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KANSAS CITY POWER & LIGHT CO - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 7, 2014

GREAT PLAINS ENERGY INCORPORATED EXECUTIVE SUMMARY Description of Business Great Plains Energy is a public utility holding company and does not own or operate any significant assets other than the stock of its subsidiaries. Great Plains Energy's sole reportable business segment is electric utility. Electric utility consists of KCP&L, a regulated utility, GMO's regulated utility operations, which include its Missouri Public Service and St. Joseph Light & Power divisions, and GMO Receivables Company. Electric utility has approximately 6,600 MWs of generating capacity and engages in the generation, transmission, distribution and sale of electricity to approximately 835,900 customers in the states of Missouri and Kansas. Electric utility's retail electricity rates are comparable to the national average of investor-owned utilities. Great Plains Energy's corporate and other activities not included in the sole reportable business segment includes GMO activity other than its regulated utility operations, GPETHC and unallocated corporate charges. 50



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Earnings Overview Great Plains Energy's earnings available for common shareholders for the three months ended June 30, 2014, decreased to $51.7 million or $0.34 per share from $63.2 million or $0.41 per share for the same period in 2013 driven by: a $3.9 million increase in gross margin due to favorable weather and an

increase in weather-normalized retail demand;

a $17.0 million increase in utility operating and maintenance expenses

driven by increased Wolf Creek operating and maintenance expenses primarily due to a planned mid-cycle maintenance outage that began in March 2014 and ended in May 2014; increased costs for energy efficiency and demand side management programs under MEEIA, which are included in retail rates; increased expenses at coal units primarily due to planned outages; and increased transmission and distribution operating and maintenance expenses;



a $2.5 million increase in general taxes due to increased property taxes; and

a $5.7 million decrease in income tax expense primarily due to decreased

pre-tax income.

Great Plains Energy's earnings available for common shareholders year to date June 30, 2014, decreased to $75.1 million or $0.49 per share from $88.8 million or $0.58 per share for the same period in 2013 driven by: a $31.0 million increase in gross margin due to favorable weather, an

increase in weather-normalized retail demand and new retail rates;

a $42.5 million increase in utility operating and maintenance expenses

driven by increased Wolf Creek operating and maintenance expenses primarily due to a planned mid-cycle maintenance outage that began in March 2014 and ended in May 2014 as well as increased amortization from a planned refueling outage that began in February 2013 and ended in April 2013; increased costs for energy efficiency and demand side management programs under MEEIA, which are included in retail rates; increased expenses at coal units primarily due to planned and unplanned outages; and increased transmission and distribution operating and maintenance expenses;



a $7.5 million increase in general taxes due to increased property taxes; and

a $9.1 million decrease in income tax expense primarily due to decreased

pre-tax income.

Gross margin is a financial measure that is not calculated in accordance with GAAP. See the explanation of gross margin and the reconciliation to GAAP operating revenues under Great Plains Energy's Results of Operations for further information. For additional information regarding the change in earnings, refer to Great Plains Energy Results of Operations and Electric Utility Results of Operations sections within this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Regulatory Proceedings See Note 5 to the consolidated financial statements for information regarding regulatory proceedings. Impact of Recently Issued Accounting Standard See Note 1 to the consolidated financial statements for information regarding the impact of ASU No. 2014-09, Revenue from Contracts with Customers, which was issued by the FASB in May 2014. Wolf Creek Mid-Cycle Maintenance Outage and Refueling Outage Wolf Creek began a mid-cycle maintenance outage on March 8, 2014, and the unit returned to service on May 13, 2014. Wolf Creek's latest refueling outage was from February 4, 2013 to April 15, 2013. The next refueling outage is planned to begin in the first quarter of 2015. 51



