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| 8-K - 8-K INVESTOR PRESENTATION JANUARY 2018 - GREAT PLAINS ENERGY INC | investorpresentation8-kjan.htm |
MERGER TO FORM
LEADING ENERGY
COMPANY
January 2018
Investor Update
Exhibit 99.1
January 2018 Investor Update
Forward-Looking Statements
2
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, statements relating to the anticipated merger transaction of Great Plains Energy Incorporated (Great
Plains Energy) and Westar Energy, Inc. (Westar Energy), including those that relate to the expected financial and operational benefits of the merger to the companies and
their shareholders (including cost savings, operational efficiencies and the impact of the anticipated merger on earnings per share), the expected timing of closing, the
outcome of regulatory proceedings, cost estimates of capital projects, dividend growth, share repurchases, balance sheet and credit ratings, rebates to customers, employee
issues 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 Westar Energy 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, KCP&L, and Westar Energy; 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 that 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; 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 and Westar Energy
to obtain the regulatory approvals necessary to complete the anticipated merger or the imposition of adverse conditions or costs in connection with obtaining regulatory
approvals; the risk that a condition to the closing of the anticipated merger may not be satisfied or that the anticipated merger may fail to close; the outcome of any legal
proceedings, regulatory proceedings or enforcement matters that may be instituted relating to the anticipated merger; the costs incurred to consummate the anticipated
merger; the possibility that the expected value creation from the anticipated merger will not be realized, or will not be realized within the expected time period; difficulties
related to the integration of the two companies; the credit ratings of the combined company following the anticipated merger; disruption from the anticipated merger making it
more difficult to maintain relationships with customers, employees, regulators or suppliers; the anticipated diversion of management time and attention on the anticipated
merger; and other risks and uncertainties.
This list of factors is not all-inclusive because it is not possible to predict all factors. Additional risks and uncertainties are discussed in the joint proxy statement/prospectus
and other materials that Great Plains Energy, Westar Energy and Monarch Energy Holding, Inc. (Monarch Energy) file with the Securities and Exchange Commission (SEC)
in connection with the anticipated merger. Other risk factors are detailed from time to time in quarterly reports on Form 10-Q and annual reports on Form 10-K filed by Great
Plains Energy, KCP&L and Westar Energy with the SEC. Each forward-looking statement speaks only as of the date of the particular statement. Monarch Energy, Great
Plains Energy, KCP&L and Westar Energy undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future
events or otherwise.
January 2018 Investor Update
Recent Focus
• Merger Approval Update
Shareholder Approval – overwhelming support with more than 90 percent of shares voted in favor at each
company – November 2017
Received HSR antitrust clearance – December 2017
• Ryan A. Silvey confirmed as Missouri Public Service Commissioner – January 2018
• Tax Reform
Continuing to evaluate the overall impact of recently passed federal tax legislation
Initial review is not expected to change previously disclosed pro forma EPS and Dividend growth targets
Continue to expect repurchase of ~60 million shares over first two years after closing
Expect to maintain strong investment grade credit profile
Projections subject to further evaluation of tax reform legislation, guidance from various regulatory
agencies, and the outcome from various state regulatory proceedings, including those focused on tax
reform
3
Merger Overview
January 2018 Investor Update
Creating A Leading Energy Company
5
Merger Drives
Value For All
Stakeholders
Expect to deliver exceptional
value through attractive
earnings and dividend growth
Serving customers and
communities with reliable
service, clean energy, and
fewer and lower rate increases
Maintaining a rewarding and
challenging work environment for
valued employees
Shareholders
Customers &
Communities
Employees
January 2018 Investor Update
Merger Of Equals
• Creates a leading energy company with a combined
equity value of ~$14.5 billion1 – a more valuable
company for shareholders and a stronger company
for customers
• 100% stock-for-stock, tax-free exchange of shares
with no transaction debt and no exchange of cash
• Exchange Ratio
WR: 1:1 (52.5% ownership)
GXP: 0.5981:1 (47.5% ownership)
• Transaction structure directly responsive to earlier
regulatory concerns
• Closing expected second quarter 2018
6
Great Plains
Energy
Westar
Energy
Pro Forma
Combined
Rate Base ($billion)4 $6.6 $6.5 $13.1
Electric Customers 864,400 707,000 1,571,400
Owned Generation
Capacity (MW)
6,524 6,573 13,097
Renewables5 (MW) 1,455 1,661 3,116
Transmission Miles 3,600 6,400 10,000
Distribution Miles 22,700 29,000 51,700
1. Great Plains Energy and Westar Energy combined market cap as of 12/29/17.
2. Excludes Great Plains Energy’s Crossroad Energy Center in the Mississippi Delta and Westar’s Spring Creek Energy Center in Logan County, OK.
