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8-K - JOINT FORM 8-K - KANSAS CITY POWER & LIGHT CO | f8keei2009.htm |
Great Plains Energy
EEI Financial
Conference Presentation
November 3, 2009
1
Statements made in
this presentation that are not based on historical facts are forward-looking,
may involve risks and
uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, the
outcome of regulatory proceedings, cost estimates of the Comprehensive Energy Plan and other matters affecting future
operations. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the registrants
are providing a number of important factors that could cause actual results to differ materially from the provided forward-looking
information. These important factors include: future economic conditions in regional, national and international markets and their
effects on sales, prices and costs, including, but not limited to, possible further deterioration in economic conditions and the timing
and extent of any economic recovery; prices and availability of electricity in regional and national wholesale markets; market
perception of the energy industry, Great Plains Energy, KCP&L and GMO; changes in business strategy, operations or
development plans; effects of current or proposed state and federal legislative and regulatory actions or developments, including,
but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates
KCP&L and GMO can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices
governing tax, accounting and environmental matters including, but not limited to, air and water quality; financial market conditions
and performance including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital
and the effects on nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or
goodwill; credit ratings; inflation rates; effectiveness of risk management policies and procedures and the ability of counterparties
to satisfy their contractual commitments; impact of terrorist acts; increased competition including, but not limited to, retail choice in
the electric utility industry and the entry of new competitors; ability to carry out marketing and sales plans; weather conditions
including, but not limited to, weather-related damage and their effects on sales, prices and costs; cost, availability, quality and
deliverability of fuel; ability to achieve generation planning goals and the occurrence and duration of planned and unplanned
generation outages; delays in the anticipated in-service dates and cost increases of additional generating capacity and
environmental projects; nuclear operations; workforce risks, including, but not limited to, retirement compensation and benefits
costs; the ability to successfully integrate KCP&L and GMO operations and the timing and amount of resulting synergy savings;
and other risks and uncertainties.
uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, the
outcome of regulatory proceedings, cost estimates of the Comprehensive Energy Plan and other matters affecting future
operations. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the registrants
are providing a number of important factors that could cause actual results to differ materially from the provided forward-looking
information. These important factors include: future economic conditions in regional, national and international markets and their
effects on sales, prices and costs, including, but not limited to, possible further deterioration in economic conditions and the timing
and extent of any economic recovery; prices and availability of electricity in regional and national wholesale markets; market
perception of the energy industry, Great Plains Energy, KCP&L and GMO; changes in business strategy, operations or
development plans; effects of current or proposed state and federal legislative and regulatory actions or developments, including,
but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates
KCP&L and GMO can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices
governing tax, accounting and environmental matters including, but not limited to, air and water quality; financial market conditions
and performance including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital
and the effects on nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or
goodwill; credit ratings; inflation rates; effectiveness of risk management policies and procedures and the ability of counterparties
to satisfy their contractual commitments; impact of terrorist acts; increased competition including, but not limited to, retail choice in
the electric utility industry and the entry of new competitors; ability to carry out marketing and sales plans; weather conditions
including, but not limited to, weather-related damage and their effects on sales, prices and costs; cost, availability, quality and
deliverability of fuel; ability to achieve generation planning goals and the occurrence and duration of planned and unplanned
generation outages; delays in the anticipated in-service dates and cost increases of additional generating capacity and
environmental projects; nuclear operations; workforce risks, including, but not limited to, retirement compensation and benefits
costs; the ability to successfully integrate KCP&L and GMO operations and the timing and amount of resulting synergy savings;
and other risks and uncertainties.
This
list of factors is not all-inclusive because it is not possible to predict all
factors. Other risk factors are detailed from time to
time in Great Plains Energy’s and KCP&L’s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with
the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is
made. Great Plains Energy and KCP&L undertake no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
time in Great Plains Energy’s and KCP&L’s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with
the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is
made. Great Plains Energy and KCP&L undertake no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Forward Looking
Statement
Great Plains Energy
EEI Financial Conference
Presentation
November 3, 2009
Mike
Chesser,
Chairman and CEO
Chairman and CEO
3
Pro
Forma 2008 Revenue by Customer Segment
Pro
Forma 2008 Revenue by Utility Jurisdiction
Service
Territories: KCP&L and GMO
Business
Highlights
• Solid Midwest
electric utility - KCP&L brand
• Transformational
events in 2008 to focus business model on
fully regulated utility operations
fully regulated utility operations
– Sale of Strategic
Energy
– Acquisition of
Aquila
• Company attributes
post-acquisition
• 820,000 customers /
3,200+ employees
• ~6,000 MW of
primarily low-cost baseload generation
• 5-year projected
synergies of $723 million
• ~$7.9bn in assets
and $3.6bn in rate base at 2008YE
Total:
$1.7bn
Total:
$1.7bn
Solid
Foundation
4
Iatan
Site Photographs - October 2009
Iatan
2 Fabric Filter
Cooling
Tower
Construction
Campus
Iatan
1 SCR
Iatan
2 Boiler
Iatan
2 SCR
Gypsum
Storage
Reagent
Prep Bldg
Iatan
2 Absorber
Recycle
Pump Building
Tank
Farm and Coal Yard
5
KCP&L
filed an application for ARRA Stimulus funding to advance energy efficiency and
conduct a Smart Grid demonstration
project in the Green Impact Zone. We will invest approximately $14 million and requested Federal matching funds for
approximately $24 million and key partner funds of $10 million for a total estimated project value of $48 million.
