Exhibit 99.2
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-707
KANSAS CITY POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0308720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Walnut Street
Kansas City, Missouri 64106
(Address of principal executive offices)
Registrant's telephone number, including area code: 816-556-2200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Cumulative Preferred Stock New York Stock Exchange
par value $100 per share -
3.80%, 4.50%, 4.35%
Common Stock without par value New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to the
Form 10-K. X
On March 13, 1997, KCPL had 61,895,819 outstanding shares of common stock
without par value, and the aggregate market value (based upon the closing price
of these shares on the New York Stock Exchange) of voting securities held by
nonaffiliates of KCPL was approximately $1,763,113,626.
Documents Incorporated by Reference Portions of the 1997 Proxy
Statement are incorporated by reference in Part III of this report.
TABLE OF CONTENTS
Page
Number
Item 1. Business 1
Proposed Merger With Western Resources, Inc. 1
Regulation 2
Rates 2
Environmental Matters 2
Air 3
Water 3
Competition 3
Fuel Supply 4
Coal 4
Nuclear 4
High-Level Waste 4
Low-Level Waste 5
Employees 5
Subsidiaries 5
Officers of the Registrant 6
KCPL Officers 6
KLT Inc. Officers 7
Item 2. Properties 8
Generation Resources 8
Transmission and Distribution Resources 9
General 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 11
Market Information 11
Holders 11
Dividends 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8. Consolidated Financial Statements 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 42
Item 10. Directors and Executive Officers of the Registrant 42
Item 11. Executive Compensation 42
Item 12. Security Ownership of Certain Beneficial Owners
and Management 42
Item 13. Certain Relationships and Related Transactions 42
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 43
PART I
ITEM 1. BUSINESS
Kansas City Power & Light Company (KCPL) was incorporated in Missouri in
1922 and is headquartered in downtown Kansas City, Missouri. KCPL is a
medium-sized public utility engaged in the generation, transmission,
distribution and sale of electricity to over 435,000 customers in a 4,700 square
mile area located in all or portions of 23 counties in western Missouri and
eastern Kansas. About two-thirds of the total retail kilowatt-hour sales and
revenues are from Missouri customers and the remainder from Kansas customers.
Customers include approximately 381,000 residences, 51,000 commercial firms, and
3,000 industrials, municipalities and other electric utilities. Retail revenues
in Missouri and Kansas accounted for approximately 91% of KCPL's total revenues
in 1996. Wholesale firm power, bulk power sales and miscellaneous electric
revenues accounted for the remainder of revenues. Low fuel costs and superior
plant performance enable KCPL to serve its customers well while maintaining a
leadership position in the bulk power market.
KCPL as a regulated utility does not have direct competition for retail
electric service in its service territory; however, there is competition in the
generation of electricity and between electric and gas as an energy source.
KLT Inc., a wholly-owned, unregulated subsidiary of KCPL, pursues
opportunities in domestic and international energy-related ventures. See
"Subsidiaries" on page 5 of this report. KCPL also owns 47% of Wolf Creek
Nuclear Operating Corporation, the operating company for the Wolf Creek
Generating Station (Wolf Creek).
Proposed Merger With Western Resources, Inc.
On February 7, 1997, KCPL and Western Resources, Inc.
(Western Resources) entered into an Agreement and Plan of Merger (the Merger
Agreement) to form a strategic business combination. The effective time of the
merger is dependent upon all conditions of the Merger Agreement being met or
waived. At the effective time, KCPL will merge with and into Western Resources,
with Western Resources being the surviving corporation.
Western Resources first delivered an unsolicited exchange offer to KCPL's
Board of Directors during the second quarter of 1996. This initial offer,
subject to numerous conditions, proposed the exchange of $28 (later increased to
$31) worth of Western Resources common stock for each share of KCPL common
stock. After careful consideration, both offers were rejected by KCPL's Board of
Directors. In July 1996 Western Resources commenced an exchange offer for KCPL
common stock. In late 1996 KCPL began discussing a possible merger with Western
Resources leading to the Merger Agreement.
Under the terms of the Merger Agreement, KCPL common stock will be
exchanged for Western Resources common stock valued at $32.00, subject to a
conversion ratio limiting the amount of Western Resources common stock that
holders of KCPL common stock would receive per share of KCPL common stock to no
more than 1.1 shares (if Western Resources' stock is priced at or below $29.09
per share), and no less than 0.917 shares (if Western Resources' stock is priced
at or above $34.90 per share). However, there is a provision in the Merger
Agreement that allows KCPL to terminate the merger if Western Resources' stock
price drops below $27.64 and either the Standard and Poor's Electric Companies
Index increases or the decline in Western Resources stock exceeds by
approximately 5% any decline in this index. Western Resources could avoid this
termination by improving the conversion ratio.
The transaction is subject to several closing conditions including
approval by each company's shareholders, approval by a number of regulatory
authorities (statutory approvals) and dissenting shares equaling less than 5.5%
of KCPL's outstanding shares. If the effective time has not occurred by June 30,
1998 (the termination date), either party may terminate the agreement as long as
they did not contribute to the delay. This termination date will be
automatically extended to June 30, 1999, if all of the Merger Agreement closing
conditions have been met except for certain conditions relating to statutory
approvals.
The Merger Agreement does not allow KCPL to increase its common stock
dividend prior to the effective time or termination. It also requires KCPL to
redeem all outstanding shares of preferred stock prior to completion of the
merger.
If the Merger Agreement is terminated under certain circumstances, a
payment of $50 million will be due Western Resources if, within two and one-half
years following
termination, KCPL agrees to consummate a business combination with a third party
that made a proposal to combine prior to termination. Western Resources will pay
KCPL $5 to $35 million if the Merger Agreement is terminated and all closing
conditions are satisfied other than conditions relating to Western Resources
receiving a favorable tax opinion, a favorable letter from its accountants
regarding pooling accounting, favorable statutory approvals, or an exemption
from the Public Utility Holding Company Act of 1935.
Regulation
KCPL is subject to the jurisdiction of the Public Service Commission of the
State of Missouri (MPSC), the State Corporation Commission of the State of
Kansas (KCC), the Federal Energy Regulatory Commission (FERC), the Nuclear
Regulatory Commission (NRC) and certain other governmental regulatory bodies as
to various phases of its operations, including rates, service, safety and
nuclear plant operations, environmental matters and issuances of securities.
Rates
KCPL's retail electric rates are regulated by the MPSC and KCC for sales
within the respective states of Missouri and Kansas. FERC approves KCPL's rates
for wholesale bulk electricity sales. Firm electric sales are made by
contractual arrangements between the entity being served and KCPL.
KCPL has not increased any of its retail or wholesale rates since 1988.
Pursuant to a stipulation and agreement with the MPSC, KCPL reduced Missouri
retail rates by about 2.7% effective January 1, 1994, 2% effective July 9, 1996,
and by about 2.5% effective January 1, 1997.
Environmental Matters
KCPL's operations must comply with federal, state and local environmental
laws and regulations. The generation and transmission of electricity uses,
produces and requires disposal of certain products and by-products, including
polychlorinated biphenyl (PCBs), asbestos and other potentially hazardous
materials. KCPL's policy is to act in an environmentally responsible manner and
to use the latest technology available to avoid and treat contamination. The
Federal Comprehensive Environmental Response, Compensation and Liability Act
(the Superfund law) imposes strict joint and several liability for those who
generate, transport or deposit hazardous waste. This liability extends to the
current property owner as well as prior owners since the time of contamination.
KCPL continually conducts environmental audits designed to detect contamination
and ensure compliance with governmental regulations. However, compliance
programs needed to meet future environmental laws
and regulations governing water and air quality, including carbon dioxide
emissions, hazardous waste handling and disposal, toxic substances and the
effects of electromagnetic fields, could require substantial changes to
operations or facilities. KCPL cannot presently estimate any additional costs of
meeting such new regulations or standards which might be established in the
future, nor can it estimate the possible effect which any new regulations or
standards could have upon its operations. However, KCPL currently estimates that
expenditures necessary to comply with environmental regulations during 1997 will
not be material with the possible exceptions set forth below.
Air
The Clean Air Act Amendments of 1990 contain two programs significantly
affecting the utility industry. KCPL has spent approximately $5 million for the
installation of continuous emission monitoring equipment to satisfy the
requirements under the acid rain provision. KCPL expects no further material
expenditures for this project. The other utility-related program calls for a
study of certain air toxic substances. Based on the outcome of this study,
regulation of these substances, including mercury, could be required. KCPL
cannot predict the likelihood of any such regulations or compliance costs.
Proposed regulations to revise the ozone and particulate matter, National
Ambient Air Quality Standards, are scheduled to be issued by June 1997 and may
require capital expenditures which cannot be estimated at this time.
Water
KCPL commissioned an environmental assessment of its Northeast Station and
of its Spill Prevention Control and Countermeasure plan as required by the Clean
Water Act. The assessment revealed contamination of the site by petroleum
products, heavy metals, volatile and semi-volatile organic compounds, asbestos,
pesticides and other regulated substances. Based upon studies and discussions
with Burns & McDonnell, the cost of the cleanup could range between $1.5 million
and $6 million.
Also, groundwater analysis has indicated that certain volatile organic
compounds are moving through the Northeast site, just above bedrock, from
unidentified sources off-site. The Missouri Department of Natural Resources
(MDNR) was notified of the possible release of petroleum products and the
presence of volatile organic compounds moving under the site. Monitoring and
removal of free petroleum products continues at the site. MDNR has concluded
that the volatile organic compounds originated from a source off-site. MDNR
stated it will continue to investigate the source of the compounds. Because KCPL
believes it will not have liability in this matter, it has not performed a study
regarding the possible cost of remediation of the flow of organic
compounds.
Competition
See "Regulation and Competition" on page 12 of this report.
Fuel Supply
KCPL's principal sources of fuel for electric generation are coal and
nuclear fuel. These fuels are expected to satisfy about 99% of the 1997 fuel
requirements with the remainder provided by other sources including natural gas,
oil and steam. The 1996 and estimated 1997 fuel mix, based on total Btu
generation, are as follows:
Estimated
1996 1997
Coal 76% 73%
Nuclear 23% 26%
Other 1% 1%
The fuel mix varies depending on the operation of Wolf Creek which requires
a refueling and maintenance outage about every 18 months. The next outage is
scheduled for the fourth quarter of 1997.
Coal
KCPL's average cost per million Btu of coal burned, excluding fuel handling
costs, was $0.85 in 1996 and $0.89 in 1995 and 1994. KCPL's cost of delivered
coal is about 63% of the regional average.
During 1997, approximately 10.4 million tons of coal (7.3 million tons,
KCPL's share) are projected to be burned at KCPL's generating units, including
jointly-owned units. KCPL has entered into coal-purchase contracts with various
suppliers in Wyoming's Powder River Basin, the nation's principal supplier of
low-sulfur coal. These contracts, with expiration dates ranging from 1997
through 2003, will satisfy approximately 95% of the projected coal requirements
for 1997, 50% for 1998, 50% for 1999, and 20% thereafter.
Nuclear
The Wolf Creek Nuclear Operating Corporation (WCNOC), which operates Wolf
Creek, has on hand or under contract 70% of the uranium required to operate Wolf
Creek through September 2003. The balance is expected to be obtained through
spot market and contract purchases.
Contracts are in place for 100% of Wolf Creek's uranium enrichment
requirements for 1997 and 82% of such requirements for 1998 to March 2005. The
balance of the 1998-2005 requirements is expected to be obtained through a
combination of spot market and contract purchases. The decision not to contract
for the full enrichment requirements is one of cost rather than availability of
service.
Contracts are in place for the conversion of uranium to uranium
hexaflouride sufficient to meet Wolf Creek's requirements through 2001.
High-Level Waste
The Nuclear Waste Policy Act of 1982 established schedules, guidelines and
responsibilities for the Department of Energy (DOE) to develop and construct
repositories for the ultimate disposal of spent fuel and high-level waste. The
DOE has not yet constructed a high-level waste disposal site and has announced
that a permanent repository may not be in operation prior to 2010 although an
interim storage facility may be available earlier. The DOE likely will not
immediately begin accepting Wolf Creek's spent fuel upon opening of the
permanent repository. Instead, KCPL expects to experience a multi-year transfer
period beginning as much as six years after opening of the permanent repository.
Wolf Creek contains an on-site spent fuel storage facility which, under current
regulatory guidelines, provides space for the storage of spent fuel through 2005
while still maintaining fuel core off-load capability. KCPL believes adequate
additional storage space can be obtained, as necessary.
