Evergy, Inc. — Q2 2022 Form 10-Q
Business context and reporting period
Unaudited results for the three and six months ended June 30, 2022, compared with 2021. Evergy is a regulated electric utility holding company serving approximately 1.6 million customers in Kansas and Missouri, with about 15,400 MW of owned generating capacity and renewable power purchase agreements. This combined filing also includes Evergy Kansas Central and Evergy Metro.
Financial and operating results
| Evergy consolidated | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 |
|---|---|---|---|---|
| Operating revenue | $1,446.5M | $1,236.2M | $2,670.4M | $2,848.1M |
| Income from operations | $335.5M | $295.3M | $588.6M | $613.0M |
| Net income attributable to Evergy | $194.5M | $185.3M | $317.0M | $376.9M |
| Diluted EPS | $0.84 | $0.81 | $1.38 | $1.65 |
| Utility gross margin (non-GAAP) | $950.7M | $878.3M | $1,786.9M | $1,785.7M |
- Q2 revenue rose 17% and attributable net income rose $9.2M year over year. Management cited higher retail sales from stronger weather-normalized demand and favorable weather, transmission revenue and transmission delivery charge riders.
- YTD revenue fell $177.7M and attributable net income fell $59.9M. The principal comparison was 2021’s $95.0M of non-regulated energy marketing margins associated with the February 2021 winter weather event. YTD utility gross margin was nearly flat; adjusted earnings were $332.2M, or $1.44 per share, versus $320.5M, or $1.40, in 2021 (non-GAAP).
- YTD operating cash flow was $588.9M, versus $224.6M; capital additions were $1,116.4M, versus $891.1M. Cash and cash equivalents were $22.4M at June 30.
- At June 30, Evergy reported $9.546B of long-term debt including current maturities, $2.029B of notes payable and commercial paper, and $347M of collateralized borrowings. Available capacity under its master credit facility was $970.7M; a separate $500M term loan was drawn and matures February 2023. Evergy reported compliance with debt covenants.
- Evergy declared a quarterly common dividend of $0.5725 per share in August, payable September 20, 2022. The filing provides no company-wide full-year EPS guidance.
Material changes, outlook, risks and unusual items
- Retail electric revenues and sales volumes increased year over year in the first half, while higher fuel and purchased-power costs largely flow through customer recovery mechanisms. Higher depreciation, property taxes, maintenance costs and interest expense weighed on results.
- Evergy recorded a $16.3M YTD pre-tax loss on an early-stage energy investment; it completed the sale/settlement in June and no longer holds the investment. Goodwill testing in May found no impairment.
- Evergy Metro’s Missouri rate case seeks a $43.9M retail revenue increase before fuel rebasing, plus a $3.8M fuel-related increase; staff recommended a $28.1M increase. New rates were expected in December 2022. Evergy Missouri West’s case seeks $27.7M before fuel rebasing plus $32.1M in other requested adjustments; staff recommended $6.2M. Outcomes remained uncertain.
- For the February 2021 winter weather costs and revenues, Kansas regulators approved recovery/refund schedules beginning April 2023. Separately, an August 1, 2022 non-unanimous stipulation proposed $306.1M of Evergy Missouri West securitization recovery over approximately 15 years; MPSC approval remained pending.
- Evergy Missouri West had accrued $34.7M for probable Sibley Station customer refunds. The filing describes a possible additional loss of approximately $50M, depending on the rate-case outcome.
- Risks include uncertain regulatory decisions and customer cost recovery, potential material costs from changing air, emissions, water and coal-ash requirements, fuel and power prices, severe weather, inflation, supply-chain and labor constraints, interest rates, and operational or cybersecurity disruptions. Management said market-risk exposure had not changed materially since year-end and disclosure controls were effective.
Important facts for investors to verify
- Track the decisions and final revenue outcomes in the Evergy Metro and Evergy Missouri West rate cases, including Sibley-related refunds.
- Confirm MPSC approval, recoverable balance and timing of the proposed $306.1M securitization, as well as the status of Kansas winter-event recovery and refunds.
- Monitor short-term borrowing, the February 2023 term-loan maturity, capital spending and liquidity as investment needs continue.
- Assess whether higher retail demand and transmission revenues can offset rising operating, property-tax, maintenance and financing costs.
- Review environmental rulemaking and compliance developments for potential effects on generating assets, retirement obligations and future capital requirements.