SEC Filing | Evergy, Inc.

evrg-20220630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _______to_______

https://cdn.kscope.io/ca7081c484a6204aea3915397eea9185-evrg-20220630_g1.jpg

Exact name of registrant as specified in its charter,

Commission

state of incorporation, address of principal

I.R.S. Employer

File Number

executive offices and telephone number

Identification Number

001-38515

EVERGY, INC.

82-2733395

(a Missouri corporation)

1200 Main Street

Kansas City, Missouri 64105

(816) 556-2200

001-03523

EVERGY KANSAS CENTRAL, INC.

48-0290150

(a Kansas corporation)

818 South Kansas Avenue

Topeka, Kansas 66612

(785) 575-6300

000-51873

EVERGY METRO, INC.

44-0308720

(a Missouri corporation)

1200 Main Street

Kansas City, Missouri 64105

(816) 556-2200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Evergy, Inc. common stock

EVRG

New York Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Evergy, Inc.

Yes

☐

Evergy Kansas Central, Inc.

Yes

☐

Evergy Metro, Inc.

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Evergy, Inc.

Yes

☐

Evergy Kansas Central, Inc.

Yes

☐

Evergy Metro, Inc.

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Evergy, Inc.

Large Accelerated Filer

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

Evergy Kansas Central, Inc.

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

Evergy Metro, Inc.

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Evergy, Inc.

☐

Evergy Kansas Central, Inc.

☐

Evergy Metro, Inc.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Evergy, Inc.

Yes

☐

Evergy Kansas Central, Inc.

Yes

☐

Evergy Metro, Inc.

Yes

☐

On July 29, 2022, Evergy, Inc. had 229,521,999 shares of common stock outstanding. On July 29, 2022, Evergy Metro, Inc. and Evergy Kansas Central, Inc. each had one share of common stock outstanding and held by Evergy, Inc.

Evergy Kansas Central, Inc. and Evergy Metro, Inc. meet the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format.

This combined Quarterly Report on Form 10-Q is provided by the following registrants: Evergy, Inc. (Evergy), Evergy Kansas Central, Inc. (Evergy Kansas Central) and Evergy Metro, Inc. (Evergy Metro) (collectively, the Evergy Companies). Information relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

This report should be read in its entirety. No one section of the report deals with all aspects of the subject matter. It should be read in conjunction with the consolidated financial statements and related notes and with the management's discussion and analysis of financial condition and results of operations included in the annual report on Form 10-K for the fiscal year ended December 31, 2021 for each of Evergy, Evergy Kansas Central and Evergy Metro (2021 Form 10-K).

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TABLE OF CONTENTS
			Page Number
Cautionary Statements Regarding Certain Forward-Looking Information			4
Glossary of Terms			6

Part I - Financial Information

Item 1.	Financial Statements
	Evergy, Inc.
	Unaudited Consolidated Balance Sheets		8
	Unaudited Consolidated Statements of Comprehensive Income		10
	Unaudited Consolidated Statements of Cash Flows		11
	Unaudited Consolidated Statements of Changes in Equity		12
	Evergy Kansas Central, Inc.
	Unaudited Consolidated Balance Sheets		14
	Unaudited Consolidated Statements of Income		16
	Unaudited Consolidated Statements of Cash Flows		17
	Unaudited Consolidated Statements of Changes in Equity		18
	Evergy Metro, Inc.
	Unaudited Consolidated Balance Sheets		19
	Unaudited Consolidated Statements of Comprehensive Income		21
	Unaudited Consolidated Statements of Cash Flows		22
	Unaudited Consolidated Statements of Changes in Equity		23

	Combined Notes to Unaudited Consolidated Financial Statements for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc.		24
	Note 1:	Organization and Basis of Presentation	24
	Note 2:	Revenue	29
	Note 3:	Receivables	31
	Note 4:	Rate Matters and Regulation	32
	Note 5:	Goodwill	36

	Note 6:	Pension Plans and Post-Retirement Benefits	37
	Note 7:	Short-Term Borrowings and Short-Term Bank Lines of Credit	39
	Note 8:	Long-Term Debt	40
	Note 9:	Fair Value Measurements	40
	Note 10:	Commitments and Contingencies	45
	Note 11:	Related Party Transactions and Relationships	48

	Note 12:	Taxes	49
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		67
Item 4.	Controls and Procedures		67

Part II - Other Information

Item 1.	Legal Proceedings		68
Item 1A.	Risk Factors		68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		68
Item 3.	Defaults Upon Senior Securities		68
Item 4.	Mine Safety Disclosures		69
Item 5.	Other Information		69
Item 6.	Exhibits		70

Signatures			72

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CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION

Statements made in this document that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, statements relating to Evergy's strategic plan, including, without limitation, those related to earnings per share, dividend, operating and maintenance expense and capital investment goals; the outcome of legislative efforts and regulatory and legal proceedings; future energy demand; future power prices; plans with respect to existing and potential future generation resources; the availability and cost of generation resources and energy storage; target emissions reductions; and other matters relating to expected financial performance or affecting future operations. Forward-looking statements are often accompanied by forward-looking words such as "anticipates," "believes," "expects," "estimates," "forecasts," "should," "could," "may," "seeks," "intends," "proposed," "projects," "planned," "target," "outlook," "remain confident," "goal," "will" or other words of similar meaning. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking information.

