Q4 2023 Evergy Inc Earnings Call

Operator: Thank you for standing by, and welcome to the Q4 2023 Evergy, Inc. Earnings Conference. At this time, all participants are in a listen-only mode.

Okay.

Speaker Change: Thank you for standing by and welcome to the Q4 'twenty to 'twenty three averaging Inc earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's presentations, there will be a question and answer session. To ask a question at that time, please press star 1-1 on your telephone. Please be advised that today's call is being recorded. I will now turn the conference over to your host, Mr. Peter Flynn, Director of Investor Relations.

Speaker Change: After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press star one on your telephone.

Speaker Change: Please be advised that today's call is being recorded.

Speaker Change: I will now turn the conference host Mr. Peter Flynn Director of Investor Relations. Please go ahead.

Peter Flynn: Thank you, Valerie, and good morning, everyone. Welcome to Evergy's fourth quarter 2023 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 of the disclosures in our SEC filings contains 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... Joining us on today's call are David Campbell, President and Chief Executive Officer, and Kirk Andrews, Executive Vice President and Chief Financial Officer.

Peter Flynn: Thank you Valerie and good morning, everyone. Welcome to average its fourth quarter 2023 earnings conference call.

Peter Flynn: Webcast slides and supplemental financial information are available on our Investor Relations website at investors <unk> com.

Peter Flynn: Today's discussion will include forward looking information.

Peter Flynn: 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.

Peter Flynn: They also include additional information on our non-GAAP financial measures.

Peter Flynn: 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 A. Campbell: David will cover 2023 highlights, discuss the economic development outlook, and provide an update on our regulatory and legislative agendas. Kirk will cover fourth quarter and full year results, retail sales trends, and our financial outlook for 2024. Other members of management are with us and will be available during the Q&A portion of the call. I'll now turn the call over to David. Thanks, Pete. And good morning, everyone.

David A. Campbell: David will cover 2023 highlights discuss the economic development outlook and provide an update on our regulatory and legislative agenda.

Kirkland B. Andrews: Kirk will cover fourth quarter and full year results retail sales trends and our financial outlook for 2024.

Kirkland B. Andrews: Other members of management are with us and will be available during the Q&A portion of the call.

Kirkland B. Andrews: I will turn the call over to David.

David A. Campbell: Thanks, Pete and good morning, everyone.

David A. Campbell: Before we begin, we'd like to extend our deepest sympathies to the family of Lisa Lopez Galvan and all those who were impacted by the tragic events during the Chiefs Super Bowl Parade. Kansas City and Chiefs Kingdom are grieving, but if there's one thing that I've learned during my time here, it's that both are very strong and very resilient. Moving to slide five, I'll open by describing the drivers for our fourth-quarter earnings falling below our guidance. While we plan for normal weather, we know the importance of consistent financial execution, and we are disappointed by these results. As you know, on the third quarter call, we narrowed our guidance range to $3.55 per share to $3.65 per share from our initial range of $3.55 to $3.75 due primarily to the timing of the Persimmon Creek Wind Farm shifting back in.

David A. Campbell: Before we begin we'd like to extend our deepest sympathies to.

David A. Campbell: So the family of Lisa, let Pascal ban and all those who were impacted by the tragic events during the cheap Super Bowl parade.

David A. Campbell: Kansas City, and Chiefs Kingdom are grieving, but if there's one thing that I've learned during my time here.

David A. Campbell: Both are very strong and very resilient.

David A. Campbell: Moving to slide five I'll open by describing the drivers for our fourth quarter earnings falling below our guidance.

David A. Campbell: While we plan for normal weather, we know the importance of consistent financial execution and we are disappointed by these results.

David A. Campbell: As you know in the third quarter call, we narrowed our guidance range to $3 55 per share to $3 65 per share from our initial range of $3 55 to $3 75, due primarily to the timing of the Persimmon Creek wind farm shifting back a year.

David A. Campbell: As shown on slide 5, results for the year were $3.54 per share, and whether the end of the year was the driver of the shortfall. For both November and December, and December in particular, with a 23% decrease in heating degree days relative to last year, weather was warmer than normal, resulting in a variance of 6 cents in these two months alone. As Kirk will describe, weather-adjusted demand was also soft in the fourth quarter relative to expectations.

As shown on slide five results for the year were $3 54 per share.

David A. Campbell: Whether at the end of the year was the driver of the shortfall.

David A. Campbell: For both November and December and December in particular, with a 23% decrease in heating degree days relative to last year.

David A. Campbell: Weather was warmer than normal resulting in a variance of six cents in these two months alone.

David A. Campbell: As Kirk will describe weather adjusted demand was also soft in the fourth quarter relative to expectations, but we were able to offset those impacts, leaving milder than normal weather as a driver.

David A. Campbell: But we were able to offset those impacts, leaving milder-than-normal weather as a driver. Our full-year results reflect strong cost management with savings well beyond what was in our financial plan, which enabled us to offset the negative drag created by higher interest rates and Lower Than Estimated Industrial Load. In 2023, we reduced our O&M expenses by $129 million, equal to a year-over-year reduction of 12%. These efficiency gains reflect the hard work of the entire Evergy team, who worked tirelessly throughout the year to advance our plan and our strategic objectives. In 2023, we also executed on our capital investment plan to improve reliability and resiliency, investing two point three billion dollars in infrastructure to modernize our grid, replace aging equipment, and advance our sustainability and affordability goals with the addition of the low-cost Persimmon Creek Wind Farm. In early December, we completed a $1.4 billion convertible note financing to mitigate interest rate and refinancing risk at the holding company.

David A. Campbell: Our full year results reflect strong cost management with savings well beyond what was in our financial plan, which enabled us to offset the negative drag created by higher interest rates and lower than expected industrial load.

David A. Campbell: In 2023, we've reduced our O&M expenses by $129 million equal to a year over year reduction of 12%.

David A. Campbell: These efficiency gains reflect the hard work of the entire <unk> team, who worked tirelessly throughout the year to advance our plan and our strategic objectives.

David A. Campbell: In 2023, we also executed on our capital investment plan to improve reliability and resiliency investing $2 $3 billion in infrastructure to modernize our grid replace aging equipment and advance our sustainability and affordability goals with the addition of the low cost per similar Creek wind farm.

David A. Campbell: In early December we completed a $1 4 billion convertible note financing to mitigate interest rate and refinancing risk at the holding company.

David A. Campbell: Of note, this financing was contemplated in and supportive of our updated growth outlook that we announced on our third quarter call. Last year, we made strong progress on reliability, as well, as shown on page 6. Relative to 2022, average outage duration and frequency, as measured by Stadia and SAFE, improved by 10 and 9%, respectively.

David A. Campbell: Of note this financing was contemplated in and supportive of our updated growth outlook.

David A. Campbell: On our third quarter earnings call.

David A. Campbell: Last year, we made strong progress on reliability as well as is shown on page six realm.

David A. Campbell: Relative to 2022 average outage duration and frequency as measured by stadium safety improved by 10, 9% respectively.

David A. Campbell: I'd like to commend the outstanding work from our distribution and transmission teams in keeping the lights on for our customers and communities. As the reliability gains reflect improvements in our outage management processes and the impact of our ongoing grid investment, slide six also highlights the nearly 30% reduction in total costs that we have achieved since 2018. These cost savings involve a comprehensive multi-year program that touched every aspect of our business.

David A. Campbell: Like to commend the outstanding work from our distribution and transmission teams in keeping the lights on for our customers and communities.

David A. Campbell: As a reliability gains reflect improvements to our outage management processes and the impact of our ongoing grid investments.

David A. Campbell: Slide six also highlights the nearly 30% reduction in total cost. So we've achieved since 2018.

David A. Campbell: These cost savings involved a comprehensive multi year program that touched every aspect of our business.

David A. Campbell: Change is hard and involves tough decisions, and efficiency gains of this magnitude necessarily involved major changes across Evergy over the past five years. The result of this hard work was affordability gains that we delivered to our customers. I am proud and honored to lead the Evergy team that made this happen.

David A. Campbell: Change is hard and involves tough decisions and efficiency gains of this magnitude necessarily involved major changes across <unk> over the past five years.

David A. Campbell: The result of this hard work was affordability gains that we delivered to our customers I.

Speaker Change: I am proud and honored to lead the average team that made this happen.

David A. Campbell: On slide 7, we introduce our 2024 GAP and adjusted EPS guidance of $3.73 per share to $3.93. The midpoint represents a 5% increase over the original 365 midpoint of our 2023 baseline year. We remain confident in our ability to deliver annual 4-6% adjusted EPS growth through 2026, and we are reaffirming that target today. Evergy's cost savings were the major enabler of the improvements in regional rate competitiveness that are shown on slide 8. When factoring in the 2023 rate case settlement, Evergy has been able to limit cumulative rate increases in both Kansas and Missouri to 1% since 2017. That compares to an average increase in rates across our region of more than 11% and Cumulative Inflation of nearly 23%. Without question, the merger has delivered affordability gains and significant benefits for our customers and the communities.

Speaker Change: On slide seven we introduced our 2020 for GAAP and adjusted EPS guidance of $3 73 per share to $3 93 per share.

Speaker Change: The midpoint represents a 5% increase over the original 365 midpoint.

Speaker Change: Of our 2023 based on year.

