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As filed with the Securities and Exchange Commission September 6, 2001
File No. 70-9861
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4
TO
FORM U-1
APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Great Plains Energy Incorporated
Kansas City Power & Light Company
Great Plains Power, Incorporated
KCPL Receivable Corporation
1201 Walnut Street
Kansas City, Missouri 64106
KLT Inc.
10740 Nall Street, Suite 230
Overland Park, Kansas 66211
(Names of companies filing this statement
and addresses of principal executive offices)
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Great Plains Energy Incorporated*
(Name of top registered holding company parent
of each applicant or declarant)
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Bernard J. Beaudoin
Chief Executive Officer
Great Plains Energy Incorporated
1201 Walnut Street
Kansas City, Missouri 64106
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The Commission is requested to mail copies of all orders, notices and
other communications to:
William G. Riggins, Esq. Nancy A. Lieberman, Esq.
General Counsel W. Mason Emnett, Esq.
Kansas City Power & Light Company William C. Weeden
1201 Walnut Street Skadden, Arps, Slate,
Kansas City, Missouri 64106 Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20008
* Great Plains Energy Incorporated will register as a public utility holding
company upon completion of the reorganization described in Item 1 of this
Application/Declaration.
TABLE OF CONTENTS
Item 1. Description of the Proposed Transaction..............................2
A. Description of the Applicants....................................2
1. KCPL ...................................................2
2. Nonutility Subsidiaries.................................5
B. Capitalization of KCPL and its Subsidiaries.....................12
C. Reasons for the Reorganization..................................15
D. Description of the Reorganization...............................16
E. Post-Reorganization Financing...................................17
1. External Financing.....................................18
2. Guarantees and Other Forms of Credit Support...........25
3. Hedging Transactions...................................26
F. Other Financing Transactions....................................27
1. Changes in Capital Stock of Subsidiaries...............28
2. Financing Subsidiaries.................................28
3. Intermediate Subsidiaries..............................29
4. Payment of Dividends out of Capital
and Unearned Surplus..................................33
G. Intrasystem Service Arrangements................................34
H. Certificates of Notification....................................36
Item 2. Fees, Commission and Expenses.......................................36
Item 3. Applicable Statutory Provisions.....................................37
A. General.........................................................37
B. Compliance with Rules 53 and 54.................................38
Item 4. Regulatory Approvals................................................39
Item 5. Procedure...........................................................39
Item 6. Exhibits and Financial Statements...................................40
A. Exhibits........................................................40
B. Financial Statements............................................41
Item 7. Information as to Environmental Effects.............................42
Introduction and Request for Commission Action
Kansas City Power & Light Company ("KCPL"), a Missouri corpora
tion, is a public utility company currently not subject to the jurisdiction
of the Commission pursuant to the Public Utility Holding Company Act of
1935, as amended (the "Act"). Pursuant to a corporate reorganization (the
"Reorganization"), KCPL proposes to adopt a new corporate structure in
which KCPL will become a wholly-owned subsidiary of a newly formed holding
company. Specifically, KCPL will form a new subsidiary, Great Plains Energy
Incorporated, a Missouri corporation ("Great Plains Energy"), which in turn
will form another new subsidiary, KC Merger Sub Incorporated, a Missouri
corporation ("NewCo"). KCPL then will merge with and into NewCo, with KCPL
as the surviving corporation, resulting in KCPL becoming a wholly-owned
subsidiary of Great Plains Energy. Finally, KCPL will dividend up to Great
Plains Energy two of KCPL's nonutility subsidiaries, KLT Inc. and Great
Plains Power, Inc. ("Great Plains Power"), such that they also become
wholly-owned subsidiaries of Great Plains Energy. Following completion of
the Reorganization, Great Plains Energy will register as a public utility
holding company pursuant to Section 5 of the Act. (KCPL, Great Plains
Energy, and the other KCPL subsidiaries identified on the signature page
are collectively referred to herein as the "Applicants.")
This Application/Declaration seeks authorization and approval
with respect to certain on-going financial activities of Great Plains
Energy and its subsid iaries following completion of the Reorganization and
the approval of certain affiliate arrangements and other related matters.
To the extent necessary, Great Plains Energy also requests the Commission
make findings under Section 11(b)(1) of the Act that (i) the electric
utility system of Great Plains Energy constitutes an "integrated" electric
utility system within the meaning of Section 2(a)(29) of the Act and (ii)
the nonutility operations of Great Plains Energy and its subsidiaries may
be retained. Finally, Great Plains Energy requests Commission authorization
pursuant to Section 9(a)(1) for KCPL and Great Plains Energy to engage in
certain leasing transactions and authorization pursuant to Sections 12 and
13 for certain intrasystem transactions.
Item 1. Description of the Proposed Transaction
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A. Description of the Applicants
1. KCPL
KCPL is an electric utility company engaged in the generation,
transmission, distribution, and sale of electric energy in Missouri and
Kansas. KCPL owns approximately 3,700 MW of generation and provides retail
electric service to approximately 467,000 customers in Kansas and Missouri,
serving retail customers in the region in and around the Kansas City
metropolitan area.(1) The Restated Articles of Consolidation and By-laws of
KCPL are attached hereto at Exhibits A-1 and A-2, respectively. A map
showing the service area of KCPL also is provided at Exhibit E-1.
KCPL is subject to the regulatory jurisdiction of the Missouri
Public Service Commission ("MPSC") and the Corporation Commission of the
State of Kansas ("KCC") with respect to its retail operations. KCPL also is
subject to regulation of the Federal Energy Regulatory Commission (the
"FERC") with respect to its wholesale and transmission-related operations
and the Nuclear Regulatory Commission (the "NRC") with respect to licensing
and operation of its nuclear generating units.
For the year ended December 31, 2000, KCPL had consolidated
operating revenues of approximately $1.1 billion, resulting in a net income
of approximately $159 million. For the year ended December 31, 2000, KCPL
derived $952 million of its operating revenues from regulated sales of
electricity and electric transmission service. At December 31, 2000, KCPL
had consolidated total assets of approximately $3.3 billion, including
approximately 1,700 miles of transmission lines, approximately 8,900 miles
of overhead distribution lines, and approximately 3,400 miles of
underground distribution lines.
Applicants request that the Commission find that the Great
Plains Energy system constitutes an "integrated" electric utility system
within the meaning of Section 2(a)(29)(A) of the Act.(2) Upon registration, the
utility operations of the Great Plains Energy system will be confined to the
single area consisting of KCPL's service territory.(3) This system will be
interconnected through the KCPL transmission system and will be operated on a
coordinated basis. The operations of Great Plains Power at all times will be
within the same "area or region" of the Great Plains Energy system within the
meaning of Section 11(b)(1). The principal executive offices of Great Plains
Energy are located in Kansas City, Missouri. As described below, KCPL is
subject to regulation with respect to rates, service, and other matters in
both of the jurisdictions in which it operates. The Great Plains Energy system
is not so large as to impair the advantages of efficient operation, localized
management and effectiveness of regulation and, accordingly, is an
"integrated" electric utility system within the meaning of the Act.
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(1) KCPL also engages in limited gas brokering activities, as permitted
under Rule 58(b)(v).
(2) Under Section 2(a)(29)(A) of the Act, an integrated electric utility
system is defined to mean:
a system consisting of one or more units of generating
plants and/or transmission lines and/or distributing
facilities, whose utility assets, whether owned by one or
more electric utility companies, are physi cally
interconnected or capable of physical interconnection and
which under normal conditions may be economically operated
as a single interconnected and coordinated system confined
in its operations to a single area or region, in one or more
States, not so large as to impair (considering the state of
the art and the area or region affected) the advantages of
localized management, efficient operation, and the
effectiveness of regulation . . . .
(3) Applicants will seek appropriate Commission authorization prior to
the acquisition of utility assets by Great Plains Power, described
below.
KCPL currently leases certain utility assets for use in
providing electric service within its service territory. Two of these
leases are for transmission assets, and one lease is for a combustion
turbine. The first transmission line lease is with Kansas Gas and Electric
Company, a wholly-owned subsidiary of Western Resources, Inc., for the Wolf
Creek/LaCygne transmission line pursuant to a tariff on file with the FERC.
Commitments under this lease total $1.9 million per year through September
2025, unless the lease is otherwise cancelled. The second transmission line
lease is with Associated Electric Cooperative, Inc. for KCPL's share of
certain Joint Facilities, as defined in the Coordinating Agreement by and
among Associated Electric Cooperative, Inc., Kansas City Power & Light
Company, St. Joseph Light & Power Company, Nebraska Public Power District,
Omaha Public Power District, City of Lincoln and Iowa Power Inc. for the
Cooper - Fairport - St. Joseph 345 Kilovolt Interconnection. KCPL also
makes payments to St. Joseph Light & Power for certain Joint and Terminal
Facilities related to the Cooper - Fairport - St. Joseph 345 Kilovolt
Interconnection. The total of all payments is less than $0.5 million per
year. Payments associated with this second lease also are made pursuant to
a tariff on file with the FERC. Finally, the combustion turbine lease is
with First Security Bank, N.A. as Owner Trustee which expires in October
2001, unless extended by mutual agreement of KCPL and the lessor. This
lease also may be extended through the execution of alternative leasing
arrangements with other nonaffiliated parties replacing First Security Bank
as Owner Trustee.
KCPL also leases from nonaffiliates a number of railcars for
the purpose of delivering fuel to KCPL's electric generating plants. When
these railcars are not being used by KCPL for its fuel deliveries, KCPL
subleases them to other utilities for purposes of fuel deliveries. Certain
of these subleases are made pursuant to a Unit Train Exchange Agreement,
which effectively aggregates the equipment of participating plant owners to
create a pool of available train equipment at any one particular time.
Charges for using another plant owners' equipment are assessed at a market
specified price on a trip-by-trip basis.(4) In 1998, KCPL also entered into
a sublease for 220 steel railcars for the remaining five years of a 15 year
lease in order to accelerate the acquisition of more economical aluminum
railcars.
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(4) The Commission has authorized subsidiaries of registered holding
companies to offer nonassociates equipment and facilities acquired
for their own pur poses during periods of nonutilization. See Indiana
& Michigan Electric Co., Holding Co. Act Release No. 24039 (Mar. 4,
1986) (use of coal transporta tion equipment); Ohio Power Co.,
Holding Co. Act Release No. 25427 (Dec. 11, 1991) (railcar repair
service).
In addition, KCPL holds contracts for delivery of five
combustion turbines. Following the Reorganization, KCPL may transfer
certain of these con tracts to Great Plains Power, an affiliate of KCPL
described below. In the alterna tive, KCPL may transfer certain or all of
these contracts to nonaffiliated parties that, in turn, would lease the
delivered turbines back to either KCPL or Great Plains Power. In the event
any of these contracts are transferred from KCPL, such transfers would be
affected prior to the inclusion of costs associated with the contracts in
KCPL's rate base. To the extent such transfers require additional
Commission authorization, Applicants will submit an application/declaration
under the Act requesting such authorization.
2. Nonutility Subsidiaries
In addition to its regulated utility operations, KCPL
wholly-owns the following Nonutility Subsidiaries:(5) Home Service
Solutions, Inc., a Missouri corporation ("Home Service"); KCPL Receivable
Corporation, a Delaware corpora tion ("KCPL Receivable"); KLT Inc., a
Missouri corporation ("KLT"); and Great Plains Power, Incorporated,
Missouri corporation.(6) During the Reorganization, KCPL will dividend up
to Great Plains Energy its interests in KLT and Great Plains Power, which
will become wholly-owned subsidiaries of Great Plains Energy. KCPL
Receivable will remain a wholly-owned subsidiary of KCPL, as will Home
Service until such time as it is sold or otherwise disposed of.(7) To the
extent required, KCPL requests the Commission determine that all of the
direct and indirect Nonutility Subsidiaries described herein are retainable
under the standards of Section 11(b)(1) of the Act.
For the year ended December 31, 2000, KCPL reported
consolidated operating revenues of $1.1 billion, of which approximately $952
million (85 percent) were derived from regulated sales of electricity and
electric transmission service and approximately $164 million (15 percent) were
derived from activities of the Nonutility Subsidiaries. Applicants request
that investments in Nonutility Subsidiar ies prior to the date of the
Reorganization be disregarded for purposes of calculating the dollar
limitation placed on Great Plains Energy for such investments under Rule 58.(8)
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(5) As used in this Application/Declaration, the term Nonutility
Subsidiaries means (i) each of the existing nonutility subsidiaries
of KCPL and their respective subsidiaries and (ii) after Great Plains
Energy registers as a public utility holding company pursuant to
Section 5 of the Act, any direct or indirect nonutility company
acquired or formed by Great Plains Energy or its nonutility
subsidiaries in a transaction that has been approved by the Com
mission or otherwise exempt under the Act or rules thereunder.
(6) As described above, KCPL also has formed Great Plains Energy, which
in turn will form NewCo. Great Plains Energy and NewCo are held by
KCPL exclusively for the purpose of effectuating the Reorganization.
(7) KCPL recently dissolved WYMO Fuels, Inc., a Missouri corporation and
wholly-owned subsidiary established to acquire and develop coal
properties in Wyoming.
(8) The Commission previously has determined that it is appropriate to
disregard existing investments in "energy-related companies" of
to-be registered holding companies for purposes of Rule 58, as such
companies were not subject to the restrictions of Section 11(b)(1)
at the time such investments were made. See, e.g., New Century
Energies, Inc., Holding Co. Act Release No. 26748 (Aug. 1, 1997);
Dominion Resources, Inc., Holding Co. Act Release No. 27113 (Dec.
15, 1999).
a. Home Service
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Home Service is an intermediate holding company(9) that owns a
100 percent interest in Worry Free Services, Inc. ("Worry Free") and a 49.4
percent interest in R.S. Andrews Enterprise, Inc. ("R.S. Andrews"). Worry
Free and R.S. Andrews assist residential customers primarily in the
purchase, financing, and servicing of heating and air conditioner
equipment, appliances, and other demand- side management equipment for the
home.(10) The operations of Worry Free and R.S. Andrews are predominantly
located in the KCPL service territory and in the southern and southeastern
United States. Home Service currently is in the process of divesting R.S.
Andrews. It is anticipated that following the divestiture of R.S. Andrews,
Home Service will be sold or otherwise disposed of.
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(9) The Commission has authorized registered holding companies to form
and capitalize intermediate nonutility subsidiaries to act as
holding companies over other nonutility subsidiaries. See, e.g., The
Southern Company, Holding Co. Act Release No. 27134 (Feb. 9, 2000);
Exelon Corp., Holding Company Act Release No. 27256 (Oct. 19, 2000).
(10) The sale of electric and gas appliances, and the financing thereof,
is consis tent with Commission rules and precedent. See Rule
58(b)(1)(iv); Consoli dated Natural Gas Co., Holding Co. Act Release
No. 26234 (1995) (financ ing of appliances satisfies functional
relationship test). The rendering of demand-side energy management
services is consistent with the provisions of Rule 58(b)(1)(i).
b. KCPL Receivable
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In 1999, KCPL entered into a revolving agreement to sell all of
its right, title and interest in the majority of its customer accounts
receivable to KCPL Receivable, a special purpose entity established to
purchase customer accounts receivable from KCPL.(11) Such accounts receivable
represent the obligations of customers within KCPL's general service area
to pay for the delivery or sale of electricity and KCPL's rights to payment
of any interest or finance charges associated therewith and all proceeds of
the foregoing. Accounts receivable sold under the agreement totaled $108.2
million at December 31, 2000.
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(11) See CP&L Energy, Inc., Holding Co. Act Release No. 27284 (2000); Central
and South West Corporation, Holding Co. Act Release No. 23578 (Jan. 22,
1985).
c. KLT
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KCPL consolidates the majority of its nonutility business
ventures in KLT, an intermediate holding company.(12) KLT's subsidiaries,
described generally below and listed individually in Exhibit E-2, primarily
engage in energy-related services and natural gas development.(13)
o KLT Energy Services Inc. ("KLT Energy Services") and its
subsidiaries invest in companies which provide products and services
to customers to control the amount, cost and quality of electricity
to commercial and indus trial customers, provide demand-side
management services, power supply coordination (including purchasing
electricity at wholesale for resale to end users), gas management,
energy consulting, generation optimization (such as scheduling and
dispatching generation) and wholesale marketing services. As shown
on Exhibit E-2, KLT Energy Services(14) holds interests in the
following companies:(15)
o Custom Energy Holdings, LLC, an intermediate holding company(16)
formed to own interests in Custom Energy, LLC ("Custom Energy") and
Strategic Energy, LLC ("Strategic Energy").
o Custom Energy and its subsidiary, Custom Energy/M&E Sales, LLC,(17)
which design and install demand-side management and energy saving
technologies in, and offers performance contracts to, commer cial,
government, and educational facilities in the United States.(18)
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(12) See supra note 9.
