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Form 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________________ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-707 KANSAS CITY POWER & LIGHT COMPANY (Exact name of registrant as specified in its charter) Missouri 44-0308720 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1201 Walnut, Kansas City, Missouri 64106-2124 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (816) 556-2200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) The number of shares outstanding of the registrant's Common stock at October 26, 1994 was 61,902,078 shares. PART I - FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS KANSAS CITY POWER & LIGHT COMPANY CONSOLIDATED BALANCE SHEETS September 30 December 31 1994 1993 ASSETS (Thousands) UTILITY PLANT, at original cost Electric $3,307,841 $3,240,384 Less-Accumulated depreciation 1,075,501 1,019,714 Net utility plant in service 2,232,340 2,220,670 Construction work in progress 56,005 67,766 Nuclear fuel, net of amortization of $84,463,000 and $ 76,722,000 39,210 29,862 Total 2,327,555 2,318,298 REGULATORY ASSET - DEFERRED WOLF CREEK COSTS 21,343 29,118 REGULATORY ASSET - RECOVERABLE TAXES 122,000 122,000 INVESTMENTS AND NONUTILITY PROPERTY 70,448 28,454 CURRENT ASSETS Cash and temporary investments 28,088 1,539 Special deposits 0 60,118 Receivables Customer accounts receivable 38,025 29,320 Other receivables 20,251 19,340 Fuel inventories, at average cost 14,647 14,550 Materials and supplies, at average cost 43,700 44,157 Prepayments 1,727 4,686 Deferred income taxes 4,772 3,648 Total 151,210 177,358 DEFERRED CHARGES Regulatory Assets Settlement of fuel contracts 17,529 20,634 KCC Wolf Creek carrying costs 7,523 9,575 Other 28,753 31,899 Other deferred charges 9,797 17,732 Total 63,602 79,840 Total $2,756,158 $2,755,068 LIABILITIES Capitalization (Note 2) Common stock-authorized 150,000,000 shares without par value-61,908,726 shares issued - stated value $449,697 $449,697 Retained earnings 431,143 418,201 Capital stock premium and expense (1,736) (1,747) Common stock equity 879,104 866,151 Cumulative preferred stock 89,000 89,000 Cumulative preferred stock (redeemable) 1,596 1,756 Long-term debt 754,686 733,664 Total 1,724,386 1,690,571 CURRENT LIABILITIES Notes payable to banks 1,000 4,000 Commercial paper 0 25,000 Current maturities of long-term debt 82,750 134,488 Accounts payable 41,647 59,421 Dividends payable 423 423 Accrued taxes 64,557 27,800 Accrued interest 9,059 15,575 Accrued payroll and vacations 19,577 20,127 Accrued refueling outage costs 9,455 7,262 Other 9,438 8,531 Total 237,906 302,627 DEFERRED CREDITS Deferred income taxes 636,487 627,819 Deferred investment tax credits 83,926 87,185 Other 73,453 46,866 Total 793,866 761,870 Commitments and Contingencies (Note 1) Total $2,756,158 $2,755,068 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KANSAS CITY POWER & LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended Twelve Months Ended September 30 September 30 September 30 1994 1993 1994 1993 1994 1993 (Thousands) ELECTRIC OPERATING REVENUES $253,771 $256,919 $676,174 $656,622 $877,002 $853,338 OPERATING EXPENSES Operation Fuel 33,631 35,311 106,971 94,875 142,213 128,761 Purchased power 11,721 9,632 26,268 22,017 35,654 28,310 Other(Note 3) 44,920 49,819 159,933 140,263 204,303 185,619 Maintenance 15,828 19,047 54,758 57,196 76,112 78,234 Depreciation 23,580 22,869 70,362 68,015 93,457 90,320 Taxes Income 32,794 31,179 56,063 59,344 66,221 67,901 General 26,563 26,153 73,810 73,414 96,055 95,862 Amortization of: MPSC rate phase-in plan 0 1,768 0 5,304 1,768 7,072 Deferred Wolf Creek costs 3,276 3,276 9,827 9,827 13,102 13,102 Total 192,313 199,054 557,992 530,255 728,885 695,181 OPERATING INCOME 61,458 57,865 118,182 126,367 148,117 158,157 OTHER INCOME AND DEDUCTIONS Allowance for equity funds used during construction 621 842 1,733 2,093 2,486 2,700 Miscellaneous (929) (1,769) (2,814) (2,877) (2,423) (2,528) Income taxes 889 750 2,292 1,295 2,546 1,398 Total 581 (177) 1,211 511 2,609 1,570 INCOME BEFORE INTEREST CHARGES 62,039 57,688 119,393 126,878 150,726 159,727 INTEREST CHARGES Long-term debt 11,143 12,190 31,910 38,781 43,247 52,107 Short-term notes 278 241 1,014 662 1,102 820 Miscellaneous 1,000 1,094 3,319 3,022 4,410 3,934 Allowance for borrowed funds used during construction (481) (757) (1,616) (2,038) (2,120) (2,219) Total 11,940 12,768 34,627 40,427 46,639 54,642 PERIOD RESULTS Net income 50,099 44,920 84,766 86,451 104,087 105,085 Preferred stock dividend requirements 880 772 2,522 2,374 3,301 3,189 Earnings available for common stock 49,219 44,148 82,244 84,077 100,786 101,896 Average number of common shares outstanding 61,900,912 61,908,726 61,903,895 61,908,726 61,905,113 61,908,726 Earnings per