Evergy, Inc. — 2021 Form 10-K Summary
Business and reporting period. Evergy is a regulated electric utility holding company serving approximately 1.64 million customers in Kansas and Missouri. This combined 10-K covers the fiscal year ended December 31, 2021; it includes Evergy, Evergy Kansas Central and Evergy Metro. The company operates as one reportable segment and is significantly affected by seasonal weather, with about one-third of retail revenue typically recorded in the third quarter.
Financial performance
| Metric | 2021 | 2020 |
|---|---|---|
| Operating revenue | $5.587 billion | $4.913 billion |
| Income from operations | $1.355 billion | $1.144 billion |
| Net income attributable to Evergy, Inc. | $879.7 million | $618.3 million |
| Diluted EPS | $3.83 | $2.72 |
| Adjusted earnings / adjusted diluted EPS (non-GAAP) | $812.6 million / $3.54 | $705.5 million / $3.10 |
| Operating cash flow | $1.352 billion | $1.754 billion |
| Capital expenditures | $1.973 billion | $1.560 billion |
- Operating margin, calculated as operating income divided by revenue, was approximately 24.3%, compared with 23.3% in 2020. Utility gross margin, a company-defined non-GAAP measure, rose $188.1 million to $3.739 billion.
- At year-end, Evergy reported $26.2 million in cash, $1.159 billion in notes payable and commercial paper, and $9.687 billion in long-term debt including current maturities. It had approximately $1.34 billion of available capacity under its $2.5 billion master credit facility.
- Common equity was 49% and long-term debt 51% of capital structure, excluding short-term debt. Total assets were $28.521 billion and total equity was $9.242 billion.
Changes versus 2020
- Revenue increased $673.3 million and attributable net income increased $261.4 million. Reported EPS rose $1.11 per share.
- Higher earnings reflected winter-event energy marketing margins, favorable weather and increased commercial and industrial demand, lower operating and maintenance expense, higher equity AFUDC and investment earnings, and lower interest expense. Higher fuel and purchased-power costs, property taxes, depreciation and income taxes partly offset the gains.
- Operating cash flow decreased $402.1 million, mainly because of winter-event cash costs and the timing of payments to tax authorities and suppliers. Capital spending increased $412.2 million.
- Short-term notes payable and commercial paper increased $844.3 million year over year. Cash and cash equivalents declined $118.7 million.
Outlook, risks and unusual items
- Strategy and targets: Management targets an annual reduction of approximately $345 million in operating and maintenance expense by 2025 versus 2018 adjusted expense; approximately $10.7 billion in base capital investment through 2026, including about $2.0 billion in renewable generation; a 70% reduction in CO2 emissions from 2005 levels by 2030; and net-zero CO2 emissions by 2045. The filing provides no specific 2022 earnings guidance.
- Winter weather event: February 2021 produced $365.5 million of net fuel and purchased-power costs, substantially deferred for expected recovery or refund through regulatory mechanisms. SPP resettlement could change the final amount materially, and regulators may extend recovery or refund timing. Evergy also recorded $94.5 million of related non-regulated energy marketing margins.
- Other unusual earnings items: A restricted-share investment in a company that became publicly traded through a SPAC transaction generated a $27.7 million unrealized gain. Adjusted earnings exclude this gain and specified other items, so adjusted and GAAP results differ.
- Regulatory matters: Evergy Missouri West’s 2022 rate case included a dispute over recovery and potential customer refunds related to retired Sibley Station; the filing estimates a possible additional loss of approximately $50 million beyond the amount accrued. Missouri utilities also filed rate cases in January 2022. Evergy Kansas Central withdrew its request for a KCC predetermination concerning planned solar investment and retirement of Lawrence Energy Center Unit 4, with refiling anticipated later in 2022.
- Principal risks: Rate-case outcomes and regulatory lag; environmental rules and potential compliance costs; inflation, supply-chain and labor constraints affecting capital projects; severe weather and climate-related impacts; fuel and wholesale power market volatility; cybersecurity and operational disruptions; pension funding; and the ability to execute generation-transition plans while maintaining reliability and affordability. The company also noted a negative credit-rating outlook assigned in 2021, with ratings affirmed.
- Evergy’s financial statements received unqualified audit opinions, and Deloitte reported effective internal control over financial reporting for Evergy, Inc. as of year-end.
Important facts for investors to verify
- Final SPP resettlement and regulatory recovery or refund treatment for the February 2021 winter-event costs and wholesale revenues.
- Outcomes and timing of the Missouri rate cases, including the Sibley Station accounting and potential refund exposure.
- Whether planned capital spending, renewable additions and emissions targets remain achievable within projected costs and regulatory approvals.
- Liquidity and financing needs as capital expenditures rise, including the impact of short-term borrowing, debt maturities, credit ratings and dividend restrictions.
- Performance and eventual sale value of the restricted public-company investment underlying the $27.7 million unrealized gain.