(13) KLT also wholly-owns Energetechs, Inc., which currently is inactive.
(14) See supra note 9.
(15) As shown on Exhibit E-2, KLT Energy Services also holds
approximately 1.3 million common shares (approximately 2.8 percent
of total outstanding shares) in Bracknell Corporation ("Bracknell"),
which provides services on communication, electrical, HVAC and other
low voltage systems. As KLT Energy Services' investment in Bracknell
is below five percent, Bracknell is neither a subsidiary nor an
affiliate of Great Plains Energy.
(16) See supra note 9.
(17) Custom Energy's other subsidiary, CM2, LLC, is currently inactive.
(18) See Rule 58(b)(1)(i).
o Strategic Energy, which markets energy commodities through the
provision of power supply coordination (including energy marketing)
and gas management services,(19) and which provides energy consulting
and generation optimization (such as scheduling and dispatching
generation) services,(20) in the United States. Strategic Energy's
retail electricity marketing operations currently include the states
of Califor nia, Texas, Ohio, Pennsylvania, New York, and
Massachusetts.
o KLT Gas Inc. ("KLT Gas") owns and operates interests in oil and gas
produc ing properties and invests in companies which in turn own and
operate interests in oil and gas producing properties, some of which
are in or near KCPL's retail electric service territory. KLT Gas'
primary focus is on coal bed methane producing properties, but also
has a 50 percent working interest in natural gas producing
properties in south Texas. KLT Gas and the compa nies in which it
invests produce and gather gas, which is then transported on
third-party pipelines and sold at wholesale. KLT Gas and its
investments do not own interstate pipelines or local distribution
facilities, and do not sell gas at retail. KLT Gas also owns FAR Gas
Acquisitions Corporation, which holds limited partnership interests
in coal bed methane gas well properties.(21)
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(19) See Rule 58(b)(1)(v).
(20) See Rule 58(b)(1)(vii).
(21) See Rule 58(b)(ix).
o KLT Telecom Inc. ("KLT Telecom") pursues investment opportunities in
telecommunications and wireless technology. KLT Telecom is a 83
percent owner of Digital Teleport, Inc., a St. Louis based
competitive access provider and inter-exchange carrier, which is
developing a national fiber optic net work.(22)
o KLT Investments Inc. ("KLT Investments") and KLT Investments Inc. II
("KLT Investments II") pursue certain passive investments for the
benefit of the Great Plains Energy system (the "Passive Interests").
Specifically, KLT Investments invests, as a limited partner, in
affordable housing partnerships that provide tax benefits to the
consolidated group. KLT Investments' portfolio consists of interests
in over 700 affordable housing projects and approximately 47,000
rental units located in 46 states, the District of Colum bia and
Puerto Rico.(23) Investments in this portfolio are made solely for
the purpose of obtaining tax credits and Applicants anticipate such
investments will be liquidated as the terms of the relevant tax
credits expire.(24)
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(22) KLT Telecom filed an application for exempt telecommunications
company status under Section 34 of PUHCA with the Federal
Communications Com mission on June 12, 2001.
(23) The Puerto Rican investments are held indirectly by two limited
partnerships, Institutional Tax Credits 7, in which KLT Investments
has a 9.9 percent limited partnership interest, and USA Metropolitan
2, in which KLT Invest ments has a 13.2 percent limited partnership
interest. Out of the approximate 47,000 rental units in which KLT
Investments has limited partnership inter ests, approximately 0.6
percent of the rental units are in Puerto Rico (an aggregate total
of approximately 283 units). Applicants expect that these
investments will be liquidated as the terms of the relevant tax
credits and their subsequent holding periods expire. Applicants
anticipate the tax credits for the Puerto Rican investments will
expire by the end of 2005. Due to the de minimus nature of these
investments in Puerto Rico, Applicants request that the Commission
not require the liquidation of these limited partnership interests
at this time. Applicants commit that, on a going-forward basis, they
will not invest in any additional limited partnerships with
investments outside of the fifty states and the District of
Columbia.
(24) The Commission has authorized similar tax-driven investments by
registered holding companies in a number of cases, most recently in
Alliant Energy Corp., Holding Co. Act Release No. 27418 (June 11,
2001). See also Exelon Corp., Holding Co. Act Release No. 27256
(Oct. 19, 2000).
KLT Investments II pursues passive investments in community, economic
development and energy-related opportunities. Specifically, KLT
Invest ments II holds the following interests:
o An approximate 3.3 percent interest in CFB Venture Fund II, a
Mis souri limited partnership ("CFB") formed to provide
venture capital to companies in the manufacturing,
distribution and services markets. With the exception of a
business investment located in Houston, Texas, the portfolio
of companies in which CFB invests are in Kansas and Missouri.
The interests held by KLT Investments II in CFP are currently
valued at approximately $598,000.
o An approximate 1.3 percent interest in KCEP I, L.P., a Kansas
limited partnership ("KCEP") formed to provide venture
capital to small businesses. The portfolio of companies in
which KCEP invests are generally located in Kansas and
Missouri. The interests held by KLT Investments II in KCEP
are valued at approximately $820,000.
o An approximate 6.36 percent interest in Envirotech Investment
Fund I, a Delaware limited partnership ("Envirotech") formed
to invest in energy and environmental technologies with
greenhouse gas reduction benefits and in technology of
strategic relevance to utilities. The interests held by KLT
Investments II in Envirotech Investment Fund I are valued at
approximately $1.7 million.
KLT Investments II is in the process of liquidating its interests in
CFB, KCEP, and Envirotech. To that end, KLT Investments II is
seeking a pur chaser for its interests in CFB and has entered into a
letter agreement to sell its interests in KCEP and Envirotech,
subject to the negotiation of definitive documents. In the interim,
Applicants request Commission authorization to retain these
investments. Such "good citizen" investments are consistent with
economic development and venture capital enterprises the Commission
has accepted previously for registered holding companies.(25)
Applicants believe that Great Plains Energy should be allowed to
retain all aspects of the businesses of KLT Investments. The
managing members and partners in the Passive Interests are companies
and banks that are not affili ated with Great Plains Energy.(26) The
limited purpose of the Passive Invest ments is to enable Great
Plains Energy to be a good corporate citizen while, at the same
time, secure tax benefits that are advantageous for its holding
company system. However, Applicants also note that these
investments, to the extent they foster economic growth in the
region, indirectly result in additional demand for electricity
within the KCPL service territory.
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(25) See, e.g., WPL Holdings, Inc., Holding Co. Act Release No. 26856
(Apr. 14, 1998) (permitting retention of venture capital and
economic development investments).
(26) In each instance, the limited rights retained by KLT Investments in
the Passive Interests are consistent with Commission No Action
Letters regarding the scope of rights that may be held without the
creation of a "subsidiary" within the meaning of PUHCA.
d. Great Plains Power
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KCPL recently created Great Plains Power, a wholly-owned subsid
iary, to hold interests in independent power plants ("IPPs") acquired after
the reorganization.(27) Applicants anticipate Great Plains Power will
acquire its IPPs from unaffiliated third parties or through construction of
its own plants. Each of Great Plains Power's plants will be fully
integrated with the Great Plains Energy public utility system, consistent
with Commission precedent regarding the operation of an integrated utility
system. Great Plains Power currently has no assets.
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(27) Upon its acquisition of jurisdictional utility assets, Great Plains
Power will become a public utility company within the meaning of
Section 2(a)(5) of the Act. The Commission has determined that the
ownership of an IPP public utility company such as Great Plains
Power is consistent with the operation of an integrated electric
utility system. See Western Resources, Holding Co. Act Release No.
27411 (2001).
B. Capitalization of KCPL and its Subsidiaries
As of December 31, 2000, KCPL had issued 61,908,726 shares of
common stock without par value. KCPL held 60,841 shares as of December 31,
2000 of its common stock to be used for future distribution resulting in
61,847,885 shares of common stock outstanding. In addition, as of December
31, 2000, KCPL has issued and outstanding five series of preferred stock:
100,000 shares of 3.80% cumulative preferred stock, $100 par value; 100,000
shares of 4.50% cumulative preferred stock, $100 par value; 70,000 shares
of 4.20% cumulative preferred stock, $100 par value; 120,000 shares of
4.35% cumulative preferred stock, $100 par value; and, 6,357 shares of
4.00% cumulative redeemable preferred stock, $100 par value.(28) KCPL's
common stock and three of the five series of KCPL's preferred stock are
listed for trading on the New York Stock Exchange.
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(28) One series of KCPL's preferred stock - the 4.00% cumulative
preferred stock - will be redeemed prior to or in connection with
consummation of the Reorganization. As of December 31, 2000, 5,734
of the 6,357 outstanding shares were held by KCPL to meet future
sinking fund requirements.
KCPL has three business trusts formed under the laws of the
State of Delaware (KCPL Financing I, II, and III). These trusts exist for
the sole purpose of issuing Trust Originated Preferred Securities (TOPrs)
and investing the proceeds in an equivalent amount of Junior Subordinated
Deferrable Interest Debentures of KCPL. In 1997, KCPL Financing I (the
"Trust") issued $150,000,000 of 8.3% preferred securities. The sole asset
of the Trust is the $154,640,000 principal amount of 8.3% Junior
Subordinated Deferrable Interest Debentures, due 2037, issued by KCPL. The
terms and interest payments on these debentures correspond to the terms and
dividend payments on the preferred securities. KCPL deducts these payments
for tax purposes. KCPL may elect to defer interest payments on the
debentures for a period up to 20 consecutive quarters, causing dividend
payments on the preferred securities to be deferred as well. In case of a
deferral, interest and dividends will continue to accrue, along with
quarterly compounding interest on the deferred amounts. KCPL may redeem all
or a portion of the debentures after March 31, 2002. If KCPL redeems all or
a portion of the debentures, the Trust must redeem an equal amount of
preferred securities at face value plus accrued and unpaid distributions.
The back-up undertakings in the aggregate provide a full and unconditional
guarantee of amounts due on the preferred securities. Further information
regarding these securities can be found in the Form S-3 filed on December
18, 1996, attached hereto at Exhibit C-1 and incorporated by reference.
KCPL is authorized to issue mortgage bonds under the General
Mortgage Indenture and Deed of Trust dated December 1, 1986, as
supplemented. This indenture creates a mortgage lien on substantially all
utility plant. As of December 31, 2000, mortgage bonds secured $444.8
million of medium-term notes and revenue refunding bonds. KCPL is
prohibited from issuing additional general mortgage bonds while its
unsecured medium-term notes are outstanding and remain unsecured. Further
information regarding this mortgage can be found in the Form 10-K and Form
10-Q for KCPL, attached hereto at Exhibits G-1 and G-2 respec tively.
During 2000, KCPL issued $200 million of unsecured, floating
rate medium-term notes and $250 million of unsecured senior notes. KCPL is
authorized to issue an additional $150 million of debt securities under its
shelf registration statement dated November 21, 2000, which is attached
hereto at Exhibit C-2 and incorporated by reference.
During 2000, KLT renegotiated its existing $125 million bank
credit agreement collateralized by the capital stock of KLT's direct
subsidiaries from short- term to a three-year revolving credit agreement
that matures in 2003. At December 31, 2000, KLT had repaid amounts borrowed
during 2000 under the new agreement.
The affordable housing notes at KLT Investments are
collateralized by the affordable housing investments. Most of the notes
also require the greater of 15 percent of the outstanding note balances or
the next annual installment to be held as cash, cash equivalents or
marketable securities.
Short-term borrowings consist of funds borrowed from banks or
through the sale of commercial paper as needed. As of December 31, 2000,
KCPL has $55.6 million of commercial paper outstanding. KCPL has short-term
bank lines of credit totaled $255 million with nine banks under minimal fee
arrangements as of December 31, 2000. KCPL also has a 364-day revolving
credit loan facility for up to $190 million to provide liquidity support
for the remarketing of KCPL's Environ mental Improvement Revenue Refunding
Bonds.
As of December 31, 2000, KCPL had entered into two interest
rate swap agreements to limit the interest rate on $30 million of long-term
debt. The swap agreements mature in 2001 (unless otherwise extended, at the
option of the counterparty, for an additional two years) and effectively
fix the interest rate to a weighted-average rate of 3.88 percent. In 2000,
KCPL also entered into three interest rate cap agreements to limit the
exposure to increases in the interest rate on the $200 million of unsecured
medium-term notes. The cap agreements mature in 2002. These swap and cap
agreements are with highly rated financial institutions and simply limit
KCPL's exposure to increases in interest rates. They do not subject KCPL to
any material credit or market risks. The fair value of these agreements is
immaterial and is not reflected in the financial statements. Although
derivatives are an integral part of KCPL's interest rate management, the
effect on interest expense for each of the last three years was not
material.
Set forth in the table below is a summary of KCPL's
consolidated capital structure as of December 31, 2000:
$ (In Thousands) %
Common Stock Equity $ 921,352 40.03%
Preferred Stock Equity $ 39,062 1.70%
Company-obligated Mandatory
Redeemable Preferred Securities $ 150,000 6.52%
Long-term Debt * $1,135,492 49.33%
Short-term Debt $ 55,600 2.42%
TOTAL: $2,301,506 100.00%
* includes current maturities on long-term debt
Great Plains Energy is authorized under its Articles of
Incorporation, attached hereto at Exhibit A-3, to issue 150,000,000 shares
of common stock, without par value ("Common Stock") and 390,000 shares of
cumulative preferred stock, $100 par value ("Preferred Stock").
Approximately 62 million shares of Great Plains Energy Common Stock and the
390,000 shares of Great Plains Energy Preferred Stock will be issued in the
one-to-one exchange of shares contemplated by the Reorganization.(29) As
described in Item 1.E. below, following the Reorganization Great Plains
Energy intends to establish financing arrangements of its own, which will
be used primarily to fund the operations of and investments in unregulated
subsidiaries.
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(29) Great Plains Energy also is authorized to issue 1,572,000 shares of
cumula tive no par preferred stock without par value and 11,000,000
shares of preference stock without par value. As of December 31,
2000, there were no shares of cumulative no par preferred stock or
preference stock issued and outstanding. To the extent such shares
may be issued by KCPL prior to the date of the Reorganization, Great
Plains Energy requests authority to issue corresponding shares of no
par preferred stock and preference stock as necessary to consummate
the one-to-one exchange of shares.
C. Reasons for the Reorganization
KCPL is undertaking the Reorganization in response to the
dramatic changes that occurred in the wholesale electric power market
during the 1990s, i.e., the emergence of unregulated competitive
generators, open access to the nation's transmission grid, and the
appearance of competitive retail electricity markets in a significant
percentage of the country. KCPL recognizes it must change the way it does
business to be successful in this new marketplace. KCPL believes that in
this new environment, its greatest opportunities for success lie in the
competitive generation markets. Indeed, its survival as a stand-alone
family of companies may depend on its success in this arena.
The proposed Reorganization will facilitate this success by
distancing Great Plains Power competitive generation ventures from KCPL's
traditional utility operations and thus placing Great Plains on an equal
footing with the competitive operations of other utility holding companies.
This will provide Great Plains with significant benefits, including access
to additional markets and greater flexibility and speed in pursuing
business opportunities. Great Plains will be able to take advantage of
market-based prices, capture and keep savings from improved asset
management, explore strategic partnerships to gain efficiencies, evaluate
selected merchant generation development and joint ventures, and expand
affiliate relationships. KCPL believes that the benefits resulting from
operating in this environment will allow Great Plains quickly to build a
significant portfolio of competitive generation facilities. Finally, the
Reorganization provide similar benefits to KLT's energy related and other
operations by giving them flexibility in responding to changing market
conditions.
D. Description of the Reorganization
As described above, the Reorganization will be accomplished
through (i) the merger of KCPL with and into NewCo, with KCPL as the
surviving corpora tion and (ii) a dividend up to Great Plains Energy of
KCPL's interests in KLT and Great Plains Power. An organizational chart
showing all of Great Plains Energy's direct and indirect investments in
active subsidiaries following consummation of the Reorganization is
provided at Exhibit E-2. The Reorganization will be governed by an
Agreement and Plan of Merger, to be entered into between KCPL, Great Plains
Energy, and NewCo (the "Reorganization Agreement"), a form of which is
attached hereto at Exhibit B-1. The Reorganization Agreement is subject to
approval of the FERC, NRC, MPSC and KCC, as well as the Federal
Communications Commission with regard to the transfer of certain licenses.
