Great Plains Energy, the parent company of Kansas City Power & Light, announced this morning that it had reached an agreement to acquire Topeka-based Westar Energy, the largest utility in Kansas, for $12.2 billion in cash and stock, including assumption of about $3.6 billion in debt.
The acquisition would give Great Plains more than 1.5 million customers in Missouri and Kansas, the company said in a news release. After the acquisition, its assets would include nearly 13,000 megawatts of generation capacity, almost 10,000 miles of transmission lines and more than 51,000 miles of distribution lines. The two utilities jointly own Wolf Creek Nuclear Generating Station near Burlington, Kan., along with the La Cygne and Jeffrey power plants. The move, said Great Plains, could help manage the impact of future federal regulations on carbon emissions, becuase the combined company will have one of the largest wind-generation portfolios among the nation’s investor-owned utilities.
“Westar and KCP&L are trusted neighbors and have worked together for generations in Kansas. The combination of our two companies is the best fit for meeting our region’s energy needs,” said Terry Bassham, Great Plains’ chairman and CEO. “This is an important transaction for Kansas and our entire region. By combining our two companies, we are keeping ownership local and management responsive to regulators, customers and regional needs, while enhancing our ability to build long-term value for shareholders.”
It’s the second major regional acquisition for Great Plains Energy within the past decade; in 2008 it acquired the faltering Aquila, Inc., a Kansas-City based electric utility serving Missouri. The agreement calls for Westar shareholders to receive $60 per share of total consideration for each share of Westar common stock, consisting of $51 in cash and $9 in Great Plains Energy common stock, with certain restrictions, for a mix of 85 percent cash and 15 percent stock.
Great Plains said it had lined up 8 billion of debt financing from Goldman Sachs Bank USA and Goldman Sachs Lending Partners to finance the deal, and secured $750 million mandatorily preferred convertible equity commitment from the Ontario Municipal Employees Retirement System (OMERS), to be funded at the closing of the transaction. It will also use a blend of equity, equity-linked securities and debt prior to closing of the transaction for long-term financing, allowing the utility maintain its investment-grade credit ratings.
Bassham will be chairman and chief executive officer of the combined company. Westar CEO Mark Ruelle will remain in his current role until the closing of the transaction.Filings with regulatory bodies will begin this month, and both companies will seek shareholder approval for the union, which must also be approved by the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.