common share $0.80 $0.72 $1.33 $1.36 $1.63 $1.65 Cash dividends per common share $0.38 $0.37 $1.12 $1.09 $1.49 $1.45 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KANSAS CITY POWER & LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended Twelve Months Ended September 30 September 30 1994 1993 1994 1993 (Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $84,766 $86,451 $104,087 $105,085 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 70,362 68,015 93,457 90,320 Amortization of: Nuclear fuel 7,741 5,881 10,565 8,648 Deferred Wolf Creek costs 9,827 9,827 13,102 13,102 MPSC rate phase-in plan 0 5,304 1,768 7,072 Other 7,413 7,923 7,724 9,383 Deferred income taxes (net) 7,544 29,117 3,929 38,524 Investment tax credit (net) (3,259) (3,259) (4,345) (4,378) Allowance for equity funds used during construction (1,733) (2,093) (2,486) (2,700) Cash flows affected by changes in: Receivables (9,616) (14,883) (4,978) (22,234) Fuel inventories (97) 4,126 1,852 5,717 Materials and supplies 457 1,261 302 1,777 Accounts payable (17,774) (32,326) (3,189) 10,568 Accrued taxes 36,757 36,469 8,224 3,542 Accrued interest (6,516) (1,346) (2,544) (6,924) Wolf Creek refueling outage accrual 2,193 (8,200) 5,055 (4,906) Pension and postretirement benefit obligations (Note 3) 30,048 29 31,924 1,112 Other operating activities 4,995 4,673 4,836 1,169 Net cash provided by operating activites 223,108 196,969 269,283 254,877 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (89,282) (87,834) (130,647) (132,225) Allowance for borrowed funds used during construction (1,616) (2,038) (2,120) (2,219) Purchases of investments (37,942) (3,109) (37,955) (3,109) Other investing activities 2,215 2,705 2,938 (2,064) Net cash used in investing activities (126,625) (90,276) (167,784) (139,617) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of long-term debt 86,340 233,000 178,186 277,000 Retirement of long-term debt (117,170) (232,000) (156,650) (303,230) Special deposits 60,118 0 0 31,007 Premium on reacquired stock and long-term debt 0 (3,717) (360) (5,626) Increase (decrease) in short-term borrowings (28,000) (33,000) 1,000 (20,000) Dividends paid (71,824) (69,883) (95,497) (92,959) Other financing activities 602 (524) (787) (890) Net cash used in financing activities (69,934) (106,124) (74,108) (114,698) NET INCREASE IN CASH 26,549 569 27,391 562 CASH AT BEGINNING OF PERIOD 1,539 128 697 135 CASH AT END OF PERIOD $28,088 $697 $28,088 $697 CASH PAID DURING THE PERIOD FOR: Interest, net of amount capitalized $38,682 $40,023 $46,020 $59,363 Income taxes $35,257 $18,715 $56,683 $34,839 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KANSAS CITY POWER & LIGHT COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Nine Months Ended Twelve Months Ended September 30 September 30 1994 1993 1994 1993 (Thousands) Beginning balance $418,201 $405,985 $422,553 $410,427 Net income 84,766 86,451 104,087 105,085 Subtotal 502,967 492,436 526,640 515,512 Dividends declared 71,824 69,883 95,497 92,959 Ending balance $431,143 $422,553 $431,143 $422,553 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. KANSAS CITY POWER & LIGHT COMPANY Notes to Consolidated Financial Statements In management's opinion, the consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the interim periods presented. These statements and notes should be read in conjunction with the financial statements and the notes thereto, included in the Company's annual report to the Securities and Exchange Commission on Form 10-K for the year 1993. 1. COMMITMENTS AND CONTINGENCIES TAX MATTERS The Company's federal income tax returns for the years 1985 through 1990 are presently under examination by the Internal Revenue Service (IRS). The IRS has issued Revenue Agent's Reports for the years 1985 through 1990. The Reports include proposed adjustments that would reduce the Company's Wolf Creek investment tax credit (ITC) by 25% or approximately $20 million and tax depreciation by 23% or approximately $205 million. These amounts include the continuing effect of the adjustments through September 30, 1994. These adjustments, principally, are based upon the IRS's contention that (i) certain start-up and testing costs considered by the Company to be costs of the plant should be treated as licensing costs, which do not qualify for ITC or accelerated depreciation, and (ii) certain cooling and generating facilities should not qualify for ITC or accelerated depreciation. If the IRS were to prevail on all of these proposed adjustments, the Company would be obligated to make cash payments, calculated through September 30, 1994, of approximately $100 million for additional federal and state income taxes and $55 million for corresponding interest. After offsets for deferred income taxes, these payments would reduce net income