-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IwYp9UeEE7Rzrawqs82QkYxFB8L2gLbPZfa09D+cUSeYMmBHs1WaON2Nn57MGGhv j4nJyQ4ZgfFO+Q2LZjsuXQ== 0000054476-96-000052.txt : 19960703 0000054476-96-000052.hdr.sgml : 19960703 ACCESSION NUMBER: 0000054476-96-000052 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960702 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KANSAS CITY POWER & LIGHT CO CENTRAL INDEX KEY: 0000054476 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 440308720 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-00707 FILM NUMBER: 96589966 BUSINESS ADDRESS: STREET 1: 1201 BALTIMORE AVE CITY: KANSAS CITY STATE: MO ZIP: 64106 BUSINESS PHONE: 8165562200 MAIL ADDRESS: STREET 1: PO BOX 418679 CITY: KANSAS CITY STATE: MO ZIP: 64141-9679 DEFA14A 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [X] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12 KANSAS CITY POWER & LIGHT COMPANY (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Payment of Filing Fee (Check the appropriate box): [ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [X] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: #### [KCPL Logo] [UtiliCorp United EnergyOne Logo] A GUIDE TO THE MERGER TABLE OF CONTENTS Western Resources' Proposal.............................................p 4 KCPL/UtiliCorp Merger...................................................p 17 Merger Benefits.........................................................p 29 Our Belief as to Potential Value of Maxim Energies......................p 39 2 CERTAIN FORWARD-LOOKING INFORMATION This presentation contains certain forward-looking information. The Private Securities Litigation Reform Act of 1995 provides a new "safe harbor" for forward-looking information to encourage companies to provide prospective information about their companies without fear of litigation so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. KCPL and UCU identify the following important factors which could cause KCPL's, UCU's and Maxim's actual results to differ materially from any such results which might be projected, forecast, estimated or budgeted by KCPL, UCU or Maxim in forward-looking information. All of such factors are difficult to predict and many of which are beyond the control of KCPL and UCU. Accordingly, while KCPL and UCU believe that the assumptions underlying the forward-looking information are reasonable for purposes of the development of estimates of revenue enhancements and cost savings, there can be no assurances that such assumptions will approximate actual experience or that all such revenue enhancements and cost savings will be realized, or that resulting beliefs as to potential stock values will prove to be correct, and in such event, actual results could differ materially from the predictions herein. These important factors include: (a) future economic conditions in the regional, national and international markets in which KCPL and UCU compete; (b) state, federal and foreign regulation, including limitations on the amount of synergies Maxim will be able to keep and possible additional reductions in regulated gas and electric rates; (c) weather conditions; (d) financial market conditions, including, but not limited to, the deregulation of the United States electric utility industry, and the entry of new competitors; (g) the ability to carry out marketing and sales plans; (h) the ability to eliminate duplicative administrative functions; (i) the ability to achieve generation planning goals and the occurrence of unplanned generation outages; (j) the ability to degree or eliminate certain capital investments which KCPL and UCU would have to make as separate companies; (k) the ability to enter new markets successfully and capitalize on growth opportunities in non-regulated businesses; and (l) adverse changes in applicable laws, regulations or rules governing environmental, tax or accounting matters. The following materials contain certain statements of opinion and belief. 