Speaker Change: Remain confident in our ability to deliver annual 4% to 6% adjusted EPS growth through 2026, and we are reaffirming that target today.

Speaker Change: <unk> cost savings with a major enabler of the improvements in regional rate competitiveness, but as shown on slide eight.

Speaker Change: When factoring in the 2023 rate case settlements.

Speaker Change: <unk> has been able to limit cumulative rate increases in both Kansas and Missouri to 1% since 2017.

Speaker Change: That compares to an average increase in rates across our region of more than 11% and.

Speaker Change: Cumulative inflation of nearly 23%.

Speaker Change: Without question. The merger has delivered affordability gains are significant benefits to our customers and the communities we serve.

David A. Campbell: On slide nine, we highlight the outlook for economic development and demand growth in Kansas and Missouri, which is as robust as it has been in decades. Our focus on affordability and regional rate competitiveness is an important contributor to this large pipeline and provides a foundation for our ongoing support of the tremendous opportunity in our state. There are currently $12 million in active development projects evaluating our service territories, representing 1.3 gigawatts of potential additional demand. The largest additions announced under construction so far are the Panasonic Electric Vehicle Battery Manufacturing Plant in Kansas and the Metadata Center in Missouri. The Panasonic plant, for which construction is already well underway, is expected to be the largest EV battery plant in the world.

Speaker Change: On slide nine we highlight the outlook for economic development and demand growth in Kansas, and Missouri, which is robust as it has been in decades.

Speaker Change: Our focus on affordability and regional rate competitiveness is an important contributor to this large pipeline and provides a foundation for our ongoing support of the tremendous opportunity in our states.

Speaker Change: There are currently $12 million of active development projects evaluating in our service territories, representing one three gigawatts of potential additional demand.

Speaker Change: The largest additions announced and under construction, so far or the Panasonic electric vehicle battery manufacturing plant in Kansas and the meta data center in Missouri.

Speaker Change: The Panasonic plant for its construction is already well underway is expected to be the largest EV battery plant in the world.

David A. Campbell: As I will describe further, for these successes to continue, the grid will require competitive access to capital and significant investment. In turn, ongoing success will drive economic growth, which benefits all of our customers and helps to cover the fixed costs of our system more efficiently. Based on Panasonic meta and projects announced to date, we expect two to three percent weather normalized annual demand growth through 2026, off of the 2023 Bays, above our traditional base planning assumption of half a percent to one percent annually. This includes incremental load from Panasonic and Meta starting in 2024 and continuing to expand to an expected full run rate in 2026. Slide 10 lays out our updated capital expenditure forecast, which has been extended through 2028. Our latest five-year investment plan totals approximately $12.5 billion, which represents a nearly $900 million increase relative to our prior five-year forecast for 2027. The program is expected to result in 6% annual rate pay.

Speaker Change: As I will describe further for these successes to continue the grid will require competitive access to capital and significant investment.

Speaker Change: In turn ongoing successes will drive economic growth, which benefits all of our customers and helps to cover the fixed costs of our system more efficiently.

Speaker Change: Based on Panasonic meta and projects announced to date, we expect 2% to 3% weather normalized annual demand growth through 2026 off of the 2023 base.

Speaker Change: Above our traditional base planning assumption of 5% to 1% annually.

Speaker Change: This includes incremental load from Panasonic and met US starting in 2024 and continuing to expand to an expected full run rate in 2026.

Speaker Change: Slide 10 lays out our updated capital expenditure forecast, which has been extended through 2028.

Speaker Change: Our latest five year investment plan totals approximately $12 5 billion, which represents a nearly $900 million increase relative to our prior five year forecast for 2027.

Speaker Change: Graham is expected to result in 6% annual rate base growth.

David A. Campbell: The revised capital forecast incorporates the integrated resource plan filed in June of last year, which reflects a balanced approach that enables fuel diversification and a responsible portfolio transition. Nearly 55% of our planned investment is targeted towards transmission and distribution projects, as we continue to modernize our grid to improve reliability and enhance. By replacing aging equipment, investing in smart grid technologies will also enable further efficiency gains in serving our customers, which has been a hallmark of Evergy's strategy since our formation in 2018. Moving to slide 11, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri. As I discussed in our call last quarter, we have been working with stakeholders to position Kansas to take advantage of an unprecedented growth environment. Evergy is a key participant, and we are doing our part to ensure that the state has affordable, competitive rates. In Kansas alone, we have delivered over $360 million in operating efficiencies and customer bill credit.

Speaker Change: The revised capital forecast incorporates the integrated resource plans filed in June of last year, which reflects a balanced approach that enables fuel diversification and a responsible portfolio transition.

Speaker Change: Nearly 55% of our planned investment is targeted towards transmission and distribution projects as we continue to modernize our grid to improve reliability and enhanced resiliency.

Speaker Change: By replacing aging equipment investing in smart grid technologies will also enable further efficiency gains and serving our customers, which has been a hallmark of <unk> strategy since our formation in 2018.

Speaker Change: Moving to slide 11, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri.

Speaker Change: As I discussed in our call last quarter, we have been working with stakeholders to position, Kansas to take advantage of an unprecedented growth environment.

Speaker Change: <unk> is a key participant and we are doing our part to ensure that the state has affordable competitive rates and.

Speaker Change: In Kansas alone, we have delivered over $360 million and operating efficiencies and customer Bill credits.

David A. Campbell: For this success to continue, the state's infrastructure will require significant capital investment to ensure sufficient capacity, competitive levels of reliability and resiliency, and a modern grid that delivers the flexibility and benefits that customers need. In our discussions with stakeholders over the past few months, we have emphasized that attracting the necessary investment cannot be done without a regulatory environment that enables the flow of competitively priced capital. Investors have a choice where they direct capital, and for Evergy and Kansas to compete, investors require debt and equity returns commensurate with current market conditions and competitive with peers, a clear and stable framework around regulatory capital structure to guide how we finance our utility, an opportunity to earn the returns we are authorized and timely recovery of invested capital both now and in the future. Without these elements, our investment proposition loses attractiveness relative to our pure utility customers, who benefit from more robust capital programs, more attractive realized returns, and more predictable and stable regulatory mechanisms.

Speaker Change: For this success to continue the state's infrastructure will require significant capital investment.

Speaker Change: To ensure sufficient capacity competitive levels of reliability, and resiliency and a modern grid that delivers a flexibility and benefits to customers demand.

Speaker Change: In our discussions with stakeholders in the past few months, we have emphasized that attracting the necessary investment.

Speaker Change: Cannot be done without a regulatory environment that enables the flow of competitively priced capital.

Speaker Change: Investors have a choice whether direct capital and for averaging in Kansas to compete investors require debt and equity returns commensurate with current market conditions and competitive with peers.

Speaker Change: Clear and stable framework around regulatory capital structure to guide, how we capitalize our utilities.

Speaker Change: An opportunity to earn the returns we are authorized and timely recovery of invested capital both now and in the future.

Speaker Change: Without these elements our investment proposition loses attractiveness relative to our peer utilities to benefit for more robust capital programs more attractive realized returns and more predictable and stable regulatory mechanisms.

David A. Campbell: An imbalanced investment proposition challenges our ability to have the infrastructure in place to compete for economic development and, by extension, challenges the shared goal of Kansas stakeholders to attract new businesses and their jobs and investments. The best way to ensure competitive rates over the long term is through economic growth. To further that goal, Evergy and a coalition of economic development organizations, business interests, and customers introduced House Bill 2527 in Kansas earlier this year. The bill incorporated multiple elements to establish a fair and competitive framework for electric infrastructure investment, including provisions allowing for the use of plant and service accounting or PISA, construction work in progress for large power plant investments, and enhanced large customer economic development rates, among other features. Discussions relating to HB 2527 are ongoing, and we are working with parties toward achieving a constructive compromise that supports our shared goal of advancing economic development and growth in Canada. We would like to thank the legislative leaders involved in these discussions.

Speaker Change: An imbalanced investment proposition challenges our ability to have the infrastructure in place to compete for economic development and by extension challenges the shared goal of Kansas stakeholders to attract new businesses and their jobs and investment.

Speaker Change: The best way to ensure competitive rates over the long term as economic growth.

Speaker Change: To further that goal averaging in a coalition of economic development organizations business interests and customers introduced house Bill $25 27 in Kansas earlier this year.

Speaker Change: The Bill incorporated multiple elements to establish a fair and competitive framework for electric infrastructure investment.

Speaker Change: Including provisions, allowing for the use of plant in service accounting or Pisa.

Speaker Change: Construction work in progress for large power plant investments.

Speaker Change: An enhanced large customer economic development rates among other features.

Speaker Change: Discussions relating the HB 20, 527 are ongoing and we are working with parties toward achieving a constructive compromise that supports our shared goal of advancing economic development and growth in Kansas.

Speaker Change: We would like to thank the legislative leaders involved in these discussions Kansas Corporation Commission staff.

David A. Campbell: Kansas Corporation Commission staff, representatives from CURB, industrial stakeholders, the governor's office, and many other stakeholders for their participation and engagement. I know that many of our investors and analysts follow the legislative proceedings closely. So please stay on the lookout as the process advances in the coming weeks, and, of course, we will provide a further update on next quarter's call. By May, we also expect to file our Triennial Integrated Resource Plan in both states. The planning process is well underway, and given the significant changes we factored into our 2023 IRP, including IRA tailwinds, updated construction costs, and higher capacity requirements in the Southwest Power Pool, we anticipate a filing similar to last year, though with some adjustments to reflect ongoing changes in marketing conditions and the economic development process. Pivoting to Missouri, we filed a Missouri West rate case on February 2nd. The procedural schedule was jointly filed by the parties earlier this week.

