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_____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Amendment No. 1 to
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
____________
KANSAS CITY POWER & LIGHT COMPANY
(Name of Subject Company)
KANSAS CITY POWER & LIGHT COMPANY
(Name of Person Filing Statement)
Common Stock, no par value
(Title of Class of Securities)
____________
485134100
(CUSIP Number of Class of Securities)
____________
Jeanie Sell Latz, Esq.
Senior Vice President-Corporate Services
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106-2124
(816) 556-2200
(Name, address and telephone number of person authorized
to receive notice and communications on behalf
of the person filing statement)
____________
Copy to:
Nancy A. Lieberman, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
_____________________________________________________________
This statement amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 of Kansas
City Power & Light Company, a Missouri corporation ("KCPL"),
filed with the Securities and Exchange Commission (the
"Commission") on July 9, 1996 (the "Schedule 14D-9"), with
respect to the exchange offer made by Western Resources, Inc., a
Kansas corporation ("Western Resources"), to exchange Western
Resources common stock, par value $5.00 per share, for all of the
outstanding shares of KCPL common stock, no par value ("KCPL
Common Stock"), on the terms and conditions set forth in the
prospectus of Western Resources dated July 3, 1996 and the
related Letter of Transmittal.
Capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Schedule 14D-9.
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
Exhibit 38. Drue Jennings' speech delivered July 9, 1996.
Exhibit 39. Other Solicitation Materials.
SIGNATURE
After reasonable inquiry and to the best of her knowledge
and belief, the undersigned certifies that the information set
forth in this Statement is true, complete and correct.
KANSAS CITY POWER & LIGHT COMPANY
By:/s/Jeanie Sell Latz
Jeanie Sell Latz
Senior Vice President-Corporate Services
Dated: July 9, 1996
EXHIBIT INDEX
Exhibit No. Description Page
__________ _______________________________________________ ____
Exhibit 38 Drue Jennings' Speech delivered July 9, 1996
Exhibit 39 Other Solicitation Materials
Exhibit 38
Drue Jennings' Speech
July 9, 1996
Hello, thank you for listening in.
My name is Drue Jennings, and I am the Chairman and Chief
Executive Officer of Kansas City Power & Light Company. I would
like to provide you with an update of the events that have
transpired around our proposed merger with UtiliCorp United.
The May 22, 1996 shareholder vote to approve the strategic
merger of equals transaction with UtiliCorp was canceled in order
to present KCP&L shareholders with a transaction that offered
even better economics and a revised merger structure. The new
structure has been revised to increase the value to KCP&L
shareholders by increasing their ownership in the combined
company (KCP&L shareholders are expected to own 57%, instead of
the 55% they would have owned under the original agreement, and
UtiliCorp shareholders will own 43% instead of 45%). KCP&L
shareholders would continue to hold their existing KCP&L shares,
and UtiliCorp shareholders would receive one share in the merged
company for each UtiliCorp share owned. The revised terms of the
merger agreement provide for a new structure pursuant to which a
new KCP&L subsidiary will be created and merged into UtiliCorp,
and UtiliCorp will then merge with KCP&L. At the time the
mergers are completed, the combined company will change its name
to Maxim Energies, Inc. Additionally, the affirmative vote of
KCP&L shareholders required to approve the transactions has
changed from two-thirds of all outstanding shares to a majority
of the shares voting. A Special Meeting of KCP&L shareholders is
scheduled for August 7, 1996 to vote upon the issuance of KCP&L
shares to be issued in the mergers. Under Missouri law, a
separate vote of the KCP&L shareholders is not required to
approve the mergers; however, since it is a condition of the
closing of the mergers that KCP&L shareholders approve the share
issuance, in essence, a vote for the share issuance is a vote for
the mergers.
On June 17, 1996, Western Resources, a Topeka, Kansas-based
utility, revised its proposal to acquire KCP&L and announced its
intention to commence an unsolicited exchange offer for KCP&L
common stock. Shortly after receipt of this second unsolicited
proposal from Western Resources, the KCP&L Board of Directors
reviewed and deliberated the Western proposal and reaffirmed its
belief that a merger with Western Resources was not in the best
long-term interest of KCP&L shareholders and rejected the Western
proposal and reiterated its unqualified support of our strategic
merger with UtiliCorp. Western Resources has formally commenced
its unsolicited exchange offer, and it was rejected by KCP&L's
Board of Directors on July 9, 1996.
I would like to provide you with some information related to
the rationale and benefits of our proposed merger with UtiliCorp.
Also, I would like to address the reasons for our Board's
rejection of the Western offer, as well as to touch on certain
aspects of their public campaign which we feel are misleading and
require some clarification.