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Evergy Companies are providing a number of risks, uncertainties and other factors that could cause actual results to differ from the forward-looking information. These risks, uncertainties and other factors include, but are not limited to: economic and weather conditions and any impact on sales, prices and costs; changes in business strategy or operations; the impact of federal, state and local political, legislative, judicial and regulatory actions or developments, including deregulation, re-regulation, securitization and restructuring of the electric utility industry; decisions of regulators regarding, among other things, customer rates and the prudency of operational decisions such as capital expenditures and asset retirements; changes in applicable laws, regulations, rules, principles or practices, or the interpretations thereof, governing tax, accounting and environmental matters, including air and water quality and waste management and disposal; the impact of climate change, including increased frequency and severity of significant weather events and the extent to which counterparties are willing to do business with, finance the operations of or purchase energy from the Evergy Companies due to the fact that the Evergy Companies operate coal-fired generation; prices and availability of electricity in wholesale markets; market perception of the energy industry and the Evergy Companies; the impact of the Coronavirus (COVID-19) pandemic on, among other things, sales, results of operations, financial condition, liquidity and cash flows, and also on operational issues, such as supply chain issues and the availability and ability of the Evergy Companies' employees and suppliers to perform the functions that are necessary to operate the Evergy Companies; changes in the energy trading markets in which the Evergy Companies participate, including retroactive repricing of transactions by regional transmission organizations (RTO) and independent system operators; financial market conditions and performance, including changes in interest rates and credit spreads and in availability and cost of capital and the effects on derivatives and hedges, nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; the transition to a replacement for the London Interbank Offered Rate (LIBOR) benchmark interest rate; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of physical and cybersecurity breaches, criminal activity, terrorist attacks, acts of war and other disruptions to the Evergy Companies' facilities or information technology infrastructure or the facilities and infrastructure of third-party service providers on which the Evergy Companies rely; ability to carry out marketing and sales plans; cost, availability, quality and timely provision of equipment, supplies, labor and fuel; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays and cost increases of generation, transmission, distribution or other projects; the Evergy Companies' ability to manage their transmission and distribution development plans and transmission joint ventures; the inherent risks associated with the ownership and operation of a nuclear facility, including environmental, health, safety, regulatory and financial risks; workforce risks, including those related to the Evergy Companies' ability to attract and retain qualified personnel, maintain satisfactory relationships with their labor unions and manage costs of, or changes in, retirement, health care and other benefits; disruption, costs and uncertainties caused by or related to the actions of individuals or entities, such as activist shareholders or special interest groups, that seek to influence Evergy's strategic plan, financial results or operations; the possibility that strategic initiatives, including mergers, acquisitions and divestitures, and long-term financial plans, may not create the value that they are expected to achieve in a timely manner or at all; difficulties in maintaining relationships with customers, employees, regulators or suppliers; and other risks and uncertainties.

This list of factors is not all-inclusive because it is not possible to predict all factors. You should also carefully consider the information contained in our other filings with the Securities and Exchange Commission (SEC). Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Evergy Companies with the SEC. Each forward-looking statement speaks only as of the date of the particular

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statement. The Evergy Companies undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

AVAILABLE INFORMATION

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at sec.gov. Additionally, information about the Evergy Companies, including their combined annual reports on Form 10-K, combined quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with the SEC, is also available through the Evergy Companies' website, http://investors.evergy.com. Such reports are accessible at no charge and are made available as soon as reasonably practical after such material is filed with or furnished to the SEC.

Investors should note that the Evergy Companies announce material financial information in SEC filings, press releases and public conference calls. In accordance with SEC guidelines, the Evergy Companies also use the Investor Relations section of their website, http://investors.evergy.com, to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on the Evergy Companies' website is not part of this document.

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GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.