by approximately $35 million. The Company has filed a protest with the appeals division of the IRS. Based upon their interpretation of applicable tax principles and the tax treatment of similar costs and facilities with respect to other plants, it is the opinion of management and outside tax counsel that the IRS's proposed Wolf Creek adjustments are substantially overstated. Management believes any additional taxes, together with interest, resulting from the final resolution of these matters will not be material to the Company's financial condition or results of operations. ENVIRONMENTAL MATTERS The Company's policy is to act in an environmentally responsible manner utilizing the latest technological processes possible to avoid and treat contamination. The Company accrues environmental and cleanup costs when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. While continually conducting environmental audits designed to assure compliance with governmental regulations and detect contamination, the regulations are constantly evolving and governmental bodies may impose additional or more rigid environmental regulations which could require substantial changes to the Company's operations or facilities. Interstate Power Company of Dubuque, Iowa (Interstate) filed a lawsuit in 1989 against the Company in the Federal District Court for the District of Iowa seeking from the Company contribution and indemnity under the Federal Comprehensive Environmental Response, Compensation and Liability Act, (the Superfund law) for cleanup costs of hazardous substances at the site of a demolished gas manufacturing plant in Mason City, Iowa. The plant was operated by the Company for very brief periods of time before it was demolished in 1952. The site and all other properties the Company owned in Iowa were sold to Interstate in 1957. The Company estimates that the cleanup could cost up to $10 million. The Company's estimate is based upon an evaluation of available information from on-going site investigation and assessment activities, including the costs of such activities. In August 1993, the Company, along with other parties to the lawsuit, received a letter from the Environmental Protection Agency (EPA) notifying each such party that it was considered a potentially responsible party for cleanup costs at the site. The EPA has also proposed to list the site on the National Priorities List. The Company believes it has several valid defenses to this action including the fact that the 1957 sales documents include clauses which require Interstate to indemnify the Company from and against all claims and damages arising after the sale. However, in 1993 the Court rejected this position, ruling that the indemnity clauses were not sufficiently broad to indemnify for environmental cleanup. This order will be final for appeal after a trial to allocate the cleanup costs among the parties, which is expected in 1995. Even if unsuccessful on the liability issue, the Company does not believe its allocated share of the cleanup costs will be material to its financial condition or results of operations. NUCLEAR PLANT DECOMMISSIONING COSTS Estimated decommissioning costs for the Wolf Creek Generating Station (Wolf Creek) were recently revised by the Missouri Public Service Commission (MPSC) and the Kansas Corporation Commission (KCC). The estimates for decontamination, dismantlement and site restoration costs were based on the immediate dismantlement method. Decommissioning of the plant is not expected to start before 2025. The following table shows each commission's estimated costs and assumptions (in 1993 dollars): KCC MPSC Undiscounted estimated decommissioning costs: Total Station $1.3 billion $1.8 billion Company's 47% share $595 million $859 million Discounted estimated decommissioning costs: Total Station $370 million $370 million Company's 47% share $174 million $174 million Commission estimated escalation factor: 3.45% 4.50% Commission estimated return on trust assets: 6.48% 7.66% These estimated costs are higher than prior estimates due to increasing cost factors, including significant increases in assumed disposal costs for low-level radioactive waste. Total discounted decommissioning costs were estimated by the KCC in 1989 to be $206 million in 1988 dollars and, by the MPSC in 1992, to be $347 million in 1990 dollars. The Company is currently contributing to a tax qualified decommissioning trust fund (approximately $3 million for each of the last three years) to be used to decommission the unit. These costs are being charged to other operation expenses and recovered over the expected life of the plant. Recent tax law changes regarding nuclear decommissioning trust funds allow for investments in higher yielding securities. As a result, no increase in annual contributions to the trust fund are anticipated during the next two years despite increases in the decommissioning estimate. The trust fund balance, including reinvested earnings, was $17.0 million at September 30, 1994 and $14.3 million at December 31, 1993. These amounts are reflected in the Consolidated Balance Sheets under Investments and Nonutility Property with the related liabilities for decommissioning included in Deferred Credits and Other Liabilities - Other. The Financial Accounting Standards Board is currently reviewing the accounting for obligations for decommissioning of nuclear power plants including the balance sheet presentation of estimated decommissioning costs. 