Electric Utility Week 2003 McGraw-Hill, Inc.

Monday, August 11, 2003 Westar posts healthy earnings increase, board adopts political ethics guidelines Topeka, Kan.-based Westar Energy posted a threefold increase in second quarter earnings Friday, reporting $27.9-million or 39 cents/share vs. $9.2-million or 13 cents/share for the same period in 2002. Second quarter earnings from continuing operations were $21.8-million or 30 cents vs. $8.3-million and 11 cents a year ago. Utility revenues were $345.9-million for Q2 2003 vs. $332.7-million for the year-earlier period, an increase of 4%. While retail revenues fell $8million or 3.1%, due to mild weather, the drop was more than offset by favorable wholesale market conditions and reduced expenses. Westar also reported Aug. 5 that it had priced a public offering of 9.5-million shares of ONEOK common stock at $19/share, and sold another 2.6-million shares to ONEOK for the same price. Westar said the transactions would produce $230.5-million in gross proceeds, with the net proceeds used to pay down debt. The transaction will reduce the company's stake in ONEOK from 27.5% to 15%. It once owned about 45% of ONEOK. In another development the company--which was caught this summer in a political firestorm due to campaign finance practices of its former management--quietly implemented tough new guidelines barring all corporate political contributions and company involvement in personal contributions by executives and employees. According to the guidelines approved last month by the board but not publicly announced, "Westar Energy holds a right and responsibility to participate in the political process. The Company will protect and advance its interests in lawful, ethical and proper ways." Specifically, officers are allowed to privately discuss political contributions but may not use any corporate personnel or physical resources to gather money or use any encouragement, which would affect terms of employment to encourage political giving. State and federal political action committees will be reestablished for Westar employees on a totally voluntary basis. It will be governed by an executive committee selected by employees. Westar officers may not serve. The committee will make all contribution decisions, coordinate and conduct all fundraising solicitations, govern and establish the PACS and recruit members from among salaried employees. "Outside counsel will provide advice to assure the PACs are in strict compliance with laws and regulations," the guidelines say.

Westar support of the federal PAC is barred by law, but the company may make an initial seedmoney contribution to encourage employee participation and ease the transition from a corporate-based state contribution environment to a PAC-based environment. Westar has retained Tim Jenkins of the O'Connor & Hannan law firm as expert counsel to investigate the campaign finance issues raised in an internal investigation made public May 15 (EUW, 19 May, 1). Westar is at the center of a purported "pay for play" scandal under which former officers allegedly arranged contributions to favored candidates in exchange for specific legislative help from key House and Senate members involved in crafting federal energy legislation last year. The lawmakers have denied any wrongdoing.