project in the Green Impact Zone. We will invest approximately $14 million and requested Federal matching funds for
approximately $24 million and key partner funds of $10 million for a total estimated project value of $48 million.
Advancement of
Existing Residential & C&I Energy Efficiency Programs
n Weatherization &
Energy Audits
n Efficient Appliances,
Lighting and HVAC Equipment
n Efficient Motors,
Drives and Data Centers
Smart Grid
Demonstration
n Smart
Distribution
– Substation
– IP/RF 2-way Field
Area Network (FAN)
– Distribution
Management System (DMS)
n Generation and
Storage
– Commercial Solar and
Photovoltaic
– Battery and Thermal
Storage
n Smart
End-Use
– Residential &
Commercial EMS Demonstration
– In-Home Display and
Interval Data
– PHEV
Charging
– Smart Appliances and
Pilot RTP or CPP Rates
Customer/Community
Benefits:
Lower utility
bills
Increased
environmental stewardship
Improved energy
information
Increased local
energy sector jobs
KCP&L
Benefits:
New business model
development
Increased
reliability
Reduced
costs
Greater asset
utilization
Environmental
Customer
satisfaction
Regional economic
development
Green
Impact Zone Investments: Benefits
For Customers and KCP&L
For Customers and KCP&L
6
• Strong Midwest
electric utilities focused on regulated operations in Missouri and
Kansas
• Diversified
customer base includes 820,000 residential, commercial, and industrial
customers
• ~6,000 Megawatts of
generation capacity
• Low-cost generation
mix - projected 76% coal, 17% nuclear (Wolf Creek) in 2009
100%
Regulated
Electric Utility
Operations Focus
Electric Utility
Operations Focus
• Growth and
stability in earnings driven by sizable regulated investments as part of
the
Comprehensive Energy Plan (“CEP”)
Comprehensive Energy Plan (“CEP”)
• Wind and
environmental retrofit components of CEP in place; Iatan 2 baseload coal
plant
targeted for completion in late summer 2010
targeted for completion in late summer 2010
• Anticipated growth
beyond 2010 driven by additional environmental capex and wind
Attractive
Platform
for Long-Term
Earnings Growth
for Long-Term
Earnings Growth
• Successful outcomes
in 2006, 2007 and 2008 rate cases in Missouri and Kansas
• Combined annual
rate increases from 2008 cases of $59mm in Kansas and $159mm in
Missouri;
new rates effective August 1st in Kansas and September 1st in Missouri
new rates effective August 1st in Kansas and September 1st in Missouri
Focused
Regulatory
Approach
Approach
• Cash flow and
earnings heavily driven by regulated operations and cost recovery
mechanisms
• Ample liquidity
currently available under $1.5bn credit facilities
• Sustainable
dividend and pay-out, right-sized to fund growth and to preserve
liquidity
• Committed to
maintaining current investment grade credit ratings
Stable
and
Improving Financial
Position
Improving Financial
Position
Strong Platform
for Long-Term Growth
William
H. Downey,
President and COO
President and COO
8
• Iatan 2
construction continues on budget and on schedule with planned completion
in
late summer 2010
late summer 2010
• New retail rates
effective August 1 in Kansas and September 1 in Missouri
• Next round of rate
case filings anticipated in late 2009 in Kansas / early 2010 in
Missouri
Missouri
• Wolf Creek started
regularly-scheduled refueling outage on October 10; anticipate
return to service in mid-November
return to service in mid-November
• Solid generation
fleet performance in third quarter of 2009, though somewhat below
2008
2008
Operational
Highlights
9
KCP&L
Coal Fleet
KCP&L
Nuclear Plant
GMO
Coal Fleet
Impact
of extended
nuclear
refueling outage
Impact
of unplanned
