filings.toolsItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the consolidated financial statements and accompanying notes in this combined Quarterly Report on Form 10-Q and the Evergy Companies' combined 2023 Form 10-K. None of the registrants make any representation as to information related solely to Evergy, Evergy Kansas Central or Evergy Metro other than itself.
EVERGY, INC.
EXECUTIVE SUMMARY
Evergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below.
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Evergy Kansas Central is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has one active wholly-owned subsidiary with significant operations, Evergy Kansas South.
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Evergy Metro is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.
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Evergy Missouri West is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.
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Evergy Transmission Company owns 13.5% of Transource with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of AEP. Transource is focused on the development of competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.
Evergy Kansas Central also owns a 50% interest in Prairie Wind, which is a joint venture between Evergy Kansas Central and subsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the SPP. Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.
Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West conduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 15,800 MWs of owned generating capacity and renewable power purchase agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.7 million customers in the states of Kansas and Missouri. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment).
Evergy Missouri West 2024 Rate Case Proceeding
In February 2024, Evergy Missouri West filed an application with the MPSC to request an increase to its retail revenues of approximately $104 million. Evergy Missouri West's request reflected a return on equity of 10.5% (with a capital structure composed of 52% equity) and increases related to the recovery of infrastructure investments made to improve reliability and enhance customer service and the inclusion of certain costs related to Dogwood and Crossroads, two natural gas plants.
In October 2024, Evergy Missouri West, MPSC staff and other intervenors in the case reached a unanimous partial stipulation and agreement to settle certain issues in the case. The partial stipulation and agreement provided for an increase to Evergy Missouri West's retail revenues of approximately $55 million after lowering base rates for fuel and purchased power expense of approximately $49 million and rebasing property tax expense. The partial stipulation and agreement excludes one prospective issue related to the proportion of fuel and purchased power costs that are shared with shareholders in Evergy Missouri West's fuel adjustment clause which will be resolved by the MPSC in its final order. The unanimous partial stipulation and agreement is subject to the approval of the MPSC expected in December 2024. If approved, new rates are expected to be effective in January 2025.
Kansas Legislation
In April 2024, Kansas H.B. 2527 was signed into law by the Governor of Kansas. Most notably, H.B. 2527 includes a plant-in service accounting (PISA) provision that can be elected by Kansas electric public utilities to defer and recover as regulatory assets 90% of depreciation expense and associated return on investment linked to qualifying electric plants in service. Qualifying electric plant includes all rate base additions by an electric public utility, but does not include transmission facilities or new electric generating units. The deferred depreciation and return on the associated regulatory asset are required to be included in determining the utility's rate base during subsequent general rate proceedings. The return on the deferred regulatory asset balances will be calculated using the weighted average cost of capital. Utilities that elect the PISA provision can make qualifying deferrals of depreciation and return from July 2024 through December 2030. Evergy Kansas Central and Evergy Metro elected the PISA provision in their Kansas jurisdictions effective in July 2024.
Additionally, the law establishes new mechanisms for the recovery of costs associated with new gas-fired generating units. If the KCC decides investment in a new gas-fired generating unit is reasonable, the utility would be able to recover the return on 100% of the associated construction costs at its weighted average cost of capital. The cost recovery from customers could begin a year after construction begins. Rates could be adjusted every six months until new base rates reflecting the plant's costs are established.
In April 2024, Kansas S.B. 410 was signed into law by the Governor of Kansas. Most notably, S.B. 410 includes an exemption from all property and ad valorem taxes on certain electric generation facilities for which construction or installation begins on or after January 1, 2025.
Renewable Plant Investments
Evergy Kansas Central intends to construct and own an approximately 159 MW solar generation facility to be located in Kansas and called Kansas Sky. The solar generation facility is expected to begin operations by summer of 2027. The construction of Kansas Sky is subject to the granting by the KCC of predetermination with reasonably acceptable terms and other closing conditions. In November 2024, Evergy Kansas Central requested predetermination from the KCC.
In the third quarter of 2024, Evergy Missouri West entered into agreements to own two solar generation facilities currently under development. The first facility, to be called Sunflower Sky, is a solar generation facility to be located in Kansas with an expected generating capacity of approximately 65 MW. The second facility, to be called Foxtrot, is a solar generation facility to be located in Missouri with an expected generating capacity of approximately 100 MW. The solar generation facilities are expected to begin operations by summer of 2027. The agreements are subject to regulatory approvals and closing conditions, including the granting by the MPSC of a CCN with reasonably acceptable terms. In October 2024, Evergy Missouri West filed an application for a CCN. Evergy Missouri West requested a response from the MPSC by May 2025.
Natural Gas Plant Investments
In October 2024, Evergy announced its plan to construct two combined-cycle natural gas plants located in Kansas. Evergy Kansas Central and Evergy Missouri West will jointly-own the first site and expect it to have an initial generating capacity of approximately 705 MW. The plant is expected to begin operations by summer of 2029. In November 2024, Evergy Kansas Central requested predetermination from the KCC. In the fourth quarter of 2024, Evergy Missouri West plans to request a CCN from the MPSC.
The second site is expected to be jointly-owned by Evergy Kansas Central and another Evergy utility still to be determined. The Evergy Companies expect the second site to also have an initial generating capacity of approximately 705 MW. The plant is expected to begin operations by summer of 2030. In November 2024, Evergy Kansas Central requested predetermination from the KCC with a request to potentially reassign a portion to another Evergy utility. A request for a CCN with the MPSC is expected in the fourth quarter of 2024.
In April 2024, Evergy Missouri West purchased a 22% ownership interest representing approximately 145 MW in Dogwood, an operational combined-cycle natural gas facility located in Missouri, for approximately $60 million. The purchase was recorded as an asset acquisition to property, plant and equipment, net, on Evergy's consolidated
balance sheet. The purchase was subject to terms and conditions listed in a stipulation and agreement approved by the MPSC allowing Evergy Missouri West to recover in rates a return of and return on the original cost, net of accumulated depreciation, of Dogwood. Evergy Missouri West shall also be allowed to recover in rates over two years a return of, but not a return on, the amount of the purchase price paid in excess of the original cost, net of accumulated depreciation, of Dogwood. In addition, net revenues generated from Evergy Missouri West's ownership of Dogwood from the date of closing to the date new rates become effective in Evergy Missouri West's current rate case shall not impact rates and shall be retained by Evergy Missouri West and reduce the amount of the purchase price paid in excess of the original cost, net of accumulated depreciation, of Dogwood to be recovered from customers.
Regulatory Proceedings
See Note 4 to the consolidated financial statements for information regarding other regulatory proceedings.
Wolf Creek Refueling Outage and Fuel Supply
Wolf Creek's most recent refueling outage began in March 2024 and the unit returned to service in May 2024. Wolf Creek's next refueling outage is planned to begin in the fourth quarter of 2025.
In May 2024, President Biden signed into law the Prohibiting Russian Uranium Imports Act, which limits the importation of uranium from the Russian Federation. The Evergy Companies have a Russian-sourced contract beginning in 2025 to obtain nuclear fuel and have taken mitigating measures to minimize the impact of the Prohibiting Russian Uranium Imports Act to their supply chain. The Evergy Companies do not expect a material impact to their supply chain or financial results.
