Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-707
KANSAS CITY POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0308720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Walnut, Kansas City, Missouri 64106-2124
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 556-2200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes (X) No ( )
The number of shares outstanding of the registrant's Common stock at
October 26, 2000, was 61,846,020 shares.
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Balance Sheets
September 30 December 31
2000 1999
(thousands)
ASSETS
Utility Plant, at Original Cost
Electric $3,789,428 $3,628,120
Less-accumulated depreciation 1,618,816 1,516,255
Net utility plant in service 2,170,612 2,111,865
Construction work in progress 276,854 158,616
Nuclear fuel, net of amortization of
$120,801 and $108,077 33,288 28,414
Total 2,480,754 2,298,895
Regulatory Asset - Recoverable Taxes 106,000 106,000
Investments and Nonutility Property 317,508 376,704
Current Assets
Cash and cash equivalents 18,948 13,073
Receivables 128,153 71,548
Equity securities 114,741 0
Fuel inventories, at average cost 19,758 22,589
Materials and supplies, at average cost 47,280 46,289
Deferred income taxes 4,316 2,751
Other 8,112 6,086
Total 341,308 162,336
Deferred Charges
Regulatory assets 26,059 31,908
Prepaid pension costs 61,957 0
Other deferred charges 27,813 14,299
Total 115,829 46,207
Total $3,361,399 $2,990,142
CAPITALIZATION AND LIABILITIES
Capitalization (see statements) $2,043,736 $1,739,590
Current Liabilities
Notes payable to banks 0 24,667
Commercial paper 222,125 214,032
Current maturities of long-term debt 73,957 128,858
Accounts payable 113,539 68,309
Accrued taxes 76,259 972
Accrued interest 8,911 15,418
Accrued payroll and vacations 24,338 20,102
Accrued refueling outage costs 11,069 7,056
Other 16,603 13,569
Total 546,801 492,983
Deferred Credits and Other Liabilities
Deferred income taxes 595,511 592,227
Deferred investment tax credits 50,980 54,333
Other 124,371 111,009
Total 770,862 757,569
Commitments and Contingencies (Note 6)
Total $3,361,399 $2,990,142
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Capitalization
September 30 December 31
2000 1999
(thousands)
Common Stock Equity
Common stock-150,000,000 shares authorized
without par value 61,908,726 shares issued,
stated value $ 449,697 $ 449,697
Retained earnings (see statements) 479,702 418,952
Accumulated other comprehensive loss
Unrealized loss on securities available
for sale 0 (2,337)
Capital stock premium and expense (1,668) (1,668)
Total 927,731 864,644
Cumulative Preferred Stock
$100 Par Value
3.80% - 100,000 shares issued 10,000 10,000
4.50% - 100,000 shares issued 10,000 10,000
4.20% - 70,000 shares issued 7,000 7,000
4.35% - 120,000 shares issued 12,000 12,000
$100 Par Value - Redeemable
4.00% 62 62
Total 39,062 39,062
Company-obligated Mandatorily Redeemable Preferred
Securities of a trust holding solely KCPL
Subordinated Debentures 150,000 150,000
Long-term Debt (excluding current maturities)
General Mortgage Bonds
Medium-Term Notes due 2001-08, 7.10% and
6.99% weighted-average rate 236,000 286,000
5.28%* Environmental Improvement Revenue
Refunding Bonds due 2012-23 158,768 158,768
Unsecured Medium-Term Notes
6.81%* due 2002 200,000 0
Environmental Improvement Revenue Refunding Bonds
5.83%* Series A & B due 2015 106,500 106,500
4.50% Series C due 2017 50,000 50,000
4.35% Series D due 2017 40,000 40,000
Subsidiary Obligations
Affordable Housing Notes due 2002-08, 8.28%
and 8.35% weighted-average rate 31,675 44,616
KLT Inc Bank Credit Agreement
7.76%* due 2003 104,000 0
Total 926,943 685,884
Total $2,043,736 $1,739,590
* Variable rate securities, weighted-average rate as of September 30, 2000.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income
Three Months Ended September 30 2000 1999
(thousands)
Electric Operating Revenues $ 324,378 $ 300,658
Operating Expenses
Operation
Fuel 54,149 41,397
Purchased power 42,942 53,397
Other 59,658 51,635
Maintenance 17,258 16,596
Depreciation 31,757 29,047
Income taxes 29,570 27,119
General taxes 27,340 27,418
Total 262,674 246,609
Electric Operating Income 61,704 54,049
Other Income and (Deductions)
Allowance for equity funds
used during construction 1,140 816
Miscellaneous income and
(deductions) - net 47,054 (12,368)
Income taxes (7,873) 11,663
Total 40,321 111
Income Before Interest Charges 102,025 54,160
Interest Charges
Long-term debt 16,805 12,754
Short-term debt 3,108 1,097
Mandatorily redeemable Preferred
Securities 3,113 3,113
Miscellaneous 943 659
Allowance for borrowed funds
used during construction (3,562) (920)
Total 20,407 16,703
Income before cumulative effect of
changes in accounting principles 81,618 37,457
Cumulative effect to January 1, 2000,
of changes in accounting principles,
net of income taxes (Note 1) 0 0
Net income 81,618 37,457
Preferred stock
dividend requirements 412 984
Earnings available for
common stock $ 81,206 $ 36,473
Average number of common
shares outstanding 61,846 61,898
Basic and diluted earnings per common
share before cumulative effect of $ 1.31 $ 0.59
changes in accounting principles
Cumulative effect to January 1, 2000,
of changes in accounting principles 0 0
Basic and diluted earnings
per common share $ 1.31 $ 0.59
Cash dividends per
common share $ 0.415 $ 0.415
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income
Year to Date September 30 2000 1999
(thousands)
Electric Operating Revenues $ 742,737 $ 708,339
Operating Expenses
Operation
Fuel 119,334 96,808
Purchased power 78,565 82,711
Other 158,842 145,856
Maintenance 55,775 47,386
Depreciation 91,923 88,544
Income taxes 48,829 54,767
General taxes 70,553 71,320
Total 623,821 587,392
Electric Operating Income 118,916 120,947
Other Income and (Deductions)
Allowance for equity funds
used during construction 3,090 2,502
Miscellaneous income and
(deductions) - net 28,192 (34,666)
Income taxes 15,510 36,337
Total 46,792 4,173
Income Before Interest Charges 165,708 125,120
Interest Charges
Long-term debt 45,544 39,009
Short-term debt 8,332 2,235
Mandatorily redeemable Preferred
Securities 9,338 9,338
Miscellaneous 2,243 2,387
Allowance for borrowed funds
used during construction (8,682) (2,327)
Total 56,775 50,642
Income before cumulative effect of
changes in accounting principles 108,933 74,478
Cumulative effect to January 1, 2000,
of changes in accounting principles,
net of income taxes (Note 1) 30,073 0
Net income 139,006 74,478
Preferred stock
dividend requirements 1,236 2,875
Earnings available for
common stock $ 137,770 $ 71,603
Average number of common
shares outstanding 61,869 61,898
Basic and diluted earnings per common
share before cumulative effect of
changes in accounting principles $ 1.74 $ 1.16
Cumulative effect to January 1, 2000,
of changes in accounting principles 0.49 0
Basic and diluted earnings
per common share $ 2.23 $ 1.16
Cash dividends per
common share $ 1.245 $ 1.245
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income
Twelve Months Ended September 30 2000 1999
(thousands)
Electric Operating Revenues $ 931,791 $ 898,681
Operating Expenses
Operation
Fuel 151,781 127,533
Purchased power 90,551 92,012
Other 209,912 191,527
Maintenance 70,978 67,542
Depreciation 121,807 117,758
Income taxes 52,610 62,695
General taxes 92,234 92,771
Total 789,873 751,838
Electic Operating Income 141,918 146,843
Other Income and (Deductions)
Allowance for equity funds
used during construction 3,245 3,583
Miscellaneous income and
(deductions) - net 11,133 (50,172)
Income taxes 34,541 51,151
Total 48,919 4,562
Income Before Interest Charges 190,837 151,405
Interest Charges
Long-term debt 57,862 52,595
Short-term debt 10,459 2,291
Mandatorily redeemable Preferred
Securities 12,450 12,450
Miscellaneous 3,429 3,661
Allowance for borrowed funds
used during construction (9,733) (2,985)
Total 74,467 68,012
Income before cumulative effect of
changes in accounting principles 116,370 83,393
Cumulative effect to January 1, 2000,
of changes in accounting principles,
net of income taxes (Note 1) 30,073 0
Net income 146,443 83,393
Preferred stock
dividend requirements 2,094 3,829
Earnings available for
common stock $ 144,349 $ 79,564
Average number of common
shares outstanding 61,877 61,899
Basic and diluted earnings per common
share before cumulative effect of
changes in accounting principles $ 1.84 $ 1.29
Cumulative effect to January 1, 2000,
of changes in accounting principles 0.49 0
Basic and diluted earnings
per common share $ 2.33 $ 1.29
Cash dividends per
common share $ 1.66 $ 1.66
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
Year to Date September 30 2000 1999
(thousands)
Cash Flows from Operating Activities
Income before cumulative effect of changes in
accounting principles $ 108,933 $ 74,478
Adjustments to reconcile income to net
cash from operating activities:
Depreciation of electric plant 91,923 88,544
Amortization of:
Nuclear fuel 12,725 11,430
Other 8,992 8,785
Deferred income taxes (net) (18,830) (32,498)
Investment tax credit amortization (3,353) (3,336)
Fuel contract settlements 0 (13,391)
Losses from equity investments 15,987 14,757
Asset impairments 23,805 20,362
Gain on sale of KLT Gas properties (60,413) 0
Gain on sale of Nationwide Electric, Inc.
stock 0 (19,835)
Kansas rate refund accrual 0 (14,200)
Allowance for equity funds used
during construction (3,090) (2,502)
Other operating activities (Note 2) 44,767 (57,898)
Net cash from operating activities 221,446 74,696
Cash Flows from Investing Activities
Utility capital expenditures (325,004) (118,937)
Allowance for borrowed funds used
during construction (8,682) (2,327)
Purchases of investments (53,575) (23,444)
Purchases of nonutility property (18,069) (40,836)
Sale of Nationwide Electric, Inc. stock 0 39,617
Sale of KLT Gas properties 36,925 0
Hawthorn No. 5 partial insurance recovery 50,000 80,000
Other investing activities 18,191 (1,778)
Net cash from investing activities (300,214) (67,705)
Cash Flows from Financing Activities
Issuance of long-term debt 294,000 10,889
Repayment of long-term debt (108,000) (37,870)
Net change in short-term borrowings (16,574) 91,674
Dividends paid (78,256) (79,893)
Other financing activities (6,527) 1,749
Net cash from financing activities 84,643 (13,451)
Net Change in Cash and Cash Equivalents 5,875 (6,460)
Cash and Cash Equivalents at Beginning of Year 13,073 43,213
Cash and Cash Equivalents at End of Period $ 18,948 $ 36,753
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
Twelve Months Ended September 30 2000 1999
(thousands)
Cash Flows from Operating Activities
Income before cumulative effect of changes in
accounting principles $ 116,370 $ 83,393
Adjustments to reconcile income to net
cash from operating activities:
Depreciation of electric plant 121,807 117,758
Amortization of:
Nuclear fuel 17,077 16,253
Other 12,470 11,054
Deferred income taxes (net) (13,116) (35,862)
Investment tax credit amortization (4,470) (4,374)
Fuel contract settlements 0 (13,391)
Losses from equity investments 26,181 19,053
Asset impairments 24,521 26,390
Gain on sale of KLT Gas properties (60,413) 0
Gain on sale of Nationwide Electric, Inc.
