Evergy, Inc. — Q1 2024 Form 10-Q
Business context and reporting period
Evergy is a regulated electric utility holding company serving approximately 1.7 million customers in Kansas and Missouri, with about 15,800 MW of owned generation capacity and renewable power purchase agreements. This combined filing covers Evergy, Inc., Evergy Kansas Central and Evergy Metro for the three months ended March 31, 2024; amounts below are for Evergy, Inc. unless stated otherwise.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Operating revenue | $1,331.0 million | $1,296.8 million |
| Income from operations | $260.2 million | $279.3 million |
| Net income attributable to Evergy | $122.7 million | $142.6 million |
| Diluted EPS | $0.53 | $0.62 |
| Operating cash flow | $317.3 million | $362.9 million |
| Capital expenditures | $618.6 million | $527.7 million |
Operating revenue rose 2.6%, while attributable net income fell 14.0% and diluted EPS declined 14.5%. Utility gross margin, a company-defined non-GAAP measure, increased to $881.9 million from $861.4 million. Evergy reported cash and cash equivalents of $63.7 million at quarter-end. Long-term debt, including current maturities, was $12.47 billion, compared with $11.85 billion at December 31, 2023. Commercial paper was $798.7 million; $1.41 billion of capacity remained available under the $2.5 billion master credit facility. Evergy was in compliance with facility debt covenants.
Changes versus prior year and management commentary
- Revenue increased mainly with higher Kansas retail rates effective December 2023 and higher transmission revenue. Total electricity sales volume declined by 295,000 MWh; retail volume was down 41,000 MWh.
- Management attributed lower net income chiefly to higher depreciation, property and other non-income taxes, transmission and distribution costs, and the absence of prior-year mark-to-market gains on energy hedges. Lower pension non-service costs and lower income tax expense partly offset these pressures.
- Operating cash flow decreased $45.6 million, while cash used in investing rose as capital additions increased. Investing outflows exceeded operating cash flow by $265.9 million in the quarter.
- Evergy Missouri West’s utility gross margin fell $6.7 million to $284.3 million; Evergy Kansas Central’s rose $28.9 million to $481.9 million. Evergy Metro’s fell $6.7 million to $284.3 million.
Outlook, significant developments and risks
- Evergy Missouri West requested a roughly $104 million retail revenue increase; hearings are scheduled to begin in September 2024, with new rates expected in January 2025. The request includes infrastructure spending and certain gas-plant costs.
- April 2024 Kansas orders set transmission delivery charge updates expected to increase annual retail revenue versus 2023 by $80.1 million for Kansas Central and $7.1 million for Metro, effective May 2024. Kansas legislation also created a plant-in-service accounting option; Kansas Central and Metro expect to elect it.
- In February 2024, a consolidated subsidiary issued $331.1 million of 5.10% securitized bonds to recover extraordinary costs from the February 2021 winter event. Repayment is through customer charges, and bondholders have no recourse to the general credit of Evergy Missouri West.
- In April 2024, Evergy Missouri West purchased an approximately 145 MW interest in the Dogwood gas plant for about $60 million. A separate April issuance by Evergy Metro comprised $300 million of 5.40% mortgage bonds due 2034.
- Wolf Creek’s refueling outage began in March 2024; the unit was expected to return to service in May. Management expects $38.6 million of pension contributions in 2024.
- Environmental rules finalized or proposed in 2024—covering emissions, particulate matter, greenhouse gases, wastewater and coal ash—could entail material compliance costs, though several impacts remain under review. A FERC complaint seeks refunds related to Kansas Central transmission rates; $7.1 million was recorded as a regulatory liability, and a decision was expected in 2024.
- In May 2024, Moody’s changed Evergy Missouri West’s outlook from Stable to Negative and affirmed its Baa2 corporate rating. Management reported no material change in market-risk exposure and no material change to previously disclosed risk factors.
Important facts for investors to verify
- Whether Evergy Missouri West receives the requested rate increase, and the timing and terms of new rates.
- Actual capital spending, operating cash flow and funding needs relative to the quarter’s elevated investment outlays and debt balance.
- Costs and recovery mechanisms for environmental compliance, including the potential effects of coal-ash, emissions and water rules.
- The outcome of the FERC transmission-rate complaint and whether the recorded $7.1 million liability proves sufficient.
- Dogwood’s purchase economics and rate recovery, along with Evergy Missouri West’s credit outlook and financing costs.