Evergy(US:EVRG)2021-11-02 16:00Part I - Financial Information Financial Statements The company presents unaudited consolidated financial statements for Evergy, Inc and its subsidiaries for the period ended September 30, 2021 Evergy, Inc. Financial Statements Evergy, Inc reported a significant increase in net income to $826.3 million for the nine months ended September 30, 2021 Evergy, Inc. Consolidated Financial Highlights (YTD September 30, 2021 vs 2020) | Metric | YTD Sep 30, 2021 (millions) | YTD Sep 30, 2020 (millions) | | :--- | :--- | :--- | | Operating Revenues | $4,464.6 | $3,819.0 | | Net Income Attributable to Evergy, Inc. | $826.3 | $567.3 | | Diluted EPS | $3.60 | $2.49 | | Total Assets (as of period end) | $28,182.1 | N/A | | Total Liabilities (as of period end) | $18,870.1 | N/A | | Total Equity (as of period end) | $9,312.0 | N/A | Evergy, Inc. Consolidated Cash Flow Summary (YTD September 30) | Cash Flow Activity | 2021 (millions) | 2020 (millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $1,036.0 | $1,421.7 | | Net Cash used in Investing Activities | $(1,349.1) | $(1,029.9) | | Net Cash from (used in) Financing Activities | $193.5 | $(53.4) | Evergy Kansas Central, Inc. Financial Statements Evergy Kansas Central's net income rose substantially to $452.3 million, driven by higher operating revenues Evergy Kansas Central, Inc. Financial Highlights (YTD September 30, 2021 vs 2020) | Metric | YTD Sep 30, 2021 (millions) | YTD Sep 30, 2020 (millions) | | :--- | :--- | :--- | | Operating Revenues | $2,277.4 | $1,864.5 | | Net Income Attributable to Evergy Kansas Central, Inc. | $452.3 | $182.0 | | Total Assets (as of period end) | $12,948.1 | N/A | | Total Equity (as of period end) | $4,572.2 | N/A | Evergy Metro, Inc. Financial Statements Evergy Metro's net income increased to $303.3 million for the nine-month period, supported by growth in operating revenues Evergy Metro, Inc. Financial Highlights (YTD September 30, 2021 vs 2020) | Metric | YTD Sep 30, 2021 (millions) | YTD Sep 30, 2020 (millions) | | :--- | :--- | :--- | | Operating Revenues | $1,526.7 | $1,328.3 | | Net Income | $303.3 | $276.2 | | Total Assets (as of period end) | $9,225.5 | N/A | | Total Equity (as of period end) | $3,012.3 | N/A | Note 1: Organization and Basis of Presentation The company details its corporate structure and the significant financial impact of the February 2021 winter weather event - Evergy is a public utility holding company serving approximately 1.6 million customers in Kansas and Missouri with 15,400 MW of generating capacity707175 - The February 2021 winter weather event resulted in $349.7 million in net fuel and purchased power costs, primarily impacting Evergy Missouri West and Evergy Kansas Central94 - The company deferred nearly all winter weather event costs to a regulatory asset for future recovery from customers9597 - Evergy recorded $95.0 million in non-regulated energy marketing margins in 2021 related to the winter weather event98 Note 4: Rate Matters and Regulation This note outlines key regulatory proceedings, including rate adjustments and cost deferrals from the 2021 winter storm - In April 2021, the KCC approved TDC adjustments, resulting in an expected annual revenue increase of $37.9 million for Evergy Kansas Central110112 - Due to the February 2021 winter weather event, Evergy Kansas Central recognized a regulatory asset of $115.0 million for increased costs116 - Evergy Kansas Central filed a predetermination request with the KCC to retire the coal-fired LEC Unit 4 and invest in 190 MW of solar generation118119121 - As of September 30, 2021, Evergy Missouri West had a regulatory asset of $278.7 million related to the winter storm126127129 Note 10: Commitments and Contingencies The company details environmental contingencies and regulations that could result in material compliance costs - The future of GHG regulations is uncertain following the vacatur of the ACE rule, and compliance costs could be material192193 - The EPA is undertaking a new rulemaking to potentially revise Effluent Limitations Guidelines, which could result in more stringent and material compliance costs195196197 - The company initiated closure of all un-lined Coal Combustion Residuals impoundments, and future revisions to Asset Retirement Obligations could be material200201 Note 12: Shareholders' Equity This note describes a significant equity transaction with Bluescape Energy Partners and the filing of new shelf registration statements - In April 2021, Evergy sold common stock and issued a warrant to an affiliate of Bluescape for net proceeds of $112.5 million216 - In September 2021, Evergy filed