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ENVIRONMENTAL MATTERS See Note 11 to the consolidated financial statements for information regarding environmental matters. RELATED PARTY TRANSACTIONS See Note 13 to the consolidated financial statements for information regarding related party transactions. GREAT PLAINS ENERGY RESULTS OF OPERATIONS The following table summarizes Great Plains Energy's comparative results of operations. Three Months Ended Year to Date June 30 June 30 2014 2013 2014 2013 (millions) Operating revenues $ 648.4$ 600.3$ 1,233.5$ 1,142.5 Fuel (115.4 ) (121.2 ) (250.6 ) (253.4 ) Purchased power (79.1 ) (34.9 ) (124.5 ) (73.7 ) Transmission (18.7 ) (12.9 ) (36.3 ) (24.3 ) Gross margin (a) 435.2 431.3 822.1 791.1 Other operating expenses (235.4 ) (215.1 ) (469.9 ) (418.6 ) Depreciation and amortization (75.6 ) (72.6 ) (150.1 ) (142.8 ) Operating income 124.2 143.6 202.1 229.7 Non-operating income and expenses 3.1 2.2 6.4 3.4 Interest charges (48.3 ) (49.4 ) (97.7 ) (99.1 ) Income tax expense (27.0 ) (32.7 ) (35.1 ) (44.2 ) Income (loss) from equity investments 0.1 (0.1 ) 0.2 (0.2 ) Net income 52.1 63.6 75.9 89.6 Preferred dividends (0.4 ) (0.4 ) (0.8 ) (0.8 )



Earnings available for common shareholders $ 51.7$ 63.2$ 75.1$ 88.8

(a) Gross margin is a non-GAAP financial measure. See explanation of gross margin below.



Three Months Ended June 30, 2014, Compared to June 30, 2013 Great Plains Energy's earnings available for common shareholders for the three months ended June 30, 2014, decreased to $51.7 million or $0.34 per share from $63.2 million or $0.41 per share for the same period in 2013. Electric utility's net income decreased $10.8 million for the three months ended June 30, 2014, compared to the same period in 2013 driven by: a $3.9 million increase in gross margin due to:

an estimated $3 million increase due to favorable weather driven by a 15% increase in cooling degree days; and an estimated $2 million increase due to an increase in weather-normalized retail demand;



a $19.9 million increase in other operating expenses primarily driven by:

a $4.3 million increase in Wolf Creek operating and maintenance expenses primarily due to a planned mid-cycle maintenance outage that began in March 2014 and ended in May 2014; a $1.2 million increase from costs for energy efficiency and demand side management programs under MEEIA, which are included in retail rates; a $3.2 million increase in operating and maintenance expense at coal units primarily due to planned outages; 52



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a $5.5 million increase in transmission and distribution operating and maintenance expenses that included higher costs of service as well as increased vegetation management costs; and



a $2.5 million increase in general taxes due to increased property taxes;

a $3.0 million increase in depreciation expense due to capital additions; and

a $5.9 million decrease in income tax expense primarily due to decreased

pre-tax income.

Great Plains Energy's corporate and other activities loss increased $0.7 million for the three months ended June 30, 2014, compared to the same period in 2013. Year to Date June 30, 2014, Compared to June 30, 2013 Great Plains Energy's earnings available for common shareholders year to date June 30, 2014, decreased to $75.1 million or $0.49 per share from $88.8 million or $0.58 per share for the same period in 2013. Electric utility's net income decreased $12.3 million year to date June 30, 2014, compared to the same period in 2013 driven by: a $31.0 million increase in gross margin due to:

an estimated $16 million increase due to favorable weather primarily driven by a 15% increase in heating degree days during the first quarter of 2014; an estimated $7 million increase due to an increase in weather-normalized retail demand; and an estimated $9 million increase from new retail rates in Missouri effective January 26, 2013;



a $50.9 million increase in other operating expenses primarily driven by:

a $14.3 million increase in Wolf Creek operating and maintenance expenses primarily due to a planned mid-cycle outage that began in March 2014 and concluded in May 2014 as well as increased amortization from a planned refueling outage that began in February 2013 and ended in April 2013, where costs are deferred and amortized between refueling outages; a $2.8 million increase from costs for energy efficiency and demand side management programs under MEEIA, which are included in retail rates; a $9.0 million increase in operating and maintenance expense at coal units primarily due to planned and unplanned outages; a $7.3 million increase in transmission and distribution operating and maintenance expenses that included higher costs of service as well as increased vegetation management costs; and



a $7.6 million increase in general taxes due to increased property taxes;

a $7.3 million increase in depreciation expense due to capital additions;

a $4.0 million increase in non-operating income and expenses due to an

increase in the equity component of AFUDC resulting from a higher average construction work in progress balance in 2014 due to environmental upgrades at KCP&L's La Cygne Station and pipe replacement for the essential service water system at the Wolf Creek nuclear unit; and



an $8.7 million decrease in income tax expense primarily due to decreased

pre-tax income.