Speaker Change: Representatives from curve industrial stakeholders, the Governor's office and many other stakeholders for their participation and engagement.

Speaker Change: I know that many of our investors and analysts followed the legislative proceedings closely.

Speaker Change: So please stay on the look out as a process advances in the coming weeks and of course, we will provide a further update on next quarter's call.

Speaker Change: By May we also expect to file our triennial integrated resource plan in both states.

Speaker Change: The planning process is well underway and given the significant changes we factored into our 2023 ERP.

Speaker Change: Including <unk> updated construction costs and higher capacity requirements in the southwest power pool.

Speaker Change: We anticipate a filing similar to last year's.

Speaker Change: There was some adjustments to reflect ongoing changes in market conditions and economic development prospects.

Speaker Change: Pivoting to Missouri, we filed in Missouri West rate case on February 2nd.

Speaker Change: Procedural schedule was jointly filed by the parties earlier this week.

David A. Campbell: Subject to approval of this schedule, we anticipate intervening or direct testimony in June, followed by rebuttal testimony in August, a settlement conference in the second half of September, and potential hearings in late September and October. We look forward to working collaboratively with the Missouri Public Service Commission staff and our stakeholders to achieve a constructive outcome for our Missouri West customers. An element of our rank request is our potential investment in the Dogwood Energy Facility, an operating combined cycle gas plant identified in our 2023 IRP. Last November, we entered into an agreement to purchase a 22% share of the plant, or 143 megawatts of summer capacity, and we subsequently filed a request for an operating CC. Earlier this week, on February 26, a stipulation and agreement with no parties opposed was filed requesting that the Missouri Public Service Commission grant the operating CCM. Dogwood is a low-cost generation resource with a solid operating history to support our Missouri West customers.

Speaker Change: Subject to approval of the schedule, we anticipate intervenor direct testimony in June followed by rebuttal testimony in August a settlement conference in the second half of September and potential hearings in late September and October.

Speaker Change: We look forward to working collaboratively with the Missouri Public Service Commission staff and our stakeholders to achieve a constructive outcome from Missouri West customers.

Speaker Change: An element of our rate request is our potential investment and the dogwood energy facility and operating combined cycle gas plant identified in our 2023 ERP.

Speaker Change: Last November we entered into an agreement to purchase a 22% share of the plant or a 143 megawatts of summer capacity.

Speaker Change: And we subsequently filed a request for an operating CCN.

Speaker Change: Earlier this week on February 26, a stipulation and agreement with no parties opposed.

Speaker Change: Was filed requesting that the Missouri Public Service Commission grant the operating CCM.

Speaker Change: Dogwood is a low cost generation resource with a solid operating history to support our Missouri West customers.

David A. Campbell: The transaction is expected to close in the second quarter, subject to commission. On February 23rd, we closed a financing to securitize extraordinary costs from winter storm Uri being carried at Missouri West, providing $323 million in net proceeds. As a result, the costs incurred from the storm will be spread over 15 years to better manage the impact on customer bills.

Speaker Change: The transaction is expected to close in the second quarter subject to commission approval.

Speaker Change: On February 20, <unk>, we closed a financing to securitize extraordinary costs of winter storm, Yuri being carried at Missouri, West providing $323 million in net proceeds.

Speaker Change: As a result of costs incurred from the storm will be spread over 15 years to better manage the impact on customer bills.

David A. Campbell: This was a lengthy process, and we appreciate the hard work of our Treasury team, PSC staff, and other parties in getting it over the finish line. Bills have been proposed in the Missouri House and Senate that would extend PISA to 2040 and modify a provision in the statute to cover new natural gas generation. House Bill 2541 passed out of committee, and Senate Bill 1422 awaits further action.

Speaker Change: This was a lengthy process and we appreciate the hard work of our Treasury team PSC staff and other parties and getting it over the finish line.

Speaker Change: Bills have been proposed in Missouri House, and Senate that would extend piece of the 2040 and modify provision in the statute to cover new natural gas generation.

Speaker Change: House Bill $25 41 passed out of Committee and Senate Bill 2014 22.

Speaker Change: Awaits further action.

David A. Campbell: Similar to our efforts in Kansas, we will continue to engage with our Missouri stakeholders regarding constructive mechanisms that support natural gas investment, as these are important resources identified in our integrated resources. I'll conclude my remarks with slide 12, which highlights the core tenets of our strategy, affordability, reliability, and sustainability. Keeping rates affordable for our customers remains at the forefront.

Speaker Change: Similar to our efforts in Kansas, We will continue to engage with our Missouri stakeholders regarding constructive mechanisms that support natural gas investments.

Speaker Change: These are important resources identified in our integrated resource plan.

Speaker Change: I'll conclude my remarks, with slide 12, which highlights the core tenants of our strategy affordability reliability and sustainability.

Speaker Change: Keeping rates affordable for our customers.

Speaker Change: <unk> at the forefront.

David A. Campbell: We will advance affordability in 2023 with our Kansas rate case settlement, maintaining the momentum of the past five years. We have saved more than $1 billion in operating costs since the merger, enabling Evergy to offset steep inflationary pressures while at the same time ramping up investment and reliability and helping to bolster economic development. We're pleased by our progress in improving regional rate competitiveness and keeping our rate trajectory well below the rate of inflation. As our capital plan outlines, we continue to invest in grid monetization to ensure reliability and strong customer service. Building on the momentum reflected in our significant improvements in SAIT and SAFE, in 2023, our overriding sustainability goal is to lead a responsible, cost-effective energy transition. In 2023, we added Persimmon Creek, a low-cost, emissions-free resource, to serve our Kansas Central customers.

Speaker Change: We advance affordability in 2023, with our Kansas rate case settlement maintain.

Speaker Change: Maintaining the momentum of the past five years.

Speaker Change: We have saved more than $1 billion in operating costs since the merger, enabling <unk> to offset steep inflationary pressures while at the same time ramping up investment in reliability and helping to bolster economic development.

Speaker Change: We're pleased by our progress in improving regional rate competitiveness, and keeping our rate trajectory well below the rate of inflation.

Speaker Change: As our capital plan outlines we continue to invest in grid modernization to ensure reliability and strong customer service.

Speaker Change: Building on the momentum reflected in our significant improvements in safety and safety in 2023.

Speaker Change: Our overriding sustainability goal is to lead a responsible cost effective energy transition.

Speaker Change: In 2023, we added for <unk> Creek, the low cost emissions free resource to serve our Kansas Central customers.

Kirkland B. Andrews: We remain committed to a long-term strategy to reduce CO2 emissions in a cost-effective and reliable manner. Our goal is to achieve net zero emissions of carbon by 2045, with an interim target of a 70% reduction, both relative to a 2005 baseline. Achieving our targets will no doubt be dependent on external factors such as new policies and regulations and the advancement of new technology. 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 along with safety. I will now turn the call over to Kirk.

Speaker Change: We remain committed to our long term strategy to reduce cotwo <unk> in a cost effective and reliable manner.

Speaker Change: Our goal is to achieve net zero emissions carbon emissions by 2045 with an interim target of a 70% reduction both relative to a 22005 baseline.

Speaker Change: <unk>, our targets will no doubt be dependent on external factors, such as new policies and regulations.

Speaker Change: And the advancement of new technologies.

Speaker Change: Our mission is to empower a better future and our vision is to lead their responsible energy transition in our region always with an eye on affordability and reliability along with sustainability.

Speaker Change: I will now turn the call over to Kirk.

Kirkland B. Andrews: Thanks, David, and good morning, everyone. Turning to slide 14, I'll start with a review of our results for the fourth quarter. For the fourth quarter of 2023, Evergy delivered adjusted earnings of $61.1 million, or $0.27 per share, and that's compared to $68.6 million, or $0.30 per share, in the fourth quarter of 2022.

Kirkland B. Andrews: Thanks, David and good morning, everyone turning to slide 14, I'll start with a review of our results for the fourth quarter.

For the fourth quarter of 2023 average delivered adjusted earnings of $61 1 million or 27 per share.

Kirkland B. Andrews: That's compared to $68 6 million or <unk> 30 per share in the fourth quarter of 2022.

Kirkland B. Andrews: As shown on the slide from left to right, the year-over-year decrease in fourth-quarter earnings was driven by the following. First, a 14% decrease in heating degree days led to a $0.05 decrease in EPS for the quarter. This impact was driven by warmer than normal weather over the final two months of 2023, which drove a six cent variance to our plan. December weather was particularly mild, which led to a 23% reduction in heating days in that month alone.

Kirkland B. Andrews: As shown on the slide from left to right the year over year decrease in fourth quarter earnings was driven by the following <unk>.

Kirkland B. Andrews: 1st% to 14% decrease in heating degree days led to a 5% decrease in EPS for the quarter.

This impact was driven by warmer than normal weather over the final two months of 2023, which drove a <unk> <unk> variance to our plan.

Kirkland B. Andrews: December weather was particularly mild which led to a 23% reduction in heating degree days in that month alone.