3. Operating metrics as of 9/30/17.
4. Estimated rate base based on ordered and settled rate cases.
5. Renewables both owned and purchase power agreements as of 12/31/17.
Energy Centers Westar Energy Great Plains Energy
Combined Service Area2 Key Operating Metrics3
January 2018 Investor Update
Stronger Platform For Earnings Growth
7
$3.25
[VALUE]
[VALUE]
2016A Pro Forma 2021E
Targeted Pro Forma EPS Growth1
6%-8%
CAGR
1. EPS growth based on Westar Energy 2016 actual EPS of $2.43.
Driven by the Following Assumptions:
• Merger savings
• FERC regulated transmission growth
• Share repurchases over first two years after closing
• Anticipated 2018 general rate reviews to reduce regulatory lag
January 2018 Investor Update
Stronger Platform For Dividend Growth
8
$2.19
[VALUE]
[VALUE]
Pro Forma 2018E Pro Forma 2021E
Targeted Pro Forma Dividend Growth
6%-8%
CAGR
• Initial dividend results in 15% increase for Westar’s shareholders
• Initial dividend maintains Great Plains Energy’s current dividend policy
• Targeted annual dividend growth in line with EPS growth while targeting payout
ratio of 60% to 70%
1. Based on most recent Great Plains Energy quarterly dividend payment annualized of $1.10 per share divided by the 0.5981 exchange ratio.
1
January 2018 Investor Update
Strong Platform For Merger Savings
9
2018E 2019E 2020E 2021E
$110.3
$143.5 $149.4
$27.8
Targeted Merger Savings ($mm)1
2016A 2021E
Great Plains Energy Westar Pro Forma
$1,367
~$1,100 – $1,200
Targeted O&M Cost Reductions ($mm)2
~(15%)
• Combination provides maximum opportunities for efficiencies, cost savings for customers, and
better ability to earn allowed returns
• Cost savings and ongoing management of O&M expected to drive total cost reductions of
approximately 15% from 2016 to 2021
• Detailed integration plans expected to result in merger savings of $160 million in 2022 and beyond
In addition to targeted merger savings, we expect over $200 million of potential cost savings
related to Great Plains Energy plant retirements
1. Excludes Great Plains Energy plant retirements announced June 2017 and potential capital expenditure savings. Planned merger savings include non-fuel O&M and Other shown net of costs to
achieve. See appendix slide for projected merger savings by type and year.
2. Inclusive of targeted O&M merger savings and expected O&M cost savings of Great Plains Energy announced plant retirements.
3. Represents Great Plains Energy utility O&M and Westar’s O&M and SG&A as reported in GAAP financials.
3
January 2018 Investor Update
• Projected significant earnings accretion to Great Plains Energy and Westar Energy
• Expect to offer top quartile total shareholder return amongst electric utilities:
Target EPS growth of 6% to 8%, 2016 to 20211
Target dividend growth in line with EPS growth, 60% to 70% target payout ratio
• Initial 15% dividend increase for Westar Energy
• Diversifies and enhances earnings stream
• Opportunity to improve earned returns relative to authorized
• Target rate base growth of 3 to 4% through 20222
Over $6 billion in investment from 2018 through 2022
Including, over $1 billion in FERC regulated transmission investment
• Capital structure rebalancing post-closing
Expect to repurchase ~60 million, or ~22% of pro forma shares outstanding, in the first two years after closing3
Rebalancing supported by strong balance sheet with expected $1.25 billion of cash at closing
