Evergy, Inc.

Good day and thank you for standing by. Welcome to the Q1 2024 Evergy, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Pete Flynn, Director of Investor Relations. Please go ahead.

Thank you, Brianna. Good morning, everyone. Welcome to Evergy's first quarter 2024 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 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, Chairman and Chief Executive Officer and Kirk Andrews, Executive Vice President and Chief Financial Officer. David will cover first quarter highlights, our updated integrated resource plan, and provide an update on our regulatory and legislative priorities. Kirk will cover in more detail our first quarter results, retail sales trends, and our financial outlook for 2024. Other members of management are with us and will be available during the Q&A portion of the call. I'll now turn the call over to David.

Thank you, Pete, and good morning, everyone. I'll begin on slide five. This morning we reported first quarter adjusted earnings of 54 cents per share compared to 59 cents per share a year ago. Relative to last year, this quarter's results were driven by higher operations and maintenance expense, depreciation and amortization expense, and interest expense, partially offset by new retail rates and transmission margin. Unseasonably warm weather was also a factor. Heating degree days were 11% below normal for the quarter, negatively impacting our results by an approximate $0.07 per share. Kirk will discuss these earnings drivers in more detail in his remarks. In terms of reliability, we've experienced a good start to the year through March. Our average added duration and frequency, measured by SADIE and SAFE, are trending favorably relative to our targets, demonstrating the benefits of our continued grid modernization investment and the hard work of our transmission and distribution teams. I'm also pleased to report that we're nearing completion of the 26th Wolf Creek nuclear refueling outage, consistent with our plans. Wolf Creek generates around 1,200 megawatts of non-carbon emitting energy, enough to power more than 800,000 homes. The plan employs over 700 people, and that number effectively doubles during outages. I'd like to thank everyone involved for their hard work and focus on sustaining the excellent operational performance of the plant. Our team's execution has enabled a solid start to the year despite the mild weather, and we are reaffirming our 2024 adjusted EPS guidance range of $3.73 to $3.93 per share, as well as our target long-term annual adjusted EPS growth target of 4% to 6% from 2023 to 2026. Slide 6 highlights our Triennial Integrated Resource Plan, or IRP, which was filed on April 1st in Missouri and will be filed on May 17th in Kansas. This year's IRP reflects the impacts of updating our long-term expected load growth, including the addition of the recently announced Google Data Center in Missouri, as well as other important inputs, such as resource adequacy requirements of the Southwest Power Pool, construction cost estimates, and commodity price forecasts. I'd like to briefly touch on the new rules recently issued by the Environmental Protection Agency. Our IRP process includes consideration of environmental rules, SPP rules, and other regulatory requirements, so the EPA's newly issued rules will play a role in our resource planning going forward. Our overarching goal in the IRP process is to identify the most cost-effective and resilient plan that reliably serves our customers across uncertain future scenarios. And natural gas additions, as shown in our IRP, are being planned in a manner that will allow Evergy to reduce carbon emissions, take advantage of best-in-class efficiency, and support economic development in our service territory, while striving to minimize the impact on affordability and ensuring that we can provide reliable electric service. We are assessing the potential impact of the new EPA rules from an affordability and reliability perspective. as the rules would likely require significant incremental investment relative to what is currently in our IRP. For example, carbon capture and storage is an important element in the new greenhouse gas rule. At present, carbon capture and storage technology is not commercially demonstrated at scale on existing plants. Along with costly and as yet unproven retrofitted control equipment, it would require pipeline and storage infrastructure, which are not in place in our region. The EPA rules are expected to face legal challenges, and we will monitor those developments closely. As a reminder, in 2023, nearly half of the energy that we generated for retail customers came from carbon-free resources, reflecting the contributions of our Wolf Creek nuclear plant and the 4,600-megawatt portfolio of renewable resources that we either own or contract through long-term power purchase agreements. Evergy has invested significantly to enable our fossil units to meet existing environmental standards, operate reliably, and be available to support our customers when called upon. We continue to take a balanced forward view of generation needs as shown through our IRP, which includes significant new solar, wind, and natural gas, balanced against the paced retirements of our coal fleet. In aggregate, the 2024 preferred plan includes 5,800 megawatts of resource additions through 2033, representing an increase of 1,500 megawatts over the next 10 years when compared to the 2023 preferred plan. As our generation fleet evolves, we are focused on achieving a responsible balance between renewables, which are non-emitting and have low or negative marginal costs but are intermittent, and both new and existing thermal resources, which have higher marginal costs for fuel and O&M, but can be dispatched to meet customer demand when they are needed most. The ultimate goal of this balance is to ensure reliability and affordability for our customers as we advance a responsible transition of our generation fleet. This transition will require sustained investment over the coming years and will incorporate the most recent IRP and its higher levels of new generation when we provide an update to our capital plan in the third quarter earnings call later this year. On slide seven, we highlight details about three customers, Google, Panasonic, and Meta, which represent major economic development wins in three of our four jurisdictions. In aggregate, demand from these three customers represents approximately 750 megawatts of load, and each will be the largest customer in their