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As filed with the Securities and Exchange Commission August 20, 2001
File No. 70-9861
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
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..........................................................35
Item 2. Fees, Commission and Expenses.............................................................36
Item 3. Applicable Statutory Provisions...........................................................37
A. General...............................................................................37
B. Compliance with Rules 53 and 54.......................................................37
Item 4. Regulatory Approvals......................................................................38
Item 5. Procedure.................................................................................39
Item 6. Exhibits and Financial Statements.........................................................39
A. Exhibits..............................................................................39
B. Financial Statements..................................................................40
Item 7. Information as to Environmental Effects...................................................41
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
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.
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1 KCPL also engages in limited gas brokering activities, as permitted under
Rule 58(b)(v).
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) The utility operations of
the Great Plains Energy system initially will be confined to the single
area consisting of KCPL's service territory. This system will be
interconnected through the KCPL transmission system and will be operated on
a coordinated basis. Upon expansion of operations of Great Plains Power
(described below), the utility operations of Great Plains Power may expand
beyond the KCPL service territory, but will continue to be operated on a
coordinated basis and will remain interconnected with the remainder of the
Great Plains Power system through participation in a regional transmission
organization ("RTO") or through a contract path, consistent with Commission
precedent. 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
opera tion, localized management and effectiveness of regulation and,
accordingly, is an "integrated" electric utility system within the meaning
of the Act.
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
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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 ....
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.(3) 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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3 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:(4) 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.(5)
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 and Home Service will
remain wholly-owned subsidiaries of KCPL or become direct or indirect
subsidiaries of Great Plains Energy, unless they are disposed of or
otherwise dissolved.(6) 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.
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4 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.
5 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.
6 KCPL recently dissolved WYMO Fuels, Inc., a Missouri corporation and
wholly-owned subsidiary established to acquire and develop coal
properties in Wyoming.
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.(7)
a. Home Service
Home Service is an intermediate holding company that owns a 100
percent interest in Worry Free Services, Inc., which assists residential
customers in obtaining financing primarily for heating and air conditioner
equipment,(8) and a 49.4 percent interest in R.S. Andrews Enterprise, Inc., a
consumer services company. 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.
b. KCPL Receivable
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.(9) 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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7 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).
8 See Rule 58(b)(1)(iv).
9 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
KCPL consolidates the majority of its nonutility business ventures
in KLT, an intermediate holding company.(10) KLT's subsidiaries, described
generally below and listed individually in Exhibit E-2, primarily engage in
energy-related services and natural gas development.(11)
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
holds interests in the following companies:(12)
o Custom Energy Holdings, LLC, an intermediate holding
company formed to own interests in Custom Energy, LLC
("Custom Energy") and Strategic Energy, LLC ("Strategic
Energy").(13)
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10 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).
11 KLT also wholly-owns Energetechs, Inc., which currently is inactive.
12 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.
13 The Commission has authorized registered holding companies to retain
intermediate holding companies in numerous cases. See, e.g., New
Century Energies, Holding Co. Act Release No. 27000 (Apr. 7, 1999).
o Custom Energy and its subsidiary, Custom Energy/M&E
Sales, LLC,(14) which design and install energy saving
technologies in, and offers performance contracts to,
commercial, government, and educa tional facilities in
the United States.(15)
o Strategic Energy, which provides power supply
coordination (includ ing energy marketing services), gas
management, energy consulting, and generation
optimization (such as scheduling and dispatching
generation) in the United States. Strategic Energy also
is a competi tive retail electricity provider in certain
states which have opened their retail electric markets.(16)
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14 Custom Energy's other subsidiary, CM2, LLC, is currently inactive.
15 See Rule 58(b)(1)(ii).
16 See Rule 58(b)(1)(v) and (vii).
17 See Rule 58(b)(ix).
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.17
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.(18)
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.(19) Investments in this
portfolio are made solely for the purpose of obtaining tax credits
and Applicants anticipate such such invest ments will be
liquidated as the terms of the relevant tax credits expire.(20)
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18 KLT Telecom filed an application to for exempt telecommunications com
pany status under Section 34 of PUHCA with the Federal Communications
Commission on June 12, 2001.
19 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 certain of the Puerto Rican investments will expire
during the fourth quarter 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 partner ships
with investments outside of the fifty states and the District of
Columbia.
20 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.(21)
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21 See, e.g., WPL Holdings, Inc., Holding Co. Act Release No. 26856
(Apr. 14, 1998) (permitting retention of venture capital and economic
development investments).