Great Plains Energy's corporate and other activities loss increased $1.4 million year to date June 30, 2014, compared to the same period in 2013. Gross Margin Gross margin is a financial measure that is not calculated in accordance with GAAP. Gross margin, as used by Great Plains Energy and KCP&L, is defined as operating revenues less fuel, purchased power and transmission. Expenses for fuel, purchased power and transmission, offset by wholesale sales margin, are subject to recovery

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through cost adjustment mechanisms, except for KCP&L's Missouri retail operations. As a result, operating revenues increase or decrease in relation to a significant portion of these expenses. Management believes that gross margin provides a more meaningful basis for evaluating electric utility's operations across periods than operating revenues because gross margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against budget and in reports for management and the Board. The Companies' definition of gross margin may differ from similar terms used by other companies. ELECTRIC UTILITY RESULTS OF OPERATIONS The following table summarizes the electric utility segment results of operations. Three Months Ended Year to Date June 30 June 30 2014 2013 2014 2013 (millions) Operating revenues $ 648.4$ 600.3$ 1,233.5$ 1,142.5 Fuel (115.4 ) (121.2 ) (250.6 ) (253.4 ) Purchased power (79.1 ) (34.9 ) (124.5 ) (73.7 ) Transmission (18.7 ) (12.9 ) (36.3 ) (24.3 ) Gross margin (a) 435.2 431.3 822.1 791.1 Other operating expenses (234.3 ) (214.4 ) (468.1 ) (417.2 ) Depreciation and amortization (75.6 ) (72.6 ) (150.1 ) (142.8 ) Operating income 125.3 144.3 203.9 231.1 Non-operating income and expenses 3.4 2.5 7.7 3.7 Interest charges (46.0 ) (47.4 ) (93.0 ) (95.2 ) Income tax expense (28.0 ) (33.9 ) (37.8 ) (46.5 ) Net income $ 54.7$ 65.5$ 80.8$ 93.1



(a) Gross margin is a non-GAAP financial measure. See explanation of gross

margin under Great Plains Energy's Results of Operations.

Electric Utility Gross Margin and MWh Sales The following tables summarize electric utility's gross margin and MWhs sold. Revenues and Costs % MWhs Sold % Three Months Ended June 30 2014 2013 Change 2014 2013 Change Retail revenues (millions) (thousands) Residential $ 235.3$ 228.0 3 % 1,904 1,868 2 % Commercial 251.6 253.0 (1 )% 2,668 2,665 - % Industrial 60.4 58.7 3 % 840 812 3 % Other retail revenues 5.0 5.5 (4 )% 29 29 (3 )% Kansas property tax surcharge 0.5 (0.1 ) N/M N/A N/A N/A Fuel recovery mechanism 15.8 5.9 N/M N/A N/A N/A Total retail 568.6 551.0 3 % 5,441 5,374 1 % Wholesale revenues 68.2 38.6 77 % 1,999 1,385 44 % Other revenues 11.6 10.7 9 % N/A N/A N/A Operating revenues 648.4 600.3 8 % 7,440 6,759 10 % Fuel (115.4 ) (121.2 ) (5 )% Purchased power (79.1 ) (34.9 ) 126 % Transmission (18.7 ) (12.9 ) 46 % Gross margin (a) $ 435.2$ 431.3 1 %



(a) Gross margin is a non-GAAP financial measure. See explanation of gross margin

under Great Plains Energy's Results of Operations. 54



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Table of Contents Revenues and Costs % MWhs Sold % Year to Date June 30 2014 2013 Change 2014 2013 Change Retail revenues (millions) (thousands) Residential $ 479.0$ 454.6 5 % 4,455 4,222 6 % Commercial 469.7 461.7 2 % 5,325 5,190 3 % Industrial 107.5 103.0 4 % 1,588 1,518 5 % Other retail revenues 10.0 10.5 (4 )% 58 60 (3 )% Kansas property tax surcharge 1.7 - N/M N/A N/A N/A Fuel recovery mechanism 29.2 14.1 N/M N/A N/A N/A Total retail 1,097.1 1,043.9 5 % 11,426 10,990 4 % Wholesale revenues 110.6 73.0 51 % 3,382 2,631 29 % Other revenues 25.8 25.6 1 % N/A N/A N/A Operating revenues 1,233.5 1,142.5 8 % 14,808 13,621 9 % Fuel (250.6 ) (253.4 ) (1 )% Purchased power (124.5 ) (73.7 ) 69 % Transmission (36.3 ) (24.3 ) 49 % Gross margin (a) $ 822.1$ 791.1 4 % (a) Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.



