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spk13: conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the call over to Peter Flint, Director in Best of Relations. Please go ahead.
spk25: Thank you, Lateef, and good morning, everyone. Welcome to Evergy's fourth quarter 2022 earnings conference call. Our webcast slides and supplemental financial information are available on our investor relations website at investors.evergy.com. Today's discussion will include forward-looking information. Slide two in the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations. They also include additional information on our non-GAAP financial measures. Joining us on today's call are David Campbell, President and Chief Executive Officer, and Kirk Andrews, Executive Vice President and Chief Financial Officer. David will cover 2022 highlights, provide upcoming regulatory and legislative updates, and discuss our upcoming Integrative Resource Plan. Kirk will cover our fourth quarter and full year results, retail sales trends, as well as our financial outlook for 2023. Other members of management are with us and will be available during the question and answer portion of the call. I will now turn the call over to David.
spk07: Thanks, Pete, and good morning, everyone. I'd be remiss if I did not start with the recognition of the Kansas City Chiefs and their victory in Super Bowl 57. For football fans who have never been to Arrowhead Stadium, definitely add it to your list. Chiefs Kingdom is quite something to behold. I'll begin on slide five. And I'll start by thanking our employees who worked tirelessly throughout the year to advance our strategic objectives of affordability, reliability, and sustainability. I'm proud and honored to lead the Avergy team. With respect to 2022 results, I am pleased to report that we had another solid year. We delivered adjusted earnings of $3.71 per share compared to $3.46 per share in 2021. These results reflect another year of strong execution relative to our objectives. We entered 2022 with a guidance range of $3.43 per share to $3.63 per share, and our results came in 8 cents higher than the top end of the range. Kirk will discuss the drivers of our 2022 results in more detail. Last year, we executed our capital plan to further improve reliability and resiliency, investing $2.2 billion in infrastructure to modernize our grid and replace aging equipment. I'd like to recognize the hard work of our regulatory staff as we completed our first two Missouri rate cases since the merger in 2018. We reached partial settlements on key economic issues at both Metro and Missouri West, delivering significant O&M savings back to our customers. These rate cases underscore our continued progress in maintaining affordability for our customers and increasing our regional rate competitiveness. Through November 2022, we've limited cumulative rate increases to 2.7% since 2017, well below the rate of increase for our regional peers and the prevailing rate of inflation over the five-year period. Slide six profiles a significant improvement that we've made in customer satisfaction as measured by J.D. Power's annual survey of utility customers. Since 2018, we've climbed 10 spots and J.D. Power's Midwest Large Utilities category, coming in at fifth out of 15 companies in 2022. Customer satisfaction remains at the forefront of our strategy. Safety tops our list of core values, and slide seven highlights the considerable progress we've made in limiting safety-related events. Both OSHA recordables and DART cases have declined by over 50% since 2018. Promoting a culture of safety, and focusing on every employee going home safely every day are paramount to our success as a company. On slide eight, we introduced our 2023 GAAP and adjusted EPS guidance of $3.55 per share to $3.75 per share. We know the importance of consistent execution, and we recognize that 2023 falls short of the midpoint relative to our long-term targets, reflecting regulatory lag in our Kansas jurisdiction and our commitment to a five-year rate case stay out as part of the merger. But we remain confident in our ability to deliver annual 6% to 8% adjusted EPS growth through 2025 off of the 2021 baseline, and we are reaffirming that target today. Moving to our five-year capital plan on slide nine, we have updated and extended our forecast through 2027. Our new five-year investment plan totals $11.6 billion from 2023 to 2027, which represents a $900 million increase relative to our 2022 to 2026 forecast, or 9%. Nearly 60% of our planned investment is targeted toward transmission and distribution projects as we continue to modernize our grid to improve reliability and enhance resiliency for our customers. by replacing aging equipment and investing in smart grid technologies will also enable further efficiency gains in serving our customers, which has been a hallmark of Evergy's strategy over the last five years. Slide 10 profiles our progress in driving cost savings. Despite historically high inflation in 2022, we held adjusted O&M flat relative to 2021, representing $232 million in cumulative savings since 2018. or 18%. The work is not done yet, and we remain laser focused on our target of an additional 11% reduction in adjusted owner through 2025. As part of this effort, the company implemented a voluntary retirement program fall of 2022, which combined with ordinary course retirements and attrition resulted in an 8.5% reduction in the size of the organization by year end. I can't say enough about the hard work of the Evergy team in delivering against and exceeding the savings for customers that were promised as part of the merger that formed our company. As shown on slide 11, Evergy has been able to limit cumulative rate increases to 2.7% since 2017, based on the latest available data from the EIA, which runs through November 2022. This compares favorably to our regional peer states and the prevailing rate of inflation over the same timeframe. Advancing and improving regional rate competitiveness are priorities in our long-term plan and are front of mind for many of our stakeholders, and that's exactly what we've accomplished over the past five years. Moving to slide 12, I'll provide an update on regulatory and legislative priorities, beginning with our rate case filings in Kansas. In mid-April, we'll file our first rate cases at Kansas Central and Kansas Metro since completion of the averaging merger in 2018. We believe these rate reviews will be relatively straightforward, requesting recovery and return on our grid modernization infrastructure investments over the past five years, and passing on the benefits of the cost savings we've achieved to our customers. We look forward to working with our regulators and stakeholders to achieve a constructive outcome for our Kansas customers and communities. In Missouri this year, we anticipate a quieter legislative session relative to last year, which saw the extension and amendment of PISA further supporting the constructive regulatory environment in the state. On the regulatory front, We have open dockets for the approval of an operating certificate of convenience and necessity for acquisition of the Persimmon Creek Wind Farm, as well as a securitization from winter storm URI costs incurred at Missouri West. Initial post-hearing briefs are due on March 6th in the Persimmon Creek docket with an order requested by April 6th. We firmly believe Persimmon Creek is the lowest cost solution to serve Missouri West customers consistent with the IRP preferred plan and will continue to work collaboratively with our regulators to secure the necessary approval. Missouri Public Service Commission's approval of our request to securitize extraordinary costs from Winter Storm URI was appealed to the Missouri Court of Appeals by the Office of Public Counsel in early January. OPC's initial briefs are due by early April, 90 days following the appeal date. We believe the Commission's decision to approve our request is well supported by the record. While we cannot complete our securitization financing until the appeal plays out, incremental carrying costs incurred prior to approval will ultimately be recovered when we issue the debt. The last item on the regulatory agenda that I'll reference is the expected June filing of our annual integrated resource plan updates in both Kansas and Missouri, which I'll cover more as you turn to slide 13. The planning process for our IRP filings is well underway, as we continue to assess the beneficial impacts of the Inflation Reduction Act on our generation resource planning. The longer-term certainty the IRA provides around renewable energy tax credits will enhance our ability to tap the abundant renewables potential in our region and deliver savings to our customers by replacing higher-cost energy. We expect our Wolf Creek nuclear plant to be eligible for the IRA's nuclear production tax credit the benefits of which will accrue to our customers in years with low realized prices for Wolf Creek. In addition to these IRA tailwinds, we'll be incorporating updated commodity projections, construction costs, and higher capacity requirements in the Southwest Power Pool into the annual update. We are excited to advance our integrated resource plans to deliver additional benefits to our customers. I'll conclude my remarks with slide 14, which summarizes the Evergy Value Proposition. The left side of the page covers the core tenets of our strategy to advance affordability, reliability, and sustainability through a relentless focus on our customers, supported by stakeholder collaboration, sustainable investment, and financial and operational excellence. The right-hand side features what we believe are particularly attractive and distinctive features for Evergy, given our business mix and geographic location. We are excited about the opportunities for our company, and we are committed the sustained effort required to deliver against our high performance objectives. I will now turn the call over to Kirk.
