Attached files
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| 8-K - JOINT FORM 8-K - KANSAS CITY POWER & LIGHT CO | f8kirdeck.htm |
Exhibit 99.1
June 2010 Investor Presentation
Great Plains Energy
Investor Presentation
June 2010
Investor Presentation
June 2010
2
Terry Bassham
Executive Vice President
Finance & Strategic Development
and Chief Financial Officer
Ellen Fairchild
Senior Director Investor Relations
and Assistant Secretary
and Assistant Secretary
816-556-2083
ellen.fairchild@kcpl.com
Mike Chesser
Chairman and
Chief Executive Officer
June 2010 Investor Presentation
Company Representatives
Statements made in this presentation that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are
intended to be as of the date when made. Forward-looking statements include, but are not limited to, the outcome of regulatory proceedings,
cost estimates of the Comprehensive Energy Plan and other matters affecting future operations. In connection with the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and KCP&L are providing a number of important factors that could
cause actual results to differ materially from the provided forward-looking information. These important factors include: future economic
conditions in regional, national and international markets and their effects on sales, prices and costs, including but not limited to possible
further deterioration in economic conditions and the timing and extent of any economic recovery; prices and availability of electricity in
regional and national wholesale markets; market perception of the energy industry, Great Plains Energy and KCP&L; changes in business
strategy, operations or development plans; effects of current or proposed state and federal legislative and regulatory actions or developments,
including, but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates
the companies can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices governing tax,
accounting and environmental matters including, but not limited to, air and water quality; financial market conditions and performance
including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital and the effects on nuclear
decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates;
effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of
terrorist acts; increased competition including, but not limited to, retail choice in the electric utility industry and the entry of new competitors;
ability to carry out marketing and sales plans; weather conditions including, but not limited to, weather-related damage and their effects on
sales, prices and costs; cost, availability, quality and deliverability of fuel; ability to achieve generation planning goals and the occurrence and
duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of additional generating
capacity and environmental projects; nuclear operations; workforce risks, including, but not limited to, increased costs of retirement,
healthcare and other benefits; the timing and amount of resulting synergy savings from the GMO acquisition; and other risks and
uncertainties.
intended to be as of the date when made. Forward-looking statements include, but are not limited to, the outcome of regulatory proceedings,
cost estimates of the Comprehensive Energy Plan and other matters affecting future operations. In connection with the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and KCP&L are providing a number of important factors that could
cause actual results to differ materially from the provided forward-looking information. These important factors include: future economic
conditions in regional, national and international markets and their effects on sales, prices and costs, including but not limited to possible
further deterioration in economic conditions and the timing and extent of any economic recovery; prices and availability of electricity in
regional and national wholesale markets; market perception of the energy industry, Great Plains Energy and KCP&L; changes in business
strategy, operations or development plans; effects of current or proposed state and federal legislative and regulatory actions or developments,
including, but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates
the companies can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices governing tax,
accounting and environmental matters including, but not limited to, air and water quality; financial market conditions and performance
including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital and the effects on nuclear
decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates;
effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of
terrorist acts; increased competition including, but not limited to, retail choice in the electric utility industry and the entry of new competitors;
ability to carry out marketing and sales plans; weather conditions including, but not limited to, weather-related damage and their effects on
sales, prices and costs; cost, availability, quality and deliverability of fuel; ability to achieve generation planning goals and the occurrence and
duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of additional generating
capacity and environmental projects; nuclear operations; workforce risks, including, but not limited to, increased costs of retirement,
healthcare and other benefits; the timing and amount of resulting synergy savings from the GMO acquisition; and other risks and
uncertainties.
This list of factors is not all-inclusive because it is not possible to predict all factors. Other risk factors are detailed from time to time in Great
Plains Energy’s and KCP&L’s most recent quarterly report on Form 10-Q and annual report on Form 10-K filed with the Securities and Exchange
Commission. Each forward-looking statement speaks only as of the date of the particular statement. Great Plains Energy and KCP&L
undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or
otherwise.
Plains Energy’s and KCP&L’s most recent quarterly report on Form 10-Q and annual report on Form 10-K filed with the Securities and Exchange
Commission. Each forward-looking statement speaks only as of the date of the particular statement. Great Plains Energy and KCP&L
undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or
otherwise.