stock 0 (19,835)
Kansas rate refund accrual 0 (11,174)
Allowance for equity funds used
during construction (3,245) (3,583)
Other operating activities (Note 2) 69,677 (69,770)
Net cash from operating activities 306,859 115,912
Cash Flows from Investing Activities
Utility capital expenditures (386,754) (166,536)
Allowance for borrowed funds used
during construction (9,733) (2,985)
Purchases of investments (65,203) (56,260)
Purchases of nonutility property (33,025) (49,761)
Sale of KLT Gas properties 36,925 0
Sale of Nationwide Electric, Inc. stock 0 39,617
Hawthorn No. 5 partial insurance recovery 50,000 80,000
Other investing activities 9,653 14,154
Net cash from investing activities (398,137) (141,771)
Cash Flows from Financing Activities
Issuance of long-term debt 294,000 7,890
Repayment of long-term debt (179,190) (17,820)
Net change in short-term borrowings 120,451 94,933
Dividends paid (105,025) (106,539)
Redemption of preferred stock (50,000) 0
Other financing activities (6,763) 1,667
Net cash from financing activities 73,473 (19,869)
Net Change in Cash and Cash Equivalents (17,805) (45,728)
Cash and Cash Equivalents at Beginning of Period 36,753 82,481
Cash and Cash Equivalents at End of Period $ 18,948 $ 36,753
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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<PAGE><TABLE>
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended Year to Date Twelve Months Ended
September 30 September 30 September 30
2000 1999 2000 1999 2000 1999
(thousands)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 81,618 $ 37,457 $ 139,006 $ 74,478 $ 146,443 $ 83,393
Other comprehensive income (loss):
Unrealized loss on
securities available for sale 0 (4,935) 0 (1,035) (2,743) (2,010)
Income tax benefit 0 1,784 0 375 992 727
Net unrealized loss on
securities available for sale 0 (3,151) 0 (660) (1,751) (1,283)
Reclassification adjustment,
net of tax 0 0 2,337 0 2,337 0
Comprehensive Income $ 81,618 $ 34,306 $ 141,343 $ 73,818 $ 147,029 $ 82,110
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three Months Ended Year to Date Twelve Months Ended
September 30 September 30 September 30
2000 1999 2000 1999 2000 1999
(thousands)
Beginning balance $ 424,163 $ 427,449 $ 418,952 $ 443,699 $ 438,284 $ 461,430
Net income 81,618 37,457 139,006 74,478 146,443 83,393
505,781 464,906 557,958 518,177 584,727 544,823
Dividends declared
Preferred stock - at required rates 412 934 1,236 2,830 2,317 3,788
Common stock 25,667 25,688 77,020 77,063 102,708 102,751
Ending balance $ 479,702 $ 438,284 $ 479,702 $ 438,284 $ 479,702 $ 438,284
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
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KANSAS CITY POWER & LIGHT COMPANY
CERTAIN FORWARD-LOOKING INFORMATION
Statements made in this report which are not based on historical facts
are forward-looking and, accordingly, involve risks and uncertainties
that could cause actual results to differ materially from those
discussed. Any forward-looking statements are intended to be as of
the date on which such statement is made. In connection with the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995, we are providing a number of important factors that could cause
actual results to differ materially from provided forward-looking
information. These important factors include:
- future economic conditions in the regional, national and
international markets
- state, federal and foreign regulation
- weather conditions
- financial market conditions, including, but not limited to
changes in interest rates
- inflation rates
- increased competition, including, but not limited to, the
deregulation of the United States electric utility industry, and the
entry of new competitors
- ability to carry out marketing and sales plans
- ability to achieve generation planning goals and the occurrence
of unplanned generation outages
- nuclear operations
- ability to enter new markets successfully and capitalize on
growth opportunities in nonregulated businesses
- adverse changes in applicable laws, regulations or rules
governing environmental (including air quality regulations), tax or
accounting matters
- delays in the anticipated in service dates of new generating
capacity
This list of factors may not be all-inclusive since it is not possible
for us to predict all possible factors.
Notes to Consolidated Financial Statements
In management's opinion, the consolidated interim financial statements
reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of operations for
the interim periods presented. These statements and notes should be
read in connection with the financial statements and related notes
included in our 1999 annual report on Form 10-K.
1. CHANGES IN PENSION ACCOUNTING PRINCIPLES
Effective January 1, 2000, Kansas City Power & Light Company (KCPL)
changed its methods of amortizing unrecognized net gains and losses
and determination of expected return related to its accounting for
pension expense. This change is being made to reflect more timely in
pension expense the gains and losses incurred by the pension funds.
At the time KCPL originally adopted the standards governing accounting
for pensions, we chose the following accounting methods that would
minimize fluctuations in pension expense:
- Recognized gains and losses if, as of the beginning of the year,
the unrecognized net gain or loss exceeds 10 percent of the greater of
the projected benefit obligation or the market-related value of plan
assets. If amortization is required, amortization is the excess
divided by the average remaining service period, approximately 15
years, of active employees expected to receive benefits under the
plan. This method has resulted in minimal gains being amortized.
9
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- Determined the expected return by multiplying the long-term rate
of return times the market-related value. We determine market-related
value by recognizing changes in fair value of plan assets over a five-
year period.
KCPL has changed the above accounting methods to the following:
- Recognize gains and losses by amortizing over a five-year period
the rolling five-year average of unamortized gains and losses.
- Determine the expected return by multiplying the long-term rate
of return times the fair value of plan assets.
Adoption of the new methods of accounting for pensions will lead to
greater fluctuations in pension expense in the future and will have
the following current effects:
Changes in Method of Accounting for Pensions *
Amortization
of
Gains and Expected Net
Losses Return Total Reductions** Total
(millions except per share)
Cumulative effect of
change in method of
accounting:
Income $ 21.4 $ 13.6 $ 35.0 $ (4.9) $ 30.1
Basic and diluted
earnings per common
share $ 0.35 0.22 $ 0.57 $(0.08) $ 0.49
Year 2000 earnings
effect of change in
method of accounting:
Income $ 4.1 $ 2.0 $ 6.1 $ (1.1) $ 5.0
Basic and diluted
earnings per common
share $ 0.07 $ 0.03 $ 0.10 $(0.02) $ 0.08
Prior year's earnings
effect of change in
method of accounting
if the change had
been made January 1,
1998:
1999
Income $ 4.4 $ 1.1 $ 5.5 $ (1.0) $ 4.5
Basic and diluted
earnings per common
share $ 0.07 $ 0.02 $ 0.09 $(0.02) $ 0.07
1998
Income $ 2.9 $ 3.2 $ 6.1 $ (1.1) $ 5.0
Basic and diluted
earnings per common
share $ 0.05 $ 0.05 $ 0.10 $(0.02) $ 0.08
* All changes are increases to income or earnings per common share and
are after income taxes. The effect on quarterly earnings would be one-
fourth of the amounts reported except for the cumulative effect of
change in method of accounting which is a one time increase to income.
** The Reductions column reflects amounts for the effects of
capitalized labor, net of depreciation, and power plants joint-owner
shares of pension costs.
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<PAGE>
2. SUPPLEMENTAL CASH FLOW INFORMATION
Sale of KLT Gas properties in September 2000 (Note 9):
Cash proceeds $ 36,925
Equity securities 106,000
Receivable 2,463
Total 145,388
Property (58,814)
Accounts payable (15,409)
Other assets and liabilities (10,752)
Gain on sale before tax $ 60,413
Year to Date Twelve Months Ended
September 30 September 30
2000 1999 2000 1999
(thousands)
Cash flows affected by changes in:
Receivables $(54,142) $(76,544) $ 20,985 $(49,450)
Fuel inventories 2,831 (3,565) 2,556 (4,981)
Materials and supplies (991) (157) (1,760) (858)
Accounts payable 29,821 6,353 30,013 14,218
Accrued taxes 75,287 45,786 14,848 (2,031)
Accrued interest (6,507) (12,266) (2,203) (7,417)
Wolf Creek refueling
outage accrual 4,013 (7,370) 6,124 (4,887)
Other (5,545) (10,135) (886) (14,364)
Total other operating
activities $ 44,767 $(57,898) $ 69,677 $(69,770)
Cash paid during the period for:
Interest $ 61,591 $61,577 $ 74,534 $ 74,358
Income taxes $ 8,370 $30,722 $ 29,948 $ 55,042
3. SECURITIES AVAILABLE FOR SALE
In 2000, CellNet Data System Inc. (CellNet) completed a sale of its
assets to a third party. Accordingly, in March 2000, KLT Inc. (KLT)
wrote-off its investment in CellNet of $4.8 million before taxes
($0.05 per share). At December 31, 1999, $3.8 million before taxes
($0.04 per share) of this loss had been reported as an unrealized loss
in the Consolidated Statement of Comprehensive Income.
Prior to the write-off, the investment in CellNet had been accounted
for as securities available for sale and adjusted to market value,
with unrealized gains or (losses) reported as a separate component of
comprehensive income.
The cost of these securities available for sale that KLT held as of
September 30, 1999, was $4.8 million. Accumulated net unrealized
losses were $0.6 million at September 30, 1999.
4. CAPITALIZATION
KCPL Financing I (Trust) has previously issued $150,000,000 of 8.3%
preferred securities. The sole asset of the Trust is the $154,640,000
principal amount of 8.3% Junior Subordinated Deferrable Interest
Debentures, due 2037, issued by KCPL.
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In the first quarter of 2000, KCPL issued $200 million of unsecured,
floating rate medium-term notes. As of September 30, 2000, $100
million of unsecured medium-term notes remained available for issuance
under a previously filed registration statement.
In 2000, KCPL entered into interest rate cap agreements to limit the
interest rate on the $200 million of unsecured medium-term notes. The
cap agreements mature in 2002 and limit the interest rate on the $200
million of unsecured debt to a maximum of 7.5%.
In the second quarter of 2000, KLT renegotiated its existing $125
million bank credit agreement from short-term to a three-year
revolving credit agreement. The new agreement had a weighted-average
rate of 7.76% at September 30, 2000, on borrowings of $104 million,
which has been included in long-term debt in the Consolidated
Statements of Capitalization. At December 31, 1999, KLT had borrowed
$61 million under its previous bank credit agreement, which was
included in current maturities of long-term debt in the Consolidated
Balance Sheet.
In October 2000, KLT used the proceeds from the October gas property
sales (See Note 9 - Significant Nonregulated Investments) to repay $92
million of the outstanding balance under the revolving credit
agreement.
On October 20, 2000, Standard and Poor's Corporation lowered its long-
term credit rating on KCPL to A- from A and lowered its short-term
credit rating to A-2 from A-1. The outlook was changed from negative
to stable. Moody's Investors Service's long-term credit rating on
KCPL is A1 and its short-term credit rating is P-1.
5. SEGMENT AND RELATED INFORMATION
KCPL's three reportable segments are strategic business units.
Electric Operations includes the regulated electric utility,
unallocated corporate charges and wholly-owned subsidiaries on an
equity basis. KLT and Home Service Solutions Inc. (HSS) are holding
companies for various nonregulated business ventures.
The summary of significant accounting policies applies to all of the
segments. We evaluate performance based on profit or loss from
operations and return on capital investment. We eliminate all
intersegment sales and transfers. We include KLT and HSS revenues and
expenses in Other Income and (Deductions) and Interest Charges in the
Consolidated Statements of Income.
The tables below reflect summarized financial information concerning
KCPL's reportable segments.