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.(22) 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.
d. Great Plains Power
KCPL recently created Great Plains Power, a wholly-owned subsid
iary, to hold interests in independent power plants ("IPPs") acquired after
the reorganization.(23) 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.
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.(24) 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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22 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.
23 Under Section 32 of the Act and rules thereunder, registered holding
compa nies are authorized to acquire interests in EWGs.
24 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 respectively.
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.(25) 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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25 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.(26) 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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26 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.(27)
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27 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.(28)
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28 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.(29) Applicants 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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29 The Commission has granted similar authority to another registered
holding company. See Entergy Corp., Holding Co. Act Release No. 27039
(June 22, 1999).
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(30) 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.(31)
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30 As used in this Application/Declaration, the term "Subsidiary" means
KCPL and the Nonutility Subsidiaries.
31 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").(32)
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32 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.(33)
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33 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).
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.(34) 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
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34 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).
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.
3. Intermediate Subsidiaries
Great Plains Energy proposes to acquire, directly or indirectly
through a Nonutility Subsidiary, the securities of one or more new
subsidiary companies ("Intermediate Subsidiaries") 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 (as authorized in this proceeding or in a separate
proceeding).(35) Great Plains Energy also requests author ity for
Intermediate Subsidiaries to provide management, administrative, project
development and operating services 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:
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35 KCPL does not hold an interest in any EWG or FUCO at this time.
(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 de scribed
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.
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.(36)
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,(37) 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
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36 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).
37 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.
interests in existing and future Nonutility Subsidiaries.(38) 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.
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.(39)
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38 The Commission has granted similar authority to another holding
company. See Entergy Corporation, Holding Co. Act Release No. 27039
(June 22, 1999).
39 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).
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.
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 administrative, management, technical,
legal and other support services to its subsidiaries for some years,
subject to regula tion by the MPSC and KCC. 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 overhead 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.
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 services, as
well as sell goods, to each other and to Great Plains Energy (as well as
services and goods of a substantially similar nature). The provision of
such services or sale of goods may be on a basis other than "cost,"
provided such pricing arrangements are consistent with applicable Missouri
and Kansas statutes and regulations. Reference is made to the form of
service agreement between KCPL and the Nonutility Subsidiaries attached at
Exhibit B-2.
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
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
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
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.
Item 5. Procedure
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 not later than August 17, 2001.
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.
Item 6. Exhibits and Financial Statements
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)
E-1 Map of KCPL service area*
E-2 Post-Reorganization Organizational Chart (Revised)
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
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. 3 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: August 20, 2001
- -------------------------------------
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: August 20, 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: August 20, 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: August 20, 2001
- ------------------------------------
Name: John J. DeStefano
Title: Vice President
KCPL RECEIVABLE CORPORATION
1201 Walnut Street
Kansas City, Missouri 64106
/s/ Andrea F. Bielsker Date: August 20, 2001
- -----------------------------------
Name: Andrea F. Bielsker
Title: President
EXHIBIT B-1
AGREEMENT AND PLAN OF MERGER
AMONG
KANSAS CITY POWER & LIGHT COMPANY,
GREAT PLAINS ENERGY INCORPORATED
AND
KC MERGER SUB INCORPORATED
DATED AS OF [ ]
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger
Agreement"), dated as of [ ], is among Kansas City Power & Light Company, a
Missouri corporation (the "Company"), Great Plains Energy Incorporated, a
Missouri corporation ("Holdings") and a direct, wholly owned subsidiary of
the Company, and KC Merger Sub Incorporated, a Missouri corporation
("Newco") and a direct, wholly owned subsidiary of Holdings.