Earnings Overview
The following table summarizes Evergy's net income and diluted EPS.
| Three Months Ended September 30 | Year to Date September 30 | ||||||||||||||||||||||||||||||||||
| 2024 | Change | 2023 | 2024 | Change | 2023 | ||||||||||||||||||||||||||||||
| (millions, except per share amounts) | |||||||||||||||||||||||||||||||||||
| Net income attributable to Evergy, Inc. | $ | 465.6 | $ | 114.0 | $ | 351.6 | $ | 795.3 | $ | 122.0 | $ | 673.3 | |||||||||||||||||||||||
| Earnings per common share, diluted | 2.02 | 0.49 | 1.53 | 3.45 | 0.53 | 2.92 |
Net income attributable to Evergy, Inc. increased for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to the recognition of a $96.5 million regulatory liability in the third quarter of 2023 for future refund of amounts of revenues previously collected from customers related to COLI rate credits, new Evergy Kansas Central retail rates effective in December 2023, higher transmission revenues and lower mark-to-market losses related to forward contracts for natural gas and electricity in the third quarter of 2023; partially offset by higher taxes other than income tax, income tax and depreciation expense and recording lower Evergy Kansas Central corporate-owned life insurance (COLI) benefits in the third quarter of 2024.
Diluted EPS increased for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to the increase in net income attributable to Evergy, Inc. discussed above.
Net income attributable to Evergy, Inc. increased year to date September 30, 2024, compared to the same period in 2023, primarily due to new Evergy Kansas Central retail rates effective in December 2023, the recognition of a $96.5 million regulatory liability in the third quarter of 2023 for future refund of amounts of revenues previously collected from customers related to COLI rate credits, higher transmission revenues and lower pension non-service costs; partially offset by higher taxes other than income tax, depreciation, interest, operating and maintenance expense and lower investment earnings in 2024.
Diluted EPS increased year to date September 30, 2024, compared to the same period in 2023, primarily due to the increase in net income attributable to Evergy, Inc. discussed above.
For additional information regarding the change in net income, refer to the Evergy Results of Operations section within this MD&A.
Non-GAAP Measures
Evergy Utility Gross Margin (non-GAAP)
Utility gross margin (non-GAAP) is a financial measure that is not calculated in accordance with GAAP. Utility gross margin (non-GAAP), as used by the Evergy Companies, is defined as operating revenues less fuel and purchased power costs and amounts billed by the SPP for network transmission costs. Expenses for fuel and purchased power costs, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms. As a result, changes in fuel and purchased power costs are offset in operating revenues with minimal impact on net income. In addition, SPP network transmission costs fluctuate primarily due to investments by SPP members for upgrades to the transmission grid within the SPP RTO. As with fuel and purchased power costs, changes in SPP network transmission costs are mostly reflected in the prices charged to customers with minimal impact on net income. The Evergy Companies' definition of utility gross margin (non-GAAP) may differ from similar terms used by other companies.
Utility gross margin (non-GAAP) is intended to aid an investor's overall understanding of results. Management believes that utility gross margin (non-GAAP) provides a meaningful basis for evaluating the Evergy Companies' operations across periods because utility gross margin (non-GAAP) excludes the revenue effect of fluctuations in fuel and purchased power costs and SPP network transmission costs. Utility gross margin (non-GAAP) is used internally to measure performance against budget and in reports for management and the Evergy Board. Utility gross margin (non-GAAP) should be viewed as a supplement to, and not a substitute for, gross margin, which is the most directly comparable financial measure prepared in accordance with GAAP. Gross margin under GAAP is defined as the excess of sales over cost of goods sold.
Utility gross margin (non-GAAP) differs from the GAAP definition of gross margin due to the exclusion of operating and maintenance expenses determined to be directly attributable to revenue-producing activities, depreciation and amortization and taxes other than income tax. See the Evergy Companies' Results of Operations for a reconciliation of utility gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.
Adjusted Earnings (non-GAAP) and Adjusted EPS (non-GAAP)
Management believes that adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are representative measures of Evergy's recurring earnings, assists in the comparability of results and is consistent with how management reviews performance.
Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) for the three months ended and year to date September 30, 2024 were $465.6 million or $2.02 per share and $797.3 million or $3.46 per share, respectively. For the three months ended and year to date September 30, 2023, Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) were $432.3 million or $1.88 per share and $754.5 million or $3.27 per share, respectively.
In addition to net income attributable to Evergy, Inc. and diluted EPS, Evergy's management uses adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) to evaluate earnings and EPS without:
i.the mark-to-market impacts of economic hedges related to Evergy Kansas Central's 8% ownership share of JEC;
ii.the costs resulting from non-regulated energy marketing margins from the February 2021 winter weather event;
iii.the second quarter 2023 recognition of a regulatory liability for the refund to customers of revenues previously collected since October 2019 for costs related to an electric subdivision rebate program to be refunded to customers in accordance with a June 2020 KCC order; and
iv.the recognition of a regulatory liability for future refund of amounts of revenues previously collected from customers related to COLI rate credits in accordance with a September 2023 KCC rate case unanimous settlement agreement.
Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are intended to aid an investor's overall understanding of results. Management believes that adjusted earnings (non-GAAP) provides a meaningful basis for evaluating Evergy's operations across periods because it excludes certain items that management does not believe are indicative of Evergy's ongoing performance or that can create period to period earnings volatility.
Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are used internally to measure performance against budget and in reports for management and the Evergy Board. Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are financial measures that are not calculated in accordance with GAAP and may not be comparable to other companies' presentations or more useful than the GAAP information provided elsewhere in this report.
The following tables provide a reconciliation between net income attributable to Evergy, Inc. and diluted EPS as determined in accordance with GAAP and adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP), respectively.
| Earnings (Loss) | Earnings (Loss) per Diluted Share | Earnings (Loss) | Earnings (Loss) per Diluted Share | ||||||||||||||||||||
| Three Months Ended September 30 | 2024 | 2023 | |||||||||||||||||||||
| (millions, except per share amounts) | |||||||||||||||||||||||
| Net income attributable to Evergy, Inc. | $ | 465.6 | $ | 2.02 | $ | 351.6 | $ | 1.53 | |||||||||||||||
| Non-GAAP reconciling items: | |||||||||||||||||||||||
| Mark-to-market impact of JEC economic hedges, pre-tax(a) | — | — | 6.8 | 0.03 | |||||||||||||||||||
| Customer refund related to COLI rate credits, pre-tax(d) | — | — | 96.5 | 0.42 | |||||||||||||||||||
| Income tax benefit(e) | — | — | (22.6) | (0.10) | |||||||||||||||||||
| Adjusted earnings (non-GAAP) | $ | 465.6 | $ | 2.02 | $ | 432.3 | $ | 1.88 |
| Earnings (Loss) | Earnings (Loss) per Diluted Share | Earnings (Loss) | Earnings (Loss) per Diluted Share | ||||||||||||||||||||
| Year to Date September 30 | 2024 | 2023 | |||||||||||||||||||||
| (millions, except per share amounts) | |||||||||||||||||||||||
| Net income attributable to Evergy, Inc. | $ | 795.3 | $ | 3.45 | $ | 673.3 | $ | 2.92 | |||||||||||||||
| Non-GAAP reconciling items: | |||||||||||||||||||||||
| Mark-to-market impact of JEC economic hedges, pre-tax(a) | 2.6 | 0.01 | 4.8 | 0.02 | |||||||||||||||||||
| Non-regulated energy marketing costs related to February 2021 winter weather event, pre-tax(b) | — | — | 0.2 | — | |||||||||||||||||||
| Electric subdivision rebate program costs refund, pre-tax(c) | — | — | 2.6 | 0.01 | |||||||||||||||||||
| Customer refunds related to COLI rate credits, pre-tax(d) | — | — | 96.5 | 0.42 | |||||||||||||||||||
| Income tax benefit(e) | (0.6) | — | (22.9) | (0.10) | |||||||||||||||||||
| Adjusted earnings (non-GAAP) | $ | 797.3 | $ | 3.46 | $ | 754.5 | $ | 3.27 |
(a)Reflects mark-to-market gains or losses related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's 8% ownership share of JEC that are included in operating revenues on the consolidated statements of comprehensive income.