Let me now address for you several of the significant
benefits which our Board views as the underlying rationale for
our proposed merger with UtiliCorp.
First, the UtiliCorp transaction provides KCP&L shareholders
with regulatory and geographic diversity given UtiliCorp's
widespread presence in both national and global markets,
including for example UtiliCorp's interests in Australia, Canada,
and New Zealand. Secondly, the merger brings together what we
see as the complementary strengths of KCP&L's operating and
financial expertise with UtiliCorp's unique marketing focus and
entrepreneurial spirit. UtiliCorp has a clearly articulated
strategy and demonstrated track record in non-regulated
businesses which are the areas that we have told our shareholders
will provide the greatest future growth. They have a strong and
well-respected Independent Power business through their UtilCo
subsidiary, a significant international presence which I have
referred to above; they are rolling out and have had success with
their national brand name strategy under the EnergyOne label. We
anticipate the newly formed company resulting from this merger
will be a low-cost, marketing-oriented, diversified energy
products and services company with national and global scope.
Additionally, through joint study by both companies and our
advisors, we have included as part of our merger filings a
documentation of synergies totaling over $600 million over a 10-
year period. We are confident that these are substantiated,
deliverable savings which will benefit both shareholders and
ratepayers. Furthermore, through joint study by both companies
and our advisors as described in detail in KCP&L's proxy
materials, we have identified and quantified revenue enhancements
that result from the mergers ranging from $0.20 per Maxim share
in the first year of the merger to $0.44 per Maxim share in the
fourth year of the merger. We project that, as detailed in our
proxy materials and subject to the assumptions therein, the
combination of synergies and revenue enhancements will provide
aggregate added value ranging from $0.38 per Maxim share in the
first year of the merger to $0.75 per Maxim share in the fourth
year of the merger.
Now let me address the Western Resources proposal and what
we feel are some issues which our shareholders should understand
as they consider how they will vote in the UtiliCorp transaction.
Unlike the UtiliCorp transaction, Western would not
provide geographic and regulatory diversity given that Western's
operations are concentrated in Kansas. Furthermore, a Western
deal would result in significant asset concentration at Wolf
Creek, our jointly owned nuclear power plant. We question
certain rate disparities and other regulatory issues involving
Western's proposal and we feel that, unlike UtiliCorp, Western's
unregulated business strategy, an area of great importance to us,
is unproven and questionable in value.
Having covered these points, I would like to now address
Western's hostile campaign and its unwarranted claims.
Western has stated to the public that its offer is for $31
per KCP&L share. Unfortunately, if one reads the fine print, one
will realize that their offer contains a collar mechanism which
limits the risks to Western shareholders of subsequent stock
price declines, placing the risk of such declines on KCP&L
shareholders. Given the long time period pending closing, perhaps
as long as two years, and all the things that can occur during
such time, this is not a minor issue. As stated in our proxy
materials and letter to shareholders dated July 5, 1996, we also
believe that Western overstated its synergies estimates and faces
significant rate reductions which could imperil Western's ability
to deliver promised dividends to KCP&L shareholders and could
have an adverse impact of Western's stock price, and thus, the
value to KCP&L shareholders. Furthermore, Western's future share
price performance will be based on the market's willingness to
accept the reasonableness of their claimed $1 billion in
synergies over the next 10 years. Western does state that this
figure is based exclusively on public information about KCP&L, as
compared to our use of confidential information with UtiliCorp.
We have reviewed their public filing relating to the proposed
synergies and cannot determine how they believe they can achieve
such savings. Just one year ago, after some preliminary
discussions between ourselves and Western, they had stated in a
letter to me, a preliminary synergy estimate of over $500
million over 10 years. Nothing could have changed that
dramatically that would cause us to believe that this figure
could double in a one year period.
Another prominent aspect of Western's proposal includes an
assumption regarding the proposed split of synergies savings
between ratepayers and shareholders. Western, in our view, has
imprudently assumed 70% of their proposed and questionable $1
billion savings will go to shareholders. It is industry practice
to assume 50% of such savings to go to shareholders, which is the
position taken by us in our proxy disclosure. The net effect of
this difference in assumptions is that Western is advertising
economics to shareholders which we believe a reasonable person
would not and should not assume.
Finally, Western has made great press about the apparent
short-term dividend accretion to our shareholders should they
accept the Western proposal. I would like to point out the use
of the word short-term, because if Western is unable to achieve
both its proposed synergies number and the retention of those
savings to shareholders coupled with potentially significant rate
reductions, we believe such proposed dividend payments in the
future would certainly be at risk, as their dividend payout would
be well in excess of prospective gross industry norms.
I know that there has been a lot of back and forth between
ourselves and Western regarding their proposed hostile
transaction. I think it is critical that your clients and our
shareholders understand the benefits of the proposed UtiliCorp
merger and, what we believe to be, the risks involved with
Western's proposal.