an automatic shelf registration statement for the sale of unlimited amounts of securities, expiring in September 2024217 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, the impact of the winter weather event, strategic initiatives, and capital resource allocation Evergy, Inc. MD&A Management discusses strong earnings driven by winter storm margins and favorable weather, alongside its net-zero emissions goal - Evergy announced a revised goal to achieve net-zero carbon emissions by 2045, with an interim goal of a 70% reduction by 2030248 - Utility gross margin for YTD 2021 increased by $184.1 million, driven by $95.0 million in non-regulated energy marketing margins from the winter storm287 Evergy, Inc. Earnings Overview (YTD September 30) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net Income Attributable to Evergy, Inc. (millions) | $826.3 | $567.3 | $259.0 | | Diluted EPS | $3.60 | $2.49 | $1.11 | Projected Capital Expenditures (2021-2025) | Year | Amount (millions) | | :--- | :--- | | 2021 | $1,953.0 | | 2022 | $2,016.0 | | 2023 | $1,993.0 | | 2024 | $2,055.0 | | 2025 | $2,417.0 | | Total | $10,434.0 | Evergy Kansas Central, Inc. MD&A Net income surged due to a significant increase in utility gross margin, fueled by winter storm-related marketing margins - Utility gross margin increased by $180.1 million year-to-date, primarily due to $95.0 million in non-regulated energy marketing margins328 - Income tax expense decreased by $103.5 million year-to-date, mainly due to a $109.0 million benefit from the 2020 revaluation of deferred taxes333 Evergy Kansas Central, Inc. Results of Operations (YTD September 30) | Metric | 2021 (millions) | 2020 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Operating Revenues | $2,277.4 | $1,864.5 | $412.9 | | Income from Operations | $626.7 | $476.4 | $150.3 | | Net Income Attributable | $452.3 | $182.0 | $270.3 | Evergy Metro, Inc. MD&A Net income increased due to favorable weather and lower operating expenses, partially offset by higher income tax expense - Utility gross margin increased by $15.1 million year-to-date, driven by a $33.1 million increase from favorable weather341 - Operating and maintenance expense decreased by $43.6 million year-to-date, primarily due to a $19.8 million decrease in severance costs342 - Income tax expense increased by $38.6 million year-to-date, as the prior year included a $32.2 million tax benefit346 Evergy Metro, Inc. Results of Operations (YTD September 30) | Metric | 2021 (millions) | 2020 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Operating Revenues | $1,526.7 | $1,328.3 | $198.4 | | Income from Operations | $439.8 | $380.6 | $59.2 | | Net Income | $303.3 | $276.2 | $27.1 | Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk disclosures since its most recent Annual Report on Form 10-K - There have been no material changes in market risk from the disclosures in the 2020 Form 10-K348 Controls and Procedures Management concluded that disclosure controls and procedures for all reporting entities were effective as of September 30, 2021 - The CEO and CFO of Evergy, Inc and its subsidiaries have all concluded that their respective disclosure controls and procedures were effective349352354 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls350353355 Part II - Other Information Legal Proceedings The company is involved in various ordinary course lawsuits and regulatory proceedings, detailed in the financial statement notes - Information regarding material lawsuits and regulatory proceedings is incorporated by reference from Notes 4 and 10 to the consolidated financial statements356 Risk Factors The company identifies new significant risks related to workforce management, including talent retention and labor negotiations - A new risk factor has been added concerning the failure to attract and retain a qualified workforce, which could impede the company's strategy359360 - Federal COVID-19 vaccination and testing mandates could result in employee or contractor labor disruptions, potentially impacting operations361 - Collective bargaining agreements with five local IBEW unions expired in 2021 and are being renegotiated, posing a risk of labor disruptions362 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None reported364 Exhibits This section lists all exhibits filed with the Form 10-Q, including a new credit agreement and officer certifications - Exhibit 10.1 is the Amended and Restated Credit Agreement dated August 31, 2021, among Evergy, Inc and its subsidiaries371 - Exhibits 31.1 through 31.6 contain the required Rule 13a-14(a)/15d-14(a) certifications from the CEO and CFO for each registrant371