Great Plains Energy Exec Insights: Wolf Creek, Shareholder Returns

On Friday, Great Plains Energy Inc (NYSE:GXP) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Wolf Creek

Shahriar Pourreza – Citigroup: When I look at your quarter you lost $0.07 right if we exclude the weather impact, your loss comes to closer to about a $0.01 and if we exclude the unplanned outage at Wolf Creek, you actually earned about $0.05 for the quarter. The question is really on Wolf Creek, I think it was determined that the problem at the plant was really stemmed from a contractor error, what do you guys doing to recoup the additional purchased power costs and O&M increases from the plant? Are you going after the contractor?

Terry Bassham – President and COO: This is Terry. The initial cause of the outage wasn’t a contractor, it was a breaker failure then a subsequent issue that occurred and we did find in the product that a contractor could have and should have worked a little more diligently on some outage work. Typically those contracts don’t allow for consequential damages, but we’ve certainly dealt with the issues around that to ensure that in future work not only do we get better performance but we’re managing that work as well to provide insurance that are overview checks up on that as well. So we are working to make sure that in the future we don’t have those kind of issues.

Shahriar Pourreza – Citigroup: Then just let me ask you just something else’s – some news came out of FERC yesterday. They essentially agreed to hear some challenges on the allowed ROE, but then from complaints in the New England region. Is there like any potential to the SPP region or how close are you guys monitoring this?

Terry Bassham – President and COO: We are obviously monitoring very closely. It’s brand-new and ROEs at the FERC level has been discussed for quite a while and will continue to be, and so we will follow it. I don’t expect there to be anything that we would know today other than what you read to be helpful, but as we follow along, we will be attentive in managing that. We continue to expect fair and full returns from FERC assets and we are comfortable with that.

Shahriar Pourreza – Citigroup: Just keep in mind, the other positive thing for us from a transmission investment standpoint is the Construction Work In Progress. So that’s not something we have available to us in Missouri. So, even with a normal ROE, these are very attractive investments.

Shareholder Returns

Ashar Jahan – Visium Partners: How should we– I guess one thing which we have been little bit frustrated as investors has been improved returns on the stock and I think that’s got something to do with I guess this regulatory lag issue, but is there a timeframe that you look forward in terms of you plan that how you can progressively improve returns to your shareholders and we can get out of a cycle of just filing rate cases every year and year and year because the regularly lag just doesn’t keep disappearing. Could you just elaborate as you takeover, how about you improve your shareholder returns?

Terry Bassham – President and COO: Absolutely, we laid out a plan in august, details around the plan and a strategic vision around a plan to do exactly as you said. As we got in the rate cases to be filed, we obviously saw the economy and gas prices and other things affect our off system sales which impact our rate case at and our current lag that forced us to reduce guidance earlier in the year, but I think as you’ve seen here even though we had weather and other things which you know you have to deal with, we didn’t reduce our guidance further and our plan is to do still what we said in August which is to manage our cost such that when we have things that affect us, we manage around them, but we have to get the structure right and we have a structural issue around regulatory lag that these cases we’ve just filed, we believe will address that. A big driver of that in Kansas City Power & Light MO is off-system sales which that credit is buried in base rates. We believe that the file in this case will reset that at a level which is manageable, and then we have riders and trackers that we’ve asked for as well as just cost to service adjustments for the last of the CEP cleanup, if you will, such that we believe we in ’13 can manage within our 50 basis points we’ve talked with reasonable results from our rate cases this year. From there on, we would expect to file rate cases, primarily would be the plan when we have asset additions. You can’t say for sure, but with the economy hopefully beginning to stabilize and grow some, we would expect not to have to file another rate case until we had an asset addition or some other major adjustment in the marketplace, and not be in a cycle to file up rate cases every year. Our customers and we are in a situation where we think we’re going to be able to manage over the next several years without that annual cycle.

Ashar Jahan – Visium Partners: That is very important is that, it’s like other companies like (NV) and all that they come to end of a plan, and it’s time to kind of harvest and improve our cash flows and not file rate cases and add assets. I think so I hope you have – I’m hearing the same priority to get rid of the regulatory lag and not get into another cycle of cases with plant additions?

Terry Bassham – President and COO: I think that’s exactly what you see from us that was our plan originally I don’t think it’s pretty difficult to see the recession that we had and the $2 gas that’s now affected our off-system sales thesis, but that’s exactly where we’re at, that’s exactly why we didn’t purchased the last a couple of hundred megawatts of wind, the reserve capital that’s one of the reasons we entered in the Transource to help to be careful with capital, so we absolutely understand we have EPA regulations and things that need to be done. We’ve got those built-in, and we’re being very cautious with additional capital needs moving forward, so we can have much as flexibility as possible to avoid that up and down in rate case requirements on a more regular basis.