(b)Reflects non-regulated energy marketing incentive compensation costs related to the February 2021 winter weather event that are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(c)Reflects the second quarter 2023 recognition of a regulatory liability for the refund to customers of revenues previously collected since October 2019 for costs related to an electric subdivision rebate program to be refunded to customers in accordance with a June 2020 KCC order that are included in operating revenues on the consolidated statements of comprehensive income.
(d)Reflects the recognition of a regulatory liability for the refund to customers for amounts of revenues previously collected related to COLI rate credits in accordance with a September 2023 KCC rate case unanimous settlement agreement reached between Evergy, the KCC staff and other intervenors that are included in operating revenues on the consolidated statements of comprehensive income.
(e)Reflects an income tax effect calculated at a statutory rate of approximately 22%.
ENVIRONMENTAL MATTERS
See Note 12 to the consolidated financial statements for information regarding environmental matters.
RELATED PARTY TRANSACTIONS
See Note 13 to the consolidated financial statements for information regarding related party transactions.
EVERGY RESULTS OF OPERATIONS
The following table summarizes Evergy's comparative results of operations.
| Three Months Ended September 30 | Year to Date September 30 | ||||||||||||||||||||||||||||||||||
| 2024 | Change | 2023 | 2024 | Change | 2023 | ||||||||||||||||||||||||||||||
| (millions) | |||||||||||||||||||||||||||||||||||
| Operating revenues | $ | 1,811.4 | $ | 142.1 | $ | 1,669.3 | $ | 4,589.9 | $ | 269.6 | $ | 4,320.3 | |||||||||||||||||||||||
| Fuel and purchased power | 433.7 | (44.7) | 478.4 | 1,169.1 | (8.3) | 1,177.4 | |||||||||||||||||||||||||||||
| SPP network transmission costs | 99.7 | 24.3 | 75.4 | 272.4 | 40.4 | 232.0 | |||||||||||||||||||||||||||||
| Operating and maintenance | 251.6 | (1.6) | 253.2 | 720.8 | 23.7 | 697.1 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 282.3 | 9.0 | 273.3 | 838.5 | 32.4 | 806.1 | |||||||||||||||||||||||||||||
| Taxes other than income tax | 116.6 | 13.5 | 103.1 | 343.3 | 37.4 | 305.9 | |||||||||||||||||||||||||||||
| Income from operations | 627.5 | 141.6 | 485.9 | 1,245.8 | 144.0 | 1,101.8 | |||||||||||||||||||||||||||||
| Other income, net | 3.0 | (9.7) | 12.7 | 8.3 | 7.3 | 1.0 | |||||||||||||||||||||||||||||
| Interest expense | 143.9 | 7.1 | 136.8 | 420.7 | 27.1 | 393.6 | |||||||||||||||||||||||||||||
| Income tax expense | 20.0 | 11.2 | 8.8 | 34.7 | 2.7 | 32.0 | |||||||||||||||||||||||||||||
| Equity in earnings of equity method investees, net of income taxes | 2.0 | 0.4 | 1.6 | 5.8 | 0.5 | 5.3 | |||||||||||||||||||||||||||||
| Net income | 468.6 | 114.0 | 354.6 | 804.5 | 122.0 | 682.5 | |||||||||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 3.0 | — | 3.0 | 9.2 | — | 9.2 | |||||||||||||||||||||||||||||
| Net income attributable to Evergy, Inc. | $ | 465.6 | $ | 114.0 | $ | 351.6 | $ | 795.3 | $ | 122.0 | $ | 673.3 |
Gross Margin (GAAP) and Utility Gross Margin (non-GAAP)
The following tables summarize Evergy's gross margin (GAAP) and MWhs sold and reconcile Evergy's gross margin (GAAP) to Evergy's utility gross margin (non-GAAP). See "Executive Summary - Non-GAAP Measures", above for additional information regarding gross margin (GAAP) and utility gross margin (non-GAAP).
| Revenues and Expenses | MWhs Sold | ||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | 2024 | Change | 2023 | 2024 | Change | 2023 | |||||||||||||||||||||||||||||
| Retail revenues | (millions) | (thousands) | |||||||||||||||||||||||||||||||||
| Residential | $ | 730.8 | $ | 55.7 | $ | 675.1 | 4,816 | (318) | 5,134 | ||||||||||||||||||||||||||
| Commercial | 615.2 | 86.6 | 528.6 | 5,165 | (47) | 5,212 | |||||||||||||||||||||||||||||
| Industrial | 188.9 | 30.0 | 158.9 | 2,211 | (18) | 2,229 | |||||||||||||||||||||||||||||
| Other retail revenues | 10.9 | (0.7) | 11.6 | 25 | (5) | 30 | |||||||||||||||||||||||||||||
| Total electric retail | 1,545.8 | 171.6 | 1,374.2 | 12,217 | (388) | 12,605 | |||||||||||||||||||||||||||||
| Wholesale revenues | 114.7 | (33.6) | 148.3 | 4,578 | (58) | 4,636 | |||||||||||||||||||||||||||||
| Transmission revenues | 123.1 | 21.2 | 101.9 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Other revenues | 27.8 | (17.1) | 44.9 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Operating revenues | 1,811.4 | 142.1 | 1,669.3 | 16,795 | (446) | 17,241 | |||||||||||||||||||||||||||||
| Fuel and purchased power | (433.7) | 44.7 | (478.4) | ||||||||||||||||||||||||||||||||
| SPP network transmission costs | (99.7) | (24.3) | (75.4) | ||||||||||||||||||||||||||||||||
| Operating and maintenance(a) | (126.7) | 4.6 | (131.3) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (282.3) | (9.0) | (273.3) | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | (116.6) | (13.5) | (103.1) | ||||||||||||||||||||||||||||||||
| Gross margin (GAAP) | 752.4 | 144.6 | 607.8 | ||||||||||||||||||||||||||||||||
| Operating and maintenance(a) | 126.7 | (4.6) | 131.3 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 282.3 | 9.0 | 273.3 | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | 116.6 | 13.5 | 103.1 | ||||||||||||||||||||||||||||||||
| Utility gross margin (non-GAAP) | $ | 1,278.0 | $ | 162.5 | $ | 1,115.5 | |||||||||||||||||||||||||||||
| (a) Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $124.9 million and $121.9 million for the three months ended September 30, 2024 and 2023, respectively. | |||||||||||||||||||||||||||||||||||
| Revenues and Expenses | MWhs Sold | ||||||||||||||||||||||||||||||||||
| Year to Date September 30 | 2024 | Change | 2023 | 2024 | Change | 2023 | |||||||||||||||||||||||||||||
| Retail revenues | (millions) | (thousands) | |||||||||||||||||||||||||||||||||
| Residential | $ | 1,746.5 | $ | 120.1 | $ | 1,626.4 | 12,382 | (109) | 12,491 | ||||||||||||||||||||||||||
| Commercial | 1,533.7 | 114.4 | 1,419.3 | 14,014 | 53 | 13,961 | |||||||||||||||||||||||||||||
| Industrial | 524.0 | 48.7 | 475.3 | 6,382 | (29) | 6,411 | |||||||||||||||||||||||||||||
| Other retail revenues | 33.0 | 1.2 | 31.8 | 77 | (15) | 92 | |||||||||||||||||||||||||||||
| Total electric retail | 3,837.2 | 284.4 | 3,552.8 | 32,855 | (100) | 32,955 | |||||||||||||||||||||||||||||
| Wholesale revenues | 259.0 | (42.8) | 301.8 | 11,214 | (468) | 11,682 | |||||||||||||||||||||||||||||
| Transmission revenues | 360.9 | 52.7 | 308.2 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Other revenues | 132.8 | (24.7) | 157.5 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Operating revenues | 4,589.9 | 269.6 | 4,320.3 | 44,069 | (568) | 44,637 | |||||||||||||||||||||||||||||
| Fuel and purchased power | (1,169.1) | 8.3 | (1,177.4) | ||||||||||||||||||||||||||||||||
| SPP network transmission costs | (272.4) | (40.4) | (232.0) | ||||||||||||||||||||||||||||||||
| Operating and maintenance(a) | (399.8) | (29.2) | (370.6) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (838.5) | (32.4) | (806.1) | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | (343.3) | (37.4) | (305.9) | ||||||||||||||||||||||||||||||||
| Gross margin (GAAP) | 1,566.8 | 138.5 | 1,428.3 | ||||||||||||||||||||||||||||||||
