Q1 2023 Evergy Inc. Earnings Call
Good day, and thank you for standing by and welcome to the Q1 2023.
However, G Conference call 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 one on your telephone you will then hear an automated message and advising your hand is right to withdraw your question. Please press star one again.
Please be advised that today's conference call is being recorded I would now like to turn the conference over to your speaker for today. Peter Fleet you May go ahead.
Thank you Lisa and good morning, everyone. Welcome to average each first quarter 2023 earnings conference call.
Our webcast slides and supplemental financial information are available on our Investor Relations website at investors Dot <unk> Dot 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.
It 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 our first quarter highlights provide regulatory and legislative updates and discuss our ESG progress.
Kirk will cover in more detail the first quarter results retail sales trends in our financial outlook for the year.
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.
Thanks, Pete and good morning, everyone I'll begin on slide five and I'm pleased to report that <unk> had a solid first quarter.
We delivered adjusted earnings of 59 per share compared to <unk> 56 per share a year ago. The.
The increase was driven by weather normalized sales growth transmission margins and lower O&M expenses.
Actually offset by the impact of the mild winter and increase in depreciation and amortization and higher interest expense.
Kirk will discuss these earnings drivers in more detail in a few minutes.
In 2022, we achieved our historically best safety year, and I'm pleased to report that our Osha recordable.
And days away and restricted time events are trending favorably.
Relative to those 22 results through the first quarter of this year.
These improvements are a testament to the work of the entire <unk> team.
I would like to thank my fellow employees for their unwavering commitment to safety.
With a solid start to the year, we are reaffirming our 2023 adjusted EPS guidance range of $3 55 to $3 75 per share.
As well as our target long term annual adjusted EPS growth target.
6% to 8% from 2021 to 2025.
On slide six and seven and I'll discuss our recently filed Kansas rate reviews, beginning with Kansas Central on slide six.
On April 25th we filed an application requesting a $204 million revenue increase premised on a 10.25% return on equity a.
52% equity ratio and a <unk>.
Rejected 6 billion rate base as of the proposed June 32023 true update.
As shown on slide seven in Kansas Metro, we requested a $14 million revenue increase premised on a 10.25% return on equity a.
52% equity ratio.
Our projected $2 6 billion rate base as of the proposed June 30th share update.
We believe these rate requests are straightforward and reflect the communications, we've had with our Kansas regulators and stakeholders and workshops and other settings over the past few years.
The principal items include recovery and return on our grid modernization and infrastructure investments since our last rate reviews in 2018.
As well as passing onto our customers the benefits of the substantial cost savings we've achieved since the merger that formed averaging five years ago.
Across our two Kansas jurisdictions these cost savings reduced their combined revenue increase request by 30, 37%.
We are pleased that the hard work of the <unk> team resulted in cost savings that are significantly higher than projected during the merger merger approval process.
These efforts have been a major contributor to successfully advancing our regional rate competitiveness.
Since the end of 2017, our rates in Kansas have remained virtually flat, while our regional peers have on average increase their rates by double digits and cumulative inflation has been over 20%.
As a reminder, Kansas rate cases run on an eight months schedule. So new rates will go into effect by year end 2023.
We will provide an updated timeline when a procedural schedule has been issued.
We look forward to working with our regulators and stakeholders over the coming months to achieve a constructive outcome for our Kansas customers and communities.
Moving on to slide eight I'll provide an update on our other regulatory and legislative priorities.
In Kansas Governor Kelly signed House, Bill $22 25 into law in April .
It will become effective in 2024.
<unk> includes a provision that matches the return on equity for our locally planned FERC transmission projects to the return on equity established by the state for our other infrastructure investments.
This law applies specifically to current and future transmission projects that are not subject to note notifications to construct from the southwest power pool.
HB 22 to 25 keeps our transmission delivery charge rider mechanism or TTC unchanged and fully intact.
This bill provides savings to customers and was a product of constructive dialogue with Kansas regulators legislators and other stakeholders.
