,
with written notice by the Company of its intention to terminate Executive's
employment, upon Executive's Disability. In such event, Executive's employment
with the Company shall terminate effective on the 90th day after receipt of
such
notice by Executive (the "Disability Effective Date"), provided that within
the
90 days after such receipt Executive shall not have returned to full-time
performance of Executive's duties.
(b)
Cause
.
The
Company may terminate Executive's employment at any time for Cause or without
Cause. Notwithstanding the foregoing, Executive shall not be deemed to have
been
terminated for Cause without (i) reasonable notice to Executive setting forth
the reasons for the Company's intention to terminate for Cause, (ii) an
opportunity for Executive, together with his counsel, to be heard before the
Board within fifteen (15) days of such notice, and (iii) delivery to Executive
of a Notice of Termination from the Board finding that, in the good faith
opinion of the Board, that Executive was guilty of conduct set forth in Section
1(d), and specifying the particulars thereof in reasonable detail.
(c)
Executive
Resignation
.
Executive's employment may be terminated at any time by Executive for Good
Reason or without Good Reason.
(d)
Notice
of Termination
.
Any
termination by the Company for Cause, or by Executive for Good Reason, shall
be
communicated by Notice of Termination to the other party hereto. The failure
by
Executive or the Company to set forth in the Notice of Termination any fact
or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive
or
the Company from asserting such fact or circumstance in enforcing Executive's
or
the Company's rights hereunder.
3.
Obligations
of the Company Upon Termination of Employment
(a)
Post-Effective
Period Terminations Other Than for Cause, Death or Disability; Post-Effective
Period Executive Resignation
.
If,
during the Post-Effective Period, the Company shall terminate Executive's
employment other than (I) for Cause or (II) on account of Executive's death
or
Disability, or Executive shall terminate employment for Good Reason, then all
shares of restricted stock granted under the Company's Long-Term Incentive
Plan
(the "LTIP") shall become fully vested and the Company shall pay to Executive,
in a lump-sum cash payment made within 30 days following the Date of
Termination, as compensation for services rendered to the Company, an amount
equal to the aggregate of the following amounts set forth below in Sections
3(a)(i) and (ii), and (iii), and provide to Executive the benefits provided
in
Section 3(a)(iv).
(i)
A
cash
amount equal to the sum of (A) Executive's full annual base salary from the
Company and its affiliated companies through the Date of Termination, to the
extent not theretofore paid, (B) a bonus in an amount at least equal to the
average annualized incentive awards paid or payable pursuant to any
Company-sponsored annual incentive compensation plan, including by reason of
any
deferral under a Company-sponsored deferred compensation program, to Executive
by the Company and its affiliated companies during the five fiscal years of
the
Company (or if Executive shall have performed services for the Company and
its
affiliated companies for four fiscal years or less, the years during which
Executive performed services) immediately preceding the fiscal year in which
the
Change in Control (or the Date of Termination if benefits are payable pursuant
to Section 3(c)) occurs, multiplied by a fraction, the numerator of which is
the
number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination and the denominator of which is 365 or 366,
as
applicable, to the extent not theretofore paid, (C) any amount credited to
Executive under any deferred contribution nonqualified deferred compensation
plan sponsored by any Parent Company or the Company and any other compensation
previously deferred by Executive (together with any interest and earnings
thereon), in each case to the extent not theretofore paid, and (D) any accrued
unpaid vacation pay;
(ii)
A
cash
amount equal to the performance bonus Executive would have received under the
LTIP with respect to all outstanding grants and assuming performance at
target;
(iii)
a
cash
amount equal to (A) three (3) times Executive's highest annual base salary
from
the Company and its affiliated companies in effect during the twelve (12)-month
period prior to the Date of Termination, plus (B) three (3) times Executive's
average annualized annual incentive compensation awards, paid, or, but for
a
deferral under a Company-sponsored deferred compensation program, would have
been paid, to Executive by the Company and its affiliated companies during
the
five fiscal years of the Company (or if Executive shall have performed services
for the Company and its affiliated companies for four fiscal years or less,
the
years during which Executive performed services) immediately preceding the
fiscal year in which the Change in Control (or if benefits are payable pursuant
to Section 3(c), the Date of Termination) occurs; provided, however, that in
the
event there are fewer than thirty-six (36) whole months remaining from the
Date
of Termination to the date of Executive's 70th birthday, the amount calculated
in accordance with this Section 3(a)(iii) shall be reduced by multiplying such
amount by a fraction the numerator of which is the number of months, including
a
partial month (with a partial month being expressed as a fraction the numerator
of which is the number of days remaining in such month and the denominator
of
which is the number of days in such month), so remaining and the denominator
of
which is thirty-six (36) months; provided further, that any amount paid pursuant
to this Section 3(a)(iii) shall be paid in lieu of any other amount of severance
pay to be received by Executive upon termination of employment of Executive
under any severance plan, policy or arrangement of the Company;
(iv)
for
a
period of three (3) years commencing on the Date of Termination, the Company
or
the Parent Company shall provide Executive and Executive's dependents with
medical, accident, disability and life insurance coverage upon substantially
the
same terms and otherwise substantially to the same extent as such coverage
was
being provided to Executive and Executive's dependent(s) immediately prior
to
the Date of Termination. At the Company's or Parent Company's election, such
continuation coverage may be provided by (A) continuing such coverage under
the
Company's or Parent Company's existing welfare benefit plans, (B) with respect
to any group health care plan and for the applicable period permitted under
Code
Section 4980B(f)(2), Executive and/or Executive's dependent(s) being deemed
to
have elected to receive such coverage pursuant to a continuation election under
Code Section 4980B with the Company being obligated to pay for the entire
portion of the applicable COBRA premiums, (C) the Company purchasing an
individual policy (to the extent such a policy is reasonably available in the
marketplace) for Executive and/or Executive's dependent(s) providing
substantially similar coverage as offered under the Company's or Parent
Company's plan, or (D) any combination of the forgoing methods under (A), (B)
and (C) of this paragraph. Notwithstanding the foregoing sentence, if any of
the
medical, accident, disability or life insurance plans then in effect generally
with respect to other peer executives of the Company and its affiliated
companies would be more favorable to Executive, such plan coverage shall be
substituted for the analogous plan coverage provided to Executive immediately
prior to the Date of Termination, and the Company and Executive shall share
the
costs of such plan coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. The obligation of the Company
to
continue coverage of Executive and Executive's dependent(s) under such plans
and
in accordance with this paragraph shall cease at such time as Executive and
Executive's dependent(s) obtain comparable coverage under another plan,
including a plan maintained by a new employer. With respect to any Company
or
Parent Company group health care plan, any continuation coverage provided under
this paragraph shall be considered as alternative continuation coverage to
any
rights Executive or Executive's dependent(s) may have with respect to any other
group health plan continuation coverage required by Code Section 4980B or any
applicable state statute mandating health insurance continuation coverage.
Except to the extent required by law, upon termination of the coverage provided
for under this Section 3(a)(iv), Executive and/or Executive's dependent(s)
shall
have no further right to continuation of coverage under any group health plan
maintained by the Company or its affiliated companies.
(b)
Termination
for Cause, Disability, Death or Other than for Good Reason
.
If at
any time during the Change in Control Period, Executive's employment shall
be
terminated for Cause, Executive's employment is terminated due to Executive's
death or Disability, or if Executive terminates employment other than for Good
Reason, this Agreement shall terminate without further obligation of the Company
to Executive other than (i) the obligation to pay to Executive his or her base
salary through the Date of Termination, any incentive bonus and other
compensation, payments and benefits for the most recently completed fiscal
year
and any accrued vacation pay, to the extent theretofore unpaid, which amounts
shall be paid to Executive in a lump sum in cash within thirty (30) days of
the
Date of Termination, and (ii) the obligation to pay to Executive all amounts
or
benefits to which Executive is entitled for the period prior to the Date of
Termination under any plan, program, policy, practice, contract or agreement
of
the Company (excluding amounts otherwise required to be paid under this Section
3(b)), at the time such amounts or benefits are due.
(c)
Certain
Terminations during Pre-CIC Protected Period.
If,
during the Pre-CIC Protected Period, Executive’s employment is terminated by the
Company other than for Cause or Executive terminates his or her employment
for
Good Reason, then, Executive shall be entitled to receive the same benefits
he
or she would be entitled to receive under Section 3(a) if such termination
of
employment would have occurred during the Post-Effective Period. Any benefits
or
payments to be paid pursuant to this Section 3(c) shall be paid in a lump-sum
payment and, subject to Section 3(d), within thirty (30) days following the
termination of Executive's employment.
(d)
Payments
to Executive Following Termination.
If (i)
Executive is a "specified employee," as defined in Code section
409A(a)(1)(B)(i), and (ii) Executive's employment is terminated, either by
Executive or by the Company, due to any reason other than Executive's death,
then, notwithstanding Sections 3(a) or 3(c) of this Agreement, Executive shall
not receive any payment pursuant to Sections 3(a) or 3(c) until the first
business day after six full months after Executive's Date of
Termination.
4.
Section
280G Gross-Up
.
(a)
Except
as
provided for in Section 4(e) below and notwithstanding any other provision
in
this Agreement to the contrary, in the event it shall be determined that any
payment or distribution by the Company or its affiliated companies to or for
the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or
any
interest or penalties are incurred by Executive with respect to such excise
tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay to
Executive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (except for any income tax under Section 409A of the Code), any interest
and penalties imposed with respect thereto, and Excise Tax imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to
the Excise Tax imposed upon the Payments.
(b)
Subject
to the provisions of Section 4(c), all determinations required to be made under
this Section 4, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent registered
public accounting firm selected by the Company that is not also the Company's
then current accounting firm for annual audit purposes (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
Executive within fifteen (15) business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested
by
the Company. In the event that the Accounting Firm is serving as accountant
or
auditor for the individual, entity or group effecting the Change in Control,
Executive shall appoint another nationally recognized public accounting firm
to
make the determinations required hereunder (which accounting firm shall then
be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as
determined pursuant to this Section 4, shall be paid by the Company to Executive
within five (5) days of the receipt of the Accounting Firm's determination,
but
in no event later than the time set forth in Section 4(f), below. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall
furnish Executive with a written opinion that failure to report the Excise
Tax
on Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result
of
the uncertainty in the application of Section 4999 of the Code at the time
of
the initial determination by the Accounting Firm hereunder, it is possible
that
Gross-Up Payments which will not have been made by the Company should have
been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c)
Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after Executive is informed in writing of such
claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. Executive shall not pay such claim prior
to
the expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Company (or such shorter period ending on
the
date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i)
give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii)
take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii)
cooperate
with the Company in good faith in order effectively to contest such claim;
and
(iv)
permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 4(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
such claim and may, at its sole option, either direct Executive to pay the
tax
claimed and sue for a refund or contest the claim in any permissible manner,
and
Executive shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided further, that if
the
Company desires Executive to pay such claim and sue for a refund, the Company
shall, on Executive's behalf, pay such claim and on an after-tax basis reimburse
Executive from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such payment and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested amount
is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the
Internal Revenue Service or any other taxing authority.
(d)
If,
after
payment by the Company pursuant to Section 4(c), Executive becomes entitled
to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
payment of an amount by the Company pursuant to Section 4(c), a determination
is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such payment shall offset, to the extent thereof,
the
amount of Gross-Up Payment required to be paid.
(e)
Notwithstanding
Executive otherwise being eligible for a Gross-Up Payment under this Section
4,
if, excluding any Gross-Up Payment required to be made pursuant to this Section
4, the "parachute payment" made to Executive does not exceed three times
Executive's "base amount" by more than $1,000, then the payments and benefits
to
be paid or provided under this Agreement will be reduced to the minimum extent
necessary so that no portion of any payment or benefit to Executive, as so
reduced, constitutes an "excess parachute payment." For purposes of this Section
4(e), the terms "excess parachute payment," "parachute payment," and "base
amount" will have the meanings assigned to them by Section 280G of the Code.
The
determination of whether any reduction in such payments or benefits to be
provided under this Agreement is required pursuant to the preceding sentence
will be made at the expense of the Company by the Accounting Firm. The fact
that
Executive's right to payments or benefits may be reduced by reason of the
limitations contained in this Section 4(e) will not of itself limit or otherwise
affect any other rights of Executive other than pursuant to this Agreement.
In
the event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this Section 4(e),
Executive will be entitled to designate the payments and/or benefits to be
so
reduced in order to give effect to this Section. The Company will provide
Executive with all information reasonably requested by Executive to permit
Executive to make such designation. In the event that Executive fails to make
such designation within 10 business days of the date of termination of
Executive's employment, the Company may effect such reduction in any manner
it
deems appropriate.
(f)
Any
Gross-Up Payment made to Executive pursuant to this Section 4 shall be exempt
from Code Section 409A pursuant to the short-term deferral exception to Code
Section 409A. Absent further guidance from the United States Treasury
Department, the Internal Revenue Service or any judicial authority relating
to
the application of Section 409A to Section 280G Gross-Up Payments, Gross-Up
Payments pursuant to this Section 4 shall be made as follows:
(i)
With
respect to any Gross-Up Payment that can be reasonably calculated as of the
time
of a Change in Control or shortly thereafter, such Gross-Up Payment shall be
made to Executive no later than March 15th of the calendar year following the
year in which the Change in Control occurs;
(ii)
With
respect to any Gross-Up Payment that results from Executive becoming eligible
for benefits under this Agreement upon Executive's termination of employment,
such Gross-Up Payment shall be made to Executive no later than March 15th of
the
calendar year following the year in which the earlier of (A) the event giving
rise to Executive's Good Reason occurs or (B) Executive's termination of
employment; and
(iii)
With
respect to any Gross-Up Payment that is required to be made to Executive
pursuant to Section 4(c), such Gross-Up Payment shall be made to Executive
no
later than March 15th of the calendar year following the year in which the
alleged obligation of Executive, as reflected by Executive's receipt of a claim
by the Internal Revenue Service, is received by Executive.
5.
Non-exclusivity
of Rights
.
Nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any Parent Company and for which Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with the Company or any Parent Company. Amounts that
are
vested benefits or that Executive is otherwise entitled to receive at or
subsequent to the Date of Termination under any plan, policy, practice or
program of or any contract or agreement with the Company shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
6.
Full
Settlement; Resolution of Disputes
.
(a)
Except
where Executive's employment is terminated for Cause, the Company's obligation
to make any payments provided for in this Agreement and otherwise to perform
its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Executive or others. In no event shall Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not Executive obtains other employment.
Subject to Executive's agreement to repay certain fees and expenses as provided
below in Section 6(c), the Company shall pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses that Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by the Company, Executive or others of the validity or
enforceability of, or the existence of liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at one hundred
twenty percent (120%) of the Federal Mid-Term Rate under Section 1274(d) of
the
Code.
(b)
If
there
shall be any dispute or contest between the Company and Executive (i) in the
event of any termination of Executive's employment by the Company, whether
such
termination was for Cause, or (ii) in the event of any termination of employment
by Executive whether Good Reason existed, then the resolution of such dispute
or
contest shall be finally determined by arbitration, which may be initiated
by
either the Company or Executive, pursuant to the Federal Arbitration Act in
accordance with the rules then in force of the American Arbitration Association.
The arbitration proceedings shall take place in Pittsburgh, Pennsylvania or
such
other location as the parties in dispute hereafter may agree upon; and such
proceedings will be conducted in the English language and shall be governed
by
the laws of the State of Pennsylvania as such laws are applied to agreements
between residents of the State entered into and to be performed entirely within
the State. There shall be one arbitrator, as shall be agreed upon by the parties
in dispute, who shall be an individual skilled in the legal and business aspects
of the subject matter of this Agreement and of the dispute. In the absence
of
such agreement, each party in dispute shall select one arbitrator and the
arbitrators so selected shall select a third arbitrator. In the event the
arbitrators cannot agree upon the selection of a third arbitrator, such third
arbitrator shall be appointed by the American Arbitration Association at the
request of any of the parties in dispute. The arbitrators shall be individuals
skilled in the legal and business aspects of the subject matter of this
Agreement and of the dispute. The decision rendered by the arbitrator or
arbitrators shall be accompanied by a written opinion in support thereof. Such
decision shall be final and binding upon the parties in dispute without right
of
appeal, it being the intent of the parties that such decision, and, irrespective
of any contrary provision of the laws of the State respecting rights of appeal,
such decision may not be appealed. The burden of proving that Executive is
not
entitled to receive the amounts and the benefits contemplated by this Agreement
shall be on the Company.
(c)
In
the
event of such an arbitration and provided that Executive shall repay the
following amounts, fees and expenses if the final and binding decision of the
arbitrator(s) is that Executive's termination was for Cause or that Good Reason
did not exist for termination of employment by Executive, (i) the Company shall
advance to Executive all legal fees and expenses that Executive may reasonably
incur as a result of any such action, and (ii) if a final and binding decision
of the arbitrator(s) is not obtained by the six-month anniversary of the date
the Company or Executive first provided notice to the other party of the dispute
or contest (the "Dispute Notice"), the Company shall pay all amounts, and
provide all benefits, to Executive and/or Executive's family or other
beneficiaries, as the case may be, that the Company would be required to pay
or
provide pursuant to Sections 3(a) or 3(c) if such termination were by the
Company without Cause or by Executive with Good Reason.
If
the
final and binding decision of the arbitrator(s) is that Executive's termination
was not for Cause or that Good Reason did exist for such termination by
Executive then, (I) if such decision is before the six-month anniversary of
the
receipt of the Dispute Notice, Executive shall receive all payments and benefits
contemplated by this Agreement, plus interest on any delayed payment or benefit
at one hundred twenty percent (120%) of the Federal Mid-Term Rate under Section
1274(d) of the Code
or (II)
if such decision is after the six-month anniversary of the receipt of the
Dispute Notice such that all payments and benefits contemplated by this
Agreement have already been paid, Executive shall receive interest (calculated
in the same manner as set forth above) for the six-month period the payments
and
provision of benefits were delayed. In no event may the arbitrator or
arbitrators award any other damages or award of any kind. Notwithstanding the
foregoing, nothing in this Agreement is intended to, or shall be construed
as,
affecting the rights and obligations of Executive and the Company to submit
any
dispute (other than such disputes contemplated by, and resolved in accordance
with Sections 6(b) and 6(c)) to the appropriate dispute resolution process
in
accordance with any applicable dispute resolution plan intended to provide
a
procedural mechanism, whether exclusive or non-exclusive, for the resolution
of
any and all disputes between the Company and its present or former
employees.
7.
Restrictive
Covenants
.
(a)
Nondisclosure
of Confidential Information
.
Executive shall hold in confidence for the benefit of the Company and any Parent
Company all Confidential Information. Executive will not disclose any
Confidential Information to any person or entity other than the Company or
any
Parent Company and those designated by them, either during or subsequent to
Executive's employment by the Company, nor will Executive use any Confidential
Information, except (i) in the regular course of Executive's employment by
the
Company, without the prior written consent of the Company or any Parent Company
or (ii) as may otherwise be required by law or legal process.
(b)
Actions
Upon Termination; Assistance with Claims
.
Upon
Executive's employment termination for whatever reason, Executive shall neither
take or copy nor allow a third party to take or copy, and shall deliver to
the
Company all property of the Company and any Parent Company, including, but
not
limited to, all Confidential Information regardless of the medium (i.e., hard
copy, computer disk, CD ROM) on which the information is contained.
During
and after Executive's employment by the Company, Executive will provide
reasonable assistance to the Company and any Parent Company in the defense
of
any claims or potential claims that may be made or threatened to be made against
the Company or any Parent Company in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative ("Proceeding") and will
provide reasonable assistance to the Company and any Parent Company in the
prosecution of any claims that may be made by the Company or any Parent Company
in any Proceeding, to the extent that such claims may relate to Executive's
employment by the Company. For the avoidance of doubt, reasonable assistance
would not include Executive being required to provide information that could
reasonably result in criminal or civil charges or penalties being assessed
or
imposed against Executive in his individual capacity.
Executive
shall, unless precluded by law, promptly inform the Company if Executive is
asked to participate (or otherwise become involved) in any Proceeding involving
such claims or potential claims. Executive shall also, unless precluded by
law,
promptly inform the Company if Executive is asked to assist in any investigation
(whether governmental or private) of the Company or any Parent Company (or
their
actions), regardless of whether a lawsuit has then been filed against the
Company or Parent Company with respect to such investigation. The Company shall
reimburse Executive for all of Executive's reasonable out-of-pocket expenses
associated with such assistance, including travel expenses and any attorneys'
fees and shall pay a reasonable per diem fee (equal to 1/250th of Executive's
annual salary rate at Executive's Date of Termination) for Executive's
services.
(c)
Noncompetition
.
As long
as Executive is employed by the Company and for a period of six (6) months
thereafter, Executive shall not, without the prior written consent of the
Company or any Parent Company, which in the case of termination will not be
unreasonably withheld, participate or engage in, directly or indirectly (as
an
owner, partner, employee, officer, director, independent contractor, consultant,
advisor or in any other capacity calling for the rendition of services, advice,
or acts of management, operation or control), any segment or division of a
business that, during Executive's employment, is in direct competition with
the
business conducted by the Company, any Parent Company or any of their affiliates
within the United States (hereinafter, the "Geographic Area"); provided,
however, that the foregoing shall not be construed to preclude Executive from
making any investments in any securities to the extent such securities are
traded on a national securities exchange or over-the-counter market and such
investment does not exceed five percent (5%) of the issued and outstanding
voting securities of such issuer.
(d)
Nonsolicitation
of Employees
.
During
Executive's employment and for a period of six (6) months thereafter, Executive
shall not, without the consent of the Company or any Parent Company, directly
or
indirectly solicit any current employee of the Company, any Parent Company
or
any of their affiliates to leave such employment and join or become affiliated
with any business that is in direct competition with the business conducted
by
the Company, the Parent Company, or any of their affiliates within the
Geographic Area.
(e)
Mutual
Non-disparagement
.
Executive shall refrain from making any statements about the Company, the Parent
Company, or their officers or directors that would disparage, or reflect
unfavorably upon the image or reputation of the Company, the Parent Company
or
any such officer or director. The Company and the Parent Company shall refrain
from making any statements about Executive that would disparage, or reflect
unfavorably upon the image or reputation of, Executive.
(f)
Irreparable
Harm
.
Executive acknowledges that: (i) Executive's compliance with this Section 7
is
necessary to preserve and protect the Confidential Information, and the goodwill
of the Company, the Parent Company and their affiliates as going concerns;
(ii)
any failure by Executive to comply with the provisions of this Section may
result in irreparable and continuing injury for which there may be no adequate
remedy at law; and (iii) in the event that Executive should fail to comply
with
the terms and conditions of this Section, the Company or any Parent Company
shall be entitled, in addition to such other relief as may be proper, to seek
all types of equitable relief (including, but not limited to, the issuance
of an
injunction and/or temporary restraining order) as may be necessary to cause
Executive to comply with this Section, to restore to the Company or the Parent
Company its property, and to make the Company and the Parent Company
whole.
(g)
Unenforceability
.
If any
provision(s) of this Section 7 shall be found invalid or unenforceable, in
whole
or in part, then such provision(s) shall be deemed to be modified or restricted
to the extent and in the manner necessary to render the same valid and
enforceable, or shall be deemed excised from this Agreement, as the case may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision(s) had been originally
incorporated herein as so modified or restricted, or as if such provision(s)
had
not been originally incorporated herein, as the case may be.
8.
Successors
.
(a)
This
Agreement is personal to Executive and shall not be assignable by Executive
without the prior written consent of the Company otherwise than by will or
the
laws of descent and distribution. If Executive should die while any amounts
would still be payable to Executive hereunder if she or he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's heirs or
representatives or, if there be no such designee, to Executive's
estate.
(b)
This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns.
(c)
The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to
perform this Agreement by operation of law, or otherwise.
9.
Prohibition
of Payments by Regulatory Agencies
.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be obligated to make any payment to Executive under this
Agreement if the payment would violate any rule, regulation or order of any
regulatory agency having jurisdiction over the Company or any of its
subsidiaries; provided, however, that the Company covenants to Executive that
it
will take all reasonable steps to obtain any regulatory agency approvals that
may be required in order to make payments to Executive as provided herein.
10.
Miscellaneous
.
(a)
This
Agreement shall be governed by and construed in accordance with the laws of
the
Commonwealth of Pennsylvania without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof
and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto. This
Agreement supersedes all previous agreements relating to the subject matter
of
this Agreement, written or oral, between the parties hereto and contains the
entire understanding of the parties hereto including, but not limited to that
Prior Severance Agreement dated November 10, 2004, between Great Plains Energy,
the Company and Executive.
(b)
All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If
to the Company:
|
|
If
to Executive:
|
|
|
|
Strategic
Energy L.L.C.
|
|
Shahid
Malik
|
Attn:
General Counsel
|
|
Strategic
Energy L.L.C.
|
Two
Gateway Center
|
|
Two
Gateway Center
|
Pittsburgh,
Pennsylvania
|
|
Pittsburgh,
Pennsylvania
|
15222
|
|
15222
|
|
|
|
or
to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(c)
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect.
(d)
This
Agreement is intended to meet the requirements of Section 409A of the Code
and
may be administered in a manner that is intended to meet those requirements
and
shall be construed and interpreted in accordance with such intent. To the extent
that any payment or benefit provided hereunder is subject to Section 409A of
the
Code, such payment or benefit shall be provided in a manner that will meet
the
requirements of Section 409A of the Code, including regulations or other
guidance issued with respect thereto, such that the payment or benefit shall
not
be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail
to
satisfy Section 409A of the Code shall be amended (in a manner that as closely
as practicable achieves the original intent of this Agreement) to comply with
Section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under Section
409A of the Code. In the event additional regulations or other guidance is
issued under Section 409A of the Code or a court of competent jurisdiction
provides additional authority concerning the application of Section 409A with
respect to the payments described in Section 4 of the Agreement, then the
provisions of such Section shall be amended to permit such payments to be made
at the earliest time permitted under such additional regulations, guidance
or
authority that is practicable and achieves the original intent of this
Agreement.
(e)
The
Company may withhold from any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(f)
Executive's
or the Company's failure to insist upon strict compliance with any provision
of
this Agreement or the failure to assert any right Executive or the Company
may
have hereunder, including, without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of
such
provision or right or any other provision or right of this
Agreement.
(g)
Executive
and the Company acknowledge that, except as may otherwise be provided under
any
other written agreement between Executive and the Company, the employment of
Executive by the Company is "at will" and, may be terminated by either Executive
or the Company at any time. Except as provided in Section 3(c), if prior to
the
Effective Date, Executive's employment with the Company terminates, then
Executive shall have no further rights under this Agreement.
(h)
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which shall constitute one agreement that
is
binding upon each of the parties hereto, notwithstanding that all parties are
not signatories to the same counterpart.
11.
Guarantee
of Payment
.
Great
Plains Energy hereby guarantees to Executive, the payment of any and all amounts
that may be due Executive under this Agreement, and the performance and
discharge of all other obligations of the Company under this Agreement after
written demand has been delivered to the Company and the Company has refused
to
so pay or perform; provided, however, that Great Plains Energy's obligation
to
perform hereunder is subject to all the conditions to the obligations of the
Company to pay or perform under this Agreement and any rights of non-payment
or
non-performance that the Company may have (other than bankruptcy or
insolvency).
IN
WITNESS WHEREOF, each of Great Plains Energy, the Company and Executive has
executed this Agreement as of the day and year first above written.
|
|
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
|
|
|
EXECUTIVE:
|
|
|
|
By:
|
|
|
Name:
|
|
Shahid
Malik
|
Title:
|
|
|
|
|
|
|
|
|
STRATEGIC
ENERGY, L.L.C.
|
|
|
|
|
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Exhibit
10.1.e
CHANGE
IN CONTROL SEVERANCE AGREEMENT
THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT is entered into as of the ___ day of
_________, 2006, between Great Plains Energy Incorporated, a Missouri
corporation ("Great Plains Energy"), and ______________
("Executive").
WITNESSETH:
WHEREAS,
Executive is a valued employee of Great Plains Energy or a subsidiary thereof
(the "Company"); and
WHEREAS,
the Board (as defined herein) believes that it is in the best interests of
the
Company and its shareholders (i) to provide assurance that the Company will
have
the continued service of Executive notwithstanding the possibility, threat
or
occurrence of a Change in Control (as defined in Section 1), (ii) to diminish
the distraction to Executive that may arise by virtue of the personal
uncertainties and risks created by such a threatened or pending Change in
Control, and (iii) to encourage Executive's full attention and dedication
to the
Company currently and in the event of a threatened or pending Change in Control;
and
WHEREAS,
the Board and Executive previously entered into a severance agreement dated
_______, ____, the "Prior Severance Agreement" whereby Great Plains Energy
agreed to provide Executive with certain compensation and perquisites following
Executive's termination or constructive termination of employment with the
Company in connection with a change in control or potential change in control
of
Great Plains Energy; and
WHEREAS,
the Board and Executive agree that, in connection with both parties entering
into this Agreement, the Prior Severance Agreement shall be terminated, rendered
null and void, and all duties and rights conferred upon the parties thereto
extinguished, and that such Prior Severance Agreement is replaced in its
entirety with the benefits, duties, terms and conditions set forth in this
Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein, the parties hereto agree as follows:
1.
Certain
Definitions
.
As used
in this Agreement, unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following
meanings:
(a)
Agreement
.
"Agreement" means this Change in Control Severance Agreement as amended from
time to time.
(b)
Beneficial
Owner
.
"Beneficial Owner" shall have the same meaning as set forth in Rule 13d-3
of the
Exchange Act.
(c)
Board
.
"Board"
means the Board of Directors of Great Plains Energy.
(d)
Cause
.
"Cause"
means (i) the material misappropriation of any of the Company's funds,
Confidential Information or property; (ii) the conviction of, or the entering
of
a guilty plea or plea of no contest with respect to, a felony, or the equivalent
thereof; (iii) commission of act of willful damage, willful misrepresentation,
willful dishonesty, or other willful conduct that can reasonably be expected
to
have a material adverse effect on the business, reputation, or financial
situation of the Company; or (iv) gross negligence or willful misconduct
in
performance of Executive's duties; provided, however, "cause" shall not exist
under clause (iv), above, with respect to an act or failure to act unless
(A)
Executive has been provided written notice describing in sufficient detail
the
acts or failure to act giving rise to the Company's assertion of such gross
negligence or misconduct, (B) been provided a reasonable period to remedy
any
such occurrence and (C) failed to sufficiently remedy the
occurrence.
(e)
Change
in Control
.
"Change
in Control" means the occurrence of one of the following events, whether
in a
single transaction or a series of related transactions:
(i)
any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of Great Plains Energy (not including in the securities beneficially owned
by
such Person any securities acquired directly from Great Plains Energy or
its
affiliates other than in connection with the acquisition by Great Plains
Energy
or its affiliates of a business) representing 35% or more of either the then
outstanding shares of common stock of Great Plains Energy or the combined
voting
power of Great Plains Energy's then outstanding securities; or
(ii)
the
following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to
the
election of directors of Great Plains Energy, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or election
by the Board or nomination for election by Great Plains Energy's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved; or
(iii)
the
consummation of a merger, consolidation, reorganization or similar corporate
transaction of Great Plains Energy, whether or not Great Plains Energy is
the
surviving corporation in such transaction, other than (A) a merger,
consolidation, or reorganization that would result in the voting securities
of
Great Plains Energy outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with
the ownership of any trustee or other fiduciary holding securities under
an
employee benefit plan of the Company, at least 60% of the combined voting
power
of the voting securities of Great Plains Energy or such surviving entity
or any
parent thereof outstanding immediately after such merger, consolidation or
reorganization, or (B) a merger, consolidation or reorganization effected
to
implement a recapitalization of Great Plains Energy (or similar transaction)
in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of
securities of Great Plains Energy (not including in the securities Beneficially
Owned by such Person any securities acquired directly from Great Plains Energy
or its affiliates other than in connection with the acquisition by Great
Plains
Energy or its affiliates of a business) representing 20% or more of either
the
then outstanding shares of common stock of Great Plains Energy or the combined
voting power of Great Plains Energy's then outstanding securities; or
(iv)
the
occurrence of, or the stockholders of Great Plains Energy approve a plan
of, a
complete liquidation or dissolution of Great Plains Energy or an agreement
for
the sale or disposition by Great Plains Energy of all or substantially all
of
Great Plains Energy's assets, other than a sale or disposition of all or
substantially all of Great Plains Energy's assets to an entity, at least
60% of
the combined voting power of the voting securities of which are owned by
Persons
in substantially the same proportions as their ownership of Great Plains
Energy
immediately prior to such sale.
Notwithstanding
the foregoing, no "Change in Control" shall be deemed to have occurred if
there
is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of Great Plains Energy
immediately prior to such transaction or series of transactions continue
to have
substantially the same proportionate ownership in an entity which owns all
or
substantially all of the assets of Great Plains Energy immediately following
such transaction or series of transactions.
(f)
Change
in Control Period
.
"Change
in Control Period" means the period commencing on the date hereof and ending
on
the second anniversary of such date; provided, however, that commencing on
a
date one year after the date hereof, and on each annual anniversary of such
date
(such date and each annual anniversary thereof being hereinafter referred
to as
the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at least
60
days prior to the Renewal Date the Company shall give notice to Executive
that
the Change in Control Period shall not be so extended; provided, further
that
during any period of time when the Board or the governing body of Great Plains
Energy has knowledge that any person has taken steps reasonably calculated
to
effect a Change in Control, the Change in Control Period shall automatically
be
extended (and may not terminate) until, in the opinion of the Board, such
person
has abandoned or terminated its efforts to effect a Change in
Control.
(g)
Company
.
"Company" means, except as the context requires otherwise, references to
Great
Plains Energy Incorporated, a Missouri corporation, its successors and assigns,
and/or any subsidiary thereof, as applicable.
(h)
Confidential
Information
.
"Confidential Information" means (1) any and all trade secrets concerning
the
business and affairs of the Company, product specifications, data, know-how,
formulae, algorithms, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned manufacturing or distribution
methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software
and
programs (including object code and source code), computer software and database
technologies, systems, structures, and architectures; (2) information concerning
the business and affairs of the Company (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials); and (3) notes, analysis,
compilations, studies, summaries, and other material prepared by or for the
Company containing or based, in whole or in part, or any information included
in
the foregoing, whether reduced to writing or not and which has not become
publicly known or made generally available through no wrongful act of Executive
or others who were under confidentiality obligations as to the item or items
involved.
(i)
Date
of Termination
.
"Date
of Termination" means (i) if Executive's employment is terminated by the
Company
for Cause, or by Executive for Good Reason, the date of receipt of the Notice
of
Termination or any later date permitted to be specified therein, as the case
may
be, (ii) if Executive's employment is terminated by the Company other than
for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies Executive of such termination, (iii) if Executive's employment
is terminated by reason of death or Disability, the Date of Termination shall
be
the date of death of Executive or the Disability Effective Date (as defined
in
Section 2(a)), as the case may be and (iv) if Executive's employment is
terminated by Executive for other than Good Reason, the Date of Termination
shall be the date on which Executive notifies the Company in writing of such
termination or any later date permitted to be specified therein, as the case
may
be.
(j)
Disability
or Disabled
.
The
term "Disability" or "Disabled" shall mean an individual (i) is unable to
engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
can be
expected to last for a continuous period of not less than twelve (12) months
or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than 3 months under a Company
sponsored accident or health plan.
(k)
Effective
Date
.
"Effective Date" means the first date on which a Change in Control occurs
during
the Change in Control Period.
(l)
Exchange
Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time
to time.
(m)
Good
Reason
.
"Good
Reason" means, without Executive's written consent any of the
following:
(i)
Any
material and adverse reduction or material and adverse diminution in Executive's
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities held, exercised or assigned at any
time
during the 90-day period immediately preceding the commencement of the Pre-CIC
Protected Period;
(ii)
Any
reduction in Executive's annual base salary as in effect immediately preceding
the commencement of the Pre-CIC Protected Period or as the same may be increased
from time to time;
(iii)
Any
reduction in benefits received by Executive under Company Plans (as defined
below) to less than the most favorable benefits provided to Executive by
the
Company under Company Plans at any time during the 90-day period immediately
preceding the commencement of the Pre-CIC Protected Period. "Company Plans"
means (1) all incentive, savings and retirement plans, practices, policies
and
programs sponsored or maintained by the Company, (2) all welfare benefit
plans,
practices, policies and programs (including medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death
and
travel accident insurance plans and programs) sponsored or maintained by
the
Company, (3) expense reimbursement by the Company for all reasonable
out-of-pocket employment expenses incurred by Executive, (4) the provision
of
fringe benefits, and (5) the provision of paid vacation time by the
Company;
(iv)
Executive
being required by the Company to be based at any office or location that
is more
than 70 miles from the location where Executive was employed immediately
preceding the commencement of the Pre-CIC Protected Period; or
(v)
Any
failure by the Company to require any successor (whether direct or indirect,
by
purchase, merger, consolidation or otherwise) to all or substantially all
of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company
would
be required to perform it if no such succession had taken place, or any failure
by any such successor after ten (10) days notice from Executive to so perform
under this Agreement.
Provided,
however, notwithstanding the occurrence of any of the events set forth above
in
this Section 1(m), Good Reason shall not include for the purpose of this
definition (1) an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of
notice
thereof given by Executive, or (2) if occurring within the Pre-CIC Protected
Period, any reduction in Executive's base annual salary or reduction in benefits
received by Executive where such reduction is in connection with a company-wide
reduction in salaries or benefits.
(n)
Notice
of Termination
.
"Notice
of Termination" means a written notice of termination which (i) indicates
the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the
provision so indicated and (iii) if the Date of Termination is other than
the
date of receipt of such notice, specifies the termination date (which date
shall
be not more than fifteen (15) days after the giving of such notice), unless
another date is mutually agreed upon between Executive and the
Company.
(o)
Person
.
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (1) Great Plains Energy or any of its subsidiaries, (2)
a
trustee or other fiduciary holding securities under an employee benefit plan
of
the Company or any of its subsidiaries, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) a corporation
owned, directly, or indirectly, by the stockholders of Great Plains Energy
in
substantially the same proportions as their ownership of stock of Great Plains
Energy.
(p)
Post-Effective
Period
.
"Post-Effective Period" means the period commencing on the Effective Date
and
ending on the earlier of (i) the second anniversary of such date or
(ii) Executive's 70
th
birthday.
(q)
Pre
-CIC
Protected Period
.
"Pre-CIC Protected Period" means the period that is within the Change in
Control
Period and begins when (A) Great Plains Energy enters into an agreement,
the
consummation of which would result in the occurrence of a Change in Control;
(B)
Great Plains Energy or any Person publicly announces an intention to take
or to
consider taking actions which, if consummated, would constitute a Change
in
Control; (C) any Person becomes the Beneficial Owner, directly or indirectly,
of
voting securities of Great Plains Energy representing 10% or more of the
combined voting power of Great Plains Energy's then outstanding voting
securities; or (D) the Board, the members or the stockholders of Great Plains
Energy adopts a resolution approving any of the foregoing or approving any
Change in Control, and ends upon the date the Change in Control transaction
is
either consummated, abandoned or terminated (for this purpose, the Board
shall
have the sole and absolute discretion to determine that a proposed transaction
has been abandoned).
2.
Termination
of Employment During the Post-Effective Period
.
(a)
Death
or Disability
.
Executive's employment shall terminate automatically upon Executive's death
or,
with written notice by the Company of its intention to terminate Executive's
employment, upon Executive's Disability. In such event, Executive's employment
with the Company shall terminate effective on the 90th day after receipt
of such
notice by Executive (the "Disability Effective Date"), provided that within
the
90 days after such receipt Executive shall not have returned to full-time
performance of Executive's duties.
(b)
Cause
.
The
Company may terminate Executive's employment at any time for Cause or without
Cause. Notwithstanding the foregoing, Executive shall not be deemed to have
been
terminated for Cause without (i) reasonable notice to Executive setting forth
the reasons for the Company's intention to terminate for Cause, (ii) an
opportunity for Executive, together with his counsel, to be heard before
the
Board within fifteen (15) days of such notice, and (iii) delivery to Executive
of a Notice of Termination from the Board finding that, in the good faith
opinion of the Board, that Executive was guilty of conduct set forth in Section
1(d), and specifying the particulars thereof in reasonable detail.
(c)
Executive
Resignation
.
Executive's employment may be terminated at any time by Executive for Good
Reason or without Good Reason.
(d)
Notice
of Termination
.
Any
termination by the Company for Cause, or by Executive for Good Reason, shall
be
communicated by Notice of Termination to the other party hereto. The failure
by
Executive or the Company to set forth in the Notice of Termination any fact
or
circumstance that contributes to a showing of Good Reason or Cause shall
not
waive any right of Executive or the Company hereunder or preclude Executive
or
the Company from asserting such fact or circumstance in enforcing Executive's
or
the Company's rights hereunder.
3.
Obligations
of the Company Upon Termination of Employment
.
(a)
Post-Effective
Period Terminations Other Than for Cause, Death or Disability; Post-Effective
Period Executive Resignation
.