Low-Level Waste
The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated that
the various states, individually or through interstate compacts, develop
alternative low-level radioactive waste disposal facilities. The states of
Kansas, Nebraska, Arkansas, Louisiana and Oklahoma formed the Central Interstate
Low-Level Radioactive Waste Compact and selected a site in northern Nebraska to
locate a disposal facility. The present estimate of the cost for such a facility
is about $154 million. WCNOC and the owners of the other five nuclear units in
the compact have provided most of the pre-construction financing for this
project. As of February 28, 1997, utilities in the compact have spent in excess
of $75 million, of which $13 million was WCNOC's share.
There is uncertainty as to whether this project will be completed.
Significant opposition to the project has been raised by the residents in the
area of the proposed facility and attempts have been made through litigation and
proposed legislation to slow down or stop development of the facility.
Employees
At December 31, 1996, KCPL and its wholly-owned
subsidiaries had 2,297 employees (including temporary and
part-time employees), 1,474 of which were represented by three local unions of
the International Brotherhood of Electrical Workers (IBEW). KCPL has labor
agreements with Local 1613, representing clerical employees (which expires March
31, 1999), with Local 1464, representing outdoor workers (which expires January
8, 2000), and with Local 412, representing power plant workers (which expires
February 28, 1998). KCPL is also a 47% owner of WCNOC, which employs 1,013
persons to operate Wolf Creek, 340 of which are represented by the IBEW.
Subsidiaries
KLT Inc. has six wholly-owned direct subsidiaries:
- KLT Investments Inc., a passive investor in affordable housing investments
which generate tax credits.
- KLT Investments II Inc., a passive investor in
economic, community-development and energy-related projects.
- KLT Energy Services Inc., a partner in an energy
management services and lighting services business.
- KLT Power Inc., a participant in independent power and cogeneration
projects. KLT Power Inc. has four subsidiaries, KLT Iatan Inc., which was
formed for the co- development of the Iatan Unit 2 coal-fired power plant;
KLT Power International, which participates in independent power projects
located in China; KLT Power Asia which participates in independent power
projects located in certain Asian countries; and KLT Power Latin American
which participates in independent power projects located in Latin America.
- KLT Gas Inc., a participant in oil and gas reserves and
exploration. KLT Gas Inc. has one wholly-owned subsidiary,
FAR Gas Acquisitions Corporation which holds limited
partnerships in coal seam methane gas wells that generate
tax credits.
- KLT Telecom Inc., an investor in communications and
information technology opportunities. KLT Telecom Inc. has
two majority-owned subsidiaries, Municipal Solutions, an
outsourcer of municipal services and Telemetry Solutions, a
provider of services using Cellnet-related technology.
KCPL's equity investment in KLT Inc. at December 31, 1996,
was $61 million.
Officers of the Registrant
KCPL Officers
Year Named
Name Age Positions Currently Held Officer
Drue Jennings 50 Chairman of the Board, President 1980
and Chief Executive Officer
Bernard J. Beaudoin 56 Executive Vice President - Chief 1984
Financial Officer
Marcus Jackson 45 Executive Vice President - Chief 1989
Operating Officer
J. Turner White 48 Executive Vice President - Corporate 1990
Development
John J. DeStefano 47 Senior Vice President - Business 1989
Development
Jeanie Sell Latz 45 Senior Vice President - Corporate 1991
Services, Corporate Secretary
and Chief Legal Officer
Frank L. Branca 49 Vice President - Wholesale and 1989
Transmission Services
Steven W. Cattron 41 Vice President - Marketing and Sales 1994
Charles R. Cole 50 Vice President - Customer Services 1990
and Purchasing
Douglas M. Morgan 54 Vice President - Information Technology 1994
Richard A. Spring 42 Vice President - Production 1994
Bailus M. Tate 50 Vice President - Human Resources 1994
Neil A. Roadman 51 Controller 1980
Mark C. Sholander 51 General Counsel and Assistant 1986
Secretary
Andrea F. Bielsker 38 Treasurer 1996
KLT Inc. Officers
Year Named
Name Age Positions Currently Held Officer
Ronald G. Wasson 52 President 1995
Floyd R. Pendleton 53 Vice President-Business 1992
Development
David M. McCoy 49 Vice President-Business 1996
Development
Mark G. English 45 Vice President and General 1995
Counsel
Janee C. Rosenthal 35 Corporate Secretary and Treasurer 1992
Teresa D. Cook 36 Controller 1997
All of the foregoing persons have been officers of KCPL or employees in a
responsible position with KCPL for the past five years except for Mr. Spring.
Mr. Spring was an employee of KCPL from 1978 to 1993, when he left KCPL to join
Northern Indiana Public Service Company as Director of Electric Production. In
July 1994, he rejoined KCPL as Vice President-Production.
The term of office of each officer commences with his or her appointment by
the Board of Directors and ends at such time as the Board of Directors may
determine.
ITEM 2. PROPERTIES
Generation Resources
KCPL's generating facilities consist of the following:
Estimated
1997
Year Megawatt(mw)
Unit Completed Capacity Fuel
Existing Units
Base Load...Wolf Creek(a) 1985 548(b) Nuclear
Iatan 1980 469(b) Coal
LaCygne 2 1977 334(b) Coal
LaCygne 1 1973 341(b) Coal
Hawthorn 6 1997 142(d) Gas/Oil
Hawthorn 5 1969 479 Coal/Gas
Montrose 3 1964 161 Coal
Montrose 2 1960 153 Coal
Montrose 1 1958 155 Coal
Peak Load...Northeast 13 and 14(c) 1976 110 Oil
Northeast 17 and 18(c) 1977 116 Oil
Northeast 15 and 16(c) 1975 111 Oil
Northeast 11 and 12(c) 1972 105 Oil
Grand Avenue (2 units) 1929 & 1948 73 Gas
---
Total 3,297
=====
(a) This unit is one of KCPL's principal generating facilities and has
the lowest fuel cost of any of its generating facilities. An extended
shutdown of the unit could have a substantial adverse effect on the
operations of KCPL and its financial condition.
(b) KCPL's share of jointly-owned unit.
(c) Combustion turbines.
(d) KCPL has entered into an operating lease with First Security Bank of
Utah, N.A. for a V.84.3A combustion turbine-generator, to be in service
in the year 1997, with an anticipated accredited capacity of
approximately 142 mw.
KCPL's maximum system net hourly peak load of 2,987 mw occurred on July 19,
1996. The maximum winter peak load of
2,012 mw occurred on December 19, 1996. The accredited generating capacity of
KCPL's electric facilities in the summer (when peak loads are experienced) of
1996 under MOKAN Power Pool standards was 3,134 mw.
KCPL owns the Hawthorn Station (Jackson County, Missouri), Montrose
Station (Henry County, Missouri), Northeast Station (Jackson County, Missouri)
and two Grand Avenue Station turbine generators (Jackson County, Missouri). KCPL
also owns 50% of the 682-mw LaCygne 1 Unit and 668-mw LaCygne 2 Unit in Linn
County, Kansas; 70% of the 670-mw Iatan Station in Platte County, Missouri; and
47% of the 1,167 mw Wolf Creek in Coffey County, Kansas.
Transmission and Distribution Resources
KCPL's electric transmission system is interconnected with systems of other
utilities to permit bulk power transactions with other electricity suppliers in
Kansas, Missouri, Iowa, Nebraska and Minnesota. KCPL is a member of the MOKAN
Power Pool, which is a contractual arrangement among eleven utilities in western
Missouri and Kansas which interchange electric energy, share reserve generating
capacity, and provide emergency and standby electricity services to each other.
KCPL owns approximately 1,700 miles of transmission lines and approximately
9,000 miles of overhead distribution lines, and approximately 3,100 miles of
underground distribution lines. KCPL has all franchises necessary to sell
electricity within the territories from which substantially all of its gross
operating revenue is derived.
General
KCPL's principal plants and properties, insofar as they constitute real
estate, are owned in fee; certain other facilities are located on premises held
under leases, permits or easements; and its electric transmission and
distribution systems are for the most part located over or under highways,
streets, other public places or property owned by others for which permits,
grants, easements or licenses (deemed satisfactory but without examination of
underlying land titles) have been obtained.
Substantially all of the fixed property and franchises of KCPL, which
consists principally of electric generating stations, electric transmission and
distribution lines and systems, and buildings (subject to exceptions and
reservations) are subject to a General Mortgage Indenture and Deed of Trust
dated as of December 1, 1986.
ITEM 3. LEGAL PROCEEDINGS
Kansas City Power & Light Co. v. Western Resources, Inc.,
et. al
On May 20, 1996, KCPL commenced litigation in the United States District
Court for the Western District of Missouri, Western Division (District Court),
against Western Resources, Inc. (Western Resources) and Robert L. Rives (Rives)
requesting the District Court to declare the Amended and Restated Agreement and
Plan of Merger between KCPL, KC Merger Sub, Inc., UtiliCorp and KC United Corp.,
dated January, 1996, amended May 20, 1996 (Amended Merger Agreement), and the
transactions contemplated thereby (collectively the Transaction) were legal and
could not be reversed. On May 24, 1996, Jack R. Manson (Manson), filed an action
to become a party to the above litigation as the shareholders' representative.
Manson made claims against KCPL and all its directors stating they had violated
their fiduciary duties, that their actions in adopting the Amended Merger
Agreement were illegal and ultra vires; that the adoption of the Amended Merger
Agreement illegally deprived shareholders of rights under Missouri law; and that
the adoption of the Amended Merger Agreement was an excessive response to
Western Resources' acquisition offer. On June 7, 1996, Western Resources and
Rives each filed claims against KCPL, charging the same violations against the
directors as Manson.
The District Court on August 2, 1996 ruled the transactions contemplated
by the Amended Merger Agreement were legally valid and authorized under Missouri
law; but the combined transactions resulted in a merger between KCPL and
UtiliCorp, requiring, under Missouri law, approval by the holders of two-thirds
of the outstanding shares of KCPL's stock.
By order dated November 25, 1996, the District Court allowed Manson to
amend his original petition claiming the directors breached their fiduciary
duties by refusing to meet with Western Resources and had committed reckless,
grossly negligent, or negligent waste of corporate assets by pursuing the merger
with UtiliCorp. In addition to requesting termination of the Amended Merger
Agreement, Manson sought monetary damages in an unspecified amount. KCPL filed a
motion on December 9, 1996 to dismiss Manson's claims and it is currently
pending before the District Court. KCPL cannot predict the outcome of these
proceedings at this time.
State of Missouri ex rel. Inter-City Beverage Co., Inc., et.
al vs. The Public Service Commission of the State of
Missouri, et. al;
Jewish Community Campus of Greater Kansas City, Inc. vs.
Kansas State Corporation Commission, et. al
On August 13, 1993, a lawsuit was filed by nine customers in the Circuit
Court of Jackson County, Missouri against KCPL. The suit alleged the
misapplication of
certain of KCPL's electric rate tariffs resulting in overcharges to industrial
and commercial customers which had been provided service under those tariffs and
requested certification as a class action. On December 3, 1993, the Court
dismissed the matter for lack of subject matter jurisdiction. Plaintiffs
appealed to the Missouri Court of Appeals, Western District. The Court of
Appeals upheld the dismissal. Plaintiffs then filed a motion to transfer the
case with the Missouri Supreme Court. The motion was denied.
Plaintiffs then took their claims to the state commissions filing
complaints at the MPSC on August 23, 1995, and at the KCC on August 30, 1995.
The MPSC complaint was dismissed May 1, 1996. The Cole County, Missouri Circuit
Court affirmed the dismissal on January 29, 1997. The time for filing an appeal
from such circuit court's decision has not yet lapsed. The KCC complaint was
dismissed April 9, 1996. The Johnson County, Kansas District Court affirmed the
dismissal on February 4, 1997. The Plaintiff filed a Notice of Appeal to the
Kansas Court of Appeals on March 3, 1997.
Should the proceedings before the MPSC and KCC be overturned by the state
courts, KCPL could be required to refund the alleged overcharges. KCPL believes
it will be able to successfully defend these actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders through the solicitation of proxies
or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information:
(1) Principal Market:
Common Stock of KCPL is listed on the New York Stock Exchange and the
Chicago Stock Exchange.
(2) Stock Price Information:
Common Stock Price Range
1996 1995
Quarter High Low High Low
First $27-1/4 $24 $24-1/2 $22-1/8
Second 27-3/4 23-5/8 24-1/8 22-1/8
Third 28-3/8 26-1/4 24-3/8 21-1/2
Fourth 29-3/8 26-1/2 26-5/8 23-1/2
Holders:
At December 31, 1996, KCPL's Common Stock was held by 26,763 shareholders of
record.
