Attached files
| file | filename |
|---|---|
| 8-K - JOINT FORM 8-K - KANSAS CITY POWER & LIGHT CO | f8kjpmorganir.htm |
March 2012 Investor Presentation
Great Plains Energy
Investor Presentation
March 2012
Exhibit 99.1
March 2012 Investor Presentation
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 capital projects 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
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 capital projects 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 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
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
managementpolicies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of
terrorist acts, including but not limited to cyber terrorism; 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; the inherent uncertainties in estimating the effects of weather, economic conditions and other
factors on customer consumption and financial results; ability to achieve generation goals and the occurrence and duration
of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of additional
generation, transmission, distribution or other projects; the inherent risks associated with the ownership and operation of a
nuclear facility including, but not limited to, environmental, health, safety, regulatory and financial risks; workforce risks,
including, but not limited to, increased costs of retirement, health care and other benefits; 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 quarterly reports 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
to time in Great Plains Energy’s and KCP&L’s quarterly reports 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.
Forward-Looking Statement
2
March 2012 Investor Presentation
3
Overview
March 2012 Investor Presentation
4
• Solid Midwest fully regulated electric utility operating under the
KCP&L brand
KCP&L brand
• Company attributes
– Regulated operations in Kansas and Missouri
– ~823,000 customers / 3,100 employees
– ~6,600 MW of primarily low-cost coal baseload generation
– ~3,600 circuit miles of transmission lines; ~ 22,200 circuit
miles of distribution lines
miles of distribution lines
– ~$9.1bn in assets at 2011YE
– ~$5.6bn in rate base at 2011YE
Service Territories: KCP&L and GMO
Business Highlights
2011 Retail MWh Sold by Customer Type
2011 Retail MWh Sales by Jurisdiction
2011 MWh Generated by Fuel Type
Total: ~ 23,404 MWhs*
Total: ~ 23,404 MWhs*
Total: ~ 25,952 MWhs*
Solid Vertically-Integrated Midwest Utility
* In thousands
March 2012 Investor Presentation
GXP’s Transformation: 2005 - Present
2011 - 3,053
INCREASE = 28%
2005 - 500,000
2011 - 823,000
INCREASE = 65%
INCREASE = 79%
2011 - 4,349 MW
INCREASE = 56%
2011 - $5.59 Billion
INCREASE = 164%
Customers
5
March 2012 Investor Presentation
Focused on Delivering Value to Shareholders
Earnings Growth
Expected Through Reduced Regulatory Lag, Disciplined Cost
Management and Long-Term Rate Base Growth
Management and Long-Term Rate Base Growth
Competitive Dividend
Goal to Maintain Competitive Dividend While Strengthening Key Credit
Metrics; Objective to Grow Dividend In Line With Payout Ratio Targets
Metrics; Objective to Grow Dividend In Line With Payout Ratio Targets
Objective: Improved Total Shareholder Returns
6
March 2012 Investor Presentation
7
• Strong emphasis on improving credit metrics
– Objective is visibility to sustainable FFO / Adjusted Debt* of 16%+
• Dividend is reviewed quarterly in context of this objective as well as a
belief that a sustainable and increasing dividend is a key driver of TSR
and therefore a desirable goal
belief that a sustainable and increasing dividend is a key driver of TSR
and therefore a desirable goal
• Target payout ratio remains 50-70%
Dividend Strategy Considerations
Competitive Dividend
Goal to Maintain Competitive Dividend While Strengthening Key Credit
Metrics; Objective to Grow Dividend In Line With Payout Ratio Targets
Metrics; Objective to Grow Dividend In Line With Payout Ratio Targets
• Company’s objective is to create shareholder value through
– Increased earnings from reduced lag, disciplined cost management and
long-term asset growth
– A competitive dividend that complements this growth platform
*FFO / Adjusted Debt is a non-GAAP measure that is defined in the Appendix
March 2012 Investor Presentation
8
• Proven track record of constructive regulatory treatment
• Credibility with regulators in terms of planning and execution of large, complex projects
• Competitive retail rates on a regional and national level supportive of potential future
investment
investment
Diligent
Regulatory
Approach
Regulatory
Approach
• Target significant reduction in regulatory lag
• Seek to deliver earnings growth and increasing and sustainable cash dividends as a
key component of TSR
• Improvement in / stability of key credit metrics is a priority
Focused on
Shareholder
Value Creation
Shareholder
Value Creation
Excellent
Relationships
with Key
Stakeholders
Relationships
with Key
Stakeholders
• Customers - Tier 1 customer satisfaction
• Suppliers - strategic supplier alliances focused on long-term supply chain value
• Employees - strong relations between management and labor (3 IBEW locals)
• Communities - Leadership, volunteerism and high engagement in the areas we serve
• Environmental - additional ~$1 billion of “High Likelihood” capital projects planned to
comply with existing / proposed environmental rules
comply with existing / proposed environmental rules
• Transmission - additional $0.4 billion of capital additions planned
• Renewables - driven by Collaboration Agreement and MO/KS RPS; potential capital
additions
• Other Growth Opportunities - selective future initiatives that will leverage our core
strengths
strengths
Attractive
Platform for
Long-Term
Growth
Platform for
Long-Term
Growth
GXP - Platform for Shareholder Value
March 2012 Investor Presentation
9
Operations and Regulatory Strategy
March 2012 Investor Presentation
10
Environmental
1. Estimated cost of compliance with
current / proposed legislation =
approximately $1 billion:
current / proposed legislation =
approximately $1 billion:
• LaCygne
– Unit 1 (368 MW*) - scrubber
and baghouse - 2015
and baghouse - 2015
– Unit 2 (343 MW*) - full Air
Quality Control System
(“AQCS”) - 2015
Quality Control System
(“AQCS”) - 2015
• Montrose 3 (176 MW) - full AQCS -
2017 (approximately)
2017 (approximately)
• Sibley 3 (364 MW) - scrubber and
baghouse - 2017 (approximately)
baghouse - 2017 (approximately)
2. Other retrofits less likely and therefore
not included in estimated cost of
compliance:
not included in estimated cost of
compliance:
• Montrose 1 and 2 (total capacity
334 MW)
• Sibley 1 and 2 (total capacity 99
MW)
MW)
• Lake Road 4 and 6 (93 MW)
*KCP&L’s share of jointly-owned facility
Upon completion of La Cygne during the second quarter 2015, we expect that
72 percent of our coal fleet will have emission-reducing scrubbers installed.