R E C I T A L S:
WHEREAS, the Company's authorized capital stock consists
of (i) [ ] shares of common stock, no par value (the "Company Common
Stock"), of which, as of the date hereof, [ ] shares are issued and
outstanding and [no] shares were held in Company's treasury; (ii) [ ]
shares of 3.80% cumulative preferred stock, par value $100 per share (the
"Company 3.80% Preferred"), of which [ ] shares are outstanding on the date
hereof; (iii) [ ] shares of 4% cumulative preferred stock, par value $100
per share (the "Company 4% Preferred"), of which [ ] shares are outstanding
on the date hereof; (iv) [ ] shares of 4.50% cumulative preferred stock,
par value $100 per share (the "Company 4.50% Preferred"), of which [ ]
shares are outstanding on the date hereof; (v) [ ] shares of 4.20%
cumulative preferred stock, par value $100 per share (the "Company 4.20%
Preferred"), of which [ ] shares are outstanding on the date hereof; and
(vi) [ ] shares of 4.35% cumulative preferred stock, par value $100 per
share (the "Company 4.35% Preferred" and, together with the Company 3.80%
Preferred, the Company 4.50% Preferred and the Company 4.20% Preferred, but
excluding the Company 4% Preferred, the "Company Preferred"), of which [ ]
shares are outstanding on the date hereof; and
WHEREAS, as of the date hereof, Holdings' authorized
capital stock consists of (i) [ ] shares of common stock, no par value (the
"Holdings Common Stock"), of which, as of the date hereof, [ ] shares are
issued and outstanding and owned by the Company and no shares are held in
treasury, and (ii) [ ] shares of 3.80% cumulative preferred stock, par
value $100 per share (the "Holdings 3.80% Preferred"), of which no shares
are outstanding on the date hereof; (iii) [ ] shares of 4.50% cumulative
preferred stock, par value $100 per share (the "Holdings 4.50% Preferred"),
of which no shares are outstanding on the date hereof; (iv) [ ] shares of
4.20% cumulative preferred stock, par value $100 per share (the "Holdings
4.20% Preferred"), of which no shares are outstanding on the date hereof;
and (v) [ ] shares of 4.35% cumulative preferred stock, par value $100 per
share (the "Holdings 4.35% Preferred" and, together with the Holdings 3.80%
Preferred, the Holdings 4.50% Preferred and the Holdings 4.20% Preferred,
the "Holdings Preferred"), of which no shares are outstanding on the date
hereof; and
WHEREAS, as of the date hereof, Newco has an authorized
capital stock consisting of [ ] shares of common stock, no par value (the
"Newco Common Stock"), of which [ ] shares are issued and outstanding on
the date hereof and owned by Holdings; and
WHEREAS, the designations, rights and preferences, and
the qualifications, limitations and restrictions thereof, of the Holdings
Common Stock, the Holdings 3.80% Preferred, the Holdings 4.50% Preferred,
the Holdings 4.20% Preferred and the Holdings 4.35% Preferred, are the same
as those of the Company Common Stock, the Company 3.80% Preferred, the
Company 4.50% Preferred, the Company 4.20% Preferred and the Company 4.35%
Preferred, respectively; and
WHEREAS, no later than immediately prior to the Effective
Date (as defined below), the Company shall redeem all outstanding shares of
Company 4% Preferred; and
WHEREAS, the Articles of Incorporation of Holdings (the
"Holdings Charter") and the By-laws of Holdings (the "Holdings By-laws") in
effect immediately after the Effective Date (as hereinafter defined) will
contain provisions identical to the Restated Articles of Consolidation of
the Company (the "Company Charter") and By-laws of the Company (the
"Company By-laws") in effect immediately before the Effective Date (other
than with respect to matters excepted by Section 351.448.1(4) of the
Missouri General and Business Corporation Law (the "MGBCL")); and
WHEREAS, the directors and officers of the Company
immediately prior to the Merger (as hereinafter defined) will be the
directors and officers of Holdings as of the Effective Date; and
WHEREAS, Holdings and Newco are newly formed corporations
organized for the purpose of participating in the transactions herein
contemplated; and
WHEREAS, the Company desires to create a new holding
company structure by merging Newco with and into the Company, with the
Company continuing as the surviving corporation of such merger, and each
outstanding share (or any fraction thereof) of Company Common Stock, the
Company 3.80% Preferred, the Company 4.50% Preferred, the Company 4.20%
Preferred and the Company 4.35% Preferred, being converted in such merger
into a like number of shares of Holdings Common Stock, the Holdings 3.80%
Preferred, the Holdings 4.50% Preferred, the Holdings 4.20% Preferred and
the Holdings 4.35% Preferred, respectively, all in accordance with the
terms of this Merger Agreement (the "Merger"); and
WHEREAS, the Boards of Directors of Holdings and the
Company have approved this Merger Agreement and the Merger upon the terms
and subject to the conditions set forth in this Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained in this Merger Agreement, and intending
to be legally bound hereby, the Company, Holdings and Newco hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. In accordance with Section
351.448 of the MGBCL and subject to and upon the terms and conditions of
this Merger Agreement, Newco shall, on the Effective Date, be merged with
and into the Company, the separate corporate existence of Newco shall cease
and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 1.2 EFFECTIVE DATE. The parties shall file
articles of merger with respect to the Merger (the "Articles of Merger"),
executed in accordance with the relevant provisions of the MGBCL, and with
this Merger Agreement attached thereto, with the Secretary of State of the
State of Missouri, and shall make all other filings or recordings required
under the MGBCL to effectuate the Merger. The Merger shall become effective
upon the filing of the Articles of Merger with the Secretary of State of
the State of Missouri (the date of such filing shall hereinafter be
referred to as the "Effective Date").
