Evergy 10-Q 2022-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

						Exact name of registrant as specified in its charter,
Commission						state of incorporation, address of principal						I.R.S. Employer
File Number						executive offices and telephone number						Identification Number
001-38515						EVERGY, INC.						82-2733395

(a Missouri corporation)

1200 Main Street

Kansas City, Missouri 64105

(816) 556-2200

001-03523						EVERGY KANSAS CENTRAL, INC.						48-0290150

(a Kansas corporation)

818 South Kansas Avenue

Topeka, Kansas 66612

(785) 575-6300

000-51873						EVERGY METRO, INC.						44-0308720

(a Missouri corporation)

1200 Main Street

Kansas City, Missouri 64105

(816) 556-2200

						Securities registered pursuant to Section 12(b) of the Act:
Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Evergy, Inc. common stock						EVRG						New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Evergy, Inc.												Yes			x												No			☐
Evergy Kansas Central, Inc.												Yes			x												No			☐
Evergy Metro, Inc.												Yes			x												No			☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Evergy, Inc.												Yes			x												No			☐
Evergy Kansas Central, Inc.												Yes			x												No			☐
Evergy Metro, Inc.												Yes			x												No			☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Evergy, Inc.			Large Accelerated Filer												x			Accelerated Filer												☐			Non-accelerated Filer																		☐			Smaller Reporting Company																		☐			Emerging Growth Company						☐
Evergy Kansas Central, Inc.			Large Accelerated Filer												☐			Accelerated Filer												☐			Non-accelerated Filer																		x			Smaller Reporting Company																		☐			Emerging Growth Company						☐
Evergy Metro, Inc.			Large Accelerated Filer												☐			Accelerated Filer												☐			Non-accelerated Filer																		x			Smaller Reporting Company																		☐			Emerging Growth Company						☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.
Evergy, Inc.						☐
Evergy Kansas Central, Inc.						☐
Evergy Metro, Inc.						☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Evergy, Inc.												Yes			☐												No			x
Evergy Kansas Central, Inc.												Yes			☐												No			x
Evergy Metro, Inc.												Yes			☐												No			x

On April 29, 2022, Evergy, Inc. had 229,478,276 shares of common stock outstanding. On April 29, 2022, Evergy Metro, Inc. and Evergy Kansas Central, Inc. each had one share of common stock outstanding and held by Evergy, Inc.

Evergy Kansas Central, Inc. and Evergy Metro, Inc. meet the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format.

This combined Quarterly Report on Form 10-Q is provided by the following registrants: Evergy, Inc. (Evergy), Evergy Kansas Central, Inc. (Evergy Kansas Central) and Evergy Metro, Inc. (Evergy Metro) (collectively, the Evergy Companies). Information relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

This report should be read in its entirety. No one section of the report deals with all aspects of the subject matter. It should be read in conjunction with the consolidated financial statements and related notes and with the management's discussion and analysis of financial condition and results of operations included in the 2021 Form 10-K for each of Evergy, Evergy Kansas Central and Evergy Metro.

TABLE OF CONTENTS
									Page Number
Cautionary Statements Regarding Certain Forward-Looking Information									4
Glossary of Terms									6
Part I - Financial Information
Item 1.			Financial Statements
			Evergy, Inc.
			Unaudited Consolidated Balance Sheets						8
			Unaudited Consolidated Statements of Comprehensive Income						10
			Unaudited Consolidated Statements of Cash Flows						11
			Unaudited Consolidated Statements of Changes in Equity						12
			Evergy Kansas Central, Inc.
			Unaudited Consolidated Balance Sheets						13
			Unaudited Consolidated Statements of Income						15
			Unaudited Consolidated Statements of Cash Flows						16
			Unaudited Consolidated Statements of Changes in Equity						17
			Evergy Metro, Inc.
			Unaudited Consolidated Balance Sheets						18
			Unaudited Consolidated Statements of Comprehensive Income						20
			Unaudited Consolidated Statements of Cash Flows						21
			Unaudited Consolidated Statements of Changes in Equity						22
			Combined Notes to Unaudited Consolidated Financial Statements for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc.						23
			Note 1:			Organization and Basis of Presentation			23
			Note 2:			Revenue			28
			Note 3:			Receivables			29
			Note 4:			Rate Matters and Regulation			31
			Note 5:			Pension Plans and Post-Retirement Benefits			34
			Note 6:			Short-Term Borrowings and Short-Term Bank Lines of Credit			36
			Note 7:			Long-Term Debt			37
			Note 8:			Fair Value Measurements			37
			Note 9:			Commitments and Contingencies			41
			Note 10:			Related Party Transactions and Relationships			44
			Note 11:			Taxes			46
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations						48
Item 3.			Quantitative and Qualitative Disclosures About Market Risk						59
Item 4.			Controls and Procedures						59
Part II - Other Information
Item 1.			Legal Proceedings						60
Item 1A.			Risk Factors						60
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds						61
Item 3.			Defaults Upon Senior Securities						61
Item 4.			Mine Safety Disclosures						61
Item 5.			Other Information						62
Item 6.			Exhibits						64
Signatures									66

CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION

Statements made in this document that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, statements relating to Evergy's strategic plan, including, without limitation, those related to earnings per share, dividend, operating and maintenance expense and capital investment goals; the outcome of legislative efforts and regulatory and legal proceedings; future energy demand; future power prices; plans with respect to existing and potential future generation resources; the availability and cost of generation resources and energy storage; target emissions reductions; and other matters relating to expected financial performance or affecting future operations. Forward-looking statements are often accompanied by forward-looking words such as "anticipates," "believes," "expects," "estimates," "forecasts," "should," "could," "may," "seeks," "intends," "proposed," "projects," "planned," "target," "outlook," "remain confident," "goal," "will" or other words of similar meaning. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking information.