We are extremely excited about our proposed merger with
UtiliCorp and feel strongly that this will provide long-term
growth in revenue, income and share value for KCP&L shareholders.
Exhibit 39
[KCPL Logo] [UtiliCorp United
EnergyOne Logo]
A GUIDE TO THE MERGER
TABLE OF CONTENTS
Western Resources' Proposal.............................................p 4
KCPL/UtiliCorp Merger...................................................p 17
Merger Benefits.........................................................p 29
Our Belief as to Potential Value of Maxim Energies......................p 39
2
CERTAIN FORWARD-LOOKING INFORMATION
This presentation contains certain forward-looking
information. The Private Securities Litigation Reform Act of
1995 provides a new "safe harbor" for forward-looking information
to encourage companies to provide prospective information about
their companies without fear of litigation so long as such
information is identified as forward-looking and is accompanied
by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those
projected in the information. KCPL and UCU identify the
following important factors which could cause KCPL's, UCU's and
Maxim's actual results to differ materially from any such results
which might be projected, forecast, estimated or budgeted by
KCPL, UCU or Maxim in forward-looking information. All of such
factors are difficult to predict and many of which are beyond the
control of KCPL and UCU. Accordingly, while KCPL and UCU believe
that the assumptions underlying the forward-looking information
are reasonable for purposes of the development of estimates of
revenue enhancements and cost savings, there can be no assurances
that such assumptions will approximate actual experience or that
all such revenue enhancements and cost savings will be realized, or
that resulting beliefs as to potential stock values will prove to be
correct, and in such event, actual results could differ materially
from the predictions herein. These important factors include: (a)
future economic conditions in the regional, national and
international markets in which KCPL and UCU compete; (b) state,
federal and foreign regulation, including limitations on the
amount of synergies Maxim will be able to keep and possible
additional reductions in regulated gas and electric rates; (c)
weather conditions; (d) financial market conditions, including,
but not limited to, the deregulation of the United States
electric utility industry, and the entry of new competitors; (g)
the ability to carry out marketing and sales plans; (h) the
ability to eliminate duplicative administrative functions; (i)
the ability to achieve generation planning goals and the
occurrence of unplanned generation outages; (j) the ability to
degree or eliminate certain capital investments which KCPL and
UCU would have to make as separate companies; (k) the ability to
enter new markets successfully and capitalize on growth
opportunities in non-regulated businesses; and (l) adverse
changes in applicable laws, regulations or rules governing
environmental, tax or accounting matters.
The following materials contain certain statements of
opinion and belief.
3
WESTERN RESOURCES' PROPOSAL
4
WHY KCPL REJECTED THE WESTERN PROPOSAL:
- - KCPL believes the Western proposal is based on faulty
synergies and savings retention assumptions and therefore is
not credible See pages 6-7, 10 and 14
- - Potential significant rate reductions for Western could
adversely impact Western's stock price and ability to
deliver promised dividends See pages 11 through 13
- - Rate disparity between KGE/KPL customers See page 11
- - Western has stated that no layoffs would result from its
offer but its synergy analysis filed with the KCC indicates
531 reductions and assumes savings available by January 1,
1998
- - As a result of its acquisition adjustment of KGE, Western
must amortize the $801 million acquisition adjustment at the
rate of approximately $20 million per year over 40 years
- - KCPL believes a KCPL/Western merger would create a company
ill-suited for industry's future See page 15
- - Concentrated Wolf Creek asset = concentrated business risk
(KCPL owns 47% of the Wolf Creek nuclear plant, and a
combined KCPL/Western entity would own 94% of Wolf Creek.)
See page 24 for reduced business risk with UtiliCorp
See pages 43-45 of the Joint Proxy Statement/Prospectus
5
KCPL believes WR used faulty assumptions
OUR VIEWS ON WESTERN'S SYNERGIES ANALYSIS Western's synergy
analysis is set forth in a report filed with the Kansas
Corporation Commission dated April 1996 and entitled "Project
Royal". KCPL analyzed this report and found that such report
used public data regarding KCPL and made certain assumptions
regarding KCPL. Based on a more complete understanding of its
own business, KCPL formed certain beliefs as to inaccuracies in
Western's analysis. Such beliefs are summarized below.
Estimated
Overstatement
Savings Category ($MM) Comments
__________________ __________ _________________________________
- - Procurement [$150] -Overstated due to universe of
Savings materials upon which savings are
calculated and discount rate
applied (e.g., universe includes
generation and small volume
items)
-Forecasts not based on any
transaction-specific data, but on
claimed experience in prior
transactions.
-FERC has criticized similar
projections by Western's
consultant as "unsubstantiated".