If,
during the Post-Effective Period, the Company shall terminate Executive's
employment other than (I) for Cause or (II) on account of Executive's death
or
Disability, or Executive shall terminate employment for Good Reason, the
Company
shall pay to Executive, in a lump-sum cash payment made within 30 days following
the Date of Termination, as compensation for services rendered to the Company,
an amount equal to the aggregate of the following amounts set forth below
in
Sections 3(a)(i), (ii), (iii), and (iv), and provide to Executive the benefits
provided in Section 3(a)(v).
(i)
A
cash
amount equal to the sum of (A) Executive's full annual base salary from the
Company and its affiliated companies through the Date of Termination, to
the
extent not theretofore paid, (B) a bonus in an amount at least equal to the
average annualized incentive awards paid or payable pursuant to any
Company-sponsored annual incentive compensation plan, including by reason
of any
deferral under a Company-sponsored deferred compensation program, to Executive
by the Company and its affiliated companies during the five fiscal years
of the
Company (or if Executive shall have performed services for the Company and
its
affiliated companies for four fiscal years or less, the years during which
Executive performed services) immediately preceding the fiscal year in which
the
Change in Control (or if benefits are payable pursuant to Section 3(c), the
Date
of Termination) occurs, multiplied by a fraction, the numerator of which
is the
number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination and the denominator of which is 365 or 366,
as
applicable, to the extent not theretofore paid, (C) any amount credited to
Executive's CAP Excess Benefits Account pursuant to the Great Plains Energy
Incorporated Nonqualified Deferred Compensation Plan and any other compensation
previously deferred by Executive (together with any interest and earnings
thereon), in each case to the extent not theretofore paid, and (D) any accrued
unpaid vacation pay;
(ii)
a
cash
amount equal to (A) two (2) times Executive's highest annual base salary
from
the Company and its affiliated companies in effect during the twelve (12)-month
period prior to the Date of Termination, plus (B) two (2) times Executive's
average annualized annual incentive compensation awards, paid, or, but for
a
deferral under a Company-sponsored deferred compensation program, would have
been paid, to Executive by the Company and its affiliated companies during
the
five fiscal years of the Company (or if Executive shall have performed services
for the Company and its affiliated companies for four fiscal years or less,
the
years during which Executive performed services) immediately preceding the
fiscal year in which the Change in Control (or if benefits are payable pursuant
to Section 3(c), the Date of Termination) occurs; provided, however, that
in the
event there are fewer than twenty-four (24) whole months remaining from the
Date
of Termination to the date of Executive's 70th birthday, the amount calculated
in accordance with this Section 3(a)(ii) shall be reduced by multiplying
such
amount by a fraction the numerator of which is the number of months, including
a
partial month (with a partial month being expressed as a fraction the numerator
of which is the number of days remaining in such month and the denominator
of
which is the number of days in such month), so remaining and the denominator
of
which is twenty-four (24) months; provided further that any amount paid pursuant
to this Section 3(a)(ii) shall be paid in lieu of any other amount of severance
pay to be received by Executive upon termination of employment of Executive
under any severance plan, policy or arrangement of the Company;
(iii)
a
cash
amount equal to the excess of (A) the actuarial equivalent value of the monthly
accrued benefits payable to Executive at age 65 under the Great Plains Energy
Incorporated Management Pension Plan (the "Pension Plan") as in effect on
the
date of this Agreement and the benefits provided under the Supplemental
Executive Retirement Plan in respect of the Pension Plan as in effect on
the
date of this Agreement, assuming (1) that benefits have accrued thereunder
and
Executive is entitled to such benefits, (2) each such benefit shall be computed
as if Executive had two (2) additional Years of Credited Service earned under
the Pension Plan and (3) Executive were fully vested in such hypothetical
benefits, over (B) the actuarial equivalent value of Executive's vested accrued
benefits under the Pension Plan and benefits payable under the Supplemental
Executive Retirement Plan. Such cash amount shall be computed using the same
actuarial methods and assumptions then in use for purposes of computing benefits
under the Pension Plan, except that the computation shall be made without
actuarial reduction for early retirement and provided that the interest rate
used in such computation shall be the interest rate used on the Date of
Termination by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution pursuant to a plan
termination;
(iv)
if
on the
Date of Termination Executive shall not be fully vested in the matching employer
contributions made on Executive's behalf under the Great Plains Energy
Incorporated Cash or Deferred Arrangement, a cash amount equal to the value
of
the unvested portion of such matching employer contributions;
(v)
for
a
period of two (2) years commencing on the Date of Termination, the Company
shall
provide Executive and Executive's dependents with medical, accident, disability
and life insurance coverage upon substantially the same terms and otherwise
substantially to the same extent as such coverage was being provided to
Executive and Executive's dependent(s) immediately prior to the Date of
Termination. At the Company's election, such continuation coverage may be
provided by (A) continuing such coverage under the Company's existing welfare
benefit plans, (B) with respect to any group health care plan and for the
applicable period permitted under Code Section 4980B(f)(2), Executive and/or
Executive's dependent(s) being deemed to have elected to receive such coverage
pursuant to a continuation election under Code Section 4980B with the Company
being obligated to pay for the entire portion of the applicable COBRA premiums,
(C) the Company purchasing an individual policy (to the extent such a policy
is
reasonably available in the marketplace) for Executive and/or Executive's
dependent(s) providing substantially similar coverage as offered under the
Company's plan, or (D) any combination of the forgoing methods under (A),
(B)
and (C) of this paragraph. Notwithstanding the foregoing sentence, if any
of the
medical, accident, disability or life insurance plans then in effect generally
with respect to other peer executives of the Company and its affiliated
companies would be more favorable to Executive, such plan coverage shall
be
substituted for the analogous plan coverage provided to Executive immediately
prior to the Date of Termination, and the Company and Executive shall share
the
costs of such plan coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. The obligation of the Company
to
continue coverage of Executive and Executive's dependent(s) under such plans
and
in accordance with this paragraph shall cease at such time as Executive and
Executive's dependent(s) obtain comparable coverage under another plan,
including a plan maintained by a new employer. With respect to any Company
group
health care plan, any continuation coverage provided under this paragraph
shall
be considered as alternative continuation coverage to any rights Executive
or
Executive's dependent(s) may have with respect to any other group health
plan
continuation coverage required by Code Section 4980B or any applicable state
statute mandating health insurance continuation coverage. Except to the extent
required by law, upon termination of the coverage provided for under this
Section 3(a)(v), Executive and/or Executive's dependent(s) shall have no
further
right to continuation of coverage under any group health plan maintained
by the
Company or its affiliated companies.
(b)
Termination
for Cause, Disability, Death or Other than for Good Reason
.
If at
any time during the Change in Control Period Executive's employment shall
be
terminated for Cause, Executive's employment is terminated due to Executive's
death or Disability, or if Executive terminates employment other than for
Good
Reason, this Agreement shall terminate without further obligation of the
Company
to Executive other than (i) the obligation to pay to Executive his or her
base
salary through the Date of Termination, any incentive bonus and other
compensation, payments and benefits for the most recently completed fiscal
year
and any accrued vacation pay, to the extent theretofore unpaid, which amounts
shall be paid to Executive in a lump sum in cash within thirty (30) days
of the
Date of Termination, and (ii) the obligation to pay to Executive all amounts
or
benefits to which Executive is entitled for the period prior to the Date
of
Termination under any plan, program, policy, practice, contract or agreement
of
the Company (excluding amounts otherwise required to be paid under this Section
3(b)), at the time such amounts or benefits are due.
(c)
Certain
Terminations During Pre-CIC Protected Period
.
If,
during the Pre-CIC Protected Period, Executive's employment is terminated
by the
Company other than for Cause or Executive terminates his or her employment
for
Good Reason, then Executive shall be entitled to receive the same benefits
he or
she would be entitled to receive under Section 3(a) if such termination of
employment would have occurred during the Post-Effective Period. Any benefits
or
payments to be paid pursuant to this Section 3(c) shall be paid in a lump-sum
payment and, subject to Section 3(d), within thirty (30) days following the
termination of Executive's employment.
(d)
Payments
to Executive Following Termination
.
If (i)
Executive is a "specified employee," as defined in Code section
409A(a)(1)(B)(i), and (ii) Executive's employment is terminated, either by
Executive or by the Company, due to any reason, other than Executive's death,
then, notwithstanding Sections 3(a) or 3(c) of this Agreement, Executive
shall
not receive any payment pursuant to Sections 3(a) or 3(c) until the first
business day after six full months after Executive's Date of Termination.
4.
Section
280G Gross-Up
.
(a)
Except
as
provided for in Section 4(e) below and notwithstanding any other provision
in
this Agreement to the contrary, in the event it shall be determined that
any
payment or distribution by the Company or its affiliated companies to or
for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or
any
interest or penalties are incurred by Executive with respect to such excise
tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay
to
Executive an additional payment (a "Gross-Up Payment") in an amount such
that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (except for any income tax under Section 409A of the Code), any interest
and penalties imposed with respect thereto, and Excise Tax imposed upon the
Gross-Up Pay
ment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b)
Subject
to the provisions of Section 4(c), all determinations required to be made
under
this Section 4, including whether and when a Gross-Up Payment is required
and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent registered
public accounting firm selected by the Company that is not also the Company's
then current accounting firm for annual audit purposes (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company
and
Executive within fifteen (15) business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested
by
the Company. In the event that the Accounting Firm is serving as accountant
or
auditor for the individual, entity or group effecting the Change in Control,
Executive shall appoint another nationally recognized public accounting firm
to
make the determinations required hereunder (which accounting firm shall then
be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as
determined pursuant to this Section 4, shall be paid by the Company to Executive
within five (5) days of the receipt of the Accounting Firm's determination,
but
in no event later than the time set forth in Section 4(f), below. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall
furnish Executive with a written opinion that failure to report the Excise
Tax
on Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result
of
the uncertainty in the application of Section 4999 of the Code at the time
of
the initial determination by the Accounting Firm hereunder, it is possible
that
Gross-Up Payments which will not have been made by the Company should have
been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c)
Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after Executive is informed in writing of such
claim
and shall apprise the Company of the nature of such claim and the date on
which
such claim is requested to be paid. Executive shall not pay such claim prior
to
the expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Company (or such shorter period ending
on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i)
give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii)
take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii)
cooperate
with the Company in good faith in order effectively to contest such claim;
and
(iv)
permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with
such
contest and shall indemnify and hold Executive harmless, on an after-tax
basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs
and
expenses. Without limitation on the foregoing provisions of this Section
4(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
such claim and may, at its sole option, either direct Executive to pay the
tax
claimed and sue for a refund or contest the claim in any permissible manner,
and
Executive shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more
appellate courts, as the Company shall determine; provided further, that
if the
Company desires Executive to pay such claim and sue for a refund, the Company
shall, on Executive's behalf, pay such claim and on an after-tax basis reimburse
Executive from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such payment and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested amount
is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Company's control of the contest shall be limited to issues with respect
to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the
Internal Revenue Service or any other taxing authority.
(d)
If,
after
payment by the Company pursuant to Section 4(c), Executive becomes entitled
to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
payment of an amount by the Company pursuant to Section 4(c), a determination
is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent
to
contest such denial of refund prior to the expiration of thirty (30) days
after
such determination, then such payment shall offset, to the extent thereof,
the
amount of Gross-Up Payment required to be paid.
(e)
Notwithstanding
Executive otherwise being eligible for a Gross-Up Payment under this Section
4,
if, excluding any Gross-Up Payment required to be made pursuant to this Section
4, the "parachute payment" made to Executive does not exceed three times
Executive's "base amount" by more than $1,000, then the payments and benefits
to
be paid or provided under this Agreement will be reduced to the minimum extent
necessary so that no portion of any payment or benefit to Executive, as so
reduced, constitutes an "excess parachute payment." For purposes of this
Section
4(e), the terms "excess parachute payment," "parachute payment," and "base
amount" will have the meanings assigned to them by Section 280G of the Code.
The
determination of whether any reduction in such payments or benefits to be
provided under this Agreement is required pursuant to the preceding sentence
will be made at the expense of the Company by the Accounting Firm. The fact
that
Executive's right to payments or benefits may be reduced by reason of the
limitations contained in this Section 4(e) will not of itself limit or otherwise
affect any other rights of Executive other than pursuant to this Agreement.
In
the event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this Section
4(e),
Executive will be entitled to designate the payments and/or benefits to be
so
reduced in order to give effect to this Section. The Company will provide
Executive with all information reasonably requested by Executive to permit
Executive to make such designation. In the event that Executive fails to
make
such designation within 10 business days of the date of termination of
Executive's employment, the Company may effect such reduction in any manner
it
deems appropriate.
(f)
Any
Gross-Up Payment made to Executive pursuant to this Section 4 shall be exempt
from Code Section 409A pursuant to the short-term deferral exception to Code
Section 409A. Absent further guidance from the United States Treasury
Department, the Internal Revenue Service or any judicial authority relating
to
the application of Section 409A to Section 280G Gross-Up Payments, Gross-Up
Payments pursuant to this Section 4 shall be made as follows:
(i)
With
respect to any Gross-Up Payment that can be reasonably calculated as of the
time
of a Change in Control or shortly thereafter, such Gross-Up Payment shall
be
made to Executive no later than March 15th of the calendar year following
the
year in which the Change in Control occurs;
(ii)
With
respect to any Gross-Up Payment that results from Executive becoming eligible
for benefits under this Agreement upon Executive's termination of employment,
such Gross-Up Payment shall be made to Executive no later than March 15th
of the
calendar year following the year in which the earlier of (A) the event giving
rise to Executive's Good Reason occurs or (B) Executive's termination of
employment; and
(iii)
With
respect to any Gross-Up Payment that is required to be made to Executive
pursuant to Section 4(c), such Gross-Up Payment shall be made to Executive
no
later than March 15th of the calendar year following the year in which the
alleged obligation of Executive, as reflected by Executive's receipt of a
claim
by the Internal Revenue Service, is received by Executive.
5.
Non-exclusivity
of Rights
.
Nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
and for which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that Executive
is otherwise entitled to receive at or subsequent to the Date of Termination
under any plan, policy, practice or program of or any contract or agreement
with
the Company shall be payable in accordance with such plan, policy, practice
or
program or contract or agreement, except as explicitly modified by this
Agreement.
6.
Full
Settlement; Resolution of Disputes
.
(a)
Except
where Executive's employment is terminated for Cause, the Company's obligation
to make any payments provided for in this Agreement and otherwise to perform
its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have
against Executive or others. In no event shall Executive be obligated to
seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not Executive obtains other employment.
Subject to Executive's agreement to repay certain fees and expenses as provided
below in Section 6(b), the Company shall pay promptly as incurred, to the
full
extent permitted by law, all legal fees and expenses that Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by the Company, Executive or others of the validity or
enforceability of, or the existence of liability under, any provision of
this
Agreement or any guarantee of performance thereof (including as a result
of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at one hundred
twenty percent (120%) of the Federal Mid-Term Rate under Section 1274(d)
of the
Code.
(b)
If
there
shall be any dispute or contest between the Company and Executive (i) in
the
event of any termination of Executive's employment by the Company, whether
such
termination was for Cause, or (ii) in the event of any termination of employment
by Executive whether Good Reason existed, then the resolution of such dispute
or
contest shall be finally determined by arbitration, which may be initiated
by
either the Company or Executive, pursuant to the Federal Arbitration Act
in
accordance with the rules then in force of the American Arbitration Association.
The arbitration proceedings shall take place in Kansas City, Missouri or
such
other location as the parties in dispute hereafter may agree upon; and such
proceedings will be conducted in the English language and shall be governed
by
the laws of the State of Missouri as such laws are applied to agreements
between
residents of the State entered into and to be performed entirely within the
State. There shall be one arbitrator, as shall be agreed upon by the parties
in
dispute, who shall be an individual skilled in the legal and business aspects
of
the subject matter of this Agreement and of the dispute. In the absence of
such
agreement, each party in dispute shall select one arbitrator and the arbitrators
so selected shall select a third arbitrator. In the event the arbitrators
cannot
agree upon the selection of a third arbitrator, such third arbitrator shall
be
appointed by the American Arbitration Association at the request of any of
the
parties in dispute. The arbitrators shall be individuals skilled in the legal
and business aspects of the subject matter of this Agreement and of the dispute.
The decision rendered by the arbitrator or arbitrators shall be accompanied
by a
written opinion in support thereof. Such decision shall be final and binding
upon the parties in dispute without right of appeal, it being the intent
of the
parties that such decision, and, irrespective of any contrary provision of
the
laws of the State respecting rights of appeal, such decision may not be
appealed. The burden of proving that Executive is not entitled to receive
the
amounts and the benefits contemplated by this Agreement shall be on the Company.
(c)
In
the
event of such an arbitration and provided that Executive shall repay the
following amounts, fees and expenses if the final and binding decision of
the
arbitrator(s) is that Executive's termination was for Cause or that Good
Reason
did not exist for termination of employment by Executive, (i) Great Plains
Energy shall advance to Executive all legal fees and expenses that Executive
may
reasonably incur as a result of any such action, and (ii) if a final and
binding
decision of the arbitrator(s) is not obtained by the six-month anniversary
of
the date the Company or Executive first provided notice to the other party
of
the dispute or contest (the "Dispute Notice"), Great Plains Energy shall
pay all
amounts, and provide all benefits, to Executive and/or Executive's family
or
other beneficiaries, as the case may be, that Great Plains Energy would be
required to pay or provide pursuant to Sections 3(a) or 3(c) if such termination
were by the Company without Cause or by Executive with Good Reason. If the
final
and binding decision of the arbitrator(s) is that Executive's termination
was
not for Cause or that Good Reason did exist for such termination by Executive
then, (I) if such decision is before the six-month anniversary of the receipt
of
the Dispute Notice, Executive shall receive all payments and benefits
contemplated by this Agreement, plus interest on any delayed payment or benefit
at one hundred twenty percent (120%) of the Federal Mid-Term Rate under Section
1274(d) of the Code or (II) if such decision is after the six-month anniversary
of the receipt of the Dispute Notice such that all payments and benefits
contemplated by this Agreement have already been paid, Executive shall receive
interest (calculated in the same manner as set forth above) for the six-month
period the payments and provision of benefits were delayed. In no event may
the
arbitrator or arbitrators award any other damages or award of any kind.
Notwithstanding the foregoing, nothing in this Agreement is intended to,
or
shall be construed as, affecting the rights and obligations of Executive
and the
Company to submit any dispute (other than such disputes contemplated by,
and
resolved in accordance with Sections 6(b) and 6(c)) to the appropriate dispute
resolution process in accordance with any applicable dispute resolution plan
intended to provide a procedural mechanism, whether exclusive or non-exclusive,
for the resolution of any and all disputes between the Company and its present
or former employees.
7.
Restrictive
Covenants
.
(a)
Nondisclosure
of Confidential Information
.
Executive shall hold in confidence for the benefit of the Company all
Confidential Information. Executive agrees that Executive will not disclose
any
Confidential Information to any person or entity other than the Company and
those designated by it, either during or subsequent to Executive's employment
by
the Company, nor will Executive use any Confidential Information, except
(i) in
the regular course of Executive's employment by the Company, without the
prior
written consent of the Company or (ii) as may otherwise be required by law
or
legal process.
(b)
Actions
Upon Termination; Assistance with Claims
.
Upon
Executive's employment termination for whatever reason, Executive shall neither
take or copy nor allow a third party to take or copy, and shall deliver to
the
Company all property of the Company, including, but not limited to, all
Confidential Information regardless of the medium (i.e., hard copy, computer
disk, CD ROM) on which the information is contained. During and after
Executive's employment by the Company, Executive will provide reasonable
assistance to the Company in the defense of any claims or potential claims
that
may be made or threatened to be made against the Company in any action, suit,
or
proceeding, whether civil, criminal, administrative, or investigative
("Proceeding") and will provide reasonable assistance to the Company in the
prosecution of any claims that may be made by the Company in any Proceeding,
to
the extent that such claims may relate to Executive's employment by the Company.
For the avoidance of doubt, reasonable assistance would not include Executive
being required to provide information that could reasonably result in criminal
or civil charges or penalties being assessed or imposed against Executive
in his
individual capacity. Executive shall, unless precluded by law, promptly inform
the Company if Executive is asked to participate (or otherwise become involved)
in any Proceeding involving such claims or potential claims. Executive also
shall, unless precluded by law, promptly inform the Company if Executive
is
asked to assist in any investigation (whether governmental or private) of
the
Company (or its actions), regardless of whether a lawsuit has then been filed
against the Company with respect to such investigation. The Company shall
reimburse Executive for all of Executive's reasonable out-of-pocket expenses
associated with such assistance, including travel expenses and any attorneys'
fees and shall pay a reasonable per diem fee (equal to 1/250th of Executive's
annual salary rate at Executive's Date of Termination) for Executive's
services.
(c)
Noncompetition
.
Executive agrees that so long as Executive is employed by the Company and
for a
period of six (6) months thereafter, Executive shall not, without the prior
written consent of the Company, which in the case of termination will not
be
unreasonably withheld, participate or engage in, directly or indirectly (as
an
owner, partner, employee, officer, director, independent contractor, consultant,
advisor or in any other capacity calling for the rendition of services, advice,
or acts of management, operation or control), any business that, during
Executive's employment, is in direct competition with the business conducted
by
the Company or any of its affiliates within the United States (hereinafter,
the
"Geographic Area"); provided, however, that the foregoing shall not be construed
to preclude Executive from making any investments in any securities to the
extent such securities are traded on a national securities exchange or
over-the-counter market and such investment does not exceed five percent
(5%) of
the issued and outstanding voting securities of such issuer.
(d)
Nonsolicitation
of Employees
.
During
Executive's employment and for a period of six (6) months thereafter, Executive
shall not, without the consent of the Company, directly or indirectly solicit
any current employee of the Company or any of its affiliates, to leave such
employment and join or become affiliated with any business that is in direct
competition with the business conducted by the Company or any of its affiliates
within the Geographic Area.
(e)
Mutual
Non-disparagement
.
Executive shall refrain from making any statements about the Company or its
officers or directors that would disparage, or reflect unfavorably upon the
image or reputation of the Company or any such officer or director. The Company
shall refrain from making any statements about Executive that would disparage,
or reflect unfavorably upon the image or reputation of, Executive.
(f)
Irreparable
Harm
.
Executive acknowledges that: (i) Executive's compliance with this Section
7 is
necessary to preserve and protect the Confidential Information, and the goodwill
of the Company and its affiliates as going concerns; (ii) any failure by
Executive to comply with the provisions of this Section may result in
irreparable and continuing injury for which there may be no adequate remedy
at
law; and (iii) in the event that Executive should fail to comply with the
terms
and conditions of this Section, the Company shall be entitled, in addition
to
such other relief as may be proper, to seek all types of equitable relief
(including, but not limited to, the issuance of an injunction and/or temporary
restraining order) as may be necessary to cause Executive to comply with
this
Section, to restore to the Company its property, and to make the Company
whole.
(g)
Unenforceability
.
If any
provision(s) of this Section 7 shall be found invalid or unenforceable, in
whole
or in part, then such provision(s) shall be deemed to be modified or restricted
to the extent and in the manner necessary to render the same valid and
enforceable, or shall be deemed excised from this Agreement, as the case
may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision(s) had been originally
incorporated herein as so modified or restricted, or as if such provision(s)
had
not been originally incorporated herein, as the case may be.
8.
Successors
.
(a)
This
Agreement is personal to Executive and shall not be assignable by Executive
without the prior written consent of the Company otherwise than by will or
the
laws of descent and distribution. If Executive should die while any amounts
would still be payable to Executive hereunder if she or he had continued
to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's heirs or
representatives or, if there be no such designee, to Executive's
estate.
(b)
This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns.
(c)
The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform it if no such succession had taken place. As used in
this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to
perform this Agreement by operation of law, or otherwise.
9.
Prohibition
of Payments by Regulatory Agencies
.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be obligated to make any payment to Executive under this
Agreement if the payment would violate any rule, regulation or order of any
regulatory agency having jurisdiction over the Company or any of its
subsidiaries; provided, however, that the Company covenants to Executive
that it
will take all reasonable steps to obtain any regulatory agency approvals
that
may be required in order to make payments to Executive as provided herein.
10.
Miscellaneous
.
(a)
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Missouri without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement executed by the parties hereto. This Agreement supersedes
all previous agreements relating to the subject matter of this Agreement,
written or oral, between the parties hereto and contains the entire
understanding of the parties hereto including, but not limited to that Prior
Severance Agreement dated March 16, 2005, between the Board and
Executive.
(b)
All
notices and other communications hereunder shall be in writing and shall
be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If
to the Company:
|
|
If
to Executive:
|
|
|
|
Great
Plains Energy Incorporated
|
|
|
Attn:
General Counsel
|
|
|
1201
Walnut
|
|
|
Kansas
City, Missouri
|
|
|
64106-2124
|
|
|
|
|
|
or
to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(c)
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect.
(d)
This
Agreement is intended to meet the requirements of Section 409A of the Code
and
may be administered in a manner that is intended to meet those requirements
and
shall be construed and interpreted in accordance with such intent. To the
extent
that any payment or benefit provided hereunder is subject to Section 409A
of the
Code, such payment or benefit shall be provided in a manner that will meet
the
requirements of Section 409A of the Code, including regulations or other
guidance issued with respect thereto, such that the payment or benefit shall
not
be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail
to
satisfy Section 409A of the Code shall be amended (in a manner that as closely
as practicable achieves the original intent of this Agreement) to comply
with
Section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under Section
409A of the Code. In the event additional regulations or other guidance is
issued under Section 409A of the Code or a court of competent jurisdiction
provides additional authority concerning the application of Section 409A
with
respect to the payments described in Section 4 of the Agreement, then the
provisions of such Section shall be amended to permit such payments to be
made
at the earliest time permitted under such additional regulations, guidance
or
authority that is practicable and achieves the original intent of this
Agreement.
(e)
The
Company may withhold from any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(f)
Executive's
or the Company's failure to insist upon strict compliance with any provision
of
this Agreement or the failure to assert any right Executive or the Company
may
have hereunder, including, without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver
of such
provision or right or any other provision or right of this
Agreement.
(g)
Executive
and Great Plains Energy acknowledge that, except as may otherwise be provided
under any other written agreement between Executive and the Company, the
employment of Executive by the Company is "at will" and, may be terminated
by
either Executive or the Company at any time. Except as provided in Section
3(c),
if prior to the Effective Date, Executive's employment with the Company
terminates, then Executive shall have no further rights under this
Agreement.
(h)
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which shall constitute one agreement
that is
binding upon each of the parties hereto, notwithstanding that all parties
are
not signatories to the same counterpart.
IN
WITNESS WHEREOF, each of Great Plains Energy and Executives has executed
this
Agreement as of the day and year first above written.
|
|
|
GREAT
PLAINS ENERGY INCORPORATED
|
|
|
|
|
EXECUTIVE:
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
No. 10.1.f
October
2,
2006
TO:
|
LaSalle
Bank National Association, as contractual representative for the
Lenders,
(the “Administrative Agent”) under that certain Amended and Restated
Credit Agreement, dated as of July 2, 2004 (the “Credit Agreement”), by
and among Strategic Energy, L.L.C. (the “Borrower”), the financial
institutions from time to time parties thereto as lenders (the “Lenders”)
and the Administrative Agent.
|
Unless
otherwise defined herein, terms defined or used in that certain Amended and
Restated Limited Guaranty dated as of July 2, 2004 and reaffirmed from time
to
time from Great Plains Energy Incorporated (the “Guarantor”) in favor of the
Lenders under the Credit Agreement (the “GPE Guaranty”) shall have the same
meanings in this Guaranty Amount Amendment Agreement.
Upon
the
Effective Date (as hereinafter defined), the Guarantor amends the GPE Guaranty
to decrease the Guaranty Adjustment Amount to $12,500,000 (which amount is
not
less than zero (0)).
The
Guarantor hereby represents and warrants that:
(i)
The
Guarantor (a) is a corporation duly organized, validly existing and in existence
under the laws of the jurisdiction of its organization, (b) is duly qualified
to
do business as a foreign corporation and is in good standing under the laws
of
each jurisdiction in which failure to be so qualified and in good standing
could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Guarantor, and (c) has all requisite corporate power and
authority to own, operate and encumber its property;
(ii)
The
Guarantor has the requisite corporate power and authority to execute, deliver
and perform this Guaranty Amount Amendment Agreement and any other document
required to be delivered by it under the Credit Agreement or the GPE Guaranty,
and this Guaranty Amount Amendment Agreement has been duly executed and
delivered and constitutes the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms;
(iii)
The
execution, delivery and performance of this Guaranty Amount Amendment Agreement
do not and will not (a) conflict with the Articles of Incorporation or By-Laws
of the Guarantor, (b) require any approval of the Guarantor’s shareholders
except such as has been obtained, (c) require any approval or consent of any
Person or Governmental Authority, or under the terms of any material agreement
except as such has been obtained, and (d) will not result in or require the
creation of any lien or security interest upon or with respect to any of the
properties or assets of the Guarantor other than pursuant to the Loan Documents;
(iv)
No
Default or Unmatured Default has occurred and is continuing under the Credit
Agreement or will result from the execution, delivery and performance of this
Guaranty Amount Amendment Agreement; and
(v)
No
Event of Default or GPE Cross Default has occurred and is continuing under
the
GPE Guaranty.
This
Guaranty Amount Amendment Agreement, and the amendment of the GPE Guaranty
contemplated thereby, will become effective on the date that all of the
following conditions precedent have been met (or waived) as determined by the
Administrative Agent in its sole discretion (the “Effective Date”): (i)
execution of this Guaranty Amount Amendment Agreement by the Guarantor, the
Borrower and the Administrative Agent, (ii) the representations and warranties
contained herein shall be true and correct in all respects, and (iii) receipt
by
the Administrative Agent of any certificates establishing compliance with the
Financial Covenants.
Except
as
expressly set forth herein, this Guaranty Amount Amendment Agreement shall
not
be deemed to waive or modify any provision of the GPE Guaranty and, as so
modified, the GPE Guaranty is hereby reaffirmed and remains in full force and
effect. This Guaranty Amount Amendment Agreement shall be binding upon and
inure
to the benefit of the parties hereto and their respective successors and
assigns. THIS GUARANTY AMOUNT AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED UNDER AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAW, AS OPPOSED
TO
THE CONFLICT OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS. This Guaranty Amount
Amendment Agreement may be delivered by facsimile and executed in one or more
counterparts and by different parties in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, but all of
which counterparts taken together shall constitute but one and the same
agreement.
2
GREAT
PLAINS ENERGY INCORPORATED
By:
_________________________________
Name:
Michael
W. Cline
Title:
Treasurer
and Chief Risk Officer
Date:
_________________________________
Acknowledged
and Agreed:
STRATEGIC
ENERGY, L.L.C.
By:
_________________________________
Name:
_________________________________
Title:
_________________________________
Date:
_________________________________
LASALLE
BANK NATIONAL ASSOCIATION,
as
Administrative Agent
By:
_________________________________
Name:
_________________________________
Title:
_________________________________
Date:
_________________________________
3
Exhibit
No. 10.1.g
Strategic
Energy, L.L.C.
Long-Term
Incentive Plan Grants
2005
Amended
May 2, 2005
Amended
October 31, 2006
Objective
The
Strategic Energy LLC (SE) Long Term Incentive Plan (Plan) is designed to reward
sustained value creation by providing competitive incentives for the achievement
of long-term financial and operational performance goals. By providing
market-competitive target awards, the plan supports the attraction and retention
of talent critical to achieving SE's strategic business objectives.
Eligible
participants include executives as approved by the Compensation Committee
(Committee) of the Board of Directors.
2005
Grants
For
2005,
there will be two grants under the Plan. One will be a two-year grant for
2005-2006 performance (in lieu of 2004 grant) and the second will be a
three-year grant for 2005-2007 performance.
Target
Awards
Award
levels will be approved by the Committee and set forth as a percentage of the
executive's base salary at target. The percentage will vary based on
organizational responsibilities and market-compilation based on industry data.
Awards will be paid 25% in time vested restricted stock with the remaining
75%
based on performance and payable in cash. The annual target award percentages
of
base salary are set forth on Appendix I attached hereto.
Performance
Goals
The
award
payout under the Plan will be determined by the proposed goals in Appendix
II
attached hereto. Performance at target will produce 100% of award and the level
of such award can be increased or decreased based on performance. The maximum
award is 300% of target value.
Goals
are
fixed for the duration of the period and will only be changed upon the approval
of the Committee.
1
APPENDIX
I
Strategic
Energy, L.L.C.
Long-Term
Incentive Plan Grants
2005
Target
Award Levels
(expressed
as a percent of base salary)
Executive
|
Annual
Target Award
Opportunity
|
Amount
of
Restricted
Shares
*
|
Amount
of
Cash
at
Target
*
|
Malik
|
150%
|
$150,000
|
$450,000
|
Purdy
|
100%
|
__________
|
__________
|
Lauer
|
100%
|
__________
|
__________
|
Washburn
|
100%
|
__________
|
__________
|
Sebben
|
80%
|
__________
|
__________
|
Fox
|
100%
|
__________
|
__________
|
Shaw
|
80%
|
__________
|
__________
|
*Dividends
will accrue quarterly on the Restricted Shares and restricted in the same manner
as the shares.
The
number of shares to be determined at time of grant based on market. Amount
of
cash (remainder of award) to be determined based on 2005
salaries.
NOTE:
Information regarding non-executive officers of Great Plains Energy has been
removed.
APPENDIX
II
Strategic
Energy, L.L.C.
Long-Term
Incentive Plan Grants
2005
Goals
The
performance goals for plan years 2005 and 2006 are:
Percentage
Allocation
|
Goals
|
Indicative
Measures
|
31.3%
|
Cumulative
Pre-tax Net Income
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
$___
million (50% payout)
$___
million (100% payout)
$___
million (200% payout)
$___
million (300% payout)
|
|
|
|
|
22.9%
|
Cumulative
Increase in Customer Accounts Under Contract from 2004 Baseline Customer
Accounts
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
___%
(50% payout)
___%
(100% payout)
___%
(200% payout)
___%
(300% payout)
|
|
|
|
|
22.9%
|
Cumulative
Reduction in General and Administrative Expenses from 2004 Baseline
of
$___/MWh**
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
___%
(50% payout)
___%
(100% payout)
___%
(200% payout)
___%
(300% payout)
|
|
|
|
|
22.9%
|
Reduce
Supply Cost to Retail from the 2004 Results After Adjusting for Market
Changes (based on $__/MWH marker)
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
___%
(50% payout)
___%
(100% payout)
___%
(200% payout)
___%
(300% payout)
|
Note:
Specific information regarding goals and indicative measures is confidential
and
has been removed.
3
The
performance goals for plan years 2005, 2006 & 2007 are:
Percentage
Allocation
|
Goals
|
Indicative
Measures
|
31.3%
|
Cumulative
Pre-tax Net Income
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
$___
million (50% payout)
$___
million (100% payout)
$___
million (200% payout)
$___
million (300% payout)
|
|
|
|
|
22.9%
|
Cumulative
Increase in Customer Accounts Under Contract from 2004 Baseline Customer
Accounts
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
___%
(50% payout)
___%
(100% payout)
___%
(200% payout)
___%
(300% payout)
|
|
|
|
|
22.9%
|
Cumulative
Reduction in General and Administrative Expenses from 2004 Baseline
of
$___/MWh**
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
___%
(50% payout)
___%
(100% payout)
___%
(200% payout)
___%
(300% payout)
|
|
|
|
|
22.9%
|
Reduce
Supply Cost to Retail from the 2004 Results After Adjusting for Market
Changes (based on $__/MWH marker)
|
80%
chance of Achieving:
50%
chance of Achieving:
20%
chance of Achieving:
10%
chance of Achieving:
|
___%
(50% payout)
___%
(100% payout)
___%
(200% payout)
___%
(300% payout)
|
|
|
|
|
**
Excluding variable incentive
costs
|
Weighing
of Goals
For
the
CEO, 80% of performance will be based on SE goals and 20% of performance will
be
based on Great Plains Energy goals.
For
the
other executives, 100% of performance will be based on SE goals.
Note:
Specific information regarding goals and indicative measures is confidential
and
has been removed.
4
Exhibit
10.1.h
Strategic
Energy Annual Incentive Plan 2006 Objectives
Amended
October 31, 2006
Objectives
|
Weighting
|
Threshold
|
Target
|
Superior
|
Core
Financial Objectives
|
SE
Pre-tax Core Earnings
|
50%
|
|
|
|
Key
Business Objectives
|
Expected
future margin
|
15%
|
|
|
|
MWh
under management
|
15%
|
|
|
|
Individual
Performance
|
Individual
performance
|
20%
|
Discretionary
|
Discretionary
|
Discretionary
|
Note:
Specific information regarding threshold, target and superior measures is
confidential and has been removed.
|
|
|
|
|
|
|
|
|
|
Exhibit
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GREAT
PLAINS ENERGY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTATION
OF RATIO OF EARNINGS TO FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
to Date
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
2005
|
2004
|
2003
|
2002
|
2001
|
|
|
(thousands)
|
|
Income
(loss) from continuing operations
|
|
$
|
90,680
|
|
$
|
164,209
|
|
$
|
173,535
|
|
$
|
189,702
|
|
$
|
136,702
|
|
$
|
(28,428
|
)
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests in subsidiaries
|
|
|
-
|
|
|
7,805
|
|
|
(2,131
|
)
|
|
(1,263
|
)
|
|
-
|
|
|
(897
|
)
|
Equity
investment (income) loss
|
|
|
1,047
|
|
|
434
|
|
|
1,531
|
|
|
2,018
|
|
|
1,173
|
|
|
(23,641
|
)
|
Income
subtotal
|
|
|
91,727
|
|
|
172,448
|
|
|
172,935
|
|
|
190,457
|
|
|
137,875
|
|
|
(52,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
on income
|
|
|
36,683
|
|
|
39,691
|
|
|
54,451
|
|
|
78,565
|
|
|
51,348
|
|
|
(34,672
|
)
|
Kansas
City earnings tax
|
|
|
664
|
|
|
498
|
|
|
602
|
|
|
418
|
|
|
635
|
|
|
583
|
|
Total
taxes on income
|
|
|
37,347
|
|
|
40,189
|
|
|
55,053
|
|
|
78,983
|
|
|
51,983
|
|
|
(34,089
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on value of leased property
|
|
|
3,100
|
|
|
6,229
|
|
|
6,222
|
|
|
5,944
|
|
|
7,093
|
|
|
10,679
|
|
Interest
on long-term debt
|
|
|
46,837
|
|
|
64,349
|
|
|
66,128
|
|
|
58,847
|
|
|
65,837
|
|
|
83,549
|
|
Interest
on short-term debt
|
|
|
6,500
|
|
|
5,145
|
|
|
4,837
|
|
|
5,442
|
|
|
6,312
|
|
|
9,915
|
|
Mandatorily
Redeemable Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,338
|
|
|
12,450
|
|
|
12,450
|
|
Other
interest expense and amortization
|
|
|
3,836
|
|
|
5,891
|
|
|
13,563
|
|
|
3,912
|
|
|
3,760
|
|
|
5,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
fixed charges
|
|
|
60,273
|
|
|
81,614
|
|
|
90,750
|
|
|
83,483
|
|
|
95,452
|
|
|
121,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
before taxes on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
and fixed charges
|
|
$
|
189,347
|
|
$
|
294,251
|
|
$
|
318,738
|
|
$
|
352,923
|
|
$
|
285,310
|
|
$
|
34,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
|
|
3.14
|
|
|
3.61
|
|
|
3.51
|
|
|
4.23
|
|
|
2.99
|
|
|
(a
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
An
$87.1 million deficiency in earnings caused the ratio of earnings
to fixed
charges to be less than a one-to-one
|
|
coverage.
A $195.8 million net write-off before income taxes related to
the
bankruptcy filing of DTI was recorded in
2001.
|
Exhibit
No. 31.1.a
CERTIFICATIONS
I,
Michael J. Chesser, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Great Plains
Energy
Incorporated;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report:
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
November
7, 2006
|
|
/s/
Michael J. Chesser
|
|
|
|
|
|
|
|
Michael
J. Chesser
Chairman
of the Board and Chief Executive
Officer
|
Exhibit
No. 31.1.b
CERTIFICATIONS
I,
Terry
Bassham, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Great Plains
Energy
Incorporated;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report:
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
November
7, 2006
|
|
/s/
Terry Bassham
|
|
|
|
|
|
|
|
Terry
Bassham
Executive
Vice President - Finance and Strategic Development and Chief Financial
Officer
|
Exhibit
No. 32.1
Certification
of CEO and CFO Pursuant to
18
U.S.C. Section 1350,
as
Adopted Pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report on Form 10-Q of Great Plains Energy
Incorporated (the "Company") for the quarterly period ended September 30, 2006
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Michael J. Chesser, as Chairman of the Board and Chief Executive
Officer of the Company, and Terry Bassham, as Executive Vice President - Finance
and Strategic Development and Chief Financial Officer of the Company, each
hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his
knowledge:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
|
/s/
Michael J. Chesser
|
|
|
Name:
Title:
|
Michael
J. Chesser
Chairman
of the Board and Chief
Executive
Officer
|
Date:
|
November 7,
2006
|
|
|
|
/s/
Terry Bassham
|
Name:
Title:
|
Terry
Bassham
Executive
Vice President - Finance and Strategic Development and Chief
Financial Officer
|
Date:
|
November
7, 2006
|
This
certification is being furnished solely pursuant to 18 U.S.C. Section 1350
and
is not being filed as part of the Report or as a separate disclosure document.