SECTION 1.3 RESTATED ARTICLES OF INCORPORATION OF
SURVIVING CORPORATION. From and after the Effective Date, the Company's
Restated Articles of Incorporation, as in effect immediately prior to the
Effective Date, shall be the Restated Articles of Incorporation of the
Surviving Corporation, except with such changes as are permitted by Section
351.448.1(7) of the MGBCL (the "Surviving Corporation's Charter") until
thereafter amended as provided by law; provided, however, that, from and
after the Effective Date:
(a) Article Third thereof shall be amended so as to read
in its entirety as follows:
"The amount of authorized capital stock of the
Company is One Thousand (1,000) shares of Common Stock
without par value.
(i) Dividends. Subject to the limitations in
this ARTICLE THIRD set forth, dividends may be paid on
the Common Stock out of any funds legally available for
the purpose, when and as declared by the Board of
Directors.
(ii) Liquidation Rights. In the event of any
liquidation or dissolution of the Company, after there
shall have been paid to or set aside for the holders of
outstanding shares having superior liquidation
preferences to Common Stock the full preferential amounts
to which they are respectively entitled, the holders of
outstanding shares of Common Stock shall be entitled to
receive pro rata, according to the number of shares held
by each, the remaining assets of the Company available
for distribution.
(iii) Voting Rights. Except as set forth in this
ARTICLE THIRD or as by statute otherwise mandatorily
provided, the holders of the Common Stock shall
exclusively possess full voting powers for the election
of Directors and for all other purposes.
(iv) No Preemptive Rights. No holders of
outstanding shares of Common Stock shall have any
preemptive right to subscribe for or acquire any shares
of stock or any securities of any kind hereafter issued
by the Company.
(v) Consideration for Shares. Subject to
applicable law, the shares of the Company, now or
hereafter authorized, may be issued for such
consideration as may be fixed from time to time by the
Board of Directors. Subject to applicable law and to the
provisions of this ARTICLE THIRD, shares of the Company
issued and thereafter acquired by the Company may be
disposed of by the Company for such consideration as may
be fixed from time to time by the Board of Directors.
(vi) Crediting Consideration to Capital. The
entire consideration hereafter received upon the issuance
of shares of Common Stock without par value shall be
credited to capital, and this requirement may not be
eliminated or amended without the affirmative vote of
consent of the holders of two-thirds of the outstanding
Common Stock.
(b) A new Article Fourteenth shall be added thereto which
shall be and read in its entirety as follows:
"ARTICLE FOURTEENTH. Any act or transaction by
or involving the Company that requires for its adoption
pursuant to Chapter 351 of the Missouri General and
Business Corporation Law or these Restated Articles of
Incorporation the approval of the shareholders of the
Company shall, pursuant to Section 351.448 of the
Missouri General and Business Corporation Law, require,
in addition, the approval of the shareholders of Great
Plains Energy Incorporated, a Missouri corporation, or
any successor thereto by merger, by the same vote as is
required pursuant to Chapter 351 of the Missouri General
and Business Corporation Law or the Restated Articles of
Incorporation of the Company."
SECTION 1.4 BY-LAWS OF SURVIVING CORPORATION. From and
after the Effective Date, the By-laws of Newco, as in effect immediately
prior to the Effective Date, shall constitute the By-laws of the Surviving
Corporation until thereafter amended as provided therein or by applicable
law.
SECTION 1.5 DIRECTORS OF SURVIVING CORPORATION. The
directors of Newco in office immediately prior to the Effective Date shall
be the initial directors of the Surviving Corporation and will hold office
from the Effective Date until their successors are duly elected or
appointed and qualified in the manner provided in the Surviving
Corporation's Charter and By-laws, or as otherwise provided by law.
SECTION 1.6 OFFICERS OF SURVIVING CORPORATION. The
officers of Newco in office immediately prior to the Effective Date shall
be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their successors are duly elected or
appointed and qualified in the manner provided in the Surviving
Corporation's Charter and By-laws, or as otherwise provided by law.
SECTION 1.7 ADDITIONAL ACTIONS. Subject to the terms of
this Merger Agreement, the parties hereto shall take all such reasonable
and lawful action as may be necessary or appropriate in order to effectuate
the Merger. If, at any time after the Effective Date, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of either of Newco or the Company acquired
or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Merger
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of
Newco and the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of Newco
and the Company or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Merger Agreement.