Dividends:
Common Stock dividends were declared as follows:
Quarter 1997 1996 1995
First $0.405 $0.390 $0.380
Second 0.390 0.380
Third 0.405 0.390
Fourth 0.405 0.390
KCPL's Restated Articles of Consolidation contains certain restrictions on
the payment of dividends on KCPL's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31
1996(a) 1995 1994(b) 1993 1992
(dollars in millions except per share amounts)
Operating revenues $ 904 $ 886 $ 868 $ 857 $ 803
Net income $ 108 $ 123 $ 105 $ 106 $ 86
Earnings per common
share $ 1.69 $ 1.92 $ 1.64 $ 1.66 $ 1.35
Total assets at
year-end $2,915 $2,883 $2,770 $2,755 $2,647
Total redeemable
preferred stock and
long-term debt
(including current
maturities) $ 971 $ 911 $ 833 $ 870 $ 817
Cash dividends per
common share $ 1.59 $ 1.54 $ 1.50 $ 1.46 $ 1.43
Ratio of earnings to
fixed charges 3.06 3.94 4.07 3.80 3.12
(a) In 1996, KCPL recorded $31 million in merger related costs. (b) In 1994,
KCPL recorded a $22.5 million expense for a voluntary early retirement program.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
REGULATION AND COMPETITION
As competition develops throughout the electric utility industry, we are
positioning Kansas City Power & Light Company (KCPL) to excel in an open market.
We are improving the efficiency of KCPL's core utility operations and creating
growth through its unregulated
subsidiary. As competition presents new opportunities, we will also consider
various strategies including partnerships, acquisitions, combinations, additions
to or dispositions of service territory, and restructuring wholesale and retail
businesses. In 1997 we will begin offering natural gas contracts to certain
customers. We have entered an Agreement and Plan of Merger with Western
Resources, Inc. (Western Resources). This agreement was reached after nine
months of defending against an unsolicited exchange offer (see Note 11 to the
Consolidated Financial Statements).
In December 1996 the Federal Energy Regulatory Commission (FERC) issued a
statement concerning electric utility mergers. Under the statement, companies
must demonstrate that their merger does not adversely affect competition or
wholesale rates. As remedies, FERC may consider a range of conditions including
transmission upgrades or divestitures of generating assets.
Competition in the electric utility industry was accelerated with the
National Energy Policy Act of 1992. This gave FERC the authority to require
electric utilities to provide transmission line access to independent power
producers (IPPs) and other utilities (wholesale wheeling). KCPL, already active
in the wholesale wheeling market, was one of the first utilities to receive
FERC's approval of an open- access tariff for wholesale wheeling transactions.
In April 1996 FERC issued an order requiring all owners of transmission
facilities to adopt open-access tariffs and participate in wholesale wheeling;
KCPL has made the necessary filings to comply with that order.
FERC's April order is likely to encourage more movement toward retail
competition at the state level. An increasing number of states have already
adopted open access requirements for utilities' retail electric service,
allowing competing suppliers access to their retail customers (retail wheeling).
Many other states are actively considering retail wheeling. Kansas has created a
retail wheeling task force to study and report on related issues.
Competition through retail wheeling could result in market-based rates
below current cost-based rates. This would provide growth opportunities for
low-cost producers and risks for higher-cost producers, especially those with
large industrial customers. Lower rates and the loss of major customers could
result in under-utilized assets (stranded investment) and place an unfair burden
on the remaining customer base or shareholders. If an adequate and fair
provision for recovery of these lost revenues is not provided, certain
generating assets may have to be evaluated for impairment and appropriate
charges recorded against earnings. In addition to lower profit margins,
market-based rates could also require generating assets to be depreciated over
shorter useful lives, increasing operating expenses.
Although Missouri and Kansas have not yet authorized retail wheeling, we
believe KCPL is positioned well to compete in an open market with its diverse
customer mix and pricing strategies. About 22% of KCPL's retail mwh sales are to
industrial customers compared to the utility average of about 35%. KCPL has a
flexible rate structure with industrial rates that are competitively priced
within our region. In addition, long-term contracts are in place or under
negotiation for a large portion of KCPL's industrial sales. There has not been
direct
competition for retail electric service in our service territory although there
has been competition in the bulk power market and between alternative fuels.
Increased competition could also force utilities to change accounting
methods. Financial Accounting Standards Board (FASB) Statement No. 71 -
Accounting for Certain Types of Regulation, applies to regulated entities whose
rates are designed to recover the costs of providing service. An entity's
operations could stop meeting the requirements of FASB 71 for various reasons,
including a change in regulation or a change in the competitive environment for
a company's regulated services. For those operations no longer meeting the
requirements of regulatory accounting, regulatory assets would be written off.
KCPL's regulatory assets, totaling $164 million at December 31, 1996, will be
maintained as long as FASB 71 requirements are met.
It is possible that competition could eventually have a materially
adverse affect on KCPL's results of operations and financial position. Should
competition eventually result in a significant charge to equity, capital costs
and requirements could increase significantly.
NONREGULATED OPPORTUNITIES
KLT Inc. is a wholly-owned subsidiary pursuing nonregulated, mainly
energy-related business ventures. KLT's strategy capitalizes on new market
opportunities by combining our expertise in energy-related fields with the
knowledge of our joint venture partners. Existing ventures include investments
in domestic and international nonregulated power production, energy services,
oil and gas reserves, telecommunications, and affordable housing limited
partnerships.
We had a total equity investment in KLT of $61 million as of December 31,
1996, and expect that investment to grow to about $210 million within the next
five years. KLT's consolidated assets at December 31, 1996, totaled $224
million. Within the next five years we expect KLT consolidated assets of about
$800 million, generated through the $210 million of equity investment,
subsidiary retained earnings and borrowings. The growth of KLT accounts for the
majority of the increase in KCPL's consolidated investments and nonutility
property.
EARNINGS OVERVIEW
Earnings per share (EPS) for 1996 of $1.69 decreased $0.23 from 1995.
Terminating our merger agreement with UtiliCorp United Inc. (UtiliCorp) and
defending against Western Resources' unsolicited exchange offer reduced 1996 EPS
by $0.31. Other factors contributing to the decrease included mild summer
temperatures and the effects of a new stipulation and agreement with the
Missouri commission. In addition, EPS for 1995 included a $0.05 per share gain
on the sale of rail cars. Despite the unfavorable weather and merger related
charges, continued load growth contributed favorably to 1996 EPS.
EPS for 1995 of $1.92 increased $0.28 from 1994. This increase was due
mostly to 1994's one-time $22.5 million ($0.22 per share) charge for the
voluntary early retirement program (see Note 2 to the
Consolidated Financial Statements). Other factors increasing 1995 EPS included
load growth, warmer summer temperatures, savings from the 1994 early retirement
program and a net gain of $0.05 per share from the sale of railcars. Partially
offsetting these increases, 1995 EPS also reflected decreased bulk power sales
and higher fuel and purchased power costs as a result of a forced outage at a
coal plant.
MEGAWATT-HOUR (MWH) SALES AND ELECTRIC OPERATING REVENUES
Sales and revenue data:
Increase (Decrease) from Prior Year
1996 1995
Mwh Revenues Mwh Revenues
(revenue change in millions)
Retail:
Residential 1 % $ - 6 % $ 17
Commercial 4 % 10 3 % 9
Industrial 6 % 5 - % (1)
Other (4)% - (6)% -
Total retail 4 % 15 3 % 25
Sales for resale:
Bulk power sales 1 % 6 (15)% (11)
Other 29 % - (11)% -
Total 21 14
Other revenues (3) 4
Total electric operating revenues $18 $18
During 1996 the Missouri Public Service Commission (MPSC) approved a new
stipulation and agreement authorizing a $20 million revenue reduction in two
phases, and an increase in depreciation and amortization expense by $9 million
per year. In July 1996 we implemented phase one of the revenue reduction
designed to reduce revenues from commercial and industrial customers by an
estimated $9 million per year. This decrease is achieved with an increase in
summer revenues offset by a larger decrease in winter revenues. This design more
closely follows our increased costs of generating electricity in the summer. The
second phase of this stipulation, effective January 1, 1997, will further reduce
Missouri residential, commercial and industrial revenues by an estimated $11
million per year. The decrease in 1996 revenues as a result of this stipulation
and agreement was about $3 million.
These lower rates, combined with lower billed sales in December of 1996
versus December of 1995, resulted in a lower accounts receivable balance at
December 31, 1996, compared with December 31, 1995.
During April and May of 1995 about 600 net commercial customers were
reclassified to industrial to more appropriately reflect their business
operations. This change resulted in the reclassification of about $680,000
(10,300 mwh sales) from commercial to industrial in each subsequent month. Prior
periods have not been restated.
Summer temperatures were very mild in 1996 compared with 1995, remaining
below normal for the fourth consecutive year. Despite this mild weather pattern,
retail mwh sales increased in each of the last four years due to load growth.
Load growth consists of higher usage-
per-customer as well as the addition of new customers.
Retail mwh sales for 1996 increased 4% over 1995 while retail revenues
increased only 2%. This difference is due largely to the Missouri revenue
reductions discussed above and the effect of long-term sales contracts with
certain major industrial customers. These contracts are tailored to meet
customers' needs in exchange for their long-term commitment to purchase energy.
Long-term contracts are in place or under negotiation for a large portion of our
industrial sales.
Retail mwh sales and revenues for 1995 increased 3% over 1994. This
increase was due mainly to improved weather and continued load growth. Similar
to 1996, long-term contracts with major industrial customers resulted in a
slight decrease in 1995 industrial revenues from 1994, despite an equal level of
mwh sales.
Bulk power sales vary with system requirements, generating unit and
purchased power availability, fuel costs and the requirements of other electric
systems. A combination of these conditions contributed to record bulk power
sales in 1994.
Changes in other revenues during 1996 and 1995 reflected changes in
classification between other revenues and bulk power sales.
Total revenue per mwh sold varies with changes in the mix of mwh sales
among customer classifications and the effect of declining price per mwh as
usage increases. An automatic fuel adjustment provision is included in only
sales for resale tariffs, which apply to less than 1% of revenues.
Future mwh sales and revenues per mwh will be affected by national and
local economies, tariff changes, weather and customer conservation efforts.
Competition, including alternative sources of energy such as natural gas,
cogeneration, IPPs and other electric utilities, may also affect future sales
and revenue.
FUEL AND PURCHASED POWER
Combined fuel and purchased power expenses for 1996 increased 8% or $15
million from 1995, while total mwh sales (total of retail and sales for resale)
increased only 3%.
This increase is largely attributable to an increase in capacity
purchases. Capacity purchase contracts provide a cost-effective alternative to
constructing new capacity and have contributed to increases in purchased power
expenses. Additional capacity purchases increased purchased power expenses about
$9 million in 1996 and $4 million in 1995.
Nuclear fuel costs per MMBTU remain substantially less than the MMBTU
price of coal, despite increases of 26% during 1996 and 15% during 1995. Nuclear
fuel costs per MMBTU averaged 59%, 45% and 40% of the MMBTU price of coal during
1996, 1995 and 1994, respectively. We expect this relationship and the price of
nuclear fuel to remain fairly constant through the year 2001. During 1996 coal
represented about 75% of generation and nuclear fuel about 25%. During 1995
nuclear fuel accounted for about 30% of generation as no refueling
outage was scheduled during that year (see Wolf Creek section).
The price of coal burned declined 4% during 1996 and increased 1% during
1995. Our coal procurement strategies continue to provide coal costs at or below
the regional average. We expect coal costs to remain fairly consistent with 1996
levels through 2001.
Other items affecting the change in combined fuel and purchased power
expenses from 1995 to 1996 include a $2 million decrease in expense from coal
inventory adjustments, an increase in replacement power expenses for Wolf
Creek's spring 1996 refueling outage (see Wolf Creek section) and a 1995 forced
generating station outage. During July 1995 a fire forced an outage at LaCygne
I, a low-cost, coal-fired generating unit. We replaced the power by increasing
the usage of higher-cost, coal-fired units and purchasing power on the wholesale
market. Damage to the unit was covered by insurance. However, uninsured,
incremental fuel and purchased power costs were about $4 million.
Combined fuel and purchased power expenses for 1995 increased 5% or $9
million from 1994, despite a 2% decrease in total mwh sales. Items contributing
to this increase include the LaCygne forced outage, increases in capacity
purchase contracts, increases in the cost of nuclear fuel and a $3 million
increase in fuel costs from coal inventory adjustments.
OTHER OPERATION AND MAINTENANCE EXPENSES
Combined other operation and maintenance expenses for 1994 were higher
than 1995 and 1996 due mainly to the costs of the voluntary early retirement
program in that year. Total program costs of $22.5 million ($0.22 per share)
were expensed during 1994. The decrease in 1995 expenses from 1994 was partially
offset by KCPL's $2 million share of Wolf Creek's voluntary early retirement
program recorded during 1995. Other cost variances in 1996 and 1995 resulted
from the timing of scheduled maintenance programs.
