10-Q 1 gxp-03312018x10q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
or
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______to_______
 
 
Exact name of registrant as specified in its charter,
 
 
Commission
 
state of incorporation, address of principal
 
I.R.S. Employer
File Number
 
executive offices and telephone number
 
Identification Number
 
 
 
 
 
001-32206
 
GREAT PLAINS ENERGY INCORPORATED
 
43-1916803
 
 
(A Missouri Corporation)
 
 
 
 
1200 Main Street
 
 
 
 
Kansas City, Missouri  64105
 
 
 
 
(816) 556-2200
 
 
 
 
 
 
 
000-51873
 
KANSAS CITY POWER & LIGHT COMPANY
 
44-0308720
 
 
(A Missouri Corporation)
 
 
 
 
1200 Main Street
 
 
 
 
Kansas City, Missouri  64105
 
 
 
 
(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.
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
X
No
_
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
X
No
_
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Great Plains Energy Incorporated
 
Large accelerated filer
X
Accelerated filer
_
 
 
 
 
 
 
Non-accelerated filer
_
Smaller reporting company
_
 
 
 
 
 
 
Emerging growth company
_
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. _
Kansas City Power & Light Company
 
Large accelerated filer
_
Accelerated filer
_
 
 
 
 
 
 
Non-accelerated filer
X
Smaller reporting company
_
 
 
 
 
 
 
Emerging growth company
_
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. _
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Great Plains Energy Incorporated
Yes
_
No
X
 
Kansas City Power & Light Company
Yes
_
No
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On April 30, 2018, Great Plains Energy Incorporated had 215,795,884 shares of common stock outstanding.  On April 30, 2018, Kansas City Power & Light Company had one share of common stock outstanding and held by Great Plains Energy Incorporated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kansas City Power & Light Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.
This combined Quarterly Report on Form 10-Q is being filed by Great Plains Energy Incorporated (Great Plains Energy) and Kansas City Power & Light Company (KCP&L).  KCP&L is a wholly owned subsidiary of Great Plains Energy and represents a significant portion of its assets, liabilities, revenues, expenses and operations.  Thus, all information contained in this report relates to, and (where required) is filed by, Great Plains Energy.  Information that is specifically identified in this report as relating solely to Great Plains Energy, such as its financial statements and all information relating to Great Plains Energy's other operations, businesses and subsidiaries, including KCP&L Greater Missouri Operations Company (GMO), does not relate to, and is not filed by, KCP&L.  KCP&L makes no representation as to that information.  Neither Great Plains Energy nor its other subsidiaries have any obligation in respect of KCP&L's debt securities and holders of such securities should not consider Great Plains Energy's or its other subsidiaries' financial resources or results of operations in making a decision with respect to KCP&L's debt securities.  Similarly, KCP&L has no obligation in respect of securities of Great Plains Energy or its other subsidiaries.
This report should be read in its entirety.  No one section of the report deals with all aspects of the subject matter.  It should be read in conjunction with the consolidated financial statements and related notes and with the management's discussion and analysis included in the 2017 Form 10-K for each of Great Plains Energy and KCP&L.



TABLE OF CONTENTS
 
 
 
Page Number
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 1:
 
Note 2:
 
Note 3:
 
Note 4:
 
Note 5:
 
Note 6:
 
Note 7:
 
Note 8:
 
Note 9:
 
Note 10:
 
Note 11:
 
Note 12:
 
Note 13:
 
Note 14:
 
Note 15:
 
Note 16:
 
Note 17:
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 
 
 


3

CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION
Statements made in this report 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, statements relating to the anticipated merger transaction of Great Plains Energy and Westar Energy, Inc. (Westar), including those that relate to the expected financial and operational benefits of the merger to the companies and their shareholders (including cost savings, operational efficiencies and the impact of the anticipated merger on earnings per share), the expected timing of closing, the outcome of regulatory proceedings, cost estimates of capital projects, dividend growth, share repurchases, balance sheet and credit ratings, rebates to customers, employee issues 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; prices and availability of electricity in regional and national wholesale markets; market perception of the energy industry, Great Plains Energy, KCP&L and Westar; changes in business strategy, operations or development plans; the outcome of contract negotiations for goods and services; 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 that 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 derivatives and hedges, 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, 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 generation, transmission, distribution or other projects; Great Plains Energy's and Westar's ability to successfully manage and integrate their respective transmission joint ventures; 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; the ability of Great Plains Energy and Westar to obtain the regulatory approvals necessary to complete the anticipated merger or the imposition of adverse conditions or costs in connection with obtaining regulatory approvals; the risk that a condition to the closing of the anticipated merger may not be satisfied or that the anticipated merger may fail to close; the outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted relating to the anticipated merger; the costs incurred to consummate the anticipated merger; the possibility that the expected value creation from the anticipated merger will not be realized, or will not be realized within the expected time period; difficulties related to the integration of the two companies; the credit ratings of the combined company following the anticipated merger; disruption from the anticipated merger making it more difficult to maintain relationships with customers, employees, regulators or suppliers; the diversion of management time and attention on the anticipated merger; and other risks and uncertainties.

This list of factors is not all-inclusive because it is not possible to predict all factors. Part II Item 1A Risk Factors included in this report, together with the risk factors included in the 2017 Form 10-K for each of Great Plains Energy and KCP&L under Part I Item 1A, should be carefully read for further understanding of potential risks for each of Great Plains Energy and KCP&L. Other sections of this report and other periodic reports filed by each of Great Plains Energy and KCP&L with the Securities and Exchange Commission (SEC) should also be read for more information regarding risk factors. 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.

4

GLOSSARY OF TERMS 
The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.
Abbreviation or Acronym
 
Definition
 
 
 
AFUDC
 
Allowance for Funds Used During Construction
Amended Merger Agreement
 
Amended and Restated Agreement and Plan of Merger dated as of July 9, 2017 by and among Great Plains Energy, Westar, Monarch Energy Holding, Inc. and King Energy, Inc.
AMT
 
Alternative Minimum Tax
ARO
 
Asset Retirement Obligation
ASU
 
Accounting Standards Update
CCRs
 
Coal combustion residuals
Clean Air Act
 
Clean Air Act Amendments of 1990
CO2
 
Carbon dioxide
Company
 
Great Plains Energy Incorporated and its consolidated subsidiaries
Companies
 
Great Plains Energy Incorporated and its consolidated subsidiaries and KCP&L and its consolidated subsidiaries
DOE
 