spk24: Thanks, David. Good morning, everyone. And I'll start with the results for the quarter on slide 16. For the fourth quarter of 2022, Evergy delivered adjusted earnings of $68.6 million, or $0.30 per share, compared to $32.9 million, or $0.14 per share, in the fourth quarter of 2021. As shown on the slide, the year-over-year increase in fourth quarter EPS was driven by the following. First, an increase in heating degree days partially offset by lower demand drove a net $0.08 increase in EPS compared to the fourth quarter of 2021. Higher transmission margins resulting from both our ongoing investments to enhance our transmission infrastructure and higher volumes drove a $0.04 increase. A decrease in O&M versus the fourth quarter of 2021 drove an eight cent increase in adjusted EPS for the quarter. These positive drivers were partially offset by three pennies of higher DNA expense and nine cents from the combination of higher interest expense and lower AFUDC equity. Income tax related items, including increased wind and other tax credits and the timing of the use of tax credits compared to the prior year, drove six cents of higher EPS in the quarter. And finally, other items, both positive and negative, drove a net two pennies of year-over-year increase. These items consist of higher COLE proceeds and other margin, which were partially offset by six cents from the Kansas Earnings Sharing Program, which was one of our merger commitments, which expired in 2022. Warmer weather through the summer and into the fall drove our earned ROE at Kansas Metro above our current authorized 9.3%, requiring us to refund half of that excess back to customers. I'll turn next to year-to-date results, which you'll find on slide 17. For the full year 2022, adjusted earnings were $853.8 million, or $3.71 per share, which compares to $795.2 million, or $3.46 per share in 2021. Again, moving from left to right, our full-year EPS drivers versus 21 include the following. Weather contributed 21 cents versus 2021. Relative to normal, weather drove an estimated 29 cents of favorability in 2022. Weather normalized demand was 1.1% higher than 2021, driving an 11 cent increase. Higher transmission margins from increased investment, as well as higher volumes, drove a 15 cent year-over-year increase. and lower O&M drove adjusted EPS 2 cents higher versus 2021. These positive drivers were partially offset by 11 cents of DNA and 14 cents of increased interest expense and lower AFUDC equity, with higher interest expense accounting for 11 of the 14-cent decrease in adjusted EPS. Finally, other items drove a net penny of favorability, consisting primarily of 4 cents from the expiry of merger bill credits 2 cents from tax credits and a penny of other items, which were partially offset by 6 cents from the Earnings Sharing Program, or ERSP, at Kansas Metro, which I mentioned earlier in my fourth quarter remarks. Turning to slide 18, I'll provide a brief update on our recent sales trends. On the left-hand side of the slide, you'll see that total retail sales increased 3.5% in 2022. driven primarily by a strong increase in residential usage and supported by healthy commercial and industrial growth. Looking to the right-hand side of the slide, after adjusting for the estimated impact of weather, retail sales increased 1.1% for the full year. These results were bolstered by strong industrial demand from the oil and chemical refining sectors. The 1.7% increase in weather normalized commercial demand was driven by customer growth and a continued return to normal post-COVID. Underlying the continued growth in residential and commercial customers is a strong labor market. Highlighted by Kansas and the Kansas City metro area unemployment rates of 2.9% and 2.4% respectively as of year-end, these remain below the national average of 3.4%. Overall, in 2022, we saw continued recovery following the pandemic, and our economy is well positioned to extend that positive trend. As a result, adjusting for 30-year weather, we expect an approximate 1.6% increase in weather normalized demand in 2023, which I'll discuss as part of our 2023 EPS guidance, which you'll find on slide 19. Starting on the left side of that slide and beginning with 2022 adjusted EPS of $3.71, we expect an 11 cent decline from demand or just under 1% decrease in total demand. This 11 cent decrease is the net impact of removing that estimated 29 cent impact in 22 from weather, partially offset by an 18 cent increase in weather normalized demand. Removing the largely weather-driven impact of the Earnings Sharing Program, or ERSP, at Kansas Metro in 2022 results in a $0.06 increase. We expect an approximate $60 million reduction in pre-tax O&M to deliver a $0.20 EPS increase as we continue to execute our cost savings programs as part of our focus on and commitment to affordability and operational excellence. Higher transmission margins are expected to add 13 cents in 2023 as we continue to make investments to improve our transmission infrastructure. The pending acquisition of the Persimmon Creek Wind Farm is expected to drive 5 cents of EPS. These positive drivers are expected to be partially offset by the following. Increased DNA of 16 cents as we continue to invest in infrastructure and execute our capital plan. Increased interest expense of 21 cents due to higher debt balances at higher rates. and $0.02 of other items, primarily driven by lower year-over-year earnings from a combination of the expiry of a wholesale contract in Kansas and the one-time true-up of URI carrying costs in 2022, which were partially offset by higher expected COLE proceeds. Turning next to slide 20, our strong results in 2022 reflect our ongoing focus on and continuing to build a track record of consistent execution. As David mentioned earlier, we're reaffirming our long-term compound annual EPS growth rate target of 6% to 8% from 2021 to 2025 as we remain confident in achieving that trajectory. And as we continue to progress on that path, we also remain committed to returning capital to our shareholders and target dividend growth in line with earnings growth with that dividend payout ratio of 60% to 70%. Our updated 5-year CapEx plan from 2023 to 2027 totals $11.6 billion and implies rate-based growth of approximately 6% from 2022 to 2027. We've included some additional disclosures in the appendix of today's presentation, including a breakdown of planned expenditures by category and by utility, which we hope you will find helpful. In addition to allowing us to achieve these financial targets, executing on this investment plan also advances our key objective to advance affordability, reliability, and sustainability over the long term. I'll conclude by reviewing some specific 2023 objectives as you turn to slide 21. Building on the positive momentum from our strong results over the past two years, we remain focused on meeting or exceeding our financial targets in 2023. This year, we'll be working collaboratively with our Kansas regulators and stakeholders to achieve a constructive outcome in our first Kansas Central and Metro rate cases since the merger in 2018. As a key factor in achieving our goal of affordability, we look forward to providing our Kansas customers with the benefits of significant O&M savings we've achieved over the last five years. Consistent with the needs identified in our integrated resource plan, We are focused on closing the acquisition of the 200 megawatt Persimmon Creek Wind Farm this year, which is PISA eligible and will serve our Missouri West customers with clean, low-cost energy. Finally, we've recently launched a new renewables RFP focused on sourcing the balance of our 2024 renewables as well as our 2025-2026 investment objectives. and we will look to complete this process later this year to begin executing agreements to achieve those objectives. We will also update our integrated resource plans in both states in June, which will, for the first time, incorporate the benefits of the Inflation Reduction Act. With that, we'll be happy to take your questions.
spk13: As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Again, that's star 11 on your telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Sullivan of Wolf Research. Your question, please, Michael.
spk10: Hey, everyone. Good morning.
spk13: Good morning.
spk11: Hey, David. Maybe just wanted to start with... The reaffirmation of the 6% to 8% CAGR through 2025, can you maybe just at a high level talk to maybe some of the drivers that get that back on track from 2023, the guidance you gave today?
spk07: You bet. Thanks, Michael. So we acknowledge, as I've noted in my remarks, that we had some headwinds in 2021. Three, and we're short of the midpoint, but we are reaffirming our, I believe we mean that back in that 68% range. And the main driver, I'd cite two factors, but the biggest driver is we're in our peak regulatory lag year, which impacts Kansas Central in particular. As you know, there are some elements of lag in our Kansas jurisdiction, and it's been five years since our last rate case. So as we advance the rate case this year, rates go into effect at year end. That will help address the under-earning that we're having on the many investments that we've made over the past five years. And that's the biggest factor that helped get us back on track. We're sort of in the peak lag year this year. And we've been taking good steps to overcome that lag in 21 and 22. So we're pleased with the results. We were able to offset it. We had some interest rate headwinds and some impacts from Missouri that we didn't fully offset for this year, but we have gone through our model in detail and we absolutely are reaffirming our commitment. The second factor is well known, and that's the ongoing advancement of cost savings. We're going to be delivering significant cost savings in this rate case. The cumulative impacts of savings since 2018, but we have ongoing opportunities ahead of us, and doing those two levers primarily is how we're going to stay on track with respect to our 68% annual earnings growth.
spk11: Okay, that's very helpful. Maybe just on that, you mentioned the regulatory lag. Just on the Metro side, I think this was alluded to in the remarks, but the fact that you hit the sharing this year, I take it that was mostly weather. Was that under-earning too, maybe adjusted for weather, or just give us a feel for where Metro's at into this rate filing?
spk07: Yeah, it partly relates to the nature of the jurisdiction. Metro actually has higher prices, but it's got a level of investment. It's a much more dense urban system. We've been doing a lot of systematic replacement across our much bigger and broader Kansas Central Service Territory. The biggest factor in Metro is weather and the impacts in 2022, and obviously reflects the relative level of investments. Even in a normalize whether we're close to earning our authorized return in Metro, but we're well short of it in Central. So it's just different characteristics of those two jurisdictions. Central is also a lot bigger overall, so a bigger impact on results, but the earnings sharing was a reflection of weather impacts in particular in 2022 on the Metro jurisdiction.
spk11: Okay, great. And then just last one for me, can you maybe just give us a sense of where things are at and where you expect them to go in terms of some of the bills pending at the Kansas legislature, looking at things like appointed commissions and such?
spk07: Sure. So, there are multiple bills in flight in Kansas, pretty active session with respect to utility bills. The one that was passed out of committee but has been – well, I don't want to get into too much process detail. The expectation, you know, our expectation is that there'll be robust discussion around potential election of commissioners. We don't think that makes sense as a policy approach, and that probably has less broad support. So, we don't think that that's going to advance, but there will continue to be good discussion around that. There have been bills advanced relating to right of first refusal for transmission projects, which I think could really benefit customers. terms of predictability, regulatory oversight, and consistency of approach and process. There's a bill that has been advanced related to our transmission delivery charge that is subject to ongoing discussion. It was passed out of committee, but the process term is called blessed by the speaker, so it has not been voted on by the full House in discussions around that. And if it does end up going to the full House, then, of course, it would go over to the Senate. Ongoing discussions in Kansas. It's unclear if Feldman will ultimately pass this year, but we're working closely with stakeholders, and we think those discussions are going constructively.
spk11: Great. Thanks for all the color.
spk07: You bet. Thank you, Michael.
spk13: Thank you. Our next question comes from the line of Char Parisa of Guggenheim. Please go ahead, Char. Hey, good morning, guys.
spk17: Morning, Char.
spk09: So just on the cases in Kansas, which I guess will be filed between now and your next update. So you've got the Kansas Central fuel balance to recover starting in April for two years. You've got, I guess, some O&M give back since the last case and the merger. I guess, how should we think about the holistic targets here for rate increases with all the puts and takes at play?