We continue to emphasize new technologies, improved methods and cost
control. We are changing processes to provide increased efficiencies and
improved operations. Through the use of cellular technology, a majority of
customer meters are read automatically. These types of changes have allowed us
to assimilate work performed by those who elected to participate in the early
retirement programs.
INCOME TAXES
Operating income taxes decreased $9 million in 1996 from 1995. The
decrease was primarily due to adjustments necessary to reflect the filing of the
1995 tax returns and the settlement with the Internal Revenue Service regarding
tax issues included in the 1985 through 1990 tax returns. This settlement is
also the primary reason for the decrease in accrued taxes.
GENERAL TAXES
Components of general taxes:
1996 1995 1994
(thousands)
Property $ 45,519 $ 46,019 $ 46,895
Gross receipts 42,554 41,416 40,397
Other 9,175 9,386 9,070
Total $ 97,248 $ 96,821 $ 96,362
OTHER INCOME
Miscellaneous Income
Miscellaneous income for 1995 includes a $5 million gain from the sale of
steel railcars, which were replaced by leased aluminum cars. Aluminum cars
are lighter-weight and offer more coal capacity per car, contributing to
lower delivered coal prices.
Miscellaneous Deductions
Miscellaneous deductions increased in 1996 from 1995 due primarily to the
termination of the UtiliCorp merger agreement and defense against Western
Resources' unsolicited exchange offer (see Notes 11 and 12 to the
Consolidated Financial Statements). During the third quarter of 1996, $13
million in previously deferred merger costs and a $5 million termination
fee were expensed. In addition, costs incurred to defend against the
unsolicited exchange offer increased 1996 expenses by $13 million. Also,
subsidiary expenses increased about $9 million reflecting increased
investing activities. Total subsidiary expenses, including interest charges
discussed below, are substantially offset by related tax benefits.
Miscellaneous deductions increased in 1995 over 1994 due to increases in
charitable contributions, fees related to the sale of customer accounts
receivable and growing subsidiary operations.
Income Taxes
We accrued tax credits in 1996, 1995 and 1994 of $12, $5 and $1 million,
respectively, related primarily to KLT's investments in affordable housing
limited partnerships. Tax credits from the investments in affordable
housing more than offset the increase in interest expense incurred from
these investments. Nontaxable increases in the cash surrender value of
corporate-owned life insurance contracts also affected the relationship
between miscellaneous deductions and income taxes.
INTEREST CHARGES
Interest expense increased during 1996 reflecting higher average levels of
long-term debt outstanding compared with 1995. The higher levels of debt
resulted from additional financing by KLT to support expanding subsidiary
operations and new investments in unregulated ventures.
Interest expense increased during 1995 reflecting higher average levels of
long-term debt outstanding and higher weighted-average interest rates compared
with 1994. The higher average level of outstanding debt was primarily due to
subsidiary investments in affordable housing partnerships.
The average interest rate on long-term debt, including current
maturities, was 6.0% in 1996 and 1995 compared with 5.4% in 1994.
We use interest rate swap and cap agreements to limit the interest expense
on a portion of our variable-rate long-term debt. We do not use derivative
financial instruments for trading or other speculative purposes. Although these
agreements are an integral part of our interest rate management, their
incremental effect on interest expense and cash flows is not significant.
WOLF CREEK
Wolf Creek is one of KCPL's principal generating units representing about
18% of its accredited generating capacity. The plant's operating performance has
remained strong, contributing about 25% of the annual mwh generation while
operating at an average capacity of 88% over the last three years. It has the
lowest fuel cost per MMBTU of any of KCPL's generating units.
Wolf Creek's eighth scheduled refueling and maintenance outage began in
early February 1996 and was completed in April 1996 (64 days). The incremental
operating, maintenance and replacement power costs are accrued evenly over the
unit's operating cycle, normally 18 months. As actual outage expenses are
incurred, the refueling liability and related deferred tax asset are reduced.
The eighth outage started one month early when the plant was shut down after
water flow from the cooling lake was restricted by ice buildup on an intake
screen. This extended the length of the outage and was the primary reason for
the increase in Wolf Creek related replacement power and maintenance expenses in
1996. Wolf Creek's ninth refueling and maintenance outage is scheduled for the
fall of 1997.
Wolf Creek's assets and operating expenses represent about 45% and 20% of
total assets and operating expenses, respectively. Currently, no major equipment
replacements are expected, but an extended shutdown of the unit could have a
substantial adverse effect on KCPL's business, financial condition and results
of operations. Higher replacement power and other costs would be incurred as a
result. Although not expected, an unscheduled plant shutdown could be caused by
actions of the Nuclear Regulatory Commission reacting to safety concerns at the
plant or other similar nuclear units. If a long-term shutdown occurred, the
state regulatory commissions could consider reducing rates by excluding the Wolf
Creek investment from rate base.
Ownership and operation of a nuclear generating unit exposes KCPL to risks
regarding the cost of decommissioning the unit at the end of its life and to
potential retrospective assessments and property losses in excess of insurance
coverage. These risks are more fully discussed in the related sections of Notes
1 and 4 to the Consolidated Financial Statements.
ENVIRONMENTAL MATTERS
Our policy is to act in an environmentally responsible manner and use the
latest technology available to avoid and treat contamination. We continually
conduct environmental audits designed to ensure compliance with governmental
regulations and detect contamination. However, these regulations are constantly
evolving; governmental
bodies may impose additional or more rigid environmental regulations which could
require substantial changes to operations or facilities.
The Clean Air Act Amendments of 1990 contain two programs significantly
affecting the utility industry. We have spent about $5 million for the
installation of continuous emission monitoring equipment to satisfy the
requirements under the acid rain provision. The other utility-related program
calls for a study of certain air toxic substances. Based on the outcome of this
study, regulation of these substances, including mercury, could be required. We
cannot predict the likelihood of any such regulations or compliance costs.
Other proposed regulations to revise the ozone and particulate matter
National Ambient Air Quality Standards, scheduled to be finalized in June 1997,
may require capital expenditures which cannot be estimated at this time.
PROJECTED CONSTRUCTION EXPENDITURES
We are fully exploring alternatives to new construction. During 1995 we
entered into an operating lease for a new 142 mw combustion turbine, scheduled
to be placed in service during 1997. We have also contracted to purchase
capacity through fixed-price agreements (see Note 4 to the Consolidated
Financial Statements - Capacity Purchase Commitments). Compared to the long-term
fixed costs of building new capacity, these contracts provide a cost-effective
way of meeting uncertain levels of demand growth, even though there are risks
associated with market price fluctuations.
Total utility capital expenditures, excluding allowance for funds used
during construction, were $101 million in 1996. The utility construction
expenditures are projected for the next five years as follows:
Construction Expenditures
1997 1998 1999 2000 2001 Total
(millions)
Generating facilities $ 35 $ 27 $ 35 $33 $ 19 $149
Nuclear fuel 20 21 2 24 27 94
Transmission facilities 11 5 2 4 3 25
Distribution and
general facilities 67 53 51 48 43 262
Total $133 $106 $ 90 $109 $ 92 $530
This construction expenditure plan is subject to continual review and
change. The next plan will be filed with the Missouri commission in July 1997.
CAPITAL REQUIREMENTS AND LIQUIDITY
As of December 31, 1996, KCPL's liquid resources included cash flows from
operations, $300 million of registered but unissued, unsecured medium-term notes
and $375 million of unused bank lines of credit. The unused lines consisted of
KCPL's short-term bank lines of credit of $280 million and KLT's long-term
revolving line of credit of $95 million.
KCPL continues to generate positive cash flows from operating activities,
although individual components of working capital will vary with normal business
cycles and operations including the timing of receipts and payments. Cash
required to meet current tax liabilities has increased as we no longer receive
the benefits of accelerated tax depreciation on any significant generating plant
assets. Accelerated depreciation lowers tax payments in the earlier years of an
asset's life while increasing deferred tax liabilities; this relationship
reverses in the later years of an asset's life. Our last significant generating
plant addition was the completion of Wolf Creek in 1985. The costs incurred to
repair damages from an October 1996 snow storm also lowered cash flows from
operating activities in 1996 and increased Other Regulatory Assets on the
balance sheet. Amortization of these costs will begin in 1997 and be reflected
as Amortization of Other in the Statement of Cash Flows. Amortization of Other
decreased in 1996 as the deferred costs of the 1993 flood were fully amortized
in 1995.
Cash used in investing activities varies with the timing of utility
capital expenditures and KLT's purchases of investments and nonutility
properties. The increase in nonutility properties during 1996 resulted mainly
from KLT's purchase of certain oil and gas projects during the year.
Subsidiary obligations increased during 1996 to finance KLT's purchases of
nonutility property and investments. KCPL's common dividend payout ratio was 94%
in 1996, 80% in 1995 and 91% in 1994. Merger related costs in 1996 and costs of
the voluntary early retirement program in 1994 contributed to the higher ratios
in those years.
EPS for 1997 will be reduced by $0.52 due to a $53 million payment in
February 1997 to UtiliCorp for terminating a merger agreement with them and then
signing an agreement to combine with Western Resources. After taxes, the payment
will reduce 1997 net income by $32 million. We sold commercial paper to pay this
termination fee.
