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NEW YORK, May 4 (Reuters) - Great Plains Energy Inc, the owner of regulated power utility Kansas City Power & Light, and Westar Energy Inc said on Thursday they will hold talks aimed at revising their planned $12.2 billion tie-up to address regulatory concerns.
A deal for Great Plains to acquire Westar, which would create a utility covering more than 1.5 million people across Kansas and Missouri, was announced in May 2016.
Reduced customer demand and the impact of energy efficiency initiatives have slowed growth for U.S. power utilities and pressured them to consider mergers and acquisitions to bolster their earnings outlook.
However, in an April 19 decision, the Kansas Corporation Commission (KCC) said while it was happy with the strategic rationale behind the tie-up, it was concerned by financial aspects of the deal including the amount of debt being used to facilitate it.
In a joint statement on Thursday, Great Plains and Westar said they had asked KCC to reconsider its order and would engage in further talks to May 31 aimed at revising the transaction to address the regulator's issues - while maintaining the benefits for customers and shareholders.
Among the points to be studied would include KCC's concerns about the high purchase price and the capital structure of the new company, as well as staffing levels at Westar's headquarters in Topeka, Kansas, according to a presentation on Great Plains' website.
Should Great Plains and Westar agree to a revised deal, the duo would re-engage with the regulator to get a new review process started, the statement added.
This would likely take several months, as opposed to the year it has taken to get this far, according to a source familiar with the matter.
"Since announcing this transaction, we have completed integration planning, and this work has only reinforced our belief in the value of this combination," said Terry Bassham, chairman and chief executive officer of Great Plains Energy.
To fund the $12.2 billion deal, consisting of an $8.6 billion purchase price and the assumption of Westar debt worth $3.6 billion, Great Plains had agreed to $8 billion financing from Goldman Sachs and said it was planning equity and debt issuance to fund part of the deal.
Should the deal go through, the generation capacity of Kansas City, Missouri-based Great Plains would increase to nearly 13,000 megawatts.
Shares of Great Plains were down 1.4 percent in late afternoon trading, while those of Westar were 0.7 percent lower. (Reporting by David French; Editing by Paul Simao)