Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 8, 2017
WESTAR ENERGY, INC.
(Exact name of registrant as specified in its charter)
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| | | | |
KANSAS | | 1-3523 | | 48-0290150 |
(State or other jurisdiction of incorporation or organization) | | (Commission File Number) | | (IRS Employer Identification No.) |
| | | | |
818 South Kansas Avenue, Topeka, Kansas | | 66612 |
(Address of principal executive offices) | | (Zip Code) |
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| |
Registrant's telephone number, including area code | (785) 575-6300 |
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
T Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
WESTAR ENERGY, INC.
Item 2.02. Results of Operations and Financial Condition.
On August 8, 2017, we issued a press release announcing our earnings for the period ended June 30, 2017. A copy of our August 8, 2017 press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. We are also including our 2017 Second Quarter Earnings package, which is attached hereto as Exhibit 99.2 and is incorporated herein by reference. The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, will not be incorporated by reference into any registration statement filed by us under the Securities Act of 1933, as amended (the "Securities Act"), unless specifically identified therein as being incorporated by reference.
Item 7.01. Regulation FD Disclosure
On August 8, 2017, we also released an investor presentation. A copy of that investor presentation is attached hereto as Exhibit 99.3. This information is available to the public on our website, http://www.WestarEnergy.com. The information furnished pursuant to this Item 7.01, except for the portions included in Item 8.01 and Exhibit 99.4 as set forth below, will not be incorporated by reference into any registration statement filed by us under the Securities Act, unless specifically identified therein as being incorporated by reference.
Item 8.01. Other Events.
As previously reported, on July 9, 2017 we entered into an Amended and Restated Agreement and Plan of Merger with Great Plains Energy Incorporated (“Great Plains Energy”), Monarch Energy Holding, Inc. (“Monarch”), and King Energy, Inc., and for certain limited purposes, GP Star, Inc. The portions of the investor presentation that relate to our pending merger with Great Plains Energy are being filed herewith as Exhibit 99.4 in compliance with Rule 425 of the Securities Act.
Item 9.01. Financial Statements and Exhibits.
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Exhibit 99.1 | Press Release dated August 8, 2017 |
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Exhibit 99.2 | 2017 Second Quarter Earnings Package |
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Exhibit 99.3 | Investor Update - August 8, 2017 |
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Exhibit 99.4 | Merger Excerpts from Investor Update - August 8, 2017 |
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy, vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed transactions, Monarch will file a Registration Statement on Form S-4, that includes a joint proxy statement of Great Plains Energy and Westar Energy, which also constitutes a prospectus of Monarch. WE URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED BY MONARCH, GREAT PLAINS ENERGY AND WESTAR ENERGY WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT GREAT PLAINS ENERGY, WESTAR ENERGY, MONARCH AND THE PROPOSED TRANSACTION.
Investors can obtain free copies of the Registration Statement and joint proxy statement/prospectus and other documents filed by Monarch, Great Plains Energy and Westar Energy with the SEC at http://www.sec.gov, the SEC’s website, or free of charge from Great Plains Energy’s website (http://www.greatplainsenergy.com) under the tab, “Investor Relations” and then under the heading “SEC Filings.” These documents are also available free of charge from Westar’s website (http://www.westarenergy.com) under the tab “Investors” and then under the heading “SEC Filings.”
Participants in Proxy Solicitation
Great Plains Energy, Westar Energy and their respective directors and certain of their executive officers and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from Great Plains Energy’s and Westar Energy’s shareholders with respect to the proposed transaction. Information regarding the officers and directors of Great Plains Energy is included in its definitive proxy statement for its 2017 annual meeting filed with SEC on March 23, 2017. Information regarding the officers and directors of Westar is included in an amendment to its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on April 28, 2017. Additional information regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the Registration Statement and joint proxy statement/prospectus and other materials filed with SEC in connection with the proposed transaction. Free copies of these documents may be obtained as described in the paragraphs above.
Forward Looking Statements
Certain matters discussed in this communication are “forward-looking statements.” The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like “believe,” “anticipate,” “target,” “expect,” “pro forma,” “estimate,” “intend,” “guidance” or words of similar meaning. Forward-looking statements describe future plans, objectives, expectations or goals. Although Westar Energy believes that its expectations are based on reasonable assumptions, all forward-looking statements involve risk and uncertainty. The factors that could cause actual results to differ materially from these forward-looking statements include those discussed herein as well as (1) those discussed in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2016 (a) under the heading, “Forward-Looking Statements,” (b) in ITEM 1. Business, (c) in ITEM 1A. Risk Factors, (d) in ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and (e) in ITEM 8. Financial Statements and Supplementary Data: Notes 3, 14 and 16; (2) those discussed in the company's Quarterly Reports on Form 10-Q filed on May 9, 2017 and Aug. 8, 2017, (a) under the heading "Forward-Looking Statements." (b) in ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, (c) in Part I, Financial Information, ITEM 1. Financial Statements: Notes 3, 11, 12 (in the Form 10-Q filed on May 9, 2017), and 13 (in the Form 10-Q filed on Aug. 8, 2017), and (d) ITEM 1A. Risk Factors; and (3) other factors discussed in the company's filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date such statement was made, and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | WESTAR ENERGY, INC. |
| | | | | | |
Date: | | August 8, 2017 | | By: | | /s/ Larry D. Irick |
| | | | Name: | | Larry D. Irick |
| | | | Title: | | Vice President, General Counsel and Corporate Secretary |
EXHIBIT INDEX
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| | |
Exhibit Number | | Description of Exhibit |
Exhibit 99.1 | | Press Release dated August 8, 2017 |
Exhibit 99.2 | | 2017 Second Quarter Earnings package |
Exhibit 99.3 | | Investor Update - August 8, 2017 |
Exhibit 99.4 | | Merger Excerpts from Investor Update - August 8, 2017 |
Exhibit
Westar Energy announces 2nd quarter 2017 results.
TOPEKA, Kan., Aug. 8, 2017 - Westar Energy, Inc. (NYSE:WR) today announced earnings of $72 million, or $0.50 per share, for the second quarter 2017 compared with earnings of $72 million, or $0.51 per share, for the second quarter 2016. Earnings for the six months ended June 30, 2017 were $132 million, or $0.92 per share, compared with $138 million, or $0.97 per share, for the same period in 2016.
Lower earnings per share for the second quarter were driven by lower residential and commercial sales primarily due to milder weather this year compared to last year. The lower sales were partially offset by a decrease in merger-related expenses and lower employee benefit costs.
Lower earnings per share for the six months ended June 30, 2017 were also driven by the effect of mild weather this year when compared to last year resulting in lower residential and commercial sales. Also contributing to lower net income was a decrease in corporate-owned life insurance income. Partially offsetting lower sales was a decrease in merger-related expenses.
Conference Call and Additional Company Information
Westar Energy management will host a conference call Wednesday, Aug. 9 with the
investment community at 10:00 a.m. ET (9:00 a.m. CT). Investors, media and the public may
listen to the conference call by dialing (844) 646-4526, conference ID 59525914. A webcast of the live conference call will be available at www.WestarEnergy.com.
Members of the media are invited to listen to the conference call and then contact Gina
Penzig with any follow-up questions.
This earnings announcement, a package of detailed second-quarter financial information, the company's quarterly report on Form 10-Q for the period ended June 30, 2017 and other filings the company has made with the Securities and Exchange Commission are available on the company's website at www.WestarEnergy.com.
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As Kansas’ largest electric utility, Westar Energy, Inc. (NYSE:WR) provides customers the safe, reliable electricity
needed to power their businesses and homes. We have 7,800 MW of electric generation capacity that includes renewables and
traditional power sources with half the electricity supplied to our more than 700,000 customers from emissions free sources:
nuclear, wind and solar, with a third coming from renewables. We are a leader in electric transmission in Kansas coordinating a
network of lines and substations that supports one of the largest consolidations of wind energy in the nation. Our employees live,
volunteer and work in the communities we serve.
For more information about Westar Energy, visit us on the Internet at http://www.WestarEnergy.com.
WESTAR ENERGY NEWS RELEASE Page 1 of 3
Westar Energy announces 2nd quarter results
Forward-looking statements: Certain matters discussed in this news release are “forward-looking statements.” The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like “believe,” “anticipate,” “target,” “expect,” “pro forma,” “estimate,” “intend,” “guidance” or words of similar meaning. Forward-looking statements describe future plans, objectives, expectations or goals. Although Westar Energy believes that its expectations are based on reasonable assumptions, all forward-looking statements involve risk and uncertainty. The factors that could cause actual results to differ materially from these forward-looking statements include those discussed herein as well as (1) those discussed in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2016 (a) under the heading, “Forward-Looking Statements,” (b) in ITEM 1. Business, (c) in ITEM 1A. Risk Factors, (d) in ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and (e) in ITEM 8. Financial Statements and Supplementary Data: Notes 3, 14 and 16; (2) those discussed in the company's Quarterly Reports on Form 10-Q filed on May 9, 2017 and Aug. 8, 2017, (a) under the heading "Forward-Looking Statements." (b) in ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, (c) in Part I, Financial Information, ITEM 1. Financial Statements: Notes 3, 11, 12 (in the Form 10-Q filed on May 9, 2017), and 13 (in the Form 10-Q filed on Aug. 8, 2017), and (d) ITEM 1A. Risk Factors; and (3) other factors discussed in the company's filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date such statement was made, and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made.