Abbreviation or Acronym						Definition

AAO						Accounting authority order
ACE						Affordable Clean Energy
AEP						American Electric Power Company, Inc.
AFUDC						Allowance for funds used during construction
AOCI						Accumulated other comprehensive income
AROs						Asset retirement obligations


BSER						Best system of emission reduction
CAA						Clean Air Act Amendments of 1990
CCRs						Coal combustion residuals
CO2						Carbon dioxide
COLI						Corporate-owned life insurance
COVID-19						Coronavirus
CPP						Clean Power Plan
CSAPR						Cross-State Air Pollution


ELG						Effluent limitations guidelines
EPA						Environmental Protection Agency
EPS						Earnings per common share

ERISA						Employee Retirement Income Security Act of 1974, as amended
ERSP						Earnings Review and Sharing Plan
Evergy						Evergy, Inc. and its consolidated subsidiaries
Evergy Board						Evergy Board of Directors
Evergy Companies						Evergy, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group
Evergy Kansas Central						Evergy Kansas Central, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries
Evergy Kansas South						Evergy Kansas South, Inc., a wholly-owned subsidiary of Evergy Kansas Central
Evergy Metro						Evergy Metro, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries

Evergy Missouri West						Evergy Missouri West, Inc., a wholly-owned subsidiary of Evergy
Evergy Transmission Company						Evergy Transmission Company, LLC
Exchange Act						The Securities Exchange Act of 1934, as amended

February 2021 winter weather event						Significant winter weather event in February 2021 that resulted in extremely cold temperatures over a multi-day period across much of the central and southern United States
FERC						Federal Energy Regulatory Commission

GAAP						Generally Accepted Accounting Principles
GHG						Greenhouse gas
Great Plains Energy						Great Plains Energy Incorporated
JEC						Jeffrey Energy Center
KCC						State Corporation Commission of the State of Kansas
KDHE						Kansas Department of Health & Environment

kV						Kilovolt

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Abbreviation or Acronym						Definition
MDNR						Missouri Department of Natural Resources
MECG						Midwest Energy Consumers Group

MPSC						Public Service Commission of the State of Missouri
MW						Megawatt
MWh						Megawatt hour
NAAQS						National Ambient Air Quality Standards
NAV						Net asset value


OCI						Other comprehensive income
OPC						Office of the Public Counsel

Prairie Wind						Prairie Wind Transmission, LLC, 50% owned by Evergy Kansas Central
RSU						Restricted share unit
RTO						Regional transmission organization
SEC						Securities and Exchange Commission
SIP						State implementation plan
SPP						Southwest Power Pool, Inc.


TDC						Transmission delivery charge
Term Loan Facility						Term Loan Credit Agreement
TFR						Transmission formula rate
Transource						Transource Energy, LLC and its subsidiaries, 13.5% owned by Evergy Transmission Company

VIE						Variable interest entity
Wolf Creek						Wolf Creek Generating Station

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)


	June 30 2022			December 31 2021
ASSETS	(millions, except share amounts)
CURRENT ASSETS:
Cash and cash equivalents		$	22.4		$	26.2

Receivables, net of allowance for credit losses of $27.1 and $32.9, respectively		384.4			221.6
Accounts receivable pledged as collateral		347.0			319.0
Fuel inventory and supplies		636.5			566.7
Income taxes receivable		2.1			28.0
Regulatory assets		411.5			424.1
Prepaid expenses		52.3			49.3
Other assets		65.9			75.4
Total Current Assets		1,922.1			1,710.3
PROPERTY, PLANT AND EQUIPMENT, NET		21,468.6			21,002.6
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET		144.3			147.8
OTHER ASSETS:
Regulatory assets		2,056.8			1,991.1
Nuclear decommissioning trust fund		687.6			768.7
Goodwill		2,336.6			2,336.6
Other		572.8			563.4
Total Other Assets		5,653.8			5,659.8
TOTAL ASSETS		$	29,188.8		$	28,520.5

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

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EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)


	June 30 2022			December 31 2021
LIABILITIES AND EQUITY	(millions, except share amounts)
CURRENT LIABILITIES:
Current maturities of long-term debt		$	349.5		$	389.3

Notes payable and commercial paper		2,028.5			1,159.3
Collateralized note payable		347.0			319.0
Accounts payable		474.3			639.7

Accrued taxes		212.2			150.4
Accrued interest		92.2			118.8
Regulatory liabilities		73.8			70.7
Asset retirement obligations		18.5			19.5
Accrued compensation and benefits		73.9			51.6
Other		189.8			184.6
Total Current Liabilities		3,859.7			3,102.9
LONG-TERM LIABILITIES:
Long-term debt, net		9,196.7			9,297.9
Deferred income taxes		1,913.5			1,861.9
Unamortized investment tax credits		180.5			181.4
Regulatory liabilities		2,578.0			2,705.0
Pension and post-retirement liability		886.3			879.1
Asset retirement obligations		959.8			940.6
Other		303.5			310.0
Total Long-Term Liabilities		16,018.3			16,175.9
Commitments and Contingencies (Note 10)
EQUITY:
Evergy, Inc. Shareholders' Equity:
Common stock - 600,000,000 shares authorized, without par value 229,515,301 and 229,299,900 shares issued, stated value		7,212.5			7,205.5
Retained earnings		2,136.0			2,082.9
Accumulated other comprehensive loss		(41.2)			(44.0)
Total Evergy, Inc. Shareholders' Equity		9,307.3			9,244.4
Noncontrolling Interests		3.5			(2.7)
Total Equity		9,310.8			9,241.7
TOTAL LIABILITIES AND EQUITY		$	29,188.8		$	28,520.5