SECTION 1.8 CONVERSION OF SECURITIES. On the Effective
Date, by virtue of the Merger and without any action on the part of
Holdings, Newco, the Company or the holder of any of the following
securities:
(a) Conversion of Company Common Stock. Each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Date shall be converted into and thereafter represent one duly
issued, fully paid and nonassessable share of Holdings Common Stock.
(b) Conversion of Company Common Stock in Treasury. Each
share of Company Common Stock issued but held by the Company in its
treasury immediately prior to the Effective Date shall be converted into
and thereafter represent one duly issued, fully paid and non-assessable
share of Holdings Common Stock held in such entity's treasury after the
Effective Date.
(c) Conversion of Company 3.80% Preferred. Each share of
Company 3.80% Preferred issued and outstanding immediately prior to the
Effective Date shall be converted into and thereafter represent one duly
issued, fully paid and nonassessable share of Holdings 3.80% Preferred.
(d) Conversion of Company 4.50% Preferred. Each share of
Company 4.50% Preferred issued and outstanding immediately prior to the
Effective Date shall be converted into and thereafter represent one duly
issued, fully paid and nonassessable share of Holdings 4.50% Preferred.
(e) Conversion of Company 4.20% Preferred. Each share of
Company 4.20% Preferred issued and outstanding immediately prior to the
Effective Date shall be converted into and thereafter represent one duly
issued, fully paid and nonassessable share of Holdings 4.20% Preferred.
(f) Conversion of Company 4.35% Preferred. Each share of
Company 4.35% Preferred issued and outstanding immediately prior to the
Effective Date shall be converted into and thereafter represent one duly
issued, fully paid and nonassessable share of Holdings 4.35% Preferred.
(g) Conversion of Capital Stock of Newco. Each share of
Newco Common Stock issued and outstanding immediately prior to the
Effective Date shall be converted into and thereafter represent one duly
issued, fully paid and nonassessable share of common stock, no par value,
of the Surviving Corporation.
(h) Cancellation of Capital Stock of Holdings. Each share
of Holdings Common Stock that is owned by the Company immediately prior to
the Merger shall automatically be cancelled and retired and shall cease to
exist.
(i) Rights of Certificate Holders. From and after the
Effective Date, holders of certificates formerly evidencing Company Common
Stock or Company Preferred shall cease to have any rights as shareholders
of the Company, except as provided by law; provided, however, that such
holders shall have the rights set forth in Section 1.10 herein.
SECTION 1.9 STOCK OPTIONS AND EQUITY-BASED AWARDS. (a) On
the Effective Date, automatically and without any action on the part of the
Company, Holdings, Newco or the holders of any options to acquire shares of
Company Common Stock (the "Company Stock Options"), or the holders of any
other equity-based award of the Company, (i) Holdings will assume each
Company Stock Option and each other equity-based award of the Company which
is outstanding immediately prior to the Effective Date, (ii) each such
Company Stock Option will become an option to purchase a number of shares
of Holdings Common Stock equal to the number of shares of Company Common
Stock issuable upon the exercise of such Company Stock Option, and
otherwise upon the same terms and conditions as such Company Stock Option
and (iii) each such other equity-based award of the Company will become a
similar equity-based award with respect to a number of shares of Holdings
Common Stock equal to the number of shares of Company Common Stock subject
to such equity-based award, and otherwise upon the same terms and
conditions as such equity-based award.
(b) Upon the consummation of the Merger, Holdings shall
as- sume sponsorship of and all obligations of the Company under the
Dividend Reinvestment and Direct Stock Purchase Plan and all employee
benefit plans of the Company, including but not limited to the Company's
Long-Term Incentive Plan, Long- and Short-Term Incentive Compensation Plan,
Supplemental Executive Retirement Plan and Nonqualified Deferred
Compensation Plan, and all retirement, medical, dental, long-term
disability, short-term disability, life insurance, flexible spending
account and any other such benefit plans and programs of the Company.
SECTION 1.10 NO SURRENDER OF CERTIFICATES. (a) Until
thereafter surrendered for transfer or exchange in the ordinary course,
each outstanding stock certificate that, immediately prior to the Effective
Date, evidenced Company Common Stock shall be deemed and treated for all
corporate purposes to evidence the ownership of the number of shares of
Holdings Common Stock into which such shares of Company Common Stock were
converted pursuant to the provisions of Section 1.8 (a) and (b) herein.