Media Contact:
Gina Penzig
Media Relations Manager
Phone: 785-575-8089
Gina.Penzig@westarenergy.com
Media line: 888-613-0003
Investor Contact:
Cody VandeVelde
Director, Investor Relations
Phone: 785-575-8227
Cody.VandeVelde@westarenergy.com
WESTAR ENERGY NEWS RELEASE Page 2 of 3
Westar Energy announces 2nd quarter results
Westar Energy, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | Change | | % Change | | 2017 | | 2016 | | Change | | % Change |
| (Dollars In Thousands, Except Per Share Amounts) |
REVENUES: | | | | | | | | | | | | | | | |
Residential | $ | 188,142 |
| | $ | 202,838 |
| | $ | (14,696 | ) | | (7.2 | ) | | $ | 364,310 |
| | $ | 382,128 |
| | $ | (17,818 | ) | | (4.7 | ) |
Commercial | 182,110 |
| | 188,197 |
| | (6,087 | ) | | (3.2 | ) | | 337,817 |
| | 353,870 |
| | (16,053 | ) | | (4.5 | ) |
Industrial | 107,990 |
| | 108,004 |
| | (14 | ) | | — |
| | 206,506 |
| | 208,702 |
| | (2,196 | ) | | (1.1 | ) |
Other retail | (10,092 | ) | | (16,502 | ) | | 6,410 |
| | 38.8 |
| | (22,440 | ) | | (30,884 | ) | | 8,444 |
| | 27.3 |
|
Total Retail Revenues | 468,150 |
| | 482,537 |
| | (14,387 | ) | | (3.0 | ) | | 886,193 |
| | 913,816 |
| | (27,623 | ) | | (3.0 | ) |
Wholesale | 63,044 |
| | 66,687 |
| | (3,643 | ) | | (5.5 | ) | | 140,411 |
| | 134,099 |
| | 6,312 |
| | 4.7 |
|
Transmission | 70,152 |
| | 66,620 |
| | 3,532 |
| | 5.3 |
| | 139,593 |
| | 130,535 |
| | 9,058 |
| | 6.9 |
|
Other | 7,975 |
| | 5,604 |
| | 2,371 |
| | 42.3 |
| | 15,698 |
| | 12,448 |
| | 3,250 |
| | 26.1 |
|
Total Revenues | 609,321 |
| | 621,448 |
| | (12,127 | ) | | (2.0 | ) | | 1,181,895 |
| | 1,190,898 |
| | (9,003 | ) | | (0.8 | ) |
OPERATING EXPENSES: | | | | | | | | | | | | | | |
|
|
Fuel and purchased power | 111,790 |
| | 118,630 |
| | (6,840 | ) | | (5.8 | ) | | 225,645 |
| | 218,688 |
| | 6,957 |
| | 3.2 |
|
SPP network transmission costs | 61,763 |
| | 55,227 |
| | 6,536 |
| | 11.8 |
| | 122,437 |
| | 115,987 |
| | 6,450 |
| | 5.6 |
|
Operating and maintenance | 87,158 |
| | 85,619 |
| | 1,539 |
| | 1.8 |
| | 168,356 |
| | 163,377 |
| | 4,979 |
| | 3.0 |
|
Depreciation and amortization | 94,029 |
| | 84,226 |
| | 9,803 |
| | 11.6 |
| | 182,655 |
| | 167,866 |
| | 14,789 |
| | 8.8 |
|
Selling, general and administrative | 57,579 |
| | 75,724 |
| | (18,145 | ) | | (24.0 | ) | | 116,735 |
| | 132,179 |
| | (15,444 | ) | | (11.7 | ) |
Taxes other than income tax | 41,890 |
| | 48,407 |
| | (6,517 | ) | | (13.5 | ) | | 84,606 |
| | 97,375 |
| | (12,769 | ) | | (13.1 | ) |
Total Operating Expenses | 454,209 |
| | 467,833 |
| | (13,624 | ) | | (2.9 | ) | | 900,434 |
| | 895,472 |
| | 4,962 |
| | 0.6 |
|
INCOME FROM OPERATIONS | 155,112 |
| | 153,615 |
| | 1,497 |
| | 1.0 |
| | 281,461 |
| | 295,426 |
| | (13,965 | ) | | (4.7 | ) |
OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | |
|
|
Investment earnings | 2,636 |
| | 2,280 |
| | 356 |
| | 15.6 |
| | 5,790 |
| | 4,296 |
| | 1,494 |
| | 34.8 |
|
Other income | 523 |
| | 3,382 |
| | (2,859 | ) | | (84.5 | ) | | 1,823 |
| | 12,860 |
| | (11,037 | ) | | (85.8 | ) |
Other expense | (2,647 | ) | | (2,908 | ) | | 261 |
| | 9.0 |
| | (7,963 | ) | | (8,451 | ) | | 488 |
| | 5.8 |
|
Total Other Income (Expense) | 512 |
| | 2,754 |
| | (2,242 | ) | | (81.4 | ) | | (350 | ) | | 8,705 |
| | (9,055 | ) | | (104.0 | ) |
Interest expense | 43,679 |
| | 39,683 |
| | 3,996 |
| | 10.1 |
| | 84,774 |
| | 80,114 |
| | 4,660 |
| | 5.8 |
|
INCOME BEFORE INCOME TAXES | 111,945 |
| | 116,686 |
| | (4,741 | ) | | (4.1 | ) | | 196,337 |
| | 224,017 |
| | (27,680 | ) | | (12.4 | ) |
Income tax expense | 35,906 |
| | 40,542 |
| | (4,636 | ) | | (11.4 | ) | | 56,816 |
| | 79,165 |
| | (22,349 | ) | | (28.2 | ) |
NET INCOME | 76,039 |
| | 76,144 |
| | (105 | ) | | (0.1 | ) | | 139,521 |
| | 144,852 |
| | (5,331 | ) | | (3.7 | ) |
Less: Net income attributable to noncontrolling interests | 3,974 |
| | 3,804 |
| | 170 |
| | 4.5 |
| | 7,795 |
| | 6,927 |
| | 868 |
| | 12.5 |
|
NET INCOME ATTRIBUTABLE TO WESTAR ENERGY, INC. | $ | 72,065 |
| | $ | 72,340 |
| | $ | (275 | ) | | (0.4 | ) | | $ | 131,726 |
| | $ | 137,925 |
| | $ | (6,199 | ) | | (4.5 | ) |
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. (See 10-Q Note 2): | | | | | | | | | | | | | | | |
Basic earnings per common share | $ | 0.50 |
| | $ | 0.51 |
| | $ | (0.01 | ) | | (2.0 | ) | | $ | 0.92 |
| | $ | 0.97 |
| | $ | (0.05 | ) | | (5.2 | ) |
Diluted earnings per common share | $ | 0.50 |
| | $ | 0.51 |
| | $ | (0.01 | ) | | (2.0 | ) | | $ | 0.92 |
| | $ | 0.97 |
| | $ | (0.05 | ) | | (5.2 | ) |
AVERAGE EQUIVALENT COMMON SHARES OUTSTANDING (in thousands): | | | | | | | | | | | | | | | |
Basic | 142,466 |
| | 142,034 |
| | 432 |
| | 0.3 |
| | 142,451 |
| | 142,013 |
| | 438 |
| | 0.3 |
|
Diluted | 142,596 |
| | 142,497 |
| | 99 |
| | 0.1 |
| | 142,579 |
| | 142,361 |
| | 218 |
| | 0.2 |
|
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.40 |
| | $ | 0.38 |
| | $ | 0.02 |
| | 5.3 |
| | $ | 0.80 |
| | $ | 0.76 |
| | $ | 0.04 |
| | 5.3 |
|
Effective income tax rate | 32 | % | | 35 | % | | | | | | 29 | % | | 35 | % | | | | |
WESTAR ENERGY NEWS RELEASE Page 3 of 3
Exhibit 99.2
Westar Energy, Inc.
Second Quarter 2017 Earnings
Released August 8, 2017
Cody VandeVelde
Director Investor Relations
785-575-8227
Cody.VandeVelde@WestarEnergy.com
NOTE:
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q for the period ended June 30, 2017 should be read in conjunction with this financial information. The enclosed statements have been prepared for the purpose of providing information concerning the Company and not in connection with any sale, offer for sale, or solicitation to buy any securities.