-Difference between Western's and
KCP&L's/UCU's procurement
estimates accounts for nearly
half of the difference in total
cost savings estimates.
- - Labor
-Irrelevant and [$110] -Relied on previous studies and
statistically assumptions unrelated to actual
invalid benchmarks KCPL data
-Salary and benefits [$27] -Assumed a 34% benefit rate for
calculations KCP&L (KCP&L rate is 26%).
-Aggressive salary and benefits
escalation (KCP&L believes 3.5%
is the rate which Deloitte and
Touche generally uses).
-Implementation of [$43] -Assumes implementation of all
synergies synergies on January 1, 1998.
-Projected force reduction and
timing reduction contradicts "no
layoff statement."
- - Customer Information [$100] -Ignored actual KCPL MIS costs
Systems and Data and configuration.
Center Operation
Costs
- - Transaction [$88] -Left out of calculation.
Costs ________
TOTAL [$518]
OVERSTATEMENT
6
KCPL believes WR used faulty assumptions
COMPARISON OF CLAIMED SYNERGIES IN RECENT UTILITY MERGERS
In Descending Order by Estimated Cost Savings as a Percent of
Combined Revenues
Estimated Cost Savings: As a Percent of Combined:
__________________________ _________________________
Aggregate # of Per Year Pre-Tax
($MM) Years ($MM) Revenues O&M Income
________ _____ ________ ________ ___ _______
PSI $1,500 10 $150 5.7% 9.3% 34.4%
Resources/
Cinn. G&E
Wisconsin $2,000 10 $200 4.8% 7.9% 27.3%
Energy/
Northern
States
Power
KCP&L/WESTERN $1,000 10 $100 4.0% 7.1% 22.6%
RESOURCES
Sierra $450 10 $45 3.9% 6.2% 22.1%
Pacific
Res./Wash.
Water Power
IES/ $700 10 $70 3.5% 5.4% 27.0%
Interstate/
WPL
Gulf $1,700 10 $170 3.0% 5.4% 18.4%
States/
Entergy
Potomac $1,300 10 $130 2.7% 4.8% 17.5%
Electric/
Baltimore
G&E
Southwestern $770 10 $77 2.7% 3.9% 21.6%
P.S./P.S.Co.
of Colorado
Iowa-Illinois $400 10 $40 2.6% 3.9% 18.5%
G&E/Midwest
Resources
Washington $370 10 $37 2.3% 3.8% 22.3%
Energy/Puget
Sound P&L
CIPSCO/Union $570 10 $57 1.8% 3.4% 9.0%
Electric
Kansas $140 5 $28 1.7% 2.6% 18.7%
G&E/
Kansas P&L
UTILICORP/
KCP&L $600 10 $60 1.6% 2.1% 19.1%
Source: As disclosed in merger proxies for respective transactions.
7
ANALYSIS OF COLLAR
[Graph]
Market Value of WR Stock/KCPL Share
- - Price 6-14-96 $28 3/4
- - KCPL shareholders would receive a maximum of 1.1 WR shares
- - Participate in downside if WR stock price falls below $28.18
- - KCPL shareholders would receive a minimum of 0.933 WR Share
- - Participate in upside only if WR stock price rises above
$33.23
8
ANALYSIS OF COLLAR
[Graph]
Dividend of WR Stock/KCPL Shares
- - Price 6-14-96 $28 3/4
- - KCPL shareholders would receive a maximum of 1.1 WR shares
- - Receive maximum dividends of $2.35 per KCPL share
- - KCPL shareholders would receive a minimum of 0.933 WR share
- - Receive minimum dividends of $2.00 per KCPL share
9
KCPL believes WR used faulty assumptions
KCPL BELIEVES WESTERN'S CLAIM OF RETAINING 70% OF SYNERGIES IS
UNREALISTIC
- - Implicit assumption in KCC filing that Western would be
allowed to retain 70% of the synergy savings
- - This is inconsistent with applicable precedent (50%)
- KCC, in order authorizing KGE merger, required merger
savings (above acquisition adjustment, not applicable
to Western's proposal to KCPL) to be shared 50/50
between customers and stockholders
- Missouri Public Service Commission (MPSC) Staff is
recommending an equal sharing of merger savings in the
UEP/CIPSCO merger
10
Potential for significant rate reductions
WE BELIEVE WESTERN FACES SIGNIFICANT RATE REDUCTIONS
- - The Kansas Corporation Commission (KCC) order approving the
Kansas Power & Light/Kansas Gas & Electric merger requires
50/50 sharing of merger benefits (after recovery of a
portion of a booked acquisition premium which is not
relevant to Western's proposal to merge with KCPL).