Under the Reorganization Agreement, KCPL's common shareholders
will receive one share of Great Plains Energy Common Stock in exchange for
each KCPL common share held immediately prior to the effective date of the
Reorganiza tion, and KCPL's preferred shareholders will receive one
equivalent share of Great Plains Energy Preferred Stock in exchange for
each KCPL preferred share held immediately prior to the effective date of
the Reorganization.(30) The common shares of KCPL will cease to be listed and
traded on the New York Stock Exchange and the Common Stock of Great Plains
Energy will be listed and traded instead. Similarly, three series of Great
Plains Energy Preferred Stock will replace the equivalent three series of
KCPL preferred shares currently listed and traded on the New York Stock
Exchange, with the Great Plains Energy Preferred Stock being listed and
trade on the New York Stock Exchange in their place. Except for the common
shares and preferred shares of Great Plains Energy, no securities will be
issued to implement the Reorganization. All existing KCPL debt obligations
will remain obligations of KCPL after the Reorganization is consummated.
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(30) Thus, upon consummation of the share exchange, (i) all of KCPL's
common shares will be held by Great Plains Energy, (ii) KCPL will
have no preferred shares outstanding, (iii) all of Great Plains
Energy's common shares will be held by the former KCPL common
shareholders, and (iv) all of Great Plains Energy's preferred shares
will be held by the former KCPL preferred share holders (with the
exception of the 4.00% cumulative preferred stock to be redeemed).
E. Post-Reorganization Financing
Applicants request authority, to the extent such transactions
are not otherwise exempt under the Act, for: (i) a program of external
financing; (ii) intrasystem credit support arrangements; and (iii) interest
rate hedging measures. Applicants are requesting approval for each of the
proposals contained herein for the period through December 31, 2004 (the
"Authorization Period"). The proceeds from the financings authorized by the
Commission pursuant to this Applica tion/Declaration will be used for
general corporate purposes, including: (i) financing, in part, investments
by and capital expenditures of Great Plains Energy and its subsidiaries;
(ii) funding of future investments in any exempt wholesale generator
("EWG"), foreign utility company ("FUCO"), exempt telecommunications
company ("ETC"), or energy-related or gas-related company within the
meaning of Rule 58 ("Rule 58 Company"); (iii) the repayment, redemption,
refunding or purchase by Great Plains Energy or any Subsidiary of its own
securities; and, (iv) financing working capital requirements of Great
Plains Energy and its Subsidiaries and for any other lawful corporate
purposes.
The Applicants represent that no financing proceeds will be
used to acquire the securities of or other interest in any company unless
such acquisition has been approved by the Commission in this proceeding, in
a separate proceeding, or in accordance with an available exemption under
the Act or rules thereunder, including Sections 32, 33 and 34 and Rule 58.
Great Plains Energy states that the aggregate amount of proceeds of
financing and guarantees approved by the Commission in this proceeding used
to fund investments in EWGs and FUCOs will not, when added to Great Plains
Energy's "aggregate investment" in all such entities at any point in time,
exceed 50 percent of Great Plains Energy's "consolidated retained
earnings," as those terms are defined in Rules 53 and 58. Further, Great
Plains Energy represents that proceeds of financing and guarantees utilized
to fund investments in Rule 58 Companies following registration by Great
Plains Energy will be subject to the limitations of that Rule. Applicants
represent that they will not seek to recover through higher rates to KCPL's
customers losses attributable to any operations of its Nonutility
Subsidiaries. Finally, Great Plains Energy and KCPL commit to maintain
their common equity, as reflected in the most recent Form 10-K or Form 10-Q
and as adjusted to reflect subsequent events that affect capitalization, at
or above 30 percent of capitalization.
1. External Financing
a. Great Plains Energy
--------------------
Great Plains Energy proposes to issue and sell from time to
time Common Stock and, directly or indirectly, short-term and long-term
debt securities and other forms of preferred or equity-linked securities.
In addition, as part of the one-to-one share exchange, Great Plains Energy
also proposes to issue a limited amount of Preferred Stock upon
consummation of the Reorganization. The aggre gate amount of all such
securities issued during the Authorization Period will not exceed $450
million.
Common Stock
- ------------
Great Plains Energy proposes to issue and sell Common Stock
pursuant to underwriting agreements of a type generally standard in the
industry. Common Stock may be issued pursuant to private negotiation with
underwriters, dealers or agents, as discussed below, or effected through
competitive bidding among underwriters. In addition, sales may be made
through private placements or other non-public offerings to one or more
persons. All such Common Stock sales will be at rates or prices and under
conditions negotiated or based upon, or otherwise determined by,
competitive capital markets. Great Plains Energy also proposes to issue
stock options, performance shares, stock appreciation rights ("SARs"), war
rants, or other stock purchase rights that are exercisable for Common Stock
and to issue Common Stock upon the exercise of such options, SARs,
warrants, or other stock purchase rights.
Great Plains Energy may issue and sell Common Stock through
underwriters or dealers, through agents, or directly to a limited number of
purchasers or a single purchaser. If underwriters are used in the sale of
Common Stock, such securities will be acquired by the underwriters for
their own account and may be resold from time to time in one or more
transactions, including negotiated transac tions, at a fixed public
offering price or at varying prices determined at the time of sale. Common
Stock may be offered to the public either through underwriting syndicates
(which may be represented by a managing underwriter or underwriters
designated by Great Plains Energy) or directly by one or more underwriters
acting alone. Common Stock may be sold directly by Great Plains Energy or
through agents designated by Great Plains Energy from time to time. If
dealers are utilized in the sale of Common Stock, Great Plains Energy will
sell such securities to the dealers, as principals. Any dealer may then
resell such Common Stock to the public at varying prices to be determined
by such dealer at the time of resale. If Common Stock is being sold in an
underwritten offering, Great Plains Energy may grant the underwrit ers
thereof a "green shoe" option permitting the purchase from Great Plains
Energy at the same price additional shares then being offered solely for
the purpose of covering over-allotments.
Great Plains Energy also requests authority to issue Common
Stock, performance shares options, SARs, warrants or other stock purchase
rights exercis able for Common Stock in public or privately-negotiated
transactions as consider ation for the equity securities or assets of other
existing companies Great Plains Energy is seeking to acquire, provided that
the acquisition of any such equity securities or assets has been authorized
in a separate proceeding or is exempt under the Act or the rules
thereunder. If Common Stock or other securities linked to Common Stock is
used as consideration in connection with any such authorized or exempt
acquisition, the market value of the Common Stock on the day before closing
of the acquisition, or the average high and low market prices for a period
prior to the closing, as negotiated by the parties, will be counted against
the proposed $450 million limitation on financing.(31)
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(31) The Commission previously has approved the issuance of common stock
as consideration for assets or securities of other companies
acquired in autho rized or exempt transactions. See, e.g.,
Interstate Energy Corp., Holding Co. Act Release No. 27069 (Aug. 26,
1999); SCANA Corp., Holding Co. Act Release No. 27137 (Feb. 14,
2000).
In addition, each of the employee and director compensation
plans which provide for investment in KCPL common stock, as in effect
immediately prior to the Reorganization, will be amended to provide for the
issuance of Great Plains Energy Common Stock instead of KCPL common stock.
Currently, KCPL maintains the following employee and director stock plans
(the "Stock Plans"):
o The Dividend Reinvestment and Direct Stock Purchase Plan, which
offers common shareholders, employees and directors of KCPL and its
subsidiaries the opportunity to purchase shares of KCPL's common
stock by reinvesting dividends and/or making optional cash payments.
A full statement of the current provisions of the Dividend
Reinvestment and Direct Stock Purchase Plan is included in the
Registration Statement on Form S-3 in File No. 33-51799 (Exhibit
H-1 hereto).
o The Employee Savings Plus Plan, which is a defined contribution plan
qualified under Section 401 of the Internal Revenue Code.
Contributions to the plan will be matched by a KCPL contribution in
cash, KCPL common stock, or a combination thereof, of an amount, up
to three percent of the employee's compensation for any payroll
period, equal to 50 percent of the amount contributed. A full
statement of the current provisions of the Em ployee Savings Plus
Plan is included in the Registration Statement on Form S-8 in File
No. 33-17403 (Exhibit H-2 hereto).
o The Long-Term Incentive Plan, which provides for granting to certain
eligible employees of KCPL and its subsidiaries incentive stock
options, awards of limited stock appreciation rights, awards of
shares of KCPL stock subject to certain restrictions on
transferability that lapse after specified periods, and awards of
performance shares to be exchanged for shares of common stock upon
the achievement of certain performance measures. A full statement of
the current provisions of the Long-Term Incentive Plan is included
in the Registration Statement on Form S-8 in File No. 33-45618
(Exhibit H-3 hereto).
Great Plains Energy will file post-effective amendments to the
Registration Statements under the Securities Act of 1933, as amended (the
"1933 Act"), with respect to the Stock Plans described above following the
Reorganization.
Shares of Common Stock for use under the Stock Plans described
above may either be newly issued shares, treasury shares or shares
purchased in the open market. Great Plains Energy will make open-market
purchases of Common Stock in accordance with the terms of or in connection
with the operation of the plans pursuant to Rule 42. Great Plains Energy
also may acquire treasury shares through other open-market purchases. Great
Plains Energy also proposes to issue and/or sell shares of Common Stock
pursuant to the existing Stock Plans and similar plans or plan funding
arrangements hereafter adopted without any additional prior Commission
order. Stock transactions of this variety would thus be treated the same as
other stock transactions permitted pursuant to this
Application/Declaration.
Preferred Stock
- ---------------
Great Plains Energy also requests authorization to issue its
authorized Preferred Stock as necessary to accomplish the one-to-one
exchange of shares contemplated by the Reorganization, as described above.
The dividend rate on any series of Preferred Stock will not exceed at the
time of issuance 500 basis points over the yield to maturity of a U.S.
Treasury security having a remaining term equal to the term of such
securities. Dividends or distributions on such Preferred Stock will be made
periodically and to the extent funds are legally available for such
purpose, but may be made subject to terms which allow the issuer to defer
dividend payments for specified periods. Such Preferred Stock may be
convertible or exchangeable into shares of Common Stock.
Long-term Debt and other
Preferred or Equity-Linked Securities
- -------------------------------------
Great Plains Energy further requests authorization to issue,
directly or indirectly through one or more Financing Subsidiaries,
long-term debt and, indirectly through one or more Financing Subsidiaries,
other types of preferred or equity-linked securities (including,
specifically, trust preferred securities). The proceeds of long- term debt
or other preferred or equity-linked securities will enable Great Plains
Energy to reduce short-term debt with more permanent capital and provide an
important source of future financing for the operations of and investments
in non- utility businesses that are exempt under the Act.(32)
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(32) Recently, the Commission approved a similar financing application
filed by Southern Company in which Southern Company requested
approval to issue preferred securities and long-term debt directly
or indirectly through special- purpose financing entities. See The
Southern Company, Holding Co. Act Release No. 27134 (Feb. 9, 2000).
In that case, the Commission took account of the changing needs of
registered holding companies for sources of capital other than
common equity and short-term debt brought about primarily by the
elimination of restrictions under the Act on investments in various
types of non-core businesses (e.g., EWGs, FUCOs, and Rule 58
Companies). The Commission noted that, without the ability to raise
capital in external markets that is appropriate for such
investments, registered holding companies would be at a competitive
disadvantage to other energy companies that are not subject to
regulation under the Act. See also American Electric Power Co.,
Inc., Holding Co. Act Release No. 27382 (Apr. 20, 2001).
Preferred or equity-linked securities may be issued by one or
more Financing Subsidiaries in one or more series with such rights,
preferences, and priorities as may be designated in the instrument creating
each such series, as determined by Great Plains Energy's board of
directors. The dividend rate on any series of preferred or equity-linked
securities will not exceed at the time of issuance 500 basis points over
the yield to maturity of a U.S. Treasury security having a remaining term
equal to the term of such securities. Dividends or distributions on
preferred or equity-linked securities will be made periodically and to the
extent funds are legally available for such purpose, but may be made
subject to terms which allow the issuer to defer dividend payments for
specified periods. Preferred or equity-linked securities may be convertible
or exchangeable into shares of Common Stock.
Long-term debt of Great Plains Energy may be in the form of
unse cured notes ("Debentures") issued in one or more series. The
Debentures of any series (i) may be convertible into any other securities
of Great Plains Energy, (ii) will have a maturity ranging from one to 50
years, (iii) will bear interest at a rate not to exceed 500 basis points
over the yield to maturity of a U.S. Treasury security having a remaining
term approximately equal to the term of such series of Debentures, (iv) may
be subject to optional and/or mandatory redemption, in whole or in part, at
par or at various premiums above or discounts below the principal amount
thereof, (v) may be entitled to mandatory or optional sinking fund
provisions, (vi) may provide for reset of the coupon pursuant to a
remarketing arrangement, and (vii) may be called from existing investors or
put to the company, or both. The Debentures will be issued under an
indenture (the "Indenture") to be entered into between Great Plains Energy
and a national bank, as trustee. Long-term debt of Great Plains Energy also
may be in the form of bank lines of credit. Loans under these bank lines
will have maturities of not more than five years from the date of each
borrowing and the effective cost of such loans will not exceed at the time
of issuance 500 basis points over LIBOR.
Great Plains Energy contemplates that the Debentures would be
issued and sold directly to one or more purchasers in privately-negotiated
transac tions or to one or more investment banking or underwriting firms or
other entities that would resell the Debentures without registration under
the 1933 Act, in reliance upon one or more applicable exemptions from
registration thereunder, or to the public either (i) through underwriters
selected by negotiation or competitive bidding or (ii) through selling
agents acting either as agent or as principal for resale to the public
either directly or through dealers.
The maturity dates, interest rates, call and/or put options,
redemption and sinking fund provisions and conversion features, if any,
with respect to the Debentures of a particular series, as well as any
associated placement, underwriting or selling agent fees, commissions and
discounts, if any, will be established by negotiation or competitive
bidding and reflected in the applicable supplemental indenture or officer's
certificate and purchase agreement or underwriting agreement setting forth
such terms.
Finally, Great Plains Energy undertakes that without further
Commis sion authorization it will not issue any preferred or equity-linked
securities or any Debentures that are not at the time of original issuance
rated at least investment grade by a nationally recognized statistical
rating organization.
Short-Term Debt
- ---------------
To provide financing for general corporate purposes, other
working capital requirements and investments in new enterprises until
long-term financing can be obtained, Great Plains Energy may sell, directly
or indirectly through one or more Financing Subsidiaries, commercial paper
or establish bank lines of credit ("Short-term Debt"). The effective cost
of money on Short-term Debt authorized in this proceeding will not exceed
at the time of issuance 500 basis points over LIBOR for maturities of one
year or less.
Specifically, Great Plains Energy may sell, directly or
indirectly, commercial paper, from time to time, in established domestic or
European commer cial paper markets. Such commercial paper would typically
be sold to dealers at the discount rate per annum prevailing at the date of
issuance for commercial paper of comparable quality and maturities sold to
commercial paper dealers generally. Great Plains Energy expects that the
dealers acquiring commercial paper from Great Plains Energy will reoffer
such paper at a discount to corporate, institutional and sophisti cated
individual investors. Great Plains Energy anticipates that its commercial
paper will be reoffered to investors such as commercial banks, insurance
companies, pension funds, investment trusts, foundations, colleges and
universities, finance companies and non-financial corporations.
Great Plains Energy also proposes to establish, directly or
indirectly, bank lines in an aggregate principal amount sufficient to
support projected levels of short-term borrowings and to provide an
alternative source of liquidity. Loans under these lines will have
maturities not more than one year from the date of each borrow ing. Great
Plains Energy also may engage, directly or indirectly, in other types of
short-term financing generally available to borrowers with comparable
credit ratings as it may deem appropriate in light of its needs and market
conditions at the time of issuance.
b. KCPL
----
KCPL requests authorization to issue and sell from time to time
during the Authorization Period notes and other evidence of indebtedness
having a maturity of one year or less in an aggregate principal amount
outstanding at any one time not to exceed $500 million. Such short-term
financing could include, without limitation, commercial paper sold in
established domestic or European commercial paper markets in a manner
similar to Great Plains Energy, bank lines of credit, and other debt
securities. The effective cost of money on short-term debt of KCPL
authorized in this proceeding will not exceed at the time of issuance 500
basis points over LIBOR for maturities of one year or less. The issuance by
KCPL of commercial paper and other short-term indebtedness having a
maturity of less than 12 months will not be exempt under Rule 52(a) since
it is not subject to approval by both the MPSC and KCC.
c. Nonutility Subsidiaries
-----------------------
As described above in Item 1.A.2, the Nonutility Subsidiaries
are engaged in and expect to continue to be active in the development and
expansion of energy-related or otherwise functionally-related non-utility
businesses. In order to finance investments in such competitive businesses,
it will be necessary for the Nonutility Subsidiaries to have the ability to
engage in financing transactions which are commonly accepted for such types
of investments. In almost all cases, such financing transactions will be
exempt from prior Commission authorization pursuant to Rule 52(b).
