ITEM 1. FINANCIAL STATEMENTS
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GREAT PLAINS ENERGY INCORPORATED
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Consolidated Balance Sheets
|
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(Unaudited)
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March 31
|
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December 31
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|
2017
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|
2016
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ASSETS
|
(millions, except share amounts)
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,552.3
|
|
|
|
|
$
|
1,293.1
|
|
|
|
Time deposit
|
|
—
|
|
|
|
|
1,000.0
|
|
|
|
Receivables, net
|
|
110.4
|
|
|
|
|
166.0
|
|
|
|
Accounts receivable pledged as collateral
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172.2
|
|
|
|
|
172.4
|
|
|
|
Fuel inventories, at average cost
|
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107.0
|
|
|
|
|
108.8
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|
|
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Materials and supplies, at average cost
|
|
166.4
|
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|
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162.2
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|
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Deferred refueling outage costs
|
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18.3
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|
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22.3
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Interest rate derivative instruments
|
|
91.4
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|
|
|
79.3
|
|
|
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Prepaid expenses and other assets
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40.6
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|
|
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|
55.4
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Total
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7,258.6
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3,059.5
|
|
|
|
Utility Plant, at Original Cost
|
|
|
|
|
|
|
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Electric
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|
13,712.9
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|
|
|
|
13,597.7
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|
Less - accumulated depreciation
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5,165.2
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5,106.9
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Net utility plant in service
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8,547.7
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8,490.8
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Construction work in progress
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370.9
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|
|
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|
403.9
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|
|
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Nuclear fuel, net of amortization of $180.1 and $172.1
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54.9
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|
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|
62.0
|
|
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Total
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8,973.5
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8,956.7
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|
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Investments and Other Assets
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Nuclear decommissioning trust fund
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232.5
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222.9
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Regulatory assets
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1,046.4
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1,048.0
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Goodwill
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169.0
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169.0
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Other
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117.5
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113.9
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Total
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1,565.4
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1,553.8
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Total
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$
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17,797.5
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$
|
13,570.0
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|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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|
|
|
|
|
|
|
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GREAT PLAINS ENERGY INCORPORATED
|
|
Consolidated Balance Sheets
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|
(Unaudited)
|
|
|
|
|
March 31
|
|
December 31
|
|
|
2017
|
|
2016
|
|
LIABILITIES AND CAPITALIZATION
|
(millions, except share amounts)
|
|
Current Liabilities
|
|
|
|
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|
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Collateralized note payable
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$
|
172.2
|
|
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$
|
172.4
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Commercial paper
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|
454.7
|
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334.8
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Current maturities of long-term debt
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732.1
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382.1
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Accounts payable
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177.7
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323.7
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Accrued taxes
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|
69.6
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33.3
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Accrued interest
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77.3
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50.8
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Accrued compensation and benefits
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44.1
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52.1
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Pension and post-retirement liability
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3.0
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3.0
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Other
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85.5
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|
|
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32.6
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Total
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1,816.2
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1,384.8
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Deferred Credits and Other Liabilities
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Deferred income taxes
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|
1,322.7
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1,329.7
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Deferred tax credits
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|
125.8
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126.2
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Asset retirement obligations
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|
282.6
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|
|
316.0
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Pension and post-retirement liability
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|
483.9
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|
488.3
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Regulatory liabilities
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|
313.6
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309.9
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Other
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88.8
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87.9
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Total
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2,617.4
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2,658.0
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Capitalization
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Great Plains Energy shareholders' equity
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Common stock - 600,000,000 shares authorized without par value
215,728,275 and 215,479,105 shares issued, stated value
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4,225.5
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4,217.0
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Preference stock - 11,000,000 shares authorized without par value
7.00% Series B Mandatory Convertible Preferred Stock
$1,000 per share liquidation preference, 862,500 shares issued and outstanding
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836.2
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836.2
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Retained earnings
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1,035.2
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1,119.2
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Treasury stock - 129,122 and 128,087 shares, at cost
|
|
(3.8
|
)
|
|
|
|
(3.8
|
)
|
|
|
Accumulated other comprehensive loss
|
|
(5.1
|
)
|
|
|
|
(6.6
|
)
|
|
|
Total shareholders' equity
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|
6,088.0
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|
|
|
|
6,162.0
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|
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Long-term debt (
Note 10
)
|
|
7,275.9
|
|
|
|
|
3,365.2
|
|
|
|
Total
|
|
13,363.9
|
|
|
|
|
9,527.2
|
|
|
|
Commitments and Contingencies (
Note 11
)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,797.5
|
|
|
|
|
$
|
13,570.0
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
|
|
|
|
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|
|
|
|
|
|
|
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GREAT PLAINS ENERGY INCORPORATED
|
|
Consolidated Statements of Comprehensive Income (Loss)
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|
(Unaudited)
|
|
|
|
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
Operating Revenues
|
|
(millions, except per share amounts)
|
|
Electric revenues
|
|
$
|
570.7
|
|
|
$
|
572.1
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
Fuel and purchased power
|
|
126.5
|
|
|
135.6
|
|
|
Transmission
|
|
23.1
|
|
|
23.5
|
|
|
Utility operating and maintenance expenses
|
|
185.4
|
|
|
179.4
|
|
|
Costs to achieve the anticipated acquisition of Westar Energy, Inc.
|
|
39.4
|
|
|
—
|
|
|
Depreciation and amortization
|
|
90.3
|
|
|
85.2
|
|
|
General taxes
|
|
57.1
|
|
|
56.3
|
|
|
Other
|
|
1.5
|
|
|
2.2
|
|
|
Total
|
|
523.3
|
|
|
482.2
|
|
|
Operating income
|
|
47.4
|
|
|
89.9
|
|
|
Non-operating income
|
|
6.6
|
|
|
2.1
|
|
|
Non-operating expenses
|
|
(3.7
|
)
|
|
(3.4
|
)
|
|
Interest charges
|
|
(66.6
|
)
|
|
(51.2
|
)
|
|
Income (loss) before income tax (expense) benefit and income from equity investments
|
|
(16.3
|
)
|
|
37.4
|
|
|
Income tax (expense) benefit
|
|
5.8
|
|
|
(11.7
|
)
|
|
Income from equity investments, net of income taxes
|
|
0.9
|
|
|
0.7
|
|
|
Net income (loss)
|
|
(9.6
|
)
|
|
26.4
|
|
|
Preferred stock dividend requirements
|
|
15.1
|
|
|
0.4
|
|
|
Earnings (loss) available for common shareholders
|
|
$
|
(24.7
|
)
|
|
$
|
26.0
|
|
|
|
|
|
|
|
|
Average number of basic common shares outstanding
|
|
215.3
|
|
|
154.4
|
|
|
Average number of diluted common shares outstanding
|
|
215.3
|
|
|
155.0
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per common share
|
|
$
|
(0.11
|
)
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
Cash dividends per common share
|
|
$
|
0.275
|
|
|
$
|
0.2625
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(9.6
|
)
|
|
$
|
26.4
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
Derivative hedging activity
|
|
|
|
|
|
|
|
Reclassification to expenses, net of tax
|
|
1.4
|
|
|
1.4
|
|
|
Derivative hedging activity, net of tax
|
|
1.4
|
|
|
1.4
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
Amortization of net losses included in net periodic benefit costs, net of tax
|
|
0.1
|
|
|
0.1
|
|
|
Change in unrecognized pension expense, net of tax
|
|
0.1
|
|
|
0.1
|
|
|
Total other comprehensive income
|
|
1.5
|
|
|
1.5
|
|
|
Comprehensive income (loss)
|
|
$
|
(8.1
|
)
|
|
$
|
27.9
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GREAT PLAINS ENERGY INCORPORATED
|
|
Consolidated Statements of Cash Flows
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
|
2016
|
|
|
Cash Flows from Operating Activities
|
(millions)
|
|
Net income (loss)
|
$
|
(9.6
|
)
|
|
|
$
|
26.4
|
|
|
|
Adjustments to reconcile income (loss) to net cash from operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
90.3
|
|
|
|
85.2
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
Nuclear fuel
|
8.0
|
|
|
|
8.3
|
|
|
|
Other
|
24.9
|
|
|
|
12.8
|
|
|
|
Deferred income taxes, net
|
(5.6
|
)
|
|
|
12.0
|
|
|
|
Investment tax credit amortization
|
(0.4
|
)
|
|
|
(0.4
|
)
|
|
|
Income from equity investments, net of income taxes
|
(0.9
|
)
|
|
|
(0.7
|
)
|
|
|
Fair value impacts of interest rate swaps
|
(12.1
|
)
|
|
|
—
|
|
|
|
Other operating activities (Note 3)
|
(7.0
|
)
|
|
|
(16.3
|
)
|
|
|
Net cash from operating activities
|
87.6
|
|
|
|
127.3
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Utility capital expenditures
|
(116.6
|
)
|
|
|
(133.6
|
)
|
|
|
Allowance for borrowed funds used during construction
|
(1.5
|
)
|
|
|
(1.4
|
)
|
|
|
Purchases of nuclear decommissioning trust investments
|
(5.9
|
)
|
|
|
(10.5
|
)
|
|
|
Proceeds from nuclear decommissioning trust investments
|
5.0
|
|
|
|
9.7
|
|
|
|
Proceeds from time deposit
|
1,000.0
|
|
|
|
—
|
|
|
|
Other investing activities
|
(12.5
|
)
|
|
|
(17.9
|
)
|
|
|
Net cash from investing activities
|
868.5
|
|
|
|
(153.7
|
)
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
1.5
|
|
|
|
0.7
|
|
|
|
Issuance of long-term debt
|
4,291.9
|
|
|
|
—
|
|
|
|
Issuance fees
|
(31.2
|
)
|
|
|
(0.2
|
)
|
|
|
Repayment of long-term debt
|
(1.1
|
)
|
|
|
(1.1
|
)
|
|
|
Net change in short-term borrowings
|
119.9
|
|
|
|
69.3
|
|
|
|
Net change in collateralized short-term borrowings
|
(0.2
|
)
|
|
|
—
|
|
|
|
Dividends paid
|
(74.3
|
)
|
|
|
(40.9
|
)
|
|
|
Purchase of treasury stock
|
(3.4
|
)
|
|
|
(4.9
|
)
|
|
|
Net cash from financing activities
|
4,303.1
|
|
|
|
22.9
|
|
|
|
Net Change in Cash and Cash Equivalents
|
5,259.2
|
|
|
|
(3.5
|
)
|
|
|
Cash and Cash Equivalents at Beginning of Year
|
1,293.1
|
|
|
|
11.3
|
|
|
|
Cash and Cash Equivalents at End of Period
|
$
|
6,552.3
|
|
|
|
$
|
7.8
|
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GREAT PLAINS ENERGY INCORPORATED
|
|
Consolidated Statements of Shareholders' Equity
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Common Stock
|
(millions, except share amounts)
|
|
Beginning balance
|
215,479,105
|
|
|
$
|
4,217.0
|
|
|
154,504,900
|
|
|
$
|
2,646.7
|
|
|
Issuance of common stock
|
249,170
|
|
|
9.5
|
|
|
336,356
|
|
|
10.0
|
|
|
Equity compensation expense, net of forfeitures
|
|
|
1.1
|
|
|
|
|
|
0.8
|
|
|
Unearned Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted common stock
|
|
|
|
(2.3
|
)
|
|
|
|
|
(2.8
|
)
|
|
Forfeiture of restricted common stock
|
|
|
0.2
|
|
|
|
|
—
|
|
|
Compensation expense recognized
|
|
|
|
0.7
|
|
|
|
|
|
0.6
|
|
|
Other
|
|
|
|
(0.7
|
)
|
|
|
|
|
0.3
|
|
|
Ending balance
|
215,728,275
|
|
|
4,225.5
|
|
|
154,841,256
|
|
|
2,655.6
|
|
|
Cumulative Preferred Stock
|
—
|
|
|
—
|
|
|
390,000
|
|
|
39.0
|
|
|
Preference Stock
|
862,500
|
|
|
836.2
|
|
|
—
|
|
|
—
|
|
|
Retained Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
|
1,119.2
|
|
|
|
|
|
1,024.4
|
|
|
Net income (loss)
|
|
|
|
(9.6
|
)
|
|
|
|
|
26.4
|
|
|
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($0.275 and $0.2625 per share)
|
|
(59.2
|
)
|
|
|
|
|
(40.5
|
)
|
|
Preferred stock - at required rates
|
|
|
|
(15.1
|
)
|
|
|
|
|
(0.4
|
)
|
|
Performance shares
|
|
|
|
(0.1
|
)
|
|
|
|
|
(0.3
|
)
|
|
Ending balance
|
|
|
|
1,035.2
|
|
|
|
|
|
1,009.6
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
(128,087
|
)
|
|
(3.8
|
)
|
|
(101,229
|
)
|
|
(2.6
|
)
|
|
Treasury shares acquired
|
(104,129
|
)
|
|
(3.0
|
)
|
|
(134,484
|
)
|
|
(4.0
|
)
|
|
Treasury shares reissued
|
103,094
|
|
|
3.0
|
|
|
105,403
|
|
|
2.8
|
|
|
Ending balance
|
(129,122
|
)
|
|
(3.8
|
)
|
|
(130,310
|
)
|
|
(3.8
|
)
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
|
(6.6
|
)
|
|
|
|
|
(12.0
|
)
|
|
Derivative hedging activity, net of tax
|
|
|
|
1.4
|
|
|
|
|
|
1.4
|
|
|
Change in unrecognized pension expense, net of tax
|
|
0.1
|
|
|
|
|
|
0.1
|
|
|
Ending balance
|
|
|
|
(5.1
|
)
|
|
|
|
|
(10.5
|
)
|
|
Total Great Plains Energy Shareholders' Equity
|
|
$
|
6,088.0
|
|
|
|
|
|
$
|
3,689.9
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KANSAS CITY POWER & LIGHT COMPANY
|
|
Consolidated Balance Sheets
|
|
(Unaudited)
|
|
|
|
|
March 31
|
December 31
|
|
|
2017
|
2016
|
|
ASSETS
|
(millions, except share amounts)
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2.1
|
|
|
|
|
$
|
4.5
|
|
|
|
Receivables, net
|
|
99.0
|
|
|
|
|
139.1
|
|
|
|
Related party receivables
|
|
69.1
|
|
|
|
|
67.2
|
|
|
|
Accounts receivable pledged as collateral
|
|
110.0
|
|
|
|
|
110.0
|
|
|
|
Fuel inventories, at average cost
|
|
73.4
|
|
|
|
|
72.9
|
|
|
|
Materials and supplies, at average cost
|
|
122.0
|
|
|
|
|
118.9
|
|
|
|
Deferred refueling outage costs
|
|
18.3
|
|
|
|
|
22.3
|
|
|
|
Refundable income taxes
|
|
2.3
|
|
|
|
|
12.7
|
|
|
|
Prepaid expenses and other assets
|
|
27.9
|
|
|
|
|
27.9
|
|
|
|
Total
|
|
524.1
|
|
|
|
|
575.5
|
|
|
|
Utility Plant, at Original Cost
|
|
|
|
|
|
|
|
|
|
|
Electric
|
|
10,009.1
|
|
|
|
|
9,925.1
|
|
|
|
Less - accumulated depreciation
|
|
3,898.4
|
|
|
|
|
3,858.4
|
|
|
|
Net utility plant in service
|
|
6,110.7
|
|
|
|
|
6,066.7
|
|
|
|
Construction work in progress
|
|
271.3
|
|
|
|
|
300.4
|
|
|
|
Nuclear fuel, net of amortization of
$180.1
and
$172.1
|
|
54.9
|
|
|
|
|
62.0
|
|
|
|
Total
|
|
6,436.9
|
|
|
|
|
6,429.1
|
|
|
|
Investments and Other Assets
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust fund
|
|
232.5
|
|
|
|
|
222.9
|
|
|
|
Regulatory assets
|
|
799.6
|
|
|
|
|
801.8
|
|
|
|
Other
|
|
29.5
|
|
|
|
|
29.1
|
|
|
|
Total
|
|
1,061.6
|
|
|
|
|
1,053.8
|
|
|
|
Total
|
|
$
|
8,022.6
|
|
|
|
|
$
|
8,058.4
|
|
|
The disclosures regarding 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)
|
|
|
|
|
|
|
|
March 31
|
|
December 31
|
|
|
2017
|
|
2016
|
|
LIABILITIES AND CAPITALIZATION
|
(millions, except share amounts)
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Collateralized note payable
|
|
$
|
110.0
|
|
|
|
|
$
|
110.0
|
|
|
|
Commercial paper
|
|
195.3
|
|
|
|
|
132.9
|
|
|
|
Current maturities of long-term debt
|
|
631.0
|
|
|
|
|
281.0
|
|
|
|
Accounts payable
|
|
136.3
|
|
|
|
|
231.6
|
|
|
|
Accrued taxes
|
|
52.3
|
|
|
|
|
27.0
|
|
|
|
Accrued interest
|
|
42.5
|
|
|
|
|
32.4
|
|
|
|
Accrued compensation and benefits
|
|
44.1
|
|
|
|
|
52.1
|
|
|
|
Pension and post-retirement liability
|
|
1.6
|
|
|
|
|
1.6
|
|
|
|
Other
|
|
42.0
|
|
|
|
|
11.4
|
|
|
|
Total
|
|
1,255.1
|
|
|
|
|
880.0
|
|
|
|
Deferred Credits and Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
1,237.4
|
|
|
|
|
1,228.3
|
|
|
|
Deferred tax credits
|
|
122.5
|
|
|
|
|
122.8
|
|
|
|
Asset retirement obligations
|
|
246.5
|
|
|
|
|
278.0
|
|
|
|
Pension and post-retirement liability
|
|
461.5
|
|
|
|
|
465.8
|
|
|
|
Regulatory liabilities
|
|
194.5
|
|
|
|
|
187.4
|
|
|
|
Other
|
|
71.3
|
|
|
|
|
70.6
|
|
|
|
Total
|
|
2,333.7
|
|
|
|
|
2,352.9
|
|
|
|
Capitalization
|
|
|
|
|
|
|
|
|
|
|
Common shareholder's equity
|
|
|
|
|
|
|
|
|
|
|
Common stock - 1,000 shares authorized without par value
|
|
|
|
|
|
|
|
|
|
|
1 share issued, stated value
|
|
1,563.1
|
|
|
|
|
1,563.1
|
|
|
|
Retained earnings
|
|
939.1
|
|
|
|
|
982.6
|
|
|
|
Accumulated other comprehensive loss
|
|
(2.9
|
)
|
|
|
|
(4.2
|
)
|
|
|
Total
|
|
2,499.3
|
|
|
|
|
2,541.5
|
|
|
|
Long-term debt (
Note
10
)
|
|
1,934.5
|
|
|
|
|
2,284.0
|
|
|
|
Total
|
|
4,433.8
|
|
|
|
|
4,825.5
|
|
|
|
Commitments and Contingencies (
Note
11
)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,022.6
|
|
|
|
|
$
|
8,058.4
|
|
|
The disclosures regarding 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 March 31
|
|
2017
|
|
2016
|
|
Operating Revenues
|
|
(millions)
|
|
Electric revenues
|
|
$
|
395.9
|
|
|
$
|
400.9
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
Fuel and purchased power
|
|
78.9
|
|
|
86.3
|
|
|
Transmission
|
|
14.3
|
|
|
15.4
|
|
|
Operating and maintenance expenses
|
|
126.4
|
|
|
123.7
|
|
|
Costs to achieve the anticipated acquisition of Westar Energy, Inc.