spk07: It's a great question, Char, because there are a number of elements that will go through the rate case, a number of elements that will not. So, for example, you referenced the URI fuel cost recovery. That's about $125 million that will recover over two years. Kent Central is well insulated from a URI cost relative to most jurisdictions in our region because it's not as gas-heavy, a pretty modest amount in total, though still an amount to recover. That has already been approved through a regulatory process. That's not going to be addressed. in the rate cases. So, the rate cases will focus on the investments that we've made since our last piece, and that will be distribution, generation, general plant, transmission. Kansas Central is reviewed at FERC, so it will not be in the rate case. But, of course, our O&M savings will be part of the rate case. And we put out estimates as part of our various workshops with commission what the rate impacts will be. Now, our estimates of rate impacts were through 2024, and then in our workshop in December, we're through 2026 because it was about a five-year plan. But in general, we've always described that we're targeting rate increases that are in line with or below the annual rate of inflation. Now, it's been five years since the last rate case, so it's going to be a cumulative increase, but our stakeholders well understand that that will be reflecting our cumulative investments over that timeframe. And given the very high inflation in 2022, we're obviously optimistic we'll be able to be under, well under inflation given how high it was broadly in the economy. So we've been able to describe our investment plans as well as our cost reduction programs in a lot of detail. So it's not going to be a lot of surprises because we had those workshops about our capital plans in 2020 and then through May of 21 and again in December of last year. So it'll still be a lively case, as they always are, the first one in five years. But we do think it's pretty straightforward, focused on reviewing our investments, the categories I mentioned, and the cost savings that we've delivered. And there'll be the usual discussion around ROE, of course, and elements like that. Got it. Hopefully that covers the question, Char.
spk09: No, it does. It does. That's helpful. Thank you for that. And then I want to just slightly tweak the prior caller's question here and It's good to see the capex roll to 27, but I'm just sort of thinking about even directionally to profile the EPS growth beyond the 25 guide, right? So the latest capex gets you to around 6% implied rate-based growth. Is there more to squeeze on the O&M side or is more dependent on the Kansas case and the IRP update? I guess put differently, What are the drivers that would push you in and out of your current six to eight guide as we look ahead?
spk07: So it's a great question, Char, and we're not introducing 2026 or beyond guidance today, as you know. But the drivers are, as you know, over time are going to be fundamentally related to rate-based growth, how we fund that. We've got a strong balance sheet. to support our investments and, of course, our ongoing cost savings. Now, we've consistently, really since the SDP was first introduced, have laid out cost targets consistent with what we've shown through 2025. We think that we've got a good system and our employees do a terrific job driving efficiency in our business. The kind of step functions changes and costs that we have are not going to be sustainable over the long term, but annual productivity gains and seeking to drive those are certainly going to be important. So, you noted it, it's going to be rate-based growth, how we fund it, and the O&M cost savings. We're going to update our IRP this year. That's going to have some impacts on our plans with respect to renewables. As I mentioned, the Southwest Power Pool is getting tighter, both because of incremental demand, but also because of a change in how the reserve margins are calculated and an increase in reserve market requirements. So, capacity needs are higher. and demand trends have been strong. We'll start seeing impacts from electrification as well as we get to latter parts of the decade. So a lot of moving parts, but like other utilities, a lot of it comes down to fundamental drivers of rate-based growth, demand growth, how you fund it, and then know now. So we feel good about those drivers in our service territory, and we look forward to providing the update once we've gotten through the IRP update as well as our rate cases.
spk09: So I guess just not to paraphrase what you're saying, but put all that together, you feel okay about tightening up that delta between rate-based growth and EPS growth in time?
spk07: You know, we like the drivers in our service territory, and we know, you know, those, we're certainly confident in our range through 2025 at 68%. And the long-term drivers, you know, we like the setup in our territory, and we look forward to going through 2026 and beyond when we have those details to share.
spk08: Okay, great. Thank you, guys. I appreciate it. Thanks.
spk07: Thanks, Jar.
spk13: Thank you. Our next question comes from the line of Nicholas Campanella of Credit Suisse. Your question, please, Nicholas.
spk16: Hey, good morning, everyone. Thanks for taking my questions today. So I wanted to just follow up on the IRP because, you know, absolutely a focus here. When you kind of think about the opportunity set in front of you and the fact that you're now showing a rate-based CAGR of 6% out to 27, does the IRP extend that 6% or could it potentially increase it? Just trying to understand the magnitude of what's to come. Thanks.
spk07: I feel like I'm your parents telling you, Nicholas. That's a great question. The IRP update is in process. We include our expectations for new generation in our Forward CapEx plans. We've been a slight shift in our expectations regarding the mix of PPAs and renewables. We've got a very heavy weighting towards PPAs right now in our renewables, and we think it's beneficial for customers to have a balance. But in Kansas, we've shifted to a two-thirds assumption of owned and one-third assumption of PPAs. something that will play out in terms of what happens in the actual RFPs that we run and what's going to be most competitive and what offers the most benefits for customers. That's sort of an element no matter what's in the IRP. I do think there are some factors, Nick, that could drive more attractive opportunities for customers in the IRP. And those relate to, you know, we now have significant benefits from the IRA that we didn't have modeled in the IRP last year. Those are not only sizable, but we know that they're going to be in place for a period of time. That clearly aids the relative cost of new renewables, which are pretty cost-effective in our region, and relative to energy provided from fossil resources. We've got a lot of coal, and the traditional ability to drive lower costs for customers by replacing high variable costs, high fuel costs, generation with renewables is going to, I think the IRP will reflect that. Now, wildcard is going to be what our construction costs. My personal view is we may still be facing some bottlenecks that are driving higher costs for construction for renewables, but we've seen in the cycles over time that those do, those constraints are lifted and generally the supply responds robustly and that helps drive down costs over time. So, I think that there are are going to be opportunities given the amount of energy we still produce at relatively high variable and high fuel costs and the tailwinds from the IRA that are going to benefit, you know, we'll have incremental opportunities for renewables. But we'll have to see how the math plays out. And it may be, you know, that math is more compelling once we see construction costs where they are and where they're trending. And the other piece is, you know, with capacity requirements tighter, We're going to have to make sure, and solar is weighted more heavily towards capacity, gas peakers or even potentially CCGT settlement capacity. With growth like what we're seeing in Panasonic, with meta coming in, there's also going to be a growth dynamic that may help drive some incremental resource needs, too, and that are weighted more towards capacity requirements. I know that's a long answer to your question, but hopefully that makes sense. Net-net, I do think there could be some tailwinds in the IRP.
spk16: Okay, thanks for that. And then I guess just on the financing plan, I'm just trying to understand, is it your intention to not do any equity past the 25 timeframe? Because now that you have this CapEx plan out to 27, just wondering how to fund that.
spk24: Hey, Nick, it's Kirk. We certainly, as we've reiterated a number of times, through our 68% growth rate, through 2025, there is no new equity in that particular plan. As you'll see, we came out of 2022, as David said earlier, with a strong balance sheet. We're ahead of our targets. We've got strong, robust free cash flow. We're not a current taxpayer, so we translate net income very efficiently into Operating cash flows, which gives us a pretty good stable of equity to help supplement financing with debt, keep those balance sheets in line. Certainly expect that to be the case through 2025. That will continue because we don't expect to be a tax taxpayer until towards the end of the decade. So we're going to look to balance those two objectives. We'll look at the IRP, obviously, and the impact on the capital expenditure plan. But our goal is to successfully balance our objective to maintain that long-term growth rate as robustly as we can. And that obviously means being prudent about issuing equity while at the same time maintaining those balance sheet objectives. But fortunately, with the combination of those robust cash flows and the foundation we come out of 2022, we feel good about where those balance sheets are and we'll continue to focus on it. And, you know, as we get through the rate case in Kansas and update the IRP, we'll have more specifics about the financing plans long term. But again, the robust cash flow and our tax yield is a tailwind for us as we move forward even beyond 2025.
spk16: Appreciate that, Collar. Thanks, everyone. And I'll take Nick or Nicholas any day.
spk13: Thank you. Our next question comes from the line of Durgesh Chopra of Evercore. Please go ahead, Durgesh.
spk18: Hey, good morning, team. Thanks for taking my question. All other questions. Good morning, David. You've answered all my other questions. Maybe just hit on the PPA opportunity that you've discussed in the past. And what is the sort of the, you know, the opportunity set there for perhaps 2023 and then longer term?
spk24: Yes, sir. Continuing to focus on that, as we talked about in 2022, I, in particular, we were disappointed we weren't able to bring one of those over the finish line, despite a number of engagements with various counterparts. That continues to be the case. As I'm sure you're well aware, there have been a number of renewable portfolios out of the marketplace. There continue to be. Those renewable portfolios often has been the case, continues to be the case going forward, includes some of our PPA counterparties. So we are continuing to be involved in that process. And I think with the clarity that's provided by the IRA, that's given us a little bit better foundation for negotiating that. I don't expect that if we get one of those done, and we're certainly focused on doing it, I think it's certainly possible in 2023. I don't expect that to be a major driver. As I said before, we probably get at least one done, because going back to the next question previously, we want to maintain the strength of our balance sheet as well as stay out of the equity markets as long as we can to maintain that growth rate. But we do have the capacity to get 1 of those done and I think it would be additive. It's not in our capital expenditures expenditure plan, but certainly is a proof of concept of moving that forward. I think there's opportunities are abundant and with a lot of the renewable sales out on the market right now, there are opportunities to participate and get that done. So, more updates to come can't be more definitive than that. But certainly, we've got a growing backlog and an opportunity set to look at with that 4,400 megawatts or 3,800 megawatts of PPA.
spk18: Got it. Thank you. And just to be clear, like the, excuse me, the recovery process or the return on that four gigawatts worth of opportunity, is that through, do you have to go to wait cases as you, as you, or get approvals as you, you know, buy out those PPI opportunities or how does that actually work?
