Filed
by
Great Plains Energy Incorporated
pursuant
to Rule 425 under the Securities Act of 1933
and
deemed filed pursuant to Rule 14a-12
under
the
Securities Exchange Act of 1934
Subject
Company: Aquila, Inc.
Commission
File No.: 333-142715
This
filing consists of questions and answers distributed by Great Plains Energy
Incorporated to its employees and others on August 9, 2007.
FINAL
-- August 8, 2007 Missouri Public Service Commission
Filing
FAQs
August
8, 2007 Filing
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1.
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Why
did Great Plains Energy make the August 8, 2007 update filing with
the
Missouri Public Service Commission
(MPSC)?
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In
April
2007, Aquila, Black Hills, KCP&L and Great Plains Energy made all necessary
state regulatory filings related to the proposed transactions. The filings
disclosed information to the state commissions regarding expected
organizational, financial, customer and community impacts and benefits
(synergies) pertinent to the proposed transactions. Within the
original filing the companies also agreed to provide the MPSC with additional
details regarding the expected synergies in August.
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2.
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Is
there a deadline for the
filing?
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Yes,
during discussions with the MPSC in May, Great Plains Energy and KCP&L were
requested to provide the additional information pertaining to expected synergies
no later than August 8, 2007.
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3.
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What
is in the filing?
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The
filing contains updated synergies expected from the proposed Great Plains
Energy/Aquila transaction. It also presents a high-level view of the
organization including staffing expectations and plans for
facilities.
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4.
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Do
we plan to file in Kansas on August
8?
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Yes,
we
will also be making a filing in Kansas on August 8th.
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5.
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Why
didn’t Black Hills make a similar
filing?
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Since
Black Hills is not acquiring any assets in Missouri, they are not subject
to
this request for information.
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6.
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What
are the highlights of the MPSC
filing?
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We
expect
to achieve a total of approximately $305 million of utility non-fuel operating
synergies over the five-year period of 2008-2012. These synergies
primarily come from four areas: $33 million from integration projects that
reduce non-fuel operating and maintenance costs, $54 million from projects
that
reduce purchase power costs or increase revenue, $87 million from non-fuel
operating and maintenance budget reductions, and $131 million from supply
chain
savings. We currently anticipate total synergies of approximately
$643 million over the five-year period of 2008-2012. Costs to achieve these
synergies (transaction and incremental transition costs) are currently estimated
at $140 million.
The
total
synergies include an estimated $302 million of corporate costs, most of which
are currently allocated to non-Missouri utility operations, including the
properties proposed to be sold to Black Hills Corporation. The
total synergies also include an estimated $36 million of interest expense
savings, net of debt reacquisition costs.
The
estimated synergies announced today are different than what we originally
estimated we announced the deal in February, as well as the synergy estimates
in
the current amended joint proxy statement/prospectus filed with the SEC.
Through
the integration efforts of the transition teams, we now have a better
understanding of potential synergies that can be derived from the
transaction. The synergies estimates in the joint proxy
statement/prospectus will be updated when we file our next amendment with
the
SEC.
The
April
2007 filing contained a proposal to share estimated synergies between
shareholders and retail utility customers. In the August update, we
proposed that customers and shareholders equally share the estimated $305
million of non-fuel operating synergies, offset by the $45 million in
incremental transition costs, over five years.
Other
items of note include:
Positions:
The updated testimony also provides Great Plains Energy’s and KCP&L’s view
of staffing levels for the companies once the transaction closes. Great Plains
Energy and KCP&L expect to eliminate 355 Aquila positions, while retaining
900 positions to be filled from the approximately 1,250 Aquila Missouri
employees. Aquila Missouri employees may also be hired by Black Hills
Corporation in connection with its proposed acquisition of certain Aquila
assets. Additionally, Aquila Missouri employees may also be retained
to fill positions vacated through retirement and attrition.
The
companies are also working to refine the recruitment and selection process,
which involves matching the interests, talents and skills of Aquila employees
with the needs and opportunities at Great Plains Energy and Black Hills.
Facilities: We
expect to achieve efficiencies through facility consolidations and relocations,
including the sale of the 20 West 9th
building. We expect to use Aquila’s Raytown facility as its primary
call center, and use its current call center for back-up support. In
the transmission and delivery area, Aquila’s Platte City and Liberty centers
will be consolidated into KCP&L’s Northland facility, and we expect to
consolidate Aquila’s Lees Summit and Blue Springs centers with
KCP&L’s Dodson center at new facility that will be built in a
location to be determined. We must keep in mind that no changes will
be made until the proposed transactions close and until then all of our service
centers are expected to remain open at their present locations.