coal
outages
Q4
08 and Q1 09
Impact
of Iatan I unit
overhaul and AQCS tie-ins
overhaul and AQCS tie-ins
Q4
08 and Q1 09 impact
Sibley
environmental
upgrade and Iatan I unit
upgrade and Iatan I unit
overhaul
and AQSC tie-ins
Plant
Performance
10
|
Project
description
|
Comments
|
100 MW plant
in Spearville, KS
Began
construction in 2005
|
ü Completed in
Q3 2006
ü In rate base
from 1/1/2007
ü No
regulatory disallowance
|
|
Selective
Catalytic Reduction (SCR) unit at LaCygne
1 plant |
ü Completed in
Q2 2007
ü In rate base
from 1/1/2008
ü No
regulatory disallowance
|
|
Air Quality
Control System at Iatan 1 coal plant
|
ü Completed in
Q2 2009
ü In rate base
starting 3Q 2009 (KS 08/1 & MO
9/1)
ü No regulatory
disallowance in 2009 MO and KS
cases; minimal exposure in 2010 cases |
|
Construction
of Iatan 2 super-critical coal plant (850
MW; 73% GXP ownership share)1 |
ü On track for
completion late summer 2010
ü Expected in
rate base Q4 2010 / 1Q 2011
|
Iatan
2
Iatan
1
Environmental
LaCygne
Environmental
Wind
Great
Plains Energy has effectively executed all elements of its Comprehensive
Energy
Plan to date and received positive, just, and reasonable regulatory treatment
Plan to date and received positive, just, and reasonable regulatory treatment
Comprehensive
Energy Plan
1 Includes
post-combustion environmental technologies including an SCR system, wet flue gas
desulphurization system and fabric
filter to control emissions
filter to control emissions
Strong Track
Record of Execution
11
|
|
|
2008
rate cases
|
|
|
||||
Company
|
Last
Allowed
ROE |
Effective
Date of Last Allowed ROE |
ROE
requested1 |
Requested
revenue increase |
Stipulated
/
settled revenue increase |
Tariff
implementation
|
RPS2
|
Fuel
Clause? |
|
|
|
10.25%
|
6/1/07
|
11.55%
|
$66mm
|
$48mm
|
9/1/09
|
ü
|
Yes
(95%) |
|
|
10.25%
|
6/1/07
|
11.55%
|
17mm
|
$15mm
|
9/1/09
|
ü
|
Yes
(95%) |
|
|
—3
|
N/A
|
11.55%
|
1mm
|
$1mm
|
7/1/09
|
ü
|
Yes
(85%) |
|
|
10.75%
|
1/1/08
|
11.55%
|
102mm
|
$95mm
|
9/1/09
|
ü
|
No
|
—3
|
N/A
|
11.40%
|
72mm
|
$59mm
|
8/1/09
|
ü
|
Yes
(100%) |
GMO-MPS
GMO-L&P
GMO-Steam
KCP&L-KS
KCP&L-MO
1 ROE of 10.75%
originally requested in all cases; requests increased in rebuttal testimony
based on financial market developments. All
cases settled; ROE not
disclosed
disclosed
2 Missouri mandatory
Renewable Portfolio Standard of 2% by 2011, 10% by 2018 and 15% by
2021;
Kansas has targets of 10% by 2011, 15% by 2016 and 20% by 2020
Kansas has targets of 10% by 2011, 15% by 2016 and 20% by 2020
3 “Black Box” settlement
- ROE not
disclosed
Focused Regulatory
Approach
Financial
Overview
Terry
Bassham, CFO
Executive Vice President Finance &
Strategic Development
Executive Vice President Finance &
Strategic Development
13
• Electric Utility
segment earnings decreased $18.6 million primarily as a result of a) $14.3
million decrease in
operating income driven by lower wholesale revenue, higher operating expenses and depreciation, partially offset by
higher retail revenue and lower purchased power; and b) an $11.6 million increase in interest expense.
operating income driven by lower wholesale revenue, higher operating expenses and depreciation, partially offset by
higher retail revenue and lower purchased power; and b) an $11.6 million increase in interest expense.
• Other segment
earnings decreased $7.8 million primarily as a result of increased interest from
the equity units issued
in May and a favorable 2008 impact from the reversal of interest expense related to unrecognized tax benefits.
in May and a favorable 2008 impact from the reversal of interest expense related to unrecognized tax benefits.
