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Great Plains Energy Announces Third Quarter Financial Results; Increases 2005 Core Earnings Guidance

Posted on: Tuesday, 1 November 2005, 18:00 CST

Great Plains Energy Incorporated (NYSE:GXP) today announced third quarter 2005 earnings available for common shareholders of $90.4 million or $1.21 per share, compared to third quarter 2004 earnings of $75.5 million or $1.02 per share. Core earnings, which exclude the impact of KLT Gas discontinued operations and mark-to-market gains and losses on energy contracts, were $77.9 million or $1.05 per share, compared to $65.0 million or $0.87 per share in the third quarter of 2004.

Year to date September 30, 2005, earnings were $131.7 million or $1.77 per share, compared to $143.6 million or $2.02 per share for the same period last year. Core earnings year to date were $118.4 million or $1.59 per share, compared to $135.4 million or $1.90 per share for same period last year.

Chairman Michael Chesser commented, "During the quarter KCP&L overcame the failure of the relatively new main transformer at our Hawthorn 5 coal plant. The 32-day outage caused increased fuel and purchased power expenses and lower wholesale revenues. Despite this outage, 2005 remains on track to be one of the company's best years for coal fleet availability. With Hawthorn 5 now back in service, KCP&L expects to be able to sell wholesale MWh's at higher prices than previously expected during the fourth quarter."

"Strategic Energy's performance has also been encouraging," Chesser pointed out. "Despite the challenging environment of high energy prices, Strategic Energy's year to date MWh's delivered are consistent with those for 2004 and it has retained more than 80% of its customer load. We've experienced strong demand for our new index-based products, which accounted for almost 60% of new contract volume for the year. We continue to believe Strategic Energy has re-positioned itself to succeed within the volatile energy price environment and to capitalize on growth opportunities in competitive supply once the pricing environment improves."

Mr. Chesser concluded, "Based on our performance year to date and expectations for higher wholesale prices in the fourth quarter, we are increasing Great Plains Energy's 2005 core earnings guidance to a range of $2.15 to $2.30 per share." (See Attachment G)

Kansas City Power & Light

KCP&L earned $69.1 million in the third quarter 2005, compared to $64.2 million in the same period last year. Third quarter 2005 revenues were $353.0 million, up from $323.3 million last year.

Retail revenues increased $31.5 million to $309.5 million compared to the same quarter last year driven by warmer weather. Wholesale revenues during the quarter were $39.3 million, down 3% from the year ago period. Higher retail usage, the Hawthorn 5 outage and coal conservation measures led to third quarter wholesale volumes which were 37% lower than last year. However, the decrease in wholesale volume was largely offset by wholesale prices that were almost double last year's average level.

Fuel and purchased power costs during the third quarter were $36.0 million higher than last year driven by the Hawthorn 5 outage and higher natural gas prices. Third quarter income taxes were $16.2 million lower than last year primarily due to a lower composite tax rate and lower taxable income. KCP&L also benefited from the regulatory accounting treatment of pension expense.

Year to date September 30, 2005, KCP&L's earnings were $109.0 million, compared to $118.4 million in the same period last year. The lower year to date earnings were driven by a $37.9 million increase in fuel and purchased power expenses, and the effect of scheduled and forced outages on wholesale sales, which more than offset favorable weather, higher wholesale prices and lower interest and income tax expenses.

Strategic Energy

Strategic Energy earned $18.1 million in the third quarter of 2005, compared to $13.4 million in the same period last year. Third quarter revenues increased 10% from the same period last year to $429.9 million driven by increased power prices, while retail MWhs delivered during the quarter declined by 5%. Core earnings in the third quarter of 2005, which exclude $10.7 million in after-tax, net mark-to-market gains on energy contracts, were $7.4 million or $0.10 per share in the third quarter compared to $10.9 million or $0.14 per share last year. As discussed last quarter, results were also impacted by a transitional charge, called Seams Elimination Cost Adjustment or SECA, related to the Midwest Independent Transmission System Operator, Inc. and PJM Interconnection markets.

Third quarter retail gross margins per MWh were $7.85, which includes $3.36 per MWh due to net mark-to-market gains on energy contracts. This compares to retail gross margins of $5.50 last year, which included $0.77 of net mark-to-market gains on energy contracts. Average retail gross margin per MWh on new contracts in the third quarter was $3.53, up from $2.86 in the second quarter, primarily due to increased sales to smaller, high margin customers.