Westar Energy, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2017 | | 2016 | | Change | | % Change |
| (Dollars in Thousands, Except Per Share Amounts) |
REVENUES: | | | | | | | |
Residential | $ | 188,142 |
| | $ | 202,838 |
| | $ | (14,696 | ) | | (7.2 | ) |
Commercial | 182,110 |
| | 188,197 |
| | (6,087 | ) | | (3.2 | ) |
Industrial | 107,990 |
| | 108,004 |
| | (14 | ) | | — |
|
Other retail | (10,092 | ) | | (16,502 | ) | | 6,410 |
| | 38.8 |
|
Total Retail Revenues | 468,150 |
| | 482,537 |
| | (14,387 | ) | | (3.0 | ) |
Wholesale | 63,044 |
| | 66,687 |
| | (3,643 | ) | | (5.5 | ) |
Transmission | 70,152 |
| | 66,620 |
| | 3,532 |
| | 5.3 |
|
Other | 7,975 |
| | 5,604 |
| | 2,371 |
| | 42.3 |
|
Total Revenues | 609,321 |
| | 621,448 |
| | (12,127 | ) | | (2.0 | ) |
OPERATING EXPENSES: | | | | | | | |
Fuel and purchased power | 111,790 |
| | 118,630 |
| | (6,840 | ) | | (5.8 | ) |
SPP network transmission costs | 61,763 |
| | 55,227 |
| | 6,536 |
| | 11.8 |
|
Operating and maintenance | 87,158 |
| | 85,619 |
| | 1,539 |
| | 1.8 |
|
Depreciation and amortization | 94,029 |
| | 84,226 |
| | 9,803 |
| | 11.6 |
|
Selling, general and administrative | 57,579 |
| | 75,724 |
| | (18,145 | ) | | (24.0 | ) |
Taxes other than income tax | 41,890 |
| | 48,407 |
| | (6,517 | ) | | (13.5 | ) |
Total Operating Expenses | 454,209 |
| | 467,833 |
| | (13,624 | ) | | (2.9 | ) |
INCOME FROM OPERATIONS | 155,112 |
| | 153,615 |
| | 1,497 |
| | 1.0 |
|
OTHER INCOME (EXPENSE): | | | | | | | |
Investment earnings | 2,636 |
| | 2,280 |
| | 356 |
| | 15.6 |
|
Other income | 523 |
| | 3,382 |
| | (2,859 | ) | | (84.5 | ) |
Other expense | (2,647 | ) | | (2,908 | ) | | 261 |
| | 9.0 |
|
Total Other Income | 512 |
| | 2,754 |
| | (2,242 | ) | | (81.4 | ) |
Interest expense | 43,679 |
| | 39,683 |
| | 3,996 |
| | 10.1 |
|
INCOME BEFORE INCOME TAXES | 111,945 |
| | 116,686 |
| | (4,741 | ) | | (4.1 | ) |
Income tax expense | 35,906 |
| | 40,542 |
| | (4,636 | ) | | (11.4 | ) |
NET INCOME | 76,039 |
| | 76,144 |
| | (105 | ) | | (0.1 | ) |
Less: Net income attributable to noncontrolling interests | 3,974 |
| | 3,804 |
| | 170 |
| | 4.5 |
|
NET INCOME ATTRIBUTABLE TO WESTAR ENERGY, INC. | $ | 72,065 |
| | $ | 72,340 |
| | $ | (275 | ) | | (0.4 | ) |
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. (See 10-Q Note 2): | | | | | | | |
Basic earnings per common share | $ | 0.50 |
| | $ | 0.51 |
| | $ | (0.01 | ) | | (2.0 | ) |
Diluted earnings per common share | $ | 0.50 |
| | $ | 0.51 |
| | $ | (0.01 | ) | | (2.0 | ) |
AVERAGE EQUIVALENT COMMON SHARES OUTSTANDING (in thousands): | | | | | | | |
Basic | 142,466 |
| | 142,034 |
| | 432 |
| | 0.3 |
|
Diluted | 142,596 |
| | 142,497 |
| | 99 |
| | 0.1 |
|
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.40 |
| | $ | 0.38 |
| | $ | 0.02 |
| | 5.3 |
|
Effective income tax rate | 32 | % | | 35 | % | | | | |
| | | | | | | |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 1
Westar Energy, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
|
| | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 | | Change | | % Change |
| (Dollars in Thousands, Except Per Share Amounts) |
REVENUES: | | | | | | | |
Residential | $ | 364,310 |
| | $ | 382,128 |
| | $ | (17,818 | ) | | (4.7 | ) |
Commercial | 337,817 |
| | 353,870 |
| | (16,053 | ) | | (4.5 | ) |
Industrial | 206,506 |
| | 208,702 |
| | (2,196 | ) | | (1.1 | ) |
Other retail | (22,440 | ) | | (30,884 | ) | | 8,444 |
| | 27.3 |
|
Total Retail Revenues | 886,193 |
| | 913,816 |
| | (27,623 | ) | | (3.0 | ) |
Wholesale | 140,411 |
| | 134,099 |
| | 6,312 |
| | 4.7 |
|
Transmission | 139,593 |
| | 130,535 |
| | 9,058 |
| | 6.9 |
|
Other | 15,698 |
| | 12,448 |
| | 3,250 |
| | 26.1 |
|
Total Revenues | 1,181,895 |
| | 1,190,898 |
| | (9,003 | ) | | (0.8 | ) |
OPERATING EXPENSES: | | | | | | | |
Fuel and purchased power | 225,645 |
| | 218,688 |
| | 6,957 |
| | 3.2 |
|
SPP network transmission costs | 122,437 |
| | 115,987 |
| | 6,450 |
| | 5.6 |
|
Operating and maintenance | 168,356 |
| | 163,377 |
| | 4,979 |
| | 3.0 |
|
Depreciation and amortization | 182,655 |
| | 167,866 |
| | 14,789 |
| | 8.8 |
|
Selling, general and administrative | 116,735 |
| | 132,179 |
| | (15,444 | ) | | (11.7 | ) |
Taxes other than income tax | 84,606 |
| | 97,375 |
| | (12,769 | ) | | (13.1 | ) |
Total Operating Expenses | 900,434 |
| | 895,472 |
| | 4,962 |
| | 0.6 |
|
INCOME FROM OPERATIONS | 281,461 |
| | 295,426 |
| | (13,965 | ) | | (4.7 | ) |
OTHER INCOME (EXPENSE): | | | | | | | |
Investment earnings | 5,790 |
| | 4,296 |
| | 1,494 |
| | 34.8 |
|
Other income | 1,823 |
| | 12,860 |
| | (11,037 | ) | | (85.8 | ) |
Other expense | (7,963 | ) | | (8,451 | ) | | 488 |
| | 5.8 |
|
Total Other Income | (350 | ) | | 8,705 |
| | (9,055 | ) | | (104.0 | ) |
Interest expense | 84,774 |
| | 80,114 |
| | 4,660 |
| | 5.8 |
|
INCOME BEFORE INCOME TAXES | 196,337 |
| | 224,017 |
| | (27,680 | ) | | (12.4 | ) |
Income tax expense | 56,816 |
| | 79,165 |
| | (22,349 | ) | | (28.2 | ) |
NET INCOME | 139,521 |
| | 144,852 |
| | (5,331 | ) | | (3.7 | ) |
Less: Net income attributable to noncontrolling interests | 7,795 |
| | 6,927 |
| | 868 |
| | 12.5 |
|
NET INCOME ATTRIBUTABLE TO WESTAR ENERGY, INC. | $ | 131,726 |
| | $ | 137,925 |
| | $ | (6,199 | ) | | (4.5 | ) |
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. (See 10-Q Note 2): | | | | | | | |
Basic earnings per common share | $ | 0.92 |
| | $ | 0.97 |
| | $ | (0.05 | ) | | (5.2 | ) |
Diluted earnings per common share | $ | 0.92 |
| | $ | 0.97 |
| | $ | (0.05 | ) | | (5.2 | ) |
AVERAGE EQUIVALENT COMMON SHARES OUTSTANDING (in thousands): | | | | | | | |
Basic | 142,451 |
| | 142,013 |
| | 438 |
| | 0.3 |
|
Diluted | 142,579 |
| | 142,361 |
| | 218 |
| | 0.2 |
|
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.80 |
| | $ | 0.76 |
| | $ | 0.04 |
| | 5.3 |
|
Effective income tax rate | 29 | % | | 35 | % | | | | |
| | | | | | | |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 2
Westar Energy, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Par Values)
(Unaudited)
|
| | | | | | | |
| June 30, 2017 | | December 31, 2016 |
ASSETS | | | |
CURRENT ASSETS: | | | |
Cash and cash equivalents | $ | 3,210 |
| | $ | 3,066 |
|
Accounts receivable, net of allowance for doubtful accounts of $5,697 and $6,667, respectively | 274,426 |
| | 288,579 |
|
Fuel inventory and supplies | 302,696 |
| | 300,125 |
|
Taxes receivable | — |
| | 13,000 |
|
Prepaid expenses | 19,077 |
| | 16,528 |
|
Regulatory assets | 110,179 |
| | 117,383 |
|
Other | 30,638 |
| | 29,701 |
|
Total Current Assets | 740,226 |
| | 768,382 |
|
PROPERTY, PLANT AND EQUIPMENT, NET | 9,406,054 |
| | 9,248,359 |
|
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET | 252,737 |
| | 257,904 |
|
OTHER ASSETS: | | | |
Regulatory assets | 750,888 |
| | 762,479 |
|
Nuclear decommissioning trust | 220,031 |
| | 200,122 |
|
Other | 226,214 |
| | 249,828 |
|
Total Other Assets | 1,197,133 |
| | 1,212,429 |
|
TOTAL ASSETS | $ | 11,596,150 |
| | $ | 11,487,074 |
|
LIABILITIES AND EQUITY | | | |
CURRENT LIABILITIES: | | | |
Current maturities of long-term debt | $ | — |
| | $ | 125,000 |
|
Current maturities of long-term debt of variable interest entities | 28,538 |
| | 26,842 |
|
Short-term debt | 329,200 |
| | 366,700 |
|
Accounts payable | 139,628 |
| | 220,522 |
|
Accrued dividends | 53,743 |
| | 52,885 |
|
Accrued taxes | 89,742 |
| | 85,729 |
|
Accrued interest | 45,124 |
| | 72,519 |
|
Regulatory liabilities | 11,903 |
| | 15,760 |
|
Other | 76,294 |
| | 81,236 |
|
Total Current Liabilities | 774,172 |
| | 1,047,193 |
|
LONG-TERM LIABILITIES: | | | |
Long-term debt, net | 3,686,180 |
| | 3,388,670 |
|
Long-term debt of variable interest entities, net | 82,653 |
| | 111,209 |
|
Deferred income taxes | 1,794,177 |
| | 1,752,776 |
|
Unamortized investment tax credits | 209,283 |
| | 210,654 |
|
Regulatory liabilities | 230,355 |
| | 223,693 |
|
Accrued employee benefits | 511,073 |
| | 512,412 |
|
Asset retirement obligations | 368,233 |
| | 323,951 |
|
Other | 85,145 |
| | 83,326 |
|
Total Long-Term Liabilities | 6,967,099 |
| | 6,606,691 |
|
COMMITMENTS AND CONTINGENCIES (See 10-Q Notes 11 and 13) | | | |
EQUITY: | | | |
Westar Energy, Inc. Shareholders’ Equity: | | | |
Common stock, par value $5 per share; authorized 275,000,000 shares; issued and outstanding 142,093,387 shares and 141,791,153 shares, respective to each date | 710,467 |
| | 708,956 |
|
Paid-in capital | 2,019,815 |
| | 2,018,317 |
|
Retained earnings | 1,095,247 |
| | 1,078,602 |
|
Total Westar Energy, Inc. Shareholders’ Equity | 3,825,529 |