Kirkland B. Andrews: Weather normalized demand declined by 2.4%, primarily driven by lower residential and industrial demand, contributing to a 6 cent decrease in EPS. A $29.5 million decrease in adjusted O&M, reflecting continued execution on driving cost efficiency, drove a 10 cent increase. The net impact of higher depreciation and amortization was seven cents for the quarter, which includes the partially offsetting impact of new retail rates; higher interest expense drove a seven cent decrease. The fourth quarter 2022 charge associated with the Kansas Earnings Review and Sharing Program, or ERSP, which is no longer in effect, drove a six cent positive variance. And finally, the net impact of tax items drove a six-cent increase. I'll turn next to full year results, which you'll find on slide 15. For the full year 2020-23, adjusted earnings were $815.6 million, or $3.54 per share.

Kirkland B. Andrews: Weather normalized demand declined by two 4%, primarily driven by lower residential and industrial demand contributing to a <unk> <unk> decrease in EPS.

Kirkland B. Andrews: A $29 $5 million decrease in adjusted O&M, reflecting continued execution on driving cost efficiencies drove a 10% increase.

Kirkland B. Andrews: The net impact of higher depreciation and amortization was seven for the quarter, which includes the partially offsetting impact of new retail rates.

Kirkland B. Andrews: Higher interest expense drove a <unk> <unk> decrease.

Kirkland B. Andrews: The fourth quarter 2022 charge associated with the Kansas Earnings review, ensuring program or our SP, which is no longer in effect drove a 6% positive variance.

Kirkland B. Andrews: And finally, the net impact of tax items drove a 6% increase.

Kirkland B. Andrews: I'll turn next to full year results, which you'll find on slide 15.

Kirkland B. Andrews: For the full year 2023, adjusted earnings were $815 6 million or $3 54 per share and that's compared to $853 8 million or $3 71 per share for the same period last year.

Kirkland B. Andrews: That's compared to $853.8 million, or $3.71 per share, for the same period last year. Again, moving from left to right, our full-year EPS drivers compared to 2022 include the following. Our 2023 results reflect a 6% year-over-year decrease in cooling degree days and a 13% decrease in heating degree days, resulting in a 28 cent decrease in EPS versus 2022. However, when compared to normal, weather drove an estimated two-cent favorable impact in 2023. Weather-normalized demand contributed two cents year over year, primarily driven by a 0.8% and 1% increase in residential and commercial demand, respectively, which were partially offset by a 3.6% decline in industrial demand.

Kirkland B. Andrews: Again, moving from left to right our full year EPS drivers compared to 2022 include the following.

Kirkland B. Andrews: Our 2023 results reflect a 6% year over year decrease in cooling degree days and a 13% decrease in heating degree days, which drove a 28% decrease in EPS versus 2022.

Kirkland B. Andrews: When compared to normal weather drove an estimated <unk> <unk> favorable impact in 2003.

Kirkland B. Andrews: Weather normalized demand contributed to year over year, primarily driven by a one 8% and 1% increase in residential and commercial demand respectively.

Kirkland B. Andrews: Which were partially offset by a three 6% decline in industrial demand.

Kirkland B. Andrews: I'll provide more context around demand later in the presentation. However, higher transmission margin resulting from our ongoing investments to enhance our transmission infrastructure drove a 4 cent increase. To help offset challenges from higher interest expense, regulatory lag, weather, and demand, we accelerated cost management initiatives, which drove a positive $0.41 variance year over year. A 26 cents decrease from higher depreciation expense, and then higher interest expense of $0.41 and a $0.05 decline in AFUDC drove a $0.46 decrease.

I'll provide more context around demand later in the presentation.

Higher transmission margins, resulting from our ongoing investments to enhance our transmission infrastructure drove a <unk> increase.

Kirkland B. Andrews: Can you help offset challenges from higher interest expense regulatory lag weather and demand, we accelerated cost management initiatives, which drove a positive 41 variance year over year.

Kirkland B. Andrews: A 26% decrease from higher depreciation expense.

Kirkland B. Andrews: And then higher interest expense of 41.

Kirkland B. Andrews: <unk> decline in <unk> of UDC drove a 46% decrease.

Kirkland B. Andrews: $0.10 of higher year-over-year proceeds from company-owned life insurance, a $0.09 positive variance related to the non-recurring ERSP charge in 2022, which was subsequently reduced in 2023 based on the final refund amount. And finally, tax items drove an increase of $0.17. Turning to slide 16, I'll provide a brief update on our recent sales trend. Overall, 2023 weather-normalized demand growth was flat relative to last year

Kirkland B. Andrews: 10 cents of higher year over year proceeds from company owned life insurance or <unk>.

Kirkland B. Andrews: <unk> positive variance related to the nonrecurring ER SP charge in 2022, which was subsequently reduced in 2023 based on the final refund amount.

Kirkland B. Andrews: And finally tax items drove this increase of <unk> 17.

Speaker Change: Turning to slide 16, I will provide a brief update on our recent sales trends.

Speaker Change: Overall 2023 weather normalized demand growth was flat relative to last year.

Kirkland B. Andrews: Despite some fall-off in the fourth quarter, which may in part reflect the art form of weather normalization, residential and commercial growth were both solid for the year, with 0.8% and 1% positive annual growth, respectively, on a weather-normalized basis. In contrast, industrial demand was down 3.6% for the year.

Speaker Change: Despite some falloff in the fourth quarter, which may in part reflect the art form of weather normalization.

Speaker Change: Residential and commercial growth were both solid for the year with <unk>, eight and 1% positive annual growth respectively on a weather normalized basis.

Speaker Change: In contrast, industrial demand was down three 6% for the year.

Kirkland B. Andrews: Through the first three quarters, this decline was driven by lower usage at two of our largest refining customers, one of which was offline in early 2023 for a planned outage, while the rest of our industrial customer base's usage was generally in line with expectations. This dynamic reversed in the fourth quarter. While demand from refining customers began to recover, we saw a contraction in demand from other industrial customers during the fourth quarter. That was driven in part by plant retooling and expansion projects being undertaken by a number of our industrial customers in the food processing and additive sector. Given that several of these events are expected to be temporary, we expect industrial demand to partially recover as we move into 2024, though not all the way back to 2022 levels. Net, next year, we project approximately 1.1% growth in industrial load on a same store basis. We also expect to see an uptick from new large customers beginning in 2024, with a more notable pickup in 25 and 26 as Panasonic, Meta, and others come fully online.

Speaker Change: Through the first three quarters. This decline was driven by lower usage at two of our largest refining customers.

Speaker Change: One of which was offline in early 2023 for a planned outage, while the rest of our industrial customer base and usage was generally in line with expectations.

Speaker Change: This dynamic reversed in the fourth quarter while.

Speaker Change: While demand from refining customers began to recover we saw a contraction in demand from other industrial customers during the fourth quarter.

Speaker Change: That was driven in part by plant retooling and expansion projects being undertaken by a number of our industrial customers in the food processing and additive sector.

Speaker Change: Given that several of these events are expected to be temporary we expect industrial demand to partially recover as we move into 2024, though not all the way back to 2022 levels.

Speaker Change: Net next year.

Speaker Change: Project, approximately one 1% growth in industrial load on a same store basis.

Speaker Change: We also expect to see an uptick from new large customers beginning in 2024 with a more notable pickup in 25% and 26 as Panasonic meta and others come fully online.

Kirkland B. Andrews: As David outlined earlier, in total, we're forecasting 2% to 3% annualized weather-normalized growth in demand from 2023 to 2026, I reflecting the impact of those large new customers on top of base demand growth of 0.5 to 1 percent. Our demand projections continue to be supported by a strong local labor market as Kansas and Kansas City metro area unemployment rates remain below the national average of 3.7 percent. Moving to slide 17, I'll review the expected year-over-year drivers, which lead to the midpoint of our 2024 EPS guidance range, which is $3.73 to $3.93 per share. Starting on the left of the slide and beginning with 2023 adjusted EPS of $3.54, we expect a $0.15 increase from demand in 2023, which includes the impact of demand growth net of the EPS contribution from weather in 2022. We expect a 1.8% increase in total weather normalized demand, which includes the contribution from new industrial load as customers like Meta and Panasonic begin to come online. Excluding the load from these new customers, we expect same store demand growth of approximately 1.2 percent.

Speaker Change: As David outlined earlier in total we're forecasting 2% to 3% annualized weather normalized growth in demand from 2023 to 2026, reflecting the impact of those large new customers on top of base demand growth of <unk>, 5% to 1%.

Speaker Change: Our demand projections continue to be supported by strong local labor market as Kansas and Kansas City Metro area unemployment rates remained below the national average of three 7%.

Speaker Change: Moving to slide 17, I'll review, the expected year over year drivers, which lead to the midpoint of our 2024 EPS guidance range, which is $3 and 73.

Speaker Change: The $3 93 per share.

Speaker Change: Starting on the left of the slide and beginning with 2023 adjusted EPS of $3 54.

Speaker Change: We expect a 15 <unk> increase from demand in 2023, which includes the impact of demand growth net of the EPS contribution from weather in 2022.

Speaker Change: We expect a one 8% increase in total weather normalized demand, which includes the contribution from new industrial load as customers like meta and Panasonic begin to come online.