This certification shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to liability under that
section. This certification shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange
Act
of 1934 except to the extent this Exhibit 32.1 is expressly and specifically
incorporated by reference in any such filing.
A
signed
original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to Great Plains Energy Incorporated and will
be retained by Great Plains Energy Incorporated and furnished to the Securities
and Exchange Commission or its staff upon request.
Exhibit
No. 10.2.a.
Contract
Between
Kansas
City Power & Light Company
and
ALSTOM
Power Inc.
for
Engineering,
Procurement, and Construction Services
for
Air
Quality Control Systems and Selective Catalytic Reduction Systems
at
Iatan
Generating Station Units 1 and 2
and
the
Pulverized
Coal-Fired Boiler
at
Iatan
Generating Station Unit 2
TABLE
OF
CONTENTS
ARTICLE
1
|
DEFINITIONS
|
1
|
ARTICLE
2
|
DESCRIPTION
OF CONTRACT
|
8
|
2.1
|
Engagement
of Contractor
|
9
|
2.2
|
Conflicting
Provisions
|
9
|
2.3
|
Section
and Exhibit References
|
9
|
2.4
|
Interpretation
|
9
|
ARTICLE
3
|
SCOPE
OF WORK
|
10
|
3.1
|
General
|
10
|
3.2
|
Procurement
|
10
|
3.3
|
Commencement
of Work
|
10
|
3.4
|
Management
and Conduct of the Work
|
10
|
3.5
|
Skill
and Judgment
|
11
|
3.6
|
Manufacturer’s
Directions
|
11
|
3.7
|
Written
Progress Reports
|
11
|
3.8
|
Progress
Meetings
|
12
|
3.9
|
Monitoring
of Schedule
|
12
|
3.10
|
Quality
Control
|
12
|
3.11
|
Safety,
Loss Control and Emergencies
|
12
|
3.12
|
Protection
of the Work and Adjacent Property
|
13
|
3.13
|
Storage
and Related Matters
|
13
|
3.14
|
Royalties
and License Fees
|
13
|
3.15
|
Project
Procedures Manual
|
13
|
3.16
|
Contractor
Permits
|
13
|
3.17
|
Operations
Personnel Training
|
13
|
ARTICLE
4
|
CONTRACTOR
PERSONNEL
|
14
|
4.1
|
Adequate
and Competent Labor Force
|
14
|
4.2
|
Wages
and Benefits
|
14
|
4.3
|
Labor
Relations
|
14
|
4.4
|
Drug
and Alcohol Testing
|
14
|
4.5
|
Federal
Contracting Requirements
|
14
|
ARTICLE
5
|
LICENSING
AND CODES
|
14
|
5.1
|
Licensed
Engineers
|
14
|
5.2
|
Contractor
License
|
15
|
5.3
|
Law,
Codes, and Standards
|
15
|
TABLE
OF
CONTENTS
(continued)
ARTICLE
6
|
OWNER
REVIEW
|
15
|
6.1
|
Owner’s
Right to Review and Inspect; Correction of Defects
|
15
|
6.2
|
Failure
to Provide Notice of Inspection
|
15
|
6.3
|
Review
Not Approval
|
15
|
ARTICLE
7
|
RESPONSIBILITIES
OF OWNER
|
16
|
7.1
|
Fuel
and Utilities
|
16
|
7.2
|
Review
of Submittals
|
16
|
7.3
|
Designation
of Owner’s Representative
|
16
|
7.4
|
Operating
Personnel
|
16
|
7.5
|
Contractor
Permits
|
16
|
7.6
|
Compliance
with Contract and Laws
|
16
|
7.7
|
Asbestos,
Lead-Based Paint, and any other Hazardous Substances
|
16
|
7.8
|
Surveys
and Reports
|
16
|
7.9
|
Owner
Permits
|
16
|
7.10
|
Performance
Test Criteria
|
17
|
ARTICLE
8
|
PROJECT
SCHEDULE AND PROJECT CONTROLS
|
17
|
8.1
|
Time
For Performance of the Work
|
17
|
8.2
|
Level
1 Milestone Schedule
|
17
|
8.3
|
Level
3 Detailed CPM Schedule
|
17
|
8.4
|
Baseline
Schedule
|
17
|
8.5
|
Work
Breakdown Structure (WBS) and Earned-Value Reporting
|
19
|
8.6
|
Project
Execution Plan
|
20
|
8.7
|
Material
Laydown Plan
|
20
|
8.8
|
Crane
Plan
|
20
|
8.9
|
Start-Up
Schedule
|
20
|
8.10
|
Commissioning
Schedule
|
21
|
9.1
|
Site
Availability
|
21
|
9.2
|
Conditions
Affecting Work and Differing Site Conditions
|
21
|
9.3
|
Use
of Owner’s Tools and Equipment at Site
|
21
|
9.4
|
Owner
Control Over Work Scope
|
22
|
9.5
|
Owner
Control Over Access
|
22
|
9.6
|
Signs
|
22
|
9.7
|
Disposal
of Excavated Material; Archeological or Historical Finds
|
22
|
9.8
|
Security.
|
22
|
9.9
|
Site
Coordination Between Owner and Contractor
|
23
|
9.10
|
Construction
Plant and Temporary Facilities.
|
24
|
9.11
|
Construction
Utilities
|
25
|
9.12
|
Construction
Area.
|
26
|
9.13
|
Cleanliness
|
26
|
9.14
|
Fire
Protection
|
27
|
TABLE
OF
CONTENTS
(continued)
ARTICLE
10
|
THE
PARTIES’ REPRESENTATIVES
|
28
|
10.1
|
Owner’s
Representative
|
28
|
10.2
|
Contractor’s
Representative
|
28
|
10.3
|
Representative’s
Access
|
28
|
10.4
|
Compliance
with Owner’s Representative’s Directives
|
28
|
ARTICLE
11
|
SUBCONTRACTORS
AND EQUIPMENT SUPPLIERS
|
29
|
11.1
|
Award
of Subcontracts for Portions of the Work
|
29
|
11.2
|
List
of Subcontractors
|
29
|
11.3
|
Contracts
with Subcontractors
|
29
|
11.4
|
Payments
to Subcontractors
|
29
|
11.5
|
Owner/Subcontractor
Communication
|
30
|
11.6
|
Approved
Equipment Suppliers
|
30
|
ARTICLE
12
|
COMPENSATION,
LETTERS OF CREDIT, AND INVOICING
|
30
|
12.1
|
Total
Compensation
|
30
|
12.2
|
Bonus.
|
30
|
12.3
|
Monthly
Applications for Payments
|
30
|
12.4
|
Certification
by Contractor
|
31
|
12.5
|
Lien
Waivers
|
31
|
12.6
|
Payment
of Undisputed Amounts
|
31
|
12.7
|
Payment
of Disputed Amounts
|
32
|
12.8
|
Retainage
|
32
|
12.9
|
Not
Used
|
32
|
12.10
|
Payments
Withheld
|
32
|
12.11
|
Final
Payment
|
32
|
12.12
|
Contractor’s
Five Percent LOC
|
33
|
ARTICLE
13
|
CHANGE
ORDERS
|
33
|
13.1
|
Owner
Initiated Change Orders
|
33
|
13.2
|
Contractor
Change Requests
|
34
|
13.3
|
Change
Order For Delays
|
34
|
13.4
|
Change
Order for Contractor Delay or Error
|
34
|
13.5
|
Minor
Changes in the Work
|
35
|
13.6
|
Duty
to Continue the Work
|
34
|
13.7
|
Effect
of Changes in the Law
|
35
|
TABLE
OF
CONTENTS
(continued)
ARTICLE
14
|
CONTRACTOR’S
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
|
35
|
14.1
|
Representations
and Warranties of Contractor
|
35
|
14.2
|
Covenants
of Contractor
|
36
|
14.3
|
Opinion
of Counsel from Contractor
|
36
|
14.4
|
Additional
Warranties and Representations of Contractor
|
36
|
14.5
|
Additional
Documentation
|
36
|
14.6
|
Changes
in Circumstances
|
36
|
ARTICLE
15
|
WARRANTY
OF THE WORK AND REMEDIES
|
36
|
15.1
|
General
Warranty of Work
|
36
|
15.2
|
Engineering
and Design
|
37
|
15.3
|
Nonconforming
Work
|
37
|
15.4
|
Standard
Warranty Work
|
37
|
15.5
|
Operating
Emergency Warranty Work
|
37
|
15.6
|
Unit
1 Warranty Callback Period
|
37
|
15.7
|
Unit
2 Warranty Callback Period
|
38
|
15.8
|
Catalyst
Warranty
|
38
|
15.9
|
Baglife
Warranty
|
38
|
15.10
|
Subcontractor
Warranties
|
38
|
15.11
|
Root
Cause Repairs
|
39
|
15.12
|
Cure
Rights of Owner for Breach of Warranty
|
39
|
15.13
|
Warranty
and Passage of Title
|
39
|
15.14
|
Extent
of Warranty
|
39
|
15.15
|
Exclusive
Warranties
|
39
|
15.16
|
Failure
of Owner to Operate and Maintain Work
|
39
|
ARTICLE
16
|
DISPUTE
RESOLUTION
|
40
|
16.1
|
Step
Negotiations
|
40
|
16.2
|
Mediation
|
40
|
16.3
|
Arbitration
|
40
|
16.4
|
Continued
Prosecution of the Work
|
40
|
17.1
|
Payment
by Contractor
|
40
|
17.2
|
Tax
Exemption
|
41
|
17.3
|
Indemnification
|
41
|
17.4
|
Assurances
|
41
|
ARTICLE
18
|
INDEMNIFICATION
|
41
|
18.1
|
Contractor
Indemnity
|
41
|
18.2
|
Workers
Compensation Waiver
|
41
|
18.3
|
Not
Used
|
41
|
18.4
|
Patent
Indemnity
|
41
|
TABLE
OF
CONTENTS
(continued)
ARTICLE
20
|
EVENTS
OF DEFAULT AND TERMINATION
|
42
|
20.1
|
Termination
Without Cause
|
42
|
20.2
|
Contractor
Events of Default
|
43
|
20.3
|
Remedies
for Contractor Default
|
43
|
20.4
|
Owner
Termination for Cause
|
44
|
20.5
|
Additional
Consequences of Termination
|
44
|
20.6
|
Limitation
of Liability
|
44
|
20.7
|
Consequential
Damages
|
44
|
20.8
|
Applicability
|
45
|
20.9
|
Books,
Records and Right To Audit
|
45
|
20.10
|
Owner
Default
|
45
|
ARTICLE
21
|
TESTING
AND FINAL COMPLETION
|
45
|
21.1
|
Scheduling
of Performance Testing
|
45
|
21.2
|
Achievement
of Performance Guarantees
|
45
|
21.3
|
Failure
of Performance Tests
|
45
|
21.4
|
Retainage
for Punchlist Items
|
45
|
ARTICLE
22
|
LIQUIDATED
DAMAGES
|
46
|
22.1
|
Performance
Guarantees
|
46
|
22.2
|
Liquidated
Damages for Failure to Meet Performance Guarantees
|
46
|
22.3
|
Liquidated
Damages for Delay and Failure to Meet Schedule
|
46
|
22.4
|
Liquidated
Damages Exclusive Remedy
|
46
|
22.5
|
No
Liquidated Damages for Owner Delay
|
46
|
22.6
|
Liquidated
Damages Reasonable
|
46
|
ARTICLE
23
|
RISK
OF LOSS
|
46
|
ARTICLE
24
|
FORCE
MAJEURE
|
47
|
24.1
|
Definition
|
47
|
24.2
|
Excused
Performance
|
47
|
24.3
|
Settlement
of Strikes
|
47
|
24.4
|
Burden
of Proof
|
47
|
24.5
|
Termination
for Force Majeure Delay
|
47
|
24.6
|
Force
Majeure as a Change
|
47
|
ARTICLE
25
|
FEDERAL
CONTRACTING REQUIREMENTS
|
48
|
TABLE
OF
CONTENTS
(continued)
ARTICLE
26
|
MILLENNIUM
COMPLIANCE
|
48
|
26.1
|
Millennium
Compliant Software
|
48
|
26.2
|
Testing
|
48
|
26.3
|
Subcontractor
Warranties
|
48
|
26.4
|
Non-Compliant
Software
|
48
|
26.5
|
Owner
Liability
|
48
|
26.6
|
Contractor
Obligations
|
48
|
ARTICLE
27
|
UNDERGROUND
INSTALLATIONS
|
49
|
27.1
|
Contractor
Responsibility
|
49
|
27.2
|
Maintaining
Records of Underground Facilities
|
49
|
ARTICLE
28
|
SAFETY
AND FIRST AID
|
49
|
28.1
|
Responsibility
and Liability
|
49
|
28.2
|
Safety
Standards
|
49
|
ARTICLE
29
|
MISCELLANEOUS
PROVISIONS
|
49
|
29.1
|
Entire
Contract; Amendment
|
49
|
29.2
|
Independent
Contractor
|
49
|
29.3
|
Title
to Plans and Specifications
|
49
|
29.4
|
Binding
Effect; Successors and Assignees
|
50
|
29.5
|
Auditing
Rights for Non-Fixed-Price Work
|
50
|
29.6
|
Notices
|
51
|
29.7
|
Not
for Benefit of Third Parties
|
51
|
29.8
|
Governing
Law and Venue
|
51
|
29.9
|
Headings;
Usage of Certain Words
|
51
|
29.10
|
Rules
of Construction
|
51
|
29.11
|
No
Waiver
|
51
|
29.12
|
Severability
|
51
|
29.13
|
Hazardous
Substances
|
52
|
29.14
|
Environmental
Compliance and Indemnification
|
52
|
29.15
|
Asbestos
& Lead Paint
|
52
|
ARTICLE
30
|
PERFORMANCE
LETTER OF CREDIT
|
53
|
30.1
|
Performance
Letter of Credit
|
53
|
LIST
OF
EXHIBITS
EXHIBIT
A
|
TECHNICAL
SPECIFICATIONS
|
EXHIBIT
B
|
MILESTONE
DATES
|
EXHIBIT
C
|
IATAN
UNIT 1 EXISTING PERMIT LIMITS
|
EXHIBIT
D
|
CONTRACT
PRICE
|
EXHIBIT
E
|
COMPLETION
DATES
|
EXHIBIT
F
|
KEY
PERSONNEL
|
EXHIBIT
G
|
FORM
OF MONTHLY PROGRESS REPORTS
|
EXHIBIT
H
|
NOT
USED
|
EXHIBIT
I
|
NOT
USED
|
EXHIBIT
J
|
NOT
USED
|
EXHIBIT
K
|
OWNER’S
DRUG AND ALCOHOL SCREENING POLICY AND PROCEDURE
|
EXHIBIT
L
|
REQUIRED
SUBMITTALS
|
EXHIBIT
M
|
FEDERAL
SUBCONTRACTING REPORTS/REQUIREMENTS
|
EXHIBIT
N
|
PREFERRED
SUBCONTRACTORS AND EQUIPMENT SUPPLIERS
|
EXHIBIT
O
|
PAYMENT
DOCUMENTATION
|
EXHIBIT
P
|
FIVE
PERCENT LETTER OF CREDIT
|
EXHIBIT
Q
|
MISSOURI
TAX EXEMPTION CERTIFICATE
|
EXHIBIT
R
|
INSURANCE
REQUIREMENTS
|
EXHIBIT
S
|
PERFORMANCE
GUARANTEES AND LIQUIDATED DAMAGES
|
EXHIBIT
T
|
NOT
USED
|
EXHIBIT
U
|
PERFORMANCE
LETTER OF CREDIT
|
EXHIBIT
V
|
RATE
SCHEDULE
|
EXHIBIT
W
|
PAYMENT
SCHEDULE
|
vii
ENGINEERING,
PROCUREMENT, AND CONSTRUCTION CONTRACT
This
Engineering, Procurement, and Construction Contract is made and entered into
as
of this 10th day of August, 2006 (“Effective Date”) by and between Kansas City
Power & Light Company, a Missouri corporation, and ALSTOM Power Inc., a
Delaware corporation, for the
design,
engineering, procurement, construction, assembly, start-up, and testing of
the
AQC Systems for Units 1 and 2, the SCR Systems for Units 1 and 2, the Boiler
for
Unit 2, and all of their collective appurtenances at the Iatan Electric
Generating Station.
RECITALS
WHEREAS,
Owner owns and operates the
Iatan
1
Electric Generating Station
(“Unit
1”), a 670 mW pulverized coal-fired power generation facility located near
Iatan, Missouri.
WHEREAS,
Owner desires to install a new pulverized coal-fired power generation facility
and appurtenant structures (“Unit 2”) next to Unit 1 that is nominally rated at
850 mW;
WHEREAS,
Owner desires to install pollution control equipment on Unit 1 and Unit 2,
including, without limitation, adding limestone based, wet scrubber flue
gas
desulfurization systems, mercury control systems, limestone and gypsum
processing systems, and baghouses and appurtenant materials, as more
particularly described in the Technical Specifications for the AQC
Systems;
WHEREAS,
Owner
desires to install an SCR System on Unit 1 and Unit 2, including, without
limitation, the Catalyst, the material handling systems, ammonia injection
grid,
ductwork, and appurtenant materials, as more particularly described in the
Technical Specifications for the SCR Systems;
WHEREAS
Owner desires to install a pulverized coal-fired boiler and appurtenant
materials on Unit 2, as more particularly described in the Technical
Specifications;
WHEREAS,
Contractor is experienced in the design, engineering, procurement, construction,
assembly, start-up, and testing of pollution control equipment projects and
systems utilized in connection with coal-fired power generation facilities
similar to the Plant; and
WHEREAS,
Owner desires to engage and Contractor agrees to be so engaged to design,
engineer, procure, construct, assemble, start-up, and test the AQC and SCR
Systems for Unit 1 and Unit 2 and the Boiler for Unit 2.
Now,
therefore, for and in consideration of the foregoing premises and of the
mutual
covenants hereinafter contained, the Parties hereto have agreed as
follows:
ARTICLE
1
DEFINITIONS
Unless
the
context otherwise requires, the following definitions shall apply to this
Contract. The singular shall include the plural and the masculine shall include
the feminine, as the context requires. The terms “includes” or “including” shall
mean “including, but not limited to.” Any term not defined in this Article 1 and
used in an administrative or technical Division or Section, Exhibit or Change
Order shall have the meaning ascribed therein.
1.1
Application
for Payment
means
the invoices submitted by Contractor pursuant to Article 12 for payments
due for
Work performed under the Contract Documents.
1.2
AQC
Material Handling System
means
but is not limited to the limestone and gypsum conveyance systems and
appurtenances to be added to the Unit 1 and Unit 2, respectively, and comprising
a portion of the Work, as specified in the Technical
Specifications.
1.3
AQC
System
means
the FGD System, Baghouse, Mercury Control System, AQC Material Handling System,
ductwork and appurtenant Materials for Unit 1 and Unit 2, respectively, as
specified in the Technical Specifications.
Page
1
1.4
Asbestos
means
any material that contains more than 1% asbestos and is friable or is releasing
asbestos fibers into the air above current action levels established by the
United States Occupational Safety and Health Administration.
1.5
Bag
Failure
means
damage to the fabric filter bags specified in the Technical Specifications,
such
as a breach, tear or opening in a bag, or blinding or pluggage of the fabric
such that the dust removal system in the Baghouse does not function to remove
the dust as specified.
1.6
Baghouse
means
the fabric filter particulate removal Materials and appurtenances specified
in
the Technical Specification.
1.7
Baglife
Failure
means
that any one or more of the following conditions has occurred during the
Guaranteed Baglife Period: (1) when a cumulative value of one percent (1%)
per
year or 3% during the Guaranteed Baglife Period (the “Attrition Allowance”) of
the original total number of fabric filter bags have suffered Bag Failure;
(2)
subject to the limitation set forth in Section 15.14, when pressure drop
of the
fabric filter system exceeds the guaranteed system operating pressure limit
by
greater than 10% to indicate unacceptable system performance on more than
one
occasion in 90 consecutive operating days; (3) when Bag Failure has occurred
to
5% of the bags in any one compartment; or (4) when filterable particulate
emissions, including opacity, exceeds permitted emissions on more than one
occasion in 90 consecutive operating days.
1.8
Boiler
means
the pulverized coal-fired boiler for Unit 2 including all equipment and
appurtenances required for pulverized coal combustion, as specified in the
Technical Specifications.
1.9
Business
Day
means
any Day except Saturday, Sunday, or a weekday that is observed by Owner as
a
holiday.
1.10
Catalyst
means
the surface specified in the Technical Specifications used to promote the
selective, low temperature reaction of NOx and ammonia (NH
3
),
converting them to nitrogen and water vapor.
1.11
Catalyst
Life Failure
means
the Catalyst fails to achieve the guaranteed NOx emission or ammonia slip
levels
when operating within the range of design fuels and operating conditions
(collectively, “Design Conditions”) at any time prior to the end of the
Guaranteed Catalyst Period.
Owner
may experience minor spikes or excursions outside the required Design
Conditions. The range of the acceptable excursions from the Catalyst Design
Conditions are as follows:
Inlet
Flue Gas Temperature to the SCR (Temperature range from 545°F to 740°F for Unit
2 and from 590°F to 740°F for Unit 1)
:
Excursion for inlet flue gas temperature: (a) Maximum operating temperature
from
the range listed above +
50°F
(time
period for excursion not to exceed 24 cumulative hours); or (b) Minimum
allowable operating temperature. Operation of the SCR system 25°F below the
minimum allowable temperature will not void the Catalyst Life Warranty as
long
as SCR operation greater than 50°F above the minimum allowable temperature
occurs for at least an equivalent number of hours. SCR operation is
defined as the injection of ammonia into the system.
Flue
Gas Velocity
.
Excursion for flue gas velocity not to exceed +5% above Boiler Maximum
Continuous Rating (“BMCR”) conditions (time period not to exceed 24 cumulative
hours).
Fuel
Constituents and Ash Constituents
.
Excursion for fuel constituents and ash constituents not to exceed 10% beyond
the worst range of properties specifically sulfur content, inlet ash loading,
sodium, calcium, phosphorus and arsenic (time period for excursion not to
exceed
240 cumulative hours).
1.12
Change
Order
means a
written order issued to Contractor pursuant to Article 13.
1.13
Construction
Aids
means
the materials, supplies, construction tools, cranes and other construction
equipment, field office equipment, field office supplies, scaffolding, form
lumber, temporary buildings and facilities, and all other items provided
by
Contractor as part of, or necessary for, completion of the Work, but which
are
not intended to become a permanent part of the Site.
Page
2
1.14
Continuous
Emission Monitoring System
means
the total equipment necessary for the determination of a gas or particulate
matter concentration or emission rate using pollutant analyzer measurements
and
a conversion equation, graph, or computer program to produce results in units
of
the applicable emission limitation or standard.
1.15
Contract
means
this Engineering, Procurement and Construction Contract between Owner and
Contractor for the engineering, procurement, and construction services
for the
AQC and SCR Systems for Units 1 and 2 and the Boiler for Unit 2.
1.16
Contract
Documents
means:
(a) this Contract including all Exhibits hereto; (b) the Purchase Order;
(c) the
Technical Specifications; (d) any applicable Contractor Specifications;
(e) any
applicable Drawings; (f) the Change Orders; and (g) any other documents
identified in this Contract and/or the Purchase Order as incorporated into
the
Contract Documents.
1.17
Contract
Implementation Documents
means
the detailed, procurement documents, engineering reports, Shop Drawings,
and
Submittals, including drawings and other documents which are prepared by
Contractor or its Subcontractors, which are accepted in writing by Owner
or
Owner’s Representatives, and which detail how Contractor or its Subcontractors
will perform the Work.
1.18
Contract
Price
shall
have the meaning set forth in Subarticle 12.1
and
Exhibit D.
1.19
Contract
Time
means
the number of Days or the dates stated in the Contract to complete the
Work on
or before all of the Milestone Dates identified in Exhibit B, including
but not
limited to: (i) achieving Mechanical Completion, Provisional Acceptance,
Substantial Completion, and Final Completion of Units 1 and 2, respectively;
and
(ii) completing the Work so that it is ready for Final Payment as delineated
in
Article 12.
1.20
Contractor
means
ALSTOM Power Inc. with whom Owner has entered into this Contract for the
performance of the Work covered thereby.
1.21
Contractor
Change Request
shall
have the meaning set forth in Subarticle 13.2.
1.22
Contractor
Specifications
means
the specifications prepared by Contractor for the performance of all aspects
of
the Work developed by Contractor and reviewed and accepted, in writing,
by
Owner. Such Contractor Specifications as they are reviewed and accepted
in
writing by Owner shall become part of the Contract Documents.
1.23
Contractor’s
Delay Costs
shall
have the meaning set forth in Subarticle 13.3.1.
1.24
Contractor’s
Representative
shall
have the meaning set forth in Subarticle 10.2.
1.25
Day
means a
calendar day commencing at 12:00 a.m.
1.26
Defective
or Defect
means,
with respect to the Work performed hereunder or any portion thereof, Work
not
conforming to the Contract Documents, including without limitation, the
standards and the requirements of Subarticles 15.1 and 15.2.
1.27
Detailed
CPM Schedule
means
the detailed critical path method schedule required to be submitted by
Contractor pursuant to Subarticle 8.3.
1.28
Effective
Date
means
the date Owner and Contractor made and entered into this Contract.
1.29
Engineer
shall
mean the consulting engineer retained by Owner, that shall be designated
as an
Other Owner-Authorized Party.
As
of the
date of this Contract, Owner’s Engineer is identified as Burns & McDonnell
Engineering Company, Inc. (“Burns & McDonnell”), but is subject to change at
the option of the Owner during the course of the Project. If Burns &
McDonnell ceases to be the Engineer at any time during the course of the
Project
and Owner does not retain a new consulting engineer, then the term “Engineer”
shall mean Owner.
Page
3
1.30
Environmental
Laws
means
any and all Permits and all applicable codes, laws, rules, and regulations
relating to actual or potential effect on human health, safety, or the
environment; the disposal of materials; the discharge or release of chemicals,
gases, or other substances or materials into the environment; or the presence
of
such materials, chemicals, gases, or other substances. Owner shall be
responsible for obtaining and complying with any environmental Permits.
Contractor shall be responsible for complying with any Performance Guarantees
contained herein.
1.31
Event
of Default
shall
have the meaning set forth in Subarticle 20.2.
1.32
FGD
System
means
the limestone based, wet scrubber component of an AQC System, complete with
the
AQC Material Handling Systems and all other components, accessories and
appurtenances, necessary for a complete and operable system, to be added
to and
placed in successful continuous operation at Unit 1 and 2 of the Plant and
comprising a portion of the Project and the Work, as more particularly described
in the Technical Specifications.
1.33
Final
Completion
means
the full performance by Contractor of all of Contractor’s obligations under the
Contract Documents and all revisions and amendments thereof, and shall require
successful achievement of Mechanical Completion, Provisional Acceptance,
Substantial Completion (including passing of all Performance Tests), the
delivery of all required Lien waivers by Contractor to Owner, Owner’s delivery
to Contractor of a written Certificate of Final Completion, a resolution
of all
Punchlist items, and Owner’s draw down of liquidated damages (if any) from the
Five Percent LOC, Performance LOC, or Retainage, as the case may be.
1.34
Final
Completion Date
means
the date Contractor achieves all of the requirements to complete all of the
Work
as set forth in Exhibit E.
1.35
Five
Percent LOC
means
“Five Percent Letter of Credit” and shall have the meaning set forth in Section
12.12.
1.36
Force
Majeure
shall
have the meaning set forth in Subarticle 24.1.
1.37
Force
Majeure Delay Date
means
the date of commencement of a Force Majeure event specified in the Notice
provided by the Party claiming the existence of a Force Majeure event pursuant
to Subarticle 24.2.
1.38
Governmental
Agency
means
any department, commission, board, regulatory authority, bureau, legislative
body, agency, political subdivision, or instrumentality, and their successors,
of any federal, state, local, or municipal government.
1.39
Guaranteed
Catalyst Period shall have the meaning set forth in Subarticle
15.8.1.
1.40
Guaranteed
Unit 1 Mechanical Completion Date
means
the date set forth in Exhibit B, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.41
Guaranteed
Unit 1 Provisional Acceptance Date
means
the date set forth in Exhibit B,, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.42
Guaranteed
Unit 1 Substantial Completion Date
means
the date set forth in Exhibit B, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.43
Guaranteed
Unit 2 Mechanical Completion Date
means
the date set forth in Exhibit B, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.44
Guaranteed
Unit 2 Provisional Acceptance Date
means
the date set forth in Exhibit B, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.45
Guaranteed
Unit 2 Substantial Completion Date A
means
the date set forth in Exhibit B, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.46
Guaranteed
Unit 2 Substantial Completion Date B
means
the date set forth in Exhibit B, as such date may be changed from time to
time
in accordance with Article 13 of this Contract.
1.47
Hazardous
Substances
means
any and all “hazardous substances,” “hazardous waste,” “waste,” or “pollutant or
contaminant” as any of such terms may be defined in any Environmental Law, or
the regulations promulgated thereunder, or case law interpreting the same,
or
any other pollutant or substance that is regulated under any Environmental
Law
or that may be the subject of liability for costs of response or remediation
under any Environmental Law.
1.48
Interim
Notice to Proceed
means
the Notice issued on April 27, 2006 by Owner to Contractor authorizing the
Work
to proceed, including any amendments thereto.
1.49
Laws
means
(1) all applicable federal, state, and local laws, treaties, ordinances,
codes
rules and regulations, judgments, decrees, injunctions, writs and orders
of any
court, arbitrator or Governmental agency or authority, (2) all applicable
and
generally recognized building and safety standards governing performance
of the
Work, and (3) all applicable Environmental Laws and applicable
Permits.
1.50
Liens
means
any mortgage, lien, pledge, claim, charge, lease, easement, servitude, right
of
others, security interest or encumbrance of any kind, including any lien
arising
pursuant to any statutory or equitable right permitting Contractor, or its
Subcontractors and/or laborers to place a Lien against any Unit, the Plant,
the
Site or the Project, as the case may be, for the value of labor bestowed
in
connection therewith and/or materials furnished thereto.
1.51
Limited
Notice to Proceed
means
the Notice issued on February 28, 2006 by Owner to Contractor authorizing
limited Work release for selected engineering, procurement, and
fabrication.
1.52
Losses
means
claims, damages, losses, liabilities, demands, costs, and expenses, including
but not limited to reasonable attorneys’ fees.
1.53
Materials
means
the materials, supplies, apparatus, equipment, machinery, and other goods
to be
provided by Contractor or any Subcontractor, as part of, or necessary for
completion of, the Work and that becomes a permanent part of the Plant.
1.54
Mercury
Control Systems
means
the systems installed, as part of the AQC Systems and as specified in the
Technical Specification, to reduce the mercury emissions of Unit 1 and Unit
2.
1.55
mW
means
megawatt.
1.56
Notice
shall
have the meaning set forth in Subarticle 29.6.
1.57
Notice
to Proceed
means
the written Notice by Owner to Contractor releasing Contractor to perform
the
entire scope of Work under this Contract.
1.58
Operating
Emergency
means
any equipment or Materials failure at the Plant which causes, or imminently
will
cause, a reduction in the output of the affected Unit.
1.59
Other
Owner-Authorized Party
means
any Person so designated by Owner pursuant to Subarticle 10.1
and
Engineer.
1.60
Owner
means
Kansas City Power & Light Company, with whom Contractor has entered into
this Contract and for whom the Work is to be provided.
1.61
Owner
Indemnitees
shall
have the meaning set forth in Subarticle 18.1.
1.62
Owner’s
Representative
means
the individual(s) appointed by Owner pursuant to Subarticle 10.1 and any
successors.
Page
5
1.63
Performance
Guarantees
means
Contractor’s performance guarantees set forth in Exhibit S while Unit 1 and Unit
2, respectively, are operated by the Owner in accordance with the design
conditions stated in the Contract Documents, including the Technical
Specifications.
1.64
Performance
Tests
means
the operation of the AQC Systems, SCR Systems, and Unit 2 Boiler in accordance
with the requirements contained in Exhibit S for the purpose of determining
the
AQC and SCR Systems’ and the Boiler’s level of achievement with respect to the
Performance Guarantees
.
1.65
Permits
means
all permits, licenses, approved plans, contracts, filings, authorizations,
approvals, easements or rights-of-way required by or entered into with any
Governmental Agency in connection with the proper conduct and performance
of the
Work, including all building permits, contractor’s licenses, zoning and land use
permits, environmental permits, conditional use permits, and all necessary
licenses, authorizations, approvals, and permits obtained from any Governmental
Agency.
1.66
Person
means an
individual, partnership, corporation, company, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity.
1.67
Plant
means
Owner’s Iatan Unit 1 and Unit 2.
1.68
Prime
Interest Rate
means
the effective “prime rate” of interest for large U.S. money center commercial
banks published under “Money Rates” by The Wall Street Journal.
1.69
Progress
Reports
means
the engineering, procurement, progress, and construction progress reports
required by the Contract Documents.
1.70
Project
means,
collectively, (a) the Work, responsibilities, obligations and warranties
of
Contractor as provided in the Contract Documents, including the securing
of all
Contractor Permits; (b) the responsibilities and obligations of Owner as
provided in this Contract, including the securing of all Owner Permits; and
(c)
any and all other elements of designing, engineering, procuring, constructing,
erecting, start-up and testing, successful continuous operating and maintaining
the AQC Systems, SCR Systems, the Boiler, and their respective appurtenances
as
set forth in the Contract Documents.
1.71
Project
Critical Path
means
the longest calculated path of activities in the Project Schedule as defined
under Article 8.
1.72
Project
Schedule
means
the Baseline Schedule, as defined in Section 8.4, for Contractor’s timely
completion of the Work as prepared by Contractor pursuant to Article 8 which
shall include all of the Milestone Dates identified in Exhibit B.
1.73
Provisional
Acceptance Test
means a
test as measured by Owner’s monitoring equipment, including Owner’s Continuous
Emission Monitoring System, to determine the applicable Unit’s ability to meet
the Provisional Acceptance requirements stated in Exhibit E.
1.74
Prudent
Industry Practice
means
for boiler and pollution control projects and systems utilized in connection
with coal-fired power generation facilities similar to the Plant, with respect
to each of engineering, procurement, design, construction, operation, testing,
and maintenance of the Work, the practices, methods, and acts engaged in
or
approved by a significant portion of the electric generation industry of
the
United States (including utilities and independent power producers) that
at a
particular time, in the exercise of reasonable judgment in light of the facts
known or that reasonably should have been known at the time a decision was
made,
would have been expected to accomplish the desired result in a manner consistent
with the Laws, the Contract Documents, reliability, safety, environmental
protection, economy, and expedition. Prudent Industry Practice is not intended
to be limited to the optimum practice, method, or act, to the exclusion of
all
others, but rather is a spectrum of possible practices, methods or acts employed
by contractors, including those involving the use of new concepts or technology,
and having due regard for current editions of applicable design, safety and
maintenance codes and standards, manufacturers’ warranties and applicable Laws.
1.75
Punchlist
means
administrative items or other items of the Work identified by Owner (with the
consultation of the Engineer) in writing on or prior to the date of Substantial
Completion of Unit 1 and Unit 2, respectively, which have not been completed
but
which do not affect the safe start-up and testing or successful continuous
operation of any component of the Work and which are to be corrected, fixed
or
repaired by Contractor at its own expense as a condition to achieving Final
Completion.
1.76
Purchase
Order
means a
document issued by Owner to Contractor, which defines among other things
the
scope, price, and duration of the Work and the Contract Documents for the
Project. Any pre-printed terms and conditions contained on the Purchase Order
are superseded by this Contract and are null and void.
1.77
Samples
means
physical examples of Materials, or workmanship that are representative of
some
portion of the Work and which establish the standards by which such portion
of
the Work will be judged.
1.78
SCR
Material Handling Systems
means
but is not limited to the ammonia storage tank and appurtenances to be added
to
the Plant and comprising a portion of the Work, as specified in the Technical
Specifications.
1.79
SCR
System
means
the selective catalytic reduction system specified in the Technical
Specifications, including the Catalyst, SCR Material Handling Systems, ammonia
injection grid, ductwork, and appurtenant Materials for Units 1 and
2.
1.80
Shop
Drawings
means
all drawings, diagrams, illustrations, schedules, and other data or information
which are specifically prepared or assembled by or for Contractor and submitted
by Contractor to illustrate some portion of the Work.
1.81
Site
means
the real property on which the Work will be performed.
1.82
Standard
Warranty Work
shall
have the meaning set forth in Subarticle 15.4.
1.83
Subcontractor
means
any individual or entity, including agents, suppliers, vendors, materialmen,
mechanics, carriers, warehousemen, artisans, and subconsultants, that has
a
contract with Contractor for the performance of any part of the Work, including
those individuals or entities of whatever tier having a subcontract for
performance of any part of the Work with the Subcontractors specified herein.
1.84
Submittal
means
Shop Drawings, product data, Samples, or other documents that are prepared
by
Contractor or a Subcontractor and submitted by Contractor as a basis to evaluate
the use of its Materials and construction requirements for incorporation
in or
installation of the Work or needed to describe proper installation, operation
and maintenance, or technical properties.
1.85
Technical
Specifications
means
the conformed specifications prepared by Owner or Owner’s Engineer and
Contractor and incorporated herein as Exhibit A including the attachments
attached thereto that are reviewed and verified by Contractor and are part
of
the Contract Documents and establish the corresponding initial requirements
of
the Contract.
1.86
Underground
Facilities
means
all pipelines, conduits, ducts, cables, wires, manholes, vaults, tanks, tunnels,
or other such facilities or attachments, and any encasements containing such
facilities which have been installed underground to furnish any of the following
services or materials: electricity; gases; steam; liquid petroleum products;
telephone or other communications; cable television; sewage and drainage
removal; traffic or other control systems; or water.
1.87
Unit
means
either one of Unit 1 or Unit 2 at Iatan Electric Generating Station.
1.88
Unit
1
Auxiliary Power Guarantee
means
the amount of power guaranteed in Exhibit S.
1.89
Unit
1
Final Completion
means
that each of the conditions to Unit 1 Final Completion set forth in Exhibit
E
have been achieved in full.
1.90
Unit
1
Guaranteed Performance Tests
means
the tests set forth in the Technical Specifications to be conducted by Owner
to
determine Unit 1’s compliance with the Performance Guarantees stated in Exhibit
S and the Technical Specifications.
1.91
Unit
1
Mechanical Completion
means
that each of the conditions to Unit 1 Mechanical Completion set forth in
Exhibit
E have been achieved in full.
1.92
Unit
1
Mechanical Completion Certificate
means a
certificate issued by Owner to Contractor confirming that Unit 1 Mechanical
Completion has occurred.
1.93
Unit
1
Performance Guarantees
means
Contractor’s guaranteed performance for the Work for Unit 1 as described in
detail in Exhibit S.
1.94
Unit
1
Provisional Acceptance
means
that each of the conditions to Unit 1 Provisional Acceptance set forth in
Exhibit E have been achieved in full.
1.95
Unit
1
Substantial Completion
means
that each of the conditions to Unit 1 Substantial Completion set forth in
Exhibit E have been achieved in full.
1.96
Unit
2
Auxiliary Power Guarantee
means
the amount of power guaranteed in Exhibit S.
1.97
Unit
2
Guaranteed Performance Tests
means
the tests set forth in the Technical Specifications to be conducted by Owner
to
determine Unit 2’s compliance with the Performance Guarantees stated in Exhibit
S.
1.98
Unit
2
Mechanical Completion
means
that each of the conditions to Unit 2 Mechanical Completion set forth in
Exhibit
E have been achieved in full.
1.99
Unit
2
Final Completion
means
that each of the conditions to Unit 2 Final Completion set forth in Exhibit
E
have been achieved in full.
1.100
Unit
2
Mechanical Completion Certificate
means a
certificate issued by Owner to Contractor confirming that Unit 2 Mechanical
Completion has occurred.
1.101
Unit
2
Performance Guarantees
means
Contractor’s guaranteed performance for the Work for Unit 2 as described in
Exhibit S.
1.102
Unit
2
Provisional Acceptance
means
that each of the conditions to Unit 2 Provisional Acceptance set forth in
Exhibit E have been achieved in full
.
1.103
Unit
2
Substantial Completion
means
that each of the conditions to Unit 2 Substantial Completion set forth in
Exhibit E have been achieved in full.
1.104
Work
means
all of the services, labor, and Materials needed for the design, engineering,
procurement, manufacturing, fabrication, distribution, construction,
supervision, training, pre-commissioning, commissioning, start-up, and testing,
training and other related services required to be provided by Contractor
to
fully complete the Project pursuant to the terms of the Contract
Documents.