spk24: We would, yes. In certain cases, especially in Kansas, we could kind of pursue that through a predetermination type process. But yet, ultimately, we'd have to pursue both prudency and prosecuting that into a rate case. And obviously, in the case of a simple buy-in, we'd look to do that to more or less replace the pass-through of what is existing PPA with a rate-based investment that's neutral, if not beneficial, to our ratepayers.
spk17: Got it. Thanks so much. I appreciate it, Kirk.
spk13: You bet. Thank you. Our next question. come from the line of Angie Storzinski of Seaport. Your question, please, Angie.
spk15: Thank you. Just a really quick question. So you have 21 cents of a drag in interest expense, and I'm just wondering, you know, I'm assuming that some of it gets trued up in the upcoming Kansas rate cases. So, you know, if I look forward, you know, roughly how much of it you know, would persist beyond this rate case cycle.
spk24: So that's obviously a year-over-year increase. And I think the better way to think about that, you know, 22 going into 23, obviously 22 was a little bit the tail of two rates, for lack of a more elegant way of putting it. We saw increasing rates more in the back half of the year, and that's obviously a full-year effect year-over-year. You're correct. We do have a number of items in that interest rate sensitivity we showed you before. Better at the utility, so we would expect some of that, especially some of those pollution control bonds that you see there. There's a portion of those at Kansas central. There's at least half of those at Metro. And we'd also look at some of that interest rate exposure is obviously our, our, our short term interest rates. Now, a lot of that gets taken up in our mechanism. But as we look to move from our construction work and process to plant and service, we'll look at that short-term rates, which are obviously higher given the backwardation of the curve, and term some of that out. I would expect if we do that in 2023, we will do that time, certainly in Kansas, that will probably take place in the context of our rate case. So a lot of that will get trued up at the end of the day.
spk15: Meaning that the drag for the year-over-year drag, I mean, there shouldn't be any, right? So that should be actually a benefit for a year-over-year match for 24, right? Yeah.
spk24: Yeah.
spk15: Okay.
spk24: I think you're right. The better way to think about that is we've just rolled from a partial year to a current year. So now we're kind of... at current rates in that regard. So I would not get, we don't see a step function going forward into yet another increase in rates over time. And it's really just the increase in debt rather than increasing rate exposure at the end of the day. Thinking about moving from 23 and forward.
spk14: Awesome. That's all I have. Thank you. Thank you.
spk13: Our next question comes from the line of Paul Patterson of Glenrock Associates. Please go ahead, Paul.
spk23: Good morning, guys.
spk21: Morning, Paul.
spk23: So on the IRA and Wolf Creek, I was wondering if you could give us a flavor for what the potential quantification could be. And if that immediately goes to ratepayers or if there might be some sort of positive rate lag or how should we think about that?
spk07: So, Paul, it's going to be fascinating as the rules come out around it. The first thing I noticed that the eligibility will start in 2024, but it is an impact that will flow directly to our customers. So, it will not have an earnings impact. Now, I think anything that helps with respect to customer costs is a good thing because regional rate competitiveness and affordability are critically important for us. And so, there's a tangible benefit that we're really excited about as well. In terms of the mechanism, it will be interesting to see how the rules operate. Presumably, since it's based on yearly realized prices, that may be assessed on a monthly basis. It may be assessed on a back cast at the end of the year. It may be based on day-ahead markets. That probably makes more sense rather than real-time. But all that is yet to be seen. But the net-net is if you went back a couple years, this wouldn't have been true in 2022, Given the high commodity prices, but if you look back at 21 and 20 and 19 and 18, the realized prices at Wolf Creek were below the thresholds that are laid out in the IRA for eligibility for a PTC. And it wouldn't be the full $15 a megawatt hour in all years, but depending on what the go-forward pricing is, it could be up to $15 a megawatt hour for a 1,200 megawatt nuclear unit. So it's a sizable potential benefit for customers. But the mechanism, we believe that's going to flow directly through the fuel clause, which is, you know, again, very important, but not an earnings driver. But it will be interesting to see as the rules come out, and it starts on 24th.
spk23: Great. Then with respect to Persimmon, which you guys put a pretty strong argument for, staff does seem to be – it's a contested case, as you guys know, I guess. Is there any possibility for a settlement?
spk07: Well, we had hearings this week – And obviously we've been in discussions with staff in advance of the hearing. So I do think it's in the commission's hands at this point. We're always, as I mentioned, you know, we're always seeing the work constructively towards approval. We think it is clearly a great option. It's a well-placed option that drives the best overall benefits for our customers in terms of costs in our view. And so we think we've got compelling arguments for adding it. So if we can't sell, it'll be great, but it's in the commission's hands given the it's likely to be an initiative commission result.
spk23: Okay, great. And then with respect to the ROFA bill, I'm sure you guys are familiar with the Fifth Circuit ruling, I guess, dealing with the Texas law and NextEra. I'm wondering, is there anything different about this law versus that, or how should we think about about the First Circuit ruling, and I guess I'm sure it will be appealed to the Supreme Court or whatever, but how should we think about how that law may or may not interact with that court ruling?
spk07: That's a good question. I was actually in Texas at the time the Texas law was passed, so it had some unique elements reflecting the unique elements of the Texas market. There were rofers in place, right of first refusals in place in you know, dozens of jurisdictions around the U.S. And they've stood the test of time in those markets and been beneficial and remain in place. Most of our neighbors have them. Most of the states in the SEP have them. So we'll track that may be narrow to the Texas law, may not. We don't have ROFR in place in Kansas and Missouri, so one step at a time. But I do think the ROFRs that are in place across multiple states, they've been resilient, but we'll obviously have to follow how those cases go. But some unique features, as you know, to the Texas market and that Texas law.
spk23: Okay. And then just finally on transmission, there are a number of FERC proceedings. They seem rather small to me, but there are a number of them, I guess. And they're very technical. They're frankly over my head to some degree in terms of the formulas and what have you. How should we think about just cumulatively – those proceedings and, you know, how you feel about, you know, any potential exposure there or not there, if you follow me.
spk07: I do. And we resolved a couple of proceedings, and one was ruled on by the FERC last year. So, I think that we've – our go-forward guidance reflects our view of the impacts of the overall regulatory framework. That's probably the easiest way to frame it. And some of it is complicated, but probably the most complicated one that was pending because it related to a formula that was in the tariff that was under review. And so, we had to follow the tariff, but obviously, we need to get the formula related to the transmission delivery charge and the transmission formula rates at the FERC level. And that was resolved last year. and our forward guidance that we've discussed reflects the impacts of that case. So there are a lot of technical ones. I guess the easiest way to describe it is that our view of their impact is reflected in our forward plan.
spk23: Okay. Okay, thanks so much, and have a great one. Thank you. You too.
spk13: Thank you. Our next question comes from the line of Ashar Khan of Verition. Please go ahead, Ashar.
spk19: Hi, David. I think so all my questions have been answered. But if I can just, I was just trying to sum up if I may. So you said you're going to have another 100 million of lower savings between now and 2025 if I see the chart. And if I'm right, that's nearly about 40 or 45 cents. So half of them came this year if I'm right. in 2023 because you're showing an O&M decrease or benefit of 20 cents. So is it fair that another 20, 25 cents is left in the next two years? And the other bridge is going to be, of course, transmission earnings and then the Kansas case next year. And shall we factor in another Missouri case that will have some impact for 2025?
spk07: I'll ask Kirk to comment on the O&M piece, but in general, you know, you can do the, we've got about 230 million shares. So, you can calculate how much O&M savings we've got in the next year. I think it's 50 to $6 million range. So, it'd be the remainder that would come through 25. I think Kirk can correct me. We do expect rate cases in the every other year timeframe. So, that would imply, you know, we haven't finalized our plan. So, that would be, that you are correct, it would be the 2024 Missouri rate case. So I think you've got a good sense for the drivers. But Kirk, anything you'd add?
spk24: On the O&M front, just to clarify that, you're right. If I incorporate the $60 million, and that's roughly what that 22 to 23 reduction in O&M equates to. I think I even mentioned that when I was going through the slides. That puts us, I think we came out at 22. You can infer, you can go through our disclosures, about $1.74 billion of non-fuel O&M in 22. So that means with that $60 million of savings, you're at $1.14 billion. We've put a target out there. Our 25 target is 960. So that gives you about $54 million between, you know, from 2023 to 25 over that period of time. So you're right. That rounds for about 20 cents prospectively once you get outside of 23, just to clarify that.
spk19: Okay. Okay. And then if I can just end up, and I know I don't want to front run this because you have been meeting your objectives and that kind of thing. But when will you do a revise, right? Because right now the CAGR is based on 2020. Is that something which will happen a year from now, or is that a 2025 exercise?
spk07: Yeah, it's likely to be a year from now, Shah. We were going to have the integrated resource plan update, and we'll get to the Kansas rate case. So I think that that's going to be most informative for investors. Again, we think the cancer rate case is pretty straightforward, but a lot of eyes are going to be on that rate case. So I think the most likely time for him forward is going to be in a Q4 call about a year from now, which I hope to open with a celebration of another Chiefs Super Bowl.
spk05: Okay. That's correct. We're hoping for that.
spk19: We're hoping for that, too. Thank you so much. So kind of you. Have a nice weekend. Thanks, Ashok. Thanks, Ashok.
spk13: Thank you. I would now like to turn the conference back to David Campbell for closing remarks. Sir?
spk07: All right. All righty. Thanks, Lateef. For everyone on the call or reading later, thank you for your time this morning, and thank you for your interest in Evergy. Have a great day.
spk13: This concludes today's conference call. Thank you for participating. You may now disconnect.
spk15: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1.
spk20: Thank you. Thank you. So, Thank you.