| | 3,805,875 |
|
Noncontrolling Interests | 29,350 |
| | 27,315 |
|
Total Equity | 3,854,879 |
| | 3,833,190 |
|
TOTAL LIABILITIES AND EQUITY | $ | 11,596,150 |
| | $ | 11,487,074 |
|
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 3
Westar Energy, Inc.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: | | | |
Net income | $ | 139,521 |
| | $ | 144,852 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 182,655 |
| | 167,866 |
|
Amortization of nuclear fuel | 15,948 |
| | 16,831 |
|
Amortization of deferred regulatory gain from sale leaseback | (2,748 | ) | | (2,748 | ) |
Amortization of corporate-owned life insurance | 8,920 |
| | 8,819 |
|
Non-cash compensation | 4,613 |
| | 4,778 |
|
Net deferred income taxes and credits | 53,852 |
| | 75,334 |
|
Allowance for equity funds used during construction | (773 | ) | | (5,247 | ) |
Changes in working capital items: | | | |
Accounts receivable | 14,154 |
| | (40,555 | ) |
Fuel inventory and supplies | (2,262 | ) | | 2,140 |
|
Prepaid expenses and other current assets | 39,167 |
| | 7,126 |
|
Accounts payable | (20,012 | ) | | (21,364 | ) |
Accrued taxes | 11,019 |
| | 16,272 |
|
Other current liabilities | (103,316 | ) | | (62,434 | ) |
Changes in other assets | 14,891 |
| | 1,848 |
|
Changes in other liabilities | 7,695 |
| | 15,163 |
|
Cash Flows from Operating Activities | 363,324 |
| | 328,681 |
|
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | | | |
Additions to property, plant and equipment | (383,627 | ) | | (503,631 | ) |
Purchase of securities - trusts | (12,140 | ) | | (39,603 | ) |
Sale of securities - trusts | 13,538 |
| | 41,201 |
|
Investment in corporate-owned life insurance | (13,875 | ) | | (14,648 | ) |
Proceeds from investment in corporate-owned life insurance | 185 |
| | 24,171 |
|
Investment in affiliated company | — |
| | (655 | ) |
Other investing activities | (3,199 | ) | | (2,798 | ) |
Cash Flows used in Investing Activities | (399,118 | ) | | (495,963 | ) |
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | | | |
Short-term debt, net | (37,632 | ) | | (73,300 | ) |
Proceeds from long-term debt | 296,296 |
| | 396,577 |
|
Proceeds from long-term debt of variable interest entities | — |
| | 162,048 |
|
Retirements of long-term debt | (125,000 | ) | | (50,000 | ) |
Retirements of long-term debt of variable interest entities | (26,840 | ) | | (190,355 | ) |
Repayment of capital leases | (1,663 | ) | | (401 | ) |
Borrowings against cash surrender value of corporate-owned life insurance | 52,302 |
| | 54,910 |
|
Repayment of borrowings against cash surrender value of corporate-owned life insurance | — |
| | (22,921 | ) |
Issuance of common stock | 659 |
| | 1,354 |
|
Distributions to shareholders of noncontrolling interests | (5,760 | ) | | (2,551 | ) |
Cash dividends paid | (109,418 | ) | | (101,137 | ) |
Other financing activities | (7,006 | ) | | (4,960 | ) |
Cash Flows from Financing Activities | 35,938 |
| | 169,264 |
|
NET INCREASE IN CASH AND CASH EQUIVALENTS | 144 |
| | 1,982 |
|
CASH AND CASH EQUIVALENTS: | | | |
Beginning of period | 3,066 |
| | 3,231 |
|
End of period | $ | 3,210 |
| | $ | 5,213 |
|
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 4
Westar Energy, Inc.
2nd Quarter 2017 vs. 2016
|
| | | | | | | | | | | | | | |
Earnings Variances | | | | | | | | |
| | | | | Change | | | | |
| | | ($ per share) | | (Dollars in Thousands) | | | | ($ per share) |
June 30, 2016 basic earnings attributable to common stock | | | | $ | 72,340 |
| | | | $ | 0.51 |
|
| | | | | | | | | |
| | | Favorable/(Unfavorable) |
| | | | | | | | | |
| Gross Margin | | | | (11,823 | ) | | A | | |
| Operating and maintenance | | | | (1,539 | ) | | B | | |
| Depreciation and amortization | | | | (9,803 | ) | | C | | |
| Selling, general and administrative | | | | 18,145 |
| | D | | |
| Taxes other than income tax | | | | 6,517 |
| | E | | |
| Other income (expense) | | | | (2,242 | ) | | F | | |
| Interest expense | | | | (3,996 | ) | | G | | |
| Income tax expense | | | | 4,636 |
| | H | | |
| Net income attributable to noncontrolling interests | | | | (170 | ) | | | | |
| Change in shares outstanding | | (0.01 | ) | | | | | | |
| | | | | | | | | |
June 30, 2017 basic earnings attributable to common stock | | | | $ | 72,065 |
| | | | $ | 0.50 |
|
| | | | | | | | | |
| Major factors influencing the period to period change in EPS -- Favorable/(Unfavorable) |
| |
A | Due primarily to lower residential and commercial sales because of milder weather in 2017
|
| | | | | | | | | |
B | Due primarily to: higher operating and maintenance costs at coal fired plants mainly from scheduled outages -- ($3.6M); higher operating expense due to start of Western Plains Wind Farm -- ($1.3M); partially offset by a decrease in nuclear operating and maintenance costs due primarily to receipt of proceeds from a legal settlement at Wolf Creek -- $4.6M |
| | | | | | | | | |
C | Due principally to property additions at Western Plains Wind Farm in March 2017 |
| | | | | | | | | |
D | Due primarily to: decrease in merger-related expense -- $7.5M; and decrease in employee benefit costs attributable partially to having fewer employees -- $4.9M
|
| | | | | | | | | |
E | Due primarily to decreased property tax amortization expense that is largely offset by decreased prices -- $6.7M
|
| | | | | | | | | |
F | Due primarily to a decrease in equity AFUDC -- ($2.8M)
|
| | | | | | | | | |
G | Due primarily to: an increase in interest expense of long-term debt from issuances of FMBs during June 2016 -- ($2.8M); and a decrease in debt AFUDC -- ($1.4M) |
| | | | | | | | | |
H | Due primarily to an increase in tax benefits from production tax credits from Western Plains Wind Farm
|
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 5
Westar Energy, Inc.
YTD June 2017 vs. 2016 |
| | | | | | | | | | | | | | |
Earnings Variances | | | | | | | | |
| | | | | Change | | | | |
| | | ($ per share) | | (Dollars in Thousands) | | | | ($ per share) |
June 30, 2016 basic earnings attributable to common stock | | | | $ | 137,925 |
| | | | $ | 0.97 |
|
| | | | | | | | | |
| | | Favorable/(Unfavorable) |
| | | | | | | | | |
| Gross Margin | | | | (22,410 | ) | | A | | |
| Operating and maintenance | | | | (4,979 | ) | | B | | |
| Depreciation and amortization | | | | (14,789 | ) | | C | | |
| Selling, general and administrative | | | | 15,444 |
| | D | | |
| Taxes other than income tax | | | | 12,769 |
| | E | | |
| Other income (expense) | | | | (9,055 | ) | | F | | |
| Interest expense | | | | (4,660 | ) | | G | | |
| Income tax expense | | | | 22,349 |
| | H | | |
| Net income attributable to noncontrolling interests | | | | (868 | ) | | | | |
| Change in shares outstanding | | (0.01 | ) | | | | | | |
| | | | | | | | | |
June 30, 2017 basic earnings attributable to common stock | | | | $ | 131,726 |
| | | | $ | 0.92 |
|
| | | | | | | | | |
| Major factors influencing the period to period change in EPS -- Favorable/(Unfavorable) |
| |
A | Due primarily to lower residential and commercial sales because of milder weather in 2017 and one less calendar day due to 2016 being a leap year
|
| | | | | | | | | |
B | Due primarily to: higher distribution maintenance expense -- ($5.6M); higher operating and maintenance costs at coal fired plants due primarily to scheduled outage -- ($3.1M); higher operating expense due to start of Western Plains Wind Farm -- ($1.7M); partially offset by a decrease in nuclear operating and maintenance costs due primarily to receipt of proceeds from a legal settlement at Wolf Creek -- $6.0M
|
| | | | | | | | | |
C | Due principally to property additions at Western Plains Wind Farm in March 2017
|
| | | | | | | | | |
D | Due primarily to: decrease in merger-related expense -- $7.1M; and decrease in employee benefit costs attributable partially to having fewer employees -- $3.1M
|
| | | | | | | | | |
E | Due primarily to decreased property tax amortization expense that is largely offset by decreased prices -- $13.4M
|
| | | | | | | | | |
F | Due primarily to: lower COLI benefit -- ($6.6M); and a decrease in equity AFUDC -- ($4.5M)
|
| | | | | | | | | |
G | Due primarily to: an increase in interest expense of long-term debt from the issuances of FMBs during June 2016 -- ($4.2M); and a decrease in debt AFUDC -- ($1.6M)
|
| | | | | | | | | |
H | Due primarily to lower income before income taxes and increases in tax benefits from production tax credits from Western Plains Wind Farm
|
| | | | | | | | | |
|
|
| | | | | | | | | |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 6
Westar Energy, Inc.