Day-to-day operations, utility construction requirements and dividends are
expected to be met with internally-generated funds. Uncertainties affecting our
ability to meet these requirements with internally-generated funds include the
effect of inflation on operating expenses, the level of mwh sales, regulatory
actions, compliance with future environmental regulations, the availability of
generating units, and the outcome of pending legal proceedings (see Note 13 to
the Consolidated Financial Statements). The funds needed for the retirement of
$393 million of maturing debt through the year 2001 will be provided from
operations, refinancings or short-term debt. We might incur additional debt
and/or issue additional equity to finance growth or take advantage of new
opportunities.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
1996 1995 1994
(thousands)
ELECTRIC OPERATING REVENUES $903,919 $885,955 $868,272
OPERATING EXPENSES
Operation
Fuel 140,505 139,371 135,106
Purchased power 52,455 38,783 33,929
Other 180,719 178,599 202,304
Maintenance 71,495 78,439 72,468
Depreciation 103,912 97,225 94,361
Income taxes 68,155 77,062 70,949
General taxes 97,248 96,821 96,362
Deferred Wolf Creek costs amortization 11,617 12,607 13,102
Total 726,106 718,907 718,581
OPERATING INCOME 177,813 167,048 149,691
OTHER INCOME
Allowance for equity funds
used during construction 2,368 2,279 2,087
Miscellaneous income 4,843 8,623 3,015
Miscellaneous deductions (55,172) (11,101) (7,174)
Income taxes 36,402 10,259 4,572
Total (11,559) 10,060 2,500
INCOME BEFORE INTEREST CHARGES 166,254 177,108 152,191
INTEREST CHARGES
Long-term debt 53,939 52,184 43,962
Short-term debt 1,251 1,189 1,170
Miscellaneous 4,840 3,112 4,128
Allowance for borrowed funds
used during construction (1,947) (1,963) (1,844)
Total 58,083 54,522 47,416
Net Income 108,171 122,586 104,775
Preferred Stock
Dividend Requirements 3,790 4,011 3,457
Earnings Available for
Common Stock $104,381 $118,575 $101,318
Average Number of Common
Shares Outstanding 61,902 61,902 61,903
Earnings per Common Share $1.69 $1.92 $1.64
Cash Dividends per
Common Share $1.59 $1.54 $1.50
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Year Ended December 31
1996 1995 1994
(thousands)
Beginning Balance $449,966 $426,738 $418,201
Net Income 108,171 122,586 104,775
558,137 549,324 522,976
Dividends Declared
Preferred stock - at required rates 3,782 4,029 3,384
Common stock 98,421 95,329 92,854
Ending Balance $455,934 $449,966 $426,738
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31 December 31
1996 1995
(thousands)
ASSETS
UTILITY PLANT, at original cost
Electric $ 3,472,607 $ 3,388,538
Less-accumulated depreciation 1,238,187 1,156,115
Net utility plant in service 2,234,420 2,232,423
Construction work in progress 69,577 72,365
Nuclear fuel, net of amortization of
$84,540 and $81,452 39,497 54,673
Total 2,343,494 2,359,461
REGULATORY ASSET - DEFERRED WOLF CREEK COSTS 0 8,880
REGULATORY ASSET - RECOVERABLE TAXES 126,000 123,000
INVESTMENTS AND NONUTILITY PROPERTY 231,874 166,751
CURRENT ASSETS
Cash and cash equivalents 23,571 28,390
Customer accounts receivable, net of allowance
for doubtful accounts of $1,644 and $1,574 27,093 32,830
Other receivables 36,113 31,838
Fuel inventories, at average cost 19,077 22,103
Materials and supplies, at average cost 47,334 47,175
Deferred income taxes 2,737 5,947
Other 5,055 5,179
Total 160,980 173,462
DEFERRED CHARGES
Regulatory assets
Settlement of fuel contracts 9,764 13,007
KCC Wolf Creek carrying costs 1,368 4,104
Other 26,615 21,231
Other deferred charges 14,417 12,610
Total 52,164 50,952
Total $2,914,512 $2,882,506
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see statements) $1,943,647 $1,824,087
CURRENT LIABILITIES
Commercial paper 0 19,000
Current maturities of long-term debt 26,591 73,803
Accounts payable 55,618 52,506
Accrued taxes 18,443 39,726
Accrued interest 21,054 16,906
Accrued payroll and vacations 25,558 22,764
Accrued refueling outage costs 7,181 13,563
Other 11,980 11,787
Total 166,425 250,055
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 643,189 648,374
Deferred investment tax credits 67,107 71,270
Other 94,144 88,720
Total 804,440 808,364
COMMITMENTS AND CONTINGENCIES (note 4)
Total $2,914,512 $2,882,506
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
1996 1995 1994
(thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $108,171 $122,586 $104,775
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 103,912 97,225 94,361
Amortization of:
Nuclear fuel 16,094 14,679 10,136
Deferred Wolf Creek costs 11,617 12,607 13,102
Other 5,507 8,152 9,608
Deferred income taxes (net) (8,662) (3,268) 20,524
Deferred investment tax credit
amortization and reversals (4,163) (11,570) (4,345)
Deferred storm costs (8,885) 0 0
Allowance for equity funds used
during construction (2,368) (2,279) (2,087)
Cash flows affected by changes in:
Receivables 1,462 (17,551) 1,543
Fuel inventories 3,026 (5,533) (2,020)
Materials and supplies (159) (2,222) (796)
Accounts payable 3,112 (20,980) 14,065
Accrued taxes (21,283) 15,042 (3,116)
Accrued interest 4,148 4,697 (3,366)
Wolf Creek refueling outage accrual (6,382) 11,443 (5,142)
Pension and postretirement benefit
obligations (84) (4,176) 32,203
Other operating activities 11,846 4,325 (2,860)
Net cash from operating activities 216,909 223,177 276,585
CASH FLOWS FROM INVESTING ACTIVITIES
Utility capital expenditures (100,947) (134,070) (124,965)
Allowance for borrowed funds used
during construction (1,947) (1,963) (1,844)
Purchases of investments (35,362) (56,759) (67,560)
Purchases of nonutility property (20,395) 0 0
Other investing activities (931) 9,046 5,624
Net cash used in investing
activities (159,582) (183,746) (188,745)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 135,441 111,055 133,793
Repayment of long-term debt (74,230) (33,428) (170,170)
Special deposits 0 0 60,118
Net change in short-term borrowings (19,000) (13,000) 3,000
Dividends paid (102,203) (99,358) (96,238)
Other financing activities (2,154) 3,473 335
Net cash used in financing
activities (62,146) (31,258) (69,162)
NET CHANGE IN CASH AND CASH
EQUIVALENTS (4,819) 8,173 18,678
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 28,390 20,217 1,539
CASH AND CASH EQUIVALENTS
AT END OF YEAR $23,571 $28,390 $20,217
CASH PAID DURING THE YEAR FOR:
Interest (net of amount capitalized) $52,457 $48,200 $48,246
Income taxes $58,344 $67,053 $53,720
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31 December 31
1996 1995
(thousands)
COMMON STOCK EQUITY
Common stock-150,000,000 shares authorized
without par value-61,908,726 shares issued,
stated value $ 449,697 $ 449,697
Retained earnings (see statements) 455,934 449,966
Unrealized gain on securities available for sale 6,484 0
Capital stock premium and expense (1,666) (1,725)
Total 910,449 897,938
CUMULATIVE PREFERRED STOCK
$100 Par Value
3.80% - 100,000 shares issued 10,000 10,000
4.50% - 100,000 shares issued 10,000 10,000
4.20% - 70,000 shares issued 7,000 7,000
4.35% - 120,000 shares issued 12,000 12,000
No Par Value
4.38%* - 500,000 shares issued 50,000 50,000
$100 Par Value - Redeemable
4.00% - (note 8) 62 1,436
Total 89,062 90,436
LONG-TERM DEBT (excluding current maturities)
General Mortgage Bonds
Medium-term Notes due 1997-2008, 6.81% and
6.72% weighted-average rate at December 31 468,500 387,000
4.24%* Environmental Improvement Revenue
Refunding Bonds due 2012-23 158,768 158,768
Guaranty of Pollution Control Bonds
4.13%* due 2015-17 196,500 196,500
Subsidiary Obligations
Affordable Housing Notes due 2000-05, 8.51%
and 8.54% weighted-average rate at
December 31 65,368 69,945
Bank Credit Agreement due 1999, 6.78% and 7.66%
weighted-average rate at December 31 55,000 23,500
Total 944,136 835,713
Total $1,943,647 $1,824,087
* Variable rate securities, weighted-average rate as of December 31, 1996
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
KANSAS CITY POWER & LIGHT COMPANY
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Kansas City Power & Light Company is a medium-sized electric utility with
more than 435,000 customers in western Missouri and eastern Kansas. About 95% of
our retail revenues are from the Kansas City metropolitan area, an agribusiness
center and major regional center for wholesale, retail and service companies.
About two-thirds of our retail sales are to Missouri customers, the remainder to
Kansas customers.
The consolidated financial statements include the accounts of Kansas City
Power & Light Company and KLT Inc., a wholly-owned, nonutility subsidiary. The
consolidated entity is referred to as KCPL. KLT was formed in 1992 as a holding
company for various nonregulated business ventures. Currently, the electric
utility accounts for about 92% of consolidated assets and substantially all
results of operations. Intercompany balances and transactions have been
eliminated. KLT's revenues and expenses have been classified as Other Income and
Interest Charges in the income statement.
The accounting records conform to the accounting standards prescribed by
the Federal Energy Regulatory Commission (FERC) and generally accepted
accounting principles. These standards require the use of estimates and
assumptions that affect amounts reported in the financial statements and the
disclosure of commitments and contingencies.
Cash and Cash Equivalents
Cash and cash equivalents consists of highly liquid investments with
original maturities of three months or less.
Derivative Financial Instruments
We use interest rate swap and cap agreements to reduce the impact of
changes in interest rates on variable-rate debt.
Interest rate swap agreements effectively fix the interest rates on a
portion of KCPL's variable-rate debt. Interest rate caps limit the interest rate
on a portion of KCPL's variable-rate debt by setting a maximum rate. The costs
of rate caps are paid annually and included in interest expense. Any difference
paid or received due to these agreements is recorded as an adjustment to
interest expense.
These agreements are not marked to market value as they are used only to
manage interest expense and the intent is to hold them until their termination
date. We do not use derivative financial instruments for trading or other
speculative purposes.
Fair Value of Financial Instruments
The stated values of financial instruments as of December 31, 1996 and
1995, approximated fair market values. KCPL's incremental borrowing rate for
similar debt was used to determine fair value if quoted market prices were not
available.
Securities Available for Sale
Certain investments in equity securities are accounted for as securities
available for sale in accordance with Financial Accounting Standards Board
(FASB) Statement No. 115 - Accounting for Certain Investments in Debt and Equity
Securities. This requires adjusting the securities to market value with
unrealized gains (or losses), net of deferred income taxes, reported as a
separate component of shareholders' equity.
Investments in Affordable Housing Limited Partnerships
Through December 31, 1996, a subsidiary of KLT had invested $97 million in
affordable housing limited partnerships. About $80 million of these investments
were recorded at cost; the equity method was used for the remainder. Tax credits
are recognized in the year generated. A change in accounting principle relating
to investments made after May 19, 1995, requires limited partnership investments
of more than 5% to use the equity method. Of the investments recorded at cost,
$70 million exceed this 5% level but were made prior to May 19, 1995.
Utility Plant
Utility plant is stated at historical costs of construction. These costs
include taxes, an allowance for funds used during construction (AFDC) and
payroll-related costs including pensions and other fringe benefits. Additions
of, and replacements and improvements to units of property are capitalized.
Repairs of property and replacements of items not considered to be units of
property are expensed as incurred (except as discussed under Wolf Creek
Refueling Outage Costs). When property units are retired or otherwise disposed,
the original cost, net of salvage and removal, is charged to accumulated
depreciation.
AFDC represents the cost of borrowed funds and a return on equity funds
used to finance construction projects. It is capitalized as a cost of
construction work in progress. AFDC on borrowed funds reduces interest charges.
AFDC on equity funds is shown as a noncash item of other income. When a
construction project is placed in service, the related AFDC, as well as other
construction costs, is used to establish rates under regulatory rate practices.
The rates used to compute gross AFDC are compounded semi-annually and averaged
8.5% for 1996, 8.7% for 1995 and 7.8% for 1994.
Depreciation is computed using the straight-line method over the estimated
lives of depreciable property based on rates approved by state regulatory
authorities. Average annual composite rates were about 3.1% in 1996 compared
with 2.9% in 1995 and 1994.
Wolf Creek Refueling Outage Costs
Forecasted incremental costs to be incurred during scheduled Wolf Creek
Generating Station (Wolf Creek) refueling outages are accrued monthly over the
unit's operating cycle, normally about 18 months. Estimated incremental costs,
which include operating, maintenance and replacement power expenses, are based
on budgeted outage costs and the estimated outage duration. Changes to or
variances from those estimates are recorded when known or probable.
Nuclear Plant Decommissioning Costs
The Missouri Public Service Commission (MPSC) and the Kansas Corporation
Commission (KCC) require the owners of Wolf Creek to submit an updated
decommissioning cost study every three years. The most recent study was filed
during 1996 and is currently under review by the MPSC and the KCC. Based on this
study, total decommissioning costs are expected to increase to reflect 1996
dollars; however, no increase in the current level of funding and expenses is
anticipated.
The following table shows the decommissioning cost estimates and the
escalation rate and earnings assumptions approved by the MPSC and the KCC in
1994 with regard to the study filed in 1993. The decommissioning cost estimates
are based on the immediate dismantlement method and include the costs of
decontamination, dismantlement and site restoration. Plant decommissioning is
not expected to start before 2025.
KCC MPSC
Future cost of decommissioning:
Total Station $1.3 billion $1.8 billion
47% share $595 million $859 million
Current cost of decommissioning (in 1993 dollars):
Total Station $370 million $370 million
47% share $174 million $174 million
Annual escalation factor 3.45% 4.50%
Annual return on trust assets 6.48% 7.66%
We contribute to a tax-qualified trust fund (about $3 million for each of
the last three years) to be used to decommission Wolf Creek. These costs were
charged to other operation expenses and recovered in rates. Based on the 1993
study, contributions are expected to increase slightly beginning in 1997. These
funding levels assume a certain return on trust assets. If the actual return on
trust assets is below the anticipated level, we believe a rate increase will be
allowed ensuring full recovery of decommissioning costs over the remaining life
of the unit. This assumes we continue to be regulated.
As of December 31, 1996 and 1995, the trust fund balance, including
reinvested earnings, was $31 and $26 million, respectively. These amounts are
reflected in Investments and Nonutility Property. The related liabilities for
decommissioning are included in Deferred Credits and Other Liabilities - Other.
In 1996 FASB issued an Exposure Draft of a proposed Statement of Financial
Accounting Standards, Accounting for Certain Liabilities Related to Closure or
Removal of Long-Lived Assets, that addressed the accounting for obligations
arising from dismantlement, removal, site reclamation, and decontamination of
certain long-lived assets. FASB hopes to finalize a statement or revised
exposure draft in 1997. If current electric utility industry accounting
practices for such decommissioning costs are changed: 1) annual decommissioning
expenses could increase, and 2) trust fund income from the external
decommissioning trusts could be reported as investment income. We are not able
to predict what affect those changes would have on results of operations,
financial position, or related regulatory practices until the final issuance of
a revised accounting guidance. However, we do not anticipate results of
operations to be significantly affected as long as we are regulated.
Nuclear Fuel
Nuclear fuel is amortized to fuel expense based on the quantity of heat
produced for the generation of electricity. Under the Nuclear Waste Policy Act
of 1982, the Department of Energy (DOE) is responsible for the permanent
disposal of spent nuclear fuel. We pay the DOE a quarterly fee of one-tenth of a
cent for each kilowatt-hour of net nuclear generation delivered and sold for
future disposal of spent nuclear fuel. These disposal costs are charged to fuel
expense and recovered through rates.
A permanent disposal site may not be available for the industry until 2010
or later, although an interim facility may be available earlier. Under current
DOE policy, once a permanent site is available, the DOE will accept spent
nuclear fuel on a priority basis; the owners of the oldest spent fuel will be
given the highest priority. As a result, disposal services for Wolf Creek may
not be available prior to 2016. Wolf Creek has an on-site, temporary storage
facility for spent nuclear fuel. Under current regulatory guidelines, this
facility can provide storage space until about 2005. Management believes
additional temporary storage space can be built or obtained as necessary.