spk13: Thank you for standing by, and welcome to Evergy's fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the call over to Peter Flint, Director in Best of Relations. Please go ahead.
spk25: Thank you, Latif, and good morning, everyone. Welcome to Evergy's fourth quarter 2022 earnings conference call. Our webcast slides and supplemental financial information are available on our investor relations website at investors.evergy.com. Today's discussion will include forward-looking information. Slide 2 and the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations. They also include additional information on our non-GAAP financial measures. Joining us on today's call are David Campbell, President and Chief Executive Officer, and Kirk Andrews, Executive Vice President and Chief Financial Officer. David will cover 2022 highlights, provide upcoming regulatory and legislative updates, and discuss our upcoming Integrative Resource Plan. Kirk will cover our fourth quarter and full year results, retail sales trends, as well as our financial outlook for 2023. Other members of management are with us and will be available during the question and answer portion of the call. I will now turn the call over to David.
spk07: Thanks, Pete, and good morning, everyone. I'd be remiss if I did not start with a recognition of the Kansas City Chiefs and their victory in Super Bowl 57. For football fans who have never been to Arrowhead Stadium, definitely add it to your list. Chiefs Kingdom is quite something to behold. I'll begin on slide five, and I'll start by thanking our employees who work tirelessly throughout the year to advance our strategic objectives of affordability, reliability, and sustainability. I'm proud and honored to lead the Averagy team. With respect to 2022 results, I am pleased to report that we had another solid year. We delivered adjusted earnings of $3.71 per share compared to $3.46 per share in 2021. These results reflect another year of strong execution relative to our objectives. We entered 2022 with a guidance range of $3.43 per share to $3.63 per share, and our results came in $0.08 higher than the top end of the range. Kirk will discuss the drivers of our 2022 results in more detail. Last year, we executed our capital plan to further improve reliability and resiliency, investing $2.2 billion in infrastructure to modernize our grid and replace aging equipment. I'd like to recognize the hard work of our regulatory staff as we completed our first two Missouri rate cases since the merger in 2018. We reached partial settlements on key economic issues at both Metro and Missouri West, delivering significant O&M savings back to our customers. These rate cases underscore our continued progress in maintaining affordability for our customers and increasing our regional rate competitiveness. Through November 2022, we've limited cumulative rate increases to 2.7% since 2017, well below the rate of increase for our regional peers and the prevailing rate of inflation over the five-year period. Slide six profiles a significant improvement that we've made in customer satisfaction as measured by J.D. Power's annual survey of utility customers. Since 2018, we've climbed 10 spots in J.D. Power's Midwest Large Utilities category, coming in at fifth out of 15 companies in 2022. Customer satisfaction remains at the forefront of our strategy. Safety tops our list of core values, and slide seven highlights the considerable progress we've made in limiting safety-related events. Both OSHA recordables and DART cases have declined by over 50% since 2018. Promoting a culture of safety and focusing on every employee going home safely every day are paramount to our success as a company. On slide eight, we introduce our 2023 GAAP and adjusted EPS guidance, of $3.55 per share to $3.75 per share. We know the importance of consistent execution, and we recognize that 2023 falls short of the midpoint relative to our long-term targets, reflecting regulatory lag in our Kansas jurisdiction and our commitment to a five-year rate case stay out as part of the merger. But we remain confident in our ability to deliver annual 6% to 8% adjusted EPS growth through 2025 off of the 2021 baseline, and we are reaffirming that target today. Moving to our five-year capital plan on slide nine, we have updated and extended our forecast through 2027. Our new five-year investment plan totals $11.6 billion from 2023 to 2027, which represents a $900 million increase relative to our 2022 the 2026 forecast, or 9%. Nearly 60% of our planned investment is targeted toward transmission and distribution projects as we continue to modernize our grid to improve reliability and enhance resiliency for our customers. By replacing aging equipment and investing in smart grid technologies, we'll also enable further efficiency gains in serving our customers, which has been a hallmark of Evergy's strategy over the last five years. Slide 10 profiles our progress in driving cost savings. Despite historically high inflation in 2022, we held adjusted O&M flat relative to 2021, representing $232 million in cumulative savings since 2018, or 18%. The work is not done yet, and we remain laser-focused on our target of an additional 11% reduction in adjusted O&M through 2025. As part of this effort, the company implemented a voluntary retirement program in the fall of 2022, which combined with ordinary course retirements and attrition resulted in an 8.5% reduction in the size of the organization by year end. I can't say enough about the hard work of the Evergy team in delivering against and exceeding the savings for customers that were promised as part of the merger that formed our company. As shown on slide 11, Evergy has been able to limit cumulative rate increases to 2.7% since 2017, based on the latest available data from the EIA, which runs through November 2022. This compares favorably to our regional peer states and the prevailing rate of inflation over the same timeframe. Advancing and improving regional rate competitiveness are priorities in our long-term plan and are front of mind for many of our stakeholders, and that's exactly what we've accomplished over the past five years. Moving to slide 12, I'll provide an update on regulatory and legislative priorities, beginning with our rate case filings in Kansas. In mid-April, we'll file our first rate cases at Kansas Central and Kansas Metro since completion of the averaging merger in 2018. We believe these rate reviews will be relatively straightforward, requesting recovery and return on our grid modernization infrastructure investments over the past five years and passing on the benefits of the cost savings we've achieved to our customers. We look forward to working with our regulators and stakeholders to achieve a constructive outcome for our Kansas customers and communities. In Missouri this year, we anticipate a quieter legislative session relative to last year, which saw the extension and amendment of PISA further supporting the constructive regulatory environment in the state. On the regulatory front, we have open dockets for the approval of an operating certificate of convenience and necessity for acquisition of the Persimmon Creek Wind Farm. as well as the securitization from winter storm URI costs incurred at Missouri West. Initial post-hearing briefs are due on March 6th in the Persimmon Creek docket with an order requested by April 6th. We firmly believe Persimmon Creek is the lowest cost solution to serve Missouri West customers consistent with the IRP preferred plan and will continue to work collaboratively with our regulators to secure the necessary approval. Missouri Public Service Commission's approval of our request to securitize extraordinary costs from Winter Storm URI was appealed to the Missouri Court of Appeals by the Office of Public Counsel in early January. OPC's initial briefs are due by early April, 90 days following the appeal date. We believe the Commission's decision to approve our request is well supported by the record. While we cannot complete our securitization financing until the appeal plays out, incremental carrying costs incurred prior to approval will ultimately be recovered when we issue the debt. The last item on the regulatory agenda that I'll reference is the expected June filing of our annual integrated resource plan updates in both Kansas and Missouri, which I'll cover more as you turn to slide 13. The planning process for our IRP filings is well underway as we continue to assess the beneficial impacts of the Inflation Reduction Act on our generation resource planning. The longer-term certainty the IRA provides around renewable energy tax credits will enhance our ability to tap the abundant renewables potential in our region and deliver savings to our customers by replacing higher-cost energy. We expect our Wolf Creek nuclear plant to be eligible for the IRA's nuclear production tax credit, the benefits of which will accrue to our customers in years with low realized prices for Wolf Creek. In addition to these IRA tailwinds, we'll be incorporating updated commodity projections, construction costs, and higher capacity requirements in the Southwest Power Pool into the annual update. We are excited to advance our integrated resource plans to deliver additional benefits to our customers. I'll conclude my remarks with slide 14, which summarizes the Evergy Value Proposition. The left side of the page covers the core tenets of our strategy to advance affordability, reliability, and sustainability through a relentless focus on our customers, supported by stakeholder collaboration, sustainable investment, and financial and operational excellence. The right-hand side features what we believe are particularly attractive and distinctive features for Evergy, given our business mix and geographic location. We are excited about the opportunities for our company, and we are committed to the sustained effort required to deliver against our high-performance objectives. I will now turn the call over to Kirk.