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7.
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Is
the information in the filing a final view of
synergies?
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To
prepare the filing, both Great Plains Energy and Aquila have scrutinized
their
financial and operational plans to make the best estimation of expected
synergies, but the information could change as the companies continue
integration planning.
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8.
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What
was the process for calculating the
synergies?
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The
transition goal is not to simply integrate the two companies’ operations, but to
build a Tier 1 organization. To that end, each integration planning team
analyzed related processes, facilities, positions and costs and then designed
its part of the integrated organization from the ground up, developing budgets
to support the plans.
Employees
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9.
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Will
any KCP&L employees be eliminated in the GPE/Aquila
transaction?
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No.
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10.
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How
does the company plan to operate after close with KCP&L’s three and
Aquila’s two existing bargaining
units?
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To
operate as one strong regional electric utility on Day 1, KCP&L intends to
pursue negotiations that would result in the integration of the Aquila employees
currently represented by IBEW 695 and 814 into KCP&L’s three existing
bargaining units. Achieving this would allow the company to have more
flexibility in aligning employees with customers’ needs and operationally
integrating common work and safety rules for all employees.
However,
in the event KCP&L is not successful in negotiating an appropriate
integration result, it will consider alternative strategies that could include
integration of certain Aquila functions and employees, and continuing to
operate
under the existing Aquila contracts for the remaining employees.
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11.
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Where
will KCP&L’s headquarters be located – and
why?
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The
facilities team has visited and analyzed every facility in both companies.
They
determined that although the historic 20 West Ninth building that was
beautifully restored by Aquila in the 1990s, it does not fit GPE’s
needs.
The
1201
Walnut location will remain as KCP&L’s headquarters’ office. We are
currently beginning negotiations for our 1201 Walnut lease and will include our
new needs in the negotiation.
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12.
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What
other facilities will be affected by the
transaction?
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Consolidation
is planned where it makes sense, but plans are not yet final.
The
801
Call Center will relocate to Aquila’s Raytown facility bringing multiple
benefits. The work environment is very conducive for call center operations
in
Raytown and the move will lower KCP&L’s exposure from having multiple
facilities located in close proximity. For example, last winter’s chemical fire
in the East Bottoms created the possibility of having to temporarily close
KCP&L’s 1201 Walnut, 801 and F&M facilities. The move to the Raytown
facility also will eliminate the possible multimillion dollar investment
for
expanded parking for 801 and provide employees with free on-site
parking.
Other
facilities-related changes include:
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•
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801
will become the Call Center backup
site.
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•
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KCP&L
will investigate consolidating the Lee’s Summit Service Center
(SC)/garage, the Blue Springs SC and the Dodson SC into a brand
new
service center in the Lee’s Summit
area.
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•
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Liberty
SC and Platte SC will be consolidated in the Northland Service
Center. At
the same time, Platte City/Liberty trouble men will be added to
provide
better, 24/7 service in those
areas.
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Next
Steps
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13. What
happens next in the acquisition
process?
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The
next
steps in the deal process are the Aquila and Great Plains Energy shareholder
vote (expected to happen in September or October) and completion of regulatory
approval processes.
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14.
What is the likelihood that the proxy vote will
pass?
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Both
Great Plains Energy and Aquila are optimistic that shareholders will approve
the
transaction, because the sale will benefit companies’ current and future
customers, communities, employees and shareholders.
15. What
happens after the proxy votes?
The
milestone events that will occur between the proxy votes and deal close are
as
follows:
In
terms
of integration planning and preparation, the teams are completing the third
phase on the Integration Planning and Preparation diagram. More intense work
is
now beginning on building the Tier 1 organization, which will include numerous
“enabler projects” and other key planning decisions.
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16.
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Will
this impact KCP&L’s 2007 financial
results?
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The
filing does not impact its financial results. Great Plains Energy and
KCP&L financial results currently include costs resulting from the
integration planning efforts, however non-labor transition costs are excluded
from core earnings.
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17.
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How
will customers be notified of the transactions and expected
synergies?
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KCP&L
and Aquila will interact with their respective customers until the transactions
close. Each will work to keep customers informed.
Communities
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18.
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How
will Aquila communities be notified of the transactions and expected
synergies?
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Aquila
will remain the primary interface with communities in its service areas until
the transactions close. Its state leaders and teams will continue to meet
with
local leaders to keep them informed of the deal progress and any impact/changes
that may be pertinent to their areas.
Reason
for Acquisition
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19. What
is the purpose of the GPE/Aquila
transaction?
