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| 8-K - 8-K INVESTOR PRESENTATION EEI CONFERENCE NOV 2016 - GREAT PLAINS ENERGY INC | a8-kinvestorpresentationee.htm |
GREAT PLAINS ENERGY
EEI INVESTOR
PRESENTATION
November 2016
OUR
FUTURE
FOCUS
Exhibit 99.1
2016 EEI INVESTOR PRESENTATION
FORWARD-LOOKING STATEMENTS
2
Statements made in this report 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, statements relating to Great Plains Energy’s proposed acquisition of Westar Energy, Inc.
(Westar), the outcome of regulatory proceedings, cost estimates of capital projects, adjusted earnings guidance for 2016 and other matters affecting future
operations. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and KCP&L 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; prices and availability of electricity in regional and
national wholesale markets; market perception of the energy industry, Great Plains Energy and KCP&L; changes in business strategy, operations or development
plans; the outcome of contract negotiations for goods and services; 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 the
Companies 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 derivatives and hedges, 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, including, but not limited to, cyber terrorism; 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; the
inherent uncertainties in estimating the effects of weather, economic conditions and other factors on customer consumption and financial results; ability to achieve
generation goals and the occurrence and duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of
generation, transmission, distribution or other projects; Great Plains Energy's ability to successfully manage its transmission joint venture or to integrate the
transmission joint ventures of Westar; the inherent risks associated with the ownership and operation of a nuclear facility including, but not limited to, environmental,
health, safety, regulatory and financial risks; workforce risks, including, but not limited to, increased costs of retirement, health care and other benefits; the ability of
Great Plains Energy to obtain the regulatory approvals necessary to complete the anticipated acquisition of Westar; the risk that a condition to the closing of the
anticipated acquisition of Westar or the committed debt or equity financing may not be satisfied or that the anticipated acquisition may fail to close; the failure to
obtain, or to obtain on favorable terms, any financings necessary to complete or permanently finance the anticipated acquisition of Westar and the costs of such
financing; the outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted relating to the anticipated acquisition of
Westar; the costs incurred to consummate the anticipated acquisition of Westar; the possibility that the expected value creation from the anticipated acquisition of
Westar will not be realized, or will not be realized within the expected time period; the credit ratings of Great Plains Energy following the anticipated acquisition of
Westar; disruption from the anticipated acquisition of Westar making it more difficult to maintain relationships with customers, employees, regulators or suppliers; the
diversion of management time and attention on the proposed transactions; and other risks and uncertainties.
ADJUSTED EPS NON-GAAP FINANCIAL MEASURES
2016 EEI INVESTOR PRESENTATION 3
In addition to earnings available for common shareholders, Great Plains Energy's management uses adjusted earnings (non-GAAP) to evaluate earnings
without the impact of costs to achieve the anticipated acquisition of Westar. Adjusted earnings excludes certain costs, expenses, gains and losses
resulting from the anticipated acquisition. This information is intended to enhance an investor's overall understanding of results. Adjusted earnings is used
internally to measure performance against budget and in reports for management and the Board of Directors. Adjusted earnings is a financial measure
that is not calculated in accordance with GAAP and may not be comparable to other companies’ presentations or more useful than the GAAP information
provided elsewhere.
Great Plains Energy provides its earnings guidance based on a non-GAAP measure and does not provide the most directly comparable GAAP measure or
a reconciliation to the most directly comparable GAAP measure due to the inherent difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliation, including certain costs, expenses, gains and losses resulting from the anticipated acquisition of Westar.
Continue to promote the economic strength of the region,
improve the customer experience and grow earnings
OUR STRATEGIC PRIORITIES
EXECUTING OUR PLAN FOR CONTINUED GROWTH
BEST-IN-CLASS
OPERATIONS
CUSTOMER
ENGAGEMENT
• Disciplined execution to
deliver reliable and low
cost power
• Focused on earning our
allowed return by actively
managing regulatory lag
• Proactive economic
development
• Transition toward
sustainable energy portfolio
• Responsive to changing
customer expectations
− Technology investments
that facilitate more
informed customer
interaction
− Expand comprehensive
suite of energy-related
products and services
TARGETED
INVESTMENTS
• Balanced strategic growth
initiatives through national
transmission opportunities
and flexibility for
opportunistic growth
• Acquisition of Westar
expected to drive
incremental investment
opportunities
4 2016 EEI INVESTOR PRESENTATION
SUCCESSFUL INTEGRATION OF WESTAR
Combination of Great Plains Energy and Westar Energy creates a leading Midwest utility better positioned to serve customers,
meet the region’s energy needs, optimize investments and achieve improved and more stable, long-term financial returns
COMPELLING STRATEGIC AND GEOGRAPHIC FIT
Great Plains Energy
Power Plants
Transmission Lines:
Projects
Operating
Electric Territory
Headquarters
Westar
Power Plants
Electric Territory
Headquarters
Shared Power
Plants
COMBINED SERVICE TERRITORY1 FUTURE CORPORATE HEADQUARTERS
KEY OPERATING METRICS
Source: SNL, Great Plains Energy and Westar Investor Presentations.