Excluding the load from these new customers, we expect same store demand growth of approximately one 2%.

Kirkland B. Andrews: $0.25 of EPS from new retail rates, which reflects both a net revenue increase of $41 million in Kansas, as well as the impact of the amortization of the company-owned life insurance regulatory liability. Higher transmission margins are expected to deliver $0.12 in 2024 as we continue to make investments to improve our transmission infrastructure. We expect a year-over-year increase in O&M of less than $20 million, driving a 6 cents of lower EPS, primarily due to one-time items in 2023 driven by changes in capitalization. Net of these items, we retain the benefit of over $100 million in incremental O&M savings achieved last year as we move into 2020. The remaining drivers consist of increased DNA, a small increase in interest expense, and a 3 cent net decrease from other items.

Speaker Change: 25 of EPS from new retail rates, which reflects both a net revenue increase of $41 million in Kansas as well as the impact of the amortization of the company owned life insurance regulatory liability.

Speaker Change: Higher transmission margins are expected to deliver 12 and 2024 as we continue to make investments to improve our transmission infrastructure.

Speaker Change: We expect eight year over year increase in O&M of less than $20 million driving a <unk> of a lower EPS, primarily due to onetime items in 2023, driven by changes in capitalization.

Speaker Change: Net of these items, we retain the benefit of over $100 million in incremental O&M savings achieved last year as we move into 2024.

Speaker Change: The remaining drivers consistent increase DNA small increase in interest expense on our <unk> net decrease from other items.

Kirkland B. Andrews: And finally, on slide 19, I'll wrap up with an overview of our long-term financial expectations. We're reaffirming our long-term adjusted EPS growth target of 4 to 6 percent through 2026 based on the original 2023 adjusted EPS guidance midpoint of $3.65 and continue to expect to achieve this growth without the need for new equity. Our updated five-year capital plan for 2024 through 2028 totals $12.5 billion and implies rate-based growth of approximately 6% from 2023 to 2028. We've included some additional disclosures in the appendix of today's presentation, including a breakdown of planned expenditures by category and by utility, which we hope you'll find helpful.

Speaker Change: And finally on slide 19, I'll wrap up with an overview of our long term financial expectations were.

Speaker Change: We're reaffirming our long term adjusted EPS growth target of 4% to 6% through 2026 based on the original 2023, adjusted EPS guidance midpoint of $3 65.

Speaker Change: We continue to expect to achieve this growth without the need for new equity.

Speaker Change: Our updated five year capital plan for 2024 through 2028 totaled $12 5 billion and implies rate base growth of approximately 6% from 23 to 28.

Speaker Change: We've included some additional disclosures in the appendix of today's presentation, including a breakdown of planned expenditures by category and by utility, which we hope you'll find helpful.

Kirkland B. Andrews: We remain focused on and committed to executing on our operational financial targets, continuing to enhance reliability and regional rate competitiveness while advancing constructive regulatory policy to support competitiveness and economic development. And with that, we're happy to open the call for questions. Thank you. Ladies and gentlemen, again, if you'd like to ask a question, please press star 1-1 on your telephone. Again, to ask a question, please press star 1-1.

Speaker Change: We remain focused on and committed to executing on our operational financial targets.

Speaker Change: To enhance reliability and regional rate competitiveness, while advancing constructive regulatory policies to support competitiveness and economic development.

Speaker Change: And with that we're happy to open the call for questions.

Speaker Change: Thank you, ladies and gentlemen, again, if you'd like to ask a question. Please press star one on your telephone again to ask a question. Please press star one way.

Operator: One moment for our first question. Our first question comes from the line of Nicholas Campanella, from Barclays. Your line is open. Hey, good morning, everyone. Thanks for all the details today. Good morning, Nick.

Speaker Change: One moment for our first question.

Speaker Change: Our first question comes from the line of Nicholas Capella <unk> sorry.

Nicholas Joseph Campanella: From Barclays. Your line is open.

Nicholas Joseph Campanella: Hey, good morning, everyone. Thanks for.

Nicholas Joseph Campanella: All the details today.

Nicholas Joseph Campanella: Morning. Hey, so appreciate the update on Kansas. I guess, you know, discussions are ongoing. Could you help just give us any kind of color on what that includes versus, I guess, the initial proposals? I'm just kind of thinking depreciation, deferrals, equilayer, ROE, just how to think about the components, if you have any color.

Nicholas Joseph Campanella: Our next.

Nicholas Joseph Campanella: Good morning, Hey, So I appreciate the update on Kansas I guess, you've noted discussions are ongoing.

Speaker Change: Could you help just give us any kind of color on what that includes versus I guess the initial proposals.

Speaker Change: I'm, just kind of thinking depreciation deferrals.

Speaker Change: <unk> Roe.

How to think about the components. If you have any color. Thank you.

David A. Campbell: Thank you. [inaudible] industrial stakeholders, the governor's office, others. So we're working with those parties, and what I'll describe is, you know, this is a very transparent process, as you know. So continue to watch developments in the legislative process to see if we're able to reach a constructive compromise because there's a lot of shared alignment on the goals of economic development and growth. Then you'll see the next steps involve going to the House committee, and from that to the full House, and hopefully on to the Senate.

Speaker Change: So thanks for the question, we wont get ahead of the process in terms of describing the details of the sample size that we're working hard with parties toward achieving a constructive compromise.

Speaker Change: And I really can't thank the parties in offices hard work, it's hard work on through the legislation. We added several weeks so thats legislators cases staff curve.

Industrial stakeholders Governor's office, others, So we're working with those parties.

Speaker Change: And what I'll describe as now that this.

Speaker Change: This is a very transparent process as you know so continue to watch developments in the latest legislative process that we're able to reach a constructive compromised because theres a lot of shared alignment on our goals of economic development growth.

Kirkland B. Andrews: So keep an eye on what's going on in the legislative process. That's the best way to get a sense for where the discussions are going and what they include. But again, we want to really thank the parties as we continue to work. Absolutely. I appreciate that. And then I guess, just quickly on, I guess, the credit side, you're at 15% episode of debt; I think you're targeting greater than 15. So can you just help us understand where you are in this new plan, and how you're trending? And then I know you've reaffirmed no equity needs through 26. How do we think about any potential equity needs beyond that? Thanks. Sure. Hey, Nick, it's Kirk.

Speaker Change: Then youll see the next steps would involve go into the House committee and from that to the full house and hopefully onto the Senate. So keep an eye on what's going on in legislative process Thats, the best way to get a sense for where.

Speaker Change: Where the discussions are going and what the England.

Speaker Change: But again, we want to really thank the parties as we continue to work with.

Speaker Change: Absolutely I appreciate that.

Speaker Change: And then I guess.

Speaker Change: Just quickly on the credit side, you're at 15% of the funded debt I think youre targeting greater than 15. So can you just help us understand where you are in this new plan. How you are trending and then I know you've reaffirmed no equity needs I think through 'twenty, how do we think about any potential equity needs beyond that thanks.

Speaker Change: Sure Nick it's Kirk so building on top of that roughly 15% pro forma which includes adjusting for the impact of the successful securitization and obviously the impact of new rates, which we which we know moving into Kansas. If you look at some of the components as we move into 2024. For example, there are other items that are additive to numerator for example.

Kirkland B. Andrews: So building on top of that, you know, roughly 15% pro forma, which includes adjusting for the impact of the successful securitization and obviously the impact of new rates, which we know are moving into Kansas. If you look at some of the components as we move into 2024, for example, there are other items that are additive to the numerator, for example, most notably the ongoing impact with minimal, basically no lag from our transmission investment. So that increases the numerator. So we expect a surplus over that threshold as we move into 2024, and we expect to utilize that surplus as we move forward into 2025 and 26, augmented by continued robust generation of operating cash flow. Because, as you know, we're not a current taxpayer.

Speaker Change: Most notably.

Speaker Change: The ongoing impact of width with minimal basically no lag from our transmission investments so that increases numerator. So.

Speaker Change: So we expect a surplus over that threshold as we move into 2024, and we expect to utilize that surplus as we move forward into 2025 and 26 augmented by <unk>.

Speaker Change: Continued robust generation of operating cash flow because as you know we're not a current taxpayer. So those two components continue to give us confidence that we can use that surplus that we're blending into in 'twenty four on those ratios.

Operator: So those two components continue to give us confidence that we can use that surplus that we're blegging into in 24 on those ratios to fund that capital investment program without that need for new equity. Beyond 2026, we haven't actually said that at some point, we will pivot to equity needs. We want to do that prudently. We want to do that at a measured pace, both from the standpoint of keeping a reasonable trajectory on EPS but also, with equal importance, maintaining those credit ratios, which obviously allow us to maintain those ratings, which is important from an affordability standpoint for our customers. All right. Hey, I appreciate it. Thanks. Thank you. One moment, please. Our next question comes from the line of Michael Sullivan of Wolf. Your line is open. Hey, good morning.

Speaker Change: To fund that capital investment program without that need for new equity beyond 2026, we haven't actually said at some point, we will pivot to two equity needs. We wanted to do that prudently and we wanted to do that on a measured pace both from a standpoint of keeping a reasonable trajectory on EPS, but also with equal importance maintaining those.

Speaker Change: Credit ratios, which obviously will allow us to maintain those ratings which is important.

Speaker Change: From an affordability standpoint for our customers.