3 WESTERN RESOURCES' PROPOSAL 4 WHY KCPL REJECTED THE WESTERN PROPOSAL: - - KCPL believes the Western proposal is based on faulty synergies and savings retention assumptions and therefore is not credible See pages 6-7, 10 and 14 - - Potential significant rate reductions for Western could adversely impact Western's stock price and ability to deliver promised dividends See pages 11 through 13 - - Rate disparity between KGE/KPL customers See page 11 - - Western has stated that no layoffs would result from its offer but its synergy analysis filed with the KCC indicates 531 reductions and assumes savings available by January 1, 1998 - - As a result of its acquisition adjustment of KGE, Western must amortize the $801 million acquisition adjustment at the rate of approximately $20 million per year over 40 years - - KCPL believes a KCPL/Western merger would create a company ill-suited for industry's future See page 15 - - Concentrated Wolf Creek asset = concentrated business risk (KCPL owns 47% of the Wolf Creek nuclear plant, and a combined KCPL/Western entity would own 94% of Wolf Creek.) See page 24 for reduced business risk with UtiliCorp See pages 43-45 of the Joint Proxy Statement/Prospectus 5 KCPL believes WR used faulty assumptions OUR VIEWS ON WESTERN'S SYNERGIES ANALYSIS Western's synergy analysis is set forth in a report filed with the Kansas Corporation Commission dated April 1996 and entitled "Project Royal". KCPL analyzed this report and found that such report used public data regarding KCPL and made certain assumptions regarding KCPL. Based on a more complete understanding of its own business, KCPL formed certain beliefs as to inaccuracies in Western's analysis. Such beliefs are summarized below. Estimated Overstatement Savings Category ($MM) Comments __________________ __________ _________________________________ - - Procurement [$150] -Overstated due to universe of Savings materials upon which savings are calculated and discount rate applied (e.g., universe includes generation and small volume items) -Forecasts not based on any transaction-specific data, but on claimed experience in prior transactions. -FERC has criticized similar projections by Western's consultant as "unsubstantiated". -Difference between Western's and KCP&L's/UCU's procurement estimates accounts for nearly half of the difference in total cost savings estimates. - - Labor -Irrelevant and [$110] -Relied on previous studies and statistically assumptions unrelated to actual invalid benchmarks KCPL data -Salary and benefits [$27] -Assumed a 34% benefit rate for calculations KCP&L (KCP&L rate is 26%). -Aggressive salary and benefits escalation (KCP&L believes 3.5% is the rate which Deloitte and Touche generally uses). -Implementation of [$43] -Assumes implementation of all synergies synergies on January 1, 1998. -Projected force reduction and timing reduction contradicts "no layoff statement." - - Customer Information [$100] -Ignored actual KCPL MIS costs Systems and Data and configuration. Center Operation Costs - - Transaction [$88] -Left out of calculation. Costs ________ TOTAL [$518] OVERSTATEMENT 6 KCPL believes WR used faulty assumptions COMPARISON OF CLAIMED SYNERGIES IN RECENT UTILITY MERGERS In Descending Order by Estimated Cost Savings as a Percent of Combined Revenues Estimated Cost Savings: As a Percent of Combined: __________________________ _________________________ Aggregate # of Per Year Pre-Tax ($MM) Years ($MM) Revenues O&M Income ________ _____ ________ ________ ___ _______ PSI $1,500 10 $150 5.7% 9.3% 34.4% Resources/ Cinn. G&E Wisconsin $2,000 10 $200 4.8% 7.9% 27.3% Energy/ Northern States Power KCP&L/WESTERN $1,000 10 $100 4.0% 7.1% 22.6% RESOURCES Sierra $450 10 $45 3.9% 6.2% 22.1% Pacific Res./Wash. Water Power IES/ $700 10 $70 3.5% 5.4% 27.0% Interstate/ WPL Gulf $1,700 10 $170 3.0% 5.4% 18.4% States/ Entergy Potomac $1,300 10 $130 2.7% 4.8% 17.5% Electric/ Baltimore G&E Southwestern $770 10 $77 2.7% 3.9% 21.6% P.S./P.S.Co. of Colorado Iowa-Illinois $400 10 $40 2.6% 3.9% 18.5% G&E/Midwest Resources Washington $370 10 $37 2.3% 3.8% 22.3% Energy/Puget Sound P&L CIPSCO/Union $570 10 $57 1.8% 3.4% 9.0% Electric Kansas $140 5 $28 1.7% 2.6% 18.7% G&E/ Kansas P&L UTILICORP/ KCP&L $600 10 $60 1.6% 2.1% 19.1% Source: As disclosed in merger proxies for respective transactions. 