Great Plains, Westar Revise $14 Billion Merger Plan for Utility Serving Missouri, Kansas

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Researched by Industrial Info Resources (Sugar Land, Texas)--Great Plains Energy Incorporated (NYSE:GXP) (Kansas City, Missouri) and Westar Energy Incorporated (NYSE:WR) (Topeka, Kansas) have announced that they will merge into a single company that will provide electric utility service to roughly 1 million customers in Kansas and nearly 600,000 customers in Missouri. The new company, which has not yet been named, will have a combined equity value of about $14 billion. Industrial Info is tracking more than $236 million in active projects involving Great Plains or Westar.

Both companies' boards of directors unanimously approved the transaction, a revision of a $12.2 billion deal that was rejected by the Kansas Corporation Commission in April. According to The Topeka Capital-Journal, the commission cited concerns about the amount of debt Great Plains would have taken on. The new deal involves no debt or cash exchange; instead, the two will form a new holding company.

Approval is still needed from shareholders and commissions in both states. If approved, the deal is expected to wrap up in the first half of 2018.

Kansas City Power & Light Company (KCP&L) (Kansas City, Missouri), a unit of Great Plains, is at work with Westar on a planned, 345-kilovolt (kV) transmission line running from Iatan, Missouri, to Stranger Creek, Kansas, with the two companies' segments tying in at the Missouri River. KCP&L is involved in the $11.1 million rebuild of 2.5 miles of the Missouri line and the $5 million expansion of the Iatan Substation, while Westar is involved in the $16 million rebuild of 16 miles of the Kansas line and the $12 million rebuild of the Stranger Creek Substation. For more information, see Industrial Info's project reports on the Missouri line and substation expansion, and the Kansas line and substation expansion.

Westar also is proposing a $28 million installation of dry-cask storage pads at its Wolf Creek Nuclear Power Station in Burlington, Kansas. The new pads would hold 30 dry-cask canisters to store spent nuclear fuel. For more information, see Industrial Info's project report.

Industrial Info also is tracking more than $100 million in maintenance-related projects involving Great Plains or Westar set to kick off during the next two years.

"This merger creates a stronger company for our customers and a much more valuable company for shareholders, with no additional acquisition debt, along with sustaining commitments to Topeka and Kansas," said Mark Ruelle, president and chief executive officer of Westar Energy, in a joint press release. "It is a win-win... We also expect significant earnings accretion and a larger and stronger earnings growth platform than we could achieve on our own."

The new company would operate regulated electric utilities in Kansas and Missouri, with operating headquarters in Topeka and Kansas City, respectively. Corporate headquarters will be in Kansas City, Missouri. Following completion of the merger, Westar Energy shareholders will own about 52.5% and Great Plains Energy shareholders about 47.5% of the combined company, according to the press release.

In their first-quarter 2017 earnings reports, both companies saw year-over-year decreases in profits, citing lower residential and commercial sales due to mild weather.

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