72 percent of our coal fleet will have emission-reducing scrubbers installed.
Net book value of
“Less Likely”
projects total
approximately
$100 million
“Less Likely”
projects total
approximately
$100 million
March 2012 Investor Presentation
11
Renewable Energy and Energy Efficiency
1. Future renewable requirements
driven by the following:
• Renewable Portfolio Standards
(“RPS”) in Missouri and Kansas
(“RPS”) in Missouri and Kansas
• 2007 Collaboration Agreement
with Sierra Club
with Sierra Club
2. Flexibility regarding acquisition of
future renewable resources:
future renewable resources:
• Through Purchased Power
Agreements (“PPAs”) and
purchases of Renewable Energy
Credits (“RECs”); or
Agreements (“PPAs”) and
purchases of Renewable Energy
Credits (“RECs”); or
• Adding to rate base if supported
by credit profile and available
equity and debt financing
by credit profile and available
equity and debt financing
3. Energy efficiency expected to be a
key component of future resource
portfolio:
key component of future resource
portfolio:
• Aggressive pursuit planned with
appropriate regulatory recovery
appropriate regulatory recovery
The 99 turbines at our Spearville, Kan., Wind Energy Facility produce
enough environmentally friendly, emission-free electricity to supply nearly
49,000 homes annually.
enough environmentally friendly, emission-free electricity to supply nearly
49,000 homes annually.
March 2012 Investor Presentation
12
Transmission
1. Two significant projects are
currently in GXP’s plans:
currently in GXP’s plans:
• Iatan-Nashua 345kV line -
Projected $54M total cost and
2015 in-service date
Projected $54M total cost and
2015 in-service date
• Sibley-Maryville-Nebraska City
345kV line - Projected $380M
total cost and 2017 in-service
date
345kV line - Projected $380M
total cost and 2017 in-service
date
2. Increasingly competitive
environment requires consideration
of strategic options
environment requires consideration
of strategic options
3. Flexibility is important - opportunity
to pursue projects unilaterally but
also preserve capital if needed
through partnership
to pursue projects unilaterally but
also preserve capital if needed
through partnership
Iatan-Nashua 345kV, 30 miles, $54M
Expected in-service: 2015
Sibley-Maryville-Nebraska City 345kV, 170
miles, projected cost ~$380M
miles, projected cost ~$380M
March 2012 Investor Presentation
13
Plant Operations
1. No additional baseload
generation expected for
several years
generation expected for
several years
2. Targeting modest
improvements in existing
fleet performance in the
coming years
improvements in existing
fleet performance in the
coming years
3. No changes currently
planned regarding nuclear’s
role in the portfolio
planned regarding nuclear’s
role in the portfolio
Iatan 2,850-megawatt coal-fired power plant recognized as
power plant of the year by Power Magazine
power plant of the year by Power Magazine
March 2012 Investor Presentation
14
Regulatory
• Our rates continue to compare well regionally and nationally
• During the Comprehensive Energy Plan, the Company received
fair and constructive rate treatment in both Kansas and
Missouri, allowing for recovery of substantially all of our capital
additions
fair and constructive rate treatment in both Kansas and
Missouri, allowing for recovery of substantially all of our capital
additions
• We continue to aggressively pursue strategies to improve our
operating cost structure and are evaluating the best
combination of rate cases and riders/trackers to reduce
regulatory lag while minimizing the impact on customers
operating cost structure and are evaluating the best
combination of rate cases and riders/trackers to reduce
regulatory lag while minimizing the impact on customers
March 2012 Investor Presentation
15
Recent Developments and
2011 Operating & Financial Review
March 2012 Investor Presentation
2011 in Review
|
Financial
|
• Full-year earnings per share of $1.25
• Increased quarterly dividend to $0.2125
|
|
|
|
|
Operational
|
• Presented the ReliabilityOne award for the Plains Region for fifth consecutive
year • Rated Tier 1 in J.D. Power and Associates 2011 Electric Utility Residential
Satisfaction Study for third consecutive year • Introduced initiatives to streamline business and improve field communications
|
|
|
|
|
Strategic
|