In Missouri, the order approving our request to securitize extraordinary costs for winter storm Yuri is in the state appellate process.
We believe the Commission's decision and supportive securitization is well supported by the record.
As a reminder, we will complete the securitization financing after the appeal plays out but.
But incremental carrying costs incurred prior to approval.
Ultimately be recovered when we issue the debt.
Anticipate resolution later this year.
On the legislative side, we're tracking the progress of Senate Bill $2 75 in Missouri, which would create a state and local sales tax exemption for the production of electricity.
If signed into law. These savings will be passed on to customers and our next Missouri rate case.
Bill has passed out of the Senate and currently awaits debate on the house floor.
Other bills relating to energy sector May also receive a testing. This month for example to build it enhances state oversight of transmission and improve the consistency of transmission operations and planning.
Referred to in shorthand as right of first refusal legislation continues to be an area of focus.
The benefits of this legislation are reflected by similar laws that are in effect in the majority of states across our region.
However, as the Missouri Legislative session is scheduled to adjourn on May 12 timing is tight and we expect that the discussion of <unk> and other energy related bills may continue into next year.
As a final note on slide eight we remain on track to file our annual integrated resource plan updates in both Kansas and Missouri by mid June .
This year's ERP updates will include significant changes in assumptions.
Notably updated cost estimates for new generation as well as substantial subsidies in the federal inflation reduction act for carbon free resources.
Moving to slide nine our profile another element of our corporate strategy relating to environmental social and governance measures.
We continue to enhance our ESG practices and disclosures and our efforts have been recognized and reflected in significant improvements in third party ESG ratings for averaging.
For example, slide nine profiles the comprehensive progress that we've made in the ESG ratings provided by ISS.
And by S&P Global's corporate sustainability assessments.
From a disclosure perspective 2020 to Mark the first year average you completed full CDP climate and water security questionnaires as well as the global reporting initiative report.
We are also joined the electric power Research Institutes climate ready initiative research partnership aimed at developing a collective approach to identifying and managing physical climate risks.
Over time, we expect this effort to support the optimization of our grid investment priorities utilizing a common framework around cost benefit analyses risk mitigation and adaptation strategies.
Finally, we continue to integrate climate related risks into our enterprise risk management system.
This is the best practice, which will allow us to identify and mitigate the impact of current and future risks in our business enhancing our ability to provide safe reliable and affordable power.
I'll conclude my remarks, with slide 10, which highlights the core tenants of our strategy.
Affordability reliability and sustainability.
On the affordability front advancing regional rate competitiveness is one of our primary objectives.
<unk> 2017, we have reduced rates by <unk>, 8% across our service territories, while regional rates have risen by double digits and inflation rose 20% over the same time period.
The impact of these efforts is reflected by ongoing wins in our region and economic development.
While we are pleased by our progress in improving regional rate competitiveness, and keeping our rate trajectory far below the rate of inflation.
Affordability will always be an area of focus.
We target top tier performance and reliability customer service and generation through modernization of our transmission and distribution lines investing in smart grid technology.
In developing systems capabilities that meet customer needs and enable the increasingly active customer engagement with their electric service.
Reliability also encompasses operational excellence in our generation fleet, leveraging the skills and capabilities of our high performing team and important assets like our look our Wolf Creek nuclear plant.
Reliability is all the more important given the increasingly central role that electricity plays in so many aspects of daily life.
We recognize the responsibility that comes with our role and we embrace the challenge.
Delivering power the cost and service level that our customers expect and demand.
With respect to sustainability, we continue to advance the transition of our generation fleet a process that has been underway for two decades since.
Since 2005, we reduced carbon emissions by nearly half while.
While reducing sulfur dioxide and nox emissions by 98% and 88% respectively.
Additionally, nearly half of the energy that we generated for our retail customers came from carbon free resources in 2022.
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.
And with that I will now turn the call over to Kirk.
