Operator:

Good day, and thank you for standing by. Welcome to the Q2 2024 Evergy, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Peter Flynn, Director of Investor Relations. Please go ahead.

David Campbell:

Thanks, Pete, and good morning, everyone. I'll begin on Slide 5. This morning, we reported second quarter adjusted earnings of $0.90 per share compared to $0.81 per share a year ago. The increase in adjusted earnings over the last year was driven primarily by demand growth, weather, new retail rates and higher transmission margin, partially offset by higher operations and maintenance cost D&A and interest expense. Geoff will discuss these earnings drivers in more detail in his remarks. Now as you all know, Kirk Andrews resigned from his role as Chief Financial Officer on June 4th. We were excited to appoint Geoff Ley as Acting CFO on June 7th while we conduct an internal and external search. We expect to conclude the search this year. Geoff worked closely with Kirk and me and he brings enough standing capabilities set to the role which has enabled a smooth transition. We’d like to thank Kirk for his leadership and we wish him all the best in his next chapter of his career closer to home. In May, we filed our triennial integrated resource plan in Kansas following a similar filing for Missouri in April. In aggregate, the 2024 preferred plan included 5800 megawatts of resource addition through 2033 representing an increase of 1500 megawatts over the next ten years when compared to the 2023 preferred plan. Our IRP and its underlying analysis reflect the benefits of a diverse field mix. Renewables have a low or negative marginal cost to no emissions, but they are intermittent depending on Mother Nature, our large-scale storage deployment from a liability. New and existing thermal resources are emitting and at higher marginal cost for fuel and O&M, but they can be dispatched to meet customer demand when they are needed most. The ultimate goal of having a balanced mix is to ensure reliability and affordability for our customers as we advance the responsible fleet transition. This transition requires sustained investments over the coming years and we’ll incorporate the most recent IRP and its higher levels of new generation when we provide an update to our capital plan on the third quarter earnings call. Shifting back to the quarter, since the beginning of April, we experienced ten severe west storm events that produced wind gust in excess of 50 miles per hour. Wind speeds at this level downs countless trees and tree lens and cause extensive damage to equipment and structures across our service territory. I'd like to thank our customers for their patience during outages caused by this unusually severe weather. And thanks our transmission and distribution teams, contractors, personnel from neighboring utilities and our call center and customer service employees for their hard work throughout our storm restoration efforts. Our frontline employees at a bedrock of safely delivering affordable and reliable power to our customers and communities. We're extremely proud of their contribution as we worked long shifts through hot and humid conditions. Our teams’ execution has enabled solid performance in the first half of the year and we are reaffirming our 2024 adjusted EPS guidance range of $3.73 to $3.93 cents per share, as well as our target long-term annual adjusted EPS growth target of 4% to 6% from 2023 to 2026. On Slide six, we highlight three major economic development wins that we have featured. Google, Panasonic, and Meta. In aggregate, their demand represents approximately 750 megawatts of load, and each will be the largest customer in their respective jurisdiction by a wide margin. The overall economic development pipeline remains robust in both Kansas and Missouri with projects representing more than six Gigawatts of demand actively considering our service territories. As a reminder, our capital investment in load growth forecasts only reflect projects announced to-date. And many of you will ask us about timing as a general rule, we will announce specifics on these projects in tandem with customer announcements regarding their plans. Of course, the environment for new economic development projects is competitors and while we do not expect to win all of these projects in our pipeline, we are excited by the very active dialogue we are having with these potential customers as they consider our region. Our strategic focus on affordability and reliability and regional rate competitiveness are important contributors to this pipeline and provide a foundation for the tremendous potential in our region building on our success with Panasonic, Meta and Google. As part of the exercise, alongside the economic development rates that are in place in both Kansas and Missouri, we're looking at rate design elements to ensure that there is appropriate and adequate recovery associated with large new loads. Moving to Slide 7, based on the announcements of Google datacenter, Panasonic’s EV battery manufacturing facility, and Meta’s datacenter, along with other announced industrial projects, we expect a solid 2% to 3% weather-normalized demand growth through 2028. Moving to Slide 8, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri. First I'm pleased to House Bill 2527 in Kansas, which became effective on July 1st of this year. The bill incorporated multiple provisions to establish a competitive framework for electric infrastructure investment, including the use of plant and service accounting or PISA and a construction work in progress mechanism that applies to new natural gas units. The PISA provisions and in HB 2527 served to mitigate regulatory lag between rate cases very similar to how it works in Missouri that with a 90% deferral in Kansas. Overall, the passage of HB 2527 signals the support of Kansas’ legislators, regulators and stakeholders for infrastructure investment and support of economic development and the importance of a competitive and constructive regulatory framework for infrastructure investment. It is an exciting time in our region as reflected by our significantly higher sales growth forecast relative to recent history. We're also looking forward to our Capital Structure Workshop in Kansas, which we expect to occur in the fourth quarter. This Workshop, which was born out of our legislative discussions with Kansas Stakeholders earlier in the year presents an opportunity for constructive dialogues around the importance of a clear, and stable framework, a regulatory capital structure and authorized return outside the confines of litigated proceeding. This framework serves an important backdrop for providers of capital to invest in Kansas and for Evergy to attract competitively priced capital, much like the constructs that exist in Missouri and other neighboring states. As always, we are committed to advancing the generational economic development opportunity ahead of us in concert with Kansas policymakers and stakeholders. Now pivoting to Missouri, we continue to work our way to our pending rate case at Missouri West. In late June, staff and other interveners filed direct testimony and earlier this week, all parties filed rebuttal testimony. True-up and surrebuttal testimony will be filed in September 10. In our upcoming filings, we anticipate that our overall revenue requests will decrease as a result of lower fuel and power costs, reflecting lower commodity prices and higher market revenues. As a reminder, changes in fuel and power costs are not earnings drivers in the rate case. The expected reduction in fuel cost would be a pass-through benefit to customers in base rates. Any subsequent increases or decreases in these costs after the new base rates are set will be reflected in the fuel clause between rate cases. After true-up and surrebuttal testimony are filed, a settlement conference will be held on September 23rd, called by hearing beginning on September 30th and running through early October. Revised rates in Missouri will go into effect by January 1st, 2025. We look forward to working collaboratively with the Missouri Public Service Commission staff and our stakeholders to achieve a constructive outcome for our Missouri West customers. As we described, we expect our cadence of rate cases going forward to be roughly every other year, but that won’t be true for every jurisdiction, some may be more frequent, others less. I’ll conclude my remarks with Slide nine, which highlights the core tenets of our strategy, affordability, reliability and sustainability. On the affordability front, advancing regional rate competitiveness is one of our primary objectives. Our focus on delivering benefits to our customers is demonstrated in the comparative EIA data on rate trends across the Central United States over the past five years. Kansas, Missouri stand out positively in that comparison. Our strategic plan is designed is to sustain this positive trajectory by keeping our long-term rate trajectory at or below the rate of inflation. By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us and lay the groundwork for continued support for the substantial economic potential within our states. Ensuring reliability is also a core element of our strategy encompasses safety, grid resiliency and public safety. This also includes a focus on metrics related to customer service, the commercial availability of our generation fleet, safety and all elements of our operations including infrastructure investment. With respect to sustainability, almost half the power generated by Evergy comes from emission-free resources. Since 2005, we have reduced carbon emissions by 53% and sulfur dioxide and nitrogen oxide emissions by 98% and 90% respectively. Our integrated resource plan includes the balanced mix of resource additions going forward as we manage the responsible transition of our generation portfolio. Evergy is committed to delivering safe, reliable affordable and sustainable energy to customers, while being a great place to work for diverse workforce and supporting the communities we serve. With that, I will now turn the call over to Geoff.

Operator:

Thank you. [Operator Instructions] And our first question comes from James Kennedy of Guggenheim Partners. Your line is open. Hey guys, good morning.

David Campbell:

Morning.

David Campbell:

It's a great question and obviously, that's something that we're going to work collaboratively with HCC staff in particular on the approach. Our objective in the workshop is outside the context of a litigated proceeding to really discuss with all parties and ground ourselves and what's the best way for Kansas to have a competitive approach to attracting capital. So we anticipate this is going to be a workshop, not a decision-oriented meeting, but a workshop that enables a robust discussion the underlying facts in terms of approaches across the country and Kansas, the competitive landscape. How the impacts the strengths as a relative utility and our ability to attract capital. And so, we really think it's a good dialogue to help level set. Not leading to a decision, but to help to have a level setting approach and how we best position Kansas to attractively - to attract capital competitively. And doing that before the rate case, outside the rate case winning is a best way to have a good dialogue around it. And the details will be forthcoming obviously as we finalize them. So I won't get ahead of that. We do expect it to occur in the fourth quarter.

David Campbell:

There will be advance notice when the dates are set. We’re not trying to hide anything. It’s really just lining up calendar. So we're going through the pitch.

David Campbell:

Yeah, the approach we're taking is really specific to each situation because it really varies frankly based on, location matters a lot, based on availability within the transmission system, what kind of upgrades may be required. So, particularly with the large loads, we found that rule of thumb it’s such a wide range and it's not especially helpful as a rule of thumb. So we generally are linking that to specific projects. So we'll update our capital plan to reflect the projects that are been announced and the specific impacts that they have. So, for example, in our capital plan update we'll do in the third quarter, the Google announcement was subsequent to our last capital filing will incorporate the impacts of the Google announcement and its impact on our T&D system in that update. But the rule of thumb really varies significantly based on size of customer and specific location. We did mention - I know that folks are interested in the quantification of size. We were comfortable describing how projects representing more than six gigawatts were in active discussions with those parties. But of course, we're at being at the end of the earnings season, we've seen a lot of different companies have discussed very large numbers. There's no doubt that different counterparties are talking to various utilities. That said, we're excited by that we are in very active and specific discussions. So we look forward to advancing those in the coming months and our approach will be to really nice specifics when customers are ready to announce at the same time.

David Campbell:

Thank you.

Nicholas Campanella :

Hey, good morning. Happy Friday.

Nicholas Campanella :

Hopefully, you can hear me. Morning. So hey, just a follow-up on the datacenter discussion. Just outside of that six gigs, it's only Google that's included in the IRP's today. So if any of this additional comes to fruition, you would have to revisit the capital plan. Is that the right understanding? That's one. And then the secondly is just, on the rate tariffs, David, you talked about for large loads, just maybe expand on what the process looks like for that. Do you have to do - would you do that in a formal rate case? And how should we think about that? Thanks.

Nicholas Campanella :

Hey, that's great. I appreciate that. And then, just on the upcoming capital refresh into the third quarter, just wanted to be clear on what to expect will obviously get the new CapEx plan. Would you be giving rate base growth as well and then EPS guidance and the five-year CAGR more a fourth quarter call item. Just what are you planning to build on? Thank you.

Nicholas Campanella:

Okay. Thanks so much. Have a great weekend. Thank you.

Brian Russo:

Yeah, hi, it's actually Brian Russo on for Julien.

Brian Russo:

Thank you. Hey just in Missouri, the inability at the legislature to extend pieces to include dispatchable generation, does that at all impact, I think what's in the IRP and/or your earned returns in Missouri and cadence of rate cases or do you think this is likely to be picked up with the next legislature and then that gives you more of the time when any dispatchable generation is planned in the IRP?

Brian Russo:

Okay, great. And then just up to confirm the 2% to 3% weather-normalized sales growth, it seems clear that it's more back-end loaded. Do you think it's going to kind of track that ‘26 to ‘28 time period for Google, Panasonic and Meta? And then, is Google still on track and on schedule, has that broke ground yet or is it still in the development stage?

David Campbell:

On the Google side, they're given very high. They had a very – the public announcements are very broad set of stakeholders, the Mayor and state officials from Missouri are present. They've lined at the land and the site. So, I think site work is underway. I don't think the datacenter construction has yet started, but Google is very committed to the region as reflected by their public announcement there. So we're excited by – Google is excited about building facility in our region.

David Campbell:

So, and that the process in both of our states we have a triennial update, but we have an annual refresh. So yes, in practice, you'll have an update next to the same time in next year April and 1 May in the other and the triennial updates historically were the more significant ones it was a process in Missouri, it's still relatively new process in Kansas. But with so much happening on the demand side a lot of changes are now happening year-to-year. So, yes, we'll have an annual process and we'll - so that as new loads emerge and we add them to our plans. Those will be reflected in our annual update.

David Campbell:

Thank you.

Michael Sullivan :

Hey, good morning.

Michael Sullivan :

Hey, David. I just wanted to go back to Nick’s question just in terms of like expectations for the Q3 call update. In terms of financing needs, are you all still planning to stick with kind of that, I guess, mismatch of three year view on financing versus five year on CapEx?

Michael Sullivan :

Okay. That's not how it is today though, right? So that is kind of different, you talk about no equity through ‘26 or did you…

Michael Sullivan :

That makes a ton of sense and it is definitely helpful. Okay. Sorry to believer that.

Michael Sullivan :

Yeah. Okay. No, great to clear that up. And then, can you give us any sense of, next year's rate case outlook? I know you said kind of every other year, it could be different. How to think about which subsidiaries are going to be in next year?

Michael Sullivan :

Okay. That makes sense. And so, do you think you can get what you need out of the workshops and anything to buy that come from that before you actually kick off the next rate cases at the beginning of next year presumably? Or could there be some overlap?

Michael Sullivan :

Okay. Thanks for all the responses. I appreciate it David.

Operator:

Thank you. Our next question comes from Travis Miller of Morningstar. Your line is open.

David Campbell:

Good morning.

Travis Miller:

Good morning. You just answered my question on the Kansas regulatory environment and timing there. So, I’ll ask more broadly just this 4% to 6% I know you're outlining a lot of positives here in terms of growth, the demands if you do go with the Kansas rate case, you would have something presumably in rates 2026 or so. The CapEx update sounds like it's going to be more positive. What are perhaps the offsets that would keep you at that 4% to 6% versus going to a 5% to 7% or more potentially even higher? Would - what are potential offsets to growth given all of the positives that you've been outlining here?

Travis Miller:

Sure. Okay. Great. And then, real quick, can you remind us what demands growth expectation is in that 4% to 6% number?

Travis Miller:

Okay. And again, just to clarify, I am not going to say a lot, but some of that was 2027 and ‘28 when you see some of these large loads come on so we had to assume the 2023 to ‘26 is less than 2% to 3% percent in terms of demand growth.

Geoff Ley:

So, the answer to that is, yes. I think you've got that. We're pleased about the growth trends in the first half of the year.

Travis Miller:

Yes, perfect.

Travis Miller:

Yeah, that's very helpful. Appreciate all the details. Thank you so much.

Operator:

Thank you. Our next question comes from Paul Patterson of Glenrock Associates. Your line is open.

David Campbell:

So, thank you, Paul for the question. We - if you recall that in our rate case last year there was luminous testimony filed on the on the topic. Ultimately, we were able to tell all parties we’re able to reach a settlement that was approved by the Commission. So it was an item that was settled. And it was also an item that was part of the legislation advanced earlier this year. Ultimately, it was removed from the legislation, so HB 2527 included PISA with a 90% deferral and included a construction work in progress mechanism for new natural gas plants. But we with the parties agree that on the capital structure issue, moving from the legislation, let's have a dialogue around it. Later this year so our objective and I think is pretty straightforward. It's really to have a discussion around that. Outside the context of the contested case, the litigated proceeding and really try to level set on what is the prevailing practice. How does Kansas stack up in terms of competitiveness where to - how does it typically impact the company’s credit and other factors. So it's really just an opportunity to have a dialogue around an important issue that drives the competitiveness in attracting capital outside of a rate case. Now in the next rate case, return on equity, capital structure other things will of course be part of those proceedings. So we think having this dialogue on a topic that was at the gear of focus in ’23 when we were teeing up the importance of being competitive and attracting capital. The parties agreed and the legislative process has a workshop. So not overstating on what we're seeing or accomplished, but it's an important topic and we look forward to dialogue outside of the rate case filed.

David Campbell:

So, I think that the rates that the economic development rates that are available, because there's also a series of rate structures that are around the contemplated incremental costs are being incurred. So, I think our view is that, but particularly the size of loads 6 gigawatts up to 6 gigawatts or more, do you want to make sure that the rates that you're including are ones that reflect the incremental cost, but it doesn't mean that every rate structure is only based on incremental costs. The number of jurisdictions where the rates are based on the average cost across the system because in some instances, right, the incremental cost of a new generation maybe higher than the average installed base not always the case. We're just trying to make sure that the great thing about having a set of structures that are already in place that the rates that are in place don't end up where a huge burden is shifted to other existing customers. And we think there's a path to get there. I think that’s very similar to what other jurisdictions are grappling with the same time, Again, when you're in a situation where it's 20 megawatts of incremental load, and you've had excess capacity in the system that was often in the past sort of price and marginal costs, it's a different context here. But I think the answer is, actually probably pretty similar across different jurisdictions. It's finding a set of rate structures that make sure that you're adequately covering the overall cost to the system when you've added that much new load.

Operator:

Thank you. I'm showing no further questions at this time. I'd like to turn it back to David Campbell for closing remarks.

Operator:

This concludes today's conference call. Thank you for participating and you may now disconnect.

Operator:

Good day, and thank you for standing by. Welcome to the Q1 2024 Evergy, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Pete Flynn, Director of Investor Relations. Please go ahead.

As shown on the slide from left to right, the year-over-year decrease in first quarter adjusted EPS was driven by the following:

First, similar to the first quarter of 2023, we saw milder-than-normal weather, particularly in the months of February and March this year. And while the year-over-year adjusted EPS impact was flat, compared to normal, weather was an estimated $0.07 unfavorable.

Operator:

[Operator Instructions] Our first question comes from the line of Nicholas Campanella from Barclays.

David Campbell:

It's a great question. We won't get ahead of the capital expenditure update that we're doing in the third quarter, but I will describe that. You're right, our current expectation rate base growth through 2028 is 6%. So that was the capital expenditure plan we put out on our Q4 call. It is at the low end of all of our peers, significantly below the average of our peers and part of why HB 2527 was so important was because we do see a historic economic development opportunity and pipeline in our territory and investing to take advantage of that opportunity is a lot more difficult when the returns you can offer capital are not competitive.

Nicholas Campanella:

That's really helpful. And then I guess as we're kind of toggling CapEx and thinking about what could be incremental to the plan. Can you just remind us where you stand on your current credit metrics where you're trending for '24? And then where that is relative to your minimums and just how to think about equity needs past the time frame you've guided?

Operator:

Our next question comes from Shar Pourreza of Guggenheim Partners.

David Campbell:

Shar, it really does vary depending on where the location is. Typically, there are incremental investments for very large loads. They're system investments, so it's always a little difficult. If you pegged the last bit of investment and it's all tied to that single customer. But when you have loads in the hundreds of megawatts given the size of our system and as you think of the share of our overall transition base, there's certainly some loads that will have investments around that level if you get to a significant size.

Shahriar Pourreza:

Then maybe just to hone in a little bit. Just maybe if you could just provide a little bit of directional color on the mechanics and the margin on the Google deal. Because if we understand it, you're supplying the actual megawatts, but some of the press releases, including coming from the governor, we're framing this as a self-supply setup 400 megawatts from Ranger and D. E. Shaw. So just trying to understand your exposure and obligations here.

David Campbell:

Thanks, Shar. It's a great question. The IRP that we just issued in Missouri and it's an overall corporate IRP also we'll file in Kansas one here in a couple of weeks. But that IRP does not include the EPA's recently issued rules. It just came out too late to be included in the process. There's a ton of analysis that goes into it. So the new rules will be factored into our IRPs going forward.

Operator:

Our next question comes from Durgesh Chopra of Evercore ISI.

David Campbell:

How I describe it [indiscernible] what HB 2527 does is it just helps to reduce the gap between the authorized return and you realize return. So it helps to mitigate regulatory lag. It gives us a better opportunity to get to approximate, to get closer to earning our authorized return.

Durgesh Chopra:

And the jump from $0.04 to $0.10, I'm sorry, this is not a great question, but that's just basically capital doubling, right, like your asset base doubling between the two.

David Campbell:

Sure. I'll start and ask Kirk to wane. I think last year, if you break down the demand trends, residential and commercial were up 23.8% and 1%, respectively. I mean it was industrial that was down other industrial margins tend to be lower, as you know, and we can really trace the industrial demand being down to 2023 to a few customers that had unique circumstances.

Operator:

Our next question is from Travis Miller of Morningstar, Inc.

David Campbell:

Our work is never done. No, just -- we certainly are working with our stakeholders on a series of issues in both states, really just looking for I think the most important thing is how do we respond to the economic development opportunities that are before us and ensure the best frameworks are in place to take advantage of those. So the discussion in Kansas, look, we HB 2527, I can't upsize enough that it's not only important in terms of provisions reducing lag, but also important as a reflection of the broad-based consensus and support for investments to take advantage of economic development opportunities and having a constructive framework for those investments.

Travis Miller:

That work step would be in the legislative sessions or regulatory?

Travis Miller:

And then a higher level on the EPS growth. You've described obviously a lot of positive things going on. Your growth rate is at or higher than other utilities. You got the CapEx, which you've suggested might be higher. In the third quarter, what pushes you at least to a 5% to 7% number, maybe not back to the 6% to 8%, but why not get to that 5% to 7% or perhaps should we anticipate that when you come out with a new CapEx plan?

Travis Miller:

I figured you want to answer my question by saying, yes, 5 to 7. So appreciate the details. Thanks so much.

Paul Patterson:

Just wanted to go over just a few quick things on the quarter. First of all, the decrease in labor capitalization. Can you elaborate a little bit more on what's driving that and how that's going to impact the rest of the year?

David Campbell:

Paul, you get the product for both in-depth reading and materials.

Kirkland Andrews:

We'll have to -- I have to get back to you offline on that. Paul will be happy to do that.

Kirkland Andrews:

Yes, it does.