• Contracted PPAs increasing renewable energy portfolio to approximately 600
MWs • Right-sized the Company with Organizational Realignment and Voluntary
Separation Program |
|
|
|
|
Regulatory
|
• Completed the Comprehensive Energy Plan
- Completed the Missouri rate cases - annual increase of $100 million
- Iatan 2 in rate base
• Kansas Corporation Commission approved predetermination for La Cygne
environmental upgrades |
16
March 2012 Investor Presentation
2012 Rate Case Summary
|
Jurisdiction
|
Case Number
|
Date Filed
|
Requested
Increase (in Millions)
|
Requested
Increase (Percent) |
Rate Base
(in Millions)
|
Requested
ROE |
Rate-making
Equity Ratio |
Anticipated
Effective Date of New Rates |
|
KCP&L - MO
|
ER-2012-0174
|
2/27/2012
|
$105.7
|
15.1%
|
$2,129.9
|
10.40%
|
52.5%
|
Late January
2013 |
|
GMO - MPS
|
ER-2012-0175
|
2/27/2012
|
$58.3
|
10.9%
|
$1,411.9
|
10.40%
|
52.5%
|
Late January
2013 |
|
GMO - L&P
|
ER-2012-0175
|
2/27/2012
|
$25.2
|
14.6%
|
$479.5
|
10.40%
|
52.5%
|
Late January
2013 |
|
Total
|
$189.2
|
|
$4,021.31
|
|
|
|
||
|
1 Projected combined rate base is approximately $226 million or 6% higher than at the conclusion of the last rate cases for these jurisdictions
|
17
Total
Increase
$105.7M
Increase
$105.7M
Total
Increase
$83.5M
Increase
$83.5M
|
* Reflects revised wholesale margin cap request of $22.7 M
|
March 2012 Investor Presentation
2012 KCP&L-MO Rate Case
• Revised wholesale margin cap requested
- Wholesale margin threshold of $22.7 million Missouri jurisdictional
share (40th percentile) compared to current cap of $45.9 million (40th
percentile)
share (40th percentile) compared to current cap of $45.9 million (40th
percentile)
• Additional infrastructure capital investment
• New trackers requested
- Property taxes
- Transmission
- Renewable energy standard (RES)
- Fuel interim energy charge (IEC) including wholesale margin offset
• Wholesale margin sharing mechanism proposed
• Other operating costs increases
18
March 2012 Investor Presentation
2012 GMO Rate Case
GMO-MPS
•Demand side management (DSM) / Energy Efficiency (EE) investment
recovery based on Missouri Energy Efficiency Investment Act (MEEIA) filing
recovery based on Missouri Energy Efficiency Investment Act (MEEIA) filing
•Additional infrastructure capital investment
•Fuel cost increases since previous rate case due to rebasing fuel
adjustment clause (FAC)
•New trackers requested
- Property taxes
- Transmission
- RES
GMO-L&P
•DSM / EE investment recovery based on MEEIA filing
•Additional infrastructure capital investment
•Fuel cost increases since previous rate case due to rebasing FAC
•New trackers requested
- Property taxes
- Transmission
- RES
19
March 2012 Investor Presentation
Recent Regulatory Developments
|
Jurisdiction
|
Topic
|
Recent Development
|
|
KCP&L-
Kansas
|
Rate Case Filing
|
• March 16, 2012 notice was provided to the Kansas
Corporation Commission of the intent to file a rate case • Rate case anticipated to be filed in 2Q 2012
|
|
KCP&L-
Kansas |
Property Tax Rider Approved
|
• Recover incremental property tax over 12-month
period • Tax surcharge amount of approximately $3.7 million
for 2012 • Effective February 1, 2012
|
|
GMO
|
Missouri Energy Efficiency
Investment Act (MEEIA) Filings |
• If approved, will allow for adequate recovery of
energy efficiency programs • Rider requested
|
|
KCP&L-
Missouri
|
Missouri River Flooding
Accounting Authority Order (AAO) Application |
• Requested deferral of expenses associated with coal
conservation and flooding related expenses |
|
KCP&L-
Missouri and GMO |
Missouri RES Solar AAO
|
• Requested deferral of incremental operating
expenses associated with RES compliance, primarily
solar rebates
|
20
March 2012 Investor Presentation
La Cygne Environmental Upgrade
Construction Update
|
Key Steps to Completion
|
|
|
• Site Prep; Major Equipment Purchase
|
Q3 2011 - Q3 2012
|
|
• New Chimney Shell Erected
|
Q3 2012
|
|
• Installation of Low Nox Burners for La Cygne 2
|
Q1 2013
|
|
• Major Construction
|
Q4 2012 - Q2 2014
|
|
• Startup Testing
|
Q3 2014
|
|
• Tie-in Outage Unit 2
|
Q4 2014
|
|
• Tie-in Outage Unit 1
|
Q1 2015
|
|
• In-service
|
Q2 2015
|
|
LaCygne Generation Station
|
|
• La Cygne Coal Unit 1 368 MW* - Wet scrubber, baghouse, activated carbon injection
|
|
• La Cygne Coal Unit 2 343 MW* - Selective catalytic reduction system, wet scrubber,
