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Great Plains Energy continues talks with Kan. regulators on Westar merger


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Great Plains Energy continues talks with Kan. regulators on Westar merger

Great Plains Energy Inc. Chairman, President and CEO Terry Bassham said talks are "going well" with Kansas Corporation Commission staff, but there are no commitments yet on a revised merger agreement with Westar Energy Inc.

The company on July 10 announced a stock-for-stock exchange to form a new holding company, where Westar shareholders would own 52.5% and Great Plains shareholders would own 47.5% of the new holding company, valued at $14 billion.

Analysts during Great Plains' Aug. 10 second-quarter earnings conference call asked about how talks are going with Kansas regulatory staff after the commission rejected a previous proposal in April. Bassham said he remains confident that the revised agreement addresses the commission's concerns laid out in the April 19 order.

"And we continue to work directly with regulatory staff in both Kansas and Missouri as well as other parties to gain necessary approvals as quickly as possible. Our goal with the KCC is to conclude the regulatory process earlier than the 300-day maximum allowed by statute," Bassham said. The company intends to file its merger proposal with state regulators in the coming weeks, Bassham added. He anticipates getting shareholder approvals late in the fourth quarter. Consistent with recent comments from Westar executives, Bassham expects to close the deal in the first half of 2018.

Great Plains plans to issue an immediate upfront rate credit of at least $50 million in 2018 as part of the revised merger agreement. That credit addresses requests from Kansas regulators that "clear, identifiable and certain benefits" that are known from the very beginning be offered to customers regardless of the concurrent rate case, Bassham indicated. The ultimate credit amount could be more than $50 million given additional savings that flow through rate cases occurring at the same time as the merger process, Bassham suggested.

Bassham told analysts, "In terms of the size of the initial $50 million, what I'll remind you all, we originally expected our rate cases in 2018 to be about a year after the merger. ... Instead, it's kind of in the middle of the process. And we've got some ongoing savings effectively because we get positions open. So there will likely be some effect in the initial case from merger savings, if you will, from that process. So likely, the combined will be more than $50 million."

In response to a question, Bassham said he did not know yet whether the timing of the potential settlement of the merger hinges on the rate case filings. He said the rate cases and merger settlement agreement may or may not be decided together.

"So sometimes it helps to have that for settlement, sometimes it's better to keep them separate and not mix issues, but we will get the filing made on the merger and we will be able to talk to the KCC staff over the course of next couple of months and see what seems to work best," he said.

In addition to the merger, analysts also questioned Bassham on his next steps to get comprehensive regulatory reform policies passed in Missouri. Proposed legislation this year got stalled by a filibuster.

Given the time of year, Bassham said it is "less likely" that Missouri Gov. Eric Greitens will call another legislative session. "There are a small group of legislators who have very firm opinions and we'll just have to continue to work with them to see if there is a way to do that," he added.

Mild weather contributed to a loss in second-quarter earnings relative to same period a year ago. Great Plains reported second-quarter adjusted earnings of $67.0 million, or 43 cents per share, down from $85.6 million, or 55 cents per share, in the second quarter of 2016. Adjusted earnings in the first six months of this year were $86.9 million, or 56 cents per share, down from $111.6 million, or 72 cents per share, in the first half of 2016.

The company reported in its earnings release overall retail power sales in the second quarter of 2017 were down 1.8% from levels in the same quarter of 2016.