David Campbell:

I think, Paul, yes, you heard me right. We've had the PISA provisions, PISA language and changes to PISA relating to natural gas investments to 90% and extending the date past of the house. There's very good discussion around it. There's broad-based support. It's just hard -- given the tight time line in the session, overall session dynamics. It's going to be hard to get anything past. So we think this is no different. Wouldn't rule it out, we certainly think it will be beneficial, but the session dynamics is the time line on the real constraint, not support for the provisions. We think it's broad-based support.

Paul Patterson:

Then just on Missouri, if I'm correct, if you -- if it ends -- the session ends, the floor action ends tomorrow, is that right?

Paul Patterson:

But I thought there was a floor action deadline or something. Okay. But okay, the 17th, okay. Okay.

Operator:

Our next question comes from Ryan Levine of Citi.

David Campbell:

Sure. So the -- it's -- you won't be surprised here. It's data centers, but also advanced in large manufacturing that can range from semiconductor, auto, food, products, food service industries are all pretty big presence in our space. So we, like others, we've got a pretty big presence in data centers already with Meta and Google, and there's a number of those are data centers, but there's also a lot of advanced manufacturing. And we're excited about all of them.

Ryan Levine:

As you're working through your resource planning and with the favorable legislation passed in Kansas, are there any nonfinancial constraints to be able to serve incremental load in your service territories, i.e., particularly on the gas generation side that we should keep in mind that may constrain your growth?

Ryan Levine:

What I was trying to get at is if you're building new gas plants, are there any pipeline constraints or anything else that [indiscernible] more onerous to overcome or permitting or any other challenges that we should keep in mind?

Operator:

Our final question comes from Michael Sullivan of Wolfe.

David Campbell:

So it's welcome to 2024, same as 2023 because we had a mild start to 2023 as well. Like we look across various levels of our business, but the important part of that, obviously, is cost management. We mentioned that the new legislation in Kansas in the first year following rate case provides a benefit. So obviously, we're in the first year following a rate case. So we've got a relatively large enterprise. We got a range of levers that we typically work through. It's -- it's not -- the first quarter is not our biggest quarter. So we'll be watching to see how second and third quarter go in particular.

Michael Sullivan:

And then when I just think about this upcoming CapEx refresh. I think you usually do that for 5 years and the IRP is kind of more like a 10-plus year outlook. If I just -- I know you're talking about capacity upside over 10 years. But if I just look at like the next 5 plan over plan, I think we're in a similar spot, a different mix of generation, but just wanted to try to reconcile that as we think about CapEx plan refresh and what changed in this IRP.

Operator:

This now concludes the question-and-answer session. I would now like to turn it back to David Campbell for closing remarks.

Operator:

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Operator:

Thank you for standing by and welcome to the Q4 2023 Evergy, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today’s call is being recorded. I would now like to turn the conference over to your host, Mr. Peter Flynn, Director of Investor Relations. Please go ahead.

David Campbell:

Thanks, Pete and good morning everyone. Before we begin, we’d like to extend our deepest sympathies to the family of Lisa Lopez-Galvan and all those who were impacted by the tragic events during the Chief Super Bowl parade, Kansas City and Chiefs Kingdom are grieving, but if there is one thing that I’ve learned during my time here, it’s that both are very strong and very resilient. Moving to Slide 5, I’ll open by describing the drivers for our fourth quarter earnings falling below our guidance. While we plan for normal weather, we know the importance of consistent financial execution we are disappointed by these results. As you know, on the third quarter call, we narrowed our guidance range to $3.55 per share to $3.65 per share from our initial range of $3.55 to $3.75, due primarily to the timing of the Persimmon Creek wind farm shifting back a year. As shown on Slide 5, results for the year were $3.54 per share. Weather at the end of the year was the driver of the shortfall. For both November and December and December in particular, with a 23% decrease in heating degree days relative to last year, weather was warmer than normal, resulting in a variance of $0.06 in these 2 months alone. As Kirk will describe, weather-adjusted demand was also soft in the fourth quarter relative to expectations, but we were able to offset those impacts leaving milder-than-normal weather as a driver. Our full year results reflect strong cost management with savings well beyond what was in our financial plan, which enabled us to offset the negative drag created by higher interest rates and lower than expected industrial load. In 2023, we reduced our O&M expenses by $129 million, equal to a year-over-year reduction of 12%. These efficiency gains reflect the hard work of the entire Evergy team who worked tirelessly throughout the year to advance our plan and our strategic objectives. In 2023, we also executed on our capital investment plan to improve reliability and resiliency, investing $2.3 billion in infrastructure to modernize our grid, replace aging equipment and advance our sustainability and affordability goals with the addition of the low cost Persimmon Creek wind farm. In early December, we completed a $1.4 billion convertible note financing to mitigate interest rate and refinancing risk at the holding company. Of note, this financing was contemplated in and supportive of our updated growth outlook that we announced on our third quarter earnings call. Last year, we made strong progress on reliability as well as is shown on Page 6. Relative to 2022, average outage duration and frequency as measured by SAIDI and SAIFI improved by 10% and 9% respectively. I’d like to commend the outstanding work from our distribution and transmission teams and keeping the lights on for our customers and communities, as the reliability gains reflect improvements to our outage management processes and the impact of our ongoing grid investments. Slide 6 also highlights the nearly 30% reduction in total costs that we have achieved since 2018. These cost savings involved a comprehensive multiyear program that touched every aspect of our business. Change is hard and involves tough decisions and efficiency gains of this magnitude necessarily involved major changes across Evergy over the past 5 years. The result of this hard work was affordability gains that we delivered to our customers. I am proud and honored to lead the Evergy team that made this happen. On Slide 7, we introduced our 2024 GAAP and adjusted EPS guidance of $3.73 per share to $3.93 per share. The midpoint represents a 5% increase over the original $3.65 midpoint of our 2023 baseline year. We remain confident in our ability to deliver annual 4% to 6% adjusted EPS growth through 2026 and we are reaffirming that target today. Evergy’s cost savings were the major enabler of the improvements in regional rate competitiveness that are shown on Slide 8. When factoring in the 2023 rate case settlements, Evergy has been able to limit cumulative rate increases in both Kansas and Missouri to 1% since 2017. That compares to an average increase in rates across our region of more than 11% and cumulative inflation of nearly 23%. Without question, the merger has delivered affordability gains and significant benefits to our customers and the communities we serve. On Slide 9, we highlight the outlook for economic development and demand growth in Kansas and Missouri, which is robust as it has been in decades. Our focus on affordability and regional rate competitiveness is an important contributor to this large pipeline and provides a foundation for our ongoing support of the tremendous opportunity in our states. There are currently $12 million of active development projects evaluating our service territories, representing 1.3 gigawatts of potential additional demand. The largest additions announced under construction so far are the Panasonic electric vehicle battery manufacturing plant in Kansas and the Meta data center in Missouri. The Panasonic plant for its construction is already well underway is expected to be the largest EV battery plant in the world. As I will describe further for these successes to continue, the grid will require competitive access to capital and significant investment. In turn, ongoing successes will drive economic growth, which benefits all of our customers and helps to cover the fixed cost of our system more efficiently. Based on Panasonic, Meta and projects announced to-date we expect 2% to 3% weather-normalized annual demand growth through 2026, off of the 2023 base, above our traditional base planning assumption of 0.5% to 1% annually. This includes incremental load from Panasonic and Meta starting in 2024 and continue to expand to an expected full run-rate in 2026. Slide 10 lays out our updated capital expenditure forecast, which has been extended through 2028. Our latest 5-year investment plan totals approximately $12.5 billion, which represents a nearly $900 million increase relative to our prior 5-year forecast through 2027. The program is expected to result in 6% annual rate base growth. The revised capital forecast incorporates the Integrated Resource Plan filed in June of last year, which reflect a balanced approach that enables fuel diversification and a responsible portfolio transition. Nearly 55% of our planned investment is targeted towards transmission and distribution projects as we continue to modernize our grid to improve reliability and enhance resiliency. By replacing aging equipment, investing in smart grid technologies will also enable further efficiency gains in serving our customers, which has been a hallmark of Evergy’s strategy since our formation in 2018. Moving to Slide 11, I’ll provide an update on our regulatory and legislative priorities in both Kansas and Missouri. As I discussed in our call last quarter, we have been working with stakeholders to position Kansas to take advantage of an unprecedented growth environment. Evergy is a key participant and we are doing our part to ensure that the state has affordable competitive rates. In Kansas alone, we have delivered over $360 million in operating efficiencies and customer bill credits. For this success to continue, the state’s infrastructure will require significant capital investment to ensure sufficient capacity, competitive levels of reliability and resiliency and a modern grid that delivers the flexibility and benefits to customers’ demand. In our discussions with stakeholders in the past few months, we have emphasized that attracting the necessary investment cannot be done without a regulatory environment that enables the flow of competitively priced capital. Investors have a choice where they direct capital. And for Evergy in Kansas to compete, investors require debt and equity returns commensurate with current market conditions and competitive with peers, a clear and stable framework around regulatory capital structure to guide how we capitalize our utilities, an opportunity to earn the returns we are authorized and timely recovery invested capital, both now and in the future. Without these elements, our investment proposition loses attractiveness relative to our peer utilities who benefit from more robust capital programs, more attractive realized returns, and more predictable and stable regulatory mechanisms. An imbalanced investment proposition challenges our ability to have the infrastructure in place to compete for economic development and by extension, challenges the shared goal of Kansas stakeholders to attract new businesses and their jobs and investment. The best way to ensure competitive rates over the long term is economic growth. To further that goal, Evergy and a coalition of economic development organizations, business interests and customers, introduced House Bill 2527 in Kansas earlier this year. The bill incorporated multiple elements to establish a fair and competitive framework for electric infrastructure investment, including provisions allowing for the use of plant-in-service accounting, or PISA, construction work in progress for large power plant investments, and enhanced large customer economic development rates among other features. Discussions relating to HB 2527 are ongoing, and we are working with parties toward achieving a constructive compromise that supports our shared goal of advancing economic development and growth in Kansas. We would like to thank the legislative leaders involved in these discussions, Kansas Corporation Commission staff, representatives from CURB, industrial stakeholders, the Governor’s office, and many other stakeholders for their participation and engagement. I know that many of our investors and analysts follow the legislative proceedings closely. So please stay on the lookout as the process advances in the coming weeks. And of course, we will provide a further update on next quarter’s call. By May, we also expect to file our triennial integrated resource plan in both states. The planning process is well underway, and given the significant changes we factored into our 2023 IRP, including IRA tailwinds, updated construction costs and higher capacity requirements in the Southwest Power Pool, we anticipate a filing similar to last year’s, though with some adjustments to reflect ongoing changes in marketing conditions and economic development prospects. Pivoting to Missouri, we filed the Missouri West rate case on February 2. The procedural schedule was jointly filed by the parties earlier this week. Subject to approval of the schedule, we anticipate intervenor direct testimony in June followed by rebuttal testimony in August, a settlement conference in the second half of September, and potential hearings in late September and October. We look forward to working collaboratively with the Missouri Public Service Commission staff and our stakeholders to achieve a constructive outcome from Reserve West customers. An element of our rate request is our potential investment in the Dogwood Energy facility and operating combined cycle gas plant identified in our 2023 IRP. Last November, we entered into an agreement to purchase a 22% share of the plant or 143 megawatts of summer capacity and we subsequently filed a request for an operating CCM. Earlier this week, on February 26, a stipulation and agreement with no parties opposed was filed requesting that the Missouri Public Service Commission grant the operating CCM. Dogwood is a low cost generation resource with a solid operating history to support our Missouri West customers. The transaction is expected to close in the second quarter, subject to commission approval. On February 23, we closed a financing to securitize extraordinary costs from Winter Storm Uri being carried at Missouri West, providing $323 million in net proceeds. As a result, the costs incurred from the storm will be spent over 15 years to better manage the impact on customer bills. This was a lengthy process and we appreciate the hard work of our treasury team, PSC staff and other parties and getting it over the finish line. Bills have been proposed in Missouri House and Senate that would extend PISA to 2040 and modify a provision of the statute to cover new natural gas generation. House Bill 2541 passed out of committee and Senate Bill 1422 awaits further action. Similar to our efforts in Kansas, we’ll continue to engage with our Missouri stakeholders, regarding constructive mechanisms that support natural gas investments as these are important resources identified in our integrated resource plan. I’ll conclude my remarks with Slide 12, which highlights the core tenets of our strategy. Affordability, reliability and sustainability. Keeping rates affordable for our customers remains at the forefront. We advanced affordability in 2023 with our Kansas rate case settlement, maintaining the momentum of the past 5 years. We have saved more than $1 billion in operating costs since the merger, enabling Evergy to offset steep inflationary pressures, while at the same time, ramping up investment and reliability and helping to bolster economic development. We’re pleased by our progress in improving regional rate competitiveness and keeping our rate trajectory well below the rate of inflation. As our capital plan outlines, we continue to invest in grid modernization to ensure reliability and strong customer service, building on the momentum reflected in our significant improvements in SAIDI and SAIFI in 2023. Our overriding sustainability goal is to lead a responsible, cost-effective energy transition. In 2023, we added for Persimmon Creek, a low-cost emissions free resource to serve our Kansas Central customers. We remain committed to a long-term strategy to reduce CO2 emissions in a cost-effective and reliable manner. Our goal is to achieve net-zero emissions – carbon emissions by 2045, with an interim target of a 70% reduction both relative to 2005 baseline. Achieving our targets will no doubt be dependent on external factors such as new policies and regulations and the advancement of new technologies. Our mission is to empower a better future, and our vision is to lead their responsible energy transition in our region, always with an eye on affordability and reliability along with sustainability. I will now turn the call over to Kirk.

Operator:

Thank you. [Operator Instructions] Our first question comes from the line of Nicholas Campanella from Barclays. Your line is open.

David Campbell:

Hi, Nick.

David Campbell:

So thanks, Nick, for the question. We won’t get ahead of the process in terms of describing the details that emphasize that we’re working hard with parties toward achieving a constructive compromise. And I really can’t thank the parties enough. This is hard work. It’s hard work on through the legislation we had several weeks. So that’s legislators, KCC staff, curb, industrial stakeholders, Governor’s office, others. So we’re working with those parties. And what I’ll describe is the – this is a very transparent process, as you know, so continue to watch developments in the legislative process that we’re able to reach a constructive compromise because there is a lot of shared alignment on the goals of economic development growth. Then you’ll see the next steps would involve going to the House Committee and from that to the full house and hopefully on to the Senate. So keep an eye on what’s going on in the legislative process. That’s the best way to get a sense for where the discussions are going and what they include. But again, we want to really thank the parties as we continue to work with.

Kirk Andrews:

Sure. Nick, it’s Kirk. So building on top of that roughly 15% pro forma, which includes adjusting for the impact of the successful securitization and obviously, the impact of new rates, which we know, moving into Kansas. If you look at some of the components as we move into 2024, for example, there are other items that are additive to numerator, for example, most notably, the ongoing impact with minimal – basically no lag from our transmission investment, so that increases numerator. So we expect a surplus over that threshold as we move into 2024. We expect to utilize that surplus as we move forward into 2025 and ‘26, augmented by continued robust generation of operating cash flow because as you know, we’re not a current taxpayer. So those two components continue to give us confidence that we can use that surplus that we’re plugging into ‘24 on those ratios to fund that capital investment program without that need for new equity. Beyond 2026, we haven’t actually said – at some point, we will pivot to equity needs. We want to do that prudently, and we want to do that on a measured pace, both from a standpoint of keeping a reasonable trajectory on EPS but also with equal importance maintaining those credit ratios, which obviously allow us to maintain those ratings, which is important from an affordability standpoint for our customers.

Operator:

Thank you. [Operator Instructions] Our next question comes from the line of Michael Sullivan of Wolfe. Your line is open.

David Campbell:

Good morning.

David Campbell:

Yes. Mike, I think it’s a good question. I think that we – and as you have seen, a lot of our peer utilities, there are pace of rate base investment was already higher than ours in terms of their annual rate base growth, and many of them have increased them significantly recently. So, the gap has widened. So, if you look at our – break it down by jurisdiction, you look at Kansas Central and Kansas Metro, the biggest source of increases in generation, particularly in the out years, and that relates to a need for new dispatchable generation resources. If you look at the earlier years in the categories of kind of traditional T&D grid and other categories, there is a modest decline. I mean that’s in the context of an inflationary environment for equipment and otherwise. So, we are making the investments we need to, to ensure reliability and serve the new customers that are identified, but we do believe, and this is a discussion we have had with stakeholders that to really take advantage of the opportunities in Kansas. There is an intersection with the regulatory mechanisms that are in place. So, when you drill down to it, you will see that, that the modest upticks in Kansas are really driven by the need for the new generation in the out years, particularly new dispatchable generation.

David Campbell:

Mike, I think that’s a great question. If we – part of the dialogue with our stakeholders in Kansas is around the need for incremental investment, if we are able to reach a constructive comprise that reflects shared belief in the infrastructure investment needed, that’s really what’s underlying the push here. I do think you will see us evaluate our capital plan for incremental opportunities and pursue those. Now, we will do that in a systematic process, of course, and make sure that, that’s a process where there is full transparency to both our – of course, our stakeholders in Kansas and the market. But I think you will see that these factors do go hand in hand underlying reflection of support for that kind of infrastructure investment will be matched by an increase in that kind of investment, which we think will be really beneficial as Kansas pursues the growth and development opportunities.

David Campbell:

No, it’s – Mike, it’s a pretty straightforward rate case. It’s largely we had a rate case 2 years ago. So, our ‘22 and ‘23 rate cases were after long stay outs, first since the merger. So, this one is a little more straightforward in that regard. So, the biggest elements I think you would see it reflected in the charts we have been posted on there are incorporating capital additions and incorporating the impacts of higher cost of capital environment. There is some transmission expense related to a generation plant that’s part of it, that’s relatively modest. But for the most part, it’s a pretty straightforward rate case. A lot of the complicated issues that I know we discussed at length with you going in the last one, thankfully resolved in that one. So, it’s generally a pretty straightforward rate case centered on the investments we have made since then and the authorized returns related to it.

David Campbell:

Thank you.

Paul Zimbardo:

Hi. Good morning team. Thanks a lot.

Paul Zimbardo:

I promise I will not ask about the legislation. The first one I have…

Paul Zimbardo:

Just in terms of the base demand, kind of the new incremental load customers, the 2% to 3% versus the base of 50 basis points to 1%. Is there a good way to think about like an earnings sensitivity or just what the contribution of that is through the plan?

David Campbell:

I would just echo Kirk’s comment, though, on – this is David, that these are industrial customers, which as you know, the profile of those are helpful, important for covering fixed costs, but generally less impact than equivalent load growth in commercial and residential.

Kirk Andrews:

That is certainly a possibility. I mean certainly, that’s natural gas plants aren’t a – you write a check at the end right before the COD. So, we are going to be building that, that informs capital investment over time. And that obviously entails a building balance in CWIP. Certainly, getting timely recovery on CWIP is one of our objective is as we look for kind of reforming the type of regulatory mechanisms that are designed to incent that. So, as we move forward on some of the legislations, which we won’t comment on, I think that will inform largely the impact on some of those elements, which are helpful, especially for large capital projects like that – like the natural gas plant sort of the back end of the plant.

Paul Zimbardo:

Thank you very much.

Operator:

Thank you. [Operator Instructions] Our next question comes from the line of Paul Fremont from Ladenburg Thalmann & Company. Your line is open.

David Campbell:

Sure. So, I think as probably reflected by the number of minutes devoted to the topic. Our legislative initiative in Kansas, really a broader effort to work with policymakers and stakeholders in Kansas to support electric infrastructure investment, to support economic development and growth. That I would list as our top priority. And there are other mechanisms. I mean we are talking with the same parties who we would work with in the regulatory front and other laws. So, I think the importance of having constructive dialogue, alignment around those shared objectives is key. But that’s our latest – I would characterize that as our number one legislated priority. We have some activities underway in Missouri as well, and those are important. They are also reflective of important priorities, but it’s fair to say that the prospects in the Missouri legislature this year in general for legislation are more challenged. And there – I think there is nearly the double-digit number of state legislators running for a statewide office, it’s an election year. So, the overall dynamics in Missouri are less likely to lead to legislation. But I would also say that there is maybe a lower priority there. Very constructive legislative actions taken in Missouri the last couple of years with the extension of pieces, some other changes to piece of the addition of the property tax rider. So, items [ph], our relative priorities on the Kansas side and the mechanisms that we have talked about there.

Kirk Andrews:

I would say marginally from that standpoint. Obviously, we had a little a little of a lower increase, obviously, commensurate with our change in the growth rate, but it’s very important for us to have a good blend of obviously capital appreciation and current returns. So, we want to be mindful of that delivering the right mix for our investors. As we pivot to maybe potentially a little bit lower or commensurate with our growth rate, the reduction in the dividend, really, I would say, sort of contributes to our ability relative to higher levels of dividend growth to fund that capital expenditures, right. It helps us maintain those all-important credit ratios that I talked about before.

Paul Fremont:

And then last question for me. It sounds like you could still raise capital spending levels without issuing equity. Is there sort of a limit to that increase where – or what would be the threshold where you would have to issue to issue equity?

Paul Fremont:

Okay. And then I guess if you were to sort of go to incremental levels what percent of would you see as being funded with equity?

Paul Fremont:

Great. Thank you very much.

Operator:

Thank you. [Operator Instructions] Our next question comes from the line of Paul Patterson of Glenrock Associates. Your line is open.

David Campbell:

Good morning Paul.

David Campbell:

I will say on what rates negotiated of course, very large loads get special contracts. I think the best way to describe it, we actually have a waterfall that goes through 2023 to 2024, so we show what the overall impact of weather and demand is in that. So, it’s part of the improvement that we see in the trajectory from ‘23 to ‘24. But in general, the industrial load, while it does help and drives incremental cost savings and opportunities, it doesn’t have the same level of impact as residential and commercial because of the rate structure. But to get a good flavor of how that translates because we give the growth rate estimate and the impact on EPS and that, I think it’s a waterfall slide in the back half of the document. So, we can walk through that with you offline just to see how that translates. But it’s a – any savings that are generated, of course, through rate cases are going to be shared. So, if you – one of the best thing as I described in my note, the best way to keep rates affordable through growth. And that affordability gain in the near-term, it can have some EPS impact. But we are going to have a regular cadence of rate cases now. That’s the great benefit of it is that’s what’s going to keep rates affordable for our customers, of course, that gets shared.

