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Don't Gamble on Empty Promises
Western's Proposal Doesn't Add Up
Western Resources is launching a hostile attach in a last-minute
attempt to derail the formation of a formidable competitor -- the
new KCPL/UtiliCorp company. KCPL believes Western is trying to
manipulate KCPL shareholders and our community into believing its
unrealistic assertions. Don't believe the hype.
Western's savings claims are inflated.
WESTERN SAYS: A Western/KCPL merger will result in savings of
more than $1 billion.
THE TRUTH IS: Western manipulated its data to create the
illusion of value. In a May 22, 1995 letter from
Western's Chairman to KCPL's Chairman, Western
estimated it could only save $500 million over 10
years in a merger with KCPL -- less than half of
what it is saying now.
Western's merger assumptions are unrealistic.
WESTERN SAYS: Regulatory authorities will allow Western to
retain 70% of its estimated merger benefits.
THE TRUTH IS: Western is under a Kansas Corporation Commission
(KCC) order that requires it to share savings "on
a 50/50 basis" with its ratepayers. Even if
Western were free of this legal requirement, it
still couldn't deliver since regulators typically
allow utilities to retain only 50% or less of
these savings. In its own SEC filings on the
UtiliCorp merger, KCPL's savings retention
estimate is a realistic 50%.
Western's promised dividend increases are questionable.
WESTERN SAYS: The dividend will be substantially increased.
THE TRUTH IS: In its official SEC filings Western admitted its
dividend could be significantly smaller than what
it is promising publicly. Since Western can't
achieve its forecast merger savings, keep most of
them, and avoid adverse regulatory treatment, KCPL
believes that Western cannot maintain its dividend
at the proposed level. In early April, Standard &
Poor's put Western on its CreditWatch list for
possible downgrade and Citizens' Utility Ratepayer
Board told Kansas regulators that it would
"request more significant rate reductions" than
those included in Western's latest proposal. Any
decrease in Western's rates or increase in the
cost of capital caused by a S&P downgrade would
undermine the value of its stock and inhibit
Western's ability to maintain even its current
dividend.
Western's stock value in any merger with KCPL is speculative.
WESTERN SAYS: Their proposal represents a current market value
of $28 per KCPL share.
THE TRUTH IS: The market value of Western's shares would be
heavily influenced by Western's ability to achieve
its inflated savings estimates and by betting that
regulators would allow it to retain a precedent-
setting 70% of such savings. The value of
Western's shares may also be affected adversely by
cuts in Western's utility rates, which are
currently under review. Western has demonstrated
concerns about a decline in its stock price. Its
proposal contains a "collar," a mechanism which
limits the risk to Western's shareholders of
subsequent stock price declines, placing it
squarely on the shoulders of KCPL shareholders.
You should know that, based upon April 23 closing
prices, if the market price of Western's common
stock declines by just 5.3%, the value of its
proposal falls below $28 per KCPL share. Any
further decline in Western's stock price will
result in even greater erosion of value.
Western's promise of "no layoffs" doesn't square with the truth.
WESTERN SAYS: There would be no layoffs in a KCPL/Western
merger.
THE TRUTH IS: In official KCC filings Western admits 531 "merger
related reductions." When Western merged with KGE
in 1992, it said there would be no layoffs. Yet
Western's hometown paper, The Wichita Eagle
reported "Western Resources now employs nearly
2,000 fewer people than KGE and KPL employed
before their merger" in 1992.
Don't Gamble On Western's Empty Promises
VOTE YES To The KCPL/UtiliCorp Merger on the WHITE Proxy Card
If you have any questions or need assistance in completing the
WHITE proxy card, please call our proxy solicitor, D. F. King &
Co., Inc., toll free, at 1-800-714-3312.
April 25, 1996