June 2010 Investor Presentation
Forward Looking Statement
4
Service Territories: KCP&L and GMO
Business Highlights
• Solid Midwest electric utility - KCP&L brand
• Transformational events in 2008 to focus business model on fully
regulated utility operations
regulated utility operations
– Sale of Strategic Energy
– Acquisition of Aquila
• Company attributes post-acquisition
• ~822,000 customers / 3,200+ employees
• ~6,000 MW of primarily low-cost baseload generation
• 5-year projected synergies of ~$740 million
• ~$8.5bn in assets and $4.4bn in rate base at 2009YE
Total: ~ $2.0bn
Total: ~ $2.0bn
June 2010 Investor Presentation
Kansas
29%
Missouri
(KCP&L)
36%
Missouri
(GMO)
35%
Solid Vertically Integrated Midwest Utility
5
• Strong Midwest electric utilities focused on regulated operations in Missouri and Kansas
• Diversified customer base includes ~822,000 residential, commercial, and industrial customers
• ~6,000 Megawatts of generation capacity
• Low-cost generation mix: 80% coal, 17% nuclear (Wolf Creek), 2% natural gas/oil and 1% wind in 2009
100% Regulated
Electric Utility
Operations Focus
Electric Utility
Operations Focus
• Growth and stability in earnings driven by sizable regulated investments as part of the Comprehensive Energy
Plan (“CEP”)
Plan (“CEP”)
• Wind and environmental retrofit components of CEP in place; Iatan 2 baseload coal plant targeted
for completion later this year
for completion later this year
• Anticipated growth beyond 2010 driven by additional environmental capex, transmission opportunities and
wind
wind
Attractive Platform for
Long-Term Earnings
Growth
Long-Term Earnings
Growth
• Successful outcomes in 2006, 2007 and 2008 rate cases in Missouri and Kansas
• Combined annual rate increases from 2008 cases of $59mm in Kansas and $159mm in Missouri; new rates
effective August 1st in Kansas and September 1st in Missouri
• $55mm rate increase for KCP&L Kansas filed in 12/09; $190 million rate increase for KCP&L MO and GMO filed 6/10
Focused Regulatory
Approach
Approach
• Cash flow and earnings heavily driven by regulated operations and cost recovery mechanisms
• Ample liquidity currently available under $1.4bn credit facilities
• Sustainable dividend and pay-out, right-sized to fund growth and to preserve liquidity
• Recent shift in outlook from Negative to Stable at Moody’s and S&P
Stable and Improving
Financial Position
Financial Position
June 2010 Investor Presentation
Strong Platform for Long-Term Growth
6
Executing the Plan
June 2010 Investor Presentation
7
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Project description
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Comments
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• 100 MW plant in Spearville, KS
• Began construction in 2005
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ü Completed in Q3 2006
ü In rate base from 1/1/2007
ü No regulatory disallowance
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• Selective Catalytic Reduction (SCR) unit at LaCygne 1
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ü Completed in Q2 2007
ü In rate base from 1/1/2008
ü No regulatory disallowance
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• Air Quality Control System at Iatan 1
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ü Completed in Q2 2009
ü In rate base starting 3Q 2009 (KS 08/1 & MO 9/1)
ü No regulatory disallowance in 2009 MO and KS cases;
capped exposure in 2010 cases |
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• Construction of Iatan 2 super-critical coal plant (850 MW;
73% GXP ownership share)1 |
ü On track for completion Q4 2010
ü Expected in Kansas rates in Q4 2010 / 1Q 2011; Missouri
rates in Q2 2011 |
Iatan 2
Iatan 1
Environmental
LaCygne
Environmental
Wind
Great Plains Energy has effectively executed all elements of its Comprehensive Energy Plan to date
and has received constructive regulatory treatment
and has received constructive regulatory treatment
Comprehensive Energy Plan
1 Includes post-combustion environmental technologies including an SCR system, wet flue gas desulphurization system and fabric filter to control
emissions
emissions
June 2010 Investor Presentation
Strong Track Record of Execution
8
June 2010 Investor Presentation
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Rate Case Outcomes
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Rate Jurisdiction
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Amount
Requested |
Amount
Approved |
Effective Date
|
Rate Base
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Return on Equity
|
Rate-making
Equity Ratio |
|
KCP&L - Missouri
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$55.8
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$50.6
|
1/1/2007
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$1,270
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11.25%
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53.69%
|
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KCP&L - Missouri
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$45.4
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$35.3
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1/1/2008
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$1,298
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10.75%
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57.62%
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KCP&L - Missouri
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$101.5
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$95.0
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9/1/2009
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$1,4961
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n/a4
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46.63%
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KCP&L - Kansas
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$42.3
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$29.0