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

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EVERGY, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
	Three Months Ended June 30				Year to Date June 30

	2022		2021		2022		2021
	(millions, except per share amounts)
OPERATING REVENUES	$	1,446.5	$	1,236.2	$	2,670.4	$	2,848.1
OPERATING EXPENSES:
Fuel and purchased power	414.3		284.1		723.3		919.2
SPP network transmission costs	81.5		73.8		160.2		143.2
Operating and maintenance	282.8		259.9		535.0		535.4
Depreciation and amortization	232.1		225.2		461.1		444.5
Taxes other than income tax	100.3		97.9		202.2		192.8
Total Operating Expenses	1,111.0		940.9		2,081.8		2,235.1
INCOME FROM OPERATIONS	335.5		295.3		588.6		613.0
OTHER INCOME (EXPENSE):
Investment earnings (loss)	(0.9)		8.4		(10.5)		10.0
Other income	5.9		14.7		14.1		25.9
Other expense	(22.9)		(18.8)		(47.8)		(39.7)
Total Other Income (Expense), Net	(17.9)		4.3		(44.2)		(3.8)
Interest expense	99.3		93.8		191.1		187.8
INCOME BEFORE INCOME TAXES	218.3		205.8		353.3		421.4
Income tax expense	22.1		19.6		33.6		42.6
Equity in earnings of equity method investees, net of income taxes	1.4		2.1		3.5		4.1
NET INCOME	197.6		188.3		323.2		382.9
Less: Net income attributable to noncontrolling interests	3.1		3.0		6.2		6.0
NET INCOME ATTRIBUTABLE TO EVERGY, INC.	$	194.5	$	185.3	$	317.0	$	376.9
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO EVERGY, INC. (see Note 1)
Basic earnings per common share	$	0.85	$	0.81	$	1.38	$	1.65
Diluted earnings per common share	$	0.84	$	0.81	$	1.38	$	1.65
AVERAGE COMMON SHARES OUTSTANDING
Basic	229.9		229.3		229.8		228.3
Diluted	230.4		229.7		230.4		228.7
COMPREHENSIVE INCOME
NET INCOME	$	197.6	$	188.3	$	323.2	$	382.9
Derivative hedging activity



Reclassification to expenses, net of tax	1.3		1.4		2.7		2.8
Derivative hedging activity, net of tax	1.3		1.4		2.7		2.8
Defined benefit pension plans



Amortization of net losses included in net periodic benefit costs, net of tax	0.1		—		0.1		—
Change in unrecognized pension expense, net of tax	0.1		—		0.1		—
Total other comprehensive income	1.4		1.4		2.8		2.8
COMPREHENSIVE INCOME	199.0		189.7		326.0		385.7
Less: Comprehensive income attributable to noncontrolling interest	3.1		3.0		6.2		6.0
COMPREHENSIVE INCOME ATTRIBUTABLE TO EVERGY, INC.	$	195.9	$	186.7	$	319.8	$	379.7

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

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EVERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)

Year to Date June 30	2022		2021
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:	(millions)
Net income	$	323.2	$	382.9
Adjustments to reconcile income to net cash from operating activities:
Depreciation and amortization	461.1		444.5
Amortization of nuclear fuel	31.8		19.8
Amortization of deferred refueling outage	12.5		12.6
Amortization of corporate-owned life insurance	11.7		11.2
Non-cash compensation	11.0		7.3
Net deferred income taxes and credits	6.9		37.1
Allowance for equity funds used during construction	(12.8)		(14.3)
Payments for asset retirement obligations	(3.9)		(4.4)
Equity in earnings of equity method investees, net of income taxes	(3.5)		(4.1)
Income from corporate-owned life insurance	(0.9)		(1.2)
Other	0.6		0.5
Changes in working capital items:
Accounts receivable	(131.9)		(102.9)
Accounts receivable pledged as collateral	(28.0)		34.0
Fuel inventory and supplies	(69.5)		(33.3)
Prepaid expenses and other current assets	(27.8)		(88.0)
Accounts payable	(75.9)		(232.3)
Accrued taxes	87.7		62.4
Other current liabilities	(61.6)		(28.2)
Changes in other assets	35.1		(