|
|
7.9
|
|
|
—
|
|
|
Depreciation and amortization
|
|
65.3
|
|
|
61.1
|
|
|
General taxes
|
|
44.6
|
|
|
43.6
|
|
|
Other
|
|
0.3
|
|
|
0.2
|
|
|
Total
|
|
337.7
|
|
|
330.3
|
|
|
Operating income
|
|
58.2
|
|
|
70.6
|
|
|
Non-operating income
|
|
2.5
|
|
|
1.3
|
|
|
Non-operating expenses
|
|
(2.1
|
)
|
|
(1.3
|
)
|
|
Interest charges
|
|
(35.6
|
)
|
|
(35.3
|
)
|
|
Income before income tax expense
|
|
23.0
|
|
|
35.3
|
|
|
Income tax expense
|
|
(8.8
|
)
|
|
(10.7
|
)
|
|
Net income
|
|
$
|
14.2
|
|
|
$
|
24.6
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14.2
|
|
|
$
|
24.6
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
Derivative hedging activity
|
|
|
|
|
|
|
|
Reclassification to expenses, net of tax
|
|
1.3
|
|
|
1.4
|
|
|
Derivative hedging activity, net of tax
|
|
1.3
|
|
|
1.4
|
|
|
Total other comprehensive income
|
|
1.3
|
|
|
1.4
|
|
|
Comprehensive income
|
|
$
|
15.5
|
|
|
$
|
26.0
|
|
The disclosures regarding 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)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
|
2017
|
|
|
|
2016
|
|
|
Cash Flows from Operating Activities
|
(millions)
|
|
|
Net income
|
|
$
|
14.2
|
|
|
|
|
$
|
24.6
|
|
|
|
Adjustments to reconcile income to net cash from operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
65.3
|
|
|
|
|
61.1
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
Nuclear fuel
|
|
8.0
|
|
|
|
|
8.3
|
|
|
|
Other
|
|
8.1
|
|
|
|
|
8.4
|
|
|
|
Deferred income taxes, net
|
|
9.2
|
|
|
|
|
10.4
|
|
|
|
Investment tax credit amortization
|
|
(0.3
|
)
|
|
|
|
(0.2
|
)
|
|
|
Other operating activities (Note 3)
|
|
(21.1
|
)
|
|
|
|
75.8
|
|
|
|
Net cash from operating activities
|
|
83.4
|
|
|
|
|
188.4
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Utility capital expenditures
|
|
(84.0
|
)
|
|
|
|
(83.2
|
)
|
|
|
Allowance for borrowed funds used during construction
|
|
(1.2
|
)
|
|
|
|
(0.9
|
)
|
|
|
Purchases of nuclear decommissioning trust investments
|
|
(5.9
|
)
|
|
|
|
(10.5
|
)
|
|
|
Proceeds from nuclear decommissioning trust investments
|
|
5.0
|
|
|
|
|
9.7
|
|
|
|
Other investing activities
|
|
(5.1
|
)
|
|
|
|
(8.6
|
)
|
|
|
Net cash from investing activities
|
|
(91.2
|
)
|
|
|
|
(93.5
|
)
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Issuance fees
|
|
—
|
|
|
|
|
(0.2
|
)
|
|
|
Net change in short-term borrowings
|
|
62.4
|
|
|
|
|
(94.5
|
)
|
|
|
Dividends paid to Great Plains Energy
|
|
(57.0
|
)
|
|
|
|
—
|
|
|
|
Net cash from financing activities
|
|
5.4
|
|
|
|
|
(94.7
|
)
|
|
|
Net Change in Cash and Cash Equivalents
|
|
(2.4
|
)
|
|
|
|
0.2
|
|
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
4.5
|
|
|
|
|
2.3
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
2.1
|
|
|
|
|
$
|
2.5
|
|
|
The disclosures regarding 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)
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
(millions, except share amounts)
|
|
Common Stock
|
1
|
|
|
$
|
1,563.1
|
|
|
1
|
|
|
$
|
1,563.1
|
|
|
Retained Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
|
982.6
|
|
|
|
|
|
879.6
|
|
|
Net income
|
|
|
|
14.2
|
|
|
|
|
|
24.6
|
|
|
Cumulative effect of adoption of ASU 2016-09 (Note 1)
|
|
|
(0.7
|
)
|
|
|
|
—
|
|
|
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock held by Great Plains Energy
|
|
|
|
(57.0
|
)
|
|
|
|
|
—
|
|
|
Ending balance
|
|
|
|
939.1
|
|
|
|
|
|
904.2
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
|
(4.2
|
)
|
|
|
|
|
(9.6
|
)
|
|
Derivative hedging activity, net of tax
|
|
|
|
1.3
|
|
|
|
|
|
1.4
|
|
|
Ending balance
|
|
|
|
(2.9
|
)
|
|
|
|
|
(8.2
|
)
|
|
Total Common Shareholder's Equity
|
|
|
|
$
|
2,499.3
|
|
|
|
|
|
$
|
2,459.1
|
|
The disclosures regarding 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 "Companies" 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 its consolidated subsidiaries. "Companies" refers to Great Plains Energy Incorporated and its consolidated subsidiaries and KCP&L and its consolidated subsidiaries. The Companies' interim financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in the opinion of management, for a fair presentation of the results for the interim periods presented.
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 and cash and cash equivalents to be used to fund the cash consideration for the anticipated acquisition of Westar Energy, Inc. (Westar). Great Plains Energy's wholly owned direct subsidiaries with significant operations are as follows:
|
|
|
|
•
|
KCP&L is an integrated, regulated electric utility that provides electricity to customers primarily in the states of Missouri and Kansas. KCP&L has one active wholly owned subsidiary, Kansas City Power & Light Receivables Company (KCP&L Receivables Company).
|
|
|
|
|
•
|
KCP&L Greater Missouri Operations Company (GMO) is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri. GMO also provides regulated steam service to certain customers in the St. Joseph, Missouri area. GMO has two active wholly owned subsidiaries, GMO Receivables Company and MPS Merchant Services, Inc. (MPS Merchant). MPS Merchant has certain long-term natural gas contracts remaining from its former non-regulated trading operations.
|
Great Plains Energy also wholly owns GPE Transmission Holding Company, LLC (GPETHC). GPETHC owns
13.5%
of Transource Energy, LLC (Transource) with the remaining
86.5%
owned by AEP Transmission Holding Company, LLC (AEPTHC), a subsidiary of American Electric Power Company, Inc. GPETHC accounts for its investment in Transource under the equity method.
Transource is focused on the development of competitive electric transmission projects.
Each of Great Plains Energy's and KCP&L's consolidated financial statements includes the accounts of their subsidiaries. Intercompany transactions have been eliminated.
Great Plains Energy's sole reportable business segment is electric utility. See Note
17
for additional information.
Basic and Diluted Earnings per Common Share Calculation
To determine basic earnings per common share (EPS), preferred stock dividend requirements are deducted from net income before dividing by the average number of common shares outstanding. To determine diluted EPS, preferred stock dividend requirements are added to earnings available for common shareholders for the periods in which the assumed conversion of Great Plains Energy's
7.00%
Series B Mandatory Convertible Preferred Stock (Series B Preferred Stock) has a dilutive effect before dividing by the diluted average number of common shares outstanding. The effect of dilutive securities assumes the issuance of common shares applicable to performance shares and restricted stock calculated using the treasury stock method and the number of common shares that would be issued under an assumed conversion of Series B Preferred Stock using the if-converted method.
The following table reconciles Great Plains Energy's basic and diluted EPS.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
Income (loss)
|
(millions, except per share amounts)
|
|
Net income (loss)
|
|
$
|
(9.6
|
)
|
|
$
|
26.4
|
|
|
Less: preferred stock dividend requirements
|
|
15.1
|
|
|
0.4
|
|
|
Earnings (loss) available for common shareholders
|
|
$
|
(24.7
|
)
|
|
$
|
26.0
|
|
|
Common Shares Outstanding
|
|
|
|
|
|
|
|
Average number of common shares outstanding
|
|
215.3
|
|
|
154.4
|
|
|
Add: effect of dilutive securities
|
|
—
|
|
|
0.6
|
|
|
Diluted average number of common shares outstanding
|
|
215.3
|
|
|
155.0
|
|
|
Basic and diluted EPS
|
|
$
|
(0.11
|
)
|
|
$
|
0.17
|
|
Anti-dilutive shares excluded from the computation of diluted EPS are detailed in the following table.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Assumed conversion of Series B Preferred Stock
|
29,930,385
|
|
|
—
|
|
|
Performance shares
|
460,169
|
|
|
372,093
|
|
|
Restricted stock shares
|
328,512
|
|
|
—
|
|
Dividends Declared
In
May 2017
, Great Plains Energy's Board of Directors (Great Plains Energy Board) declared a quarterly dividend of
$0.275
per share on Great Plains Energy's common stock. The common dividend is payable
June 20, 2017
, to shareholders of record as of
May 30, 2017
.
The Great Plains Energy Board also declared a regular quarterly dividend on Great Plains Energy's Series B Preferred Stock. The dividend will be payable
June 15, 2017
, to shareholders of record as of
June 1, 2017
.
In
May 2017
, KCP&L's Board of Directors declared a cash dividend payable to Great Plains Energy of
$75.0 million
payable on
June 19, 2017
.
New Accounting Standards
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07,
Compensation-Retirement Benefits
, which requires an employer to disaggregate the service cost component from the other components of net benefit cost. The service cost component is to be reported in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components are to be reported separately from service costs and outside of a subtotal of income from operations. The amendments in this update allow only the service cost component to be eligible for capitalization. The new guidance is to be applied retrospectively for the presentation of service cost and other components in the income statement and prospectively for the capitalization of the service cost component. The Companies plan to adopt ASU No. 2017-07 on January 1, 2018, and are evaluating the effect it will have on their consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation-Stock Compensation
, which is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The Companies adopted ASU No. 2016-09 on January 1, 2017. The cumulative effect from the adoption of ASU No. 2016-09 was insignificant to Great Plains Energy's consolidated financial statements and resulted in a reduction to retained earnings of
$0.7 million
for KCP&L. The Companies have elected to adopt the cash flow presentation of the excess tax benefits as an operating activity prospectively and no prior periods have been adjusted.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
, which requires an entity that is a lessee to record a right-of-use asset and a lease liability for lease payments on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted
and is required to be applied using a modified retrospective approach
. Great Plains Energy and KCP&L plan to adopt the new guidance January 1, 2019. The Companies expect that the new guidance will affect the balance sheet by increasing the assets and liabilities recorded related to operating leases and continue to evaluate the effect that ASU No. 2016-02 will have on their income statement, statement of cash flows and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in Generally Accepted Accounting Principles (GAAP) when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, deferring the effective date of ASU No. 2014-09 one year, from January 1, 2017, to January 1, 2018. The Companies plan to adopt ASU No. 2014-09 on January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Companies have completed a review of the majority of their revenue arrangements and do not expect the standard to have a material impact on their consolidated financial statements. However, the Companies are still evaluating the impacts on revenue recognition of their remaining revenue arrangements and contracts where collectability is uncertain. The Companies are in the process of determining their method of adoption, which depends in part on completing the evaluation of the remaining items noted above.
2
. ANTICIPATED ACQUISITION OF WESTAR ENERGY, INC.
On May 29, 2016, Great Plains Energy entered into an Agreement and Plan of Merger (Merger Agreement) by and among Great Plains Energy, Westar, and, from and after its accession to the Merger Agreement, GP Star, Inc., a wholly owned subsidiary of Great Plains Energy in the State of Kansas (Merger Sub). Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into Westar, with Westar continuing as the surviving corporation. Upon closing, pursuant to the Merger Agreement, Great Plains Energy will acquire Westar for (i)
$51.00
in cash and (ii) a number, rounded to the nearest 1/10,000 of a share, of shares of Great Plains Energy common stock, equal to the Exchange Ratio (as described below) for each share of Westar common stock issued and outstanding immediately prior to the effective time of the merger, with Westar becoming a wholly owned subsidiary of Great Plains Energy.
The Exchange Ratio is calculated as follows:
If the volume-weighted average share price of Great Plains Energy common stock on the New York Stock Exchange for the twenty consecutive full trading days ending on (and including) the third trading day immediately prior to the closing date of the merger (the Great Plains Energy Average Stock Price) is:
(a) greater than
$33.2283
, the Exchange Ratio will be
0.2709
;
(b) greater than or equal to
$28.5918
but less than or equal to
$33.2283
, the Exchange Ratio will be an amount equal to the quotient obtained by dividing (x)
$9.00
by (y) the Great Plains Energy Average Stock Price; or
(c) less than
$28.5918
, the Exchange Ratio will be
0.3148
.
Financing
Great Plains Energy's plan to finance the cash portion of the merger consideration with equity and debt financing includes (i)
$750 million
of mandatory convertible preferred equity pursuant to a stock purchase agreement with OCM Credit Portfolio LP (OMERS), (ii) approximately
$2.35 billion
of equity comprised of a combination of Great Plains Energy common stock and additional mandatory convertible preferred stock, which, as discussed below, was completed in October 2016, and (iii) approximately
$4.3 billion
in debt, which, as discussed below, was completed in March 2017.
On May 29, 2016, in connection with the Merger Agreement, Great Plains Energy entered into a commitment letter for a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of
$8.017 billion
(which has subsequently been reduced to
$864.5 million
as of March 31, 2017) to support the anticipated transaction and provide flexibility for the timing of long-term financing. See Note 9 for additional information.
On May 29, 2016, Great Plains Energy entered into a stock purchase agreement with OMERS, pursuant to which Great Plains Energy will issue and sell to OMERS
750,000
shares of preferred stock of Great Plains Energy designated as
7.25%
Mandatory Convertible Preferred Stock, Series A (Series A Preferred Stock), without par value, for an aggregate purchase price equal to
$750 million
at the closing of the merger.
On October 3, 2016, Great Plains Energy completed a registered public offering of
60.5 million
shares of common stock, without par value, at a public offering price of
$26.45
per share, for total gross proceeds of approximately
$1.6 billion
(net proceeds of approximately
$1.55 billion
after issuance costs). Concurrent with this offering, Great Plains Energy also completed a registered public offering of
17.3 million
depositary shares, each representing a 1/20th interest in a share of Great Plains Energy's Series B Preferred Stock, without par value, at a public offering price of
$50
per depositary share for total gross proceeds of
$862.5 million
(net proceeds of approximately
$836.2 million
after issuance costs).
In the event that the merger is terminated or if Great Plains Energy determines in its reasonable judgment that the anticipated acquisition of Westar will not close or if the anticipated acquisition of Westar has not closed by November 30, 2017, then Great Plains Energy could at its sole option (but is not required to) redeem all of the Series B Preferred Stock. The redemption price would be equal to either:
(a)
$1,000
per share plus accumulated and unpaid dividends up to the redemption date; or
(b) if the average price of Great Plains Energy’s common stock exceeds a certain threshold amount, then a repurchase price that is equal to a make-whole formula.