- - KCPL believes Western's rate levels now ripe for downward
adjustment
- Western's base rates not adjusted (so far) to reflect
the KGE/KPL merger savings John Hayes claimed in his
April 14 letter to Drue Jennings
- Western has implicitly admitted overearnings of $58.7
million ($8.7MM interim KGE rate reduction, $50 MM
accelerated depreciation requested for Wolf Creek)
- - The Mayor of Wichita in May 22 testimony before the KCC has
called for significant KGE rate reductions to eliminate the
more than 40% rate disparity he claims exists between KGE
and KPL. (KCC Staff testimony indicates that eliminating
the difference would cost Western approximately $171 million
per year.)
- - KCC Staff has indicated that its recommended rate reduction
(see page 12) could be applied entirely to KGE to address
the rate disparity issue
11
Potential for significant rate reductions
WE BELIEVE WESTERN CANNOT AVOID THESE SIGNIFICANT RATE REDUCTIONS
- - In 1995, Western filed for $50 million accelerated
depreciation on Wolf Creek, but at KCC Staff's request KCC
turns proceeding into general cost-of-service review
- - KCC Staff and CURB filed cost of service studies supporting
large rate decrease recommendations. (CURB, Citizen's
Utility Ratepayer Board, is an organization created by
Kansas statute to represent consumers' interests in public
utility matters.)
- KCC Staff - $105 million, after accounting for all of
Western's cost of providing electric service and
incorporating Staff's calculation of the ratepayer
share of KGE/KPL merger savings
- CURB - $87 million, after accounting for only certain
of Western's costs of providing electric service
- - Western requested KCC to combine these rate reduction
proposals with its request for approval of proposed merger
with KCPL
- Western's request for consolidation of these matters
pointed to the KCPL merger as the source of funds for
KGE rate reductions above $8.7 million
- - KCC rejected Western's consolidation request
- Issued June 14 order separating rate review proceeding
from merger docket
- - Rate reduction hearing set for Sept 30, 1996
- - We feel the larger rate reductions imperil Western's stock
price and its ability to deliver promised dividends (See
page 13)
12
The following is not a prediction as to specific future market
values and should be read in conduction with page 3 hereof.
Specific future market values cannot be predicted with certainty
Potential for significant rate reductions
We Believe Western Rate Reductions Will Result in Lower Values
for Shareholders
Incremental Annual
$8.7MM $58.7MM Rate Reductions
Rate Red/ Reduction/ Above WR Proposal
$50MM No Depr ____________________
Rate Case Scenarios: Depr Inc* Inc** $20MM $46.3MM***
____________________ ________ ________ _______ _______
Pro forma 1998 EPS $2.45(1) $2.45(1) $2.36 $2.24
Less: Synergy 0.11 0.11 0.11
adjustment-See _____ _____ _____
page 14
Adjusted pro forma $2.34 $2.25 $2.13
1998 EPS
Cash flow impact ($44MM) ($56MM) ($72MM)
Combined dividend 87.3% 91.5% 95.1% 100.5%
payout(2)
Western stock $28.75(1)
price
Implied P/E ratio 11.7(3)
Implied WR price $27.38 $26.33 $24.92
at P/E of 11.7
Implied KCPL share $31.00(1) $30.12 $28.96 $27.41
value
(1) As reported in Amendment No. 1 to S-4 dated June 19, 1996
filed by Western with the SEC; EPS based on WR stock price
of $28.75 on June 14, 1996 resulting in exchange ratio of
1.07826
(2) Using $2.14 dividend rate reported in Amendment No. 1 to
Western S-4
(3) $28.75/$2.45
*As filed with the KCC in the WR stand-alone regulatory plan.
Assumes an $8.7 MM electric rate reduction and $50MM accelerated
depreciation
**Assumes no accelerated depreciation. Assumes all of $58.7MM is
applied to reducing electric rates
***$105 million KCC Staff recommendation.
13
WE BELIEVE WESTERN OVERSTATED SYNERGY SAVINGS
Western first year claimed savings $70,421 (1)
Percentage reduction X 1/3% (2)
_______
Adjustment to Western's synergies 23,474
Tax affect (1-40%) X .60
_______
After-tax adjustment $14,084
Shares outstanding 132,223 (1)
EPS adjustment for overstated savings $0.11
Note: Adjustment to Western's synergies results in first year
savings of approximately $47 million ($70,421-$23,474)
compared to KCPL/UCU first year savings of approximately $35
million (See "The Merger -- Synergies From the Merger, --
Summary of Additional Operational Benefits" on page 52-56 of
the Joint Proxy Statement/Prospectus
(1) As reported in Amendment No. 1 to S-4 dated June 19, 1996
filed by Western with the SEC
(2) See page 6 for our views on Western's synergies analysis --
we believe Western's synergies could be overstated by as
much as approximately 50%.