1. Excludes Great Plains’ power plant in the Mississippi Delta and Westar’s Spring Creek Energy Center in Logan County, OK.
2. Estimated rate base based on ordered and settled rate cases.
3. Excludes 920MW of purchased power.
Great
Plains
Energy Westar Combined
Rate Base ($B)2 $6.7 $7.1 $13.8
Electric Customers 853,000 702,000 1,555,000
Generation Capacity
(MW)
6,446 6,267² 12,713
Transmission Miles 3,600 6,300 9,900
Distribution Miles 22,500 28,800 51,300
Great Plains Energy: Downtown, Kansas City, Missouri
Kansas Operations: Downtown, Topeka, Kansas
5 2016 EEI INVESTOR PRESENTATION
WESTAR ACQUISITION REMAINS ON TRACK TO CLOSE IN SPRING 2017
WE REMAIN AS CONFIDENT AS EVER ABOUT THE SIGNIFICANT VALUE THIS COMBINATION WILL
DELIVER TO SHAREHOLDERS, CUSTOMERS AND THE COMMUNITIES WE SERVE
6 2016 EEI INVESTOR PRESENTATION
Combination creates a leading Midwest utility
• Enhanced earnings stability and dividend growth profile
provides opportunities for cost savings and investment
optimization across combined company
• Consistent track record of operational excellence and
commitment to superior customer service and reliability
• Enhanced operating platform to drive cost savings and
benefits for more than 900,000 Kansas customers and
600,000 Missouri customers
• Ability to deliver more competitive rates and meet the
region’s energy needs
• Expected to maintain strong investment grade ratings with
solid free cash flow profile to facilitate investment and debt
repayment without incremental equity following the closing of
the transaction
WE REMAIN CONFIDENT ABOUT THE SIGNIFICANT V LUE THIS COMBINATION WILL
SHAREHOLDER APPROVALS
STAKEHOLDER VOTES
APPROVALS
GRANTED
GXP and WR
Shareholders √ 3Q 2016
REGULATORY APPROVALS
STAKEHOLDER FILED
APPROVAL
ANTICIPATED
Kansas √ 2Q 2017
FERC √ 1Q 2017
NRC √ 1Q 2017
U.S. DOJ/FTC
(Hart-Scott-Rodino) √ Approved
FCC 4Q 2016 4Q 2016
BASE PLAN INCREMENTAL OPPPORTUNITIES FROM
WESTAR TRANSACTION
EPS
GROWTH
TARGET
• Annualized EPS growth of 4% to 5% through
20201
• Rate base growth of 2% to 3% through 20202
• Focus on minimizing regulatory lag
• Annualized EPS growth of 6% to 8% through
20201
• Rate base growth of 3% to 4% through 20202
• Focus on minimizing regulatory lag
DIVIDEND
GROWTH
TARGET
• Dividend growth of 5% to 7% through 2020
• Dividend payout ratio of 60% to 70% through
2020
• Dividend growth of 5% to 7% through 2020
• Dividend payout ratio of 60% to 70% through
2020
TOTAL
RETURN
• Balanced total shareholder return profile
• Potential for top-quartile total shareholder return
profile
7
ENHANCED SHAREHOLDER RETURN PROFILE OVER STANDALONE PLAN
2016 EEI INVESTOR PRESENTATION
1. Based on our original 2016 EPS guidance range of $1.65 - $1.80
2. Includes the impact of bonus depreciation
Enhanced platform to deliver compelling shareholder returns
SIGNIFICANT OPPORTUNITIES FOR EFFICIENCIES
FROM COMPLEMENTARY OPERATIONS AND ADJACENT SERVICE TERRITORIES
Combination of Great Plains Energy and Westar Energy provides significant opportunities for increased