spk24: Thanks, David. Good morning, everyone. And I'll start with the results for the quarter on slide 16. For the fourth quarter of 2022, Evergy delivered adjusted earnings of $68.6 million or $0.30 per share, compared to $32.9 million or $0.14 per share in the fourth quarter of 2021. As shown on the slide, the year-over-year increase in fourth quarter EPS was driven by the following. First, an increase in heating degree days, partially offset by lower demand, drove a net $0.08 increase in EPS compared to the fourth quarter of 2021. Higher transmission margins resulting from both our ongoing investments to enhance our transmission infrastructure and higher volumes drove a $0.04 increase. A decrease in O&M versus the fourth quarter of 2021 drove an $0.08 increase in adjusted EPS for the quarter. These positive drivers were partially offset by three pennies of higher DNA expense and nine cents from the combination of higher interest expense and lower AFUDC equity. Income tax-related items, including increased wind and other tax credits and the timing of the use of tax credits compared to the prior year, drove six cents of higher EPS in the quarter. And finally, other items, both positive and negative, drove a net two pennies of year-over-year increase. These items consist of higher COLE proceeds and other margin, which were partially offset by $0.06 from the Kansas Earnings Sharing Program, which was one of our merger commitments, which expired in 2022. Warmer weather through the summer and into the fall drove our earned ROE at Kansas Metro above our current authorized 9.3%, requiring us to refund half of that excess back to customers. I'll turn next to year-to-date results, which you'll find on slide 17. For the full year 2022, adjusted earnings were $853.8 million, or $3.71 per share, which compares to $795.2 million, or $3.46 per share in 2021. Again, moving from left to right, our full-year EPS drivers versus 21 include the following. Weather contributed 21 cents versus 2021. Relative to normal, weather drove an estimated 29 cents of favorability in 2022. Weather normalized demand was 1.1% higher than 2021, driving an 11 cent increase. Higher transmission margins from increased investment, as well as higher volumes, drove a 15 cent year-over-year increase. and lower O&M drove adjusted EPS 2 cents higher versus 2021. These positive drivers were partially offset by 11 cents of DNA and 14 cents of increased interest expense and lower AFUDC equity, with higher interest expense accounting for 11 of the 14-cent decrease in adjusted EPS. Finally, other items drove a net penny of favorability, consisting primarily of 4 cents from the expiry of merger bill credits 2 cents from tax credits and a penny of other items, which were partially offset by 6 cents from the Earnings Sharing Program, or ERSP, at Kansas Metro, which I mentioned earlier in my fourth quarter remarks. Turning to slide 18, I'll provide a brief update on our recent sales trends. On the left-hand side of the slide, you'll see that total retail sales increased 3.5% in 2022. driven primarily by a strong increase in residential usage and supported by healthy commercial and industrial growth. Looking to the right-hand side of the slide, after adjusting for the estimated impact of weather, retail sales increased 1.1% for the full year. These results were bolstered by strong industrial demand from the oil and chemical refining sectors. The 1.7% increase in weather normalized commercial demand was driven by customer growth and a continued return to normal post-COVID. Underlying the continued growth in residential and commercial customers is a strong labor market. Highlighted by Kansas and the Kansas City metro area unemployment rates of 2.9% and 2.4% respectively as of year-end, these remain below the national average of 3.4%. Overall, in 2022, we saw continued recovery following the pandemic, and our economy is well positioned to extend that positive trend. As a result, adjusting for 30-year weather, we expect an approximate 1.6% increase in weather normalized demand in 2023, which I'll discuss as part of our 2023 EPS guidance, which you'll find on slide 19. Starting on the left side of that slide and beginning with 2022 adjusted EPS of $3.71, we expect an $0.11 decline from demand or just under 1% decrease in total demand. This $0.11 decrease is the net impact of removing that estimated $0.29 impact in 2022 from weather, partially offset by an $0.18 increase in weather normalized demand. Removing the largely weather-driven impact of the Earnings Sharing Program, or ERSP, at Kansas Metro in 2022 results in a $0.06 increase. We expect an approximate $60 million reduction in pre-tax O&M to deliver a $0.20 EPS increase as we continue to execute our cost savings programs as part of our focus on and commitment to affordability and operational excellence. Higher transmission margins are expected to add 13 cents in 2023 as we continue to make investments to improve our transmission infrastructure. The pending acquisition of the Persimmon Creek Wind Farm is expected to drive 5 cents of EPS. These positive drivers are expected to be partially offset by the following. Increased DNA of 16 cents as we continue to invest in infrastructure and execute our capital plan. Increased interest expense of 21 cents due to higher debt balances at higher rates. and two cents of other items, primarily driven by lower year-over-year earnings from a combination of the expiry of a wholesale contract in Kansas and the one-time true-up of URI carrying costs in 2022, which were partially offset by higher expected COLE proceeds. Turning next to slide 20, our strong results in 2022 reflect our ongoing focus on and continuing to build a track record of consistent execution. As David mentioned earlier, we're reaffirming our long-term compound annual EPS growth rate target of 6% to 8% from 2021 to 2025 as we remain confident in achieving that trajectory. And as we continue to progress on that path, we also remain committed to returning capital to our shareholders and target dividend growth in line with earnings growth with that dividend payout ratio of 60% to 70%. Our updated 5-year CapEx plan from 2023 to 2027 totals $11.6 billion and implies rate-based growth of approximately 6% from 2022 to 2027. We've included some additional disclosures in the appendix of today's presentation, including a breakdown of planned expenditures by category and by utility, which we hope you will find helpful. In addition to allowing us to achieve these financial targets, executing on this investment plan also advances our key objective to advance affordability, reliability, and sustainability over the long term. I'll conclude by reviewing some specific 2023 objectives as you turn to slide 21. Building on the positive momentum from our strong results over the past two years, we remain focused on meeting or exceeding our financial targets in 2023. This year, we'll be working collaboratively with our Kansas regulators and stakeholders to achieve a constructive outcome in our first Kansas Central and Metro rate cases since the merger in 2018. As a key factor in achieving our goal of affordability, we look forward to providing our Kansas customers with the benefits of significant O&M savings we've achieved over the last five years. Consistent with the needs identified in our integrated resource plan, We are focused on closing the acquisition of the 200 megawatt Persimmon Creek Wind Farm this year, which is PISA eligible and will serve our Missouri West customers with clean, low-cost energy. Finally, we've recently launched a new renewables RFP focused on sourcing the balance of our 2024 renewables as well as our 2025-2026 investment objectives. And we will look to complete this process later this year to begin executing agreements to achieve those objectives. We will also update our integrated resource plans in both states in June, which will, for the first time, incorporate the benefits of the Inflation Reduction Act. With that, we'll be happy to take your questions.
spk13: As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Again, that's star 11 on your telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Sullivan of Wolf Research. Your question, please, Michael.
spk10: Hey, everyone. Good morning.
spk13: Good morning.
spk11: Hey, David. Maybe just wanted to start with... The reaffirmation of the 6% to 8% CAGR through 2025, can you maybe just at a high level talk to maybe some of the drivers that get that back on track from 2023, the guidance you gave today?
spk07: You bet. Thanks, Michael. So we acknowledge, as I've noted in my remarks, that we had some headwinds in 2021. Three, and we're short of the midpoint, but we are reaffirming our, I believe we mean that back in that six to eight percent range. And the main driver, I'd cite two factors, but the biggest driver is we're in our peak regulatory lag year, which impacts Kansas Central in particular. As you know, there's some elements of lag in our Kansas jurisdiction, and it's been five years since our last rate case. So as we advance the rate case this year, rates go into effect at year end. That will help address the under-earning that we're having on the many investments that we've made over the past five years. And that's the biggest factor that helped get us back on track. We're sort of in the peak lag year this year. And we've been taking good steps to overcome that lag in 21 and 22. So we're pleased with the results. We were able to offset it. We had some interest rate headwinds and some impacts from Missouri that we didn't fully offset for this year, but we have gone through our model in detail and we absolutely are reaffirming our commitment. The second factor is well known, and that's the ongoing advancement of cost savings. We're going to be delivering significant cost savings in this rate case. The cumulative impacts of savings since 2018, but we have ongoing opportunities ahead of us. And doing those two levers primarily is how we're going to stay on track with respect to our 6% to 8% annual earnings growth.
spk11: Okay, that's very helpful. Maybe just on that, you mentioned the regulatory lag. Just on the Metro side, I think this was alluded to in the remarks, but the fact that you hit the sharing this year, I take it that was mostly weather. Was that under-earning too, maybe adjusted for weather, or just give us a feel for where Metro's at into this rate filing?
spk07: Yeah, it partly relates to the nature of the jurisdiction. Metro actually has higher prices, but it's got a level of investment. It's a much more dense urban system. We've been doing a lot of systematic replacement across our much bigger and broader Kansas Central Service Territory. The biggest factor in Metro is weather and the impacts in 2022, and obviously reflects the relative level of investments. Even in a normalized whether we're close to earning our authorized return in Metro, but we're well short of it in Central. So it's a different characteristic of those two jurisdictions. Central is also a lot bigger overall, so a bigger impact on results, but the earnings sharing was a reflection of weather impacts in particular in 2022 on the Metro jurisdiction. Okay, great.
spk11: And then just last one for me, can you maybe just give us a sense of where things are at and where you expect them to go in terms of some of the bills pending at the Kansas legislature, looking at things like appointed commissions and such?
spk07: Sure. So, there are multiple bills in flight in Kansas, pretty active session with respect to utility bills. The one that was passed out of committee but has been – well, I don't want to get into too much process detail. The expectation, you know, our expectation is that there'll be robust discussion around potential election of commissioners. We don't think that makes sense as a policy approach, and that probably has less broad support. So, we don't think that that's going to advance, but there will continue to be good discussion around that. There have been bills advanced relating to right of first refusal for transmission projects, which I think could really benefit customers. terms of predictability, regulatory oversight, and consistency of approach and process. There's a bill that has been advanced related to our transmission delivery charge that is subject to ongoing discussion. It was passed out of committee, but it was – the process term is called blessed by the speaker, so it has not been voted on by the full House in discussions around that. And if it does end up going to the full House, then, of course, it would go over to the Senate. Ongoing discussions in Kansas. Unclear if filming will ultimately pass this year, but we're working closely with stakeholders and we think those discussions are going constructively.
spk11: Great. Thanks for all the color.
spk07: You bet. Thank you, Michael.
spk13: Thank you. Our next question comes from the line of Char Parisa of Guggenheim. Please go ahead, Char. Hey, good morning, guys.
spk17: Morning, Char.
spk09: So just on the cases in Kansas, which I guess will be filed between now and your next update, so you've got the Kansas Central fuel balance to recover starting in April for two years. You've got, I guess, some O&M give back since the last case and the merger. I guess, how should we think about the holistic targets here for rate increases with all the puts and takes at play?