Thanks, David and good morning, everyone.
Turning to slide 12, I'll start with a review of our results for the quarter.
For the first quarter of 2023 average delivered adjusted earnings of $136 million or <unk> 59 per share and that's compared to $130 million or <unk> 56 per share in the first quarter of 2022.
As shown on the slide from left to right the year over year increase in first quarter adjusted EPS was driven by the following.
First mild winter weather resulted in an approximate 11% decrease in heating degree days compared to last year, driving an 8% decrease in EPS.
Strong weather normalized demand of two 1% driven by the residential and commercial sectors contributed <unk> <unk> per share.
Higher transmission margins, resulting from our ongoing investments to enhance our transmission infrastructure drove a <unk> <unk> increase.
A $36 million decrease in O&M and drove a positive 12 variance year over year.
This was partially the result of timing of O&M expenditures within 2023.
The net impact of higher depreciation and amortization was seven for the quarter, which includes the offsetting impact of new retail rates.
Proceeds from company owned life insurance contributed four during the quarter.
And the combination of higher interest expense and lower <unk> drove a 13% decrease with interest expense representing 11 of that variance.
The increase in interest expense reflects the lower rate environment in early 2022, and we expect rate driven variances to decrease in magnitude as we move through the year consistent with the assumptions in our guidance.
And finally other items, both positive and negative drove a net increase of nine.
Which was primarily driven by other income and income tax related items.
Turning to slide 13, I'll provide a brief update on our recent sales trends.
On the left side of the slide you'll see the total retail sales increased two 1% over the first quarter of 2022 drew.
Driven primarily by increases in both residential and commercial usage.
The decrease in industrial demand is primarily attributable to two refining customers, one of which experienced a high demand a year ago and the other offline this past quarter due to a planned outage.
Excluding these two customers however, remaining industrial weather normalized demand increased.
Demand growth continues to be supported by strong local labor market with Kansas, and Kansas City Metro area unemployment rates of two 7% and two 9%, respectively, which remained below the national average of three 6%.
I'll conclude my remarks with slide 14.
Our focus remains on continuing to demonstrate our strong track record of execution.
As David mentioned earlier based on solid first quarter results combined with our outlook for the remainder of the year. We are reaffirming both our adjusted EPS guidance range for 2023 as well as our long term compound annual EPS growth rate target of 6% to 8% from 2021 to 2025 based on the midpoint.
Our original 2021 EPS guidance of $3 30.
We also remain committed to returning capital to our shareholders and target dividend growth in line with earnings growth with a dividend payout ratio of between 60% to 70% in.
In addition to allowing us to achieve these financial targets executing on this investment plan advances, our key objectives of ensuring affordability reliability and sustainability over the long term.
And with that we'll open the call up for questions.
Thank you.
A reminder, we would like to ask a question. Please press star one on your telephone.
While we compile the Q&A roster.
As well please wait for your name to be announced before you proceed with your question first question is coming from Sal <unk>.
Of Guggenheim Your line is open.
Hey, guys good morning.
Alright.
Good morning.
Maybe you could just start with the person Creek project.
Obviously, you pivoted from Missouri, Kansas and included in the latest cases there.
Whereas the pathway forward. If you are unable to roll the project into rates. There does it stay at the parent and also any color on how to think about the earnings impact if that were the case versus the <unk> originally had planned.
So I'll start off in <unk>.
As Kirk just supplement we think the pursuant Creek asset is.
A great asset given the overall cost at its size its we think the best.
Value is supported by integrated integrated resource plan in terms of both capacity and energy needs.
It's well situated from a transmission perspective, and we think it fits well with the needs that we're going to have in.
Our Kansas jurisdiction, which continue to see ongoing growth.
And demand and across service territory with the new customers like Panasonic, So we'd like.
The asset fits in well with ERP, we think it's a great resource.
For our customers. So as noted it was included in our filing on April 25.
It'll go through the process.
And so we will.