Electric Intersegment Consolidated
Operations KLT HSS Eliminations Totals
Three Months Ended (thousands)
September 30, 2000
Electric Operating
Income (a) $ 61,704 $ 61,704
Miscellaneous
income (b) 48,647 $ 117,797 $ (1,401) $ (37,830) 127,213
Miscellaneous
deductions (c) (14,993) (49,583) (15,727) 144 (80,159)
Income taxes on
Other Income and
(Deductions) 1,545 (16,098) 6,680 0 (7,873)
Interest Charges (16,425) (3,982) 0 0 (20,407)
Net income(loss) 81,618 48,134 (10,448) (37,686) 81,618
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Electric Intersegment Consolidated
Operations KLT HSS Eliminations Totals
Three Months Ended
September 30, 1999
Electric Operating
Income (a) $ 54,049 $ 54,049
Miscellaneous
income (b) 6,907 $ 19,472 $ 760 $ 766 27,905
Miscellaneous
deductions (c) (11,663) (27,740) (870) 0 (40,273)
Income taxes on
Other Income and
(Deductions) 1,206 10,432 25 0 11,663
Interest Charges (13,858) (2,845) 0 0 (16,703)
Net income(loss) 37,457 (681) (85) 766 37,457
Nine Months Ended
September 30, 2000
Electric Operating
Income (a) $118,916 $ 118,916
Miscellaneous
income (b) 68,711 $ 174,896 $ (1,182) $ (37,735) 204,690
Miscellaneous
deductions (c) (39,209) (118,150) (19,580) 441 (176,498)
Income taxes on
Other Income and
(Deductions) 2,998 4,415 8,097 0 15,510
Interest Charges (45,573) (11,202) 0 0 (56,775)
Net income(loss) 139,006 49,959 (12,665) (37,294) 139,006
Nine Months Ended
September 30, 1999
Electric Operating
Income (a) $120,947 $ 120,947
Miscellaneous
income (b) 16,909 $ 16,952 $ 1,747 $ 1,608 37,216
Miscellaneous
deductions (c) (26,619) (42,930) (2,333) 0 (71,882)
Income taxes on
Other Income and
(Deductions) 2,417 33,775 145 0 36,337
Interest Charges (41,678) (8,964) 0 0 (50,642)
Net income(loss) 74,478 (1,167) (441) 1,608 74,478
Twelve Months Ended
September 30, 2000
Electric Operating
Income (a) $141,918 $ 141,918
Miscellaneous
income (b) 77,432 $ 175,117 $ (3,284) $ (34,397) 214,868
Miscellaneous
deductions (c) (54,605) (127,006) (22,565) 441 (203,735)
Income taxes on
Other Income and
(Deductions) 8,732 15,838 9,971 0 34,541
Interest Charges (60,352) (14,115) 0 0 (74,467)
Net income(loss) 146,443 49,834 (15,878) (33,956) 146,443
Twelve Months Ended
September 30, 1999
Electric Operating
Income (a) $146,843 $ 146,843
Miscellaneous
income (b) 21,949 $ 16,016 $ 2,351 $ 6,227 46,543
Miscellaneous
deductions (c) (37,357) (56,092) (3,266) 0 (96,715)
Income taxes on
Other Income and
(Deductions) 4,332 46,596 223 0 51,151
Interest Charges (55,957) (12,055) 0 0 (68,012)
Net income(loss) 83,393 (5,535) (692) 6,227 83,393
(a) Refer to the Consolidated Statements of Income for detail of
Electric Operations revenues and expenses.
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(b) Includes nonregulated revenues, interest and dividend income,
income and losses from equity investments and gains on sales of
property.
(c) Includes nonregulated expenses, losses on sales of property,
asset impairments and merger-related expenses.
(d) Includes $30.1 million cumulative effect to January 1, 2000, of
changes in accounting principles, net of income taxes.
Identifiable Assets
September 30, 2000 December 31, 1999
(thousands)
Electric Operations $ 3,167,043 $ 2,851,469
KLT 381,525 267,763
HSS 27,867 50,043
Intersegment Eliminations (215,036) (179,133)
Consolidated Totals $ 3,361,399 $ 2,990,142
6. COMMITMENTS AND CONTINGENCIES
Environmental Matters
KCPL's policy is to act in an environmentally responsible manner and
use the latest technology available to avoid and treat contamination.
We continually conduct environmental audits designed to ensure
compliance with governmental regulations and to detect contamination.
However, governmental bodies may impose additional or more rigid
environmental regulations that could require substantial changes to
operations or facilities.
Monitoring Equipment and Certain Air Toxic Substances
The Clean Air Act Amendments of 1990 required KCPL to spend about
$5 million in prior years for the installation of continuous
emission monitoring equipment to satisfy the requirements under
the acid rain provision. Also, a study under the Act could
require regulation of certain air toxic substances. In July
2000, the National Research Council published its findings
stating power plants that burn fossil fuels, particularly coal,
generate the greatest amount of mercury emissions. The United
States Environmental Protection Agency (EPA) is expected to reach
a decision in December on whether or not to regulate mercury. We
cannot predict the likelihood or compliance costs of such
regulations.
Air Particulate Matter
In July 1997, the EPA published new air quality standards for
particulate matter. Additional regulations implementing these
new particulate standards have not been finalized. Without the
implementation regulations, the impact of the standards on KCPL
cannot be determined. However, the impact on KCPL and other
utilities that use fossil fuels could be substantial. Under the
new fine particulate regulations, the EPA is conducting a three-
year study of fine particulate emissions. Until this testing and
review period has been completed, KCPL cannot determine
additional compliance costs, if any, associated with the new
particulate regulations.
Nitrogen Oxide
In 1997 the EPA also issued new proposed regulations on reducing
nitrogen oxide (NOx) emissions. The EPA announced in 1998 final
regulations implementing reductions in NOx emissions. These
regulations initially called for 22 states, including Missouri,
to submit plans for controlling NOx emissions. The regulations
require a significant reduction in NOx emissions from 1990 levels
at KCPL's Missouri coal-fired plants by the year 2003.
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In December 1998, KCPL and several other western Missouri
utilities filed suit against the EPA over the inclusion of
western Missouri in the 1997 NOx reduction program. On March 3,
2000, a three-judge panel of the D.C. Circuit of the U.S. Court
of Appeals sent the NOx rules related to Missouri back to the EPA
stating the EPA failed to prove that fossil plants in the western
part of Missouri contribute to ozone formation in downwind
states. The impact of this decision, which has been appealed, is
unknown at this time, however, it is likely to delay the
implementation of new NOx regulations by EPA in Missouri for some
time.
In May 1999, a three-judge panel of the D.C. Circuit of the U.S.
Court of Appeals found certain portions of the NOx control
program unconstitutional in a related case. The U.S. Supreme
Court has agreed to hear the EPA's appeal of this decision. A
final decision by the U.S. Supreme Court is expected in the
spring of 2001, and the outcome cannot be predicted at this time.
If the panel's decision is upheld, the effect will be to decrease
the severity of the standards with which KCPL ultimately may need
to comply.
To achieve the reductions proposed in the 1997 NOx reduction
program, KCPL would need to incur significant capital costs,
purchase power or purchase NOx emissions allowances. It is
possible that purchased power or emissions allowances may be too
costly or unavailable.
Preliminary analysis of the regulations indicates that selective
catalytic reduction technology, as well as other changes, may be
required for some of the KCPL units. Currently, we estimate that
additional capital expenditures to comply with these regulations
could range from $40 million to $60 million. Operations and
maintenance expenses could also increase by more than $2.5
million per year. These capital expenditure estimates do not
include the costs of the new air quality control equipment to be
installed at Hawthorn No. 5. The new air control equipment
designed to meet current environmental standards will also comply
with the proposed requirements discussed above.
We continue to refine our preliminary estimates and explore
alternatives to comply with these new regulations in order to
minimize, to the extent possible, KCPL's capital costs and
operating expenses. The ultimate cost of these regulations could
be significantly different from the amounts estimated above.
The State of Missouri is currently developing a State
Implementation Plan (SIP) for NOx reduction in response to the
EPA's effort to regulate NOx emissions. As currently proposed,
KCPL would not incur significant additional costs to comply with
the State of Missouri SIP. In May 2000, the Missouri Air
Conservation Commission approved statewide NOx regulations
requiring compliance with a rate of 0.35 lbs. NOx / mmBtu of heat
input. We do not anticipate that KCPL will incur significant
additional costs to comply with these new regulations.
Carbon Dioxide
At a December 1997 meeting in Kyoto, Japan, the Clinton
Administration supported changes to the International Global
Climate Change treaty which would require a seven percent
reduction in United States carbon dioxide (CO2) emissions below
1990 levels. The Administration has not submitted this change to
the U.S. Senate where ratification is uncertain. If future
reductions of electric utility CO2 emissions are eventually
required, the financial impact upon KCPL could be substantial.
Low-Level Waste
The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated
that the various states, individually or through interstate compacts,
develop alternative low-level radioactive waste disposal facilities.
The states of Kansas, Nebraska, Arkansas, Louisiana and Oklahoma
formed the Central Interstate Low-Level Radioactive Waste Compact and
selected a site in northern Nebraska
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to locate a disposal facility. Wolf Creek Nuclear Operating Corporation
(WCNOC) and the owners of the other five nuclear units in the compact
have provided most of the pre-construction financing for this project.
As of September 30, 2000, KCPL's net investment on its books was $7.4
million.
Significant opposition to the project has been raised by Nebraska
officials and residents in the area of the proposed facility, and
attempts have been made through litigation and proposed legislation in
Nebraska to slow down or stop development of the facility. On
December 18, 1998, the application for a license to construct this
project was denied. In December 1998, the utilities filed a federal
court lawsuit contending Nebraska officials acted in bad faith while
handling the license application. In September 1999, the U.S.
District Court partially denied and partially granted Nebraska's
motions to dismiss the utilities' case. Nebraska has appealed the
denial. The parties presented oral arguments to the U.S. Court of
Appeals in October 2000 and are awaiting the court's decision.
On January 15, 1999, a request for a contested case hearing on the
denial of the license was filed. On April 16, 1999, a U.S. District
Court judge in Nebraska issued an injunction staying indefinitely any
further activity on the contested case hearing. In April 2000, the
court of appeals affirmed the U.S. District Court's decision. The
possibility of reversing the license denial will be greater when the
contested case hearing ultimately is conducted than it would have been
had the hearing been conducted immediately.
In May 1999, the Nebraska legislature passed a bill withdrawing
Nebraska from the Compact. In August 1999, the Nebraska governor gave
official notice of the withdrawal to the other member states.
Withdrawal will not be effective for five years and will not, of
itself, nullify the site license proceeding.
Corporate Owned Life Insurance
On January 4, 2000, KCPL received written notification from the
Internal Revenue Service (IRS) that it intends to dispute interest
deductions associated with KCPL's corporate owned life insurance
(COLI) program. We understand this issue is an IRS Coordinated Issue
and thus has been raised and not finalized for many of the largest
companies in the country. A disallowance of KCPL's COLI interest
deductions and assessed interest on the disallowance for tax years
1994 to 1998 would reduce net income by approximately $13 million.
KCPL believes it has complied with all applicable tax laws and
regulations and will vigorously contest any adjustment or claim by the
IRS including exhausting all appeals available.
Home Service Solutions Inc. Debt Guarantee
During 2000, R.S. Andrews Enterprises, Inc. (RSAE), 49%-owned by HSS,
entered into a bank credit agreement which as of October 26, 2000, had
an outstanding loan balance of $8.5 million. The agreement is
collateralized by the common stock shares of a major shareholder of
RSAE. As secondary assurance to the lender, HSS guaranteed the loan;
however, HSS' wholly-owned subsidiary, Worry Free Service, Inc., and
its assets are not subject to the guarantee.
Legal Proceedings
See Part II - Other Information, Item 1. Legal Proceedings.
7. OIL AND GAS PROPERTY AND INTANGIBLE PROPERTY
Oil and gas property and equipment included in Investments and
Nonutility Property on the consolidated balance sheets totaled $40
million, net of accumulated depreciation of $11 million, at September
30, 2000 and $87 million, net of accumulated depreciation of $5
million at December 31, 1999. See Note 9 Significant Nonregulated
Investments for discussion of the gas property sales.
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8. RECEIVABLES
September 30 December 31
2000 1999
(thousands)
KCPL Receivable Corporation $ 74,470 $ 29,705
Other Receivables 53,683 41,843
Receivables $ 128,153 $ 71,548
In 1999 KCPL entered into a revolving agreement to sell all of its
right, title and interest in the majority of its customer accounts
receivable to KCPL Receivable Corporation, a special purpose entity
established to purchase customer accounts receivable from KCPL. KCPL
Receivable Corporation has sold receivable interests to outside
investors. In consideration of the sale, KCPL received $60 million in
cash and the remaining balance in the form of a subordinated note from
KCPL Receivable Corporation. The agreement is structured as a true
sale under which the creditors of KCPL Receivable Corporation will be
entitled to be satisfied out of the assets of KCPL Receivable
Corporation prior to any value being returned to KCPL or its
creditors.
Other receivables consist primarily of receivables from partners in
jointly-owned electric utility plants, bulk power sales receivables
and receivables held by subsidiaries.
9. SIGNIFICANT NONREGULATED INVESTMENTS (Subsequent to December 31,
1999)
KLT Gas Agreements to Sell Producing Natural Gas Properties
KLT Gas Inc. sold producing natural gas properties to Evergreen
Resources, Inc. (Evergreen) in two parts with one part closed in
September 2000 (total proceeds of $145 million) and the remaining
portion closed in October 2000 (total proceeds of $35 million). KLT
Gas Inc.'s business strategy is to acquire and develop early stage
coal bed methane properties and then divest properties in order to
create shareholder value.