Department of Energy
EIRR
 
Environmental Improvement Revenue Refunding
Electric Utility
 
Electric utility segment
EPA
 
Environmental Protection Agency
EPS
 
Earnings (loss) per common share
ERISA
 
Employee Retirement Income Security Act of 1974, as amended
Exchange Act
 
The Securities Exchange Act of 1934, as amended
FASB
 
Financial Accounting Standards Board
FERC
 
The Federal Energy Regulatory Commission
FCC
 
The Federal Communications Commission
GAAP
 
Generally Accepted Accounting Principles
GMO
 
KCP&L Greater Missouri Operations Company, a wholly owned subsidiary of Great Plains Energy
GP Star
 
GP Star, Inc.
GPETHC
 
GPE Transmission Holding Company LLC, a wholly owned subsidiary of Great Plains Energy
Great Plains Energy
 
Great Plains Energy Incorporated and its consolidated subsidiaries
Great Plains Energy Board
 
Great Plains Energy Board of Directors
HSR
 
Hart-Scott-Rodino
Holdco
 
Monarch Energy Holding, Inc., a Missouri corporation
KCC
 
The State Corporation Commission of the State of Kansas
KCP&L
 
Kansas City Power & Light Company, a wholly owned subsidiary of Great Plains Energy, and its consolidated subsidiaries
KCP&L Receivables Company
 
Kansas City Power & Light Receivables Company, a wholly owned subsidiary of KCP&L
kWh
 
Kilowatt hour
MEEIA
 
Missouri Energy Efficiency Investment Act
Merger Sub
 
King Energy, Inc., a Kansas corporation and wholly owned subsidiary of Holdco
MGP
 
Manufactured gas plant
MPS Merchant
 
MPS Merchant Services, Inc., a wholly owned subsidiary of GMO

5

Abbreviation or Acronym
 
Definition
 
 
 
MPSC
 
Public Service Commission of the State of Missouri
MW
 
Megawatt
MWh
 
Megawatt hour
NERC
 
North American Electric Reliability Corporation
NOL
 
Net operating loss
NRC
 
Nuclear Regulatory Commission
Original Merger Agreement
 
Agreement and Plan of Merger dated as of May 29, 2016, by and among Great Plains Energy, Westar and GP Star, Inc.
SEC
 
Securities and Exchange Commission
Series B Preferred Stock
 
7.00% Series B Mandatory Convertible Preferred Stock
SPP
 
Southwest Power Pool, Inc.
Transource
 
Transource Energy, LLC and its subsidiaries, 13.5% owned by GPETHC
WCNOC
 
Wolf Creek Nuclear Operating Corporation
Westar
 
Westar Energy, Inc.
Westar Board
 
Westar Board of Directors
Wolf Creek
 
Wolf Creek Generating Station


6

PART II
ITEM 1. FINANCIAL STATEMENTS

GREAT PLAINS ENERGY INCORPORATED
Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
March 31
 
December 31
 
2018
 
2017
ASSETS
(millions, except share amounts)
Current Assets
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,142.1

 
 
 
$
1,125.4

 
Receivables, net
 
108.2

 
 
 
151.7

 
Accounts receivable pledged as collateral
 
180.0

 
 
 
180.0

 
Fuel inventories, at average cost
 
105.0

 
 
 
103.2

 
Materials and supplies, at average cost
 
172.3

 
 
 
171.2

 
Deferred refueling outage costs
 
5.9

 
 
 
6.8

 
Interest rate derivative instruments
 
98.4

 
 
 
91.4

 
Prepaid expenses and other assets
 
37.7

 
 
 
33.4

 
Total
 
1,849.6

 
 
 
1,863.1

 
Utility Plant, at Original Cost
 
 

 
 
 
 

 
Electric
 
13,733.1

 
 
 
13,674.1

 
Less - accumulated depreciation
 
5,305.1

 
 
 
5,224.0

 
Net utility plant in service
 
8,428.0

 
 
 
8,450.1

 
Construction work in progress
 
494.4

 
 
 
458.6

 
Plant to be retired, net
 
142.0

 
 
 
143.6

 
Nuclear fuel, net of amortization of $211.9 and $204.2
 
65.7

 
 
 
72.4

 
Total
 
9,130.1

 
 
 
9,124.7

 
Investments and Other Assets
 
 

 
 
 
 

 
Nuclear decommissioning trust fund
 
255.3

 
 
 
258.4

 
Regulatory assets
 
901.7

 
 
 
913.9

 
Goodwill
 
169.0

 
 
 
169.0

 
Other
 
142.7

 
 
 
128.8

 
Total
 
1,468.7

 
 
 
1,470.1

 
Total
 
$
12,448.4

 
 
 
$
12,457.9

 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

7

GREAT PLAINS ENERGY INCORPORATED
Consolidated Balance Sheets
(Unaudited)
 
 
March 31
 
December 31
 
2018
 
2017
LIABILITIES AND CAPITALIZATION
(millions, except share amounts)
Current Liabilities
 
 
 
 
 
 
 
Notes payable
 
$
23.0

 
 
 
$
11.0

 
Collateralized note payable
 
180.0

 
 
 
180.0

 
Commercial paper
 
523.8

 
 
 
376.8

 
Current maturities of long-term debt
 
1.1

 
 
 
351.1

 
Accounts payable
 
186.0

 
 
 
340.0

 
Accrued taxes
 
72.7

 
 
 
35.1

 
Accrued interest
 
57.4

 
 
 
42.8

 
Accrued compensation and benefits
 
40.4

 
 
 
50.1

 
Pension and post-retirement liability
 
2.7

 
 
 
2.7

 
Other
 
62.9

 
 
 
59.2

 
Total
 
1,150.0

 
 
 
1,448.8

 
Deferred Credits and Other Liabilities
 
 

 
 
 
 

 
Deferred income taxes
 
639.5

 
 
 
621.7

 
Deferred tax credits
 
124.5

 
 
 
124.8

 
Asset retirement obligations
 
257.5

 
 
 
262.5

 
Pension and post-retirement liability
 
532.4

 
 
 
535.0

 
Regulatory liabilities
 
1,112.4

 
 
 
1,106.3

 
Other
 
81.8

 
 
 
81.4

 
Total
 
2,748.1

 
 
 
2,731.7

 
Capitalization
 
 

 
 
 
 

 
Great Plains Energy shareholders' equity
 
 

 
 
 
 

 
Common stock - 600,000,000 shares authorized without par value
215,886,844 and 215,801,723 shares issued, stated value
 
4,232.1

 
 
 
4,233.1

 
Retained earnings
 
713.6

 
 
 
737.9

 
Treasury stock - 90,960 and 137,589 shares, at cost
 
(2.7
)
 
 
 
(4.0
)
 
Accumulated other comprehensive loss
 
(1.2
)
 
 
 
(2.2
)
 
Total shareholders' equity
 
4,941.8

 
 
 
4,964.8

 
Long-term debt (Note 11)
 
3,608.5

 
 
 
3,312.6

 
Total
 
8,550.3

 
 
 
8,277.4

 
Commitments and Contingencies (Note 12)
 


 
 
 


 
Total
 
$
12,448.4

 
 
 
$
12,457.9

 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

8

GREAT PLAINS ENERGY INCORPORATED
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
 
 
 
Three Months Ended March 31
 
2018
 
2017
 
Operating Revenues
 
(millions, except per share amounts)
Electric revenues
 
$
583.9

 
$
570.7

 
Operating Expenses
 
 
 
 
 
Fuel and purchased power
 
154.3

 
126.5

 
Transmission
 
25.4

 
23.1

 
Utility operating and maintenance expenses
 
180.2

 
174.1

 
Costs to achieve the anticipated merger with Westar Energy, Inc.
 