7 ANALYSIS OF COLLAR [Graph] Market Value of WR Stock/KCPL Share - - Price 6-14-96 $28 3/4 - - KCPL shareholders would receive a maximum of 1.1 WR shares - - Participate in downside if WR stock price falls below $28.18 - - KCPL shareholders would receive a minimum of 0.933 WR Share - - Participate in upside only if WR stock price rises above $33.23 8 ANALYSIS OF COLLAR [Graph] Dividend of WR Stock/KCPL Shares - - Price 6-14-96 $28 3/4 - - KCPL shareholders would receive a maximum of 1.1 WR shares - - Receive maximum dividends of $2.35 per KCPL share - - KCPL shareholders would receive a minimum of 0.933 WR share - - Receive minimum dividends of $2.00 per KCPL share 9 KCPL believes WR used faulty assumptions KCPL BELIEVES WESTERN'S CLAIM OF RETAINING 70% OF SYNERGIES IS UNREALISTIC - - Implicit assumption in KCC filing that Western would be allowed to retain 70% of the synergy savings - - This is inconsistent with applicable precedent (50%) - KCC, in order authorizing KGE merger, required merger savings (above acquisition adjustment, not applicable to Western's proposal to KCPL) to be shared 50/50 between customers and stockholders - Missouri Public Service Commission (MPSC) Staff is recommending an equal sharing of merger savings in the UEP/CIPSCO merger 10 Potential for significant rate reductions WE BELIEVE WESTERN FACES SIGNIFICANT RATE REDUCTIONS - - The Kansas Corporation Commission (KCC) order approving the Kansas Power & Light/Kansas Gas & Electric merger requires 50/50 sharing of merger benefits (after recovery of a portion of a booked acquisition premium which is not relevant to Western's proposal to merge with KCPL). - - KCPL believes Western's rate levels now ripe for downward adjustment - Western's base rates not adjusted (so far) to reflect the KGE/KPL merger savings John Hayes claimed in his April 14 letter to Drue Jennings - Western has implicitly admitted overearnings of $58.7 million ($8.7MM interim KGE rate reduction, $50 MM accelerated depreciation requested for Wolf Creek) - - The Mayor of Wichita in May 22 testimony before the KCC has called for significant KGE rate reductions to eliminate the more than 40% rate disparity he claims exists between KGE and KPL. (KCC Staff testimony indicates that eliminating the difference would cost Western approximately $171 million per year.) - - KCC Staff has indicated that its recommended rate reduction (see page 12) could be applied entirely to KGE to address the rate disparity issue 11 Potential for significant rate reductions WE BELIEVE WESTERN CANNOT AVOID THESE SIGNIFICANT RATE REDUCTIONS - - In 1995, Western filed for $50 million accelerated depreciation on Wolf Creek, but at KCC Staff's request KCC turns proceeding into general cost-of-service review - - KCC Staff and CURB filed cost of service studies supporting large rate decrease recommendations. (CURB, Citizen's Utility Ratepayer Board, is an organization created by Kansas statute to represent consumers' interests in public utility matters.) - KCC Staff - $105 million, after accounting for all of Western's cost of providing electric service and incorporating Staff's calculation of the ratepayer share of KGE/KPL merger savings - CURB - $87 million, after accounting for only certain of Western's costs of providing electric service - - Western requested KCC to combine these rate reduction proposals with its request for approval of proposed merger with KCPL - Western's request for consolidation of these matters pointed to the KCPL merger