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Financial News

Fortnightly Magazine - June 15 1996

no doubt lead to financial distress for some utilities; investors may find this a greater risk for investors than exposure to stranded investment. t

Charles M. Studness is a contributing editor of PUBLIC UTILITIES FORTNIGHTLY. Dr. Studness has a PhD in

economics from Columbia University, and specializes in economics and financial research on electric utilities.

Governor Joins Hostilities

On April 14, Western Resources, Inc. (WR) made an unsolicited offer to buy Kansas City Power & Light Co. (KCPL). If approved, the offer would derail the planned merger of KCPL with UtiliCorp United. The KCPL board of directors unanimously spurned the bid.

A letter from WR chairman and CEO John E. Hayes, Jr. to Drue Jennings, KCPL chairman and CEO, projects over 1 billion in cost savings during the first 10 years (em 64 percent greater than estimates under the proposed KCPL/UU merger. Hayes attributed the larger savings to efficiencies due to overlapping service territories and $2 billion of plant under common ownership.

At an April 22 news conference, Jennings strongly disagreed with WR's savings estimates, calling the WR proposal a "brazen, desperate, eleventh-hour attempt" to derail what will become a formidable competitor. UtiliCorp United chairman and CEO Richard C. Green, Jr. has also reaffirmed his company's commitment to the proposed merger with KCPL.

On May 16, Gov. Mel Carnahan of Missouri weighed in: "I believe the strategic merger of [KCPL and UU] will result in a situation that is in the best interest of the State of Missouri."

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