In order to be exempt under Rule 52(b), any loan by Great
Plains Energy to a Nonutility Subsidiary or by one Nonutility Subsidiary to
another must have interest rates and maturities that are designed to
parallel the lending company's effective cost of capital. However, if a
Nonutility Subsidiary making a borrowing is not wholly-owned by Great
Plains Energy, directly or indirectly, and does not sell goods or services
to KCPL, then the Applicants request authority to make loans to any such
associate company at interest rates and maturities designed to provide a
return to the lending company of not less than its effective cost of
capital.(33) Appli cants make this request since, if Great Plains Energy or a
Nonutility Subsidiary were required to charge only its effective cost of
capital on a loan to a less than wholly- owned associate company when
market rates were greater, the other owner(s) of such associate company
would in effect receive a subsidy from Great Plains Energy or other lending
Nonutility Subsidiary equal to the difference between the cost of providing
the loan at its effective cost of capital and the other owner(s)
proportionate share of the price at which it would have to obtain a similar
loan on the open market. Great Plains Energy will include in the next
certificate filed pursuant to Rule 24 in this proceeding substantially the
same information as that required on Form U-6B-2 with respect to any such
intra-system loan transaction.
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(33) The Commission has granted similar authority to another registered
holding company. See WGL Holdings, Inc., Holding Co. Act Release No.
27253 (2000).
2. Guarantees and Other Forms of Credit Support
Great Plains Energy further proposes to enter into guarantees
and other forms of support agreements on behalf or for the benefit of any
Subsidiary(34) during the Authorization Period in an aggregate principal
amount not to exceed $600 million outstanding at any one time. Applicants
also request authorization for Nonutility Subsidiaries to provide credit
support on behalf and for the benefit of other Nonutility Subsidiaries in
an aggregate principal amount not to exceed $300 million outstanding at any
one time, exclusive of any guarantees and other forms of credit support
exempt under Rule 45(b)(7) or Rule 52(b).
a. Great Plains Energy
-------------------
Great Plains Energy requests authorization to enter into
guarantees and capital maintenance agreements, obtain letters of credit,
enter into expense agreements or otherwise provide credit support
(collectively, "Great Plains Energy Guarantees") on behalf or for the
benefit of any Subsidiary as may be appropriate to enable such Subsidiary
to carry on in the ordinary course of its business, in an aggregate
principal amount not to exceed $600 million outstanding at any one time.
Subject to such limitation, Great Plains Energy may guarantee both
securities issued by and other contractual or legal obligations of any
Subsidiary. Great Plains Energy proposes to charge each Subsidiary a fee
for each guarantee provided on its behalf that is determined by multiplying
the amount of the Great Plains Energy Guarantee provided by the cost of
obtaining the liquidity necessary to perform the guarantee (for example,
bank line commitment fees or letter of credit fees, plus other
transactional expenses) for the period of time the guarantee remains
outstanding.(35)
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(34) As used in this Application/Declaration, the term "Subsidiary" means
KCPL and the Nonutility Subsidiaries.
(35) The Commission previously has authorized registered holding
companies to recoup from any subsidiary the actual cost of obtaining
the liquidity necessary to perform under a guarantee issued on
behalf of such subsidiary. See e.g., Interstate Energy Corporation,
Holding Co. Act Release No. 27069 (Aug. 26, 1999).
b. Nonutility Subsidiaries
-----------------------
In addition, Applicants request authorization for Nonutility
Subsidiar ies to provide guarantees and other forms of credit support
("Nonutility Subsidiary Guarantees") on behalf or for the benefit of other
Nonutility Subsidiaries in an aggregate principal amount not to exceed $300
million outstanding at any one time, exclusive of any guarantees and other
forms of credit support that are exempt pursuant to Rule 45(b)(7) and Rule
52(b). The Nonutility Subsidiary providing any such credit support may
charge its associate company a fee for each guarantee provided on its
behalf determined in the same manner as specified above in Item 1.E.1.c
above.
3. Hedging Transactions
Great Plains Energy and, to the extent not exempt pursuant to
Rule 52, the Subsidiaries request authorization to enter into interest rate
hedging transac tions with respect to existing indebtedness ("Interest Rate
Hedges"), subject to certain limitations and restrictions, in order to
reduce or manage interest rate cost. Interest Rate Hedges would only be
entered into with counterparties ("Approved Counterparties") whose senior
debt ratings, or the senior debt ratings of the parent companies of the
counterparties, as published by Standard and Poor's Ratings Group, are
equal to or greater than BBB, or an equivalent rating from Moody's
Investors Service, Fitch, or Duff and Phelps.
Interest Rate Hedges will involve the use of financial
instruments commonly used in today's capital markets, such as interest rate
swaps, caps, collars, floors, and structured notes (i.e., a debt instrument
in which the principal and/or interest payments are indirectly linked to
the value of an underlying asset or index), or transactions involving the
purchase or sale, including short sales, of U.S. Treasury obligations. The
transactions would be for fixed periods and stated notional amounts. Fees,
commissions and other amounts payable to the counterparty or exchange
(excluding, however, the swap or option payments) in connection with an
Interest Rate Hedge will not exceed those generally obtainable in
competitive markets for parties of comparable credit quality.
Applicants will comply with SFAS 133 ("Accounting for
Derivatives Instruments and Hedging Activities") and SFAS 138 ("Accounting
for Certain Derivative Instruments and Certain Hedging Activities") or such
other standards relating to accounting for derivative transactions as are
adopted and implemented by the Financial Accounting Standards Board (the
"FASB").(36)
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(36) The proposed terms and conditions of the Interest Rate Hedges are
substan tially the same as the Commission has approved in other
cases. See New Century Energies, Inc., Holding Co. Act Release No.
27000 (April 7, 1999); SCANA Corporation, Holding Co. Act Release
No. 27137 (February 14, 2000).
F. Other Financing Transactions
Applicants also request authorization, to the extent such
transactions are not otherwise exempt under the Act, for (i) changes to any
wholly-owned Subsidiary's capital stock capitalization; (ii) the
acquisition of the securities of certain specified categories of nonutility
companies; (iii) the payment of dividends out of capital or unearned
surplus by Nonutility Subsidiaries; and, (iv) sales and service agreements
between the Subsidiaries, to the extent no otherwise permitted or exempt by
rule.
1. Changes in Capital Stock of Subsidiaries
The portion of an individual Subsidiary's aggregate financing
to be effected through the sale of stock to Great Plains Energy or other
immediate parent company during the Authorization Period pursuant to Rule
52 and/or pursuant to an order issued in this proceeding cannot be
ascertained at this time. It may happen that the proposed sale of capital
securities may in some cases exceed the then-authorized capital stock of
such Subsidiary. In addition, the Subsidiary may choose to use capital
stock with no par value or receive a capital contribution without issuing
capital stock. Also, a wholly-owned Subsidiary may wish to engage in a
reverse stock split to reduce franchise taxes. As needed to accommodate
such proposed transactions and to provide for future issues, request is
made for authority to change the terms of any such wholly-owned
Subsidiary's authorized capital stock capitaliza tion by an amount deemed
appropriate by Great Plains Energy or other intermediate parent company in
the instant case. A Subsidiary would be able to change the par value, or
change between par value and no-par stock, without additional Commission
approval. Any such action by a utility subsidiary would be subject to and
would only be taken upon the receipt of any necessary approvals by the
state commissions in the state or states in which such utility subsidiary
is incorporated and doing business.(37)
2. Financing Subsidiaries
Great Plains Energy and the Subsidiaries request authority to
acquire, directly or indirectly, the equity securities of one or more
corporations, trusts, partnerships or other entities (hereinafter,
"Financing Subsidiaries") created specifi cally for the purpose of
facilitating the financing of the authorized and exempt activities
(including exempt and authorized acquisitions) of Great Plains Energy and
the Subsidiaries through the issuance of debt or equity securities,
including but not limited to company-obligated mandatorily redeemable trust
preferred securities, to third parties. Financing Subsidiaries would loan,
dividend or otherwise transfer the proceeds of any such financing to its
parent or to other Subsidiaries, provided, however, that a Financing
Subsidiary of KCPL will dividend, loan or transfer proceeds of financing
only to KCPL. The terms of any loan of the proceeds of any securities
issued by a Financing Subsidiary to Great Plains Energy would mirror the
terms of those securities.(38) Great Plains Energy may, if required,
guarantee or enter into expense agreements in respect of the obligations of
any Financing Subsidiary which it organizes. The Subsidiaries also may
provide guarantees and enter into expense agreements pursuant to Rules
45(b)(7) and 52, as applicable, if required on behalf of any Financing
Subsidiaries which they organize. If the direct parent company of a
Financing Subsidiary is authorized in this proceeding or any subse quent
proceeding to issue long-term debt or similar types of equity securities,
then the amount of such securities issued by that Financing Subsidiary
would count against the limitation applicable to its parent for those
securities. In such cases, however, the guaranty by the parent of that
security issued by its Financing Subsid iary would not be counted against
the limitations on Great Plains Energy Guarantees or Subsidiary Guarantees,
as the case may be, set forth in Item 1.E.2 above. In other cases, in which
the parent company is not authorized herein or in a subsequent proceeding
to issue similar types of securities, the amount of any guarantee not
exempt pursuant to Rules 45(b)(7) and 52 that is entered into by the parent
company with respect to securities issued by its Financing Subsidiary would
be counted against the limitation on Great Plains Energy Guarantees or
Subsidiary Guarantees, as the case may be.
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(37) The Commission has granted similar approvals to other registered
holding companies. See Conectiv, Inc., Holding Co. Act Release No.
26833 (Feb. 26, 1998); New Century Energies, Inc., Holding Co. Act
Release No. 26750 (Aug. 1, 1997).
(38) The Commission has previously authorized registered holding
companies and their subsidiaries to create financing subsidiaries,
subject to substantially the same terms and conditions. See New
Century Energies, Inc., Holding Co. Act Release No. 27000 (April 7,
1999); Ameren Corp., Holding Co. Act Release No. 27053 (July 23,
1999); The Southern Company, Holding Co. Act Release No. 27134 (Feb.
9, 2000); American Electric Power Co., Inc., Holding Co. Act Release
No. 27382 (Apr. 20, 2001).
3. Intermediate Subsidiaries
Great Plains Energy requests authority to acquire, directly or
indi rectly through a Nonutility Subsidiary, the securities of one or more
new intermediate subsidiary companies which may be organized exclusively
for the purpose of acquiring, holding and/or financing the acquisition of
the securities of or other interest in one or more EWGs, FUCOs, or ETCs
("Exempt Companies"), Rule 58 Companies or other non-exempt Nonutility
Subsidiaries(39) (as authorized in this roceeding or in a separate
proceeding).(40) Great Plains Energy also requests author ity for these new
intermediate subsidiaries, as well the intermediate subsidiaries existing
prior to the Reorganization (collectively, the "Intermediate
Subsidiaries"), to provide management, administrative, project development
and operating services(41) to such entities at fair market prices determined
without regard to cost, and therefore requests an exemption (to the extent
that Rule 90(d) does not apply) pursuant to Section 13(b) from the cost
standards of Rules 90 and 91 as applicable to such transactions, in any
case in which the Non-Utility Subsidiary purchasing such goods or services
is:
(i) A FUCO or foreign EWG that derives no part of its income,
directly or indirectly, from the generation, transmission,
or distribution of electric energy for sale within the
United States;
(ii) An EWG that sells electricity at market-based rates which
have been approved by the FERC, provided that the purchaser
is not KCPL;
(iii) A "qualifying facility" ("QF") within the meaning of the
Public Utility Regulatory Policies Act of 1978, as amended
("PURPA") that sells electricity exclusively (a) at rates
negotiated at arms'-length to one or more industrial or
commercial customers purchasing such electricity for their
own use and not for resale, and/or (b) to an electric
utility company at the purchaser's "avoided cost" as
determined in accor dance with the regulations under PURPA;
(iv) A domestic EWG or QF that sells electricity at rates based
upon its cost of service, as approved by FERC or any state
public utility commission having jurisdiction, provided that
the purchaser thereof is not KCPL; or
(v) A Rule 58 Subsidiary or any other Nonutility Subsidiary that
(a) is partially-owned by Great Plains Energy, provided that
the ultimate purchaser of such goods or services is not KCPL
(or any other entity that Great Plains Energy may form whose
activities and operations are primarily related to the
provision of goods and services to KCPL), (b) is engaged
solely in the business of developing, owning, operating
and/or providing services or goods to Nonutility
Subsidiaries described in clauses (i) through (iv)
immediately above, or (c) does not derive, directly or
indirectly, any material part of its income from sources
within the United States and is not a public-utility company
operating within the United States.(42)
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(39) As used in this Application/Declaration, the term "non-exempt
Nonutility Subsidiaries" includes any Great Plains Energy nonutility
associate company that does not qualify for exemption under the
statutory provisions of the Act or the rules thereunder. For
example, at this time Great Plains Power does not qualify for status
as an EWG, QF, Rule 58 Company, ETC, or any other type of company
exempt from the Act and rules thereunder.
(40) KCPL does not hold an interest in any EWG or FUCO at this time.
(41) The source of such services initially would be KCPL, in accordance
with the interim authority requested below. It is contemplated that
once a subsidiary service company is formed, such services will be
provided by the service company, as authorized by the Commission.
(42) Similar authority has been granted to a number of registered holding
compa nies. See, e.g., Exelon Corp., Holding Co. Act Release No.
27256 (2000); New Century Energies, Holding Co. Act Release No.
27212 (2000); Nisource Inc., Holding Co. Act Release No. 27265
(2000).
An Intermediate Subsidiary may be organized, among other
things, (i) in order to facilitate the making of bids or proposals to
develop or acquire an interest in any Exempt Company, Rule 58 Company, or
other non-exempt Nonutility Subsidiary; (ii) after the award of such a bid
proposal, in order to facilitate closing on the purchase or financing of
such acquired company; (iii) at any time subsequent to the consummation of
an acquisition of an interest in any such company in order, among other
things, to effect an adjustment in the respective ownership interests in
such business held by Great Plains Energy and unaffiliated investors; (iv)
to facilitate the sale of ownership interests in one or more acquired
nonutility companies; (v) to comply with applicable laws of foreign
jurisdictions limiting or otherwise relating to the ownership of domestic
companies by foreign nationals; (vi) as a part of tax planning in order to
limit Great Plains Energy's exposure to U.S. and foreign taxes; (vii) to
further insulate Great Plains Energy and KCPL from operational or other
business risks that may be associated with investments in non-utility
companies; or (vii) for other lawful business purposes.
Investments in Intermediate Subsidiaries may take the form of
any combination of the following: (i) purchases of capital shares,
partnership interests, member interests in limited liability companies,
trust certificates or other forms of equity interests; (ii) capital
contributions; (iii) open account advances with or without interest; (iv)
loans; and (v) guarantees issued, provided or arranged in respect of the
securities or other obligations of any Intermediate Subsidiaries. Funds for
any direct or indirect investment in any Intermediate Subsidiary will be
derived from (i) financings authorized in this proceeding; (ii) any
appropriate future debt or equity securities issuance authorization
obtained by Great Plains Energy from the Commis sion; and (iii) other
available cash resources, including proceeds of securities sales by a
Nonutility Subsidiary pursuant to Rule 52. To the extent that Great Plains
Energy provides funds or guarantees directly or indirectly to an
Intermediate Subsidiary which are used for the purpose of making an
investment in any EWG or FUCO or a Rule 58 Company, the amount of such
funds or guarantees will be included in Great Plains Energy's "aggregate
investment" in such entities, as calculated in accordance with Rule 53 or
Rule 58, as applicable.(43)
Great Plains Energy may determine from time to time to
consolidate or otherwise reorganize all or any part of its direct and
indirect ownership interests in Nonutility Subsidiaries, and the activities
and functions related to such investments, under one or more Intermediate
Subsidiaries. To effect any such consolidation or other reorganization,
Great Plains Energy may wish to either contribute the equity securities of
one Nonutility Subsidiary to another Nonutility Subsidiary or sell (or
cause a Nonutility Subsidiary to sell) the equity securities of one
Nonutility Subsid iary to another one. To the extent that these
transactions are not otherwise exempt under the Act or rules
thereunder,(44) Great Plains Energy hereby requests authoriza tion under
the Act to consolidate or otherwise reorganize under one or more direct or
indirect Intermediate Subsidiaries Great Plains Energy's ownership
interests in existing and future Nonutility Subsidiaries.(45) Such
transactions may take the form of a Nonutility Subsidiary selling,
contributing or transferring the equity securities of a subsidiary as a
dividend to an Intermediate Subsidiary or the acquisition by Interme diate
Subsidiaries, directly or indirectly, of the equity securities of such
companies, either by purchase or by receipt of a dividend. The purchasing
Nonutility Subsidiary in any transaction structured as an intrasystem sale
of equity securities may execute and deliver its promissory note evidencing
all or a portion of the consideration given. Each transaction would be
carried out in compliance with all applicable U.S or foreign laws and
accounting requirements, and any transaction structured as a sale would be
carried out for a consideration equal to the book value of the equity
securities being sold. Great Plains Energy will report each such
transaction in the next quarterly certificate filed pursuant to Rule 24 in
this proceeding, as described below.