2. CAPITALIZATION As of September 30, 1994 the Company held approximately 6,600 shares of its common stock to be used for future distribution. The cost of the reacquired shares has been included in Investments and Nonutility Property on the Consolidated Balance Sheets. The restated Articles of Consolidation contain a restriction relating to the payment of dividends in the event common equity falls to 25% of total capitalization. During August 1994, the Company issued $20 million of Medium-Term Notes (Notes) to replace maturing debt. The Notes were issued at a weighted average interest rate of 7.14% and have maturities ranging from 1997 to 2004. As of September 30, 1994, $58 million of registered Notes remained available for issuance. In February 1994, the Company issued $35.9 million of its General Mortgage Bonds ($21.9 million due 2018 and $14.0 million due 2015) at a variable rate to support $35.9 million City of LaCygne, Kansas Environmental Improvement Revenue Refunding Bonds (Kansas City Power & Light Company Project) Series 1994. The proceeds from the issuance were used to redeem at par value the $21.9 million City of LaCygne, Kansas Pollution Control Revenue Refunding Bonds collateralized with the Company's 5 7/8% First Mortgage Bonds due 2007, and the $14.0 million 5 3/4% City of LaCygne, Kansas Pollution Control Revenue Bonds due 2003. A subsidiary of the Company, KLT Investments, Inc., has issued approximately $30 million of long-term debt through September 30, 1994. This debt finances affordable housing projects and has interest rates ranging from 6 1/2% to 8 1/2% with maturity dates through 2002. From October 1, 1994 to October 26, 1994, an additional $8 million of long-term debt was issued. 3. EARLY RETIREMENT In March 1994, the Company offered a voluntary early retirement program to 411 eligible management and union employees. Of the 411 eligible employees, 332, or 81%, elected to participate in the program. Based on an actuarial valuation, total program costs of $24 million ($0.24 per share) were recorded in the first half of 1994. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three month period: three months ended September 30, 1994 compared to three months ended September 30, 1993 Nine month period: nine months ended September 30, 1994 compared to nine months ended September 30, 1993 Twelve month period: twelve months ended September 30, 1994 compared to twelve months ended September 30, 1993 KILOWATT (KWH) SALES AND OPERATING REVENUES Sales and revenue data: (Revenues in millions) Increase (Decrease) From Prior Year Three Month Nine Month Twelve Month Period Period Period KWH Revenues KWH Revenues KWH Revenues Retail Sales: Residential (2)% $ (3) 2 % $ 1 2 % $ 2 Commercial 2 % - 3 % 2 2 % 3 Industrial 1 % (2) 2 % (2) 3 % (2) Other (6)% - (4)% - (3)% - Total Retail - % (5) 3 % 1 2 % 3 Sales for Resale: Bulk Power Sales 42 % 3 60 % 20 44 % 22 Other (36)% (1) (16)% (1) (11)% (1) Total Operating Revenues $ (3) $ 20 $ 24 Effective January 1, 1994, Missouri jurisdictional retail rates were reduced 2.66%, or approximately $12.5 million annually, primarily to reflect the end of the Missouri Public Service Commission (MPSC) rate phase-in amortization. This agreement with the MPSC and public counsel also includes a provision whereby none of the parties can unilaterally file for a general increase or decrease in Missouri retail electric rates prior to January 1, 1996. Approximately two-thirds of total retail sales are from Missouri customers. Other tariffs have not changed materially since 1988. Less than 1% of the Company's revenues are affected by an automatic fuel adjustment provision. Residential and commercial sales increased for the nine and twelve month periods reflecting closer to normal temperatures than the mild weather during the 1993 periods. The 1994 periods also reflect basic load growth. Revenues from industrial customers decreased despite an increase in sales as certain large industrial customers received additional load management curtailment credits. These industrial customers have contracted to receive billing credits in exchange for a reduction in their