1.105
Work
Breakdown Structure
shall
have the meaning set forth in Subarticle 8.5.
1.
Page
8
ARTICLE
2
DESCRIPTION
OF CONTRACT
2.1
Engagement
of Contractor
.
Owner
hereby engages Contractor to perform all of the Work in accordance with the
requirements of the Contract Documents for the Contract Price, and Contractor
hereby accepts such engagement. Contractor acknowledges that Owner is relying
upon the expertise of Contractor to furnish the completed Project in accordance
with the requirements of the Contract Documents.
Specifically
as to the Unit 1 SCR, Owner and Contractor acknowledge and agree that the
Contract, the Contract Documents, the Contract Price, the Contract Time
and the
Project Schedule are based upon the Owner’s original Unit 1 SCR Specification
dated March 2, 2006, including Addenda 1 and 2, as modified by Contractor's
exceptions thereto, all of which are attached hereto as Exhibit A4-1 (the
“Base
SCR Specification”). Owner and Contractor further acknowledge and agree that
Owner's revised Unit 1 SCR specification (the “Revised SCR Specification”) will
be developed and when completed shall be attached hereto as Exhibit A4-2
and
will replace and supersede Exhibit A4-1, the Base SCR Specification and
will
form a part of the contract as to the Unit 1 SCR. Owner and Contractor
will
negotiate in good faith to conform the Revised SCR Specification, and any
affected Contract Documents, on or before September 12, 2006.
If
no
agreement can be reached, then the Base Specification, the Contract Price
and
the Project Schedule shall remain in effect subject to the provisions of
Article
13.
Additionally, as to the Unit 2 Elevators, Owner and Contractor acknowledge
and
agree that the Contract, the Contract Documents, the Contract Price, the
Contract Time and the Project Schedule are based upon two Vendors’ quotations
for the passenger and freight elevators dated June 22, 2006, from Otis
Elevator Company, and July 21, 2006, from Alimak Hek, Inc., both of which
are
attached hereto as Exhibit A2S-1 (the “Base Elevator Quotations”), but are not
part of the Contract Documents for the Project. Owner and Contractor further
acknowledge and agree that Owner’s specification for the elevators (the
“Elevator Specification”) will be developed based upon these quotations and the
scope exceptions set forth therein, as well as Contractor’s comments on scope as
set forth in an email dated July 25, 2006 from Mike Sivas to Steve Jones,
Brent
Davis and Jeffrey Fleenor, and when completed shall be attached hereto
as
Exhibit A2S-2. Owner and Contractor will negotiate in good faith to
develop the Elevator Specification on or before September 12, 2006.
Once
agreed upon, the terms of Exhibit A2S-2 and the agreed pricing, scope of
Work
and schedule, subject to the conditions stated herein and the result
of the negotiations, will be reflected in a Change Order amending the
Contract Documents, including any necessary Contract Price and scope of
Work
adjustments, on or before September 12, 2006. If the Parties are unable to
agree on the price, and scope of Work for the elevators and the exceptions,
then
the value of the elevators reflected in Exhibit D to the Contract and the
scope
of Work to provide the elevators shall be deducted by Change Order from
the
Contract Price.
2.2
Conflicting
Provisions
.
In
the
event of any conflict between or among the Contract Documents and the Contract
Implementation Documents, the following order of interpretation shall prevail:
(a) the terms of a duly authorized and executed Change Order; (b) the Contract;
(c) the terms of Exhibits B through W; (d) the terms of Exhibit A; (e)
Contractor Specifications, if any; (f) the Contract Implementation Documents;
and (g) the Purchase Order. Notwithstanding the foregoing, the several
documents
forming the Contract Documents shall be taken as mutually explanatory of
one
another; however, subject to dispute resolution provisions of Article 16,
Owner
shall decide priority where there exists ambiguities, discrepancies, conflicts,
or inconsistencies between or among respective Contract Documents of equal
precedence to each other.
Notwithstanding the above, Contractor acknowledges that it has provided
data to
Owner which have been attached to Exhibit A as “Contractor exhibits” (exhibits
A2A, A2C, A2D, and A2P). The Parties agree that to the extent such Contractor
exhibits do not accurately reflect the Work necessary to fulfill Contractor's
obligation to design, manufacture, procure, and construct the complete
systems
reflected in such Contract Documents, Contractor cannot request a Change
Order
.
2.3
Section
and Exhibit References
.
Any
reference in this Contract to a “Section,” “Subsection,” “Article,”
“Subarticle,” or “Exhibit,” is a reference to an article, subarticle, section,
subsection, or exhibit to this Contract unless otherwise specified.
2.4
Interpretation
.
As used
in this Contract, any agreement, document or drawing defined or referred
to
herein shall include each amendment, modification and supplement thereto
and
waiver thereof as may become effective from time to time, except where
otherwise
indicated. Any term defined by reference to any other agreement or document
shall have such meaning whether or not such agreement or document remains
in
effect. The terms “hereof,” “herein,” “hereunder” and comparable terms refer to
the entire agreement with respect to which such terms are used and not
to any
particular article, section or other subdivision thereof. A reference to
any
specific Laws includes any amendment or modification to such Laws (provided
that
such amendment or modification enacted after the Effective Date may constitute
a
basis for a Change pursuant to Article 13). Owner and Contractor may be
referred
to individually as “Party” or collectively as “Parties.” A reference to any
Person or Party includes its permitted successors and assigns. A reference
to a
company, corporation, partnership or other entity shall include its successors
and permitted assigns. If any provision of this Contract contemplates that
the
Parties shall negotiate or agree to any matter after the date that this
Contract
is signed, such provision shall be construed to include an obligation of
the
Parties to negotiate or reach an agreement in good faith within the spirit
and
intent of mutual cooperation and the content of this Contract and any failure
of
the Parties to negotiate or agree shall be a dispute within the meaning
of
Article 16.
ARTICLE 3
SCOPE
OF WORK
In
addition to the specific requirements relating to the Work contained in the
Contract Documents, Contractor shall have the following obligations with
respect
to the Work:
3.1
General
.
All
parts of the Work indicated or reasonably inferred from the terms of this
Contract and not expressly mentioned herein, and all of the usual and/or
necessary Work to complete projects that are the same or similar to the Project,
shall be furnished and executed as if it were expressly required by this
Contract. Without limiting the generality of the foregoing, scope content
details omitted from this Contract shall, as a minimum, be defined by the
details and meet the performance requirements of the Technical Specifications.
While Owner is conducting the Performance Tests, Contractor must comply with
the
requirements of the Contract Documents, including Exhibit S.
3.2
Procurement
.
Contractor shall, and shall cause its Subcontractors to, procure and pay
for, in
Contractor’s name as an independent contractor and not as an agent for Owner,
the following items: all Contractor and Subcontractor labor, Materials, tools,
equipment, all Contractor Permits, insurance, security, supplies, manufacturing
and related services (whether on-site or off-site) for construction of the
AQC
and SCR Systems for Units 1 and 2 and the Boiler for Unit 2 and incorporation
into the Plant which are required for completion of the Work in accordance
with
this Contract and are not explicitly specified to be furnished by Owner.
All
such items must comply with the Technical Specifications. Contractor shall
also
provide management and supervision necessary to satisfactorily engineer,
design,
fabricate, deliver, receive, off-load, store, construct, inspect, start-up,
and
test the AQC and SCR Systems for Units 1 and 2, and the Boiler for Unit 2
all in
accordance with the provisions of the Contract Documents.
3.3
Commencement
of Work
.
Contractor shall commence the Work as soon as practicable after receipt of
the
Notice to Proceed. Contractor shall not be authorized to commence any Work,
nor
shall any Work be deemed to have been commenced under this Contract, prior
to
the date specified in the Notice to Proceed; provided that, pursuant to such
terms and conditions as Owner and Contractor may agree upon, Contractor shall
proceed with so much of the Work as may be specified in the Limited Notice
to
Proceed, the Interim Notice to Proceed, and any amendments thereto, from
the
date specified therein. Contractor warrants that it has reviewed the Technical
Specifications and agrees that they are sufficient to perform all of the
Work.
Contractor further agrees that, after the Effective Date, it will not make
any
claims for additional costs or extensions of the Milestone Dates based on
the
content of the Technical Specifications being insufficient to complete the
Work.
3.4
Management
and Conduct of the Work
.
Contractor shall manage and conduct the Work in accordance with the terms
of the
Contract Documents. Without limiting the generality of the foregoing, Contractor
agrees that:
3.4.1
Selection
and Approval of Contractor’s Representative and Site Construction
Manager
.
Contractor shall, promptly following the Effective Date, select and give
Owner
written Notice of the identity of the proposed Contractor’s Representative and
Contractor employee who will manage all of the Work at the Site (the “Site
Construction Manager”), which persons shall be subject to the prior consent of
Owner, which consent shall not be unreasonably withheld. Contractor’s
Representative shall be authorized to act on behalf of Contractor and shall
be
the individual with whom Owner or Owner’s Representative may consult at all
reasonable times, and whose instructions, requests, and decisions will be
binding upon Contractor as to all matters pertaining to this Contract and
the
performance of the Parties hereunder (provided neither any amendment or
modification of this Contract nor any other change shall be effected except
by a
Change Order). Contractor’s Representative shall also have the responsibility to
ensure that the Work being performed is in accordance with all provisions
of the
Contract Documents. At all times, the Work to be performed by Contractor
at the
Plant Site shall be conducted and managed under the auspices of a competent
Site
Construction Manager experienced in engineering, procurement and construction
of
air quality control and selective catalytic reduction systems, pulverized
coal-fired boilers, and incorporating each with their component parts into
power
plants. The Site Construction Manager shall be designated by Contractor no
later
than thirty (30) Days prior to the date of Contractor’s scheduled mobilization
on the Plant Site and shall be listed as one of Contractor’s Key Personnel on
the attached Exhibit F. The Site Construction Manager’s duties shall include,
among other things, coordination of Work between all entities performing
Work on
the Plant Site on behalf of Contractor, including Contractor’s Subcontractors.
Contractor shall not change the Site Construction Manager or Contractor’s
Representative, or other key members of Contractor’s staff assigned to perform
the Work without the prior consent of Owner, which consent shall not be
unreasonably withheld.
Page
10
3.4.2
Key
Personnel
.
Concurrently with the appointment of Contractor’s Representative, Contractor
shall provide Owner with a list of all Key Personnel and their respective
resumes which Contractor intends to use in the performance of the Work. A
preliminary list of Key Personnel of Contractor is set forth in Exhibit F.
Contractor shall not replace any such personnel at any time without the prior
written consent of Owner, which consent shall not be unreasonably withheld
or
delayed. Contractor shall exert its best efforts to promptly replace any
Key
Personnel to which Owner reasonably objects in writing. Contractor shall
at all
times enforce good order among its employees and those of Subcontractors
and
shall not employ or permit any Subcontractor to employ in connection with
its
performance under this Contract any unfit person or anyone not skilled in
the
work assigned to such person. Contractor shall use reasonable efforts in
the
employment of labor (whether directly or indirectly employed) so as to cause
no
conflict or interference with or between the various trades, or delay in
performance of Contractor’s obligations. Whenever required by Laws, Contractor
agrees to employ only licensed personnel to perform engineering, design,
architectural or other services in the performance of the Work. Contractor
shall
have and exercise full responsibility for compliance hereunder by Contractor’s
employees and Subcontractors generally, and in particular, with respect to
Contractor’s portion of the Work; shall itself comply with all Laws, and require
and be directly responsible for compliance therewith on the part of Contractor’s
employees and Subcontractors; and shall directly receive, respond to, defend
and
be responsible for all citations, assessments, fines or penalties which may
be
incurred by reason of Contractor’s failure or failure on the part of
Contractor’s employees or Subcontractors to so comply.
3.5
Skill
and Judgment
.
Contractor shall perform the Work in accordance with the Contract Documents
and
Prudent Industry Practice.
3.6
Manufacturer’s
Directions
.
Unless
the Contract Documents otherwise require, Contractor shall comply with
the
manufacturer’s instructions and printed directions for any Materials or related
systems supplied by such manufacturer.
3.7
Written
Progress Reports
.
Contractor shall submit to Owner Progress Reports and participate in regularly
scheduled meetings in accordance with the provisions of Article 8 and shall
participate in such other meetings as Owner reasonably may request.
3.7.1
Monthly
Progress Reports
.
Contractor shall deliver to Owner no less frequently than monthly, by the
tenth
(10th) Day of each month, a written report, in a format similar to Exhibit
G, of
the progress of the Work during the preceding month (each a “Monthly Progress
Report”) and on all matters deemed significant by Owner.
3.7.2
Reports
on Events of Force Majeure and Emergencies
.
In
addition to all other reports required under this Contract, should any
Force
Majeure event, significant problem, emergency, strike, injury, work stoppage
or
legal problem be anticipated, or any Force Majeure or other unanticipated
event
occur which might adversely affect Contractor’s ability to perform its
obligations hereunder, Contractor shall immediately prepare a written report
detailing all available information and steps being taken to correct such
Force
Majeure or significant problem, emergency, or other event or problem and
deliver
such significant event report to Owner as soon as practicable. Owner may
at any
time request a significant event report on any event which Owner reasonably
regards as being significant.
3.7.3
Damage
Reports
.
If,
prior to each of their respective dates of Substantial Completion, the
AQC
Systems, SCR Systems, Boiler or any component or portion thereof is materially
damaged, Contractor shall provide Owner, as soon as practicable after the
occurrence of such damage, a damage report detailing such occurrence, any
required repairs and the estimated duration of such repairs.
3.7.4
Additional
Reports
.
Contractor shall also provide written Notice to Owner in accordance with
Subarticle 29.6 of any significant changes or developments in the Work.
Contractor shall make available, and upon Owner’s request shall furnish, to
Owner such documents necessary for Owner to review the Work. Contractor
shall,
upon Owner’s request, provide to Owner or Engineer technical information
regarding the design of the AQC Systems, the SCR Systems, or the Unit 2
Boiler;
provided that, Contractor shall not be obligated to provide proprietary
technical data regarding equipment manufactured by or for Contractor and
not
provided by Contractor to other Persons so long as the non-proprietary
data
provided by Contractor shall be of such type and detail as is customarily
provided by vendors and provides Owner a reasonable basis for technical
review
of the design of the AQC Systems, the SCR Systems, and the Unit 2 Boiler
and the
ability to adequately perform maintenance and secure bids for such maintenance.
Except for Owner’s responsibilities set forth in Article 7 of this Contract,
Contractor shall be solely responsible for all construction means, methods,
techniques, sequences and procedures and for coordinating all portions
of the
Work under this Contract.
Page
11
3.8
Progress
Meetings
.
During
performance of the Work, periodic progress meetings shall be held at the
Plant
Site, in Contractor’s office, Owner’s office, or at such other place mutually
agreeable to the Parties. Such meetings shall be at least weekly or as
otherwise
agreed. All matters bearing on the progress and performance of the Work
and the
Project Schedule since the preceding progress meeting shall be discussed
and
resolved, including any previously unresolved matters, deficiencies in
the Work
or the methods being employed for the Work, and problems, difficulties,
or
delays which may be encountered. Contractor shall be represented by Contractor’s
Representative and Owner shall be represented by the Owner’s Representative.
Owner will provide minutes of all progress meetings to Contractor. Contractor,
with the reasonable agreement of Owner, shall retain the right to amend
the
minutes. In addition, Contractor’s Representative and employees appropriate for
the stage of the Work must attend daily Site coordination meetings held
at the
Plant Site.
3.9
Monitoring
of Schedule
.
Contractor shall provide regular monitoring of the Project Schedule as
the Work
progresses, review the Project Schedule for the Work not started or incomplete,
and take necessary action to meet the Project Schedule.
3.10
Quality
Control
.
Contractor shall establish, implement and maintain in accordance with
the
requirements of the Technical Specifications, a quality control program
to meet
applicable Laws for the Work and to meet the requirements of the Contract
Documents and require Subcontractors to establish, implement and maintain
appropriate quality control programs with respect to their portion of
the Work.
Notwithstanding any such quality control programs established by Subcontractors,
Contractor shall be responsible for assuring that the Work and the performance
thereof is in compliance with the requirements of the Contract Documents
and
applicable Laws, Permits, and Prudent Industry Practice.
3.11
Safety,
Loss Control and Emergencies
.
3.11.1
Safety
and Loss Control Program
.
Contractor shall implement a safety and loss control program that meets
the
minimum requirements of Owner and comply with the program during the
Work. The
inspection, utilization or acceptance of all or any portion of the Work
by Owner
shall not absolve Contractor of its duty of furnishing a safe workplace
for all
personnel engaged in the Work. Contractor shall not expose Owner’s employees or
Owner’s other contractors or their employees to (a) any chemical substance
or
Hazardous Substances used or brought to the surface by Contractor or
(b) any
unsafe or hazardous condition in connection with performance of the Work,
unless
Contractor has taken appropriate safety and protective measures to prevent
injury to persons or property. Nothing herein shall relieve Contractor
of its
obligations and liability for the safe handling and utilization of such
chemical
substance or Hazardous Substances.
3.11.2
Action
to Prevent Injury, Loss, or Damage in Emergencies
.
Contractor shall take actions, in the event of any emergency endangering
life or
property, as may be reasonable and necessary to prevent, avoid, or mitigate
injury, damage, or loss and, as soon as possible, report any such incidents
and
Contractor’s response thereto to Owner. If Contractor has not complied with the
Laws or has not taken reasonable precautions for the safety of the public
or
protection of the Work and the structures, or property on or adjacent
to the
Site, and thereby creates or causes an emergency requiring immediate
action,
then Owner, with or without notice to Contractor, if the delay which
would
result from giving Contractor such notice would further endanger persons
or
property, may, but shall be under no obligation to, take any action that
Owner
shall deem necessary, including causing requisite work to be performed
and
materials and equipment to be furnished, to mitigate or remedy the emergency;
provided, however, that Owner’s action or inaction shall not limit Contractor’s
liability or relieve Contractor of its obligations under the Contract
Documents;
and further provided, that Owner shall take action reasonably required
under the
circumstances until Contractor can be notified and respond. The actions,
performance of emergency work, or provision of materials and equipment
by Owner
or its agents or employees shall be for the account of Contractor. Contractor
shall reimburse Owner for any reasonable expenses incurred by taking
such
actions, performing any Work or emergency work, or furnishing any materials
and
equipment. Except to the extent of Owner’s or its contractor’s (other than
Contractor or its Subcontractors) negligence, Owner shall not be liable
to
Contractor for any damages or costs incurred by reason of Owner’s exercise of
its rights pursuant this Subarticle.
3.12
Protection
of the Work and Adjacent Property
.
3.12.1
Adequate
Protection of the Work
.
Contractor shall provide and maintain adequate protection of all portions
of the
Work and the property of Contractor from physical loss and damage,
including
vandalism, theft, malicious mischief and damage by weather. Contractor
shall
provide and maintain adequate protection of the property of Owner and
others
connected with the Work (when affected or utilized during performance
of the
Work) from physical loss and damage, but not including vandalism, theft
or
malicious mischief by other than Contractor and those under its control.
3.12.2
Protection
by Subcontractors
.
Contractor shall conduct its operations and shall require all Subcontractors
to
conduct their operations so as to protect from damage to existing structures
or
the Work or work installed by Owner or Owner’s other contractors or
subcontractors.
3.12.3
Adequate
Protection of Property
.
Contractor shall perform the Work in such a manner so as to avoid damage
and to
protect any and all property including parallel, converging, and intersecting
electric lines and poles, telephone lines and poles, highways, waterways,
railroads, sewer lines, natural gas pipelines, oil pipelines, steam
pipelines,
water pipelines, drainage ditches, culverts, and any and all property
of third
parties.
3.13
Storage
and Related Matters
.
Contractor shall warehouse or otherwise provide appropriate storage
(in
accordance with manufacturers’ recommendations) for all Materials and other
supplies required for performance of the Work and provide for the procurement
or
disposal of all soil, gravel and similar materials required for performance
of
the Work. All Materials and other supplies which are stored at a location
other
than the Site shall be (a) stored in a warehouse or other appropriate
location
approved in advance in writing by Owner, (b) properly tagged and identified
for
the Work and segregated from other goods, and (c) properly insured.
3.14
Royalties
and License Fees
.
Contractor shall pay all required royalties and license fees and shall
procure,
as required, the appropriate proprietary rights, licenses, contracts
and
permissions for materials, methods, processes and systems incorporated
into the
Work. In performing the Work hereunder, Contractor shall not incorporate
into
the Work any materials, equipment, methods, processes or systems which
may
result in Losses against Owner or Contractor arising out of infringement
of any
patent rights, copyrights, or proprietary rights. Contractor shall
satisfy all
demands that may be made at any time for such royalties or fees, and
Contractor
shall be solely liable for any Losses related thereto.
3.15
Project
Procedures Manual
.
Within
thirty (30) Days after the Effective Date, Contractor shall submit
to Owner’s
Representative for review and approval, such approval not to be unreasonably
withheld, Contractor’s proposed Project Procedures Manual which shall, at a
minimum, cover the topics described in Section 01100 of the Technical
Specifications.
3.16
Contractor
Permits
.
Contractor shall obtain and pay for all Permits necessary for the performance
of
the Work which are required by Laws to be in Contractor’s name. Contractor shall
provide Owner with engineering and design data, information and support
with
respect to the design and performance characteristics of the Project
to the
extent reasonably requested or required by Owner to assist Owner in
obtaining
all Owner Permits. Contractor shall comply with all Laws applicable
to the
prosecution of the Work. If Contractor becomes aware that any Contract
Documents
or Contract Implementation Documents are at variance with applicable
Permits or
Laws, Contractor shall promptly notify Owner. If such variance is due
to a
change in the applicable Permits or Laws enacted or adopted after the
Effective
Date, the provisions of Subarticle 13.7 shall apply.
3.17
O
perations
Personnel Training
.
Contractor shall (a) train, in up to three groups, up to twenty-five (25)
qualified individuals provided by Owner pursuant to Subarticle 7.4
of this
Contract with the training in the operations of the AQC Systems, the
SCR
Systems, and the Unit 2 Boiler specified in the Technical Specifications,
in
accordance with a training program to be approved by Owner, (b) assist
Owner with the start-up and testing activities, and (c) assist Owner with
all Performance Tests. Contractor shall bear the cost of its employees
assisting
Owner with start-up and testing activities of operations personnel
until
Substantial Completion. The training program described in clause (a) of
this Subarticle shall consist of two phases: (i) a classroom phase, to
consist of at least two (2) consecutive weeks of instruction in the
design,
capabilities, component operation and procedures, and emergency and
safety rules
of each of the AQC Systems, the SCR Systems, and the Unit 2 Boiler;
and
(ii) a hands-on phase to train operators for the operation of each of the
AQC Systems, the SCR Systems, and the Unit 2 Boiler. Contractor shall
submit
such training program in accordance with the outlines provided under
the
Technical Specifications to Owner for approval at least 180 Days prior
to the
Mechanical Completion Date.
ARTICLE 4
CONTRACTOR
PERSONNEL
4.1
Adequate
and Competent Labor Force
.
At all
times during the performance of the Work, Contractor shall keep,
and cause to be
kept, at the Site, a sufficient number of skilled workers, laborers
and other
personnel necessary to perform and complete each part and portion
of the Work in
accordance with the Project Schedule. Following consultation with
Contractor,
Owner has the right to disapprove and demand the removal of any craft
or
managerial personnel provided by Contractor or its Subcontractors,
and
Contractor shall then promptly cause such personnel to be removed.
4.2
Wages
and Benefits
.
Contractor shall be responsible for payment of all wages, at the
applicable
“Prevailing Wage” as that term is defined by the Missouri Division of Labor,
fringe benefits, pension or retirement obligations, housing obligations,
social
security, unemployment, workers compensation and all other social
taxes or
charges for its employees, and Contractor shall ensure that its Subcontractors
at the Site are so responsible for their employees.
4.3
Labor
Relations
.
In the
performance of its Work, Contractor shall comply with, and shall
require its
Subcontractors of all tiers at the Site to comply with, the terms
of the
National Maintenance Agreements and/or their equal under similar
National
Maintenance Agreements.
4.3.1
Jurisdictional
Disputes
.
All
jurisdictional disputes arising out of the performance of the Work
shall be
settled by application of the provisions of the National Maintenance
Agreements.
4.3.2
Copies
of National Maintenance Agreements Furnished to Owner
.
Contractor and its Subcontractors at the Site shall furnish to Owner
copies of
the applicable National Maintenance Agreements along with written
permissions
for their use by the affected International Union(s). Contractor
and its
Subcontractors at the Site shall also furnish a copy of the site
extension
approval(s) granted by the International Union(s) prior to commencing
the
Work.
4.3.3
Pre-Job
Conferences
.
Contractor and its Subcontractors at the Site shall conduct pre-job
conferences,
and assign Work to the appropriate crafts according to the recognized
and
traditional jurisdiction.
4.4
Drug
and Alcohol Testing
.
All
Contractor personnel, including administrative and supervisory employees,
shall
be subject to alcohol and substance abuse screening while at any
Owner location.
Random screenings scheduled and/or requested by Owner will be conducted
on-site.
Contractor will not be reimbursed for employee lost time on the Project
for drug
testing. Consideration will be given to keep Project disruption to
a minimum.
Initial random testing expenses incurred as a result of the enforcement
of this
policy scheduled and/or requested by an Owner policy administrator
will be at no
cost to Contractor. Alcohol and substance abuse screening is performed
randomly
at Owner’s Site(s). Owner’s screening policy and procedure is listed in Exhibit
K. Revisions to this policy may be made without notice. Contractor
and
Contractor’s Subcontractors shall enforce and administer a drug testing program
for their personnel that shall be no less stringent than Owner’s drug testing
program.
4.5
Federal
Contracting Requirements
.
Contractor shall comply with all Federal Contracting Requirements
as set forth
in Exhibit M. The terms of Exhibit M shall apply to Contractor
and all
Subcontractors.
ARTICLE 5
LICENSING
AND CODES
5.1
Licensed
Engineers
.
Contractor shall ensure that all engineering calculations, drawings,
specifications, etc., including structural arrangement drawings,
required by
Laws to be prepared under the direct engineering of a design professional
licensed by the State of Missouri shall be prepared under such supervisions
and
shall be sealed and/or stamped as required by Laws.
Page
14
5.2
Contractor
License
.
Contractor shall maintain, and shall require all Subcontractors to maintain,
applicable contractor’s licenses as required by applicable Laws.
5.3
Law,
Codes, and Standards
.
The
Laws referenced in the Contract Documents establish minimum requirements
for the
Work. In instances where the Contract Documents do not specifically reference
codes or standards, the normally applicable codes and standards for the relevant
Work shall be followed by Contractor. Contractor shall not deviate from the
applicable codes and standards referenced in the Contract Documents without
the
written consent of Owner’s Representative. Reference to known standards of any
technical society, organization, or association, or to Laws or codes of local,
state or federal authorities means the latest edition of such standard, law
or
code published and in effect on the Effective Date as well as those enacted
or
adopted but not yet in effect as of the Effective Date, if such standards
will
be applicable to the Work. In the event that applicable codes, laws or standards
are modified after the Effective Date, Contractor shall advise Owner of such
modification and the provisions of Article 13 shall apply to determine whether
a
Change Order is necessary due to the impact of such modification.
ARTICLE 6
OWNER
REVIEW
6.1
Owner’s
Right to Review and Inspect; Correction of Defects
.
Contractor shall provide Owner, Owner’s Representative, Other Owner Authorized
Parties, and/or their designees with: (a) reasonable opportunity to review
and
comment on all Shop Drawings, construction drawings, specifications and other
Contract Implementation Documents prepared for, or that may impact, the Work
and
its operations as they are developed; (b) the opportunity to inspect, review
and
comment on the progress of the Work; and (c) the opportunity to observe,
review and comment on all on-Site tests, including the Performance Tests,
and
off-Site tests of the Work, subject to Owner’s observance of safety measures
reasonably deemed by Contractor to be necessary or appropriate. Contractor
shall
arrange for such inspection and observance of such tests at the Site or at
the
mills or shops of Contractor or, if appropriate, of any Subcontractor where
any
part of the Work is being fabricated or manufactured. In order to allow such
inspection, Contractor shall give Owner or its designees reasonable Notice
of
any inspection on Site, test of any part of the Work. In order to allow such
inspection off Site, Contractor shall give Owner or its designees reasonable
Notice of any inspection, check-out, or test of any part of the Work which
Contractor intends to attend, and Owner may in its sole discretion attend
such
inspection, check-out, or test. Where practical, Contractor shall obtain
from
its Subcontractors their test and inspection schedule for engineered products,
and Contractor shall provide said schedule to Owner. Contractor shall correct
Defects identified by Owner, Owner’s Representative, other Owner Authorized
Parties, and/or their designees under this Article 6. Contractor agrees to
consider in good faith any and all comments of Owner, Owner’s Representative,
and Other Owner-Authorized Parties.
6.2
Failure
to Provide Notice of Inspection
.
If
Contractor fails to provide Owner and its designees with reasonable notice
of,
or access to, any of the inspections described in this Article 6, and Owner
reasonably believes that it is necessary to dismantle Work in order to conduct
such an inspection, then Contractor shall bear the expense of dismantling
and
reassembling of such Work. If Owner requests that Contractor dismantle Work
which Owner failed to inspect despite receipt of a properly delivered Notice
from Contractor of the availability of such Work for an inspection under
this
Article 6, then, (i) if such Work is not in conformity with the Contract
Documents, Contractor shall pay the expense of dismantling and reassembling
such
Work, and (ii) if such Work is in conformity with the Contract Documents,
Owner
shall pay the expense of dismantling and reassembling such Work.
6.3
Review
Not Approval
.
No
inspection or review by any person designated in this Article 6 shall constitute
an approval, endorsement or confirmation of any drawing, plan, manual,
specification, Submittal, test, bidder, Work, program, method of procedure
or
other work done or an acknowledgment by any such person that a drawing, plan,
specification, Submittal, test, bidder, Work, program, method of procedure,
or
that any of the foregoing or other work done satisfies the requirements of
the
Contract Documents, nor shall any such inspection or review relieve Contractor
of any of its obligations to perform the Work so that the Work, when complete,
satisfies all the requirements of the Contract Documents, or relieve Contractor
from any liability or responsibility for injuries to persons or damage to
property.
Page
15
ARTICLE 7
RESPONSIBILITIES
OF OWNER
Owner
shall at Owner’s own expense and at such times as may be required by Contractor
for the successful completion of the Work in accordance with the Project
Schedule:
7.1
Fuel
and Utilities
.
Provide, at Owner’s expense, all coal and other consumables (except as provided
in Article 9) and utilities to be used in the operation of the Plant, and
remove, at its own expense, all process byproducts. Owner shall provide
fuel,
oil, gas, for Plant operation and start-up, and construction power and
water in
order to support the Project Schedule.
7.2
Review
of Submittals
.
Review
of Submittals by Contractor within ten (10) Business Days from their initial
submission and seven (7) Business Days on any resubmittal. If Contractor
believes that a failure by Owner to timely reject any such Submittals caused
an
adverse effect on the Critical Path of the Project, then Contractor shall
promptly notify Owner, and the provisions of Article 13 shall apply. In
the
event that Owner’s Engineer receives an extraordinary number of Submittals from
Contractor in a particular week, and the volume of such Submittals will
prevent
the Owner’s Engineer from performing a review of all the Submittals within the
contractually-required time period set forth above, then the Owner’s Engineer
shall notify the Contractor and the Parties will agree upon a priority
list for
review of the Submittals in question, including an agreed schedule for
those
Submittals which may be returned after the ten Business Day time period
and a
list of those Submittals which must be returned with the ten Business Day
period
in order for the Contractor to maintain the Project Critical Path. So long
as
the Owner’s Engineer adheres to the agreed schedule, Contractor will not make a
claim for Owner’s delay.
7.3
Designation
of Owner’s Representative
.
Designate an Owner’s Representative to act as a single point of contact for
Contractor with respect to the performance of the Work and to provide interface
and integration of all work which is being contracted by Owner to other
contractors (if any) for ancillary facilities on the Plant Site or for
the
Project.
7.4
Operating
Personnel
.
Provide
suitable and competent personnel to be trained by Contractor in accordance
with
the Technical Specifications by the date specified. Contractor shall deliver
advance notice of the times Contractor wants to conduct such training no
later
than 120 Days prior to the date Contractor is to commence training. Training
shall commence in time to train operators for the sequence of systems startup
required for the AQC Systems, the SCR Systems, and the Unit 2 Boiler, which
date
shall be no less than 120 Days prior to the anticipated date of Mechanical
Completion for Unit 1 and Unit 2, respectively. Such personnel provided
by Owner
are to be available to assist or work with Contractor to operate the AQC
Systems, the SCR Systems, and the Unit 2 Boiler. Employees provided by
Owner are
to provide assistance in the operation of the Plant only and are not to
perform
any Work otherwise to be performed by Contractor.
7.5
Contractor
Permits
.
Assist
Contractor upon Contractor’s reasonable request in obtaining Contractor Permits.
7.6
Compliance
with Contract and Laws
.
Perform
all of its other obligations specifically set forth in other provisions
of the
Contract Documents and comply with all applicable Laws and Permits.
7.7
Asbestos,
Lead-Based Paint, and any other Hazardous Substances
.
Perform
or cause to be performed any testing for Asbestos and lead-based paint;
provided, however, that Contractor shall be responsible for notifying Owner
of
any possible Asbestos, lead-based paint, and any other Hazardous Substances
identified during the course of the performance of the Work. Owner shall
be
solely responsible and liable for the removal and disposal of any Asbestos,
lead-based paint or other hazardous or toxic materials not brought onto
the
Plant Site by Contractor. The Work shall be suspended, if required, under
the
provisions of Article 24 to allow for Owner’s removal and disposal of such
materials.
7.8
Surveys
and Reports
.
Make
available to Contractor, without warranty or guarantee, all surveys, geological
and subsurface data and reports in Owner’s possession with respect to the Plant
Site.
7.9
Owner
Permits
.
Obtain
and pay for all easements, rights-of-way, and Permits required to be in
Owner’s
name, including, but not limited to, all zoning, building, environmental
and
operating Permits. Owner shall provide Contractor with copies of Owner
Permits
and/or applications for Owner Permits.
Page
16
7.10
Performance
Test Criteria
.
Supply
Owner’s detailed procedures for the Performance Tests to Contractor at least
ninety (90) Days before Owner commences the Performance Tests.
Contractor shall provide written comments thereto to Owner within thirty
(30)
days, whereupon Contractor and Owner shall work to agree to the final test
procedures.
ARTICLE 8
PROJECT
SCHEDULE AND PROJECT CONTROLS
8.1
Time
For Performance of the Work
.
Contractor shall carry out and complete the Work on or before the Milestone
Dates inserted in the Project Schedule and listed in Exhibit B. Should
the Work
fall behind to such extent that the respective Milestone Dates may, as
determined by Owner or Owner’s Representative in consultation with Contractor,
be at risk, Contractor shall propose to Owner and Owner’s Representative, within
five (5) Days of determining that any Milestone Date may be at risk,
another
course of action that will return the Project to a state of Schedule
compliance
to meet the remaining Milestone Dates contained in the Contract Documents.
Such
recovery Schedule may include re-planning task sequences, increasing
personnel
or other resources of Contractor or of any Subcontractor employed on
the Work,
increasing the number of shifts, overtime operations, the addition of
Subcontractors or other steps to cause the recovery of the progress of
the Work.
Contractor shall not be entitled to any additional payment for taking
any such
steps. Should Owner or Owner’s Representative reasonably believe that
Contractor’s proposed course of action is not sufficient to restore the Work to
meet the Milestone Dates, Owner shall advise Contractor that Contractor
has five
(5) Days to correct the schedule problem and recover the time on the
Project
Critical Path or to make arrangements, acceptable to Owner and Owner’s
Representative, to correct the schedule problem and recover the time
on the
Project Critical Path. If Contractor has not corrected the schedule problem
or
does not have a reasonably acceptable plan to correct the schedule problem
within such time, Owner shall have the right, following consultation
with
Contractor as to the most appropriate method, to require Contractor to
increase
the number of its employees, or to increase or change the amount or kind
of
tools or equipment or to increase the time worked by the employees until
the
Work is back on schedule or a plan for regaining the schedule reasonably
acceptable to Owner is proposed by Contractor or any combination thereof.
Costs
for such Work shall be paid by Contractor if such delay has been caused
by the
Contractor.
8.2
Level
1 Milestone Schedule
.
A
milestone schedule in a bar chart format is required to be submitted
within
fourteen (14) Days after the Effective Date (“Milestone Schedule”). The
Milestone Schedule shall incorporate the Key Milestone Dates shown in
Exhibit B
and Level 1 engineering and procurement activities. The Milestone Schedule
shall
also address each building area, category of Work, phase sequence and/or
Material installation scope of Work for the Project.
8.3
Level
3 Detailed CPM Schedule
.
Contractor will prepare and submit a critical path method (“CPM”) schedule for
the Work by June 30, 2006 for the Level 3 engineering and procurement
Schedule
and by September 12, 2006 for the Level 3 construction Schedule that is
integrated with the Level 3 engineering and procurement Schedule (“Level 3
Detailed CPM Schedule”). The Level 3 Detailed CPM Schedule will include the
Milestone Dates and shall be produced utilizing Primavera Project Planner
P3e
5.0. software. Once submitted by Contractor, the Level 3 Detailed CPM
Schedule
will be subject to review by Owner. The schedule is to be mutually agreed
upon
by the Owner and Contractor and thereafter the Level 3 Detailed CPM Schedule
will be frozen and will comprise the “Baseline Schedule” for monitoring the
Project.
8.4
Baseline
Schedule
.
The
Baseline Schedule shall include the following: (a) identified logical
sequences;
(b) mathematical analysis (calculation of early and late dates and float
variances based on the logic sequences); (c) resource analysis for the
Level 3
Construction Schedule (manpower loaded and balanced to the final estimate);
and
(d) originally planned and remaining durations. More specifically, the
Baseline
Schedule shall contain the following:
8.4.1
Designated
Work Activities
.
W
ork
as
represented by the Baseline Schedule shall be broken into easily identifiable
Work activities including: all Contractor installation tasks; suppliers
of
Materials and their delivery schedule; engineering design status; procurement
of
Materials and its delivery status and method of delivery; installation
and
erection tasks; start-up and testing sequences and final commissioning
activities. These activities shall be described in sufficient detail
as to
clearly communicate the scope of Work to be performed. Work activities
must not
exceed (3) weeks in length without agreement between Owner and Contractor
on the
method to be used for tracking progress of installation. Acceptable
methods of
tracking and accounting for progress may include, but are not limited
to, tons
of structural steel installed/remaining, tons of duct work installed/remaining,
linear feet of pipe, conduit, cable installed/remaining, linear feet
of weld
complete vs. linear feet of weld remaining to be completed, number
of pressure
welds complete vs. number of pressure welds remaining to be completed,
or any
other commodity that signifies physical completion of the Work complete
or left
to be completed. The anticipated number of activities for the completion
of the
Project shall be defined and mutually agreed by Owner and Contractor.
All
Milestone Dates shall be included in the Level 3 Detailed CPM Schedule
as an
activity and shall be titled “Key Milestones.”
Page
17
8.4.2
Baseline
Schedule Updates
.
The
engineering and procurement activities in the Baseline Schedule will
be updated
monthly starting with the July 2006 reporting through September 2006.
In
mid-October 2006, the Owner and Contractor will meet to determine
whether to
increase the frequency of the engineering and procurement Baseline
Schedule
updates to bi-monthly in consideration of the Owner’s reasonable assessment of
the Contractor’s reporting to date. The Construction activities in the Baseline
Schedule will be updated weekly. All progress will be reported on
the basis of
physical percent complete of the activity to date. The amount of
remaining
duration on partially completed activities shall be based on the
amount of time
required to complete the remaining Work. Actual start and finish
dates will be
recorded on each of the Baseline Schedule activities as they are
started and
completed. The updated Schedule of construction activity will be
electronically
transmitted to Owner weekly for inclusion in the Owner-controlled
Baseline
Schedule for the entire Site and to coordinate the interface between
Contractor
and others working on the Site.
8.4.3
Manpower
Loading
.
The
Baseline Schedule for construction and all schedule updates thereto
will be
manpower loaded. Each Schedule activity or task will be assigned
a total number
of craft-hours (based on direct man-hours including foreman and general
foreman)
as required to perform the Work involved. Contractor shall demonstrate
to the
reasonable satisfaction of the Owner that the total number of man-hours
loaded
in the Schedule are the same as and balance to the total direct man-hours
estimated by Contractor.
8.4.4
CPM
Diagrams
.
The CPM
Schedule will be submitted by the Contractor to the Owner in electronic
form
(XER File) and shall be structured so that the Owner can produce
graphical
charts at its offices that show the logical relationships of all
Work activities
including time-scaled logic diagrams of the Baseline Schedule with
all
information contained on each sheet without reducing its readability.