Proceeds of $145 million from the Evergreen sale closed in September
2000 primarily consisted of $37 million in cash, $100 million of 9.5%
redeemable preferred stock held to maturity and $6 million of Evergreen
common stock. The preferred stock is expected to be redeemed by December
29, 2000, and has been classified as a current asset along with the
Evergreen common stock that is considered a trading security. A $1 million
increase in the value of the Evergreen common stock held by KLT Gas since
the closing was recorded as income. The $145 million of proceeds from the
sale closed in September 2000 were reduced by $26 million in transaction
costs and the cost basis of the properties sold of $59 million resulting in
a $60 million gain before taxes. The after tax gain on the sale was $39
million and $0.62 per share. The $26 million in transaction costs consist
primarily of the $20.2 million present value cost incurred by KLT Gas
to reduce its hedge position on gas sales since the producing
properties associated with the hedges were sold. This cost will be
paid over 16 months and has been recorded in Accounts Payable ($14.7
million) and Deferred Credits and Other Liabilities - other ($5.5
million).
On October 23, 2000, KLT Gas sold additional natural gas properties to
Barrett Resources Corporation (Barrett) for total proceeds of about
$54 million. This sale, along with the part of the Evergreen sale
that closed in October, will increase fourth quarter 2000 earnings per
share by approximately $0.50.
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KLT Gas
During the first quarter of 2000, KLT Gas purchased a 50% ownership in
Patrick Energy, LLC, an Oklahoma oil and gas exploration and
development company. The investment is accounted for using the equity
method and is about $21 million at September 30, 2000.
KLT Energy Services
In April 2000, KLT Energy Services invested an additional $6.4 million
to purchase shares in Strategic Energy, LLC (SEL) from passive
shareholders. SEL provides energy supply coordination services and
purchases electricity and gas for resale to retail end users. SEL
also provides strategic planning and consulting services in natural
gas and electricity markets. With this investment, KLT Energy
Services economic ownership percentage increased to 71% (68% of the
voting interest) and required KLT to change its accounting treatment
of SEL from the equity basis to consolidation. Goodwill associated
with KLT Energy Services' ownership in SEL is being amortized over 15
years using the straight-line method.
KLT Energy Services has consolidated SEL as if the acquisition took
place at the beginning of 2000. Consistent with the purchase method of
accounting for business combinations, prior year financial information
has not been restated. SEL revenues, consolidated by KLT for the nine
months ended September 30, 2000, totaled $85 million and resulted in
$14 million of income before taxes. SEL revenues for the year ended
December 31, 1999, totaled $63 million.
HSS' Investment in R. S. Andrews Enterprises, Inc.
HSS' net investment of $23 million in R. S. Andrews Enterprises, Inc.
was written down to net realizable value of $8 million.
10. DERIVATIVE FINANCIAL INSTRUMENTS
Common Stock Put and Call Option Agreement
In September 2000, KLT exercised its option to purchase common shares
of a publicly traded stock for $4.8 million. The shares are
considered trading securities and have been classified as a current
asset. A $2.9 million increase in the market value of the securities
has been recorded in income since the closing of the purchase.
Gas Market Price Hedge Instruments
KLT Gas' risk management policy is to use firm sales agreements or
financial hedge instruments to mitigate its exposure to market price
fluctuations on approximately 85% of its daily natural gas production.
Prior to the sales of producing natural gas properties in September
and October 2000 (See Note 9 to the Consolidated Financial
Statements), KLT Gas had two firm sales agreements each covering 5,000
mmBtu (equivalent to approximately 5 Million Cubic Feet) of natural
gas per day through February 2001 at rates of $2.59 and $2.61 per
mmBtu, respectively. These contracts are forward contracts settled by
physical delivery and KLT Gas records revenues on the covered sales
using the rates under the agreements. Additionally, KLT Gas had
entered financial hedge instruments covering additional mmBtu of
natural gas production through April 2002. These financial
instruments have weighted-average rates of $2.71 to $3.07 per mmBtu.
After the sales of producing natural gas properties in September and
October 2000, KLT Gas retained production or entered into physical gas
purchase agreements to fulfill the firm commitment
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contracts. KLT Gas also unwound the financial instruments to reduce
its hedge position to approximately 85% of the remaining gas production.
The net present value cost of the physical gas purchase agreements to
fulfill the firm commitment contracts and to unwind the financial
hedge instruments approximated $24.9 million and reduced the before
tax gains on the sales. Of the $24.9 million, $20.2 million was
recorded with the Evergreen sale in September 2000. The remaining
$4.7 million will be recorded in October 2000 as part of the October
2000 Evergreen sale and the Barrett sale.
After the September and October 2000 sales, the financial hedge
instruments, covering approximately 85% of the remaining natural gas
production, total 5,000 mmBtu per day in January 2001 and decrease to
3,000 mmBtu per day in April 2002. The weighted-average rate ranges
from $2.71 to $3.07 per mmBtu. The effect of the remaining hedge
instruments is calculated by comparing the rate per the agreements to
the NYMEX natural gas rate as of the beginning of the month, which for
September 2000, was $4.62 per mmBtu. KLT Gas accounts for the
difference as an adjustment to the related revenues. For its
remaining gas sales not covered by these agreements, KLT Gas sells at
prevailing market prices.
11. NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FASB 133). FASB 133, as amended,
is effective for fiscal years beginning after June 15, 2000. KCPL
will adopt FASB 133 January 1, 2001. We have not yet quantified all
effects of adopting FASB 133. At September 30, 2000, we have
completed a preliminary review of KCPL's significant commodity
contracts and financial instruments that have been identified as
derivative instruments. Based on our preliminary review of these
contracts, we believe that adoption of FASB 133 will not have a
material impact on KCPL's financial position or results of operations.
However, changing market conditions, effects of transactions not yet
identified or new transactions, and interpretations from the FASB's
Derivative Implementation Group could change our current assessment.
FASB 133, as amended, could increase the volatility of KCPL's future
earnings.
12. KLT TELECOM INC. ENTERS AGREEMENT TO PURCHASE AN ADDITIONAL
OWNERSHIP INTEREST IN DTI HOLDINGS, INC.
On September 27, 2000, KLT Telecom Inc. entered a conditional
agreement to purchase shares of the common stock of DTI Holdings, Inc.
held by Richard Weinstein. Under the agreement, KLT Telecom would
purchase from Weinstein a portion of his outstanding shares of common
stock (Initial Shares) at an aggregate purchase price of about $110
million. This purchase would increase KLT Telecom's ownership of DTI
Holdings, Inc. to 78%. If KLT Telecom acquires the Initial Shares by
November 20, 2000, Weinstein will grant KLT Telecom a five-year option
to purchase his remaining 15% ownership of DTI Holdings, Inc. (Remaining
Shares). The aggregate exercise price of the Remaining Shares equals
about $12 million plus an escalation factor of 15% per year compounded
semi-annually commencing from the Initial Shares Closing Date.
The purchase of the Initial Shares by KLT Telecom is subject to the
satisfaction of several significant conditions by November 20, 2000
(Initial Shares Closing Date). The conditions consist of the
following among others. KLT Telecom shall:
- have purchased, at prices determined at the sole discretion of
KLT Telecom, at least:
- 90% of the principal amount of the 12 1/2% Series B Senior
Discount Notes (Notes) due 2008 issued by DTI Holdings, Inc. The
accreted value of the Notes at June 30, 2000, was about $357 million.
- 90% of the warrants, issued as part of the Notes agreement, each
initially entitling the holder to purchase 1.552 shares of the common
stock of DTI Holdings, Inc. (Warrants).
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- have received all waivers of covenants and other provisions in
KLT Inc.'s current credit agreement in form and substance satisfactory
to KLT Inc.
- have received assurance of no threatened or pending litigation
that would prohibit the closing of the transactions or expose KLT
Telecom, KLT Inc. or KCPL to any liability.
- have obtained financing commitments sufficient to meet financial
obligations in connection with the transactions, including the $121
million purchase price for the initial and remaining shares and the
purchase of Notes and Warrants at an aggregate purchase price to be
determined by KLT Telecom.
- be under no obligation to purchase any Notes or Warrants unless
the aggregate purchase price does not exceed the price determined by
KLT Telecom and all of the conditions set forth in the Agreement have
been satisfied, or waived by KLT Telecom, at the Initial Shares
Closing.
The Agreement can be terminated under certain circumstances including:
- By either party if certain conditions as identified above have
not been met.
- By mutual consent of the parties.
- By either party if a material breach of any representation,
warranty or covenant in the Agreement has been committed by the other
party.
- By either party if the Initial Shares Closing has not occurred on
or before December 1, 2000, or such other later date as the parties
may agree upon.
On October 23, 2000, KLT Telecom placed on hold a tender offer for the
Notes and Warrants due to the unfavorable credit market for
telecommunications companies. This also placed on hold the
conditional agreement to purchase Weinstein's shares.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
REGULATION AND COMPETITION
As competition develops throughout the electric utility industry, we
are positioning Kansas City Power & Light Company (KCPL) to excel in
an open market. We continually strive to improve the efficiency of
KCPL's electric utility operations.
Competition in the electric utility industry accelerated with the
passage of the National Energy Policy Act of 1992. This Act gave the
Federal Energy Regulatory Commission (FERC) the authority to require
electric utilities to provide transmission line access to independent
power producers (IPPs) and other utilities (wholesale wheeling).
An increasing number of states have already adopted open access
requirements for utilities' retail electric service, allowing
competing suppliers access to their retail customers (retail
wheeling). Many other states, including Kansas and Missouri, have
actively considered retail competition. Several comprehensive retail
competition bills were introduced in the 2000 Missouri General
Assembly but none passed this year. No comprehensive retail
competition bills were introduced in the 2000 Kansas Legislature.
Retail access could result in market-based rates below current cost-
based rates providing growth opportunities for low-cost producers and
risks for higher-cost producers, especially those with large
industrial customers. Lower rates and the loss of major customers
could result in stranded costs and place an unfair burden on the
remaining customer base or shareholders. We cannot predict whether
any stranded costs would be recoverable in future rates. If an
adequate and fair provision for recovery of lost revenues is not
provided, certain generating assets may have to be evaluated for
impairment and appropriate charges recorded against earnings. In
addition to lowering profit margins, market-based rates could require
generating assets to be depreciated over shorter useful lives,
increasing operating expenses.
KCPL is positioned to compete in an open market with its diverse
customer mix and pricing strategies. Industrial customers make up
about 19% of KCPL's retail mwh sales, well below the utility industry
average. KCPL's flexible industrial rate structure is competitive
with other companies' rate structures in the region. In addition, we
have entered into long-term contracts for a significant portion of
KCPL's industrial sales. Although no direct competition for retail
electric service currently exists within KCPL's service territory, it
does exist in the bulk power market and between alternative fuel
suppliers and KCPL. Third-party energy management companies are
seeking to initiate relationships with large users in KCPL's service
territory to enhance their chances to supply electricity directly when
retail wheeling is authorized.
Increased competition could also force utilities to change accounting
methods. Financial Accounting Standards Board (FASB) Statement No. 71
- Accounting for Certain Types of Regulation, applies to regulated
entities whose rates are designed to recover the costs of providing
service. A utility's operations could cease meeting the requirements
of FASB 71 for various reasons, including a change in regulation or a
change in the competitive environment for a company's regulated
services. For those operations no longer meeting the requirements of
regulatory accounting, regulatory assets would be written off. KCPL
can maintain its $132 million of regulatory assets at September 30,
2000, as long as FASB 71 requirements are met.
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Competition could eventually have a material, adverse effect on KCPL's
results of operations and financial position. Should competition
eventually result in a significant charge to equity, capital
requirements and related costs could increase significantly.
PROPOSED RESTRUCTURING
KCPL is proactively seeking to restructure the company in advance of
retail access legislation into a holding company with three separate
subsidiaries - Power Supply, Power Delivery and KLT Inc. (KLT). This
proposed restructuring will be subject to approval by a number of
regulatory authorities. We cannot predict when or if these approvals
will be received. As part of this restructuring, we are requesting
that the generation assets (Power Supply) be deregulated.