14
KCPL believes Western is an ill-suited merger partner
COMPARATIVE PROFILES OF UTILICORP AND WESTERN
UTILICORP WESTERN
_________________________ _____________________
Geographic Anchored in suburban Concentrated in eastern
Diversification: and rural western and central Kansas
Missouri; 9 gas and
electric divisions
in 8 states acquired
over the past 10 years.
Foreign Majority ownership None
Utility and control of distribution
Operations: utilities in Australia and
New Zealand.
IPP Business: Equity investments Acquired the Wing Group,
in 19 IPPs in the with options to buy into
U.S. and Jamaica; overseas projects; no
business plan near equity in any operating
completion for (foreign) power projects.
assessing IPP
investments in 11
foreign countries.
Energy EnergyOne - national Modest gas marketing
Marketing: brand name for operation established in
energy services; one 1995; applied for FERC
of the 10 largest electric marketing
gas marketers in the license.
U.S. - in operation
for 10 years; received FERC
license for electric
marketing; gas marketing in
U.K.
Customer Joint venture with Planned pilot program for
Centered Novell to deploy in- 32,000 drive-by meters;
Technology home and in-business passive investment in ADT
energy management Ltd.
LANs.
15
CONDITIONS TO WESTERN'S EXCHANGE OFFER
- - Western can amend the terms or terminate transaction any time prior to
closing in late 1998
- - 90% of KCPL shares must be tendered
- - Exchange offer must receive pooling of interests treatment;
but the exchange offer will permit participants in KCPL's
Long Term Incentive Plan to receive cash payments in lieu of
securities that are essentially the same as common stock,
violating paragraph 47 (b) of opinion 16 of the Accounting
Principles Board and thereby prohibiting pooling of interests
16
KCPL/UTILICORP MERGER
17
TWO DISTINCT COMPANIES
[Pie Chart] [Pie Chart]
KCPL UTILICORP
Regulated 100% Regulated 43%
Non-Regulated 0% Non-Regulated 57%
ONE UNIQUE VISION
[Pie Chart]
MAXIM ENERGIES
Regulated 56%
Non-Regulated 44%
18
Strategic Merger
- - KCPL and UCU believe that merger blends the best of two
worlds:
- a conservatively managed, well-capitalized financial
position, coupled with an aggressive strategy for
growth
- - We believe the merged company will have rare combination of
marketing and entrepreneurial skills
19
COMPLEMENTARY STRENGTHS
The combined company will match KCPL's experience and strength in
regulated businesses with UtiliCorp's experience and strength in
unregulated businesses
- - The KCPL/UtiliCorp vision is to be a full participant in the
global energy marketplace, adding diversified products and
services, entering new markets, and growing shareholder
value
- - Revenue diversity through investment in non-regulated
businesses
- - EnergyOne provides energy solutions to over 125 of the
Fortune 500
20
OUR VISION FOR MAXIM ENERGIES
- - 10 years experience operating competitive non-regulated
businesses
- - Diverse products, territories, asset base and generating mix
- - 10 years investment in growth - $3 billion
- - Recognized leader in fuel procurement and generating
technology
- - Top 10 in power marketing
- - Top 10 in gas wholesaling
- - Top level of employee ownership
- - Chairman and CEO combined experience - over 40 years
21
NORTH AMERICA
[Map of North America showing the areas and locations of KCPL and
UtiliCorp operations]
22
COMBINED FINANCIALS
(Based on year end 1995 - pro forma)
millions UCU KCPL Maxim Energies
- -Revenues $2,798 $886 $3,684
- -Operating income $225 $244 $469
- -Earnings available $78 $119 $196
- -10-yr total return* 298% 373%
- -Total assets $3,886 $2,882 $6,768
*Industry average -- 211%
23
WE BELIEVE THE KCPL/UCU MERGER WILL REDUCE BUSINESS RISK FOR KCPL
TYPE OF BUSINESS RISK CHANGE
Asset Concentration (Nuclear) -Nuclear Asset Concentration Reduced
-45% net plant to 26% net plant
-119% of equity to 58% of equity
Energy Product Concentration -Adds gas product to electric product
-Adds gas distribution to total electric
distribution
-0% gas revenue to 25% of total
revenue
Service Territory/Geographic/ -Adds six states, British Columbia, New
Customer Concentration Zealand and Australia to Regulated
Service Territories
-Adds 2 million customers to existing
430,000
-Indirectly reaches over 22 million
customers considering non-regulated