Year to date September 30, 2005, Strategic Energy earned $34.6 million, compared to $32.0 million in the same period last year. Earnings for the year to date period were impacted by mark-to-market gains on energy contracts and $4.7 million after tax due to SECA. Core earnings, which exclude $15.1 million in after-tax, net mark-to-market gains on energy contracts, were $19.5 million or $0.26 per share year to date compared to $29.8 million or $0.42 per share last year. Core earnings were also impacted by SECA charges. Year to date MWhs delivered were flat compared to last year, while retail gross margins per MWh were $6.30, which included $1.71 per MWh of net mark-to-market gains on energy contracts. This compares to $6.00 in 2004, which included $0.25 per MWh of net mark-to-market gains on energy contracts.

At September 30, Strategic Energy had 4.1 million MWhs in backlog for 2005. When combined with the 15.2 million MWhs delivered year to date, Strategic Energy expects 2005 deliveries to be within the previously stated range of 17.5-21 million MWhs.

"Other" Category

The "other" category was breakeven during the quarter compared to a loss of $10.8 million in the third quarter last year. Results in this year's quarter reflect the release of tax reserves. Additionally, while not affecting Great Plains Energy's consolidated earnings, results in the same quarter last year included a loss due to changes in parent company tax allocations.

Non-GAAP Financial Measure

Great Plains Energy provides in its earnings releases descriptions of "core earnings" in addition to earnings calculated in accordance with GAAP. Great Plains Energy also provides its earnings guidance in terms of core earnings. Core earnings is a non-GAAP financial measure that differs from GAAP earnings because it excludes the effects of discontinued operations, certain unusual items and mark-to-market gains and losses on energy contracts. Core earnings for historical periods are reconciled to GAAP earnings in Attachments B and C.

Great Plains Energy previously provided a non-GAAP financial measure entitled "Ongoing earnings" which excluded the effects of discontinued operations and certain non-recurring items but included mark-to-market gains and losses on energy contracts. The company believes core earnings provide to investors a more meaningful indicator of its results that is comparable among periods because it excludes the effects of discontinued operations, unusual items and mark-to-market gains and losses on energy contracts. These items are excluded from core earnings because they may not be indicative of Great Plains Energy's prospective earnings potential. Investors should note that this non-GAAP measure involves judgments by management including whether an item is classified as an unusual item. Core earnings is used internally to measure performance against budget and in reports for management and the Board of Directors. Great Plains Energy's definition of core earnings may differ from similar terms used by other companies.

Great Plains Energy Incorporated (NYSE:GXP) headquartered in Kansas City, MO, is the holding company for Kansas City Power & Light Company, a leading regulated provider of electricity in the Midwest, and Strategic Energy LLC, a competitive electricity supplier. The Company's web site is www.greatplainsenergy.com.

