XNYS:GXP Great Plains Energy Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______to_______

   
Exact name of registrant as specified in its charter,
   
Commission
 
state of incorporation, address of principal
 
I.R.S. Employer
File Number
 
executive offices and telephone number
 
Identification Number
         
001-32206
 
GREAT PLAINS ENERGY INCORPORATED
 
43-1916803
   
(A Missouri Corporation)
   
   
1200 Main Street
   
   
Kansas City, Missouri  64105
   
   
(816) 556-2200
   
         
000-51873
 
KANSAS CITY POWER & LIGHT COMPANY
 
44-0308720
   
(A Missouri Corporation)
   
   
1200 Main Street
   
   
Kansas City, Missouri  64105
   
   
(816) 556-2200
   

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
X
No
_
   
                         
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
X
No
_
   
                         
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
             
Great Plains Energy Incorporated
Large accelerated filer
  X
Accelerated filer
  _
     
 
Non-accelerated filer
  _
Smaller reporting company
  _
     
Kansas City Power & Light Company
Large accelerated filer
  _
Accelerated filer
  _
     
 
Non-accelerated filer
  X
Smaller reporting company
  _
     
                               
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Great Plains Energy Incorporated
Yes
_
No
X
 
Kansas City Power & Light Company
Yes
_
No
X
   
                               
On April 30, 2012, Great Plains Energy Incorporated had 136,310,442 shares of common stock outstanding.  On April 30, 2012,
Kansas City Power & Light Company had one share of common stock outstanding and held by Great Plains Energy Incorporated.
 
Kansas City Power & Light Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is
therefore filing this Form 10-Q with the reduced disclosure format.
 
 
 
 
This combined Quarterly Report on Form 10-Q is being filed by Great Plains Energy Incorporated (Great Plains Energy) and Kansas City Power & Light Company (KCP&L).  KCP&L is a wholly owned subsidiary of Great Plains Energy and represents a significant portion of its assets, liabilities, revenues, expenses and operations.  Thus, all information contained in this report relates to, and is filed by, Great Plains Energy.  Information that is specifically identified in this report as relating solely to Great Plains Energy, such as its financial statements and all information relating to Great Plains Energy’s other operations, businesses and subsidiaries, including KCP&L Greater Missouri Operations Company (GMO), does not relate to, and is not filed by, KCP&L.  KCP&L makes no representation as to that information.  Neither Great Plains Energy nor its other subsidiaries have any obligation in respect of KCP&L’s debt securities and holders of such securities should not consider Great Plains Energy’s or its other subsidiaries’ financial resources or results of operations in making a decision with respect to KCP&L’s debt securities.  Similarly, KCP&L has no obligation in respect of securities of Great Plains Energy or its other subsidiaries.

This report should be read in its entirety.  No one section of the report deals with all aspects of the subject matter.  It should be read in conjunction with the consolidated financial statements and related notes and with the management’s discussion and analysis included in the 2011 Form 10-K for each of Great Plains Energy and KCP&L.

CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION
Statements made in this report that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made.  Forward-looking statements include, but are not limited to, the outcome of regulatory proceedings, cost estimates of capital projects and other matters affecting future operations.  In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and KCP&L are providing a number of important factors that could cause actual results to differ materially from the provided forward-looking information.  These important factors include: future economic conditions in regional, national and international markets and their effects on sales, prices and costs, including, but not limited to, possible further deterioration in economic conditions and the timing and extent of economic recovery; prices and availability of electricity in regional and national wholesale markets; market perception of the energy industry, Great Plains Energy and KCP&L; changes in business strategy, operations or development plans; effects of current or proposed state and federal legislative and regulatory actions or developments, including, but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates the Companies can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices governing tax, accounting and environmental matters including, but not limited to, air and water quality; financial market conditions and performance including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital and the effects on nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of terrorist acts, including, but not limited to, cyber terrorism; ability to carry out marketing and sales plans; weather conditions including, but not limited to, weather-related damage and their effects on sales, prices and costs; cost, availability, quality and deliverability of fuel; the inherent uncertainties in estimating the effects of weather, economic conditions and other factors on customer consumption and financial results; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of generation, transmission, distribution or other projects; the inherent risks associated with the ownership and operation of a nuclear facility including, but not limited to, environmental, health, safety, regulatory and financial risks; workforce risks, including, but not limited to, increased costs of retirement, health care and other benefits; and other risks and uncertainties.
 
This list of factors is not all-inclusive because it is not possible to predict all factors.  Part II Item 1A Risk Factors included in this report, together with the risk factors included in the 2011 Form 10-K for each of Great Plains Energy and KCP&L under Part I Item 1A, should be carefully read for further understanding of potential risks for each of Great Plains Energy and KCP&L.  Other sections of this report and other periodic reports filed by each of
 
2
 
 
Great Plains Energy and KCP&L with the Securities and Exchange Commission (SEC) should also be read for more information regarding risk factors.  Each forward-looking statement speaks only as of the date of the particular statement.  Great Plains Energy and KCP&L undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
 
GLOSSARY OF TERMS
 
The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.
 
Abbreviation or Acronym
 
Definition
     
AFUDC
 
Allowance for Funds Used During Construction
ARO
 
Asset Retirement Obligation
BART
 
Best available retrofit technology
Board
 
Great Plains Energy Board of Directors
CAIR
 
Clean Air Interstate Rule
CAMR
 
Clean Air Mercury Rule
Clean Air Act
 
Clean Air Act Amendments of 1990
CO2
 
Carbon dioxide
Collaboration Agreement
 
Agreement among KCP&L, the Sierra Club and the Concerned
   Citizens of Platte County
Company
 
Great Plains Energy Incorporated and its subsidiaries
Companies
 
Great Plains Energy Incorporated and its consolidated subsidiaries and
   KCP&L and its consolidated subsidiaries
CSAPR
 
Cross-State Air Pollution Rule
DOE
 
Department of Energy
EBITDA
 
Earnings before interest, income taxes, depreciation and amortization
ECA
 
Energy Cost Adjustment
EGU
 
Electric steam generating unit
EIRR
 
Environmental Improvement Revenue Refunding
EPA
 
Environmental Protection Agency
EPS
 
Earnings per common share
ERISA
 
Employee Retirement Income Security Act of 1974, as amended
FAC
 
Fuel Adjustment Clause
FERC
 
The Federal Energy Regulatory Commission
GAAP
 
Generally Accepted Accounting Principles
GMO
 
KCP&L Greater Missouri Operations Company, a wholly owned subsidiary of Great Plains Energy
Great Plains Energy
 
Great Plains Energy Incorporated and its subsidiaries
ISO
 
Independent System Operator
KCC
 
The State Corporation Commission of the State of Kansas
KCP&L
 
 
Kansas City Power & Light Company, a wholly owned subsidiary
   of Great Plains Energy
KDHE
 
Kansas Department of Health and Environment
kV
 
Kilovolt
KW
 
Kilowatt
kWh
 
Kilowatt hour
L&P
 
St. Joseph Light & Power, a division of GMO
MACT
 
Maximum achievable control technology
MATS
 
Mercury and Air Toxics Standards
MD&A
 
Management’s Discussion and Analysis of Financial Condition and
   Results of Operations
 