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Evergy Companies are providing a number of risks, uncertainties and other factors that could cause actual results to differ from the forward-looking information. These risks, uncertainties and other factors include, but are not limited to: economic and weather conditions and any impact on sales, prices and costs; changes in business strategy or operations; the impact of federal, state and local political, legislative, judicial and regulatory actions or developments, including deregulation, re-regulation, securitization and restructuring of the electric utility industry; decisions of regulators regarding, among other things, customer rates and the prudency of operational decisions such as capital expenditures and asset retirements; changes in applicable laws, regulations, rules, principles or practices, or the interpretations thereof, governing tax, accounting and environmental matters, including air and water quality and waste management and disposal; the impact of climate change, including increased frequency and severity of significant weather events and the extent to which counterparties are willing to do business with, finance the operations of or purchase energy from the Evergy Companies due to the fact that the Evergy Companies operate coal-fired generation; prices and availability of electricity in wholesale markets; market perception of the energy industry and the Evergy Companies; the impact of the Coronavirus (COVID-19) pandemic on, among other things, sales, results of operations, financial condition, liquidity and cash flows, and also on operational issues, such as supply chain issues and the availability and ability of the Evergy Companies' employees and suppliers to perform the functions that are necessary to operate the Evergy Companies; changes in the energy trading markets in which the Evergy Companies participate, including retroactive repricing of transactions by regional transmission organizations (RTO) and independent system operators; financial market conditions and performance, including changes in interest rates and credit spreads and in availability and cost of capital and the effects on derivatives and hedges, nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; the transition to a replacement for the London Interbank Offered Rate (LIBOR) benchmark interest rate; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of physical and cybersecurity breaches, criminal activity, terrorist attacks, acts of war and other disruptions to the Evergy Companies' facilities or information technology infrastructure or the facilities and infrastructure of third-party service providers on which the Evergy Companies rely; ability to carry out marketing and sales plans; cost, availability, quality and timely provision of equipment, supplies, labor and fuel; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays and cost increases of generation, transmission, distribution or other projects; the Evergy Companies' ability to manage their transmission and distribution development plans and transmission joint ventures; the inherent risks associated with the ownership and operation of a nuclear facility, including environmental, health, safety, regulatory and financial risks; workforce risks, including those related to the Evergy Companies' ability to attract and retain qualified personnel, maintain satisfactory relationships with their labor unions and manage costs of, or changes in, retirement, health care and other benefits; disruption, costs and uncertainties caused by or related to the actions of individuals or entities, such as activist shareholders or special interest groups, that seek to influence Evergy's strategic plan, financial results or operations; the possibility that strategic initiatives, including mergers, acquisitions and divestitures, and long-term financial plans, may not create the value that they are expected to achieve in a timely manner or at all; difficulties in maintaining relationships with customers, employees, regulators or suppliers; and other risks and uncertainties.

This list of factors is not all-inclusive because it is not possible to predict all factors. You should also carefully consider the information contained in our other filings with the Securities and Exchange Commission (SEC). Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Evergy Companies with the SEC. Each forward-looking statement speaks only as of the date of the particular

statement. The Evergy Companies undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

AVAILABLE INFORMATION

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at sec.gov. Additionally, information about the Evergy Companies, including their combined annual reports on Form 10-K, combined quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with the SEC, is also available through the Evergy Companies' website, http://investors.evergy.com. Such reports are accessible at no charge and are made available as soon as reasonably practical after such material is filed with or furnished to the SEC.

Investors should note that the Evergy Companies announce material financial information in SEC filings, press releases and public conference calls. In accordance with SEC guidelines, the Evergy Companies also use the Investor Relations section of their website, http://investors.evergy.com, to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on the Evergy Companies' website is not part of this document.

GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.