energy consumption during peak periods. The Company expects to realize short-term and long-term capacity savings through load management programs. Bulk power sales reflect the Company's high unit availability and its greater emphasis on new interchange markets. The level of future kwh sales will depend upon weather conditions, customer conservation efforts, competing fuel sources and the overall economy of the Company's service territory. Sales to industrial customers, such as steel and auto manufacturers, are also affected by the national economy. The level of bulk power sales in the future will depend upon the availability of generating units, fuel costs, requirements of other electric systems and the Company's system requirements. While the Company continues to enhance its competitive position, revenue per kwh and sales could be affected by competitive forces. Alternative sources of electricity, such as cogeneration, could affect the retention of, and future sales to, large industrial customers. FUEL, PURCHASED POWER AND OTHER OPERATION EXPENSES Combined fuel and purchased power expenses increased for the 1994 periods to support the additional kwh sales. These increases were partially offset by reduced delivered coal prices. Other operation expenses increased for the nine and twelve month periods due to the costs associated with the voluntary early retirement program. The Company expensed $24 million ($0.24 per share) during the first half of the year representing total program costs. These costs are partially offset by the savings from reduced payroll and benefits after the July 1, 1994 retirements. The Company continues to place emphasis on cost control. Processes are being reviewed and changed to provide increased efficiencies and improved operations. This will also allow the Company to assimilate work performed by those who elected to participate in the early retirement program. MAINTENANCE Maintenance expense decreased reflecting the strong operating performance of the Company's generating units and the effectiveness of the Company's maintenance programs. Also reflected are savings in payroll and benefits resulting from the early retirement program. INTEREST CHARGES The decrease in interest charges reflects the refinancing of long-term debt with lower fixed or variable rate debt. EARNINGS PER SHARE (EPS) EPS was reduced $0.24 for the nine and twelve months ended September 30, 1994 reflecting the cost of the voluntary early retirement program. Savings of payroll and benefits, beginning July 1, 1994, are expected to offset the program costs in less than two years assuming minimal replacements of retired employees. The Company estimates savings during 1994 will be approximately $8 million ($0.08 per share). Although all periods were affected by milder than normal temperatures, the weather for the 1994 periods was closer to normal than the prior year periods. Based on a statistical relationship between sales and the differences in actual and normal temperatures for the year, the Company estimates the effects of the unseasonably mild weather were as follows: Three Month Nine Month Twelve Month Period Period Period 1994 1993 1994 1993 1994 1993 Estimated effects of abnormal weather on EPS $(0.08)$(0.09) $(0.06)$(0.10) $(0.06) $(0.09) EPS for the three, nine and twelve months ended September 30, 1994 also reflects increased bulk power sales, decreased delivered coal prices, and reduced interest costs resulting from the refinancing of long-term debt with lower fixed or variable rate debt. ENVIRONMENTAL MATTERS See Note 1 to the Consolidated Financial Statements-Commitments and Contingencies-Environmental Matters for a discussion of costs of compliance with environmental laws and regulations and a potential liability (which the Company believes is not material to its financial condition or results of operations) for cleanup costs under the Superfund law. WOLF CREEK Wolf Creek is one of the Company's principal generating facilities representing approximately 17% of the Company's accredited generating capacity and 26% of the Company's annual kwh generation. The unit has the lowest fuel cost of any of the Company's generating facilities. On September 16, 1994, Wolf Creek was taken off-line for its seventh refueling and maintenance outage which is expected to last up to eight weeks. Scheduling refueling outages in the spring and fall when system demands are lower enables the Company to replace the majority of the power with its own economical coal-fired generation. Forecasted outage costs are accrued over the unit's 18-month operating cycle. The Company expects total incremental refueling costs of this outage to approximate forecasted amounts. An extended shut-down of the unit could have a substantial adverse effect on the Company's business, financial