| Operating and maintenance(a) | 399.8 | 29.2 | 370.6 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 838.5 | 32.4 | 806.1 | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | 343.3 | 37.4 | 305.9 | ||||||||||||||||||||||||||||||||
| Utility gross margin (non-GAAP) | $ | 3,148.4 | $ | 237.5 | $ | 2,910.9 | |||||||||||||||||||||||||||||
| (a) Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $321.0 million and $326.5 million year to date September 30, 2024 and 2023, respectively. |
Evergy's gross margin (GAAP) increased $144.6 million for the three months ended September 30, 2024, compared to the same period in 2023 and Evergy's utility gross margin (non-GAAP) increased $162.5 million for the three months ended September 30, 2024, compared to the same period in 2023, both measures were driven by:
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a $96.5 million increase due to the third quarter 2023 recognition of a regulatory liability at Evergy Kansas Central for the refund to customers of revenues previously collected from customers related to COLI rate credits;
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a $43.1 million net increase from new retail rates in Kansas effective in December 2023 consisting of $51.1 million from higher Evergy Kansas Central retail rates, partially offset by $8.0 million from lower Evergy Metro retail rates;
-
a $21.2 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2024;
-
a $9.5 million increase due to Evergy Missouri West's recovery of extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event through a securitized utility tariff charge effective in February 2024; and
-
a $6.8 million increase due to lower mark-to-market losses in 2024 related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's 8% ownership share of JEC; partially offset by
-
a $10.6 million decrease related to non-regulated sales in the third quarter of 2023 related to Evergy Kansas Central's 8% ownership share of JEC, which is included in rate base in 2024 as a result of Evergy Kansas Central's 2023 rate case; and
-
a $4.0 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased by 12%), partially offset by higher weather-normalized residential, commercial and industrial demand.
Additionally, the increase in Evergy's gross margin (GAAP) was also impacted by:
-
a $13.5 million increase in taxes other than income tax as further described below; and
-
a $9.0 million increase in depreciation and amortization as further described below; partially offset by
-
a $4.6 million decrease in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by a $4.8 million decrease in transmission and distribution operating and maintenance expense.
Evergy's gross margin (GAAP) increased $138.5 million year to date September 30, 2024, compared to the same period in 2023 and Evergy's utility gross margin (non-GAAP) increased $237.5 million year to date September 30, 2024, compared to the same period in 2023, both measures were driven by:
-
a $99.9 million net increase from new retail rates in Kansas effective in December 2023 consisting of $117.9 million from higher Evergy Kansas Central retail rates, partially offset by $18.0 million from lower Evergy Metro retail rates;
-
a $96.5 million increase due to the third quarter 2023 recognition of a regulatory liability at Evergy Kansas Central for the refund to customers of revenues previously collected from customers related to COLI rate credits;
-
a $52.7 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2024;
-
a $14.7 million increase due to Evergy Missouri West's recovery of extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event through a securitized utility tariff charge effective in February 2024;
-
an $8.3 million increase primarily due to higher retail sales driven by higher weather-normalized residential and commercial demand, partially offset by unfavorable weather (cooling degree days decreased by 6% and heating degree days decreased by 4%); and
-
a $2.2 million increase due to lower mark-to-market losses in 2024 related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's 8% ownership share of JEC; partially offset by
-
a $25.7 million decrease related to non-regulated sales in 2023 related to Evergy Kansas Central's 8% ownership share of JEC, which is included in rate base in 2024 as a result of Evergy Kansas Central's 2023 rate case; and
-
an $11.1 million decrease as a result of recording a reduction in the second quarter of 2023 to Evergy Metro's Earnings Review and Sharing Plan (ERSP) refund obligation to customers.
Additionally, the increase in Evergy's gross margin (GAAP) was also impacted by:
-
a $37.4 million increase in taxes other than income tax as further described below;
-
a $32.4 million increase in depreciation and amortization as further described below; and
-
a $29.2 million increase in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by a $16.5 million increase in transmission and distribution operating and maintenance expense and a $12.7 million increase in operating and maintenance expense at generating facilities as further described below.
Operating and Maintenance
Evergy's operating and maintenance expense increased $23.7 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $16.5 million increase in transmission and distribution operating and maintenance expenses driven by a $9.5 million increase in labor expense primarily due to a decrease in labor capitalization in 2024 driven by lower capitalization activity related to the installation of transformers and meters in 2024 and higher employee headcount and a $7.0 million increase in non-labor expense including a $2.8 million increase in vegetation management costs; and
-
a $12.7 million increase in operating and maintenance expense at generating facilities primarily due to a $16.0 million increase at Evergy Kansas Central driven by a major maintenance outage at JEC in 2024; partially offset by a $5.0 million decrease at Evergy Metro driven by a major maintenance outage at Hawthorn Station in 2023.
Depreciation and Amortization
Evergy's depreciation and amortization increased $9.0 million for the three months ended September 30, 2024, compared to the same period in 2023, driven by:
-
a $7.4 million increase primarily due to a change in depreciation rates as a result of Evergy Kansas Central's and Evergy Metro's 2023 rate cases effective in December 2023; and
-
a $1.6 million increase primarily due to capital additions.
Evergy's depreciation and amortization increased $32.4 million year to date September 30, 2024, compared to the same period in 2023, driven by:
-
a $22.1 million increase primarily due to a change in depreciation rates as a result of Evergy Kansas Central's and Evergy Metro's 2023 rate cases effective in December 2023; and
-
a $10.3 million increase primarily due to capital additions.
Taxes Other than Income Tax
Evergy's taxes other than income tax increased $13.5 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by increases at Evergy Kansas Central and Evergy Metro primarily due to the rebasing of property taxes as a result of Evergy Kansas Central's and Evergy Metro's 2023 rate cases effective in December 2023.
Evergy's taxes other than income tax increased $37.4 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by increases at Evergy Kansas Central and Evergy Metro primarily due to the rebasing of property taxes as a result of Evergy Kansas Central's and Evergy Metro's 2023 rate cases effective in December 2023.