On March 9, 2017, Great Plains Energy issued, at a discount,
$4.3 billion
of unsecured senior notes. See Note 10 for additional information.
In the event that the anticipated acquisition of Westar does not close by November 30, 2017, or in the event that the Merger Agreement is earlier terminated, then Great Plains Energy would be required to redeem all of the
$4.3 billion
unsecured senior notes it issued on March 9, 2017, in connection with the anticipated acquisition. Additionally, if at any time prior to November 30, 2017, Great Plains Energy determines in its reasonable judgment that the anticipated acquisition of Westar will not close prior to November 30, 2017, then Great Plains Energy could at its sole option (but is not required to) redeem the unsecured senior notes. The redemption price in each case would be
101%
of the aggregate principle amount of the senior notes. In the event that Great Plains Energy would redeem the senior notes, any deferred debt issuance costs would be written off.
Regulatory and Shareholder Approvals
Great Plains Energy's anticipated acquisition of Westar was unanimously approved by the Great Plains Energy Board and Westar's Board of Directors (Westar Board). In September 2016, shareholders of Great Plains Energy and Westar approved all proposals necessary for Great Plains Energy's acquisition of Westar at each company's respective shareholder meeting. The anticipated acquisition remains subject to regulatory approvals from The State Corporation Commission of the State of Kansas (KCC), the Public Service Commission of the State of Missouri (MPSC), and The Federal Energy Regulatory Commission (FERC); as well as other customary conditions.
KCC Approval
In June 2016, Great Plains Energy, KCP&L and Westar filed a joint application with KCC for approval of the anticipated acquisition of Westar by Great Plains Energy. Under applicable Kansas regulations, KCC has 300 days following the filing to rule on the transaction. On April 19, 2017, KCC issued its order denying Great Plains Energy's, KCP&L's and Westar's joint application for approval of the anticipated acquisition of Westar by Great Plains Energy citing concerns with the purchase price, Great Plains Energy's capital structure, quantifiable and demonstrable customer benefits and staffing levels in Westar's service territory, among other items. On May 4,
2017, Great Plains Energy, KCP&L and Westar filed with KCC a petition for reconsideration of KCC's April 19, 2017, order and to set the matter for further proceedings so that Great Plains Energy, KCP&L and Westar may work together to determine whether it is feasible to develop a revised acquisition proposal addressing KCC's concerns and, if so, file such revised acquisition proposal along with a supplemental application by May 31, 2017. Under applicable Kansas regulations, KCC has 30 days following the filing of the petition for reconsideration to either deny or grant the petition.
MPSC Approval
On February 22, 2017, the MPSC issued an order directing Great Plains Energy to file an application with the MPSC for approval of the anticipated acquisition of Westar. Great Plains Energy filed its application on February 23, 2017. An evidentiary hearing in the case was held in April 2017. Following the order by the KCC described above, the MPSC approved a request by Great Plains Energy and other joint applicants to suspend the acquisition procedural schedule. Great Plains Energy and the joint applicants agreed to file a status report on any developments related to the KCC proceeding for the proposed acquisition by no later than May 31, 2017.
Prior to receiving the MPSC order to file an application for approval of the anticipated acquisition of Westar, Great Plains Energy had reached separate stipulations and agreements with the MPSC staff and the Office of the Public Counsel (OPC) in which the MPSC staff and OPC agreed that they would not file complaints alleging that MPSC approval was necessary in order for Great Plains Energy to acquire Westar. The stipulations and agreements impose certain conditions on Great Plains Energy, KCP&L and GMO in the areas of financing, ratemaking, customer service, corporate social responsibility and also include other general provisions. The stipulation and agreement with the MPSC staff, among other things, provides that retail rates for KCP&L Missouri and GMO customers will not increase as a result of the acquisition and that in the event KCP&L's or GMO's credit ratings are downgraded below investment grade as a result of the acquisition, KCP&L and GMO will be restricted from paying a dividend to Great Plains Energy unless approved by the MPSC or until their credit ratings are restored to investment grade. The stipulations and agreements must still be approved by the MPSC and are being considered as part of Great Plains Energy's application for approval of the anticipated acquisition of Westar.
FERC Approval
In July 2016, Great Plains Energy and Westar filed a joint application with FERC for approval of the anticipated acquisition of Westar by Great Plains Energy. Approval of the application requires action by the FERC commissioners because it is a contested application. The Federal Power Act requires a quorum of three or more commissioners to act on a contested application. Following the resignation of the FERC Chairman effective February 3, 2017, the FERC is comprised only of two commissioners and is therefore unable to act on the application. A new commissioner must be appointed by the President of the United States, with the advice and consent of the United States Senate, before FERC will be able to act on the application. If the FERC commissioners do not issue an order on the application by November 1, 2017, approval of the application may be deemed granted by operation of law. Great Plains Energy is unable to predict when FERC will regain a quorum or how the change in commissioners will impact the review of the application.
Other Approvals
In July 2016, Great Plains Energy and Westar filed applications with FERC and NRC for approval of the merger. In August 2016, the Securities and Exchange Commission (SEC) declared effective a registration statement including a joint proxy statement with Westar (the Proxy Statement Prospectus) used in connection with the Great Plains Energy and Westar special shareholder meetings that occurred in September 2016. In September 2016, shareholders of Great Plains Energy and Westar approved all proposals necessary for Great Plains Energy's acquisition of Westar at each company's respective shareholder meeting. In September 2016, Great Plains Energy and Westar filed their respective Pre-Merger Notification and Report forms with the Federal Trade Commission (FTC) and the Department of Justice (DOJ) under the Hart-Scott-Rodino (HSR) Act. In October 2016, the FTC granted Great Plains Energy's request for early termination of the waiting period under the HSR Act with respect to the anticipated acquisition, and the DOJ also notified Great Plains Energy that it has closed its investigation of the antitrust aspects of the anticipated acquisition. In January 2017, The Federal Communications Commission (FCC) consented to the Transfer of Control application filed by Great Plains Energy and Westar relating to the anticipated
acquisition. In April 2017, the Nuclear Regulatory Commission (NRC) issued an order approving the indirect ownership transfer of control of Wolf Creek Generating Station (Wolf Creek).
Termination Fees
The Merger Agreement provides that in connection with the termination of the Merger Agreement under specified circumstances relating to a failure to obtain required regulatory approvals prior to May 31, 2017 (which date may be extended to November 30, 2017, under certain circumstances (the End Date)), a final and nonappealable order enjoining the consummation of the merger in connection with regulatory approvals or failure by Great Plains Energy to consummate the merger once all of the conditions have been satisfied, Great Plains Energy will be required to pay Westar a termination fee of
$380 million
. In addition, in the event that the Merger Agreement is terminated by (a) either party because the closing has not occurred by the End Date or (b) Westar, as a result of Great Plains Energy's uncured breach of the Merger Agreement, and prior to such termination, an acquisition proposal for Great Plains Energy is publicly disclosed or made to Great Plains Energy, if Great Plains Energy enters into an agreement or consummates a transaction with respect to an acquisition proposal within twelve months following such termination, then Great Plains Energy may be required to pay Westar a termination fee of
$180 million
. Similarly, in the event that the Merger Agreement is terminated by (x) either party because the closing has not occurred by the End Date or (y) Great Plains Energy, as a result of Westar's uncured breach of the Merger Agreement, and prior to such termination, an acquisition proposal for Westar is publicly disclosed or made to Westar, if Westar enters into an agreement or consummates a transaction with respect to an acquisition proposal within twelve months following such termination, then Westar may be required to pay Great Plains Energy a termination fee of
$280 million
.
3. SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
Great Plains Energy Other Operating Activities
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Cash flows affected by changes in:
|
(millions)
|
|
Receivables
|
$
|
55.5
|
|
|
$
|
39.7
|
|
|
Accounts receivable pledged as collateral
|
0.2
|
|
|
—
|
|
|
Fuel inventories
|
1.8
|
|
|
6.3
|
|
|
Materials and supplies
|
(4.2
|
)
|
|
(2.1
|
)
|
|
Accounts payable
|
(136.8
|
)
|
|
(120.4
|
)
|
|
Accrued taxes
|
36.3
|
|
|
38.0
|
|
|
Accrued interest
|
26.5
|
|
|
14.4
|
|
|
Deferred refueling outage costs
|
4.0
|
|
|
4.9
|
|
|
Pension and post-retirement benefit obligations
|
11.6
|
|
|
23.7
|
|
|
Allowance for equity funds used during construction
|
(1.0
|
)
|
|
(0.9
|
)
|
|
Fuel recovery mechanisms
|
(14.1
|
)
|
|
(4.6
|
)
|
|
Other
|
13.2
|
|
|
(15.3
|
)
|
|
Total other operating activities
|
$
|
(7.0
|
)
|
|
$
|
(16.3
|
)
|
|
Cash paid during the period:
|
|
|
|
|
|
|
Interest
|
$
|
34.2
|
|
|
$
|
33.3
|
|
|
Income taxes
|
$
|
—
|
|
|
$
|
0.1
|
|
|
Non-cash investing activities:
|
|
|
|
|
|
Liabilities accrued for capital expenditures
|
$
|
22.6
|
|
|
$
|
24.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KCP&L Other Operating Activities
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Cash flows affected by changes in:
|
(millions)
|
|
Receivables
|
$
|
36.2
|
|
|
$
|
36.5
|
|
|
Fuel inventories
|
(0.5
|
)
|
|
4.9
|
|
|
Materials and supplies
|
(3.1
|
)
|
|
(2.0
|
)
|
|
Accounts payable
|
(88.8
|
)
|
|
(75.5
|
)
|
|
Accrued taxes
|
35.5
|
|
|
102.2
|
|
|
Accrued interest
|
10.1
|
|
|
9.9
|
|
|
Deferred refueling outage costs
|
4.0
|
|
|
4.9
|
|
|
Pension and post-retirement benefit obligations
|
10.3
|
|
|
23.9
|
|
|
Allowance for equity funds used during construction
|
(1.0
|
)
|
|
(0.6
|
)
|
|
Fuel recovery mechanisms
|
(10.8
|
)
|
|
(14.3
|
)
|
|
Other
|
(13.0
|
)
|
|
(14.1
|
)
|
|
Total other operating activities
|
$
|
(21.1
|
)
|
|
$
|
75.8
|
|
|
Cash paid during the period:
|
|
|
|
|
|
|
Interest
|
$
|
22.5
|
|
|
$
|
22.2
|
|
|
Non-cash investing activities:
|
|
|
|
|
|
Liabilities accrued for capital expenditures
|
$
|
19.9
|
|
|
$
|
16.5
|
|
4. RECEIVABLES
Great Plains Energy's and KCP&L's receivables are detailed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
December 31
|
|
|
|
2017
|
|
|
2016
|
|
|
Great Plains Energy
|
|
(millions)
|
|
|
Customer accounts receivable - billed
|
|
$
|
10.2
|
|
|
|
$
|
26.2
|
|
|
|
Customer accounts receivable - unbilled
|
|
51.9
|
|
|
|
79.1
|
|
|
|
Allowance for doubtful accounts - customer accounts receivable
|
|
(4.4
|
)
|
|
|
(4.0
|
)
|
|
|
Other receivables
|
|
52.7
|
|
|
|
64.7
|
|
|
|
Total
|
|
$
|
110.4
|
|
|
|
$
|
166.0
|
|
|
|
KCP&L
|
|
|
|
|
|
|
|
|
|
Customer accounts receivable - billed
|
|
$
|
9.0
|
|
|
|
$
|
25.5
|
|
|
|
Customer accounts receivable - unbilled
|
|
47.7
|
|
|
|
63.7
|
|
|
|
Allowance for doubtful accounts - customer accounts receivable
|
|
(1.8
|
)
|
|
|
(1.8
|
)
|
|
|
Other receivables
|
|
44.1
|
|
|
|
51.7
|
|
|
|
Total
|
|
$
|
99.0
|
|
|
|
$
|
139.1
|
|
|
Great Plains Energy's and KCP&L's other receivables at
March 31, 2017
, and December 31,
2016
, consisted primarily of receivables from partners in jointly owned electric utility plants and wholesale sales receivables.
Sale of Accounts Receivable – KCP&L and GMO
KCP&L and GMO sell all of their retail electric accounts receivable to their wholly owned subsidiaries, KCP&L Receivables Company and GMO Receivables Company, respectively, which in turn sell an undivided percentage ownership interest in the accounts receivable to Victory Receivables Corporation, an independent outside investor. Each of KCP&L Receivables Company's and GMO Receivables Company's sale of the undivided percentage ownership interest in accounts receivable to Victory Receivables Corporation is accounted for as a secured borrowing with accounts receivable pledged as collateral and a corresponding short-term collateralized note payable recognized on the balance sheets. At
March 31, 2017
, and December 31,
2016
, Great Plains Energy's accounts receivable pledged as collateral and the corresponding short-term collateralized note payable were
$172.2 million
and
$172.4 million
, respectively. At
March 31, 2017
, and December 31,
2016
, KCP&L's accounts receivable
pledged as collateral and the corresponding short-term collateralized note payable were
$110.0 million
. KCP&L's agreement expires in September 2017 and allows for
$110 million
in aggregate outstanding principal amount of borrowings at any time. GMO's agreement expires in September 2017 and allows for
$65 million
in aggregate outstanding principal of borrowings from mid-November through mid-June and then increases to
$80 million
from mid-June through mid-November.
5. NUCLEAR PLANT
KCP&L owns
47%
of Wolf Creek, its only nuclear generating unit. Wolf Creek is located in Coffey County, Kansas, just northeast of Burlington, Kansas. Wolf Creek's operating license expires in 2045. Wolf Creek is regulated by the NRC with respect to licensing, operations and safety-related requirements.
Spent Nuclear Fuel and High-Level 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. Wolf Creek historically paid the DOE a quarterly fee of one-tenth of a cent for each kWh of net nuclear generation delivered and sold for the future disposal of spent nuclear fuel. In May 2014, this fee was set to zero.
In 2010, the DOE filed a motion with the NRC to withdraw its then pending application to the NRC to construct a national repository for the disposal of spent nuclear fuel and high-level radioactive waste at Yucca Mountain, Nevada. An NRC board denied the DOE's motion to withdraw its application. In 2011, the NRC announced that it was evenly divided on whether to take affirmative action to overturn or uphold the board's decision and ordered the licensing board, consistent with budgetary limitations, to close out its work on the DOE's application. In August 2013, a federal court of appeals ruled that the NRC must resume its review of the DOE's application to the extent of appropriated funds. With the available funds, the NRC was able to complete its technical review of the Yucca Mountain application but was not able to resume the licensing hearing.
Wolf Creek is currently evaluating alternatives for expanding its existing on-site spent nuclear fuel storage to provide additional capacity prior to 2025. Management cannot predict when, or if, an off-site storage site or alternative disposal site will be available to receive Wolf Creek's spent nuclear fuel and will continue to monitor this activity.
Low-Level Radioactive Waste
Wolf Creek disposes of most of its low-level radioactive waste (Class A waste) at an existing third-party repository in Utah. Management expects that the site located in Utah will remain available to Wolf Creek for disposal of its Class A waste. Wolf Creek has contracted with a waste processor that will process, take title and dispose in another state most of the remainder of Wolf Creek's low-level radioactive waste (Classes B and C waste, which is higher in radioactivity but much lower in volume). Should on-site waste storage be needed in the future, Wolf Creek has current storage capacity on site for about four years' generation of Classes B and C waste and believes it will be able to expand that storage capacity as needed if it becomes necessary to do so.