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(43) The Commission has previously authorized registered holding
companies to organize intermediate subsidiary companies to acquire
and hold various non- utility subsidiaries, and for such
intermediate companies to provide adminis trative and development
services to such subsidiaries at market prices. See Entergy
Corporation, Holding Co. Act Release No. 27039 (June 22, 1999);
Energy East Corp., Holding Co. Act Release No. 27228 (Sept. 12,
2000).
(44) Sections 12(c), 32(g), 33(c)(1) and 34(d), and Rules 43(b), 45(b),
46(a) and 58, as applicable, may exempt many of the transactions
described in this paragraph.
(45) The Commission has granted similar authority to another holding
company. See Entergy Corporation, Holding Co. Act Release No. 27039
(June 22, 1999).
4. Payment of Dividends out of Capital and Unearned Surplus
Great Plains Energy also proposes, on behalf of each of its
current and future non-exempt Nonutility Subsidiaries, that such companies
be permitted to pay dividends with respect to the securities of such
companies, from time to time through the Authorization Period, out of
capital and unearned surplus (including revaluation reserve), to the extent
permitted under applicable corporate law; provided, however, that, without
further approval of the Commission, no non-exempt Nonutility Subsid iary
will declare or pay any dividend out of capital or unearned surplus if such
Nonutility Subsidiary derives any material part of its revenues from the
sale of goods, services, electricity or natural gas to KCPL. Great Plains
Energy requests that the Commission reserve jurisdiction over dividends
paid by any such non-exempt Nonutility Subsidiary.(46)
Great Plains Energy anticipates that there will be situations
in which one or more Nonutility Subsidiaries will have unrestricted cash
available for distribu tion in excess of any such company's current and
retained earnings. In such situa tions, the declaration and payment of a
dividend would have to be charged, in whole or in part, to capital or
unearned surplus. As an example, if an Intermediate Subsid iary of Great
Plains Energy were to purchase all of the stock of a Rule 58 Company, and
following such acquisition the Rule 58 Company incurs non-recourse
borrowings some or all of the proceeds of which are distributed to the
Intermediate Subsidiary as a reduction in the amount invested in the Rule
58 Company (i.e., return of capital), the Intermediate Subsidiary (assuming
it has no earnings) could not, without the Commission's approval, in turn
distribute such cash to Great Plains Energy or its other parent.
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(46) The Commission has granted similar approvals, subject to such
reservation of jurisdiction, to other registered holding companies.
See The Southern Com pany, Holding Co. Act Release No. 26738 (July
2, 1997).
Similarly, using the same example, if an Intermediate
Subsidiary, following its acquisition of all of the stock of a Rule 58
Company, were to sell part of that stock to a third party for cash, the
Intermediate Subsidiary would again have substantial unrestricted cash
available for distribution, but (assuming no profit on the sale of the
stock) would not have current earnings and therefore could not, without the
Commission's approval, declare and pay a dividend to its parent out of such
cash proceeds. Further, there may be periods during which unrestricted cash
available for distribution by a Nonutility Subsidiary exceeds current and
retained earnings due to the difference between accelerated depreciation
allowed for tax purposes, which may generate significant amounts of
distributable cash, and depreciation methods required to be used in
determining book income. Finally, even under circumstances in which a
Nonutility Subsidiary has sufficient earnings, and therefore may declare
and pay a dividend to its immediate parent, such immediate parent may have
negative retained earnings, even after receipt of the dividend, due to
losses from other operations. In this instance, cash would be trapped at a
subsidiary level where there is no current need for it.
Great Plains Energy, on behalf of each current and future
non-exempt Nonutility Subsidiary, represents that it will not declare or
pay any dividend out of capital or unearned surplus in contravention of any
law restricting the payment of dividends. In this regard, it should be
noted that all U.S. jurisdictions limit to one extent or another the
authority of corporations to make dividend distributions to shareholders.
Most State corporation statutes contain either or both an equity insolvency
test or some type of balance sheet test. Great Plains Energy also states
that its subsidiaries will comply with the terms of any credit agreements
and inden tures that restrict the amount and timing of distributions to
shareholders.
G. Intrasystem Service Arrangements
KCPL has been providing accounts payable, information
technology, investor relations, legal, office space, and other general
as-requested administrative and support services to its subsidiaries for
some years, subject to regulation by the MPSC and KCC.(47) In conformance
with relevant state requirements,(48) KCPL has billed its subsidiaries
directly for all identifiable costs related to the particular transactions
involved. Other elements of costs, such as taxes, interest, other over head
and compensation for the use of capital procured by the issuance of capital
stock, is allocated according to ratios designed to recover an equitable
share of these costs. The services provided by KCPL to its affiliates are
used for the benefit of these companies and are not indirectly returned to
KCPL.
KCPL is in the process of evaluating the most economical and
effective manner of providing support services to affiliate companies
following the Reorganization. Currently, KCPL intends to file with the
Commission not later than April 30, 2002, an application/declaration
seeking authority to create a service company and to implement the final
support service structure for the Great Plains Energy system. Until such
time as that application/declaration is made effective by the Commission,
Applicants request authorization pursuant to Section 13(b) of the Act and
rules thereunder for KCPL and the Nonutility Subsidiaries, after consumma
tion of the Reorganization, to provide on an interim basis support
services, as well as sell goods, to each other and to Great Plains Energy
consistent with current practice (as well as services and goods of a
substantially similar nature) and pricing arrange ments, described
above.(49) Reference is made to the form of service agreement between KCPL
and the Nonutility Subsidiaries attached at Exhibit B-2.
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(47) Most of these services have been provided by KCPL pursuant to
informal arrangements. KLT renders services to certain of its
subsidiaries at cost in accordance with Rule 87(b)(1).
(48) Missouri utility regulations prohibit the provision of a financial
advantage by a public utility to an affiliate. 4
C.S.R.ss.240-20.015. Kansas law places no explicit restrictions on
affiliate contracts, rather requires that such contracts be filed
with the KCC, which has the right to investigate and disapprove the
contracts. Kansas Stat. Ann.ss.66-1402.
(49) The Commission has provided an exemption from the requirements of
Section 13(b) as necessary to permit to a newly-formed registered
holding company to continue its existing service arrangements for an
interim period of up to 14 months during the formation and
development of a mutual service company. See Exelon, Holding Co. Act
Release No. 27256 (Oct. 19, 2000). In this matter, the 14 month
period would extend from the date of the Com mission's order
permitting this Application to become effective, unless otherwise
amended.
H. Certificates of Notification
Great Plains Energy proposes to file certificates of
notification pursuant to Rule 24 that report each of the transactions
carried out in accordance with the terms and conditions of and for the
purposes represented in this Applica tion/Declaration. Such certificates of
notification would be filed within 60 days after the end of each of the
first three fiscal quarters, and 90 days after the end of the last fiscal
quarter, in which transactions occur. The Rule 24 certificates will contain
the following information for the reporting period:
(i) The sales of any Common Stock by Great Plains Energy and the
purchase price per share and the market price per share at
the date of the agreement of sale;
(ii) The total number of shares of Common Stock issued or
issuable under options granted during the quarter under any
Stock Plan or otherwise;
(iii) If Common Stock has been transferred to a seller of
securities of a company being acquired, the number of shares
so issued, the value per share and whether the shares are
restricted to the acquirer;
(iv) The amount and terms of any long-term debt, Preferred Stock,
or other forms of preferred or equity-linked securities
issued directly or indirectly during the quarter by Great
Plains Energy;
(v) The amount and terms of any Short-term Debt issued by Great
Plains Energy or KCPL during the quarter;
(vi) The name of the guarantor and of the beneficiary of any
Great Plains Energy Guarantee or Nonutility Subsidiary
Guarantee issued during the quarter, and the amount, terms
and purpose of the guarantee;
(vii) The amount and terms of any financings consummated by any
Nonutility Subsidiary during the quarter that are not exempt
under Rule 52;
(viii) The notional amount and principal terms of any Interest Rate
Hedge entered into during the quarter and the identity of
the parties to such instruments;
(ix) The name, parent company, and amount invested in any new
Interme diate Subsidiary or Financing Subsidiary during the
quarter;
(x) A list of Form U-6B-2 statements filed with the Commission
during the quarter, including the name of the filing entity
and the date of the filing; and
(xi) Consolidated balance sheets as of the end of the quarter,
and separate balance sheets as of the end of the quarter for
each company, includ ing Great Plains Energy, that has
engaged in any jurisdictional financ ing transactions during
the quarter.
Item 2. Fees, Commission and Expenses
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The fees, commissions and expenses incurred or to be incurred
in connection with the transactions proposed herein are in the process of
being esti mated. The above fees do not include underwriting fees and other
expenses incurred in consummating financings covered hereby. The Applicants
estimate that such fees and expenses will not exceed 5 percent of the
proceeds of any such financings.
Item 3. Applicable Statutory Provisions
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A. General
Sections 6(a) and 7 of the Act are applicable to the issuance
of Common Stock and Preferred Stock and to the direct or indirect issuance
of Deben tures or other forms of preferred or equity-linked securities by
Great Plains Energy, and to the issuance of Short-term Debt by Great Plains
Energy and KCPL. In addition, Sections 6(a) and 7 of the Act are applicable
to Interest Rate Hedges, except to the extent that they may be exempt under
Rule 52. Section 12(b) of the Act and Rule 45(a) are applicable to the
issuance of Great Plains Energy Guarantees and to Nonutility Subsidiary
Guarantees, to the extent not exempt under Rules 45(b) and 52. Sections
9(a)(1) and 10 of the Act are applicable to the acquisition by Great Plains
Energy's or any Nonutility Subsidiary's of the equity securities of any
Financing Subsidiary or Intermediate Subsidiary and to Great Plains
Energy's investment in existing or new subsidiaries to engage in financing
of energy-related equipment, products or services. Section 9(a)(1) and 10
of the Act also are applicable to the KCPL's acquisition by lease of
transmission lines and to KCPL's participation in the railcar leasing
activities described in Item 1.A.1. Section 12(c) of the Act and Rule 46
are applicable to the payment of dividends from capital and unearned
surplus by any Nonutility Subsidiary. Section 13(b) of the Act and Rules 80
through 92 are applicable to the performance of services and sale of goods
among KCPL and Nonutility Subsidiaries, but may be exempt from the
requirements thereof in some cases pursuant to Rules 87(b)(1), 90(d) and
92, as applicable.
B. Compliance with Rules 53 and 54
The transactions proposed herein are also subject to Rules 53
and 54. Under Rule 53(a), the Commission shall not make certain specified
findings under Sections 7 and 12 in connection with a proposal by a holding
company to issue securities for the purpose of acquiring the securities of
or other interest in an EWG, or to guarantee the securities of an EWG, if
each of the conditions in paragraphs (a)(1) through (a)(4) thereof are met,
provided that none of the conditions specified in paragraphs (b)(1) through
(b)(3) of Rule 53 exists. Rule 54 provides that the Commission shall not
consider the effect of the capitalization or earnings of subsid iaries of a
registered holding company that are EWGs or FUCOs in determining whether to
approve other transactions if Rule 53(a), (b) and (c) are satisfied. These
standards are met.
Rule 53(a)(1): Following the Reorganization, Great Plains
Energy will not hold any interest in any EWG or FUCO.
Rule 53(a)(2): Great Plains Energy will maintain books and
records enabling it to identify investments in and earnings from each EWG
and FUCO in which it directly or indirectly acquires and holds an interest.
Great Plains Energy will cause each domestic EWG in which it acquires and
holds an interest, and each foreign EWG and FUCO that is a majority-owned
subsidiary, to maintain its books and records and prepare its financial
statements in conformity with U.S. generally accepted accounting principles
("GAAP"). All of such books and records and financial statements will be
made available to the Commission, in English, upon request.
Rule 53(a)(3): No more than 2 percent of KCPL employees will,
at any one time, directly or indirectly, render services to EWGs and FUCOs.
Rule 53(a)(4): Great Plains Energy will submit a copy of the
Applica tion/Declaration in this proceeding and each amendment thereto, and
will submit copies of any Rule 24 certificates required hereunder, as well
as a copy of Great Plains Energy's Form U5S, to each of the public service
commissions having jurisdiction over the retail rates of KCPL.
In addition, Great Plains Energy states that the provisions of
Rule 53(a) are not made inapplicable to the authorization herein requested
by reason of the occur rence or continuance of any of the circumstances
specified in Rule 53(b). Rule 53(c) is inapplicable by its terms.
Item 4. Regulatory Approvals
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Approval of the MPSC is required prior to the encumbrance of
KCPL's assets or the issuance by KCPL of long-term (one year or longer)
evidences of indebtedness. Approval of the KCC is required before KCPL may
enter into management, construction, engineering, or similar contracts with
its affiliates. To the extent transactions between Great Plains Energy and
KCPL affect utility charges, approval of the KCC also may be required for
such transactions. Except as stated above, no state commission, and no
federal commission other than this Commission, has jurisdiction over any of
the transactions proposed herein.(50)
Item 5. Procedure
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The Commission published on May 11, 2001, the requisite notice
under Rule 23 with respect to the filing of this Application/Declaration,
requiring comments to be filed by June 5, 2001. No comments to the
Application/Declaration have been filed. Applicants respectfully request
the Commission enter an order granting and permitting this
Application/Declaration to become effective at the earliest date possible.
Applicants submit that a recommended decision by a hearing or
other responsible officer of the Commission is not needed for approval of
the financing requests made herein. The Division of Investment Management
may assist in the preparation of the Commission's decision. The Applicants
further request that there be no waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
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(50) The Reorganization itself is not subject to the jurisdiction of the
Commission. The FERC, the MPSC, the KCC, and the Nuclear Regulatory
Commission (the "NRC") each have approved the Reorganization, the
orders of which are attached at Exhibits D-1, D-2, and D-3
respectively.
Item 6. Exhibits and Financial Statements
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A. Exhibits
A-1 Restated Articles of Consolidation of KCPL dated as of May 5, 1992
(previ ously filed as Exhibit 4 to Registration Statement in File
No. 33-54196 and incorporated herein by reference)
A-2 By-laws of KCPL, as amended and in effect on November 7, 2000
(previ ously filed as Exhibit 3-b to Exhibit G-1 hereto and
incorporated herein by reference)
A-3 Articles of Incorporation of Great Plains Energy*
A-4 By-laws of Great Plains Energy*
B-1 Form of Agreement and Plan of Merger*
B-2 Form of Service Agreement between KCPL and Nonutility
Subsidiaries*
C-1 Registration Statement on Form S-3 (previously filed on December
18, 1996 in File No. 333-18139 and incorporated herein by
reference)
C-2 Registration Statement on Form S-3 (previously filed on November
21, 2000 in File No. 333-50396 and incorporated herein by
reference)
D-1 Order of the FERC
D-2 Order of the MPSC
D-3 Order of the KCC
D-4 Order of the NRC
E-1 Map of KCPL service area*
E-2 Post-Reorganization Organizational Chart*
F-1 Preliminary Opinion of Counsel*
F-2 Past-Tense Opinion of Counsel**
G-1 KCPL's Annual Report on Form 10-K for the fiscal year ended December
31, 2000 (previously filed on February 28, 2001 in File No. 001-00707
and incorporated by reference)
G-2 KCPL's Quarterly Report on Form 10-Q for the quarter ended March 31,
2001 (previously filed on May 10, 2001 in File No. 001-00707 and
incorpo rated by reference)
H-1 Dividend Reinvestment and Direct Stock Purchase Plan (previously
filed in Registration Statement on Form S-3 in File No. 33-51799
and incorporated herein by reference)
H-2 Employee Savings Plus Plan (previously filed in Registration
Statement on Form S-8 in File No. 33-17403 and incorporated herein
by reference)
H-3 Long-Term Incentive Plan (previously filed in Registration
Statement on Form S-8 in File No. 33-45618 and incorporated herein
by reference)
I-1 Form of Notice*
* Previously filed
** To be filed by amendment
B. Financial Statements
FS-1 KCPL Consolidated Balance Sheet as of December 31, 2000
(previously filed in KCPL's Annual Report on Form 10-K for the
year ended December 31, 2000 (Exhibit G-1 hereto) and incorporated
by reference)
FS-1A KCPL Consolidated Balance Sheet as of March 31, 2001 (previously
filed in KCPL's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001 (Exhibit G-2 hereto) and incorporated by
reference)
FS-2 KCPL Consolidated Statement of Income for the 12 months ended
December 31, 2000 (previously filed with the Commission in KCPL's
Annual Report on Form 10-K for the year ended December 31, 2000
(Exhibit G-1 hereto) and incorporated by reference)
FS-2A KCPL Consolidated Statement of Income for the 3 months ended March
31, 2001 (previously filed in KCPL's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001 (Exhibit G-2 hereto) and
incorporated by reference)
Item 7. Information as to Environmental Effects
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The transactions proposed herein will not involve major
federal action significantly affecting the quality of human environment as
those terms are used in Section 102(2)(C) of the National Environmental Policy
Act, 42 U.S.C. ss. 4321 et seq. Second, consummation of these transactions
will not result in changes in the operations of Great Plains Energy or its
subsidiaries that would have any significant impact on the environment. To the
Applicants' knowledge, no federal agency is preparing an environmental impact
statement with respect to this matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned Applicants have duly caused this
pre-effective Amend ment No. 4 to their Application/Declaration on Form U-1
to be signed on their behalf by the undersigned thereunto duly authorized.