Combined company expected to maintain strong investment-grade credit ratings
10
1. Targeted EPS growth based on Westar Energy 2016 actual EPS of $2.43.
2. Based on 2016 pro forma rate base currently reflected in rates of $13.1 billion.
3. Anticipated initial pro forma shares of approximately 272 million at merger closing.
Financial Benefits
10
January 2018 Investor Update
Strong Credit with Capacity for Share
Repurchases
• Great Plains Energy completed unwind of prior debt and mandatory convertible preferred equity acquisition financing
following July 2017 merger of equals announcement
• Merger of equals structure with no merger debt results in a strengthened credit profile and positive rating agency action
Credit metrics for combined company expected to be in-line with those of Great Plains Energy pre-merger
• Expect to repurchase ~60 million shares (~22% of pro forma shares outstanding) in the first two years after closing1
• Projected consolidated FFO / Total Debt of ~18% to 20% in 2019 – 20212
• Projected consolidated Debt / Capitalization of ~48 to 50% in 2019 – 20212
11
Ratings / Outlook3
Westar
Energy
Great Plains
Energy KCP&L GMO
S
&
P
Issuer Rating BBB+ BBB+ BBB+ BBB+
Senior Secured Debt A - A -
Senior Unsecured Debt - BBB BBB+ BBB+
Outlook Positive Positive Positive Positive
M
o
o
d
y
’s
Issuer Rating Baa1 - - -
Senior Secured Debt A2 - A2 -
Senior Unsecured Debt - Baa2 Baa1 Baa2
Outlook Stable Stable Stable Stable
1. Anticipated initial pro forma shares of approximately 272 million at merger closing.
2. Projected FFO/Debt and Debt/Capitalization could be impacted by recently passed tax legislation.
3. Credit ratings as of 11/1/2017.
January 2018 Investor Update
Merger Expected To Close Second
Quarter of 2018
12
Stakeholder Filed
Approval
Anticipated Additional Information
GXP and WR shareholders Approved November 21, 2017
KCC 2Q18 Docket: 18-KCPE-095-MER
MPSC 2Q18 Docket: EM-208-0012
FERC 1Q18 – 2Q18 Docket: EC-171-000
NRC 1Q18 – 2Q18 Docket: 50-482
U.S. DOJ/FTC (HSR) Received December 12, 2017
FCC 1Q18 – 2Q18 1Q18 – 2Q18
January 2018 Investor Update
State Merger Procedural Schedules
13
Key Dates (2018) Kansas Corporation Commission Missouri Public Service Commission1
January 16 Rebuttal Testimony Due
January 22 Public Hearing
January 29 Staff/Intervenor Direct Testimony Due
February 19 Rebuttal Testimony Due
February 21 Surrebuttal Testimony Due
Week of February 26 Settlement Conferences
March 7 Deadline to Submit Settlement Agreement
March 12-16 Evidentiary Hearings
March 19-27 Evidentiary Hearings
March 30 Initial Briefs Due
April 10 Initial Brief Due
April 13 Reply Briefs Due
April 20 Staff/Intervenor Responsive Brief Due
April 28 Reply Brief Due
June 5 Commission Order Due
1. The Missouri Public Service Commission’s procedural schedule was silent on an expected order date but is supportive of an end of May, 2018 order effective date.
Regulatory and Legislative
Priorities
January 2018 Investor Update
Regulatory Initiatives
Westar General Rate Review Considerations:
• Western Plains Wind Farm
• Expiration of wholesale contracts currently reflected in rates as offsets to retail cost of service
• Expiring production tax credits from initial wind investments
• Federal income tax reform
• Updated depreciation study
KCP&L/GMO General Rate Review Considerations:
• Drivers include new customer information system and other infrastructure investments since rates were last set
• Federal income tax reform
Energy Legislative Priorities:
