SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule
240.14a-12
KANSAS CITY POWER & LIGHT COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
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Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
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applies:
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####
<PAGE>
[KCPL logo]
[Western Resources logo]
CREATE WESTAR ENERGY
Leading the electric energy industry
Increasing Shareholder Value
Building Growth
Enhancing Customer Service
GUIDE TO THE TRANSACTION
<PAGE>
TABLE OF CONTENTS
Restructured Merger Agreement .......... p 4
Westar Energy .......... p 9
Benefits of the Merger .......... p 14
Regulatory Matters .......... p 20
Financial Data .......... p 24
Why Approve Merger .......... p 30
<PAGE>
CERTAIN FORWARD LOOKING INFORMATION
This presentation contains certain forward-looking statements and
analyses within the meaning of Section 27A of the Securities Act
of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Forward-looking statements are statements other than
historical information or statements of current condition. Some
forward-looking statements may be identified by use of terms such
as "believes," "anticipates," "intends," ` estimates" or
"expects." These forward-looking statements relate to the plans
and objectives of Western Resources and Westar Energy for future
operations. In light of the risks and uncertainties inherent in
all future projections, the inclusion of forward-looking
statements in this presentation should not be considered a
representation by Western Resources or Westar Energy or any other
person that the objectives or plans of Western Resources or
Westar Energy will by achieved. Numerous factors could cause
Western Resources' or Westar Energy's actual results to differ
materially from those in the forward-looking statements,
including the following: (i) the occurrence of catastrophic
events with a frequency or severity exceeding Western Resources'
or Westar Energy's estimates; (ii) a unforeseeable material
decrease in the level of demand for electrical services; (iii)
loss of services of any one of Western Resources' or Westar
Energy's executive officers; (iv) the passage of federal or
state regulation curtailing the permissible activities of
electric providers; (v) future economic conditions; (vi)
developments in the legislative, regulatory and competitive
environments in which Western Resources and Westar Energy
operate; (vii) the success of diversified efforts; or (viii)
other circumstances affecting anticipated operations, revenues
and costs, including investments in natural gas and security
businesses. The foregoing review of factors should not be
construed as exhaustive. Western Resources and Westar Energy
undertake no obligation to release publicly the results of any
future revisions it may make to forward-looking statements to
reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
3
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RESTRUCTURED MERGER AGREEMENT
4
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RESTRUCTURED MERGER AGREEMENT
- - Formation of new electric company -Westar Energy
- - KCPL shareholders receive stock in Westar as well as Western
Resources
- - Westar -
- One million electric customers
- $8.2 billion assets
- 8,000 MW of electric generation resources
- Innovative value-added products and services
5
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TERMS OF THE AGREEMENT
- - KCPL's and WR's electric operations transferred to Westar
- - $800 million of KCPL debt and $1.9 million of WR debt
transferred to Westar
- - KLT Inc. transferred to Western
- - For each KCPL share, shareholders will receive:
- Between $21.50 and $26.50 of Western Resources
stock pursuant to a collar mechanism
- One share of Westar Energy, estimated by KCPL and
Western Resources to be work approximately $10-$12
- - KCPL shareholders will own 19.1% of Westar and approximately
35%* of Western Resources
*Based on current Western Resources stock price
6
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PRE-TRANSACTION:
[flow chart]
WR KCPL
(KPL) (Regulated
Utility)
[down arrow [down arrow] [down arrow
to Unregulated to KGE] to KLT Inc.]
Businesses]
Unregulated KGE KLT Inc.
