Evergy, Inc.

Good day, and thank you for standing by. Welcome to the Q4 2024 Avergy, 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 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, Jill, and good morning, everyone. Welcome to Evergy's fourth 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 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, Chairman and Chief Executive Officer, and Brian Buckler, Executive Vice President and Chief Financial Officer. David will cover 2024 highlights, provide updates on economic development activities, and discuss our regulatory and legislative agendas. Brian will cover our fourth quarter and full year results, retail sales trends, and our financial outlook. Other members of management are with us and will be available during the Q&A portion of the call. I will now turn the call over to David.

Thanks, Pete, and good morning, everyone. I'll begin on slide five by first 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 Evergy team. And with respect to 2024 results, I'm pleased to report that we had a solid year. Overcoming weather headwinds in the fourth quarter and throughout the year, we reported adjusted earnings of $3.81 per share compared to $3.54 per share a year ago. Strong cost management helped offset the impact of the mild weather. Brian will discuss earnings drivers in more detail as part of his remarks. In 2024, we also executed on our capital investment plan to improve reliability and resiliency, investing $2.3 billion in infrastructure to modernize our grid and replace aging equipment. As we look ahead, executing on our five-year, $17.5 billion capital plan is a great challenge and a great opportunity to support and enable the economic prosperity of our region. Our success will come from the tremendous teamwork we have within Evergy. 2024 also proved to be a strong year in regulatory execution and advancing initiatives that allow us to invest for growth in Kansas and Missouri to the benefit of the customers and communities we serve. In Kansas, the passage of House Bill 2527 demonstrated the support of Kansas legislators, regulators, and stakeholders for infrastructure investment to power economic development. It also underscores the importance of a competitive and constructive regulatory framework, helping to mitigate regulatory lag and supporting our credit profile. In Missouri, we are pleased to reach unanimous settlement with stakeholders in our Missouri West Rate Case, which included the addition of a joint ownership interest in the Dogwood Energy Center, a low-cost energy solution for our customers. The settlement provided a balanced outcome for customers and communities we serve and reflects the broad-based alignment around our infrastructure investments while ensuring we continue to provide reliable and affordable electric service. We also requested to go ahead to construct three new natural gas facilities and three solar farms. If approved by our Kansas and Missouri regulators, these will represent the first new dispatchable resources we've built in over 10 years and our first utility-scale solar farms. In aggregate, these plants total just over 2,100 megawatts. 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. We expect to file our annual updates to our IRPs in March and April in Missouri and Kansas, respectively. In targeting top-tier performance in operations, 2024 was another solid year. After achieving significant improvements in reliability in 2023, we matched and maintained that strong performance during a year with unusually severe weather. Through the summer, we experienced 10 severe storm events with wind gusts in excess of 50 miles per hour downing trees and causing extensive damage to equipment and structures across our territory. Our line crews, who are the bedrock of safely delivering affordable and reliable power to our customers, work tirelessly through the extreme weather to restore power to our customers, and we thank them for their contributions. In November, we raised our dividend 4% to an annualized $2.67, consistent with our 60% to 70% target payout ratio, and gradually lowering the payout ratio within that range, which is a trend that we expect to continue. As noted on slide five, we are reaffirming 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 reaffirming our 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. Moving to slide six, we highlight our three major economic development wins, Google, Panasonic, Meta, and two additional data centers in Missouri. In total, their demand represents 800 megawatts of load. Based on these announcements, we are reaffirming our weather normalized demand growth forecasts of 2% to 3% through 2029. Additional large customers will be additive to this forecast. Slide 7 describes our economic development pipeline in greater detail. Reflecting the economic vitality and geographic advantages of our region, the overall pipeline remains robust in both Kansas and Missouri and has grown from roughly 6 gigawatts to over 11 gigawatts, including the customers announced to date. As a point of reference, our projected peak summer demand for 2025 is approximately 10.6 gigawatts. So relative to our size, this makes our backlog of growth opportunities one of the most robust in the country, reflecting the competitiveness of our region. Of course, the environment for new economic development projects is competitive, and we do not expect to win all projects in the queue. As we discussed in our third quarter earnings call, we remain in advanced stages in negotiation with two large customers. We have identified generation and transmission solutions for both. We previously shared with you that