3
 
 
Abbreviation or Acronym
 
Definition
     
MDNR
 
Missouri Department of Natural Resources
MEEIA
 
Missouri Energy Efficiency Investment Act
MGP
 
Manufactured gas plant
MPS Merchant
 
MPS Merchant Services, Inc., a wholly owned subsidiary of GMO
MPSC
 
Public Service Commission of the State of Missouri
MW
 
Megawatt
MWh
 
Megawatt hour
NAAQS
 
National Ambient Air Quality Standard
NERC
 
North American Electric Reliability Corporation
NEIL
 
Nuclear Electric Insurance Limited
NOL
 
Net operating loss
NOx
 
Nitrogen oxide
NPNS
 
Normal purchases and normal sales
NRC
 
Nuclear Regulatory Commission
OCI
 
Other Comprehensive Income
PCB
 
Polychlorinated biphenyls
ppm
 
Parts per million
PRB
 
Powder River Basin
QCA
 
Quarterly Cost Adjustment
Receivables Company
 
Kansas City Power & Light Receivables Company, a wholly owned
   subsidiary of KCP&L
RTO
 
Regional Transmission Organization
SCR
 
Selective catalytic reduction
SEC
 
Securities and Exchange Commission
SERP
 
Supplemental Executive Retirement Plan
SO2
 
Sulfur dioxide
SPP
 
Southwest Power Pool, Inc.
Syncora
 
Syncora Guarantee Inc.
WCNOC
 
Wolf Creek Nuclear Operating Corporation
Westar
 
Westar Energy, Inc., a Kansas utility company
Wolf Creek
 
Wolf Creek Generating Station
 
4
 
 
PART 1 - FINANCIAL INFORMATION
         
ITEM 1. FINANCIAL STATEMENTS
         
                   
Great Plains Energy Incorporated
           
Unaudited Consolidated Balance Sheets
         
Unaudited Consolidated Statements of Income and Comprehensive Income
   
Unaudited Consolidated Statements of Cash Flows
   
 
 
Unaudited Consolidated Statements of Common Shareholders’ Equity and Noncontrolling Interest
 
                   
Kansas City Power & Light Company
         
Unaudited Consolidated Balance Sheets
         
Unaudited Consolidated Statements of Income and Comprehensive Income
 
 
Unaudited Consolidated Statements of Cash Flows
   
 
 
Unaudited Consolidated Statements of Common Shareholder’s Equity
     
                   
Combined Notes to Unaudited Consolidated Financial Statements for Great Plains Energy Incorporated and
 Kansas City Power & Light Company
         
 
Note 1:
Summary of Significant Accounting Policies
       
 
Note 2:
Supplemental Cash Flow Information
       
 
Note 3:
Receivables
       
 
 
 
Note 4:
Nuclear Plant
           
 
Note 5:
Regulatory Matters
           
 
Note 6:
Pension Plans and Other Employee Benefits
       
 
Note 7:
Equity Compensation
 
         
 
Note 8:
Short-Term Borrowings and Short-Term Bank Lines of Credit
   
 
Note 9:
Long-Term Debt
 
 
       
 
Note 10:
Commitments and Contingencies
         
 
Note 11:
Legal Proceedings
           
 
Note 12:
Related Party Transactions and Relationships
       
 
Note 13:
Derivative Instruments
   
 
   
 
Note 14:
Fair Value Measurements
         
 
Note 15:
Taxes
             
 
Note 16:
Segments and Related Information
       
 
5
 
 
GREAT PLAINS ENERGY INCORPORATED
Consolidated Balance Sheets
(Unaudited)
         
 
March 31
December 31
 
2012
2011
ASSETS
(millions, except share amounts)
Current Assets
       
Cash and cash equivalents
$ 6.2   $ 6.2  
Funds on deposit
  1.5     1.4  
Receivables, net
  176.6     231.2  
Accounts receivable pledged as collateral
  110.0     95.0  
Fuel inventories, at average cost
  108.1     89.0  
Materials and supplies, at average cost
  142.9     140.3  
Deferred refueling outage costs
  23.0     27.5  
Refundable income taxes
  -     0.3  
Deferred income taxes
  11.1     7.5  
Derivative instruments
  0.8     1.0  
Prepaid expenses and other assets
  22.1     19.7  
Total
  602.3     619.1  
Utility Plant, at Original Cost
           
Electric
  10,967.0     10,924.8  
Less - accumulated depreciation
  4,289.2     4,235.8  
Net utility plant in service
  6,677.8     6,689.0  
Construction work in progress
  346.7     287.9  
Nuclear fuel, net of amortization of $134.1 and $132.7
  94.7     76.6  
Total
  7,119.2     7,053.5  
Investments and Other Assets
           
Nuclear decommissioning trust fund
  146.8     135.3  
Regulatory assets
  1,049.6     1,058.2  
Goodwill
  169.0     169.0  
Derivative instruments
  6.1     6.8  
Other
  69.5     76.1  
Total
  1,441.0     1,445.4  
Total
$ 9,162.5   $ 9,118.0  
             
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
 
6
 
 
GREAT PLAINS ENERGY INCORPORATED
Consolidated Balance Sheets
(Unaudited)
         
 
March 31
December 31
 
2012
2011
LIABILITIES AND CAPITALIZATION
(millions, except share amounts)
Current Liabilities
       
Notes payable
$ 30.0   $ 22.0  
Collateralized note payable
  110.0     95.0  
Commercial paper
  366.8     267.0  
Current maturities of long-term debt
  507.1     801.4  
Accounts payable
  221.7     275.6  
Accrued taxes
  53.3     25.8  
Accrued interest
  78.0     76.9  
Accrued compensation and benefits
  37.4     40.8  
Pension and post-retirement liability
  4.4     4.4  
Other
  24.2     26.0  
Total
  1,432.9     1,634.9  
Deferred Credits and Other Liabilities
           
Deferred income taxes
  624.0     628.6  
Deferred tax credits
  130.6     131.2  
Asset retirement obligations
  151.9     149.6  
Pension and post-retirement liability
  454.3     461.9  
Regulatory liabilities
  279.3     268.5  
Other
  103.0     101.1  
Total
  1,743.1     1,740.9  
Capitalization
           
Great Plains Energy common shareholders' equity
           
Common stock - 250,000,000 shares authorized without par value
           
136,481,474 and 136,406,306 shares issued, stated value
  2,330.3     2,330.6  
Retained earnings
  646.1     684.7  
Treasury stock - 185,068 and 264,567 shares, at cost
  (3.9 )   (5.6 )
Accumulated other comprehensive loss
  (46.8 )   (49.8 )
Total
  2,925.7     2,959.9  
Noncontrolling interest
  0.2     1.0  
Cumulative preferred stock $100 par value
           
3.80% - 100,000 shares issued
  10.0     10.0  
4.50% - 100,000 shares issued
  10.0     10.0  
4.20% - 70,000 shares issued
  7.0     7.0  
4.35% - 120,000 shares issued
  12.0     12.0  
Total
  39.0     39.0  
Long-term debt (Note 9)
  3,021.6     2,742.3  
Total
  5,986.5     5,742.2  
Commitments and Contingencies (Note 10)
           
Total
$ 9,162.5   $ 9,118.0  
             
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
 
7
 
 
GREAT PLAINS ENERGY INCORPORATED
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
         
Three Months Ended March 31
2012
2011
Operating Revenues
(millions, except per share amounts)
Electric revenues
$ 479.7   $ 492.9  
Operating Expenses
           