Businesses
7
<PAGE>
TRANSACTION:
[flow chart]
WR Shareholders KCPL Shareholders
65% 35%*
[down arrow [down arrow
to Western to Western
Resources box] Resources box]
Western 19.9%
Resources [down arrow
to Westar Energy
KCPL
KGE
KPL box]
100% 80.1%
[down arrow [down arrow [down arrow
to Monitored to KLT Inc. from Western
Energy box] Resources box
Security, Gas to Westar Energy
& Other Businesses box] KCPL
KGE
KPL box]
Monitored KLT Inc. Westar Energy
Security, Gas KCPL
& Other KGE
Businesses KPL
*Approximate percent based on current Western Resources stock price
8
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WESTAR ENERGY
9
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OUR VISION FOR WESTAR
- - Leading the electric utility industry
- - Increasing shareholder value
- - Building growth
- - Enhancing customer service
10
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ELECTRIC STRATEGY - GROW THE BUSINESS
Westar plans to grow the business include:
- Expanding geographic footprint - grow customer base and
generation
- Continuing to be a low-cost energy provider
- Reducing costs further through reorganization and
economies of scale
11
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WESTAR ENERGY - LONG-TERM OUTLOOK
Westar Energy's longer term outlook
- Super-regional competitor
- Strong marketing presence
- Competitive cost profile
- 20,000 megawatts of generation
12
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MANAGEMENT AND BOARD
WESTAR ENERGY
- - John E. Hayes Jr.- Chairman of the Board
- - Drue Jennings - Chief Executive Officer
- - Board - 6 designated by Western Resources
4 selected from the KCPL Board
13
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BENEFITS OF THE MERGER
14
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STRATEGIC MERGER
- - Three established, successful utilities are uniting to create a
larger utility better positioned to serve customers' needs in a
competitive marketplace
- - By combining KCPL, KGE and KPL `s synergies of size, resources
and talent, Westar Energy should quickly become a leader in the
transformed electric utility industry
- - KCPL and Western share a common vision of creating value for
shareowners through a diversified portfolio
- - This unique and innovative transaction allows shareholders to
reap the benefits of a regulated electric company while also
becoming shareholders in Western
15
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BENEFITS OF THE MERGER
Western Resources and KCPL believe the merger offers significant
strategic and financial benefits to each company including:
- - Significant potential synergies and cost savings
- - Share price premium for KCPL shareholders
- - Increased opportunities for expansion into unregulated
products markets and diverse geographic markets
- - Greater financial strength for the combined entities
- - Concentration of electric utility operations into a single
entity focusing on that line of business
16
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OPERATIONAL AND STRUCTURAL BENEFITS
- - OPERATIONAL COORDINATION - efficient integration of all
aspects of combined electric utility operations
- - NONREGULATED BUSINESS OPPORTUNITIES - continued growth from
complementary businesses of KCPL and WR. The combined
customer bases provide more opportunities for growth
- - FINANCIALLY STRONGER COMPANY AND A LARGER SERVICE TERRITORY -
enhanced flexibility to deal with new industry developments
- - ECONOMIC DEVELOPMENT OPPORTUNITIES - concentration of
economic development programs and activities which would enhance
the ability of the combined company to attract or retain potential
customers or industry groups
- - POTENTIAL SYNERGIES AND COST SAVINGS - see next page
17
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ANTICIPATED COST SAVINGS
Cost savings are estimated at $905 million over the first 10 years and
consist of the following:
GENERATION
- Integration of dispatching and production operations
- Avoidance or deferral of future capital expenditures
- Integration of generation and technical support functions
PURCHASING ECONOMIES
- Streamlining of inventories and purchasing economies
CORPORATE AND ADMINISTRATIVE
- Integration of
- Facilities
- Corporate management and administrative functions
- Corporate programs and expenditures
18
<PAGE>
MERGER SAVINGS, NET OF COSTS TO ACHIEVE
[Pie chart/graph depicting the following data:]
Year Savings
1999 $14
2000 $55
2001 $62
2002 $73
2003 $81
2004 $92
2005 $96
2006 $102
2007 $125
2008 $135
2009 $70
Note: Amounts in millions. Assumes savings begin in mid-1999
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REGULATORY MATTERS
20
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REGULATORY MATTERS
- - Significant rate reductions recently have been implemented