CERTAIN FORWARD-LOOKING INFORMATION -- Statements made in this release 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. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company is 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 the regional, national and international markets, including but not limited to regional and national wholesale electricity markets; market perception of the energy industry and the Company; 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 and constraints placed on the Company's actions by the Public Utility Holding Company Act of 1935; adverse changes in applicable laws, regulations, rules, principles or practices governing tax, accounting and environmental matters including, but not limited to, air quality; financial market conditions and performance including, but not limited to, changes in interest rates and in availability and cost of capital and the effects on the Company's pension plan assets and costs; ability to maintain current 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; increased competition including, but not limited to, retail choice in the electric utility industry and the entry of new competitors; ability to carry out marketing and sales plans; weather conditions including weather-related damage; cost, availability, quality and deliverability of fuel; ability to achieve generation planning goals and the occurrence and duration of unplanned generation outages; delays in the anticipated in-service dates of additional generating capacity; nuclear operations; ability to enter new markets successfully and capitalize on growth opportunities in non-regulated businesses; performance of projects undertaken by the Company's non-regulated businesses and the success of efforts to invest in and develop new opportunities; and other risks and uncertainties. This list of factors is not all-inclusive because it is not possible to predict all factors. Attachment A GREAT PLAINS ENERGY Consolidated Statements of Income (Unaudited) Three Months Ended Year to Date September 30 September 30 2005 2004 2005 2004 ---------------------------------------------------------------------- Operating Revenues (thousands) Electric revenues - KCP&L $352,974 $323,287 $858,272 $844,447 Electric revenues - Strategic Energy 429,407 390,747 1,099,895 1,022,887 Other revenues 446 817 1,495 2,495 ------------------------------------------- Total 782,827 714,851 1,959,662 1,869,829 ---------------------------------------------------------------------- Operating Expenses Fuel 73,935 52,257 160,228 135,113 Purchased power - KCP&L 28,303 14,015 56,590 43,835 Purchased power - Strategic Energy 386,499 358,879 1,003,201 930,637 Other 76,358 79,108 240,628 236,748 Maintenance 19,230 19,276 69,140 63,306 Depreciation and amortization 38,382 37,999 114,485 112,084 General taxes 31,197 28,468 83,619 78,492 (Gain) loss on property 3,419 (613) 1,906 (771) ------------------------------------------- Total 657,323 589,389 1,729,797 1,599,444 ---------------------------------------------------------------------- Operating income 125,504 125,462 229,865 270,385 Non-operating income 3,563 1,626 15,334 4,595 Non-operating expenses (4,699) (6,914) (15,671) (13,393) Interest charges (17,904) (17,973) (53,777) (55,278) ---------------------------------------------------------------------- Income from continuing operations before income taxes, minority interest in subsidiaries and loss from equity investments 106,464 102,201 175,751 206,309 Income taxes (17,300) (35,161) (32,396) (67,273) Minority interest in subsidiaries - 1,283 (7,805) 848 Loss from equity investments, net of income taxes (69) (461) (758) (1,074) ---------------------------------------------------------------------- Income from continuing operations 89,095 67,862 134,792 138,810 Discontinued operations, net of income taxes 1,780 8,067 (1,826) 6,048 ---------------------------------------------------------------------- Net income 90,875 75,929 132,966 144,858 Preferred stock dividend requirements 412 412 1,235 1,235 ---------------------------------------------------------------------- Earnings available for common shareholders $90,463 $75,517 $131,731 $143,623 ---------------------------------------------------------------------- Average number of common shares outstanding 74,653 74,270 74,561 71,251 Basic and diluted earnings (loss) per common share Continuing operations $1.19 $0.91 $1.79 $1.93 Discontinued operations 0.02 0.11 (0.02) 0.09 ---------------------------------------------------------------------- Basic and diluted earnings per common share $1.21 $1.02 $1.77 $2.02 ---------------------------------------------------------------------- Cash dividends per common share $0.415 $0.415 $1.245 $1.245 ----------------------------------------------------------------------

Attachment B GREAT PLAINS ENERGY Consolidated Earnings and Earnings Per Share Three Months Ended September 30 (Unaudited) ---------------------------------------------------------------------- Earnings per Great Plains Energy Earnings Share ----------------- ---------------- 2005 2004 2005 2004 ---------------------------------------------------------------------- (millions) KCP&L $69.1 $64.2 $0.92 $0.86 Strategic Energy 18.1 13.4 0.24 0.18 KLT Investments 1.9 1.1 0.03 0.01 Other - (10.8) - (0.14) ------------------------------------ Income from continuing operations 89.1 67.9 1.19 0.91 KLT Gas discontinued operations, net of income taxes 1.8 8.0 0.02 0.11 Preferred dividends (0.5) (0.4) - - ---------------------------------------------------------------------- Earnings available for common shareholders $90.4 $75.5 $1.21 $1.02 ---------------------------------------------------------------------- Reconciliation of GAAP to Non-GAAP Earnings available for common shareholders $90.4 $75.5 $1.21 $1.02 Reconciling items Strategic Energy -- mark-to- market impacts from energy contracts (10.7) (2.5) (0.14) (0.04) KLT Gas -- Discontinued operations (1.8) (8.0) (0.02) (0.11) ---------------------------------------------------------------------- Core earnings $77.9 $65.0 $1.05 $0.87 ----------------------------------------------------------------------

Attachment C GREAT PLAINS ENERGY Consolidated Earnings and Earnings Per Share Year to Date September 30 (Unaudited) ---------------------------------------------------------------------- Earnings per Great Plains Energy Earnings Share ----------------- ---------------- 2005 2004 2005 2004 ---------------------------------------------------------------------- (millions) KCP&L $109.0 $118.4 $1.46 $1.66 Strategic Energy 34.6 32.0 0.46 0.45 KLT Investments 2.4 7.5 0.03 0.11 Other (11.2) (19.1) (0.14) (0.27) ------------------------------------ Income from continuing operations 134.8 138.8 1.81 1.95 KLT Gas discontinued operations, net of income taxes (1.8) 6.0 (0.02) 0.09 Preferred dividends (1.3) (1.2) (0.02) (0.02) ---------------------------------------------------------------------- Earnings available for common shareholders $131.7 $143.6 $1.77 $2.02 ---------------------------------------------------------------------- Reconciliation of GAAP to Non-GAAP Earnings available for common shareholders $131.7 $143.6 $1.77 $2.02 Reconciling items Strategic Energy -- mark-to- market impacts from energy contracts (15.1) (2.2) (0.20) (0.03) KLT Gas -- Discontinued operations 1.8 (6.0) 0.02 (0.09) ---------------------------------------------------------------------- Core earnings $118.4 $135.4 $1.59 $1.90 ----------------------------------------------------------------------