Speaker Change: Okay.

Speaker Change: Alright I appreciate it thank you.

Speaker Change: Thank you gentlemen, please.

Speaker Change: Our next question comes from the line of Michael Sullivan of Wolfe. Your line is open.

Michael P. Sullivan: Thanks for the update. Morning. Hey, David.

Michael P. Sullivan: Hey, good morning, Thanks for the update.

Michael P. Sullivan: Good morning.

David A. Campbell: I wanted to ask, just on the CapEx update, when we kind of break it out by jurisdiction and, you know, how much thought you gave to potentially shifting some of your jurisdictions based on some of the outcomes that we got, it looks like, Kansas Central was still up, I think, plan over plan. Yeah, just how do you think about that in light of the outcome you got last year? I know a bunch of your peers have, you know, maybe taken more aggressive approaches in terms of shifting between jurisdictions based on outcomes. Yeah, Mike, I think it's a good question. I think that we, as you've seen a lot of our peer utilities, their pace of rate-based investment was already higher than ours in terms of their annual rate-based growth, and many of them have increased it significantly recently, so the gap has widened.

Michael P. Sullivan: Wanted to ask just on the Capex.

And we kind of break it out by by jurisdiction and how.

Michael P. Sullivan: How much thought you gave to potentially shifting.

Michael P. Sullivan: Amongst your jurisdictions based on some of the outcomes that we got it looks like.

Michael P. Sullivan: Kansas Central was still up I think plan over plan.

Michael P. Sullivan: Yes, just how you think about that in light of the outcome you got last year I know a bunch of your peers.

Michael P. Sullivan: Maybe take a more aggressive approaches in terms of shifting between jurisdictions based on outcomes.

Speaker Change: Yeah, Mike I think it's a good question I think that we as you've seen a lot of our peer utilities their pace of rate base investment.

Speaker Change: Was already higher than ours in terms of annual rate based growth in many of them have increased them significantly recently so the gap has widened. So if you look at our break.

David A. Campbell: So if you look at our, break it down by jurisdiction. You look at Kansas Central and Kansas Metro, the biggest source of increases in generation, particularly in the out years, and that relates to a need for new dispatchable generation resources. If you look at the early years in the categories of, you know, kind of traditional T&D grid and other categories, there's a modest decline.

Speaker Change: Break it down by jurisdiction, Kansas Central Kansas Metro the biggest source of increases in generation, particularly in the out years and that relates to a need for new dispatch will generation resources.

Speaker Change: If you look at the early years in the categories of kind of traditional T&D grid and other categories. There was a modest decline.

David A. Campbell: And that's in the context of an inflationary environment for equipment and otherwise. So we're making the investments we need to to ensure reliability and serve the new customers that are identified. But we do believe, and this is a discussion we've had with stakeholders, that to really take advantage of the opportunities in Kansas, there's an intersection with the regulatory mechanisms that are in place.

Speaker Change: And that's in the context of an inflationary environment for equipment and otherwise so were.

Speaker Change: We're making the investments we need to to ensure reliability and serve new customers that are identified but.

Speaker Change: We do believe and this is a discussion we've had with stakeholders at to really take advantage of the opportunities in Kansas.

Okay.

Speaker Change: Theres a intersection with the regulatory mechanisms that are in place so.

David A. Campbell: So when you drill down to it, you'll see that the modest uptick in Canada is really driven by the need for new generation in the out, particularly new dispatchable generation. Okay, and kind of just along that, how influenced can these plans be to the outcomes you get in the legislative session this year? Could we see further shifting to the extent that you do or don't have success? Mike, I think that's a great question if we, you know, part of the dialogue with our stakeholders in Kansas is around the need for incremental investment if we're able to reach constructive compromise that reflects shared belief in the infrastructure investment needed. That's really what's underlying the push here.

Speaker Change: When you drill down to what Youll see that that the modest upticks in Kansas are really driven by the need for new generation in the out years, particularly new dispatch with generation.

Speaker Change: Okay, and kind of just along that how.

Speaker Change: Influence can these plans speed to the outcomes you get and the legislative session. This year could could we see further shifting to the extent that you do or don't have success.

Speaker Change: But Mike I think that's a great question. If we didn't know part of the dialogue with our stakeholders and canvas is around the need for incremental investment if we are able to reach.

Speaker Change: Constructive compromise that reflects shared belief in the infrastructure investment needed that's really what's underlying that.

David A. Campbell: I do think you'll see us evaluate our capital plan for incremental opportunities and pursue those. We'll do that in a systematic process, of course. I'll make sure that that's a process where there's full transparency to both of course our stakeholders in Kansas and the market. But I think you will see these factors do go hand in hand, and the underlying reflection of support for that kind of infrastructure investment will be matched by an increase in that kind of investment, which we think will be really beneficial as Kansas pursues its growth and development opportunities. Okay, great. And then my last one just on the Missouri West case. Looks like you got a settlement on the Dogwood plant.

Push here I do think Youll see us evaluate our capital plan for incremental opportunities and pursue those and we will do that in a systematic process of course.

Speaker Change: I'll make sure that that's it.

Speaker Change: Process, where there is full transparency to both our of course, our stakeholders in Kansas and in the market, but I think you will see.

Speaker Change: Yes.

Speaker Change: These factors do go hand in hand underlying reflection of support for that kind of infrastructure investment will.

Speaker Change: It will be matched by an increase in that kind of investment, which we think will be really beneficial as kansas pursues the growth and development opportunities.

Speaker Change: Okay, Great and then my last one just on the Missouri West case looks like.

Got a settlement on the <unk>.

David A. Campbell: Beyond that, any particular areas where you're expecting the most pushback? It's a pretty straightforward rate case. It's largely because we had a rate case two years ago, so our 22 and 23 rate cases were after long stayouts, first since the merger. So this one's a little more straightforward in that regard. So the biggest elements, I think you'd see it reflected in the charts we've been posting on there, are incorporating capital additions and incorporating the impacts of a higher cost of capital environment. There's some transmission expense related to a generation plant that's part of it that's relatively modest, but for the most part, it's a pretty straightforward rate case.

Speaker Change: Dogwood.

Speaker Change: Plant.

Beyond that.

Speaker Change: Any particular areas, where youre expecting the most pushback.

Speaker Change: Mike It's a pretty straightforward rate case, it's largely we had a rate case two years ago. So R 22, and 'twenty three rate cases, we're after long stay outs first since the merger. So this one's a little more straightforward in that regard.

Speaker Change: So the biggest elements I think you'd see it reflected in the charts. We've been posted on there are incorporating capital additions and incorporating the impacts of <unk>.

Speaker Change: Higher cost of capital environment.

Speaker Change: Eric.

Speaker Change: You have some transmission expense related to generation plant, that's part of it that's relatively modest but for the most part it's a pretty straightforward rate case.

David A. Campbell: A lot of the complicated issues that I know we discussed at length with you going into the last one thankfully were resolved in that one. So it's generally a pretty straightforward rate case centered on the investments we've made since then and the authorized returns related to it. Thank you for being here. Thank you. Thank you. Thank you. Our next question comes from the line of Paul Zimbardo of Bank of America. Your line is open. Hi. Good morning, team. Thanks a lot. Good morning. I promise I will not ask about the legislation. The first one I had was...

Speaker Change: The complicated issues that I know we've discussed at length with you going into last one thankfully resolved in that one.

Speaker Change: Generally a pretty straightforward rate case centered on the investments we've made since then.

Speaker Change: The authorized returns related to it.

Speaker Change: Good to hear thank you.

Speaker Change: Thank you. Thank you one moment please.

Speaker Change: Our next question comes from the line of pause embargo of Bank of America. Your line is open.

Pause Embargo: Hi, good morning team Thanks, a lot.

Pause Embargo: Good morning, I promise I will not ask about the legislation.

Paul Andrew Zimbardo: I'll believe it when I hear it. Well, you'll hear it. Just in terms of the base demand, kind of a new incremental load customer, the 2% to 3% versus the base of 50 basis points to 1%, is there a good way to think about like an earning sensitivity or just what the contribution of that is through the plan? You know, in terms of earning sensitivity, I wouldn't I wouldn't call it linear from that perspective. These are obviously large industrial customers which come with great incentives there. It is certainly additive from a tailwind perspective, but difficult to give you specifics beyond that because it literally has to do with the obviously individualized contract that those customers negotiate going forward.

Speaker Change: First wanted to ask even when I hear it.

Speaker Change: The only correct.

Speaker Change: Just in terms of that the base demand kind of a new incremental load customer that 2% to 3% versus the base.

Speaker Change: <unk> 50 basis points to 1% is there a good way to think about like an earnings sensitivity or just what the contribution of that is due to the plan.

Speaker Change: In terms of earnings sensitivity.

Speaker Change: I wouldn't I wouldn't call. It linear from that perspective. These are obviously large industrial customers, which come with with rate incentives there.

Speaker Change: It is certainly additive from a tailwind perspective, but difficult to give you specifics beyond that because it literally has to do with with obviously the the individualized contracted those those customers negotiate going forward.

Paul Andrew Zimbardo: And it is a ramp-up period, right, that that two to three percent on top of that half a percent to one really builds over time. We start to see a modest contribution in twenty-four, but it really kind of kind of reaches its pace as we move into twenty-two six. I would just echo Kirk's comment though on, this is David, that these are industrial customers, the profile of which is helpful, important for covering fixed costs, but generally less impactful and equivalent load growth and commercial revenue.