2.9

 
39.4

 
Depreciation and amortization
 
93.7

 
90.3

 
General taxes
 
41.1

 
57.1

 
Other
 
—

 
1.1

 
Total
 
497.6

 
511.6

 
Operating income
 
86.3

 
59.1

 
Other Income (Expense)
 
 
 
 
 
Non-operating income
 
14.5

 
6.6

 
Non-operating expenses
 
(13.2
)
 
(15.4
)
 
Total
 
1.3

 
(8.8
)
 
Interest charges
 
(48.1
)
 
(66.6
)
 
Income (loss) before income tax (expense) benefit and income from equity investments
 
39.5

 
(16.3
)
 
Income tax (expense) benefit
 
(5.5
)
 
5.8

 
Income from equity investments, net of income taxes
 
1.0

 
0.9

 
Net income (loss)
 
35.0

 
(9.6
)
 
Preferred stock dividend requirements
 
—

 
15.1

 
Earnings (loss) available for common shareholders
 
$
35.0

 
$
(24.7
)
 
 
 
 
 
 
 
Average number of basic common shares outstanding
 
215.7

 
215.3

 
Average number of diluted common shares outstanding
 
216.0

 
215.3

 
 
 
 
 
 
 
Basic and diluted earnings (loss) per common share
 
$
0.16

 
$
(0.11
)
 
 
 
 
 
 
 
Cash dividends per common share
 
$
0.275

 
$
0.275

 
Comprehensive Income (Loss)
 
 
 
 
 
Net income (loss)
 
$
35.0

 
$
(9.6
)
 
Other comprehensive income
 
 
 
 
 
Derivative hedging activity
 
 
 
 
 
Reclassification to expenses, net of tax
 
0.9

 
1.4

 
Derivative hedging activity, net of tax
 
0.9

 
1.4

 
Defined benefit pension plans
 
 
 
 
 
Amortization of net losses included in net periodic benefit costs, net of tax
 
0.1

 
0.1

 
Change in unrecognized pension expense, net of tax
 
0.1

 
0.1

 
Total other comprehensive income
 
1.0

 
1.5

 
Comprehensive income (loss)
 
$
36.0

 
$
(8.1
)
 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.


9


GREAT PLAINS ENERGY INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
 
 
Three Months Ended March 31
2018
 
 
2017
Cash Flows from Operating Activities
(millions)
Net income (loss)
$
35.0

 
 
$
(9.6
)
Adjustments to reconcile income (loss) to net cash from operating activities:
 

 
 
 

Depreciation and amortization
93.7

 
 
90.3

Amortization of:
 

 
 
 

Nuclear fuel
7.7

 
 
8.0

Other
8.7

 
 
24.9

Deferred income taxes, net
5.8

 
 
(5.6
)
Investment tax credit amortization
(0.3
)
 
 
(0.4
)
Income from equity investments, net of income taxes
(1.0
)
 
 
(0.9
)
Fair value impacts of interest rate swaps
(7.0
)
 
 
(12.1
)
Other operating activities (Note 4)
(29.1
)
 
 
(7.0
)
Net cash from operating activities
113.5

 
 
87.6

Cash Flows from Investing Activities
 

 
 
 

Utility capital expenditures
(119.7
)
 
 
(116.6
)
Allowance for borrowed funds used during construction
(2.4
)
 
 
(1.5
)
Purchases of nuclear decommissioning trust investments
(12.1
)
 
 
(5.9
)
Proceeds from nuclear decommissioning trust investments
11.3

 
 
5.0

Proceeds from time deposit
—

 
 
1,000.0

Other investing activities
(17.1
)
 
 
(12.5
)
Net cash from investing activities
(140.0
)
 
 
868.5

Cash Flows from Financing Activities
 

 
 
 

Issuance of common stock
—

 
 
1.5

Issuance of long-term debt
299.7

 
 
4,291.9

Issuance fees
(3.1
)
 
 
(31.2
)
Repayment of long-term debt
(351.1
)
 
 
(1.1
)
Net change in short-term borrowings
159.0

 
 
119.9

Net change in collateralized short-term borrowings
—

 
 
(0.2
)
Dividends paid
(59.3
)
 
 
(74.3
)
Other financing activities
(2.0
)
 
 
(3.4
)
Net cash from financing activities
43.2

 
 
4,303.1

Net Change in Cash and Cash Equivalents
16.7

 
 
5,259.2

Cash and Cash Equivalents at Beginning of Year
1,125.4

 
 
1,293.1

Cash and Cash Equivalents at End of Period
$
1,142.1

 
 
$
6,552.3

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

10

GREAT PLAINS ENERGY INCORPORATED
Consolidated Statements of Shareholders' Equity
(Unaudited)
 
 
 
 
Three Months Ended March 31
2018
 
2017
 
Shares
 
Amount
 
Shares
 
Amount
Common Stock
(millions, except share amounts)
Beginning balance
215,801,723

 
$
4,233.1

 
215,479,105

 
$
4,217.0

Issuance of common stock
85,121

 
3.3

 
249,170

 
9.5

Equity compensation expense, net of forfeitures
 
 
1.3

 
 

 
1.1

Unearned Compensation
 

 
 

 
 

 
 

Issuance of restricted common stock
 

 
(2.0
)
 
 

 
(2.3
)
Forfeiture of restricted common stock
 
 
—

 
 
 
0.2

Compensation expense recognized
 

 
0.5

 
 

 
0.7

Other
 

 
(4.1
)
 
 

 
(0.7
)
Ending balance
215,886,844

 
4,232.1

 
215,728,275

 
4,225.5

Preference Stock
—

 
—

 
862,500

 
836.2

Retained Earnings
 

 
 

 
 

 
 

Beginning balance
 

 
737.9

 
 

 
1,119.2

Net income (loss)
 

 
35.0

 
 

 
(9.6
)
Dividends:
 

 
 

 
 

 
 

Common stock ($0.275 per share)
 
(59.3
)
 
 

 
(59.2
)
Preferred stock - at required rates
 

 
—

 
 

