Wichita Western Resources has agreed to sell its KGE headquarters to its home-security subsidiary Protection One for more than $1.8 million less than it once said the building was worth.
The sale takes place even as state regulators question whether Western is strengthening its non-regulated businesses, such as Protection One, at the expense of its regulated utilities. But Western officials say the sale will save KGE money in the long run.
Western has agreed to sell the seven-story building in downtown Wichita for $475,000, far less than the $2.3 million Western said it was worth last year. In its filing with the Kansas Corporation Commission Thursday, Western said the state appraisal of the building for tax purposes was $964,526.
Westar Energy, which is the new name of Western's KPL and KGE utilities, will lease two floors of the building from Protection One for $8 per square foot, according to the filing. Protection One, currently a tenant in the building, will expand its presence and occupy the other five floors.
David Wittig, Western's chief executive officer, said the sale price was the result of three independent appraisals of the building. Those appraisals were filed at the commission under seal as confidential business information.
Both the Citizens' Utility Ratepayer Board, which represents residential and small-business customers in utility issues, and KCC staff said they plan to analyze the agreement for the building sale in more detail.
Last July, the commission blocked a restructuring plan that would have split Western's utilities and unregulated businesses into separate publicly traded companies. Commissioners said they were concerned that utility consumers would be left paying off debt compiled by Protection One.
Western submitted a new plan in November that critics said was little different from the one the commission rejected. A hearing on the plan is scheduled for May 31.
The KCC also must determine if the sale agreement violates a commission order directing Western to take no action to increase the debt in its utility operation until the commission approves a financial plan for the company, KCC spokeswoman Rosemary Foreman said.
In its filing, Western denied that it violated the commission order. It said that selling or donating unneeded property is part of the "ordinary course of its business" and that the sale actually would decrease the utility's debt.
"Current estimates are that the utility will save approximately $1 million a year in operating expenses in the building," Wittig said. "More importantly for downtown Wichita, a new expanding business operation will move into a building that is only partially occupied at this time, and with it comes an injection of new economic life into the downtown area."