Regulatory Assets
FASB Statement No. 71 - Accounting for Certain Types of Regulation,
applies to regulated entities whose rates are designed to recover the costs of
providing service. In accordance with this statement, certain items that would
normally be reflected in the income statement are deferred on the balance sheet.
These items are then amortized as the related amounts are recovered from
customers through rates.
We recognize regulatory assets when allowed by a commission's rate order
or when it is probable, based on regulatory precedent, that future rates will
recover the amortization of the deferred costs. We continuously monitor changes
in market and regulatory conditions and consider the effects of any changes in
assessing the continued applicability of FASB 71. If we were unable to apply
FASB 71, the unamortized balance of $164 million of our regulatory assets, net
of the related tax benefit, would be written off.
Deferred Wolf Creek Costs
The KCC and MPSC allowed continued construction accounting for
ratemaking purposes after Wolf Creek's 1985 commercial in-service date.
Certain other carrying costs were also deferred. The deferrals were
amortized and recovered in rates from 1987 through 1996.
Recoverable Taxes
See the following Income Taxes section.
Settlement of Fuel Contracts
We deferred the cost of terminating certain coal purchase contracts.
These costs are being amortized over various periods ending in 2002.
KCC Wolf Creek Carrying Costs
The KCC ordered certain Wolf Creek carrying costs to be deferred.
These costs are being recovered and amortized over six years ending in June
1997.
Other
Other regulatory assets include premium on redeemed debt, deferred
costs to decommission and decontaminate federal uranium enrichment
facilities and other costs. These deferrals are amortized over various
periods extending to 2023. Also included in other regulatory assets are
incremental costs of $8.9 million related to an October 1996 snow storm. We
have received accounting authority orders from the KCC and MPSC approving
the deferral of these costs. The costs will be amortized over five years
beginning in January 1997.
Revenue Recognition
We use cycle billing and accrue estimated unbilled revenue at the
end of each reporting period.
Income Taxes
The balance sheet includes deferred income taxes for all temporary
differences between the tax basis of an asset or liability and that reported in
the financial statements. These deferred tax assets and liabilities are
determined using the tax rates scheduled by the tax law to be in effect when the
differences reverse.
Regulatory Asset - Recoverable Taxes mainly reflects the future revenue
requirements necessary to recover the tax benefits of existing temporary
differences previously passed through to customers. Operating income tax expense
is recorded based on ratemaking principles. However, if the method used for the
balance sheet were reflected in the income statement, net income would remain
the same.
Investment tax credits are deferred when utilized and amortized to income
over the remaining service lives of the related properties.
Environmental Matters
Environmental costs are accrued when it is probable a liability has been
incurred and the amount of the liability can be reasonably estimated. We believe
all appropriate costs related to environmental matters have been recorded.
2. PENSION PLANS AND OTHER EMPLOYEE BENEFITS
Early Retirement Program
In 1994, 332 employees retired under a voluntary early retirement plan. We
expensed estimated pension and postretirement program costs of $16.5 and $6.0
million, respectively ($0.22 per share).
In 1995, 56 employees retired under the Wolf Creek voluntary early
retirement plan. We expensed our share of estimated program costs of $2.1
million ($0.02 per share) during the second quarter of 1995.
Pension Plans
KCPL has defined benefit pension plans for its employees, including
officers. Benefits under these plans reflect the employees' compensation, years
of service and age at retirement. KCPL satisfies at least the minimum funding
requirements under the Employee Retirement Income Security Act of 1974.
Funded status of the plans:
December 31 1996 1995
(thousands)
Accumulated benefit obligation:
Vested $247,264 $251,042
Nonvested 6,526 6,474
Total $253,790 $257,516
Determination of plan assets less obligations:
Fair value of plan assets (a) $363,285 $339,236
Projected benefit obligation (b) 307,050 315,395
Difference $ 56,235 $ 23,841
Reconciliation of difference:
Accrued trust liability $(13,645) $(13,890)
Unrecognized transition obligation 10,541 12,612
Unrecognized net gain 63,022 29,293
Unrecognized prior service cost (3,683) (4,174)
Difference $ 56,235 $ 23,841
(a) Plan assets are invested in insurance contracts, corporate bonds, equity
securities, U.S. Government securities, notes, mortgages and short-term
investments.
(b) Based on weighted-average discount rates of 8.0% in 1996 and 7.5% in 1995;
and increases in future salary levels of 4% to 5% in 1996 and 1995.
Components of provisions for pensions (excluding 1995 and 1994 early retirement
program costs):
1996 1995 1994
(thousands)
Service cost $ 8,164 $ 6,414 $ 8,193
Interest cost on projected benefit
obligation 23,379 22,593 20,759
Actual return on plan assets (40,831) (50,108) (1,143)
Other 15,347 25,656 (22,297)
Net periodic pension cost $ 6,059 $ 4,555 $ 5,512
Long-term rates of return on plan assets of 8.5% to 9.25% were used.
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, certain postretirement health
care and life insurance benefits are provided for substantially all retired
employees.
We accrue the cost of postretirement health care and life insurance
benefits during an employee's years of service. These costs are currently
recovered through rates on an accrual basis in Missouri and a pay-as-you-go
basis in Kansas. In 1995 we began funding the year's overall net periodic
postretirement benefit cost, subject to maximum deductible limits for income tax
purposes.
Reconciliation of postretirement benefits to amounts recorded in the balance
sheets:
December 31 1996 1995
(thousands)
Accumulated postretirement benefit obligation (APBO) (a):
Retirees $ 20,582 $22,515
Fully eligible active plan participants 3,149 2,659
Other active plan participants 8,459 9,315
Total APBO 32,190 34,489
Fair value of plan assets (b) (3,620) (2,189)
Unrecognized transition obligation (18,791) (19,965)
Unrecognized net gain 3,255 892
Unrecognized prior service cost (709) (786)
Accrued postretirement benefit obligation
(included in Deferred Credits
and Other Liabilities - Other) $ 12,325 $12,441
(a) Based on weighted-average discount rates of 8.0% in 1996 and 7.5% in 1995;
and increases in future salary levels of 4% in 1996 and 1995.
(b) Plan assets are invested in certificates of deposit.
Net periodic postretirement benefit cost (excluding 1995 and 1994 early
retirement program costs):
1996 1995 1994
(thousands)
Service cost $ 574 $ 435 $ 645
Interest cost on APBO 2,520 2,423 2,305
Amortization of unrecognized
transition obligation 1,174 1,175 1,175
Other 6 (60) 75
Net periodic postretirement benefit cost $4,274 $3,973 $4,200
Actuarial assumptions include an increase in the annual health care cost
trend rate for 1997 of 10%, decreasing gradually over a four-year period to its
ultimate level of 6%. The health care plan requires retirees to share in the
cost when premiums exceed a certain amount. Because of this provision, an
increase in the assumed health care cost trend rate by 1% per year would only
increase the APBO as of December 31, 1996, by about $704,000 and the combined
service and interest costs of the net periodic postretirement benefit cost for
1996 by about $80,000.
Long-term Incentive Plan
We have granted stock options where the exercise price equals the market
price of KCPL's common stock on the grant date. One-half of all options granted
vest one year after the grant date, the other half vest two years after the
grant date. When exercised, recipients receive shares of stock and accumulated
dividends (as though they had been reinvested). Unexercised options expire 10
years after the grant date.
KCPL follows APB Opinion 25 - Accounting for Stock Issued to Employees and
related Interpretations in accounting for this plan. Because of the dividend
provision, we expensed $1.4, $1.0 and $0.4 million for 1996, 1995 and 1994,
respectively. The expense includes accumulated and reinvested dividends plus the
appreciation in stock price since the grant date. If the stock price fell below
the exercise price, the cumulative expense related to those options is reversed.
If KCPL accounted for this plan using the optional, fair-value method of
FASB Statement No. 123 - Accounting for Stock-Based Compensation, the fair value
of options granted and related expense recorded for these plans would not be
material.
For options outstanding at December 31, 1996, exercise prices range from
$20.625 to $26.188 and the weighted-average remaining contractual life is 7
years.
Stock option activity over the last three years is summarized below:
1996 1995 1994
shares price* shares price* shares price*
Outstanding at January 1 266,125 $22.14 197,375 $21.87 145,125 $22.60
Granted 59,000 26.19 68,750 23.06 69,125 20.63
Exercised (26,250) 22.27 - - (6,000) 21.63
Canceled - - - - (10,875) 23.88
Outstanding at December 31 298,875 $22.96 266,125 $22.18 197,375 $21.87
Exercisable as of December 31 206,500 $22.02 162,813 $22.14 102,125 $22.20
*weighted-average exercise price
3. INCOME TAXES
Income tax expense consisted of the following:
1996 1995 1994
(thousands)
Current income taxes:
Federal $35,816 $69,697 $42,736
State 8,762 11,944 7,462
Total 44,578 81,641 50,198
Deferred income taxes, net:
Federal (7,441) (3,152) 17,005
State (1,221) (116) 3,519
Total (8,662) (3,268) 20,524
Investment tax credit amortization
and reversals (4,163) (11,570) (4,345)
Total income tax expense $31,753 $66,803 $66,377
KCPL's effective income tax rates differed from the statutory federal rates
mainly due to the following:
1996 1995 1994
Federal statutory income tax rate 35.0% 35.0% 35.0%
Differences between book and tax
depreciation not normalized (0.4) 1.2 1.2
Amortization of investment tax credits (3.0) (2.5) (2.5)
Income tax credits (9.1) (2.3) (0.2)
State income taxes 3.5 4.1 4.2
Other (3.3) (0.2) 1.1
Effective income tax rate 22.7% 35.3% 38.8%
The tax effects of major temporary differences resulting in deferred
tax assets and liabilities in the balance sheets are as follows:
December 31 1996 1995
(thousands)
Plant related $562,287 $572,792
Recoverable taxes 49,000 48,000
Other 29,165 21,635
Net deferred income tax liability $640,452 $642,427
The net deferred income tax liability consisted of the following:
December 31 1996 1995
(thousands)
Gross deferred income tax assets $(60,979) $(61,181)
Gross deferred income tax liabilities 701,431 703,608
Net deferred income tax liability $640,452 $642,427
4. COMMITMENTS AND CONTINGENCIES
Nuclear Liability and Insurance
Liability Insurance
The Price-Anderson Act currently limits the combined public liability of
nuclear reactor owners to $8.9 billion for claims that could arise from a
single nuclear incident. The owners of Wolf Creek (the Owners) carry the
maximum available commercial insurance of $0.2 billion. The remaining $8.7
billion balance is provided by Secondary Financial Protection (SFP), an
assessment plan mandated by the Nuclear Regulatory Commission.
Under SFP, if there were a catastrophic nuclear incident involving any of
the nation's licensed reactors, the Owners would be subject to a maximum
retrospective assessment per incident of up to $79 million ($37 million,
KCPL's share). The Owners are jointly and severally liable for these
charges, payable at a rate not to exceed $10 million ($5 million, KCPL's
share) per incident per year, excluding applicable premium taxes. The
assessment, most recently revised in 1993, is subject to an inflation
adjustment every five years based on the Consumer Price Index.
Property, Decontamination and Premature Decommissioning Insurance
The Owners also carry $2.8 billion ($1.3 billion, KCPL's share) of property
damage, decontamination and premature decommissioning insurance for loss
resulting from damage to the Wolf Creek facilities. Nuclear insurance pools
provide $0.5 billion of coverage, while Nuclear Electric Insurance Limited
(NEIL) provides $2.3 billion.
In the event of an accident, insurance proceeds must first be used for
reactor stabilization and site decontamination. KCPL's share of any
remaining proceeds can be used for property damage and premature
decommissioning costs. Premature decommissioning coverage applies only if an
accident at Wolf Creek exceeds $500 million in property damage and
decontamination expenses, and only after trust funds have been exhausted
(see Note 1 - Nuclear Plant Decommissioning Costs).
Extra Expense Insurance - Including Replacement Power
The Owners also carry additional insurance from NEIL to cover costs of
replacement power and other extra expenses incurred in the event of a
prolonged outage resulting from accidental property damage at Wolf Creek.
Retrospective Assessments
Under all NEIL policies, KCPL is subject to retrospective assessments
if NEIL losses, for each policy year, exceed the accumulated funds
available to the insurer under that policy. The estimated maximum amount of
retrospective assessments to KCPL under the current policies could total
about $8 million.
Other
In the event of a catastrophic loss at Wolf Creek, the insurance
coverage may not be adequate to cover property damage and extra expenses
incurred. Uninsured losses, to the extent not recovered through rates,
would be assumed by KCPL and could have a material, adverse effect on our
financial condition and results of operations.