The
Project Critical Path shall be clearly shown and identified in the
Baseline
Schedule calculations and also on the time-scaled logic diagrams.
Contractor
shall designate for each Work activity its unique identification
number, full
description, planned duration, remaining duration, percent complete,
calendar
identification (“Activity ID”), and the Owner’s WBS, if provided.
8.4.5
Monitoring
Activity IDs
.
Contractor must closely monitor the relationships between each Activity
ID to
assure the Baseline Schedule and all updated schedules properly reflect
the
planned Work sequences, the physical relationships and the known
constraints.
Negative lag relationships will be minimized; however, they can be
used and with
an explanation provided to the Owner when requested. Zeroing out
of free float
is allowed. Milestones and Schedule Plug Dates shall be included,
and may be
tied to the logic; however, the Contractor will provide the scheduling
methodology to the Owner when requested in such cases.
8.4.6
Features
Included in Baseline Schedule
.
The
Baseline Schedule must include the following features and shall,
at a minimum,
consist of the following:
8.4.6.1
Activity
ID Numbers
.
Each
Activity ID number shall be unique to one activity only. For purposes
of overall
project management, Owner reserves the right to assign two (2) alphanumeric
characters in the farthest left position, which may assist in identifying
building locations. Activity ID numbers will correspond to the Contractor’s
internal system.
8.4.6.2
Activity
Description
.
Each
activity shall be described in sufficient detail as to fully describe
the Work
to be performed. Generic terms or description will not be accepted.
Hammocks and
milestones shall be clearly indicated by the activity description.
8.4.6.3
Activity
Relationships (logic sequences)
.
All
preceding and succeeding event Activity ID numbers, associated relationship
types and lag values will be expressed in each activity. Revisions
to any logic
which affects the Project Critical Path will be submitted at the
time such
revision(s) are included in the mathematical analysis. A brief reason
for each
revision will be provided by Contractor upon request of the Owner.
Page
18
8.4.6.4
Calendar
ID/Planning Units
.
Multiple calendars are acceptable only if each calendar is clearly
identified
and included with each mathematical analysis. Planning units shall
not be
greater or less than one (1) calendar Day.
8.4.6.5
Early
Dates
.
Actual
start and actual finish dates will replace calculated early dates,
as progress
is reported, and shall be clearly marked as an actual start or
actual finish
dates. Plugged or fill dates may be used in lieu of calculated
dates and/or
logic, and such dates may include start-no-earlier-than, start-no-later-than,
or
like constraint dates. If such conventions are used in calculating
early dates,
they shall be clearly indicated. Provisions shall be made to allow
the “Current
Early Dates” to be adjusted based on the progress accomplished to date and the
current status of the Project as calculated by the updating of
the schedule and
the mathematical analysis of the logic sequences.
8.4.6.6
Late
Dates
.
Actual
start and actual finish dates will replace calculated late dates,
as progress is
reported, and shall be clearly marked as an “actual finish date.” Plugged or
fill dates may be used in lieu of calculated dates and/or logic
sequences, and
such dates may include finish-no-earlier-than, finish-no-later-than,
or like
constraints dates. If such conventions are used in calculating
late dates, they
shall be clearly indicated. Provisions shall be made to hold or
freeze the
“Current Late Start and Finish Dates”, as shown in the reviewed and approved
mathematical analysis, as the agreed no-later-than Baseline Schedule.
8.4.6.7
Float
or Slack
.
Both
the calculated total float and free float shall be clearly identified
in terms
of their appropriate calendar and planning units.
8.4.6.8
Planned
Duration
.
To be
shown in terms of appropriate calendar and planning units. Provisions
shall be
made to store and show all planned durations included in mathematical
analysis
for the approved Baseline Schedule.
8.4.6.9
Remaining
Duration
.
The
number of days to complete the remaining Work for a construction
activity in
progress based on units or commodities left to complete and estimated
manpower
loading.
8.4.6.10
Percentage
Complete
.
Activity percentage of completion shall be determined by the physical
status of
the Work involved and shall be consistent with the amount of remaining
Work.
8.4.6.11
Construction
Resource Analysis
.
The
resource analysis shall, at a minimum, include Construction Schedule
craft
manpower loading and provide the estimated manpower based on the
planned
man-hours per activity. The comparison of planned vs. actual man-hours
for each
activity will be analyzed as part of the earned-value analysis.
For all of the
above resources, Contractor shall graphically show all required
elements through
“S” curves, histograms, and bar graphs in a format approved by Owner.
Planned
and Actual elements will always be shown together in the same
graphic.
8.4.6.12
Electronic
Transfer of Data
.
Contractor will issue fully transferable electronic information
data files (XER
Files ) to Owner.
8.5.1
Work
Breakdown Structure
.
Contractor is required to submit a Work Breakdown Structure (“WBS”) based on
Contractor’s final definitive estimate of the Work as represented by the final
estimate by line-item with detailed descriptions and codes for
each building
area, category of Work, phase sequence and/or Material installation
as required
to perform the Work identified in the Contract and is subject to
Owner’s
approval. At a minimum, each Schedule activity shall be coded to
the Contract
number, unit number, Work or system, phase designation, outage/non-outage
task,
and purchaser summary code per the WBS. Code values and details
will be
developed per the WBS and provided to Contractor after the Contract
award. The
Baseline Schedule and the WBS Reporting coding system shall be
compatible and
mutually reference the Activity IDs. The codes used in the WBS
must be approved
by Owner before they may be used.
Page
19
8.5.2
Progress
Reporting
.
Contractor shall update the Detailed CPM Schedule not less than once weekly
(“Weekly Update”). The Weekly Update shall include all required reports
specified herein that are necessary for maintaining the Detailed CPM Schedule
and the Earned Value Reporting. Each Weekly Update will show the actual and
projected start dates for all Work activities, actual and projected finish
dates, all logic revisions and a statement as required regarding the reason(s)
logic within the Detailed CPM Schedule was revised, actual man-hours expended
to
date, actual equipment used and actual material installed. Each Weekly Update
must be accompanied by a detailed status report indicating the overall status
of
the Work, problem areas, recovery plans, unresolved issues, change orders
and
their effect on the Work progress, and manpower productivity and availability.
Each Weekly Update must be accompanied by a Material Received Report and
a
Materials Report.
8.5.3
Earned-Value
Reporting
.
Contractor shall provide updates of its progress (“Earned-Value Reports”) in
completing the Work in comparison to the man-hours loading by updating its
progress in accordance with the categories established in the WBS. Formatting
of
the Earned-Value Reports shall be subject to Owner’s approval. Contractor’s
Earned-Value Reports shall include the following detail:
8.5.3.1
Comparison
of the final man-hours loading to similar planned metrics material quantities
and equipment to be installed as identified in the WBS line item
codes.
8.5.3.2
Actual
man-hours expended by Contractor each Day (and by shifts per Day if shifts
are
implemented) as identified in the WBS line-item codes or schedule
activity.
8.5.3.3
Actual
percent complete status for each WBS line-item code or scheduled activity
of
Work based on the to-date progress of the Work, including but not limited
to
material, commodities, units installed, and equipment installed.
8.5.4
Schedule
Performance Index
.
Contractor shall report on a weekly basis its schedule progress in an index
dividing earned hours by budgeted or scheduled hours (“SPI”).
8.5.5
Cost
Performance Index
.
Contractor shall report on a weekly basis its cost progress in an index dividing
earned hours by actual hours expended (“CPI”).
8.5.6
Daily
Force Reports
.
Every
Day, Contractor will submit a force report identifying Contractor’s total
manpower head count performing the Work with a breakdown by craft, plus a
description of the Work currently being performed.
8.6
Project
Execution Plan
.
As a
condition precedent to Owner’s obligation to pay Contractor’s first Application
for Payment following the Effective Date, Contractor must submit its detailed
“Project Execution Plan” for performing its Work
at the
Site.
8.7
Material
Laydown Plan
.
Contractor shall submit a Material Laydown Plan within ninety (90) Days after
Effective Date of the Contract. The Material Laydown Plan shall identify
all
material laydown areas and the shakedown sequence. It shall fully describe
any
effect on the Crane Plan and any known coordination issues concerning materials
storage related to the Project.
8.8
Crane
Plan
.
As a
condition precedent to Owner’s obligation to pay Contractor’s first Application
for Payment following the Effective Date, Contractor must submit its detailed
“Crane Plan” for performing its Work.
The
crane plan will include preliminary crane locations and time lines, but may
be
subject to change based on the final design of components, degree of ground
fabrication and fabrication table locations.
8.9
Start-Up
Schedule
.
When
the Project reaches sixty percent 60% completion as determined by the Earned
Value Analysis of Owner or six months prior to initial operation of the first
mechanical subsystems, whichever is earlier, Contractor shall submit a detailed
Start-Up Schedule.
Page
20
8.10
Commissioning
Schedule
.
Owner
will prepare a Commissioning Schedule for the Project and deliver it to
Contractor and deliver it no later than September 12, 2006 for Contractor’s
review and comment. Owner and Contractor shall then mutually agree upon the
Commissioning Schedule.
ARTICLE 9
SITE
9.1
Site
Availability
.
Owner
shall make available to Contractor portions of the Site necessary for the
Contractor’s performance of the Work, all reasonable and necessary access
thereto, and areas suitable for large mobile crane operations and for
installation of Contractor’s office and warehouse, equipment receiving and
laydown, craft change rooms, welding facilities, materials storage, and
employee
parking as indicated on Contract drawings. Owner shall properly maintain
storage
and laydown areas and access roads.
9.2
Conditions
Affecting Work and Differing Site Conditions
.
Contractor acknowledges that it has made a reasonable investigation and
reasonably satisfied itself as to the conditions affecting the Work, provided
that such conditions were reasonably ascertainable from a Site visit, including
but not limited to those bearing upon: the transportation, disposal, handling
and storage of materials; availability of labor, water, electric power
and
roads; the reasonably anticipated uncertainties of weather, river stages,
tides,
surface or similar physical conditions at the Site; the conformation and
condition of the ground; and the character of equipment needed preliminary
to
and during the prosecution of the Work.
9.2.1
Notification
by Contractor Change Request
.
Contractor shall promptly, and before conditions are disturbed, notify
Owner’s
Representative by means of a Contractor Change Request of (a) latent physical
conditions at the Site differing materially from those indicated in this
Contract or (b) unknown physical conditions at Site, of an unusual nature,
differing from those ordinarily encountered and generally recognized as
inherent
in work of the character provided for in this Contract for which Contractor
believes that an adjustment in Contract Price or the Project Schedule is
justified. The Owner shall provide such Change Order allowing for reimbursement
of increased costs; however, Contractor shall not be entitled to any additional
time or compensation if Contractor negligently or knowingly exacerbated
the
condition.
9.2.2
No
Contractor Liability for Pre-Existing Conditions
.
Except
to the extent that such conditions were readily apparent upon reasonable
investigation or unless otherwise required by the Contract Documents, Contractor
takes no responsibility and shall have no liability for pre-existing site
conditions, including but not limited to sub-surface conditions, historical
artifacts, hazardous materials, structural integrity of existing steel
or other
structures, and buried or concealed conditions.
9.2.3
Hazardous
or Toxic Material
.
Contractor shall have no liability or responsibility for any existing Asbestos,
lead-based paints, pollution, contamination, or other hazardous or toxic
material or for Owner’s generation, emission or disposal or other Hazardous
substances, except to the extent Contractor negligently or knowingly exacerbates
the condition.
9.2.4
Owner
Abatement
.
In the
event any such pre-existing site conditions are encountered in the course
of the
Work, Contractor shall notify Owner and stop Work in the area until Owner
rectifies or abates these conditions.
9.2.5
Delays,
Additional Costs and Indemnity
.
Delays
or additional costs encountered by Contractor as a result of such pre-existing
site conditions shall result in an equitable adjustment in the Contract
Price
and Schedule. Owner shall protect and indemnify Contractor against any
and all
claims or liabilities based on such conditions.
9.3
Use
of Owner’s Tools and Equipment at Site
.
9.3.1
Contractor
to Supply Tools and Consumables for Work
.
Contractor is required to supply all tools and consumables required to
perform
the Work. Contractor shall mark all of its tools by color code or Contractor
nameplate before mobilizing to the Site. No marking shall be done on the
Site.
Any tools or equipment not marked will be considered the property of Owner
unless conclusively proven otherwise. Owner retains the right for continual
inventory and inspection of all Contractor tools located on Owner property.
Contractor shall not normally be allowed to borrow tools from Owner. Should
Owner allow Contractor to borrow tools, only designated Owner employees
shall be
allowed to check out items from Owner’s tool crib or storeroom. Owner retains
the right to charge Contractor for any tools, equipment, consumables, or
material that are obtained from Owner that should have been supplied by
Contractor. The charge shall be at Owner’s cost plus a twenty percent (20%)
markup.
Page
21
9.3.2
Contractor’s
Release and Indemnity for Use Of Owner’s Equipment
.
Should
Owner permit Contractor to use any of Owner’s equipment, tools or facilities or
should Owner provide transportation, labor, electric power, other utility
service or other assistance in connection with the performance of the
Work, such
use or furnishings, unless expressly provided otherwise, shall be gratuitous
and
Contractor hereby waives, releases, and renounces all Losses relating
thereto,
whether for personal injury, occupational sickness or disease or death
or for
physical damage to property, or loss of use thereof, and whether based
on the
condition thereof or any negligence, strict liability or other fault
of Owner
and shall indemnify Owner for any and all Losses resulting in any way
from
Contractor’s use of any of Owner’s equipment, tools or facilities or Owner’s
provision of transportation, labor, electric power or other utility service
of
other assistance in connection with the performance of the Work. Notwithstanding
the foregoing, such waiver and indemnity obligations shall not apply
to
circumstances of gross negligence or intentional misconduct by Owner
or others
for whom Contractor is not responsible.
9.4
Owner
Control Over Work Scope
.
Owner
reserves the right to delete portions of the Work from this Contract
and to
perform such portions of the Work or work outside the scope of this Contract
with its own forces or other contractors and to award contracts for such
other
work at the Site. Contractor shall cooperate with Owner’s Representative,
Owner’s other contractors, or other designees, in the scheduling and prosecution
of the Work to accommodate such other work. If Contractor believes that
the
scheduling or prosecution of such other work has or will have an adverse
effect
on the Project Schedule, then Contractor shall promptly notify Owner
and the
provisions of Article 13 shall apply.
9.5
Owner
Control Over Access
.
Owner
reserves the right to deny access to, or expel from, the Site any employee
of
Contractor or its Subcontractors, following consultation with Contractor,
if in
Owner’s reasonable judgment such exclusion shall be in the interest of safety
or
security at the Site. Former employees of Owner (or Owner’s affiliates) may be
brought onto the Site only if prior approval from Owner’s Representative is
obtained and Contractor has advance knowledge that the individual was
an
employee of Owner within the last five years. Should Contractor learn
that one
of its personnel is a former employee of Owner after such employee has
been
admitted to the Site, Contractor shall immediately notify Owner. Owner
shall
have the right and power to then exclude such employee from the
Site.
9.6
Signs
.
Contractor shall not place or maintain, or permit to be placed or maintained,
any sign, bill or poster on or about the Site without the prior consent
of
Owner’s Representative.
9.7
Disposal
of Excavated Material; Archeological or Historical
Finds
.
In the
event that any relics or items with archeological or historical value
or other
valuable materials (“Relics”) are discovered on the Site by Contractor or any
Subcontractor, Contractor shall immediately notify Owner’s Representative and
appropriate authorities in accordance with applicable Laws, and await
the
decision of Owner’s Representative before proceeding with any further Work that
might harm or destroy such Relics. If Contractor believes that the proper
disposal of any Relics constitute grounds for issuance of a Change Order,
then
Contractor shall proceed in accordance with the requirements of Article
13.
Neither Contractor or any Subcontractor shall have any property rights
to such
Relics.
9.8
Security
.
9.8.1
Responsibility
.
Contractor shall be solely responsible for the security of all Work in
its
custody or placed in construction by it. The presence of Owner’s plant security
shall not mean that Owner shall be responsible for protection and security
of
Contractor’s Work.
9.8.2
Methods
.
Security methods shall be employed by Contractor as required to reasonably
ensure the protection of all materials, equipment, and construction Work
from
theft, vandalism, fire, and all other damage and loss.
9.8.3
Employees
.
Contractor’s and its Subcontractors’ employees (referred to as “Personnel”),
will be required to check in and out of a designated security gate. All
Personnel will on their first Day of employment, inform the security
guard of
their name and employer when they enter and leave the Site. All Personnel
will
be required to fill out a gate access register, and turn it into the
Contract
administration clerk. Contractor must notify Owner of all new and laid
off
employees each Day. All Personnel will be assigned an access card to
be used to
identify him or her for entrance and exit at the designated security
gate. Use
of the access card will commence on the first Day of employment. Personnel
shall
show proper respect to the Plant security services at all times. All
Personnel
shall leave the Site immediately after completing their shift. Congregating
in
the parking lot or other locations on the Site shall not be permitted.
Page
22
9.8.4
Vehicles
.
Contractor shall not permit vehicles to drive in and out of Owner premises
except those explicitly designated by Owner. No Contractor employees
will be
allowed to ride in the vehicle through the security gate except the
driver.
9.8.5
Inspections
and Searches
.
All
Personnel will check in and out with their lunch boxes in an open position
for
inspection by the security guards. Personnel will not be allowed to
bring lunch
sacks onto the Site. Vehicles, toolboxes, lunch boxes, and other containers
shall be subject to an unannounced search at the gate or other location
as
determined by Owner.
9.9
Site
Coordination Between Owner and Contractor
.
The
Parties recognize that a close working relationship is essential in
order for
the Parties to realize all of the benefits of this Contract.
9.9.1
Contractor
Site Office
.
During
the performance of this Contract, Contractor shall maintain a suitable
office on
the Site and near the location of the Work as designated by Owner.
9.9.1.1
Staffing
.
The
Contractor shall staff its office to facilitate proper office administration
to
Owner’s satisfaction. The office shall be continually staffed by a
representative of Contractor authorized to receive drawings, instructions,
or
other communications or articles. Any communication given to said
representative, or delivered to said office, shall be deemed to have
been
delivered to Contractor.
9.9.1.2
Field
Records
.
Contractor shall maintain at its Site office up-to-date copies of all
drawings,
Contractor’s Specifications, the Technical Specifications, and other Contract
Documents and supplementary data, complete with the latest revisions
thereto. In
addition, Contractor shall maintain a continuous record of all field
changes,
which shall be available for inspection by Owner at all times. At the
conclusion
of the Work, Contractor shall deliver a copy of the continuous record
to Owner,
and shall incorporate all such changes on the drawings and other engineering
data, and submit the required number of copies thereof to Owner.
9.9.2
Contractor
Site Supervision and Technical Expertise
.
Contractor shall furnish adequate management, supervisory, and technical
personnel on the Site to ensure expeditious and competent handling
of the
Work.
9.9.2.1
Scheduling
of Site Work.
9.9.2.1.1
Non-Emergency
Work
.
The
performance of any Work that would affect the operation of Owner’s system
facilities shall be scheduled to be performed only at times acceptable
to Owner.
No Work shall be done between 6:00 p.m. and 7:00 a.m., local time,
or on Sundays
or legal holidays without the written permission of Owner. Night Work
may be
established by Contractor as a regular procedure with the written permission
of
Owner. Such permission, however, may be revoked at any time if Contractor
fails
to maintain adequate equipment and supervision for the proper prosecution
and
control of the Work at night.
9.9.2.1.2
Emergency
Work
.
Owner
shall have the right to perform emergency work without the prior consent
of
Contractor.
9.9.2.2
Interruptions
of Owner Plant or System
.
All
Work which will disrupt Owner’s Plant or system shall be scheduled subject to
approval by Owner and taking into consideration the facilities and
Owner’s
requirements at all times during construction. In the event that it
is necessary
to either interrupt the power supply or to impose abnormal operating
conditions
on Owner’s utility system, such procedure must be acceptable to Owner and a
complete understanding and agreement must be reached by all parties
concerned
well in advance of the time scheduled for such operation, and such
understanding
shall be definite as to date, time of day, and length of time required.
This
understanding and agreement must be evidenced in writing. It shall
be the
Contractor’s responsibility to ascertain that such understanding and agreement
is properly evidenced in writing with the signature of Owner’s Representative
affixed thereto.
Page
23
9.9.2.3
Owner
Hold Procedure
.
Contractor shall not be allowed to operate any electrical switches, circuit
breakers, valves or other controls on Owner’s operating facilities. Owner shall
do all switching and attach “HOLD” tags to secure equipment for Contractor, but
it shall be the responsibility of Contractor to check all holds applied
for its
protection except in the case of an emergency. Contractor shall request
the
application or release of all equipment safety holds through Owner
Representative.
9.9.3
Relations With
Other Contractors
.
9.9.3.1
Cooperation
.
Contractor shall cooperate with all other contractors who may be performing
work
on behalf of Owner, and workers who may be employed by Owner, in the vicinity
of
the Work under this Contract, and Contractor shall conduct its operations
to
minimize interference with the work of such contractors or workers. Any
difference or conflict that may arise between Contractor and other contractors,
or between Contractor and workers of Owner, in regard to their work shall
be
resolved as determined by Owner. Owner shall make the final decision resolving
the conflict.
9.9.3.2
Site
Coordination
.
Owner
shall coordinate the work between or among all of the contractors on the
Project
Site; however, Contractor shall coordinate its daily Work with that of
other
contractors and shall cooperate fully with Owner in maintaining orderly
progress
towards completion of the Work as scheduled. Owner’s decision regarding priority
between Contractor’s Work and the work of other contractors at the Site shall be
final.
9.9.3.3
Site
Meetings
.
Periodic meetings of the contractors at the Site may be held at the times
and
places designated by Owner. The purpose of the meetings will be for the
scheduling and coordination of each contractor’s work, including Contractor’s
Work, within the requirements of the overall Project. Representatives of
Owner
and each contractor, including Contractor, shall attend each scheduled
meeting.
9.9.3.4
Delay
by Owner’s Contractors
.
If
Owner’s other contractors on Site delay the Critical Path of Contractor’s
performance of the Work as set forth on the Milestone Schedule or if Owner’s
other contractors on the Site cause Contractor to incur additional cost(s),
Contractor shall be entitled to an equitable adjustment in the Contract
Price
and Project Schedule, as appropriate and in accordance with Article 13
of this
Contract.
9.9.3.5
Owner’s
Construction Durations
.
Owner,
shall be entitled to the construction durations allotted in the Level 3
Detailed
CPM Schedule for Owner and Owner’s contractors to complete portions of the
Project. If Owner’s contractors do not take longer than the allotted durations
for such work, then Contractor shall not be entitled to an extension of
time.
9.10
Construction
Plant and Temporary Facilities
.
9.10.1
Contractor
to Supply
.
Contractor shall furnish all Construction Aids required for prosecution
of the
Work but which will not be incorporated in the completed Work, unless otherwise
specified herein. Temporary structures for offices, change houses, warehouses,
and other uses for Contractor or its Subcontractors shall be provided by
Contractor using materials, design, and construction approved by Owner.
Suitable
construction trailers may be used in lieu of temporary structures. Such
structures or trailers shall be placed only in the locations assigned by
Owner.
Page
24
9.10.2
Condition
.
All
Construction Aids shall be in first-class condition and shall be of the
proper
type and size to perform the Work. The Construction Aids shall be regularly
and
systematically maintained throughout the Work to ensure proper, efficient
operation. Construction Aids that are inadequate or improperly maintained
shall
be promptly modified, repaired, or removed from the Site and
replaced.
9.10.3
Ownership
and Removal
.
All
temporary structures and facilities furnished by Contractor shall remain
the
property of Contractor and shall be maintained throughout the construction
Work.
When the construction Work is completed, all of the Construction Aids
shall be
removed promptly from the Site and the area shall be restored to its
original
condition.
9.11
Construction
Utilities
.
9.11.1
Contractor
to Supply
.
9.11.1.1
Power
Extension Facilities
.
Contractor shall provide its own power extension facilities including
all
necessary connectors, disconnect switches, breakers, transformers, wiring,
and
other devices required to distribute power for its use and for the use
of its
agents, the installation of which shall not impede walkways, exits, platforms
and other access used by Owner operating and maintenance personnel.
9.11.1.2
Lighting
.
Contractor shall furnish and install all temporary lighting required
in the
prosecution of its Work in accordance with current standards.
9.11.1.3
Water
.
Contractor shall provide piping, valves, pumps, and hoses as required
to
distribute water for its and its Subcontractors’ use. Contractor shall provide
sanitary drinking water facilities for its employees including coolers,
ice,
disposable cups, and a trash barrel at each water cooler.
9.11.1.4
Heating
.
Contractor shall provide all heating facilities required for the efficient
prosecution of its Work and as required to prevent freeze damage to equipment
under its custody. Contractor shall operate all heating facilities in
a safe
manner at all times and shall provide all such facilities with adequate
safeguards. The method of heating shall be subject to approval by Owner.
Salamanders, open fires, or other methods of heating which constitute
a hazard
to personnel or property shall not be used by Contractor.
9.11.1.5
Sanitary
Facilities
.
Contractor shall furnish and maintain sanitary facilities, including
chemical
toilets for the use of persons engaged in the Work under this Agreement.
Contractor’s personnel will not be permitted to use the permanent Plant toilet
and washroom facilities.
9.11.1.6
Elevators
.
Contractor may provide its own hoists and elevators or may make arrangements
with other contractors for construction and use of hoists and
elevators.
9.11.1.7
Telephone
.
Contractor shall provide its own telephone service.
9.11.1.8
Compressed
Air
.
Contractor shall provide all air compressors, fuels, lubricants, hoses,
piping
and other apparatus as required for supplying compressed air required
for
prosecution of its Work.
9.11.2
Owner
to Supply
.
9.11.2.1
Water
.
Water
for construction use and drinking will be furnished by Owner at no charge
at
designated supply points.
9.11.2.2
Railroad
Spurs
.
Railroad spurs may be used by Contractor with the permission of
Owner.
9.11.2.3
Barge
Unloading Facility
.
Owner’s
barge unloading facility may be used by Contractor with the permission
of
Owner.
9.11.2.4
Construction
Power
.
Owner
will furnish all energy for construction electric power and temporary
lighting
at no charge. Owner will supply 480 volt, 3-phase ac power at Owner
designated
points. Owner assumes no responsibility for interruption of construction
power.
Notwithstanding the above, extended interruption of construction power
not
caused by Contractor that delays the Project Critical Path or for items
not on
the Project Critical Path an interruption of a continuous period of
construction
constituting more than twenty-four hours of Contractor’s Work shall constitute a
change entitling Contractor to an equitable adjustment in accordance
with
Article 13 of this Contract.
9.11.3
Condition
.
9.11.3.1
Power
.
Power
facilities shall comply with applicable safety and National Electric
Code
requirements, shall be constructed by Contractor to provide proper
clearances
and minimum interference with construction and shall be subject to
Owner
approval. All 480 volt circuits shall be multi-conductor with neoprene
or metal
sheaths or be run in metallic conduit.
9.11.3.2
Lighting
.
Lighting conductors shall be not less than 12 AWG copper and insulated
for 600
volts. A fuse of proper size and amperage shall be provided for the
protection
of each circuit.
9.11.3.3
Potable
Water
. Personnel shall be assigned to assure maintenance and cleanliness
of
the potable water supply. Potable water containers and dispensers shall
not be
used to hold or cool other foods or materials while being used to contain
and
dispense drinking water.
9.11.3.4
Sanitary
Facilities
. Contractor shall comply with all regulations of agencies having
jurisdiction with respect to sanitation. Any facilities or methods
failing to
meet these requirements shall be corrected immediately. Raising and
lowering of
the chemical toilets shall be performed by Contractor.
9.12
Construction
Area
.
9.12.1
Area
Boundaries
.
Owner
will designate the agreed boundary limits of access roads, parking
areas,
storage areas, and construction areas, and Contractor shall not
trespass in or
on areas not so designated.
9.12.2
Owner
Facilities
. Owner’s lunchroom, control room, locker rooms, toilet and wash
facilities, parking lots and maintenance shops are considered off limits
to
Contractor personnel.
9.12.3
Access
Roads, Parking And Storage Areas
. Construction access roads, parking lots,
and storage areas will be assigned for Contractor’s use by Owner. Contractor’s
employees shall park their automobiles, trucks, and other vehicles
in the
assigned construction personnel parking area. Contractor shall use
only the
route to and from their work area as designated by Owner.
9.12.4
Food
Services
. No food services will be permitted on the construction
Site.
9.13
Cleanliness
.
Contractor shall give special attention
to
keeping the inside of the structures and surrounding grounds clean
and free from
trash and debris. Contractor shall be responsible for ensuring that
its
Subcontractors comply with the same standards as Contractor is required
to meet
hereunder.
9.13.1
Personnel
.
Contractor shall employ sufficient and special personnel to thoroughly
clean its
work areas continuously each working Day and shall cooperate with the
other
contractors to keep the entire construction Site clean. This shall
include
sweeping the floors, collecting and disposing of trash, and all other
functions
required to keep the Site clean.
Page
26
9.13.2
Storage
of Materials and Supplies
.
Contractor shall store all materials and supplies in locations that will
not
block access ways and arrange all materials and supplies to permit easy cleaning
of the Work area.
9.13.3
Trash
.
Contractor shall collect, sort and deposit all trash, debris, and waste
materials daily in waste collection areas near the Work as designated by
Owner.
Promptly upon the completion of the Work, Contractor shall remove all trash,
waste materials, and debris resulting from Work under this Contract from
the
Site in a safe manner. Nothing shall be thrown or allowed to fall from any
of
the structures. Contractor shall promptly remove any Hazardous Substances
from
Owner’s premises in compliance with Subarticle 29.13 (and each of its Subparts)
and applicable Laws.
9.13.4
Finishes
.
Contractor shall thoroughly clean the areas of the Work, removing all
accumulations of dust, scraps, waste, oil, grease, weld spatter, insulation,
paint, and other foreign substances. Surfaces damaged by deposits of insulation,
concrete, paint, weld metal, or other adhering materials shall be restored
by
Contractor at Contractor’s sole cost.
9.13.5
Parking
Area
.
It
shall be Contractor’s responsibility to keep the construction parking area clean
at all times.
9.13.6
Conflict
Between Contractors
.
In the
event of conflict between contractors, including Contractor, concerning cleaning
responsibilities, Owner will determine the responsibility and assign the
work.
Owner’s decision will be binding and the contractor, including Contractor, shall
promptly perform the disputed work at that contractor’s sole
expense.
9.13.7
Failure
.
In the
event that Contractor fails to comply with the cleanliness requirements
specified herein or to perform the cleanup work assigned to it by Owner,
Owner
following consultation with Contractor and an opportunity for Contractor
to cure
its failure, reserves the right to hire another contractor (not necessarily
one
of the construction contractors) to perform the necessary cleanup work and
charge Contractor for all such costs.
9.14
Fire
Protection
.
9.14.1
Responsibility
for Fire Protection
.
Contractor shall be responsible for ensuring that there is adequate fire
protection for its Work.
9.14.2
Fire
Fighting
.
Contractor’s supervisory personnel and a sufficient number of workers shall be
instructed in proper methods for extinguishing fires and shall be assigned
specific fire protection duties. When trained personnel leave the job, new
personnel shall be trained in their duties. All workers shall be instructed
in
the selection and the operation of each type of fire extinguisher supplied
by
Contractor for each type of fire that might be encountered.
9.14.3
Work
Procedures
.
Contractor must employ work procedures that minimize fire hazards to the
extent
practicable. Contractor shall follow OSHA 29 CRF 1926 Subpart F - Fire
Protection and Prevention.
9.14.4
Volatile
and Flammable Materials
.
9.14.4.1
Fuels
and Solvents
.
Contractor shall store all fuels, solvents and other volatile or flammable
materials away from the Work and in storage areas in well-marked, safe
containers as required by Laws. Only solvents with a flash point of one hundred
forty degrees Fahrenheit (140°F) and above are permitted on site.
9.14.4.2
Form
Work, Scaffolding, Etc
.
Contractor shall treat for fire resistance or otherwise protect against
combustion resulting from welding sparks, cutting flames, and similar fire
sources all form work, scaffolding, planking, and similar materials that
are
combustible but which are essential to execution of the Work.
9.14.5
Burning
.
Contractor shall not permit open fires or burning on the Site.
9
.14.6
Fire
Protection Equipment
.
Owner
shall provide adequate fire protection for any temporary structures it
provides
for Contractor’s Use. Contractor shall ensure that there is adequate fire
protection equipment in each warehouse and office, in other temporary structures
and in each work area it is occupying. Access to sources of water for
extinguishing fires shall be identified and kept clear at all times. Contractor
shall provide suitable fire extinguishers in enclosed areas, in areas that
are
not accessible to water for extinguishing fires, or in areas that may be
exposed
to fire that cannot be safely extinguished with water. Each fire extinguisher
shall be of a type suitable for extinguishing fires that might occur in
the area
in which it is located. In areas where more than one type of fire might
occur,
the type of fire extinguisher required in each case shall be provided.
Each
extinguisher shall be placed in a convenient, clearly identified location
that
will be readily accessible in the event of fire.
ARTICLE 10
THE
PARTIES’ REPRESENTATIVES
10.1
Owner’s
Representative
.
Owner
shall appoint an Owner’s Representative who shall be authorized to act on behalf
of Owner and with whom Contractor may consult at all reasonable times,
and whose
instructions, requests and decisions will be binding upon Owner as to all
matters pertaining to the Contract Documents and the performance of Owner
hereunder except that Owner’s Representative shall not have the authority to
modify this Contract. Notwithstanding the foregoing, Owner’s Representative
shall be allowed to issue Change Orders in accordance with Article 13.
The
initial Owner’s Representative is the individual identified in Subarticle 29.6.
In addition, Owner may from time to time appoint such other individuals,
each an
“Other Owner-Authorized Party,” whose duties, authority and responsibilities
shall be specified in the Notice provided to Contractor of such Other
Owner-Authorized Party’s appointment. Owner may change the identity of its
Owner’s Representative or Other Owner-Authorized Party by providing Notice to
Contractor pursuant to the provisions of Subarticle 29.6. Owner’s Representative
and Contractor’s Representative shall confer before the Work starts to ensure
that the nature and scheduling of the Work’s activities are mutually understood
and shall meet multiple times weekly during the Work’s duration to discuss the
progress made, impediments encountered or expected and their resolution,
and all
other relevant matters.
10.2
Contractor’s
Representative
.
Unless
otherwise agreed in writing by Owner, Contractor shall appoint its Project
Manager as Contractor’s Representative who shall be a resident of the Site
throughout the Work and available for consultation with Owner’s Representative
and Other Owner-Authorized Party, if any, at all reasonable times. Contractor’s
Representative shall be authorized to act on behalf of Contractor, and
his or
her instructions, requests, and decisions shall be binding upon Contractor
as to
all matters pertaining to the Contract Documents and the performance of
the
Work. The initial Contractor’s Representative is the individual identified in
Subarticle 29.6. Contractor shall not change Contractor’s Representative without
the prior written consent of Owner’s Representative, which consent will not be
unreasonably withheld or delayed. If Owner is reasonably dissatisfied with
the
performance of Contractor’s Representative, Owner, following consultation with
Contractor, may request that Contractor remove such person from his position,
and Contractor shall immediately remove such person from the
Project.
10.3
Representative’s
Access
.
Owner,
Owner’s Representatives, and any Other Owner-Authorized Party, and their agents,
employees and invitees, shall at all reasonable times have access to the
Work
wherever and whenever it is in preparation and progress provided said access
shall not unduly interfere with the Work. Without limiting the generality
of the
foregoing, Owner, Owner’s Representatives, and any Other Owner-Authorized Party
shall have the right to videotape, photograph, copy or otherwise record
the
activities and the Work. The presence of Owner, Owner’s Representatives, and any
Other Owner-Authorized Party shall not relieve Contractor of the responsibility
for construction means, methods, techniques, sequences or procedures, or
for
safety precautions and programs in connection with the Work, and Owner,
Owner’s
Representative or Other Owner-Authorized Party will not be responsible
for the
acts and omission of Contractor or Subcontractors.
10.4
Compliance
with Owner’s Representative’s Directives
.
The
conduct of the Work is the responsibility of Contractor. Contractor shall
issue
all appropriate orders to Contractor’s employees and Subcontractors. Contractor
will closely cooperate with Owner’s Representative, and Other Owner Authorized
Parties to the extent of their stated authority and to the extent consistent
with the requirements for performance of the Work. Owner, or Owner’s
Representative may direct Contractor to take such action they deem to be
in
Owner’s interest. If Contractor is of the opinion that any such directive
constitutes grounds for issuance of a Change Order, then Contractor shall
proceed in accordance with the requirements of Article 13.
Page
28
ARTICLE
11
SUBCONTRACTORS
11.1
Award
of Subcontracts for Portions of the Work
.
Contractor shall comply with the requirements of the subcontracting plans
contained in Exhibit M.
11.2
List
of Subcontractors
.
Contractor shall attempt to use Owner’s preferred Subcontractors, and
Contractor’s pre-approved Subcontractors, identified in Exhibit N. If Contractor
has difficulty using Owner’s preferred Subcontractors and Contractor wishes to
use a Subcontractor other than those listed or agreed to by Owner, Contractor
shall submit the name of the proposed Subcontractor to Owner’s Representative
for his or her approval (such approval not to be unreasonably withheld).
The
Submittal shall contain the name, address, and contact person of the
proposed
Subcontractor, as well as a description of the Work to be performed.
Owner’s
Representative shall notify Contractor within five (5) Business Days
if it
objects to any proposed Subcontractor. Contractor shall identify a suitable
substitute party in writing within ten (10) Business Days after it receives
Owner’s disapproval of a proposed Subcontractor. If after choosing a
Subcontractor to perform a portion of the Work, Contractor decides to
terminate
such Subcontractor or such Subcontractor no longer performs a portion
of the
Work, Contractor must notify and consult with Owner regarding any replacement
Subcontractor.
11.3
Contracts
with Subcontractors
.
11.3.1
Commercially
Reasonable Efforts
.
Contractor shall use commercially reasonable efforts to incorporate the
following provisions into the subcontract with each proposed Subcontractor
covered by the provisions of Subarticle 11.2:
11.3.1.1
Require
each Subcontractor, to the extent of the Work to be performed by such
entity, to
be bound to Contractor by the applicable terms of this Contract as related
to
Subcontractor’s scope of work and, where appropriate to assume to Contractor all
of the obligations and responsibilities that Contractor has to Owner
under this
Contract; and
11.3.1.2
Make
Owner an intended third-party beneficiary and preserve the rights and
remedies
of Owner under this Contract with respect to the portion of the Work
to be
performed by a Subcontractor, so that the subcontracting thereof will
not
prejudice such rights and remedies.
11.3.2
Duty
to Incorporate
.
Contractor must incorporate the following provisions into the subcontracts
with
each proposed Subcontractor:
11.3.2.1
Require
each Subcontractor to obtain and maintain the appropriate insurance as
related
to Subcontractor’s scope of work;
11.3.2.2
Require
each Subcontractor whose scope of work may require disclosure of Contractor’s
confidential information to execute an appropriate confidentiality agreement;
11.3.2.3
Require
that each subcontract provide for a contingent assignment of the subcontract
upon termination of
Contractor
by
Owner. Such contingent assignment shall provide that if Owner fulfills
Contractor’s obligations to the Subcontractor, then the Subcontractor will
perform the subcontract on behalf of Owner, its successors and assigns;
and
11.3.2.4
Incorporate
the provisions of Exhibit M.
11.3.3
No
Contractual Rights by Subcontractor Against Owner
.
The
provisions of this Section shall not empower any Subcontractor with any
contractual rights against Owner.
11.4
Payments
to Subcontractors
.
Upon
receipt of payment from or on behalf of Owner, Contractor shall promptly
pay to
each Subcontractor the amount paid by Owner to Contractor for such
Subcontractor’s Work. Contractor must require each Subcontractor to make similar
payments to such Subcontractor’s Subcontractors. Owner shall have no obligation
to pay, or cause the payment of, any money to any Subcontractor or any
other
party acting through, under or on behalf of Contractor except as may
be
otherwise required by Laws, and then subject to Contractor’s indemnity
obligations under this Contract. Notwithstanding the above, Contractor
shall be
entitled to withhold payment(s) and/or offset amounts otherwise due any
Subcontractor based on such Subcontractor’s failure to perform other obligations
under its subcontract with Contractor; however, in the event such Subcontractor
files a Lien or otherwise requests or demands payment from Owner, Contractor
must defend and indemnify Owner against any Losses related thereto.
Page
29
11.5
Owner/Subcontractor
Communication
.
Owner
may, at its discretion, furnish to any Subcontractor information regarding
the
percentages of completion or the amounts applied for by Contractor and
the
action taken thereon by Owner on account of Work done by such Subcontractor.
Owner shall have no obligation to pay or to see to the payment of any
monies to
any Subcontractor, except as otherwise may be required by Laws. Notwithstanding
the foregoing, any payments made by Owner to any Subcontractor shall
be
reimbursed by Contractor or may be offset by Owner against and deducted
from any
future payments due to Contractor from Owner provided that no such payment
by
Owner shall be made without first consulting Contractor.