Electric utility's gross margin increased $3.9 million for the three months ended June 30, 2014, compared to the same period in 2013 primarily driven by: an estimated $3 million increase due to favorable weather driven by a 15%

increase in cooling degree days; and an estimated $2 million increase due to an increase in weather-normalized retail demand. Electric utility's gross margin increased $31.0 million year to date June 30, 2014, compared to the same period in 2013 driven by: an estimated $16 million increase due to favorable weather primarily driven by a 15% increase in heating degree days during the first quarter of 2014; an estimated $7 million increase due to an increase in weather-normalized retail demand; and an estimated $9 million increase from new retail rates in Missouri effective January 26, 2013. Electric Utility Other Operating Expenses (including utility operating and maintenance expenses, general taxes and other) Electric utility's other operating expenses increased $19.9 million for the three months ended June 30, 2014, compared to the same period in 2013 primarily due to: a $4.3 million increase in Wolf Creek operating and maintenance expenses



primarily due to a planned mid-cycle maintenance outage that began in

March 2014 and ended in May 2014;

a $1.2 million increase from costs for energy efficiency and demand side

management programs under MEEIA, which are included in retail rates;

a $3.2 million increase in operating and maintenance expense at coal units

primarily due to planned outages;

a $5.5 million increase in transmission and distribution operating and

maintenance expenses that included higher costs of service as well as

increased vegetation management costs; and

a $2.5 million increase in general taxes due to increased property taxes.

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Electric utility's other operating expenses increased $50.9 million year to date June 30, 2014, compared to the same period in 2013 primarily due to: a $14.3 million increase in Wolf Creek operating and maintenance expenses

primarily due to a planned mid-cycle outage that began in March 2014 and ended in May 2014 as well as increased amortization from a planned refueling outage that began in February 2013 and ended in April 2013, where costs are deferred and amortized between refueling outages;



a $2.8 million increase from costs for energy efficiency and demand side

management programs under MEEIA, which are included in retail rates;

a $9.0 million increase in operating and maintenance expense at coal units

primarily due to planned and unplanned outages;

a $7.3 million increase in transmission and distribution operating and

maintenance expenses that included higher costs of service as well as

increased vegetation management costs; and

a $7.6 million increase in general taxes due to increased property taxes.

Electric Utility Depreciation and Amortization Electric utility's depreciation and amortization increased $3.0 million and $7.3 million for the three months ended and year to date June 30, 2014, respectively, compared to the same periods in 2013 due to capital additions. Electric Utility Non-Operating Income and Expenses Electric utility's non-operating income and expenses increased $4.0 million year to date June 30, 2014, compared to the same period in 2013 due to an increase in the equity component of AFUDC resulting from a higher average construction work in progress balance in 2014 due to environmental upgrades at KCP&L's La Cygne Station and pipe replacement for the essential service water system at the Wolf Creek nuclear unit. Electric Utility Income Tax Expense Electric utility's income tax expense decreased $5.9 million and $8.7 million for the three months ended and year to date June 30, 2014, respectively, compared to the same periods in 2013 primarily due to decreased pre-tax income. GREAT PLAINS ENERGY SIGNIFICANT BALANCE SHEET CHANGES (June 30, 2014, compared to December 31, 2013) Great Plains Energy's receivables, net increased $57.1 million primarily due to seasonal increases in customer accounts receivable. Assets held for sale decreased $36.2 million to reflect the sale of KCP&L's and GMO's SPP-approved regional transmission projects to Transource Missouri in January 2014. Great Plains Energy's commercial paper increased $268.3 million due to borrowings for capital expenditures, pension funding contributions and the timing of other cash payments. Great Plains Energy's accounts payable decreased $49.7 million due to the timing of cash payments. Great Plains Energy's accrued taxes increased $46.0 million primarily due to the timing of property tax payments.



