Evergy, Inc.

Good day, and thank you for standing by. Welcome to the third quarter 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that 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, Peter Flynn, Director of Investor Relations. Please go ahead.

Thank you, Jill, and good morning, everyone. Welcome to Evergy's third 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 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, Chairman and Chief Executive Officer, and Brian Buckler, Executive Vice President and Chief Financial Officer. David will cover third quarter highlights, provide updates on our generation plans and our regulatory and legislative agendas, and discuss updates to our financial outlook. Brian will cover our third quarter results, retail sales trends, and our long-term guidance. 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.

Thanks, Pete, and good morning, everyone. I'll begin on slide five. This morning, we reported third quarter adjusted earnings. of $2.02 per share compared to $1.88 per share a year ago. The increase over last year was driven primarily by demand growth, new retail sales, and FERC investments, partially offset by cooler summer weather and higher depreciation and amortization expense. Our year-to-date adjusted earnings are $3.46 per share compared to $3.27 per share a year ago. With these solid results year-to-date, we are reaffirming our 2024 Adjusted EPS guidance range of $3.73 per share to $3.93 per share. Brian will discuss these earnings drivers in more detail in his portion of the remarks. Speaking of Brian, as many of you know, he joined Evergy on October 1st as our chief financial officer. Brian brings a strong track record of experience to our company, and he'll be a tremendous addition to our leadership team. I would also like to thank Jeff Lay for his very able service in the interim role. We all look forward to working with Brian, and I know he will be a great mentor and leader for our financial organization. As part of today's announcement, we are establishing our 2025 adjusted EPS guidance range of $3.92 per share to $4.12 per share, with a midpoint of $4.02 per share. We're also establishing a long-term growth target of 4% to 6% through 2029, based on the 2025 midpoint of $4.02 per share. From 2026 to 2029, we anticipate being in the top half of this guidance range relative to the 2025 baseline. I'll provide more details in the upcoming slides. I'm also happy to announce a 4% increase in our quarterly dividend, or $2.67 per share on an annualized basis. This increase is consistent with our updated growth outlook and working toward the midpoint of our 60 to 70% target payout ratio. Let's move on to slide six, where I'll highlight our recently announced new generation investments that will help enable the historic economic development opportunities in Kansas and Missouri. As we outlined in our 2024 integrated resource plans, our overarching goal is to identify the most cost effective and resilient plan that reliably serves our customers across uncertain future scenarios. We expect to achieve that goal through a balanced approach to new resource additions, including the use of the latest, most efficient new technologies for dispatchable generation, complemented by emissions-free renewable resources that support economic development in the communities we serve, all while maintaining affordable rates and ensuring that we provide reliable electric service. On October 21st, we announced plans to invest in two new combined cycle natural gas plants in Sumner County and Reno County, Kansas. These high-efficiency plants will provide flexible baseload generation that meets stringent emission standards and pairs well with the abundant renewable resources in our region. Over 1,000 jobs will be required for the construction phase of these plants, which will create new skilled craft jobs and generate substantial property tax revenues. We launched the predetermination process with the Kansas Corporation Commission yesterday, and we look forward to working with KCC staff, CURB, and other parties toward a constructive outcome. Later this month, we will file CCN applications for the Missouri share of the new gas plants, including a simple cycle plant to be located in Missouri. Construction of these plants is scheduled to begin in 2026 and 2027, respectively. And if approved, these investments will be eligible for CWIP treatment in Kansas, or Construction Work in Progress treatment in Kansas, as provided for under House Bill 2527. We've also announced investments in three solar farms, totaling 325 megawatts. These will be our company's first utility-scale solar projects at Kansas Central and Missouri West, adding an important element to our portfolio and reflecting an all-of-the-above generation mix. We anticipate all three projects to start commercial operations in 2027. We filed a request for certificates of convenience and necessity with the Missouri Public Service Commission on October 25th for two projects totaling 165 megawatts, both of which will be eligible for PISA treatment in Missouri. In addition, we filed for predetermination for a 159 megawatt solar project in Kansas in tandem with the filing for the new natural gas plants. We are very excited to advance our responsible energy transition as Evergy prepares to meet the growing demands of our customers, ensuring that their needs are met both today and in the future. Slide seven lays out our updated capital expenditure forecast, which has been extended through 2029. Our latest rolling five-year investment plan totals approximately $16.2 billion from 2025 to 2029, which represents a $3.7 billion increase relative to our prior five-year forecast through 2028. The forecast includes $2.4 billion of incremental generation investment and $1.3 billion of incremental distribution investment to support growth and improve reliability and resiliency. The program is expected to result in 8% annualized rate-based growth through 2029. We'll take a prudent approach to financing the tremendous growth opportunity this investment plan represents, utilizing a balanced mix of debt, equity and equity-like securities, and internally generated cash flow to support our balance sheet and strong investment-grade credit rating. We'll take a flexible approach to equity financing with optionality around timing and execution options. Brian will provide more details on our financing strategy in his remarks. Our revised capital forecast incorporates a significant portion of the integrated resource plans filed in April and May of this year. These IRPs prioritize a cost-effective approach to reliably serve customers and result in a balanced mix that enables fuel diversification and responsible portfolio transition. And alongside these new generation investments, the majority of our five-year capital plan is focused on transmission and distribution projects and other investments that advance our strategic objectives of affordability, reliability, and sustainability, and enable us to support the tremendous economic development opportunities in our states. On slide eight, we introduce our updated adjusted EPS growth outlook, which contemplates 4% to 6% growth off the 2025 adjusted EPS guidance midpoint of $4.02, with an expectation