Fuel
  119.3     104.9  
Purchased power
  24.7     54.9  
Transmission of electricity by others
  7.3     7.5  
Utility operating and maintenance expenses
  163.1     157.5  
Voluntary separation program
  -     9.7  
Depreciation and amortization
  67.4     72.4  
General taxes
  44.5     42.0  
Other
  4.4     2.8  
Total
  430.7     451.7  
Operating income
  49.0     41.2  
Non-operating income
  0.9     3.6  
Non-operating expenses
  (1.8 )   (2.2 )
Interest charges
  (66.9 )   (44.9 )
Loss before income tax benefit
  (18.8 )   (2.3 )
Income tax benefit
  9.5     4.6  
Net income (loss)
  (9.3 )   2.3  
Less: Net loss attributable to noncontrolling interest
  0.2     0.1  
Net income (loss) attributable to Great Plains Energy
  (9.1 )   2.4  
Preferred stock dividend requirements
  0.4     0.4  
Earnings (loss) available for common shareholders
$ (9.5 ) $ 2.0  
             
Average number of basic common shares outstanding
  135.9     135.4  
Average number of diluted common shares outstanding
  135.9     138.2  
             
Basic earnings (loss) per common share
$ (0.07 ) $ 0.02  
Diluted earnings (loss) per common share
$ (0.07 ) $ 0.01  
             
Cash dividends per common share
$ 0.2125   $ 0.2075  
             
Comprehensive Income
           
Net income (loss)
$ (9.3 ) $ 2.3  
Other comprehensive income
           
Derivative hedging activity
           
Gain (loss) on derivative hedging instruments
  (0.3 )   0.5  
Income tax (expense) benefit
  0.1     (0.1 )
Net gain (loss) on derivative hedging instruments
  (0.2 )   0.4  
Reclassification to expenses, net of tax
  3.1     1.7  
Derivative hedging activity, net of tax
  2.9     2.1  
Defined benefit pension plans
           
  Amortization of net gains included in net periodic benefit costs
  0.1     -  
Change in unrecognized pension expense, net of tax
  0.1     -  
Total other comprehensive income
  3.0     2.1  
Comprehensive income (loss)
  (6.3 )   4.4  
Less:  comprehensive loss attributable to noncontrolling interest
  0.2     0.1  
Comprehensive income (loss) attributable to Great Plains Energy
$ (6.1 ) $ 4.5  
             
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
 
8
 
 
GREAT PLAINS ENERGY INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
         
Three Months Ended March 31
2012
2011
Cash Flows from Operating Activities
(millions)
Net income (loss)
$ (9.3 ) $ 2.3  
Adjustments to reconcile income to net cash from operating activities:
           
Depreciation and amortization
  67.4     72.4  
Amortization of:
           
Nuclear fuel
  1.4     5.8  
Other
  4.5     (0.3 )
Deferred income taxes, net
  (9.1 )   (7.4 )
Investment tax credit amortization
  (0.6 )   (0.1 )
Other operating activities (Note 2)
  (0.2 )   (35.7 )
Net cash from operating activities
  54.1     37.0  
Cash Flows from Investing Activities
           
Utility capital expenditures
  (126.5 )   (99.9 )
Allowance for borrowed funds used during construction
  (1.5 )   (1.3 )
Purchases of nuclear decommissioning trust investments
  (7.3 )   (3.8 )
Proceeds from nuclear decommissioning trust investments
  6.5     2.9  
Other investing activities
  (2.0 )   (6.1 )
Net cash from investing activities
  (130.8 )   (108.2 )
Cash Flows from Financing Activities
           
Issuance of common stock
  1.5     1.5  
Issuance fees
  (1.9 )   -  
Repayment of long-term debt
  (13.4 )   (138.4 )
Net change in short-term borrowings
  107.8     234.8  
Net change in collateralized short-term borrowings
  15.0     -  
Dividends paid
  (29.3 )   (28.6 )
Other financing activities
  (3.0 )   (2.3 )
Net cash from financing activities
  76.7     67.0  
Net Change in Cash and Cash Equivalents
  -     (4.2 )
Cash and Cash Equivalents at Beginning of Year
  6.2     10.8  
Cash and Cash Equivalents at End of Period
$ 6.2   $ 6.6  
             
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
 
9
 
 
GREAT PLAINS ENERGY INCORPORATED
Consolidated Statements of Common Shareholders' Equity and Noncontrolling Interest
(Unaudited)
                 
Three Months Ended March 31
2012
2011
 
Shares
Amount
Shares
Amount
Common Stock
(millions, except share amounts)
Beginning balance
  136,406,306   $ 2,330.6     136,113,954   $ 2,324.4  
Issuance of common stock
  75,168     1.5     78,266     1.5  
Equity compensation expense, net of forfeitures
        0.1           -  
Unearned Compensation
                       
Issuance of restricted common stock
        (2.8 )         (2.6 )
Forfeiture of restricted common stock
        -           0.1  
Compensation expense recognized
        0.5           0.6  
Other
        0.4           -  
Ending balance
  136,481,474     2,330.3     136,192,220     2,324.0  
Retained Earnings
                       
Beginning balance
        684.7           626.5  
Net income (loss) attributable to Great Plains Energy
    (9.1 )         2.4  
Loss on reissuance of treasury stock
        (0.2 )         (0.5 )
Dividends:
                       
Common stock
        (28.9 )         (28.2 )
Preferred stock - at required rates
        (0.4 )         (0.4 )
Performance shares
        -           (0.2 )
Ending balance
        646.1           599.6  
Treasury Stock
                       
Beginning balance
  (264,567 )   (5.6 )   (400,889 )   (8.9 )
Treasury shares acquired
  (63,145 )   (1.3 )   (58,225 )   (1.1 )
Treasury shares reissued
  142,644     3.0     204,674     4.5  
Ending balance
  (185,068 )   (3.9 )   (254,440 )   (5.5 )
Accumulated Other Comprehensive Income (Loss)
                   
Beginning balance
        (49.8 )         (56.1 )
Derivative hedging activity, net of tax
        2.9           2.1  
Change in unrecognized pension expense, net of tax
    0.1           -  
Ending balance
        (46.8 )         (54.0 )
Total Great Plains Energy Common Shareholders' Equity
  $ 2,925.7         $ 2,864.1  
                         
Noncontrolling Interest
                       
Beginning balance
      $ 1.0         $ 1.2  
Net loss attributable to noncontrolling interest
        (0.2 )         (0.1 )
Distribution
        (0.6 )         -  
Ending balance
      $ 0.2         $ 1.1  
                         
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
 
10
 
 
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Balance Sheets
(Unaudited)
         
 
March 31
December 31
 
2012
2011
ASSETS
(millions, except share amounts)
Current Assets
       
Cash and cash equivalents
$ 2.4   $ 1.9  
Funds on deposit
  0.1     0.1  
Receivables, net
  111.3     172.9  
Accounts receivable pledged as collateral
  110.0     95.0  
Fuel inventories, at average cost
  73.3     59.0  
Materials and supplies, at average cost
  102.8     101.1  
Deferred refueling outage costs
  23.0     27.5  
Refundable income taxes
  0.5     5.7  
Deferred income taxes
  2.9     -  
Prepaid expenses and other assets
  19.1     16.0  
Total
  445.4     479.2  
Utility Plant, at Original Cost
           
Electric
  7,843.3     7,829.3  
Less - accumulated depreciation
  3,279.0     3,243.0  
Net utility plant in service
  4,564.3     4,586.3  
Construction work in progress
  271.2     203.5  
Nuclear fuel, net of amortization of $134.1 and $132.7
  94.7     76.6  
Total
  4,930.2     4,866.4  
Investments and Other Assets
           