condition and results of operations. Higher replacement power and other costs would be incurred as a result. Although not expected, an abnormal shut-down of the plant could be caused by adverse incidents at the plant or by actions of the Nuclear Regulatory Commission reacting to safety concerns at the plant or other similar nuclear facilities. If a long-term shut-down occurred, the state regulatory commissions could consider reducing rates by excluding Wolf Creek investment from rate base. Ownership and operation of a nuclear generating unit exposes the Company to potential retroactive assessments and property losses in excess of insurance coverage. CAPITAL REQUIREMENTS AND LIQUIDITY See Note 2 to the Consolidated Financial Statements - Capitalization regarding the refinancing of long-term debt. The Company currently uses an accelerated depreciation method for tax purposes. The accelerated depreciation on the Wolf Creek plant has reduced the Company's tax payments during the last three years by approximately $30 million per year. Accelerated depreciation on Wolf Creek ends in 1994. Management is investigating and implementing various tax planning strategies, including investments in affordable housing projects and corporate-owned life insurance contracts, to minimize future tax payments resulting from the loss of this depreciation deduction. See Note 1 to the Consolidated Financial Statements-Commitments and Contingencies-Tax Matters for a discussion of the Company's federal income tax returns for the years 1985 through 1990 which are presently under audit by the Internal Revenue Service. In order to take advantage of the potential benefits inherent in a more diverse energy system, the Company might incur additional debt and/or issue additional equity to finance system growth or new growth opportunities, through business combinations or other investments. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 10 - Copy of Amendment No. 2 to Receivables Purchase Agreement dated as of September 27, 1994, between the Company, Ciesco L.P. and Citicorp North America, Inc. (b) No current reports on Form 8-K have been filed during the quarter ended September 30, 1994. SIGNATURES 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 thereunto duly authorized. KANSAS CITY POWER & LIGHT COMPANY Dated: October 27, 1994 /s/Drue Jennings (Drue Jennings) (Chief Executive Officer) Dated: October 27, 1994 /s/Neil Roadman (Neil Roadman) (Principal Accounting Officer)
[EXECUTION COPY]
AMENDMENT NO. 2
Dated as of September 27, 1994
KANSAS CITY POWER & LIGHT COMPANY, a Missouri corporation
(the "Seller"), CIESCO L.P. (formerly known as Commercial Industrial
Trade-receivables Investment Company), a New York limited partnership
(the "Investor"), and CITICORP NORTH AMERICA, INC., a Delaware corpora-
tion ("CNA"), individually and as agent (the "Agent") for the Investor,
agree as follows:
PRELIMINARY STATEMENTS:
(1) The Seller, the Investor, and CNA, individually and as
Agent, have entered into a Receivables Purchase Agreement, dated as of
September 27, 1989, as amended by an Amendment No. 1, dated as of August
8, 1991 (as so amended, the "Agreement"; the terms defined therein being
used herein as therein defined, unless otherwise defined herein).
(2) The parties hereto have agreed to amend the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments to Agreement. The Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as
follows:
(a) The terms "Commercial Industrial Trade-receivables
Investment Company", "CITICO" or "CITICO's" are deleted and
replaced with the terms "Ciesco L.P.", "CIESCO" or "CIESCO's",
respectively, wherever they appear.
(b) Section 1.05 is hereby amended by restating such
section to read as follows:
"SECTION 1.05. Fees. The Seller shall pay fees to
the Agent pursuant to separate letter agreements executed
from time to time.".
(c) Exhibit I is hereby amended by adding thereto the
following new definition:
"'CP Fixed Period Date' means, for any Receivable
Interest, the date of purchase of such Receivable Interest
and thereafter the last day of each calendar month (or, if
such day is not a Business Day, the immediately succeeding
Business Day) or any other day as shall have been agreed to
in writing by the Agent and the Seller prior to the first
day of the preceding Fixed Period for such Receivable
Interest or, if there is no preceding Fixed Period, prior
to the first day of such Fixed Period."
(d) The definition of the term "Concentration Limit"
contained in Exhibit I is amended by deleting the percentage "4%"
and substituting in place thereof "3%".
(e) The definition of the term "Facility Termination Date"
contained in Exhibit I is amended by deleting the date "September
27, 1994" and substituting in place thereof the date "September
2, 1999".