 
(15.1
)
Performance shares
 

 
—

 
 

 
(0.1
)
Ending balance
 

 
713.6

 
 

 
1,035.2

Treasury Stock
 

 
 

 
 

 
 

Beginning balance
(137,589
)
 
(4.0
)
 
(128,087
)
 
(3.8
)
Treasury shares acquired
(56,589
)
 
(1.7
)
 
(104,129
)
 
(3.0
)
Treasury shares reissued
103,218

 
3.0

 
103,094

 
3.0

Ending balance
(90,960
)
 
(2.7
)
 
(129,122
)
 
(3.8
)
Accumulated Other Comprehensive Income (Loss)
 
 

 
 

 
 

Beginning balance
 

 
(2.2
)
 
 

 
(6.6
)
Derivative hedging activity, net of tax
 

 
0.9

 
 

 
1.4

Change in unrecognized pension expense, net of tax
 
0.1

 
 

 
0.1

Ending balance
 

 
(1.2
)
 
 

 
(5.1
)
Total Great Plains Energy Shareholders' Equity
 
$
4,941.8

 
 

 
$
6,088.0

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

11

KANSAS CITY POWER & LIGHT COMPANY
 
Consolidated Balance Sheets
 
(Unaudited)
 
 
 
March 31
 
December 31
 
 
2018
2017
 
ASSETS
(millions, except share amounts)
 
Current Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
13.8

 
 
 
$
2.2

 
 
Receivables, net
 
74.3

 
 
 
106.3

 
 
Related party receivables
 
69.1

 
 
 
84.7

 
 
Accounts receivable pledged as collateral
 
130.0

 
 
 
130.0

 
 
Fuel inventories, at average cost
 
72.0

 
 
 
71.0

 
 
Materials and supplies, at average cost
 
127.8

 
 
 
126.0

 
 
Deferred refueling outage costs
 
5.9

 
 
 
6.8

 
 
Refundable income taxes
 
7.2

 
 
 
5.4

 
 
Prepaid expenses and other assets
 
31.3

 
 
 
27.6

 
 
Total
 
531.4

 
 
 
560.0

 
 
Utility Plant, at Original Cost
 
 

 
 
 
 

 
 
Electric
 
10,251.8

 
 
 
10,213.2

 
 
Less - accumulated depreciation
 
4,130.0

 
 
 
4,070.3

 
 
Net utility plant in service
 
6,121.8

 
 
 
6,142.9

 
 
Construction work in progress
 
384.7

 
 
 
350.3

 
 
Nuclear fuel, net of amortization of $211.9 and $204.2
 
65.7

 
 
 
72.4

 
 
Total
 
6,572.2

 
 
 
6,565.6

 
 
Investments and Other Assets
 
 

 
 
 
 

 
 
Nuclear decommissioning trust fund
 
255.3

 
 
 
258.4

 
 
Regulatory assets
 
681.9

 
 
 
691.9

 
 
Other
 
49.5

 
 
 
48.0

 
 
Total
 
986.7

 
 
 
998.3

 
 
Total
 
$
8,090.3

 
 
 
$
8,123.9

 
 
The disclosures regarding KCP&L included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

12

KANSAS CITY POWER & LIGHT COMPANY
 
Consolidated Balance Sheets
 
(Unaudited)
 
 
 
 
 
 
March 31
 
December 31
 
 
2018
 
2017
 
LIABILITIES AND CAPITALIZATION
(millions, except share amounts)
 
Current Liabilities
 
 
 
 
 
 
 
 
Collateralized note payable
 
$
130.0

 
 
 
$
130.0

 
 
Commercial paper
 
288.3

 
 
 
167.5

 
 
Current maturities of long-term debt
 
—

 
 
 
350.0

 
 
Accounts payable
 
147.6

 
 
 
249.0

 
 
Accrued taxes
 
55.8

 
 
 
29.0

 
 
Accrued interest
 
40.7

 
 
 
32.4

 
 
Accrued compensation and benefits
 
40.4

 
 
 
50.1

 
 
Pension and post-retirement liability
 
1.4

 
 
 
1.4

 
 
Other
 
50.7

 
 
 
46.8

 
 
Total
 
754.9

 
 
 
1,056.2

 
 
Deferred Credits and Other Liabilities
 
 

 
 
 
 

 
 
Deferred income taxes
 
628.3

 
 
 
616.1

 
 
Deferred tax credits
 
121.5

 
 
 
121.8

 
 
Asset retirement obligations
 
227.0

 
 
 
231.4

 
 
Pension and post-retirement liability
 
509.7

 
 
 
512.2

 
 
Regulatory liabilities
 
782.7

 
 
 
779.2

 
 
Other
 
62.6

 
 
 
61.6

 
 
Total
 
2,331.8

 
 
 
2,322.3

 
 
Capitalization
 
 

 
 
 
 

 
 
Common shareholder's equity
 
 

 
 
 
 

 
 
Common stock - 1,000 shares authorized without par value
 
 

 
 
 
 

 
 
1 share issued, stated value
 
1,563.1

 
 
 
1,563.1

 
 
Retained earnings
 
909.9

 
 
 
949.7

 
 
Accumulated other comprehensive income
 
1.3

 
 
 
0.4

 
 
Total
 
2,474.3

 
 
 
2,513.2

 
 
Long-term debt (Note 11)
 
2,529.3

 
 
 
2,232.2

 
 
Total
 
5,003.6

 
 
 
4,745.4

 
 
Commitments and Contingencies (Note 12)
 


 
 
 


 
 
Total
 
$
8,090.3

 
 
 
$
8,123.9

 
 
The disclosures regarding KCP&L included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

13

KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
 
 
 
 
 
 
Three Months Ended March 31
 
2018
 
2017
 
Operating Revenues
 
(millions)
Electric revenues
 
$
397.1

 
$
395.9

 
Operating Expenses
 
 
 
 
 
Fuel and purchased power
 
101.8

 
78.9

 
Transmission
 
15.7

 
14.3

 
Operating and maintenance expenses
 
121.0

 
119.6

 
Costs to achieve the anticipated merger with Westar Energy, Inc.
 