Along with our other infrastructure investments that we've included.
The your question on.
EPS given that it's.
Relative to the Kansas jurisdiction, which doesn't have the same piece of requirements.
We won't see the earnings contribution in 2023 will have a very similar profile in the following years Scott and.
Again, we think it's a great asset.
Got it perfect and then David I know <unk> been working tirelessly with the KC.
Obviously.
The capital components of the case have been really well vetted through the FTP.
We kind of get the process started realize it's obviously very early innings, but is it settlement, possibly here do you expect kind of a fully litigate the case at this point.
Sure. That's a question we get from many investors as you can get if we file that on April 25th.
B.
A little speculative for me to.
Be specific as to what will occur we do think that we have a pretty straightforward rate case. The complexity only really comes from the fact that it's been five years since our last general rate case, but the elements are straightforward without any major generation retirements.
Have complexities like some of the things that you can see after this longer time period.
So we think the framing is there for a constructive set of dialogues and certainly it would be our objective to drive toward settlement now that'll be in.
In the fall so we're a ways away.
But as you noted what's a real positive in this case is that we've had the opportunity to preview.
And go through our capital investment plans and a series of workshops over the last three years.
<unk> with the STB workshops as you noted in 2020 and continuing even to the capital workshop that we had in December and those were multi hour workshop attended by all three commissioners the whole time.
And it included forward projections on rates and what we filed is in line with what we laid out and those are proceeding. So we think that sets the groundwork for a constructive set of discussions.
Of course, the process will play out as well, we've got a very highly capable and knowledgeable.
Staff of the <unk>. So we look forward to interacting with them with curve and with other stakeholders to the process and we certainly hope that well have a constructive dialogue that enables the settlement as we advance through the year eight month timeline as I mentioned, so that rates will go into effect in December .
Lot of the crescendo happens in the in the fall timeframe.
Got it got it perfect and then just real quick lastly for me is just the ROE tweak from the PDC Bill that passed in Kansas. It seems like it could be a modest drag.
<unk> 24, and maybe beyond is that the case and how are you thinking about potential offsets there I appreciate it.
Yes, so it is a pretty modest.
Impact Shar.
And the range of roughly <unk> or so.
I think we can absolutely manage that in the context of our business given our size and our overall earnings power we.
We think the ultimate resolution was reflected a constructive dialogue the initial proposal.
Was issued was to remove the TTC mechanism there.
Concerns about some of why do you have a different mechanism in place.
Level of state oversight.
We were able to get an accommodation that enhanced state oversight of transmission.
Great day equivalents of return on equity for different types of infrastructure investments, but keeps the TTC mechanism in place. So we thought it was a constructive outcome overall and one that's very manageable.
It was a sensible approach as we headed into 2023 and our rate case here and we are glad we were able to work with parties to get that outcome.
Fantastic I appreciate it very clear cut thank you.
Thanks Chuck.
Thank you one moment, while we prepare for the next question.
Yes.
And our next question is going to be coming from Michael Sullivan of Wolfe Research. Your line is open.
Hey, good morning.
Morning, Michael.
Hey, David I wanted to just SaaS.
How things are tracking on the year, just given the mild weather and then also seemingly.
<unk> Creek nickel that you had in guidance isn't going to be realized potential until next year now what were the offsets are coming from.
So actually Kirk you want to take that one it's been hearing from me for a bit you want to build it sure Michael good morning.
Look it's early in the year, we had a strong start to the quarter.
We've reevaluated and kind of reset our expectations for the year, including that impact of at least the delay.
Really relatively mild the way in terms of a realization of the earnings on percent of crude we feel confident we've got it means at our disposal to offset that through a number of it means obviously were.
We're pleased with the performance on O&M year to date I mentioned earlier some of that is relative to timing, but gives us a lot of flexibility.
Throughout the year to to pull levers to offset so that's really what underpins our confidence in reaffirming that guidance for the year.