operations
-Climate diversity
Regulatory Concentration -Diversifies Regulatory risk by adding
seven (7) regulatory jurisdictions
24
WE BELIEVE THAT THE KCPL/UCU MERGER WILL BENEFIT STAKEHOLDERS --
SHAREHOLDERS
- - STRONG POTENTIAL FOR EARNINGS GROWTH See " Earnings Growth
Strategies" on pages 31 through 38
- - INCREASE OVER KCPL DIVIDEND See "Maxim Energies dividend" on
page 27
CUSTOMERS
- - RANGE OF ENERGY PRODUCTS AND SERVICES
- - IMMEDIATE REDUCTIONS IN RETAIL ELECTRIC RATES; SHARED
SAVINGS
- - 5-YEAR PERIOD OF RATE STABILITY
25
WE BELIEVE THAT THE KCPL/UCU MERGER WILL BENEFIT STAKEHOLDERS --
EMPLOYEES
- - Part of a stronger, growth-oriented company
- - Expanded career opportunities with multinational reach
- - Opportunity to own stock in a competitive, national energy
company
COMMUNITIES
- - Stronger voice in national policy debates
- - Greater ability to attract new business
- - Enhanced community involvement and support
- - Support from Missouri Governor and KC Mayor
26
MAXIM ENERGIES' DIVIDEND
- - Initial annualized dividend rate of $1.85
- - Represents 18.6% increase for KCPL shareholders over current
KCPL annual dividend of $1.56
- - Confirmation of our belief in strong growth potential
- - First year ratio of dividends paid to Maxim's earnings of 73
percent based on $1.85 annual dividend and estimates of
combined company's earnings See Our Belief as to Potential
Value of Maxim Energies on page 40
- - Platform for continued dividend growth
27
TERMS OF REVISED MERGER
- - UtiliCorp shareholders receive one share in the merged
company for each UtiliCorp share owned
- - KCPL shareholders would continue to hold their existing KCPL
shares
- - Enhanced value for KCPL shareholders - KCPL shareholders
will own 57% of Maxim based on capitalization of KCPL and
UCU on execution date of the revised merger agreement
compared to 55% under the original merger agreement
- - Regulatory filings on track
- - Requires approval of majority of KCPL shares voted on the
merger
28
MERGER BENEFITS
29
HISTORICAL GROWTH IN SHAREHOLDER VALUE
KCPL UCU Util Index
1986 1,335.4 1,539.4 1,317.5
1987 1,289.8 1,205.2 1,196.6
1988 1,752.1 1,665.5 1,415.3
1989 2,100.5 2,107.3 1,788.4
1990 2,296.2 2,091.5 1,773.2
1991 3,298.8 3,093.7 2,283.5
1992 3,377.9 3,162.0 2,486.7
1993 3,625.6 3,819.7 2,718.2
1994 3,953.3 3,392.7 2,430.1
1995 4,732.9 3,981.0 3,109.8
10 Yr. Avg. Annual Returns
_________________________________
KCPL UCU D&P Index
_____ _____ _____
17.7% 17.3% 13.1%
Utility Index represents Duff & Phelps (D&P) Electric Utility Index
30
EARNINGS GROWTH STRATEGIES
OVERVIEW
We believe that a KCPL/UCU combination --
- - Is a forward-looking transaction that positions Maxim
Energies to successfully compete in a deregulated
environment
- - Will create a formidable competitor in the evolving energy
services industry
- - Will provide opportunities for significant earnings growth
in three areas:
- Synergy savings
- Additional operational benefits
- Enhancement of financial performance
31
SYNERGY SAVINGS
- - $606 million net in pretax synergy savings over 10 years
- - Ernst & Young study for regulatory filings
[Pie Chart] ($ in millions)
$315 Generate Electricity
$ 32 Distribute and Transport Energy
$113 Information Technology
$ 51 Purchasing/Materials & Facilities
$ 30 Fleet & Facilities
$ 65 Executive and Adm Support
See "The Merger -- Synergies From the Merger" on page 52-55 of
the Joint Proxy Statement/Prospectus
32
WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ADDITIONAL
OPERATIONAL BENEFITS
- - Additional savings identified after regulatory filings and
announcement of merger in January
- - Anticipate updated regulatory filings and sharing of savings
between shareholders and customers
- - Yearly pre-tax savings ranging from $12 million to $16
million over next four years
- System dispatch
- Non-generating small stock purchases
- Combined purchases of technical information
- Internalization of certain legal and regulatory
services
See "The Merger -- Additional Operational Benefits" on page 55-56
of the Joint Proxy Statement/Prospectus
33
WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ENHANCEMENT OF
FINANCIAL PERFORMANCE
- - We believe that the KCPL/UCU merger provides significant
opportunities for growth in three areas
- International
- Energy Marketing
- New Products