1.5

 
7.9

 
Depreciation and amortization
 
66.9

 
65.3

 
General taxes
 
29.0

 
44.6

 
Other
 
0.2

 
0.3

 
Total
 
336.1

 
330.9

 
Operating income
 
61.0

 
65.0

 
Other Income (Expense)
 
 
 
 
 
Non-operating income
 
3.6

 
2.5

 
Non-operating expenses
 
(7.9
)
 
(8.9
)
 
Total
 
(4.3
)
 
(6.4
)
 
Interest charges
 
(33.0
)
 
(35.6
)
 
Income before income tax expense
 
23.7

 
23.0

 
Income tax expense
 
(3.5
)
 
(8.8
)
 
Net income
 
$
20.2

 
$
14.2

 
Comprehensive Income
 
 
 
 
 
Net income
 
$
20.2

 
$
14.2

 
Other comprehensive income
 
 
 
 
 
Derivative hedging activity
 
 
 
 
 
Reclassification to expenses, net of tax
 
0.9

 
1.3

 
Derivative hedging activity, net of tax
 
0.9

 
1.3

 
Total other comprehensive income
 
0.9

 
1.3

 
Comprehensive income
 
$
21.1

 
$
15.5

 
The disclosures regarding KCP&L included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.


14

KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
 
 
 
Three Months Ended March 31
 
2018
 
 
2017
Cash Flows from Operating Activities
(millions)
Net income
 
$
20.2

 
 
$
14.2

Adjustments to reconcile income to net cash from operating activities:
 
 
 
 
 

Depreciation and amortization
 
66.9

 
 
65.3

Amortization of:
 
 

 
 
 

Nuclear fuel
 
7.7

 
 
8.0

Other
 
6.6

 
 
8.1

Deferred income taxes, net
 
5.6

 
 
9.2

Investment tax credit amortization
 
(0.3
)
 
 
(0.3
)
Other operating activities (Note 4)
 
(1.7
)
 
 
(21.1
)
Net cash from operating activities
 
105.0

 
 
83.4

Cash Flows from Investing Activities
 
 

 
 
 

Utility capital expenditures
 
(93.5
)
 
 
(84.0
)
Allowance for borrowed funds used during construction
 
(2.0
)
 
 
(1.2
)
Purchases of nuclear decommissioning trust investments
 
(12.1
)
 
 
(5.9
)
Proceeds from nuclear decommissioning trust investments
 
11.3

 
 
5.0

Other investing activities
 
(4.5
)
 
 
(5.1
)
Net cash from investing activities
 
(100.8
)
 
 
(91.2
)
Cash Flows from Financing Activities
 
 

 
 
 

Issuance of long-term debt
 
299.7

 
 
—

Issuance fees
 
(3.1
)
 
 
—

Repayment of long-term debt
 
(350.0
)
 
 
—

Net change in short-term borrowings
 
120.8

 
 
62.4

Dividends paid to Great Plains Energy
 
(60.0
)
 
 
(57.0
)
Net cash from financing activities
 
7.4

 
 
5.4

Net Change in Cash and Cash Equivalents
 
11.6

 
 
(2.4
)
Cash and Cash Equivalents at Beginning of Year
 
2.2

 
 
4.5

Cash and Cash Equivalents at End of Period
 
$
13.8

 
 
$
2.1

The disclosures regarding KCP&L included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

15

KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Common Shareholder's Equity
(Unaudited)
 
 
 
 
Three Months Ended March 31
2018
 
2017
 
Shares
 
Amount
 
Shares
 
Amount
 
(millions, except share amounts)
Common Stock
1

 
$
1,563.1

 
1

 
$
1,563.1

Retained Earnings
 

 
 

 
 

 
 

Beginning balance
 

 
949.7

 
 

 
982.6

Net income
 

 
20.2

 
 

 
14.2

Cumulative effect of adoption of ASU 2016-09
 
 
—

 
 
 
(0.7
)
Dividends:
 

 
 

 
 

 
 

Common stock held by Great Plains Energy
 

 
(60.0
)
 
 

 
(57.0
)
Ending balance
 

 
909.9

 
 

 
939.1

Accumulated Other Comprehensive Income (Loss)
 
 
 

 
 

 
 

Beginning balance
 

 
0.4

 
 

 
(4.2
)
Derivative hedging activity, net of tax
 

 
0.9

 
 

 
1.3

Ending balance
 

 
1.3

 
 

 
(2.9
)
Total Common Shareholder's Equity
 

 
$
2,474.3

 
 

 
$
2,499.3

The disclosures regarding KCP&L included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

16

GREAT PLAINS ENERGY INCORPORATED
KANSAS CITY POWER & LIGHT COMPANY
Notes to Unaudited Consolidated Financial Statements
The notes to unaudited consolidated financial statements that follow are a combined presentation for Great Plains Energy Incorporated and Kansas City Power & Light Company, both registrants under this filing.  The terms "Great Plains Energy," "Company," "KCP&L" and "Companies" are used throughout this report.  "Great Plains Energy" and the "Company" refer to Great Plains Energy Incorporated and its consolidated subsidiaries, unless otherwise indicated.  "KCP&L" refers to Kansas City Power & Light Company and its consolidated subsidiaries. "Companies" refers to Great Plains Energy Incorporated and its consolidated subsidiaries and KCP&L and its consolidated subsidiaries. The Companies' interim financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in the opinion of management, for a fair presentation of the results for the interim periods presented.  
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Great Plains Energy, a Missouri corporation incorporated in 2001, is a public utility holding company and does not own or operate any significant assets other than the stock of its subsidiaries and cash and cash equivalents.  Great Plains Energy's wholly owned direct subsidiaries with significant operations are as follows:
•
KCP&L is an integrated, regulated electric utility that provides electricity to customers primarily in the states of Missouri and Kansas.  KCP&L has one active wholly owned subsidiary, Kansas City Power & Light Receivables Company (KCP&L Receivables Company).
•
KCP&L Greater Missouri Operations Company (GMO) is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.  GMO also provides regulated steam service to certain customers in the St. Joseph, Missouri area.  GMO has one active wholly owned subsidiary, GMO Receivables Company.
Great Plains Energy also wholly owns GPE Transmission Holding Company, LLC (GPETHC). GPETHC owns 13.5% of Transource Energy, LLC (Transource) with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of American Electric Power Company, Inc. GPETHC accounts for its investment in Transource under the equity method. Transource is focused on the development of competitive electric transmission projects.
Each of Great Plains Energy's and KCP&L's consolidated financial statements includes the accounts of their subsidiaries.  Intercompany transactions have been eliminated.
Great Plains Energy's sole reportable business segment is the electric utility segment (Electric Utility).  See Note 17 for additional information.
Basic and Diluted Earnings (Loss) per Common Share Calculation
To determine basic earnings (loss) per common share (EPS), preferred stock dividend requirements are deducted from net income (loss) before dividing by the average number of common shares outstanding. To determine diluted EPS, preferred stock dividend requirements are added to earnings available for common shareholders for the periods in which the assumed conversion of Great Plains Energy's 7.00% Series B Mandatory Convertible Preferred Stock (Series B Preferred Stock) has a dilutive effect before dividing by the diluted average number of common shares outstanding. The effect of dilutive securities assumes the issuance of common shares applicable to performance shares and restricted stock calculated using the treasury stock method and the number of common shares that would be issued under an assumed conversion of Series B Preferred Stock using the if-converted method.