Nuclear Decommissioning Trust Fund
The following table summarizes the change in Great Plains Energy's and KCP&L's nuclear decommissioning trust fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
December 31
|
|
|
2017
|
2016
|
|
Decommissioning Trust
|
|
(millions)
|
|
|
Beginning balance January 1
|
|
$
|
222.9
|
|
|
|
|
$
|
200.7
|
|
|
|
Contributions
|
|
0.9
|
|
|
|
|
3.3
|
|
|
|
Earned income, net of fees
|
|
1.1
|
|
|
|
|
4.1
|
|
|
|
Net realized gains
|
|
0.2
|
|
|
|
|
0.3
|
|
|
|
Net unrealized gains
|
|
7.4
|
|
|
|
|
14.5
|
|
|
|
Ending balance
|
|
$
|
232.5
|
|
|
|
|
$
|
222.9
|
|
|
The nuclear decommissioning trust is reported at fair value on the balance sheets and is invested in assets as detailed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
Cost
Basis
|
|
Unrealized Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Cost
Basis
|
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
|
(millions)
|
|
Equity securities
|
$
|
93.9
|
|
|
|
$
|
68.6
|
|
|
|
|
$
|
(0.8
|
)
|
|
|
|
$
|
161.7
|
|
|
|
|
$
|
93.3
|
|
|
|
|
$
|
62.1
|
|
|
|
|
$
|
(1.5
|
)
|
|
|
|
$
|
153.9
|
|
|
|
Debt securities
|
63.2
|
|
|
|
2.4
|
|
|
|
|
(0.4
|
)
|
|
|
|
65.2
|
|
|
|
|
63.4
|
|
|
|
|
2.3
|
|
|
|
|
(0.5
|
)
|
|
|
|
65.2
|
|
|
|
Other
|
5.6
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
5.6
|
|
|
|
|
3.8
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
3.8
|
|
|
|
Total
|
$
|
162.7
|
|
|
|
$
|
71.0
|
|
|
|
|
$
|
(1.2
|
)
|
|
|
|
$
|
232.5
|
|
|
|
|
$
|
160.5
|
|
|
|
|
$
|
64.4
|
|
|
|
|
$
|
(2.0
|
)
|
|
|
|
$
|
222.9
|
|
|
The weighted average maturity of debt securities held by the trust at
March 31, 2017
, was approximately
8
years. The costs of securities sold are determined on the basis of specific identification. The following table summarizes the realized gains and losses from the sale of securities in the nuclear decommissioning trust fund.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
|
(millions)
|
|
Realized gains
|
$
|
0.3
|
|
|
$
|
0.7
|
|
|
Realized losses
|
(0.1
|
)
|
|
(0.7
|
)
|
6
. REGULATORY MATTERS
KCP&L Kansas 2016 Abbreviated Rate Case Proceedings
In November 2016, KCP&L filed an abbreviated application with the KCC to request a decrease to its retail revenues of
$2.8 million
, reflecting the true-up to actuals of construction and environmental upgrade costs at the La Cygne station and Wolf Creek capital addition costs and the removal of certain regulatory asset and liability amortizations. The previously approved return on equity and rate-making ratio for KCP&L will not be addressed in this case. In April 2017, KCP&L, KCC staff and the Citizens' Utility Ratepayer Board filed a joint motion to approve a unanimous settlement agreement with the KCC that (i) requested a decrease in retail revenues of
$3.6 million
; (ii) requested to cancel the May 2017 evidentiary hearing; and (iii) requested an order by June 7, 2017, which would facilitate a June 28, 2017, effective date for the decrease to retail revenues.
KCP&L Missouri 2016 Rate Case Proceedings
In July 2016, KCP&L filed an application with the MPSC to request an increase to its retail revenues of
$62.9 million
, with a return on equity of
9.9%
and a rate-making equity ratio of
49.88%
. The request reflects increases in infrastructure investment costs, costs for regional transmission lines, property tax costs and costs to comply with environmental and cybersecurity mandates. KCP&L also requested an additional
$27.2 million
increase associated with rebasing fuel and purchased power expense.
In May 2017, the MPSC issued an order for KCP&L authorizing a return on equity of
9.5%
and a rate-making equity ratio of approximately
49.2%
. Pursuant to the order, KCP&L will file tariff sheets sufficient to recover revenues approved in compliance with the order no later than May 9, 2017. KCP&L anticipates the increase to retail revenues will be approximately
$30 million
to
$35 million
. The MPSC staff has until May 15, 2017, to file its recommendation concerning approval of KCP&L's tariff sheets. New rates are expected to be effective by May 28, 2017.
7. PENSION PLANS AND OTHER EMPLOYEE BENEFITS
Great Plains Energy maintains defined benefit pension plans for the majority of KCP&L's and GMO's active and inactive employees, including officers, and its
47%
ownership share of Wolf Creek Nuclear Operating Corporation (WCNOC) defined benefit plans. For the majority of employees, pension benefits under these plans reflect the employees' compensation, years of service and age at retirement. Effective in 2014, the non-union plan was closed
to future employees. Great Plains Energy also provides certain post-retirement health care and life insurance benefits for substantially all retired employees of KCP&L, GMO and its 47% ownership share of WCNOC.
KCP&L and GMO record pension and post-retirement expense in accordance with rate orders from the MPSC and KCC that allow the difference between pension and post-retirement costs under GAAP and costs for ratemaking to be recognized as a regulatory asset or liability. This difference between financial and regulatory accounting methods is due to timing and will be eliminated over the life of the plans.
The following table provides Great Plains Energy's components of net periodic benefit costs prior to the effects of capitalization and sharing with joint owners of power plants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Components of net periodic benefit costs
|
|
(millions)
|
|
Service cost
|
|
$
|
11.0
|
|
|
$
|
10.5
|
|
|
$
|
0.5
|
|
|
$
|
0.7
|
|
|
Interest cost
|
|
13.4
|
|
|
13.2
|
|
|
1.3
|
|
|
1.5
|
|
|
Expected return on plan assets
|
|
(12.8
|
)
|
|
(12.3
|
)
|
|
(0.6
|
)
|
|
(0.8
|
)
|
|
Prior service cost
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
0.3
|
|
|
Recognized net actuarial (gain)/loss
|
|
12.4
|
|
|
13.0
|
|
|
(0.1
|
)
|
|
(0.4
|
)
|
|
Net periodic benefit costs before regulatory adjustment
|
|
24.2
|
|
|
24.6
|
|
|
1.1
|
|
|
1.3
|
|
|
Regulatory adjustment
|
|
0.8
|
|
|
(1.0
|
)
|
|
1.3
|
|
|
1.5
|
|
|
Net periodic benefit costs
|
|
$
|
25.0
|
|
|
$
|
23.6
|
|
|
$
|
2.4
|
|
|
$
|
2.8
|
|
For the three months ended
March 31, 2017
, Great Plains Energy contributed
$16.0 million
to the pension plans and expects to contribute an additional
$63.6 million
in
2017
to satisfy the Employee Retirement Income Security Act of 1974, as amended (ERISA) funding requirements and the MPSC and KCC rate orders, the majority of which is expected to be paid by KCP&L. Also in
2017
, Great Plains Energy expects to make contributions of
$4.1 million
to the post-retirement benefit plans, the majority of which is expected to be paid by KCP&L.
8. EQUITY COMPENSATION
Great Plains Energy's Long-Term Incentive Plan is an equity compensation plan approved by Great Plains Energy's shareholders. The Long-Term Incentive Plan permits the grant of restricted stock, restricted stock units, bonus shares, stock options, stock appreciation rights, limited stock appreciation rights, director shares, director deferred share units and performance shares to directors, officers and other employees of Great Plains Energy and KCP&L. Forfeiture rates are based on historical forfeitures and future expectations and are reevaluated annually.
The following table summarizes Great Plains Energy's and KCP&L's equity compensation expense and the associated income tax benefit.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
Great Plains Energy
|
|
(millions)
|
|
Equity compensation expense
|
|
$
|
1.2
|
|
|
$
|
3.7
|
|
|
Income tax benefit
|
|
0.6
|
|
|
1.5
|
|
|
KCP&L
|
|
|
|
|
|
|
|
Equity compensation expense
|
|
$
|
0.8
|
|
|
$
|
2.5
|
|
|
Income tax benefit
|
|
0.4
|
|
|
1.0
|
|
Performance Shares
Performance share activity for the three months ended March 31, 2017, is summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Shares
|
|
Grant Date
Fair Value*
|
|
Beginning balance January 1, 2017
|
|
625,100
|
|
|
|
|
$
|
28.13
|
|
|
|
Granted
|
|
236,433
|
|
|
|
|
31.26
|
|
|
|
Earned
|
|
(182,676
|
)
|
|
|
|
28.78
|
|
|
|
Forfeited
|
|
(32,264
|
)
|
|
|
|
27.74
|
|
|
|
Ending balance March 31, 2017
|
|
646,593
|
|
|
|
|
29.09
|
|
|
* weighted-average
At
March 31, 2017
, the remaining weighted-average contractual term was
1.9
years. The weighted-average grant-date fair value of shares granted was
$31.26
and
$31.41
for the three months ended March 31, 2017, and 2016, respectively. At
March 31, 2017
, there was
$11.7 million
of total unrecognized compensation expense, net of forfeiture rates, related to performance shares granted under the Long-Term Incentive Plan, which will be recognized over the remaining weighted-average contractual term. The total fair value of performance shares earned and paid was
$5.3 million
and
$7.4 million
for the three months ended March 31,
2017
, and
2016
, respectively.
The fair value of performance share awards is estimated using the market value of the Company's stock at the valuation date and a Monte Carlo simulation technique that incorporates assumptions for inputs of expected volatilities, dividend yield and risk-free rates. Expected volatility is based on daily stock price change during a historical period commensurate with the remaining term of the performance period of the grant. The risk-free rate is based upon the rate at the time of the evaluation for zero-coupon government bonds with a maturity consistent with the remaining performance period of the grant. The dividend yield is based on the most recent dividends paid and the actual closing stock price on the valuation date. For shares granted in
2017
, inputs for expected volatility, dividend yield and risk-free rates were
18%
,
3.80%
and
1.58%
, respectively.
Restricted Stock
Restricted stock activity for the three months ended March 31, 2017, is summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
Restricted Stock
|
|
Grant Date
Fair Value*
|
|
Beginning balance January 1, 2017
|
|
249,672
|
|
|
|
|
$
|
27.20
|
|
|
|
Granted and issued
|
|
78,840
|
|
|
|
|
28.60
|
|
|
|
Vested
|
|
(84,473
|
)
|
|
|
|
27.05
|
|
|
|
Forfeited
|
|
(7,320
|
)
|
|
|
|
27.58
|
|
|
|
Ending balance March 31, 2017
|
|
236,719
|
|
|
|
|
27.71
|
|
|
* weighted-average
At
March 31, 2017
, the remaining weighted-average contractual term was
1.9
years. The weighted-average grant-date fair value of shares granted was
$28.60
and
$29.42
for the three months ended March 31, 2017, and 2016, respectively. At
March 31, 2017
, there was
$3.9 million
of total unrecognized compensation expense, net of forfeiture rates, related to nonvested restricted stock granted under the Long-Term Incentive Plan, which will be recognized over the remaining weighted-average contractual term. Total fair value of shares vested was
$2.3 million
and
$1.6 million
for the three months ended March 31, 2017, and 2016, respectively.
9
. SHORT-TERM BORROWINGS AND SHORT-TERM BANK LINES OF CREDIT
Great Plains Energy's $200 Million Revolving Credit Facility
Great Plains Energy's
$200 million
revolving credit facility with a group of banks expires in
October 2019
. The facility's terms permit transfers of unused commitments between this facility and the KCP&L and GMO facilities discussed below, with the total amount of the facility not exceeding
$400 million
at any one time. A default by
Great Plains Energy or any of its significant subsidiaries on other indebtedness totaling more than $50.0 million is a default under the facility. Under the terms of this facility, Great Plains Energy is required to maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in the facility, not greater than 0.65 to 1.00 at all times. At
March 31, 2017
, Great Plains Energy was
in compliance
with this covenant. In June 2016, the facility was amended, among other things, to increase the maximum consolidated indebtedness to consolidated capitalization ratio of 0.65 to 1.00 to a level such that, if Great Plains Energy would not be in compliance with the covenant as of the date of the closing of the anticipated acquisition of Westar, the ratio would increase up to a maximum of 0.75 to 1.00 for one year. At
March 31, 2017
, and December 31, 2016, Great Plains Energy had
no
outstanding cash borrowings and had issued
$1.0 million
in letters of credit under the credit facility.
KCP&L's $600 Million Revolving Credit Facility and Commercial Paper
KCP&L's
$600 million
revolving credit facility with a group of banks provides support for its issuance of commercial paper and other general corporate purposes and expires in
October 2019
. Great Plains Energy and KCP&L may transfer up to
$200 million
of unused commitments between Great Plains Energy's and KCP&L's facilities.
A default by KCP&L on other indebtedness totaling more than $50.0 million is a default under the facility. Under the terms of this facility, KCP&L is required to maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in the facility, not greater than 0.65 to 1.00 at all times.
At
March 31, 2017
, KCP&L was
in compliance
with this covenant. At
March 31, 2017
, KCP&L had
$195.3 million
of commercial paper outstanding at a weighted-average interest rate of
1.20%
, had issued letters of credit totaling
$2.7 million
and had
no
outstanding cash borrowings under the credit facility. At
December 31, 2016
, KCP&L had
$132.9 million
of commercial paper outstanding at a weighted-average interest rate of
0.98%
, had issued letters of credit totaling
$2.8 million
and had
no
outstanding cash borrowings under the credit facility.
GMO's $450 Million Revolving Credit Facility and Commercial Paper
GMO's
$450 million
revolving credit facility with a group of banks provides support for its issuance of commercial paper and other general corporate purposes and expires in
October 2019
. Great Plains Energy and GMO may transfer up to
$200 million
of unused commitments between Great Plains Energy's and GMO's facilities.
A default by GMO or any of its significant subsidiaries on other indebtedness totaling more than $50.0 million is a default under the facility. Under the terms of this facility, GMO is required to maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in the facility, not greater than 0.65 to 1.00 at all times.
At
March 31, 2017
, GMO was
in compliance
with this covenant. At
March 31, 2017
, GMO had
$259.4 million
of commercial paper outstanding at a weighted-average interest rate of
1.21%
, had issued letters of credit totaling
$2.0 million
and had
no
outstanding cash borrowings under the credit facility. At
December 31, 2016
, GMO had
$201.9 million
of commercial paper outstanding at a weighted-average interest rate of
1.02%
, had issued letters of credit totaling
$1.9 million
and had
no
outstanding cash borrowings under the credit facility.
Great Plains Energy's $864.5 Million Term Loan Facility
In connection with the Merger Agreement, Great Plains Energy entered into a commitment letter for a 364-day senior unsecured bridge term loan facility, originally for an aggregate principal amount of
$8.017 billion
to support the anticipated transaction and provide flexibility for the timing of long-term financing. The aggregate principal amount of the facility has been reduced most recently in connection with the March 2017 Great Plains Energy senior note issuance
and
as of March 31, 2017, the available aggregate principal amount of the facility was
$864.5 million
.
The facility is scheduled to expire on
May 31, 2017
, unless otherwise extended in connection with any extension of the Merger Agreement.
10. LONG-TERM DEBT
Great Plains Energy's and KCP&L's long-term debt is detailed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
December 31
|
|
|
Year Due
|
|
2017
|
|
2016
|
|
KCP&L
|
|
|
|
(millions)
|
|
General Mortgage Bonds
|
|
|
|
|
|
|
|
|
|
2.47% EIRR bonds
(a)
|
2017-2023
|
|
|
$
|
110.5
|
|
|
|
|
$
|
110.5
|
|
|
7.15% Series 2009A (8.59% rate)
(b)
|
2019
|
|
|
400.0
|
|
|
|
|
400.0
|
|
|
Senior Notes
|
|
|
|
|
|
|
|
|
|
|
|
5.85% Series (5.72% rate)
(b)
|
2017
|
|
|
250.0
|
|
|
|
|
250.0
|
|
|
6.375% Series (7.49% rate)
(b)
|
2018
|
|
|
350.0
|
|
|
|
|
350.0
|
|
|
3.15% Series
|
2023
|
|
|
300.0
|
|
|
|
|
300.0
|
|
|
3.65% Series
|
2025
|
|
|
350.0
|
|
|
|
|
350.0
|
|
|
6.05% Series (5.78% rate)
(b)
|
2035
|
|
|
250.0
|
|
|
|
|
250.0
|
|
|
5.30% Series
|
2041
|
|
|
400.0
|
|
|
|
|
400.0
|
|
|
EIRR Bonds
|
|
|
|
|
|
|
|
|
|
0.773% Series 2007A and 2007B
(c)
|
2035
|
|
|
146.5
|
|
|
|
|
146.5
|
|
|
2.875% Series 2008
|
2038
|
|
|
23.4
|
|
|
|
|
23.4
|
|
|
Current maturities
|
|
|
|
(631.0
|
)
|
|
|
|
(281.0
|
)
|
|
Unamortized discount and debt issuance costs
|
|
|
|
(14.9
|
)
|
|
|
|
(15.4
|
)
|
|
Total KCP&L excluding current maturities
(d)
|
|
|
|
1,934.5
|
|
|
|
|
2,284.0
|
|
|
Other Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
|
GMO First Mortgage Bonds 9.44% Series
|
2018-2021
|
|
|
4.6
|
|
|
|
|
5.7
|
|
|
GMO Senior Notes
|
|
|
|
|
|
|
|
|
|
8.27% Series
|
2021
|
|
|
80.9
|
|
|
|
|
80.9
|
|
|
3.49% Series A
|
2025
|
|
|
125.0
|
|
|
|
|
125.0
|
|
|
4.06% Series B
|
2033
|
|
|
75.0
|
|
|
|
|
75.0
|
|
|
4.74% Series C
|
2043
|
|
|
150.0
|
|
|
|
|
150.0
|
|
|
GMO Medium Term Notes
|
|
|
|
|
|
|
|
|
|
|
|
7.33% Series
|
2023
|
|
|
3.0
|
|
|
|
|
3.0
|
|
|
7.17% Series
|
2023
|
|
|
7.0
|
|
|
|
|
7.0
|
|
|
Great Plains Energy Senior Notes
|
|
|
|
|
|
|
|
|
|
6.875% Series (7.33% rate)
(b)
|
2017
|
|
|
100.0
|
|
|
|
|
100.0
|
|
|
2.50% Series
|
2020
|
|
|
750.0
|
|
|
|
|
—
|
|
|
4.85% Series
|
2021
|
|
|
350.0
|
|
|
|
|
350.0
|
|
|
5.292% Series
|
2022
|
|
|
287.5
|
|
|
|
|
287.5
|
|
|
3.15% Series
|
2022
|
|
|
1,150.0
|
|
|
|
|
—
|
|
|
3.90% Series
|
2027
|
|
|
1,400.0
|
|
|
|
|
—
|
|
|
4.85% Series
|
2047
|
|
|
1,000.0
|
|
|
|
|
—
|
|
|
Current maturities
|
|
|
|
(101.1
|
)
|
|
|
|
(101.1
|
)
|
|
Unamortized discount and premium, net and debt issuance costs
|
|
|
|
(40.5
|
)
|
|
|
|
(1.8
|
)
|
|
Total Great Plains Energy excluding current maturities
(d)
|
|
|
|
$
|
7,275.9
|
|
|
|
|
$
|
3,365.2
|
|
|
|
|
|
(a)
|
Weighted-average interest rates at
March 31, 2017
|
|
|
|
|
(b)
|
Rate after amortizing gains/losses recognized in other comprehensive income (OCI) on settlements of interest rate hedging instruments
|
|
|
|
|
(d)
|
At
March 31, 2017
, and December 31, 2016, does not include
$50.0 million
and
$21.9 million
of secured Series 2005 Environmental Improvement Revenue Refunding (EIRR) bonds because the bonds were repurchased in September 2015 and are held by KCP&L
|
Great Plains Energy Senior Notes
In March 2017, Great Plains Energy issued, at a discount, the following series of unsecured senior notes:
|
|
|
|
•
|
$750.0 million
of
2.50%
Notes, maturing in
2020
;
|
|
|
|
|
•
|
$1,150.0 million
of
3.15%
Notes, maturing in
2022
;
|
|
|
|
|
•
|
$1,400.0 million
of
3.90%
Notes, maturing in
2027
; and
|
|
|
|
|
•
|
$1,000.0 million
of
4.85%
Notes, maturing in
2047
.