We expect this proposed restructuring to create additional value for
KCPL and its shareholders by:
- Enabling KCPL to leverage its low-cost generation assets in an
unregulated environment.
- Allowing management to focus on value creation within each
business unit.
- Facilitating growth of each business unit and expansion into new
markets.
- Allowing the financial market to evaluate the nonregulated assets
at a share price to earnings multiple that is greater than the
multiple historically used to evaluate the regulated electric utility.
Applications for approval of the proposed restructuring were filed
with the Missouri Public Service Commission (MPSC) on May 15, 2000,
and with the Kansas Corporation Commission (KCC) on June 5, 2000. The
state regulatory process has been divided into four phases, and the
approval process will extend at least into the last quarter of 2001.
Phase I filings were made on September 14, 2000, and Phase II filings
are due in December 2000. Required federal filings will be made in
2001.
Power Supply - generation
KCPL's electric generation business is fundamentally sound and
competitive. It has a strong asset mix including baseload,
intermediate and peaking units. KCPL has historically been a low-cost
provider in its region and, with the rebuild of Hawthorn No. 5
(projected to be placed in service in June 2001), KCPL's generation
should be positioned well to compete in a deregulated market.
In addition to the rebuild of Hawthorn No. 5, KCPL has increased its
generating capacity. In July 1999, Hawthorn No. 6, a 141-megawatt
unit was placed in service. Hawthorn Nos. 7, 8 and 9 were placed into
commercial use this summer. Combined, Hawthorn Nos. 7, 8 and 9 have
294 megawatts of natural gas-fired generating capacity.
We expect that there will be a power supply agreement for a period of
time between the Power Supply and Power Delivery subsidiaries while
Power Supply's additional generating capacity and competitive cost
structure can also be utilized to sell electricity in the competitive
wholesale market. We believe KCPL will realize many benefits,
including:
- The ability to make a higher return in a deregulated or
competitive market.
- The ability to make investment decisions and enter into strategic
partnerships without needing regulatory approval.
Power Delivery - transmission and distribution
KCPL transmission and distribution (T&D) serves over 460,000 customers
and experiences annual load growth of around 2% to 3% through
increased customer usage and additional customers. KCPL's rates
charged for electricity are currently below the national average.
Additionally, there is a moratorium on changes to Missouri retail
rates until 2002.
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The creation of a separate business for T&D will segregate KCPL's
regulated assets into a separate business unit. In addition, the T&D
business intends to join a FERC approved Regional Transmission
Organization (RTO), most likely the Southwest Power Pool Independent
System Operator (ISO). RTOs will combine the transmission operations
of utility businesses in the region into an organization that can
schedule and deliver energy in the region to ensure regional
transmission reliability.
KLT INC. NONREGULATED OPPORTUNITIES
KLT, a wholly-owned subsidiary of KCPL, pursues nonregulated business
ventures. Existing ventures include investments in
telecommunications, natural gas development and production, energy
services and affordable housing limited partnerships.
KCPL's investment in KLT was $119 million as of September 30, 2000 and
December 31, 1999. KLT's income for the nine months ended September
30, 2000, totaled $50.0 million compared to a loss of $1.2 million for
the nine months ended September 30, 1999. (See KLT earnings per share
analysis on page 30 for significant factors impacting KLT's operations
and resulting net income (loss) for all periods.) KLT's consolidated
assets totaled $382 million at September 30, 2000 compared to $268
million at December 31, 1999.
Telecommunications
KLT Telecom owns 47% of DTI Holdings, Inc. (acquired in 1997), which
is the parent company of Digital Teleport, Inc. (DTI), a facilities-
based telecommunications company. DTI is creating an approximately
20,000 route-mile, digital fiber optic network comprised of 23
regional rings that interconnect primary, secondary and tertiary
cities in 37 states. Currently, DTI has approximately 18,000 route
miles of fiber optic cable in place or under construction throughout
the United States consisting of long-haul segments and local loop
networks in the St. Louis, Kansas City and Memphis metropolitan areas,
as well as other smaller markets. DTI currently offers services over
approximately 2,000 route miles of the network.
The strategic design of the DTI network allows DTI to offer reliable,
high-capacity voice and data transmission services, on a region-by-
region basis, to primary carriers and end-user customers who seek a
competitive alternative to existing providers. DTI's network
infrastructure is designed to provide reliable customer service
through back-up power systems, automatic traffic re-routing and
computerized automatic network monitoring. If the network experiences
a failure of one of its links, the routing intelligence of the
equipment transfers traffic to the next choice route, thereby ensuring
call delivery without affecting customers. DTI currently provides
services to other communications companies including Tier 1 and Tier 2
carriers. DTI also provides private line services to targeted
business and governmental end-user customers.
DTI Holdings disclosed in its report on Form 10-K for the fiscal year
ended June 30, 2000, that it has not yet been successful in obtaining
additional financing to sustain its operations and may have
insufficient liquidity to meet its needs for continuing operations and
obligations. DTI Holdings also disclosed that there is substantial
doubt about its ability to continue as a going concern. DTI Holdings
also estimated total capital expenditures necessary to complete its
network will be in excess of $300 million.
KLT Telecom continues to evaluate options to realize value from its
47% ownership in DTI. At June 30, 2000, KLT Telecom's $45 million
equity investment in DTI had been completely written down. In
September 2000, KLT Telecom announced its intent to conditionally
acquire an additional
23
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ownership in DTI. See Note 12 to the Consolidated Financial Statements
on page 19 for further information.
KLT Telecom and KCPL continue to explore the creation of a business-to-
business online exchange, the purpose of which is to allow utilities
and other companies to purchase various goods and services online.
KLT Telecom is pursuing additional participants for the exchange and
cannot at this time predict when operations will commence.
Natural Gas Development and Production
KLT Gas Inc.'s business strategy is to acquire and develop early stage
coalbed methane properties and then divest properties in order to
create shareholder value. We believe that coalbed methane production
provides an economically attractive alternative source of supply to
meet the growing demand for natural gas in North America. We have
built a knowledge base in coalbed methane production and reserves
evaluation. Therefore, KLT Gas focuses on coalbed methane; a niche in
the oil and gas industry where we believe our expertise gives us a
competitive advantage. Coalbed methane, with a longer, predictable
reserve life, is inherently lower risk than conventional gas
exploration. The future price scenarios for natural gas appear
strong, showing steady growth. We believe the demand for natural gas
should strengthen into the future. Environmental concerns and the
increased demand for natural gas for new electric generating capacity
are driving this projected growth in demand. We believe that natural
gas prices will continue to be more stable than oil prices and that an
increased demand for natural gas will move natural gas prices upward
in the future.
In September and October 2000, KLT Gas completed sales of a portion of
its coalbed methane properties. See Note 9 to the Consolidated
Financial Statements on page 17 for further information concerning the
sales.
After the sales, KLT Gas' remaining properties are located in
Colorado, Texas, Wyoming, Oklahoma, Kansas, New Mexico, and North
Dakota. The retained properties represent 72% of the total natural
gas development acreage prior to the sales. After the September and
October 2000 sales, KLT Gas has a remaining ownership interest in
approximately 80 wells with significant proved reserves.
Energy Services
In 1999 KLT Energy Services acquired a 56% ownership interest (49% of
the voting interest) in Strategic Energy, LLC (SEL). In April 2000,
KLT Energy Services invested an additional $6.4 million to increase
its ownership interest to 71% (68% of the voting interest). SEL buys
and manages electricity and natural gas in unregulated markets for
commercial and industrial customers. SEL also provides strategic
planning and consulting services in natural gas and electricity
markets.
SEL builds strong customer relationships by providing quality services
over extended periods of time. SEL has provided services to over 100
Fortune 500 companies and currently serves over 6,000 customers. SEL
has developed an excellent market reputation over the past fifteen
years.
SEL has developed into a major provider of services, mainly
electricity for a fee, in the newly deregulated electricity market in
Pennsylvania, capturing in excess of 300 megawatts in western
Pennsylvania. SEL is also serving customers in newly deregulated
markets of California and New York. SEL utilizes hedges on most of
its retail obligations to eliminate any material market risk.
SEL has invested substantial amounts over the past three years in
information systems necessary to manage both retail and wholesale
energy on an integrated basis. SEL plans to continue investing in
systems to maintain and exploit their technological advantage.
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Affordable Housing Limited Partnerships
Through September 30, 2000, KLT Investments Inc. had invested $101
million in affordable housing limited partnerships. About 70% of
these investments were recorded at cost and were incurred prior to May
19, 1995; the equity method was used for the remainder. We reduce tax
expense in the year tax credits are generated. The investments
generate future cash flows from tax credits and tax losses of the
partnerships. The investments also generate cash flows from the sales
of the properties (estimated residual value). For most investments,
tax credits are received over ten years.
On a quarterly basis, KLT completes a valuation study of its cost
method investments in affordable housing by comparing the cost of
those properties to the total of projected residual value of the
properties and remaining tax credits to be received. Estimated
residual values are based on studies performed by an independent firm.
Projected annual reductions of the book cost based on the latest
valuation study for the years 2000 through 2005 total $2, $13, $9,
$11, $10 and $8 million, respectively. Estimated reductions for the
year ended December 31, 2000, are expected to be incurred in the
fourth quarter. Even after these reductions, earnings from affordable
housing will continue to be positive for the next five years.
These projections are based on the latest information available but
the ultimate amount and timing of actual reductions made could be
significantly different from the above estimates. Also, based on
preliminary external information, management believes the assets could
be sold at a loss significantly lower than the accumulated reductions
to be recorded during the next five years.
HOME SERVICE SOLUTIONS INC. NONREGULATED OPPORTUNITIES
Home Service Solutions Inc. (HSS), a wholly-owned subsidiary of KCPL,
pursues nonregulated business ventures primarily in residential
services. At September 30, 2000, HSS had a 49% ownership in R.S.
Andrews Enterprises, Inc. (RSAE), a consumer services company in
Atlanta, Georgia. Additionally, Worry Free Service, Inc., a wholly-
owned subsidiary of HSS, assists residential customers in obtaining
financing primarily for heating and air conditioning equipment.
KCPL's investment in HSS was $46.3 million as of September 30, 2000,
and December 31, 1999. HSS' loss for the nine months ended September
30, 2000, totaled $12.6 million compared to $0.4 million for the nine
months ended September 30, 1999. HSS' increased loss for the nine
months ended September 30, 2000, was primarily due to writing down its
investment in RSAE to net realizable value of $8 million. At
September 30, 2000, KCPL's accumulated losses were $17.1 million on
its investment in HSS.
RESULTS OF OPERATIONS
Three-month period: Three months ended September 30, 2000, compared
with three months ended September 30, 1999
Nine-month period: Nine months ended September 30, 2000, compared
with nine months ended September 30, 1999
Twelve-month period: Twelve months ended September 30, 2000, compared
with twelve months ended September 30, 1999
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EARNINGS OVERVIEW
Three months Nine months Twelve months
ended ended ended
September 30 September 30 September 30
Earnings per share (EPS) summary 2000 1999 2000 1999 2000 1999
Core utility $0.70 $0.60 $1.13 $1.19 $1.29 $1.39
KLT Inc. 1 0.78 (0.01) 0.81 (0.02) 0.81 (0.09)
HSS Inc. (0.17) - (0.20) (0.01) (0.26) (0.01)
Cumulative effect of changes
in pension accounting - - 0.49 - 0.49 -
Reported Consolidated EPS $1.31 $0.59 $2.23 $1.16 $2.33 $1.29
For the Periods Ended
September 30, 2000
Three Nine Twelve
Months Months Months
Increase (decrease)
Factors impacting the change in
core utility EPS
Merger impact $ 0.01 $ 0.03 $ 0.10
July 1999 heat storm 0.18 0.18 0.18
1999 write off of start up costs - 0.02 0.02
Retail customers' rate reduction in
Missouri effective March 1, 1999 - (0.02) (0.05)
Increased cost of gas and oil (0.06) (0.08) (0.08)
Replacement power insurance and
options to purchase capacity (0.06) (0.08) (0.08)
Other (see discussion below) 0.03 (0.11) (0.19)
Total $ 0.10 $(0.06) $(0.10)
1 See KLT earnings per share analysis on page 30.
Contributing to the other factors impacting core utility EPS
(reflected in the table above) are the following:
- In all periods, the impact of the unavailability of Hawthorn No.5
(see discussion on page 35).