efficiency, cost savings and investment optimization across the combined company
8
Operations
~38%
Supply Chain
~32%
Shared Services
~12%
CapEx1
~18%
ESTIMATED NET EFFICIENCIES OF ~$200 MILLION IN YEAR 3 AND BEYOND
1. Includes estimated pre-tax customer cost of capital and depreciation impacts.
2016 EEI INVESTOR PRESENTATION
• Significant efficiencies and
cost savings
• Incremental investment
opportunities
― Transmission
― Renewables
― Energy efficiency
• Attractive, efficient financing
SIGNIFICANT TARGETED EPS ACCRETION
OVERVIEW OF BENEFITS GREAT PLAINS ENERGY EPS GROWTH TARGET
9
• Potential for ~$0.15 to ~$0.25 of EPS accretion by 2020
over standalone plan (with meaningful upside)
MEANINGFUL ACCRETION BASED ON MIDPOINT OF OUR ORIGINAL 2016 EPS GUIDANCE RANGE OF $1.65 - $1.80
Standalone EPS Target Pro Forma EPS Target
$1.65
$1.90
$1.80
$2.20
2016E 2020E
~
~
$1.65
$2.10
$1.80
$2.45
2016E 2020E
~
~
2016 EEI INVESTOR PRESENTATION
1
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EPS Growth Dividend Yield
TRANSACTION FACILITATES TOP TIER SHAREHOLDER RETURNS
Source: IBES median estimates and Bloomberg market data as of 31-Oct-2016.
Note: EPS growth of peers calculated as ’16-’19 EPS CAGR based on IBES consensus estimates. Where 2019 IBES estimates are not available, ’16-’18 CAGR is used.
Standalone Great Plains Energy TSR based on EPS guidance prior to transaction announcement. Pro Forma Great Plains Energy TSR based on current EPS guidance.
1. Dividend yield calculated as latest quarterly dividend annualized divided by current share price.
GREAT PLAINS ENERGY VS. EEI INDEX
FULLY REGULATED MODEL DIFFERENTIATES GREAT PLAINS ENERGY FROM MANY INDUSTRY PEERS
Pro Forma
Great Plains
Energy
Standalone
Great Plains
Energy
4th QUARTILE 1st QUARTILE 2nd QUARTILE 3rd QUARTILE
10 2016 EEI INVESTOR PRESENTATION
$18.8
$11.8 $8.8
$12.1
$7.5 $8.7 $8.5 $8.1 $6.2 $4.3 $3.9 $4.2 $3.0
$28.8
$21.4 $21.4 $20.1
$14.7
$13.0 $12.8
$11.8
$9.1 $8.5 $6.2 $5.9 $4.5
Combined
Company
WR GXP¹
Market Cap EV
TRANSFORMATION INTO A LEADING MIDWEST UTILITY
SELECTED MID-CAP UTILITIES BY ENTERPRISE VALUE ($BN)
Source: Company filings, investor presentations, Bloomberg market data as of 31-Oct-2016.
1. GXP market cap of $4.3bn does not include new shares issued in October 2016 equity issuance.
$17.0
$13.7
$12.1 $11.8
$8.9
$7.1 $7.0 $6.6
$5.7
$4.4
$3.4 $3.3 $2.5
WR GXP
SELECTED MID-CAP UTILITIES BY CUSTOMERS (MILLIONS) SELECTED MID-CAP UTILITIES BY RATE BASE ($BN)
4.4
4.0
3.5
3.3
1.6 1.4 1.2 1.1
0.9 0.9 0.8 0.7
0.1
GXP WR Combined
Company
Combined
Company
11 2016 EEI INVESTOR PRESENTATION
PRO FORMA CREDIT METRICS
SUPPORTS INVESTMENT GRADE RATINGS
PROJECTED CASH FROM OPERATIONS / TOTAL DEBT
12
PROJECTED INTEREST COVERAGE RATIO
13 – 14%
14 – 15%
Year 1 Year 2 Year 3
15.5 – 16.5%
4.0 – 4.5x
4.5 – 5.0x
Year 1 Year 2 Year 3
4.25 – 4.75x
• Significant combined company free cash flow facilitates improving credit metrics over time
• Rating agencies confirmed solid investment grade ratings at transaction close1
1. GPE senior unsecured debt is currently rated BBB at S&P with a negative outlook and Baa2 at Moody's and under review for possible downgrade. We expect to maintain our
investment grade ratings.