Revenue, Sales and Energy Supply
|
| | | | | | | | | | | | | | |
Supplemental Data | Three Months Ended June 30, |
| 2017 | | 2016 | | Change | | % Change |
Revenues | (Dollars In Thousands) |
Residential | $ | 188,142 |
| | $ | 202,838 |
| | $ | (14,696 | ) | | (7.2 | ) |
Commercial | 182,110 |
| | 188,197 |
| | (6,087 | ) | | (3.2 | ) |
Industrial | 107,990 |
| | 108,004 |
| | (14 | ) | | — |
|
Other retail | 5,706 |
| | 4,013 |
| | 1,693 |
| | 42.2 |
|
Provision for rate refunds | (15,798 | ) | | (20,515 | ) | | 4,717 |
| | 23.0 |
|
Total Retail Revenues | 468,150 |
| | 482,537 |
| | (14,387 | ) | | (3.0 | ) |
Tariff-based wholesale | 53,332 |
| | 56,260 |
| | (2,928 | ) | | (5.2 | ) |
Market-based wholesale | 9,712 |
| | 10,427 |
| | (715 | ) | | (6.9 | ) |
Transmission | 70,152 |
| | 66,620 |
| | 3,532 |
| | 5.3 |
|
Other | 7,975 |
| | 5,604 |
| | 2,371 |
| | 42.3 |
|
Total Revenues | $ | 609,321 |
| | $ | 621,448 |
| | $ | (12,127 | ) | | (2.0 | ) |
| | | | | | | |
| | | | | | | |
Electricity Sales | (Thousands of MWh) |
Residential | 1,393 |
| | 1,492 |
| | (99 | ) | | (6.6 | ) |
Commercial | 1,814 |
| | 1,875 |
| | (61 | ) | | (3.3 | ) |
Industrial | 1,422 |
| | 1,391 |
| | 31 |
| | 2.2 |
|
Other retail | 25 |
| | 19 |
| | 6 |
| | 31.6 |
|
Total Retail | 4,654 |
| | 4,777 |
| | (123 | ) | | (2.6 | ) |
Tariff-based wholesale | 793 |
| | 915 |
| | (122 | ) | | (13.3 | ) |
Market-based wholesale | 1,200 |
| | 781 |
| | 419 |
| | 53.6 |
|
Total wholesale | 1,993 |
| | 1,696 |
| | 297 |
| | 17.5 |
|
Total Electricity Sales | 6,647 |
| | 6,473 |
| | 174 |
| | 2.7 |
|
| | | | | | | |
| (Dollars per MWh) |
Total retail | $ | 100.59 |
| | $ | 101.01 |
| | $ | (0.42 | ) | | (0.4 | ) |
Tariff-based wholesale | $ | 67.25 |
| | $ | 61.49 |
| | $ | 5.76 |
| | 9.4 |
|
Market-based wholesale | $ | 8.09 |
| | $ | 13.35 |
| | $ | (5.26 | ) | | (39.4 | ) |
| | | | | | | |
| | | | | | | |
Fuel and Purchased Power | (Dollars In Thousands) |
Fuel used for generation | $ | 79,595 |
| | $ | 91,980 |
| | $ | (12,385 | ) | | (13.5 | ) |
Purchased power | 42,815 |
| | 34,071 |
| | 8,744 |
| | 25.7 |
|
Subtotal | 122,410 |
| | 126,051 |
| | (3,641 | ) | | (2.9 | ) |
RECA recovery and other | (10,620 | ) | | (7,421 | ) | | (3,199 | ) | | (43.1 | ) |
Total fuel and purchased power expense | $ | 111,790 |
| | $ | 118,630 |
| | $ | (6,840 | ) | | (5.8 | ) |
| | | | | | | |
Electricity Supply | (Thousands of MWh) |
Generated - Gas | 372 |
| | 472 |
| | (100 | ) | | (21.2 | ) |
Coal | 2,966 |
| | 3,373 |
| | (407 | ) | | (12.1 | ) |
Nuclear | 1,246 |
| | 1,242 |
| | 4 |
| | 0.3 |
|
Wind | 402 |
| | 100 |
| | 302 |
| | 302.0 |
|
Subtotal electricity generated | 4,986 |
| | 5,187 |
| | (201 | ) | | (3.9 | ) |
Purchased | 2,055 |
| | 1,455 |
| | 600 |
| | 41.2 |
|
Total Electricity Supply | 7,041 |
| | 6,642 |
| | 399 |
| | 6.0 |
|
| | | | | | | |
| (Dollars per MWh) |
Average cost of fuel used for generation | $ | 15.96 |
| | $ | 17.73 |
| | $ | (1.77 | ) | | (10.0 | ) |
Average cost of purchased power | $ | 20.83 |
| | $ | 23.42 |
| | $ | (2.59 | ) | | (11.1 | ) |
Average cost of fuel and purchased power | $ | 17.39 |
| | $ | 18.98 |
| | $ | (1.59 | ) | | (8.4 | ) |
| | | | | | | |
| | | | | | | |
Degree Days | | | 2016/ | | | | |
| 2017 | | 20 yr Avg | | Change | | % Change |
Cooling | | | | | | | |
Actual compared to last year | 508 |
| | 593 |
| | (85 | ) | | (14.3 | ) |
Actual compared to 20 year average | 508 |
| | 457 |
| | 51 |
| | 11.2 |
|
Heating | | | | | | |
|
|
Actual compared to last year | 310 |
| | 285 |
| | 25 |
| | 8.8 |
|
Actual compared to 20 year average | 310 |
| | 386 |
| | (76 | ) | | (19.7 | ) |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 7
Westar Energy, Inc.
Revenue, Sales and Energy Supply
|
| | | | | | | | | | | | | | |
Supplemental Data | Six Months Ended June 30, |
| 2017 | | 2016 | | Change | | % Change |
Revenues | (Dollars In Thousands) |
Residential | $ | 364,310 |
| | $ | 382,128 |
| | $ | (17,818 | ) | | (4.7 | ) |
Commercial | 337,817 |
| | 353,870 |
| | (16,053 | ) | | (4.5 | ) |
Industrial | 206,506 |
| | 208,702 |
| | (2,196 | ) | | (1.1 | ) |
Other retail | 9,643 |
|
| 7,854 |
| | 1,789 |
| | 22.8 |
|
Provision for rate refunds | (32,083 | ) | | (38,738 | ) | | 6,655 |
| | 17.2 |
|
Total Retail Revenues | 886,193 |
| | 913,816 |
| | (27,623 | ) | | (3.0 | ) |
Tariff-based wholesale | 110,553 |
| | 115,280 |
| | (4,727 | ) | | (4.1 | ) |
Market-based wholesale | 29,858 |
| | 18,819 |
| | 11,039 |
| | 58.7 |
|
Transmission | 139,593 |
| | 130,535 |
| | 9,058 |
| | 6.9 |
|
Other | 15,698 |
| | 12,448 |
| | 3,250 |
| | 26.1 |
|
Total Revenues | $ | 1,181,895 |
| | $ | 1,190,898 |
| | $ | (9,003 | ) | | (0.8 | ) |
| | | | | | | |
| | | | | | | |
Electricity Sales | (Thousands of MWh) |
Residential | 2,747 |
| | 2,889 |
| | (142 | ) | | (4.9 | ) |
Commercial | 3,432 |
| | 3,533 |
| | (101 | ) | | (2.9 | ) |
Industrial | 2,756 |
| | 2,693 |
| | 63 |
| | 2.3 |
|
Other retail | 44 |
| | 40 |
| | 4 |
| | 10.0 |
|
Total Retail | 8,979 |
| | 9,155 |
| | (176 | ) | | (1.9 | ) |
Tariff-based wholesale | 1,802 |
| | 1,910 |
| | (108 | ) | | (5.7 | ) |
Market-based wholesale | 2,682 |
| | 1,660 |
| | 1,022 |
| | 61.6 |
|
Total wholesale | 4,484 |
| | 3,570 |
| | 914 |
| | 25.6 |
|
Total Electricity Sales | 13,463 |
| | 12,725 |
| | 738 |
| | 5.8 |
|
| | | | | | | |
| (Dollars per MWh) |
Total retail | $ | 98.70 |
| | $ | 99.82 |
| | $ | (1.12 | ) | | (1.1 | ) |
Tariff-based wholesale | $ | 61.35 |
| | $ | 60.36 |
| | $ | 0.99 |
| | 1.6 |
|
Market-based wholesale | $ | 11.13 |
| | $ | 11.34 |
| | $ | (0.21 | ) | | (1.9 | ) |
| | | | | | | |
| | | | | | | |
Fuel and Purchased Power | (Dollars In Thousands) |
Fuel used for generation | $ | 169,442 |
| | $ | 173,619 |
| | $ | (4,177 | ) | | (2.4 | ) |
Purchased power | 86,267 |
| | 72,901 |
| | 13,366 |
| | 18.3 |
|
Subtotal | 255,709 |
| | 246,520 |
| | 9,189 |
| | 3.7 |
|
RECA recovery and other | (30,064 | ) | | (27,832 | ) | | (2,232 | ) | | (8.0 | ) |
Total fuel and purchased power expense | $ | 225,645 |
| | $ | 218,688 |
| | $ | 6,957 |
| | 3.2 |
|
| | | | | | | |
Electricity Supply | (Thousands of MWh) |
Generated - Gas | 694 |
| | 697 |
| | (3 | ) | | (0.4 | ) |
Coal | 6,424 |
| | 6,661 |
| | (237 | ) | | (3.6 | ) |
Nuclear | 2,490 |
| | 2,494 |
| | (4 | ) | | (0.2 | ) |
Wind | 696 |
| | 222 |
| | 474 |
| | 213.5 |
|
Subtotal electricity generated | 10,304 |
| | 10,074 |
| | 230 |
| | 2.3 |
|
Purchased | 3,810 |
| | 3,011 |
| | 799 |
| | 26.5 |
|
Total Electricity Supply | 14,114 |
| | 13,085 |
| | 1,029 |
| | 7.9 |
|
| | | | | | | |
| (Dollars per MWh) |
Average cost of fuel used for generation | $ | 16.44 |
| | $ | 17.23 |
| | $ | (0.79 | ) | | (4.6 | ) |
Average cost of purchased power | $ | 22.64 |
| | $ | 24.21 |
| | $ | (1.57 | ) | | (6.5 | ) |
Average cost of fuel and purchased power | $ | 18.12 |
| | $ | 18.84 |
| | $ | (0.72 | ) | | (3.8 | ) |
| | | | | | | |
| | | | | | | |
Degree Days | | | 2016/ | | | | |
| 2017 | | 20 yr Avg | | Change | | % Change |
Cooling | | | | | | | |
Actual compared to last year | 523 |
| | 597 |
| | (74 | ) | | (12.4 | ) |
Actual compared to 20 year average | 523 |
| | 460 |
| | 63 |
| | 13.7 |
|
Heating | | | | | | | |
Actual compared to last year | 2,210 |
| | 2,367 |
| | (157 | ) | | (6.6 | ) |
Actual compared to 20 year average | 2,210 |
| | 2,814 |
| | (604 | ) | | (21.5 | ) |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 8
Westar Energy, Inc.