11.6
Approved
Equipment Suppliers
.
11.6.1
Approved
Equipment Suppliers List
.
The
approved equipment supplier’s list is attached as Exhibit N. Contractor may
request that additional vendors be added to the list subject to the
Owner’s
approval, with such approval to be not unreasonably withheld.
11.6.2
Owner
Preferred Equipment
.
In
Exhibit N, Owner has identified categories of items, as indicated by
highlight,
where Subcontractor preferences may exist. Prior to Contractor placing
a
purchase order for equipment for which the Owner has identified a preference,
the Contractor will offer optional pricing for said identified Owner-preferred
equipment. Such additional pricing shall include any necessary schedule
and
technical information required by Owner to evaluate the option. Owner
shall
select its preferred equipment supplier and advise Contractor within
three (3)
Business Days of receiving the Contractor’s offer of said optional pricing. Any
adjustment resulting from Owner’s option selection shall be set forth in a
Change Order to be issued to Contractor.
ARTICLE
12
COMPENSATION,
LETTERS OF CREDIT, AND INVOICING
12.1
Contract
Price
.
Contractor’s
total compensation for performance of the Work under this Contract
shall be
$713,067,494 as set forth in Exhibit D and as adjusted by any Change
Orders. The
Contract Price shall not be increased by: 1) any event of Force Majeure,
unless
the Force Majeure event lasts more than five (5) consecutive Days;
or 2) any
emergency caused by the negligence or misconduct of Contractor, any
Subcontractor or other person under Contractor’s or its Subcontractors’
control.
12.2
Bonus
.
The
Parties agree that they will make a good faith effort to reach an agreement
by
April 2, 2007 on a bonus which may be paid to Contractor for early
achievement
of Provisional Acceptance of Unit 2, if Mechanical Completion has been
accomplished by or shortly after the Guaranteed Unit 2 Mechanical Completion
Date. If no agreement can be reached by the Parties by April 2, 2007,
no bonus
will be due or payable to Contractor regardless of the date(s) Contractor
achieves Provisional Acceptance of Unit 2.
12.3
Monthly
Applications for Payments
.
On or
about the tenth (10th) Day of each calendar month, Contractor shall
submit to
Owner’s Representative an Application for Payment in accordance with the
Payment
Schedule set forth in Exhibit W. Owner shall not be obligated to make
any
payments earlier than the months indicated or in percentages other
than those
set forth in Exhibit W. Owner may withhold monies for any Payment Milestone
that
is not sufficiently complete at the time the invoice is issued. Owner’s right to
withhold monies includes, but is not limited to, the Contractor’s failure to
achieve a Payment Milestone by a Milestone Date identified in Exhibit
W. The
amounts withheld shall be calculated on a pro rata basis, based on
the number of
Payment Milestones not achieved. For example, if four (4) milestones
are
identified for a particular month, the value of each Payment Milestone
is twenty
five (25%) per cent. Upon the issuance of the Project Schedule pursuant
to
Section 8.3, the Parties will mutually agree to the additional Payment
Milestones that serve as conditions precedent for the payment of any
Application
for Payment and amend the Payment Schedule in Exhibit W. Each Application
for
Payment shall include Partial Lien Waivers, substantially in the form
of Exhibit
O, and certification by Contractor that all of its laborers and Subcontractors
have been paid all monies due for Work performed and Material received
through
the previous month payment by Owner. As part of such certification,
Contractor
shall identify any claims, setoffs or back charges it may have or have
taken
against any Subcontractor so that Owner shall know if any Subcontractor
may have
a colorable right to lien Owner’s property. No payment made to Contractor shall
constitute an acceptance by Owner of any of the Work to be performed
hereunder.
Owner
shall hold a five percent (5%) retention from each Application for
Payment,
which Owner shall release in accordance with Section
12.8.
Page
30
12.4
Certification
by Contractor
.
In each
Application for Payment, Contractor shall certify that such Application
for
Payment represents the amount to which Contractor is entitled pursuant
to the
terms of this Contract and shall also certify as follows:
There
are
no known Liens outstanding at the date of this Application for Payment,
all
amounts which are due and payable to any third party (including Subcontractors)
with respect to the Work as of the date of this Application for Payment
have
been paid or are included in the amount requested in the current
application,
and, except for such bills not paid but so included, and except for
amounts
disputed between Owner and Contractor in accordance with Article
12 of the
Contract between Owner and Contractor, there is no known basis for
the filing of
any Liens on the Site or the Plant, except in respect of payments
to
Subcontractors withheld for proper reasons, and that lien releases
or waivers
from all Subcontractors required pursuant to Subarticle 12.5 of the
Contract
have been obtained in such form as to constitute an effective release
of lien
under the laws of the State of Missouri
.
12.5
Lien
Waivers
.
Contractor shall furnish at its sole cost and expense, an unconditional
partial
lien waiver and release of all Liens upon progress payment for the
benefit of
Owner with each Application for Payment, or such other documents
necessary to
ensure an effective release of all Liens with respect to the Project
in
compliance with the laws of the State of Missouri. Contractor shall
obtain from
each Subcontractor whose subcontracts or equipment or material supply
contracts
are in excess of $250,000 in the aggregate (“Major Subcontractor”) an
unconditional partial Lien waiver and release of all Liens upon progress
payment
to such Major Subcontractor (for the benefit of Owner), provided
that Contractor
shall only be obligated to provide to Owner such partial and final
Lien waivers
and releases or such other documents necessary to assure an effective
release of
Liens with respect to the Plant Site in compliance with the laws
of the State of
Missouri from each Major Subcontractor upon completion of the work
of said Major
Subcontractor or complete supply or provision of goods covered under
its
subcontract by such Major Subcontractor and shall not be obligated
to obtain
Lien waivers or releases from any other Subcontractor who is not
a Major
Subcontractor. Except as contemplated in the preceding sentence,
Owner’s receipt
of Lien waivers and releases for each portion of the Work covered
by the
Progress Payment shall be a condition precedent to Owner’s obligation to pay for
such portion of the Work covered in any Application for Payment.
Contractor has
an obligation and duty to provide prompt payment to all of its Subcontractors,
whether such Subcontractor is a Major Subcontractor or not. Contractor
acknowledges and agrees that it shall have the obligation at its
sole expense to
cause any Liens filed against the Plant Site to be promptly released
or
discharged or shall post a bond in accordance with applicable laws
or shall post
other security reasonably satisfactory to Owner in the full amount
of the Lien
except to the extent that such Liens have been filed against the
Project as a
result of nonpayment by Owner of any valid and proper Application
for Payment or
portion thereof for which Contractor is entitled to receive payment
under this
Contract or is otherwise being disputed by the Parties pursuant to
the
applicable provisions of this Article.
12.6
Payment
of Undisputed Amounts
.
Owner
shall pay Contractor the amount determined by Owner’s Representative to be
payable from each Application for Payment (
i.e.
,
undisputed amounts) within thirty (30) Days after Owner’s receipt of such
invoice and accompanying data and other items in accordance with
Subarticle
12.4. In addition to disputed amounts of any Application for Payment,
at Owner’s
option, Owner may deduct from the amount due under any Application
for Payment,
any liquidated damages payable by Contractor pursuant to the Contract
Documents.
Owner may set off amounts owed to Contractor under this Contract
against amounts
owed by Contractor to Owner under the Contract
12.6.1
Suspension
by Contractor
.
Contractor shall have the right to suspend performance of the Work
upon ten days
Notice to Owner, if the Owner fails to make payment of any undisputed
amount for
sixty days after its due date. Contractor shall resume performance
of the Work
upon payment of all amounts then due together with an equitable adjustment
in
the Project Schedule and payment of Contractor’s costs resulting from the
suspension and resumption of the Work.
Page
31
12.7
Payment
of Disputed Amounts
.
Within
fifteen (15) Days of receipt of an Application for Payment, Owner shall
provide
Contractor with Notice setting forth the amount of any portion of such
Application for Payment that is disputed by Owner and the reasons therefore.
Any
deduction of a disputed amount of an Application for Payment that is
not
specifically agreed to by Contractor in writing and that finally is determined
by arbitration, or by mutual agreement, to have been improperly withheld
by
Owner shall be paid promptly by Owner, together with simple interest,
from the
date of withholding to the date of payment, calculated using the Prime
Interest
Rate plus two (2) percent on the date of withholding.
12.8
Retainage
.
For
each Application for Payment, Owner shall be entitled to retain and withhold
payment of five percent (5%) of each payment as security for Contractor’s full
and faithful performance of its obligations pursuant to this Contract.
All
amounts withheld or secured pursuant to this Subarticle shall be referred
to
herein as “Retainage.” The Retainage shall be payable, subject to the provisions
of this Subarticle, to Contractor with interest at the Prime Interest
Rate plus
two per cent at the following events in accordance with the Payment Schedule,
at
Exhibit W: Delivery of Unit 2 Tier 6 steel, Unit 1 Mechanical Completion,
Unit 2
Mechanical Completion, Unit 2 Synchronization, Unit 2 Substantial Completion
B.
In the event that a scheduled Milestone retention release date is not
achieved,
the retention shall be paid at the next monthly payment date after the
Milestone
has been achieved
.
12.9
Not
Used
.
12.10
Payments
Withheld
.
In
addition to any amounts otherwise permitted to be withheld under this
Article
12, Owner, without limitation of any other rights or remedies contained
in this
Contract, may withhold payment on one or more Applications for Payment,
or any
portion thereof, an amount, and to such extent as may be reasonably necessary,
to protect Owner from loss because of:
12.10.1
Contractor’s
or any Subcontractor’s failure to carry out any substantive portions of the Work
in accordance with the Contract Documents;
12.10.2
Third-party
claims made or filed, against Owner on account of Contractor or any
Subcontractor;
12.10.3
Damage
to
Owner property for which Contractor is liable under this Contract arising
from
the performance of the Work or failure to perform the Work
properly;
12.10.4
Failure
of Contractor to maintain the Five Percent LOC, or the Performance LOC
as
required by the Contract Documents.
Promptly
with the next monthly payment following the remedy or cure of any of
the
foregoing, Owner shall make the payment withheld in connection therewith.
Owner’s right to withhold monies due Contractor pursuant to this Subsection
is
conditioned upon Owner providing Notice to Contractor if its intent to
withhold
such funds stating the specific reason(s) therefore within 20 days of
receipt of
Contractor’s
Application for Payment.
12.11
Final
Payment
.
12.11.1
Unit
2
Provisional Acceptance
.
Final
payment of 1.0% of the Contract Price shall be made to Contractor upon
achievement of Unit 2 Provisional Acceptance. Contractor shall submit,
in
addition to the material required under Subarticles 12.4 and 12.5, a
statement
summarizing and reconciling all previous invoices, payments, Change Orders,
Contractor Change Requests and Final Lien Waivers from Contractor and
all Major
Subcontractors.
12.11.2
Owner
Review of Statement
.
Owner
shall review and accept or reject such statement within ten (10) Days
of receipt
thereof. To the extent accepted, Owner shall pay Contractor all remaining
amounts due, within thirty (30) Days of the receipt of such statement.
Owner
shall notify Contractor of the rejection of any portion or all of such
statement. Any amount not accepted shall be treated as being in dispute.
When
Contractor’s final statement submitted pursuant to this Subarticle has been
fully paid, Contractor’s acceptance of final payment shall be deemed to be a
waiver of all claims by Contractor for payment of the Contract Price
or other
obligations of Owner except for claims that have been previously made
but have
not been resolved. Nothing in this Article shall be construed to imply
a waiver
of any right to any amount that is the subject of a written protest at
the time
acceptance of final payment is made.
Page
32
12.11.3
Contractor
Prevention of Liens
.
The
final payment shall not become due unless the Five Percent LOC, if
applicable,
complies with Subarticle 12.12 and until Contractor submits to Owner
an
affidavit, together with a final release of Lien in form and content
specified
in Exhibit O
from
Contractor and from each of the Major Subcontractors as required by
Subarticles
12.4 and 12.5, representing and affirming that all indebtedness connected
with
the Work and any Lien or rights to file any such Liens related thereto,
for
which Owner or its property might in any way be responsible or to which
it may
be subject, have been paid, waived or otherwise satisfied. Contractor
shall not
permit a Lien to be placed on any Owner property by Contractor’s Subcontractors
or their employees. Should Owner receive Notice of an intent to file
a Lien from
any of Contractor’s Subcontractors, or employees, Owner will notify Contractor.
Upon receipt of Notice from Owner of the intent of one of Contractor’s
Subcontractor employees, to file a Lien, Contractor shall immediately
take steps
to prevent the filing of such Lien. If Contractor fails to prevent
the filing of
such Lien, Contractor shall be responsible and liable for and shall
indemnify
Owner for all of Owner’s costs, expenses (including attorneys’ fees),
liabilities, damages, fees, penalties, judgments and settlement costs
arising
from the placement of such Lien. The obligations and liabilities of
Contractor
under this Subsection shall not apply where the basis for such Lien
relates to
amounts invoiced by Contractor that are either not paid or disputed
by Owner.
12.11.4
No
Entitlement to Final Payment Until Unit 2 Provisional Acceptance
.
Notwithstanding any provisions to the contrary in this Contract, Owner
and
Contractor acknowledge and agree that Contractor shall not be entitled
to the
final payment (less any retention) unless and until Contractor has
achieved Unit
2 Provisional Acceptance.
12.12
Contractor’s
Five Percent LOC
.
12.12.1
Amount
of Letter of Credit
.
Within
30 days following the Effective Date, Contractor shall provide to Owner
a letter
of credit substantially in the form of Exhibit P and in an amount equal
to five
percent (5%) of the Contract Price (the “Five Percent LOC”). The Five Percent
LOC shall remain in full force and effect until the expiration of the
Warranty
Callback Period for Unit 1 or Unit 2, whichever is later.
12.12.2
Reduction
of Five Percent LOC
.
At the
end of the two-year Warranty Callback Period for Unit 2, Contractor
may reduce
the amount of the Five Percent LOC to thirty-three percent (33%) of
the original
value of the Five Percent LOC. The remaining thirty-three percent (33%)
of the
initial value of the Five Percent LOC shall remain in effect until
the end of
the Guaranteed Catalyst Period or the Guaranteed Baglife Period, whichever
is
later.
12.12.3
Liquidated
Damages Draws Upon the Five Percent LOC and Performance LOC
.
In the
event that Contractor fails to pay liquidated damages pursuant to Article
22 of
this Contract within 30 days
of
the
date
due under the Contract, then Owner shall be entitled to draw upon the
Five
Percent LOC and Performance LOC for the amount due by Contractor. In
the event
that Owner draws upon any LOC and it is subsequently determined that
Owner was
not entitled to all or any portion of the draw, Owner shall repay to
Contractor
the amount of any such incorrect draw, plus simple interest, from the
date of
Owner’s draw, at the Prime Interest Rate on the date of Owner’s draw plus two
percent (2%) and reasonable costs incurred including attorney’s fees.
12.12.4
Warranty
Repairs Draws Upon the Five Percent LOC
.
Prior
to expiration of the Unit 1 or Unit 2 Warranty Callback Period, as
the case may
be, and all extensions of the Unit 1 or Unit 2 Warranty Callback Period,
Owner
shall be permitted to draw upon the Five Percent LOC, for any warranty
payments
due and not otherwise paid by Contractor and release the remaining
amounts under
the Five Percent LOC, if they have not been fully drawn down. Owner
shall return
the Five Percent LOC and the Performance LOC to Contractor upon their
respective
expiration dates subject to any extensions permitted hereunder.
ARTICLE 13
CHANGE
ORDERS
13.1
Owner
Initiated Change Orders
.
Owner,
without invalidating this Contract, may order changes in the Work,
with
resulting changes in the Contract Price and/or the Project Schedule
or other
applicable provisions of the Contract Documents (including the required
Final
Completion Date) through the issuance of a Change Order. A Change Order
signed
by Owner and Contractor indicates an agreement to the changes in the
Work,
and/or amount of compensation increase or decrease, and/or adjustment
in the
Project Schedule reflected in such Change Order. Owner and Contractor
shall use
their good faith efforts to agree on the price for such ordered changes
prior to
the issuance of such Change Order. If, however, the Parties cannot
agree on the
adjustment to be made in the Contract Price, the Work or the Project
Schedule as
a result of such Change Order, then Contractor shall nevertheless proceed
to
execute the Work described in the Change Order promptly upon authorization
from
Owner and shall be paid for such changed Work in accordance with Subarticle
13.6. If the value of a proposed Change Order exceeds 15% of the Contract
Price,
Contractor must execute such Change Order before it is obligated to
perform such
Work.
Page
33
13.2
Contractor
Change Requests
.
If
Contractor would like to seek a Change Order, Contractor must give Owner
written
Notice within fifteen (15) Business Days after Contractor’s knowledge of the
occurrence of the event giving rise to such request. Within a reasonable
time
thereafter, not to exceed forty five (45) Days of any such Notice, unless
the
circumstances of the event giving rise to the request reasonably require
additional time, Contractor shall provide Owner with an appropriate statement
setting forth the reasons why Contractor believes additional compensation
or
additional time should be granted, and include the nature of any costs
to be
incurred, including reasonable adjustment to other applicable Contract
provisions, and if applicable, the probable length of performance that
could
result in a delay to the Project Critical Path (a “Contractor Change Request”).
If Owner accepts any such Contractor Change Request, a Change Order shall
be
executed by the Parties and the Contract Price or Project Schedule, or
both, as
the case may be, shall be adjusted in accordance with the terms of such
Change
Order. Owner shall have no obligation to accept a Contractor Change Request.
Failure
to comply with the requirements of this Subarticle shall constitute a waiver
by
Contractor of any and all Contractor Change Requests not pursued in accordance
with the terms herein.
13.
Change
Order For Delays
.
If a
delay or suspension of Work or activities occurs and causes a delay to
the
Project’s Critical Path and Contractor has prepared an appropriate analysis
identifying the extent of the delay, an appropriate Change Order will be
issued
to adjust the Project Schedule and the Contract Price as specified
below:
13.3.1
Delay
to Critical Path
.
To the
extent the delay or suspension of activities causes a delay to the Critical
Path
of the Project Schedule and is caused by Owner or others not under the
control
of Contractor, or unknown subsurface conditions, the Project Schedule shall
be
extended and the Contract Price shall be adjusted in an amount necessary
to
compensate Contractor for all reasonable direct and indirect costs and
expenses
on the basis set forth in Subarticle 13.6 resulting from such delay or
suspension (“Contractor’s Delay Costs”).
13.3.2
Delay
Caused by Force Majeure
.
To the
extent the delay or suspension is caused by Force Majeure, as that term
is
defined in Article 24 (excepting for purposes of Subarticle 13.3.2), Contractor
shall give Owner written Notice specifying the date of commencement of
such
delay or suspension within ten (10) Business Days after the date on which
Contractor first becomes aware of the event or act constituting the Force
Majeure. The Project Schedule shall be extended on a Day-for-Day basis
from the
Force Majeure Delay Date. To the extent that a Force Majeure event lasts
more
than five (5) consecutive Days, Contractor shall be entitled to an adjustment
in
the Contract Price as set forth in Subarticle 24.6.
13.3.3
Best
Efforts to Mitigate Delay
.
Contractor shall use its best efforts to re-sequence the Work and/or mitigate,
to the greatest extent practicable, the effect of any delay described in
this
Article.
In
order
to receive an equitable price or schedule adjustment for a delay or deficiency
for which Owner is responsible, Contractor must demonstrate that there
was an
actual delay in the performance of the Contractor’s Work that impacts the
Project Critical Path of the Contractor Schedule and/or an actual increase
in
the Contractor’s costs.
13.4
Change
Order for Contractor Delay or Error
.
To the
extent the delay or suspension of the Work causes a delay to the Critical
Path
of the Project Schedule and is caused by Contractor or any Subcontractor,
no
adjustment will be made to the Contract Price or Project Schedule, and
Contractor shall propose a plan to perform the changed Work while minimizing
Project Schedule impacts, which may include increasing manpower and extended
work hours or extra shifts if required, for Contractor to meet the required
Guaranteed Completion Dates. Excess costs for such work will be Contractor’s
responsibility. Further, no Change Order shall be issued and no adjustment
of
the Contract Price or the Project Schedule shall be made in connection
with any
correction of errors, omissions, deficiencies, or improper or Defective
Work on
the part of Contractor or any Subcontractors in the performance of the
Work.
Page
34
13.5
Minor
Changes in the Work
.
Without
a Change Order, Owner and Contractor may mutually agree in writing to make,
changes in the Work which do not require an adjustment in the Contract Price
or
an extension of the Project Schedule.
13.6
Duty
to Continue the Work
.
In the
event Owner and Contractor are unable, within twenty (20) Days of an Application
for Payment to agree upon an acceptable adjustment in the Project Schedule
and
acceptable changes in the Contract Price, pursuant to Subarticles 13.1 or
13.2,
then Contractor shall proceed with the Work following Owner’s written direction
to do so; provided however, Owner reserves its rights to dispute any claims
of
Contractor pursuant to Article 16. Owner’s written direction shall include an
equitable adjustment in the Project Schedule, if applicable. The cost of
such
extra Work shall then be determined on the basis of one hundred twenty percent
(120%) of all verifiable direct costs reasonably and prudently incurred in
the
performance of the changed Work. Direct costs shall be in accordance with
the
Rate Schedule attached hereto as Exhibit V, submitted by Contractor on or
before
the Effective Date. Direct costs incurred in the performance of such extra
work
shall include: additional costs of materials, costs of labor, including premiums
and shift differentials; social security; old age and unemployment insurance;
fringe benefits required by agreement or custom; workmen’s compensation
insurance; rental value of equipment and machinery; all actual and reasonably
allocated costs of construction supervision and field office; and all actual
and
reasonable costs, if any, of shutdown, delay and start-up; provided, however,
that Contractor shall notify Owner if Contractor anticipates such shutdowns,
delay and start-up costs in advance. In the event Owner so directs Contractor
to
perform changed Work, then Contractor shall submit monthly invoices to Owner
itemizing all costs incurred in the performance of such Work during the period
covered by the invoice in accordance with this paragraph. Pending final
determination of Contractor’s total costs, Owner shall pay such invoices on
account in accordance with Article 12 of this Contract. Contractor shall
maintain complete and accurate records and supporting documentation regarding
Change Orders in accordance with Contractor’s established policies and
procedures and generally accepted accounting practices, consistently applied.
Upon three (3) Business Days prior Notice, Owner shall have access to such
records during normal business hours for a period of three (3) years after
Final
Completion or termination of the Work, to the extent required to verify the
payroll and other costs (excluding agreed-upon mark-ups and rates) set forth
above.
13.7
Effect
of Changes in the Law
.
The
Contract Price is based on applicable Laws in effect as of the Effective
Date.
After the Effective Date, if a change occurs to any Laws that affects
performance of the Work by Contractor, or any Subcontractor, Contractor shall
comply with such changed Laws and Contractor may be entitled to an equitable
adjustment to any applicable provisions of the Contract. Notwithstanding
the
foregoing, in the event the change in Laws constitutes an event of Force
Majeure
for which termination of this Contract would be appropriate, the provisions
of
Subarticle 24.5 shall apply.
ARTICLE 14
CONTRACTOR’S
GENERAL REPRESENTATIONS,
WARRANTIES
AND COVENANTS
14.1
Representations
and Warranties of Contractor
.
Contractor, as a material inducement to Owner’s entering into this Contract,
represents and warrants to Owner that, as of the date of this
Contract:
14.1.1
There
are
no suits, proceedings, judgments, rulings or orders by or before any court
or
any governmental authority pending or to the best of Contractor’s knowledge
threatened action or proceeding affecting Contractor before any court,
Governmental Agency, or arbitrator that could reasonably be expected to
materially and adversely affect the financial condition or operations of
Contractor or the ability of Contractor to perform its obligations hereunder,
or
which purports to affect the legality, validity or enforceability of this
Contract (as in effect on the date hereof);
14.1.2
It
is a
duly organized and validly existing entity of the type described in the recital
clauses of this Contract and is in good standing under the laws of the
jurisdiction of its formation; it has the legal right, power, and authority
and
is qualified to conduct its business, and to execute and deliver this Contract
and perform its obligations under this Contract; and all regulatory
authorizations have been or will be obtained and will be maintained as necessary
for it to perform legally its obligations under this Contract as such
obligations become due;
Page
35
14.1.3
Its
making and performing this Contract are within its powers, have been duly
authorized by all necessary action on its part, and do not and will not violate
any provision of Laws or order, writ, judgment, decree, or other determination
presently in effect and applicable to it or its governing documents;
and
14.1.4
This
Contract constitutes its legal, valid, and binding act and obligation,
enforceable against it in accordance with this Contract’s terms, subject to
applicable bankruptcy, insolvency, reorganization and other laws affecting
creditors’ rights generally, and general equitable principles, to the discretion
of the tribunal before which proceedings to obtain same may be
pending.
14.2
Covenants
of Contractor
.
Contractor warrants and represents to Owner that during the term of this
Contract it will:
14.2.1
Comply
at
all times with applicable Laws necessary for its performance under this
Contract, or, in the event of any alleged continuing noncompliance, diligently
contest any allegations of non-compliance with such Laws in good faith by
appropriate proceeding to the extent permitted without material adverse effect
on Contractor’s performance under this Contract; and
14.2.2
Give
all
required notices, procure, maintain and comply with all applicable Permits
necessary for the performance of its obligations under this Contract, and pay
all charges and fees in connection therewith.
14.3
Opinion
of Counsel from Contractor
.
No
later than the Effective Date, Contractor shall, upon request of Owner, and
at
Contractor’s expense, cause its counsel to issue an opinion to Owner affirming
in customary form the representations in Subarticle 14.1 as of the Effective
Date and setting forth such further matters as Owner may reasonably request.
14.4
Additional
Warranties and Representations of Contractor
.
14.4.1
Qualifications
.
Contractor warrants and represents that it is a fully experienced and properly
licensed in the State of Missouri, equipped, organized, financed and qualified
to perform the Work and that all detailed design and construction drawings
will
be supervised, approved and signed by an engineer licensed by the State of
Missouri where required by Laws.
14.4.2
Performance
Guarantees
.
Contractor warrants and guarantees that the AQC Systems, the SCR Systems, and
the Unit 2 Boiler supplied pursuant to this Contract will operate at or above
the levels required by the Performance Guarantees.
14.5
Additional
Documentation
.
Contractor, upon request of Owner and at Contractor’s expense, shall deliver or
cause to be delivered from time to time, such additional certifications of
its
officers, accountants, engineers or agents or opinions of counsel, as may be
reasonably requested and as related to Contractor’s obligations under this
Contract.
14.6
Changes
in Circumstances
.
Contractor agrees that it shall promptly advise Owner of any fact, event, or
occurrence taking place subsequent to the Effective Date that would cause it
to
be unable to continue to make such representations and warranties provided
above
at any time subsequent to such dates; provided that no such inability shall
be
considered a default under this Contract, except to the extent it shall
constitute a default under another provision of this Contract.
ARTICLE 15
WARRANTY
OF THE WORK AND REMEDIES
15.1
General
Warranty of Work
.
Contractor hereby warrants to Owner that:
15.1.1
The
Work
furnished and performed under this Contract by Contractor and any Subcontractor
shall be furnished and performed to (a) Prudent Industry Practice, (b)
professional standards with the accuracy, care and skill customarily employed
by
and expected from comparable firms in the electric generation construction
industry, and (c) comply with all Laws;
Page
36
15.1.2
The
Work
will conform to the requirements of the Contract Documents, and will be free
from Defects in materials, engineering, design, and workmanship;
and
15.1.3
All
Materials provided by Contractor will be new and free from Defects in materials,
engineering, design, and workmanship.
15.2
Engineering
and Design
.
Contractor hereby warrants that all engineering and design performed as part
of
the Work shall be performed in accordance with sound engineering practice,
Prudent Industry Practice, Laws, and applicable Permits, and in conformity
with
the requirements of the Contract Documents.
15.3
Nonconforming
Work
.
If Work
is discovered that does not conform to the requirements of the Contract
Documents prior to the end of the applicable Warranty Callback Period, Owner,
Owner’s Representative, and Other Owner Authorized Parties to the extent of
their authority, shall have the authority to require Contractor at Contractor’s
option to reperform, repair or replace any such item of the Work (including
without limitation engineering, design or supply of Materials); provided,
however, that neither their authority to act under this Subarticle 15.3,
nor any
decision made by them in good faith either to exercise or not to exercise
such
authority, shall give rise to any duty or responsibility of Owner, Owner’s
Representative and Other Owner Authorized Parties to Contractor, or any
Subcontractor, it being understood that Owner’s (or its representatives’)
failure to so require Contractor does not relieve Contractor from its
responsibility under the Contract Documents and liability for any error,
fault
or inconsistency in the Work or the Project. Failure to so require Contractor
shall not be considered as acceptance of the Work.
15.4
Standard
Warranty Work
.
Except
in the case of an Operating Emergency, if any of the Work is Defective or
does
not comply with the warranties contained in this Article and Owner gives
Contractor Notice of such Defect, Contractor shall, at its sole expense and
option, promptly correct such Defect by repair or replacement of any Defective
Work. The decision to repair or replace shall be made following consultation
with Owner and the repair or replacement shall be scheduled consistent with
Owner’s operating requirements so as to minimize loss of production or use of
any portion of the Plant to which the Work relates. Warranty Work shall be
performed on a straight time basis; however, Contractor shall conduct such
Warranty Work on an overtime schedule basis if Owner reasonably determines
such
a schedule is necessary to avoid or minimize the effects of an outage or
load
reduction, and Owner shall bear such additional costs. Except as stated herein,
Contractor shall bear all costs and expenses associated with correcting any
Defective Work and for the deductible portion of direct property damage of
Owner
to the extent caused by Contractor’s breach of warranty during the Warranty
Remedy Period. Such costs and direct damages shall include, without limitation,
the costs of necessary disassembly, transportation, reassembly, retesting,
reworking, repair, or replacement of such Defective Work. Direct damages
shall
also include reasonable attorneys’ fees, engineering fees, the costs of testing
reasonably required to verify that the repaired or replaced Work conforms
to the
applicable Warranties and requirements of this Contract in enforcing the
provisions of Article 15. Contractor shall collect and assemble all warranties
and maintenance manuals and deliver them to Owner as set forth in Exhibit
L. Any
repair and replacement performed by Contractor pursuant to Article 15 shall
comply with the Laws, Prudent Industry Practice, and this Contract.
15.5
Operating
Emergency Warranty Work
.
In the
event of an Operating Emergency which results from Work which is Defective
or
does not comply with the warranties contained in Article 15, Owner shall
consult
with Contractor to determine who would best be able to correct the Defective
Work. If the Parties agree that Contractor would best accomplish such
correction, Subarticle 15.4 shall apply to such correction. If the Parties
agree
that Owner would best accomplish such correction, Owner shall promptly correct
such Defective Work by repair or replacement of any Defective Work. The decision
to repair or replace shall be made with the concurrence of Contractor. Normally,
Warranty Work shall be performed on a straight time basis; however, such
Warranty Work shall be performed on an overtime schedule basis if Owner
reasonably determines such a schedule is necessary to avoid or minimize the
effects of an outage or load reduction, and Owner shall bear such additional
costs. As with Standard Warranty Work, Contractor shall bear all costs and
expenses associated with correcting any Defective Work to the extent caused
by
Contractor’s acts or omissions. Such costs and direct damages shall include,
without limitation, the costs of necessary disassembly, transportation,
reassembly, retesting, reworking, repair, or replacement of such Defective
Work.
15.6
Unit
1 Warranty Callback Period
.
The
Unit 1 Warranty Callback Period for the Work shall run for a period of two
(2)
years from the Unit 1 Provisional Acceptance Date. If any Work shall be
repaired, replaced, or otherwise corrected pursuant to this Article 15, the
Unit
1 Warranty Callback Period for such Work shall be two years from the date
that
such repair, replacement, or correction is completed to Owner’s reasonable
satisfaction. Notwithstanding the foregoing, in no event shall the Unit 1
Warranty Callback Period exceed three (3) years from the Unit 1 Provisional
Acceptance Date.
Page
37
15.7
Unit
2 Warranty Callback Period
.
The
Unit 2 Warranty Callback Period for the Work shall run for a period of two
(2)
years from the Unit 2 Provisional Acceptance Date. If any Work shall be
repaired, replaced, or otherwise corrected pursuant to Article 15, the Unit
2
Warranty Callback Period for such Work shall be two years from the date that
such repair, replacement, or correction is accepted by Owner. Notwithstanding
the foregoing, in no event shall the Unit 2 Warranty Callback Period exceed
three (3) years from the Unit 2 Provisional Acceptance Date.
15.8
Catalyst
Warranty
.
15.8.1
Guaranteed
Catalyst Period
.
In
addition to the above Warranties, Contractor warrants that the Catalyst
used in
the SCR Systems for Unit 1 and Unit 2, respectively, will not suffer a
Catalyst
Life Failure for a minimum of 24,000 hours (the “Guaranteed Catalyst Period”)
from the date flue gas first passes through the Catalyst on each respective
Unit.
15.8.2
Catalyst
Life
.
For
Catalyst Life Failure, unless such failure is caused by Owner, that occurs
between 0 to 24,000 hours of operation from first gas of Unit 1 or Unit
2, as
the case may be, Contractor will conduct a root cause failure evaluation.
After
the corrective action plan as defined by Section 15.8.3 with the Owner
and
Catalyst manufacturer and selecting mutually agreeable repairs or modifications,
Contractor shall make indicated repairs or modifications to achieve Performance
Guarantees and replace and/or add Catalyst as required if Catalyst replacement
and/or addition is indicated by the root cause failure evaluation. The
repairs,
modifications and retesting shall follow the procedure identified in Section
15.8.3.
15.8.3
Catalyst
Life Corrective Actions
.
Within
fourteen (14) Days of a Catalyst Life Failure, Contractor shall initiate
preparation of a corrective action plan complete with all drawings, data,
specifications, and other information required for approval of the Work
by
Owner, and shall complete all such corrective action as soon as reasonably
possible. For failure to meet the Guaranteed Catalyst Period, Contractor
shall
make all repairs and modifications necessary to correct and modify the
Work to
cause performance to so conform without cost to Owner. Contractor’s obligation
to make repairs and modify the Work to meet the Guaranteed Catalyst Period
shall
not be limited by the Unit 1 or Unit 2 Warranty Callback Period but should
extend only for three years from date flue gas first passes through the
Catalyst
on each respective Unit.
15.9
Baglife
Warranty.
15.9.1
Guaranteed
Baglife Period
.
In
addition to the above Warranties, Contractor warrants that the fabric filter
bags used in the Baghouse for Unit 1 or Unit 2, as the case may be, will
not
suffer Baglife Failure for a minimum of 25,000 hours (the “Guaranteed Baglife
Period”) from the date flue gas first passes through the fabric filter bags on
each respective Unit. Contractor shall provide replacement bags for all
bags
that suffer Baglife Failure during the Guaranteed Baglife Period and
replacements will be made as Baglife Failure occurs. Owner will store bags
provided by Contractor in a temperature and humidity controlled environment
in
accordance with the manufacturer’s written recommendations.
15.9.2
Baglife
Corrective Action
.
Within
fourteen (14) Days of any Baglife Failure, Contractor shall conduct a root
cause
evaluation and prepare a corrective action plan complete with all drawings,
data, specifications, and other information required for approval of the
Work by
Owner. Contractor shall complete all such corrective action as soon as
reasonably possible. For failure to meet the Guaranteed Baglife Period
Contractor shall provide replacement bags suitable to cause performance
to so
conform without cost to Owner. Contractor’s obligation to make repairs and
modifications to the Work to meet the Guaranteed Baglife Period shall not
be
established by the Warranty Callback Period but will extend for three years
from
the date flue gas first passes through each respective Baghouse.
15.9.3
Bag
Pre-Coat
.
Contractor’s Baglife Warranty is contingent on Owner pre-coating the bags prior
to first flue gas passage in accordance with Contractor’s recommendations in the
O&M manual.
Page
38
15.10
Subcontractor
Warranties
.
Contractor shall, for the protection of Contractor and Owner, obtain from
all
Subcontractors, and thereafter enforce, all warranties with respect to
Work as
are reasonably obtainable. Contractor shall use commercially reasonable
efforts
to secure warranties from all Subcontractors that extend for the
Unit
1
Warranty Callback Period or the Unit 2 Warranty Callback Period, as the
case may
be
,
set out
in Subarticles 15.6 and 15.7, respectively. Contractor agrees during the
Warranty Callback Period, as soon as reasonably possible after receipt
of Notice
from Owner specifying any Defects, to cause the Subcontractor of such Work
(or
upon failure or refusal by such Subcontractor to do so itself), to inspect
and
to repair such Defects. All such repairs and replacements shall comply
with Laws
and Prudent Industry Practices. Contractor shall cause the Subcontractor
of such
Work (or upon failure or refusal by such Subcontractor to do so itself),
to bear
all costs and expenses associated with correcting any such Defective Work,
including necessary disassembly, transportation, reassembly, and retesting,
as
well as reworking, repair, or replacement of such Work, and disassembly
and
reassembly of adjacent Work when necessary to give access to Defective
Work.
Notwithstanding the issuance of or inability to obtain any Subcontractor
warranties, Contractor is responsible for the Work and compliance thereof
with
the requirements of the terms of the Contract Documents.
15.11
Root
Cause Repairs
.
If
chronic failure of any of the Project’s components or Materials occurs during
either the Unit 1 Warranty Callback Period or the Unit 2 Warranty Callback
Period (either original or as may be extended as a result of failures during
the
original Warranty Callback Periods), as the case may be, Contractor shall
investigate the root cause of such chronic failure and make such repairs,
replacements or adjustments necessary to correct the root cause of the
chronic
failure in accord with Subarticles 15.6 and 15.7, respectively.
15.12
Cure
Rights of Owner for Breach of Warranty
. Except in cases of
emergency, within ten (10) Days of receipt by Contractor of Notice and
adequate
supporting documentation from Owner specifying a Defect, (or such additional
period as is necessary in circumstances where ten (10) Days is not reasonable
given the circumstances), Contractor shall give Notice to Owner of when
and how
Contractor shall remedy said Defect; provided, however, that in cases of
emergency, Contractor shall remedy such Defect as quickly as reasonably
possible
under the circumstances. If Owner objects to the remedy period specified
by Contractor and Contractor does not offer a substitute remedy period
satisfactory to Owner, or if Contractor does not begin and diligently proceed
to
complete said remedy within the time period specified by Contractor and
accepted
by Owner, or if Contractor unreasonably fails to specify a remedy period
acceptable to Owner within such ten-Day period (or immediately, in the
case of
emergency conditions), Owner, after Notice to Contractor, shall have the
right
to perform or to have performed by third parties the necessary remedy,
and the
reasonable and actual costs thereof shall be paid by Contractor, together
with
all reasonable and actual attorneys’ fees and engineering fees.
15.13
Warranty
and
Passage of Title
. Contractor warrants that it passes good
title to all Work provided pursuant to this Contract to Owner, free and
clear of
all Liens upon delivery to the Site. Passage of title shall not affect
risk of loss, which shall be governed by Article 23.
Page
39
ARTICLE
16
DISPUTE
RESOLUTION
ARTICLE
17
TAXES
17.1
Payment
by Contractor
.
The
Contract Price includes federal, state and local taxes levied on
wages and/or
salaries paid to Contractor’s employees, and all taxes based upon net income of
Contractor’s business. However, the Contract Price is exclusive of any present
or future federal, state, municipal or other sales or use tax with
respect to
the Work covered hereby, or of any other present or future excise
tax upon or
measured by the gross receipts from this transaction or any allocated
portion
thereof or by the gross value of the Work covered hereby; and of
any present or
future property tax or other similar charge with respect to the Work
covered
hereby. If Contractor is required by applicable Laws to pay or collect
any such
tax or taxes or import duties on account of this transaction or the
Work covered
hereby, then such amount of tax or import duties and any penalties
and interest
thereon shall be reimbursed to Contractor or paid by Owner.
Page
40
ARTICLE
18
INDEMNIFICATION
18.1
Contractor
Indemnity
.
To the
fullest extent permitted by Laws, Contractor waives any right of
contribution
and agrees to indemnify, defend and hold harmless Owner and its
parent,
affiliates, sister entities, officers, directors, employees, agents,
representatives, subsidiaries, successors, and assigns and the Owner’s
Engineer,
(collectively, “Owner Indemnitees”) from and against all Losses in respect of
any loss or damage to third-party physical property, other than the
Work, death
or personal injury, to the extent caused by the negligence, including
any in the
performance of professional services Work under the Contract Documents
or breach
of statutory duty of Contractor, Subcontractors, or their respective
employees
and agents arising prior to three years from the date Owner and Contractor
execute a Certificate of Final Completion. Such obligation shall
not negate,
abridge, or otherwise reduce any other common law or statutory right
or
obligation of indemnity or contribution which exists in favor of
the Owner
Indemnitees. The obligations of Contractor under this Contract shall
not extend
to the liability of Owner Indemnitees arising out of their negligence.
