Western Resources 2000 Annual Report

David C. Wittig
Western Resources
Chairman of the Board, President
and Chief Executive Officer

In 2000, our common stock price rose 46 percent from the previous year and the total return to shareholders topped 58 percent. If you participated in our dividend reinvestment plan, you earned a return of more than 60 percent.

Here's a look at the company's many highlights during 2000:

We had record earnings during the first six months, surpassing the previous record set in 1994.
We exceeded previous utility sales levels without interrupting customers during a sweltering Kansas summer that shattered heat records across the state. Part of the reason reliability was not threatened for Kansas customers last summer was because of rigorous power plant maintenance efforts and the addition of two combustion turbines at Gordon Evans to help meet record demand for electricity.
KPL customers set a new record peak of 2,485 megawatts on Aug. 28, 2000, and KPL and KGE set a combined record peak of 4,531 megawatts on Sept. 11, 2000. We were able to continue service without having to cut power to “interruptible” customers or make pleas for conservation as many electric companies across the country were forced to do.
The value of Westar Industries’ investment in ONEOK rose by 91.5 percent to more than $1 billion.
We sold the balance of our Hanover Compressor Company position for a $91.1 million gain, and we sold our interest in Paradigm Direct for $51.0 million, making a 60 percent gain on the investment in just 18 months.
We reduced our consolidated total debt by $385 million.
In May 2000, Westar Wind celebrated its first anniversary as a viable renewable energy option for environmentally committed customers. The two wind turbines provide 1.5 megawatts of electrical capacity.

Another notable highlight was our agreement on Nov. 8, 2000, to combine our KPL and KGE utilities in a tax-free, stock-for-stock transaction with Public Service Company of New Mexico (PNM), a company with similar corporate philosophies and operating procedures. (Please see the inside front cover for more information about PNM.)

This year, 2001, poses several pivotal challenges for the company. We're asking the Kansas Corporation Commission to grant rate increases for KPL and KGE so we can recover our investment in new power plants and higher operating and maintenance costs, including natural gas fuel costs. The companies were last granted rate increases in 1983 and 1989, respectively. The rate cases are necessary to ensure our continued ability to provide safe, reliable electricity to meet customer demand that has grown by more than 22 percent in the last decade.

The rate requests encompass new generation and depreciation costs, retiree medical benefits, tax and interest adjustments, operating and maintenance expenses, environmental expenses and fuel costs. Few companies, if any, can provide products and services at the same prices they did in 1983 or 1989. We believe our rate relief requests are fair and reasonable.

A second vital area is Protection One. Business operations have improved significantly. Protection One has decreased debt and achieved positive cash flow in 2000. Management at Protection One and Protection One Europe is continuing to find ways to enhance operating and financial performance.

In 2001, shareholders will have an opportunity to participate in the initial public offering of Westar Industries, which represents the unregulated part of our business. Westar Industries includes our investments in Protection One, other wholly owned subsidiaries collectively referred to as Protection One Europe, ONEOK, the utility created by the merger of PNM, KGE and KPL, unregulated international generation interests and other miscellaneous assets. Details concerning Westar Industries and the initial public offering will be provided to shareholders.

The year 2000, more than any other before it, underscored the amount of risk and volatility inherent in the utility industry, with the ongoing energy crisis in California as a prime example. During the last six years, returns for Western Resources’ shareholders were as follows:

1995, up 24 percent
1996, down 1 percent

1997, up 48 percent
1998, down 18 percent

1999, down 44 percent
2000, up 58 percent

Later this year we expect to combine the annual shareholders’ meeting with the special meeting to vote on the PNM transaction. We will provide you with details of the meeting later this year.

The noteworthy accomplishments of 2000 also extend to the company’s community activism. We strive to be a leader in the many communities we serve through our charitable donations and encourage employees to volunteer for a variety of causes through our Community Partners program. Our award-winning Green Team employee volunteers are dedicated to preserving and enhancing the Kansas environment so more generations can enjoy its beauty and abundance. I encourage you to read more about our commitment to the communities we serve in the next few pages.

Thank you for your support and your investment.

Sincerely,

David C. Wittig
Chairman of the Board, President
and Chief Executive Officer