(b) Until thereafter surrendered for transfer or exchange
in the ordinary course, each outstanding stock certificate that,
immediately prior to the Effective Date, evidenced the Company 3.80%
Preferred, Company 4.50% Preferred, Company 4.20% Preferred or Company
4.35% Preferred, as the case may be, shall be deemed and treated for all
corporate purposes to evidence the ownership of the number of shares of the
Holdings 3.80% Preferred, Holdings 4.50% Preferred, Holdings 4.20%
Preferred or Holdings 4.35% Preferred, as the case may be, into which such
shares of Company Preferred were converted pursuant to the provisions of
Sections 1.8 (c), (d), (e) or (f) herein, as the case may be.
ARTICLE II
ACTIONS TO BE TAKEN IN
CONNECTION WITH THE MERGER
SECTION 2.1 LISTING OF CERTAIN HOLDINGS CAPITAL STOCK.
The Company shall use its reasonable efforts to cause the Holdings Common
Stock, Holdings 3.80% Preferred, Holdings 4.50% Preferred and Holdings
4.35% Preferred to be issued pursuant to the Merger to be approved for
listing on the New York Stock Exchange (the "NYSE") prior to the Effective
Date, subject to official notice of issuance.
SECTION 2.2 PROCUREMENT OF CUSIP NUMBERS. On or prior to
the Effective Date, Holdings will use reasonable efforts to procure a new
CUSIP number for the Holdings Common Stock, for each series of Holdings
Preferred and for any other securities which so require new CUSIP numbers
in connection with the Merger.
SECTION 2.3 APPLICATION FOR REGULATORY APPROVALS. Prior
to the Effective Date, the Company shall apply for, and use reasonable
efforts to obtain, the following regulatory approvals and orders (the
"Regulatory Approvals") for the Merger: (1) all necessary approvals from
the Kansas Corporation Commission under Chapter 66 of the Kansas Statutes
Annotated; (2) all necessary approvals from the Missouri Public Service
Corporation under Chapter 393 of the Missouri Revised Statutes; (3) all
necessary approvals from the Federal Energy Regulatory Commission under the
Federal Power Act; (4) all necessary approvals from the Nuclear Regulatory
Commission under the Atomic Energy Act; and (5) an order from the
Securities and Exchange Commission ("SEC"), in form and substance
reasonably acceptable to the Company, authorizing Holdings and its
subsidiaries to engage in such transactions subject to SEC jurisdiction
under the Public Utility Holding Company Act of 1935 ("PUHCA") as the
Company deems necessary for the normal operation of Holdings' utility
holding company system following Holdings' registration with the SEC under
Section 5 of PUHCA, including, but not limited to, financing transactions
subject to SEC jurisdiction under Sections 6 and 7 of PUHCA and
acquisitions subject to SEC jurisdiction under Sections 9 and 10 of PUHCA.
SECTION 2.4 REDEMPTION OF COMPANY 4% PREFERRED. No later
than immediately prior to the Effective Date, the Company shall redeem all
outstanding shares of Company 4% Preferred.
ARTICLE III
CONDITIONS OF MERGER
SECTION 3.1 CONDITIONS PRECEDENT. The obligations of the
parties to this Merger Agreement to consummate the Merger and the
transactions contemplated by this Merger Agreement shall be subject to
fulfillment or waiver by the parties hereto of each of the following
conditions:
(a) Prior to the Effective Date, the Holdings Common
Stock, Holdings 3.80% Preferred, Holdings 4.50% Preferred and Holdings
4.35% Preferred to be issued pursuant to the Merger shall have been
approved for listing, upon official notice of issuance, by the NYSE.