as the source of funds for KGE rate reductions above $8.7 million - - KCC rejected Western's consolidation request - Issued June 14 order separating rate review proceeding from merger docket - - Rate reduction hearing set for Sept 30, 1996 - - We feel the larger rate reductions imperil Western's stock price and its ability to deliver promised dividends (See page 13) 12 The following is not a prediction as to specific future market values and should be read in conduction with page 3 hereof. Specific future market values cannot be predicted with certainty Potential for significant rate reductions We Believe Western Rate Reductions Will Result in Lower Values for Shareholders Incremental Annual $8.7MM $58.7MM Rate Reductions Rate Red/ Reduction/ Above WR Proposal $50MM No Depr ____________________ Rate Case Scenarios: Depr Inc* Inc** $20MM $46.3MM*** ____________________ ________ ________ _______ _______ Pro forma 1998 EPS $2.45(1) $2.45(1) $2.36 $2.24 Less: Synergy 0.11 0.11 0.11 adjustment-See _____ _____ _____ page 14 Adjusted pro forma $2.34 $2.25 $2.13 1998 EPS Cash flow impact ($44MM) ($56MM) ($72MM) Combined dividend 87.3% 91.5% 95.1% 100.5% payout(2) Western stock $28.75(1) price Implied P/E ratio 11.7(3) Implied WR price $27.38 $26.33 $24.92 at P/E of 11.7 Implied KCPL share $31.00(1) $30.12 $28.96 $27.41 value (1) As reported in Amendment No. 1 to S-4 dated June 19, 1996 filed by Western with the SEC; EPS based on WR stock price of $28.75 on June 14, 1996 resulting in exchange ratio of 1.07826 (2) Using $2.14 dividend rate reported in Amendment No. 1 to Western S-4 (3) $28.75/$2.45 *As filed with the KCC in the WR stand-alone regulatory plan. Assumes an $8.7 MM electric rate reduction and $50MM accelerated depreciation **Assumes no accelerated depreciation. Assumes all of $58.7MM is applied to reducing electric rates ***$105 million KCC Staff recommendation. 13 WE BELIEVE WESTERN OVERSTATED SYNERGY SAVINGS Western first year claimed savings $70,421 (1) Percentage reduction X 1/3% (2) _______ Adjustment to Western's synergies 23,474 Tax affect (1-40%) X .60 _______ After-tax adjustment $14,084 Shares outstanding 132,223 (1) EPS adjustment for overstated savings $0.11 Note: Adjustment to Western's synergies results in first year savings of approximately $47 million ($70,421-$23,474) compared to KCPL/UCU first year savings of approximately $35 million (See "The Merger -- Synergies From the Merger, -- Summary of Additional Operational Benefits" on page 52-56 of the Joint Proxy Statement/Prospectus (1) As reported in Amendment No. 1 to S-4 dated June 19, 1996 filed by Western with the SEC (2) See page 6 for our views on Western's synergies analysis -- we believe Western's synergies could be overstated by as much as approximately 50%. 14 KCPL believes Western is an ill-suited merger partner COMPARATIVE PROFILES OF UTILICORP AND WESTERN UTILICORP WESTERN _________________________ _____________________ Geographic Anchored in suburban Concentrated in eastern Diversification: and rural western and central Kansas Missouri; 9 gas and electric divisions in 8 states acquired over the past 10 years. Foreign Majority ownership None Utility and control of distribution Operations: utilities in Australia and New Zealand. IPP Business: Equity investments Acquired the Wing Group, in 19 IPPs in the with options to buy into U.S. and Jamaica; overseas projects; no business plan near equity in any operating completion for (foreign) power projects. assessing IPP investments in 11 foreign countries. Energy EnergyOne - national Modest gas marketing Marketing: brand name for operation established in energy services; one 1995; applied for FERC of the 10 largest electric marketing gas marketers in the license. U.S. - in operation for 10 years; received FERC license for electric marketing; gas marketing in U.K. Customer Joint venture with Planned pilot program for Centered Novell to deploy in- 32,000 drive-by