S&P: Great Plains Energy on watch

Standard & Poor's said it placed the BBB long-term corporate credit ratings on Great Plains Energy Inc. and its regulated utility subsidiary, Kansas City Power & Light Co., on CreditWatch with negative implications.

At the same time, S&P said it lowered Kansas City Power's short-term rating to A-3 from A-2.

The rating action follows Great Plains' announcement that it will acquire 100% of the common stock of Aquila Inc. for roughly $1.7 billion, the agency noted, adding that Great Plains will finance the transaction with 40% cash and 60% stock.

Shortly after the merger's close, Great Plains will tender roughly 40% of Aquila's debt, the agency said.

The short-term rating downgrade and the long-term CreditWatch listing reflect concerns that the transaction, which comes as Kansas City Power begins to implement its $1.5 billion comprehensive energy plan, will - at least until the company's capital expenditure plan is complete and the Aquila integration underway - stress cash flows and add to leverage, the agency noted.

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