(b) On the Effective Date, Skadden, Arps, Slate, Meagher
& Flom LLP, special tax counsel to the Company, shall render an opinion to
the Board of Directors of the Company, in form and substance reasonably
satisfactory to the Company, on the basis of certain facts, representations
and assumptions set forth in such opinion, to the effect that for federal
income tax purposes (i) the Merger will qualify as an exchange described in
Section 351 of the Internal Revenue Code of 1986, as amended; (ii) no gain
or loss will be recognized by the shareholders of the Company upon receipt
of the Holdings Common Stock, Holdings 3.80% Preferred, Holdings 4.50%
Preferred, Holdings 4.20% Preferred or Holdings 4.35% Preferred as the case
may be, in exchange for their shares of Company Common Stock, Company 3.80%
Preferred, Company 4.50% Preferred, Company 4.20% Preferred or Company
Preferred 4.35%, as the case may be, pursuant to the Merger; (iii) the tax
basis of the shares of Holdings Common Stock, Holdings 3.80% Preferred,
Holdings 4.50% Preferred, Holdings 4.20% Preferred or Holdings 4.35%
Preferred, as the case may be, to be received by the Company's shareholders
pursuant to the Merger Agreement will be the same as their tax basis in the
Company Common Stock, Company 3.80% Preferred, Company 4.50% Preferred,
Company 4.20% Preferred or Company 4.35% Preferred, as the case may be,
converted or exchanged therefor; and (iv) the holding period of the
Holdings Common Stock, Holdings 3.80% Preferred, Holdings 4.50% Preferred,
Holdings 4.20% Preferred or Holdings 4.35% Preferred, as the case may be,
to be received by each of the Company's shareholders pursuant to the Merger
Agreement will include the holding period of the Company Common Stock,
Company 3.80% Preferred, Company 4.50% Preferred, Company 4.20% Preferred
or Company 4.35% Preferred, as the case may be, converted or exchanged
therefor, provided that such Company Common Stock, Company 3.80% Preferred,
Company 4.50% Preferred, Company 4.20% Preferred or Company 4.35%
Preferred, as the case may be, is held as a capital asset in the hands of
such shareholder at the time of the Merger. In rendering the opinion, such
counsel may require and rely upon representations contained in certificates
of officers of Holdings and the Company.
(c) Prior to the Effective Date, no order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or
restraining order shall have been enacted, entered, promulgated or enforced
by any court or governmental or regulatory authority or instrumentality
which prohibits or makes illegal the consummation of the Merger or the
transactions contemplated hereby.
(d) Prior to the Effective Date, if necessary, the
Company shall have filed with the office of the Missouri Secretary of State
an amendment to the Holdings Charter to change the name of Holdings to a
name to be determined by the Company.
(e) The Company and Holdings shall have taken all
necessary corporate action to ensure that, immediately prior to the
Effective Date, the Holdings Charter (including with respect to authorized
capital stock) and the Holdings By-laws shall contain provisions identical
to the Company Charter and Company By-laws, respectively, in effect
immediately prior to the Effective Date (other than with respect to matters
excepted by Section 351.448.1(4) of the MGBCL).
(f) Prior to the Effective Date, the Regulatory Approvals
shall have been obtained, in form and substance satisfactory to the
parties, and shall be final and nonappealable.
(g) Prior to the Effective Date, all outstanding shares
of Company 4% Preferred shall have been redeemed by the Company.
ARTICLE IV
TERMINATION AND AMENDMENT
SECTION 4.1 TERMINATION. This Merger Agreement may be
terminated and the Merger contemplated hereby may be abandoned at any time
prior to the Effective Date by action of the Board of Directors of the
Company, Holdings or Newco if it is determined that for any reason the
completion of the transactions provided for herein would be inadvisable or
not in the best interest of such corporation or its shareholders. In the
event of such termination and abandonment, this Merger Agreement shall
become void and neither the Company, Holdings or Newco nor their respective
shareholders, directors or officers shall have any liability with respect
to such termination and abandonment.
SECTION 4.2 AMENDMENT. This Merger Agreement may be
supplemented, amended or modified by the mutual consent of the Boards of
Directors of the parties to this Merger Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1 GOVERNING LAW. THIS MERGER AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MISSOURI, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 5.2 BINDING EFFECT AND ASSIGNMENT. This Merger
Agreement shall be binding upon and inure to the benefit of the parties and
to their respective successors and assigns.
SECTION 5.3 THIRD PARTY BENEFICIARIES. This Merger
Agreement is not intended and shall not be construed to confer upon any
person, other than the parties hereto and their respective successors and
assigns, any rights or remedies hereunder.
SECTION 5.4 COUNTERPARTS. This Merger Agreement may be
executed in one or more counterparts, each of which when executed shall be
deemed to be an original but all of which shall constitute one and the same
agreement.
SECTION 5.5 ENTIRE MERGER AGREEMENT. This Merger
Agreement, including the documents and instruments referred to herein,
constitutes the entire agreement and supersedes all other prior agreements
and undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof.
