TOPEKA Kansas utility regulators Wednesday rejected a proposed $12.2 billion buyout of Topeka-based Westar Energy, saying the proposed purchase price offered by Great Plains Energy, the parent company of Kansas City Power and Light, was “simply too high.”
In a 44-page order that was read aloud before a packed hearing room, the Kansas Corporation Commission said there was no credible evidence that the merger would have produced savings for customers, but instead would have weakened the combined company financially, reducing its credit rating to just above junk status.
“The Joint Applicants essentially ask the Commission to trust their raw estimates and projections,” the KCC said in its order. “The Commission cannot take that risk because if the Joint Applicants’ projections are overly rosy, the customers will face higher rates or decreased service.”
In August 2016, the KCC issued an order spelling out the standards by which it would judge the proposed merger. Those included the impact the merger would have on customers; the financial condition of the new, combined company; the environment; and public safety. The KCC also examined the impact it would have on the Kansas economy, and whether it would result in “labor dislocation that may be particularly harmful to local communities.”
Both companies had argued that the merger would result in substantial savings. But the KCC said in its order that those savings were “speculative” at best and that some of the savings could have come from the retirement of power plants in Kansas.
In its order, the KCC said the proposed merger failed to meet nearly all of the standards.
One of Westar’s plants is the Lawrence Energy Center, a 530-megawatt coal-fired plant north of the city that employs 85 people, according to Westar.
The commission also said it was concerned about Westar’s Topeka headquarters, where about 575 people are employed. The companies had said that office would remain open and serve as the Kansas operations center for the new company. But the commission said the proposal contained no assurance that the office would remain fully staffed.
Westar spokeswoman Gina Penzig said before the order was issued that both companies had already started the process of offering jobs in the new company to some of their employees, while others were being offered severance packages or early retirement. But she was not able to say at that time how many jobs would be affected by the merger.
After the order was issued, Penzig said Westar would need to review the order before deciding on its next move, which could involve an appeal to the Kansas Court of Appeals.
“We knew that the commission has had a lot to look at and a lot to consider with this transaction, so we’ll be looking through the order to see a little more detail on the concerns and what the path is going forward,” she said.
She also said part of the merger agreement requires Great Plains to make a $380 million cash payment to Westar if the merger was rejected.
KCP&L; spokesman Chuck Caisley said his company was disappointed by the decision, but that it too had to review the full order before deciding on its next step.
The KCC order noted that of the 28 parties that provided testimony in the case, the only ones supporting the merger were the two companies.
“It was the right decision,” said David Nickel, consumer counsel for the Citizens Utility Ratepayer Board, an agency that represents consumers in utility cases before the KCC.