• Supporting comprehensive regulatory reform in Missouri in 20181
• Not expecting major Kansas legislative activities in 2018
15
Regulatory Timing 1Q18 2Q18 3Q18 4Q18
Merger Approval
Westar General Rate Review
KCP&L – KS General Rate Review
KCP&L – MO General Rate Review
GMO General Rate Review
Missouri & Kansas Legislative Session
1. Missouri Senate Bill 564 filed December 1, 2017 and House Bill 1575 filed December 11, 2017.
January 2018 Investor Update
Constructive Ratemaking
16
Cost Recovery Mechanisms
Westar
Kansas
KCP&L
Kansas
KCP&L
Missouri
GMO
Missouri
Energy Cost Adj. Rider (KS) / Fuel Adj. Clause Rider (MO) √ √ √ √
Pension and OPEB Tracker √ √ √ √
Property Tax Surcharge Rider √ √
Energy Efficiency Cost Recovery Rider √ √
Missouri Energy Efficiency Investment Act Program Rider √ √
Renewable Energy Standards Tracker √ √
Renewable Energy Standard Rate Adj. Mechanism Rider √
Transmission Delivery Charge Rider √ √
Critical Infrastructure Protection Standards / Cybersecurity
Tracker √ √
Abbreviated Rate Case √ √
January 2018 Investor Update
State Commissioners
17
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. Pat Apple (R)
Chair (since January 2017)
Term began: March 2014
Term expires: March 20181
Mr. William P. Kenney (R)
Commissioner
Term began: January 2013
Term expires: January 2019
Ms. Shari Feist Albrecht (I)
Commissioner
Term began: June 2012
Reappointed: January 2017
Term expires: March 2020
Mr. Scott T. Rupp (R)
Commissioner
Term began: March 2014
Term expires: March 2020
Mr. Jay S. Emler (R)
Commissioner
Term began: January 2014
Reappointed: May 2015
Term expires: March 2019
Ms. Maida J. Coleman (D)
Commissioner
Term began: August 2015
Term expires: August 2021
Mr. Ryan A. Silvey (R)
Commissioner
Term began: January 2018
Term expires: January 2024
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
1. Chair Pat Apple has indicated he will not serve past his term.
Clean Energy Leader
January 2018 Investor Update
Sustainable Energy Portfolio
• Combined wind portfolio will be one of the largest in the United
States: ~3,200 MW1
• Renewable energy ~30% of retail sales
Emission-free energy (renewable and nuclear) nearly half
of retail sales
• Well ahead of renewable portfolio standards in Missouri and
voluntary goals in Kansas3
19
1. Includes owned generation and power purchase agreements based on nameplate capacity of the facility.
2. Source: American Wind Energy Association.
3. Missouri RPS requires 15% of electricity sales to customers with renewable sources by 2021. Kansas has voluntary goal of 20% of utility’s peak by 2020.
• Focused on growing renewables while retiring end-of-life
fossil plants
• Strong platform to grow renewables and take advantage
of abundant local natural resources
Kansas ranks 5th in the nation for installed wind
capacity2
2005 2018
0%
10%
20%
30%
40%
Combined Company Projections
Anticipated Emission Reduction 2005 - 2020 Renewables as Percent of Retail Sales
0%
25%
50%
75%
100%
2005 2008 2011 2014 2017E 2020E
SO2
98%
85%
~30%
NOx
85%
SO2
38%
Appendix
January 2018 Investor Update
Projected Merger Savings
21
2016- 2017 2018E 2019E 2020E 2021E 2022E Total
NFOM
Labor
- $38.3 $66.6 $78.1 $83.2 $85.3 $351.5
NFOM Non-
Labor
- $8.6 $41.4 $55.1 $54.3 $61.1 $220.5
Fuel - $0.7 $1.0 $1.1 $1.3 $2.3 $6.4
Other - $2.2 $7.9 $12.3 $13.3 $13.4 $49.0
Gross
Efficiencies
- $49.7 $116.9 $146.5 $151.9 $162.0 $627.0
Transition
Costs
($35.6) ($21.9) ($6.6) ($3.0) ($2.5) ($2.2) ($71.8)
Net
Savings
($35.6) $27.8 $110.3 $143.5 $149.4 $159.8 $555.2
Merger Savings by Type and Year ($mm)1,2
1. Some numbers may not add due to rounding.
2. Source: Steven Busser, Kansas direct testimony filed August 25, 2017; page 15 (Docket: 18-KCPE-095-MER).
Steven Busser, Missouri direct testimony filed August 31, 2017; page 14 (Docket: EM-2018-0012).
January 2018 Investor Update
Creating a Leading Midwest Energy
Utility
22
Source: Company filings, investor presentations, Bloomberg market data as of 12/29/2017.