Other Income, Net
Evergy's other income, net decreased $9.7 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $10.2 million decrease due to recording lower Evergy Kansas Central COLI benefits in 2024; and
-
a $6.3 million decrease in investment earnings primarily driven by a $4.5 million decrease in interest and dividend income primarily due to a decrease in carrying charges related to deferred Evergy Missouri West costs associated with the February 2021 winter weather event to be recovered through a securitized utility tariff charge effective in February 2024; partially offset by
-
a $3.7 million increase in equity allowance for funds used during construction (AFUDC) primarily at Evergy Kansas Central and Evergy Metro primarily driven by higher construction work in progress balances and lower short-term debt balances in 2024; and
-
a $2.9 million decrease in pension non-service costs primarily due to the resetting of pension expense in retail rates as a result of Evergy Kansas Central's and Evergy Metro's 2023 rate cases effective in December 2023.
Evergy's other income, net increased $7.3 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $24.4 million decrease in pension non-service costs primarily due to the resetting of pension expense in retail rates as a result of Evergy Kansas Central's and Evergy Metro's 2023 rate cases effective in December 2023; and
-
a $6.8 million increase in equity AFUDC at Evergy Kansas Central primarily driven by higher construction work in progress balances and lower short-term debt balances in 2024; partially offset by
-
a $14.2 million decrease in investment earnings primarily driven by an $11.3 million decrease in interest and dividend income primarily due to a decrease in carrying charges related to deferred Evergy Missouri West costs associated with the February 2021 winter weather event to be recovered through a securitized utility tariff charge effective in February 2024; and
-
a $9.6 million decrease due to recording lower Evergy Kansas Central COLI benefits in 2024.
Interest Expense
Evergy's interest expense increased $7.1 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $33.6 million increase due to issuances of long-term debt; partially offset by
-
a $20.1 million decrease in interest expense on short-term borrowings primarily due to lower short-term debt balances in the third quarter of 2024; and
-
a $6.5 million decrease in interest expense due to increases in carrying costs deferred to a regulatory asset in accordance with PISA due to a higher outstanding balance of qualified PISA additions and Evergy Kansas Central and Evergy Metro electing into Kansas PISA beginning July 2024.
Evergy's interest expense increased $27.1 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $95.6 million increase due to issuances of long-term debt; partially offset by
-
a $45.5 million decrease in interest expense on short-term borrowings primarily due to lower short-term debt balances in 2024;
-
a $15.4 million decrease in interest expense due to increases in carrying costs deferred to a regulatory asset in accordance with PISA due to a higher outstanding balance of qualified PISA additions and Evergy Kansas Central and Evergy Metro electing into Kansas PISA beginning July 2024; and
-
a $7.8 million decrease in interest expense due to higher capitalization of interest charges for AFUDC primarily driven by higher construction work in progress balances and lower short-term debt balances in 2024.
Income Tax Expense
Evergy's income tax expense increased $11.2 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $27.5 million increase primarily due to higher Evergy Kansas Central pre-tax income in the third quarter of 2024; partially offset by
-
an $8.4 million decrease primarily due to higher wind and other income tax credits in 2024 driven by the acquisition of Persimmon Creek in the second quarter of 2023; and
-
a $5.8 million decrease primarily due to higher amortization of excess deferred income taxes authorized by Evergy Kansas Central's and Evergy Metro's 2023 rate case.
Evergy's income tax expense increased $2.7 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $27.4 million increase primarily due to higher Evergy Kansas Central pre-tax income in 2024; partially offset by
-
a $14.3 million decrease primarily due to higher wind and other income tax credits in 2024 driven by the acquisition of Persimmon Creek in the second quarter of 2023; and
-
a $10.1 million decrease primarily due to higher amortization of excess deferred income taxes authorized by Evergy Kansas Central's and Evergy Metro's 2023 rate case.
LIQUIDITY AND CAPITAL RESOURCES
Evergy relies primarily upon cash from operations, short-term borrowings, long-term debt and equity issuances and its existing cash and cash equivalents to fund its capital requirements. Evergy's capital requirements primarily consist of capital expenditures, payment of contractual obligations and other commitments, and the payment of dividends to shareholders. See the Evergy Companies' combined 2023 Form 10-K for more information on Evergy's sources and uses of cash.
Short-Term Borrowings
As of September 30, 2024, Evergy had $1,074.5 million of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $216.1 million for Evergy, Inc., $257.3 million for Evergy Kansas Central, $377.1 million for Evergy Metro and $224.0 million for Evergy Missouri West. The Evergy Companies' borrowing capacity under the master credit facility also supports their issuance of commercial paper. See Note 8 to the consolidated financial statements for more information regarding the master credit facility.
Along with cash flows from operations and receivable sales facilities, Evergy generally uses borrowings under its master credit facility and the issuance of commercial paper to meet its day-to-day cash flow requirements. Evergy may also utilize these short-term borrowings to repay maturing long-term debt until the long-term debt is able to be refinanced. Evergy believes that its existing cash on hand and available borrowing capacity under its master credit facility provide sufficient liquidity for its existing capital requirements.
Significant Debt Issuances
See Note 9 to the consolidated financial statements for information regarding significant debt issuances.
Shelf Registration Statements and Regulatory Authorizations
Evergy
In August 2024, Evergy filed a Form S-3 with the SEC. Under this Form S-3, which is uncapped, Evergy may issue debt and other securities, including common stock, in the future with the amounts, prices and terms to be determined at the time of future offerings. The registration statement was filed to replace a similar Form S-3 upon expiration of its three-year term. The shelf registration statement expires in August 2027.
Evergy Kansas Central
In August 2024, Evergy Kansas Central filed a Form S-3 with the SEC. Under this Form S-3, which is uncapped, Evergy Kansas Central may issue debt securities in the future with the amounts, prices and terms to be determined at the time of future offerings. The registration statement was filed to replace a similar Form S-3 upon expiration of its three-year term. The shelf registration statement expires in August 2027.
Evergy Metro
In August 2024, Evergy Metro filed a Form S-3 with the SEC. Under this Form S-3, which is uncapped, Evergy Metro may issue debt securities in the future with the amounts, prices and terms to be determined at the time of future offerings. The registration statement was filed to replace a similar Form S-3 upon expiration of its three-year term. The shelf registration statement expires in August 2027.
Credit Ratings
In May 2024, Moody's Investors Service changed Evergy Missouri West's outlook from Stable to Negative, and affirmed credit ratings as detailed in the following table.
| Moody's | |||||||||||||||||||||||
| Investors Service**(a)** | |||||||||||||||||||||||
| Evergy Missouri West | |||||||||||||||||||||||
| Corporate Credit Rating | Baa2 | ||||||||||||||||||||||
| Senior Secured Debt | A3 | ||||||||||||||||||||||
| Commercial Paper | P-2 |
(a)A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.
Pensions
Year to date September 30, 2024, Evergy made no cash pension contributions. Evergy expects to make cash pension contributions of $36.8 million in 2024. Year to date September 30, 2024, Evergy made post-retirement benefit contributions of $0.8 million. Evergy expects to make no additional post-retirement benefit contributions in 2024. See Note 7 to the consolidated financial statements for additional information on Evergy's pension and post-retirement plans.
Debt Covenants
As of September 30, 2024, Evergy was in compliance with all debt covenants under the master credit facility and certain debt instruments that contain restrictions that require the maintenance of certain capitalization and leverage ratios. See Note 8 to the consolidated financial statements for more information.