Nuclear Fuel Commitments
As of December 31, 1996, KCPL's portion of Wolf Creek nuclear fuel
commitments included $130 million for enrichment and fabrication through 2025
and $15 million for uranium and conversion through 2001.
Environmental Matters
KCPL's operations must comply with federal, state and local environmental
laws and regulations. The generation and transmission of electricity uses,
produces and requires disposal of certain products and by-products, including
polychlorinated biphenyl (PCBs), asbestos and other potentially hazardous
materials. The Federal Comprehensive Environmental Response, Compensation and
Liability Act (the Superfund law) imposes strict joint and several liability for
those who generate, transport or deposit hazardous waste. This liability extends
to the current property owner as well as prior owners since the time of
contamination. We continually conduct environmental audits designed to detect
contamination and ensure compliance with governmental regulations. However,
compliance programs needed to meet future environmental laws and regulations
governing water and air quality, including carbon dioxide emissions, hazardous
waste handling and disposal, toxic substances and the effects of electromagnetic
fields, could require substantial changes to operations or facilities.
Long-term Coal Contracts
KCPL's share of coal purchased under long-term contracts was $36, $42 and
$21 million in 1996, 1995 and 1994, respectively. Under these coal contracts,
KCPL's remaining share of purchase commitments totals $113 million. Obligations
for the years 1997 through 2001 total $34, $20, $20, $10 and $10 million,
respectively. The remainder of our coal requirements are fulfilled through spot
market purchases.
Leases
KCPL has a transmission line lease with another utility whereby, with FERC
approval, the rental payments can be increased by the lessor. If this occurs, we
can cancel the lease if we are able to secure an alternative transmission path.
Commitments under this lease total $2 million per year and $54 million over the
remaining life of
the lease if it is not canceled.
Rental expense for other leases including railcars, computer equipment,
buildings, transmission line and other items was $18 to $20 million per year
during the last three years. The remaining rental commitments under these leases
total $174 million. Obligations for the years 1997 through 2001 average $14
million per year. Capital leases are not material and are included in these
amounts.
As the managing partner of three jointly-owned generating units, we have
entered into leases for railcars to serve those units. The entire lease
commitment is reflected in the above amounts although about $2 million per year
($31 million total) will be reimbursed by the other owners.
Purchased Capacity Commitments
We purchase capacity from other utilities and nonutility suppliers.
Purchased capacity gives us the option to purchase energy if needed or when
market prices are favorable. This provides a cost-effective alternative to new
construction. As of December 31, 1996, contracts to purchase capacity total $267
million through 2016. During 1996, 1995 and 1994, capacity purchases were $26,
$17 and $13 million, respectively. For the years 1997 through 2001, these
commitments average $22 million per year. For each of the next five years, net
capacity purchases represent about 11% of KCPL's 1996 total available capacity.
Legal Proceedings
See Note 13.
5. SECURITIES AVAILABLE FOR SALE
KLT Inc., a wholly-owned subsidiary of KCPL, held a $5 million investment
in convertible preferred stock. In September 1996 the investee company completed
a public offering triggering conversion of the preferred stock into common
stock. As a result of the conversion, the carrying value of the investment at
December 31, 1996, was adjusted to its market value of $15.2 million. The $10.2
million increase in market value over original cost resulted in an unrealized
gain at December 31, 1996, of $6.5 million (net of deferred taxes of $3.7
million).
6. SALE OF ACCOUNTS RECEIVABLE
As of December 31, 1996 and 1995, an undivided interest in $60 million of
designated customer accounts receivable was sold with limited recourse. Related
costs of $3.5, $3.8 and $2.8 million for 1996, 1995 and 1994, respectively, were
included in Other Income Miscellaneous deductions.
7. SHORT-TERM BORROWINGS
Short-term borrowings consist of funds borrowed from banks or through the
sale of commercial paper as needed. The weighted-average interest rate on the
short-term debt outstanding as of December 31, 1995, was 5.9%. As of December
31, 1996, under minimal fee
arrangements, unused bank lines of credit totaled $280 million.
8. COMMON STOCK EQUITY, PREFERRED STOCK AND REDEEMABLE PREFERRED STOCK
Common Stock Equity
KCPL has shares of common stock registered with the Securities and
Exchange Commission for a Dividend Reinvestment and Stock Purchase Plan (the
Plan). The Plan allows common shareholders, directors and employees to purchase
shares of the common stock by reinvesting dividends or making optional cash
payments. We are currently purchasing shares for the Plan on the open market.
As of December 31, 1996 and 1995, KCPL held 12,907 and 6,643 shares of its
common stock to be used for future distribution, respectively. The cost of these
shares is included in Investments and Nonutility Property.
The Restated Articles of Consolidation contain a restriction relating to
the payment of dividends in the event common equity falls to 25% of total
capitalization.
If preferred stock dividends are not declared and paid when scheduled,
KCPL could not declare or pay common stock dividends or purchase any common
shares. If the unpaid preferred stock dividends equal four or more full
quarterly dividends, the preferred shareholders, voting as a single class, could
elect members to the Board of Directors.
Preferred Stock and Redeemable Preferred Stock
Scheduled mandatory sinking fund requirements for the redeemable 4%
Cumulative Preferred Stock are 1,600 shares per year. Shares issued as of
December 31 totaled 12,757 in 1996 and 14,357 in 1995. Shares held by KCPL at
December 31 to meet future sinking fund requirements totaled 12,134 in 1996 and
3,192 in 1995. The cost of the shares held at the end of 1996 is reflected as a
reduction of the capital account while at the end of 1995 is included in
Investments and Nonutility Property.
As of December 31, 1996, 0.4 million shares of $100 par Cumulative
Preferred Stock, 1.6 million shares of Cumulative No Par Preferred Stock and 11
million shares of no par Preference Stock were authorized. We have the option to
redeem the $89 million Cumulative Preferred Stock at prices approximating par or
stated value.
9. LONG-TERM DEBT
General Mortgage Bonds and Unsecured Notes
KCPL is authorized to issue mortgage bonds under the General Mortgage
Indenture and Deed of Trust dated December 1, 1986, as supplemented. The
Indenture creates a mortgage lien on substantially all utility plant.
As of December 31, 1996, $644 million general mortgage bonds were pledged
under the Indenture to secure the outstanding medium-term notes and revenue
refunding bonds.
KCPL is also authorized to issue up to $300 million in unsecured
medium-term notes under an indenture dated December 1, 1996. This indenture
prohibits KCPL from issuing additional general mortgage bonds while any
unsecured notes are outstanding. As of December 31, 1996, no unsecured notes had
been issued.
Interest Rate Swap and Cap Agreements
As of December 31, 1996, we had entered into five interest rate swap
agreements and three cap agreements to limit the interest rate on $120 million
of long-term debt. The swap agreements mature from 1997 to 1998 and effectively
fix the interest rates on $60 million of variable-rate debt to a
weighted-average rate of 3.84% as of December 31, 1996. The cap agreements limit
the interest rate on $60 million of variable-rate debt to 5.0% expiring through
1998.
As of December 31, 1995, we had entered into eight interest rate swap
agreements and three cap agreements limiting the interest rate on $150 million
of long-term debt. The swap agreements matured from 1996 to 1998 and effectively
fixed the interest rates on $90 million of variable-rate debt to a
weighted-average rate of 3.7% as of December 31, 1995. The cap agreements
limited the interest rate on $60 million of variable-rate debt to 5.0% expiring
through 1998.
These swap and cap agreements are with several highly rated financial
institutions and simply limit our exposure to increases in interest rates. They
do not subject KCPL to any material credit or market risks. The fair value of
these agreements is immaterial and is not reflected in the financial statements.
Although derivatives are an integral part of our interest rate management, their
incremental effect on interest expense for 1996 and 1995 was insignificant.
Subsidiary Obligations
During 1995 KLT entered into a long-term revolving line of credit agreement
for $65 million collateralized by the capital stock of KLT's direct
subsidiaries. During 1996 KLT amended this agreement, extending the amount of
credit available to $150 million. Other significant terms were not changed. The
affordable housing notes are collateralized by the affordable housing
investments.
Scheduled Maturities
Long-term debt maturities for the years 1997 through 2001 are $27, $73,
$136, $66 and $91 million, respectively.
10. JOINTLY-OWNED ELECTRIC UTILITY PLANTS
Joint ownership agreements with other utilities provide undivided interests
in utility plants as of December 31, 1996, as follows (in millions of dollars):
Wolf Creek LaCygne Iatan
Unit Units Unit
KCPL's share 47% 50% 70%
Utility plant in service $1,344 $ 287 $ 244
Estimated accumulated depreciation
(production plant only) $ 357 $ 171 $ 129
Nuclear fuel, net $ 39 $ - $ -
KCPL's accredited capacity-megawatts 548 672 469
Each owner must fund its own portion of the plant's operating expenses and
capital expenditures. KCPL's share of direct expenses is included in the
appropriate operating expense classifications in the income statement. Western
Resources, Inc. (Western Resources) also owns a 47% share of the Wolf Creek unit
and a 50% share of the LaCygne units (see Note 11).
11. AGREEMENT AND PLAN OF MERGER WITH WESTERN RESOURCES
On February 7, 1997, KCPL and Western Resources entered into an Agreement
and Plan of Merger (the Merger Agreement) to form a strategic business
combination. The effective time of the merger is dependent upon all conditions
of the Merger Agreement being met or waived. At the effective time, KCPL will
merge with and into Western Resources, with Western Resources being the
surviving corporation.
Western Resources first delivered an unsolicited exchange offer to KCPL's
Board of Directors during the second quarter of 1996. This initial offer,
subject to numerous conditions, proposed the exchange of $28 (later increased to
$31) worth of Western Resources stock for each share of KCPL stock. After
careful consideration, both offers were rejected by KCPL's Board of Directors.
In July 1996 Western Resources commenced an exchange offer for KCPL common
stock. In late 1996 KCPL began discussing a possible merger with Western
Resources leading to the Merger Agreement.
Under the terms of the Merger Agreement, KCPL common stock will be
exchanged for Western Resources common stock valued at $32.00, subject to a
conversion ratio limiting the amount of Western Resources common stock that
holders of KCPL common stock would receive per share of KCPL common stock to no
more than 1.1 shares (if Western Resources' stock is priced at or below $29.09
per share), and no less than 0.917 shares (if Western Resources' stock is priced
at or above $34.90 per share). However, there is a provision in the Merger
Agreement that allows KCPL to terminate the merger if Western Resources' stock
price drops below $27.64 and either the Standard and Poor's Electric Companies
Index increases or the decline in Western Resources stock exceeds by
approximately 5% any decline in this index. Western Resources could avoid this
termination by improving the conversion ratio.
The transaction is subject to several closing conditions including
approval by each company's shareholders, approval by a number of regulatory
authorities (statutory approvals) and dissenting shares equaling less than 5.5%
of KCPL's outstanding shares. If the effective time has not occurred by June 30,
1998 (the termination date), either party may terminate the agreement as long as
they did not contribute to the delay. This termination date will be
automatically extended to June 30, 1999, if all of the Merger Agreement closing
conditions have been met except for certain conditions relating to statutory
approvals.
The Merger Agreement does not allow KCPL to increase its common stock
dividend prior to the effective time or termination. It also
requires KCPL to redeem all outstanding shares of preferred stock prior to
completion of the merger.
If the Merger Agreement is terminated under certain circumstances, a
payment of $50 million will be due Western Resources if, within two and one-half
years following termination, KCPL agrees to consummate a business combination
with a third party that made a proposal to combine prior to termination. Western
Resources will pay KCPL $5 to $35 million if the Merger Agreement is terminated
and all closing conditions are satisfied other than conditions relating to
Western Resources receiving a favorable tax opinion, a favorable letter from its
accountants regarding pooling accounting, favorable statutory approvals, or an
exemption from the Public Utility Holding Company Act of 1935.
In February 1997 KCPL paid UtiliCorp United Inc. (UtiliCorp) $53 million
for agreeing to combine with Western Resources within two and one-half years
from the termination of KCPL's agreement to merge with UtiliCorp. This agreement
was terminated due to failure of KCPL shareholders to approve the transaction
with UtiliCorp.
12. QUARTERLY OPERATING RESULTS (UNAUDITED)
Quarter
1st 2nd 3rd 4th
(millions)
1996
Operating revenues $ 207 $ 226 $ 270 $ 201
Operating income 35 42 68 33
Net income 25 27 36 20
Earnings per common share $ 0.38 $ 0.43 $ 0.57 $0.31
Quarter
1st 2nd 3rd 4th
(millions)
1995
Operating revenues $ 199 $ 205 $ 278 $ 204
Operating income 29 31 72 35
Net income 23 19 58 23
Earnings per common share $ 0.35 $ 0.29 $ 0.91 $ 0.37
The quarterly data is subject to seasonal fluctuations with peak periods
occurring during the summer months. As a result of terminating the merger
agreement with UtiliCorp, $13 million in previously deferred merger costs and a
$5 million termination fee were expensed lowering 1996 third quarter earnings.