Nuclear decommissioning trust fund
  146.8     135.3  
Regulatory assets
  775.5     780.7  
Other
  24.8     30.6  
Total
  947.1     946.6  
Total
$ 6,322.7   $ 6,292.2  
             
The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
 
11
 
 
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Balance Sheets
(Unaudited)
         
 
March 31
December 31
 
2012
2011
LIABILITIES AND CAPITALIZATION
(millions, except share amounts)
Current Liabilities
       
Collateralized note payable
$ 110.0   $ 95.0  
Commercial paper
  256.0     227.0  
Current maturities of long-term debt
  0.4     12.7  
Accounts payable
  202.4     214.8  
Accrued taxes
  40.1     20.6  
Accrued interest
  43.4     30.0  
Accrued compensation and benefits
  37.4     40.8  
Pension and post-retirement liability
  3.0     3.0  
Other
  13.2     13.7  
Total
  705.9     657.6  
Deferred Credits and Other Liabilities
           
Deferred income taxes
  772.2     772.7  
Deferred tax credits
  127.4     127.9  
Asset retirement obligations
  136.4     134.3  
Pension and post-retirement liability
  433.4     440.9  
Regulatory liabilities
  151.6     142.8  
Other
  69.9     68.6  
Total
  1,690.9     1,687.2  
Capitalization
           
Common shareholder's equity
           
Common stock-1,000 shares authorized without par value
           
  1 share issued, stated value
  1,563.1     1,563.1  
Retained earnings
  491.1     513.8  
Accumulated other comprehensive loss
  (30.2 )   (31.4 )
Total
  2,024.0     2,045.5  
Long-term debt (Note 9)
  1,901.9     1,901.9  
Total
  3,925.9     3,947.4  
Commitments and Contingencies (Note 10)
           
Total
$ 6,322.7   $ 6,292.2  
             
The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
 
12
 
 
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
         
Three Months Ended March 31
2012
2011
Operating Revenues
(millions)
Electric revenues
$ 327.0   $ 330.8  
Operating Expenses
           
Fuel
  84.6     68.2  
Purchased power
  7.0     21.4  
Transmission of electricity by others
  5.0     4.3  
Operating and maintenance expenses
  117.9     114.9  
Voluntary separation program
  -     6.8  
Depreciation and amortization
  45.7     53.4  
General taxes
  35.2     33.9  
Other
  -     1.4  
Total
  295.4     304.3  
Operating income
  31.6     26.5  
Non-operating income
  0.5     0.5  
Non-operating expenses
  (0.7 )   (1.0 )
Interest charges
  (32.4 )   (23.1 )
Income (loss) before income tax benefit
  (1.0 )   2.9  
Income tax benefit
  3.3     1.1  
Net income
$ 2.3   $ 4.0  
             
Comprehensive Income
           
Net income
$ 2.3   $ 4.0  
Other comprehensive income
           
Derivative hedging activity
           
Loss on derivative hedging instruments
  (0.3 )   -  
Income tax expense
  0.1     -  
Net loss on derivative hedging instruments
  (0.2 )   -  
Reclassification to expenses, net of tax
  1.4     1.3  
Derivative hedging activity, net of tax
  1.2     1.3  
Total other comprehensive income
  1.2     1.3  
Comprehensive income
$ 3.5   $ 5.3  
             
The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial
Statements are an integral part of these statements.
 
13
 
 
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
         
Three Months Ended March 31
2012
2011
Cash Flows from Operating Activities
(millions)
Net income
$ 2.3   $ 4.0  
Adjustments to reconcile income to net cash from operating activities:
       
Depreciation and amortization
  45.7     53.4  
Amortization of:
           
Nuclear fuel
  1.4     5.8  
Other
  7.2     6.8  
Deferred income taxes, net
  (3.4 )   (3.5 )
Investment tax credit amortization
  (0.5 )   -  
Other operating activities (Note 2)
  43.9     (20.7 )
Net cash from operating activities
  96.6     45.8  
Cash Flows from Investing Activities
           
Utility capital expenditures
  (100.5 )   (75.5 )
Allowance for borrowed funds used during construction
  (0.7 )   (0.8 )
Purchases of nuclear decommissioning trust investments
  (7.3 )   (3.8 )
Proceeds from nuclear decommissioning trust investments
  6.5     2.9  
Net money pool lending
  -     12.1  
Other investing activities
  (2.4 )   (3.9 )
Net cash from investing activities
  (104.4 )   (69.0 )
Cash Flows from Financing Activities
           
Repayment of long-term debt
  (12.3 )   -  
Net change in short-term borrowings
  29.0     25.3  
Net change in collateralized short-term borrowings
  15.0     -  
Net money pool borrowings
  1.6     20.8  
Dividends paid to Great Plains Energy
  (25.0 )   (25.0 )
Net cash from financing activities
  8.3     21.1  
Net Change in Cash and Cash Equivalents
  0.5     (2.1 )
Cash and Cash Equivalents at Beginning of Year
  1.9     3.6  
Cash and Cash Equivalents at End of Period
$ 2.4   $ 1.5  
             
The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial
Statements are an integral part of these statements.
 
14
 
 
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Common Shareholder's Equity
(Unaudited)
                 
Three Months Ended March 31
2012
2011
 
Shares
Amount
Shares
Amount
Common Stock
(millions, except share amounts)
Ending balance
  1   $ 1,563.1     1   $ 1,563.1  
Retained Earnings
                       
Beginning balance
        513.8           478.3  
Net income
        2.3           4.0  
Dividends:
                       
Common stock held by Great Plains Energy
        (25.0 )         (25.0 )
Ending balance
        491.1           457.3  
Accumulated Other Comprehensive Income (Loss)
                       
Beginning balance
        (31.4 )         (36.4 )
Derivative hedging activity, net of tax
        1.2           1.3  
Ending balance
        (30.2 )         (35.1 )
Total Common Shareholder's Equity
      $ 2,024.0         $ 1,985.3  
                         
The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
 
15
 
 
GREAT PLAINS ENERGY INCORPORATED
KANSAS CITY POWER & LIGHT COMPANY
 
Notes to Unaudited Consolidated Financial Statements
 
The notes to unaudited consolidated financial statements that follow are a combined presentation for Great Plains Energy Incorporated and Kansas City Power & Light Company, both registrants under this filing.  The terms “Great Plains Energy,” “Company,” “KCP&L” and “Companies” are used throughout this report.  “Great Plains Energy” and the “Company” refer to Great Plains Energy Incorporated and its consolidated subsidiaries, unless otherwise indicated.  “KCP&L” refers to Kansas City Power & Light Company and its consolidated subsidiaries.  “Companies” refers to Great Plains Energy Incorporated and its consolidated subsidiaries and KCP&L and its consolidated subsidiaries.  The Companies’ interim financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in the opinion of management, for a fair presentation of the results for the interim periods presented.
 
1.  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Organization
Great Plains Energy, a Missouri corporation incorporated in 2001, is a public utility holding company and does not own or operate any significant assets other than the stock of its subsidiaries.  Great Plains Energy’s wholly owned direct subsidiaries with operations or active subsidiaries are as follows:
 
·  
KCP&L is an integrated, regulated electric utility that provides electricity to customers primarily in the states of Missouri and Kansas.  KCP&L has one active wholly owned subsidiary, Kansas City Power & Light Receivables Company (Receivables Company).
 