David Campbell:

Thank you.

David Campbell:

Thank you, Valerie and thanks everyone for your interest and time this morning. That concludes the call today. Thank you.

Operator:

Good day and thank you for standing by. Welcome to the Third Quarter 2023 Evergy Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Peter Flynn. Please go ahead.

David Campbell:

Thanks, Pete, and good morning, everyone. I'll begin on Slide 5. I'm pleased to report that Evergy had a solid quarter as we delivered adjusted earnings of $1.88 per share compared to $2 per share a year ago. The decrease was driven by milder weather and higher depreciation and amortization and interest expense, partially offset by lower O&M expenses, higher corporate-owned life insurance proceeds or COLI and tax items. Results for the quarter were also impacted by over $9 million in excess O&M storm costs in July, driven by a mid-month storm, which brought straight-line wins of over 80 miles per hour over much of our service territory. Overall, I'm pleased to report that our reliability metrics held strong for the quarter. Relative to last year, average outage duration and frequency, measured by SAIDI and SAIFI, have improved greater than 5% through September and remained favorable relative to our targets. This is a strong testament to the work of our distribution and transmission teams to restore power and keep the lights on, as well as the investments that we have made in our system. With these results year-to-date, we are narrowing our 2023 adjusted EPS guidance range to $3.55 per share to $3.65 per share. While we've offset the excess storm costs and delivered O&M savings well beyond our initial guidance for the year, we have not been able to offset the full magnitude of headwinds elsewhere, most notably from higher interest expense and the shift of Persimmon Creek from Missouri to Kansas. Kirk will discuss these drivers and net onetime effects in more detail. Looking beyond 2023, we are establishing a new long-term adjusted EPS growth target of 4% to 6%, off of the midpoint of our original 2023 adjusted EPS guidance range of $3.65 per share. Since the completion of the Evergy merger in 2018, we've delivered solid earnings growth, driven in large part by a highly successful O&M reduction plan. This program has enabled us to deliver significant cost savings to our customer, while at the same time, increasing our pace of investment to modernize our grid and improve service to customers. Notwithstanding this progress, two factors, in particular, have negatively impacted our ability to meet the earnings growth target we previously laid out. First, challenging rate case outcomes. And second, a higher interest rate environment. Most significantly, the Kansas rate cases fell short of expectations. In the context of a challenging position taken by the Kansas Corporation Commission staff on our proposed revenue requirement as well as the level of attention focused on our first-rate case since the merger that created Evergy more than five years ago, we ultimately negotiated unanimous settlement that is currently pending approval by the commission. However, the Kansas rate case settlement negatively impacted our forward plan by approximately $0.15 a share. The dynamics in the rate case are a reflection of the singular focus that Kansas has had on improving regional rate competitiveness. And without question, Evergy has delivered against that objective. Going forward, we know that state policymakers and stakeholders are excited by an unprecedented economic development pipeline in Kansas. To help the state capitalize on this opportunity and enable beneficial investment, we have important work to do to ensure that Kansas offers a competitive cost of capital and the potential to earn a competitive return. I'll discuss that further in a moment. With respect to Missouri, the context is different. Following our successful motion for rehearing, the Missouri rate case outcomes in 2022 were more constructive with respect to the key economic terms. The main challenges in the rate case is related to legacy issues that have now been resolved and put behind us, most notably relating to the 2018 Sibley plant retirement. Higher interest rates are also dragging the forward plan. Most significantly, they impact the refinancing that will occur in 2024 and for $800 million of holding company debt. In addition, our plan includes some additional holding company debt by 2025 for which we are expecting to refinance our $500 million term loan. The revised long-term growth rate target of 4% to 6% extends through 2026 and reflects our trajectory after the wave step function cost savings that we have delivered since the 2018 merger. Over the long term, our growth rate will reflect our rate base growth and the related financing plan. Our current rate base growth level is expected to be 6% annually. In addition to the projects currently included in our capital plan, we see a significant backlog of additional projects that will benefit customers across the T&D system and in the ongoing transition of our generation fleet. However, in Kansas, in particular, we will shape our capital plan to reflect the policy objectives of our key decision-makers and stakeholders. We will be actively pursuing mechanisms that we think align with those objectives and that will enhance our ability to partner in support of state priorities and earn a competitive return with timely recovery. While our long-term target has changed, our culture will not, we remain laser-focused on operational and financial execution for the items within our control and achieving constructive regulatory outcomes and a more regular cadence of rate cases, after the long stay outs that were agreed to as part of the 2018 merger. In both of our states, we expect to file rate cases roughly every two years, similar to the cadence of our peer utilities. We know the importance of consistent execution, and we recognize that today's update falls short of that. However, we are confident in our ability to execute our strategic plan going forward at the revised target. In addition, we see opportunities to work with our stakeholders to advance constructive regulation in both states. As part of today's update, we also announced a 5% increase in our quarterly dividend to $64.25 per share or $2.57 per share on an annualized basis. This increase is consistent with our updated growth outlook as well as our 60% to 70% payout ratio target. Combination of our annual growth outlook and our dividend yield positions Evergy to deliver a competitive total annual return of 9% to 11%. Moving to Slide 6, as I mentioned, we reached unanimous settlement and the pending Kansas rate cases. If approved, the resulting rate increases are far below those regional peers in inflation. The settlement calls for a net revenue increase of $41.1 million across our Kansas jurisdictions, reflecting a $74 million increase at Kansas Central and a $32.9 million decrease at Kansas Metro. The settlement includes the addition of the Persimmon Creek wind farm and our 8% interest in Jeffrey Energy Center into Kansas Central's rate base. These additions provide low-cost generation solutions to meet our customers' growing demand and energy needs. The settlement also provides final resolution to the rate discounts that were provided to customers through the COLI program, which was first put in place nearly 40 years ago, when the Wolf Creek nuclear plant came online. The settlement sets a $96.5 million rate credit to be amortized over three years, after which the program is removed entirely from the regulatory construct. With this settlement, our COLI program has provided tremendous savings for customers, $750 million in total since the mid-1980s. While the settlement is silent on return on equity and capital structure, it specifies a 9.4% return on equity to be utilized for purposes of the transmission delivery charge filings required by legislation passed last year. We've included more details on this in the appendix. If this settlement is approved, we expect the Kansas Corporation Commission will issue an order, implementing new rates by December 21. As shown on Slide 7, when factoring in the rate case settlements, Evergy has been able to limit cumulative rate increases in Kansas to 1% since 2017. In contrast, rates increased in our regional peer states by 12.7% over the same time period. Many of our peer utilities have rate cases pending or planned, which will further widen the gap. Our rate increase is even further below the rate of inflation since the merger. Advancing and improving regional rate competitiveness has been top of mind for many of our stakeholders in Kansas and were primary drivers for the 2018 merger, and that's exactly what we've delivered. On Slide 8, we highlight the outlook for economic development in Kansas, which is as promising as it has been in decades. As the largest utility in Kansas, Evergy plays a vital role in enabling growth. Over the past five years, the state's economic development pipeline has grown to previously unseen levels. In 2022, the best year for economic development in Kansas in Evergy's history, we helped to land 13 major projects, representing more than $5.2 billion of capital investment, 6,000 new jobs with the Panasonic electric vehicle battery plant, a leading example. The future looks even brighter with more than $10 billion of active economic development projects, evaluating our Kansas service territories, representing 650 megawatts of potential additional demand. The state's recent track record and large economic development pipeline, in part reflect the success of our focus on ensuring affordability and regional rate competitiveness. Through a highly successful cost savings program following the merger, we have delivered over $360 million in operating efficiencies in customer bill credits in Kansas. I would like to thank the dedication and focus of the entire Evergy team in making this happen. It has taken a tremendous amount of sustained effort. At the same time, the team achieved record safety results last year, along with strong generation commercial fleet availability and ongoing reliability improvements in 2023. The results the team has achieved have directly supported and advanced stay priorities. For this success to continue, the grid will require significant capital investment to ensure sufficient capacity competitive levels of reliability and resiliency and a modern grid that delivers the flexibility and benefits that customers increasingly demand. This cannot be done without a regulatory environment that enables the flow of competitively priced capital in Kansas. Cost of capital parameters, regulatory capital structure and timely recovery investment are crucial importance when utility investors make capital allocation decisions. Investors have a choice where they direct capital and for Evergy in Kansas to compete for that capital, investors require debt and equity returns, commensurate with current market conditions and competitive with peers, a clear and stable framework around regulatory capital structure, to guide how we capitalize our utilities, an opportunity to earn the returns we are authorized and timely recovery of invested capital, both now and in the future. Without these elements, our investment proposition loses attractiveness relative to our peer utilities to benefit from more robust capital programs, more attractive authorized and realized returns as well as more predictable and balanced regulatory mechanisms. An imbalanced investment proposition challenges our ability to put the infrastructure in place to effectively partner and compete for economic development and by extension challenges the shared goal of Kansas stakeholders to attract new businesses and their jobs and investment. We see a bright future for Kansas, and we are honored by the privilege to play a key role in that future. To capitalize on the state's economic development potential, we believe that the focus must include constructive regulatory mechanisms for the investment necessary to enable that growth. This is a priority for Evergy, and going forward, we will work with regulators and policymakers to ensure that Kansas is competitive with peer states and seizes on the unprecedented opportunities that are before us. Moving to Slide 9, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri. As I mentioned, we expect a final order on the settlement agreement filed in our Kansas rate cases by December 21. On September 1, the commission conditionally approved a settlement in our energy efficiency document, otherwise known as Kia. Kia was established to support the state's goal of promoting the implementation of cost-effective demand-side programs, such as home energy assessments and rebates for energy saving appliances. We expect the first key programs will begin in 2024. On the policy front, our efforts will focus on cost of capital and capital structure as well as recovery mechanisms supporting our grid and generation investments. One area of focus will be provisions applying to new dispatchable generation. Heading to Missouri, the commission order approving our request to securitize extraordinary costs from Winter Storm Uri was affirmed in the Missouri Court of Appeals in late September. The Missouri Office of Public Council of OPC, filed a motion for rehearing, which was denied on October 24. It is possible that OPC will further appeal to the Missouri Supreme Court. Consistent with the appellate court's decision, we believe the Missouri Commission's decision and support of securitization is well supported by the record, and we anticipate resolution by the end of the year. As a reminder, we will complete the securitization financing after the appeal plays out, but incremental carrying costs incurred prior to approval will ultimately be recovered when we issue the debt. Similar, our efforts in Kansas work to engage with our Missouri stakeholders regarding constructive regulatory mechanisms to support timely recovery in new dispatchable generation investments as these have been identified as important new resources, in our integrated resource plan. Last, we began the planning process for Missouri West rate case, which we expect to file in February 2024. I'll conclude my remarks with Slide 10, which highlights the core tenets of our strategy. affordability, reliability and sustainability. Keeping rates affordable for our customers has been and will continue to be at the forefront of our thinking. Nailed by the merger, Evergy has now saved more than $1 billion in operating costs over the past five years. These savings allow the company to offset steep inflationary pressures while also helping to attract and bolster economic development in our region. We're pleased by our progress in improving regional rate competitiveness and keeping our rate trajectory well below the rate of inflation. Affordability is and will always be an area of focus. Ensuring reliability is also a core element of our strategy, along with SAIDI, SAIFI, grid resiliency and public safety. This includes a focus on metrics relating to customer service, the commercial availability of our fleet, safety and all elements of our operations, including infrastructure investment. With respect to sustainability, we continue to advance the responsible transition of our generation fleet with investments such as the Persimmon Creek wind farm. We expect to add over three gigawatts of renewable resources through 2032 and 1.5 gigawatts of new hydrogen cable gas generation, advancing our decarbonization goals, ensuring day-to-day grid demands and customer needs are met. Our mission is to empower better future, and our vision is to lead the responsible energy transition in our region, always with an eye on affordability and reliability as well as sustainability. I will now turn the call over to Kirk.

Operator:

Thank you. [Operator Instructions] Our first question is going to come from the line of Shar Pourreza with Guggenheim Partners. Your line is open. Please go ahead.

David Campbell:

Shar, thanks for the question. So as we set the revised growth rate target, we did factor in -- our view of where the current macro conditions are. So certainly, the interest rate environment reflects the current forward curve, and it reflects the current regulatory mechanisms that are in place in our states. It reflects our current rate base outlook. And it reflects the O&M reduction plan that we previously described to investors. We're -- I'm very pleased with the work of all of our employees in accelerating some of those cost savings to offset some of the headwinds in 2023. But you'll recall that we've announced an ongoing O&M savings trajectory through 2025. I would characterize our actions this year is really an acceleration. And and where we're tracking, if not all the way to where we expect to be, we've gotten a long way towards it. So we basically holding to the prior O&M targets that we outlined separately. You'll see in our -- going back to our Investor Day, I think we teed up $960 million run rate O&M in 2025. Last year, it was more like $1.70 billion. Obviously, we reduced that significantly already year-to-date. So I would describe our go-forward plan is reflecting the disappointing results of the Kansas rate case the macro environment that we see and the headwinds on interest rates, but then the ongoing execution of our plants. So we're obviously disappointed in not having execution path that matched our prior targets but we feel good about the new plan that we've outlined. And obviously, as we emphasize, we do see opportunities to work with our regulators for ongoing changes to regulatory mechanisms that we think will be in support of the objectives of of our policymakers and stakeholders in our states.

David Campbell:

Yes. I would describe it, Shar, that the -- in our current capital plan, we don't anticipate a need for equity through 2026. As Kirk described, we'll update our capital plan on the year-end call. While we see significant additional opportunities for beneficial investments, investments that will benefit our customers and our grid, we'll shape the capital plan based on to reflect the objectives of our policymakers. And if we stick with the current capital plan, we don't anticipate that we'd see equity into 2026. So if we change it, then obviously, we'll update the financing claim at the same time.

David Campbell:

Sure. So I described it at two levels, Shar. First on what it means in terms of what we're pursuing. So I do think that the -- there are several items coming out of the rate case that we've identified as priorities, and we think align with the opportunities that are in front of us in both Kansas and Missouri to support economic development. On that list include a clear and stable framework for capital structure. It is common for our peer utilities for utility holding companies to have responsible levels of holdco debt. We think that the dialogue through testimony and the Kansas rate case will give us the opportunity to advance that discussion, going forward. So capital structure is an important piece. The second piece is the opportunity to earn returns that are competitive with and commensurate with market conditions and competitive peers. And the third is around the time and recovery of capital. So those will be areas that we'll be focused on. Specific things we'll likely look at include -- we have plans to build natural gas generation for reliable hydrogen capable dispatchable generation in both states. So mechanisms to support that build-out will be an area of focus. And then on your question about allocation of capital, obviously, we will shape our capital plan always to meet the requirements of our jurisdictions for reliability and to meet our customer needs, but the incremental opportunities to invest, we think we'll benefit customers that will position us to capitalize on economic development opportunities. We'll shape that capital plan based on the mechanisms and policies that we see in the respective states.

Nicholas Campanella:

Hey, good morning. Thanks for taking my questions. I guess just to follow up on some of Shar's questions. Like I think as you kind of look at the glide path through 2026, it implies something linear. But just how should we think about 2024? Can you kind of grow within this 4% to 6% range into 2024 as we kind of handicap what your earnings would be there? And is this CAGR linear? Or is it more lumpy? Thank you.

Nicholas Campanella:

Okay. Great. And then I acknowledge that you're kind of taking down the growth rate today and you have had some headwinds in Kansas. The mechanisms obviously aren't as constructive to deploy capital. But on this new plan, can you still do 6% rate base growth like prior plans? Or is that subject to change as well? I'm just acknowledging the comments I think Kirk said there's been a little bit of an acceleration even in '23, and you continue to highlight a lot of economic development. Thank you.

Nicholas Campanella:

One more follow-up for me, just to triple check, this outlook basically assumed the settlement? And just if anything gets tweaked on December 20, how should we think about that?

Operator:

Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Julien Dumoulin-Smith with Bank of America. Your line is open. Please go ahead.

David Campbell:

You know, Darius. It's been our historical practice as well. We typically have a three-year forward outlook. I don't know if there's any magic to it. I think you can, you know, based on where we are today, our long-term growth rate target is 4% to 6%, but we've extended it through 26. But we certainly -- that's really just a matter of practice. We typically have that three-year outlook.

David Campbell:

Yeah, there are several different paths that we can go down on that. So it will be -- and especially once the rate case is approved, we'll get more visibility into it, but there's -- you can work that directly with regulators. You can work that with other stakeholders. What I really emphasize is that I think the rate case and the testimony that was included on the capital structure topic and there was luminous testimony on it, sets the stage for a good discussion, particularly if you look at [indiscernible] direct testimony in our rebuttal testimony, we've communicated the importance of competitive equity returns. We've communicated and have good evidence to show how it was common and almost universal for utility holding companies to have responsible levels of holdco leverage. And it's also common at the same time, have you have utility-only capital structures used in regulated rate making. So that's the dialogue that we're going to advance and a couple of different mechanisms that we'll evaluate as we as we advance that discussion. As I mentioned, we've got a rate case in Missouri West next year. We have a little time before our next planned Kansas rate case. There'll be a little bit of a dynamic in the final decisions around that. But that will give us some time to advance the dollar.

David Campbell:

It was timely for Missouri West to file a rate case. So we're planning to do it for next year. We'll certainly -- for all of our jurisdictions, we'll look at the right cadence to do it. We had the long stay outs coming out of the merger. I don't think you're going to see those in the four-to-five-year stats, but it's timely for Missouri West rate case. So we're filing on next year and not currently -- not planned for Missouri Metro at this time for next year.

Steven Fleishman:

Yeah, good morning. Thanks. So just on the I guess, first on the kind of interest rate impacts. So you're basically in the new plan, assuming kind of the current forward curves as they are?

Steven Fleishman:

Okay. And you mentioned the Kansas rate case being kind of a $0.15 difference versus the prior plan? Is most of the other difference, just the interest rate move?

Steven Fleishman:

Okay. Could you just talk to kind of how your credit metrics look in the new plan with the Kansas settlement FFO to debt metrics range?

Steven Fleishman:

Okay. And your threshold again is what is it again? Is it 14% or 15%?

Steven Fleishman:

Okay. And just one more, I guess, sorry, on the capital plan. So I think you're going to update the capital plan on the year-end call, and you seem to be talking about maybe making updates by them. But like that's -- I mean that's pretty soon. Some of these processes in the state you're talking about, you wouldn't necessarily think would be kind of really started or done by the year-end call. Are these things that might get added like later on?

Steven Fleishman:

Okay. And then maybe just one last thing on just that last point of Kansas because obviously, this would have been a relevant thing to be aware of kind of in the current rate case too in terms of perceived ability to -- for future kind of growth and all the stuff. Just like is there any olive branches or things that have been shared that should give us any hope that the other folks are going to engage in a -- along the lines of what you want as opposed to kind of what happened in this rate case?

Steven Fleishman:

Okay. All right. But you're saying -- you think it is, are you getting a sense that other people kind of get that too?

Operator:

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Paul Patterson with Glenrock Associates. Your line is open. Please go ahead.

David Campbell:

Yes. Paul, I think you've got it right.

Kirkland Andrews:

Paul, it's Kirk, I think as you're thinking about capitalized interest, you may be referring to the fact that we're able to defer some of the interest cost on...

Kirkland Andrews:

Capitalized O&M.

Kirkland Andrews:

All I would tell you is that our capitalization of certain portions of O&M is informed by the activities that either directly or indirectly support our capital investment program and is consistent and well researched from a benchmarking standpoint, time studies and the like. So it's basically in line with industry policy and certainly reflects the initiatives that are underway in terms of improving our infrastructure and investing in things like new generation. So it's really important by that and expect it to be pretty consistent going forward.

Kirkland Andrews:

No. Nothing of significant change going forward.

Operator:

And I would now like to hand the conference back over to David Campbell for any closing remarks.

Operator:

This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator:

Good day, and thank you for standing by. Welcome to the Q2 2023 Evergy, Inc. Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pete Flynn, Director of Investor Relations. Please go ahead.