(f) The definition of the term "Fixed Period" contained
in Exhibit I is amended in its entirety to read as follows:
"'Fixed Period' means, with respect to any Receivable
Interest:
(a) in the case of any Fixed Period in respect
of which Yield is computed by reference to the Inves-
tor Rate referred to in paragraph (a) of the defini-
tion of 'Investor Rate', each successive period
commencing on each CP Fixed Period Date for such
Receivable Interest and ending on the next succeeding
CP Fixed Period Date for such Receivable Interest;
and
(b) in the case of any Fixed Period in respect
of which Yield is computed by reference to the Inves-
tor Rate referred to in paragraph (b) of the defini-
tion of 'Investor Rate', each successive period of
(x) from one to and including 14 days, or a period of
21, 30, 60, 90 or 180 days, or (y) for any Fixed
Period in respect of which Yield is computed by
reference to the Eurodollar Rate, either a period
from one (to and including) 29 days, or a period of
one, two or three months, in each case as the Seller
shall select and the Agent shall approve on notice by
the Seller received by the Agent (including notice by
telephone, confirmed in writing) not later than 11:00
A.M. (New York City time) on the day which occurs
three Business Days before the first day of such
Fixed Period, each such Fixed Period for such Receiv-
able Interest to commence on the last day of the
immediately preceding Fixed Period for such Receiv-
able Interest (or, if there is no such Fixed Period,
on the date of purchase of such Receivable Interest),
except that, if the Agent shall not have received
such notice or approved such notice before 11:00 A.M.
(New York City time) on such day, such Fixed Period
shall be one day;
provided that:
(i) any Fixed Period (other than of one day)
which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding
Business Day, except that, if such Fixed Period
relates to the Eurodollar Rate and such extension
would cause the last day of such Fixed Period to
occur in the next succeeding month, the last day of
such Fixed Period shall occur on the immediately
preceding Business Day;
(ii) in the case of any Fixed Period of one
day for such Receivable Interest, (a) if such Fixed
Period is such Receivable Interest's initial Fixed
Period, such Fixed Period shall be the day of the
related purchase; (b) any subsequently occurring
Fixed Period which is one day shall, if the immedi-
ately preceding Fixed Period is more than one day, be
the last day of such immediately preceding Fixed
Period, and, if the immediately preceding Fixed
Period is one day, be the day next following such
immediately preceding Fixed Period; and (c) if such
Fixed Period occurs on a day immediately preceding a
day which is not a Business Day, such Fixed Period
shall be extended to the next succeeding Business
Day; and
(iii) in the case of any Fixed Period for such
Receivable Interest which commences before the Termi-
nation Date for such Receivable Interest and would
otherwise end on a date occurring after such Termina-
tion Date, such Fixed Period shall end on such Termi-
nation Date and the duration of each Fixed Period
which commences on or after the Termination Date for
such Receivable Interest shall be of such duration as
shall be selected by the Agent.".
(g) The definition of "Investor Rate" contained in Exhibit
I is amended in its entirety to read as follows:
"'Investor Rate' for any Fixed Period for any Receiv-
able Interest means:
(a) the per annum rate equivalent to the
weighted average of the per annum rates paid or
payable by CIESCO from time to time as interest on or
otherwise (by means of interest rate hedges or other-
wise) in respect of those promissory notes issued by
CIESCO that are allocated, in whole or in part, by
CNA (on behalf of CIESCO) to fund the purchase or
maintenance of such Receivable Interest during such
Fixed Period, as determined by CNA (on behalf of
CIESCO) and reported to the Seller and, if the
Collection Agent is not the Seller, the Collection
Agent, which rates shall reflect and give effect to
the commissions of placement agents and dealers in
respect of such promissory notes, to the extent such
commissions are allocated, in whole or in part, to
such promissory notes by CNA (on behalf of CIESCO);
provided that, if any component of such rate is a
discount rate, in calculating the 'Investor Rate' for
such Fixed Period, CNA shall for such component use
the rate resulting from converting such discount rate
to an interest-bearing equivalent rate per annum, or
(b) if the Investor is not able to fund its
purchase or maintenance of such Receivable Interest
for such Fixed Period by its issuing promissory notes
referred to in paragraph (a) above, a rate equal to
the Assignee Rate for such Fixed Period or such other
rate as the Agent and the Seller shall agree to in
writing;
provided that, if the Investor so requests and the Seller
consents thereto, the 'Investor Rate' for any Fixed Period
of one day shall be the Assignee Rate for such Fixed Peri-
od.".
(h) The definition of "Liquidation Fee" contained in
Exhibit I is amended by restating the initial parenthetical clause
thereof to read as follows:
"(calculated without taking into account any Liquidation
Fee or any shortened duration of such Fixed Period pursuant
to clause (iii) of the definition thereof)".