spk07: It's a great question, Char, because there are a number of elements that will go through the rate case, a number of elements that will not. So, for example, you referenced the URI fuel cost recovery. That's about $125 million that will recover over two years. Kent Central is well insulated from a URI cost relative to most jurisdictions in our region because it's not as gas heavy, a pretty modest amount in total, though still an amount to recover. That has already been approved through a regulatory process. That's not going to be addressed. in the rate cases. So the rate cases will focus on the investments that we've made since our last piece, and that will be distribution, generation, general plant, transmission. Kansas Central is reviewed at FERC, so it will not be in the rate case. But of course, our O&M savings will be part of the rate case. And we put out estimates as part of our various workshops with the commission what the rate impacts will be now our estimates of rate impacts were through 2024 and then in our workshop in december we're through 2026 because it was about a five-year plan but in general we've always described that we're uh targeting rate increases that are um in in line with or below the annual rate of inflation now it's been five years since the last rate case um so it's going to be a cumulative increase but we'll our stakeholders well understand that that will be reflecting our cumulative investments over that timeframe. And given the very high inflation in 2022, we're obviously optimistic we'll be able to be under, well under inflation given how high it was broadly in the economy. So we've been able to describe our investment plans as well as our cost reduction programs in a lot of detail. So it's not going to be a lot of surprises because we had those workshops about our capital plans in 2020 and then through May of 21 and again in December of last year. So it'll still be a lively case, as they always are, the first one in five years. But we do think it's pretty straightforward, focused on reviewing our investments, the categories I mentioned, and the cost savings that we've delivered. And there'll be the usual discussion around ROE, of course, and elements like that. Got it. Hopefully that covers the question, Char.
spk09: No, it does. It does. That's helpful. Thank you for that. And then I want to just slightly tweak the prior caller's question here and It's good to see the CapEx roll to 27, but I'm just sort of thinking about even directly the profile, the EPS growth beyond the 25 guide, right? So the latest CapEx gets you to around 6% implied rate-based growth. Is there more to squeeze on the O&M side or is more dependent on the Kansas case and the IRP update? I guess put differently, What are the drivers that would push you in and out of your current six to eight guide as we look ahead?
spk07: So it's a great question, Char, and we're not introducing 2026 or beyond guidance today, as you know. But the drivers are, as you know, over time are going to be fundamentally related to rate-based growth, how we fund that. We've got a strong balance sheet. to support our investments and, of course, our ongoing cost savings. Now, we've consistently, really since the SDP was first introduced, have laid out cost targets consistent with what we've shown through 2025. We think that we've got a good system and our employees do a terrific job driving efficiency in our business. The kind of step functions changes and costs that we have are not going to be sustainable over the long term, but annual productivity gains and seeking to drive those are certainly going to be important. So, if you noted it, it's going to be rate-based growth, how we fund it, and the O&M cost savings. We're going to update our IRP this year. That's going to have some impacts on our plans with respect to renewables. As I mentioned, the Southwest Power Pool is getting tighter, both because of incremental demand, but also because of a change in how the reserve margins are calculated and an increase in reserve market requirements. So, capacity needs are higher. and demand trends have been strong. We'll start seeing impacts from electrification as well as we get to latter parts of the decade. So, a lot of moving parts, but like other utilities, a lot of it comes down to fundamental drivers of rate-based growth, demand growth, how you fund it, and then know now. So, we feel good about those drivers in our service territory, and we look forward to providing the update once we've gotten through the IRP update as well as our rate cases.
spk09: So I guess just not to paraphrase what you're saying, but put all that together, you feel okay about tightening up that delta between rate-based growth and EPS growth in time?
spk07: You know, we like the drivers in our service territory, and we know, you know, those, we're certainly confident in our range through 2025, the 68%. And the long-term drivers, you know, we like the setup in our territory, and we look forward to going through 2026 and beyond when we have those details to share.
spk08: Okay, great. Thank you, guys. I appreciate it. Thanks.
spk07: Thanks, Jar.
spk13: Thank you. Our next question comes from the line of Nicholas Campanella of Credit Suisse. Your question, please, Nicholas.
spk16: Hey, good morning, everyone. Thanks for taking my questions today. So I wanted to just follow up on the IRP because, you know, absolutely a focus here. When you kind of think about the opportunity set in front of you and the fact that you're now showing a rate-based CAGR of 6% out to 27, does the IRP extend that 6% or could it potentially increase it? Just trying to understand the magnitude of what's to come. Thanks.
spk07: I feel like I'm your parents telling you, Nicholas. That's a great question. The IRP update is in process. We include our expectations for new generation in our forward CapEx plans. We've been a slight shift in our expectations regarding the mix of PPAs and renewables. We've got a very heavy weighting towards PPAs right now in our renewables, and we think it's beneficial for customers to have a balance. But in Kansas, we've shifted to a two-thirds assumption of owned and one-third assumption of PPAs. something that will play out in terms of what happens in the actual RFPs that we run and what's going to be most competitive and what offers the most benefits for customers. That's sort of an element no matter what's in the IRP. I do think there are some factors, Nick, that could drive more attractive opportunities for customers in the IRP. And those relate to, you know, we now have significant benefits from the IRA that we didn't have modeled in the IRP last year. Those are not only sizable, but we know that they're going to be in place for a period of time. That clearly aids the relative cost of new renewables, which are pretty cost-effective in our region, and relative to energy provided from fossil resources. We've got a lot of coal, and the traditional ability to drive lower costs for customers by replacing high variable costs, high fuel costs, generation with renewables is going to, I think the IRP will reflect that. Now, wildcard is going to be what our construction costs. My personal view is we may still be facing some bottlenecks that are driving higher costs for construction for renewables, but we've seen in the cycles over time that those do, those constraints are lifted, and generally the supply responds robustly, and that helps drive down costs over time. So, I think that there are are going to be opportunities given the amount of energy we still produce at relatively high variable and high fuel costs and the tailwinds from the IRA that are going to benefit, you know, we'll have incremental opportunities for renewables. But we'll have to see how the math plays out. And it may be, you know, that math is more compelling once we see construction costs where they are and where they're trending. And the other piece is, you know, with capacity requirements tighter, We're going to have to make sure, and solar is weighted more heavily towards capacity, gas peakers or potentially CCGT settlement capacity. With growth like what we're seeing in Panasonic, with meta coming in, there's also going to be a growth dynamic that may help drive some incremental resource needs, too, and that are weighted more towards capacity requirements. I know that's a long answer to your question, but hopefully that makes sense. Net-net, I do think there could be some tailwinds in the IRP.
spk16: Okay, thanks for that. And then I guess just on the financing plan, I'm just trying to understand, is it your intention to not do any equity past the 25 timeframe? Because now that you have this CapEx plan out to 27, just wondering how to fund that.
spk24: Hey, Nick, it's Kirk. We certainly, as we've reiterated a number of times, through our 68% growth rate, through 2025, there is no new equity in that particular plan. As you'll see, we came out of 2022, as David said earlier, with a strong balance sheet. We're ahead of our targets. We've got strong, robust free cash flow. We're not a current taxpayer, so we translate net income very efficiently into Operating cash flows, which gives us a pretty good stable of equity to help supplement financing with debt, keep those balance sheets in line. Certainly expect that to be the case through 2025. That will continue because we don't expect to be a tax cash payer until towards the end of the decade. So we're going to look to balance those two objectives. We'll look at the IRP, obviously, and the impact on the capital expenditure plan. But our goal is to successfully balance our objective to maintain that long-term growth rate as robustly as we can. And that obviously means being prudent about issuing equity while at the same time maintaining those balance sheet objectives. But fortunately, with the combination of those robust cash flows and the foundation we come out of 2022, we feel good about where those balance sheets are and we'll continue to focus on it. And, you know, as we get through the rate case in Kansas and update the IRP, we'll have more specifics about the financing plans long term. But again, the robust cash flow and our tax yield is a tailwind for us as we move forward even beyond 2025.
spk16: Appreciate that, Collar. Thanks, everyone. And I'll take Nick or Nicholas any day.
spk13: Thank you. Our next question comes from the line of Durgesh Chopra of Evercore. Please go ahead, Durgesh.
spk18: Hey, good morning, team. Thanks for taking my question. All other questions. Good morning, David. You've answered all my other questions. Maybe just hit on the PPA opportunity that you've discussed in the past. And what is the sort of the, you know, the opportunity set there for perhaps 2023 and then longer term?
spk24: Yes, sir. Continuing to focus on that, as we talked about in 2022, I, in particular, we were disappointed we weren't able to bring one of those over the finish line, despite a number of engagements with various counterparties. That continues to be the case. As I'm sure you're well aware, there have been a number of renewable portfolios out of the marketplace. There continue to be. Those renewable portfolios often has been the case, continues to be the case going forward, includes some of our PPA counterparties. So we are continuing to be involved in that process. And I think with the, the clarity that's provided by the IRA, that's given us a little bit better foundation for negotiating that. I don't expect that if we get 1 of those done, and we're certainly focused on doing, and I think certainly possible in 2023. I don't expect that to be a major driver. As I said, before we probably get at least 1 done, because going back to the next question previously, we want to maintain the strength of our balance sheet as well as stay out of the equity market as long as we can to maintain that growth rate. But we do have the capacity to get 1 of those done and I think it would be additive. It's not in our capital expenditures expenditure plan, but certainly is a proof of concept of moving that forward. I think there's opportunities are abundant and with a lot of the renewable sales out on the market right now, there are opportunities to participate and get that done. So, more updates to come can't be more definitive than that. But certainly, we've got a growing backlog and an opportunity set to look at with that for 4,400 megawatts or 3,800 megawatts of PPA.
spk18: Got it. Thank you. And just to be clear, like the, excuse me, the recovery process or the return on that four gigawatts worth of opportunity, is that through, do you have to go to wait cases as you, as you, or get approvals as you, you know, buy out those PPA opportunities or how does that actually work?