the load from these projects could total 500 megawatts to 1,000 megawatts in aggregate, which we now anticipate will be 1.6 gigawatts. One of these customers is evaluating our Kansas service territory, and the other, an existing data center customer, is evaluating and expansion in Missouri. Subject to final agreements and project announcements, we expect to begin to see an impact on our demand growth from these customers in 2027 or in 2028 and into the next decade. We'll be very excited to add these new projects and further establish our region as a leading player in the US digital and advanced manufacturing economy. Both customers are tracking to share announcements regarding their plans later this year. In addition, we are actively working with customers whose loads would represent approximately three gigawatts. These are customers that have acquired land or land rights, presented a site plan, and in some cases signed letters of agreement to advance the evaluation process. The remaining six gigawatts in our pipeline are associated with preliminary conversations had with potential customers. While all of this load may not be addressable, the dialogue nonetheless demonstrates the significant activity and interest in Kansas and Missouri and customers who stand ready if others drop out of the queue. We are very excited about the economic impact and prosperity that these large customers will bring, including construction jobs, permanent jobs, an expanded tax base, and many other benefits, such as helping us to advance our affordability and reliability goals. It is truly a transformative time for our company, reflecting and further advancing the vitality of Kansas and Missouri. As a reminder, our capital investment and load growth forecasts only reflect the projects announced to date that are shown on slide six. Many of you will ask about the timing of revising our plan to reflect new large customers. As a general rule, we will announce specifics on these projects in tandem with customer announcements regarding their plans. Our focus on affordability and regional rate competitiveness is an important contributor to this pipeline and provides a foundation for support supporting the tremendous growth in our region. As part of the exercise alongside the economic development rates that are in place in both Kansas and Missouri, we have filed large load power service tariffs in both states to ensure that there is appropriate and adequate recovery associated with large new loads. While the procedural schedules have not yet been finalized, we anticipate resolution in both states in the third quarter. Slide 8 lays out our updated capital expenditure forecast. Our latest rolling five-year investment plan totals approximately $7.5 billion from 2025 to 2029, which represents a $1.3 billion increase relative to the revised five-year forecast we provided on our third quarter earnings call. This quarter's update primarily reflects the assignment of one-half of a combined cycle natural gas plant to Missouri West, which was previously unallocated across our operating companies and excluded from our capital forecast. It also incorporates an updated cost estimate for the natural gas combustion turbine facility we announced last year, along with some minor shifts across divisions. To summarize, our revised capital forecast includes a significant portion of the 2024 integrated resource plans and will continue to evaluate incremental projects pending our 2025 IRP updates, including a third combined cycle unit at Kansas Central and a combustion turbine unit at our metro jurisdiction. Our five-year investment program is expected to result in 8.5% annualized rate-based growth through 2029, which compares to our prior forecast of approximately 8%. 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, as well as internally generated cash flow to support our balance sheet and strong investment-grade credit ratings. 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. 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 economic prosperity and growth in our state. Turning to slide nine, We highlight our adjusted EPS growth outlook, which projects 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 4% to 6% range through 2029. The midpoint of 2025 guidance represents a 5% increase over the 2024 guidance midpoint consistent with our prior target. Our growth outlook is driven by our $17.5 billion five-year capital plan, which includes the investments to serve the 2% to 3% load growth that we expect through 2029. We anticipate a regular cadence of rate case filings across our jurisdictions approximately every 18 months, though that won't be true every cycle or in every jurisdiction. Importantly, our growth outlook only reflects the new customers announced to date, and any new announcements will be additive to this forecast. Moving to slide 10, I'll provide a brief update on our regulatory and legislative priorities in both Kansas and Missouri. In a nutshell, it's been a busy and productive start to the year. On January 31st, we filed our Evergy Kansas Central Rate Review, requesting a $196 million revenue increase premised on a 10.5% return on equity, an approximate 52% equity ratio, and a projected $6.7 billion rate base as of the proposed March 31st, 2025 TRO period. We believe this rate request is straightforward, and reflects the capital plan and infrastructure investment priorities that we've communicated to Kansas regulators and stakeholders in workshops and other settings over the past few years. The principal items include recovery of and return on our grid modernization and infrastructure investments since our last rate review in 2023. The