|
| | | | | | | | | | | | | | |
Capitalization |
| | June 30, 2017 | | | | December 31, 2016 | | |
| | (Dollars in Thousands) | | |
Current maturities of long-term debt | | $ | — |
| | | | $ | 125,000 |
| | |
Current maturities of long-term debt of VIEs | | 28,538 |
| | | | 26,842 |
| | |
Long-term debt, net | | 3,686,180 |
| | | | 3,388,670 |
| | |
Long-term debt of variable interest entities, net | | 82,653 |
| | | | 111,209 |
| | |
Total long-term debt | | 3,797,371 |
| | 49.6 | % | | 3,651,721 |
| | 48.8 | % |
Common equity | | 3,825,529 |
| | 50.0 | % | | 3,805,875 |
| | 50.8 | % |
Noncontrolling interests | | 29,350 |
| | 0.4 | % | | 27,315 |
| | 0.4 | % |
Total capitalization | | $ | 7,652,250 |
| | 100.0 | % | | $ | 7,484,911 |
| | 100.0 | % |
| | | | | | | | |
GAAP Book value per share | | $ | 26.92 |
| | | | $ | 26.84 |
| |
|
|
Period end shares outstanding (in thousands) | | 142,093 |
| | | | 141,791 |
| | |
| | | | | | | | |
Outstanding Long-Term Debt |
| | | | | | | | |
| CUSIP | June 30, 2017 | | | | December 31, 2016 | | |
Westar Energy: | | (Dollars in Thousands) | | |
First Mortgage Bond series: | | | | | | | | |
5.15% Series due January 2017 | 95709TAB6 | $ | — |
| | | | $ | 125,000 |
| | |
5.10% Series due July 2020 | 95709TAD2 | 250,000 |
| | | | 250,000 |
| | |
3.25% Series due December 2025 | 95709TAL4 | 250,000 |
| | | | 250,000 |
| | |
2.55% Series due June 2026 | 95709TAN0
| 350,000 |
| | | | 350,000 |
| | |
3.10% Series due April 2027 | 95709TAP5 | 300,000 |
| | | | — |
| | |
4.125% Series due March 2042 | 95709TAH3 | 550,000 |
| | | | 550,000 |
| | |
4.10% Series due April 2043 | 95709TAJ9 | 430,000 |
| | | | 430,000 |
| | |
4.625% Series due September 2043 | 95709TAK6 | 250,000 |
| | | | 250,000 |
| | |
4.25% Series due December 2045 | 95709TAM2 | 300,000 |
| | | | 300,000 |
| | |
| | 2,680,000 |
| | | | 2,505,000 |
| | |
Pollution control bond series: | | | | | | | | |
Variable series due April 2032 (Wamego) | 933623BN9 | 30,500 |
| | | | 30,500 |
| | |
Variable series due April 2032 (St Marys) | 792609AF6 | 45,000 |
| | | | 45,000 |
| | |
| | 75,500 |
| | | | 75,500 |
| | |
Total Westar Energy | | 2,755,500 |
| | | | 2,580,500 |
| | |
| | | | | | | | |
KGE | | | | | | | | |
First mortgage bond series: | | | | | | | | |
6.70% Series due June 2019 | 485260BL6 | 300,000 |
| | | | 300,000 |
| | |
6.15% Series due May 2023 | 485260B@1 | 50,000 |
| | | | 50,000 |
| | |
6.53% Series due December 2037 | 485260BJ1 | 175,000 |
| | | | 175,000 |
| | |
6.64% Series due May 2038 | 485260B#9 | 100,000 |
| | | | 100,000 |
| | |
4.30% Series due July 2044 | 485260BM4 | 250,000 |
| | | | 250,000 |
| | |
| | 875,000 |
| | | | 875,000 |
| | |
Pollution control bond series: | | | | | | | | |
Variable rate series due April 2027 (LaCygne) | 502828AJ5 | 21,940 |
| | | | 21,940 |
| | |
2.50% Series due June 2031 | N/A | 50,000 |
| | | | 50,000 |
| | |
Variable rate series due April 2032 (St Marys) | 792609AE9 | 14,500 |
| | | | 14,500 |
| | |
Variable rate series due April 2032 (Wamego) | 933623BM1 | 10,000 |
| | | | 10,000 |
| | |
| | 96,440 |
| | |
| 96,440 |
| | |
Total KGE | | 971,440 |
| | | | 971,440 |
| | |
| | | | | | | | |
Total long-term debt | | 3,726,940 |
| | | | 3,551,940 |
| | |
Unamortized debt discount | | (11,238 | ) | | | | (10,358 | ) | | |
Unamortized debt issuance expense | | (29,522 | ) | | | | (27,912 | ) | | |
Long-term debt due within one year | | — |
| | | | (125,000 | ) | | |
Total long-term debt, net | | $ | 3,686,180 |
| | | | $ | 3,388,670 |
| | |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 9
Westar Energy, Inc.
GAAP to Non-GAAP Reconciliation
Fuel and purchased power costs fluctuate with electricity sales and unit costs. As permitted by regulators, prices are adjusted to reflect changes in the costs of fuel and purchased power. Fuel and purchased power costs for wholesale customers are recovered at prevailing market prices or based on a predetermined formula with a price adjustment approved by FERC. As a result, changes in fuel and purchased power costs are offset in revenues with minimal impact on net income. For this reason, Westar management believes that gross margin is useful for understanding and analyzing changes in operating performance from one period to the next. Gross margin is calculated as total revenues, including transmission revenues, less the sum of fuel and purchased power costs and amounts billed by the SPP for network transmission costs (SPP NITS). Accordingly, gross margin reflects transmission revenues and costs on a net basis.
The calculations of gross margin for the three and six months ended June 30, 2017 and 2016 are shown in the table below. The table also includes a reconciliation of gross margin to income from operations for both periods. Income from operations is the GAAP financial measure most directly comparable to gross margin.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
| (Dollars in Thousands) |
Revenues | $ | 609,321 |
| | $ | 621,448 |
|
| $ | (12,127 | ) |
| $ | 1,181,895 |
|
| $ | 1,190,898 |
|
| $ | (9,003 | ) |
Less: Fuel and purchased power expense | 111,790 |
| | 118,630 |
| | (6,840 | ) | | 225,645 |
| | 218,688 |
| | 6,957 |
|
SPP network transmission costs | 61,763 |
| | 55,227 |
| | 6,536 |
| | 122,437 |
| | 115,987 |
| | 6,450 |
|
Gross margin | $ | 435,768 |
|
| $ | 447,591 |
|
| $ | (11,823 | ) |
| $ | 833,813 |
|
| $ | 856,223 |
|
| $ | (22,410 | ) |
| | | | | | | | | | | |
Income from operations | $ | 155,112 |
| | $ | 153,615 |
| | $ | 1,497 |
| | $ | 281,461 |
| | $ | 295,426 |
| | $ | (13,965 | ) |
Plus: Operating and maintenance expense | 87,158 |
| | 85,619 |
| | 1,539 |
| | 168,356 |
| | 163,377 |
| | 4,979 |
|
Depreciation and amortization expense | 94,029 |
| | 84,226 |
| | 9,803 |
| | 182,655 |
| | 167,866 |
| | 14,789 |
|
Selling, general and administrative expense | 57,579 |
| | 75,724 |
| | (18,145 | ) | | 116,735 |
| | 132,179 |
| | (15,444 | ) |
Taxes other than income tax | 41,890 |
| | 48,407 |
| | (6,517 | ) | | 84,606 |
| | 97,375 |
| | (12,769 | ) |
Gross margin | $ | 435,768 |
| | $ | 447,591 |
|
| $ | (11,823 | ) |
| $ | 833,813 |
|
| $ | 856,223 |
|
| $ | (22,410 | ) |
| | | | | | | | | | | |
| | | | | | | | | | | |
The Notes to the Condensed Consolidated Financial Statements in the company's Quarterly Report on Form 10-Q
for the period ended June 30, 2017 should be read in conjunction with this financial information.
