State regulators approve Westar, Great Plains Energy $15B merger

Dive Brief:

The Kansas Corporation Commission (KCC) approved the merger between neighboring utilities Westar Energy and Great Plains Energy, the parent company of Kansas City Power & Light (KCP&L), on Thursday. Earlier that day, the Missouri Public Service Commission also approved the "stock-for-stock" merger.
The deal is two years in the making, as the KCC unanimously rejected Great Plains Energy's $12.2 billion acquisition of Westar last year. The utilities revised the merger agreement to meet the regulators' recommendations, combining to create a new company with an equity value of approximately $15 billion.
Westar and Great Plains Energy expect the merger to become final in early June, according to a joint press statement. The new entity will be named Evergy, serving 1 million customers in Kansas and nearly 600,000 customers in Missouri.

Dive Insight:

The KCC rejected the previous merger attempt in part due to a $4.9 billion acquisition premium Great Plains proposed to pay for Westar.

Consumer advocates said that price was far too high, but the revised "stock-for-stock" merger will not involve an acquisition premium or acquisition debt. The Federal Energy Regulatory Commission approved the deal in February.

Once the merger closes, Kansas customers will also receive $75 million in bill credits over the next five years and Missouri customers will receive $29 million in bill credits upfront.

The deal also calls for the new company to fix base rates for customers for up to five years in Kansas, after currently pending rate reviews are resolved. Westar has a current proposal before the KCC to increase rates by $52 million. A Westar spokesperson told the Lawrence Journal-World that the merger would effectively cut that by more than half.

"The increased scale and efficiency will deliver savings not possible without the merger," Terry Bassham, chairman and CEO of Great Plains Energy, said in a statement.

Bassham will serve as president and CEO of Evergy, while Westar's CEO, Mark Ruelle, will become non-executive chairman of the new company board. Evergy's subsidiaries will not change their names and will maintain their current headquarters. Shareholders of both companies approved the deal last November.

Nearly one-third of the power from the new entity will come from renewable energy, according to a joint press statement calling Evergy "one of the largest wind energy providers in the nation." In order to provide emissions-free energy to nearly half of its customers, Evergy said it will prioritize development of additional renewable energy and energy efficiency programs.