Yes, Michael I, just note that we had very mild winter you saw it across the Midwest.
We're fortunate that we're able to offset that we're pleased with the solid quarter I know it.
All companies have to deal with the weather piece, but for US we're able to offset it.
We're pleased with the solid quarter results as opposed to being that that's having to manage over the course of the year.
The team did realize job managing it in the context of the quarter. So we feel good about the year and reaffirming our guidance range.
Okay great.
On the on.
On the ERP I know thats coming in a couple of weeks can we just get sort of a high level.
Preview there of.
Maybe just how material changes, we should be expecting in terms of new capacity need in.
But some of the moving pieces on cost of renewables post IRA.
Inflation and all of that.
So Michael I won't get ahead of the results in terms of the total renewables.
<unk> build out plans, but I will note is that beneath.
Beneath the surface of the water there has been a ton of churn is because the combination of.
Yes, we didn't include that.
Renewables incentive you see in the IRR because the last RFP update that law was in effect. So that's a big change at the same time.
We have bids from our all source request for proposal that we can integrate.
The capital costs from that real time market information in the RFP.
That's it.
Those costs have trended higher so there's some offsets there so beneath the surface there were significant changes in assumptions on commodity costs.
We went through.
A lot of volatility in natural gas prices in the back half of the year, maybe we're back to low gas forever, but I think we're probably back to us that hey, theres potential volatility in natural gas.
So there are a lot of different factors, but.
When you.
So to run them through the modeling process, which is still ongoing it reinforces the value.
Our renewables over time and a lot of it comes down to availability particular supply chain challenges. So.
I would note that I think the robust support for renewables as being a low cost opportunity for customers and our long term resource plan at it absolutely remains minimal near term, it's about supply chain and what that impact in terms of.
Resources that are available sooner rather later.
Some elements there.
That will change in the future there is a number of different EPA bills.
Our EPA rules that.
Regarding the mix right now a couple of proposals have been issued others. There have been press reports around so I would not expect this <unk> to reflect the greenhouse gas proposal for example that hasnt been formally issued yet you've seen a lot of reports on it.
Those kind of rules only further reinforce I expect the relative value of adding lower cost resources of the system. I think it will also further reinforce the importance of capacity. So one thing from last year that has changed is.
And there is the benefits of having capacity or even higher we've also seen increases in demand. So long runway I'm, not giving you a new numbers, but the dynamics that support.
The value to customers of adding renewables to the system or there may be some further and batiste capacity resources.
And then some supply chain issues in the near term work through but we're excited about the.
The prospects and we will obviously have a comprehensive update when that when we issue the rfps.
Okay, that's very helpful.
Your response, there was kind of where I wanted to follow up I mean.
At the end of the day in terms of.
Where do you expect the pushback is this really just approving lowest cost type thing as long as long as they can get the reliability, where it needs to be is that kind of what.
When stakeholders are going to be looking foremost.
Yes, we look at the lowest overall cost in terms of net present value of the revenue requirement.
We're looking at fundamentally what's going to deliver the most value for customers in light of the various incentives to 20 to 30 year model of what's complicated are 15 to 20 year model. So there's a lot of inputs, but thats what it comes down to is what's going to deliver the best value for our customers while ensuring reliability.
Great. Thanks, a lot.
Thank you.
Thank you one moment, while we prepare for the next question.
And again, please wait for your name to be announced before you proceed with your question and the next question is coming from degrees.
Chopra.
Evercore Your line is open.
Hey, good morning team.
Straightforward in my questions had been answered maybe I was just curious and I can follow up with BD. If you don't go ahead.
The answer David.
The prepared remarks, you mentioned that the cost savings exceeded the original kind of.
Targets you had when the merger happened can.
Can you quantify what that looks like if not I'll just follow up would be thank you.
Yes, Hey, guys.
A few hundred million dollars by which we exceeded several hundred million dollars overall.
Thats a core across the corporate enterprise.
And.
Yes.