David Campbell:

Thanks, Pete, and good morning, everyone. I will begin on Slide 5, and I'm pleased to report that Evergy had a solid second quarter as we delivered adjusted earnings of $0.81 per share compared to $0.84 per share a year ago. The decrease was driven by less favorable weather as well as higher depreciation and amortization interest expense partially offset by growth in weather normalized sales, transmission margin and lower O&M expenses. Kirk will discuss these earnings drivers in more detail in his remarks. Our reliability metrics were strong for the year, through June as average duration and frequency, otherwise known as SAIDI and SAIFI, were favorable to relative to our target. I'd like to call out the work of our distribution and transmission teams for the improvements in system resiliency that we're seeing. Weather has been less cooperative to start the third quarter and on July 14, our service territory experienced a severe storm. The storm produced 80 to 100-mile per hour winds resulting in our most impactful storm in recent history. As the storm's peak, nearly 200,000 Evergy customers were without power, as high winds down countless turbulence and damaged or destroyed nearly 500 power poles. We estimate total O&M costs of $6.5 million for the storm recovery efforts. I'd like to thank the nearly 3,500 Evergy employees contractors and personnel from neighboring utilities that assisted in making repairs, working with customers and restoring power. Our crews worked 16-hour shifts through hot and humid conditions as well as follow-on storms that disrupted the restoration efforts, and our customer teams also worked over time to field calls and support our customers. Our front-line workers are the bedrock of safely delivering affordable and reliable power to our customers and communities. We're extremely proud of and grateful for their contributions to these challenging conditions. Our team's consistent execution has resulted in a solid start to the year, and we are reaffirming our 2023 adjusted EPS guidance range of $3.55 to $3.75 per share as well as our target long-term annual adjusted EPS growth of 6% to 8% from 2021 to 2025. Slide 6 highlights our annual integrated resource plan updates, which were filed on June 15 in both Kansas and Missouri. This year's updates reflect the impacts of the renewable support provided by the Inflation Reduction Act, revised load forecast, increase Southwest Power Pool capacity margin requirements, potential changes to environmental regulations and updated commodity price forecasts. As a reminder, in 2022, nearly half of the energy that we generated for our retail customers came from carbon-free resources. Reflecting the contributions of our Wolf Creek nuclear plant and the 4,400 megawatt portfolio of renewable resources that we own or contract with long-term power purchase agreements. Over the next 10 years, taking advantage of the ample resource potential of our region as well as substantial federal subsidies, we plan to add more than 3,000 megawatts of new end and solar resources. The timing of these additions reflects the outputs of our recent all resource request for proposal, which was no doubt, affected the global supply chain challenges impacting solar wind and battery project availability and costs. Tightening capacity conditions in the Southwest Power Pool and higher demand also factored into the annual IRP update, reflecting higher capacity needs, this year's preferred plan includes the introduction hydrogen capable combined cycle gas turbines in the latter half of the decade. We now expect to cease all coal operations in Lawrence units 4 and 5 and to convert Lawrence Unit 5 to natural gas in 2028. In aggregate, the 2023 preferred plan includes 4,800 megawatts of new resource additions through 2032, an increase of 1,200 megawatts when compared to the 2022 Integrated Resource Plan update. As our generation fleet evolves, we are focused on achieving a responsible balance between non-carbon emitting inter-median resources typically with low or negative marginal costs and older firm dispatchable generation with higher marginal costs, all while ensuring reliability and affordability for our customers and communities. We're excited about the potential investment opportunities ahead of us as we continue to transition our portfolio over the coming years. Moving to Slide 7, I'll provide an update on our regulatory and legislative priorities. In Kansas, we're awaiting intervenor testimony, which is due to be filed by August 29 and our pending Kansas Central and Kansas Metro rate cases. Activity in September picks up with rebuttal testimony due September 18 and the settlement conference scheduled for September 21. Should an agreement be reached, we'd be required to file it by September 29. Otherwise, hearings would run from October 9 through the 13. We look forward to working with all parties to achieve a constructive outcome and advance regionally competitive rates for our Kansas customers and communities. Shifting to Missouri, the order approving our request to securitize extraordinary costs from Winter Storm Uri remains in the state of pellet process with oral arguments to be held September 7. We believe the Missouri Commission's decision and support of securitization is well supported by the record. As a reminder, we will complete the securitization financing after the appeal plays out, but incremental carrying costs incurred prior to approval will ultimately be recovered when we issue the debt. We anticipate resolution later this year. I'll conclude my remarks with Slide 8, which highlights the core tenets of our strategy, affordability, reliability and sustainability. On the affordability front, advancing regional rate competitiveness is one of our primary objectives. Our focus on delivering benefits to our customers since the 2018 merger is reflected and demonstrated in the EIA data on rate trends across states in the Central United States over the past 5 years. In addition, direct market evidence is provided by ongoing wins in economic development in our territory. We're pleased by our progress in improving regional rate competitiveness and keeping our rate trajectory well below the rate of inflation. Affordability is and will always be an area of focus. Ensuring reliability is also a core element of our strategy. And along with SAIDI and SAIFI, this includes a focus on metrics relating to customer service, the commercial availability of our fleet, safety and all elements of our operations, including infrastructure investment. This summer has brought resiliency and reliability to the forefront as storm activity in our service territory has been more prevalent than normal. Including the July 14 storms, of straight-line wins in excess of 80 miles an hour. These types of conditions reinforce the importance of our ongoing transmission and distribution investments. And with respect to sustainability, we continue to advance the transition of our generation fleet as detailed in our 2023 IRP update and continuing the progress of the last 2 decades. Since 2005, we significantly and cost effectively transformed our generation fleet, reducing carbon emissions by nearly half, reducing sulfur dioxide and NOx emissions by 98% and 88%, respectively, and we look forward to the ongoing portfolio transition. Our mission is to empower a better future, and our vision is to lead the responsible energy transition in our region, always with an eye on affordability and reliability as well as sustainability. With that, I will now turn the call over to Kirk.

Operator:

[Operator Instructions]. Our first question comes from the line of Durgesh Chopra from Evercore ISI.

David Campbell:

Sure. So I guess, thanks for the question. It's a good one. When we put out our integrated resource plan, you'll recall that we also released a slide at the time, saying that our overall capital investment plan for 2023 -- 2022, 2023 to 2027 was in line with our updates within the last quarter. Now there is some mix shift in that we haven't published that overall change yet. We're going through that process as we typically will through the course of the year. The Integrated Resource Plan has a higher overall total level of resource additions, but there's some phasing shifts over the near term, particularly there's a drop in window in the near term, and that reflects to a large degree, supply chain constraints and the impact of product availability and costs. And why we reaffirmed our overall capital plans is for the factors that you highlighted. We have a wide range of beneficial infrastructure investments, particularly in the grid modernization and grid resiliency side that are the elements that we expect will be a little bit higher and will contribute to an overall capital plan that is consistent. Now again, over the 10-year time frame, we have a relatively significant addition of new resources. So in that time period, you can expect that they'll all sequel be an uptick and capital expenditures, we only give a 5-year plan update. But you'll see some elements of that when we get to year-end because we'll add 2028 to our public disclosures, and you'll start seeing -- we start some of those resource additions that I mentioned, in particular relating to hydrogen capable new natural gas units, a lot of that capital expenditure, you'll see showing up in the latter part of our capital plan, a 5-year plan.

David Campbell:

Yes to guess for better worse, the way the process plays out. We don't have a lot to share. We'll see the -- we're still in the process of sort of a rigorous back and forth in terms of receiving a lot of questions with capital, if happens in all rate cases. So we'll have a good sense and you can get some feel for where parties are focusing to the questions. We really get a sense of things when they're -- when the first round of testimonies filed. So August 29 is going to be a day that people will be doing a lot of reading, certainly on our side, so you'll see staff and intervenor testimony on that day. So I get a lot more color on things as we head into in August and September. We will certainly look forward to the opportunity to work constructively with all parties and seeking a settlement. It's been 5 years since the last rate case. But otherwise, at least in our , it's a pretty straightforward rate case in terms of the elements that are included, it's primarily related to the infrastructure investments that have been made over that time period, plus the amount of cost savings that we've been able to achieve as a result of the merger with a couple of items that I think are pretty clearly described and laid out. So it's a little less complicated than some elements at least of our Missouri West case last year, that's again probably many years. So we look forward to constructively engaging with the parties, but you'll learn more about that later this month and then particularly as we head into September and October.

Shahriar Pourreza:

I just want to be crystal clear on the response that you gave to Durgesh because, I mean, obviously, this was a very deep IRP update a few weeks ago. So is the messaging that it is status quo from just a capital perspective to the current trajectory, but there could be some step function increases as we shift forward. I just want to get a bit of a sense there.

Kirkland Andrews:

So I think about it -- first of all, I think Durgesh asked this question as well. I mean, I think our overall -- and we put this in a broad category, new generation renewables, our fourth quarter update, the cumulative amount of that was a little over $2.1 billion. And that's obviously contributes to the aggregate $11.6 billion. The way to think about that is, yes, our overall magnitude of capital expenditures is in line. We also expect the magnitude capital expenditure on new generation and renewals to be in line. We do expect some probably some timing shifts. We also expect the annual cadence of that capital expenditure is to accumulate up to that $11.6 billion to also be consistent, will probably be a little bit of a mix shift because if you look at the magnitude and the cadence specifically of renewables and new generation year-over-year informed by the IRP kind of plan over plan, that will probably imply a little bit of variation in the implied capital expenditure space over that period of time. Over we have an abundance of very necessary and beneficial grid modernization projects. So you may see a little shift between those 2 categories year-over-year. But overall, the aggregate magnitude, the amount of generation as well as the annual magnitude will be in line. That helps.

David Campbell:

And I'll add. So Kirk, thank you for the clarity. I'll add an additional point is we're very focused on affordability and as we think about our capital planning. We have and we were able to have the opportunity to go through this with. Our Kansas commissioners and we have a similar dialogue. Of course, Missouri, we've been able to go through, we've got an old system. We've got a lot of very wide range of beneficial projects that are available to us. We calibrate our level of expenditure with an eye towards affordability. There's no doubt around that. So we'll continue to shape that, but we've got a really robust capital plan informed by parts of our system are still very old. So we've got, if you will, a backlog of beneficial projects. So we're always going to keep an eye on affordability as well.

David Campbell:

Well, that's a great question, Shar. I think it's fair to say that the Southwest Power Pool, certainly, if you look at their strategic plan, the grid of the future and the future evolution of the long-term transmission plan is on their agenda. But it's also fair to say that what's on their agenda is a process that will lead to kind of tranches 1, 2 and 3. So in that sense, it's -- they're not at the same stage as MISO in the Southwest Power Pool. In other words, it's still some time away. Now we, as a big player in the Southwest Power Pool are certainly an advocate for going through the process. We know how important it's going to be as you look at our integrated resource plan, especially as you get to the latter part of this decade in the 2030s. And this is true across all of the players really in our space and will be impacted by things like the evolving federal EPA rules, there's a lot of changes in our resource plan that are coming. And the transmission grid is going to have to be ready for that. So I think we, as a participant in SPP will continue to be an advocate for moving down the path. I think it's fair to say that the where you see tranches 1, 2 and 3 mice, so you don't yet see those in SPP, but it's on their strategic agenda, and we'll be working with them to try to advance it because it is evolving -- further evolving the transmission grid is going to be very important to our region to keep rates affordable as we transition our fleet.

Operator:

One moment for our next question. Our next question comes from the line of Julien Dumoulin-Smith from Bank of America.

David Campbell:

Yes, it's a great question, Julien, because it's a -- I think it is an upside factor for our sector and for our region as well. We do have a low, medium and high demand case in the integrated resource plan. We typically, in the long-term planning elements I think in the mid-range at 0.5% rate of growth. We had a higher level of growth we expected in are embedded in our plan in 2023, which we've seen tracking with our results at least in the first half of the year. Over the long term, there are certainly structural factors that I would argue could take us more towards the higher end rather than that 0.5% per year, and that's going to be from electrification and some of the large new loads that are coming in as we effectively are reshoring, if you will, here in the United States. So the -- and then the last element which gets more and more focused is the transformation of electricity demand driven by AI and the need for more and more data centers. So I do think there's some upside factors. Those 3 electrification onshoring and proliferation of data centers. I think it's also fair to say that, that could be upside to the long-term plans. Now a lot of that will manifest itself the latter part of this decade into the 2030s. But I think those long-term fundamentals are strong and should present some, if you will, bias towards the higher -- it's in the IRP, but it's more in the high case close the mid. And I think for our region, the additional piece that we have relative to some others is, of course, a lot of our portfolio transition does occur in the 2030s well, right? We've -- as we know, we've got a -- we have an interesting mix in our generation portfolio. We've got half -- basically half its emissions free and half that's fossil-based relatively higher share of coal. There's several utilities have a similar share. But a lot of that transition for us will happen in the 2030. So I think the long-term fundamentals from a resource planning perspective, from a demand perspective, are strong. And as we know, when there's demand growth, that helps with affordability because you're spreading across costs across a bigger pie. So I think it's a great question, and I think it's something that leads us to have a bullish outlook in the long term.

David Campbell:

So Julien, there's a lot there. I think -- and I'll ask Kirk to supplement. It's -- we like our peer utilities try to manage our business in an overall perspective based on managing as best we can the things in our control, as things outside of our control move. Weather has been a headwind this year. July was on the mile side, at least in our region, I know it's been quite variable across the U.S. We're in the milder side in July, but it did even vary across our service territory. So proud of the team and how we manage costs. You asked about which elements it really is, and we review this on a rigorous basis across the entire part of our business from ops to our generation side, transition distribution, our customer operation in the corporate center. So some of this is timing and phasing, as Kirk mentioned in his remarks, but we are going to be managing the business dynamically and just as our peer utilities do, because we reaffirm our annual guidance this year, and we seek to, again, manage the things that are within our control so that we are in a position to offset factors that are outside of our control. So proud of the team for their cost management we've laid out is no ongoing cost savings as part of our plan. So I think that, that continues to be our plan as we look through to 2025. But it's a testament to the work of the team and the efforts of our enterprise to drive affordability and benefits for our customers and manage our business so that we can hit our plan and deliver results.

David Campbell:

Yes. Yes, we're sticking with our guidance for the year, Julien, and it's -- we'll manage the business dynamically just as you've seen us do in for the first part of the year and the prior year.

Julien Dumoulin-Smith:

Got it. All right. I got more I'll leave them offline. Thank you very much. Have a great day.

Michael Sullivan:

Just wanted to put a finer point on that last line of questioning. So the mild July weather and then that storm impact is -- are both of those factored into the '23 guide reaffirmation?

Michael Sullivan:

Okay. Great. That's helpful. And then a lot of what you updated in the IRP, I think you mentioned, was formed by the recent RFP process? When will we see the results or more detail on that RFP?

David Campbell:

And part of it Michael, you can appreciate it relates to ongoing negotiations that are currently -- that's the main driver as to why, you're not hearing more.

Paul Patterson:

I just have one question at this point. And that is there's a rate design change with time of use that's coming up here, I guess, in Missouri for you guys. And I'm just wondering, it looks like there's a potential for some significant changes. And is there any I guess, is there any risk that customers might be -- some customers might be implicitly surprised by the change even though it's a rate design issue, people don't necessarily know what's going on and it's time of use and they're just not prepared for it. And sometimes in certain jurisdictions, we've seen, it happens from time to time where people are very upset by something that kind of a change, if you follow me.

Operator:

Thank you. At this time, I would now like to turn the conference back over to David Campbell for closing remarks.

Operator:

This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator:

Good day and thank you for standing by. Welcome to the Q1 2023 Evergy Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star-one-one on your telephone. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to turn the conference over to your speaker for today. Peter Flynn, you may go ahead.

David Campbell:

Thanks, Pete, and good morning, everyone. I'll begin on Slide 5, and I'm pleased to report that Evergy had a solid first quarter as we delivered adjusted earnings of $0.59 per share compared to $0.56 per share a year ago. The increase was driven by weather-normalized sales growth, transmission margin and lower O&M expenses, partially offset by the impact of a mild winter, an increase in depreciation and amortization and higher interest expense. Kirk will discuss these earnings drivers in more detail in a few minutes. In 2022, we achieved our historically best safety year, and I'm pleased to report that our OSHA recordables and days away and restricted time events are trending favorably relative to those '22 results through the first quarter of this year. These improvements are a testament to the work of the entire Evergy team. I'd like to thank my fellow employees for their unwavering commitment to safety. With the solid start to the year, we are reaffirming our 2023 adjusted EPS guidance range of $3.55 to $3.75 per share as well as our target long-term annual adjusted EPS growth target of 6% to 8% from 2021 to 2025. On Slide 6 and 7, I'll discuss our recently filed Kansas rate reviews, beginning with Kansas Central on Slide 6. On April 25, we filed an application requesting a $204 million revenue increase, premised on a 10.25% return on equity, a 52% equity ratio and a projected $6 billion rate base as of the proposed June 30, 2023 true update. As shown on Slide 7, in Kansas Metro, we requested a $14 million revenue increase, premised on a 10.25% return on equity a 52% equity ratio and a projected $2.6 million rate base as of the proposed June 30 true update. We believe these rate requests are straightforward and reflect the communications we've had with our Kansas regulators and stakeholders in workshops and other settings over the past few years. The principal items include recovery and return on our grid modernization and infrastructure investments since our last rate reviews in 2018 as well as passing on to our customers the benefits of the substantial cost savings we've achieved since the merger that formed Evergy five years ago. Across our two Kansas jurisdictions, these cost savings reduced the combined revenue increase request by 37%. We are pleased that the hard work of the Evergy team resulted in cost savings that are significantly higher than projected during the merger approval process. These efforts have been a major contributor to successfully advancing our regional rate competitiveness. Since the end of 2017, our rates in Kansas have remained virtually flat, while our regional peers have, on average, increased their rates by double digits and cumulative inflation has been over 20%. As a reminder, Kansas rate cases run on an eight-month schedule, so new rates will go into effect by year-end 2023. We'll provide an updated time line when a procedural schedule has been issued. We look forward to working with our regulators and stakeholders over the coming months to achieve a constructive outcome for our Kansas customers and communities. Moving on to Slide 8. I'll provide an update on our other regulatory and legislative priorities. In Kansas, Governor Kelly signed House Bill 2225 into law in April and will become effective in 2024. The bill includes provision that matches the return on equity for our locally planned FERC transition projects to the return on equity established by the state for our other infrastructure investments. This law applies specifically to current and future transmission projects that are not subject to notifications to construct from the Southwest Power Pool. HB 2225 keeps our transmission delivery charge rider mechanism, or TDC, unchanged and fully intact. This bill provides savings to customers and was a product of constructive dialogue with Kansas regulators, legislators and other stakeholders. In Missouri, the order approving our request to securitize extraordinary costs from Winter Storm Uri is in the state of pellet process. We believe the commission's decision in support of securitization is well supported by the record. As a reminder, we will complete the securitization financing after the appeal plays out, but incremental carrying costs incurred prior to approval will ultimately be recovered when we issue the debt. We anticipate resolution later this year. On the legislative side, we're tracking the progress of Senate Bill 275 in Missouri, which would create a state and local sales tax exemption for the production of electricity. If signed into law, these savings will be passed on to customers and our next Missouri rate case. And bill has passed out of the Senate and currently waits debate on the House floor. Other bills relating to the energy sector may also receive attention this month. For example, the build it enhances state oversight of transmission and improve the consistency of transmission operations and planning, referred to in shorthand as right of first refusal legislation continues to be an area of focus. The benefits of this legislation are reflected by similar laws that are in effect in the majority of states across our region. However, as the Missouri legislative session is scheduled to adjourn on May 12, timing is tight, and we expect that the discussion of ROFR and other energy-related bills may continue into next year. As a final note on Slide 8, we remain on track to file our annual integrated resource plan updates in both Kansas and Missouri by mid-June. This year's IRP updates will include significant changes in assumptions, most notably updated cost estimates for new generation as well as substantial subsidies in the Federal Inflation Reduction Act for carbon-free resources. Moving to Slide 9. I'll profile another element of our corporate strategy related to environmental, social and governance measures. We continue to enhance our ESG practices and disclosures and our efforts have been recognized and reflected in significant improvements and third-party ESG ratings for Evergy. For example, Slide 9 profiles the comprehensive progress that we've made in the ESG ratings provided by ISS and by S&P Global's corporate sustainability assessment. From a disclosure perspective, 2022 marked the first year Evergy completed full CDP climate and water security questionnaires as well as the global reporting initiative report. We've also joined the Electric Power Research Institute's Climate Ready Initiative, a research partnership aimed at developing a collective approach to identifying and managing physical climate risks. Over time, we expect this effort to support the optimization of our grid investment priorities, utilizing a common framework around cost benefit analysis, risk mitigation and adaptation strategies. Finally, we continue to integrate climate-related risks into our enterprise risk management system. This is the best practice, which will allow us to identify and mitigate the impact of current and future risks in our business enhancing our ability to provide safe, reliable and affordable power. I'll conclude my remarks with Slide 10, which highlights the core tenets of our strategy

Operator:

[Operator Instructions] First question is coming from Shar Pourreza of Guggenheim. Your line is open.

David Campbell:

So I'll start off and ask Kirk to supplement, we think the Persimmon Creek asset is a great asset, given the overall cost at its size. It's we think the best value is supported by integrated resource plan in terms of both capacity and energy needs. It's well situated from a transmission perspective, and we think it fits well with the needs that we're going to have in our Kansas jurisdiction, which continue to see ongoing growth in demand and across service territory with new customers like Panasonic. So, we like the asset that fits in well with the RP. We think it's a great resource for our customers. So as noted, it was included in our filing on April 25. It will go through the process. And so, we'll -- along with our other infrastructure investments that we've included. Your question on EPS, given that it's rolling to the Kansas jurisdiction, which doesn't have the same piece of requirements, we won't see the earnings contribution in 2023 deliver a very similar profile in the following years. And again, we think it's a great asset.

David Campbell:

So Shar, that's a question we get for many investors. As you can guess, since we filed it on April 25, probably a little speculative for me to be specific as to what will occur. We do think that we have a pretty straightforward rate case. The complexity only really comes from the fact that it's been five years since our last general rate case. But the elements are straightforward. We have any major generation retirements. We don't have complexities like some of the things that you can see after this longer time period. So we think the framing is there for a constructive set of dialogues and certainly will be our objective to drive towards settlement. Now that will be in the fall. So we're a ways away. But as you noted, what's a real positive in this case is that we've had the opportunity to preview and go through our capital investment plans in a series of workshops over the last three years. Starting with the STP workshops as you noted in 2020 and continuing given to the capital workshop that we had in December, and those were multi-hour workshops attended by all three commissioners the whole time. And it included for projections on rates. And what we filed is in line with what we laid out in those proceeding. So, we think that sets the groundwork for a constructive set of discussions. And of course, the process will play out as it will. We've got a very highly capable and knowledgeable staff at the KCC. So, we look forward to interacting with them with curb and with other stakeholders through the process, and we certainly hope that will have a constructive dialogue that enables the settlement as we advance through the year. Eight months time line, as I mentioned. So the rates will go into effect in December, and a lot of the crescendo happens in the fall time frame.

David Campbell:

Yes. So, it is a pretty modest impact, Shar, in the range of roughly $0.04 or so. We think we can absolutely manage that in the context of our business given our size and our overall earnings power. We think the ultimate resolution was reflected a constructive dialogue. The initial proposal that was issued was to remove the TDC mechanism or concerns by some of why you have a different mechanism in place and a lower level of state oversight. So, we're able to get an accommodation that enhanced data oversight of transmission at an equivalent and the return on equity for different types of infrastructure investments, but keeps the TDC mechanism in place. So, we thought it was constructive or outcome overall and one that's very manageable and was a sensible approach as we headed into 2023 in a rate case here, and we're glad that we're able to work with parties to get to that outcome.