17

The following table reconciles Great Plains Energy's basic and diluted EPS.
Three Months Ended March 31
2018
 
2017
Income (loss)
(millions, except per share amounts)
Net income (loss)
$
35.0

 
$
(9.6
)
Less: preferred stock dividend requirements
—

 
15.1

Earnings (loss) available for common shareholders
$
35.0

 
$
(24.7
)
Common Shares Outstanding
 
 
 

Average number of common shares outstanding
215.7

 
215.3

Add: effect of dilutive securities
0.3

 
—

Diluted average number of common shares outstanding
216.0

 
215.3

Basic and diluted EPS
$
0.16

 
$
(0.11
)

There were no anti-dilutive shares excluded from the computation of diluted EPS for the three months ended March 31, 2018. Anti-dilutive shares excluded from the computation of diluted EPS for the three months ended March 31, 2017 were 29,930,385 shares of Series B Preferred Stock assumed to be converted, 460,169 performance shares and 328,512 restricted stock shares.
Dividends Declared
In May 2018, Great Plains Energy's Board of Directors (Great Plains Energy Board) declared a quarterly dividend of $0.275 per share on Great Plains Energy's common stock.  The common dividend is payable June 20, 2018, to shareholders of record as of May 30, 2018. 

In May 2018, KCP&L's Board of Directors declared a cash dividend payable to Great Plains Energy of $60.0 million payable on June 19, 2018.
New Accounting Standards
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, Compensation-Retirement Benefits, which requires an employer to disaggregate the service cost component from the other components of net benefit cost. The service cost component is to be reported in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The non-service cost components are to be reported separately from service costs and outside of a subtotal of income from operations. The amendments in this update allow only the service cost component to be eligible for capitalization as part of utility plant. The non-service cost components that are no longer eligible for capitalization as part of utility plant will be recorded as a regulatory asset. The new guidance is to be applied retrospectively for the presentation of service cost and non-service cost components in the income statement and prospectively for the capitalization of the service cost component and is effective for interim and annual periods beginning after December 15, 2017. The Companies adopted ASU No. 2017-07 on January 1, 2018, and accordingly have retrospectively adjusted prior periods.

18

The following table reflects the retrospective adjustments in the line items of Great Plains Energy's and KCP&L's consolidated statements of comprehensive income associated with the adoption of ASU No. 2017-07.
Three Months Ended March 31, 2017
As Previously Reported
 
Effect of
Change
 
As Reported
Great Plains Energy
(millions)
Utility operating and maintenance expenses
$
185.4

 
$
(11.3
)
 
$
174.1

Other operating expense
1.5

 
(0.4
)
 
1.1

Operating expenses
523.3

 
(11.7
)
 
511.6

Operating income
47.4

 
11.7

 
59.1

Non-operating expenses
(3.7
)
 
(11.7
)
 
(15.4
)
Other income (expense)
2.9

 
(11.7
)
 
(8.8
)
KCP&L
 
 
 
 

Utility operating and maintenance expenses
$
126.4

 
$
(6.8
)
 
$
119.6

Operating expenses
337.7

 
(6.8
)
 
330.9

Operating income
58.2

 
6.8

 
65.0

Non-operating expenses
(2.1
)
 
(6.8
)
 
(8.9
)
Other income (expense)
0.4

 
(6.8
)
 
(6.4
)
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires an entity that is a lessee to record a right-of-use asset and a lease liability for lease payments on the balance sheet for all leases with terms longer than 12 months.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  The new guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and is required to be applied using a modified retrospective approach.  Great Plains Energy and KCP&L plan to adopt the new guidance on January 1, 2019. The Companies expect that the new guidance will affect the balance sheet by increasing the assets and liabilities recorded related to operating leases and continue to evaluate the effect that ASU No. 2016-02 will have on their income statement, statement of cash flows and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015-14, deferring the effective date of ASU No. 2014-09 one year, from January 1, 2017, to January 1, 2018. The ASU replaced most existing revenue recognition guidance in Generally Accepted Accounting Principles (GAAP) when it became effective. The Companies adopted ASU No. 2014-09 and its related amendments (ASC 606) on January 1, 2018 using the modified retrospective transition method for all contracts not completed as of the date of adoption. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while historical periods have not been adjusted and continue to be reported in accordance with the legacy guidance in ASC 605 - Revenue Recognition.
There was no cumulative effect adjustment to the opening balance of retained earnings in 2018 for Great Plains Energy or KCP&L as a result of the adoption of the new guidance. The impact to both electric revenues and general taxes on Great Plains Energy's and KCP&L's statements of comprehensive income in 2018 as a result of adopting ASC 606 was a decrease of $17.9 million. This impact was related to sales taxes and franchise fees collected from KCP&L's Missouri customers, which prior to ASC 606, were recorded gross on Great Plains Energy's and KCP&L's statements of comprehensive income.

19

2. REVENUE RECOGNITION
Great Plains Energy's and KCP&L's revenues disaggregated by customer class and for Great Plains Energy's direct subsidiaries are summarized in the following table. All of Great Plains Energy's revenues pertain to Electric Utility.
Three Months Ended March 31, 2018
KCP&L
 