or agreed to for KCPL, KGE and KPL in both Missouri and Kansas
in anticipation of a merger
- - No additional rate reductions are proposed
- - A mechanism to share merger savings with customers has been
proposed -- depends on the amount of savings actually achieved
and upon Westar's earnings
- - Acquisition premium estimated at $1.074 billion -- $886
amortization by Westar over 40 years has been proposed (and
excluded from cost of service)
21
<PAGE>
MERGER SHARING MECHANISM
[table depicting the following data:]
Regulatory Customer/
Merger Savings ROE Threshold Shareholder Split
- --------------------- ------------- -----------------
GRID 1
< $16 MM > 13.5% 50/50
GRID 2
> 16 MM but > 13.5% 50/50
< = $32 MM > 14.0% 40/60
GRID 3
> $32 MM but > 13.5% 50/50
< = $48 MM > 14.0% 40/60
> 14.5% 30/70
GRID 4
> $48 MM > 13.5% 50/50
> 14.0% 40/60
> 14.5% 30/70
> 15.0% 20/80
22
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WESTERN RESOURCES/KCPL/ONEOK
COMBINED REGULATED SERVICE TERRITORY
- - With completion of KCPL and ONEOK transactions, the company
will rank
- 33rd* nationally among electric companies
- 8th** nationally among natural gas distribution
companies
- - Contiguous service territories
- - All electric operations are interconnected through five 345
KV lines
* Based on retail electric revenues
** Based on customer count
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<PAGE>
FINANCIAL DATA
- - Collar
- - Pro Forma Financial Information
- - Dividend Policy
24
<PAGE>
COLLAR
KCPL shareholders:
- - Will receive $23.50 per share of WR stock if WR stock is
between $38.28 and $47.00*
- - Could obtain conversion ratios above and below this range
indentified in merger agreement - see next slide
- - Are protected by a Walk-away Right if WR's stock falls below
$29.78
*Aggregate of the average of the high and low sales prices of
Western Resources Common Stock on each of the twenty consecutive
NYSE trading days ending the tenth NYSE trading day immediately
preceding the closing date, dividend by twenty.
25
<PAGE>
CONSIDERATION PER KCPL SHARE IN WESTERN RESOURCES STOCK
Note 1: Mutual walk-away right at Western Resources price of below
$29.78
Note 2: If the Western Resources Index Price is greater than $58.46,
the conversion ratio will be fixed at 0.449 provided that if
0.449 multiplied by the Western Resources Index Price exceeds
$30, the conversion ratio will mean the quotient obtained by
dividing $30 by the Western Resources Index Price
[a line graph depicting the Conversion Ratio and implied value of
consideration in Western Resources Stock per KCPL share using the
following information as provided in the Company's Form S-4 and
proxy statement filed with the SEC on June 9 and 10, 1998:
The Conversion Ratio is the quotient (rounded to the nearest
1/100,000) determined by dividing $23.50 by the Western Resources
Index Price (as defined below); provided, however, that if the
Western Resources Index Price (i) is greater than $58.46, the
Conversion Ratio shall be fixed at 0.449, provided that if 0.449
multiplied by the Western Resources Index Price exceeds $30.00,
the Conversion Ratio shall mean the quotient (rounded to the
nearest 1/100,000) obtained by dividing $30.00 by the Western
Resources Index Price, (ii) is greater than $55.03 but less than
or equal to $58.46, the Conversion Ratio shall mean the quotient
(rounded to the nearest 1/100,000) obtained by dividing $26.25 by
the Western Resources Index Price, (iii) is greater than $52.41
but less than equal to $55.03, the Conversion Ratio shall be
fixed at 0.477, (iv) is greater than $50.00 but less than or
equal to $52.41, the Conversion Ratio shall mean the quotient
(rounded to the nearest 1/100,000) determined by dividing $25.00
by the Western Resources Index Price, (v) is greater than $47.00
but less than or equal to $50.00, the Conversion Ratio shall be
fixed at 0.500, (vi) is greater than $35.01 but less than or
equal to $38.27, the Conversion Ratio shall be fixed at 0.614,
(vii) is greater than $29.78 but less than or equal to $35.01,
the Conversion Ratio shall mean the quotient (rounded to the
nearest 1/100,000) obtained by dividing $21.50 by the Western
Resources Index price or (viii) is less than or equal to $29.78,
the Conversion Ratio shall be fixed at 0.722. The term "Western
Resources Index Price" means the aggregate of the average of the
high and low sales prices of Western Resources Common Stock (as
reported on the New York Stock Exchange (the "NYSE") Composite
Transactions reporting system as published in The Wall Street
Journal or, if not published therein, in another authoritative
source) on each of the twenty consecutive NYSE trading days
ending the tenth NYSE trading day immediately preceding the KGE
Effective Time, divided by twenty.]