Regulatory Authorizations
The following table summarizes the regulatory short-term and long-term debt financing authorizations for Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West and the remaining amount available under these authorizations as of September 30, 2024.
| Type of Authorization | Commission | Expiration Date | Authorization Amount | Available Under Authorization | ||||||||||||||||||||||
| Evergy Kansas Central & Evergy Kansas South | (in millions) | |||||||||||||||||||||||||
| Short-Term Debt | FERC | December 2024 | $ | 1,250.0 | $ | 558.3 | ||||||||||||||||||||
| Evergy Metro | ||||||||||||||||||||||||||
| Short-Term Debt | FERC | December 2024 | $ | 1,250.0 | $ | 1,178.1 | ||||||||||||||||||||
| Evergy Missouri West | ||||||||||||||||||||||||||
| Short-Term Debt | FERC | December 2024 | $ | 750.0 | $ | 574.0 | ||||||||||||||||||||
| Long-Term Debt | FERC | October 2024 | $ | 600.0 | $ | — |
In July 2024, Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West filed applications with FERC to issue and to have outstanding at any one time up to $1,250.0 million, $1,000.0 million, $1,250.0 million and $750.0 million in short-term debt instruments, respectively, through December 2026. Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West are awaiting a response from FERC.
In July 2024, Evergy Missouri West filed an application with FERC to issue up to a total of $600.0 million in long-term debt instruments for a two-year authorization period beginning on the date of the FERC approval. Evergy Missouri West is awaiting a response from FERC.
Capital Expenditures
Evergy expects to access the debt and equity markets for significant amounts of capital to fund the infrastructure investments outlined in the table below. The investments are part of Evergy's long-term strategy of executing a responsible generation transition and in anticipation of growing demand in its service territory. These investments include other utility construction programs required to maintain Evergy's electric utility operations, improve reliability, retire older plants and expand facilities related to providing electric service. These capital expenditures could include, but are not limited to, expenditures to develop new transmission lines and make improvements to or investments in power plants, transmission and distribution lines and equipment.
Capital expenditures projected for the next five years, excluding AFUDC and including costs of removal, are detailed in the following table, which updates the projected capital expenditures table disclosed under "Management's Discussion and Analysis - Liquidity and Capital Resources - Capital Requirements - Capital Expenditures" in Evergy's 2023 Form 10-K. This capital expenditure plan is subject to continual review and change.
| 2025 | 2026 | 2027 | 2028 | 2029 | |||||||||||||||||||||||||||||||
| (millions) | |||||||||||||||||||||||||||||||||||
| Generating facilities - new renewable/other generation | $ | 472.0 | $ | 852.0 | $ | 1,158.0 | $ | 1,557.0 | $ | 1,228.0 | |||||||||||||||||||||||||
| Generating facilities - other | 344.0 | 344.0 | 331.0 | 354.0 | 363.0 | ||||||||||||||||||||||||||||||
| Transmission facilities | 528.0 | 555.0 | 682.0 | 710.0 | 728.0 | ||||||||||||||||||||||||||||||
| Distribution facilities | 984.0 | 1,139.0 | 925.0 | 918.0 | 941.0 | ||||||||||||||||||||||||||||||
| General facilities | 156.0 | 160.0 | 227.0 | 256.0 | 262.0 | ||||||||||||||||||||||||||||||
| Total capital expenditures | $ | 2,484.0 | $ | 3,050.0 | $ | 3,323.0 | $ | 3,795.0 | $ | 3,522.0 |
Cash Flows
The following table presents Evergy's cash flows from operating, investing and financing activities.
| Year to Date September 30 | 2024 | 2023 | ||||||
| (millions) | ||||||||
| Cash Flows from Operating Activities | $ | 1,588.1 | $ | 1,551.7 | ||||
| Cash Flows used in Investing Activities | (1,790.3) | (1,791.9) | ||||||
| Cash Flows from Financing Activities | 231.2 | 256.0 |
Cash Flows from Operating Activities
Evergy's cash flows from operating activities increased $36.4 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by an increase in cash receipts for retail electric sales in 2024 primarily due to higher retail rates at Evergy Kansas Central, partially offset by the lower collection of receivables in January in 2024 compared to the same period in 2023.
Cash Flows used in Investing Activities
Evergy's cash flows used in investing activities decreased $1.6 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $65.8 million decrease in additions to property, plant and equipment, and other investing items primarily due to the acquisition of Persimmon Creek for $217.9 million, net of cash acquired, in 2023; partially offset by $92.1 million of increased spending in 2024 for a variety of capital projects including transmission projects related to grid resiliency and other investing activities and Evergy Missouri West's purchase of a joint ownership interest in Dogwood for approximately $60 million in April 2024; partially offset by
-
a $64.2 million decrease in proceeds from COLI investments, primarily from Evergy Kansas Central due to a higher number of policy settlements in 2023.
Cash Flows from Financing Activities
Evergy's cash flows from financing activities decreased $24.8 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $450.0 million decrease due to higher retirements of long-term debt, net due to Evergy's repayment of $800.0 million of 2.45% Senior Notes in September 2024; partially offset by Evergy Metro's repayment of $300.0 million of 3.15% Senior Notes in March 2023 and Evergy Kansas South's repayment of $50.0 million of 6.15% FMBs in May 2023; and
-
a $21.2 million increase in cash dividends paid due to a higher per share dividend paid in 2024 than in 2023; partially offset by
-
a $229.3 million increase in proceeds from long-term debt, net due to the issuance of $919.6 million of long-term debt year to date September 30, 2024, compared to the issuance of $690.3 million of long-term debt in the same period in 2023;
-
a $126.3 million increase in short-term debt borrowings primarily driven by Evergy's repayment of $800.0 million of 2.45% Senior Notes in September 2024 primarily with commercial paper borrowings; partially offset by the repayment of commercial paper borrowings in 2024 with proceeds from long-term debt issuances;
-
a $47.0 million increase in collateralized short-term debt, net due to a higher level of retail electric receivables available for sale in 2024 due to the amended terms of Evergy's receivable sales facilities; and
-
a $53.2 million decrease in repayment of borrowings against cash surrender value of corporate-owned life insurance primarily due to a higher number of policy settlements in 2023.
EVERGY KANSAS CENTRAL, INC.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The below results of operations and related discussion for Evergy Kansas Central is presented in a reduced disclosure format in accordance with General Instruction (H)(2)(a) to Form 10-Q.
The following table summarizes Evergy Kansas Central's comparative results of operations.
| Year to Date September 30 | 2024 | Change | 2023 | ||||||||||||||||||||||||||
| (millions) | |||||||||||||||||||||||||||||
| Operating revenues | $ | 2,338.0 | $ | 246.5 | $ | 2,091.5 | |||||||||||||||||||||||
| Fuel and purchased power | 445.7 | (24.8) | 470.5 | ||||||||||||||||||||||||||
| SPP network transmission costs | 272.4 | 40.4 | 232.0 | ||||||||||||||||||||||||||
| Operating and maintenance | 355.9 | 8.8 | 347.1 | ||||||||||||||||||||||||||
| Depreciation and amortization | 422.3 | 36.3 | 386.0 | ||||||||||||||||||||||||||
| Taxes other than income tax | 190.4 | 25.3 | 165.1 | ||||||||||||||||||||||||||
| Income from operations | 651.3 | 160.5 | 490.8 | ||||||||||||||||||||||||||
| Other income, net | 13.8 | 12.7 | 1.1 | ||||||||||||||||||||||||||
| Interest expense | 173.2 | 9.9 | 163.3 | ||||||||||||||||||||||||||
| Income tax expense | 13.0 | 9.4 | 3.6 | ||||||||||||||||||||||||||
| Equity in earnings of equity method investees, net of income taxes | 2.4 | (0.2) | 2.6 | ||||||||||||||||||||||||||
| Net income | 481.3 | 153.7 | 327.6 | ||||||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 9.2 | — | 9.2 | ||||||||||||||||||||||||||
| Net income attributable to Evergy Kansas Central, Inc. | $ | 472.1 | $ | 153.7 | $ | 318.4 |
Evergy Kansas Central Gross Margin (GAAP) and Utility Gross Margin (non-GAAP)
The following table summarizes Evergy Kansas Central's gross margin (GAAP) and MWhs sold and reconciles Evergy Kansas Central's gross margin (GAAP) to Evergy Kansas Central's utility gross margin (non-GAAP). See "Executive Summary - Non-GAAP Measures" for additional information regarding gross margin (GAAP) and utility gross margin (non-GAAP).