baghouse, activated carbon injection, over-fired air, low Nox burners |
|
• Project cost estimate, excluding AFUDC and property tax, $615 million*. Kansas
jurisdictional share is $281 million |
|
• 2011 predetermination order issued in Kansas deeming project as requested and cost
estimate to be reasonable |
|
• Project is on schedule and on budget
|
|
* KCP&L’s 50% share
|
21
March 2012 Investor Presentation
Weather-Normalized Year-over-Year
Retail MWh Sales
Retail MWh Sales
1 Drivers contributing to the portion of the YTD decline that occurred in 1Q11 may have included a) switching to natural gas heat; b) conversion to more
efficient heat pumps; c) conservation among KCP&L KS customers on an all-electric rate triggered by a substantial rate increase for this rate class in
efficient heat pumps; c) conservation among KCP&L KS customers on an all-electric rate triggered by a substantial rate increase for this rate class in
KCP&L’s 2010 KS rate case; and d) continued challenges in the local economy
2009
2010
Residential
Commercial
Total Customer Class
Full-Year 20111
Full-Year 20111
Full-Year 20111
22
March 2012 Investor Presentation
Plant Performance
23
March 2012 Investor Presentation
2011 Full-Year and Quarterly EPS Reconciliation Versus 2010
|
|
Special
Factors |
2010 Iatan
Loss |
WN
Demand |
Weather
|
Lag
|
Other
|
Total
|
|
1Q 2011
|
($0.07)
|
|
($0.04)
|
$0.01
|
($0.04)
|
|
($0.14)
|
|
2Q 2011
|
($0.06)
|
|
($0.01)
|
($0.03)
|
($0.02)
|
($0.04)
|
($0.16)
|
|
3Q 2011
|
($0.09)
|
$0.02
|
$0.02
|
|
($0.03)
|
$0.03
|
($0.05)
|
|
4Q 2011
|
|
$0.06
|
($0.01)
|
(0.01)
|
|
$0.01
|
$0.05
|
|
Total
|
($0.22)
|
$0.07
|
($0.03)
|
($0.03)
|
($0.09)
|
$0.02
|
($0.28)
|
|
|
2010 EPS
|
2011 EPS
|
Change in EPS
|
|
1Q
|
$0.15
|
$0.01
|
($0.14)
|
|
2Q
|
$0.47
|
$0.31
|
($0.16)
|
|
3Q
|
$0.96
|
$0.91
|
($0.05)
|
|
4Q
|
($0.04)
|
$0.01
|
$0.05
|
|
Total
|
$1.53
|
$1.25
|
($0.28)
|
Contributors to Change in 2011 EPS Compared to 2010
Note: Numbers may not add due to the effect of dilutive shares on EPS
24
March 2012 Investor Presentation
Special Factors Impacting
Full-Year Results and 2011 Guidance
Full-Year Results and 2011 Guidance
|
|
1Q
|
2Q
|
3Q
|
Total
|
|
Disallowances and other
accounting effects from Missouri rate case orders
|
($0.03)
|
|
|
($0.03)
|
|
Organizational realignment and
voluntary separation program |
($0.04)
|
($0.01)
|
|
($0.05)
|
|
Wolf Creek extended outage
and replacement power |
|
($0.05)
|
|
($0.05)
|
|
Coal conservation and flooding
related expenses |
|
|
($0.09)
|
($0.09) (a)
|
|
Total
|
($0.07)
|
($0.06)
|
($0.09)
|
($0.22)
|
(a) Coal conservation ended mid-October 2011; 4Q impact was insignificant
(All Amounts Per-Share)
25
March 2012 Investor Presentation
Great Plains Energy Consolidated Earnings
and Earnings Per Share - Year Ended December 31
and Earnings Per Share - Year Ended December 31
(Unaudited)
Common stock outstanding for year ended December 31 averaged 138.7 million shares, about 1
percent higher than the same period in 2010
|
|
Earnings (in Millions)
|
|
Earnings per Share
|
||
|
|
2011
|
2010
|
|
2011
|
2010
|
|
Electric Utility
|
$ 199.9
|
$ 235.3
|
|
$ 1.44
|
$ 1.72
|
|
Other
|
(25.7)
|
(23.4)
|
|
(0.18)
|
(0.17)
|
|
Net income
|
174.2
|
211.9
|
|
1.26
|
1.55
|
|
Less: Net (income) loss attributable to noncontrolling
interest |
0.2
|
(0.2)
|
|
-
|
-
|
|
Net income attributable to Great Plains Energy
|
174.4
|
211.7
|
|
1.26
|
1.55
|
|
Preferred dividends
|
(1.6)
|
(1.6)
|
|
(0.01)
|
(0.02)
|
|
Earnings available for common shareholders
|
$ 172.8
|
$ 210.1
|
|
$ 1.25
|
$ 1.53
|
26
March 2012 Investor Presentation
2011 Earnings Review
*Based on Third Quarter 2011 Earnings Presentation
|
2011 Considerations
|
|
|
(a) Wholesale Margin
|
• Lower natural gas prices and related off-system sales impact due to KCP&L-MO wholesale margin cap
• Special Factors includes impacts for flooding and Wolf Creek extended outage
|
|
(b) Other Lag and
Variability |
• Lower 4Q11 weather-normalized load growth than anticipated
• Favorable 4Q11 impact from Kansas property tax rider
|
|
(c) Regulatory Normalized
|
• ROE and Normalized Lag in line with prior guidance
• Includes full year favorable impact of $0.12 EPS due to weather
|
27
March 2012 Investor Presentation
Debt Profile and Liquidity
as of December 31, 2011
|
