Fearingthat Great Plains Energy Inc.'sproposed acquisition of WestarEnergy Inc. may be detrimental to the public interest, the staff ofthe Missouri Public Service Commission urged state regulators to exercisejurisdiction over the merger.
KansasCity, Mo.-headquartered Great Plains Energy announced May 31 it Topeka,Kan.-headquartered Westar Energy in an $8.6 billion cash-and-stock deal. Great Plains also willassume approximately $3.6 billion in Westar debt.
Shortlyafter the announcement, staff of the Missouri PSC urged state regulators toauthorize an investigationinto the transaction based on Great Plains' previous commitment to seek PSCapproval before acquiring or merging with a public utility or the affiliate ofa public utility. The commission obliged,but said its decision does not require it to determine whether it willultimately rule on the transaction. (Case No. EM-2016-0324)
"Atthis time, Staff maintains that all of the known evidence supports adetermination that the proposed transaction is detrimental to the publicinterest and ought not to be permitted to go forward. For this reason, Staffconcludes that [Great Plains Energy] must comply with the approval provisionsof the First Amended Stipulation and Agreement and seek Commission approval sothe Commission may make a determination as to whether the proposed transactionis likely to be detrimental to the public interest," the staff wrote inits investigation report filed July 25 with the PSC.
Thestaff noted that the proposed transaction will likely mean higher rates forMissouri customers of Kansas CityPower & Light Co. and KCP&LGreater Missouri Operations Co.
"Likewise,the distraction of KCPL's employees by the acquisition and subsequentintegration of the companies and harvesting of synergies appears likely toStaff to result in both decreased operational efficiency and improper affiliatetransactions," staff wrote.
Thefiling also highlighted concerns raised by analysts and rating agencies aboutthe amount of debtinvolved in the deal.
GreatPlains contends the transaction is subject to customary approvals, includingthe approval of the Kansas Corporation Commission, but not the Missouri PSC.
"Westrongly disagree with the Missouri Public Service Commission staff's assertionon jurisdiction, and believe the acquisition will result in benefits and valueto both Missouri and Kansas customers," Great Plains Energy said July 26in a written statement. "By combining Westar and Great Plains Energy, wewill create significant operational efficiencies and cost savings that willbenefit all our customers. We are committed to continuing transparency with theMPSC as they consider the staff report and as they work toward a final ruling.We appreciate the Commission's desire not to interfere with the transactionprocess and timeline."
Ifthe transaction is approved, the combined company will have more than 1.5million customers in Kansas and Missouri, almost 10,000 miles of transmissionlines, more than 51,000 miles of distribution lines and nearly 13,000 MW ofgenerating capacity.
GreatPlains and Westar both have a 47% interest in the 1,205-MW nuclear plant inCoffey County, Kan., as well as joint ownership in the and coal plants.
GreatPlains said it remains on track to close the deal in the second quarter of 2017.