Great Plains Energy Sees Earnings Drop from Heavy Outage Costs, but Expects to Benefit from New Rates

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Researched by Industrial Info Resources (Sugar Land, Texas)--Great Plains Energy (NYSE:GXP) (GPE) (Kansas City, Missouri), the holding company for Kansas City Power & Light Company (KCP&L) and KPC&L Greater Missouri Operations Company, which are two of the top electricity providers in the U.S. Midwest, saw its earnings tumble in the second quarter of 2014. A string of operational and maintenance costs, especially for a months-long outage at the Wolf Creek Nuclear Generating Station, offset strong retail sales. Net earnings were reported to be $51.7 million, a, 18.2% decrease from the second quarter of 2013.

Industrial Info is tracking more than $1.1 billion in projects involving GPE, including the planned, $400 million construction of the Midwest Transmission Line Project. The project involves building 150 to 190 miles of overhead, 345-kilovolt (kV) line from KCP&L's existing Sibley Substation in Sibley, Missouri, to KCP&L's proposed Mullen Creek Substation in Maryville, Missouri, and ultimately to Omaha Public Power's existing Nebraska City Substation in Nebraska City, Nebraska. Kiewit Power Engineers Company (Lenexa, Kansas) is performing engineering, procurement and construction services for the line. The construction of the Maryville station is valued at $45 million.

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GPE saw a 1.2% increase in retail megawatt-hour (MWh) sales from second-quarter 2013, benefiting from 15% more cooling-degree days and an overall increase in retail demand. But the company faced a slew of offsetting factors, including a $5.5 million increase in transmission, distribution and generation expenses; a $4.3 million increase in operating and maintenance expenses at the Wolf Creek Nuclear Generating Station in Burlington, Kansas, due to a planned, mid-cycle outage; and a $3.2 million increase in operating and maintenance expenses from planned outages at coal units.

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"We successfully settled and received an order in our Kansas abbreviated rate case, where we're seeing construction work in progress," said Terry Bassham, the chairman and chief executive officer of GPE, in a conference call. "As a result, new retail rates were effective in late July, a couple of weeks ahead of the anticipated time line. In addition, we recently reached an agreement to expand our energy efficiency programs, authorized under the Missouri Energy Efficiency Act, through a rider. Next year, we expect to seek approval to offer similar programs to our customers in Kansas through the Kansas Energy Efficiency Investment Act, which was signed into law earlier this quarter."

GPE executives expect to see a 0.5% to 1% growth in weather-normalized retail sales for full-year 2013, as well as a full month of new retail sales in Missouri. Executives also expect the economic status of the company's service areas to continue improving. Operational and maintenance expense are expected to increase 3% to 4% from full-year 2013 due to the Wolf Creek outage and new investments, while transmission costs and depreciation expenses also are expected to be higher; nonetheless, these expenses are expected to be lower in the second half of 2014 when compared with the first half.

Ongoing environmental upgrades at GPE's coal-fired power station in La Cynge, Kansas, are expected to hike construction costs. However, GPE expects new Kansas retail rates, which went into effect July 25 following the abbreviated rate case, to prove beneficial for the remainder of the year.

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"We continue to make progress on the environmental upgrades at our La Cynge generating station," Bassham said in the conference call. "The project remains within budget and on schedule for completion by June 2015. This investment provides significant customer benefits in the form or clean and reliable power, and is a key driver of rate-based earnings growth."

For more information, visit Industrial Info's North American Power Project Database.

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