Westar, Great Plains Energy move to save $12.2 billion deal amid criticism
The three-member commission regulates utilities in Kansas and must approve the deal
TOPEKA, Kan. (AP) — A Missouri-based utility sought Monday to rescue its proposal to buy Kansas' largest electric company amid strong criticism that their $12.2 billion deal is too rich and would create a larger but financially weakened firm with consumers on the hook for its problems.
An attorney representing both Great Plains Energy Inc., based in Kansas City, Missouri, and Westar Energy Inc., headquartered in Topeka, told the Kansas Corporation Commission that Great Plains' proposed acquisition of Westar would create nearly $2 billion in efficiencies over the next decade to keep consumers' rates in check. Attorney Rob Hack said the deal provides significant long-term benefits.
The three-member commission regulates utilities in Kansas and must approve the deal. Its own staff, consumer advocates and other parties strongly oppose the acquisition, which would create a single utility straddling both sides of the Kansas City metropolitan area, with 1.5 million customers from central Kansas to central Missouri. Great Plains is the parent company of Kansas City Power & Light Co.
"We hope the commission sees that saying no means Westar and KCP&L rates will rise more quickly and higher than with the transaction," Hack said in an opening statement as the commission started two weeks of hearings on the deal. "We feel more passionately today about our future as one company than we did the day we announced."
The companies announced Great Plains' proposed purchase of Westar in May 2016, and the two companies' stockholders overwhelmingly approved the deal in September. But criticism from the KCC's staff, consumer advocates and other parties has intensified in recent months, as the commission's hearings have approached.
Great Plains would acquire Westar's $3.6 billion in debt, and critics contend that it is paying as much as $4.9 billion more than the book value of Westar's assets. Attorneys for the KCC's staff and other parties argued in their opening statements that Great Plains is paying an unreasonable premium to acquire Westar and that the combined company would be so financially fragile that its electric services could suffer or regulators could be forced to boost rates to keep the company stable.
"The merger will not result in the improvement of the financial standing of Westar or KCP&L," said David Nickel, consumer counsel for the Citizens' Utility Ratepayers Board, a state agency representing small businesses and residential customers. "This merger will not result in demonstrative savings. Savings are not only unassured, they are doubtful."
Great Plains and Westar have acknowledged that their deal will result in the companies trimming their workforces to promote efficiencies, but they're promising that Westar will retain its Topeka headquarters. Hack told the commission that the companies have included more than 40 provisions in their deal to protect consumers from the financial risks associated with the deal.
But critics said to achieve its promised savings in operating costs, Great Plains will have to shutter generating plants and cut more than 600 full-time jobs by 2020. They said that despite its promises, the company would have to consider closing Westar's offices in Topeka.