Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2024, for Evergy, Inc. (Evergy) and its wholly-owned subsidiaries, Evergy Kansas Central, Inc. and Evergy Metro, Inc. (collectively, the Evergy Companies). Evergy is a public utility holding company headquartered in Kansas City, Missouri, operating regulated electric utilities in Kansas and Missouri. The company serves approximately 1.7 million customers with roughly 15,800 MW of owned generating capacity and renewable power purchase agreements.
Key Financial Metrics (Year-to-Date June 30, 2024)
| Metric | 2024 (YTD) | 2023 (YTD) | Change |
|---|---|---|---|
| Operating Revenues | $2,778.5 million | $2,651.0 million | +$127.5 million |
| Net Income (Evergy, Inc.) | $329.7 million | $321.7 million | +$8.0 million |
| Diluted EPS | $1.43 | $1.40 | +$0.03 |
| Operating Cash Flow | $634.8 million | $715.2 million | -$80.4 million |
| Capital Expenditures | $1,296.1 million | $1,104.2 million | +$191.9 million |
| Total Debt (Long-term + Current) | $12,774.1 million | $11,853.3 million | +$920.8 million |
| Cash and Cash Equivalents | $26.1 million | $27.7 million | -$1.6 million |
Note: Total Debt includes current maturities of long-term debt ($819.5M) and long-term debt, net ($11,954.6M). Commercial paper outstanding was $969.7 million.
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased primarily due to new retail rates in Kansas effective December 2023, higher transmission revenues from updated FERC transmission formula rates, and favorable weather conditions driving higher retail sales.
- Expense Increases: Operating and maintenance expenses rose due to storm-related costs, vegetation management, and a major maintenance outage at the Jeffrey Energy Center (JEC). Depreciation and amortization increased due to rate case adjustments and capital additions.
- Interest Expense: Interest expense increased by $20.0 million year-to-date, driven by new long-term debt issuances, partially offset by lower short-term borrowing balances.
- Income Tax: Income tax expense decreased by $8.5 million, largely due to higher wind and other income tax credits (including from the Persimmon Creek acquisition) and amortization of excess deferred income taxes.
- Asset Retirement Obligations (AROs): The company recorded $72.8 million in new ARO liabilities in Q2 2024 related to new EPA regulations on coal combustion residuals (CCRs).
Guidance, Outlook, and Risks
- Regulatory Proceedings: Evergy Missouri West filed a rate case in February 2024 requesting a $104 million revenue increase, with new rates expected in January 2025. Kansas legislation (H.B. 2527) allows for plant-in-service accounting (PISA) deferrals starting July 2024.
- Environmental Compliance: Significant uncertainty exists regarding EPA rules on Ozone Interstate Transport, Particulate Matter standards, and Greenhouse Gas emissions. The company notes that compliance costs for these regulations could be material.
- Capital Projects: Capital spending increased significantly, driven by grid resiliency projects and the purchase of a 22% interest in the Dogwood Energy Center ($60 million).
- Dividends: The Board declared a quarterly dividend of $0.6425 per share in August 2024, payable September 20, 2024.
- Market Risks: The company faces risks related to commodity price volatility, interest rate fluctuations, and potential credit rating downgrades (Moody's changed Evergy Missouri West's outlook to Negative in May 2024).
Investor Verification Checklist
- Rate Case Outcomes: Monitor the final decision on Evergy Missouri West's 2024 rate case and the implementation of Kansas PISA provisions.
- Environmental Costs: Track the finalization and litigation status of EPA rules regarding CCRs, Ozone, and GHG emissions to assess potential capital and operating cost impacts.
- Debt Refinancing: Review the impact of rising interest rates on future debt issuances and the company's ability to refinance maturing debt.
- Capital Expenditure Execution: Verify the progress and cost management of grid resiliency projects and the Dogwood Energy Center investment.
- Weather Normalization: Assess the sustainability of revenue growth driven by favorable weather conditions versus structural rate increases.