|
Great Plains Energy plans to use proceeds from the offering to finance a portion of the cash consideration for the anticipated acquisition of Westar. In the event that the anticipated acquisition of Westar does not close by November 30, 2017, or in the event that the Merger Agreement is earlier terminated, then Great Plains Energy would be required to redeem all of the
$4.3 billion
unsecured senior notes. Additionally, if at any time prior to November 30, 2017, Great Plains Energy determines in its reasonable judgment that the anticipated acquisition of Westar will not close prior to November 30, 2017, then Great Plains Energy could at its sole option (but is not required to) redeem the unsecured senior notes. The redemption price in each case would be 101% of the aggregate principle amount of the senior notes.
11
. COMMITMENTS AND CONTINGENCIES
Environmental Matters
Great Plains Energy and KCP&L are subject to extensive federal, state and local environmental laws, regulations and permit requirements relating to air and water quality, waste management and disposal, natural resources and health and safety. In addition to imposing continuing compliance obligations and remediation costs, these laws, regulations and permits authorize the imposition of substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. The cost of complying with current and future environmental requirements is expected to be material to Great Plains Energy and KCP&L. Failure to comply with environmental requirements or to timely recover environmental costs through rates could have a material effect on Great Plains Energy's and KCP&L's results of operations, financial position and cash flows.
Great Plains Energy's and KCP&L's current estimates of capital expenditures (exclusive of Allowance for Funds Used During Construction (AFUDC) and property taxes) over the next four years to comply with environmental regulations are in the following table. The total cost of compliance with any existing, proposed or future laws and regulations may be significantly different from these cost estimates provided.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
2018
|
2019
|
2020
|
|
|
(millions)
|
|
Great Plains Energy
|
$
|
43.4
|
|
$
|
36.6
|
|
$
|
11.5
|
|
$
|
14.0
|
|
|
KCP&L
|
34.9
|
|
16.5
|
|
7.6
|
|
13.0
|
|
The Companies expect to seek recovery of the costs associated with environmental requirements through rate increases; however, there can be no assurance that such rate increases would be granted. The Companies may be subject to materially adverse rate treatment in response to competitive, economic, political, legislative or regulatory factors and/or public perception of the Companies' environmental reputation.
The following discussion groups environmental and certain associated matters into the broad categories of air and climate change, water, solid waste and remediation.
Clean Air Act and Climate Change Overview
The Clean Air Act Amendments of 1990 (Clean Air Act) and associated regulations enacted by the Environmental Protection Agency (EPA) form a comprehensive program to preserve and enhance air quality. States are required to establish regulations and programs to address all requirements of the Clean Air Act and have the flexibility to enact
more stringent requirements. All of Great Plains Energy's and KCP&L's generating facilities, and certain of their other facilities, are subject to the Clean Air Act.
Climate Change
The Companies' current generation capacity is primarily coal-fired and is estimated to produce about one ton of carbon dioxide (CO
2
) per MWh, or approximately
19 million
tons and
15 million
tons per year for Great Plains Energy and KCP&L, respectively. The Companies are subject to existing greenhouse gas reporting regulations and certain greenhouse gas requirements. Federal or state legislation concerning the reduction of emissions of greenhouse gases, including CO
2
, could be enacted in the future. At the international level, the Paris Agreement was adopted in December 2015 by nearly 200 countries and became effective in November 2016 as the threshold of at least 55 countries representing at least 55% of global greenhouse gas emissions have joined it through ratification. The Paris Agreement does not result in any new, legally binding obligations on the United States to meet a particular greenhouse gas emissions target, but establishes a framework for international cooperation on climate change. Other international agreements legally binding on the United States may be reached in the future. Greenhouse gas legislation has the potential of having significant financial and operational impacts on Great Plains Energy and KCP&L; however, the ultimate financial and operational consequences to Great Plains Energy and KCP&L cannot be determined until such legislation is passed. In the absence of new Congressional mandates, the EPA is proceeding with the regulation of greenhouse gases under the existing Clean Air Act.
In August 2015, the EPA finalized CO
2
emission standards for new, modified and reconstructed affected fossil-fuel-fired electric utility generating units. The standards would not apply to Great Plains Energy's and KCP&L's existing units unless the units were modified or reconstructed in the future. Also in August 2015, the EPA finalized its Clean Power Plan which sets CO
2
emission performance rates for existing affected fossil fuel-fired electric generating units. Nationwide, by 2030, the EPA projects the Clean Power Plan would achieve CO
2
emission reductions from the power sector of approximately
32%
from CO
2
emission levels in 2005.
In February 2016, the U.S. Supreme Court granted a stay of the Clean Power Plan putting the rule on hold pending review in the United States Court of Appeals for the District of Columbia Circuit and any subsequent review by the U.S. Supreme Court if such review is sought. In March 2017, United States President Donald Trump issued an Executive Order, Promoting Energy Independence and Economic Growth, that contains a number of climate-related actions. As to the Clean Power Plan and related rules, the order instructs the EPA to review the final rules addressing greenhouse gas emissions from existing, new and modified power plants and suspend, revise or rescind the rules if appropriate. The order directs the EPA Administrator to notify the Attorney General of actions pursuant to this order so that the Attorney General may request courts that are judicially reviewing the above rules and associated litigation to stay or otherwise delay further the litigation while EPA reviews them. Compliance with the Clean Power Plan has the potential of having significant financial and operational impacts on Great Plains Energy and KCP&L; however, the ultimate financial and operational consequences to Great Plains Energy and KCP&L cannot be determined until the outcome of the EPA's review and pending litigation is known.
Clean Water Act
The Clean Water Act and associated regulations enacted by the EPA form a comprehensive program to restore and preserve water quality. Like the Clean Air Act, states are required to establish regulations and programs to address all requirements of the Clean Water Act, and have the flexibility to enact more stringent requirements. All of Great Plains Energy's and KCP&L's generating facilities, and certain of their other facilities, are subject to the Clean Water Act.
In May 2014, the EPA finalized regulations pursuant to Section 316(b) of the Clean Water Act regarding cooling water intake structures pursuant to a court approved settlement. KCP&L generation facilities with cooling water intake structures are subject to the best technology available standards based on studies completed to comply with such standards. The rule provides flexibility to work with the states to develop the best technology available to minimize aquatic species impacted by being pinned against intake screens (impingement) or drawn into cooling
water systems (entrainment). Estimated costs to comply with Section 316(b) of the Clean Water Act are included in the estimated capital expenditures table above.
KCP&L holds a permit from the Missouri Department of Natural Resources (MDNR) covering water discharge from its Hawthorn Station. The permit authorizes KCP&L to, among other things, 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. Future water permit renewals at GMO's Sibley and Lake Road Stations could also be impacted by the allowable amount of heat that can be contained in the returned water. Great Plains Energy and KCP&L cannot predict the outcome of these matters; however, while less significant outcomes are possible, these matters may require a reduction in generation, installation of cooling towers or other technology to cool the water, or both, any of which could have a significant impact on Great Plains Energy's and KCP&L's results of operations, financial position and cash flows.
In September 2015, the EPA finalized a revision of the technology-based effluent limitations guidelines and standards regulation to make the existing controls on discharges from steam electric power plants more stringent. The final rule sets the first federal limits on the levels of toxic metals in wastewater that can be discharged from power plants. The new requirements for existing power plants would be phased in between 2018 and 2023. The final rule establishes new or additional requirements for wastewaters associated with the following processes and byproducts at certain KCP&L and GMO stations: flue gas desulfurization, fly ash, bottom ash, flue gas mercury control, and combustion residual leachate from landfills and surface impoundments. In April 2017, the EPA announced its decision to review and reconsider the new requirements and issued an administrative stay to delay the compliance deadlines. Estimated capital costs to comply with the final rule are included in the estimated capital expenditures table above.
Solid Waste
Solid and hazardous waste generation, storage, transportation, treatment and disposal are regulated at the federal and state levels under various laws and regulations. In December 2014, the EPA finalized regulations to regulate coal combustion residuals (CCRs) under the Resource Conservation and Recovery Act (RCRA) subtitle D to address the risks from the disposal of CCRs generated from the combustion of coal at electric generating facilities. The Companies use coal in generating electricity and dispose of the CCRs in both on-site facilities and facilities owned by third parties. KCP&L's Iatan, La Cygne, and Montrose Stations and GMO's Sibley Station have on-site facilities affected by the rule. The rule requires periodic assessments; groundwater monitoring; location restrictions; design and operating requirements; recordkeeping and notifications; and closure, among other requirements, for CCR units. The rule was promulgated in the Federal Register on April 17, 2015, and became effective six months after promulgation with various obligations effective at specified times within the rule. Estimated capital costs to comply with the CCR rule are included in the estimated capital expenditures table above. Certain requirements of the rule would require Great Plains Energy or KCP&L to expedite or incur additional capital expenditures in the future.
Great Plains Energy and KCP&L have asset retirement obligations (AROs) on their balance sheets for closure and post-closure of ponds and landfills containing CCRs. Certain requirements of the rule could in the future require further evaluation of the expected method of compliance and refinement of assumptions underlying the cost estimates for closure and post-closure. Great Plains Energy's and KCP&L's AROs could increase from the amounts presently recorded.
Remediation
Certain federal and state laws, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), hold current and previous owners or operators of contaminated facilities and persons who arranged for the disposal or treatment of hazardous substances liable for the cost of investigation and cleanup. CERCLA and other laws also authorize the EPA and other agencies to issue orders compelling potentially responsible parties to clean up sites that are determined to present an actual or potential threat to human health or the environment. GMO retains some environmental liability for several operations and investments it no longer owns. In addition, GMO
also owns, or has acquired liabilities from companies that once owned or operated, former manufactured gas plant (MGP) sites, which are subject to the supervision of the EPA and various state environmental agencies.
At
March 31, 2017
, and December 31,
2016
, KCP&L had
$0.3 million
accrued for environmental remediation expenses, which covers ground water monitoring at a former MGP site. The amount accrued was established on an undiscounted basis and KCP&L does not currently have an estimated time frame over which the accrued amount may be paid.
In addition to the
$0.3 million
accrual above, at
March 31, 2017
, and December 31,
2016
, Great Plains Energy had
$1.4 million
accrued for the future investigation and remediation of certain additional GMO identified MGP sites and retained liabilities. This estimate was based upon review of the potential costs associated with conducting investigative and remedial actions at identified sites, as well as the likelihood of whether such actions will be necessary. This estimate could change materially after further investigation, and could also be affected by the actions of environmental agencies and the financial viability of other potentially responsible parties; however, given the uncertainty of these items the possible loss or range of loss in excess of the amount accrued is not estimable.
GMO has pursued recovery of remediation costs from insurance carriers and other potentially responsible parties. As a result of a settlement with an insurance carrier, approximately
$1.5 million
in insurance proceeds less an annual deductible is available to GMO to recover qualified MGP remediation expenses. GMO would seek recovery of additional remediation costs and expenses through rate increases; however, there can be no assurance that such rate increases would be granted.
12. LEGAL PROCEEDINGS
GMO Western Energy Crisis
In response to complaints of excessive prices in the California energy markets, FERC issued an order in July 2001 requiring net sellers of power in the California markets from October 2, 2000, through June 20, 2001, at prices above a FERC-determined competitive market clearing price, to make refunds to net purchasers of power in the California market during that time period. MPS Merchant was a net purchaser of power during the refund period.
In November 2014, FERC issued an order finding that MPS Merchant engaged in tariff violations during the periods prior to October 2, 2000 (the Summer Period) and ordered refunds in the form of disgorgement of certain revenues. In November 2015 and February 2016, FERC issued additional orders regarding the refunds MPS Merchant owed.
In October 2016, MPS Merchant reached a settlement agreement, which was subsequently revised in February 2017, with certain California utilities and governmental agencies that would settle all issues in the case in exchange for
$7.5 million
of cash consideration as well as MPS Merchant's interest in additional funds it was entitled to during the refund period discussed above. In accordance with the terms of the settlement agreement, the
$7.5 million
of cash consideration will accrue interest at the FERC interest rate beginning on January 1, 2017, until the date paid. The settlement agreement is subject to approval by FERC. At March 31, 2017, and December 31, 2016, Great Plains Energy had accrued for the cash consideration and any applicable interest pursuant to the settlement agreement.
13
. RELATED PARTY TRANSACTIONS AND RELATIONSHIPS
KCP&L employees manage GMO's business and operate its facilities at cost, including GMO's
18%
ownership interest in KCP&L's Iatan Nos. 1 and 2. The operating expenses and capital costs billed from KCP&L to GMO were
$47.9 million
and
$47.2 million
, respectively, for the three months ended March 31, 2017 and 2016.
KCP&L and GMO are also authorized to participate in the Great Plains Energy money pool, an internal financing arrangement in which funds may be lent on a short-term basis to KCP&L and GMO from Great Plains Energy and between KCP&L and GMO. At March 31, 2017, and December 31, 2016, KCP&L had
no
outstanding receivables or payables under the money pool.
The following table summarizes KCP&L's related party net receivables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
December 31
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
(millions)
|
|
|
Net receivable from GMO
|
|
$
|
47.3
|
|
|
|
$
|
64.6
|
|
|
|
Net receivable from Great Plains Energy
|
|
21.8
|
|
|
|
2.6
|
|
|
14. FAIR VALUE MEASUREMENTS
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad categories, giving the highest priority to quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. A definition of the various levels, as well as discussion of the various measurements within the levels, is as follows:
Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets that Great Plains Energy and KCP&L have access to at the measurement date.
Level 2 – Market-based inputs for assets or liabilities that are observable (either directly or indirectly) or inputs that are not observable but are corroborated by market data.
Level 3 – Unobservable inputs, reflecting Great Plains Energy's and KCP&L's own assumptions about the assumptions market participants would use in pricing the asset or liability.
Great Plains Energy and KCP&L record cash and cash equivalents and short-term borrowings on the balance sheet at cost, which approximates fair value due to the short-term nature of these instruments.
In June 2016, Great Plains Energy entered into four interest rate swaps, with a total notional amount of
$4.4 billion
, to hedge against interest rate fluctuations on future issuances of long-term debt expected to be issued to finance a portion of the cash consideration for the anticipated acquisition of Westar. Settlement of the interest rate swaps is contingent on the consummation of the anticipated acquisition of Westar. The interest rate swaps have been designated as economic hedges (non-hedging derivatives).
In March 2017, in connection with Great Plains Energy's
$4.3 billion
senior note issuance, the settlement value of the interest rate swaps to Great Plains Energy of
$140.6 million
was fixed. Cash settlement of the
$140.6 million
is contingent on the consummation of the anticipated acquisition of Westar. The fair value of the interest rate swaps recorded on Great Plains Energy's balance sheets reflects a contingency factor that management believes is representative of what a market participant would use in valuing these instruments in order to account for the contingent nature of the cash settlement of the interest rate swaps. The contingency factor at March 31, 2017, and December 31, 2016, was
0.35
. At March 31, 2017, and December 31, 2016, the fair value of the interest rate swaps was
$91.4 million
and
$79.3 million
, respectively, and was recorded on Great Plains Energy's balance sheet in interest rate derivative instruments. For the three months ended March 31, 2017, Great Plains Energy recognized a
$12.1 million
gain in interest charges for the change in fair value.