CAPITAL REQUIREMENTS AND LIQUIDITY Great Plains Energy operates through its subsidiaries and has no material assets other than the stock of its subsidiaries. Great Plains Energy's ability to make payments on its debt securities and its ability to pay dividends are dependent on its receipt of dividends or other distributions from its subsidiaries, proceeds from the issuance of its securities and borrowing under its revolving credit facility.

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Great Plains Energy's capital requirements are principally comprised of debt maturities and electric utility's construction and other capital expenditures. These items as well as additional cash and capital requirements are discussed below. Great Plains Energy's liquid resources at June 30, 2014, consisted of $12.5 million of cash and cash equivalents on hand and $886.2 million of unused bank lines of credit. The unused lines consisted of $200.0 million from Great Plains Energy's revolving credit facility, $309.0 million from KCP&L's credit facilities and $377.2 million from GMO's credit facilities. See Note 8 to the consolidated financial statements for more information on the revolving credit facilities. Generally, Great Plains Energy uses these liquid resources to meet its day-to-day cash flow requirements, and from time to time issues equity and/or long-term debt to repay short-term debt or increase cash balances. Great Plains Energy intends to meet day-to-day cash flow requirements including interest payments, retirement of maturing debt, construction requirements, dividends and pension benefit plan funding requirements with a combination of internally generated funds and proceeds from short-term debt. From time to time, Great Plains Energy issues equity and/or long-term debt to repay short-term debt or increase cash balances. Great Plains Energy's intention to meet a portion of these requirements with internally generated funds may be impacted by the effect of inflation on operating expenses, the level of MWh sales, regulatory actions, compliance with environmental regulations and the availability of generating units. In addition, Great Plains Energy may issue equity, equity-linked securities and/or debt to finance growth. Cash Flows from Operating Activities Great Plains Energy generated positive cash flows from operating activities for the periods presented. The $3.5 million decrease in cash flows from operating activities for Great Plains Energy year to date June 30, 2014, compared to the same period in 2013 is primarily due to a $13.7 million decrease in net income and a $21.5 million increase in solar rebates paid to customers offset by a $34.8 million decrease in deferred refueling outage costs. Other changes in working capital are detailed in Note 2 to the consolidated financial statements. The individual components of working capital vary with normal business cycles and operations. Cash Flows from Investing Activities Great Plains Energy's cash used for investing activities varies with the timing of utility capital expenditures and purchases of investments and nonutility property. Investing activities are offset by proceeds from the sale of properties and insurance recoveries. Great Plains Energy's utility capital expenditures increased $13.1 million year to date June 30, 2014, compared to the same period in 2013 primarily due to an increase in cash utility capital expenditures at the Wolf Creek nuclear unit for a pipe replacement for the essential service water system offset by a decrease in expenditures related to environmental upgrades at KCP&L's La Cygne Station. In January 2014, KCP&L and GMO completed the sale of two SPP-approved regional transmission projects to Transource Missouri for cash proceeds of $37.7 million. See Note 10 to the consolidated financial statements for additional information regarding the sale. Cash Flows from Financing Activities Great Plains Energy's cash flows from financing activities year to date June 30, 2014, reflect short-term borrowings for capital expenditures, pension funding contributions and other cash payments. Great Plains Energy's cash flows from financing activities year to date June 30, 2013, reflect KCP&L's issuance, at a discount, of $300.0 million of 3.15% Senior Notes that mature in 2023 and the remarketing of $112.8 million of EIRR bonds previously held by KCP&L, with the proceeds used to repay short-term borrowings. Impact of Credit Ratings on Liquidity The ratings of Great Plains Energy's, KCP&L's and GMO's securities by the credit rating agencies impact their liquidity, including the cost of borrowings under their revolving credit agreements and in the capital markets. The 57