A tremendous result was achieved by our employees. So we can get you the exact number of several hundred million dollars.
In excess of what was initially predicted if you look at the cumulative savings over five years.
Got it thanks, so much.
Thank you one moment, while we proceed with the next question. Please.
And the next question.
We will be coming from Julien.
Smith of Bank of America. Your line is open.
Hey, guys. Good morning, it's Darius on for Julien Thanks for taking the question.
Just kind of a high level, one obviously you've had.
You've had several regulatory processes in Missouri, and now Youre heading into this critical Kansas rate case, any learning slash takeaway or maybe.
Modifications to your approach that.
From the Missouri processes that you think are applicable as you head into the Kansas process.
Good morning, Darrin, Hey, Youre going to have to make sure youre, namely the off it keeps being a darius on behalf of Julia Julian has got a share of the light.
Yes, it's a great question I think there are some distinguishing element between.
Was there any candidate, but there's always things you can learn in Missouri, we had some.
More complicated legacy issues and the Sibley plant retirement that followed we had the Pisa legislation that had been enacted but the cases under the legacy <unk>.
And service accounting rules, which had a cost cap that kind.
Kind of commodity price surge.
<unk> had impacts in Missouri, west so some pretty complicated legacy issues that were impacted.
No we don't face in Kansas.
In Missouri, we reached a constructive settlement on our key economic issues in our metro jurisdiction, which is the bigger of our two jurisdictions in Missouri.
<unk>.
Sibley in that piece of legislation and the biggest impacts in Missouri West. So the settlement that we reached in Metro.
As a good template for what we're going to be seeking in in Kansas and in Kansas, We have the benefit of.
Even more extensive dialogue there.
STP workshop in both states, but the ones in Kansas were probably listen to any of them are quite in depth.
And thorough and involved.
Missionary staff curve and other stakeholders.
So our rate case in Kansas is even more well situated in terms of a constructive dialogue, it's pretty straightforward it's elements, but we strive for.
Trying to get to common ground and settlements, where we can and I think Missouri Metro is a good template for that.
The setup is also more amenable for it and that we are a little less complexity. It has been five years, but again the range of things that we're bringing a little more straightforward and as a reminder in.
In Kansas transmission that part of the rate case, Thats focused on our distribution investments generation customer systems really a lot of our grid modernization and customer facing investments. So we look forward to the dialog. We think the case setup is one that.
It will enable a good constructive dialogue with the key participants.
Okay, great. Thank you for the color there I appreciate that and I apologize if you touched on this in opening remarks, but I just noticed that there is a bit of a delta between revenue and commercial sales in industrial in Q1.
Can you maybe talk through any of the high level drivers there.
Sure Derrick it's Kirk.
I mentioned on the call yes, we are.
Our industrial sales were a little bit data. It was largely a result of two refining customers one of which had a pretty high level comp last year with higher demand. So just kind of normalizing that a little bit that's one effect of those two customers. The other one had a planned outage this quarter, but for those two customers in the industrial sector, our industrial demand was.
Up year over year.
Excluding those two refining customers.
Overall, we are pleased with the ongoing demand.
Trajectory, especially on the residential and commercial side on the industrial as Kirk mentioned, we can actually isolate adapt to customers.
Okay.
Okay excellent. Thank you for the color I'll pass it along here.
Great. Thank you Dara. Thanks <unk>. Thank you.
Yeah.
And one moment, while we prepare for the next question.
And our next question will.
We will be coming from Paul Patterson.
Tim long with Barclays.
Hey, good morning, guys.
Morning, Paul.
So I noticed that there was a.
Labor capitalization.
It seemed.
Could you.
Elaborate a little bit more on that and how it.
How what the impact will be.
Sort of.
And its trajectory if you follow what I'm, saying in other words is it going to be more of a benefit going forward in the near term and is there a.
I'll flip around or.
Just if you could just elaborate a little bit more on that.