Great Plains Energy and KCP&L record long-term debt on the balance sheet at amortized cost. The fair value of long-term debt is measured as a Level 2 liability and is based on quoted market prices, with the incremental borrowing rate for similar debt used to determine fair value if quoted market prices are not available. At
March 31,
2017
, the book value and fair value of Great Plains Energy's long-term debt, including current maturities, were
$8.1 billion
and
$8.3 billion
, respectively. At
December 31, 2016
, the book value and fair value of Great Plains Energy's long-term debt, including current maturities, were
$3.8 billion
and
$4.0 billion
, respectively. At
March 31, 2017
, and December 31, 2016, the book value and fair value of KCP&L's long-term debt, including current maturities, were
$2.6 billion
and
$2.7 billion
, respectively.
At March 31, 2017, and December 31, 2016, GMO's Supplemental Executive Retirement Plan (SERP) rabbi trusts included
$15.4 million
and
$16.0 million
, respectively, of fixed income funds valued at net asset value per share (or its equivalent) that are not categorized in the fair value hierarchy. The fixed income fund invests primarily in intermediate and long-term debt securities, can be redeemed immediately and is not subject to any restrictions on redemptions.
The following tables include Great Plains Energy's and KCP&L's balances of financial assets and liabilities measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
March 31
2017
|
|
|
Level 1
|
|
|
Level 2
|
|
Level 3
|
|
KCP&L
|
|
(millions)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
161.7
|
|
|
|
|
$
|
161.7
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
28.2
|
|
|
|
|
28.2
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
U.S. Agency
|
|
1.7
|
|
|
|
|
—
|
|
|
|
|
1.7
|
|
|
|
|
—
|
|
|
|
State and local obligations
|
|
4.1
|
|
|
|
|
—
|
|
|
|
|
4.1
|
|
|
|
|
—
|
|
|
|
Corporate bonds
|
|
31.1
|
|
|
|
|
—
|
|
|
|
|
31.1
|
|
|
|
|
—
|
|
|
|
Foreign governments
|
|
0.1
|
|
|
|
|
—
|
|
|
|
|
0.1
|
|
|
|
|
—
|
|
|
|
Cash equivalents
|
|
5.6
|
|
|
|
|
5.6
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total nuclear decommissioning trust
|
|
232.5
|
|
|
|
|
195.5
|
|
|
|
|
37.0
|
|
|
|
|
—
|
|
|
|
Self-insured health plan trust
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
0.7
|
|
|
|
|
0.7
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Debt securities
|
|
2.6
|
|
|
|
|
—
|
|
|
|
|
2.6
|
|
|
|
|
—
|
|
|
|
Cash and cash equivalents
|
|
8.0
|
|
|
|
|
8.0
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total self-insured health plan trust
|
|
11.3
|
|
|
|
|
8.7
|
|
|
|
|
2.6
|
|
|
|
|
—
|
|
|
|
Total
|
|
$
|
243.8
|
|
|
|
|
$
|
204.2
|
|
|
|
|
$
|
39.6
|
|
|
|
|
$
|
—
|
|
|
|
Other Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivative instruments
(c)
|
|
91.4
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
91.4
|
|
|
|
Total
|
|
$
|
91.4
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
91.4
|
|
|
|
Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust
(a)
|
|
$
|
232.5
|
|
|
|
|
$
|
195.5
|
|
|
|
|
$
|
37.0
|
|
|
|
|
$
|
—
|
|
|
|
Self-insured health plan trust
(b)
|
|
11.3
|
|
|
|
|
8.7
|
|
|
|
|
2.6
|
|
|
|
|
—
|
|
|
|
Interest rate derivative instruments
(c)
|
|
91.4
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
91.4
|
|
|
|
Total
|
|
$
|
335.2
|
|
|
|
|
$
|
204.2
|
|
|
|
|
$
|
39.6
|
|
|
|
|
$
|
91.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
December 31
2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
KCP&L
|
|
(millions)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
153.9
|
|
|
|
|
$
|
153.9
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
27.8
|
|
|
|
|
27.8
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
U.S. Agency
|
|
1.7
|
|
|
|
|
—
|
|
|
|
|
1.7
|
|
|
|
|
—
|
|
|
|
State and local obligations
|
|
3.2
|
|
|
|
|
—
|
|
|
|
|
3.2
|
|
|
|
|
—
|
|
|
|
Corporate bonds
|
|
32.4
|
|
|
|
|
—
|
|
|
|
|
32.4
|
|
|
|
|
—
|
|
|
|
Foreign governments
|
|
0.1
|
|
|
|
|
—
|
|
|
|
|
0.1
|
|
|
|
|
—
|
|
|
|
Cash equivalents
|
|
3.8
|
|
|
|
|
3.8
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total nuclear decommissioning trust
|
|
222.9
|
|
|
|
|
185.5
|
|
|
|
|
37.4
|
|
|
|
|
—
|
|
|
|
Self-insured health plan trust
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
0.9
|
|
|
|
|
0.9
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Debt securities
|
|
4.8
|
|
|
|
|
0.1
|
|
|
|
|
4.7
|
|
|
|
|
—
|
|
|
|
Cash and cash equivalents
|
|
5.6
|
|
|
|
|
5.6
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total self-insured health plan trust
|
|
11.3
|
|
|
|
|
6.6
|
|
|
|
|
4.7
|
|
|
|
|
—
|
|
|
|
Total
|
|
$
|
234.2
|
|
|
|
|
$
|
192.1
|
|
|
|
|
$
|
42.1
|
|
|
|
|
$
|
—
|
|
|
|
Other Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivative instruments
(c)
|
|
79.3
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
79.3
|
|
|
|
Total
|
|
$
|
79.3
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
79.3
|
|
|
|
Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust
(a)
|
|
$
|
222.9
|
|
|
|
|
$
|
185.5
|
|
|
|
|
$
|
37.4
|
|
|
|
|
$
|
—
|
|
|
|
Self-insured health plan trust
(b)
|
|
11.3
|
|
|
|
|
6.6
|
|
|
|
|
4.7
|
|
|
|
|
—
|
|
|
|
Interest rate derivative instruments
(c)
|
|
79.3
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
79.3
|
|
|
|
Total
|
|
$
|
313.5
|
|
|
|
|
$
|
192.1
|
|
|
|
|
$
|
42.1
|
|
|
|
|
$
|
79.3
|
|
|
|
|
|
|
(a)
|
Fair value is based on quoted market prices of the investments held by the fund and/or valuation models.
|
|
|
|
|
(b)
|
Fair value is based on quoted market prices of the investments held by the trust. Debt securities classified as Level 1 are comprised of U.S. Treasury securities. Debt securities classified as Level 2 are comprised of corporate bonds, U.S. Agency, state and local obligations, and other asset-backed securities.
|
|
|
|
|
(c)
|
At March 31, 2017, the fair value of interest rate derivative instruments is based on the settlement value of
$140.6 million
discounted by a contingency factor of
0.35
that management believes is representative of what a market participant would use in valuing these instruments in order to account for the contingent nature of the cash settlement of these instruments. At December 31, 2016, the fair value of interest rate derivative instruments is determined by calculating the net present value of expected payments and receipts under the interest rate swaps using observable market inputs including interest rates and LIBOR swap rates discounted by a contingency factor of
0.35
. A decrease in the contingency factor would result in a higher fair value measurement. Management expects that the contingency factor will decrease as the Company obtains certain regulatory approvals connected with the anticipated acquisition of Westar but could also increase in response to facts and circumstances that in the view of a market participant, would increase the likelihood that the anticipated acquisition of Westar is not consummated. Because of the unobservable nature of the contingency factor, the interest rate derivatives have been classified as Level 3.
|
The following table reconciles the beginning and ending balances for all Level 3 assets measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
Great Plains Energy
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
|
|
Derivative Instruments
|
|
|
2017
|
|
|
(millions)
|
|
Net asset at January 1
|
$
|
79.3
|
|
|
Total unrealized gains:
|
|
|
|
included in interest charges
|
12.1
|
|
|
Net asset at March 31
|
$
|
91.4
|
|
|
Total unrealized gains relating to assets still on the consolidated balance sheet at March 31:
|
|
|
included in interest charges
|
$
|
12.1
|
|
15
. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables reflect the change in the balances of each component of accumulated other comprehensive loss for Great Plains Energy and KCP&L.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Plains Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains and Losses on Cash Flow Hedges
(a)
|
|
Defined Benefit Pension Items
(a)
|
|
|
Total
(a)
|
|
|
|
|
(millions)
|
|
Three Months Ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance January 1
|
|
|
$
|
(4.5
|
)
|
|
|
|
$
|
(2.1
|
)
|
|
|
|
$
|
(6.6
|
)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
1.4
|
|
|
|
|
0.1
|
|
|
|
|
1.5
|
|
|
|
Net current period other comprehensive income
|
|
|
1.4
|
|
|
|
|
0.1
|
|
|
|
|
1.5
|
|
|
|
Ending balance March 31
|
|
|
$
|
(3.1
|
)
|
|
|
|
$
|
(2.0
|
)
|
|
|
|
$
|
(5.1
|
)
|
|
|
Three Months Ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance January 1
|
|
|
$
|
(10.1
|
)
|
|
|
|
$
|
(1.9
|
)
|
|
|
|
$
|
(12.0
|
)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
1.4
|
|
|
|
|
0.1
|
|
|
|
|
1.5
|
|
|
|
Net current period other comprehensive income
|
|
|
1.4
|
|
|
|
|
0.1
|
|
|
|
|
1.5
|
|
|
|
Ending balance March 31
|
|
|
$
|
(8.7
|
)
|
|
|
|
$
|
(1.8
|
)
|
|
|
|
$
|
(10.5
|
)
|
|
(a)
Net of tax
|
|
|
|
|
|
|
|
|
|
|
KCP&L
|
|
|
|
|
|
|
|
Gains and Losses on Cash Flow Hedges
(a)
|
|
|
|
(millions)
|
|
Three Months Ended March 31, 2017
|
|
|
|
|
|
Beginning balance January 1
|
|
|
$
|
(4.2
|
)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
1.3
|
|
|
|
Net current period other comprehensive income
|
|
|
1.3
|
|
|
|
Ending balance March 31
|
|
|
$
|
(2.9
|
)
|
|
|
Three Months Ended March 31, 2016
|
|
|
|
|
|
Beginning balance January 1
|
|
|
$
|
(9.6
|
)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
1.4
|
|
|
|
Net current period other comprehensive income
|
|
|
1.4
|
|
|
|
Ending balance March 31
|
|
|
$
|
(8.2
|
)
|
|
(a)
Net of tax
The following tables reflect the effect on certain line items of net income from amounts reclassified out of each component of accumulated other comprehensive loss for Great Plains Energy and KCP&L.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Plains Energy
|
|
|
|
|
|
|
|
Details about Accumulated Other Comprehensive Loss Components
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss
|
|
Affected Line Item in the Income Statement
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
|
|
|
|
(millions)
|
|
|
|
Gains and (losses) on cash flow hedges (effective portion)
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
(2.3
|
)
|
|
$
|
(2.3
|
)
|
|
Interest charges
|
|
|
|
(2.3
|
)
|
|
(2.3
|
)
|
|
Income (loss) before income tax (expense) benefit and income from equity investments
|
|
|
|
0.9
|
|
|
0.9
|
|
|
Income tax (expense) benefit
|
|
|
|
$
|
(1.4
|
)
|
|
$
|
(1.4
|
)
|
|
Net income (loss)
|
|
Amortization of defined benefit pension items
|
|
|
|
|
|
|
|
Net losses included in net periodic benefit costs
|
|
$
|
(0.2
|
)
|
|
$
|
(0.2
|
)
|
|
Utility operating and maintenance expenses
|
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
Income (loss) before income tax (expense) benefit and income from equity investments
|
|
|
|
0.1
|
|
|
0.1
|
|
|
Income tax (expense) benefit
|
|
|
|
$
|
(0.1
|
)
|
|
$
|
(0.1
|
)
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
Total reclassifications, net of tax
|
|
$
|
(1.5
|
)
|
|
$
|
(1.5
|
)
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KCP&L
|
|
|
|
|
|
|
|
Details about Accumulated Other Comprehensive Loss Components
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss
|
|
Affected Line Item in the Income Statement
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
|
|
|
|
(millions)
|
|
|
|
Gains and (losses) on cash flow hedges (effective portion)
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
(2.2
|
)
|
|
$
|
(2.3
|
)
|
|
Interest charges
|
|
|
|
(2.2
|
)
|
|
(2.3
|
)
|
|
Income before income tax expense
|
|
|
|
0.9
|
|
|
0.9
|
|
|
Income tax benefit
|
|
Total reclassifications, net of tax
|
|
$
|
(1.3
|
)
|
|
$
|
(1.4
|
)
|
|
Net income
|
16. TAXES
Components of income tax expense (benefit) are detailed in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
Great Plains Energy
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Current income taxes
|
(millions)
|
|
Federal
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
|
State
|
0.2
|
|
|
0.2
|
|
|
Total
|
0.2
|
|
|
0.1
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
Federal
|
(4.5
|
)
|
|
9.7
|
|
|
State
|
(1.1
|
)
|
|
2.3
|
|
|
Total
|
(5.6
|
)
|
|
12.0
|
|
|
Investment tax credit amortization
|
(0.4
|
)
|
|
(0.4
|
)
|
|
Income tax expense (benefit)
|
$
|
(5.8
|
)
|
|
$
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KCP&L
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Current income taxes
|
(millions)
|
|
Federal
|
$
|
(0.1
|
)
|
|
$
|
0.4
|
|
|
State
|
—
|
|
|
0.1
|
|
|
Total
|
(0.1
|
)
|
|
0.5
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
Federal
|
7.8
|
|
|
8.4
|
|
|
State
|
1.4
|
|
|
2.0
|
|
|
Total
|
9.2
|
|
|
10.4
|
|
|
Investment tax credit amortization
|
(0.3
|
)
|
|
(0.2
|
)
|
|
Income tax expense
|
$
|
8.8
|
|
|
$
|
10.7
|
|
Effective Income Tax Rates
Effective income tax rates reflected in the financial statements and the reasons for their differences from the statutory federal rates are detailed in the following tables.
|
|
|
|
|
|
|
|
|
|
Great Plains Energy
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
Differences between book and tax depreciation not normalized
|
—
|
|
|
0.5
|
|
|
Amortization of investment tax credits
|
(0.4
|
)
|
|
(0.9
|
)
|
|
Federal income tax credits
|
(1.5
|
)
|
|
(8.0
|
)
|
|
State income taxes
|
4.2
|
|
|
4.2
|
|
|
Transaction costs
|
3.1
|
|
|
—
|
|
|
Other
|
(2.5
|
)
|
|
—
|
|
|
Effective income tax rate
|
37.9
|
%
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
|
KCP&L
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
Differences between book and tax depreciation not normalized
|
(0.1
|
)
|
|
0.4
|
|
|
Amortization of investment tax credits
|
(0.3
|
)
|
|
(0.7
|
)
|
|
Federal income tax credits
|
(1.8
|
)
|
|
(7.8
|
)
|
|
State income taxes
|
4.0
|
|
|
3.9
|
|
|
Other
|
1.5
|
|
|
(0.5
|
)
|
|
Effective income tax rate
|
38.3
|
%
|
|
30.3
|
%
|
17
. SEGMENTS AND RELATED INFORMATION
Great Plains Energy has one reportable segment based on its method of internal reporting, which segregates reportable segments based on products and services, management responsibility and regulation. The one reportable business segment is electric utility, consisting of KCP&L, GMO's regulated utility operations and GMO Receivables Company. Other includes GMO activity other than its regulated utility operations, GPETHC and unallocated corporate charges including costs to achieve the anticipated acquisition of Westar. The summary of significant accounting policies applies to the reportable segment. Segment performance is evaluated based on net income.