GREAT PLAINS ENERGY INCORPORATED
1201 Walnut Street
Kansas City, Missouri 64106
/s/ Bernard J. Beaudoin Date: September 6, 2001
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Name: Bernard J. Beaudoin
Title: Chairman of the Board, President
and Chief Executive Officer
KANSAS CITY POWER AND LIGHT COMPANY
1201 Walnut Street
Kansas City, Missouri 64106
/s/ Bernard J. Beaudoin Date: September 6, 2001
- -------------------------------
Name: Bernard J. Beaudoin
Title: Chairman of the Board, President
and Chief Executive Officer
KLT INC.
10740 Nall Street, Suite 230
Overland Park, Kansas 66211
/s/ Gregory J. Orman Date: September 6, 2001
- ------------------------------
Name: Gregory J. Orman
Title: President and CEO
GREAT PLAINS POWER, INCORPORATED
1201 Walnut Street
Kansas City, Missouri 64106
/s/ John. J. DeStefano Date: September 6, 2001
- ------------------------------
Name: John J. DeStefano
Title: Vice President
KCPL RECEIVABLE CORPORATION
1201 Walnut Street
Kansas City, Missouri 64106
/s/ Andrea F. Bielsker Date: September 6, 2001
- ------------------------------
Name: Andrea F. Bielsker
Title: President
EXHIBIT D-1
94 FERCP. 62,244
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Kansas City Power & Light Company Docket No. EC01-74-000
ORDER AUTHORIZING DISPOSITION
OF JURISDICTIONAL FACILITIES AND
CORPORATE REORGANIZATION
(Issued March 23, 2001)
On February 23, 2001, Kansas City Power & Light Company (KCPL)
filed an application pursuant to section 203 of the Federal Power Act (FPA)
1 for Commission authorization to implement a corporate reorganization
resulting in the formation of a registered holding company to be known as
HoldCo. As a result of the proposed restructuring, KCPL will become a
wholly-owned subsidiary of HoldCo.
Current Corporate Structure
KCPL is a vertically integrated electric utility engaged in the
generation, transmission, distribution, and sale of electric energy in
Kansas and Missouri and provides retail services in and around the Kansas
City metropolitan area. KCPL consists of four wholly-owned direct
subsidiaries: KLT Inc. (KLT), KCPL Receivables Company (KCPL Receivables),
Great Plains Power Inc. (Great Plains) and Home Services Solutions Inc.
(HSSI).
Proposed Corporate Reorganization
Under the proposed corporate reorganization (Transaction), KCPL
will create a new subsidiary, HoldCo, which in turn, will form a new
subsidiary, NewCo. KCPL will then merge with and into NewCo, with KCPL as
the surviving corporation. KCPL will dividend up to HoldCo, KLT and Great
Plains. KCPL, KLT, and Great Plains will then become direct subsidiaries of
HoldCo. KCPL Receivables will remain a direct subsidiary of KCPL and HSSI
will be divested prior to closing of the Transaction.
- --------
1 16 U.S.C.ss. 824(b) (1994).
Docket No. EC01-74-000 - 2 -
The common and preferred shareholders of KCPL who held their
shares immediately prior to the effective date of the Transaction will
receive equivalent common and preferred shares of HoldCo, respectively.
HoldCo will acquire the common stock of KCPL.
Discussion
In Central Vermont Public Service Corporation (Central Vermont), 2
the Commission concluded that the transfer of ownership and control of
jurisdictional facilities, through a transfer of common stock from existing
shareholders to a newly created holding company, constitutes a disposition
of jurisdictional facilities requiring prior Commission approval under
section 203. Consistent with the Commission's holding in Central Vermont,
because KCPL's Transaction involves the transfer of ownership of common
stock from existing shareholders to HoldCo, the Transaction is subject to
the requirements of section 203.
KCPL states that the Transaction is consistent with the public
interest and will not have an adverse effect on competition, rates or
regulation. With respect to competition, KCPL states that since the
Transaction is an internal corporate restructuring there will not be any
horizontal or vertical competitive impacts. With respect to rates, KCPL
states that the Transaction will have no effect on either KCPL's operating
costs or rate levels and commits not to include the costs of the
Transaction in its retail or wholesale rates, or transmission rates. With
respect to regulation, KCPL agrees to waive any preemption rights it might
otherwise assert under Ohio Power 3 and therefore concludes that the
Transaction will not impair the effectiveness of either state or federal
regulation.
Notice of the application was published in the Federal Register
with comments due on or before March 16, 2001. Kansas Corporation
Commission (KCC) and Missouri Public Service Commission (MPSC) filed timely
notices of intervention, raising no issues. Pursuant to Rule 214 of the
Commission's Rules of Practice and Procedures, 4 KCC and MPSC's notices of
intervention serve to make them parties to this proceeding.
After consideration, it is concluded that the Transaction is
consistent with the public interest and is authorized, subject to the
following conditions:
- --------
2 39 FERCP. 61,295 (1987)
3 Ohio Power v. FERC, 954 F.2d 779, 784-85 (D.C. Cir. 1992) (Ohio Power).
4 18 C.F.R.ss. 385.214(a)(2)(2000).
Docket No. EC01-74-000 - 3 -
(1) The proposed Transaction is authorized upon the terms and
conditions and for the purposes set forth in the
application;
(2) The foregoing authorization is without prejudice to the
authority of the Commission or any other regulatory body
with respect to rates, service, accounts, valuation,
estimates or determinations of cost, or any other matter
whatsoever now pending or which may come before the
Commission;
(3) Nothing in this order shall be construed to imply
acquiescence in any estimate or determination of cost or
any valuation of property claimed or asserted;
(4) The Commission retains authority under sections 203(b)
and 309 of the FPA to issue supplemental orders as
appropriate;
(5) In the event that HoldCo should seek to merge with
another public utility holding company, the public
utilities of those companies are required to make
appropriate filings under section 203 of the FPA;
(6) KCPL or its affiliates shall make appropriate filings
under section 205 of the FPA, as necessary, to implement
the Transaction; and
(7) KCPL shall promptly notify the Commission of the date the
disposition of the jurisdictional facilities is
consummated.
Authority to act on this matter is delegated to the Director,
Division of Corporate Applications, pursuant to 18 C.F.R. ss. 375.307. This
order constitutes final agency action. Requests for rehearing by the
Commission may be filed within thirty (30) days of the date of issuance of
this order, pursuant to 18 C.F.R. ss. 385.713.
Michael C. McLaughlin, Director
Division of Corporate Applications
EXHIBIT D-2
STATE OF MISSOURI
PUBLIC SERVICE COMMISSION
At a session of the Public
Service Commission held
at its office in
Jefferson City on the
31st day of July, 2001.
In the Matter of the Application of Kansas City Power & )
Light Company for an Order Authorizing its Plan to ) Case No. EM-2001-464
Reorganize Itself into a Holding Company Structure. )
ORDER APPROVING STIPULATION AND AGREEMENT
AND CLOSING CASE
-----------------------------------------
The Missouri Public Service Commission is authorized to approve
the corporate restructuring of public utilities where there is no detriment
to the public interest. Kansas City Power & Light Company (KCPL) seeks
permission to restructure itself and no party has objected. This order
grants KCPL's application.
Procedural History:
- ------------------
On February 26, 2001, KCPL filed its application for approval of
its plan to reorganize itself as a holding company. KCPL, which is an
electric corporation and a regulated public utility, owns certain
subsidiaries which are not regulated entities. KCPL proposes to reorganize
so that a holding company will own KCPL and also each of its present
subsidiaries.
On February 28, 2001, the Commission issued its Order Directing
Notice, setting March 20 as the deadline for any interested person to file
an application for leave to intervene. The Missouri Joint Municipal
Electric Utility Commission and the City of Kansas City, Missouri, filed
their applications to intervene on March 20. UtiliCorp United, Inc., filed
its application on March 21. The City of Independence, Missouri, filed its
application on March 23. Jackson County, Missouri, filed its application on
March 26. The Empire District Electric Company filed its application on
March 28. KCPL filed its response on March 29, and the Missouri Energy
Group filed its application on March 30.
KCPL, in its response filed on March 29, expressed no objection to
the applications filed by the Missouri Joint Municipal Electric Utility
Commission, Independence, Kansas City, Jackson County, Empire, and
UtiliCorp. KCPL never responded to Missouri Energy Group's application. All
of the applications to intervene met the requirements of Commission Rule 4
CSR 240-2.075 and were granted on April 23. Also on that date, the
Commission set a prehearing conference for May 1 and directed the parties
to submit a proposed procedural schedule by May 8.
The prehearing conference was held as scheduled. At the prehearing
conference, the parties advised the presiding officer that they had that
day filed a Stipulation and Agreement resolving all of the issues in the
case. The Stipulation and Agreement was, however, not unanimous. It was
executed only by KCPL, Staff and the Office of the Public Counsel. The
parties requested that the requirement that a proposed procedural schedule
be filed by May 8 be suspended pending resolution of the Stipulation and
Agreement. The Staff of the Commission also promised to file suggestions in
support of the Stipulation and Agreement. Also on May 1, the Commission
issued its order directing Staff to file either suggestions in support of
the Stipulation and Agreement or a proposed procedural schedule by May 11.
On May 7, Intervenors the City of Kansas City and Jackson County
advised the Commission that they neither supported nor opposed the
Stipulation and Agreement and did not request a hearing. Also on May 7,
Intervenor UtiliCorp advised the Commission that it neither supported nor
opposed the Stipulation and Agreement and waived its right to a hearing.
UtiliCorp stated that this waiver was conditioned upon certain
considerations, including: that the Stipulation and Agreement is a
compromise settlement between the signatories thereof; that it does not
bind any non-signatory; that UtiliCorp does not concur nor acquiesce in the
Stipulation and Agreement; that no general regulatory policy or precedent
is thereby established by the Commission for application to any other
regulated entity; and that UtiliCorp reserves the right to take a different
or adverse position in any other case. Intervenor Empire District filed an
identical waiver on May 7. The remaining parties filed nothing.
On May 11, Staff filed its response to the Commission's Order
Directing Filing of May 1. This response took the form of suggestions in
support of the Stipulation and Agreement.
On June 21, 2001, the Commission discussed this case at its
regularly-scheduled Agenda meeting and determined to convene an
on-the-record presentation to permit clarification of certain concerns. The
Commission issued its Order and Notice on June 25, set the on-the-record
presentation for July 5, and advised the parties that
[a]mong the topics that will be addressed are (1) the purpose and
effect of the conditional waivers of the right to a hearing filed
by two intervenors, and (2) whether it is in the public interest
to permit Kansas City Power & Light Company (KCPL) to meet a
portion of its future generation requirements via a purchase power
agreement with Great Plains Power (GPP), an unregulated,
competitive affiliate.[1]
_____________________
[1] GPP is presently a subsidiary and not an affiliate, but will become an
affiliate if the restructuring proposed by KCPL is approved.
The Commission convened the on-the-record presentation as
scheduled on July 5, 2001. All of the parties appeared except for the
Missouri Joint Municipal Electric Utility Commission, which was excused.
The Commissioners directed extensive questioning to KCPL.
On July 6, 2001, Great Plains Power, Inc. (GPP), entered its
appearance in this case. On July 9, 2001, KCPL filed its First Amended
Stipulation and Agreement. The First Amended Stipulation and Agreement
differs from the original Stipulation and Agreement in only two respects:
it adds GPP as a signatory and Section 9, relating to Combustion Turbines,
has been largely rewritten. Like the original Stipulation and Agreement,
the First Amended Stipulation and Agreement is not unanimous. It was
executed only by KCPL, GPE, GPP, Staff, and the Office of the Public
Counsel.
Also on July 9, Staff filed its Suggestions in Support of the
First Amended Stipulation and Agreement. On July 10, 2001, KCPL filed its
Motion for Expedited Treatment of the Approval of the First Amended
Stipulation and Agreement. Therein, counsel for KCPL advises the Commission
that he has been authorized by all parties except UtiliCorp and Empire
District Electric Company to state on their behalf "that they will not
request any hearings in this matter." KCPL prays that the Commission will
act on its application no later than July 12, 2001, so that the proposed
transaction may close on August 8, 2001, and public trading in the stocks
of GPE may commence on August 9, 2001. Finally, on July 10, Intervenors
Empire District Electric Company and UtiliCorp United, Inc., filed their
pleadings stating that they have no objection to either the Motion for
Expedited Treatment of the Approval of the First Amended Stipulation and
Agreement or the First Amended Stipulation and Agreement. Both intervenors
advised the Commission that they did not seek a hearing in this matter.[2]
__________________
[2] At the hearing on July 5, counsel for Intervenors Empire and UtiliCorp
repeatedly assured the Commission on behalf of his clients that they
had no objection to the Stipulation and Agreement.
On July 12, 2001, the Commission again considered this matter at
its regularly scheduled Agenda session. The Commission again determined to
set an on-the-record presentation, which it did by Order and Notice issued
on July 17. KCPL also moved for a second on-the-record presentation on July
13.
The second on-the-record presentation took place as scheduled on
July 27, 2001.
Findings of Fact:
- ----------------
KCPL is a vertically integrated public utility which generates,
transmits and sells electrical energy at retail in the state of Missouri to
some 230,000 residential customers and some 30,100 commercial customers.
KCPL is regulated by this Commission, as well as by agencies of the state
of Kansas and of the United States.
KCPL seeks approval from the Commission to restructure itself as a
holding company with a single tier of operating companies. At the
conclusion of the proposed reorganization, KCPL will be one of those
operating companies. KCPL will still be a vertically integrated public
utility. The reorganization will have no effect on the tax revenues of any
Missouri political subdivision.
KCPL owns two subsidiaries, KLT, Inc. (KLT), and GPP. KLT invests
in competitive, high-growth businesses, including telecommunications, gas
production and development and energy services. GPP is a competitive,
wholesale generator. KLT and GPP are not regulated by this Commission. GPP
is, however, subject to regulation by the Federal Energy Regulatory
Commission (FERC).
Specifically, KCPL proposes to form a new subsidiary, Great Plains
Energy (GPE), which will in turn form a subsidiary, NewCo. KCPL will then
merge into NewCo, with KCPL surviving. Each share of KCPL's preferred and
common stock will convert into a share of GPE's preferred or common stock.
KCPL will then pass ownership of its two other subsidiaries to GPE by
dividend. The result will be a publicly traded holding company, GPE, with
three wholly owned subsidiaries: KCPL, KTL and GPP. KCPL will not transfer
any of its generating assets in the course of the proposed reorganization
and its services to its Missouri customers will be unaffected. In addition
to approval by this Commission, KCPL seeks approval from the Kansas
Corporations Commission, FERC, the Nuclear Regulatory Commission (NRC), and
the Federal Communications Commission (FCC). Additionally, KCPL will file a
registration with the Securities and Exchange Commission (SEC).
Upon completion of the proposed restructuring and registration
with the SEC, GPE will become subject to the Public Utility Holding Company
Act (PUHCA). The First Amended Stipulation and Agreement contains
contractual provisions that reflect many of the protections contained in
PUHCA. Thus, should PUHCA be repealed, these protections will still be
imposed on GPE, GPP and KCPL by the First Amended Stipulation and
Agreement. PUHCA favors the use of service companies by affiliated
corporations and KCPL anticipates that a service company subsidiary will
eventually be formed by GPE. The allocation of costs between KCPL and its
affiliates will be governed by a Cost Allocation Manual (CAM).