Page 10
Westar Energy
Investor Update – August 8, 2017
Exhibit 99.3
Forward-Looking Disclosures
AUGUST 8, 2017 INVESTOR UPDATE 2
Forward Looking Statements
Forward-looking statements: Certain matters discussed in this news release are “forward-looking statements.” The Private Securities Litigation
Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words
like “believe,” “anticipate,” “target,” “expect,” “pro forma,” “estimate,” “intend,” “guidance” or words of similar meaning. Forward-looking
statements describe future plans, objectives, expectations or goals. Although Westar Energy believes that its expectations are based on reasonable
assumptions, all forward-looking statements involve risk and uncertainty. The factors that could cause actual results to differ materially from these
forward-looking statements include those discussed herein as well as (1) those discussed in the company's Annual Report on Form 10-K for the
year ended Dec. 31, 2016 (a) under the heading, “Forward-Looking Statements,” (b) in ITEM 1. Business, (c) in ITEM 1A. Risk Factors, (d) in
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and (e) in ITEM 8. Financial Statements and
Supplementary Data: Notes 3, 14 and 16; (2) those discussed in the company's Quarterly Reports on Form 10-Q filed on May 9, 2017 and Aug. 8,
2017, (a) under the heading "Forward-Looking Statements." (b) in ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, (c) in Part I, Financial Information, ITEM 1. Financial Statements: Notes 3, 11, 12 (in the Form 10-Q filed on May 9,
2017), and 13 (in the Form 10-Q filed on Aug. 8, 2017), and (d) ITEM 1A. Risk Factors; and (3) other factors discussed in the company's filings
with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date such statement was made, and the
company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which
such statement was made.
Additional Information
The information in this investor update is not complete, and is intended to be read in conjunction with Westar Energy, Inc.’s full earnings package
for the quarter ended June 30, 2017 as well as other information regarding the company that is filed with the Securities and Exchange
Commission. The full earnings package is available is available under Supplemental Materials within the investor section of the company website
at www.WestarEnergy.com, and the company’s filings with the Securities and Exchange Commission can be found in the same section under SEC
Filings.
Company Update
3 AUGUST 8, 2017 INVESTOR UPDATE
Recent Announcements & Focus
Merger of Equals with Great Plains Energy
100% stock-for-stock tax-free exchange
Westar: exchange 1 WR share for 1 share of new company stock
Great Plains: exchange 1 GXP share for .5981 share of new company stock
Targeted EPS CAGR at 6-8% (off WR‟s „16 EPS of $2.43)
Immediate 15% WR dividend boost at closing
Targeted dividend CAGR at 6-8% thereafter
Strong credit profile, outlook already improved
New structure addresses KCC objections to prior deal
Reported Q2 2017 EPS of $0.50
Abbreviated rate case effective mid-year ≈ $16M
New renewables online
Western Plains Wind
Community Solar
Not issuing 2017 guidance due to pending merger
4 AUGUST 8, 2017 INVESTOR UPDATE
Clean Energy Leader
5
Westar’s recently completed 1.2MW community
solar near Hutchinson, KS gives customers access
to solar energy without upfront investment or
commitment.
Newly commissioned Kingman Wind Farm serves
both retail and local wholesale partners.
Emission Free Energy
> 50%
of Retail Sales
AUGUST 8, 2017 INVESTOR UPDATE
Innovation drives efficiency
6
Drones help identify struggling equipment before it causes
an outage. They are also safer and faster to inspect difficult-
to-reach areas while locating the cause of a power outage.
Westar deploys Unmanned Aircraft Systems
A drone with a protective cage flown into a power plant
condenser still at unsafe temperatures and atmosphere.
Helped identify ruptured expansion joint about 12 hours
sooner than with conventional inspection.
AUGUST 8, 2017 INVESTOR UPDATE
Investing in Data Analytics and Technology
Big data to improve fossil & wind reliability
Pilot monitoring program at Jeffrey Energy Center and Central
Plains Wind Farm
24/7 monitoring
Models compare real time data to expected values
Initial hit saved more than entire cost of pilot program
Recent technology investments
Finance & Accounting - PeopleSoft
Supply Chain – PeopleSoft
Human Resources – PeopleSoft
Enterprise Asset Management – Maximo
Customer Information System – Next to be replaced;
will piggyback off of Great Plains Oracle installation
7 AUGUST 8, 2017 INVESTOR UPDATE
Continued Focus of Safety
8
Gordon Evans Energy Center received the
OSHA Voluntary Protection Program Region
VII Star of Excellence award.
National Safety Recognition
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
2017
OSHA Incident Rate PVA Rate
2017 on pace for one of our
safest years ever!
AUGUST 8, 2017 INVESTOR UPDATE
Improving Customer Experience
9
• Ranked #1 in
customer service in the
Midwest!
• Ranked #2
nationally in utility
website satisfaction!
According to JD Power - 2017
Commitment to customers paying off!
AUGUST 8, 2017 INVESTOR UPDATE
Earnings Update
10 AUGUST 8, 2017 INVESTOR UPDATE
Year Over Year Earnings Variance
$0.51 $0.50
$0.97
$0.92
2Q16 2Q17 YTD 16 YTD 17
EPS
2016 vs 2017
11
Q2 Variance Drivers
14% decrease in CDD
Higher depreciation expense ~ ($10M)
Higher expenses at fossil plants ~ ($4M)
Decrease in merger-related expenses ~ $8M
Lower income tax expense ~ $5M
YTD Variance Drivers
12% decrease in CDD
Higher O&M ~ ($5M)
Higher depreciation expense ~ ($15M)
Lower COLI benefit ~ ($7M)
Lower Equity AFUDC ~ ($5M)
Decrease in merger-related expense ~ $7M
Lower property tax amortization expense ~ $13M
Lower income tax expense ~ $22M
Full Earnings Package is available under Supplemental
Materials within the investor section of the company
website at www.WestarEnergy.com.
AUGUST 8, 2017 INVESTOR UPDATE
Additional Earnings Detail
Merger Expenses
2016 -- $10.2M
2017 through July 31 -- $8.5M
Expected total upon closing -- $45M
Weather EPS Estimate
Q2 – $0.04 unfavorable to 2016 – $0.01 unfavorable to normal
2017 – $0.04 unfavorable to 2016 – $0.06 unfavorable to normal
COLI
Actual:
Q2 – $0M
2017 – $0M
2017 annual assumption – $20M
Transmission Margin Increase
2017 annual assumption – $18M
12 AUGUST 8, 2017 INVESTOR UPDATE
Merger Update
13 AUGUST 8, 2017 INVESTOR UPDATE
Merger Summary
Transaction
Structure
• All stock merger of equals (100% stock-for-stock tax-free exchange); combined equity value of
~$14 billion
• New company to be jointly named prior to close
Exchange Ratio
• Westar Energy exchanges 1 share of WR for 1 share of new holding company
• Great Plains Energy exchanges 1 share of GXP for 0.5981 share of new holding company
Approximate Pro
Forma Ownership
• Westar Energy 52.5%
• Great Plains Energy 47.5%
Pro Forma Dividend • 15% dividend uplift for Westar Energy; maintains current Great Plains Energy dividend
Termination Fee
• Reverse break-up fee of $190 million in favor of Westar Energy
• Mutual fiduciary out break-up fees of $190 million in favor of the other
• Great Plains Energy no-vote fee of $80 million in favor of Westar Energy
Governance
• Mark Ruelle, Westar Energy CEO to become non-executive chairman
• Terry Bassham, Great Plains Energy President & CEO to remain President & CEO
• Tony Somma (Westar Energy CFO) to be CFO; Kevin Bryant (Great Plains Energy CFO) to be COO
• Equal board representation from each company, including Bassham and Ruelle
Headquarters
• Corporate Headquarters – Kansas City, Missouri
• Operating Headquarters – Topeka, Kansas; Kansas City, Missouri
Timing / Approvals
• Expected to close first half 2018
• Shareholders, federal and state regulators
14 AUGUST 8, 2017 INVESTOR UPDATE
Merger Value
15 AUGUST 8, 2017 INVESTOR UPDATE
Expected stronger EPS growth
New company EPS CAGR of 6-8%1 vs
WR stand-alone EPS CAGR of 4-6%2
Merger savings – Improve “slope” of EPS growth
Share buybacks – Upward “shift” of EPS growth
Immediate ≈15% dividend increase
Not at expense of credit or payout ratio
Tax-free exchange
Structured to address regulatory order
Not as dependent on future ongoing
rate relief
2016 2022e
Westar Stand Alone Plan, Guidance 4%-6%, Middle of Range
Merger, Opportunities for Additional Synergies/Buy-back Shares
Merger, Modest Synergies
Merger, No Synergies, Excess Cash Used to Buy-back Approximately 30 Million
Shares
EPS Growth Targets
6%
7%
8%
Merger Close
2018e
1New company expected EPS CAGR based off ‘16 WR EPS of $2.43/sh.
2 WR stand-alone expected EPS CAGR based off normalized ‘15 WR EPS of $2.21/sh.
Strong Growth Targets
16 AUGUST 8, 2017 INVESTOR UPDATE
$2.19
$1.44
$1.52
$1.60
$1.84
$2.32
2015A 2016A 2017 Pro Forma
2018E
Pro Forma
2021E
$2.43
$3.57
2016A Pro Forma 2021E
$3.25
Targeted EPS Growth 6-8%1 Targeted Dividend Growth 6-8%1
1Indicated annual earnings per share and dividend per share are historical Westar Energy and targeted combined company.
Path to Merger Close
17 AUGUST 8, 2017 INVESTOR UPDATE
Local & Political Support Proxy Effective
Dialogue with Regulatory Parties Shareholder Approval
(WR >50% outstanding; GXP >2/3 outstanding)
Execute Agreement HSR Approval
Initial positive reaction FCC Approval
File KS/MO Applications NRC Approval
File FERC Application FERC Approval
File NRC / FCC / HSR KS Approval
File Proxy MO Approval
Estimate Completion 1st Half 2018
Additional Information
AUGUST 8, 2017 INVESTOR UPDATE 18
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy, vote or
approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction. In connection with the proposed transactions, Monarch Energy Holding, Inc.