meters; Technology home and in-business passive investment in ADT energy management Ltd. LANs. 15 CONDITIONS TO WESTERN'S EXCHANGE OFFER - - Western can amend the terms or terminate transaction any time prior to closing in late 1998 - - 90% of KCPL shares must be tendered - - Exchange offer must receive pooling of interests treatment; but the exchange offer will permit participants in KCPL's Long Term Incentive Plan to receive cash payments in lieu of securities that are essentially the same as common stock, violating paragraph 47 (b) of opinion 16 of the Accounting Principles Board and thereby prohibiting pooling of interests 16 KCPL/UTILICORP MERGER 17 TWO DISTINCT COMPANIES [Pie Chart] [Pie Chart] KCPL UTILICORP Regulated 100% Regulated 43% Non-Regulated 0% Non-Regulated 57% ONE UNIQUE VISION [Pie Chart] MAXIM ENERGIES Regulated 56% Non-Regulated 44% 18 Strategic Merger - - KCPL and UCU believe that merger blends the best of two worlds: - a conservatively managed, well-capitalized financial position, coupled with an aggressive strategy for growth - - We believe the merged company will have rare combination of marketing and entrepreneurial skills 19 COMPLEMENTARY STRENGTHS The combined company will match KCPL's experience and strength in regulated businesses with UtiliCorp's experience and strength in unregulated businesses - - The KCPL/UtiliCorp vision is to be a full participant in the global energy marketplace, adding diversified products and services, entering new markets, and growing shareholder value - - Revenue diversity through investment in non-regulated businesses - - EnergyOne provides energy solutions to over 125 of the Fortune 500 20 OUR VISION FOR MAXIM ENERGIES - - 10 years experience operating competitive non-regulated businesses - - Diverse products, territories, asset base and generating mix - - 10 years investment in growth - $3 billion - - Recognized leader in fuel procurement and generating technology - - Top 10 in power marketing - - Top 10 in gas wholesaling - - Top level of employee ownership - - Chairman and CEO combined experience - over 40 years 21 NORTH AMERICA [Map of North America showing the areas and locations of KCPL and UtiliCorp operations] 22 COMBINED FINANCIALS (Based on year end 1995 - pro forma) millions UCU KCPL Maxim Energies - -Revenues $2,798 $886 $3,684 - -Operating income $225 $244 $469 - -Earnings available $78 $119 $196 - -10-yr total return* 298% 373% - -Total assets $3,886 $2,882 $6,768 *Industry average -- 211% 23 WE BELIEVE THE KCPL/UCU MERGER WILL REDUCE BUSINESS RISK FOR KCPL TYPE OF BUSINESS RISK CHANGE Asset Concentration (Nuclear) -Nuclear Asset Concentration Reduced -45% net plant to 26% net plant -119% of equity to 58% of equity Energy Product Concentration -Adds gas product to electric product -Adds gas distribution to total electric distribution -0% gas revenue to 25% of total revenue Service Territory/Geographic/ -Adds six states, British Columbia, New Customer Concentration Zealand and Australia to Regulated Service Territories -Adds 2 million customers to existing 430,000 -Indirectly reaches over 22 million customers considering non-regulated operations -Climate diversity Regulatory Concentration -Diversifies Regulatory risk by adding seven (7) regulatory jurisdictions 24 WE BELIEVE THAT THE KCPL/UCU MERGER WILL BENEFIT STAKEHOLDERS -- SHAREHOLDERS - - STRONG POTENTIAL FOR EARNINGS GROWTH See " Earnings Growth Strategies" on pages 31 through 38 - - INCREASE OVER KCPL DIVIDEND See "Maxim Energies dividend" on page 27 CUSTOMERS - - RANGE OF ENERGY PRODUCTS AND SERVICES - - IMMEDIATE REDUCTIONS IN RETAIL ELECTRIC RATES; SHARED SAVINGS - - 5-YEAR PERIOD OF RATE STABILITY 25 WE BELIEVE THAT THE KCPL/UCU MERGER WILL BENEFIT STAKEHOLDERS -- EMPLOYEES - - Part of a stronger, growth-oriented company - - Expanded career opportunities with multinational reach - - Opportunity to own stock in a competitive, national energy company