• A 21.0 million
increase in the average number of shares outstanding since the third quarter of
2008 resulted in $0.11
per share dilution
per share dilution
14
• Increased Electric
Utility segment earnings of $6.7 million mainly attributable to the inclusion of
GMO’s regulated utility
operations for the full period in 2009;
operations for the full period in 2009;
• Increased Other
segment earnings of $17.6 million including a $16.0 million tax benefit from an
audit settlement in
GMO’s non-utility operation;
GMO’s non-utility operation;
• Loss of $2.3
million in 2009 related to the discontinued operations of Strategic Energy
compared to earnings of $35.0
million for the first nine months of 2008.
million for the first nine months of 2008.
• Increase of 32.3
million average dilutive shares outstanding resulted in dilution of $0.36 per
share.
15
Earnings
Key
Earnings Drivers:
+ Increased retail
revenue of $22.2 million driven by GMO’s inclusion for full quarter in 2009 and
new
retail rates partially offset by mild weather and lower weather-normalized demand
retail rates partially offset by mild weather and lower weather-normalized demand
+ Decline in
purchased power expense of $24.2 million
+ Increased AFUDC of
$2.7 million
- Decline in
wholesale revenue of $28.5 million
- Increased
depreciation & amortization of $12.5 million; including $3.8 million of
additional amortization
- Increased non-fuel
operating expense including $7.5 million wind termination fee and $5.2
million
increase
for GMO driven by inclusion for a full quarter in 2009
- Increased interest
expense, net of AFUDC, of $11.6 million
- Higher shares
outstanding caused electric utility segment dilution of $0.12 per
share.
(millions
except
where indicated)
where indicated)
Earnings
Per Share
$83.9
$0.90
$0.62
$102.5
16
Earnings
Per Share
Earnings
(millions
except
where indicated)
where indicated)
Earnings
Drivers:
+ GMO utility
earnings increased $6.6 million
+ Decreased fuel and
purchase power expense of $51.0 million at KCP&L
+ Decreased income
taxes of $20.9 million at KCP&L
+ Increase in
KCP&L’s AFUDC equity of $8.3 million
- Reduced KCP&L
revenues of $58.5 million, including $52.4 million drop in
wholesale
- Increased
depreciation and amortization of $13.7 million including $3.8 million
of
additional
amortization at KCP&L
- Increased interest
expense, net of AFUDC, of $9.4 million at KCP&L
- Dilution of $0.36
per share caused by additional shares outstanding
$134.1
$1.34
$1.05
$127.4
Electric Utility
Year-to-Date Results
17
|
3Q
2009 Compared to 3Q 2008
|
YTD
2009 Compared to YTD 2008
|
||||
GPE
|
Customers
|
Use/Customer
|
Change
MWh Sales |
Customers
|
Use/Customer
|
Change
MWh Sales |
Residential
|
0.2%
|
-0.1%
|
0.1%
|
0.4%
|
-0.4%
|
0.0%
|
Commercial
|
-0.4%
|
-2.2%
|
-2.5%
|
0.1%
|
-0.5%
|
-0.4%
|
Industrial
|
-3.5%
|
-5.0%
|
-8.2%
|
-1.5%
|
-7.7%
|
-9.1%
|
Weighted
Avg. |
0.1%
|
-2.3%
|
-2.2%
|
0.3%
|
-1.8%
|
-1.5%
|
Retail
MWh Sales by Customer Class - Third Quarter 2009
Weather-Normalized
Retail MWh Sales and Customer Growth Rates
Note: Includes
GMO for full periods presented
Electric Utility
Segment
18
Earnings
Earnings
Per Share
$0.02
$(0.05)
Key
Earnings Drivers:
- Increased
after-tax interest of $4.6 million from equity units
- Unfavorable
comparison to 2008, which included $3.6 million positive earnings impact
from
reversal
of after-tax interest expense related to unrecognized tax benefits
$(6.0)
$1.8
(millions
except
where indicated)
where indicated)
3Q
‘09
3Q
‘08
3Q
‘09
3Q
‘08
Other
Segment Third Quarter Results
19
Earnings
Key
Drivers:
+ $16.0 million
first quarter GMO non-utility tax benefit
+ Favorable
comparison to 2008, which included an after-tax loss of $5.7 million from a
mark-to-
market change on interest rate hedges
market change on interest rate hedges
– Higher after-tax
interest expense of $6.8 million
– Negative
comparison to 2008, which included $3.4 million after-tax income related to
the
release of a legal liability
release of a legal liability
$1.5
$(16.1)
(millions
except
where indicated)
where indicated)
YTD
‘09
YTD
‘08
$0.01
$(0.17)
Other
Segment Year-to-Date Results
20
Great
Plains Energy Debt
Long-term
Debt Maturities
Credit
Ratings
*Includes current
maturities
Credit Ratings,
Debt, Capital Structure
Great Plains Energy
EEI Financial
Conference Presentation
November 3, 2009