Evergy, Inc. — 2022 Form 10-K Summary
Business context and reporting period
Evergy is a regulated electric utility holding company serving approximately 1.7 million customers in Kansas and Missouri through Evergy Kansas Central, Evergy Metro, and Evergy Missouri West. The filing covers the fiscal year ended December 31, 2022; it is an annual report, not a standalone fourth-quarter report. Results are materially seasonal, with about one-third of retail revenue typically recorded in the third quarter.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Operating revenue | $5,859.1 million | $5,586.7 million |
| Income from operations | $1,267.2 million | $1,354.9 million |
| Net income attributable to Evergy | $752.7 million | $879.7 million |
| Diluted EPS | $3.27 | $3.83 |
| Utility gross margin (non-GAAP) | $3,714.9 million | $3,739.3 million |
| Cash from operating activities | $1,801.9 million | $1,351.7 million |
| Capital expenditures | $2,166.5 million | $1,972.5 million |
Revenue increased 4.9%, while net income attributable to Evergy fell 14.4% and diluted EPS declined 14.6%. Management’s adjusted earnings, a non-GAAP measure, were $853.8 million, or $3.71 per diluted share, versus $795.2 million, or $3.46, in 2021. GAAP gross margin was $1,844.8 million, down $81.9 million. Cash from operations less capital expenditures was approximately negative $364.6 million.
At year-end, total assets were $29.49 billion, long-term debt including current maturities was approximately $10.34 billion, and common equity represented 48% of capital structure excluding short-term debt. Notes payable and commercial paper were $1.33 billion; collateralized notes payable were $359.0 million. Cash was $25.2 million, with $1.17 billion of available capacity under the $2.5 billion master credit facility. The company reported compliance with debt covenants. Its debt-to-equity funding needs and near-term maturities warrant attention; $439.5 million of long-term debt principal was scheduled for 2023.
Material changes versus 2021
- Retail electric revenue rose to $4.71 billion from $4.23 billion, with retail sales up 1.47 million MWh. Favorable weather and higher weather-normalized demand supported sales.
- Wholesale revenue fell $207.3 million, principally reflecting the prior-year energy marketing margin from the February 2021 winter storm. Fuel and purchased-power expense rose $264.2 million; higher costs are substantially subject to regulatory recovery mechanisms.
- Operating and maintenance expense decreased $22.2 million, but depreciation and amortization increased $33.0 million and interest expense increased $31.4 million.
- Net income was pressured by lower prior-year-comparable energy marketing results, regulatory refunds and disallowances, weaker equity investment results, higher depreciation and interest expense. Lower income tax expense partly offset these items.
- Operating cash flow increased $450.2 million, while capital spending increased $194.0 million. Year-end long-term debt increased from $9.30 billion to $9.91 billion, excluding current maturities.
Outlook, management commentary, risks and unusual items
- Evergy targets approximately $11.6 billion of base capital investment through 2027, including about $2.1 billion for new generation, expected primarily to be renewable. Its published annual capital plan ranges from $2.01 billion to $2.46 billion for 2023–2027.
- Climate targets are a 70% reduction in CO2 emissions from 2005 levels by 2030 and net-zero emissions by 2045. Management says achievement depends on technology, transmission capacity, grid reliability, policy and other external factors.
- Management targets a long-term dividend payout ratio of 60%–70% of earnings. In February 2023, the board declared a quarterly dividend of $0.6125 per share.
- Missouri rate orders effective January 2023 approved annual retail revenue increases of $25.0 million for Evergy Metro and $30.1 million for Evergy Missouri West. The orders included meter-cost disallowances and adverse Sibley Station treatment. Evergy Missouri West may recover $182.3 million of Sibley investment over eight years, but not a return on that investment, and must refund specified post-retirement collections over four years. Evergy recorded a $68.0 million revenue reduction and $26.7 million Sibley impairment in 2022.
- A December 2022 FERC order led to a $32.8 million revenue reduction for estimated transmission-formula-rate refunds. Final refund calculations remain subject to FERC review.
- Evergy Missouri West’s $309.0 million regulatory asset for the February 2021 winter-weather event is expected to be financed through securitized bonds. An appeal filed in January 2023 delays issuance pending a final, nonappealable order; the expected court decision timeline was uncertain.
- A proposed $250 million purchase of an operating 199-MW Oklahoma wind farm remained subject to regulatory approval. In January 2023, MPSC staff recommended rejection or further review of the application.
- Key risks include regulatory recovery and rate-case outcomes, inflation and supply-chain constraints, significant capital requirements and financing costs, weather and climate exposure, environmental compliance and potential coal-ash remediation, generation and transmission reliability, cybersecurity, and nuclear plant risks at Wolf Creek. The company reported $1.15 billion of asset retirement obligations at year-end; 2022 revisions to coal-ash closure estimates increased these obligations.
- Evergy reported unqualified financial-statement audit opinions and effective internal control over financial reporting for Evergy, Inc. Deloitte identified rate regulation and related estimates—including cost recovery, plant retirement and customer refunds—as a critical audit matter.
Important facts for investors to verify
- Reconcile GAAP earnings and EPS with management’s adjusted, non-GAAP figures and review the adjustments used.
- Track regulatory outcomes and actual customer refunds related to Sibley Station, the FERC transmission-rate challenge, and the winter-weather securitization appeal.
- Assess whether the capital plan can be executed on schedule and within cost, and whether regulatory recovery and operating cash flow will support investment without added credit pressure.
- Confirm the status and economics of the proposed wind-farm acquisition and monitor progress against emissions targets and related enabling requirements.
- Review debt maturities, short-term borrowings, credit ratings, liquidity availability, dividend restrictions, and the impact of interest rates on financing costs.