respective jurisdiction by a wide margin. The overall economic development pipeline continues to show promise in both Kansas and Missouri with more than $10 billion of projects considering locating in our service territories. We are very excited to work with these potential customers as they consider our region. As part of the exercise alongside the economic development rates that are in place in both Kansas and Missouri, we are looking at rate design elements to ensure that there is appropriate and adequate recovery associated with large new loads. More broadly, our strategic focus on affordability and regional rate competitiveness is an important contributor to this large pipeline and provides a foundation for our support of the tremendous economic potential in our states. As shown on slide eight, when factoring in economic development and these large new loads, including the recently announced Google data center, we are extending our weather normalized demand growth forecast of 2% to 3% to 2028 off of the 2023 base. which previously ran through 2026. Moving to slide nine, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri. I'm very pleased to start by discussing House Bill 2527 in Kansas, which becomes effective on July 1st of this year. The passage of HB 2527 signals the support of Kansas legislators, regulators, and stakeholders for infrastructure investment in support of economic development and the importance of a competitive and constructive regulatory framework for that infrastructure investment. It is an exciting time in our region, as reflected by the significantly higher sales growth forecast relative to recent history that is described. In terms of financial impact, the piece of provisions in HB 2527 serve to mitigate regulatory lag between rate cases very similar to how it works in Missouri. The construction work in progress provisions that apply to new natural gas units also demonstrate Kansas' support for our plans to invest in new gas-fired generation. For our current capital expenditure plan, many of you have asked to quantify the financial impact relative to not having HB 2527 in place and how it helps to reduce the gap between allowed returns and actual realized returns. Under the provisions of the new law, in the first year following a rate case, at our current investment levels, the impact is roughly three to four cents per share. If we go two full years between rate cases, the impact is roughly 10 cents in the second year. And as we've described, we expect our cadence of rate cases going forward to be roughly every other year, though that won't be true for every jurisdiction. Of course, that estimated impact is a standalone view of a single item and does not factor in does not factor in any other potential drivers, such as changes in interest rates or changes to the capital plan, just to cite two examples. Overall, the most important aspect of the passage of HB 2527 is the alignment that it reflects in Kansas about a competitive framework for investment as we respond to historic economic development opportunities. I'd like to thank legislative leaders, Kansas Corporation Commission staff, representatives from CURB, industrial stakeholders, the governor's office, and many other stakeholders, as well as the Evergy public affairs team, for their participation and engagement in getting this legislation passed. I also want to highlight the passage of Senate Bill 410, which provides a 10-year property tax exemption for newly constructed natural gas units. The benefits of this exemption will be shared with our customers. This bill further reflects Kansas' support for our planned natural gas investments, which are a crucial aspect of our long-term resource planning to meet the demands of our growing customer base and ensure reliability. On May 17th, we will file our 2024 IRP with the Kansas Corporation Commission, provide our outlook for Kansas Central similar to what we provided in our Missouri IRP filing. Now, pivoting to Missouri, we continue to work our way through our pending general rate case in Missouri West. On June 27th, staff and other interveners will file their direct testimonies. and rebuttal testimony is due by August 6th. During the subsequent weeks, parties will file true-up and true-rebuttal testimony, followed by a settlement conference around September 23rd. Hearings will occur in late September through early October, and revised rates in Missouri West will go into effect in January 2025. We look forward to working collaboratively with the Missouri Public Service Commission staff and our stakeholders to achieve a constructive outcome for our Missouri West customers. Regarding Missouri legislative initiatives, language to amend the PISA statute has passed the House and awaits further action in the Senate. Key provisions would amend the PISA statute to include new natural gas units at a 90% deferral and extend the PISA sunset to 2035. Discussions around the topic and the need for new gas generation have been positive, reflecting broad support. However, given the schedule and overall session dynamics, it will be hard to get any new legislation passed in the short time remaining for the 2024 session. This initiative is no exception. I'll conclude my remarks with slide 10, which highlights the core tenets of our strategy, affordability, reliability, and sustainability. Our efforts to enhance affordability have yielded significant progress in improving regional rate competitiveness over the past few years. Our strategic plan is designed to sustain this positive trajectory. By prioritizing affordability, we contribute the robust economic development pipeline ahead of us, and support the substantial economic potential within our states. Ensuring reliability is also a core element of our strategy as reflected by SADI safety, grid resiliency, and public safety. This also includes a focus on metrics relating to customer service, the commercial availability of our fleet, safety in all elements of our operations, including infrastructure investments. With respect to sustainability, We continue to advance the cost-effective transition of our generation fleet. Since 2005, we have reduced carbon emissions by 53% and reduced sulfur dioxide and NOx emissions by 98% and 90%, respectively. We look forward to ongoing progress along this path. Our mission is to empower a better future, and our vision is to lead the responsible energy transition in our region, always with an eye on affordability and reliability, as well as sustainability. I will now turn the call over to Kirk.