Great Plains Energy Debt
|
||||||||
|
($ in Millions)
|
KCP&L
|
GMO (1)
|
GPE
|
Consolidated
|
||||
|
|
Amount
|
Rate (2)
|
Amount
|
Rate (2)
|
Amount
|
Rate (2)
|
Amount
|
Rate (2)
|
|
Short-term debt
|
$ 322.0
|
0.70%
|
$ 40.0
|
0.88%
|
$ 22.0
|
2.06%
|
$ 384.0
|
0.80%
|
|
Long-term debt (3)
|
1,914.6
|
6.01%
|
642.3
|
10.96%
|
986.8
|
6.61%
|
3,543.7
|
7.05%
|
|
Total
|
$2,236.6
|
5.24%
|
$682.3
|
10.36%
|
$1,008.8
|
6.51%
|
$3,927.7
|
6.44%
|
|
Secured debt = $749 (19%), Unsecured debt = $3,179 (81%)
(1) GPE guarantees substantially all of GMO’s debt
(2) Weighted Average Rates - excludes premium / discounts and fair market value adjustments; includes full Equity Units coupon (12%) for GPE
(3) Includes current maturities of long-term debt
|
||||||||
Long-Term Debt Maturities (4)(5)
(4) Includes long-term debt maturities through December 31, 2021
(5) 2013 reflects mode maturity for $167.6 million of KCP&L tax-exempt
bonds subject to remarketing prior to final maturity date
Liquidity (6)
(6) As of December 31, 2011
(7) Includes KCP&L $110M accounts receivable securitization facility
28
March 2012 Investor Presentation
* All ratios calculated using Standard and Poor’s methodology. Ratios are non-GAAP measures that are defined and reconciled to GAAP in Appendix
Credit Profile for Great Plains Energy
|
Current Credit Ratings
|
||
|
|
Moody’s
|
Standard & Poor’s
|
|
Great Plains Energy
Outlook
Corporate Credit Rating
Preferred Stock
Senior Unsecured Debt
|
Stable
-
Ba2
Baa3
|
Stable
BBB
BB+
BBB-
|
|
KCP&L
Outlook
Senior Secured Debt
Senior Unsecured Debt
Commercial Paper
|
Stable
A3
Baa2
P-2
|
Stable
BBB+
BBB
A-2
|
|
GMO
Outlook
Senior Unsecured Debt
Commercial Paper
|
Stable
Baa3
P-3
|
Stable
BBB
A-2
|
29
March 2012 Investor Presentation
30
2012 Earnings Guidance
and 2013 Projected Drivers
March 2012 Investor Presentation
2012 Earnings Guidance $1.20 - $1.40
|
2011 to 2012 Considerations
|
|
|
Carrying Cost and
Equity Converts
|
• Missouri Iatan No. 2 carrying cost capitalized prior to 2011 rate case effective dates
• Conversion to 17.1 million shares of GXP common stock partially offset by lower debt re-market rate
|
|
Wholesale Margin
|
• Lower natural gas prices and related off-system sales impact due to KCP&L-MO wholesale margin cap
• Majority of 2011 allocated to Special Factors for flooding and Wolf Creek extended outage
|
|
Guidance Variability
|
• Retail weather-normalized load growth, weather, operating expenses, cost of capital, etc.
• Natural gas prices and resulting impact on KCP&L-MO wholesale margin
|
31
March 2012 Investor Presentation
Guidance Assumptions
KCP&L-MO Wholesale Margin
KCP&L-MO Wholesale Margin
KCP&L Missouri customer rates are set assuming KCP&L earns a prescribed level of
wholesale margin* (“cap”) to achieve its revenue requirement
wholesale margin* (“cap”) to achieve its revenue requirement
• If cap is exceeded, excess margin booked as a regulatory liability to be returned,
with interest, to customers in the next rate case
with interest, to customers in the next rate case
• If cap not achieved, KCP&L falls short of its revenue requirement with no
regulatory mechanism to recover the shortfall
•Two distinct caps apply in 2012
- $45.9 million Annual cap for May 2011 to April 2012
• Excess margin books as a regulatory liability whenever cap is exceeded
• Earnings and cash in a fiscal year could be significantly impacted by
timing of wholesale margins
timing of wholesale margins
- $45.9 million Annual cap begins May 2012
• New cap proposed in current rate case
- New retail rates include new cap, effective in 1Q 2013
*Also referred to as non-firm wholesale electric sales margin (wholesale margin offset) in the 2011 10-K
32
March 2012 Investor Presentation
Macroeconomic Factors
•Milder than normal weather
•Lower regional demand / excess regional
generation supply
generation supply
•Higher natural gas inventories
Wholesale Margin Impact on 2012 Guidance
|
2012 Average as of:
|
Henry Hub Natural Gas ($/MMBTu)
|
|
June 28, 2011
|
$ 4.80
|
|
September 27, 2011
|
$ 4.36
|
|
December 27, 2011
|
$ 3.38
|
|
February 21, 2012
|
$ 3.03
|
Curve as of:
KCP&L Missouri Financial Impact
• Current wholesale margin in rates: $45.9
million
million
• Projected EPS impact in 2012(a)(b): ($0.10)
(a) 2011 EPS impact due to lower wholesale margins was ($0.02).