·  
KCP&L Greater Missouri Operations Company (GMO) is an integrated, regulated electric utility that primarily provides electricity to customers in the state of Missouri.  GMO also provides regulated steam service to certain customers in the St. Joseph, Missouri area.  GMO wholly owns MPS Merchant Services, Inc. (MPS Merchant), which has certain long-term natural gas contracts remaining from its former non-regulated trading operations.
 
Each of Great Plains Energy’s and KCP&L’s consolidated financial statements includes the accounts of their subsidiaries.  Intercompany transactions have been eliminated.
 
Great Plains Energy’s sole reportable business segment is electric utility.  See Note 16 for additional information.
 
Basic and Diluted Earnings per Common Share Calculation
To determine basic EPS, preferred stock dividend requirements and net loss attributable to noncontrolling interest are deducted from net income (loss) before dividing by the average number of common shares outstanding.  The effect of dilutive securities, calculated using the treasury stock method, assumes the issuance of common shares applicable to performance shares, restricted stock, stock options and Equity Units.
 
16
 
 
The following table reconciles Great Plains Energy’s basic and diluted EPS.
         
Three Months Ended March 31
2012
2011
Income
(millions, except per share amounts)
Net income (loss)
$ (9.3 ) $ 2.3  
Less: net loss attributable to noncontrolling interest
  (0.2 )   (0.1 )
Less: preferred stock dividend requirements
  0.4     0.4  
Earnings (loss) available for common shareholders
$ (9.5 ) $ 2.0  
Common Shares Outstanding
           
Average number of common shares outstanding
  135.9     135.4  
Add: effect of dilutive securities
  -     2.8  
Diluted average number of common shares outstanding
  135.9     138.2  
Basic EPS
$ (0.07 ) $ 0.02  
Diluted EPS
$ (0.07 ) $ 0.01  
             
 
 
Great Plains Energy had a net loss for the three months ended March 31, 2012; therefore, no potential common shares are included in the diluted EPS calculation because the effect is always anti-dilutive.  The computation of diluted EPS for the three months ended March 31, 2012, excludes anti-dilutive shares consisting of 390,322 restricted stock shares and 17.1 million shares related to Equity Units.  There were no anti-dilutive shares applicable to performance shares or stock options.
 
The computation of diluted EPS for the three months ended March 31, 2011, excludes anti-dilutive shares consisting of 213,522 performance shares, 39,722 restricted stock shares and 159,665 stock options.
 
Dividends Declared
In May 2012, Great Plains Energy’s Board of Directors (Board) declared a quarterly dividend of $0.2125 per share on Great Plains Energy’s common stock.  The common dividend is payable June 20, 2012, to shareholders of record as of May 30, 2012.  The Board also declared regular dividends on Great Plains Energy’s preferred stock, payable September 1, 2012, to shareholders of record as of August 13, 2012.
 
In May 2012, KCP&L’s Board of Directors declared a cash dividend payable to Great Plains Energy of $25 million payable on June 18, 2012.
 
17
 
 
2.  
SUPPLEMENTAL CASH FLOW INFORMATION
 
Great Plains Energy Other Operating Activities
       
Three Months Ended March 31
2012
2011
Cash flows affected by changes in:
(millions)
Receivables
$ 54.9   $ 44.7  
Accounts receivable pledged as collateral
  (15.0 )   -  
Fuel inventories
  (19.1 )   (7.7 )
Materials and supplies
  (2.6 )   (2.4 )
Accounts payable
  (50.2 )   (79.8 )
Accrued taxes
  27.9     28.2  
Accrued interest
  1.1     (3.2 )
Deferred refueling outage costs
  4.5     (9.9 )
Fuel adjustment clauses
  3.6     (2.0 )
Pension and post-retirement benefit obligations
  3.3     5.2  
Allowance for equity funds used during construction
  (0.1 )   (0.4 )
Iatan Nos. 1 and 2 impact of disallowed construction costs
  -     2.0  
Other
  (8.5 )   (10.4 )
Total other operating activities
$ (0.2 ) $ (35.7 )
Cash paid during the period:
           
Interest
$ 67.7   $ 71.4  
Income taxes
$ -   $ -  
Non-cash investing activities:
           
Liabilities assumed for capital expenditures
$ 42.5   $ 21.2  
             
             
KCP&L Other Operating Activities
           
Three Months Ended March 31
2012 2011
Cash flows affected by changes in:
(millions)
Receivables
$ 61.6   $ 29.8  
Accounts receivable pledged as collateral
  (15.0 )   -  
Fuel inventories
  (14.3 )   (13.2 )
Materials and supplies
  (1.7 )   (2.1 )
Accounts payable
  (16.1 )   (56.3 )
Accrued taxes
  24.8     21.0  
Accrued interest
  13.4     12.3  
Deferred refueling outage costs
  4.5     (9.9 )
Pension and post-retirement benefit obligations
  4.2     9.1  
Kansas Energy Cost Adjustment
  (5.8 )   (4.9 )
Iatan Nos. 1 and 2 impact of disallowed construction costs
  -     1.3  
Other
  (11.7 )   (7.8 )
Total other operating activities
$ 43.9   $ (20.7 )
Cash paid during the period:
           
Interest
$ 16.1   $ 18.3  
Income taxes
$ -   $ -  
Non-cash investing activities:
           
Liabilities assumed for capital expenditures
$ 39.2   $ 18.5  
             
 
18
 
 
3.  
RECEIVABLES
 
Great Plains Energy’s and KCP&L’s receivables are detailed in the following table.
         
 
March 31
December 31
 
2012
2011
Great Plains Energy
(millions)
Customer accounts receivable - billed
$ 27.1   $ 69.8  
Customer accounts receivable - unbilled
  65.8     82.4  
Allowance for doubtful accounts
  (3.0 )   (2.5 )
Other receivables
  86.7     81.5  
Total
$ 176.6   $ 231.2  
KCP&L
           
Customer accounts receivable - billed
$ -   $ 16.4  
Customer accounts receivable - unbilled
  19.3     50.0  
Allowance for doubtful accounts
  (1.4 )   (1.4 )
Intercompany receivables
  22.4     38.7  
Other receivables
  71.0     69.2  
Total
$ 111.3   $ 172.9  
             
Great Plains Energy’s and KCP&L’s other receivables at March 31, 2012, and December 31, 2011, consisted primarily of receivables from partners in jointly owned electric utility plants and wholesale sales receivables.
 
Sale of Accounts Receivable – KCP&L
KCP&L sells all of its retail electric accounts receivable to its wholly owned subsidiary, Receivables Company, which in turn sells an undivided percentage ownership interest in the accounts receivable to Victory Receivables Corporation, an independent outside investor.  Receivables Company’s sale of the undivided percentage ownership interest in accounts receivable to Victory Receivables Corporation is accounted for as a secured borrowing with $110.0 million and $95.0 million of accounts receivable pledged as collateral and a corresponding short-term collateralized note payable recognized on Great Plains Energy’s and KCP&L’s balance sheets at March 31, 2012, and December 31, 2011, respectively.
 