Both of the Stipulations and Agreements filed in this case contain
the same conditions imposed in Cases Nos. EM-97-515 and EM-96-149, which
involved Missouri utilities which became subsidiaries of registered holding
companies. These conditions are intended to protect the Missouri customers
of such utilities. The conditions relate to such matters as access to books
and records, affiliate transactions, and the creation of a service company.
The Stipulations and Agreements also contain provisions relating to
surveillance reports, the CAM, transaction costs, and combustion turbines,
among others.
In January of 2001, KCPL entered into a binding memorandum of
understanding with General Electric Company under which KCPL may lease or
purchase up to five combustion turbine generation units. Each of these
units has a generating capacity of 77 MW. These turbines will not be
completed until 2003. If the proposed reorganization is approved, KCPL
anticipates seeking Commission approval to transfer its rights under the
memorandum of understanding to GPP. KCPL anticipates that it will need an
additional 231 MW of generation capacity in the next three years, that is,
the generating capacity of three of the five combustion turbines. KCPL
currently purchases less than five percent of its energy needs on the open
market.
If the proposed reorganization is approved, KCPL may enter into a
cost-based purchase supply agreement with GPP to acquire this additional
capacity. Such a cost-based purchase supply agreement would provide power
at a cost to ratepayers identical to costs under traditional
cost-of-service based rates. The cost of power generated by a combustion
turbine owned by GPP would be essentially identical to the cost of power
generated by a combustion turbine owned directly by KCPL. KCPL, GPE and GPP
further stipulated, at the on-the-record presentation on July 5, 2001, that
they will not form a marketing subsidiary. KCPL also stated that its
principal purpose in seeking to reorganize is to position itself for an
anticipated deregulated environment in the future.
At the second on-the-record presentation, GPP stated that it is
also exploring the possibility of building a 500 MW to 900 MW coal-fired,
base-load generating plant near Weston Bend on the Missouri River. If
built, this plant would generate power for sale on the open market. KCPL
does not presently anticipate any need to use the output of this plant to
meet the needs of its customers. This project is presently in a very early
stage and the proposed plant may never be built at all.
Staff supports the First Amended Stipulation and Agreement and
recommends that the Commission approve it. Staff states, in particular,
that it contains additional and more specific protections relating to
financial matters than the Stipulations and Agreements approved in Cases
Nos. EM-97-515 and EM-96-149. Staff states its position that the proposed
restructuring is not detrimental to the public interest. The Office of the
Public Counsel is a signatory of the Stipulation and Agreement and also
supports it. At both hearings, the Office of the Public Counsel stated that
the Stipulation and Agreement contains adequate safeguards for ratepayers.
Conclusions of Law:
- ------------------
Based on the facts found herein, the Commission makes the
following conclusions of law.
Jurisdiction
KCPL is an "electrical corporation" and a "public utility" within
the intendments of Section 386.020, (15) and (42), RSMo 2000, and is thus
subject to the jurisdiction of this Commission pursuant to Chapters 386 and
393, RSMo 2000.
No party has requested a hearing in this case. The requirement for
a hearing is met when the opportunity for hearing has been provided and no
proper party has requested the opportunity to present evidence.[3] Since no
one has requested a hearing, the Commission may determine this case based
on the pleadings.
The Non-unanimous Stipulation and Agreement
Pursuant to Commission rule, a non-unanimous stipulation and
agreement may be deemed unanimous if no party requests a hearing within
seven days of its filing.[4] A failure to timely request a hearing
constitutes full waiver of the right to a hearing.[5] With respect to the
First Amended Stipulation and Agreement at issue here, all of the parties
have either signed it or affirmatively acted to notify the Commission that
they would not request a hearing. Therefore, the Commission will deem the
First Amended Stipulation and Agreement filed in this matter to be
unanimous.
____________________
[3] State ex rel. Rex Deffenderfer Enterprises, Inc. v. Public Service
Commission, 776 S.W.2d 494, 496 (Mo. App. W.D. 1989).
[4] Commission Rule 4 CSR 240-2.115.1 and 3.
[5] Commission Rule 4 CSR 240-2.115.3.
Mergers, Transfers and Stock Ownership
KCPL seeks authority to reorganize as described above under
Section 393.190, RSMo 2000. That statute provides that a Missouri electric
corporation may not transfer or encumber any part of its system without
Commission approval.[6] Likewise, it may not merge with another corporation
without permission from the Commission.[7] A regulated utility cannot
lawfully acquire another regulated utility without Commission approval.[8]
Commission approval is also necessary for any corporation other than a
utility to own more than ten percent of the total capital stock of a public
utility.[9]
The Missouri Supreme Court, in State ex rel. City of St. Louis v.
Public Service Commission, stated that, in considering such cases, the
Commission must be mindful that the right to transfer or encumber property
is an important incident of the ownership thereof and that a property owner
should be allowed to do such things unless it would be detrimental to the
public.[10] The same standard is applied to proposed mergers and
reorganizations. The Missouri Court of Appeals has stated that "[t]he
obvious purpose of [Section 393.190] is to ensure the continuation of
adequate service to the public served by the utility."[11] This is the
standard by which public detriment is to be measured in such cases. The
Commission notes that it is unwilling to deny private, investor-owned
companies an important incident of the ownership of property unless there
is compelling evidence on the record showing that a public detriment is
likely to occur.[12]
The Commission reads State ex rel. City of St. Louis v. Public
Service Commission to require a direct and present public detriment.[13]
For example, where the sale of all or part of a utility's system was at
issue, the Commission considered such factors as the applicant's experience
in the utility industry; the applicant's history of service difficulties;
the applicant's general financial health and ability to absorb the proposed
transaction; and the applicant's ability to operate the asset safely and
efficiently.[14] In the present case, there is no evidence of a direct and
present public detriment in the record and the parties believe that none is
posed by the proposed reorganization. If the reorganization is approved,
KCPL will still be a vertically-integrated public utility subject to
regulation by this Commission; it will still serve the same customers with
the same system pursuant to its existing tariffs.
_______________________
[6] Section 393.190.1, RSMo 2000.
[7] Id.
[8] Section 393.190.2, RSMo 2000.
[9] Id.
[10] State ex rel. City of St. Louis v. Public Service Commission, 335
Mo. 446, 459, 73 5.W.2d 383, 400 (Mo. banc 1934).
[11] State ex rel. Fee Fee Trunk Sewer, Inc. v. Litz, 596 S.W.2d 466, 468
(Mo. App., E.D. 1980).
[12] In the Matter of the Joint Application of Missouri Gas Company et al.,
3 Mo. P.S.C.3d 218, 221 (1994).
Based on its consideration of the record before it, the Commission
concludes that the proposed reorganization is not detrimental to the public
interest and should be approved. Specifically, this includes approval for
KCPL to merge with NewCo, approval for GPE to own more than ten percent of
KCPL, and approval, to the extent that approval is needed, for KCPL to
transfer ownership of KTL and GPP to GPE.
Issuance of Stocks and Bonds
KCPL also seeks authority under Section 393.200, RSMo 2000. That
section provides that a public utility may not issue stocks, bonds, or
other evidence of indebtedness without prior Commission approval.[15]
Commission approval is conditioned on a finding that the money thereby
acquired is reasonably required for the purposes set out in the
Commission's order.[16] Permissible purposes include property acquisition,
construction and maintenance, improvements, and the retirement of
obligations.[17]
______________________
[13] Supra, 335 Mo. at 459, 73 S.W.2d at 400.
[14] See In the Matter of the Joint Application of Missouri Gas Energy
et al., Case No. GM-84-252 (Report and Order, issued October 12, 1994)
3 Mo. P.S.C.3d 216, 220.
[15] Section 393.200.1, RSMo 2000.
[16] Id.
[17] Id.
[18] Section 393.210, RSMo 2000.
[19] Section 393.260.1, RSMo 2000.
[20] Section 393.260.2 and 3. RSMo 2000.
Based on its consideration of the record before it, the Commission
concludes that the stock transactions proposed by KCPL are reasonably
necessary for the purpose of the proposed reorganization and should be
approved.
Dividends
KCPL also seeks authority under Section 392.210, RSMo 2000. That
statute provides in pertinent part that an electrical corporation may not
declare a dividend without Commission authority.[18] Based on the record
before it, the Commission determines that KCPL's proposal to transfer KTL
and GPP to GPE via a dividend is reasonable and that the same will not have
a detrimental effect on the public. Therefore, the Commission should
approve the proposed dividend.
Reorganization
KCPL also seeks authority under Section 393.250, RSMo 2000. That
statute provides that the reorganization of an electrical corporation is
subject to Commission "supervision and control" and may not be had without
authorization from the Commission.[19] It also empowers the Commission to
set the capitalization amount of the reorganized entity.[20]
Based on its consideration of the record before it, the Commission
concludes that the proposed reorganization is reasonable and is not a
detriment to the public interest. Therefore, it should be approved.
IT IS THEREFORE ORDERED:
1. That the Motion for Expedited Treatment of the Approval of the
First Amended Stipulation and Agreement, filed by Kansas City Power & Light
Company on July 10, 2001, is granted.
2. That the application filed by Kansas City Power & Light Company
on February 26, 2001, is approved.
3. That the First Amended Stipulation and Agreement, filed on July
9, 2001, is deemed to be unanimous. Further, the Commission finds the First
Amended Stipulation and Agreement to be reasonable and approves the same.
Kansas City Power & Light Company, Great Plains Energy, Inc., and Great
Plains Power, Inc., are directed to comply with its provisions.
4. That Kansas City Power & Light Company is authorized to
reorganize as described in its application referred to in Ordered Paragraph
2, above, subject to the conditions contained in the First Amended
Stipulation and Agreement referred to in Ordered Paragraph 3, above. Kansas
City Power & Light Company is authorized to take all necessary and lawful
actions to effect and consummate the reorganization herein approved.
5. That nothing in this order shall be considered a finding by the
Commission of the value for ratemaking purposes of the properties,
transactions and expenditures herein involved. The Commission reserves the
right to consider any ratemaking treatment to be afforded the properties,
transactions and expenditures herein involved in a later proceeding.
6. That this order shall be effective on August 10, 2001.
7. That this case may be closed on August 11, 2001.
BY THE COMMISSION
/s/ Dale Hardy Roberts
Dale Hardy Roberts
Secretary/Chief Regulatory Law Judge
( S E A L )
Simmons, Ch., Murray, and Lumpe,
CC., concur.
Gaw, C., dissents, with dissenting
opinion to follow.
Thompson, Deputy Chief Regulatory Law Judge
STATE OF MISSOURI
OFFICE OF THE PUBLIC SERVICE COMMISSION
I have compared the preceding copy with the original on file in
this office and I do hereby certify the same to be a true copy therefrom
and the whole thereof.
WITNESS my hand and seal of the Public Service Commission, at
Jefferson City, Missouri, this 31st day of July 2001.
/s/ Dale Hardy Roberts
Dale Hardy Roberts
Secretary/Chief Regulatory Law Judge
EXHIBIT D-3
THE STATE CORPORATION COMMISSION
OF THE STATE OF KANSAS
Before Commissioners: John Wine, Chair
Cynthia L. Claus
Brian J. Moline
In the Matter of the Application of Kansas )
City Power & Light Company for an ) Docket No. 01-KCP-708-MIS
Order Authorizing Its Plan to Reorganize )
Itself Into a Holding Company Structure. )
ORDER APPROVING UNANIMOUS STIPULATION AND AGREEMENT
AND AUTHORIZING REORGANIZATION
The above-captioned matter comes before the State Corporation Commission
of the State of Kansas ("Commission") upon Stipulation and Agreement
("Stipulation") filed by Commission Staff ("Staff"), Kansas City Power &
Light Company ("KCPL") and the Citizens' Utility Ratepayer Board ("CURB").
For the reasons discussed below, the Commission approves KCPL's application
subject to the terms of the Stipulation and additional conditions imposed
herein.
I. BACKGROUND
1. On February 26, 2001, KCPL filed its Application, in accordance with
Kansas law and the Public Utility Holding Company Act of 1935 (15 U.S.C.
ss. 79 et seq.) ("PUHCA"), seeking Commission approval of its proposal for
reorganization into a registered holding company structure. KCPL asserts
this change is necessary because of increased competition in capital and
energy markets, which has required traditional utilities to diversify their
business operations and, in particular, to invest in businesses offering
higher growth opportunities for its shareholders. KCPL states that the
proposed reorganization will facilitate the efforts of its affiliated
competitive businesses to access more markets and will allow them to pursue
business opportunities for its shareholders with greater flexibility and
speed. Application, at 6. KCPL did not identify any ratepayer benefits that
would result from its proposed reorganization of its corporate structure.
2. KCPL states in its Application that the proposed reorganization will
not involve the transfer of any of its assets, including generating assets,
from KCPL to affiliates and that KCPL will remain a vertically integrated
utility subject to the jurisdiction of the Commission. KCPL pledges that
the Commission will continue to have the statutory authority to ensure that
KCPL's retail electric customers receive electric service that is safe,
reliable and reasonably priced. Application, p. 7.
3. The Application, at p. 11, contains the following representations:
KCPL is a Missouri corporation in good standing in all respects,
with its principal office and place of business located at 1201
Walnut, Kansas City, Missouri 64106. KCPL is engaged in the
generation, transmission, distribution, and sale of electric
energy and power in areas of eastern Kansas certificated to it by
the Commission. KCPL is an "electric public utility" and "public
utility" as those terms are defined in K.S.A. 66-101a and K.S.A.
66-104, respectively, and, as such, is subject to the jurisdiction
of the Commission as provided by law. KCPL provides electric
service to approximately 183,400 residential customers and
approximately 23,000 commercial and industrial customers in
Kansas. . .
4. The Application, at p. 1, contains a summary of the restructuring
plan, which describes the current KCPL as a vertically integrated electric
utility company. The summary provides the following general description of
the expected holding company structure after the proposed changes:
After the reorganization, a new holding company ("HoldCo") will be
the sole owner of three subsidiary companies, all of which already
exist - i.e. KCPL, KLT, Inc. ("KLT") and Great Plains Power
("GPP"). (Footnote 1 omitted.) KCPL will remain a vertically
integrated electric utility subject to this Commission's
jurisdiction and will not transfer any of its generating assets as
a part of this proposed restructuring plan. KLT will continue to
invest in competitive, high-growth businesses. GPP will pursue
opportunities in the competitive wholesale generation market.
KCPL further describes the restructuring process to include several
intermediary steps. These steps, which include the formation of a new
subsidiary, "NewCo", with which KCPL will merge with KCPL being the
surviving corporation, are generally described on page three of the
Application.
5. In its Application, KCPL requests the Commission to issue its Order:
a. Granting KCPL the authority to restructure and reorganize itself
as proposed;
b. Granting KCPL the authority to merge with NewCo with KCPL being
the surviving corporation;
c. Granting KCPL the authority to convert its stock to HoldCo stock,
as described in the Application; and
d. Granting such other relief as may be deemed necessary and
appropriate to accomplish the purposes of the Application and to consummate
the restructuring transaction, as described in the Application.
II. DISCUSSION
6. On April 30, 2001, a unanimous Stipulation was filed with the
Commission. This Stipulation was signed by representatives of KCPL as well
as the two other parties to this docket, Staff and CURB. No other party has
sought to intervene and there have been no objections to this Stipulation.
7. A duly-noticed hearing was held Monday, June 25, 2001. KCPL appeared
by Bernie J. Beaudoin, Chairman, President and Chief Executive Officer;
Chris Giles, Director of Regulatory Affairs; William G. Riggins, General
Counsel; and Glenda L. Cafer, Attorney-At-Law. Staff appeared by Joseph
White, Director of Utilities; Larry Holloway, Chief of Energy Operations;
Adam Gatewood, Financial Analyst; and W. Thomas Stratton, Jr., Assistant
General Counsel. CURB appeared by Walker Hendrix, Consumer Counsel.
8. At the June 25 hearing, counsel for Staff and KCPL informed the
Commission of agreed corrections and changes to the Stipulation, which the
parties requested the Commission to adopt as part of its order approving
the Stipulation, as follows:
a. Deletion of the following words from the end of paragraph II.
F.12, at page 13 of the Stipulation: ". . . and the Commission has found
that no detriment to the public would result from the transaction."
b. At paragraph II.B.5 at page 8 of the Stipulation, last sentence,
change the page number from 3 to 5 and the section number from 3.1.2 to
4.1.2. In the following paragraph, paragraph 6, at the end of the last
sentence, add as part of that last sentence, after "Commission": ". . .,
with the exception that on page 3, section 3.1.2 of the Stipulation, the
reference to 'twenty (20) days after the contract is filed' shall be
amended to 'thirty (30) days after the contract is filed.'"