During 1996 about $13 million in costs to defend against Western Resources'
unsolicited exchange offer were expensed ($5 million during the second quarter
and $8 million during the third quarter).
13. LEGAL PROCEEDINGS
Jack R. Manson (Manson), as a representative of KCPL's shareholders,
alleged in a District Court proceeding, that KCPL and its directors breached
their fiduciary duties in adopting the Amended Merger Agreement with UtiliCorp
(Agreement). Manson also alleged
their actions 1) were illegal, 2) illegally deprived KCPL shareholders of voting
and appraisal rights under Missouri law, and 3) were a disproportionate response
to Western Resources' acquisition offer. Also, on June 7, 1996, Western
Resources and Robert L. Rives each alleged against KCPL in the same court
proceeding, that the Agreement was illegal under Missouri law and the directors
had breached their fiduciary duties by adopting the Agreement.
By order dated November 25, 1996, the District Court allowed Manson to
amend his allegation to allege that the directors breached their fiduciary
duties by refusing to negotiate a merger with Western Resources and committed
reckless, grossly negligent, or negligent waste of corporate assets by pursuing
the merger with UtiliCorp. Manson seeks monetary damages in an unspecified
amount for the waste of corporate assets. KCPL filed a motion on December 9,
1996, to dismiss Manson's amendment; it is currently pending before the District
Court. The Company cannot predict the outcome of these proceedings at this time.
14. SUBSEQUENT EVENTS
In 1997 KLT closed investments totaling nearly $60 million financed
through additional borrowings.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Kansas City Power & Light Company:
We have audited the consolidated financial statements of Kansas City Power
& Light Company and Subsidiary listed in the index on page 43 of this Form 10-K.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kansas City
Power & Light Company and Subsidiary as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
February 14, 1997
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
See General Note to Part III.
Executive Officers
See Part I, page 7, entitled "Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
See General Note to Part III.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
See General Note to Part III.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
GENERAL NOTE TO PART III
Pursuant to General Instruction G to Form 10-K, the other information
required by Part III (Items 10, 11, and 12) of Form 10-K not disclosed above
will be either (i) incorporated by reference to the Definitive Proxy Statement
for KCPL's 1997 Annual Meeting of Shareholders, filed with the Securities and
Exchange Commission not later than April 30, 1997, or (ii) included in an
amendment to this report filed with the Commission on Form 10-K/A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
Page
No.
Financial Statements
a. Consolidated Statements of Income and Consolidated 21
Statements of Retailed Earnings for the years ended
December 31, 1996, 1995, and 1994
b. Consolidated Balance Sheets - December 31, 1996, and 22
c. Consolidated Statements of Cash Flows for the years ended 23
December 31, 1996, 1995, and 1994
d. Consolidated Statements of Capitalization - December 31,
1996 and 1995 24
e. Notes to Consolidated Financial Statements 25
f. Report of Independent Accountants 41
Exhibits
Exhibit
Number Description of Document
2 *Amendment and Plan of Merger (Exhibit (2)-1
to Form 8-K dated February 11, 1997).
3-a *Restated Articles of Consolidation of KCPL
dated as of May 5, 1992 (Exhibit 4 to Registration
Statement, Registration No. 33-54196).
3-b *By-laws of KCPL, as amended and in effect on August 6, 1996 (Exhibit
3(ii) to Form 10-Q dated September 30, 1996).
4-a *General Mortgage and Deed of Trust dated as of December 1, 1986,
between KCPL and UMB Bank, n.a. (formerly United Missouri Bank) of
Kansas City, N.A., Trustee (Exhibit 4-bb to Form 10-K for the year ended
December 31, 1986).
4-b *Third Supplemental Indenture dated as of April 1, 1991, to Indenture
dated as of December 1, 1986 (Exhibit 4-aq to Registration Statement,
Registration No. 33-42187).
4-c *Fourth Supplemental Indenture dated as of February 15, 1992, to
Indenture dated as of December 1, 1986 (Exhibit 4-y to Form 10-K for
year ended December 31, 1991).
4-d *Fifth Supplemental Indenture dated as of September 15, 1992, to
Indenture dated as of December 1, 1986 (Exhibit 4-a to Form 10-Q dated
September 30, 1992).
4-e *Sixth Supplemental Indenture dated as of November 1, 1992, to Indenture
dated as of December 1, 1986 (Exhibit 4-z to Registration Statement,
Registration No. 33-54196).
4-f *Seventh Supplemental Indenture dated as of October 1, 1993, to
Indenture dated as of December 1, 1986 (Exhibit 4-a to Form 10-Q dated
September 30, 1993).
4-g *Eighth Supplemental Indenture dated as of December 1, 1993, to
Indenture dated as of December 1, 1986 (Exhibit 4 to Registration
Statement, Registration No. 33-51799).
4-h *Ninth Supplemental Indenture dated as of February 1, 1994, to Indenture
dated as of December 1, 1986 (Exhibit 4-h to Form 10-K for year ended
December 31, 1993).
4-i *Tenth Supplemental Indenture dated as of November 1, 1994, to Indenture
dated as of December 1, 1986 (Exhibit 4I to Form 10-K for year ended
December 31, 1994).
4-j *Resolution of Board of Directors Establishing
3.80% Cumulative Preferred Stock (Exhibit 2-R to
Registration Statement, Registration No. 2-40239).
4-k *Resolution of Board of Directors Establishing
4% Cumulative Preferred Stock (Exhibit 2-S to
Registration Statement, Registration No. 2-40239).
4-l *Resolution of Board of Directors Establishing
4.50% Cumulative Preferred Stock (Exhibit 2-T to
Registration Statement, Registration No. 2-40239).
4-m *Resolution of Board of Directors Establishing
4.20% Cumulative Preferred Stock (Exhibit 2-U to
Registration Statement, Registration No. 2-40239).
4-n *Resolution of Board of Directors Establishing
4.35% Cumulative Preferred Stock (Exhibit 2-V to
Registration Statement, Registration No. 2-40239).
4-o *Certificate of Designation of Board of Directors Establishing the
$50,000,000 Cumulative No Par Preferred Stock, Auction Series A (Exhibit
4- a to Form 10-Q dated March 31, 1992).
4-p *Indenture for Medium-Term Note Program dated as of April 1, 1991,
between KCPL and The Bank of New York (Exhibit 4-bb to Registration
Statement, Registration No. 33-42187).
4-q *Indenture for Medium-Term Note Program dated as of February 15, 1992,
between KCPL and The Bank of New York (Exhibit 4-bb to Registration
Statement, Registration No. 33-45736).
4-r *Indenture for Medium-Term Note Program dated as of November 15, 1992,
between KCPL and The Bank of New York (Exhibit 4-aa to Registration
Statement, Registration No. 33-54196).
4-s *Indenture for Medium-Term Note Program dated as of November 17, 1994,
between KCPL and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Smith Barney Inc. (Exhibit 4-s to Form 10-K for
year ended December 31, 1994).
4-t Indenture for Medium-Term Note Program
dated as of December 1, 1996, between KCPL and The
Bank of New York. (Exhibit 4 to Registration
Statement, Registration No. 333-17285).
10-a *Copy of Wolf Creek Generating Station Ownership Agreement between
Kansas City Power & Light Company, Kansas Gas and Electric Company and
Kansas Electric Power Cooperative, Inc. (Exhibit 10-d to Form 10-K for
the year ended December 31, 1981).
10-b *Copy of Receivables Purchase Agreement dated as of
September 27, 1989, between KCPL, Commercial
Industrial Trade-Receivables Investment Company and
Citicorp North America, Inc., (Exhibit 10-p to Form
10-K for year ended December 31, 1989).
10-c *Copy of Amendment to Receivables Purchase
Agreement dated as of August 8, 1991, between KCPL, Commercial
Industrial Trade-Receivables Investment Company and Citicorp North
America, Inc. (Exhibit 10-m to Form 10-K for year ended December 31,
1991).
10-d *Long-Term Incentive Plan (Exhibit 28 to
Registration Statement, Registration 33-42187).
10-e Long-and Short-Term Incentive Compensation Plan,
January 1, 1997.
10-f *Copy of Indemnification Agreement entered into by KCPL with each of its
officers and directors. (Exhibit 10-f to Form 10-K for year ended
December 31, 1995).
10-g *Copy of Severance Agreement entered into by KCPL with certain of its
executive officers. (Exhibit 10 to Form 10-Q dated June 30, 1993).
10-h *Copy of Amendment to Severance Agreement dated January 15, 1996,
entered into by KCPL with certain of its executive officers. (Exhibit
10-h to Form 10-K dated December 31, 1995).
10-i Copy of Amendment to Severance Agreement dated January, 1997 entered
into by KCPL with certain of its executive officers.
10-j *Copy of Supplemental Executive Retirement and Deferred Compensation
Plan (Exhibit 10-h to Form 10-K for year ended December 31, 1993).
10-k *Copy of $50 million Letter of Credit and reimbursement agreement dated
as of August 19, 1993, with The Toronto-Dominion Bank (Exhibit 10-i to
Form 10-K for year ended December 31, 1993).
10-l *Copy of $56 million Letter of Credit and Reimbursement Agreement dated
as of August 19, 1993, with Societe Generale, Chicago Branch (Exhibit
10-j to Form 10-K for year ended December 31, 1993).
10-m *Copy of $50 million Letter of Credit and Reimbursement Agreement dated
as of August 19, 1993, with The Toronto-Dominion Bank (Exhibit 10-k to
Form 10-K for year ended December 31, 1993).
10-n *Copy of $40 million Letter of Credit and Reimbursement Agreement dated
as of August 19, 1993, with Deutsche Bank AG, acting through its New
York and Cayman Islands Branches (Exhibit 10-l to Form 10-K for year
ended December 31, 1993).
10-o *Copy of Railcar Lease dated as of April 15, 1994, between Shawmut Bank
Connecticut, National Association, and KCPL (Exhibit 10 to Form 10-Q for
period ended June 30, 1994).
10-p *Copy of Amendment No. 2 to Receivables Purchase
Agreement between KCPL and Ciesco L.P. and Citicorp
North America, Inc. (Exhibit 10 to Form 10-Q for
period ended September 30, 1994).
10-q *Copy of Railcar Lease dated as of January 31, 1995, between First
Security Bank of Utah, National Association, and KCPL (Exhibit 10-o to
Form 10-K for year ended December 31, 1994).
10-r *Copy of Lease Agreement dated as of October 18, 1995, between First
Security Bank of Utah, N.A., and KCPL (Exhibit 10 to Form 10-Q for
period ended September 30, 1995).
12 Computation of Ratios of Earnings to Fixed
Charges.
23-a Consent of Counsel.
23-b Consent of Independent Accountants--Coopers &
Lybrand L.L.P.
24 Powers of Attorney.
27 Financial Data Schedules (filed electronically).
* Filed with the Securities and Exchange Commission as exhibits to prior
registration statements (except as otherwise noted) and are incorporated herein
by reference and made a part hereof. The exhibit number and file number of the
documents so filed, and incorporated herein by reference, are stated in
parenthesis in the description of such exhibit.
Copies of any of the exhibits filed with the Securities and Exchange
Commission in connection with this document may be obtained from KCPL upon
written request.
Reports on Form 8-K
No report on Form 8-K was filed in the last quarter of 1996; however, a
report on Form 8-K was filed with the Securities and Exchange Commission on
February 11, 1997, with attached copy of the Agreement and Plan of Merger dated
as of February 7, 1997, by and among KCPL and Western Resources, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Kansas
City, and State of Missouri on the 17th day of March, 1997.
KANSAS CITY POWER & LIGHT COMPANY
By /s/Drue Jennings
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates
indicated.
Signature Title Date
Chairman of the Board and )
/s/ Drue Jennings President (Principal )
(Drue Jennings) Executive Officer) )
)
Executive Vice President-Chief )
/s/ Bernard J. Beaudoin Financial Officer (Principal )
(Bernard J. Beaudoin) Financial Officer) )
)
/s/ Neil A. Roadman Controller (Principal )
(Neil A. Roadman) Accounting Officer) )
)
David L. Bodde* Director )
)
William H. Clark* Director ) March 17,1997
)
Robert J. Dineen* Director )
)
Arthur J. Doyle* Director )
)
W. Thomas Grant II* Director )
)
George E. Nettels, Jr.* Director )
)
Linda Hood Talbott* Director )
)
Robert H. West* Director )
)
*By /s/ Drue Jennings
(Drue Jennings)
Attorney-in-Fact