Operator:

Thank you, one moment while we prepare for the next question. And our next question is going to be coming from Michael Sullivan of Wolfe Research. Your line is open.

David Campbell:

So, I'll -- actually, Kirk, do you want to take that one? It's been hearing from me for a bit. Do you want to build it?

David Campbell:

Yes, Michael, I'd just note that we had a very mild winter, you saw it across the Midwest and we're fortunate that we were able to offset that. We're pleased with the solid quarter. I know that all companies have to deal with the weather piece. But for us, we're able to offset it, and we're pleased with the solid quarter results as opposed to being -- that's something to manage over the course of the year. We -- the team did really job managing in the context of the quarter. So, we feel good about the year and reaffirming our guidance range.

David Campbell:

So, Michael, I won't get ahead of the results in terms of the total renewables build-out plans. What I'll note is that beneath the surface of the water, there's been a ton of churn just because the combination of -- we didn't include the kind of renewables incentives you've seen in the IRA because their last RFP update, that law was in effect. So that's a big change. At the same time, we have bids from our all-source request for proposal that we can integrate the capital costs from that real-time market information in the IRP. That's -- most of those costs have trended higher. So, there's some offsets there. So beneath the service, there are significant changes in assumptions on commodity costs. We went through a lot of volatility in natural gas prices in the back half of the year, maybe we're back to low gas forever, but I think we're probably back to is that, hey, there's potential volatility in natural gas. So there are a lot of different factors, but when you sort of run them through the modeling process, which is still ongoing, it reinforces the value of renewables over time and a lot of it comes down to availability, particularly with supply chain challenges. So I would note that I think the robust support for renewables as being low-cost opportunity for customers in a long-term research plan that absolutely remains then in the near term, it's about supply chain and what that impacts in terms of resources that are available sooner rather than later. Now some elements that will change in the future, there's a number of different EPA builds. Our EPA rules that are in the mix right now, a couple of have been issued. Others have been press reports around. So I would not expect this IRP to reflect the greenhouse gas post rule, for example. That hasn't been formally issued yet. We've seen a lot of reports on it. Those kind of rules only further reinforce, I expect the relative value of adding lower-cost resources of the system, I think it will also further reinforce the importance of capacity. So, one thing from last year that has changed is -- and there's the benefits of having capacity or even higher. We've also seen increases in demand. So a long-winded way, I'm not giving you new numbers, but the dynamics that support the value to customers of adding renewables, the system are there, maybe some further impetus to capacity resources and then some supply chain issues in the near-term work through. But we're excited about the prospects, and we'll -- obviously, I have a comprehensive update when that's when we issue the IRPs.

David Campbell:

We look at the lowest overall cost in terms of net present value of the revenue requirement. So it's a -- we're looking at fundamental what's going to deliver the most value for customers in light of the various incentives. It's a 20- to 30-year models. So it's complicated. Our 15- to 20-year model, so there's a lot of input, but that's what it comes down is what's going to deliver the best value to our customers while ensuring reliability.

Durgesh Chopra:

Straightforward and my questions have been answered. Maybe I was just curious and I can follow up with Pete, if you don't have the answer. David, in your prepared remarks, you mentioned that the cost savings exceeded the original kind of targets you had when the merger -- merger happened? Can you quantify what that looks like? If not, I'll just follow up with Pete.

Operator:

Thank you, one moment while we proceed with next question. And the next question will be coming from Julian Smith of Bank of America. Your line is open.

David Campbell:

You're going to have to make sure your name leads off. It keeps being various on behalf of Julian. Julian's got to share a little light. It's a great question. I think there are some distinguishing elements between Missouri and Kansas, but there's always things you can learn. Missouri, we had some more complicated legacy issues. We had the Sibley plant retirement that followed. We had the piece of legislation that had been enacted, but the case was under the legacy plant and service accounting rules, which had a cost cap that kind of a commodity price surge had impacts to Missouri West, so some pretty complicated legacy issues that were impacted. No we don't face in Kansas, Missouri, we reached a constructive settlement on key economic issues in our Metro jurisdiction, which is a bigger of our two jurisdiction in Missouri. Simply in the piece of legislation, the biggest impact of Missouri West. So the settlement that we reached in Metro is a good template for what we're going to be seeking in Kansas. And in Kansas, we have the benefit of even more extensive dialogue. There was STP workshops in both states, but the ones in Kansas were -- you probably listened to a lot of them were quite in-depth and thorough and involved the commissioners, staff curve and other stakeholders. So, a rate case in Kansas is even more well situated in terms of a constructive book. It's pretty straightforward in settlements, but we strive for trying to get to common ground and settlements where we can. And I think Missouri Metro is a good template for that. And the setup is also more amenable for it and that we have a little less complexity. It has been five years. But again, the range of things that we're bringing is a little more straightforward. And as a reminder, in Kansas, transmission not for the rate case, it's focused on our distribution investments, generation, customer systems, really a lot of our grid modernization and customer-facing investments. So we look forward to the dialogue. We think the case setup is one that will enable a good constructive dialogue with the key participants.

Kirk Andrews:

Sure, Dariusz, it's Kirk. I've mentioned on the call, yes, we -- our industrial sales were a little bit down. It was largely a result of two refining customers, one of which had a pretty high-level comp last year with higher demand, so just kind of normalizing that a little bit. That's one effect of those two customers. The other one had a planned outage this quarter. But for those two customers in the industrial sector, our industrial demand was up year-over-year, excluding those two refining customers.

Dariusz Lozny:

Okay, excellent. Thank you for the color. I'll pass it along here.

Operator:

Thank you and one moment while we prepare for the next question. And our next question will be coming from Paul Patterson of Glenrock Associates. Your line is open.

David Campbell:

Sure, Paul. And I applaud your as always, detailed review of materials. So we -- like all utilities, we have a rigorous process for reviewing our capitalization rates and making sure we're getting the right it's reflected in the underlying activities. We've had a lot of capital investment, and there's an appropriate amount that should be -- of labor that should be capitalized and a robust methodology that we know the utilities follow. So, we're applying that. I think you saw in our -- for example, in our Wolf Creek plant, there was a little bit higher capitalization rate relating to activity that was underway. Our overall trajectory in terms of O&M expenses and capital, we -- it's all part of our planning process. So, it's reflected in where our plans are. So, I wouldn't tee up that you're going to see a major change, what you'll see is ongoing implementation of the adherence to the rules that are in place in that regard. So it's reflected in our plans and is underpinned by the rigorous application, the appropriate accounting processing. So -- but I think that what you noticed was particularly driven by some projects that both Creek our nuclear plant.

David Campbell:

That's right, Paul. We it reflects the activities that are underway and the application of the relevant rules that are in place. We're looking at and making sure we're following the right approach, if you think about being in an industry like ours sorry, that we're well benchmarked. We got a great support from our accounting team and our external auditors. So well-established approaches to take in that regard and best practices.

David Campbell:

Really depends on what -- it depends on what they're working on, if it's related to an outage. It will be different ligand in other words, and it gets down to every single project also probably won't be able to get through the 100 in this call, but it always relates to the work that's underway. And some are shorter, some are longer to put them in the nature of the work.

David Campbell:

We think it's the best fit for Evergy Cancer Central. So, it's really just where it lines up well with the integrated resource plan needs and overall mix and benefits -- it's well placed for that customer base, too. So, it fits well with EKCs, so that's what it's allocated is.

David Campbell:

I do follow. I think the -- so we need a depreciation studies that typically happens in rate cases, especially if there's been a relatively long gap. So this reflects depreciation studies that we've done is been five years since the last rate review. So a pretty standard process. You're bringing an outside expert, you review that work. And so, it's I don't necessarily encourage all investors to read through the depreciation studies, but you're welcome to. It's in our publicly filed testimony, but it's -- I mean, I'll get inside. So, it's a rigorous review. You need to go through as part of the rate case and making sure you're getting the right level of depreciation, the right reachable lives for your long-lived assets, and that's the driver.

David Campbell:

Lisa, it was efficient. It's like the first round of the NFL Draft, which I hope everyone enjoys in a great city of Kansas City. We appreciate all of you joining us this morning. Thank you for your interest in Evergy, and have a great day. That concludes the call.

Operator:

Thank you for standing by, and welcome to Evergy’s fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you will need to press star-one-one on your telephone. I would now like to hand the call over to Peter Flynn, Director of Investor Relations. Please go ahead.

David Campbell:

Thanks Pete and good morning everyone. I’d be remiss if I did not start with the recognition of the Kansas City Chiefs and their victory in Super Bowl LVII. For football fans who have never been to Arrowhead Stadium, definitely add it to your list. Chiefs Kingdom is quite something to behold. I’ll begin on Slide 5, and I’ll start by thanking our employees who worked tirelessly throughout the year to advance our strategic objectives of affordability, reliability and sustainability. I’m proud and honored to lead the Evergy team. With respect to 2022 results, I am pleased to report that we had another solid year. We delivered adjusted earnings of $3.71 per share compared to $3.46 per share in 2021. These results reflect another year of strong execution relative to our objectives. We enter 2022 with a guidance range of $3.43 per share to $3.63 per share and our results came in $0.08 higher than the top end of the range. Kirk will discuss the drivers of our 2022 results in more detail. Last year, we executed on our capital plan to further improve reliability and resiliency, investing $2.2 billion in infrastructure to modernize our grid and replace aging equipment. I’d like to recognize the hard work of our regulatory staff as we completed our first two Missouri rate cases since the merger in 2018. We reached partial settlements on key economic issues at both Metro and Missouri West, delivering significant O&M savings back to our customers. These rate cases underscore our continued progress in maintaining affordability for our customers and increasing our regional rate competitiveness. Through November 2022, we’ve limited cumulative rate increases to 2.7% since 2017, well below the rate of increase for our regional peers and the prevailing rate of inflation over the five-year period. Slide 6 profiles the significant improvement that we’ve made in customer satisfaction, as measured by JD Power’s annual survey of utility customers. Since 2018, we’ve climbed 10 spots in JD Power’s midwest large utilities category, coming in at fifth out of 15 companies in 2022. Customer satisfaction remains at the forefront of our strategy. Safety tops our list of core values, and Slide 7 highlights the considerable progress we’ve made in limiting safety related events. Both OSHA recordables and DART cases have declined by over 50% since 2018. Promoting a culture of safety and focusing on every employee going home safely every day are paramount to our success as a company. On Slide 8, we introduce our 2023 GAAP and adjusted EPS guidance of $3.55 per share to $3.75 per share. We know the importance of consistent execution and we recognize that 2023 falls short of the midpoint relative to our long term targets, reflecting regulatory lag in our Kansas jurisdiction and our commitment to a five-year rate case stay out as part of the merger, but we remain confident in our ability to deliver annual 6% to 8% adjusted EPS growth through 2025 off of the 2021 baseline, and we are reaffirming that target today. Moving to our five-year capital plan on Slide 9, we have updated and extended our forecast through 2027. Our new five-year investment plan totals $11.6 billion from 2023 to 2027, which represents a $900 million increase relative to our 2022 to 2026 forecast, or 9%. Nearly 60% of our planned investment is targeted towards transmission and distribution projects as we continue to modernize our grid to improve reliability and enhance resiliency for our customers. By replacing aging equipment and investing in smart grid technologies, we’ll also enable further efficiency gains in serving our customers, which has been a hallmark of Evergy’s strategy over the last five years. Slide 10 profiles our progress in driving cost savings. Despite historically high inflation in 2022, we held adjusted O&M flat relative to 2021, representing $232 million in cumulative savings since 2018, or 18%. The work is not done yet and we remain laser-focused on our target of an additional 11% reduction in adjusted O&M through 2025. As part of this effort, the company implemented a voluntary retirement program in the fall of 2022 which, combined with ordinary course retirements and attrition, resulted in an 8.5% reduction in the size of the organization by year end. I can’t say enough about the hard work of the Evergy team in delivering against and exceeding the savings for customers that were promised as part of the merger that formed our company. As shown on Slide 11, Evergy has been able to limit cumulative rate increases to 2.7% since 2017 based on the latest available data from the EIA which runs through November 2022. This compares favorably to our regional peer states and the prevailing rate of inflation over the same time frame. Advancing and improving regional rate competitiveness are priorities in our long term plan and are front of mind for many of our stakeholders, and that’s exactly what we have accomplished over the past five years. Moving to Slide 12, I’ll provide an update on regulatory and legislative priorities, beginning with our rate case filings in Kansas. In mid-April, we’ll file our first rate cases at Kansas Central and Kansas Metro since completion of the Evergy merger in 2018. We believe these rate reviews will be relatively straightforward, requesting recovery and return on our grid modernization and infrastructure investments over the past five years and passing on the benefits of the cost savings we’ve achieved to our customers. We look forward to working with our regulators and stakeholders to achieve a constructive outcome for our Kansas customers and communities. In Missouri this year, we anticipate a quieter legislative session relative to last year, which saw the extension and amendment of PISA, further supporting the constructive regulatory environment in the state. On the regulatory front, we have open dockets for the approval of an operating certificate of convenience and necessity for our acquisition of Persimmon Creek Wind Farm, as well as securitization of Winter Storm Uri costs incurred at Missouri West. Initial post-hearing briefs are doing on March 6 in the Persimmon Creek docket with an order requested by April 6. We firmly believe Persimmon Creek is the lowest cost solution to serve Missouri West customers consistent with the IRP preferred plan, and we’ll continue to work collaboratively with our regulators to secure the necessary approvals. The Missouri Public Service Commission’s approval of our request to securitize extraordinary costs from Winter Storm Uri was appealed to the Missouri Court of Appeals by the Office of Public Counsel in early January. OPC’s initial briefs are due by early April, 90 days following the appeal date. We believe the Commission’s decision to approve our request is well supported by the record. While we cannot complete our securitization financing until the appeal plays out, incremental carrying costs incurred prior to approval will ultimately be recovered when we issue the debt. The last item on the regulatory agenda that I’ll reference is the expected June filing of our annual integrated resource plan updates in both Kansas and Missouri, which I’ll cover more as you turn to Slide 13. The planning process for our IRP filings is well underway as we continue to assess the beneficial impacts of the Inflation Reduction Act on our generation resource planning. The longer term certainty the IRA provides around renewable energy tax credits will enhance our ability to tap the abundant renewables potential in our region and deliver savings to our customers by replacing higher cost energy. We expect our Wolf Creek nuclear plan to be eligible for the IRA’s nuclear production tax credit, the benefits of which will accrue to our customers in years with low realized prices for Wolf Creek. In addition to these IRA tailwinds, we’ll be incorporating updated commodity projections, construction costs, and higher capacity requirements in the southwest power pool into the annual update. We are excited to advance our integrated resource plans to deliver additional benefits to our customers. I’ll conclude my remarks with Slide 14, which summarizes the Evergy value proposition. The left side of the page covers the core tenets of our strategy to advance affordability, reliability and sustainability through a relentless focus on our customers, supported by stakeholder collaboration, sustainable investments, and financial and operational excellence. The right-hand features what we believe are particularly attractive and distinctive features for Evergy, given our business mix and geographic location. We are excited about the opportunities for our company and we are committed to the sustained effort required to deliver against our high performance objectives. I’ll now turn the call over to Kirk.

Operator:

[Operator instructions] Our first question comes from the line of Michael Sullivan of Wolfe Research. Your question please, Michael.

David Campbell:

Good morning.

David Campbell:

You bet, thanks Michael. We acknowledge, as I noted in my remarks, that we had some headwinds in 2023 and were short of the midpoint, but we’re reaffirming our belief we can be back in that 6% to 8% range, and the main driver--I’d cite two factors, but the biggest driver is we’re in a peak regulatory lag year, which impacts Kansas Central in particular. As you know, there are some elements of lag in our Kansas jurisdiction and it’s been five years since our last rate case, so as we advance the rate case this year and rates go into effect at year end, that will help address the under-earning that we’re having on many investments that we’ve made over the past five years, and that’s the biggest factor that helps get us back on track. We’re sort of in the peak lag year this year, and we’ve been taking good steps to overcome that lag in ’21 and ’22, so we’re pleased with the results, we were able to offset it. We had some interest rate headwinds and some impacts from Missouri that we didn’t fully offset for this year, but we have gone through our model in detail and we absolutely are reaffirming our commitment to ’24 and ’25. The second factor is well known, and that’s the ongoing advancement of cost savings. We’re going to be delivering significant cost savings in this rate case, the cumulative impact of savings since 2018, but we have ongoing opportunities ahead of us and between those two levers primarily is how we’re going to stay on track with respect to our 6% to 8% annual earnings growth.

David Campbell:

Yes, it partly relates to the nature of the jurisdiction. Metro has--actually has higher prices but it’s got a level of investment, it’s a much more dense urban system and we’ve been doing a lot of systematic replacement across our much bigger and broader Kansas Central service territory. The biggest factor in Metro is weather and the impacts in 2022, and obviously reflects the relative level investment. Even in a normalized weather, we’re close to earning our authorized return in Metro, but we’re well short of it in Central, so it’s just different characteristics of those two jurisdictions. Central is also a lot bigger overall, so a bigger impact on results, but the earnings sharing was a reflection of weather impacts in particular in 2022 on the Metro jurisdiction.

David Campbell:

Sure, so there are multiple bills in flight in Kansas, pretty active session with respect to utility bills. The one that was passed out of committee but has been--well, I don’t want to get into too much process detail, so the expectation--you know, our expectation is that there will be robust discussion around potential election of commissioners, we don’t think that makes sense as a policy approach, and that probably has less broad support so we don’t think that that’s going to advance, but there will continue to be good discussion around that. There have been bills advanced relating to right of first refusal for a transmission project which we think could really benefit customers in terms of predictability, regulatory oversight, and consistency of approach and process. There is a bill that has been advanced related to our transmission delivery charge that is subject to ongoing discussion. It was passed out of committee but it was--the process term is called blessed by the speaker, so it has not been voted on by the full house since--in discussions around that, and if it does end up going to the full house, then of course it’d go over to the senate. I think there will be ongoing discussions in Kansas, unclear if something will ultimately pass this year, but we’re working closely with stakeholders and we think those discussions are going constructively.

David Campbell:

You bet, thank you Michael.

Shahriar Pourreza:

Hey, good morning guys.

Shahriar Pourreza:

Just on the cases in Kansas, which I guess will be filed between now and your next update, you’ve got the Kansas Central fuel balance to recover starting in April for two years, you’ve got, I guess, some O&M give-back since the last case and the merger. How should we think about the holistic targets here for rate increases with all these puts and takes at play?

Shahriar Pourreza:

No, it does, it does. That’s helpful, thank you for that. I want to just slightly tweak the prior caller’s question here. It’s good to see the capex roll to ’27, but I’m just thinking about even directionally, the profile of the EPS growth beyond the ’25 guide. The latest capex gets you to around 6% implied rate base growth. Is there more to squeeze on the O&M side or is more dependent on the Kansas case and the IRP update? I guess put differently, what are the drivers that would push you in and out of your current 6% to 8% guide as we look ahead?

Shahriar Pourreza:

I guess--not to paraphrase what you’re saying, but put all that together, you feel okay about tightening up that delta between rate base growth and EPS growth in time?

Shahriar Pourreza:

Okay, great. Thank you guys, I appreciate it. Thanks.

Operator:

Thank you. Our next question comes from the line of Nicholas Campanella of Credit Suisse. Your question please, Nicholas.

David Campbell:

I feel like I’m your parents, calling you Nicholas. Nick, that’s a great question. The IRP update is in process. We include our expectations for new generation in our forward capex plans. There’s been a slight shift in our expectations regarding the mix of PPAs in renewables. We’ve got a very heavy weighting towards PPAs right now in our renewables and we think it’s beneficial for customers to have a balance, but in Kansas we’ve shifted to a two-thirds assumption of owned and one-third assumption of PPA, so that’s something that will play out in terms of what happens with the actual RFPs that we run and what’s going to be most competitive and what offers the most benefits for customers. That’s sort of an element no matter what’s in the IRP. I do think there’s some factors, Nick, that could drive more attractive opportunities for customers in the IRP, and those relate to--you know, we now have significant benefits in the IRA that we didn’t have modeled in the IRP last year. Those are not only sizeable but we know that they’re going to be in place for a period of time. That clearly aids the relative cost of new renewables, which are pretty cost effective in our region, and relative to energy provided from fossil resources. We’ve got a lot of coal and the traditional ability to drive lower cost for customers by replacing high variable costs, high fuel cost generation with renewables is going to--I think the IRP will reflect that. Now, the wildcard is going to be what are construction costs. My personal view is we may still be facing some bottlenecks that are driving higher cost for construction for renewables, but we’ve seen in the cycles over time that those do--those constraints are lifted and generally the supply responds robustly, and that helps driven down cost over time. I think that there are going to be opportunities given the amount of energy we still produce at a relatively high variable and high fuel costs and the tailwinds from the IRA that are going to benefit-you know, we’ll have incremental opportunities for renewables, but we’ll have to see how the math plays out. It may be that math is more compelling once we see construction costs, where they are and where they’re trending. The other piece is with capacity requirements tighter, we’re going to make sure--and solar is weighted more heavily towards capacity, gas peakers or potentially you could see [indiscernible] capacity, with growth like what we’re seeing in Panasonic and with Meta coming in, there’s also going to be a growth dynamic that may help drive some incremental resource needs too, and that are weighted more towards capacity requirements. That’s a long answer to your question, but hopefully that makes sense. Net-net, I do think there could be some tailwinds in the IRP.