- In all periods, increased retail sales primarily due to warmer
summer weather in 2000 as compared to 1999 and continued load growth.
- In all periods, increased natural gas-fired generation as a
percentage of total generation from fossil plants because of the
addition of Hawthorn Nos. 6 through 9. Natural gas has a
significantly higher fuel cost per mwh of generation than coal or
nuclear fuel.
Effective January 1, 2000, KCPL changed its methods of amortizing
unrecognized net gains and losses and determination of expected return
related to its accounting for pension expense. Accounting principles
required KCPL to record the cumulative effect of these changes in the
three months ended March 31, 2000, increasing common stock earnings by
$0.49 per share or $30.1 million. Additionally, the changes in
pension accounting will reduce pension expense by $8.2 million for the
year 2000, increasing earnings per share by $0.08 per share. Three-
fourths of this reduction in pension expense was allocated to the nine
months ended September 30, 2000. See Note 1 to the Consolidated
Financial Statements for further information.
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MEGAWATT-HOUR (MWH) SALES AND OPERATING REVENUES
Sales and revenue data:
(revenue change in millions)
For the Periods ended September 30, 2000
Three Months Nine Months Twelve Months
Mwh Revenues Mwh Revenues Mwh Revenues
Increase (decrease)
Retail Sales:
Residential 13 % $ 15 7 % $ 18 5 % $ 18
Commercial 10 % 9 7 % 14 6 % 14
Industrial (6) % - (1) % 3 (2) % 1
Other 9 % - 10 % - 8 % -
Total Retail 8 % 24 5 % 35 4 % 33
Sales for Resale:
Bulk Power Sales 1 % (2) (14) % (4) (8) % (3)
Other 6 % - 4 % - 5 % -
Total 8 % 22 3 % 31 3 % 30
Other Revenues 2 3 3
Total Operating
Revenues $ 24 $ 34 $ 33
In 1999 the Missouri Public Service Commission (MPSC) approved a
stipulation and agreement that called for KCPL to reduce its annual
Missouri electric revenues by 3.2%, or about $15 million effective
March 1, 1999. Revenues decreased by approximately $2 million for the
nine-month period and $5 million for the twelve-month period as a
result of the Missouri rate reduction. As part of the stipulation and
agreement, KCPL, MPSC Staff or the Office of Public Counsel will not
file any case with the Commission requesting a general increase or
decrease, rate credits or rate refunds that would become effective
prior to March 1, 2002.
For all periods, retail mwh sales increased primarily due to warmer
summer weather and continued load growth. Load growth consists of
higher usage-per-customer and the addition of new customers. Less
than 1% of revenues include an automatic fuel adjustment provision.
KCPL set a record peak demand for the consumption of energy of 3,374
megawatts on August 28, 2000, which replaced the record of 3,312
megawatts set on August 16, 2000. This reflects the higher than
normal megawatt demand on the system during the summer of 2000.
Bulk power sales vary with system requirements, generating unit and
purchased power availability, fuel costs and requirements of other
electric systems. Bulk power mwh sales increased for the three-month
period, even with increased retail mwh sales, due to the additions of
Hawthorn Nos. 7, 8 and 9 during summer 2000. The unavailability of
Hawthorn No. 5 contributed to the decreased bulk power mwh sales in
the nine- and twelve-month periods. Wolf Creek's tenth maintenance
and refueling outage during the second quarter of 1999 contributed to
reduced bulk power mwh sales for the nine and twelve months ended
September 30, 1999.
Future mwh sales and revenues per mwh could be affected by national
and local economies, weather, customer conservation efforts and
availability of generating units. Competition, including alternative
sources of energy, such as natural gas, co-generation, IPPs and other
electric utilities, may also affect future sales and revenues.
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<PAGE>
FUEL AND PURCHASED POWER
Percentage change for the period
Combined fuel
and purchased
power expenses Total MWH sales
Increase(Decrease)
Three-month period 2 % 8 %
Nine-month period 10 % 3 %
Twelve-month period 10 % 3 %
Fuel costs per mmBtu of generation increased 27% for the three-month
period, 16% for the nine-month period and 13% for the twelve-month
period primarily because of the addition of 294 megawatts of natural
gas-fired generation. This increase in generation capacity replaced
more expensive purchased power contracts. Natural gas-fired
generation increased as a percentage of total generation by 6% for the
three-month period, 4% for the nine-month period and 3% for the twelve-
month period. Natural gas has a significantly higher cost per mmBtu
of generation than coal or nuclear fuel. In addition, the cost of
natural gas increased considerably in all periods due to market price
increases.
For all periods, the unavailability of Hawthorn No. 5 resulted in
increased purchased power expenses. In addition, excluding the impact
of the July 1999 heat storm, the cost per mwh of purchased power
increased in the nine- and twelve-month periods primarily due to the
addition of new natural gas-fired generation throughout the country.
In all periods, the cost per mwh for purchased power was significantly
higher than the fuel cost per mwh of generation.
As a result of the intense and prolonged heat in the Midwest during
the last half of July 1999, KCPL incurred approximately $18 million in
higher costs, including purchased power expenses, net of the increased
revenues.
We continually evaluate the need for risk mitigation measures in order
to minimize KCPL's financial exposure to, among other things, spikes
in wholesale power prices during periods of high demand. Replacement
power insurance and options to purchase capacity totaled $6 million or
$0.06 per share for the three-month period and $8 million or $0.08 per
share for the nine- and twelve-month periods.
Nuclear fuel costs per mmBtu decreased 5% for the twelve-month period
and remained substantially less than the mmBtu price of coal. Nuclear
fuel costs per mmBtu averaged about 53% of the mmBtu price of coal for
the twelve months ended September 30, 2000, and 57% of the mmBtu price
of coal for the twelve months ended September 30, 1999. We expect the
price of nuclear fuel to remain fairly constant through the year 2003.
During the twelve months ended September 30, 2000, fossil plants
represented about 69% and the nuclear plant about 31% of total
generation. For the twelve months ended September 30, 1999, fossil
plants represented about 71% and the nuclear plant about 29% of total
generation.
The cost of coal per mmBtu increased 2% for the twelve-month period
partially because of the unavailability of Hawthorn No. 5. The cost
of coal per mmBtu at Hawthorn No. 5 was lower than the average cost of
coal per mmBtu at most of KCPL's other coal-fired plants. While we
expect a slight increase in the cost of coal in 2001, KCPL's coal
procurement strategies continue to provide coal costs below the
regional average.
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OTHER OPERATION AND MAINTENANCE EXPENSES
Combined other operation and maintenance expenses increased about $9
million or 13% for the three-month period, $21 million or 11% for the
nine-month period and about $22 million or 8% for the twelve-month
period primarily due to the following:
- For all periods, non-station production expenses increased
because of the cost of replacement power insurance incurred during the
summer months of 2000 and energy costs incurred during the test runs
at Hawthorn Nos. 7, 8 and 9.
- For all periods, non-fuel production operations increased due to
operating and lease expenses for Hawthorn No. 6, which was placed into
commercial operation in July 1999, and higher operating expenses at
certain generating units.
- For all periods, administrative and general expenses increased
primarily due to increased salary expenses for implementation of
system applications partially offset in the nine-month period by
KCPL's share of a property insurance refund related to Wolf Creek and
in all periods due to the impact of the changes in pension accounting.
- For all periods, production maintenance expenses vary primarily
due to the timing of scheduled maintenance at KCPL's generating units.
For all periods, distribution maintenance expenses increased primarily
due to maintenance costs incurred on overhead distribution lines as a
result of July and August 2000 storm damage.
- For all periods, customer record keeping expenses increased
primarily due to computer software consulting services. For the
twelve-month period, meter reading expenses increased because of
higher payments for automated meter reading primarily due to
additional meters being read and a 1999 rate increase for automated
reading services.
- For all periods, other operating expenses decreased because of
the October 1999 sale of accounts receivable to KCPL Receivable
Corporation. Bad debt expenses associated with the receivables was
reflected as other operating expenses prior to the sale and is
reflected as a miscellaneous deduction subsequent to the sale.
- For all periods, Hawthorn No. 5's other operation and maintenance
expenses decreased because of the boiler explosion in February 1999.
We continue to emphasize new technologies, improved work methodology
and cost control. We continuously improve our work processes to
increase efficiencies and improve operations.
DEPRECIATION
The increase in depreciation expense for all periods reflected
increased depreciation of capitalized computer software for internal
use and normal increases in depreciation from capital additions.
These increases were partially offset in the nine- and twelve-month
periods by a decrease in depreciation expense because Hawthorn No. 5
was partially retired due to the February 1999 explosion.
TAXES
Operating income taxes increased for the three-month period reflecting
higher taxable operating income. Operating income taxes decreased for
the nine- and twelve-month periods reflecting lower taxable operating
income.
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<PAGE>
Components of general taxes:
Three months Nine months Twelve months
ended ended ended
September 30 September 30 September 30
2000 1999 2000 1999 2000 1999
(thousands)
Property $ 10,101 $ 10,741 $ 30,782 $ 32,224 $ 41,292 $ 42,097
Gross receipts 14,578 14,158 32,514 32,077 41,653 41,295
Other 2,661 2,519 7,257 7,019 9,289 9,379
Total $ 27,340 $ 27,418 $ 70,553 $ 71,320 $ 92,234 $ 92,771
OTHER INCOME AND (DEDUCTIONS)
KLT summarized operations:
Three months Nine months Twelve months
ended ended ended
September 30 September 30 September 30
2000 1999 2000 1999 2000 1999
(millions, except for earnings per share)
Miscellaneous income and
(deductions) - net $ 68.3 $ (8.3) $ 56.8 $(26.0) $ 48.2 $(40.2)
Income taxes (16.1) 10.4 4.4 33.8 15.8 46.6
Interest charges (4.0) (2.8) (11.2) (9.0) (14.1) (12.0)
Net income (loss) $ 48.2 $ (0.7) $ 50.0 $ (1.2) $ 49.9 $ (5.6)
KLT earnings (loss) per
share $ 0.78 $(0.01) $ 0.81 $(0.02) $ 0.81 $(0.09)
KLT earnings per share analysis:
Three months Nine months Twelve months
ended ended ended
September 30 September 30 September 30
2000 1999 2000 1999 2000 1999
(earnings per share)
KLT normal operations $ 0.78 $ 0.10 $ 1.00 $ 0.23 $ 1.08 $ 0.29
Write-off of CellNet
stock - - (0.05) - (0.05) -
Sale of Nationwide
Electric - 0.20 - 0.20 - 0.20
Write down of Lyco
investment - (0.03) - (0.03) - (0.03)
Write off of a note
receivable - (0.05) - (0.05) - (0.05)
KLT Power transactions -
1998 - - - - - (0.06)
KLT Telecom - Digital
Teleport Inc. - (0.06) (0.14) (0.17) (0.21) (0.22)
KLT Telecom - Telemetry
Solutions - (0.17) - (0.20) (0.01) (0.22)
KLT Earnings(Loss)
per share $ 0.78 $(0.01) $ 0.81 $(0.02) $ 0.81 $(0.09)
KLT normal operations earnings per share increased $0.62 in all
periods as a result of KLT Gas' sale of producing natural gas
properties to Evergreen Resources, Inc. in September 2000. KLT Gas'
business strategy is to acquire and develop early stage coal bed
methane properties and then divest properties in order to create
shareholder value. Normal operations also increased primarily due to
improved earnings from its investments in gas production and
development, and income from Strategic Energy, LLC.
In March 2000, KLT wrote off its investment of $4.8 million before
taxes in CellNet Data Systems Inc. Through December 31, 1999, $3.8
million before taxes, or $0.04 per share, of this loss had
30
<PAGE>
been reported as an unrealized loss in the Consolidated Statements of
Comprehensive Income. In September 1999, KLT Energy Services sold
100% of the stock it held in Nationwide Electric, Inc., resulting in a
gain of $20 million and increasing EPS by $0.20 for the three, nine
and twelve months ended September 30, 1999.
KLT recorded equity losses on its investment in DTI Holdings, Inc. of
approximately $14 million for the nine months ended September 30,
2000, and $21 million for the twelve months ended September 30, 2000.