| Revenues and Expenses | MWhs Sold | ||||||||||||||||||||||||||||||||||
| Year to Date September 30 | 2024 | Change | 2023 | 2024 | Change | 2023 | |||||||||||||||||||||||||||||
| Retail revenues | (millions) | (thousands) | |||||||||||||||||||||||||||||||||
| Residential | $ | 779.8 | $ | 132.5 | $ | 647.3 | 5,291 | 15 | 5,276 | ||||||||||||||||||||||||||
| Commercial | 652.9 | 97.6 | 555.3 | 5,705 | 22 | 5,683 | |||||||||||||||||||||||||||||
| Industrial | 342.4 | 42.3 | 300.1 | 4,030 | (40) | 4,070 | |||||||||||||||||||||||||||||
| Other retail revenues | 18.9 | 6.4 | 12.5 | 30 | — | 30 | |||||||||||||||||||||||||||||
| Total electric retail | 1,794.0 | 278.8 | 1,515.2 | 15,056 | (3) | 15,059 | |||||||||||||||||||||||||||||
| Wholesale revenues | 194.9 | (37.8) | 232.7 | 7,431 | (136) | 7,567 | |||||||||||||||||||||||||||||
| Transmission revenues | 340.1 | 45.3 | 294.8 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Other revenues | 9.0 | (39.8) | 48.8 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Operating revenues | 2,338.0 | 246.5 | 2,091.5 | 22,487 | (139) | 22,626 | |||||||||||||||||||||||||||||
| Fuel and purchased power | (445.7) | 24.8 | (470.5) | ||||||||||||||||||||||||||||||||
| SPP network transmission costs | (272.4) | (40.4) | (232.0) | ||||||||||||||||||||||||||||||||
| Operating and maintenance (a) | (189.9) | (18.3) | (171.6) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (422.3) | (36.3) | (386.0) | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | (190.4) | (25.3) | (165.1) | ||||||||||||||||||||||||||||||||
| Gross margin (GAAP) | 817.3 | 151.0 | 666.3 | ||||||||||||||||||||||||||||||||
| Operating and maintenance (a) | 189.9 | 18.3 | 171.6 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 422.3 | 36.3 | 386.0 | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | 190.4 | 25.3 | 165.1 | ||||||||||||||||||||||||||||||||
| Utility gross margin (non-GAAP) | $ | 1,619.9 | $ | 230.9 | $ | 1,389.0 | |||||||||||||||||||||||||||||
| (a) Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $166.0 million and $175.5 million year to date September 30, 2024 and 2023, respectively. |
Evergy Kansas Central's gross margin (GAAP) increased $151.0 million year to date September 30, 2024, compared to the same period in 2023, and Evergy Kansas Central's utility gross margin (non-GAAP) increased $230.9 million year to date September 30, 2024, compared to the same period in 2023, both measures were driven by:
-
a $117.9 million increase primarily from new Evergy Kansas Central retail rates effective in December 2023;
-
a $96.5 million increase due to the third quarter 2023 recognition of a regulatory liability for the refund to customers of revenues previously collected from customers related to COLI rate credits;
-
a $45.3 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2024;
-
a $6.0 million increase primarily due to higher retail sales driven by higher weather-normalized residential demand, partially offset by unfavorable weather (heating degree days decreased 7% and cooling degree days decreased 5%); and
-
a $2.2 million increase due to lower mark-to-market losses related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's 8% ownership share of JEC in 2024; partially offset by
-
a $25.7 million decrease related to non-regulated sales in 2023 related to Evergy Kansas Central's 8% ownership share of JEC, which is included in rate base in 2024 as a result of Evergy Kansas Central's 2023 rate case; and
-
an $11.3 million decrease related to Evergy Kansas Central's TDC rider in 2024.
Additionally, the increase in Evergy Kansas Central's gross margin (GAAP) was also impacted by:
-
a $36.3 million increase in depreciation and amortization as described further below;
-
a $25.3 million increase in taxes other than income tax as described further below; and
-
an $18.3 million increase in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily due to a $16.0 million increase in operating and maintenance expense at generating facilities as described further below.
Evergy Kansas Central Operating and Maintenance
Evergy Kansas Central's operating and maintenance expense increased $8.8 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $16.0 million increase in operating and maintenance expense at generating facilities primarily due to a $10.5 million increase due to a major maintenance outage at JEC in 2024; partially offset by
-
a $9.5 million decrease in administrative and general expense primarily driven by a $6.6 million decrease due to the amortization of Evergy Kansas Central's refunds to customers of storm costs previously collected in rates in accordance with Evergy Kansas Central's 2023 rate case.
Evergy Kansas Central Depreciation and Amortization
Evergy Kansas Central's depreciation and amortization expense increased $36.3 million year to date September 30, 2024, compared to the same period in 2023, driven by:
-
a $30.4 million increase primarily due to a change in depreciation rates as a result of Evergy Kansas Central's 2023 rate case effective in December 2023; and
-
a $5.9 million increase primarily due to capital additions.
Evergy Kansas Central Taxes Other than Income Tax
Evergy Kansas Central's taxes other than income tax increased $25.3 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by the rebasing of property taxes as a result of Evergy Kansas Central's 2023 rate case effective in December 2023.
Evergy Kansas Central Other Income, Net
Evergy Kansas Central's other income, net increased $12.7 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $14.3 million decrease in pension non-service costs primarily due to the resetting of pension expense in retail rates as a result of Evergy Kansas Central's 2023 rate case effective in December 2023; and
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a $7.2 million increase in equity AFUDC primarily driven by higher construction work in progress balances and lower short-term debt balances in 2024; partially offset by
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a $10.1 million decrease due to recording lower Evergy Kansas Central COLI benefits in 2024.
Evergy Kansas Central Interest Expense
Evergy Kansas Central's interest expense increased $9.9 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $17.9 million increase due to issuances of long-term debt; partially offset by
-
a $5.5 million decrease due to higher debt AFUDC primarily driven by higher construction work in progress balances and lower short-term debt balances in 2024.
Evergy Kansas Central Income Tax Expense
Evergy Kansas Central's income tax expense increased $9.4 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
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a $35.9 million increase due to higher pre-tax income in 2024; partially offset by
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a $12.7 million decrease primarily due to higher amortization of excess deferred income taxes authorized by Evergy Kansas Central's 2023 rate case; and
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a $12.8 million decrease primarily due to higher wind and other income tax credits in 2024 principally driven by the acquisition of Persimmon Creek in the second quarter of 2023.
EVERGY METRO, INC.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The below results of operations and related discussion for Evergy Metro is presented in a reduced disclosure format in accordance with General Instruction (H)(2)(a) to Form 10-Q.