Contractor shall use commercially reasonable efforts to impose identical
duties
upon all Subcontractors of Contractor; however, the inability of
Contractor to
impose such identical duties on a Subcontractor shall not relieve
Contractor
from any liability assumed under this Section, including Losses caused
by
Subcontractor.
18.3
Not
Used.
18.4.1
Notification
by Owner
.
Contractor shall, at its sole expense, promptly defend against any
patent
indemnity claim, demand, action or proceeding, unless directed otherwise
by
Owner, provided that Owner shall have notified Contractor upon becoming
aware of
such claim, demand, action or proceeding and provided further that
Contractor’s
aforementioned obligations shall not apply to materials, equipment
or processes
furnished or specified by Owner.
18.4.2
Substitution
of Non-Infringing Equipment or Processes or Modification
.
Contractor shall have the right, in order to avoid such claim, demand,
action or
proceeding, to substitute, at its expense, non-infringing equipment
or
processes, or to modify such infringing equipment or processes of the
Work so
they become non-infringing, or to obtain the necessary licenses to
use the
infringing equipment or processes provided that such substituted and
modified
equipment or processes meet all the requirements and are subject to
all the
provisions of this Contract.
18.4.3
Rights
of Owner Upon Injunction
.
If
Owner or Contractor is enjoined from completion of the Work or any
part thereof,
or from the use, operation, or enjoyment of the Work or any part thereof
as a
result of any claim, legal action, or litigation of the type described
in this
Subarticle, Contractor shall use commercially reasonable efforts to
have such
injunction removed promptly at no cost to Owner, and Owner may without
thereby
limiting any other right it may have hereunder or at law or in equity,
require
Contractor at Contractor’s option to supply, temporarily or permanently,
facilities not subject to such injunction and not infringing any patent
or to
replace all such facilities or to take such steps as may be necessary
to ensure
compliance by Owner with such injunction, all to the satisfaction of
Owner while
maintaining the functionality of the AQC Systems, the SCR Systems,
and the Unit
2 Boiler and all without cost or expense to Owner, including any additional
operating cost.
ARTICLE
19
INSURANCE
Contractor shall provide the insurance as set forth in the attached Exhibit
R. Owner reserves the right to implement an Owner Controlled Insurance
Program (OCIP) and Contractor agrees to cooperate with Owner and provide
Owner a
credit for the full value of those insurance premiums that Contractor no
longer
incurs as a result of the implementation of an OCIP.
EVENTS
OF DEFAULT AND TERMINATION
20.1
Termination Without Cause
. This Contract may be
terminated by Owner at any time without liability for damages and without
need
to show cause by giving ten (10) Days Notice to Contractor, provided however,
upon termination of this Contract pursuant to this Subarticle. Owner shall
pay Contractor for the sums expended in the performance of the Work performed
up
to the date of termination as follows:
(a) All direct labor and
material costs and expenses incurred prior to cancellation or suspension;
(b) Ten percent (10%) of the direct labor costs and expenses incurred
prior to cancellation or suspension for overhead expenses; (c) Ten percent
(10%) of the direct labor cost and expenses incurred prior to cancellation
or
suspension for profit; and (d) Reasonable expenses, if any, specifically
incurred by Contractor solely as a result of the cancellation or suspension,
less salvage value (if any) of the Work. This includes, but is not limited
to, all amounts due and not previously paid to Contractor for products
completed
in accordance with this Contract prior to such Notice, a reasonable amount
for
any products then in production, reasonable costs of settling and paying
claims
arising out of the cancelled orders, and all costs for providing Owner
with
requested assistance pursuant to Article 20 or otherwise, after the date
of
termination. These items shall not be considered incidental, consequential
or indirect damages.
20.1.1
Limitation of Liability
. Owner’s liability for termination shall be
limited to the foregoing, and Owner shall not be liable for incidental,
consequential or indirect damages.
20.1.2
Credits
. Owner shall be credited in full for any and all payments
made prior to termination.
20.1.3
Profits
.
Contractor shall make every reasonable effort to mitigate any termination
costs. Whether Owner terminates Contractor with or without cause or
suspends Contractor’s Work, in no event shall Owner be responsible for
termination expenses (other than provided above), for overhead costs
associated
with Work not performed by Contractor, for any profits Contractor would
have
earned if it had completed the Work, or for any consequential, incidental,
or
indirect damages.
20.1.4
Contractor
Duty
. Contractor shall make every reasonable effort to minimize such
termination charges, including alternate utilization of its work force,
materials and equipment to fill other existing and additional orders
and
contracts. Within thirty (30) Days of receipt of written Notice of
termination, Contractor shall present in writing its claim for termination
charges, providing documentation and justification for each item in reasonable
detail. In no event shall Owner be responsible for termination expenses
(other than provided herein), for overhead costs associated with Work
not
performed by Contractor, for any profits Contractor would have earned
if it had
completed the Work, or for any consequential, incidental, or indirect
damages.
20.2.1 Failure
of Contractor to discharge or perform any material duty or obligation under
the
Contract Documents for which no other exclusive remedy, such as a liquidated
damage, applies unless such exclusive remedy has not been fulfilled by
Contractor;
20.2.2 Failure
of Contractor to make to Owner, when due, any payment required under this
Contract if that failure is not remedied on or before the thirtieth (30th)
Day
after Owner provides Notice to Contractor of such failure; provided, however,
the provisions of this Subarticle shall not apply to payments that are the
subject of a good faith dispute pursuant to Article 16;
20.2.3 Failure
of Contractor to maintain the Five Percent LOC or Performance LOC as
required by this Contract;
20.2.4 Assignment
of Contractor’s rights or obligations under this Contract, except as provided in
this Contract.
20.2.5 Any
of the following shall be considered “Events of Default” to which no period of
cure shall apply and Owner shall immediately have the right to exercise the
remedies listed in Subarticle 20.4:
20.2.5.1 The
dissolution or termination of Contractor’s existence;
20.2.5.2 The appointment of a
receiver, trustee or liquidator of Contractor or of substantially all of
Contractor’s property;
20.2.5.3 An admission in writing
by Contractor of its inability to pay its debts generally as they become
due;
20.2.5.4 A general assignment by Contractor
for the benefit of its creditors;
20.2.5.5 The filing by or against
Contractor of a petition in a proceeding under the bankruptcy or insolvency
laws
applicable to it as such bankruptcy or insolvency laws are now or hereafter
in
effect;
20.2.5.6 Contractor seeking relief from
its creditors in any other proceeding under federal bankruptcy laws or state
insolvency statutes, or shall otherwise become insolvent or
bankrupt.
20.3.1 Proceed
against Contractor pursuant to Article 16;
20.3.2 Seek
specific performance of Contractor’s obligations under this Contract to the
extent permitted by Laws; or
20.3.3 Terminate
this Contract.
Page
43
20.4
Owner
Termination for Cause
. In the event that Owner terminates
this Contract for Contractor’s default, Owner shall have a license to use any
and all patented and/or proprietary information, and all drawings and plans
Owner deems necessary to complete the Work including use of such information
for
the operation and maintenance of the AQC Systems, the SCR Systems, and the
Unit
2 Boiler. Further, Owner shall have the right, but not the obligation to
pay for Materials already ordered by Contractor for use on the Project, to
take
possession of any or all of Construction Aids located at the Site for the
purpose of completing the Work, with such Construction Aids to be returned
to
Contractor upon the completion of the Work. Although Owner shall use
reasonable efforts to mitigate the cost for completion of the Work, Owner may
employ any person, firm, or corporation to finish the Work by whatever method
Owner may deem expedient and may undertake such expenditures as in Owner’s sole
judgment will best accomplish the timely completion of the Work (including,
where necessary, the entry into contracts without prior solicitation of
proposals). In such event, Contractor shall not be entitled to receive any
further payments under this Contract except for payments for Work performed
prior to such termination based on the percentage of Work completed, subject
to
Subarticle 20.5.
20.4.1
Contractor Liable for Excess Costs to Complete Work
. If the cost to
Owner of completing the Work, including costs of accelerated or expedited
construction methods customarily and actually performed in an attempt to
mitigate any delay by Contractor and reasonable charges for administering any
subcontract and for legal fees associated with the termination exceeds the
Contract Price, then Contractor shall be liable for the amount of such
excess. Owner shall be entitled to offset any such excess costs against
any amount due Contractor for Work performed prior to termination.
20.4.2
Contractor’s Additional Services Relative to the Work
. If Owner
elects to terminate this Contract pursuant to Subarticle 20.4, Contractor shall,
at Owner’s request and Contractor’s expense, perform the following services
relative to the Work so affected: (a) Assist Owner in preparing an
inventory of all Materials in use or in storage at the Site; (b) Assign to
Owner all subcontracts and other contractual agreements as may be designated
by
Owner; and (c) Remove from the Site all such Construction Aids and rubbish
as Owner may request.
20.5
Additional Consequences of Termination
.
Upon any
termination pursuant to this Article 20, Contractor shall have no further
liability for payment of unaccrued liquidated damages for failure to meet
Schedule pursuant to Article 22, nor liquidated damages for failure to meet
the
Performance Guarantees pursuant to Article 22. Owner may at its option elect
to
(a) take possession of the Work performed to date, materials or equipment
remaining at the Site, and (b) succeed to the interests of Contractor in any
or
all subcontracts entered into by Contractor with respect to the Project, and
shall be required to compensate such Subcontractors only for compensation
becoming due and payable to such parties under the terms of their Subcontracts
with Contractor from and after the date Owner elects to succeed to the interests
of Contractor in such Subcontracts.
20.6
Limitation of Liability
. Except only as provided
in the penultimate sentence of this Subarticle 20.6, the liability of one Party
to the other and its successors and assigns relating to the Work of this
Contract shall not exceed in the cumulative aggregate the Contract Price (the
“Total Liability Limitation”), regardless of whether any such liability may be
based on contract, guarantee, indemnity (except only as provided in the last
sentence of this Subarticle 20.6), warranty, tort, including negligence or
gross
negligence, strict liability, or otherwise, and each Party hereby releases
the
other Party from any liability in excess thereof. The provisions of this
Subarticle 20.6 do not apply to limit: (a) Contractor’s obligation to achieve
Unit 1 Final Completion; (b) Contractor’s obligation to achieve Unit 2 Final
Completion; (c) Subarticle 20.4.1; (d) Contractor’s indemnity obligations under
Article 18.1, 18.3 and 18.4; or (e) Owner’s Indemnity for Hazardous
Substances. This Limitation of Liability shall prevail over any
inconsistent provisions contained in any of the documents comprising the
Contract, irrespective of any order of precedence.
20.7
Consequential Damages
. Except to the extent of the
liquidated
damages provided for in
Article 22 and Exhibit S
, the requirement to prevent the placement of Liens
in Article 12, the adjustments provided for in Article 13, any amounts paid
to
third parties as a result of Contractor’s indemnity obligations under Article
18.1, 18.3 and 18.4, or Contractor’s costs incurred in performing Warranty Work
set forth in Article 15 may be construed to be consequential damages, whether
as
a result of breach of contract, guarantee, tort, including negligence, strict
liability or otherwise, neither Party hereto shall be liable for loss of profits
or revenue, loss of use, cost of capital, down time costs, loss of opportunity,
loss of goodwill, cost of purchased or replacement power, and/or claims of
customers of the other Party for such damages or for indirect, incidental,
consequential or exemplary damages of any nature or kind; and Owner and
Contractor hereby release each other from liability to the other for such
damage. Contractor shall obtain from all Subcontractors for the benefit of
Owner releases from all such liability in accordance with the foregoing
provisions of this Subarticle 20.7.
Page
44
20.8
Applicability
. The waivers and disclaimers of
liability, releases from liability, limitations on liability, indemnities,
and
exclusive remedy provisions set forth in this Contract shall apply even in
the
event of the fault, negligence (in whole or in part), strict liability, or
other
basis of liability of the Party to the benefit of which such provisions
operate. In the event either Party asserts a claim or claims against any
of the other Party’s partners, shareholders, directors, officers,
employees, agents, companies affiliated with such Party or their directors,
officers or employees (such Persons, “Related Persons”), the aggregate recovery
of the asserting Party pursuant to such claim or claims shall, except to the
extent prohibited by law, be limited by the waivers and disclaimers of
liability, releases from liability, limitations on liability, indemnities,
and
exclusive remedy provisions set forth in this Contract, even in the event of
the
fault, negligence (in whole or in part), strict liability, or other basis of
liability of any of the Related Persons.
ARTICLE
21
TESTING
AND FINAL COMPLETION
21.1
Scheduling
of Performance Testing
.
At
least sixty (60) Days prior to the time Contractor believes that the Work
is
ready for Performance Testing as set forth in Exhibit E, Contractor shall
provide Notice to Owner of the estimated date to begin the Performance
Tests
identified in the Contract Documents. The Performance Testing shall not
be
postponed more than nine (9) months from the date of Provisional Acceptance.
If
Performance Testing is not conducted within nine (9) months from the Guaranteed
Unit 1 Provisional Acceptance Date or the Guaranteed Unit 2 Provisional
Acceptance Date, as applicable, due to no fault of Contractor, the Performance
Testing shall be deemed to have been achieved If Performance Testing has
not
been completed by Owner prior to the Guaranteed Unit 1 Substantial Completion
Date or the Guaranteed Unit 2 Substantial Completion Date B, as the case
may be,
due to no fault of Contractor, then Owner will pay Contractor the payment
due
for achieving Unit 1 Substantial Completion or Unit 2 Substantial Completion
B
as if Substantial Completion for the Unit had been achieved. However, by
making
such payment, Owner does not waive its right to dispute Contractor’s entitlement
to such payment if, once the Performance Tests have been performed, such
Performance Tests demonstrate that the Work does not meet the Performance
Guarantees in Exhibit S.
21.2
Achievement of Performance Guarantees
.
If the
Performance Tests demonstrate that the Work meets the Performance Guarantees
as
set forth in Exhibit S, the Work shall be accepted by Owner for Unit 1
Substantial Completion or Unit 2 Substantial Completion B, as the case may
be. Upon Provisional Acceptance of each Unit, Owner shall assume
operational control of the Unit. Contractor may continue to work to
complete the Work at the scheduling of Owner and without interfering with
Owner’s needs to supply power.
Page
45
ARTICLE
22
LIQUIDATED
DAMAGES
22.1
Performance Guarantees
.
The
principal Unit 2 Boiler and Units 1 and 2 AQC Systems performance features
with
specific performance guarantees by Contractor are listed in Exhibit S.
Contractor guarantees that if the Boiler, AQC and SCR Systems are operated
and
tested as provided in Exhibit S, they will each perform in accordance with
the
guaranteed performance data stipulated in the Technical Specifications utilizing
performance fuel. The specific Performance Guarantees set forth in Exhibit
S are the only guarantees of performance made by Contractor with respect to
the
Work with the exception of the Catalyst Life Guarantee and the Baglife
Guarantees set forth in Article 15.
22.2
Liquidated Damages For Failure to Meet Performance
Guarantees
. The amount of liquidated damages payable to Owner
in the event that Contractor is unable to satisfy the Performance Guarantees
as
set forth in Exhibit S. Performance Guarantees and associated liquidated
damages, if applicable, for Unit 1 and Unit 2 shall be the same unless otherwise
indicated. The Parties agree that certain Performance Guarantees for Unit
1 or Unit 2 for which the payment of liquidated damages shall be an acceptable
remedy for failure to satisfy the applicable Performance
Guarantees.
22.3
Liquidated Damages For Delay and Failure to Meet
Schedule
. The applicable liquidated damages are more fully
described in Exhibit S.
22.4
Liquidated Damages
Exclusive
Remedy
. Payment of liquidated damages by Contractor to
Owner shall be Owner’s sole and exclusive remedy and Contractor’s sole liability
for delay. Additionally, after Contractor achieves Provisional Acceptance
for each respective Unit, Contractor’s payment of the applicable amount of
liquidated damages with respect of the limited range of deviation from the
Performance Guarantees shall constitute the sole and exclusive remedy by Owner
and the sole liability of Contractor to Owner for Contractor’s failure to
achieve a percentage of the Performance Guarantee. Notwithstanding the
foregoing, Contractor’s obligation to pay liquidated damages to Owner shall not
affect, waive, or otherwise modify Contractor’s warranty obligations to
Owner.
22.5
No Liquidated Damages for Owner Delay
.
If
no bonus is agreed upon by the Parties pursuant to Section 12.2, Contractor
shall have no liability for liquidated damages for any delay in achieving Unit
2
Provisional Acceptance, if, after the Guaranteed Unit 2 Provisional Acceptance
Date, the period of time the Unit is not operating for reasons other than
Contractor’s delay, including but not limited to delay by Owner or Owner’s other
contractors including the turbine installation contractor and balance of Plant
contractor. However, if the Parties are able to agree on a bonus, then
Contractor will be liable for Liquidated Damages for delay in accordance with
the Contract Documents.
22.6
Liquidated Damages Reasonable
.
It is understood and agreed between Contractor and
Owner that: (a) Contractor’s
failure to meet the Guaranteed Unit 1 Provisional Acceptance Date and the
Guaranteed Unit 2 Provisional Acceptance as set forth in Exhibit E, will cause
Owner to suffer substantial damages; (b) Owner’s loss from failure to achieve
Unit 1 Provisional Acceptance on or before the Guaranteed Unit 1 Provisional
Acceptance Completion Date, Unit 2 Provisional Acceptance by the Guaranteed
Unit
2 Provisional Acceptance Date, or failure of the Work to comply with any of
the
Performance Guarantees would be uncertain and impossible to determine or
quantify with precision; (c) the provisions set forth in this Section both
limit the liability of Contractor and establish agreed compensation and damages;
(d) such provisions represent a reasonable endeavor on the part of
Contractor and Owner to estimate fair and reasonable compensation for the
foreseeable damages from each of the potential events for which liquidated
damages are provided in Exhibit S; and (e) subject to the limitations on
liquidated damages contained in this Article and Exhibit S, such liquidated
damages are cumulative.
ARTICLE
23
RISK
OF LOSS
Care,
custody, and control of the Work and full risk of loss shall pass to Owner
upon
the earlier to occur of Provisional Acceptance of each Unit, or Termination
or
as agreed by the Parties the (“Care, Custody and Control Date”). Owner
shall assume the risk of physical loss or damage to the applicable portion
of
the Work or the Plant from and after the Care, Custody and Control Date;
provided, however, Contractor shall remain liable for deductibles under Owner’s
insurance policies for loss or damages to the extent caused by fault, including
negligence, of Contractor to the extent of Contractor’s or its Subcontractors’
acts or omissions. Owner shall waive its rights of subrogation against
Contractor and Subcontractors for loss or damage incurred from and after the
Care, Custody and Control Date that may be covered under Owner’s insurance
and hereby releases Contractor and Subcontractors for such liability to the
extent of recoveries from Owner’s insurance. Contractor shall be obligated
to replace, repair, or reconstruct any and all Work or supplies furnished by
Contractor that are lost, damaged, or destroyed prior to transfer of care,
custody, and control of the Work to Owner.
Page
46
ARTICLE
24
FORCE
MAJEURE
24.1
Definition
. As used in this Contract, the term
“Force Majeure” shall mean any acts, events, or occurrences that
are not caused
by the fault, negligence or willful misconduct of the affected Party and
are
beyond the reasonable control of a Party, including but not limited to
acts of
God, earthquakes, floods, tornado, tidal wave, lightning, fire, quarantine,
blockade, governmental acts (other than the time periods associated with
obtaining approvals necessary from governmental agencies), court orders
or
injunctions, war (declared or not), rebellion, terrorism (foreign and domestic),
riots, insurrection or civil strife, sabotage, explosions, strikes, work
stoppages or other labor dispute (if, (a) a national or regional strike,
and (b)
if the strike is not against Contractor or its Subcontractors), other than
those
caused by: (1) breaches of any collective bargaining agreement by Contractor
or
any of its Subcontractors, (2) actions of Contractor toward Owner’s personnel or
Owner’s contractors’ personnel, or (3) unfair labor practices of Contractor;
provided, however, that “Force Majeure” does not include Contractor’s inability
to obtain labor or to pay monies due and owing, nor shall Force Majeure
include
weather conditions other than those specifically listed above or those
weather
conditions upon which Owner and Contractor mutually agree prevent the Work
from
proceeding for safety or efficiency reasons.
24
.3
Settlement
of Strikes
. Notwithstanding the foregoing, nothing in Article
24 shall be construed to require the settlement of any strike, walkout,
lockout
or other labor dispute on terms which, in the sole judgment of the Party
involved in the dispute, are contrary to such Party’s interest. It is
understood and agreed that the settlement of strikes, walkouts, lockouts
or
other labor disputes shall be entirely within the discretion of the Party
experiencing such action. Owner may direct Contractor, at Contractor’s
costs, to take reasonable steps to resolve any strike, walkout, lockout
or other
labor dispute and procure Materials or labor from other sources so as to
minimize adverse impact on the Project.
ARTICLE
25
FEDERAL
CONTRACTING REQUIREMENTS
Owner
is
a U.S. government contractor. In order to comply with the requirements
applied to Owner by the government under Owner’s agreement, Owner’s suppliers
and contractors, including Contractor, are required to comply with the
rules
outlined in Exhibit M.
ARTICLE
26
MILLENNIUM
COMPLIANCE
26.1.1 The
Software accepts, calculates, compares, sorts, extracts, sequences, and
otherwise processes date and time inputs and date and time values, and
returns
and displays date and time values, in a consistent manner regardless
of the
dates used, whether before, on, or after January 1, 2000;
26.1.2 The
Software will function without interruptions caused by the date in time
on which
the processes are actually performed or by the date input to the Software,
whether before, on, or after January 1, 2000;
26.1.3 The
Software stores and displays date information in ways that are unambiguous
as to
the determination of the century.
Page
48
ARTICLE
27
UNDERGROUND
INSTALLATIONS
ARTICLE
28
SAFETY
AND FIRST AID
ARTICLE
29
MISCELLANEOUS
PROVISIONS
29.1
Entire
Contract; Amendment
.
This
Contract sets forth the full and complete understanding of the Parties
with
respect to the subject matter hereof, as of the Effective Date, and
supersedes
any and all agreements and representations (oral or written) made or
dated prior
thereto. Subsequent to the date hereof, this Contract may be supplemented
and
amended only by written agreement signed by authorized representatives
of the
Parties.
29.3.1
Delivery of Documents
. Provided
Contractor has been paid in accordance with the requirements of the Contract
and
Owner is not in default of its obligations under the Contract, in the event
of
any termination of this Contract, Contractor agrees to deliver to Owner
forthwith all original documents (including, but not limited to, reports
and
calculations) and also computer disks containing the Contract Documents,
drawings and specifications prepared or in the process of being prepared
by or
on behalf of Contractor in readable form through the date of termination
and
hereby grants to Owner a license to use the copyright information to
allow:
Page
49
29.3.1.1
Use
of any drawings, specifications and other documents to complete the
Work, including providing any drawings and specifications and other documents
to
others.
29.3.1.2
Owner
to amend or have amended any drawings, specifications or other
Project documents as may be required by Owner.
29.3.1.3
Use
of any drawings, specifications and other documents in connection
with the use or maintenance of or modification of the Project or the bidding
of
any work related thereto.
29.4.1
Binding
Effect
. This Contract shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective successors
and permitted assignees.
29.4.2
Successors and
Assigns
. Neither Party hereto shall assign or otherwise convey any of
its rights, titles, or interests under this Contract without the prior written
consent of the other Party hereto (which consent shall not be unreasonably
withheld or delayed); provided, however, that without any such consent, either
Party may assign its interest in this agreement by way of merger, consolidation
or acquisition of substantially all of the assets of the assigning Party
to a
parent company or successor. . Upon each permitted assignment
described in this Section by either Party hereto, the assignee of such Party
shall expressly assume in writing all of the obligations of such Party
hereunder.
29.4.3
Acknowledgement of
Assignment
. Upon the request of either Party, the other Party shall
acknowledge in writing any permitted assignment described in Section 29.4.2
and
the right of any permitted assignee to enforce this Contract against such
other
Party.
29.4.4
Continuance of
Contractual Obligations
. Unless otherwise agreed by the Parties hereto
in a separate writing, no permitted assignment described in Section 29.4.2
shall
relieve the assigning Party from any of its obligations under this
Contract. However, the assignee may be required by the assigning Party to
agree to indemnify and hold harmless the assigning Party from some or all
of its
obligations under this Contract.
29.5.1
Review Evidence and
Interview Employees
. For any and all non-fixed price Work, Contractor
and its Subcontractors shall permit Owner’s auditors or their agents to: (a)
Review all evidence deemed necessary by auditors or their agents to substantiate
charges for direct and indirect costs, including overhead allocations as
may
apply to associated costs. Auditors or their agents shall have the right
to examine records to the extent necessary to determine proper charges for
non-fixed price work are not also charged to the firm fixed price. This
information shall be provided by Contractor to auditors or their agents upon
request in both hard copy via U.S. mail, and transmission in electronic
formats. Contractor shall ensure that these same audit rights are provided
in all contracts between Contractor and its Subcontractors; and (b) Interview
any current or former employees of Contractor or appropriate Subcontractor
during the audit relative to amounts charged by Contractor.
29.5.2
Workspace
.
Contractor
and all Subcontractors will provide
Owner auditors or their agents adequate and appropriate workspace, with access
to photocopy machines.
29.5.3
Reimbursement
of Overcharges
. If the audit detects
overcharges that equal or exceed 1% of total billings for non-fixed price
work,
Contractor shall reimburse Owner for the cost of the audit.
29.5.4
Deadline
for Repayment
. Contractor will repay any
overcharges discovered during the audit within thirty (30) Days after the
completion of the audit.
29.5.5
Maintenance
of Records
. Contractor and all Subcontractors
will be subject to audit during the course of the Work in question and for
a
period of three (3) years after Unit 2 Substantial Completion. Contractor
and all Subcontractors agree to maintain all records related to the Project
for
a period of three (3) years after Unit 2 Substantial Completion.
Page
50
To
Owner:
Kansas
City Power & Light
Company
1201
Walnut,
11
th
Floor
Kansas
City, MO
64141-9679
Attn.:
Brent Davis
FAX:
(816)-654-1623
and
To Contractor: ALSTOM
Power Inc.
2000 Day Hill Road
Windsor, CT 06095
Attn.: Gary Lexa
cc: ALSTOM Power Inc.
2000 Day Hill Road
Windsor, CT 06095
Attn.: General Counsel
Changes
of
address or addresses for Notice shall be in compliance with this Subarticle
29.6. Notices properly addressed and stamped shall be deemed received by
the addressee on the Day of actual receipt. Express-type courier service
and facsimile Notices shall be deemed to have been received at the end of
the
first Business Day following the actual date of delivery by such courier
or of
transmission.
Page
51
29.12
Severability
. In the event that any
provision of this Contract or the documents and instruments contemplated
hereby
is held by a tribunal of competent jurisdiction to be invalid, prohibited
or
unenforceable for any reason, unless narrowed by construction, this Contract
and
the documents and instruments contemplated hereby shall be construed as if
such
invalid, prohibited or unenforceable provision had been more narrowly drawn
so
as not to be invalid, prohibited or unenforceable, or if such language cannot
be
drawn narrowly enough to satisfy such tribunal, the tribunal making any such
determination shall have the power to modify in scope, duration or otherwise
any
such provision, but only to the extent necessary to make such provision or
provisions enforceable by such tribunal, and such provision then shall be
applicable in such modified form. No narrowed construction,
tribunal-modification, or invalidation of any provision of this Contract
and the
documents and instruments contemplated hereby shall affect the construction,
validity, or enforceability of such provision or of this Contract and the
documents and instruments contemplated hereby in any jurisdiction other than
that upon which the decision of the tribunal of competent jurisdiction shall
govern.
29.13.1
Removal,
Transport and Disposal
. Owner shall remove,
transport, and dispose of any Hazardous Substances discovered or released
at the
Site, other than hazardous materials (a) transported and released onto the
Site
or on off-site rights of way and easements by Contractor or any Subcontractor
or
(b) used as part of Contractor’s or any Subcontractor’s activities at the
Site.
29.13.2
Notice
.
Contractor
shall provide written Notice of the
presence of Hazardous Substances to local fire, medical, and law enforcement
agencies as required with a copy of such Notice to Owner.
29.13.3
Material
Safety Data Sheets Required
. As required under
Federal Hazardous Communications Standards and certain state and local Laws,
Contractor shall maintain Material Safety Data Sheets covering all Hazardous
Substances furnished under, brought on Site under, or otherwise associated
with
the Work under this Contract and provide them prior to or at the time Hazardous
Substances are delivered to or otherwise brought on the Site. If
Contractor does not bring any hazardous materials on Site, Contractor shall
provide Owner with copies of a document certifying that no Material Safety
Data
Sheets are required under any Laws in effect at the Site.
29.13.4
Labeling
and Training
. Contractor shall provide labeling of
Hazardous Substances and training of their employees in the safe usage of
such
materials as required under any applicable Laws.
29.14.1
Warranty
.
Contractor
warrants that it shall fully comply
with all Laws applicable to its services provided to Owner under this Contract,
including but not limited to the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substances Control Act, and the
Resource Conservation and Recovery Act, as the same may be amended from time
to
time.
29.14.2
Environmental
Indemnification
. Contractor shall indemnify
and defend Owner from and against all Losses (including but not limited to
damages for injury or loss of natural resources) arising out of and to the
extent of: (a) Contractor’s provision of services to Owner relating to
Hazardous Substances, and (b) The transporting, handling, storage,
treatment, release, threatened release or disposal by Contractor, or any
third
party, of any equipment, substances or other materials brought onto the Site
or
used by Contractor during the course of providing such services.
29.14.3
Owner
shall fully indemnify, save harmless, and defend Contractor and
each of Contractor’s directors, officers, subcontractors, agents, employees and
successors and permitted assigns from and against all Losses resulting
from: (a) the presence of any Hazardous Substances on the Site prior to the
commencement by Contractor of performance of the Work, of (b) the introduction
of any Hazardous Substances (other than pursuant to the Contract) at, on
or into
the Site after the commencement of the Work other than due to actions or
inactions of Contractor of any Subcontractor or of a person acting on behalf
of,
or under the direction or supervision of Contractor, and (c) Hazardous
Substances which are byproducts of the normal operation of the
Plant.
Page
52
29.15.1
Discovery
.
Owner’s
existing facilities may contain
Asbestos-containing materials and lead paint. If Contractor or any of its
Subcontractors is required to perform Work within or immediately adjacent
to any
of the existing structures or facilities, the possibility exists that
Asbestos-containing material and lead paint may be encountered during the
execution of the Work. Should Contractor or any of its Subcontractors
encounter or have reason to believe that Asbestos-containing material or
lead
paint is present while performing Work, Contractor must immediately notify
Owner. Contractor shall take the necessary precautions to prevent
disturbing insulation or lead paint adjacent to the Work. If the Work
cannot be continued without disturbing or exposing such material, Contractor
shall stop Work in the immediate vicinity of the affected area.
29.15.2
Investigation
and Determination
. If Contractor notifies
Owner that it has reason to believe that it has encountered Asbestos or Asbestos
containing material or lead paint, Owner will investigate the material and
determine whether Asbestos or lead is present. Owner shall thereupon
notify Contractor of its determination. If Asbestos or lead paint is not
present, Contractor shall immediately resume any of its operations that have
been stopped.
29.15.3
Removal or Protection
. Removal or protection of the
Asbestos material or lead paint will be done by, and at the expense of, Owner.
ARTICLE 30
PERFORMANCE
LETTER OF CREDIT
IN
WITNESS WHEREOF, the Parties have executed these Terms and Conditions as
of the
day and year first above written.
THIS CONTRACT CONTAINS
A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
ALSTOM
POWER INC
.
By:
Its:
|
KANSAS
CITY POWER & LIGHT
COMPANY
By:
Its:
|
Page
53
Exhibit
10.2.b
BEFORE
THE STATE CORPORATION COMMISSION
OF
THE STATE OF KANSAS
In
the Matter of the Application of Kansas City Power and Light Company
for
Approval to Make Certain Changes in its Charges for Electric Service
to
Begin the Implementation of Its Regulatory Plan.
|
)
)
)
)
)
)
|
Docket
No.: 06-KCPE-828-RTS
|
STIPULATION
AND AGREEMENT
As
a
result of extensive discussions between the parties to this docket, the Staff
of
the Kansas Corporation Commission (“Staff”), Kansas City Power & Light
Company (“KCPL” or “Company”), the Citizens’ Utility Ratepayer Board (“CURB”),
the Midwest Utility Users Group (“MUUG” - a group comprised of
Danisco
USA, Inc., Blue Valley United School District #229, Shawnee Mission United
School District #512, United School District #233 of Johnson County, and
Amcor PET Packaging USA, Inc.
),
Wal-Mart Stores Inc. (“Wal-Mart”), and the
International
Brotherhood of Electrical Workers, Local Union Nos. 412, 1464 and 1613 (“IBEW”),
(referred
to collectively as “the signatories” or “the signatory parties”), hereby submit
to the Kansas Corporation Commission ("Commission") for its consideration and
approval the following Stipulation and Agreement:
I.
KANSAS
CITY POWER & LIGHT COMPANY’S APPLICATION
1.
On
January 31, 2006, KCPL filed an Application with the Commission to make certain
changes in its rates and charges for electric service, which was docketed as
the
above-captioned proceeding. Pursuant to a Commission Order issued on February
10, 2006, the effective date of this Application was suspended until December
10, 2006. This Application was the first in a series of rate cases in which
KCPL
hopes to continue the collaborative process and take constructive steps toward
fulfillment of the obligations and commitments that were made by KCPL in Docket
No. 04-KCPE-1025-GIE (the “1025 Docket”), which culminated in the approval of a
Stipulation and Agreement (the “1025 Stipulation”) by the
Commission.
2.
In
accordance with the 1025 Stipulation that was approved in the 1025 Docket,
KCPL committed to file this rate Application no later than February 1, 2006.
The
filing of this Application also complies with the Commission’s Order in Docket
No. 02-KCPE-840-RTS, which required KCPL to file a rate case on or before
May 1, 2006.
3.
This
rate
Application is the first in a series of rate applications that are contemplated
in the Rate Plan
1
,
in
conjunction with KCPL’s implementation of the Resource Plan.
Under
the Rate Plan, KCPL will file as many as three, and at least one, additional
rate application over the next four years, as
described
in Appendix C of the 1025 Stipulation.
4.
KCPL’s
rates were last adjusted in Docket No. 02-KCPE-840-RTS by an Order of the
Commission that was issued on May 24, 2002, which resulted in a decrease of
$12.4 million in KCPL’s retail jurisdictional rates in Kansas.
5.
The
schedules filed with KCPL’s Application indicated a gross revenue deficiency of
$42,270,000, based upon normalized operating results for the 12 months ending
December 31, 2005, adjusted for known and measurable changes in revenues,
operating and maintenance expenses, cost of capital and taxes, and
other
adjustments. KCPL did not propose implementing an energy cost adjustment
mechanism (“ECA”) or tariff. Similarly, KCPL opted not to implement its
previously proposed contribution in aid of construction (“CIAC”) mechanism in
order to maintain its financial ratios during the period when rates established
by the Commission in this case will be in effect.
1
The
1025
Stipulation refers collectively to the “Regulatory Plan” that is comprised of a
Resource Plan set forth in Appendices A and A-1, the Customer Programs set
forth
in Appendices B and B-1, and the Rate Plan set forth in Appendices C, C-1
and C-2. References to the “Regulatory Plan” within this Stipulation and
Agreement shall have the same meaning.
2
6.
In
its
Application, KCPL requested Commission approval of the following accounting
provisions as part of this rate proceeding:
A.
Wolf
Creek Decommissioning Trust Fund Accrual
.
KCPL
requested that
the
Commission use the same language in the order in this rate proceeding approving
the decommissioning funding level that was required under Section 468A of the
Internal Revenue Code prior to the revisions to Section 468A resulting from
the
Energy Policy Act of 2005. The required language prior to the changes to Section
468A included a statement in an order of the state commission (1) approving
the
schedule of decommissioning cost accruals; (2) finding that the decommissioning
cost accruals were included in cost of service and were included in rates for
ratemaking purposes; and (3) finding that the earnings rate assumed
for
the
trust takes into consideration the tax rate change and the removal of the
investment restrictions resulting from the Energy Policy Act of
1992.
B.
Pensions
.
KCPL
requested that
the
Commission reaffirm its approval of the regulatory asset or liability
which
the
Company records for the annual difference in Statement of Financial Accounting
Standards No. 87 (“FAS 87”) pension expense recorded for financial
reporting purposes and the amount of FAS 87 pension expense calculated for
ratemaking purposes, as addressed in
Appendix
C(E
)
of the
1025 Stipulation.
KCPL
also
requested that
the
Commission reaffirm its approval of the regulatory asset or liability the
Company records for the annual difference in FAS 87 pension expense calculated
for ratemaking purposes and the level of pension expense built into rates
for
that period, as addressed in Appendix C
(E)
of
the 1025 Stipulation.
Similarly,
KCPL requested Commission approval to set up a regulatory asset or liability
to
track the difference in Statement of Financial Accounting Standards No. 88
(“FAS
88”) pension expense recorded for financial reporting purposes, because, unlike
FAS 87, which allows for the delayed recognition in net periodic pension
cost of certain gains and losses, FAS 88 requires immediate recognition of
certain gains and losses arising from settlements and curtailments of defined
benefit plans.
7.
In
support of its Application, KCPL submitted the testimony of 22 witnesses
and the schedules required by K.A.R. 82-1-231. KCPL also filed a class cost
of
service study and proposed rate design to be determined in this
proceeding.
3
II.
ADDITIONAL PARTIES TO THIS PROCEEDING
1.
In
addition to the signatory parties identified above, the following parties sought
and were granted intervention in this proceeding:
Sierra
Club of Kansas (“Sierra Club”)
,
Kansas
Gas Service Company (“KGS”), and the City of Mission Hills, Kansas (“Mission
Hills”).
2.
In
addition to the direct and rebuttal testimony filed by KCPL, direct and rebuttal
testimony was also filed by Staff, CURB, Wal-Mart, Mission Hills, and MUUG.
The
testimony of Wal-Mart, Mission Hills, and MUUG primarily addressed issues
pertaining to class cost of service and rate design and is not summarized in
this Agreement.
III.
KCPL,
STAFF AND OTHER PARTIES’ PRE-FILED POSITIONS
1.
On
August
17, 2006, Staff filed its direct testimony in the above docket, wherein it
recommended a rate increase for KCPL of approximately $15,700,000, including
a
CIAC amortization amount of $5,825,194, and recommended adoption of an ECA
tariff.
2.
Subsequent
to the filing of Staff’s testimony, KCPL identified errors that it believed
existed in Staff’s accounting adjustments, and Staff has agreed with some of
KCPL’s proposed corrections for settlement purposes. When those corrections are
incorporated into Staff’s filed position, Staff’s revenue requirement increases
by approximately $10,000,000, resulting in a recommended rate increase of
approximately $26,000,000.
4
3.
On
September 18, 2006, September 20, 2006, and September 25, 2006, the parties
met
collectively to discuss the terms of a stipulation and agreement. This Agreement
is the result of those negotiations.
IV.
TERMS
OF THE STIPULATED SETTLEMENT
After
extensive negotiations, the signatory parties have agreed upon the following
terms:
A.
Stipulated
Revenue Requirement and Customer Advancement Amount
KCPL’s
overall revenue increase will be twenty-nine million dollars ($29,000,000).
To
provide KCPL with sufficient cash flow to proceed with the Resource Plan as
set
forth in the 1025 Stipulation, the signatory parties agree that four million
dollars ($4,000,000) of the total revenue increase will be treated for
accounting purposes as a pre-tax payment on plant on behalf of consumers. The
$4
million pre-tax payment shall be treated as an increase to KCPL’s depreciation
reserve and will be assigned to primary plant accounts in a future rate case.
B.
Energy
Cost Adjustment
Staff
agrees to abandon its ECA recommendations in this case, and KCPL agrees it
shall
propose an ECA mechanism, including a proposed ECA tariff, in its next rate
filing that will be filed no later than March 1, 2007. Prior to March 1, 2007,
the signatory parties agree that they shall meet and discuss the specifics
of
the ECA mechanism in order to attempt to reach a compromise on the issue.
Nothing in this section shall be interpreted to mean that the signatory parties
must accept without objection any ECA mechanism proposed in KCPL’s next rate
filing or preclude any party from presenting alternative mechanisms.
5
C.
Spearville
Wind Facility
Regarding
KCPL’s new wind generation at Spearville, Staff reserves the right to propose
the same or similar performance mechanism in the next rate case as it did in
this case. KCPL agrees it will not argue that the proposal of such mechanisms
violates the 1025 Stipulation. However, the signatory parties agree that KCPL
is
free to object to such mechanisms on any other grounds.
D.
Miscellaneous
Stipulated Accounting Provisions
As
set
forth in KCPL’s rate Application and as agreed by the signatory parties and
consistent with the 1025 Stipulation, the following accounting provisions should
be adopted by the Commission:
1)
Rate
Case Expenses
The
Commission authorizes KCPL to establish a regulatory asset for incremental
rate
case expenses incurred through the duration of Docket No. 06-KCPE-828-RTS.