Kirk Andrews:

Hey Nick, it’s Kirk. Certainly as we’ve reiterated a number of times through our 6% to 8% growth rate through 2025, there is no new equity in that particular plan. As you’ll see, we came out of 2022, as David said earlier, with a strong balance sheet. We’re ahead of our targets, we’ve got strong robust free cash flow, we’re not a current taxpayer so we translate net income very efficiently into operating cash flows, which gives us a pretty good stable of equity to help supplement financing with debt, keep the balance sheet in line. Certainly expect that to be the case through 2025. That will continue because we don’t expect to be a cash taxpayer until towards the end of the decade, so we’re going to look to balance those two objectives. We’ll look at the IRP obviously and the impact on the capital expenditure plan, but our goal is to successfully balance our objective to maintain that long term growth rate as robustly as we can, and that obviously means being prudent about issuing equity while at the same time maintaining those balance sheet objectives. But fortunately with the combination of those robust cash flows and the foundation we’ve come out of 2022, we feel good about where those balance sheets are and we’ll continue to focus on it. As we get through the rate case in Kansas and update the IRP, we’ll have more specifics about the financing plans long term, but again robust cash flow and our tax shield is a tailwind for us as we move forward, even beyond ’25.

David Campbell:

Thanks Nick.

Durgesh Chopra:

Hey, good morning team. Thanks for taking my questions.

Durgesh Chopra:

Good morning David. You’ve answered all of my other questions. Maybe just hit on the PPA opportunity that you’ve discussed in the past and what is the opportunity set there for perhaps 2023 and then longer term.

Durgesh Chopra:

Got it, thank you. Just to be clear, the recovery process or the return on that 4 gigawatts’ worth of opportunity, is that through--do you have to go through rate cases or get approvals as you buy out those PPA opportunities, or how does that actually work?

Durgesh Chopra:

Got it. Thanks so much, I appreciate it, Kirk.

Operator:

Thank you. Our next question comes from the line of Angie Storozynski of Seaport. Your question please, Angie.

Kirk Andrews:

That’s obviously a year-over-year increase, and I think the better way to think about that, you know, ’22 going into ’23, obviously ’22 was a little bit a tale of two rates, for lack of a more elegant way of putting it. We saw increasing rates more in the back half of the year, and that’s obviously a full year effect year-over-year. You are correct - we do have a number of items in that interest rate sensitivity we showed you before, better at the utility, so we would expect some of that, especially some of those pollution control bonds that you see there, there is a portion of those at Kansas Central, there’s at least half of those at Metro, and we’d also look--some of that interest rate exposure is obviously our short term interest rate. Now, a lot of that gets taken up in our AFUDC mechanism, but as we look to move from our construction work in process to plant and service, we’ll look at that short term rates, which are obviously higher given the backwardation of the curve, and term some of that out. I would expect if we do that in 2023, we will do that timed--certainly in Kansas, that will probably take place in the context of our rate case, so a lot of that will get trued up at the end of the day.

Kirk Andrews:

Yes.

Kirk Andrews:

I think the better way to think about that is we’ve just rolled from a partial year to a current year, so now we’re kind of at current rates in that regard, so I would not--we don’t see a step function going forward into yet another increase in rates over time, and it’s really just the increasing debt rather than increasing rate exposure at the end of the day, thinking about moving from ’23 and forward.

Operator:

Thank you. Our next question comes from the line of Paul Patterson of Glenrock Associates. Please go ahead, Paul.

David Campbell:

Morning Paul.

David Campbell:

Paul, it’s going to be fascinating as the rules come out around it. The first thing to note is that the eligibility will start in 2024, but it is an impact that will flow directly to our customers so it will not have an earnings impact. Now, I think anything that helps with respect to customer cost is a good thing. Regional rate competitiveness and affordability are critically important for us, so there’s a tangible benefit that we’re really excited about as well. In terms of the mechanism, it will be interesting to see how the rules operate. Presumably since it’s based on yearly realized prices, that may be assessed on a monthly basis, it may be assessed in a back cast at the end of the year, it may be based on day-ahead markets - that probably makes more sense rather than real time, but all that is yet to be seen. But the net-net is if you went back a couple years, this wouldn’t have been true in ’22 given the high commodity prices, but if you look back at ’21 and ’20 and ’19 and ’18, the realized prices at Wolf Creek were below the thresholds that are laid out in the IRA for eligibility for a PTC, and it wouldn’t be the full $15 a megawatt hour in all years but, depending on what the go-forward pricing is, it could be up to $15 a megawatt hour for a 1,200 megawatt nuclear unit, so it’s a sizeable potential benefit for customers. But the mechanism, we believe that’s going to flow directly through the fuel clause, which is again very important but not an earnings driver. But it will be interesting to see as the rules come out and it starts in ’24.

David Campbell:

Well, we had hearings this week and obviously we’ve been in discussions with staff in advance of the hearings, so I do think it’s in the commission’s hands at this point. We’re always--as I mentioned, we’re always seeing the work constructively towards approval, we think it is clearly a great option. It’s a well-placed option that drives the best overall benefits for our customers in terms of costs, in our view, and so we think we’ve got compelling arguments for adding it. If we can settle, it’d be great, but it’s in the commission’s hands given that it’s likely to be an issue the commission resolves.

David Campbell:

It’s a good question. I was actually in Texas at the time the Texas law was passed, so it has some unique elements reflecting the unique elements of the Texas market. There are ROFRs in place - right of first refusals in place in dozens of jurisdictions around the U.S., and they’ve stood the test of time in those markets and been beneficial and remain in place. Most of our neighbors have them, most of the states in the SPP have them, so we’ll track, it may be narrow to the Texas law, it may not. We don’t have ROFR in place in Kansas and Missouri, so one step at a time, but I do think the ROFRs that are in place across multiple states, they’ve been resilient. We’ll obviously have to follow how those cases go, but some unique features, as you know, in that Texas law.

David Campbell:

I do, and we’ve resolved a couple proceedings, and one was ruled on by the FERC last year, so I think that we--our go-forward guidance reflects our view of the impact of the overall regulatory framework, is probably the easiest way to frame it. Some of it is complicated, but probably the most complicated one that was pending, because it related to a formula that was in the tariff that was under review, and so we had to follow the tariff but obviously when you get a formula that’s related to the transmission delivery charge, and the transmission formula rates to FERC level, and that was resolved last year. Our forward guidance that we’ve discussed reflects the impacts of that case. There are a lot of technical ones. I guess the easiest way to describe it is that we--our view of their impact is reflected in our forward plan.

David Campbell:

Thank you, you too.

Ashar Khan:

Hi David. I think all my questions have been answered, but if I can just--I was just trying to sum up, if I may, so you said you’re going to have another $100 million of lower savings between now and 2025, if I see the chart, and if I’m right, that’s nearly about $0.40 or $0.45, so half of them came this year, if I’m right, in 2023, because you are showing an O&M decrease or benefit of $0.20. Is it fair that another $0.20, $0.25 is left in the next two years, and the other bridge is going to be, of course, transmission earnings and then the Kansas case next year, and should we factor in another Missouri case that will have some impact for 2025?

Kirk Andrews:

On the O&M front, just to clarify that you’re right - you know, if I incorporate the $60 million, and that’s roughly what that ’22 to ’23 reduction in O&M equates to, I think I even mentioned that when I was going through the slides, that puts us--I think we came out of ’22, and you can infer--you can go through our disclosures, about $1.74 billion of non-fuel O&M in ’22, so that means with that $60 million of savings, you’re at $1.14 billion. We’ve put a target out there, our ’25 target is 960, so that gives you about $54 million between--you know, from 2023 to 2025, over that period of time, so you’re right, that round to about $0.20 prospectively once you get outside of ’23, just to clarify that.

David Campbell:

Yes, it’s likely to be a year from now, Ashar. We’re going to have the integrated resource plan update and we’ll get to the Kansas rate case, so I think that that’s going to be most informative for investors. Again, we think the Kansas rate case is pretty straightforward, but a lot of eyes are going to be on that rate case, so I think the most likely time frame forward is going to be in the Q4 call about a year from now, which I hope to open with a celebration of another Chiefs Super Bowl.

David Campbell:

Thanks Ashar.

David Campbell:

All right, thanks Latif. For everyone on the call or reading later, thank you for your time this morning and thank you for your interest in Evergy. Have a great day.

Operator:

Good day and thank you for standing by. Welcome to the Third Quarter 2022 Evergy Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lori Wright, Vice President of Investor Relations and Treasurer. Please go ahead.

David Campbell:

Thanks, Lori, and good morning, everyone. I'll begin on Slide 5, and I'm pleased to report that we had another solid quarter as we delivered adjusted earnings of $2.01 per share compared to $1.97 per share in 2021. The increase in adjusted earnings over last year was driven primarily by favorable demand, above normal weather and higher transmission margin, partially offset by higher D&A and interest expense. For year-to-date, September 30, adjusted earnings were $3.43 per share compared to $3.35 per share a year ago. With these strong results, we are raising the midpoint of our guidance from $3.53 per share to $3.58 per share and revising our adjusted EPS guidance range to $3.53 to $3.63 per share from $3.43 to $3.63 per share. Kirk will detail the drivers of our third quarter performance and upward guidance revision. I would also like to call out and compliment the strong work of the entire Evergy team in providing safe and reliable power to our customers and communities through a hot summer and early fall. In particular, I'll call out our team's strong safety performance with a 66% reduction in DART events and a 62% reduction in OSHA recordables compared to the first nine months of 2021. On August 9, we announced an agreement to acquire Persimmon Creek Wind Farm, a 199 megawatt operating wind farm in western Oklahoma, for $250 million. This investment satisfies two thirds of our planned 300 megawatts of renewable additions in 2024. Persimmon Creek will deliver low cost power to our Missouri West customers, subject to approval from Missouri Public Service Commission, and supports our carbon reduction and net zero emission targets. We also announced the 7% increase in our quarterly dividend to $0.6125 per share, or $2.45 per share on an annualized basis. This increase is consistent with our recent growth trajectory and long-term targets. We remain laser focused on executing our plan and advancing our strategic objectives of affordability, reliability and sustainability in the context of historically volatile economic conditions and inflation. We remain confident in our long-term plan and we are reaffirming our target annual EPS growth rate of 6% to 8% from 2021 to 2025. Now moving to Slide 6, and Missouri. We are pleased to reach partial stipulations and agreements with our stakeholders in the pending Metro and Missouri West rate cases, which we expect will provide a balanced outcome for customers and shareholders. The approved agreements call for 67.5 million revenue increase across our Missouri jurisdictions. Not all the relevant details are public in the black-box settlement, but I'll highlight the 8.25% pre-tax rate of return for plant-in-service accounting, or PISA, as a helpful data point, as we plan go-forward investments. While the settlement resolved most of the key economic issues, there are several items that the Missouri Commission will resolve in the coming weeks. Revised rates will go into effect on December 6. We're pleased that we are able to find common ground with our stakeholders in these settlements. We continue to view Missouri as a very attractive jurisdiction to invest in as evidenced by the rate case and the constructive extension and changes to the PISA legislation that were enacted earlier this year. Turning to Slide 7. I'll provide a summary of other key regulatory and legislative milestones and ongoing constructive developments in both Kansas and Missouri. I'm happy to report the Missouri Commission issued a financing order in October that approved our request to recover and securitize approximately 300 million of Winter Storm Uri costs at our Missouri West jurisdiction. We expect to go to market in the first half of 2023 to complete this financing. For the Persimmon Creek acquisition, we filed for a Certificate of Convenience and Necessity or CCN in August. We expect this investment to qualify for PISA treatment at our Missouri West restriction. Missouri Commission staff will issue its recommendation by November 18, and we requested approval by year end. On the other side of the state line, the Kansas Corporation Commission issued an order in mid September that determined our 2022 capital investment plan meets the requirements of the capital investment plan framework. Consistent with prior years, the Commission also requested Evergy attend a workshop to explain the impact of the proposed capital spending and to answer questions for the commissioners, KCC staff and the Citizens' Utility Ratepayer Board, or CURB. The workshop will take place on December 13. We look forward to the opportunity to highlight the benefits of our planned transmission and distribution investments in a system with a lot of older infrastructure, the addition of renewables consistent with our integrated resource plan, the benefits of which are now further enhanced by the federal subsidies in the IRA, as well as upgrades to technology and customer service platforms that will help us to serve customers more effectively and efficiently. In addition, we'll cover our ongoing progress in advancing the regional rate competitiveness with Evergy's system, which is a core element of our strategic focus on affordability. Also in Kansas, preparation is underway for our 2023 rate cases, which we will file in late April. This will be our first request for new base rates in Kansas since we formed Evergy in 2018. Key drivers of the case will include return on equity, capital structure, review of our reliability and efficiency focused distribution, customer and technology infrastructure investments since our last rate case, as well as passing on the significant O&M savings we've generated for customers since the completion of the merger. We look forward to working constructively with our regulators and stakeholders just as we have in multiple forms over the past few years in Kansas to advance the 2023 rate cases and deliver against our strategic objectives of ensuring affordability, reliability and sustainability for our Kansas customers and communities. Turning to Slide 8, I'll review our demand growth and comment on economic trends and developments. For the third quarter, total weather-normalized retail demand increased by approximately 1.7% driven by a robust increase in industrial demand for the chemical and oil and gas sectors. Year-to-date, weather-normalized demand is up approximately 2%. Total demand is up 2.4% for the quarter and approximately 3% for the year. While 2021 was warmer than average, temperatures were even higher in the third quarter of 2022. Our regional economy has remained healthy as the unemployment rate in both Kansas and Missouri continues to track below the national average. We're also excited about the ongoing growth that we've seen as reflected in the numbers I just shared as well as the large product announcements such as Metis data center and Panasonic's new electric vehicle battery manufacturing plant. I'll conclude my remarks with a few comments on the Inflation Reduction Act, or IRA, on Slide 9. There's no question that the IRA is a very consequential piece of legislation. We are assessing the key impacts of the IRA through the economic and customer affordability lenses, as the bill provides longer term certainty and visibility for significant renewable energy tax credits and emerging technologies. This economic support will further enhance our ability to take advantage of the abundant renewable potential of our region, and deliver savings to our customers by replacing energy produced from resources with higher fuel and O&M costs. We also expect the Wolf Creek nuclear plant to be eligible for the IRA's nuclear production tax credit, which will have a beneficial impact for customer bills in years with low realized prices for Wolf Creek. We expect to provide an update on our future renewable generation plans by mid 2023 when we file a revised annual integrated resource plans in Kansas and Missouri. This update will incorporate the impacts of the IRA, updated commodity projections and higher capacity requirements in the Southwest power pool. We are excited to advance a program that will further enhance our affordability, reliability and sustainability goals. I will now turn the call over to Kirk.

Operator:

[Operator Instructions]. Our first question comes from the line of Angelique Aiello with Bank of America. Your line is now open.

David Campbell:

Hi, Dariusz.

David Campbell:

Sure. I'll hand that over to Kirk. This is David. I appreciate the question, Dariusz. As you would expect, the evolution of the Inflation Reduction Act has created some uncertainty in the marketplace, both around what the subsidies would be and whether they would occur. And that has created some dynamics with respect to both considering what valuation is and what the future potential could be. We now have clarity around that, of course, but folks are still settling on respective values. We think that on balance, it further enhances the value proposition where we're proposing in terms of the benefits to potential sellers and for us to potential buyers and what we can offer to customers, but has impacted time. But I'll hand it over to Kirk who's driving that process.

David Campbell:

And we've been pleased with -- Kirk and his team were able to negotiate and agree to the acquisition of Persimmon Creek. That's an operating wind farm. We hope to get approval on that by year end and certainly have that in the system next year. As an operating wind farm, it's added a portfolio earlier than what was in our IRP that was initially part of our 2024 plan.

Kirkland Andrews:

Sure, Dariusz. First of all, in terms of in our forward expectations, as you know and as I indicated, a part of our rate filing in Missouri included the ongoing return on Sibley. That's something we've discussed before. So that is obviously pending and for the Commission and that's in our expectations. We've kind of talked about the order of magnitude of what that means from an EPS perspective on a go-forward, about $0.03. Drawing the distinction between that and the accounting change, however, as I indicated in my remarks, the deferral to the regulatory liability, although that does change in hindsight as well, we recast our adjusted EPS by that $0.01 a quarter. Looking forward, as I also indicated, that does not change our expected earnings on a go forward basis. The accounting change does not change our expected earnings.

Dariusz Lozny:

Okay. Excellent. Thank you for clarifying. I'll pass it along here.

Operator:

That concludes today's question-and-answer session. I'd like to turn the call back to David Campbell for closing remarks.

Operator:

This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator:

Good day, and thank you for standing by. Welcome to the Q2 2022 Evergy Incorporated Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lori Wright, Vice President, Investor Relations and Treasurer. Please go ahead.

David Campbell :

Thanks, Lori. And good morning, everyone. Thanks for joining us today. I'll begin on Slide 5. I'm pleased to report that we had a solid second quarter as we delivered adjusted earnings per share of $0.86 compared to $0.85 in 2021. The increase in adjusted earnings over last year was driven primarily by favorable weather, an increase in weather-normalized demand and higher transmission margin, partially offset by higher planned operations and maintenance expense and lower other income net of expense. Kirk will discuss the second quarter drivers in more detail. On our first quarter earnings call, I highlighted that we had just participated in a safety roadshow and that our focus on safety contributed to strong safety performance in the first quarter. Our employees continued this positive trend through midyear reducing work-related injuries, including recordable and restricted events by 60% compared to the same period last year. And our customer reliability has been solid despite challenging weather, reflecting the beneficial impacts of our ongoing grid investments. Compared to the 5-year trend in our service territory, so far this year, the number of days with sustained wins over 25 miles per hour increased 89% to 65 days, and days with wind gust over 40 miles per hour increased nearly 50% to 78 days. 2021 was in line with this 5-year average for both measures, so 2022 has been a clear outlier. In contrast, relative to the 5-year trend, average daily outage events have decreased by 14% in the first 6 months of 2022, notwithstanding the more extreme weather, indicating improved system resiliency. I would like to thank all Evergy employees for their focus on safety and their dedication to providing safe, reliable and affordable power to our customers. I would also like to highlight a recent generation milestone. As you know, we have been expanding our wind portfolio for over a decade. With about 4,400 megawatts of owned and contracted wind generation, our portfolio recently marked 100 million-megawatt hours of cumulative wind energy production. And in 2021, factoring in the production from our Wolf Creek nuclear plant, our emission-free generation was equivalent to 56% of our total retail customers' usage. Our team's consistent execution has resulted in a solid start to the year, and we are reaffirming our 2022 adjusted EPS guidance of $3.43 per share to $3.63 per share as well as our target long-term annual EPS growth rate of 6% to 8% from 2021 to 2025. Slide 6 highlights our annual Integrated Resource Plan update, which was filed in June for both Kansas and Missouri. Our preferred plan for the next decade is consistent with the resource plan laid out in last year's Triennial IRP filing and the renewables development plan Kirk discussed during our Investor Day last September. The minor tweaks in the plan reflects updates to the sequencing of our near-term investments. Specifically, we shifted the 190-megawatt solar edition and the Lawrence coal retirements to 2024, primarily due to the dynamic market conditions facing the solar supply chain and the benefits to customers of keeping Lawrence online with current high natural gas prices. In 2026, we shifted a planned solar project to wind and increased the capacity assumption for the project by 100 megawatts. Beyond 2026, we slightly reduced megawatt assumptions for our solar projects, which on a net basis offset some upward pressures on pricing. Overall, by the end of 2032, our preferred plan now includes 3,500 megawatts of renewable additions while also responsibly retiring nearly 2,000 megawatts of coal, balancing both affordability and reliability as we advance our fleet transition and advance toward achieving our sustainability and emissions reduction goals. Moving on to Slide 7, I'll provide a summary of key regulatory and legislative milestones and ongoing constructive developments in both Kansas and Missouri. In Missouri, we continue to work our way to the pending general rate case. In early June, staff and other interveners filed their direct testimony. And mid-July, all parties filed rebuttal testimony. In the next few weeks, parties will file true-up and surrebuttal testimony with a settlement conference to follow around August 22 and hearings later this month through early September. Revised rates in Missouri will go effective on December 6. We look forward to working with the parties to constructively resolve the case. At Missouri West, we have also been advancing the securitization process to recover the roughly $300 million of winter storm Uri costs. Earlier this week, we filed a nonunanimous settlement that resolves all key issues with the Missouri Commission staff. In terms of timing, hearings are wrapping up this week, and we expect a commission financing order in mid-October. On the legislative front of Missouri, Senate Bill 745, which modifies Plant In Service Accounting, or PISA, was signed by the governor and became law in late June. The modifications reduced the revenue requirement cap to a 2.5% annual compounded growth rate and narrow the calculation to consider PISA deferrals only. Importantly, this bill also puts into a law a property tax tracker effective later this month, which will eliminate a historical source of lag in our Missouri jurisdictions. The PISA extension marks the second consecutive year of passing new legislation in Missouri that will benefit customers and stakeholders. In 2021, HB 734 was signed into law, authorizing the securitization of extraordinary costs and the unrecovered book value of our retired generation plants. Moving to Kansas. I'm pleased to report that in June, the Kansas Corporation Commission approved the nonunanimous stipulation agreement for winter storm Uri costs. The order allows us to recover roughly $120 million of deferred extraordinary fuel purchase power and nonfuel costs at Kansas Central over a 2-year period beginning in April 2023. Similarly, the $37 million of net benefits at Kansas Metro will be returned to customers over a 1-year period, also beginning in April next year. Preparations are underway for our Kansas Central and Kansas Metro rate cases, which we will file in April 2023. We expect the test year ending September 30, 2022 and the true-up date around June 30, 2023, with new rates becoming effective in December of next year. Other important milestones in Kansas include the passage and signing of securitization legislation in mid-2021 as well as the completion last November of the docket before the Kansas Corporation Commission relating to the Sustainability Transformation Plan. In both Kansas and Missouri, the Triennial Integrated Resource Plans have completed their review process. The Missouri Public Service Commission approved the IRP in March of this year and the Kansas Corporation Commission accepted the IRP in May. We will continue to work collaboratively with regulators and interveners in both states to achieve constructive outcomes that advance our core objectives of delivering affordable, reliable and sustainable power to the customers and the communities that we serve. Overall, we are pleased with the strong start to the year, the progress that we have achieved in working closely with regulators and stakeholders to enhance our service to our customers and the ongoing consistent execution of our business plan. I will now turn the call over to Kirk.