2016 EEI INVESTOR PRESENTATION
ATTRACTIVE, EFFICIENT FINANCING OF WESTAR TRANSACTION
ACQUISITION FINANCING UPDATE
13 2016 EEI INVESTOR PRESENTATION
Completed the equity financing required for the Westar acquisition
ACQUISITION CONSIDERATION FUNDING AMOUNT FINANCING STATUS
Common Equity to be Issued to Westar Shareholders $1.3B √
Mandatory Convertible Preferred to be Issued to OMERS $750M √
New Great Plains Energy equity issued in October 2016
(Common Stock and Mandatory Convertible Preferred)
$2.5B √
New Great Plains Energy debt to be issued $4.4B To Be Completed Pre-Close
COMMITTED TO MAINTAINING SOLID, INVESTMENT GRADE PROFILE
1. Anticipated financing plans are subject to charge based on market conditions.
• Expect to finance total equity purchase price of $8.6 billion for the Westar acquisition with
approximately 50% equity and 50% debt1
COMBINATION EXPANDS GEOGRAPHIC AND REGULATORY DIVERSIFICATION
1. Customer breakdown by jurisdiction based on retail sales generation for 12/31/2015.
2. KCP&L and GMO are also subject to regulation by The Federal Energy Regulatory Commission (FERC) with respect to transmission, wholesale sales and rates, and other matters.
Rate base as of 12/31/2015. KCP&L and GMO have approximately $360mm of assets and FERC transmission formula rates.
3. Westar Energy generation excludes 920MW generation under PPA, includes 480MW renewables under development. Generation capacity as of 12/31/2015.
Standalone Great Plains Energy Standalone Westar Energy Combined Company
G
eo
g
rap
h
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y
C
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r1
Ra
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ix
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2
Capacit
y
M
ix
(M
W
)3
MO
72%
KS
28% KS
100%
KS
60%
MO
40%
MO
67%
KS
33%
KS
81%
FERC
19%
KS
56%
MO
34%
FERC
10%
Coal
56% Natural
Gas & Oil
35%
Nuclear
9%
Renewable
1%
Coal
52% Natural
Gas & Oil
35%
Nuclear
8%
Renewable
5%
Coal
48%
Natural
Gas
35%
Nuclear
8%
Renewable
9%
14 2016 EEI INVESTOR PRESENTATION
Solid track record of execution and constructive regulatory treatment with opportunities for
improvements in regulatory framework
OUR REGULATORY PRIORITIES
• Approval of Westar acquisition
• Committed to work toward comprehensive regulatory reform
and expect to propose legislation again in 2017 in Missouri
• Concluded GMO rate case; new retail rates effective
December 2016
• KCP&L Missouri filed $62.9 million1 general rate case on July
1, 2016, to recover investments and to address cost of
service lag
• Expect to file abbreviated rate case for KCP&L Kansas by
November 9, 2016
MANAGING LEGISLATIVE AND REGULATORY ENVIRONMENT
1. Does not include net fuel and purchased power of $27.2 million that absent the case would flow through a fuel recovery mechanism. Total requested increase in base rates including
net fuel and purchased power is $90.1 million or 10.77%.
15 2016 EEI INVESTOR PRESENTATION
MISSOURI PUBLIC SERVICE COMMISSION (MPSC) KANSAS CORPORATION COMMISSION (KCC)
Mr. Daniel Y. Hall (D)
Chair (since August 2015)
Term began: September 2013
Term expires: September 2019
Mr. Jay S. Emler (R)
Chair (since January 2016)
Term began: January 2014, reappointed May 2015
Term expires: March 2019
Mr. Stephen M. Stoll (D)
Commissioner
Term began: June 2012
Term expires: December 2017
Ms. Shari Feist Albrecht (I)
Commissioner
Term began: June 2012
Term expired: March 2016
Mr. William P. Kenney (R)
Commissioner
Term began: January 2013
Term expires: January 2019
Mr. Pat Apple (R)
Commissioner
Term began: March 2014
Term expires: March 2018
Mr. Scott T. Rupp (R)
Commissioner
Term began: March 2014
Term expires: March 2020
Ms. Maida J. Coleman (D)
Commissioner
Term began: August 2015
Term expires: August 2021
MPSC consists of five (5) members, including the Chairman, who are appointed
by the Governor and confirmed by the Senate.
Members serve six-year terms (may continue to serve after term expires until
reappointed or replaced)
Governor appoints one member to serve as Chairman
KCC consists of three (3) members, including the Chairman, who are appointed by
the Governor and confirmed by the Senate.
