Great Plains Energy Benefits from Scorching Weather in Second-Quarter 2012, Expects Slight Demand Growth

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Researched by Industrial Info Resources (Sugar Land, Texas)--Great Plains Energy (NYSE:GXP) (Kansas City, Missouri) saw strong gains in revenues and earnings in the second quarter of 2012, as the blistering heat engulfing much of the U.S. sharply increased demand for services. Great Plains is the holding company for Kansas City Power & Light Company (KPC&L) and KPC&L Greater Missouri Operations Company (GMO), which are two of the top electricity providers in the U.S. Midwest. Net earnings were reported to be $57.7 million for the quarter, a 34.19% increase from second-quarter 2011.

Total revenues stood at $603.6 million, a 6.81% increase from the same period last year. The warmer weather was reflected in cooling degree days, a measurement of the amount of energy used to cool a home or business. There was a 30% increase in cooling degree days from second-quarter 2011, and 56% more than what is considered normal. (Similarly, the first quarter of 2012 saw a 34% decline in heating degree days.) Another boost came from new retail rates at subsidiaries KCP&L and GMO, which added about $13 million. Utility capital expenditures for the first half of 2012 totaled $263.4 million, compared with $193.2 million in the first half of 2011.

To address the worsening heat, KCP&L is expanding a program that assists low-income customers and senior citizens with their electric bills, and is creating a "Family Relief Fund" to provide bill credits to qualifying customers with at-home children.

Industrial Info is tracking more than $900 million in projects involving Great Plains Energy that are in the planning, engineering and construction stages, including the planned $50 million upgrade to the 685-megawatt Unit 2 at the power station in La Cygne, Kansas. The project involves repairing or replacing tubes and other equipment on a coal opposed-fired dry bottom boiler and GE Tandem compound steam turbine generator set as part of scrubber/controls upgrade. The planned kickoff and completion dates are in March and June of 2014, respectively.

"The headline to our story for the second quarter is hot weather, which helped offset much of the negative, year-to-date earnings impact associated with unseasonably warm weather in the winter," said Terry Basshan, the president and chief executive officer of Great Plains Energy, in a conference call. "In addition, we continue to execute on our cost-containment program, including the ongoing benefits from the 2011 organizational realignment and voluntary separation program to reduce the size of our workforce."

All of the major Great Plains Retail businesses saw steady increases in revenues from second-quarter 2011. The total number of megawatt-hours sold was slightly higher than the same period last year, except in the Wholesale segment, which saw a 90% increase:

• Retail revenues were reported to be $544.7 million, a 5.36% increase from second-quarter 2011.
• Residential revenues were reported to be $236.7 million, an 8.98% increase from the same period last year.
• Commercial revenues were reported to be $242.5 million, an 8.79% increase from second-quarter 2011.
• Industrial revenues were reported to be $55.4 million, a 4.14% increase from the same period last year.
• All other Retail revenues were reported to be a total of $4.9 million, a 2.08% increase from second-quarter 2011.
• Wholesale revenues were reported to be $48.6 million, a 28.57% increase from the same period last year.
• All other revenues were reported to be $10.3 million, basically unchanged from second-quarter 2011.

"Overall, we are maintaining our expectation of 0.5% weather-normalized demand growth in 2012," said Jim Shay, the senior vice president and chief financial officer of Great Plains Energy, in the conference call. "To the extent that this growth is not achieved, it may be offset by the positive impacts from weather."

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