Evergy downplays NextEra offer, says will focus on 'sustainability transformation plan'

Houston — Evergy, the investor-owned utility based in Kansas City, Missouri, initially said press reports of a $15 billion takeover offer from NextEra Energy were "market rumors" even as it said in an email that the company is "focusing on a sustainability transformation plan" to provide "certain value for shareholders and benefits for our stakeholders."

Late on Nov. 9, Reuters reported that NextEra Energy had made an all-stock offer of approximately $15 billion that valued Evergy at roughly $60/share. The report said Evergy had turned down the offer as inadequate and required a detailed plan to overcome regulatory hurdles to a deal.

Evergy spokesperson Gina Prezig said the company "does not respond to market rumors ... As previously discussed, including on our third quarter earnings call on November 5, we conducted an extensive strategic review process. That process is complete, and our attention is focused on our Sustainability Transformation Plan."

She added that the Evergy board has "unanimously determined" that the STP option will create "the highest, most certain value for shareholders."

NextEra Energy, which closed its $6.47 billion acquisition of the Southern Co. utility subsidiary Gulf Power in January 2019, did not respond to emails requesting comments about the Reuters report.

The Florida-based company, however, has reportedly been eyeing Evergy since at least April, after hedge fund and Evergy shareholder Elliott Management told the company in a letter it should either pursue a "high-performance development plan" or pursue a "strategic premium merger transaction."

In a subsequent statement released Nov. 10, Evergy said the STP "is the result of an independent, multi-month and comprehensive review of both a potential strategic combination and a modified standalone plan," and that the process was led by a four-member strategic review committee that included Morgan Stanley and Goldman Sachs.

Elliott Management said Nov. 10 that it believes Evergy should "immediately reengage with NextEra and fully explore the possibility of a transaction."

Board-backed plan

During the Nov. 5 earnings call, Evergy president, CEO and director, Terry Bassham, said the company's board agreed to raise the quarterly dividend 6%, "which underscores their confidence and our execution of the sustainability transformation plan."

Like many of its Midwest utility peers, Evergy has described the plan as calling for grid modernization and "accelerating the transition" of the company's generation portfolio.

Asked during the earnings call if the company's board had ruled out any M&A, and if STP was not just the preferred but now the only option to pursue, with M&A "now definitively off the table," Bassham said, "Our company will always do our fiduciary duty with regard to any proposal or any process that would provide shareholder value greater than our current plan."

"Having said that, we went through a very deliberate, very exhaustive process back in the summer that's just a few months old, and we're very much committed to our STP, and we're working to execute on that as we speak."

The company, which has a total generating capacity of approximately 16,000 MW, said it intends to invest $9 billion in its STP project from 2020 through 2024.

Bassham told analysts that the company expects to introduce long-term energy policy bills in Kansas and Missouri in the 2021 legislative sessions in those states.

He said the company's integrated resource plan process "is well underway, which includes discussions around modeling scenarios and gathering feedback on preferred plans."

"We will file the Missouri IRP by April 1 of next year, and the Kansas IRP by July 1 of next year," he said.