Speaker Change: And it is a ramp up period rate, 2% to 3% on top of that half a percent to one really builds over time, we start to see a modest contribution pattern 24, but it really kind of kind of reaches its pace as we move into 2026.

David A. Campbell: I would just echo Kirk's comment, though on how this is David that the these are industrial customers, which as you know the profile of those helpful important for covering fixed cost, but generally the less impact than equivalent load growth in commercial residential.

Kirkland B. Andrews: Okay, yes, understood. And then the second question I had, and not to get too technical, but I noticed there's a pretty big increase in CapEx for 2028 on the generation side, and you give a year-end rate base in your guidance for 2028. Is there a large CWIP balance or just anything we should think of? Like, could there have been faster growth in that period with CWIP on top of rate-based growth versus 6%, if that makes sense?

Speaker Change: Okay, Yes understood.

And then the second I had not to get too technical but I know this is a pretty big increase in Capex for 2028 on the generation side and you gave year end rate base and your guidance for 2028 is there a large well.

Speaker Change: Balance or just anything we should think of like there'd be faster growth in that period with C with on top of rate base growth versus the 6% that makes sense.

Kirkland B. Andrews: That is certainly a possibility, natural gas plants aren't a you know you write a check at the end right before the COD so we're going to be building that that informs capital investment over time and that obviously entails a building balance in CWIP. Certainly getting timely recovery on CWIP is one of our objectives as we look for you know kind of reforming you know the type regulatory mechanisms that are designed to incent that so as we move forward on some of the legislation which we won't comment on I think that'll inform largely the impact on some of those elements which which are helpful especially for large capital projects like that like the natural gas plants sort of back into the I think the 6% rate based growth is indicative of the overall capital planning trajectory is what I described, you know, and you can follow up in some of the details.

Speaker Change: That is that is certainly a possibility certainly.

Speaker Change: Natural gas plants arent you write a check at the end right before this EOD. So we're going to be building that informs capital investment over time and that obviously entails a building balance in <unk> <unk>.

Speaker Change: Certainly getting timely recovery on <unk> is one of our objective is as we look for kind of reforming.

Speaker Change: The type of regulatory mechanisms that are designed to incent that so as we move forward on some of the legislation, which we won't comment on I think that will inform largely be impact on some of those elements, which which are helpful, especially for large capital projects like that like the natural gas plants or the backend of the plant.

Speaker Change: I think the 6% rate base growth is indicative of the overall capital plan and trajectory as what I described.

Speaker Change: And you can follow up on some of the details, but I'd emphasize and also is that.

Kirkland B. Andrews: What I emphasize also is that we're pursuing a pretty balanced portfolio, as you'll see, and I actually think you've seen that from a number of our peer utilities as well with the growth that we're seeing. Adding new dispatchable resources is also an important part of the mix, and that generally has pretty wide support in our jurisdiction. And it's an important part of the investment program. So adding gas while we're adding wind and adding solar, leading that responsible energy trend transition, but with a balanced portfolio, is an important part of the mix. And I think we've got alignment with our stakeholders in our states around the importance of doing that. Absolutely. Thank you very much.

Speaker Change: We're pursuing a pretty balanced portfolios of C&I actually you've seen that from a number of our peer utilities as well with the growth that we're seeing.

Speaker Change: Adding new dispatch for resources also an important part of the mix and that generally has a pretty wide support in our jurisdictions.

Speaker Change: And it's an important part of the investment program, so adding gas, while we're adding win and adding solar leaving that responsible energy transition, but with a balanced portfolio is an important part of the mix and I think we.

Speaker Change: We've got alignment with our stakeholders and our states around the importance of doing that.

Speaker Change: Absolutely. Thank you very much.

Operator: Thank you. Thank you. Our next question comes from the line of Paul Fremont. Leighton, Thalman & Company, and a lot of...

Speaker Change: Thank you. Thank you one moment please.

Speaker Change: Our next question comes from the line of Paul Fremont.

Speaker Change: Ladies and gentlemen, and company your line is open.

Speaker Change: Yes.

Paul Patterson: Thank you. Thank you. It looks like you've got a lot of legislative and regulatory initiatives. Can you maybe just prioritize for us in your mind which are the ones that are most important?

Speaker Change: Thanks.

Paul Patterson: It looks like you've got a lot of legislative and regulatory initiatives can you maybe just prioritize for us in your mind, which are the ones.

David A. Campbell: Sure, so I think, as probably even reflected by the number of minutes devoted to the topic, our legislative initiative in Kansas, really the broader effort to work with policymakers and stakeholders in Kansas to support electric infrastructure investment to support economic development and growth. That I'd list as our top priority. There are other mechanisms. I mean, we're talking about the same parties who we'd work with in the regulatory front otherwise.

Paul Patterson: That are most important from your perspective.

Speaker Change: Sure. So I think as volume reflected by the number of minutes devoted to the topic, our legislative initiative in Kansas.

Speaker Change: Really a broader effort to work with.

Speaker Change: Policymakers and stakeholders in Kansas to.

Speaker Change: Support electric infrastructure investment to support economic development and growth that I would list as our top priority.

Speaker Change: There are other mechanisms, we're talking about the same parties, who we would work within the regulatory front and otherwise so I think the importance of having a constructive dialogue alignment around those shared objectives is key but thats our latest.

David A. Campbell: So I think the importance of having a constructive dialogue and alignment around those shared objectives is key. But that's our, I would characterize that as our number one legislative priority. We have some activities underway in Missouri as well, and those are important. They're also reflective of important priorities, but it's fair to say that the prospects in the Missouri legislature this year, in general, for legislation are more challenging. I think there are nearly a double-digit number of state legislators running for statewide office.

Characterize that is our number one legislative priority.

Speaker Change: We have some activities underway in Missouri, as well and those are important they're also reflected important priorities, but it's.

Speaker Change: Fair to say that the prospects in the Missouri legislature. This year in general for legislation are more challenged.

Speaker Change: I think there is.

Speaker Change: The double digit number of state legislators running first state wide office, it's an election year.

David A. Campbell: It's an election year, so the overall dynamics in Missouri are less likely to lead to legislation. But I'd also say that there's maybe a lower priority there. Very constructive legislative actions taken in Missouri the last couple of years, with the extension of PISA, some other changes to PISA, and the addition of the property tax rider. So I'd emphasize that our relative priority is on the Kansas side and the mechanisms that we've talked about. Second question. Would a slower rate of dividend increase sort of improve your ability to deliver on sort of the... Targeting.

Speaker Change: So the overall dynamics in Missouri are less likely to lead to legislation, but I'd also say that there is maybe a lower priority there very constructive legislative.

Speaker Change: Actions taken in Missouri. The last couple of years with extension of pieces. Some other changes to piece of the addition of the property tax rider so.

Speaker Change: Besides that our relative priorities on the canvas side and the mechanisms that we've talked about there.

Speaker Change: Sort of second question.

Speaker Change: Would a slower level rate of dividend increase sort of improve your ability to deliver on sort of the EPS growth target that you have.

Kirkland B. Andrews: I would say marginally, from that standpoint, obviously, we had a little bit of a lower increase, obviously commensurate with our change in the growth rate. But it's very important for us to have a good blend of, obviously, capital appreciation and current returns. So we want to be mindful of that, you know, delivering the right mix for our investors. As we pivot to, you know, maybe potentially a little bit lower or commensurate with our growth rate, the reduction in the dividend really, I'd say, sort of contributes to our ability, relative to higher levels of dividend growth, to fund that capital expenditure, right? It helps us maintain those all-important credit ratios that I talked about before. And just to clarify, Kirk was referring to a reduction in the rate of dividend growth, not a reduction in the dividend itself, of course. So we had a 5% addition. We raised our dividend growth rate by 5% last quarter consistent with the midpoint of our earnings growth rate range.

Speaker Change: I would say marginally from that standpoint, obviously, we had a little bit of a lower increase obviously commensurate with our change in.

And the growth rate, but it's very important for us to have a good blend of obviously capital appreciation and current returns. So we want to be mindful of that delivering the right mix for our investors.

Speaker Change: As we as we pivot to maybe potentially a little bit lower are commensurate with our growth.

Speaker Change: Growth rate the reduction in the dividend really I'd say sort of contributes to our ability relative to higher levels of dividend growth.

Speaker Change: To fund that capital expenditures right. It helps us maintain those all important credit ratios that I talked about before and just to clarify Kurt.

Speaker Change: Turning to a reduction in the rate of dividend growth not a reduction of the dividend or so we had a 5% 5% mentioned, we raised our dividend growth of 5%.

Speaker Change: Because last quarter consistent with the midpoint of our earnings growth rate range. I think you raise a good question just stepping back around the mix of.

David A. Campbell: I think you raised a good question just stepping back around the mix of, What's your dividend payout ratio as you think about the overall funding for your capital plan? We've described that we don't see a need to issue equity through 2026. So I think that in particular becomes a factor that our peer companies who are issuing equity seek to balance on what's the right payout ratio or otherwise. We've described a target payout ratio of 60 to 70 percent. That remains our payout ratio. But being thoughtful about our growth rate and our dividend as our earnings grow and keeping those in tandem and thinking about that payout range is probably what we're considering. And then last question for me: It sounds like you could still raise capital spending levels without issuing equity. Is there sort of... limit to batting?

