Evergy, Inc. — 2020 Form 10-K
Business context and reporting period. This combined filing covers Evergy, Inc., Evergy Kansas Central and Evergy Metro for the fiscal year ended December 31, 2020; it is an annual report, not a standalone fourth-quarter filing. Evergy is a regulated electric utility holding company serving approximately 1.62 million customers in Kansas and Missouri, with about 15,400 MW of owned generation and renewable power purchase agreements. Results are seasonal, with roughly one-third of retail revenue typically earned in the third quarter.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Operating revenue | $4,913.4 million | $5,147.8 million |
| Income from operations | $1,143.9 million | $1,185.8 million |
| Net income attributable to Evergy | $618.3 million | $669.9 million |
| Diluted EPS | $2.72 | $2.79 |
| Operating cash flow | $1,753.8 million | $1,749.0 million |
| Capital expenditures | $1,560.3 million | $1,210.1 million |
| Cash dividends per share | $2.05 | $1.93 |
Utility gross margin, a company-defined non-GAAP measure, declined $80.3 million to $3,551.2 million. At year-end, cash and cash equivalents were $144.9 million and unused capacity under the $2.5 billion master credit facility was approximately $2.17 billion. Long-term debt book value was $9.63 billion, excluding $18.8 million of VIE debt; debt represented 53% of capital structure, compared with 51% in 2019. Total assets were $27.11 billion. The board’s long-term dividend payout target is 60%–70% of earnings.
Changes versus 2019
- Revenue fell $234.4 million and attributable net income fell $51.6 million. Management cited lower retail sales from unfavorable weather and reduced weather-normalized commercial and industrial demand during COVID-19, alongside higher depreciation and interest expense.
- Retail electricity sales decreased 1.64 million MWh; commercial and industrial sales declined, while residential demand increased. Fuel and purchased power expense fell $166.0 million, largely offsetting revenue pressure through regulated recovery mechanisms.
- Operating and maintenance expense decreased $55.5 million, including lower labor and other costs, but included $66.3 million of voluntary severance costs and $32.3 million of strategic-planning advisor expenses.
- Operating cash flow was nearly flat. Capital spending increased $350.2 million, and investing cash outflow rose to $1,533.7 million. Cash increased $121.7 million during the year.
- Evergy recorded a $259.1 million increase in its Wolf Creek decommissioning asset-retirement obligation based on a revised cost study. Goodwill of $2,336.6 million was tested, with no impairment recorded.
For the fourth quarter specifically, revenue was $1,094.4 million versus $1,131.6 million; net income attributable to Evergy was $51.0 million versus $63.9 million; and diluted EPS was $0.22 versus $0.28.
Outlook, commentary and risks
- Sustainability Transformation Plan: Evergy targets approximately $330 million of operating and maintenance expense reductions by 2024 versus 2018 adjusted expense, $145 million lower fuel and purchased power expense between 2019 and 2024, and approximately $8.9 billion of base capital investment through 2024. Planned investment includes reliability, grid improvements and renewables. These are targets, not guarantees.
- Emissions and generation: Evergy reported CO2 emissions approximately 50% below 2005 levels in 2020, set an 80% reduction goal by 2050, and said the plan could enable an 85% reduction by 2030. Coal retirements and renewable expansion depend on regulatory recovery, reliability needs, stakeholder input and technology development.
- February 2021 winter weather event: After year-end, Evergy estimated approximately $300 million of increased net fuel and purchased power costs, subject to SPP settlement. The utilities expect to defer substantially all such costs for future customer recovery, but timing or amount of recovery remains subject to regulatory decisions. Management reported approximately $2 billion of available credit capacity as of February 25, 2021.
- Regulatory and operating risks: Cost recovery, rate-case outcomes, regulatory lag, environmental rules, potential coal plant retirements and Sibley Station-related customer refunds could affect earnings and asset recovery. COVID-19 affected commercial and industrial demand, collections and operations; regulators authorized deferral of certain pandemic costs, but recovery is not assured. Weather, fuel and power prices, outages, cybersecurity, supply chains, pension funding and nuclear operations are also material risks.
- Post-year-end developments: In February 2021, Evergy agreed to a proposed Bluescape investment of approximately $113.2 million for shares and a warrant, subject to customary closing conditions; two directors were also expected to join the board under a separate agreement. Management announced CEO and CFO transitions effective in January and February 2021.
The filing gives no clear full-year 2021 EPS guidance. The financial statements received unqualified audit opinions; Evergy reported effective internal control over financial reporting.
Investor verification priorities
- Track whether the $300 million winter-event cost estimate changes after SPP settlement, and the timing and regulatory treatment of recovery.
- Assess the execution, financing and regulatory approval of the STP, including the $8.9 billion investment plan and targeted cost reductions.
- Review upcoming rate cases, COVID-19 regulatory assets, the Sibley AAO and related potential customer refunds.
- Monitor leverage, debt maturities, credit ratings, liquidity and dividend capacity as capital spending rises.
- Confirm the terms and closing status of the Bluescape investment and related governance changes.