(i) The definition of "Loss Percentage" contained in
Exhibit I is amended in its entirety to read as follows:
"'Loss Percentage' means, for any Receivable Interest
at any date, the greatest of (i) four times the highest
Default Ratio as of the last day of each of the three
months ended immediately preceding such date, (ii) three
times the Concentration Limit, and (iii) 9%.".
(j) Subsection (i) of Exhibit V is amended in its entirety
to read as follows:
"(i) The Net Receivables Pool Balance shall for a
period of five consecutive Business Days be less than the
sum of the aggregate outstanding Capital, plus Yield
Reserve, plus Collection Agent Fee Reserve of the Receiv-
able Interests and the aggregate outstanding Capital of the
"Receivable Interests" under the Citibank Agreement; or".
(k) Subsection (b) of Section 4.04 is amended in its
entirety to read as follows:
"(b) In addition, the Seller shall pay any and all
stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents to
be delivered hereunder, and agrees to save each Indemnified
Party harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.".
(l) Annex A is deleted and Annex A hereto is substituted
therefor.
SECTION 2. Conditions of Effectiveness. This Amendment
shall become effective when, and only when, all of the following shall
have occurred:
(a) the Agent shall have received counterparts of this
Amendment executed by the Seller, the Investor, and the Agent; and
(b) the Agent shall have additionally received all of the
following documents, each document (unless otherwise indicated)
being dated the date of receipt thereof by the Agent (which date
shall be the same for all such documents), in form and substance
satisfactory to the Agent:
(i) certified copies of the resolutions of Board of
Directors of the Seller, dated August 1, 1989, and August
6, 1991;
(ii) a certificate of the Secretary or an Assistant
Secretary of the Seller certifying the names and true
signatures of its officers authorized to sign this Amend-
ment and the other documents to be delivered hereunder;
(iii) a favorable opinion of Jeanie S. Latz, Vice
President-Law of the Seller, in substantially the form of
Exhibit A hereto; and
(iv) a certificate signed by a duly authorized
officer of the Seller stating that:
(i) The representations and warranties con-
tained in Section 3 hereof are correct on and as of
the date of such certificate as though made on and as
of such date, and
(ii) No event has occurred and is continuing
which constitutes an Event of Termination or would
constitute an Event of Termination but for the re-
quirement that notice be given or time elapse or
both.
SECTION 3. Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Missouri.
(b) The execution, delivery and performance by the Seller
of this Amendment, and the performance by the Seller of the
Agreement as amended by this Amendment, are within the Seller's
corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) the Seller's charter
or by-laws, (ii) any law, rule or regulation, or (iii) any
contractual restriction binding on or affecting the Seller.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Seller of this Amendment or the performance by
the Seller of the Agreement as amended by this Amendment.
(d) This Amendment, and the Agreement as amended by this
Amendment, constitute the legal, valid and binding obligations of
the Seller enforceable against the Seller in accordance with their
respective terms, subject to bankruptcy, insolvency or other
similar laws affecting creditors' rights in general and to general
principles of equity (whether considered in proceedings in equity
or at law).
SECTION 4. References to and Effect on the Agreement. (a)
On and after the effective date of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "hereof ", "herein" or words
of like import referring to the Agreement, shall mean and be a reference
to the Agreement as amended hereby.
(b) Except as specifically amended above, the Agreement is and
shall continue to be in full force and effect and is hereby ratified and
confirmed.
SECTION 5. Costs, Expenses and Taxes. The Seller agrees
to pay on demand all costs and expenses of the Agent in connection with
the preparation, execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities hereunder and thereunder.
In addition, the Seller shall pay any and all stamp and other taxes
payable or determined to be payable in connection with the execution and
delivery of this Amendment and the other instruments and documents to
be delivered hereunder, and agrees to save the Agent, the Investor and
the other Owners harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes.
SECTION 6. Execution in Counterparts. This Amendment may
be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement. Delivery of
an executed counterpart of a signature page to this Amendment No. 2 by
telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment No. 2.
SECTION 7. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
KANSAS CITY POWER & LIGHT
COMPANY
By /s/ John J. DeStefano
Title: Treasurer
CIESCO L.P.
By: CITICORP NORTH
AMERICA, INC.,
its attorney-in-fact
By /s/ Arthur B. Bovino
Vice President
CITICORP NORTH AMERICA,
INC., Individually and
as Agent
By /s/ Arthur B. Bovino
Vice President