Attachment D GREAT PLAINS ENERGY Summary Income Statement by Segment Three Months Ended September 30, 2005 (Unaudited) ---------------------------------------------------------------------- Consolidated Strategic GPE KCP&L Energy Other ---------------------------------------------------------------------- (millions) Operating revenues $782.9 $353.0 $429.9 $- Fuel (73.9) (73.9) - - Purchased power (414.8) (28.3) (386.5) - Other operating expense (126.9) (110.2) (14.3) (2.4) Depreciation and amortization (38.4) (36.7) (1.6) (0.1) Gain (loss) on property (3.4) (3.7) - 0.3 ---------------------------------------------------------------------- Operating income 125.5 100.2 27.5 (2.2) Non-operating income (expenses) (1.1) 0.3 0.7 (2.1) Interest charges (17.9) (15.0) (0.7) (2.2) Income taxes (17.3) (16.4) (9.4) 8.5 Loss from equity investments (0.1) - - (0.1) Discontinued operations 1.8 - - 1.8 ---------------------------------------- Net income $90.9 $69.1 $18.1 $3.7 ---------------------------------------------------------------------- Earnings per GPE common share $1.21 $0.92 $0.24 $0.05 ---------------------------------------------------------------------- GREAT PLAINS ENERGY Summary Income Statement by Segment Year to Date September 30, 2005 (Unaudited) ---------------------------------------------------------------------- Consolidated Strategic GPE KCP&L Energy Other ---------------------------------------------------------------------- (millions) Operating revenues $1,959.7 $858.3 $1,101.3 $0.1 Fuel (160.2) (160.2) - - Purchased power (1,059.8) (56.6) (1,003.2) - Other operating expense (393.4) (343.1) (37.6) (12.7) Depreciation and amortization (114.5) (109.7) (4.6) (0.2) Gain (loss) on property (1.9) (3.7) - 1.8 ---------------------------------------------------------------------- Operating income 229.9 185.0 55.9 (11.0) Non-operating income (expenses) (0.3) 9.3 1.8 (11.4) Interest charges (53.8) (45.1) (2.2) (6.5) Income taxes (32.4) (32.4) (20.9) 20.9 Minority interest in subsidiaries (7.8) (7.8) - - Loss from equity investments (0.8) - - (0.8) Discontinued operations (1.8) - - (1.8) ---------------------------------------- Net income (loss) $133.0 $109.0 $34.6 $(10.6) ---------------------------------------------------------------------- Earnings (loss) per GPE common share $1.77 $1.46 $0.46 $(0.15) ----------------------------------------------------------------------

Attachment E GREAT PLAINS ENERGY Consolidated Balance Sheets (Unaudited) September 30 December 31 2005 2004 ---------------------------------------------------------------------- ASSETS (thousands) Current Assets Cash and cash equivalents $58,414 $127,129 Restricted cash 17,500 7,700 Receivables, net 338,381 247,184 Fuel inventories, at average cost 19,650 21,121 Materials and supplies, at average cost 56,985 54,432 Deferred income taxes - 13,065 Assets of discontinued operations 1,255 749 Derivative instruments 92,797 6,372 Other 8,890 14,485 --------------------------- Total 593,872 492,237 ---------------------------------------------------------------------- Nonutility Property and Investments Affordable housing limited partnerships 28,424 41,317 Nuclear decommissioning trust fund 89,888 84,148 Other 18,865 32,739 --------------------------- Total 137,177 158,204 ---------------------------------------------------------------------- Utility Plant, at Original Cost Electric 4,913,145 4,841,355 Less-accumulated depreciation 2,286,249 2,196,835 --------------------------- Net utility plant in service 2,626,896 2,644,520 Construction work in progress 60,751 53,821 Nuclear fuel, net of amortization of $111,262 and $127,631 31,104 36,109 --------------------------- Total 2,718,751 2,734,450 ---------------------------------------------------------------------- Deferred Charges and Other Assets Regulatory assets 160,237 144,345 Prepaid pension costs 105,583 119,811 Goodwill 87,624 86,767 Derivative instruments 30,563 2,275 Other 56,573 60,812 --------------------------- Total 440,580 414,010 ---------------------------------------------------------------------- Total $3,890,380 $3,798,901 ----------------------------------------------------------------------