The following table summarizes Evergy Metro's comparative results of operations.
| Year to Date September 30 | 2024 | Change | 2023 | ||||||||||||||
| (millions) | |||||||||||||||||
| Operating revenues | $ | 1,503.2 | $ | 3.3 | $ | 1,499.9 | |||||||||||
| Fuel and purchased power | 431.2 | 13.4 | 417.8 | ||||||||||||||
| Operating and maintenance | 210.3 | (3.3) | 213.6 | ||||||||||||||
| Depreciation and amortization | 303.2 | (8.7) | 311.9 | ||||||||||||||
| Taxes other than income tax | 111.9 | 11.5 | 100.4 | ||||||||||||||
| Income from operations | 446.6 | (9.6) | 456.2 | ||||||||||||||
| Other expense, net | (0.8) | 10.8 | (11.6) | ||||||||||||||
| Interest expense | 112.0 | 11.4 | 100.6 | ||||||||||||||
| Income tax expense | 42.5 | 0.2 | 42.3 | ||||||||||||||
| Net income | $ | 291.3 | $ | (10.4) | $ | 301.7 |
Evergy Metro Gross Margin (GAAP) and Utility Gross Margin (non-GAAP)
The following table summarizes Evergy Metro's gross margin (GAAP) and MWhs sold and reconciles Evergy Metro's gross margin (GAAP) to Evergy Metro's utility gross margin (non-GAAP). See "Executive Summary - Non-GAAP Measures" for additional information regarding gross margin (GAAP) and utility gross margin (non-GAAP).
| Revenues and Expenses | MWhs Sold | ||||||||||||||||||||||||||||||||||
| Year to Date September 30 | 2024 | Change | 2023 | 2024 | Change | 2023 | |||||||||||||||||||||||||||||
| Retail revenues | (millions) | (thousands) | |||||||||||||||||||||||||||||||||
| Residential | $ | 592.9 | $ | (11.0) | $ | 603.9 | 4,304 | (70) | 4,374 | ||||||||||||||||||||||||||
| Commercial | 610.3 | 4.2 | 606.1 | 5,625 | (23) | 5,648 | |||||||||||||||||||||||||||||
| Industrial | 103.8 | 3.2 | 100.6 | 1,304 | 35 | 1,269 | |||||||||||||||||||||||||||||
| Other retail revenues | 7.9 | (1.6) | 9.5 | 34 | (12) | 46 | |||||||||||||||||||||||||||||
| Total electric retail | 1,314.9 | (5.2) | 1,320.1 | 11,267 | (70) | 11,337 | |||||||||||||||||||||||||||||
| Wholesale revenues | 64.8 | (15.9) | 80.7 | 3,700 | (336) | 4,036 | |||||||||||||||||||||||||||||
| Transmission revenues | 15.0 | 4.2 | 10.8 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Other revenues | 108.5 | 20.2 | 88.3 | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Operating revenues | 1,503.2 | 3.3 | 1,499.9 | 14,967 | (406) | 15,373 | |||||||||||||||||||||||||||||
| Fuel and purchased power | (431.2) | (13.4) | (417.8) | ||||||||||||||||||||||||||||||||
| Operating and maintenance (a) | (150.7) | (3.8) | (146.9) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (303.2) | 8.7 | (311.9) | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | (111.9) | (11.5) | (100.4) | ||||||||||||||||||||||||||||||||
| Gross margin (GAAP) | 506.2 | (16.7) | 522.9 | ||||||||||||||||||||||||||||||||
| Operating and maintenance (a) | 150.7 | 3.8 | 146.9 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 303.2 | (8.7) | 311.9 | ||||||||||||||||||||||||||||||||
| Taxes other than income tax | 111.9 | 11.5 | 100.4 | ||||||||||||||||||||||||||||||||
| Utility gross margin (non-GAAP) | $ | 1,072.0 | $ | (10.1) | $ | 1,082.1 | |||||||||||||||||||||||||||||
| (a) Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $59.6 million and $66.7 million year to date September 30, 2024 and 2023, respectively. |
Evergy Metro's gross margin (GAAP) decreased $16.7 million year to date September 30, 2024, compared to the same period in 2023, and Evergy Metro's utility gross margin (non-GAAP) decreased $10.1 million year to date September 30, 2024, compared to the same period in 2023, both measures were driven by:
-
an $18.0 million decrease from new Evergy Metro retail rates in Kansas effective in December 2023; and
-
an $11.1 million decrease as a result of recording a reduction in the second quarter of 2023 to Evergy Metro's ERSP refund obligation to customers; partially offset by
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a $9.4 million increase due to factors including changes in Evergy Metro's rate design in its Kansas jurisdiction impacting the timing of billings to its Kansas commercial customers and higher weather-normalized residential and commercial demand, partially offset by unfavorable weather (cooling degree days decreased 6% and heating degree days decreased by 4%);
-
a $5.4 million increase related to Evergy Metro's TDC rider in 2024; and
-
a $4.2 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Metro's FERC TFR effective in January 2024.
Additionally, the decrease in Evergy Metro's gross margin (GAAP) was also driven by:
-
an $8.7 million decrease in depreciation and amortization as further described below; partially offset by
-
an $11.5 million increase in taxes other than income tax as further described below; and
-
a $3.8 million increase in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by an $8.8 million increase in transmission and distribution operating and maintenance expense; partially offset by a $5.0 million decrease in operating and maintenance expense at generating facilities as further described below.
Evergy Metro Operating and Maintenance
Evergy Metro's operating and maintenance expense decreased $3.3 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $7.1 million decrease in administrative and general expense driven by higher costs billed primarily to Evergy Missouri West and Evergy Kansas Central for common use assets related to facilities and software assets; and
-
a $5.0 million decrease in operating and maintenance expense at generating facilities primarily driven by a $3.2 million decrease due to a major maintenance outage at Hawthorn Station in 2023; partially offset by
-
an $8.8 million increase in transmission and distribution operating and maintenance expenses driven by a $5.3 million increase in non-labor expense primarily due to higher contractor costs, costs billed for common use assets from Evergy Metro to Evergy Kansas Central and Evergy Missouri West and a $1.6 million increase in vegetation management costs and a $3.5 million increase in labor expense primarily due to a decrease in labor capitalization driven by lower capitalization activity related to the installation of transformers and meters in 2024.
Evergy Metro Depreciation and Amortization
Evergy Metro's depreciation and amortization expense decreased $8.7 million year to date September 30, 2024, compared to the same period in 2023, primarily due to a change in depreciation rates as a result of Evergy Metro's 2023 rate case effective in December 2023.
Evergy Metro Taxes Other than Income Tax
Evergy Metro's taxes other than income tax increased $11.5 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by the rebasing of property taxes as a result of Evergy Metro's 2023 rate case effective in December 2023.
Evergy Metro Other Expense, Net
Evergy Metro's other expense, net decreased $10.8 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by a $9.4 million decrease in pension non-service costs primarily due to the resetting of pension expense in retail rates as a result of Evergy Metro's 2023 rate case effective in December 2023.
Evergy Metro Interest Expense
Evergy Metro's interest expense increased $11.4 million year to date September 30, 2024, compared to the same period in 2023, primarily driven by:
-
a $14.5 million increase due to issuances of long-term debt; and
-
a $4.8 million increase in interest expense on short-term borrowings primarily due to higher commercial paper borrowings in 2024; partially offset by
-
a $4.2 million decrease in interest expense due to increases in carrying costs deferred to a regulatory asset in accordance with PISA due to a higher outstanding balance of qualified PISA additions and Evergy Metro electing into Kansas PISA beginning July 2024; and
-
a $3.8 million decrease due to maturities of long-term debt.
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