Speaker Change: What's your dividend payout ratio as you think about the overall funding for your capital plan. We've described that we don't see a need to issue equity through 2026. So I think that in particular becomes a factor that our peer companies are issuing equity seek the balance of what's the right payout ratio or otherwise, we describe a tire target payout ratio of 60% to 70% that remains our payout.

Speaker Change: Ratio, but being thoughtful about our.

Speaker Change: Our growth rate in our dividend as our earnings.

Speaker Change: <unk> and keeping those in tandem and thinking about that payout range is probably how we're considering.

Speaker Change: And then last question for me.

Speaker Change: It sounds like you could still raise capital spending levels without issuing equity is is there sort of.

Speaker Change: A limit to that increase.

David A. Campbell: Where or what would be the threshold where you would have an issue? Yes, that's it. Thank you. So we won't, you know, give you the exact number on. Obviously, those things go in tandem.

Speaker Change: What would be the threshold, where you would have that issue.

Speaker Change: To issue equity.

Speaker Change: So we won't give the exact number on obviously those things go in tandem you can't.

David A. Campbell: You can't, we, if we raise our capital plan by a very significant amount. You have to think about the funding approach to that. And the governor is really what Kirk described earlier.

Speaker Change: If we.

Speaker Change: Raised our capital plan.

Speaker Change: A very significant amount you have to think about the funding approach to that and the government is really what Kirk described earlier, we look at our our credit ratios and maintaining it.

David A. Campbell: We look at our credit ratios and maintain the ratios we look at in the Moody's threshold. So, as we consider changes to our capital plan, there's always room in that capital plan. It's just a matter of how significant the changes would be. But in general, we've described with the capital plan we have, even with the changes we've implemented, that we don't expect to issue equity through 2026.

Speaker Change: The ratios, we look at in the Moody's threshold so.

Speaker Change: As we consider changes to our capital plan.

Speaker Change: There's always room in that capital plan as a matter of how significant the changes would be but in generally described with the capital plan, we have even with the changes we've implemented that were.

Speaker Change: We affirm that we don't expect to issue equity through 2006, we made major changes to the capital plan, we'd be looking at the funding approach same time.

David A. Campbell: If we made major changes to the capital plan, we'd be looking at the funding approach at the same time. Okay, and then I guess if you were to sort of go to an incremental level. Um, What...uh... What?

Speaker Change: Oh, Okay, and then I guess, if you were to sort of go to incremental levels.

Speaker Change: What.

Speaker Change: <unk>.

David A. Campbell: percent of what you see as being funded. Well, again, I would describe us as we don't see in our capital plan a need to issue Act 3 through 2026. So I think you're probably getting ahead of the game a little bit with that question.

Speaker Change: What.

Speaker Change: Percent.

Speaker Change: Would you see as being funded with equity.

Speaker Change: Well again I would describe.

Speaker Change: <unk> seen our capital plan and need to issue equity through 2026, So I think youre, probably getting ahead of the game a little bit with that question I think what we would it relates to the question of.

David A. Campbell: I think we would, you know, relate to the question of, It's not formulaic, but the discussions we're having in Kansas, in particular, about how do we fund electric infrastructure investment to support economic development and growth. A lot of that comes down to T&D investment and having that in place, where you put that, and how you put that in place. So it'll be much more tactile around the timing and the positioning of where we make some of those investments to support the growth. So it's not the equivalent of adding a huge new solar farm or a big new gas plant where you've got orders of magnitude that. So we'll look at that on an integrated basis, but we're pretty thoughtful about how we approach our financing plan and how we think about the timetable for when we issue equity. I think your question is signaling some kind of major change; I wouldn't think about it that way. I'd really think about how we're going to be funding and where we're going to be opportunities to fund this, particularly T&D and some grid work to support economic development and growth in Kansas.

Speaker Change: And it's not formulaic, but the the discussions we're having in Kansas, particularly about how do we fund electric infrastructure investment to support economic development of growth a lot of that comes down to TMT investment and having that in place and where you put that in how you put that in place.

Speaker Change: So it will be much more tax around the timing and the positioning of where it makes some of those investments to support the growth. So it's sort of the equivalent of adding a.

Speaker Change: Huge new solar farm or a big new gas plant.

Speaker Change: Got orders of magnitude that.

Speaker Change: I've tried to kind of changes you may be discussing so we will look at that on an integrated basis, but we're pretty thoughtful about how we approach our financing plan and how we think about the timetable for when we issue equity.

Speaker Change: So.

Speaker Change: I think your question is signaling some kind of major change I wouldn't think about that way I'd really think about how we can be funding and where we're going to be opportunities to fund. This.

Speaker Change: Particularly T&D and some grid work to support economic development growth in Kansas, That's what we're working towards with our stakeholders.

Paul Patterson: That's what we're working towards with our stakeholders. Great, thank you very much. Thank you. One moment, please. Our next question comes from the line of Paul Patterson of Glen Rock Associates. Your line is open. Good morning, how are you?

Speaker Change: Great. Thank you. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Our next question comes from the line of Paul Patterson of Glen Robinson Humphrey Your line is open.

Paul Patterson: Good morning, how are you.

Paul Patterson: Good morning, Paul. Just one sort of quick follow-up question from Paul Zimbardo on slide 9, as opposed to the earnings impact associated with these industrial customers. You mentioned that there's an impact, spreading more fixed costs over greater megawatt hours. Could you give us a flavor as to what that is? I mean, if you don't have it, that's cool, but I'm just wondering if... Wood is kind of the rate impactor for industrial development. What always depends on what rates are negotiated, of course; a lot of the very large loads get special contracts.

Paul Patterson: Good morning, Paul.

Paul Patterson: Gary.

Paul Patterson: Just one quick sort of follow up question from pulse embargoes on slide nine.

Paul Patterson: Just.

Paul Patterson: As opposed to the earnings impact associated with these.

Industrial customers.

Paul Patterson: You mentioned that.

Paul Patterson: There is there is an impact from <unk>.

Paul Patterson: Adding more fixed costs.

Paul Patterson: Greater megawatt hours I guess.

Paul Patterson: Could you give us a flavor as to what that is.

Speaker Change: If you don't have it that's cool, but I'm just wondering if.

Speaker Change: What is kind of the rate impact of.

Speaker Change: Of these.

Speaker Change: The industrial development.

Speaker Change: Initiatives like that.

Speaker Change: But it always depends on what rates negotiated for us while they're very large loads get special contracts I think.

David A. Campbell: I think the best way to describe it is, you know, we actually have a waterfall that goes from 2023 to 2024. So we show what the overall impact of weather and demand is. And that it's a it's part of the improvement that we see in the trajectory from 23 to 24. But in general, the industrial load, while it does help and drives incremental cost savings and opportunities. It doesn't have the same level of impact as residential or commercial because of the rate structure.

Maybe the best way to describe it we actually have a waterfall that goes through 2023 to 2024. So we show what the overall impact of weather and demand is.

Speaker Change: And that's it so it's part of the improvement that we see in the trajectory from 23 to 24.

Speaker Change: But in general the.

Speaker Change: Industrial load.

Speaker Change: While it does help and drives incremental.

Cost savings in.

Speaker Change: Opportunities it doesn't have the same level of impact as residential and commercial because of the rate structure.

David A. Campbell: But I think you get a good flavor of how that translates, you know, because we give the growth rate estimate and the impact on EPS and that I think it's our waterfall slide in the back of the document. So we can walk through that with you offline just to see how they translate. But it's

Speaker Change: But if you get a good flavor of how that translates because we give the growth rate estimate in the <unk>.

Speaker Change: Impact on EPS in that I think it's a waterfall slide in the back half of the documents. So we can walk through that with you offline just to see how they translate but it's a.

David A. Campbell: You know, any savings that are generated, of course, through rate cases are going to be shared. So one of the best things is what I described in my note, the best way to keep rates affordable through growth. And that affordability gain, you know, in the near term, it can have some EPS impact.

Speaker Change: And any savings that are generated of course to rate cases are going to be.

Sure. So if you.

Speaker Change: One of the best thing as I described in my note the best way to keep rates affordable through growth.

Speaker Change: And that affordability gains in the near term it can have some.

David A. Campbell: But we're going to have a regular cadence of rate cases now. And that's the great benefit of it, because that's what's going to keep rates affordable for customers because, of course, that gets shared. Okay, thanks so much. Thank you. Thanks. And that's our time for the Q&A today. I'd like to turn the call back over to David Campbell for any questions. Thank you, Valerie. And thanks, everyone, for your interest and time this morning. That concludes our call today. Thank you. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. Have a great day!

Speaker Change: EPS impact, but we're going to have a regular cadence of rate cases, now thats. The great benefit of it is that's what's going to keep rates affordable for our customers because of course that gets shared.

Speaker Change: Okay. Thanks, so much.

Speaker Change: Thank you.

Speaker Change: Yes.

And at that time for the Q&A today I'd like to turn the call back over to David Campbell for any closing remarks.

David A. Campbell: Thank you Valerie and thanks, everyone for your interest and time. This morning that concludes the call today. Thank you.

Speaker Change: Ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.

Speaker Change: Yes.

Speaker Change: [music].