At June 30, 2000, the equity investment in DTI Holdings, Inc. had been
completely written down.
In September 1999, KLT Telecom wrote off its investment in Telemetry
Solutions. Both the write-off of the investment ($0.13 per share) and
the operating losses incurred prior to the write-off are included on
the KLT Telecom - Telemetry Solutions line in the earnings per share
table above.
Miscellaneous income and (deductions) - net:
Three months Nine months Twelve months
ended ended ended
September 30 September 30 September 30
2000 1999 2000 1999 2000 1999
(millions)
Merger-related expenses $ - $ (1.0) $ (0.2) $ (2.1) $ (1.3) $ (2.6)
From table on page 30 68.3 (8.3) 56.8 (26.0) 48.2 (40.2)
Other (21.2) (3.1) (28.4) (6.6) (35.8) (7.4)
Total Miscellaneous
income and (deductions)
- net $ 47.1 $(12.4) $ 28.2 $(34.7) $ 11.1 $(50.2)
Other increased $3 million in the three-month period, $4 million in
the nine-month period, and $5 million in the twelve-month period
because of a change in classification of bad debt expense. After the
new agreement in October 1999 to sell accounts receivable to KCPL
Receivable Corporation, bad debt expense was recorded to this
category. Prior to the sale, bad debt expense was charged to other
operating expense. Further, HSS' operations resulted in increased
deductions of approximately $17.0 million for the three-month period,
$20.2 million for the nine-month period and $24.9 million for the
twelve-month period primarily due to writing down its investment in
R.S. Andrews Enterprises, Inc. by $15 million to net realizable value
of $8 million and equity losses on this investment prior to the
writedown.
Other Income and (Deductions) - Income taxes
Other Income and (Deductions) - Income taxes for all periods reflects
the tax impact on total miscellaneous income and (deductions) - net.
In addition, KLT accrued tax credits of $21 million for the nine
months ended September 30, 2000 and 1999. KLT accrued tax credits of
$28 million for the twelve months ended September 30, 2000 and $27
million for the twelve months ended September 30, 1999.
INTEREST CHARGES
Long-term debt interest expense increased for all periods reflecting
higher average levels of outstanding long-term debt and higher average
interest rates on variable rate debt. The higher average levels of
debt primarily reflect $200 million of unsecured, floating rate medium-
term notes issued by KCPL in March 2000 partially offset by scheduled
debt repayments by KCPL. In addition, KLT Gas made borrowings on a
new bank credit agreement entered in the first quarter of 2000.
However, the KLT Gas borrowings were repaid in September 2000
primarily with proceeds from the
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September 2000 sale of producing natural gas properties to Evergreen
Resources, Inc. and also with funds from increased borrowings on the KLT
Inc. bank credit agreement. KLT also made scheduled debt repayments on
its affordable housing notes partially offsetting the increase in average
levels of outstanding long-term debt.
Short-term debt interest expense increased for all periods because
KCPL had higher average levels of outstanding short-term debt. KCPL
had $222 million of commercial paper outstanding at September 30,
2000, compared to $85 million at September 30, 1999.
We use interest rate swap and cap agreements to limit the volatility
in interest expense on a portion of KCPL's variable-rate, long-term
debt. Although these agreements are an integral part of interest rate
management, the incremental effect on interest expense and cash flows
is not significant. We do not use derivative financial instruments
for speculative purposes.
Allowance for Funds Used During Construction
Allowance for funds used during construction (allowance for equity
funds and borrowed funds) increased during all periods because of
increased expenditures for construction projects at the Hawthorn
generating station. Allowance for borrowed funds used during
construction increased more than equity funds used during construction
in all periods due to higher balances of outstanding short-term debt
during the periods. FERC guidelines for calculating the allowance
used during construction require consideration of the level of
outstanding short-term debt before equity funds.
WOLF CREEK
Wolf Creek is one of KCPL's principal generating units, representing
about 17% of KCPL's generating capacity, excluding the Hawthorn No. 5
generating unit. The plant's operating performance has remained
strong over the last three years, contributing about 28% of the annual
mwh generation while operating at an average capacity of 91%.
Furthermore, Wolf Creek has the lowest fuel cost per mmBtu of any of
KCPL's generating units.
We accrue the incremental operating, maintenance and replacement power
costs for planned outages evenly over the unit's operating cycle,
normally 18 months. As actual outage expenses are incurred, the
refueling liability and related deferred tax asset are reduced. Wolf
Creek's eleventh refueling and maintenance outage, estimated to be a
35-day outage, began September 30, 2000, and is expected to be
completed on schedule in November 2000.
Wolf Creek's tenth refueling and maintenance outage, estimated to be a
40-day outage, began April 3, 1999, and was completed May 9, 1999.
Actual costs of the 1999 outage were $1 million less than the
estimated and accrued costs for the outage primarily because the 36-
day outage was shorter than estimated. In fact, it was the shortest
refueling and maintenance outage in Wolf Creek's history.
Ownership and operation of a nuclear generating unit exposes KCPL to
risks regarding decommissioning costs at the end of the unit's life
and to potential retrospective assessments and property losses in
excess of insurance coverage.
ENVIRONMENTAL MATTERS
KCPL's operations must comply with federal, state and local
environmental laws and regulations. The generation and transmission
of electricity produces and requires disposal of certain products and
by-products, including polychlorinated biphenyl (PCBs), asbestos and
other potentially
32
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hazardous materials. The Federal Comprehensive Environmental Response,
Compensation and Liability Act (the Superfund law) imposes strict joint
and several liability for those who generate, transport or deposit
hazardous waste. This liability extends to the current property owner,
as well as prior owners, back to the time of contamination.
We continually conduct environmental audits to detect contamination
and ensure compliance with governmental regulations. However,
compliance programs need to meet new and future environmental laws, as
well as regulations governing water and air quality, including carbon
dioxide emissions, nitrogen oxide emissions, hazardous waste handling
and disposal, toxic substances and the effects of electromagnetic
fields. Therefore, compliance programs could require substantial
changes to operations or facilities (see Note 6 to the Consolidated
Financial Statements).
SIGNIFICANT CONSOLIDATED BALANCE SHEET CHANGES (September 30, 2000
compared to December 31, 1999)
- Utility plant - construction work in process increased $118.2
million primarily due to increases of $169.6 million at Hawthorn No. 5
for rebuilding the boiler partially offset by amounts related to the
construction of Hawthorn Nos. 7, 8 and 9 which were placed into
commercial service in 2000. Hawthorn Nos. 7, 8 and 9 had $45.1
million in construction work in process at December 31, 1999.
- Investments and nonutility property decreased $59.2 million
primarily due to a $14.9 million writedown by HSS of its investment in
R.S. Andrews Enterprises, Inc. and a $46.4 million decrease in KLT's
investments including:
- $ 25.3 million decrease in natural gas property and investments,
- $ 7.3 million decrease due to increased ownership in Strategic
Energy, L.L.C. (SEL) resulting in a change in the accounting for
SEL from the equity method to consolidation,
- $ 14.0 million decrease due to equity losses from the investment
in Digital Teleport Inc.
- Receivables increased $56.6 million primarily due to $11.8
million in receivables recorded by KLT due to the consolidation of
SEL, a $5.4 million increase in receivables associated with KLT Gas,
and a $44.8 million increase in a receivable from KCPL Receivable
Corporation. Because of seasonally higher retail sales in September
2000 versus December 1999, there were higher customer accounts
receivable available to sell to KCPL Receivable Corporation. These
increases were partially offset by decreased receivables of $8.5
million from partners in jointly-owned plants.
- Equity securities increased $114.7 million due to $100.0 million
of preferred stock and $6.0 million in common stock received as
proceeds in the sale of natural gas properties to Evergreen Resources,
Inc. by KLT Gas in September 2000 and $4.8 million of a publicly-
traded common stock purchased by KLT Energy Services in September 2000
under an option agreement. These common stock holdings increased in
value by $3.9 million as of September 30, 2000.
- Prepaid pension costs increased $62.0 million because KCPL
changed its methods of accounting for pension expenses (see Note 1 to
the Consolidated Financial Statements).
- Other deferred charges increased $13.5 million primarily due to
increased goodwill resulting from KLT's purchase of an additional
ownership interest in SEL and the change in accounting for SEL from
the equity method to consolidation.
- Capitalization increased $304.1 million primarily due to KCPL's
issuance of $200 million of unsecured medium-term notes. Proceeds
from the issuance were used to repay outstanding commercial paper.
Additionally, KCPL recorded net income in excess of dividend payments
of $60.8 million, including $30.1 million for the cumulative effect of
changes in pension accounting. KLT's long-term debt increased $91.1
million primarily due to renegotiating KLT's bank credit agreement
from short-term to long-term. Partially
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offsetting these increases in capitalization, KCPL reclassified $50.0
million of long-term debt to current maturities.
- Notes payable to banks decreased $24.7 million because KLT Gas
repaid its notes payable to banks with proceeds from borrowings on its
new long-term bank credit agreement.
- Commercial paper increased $8.1 million because of additional
commercial paper borrowings as expenditures exceeded cash receipts.
The $200.0 million repayment with proceeds from the long-term debt
issuance mostly offset these increased borrowings.
- Current maturities of long-term debt decreased $54.9 million
primarily reflecting the renegotiating of KLT's bank credit agreement
from short-term to long-term, which was $61.0 million at December 31,
1999, partially offset by an $8.0 million increase in the current
portion of KCPL's medium-term notes.
- Accounts payable increased $45.2 million primarily due to the
timing of payments for expenditures associated with the reconstruction
of Hawthorn No. 5, $5.9 million in accounts payable recorded by KLT
due to the consolidation of SEL, and $14.7 million in accounts payable
recorded by KLT Gas for the current portion of the cost to reduce its
hedge position on natural gas sales.
- Accrued taxes increased $75.3 million primarily due to taxes
accrued on the proceeds of the sale of producing natural gas
properties by KLT Gas and the timing of income tax and property tax
payments.
- Deferred income taxes increased by $3.3 million mostly due to a
$19.2 million increase in deferred taxes associated with the
cumulative effect of changes in pension accounting offset by deferred
tax assets related to equity losses incurred by KLT Telecom on its
investment in DTI and the write down of HSS' investment in R.S.
Andrews Enterprises, Inc.
CAPITAL REQUIREMENTS AND LIQUIDITY
KCPL's liquid resources at September 30, 2000, included cash flows
from operations; $100 million of registered but unissued, unsecured
medium-term notes; and $54 million of unused bank lines of credit.
The unused lines consisted of KCPL's short-term bank lines of credit
of $33 million and KLT's bank credit agreement of $21 million.
KCPL continues to generate positive cash flows from operating
activities. Individual components of working capital will vary with
normal business cycles and operations. Also, the timing of the Wolf
Creek outage affects the refueling outage accrual, deferred income
taxes and amortization of nuclear fuel. The increase in cash from
operating activities for the nine-month period was primarily due to
changes in certain working capital items (as detailed in Note 2 to the
Consolidated Financial Statements). In addition, the buyout of a fuel
contract in 1999; the refund of amounts accrued for the Kansas rate
refunds; and a payment of $19 million in 1999 to the IRS to settle
certain outstanding issues decreased cash flows from operating
activities for the nine months ended September 30, 1999. Partially
offsetting these changes for the nine-month period, income before non-
cash expenses (income is before the cumulative effect of changes in
accounting principles) decreased by about $3 million.
Cash from operating activities increased for the twelve-month period
primarily due to changes in certain working capital items (as detailed
in Note 2 to the Consolidated Financial Statements). Also, the buyout
of a fuel contract in 1999 and a payment of $19 million in 1999 to the
IRS to settle certain outstanding issues decreased cash flows from
operating activities for the twelve months ended September 30, 1999.
In addition, contributing to the increased cash from operating
activities for the twelve-month period, income before non-cash
expenses (income is before the cumulative effect of changes in
accounting principles) increased by about $8 million.