(b) Point estimate to simplify analysis on 2012 Earnings Guidance
slide.
slide.
33
March 2012 Investor Presentation
2012 Earnings Guidance
*Based on Third Quarter 2011 Earnings Presentation
**2012 includes conversion to 17.1 million shares of GXP common stock in June
|
2012 Considerations
|
|
|
(a) Wholesale Margin
|
• Lower natural gas prices and related off-system sales impact due to KCP&L-MO wholesale margin cap
• Majority of 2011 lag allocated to Special Factors for flooding and Wolf Creek extended outage
|
|
b) Other Lag and Variability
|
• Lower projected weather-normalized load growth from 1% to 0.5%
• 2011 includes $0.12 EPS due to weather, 2012 assumes normal weather
|
|
(c) Regulatory Earned
|
• Regulatory earned ROE improving by 0 to 110 basis points over 2011
|
34
March 2012 Investor Presentation
2012 Guidance Assumptions
Depreciation, CWIP, AFUDC
Depreciation, CWIP, AFUDC
• Depreciation and Amortization
− KCP&L-MO regulatory amortization of $3.5 million/month ended May 2011
− MO Iatan 2 traditional depreciation for partial year 2011, full year 2012
• KCP&L began in May 2011, GMO began in June 2011
− Change in depreciation rates from rate case orders
− Depreciation growing for plant placed in service and not in current rates
• Construction Work in Progress (CWIP)/Accumulated Funds Used During
Construction (AFUDC)
- Short-term debt balance of approximately $450 million to $500 million by end
of the year
of the year
35
March 2012 Investor Presentation
2012 Guidance Assumptions
Income Taxes
Income Taxes
• Effective income tax rate of approximately 34%
• Federal/State combined statutory rate of approximately
38.9% impacted by:
38.9% impacted by:
- AFUDC Equity (non-taxable)
- Wind Production Tax Credits (PTC)
- Amortization of Investment Tax Credits (ITC)
• Do not expect to generate significant income tax liability or
pay significant income taxes during 2012 due to:
pay significant income taxes during 2012 due to:
- Bonus depreciation of approximately $200 million
- Differences between book and tax depreciation, primarily
related to seven year depreciable tax life for pollution controls
recently placed in service at Iatan facilities
- Ongoing wind PTC
36
March 2012 Investor Presentation
2012 Guidance Assumptions
Deferred Income Taxes
Deferred Income Taxes
• Year-end 2011 deferred tax income taxes include:
- $213.7 million tax credit carry forwards primarily related to Advanced
Coal ITCs, wind PTCs, and Alternative Minimum Tax (AMT) credits
Coal ITCs, wind PTCs, and Alternative Minimum Tax (AMT) credits
($89.8 million) related to GMO acquisition)
• Coal and wind credits expire in years 2028 to 2031
• AMT credits do not expire
• $0.7 million Federal and state valuation allowance
- $543.7 million Net Operating Loss (NOL) carry forward with
approximately $365.6 million related to the GMO acquisition
approximately $365.6 million related to the GMO acquisition
• Federal NOL carry forwards expire in years 2023 to 2031
• $23.2 million state valuation allowance
• Do not expect to generate significant income tax liability during 2012 (see
previous slide)
previous slide)
• Do not anticipate paying significant income taxes through the end of 2017
- Expect to utilize year-end 2011 NOL and tax credit carry forwards, net
of valuation allowances
- Estimate that impact of bonus depreciation in 2012 has delayed paying
significant income taxes by about one year
significant income taxes by about one year
37
March 2012 Investor Presentation
2011-2012 Net Free Cash Flow*
|
Net Free Cash Flow Impacts
|
|
|
Combined
2011 Actual
2012 Projected
|
• Analyst Day Projected ($200) to ($240) million
• Weaker weather-normalized load growth
• Lower off-system sales
• Compliance with Cross States Air Pollution Rule (CSAPR)
|
|
Dividends
|
2012 common dividends for illustrative purposes only based on current annual dividend rate of $0.85 per share
and not an indication of Board of Directors’ approval |
*Net Free Cash Flow is a non-GAAP financial measure and is defined in Appendix
38
March 2012 Investor Presentation
2013 Projected Drivers
• Target is 50 basis points of lag in regulated operations in 2013 (compared to
approximately 160-270 basis points reflected in 2012 revised guidance)
approximately 160-270 basis points reflected in 2012 revised guidance)
• Strategies to reduce lag in 2013 are 1) operational and 2) regulatory
– Operational
• High level of system reliability and plant performance
• Continue baseline assumption that changes in non-fuel operating and maintenance
(NFOM) expenses and weather-normalized load are offsetting
(NFOM) expenses and weather-normalized load are offsetting