$14.3 $14.3 $12.2
$8.6 $9.9 $9.5 $9.5 $8.1 $5.7 $7.5 $6.6 $6.9
$22.6
$21.1 $19.6
$17.3
$14.9 $14.5 $13.1 $12.7 $12.5 $11.4
$9.8 $9.8
Combined
Company
WR GXP
Market Cap EV
17.3
15.0 15.0 14.2 13.4 13.1
11.0
9.4 9.2
8.2 7.6
6.6 6.5
GXP WR
1.6 1.6
1.2
1.0 0.9 0.9 0.8 0.8 0.7 0.7
0.5 0.5
GXP WRCombined Company
SELECTED MID-CAP UTILITIES BY ENTERPRISE VALUE ($BN)
SELECTED MID-CAP UTILITIES BY CUSTOMERS (MILLIONS) SELECTED MID-CAP UTILITIES BY RATE BASE ($BN)
Combined
Company
January 2018 Investor Update
Compelling Strategic and
Geographic Fit
23
• Better positioned to meet customer’s energy needs, provide clean energy and optimize investments to achieve improved
long-term financial returns
• Increased scale and jurisdictional diversity with enhanced platform to drive value for shareholders and customers
• Strong geographic fit, complementary operations with contiguous territories and existing shared assets produce economies of
scale and significant savings and efficiencies
Great Plains Energy Westar Energy Combined Company
G
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Rat
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2
Cap
a
c
it
y
(M
W
)3
KS
100%
KS
60%
MO
40%
MO
64%
KS
31%
FERC
5%
KS
81%
FERC
19%
KS
56%
MO
32%
FERC
12%
Coal
44% Natural
Gas & …
Nuclear
7%
Renewable
19%
Coal
43% Natural
Gas & …
Nuclear
7%
Renewable
20%
Coal
42% Natural
Gas …
Nuclear
7%
Renewabl
e …
MO
72%
KS
28%
1. Customer breakdown by jurisdiction based on retail sales generation.
2. KCP&L,GMO, Westar and KG&E are also subject to regulation by The Federal Energy Regulatory Commission (FERC) with respect to transmission, wholesale sales and rates, and
other matters.
3. As of year-end 2017.
January 2018 Investor Update
Pro Forma Corporate Structure
24
NewCo1
Kansas City Power &
Light
KCP&L Greater
Missouri Operations
Great Plains Energy
Other Subsidiaries
Westar Energy
Westar Subsidiaries,
notably, KG&E
1. NewCo and operating utilities will be rebranded, with study underway.
January 2018 Investor Update
Pro Forma Executive Officer Team
President & CEO
Terry Bassham
EVP Chief Operating
Officer
Kevin Bryant
EVP Strategy & Chief
Administrative Officer
Greg Greenwood
EVP Chief Financial
Officer
Tony Somma
SVP Chief People
Officer
Jerl Banning
SVP Marketing, Public
Affairs & Chief
Customer Officer
Chuck Caisley
SVP General Counsel
& Corporate Secretary
Heather Humphrey
25
• Board of Directors to be comprised equally of Westar Energy and Great Plains
Energy board members.
• Both Mark Ruelle and Terry Bassham will be members of the Board of
Directors.
• Mark Ruelle will serve as non-executive Chairman of the Board.
• Charles Q. Chandler IV, currently non-executive chairman of Westar Energy’s
Board, will be lead independent director.
January 2018 Investor Update
Key Terms
26
Transaction
Structure
• All stock merger of equals (100% stock-for-stock tax-free exchange); combined equity value of
~$14.51 billion
• New company to be jointly named prior to close
Exchange Ratio
• Westar Energy: 1:1
• Great Plains Energy: 0.5981:1
Approximate Pro
Forma Ownership
• Westar Energy 52.5%
• Great Plains Energy 47.5%
Pro Forma Dividend
• Adjust to maintain current Great Plains Energy dividend
• Results in 15% dividend uplift for Westar Energy
Termination Fees
• Reverse break-up fee of $190 million in favor of Westar Energy
• Mutual fiduciary out break-up fees of $190 million in favor of the other
Governance
• Mark Ruelle (Westar Energy CEO) to be non-executive chairman
• Terry Bassham (Great Plains Energy Chairman, President & CEO) to be President & CEO
• Tony Somma (Westar Energy CFO) to be CFO; Kevin Bryant (Great Plains Energy CFO) to be COO
• Equal board representation from each company, including Bassham and Ruelle
Headquarters
• Corporate Headquarters – Kansas City, Missouri
• Operating Headquarters – Topeka, Kansas; Kansas City, Missouri
Timing / Approvals
• Expected to close second quarter 2018
• Shareholders, federal and state regulators
1. Great Plains Energy and Westar Energy combined market cap as of 12/29/17.
January 2018 Investor Update
Investor Relations Information
27
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
NYSE: GREAT PLAINS ENERGY (GXP)
Cody VandeVelde
Director, Investor Relations
(785) 575-8227
cody.vandevelde@westarenergy.com
Amber Housholder
Investor Relations Manager
(785) 575-8278
amber.housholder@westarenergy.com
NYSE: WESTAR ENERGY (WR)