(Monarch) will file a Registration Statement on Form S-4, that includes a joint proxy statement of Great Plains Energy and Westar Energy, which
also constitutes a prospectus of Monarch. WE URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED BY MONARCH, GREAT PLAINS ENERGY AND WESTAR ENERGY
WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT GREAT PLAINS ENERGY, WESTAR ENERGY, MONARCH AND THE PROPOSED TRANSACTION.
Investors can obtain free copies of the Registration Statement and joint proxy statement/prospectus and other documents filed by Monarch, Great
Plains Energy and Westar Energy with the SEC at http://www.sec.gov, the SEC’s website, or free of charge from Great Plains Energy’s website
(http://www.greatplainsenergy.com) under the tab, “Investor Relations” and then under the heading “SEC Filings.” These documents are also
available free of charge from Westar’s website (http://www.westarenergy.com) under the tab “Investors” and then under the heading “SEC
Filings.”
Participants in Proxy Solicitation
Great Plains Energy, Westar Energy and their respective directors and certain of their executive officers and employees may be deemed, under
SEC rules, to be participants in the solicitation of proxies from Great Plains Energy’s and Westar Energy’s shareholders with respect to the
proposed transaction. Information regarding the officers and directors of Great Plains Energy is included in its definitive proxy statement for its
2017 annual meeting filed with SEC on March 23, 2017. Information regarding the officers and directors of Westar is included in an amendment
to its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on April 28, 2017. Additional information
regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the
Registration Statement and joint proxy statement/prospectus and other materials filed with SEC in connection with the proposed transaction. Free
copies of these documents may be obtained as described in the paragraphs above.
wr063020178kexhibit994
Westar Energy
Investor Update – August 8, 2017
Exhibit 99.4
Filed by: Westar Energy, Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Westar Energy, Inc.
Commission File Number: 001-03523
Subject Company: Great Plains Energy Incorporated
Commission File Number: 001-32206
Subject Company: Monarch Energy Holding, Inc.
Commission File Number: 132-02816
Date: August 8, 2017 {Merger Excerpts}
Forward-Looking Disclosures
AUGUST 8, 2017 INVESTOR UPDATE 2
Forward Looking Statements
Forward-looking statements: Certain matters discussed in this news release are “forward-looking statements.” The Private Securities Litigation
Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words
like “believe,” “anticipate,” “target,” “expect,” “pro forma,” “estimate,” “intend,” “guidance” or words of similar meaning. Forward-looking
statements describe future plans, objectives, expectations or goals. Although Westar Energy believes that its expectations are based on reasonable
assumptions, all forward-looking statements involve risk and uncertainty. The factors that could cause actual results to differ materially from these
forward-looking statements include those discussed herein as well as (1) those discussed in the company's Annual Report on Form 10-K for the
year ended Dec. 31, 2016 (a) under the heading, “Forward-Looking Statements,” (b) in ITEM 1. Business, (c) in ITEM 1A. Risk Factors, (d) in
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and (e) in ITEM 8. Financial Statements and
Supplementary Data: Notes 3, 14 and 16; (2) those discussed in the company's Quarterly Reports on Form 10-Q filed on May 9, 2017 and Aug. 8,
2017, (a) under the heading "Forward-Looking Statements." (b) in ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, (c) in Part I, Financial Information, ITEM 1. Financial Statements: Notes 3, 11, 12 (in the Form 10-Q filed on May 9,
2017), and 13 (in the Form 10-Q filed on Aug. 8, 2017), and (d) ITEM 1A. Risk Factors; and (3) other factors discussed in the company's filings
with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date such statement was made, and the
company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which
such statement was made.
Additional Information
The information in this investor update is not complete, and is intended to be read in conjunction with Westar Energy, Inc.’s full earnings package
for the quarter ended June 30, 2017 as well as other information regarding the company that is filed with the Securities and Exchange
Commission. The full earnings package is available is available under Supplemental Materials within the investor section of the company website
at www.WestarEnergy.com, and the company’s filings with the Securities and Exchange Commission can be found in the same section under SEC
Filings.
Recent Announcements & Focus
Merger of Equals with Great Plains Energy
100% stock-for-stock tax-free exchange
Westar: exchange 1 WR share for 1 share of new company stock
Great Plains: exchange 1 GXP share for .5981 share of new company stock
Targeted EPS CAGR at 6-8% (off WR‟s „16 EPS of $2.43)
Immediate 15% WR dividend boost at closing
Targeted dividend CAGR at 6-8% thereafter
Strong credit profile, outlook already improved
New structure addresses KCC objections to prior deal
3 AUGUST 8, 2017 INVESTOR UPDATE
Merger Update
4 AUGUST 8, 2017 INVESTOR UPDATE
Merger Summary
Transaction
Structure
• All stock merger of equals (100% stock-for-stock tax-free exchange); combined equity value of
~$14 billion
• New company to be jointly named prior to close
Exchange Ratio
• Westar Energy exchanges 1 share of WR for 1 share of new holding company
• Great Plains Energy exchanges 1 share of GXP for 0.5981 share of new holding company
Approximate Pro
Forma Ownership
• Westar Energy 52.5%
• Great Plains Energy 47.5%
Pro Forma Dividend • 15% dividend uplift for Westar Energy; maintains current Great Plains Energy dividend
Termination Fee
• Reverse break-up fee of $190 million in favor of Westar Energy
• Mutual fiduciary out break-up fees of $190 million in favor of the other
• Great Plains Energy no-vote fee of $80 million in favor of Westar Energy
Governance
• Mark Ruelle, Westar Energy CEO to become non-executive chairman
• Terry Bassham, Great Plains Energy President & CEO to remain President & CEO
• Tony Somma (Westar Energy CFO) to be CFO; Kevin Bryant (Great Plains Energy CFO) to be COO
• Equal board representation from each company, including Bassham and Ruelle
Headquarters
• Corporate Headquarters – Kansas City, Missouri
• Operating Headquarters – Topeka, Kansas; Kansas City, Missouri
Timing / Approvals
• Expected to close first half 2018
• Shareholders, federal and state regulators
5 AUGUST 8, 2017 INVESTOR UPDATE
Merger Value
6 AUGUST 8, 2017 INVESTOR UPDATE
Expected stronger EPS growth
New company EPS CAGR of 6-8%1 vs
WR stand-alone EPS CAGR of 4-6%2
Merger savings – Improve “slope” of EPS growth
Share buybacks – Upward “shift” of EPS growth
Immediate ≈15% dividend increase
Not at expense of credit or payout ratio
Tax-free exchange
Structured to address regulatory order
Not as dependent on future ongoing
rate relief
2016 2022e
Westar Stand Alone Plan, Guidance 4%-6%, Middle of Range
Merger, Opportunities for Additional Synergies/Buy-back Shares
Merger, Modest Synergies
Merger, No Synergies, Excess Cash Used to Buy-back Approximately 30 Million
Shares
EPS Growth Targets
6%
7%
8%
Merger Close
2018e
1New company expected EPS CAGR based off ‘16 WR EPS of $2.43/sh.
2 WR stand-alone expected EPS CAGR based off normalized ‘15 WR EPS of $2.21/sh.
Strong Growth Targets
7 AUGUST 8, 2017 INVESTOR UPDATE
$2.19
$1.44
$1.52
$1.60
$1.84
$2.32
2015A 2016A 2017 Pro Forma
2018E
Pro Forma
2021E
$2.43
$3.57
2016A Pro Forma 2021E
$3.25
Targeted EPS Growth 6-8%1 Targeted Dividend Growth 6-8%1
1Indicated annual earnings per share and dividend per share are historical Westar Energy and targeted combined company.
Path to Merger Close
8 AUGUST 8, 2017 INVESTOR UPDATE
Local & Political Support Proxy Effective
Dialogue with Regulatory Parties Shareholder Approval
(WR >50% outstanding; GXP >2/3 outstanding)
Execute Agreement HSR Approval
Initial positive reaction FCC Approval
File KS/MO Applications NRC Approval
File FERC Application FERC Approval
File NRC / FCC / HSR KS Approval
File Proxy MO Approval
Estimate Completion 1st Half 2018
Additional Information
AUGUST 8, 2017 INVESTOR UPDATE 9
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy, vote or
approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction. In connection with the proposed transactions, Monarch Energy Holding, Inc.
(Monarch) will file a Registration Statement on Form S-4, that includes a joint proxy statement of Great Plains Energy and Westar Energy, which
also constitutes a prospectus of Monarch. WE URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED BY MONARCH, GREAT PLAINS ENERGY AND WESTAR ENERGY
WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT GREAT PLAINS ENERGY, WESTAR ENERGY, MONARCH AND THE PROPOSED TRANSACTION.
Investors can obtain free copies of the Registration Statement and joint proxy statement/prospectus and other documents filed by Monarch, Great
Plains Energy and Westar Energy with the SEC at http://www.sec.gov, the SEC’s website, or free of charge from Great Plains Energy’s website
(http://www.greatplainsenergy.com) under the tab, “Investor Relations” and then under the heading “SEC Filings.” These documents are also
available free of charge from Westar’s website (http://www.westarenergy.com) under the tab “Investors” and then under the heading “SEC
Filings.”
Participants in Proxy Solicitation
Great Plains Energy, Westar Energy and their respective directors and certain of their executive officers and employees may be deemed, under
SEC rules, to be participants in the solicitation of proxies from Great Plains Energy’s and Westar Energy’s shareholders with respect to the
proposed transaction. Information regarding the officers and directors of Great Plains Energy is included in its definitive proxy statement for its
2017 annual meeting filed with SEC on March 23, 2017. Information regarding the officers and directors of Westar is included in an amendment
to its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on April 28, 2017. Additional information
regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the
Registration Statement and joint proxy statement/prospectus and other materials filed with SEC in connection with the proposed transaction. Free
copies of these documents may be obtained as described in the paragraphs above.