KCP&L sells its receivables at a fixed price based upon the expected cost of funds and charge-offs.  These costs comprise KCP&L’s loss on the sale of accounts receivable.  KCP&L services the receivables and receives an annual servicing fee of 1.5% of the outstanding principal amount of the receivables sold to Receivables Company.  KCP&L does not recognize a servicing asset or liability because management determined the collection agent fee earned by KCP&L approximates market value.  The agreement expires in September 2014 and allows for $110 million in aggregate outstanding principal amount at any time.
 
19
 
 
Information regarding KCP&L’s sale of accounts receivable to Receivables Company is reflected in the following tables.
             
     
Receivables
Consolidated
Three Months Ended March 31, 2012
KCP&L
Company
KCP&L
 
(millions)
Receivables (sold) purchased
$ (293.5 ) $ 293.5   $ -  
Gain (loss) on sale of accounts receivable (a)
  (3.7 )   4.1     0.4  
Servicing fees
  0.5     (0.5 )   -  
Fees to outside investor
  -     (0.3 )   (0.3 )
                   
Cash flows during the period
                 
Cash from customers transferred to Receivables Company
  (327.2 )   327.2     -  
Cash paid to KCP&L for receivables purchased
  323.1     (323.1 )   -  
Servicing fees
  0.5     (0.5 )   -  
Interest on intercompany note
  0.1     (0.1 )   -  
                   
             
     
Receivables
Consolidated
Three Months Ended March 31, 2011
KCP&L
Company
KCP&L
 
(millions)
Receivables (sold) purchased
$ (291.9 ) $ 291.9   $ -  
Gain (loss) on sale of accounts receivable (a)
  (3.7 )   3.9     0.2  
Servicing fees
  0.6     (0.6 )   -  
Fees to outside investor
  -     (0.3 )   (0.3 )
                   
Cash flows during the period
                 
Cash from customers transferred to Receivables Company
  (308.3 )   308.3     -  
Cash paid to KCP&L for receivables purchased
  304.4     (304.4 )   -  
Servicing fees
  0.6     (0.6 )   -  
Interest on intercompany note
  0.1     (0.1 )   -  
(a) Any net gain (loss) is the result of the timing difference inherent in collecting receivables and over the life of the agreement will net to zero.
 
4.  
NUCLEAR PLANT

KCP&L owns 47% of Wolf Creek Generating Station (Wolf Creek), its only nuclear generating unit.  Wolf Creek is located in Coffey County, Kansas, just northeast of Burlington, Kansas.  Wolf Creek’s operating license expires in 2045.  Wolf Creek is regulated by the Nuclear Regulatory Commission (NRC), with respect to licensing, operations and safety-related requirements.
 
Spent Nuclear Fuel and High-Level Radioactive Waste
Under the Nuclear Waste Policy Act of 1982, the Department of Energy (DOE) is responsible for the permanent disposal of spent nuclear fuel.  KCP&L pays the DOE a quarterly fee of one-tenth of a cent for each kWh of net nuclear generation delivered and sold for the future disposal of spent nuclear fuel.  These disposal costs are charged to fuel expense.  In 2010, the DOE filed a motion with the NRC to withdraw its then pending application to the NRC to construct a national repository for the disposal of spent nuclear fuel and high-level radioactive waste at Yucca Mountain, Nevada.  An NRC board denied the DOE’s motion to withdraw its application, and the DOE appealed that decision to the full NRC.  In 2011, the NRC issued an evenly split decision on the appeal and also ordered the licensing board to close out its work on the DOE’s application by the end of September 2011 due to a lack of funding.  These agency actions prompted the states of Washington and South Carolina, and a county
 
20
 
 
in South Carolina, to file a lawsuit in a federal Court of Appeals asking the court to compel the NRC to resume its license review and to issue a decision on the license application.  Oral argument to the court is scheduled to occur in May 2012.  Wolf Creek has an on-site storage facility designed to hold all spent fuel generated at the plant through 2025, and believes it will be able to expand on-site storage as needed past 2025.  Management cannot predict when, or if, an alternative disposal site will be available to receive Wolf Creek’s spent nuclear fuel and will continue to monitor this activity.  See Note 11 for a related legal proceeding.
 
Low-Level Radioactive Waste
Wolf Creek disposes of most of its low-level radioactive waste (Class A waste) at an existing third-party repository in Utah.  Management expects that the site located in Utah will remain available to Wolf Creek for disposal of its Class A waste.  Wolf Creek has contracted with a waste processor that will process, take title and store in another state most of the remainder of Wolf Creek’s low-level radioactive waste (Classes B and C waste, which is higher in radioactivity but much lower in volume).  Should on-site waste storage be needed in the future, Wolf Creek has current storage capacity on site for about four years’ generation of Classes B and C waste and believes it will be able to expand that storage capacity as needed if it becomes necessary to do so.
 
Nuclear Decommissioning Trust Fund
The following table summarizes the change in Great Plains Energy’s and KCP&L’s nuclear decommissioning trust fund.
         
 
March 31
December 31
 
2012
2011
Decommissioning Trust
(millions)
Beginning balance January 1
$ 135.3   $ 129.2  
Contributions
  0.8     3.4  
Earned income, net of fees
  0.8     4.8  
Net realized gains
  0.4     0.3  
Net unrealized gains (losses)
  9.5     (2.4 )
   Ending balance
$ 146.8   $ 135.3  
             
The nuclear decommissioning trust is reported at fair value on the balance sheets and is invested in assets as detailed in the following table.
                                   
    March 31     December 31
 
2012
 
2011
 
Cost
Unrealized
Unrealized
Fair
 
Cost
Unrealized
Unrealized
Fair
 
Basis
Gains
Losses
Value
 
Basis
Gains
Losses
Value
 
(millions)
Equity securities
$ 77.9   $ 19.2   $ (1.6 ) $ 95.5     $ 76.5   $ 12.3   $ (4.5 ) $ 84.3  
Debt securities
  44.0     4.2     (0.1 )   48.1       44.2     4.5     (0.1 )   48.6  
Other
  3.2     -     -     3.2       2.4     -     -     2.4  
   Total
$ 125.1   $ 23.4   $ (1.7 ) $ 146.8     $ 123.1   $ 16.8   $ (4.6 ) $ 135.3  
                                                   
 
21
 
 
The weighted average maturity of debt securities held by the trust at March 31, 2012, was approximately 7 years.  The costs of securities sold are determined on the basis of specific identification.  The following table summarizes the realized gains and losses from the sale of securities in the nuclear decommissioning trust fund.
         
Three Months Ended March 31
2012
2011
 
(millions)
Realized gains
$ 0.5   $ 0.1  
Realized losses
  (0.1 )   -  
             
5.  
REGULATORY MATTERS

KCP&L Kansas Rate Case Proceedings
On April 20, 2012, KCP&L filed an application with The State Corporation Commission of the State of Kansas (KCC) to request an increase to its retail revenues of $63.6 million, with a return on equity of 10.4% and a rate-making equity ratio of 51.8%.  The request includes recovery of costs related to significant upgrades at its generating facilities, including environmental upgrades at the La Cygne Station; investments in additional wind generation; and increased investments in electrical infrastructure.  KCP&L is also requesting that KCC approve a change to depreciation rates to reflect the increase in plant in service as well as a change to the current method of allocating costs between its Kansas and Missouri jurisdictions to better reflect KCP&L’s summer peaking business.
 