Members serve four-year terms (may continue to serve after term expires until
reappointed or replaced)
Commissioners elect one member to serve as Chairman
STATE COMMISSIONERS
16 2016 EEI INVESTOR PRESENTATION
ROADMAP TO CLOSE FOR ACQUISITION
1. Kansas has 300 days following filing to rule on transaction.
17 2016 EEI INVESTOR PRESENTATION
2016 2017
Q2 Q3 Q4 Q1 Q2
Acquisition Announcement
Regulatory Filings (U.S. DOJ/FTC, Kansas1, NRC, FERC)
Secure Appropriate State and Federal Regulatory Approvals
File Proxy Statement / Hold Special Shareholder Meetings
Public Equity (Common/Mandatory) Financings
Public Debt Financing
Receive Regulatory Approvals
Target Close
TRADITIONAL 11-MONTH RATE CASE TIMELINE IN MISSOURI AND ~8 MONTHS IN KANSAS
RATE CASE TIMELINE
TRANSACTION EXPECTED TO MITIGATE RATE INCREASES OVER TIME
18 2016 EEI INVESTOR PRESENTATION
2016 2017
Q1 Q3 Q4 Q1 – Q4
GMO general rate case filing1
KCP&L MO general rate case filing2
Anticipated KCP&L KS abbreviated rate case filing
Anticipated Westar abbreviated rate case filing
Anticipated KCP&L KS, KCP&L MO, GMO and Westar rate case
filings
1. New retail rates effective December 22, 2016.
2. Expect new retail rates to be effective late May 2017.
19
FULL-YEAR 2016 EARNINGS OUTLOOK
2016 EEI INVESTOR PRESENTATION
EARNINGS
GUIDANCE
• Narrowing and increasing 2016 adjusted EPS (non-GAAP) guidance range
from $1.65 - $1.80 to $1.75 - $1.85
REVENUE
ASSUMPTIONS
• Normal weather for the remainder of 2016
• Weather-normalized demand growth
- 12-months ended September 30, 2016, weather-normalized demand up
0.3%, net of an estimated 0.7% impact from energy efficiency—in line with
full year estimate of flat to 0.5%
• New retail rates and cost recovery mechanisms in KCP&L’s Missouri and
Kansas jurisdictions effective September 29, 2015 and October 1, 2015,
respectively
OTHER
DRIVERS
• Disciplined cost and capital management
• Effective tax rate of approximately 37% in 2016
TRANSOURCE ENERGY, LLC
NATIONAL PLATFORM TO PURSUE COMPETITIVE TRANSMISSION OPPORTUNITIES
Well-positioned to compete and deliver innovative transmission solutions
1. The venture excludes transmission projects in the Electric Reliability Council of Texas (ERCOT) and AEP’s existing transmission project joint ventures
• Joint venture between
Great Plains Energy
(13.5%) and AEP (86.5%)
structured to pursue
competitive transmission
projects1
• Total project portfolio
approximately $600 million
• Positioned for sustainable,
long-term growth in
competitive transmission
market
20 2016 EEI INVESTOR PRESENTATION
APPENDIX
21 2016 EEI INVESTOR PRESENTATION
PRO FORMA COMBINED COMPANY
CORPORATE STRUCTURE
Great Plains Energy
Baa2 / BBB
Revolver Size: $200mm
Kansas City Power &
Light
Baa1 / BBB+
Revolver Size: $600mm
KCP&L Greater Missouri
Operations
Baa2 / BBB+
Revolver Size: $450mm
Westar
A2 / A1
Revolver Size: $1,000mm
Kansas Gas & Electric
A2 / A1
.
1. Westar and KGE ratings shown are senior secured ratings given term debt is all secured.
22 2016 EEI INVESTOR PRESENTATION
KEY FINANCIAL TERMS
1. Number of shares of Great Plains Energy stock to be based on an Exchange Ratio equal to the quotient obtained by dividing $9.00 by the 20-day volume-weighted average
price of Great Plains stock at closing, subject to a 7.5% collar mechanism such that the minimum number of Great Plains Energy shares issued per Westar Energy share will be
0.2709 and maximum will be 0.3148, based on the May 26, 2016 closing price of $30.91.
23
• Total equity purchase price of approximately $8.6 billion
−85% cash ($7.3 billion)
−15% stock to Westar shareholders ($1.3 billion)
• Enterprise value of approximately $12.2 billion including Westar Energy’s
assumed net debt
• Purchase price consists of $51.00 in cash and 0.2709 – 0.3148 of Great
Plains Energy shares based on a collar mechanism
• Collar mechanism that adjusts number of shares issued to provide fixed
value within a 7.5% trading band for Great Plains Energy stock1
2016 EEI INVESTOR PRESENTATION
24
Lori Wright
Vice President – Corporate Planning, Investor Relations and Treasurer
(816) 556-2506
lori.wright@kcpl.com
Calvin Girard
Senior Manager, Investor Relations
(816) 654-1777
calvin.girard@kcpl.com
CONTACT INFORMATION
NYSE: Great Plains Energy (GXP)
INVESTOR RELATIONS INFORMATION
2016 EEI INVESTOR PRESENTATION