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1/1/2007
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$1,0001
|
n/a2
|
n/a
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KCP&L - Kansas
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$47.1
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$28.0
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1/1/2008
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$1,1001
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n/a3
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n/a
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KCP&L - Kansas
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$71.6
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$59.0
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8/1/2009
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$1,2701
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n/a4
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50.75%
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GMO - MPS
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$94.5
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$45.2
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6/1/2007
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$918
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10.25%
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48.17%
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GMO - MPS
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$66.0
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$48.0
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9/1/2009
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$1,1881
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n/a5
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45.95%
|
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GMO - L&P
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$24.4
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$13.6
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6/1/2007
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$186
|
10.25%
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48.17%
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GMO - L&P
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$17.1
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$15.0
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9/1/2009
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$2861
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n/a5
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45.95%
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1 Rate Base amounts are approximate amounts since the cases were black box settlements
2 Iatan 2 AFUDC calculation was set at 8.5%
3 Iatan 2 AFUDC calculation was set at 8.3%
4 Iatan 2 AFUDC calculation was set at 8.25%
5 Iatan 2 AFUDC calculation was set at 10.2%
Focused Regulatory Approach
9
June 2010 Investor Presentation
Steps to In-Service Date for Iatan 2
q First Fire on Coal
q Synchronization
q Provisional Acceptance
10
Iatan 2 Reforecast
• Currently anticipate a fourth quarter 2010 in-service date for Iatan 2
• New cost estimate range for GXP share is a $69 million (6%) increase to the low end and a
$50 million (4%) increase to the high end
$50 million (4%) increase to the high end
Current
Estimated Cost of Iatan 2
1,680
$
2
1,720
$
2
1,222
$
1,251
$
Previous
Estimated Cost of Iatan 2
1,587
$
2
1,652
$
2
1,153
$
1,201
$
Increase / (Decrease)
93
$
68
$
69
$
50
$
2
Derived from KCP&L and Great Plains Energy disclosed amounts
Total Project (850 MW)
GPE Share (618 MW)
1
Excluding Allowance for Funds Used During Construction ("AFUDC") and common facilities that were identified at the time
of the start-up of the Iatan 1 environmental project that will be used by both Iatan 1 and Iatan 2
June 2010 Investor Presentation
11
Rate Case Update
• KCP&L Kansas electric service case filed December 2009
– $55.2 million or an 11.5% annual increase request
– ROE: 11.25%
– Equity ratio: 46.17%
– Rate base: $1.795 billion
• KCP&L Kansas - Interveners’ Direct Testimony to be filed in early June
• Missouri - Filed KCP&L and GMO cases June 2010
June 2010 Investor Presentation
12
*
* Includes Kansas City Power and Light and
KCP&L Greater Missouri Operations (GMO)
June 2010 Investor Presentation
2010 Rate Case Summary
13
June 2010 Investor Presentation
KCP&L KS and MO Rate Cases
14
June 2010 Investor Presentation
KCP&L GMO Rate Cases
15
Drivers of Change
Environmental
Rules
Natural Gas
Prices
Load Growth
Energy
Legislation
Financing
Emergent
Technologies
June 2010 Investor Presentation
16
Sustainable Resource Strategy
Change Creates Opportunity
Change Creates Opportunity
June 2010 Investor Presentation
Transmission &
Distribution
Opportunities
Distribution
Opportunities
Opportunities
Resulting from
SmartGrid
Technologies
Resulting from
SmartGrid
Technologies
Generation Fleet
Optimization
Opportunities
Optimization
Opportunities
17
2010 - 2012 Capital Expenditures
June 2010 Investor Presentation
The majority of our expected environmental spend is related to our LaCygne units for a scrubber and baghouse
on Unit 1 (already has an SCR, installed in 2007), as well as an SCR, scrubber, baghouse, and low NOx burners
for Unit 2.
on Unit 1 (already has an SCR, installed in 2007), as well as an SCR, scrubber, baghouse, and low NOx burners
for Unit 2.
We continue to monitor and evaluate the impact of potential environmental mandates on our other generating
facilities, but have not included any potential costs in our capital expenditures table at this time.
facilities, but have not included any potential costs in our capital expenditures table at this time.
No capital for wind is included in the 2010 to 2012 period. Our current view over the next three years
is that any wind projects would be completed as purchase power agreements, or “PPAs”.