GMO
 
Great Plains Energy
Customer class
(millions)
Residential
$
154.9

 
$
88.1

 
$
243.0

Commercial
181.8

 
64.2

 
246.0

Industrial
32.2

 
19.9

 
52.1

Other
2.7

 
1.8

 
4.5

Total electric retail
$
371.6

 
$
174.0

 
$
545.6

Wholesale
3.1

 
2.9

 
6.0

Transmission
3.3

 
4.6

 
7.9

Industrial steam
—

 
4.3

 
4.3

Total revenue from contracts with customers
$
378.0

 
$
185.8

 
$
563.8

Other revenue
19.1

 
1.0

 
20.1

Electric revenue
$
397.1

 
$
186.8

 
$
583.9


Retail Revenues
Great Plains Energy's and KCP&L's retail revenues are generated by the regulated sale of electricity to KCP&L's and GMO's residential, commercial and industrial customers within their franchised service territories. Great Plains Energy and KCP&L recognize revenue on the sale of electricity to their customers over time as the service is provided in the amount they have a right to invoice. Retail customers are billed on a monthly basis at the tariff rates approved by the MPSC and KCC based on customer kWh usage.
Revenues recorded include electric services provided but not yet billed by KCP&L and GMO. Unbilled revenues are recorded for kWh usage in the period following the customers' billing cycle to the end of the month. KCP&L's and GMO's estimate is based on net system kWh usage less actual billed kWhs. KCP&L's and GMO's estimated unbilled kWhs are allocated and priced by regulatory jurisdiction across the rate classes based on actual billing rates.
KCP&L and GMO also collect sales taxes and franchise fees from customers concurrent with revenue-producing activities that are levied by state and local governments. These items are excluded from revenue upon the adoption of ASC 606 and thus presented net on Great Plains Energy's and KCP&L's statements of comprehensive income.
Wholesale Revenues
Great Plains Energy's and KCP&L's wholesale revenue are generated by the sale of wholesale power and capacity in circumstances when the power that KCP&L and GMO generate is not required for customers in their service territory. These sales primarily occur within the Southwest Power Pool, Inc. (SPP) Integrated Marketplace. Great Plains Energy and KCP&L also purchase power from the SPP Integrated Marketplace and record sale and purchase activity on a net basis in wholesale revenue or purchased power. In addition, Great Plains Energy and KCP&L sell wholesale power and capacity through bilateral contracts between KCP&L and GMO and other counterparties, such as municipalities.
For both wholesale sales to the SPP Integrated Marketplace and through bilateral contracts, Great Plains Energy and KCP&L recognize revenue on the sale of wholesale electricity to their customers over time as the service is provided in the amount they have a right to invoice.
With regards to the SPP Integrated Marketplace, wholesale sales are billed weekly based on the fixed transaction price determined by the market at the time of the sale and the MWh quantity purchased. With regards to bilateral

20

contracts, wholesale sales are billed monthly based on the contractually determined transaction price and the kWh quantity purchased.
Transmission Revenues
Great Plains Energy's and KCP&L's transmission revenues are generated by the use of KCP&L's and GMO's transmission network by the SPP, which operates the network, on behalf of other power providers. Great Plains Energy and KCP&L recognize revenue on the sale of transmission service to their customers over time as the service is provided in the amount they have a right to invoice. Transmission service to the SPP is billed monthly based on a fixed transaction price determined by KCP&L's and GMO's FERC formula transmission rates along with other SPP-specific charges and the MW quantity purchased.
Industrial Steam Revenues
Great Plains Energy's industrial steam revenues are generated by the regulated sale of industrial steam to GMO's steam customers. Great Plains Energy recognizes revenue on the sale of industrial steam to its customers over time as the service is provided in the amount that it has the right to invoice. Steam customers are billed on a monthly basis at the tariff rate approved by the MPSC based on customer MMBtu usage.
Optional Exemption
Great Plains Energy and KCP&L do not disclose the value of unsatisfied performance obligations on certain bilateral wholesale contracts with an original expected duration of greater than one year for which the Companies recognize revenue in the amount they have the right to invoice.
3. ANTICIPATED MERGER WITH WESTAR ENERGY, INC.
In May 2016, Great Plains Energy entered into an Agreement and Plan of Merger dated as of May 29, 2016, by and among Great Plains Energy, Westar Energy, Inc. (Westar) and GP Star, Inc. (GP Star) (Original Merger Agreement). Pursuant to the Original Merger Agreement, Great Plains Energy would have acquired Westar for (i) $51.00 in cash and (ii) a number of shares of Great Plains Energy common stock, equal to an exchange ratio for each share of Westar common stock issued and outstanding immediately prior to the effective time of the merger, with Westar becoming a wholly owned subsidiary of Great Plains Energy. The acquisition was subject to various shareholder and regulatory approvals, including from The State Corporation Commission of the State of Kansas (KCC), the Public Service Commission of the State of Missouri (MPSC) and The Federal Energy Regulatory Commission (FERC).
In April 2017, KCC issued an order denying Great Plains Energy's, KCP&L's and Westar's joint application for approval of the acquisition of Westar by Great Plains Energy citing concerns with the purchase price, Great Plains Energy's capital structure, quantifiable and demonstrable customer benefits and staffing levels in Westar's service territory, among other items.
In July 2017, Great Plains Energy entered into an Amended and Restated Agreement and Plan of Merger dated as of July 9, 2017, by and among Great Plains Energy, Westar, Monarch Energy Holding, Inc., a Missouri corporation (Holdco), and King Energy, Inc., a Kansas corporation and wholly owned subsidiary of Holdco (Merger Sub) (Amended Merger Agreement). Pursuant to the Amended Merger Agreement, subject to the satisfaction or waiver of certain conditions, Great Plains Energy will merge with and into Holdco, with Holdco surviving such merger, and Merger Sub will merge with and into Westar, with Westar surviving such merger. Pursuant to the Amended Merger Agreement, at closing each outstanding share of Great Plains Energy's and Westar's common stock will be converted into the right to receive 0.5981 and 1.0, respectively, of validly issued, fully paid and nonassessable shares of common stock, no par value, of Holdco. Following the mergers, Holdco, with a new name that has yet to be publicly announced, will be the parent of Great Plains Energy's direct subsidiaries, including KCP&L, and Westar.
The anticipated merger with Westar has been structured as a merger of equals in a tax-free exchange of shares that involves no premium paid or received with respect to either Great Plains Energy or Westar. Following the