• Aggressively manage NFOM expenses as close to allowed level in rates as possible
– Demand growth would potentially create earnings upside
• Increased AFUDC from environmental and other capital projects
– Regulatory
• Missouri rate cases - new rates in effect 1Q 2013
- Requested new KCP&L Missouri wholesale margin cap
• Kansas - present view contemplates filing to achieve new rates effective early 2013
• Riders & Trackers - Full-year impact of Kansas property tax rider; transmission, RES and
property tax trackers requested at KCP&L Missouri and GMO in rate cases
property tax trackers requested at KCP&L Missouri and GMO in rate cases
• Other drivers
– Weighted average shares - increase to 154 million with full-year impact from Equity Units
conversion
conversion
– Other impacts from Equity Units conversion
• ROE benefit from additional equity in capital structure largely offset by significantly lower
interest expense on Equity Units’ remarketed debt
interest expense on Equity Units’ remarketed debt
– Full-year impact from refinancing GMO high-coupon debt
• Expected to be negative in terms of GAAP interest expense
39
March 2012 Investor Presentation
Projected Capital Expenditures
|
Major Projects included in 2012-2014 Capital Expenditure Plan
|
|
|
Environmental
|
• La Cygne $178.1, $189.3, and $127.3 million for 2012-2014
|
|
SPP
|
• Iatan-Nashua $0.5, $5.0, and $15.0 million for 2012-2014
• Sibley-Maryville-Nebraska City $3.7, $37.2, and $55.9 million for 2012-2014
|
SPP $4.2
40
March 2012 Investor Presentation
41
Great Plains Energy
Investor Presentation
March 2012
March 2012 Investor Presentation
Appendix
42
March 2012 Investor Presentation
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.
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.
Great Plains Energy Reconciliation of
Gross Margin to Operating Revenues
(Unaudited)
Gross Margin to Operating Revenues
(Unaudited)
|
(millions)
|
Three Months Ended
December 31 |
Year Ended
December 31
|
||
|
|
2011
|
2010
|
2011
|
2010
|
|
Operating revenues
|
$ 486.3
|
$ 467.8
|
$ 2,318.0
|
$ 2,255.5
|
|
Fuel
|
(118.0)
|
(97.5)
|
(483.8)
|
(430.7)
|
|
Purchased power
|
(25.0)
|
(42.4)
|
(203.4)
|
(213.8)
|
|
Transmission of electricity by others
|
(7.1)
|
(6.5)
|
(30.2)
|
(27.4)
|
|
Gross margin
|
$ 336.2
|
$ 321.4
|
$ 1,600.6
|
$ 1,583.6
|
43
March 2012 Investor Presentation
Credit Metric Reconciliation to GAAP
Funds from operations (FFO) to adjusted debt is a
financial measure that is not calculated in
accordance with generally accepted accounting
principles (GAAP). FFO to adjusted debt, as used by
Great Plains Energy, is defined in accordance with
Standard & Poor’s methodology used for calculating
FFO to debt. The numerator of the ratio is defined as
net cash from operating activities (GAAP) plus non-
GAAP adjustments related to operating leases,
hybrid securities, post-retirement benefit obligations,
capitalized interest, power purchase agreements,
asset retirement obligations, changes in working
capital and decommissioning fund contributions. The
denominator of the ratio is defined as the sum of
debt balances (GAAP) plus non-GAAP adjustments
related to some of the same items adjusted for in the
numerator and other adjustments related to
securitized receivables and accrued interest.
Management believes that FFO to adjusted debt
provides a meaningful way to better understand the
Company’s credit profile. FFO to adjusted debt is
used internally to help evaluate the possibility of a
change in the Company’s credit rating.
financial measure that is not calculated in
accordance with generally accepted accounting
principles (GAAP). FFO to adjusted debt, as used by
Great Plains Energy, is defined in accordance with
Standard & Poor’s methodology used for calculating
FFO to debt. The numerator of the ratio is defined as
net cash from operating activities (GAAP) plus non-
GAAP adjustments related to operating leases,
hybrid securities, post-retirement benefit obligations,
capitalized interest, power purchase agreements,
asset retirement obligations, changes in working
capital and decommissioning fund contributions. The
denominator of the ratio is defined as the sum of
debt balances (GAAP) plus non-GAAP adjustments
related to some of the same items adjusted for in the
numerator and other adjustments related to
securitized receivables and accrued interest.
Management believes that FFO to adjusted debt
provides a meaningful way to better understand the
Company’s credit profile. FFO to adjusted debt is
used internally to help evaluate the possibility of a
change in the Company’s credit rating.