18
Positioned for Long-term Earnings Growth
• Complete Iatan 2
• Navigate rate case process with constructive outcomes
• Continue to deliver on GMO synergies and movement toward Tier 1 costs
across the organization
across the organization
• Evaluate future opportunities through Sustainable Resource Strategy and
continue to advocate on behalf of our shareholders, customers, and
communities
continue to advocate on behalf of our shareholders, customers, and
communities
June 2010 Investor Presentation
19
Appendix
1Q 2010
Financial Overview
June 2010 Investor Presentation
20
Electric utility’s net income increased $17.5 million primarily driven by
an increase in gross margin* due to new retail rates.
Other segment earnings decreased primarily as a result of a $16 million benefit
in the first quarter of 2009 from a 2003-04 tax audit settlement at GMO’s non-utility
operations.
Increased number of shares outstanding primarily from the May 2009 equity
offering resulted in $0.02 per share dilution.
*Gross margin is defined and reconciled to operating revenues at the end of the presentation
June 2010 Investor Presentation
21
Electric Utility First Quarter
(millions except
where indicated)
Key Earnings Drivers:
+ A $65.6 million, or 24 percent, increase in gross margin primarily due to new retail rates
– Increased operating expense of $13.8 million primarily due to a $10.3 million increase in
O&M expenses driven by planned plant outages; and
– Increased depreciation and amortization of $13.2 million
Earnings
Earnings Per Share
June 2010 Investor Presentation
22
Electric Utility Segment
Weather Normalized Retail MWh Sales and Customer Growth Rates
Retail MWh Sales by Customer Class - First Quarter 2010
43%
13%
44%
June 2010 Investor Presentation
23
Outlook
Stable
Stable
Corporate Credit Rating
-
BBB
Preferred Stock
Ba1
BB+
Senior Unsecured Debt
Baa3
BBB-
KCP&L
Outlook
Stable
Stable
Senior secured Debt
A3
BBB+
Senior Unsecured Debt
Baa2
BBB
Commercial Paper
P-2
A-2
GMO
Outlook
Stable
Stable
Moody’s March 12, 2010:
• Revised outlook on GXP, KCP&L and GMO to Stable from Negative
• Downgraded KCP&L’s senior unsecured rating to Baa2 from Baa1
• Affirmed all other ratings
S&P April 9, 2010:
• Revised outlook on GXP, KCP&L and GMO to Stable from Negative
• Raised short-term rating on KCP&L to A-2 from A-3
• Affirmed all long-term ratings
June 2010 Investor Presentation
24
*Includes current maturities
Long-term Debt Maturities
Capital Structure
Secured debt = $862.7 (23%), Unsecured debt = $2,950.4 (77%)
(1) GPE guarantees substantially all of GMO’s debt
(2) Weighted Average Rates - excludes premium/discounts and fair market value adjustments
(3) Includes current maturities of long-term debt
June 2010 Investor Presentation
25
Gross margin is a financial measure that is not calculated in accordance with generally accepted accounting principles (GAAP). Gross
margin, as used by Great Plains Energy, is defined as operating revenues less fuel, purchased power and transmission of electricity by
others. The Company’s expense for fuel, purchased power and transmission of electricity by others, offset by wholesale sales margin, is
subject to recovery through cost adjustment mechanisms, except for KCP&L’s Missouri retail operations. As a result, operating
revenues increase or decrease in relation to a significant portion of these expenses. Management believes that gross margin provides
a more meaningful basis for evaluating the Electric Utility segment’s operations across periods than operating revenues because gross
margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against
budget and in reports for management and the Board of Directors. The Company’s definition of gross margin may differ from similar
terms used by other companies. A reconciliation to GAAP operating revenues is provided in the table above.
margin, as used by Great Plains Energy, is defined as operating revenues less fuel, purchased power and transmission of electricity by
others. The Company’s expense for fuel, purchased power and transmission of electricity by others, offset by wholesale sales margin, is
subject to recovery through cost adjustment mechanisms, except for KCP&L’s Missouri retail operations. As a result, operating
revenues increase or decrease in relation to a significant portion of these expenses. Management believes that gross margin provides
a more meaningful basis for evaluating the Electric Utility segment’s operations across periods than operating revenues because gross
margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against
budget and in reports for management and the Board of Directors. The Company’s definition of gross margin may differ from similar
terms used by other companies. A reconciliation to GAAP operating revenues is provided in the table above.
June 2010 Investor Presentation