- - Palmer Bellevue practice of Coopers & Lybrand Consulting
facilitated management analyses
See "The Merger -- Enhancement of Financial Performance" on page
56-59 of the Joint Proxy Statement/Prospectus
34
WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN
ENHANCEMENT OF FINANCIAL PERFORMANCE -- INTERNATIONAL
- - Strategic focal points: rapidly developing overseas
opportunities in utility acquisitions and privatizations as
well as power plant development
- - Combine UCU's investment and operating experience in United
Kingdom, New Zealand and Australia with KLT's penetration in
China and KCPL's technical/operational expertise and
financial strength
- - Anticipated improvements in operational efficiencies from
these investments expected to produce yearly incremental pre-
tax income ranging from $16 to $30 million over the next
four years
See "The Merger -- Enhancement of Financial Performance" on page
56-59 of the Joint Proxy Statement/Prospectus
35
WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ENHANCEMENT OF
FINANCIAL PERFORMANCE -- ENERGY MARKETING
- - Growth opportunities through combining KCPL's low variable
cost wholesale position and financial strength with UCU's
pioneer status in gas and electric marketing
- - Increased focus on energy marketing is expected to produce
yearly pre-tax income ranging from $7 million to $10 million
over the next four years
See "The Merger -- Enhancement of Financial Performance" on page
56-59 of the Joint Proxy Statement/Prospectus
36
WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN
ENHANCEMENT OF FINANCIAL PERFORMANCE -- NEW PRODUCTS
- - Both KCPL and UCU are expanding customer relationships by
offering value-added services:
- EnergyOne
- Novell
- CellNet
- Electronic home security, appliance warranty service
and leasing of fiber optic capacity
- - Yearly pre-tax income from new products and services is
expected to range from $7 million to $19 million over the
first four years
- - EnergyOne is expected to contribute approximately $2 million
in pre-tax earnings in the first year growing to $30 million
by year four
See "The Merger -- Enhancement of Financial Performance" on page
56-59 of the Joint Proxy Statement/Prospectus
37
SUMMARY OF SYNERGIES FROM THE MERGER, ADDITIONAL OPERATIONAL
BENEFITS AND ENHANCEMENT OF FINANCIAL PERFORMANCE
Year 1 Year 2 Year 3 Year 4
(Per Share)
Synergy Savings $0.10 $0.16 $0.22 $0.25
_________________________________
Additional Operating Benefits $0.08 $0.08 $0.07 $0.06
_________________________________
Enhancement of Financial
Performance $0.20 $0.25 $0.35 $0.44
_________________________________
Aggregate Added Value $0.38 $0.49 $0.64 $0.75
=================================
Note: Per share data does not reflect allocation of savings
between stockholders and customers
See page 40 for impact on Maxim Energies' earnings per share
projections
See "The Merger -- Synergies From the Merger, -- Additional
Operational Benefits, -- Enhancement of Financial Performance" on
page 52-59 of the Joint Proxy Statement/Prospectus
38
OUR BELIEF AS TO POTENTIAL VALUE OF MAXIM ENERGIES
39
OUR BELIEF AS TO POTENTIAL VALUE OF MAXIM ENERGIES
1998 1999 2000
_____ _____ _____
UCU stand alone EPS* $2.39 $2.51 $2.64
KCPL stand alone EPS* 2.13 2.20 2.27
Maxim Energies EPS
without synergies 2.25 2.35 2.45
E&Y synergies - see page 38** 0.05 0.08 0.11
Additional operational benefits
- - see page 38** 0.04 0.04 0.04
Enhancement of financial
performance - see page 38 0.20 0.25 0.35
_____ _____ _____
Total Maxim Energies'
EPS potential $2.54 $2.72 $2.95
P/E ratio - see page 41 12.5 to 13
IMPLIED 1997 MAXIM SHARE PRICE
$31.75 TO $33/SHARE
Maxim Energies dividend $1.85 $1.90 $1.95
Payout ratio 73% 70% 66%
* Using Institutional Broker Estimating System (IBES) estimates
** Assumes 50% retention
The foregoing is not a prediction as to specific future market
values and should be read in conjunction with page 3 hereof.
Specific future market values cannot be predicted with certainty
40
PRICE/EARNINGS RATIO
COMPARISON BASED ON YEAR-END CLOSING STOCK PRICES
KLT UCU WR
___ ___ ___
1995 13.7 17.1 12.3
1994 12.6 12.7 10.2
1993 13.9 16.3 12.6
1992 16.9 20.9 14.3
1991 15.0 12.0 11.8
1990 11.3 11.5 9.4
1989 10.6 12.0 12.1
1988 9.8 9.8 10.2
1987 8.3 8.6 9.2
1986 10.0 11.4 11.2
10 yr avg 12.2 13.2 11.3
Avg KLT/UCU 12.7
Avg KLT/WR 11.7
41