Illustrative Western Resources stock Price (Implied Exchange Ratio See
Notes 1 and 2 above)
26
<PAGE>
TOTAL CONSIDERATION PER KCPL SHARE IN
WESTERN RESOURCES AND WESTAR ENERGY STOCK
NOTE 1: Mutual walk-away right at Western Resources price of below
$29.78)
NOTE 2: If the Western Resources Index Price is greater than $58.46,
the conversion ratio will be fixed at 0.449 provided that if
0.449 multiplied by the Western Resources Index Price exceeds
$30, the conversion ratio will mean the quotient obtained by
dividing $30 by the Western Resources Index Price
NOTE 3: Estimated based on analysis by KCPL and Western Resources
assuming an expected initial dividend for the first year of
operation of Westar Energy of $0.72 and a normal electric utility
payout ratio of approximately 85%. Based on current market
conditions and comparable publicly traded electric utilities'
dividend yields and price-to-earnings ratios, KCPL and Western
Resources calculated an estimated value range of $10 to $12 per
share
[a line graph repeating the line graph on page 26 which indicated
the Conversion Ratio and implied value of consideration in
Western Resources Stock per KCPL share. In addition, a second
line was added depicting the total value of consideration per
KCPL share when a Westar Energy estimated stock value of $11 per
share is added to the Western Resources value. The Westar Energy
value was estimated based on analysis by KCPL and Western
resources assuming an expected initial dividend for the first
year of operation of Westar Energy of $0.72 and a normal electric
utility payout ratio of approximately 85%. Based on current
market conditions and comparable publicly traded electric
utilities' dividend yields and price-to-earnings ratios, KCPL and
Western resources calculated an estimated value range of $10 to
$12 per share.]
Illustrative Western Resources stock Price (Implied Exchange Ratio -
See Notes 1 and 2 above.)
27
<PAGE>
SELECTED FINANCIAL DATA
Year Ended December 31, 1997
---------------------------------------------------
Western Resources Pro Forma
Electric Business KCPL Westar Energy (1)
----------------------- -------- -------------
Sales $1,230 $896 $2,126
Oper income before tax $211 $234 $423
Total Assets $4,537 $3,058 $8,071 (2)
(1) Excludes any estimated cost savings or revenue enhancements
that may result from the merger
Reflects amortization of goodwill created through purchase
accounting
(2) Excludes KLT Inc. assets transferred to Western Resources
28
<PAGE>
DIVIDEND POLICY
- - KCPL's current annualized dividend at $1.62 per share*
- - Western Resources' current annualized dividend at $2.14 per share*
- - Westar's annual dividend targeted initially at $0.72
- - The combination of Westar and Western Resources stock will
provide a consistent stream of dividends from diversified sources
*Dividends for each company are declared and paid at the discretion
of each company's Board of Directors and are therefore subject to
change.
29
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WHY APPROVE MERGER
30
<PAGE>
WHY MERGER SHOULD BE APPROVED
- - Electric utility industry is being transformed by consumer
demand and legislative reforms leading to increased
competition --this merger will permit KCPL shareholders to
participate in a more diversified holding company (Western
Resources) and a regulated electric utility (Westar)
- - KCPL shareholders will have a high degree of flexibility in
holding investments in Western Resources and Westar
- - Both KCPL and Western Resources have a track record of
creating superior shareholder value
- - Significant synergies and cost savings are anticipated
- - KCPL shareholders can expect a share price premium and
consistent stream of dividends from diversified sources
31
<PAGE>
KCPL SHAREHOLDERS WILL PARTICIPATE IN
A MORE DIVERSIFIED HOLDING COMPANY
[Chart depicting Western Resources ownership in the following
companies after the completion of the transaction:]
KCPL shareholders will own
35%* of Western Resources, a
more diversified holding
company
Western Resources [centered in page]
Company % Owned Description of Business
- ---------------- ------- -------------------------------------
Westar Energy 80.1% Electricity $8.2 billion in assets
ONEOK 45% Natural Gas 8th largest in USA
Protection One 80% Monitored Security 2nd largest in USA
Wing Group 100% International power development
Other Regulated
Businesses 100% KLT Inc.
*Approximate percentage based on current Western Resources stock price
32