KCP&L Missouri Rate Case Proceedings
On February 27, 2012, KCP&L filed an application with the Public Service Commission of the State of Missouri (MPSC) to request an increase to its retail revenues of $105.7 million, with a return on equity of 10.4% and a rate-making equity ratio of 52.5%.  The request includes recovery of costs related to improving and maintaining infrastructure to continue to be able to provide reliable electric service and also includes a lower annual offset to the revenue requirement for the Missouri jurisdictional portion of KCP&L’s annual non-firm wholesale electric sales margin (wholesale margin offset).  KCP&L currently expects that it will not be able to achieve the $45.9 million wholesale margin offset currently reflected in its retail rates due to a decline in wholesale power prices, which is being driven by low natural gas prices.  Testimony from MPSC staff regarding the case is expected in August 2012 with an evidentiary hearing to occur in October 2012.
 
In a March 2011 order, the MPSC required KCP&L and GMO to apply to the Internal Revenue Service (IRS) to reallocate approximately $26.5 million of Iatan No. 2 qualifying advance coal project tax credits from KCP&L to GMO.  KCP&L and GMO did apply to the IRS but in September 2011, the IRS denied KCP&L’s and GMO’s request.  The MPSC has indicated it will consider the ratemaking treatment of the tax credits in a future rate case.  Certain ratemaking treatments that may be pursued by the MPSC could trigger the loss or repayment to the IRS of a portion of unamortized deferred investment tax credits.  At March 31, 2012, KCP&L and GMO had $127.4 million and $3.2 million, respectively, of unamortized deferred investment tax credits.
 
GMO Missouri Rate Case Proceedings
On February 27, 2012, GMO filed an application with the MPSC to request an increase to its retail revenues of $58.3 million for its Missouri Public Service division and $25.2 million for its St. Joseph Light & Power (L&P) division, with a return on equity of 10.4% and a rate-making equity ratio of 52.5%.  The requests include recovery of costs related to improving and maintaining infrastructure to continue to be able to provide reliable electric service, costs related to energy efficiency and demand side management programs, and increased fuel costs.  Testimony from MPSC staff regarding the case is expected in August 2012 with an evidentiary hearing to occur in October 2012.
 
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In December 2011, GMO filed a request with the MPSC seeking to recover costs for new and enhanced energy efficiency and demand side management programs under the Missouri Energy Efficiency Investment Act (MEEIA).  If approved, the costs would be recovered through a rider mechanism and GMO would reduce its request to increase retail rates that it filed with the MPSC on February 27, 2012.  A decision on the MEEIA request is expected in the third quarter of 2012.
 
GMO Fuel Adjustment Clause (FAC) Prudence Review
GMO’s electric retail rates contain an FAC tariff under which 95% of the difference between actual fuel cost, purchased power costs and off-system sales margin and the amount provided in base rates for these costs is passed along to GMO’s customers.  The MPSC requires prudence reviews of the FAC no less frequently than at 18-month intervals.  On November 28, 2011, the MPSC staff filed its prudence review report for the 18-month prudence review period covering June 1, 2009 through November 30, 2010.  The MPSC staff recommended to the MPSC to order GMO to refund approximately $19 million, plus interest, to customers through an adjustment to its FAC because the MPSC staff asserts that GMO was imprudent in its use of natural gas hedges to mitigate risk associated with its future purchases in the spot power market.  GMO is disputing the MPSC staff’s claim of imprudence and filed its testimony on February 22, 2012.  A hearing is scheduled for June 5-6, 2012, with an order expected in July 2012.
 
SPP and NERC Inquiries
The Southwest Power Pool, Inc. (SPP) conducted a compliance inquiry regarding a transmission system outage that occurred in the St. Joseph, Missouri area in the summer of 2009.  The North American Electric Reliability Corporation (NERC) also investigated the circumstances surrounding this transmission system outage.  GMO was assessed an immaterial penalty related to this matter.

6.  
PENSION PLANS AND OTHER EMPLOYEE BENEFITS

Great Plains Energy maintains defined benefit pension plans for substantially all active and inactive employees, including officers, of KCP&L, GMO and Wolf Creek Nuclear Operating Corporation (WCNOC) and incurs significant costs in providing the plans.  Pension benefits under these plans reflect the employees’ compensation, years of service and age at retirement.  In addition to providing pension benefits, Great Plains Energy provides certain post-retirement health care and life insurance benefits for substantially all retired employees of KCP&L, GMO and WCNOC.
 
KCP&L and GMO record pension and post-retirement expense in accordance with rate orders from the MPSC and KCC that allow the difference between pension and post-retirement costs under Generally Accepted Accounting Principles (GAAP) and costs for ratemaking to be recognized as a regulatory asset or liability.  This difference between financial and regulatory accounting methods is due to timing and will be eliminated over the life of the plans.
 
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The following table provides Great Plains Energy’s components of net periodic benefit costs prior to the effects of capitalization and sharing with joint-owners of power plants.
                 
 
Pension Benefits
Other Benefits
Three Months Ended March 31
2012
2011
2012
2011
Components of net periodic benefit costs
(millions)
Service cost
$ 8.9   $ 7.8   $ 0.8   $ 0.8  
Interest cost
  12.2     12.5     1.9     2.0  
Expected return on plan assets
  (10.7 )   (9.6 )   (0.5 )   (0.4 )
Prior service cost
  1.1     1.1     1.8     1.8  
Recognized net actuarial loss (gain)
  11.1     9.7     -     (0.1 )
Transition obligation
  -     -     0.3     0.3  
Net periodic benefit costs before
                       
regulatory adjustment
  22.6     21.5     4.3     4.4  
Regulatory adjustment
  (3.9 )   (6.4 )   0.4     0.2  
Net periodic benefit costs
$ 18.7   $ 15.1   $ 4.7   $ 4.6  
                         
 
7.  
EQUITY COMPENSATION

Great Plains Energy’s Long-Term Incentive Plan is an equity compensation plan approved by Great Plains Energy’s shareholders.  The Long-Term Incentive Plan permits the grant of restricted stock, restricted stock units, bonus shares, stock options, stock appreciation rights, limited stock appreciation rights, director shares, director deferred share units and performance shares to directors, officers and other employees of Great Plains Energy and KCP&L.  Forfeiture rates are based on historical forfeitures and future expectations and are reevaluated annually.
 
The following table summarizes Great Plains Energy’s and KCP&L’s equity compensation expense and associated income tax benefits.
         
Three Months Ended March 31
2012
2011
Great Plains Energy
(millions)
Compensation expense
$ 1.0   $ 1.6  
Income tax benefits
  0.6     0.6  
KCP&L
           
Compensation expense
  0.7     1.1  
Income tax benefits
  0.5     0.4  
             
 
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Performance Shares
Performance share activity for the three months ended March 31, 2012, is summarized in the following table.  Performance adjustment represents the number of shares of common stock related to performance shares ultimately issued that can vary from the number of performance shares initially granted depending on Great Plains Energy’s performance over a stated period of time.
         
 
Performance
Grant Date
 
Shares
Fair Value*
Beginning balance
  442,042   $ 21.06  
Granted
  139,924     18.71  
Performance adjustment
  (160,717 )      
Ending balance
  421,249     22.57  
* weighted-average
           
             
At March 31, 2012, the remaining weighted-average contractual term was 1.7 years.  The weighted-average grant-date fair value of shares granted was $18.71 and $22.31 for the three months ended March 31, 2012 and 2011, respectively.  At March 31, 2012, there was $5.2 million of total unrecognized compensation expense, net of forfeiture rates, related to performance shares granted under the Long-Term Incentive Plan, which will be recognized over the remaining weighted-average contractual term.  There were no performance shares earned and paid for the three months ended March 31, 2012.  The total fair value of performance shares earned and paid for the three months ended March 31, 2011, was $0.8 million.
 