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Cash used for investing activities varies with the timing of utility
capital expenditures and purchases of investments and nonutility
property. Cash used for investing activities increased for the nine-
month period primarily reflecting increased utility capital
expenditures for construction projects at the Hawthorn generating
station, increased purchases by KLT of natural gas investments and
KLT's exercise of its option to acquire common stock of a publicly-
traded company. Cash used for investing activities increased for the
twelve-month period primarily because of increased utility capital
expenditures. The receipt of $50 million of partial insurance
recoveries related to Hawthorn No. 5 and proceeds from the September
sale of KLT Gas properties to Evergreen Resources, Inc. reduced cash
used for investing activities in the nine and twelve months ended
September 30, 2000. Proceeds from the sale of Nationwide Electric,
Inc. stock by KLT Energy Services and $80 million in partial insurance
recoveries related to Hawthorn No. 5 reduced cash used for investing
activities in the nine and twelve months ended September 30, 1999.
Cash from financing activities increased for the nine- and twelve-
month periods primarily because KCPL issued $200 million of unsecured
medium-term notes in the first quarter of 2000 and KLT Inc. increased
borrowings on its bank credit agreement. KLT Gas borrowed $51 million
on a new bank credit agreement and repaid the amount in full during
the nine months ended September 30, 2000. Furthermore, KCPL's short-
term borrowings increased for the nine- and twelve-month periods
however the increase in the nine-month period was more than offset by
the repayment with proceeds from the unsecured medium-term note
issuance. Partially offsetting these increases, KCPL's scheduled debt
repayments were higher in both periods. In the twelve-month period,
KCPL redeemed $50 million of preferred stock.
On October 20, 2000, Standard and Poor's Corporation lowered its long-
term credit rating on KCPL to A- from A and lowered its short-term
credit rating to A-2 from A-1. The outlook was changed from negative
to stable. Moody's Investors Service's long-term credit rating on
KCPL is A1 and its short-term credit rating is P-1.
KCPL's common dividend payout ratio was 90% (excluding the cumulative
effect of changes in accounting principles) for the twelve months
ended September 30, 2000, and 129% for the twelve months ended
September 30, 1999.
We expect KCPL to meet day-to-day operations, utility construction
requirements (excluding new generating capacity) and dividends with
internally-generated funds. But KCPL might not be able to meet these
requirements with internally-generated funds because of the effect of
inflation on operating expenses, the level of mwh sales, regulatory
actions, compliance with future environmental regulations and the
availability of generating units (see Hawthorn No. 5 discussion
below). The funds needed to retire $535 million of maturing debt
through the year 2004 will be provided from operations, refinancings
and/or short-term debt. KCPL may issue additional debt and/or
additional equity to finance growth or take advantage of new
opportunities.
HAWTHORN NO. 5
On February 17, 1999, an explosion occurred at the 476-megawatt, coal-
fired Hawthorn Generating Station Unit No. 5 (Hawthorn No. 5). The
boiler, which was not operating at the time, was destroyed, but there
were no injuries. KCPL's investigation indicates that an explosion of
accumulated gas in the boiler's firebox caused the damage. KCPL has
property insurance coverage with limits of $300 million. Through
September 30, 2000, KCPL has received $130 million in insurance
recoveries under this coverage and has recorded the recoveries in
Utility Plant - accumulated depreciation on the consolidated balance
sheet.
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We have entered into a contract for construction of a new coal-fired
boiler to permanently replace the lost capacity of Hawthorn No. 5.
Expenditures for rebuilding Hawthorn No. 5 were $36 million in 1999
and are projected to be $210 million in 2000 and $73 million in 2001.
These amounts have not been reduced by the insurance proceeds received
to date or future proceeds to be received. Construction on the new
unit, expected to have a capacity of 550 megawatts, is progressing and
is on target to be in-service in June 2001.
We believe that we can secure sufficient power to meet the energy
needs of KCPL's customers during the Hawthorn No. 5 reconstruction.
Hawthorn No. 6, a 141-megawatt, gas-fired combustion turbine was
accepted under a lease arrangement and placed into commercial
operation in July 1999. In addition, construction of Hawthorn Nos. 7,
8 and 9 has been completed and the units were placed into commercial
use this summer. These three units are capable of generating 294
megawatts of capacity.
Assuming normal weather and operating conditions, we estimate
additional expenses (before tax) of $31 million for the year 2000 and
$3 million for the year 2001 due to the unavailability of Hawthorn No.
5. This estimate mainly includes the effect of increased net
replacement power costs, reduced bulk power sales and reduced fuel
expense at Hawthorn No. 5.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
KCPL is exposed to market risks associated with commodity price
and supply, interest rates and equity prices. Market risks are
handled in accordance with established policies, which may
include entering into various derivative transactions. In the
normal course of business, KCPL also faces risks that are either
non-financial or non-quantifiable. Such risks principally
include business, legal, operational and credit risk and are not
represented in the following analysis.
Commodity Risk
KCPL and KLT, through its majority-owned subsidiary, Strategic
Energy, L.L.C. (SEL), engage in the wholesale and retail
marketing of electricity, and accordingly, are exposed to risk
associated with the price of electricity.
KCPL's wholesale operations include the physical delivery and
marketing of power obtained through its generation capacity and
long, intermediate and short-term contracts. KCPL maintains a
net positive supply of energy and capacity, through its
generation assets and power purchase and lease agreements, to
protect it from the potential operational failure of one of its
owned or contracted power generating units. Including the
proposed capacity for the rebuilt Hawthorn No. 5, KCPL's expected
reserve margin will approximate 16% of its capacity. However, as
necessary, KCPL enters into power purchase agreements with the
objective of obtaining low-cost energy to meet its physical
delivery obligations to its customers. We implemented price and
volume risk mitigation measures to protect KCPL in the event of a
hot summer period. We continually evaluate the need for risk
mitigation measures in order to minimize KCPL's financial
exposure to, among other things, spikes in wholesale power prices
during periods of high demand.
KCPL's sales include the regulated sales of electricity to its
retail customers and bulk power sales of electricity in the
unregulated, wholesale market. There is a moratorium on changes
to Missouri retail rates until 2002. A hypothetical 10% increase
in the cost of purchased power would have resulted in a $9
million decrease in pretax earnings in the twelve months ended
September 30, 2000. A hypothetical 10% increase in gas and oil
fuel costs for generation would have resulted in a $3 million
decrease in pretax earnings in the twelve months ended September
30, 2000. KCPL has approximately 80% of its forecasted coal
requirements under contract for the year 2001.
SEL provides power supply coordination services purchasing
electricity and reselling it to retail end users. SEL aggregates
retail customers into economic purchasing pools, develops
predictive load models for the pools and then builds a portfolio
of suppliers to provide the pools with reliable power at the
lowest possible cost. SEL has entered into significant supply
contracts with dispatchable and firm power agreements through the
year 2005 that mitigates most of the commodity risk associated
with its power supply coordination services.
KLT, through its wholly-owned subsidiary, KLT Gas Inc., entered
into two firm gas sales agreements and three financial hedge
instruments to mitigate its exposure to market price fluctuations
on approximately 85% of its daily gas sales. After the September
and October 2000 sales of producing natural gas properties, KLT
reduced its hedge position on gas sales at a present value cost of
$24.9 million. For further discussion of these agreements see
Note 9 to the Consolidated Financial Statements.
We continue to believe that KCPL and KLT's business philosophy,
performance measurement and other management activities are not
consistent with that of a "trading organization".
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Commitments to purchase and sell energy and energy-related products
are carried at cost. We report the revenue and expense associated
with all energy contracts at the time the underlying physical
transaction closes consistent with industry practice and the business
philosophy of generating/purchasing and delivering physical power
to customers.
Interest Rate Risk
KCPL and KLT use a combination of fixed rate and variable rate
debt. Interest rate swap and cap agreements may be entered into
with highly rated financial institutions to reduce interest rate
exposure on variable rate debt when deemed appropriate, based
upon market conditions. Using outstanding balances and
annualized interest rates as of September 30, 2000, a
hypothetical 10% increase in the interest rates associated with
variable rate debt would have resulted in a $5 million decrease
in pretax earnings for the twelve-months ended September 30,
2000.
Equity Price Risk
KCPL maintains trust funds, as required by the Nuclear Regulatory
Commission (NRC), to fund certain costs of decommissioning its
nuclear plant. We do not expect nuclear plant decommissioning to
start before 2025. As of September 30, 2000, these funds were
invested primarily in domestic equity securities and fixed income
securities and are reflected at fair value on the Consolidated
Balance Sheets. The mix of securities is designed to provide
returns to be used to fund decommissioning and to compensate for
inflationary increases in decommissioning costs. However the
equity securities in the trusts are exposed to price fluctuations
in equity markets, and the value of fixed rate fixed income
securities are exposed to changes in interest rates. Investment
performance and asset allocation are periodically reviewed. A
hypothetical increase in interest rates resulting in a
hypothetical 10% decrease in the value of the fixed income
securities would have resulted in a $3 million reduction in the
value of the decommissioning trust funds. A hypothetical 10%
decrease in equity prices would have resulted in a $2 million
reduction in the fair value of the equity securities as of
September 30, 2000. KCPL's exposure to equity price market risk
associated with the decommissioning trust funds is in large part
mitigated due to the fact that KCPL is currently allowed to
recover its decommissioning costs in its rates.
KLT owns common stock of certain companies with a cost basis of
$11 million. These equity securities are considered trading
securities and as such have been recorded at their fair value of
about $15 million at September 30, 2000. These equity securities
are exposed to price fluctuations in equity markets. A
hypothetical 10% decrease in equity prices would have resulted in
a $1.5 million reduction in the fair value of these equity
securities as of September 30, 2000.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
DISCRIMINATION CLAIMS. Three law firms joined together
and filed eight cases representing a number of plaintiffs
alleging race discrimination and hostile work environment
against KCPL in the United States District Court, Western
District of Missouri. Three of these cases were settled or
tried with outcomes in amounts which were not material to
results of operations. Two of these cases, PATRICIA S. LANG,
ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED V.
KANSAS CITY POWER & LIGHT COMPANY, and CARLOS SALAZAR, ET AL.
V. KANSAS CITY POWER & LIGHT COMPANY, were previously
disclosed in the Company's report on Form 10-K for the period
ended December 31, 1999.
In the PATRICIA S. LANG case, plaintiff seeks to bring a
claim of race discrimination as a class action on behalf of
herself and all other current and former African American
employees from May 11, 1994 to the present. The complaint
alleges that plaintiff and members of the proposed class are
subjected to a hostile and offensive working environment,
denied promotional opportunities, compensated less than
similarly situated or less qualified Caucasian employees, and
are disciplined and/or terminated when they complain of
racially discriminatory practices at KCPL. The complaint
seeks a money award for alleged lost wages and fringe
benefits, alleged wage differentials, as well as punitive
damages, attorneys fees and costs of the action together with
an injunction prohibiting KCPL from retaliating against
anyone participating in the litigation and continuing
monitoring of KCPL's compliance with anti-discrimination
laws. Additional plaintiffs were added to the case during
the second quarter. It is not possible at this time to
evaluate the materiality of the relief sought. We believe,
however, that we will be able to successfully defend the
certification of any class action. In the CARLOS SALAZAR
case, the request for class action certification has been
withdrawn.
Management intends to vigorously defend the remainder of
these cases, but it is possible that the total costs
(including legal costs) associated with these cases and
potential related unasserted claims could be in an amount
material to the Company's financial condition or results of
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
Exhibit 10(a) Agreement For Purchase and Sale by and between
Apache Canyon Gas, L.L.C., and Evergreen
Resources, Inc. dated September 19, 2000.
Exhibit 10(b) Agreement For Purchase and Sale by and between
Apache Canyon Gas, L.L.C., and Evergreen
Resources, Inc. dated September 19, 2000.
Exhibit 10(c) Amended and Restated Agreement between Richard
D. Weinstein and KLT Telecom, Inc., dated as
of September 27, 2000
Exhibit 10(d) Purchase and Sale Agreement between Apache
Canyon Gas, L.L.C. and Barrett Resources
Corporation dated October 13, 2000
Exhibit 27 Financial Data Schedule (for the nine months
ended September 30, 2000)
REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the three months
ended September 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
KANSAS CITY POWER & LIGHT COMPANY
Dated: October 30, 2000 By: /s/Drue Jennings
(Drue Jennings)
(Chief Executive Officer)
Dated: October 30, 2000 By: /s/Neil Roadman
(Neil Roadman)
(Principal Accounting Officer)