David Campbell :

Thank you, Kirk. We appreciate your time with us today, and we now would be happy to take your questions.

Michael Sullivan:

David, I wanted to just start with pretty strong quarter in terms of just the sales growth, weather normal and then also the weather benefit. Maybe if we could just get a little color on how the weather normal compared to plan. And just given the strength, why not raise the guidance at this point in the year?

Michael Sullivan:

Okay. Great. And then I just wanted to shift to the rate case and maybe if you could just talk about where there may be outstanding sticking points and potential for settlement. And then also, I think one of them is obviously the Sibley issue if that were not to go your way. Is that something that you see as manageable? There are a couple of questions there.

Michael Sullivan:

Great. And just last one if I could throw it in, just initial thoughts on the Inflation Reduction Act and what it means for your company.

Operator:

[Operator Instructions] The next question comes from Durgesh Chopra with Evercore.

David Campbell :

Yes, the residual rate base. There are some parties who may argue for a different number, but that's the residual rate base. And Sibley at this time -- so a pretty modest number as you described.

Kirkland Andrews :

That's correct. I add to that on that 15% minimum tax. Part of it is aided by our inventory of tax credits as we move forward. You're correct, we expect to be below that threshold. So I would think about that something that we -- potentially, if we rise to that level, it would be beyond or coincident with the very least our expected cash taxpayer year, which is beyond the middle of this decade.

Kirkland Andrews :

That's correct. And again, that will also be somewhat dependent on the ongoing generation of tax credits as we move forward to some extent from -- as we progress around our renewables plans. But you're right directionally in terms of all things being equal, that time frame in that inflection point, correct.

Kirkland Andrews :

So I would say that the extension of the tax credits, first of all, is passed. And certainly, we're hopeful and optimistic that, that takes place. Gives us greater flexibility on the repowering side of that equation. So that's a benefit, especially as we focus on earnings and, certainly, affordability for our customers. We're continuing to hold that objective. We're continuing to advance our discussions with counterparties, and I'm maintaining that target to announce at least one of those this year. It may be a buy-in or it may be a buy-in combined with a repowering, but we continue to be focused on that. And at the same time, we had robust responses to our RFP that we launched toward our of renewables objectives, in particular the 300 megawatts of wind and 24 followed by 525. So we've had good results from that as well, and we're expecting to have some news on that front as we progress through the balance of the year as well.

Paul Patterson:

So can you hear me?

Paul Patterson:

Okay. Good. Sorry. So I wanted to -- and I apologize, but you guys made some comments about, I think, wind production at the beginning of the call and I was wondering if you could, if possible, sort of to summarize what you're seeing in terms of wind production. And I apologize I just wasn't able to completely comprehended on my end, sorry.

Paul Patterson:

Okay. Got it. I think you also or maybe I misunderstood you guys were also talking about the performance of wind. I was just wondering, has there been any issue in terms of production year-over-year? As I recall, there might have been a decrease. I just was wondering what -- how has wind been performing sort of on same-store kind of -- has production been going? And also, I was just wondering, we've seen around the country sort of some curtailments in different areas do transmission constraints and what have you. Have you seen any -- in your -- not just with you guys but with any neighboring -- because you guys have a significant sort of area in terms of wind. Have you seen any projects or what have you in your neighborhood, so to speak, experiencing any curtailments due to transmission constraints?

Operator:

[Operator Instructions] The next question comes from Nick Campanella with Credit Suisse.

David Campbell :

So you are tracking things well and closely. SPP did recently increase their reserve margin to 15% from 12%, and that will go in effect next year. You are correct in that it's not going to have a near-term impact on our capacity requirements, so we will be able to meet that. But it is going to be a factor in our longer-term planning. So as we think about our coal retirements and the overall transmission of our portfolio, obviously, we'll be factoring that in and making sure that we can meet it. I think as SPP continues to look at different seasonable -- seasonal reserve margins, so for example, a winter reserve margin, that will be very interesting as well. But the short answer is we can accommodate that change in reserve margin with our portfolio. We'll factor it into our ongoing plans. On balance, obviously, it will have some impacts to the longer-term plans but relatively modest, but it will -- we'll be factoring that in as we consider our resource transition, and we'll be working closely with stakeholders as we think about that winter reserve margin requirement as well. Obviously, the winter peaks are lower. But as you look at the average capacity factors across the fleet as you add more renewables, the winter is going to be important thing to consider as well.

Kirkland Andrews :

Sure. Happy to address that. So COLI, overall, I think we said this in the past, we generally expect about $20 million of COLI impact. That is both a pretax and after tax. COLI is not tax-affected at the end of the day. So year-to-date relative to our expectations, we're probably $0.04 lower than we would have expected, basically half the year on that COLI because we've effectively had very little proceeds from COLI, and that's actually just a function of the performance of the underlying folks that are insured by that. So year-to-date, I think about that is about $0.04 short of what would normally be our ratable expectations for the year.

David Campbell :

Thank you. We appreciate all of you joining this morning. Thank you for your interest in Evergy, and have a great day. That concludes the call.

Operator:

Good day, ladies and gentlemen, and welcome to the First Quarter 2022 Evergy Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Lori Wright, Vice President Investor Relations and Treasurer. Thank you. Please go ahead.

David A. Campbell:

Thanks, Lori, and good morning, everyone. I'll begin on Slide 5. I'm pleased to report that we had a solid first quarter as we delivered adjusted earnings per share of $0.58 compared to $0.55 in 2021. The increase in adjusted earnings over last year was driven primarily by higher transmission margin and lower operating expenses partially offset by an increase in depreciation and amortization and higher income tax expense. Kirk will discuss these first-quarter drivers in more detail. One of our objectives is to become widely recognized for operational excellence, which includes safety. Our strong safety culture drives both discipline and consistency of performance as well as cost management. During the first quarter, our employees participated in a safety roadshow that included presentations at 70 sessions throughout our service territory. This continued focus on safety has contributed to a 68% reduction in OSHA recordable safety events relative to the first quarter of 2021. I would like to thank all Evergy employees for their focus on safety and their dedication to providing safe, reliable, and affordable power to our customers. I would also like to congratulate our Wolf Creek nuclear plant for completing a project to store spent fuel in a concrete bunker adjacent to the plant. This is Wolf Creek's first dry cask fuel storage campaign and the team did an excellent job managing the project. With a solid start to the year, we are reaffirming our 2022 adjusted EPS guidance of $3.43 to $3.63 per share, as well as our target long-term annual EPS growth rate of 6% to 8% from 2021 to 2025. Slide 6 highlights the core tenets of our strategy, affordability, reliability, and sustainability. Keeping rates affordable is at the forefront of our thinking given its importance to our customers, especially given current economic conditions. We've made clear progress in advancing the competitiveness of our regional rates over the last few years and our plan is constructed to continue this trajectory. We are closely monitoring and managing inflation in all aspects of our business. And regarding fuel cost, inflation in particular, we are well-positioned relative to many other utilities given our relatively lower level of natural gas exposure, as natural gas comprises typically 5% or less of our generation fuel mix annually. We like many of our peers have revisited our commodity procurement and hedging practices in light of the increased volatility which are at levels not seen for more than a decade. Ensuring reliability is also a core element of our strategy, along with [indiscernible] and safety. This includes a focus on metrics relating to customer service, the commercial availability of our fleet, safety, and all elements of our operations, including infrastructure investment. This spring has brought resiliency to the forefront as high winds in our service territory have been significantly more prevalent than normal, including several days in recent weeks with wind gust in the 50 to 60 miles per hour range. These types of conditions reinforce the importance of our ongoing transmission and distribution investments.

David A. Campbell:

We're proud of the advancements we've made to further demonstrate our commitment to leading ESC practices. We are focused on maintaining this momentum as we execute our plan and deliver sustainable results in the years ahead. Now, before handing over to Kirk, I'll conclude by discussing some of our key regulatory and legislative priorities on Slide 8. In Kansas, we recently reached a non-unanimous stipulation agreement with key interveners for the Winter Storm Uri costs from February 2021. The settlement calls for roughly $120 million of deferred extraordinarily fuel, purchase power and non-fuel costs at Kansas Central to be recovered through our fuel clause over a two-year period beginning in April of next year. Similarly, the $37 million of net benefits of Kansas Metro will be returned to customers by the same method over a one-year period, also beginning in April 2023. We remain on track to file this summer the annual update to our Kansas and Missouri integrated resource plan. We expect that the annual filing will be consistent with the resource plan than we laid out in last year's triennial IRP filing and the renewable development plan that Kirk discussed during our Investor Day last September. In Missouri, we initiated the securitization process to recover the approximately $300 million of Winter Storm Uri costs in Missouri West. If approved, securitization will extend the recovery period for these costs over 15 years, and thereby significantly moderate the impacts on customers. In terms of timing, we expect an order in the securitization proceeding in the fall of this year. And last month, we began flowing the approximately $25 million of net benefits from Uri, back to Missouri Metro customers. This benefit we shared over one-year period. I'll wrap up this slide with an update on our legislative efforts to enhance and extend the plant and service accounting law known as PISA in Missouri. The bill under consideration sets an annual revenue requirement cap at 2.5%, applicable only to PISA related deferrals. The bill also includes a property tax tracker and extends the law through 2028 with the opportunity for extension through 2033, with commission approval. We are encouraged by the support the bill has received in both the senate and house, and we'll continue to work with legislators and parties to secure passage over the next 10 days. With respect to the pending Missouri rate case, we expect to receive intervenor direct testimony on June 8th, related to revenue requirements, and on June 22nd, relating to rate design aspects, with rebuttal testimony, due mid-July and serve rebuttal testimony due mid-August. Our settlement conference is scheduled for August 22nd, with hearings later that month through early September, provides rates and Missouri will go effective on December 2nd. We look forward to working with parties to constructively resolve the case. I will now turn the call over to Kirk.

David A. Campbell:

We now welcome your questions.

Michael Sullivan:

Hey, everyone. Good morning.

Michael Sullivan:

Wanted to start with the pending Missouri legislation there, and maybe if you could just give us a little more color on the process, is it really just a matter of working through things here or do you sense there is some level of opposition that could waylay things at the last moment? And if it does get done, does that change the way you think about how you invest or frequency of late case filings and things like that?

Michael Sullivan:

Yes, it does. And then also wanted to circle back to just the near-term resource planning. I think on the last call, you provide an update around the 190 megawatt solar project that it sounded like was slipping a little bit and then I think in conjunction with that, had the Lawrence coal plant retirement. Can you just update us on where that stands?

Kirkland Andrews:

On good selling, just obviously focused on consistency and certainty of costs there. And with some of the headwinds we've seen with the recent Department of Commerce Investigation around anti-dumping and countervailing duties, I think that's going to be a little bit of pacing item as we look to work constructively of our counter-party on that project. But overall, if at the very least it results in a delay, as David said, I think I've talked to a lot of you about this, not a meaningful driver of earnings in the early years of our plans. So if anything, it's just shifts us closer to the point at which should -- it would deliver more consistent earnings strength. But relatively small project, and we're going to continue to manage the process as we move forward our counterpart here.

Michael Sullivan:

Super helpful. Thanks for all the [Indiscernible]

Operator:

Your next question comes from the line of Michael Lapides from Goldman Sachs. Your line is now open.

David A. Campbell:

It's a predominance of the Michaels this morning. Good morning, Michael. Michael following Michael. So for us, it's not that we don't have an earnings exposure, we're only giving our regulatory mechanisms in the two states. Our funding status is relatively lower than some other plans and that's again related to how our regulatory funding mechanisms work. So I think we'll continue to show that funding level. We don't expect the change in this trend is going to have a material impact on the cost that flow through the rates to customers. So for us, relative to others, this is not the thing in our earnings struggle. And it's a pretty arcane setup and maybe simplest to go through offline, but I got headlines summary is one that can you can go with.

David A. Campbell:

Sure, Michael. The only thing I'd tell you is we've -- as I've said at the fourth quarter call, we felt confident enough given the progression of dialogue with a subset of those counterparties that we're targeting, getting at least one of those buy-ins and potentially repowering done this year. We remain in active dialogue with those counterparties, we're progressing with discussion. So I'll just reaffirm that we're continuing to target that and we'll keep you apprised as we continue to progress that project or process, I should say.

David A. Campbell:

It is not. That would be incremental, yes. Direct.

David A. Campbell:

Thank you, Michael.

Darius Anderson:

Hey, good morning, guys. This is Darius is for Julien. Thanks for the time this morning. Just wanted to maybe come back to the Lauren Gas converging discussion. Can you maybe just kind of talk through the puts and takes, their relative to the a 190 megawatts of solar that appears to be on hold at the moment, from a capital perspective, how the one compared to the other?

Darius Anderson:

Okay. Thank you. That's very helpful. One more if I can, and this relates to -- again, this relates to some of the objectives you guys sit out on the Q4 call. Obviously, we are in inflationary environment that's been in discussion certainly with respect to wind. You guys have stated that you're hoping to execute some build trends for agreements for wind, for delivery in the mid-decade time frame, can you just give an update on how those conversations are progressing?

Darius Anderson:

Okay, I appreciate the color. I'll turn it back here. Thank you.

Operator:

There are no further questions at this time. I would now like to turn the conference back to David Campbell, President and CEO.

Operator:

This concludes today's conference call. Thank you for participating and have a wonderful day. You may now disconnect.

Operator:

Thank you for standing by and welcome to EVRG Inc.'s Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator instructions] I would now like to hand the call over to Lori Wright, Vice President of Investor Relations and Treasurer. Please go ahead.

David Campbell:

Thanks, Lori, and good morning, everyone. I'll begin on Slide 5. This morning, we reported full year 2021 GAAP earnings of $3.83 per share compared to a $2.72 per share in 2020. Adjusted earnings per share were $3.54 in 2021, compared to $3.10 in 2020. These results reflect strong execution relative to our objectives for the year. We entered 2021 with a midpoint guidance of $3.30 per share, in line with our 6% to 8% target growth rate range. We were able to deliver $3.54 per share representing a 14% increase over 2020 and a 7% increase over our initial guidance midpoint. Kirk will discuss the drivers of this year’s results as part of his remarks. A critical part of the company’s five year sustainability transformation plan involves a comprehensive program to modernize our grid and invest in infrastructure. We advanced this capital plan in 2021 deploying $2.05 billion or $100 million higher than our Investor Day estimate to replace ageing equipment and improve reliability, resiliency and security. We also maintain our focus on advancing affordability and regional rate competitiveness. Since 2017, we have delivered a 4.2% overall rate reduction to our customers. At the same time, we have reduced our total operating and maintenance expenses by 18% since 2018, enabling us to pass on these cost savings in our upcoming Missouri and Kansas rate cases. In 2021, our total CO2 emissions were 46% below 2005 levels reflecting strong progress relative to our long-term emissions reduction targets. And last but certainly not least, we continue to prioritize constructive interactions with our key regulatory and legislative stakeholders. In 2021, we wrapped up STP dockets in both Missouri and Canada and securitization legislation was enacted in both states. We expect that securitization will serve as a helpful tool in managing the company’s ongoing fleet transition in the coming years. On Slide 6, you will see our recent earnings and dividend growth trends. As we have emphasized over the past year, consistent execution remains at the forefront of everything we do. The $3.53 midpoint of our 2022 adjusted EPS guidance tracks with the 7% compound annual growth rate from 2019 which was Evergy’s first full year as a company. This is squarely in line with our targeted long-term annual earnings growth of 6% to 8%. Alongside the earnings, you will see the attractive dividend growth that is tracked within our 60% to 70% dividend payout policy. I would like to thank my fellow Evergy employees for their continued focus and team works and driving these results, overcoming the challenges of another unprecedented year including extreme weather during winter storm Uri, and the ongoing pandemic. We look forward to working together to further advance this track record of execution. As noted on Slide 7, we made significant progress on emission reductions as we’ve transitioned our generation fleet over the last decade and a half. Since 2005, we’ve reduced carbon emissions by nearly half by reducing sulfur dioxide and NOx emissions by 98% and 88% respectively. Our renewable energy portfolio is approaching 4.5 gigawatts and we’ve responsibly retired nearly 2.5 gigawatt to fossil generation over the last 15 years. Our updated integrated resource plans which were filed last spring outlined our intention to add nearly 4 gigawatts of renewable generation and retired nearly 2 gigawatts of coal over the next decades. In 2021, nearly half of the electricity we provided to customers came from carbon free sources and we are on pace to reach our goal of 70% reduction in CO2 emissions from 2005 levels by 2030 with a long-term objective of net zero carbon by 2045. Slide 8 summarizes our five year capital expenditure plan, which totals $10.7 billion from 2022 to 2026. On a comparative basis, the current 2021 to 2025 plan is in line with what we presented in our Investor Day last September with some timing shifts reflected in higher base CapEx in 2021 and 2023 and slight reductions in the other years netting to roughly $100 million increase overall. With the addition of 2026, the rolling five year capital expenditure plan is $235 million higher than the 2021 to 2025 plan. The largest portion of our infrastructure investment is targeted towards transmission and distributions. The program is focused on replacing aging equipment and modernizing the grid, driving benefits for our customers by improving reliability, enhancing resiliency, and the ability to withstand extreme weather, upgrading customer systems and the customer experience and increasing security. As we advance the use of smart grid technologies and transition towards a lower cost, lower emissions generation fleet, our investments will also enable us to reduce cost to serve customers, which helps to create a virtuous surplus which has on these savings. Slide 9 summarizes our progress in driving cost savings and capturing efficiencies and how we work enabled by the 2018 merger and a comprehensive program across the business, we have reduced cost by $233 million or 18% since 2018. We are laser-focused on operational excellence as we leverage investments and technology to operate more effectively and efficiently. We are also building more and more flexibility into our generation operating model in the southwest power pool market which continues to see an increase in penetration of renewable generation. And we are not done, as we are targeting a further 11% reduction in total O&M by 2025 as part of our five year plan. Thus far we have been able to manage the impacts of inflation on our O&M costs and we have developed plans to capture the vast majority of our targeted savings. The back half of 2021 brought increasing pressures on fuel and purchase power costs as we’ve been seeing across the country to create higher levels elsewhere than what we see in our jurisdictions. And it appears that those trends may continue in the current macro environment and geopolitical context. Affordability and improving regional rate competitiveness are core elements of Evergy’s strategy. As shown on Slide 10 since 2017, Evergy has been able to reduce rates by an average of 4.2% outpacing regional peers and at a level well below inflation. On the slide, we layout how we’ve been able to deliver these savings across each of our four jurisdictions from 2017 to 2021. This topic remains at the forefront for our customers and stakeholders and going forward, maintaining affordable rates will continue to be features as a priority objective in our five year plan. Let’s turn to Slide 11, I’ll give an update on our ongoing Missouri rate reviews we filed this January. Starting on the left hand side with Missouri Metro, we have requested a $44 million rate increase including the rebates – excuse me, excluding the rebates to fuels, based on a 10% return on equity, a 51.2% common equity ratio and a projected $3.1 billion rate base as with the proposed May 31, 2022 WHO update. The primary drivers of the rate requests include our increased infrastructure investments, which improve reliability enhanced customer service and enable the company’s transition to cleaner energy resources, updated depreciation rates that better align with the estimated remaining lives of IFRS and increased power pre-taxes. These increases are significantly offset by roughly $55 million of lower annual operating cost savings that we are pleased to be able to pass on to customers. Moving on to Missouri West, we requested a $28 million rate increase excluding the rebates of fuel and based on a 10% return on equity, a 51.8% common equity ratio and a projected $2.5 billion rate base as of the proposed update. Missouri West rate request drivers are similar and include an increase from infrastructure investments, updated depreciation rates, and increased property taxes partially offset by ongoing customer savings and cost reductions of roughly $57 million per year. These savings effectively lowered the rate increase request by more than 60%. The Missouri West case also includes the handling of our previously retired Staubli power plant. We’ve been deferring the revenues associated with the foregone O&M resulting for the plant’s retirement in 2018. As part of this case, we’ve offered to return these revenues back to customers over the next four years, which would reduce annual revenues by roughly $10 million and with no impact on earnings. To summarize, we believe that the pending Missouri rate reviews are relatively typical and straightforward with two main elements. First, passing on the benefits of cost savings and second, any infrastructure and grid monetization investments that are consistent and advance the objectives of Missouri policymakers and stakeholders. We are excited about the benefits that these investments will deliver to our Missouri customers. Now the procedural schedule is not yet final but on the bottom of the Slide 11 you will see our estimated timeline from here. We expect stats and intervenor testimony we filed in June which will bundle testimony in July, potential hearings in early September and finally commission orders in November. If approved as filed excluding the fuel, the rate request which represent an increase of 5.2% for Missouri Metro customers and a 3.85 increase for Missouri West customers both of which are well below the rate of inflation we’ve seen since our last rate cases. Moving to Slide 12, I’ll provide an update on other regulatory and legislative priorities beginning with our predetermination docket in Kansas. As a reminder, last September, we initiated a proceeding to approve the elimination of coal at the Lawrence Energy Center, the retirement of Lawrence Unit 4 with recoveries through securitization and the addition of a 190 megawatts of solar generation in Kansas. Later in the year, last year, we filed a request to temporarily suspend the procedural schedule to allow time to develop more clarity on solar tariffs with the potential for tax incentives to improve customer economics and the resolution of supply chain and customs issues that could impact pricing and availability. Given the lingering uncertainty around those issues rather than keeping this docket on hold, we have withdrawn the filing and plan to file a new application once definitive agreements are reached with the solar developer. The elements of the plan are unchanged and we still expect to see pre-determination approval for the cessation of coal, the retirement of Lawrence 4 and the addition of 190 megawatts of solar. While this may impact the timing of the solar farm addition, it does not have a meaningful impact on our earnings expectations as the structure for the new solar was expected to contribute less than a penny to annual adjusted EPS in both 2024 and 2025. This is due to the market-based rate construct that was pursued in this case under which the earnings profile is tied to the time that Evergy can monetize the value of the ITC tax benefits of the project in the back half of this decade. In parallel, we are in the process of evaluating competitive proposals for up to one gigawatt of new wind resources that would come online in the 2024 to 2025 timeframe. Kirk and his team are overseeing our renewable efforts and he will highlight our priorities in his remarks. Other regulatory items include recovery of costs incurred during winter storm Uri. In Missouri, we are awaiting commission approval of our request to defer approximately $300 million at Missouri West with plans to securitize the costs and smooth the impact on the customers over multiple years. We are also seeking approval to defer and return approximately $25 million of net benefits to Missouri Metro customers. We expect to reach resolution on the deferral request in the second or third quarter and a commission decision on the securitization on the Missouri West cost by the end of the year. In Kansas, last month the KCC Staff filed its recommendation to approve our recovery plan of approximately $115 million of Uri costs in Kansas Central and the return of approximately $35 million of benefits in Kansas Metro. We are working closely with all parties and we expect to finalize the details of the path forward in the first half of this year. In 2021, we filed our integrated resource plans in Missouri and Kansas providing an updated 20 year roadmap for our generation fleet transition in conjunction with our announcement of our long-term emissions reduction targets. We will file our annual update to the IRP in both states by July 1st. I’ll wrap up this slide with a legislative update focusing on Missouri. The bills have been introduced to extend and update legislation that was passed in 2018 widely referred to as plant and service accounting or PSA. We’ve been utilizing this legislation since 2019 supporting our investments in grid monetization and improve reliability. We believe that the build has good policy and enjoys wide support. But whether it ultimately advances this year will depend most likely on unrelated issues and receive the bulk of legislative attention. We are focused on working with key stakeholders to advance the PSA extension this spring but given the provisions of the currently existing PSA legislation. This is an initiative that we would also be able to pursue next year. In addition in Missouri, we are pursuing mechanisms to enable the efficient recovery of costs outside of our control notably property taxes. Before handing it over to Kirk, I’ll wrap up on Slide 13 which summarizes the Evergy value proposition. The left side of the page covers the core tenets of our strategy to advance affordability, reliability, and sustainability through relentless focus on our customers supported by stakeholder collaborations, sustainable investments and financial and operational excellence. The right hand side of the slide 13 features what we believe are particularly attractive and distinctive features for Evergy given our business mix and geographic locations. We are excited about the opportunities for our company and we are committed for the sustained effort required to deliver against our high performance objectives. I’ll now turn the call over to Kirk.