spk24: We would, yes. In certain cases, especially in Kansas, we could kind of pursue that through a predetermination type process. But yet, ultimately, we'd have to pursue both prudency and prosecuting that into a rate case. And obviously, in the case of a simple buy-in, we'd look to do that to more or less replace the pass-through of what is existing PPA with a rate-based investment that's neutral, if not beneficial, to our ratepayers.
spk17: Got it. Thanks so much. I appreciate it, Kirk.
spk13: You bet. Thank you. Our next question. comes from the line of Angie Storzinski of Seaport. Your question, please, Angie.
spk15: Thank you. Just a really quick question. So you have 21 cents of a drug in interest expense, and I'm just wondering, you know, I'm assuming that some of it gets trued up in the upcoming Kansas rate cases. So, you know, if I look forward, you know, roughly how much of it you know, would persist beyond this rate case cycle.
spk24: So that's obviously a year-over-year increase. And I think the better way to think about that, you know, 22 going into 23, obviously 22 was a little bit the tail of two rates, for lack of a more elegant way of putting it. We saw increasing rates more in the back half of the year, and that's obviously a full-year effect year-over-year. You're correct. We do have a number of items in that interest rate sensitivity we showed you before. Better at the utility, so we would expect some of that, especially some of those pollution control bonds that you see there. There's a portion of those at Kansas central. There's at least half of those at Metro. And we'd also look at some of that interest rate exposure is obviously our, our, our short term interest rates. Now, a lot of that gets taken up in our mechanism. But as we look to move from our construction work and process to plant and service, we'll look at that short-term rates, which are obviously higher given the backwardation of the curve, and term some of that out. I would expect if we do that in 2023, we will do that, you know, timed certainly in Kansas. That will probably take place in the context of our rate case. So a lot of that will get trued up at the end of the day.
spk15: Meaning that the drag for the year over year drag. I mean, there shouldn't be any right so that that should be actually a benefit for a year over year math for 24, right? Yeah.
spk24: Yeah.
spk15: Okay.
spk24: I think the better the better way to think about that is we've just rolled from a partial year to a current year. So now now we're kind of. at current rates in that regard. So I would not, we don't see a step function going forward into yet another increase in rates over time. And it's really just the increase in debt rather than increasing rate exposure at the end of the day. We're thinking about moving from 23 and forward.
spk14: Awesome. That's all I have. Thank you. Thank you.
spk13: Our next question comes from the line of Paul Patterson of Glenrock Associates. Please go ahead, Paul.
spk23: Good morning, guys.
spk21: Morning, Paul.
spk23: So on the IRA and Wolf Creek, I was wondering if you could give us a flavor for what the potential quantification could be. And if that immediately goes to ratepayers or if there might be some sort of positive rate lag or how should we think about that?
spk07: So, Paul, it's going to be fascinating as the rules come out around it. The first thing to note is that the eligibility will start in 2024, but it is an impact that will flow directly to our customers. So, it will not have an earnings impact. Now, I think anything that helps with respect to customer costs is a good thing. Regional rate competitiveness and affordability are critically important for us, and so there's a tangible benefit that we're really excited about as well. In terms of the mechanism, it will be interesting to see how the rules operate, like presumably since it's based on yearly realized prices, that may be assessed on a monthly basis. It may be assessed on a back cast at the end of the year. It may be based on day ahead markets. That probably makes more sense rather than real time. But all that is yet to be seen. But the net-net is if you went back a couple years, this wouldn't have been true in 22 given the high commodity prices, but if you look back at 21 and 20 and 19 and 18, the realized prices at Wolf Creek were below the thresholds that are laid out in the IRA for eligibility for a PTC. And it wouldn't be the full $15 a megawatt hour in all years, but depending on what the go-forward pricing is, it could be up to $15 a megawatt hour for a 1,200 megawatt nuclear unit. So it's a sizable potential benefit for customers. But the mechanism, we believe that's going to flow directly through the fuel clause, which is, again, very important, but not an earnings driver. But it'll be interesting to see as the rules come out, and it starts on 24th. Great.
spk23: Then with respect to Persimmon, which you guys put a pretty strong argument for, staff does seem to appeal. It's a contested case, as you guys know, I guess. Is there any possibility for a settlement?
spk07: Well, we had hearings this week. And obviously we've been in discussions with staff in advance of the hearing. So I do think it's in the commission's hands at this point. We're always, as I mentioned, you know, we're always seeing the work constructively towards approval. We think it is clearly a great option. It's a well-placed option that drives the best overall benefits for our customers in terms of costs in our view. And so we think we've got compelling arguments for adding it. So we can't say it'll be great, but it's in the commission's hands given the 10-line is likely to be an initiative commission result.
spk23: Okay, great. And then with respect to the ROFR bill, I'm sure you guys are familiar with this Fifth Circuit ruling, I guess, dealing with the Texas law and next year. I'm wondering, is there anything different about this law versus that, or how should we think about about the First Circuit ruling, and I guess I'm sure it will be appealed to the Supreme Court or whatever, but how should we think about how that law may or may not interact with that court ruling?
spk07: That's a good question. I was actually in Texas at the time the Texas law was passed, so it had some unique elements reflecting the unique elements of the Texas market. There were rofers in place, right of first refusals in place in you know, dozens of jurisdictions around the U.S., and they've stood the test of time in those markets and been beneficial and remain in place. Most of our neighbors have them. Most of the states in the SVP have them. So we'll track. It may be narrow to the Texas law. It may not. We don't have ROFR in place in Kansas and Missouri, so one step at a time. But I do think the ROFRs that are in place across multiple states, they've been resilient, but we'll obviously have to follow how those cases go. But some unique features, as you know, to the Texas market and that Texas law.
spk23: Okay. And then just finally on transmission, there are a number of FERC proceedings. They seem rather small to me, but there are a number of them, I guess. And they're very technical. They're frankly over my head to some degree in terms of the formulas and what have you. How should we think about just cumulatively – those proceedings and, you know, how you feel about, you know, any potential exposure there or not there, if you follow me.
spk07: I do. And we've resolved a couple of proceedings, and one was ruled on by the FERC last year. So, I think that we've – our go-forward guidance reflects our view of the impacts of the overall regulatory framework. That's probably the easiest way to frame it. And some of it is complicated, but probably the most complicated one that was pending because it related to a formula that was in the tariff that was under review. And so we had to follow the tariff, but obviously we need to get the formula related to the transmission delivery charge and the transmission formula rates at the FERC level. And that was resolved last year. and our forward guidance that we've discussed reflects the impacts of that case. So there are a lot of technical ones. I guess the easiest way to describe it is that our view of their impact is reflected in our forward plan.
spk23: Okay. Okay, thanks so much, and have a great one. Thank you. You too.
spk13: Thank you. Our next question comes from the line of Ashar Khan of Verition. Please go ahead, Ashar.
spk19: Hi, David. I think so all my questions have been answered. But if I can just, I was just trying to sum up if I may. So you said you're going to have another 100 million of lower savings between now and 2025, if I see the chart. And if I'm right, that's nearly about 40 or 45 cents. So half of them came this year, if I'm right. in 2023 because you're showing an O&M decrease or benefit of 20 cents. So is it fair that another 20, 25 cents is left in the next two years? And the other bridge is going to be, of course, transmission earnings and then the Kansas case next year. And shall we factor in another Missouri case that will have some impact for 2025?
spk07: I'll ask Kirk to comment on the O&M piece, but in general, you know, you can do the, we've got about 230 million shares. So you can calculate how much O&M savings we've got in the next year. I think it's 50 to $6 million range. So it'd be the remainder that would come through 25. I think Kirk can correct me. We do expect rate cases in the every other year timeframe. So that would imply, you know, we haven't finalized our plan. So that would be that you're correct. That would mean a 2024 Missouri rate case. So I think you've got a good sense for the drivers. But Kirk, anything you'd add?
spk24: On the O&M front, just to clarify that, you're right. If I incorporate the $60 million, and that's roughly what that 22 to 23 reduction in O&M equates to. I think I even mentioned that when I was going through the slides. That puts us, I think we came out at 22. You can infer, you can go through our disclosures, about $1.74 billion of non-fuel O&M in 22. So that means with that $60 million of savings, you're at $1.14 billion. We've put a target out there. Our 25 target is 960. So that gives you about $54 million between, you know, from 2023 to 25 over that period of time. So you're right. That rounds for about 20 cents prospectively once you get outside of 23, just to clarify that.
spk19: Okay. Okay. And then if I can just end up, and I know I don't want to front run this because you have been meeting your objectives and that kind of thing. But when will you do a revise, right? Because right now the CAGR is based on 2020. Is that something which will happen a year from now, or is that a 2025 exercise?
spk07: Yeah, it's likely to be a year from now, Shahar. We were going to have the integrated resource plan update, and we'll get to the Kansas rate case. So I think that that's going to be most informative for investors. Again, we think the cancer rate case is pretty straightforward, but a lot of eyes are going to be on that rate case. So I think the most likely time frame forward is going to be in the Q4 call about a year from now, which I hope to open with a celebration of another Chiefs Super Bowl.
spk05: Okay. That's correct. We're hoping for that.
spk19: We're hoping for that, too. Thank you so much. So kind of you. Have a nice weekend. Thanks, Ashok. Thanks, Ashok.
spk13: Thank you. I would now like to turn the conference back to David Campbell for closing remarks. Sir?
spk07: All right. All righty. Thanks, Lateef. For everyone on the call or reading later, thank you for your time this morning, and thank you for your interest in Evergy. Have a great day.
spk13: This concludes today's conference call. Thank you for participating. You may now disconnect.
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