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Companies view maintenance of strong credit ratings as extremely important to their access to and cost of debt financing and to that end maintain an active and ongoing dialogue with the agencies with respect to results of operations, financial position and future prospects. While a decrease in these credit ratings would not cause any acceleration of Great Plains Energy's, KCP&L's or GMO's debt, it could increase interest charges under Great Plains Energy's 6.875% Senior Notes due 2017 or Great Plains Energy's, KCP&L's and GMO's revolving credit agreements. A decrease in credit ratings could also have, among other things, an adverse impact, which could be material, on Great Plains Energy's, KCP&L's and GMO's access to capital, the cost of funds, the ability to recover actual interest costs in state regulatory proceedings, the type and amounts of collateral required under supply agreements and Great Plains Energy's ability to provide credit support for its subsidiaries. On May 1, 2014, Standard & Poor's made the following rating changes for the securities of Great Plains Energy, KCP&L and GMO: Outlook for Great Plains Energy, KCP&L and GMO from Positive to Stable;

Corporate credit rating for Great Plains Energy from BBB to BBB+;

Preferred stock rating for Great Plains Energy from BB+ to BBB-;

Senior unsecured debt for Great Plains Energy from BBB- to BBB;

Senior secured debt for KCP&L from A- to A; and

Senior unsecured debt for KCP&L and GMO from BBB to BBB+.

A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Financing Authorization Under stipulations with the MPSC and KCC, Great Plains Energy and KCP&L maintain common equity at not less than 30% and 35%, respectively, of total capitalization (including only the amount of short-term debt in excess of the amount of construction work in progress). KCP&L's long-term financing activities are subject to the authorization of the MPSC. In July 2014, the MPSC authorized KCP&L to issue up to $350.0 million of long-term debt and enter into interest rate hedging instruments in connection with such debt through June 30, 2016. KCP&L has not utilized any of this authorization. In October 2012, FERC authorized KCP&L to have outstanding at any time up to a total of $1.0 billion in short-term debt instruments through December 2014, conditioned on KCP&L's borrowing costs not exceeding the greater of: (i) 2.25% over LIBOR; (ii) the greater of 1.25% over the prime rate, 1.75% over the federal funds rate, and 2.25% over LIBOR; or (iii) 2.25% over the A2/P-2 nonfinancial commercial paper rate most recently published by the Federal Reserve at the time of the borrowing. The authorization is subject to four restrictions: (i) proceeds of debt backed by utility assets must be used for utility purposes; (ii) if any utility assets that secure authorized debt are divested or spun off, the debt must follow the assets and also be divested or spun off; (iii) if any proceeds of the authorized debt are used for non-utility purposes, the debt must follow the non-utility assets (specifically, if the non-utility assets are divested or spun off, then a proportionate share of the debt must follow the divested or spun off non-utility assets); and (iv) if utility assets financed by the authorized short-term debt are divested or spun off to another entity, a proportionate share of the debt must also be divested or spun off. At June 30, 2014, there was $711.7 million available under this authorization. In January 2014, FERC authorized GMO to have outstanding at any time up to a total of $750.0 million in short-term debt instruments through March 2016, conditioned on GMO's borrowing costs not exceeding the greater of 2.25% over LIBOR or 1.75% over the prime rate or federal funds rate, as applicable, and subject to the same four restrictions as the KCP&L FERC short-term authorization discussed in the preceding paragraph. At June 30, 2014, there was $661.8 million available under this authorization. 58



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KCP&L and GMO are also authorized by FERC to participate in the Great Plains Energy money pool, an internal financing arrangement in which funds may be lent on a short-term basis to KCP&L and GMO. At June 30, 2014, GMO had outstanding payables under the money pool of $7.9 million to Great Plains Energy. Debt Agreements See Note 8 to the consolidated financial statements for information regarding revolving credit facilities. Pensions Great Plains Energy maintains defined benefit pension plans for substantially all active and inactive employees of KCP&L and GMO, and its 47% ownership share of WCNOC's defined benefit plans. Effective in 2014, the KCP&L non-union plan was closed to future employees. Funding of the plans follows legal and regulatory requirements with funding equaling or exceeding the minimum requirements of ERISA. Year to date June 30, 2014, the Company contributed $46.1 million to the pension plans and expects to contribute an additional $16.1 million in 2014 to satisfy the minimum ERISA funding requirements and the MPSC and KCC rate orders, the majority of which is expected to be paid by KCP&L. Additionally, the Company provides post-retirement health and life insurance benefits for certain retired employees and expects to make benefit contributions of $11.3 million under the provisions of these plans in 2014, the majority of which is expected to be paid by KCP&L. Management believes the Company has adequate access to capital resources through cash flows from operations or through existing lines of credit to support these funding requirements. KANSAS CITY POWER & LIGHT COMPANY MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS The following table summarizes KCP&L's consolidated comparative results of operations. Year to Date June 30 2014 2013 (millions) Operating revenues $ 830.5$ 777.5 Fuel (181.8 ) (180.5 ) Purchased power (59.4 ) (37.7 ) Transmission (22.6 ) (16.8 ) Gross margin (a) 566.7 542.5 Other operating expenses (336.7 ) (299.6 )