COMMUNITIES - - Stronger voice in national policy debates - - Greater ability to attract new business - - Enhanced community involvement and support - - Support from Missouri Governor and KC Mayor 26 MAXIM ENERGIES' DIVIDEND - - Initial annualized dividend rate of $1.85 - - Represents 18.6% increase for KCPL shareholders over current KCPL annual dividend of $1.56 - - Confirmation of our belief in strong growth potential - - First year ratio of dividends paid to Maxim's earnings of 73 percent based on $1.85 annual dividend and estimates of combined company's earnings See Our Belief as to Potential Value of Maxim Energies on page 40 - - Platform for continued dividend growth 27 TERMS OF REVISED MERGER - - UtiliCorp shareholders receive one share in the merged company for each UtiliCorp share owned - - KCPL shareholders would continue to hold their existing KCPL shares - - Enhanced value for KCPL shareholders - KCPL shareholders will own 57% of Maxim based on capitalization of KCPL and UCU on execution date of the revised merger agreement compared to 55% under the original merger agreement - - Regulatory filings on track - - Requires approval of majority of KCPL shares voted on the merger 28 MERGER BENEFITS 29 HISTORICAL GROWTH IN SHAREHOLDER VALUE KCPL UCU Util Index 1986 1,335.4 1,539.4 1,317.5 1987 1,289.8 1,205.2 1,196.6 1988 1,752.1 1,665.5 1,415.3 1989 2,100.5 2,107.3 1,788.4 1990 2,296.2 2,091.5 1,773.2 1991 3,298.8 3,093.7 2,283.5 1992 3,377.9 3,162.0 2,486.7 1993 3,625.6 3,819.7 2,718.2 1994 3,953.3 3,392.7 2,430.1 1995 4,732.9 3,981.0 3,109.8 10 Yr. Avg. Annual Returns _________________________________ KCPL UCU D&P Index _____ _____ _____ 17.7% 17.3% 13.1% Utility Index represents Duff & Phelps (D&P) Electric Utility Index 30 EARNINGS GROWTH STRATEGIES OVERVIEW We believe that a KCPL/UCU combination -- - - Is a forward-looking transaction that positions Maxim Energies to successfully compete in a deregulated environment - - Will create a formidable competitor in the evolving energy services industry - - Will provide opportunities for significant earnings growth in three areas: - Synergy savings - Additional operational benefits - Enhancement of financial performance 31 SYNERGY SAVINGS - - $606 million net in pretax synergy savings over 10 years - - Ernst & Young study for regulatory filings [Pie Chart] ($ in millions) $315 Generate Electricity $ 32 Distribute and Transport Energy $113 Information Technology $ 51 Purchasing/Materials & Facilities $ 30 Fleet & Facilities $ 65 Executive and Adm Support See "The Merger -- Synergies From the Merger" on page 52-55 of the Joint Proxy Statement/Prospectus 32 WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ADDITIONAL OPERATIONAL BENEFITS - - Additional savings identified after regulatory filings and announcement of merger in January - - Anticipate updated regulatory filings and sharing of savings between shareholders and customers - - Yearly pre-tax savings ranging from $12 million to $16 million over next four years - System dispatch - Non-generating small stock purchases - Combined purchases of technical information - Internalization of certain legal and regulatory services See "The Merger -- Additional Operational Benefits" on page 55-56 of the Joint Proxy Statement/Prospectus 33 WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ENHANCEMENT OF FINANCIAL PERFORMANCE - - We believe that the KCPL/UCU merger provides significant opportunities for growth in three areas - International - Energy Marketing - New Products - - Palmer Bellevue practice of Coopers & Lybrand Consulting facilitated management analyses See "The Merger -- Enhancement of Financial Performance" on page 56-59 of the Joint Proxy Statement/Prospectus 34 WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ENHANCEMENT OF FINANCIAL PERFORMANCE -- INTERNATIONAL - - Strategic focal points: rapidly developing overseas opportunities in utility acquisitions and privatizations