Sure Paul in your I applaud your as always detailed review of materials. So we like all.
<unk>, we have a rigorous process for reviewing our capitalization rates.
And making sure we're getting the right.
Reflecting the underlying activities, we've had a lot of capital investment in.
There is an appropriate amount there should be a flavor that should be capitalized and robust methodologies that we and other utilities follow so we're applying that and I think you saw in our for example, our Wolf Creek plant there was a little bit higher capitalization rate relating activity that was underway.
Our overall trajectory in terms of O&M expenses and capital.
It's all part of our planning process. So it is reflected in <unk>.
We're our plans are so I wouldn't.
Tee up that Youre going to see a major change what youll see as ongoing implementation of the.
Adherence to the rules that are in place in that regard so it's.
It's reflected in our plans and is under underpinned by the rigorous application of the appropriate accounting processes, so, but I think that.
You noticed.
In particular driven by.
So projects at Wolf Creek, our nuclear plant.
Right. So I guess, what I'm wondering is is that.
So it sounds like it's associated with those projects.
And then but.
But going forward does that.
So in other words, it's not a permanent change I guess.
If im gathering is correct, it's associated with a specific project activity.
That's right yes.
Yes.
Alright Basel.
Yes.
It reflects the activities that are underway and the application they're relevant rules are in place.
There's always something that we're looking at and making sure. We're following the right approach.
So it's a good thing about being in an industry like ours that were well benchmark.
Got a great support from our accounting team and our external auditors so.
Well established approaches to take in that regard and best practice.
Okay.
Absolutely.
Just wondering just sort of mechanically what period does that get through.
Good.
What period is that amortized over I guess I'm sort of wondering I mean or is it just over the life of the play it or is it is it something that.
Is it sort of on an account that gets amortized over just a sort of yeah. It really depends on what the yes. It depends on what they are working on it it's related to an adage it will be a different I mean in other words.
Okay.
It gets down to every single project, but also probably.
I won't be able to get through the 100.
Paul.
As it relates to the work that's underway and summer charter some are longer equipment nature of the work.
Absolutely okay.
That's great and then just on the <unk>.
On the rate case.
Presuming seem to be allocated I think to the KC as opposed to both utilities.
Curious.
Is there a reason for that or is it just.
Okay.
If I was correct in reading that.
Is there a reason why it wasn't allocated to both I guess.
We think it's the best fit for everybody, Kansas Central.
So it really was just where it lines up well with the integrated resource plant needs and overall.
And benefit is well placed for that customer base too so it fits well with <unk>. So that's why it's allocated it okay.
Finally on the depreciation rate.
Rate change.
Was this.
I was just wondering I mean I apologize.
I read this a little while ago, but what was the driver again can you remind me about the request for change in depreciation rates in the rate case is that.
Is there life issue there that specific or is it just basically just updating the did.
The depreciation rate people are equal.
I do follow I think.
So we need a depreciation study that typically happens in.
Rate cases, especially if theres been a.
Relatively long gap. So this reflects.
Depreciation studies that we've done it's been five years since our last rate review so.
A pretty standard process, you're bringing an outside expert you review that work.
I don't necessarily encourage all investors to read through the depreciation studies, but you're welcome to it in our publicly filed testimony, but its up I mean <unk>.
King size so its a rigorous review you need to go through.
As part of the rate case, and making sure you're getting the right level of depreciation.
Depreciation the right depreciable lives for your long live assets.
Got it.
Okay I really appreciate it thanks, so much.
You bet. Thank you Paul.
Thank you that concludes the Q&A session.
Over to David Campbell for closing remarks.
You lease out with efficient like the first round of the NFL draft, which I hope everyone enjoyed from the great City of Kansas City.
We appreciate all of you joining us. This morning. Thank you for your interest in <unk> and have a great day.
That concludes the call.
Thank you everyone for joining you enjoy the rest of your day conference call has been concluded.
Okay.
Okay.
Yes.
[music].
Okay.