David Campbell:

Thank you, Kirk. So, for those on the call, we appreciate your time today and we’d like to open it up to questions.

Shar Pourreza :

Hey, good morning, guys.

Shar Pourreza :

Morning. David, Kansas seems like it has been a little bit noisier maybe even somewhat hostel to actually both you and the KCC. We saw One Republic and others demoted from a committee because of an off paddy road. There was obviously recently legislation for in – for price cap some lawmakers have been really hounding on the KCC. I guess, could we just get any color on your conversations in recent weeks there? Any efforts to sort of pivot the conversation? It’s just been a little bit more noisier than we are used to.

Shar Pourreza :

Got it. Thank you for that. And just last maybe for Kirk, just maybe – just on the buy-in, how does that interact with the IRP update process? And just remind us or any buy-ins in the CapEx plan or is it sort of an opportunity that’s incremental?

Shar Pourreza :

Got it. No, no, that’s helpful. Very clear cut quarter. Thanks guys. I appreciate it.

Operator:

Thank you. Our next question comes from Durgesh Chopra of Evercore ISI. Your line is open.

Kirk Andrews:

Well, the timeline as I’ve said, we are currently actively involved in discussions with multiple PPA counterparties for a potential buy-in which is why as I indicated we feel comfortable in at least targeting one of those who occurred this year. Obviously, it’s a two party negotiation. So we’ve obviously got to get to closure on that. In terms of the regulatory process, directionally speaking, I think the way you describe it is correct. We are basically taking a PPA pass through and converting that to capital. Ultimately with the focus being for the benefit of the customer, i.e. the target and the first step of that is, if we can buy in that PPA at an attractive overall capital price, so that be associated impact on rates with that if you will, rate base investment provides customer savings, that’s the most important step. In terms of how that gets adjudicated, it would go through a similar processes, really any rate based investment. Right, if that was in Kansas, we’d go through pre-determination of those in Missouri. We’d actually pursue through different names and an ordinary rate case context. Combining that with powering, it’s just an increase in the overall capital would be well or an extension of that time line albeit rather in the pass through, it would be a rate base investment within all in savings, right. I think about that almost a blend and extend type approach if you will.

David Campbell:

So, that’s a good question thus far and obviously, in the macro environment, that continues to be dynamic. So, one we are highly attentive to as does everyone. Thus far we’ve been able to manage the inflationary pressures on the O&M side. It has some impact despite – some impact on the cost and building on the capital side we’ve also been able to work through those as well. And we are confident that we can continue to manage it. In our 2022 plan as you may have seen in the waterfall that Kirk walked you from 2021 to 2022, it’s an overall $0.06 uplift in O&M. So we have some cost savings this year. We also had some impact last year from the outperformance – unusual outperformance in our unregulated business should have some impact in our O&M cost modest, but that’s part of the uplift we see going into next year. But it’s an ongoing effort that we are going to drive in 2023. 2024, and 2025. So we have, as part of our five year plan we already have teams in place that have identified the bulk of those savings and how we are going to achieve them and we’ll be in execution mode in the back half of this year and in the upcoming years. So it’s got to take the same effort, it’s been a comprehensive program across our whole company, Kevin Bryant our Chief Operating Officer is coordinating that effort on our behalf, but the company has got a great track record in this year and we know how to do it. That’s going to take sustained execution. So, we don’t want to certainly acknowledge that but we have the tools and the compliance in place to make it happen.

David Campbell:

Thank you.

Michael Lapides :

Hey guys. Thank you for taking my question and congrats to a strong year. I wanted to talk about the PPA buy-ins as well as any build own transfer of loads. Congress obviously hasn’t been able to get anything across the finish line both CFA can try to do something in the Lame-Duck Session at the end of this year, it doesn’t look like anything to happen before the mid-terms. Just curious, do you think about pulling forward all of your renewable plants to capture what could be the safe harboring benefit that some of the developers who themselves maybe thinking about repowering for – thinking about building new solar. The reason toward the Safe Harbor provision benefit that would happen because they’ve got it Safe Harbor that last year or two years ago PPP or ITP level versus what this year through next year would be?

David Campbell:

And Mike, I’ll also add is the – from, this is David, so, from the perspective of the integrated resource plan and our multiyear capital expenditure plan, we look at the overall level of capital we are spending. We look at the overall rate impacts and affordability. We do think to bring on renewable as a win-win, because it typically lower cost as well as lower emissions. But we are going to track with the program and with respect to the IRP, part of the rational for why there is some sequence in shift, wind relative to solar was in consideration of some of the factors around a safe harbor. So the category of truly new development we are sensitive to all those various factors and balancing them. Of course, we have an IRP update that we’ll do this year and it’s a dynamic market and we are going to be responsible for what we see. The PPA is a little bit different, the buy-ins and repowerings and that’s as Kirk described in existing set of resources, so that’s for complicated new issue with the initial set of counterparties obviously, but for those, we have opportunities that are sooner and we’ll certainly look for that. But it’s subject to what you can accomplish with the counterparties. They’ll of course, those are all basically wins. So, talking about the PPAs for repowering those are really on the wind side. But the safe harbor point that you made is relevant and we’ll seek to do as many others as we can, but within the constraints of what the counterparties will do with us.

David Campbell:

Well, first of all I could comment in two forms, right. Buy-in and repowering can be a single negotiation with the counterparty that we can contract with on both elements of that. Obviously, that would be the owner of the existing asset, that was our counterparty end of the PPA. And a potential repowering initiative, almost again the kind of bill transfer expect with that seem counterparty negotiating those in tandem, that’s sort of my blend and extend example, so it’s sort of a single view of the capital required to buy in the remaining years of the PPA combined with the capital and the repowering. That would be an overall rate base investment. And again, that would need to be viewed by us especially through the lens of affordability for our customers. It only makes sense for us to do this as a first order. If that we can substantiate that capital investment when combined to result in a savings to the customer, relative to the PPA that’s being pass through and obviously supplemented by greater certainty of what those costs are in the long run. There is the possibility that there could be a negotiating of a buy-in and a later repowering. That would really be a bifurcation of really two capital investment considerations, right. A little bit more challenging in one sense, because you’ve got to substantiate the affordability and the prudency of both of those two things individually, which is why I think it’s a cleaner path to do them combined. But there are opportunities to do both, that will mean we go through and say, here is the capital investments replaces existing PPA pass through. Here is the savings around that, that will be separately adjudicated and then we’d approach the repowering separately.

David Campbell:

Not a tracker on the Missouri side if I understand what your question is there.

David Campbell:

Correct. Yes. That’s right.

David Campbell:

Yes, Michael, again, I want to add on that as the – you could take your pre-determinations. So you get a sense for Kansas, the weather how will be treated in the upcoming rate case and we’ve got a rate case scheduled for 2023 as you know and following a rate case you can do an abbreviated rate case six months into 2024. So there are couple different pathway if you can go down starting with the pre-determinations to get at comfort at how it will be treated and then you can do it either in the general rate case or an abbreviated rate case and nearly filing one that you complete.

David Campbell:

Thank you.

Julien Dumoulin-Smith:

Excellent. Hey, good morning, thanks team for the time. Perhaps, listen I don’t want to hammer too much on this buy-in opportunity. But just, you say that you’ve got a few contracts at least one year. What’s the order of magnitude of megawatts that we are talking about here? I am not sure I pin you guys down, just curious if you can speak to that?

Julien Dumoulin-Smith:

Right. Effectively establishing a framework for how to scale that up to around that one, two or whatever if you can make it work.

Kirk Andrews:

Yes, it’s some level and we view that PPA base as pipeline, now it’s – some of that pipeline is near term to longer term. But that’s at least long term pipeline for us.

David Campbell:

Sure, that we felt that was just an approving our [Indiscernible] process have the ability for a shareholder to call that kind of meeting. So, we are evaluating our overall governance practice. We felt – that we saw that would be an enhancement to create that ability to call a meeting. So, we looked at where the threshold work for peer companies where other companies or a lot of companies still don’t offer that. But we wanted to add that as an additional capability of the shareholder family proposal. But I view that as – I would put that in the category of our overall evaluation of our ESG policies and approaches of trying to continue to approve on those.

David Campbell:

We do not think that it has broad support. We don’t think that it’s going to giving it out. So it’s lots of proposals get offered. I’ve seen that over my career and all the legislative discussions that are seen in every states, but now we don’t even think that would get out a committee. I had some discussions but we don’t think it’s got large support.

David Campbell:

You bet.

David Campbell:

Thank you.

Nicholas Campanella:

Hey, good morning. Thanks for taking my question. I was just curious in light of the comments on the 190 megawatts of solar and you talked about looking for more clarity on tax incentives and supply chain pricing impacts. Can you just help us think about how that translates to the overall roughly $2 billion renewable CapEx program that you have outlined here? I know it’s fairly back-end loaded, but are you kind of taking a wait and see approach to this capital so far out or does the CapEx that you have in the slides today kind of reflects this supply chain and pricing pressures that you are seeing. Thanks.

Kirk Andrews:

Yes, the only thing I’d add to that on the 190 megawatt solar project, as David characterized it I agree that’s unique around some of those supply chain issues. I think I have mentioned in my remarks. Coming out of our initial pre-determination filing, there was still some lingering uncertainty about what the administration was going to do around whether or not they were going to extend and what the scope of that extension might look like when it comes to tariffs. And there are existing, I mentioned, this as well, in terms of customs and board reduction, there these withhold release orders around, concerns around certain products from China and of course labor provisions which are kind of holding things up a little bit. So those are the best two examples of the uncertainty. And I think that's more unique to solar in this particular project. We wanted to get some clarity on that. Our counterparty wanted to as well. We've obviously seen the Biden ministration give clarity around the least around what their attentions are in terms of the tariffs. So gives us a better backdrop to do that. And we thought it was prudent to do so because we're very focused on this next step in our evolution of moving from what's been primarily a PPA dominated strategy to an own renewables dominated strategy, very important to us that first for at least in the solar side, we do so with an eye toward affordability. So we didn't want to move too fast in negotiating this for the sake of getting it done. We wanted to do it with clarity and certainty about, as I said, cost and schedule for the benefit of our customers. And the reason David mentioned the unique nature of that particular project from a structural array perspective, but it is not, as David indicated, I think, in his remarks, a major contributor in the early years of our plan due to some of the tax aspects of it. So it gives us a little bit greater flexibility to work through some of those unique issues in the near-term.

Nicholas Campanella:

Got it. Yeah, that's very clear. Super helpful. Really appreciate that. Just on your comments about the higher fuel costs and inflation and trying to translate more savings to customers, obviously, you guys have already done a great job in the base plan today. But you're also going to be kind of filing an update to the IRP this July. And I'm just curious if we're going to get into a tipping point where there's just an argument to kind of further accelerate some of the fossil fleet and how you're kind of thinking about that, in terms of the closures? Thanks.

Nicholas Campanella:

That’s helpful. And one more if I can just, if I'm hearing you, right, the PPA buyout opportunities are upside to the capital plan. And just as we think about putting more CapEx into the model, what's your ability to just raise CapEx without additional growth equity capital?

Nicholas Campanella:

Really appreciate the time today. Thank you.

David Campbell:

Thank you.

Travis Miller:

Good morning. Thank you.

Travis Miller:

I was wondering holistically if you look at that CapEx program $10 billion-plus and then you think about the regulatory activity that you have going on right now, Missouri and essentially in Kansas here coming up. How could the outcome of those kind of near-term regulatory outcomes impact that full CapEx plan? And thinking about if things go well, then you might upsize it, things go poorly by downsizing. What are your thoughts there in terms of sensitivity?

Travis Miller:

Okay, great. That makes sense. The – you had answered my other question, so appreciate the time.

Operator:

Thank you. Our next question comes from Paul Patterson of Glenrock Associates. Your line is open.

Kirk Andrews:

Hi, Paul.

Paul Patterson:

I apologize if I missed this, but the – but for 2022 the power ventures telemarketing, what's the expectation for the contribution for that in 2022? It wasn’t fair to me, I’m sorry.

Paul Patterson:

Okay. And then, again, I'm sorry, but the sales growth for 2022, you said was about 1%. And it wasn't clear to me is COVID, I mean, how far – I mean, it sounds like you're also still responding to COVID sort of longer-term, non-COVID recovery. What do you – what's your expectation for sales growth at this point?

Paul Patterson:

Okay. And then finally, back to the Missouri piece of case, the piece of legislation, my understanding is that, without legislation that the PSC would have the flexibility to go with PISA or not. If under the current PISA setup, and I realize it's a 3% cap on the total rate in the 2.5%, does the 3% cover fuel, or just could just give us a little bit of a flavor as to the – what life under the current PISA or the current legislation is versus what it would be vis-à-vis the proposed legislation?

Paul Patterson:

Okay. Just in terms of with the increase in fuel prices that we're seeing in everything, is there a significant amount of deferred fuel recovery? Or are you projecting potentially? How does the outlook for fuel recovery, or any other I guess, cost recovery mean? Is there a big – are there are significant deferrals? Let me ask it this way. Are you seeing significant levels of deferred expenses accumulating here? Or what's the outlook for that under the current setup?

Paul Patterson:

Okay, thanks so much. I appreciate.

Operator:

Thank you. At this time, I'd like to turn the call back over to President and CEO, David Campbell for closing remarks. Sir?

Operator:

Thank you for standing by and welcome to EVRG's Third Quarter earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator instructions] I will now like to hand the conference over to your host, Vice President Investor Relations and Treasurer, Lori Wright. Please go ahead.

David Campbell :

Thank you, Lori. And good morning, everyone. I'll begin on Slide 5 of our presentation. This morning, we reported third quarter adjusted earnings of $1.98 per share compared to a $1.73 per share a year ago, equal to a 14% increase. On a period-over-period basis, these results were driven primarily by favorable weather, higher transmission margin, higher other income, and lower income taxes, partially offset by a decline in weather-normalized demand. For year-to-date September 30th, adjusted earnings were $3.38 per share compared with $2.82 per share a year ago, equal to a 20% increase. As with the quarter, favorable weather is the most significant driver. With these strong results, we are raising and narrowing our adjusted EPS guidance range to $3.50 -- to $3.60 per share, an increase from $3.20 to $3.40 per share. I commend and thank our team's ability to execute and focus on providing safe and reliable electric service to our customers throughout the first 9 months of the year, notwithstanding the lingering pandemic impacts and a significant winter weather event in February. Kirk will detail the drivers of our financial performance that resulted in the upside guidance revisions. In addition, we are affirming our 2022, adjusted EPS guidance, of $3.43 to $3.63 share, as well as our targeted annual adjusted EPS growth target of 6%-8% through 2025, as we laid out during our Investor Day. Lastly, this morning, we also announced a 7% increase in our quarterly dividend to $57.25 per share, or $2.29 per share on an annualized basis. This increase is consistent with our growth trajectory and reflects our Board's confidence in the execution of our plan. Moving on to slide 6, I'll provide a brief recap of the business plan highlights from our recent Investor Day. As part of the event, we re-based and extended our key targets through 2025. Our 5-year capital investments are estimated to be $10.4 billion through 2025, of which nearly $1.5 billion is for renewals projects. This spending plan drives our projected rate base growth of 5 to 6% annually over that time -- that same time period. We also extended our target for cost efficiencies and added nearly $20 million of savings in 2025 increasing our total estimated annual O&M savings from our 2018 base year to $345 million annually in 2025. This represents more than a 25% overall decline. Building on the strong performance and realized cost savings achieved over the last three years, this trajectory implies a one to 2% annualized cost productivity gain through the five-year forecast period. The planned beneficial infrastructure investment, and additional O&M savings, enable us to extend our top-tier 6% to 8% annual growth rate and adjusted earnings per share, through 2025. We're able to fund this plan with significant cash flow and modest incremental debt, allowing us to maintain our strong balance sheet and credit metrics with no planned incremental equity through 2025. Lastly, we showcased our strong ESG profile, including our significant progress in clean energy and changing our generation mix. In 2020, 50% of our energy was emissions-free and we achieved a 51% reduction in EVRG CO2 emissions relative to 2005 levels. We stack up well, relative to our Midwest peers, in terms of both clean energy delivered to our customers and our reduction in carbon emissions. We have ambitious, but achievable goals, as we advanced towards our target of net 0 carbon by 2045. Slide 7 outlines our resource plans through 2026. To further lower energy costs for customers and reduce emissions, we plan to add more than 1,300 megawatts of new renewables split between over 500 megawatts of solar and 800 megawatts of wind, through a series of yearly additions. We also plan to retire coal operations at our plant in Lawrence, Kansas. In September, we initiated a regulatory proceeding in Kansas called predetermination, seeking approval in advance for the Lawrence coal retirement and for the first 190 megawatts of solar generation. We expect to have an order in this proceeding by mid-2022. In October, we also issued a request for proposal for 800 megawatts of wind generation projects. We have sequenced across 2024 and 2025, for the benefit of Kansas and Missouri customers. Bids are due later this month and we plan to select a shortlist of projects before the end of the year. We are targeting having negotiations completed by mid-2022. In parallel, we will continue to evaluate potential opportunities to buy in and re-power existing power purchase agreements as initial production tax credits expire. Before handing it over to Kirk, I'll wrap up on Slide 8, which summarizes the EVRG value proposition. The left-hand side of the page covers what we're focused on and how we plan to execute our strategy, which I discussed in depth during our Investor Day. The core tenants of our strategy are to advance affordability, reliability, and sustainability, through a relentless focus on our customers supported by stakeholder and collaboration, sustainable investment, and financial and operational excellence. The right-hand side of Slide 8 features what we believe are particularly attractive and distinctive features for our Company. First, we are in all electric regulated utility with significant benefits delivered since the merger, and further opportunities that we will capture through continuous improvement, performance management, and sustained consistent execution. 2, we have significant opportunities ahead for the ongoing transition of our generation portfolio. And we can do so cost-effectively, given that we'll be replacing coal with low-cost renewables, which is a win-win for affordability and sustainability. 3, we are geographically advantaged given our proximity to world-class wind resources in Kansas. We are well-positioned to participate in the renewables and transmission build-out that will occur as part of the national transition to a clean energy economy. And finally, we are targeting a high performing 68% annual growth rate and adjusted earnings per share through 2025 at the top rank with our peers. We are very excited about the opportunities for our Company and we are deeply committed to the sustained effort required to deliver against our high-performance objectives. I will now turn the call over to Kirk.

David Campbell :

Thank you, Kirk. For everyone on the call, we appreciate your time with us today. And now we'd be happy to take your questions.

Shar Pourreza:

Good morning, guys.

Shar Pourreza:

Just a couple of questions here if I may. First, the updated guidance for 2021, which obviously even as weaker weather-normalized demand is somewhat noticeably higher, right? Are you including any pull-forward of OpEx from '22? I'm just try to get a sense on potential flexibility in next year's guide, especially as we're seeing some demand drag continuing to -- into '22 versus your prior expectations.

Shar Pourreza:

Got it. See, you have some contingency there to cushion.

Shar Pourreza:

Okay. Got it. And then just on the O&M side, obviously, some pretty sizable reductions you're expecting through '25. How do we sort of think about where you're currently guiding versus the overall opportunity set? You see more -- do you see more to squeeze, especially as you guys are shooting for Tier 1 utility status and even further, looking at asset-level transition opportunities. 25% reduction is a lot, the question is, can you do more?

Shar Pourreza:

Got it. And then just lastly for me, if I may just on the IRP how much did you file earlier this year, we've already seen multiple stakeholder groups make some noise in the Kansas docket. Staff made some positive and constructive comments. Um, what should we be watching for in the process for the balance of the year across the states. And more importantly, is there any concerns around the IRP related spending opportunities in light of some of the input cost pressures? We've seen in the renewable space. I mean, how do you price in these headwinds as we think about future generation opportunities through 26 and beyond. Thank you.