These changes, as set forth in KCPL Exhibit No. 1, were intended to reform
the Contingent Jurisdictional Stipulation that was incorporated into the
Stipulation presented to the Commission at the hearing.
9. At the June 25 hearing, following the recitation of desired
corrections or changes, KCPL witnesses Beaudoin and Giles testified in
support of the Stipulation. Staff witness Holloway generally summarized the
Stipulation and described Staff's reasons for supporting its approval, as
more specifically described in his June 22, 2001 Memorandum to the
Commissioners ("Memorandum", attached hereto as Exhibit 1), which was
distributed to the Commission and parties in advance of the hearing. The
witnesses also answered questions regarding the Stipulation that were posed
by the Commission and CURB.
10. Upon the suggestion of Commissioner Moline made during the course of
the hearing, one additional change to the Contingent Jurisdictional
Stipulation, Exhibit 5 to the Application, was agreed by the parties, as
follows: Insert "Commission Staff ('Staff')" prior to "the Citizen's (sic)
Utility. . ." atss.1.2, page 1 of 6. It was acknowledged that the omission
in the original was an oversight. A similar omission occurs in the
Stipulation at paragraph II. B. 4, first line, which could be addressed by
the inclusion of "Staff" after "Commission."
11. At the conclusion of the hearing, the matter of approval of the
Stipulation was taken under advisement by the Commission. Subsequently,
Staff was informed by KCPL regarding an amendment to a stipulation, similar
to the Stipulation pending here, that is pending approval by the Missouri
Public Service Commission. Among the amendments to that stipulation is the
following additional language: "Any purchase supply agreement between KCPL
and GPP and/or any GPE affiliate will be submitted by KCPL for review and
approval by the Commission."
III. FINDINGS AND CONCLUSIONS
12. The Commission has full power, authority and jurisdiction to
supervise and control electric public utilities conducting operations
within the state of Kansas, and is further empowered to do all things
necessary and convenient for the exercise of such authority and
jurisdiction. K.S.A. 66-101 et seq. In addition, as applied to the
regulation of electric public utilities, the provisions of K.S.A. 66-101 et
seq. and all grants of power, authority and jurisdiction therein made to
the Commission shall be liberally construed, and all incidental powers
necessary to carry the act into effect are expressly granted to and
conferred upon the Commission. K.S.A. 66-101g; Grindsted Products, Inc. v.
Kansas City Power & Light Co., 21 Kan.App.2d 435, 443, 901 P.2d 20 (1995).
13. An electric public utility is required under K.S.A. 66-101b to carry
out the mandate of its certificate to provide efficient and sufficient
service at just and reasonable rates. The Commission has the jurisdiction
and authority to investigate, on its own initiative, any act or practice of
an electric public utility that affects its ability to provide efficient
and sufficient service at just and reasonable rates, and to substitute such
act or practice after investigation and hearing under K.S.A. 2000 Supp.
66-101d. Further, the Commission has the clear authority under K.S.A.
66-101h to "examine and inspect the condition of each electric public
utility" and the "manner of its conduct and its management with reference
to the public safety and convenience." Finally, the Commission has
jurisdiction to investigate any transaction that constitutes a "contract or
agreement with reference to or affecting" the certificate of convenience
pursuant to K.S.A. 2000 Supp. 66- 136.
14. KCPL is a certificated electric public utility subject to the
jurisdiction of the Commission, which has jurisdiction to hear and make
determinations regarding this Application pursuant to K.S.A. 66-101b, 66-
101d and 66-136. The Commission finds that notice of the Commission's June
25, 2001 hearing regarding the proposed Stipulation was proper.
15. The Commission further finds that KCPL presented itself, at the time
of filing of its Application, as a financially sound utility, with no
history of failed unregulated investments. KCPL has been forthright with
the Commission by filing its Application seeking the Commission's approval
of its proposed reorganization and in its conduct since the filing of the
Application. KCPL has offered many assurances of its intention to remain
focused on its central mission of providing efficient and sufficient
service to its ratepayers at just and reasonable rates. These assurances
have been provided in KCPL's Application, by its agreements incorporated in
the Stipulation, and by its witnesses and counsel at the hearing, and this
Order is based primarily on these assurances. Further, under KCPL's
reorganization plan, the capital structure of the utility business will
change; however, no currently-held assets, and in particular, no generation
assets, will be transferred from the utility business to any affiliate and
the financial integrity of the utility business does not appear to be
compromised. Finally under KCPL's reorganization plan, the Commission has
continuing jurisdiction over KCPL's retail rates, including review of
KCPL's decisions to enter into purchased power agreements or build new
generation and affiliate transactions covered by the Kansas Holding Company
Act, K.S.A. 66-1401 et seq. Because of the Commission's continuing
jurisdiction, the protections provided in the Stipulation and the
conditions set forth herein are sufficient to ensure that the financial
viability of the utility business will remain in place. The Commission
recognizes that there is a risk of federal preemption related to the
approval of KCPL's reorganization plan. The Commission believes that the
risk is diminished for two reasons: (i) current prevailing law supports
state jurisdiction over affiliate transactions and (ii) KCPL's commitment
to not challenge the Commission's jurisdiction.
16. As stated in Larry W. Holloway's June 22, 2001 Memorandum to the
Commission, the Stipulation:
a. Contains provisions that assure the Staff and CURB will have, on
an ongoing basis, access to information;
b. Contains several provisions relating to reporting of important
financial information;
c. Contains numerous provisions intended to ensure the ongoing
financial integrity of the electric utility;
d. Requires the filing of a Cost Allocation Manual, containing
negotiated modifications and enhancements, by a set time; and
e. Contains the current KCPL management's promise to not challenge
the Commission's jurisdiction to review affiliate contracts and
provides a procedural framework for that review.
17. With the treatment of affiliate contracts required to be filed at
the SEC, the Commission finds that another correction is necessary to the
Contingent Jurisdictional Stipulation. The first sentence at paragraph
3.1.2 should be corrected by inserting the "or upon" after the word
"during" and before the phrase "the expiration of the Review Period."
18. The Commission finds that KCPL should be allowed to restructure and
reorganize in the manner proposed in the Stipulation, subject to conditions
and limitations set forth in this Order. The Commission recognizes that
KCPL's restructuring proposal is responsive to federal restructuring
initiatives and that it is appropriate to allow KCPL to proceed with its
reorganization in that context. The Commission notes that KCPL will need to
meet the public interest standard, including an affirmative showing of
ratepayer benefits, for any subsequent merger or reorganization. The
Commission also remains concerned about affiliate transactions, (See Docket
No. 01-WERE-949-GIE), and the Commission finds that additional conditions
beyond the assurances provided in the Stipulation are necessary and
appropriate to ensure that KCPL's ability to provide retail electric
service under its certificate of convenience will not be adversely affected
by the reorganization. These additional conditions are set forth below in
the order paragraphs.
19. Accordingly, the Commission concludes that the Stipulation, which
has been unanimously approved by the parties, and the Application should be
approved, subject to the additional conditions set forth in this Order.
IT IS, THEREFORE, BY THE COMMISSION ORDERED:
(A) The Application of KCPL, to the extent that it serves as the
basis for the Stipulation and this Order approving the
Stipulation, is hereby approved, subject to the conditions set
forth in this Order.
(B) The Stipulation of the parties is approved, as modified as
follows:
1. Deletion of the following words from the end of paragraph
II.F.12 of the Stipulation: ". . . and the Commission has
found that no detriment to the public would result from
the transaction."
2. Change the page number from 3 to 5 in the Stipulation,
paragraph II.B.5, last sentence, and the section number
from 3.1.2 to 4.1.2. In the following paragraph,
paragraph 6, at the end of the last sentence, add as part
of that last sentence, after "Commission": ". . ., with
the exception that on page 3, section 3.1.2 of the
Stipulation, the reference to 'twenty (20) days after the
contract is filed' shall be amended to 'thirty (30) days
after the contract is filed.'"
3. Insert "Commission Staff ('Staff')" prior to "the
Citizen's (sic) Utility. . ." atss.1.2 of the Contingent
Jurisdictional Stipulation, Exhibit 5 to the Application.
Insert "Staff" after "Commission" at Stipulation,
paragraph II. B. 4, first line.
4. Insert "or upon" in the first sentence of paragraph 3.1.2
of the Contingent Jurisdictional Stipulation, Exhibit 5
to the Application, after the word "during" and before
the phrase "expiration of the Review Period."
5. To the extent that the Stipulation or Contingent
Jurisdictional Stipulation provides for information,
documents or other data to be furnished to the Commission
or Staff, such information, documents or data shall be
filed with the Commission and a copy served upon the
Commission's Director of Utilities. Such information,
documents or data shall be marked and identified with the
docket number of the present proceeding.
6. The parties must file with the Commission reformed copies
of the Stipulation and Contingent Jurisdictional
Stipulation, reflecting the modifications and corrections
noted herein, within 18 days from the date of this order.
(C) The following additional requirements are ordered for KCPL and
any successor entity:
1. The ability of KCPL to provide efficient and sufficient
service at just and reasonable rates shall not be
diminished. In particular, KCPL and its affiliates shall
not enter into transactions that negatively impact on the
regulated electric company's ability to provide efficient
and sufficient service at just and reasonable rates, or
that could impair the financial viability of the
regulated electric company. KCPL shall maintain service
quality and reliability at acceptable levels and continue
to comply with the Commission's quality of service
regulations. KCPL shall maintain employee safety at
acceptable levels.
2. All purchase supply agreements between KCPL and GPP
and/or any GPE affiliate must be submitted in advance by
KCPL for review and approval by the Commission before
becoming effective. The Commission's authority to apply
"prudence" and "used and useful" test to determine
whether costs of particular wholesale purchase agreements
should be included in retail rates shall remain
unaffected.
3. While the Commission is not requiring in this Order that
all affiliate contracts be filed with the Commission for
its prior approval before the effective date of such
contracts, the Commission retains the right to reconsider
whether additional filing requirements are necessary to
protect the public interest. The Commission previously
announced in Docket No. 01-WERE- 436-RTS that a generic
investigation will be opened to consider affiliate
transactions. KCPL shall comply with any rules or
regulations that result from that investigation. All SEC
filings shall be filed with the Commission.
4. After the consummation of the transactions contemplated
in the Stipulation, KCPL, the surviving corporation of
KCPL's merger with NewCo, shall remain a wholly-owned
subsidiary of HoldCo. No capital stock of KCPL shall be
offered or sold to any third party without prior
Commission approval.
5. After the consummation of the transactions contemplated
in the Stipulation, KCPL shall not transfer any assets to
any third party outside the ordinary course of business
without prior Commission approval.
(D) The following requests for authorization by KCPL are approved,
subject to the foregoing conditions, to the extent such
authorizations are necessitated by the Stipulation:
1. KCPL is granted the authority to restructure and
reorganize itself;
2. KCPL is granted the authority to merge with NewCo, with
KCPL being the surviving corporation;
3. KCPL is granted the authority to convert its stock to
HoldCo stock, as described in the Application; and
4. KCPL is granted such other relief as may be deemed
necessary and appropriate to consummate the restructuring
transaction(s), as described in the Stipulation.
(E) Any party may file a Petition for Reconsideration of this Order
within fifteen days of the date this order is served. If service
is by mail, service is complete upon mailing and three days may
be added to the above time frame.
(F) The Commission retains jurisdiction over the subject matter and
the parties for the purpose of entering such further order or
orders as it may deem necessary.
BY THE COMMISSION IT IS SO ORDERED.
Wine, Chr.; Claus, Com.; Moline, Com.
Dated: AUG 07 2001
Order Mailed
August 8 2001
/s/ Jeffrey S. Wagamann
---------------------------------
JEFFREY S. WAGAMAN
EXECUTIVE DIRECTOR
EXHIBIT D-4
UNITED STATES OF AMERICA
NUCLEAR REGULATORY COMMISSION
In the Matter of )
)
KANSAS CITY POWER & LIGHT COMPANY ) Docket No. 50-482
)
(Wolf Creek Generating Station) )
)
ORDER APPROVING APPLICATION REGARDING PROPOSED CORPORATE
RESTRUCTURING
I.
Kansas City Power & Light Company (KCPL) holds a 47 percent
ownership interest in Wolf Creek Generating Station (WCGS) and in
connection therewith is a holder of Facility Operating License No. NPF-42.
The facility is located in Coffey County, Kansas. The other co-owner
licensees for WCGS are Kansas Gas & Electric Company (KGE) (with a 47
percent share of WCGS), and Kansas Electric Power Cooperative, Inc. (KEPCo)
(with a 6 percent share.) Wolf Creek Nuclear Operating Corporation (WCNOC)
is the licensed operator of WCGS, and KCPL also owns a 47 percent interest
in WCNOC, with KGE and KEPCo owning 47 percent and 6 percent interests in
WCNOC, respectively. KCPL, as well as KGE and KEPCo, hold possession-only
licenses.
II.
Pursuant to Section 184 of the Atomic Energy Act of 1954, as
amended, and 10 CFR 50.80, KCPL filed an application dated February 20,
2001, which was supplemented by submittals dated February 27, March 5,
March 8, March 28, and May 4, 2001, from counsel for KCPL, requesting
approval of the indirect transfer of the WCGS license, to the extent such
would result from the proposed restructuring of KCPL. As stated in the
application, the proposed restructuring encompasses the formation by KCPL
of a new holding company as yet unnamed ("HoldingCo"). Upon the proposed
restructuring, KCPL will cease to be publicly-traded and become a
wholly-owned subsidiary of HoldingCo, but will retain ownership of its
regulated electric power generation, transmission, and distribution assets,
including its interests in WCGS and WCNOC. No direct transfer of the
license to HoldingCo or otherwise is being proposed. WCNOC would remain as
the managing agent for the joint owner licensees (KCPL, KGE, and KEPCo) of
the facility and would continue to have exclusive responsibility for the
management, operation, and maintenance of WCGS as the non-owner operator
licensee. The application does not propose a change in the rights,
obligations, or interests of the licensees of WCGS. In addition, no
physical changes to WCGS or operational changes are being proposed.
KCPL stated that it and HoldingCo will be able to respond more
effectively to increased competition in the energy industry and pursue
pending unregulated electric generation ventures as a result of the new
corporate structure.
Notice of the application and an opportunity for hearing was
published in the Federal Register on May 2, 2001 (66 FR 22019). No written
comments or hearing requests were received.
Under 10 CFR 50.80, no license shall be transferred, directly or
indirectly, through transfer of control of the license, unless the
Commission gives its consent in writing. Upon review of the information
provided by KCPL in its application, the supplements thereto, and other
information before the Commission, the NRC staff has determined that the
proposed restructuring will not affect the qualifications of KCPL or WCNOC
as holders of the license referenced above and that the indirect transfer
of the license, to the extent effected by the proposed restructuring of
KCPL, is otherwise consistent with applicable provisions of law,
regulations, and orders issued by the Commission, subject to the conditions
set forth herein. These findings are supported by a safety evaluation dated
June 1, 2001.
III.
Accordingly, pursuant to Sections 161b, 161i, 161o, and 184 of the
Atomic Energy Act of 1954, as amended, 42 USC ss.ss. 2201(b), 2201(i),
2201(o), and 2234; and 10 CFR 50.80, IT IS HEREBY ORDERED that the
application regarding the proposed restructuring of KCPL and indirect
license transfer is approved, subject to the following conditions:
(1) KCPL shall provide the Director of the Office of Nuclear Reactor
Regulation a copy of any application, at the time it is filed, to
transfer (excluding grants of security interests or liens) from
KCPL to its proposed parent, or to any other affiliated company,
facilities for the production, transmission, or distribution of
electric energy having a depreciated book value exceeding 10
percent (10%) of KCPL's consolidated net utility plant as recorded
on KCPL's books of account.
(2) Should the proposed restructuring of KCPL not be completed by June
1, 2002, this Order shall become null and void, provided, however,
upon application and for good cause shown, such date may be
extended.
This Order is effective upon issuance.
For further details with respect to this action, see the license
transfer application filed by KCPL dated February 20, 2001, and the
supplemental submittals dated February 27, March 5, March 8, March 28, and
May 4, 2001, from counsel for KCPL, and the safety evaluation dated June 1,
2001, which are available for public inspection at the Commission's Public
Document Room located at One White Flint North, 11555 Rockville Pike (first
floor), Rockville, Maryland, and accessible electronically through the
ADAMS Public Electronic Reading Room link at the NRC Web site
(http://www.nrc.gov).
Dated at Rockville, Maryland, this first day of June 2001.
FOR THE NUCLEAR REGULATORY COMMISSION
Jon R. Johnson, Acting Director
Office of Nuclear Reactor Regulation