Abbreviation or Acronym						Definition
AAO						Accounting authority order
ACE						Affordable Clean Energy
AEP						American Electric Power Company, Inc.
AFUDC						Allowance for funds used during construction
AOCI						Accumulated other comprehensive income
AROs						Asset retirement obligations
BSER						Best system of emission reduction
CAA						Clean Air Act Amendments of 1990
CCRs						Coal combustion residuals
CO****2						Carbon dioxide
COLI						Corporate-owned life insurance
COVID-19						Coronavirus
CPP						Clean Power Plan
CSAPR						Cross-State Air Pollution
ELG						Effluent limitations guidelines
EPA						Environmental Protection Agency
EPS						Earnings per common share
ERISA						Employee Retirement Income Security Act of 1974, as amended
ERSP						Earnings Review and Sharing Plan
Evergy						Evergy, Inc. and its consolidated subsidiaries
Evergy Board						Evergy Board of Directors
Evergy Companies						Evergy, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group
Evergy Kansas Central						Evergy Kansas Central, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries
Evergy Kansas South						Evergy Kansas South, Inc., a wholly-owned subsidiary of Evergy Kansas Central
Evergy Metro						Evergy Metro, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries
Evergy Missouri West						Evergy Missouri West, Inc., a wholly-owned subsidiary of Evergy
Evergy Transmission Company						Evergy Transmission Company, LLC
Exchange Act						The Securities Exchange Act of 1934, as amended
February 2021 winter weather event						Significant winter weather event in February 2021 that resulted in extremely cold temperatures over a multi-day period across much of the central and southern United States
FERC						Federal Energy Regulatory Commission
GAAP						Generally Accepted Accounting Principles
GHG						Greenhouse gas
Great Plains Energy						Great Plains Energy Incorporated
JEC						Jeffrey Energy Center
KCC						State Corporation Commission of the State of Kansas
KDHE						Kansas Department of Health & Environment
kV						Kilovolt

Abbreviation or Acronym						Definition
MDNR						Missouri Department of Natural Resources
MECG						Midwest Energy Consumers Group
MPSC						Public Service Commission of the State of Missouri
MW						Megawatt
MWh						Megawatt hour
NAAQS						National Ambient Air Quality Standards
NAV						Net asset value
OCI						Other comprehensive income
OPC						Office of the Public Counsel
Prairie Wind						Prairie Wind Transmission, LLC, 50% owned by Evergy Kansas Central
RSU						Restricted share unit
RTO						Regional transmission organization
SEC						Securities and Exchange Commission
SIP						State implementation plan
SPP						Southwest Power Pool, Inc.
TDC						Transmission delivery charge
Term Loan Facility						Term Loan Credit Agreement
TFR						Transmission formula rate
Transource						Transource Energy, LLC and its subsidiaries, 13.5% owned by Evergy Transmission Company
VIE						Variable interest entity
Wolf Creek						Wolf Creek Generating Station

PART I - FINANCIAL INFORMATION

EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)
			March 31 2022												December 31 2021
ASSETS			(millions, except share amounts)
CURRENT ASSETS:
Cash and cash equivalents						$	22.2											$	26.2
Receivables, net of allowance for credit losses of $24.4 and $32.9, respectively						185.2												221.6
Accounts receivable pledged as collateral						338.0												319.0
Fuel inventory and supplies						612.7												566.7
Income taxes receivable						16.9												28.0
Regulatory assets						425.3												424.1
Prepaid expenses						44.9												49.3
Other assets						76.8												75.4
Total Current Assets						1,722.0												1,710.3
PROPERTY, PLANT AND EQUIPMENT, NET						21,157.7												21,002.6
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET						146.0												147.8
OTHER ASSETS:
Regulatory assets						2,058.0												1,991.1
Nuclear decommissioning trust fund						733.2												768.7
Goodwill						2,336.6												2,336.6
Other						586.4												563.4
Total Other Assets						5,714.2												5,659.8
TOTAL ASSETS						$	28,739.9											$	28,520.5

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)
			March 31 2022												December 31 2021
LIABILITIES AND EQUITY			(millions, except share amounts)
CURRENT LIABILITIES:
Current maturities of long-term debt						$	587.3											$	389.3
Notes payable and commercial paper						1,392.2												1,159.3
Collateralized note payable						338.0												319.0
Accounts payable						396.1												639.7
Accrued taxes						248.0												150.4
Accrued interest						143.3												118.8
Regulatory liabilities						56.5												70.7
Asset retirement obligations						19.0												19.5
Accrued compensation and benefits						50.2												51.6
Other						160.7												184.6
Total Current Liabilities						3,391.3												3,102.9
LONG-TERM LIABILITIES:
Long-term debt, net						9,247.1												9,297.9
Deferred income taxes						1,885.6												1,861.9
Unamortized investment tax credits						182.5												181.4
Regulatory liabilities						2,651.7												2,705.0
Pension and post-retirement liability						884.3												879.1
Asset retirement obligations						950.8												940.6
Other						309.1												310.0
Total Long-Term Liabilities						16,111.1												16,175.9
Commitments and Contingencies (Note 9)
EQUITY:
Evergy, Inc. Shareholders' Equity:
Common stock - 600,000,000 shares authorized, without par value 229,476,558 and 229,299,900 shares issued, stated value						7,206.4												7,205.5
Retained earnings						2,073.3												2,082.9
Accumulated other comprehensive loss						(42.6)												(44.0)
Total Evergy, Inc. Shareholders' Equity						9,237.1												9,244.4
Noncontrolling Interests						0.4												(2.7)
Total Equity						9,237.5												9,241.7
TOTAL LIABILITIES AND EQUITY						$	28,739.9											$	28,520.5

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

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