The following tables reflect summarized financial information concerning Great Plains Energy's reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017
|
Electric
Utility
|
|
Other
|
|
Eliminations
|
|
Great Plains
Energy
|
|
|
|
(millions)
|
|
Operating revenues
|
|
$
|
570.7
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
570.7
|
|
|
|
Depreciation and amortization
|
|
(90.3
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(90.3
|
)
|
|
|
Interest (charges) income
|
|
(50.1
|
)
|
|
|
|
(24.5
|
)
|
|
|
|
8.0
|
|
|
|
|
(66.6
|
)
|
|
|
Income tax (expense) benefit
|
|
(10.1
|
)
|
|
|
|
15.9
|
|
|
|
|
—
|
|
|
|
|
5.8
|
|
|
|
Net income (loss)
|
|
16.1
|
|
|
|
|
(25.7
|
)
|
|
|
|
—
|
|
|
|
|
(9.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
Electric
Utility
|
|
Other
|
|
Eliminations
|
|
Great Plains
Energy
|
|
|
|
(millions)
|
|
Operating revenues
|
|
$
|
572.1
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
572.1
|
|
|
|
Depreciation and amortization
|
|
(85.2
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(85.2
|
)
|
|
|
Interest (charges) income
|
|
(49.1
|
)
|
|
|
|
(10.1
|
)
|
|
|
|
8.0
|
|
|
|
|
(51.2
|
)
|
|
|
Income tax (expense) benefit
|
|
(13.1
|
)
|
|
|
|
1.4
|
|
|
|
|
—
|
|
|
|
|
(11.7
|
)
|
|
|
Net income (loss)
|
|
29.0
|
|
|
|
|
(2.6
|
)
|
|
|
|
—
|
|
|
|
|
26.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric
Utility
|
|
Other
|
|
Eliminations
|
|
Great Plains
Energy
|
|
March 31, 2017
|
|
(millions)
|
|
|
Assets
|
|
$
|
11,465.6
|
|
|
|
|
$
|
6,729.5
|
|
|
|
|
$
|
(397.6
|
)
|
|
|
|
$
|
17,797.5
|
|
|
|
Capital expenditures
(a)
|
|
116.6
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
116.6
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
11,444.2
|
|
|
|
|
$
|
2,461.3
|
|
|
|
|
$
|
(335.5
|
)
|
|
|
|
$
|
13,570.0
|
|
|
|
Capital expenditures
(a)
|
|
609.4
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
609.4
|
|
|
(a)
Capital expenditures reflect year to date amounts for the periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GREAT PLAINS ENERGY INCORPORATED
EXECUTIVE SUMMARY
Description of Business
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 and cash and cash equivalents to be used to fund the cash consideration for the anticipated acquisition of Westar.
Great Plains Energy's sole reportable business segment is electric utility. Electric utility consists of KCP&L, a regulated utility, GMO's regulated utility operations and GMO Receivables Company. Electric utility has
approximately 6,500
MWs of owned generating capacity and engages in the generation, transmission, distribution and sale of electricity to approximately
860,100
customers in the states of Missouri and Kansas. Electric utility's retail electricity rates
are comparable
to the national average of investor-owned utilities.
Great Plains Energy's corporate and other activities not included in the sole reportable business segment includes GMO activity other than its regulated utility operations, GPETHC and unallocated corporate charges including certain costs to achieve the anticipated acquisition of Westar.
Anticipated Acquisition of Westar Energy, Inc.
On May 29, 2016, Great Plains Energy entered into a Merger Agreement by and among Great Plains Energy, Westar, and, from and after its accession to the Merger Agreement, Merger Sub. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into Westar, with Westar continuing as the surviving corporation. Upon closing, pursuant to the Merger Agreement, Great Plains Energy will acquire Westar for (i) $51.00 in cash and (ii) a number, rounded to the nearest 1/10,000 of a share, of Great Plains Energy common stock equal to an exchange ratio that may vary between 0.2709 and 0.3148, based upon the volume-weighted average price per share of Great Plains Energy common stock during a 20 consecutive full trading day period ending on (and including) the third trading day immediately prior to the closing date of the merger, for each share of Westar common stock issued and outstanding immediately prior to the effective time of the merger, with Westar becoming a wholly owned subsidiary of Great Plains Energy.
On October 3, 2016, Great Plains Energy completed registered public offerings of 60.5 million shares of common stock for total net proceeds of $1.55 billion and 17.3 million depositary shares each representing a 1/20th interest in a share of Great Plains Energy's Series B Preferred Stock for total net proceeds of $836.2 million. On March 9, 2017, Great Plains Energy issued, at a discount, $4.3 billion of unsecured senior notes. The proceeds from these offerings will be used to fund the majority of the cash consideration for the anticipated acquisition.
Great Plains Energy's anticipated acquisition of Westar was unanimously approved by the Great Plains Energy Board and the Westar Board, has received the required approvals of each of Great Plains Energy's and Westar's shareholders and FCC and the NRC, and has received early termination of the waiting period under the HSR Act with respect to antitrust review. The anticipated acquisition remains subject to regulatory approvals from KCC, the MPSC, and FERC; as well as other customary conditions. In April 2017, KCC issued an order denying Great Plains Energy's, KCP&L's and Westar's joint application for approval of the anticipated acquisition of Westar, citing concerns with the purchase price, Great Plains Energy's capital structure, quantifiable and demonstrable customer benefits and staffing levels in Westar's service territory, among other items. On May 4, 2017, Great Plains Energy, KCP&L and Westar filed with KCC a petition for reconsideration of the KCC's order and to set the matter for further proceedings so that Great Plains Energy, KCP&L and Westar may work together to determine whether it is feasible to develop a revised acquisition proposal addressing KCC’s concerns.
See Note 2 to the consolidated financial statements for more information regarding the acquisition.
Earnings Overview
Great Plains Energy had a loss available for common shareholders of $24.7 million or $0.11 per share for the three months ended
March 31, 2017
, compared to earnings of $26.0 million or $0.17 per share for the same period in
2016
driven primarily by costs to achieve the anticipated acquisition of Westar; an increase in depreciation and amortization expense; an increase in interest expense; and increased preferred stock dividend requirements; partially offset by an increase in weather-normalized retail demand; and lower income tax expense.
In addition, a higher number of average shares outstanding due to Great Plains Energy's registered public offering of 60.5 million shares of common stock in October 2016 diluted earnings per share by $0.04 for the three months ended March 31, 2017.
For additional information regarding the change in earnings, refer to the Great Plains Energy Results of Operations and the Electric Utility Results of Operations sections within this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Adjusted Earnings (Non-GAAP) and Adjusted Earnings Per Share (Non-GAAP)
Great Plains Energy's adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) for the three months ended
March 31, 2017
, were
$19.9 million
and
$0.13
, respectively. For the three months ended
March 31, 2016
, adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) were the same as GAAP earnings and GAAP earnings per share at $26.0 million and $0.17. In addition to earnings (loss) available for common shareholders and diluted earnings (loss) per common share, Great Plains Energy's management uses adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) to evaluate earnings and earnings per share without the impact of the anticipated acquisition of Westar. Adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) excludes certain costs, expenses, gains, losses and the per share dilutive effect of equity issuances resulting from the anticipated acquisition. This information is intended to enhance an investor's overall understanding of results. Adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) are used internally to measure performance against budget and in reports for management and the Great Plains Energy Board. Adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) are financial measures that are not calculated in accordance with GAAP and may not be comparable to other companies' presentations or more useful than the GAAP information provided elsewhere in this report.
The following table provides a reconciliation between loss available for common shareholders and diluted loss per common share as determined in accordance with GAAP and adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017
|
|
|
|
Reconciliation of GAAP to Non-GAAP
|
|
|
|
Earnings (loss)
per
diluted
share
|
|
|
|
(millions, except per share amounts)
|
|
Loss available for common shareholders
|
|
$
|
(24.7
|
)
|
|
$
|
(0.11
|
)
|
|
Costs to achieve the anticipated acquisition of Westar:
|
|
|
|
|
|
Operating expense, pre-tax
(a)
|
|
39.4
|
|
|
0.25
|
|
|
Financing, pre-tax
(b)
|
|
26.6
|
|
|
0.17
|
|
|
Mark-to-market impacts of interest rate swaps, pre-tax
(c)
|
|
(12.1
|
)
|
|
(0.08
|
)
|
|
Interest income, pre-tax
(d)
|
|
(4.6
|
)
|
|
(0.03
|
)
|
|
Income tax benefit
(e)
|
|
(19.8
|
)
|
|
(0.13
|
)
|
|
Preferred stock
(f)
|
|
15.1
|
|
|
0.10
|
|
|
Dilutive impact of October 2016 share issuance
(g)
|
|
N/A
|
|
|
(0.04
|
)
|
|
Adjusted earnings (non-GAAP)
|
|
$
|
19.9
|
|
|
$
|
0.13
|
|
|
Average Shares Outstanding
|
|
|
|
|
|
Shares used in calculating diluted loss per common share
|
|
215.3
|
|
Adjustment for October 2016 share issuance
(g)
|
|
(60.5)
|
|
Shares used in calculating adjusted earnings per share (non-GAAP)
|
|
154.8
|
(a)
Reflects legal, advisory and consulting fees, certain severance expenses and a fair value adjustment of the forward contract to issue Series A Preferred Stock.
(b)
Reflects fees and interest incurred to finance the anticipated acquisition of Westar, including fees for a bridge term loan facility and interest on Great Plains Energy's $4.3 billion senior notes issued in March 2017.
(c)
Reflects the mark-to-market gain on interest rate swaps entered into in connection with financing the anticipated acquisition of Westar.
(d)
Reflects interest income earned on the proceeds from Great Plains Energy's October 2016 equity offerings and March 2017 issuance of senior notes to fund the majority of the cash consideration for the anticipated acquisition of Westar.
(e)
Reflects an income tax effect calculated at a 38.9% statutory rate, with the exception of certain non-deductible legal and financing fees.
(f)
Reflects reductions to earnings available for common shareholders related to preferred stock dividend requirements for Great Plains Energy's Series B Preferred Stock issued in October 2016.
(g)
Reflects the average share impact of Great Plains Energy's issuance of 60.5 million shares of common stock in October 2016.
Regulatory Proceedings
See Note
6
to the consolidated financial statements for information regarding regulatory proceedings.
Impact of Recently Issued Accounting Standards
See Note 1 to the consolidated financial statements for information regarding the impact of recently issued accounting standards.
Wolf Creek Refueling Outage
Wolf Creek's latest refueling outage began on September 10, 2016 and ended on November 21, 2016. Wolf Creek's next refueling outage is planned to begin in the first quarter of 2018.
ENVIRONMENTAL MATTERS
See Note
11
to the consolidated financial statements for information regarding environmental matters.
RELATED PARTY TRANSACTIONS
See Note
13
to the consolidated financial statements for information regarding related party transactions.
GREAT PLAINS ENERGY RESULTS OF OPERATIONS
The following table summarizes Great Plains Energy's comparative results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
|
(millions)
|
|
Operating revenues
|
$
|
570.7
|
|
|
$
|
572.1
|
|
|
Fuel and purchased power
|
(126.5
|
)
|
|
(135.6
|
)
|
|
Transmission
|
(23.1
|
)
|
|
(23.5
|
)
|
|
Other operating expenses
|
(244.0
|
)
|
|
(237.9
|
)
|
|
Costs to achieve the anticipated acquisition of Westar
|
(39.4
|
)
|
|
—
|
|
|
Depreciation and amortization
|
(90.3
|
)
|
|
(85.2
|
)
|
|
Operating income
|
47.4
|
|
|
89.9
|
|
|
Non-operating income and expenses
|
2.9
|
|
|
(1.3
|
)
|
|
Interest charges
|
(66.6
|
)
|
|
(51.2
|
)
|
|
Income tax (expense) benefit
|
5.8
|
|
|
(11.7
|
)
|
|
Income from equity investments
|
0.9
|
|
|
0.7
|
|
|
Net income (loss)
|
(9.6
|
)
|
|
26.4
|
|
|
Preferred dividends
|
(15.1
|
)
|
|
(0.4
|
)
|
|
Earnings (loss) available for common shareholders
|
$
|
(24.7
|
)
|
|
$
|
26.0
|
|
|
Reconciliation of gross margin to operating revenue:
|
|
|
|
|
Operating revenues
|
$
|
570.7
|
|
|
$
|
572.1
|
|
|
Fuel and purchased power
|
(126.5
|
)
|
|
(135.6
|
)
|
|
Transmission
|
(23.1
|
)
|
|
(23.5
|
)
|
|
Gross margin
(a)
|
$
|
421.1
|
|
|
$
|
413.0
|
|
|
|
|
|
(a)
|
Gross margin is a non-GAAP financial measure. See explanation of gross margin below.
|
Great Plains Energy had a loss available for common shareholders of $24.7 million or $0.11 per share for the three months ended March 31, 2017, compared to earnings of $26.0 million or $0.17 per share for the same period in 2016.
Electric Utility Segment
Electric utility's
net income
decreased $12.9 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to:
|
|
|
|
•
|
a $6.4 million increase in other operating expenses driven by an increase in program costs for energy efficiency programs under MEEIA;
|
|
|
|
|
•
|
$11.7 million of costs to achieve the anticipated acquisition of Westar;
|
|
|
|
|
•
|
a $5.1 million increase in depreciation and amortization expense driven by capital additions;
|
|
|
|
|
•
|
an $8.1 million increase in gross margin primarily driven by weather-normalized retail demand and an increase in recovery of program costs for energy efficiency programs under MEEIA, partially offset by milder weather; and
|
|
|
|
|
•
|
a $3.0 million decrease in income tax expense primarily due to a decrease in pre-tax income partially offset by lower tax credits.
|
Corporate and Other Activities
Great Plains Energy's corporate and other activities loss increased $37.8 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to:
|
|
|
|
•
|
$27.7 million of operating expenses for costs to achieve the anticipated acquisition of Westar;
|
|
|
|
|
•
|
$26.6 million of interest charges incurred to finance the anticipated acquisition of Westar, including fees for a bridge term loan facility and interest on Great Plains Energy's $4.3 billion senior notes issued in March 2017;
|
|
|
|
|
•
|
a $12.1 million mark-to-market gain on interest rate swaps entered into in June 2016 to hedge against interest rate fluctuations prior to Great Plains Energy's issuance of $4.3 billion senior notes in March 2017 to finance a portion of the cash consideration for the anticipated acquisition of Westar
;
|
|
|
|
|
•
|
$4.6 million of interest income earned on the proceeds from Great Plains Energy's October 2016 common stock and depositary share offerings and March 2017 issuance of senior notes to finance the cash consideration for the anticipated acquisition of Westar;
|
|
|
|
|
•
|
$15.1 million of income tax benefit related to these items; and
|
|
|
|
|
•
|
$15.1 million of reductions to earnings available for common shareholders related to preferred stock dividend requirements for Great Plains Energy's Series B Preferred Stock issued in October 2016.
|
Gross Margin
Gross margin is a financial measure that is not calculated in accordance with GAAP. Gross margin, as used by Great Plains Energy and KCP&L, is defined as operating revenues less fuel and purchased power and transmission. Expenses for fuel and purchased power and certain transmission costs, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms. As a result, operating revenues increase or decrease in relation to a significant portion of these expenses. Management believes that gross margin provides a meaningful basis for evaluating electric utility's operations across periods because gross margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against budget and in reports for management and the Great Plains Energy Board. The Companies' definition of gross margin may differ from similar terms used by other companies.
ELECTRIC UTILITY RESULTS OF OPERATIONS
The following table summarizes the electric utility segment results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
|
(millions)
|
|
Operating revenues
|
$
|
570.7
|
|
|
$
|
572.1
|
|
|
Fuel and purchased power
|
(126.5
|
)
|
|
(135.6
|
)
|
|
Transmission
|
(23.1
|
)
|
|
(23.5
|
)
|
|
Other operating expenses
|
(242.7
|
)
|
|
(236.3
|
)
|
|
Costs to achieve the anticipated acquisition of Westar
|
(11.7
|
)
|
|
—
|
|
|
Depreciation and amortization
|
(90.3
|
)
|
|
(85.2
|
)
|
|
Operating income
|
76.4
|
|
|
91.5
|
|
|
Non-operating income and expenses
|
(0.1
|
)
|
|
(0.3
|
)
|
|
Interest charges
|
(50.1
|
)
|
|
(49.1
|
)
|
|
Income tax expense
|
(10.1
|
)
|
|
(13.1
|
)
|
|
Net income
|
$
|
16.1
|
|
|
$
|
29.0
|
|
|
Reconciliation of gross margin to operating revenue
|
|
|
|
|
Operating revenues
|
$
|
570.7
|
|
|
$
|
572.1
|
|
|
Fuel and purchased power
|
(126.5
|
)
|
|
(135.6
|
)
|
|
Transmission
|
(23.1
|
)
|
|
(23.5
|
)
|
|
Gross margin
(a)
|
$
|
421.1
|
|
|
$
|
413.0
|
|
|
|
|
|
(a)
|
Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.
|
Electric Utility Gross Margin and MWh Sales
The following table summarizes electric utility's gross margin and MWhs sold.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and Costs
|
|
%
|
|
MWhs Sold
|
|
%
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
Change
(c)
|
2017
|
|
2016
|
|
Change
|
|
Retail revenues
|
(millions)
|
|
|
|
(thousands)
|
|
|
|
Residential
|
$
|
218.3
|
|
|
$
|
226.2
|
|
|
(4
|
)
|
|
2,028
|
|
|
2,076
|
|
|
(2
|
)
|
|
Commercial
|
231.7
|
|
|
231.5
|
|
|
—
|
|
|
2,541
|
|
|
2,553
|
|
|
(1
|
)
|
|
Industrial
|
49.9
|
|
|
50.7
|
|
|
(2
|
)
|
|
739
|
|
|
765
|
|
|
(3
|
)
|
|
Other retail revenues
|
4.6
|
|
|
5.3
|
|
|
(12
|
)
|
|
27
|
|
|
29
|
|
|
(8
|
)
|
|
Provision for rate refund
|
3.8
|
|
|
(6.6
|
)
|
|
N/M
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Energy efficiency (MEEIA)
(a)
|
15.5
|
|
|
12.8
|
|
|
21
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Total retail
|
523.8
|
|
|
519.9
|
|
|
1
|
|
|
5,335
|
|
|
5,423
|
|
|
(2
|
)
|
|
Wholesale revenues
|
30.2
|
|
|
36.8
|
|
|
(18
|
)
|
|
1,948
|
|
|
2,356
|
|
|
(17
|
)
|
|
Other revenues
|
16.7
|
|
|
15.4
|
|
|
8
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Operating revenues
|
570.7
|
|
|
572.1
|
|
|
—
|
|
|
7,283
|
|
|
7,779
|
|
|
(6
|
)
|
|
Fuel and purchased power
|
(126.5
|
)
|
|
(135.6
|
)
|
|
(7
|
)
|
|
|
|
|
|
|
|
Transmission
|
(23.1
|
)
|
|
(23.5
|
)
|
|
(2
|
)
|
|
|
|
|
|
|
|
Gross margin
(b)
|
$
|
421.1
|
|
|
$
|
413.0
|
|
|
2
|
|
|
|
|
|
|
|
|
(a)
Consists of recovery of program costs of $13.8 million and $8.0 million for the three months ended March 31, 2017, and 2016, respectively, that have a direct offset in utility operating and maintenance expenses, recovery of throughput disincentive of $1.5 million and $4.8 million for the three months ended March 31, 2017, and 2016, respectively, and a performance incentive of $0.2 million for the three months ended March 31, 2017.
|
|
(b)
Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.
|
|
(c)
N/M - not meaningful
|
Electric utility's gross margin increased $8.1 million for the
three months ended
March 31, 2017
, compared to the same period in
2016
primarily driven by:
|
|
|
|
•
|
an estimated $5 million increase due to weather-normalized retail demand;
|
|
|
|
|
•
|
a $5.8 million increase for recovery of program costs for energy efficiency programs under MEEIA, which have a direct offset in utility operating and maintenance expense; and
|
|
|
|
|
•
|
an estimated $3 million decrease due to milder weather with a 7% decrease in heating degree days in the first quarter of 2017.
|
Electric Utility Other Operating Expenses
(including utility operating and maintenance expenses, general taxes and other)
Electric utility's other operating expenses increased $6.4 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to a $5.8 million increase in program costs for energy efficiency programs under MEEIA, which have a direct offset in revenue.