to grow in the top half of the range through 2029. The midpoint of 2025 guidance represents a 5% increase over the 2024 guidance midpoint consistent with our prior target. Our updated growth outlook is driven by our $16.2 billion five-year capital plan, which includes the investments to serve the 2% to 3% low growth that we expect through 2029. We anticipate a regular cadence of rate case filings across our jurisdictions approximately every 18 months, but that won't be true every cycle or in every jurisdiction. Importantly, our growth outlook only reflects the three large new customers announced today. Brian will describe the growth drivers in more detail in his remarks. Moving to slide nine, we were pleased to reach a unanimous settlement with stakeholders in our pending Missouri West rate case, which, if approved by the Missouri PSC, would provide a balanced outcome for customers. The settlement calls for a net revenue increase of $55 million, which also reflects a significant reduction in fuel costs and base rates. The settlement includes the addition of our 22% share of the Dogwood Energy Center, an operating combined cycle gas plant identified in our 2023 IRP. Dogwood provides a low-cost generation solution to support our customers' energy needs. The fuel adjustment clause sharing mechanism remains an outstanding item that will require a commission ruling. We believe that our position, which contemplates maintaining the existing 95% and 5% sharing splits, is well supported by the record and passed commission decision. We continue to view Missouri as a supportive jurisdiction for infrastructure investment as evidenced by this rate case. We expect a commission order in December with new rates effective by January 1st, 2025. On slide 10, I'll provide a brief update on our regulatory and legislative priorities in both Kansas and Missouri. First, I'm pleased to highlight House Bill 2527 in Kansas, which became effective on July 1st. The passage of HB 2527 reflects the support of Kansas legislators, regulators, and stakeholders for infrastructure investment in support of economic development. As we described earlier, our capital investment plan includes new combined cycle gas plants and incremental distribution projects, which will qualify for CWIP treatment and PISA treatment, respectively, which serve to mitigate regulatory lag and support our credit profiles. We look forward to our capital structure workshop and ROE workshop in Kansas, which is scheduled for November 20th and will be live streamed. This workshop was born out of discussions with Kansas stakeholders earlier this year and presents an opportunity outside the confines of a litigated proceeding for constructive dialogue around the importance of a clear and stable framework for regulatory capital structure and authorized returns. This framework serves as an important backdrop for providers of capital Kansas for their investments and for Evergy to attract competitively priced capital, much like the constructs that exist in Missouri and other neighboring states. As always, we are committed to advancing the generational economic development opportunity ahead of us in concert with Kansas policymakers and stakeholders. Also in Kansas, we've begun the planning process for our Kansas Central rate case, which we expect to file in the first quarter of 2025. Key drivers of the case will include a request for the recovery of our reliability and efficiency-focused distribution investments, as well as customer and technology infrastructure investments. We look forward to working constructively with our regulators and stakeholders, just as we have in multiple forms over the years, to advance these cases and deliver benefits for our Kansas customers and communities. Lastly, as mentioned earlier, on Wednesday, we filed for predetermination for our new natural gas plants and the Kansas Sky Solar Farm Predetermination filings run on an eight-month clock, and we anticipate an order from the Kansas Commission in the summer of 2025. Fitting to Missouri, we expect a commission order on our Missouri West rate case in December, and for the CCN proceedings, the procedural schedule has not yet been finalized, but based on prior CCN proceedings, we anticipate resolution approximately seven to nine months after the filings. Moving to slide 11, we highlight our three major economic development wins, Google, Panasonic, and Meta. In aggregate, their demand 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 remains robust in both Kansas and Missouri, with projects representing more than 6 gigawatts of demand, actively considering our service territory. We're happy to share that we're in advanced stages of negotiation with two new data centers. And combined, these represent between 500 and 1,000 megawatts of incremental load. As a reminder, our capital investment and load growth forecasts only reflect the three projects announced today. I know many of you will ask about timing. As a general rule, we will announce specifics on these projects in tandem with customer announcements regarding their plans. Of course, the economic The environment for new economic development projects is competitive, and while we do not expect to win all projects in the more than six gigawatt pipeline, we are currently having a very active dialogue with these potential new customers. Our focus on affordability and regional rate competitiveness is an important contributor to this pipeline and provides a foundation of support with a tremendous potential in our region, building on our success with Panasonic, Meta, and Google. We are very excited to work with potential customers as they consider our region. As part of the exercise, along with 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. Based on the announcements of Google's data center, Panasonic's EV battery manufacturing facility, and Meta's data center, we are extending our weather normalized demand growth forecasts of 2 to 3 percent through 2029, previously ran through 2028. I'll conclude my remarks on slide 12, which highlights the core tenets of our strategy. 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 that positive trajectory by keeping our long-term rate trajectory in line with inflation while at the same time investing in infrastructure and technology to meet customer demands. By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us and support the substantial economic potential within our states. As outlined in our capital plan, we will continue to invest in grid modernization to ensure reliability, strong customer service, and improvements in safety, public safety, and grid resiliency. This includes a focus on metrics related to customer service, the performance of our generation fleet, safety, and all operational elements, including infrastructure investment. Our primary sustainability goal is to lead a responsible and cost-effective energy transition as reflected by our investments in new hydrogen-enabled natural gas plants and in new solar farms to support our Kansas and Missouri customers. We look forward to continuing to advance a balanced mix of resource additions over the coming years, always with a focus on affordability, reliability, and sustainability. And with that, I will turn the call over to Brian.