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Key Capital

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  1. Key Capital

  2. Valuation Steps Key Capital

  3. Recommendation: Hold Shares of GXP Current Price: $19.93 Price Target: $20.15 Upside: 1.10% Recommendation: Hold Key Capital Source: Company Reports and Key Capital Estimates

  4. Key Capital

  5. Major driver for rate increase Key Capital

  6. Key Capital • In the recent rate case outcome for KCP&L (KS), the company was granted 4.6% rate increase compared to a request of 11.5%. • In November 2010, MPSC staff filed recommendation suggesting return on equity in the range of 8.5% -9%. This is well below the requested ROE of 11%. Source: Company Reports

  7. Best Available Retrofit Technology (BART) will cost between $800-900 million. • Transmission investments include a proposed 170-mile 345-kV line costing approximately $380 million. • Possible involvement in building of an additional Nuclear Plant in Callaway estimated total cost as of 2008 for all the partners is estimated at $6 Billion. Key Capital Source: Company Reports and Key Capital Estimates

  8. Key Assumptions of our Model Key Capital Source: Company Reports and Key Capital Estimates

  9. The Powder River Basin prices for coal have remained stable Key Capital Source: EIA

  10. Cash flow and Income Statement Data for GXP Projected FCF/S and CFO/S Key Capital Source: Company Reports and Key Capital Estimates Source: Company Reports and Key Capital Estimates

  11. Industry vs. GXP Key Capital Source: Yahoo

  12. PEER Group vs. GXP Key Capital Source: NASDAQ

  13. Valuation based on P/E multiple • Forward P/E Valuation and PEER Group show small discount relative to GXP current share price Source: Company’s Reports and Key Capital Estimates Key Capital

  14. Investment Risks Great Plains Key Capital

  15. Current Price: $19.93 • Price Target: $20.15 • Recommendation: Hold • Upside of 1.10% is not enough to compensate investors based on our forward P/E valuation. Recommendation: Hold Current Price: $19.93 Price Target: $20.15 Upside: 1.10% Key Capital

  16. Company Information Industry Information Financial information Key Capital

  17. Company Information

  18. Incorporated in 2001 • The holding company of KCP&L and GMO. • Operates under the brand name KCP&L. • Primary source of business comes from Electric Utility. • Acquired Aquila in July of 2008. • Serves over 820,000 customers in Missouri and Kansas Key Capital

  19. Sale of Strategic Energy and Acquisition of Aquila Points • Great Plains netted $102.6 M from the sale of Strategic Energy in 4/3/2008. This resulted in a loss of earnings of 0.26 cents a share. • Acquisition of Aquila was completed in 7/15/2008. During the transaction Aquila shareholders were compensated with 1.80 in cash and .0856 shares of Great Plains. This resulted in earnings per share dilution of 0.28 cents a share for 2008 due to the issuance of 32.7 Million shares of GXP. Resulting in a total cost of 1.7 Billion. • Great Plains Energy expects the transaction to deliver financial and operational benefits In several areas. Total pre-tax synergies are estimated to reach about $500 million over a five-year period, with costs to achieve, including transaction costs, of approximately $185 million. • Operational synergies over the same five-year period are expected to total about $310 million. These synergies are expected to result from: · Improved operational and scale efficiencies enabled by adjacent service areas; · Reduction in overlapping positions and overhead expenses; · Capturing the benefits of more efficient procurement; · Integrating and enhancing information technology; and · Investments in infrastructure and energy efficiency. Key Capital Source: Company Reports and Key Capital Estimates

  20. Service Territory and Capacity Key Capital

  21. NRC SPP • NERC GXP MPSC KCC FERC • Highly Regulated Electric Utility • Public Service Commission of the state of Missouri • Kansas Corporation Commissions • Southwest Power Pool • Federal Energy Regulatory Commission • Nuclear Regulatory Commission • Northern American Electric Reliability Commission • Environmental Protection Agency EPA Key Capital

  22. GXP as an Electric Utility Key Capital Source: Reuters

  23. Key Executives Key Capital

  24. 2009 Revenue Breakdown GXP GXP Sales by Jurisdiction Key Capital KCP&L GMO Source: Company Reports

  25. Major News in 2010 On May 2010,Great Plains Energy and KCP&L announced the promotion of Terry Bassham to executive vice president of Utility while James Shay has been appointed senior vice president of Finance and Strategic Planning and chief financial officer of Great Plains Energy and KCP&L. In August, KCP&L Announced that Iatan II Has Completed In-Service Testing. The plant met in-service criteria subject to confirmation by regulatory authorities. In November, Great Plains Energy and KCP&L announced the promotion of Heather Humphrey to General Counsel and Vice President - Human Resources, and Ellen Fairchild to Vice President - Corporate Secretary and Chief Compliance Officer. In November 20, The Kansas Corporation Commission (KCC) released its order regarding KCP&L’s Kansas rate increase request. The order calls for a $21.8 million, or 4.5% increase in revenue. KCP&L originally requested a $55.2 million, or 11.5% increase in revenue. Key Capital

  26. YTD Stock Price Chart Key Capital Source: Factset

  27. Strength at Core Key Capital Source: Company Reports

  28. GXP Stock Holding Summary Key Capital Source: NASDAQ

  29. Institutional Ownership: GXP vs. Competitors Key Capital Source: Nasdaq

  30. SWOT Analysis Key Capital

  31. Industry Information

  32. Rebased Electricity Demand in Residential Segment Key Capital

  33. Rebased Electricity Demand in Commercial Segment Key Capital

  34. Rebased Electricity Demand in Industrial Segment Key Capital

  35. Population (Missouri and Kansas) Key Capital Source: Census.gov

  36. GDP of Kansas and Missouri Key Capital Source: Bureau Economic Analysis

  37. Business Process and Cost Sharing Key Capital Source: EIA

  38. Key Capital Source: EIA

  39. Demand for Growth for Electricity is Expected to Decline Key Capital Source: EIA

  40. Expected Fuel Mix to generate electricity in the long run Key Capital Source: EIA

  41. Natural Gas Prices are expected to stay low due to oversupply U.S. Annual shale gas production (trillion cubic feet per year) Key Capital U.S. shale gas production increased 14-fold over the last decade; reserves tripled over the last few years Source: EIA

  42. Natural Gas Futures are indicating stability in prices Key Capital Source: EIA

  43. Factors that can change the fuel mix for electricity generation • Clean Air Transportation Rule • Ash Disposal Requirements • Requirements for cooling water systems • Variation in input costs in different resources • Possible Regulations on Carbon Emissions Key Capital

  44. Financial Section

  45. GXP as an Electric Utility Company Key Capital Source: Reuters

  46. Income Statement Source: Company Reports and Key Capital Estimates Key Capital

  47. Balance Sheet Key Capital Source: Company Reports and Key Capital Estimates

  48. Statement of Cash Flows Key Capital Source: Company Reports and Key Capital Estimates

  49. Common Size Balance Sheet Key Capital Source: Company Reports and Key Capital Estimates

  50. Key Financial Ratios Key Capital Source: Company Reports and Key Capital Estimates