Electric Utility Costs to Achieve the Anticipated Acquisition of Westar
Electric utility's costs to achieve the anticipated acquisition of Westar of $11.7 million for the three months ended
March 31, 2017
, reflects consulting fees, certain severance expenses and other transition costs related to the anticipated acquisition of Westar.
Electric Utility Depreciation and Amortization
Electric utility's depreciation and amortization increased $5.1 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to capital additions.
Electric Utility Income Tax Expense
Electric utility's income tax expense decreased $3.0 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to decreased pre-tax income partially offset by lower tax credits.
GREAT PLAINS ENERGY SIGNIFICANT BALANCE SHEET CHANGES
(
March 31, 2017
compared to
December 31, 2016
)
|
|
|
|
•
|
Great Plains Energy's cash and cash equivalents increased $5.3 billion due to the proceeds from Great Plains Energy's March 2017 issuance of $4.3 billion senior notes and the maturity of a $1.0 billion time deposit.
|
|
|
|
|
•
|
Great Plains Energy's time deposit decreased $1.0 billion due to its maturity.
|
|
|
|
|
•
|
Great Plains Energy's receivables, net decreased $55.6 million primarily due to seasonal decreases in customer accounts receivable.
|
|
|
|
|
•
|
Great Plains Energy's interest rate derivative instruments increased $12.1 million due to a mark-to-market gain on interest rate swaps entered into in June 2016 to hedge against interest rate fluctuations prior to Great Plains Energy's issuance of $4.3 billion senior notes in March 2017 to finance a portion of the cash consideration for the anticipated acquisition of Westar.
|
|
|
|
|
•
|
Great Plains Energy's commercial paper
increased
$119.9 million
due to an increase in commercial paper of $57.5 million at GMO and $62.4 million at KCP&L due to borrowings for general corporate purposes.
|
|
|
|
|
•
|
Great Plains Energy's current maturities of long-term debt increased $350.0 million due to the reclassification of KCP&L's $350.0 million of 6.375% Senior Notes from long-term to current.
|
|
|
|
|
•
|
Great Plains Energy's accounts payable decreased $146.0 million primarily due to the timing of cash payments.
|
|
|
|
|
•
|
Great Plains Energy's accrued taxes increased $36.3 million primarily due to the timing of property tax payments.
|
|
|
|
|
•
|
Great Plains Energy's accrued interest increased $26.5 million primarily due to additional interest incurred from Great Plains Energy's issuance of $4.3 billion senior notes in March 2017 along with the timing of interest payments.
|
|
|
|
|
•
|
Great Plains Energy's long-term debt increased $3.9 billion due to the March 2017 issuance, at a discount, of Great Plains Energy's $4.3 billion senior notes partially offset by the reclassification of KCP&L's $350.0 million of 6.375% Senior Notes from long-term to current.
|
CAPITAL REQUIREMENTS AND LIQUIDITY
Great Plains Energy operates through its subsidiaries and has no material assets other than the stock of its subsidiaries and cash and cash equivalents to be used to fund the majority of the cash consideration for the anticipated acquisition of Westar. 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, proceeds from the issuance of its securities and borrowing under its revolving credit facility.
Great Plains Energy's capital requirements are principally comprised of debt maturities and electric utility's construction and other capital expenditures. These items as well as additional cash and capital requirements, including the anticipated acquisition of Westar, are discussed below.
Great Plains Energy's liquid resources at
March 31, 2017
, consisted of
$6.6 billion
of cash and cash equivalents on hand and $
792.4 million
of available borrowing capacity from unused bank lines of credit and receivable sale agreements. The available borrowing capacity consisted of $
199.0 million
from Great Plains Energy's revolving credit facility, $
402.0 million
from KCP&L's credit facilities and $
191.4 million
from GMO's credit facilities. See Notes 4 and
9
to the consolidated financial statements for more information regarding the receivable sale agreements and revolving credit facilities, respectively. Generally, Great Plains Energy uses these liquid resources to meet its day-to-day cash flow requirements, and from time to time issues equity and/or long-term debt to repay short-term debt or increase cash balances. However, the $6.6 billion of cash and cash equivalents on hand at March 31, 2017, is primarily the result of Great Plains Energy's equity issuances in October 2016 and debt issuance in March 2017, the proceeds of which are to be used to fund the majority of the cash consideration for the anticipated acquisition of Westar.
Great Plains Energy intends to meet day-to-day cash flow requirements including interest payments, retirement of maturing debt, construction requirements, dividends and pension benefit plan funding requirements with a combination of internally generated funds and proceeds from short-term debt. From time to time, Great Plains Energy issues equity and/or long-term debt to repay short-term debt or increase cash balances. Great Plains Energy's intention to meet a portion of these requirements with internally generated funds may be impacted by the effect of inflation on operating expenses, the level of MWh sales, regulatory actions, compliance with environmental regulations and the availability of generating units. In addition, Great Plains Energy may issue equity, equity-linked securities and/or debt to finance growth.
For a description of Great Plains Energy's financing activities with respect to the anticipated acquisition of Westar and potential cash requirements in the event the merger is not consummated, see Note 2 to the consolidated financial statements.
Great Plains Energy also has a 364-day $864.5 million senior unsecured bridge term loan facility to support the anticipated acquisition of Westar. See Note
9
to the consolidated financial statements for additional information.
Cash Flows from Operating Activities
Great Plains Energy generated positive cash flows from operating activities for the periods presented. The
$39.7 million
decrease
in cash flows from operating activities for Great Plains Energy for the three months ended March 31,
2017
, compared to the same period in
2016
was primarily driven by costs to achieve the anticipated acquisition of Westar. Other changes in working capital are detailed in Note 3 to the consolidated financial statements. The individual components of working capital vary with normal business cycles and operations.
Cash Flows from Investing Activities
Great Plains Energy'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 proceeds from the sale of properties and insurance recoveries.
Great Plains Energy's cash flows from investing activities increased $1.0 billion for the three months ended March 31, 2017, compared to the same period in 2016 due to $1.0 billion for proceeds from the maturity of a time deposit. Great Plains Energy had purchased the $1.0 billion time deposit in 2016 with a portion of the proceeds from its October 2016 common stock and depositary share offerings.
Cash Flows from Financing Activities
Great Plains Energy's cash flows from financing activities increased $4.3 billion for the three months ended March 31, 2017, compared to the same period in 2016 due to the proceeds from Great Plains Energy's March 2017 issuance of $4.3 billion senior notes.
Financing Authorization
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 (including only the amount of short-term debt in excess of the amount of construction work in progress). KCP&L's long-term financing activities are subject to the authorization of the MPSC. In May 2017, the MPSC authorized KCP&L to issue up to $350.0 million of long-term debt through December 31, 2017.
KCP&L's and GMO's short-term financing activities are subject to the authorization of FERC. In November 2016, FERC authorized KCP&L to have outstanding at any one time up to a total of $1.0 billion in short-term debt instruments through December 2018. At March 31, 2017, there was
$804.7 million
available under this authorization. In February 2016, FERC authorized GMO to have outstanding at any one time up to a total of $750.0 million in short-term debt instruments through March 2018. At
March 31, 2017
, there was
$490.6 million
available under this authorization.
KCP&L and GMO are also authorized by FERC to participate in the Great Plains Energy money pool, an internal financing arrangement in which funds may be lent on a short-term basis to KCP&L and GMO. At
March 31, 2017
, there were
no
outstanding payables under the money pool.
Significant Financing Activities
In March 2017, Great Plains Energy issued, at a discount, the following series of unsecured senior notes:
|
|
|
|
•
|
$750.0 million of 2.50% Notes, maturing in 2020;
|
|
|
|
|
•
|
$1,150.0 million of 3.15% Notes, maturing in 2022;
|
|
|
|
|
•
|
$1,400.0 million of 3.90% Notes, maturing in 2027; and
|
|
|
|
|
•
|
$1,000.0 million of 4.85% Notes, maturing in 2047.
|
Great Plains Energy plans to use proceeds from the offering to finance a portion of the cash consideration for the anticipated acquisition of Westar. In the event that the anticipated acquisition of Westar does not close by November 30, 2017, or in the event that the Merger Agreement is earlier terminated, then Great Plains Energy would be required to redeem all of the
$4.3 billion
unsecured senior notes. Additionally, if at any time prior to November 30, 2017, Great Plains Energy determines in its reasonable judgment that the anticipated acquisition of Westar will not close prior to November 30, 2017, then Great Plains Energy could at its sole option (but is not required to) redeem the unsecured senior notes. The redemption price in each case would be 101% of the aggregate principle amount of the senior notes.
Debt Agreements
See Note
9
to the consolidated financial statements for information regarding revolving credit facilities and term loan facility related to the anticipated acquisition of Westar.
Pensions
The Company incurs significant costs in providing defined benefit plans for substantially all active and inactive employees of KCP&L and GMO and its 47% ownership share of WCNOC's defined benefit plans. Funding of the plans follows legal and regulatory requirements with funding equaling or exceeding the minimum requirements of ERISA.
For the three months ended March 31,
2017
, the Company contributed
$16.0 million
to the pension plans and expects to contribute an additional
$63.6 million
in 2017 to satisfy ERISA funding requirements and the MPSC and KCC rate orders, the majority of which is expected to be paid by KCP&L.
Additionally, the Company provides post-retirement health and life insurance benefits for certain retired employees and expects to make benefit contributions of
$4.1 million
under the provisions of these plans in
2017
, the majority of which is expected to 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 these funding requirements.
KANSAS CITY POWER & LIGHT COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The following table summarizes KCP&L's consolidated comparative results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
|
2017
|
|
2016
|
|
|
|
(millions)
|
|
Operating revenues
|
|
$
|
395.9
|
|
|
$
|
400.9
|
|
|
|
Fuel and purchased power
|
|
(78.9
|
)
|
|
(86.3
|
)
|
|
|
Transmission
|
|
(14.3
|
)
|
|
(15.4
|
)
|
|
|
Other operating expenses
|
|
(171.3
|
)
|
|
(167.5
|
)
|
|
|
Costs to achieve the anticipated acquisition of Westar
|
|
(7.9
|
)
|
|
—
|
|
|
|
Depreciation and amortization
|
|
(65.3
|
)
|
|
(61.1
|
)
|
|
|
Operating income
|
|
58.2
|
|
|
70.6
|
|
|
|
Non-operating income and expenses
|
|
0.4
|
|
|
—
|
|
|
|
Interest charges
|
|
(35.6
|
)
|
|
(35.3
|
)
|
|
|
Income tax expense
|
|
(8.8
|
)
|
|
(10.7
|
)
|
|
|
Net income
|
|
$
|
14.2
|
|
|
$
|
24.6
|
|
|
|
Reconciliation of gross margin to operating revenue:
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
395.9
|
|
|
$
|
400.9
|
|
|
|
Fuel and purchased power
|
|
(78.9
|
)
|
|
(86.3
|
)
|
|
|
Transmission
|
|
(14.3
|
)
|
|
(15.4
|
)
|
|
|
Gross margin
(a)
|
|
$
|
302.7
|
|
|
$
|
299.2
|
|
|
|
|
|
|
(a)
|
Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.
|
KCP&L Gross Margin and MWh Sales
The following table summarizes KCP&L's gross margin and MWhs sold.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and Costs
|
|
%
|
|
MWhs Sold
|
|
%
|
|
Three Months Ended March 31
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
|
Retail revenues
|
(millions)
|
|
|
|
(thousands)
|
|
|
|
Residential
|
$
|
139.8
|
|
|
$
|
141.8
|
|
|
(1
|
)
|
|
1,190
|
|
|
1,209
|
|
|
(2
|
)
|
|
Commercial
|
175.4
|
|
|
174.0
|
|
|
1
|
|
|
1,784
|
|
|
1,784
|
|
|
—
|
|
|
Industrial
|
31.9
|
|
|
32.3
|
|
|
(1
|
)
|
|
422
|
|
|
446
|
|
|
(6
|
)
|
|
Other retail revenues
|
2.7
|
|
|
3.3
|
|
|
(18
|
)
|
|
19
|
|
|
22
|
|
|
(11
|
)
|
|
Provision for rate refund
|
0.1
|
|
|
0.1
|
|
|
4
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Energy efficiency (MEEIA)
(a)
|
8.6
|
|
|
7.9
|
|
|
9
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Total retail
|
358.5
|
|
|
359.4
|
|
|
—
|
|
|
3,415
|
|
|
3,461
|
|
|
(1
|
)
|
|
Wholesale revenues
|
29.9
|
|
|
34.7
|
|
|
(14
|
)
|
|
1,884
|
|
|
2,253
|
|
|
(16
|
)
|
|
Other revenues
|
7.5
|
|
|
6.8
|
|
|
11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Operating revenues
|
395.9
|
|
|
400.9
|
|
|
(1
|
)
|
|
5,299
|
|
|
5,714
|
|
|
(7
|
)
|
|
Fuel and purchased power
|
(78.9
|
)
|
|
(86.3
|
)
|
|
(9
|
)
|
|
|
|
|
|
|
|
Transmission
|
(14.3
|
)
|
|
(15.4
|
)
|
|
(7
|
)
|
|
|
|
|
|
|
|
Gross margin
(b)
|
$
|
302.7
|
|
|
$
|
299.2
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Consists of recovery of program costs of $7.8 million and $4.6 million for the three months ended March 31, 2017, and 2016, respectively, that have a direct offset in operating and maintenance expenses and recovery of throughput disincentive of $0.8 million and $3.3 million for the three months ended March 31, 2017, and 2016, respectively.
|
|
|
|
|
(b)
|
Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.
|
KCP&L's gross margin increased $3.5 million for the three months ending
March 31, 2017
, compared to the same period in
2016
primarily driven by:
|
|
|
|
•
|
an estimated $5 million increase due to weather-normalized retail demand;
|
|
|
|
|
•
|
a $3.2 million increase for recovery of program costs for energy efficiency programs under MEEIA, which have a direct offset in utility operating and maintenance expense; and
|
|
|
|
|
•
|
an estimated $3 million decrease due to milder weather with a 7% decrease in heating degree days in the first quarter of 2017.
|
KCP&L Other Operating Expenses
(including operating and maintenance expenses, general taxes and other)
KCP&L's other operating expenses increased $3.8 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily driven by a $3.2 million increase in program costs for energy efficiency programs under MEEIA, which have a direct offset in revenue.
KCP&L Costs to Achieve the Anticipated Acquisition of Westar
KCP&L's costs to achieve the anticipated acquisition of Westar of $7.9 million for the three months ended March 31, 2017, reflects consulting fees, certain severance expenses and other transition costs related to the anticipated acquisition of Westar.
KCP&L Depreciation and Amortization
KCP&L's depreciation and amortization expense increased $4.2 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to capital additions.
KCP&L Income Tax Expense
KCP&L's income tax expense decreased $1.9 million for the three months ended
March 31, 2017
, compared to the same period in
2016
primarily due to decreased pre-tax income partially offset by lower tax credits.