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As
stated
in the February 7, 2007 announcement, the transaction will create a strong
regional utility that is committed to improving the total living environment
and
providing superior service, reliability, environmental benefits and long-term
low prices. It will provide increased value for investors and more opportunity
for employees to be part of a growing Tier 1 regional utility, along with
growth
that delivers significant value to all stakeholders.
Definitions
20. What
does “Tier 1” mean?
The
term
“Tier 1” is used to describe a company that is performing in the top quartile,
as compared to its industry peers, in specific operational areas. Great Plains
is developing a strategy for achieving Tier 1 performance in each functional
area.
The
term
“Day 1” is used to describe the day following the close of the
transactions. At that point in time, the management and operating
duties of running the Aquila businesses will be the responsibility of Great
Plains and Black Hills for the properties acquired.
Questions
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22.
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Where
can I get answers to my questions about this filing or other
transition-related
questions?
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We
have
established an e-mail link on the transaction page of the
intranet. You can also call Margie Paxton at 816-556-2136 or your
supervisor as well. Questions are encouraged.
Information
Concerning Forward-Looking Statements
Statements
made in this document 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, Great Plains Energy is
providing a number of important factors, risks and uncertainties that could
cause actual results to differ materially for the provided forward-looking
information. These include: obtaining shareholder approvals required for
the
transactions; the timing of, and the conditions imposed by, regulatory approvals
required for the transactions; satisfying the conditions to the closing of
the
transactions; Great Plains Energy successfully integrating the acquired Aquila
businesses into its other operations, avoiding problems which may result
in
either company not operating as effectively and efficiently as expected;
the
timing and amount of cost-cutting synergies; unexpected costs or unexpected
liabilities, or the effects of purchase accounting may be different from
Great
Plains Energy's expectations; the actual resulting credit ratings of Great
Plains Energy or Aquila or their respective subsidiaries; the effects on
the
businesses of Great Plains Energy or Aquila resulting from uncertainty
surrounding the transactions; the effect of future regulatory or legislative
actions on Great Plains Energy or Aquila; and other economic, business, and/or
competitive factors. Additional factors that may affect the future results
of
Great Plains Energy and Aquila are set forth in their most recent quarterly
report on Form 10-Q or annual report on Form 10-K with the Securities and
Exchange Commission ("SEC"), which are available at www.greatplainsenergy.com
and www.aquila.com, respectively. Great Plains Energy undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a
result
of new information, future events or otherwise.
Additional
Information and Where to Find It
In
connection with the acquisition of Aquila by Great Plains Energy, Great Plains
Energy filed with the SEC a registration statement on Form S-4 (Registration
No.
333-142715), containing a preliminary joint proxy statement/prospectus and
other
relevant materials. The final joint proxy statement/prospectus will be mailed
to
the stockholders of Great Plains Energy and Aquila. INVESTORS AND SECURITY
HOLDERS OF GREAT PLAINS ENERGY AND AQUILA ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT GREAT PLAINS ENERGY,
AQUILA AND THE ACQUISITION. The registration statement and joint proxy
statement/prospectus and other relevant materials (when they become available),
and any other documents filed by Great Plains Energy or Aquila, Inc., with
the
SEC, may be obtained free of charge at the SEC’s web site at www.sec.gov. In
addition, investors and security holders may obtain free copies of the documents
(when they are available) filed with the SEC by Great Plains Energy by directing
a request to: Great Plains Energy, 1201 Walnut, Kansas City, MO 64106, Attn:
Investor Relations. Investors and security holders may obtain free copies
of the
documents filed with the SEC by Aquila by contacting Aquila, 20 West Ninth
Street, Kansas City, MO 64105, Attn: Investor Relations.
Participants
in Proxy Solicitation
Great
Plains Energy, Aquila, and their respective executive officers and directors
may
be deemed to be participants in the solicitation of proxies relating to the
proposed transaction. Information about the executive officers and directors
of
Great Plains Energy and their ownership of Great Plains Energy common stock
is
set forth in the proxy statement for Great Plains Energy’s 2007 Annual Meeting
of Stockholders, which was filed with the SEC on March 19,
2007. Information regarding Aquila, Inc., directors and executive
officers and their ownership of Aquila, Inc., common stock is set forth in
the
proxy statement for Aquila’s 2007 Annual Meeting of Stockholders, which was
filed with the SEC on March 21, 2007. Investors and security holders
may obtain more detailed information regarding the direct and indirect interests
of Great Plains Energy, Aquila, and their respective executive officers and
directors in the proposed transaction by reading the joint proxy
statement/prospectus regarding the proposed transaction.