procedural schedule calls for staff and intervener testimony by June 6th, rebuttal testimony on July 3rd, settlement conferences on July 8th and 9th, and hearings beginning on July 21st. As a reminder, Kansas rate cases run on an eight-month clock. We look forward to working with our regulators and stakeholders over the coming months to achieve a constructive outcome for our Kansas customers. We also have pending requests for predetermination on partial ownership of two combined cycle gas plants and a solar farm in Kansas. Next up in the predetermination procedural schedule is staff testimony, which is due March 14th. followed by rebuttal testimony on April 4th, a settlement conference on April 9th, and hearings beginning on April 21st. We anticipate an order from the KCC by July 7th. And as I mentioned earlier, we have filed a request to approve a large-load power service tariff that would apply to prospective data center customers. We are currently awaiting a procedural schedule and anticipate resolution in the third quarter. We believe the tariff allows for adequate cost recovery associated with large new loads, while being competitive with rates in neighboring states. The filing presents a strong framework that will advance the prosperity of our region, and we look forward to working with KCC staff and all of our stakeholders to the approval process. Now, switching the legislative front, we introduced House Bill 2107 in Kansas this year. If passed, this bill would codify in statute the legal framework around wildfire damages and call for a workshop before the KCC to assess wildfire mitigation strategies and cost recovery. We view wildfire mitigation through the lens of safety and reliability, which are driving principles behind our transmission and distribution capital plan. Along with a limit on punitive damages, the legislation requires potential lawsuits to prove that a wildfire was caused by utility negligence and calls for a wildfire-focused workshop at the KCC, providing an opportunity for constructive dialogue with Kansas stakeholders to explore additional risk mitigation and cost recovery options. The bill passed unanimously out of committee and was recommended favorably for passage in the House yesterday afternoon. Later today, in fact, we expect the House to bring HB 2107 up for final action in the House. The bill would then be sent to the Senate. We appreciate the engagement from legislative committee members, the Kansas Farm Bureau, Kansas Livestock Association, and many others in advancing this legislation. Pivoting to Missouri, earlier this week, Senate Bill 4 cleared a major hurdle and was passed out of the Senate. It has now been sent to the House, where it awaits further action. Key provisions include amending the PISA statute to include new natural gas units and extension of the PISA sunset to the end of 2025, as well as allowing for recovery of Construction Work in Progress, or CWIP, from new natural gas plant investment and base rates, similar to that in Kansas. There are also provisions that would streamline the generation resource planning process, and ensure we have sufficient capacity to serve our customers. In addition, SB4 expands CWIP to all forms of generation as part of a new integrated resource planning process, replacing a nearly 50-year-old prohibition on CWIP put in place by a statewide vote way back in 1976. If passed, this legislation will be transformative for the Missouri regulatory framework. We are grateful for the collaboration with the Missouri Public Service Commission, legislative leadership, the governor's office, commission staff, the Office of Public Counsel, our utility partners, and our key stakeholders in making the significant progress that we've achieved thus far. This bill positions Missouri to support infrastructure investment, resource adequacy, reliability, and growth. As a reminder, the legislative session in Missouri is scheduled to wrap up in May. On the Missouri regulatory front, we have pending requests for Certificates of Convenience and Necessity, or CCNs, related to two solar farms, partial ownership, and two combined cycle natural gas units, and full ownership of a simple cycle natural gas plant all in Missouri West. Staff's recommendation in the solar case is due on March 17th, and staff's report and rebuttal in the natural gas case is due April 25th. Similar to Kansas, we filed a request to Missouri to approve a large load power service tariff on February 14th, and we are currently awaiting a procedural schedule. We anticipate resolution in the third quarter. I'll conclude my remarks with side 11, 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 this momentum by keeping our long-term rate trajectory in line with the rate of inflation while investing in infrastructure to support growth across our region. By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us and support this substantial economic potential within our state. As outlined in our capital plan, we will continue to invest in grid modernization to ensure reliability, strong customer service, and strong performance in safety, public safety, and grid resiliency. This includes a focus on metrics related to personnel safety, customer service, generation availability, and infrastructure investments. Our primary sustainability goal is to lead a cost-effective energy transition, as reflected by our investments in new natural gas plants and solar farms in support of our Kansas, Missouri customers. We look forward to continuing to advance a balanced mix of resource additions over the coming years to support growth and prosperity in our state. With that, I will now turn the call over to Brian.