as well as power plant development - - Combine UCU's investment and operating experience in United Kingdom, New Zealand and Australia with KLT's penetration in China and KCPL's technical/operational expertise and financial strength - - Anticipated improvements in operational efficiencies from these investments expected to produce yearly incremental pre- tax income ranging from $16 to $30 million over the next four years See "The Merger -- Enhancement of Financial Performance" on page 56-59 of the Joint Proxy Statement/Prospectus 35 WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ENHANCEMENT OF FINANCIAL PERFORMANCE -- ENERGY MARKETING - - Growth opportunities through combining KCPL's low variable cost wholesale position and financial strength with UCU's pioneer status in gas and electric marketing - - Increased focus on energy marketing is expected to produce yearly pre-tax income ranging from $7 million to $10 million over the next four years See "The Merger -- Enhancement of Financial Performance" on page 56-59 of the Joint Proxy Statement/Prospectus 36 WE BELIEVE THE KCPL/UCU MERGER WILL RESULT IN ENHANCEMENT OF FINANCIAL PERFORMANCE -- NEW PRODUCTS - - Both KCPL and UCU are expanding customer relationships by offering value-added services: - EnergyOne - Novell - CellNet - Electronic home security, appliance warranty service and leasing of fiber optic capacity - - Yearly pre-tax income from new products and services is expected to range from $7 million to $19 million over the first four years - - EnergyOne is expected to contribute approximately $2 million in pre-tax earnings in the first year growing to $30 million by year four See "The Merger -- Enhancement of Financial Performance" on page 56-59 of the Joint Proxy Statement/Prospectus 37 SUMMARY OF SYNERGIES FROM THE MERGER, ADDITIONAL OPERATIONAL BENEFITS AND ENHANCEMENT OF FINANCIAL PERFORMANCE Year 1 Year 2 Year 3 Year 4 (Per Share) Synergy Savings $0.10 $0.16 $0.22 $0.25 _________________________________ Additional Operating Benefits $0.08 $0.08 $0.07 $0.06 _________________________________ Enhancement of Financial Performance $0.20 $0.25 $0.35 $0.44 _________________________________ Aggregate Added Value $0.38 $0.49 $0.64 $0.75 ================================= Note: Per share data does not reflect allocation of savings between stockholders and customers See page 40 for impact on Maxim Energies' earnings per share projections See "The Merger -- Synergies From the Merger, -- Additional Operational Benefits, -- Enhancement of Financial Performance" on page 52-59 of the Joint Proxy Statement/Prospectus 38 OUR BELIEF AS TO POTENTIAL VALUE OF MAXIM ENERGIES 39 OUR BELIEF AS TO POTENTIAL VALUE OF MAXIM ENERGIES 1998 1999 2000 _____ _____ _____ UCU stand alone EPS* $2.39 $2.51 $2.64 KCPL stand alone EPS* 2.13 2.20 2.27 Maxim Energies EPS without synergies 2.25 2.35 2.45 E&Y synergies - see page 38** 0.05 0.08 0.11 Additional operational benefits - - see page 38** 0.04 0.04 0.04 Enhancement of financial performance - see page 38 0.20 0.25 0.35 _____ _____ _____ Total Maxim Energies' EPS potential $2.54 $2.72 $2.95 P/E ratio - see page 41 12.5 to 13 IMPLIED 1997 MAXIM SHARE PRICE $31.75 TO $33/SHARE Maxim Energies dividend $1.85 $1.90 $1.95 Payout ratio 73% 70% 66% * Using Institutional Broker Estimating System (IBES) estimates ** Assumes 50% retention The foregoing is not a prediction as to specific future market values and should be read in conjunction with page 3 hereof. Specific future market values cannot be predicted with certainty 40 PRICE/EARNINGS RATIO COMPARISON BASED ON YEAR-END CLOSING STOCK PRICES KLT UCU WR ___ ___ ___ 1995 13.7 17.1 12.3 1994 12.6 12.7 10.2 1993 13.9 16.3 12.6 1992 16.9 20.9 14.3 1991 15.0 12.0 11.8 1990 11.3 11.5 9.4 1989 10.6 12.0 12.1 1988 9.8 9.8 10.2 1987 8.3 8.6 9.2 1986 10.0 11.4 11.2 10 yr avg 12.2 13.2 11.3 Avg KLT/UCU 12.7 Avg KLT/WR 11.7 41 -----END PRIVACY-ENHANCED MESSAGE-----