44
March 2012 Investor Presentation
Credit Metric Reconciliation to GAAP
Funds from operations (FFO) interest coverage
ratio is a financial measure that is not calculated in
accordance with generally accepted accounting
principles (GAAP). FFO interest coverage, as used
by Great Plains Energy, is defined in accordance
with Standard & Poor’s methodology used for
calculating FFO interest coverage. The numerator
of the ratio is defined as net cash from operating
activities (GAAP) plus non-GAAP adjustments
related to operating leases, hybrid securities, post-
retirement benefit obligations, capitalized interest,
power purchase agreements, asset retirement
obligations, changes in working capital and
decommissioning fund contributions plus adjusted
interest expense (non-GAAP). The denominator of
the ratio, adjusted interest expense, is defined as
interest charges (GAAP) plus non-GAAP
adjustments related to some of the same items
adjusted for in the numerator and other
adjustments needed to match Standard & Poor’s
calculation. Management believes that FFO
interest coverage provides a meaningful way to
better understand the Company’s credit profile.
FFO interest coverage is used internally to help
evaluate the possibility of a change in the
Company’s credit rating.
ratio is a financial measure that is not calculated in
accordance with generally accepted accounting
principles (GAAP). FFO interest coverage, as used
by Great Plains Energy, is defined in accordance
with Standard & Poor’s methodology used for
calculating FFO interest coverage. The numerator
of the ratio is defined as net cash from operating
activities (GAAP) plus non-GAAP adjustments
related to operating leases, hybrid securities, post-
retirement benefit obligations, capitalized interest,
power purchase agreements, asset retirement
obligations, changes in working capital and
decommissioning fund contributions plus adjusted
interest expense (non-GAAP). The denominator of
the ratio, adjusted interest expense, is defined as
interest charges (GAAP) plus non-GAAP
adjustments related to some of the same items
adjusted for in the numerator and other
adjustments needed to match Standard & Poor’s
calculation. Management believes that FFO
interest coverage provides a meaningful way to
better understand the Company’s credit profile.
FFO interest coverage is used internally to help
evaluate the possibility of a change in the
Company’s credit rating.
45
March 2012 Investor Presentation
Credit Metric Reconciliation to GAAP
Adjusted debt to total adjusted capitalization is a
financial measure that is not calculated in
accordance with generally accepted accounting
principles (GAAP). Adjusted debt to total
adjusted capitalization, as used by Great Plains
Energy, is defined in accordance with Standard
& Poor’s methodology used for calculating the
ratio of debt to debt and equity. The numerator
of the ratio, adjusted debt, is defined as the sum
of debt balances (GAAP) plus non-GAAP
adjustments related to securitized receivables,
operating leases, hybrid securities, post-
retirement benefit obligations, accrued interest,
power purchase agreements and asset
retirement obligations. The denominator of the
ratio, total adjusted capitalization, is defined as
the sum of equity balances (GAAP) plus non-
GAAP adjustments related to hybrid securities
plus the non-GAAP adjusted debt as defined for
the numerator. Management believes that
adjusted debt to total adjusted capitalization
provides a meaningful way to better understand
the Company’s credit profile. Adjusted debt to
total adjusted capitalization is used internally to
help evaluate the possibility of a change in the
Company’s credit rating.
financial measure that is not calculated in
accordance with generally accepted accounting
principles (GAAP). Adjusted debt to total
adjusted capitalization, as used by Great Plains
Energy, is defined in accordance with Standard
& Poor’s methodology used for calculating the
ratio of debt to debt and equity. The numerator
of the ratio, adjusted debt, is defined as the sum
of debt balances (GAAP) plus non-GAAP
adjustments related to securitized receivables,
operating leases, hybrid securities, post-
retirement benefit obligations, accrued interest,
power purchase agreements and asset
retirement obligations. The denominator of the
ratio, total adjusted capitalization, is defined as
the sum of equity balances (GAAP) plus non-
GAAP adjustments related to hybrid securities
plus the non-GAAP adjusted debt as defined for
the numerator. Management believes that
adjusted debt to total adjusted capitalization
provides a meaningful way to better understand
the Company’s credit profile. Adjusted debt to
total adjusted capitalization is used internally to
help evaluate the possibility of a change in the
Company’s credit rating.
46
March 2012 Investor Presentation
Net Free Cash Flow (NFCF) is a financial measure that is not calculated in accordance with generally
accepted accounting principles (GAAP). NFCF, as used by Great Plains Energy, is calculated from the
Consolidated Statement of Cash Flows as Cash Flows from Operating Activities less Cash Flows from
Investing Activities less Dividends paid. Management believes that NFCF is an important measurement in
evaluating financing and/or dividend alternatives. The Company’s definition of NFCF may differ from similar
terms used by other companies.
Great Plains Energy Reconciliation of
Net Free Cash Flow (NFCF)
Net Free Cash Flow (NFCF)
(Unaudited)
*GAAP dividends paid includes an assumed $0.85 of common dividends in 2012
for illustrative purposes only and is not an indication of approval of such amount
by the Company’s Board of Directors
for illustrative purposes only and is not an indication of approval of such amount
by the Company’s Board of Directors
47