21

completion of the anticipated merger, Westar shareholders will own approximately 52.5 percent and Great Plains Energy shareholders will own approximately 47.5 percent of the combined company.
Regulatory and Shareholder Approvals
Great Plains Energy's anticipated merger with Westar was unanimously approved by Great Plains Energy's Board of Directors (Great Plains Energy Board) and Westar's Board of Directors (Westar Board). In November 2017, shareholders of Great Plains Energy and Westar approved all proposals necessary for the merger of Great Plains Energy and Westar at each company's respective shareholder meeting. In the first quarter of 2018, regulatory approvals were obtained from the Nuclear Regulatory Commission (NRC), FERC and The Federal Communications Commission (FCC). The anticipated merger remains subject to regulatory approvals from KCC and the MPSC as well as other contractual conditions.
KCC Approval
In August 2017, Great Plains Energy, KCP&L and Westar filed a joint application with KCC for approval of the anticipated merger with Westar. In March 2018, Great Plains Energy, KCP&L and Westar reached a non-unanimous settlement agreement with KCC staff and certain other intervenors in the case recommending the approval of the merger subject to certain conditions included in the settlement agreement. The conditions include $7.5 million of one-time bill credits to be paid following the close of the merger to KCP&L's Kansas retail electric customers; $2.8 million in annual bill credits to be paid in each of 2019 through 2022 to KCP&L's Kansas retail electric customers; a 5-year base rate moratorium following KCP&L's 2018 Kansas rate case, subject to certain conditions; an Earnings Review and Sharing Plan for the years 2019 through 2022 which may result in KCP&L being subject to refunding 50% of earned return on equity in excess of authorized return on equity to its Kansas retail electric customers; the recovery of certain merger transition costs; and other organizational, financing, customer service and social responsibility commitments. The non-unanimous settlement agreement must still be approved by KCC.
A decision from KCC on the joint application is expected by June 5, 2018.
MPSC Approval
In August 2017, Great Plains Energy, KCP&L, GMO and Westar filed a joint application with the MPSC for approval of the anticipated merger with Westar. In January 2018 and March 2018, Great Plains Energy, KCP&L, GMO and Westar reached stipulations and agreements with the MPSC staff and certain other intervenors in the case recommending the approval of the merger subject to certain conditions included in the stipulations and agreements. The stipulations and agreements impose certain conditions on Holdco, KCP&L and GMO in the areas of financing, ratemaking, customer service, corporate social responsibility and also include other general provisions. The stipulations and agreements with the MPSC staff, among other things, provides that retail rates for KCP&L Missouri and GMO customers will not increase as a result of the merger and that in the event KCP&L's or GMO's credit ratings are downgraded below investment grade as a result of their affiliation with Holdco or any of Holdco's affiliates, KCP&L and GMO will be restricted from paying a dividend unless approved by the MPSC or until their credit ratings are restored to investment grade. The stipulations and agreements also provide upfront bill credits of $14.9 million and $14.2 million to KCP&L's and GMO's Missouri retail electric customers, respectively. The stipulations and agreements must still be approved by the MPSC.
While there is not a statutory deadline for an MPSC ruling on the joint application, a decision from the MPSC is expected in the second quarter of 2018.
Other Approvals
In September 2017, Great Plains Energy and Westar filed applications with FERC and the NRC for approval of the merger. In October 2017, the Securities and Exchange Commission (SEC) declared effective a registration statement on Form S-4 of Holdco including a joint proxy statement of Great Plains Energy and Westar that was used in connection with Great Plains Energy's and Westar's special shareholder meetings on November 21, 2017, and the registration of shares of Holdco common stock to be issued to Great Plains Energy's and Westar's shareholders at the closing of the anticipated merger. In November 2017, Great Plains Energy and Westar filed their respective Pre-Merger Notification and Report forms with the Federal Trade Commission (FTC) and the

22

Department of Justice under the Hart-Scott-Rodino (HSR) Act. In December 2017, the FTC granted Great Plains Energy's request for early termination of the waiting period under the HSR Act with respect to the anticipated merger. In February 2018, FERC issued an order authorizing the merger. In March 2018, the NRC issued an order approving the indirect ownership transfer of Wolf Creek Generating Station (Wolf Creek) and FCC consented to Transfer of Control applications that were filed by Great Plains Energy, KCP&L, GMO and Westar.
Termination Fees
The Amended Merger Agreement provides that in connection with a termination of the agreement under specified circumstances relating to a failure to obtain regulatory approvals by July 9, 2018 (which date may be extended to January 9, 2019), a final and nonappealable order enjoining the consummation of the anticipated merger in connection with regulatory approvals or failure by Great Plains Energy to comply with its obligations under the Amended Merger Agreement to consummate the closing of the anticipated merger once all of the conditions have been satisfied, Great Plains Energy may be required to pay Westar a termination fee of $190 million. In addition, in the event that the Amended Merger Agreement is terminated by Westar under certain circumstances to enter into a definitive acquisition agreement with respect to a superior proposal, Westar may be required to pay Great Plains Energy a termination fee of $190 million. Similarly, in the event that the Amended Merger Agreement is terminated by Great Plains Energy under certain circumstances to enter into a definitive acquisition agreement with respect to a superior proposal, Great Plains Energy may be required to pay Westar a termination fee of $190 million.
4. SUPPLEMENTAL CASH FLOW INFORMATION
Great Plains Energy Other Operating Activities
Three Months Ended March 31
2018
 
2017
Cash flows affected by changes in:
(millions)
Receivables
$
43.2

 
$
55.5

Accounts receivable pledged as collateral
—

 
0.2

Fuel inventories
(1.8
)
 
1.8

Materials and supplies
(1.1
)
 
(4.2
)
Accounts payable
(142.1
)
 
(136.8
)
Accrued taxes
37.6

 
36.3

Accrued interest
14.6

 
26.5

Deferred refueling outage costs
0.9

 
4.0

Pension and post-retirement benefit obligations
10.5

 
11.6

Allowance for equity funds used during construction
(1.4
)
 
(1.0
)
Fuel recovery mechanisms
(3.5
)
 
(14.1
)
ARO settlements
(4.5
)
 
(4.3
)
Other
18.5

 
17.5

Total other operating activities
$
(29.1
)
 
$
(7.0
)
Cash paid during the period:
 

 
 

Interest
$
31.3

 
$
34.2

Non-cash investing activities:
 
 
 

Liabilities accrued for capital expenditures
$
25.4

 
$
22.6


23

KCP&L Other Operating Activities
Three Months Ended March 31
2018
 
2017
Cash flows affected by changes in:
(millions)
Receivables
$
47.9

 
$
36.2

Fuel inventories
(1.0
)
 
(0.5
)
Materials and supplies
(1.8
)
 
(3.1
)
Accounts payable
(90.0
)
 
(88.8
)
Accrued taxes
25.0

 
35.5

Accrued interest
8.3

 
10.1

Deferred refueling outage costs
0.9

 
4.0

Pension and post-retirement benefit obligations
9.0

 
10.3

Allowance for equity funds used during construction
(1.4
)
 
(1.0
)
Fuel recovery mechanisms
1.2

 
(10.8
)
ARO settlements
(3.6
)
 
(3.9
)
Other
3.8

 
(9.1
)
Total other operating activities
$
(1.7
)
 
$
(21.1
)
Cash paid during the period:
 

 
 

Interest
$
22.7

 
$
22.5

Non-cash investing activities:
 
 
 

Liabilities accrued for capital expenditures
$
19.5

 
$
19.9

5. RECEIVABLES
Great Plains Energy's and KCP&L's receivables are detailed in the following table.
 
March 31
December 31
 
 
2018
 
 
2017
 
Great Plains Energy
 
(millions)
 
Customer accounts receivable - billed
 
$
—

 
 
$
3.7

 
Customer accounts receivable - unbilled
 
80.3

 
 
103.2

 
Allowance for doubtful accounts - customer accounts receivable
 
(5.0
)
 
 
(4.7
)
 
Other receivables
 
32.9

 
 
49.5

 
Total
 
$
108.2

 
 
$
151.7

 
KCP&L
 
 

 
 
 

 
Customer accounts receivable - billed
 
$
—

 
 
$
1.6

 
Customer accounts receivable - unbilled
 
50.4

 
 
67.6

 
Allowance for doubtful accounts - customer accounts receivable
 
(2.3
)
 
 
(2.2
)
 
Other receivables
 
26.2