Depreciation and amortization (104.3 ) (97.2 ) Operating income

125.7 145.7 Non-operating income and expenses 7.6 3.9 Interest charges (61.7 ) (63.5 ) Income tax expense (19.6 ) (25.7 ) Net income $ 52.0$ 60.4



(a) Gross margin is a non-GAAP financial measure. See explanation of gross

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KCP&L Gross Margin and MWh Sales The following table summarizes KCP&L's gross margin and MWhs sold. Revenues and Costs % MWhs Sold % Year to Date June 30 2014 2013 Change 2014 2013 Change Retail revenues (millions) (thousands) Residential $ 291.5$ 278.4 5 % 2,640 2,513 5 % Commercial 340.9 335.3 2 % 3,738 3,636 3 % Industrial 65.0 61.6 6 % 918 862 7 % Other retail revenues 6.2 6.5 (6 )% 42 44 (4 )% Kansas property tax surcharge 1.7 - N/M N/A N/A N/A Fuel recovery mechanism 1.1 7.5 N/M N/A N/A N/A Total retail 706.4 689.3 2 % 7,338 7,055 4 % Wholesale revenues 115.1 79.7 44 % 3,547 2,863 24 % Other revenues 9.0 8.5 6 % N/A N/A N/A Operating revenues 830.5 777.5 7 % 10,885 9,918 10 % Fuel (181.8 ) (180.5 ) 1 % Purchased power (59.4 ) (37.7 ) 58 % Transmission (22.6 ) (16.8 ) 34 % Gross margin (a) $ 566.7$ 542.5 4 % (a) Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations. KCP&L's gross margin increased $24.2 million year to date June 30, 2014, compared to the same period in 2013 primarily driven by: an estimated $11 million increase due to favorable weather primarily driven by a 15% increase in heating degree days during the first quarter of 2014; an estimated $4 million increase due to an increase in weather-normalized retail demand; and an estimated $6 million increase from new retail rates in Missouri effective January 26, 2013.



KCP&L Other Operating Expenses (including operating and maintenance expenses, general taxes and other) KCP&L's other operating expenses increased $37.1 million year to date June 30, 2014, compared to the same period in 2013 primarily driven by: a $14.3 million increase in Wolf Creek operating and maintenance expenses

primarily due to a planned mid-cycle outage that began in March 2014 and ended in May 2014 as well as increased amortization from a planned refueling outage that began in February 2013 and ended in April 2013, where costs are deferred and amortized between refueling outages;



a $4.5 million increase in operating and maintenance expense at coal units

primarily due to outages;

a $4.1 million increase in transmission and distribution operating and

maintenance expenses that included higher costs of service as well as

increased vegetation management costs; and

a $5.7 million increase in general taxes due to increased property taxes.

KCP&L Depreciation and Amortization KCP&L's depreciation and amortization increased $7.1 million year to date June 30, 2014, compared to the same period in 2013 due to capital additions. KCP&L Non-Operating Income and Expenses KCP&L's non-operating income and expenses increased $3.7 million year to date June 30, 2014, compared to the same period in 2013 due to an increase in the equity component of AFUDC resulting from a higher average 60



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construction work in progress balance in 2014 due to environmental upgrades at KCP&L's La Cygne Station and pipe replacement for the essential service water system at the Wolf Creek nuclear unit. KCP&L Income Tax Expense KCP&L's income tax expense decreased $6.1 million year to date June 30, 2014, compared to the same period in 2013 primarily due to decreased pre-tax income.


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