The fair value of performance share awards is estimated using a Monte Carlo simulation technique that uses the closing stock price at the valuation date and incorporates assumptions for inputs of expected volatilities, dividend yield and risk-free rates.  Expected volatility is based on daily stock price change during a historical period commensurate with the remaining term of the performance period of the grant.  The risk-free rate is based upon the rate at the time of the evaluation for zero-coupon government bonds with a maturity consistent with the remaining performance period of the grant.  The dividend yield is based on the most recent dividends paid and the actual closing stock price on the valuation date.  For shares granted in 2012, inputs for expected volatility, dividend yield and risk-free rates were 21%, 4.32% and 0.40%, respectively.
 
Restricted Stock
Restricted stock activity for the three months ended March 31, 2012, is summarized in the following table.
 
       
 
Nonvested
Grant Date
 
Restricted Stock
Fair Value*
Beginning balance
  386,183   $ 17.06  
Granted and issued
  139,924     19.66  
Vested
  (135,785 )   14.53  
Ending balance
  390,322     18.87  
* weighted-average
           
             
At March 31, 2012, the remaining weighted-average contractual term was 2.1 years.  The weighted-average grant-date fair value of shares granted for the three months ended March 31, 2012 and 2011, was $19.66 and $19.14, respectively.  At March 31, 2012, there was $4.9 million of total unrecognized compensation expense, net of forfeiture rates, related to nonvested restricted stock granted under the Long-Term Incentive Plan, which will be recognized over the remaining weighted-average contractual term.  The total fair value of shares vested was $2.0 million for the three months ended March 31, 2012 and 2011, respectively.
 
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8.  
SHORT-TERM BORROWINGS AND SHORT-TERM BANK LINES OF CREDIT

Great Plains Energy’s $200 Million Revolving Credit Facility
Great Plains Energy’s $200 million revolving credit facility with a group of banks expires in December 2016.  The facility’s terms permit transfers of unused commitments between this facility and the KCP&L and GMO facilities discussed below, with the total amount of the facility not exceeding $400 million at any one time.  A default by Great Plains Energy or any of its significant subsidiaries on other indebtedness totaling more than $50.0 million is a default under the facility.  Under the terms of this facility, Great Plains Energy is required to maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in the facility, not greater than 0.65 to 1.00 at all times.  At March 31, 2012, Great Plains Energy was in compliance with this covenant.  At March 31, 2012, Great Plains Energy had $30.0 million of outstanding cash borrowings at a weighted-average interest rate of 2.00% and had issued letters of credit totaling $4.8 million under the credit facility.  At December 31, 2011, Great Plains Energy had $22.0 million of outstanding cash borrowings at a weighted-average interest rate of 2.06% and had issued letters of credit totaling $11.6 million under the credit facility.
 
KCP&L’s $600 Million Revolving Credit Facility and Commercial Paper
KCP&L’s $600 million revolving credit facility with a group of banks provides support for its issuance of commercial paper and other general corporate purposes and expires in December 2016.  Great Plains Energy and KCP&L may transfer up to $200 million of unused commitments between Great Plains Energy’s and KCP&L’s facilities.  A default by KCP&L on other indebtedness totaling more than $50.0 million is a default under the facility.  Under the terms of this facility, KCP&L is required to maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in the facility, not greater than 0.65 to 1.00 at all times.  At March 31, 2012, KCP&L was in compliance with this covenant.  At March 31, 2012, KCP&L had $256.0 million of commercial paper outstanding at a weighted-average interest rate of 0.49%, had issued letters of credit totaling $20.2 million and had no outstanding cash borrowings under the credit facility.  At December 31, 2011, KCP&L had $227.0 million of commercial paper outstanding at a weighted-average interest rate of 0.50%, had issued letters of credit totaling $21.5 million and had no outstanding cash borrowings under the credit facility.
 
GMO’s $450 Million Revolving Credit Facility and Commercial Paper
GMO’s $450 million revolving credit facility with a group of banks provides support for its issuance of commercial paper and other general corporate purposes and expires in December 2016.  Great Plains Energy and GMO may transfer up to $200 million of unused commitments between Great Plains Energy’s and GMO’s facilities.  A default by GMO, Great Plains Energy or any of its significant subsidiaries on other indebtedness totaling more than $50.0 million is a default under the facility.  Under the terms of this facility, GMO is required to maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in the facility, not greater than 0.65 to 1.00 at all times.  At March 31, 2012, GMO was in compliance with this covenant.  At March 31, 2012, GMO had $110.8 million of commercial paper outstanding at a weighted-average interest rate of 0.92%, had issued letters of credit totaling $13.2 million and had no outstanding cash borrowings under the credit facility.  At December 31, 2011, GMO had $40.0 million of commercial paper outstanding at a weighted-average interest rate of 0.88%, had issued letters of credit totaling $13.2 million and had no outstanding cash borrowings under the credit facility.
 
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9.  
LONG-TERM DEBT

Great Plains Energy’s and KCP&L’s long-term debt is detailed in the following table.
           
   
March 31
December 31
 
Year Due
2012
2011
KCP&L
 
(millions)
General Mortgage Bonds
         
4.97% EIRR bonds(a)
2015-2035 $ 106.9   $ 119.3  
7.15% Series 2009A (8.59% rate)(b)
2019   400.0     400.0  
4.65% EIRR Series 2005
2035   50.0     50.0  
5.375% EIRR Series 2007B
2035   73.2     73.2  
Senior Notes
             
5.85% Series (5.72% rate)(b)
2017   250.0     250.0  
6.375% Series (7.49% rate)(b)
2018   350.0     350.0  
6.05% Series (5.78% rate)(b)
2035   250.0     250.0  
5.30% Series
2041   400.0     400.0  
EIRR bonds 4.90% Series 2008
2038   23.4     23.4  
Other
2012-2018   2.9     2.9  
Current maturities
    (0.4 )   (12.7 )
Unamortized discount
    (4.1 )   (4.2 )
Total KCP&L excluding current maturities(c)
    1,901.9     1,901.9  
Other Great Plains Energy
             
GMO First Mortgage Bonds 9.44% Series
2013-2021   10.1     11.2  
GMO Pollution Control Bonds
             
5.85% SJLP Pollution Control
2013   5.6     5.6  
0.234% Wamego Series 1996(d)
2026   7.3     7.3  
0.401% State Environmental 1993(d)
2028   5.0     5.0  
GMO Senior Notes
             
11.875% Series
2012   500.0     500.0  
8.27% Series
2021   80.9     80.9  
Fair Value Adjustment
    8.1     16.3  
GMO Medium Term Notes
             
7.16% Series
2013   6.0     6.0  
7.33% Series
2023   3.0     3.0  
7.17% Series
2023   7.0     7.0  
Great Plains Energy 2.75% Senior Notes (3.67% rate)(b)
2013   250.0     250.0  
Great Plains Energy 6.875% Senior Notes (7.33% rate)(b)
2017   100.0     100.0  
Great Plains Energy 4.85% Senior Notes (7.34% rate)(b)
2021   350.0     350.0  
Great Plains Energy 5.292% Senior Notes
2022   287.5     -  
Great Plains Energy 10.00% Equity Units Subordinated Notes
    -     287.5  
Current maturities
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