IN WITNESS WHEREOF, Holdings, Newco and the Company have
caused this Merger Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
KANSAS CITY POWER & LIGHT
COMPANY
By:
--------------------------------
Name:
Title:
GREAT PLAINS ENERGY
INCORPORATED
By:
---------------------------------
Name:
Title:
KC MERGER SUB INCORPORATED
By:
--------------------------------
Name:
Title:
EXHIBIT E-2
Post-Reorganization Organizational Chart
[Graphic omitted]
Exhibit F-1
[Letterhead of Kansas City Power & Light]
William G. Riggins
General Counsel
(816) 556-2645
(816) 556-2787 (Fax)
August 2, 2001
Securities and Exchange Commission
Office of Public Utility Regulation
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Application/Declaration of Great Plain
Energy Incorporated
under the Public Utility Holding Company Act of 1935
(File No. 70-9861)
Ladies and Gentlemen:
This opinion is furnished to the Securities and Exchange
Commission (the "Commission") in connection with the
Application/Declaration on Form U-1 (File No. 70-9861), as amended (the
"Application"), under the Public Utility Holding Company Act of 1935, as
amended (the "Act"), filed jointly by Great Plains Energy Incorporated
("Great Plains Energy"), Kansas City Power & Light Company ("KCPL"), Great
Plains Power, Incorporated ("Great Plains"), KCPL Receivable Corporation
("KCPL Receivable"), and KLT Inc. ("KLT") (collectively, the "Appli
cants"). The Application requests an order of the Commission authorizing
and approving certain on-going financial activities of Great Plains Energy
and its subsidiaries, as well as related matters (collectively, the
"Proposed Transactions"), following the reorganization of KCPL and the
registration of Great Plains Energy as a holding company under the Act (the
"Reorganization").
I am General Counsel of KCPL and, as such, I am familiar
with the corporate proceedings taken by the Applicants in connection with
the Reorganization and the Proposed Transactions. I have examined originals
or copies, certified or otherwise identified to my satisfaction, of such
corporate records, certificates, and other documents as I have considered
relevant and necessary as a basis for the opinions expressed herein. In my
examination, I have assumed the genuineness of all signatures, the legal
capacity of all persons, the authenticity of all documents submitted to me
as originals, the conformity to original documents of documents submitted
to me as copies, and the authenticity of the originals of such latter
documents.
The opinions expressed below with respect to the Proposed
Transac tions are subject to and rely upon the following assumptions:
(a) Any regulatory approvals required with respect to the
Proposed Transactions shall have been obtained and shall remain in full
force and effect.
(b) The Proposed Transactions shall have been duly
authorized and approved, to the extent required by the applicable governing
corporate documents and applicable state laws and by the Board of Directors
of Great Plains Energy or of the appropriate Applicant, as the case may be.
(c) The Commission shall have duly entered an appropriate
order or orders with respect to the Proposed Transactions as described in
the Application, granting and permitting the Application to become
effective under the Act and the rules and regulations thereunder, and the
Proposed Transactions shall have been consummated in accordance with the
Application.
(d) Registration statements with respect to the shares of
Great Plains Energy common stock to be issued in connection with the
Proposed Transactions shall have become effective pursuant to the
Securities Act of 1933, as amended; no stop order shall have been entered
with respect thereon; and the issuance of shares of Great Plains Energy
common stock in connection with the Proposed Transactions shall have been
consummated in compliance with the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
(e) The parties shall have obtained all consents, waivers
and releases, if any, required for the Proposed Transactions under all
applicable governing corporate documents, contracts, agreements, debt
instruments, indentures, franchises, licenses and permits.
(f) No act or event other than as described herein shall
have occurred subsequent to the date hereof which would change the opinions
expressed above.
Based on the foregoing I am of the opinion that, in the
event the Proposed Transactions are consummated in accordance with the
Application.
1. All state laws applicable to the Proposed Transactions
will have been complied with;
2. Great Plains Energy and the other Applicants will be
validly existing as corporations under the laws of their respective states
of incorporation;
3. The equity securities to be issued by Great Plains Energy
in the Proposed Transactions will be validly issued, fully paid and
nonassessable, and the holders thereof will be entitled to the rights and
privileges appertaining thereto set forth in the applicable articles of
incorporation and related documents which define such rights and
privileges;
4. The various debt instruments and guarantees to be issued
by Great Plains Energy and certain other Applicants as part of the Proposed
Transactions will be valid and binding obligations of Great Plains Energy
and such other Applicant in accordance with the terms of such instruments
and guarantees, subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws from time to time in
effect affecting the enforceability of creditors' rights generally and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing) regardless of
whether considered in a proceeding in equity or at law; and,
5. The consummation of the Proposed Transactions will not
violate the legal rights of the holders of any securities issued by Great
Plains Energy, any other Applicant, or any associate company thereof.
This opinion is being delivered solely for the benefit of
the person to whom it is addressed. It may not be utilized by any other
person for any other purpose without my prior written consent. I hereby
consent to the use of this opinion as an exhibit to the Application.
Very truly yours,
/s/ William G. Riggins
William G. Riggins