Attachment E continued GREAT PLAINS ENERGY Consolidated Balance Sheets (Unaudited) September 30 December 31 2005 2004 ---------------------------------------------------------------------- LIABILITIES AND CAPITALIZATION (thousands) Current Liabilities Notes payable $- $20,000 Commercial paper 13,600 - Current maturities of long-term debt 251,607 253,230 EIRR bonds classified as current - 85,922 Accounts payable 222,663 199,952 Accrued taxes 112,501 46,993 Accrued interest 12,936 11,598 Accrued payroll and vacations 27,657 32,462 Accrued refueling outage costs 5,525 13,180 Deferred income taxes 21,030 - Supplier collateral 17,500 7,700 Liabilities of discontinued operations 112 2,129 Derivative instruments 11,634 2,434 Other 24,645 22,497 ---------------------------- Total 721,410 698,097 ---------------------------------------------------------------------- Deferred Credits and Other Liabilities Deferred income taxes 616,512 632,160 Deferred investment tax credits 30,670 33,587 Asset retirement obligations 117,203 113,674 Pension liability 95,496 95,805 Regulatory liabilities 63,300 4,101 Derivative instruments 6,134 112 Other 75,092 84,311 ---------------------------- Total 1,004,407 963,750 ---------------------------------------------------------------------- Capitalization Common shareholders' equity Common stock-150,000,000 shares authorized without par value 74,728,020 and 74,394,423 shares issued, stated value 775,561 765,482 Unearned compensation (2,396) (1,393) Capital stock premium and expense (30,851) (32,112) Retained earnings 490,386 451,491 Treasury stock-34,868 and 28,488 shares, at cost (1,049) (856) Accumulated other comprehensive income (loss) 393 (41,018) ---------------------------- Total 1,232,044 1,141,594 Cumulative preferred stock $100 par value 3.80% - 100,000 shares issued 10,000 10,000 4.50% - 100,000 shares issued 10,000 10,000 4.20% - 70,000 shares issued 7,000 7,000 4.35% - 120,000 shares issued 12,000 12,000 ---------------------------- Total 39,000 39,000 Long-term debt 893,519 956,460 ---------------------------- Total 2,164,563 2,137,054 ---------------------------------------------------------------------- Commitments and Contingencies ---------------------------------------------------------------------- Total $3,890,380 $3,798,901 ----------------------------------------------------------------------

Attachment F GREAT PLAINS ENERGY Statistical Summary ---------------------------------------------------------------------- Three Months Ended Year to Date September 30 September 30 2005 2004 2005 2004 ---------------------------------------------------------------------- KCP&L Retail revenues (millions) $309.5 $278.0 $730.9 $687.9 Wholesale revenues (millions) $39.3 $40.4 $115.7 $144.0 Average wholesale price per MWh $50.86 $25.54 $40.18 $30.26 Wholesale sales (MWh) 918 1,457 3,166 4,801 Cooling degree days 1,116 726 1,564 1,100 Equivalent availability - coal plants 82 % 91 % 80 % 84 % Capacity factor - coal plants 76 % 85 % 76 % 80 % Strategic Energy MWhs delivered 5,424 5,734 15,185 15,198 MWhs delivered plus current year backlog N/A N/A 19,309 20,065 Average contract duration - overall (months) 15 5 13 8 Average contract duration - new business (months) 13 12 14 15 Average retail gross margins - overall $7.85 $5.50 $6.30 $6.00 Retention rate 39 % 82 % 65 % 83 % Retention rate including month to month customers 79 % 86 % 81 % 86 % ----------------------------------------------------------------------

Attachment G GREAT PLAINS ENERGY Core Earnings Guidance ---------------------------------------------------------------------- Previous 2005 Revised 2005 Guidance Range Guidance Range ------------------- ------------------- Kansas City Power & Light $1.96 - $2.03 $2.01 - $2.11 Strategic Energy(1) 0.26 - 0.31 0.30 - 0.34 KLT Investments 0.07 - 0.08 0.07 - 0.07 Other(2) (0.24) - (0.22) (0.23) - (0.22) ---------------------------------------------------------------------- Consolidated core EPS(3) $2.05 - $2.20 $2.15 - $2.30 ---------------------------------------------------------------------- (1) Represents Great Plains Energy's indirect ownership interest in Strategic Energy of just under 100%. (2) Other includes Home Service Solutions, Holding Company cost and other miscellaneous items. (3) Great Plains Energy is unable to reconcile its 2005 core earnings guidance to GAAP earnings per share because we do not predict the future impact of unusual items and mark-to-market gains or losses on energy contracts. The impact of unusual items could be material to our operating results computed in accordance with GAAP.

Source: Business Wire

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