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SECURITIES EXCHANGE ACT OF 1934
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KANSAS CITY POWER & LIGHT COMPANY
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FOR IMMEDIATE RELEASE
KANSAS CITY POWER & LIGHT COMPANY BOARD REJECTS
WESTERN RESOURCES' "HOSTILE" EXCHANGE OFFER
Kansas City, MO., (July 9, 1996) -- The members of the
board of directors of Kansas City Power & Light Company (NYSE:
KLT), by a unanimous vote of those directors present, recommended
that KCPL shareholders reject Western Resources, Inc.'s hostile
exchange offer. At the same time, the KCPL Board reaffirmed its
decision to merge with UtiliCorp United Inc. (NYSE: UCU) to form
Maxim Energies, Inc.
In rejecting Western's unsolicited hostile offer, the KCPL
Board reviewed KCPL's long-term strategic plan and the benefits
of a merger with UtiliCorp, and determined that Western's offer
is not in the best interests of KCPL, its shareholders,
customers, employees and other constituencies.
"There are many reasons why we think that Western is an
unattractive partner. Of paramount concern is our belief that
Western's hostile offer is based on a number of faulty
assumptions that raise serious questions as to Western's
financial prospects and its ability to sustain dividends at its
promised dividend rate," said Drue Jennings, chairman, president
and chief executive officer of KCPL. Mr. Jennings cited the
following:
- - Western faces significant rate reductions which KCPL
believes will imperil its ability to sustain promised
dividends. The staff of the Kansas Corporation Commission
has recommended that Western reduce its rates by $105
million annually, which is twelve times greater (in the
first year of reductions) than the $8.7 million per year
over seven years that Western has proposed. If the $105
million annual rate reduction is implemented, then virtually
all of Western's projected earnings for a combined
KCPL/Western entity in 1998 (as reported in Western's own
prospectus dated July 3, 1996, and as adjusted by KCPL to
reflect the full impact of the Kansas Corporation Commission
staff's recommended $105 million annual rate reduction)
would be required to pay dividends at the rate promised to
KCPL shareholders.
- - KCPL believes that reductions in merger-related savings
realized and/or retained will further hamper Western's
ability to make its promised dividend payments. Based on a
review of Western's claimed merger-related savings, KCPL
believes that Western has significantly overestimated the
amount of savings that would result from a combination of
KCPL and Western. In addition, both the Kansas Corporation
Commission (in its order regarding the merger of Kansas Gas
and Electric Company (KGE) and Western's predecessor, Kansas
Power and Light Company (KPL)) and the Missouri Public
Service Commission (in the pending Union Electric/CIPSCO
merger) have advocated and equal (50-50) sharing of savings
between shareholders and customers. In contrast, Western's
proposal to acquire KCPL contemplates that Western be
allowed to keep 70% of merger-related savings.
- - KCPL believes that Western will be under pressure to
reduce rates for its KGE customers, and any reduction to
Western's revenue base would further threaten Western's
ability to makes its promised dividend payments. Testimony
before the Kansas Corporation Commission indicates that if
the rates charged to Western's KGE customers were reduced to
equal the rates charged to Western's KPL customers, Western
would suffer a $171 million annual revenue reduction. Even
if the Kansas Corporation Commission follows its own staff's
recommendation and the entire $105 million annual rate
reduction is applied to KGE customers, Western would still
face a rate disparity of approximately $65 million per year.
In an increasingly deregulated utility environment, KCPL
believes that Western must address the rate disparity issue
because Western's customers may otherwise choose to purchase
cheaper power from Western's competitors.
- - A KCPL/Western combination would concentrate risk in a
single asset and a single geographic market. A combined
KCPL/Western entity would own 94% of the Wolf Creek nuclear
plant, concentrating a significant amount of capital and
risk in a single asset. In contrast, a combined
KCPL/UtiliCorp company will own only 47% of Wolf Creek. In
addition, a combined KCPL/Western entity would conduct a
substantial portion of its business in two states, Missouri
and Kansas. KCPL believes that a combined KCPL/UtiliCorp
entity would be much better prepared for the deregulated
utility environment because it would have operations in
eight states and five foreign countries, thereby achieving
geographic, regulatory and climatic diversity.
- - The KCPL Board questions Western's commitment to KCPL
employees. Western has stated that no layoffs would result
from its proposal, but Western's filings with the Kansas
Corporation Commission state that 531 employee positions
will be eliminated and assume that all resulting savings
will be available by January 1, 1998. The KCPL Board does
not believe that Western can reduce 531 positions in such a
short time without laying off KCPL employees.
- - Western's hostile offer is conditioned on its
transaction being accounted for as a "pooling of interests,"
and KCPL does not believe that such accounting treatment
will be available.
The KCPL Board also reaffirmed its support for a merger with
UtiliCorp to form Maxim Energies, Inc. The KCPL Board believes
that Maxim will be a customer-focused, low-cost energy supplier
with diversified assets and the financial resources to grow and
thrive in the electric utility industry which is on the verge of
deregulation. The KCPL Board believes that Maxim will allow KCPL
shareholders improved opportunities for long-term earnings and
dividend growth which are superior to that offered by Western's
hostile offer.
A shareholder vote to consider the UtiliCorp transaction has
been scheduled for Wednesday, August 7, 1996.
Kansas City Power & Light Company provides electric power to
a growing and diversified service territory encompassing
metropolitan Kansas City and parts of eastern Kansas and western
Missouri. KCPL is a low-cost producer and leader in fuel
procurement and plant technology. KLT Inc., a wholly owned
subsidiary of KCPL, pursues opportunities in non-regulated,
primarily energy-related ventures.
# # #
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