KCPL
currently estimates the Kansas jurisdictional regulatory asset will be
approximately $1.5 million at December 31, 2006. KCPL is authorized to amortize
this regulatory asset over four (4) years commencing January 1, 2007. The
deferred expenses will not receive any rate base treatment in future rate
cases.
2)
Talent
Assessment Expenses
The
Commission authorizes KCPL to establish a regulatory asset for Talent Assessment
expenses in the amount of $516,316 (Kansas jurisdictional $216,771). KCPL is
authorized to amortize this regulatory asset over ten (10) years commencing
January 1, 2007. The deferred expenses will not receive any rate base treatment
in future rate cases.
6
3)
Depreciation
Rates
The
Commission authorizes KCPL to continue utilizing the depreciation rates set
forth in Appendix A, which are the same rates set out in Appendix C-2 of the
1025 Stipulation.
4)
Enhanced
Security Costs
The
Commission reaffirms KCPL’s regulatory asset, to be included in rate base, for
the Kansas jurisdictional portion of enhanced security costs through December
31, 2006. The costs to be included in the regulatory asset are consistent with
the direct testimony of KCPL witness Lawrence H. Dolci. KCPL is authorized
to
amortize this regulatory asset over five (5) years commencing January 1,
2007.
5)
Asset
Retirement Obligations and Cost of Removal
The
Commission reaffirms its Order in Kansas Docket No. 04-WSEE-605-ACT allowing
KCPL to defer all costs on the balance sheet, for financial reporting purposes,
associated with the adoption of Statement of Financial Accounting Standards
No.
143 (“FAS 143”) and Financial Accounting Standards Board Interpretation No. 47
(“FIN 47”), including accretion and depreciation expenses and amounts included
for cost of removal in depreciation rates as set forth in Appendix A.
6)
Pension
Costs
Treatment
of pension costs shall be as set forth in the attached Appendix B. Appendix
B
hereto is intended to be consistent with the treatment of pension costs outlined
in Appendix C(E) of the 1025 Stipulation.
7
7)
Decommissioning
Accruals for Wolf Creek
The
Commission approves the schedule of decommissioning cost accruals included
in
Appendix C, affirms that the decommissioning cost accruals are included in
cost
of service and are included in rates for ratemaking purposes and affirms that
the earnings rate assumed for the trust takes into consideration the tax rate
change and the removal of the investment restrictions resulting from the Energy
Policy Act of 1992.
8)
SO
2
Emission
Allowances
The
Commission authorizes KCPL’s sale of SO
2
emission
allowances through June 1, 2010. KCPL will record net sales proceeds to a
regulatory liability (FERC Account 254) and offset to rate base for ratemaking
purposes. The regulatory liability will be amortized over a time period to
be
determined in the 2009 rate filing. Such amortization shall be reflected in
rates beginning with the rates resulting from the 2009 rate filing.
KCPL
currently purchases coal from vendors under contracts that indicate nominal
sulfur content. To the extent that coal supplied has a lower sulfur content
than
specified in the contract, KCPL pays a premium over the contract price.
Beginning January 1, 2008, to the extent that KCPL pays premiums for lower
sulfur coal and has an approved ECA in place, the Commission authorizes KCPL
to
determine the portion of such premiums, net of joint partners’ shares, that
apply to retail sales and will record the proportionate cost of such premiums
in
FERC Account 254 as a reduction of the regulatory liability. But in no event
will the charges to the Kansas jurisdictional portion of FERC Account 254 for
these premiums exceed $5,000,000 annually. The portion of premiums applicable
to
retail will be determined monthly based on the system-wide percentage of MWhs
from coal generation used for retail sales versus wholesale sales as computed
by
the hourly energy costing model. This system-wide percentage will be applied
to
premiums invoiced during the same period.
8
9)
Surface
Transportation Board Expenses
The
Commission authorizes KCPL to establish a regulatory asset for actual Surface
Transportation Board expenses incurred through December 31, 2006. KCPL will
amortize this regulatory asset over a five-year period beginning January 1,
2007. The Commission authorizes KCPL to establish a regulatory asset for actual
Surface Transportation Board expenses incurred after December 31, 2006, to
be
amortized over a five-year period in a future rate case. The deferred expenses
will not receive any rate base treatment in future rate cases.
10)
AFUDC
Rate on Iatan 2
The
Commission authorizes KCPL for purposes of calculating the equity component
of
the AFUDC rate on Iatan 2 to set the equity rate used in the calculation at
8.5%. This agreed upon equity component of AFUDC may be revised either through
a
Commission order determining a Return on Equity or through a Stipulation and
Agreement in KCPL’s next rate case.
E.
Test
Period in Future Rate Cases
KCPL
agrees to use a test period reflective of 12-months actual operations rather
than using budgeted information in future rate cases. To the extent KCPL may
need to file certain information in its next rate case later than March 1 of
the
applicable year, KCPL may coordinate such filings with Staff.
9
F.
Rules
and Regulations
As
set
forth in KCPL’s rate Application and as agreed by the signatory parties and
consistent with the 1025 Stipulation, the following changes to KCPL’s Rules and
Regulations should be adopted by the Commission:
1)
Returned
Check Charges
The
Commission authorizes KCPL to increase its returned check charge from $10 to
$30.
|
2)
|
Credit
and Debit Card Program
|
The
Commission authorizes KCPL to implement the use of credit and debit cards for
payment of customer bills. KCPL agrees to work with Staff to modify the proposed
tariff language to meet the Commissions Minimum Standards.
|
3)
|
Deletion
of “seasonal” in Tariff
Language
|
The
Commission authorizes KCPL to remove reference to “seasonal” service from
section 2.03 of its Rules and Regulations in recognition that the Company no
longer provides seasonal rates.
|
4)
|
Merging
of “Liability of Company” and “Continuity of
Service”
|
The
Commission authorizes KCPL to combine sections 7.06 “Continuity of Service” and
7.12 “Liability of Company” of its Rules and Regulations, into one
section.
G.
Rate
Design
The
signatory parties agree that the rates should be apportioned among the
respective classes of customers according to the amounts of revenue requirement
indicated for each class as shown on Appendix D. The signatory parties agree
that within the residential class, rates shall be apportioned among sub-classes
as indicated on Appendix D. Residential single meter customer charges shall
be
set at seven dollars twenty-five cents ($7.25), and nine-dollars ($9.00) for
two-meter customers. Rate design amounts assigned to each class are subject
to
check in order to assure that rate design recovery is consistent with the
revenue increase approved by the Commission and shall set forth no precedent
in
future rate proceedings as to the methodology of allocation. KCPL agrees that
it
shall conduct a class cost of service study and report the results of that
study
in its next rate filing. KCPL shall have the right to file the results of that
study in testimony as late-filed testimony no later than May 1, 2007. The
signatory parties preserve their rights to review and oppose any such filing
in
future proceedings, including opposing any methodology proposed by any party
regarding the allocation of rates or rate design.
10
V.
MISCELLANEOUS
PROVISIONS
A.
The
Commission's Rights
Nothing
in this Stipulation and Agreement is intended to impinge or restrict, in any
manner, the exercise by the Commission of any statutory right, including the
right of access to information, and any statutory obligation, including the
obligation to ensure that KCPL is providing efficient and sufficient service
at
just and reasonable rates.
B.
Staff's
Rights
The
Staff
shall have the right to provide, at any meeting or hearing at which this
Stipulation and Agreement is noticed to be considered by the Commission,
whatever oral explanation the Commission requests, provided that the Staff
shall, to the extent reasonably practicable, provide the other signatory parties
with advance notice of when the Staff shall respond to the Commission's request
for such explanation once such explanation is requested from the Staff. Staff's
oral explanation shall be subject to public disclosures, except to the extent
it
refers to matters that are privileged or protected from disclosure pursuant
to
Kansas law or any Protective Order issued in this docket.
11
C.
Signatory
Parties’ Rights
The
signatory parties, including Staff, shall have the right to present pre-filed
testimony in support of this Stipulation. Such testimony shall be filed formally
in the docket and presented by witnesses at a hearing on this
Stipulation.
D.
Parties
not Signatories to the Agreement
Sierra
Club and Mission Hills are
not yet signatories to this Stipulation and Agreement, but negotiations with
those parties continue. KGS is not a signatory, but has authorized the
signatories to represent to the Commission that KGS has no objection to the
terms of the Agreement.
E.
Negotiated
Settlement
This
Stipulation and Agreement represents a negotiated settlement that fully resolves
the issues addressed in this document. The signatory parties represent that
the
terms of this Stipulation and Agreement constitute a fair and reasonable
resolution of the issues addressed herein. Except as specified herein, the
signatory parties to this Stipulation and Agreement shall not be prejudiced,
bound by, or in any way affected by the terms of this Stipulation and Agreement:
(a) in any future proceeding; (b) in any proceeding currently pending
under a separate docket; and/or (c) in this proceeding should the
Commission decide not to approve this Stipulation and Agreement in the instant
proceeding. If the Commission accepts this Stipulation and Agreement in its
entirety and incorporates the same into a final order without material
modification, the signatory parties shall be bound by its terms and the
Commission's order incorporating its terms as to all issues addressed herein
and
in accordance with the terms hereof, and will not appeal the Commission's order
on these issues.
12
F.
Interdependent
Provisions
The
provisions of this Stipulation and Agreement have resulted from negotiations
among the signatory parties and are interdependent. In the event that the
Commission does not approve and adopt the terms of this Stipulation and
Agreement in total, it shall be voidable and no signatory party hereto shall
be
bound, prejudiced, or in any way affected by any of the agreements or provisions
hereof. Further, in such event, this Stipulation and Agreement shall be
considered privileged and not admissible in evidence or made a part of the
record in any proceeding.
G.
Submission
Of Documents To The Commission Or Staff
To
the
extent this Stipulation and Agreement provides for information, documents or
other data to be furnished to the Commission or Staff, such information,
documents or data shall be filed with the Commission and a copy served upon
the
Commission’s Director of Utilities. Such information, documents or data shall be
marked and identified with the docket number of this proceeding.
13
IN
WITNESS WHEREOF, the signatory parties have executed and approved this
Agreement, effective as of the 29
th
day of
September 2006, by subscribing their signatures below.
By:_____________________________
SUSAN
B.
CUNNINGHAM
DANA
BRADBURY
MATTHEW
TOMC
Kansas
Corporation Commission
1500
S.W.
Arrowhead Road
Topeka,
Kansas 66604
(785)-271-3100
ATTORNEYS
FOR STAFF
By:
____________________________________
Vice
President and General Counsel
Kansas
City Power & Light Company
1201
Walnut
Kansas
City, MO 64141
(816)
556-2785
GLENDA
CAFER
Cafer
Law
Office, LLC
2921
SW
Wanamaker Dr. Ste 101
Topeka,
Kansas 66614
ATTORNEYS
FOR KCPL
By:
_______________________________
DAVID
SPRINGE
NIKI
CHRISTOPHER
Citizens’
Utility Ratepayer Board
1500
SW
Arrowhead Road
Topeka,
KS 66604
ATTORNEYS
FOR CURB
14
By:
____________________________
JANE
L.
WILLIAMS
JAMES
R.
WAERS
Blake
& Uhlig, P.A.
753
State
Ave., Ste. 475
Kansas
City, KS 66101
ATTORNEYS
FOR IBEW LOCAL UNION NOS. 1464, 1613, 412
By:
____________________________
GREG
LAWRENCE
GRACE
WUNG
McDermott
Will & Emery LLP
28
State
Street
Boston,
MA 02109-1775
ATTORNEYS
FOR WALMART
15
APPENDIX
A
Kansas
City Power & Light Company
Depreciation
& Amortization Rates
Kansas
Jurisdictional
Account
|
Acct.
No.
|
Avg.
Service
Life
|
Net
Salvage
|
Deprec.
Rate
|
Total
Steam Production (Note)
|
|
|
|
|
Structures
& Improvements
|
311
|
32.0
|
-10.0%
|
3.44%
|
Structures
& Improv - Haw 5 Rebuild
|
311
|
|
|
0.85%
|
Boiler
Plant Equipment (excl trains)
|
312
|
25.5
|
-5.0%
|
4.12%
|
Boiler
Plant Equipment - Trains
|
312
|
15.0
|
10.0%
|
6.00%
|
Boiler
Plant Equip-Scrubber-La Cygne
|
312
|
10.0
|
0.0%
|
10.00%
|
Boiler
Plant Equip - Haw 5 Rebuild
|
312
|
|
|
1.02%
|
Turbogenerator
Units
|
314
|
42.4
|
0.0%
|
2.36%
|
Accessory
Electric Equipment
|
315
|
33.7
|
5.0%
|
2.82%
|
Accessory
Electric Equip - Haw 5 Rebuild
|
315
|
|
|
0.70%
|
Acc
Electric Equip - Computers (like 391)
|
315
|
30.0
|
8.0%
|
3.07%
|
Miscellaneous
Power Plant Equipment
|
316
|
22.8
|
5.0%
|
4.16%
|
Misc
Power Plant Equip - Haw 5 Rebuild
|
316
|
|
|
1.03%
|
|
|
|
|
|
Total
Nuclear Production (Note)
|
|
|
|
|
Structures
& Improvements
|
321
|
|
|
1.55%
|
Reactor
Plant Equipment
|
322
|
|
|
1.73%
|
Turbogenerator
Unites
|
323
|
|
|
1.96%
|
Accessory
Electric Equipment
|
324
|
|
|
1.73%
|
Miscellaneous
Power Plant Equipment
|
325
|
|
|
2.36%
|
Nuclear
Plant Write-Off
|
328
|
|
|
1.73%
|
|
|
|
|
|
Total
Combustion Turbines
|
|
|
|
|
Structures
& Improvements
|
341
|
25.0
|
0.0%
|
4.00%
|
Fuel
Holders, Producers, & Acc. Equip.
|
342
|
25.0
|
0.0%
|
4.00%
|
Generators
|
344
|
25.0
|
0.0%
|
4.00%
|
Accessory
Electric Equipment
|
345
|
25.0
|
0.0%
|
4.00%
|
|
|
|
|
|
Total
Wind Generation
|
|
|
|
|
Structures
& Improvements
|
341
|
20.0
|
|
5.00%
|
Generators
|
344
|
20.0
|
|
5.00%
|
Accessory
Electric Equipment
|
345
|
20.0
|
|
5.00%
|
|
|
|
|
|
Total
Transmission Plant
|
|
|
|
|
Structures
& Improvements
|
352
|
45.0
|
-5.0%
|
2.33%
|
Station
Equipment
|
353
|
29.3
|
5.0%
|
3.24%
|
Station
Equip-Communication Equip (like 397)
|
353
|
26.0
|
5.0%
|
3.65%
|
Towers
& Fixtures
|
354
|
40.0
|
-10.0%
|
2.75%
|
Poles
& Fixtures
|
355
|
27.0
|
-5.0%
|
3.89%
|
Overhead
Conductors & Devices
|
356
|
27.0
|
15.0%
|
3.15%
|
Underground
conduit
|
357
|
50.0
|
-5.0%
|
2.10%
|
Underground
Conductors & Devices
|
358
|
50.0
|
10.0%
|
1.80%
|
Note:
Nuclear
Production rates are based on a lifespan under a 60-year
license using
remaining life rates.
Rates
for Steam Production Plant related to Hawthorn Unit 5 Rebuild
plant
reflect Missouri jurisdictional rates after consideration
of insurance and
subrogation recoveries recorded in Account 108, Accumulated
Provision for
Depreciation. Future depreciation studies will use remaining
life
rates.
16
Total
Distribution Plant
|
Structures
& Improvements
|
361
|
45.0
|
-5.0%
|
2.33%
|
Station
Equipment
|
362
|
37.0
|
7.0%
|
2.51%
|
Station
Equip-Communication Equip (like 397)
|
362
|
26.0
|
5.0%
|
3.65%
|
Poles,
Towers, & Fixtures
|
364
|
30.0
|
-6.0%
|
3.53%
|
Overhead
Conductors & Devices
|
365
|
27.0
|
25.0%
|
2.78%
|
Underground
Conduit
|
366
|
50.0
|
-5.0%
|
2.10%
|
Underground
Conductors & Dev
|
367
|
25.0
|
20.0%
|
3.20%
|
Line
Transformers
|
368
|
25.0
|
10.0%
|
3.60%
|
Services
|
369
|
33.0
|
5.0%
|
2.88%
|
Meters
|
370
|
28.0
|
5.0%
|
3.39%
|
Install
on Customers’ Premises
|
371
|
8.5
|
2.0%
|
11.53%
|
Street
Lighting & Signal Systems
|
373
|
29.0
|
5.0%
|
3.28%
|
|
|
|
|
|
Total
General Plant
|
|
|
|
|
Structures
& Improvements
|
390
|
50.0
|
5.0%
|
1.90%
|
Office
Furniture & Equipment
|
391
|
30.0
|
8.0%
|
3.07%
|
Transportation
Equipment
|
392
|
11.0
|
15.0%
|
7.73%
|
Stores
Equipment
|
393
|
30.0
|
5.0%
|
3.17%
|
Tools,
Shop & Garage Equipment
|
394
|
27.0
|
5.0%
|
3.52%
|
Laboratory
Equipment
|
395
|
33.0
|
5.0%
|
2.88%
|
Power
Operated Equipment
|
396
|
15.0
|
20.0%
|
5.33%
|
Communication
Equipment
|
397
|
26.0
|
5.0%
|
3.65%
|
Miscellaneous
Equipment
|
398
|
17.0
|
5.0%
|
5.59%
|
Amortization
of Limited Term & Other Electric Plant
Account
|
Acct.
No.
|
Avg.
Service
Life
|
Net
Salvage
|
Deprec.
Rate
|
|
|
|
|
|
Intangible
- Five Year Software
|
303
|
5.0
|
0.0%
|
20.0%
|
Intangible
- Ten Year Software
|
303
|
10.0
|
0.0%
|
10.0%
|
Intangible
- Communication Equip (like 397)
|
303
|
26.0
|
5.0%
|
3.65%
|
Intangible
- Accessory Equip (like 345)
|
303
|
25.0
|
0.0%
|
4.00%
|
Steam
Prod-Structures & Impr-Leasehold Impr
|
311
|
Lease
|
|
|
Combustion
Turbine Plant - Land Rights
|
340
|
|
|
0.00%
|
Transmission
Plant - Land Rights
|
350
|
|
|
0.00%
|
Distribution
Plant - Land Rights
|
360
|
|
|
0.00%
|
General
-Structures & Impr-Leasehold Impr
|
390
|
Lease
|
|
|
Note:
Nuclear
Production rates are based on a lifespan under a 60-year license using
remaining
life rates.
Rates
for
Steam Production Plant related to Hawthorn Unit 5 Rebuild plant reflect
Missouri
jurisdictional rates after consideration of insurance and subrogation
recoveries
recorded in Account 108, Accumulated Provision for Depreciation. Future
depreciation studies will use remaining life rates.
17
Appendix
B
Treatment
of Pension Costs
Docket
No. 06-KCPE-828-RTS
1.
The
intent of this pension agreement is to:
|
·
|
Ensure
that KCPL recovers the amount of the net prepaid pension asset
representing the recognition of a negative pension cost used
in setting
rates in prior years;
|
|
·
|
Ensure
that the amount collected in rates is based on the pension
cost determined
using the methodology described below in item
2.b.;
|
|
·
|
Ensure
that, once the amount in section 4 has been collected in rates
by KCPL,
all pension cost collected in rates is contributed to the pension
trust;
|
|
·
|
Ensure
that all amounts contributed by KCPL are recoverable in
rates.
|
2.
To
accomplish these goals, the following items are agreed upon as part of
this
Stipulation and Agreement.
a.
KCPL’s
pension cost, for financial reporting purposes, will differ from the
method used
for ratemaking purposes described in item 2.b.. For financial reporting
purposes, KCPL will amortize gains and losses over a five-year period.
18
b.
Pension
cost, excluding cost determined under FAS 88, used for ratemaking purposes
will
be calculated based on the following methodology:
i.
Market
Related Value for asset determination, smoothing all asset gains and
losses that
occur on and after January 1, 2005 over five (5) years;
ii.
No
10%
corridor; and
iii.
Amortization
period of ten (10) years for unrecognized gains and losses.
3.
KCPL’s
actuary will maintain actuarial reports under each method on an annual
basis.
Any difference between the two methods is merely a timing difference
that will
eventually be recovered, or refunded, through rates under the method
used in
setting rates over the life of the pension plan. KCPL will establish
a
regulatory asset or liability for the difference in pension cost calculated
under the two methods. No rate base recognition will be provided for
the
regulatory asset or liability determined pursuant to this paragraph.
4.
Any
pension cost amount calculated pursuant to item 2.b. above, which exceeds
the
pension contribution will reduce the prior net prepaid pension asset
recognized
in rate base currently estimated to be $17.1 million ($7.6 million Kansas
jurisdictional) at December 31, 2006. When the prior net prepaid pension
asset
is reduced to zero, any pension cost (as calculated in item 2.b. above)
that
exceeds the amounts contributed, must be funded. Any pension cost that
is not
funded because it exceeds the amount of funding that is tax deductible
will be
tracked as a regulatory liability to ensure it is funded in the future
when it
becomes tax deductible.
19
5.
In
the
case pension cost becomes negative, KCPL is ordered to establish a regulatory
liability to offset the negative amount. In future years, when pension
cost
becomes positive, rates will remain zero ($0) until the prepaid pension
asset
that was created by the negative amount is reduced to zero ($0). The
regulatory
liability will be reduced at the same rate as the prepaid pension asset
is
reduced until the regulatory liability becomes zero. This regulatory
liability
is not provided rate base recognition
.
6.
KCPL
will
be allowed to establish a regulatory asset with rate base recognition
for
contributions made to the pension trust in excess of pension cost calculated
pursuant to item 2.b.
7.
A
regulatory asset or liability will be established on KCPL’s books to track the
difference between the level of pension cost calculated pursuant to item
2.b.
and the level of pension cost built into rates. The level of pension
cost built
into rates effective January 1, 2007 is established as $42,586,121 ($19,360,459
Kansas jurisdictional), before amounts capitalized and applicable to
joint
owners. If the pension cost, before amounts capitalized and applicable
to joint
owners, during the rate period is more than the cost built into rates
for the
period, KCPL will establish a regulatory asset. If the pension cost during
the
period is less than the cost built into rates, KCPL will establish a
regulatory
liability. If the pension cost, before amounts capitalized and applicable
to
joint owners, becomes negative, a regulatory liability equal to the difference
between the level of pension cost built into rates for that period and
zero ($0)
will be established. The regulatory asset or liability will have rate
base
recognition and will be amortized over five (5) years beginning with
the
effective date of rates approved in KCPL’s next rate case.
20
8.
KCPL
will
amortize the regulatory asset used to track the difference between the
level of
pension cost calculated for regulatory purposes and the level of cost
built into
rates at December 31, 2006, of $36,146,186 ($16,432,742 Kansas jurisdictional)
over five (5) years commencing January 1, 2007.
9.
The
parties agree that KCPL should follow the accounting treatment prescribed
by the
Federal Energy Regulatory Commission (FERC) in General Instruction No.
23
regarding pension-related Other Comprehensive Income (OCI) and transfer
existing
and future pension OCI amounts to a regulated asset.
10.
FAS
88
does not allow for delayed recognition of certain unrecognized amounts
in net
periodic pension cost. FAS 88 requires immediate recognition of certain
costs
arising from settlements and curtailments of defined benefit plans. KCPL
shall
establish a regulatory asset or liability, with rate base recognition,
for the
amount of pension costs,
before
amounts capitalized and applicable to joint owners, determined pursuant
to FAS
88 and the level of FAS 88 pension cost built into rates (currently $0),
effective January 1, 2006. This regulatory asset or liability will be
amortized
over five (5) years beginning with the effective date of rates approved
in
KCPL’s next rate case. Following an order from the Commission approving this
treatment for FAS 88 costs, KCPL will withdraw its Accounting Authority
Order
request currently docketed as 06-KCPE-1364-ACT.
21
Appendix
C-1 (Schedule DAF-5)
KANSAS
CITY POWER & LIGHT
COMPANY
|
|
DECOMMISSIONING
COST ASSUMPTIONS
|
|
|
|
|
|
$517,601,292
|
|
Cost
Escalation Rate
|
|
|
4.40%
|
KCPL
Share
|
|
|
47.00%
|
Future
Juris Allocation Factor
|
|
|
45.51%
|
Wtd
Historical/Future Alloc Factor
|
|
|
43.16%
|
Year
|
2005
Wolf Creek Decom Cost
|
Escalated
Wolf Creek Decom Cost
|
KCPL
Kansas Decom Cost
|
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,750,150
98,265,842
117,044,694
69,175,512
57,217,156
51,909,882
30,547,288
32,682,038
21,008,731
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
222,514,704
574,279,120
714,122,428
440,629,758
380,494,347
360,389,791
221,409,168
247,304,811
165,967,770
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45,135,564
116,488,536
144,854,781
89,378,690
77,180,639
73,102,569
44,911,314
50,164,065
33,665,411
|
517,601,292
3,327,111,897
674,881,568
Appendix C-2 (Schedule DAF-5)
WOLF
CREEK DECOMMISSIONING TRUST
ANALYSIS
|
|
|
|
|
|
|
|
DECOMMISSIONING
TRUST FUND EARNINGS
ASSUMPTIONS
|
|
|
|
|
|
|
|
TRUST
FUND MANAGEMENT FEE
|
|
|
|
|
|
|
KS
Avg Fund Bal
|
|
231,278,443
|
|
|
|
|
KS
Ann Fixed Fee
|
|
15,930
|
|
|
|
|
Avg
Fixed Fee %
|
|
0.01%
|
|
|
|
|
Variable
Fee %
|
|
0.21%
|
|
|
|
|
Avg
Tot Fee %
|
|
0.22%
|
0.22%
|
|
|
|
|
|
|
|
|
|
|
|
US
T-Bills
|
IT
Govt
Bonds
|
LT
Govt
Bonds
|
LT
Corp
Bonds
|
Lrg
Corp
Equities
|
|
|
|
SBBI
1925-2004 Arithmetic Mean
|
3.80%
3.70%
|
5.50%
5.40%
|
5.80%
5.40%
|
6.20%
5.90%
|
12.40%
10.40%
|
|
SBBI
1925-2004 Geometric Mean
|
|
Assumed
Earnings
|
3.75%
|
5.45%
|
5.60%
|
6.05%
|
11.40%
|
|
Effective
Tax Rate
|
20.00%
|
20.00%
|
20.00%
|
20.00%
|
20.00%
|
|
Earnings
After Fees & Taxes
|
2.82%
|
4.18%
|
4.30%
|
4.66%
|
8.94%
|
Weighted
After-Tax
Earnings
|
|
Year
|
Investment
Mix
|
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
|
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
17.5%
20.0%
22.5%
25.0%
27.5%
30.0%
32.5%
35.0%
37.5%
40.0%
42.5%
45.0%
47.5%
50.0%
56.3%
62.5%
68.8%
75.0%
81.3%
87.5%
93.8%
100.0%
|
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.3%
15.5%
15.8%
16.0%
16.3%
16.5%
16.8%
17.0%
17.3%
17.5%
17.8%
18.0%
18.3%
18.5%
18.8%
19.0%
19.3%
19.5%
19.8%
20.0%
17.5%
15.0%
12.5%
10.0%
7.5%
5.0%
2.5%
0.0%
|
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
8.8%
7.5%
6.3%
5.0%
3.8%
2.5%
1.3%
0.0%
|
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
29.0%
28.0%
27.0%
26.0%
25.0%
24.0%
23.0%
22.0%
21.0%
20.0%
19.0%
18.0%
17.0%
16.0%
15.0%
14.0%
13.0%
12.0%
11.0%
10.0%
8.8%
7.5%
6.3%
5.0%
3.8%
2.5%
1.3%
0.0%
|
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
45.0%
43.3%
41.5%
39.8%
38.0%
36.3%
34.5%
32.8%
31.0%
29.3%
27.5%
25.8%
24.0%
22.3%
20.5%
18.8%
17.0%
15.3%
13.5%
11.8%
10.0%
8.8%
7.5%
6.3%
5.0%
3.8%
2.5%
1.3%
0.0%
|
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.48%
6.36%
6.24%
6.12%
5.99%
5.87%
5.75%
5.63%
5.51%
5.38%
5.26%
5.14%
5.02%
4.89%
4.77%
4.65%
4.53%
4.41%
4.28%
4.16%
4.04%
3.89%
3.74%
3.58%
3.43%
3.28%
3.13%
2.98%
2.82%
|
23
Appendix
C-3 (Schedule DAF-5)
KANSAS
JURISDICTION -
QUALIFIED TAXABLE TRUST
|
|
|
|
|
|
|
|
DECOMMISSIONING
TRUST FUND CASH
FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
NET AFTER-TAX MARKET
VALUE
|
|
|
|
|
|
EOY
2005 Market Value
Jan
2006 Deposit
Market
Value Incl Jan Deposit
|
29,141,298
312,183
29,453,481
|
|
|
|
|
|
|
EOY
2005 Unrealized Net Gain
Effective
Tax
Rate
Tax
on Unrealized Net
Gain
|
2,416,440
20.00%
483,288
|
|
|
|
|
|
|
Net
After-Tax Market
Value
|
|
28,970,193
|
|
|
|
|
|
|
|
|
Annual Accrual
Escalation
|
0.00%
|
|
|
|
|
|
Trust
Fund
Accrual
|
Trust
Fund
Expenditure
|
Earnings
After
Fees
&
Taxes
|
Trust
Fund
Balance
|
|
Year
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
|
|
|
28,970,193
32,288,620
36,851,568
41,710,286
46,883,946
52,392,963
58,259,075
64,505,428
71,156,669
78,239,044
85,780,499
93,810,791
102,361,606
111,466,685
121,161,955
131,485,673
142,478,574
154,184,035
166,648,243
179,920,382
194,052,821
208,862,926
224,358,456
240,545,164
257,426,636
275,004,137
293,276,461
312,239,783
331,887,523
352,210,214
373,195,387
394,827,458
417,087,635
439,953,835
463,400,623
487,399,160
511,917,174
536,918,950
562,365,340
588,213,796
566,540,528
469,814,551
339,806,155
261,004,452
191,457,066
123,435,406
81,682,739
33,203,111
(0)
|
|
1,395,355
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
2,392,460
598,115
0
0
0
0
0
0
0
0
|
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(45,135,564)
(116,488,536)
(144,854,781)
(89,378,690)
(77,180,639)
(73,102,569)
(44,911,314)
(50,164,065)
(33,665,411)
|
1,923,071
2,170,488
2,466,258
2,781,200
3,116,557
3,473,652
3,853,893
4,258,781
4,689,915
5,148,994
5,637,832
6,158,355
6,712,619
7,302,810
7,931,258
8,600,441
9,313,001
10,071,749
10,879,679
11,739,979
12,417,644
13,103,070
13,794,248
14,489,012
15,185,042
15,879,864
16,570,862
17,255,279
17,930,231
18,592,713
19,239,611
19,867,716
20,473,740
21,054,328
21,606,077
22,125,554
22,609,316
23,053,931
23,455,996
22,864,181
19,762,559
14,846,384
10,576,986
7,633,253
5,080,910
3,158,647
1,684,437
462,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
REVENUE
EQUALIZATION RECOMMENDATIONS
|
|
|
|
|
|
APPENDIX
D
|
|
|
|
|
06-KCPE-828-RTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate
Design and Jurisdictional Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
Small and Medium C&I decrease of 2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Large and Large Power C&I decrease of 1.75%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
Total
|
|
Total
|
|
|
|
General
Use &
|
|
General
Use &
|
|
General
Use &
|
|
General
Use &
|
|
|
|
|
|
Juris
|
|
Residential
|
|
General
Use
|
|
Water
Heat
|
|
Spc
Ht (1mtr)
|
|
Spc
Ht (2mtr)
|
|
Spc/Wtr
Ht (2 mtr)
|
|
Time
of Day
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate
Revenue per KCC Staff CCOS
|
|
|
392,338,112
|
|
|
194,505,476
|
|
|
149,770,443
|
|
|
3,443,044
|
|
|
28,652,466
|
|
|
1,263,844
|
|
|
11,310,231
|
|
|
65,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levelization
Adjustment (%)
|
|
|
|
|
|
1.82
|
%
|
|
2.36
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Levelization
Adjustment ($)
|
|
|
(0
|
)
|
|
3,538,205
|
|
|
3,538,205
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Level
Adj. Revenue - before Increase
|
|
|
392,338,112
|
|
|
198,043,681
|
|
|
153,308,648
|
|
|
3,443,044
|
|
|
28,652,466
|
|
|
1,263,844
|
|
|
11,310,231
|
|
|
65,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jurisdictional
Revenue Increase (%)
|
|
|
7.395
|
%
|
|
7.14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jurisdictional
Revenue Increase ($)
|
|
|
29,013,958
|
|
|
13,879,761
|
|
|
9,455,787
|
|
|
298,701
|
|
|
2,863,524
|
|
|
126,274
|
|
|
1,129,794
|
|
|
5,681
|
|
Rate
Revenue
|
|
|
421,352,070
|
|
|
208,385,237
|
|
|
159,226,230
|
|
|
3,741,744
|
|
|
31,515,989
|
|
|
1,390,118
|
|
|
12,440,025
|
|
|
71,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUE INCREASE (%)
|
|
|
7.395
|
%
|
|
8.955
|
%
|
|
8.68
|
%
|
|
8.68
|
%
|
|
9.99
|
%
|
|
9.99
|
%
|
|
9.99
|
%
|
|
8.68
|
%
|
TOTAL
REVENUE INCREASE ($)
|
|
|
29,013,958
|
|
|
17,417,965
|
|
|
12,993,991
|
|
|
298,701
|
|
|
2,863,524
|
|
|
126,274
|
|
|
1,129,794
|
|
|
5,681
|
|
TOTAL
RATE REVENUE ($)
|
|
|
421,352,070
|
|
|
211,923,441
|
|
|
162,764,434
|
|
|
3,741,744
|
|
|
31,515,989
|
|
|
1,390,118
|
|
|
12,440,025
|
|
|
71,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
Medium
|
|
|
Large
|
|
|
Large
|
|
|
Off-Peak
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
General
|
|
|
General
|
|
|
Power
|
|
|
Lighting
|
|
|
Lighting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate
Revenue per KCC Staff CCOS
|
|
|
28,520,191
|
|
|
50,461,523
|
|
|
81,714,363
|
|
|
30,203,949
|
|
|
1,426,842
|
|
|
5,505,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levelization
Adjustment (%)
|
|
|
-2.00
|
%
|
|
-2.00
|
%
|
|
-1.75
|
%
|
|
-1.75
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
|
|
|
|
|
Levelization
Adjustment ($)
|
|
|
(570,404
|
)
|
|
(1,009,230
|
)
|
|
(1,430,001
|
)
|
|
(528,569
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Level
Adj. Revenue - before Increase
|
|
|
27,949,787
|
|
|
49,452,293
|
|
|
80,284,362
|
|
|
29,675,380
|
|
|
1,426,842
|
|
|
5,505,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jurisdictional
Revenue Increase (%)
|
|
|
7.65
|
%
|
|
7.65
|
%
|
|
7.65
|
%
|
|
7.65
|
%
|
|
7.65
|
%
|
|
7.65
|
%
|
|
|
|
|
|
|
Jurisdictional
Revenue Increase ($)
|
|
|
2,181,795
|
|
|
3,860,307
|
|
|
6,251,149
|
|
|
2,310,602
|
|
|
109,153
|
|
|
421,191
|
|
|
|
|
|
|
|
Rate
Revenue
|
|
|
30,701,986
|
|
|
54,321,830
|
|
|
87,965,512
|
|
|
32,514,551
|
|
|
1,535,995
|
|
|
5,926,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUE INCREASE (%)
|
|
|
5.650
|
%
|
|
5.650
|
%
|
|
5.900
|
%
|
|
5.900
|
%
|
|
7.650
|
%
|
|
7.650
|
%
|
|
|
|
|
|
|
TOTAL
REVENUE INCREASE ($)
|
|
|
1,611,391
|
|
|
2,851,076
|
|
|
4,821,147
|
|
|
1,782,033
|
|
|
109,153
|
|
|
421,191
|
|
|
|
|
|
|
|
TOTAL
RATE REVENUE ($)
|
|
|
30,131,582
|
|
|
53,312,599
|
|
|
86,535,510
|
|
|
31,985,982
|
|
|
1,535,995
|
|
|
5,926,959
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
Exhibit
12.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KANSAS
CITY POWER & LIGHT COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTATION
OF RATIO OF EARNINGS TO FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
to Date
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
2005
|
2004
|
2003
|
2002
|
2001
|
|
|
(thousands)
|
|
Income
from continuing operations
|
|
$
|
116,559
|
|
$
|
143,657
|
|
$
|
143,292
|
|
$
|
125,845
|
|
$
|
102,666
|
|
$
|
116,065
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests in subsidiaries
|
|
|
-
|
|
|
7,805
|
|
|
(5,087
|
)
|
|
(1,263
|
)
|
|
-
|
|
|
(897
|
)
|
Equity
investment income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(23,516
|
)
|
Income
subtotal
|
|
|
116,559
|
|
|
151,462
|
|
|
138,205
|
|
|
124,582
|
|
|
102,666
|
|
|
91,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
on income
|
|
|
61,946
|
|
|
48,213
|
|
|
52,763
|
|
|
83,572
|
|
|
62,857
|
|
|
31,935
|
|
Kansas
City earnings tax
|
|
|
664
|
|
|
498
|
|
|
602
|
|
|
418
|
|
|
635
|
|
|
583
|
|
Total
taxes on income
|
|
|
62,610
|
|
|
48,711
|
|
|
53,365
|
|
|
83,990
|
|
|
63,492
|
|
|
32,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on value of leased property
|
|
|
3,100
|
|
|
6,229
|
|
|
6,222
|
|
|
5,944
|
|
|
7,093
|
|
|
10,679
|
|
Interest
on long-term debt
|
|
|
41,332
|
|
|
56,655
|
|
|
61,237
|
|
|
57,697
|
|
|
63,845
|
|
|
78,915
|
|
Interest
on short-term debt
|
|
|
5,743
|
|
|
3,117
|
|
|
480
|
|
|
560
|
|
|
1,218
|
|
|
8,883
|
|
Mandatorily
Redeemable Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,338
|
|
|
12,450
|
|
|
12,450
|
|
Other
interest expense and amortization
|
|
|
2,365
|
|
|
3,667
|
|
|
13,951
|
|
|
4,067
|
|
|
3,772
|
|
|
5,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
fixed charges
|
|
|
52,540
|
|
|
69,668
|
|
|
81,890
|
|
|
77,606
|
|
|
88,378
|
|
|
116,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
before taxes on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
and fixed charges
|
|
$
|
231,709
|
|
$
|
269,841
|
|
$
|
273,460
|
|
$
|
286,178
|
|
$
|
254,536
|
|
$
|
240,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
|
|
4.41
|
|
|
3.87
|
|
|
3.34
|
|
|
3.69
|
|
|
2.88
|
|
|
2.07
|
|
Exhibit
No. 31.2.a
CERTIFICATIONS
I,
William H. Downey, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Kansas City Power
& Light Company;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report:
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
November
7, 2006
|
|
/s/
William H. Downey
|
|
|
|
|
|
|
|
William
H. Downey
President
and Chief Executive
Officer
|
Exhibit
No. 31.2.b
CERTIFICATIONS
I,
Terry
Bassham, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Kansas City
Power
& Light Company;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report:
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including
its
consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such
internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
November 7,
2006
|
|
/s/
Terry Bassham
|
|
|
|
|
|
|
|
Terry
Bassham
Chief
Financial
Officer
|
Exhibit
No. 32.2
Certification
of CEO and CFO Pursuant to
18
U.S.C. Section 1350,
as
Adopted Pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report on Form 10-Q of Kansas City
Power & Light Company (the "Company") for the quarterly period ended
September 30, 2006 as filed with the Securities and Exchange Commission on
the
date hereof (the "Report"), William H. Downey, as President and Chief Executive
Officer of the Company, and Terry Bassham, as Chief Financial Officer of the
Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best
of
his knowledge:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
|
/s/
William H. Downey
|
|
|
Name:
Title:
|
William
H. Downey
President
and Chief Executive Officer
|
Date:
|
November
7, 2006
|
|
|
|
/s/
Terry Bassham
|
|
|
Name:
Title:
|
Terry
Bassham
Chief
Financial Officer
|
Date:
|
November
7, 2006
|
This
certification is being furnished solely pursuant to 18 U.S.C. Section 1350
and
is not being filed as part of the Report or as a separate disclosure document.
This certification shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to liability under that
section. This certification shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange
Act
of 1934 except to the extent this Exhibit 32.2 is expressly and specifically
incorporated by reference in any such filing.
A
signed
original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to Kansas City Power & Light Company
and will be retained by Kansas City Power & Light Company and furnished
to the Securities and Exchange Commission or its staff upon
request.