Q2 2024 Evergy Inc Earnings Call

Good day and thank you for standing by.

Operator: Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Peter Flynn, Director of Investor Relations. Please go ahead.

Speaker Change: Welcome to the Q2 2024 Evergy, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Peter Flynn Director of Investor Relations, please go ahead

DeeDee: Thank you, DeeDee. Good morning, everyone.

Peter Flynn: Thank you, DeeDee. Good morning, everyone. Welcome to Evergy's second quarter 2024 earnings conference call.

Peter Flynn: Welcome to Evergy's second quarter 2024 earnings conference call. Our webcast slides and supplemental financial information are available on our investor relations website at investors.evergy.com. Today's discussion will include forward-looking information. Slide 2 in 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 measures.

Speaker Change: Our webcast slides and supplemental financial information are available on our Investor Relations website at investors.evergy.com.

Speaker Change: Today's discussion will include forward-looking information. Slide 2 and the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations.

Speaker Change: They also include additional information on our non-GAAP financial measures.

Peter Flynn: Joining us on today's call are David Campbell, Chairman and Chief Executive Officer, and Geoff Ley, Acting Chief Financial Officer and Treasurer. David will cover second quarter highlights and an update on our regulatory and legislative agendas. Geoff will cover our second quarter 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 will now turn the call over to David.

Speaker Change: Joining us on today's call are David Campbell, Chairman and Chief Executive Officer, and Jeff Wei, Acting Chief Financial Officer and Treasurer.

Speaker Change: David will cover second quarter highlights and an update on our regulatory and legislative agendas.

Jeff Way: Jeff will cover our second quarter results, retail sales trends, and our financial outlook for 2024.

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

Peter Flynn: Thanks, Pete, and good morning, everyone. I'll begin on slide five.

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

David Campbell: This morning, we reported second quarter adjusted earnings of $0.90 per share compared to $0.81 per share a year ago. The increase in adjusted earnings over last year was driven primarily by demand growth, weather, new retail rates, and higher transmission margin, partially offset by higher operations and maintenance costs, DNA, and interest expense. Geoff will discuss these earnings drivers in more detail in his remarks. Now, as you all know, Kirk Andrews resigned from his role as chief financial officer on June 4th.

Jeff Way: Thanks, Pete, and good morning, everyone. I'll begin on slide 5. This morning, we reported second-quarter adjusted earnings of $0.90 per share compared to $0.81 per share a year ago.

David Campbell: The increase in adjusted earnings over last year was driven primarily by demand growth, weather, new retail rates, and higher transmission margin, partially offset by higher operations and maintenance costs, DNA, and interest expense.

David Campbell: Jeff will discuss these earnings drivers in more detail in his remarks.

Speaker Change: Now, as you all know, Kirk Andrews resigned from his role as Chief Financial Officer on June 4th. We were excited to appoint Jeff Ley as Acting CFO on June 7th while we conduct an internal and external search.

David Campbell: We were excited to appoint Geoff Ley as acting CFO on June 7th while we conduct an internal and external search. We expect to conclude the search this year. Geoff worked closely with Kirk and me, and he brings an outstanding capability set to the role, which has enabled a smooth transition. We'd like to thank Kirk for his leadership, and we wish him all the best in his next chapter of his career closer to home.

David Campbell: We expect to conclude the search this year.

Speaker Change: Jeff worked closely with Kirk and me, and he brings an outstanding capability set to the role, which has enabled a smooth transition.

Speaker Change: We'd like to thank Kirk for his leadership, and we wish him all the best in his next chapter of his career, Closer to Home.

David Campbell: In May, we filed our Triennial Integrated Resource Plan in Kansas following a similar filing for Missouri in April. In aggregate, the 2024 Preferred Plan includes 5,800 megawatts of resource addition through 2033, representing an increase of 1,500 megawatts over the next 10 years when compared to the 2023 Preferred Plan. Our IRP and its underlying analysis reflect the benefits of a diverse fuel mix. Renewables have low or negative marginal costs and no emissions, but they are intermittent depending on Mother Nature or large-scale storage deployment for reliability.

Speaker Change: In May, we filed our Triennial Integrated Resource Plan in Kansas following a similar filing for Missouri in April .

Speaker Change: In aggregate, the 2024 Preferred Plan includes 5,800 megawatts of resource addition through 2033, representing an increase of 1,500 megawatts over the next 10 years when compared to the 2023 Preferred Plan.

Speaker Change: Our IRP and its underlying analysis reflect the benefits of a diverse fuel mix.

Speaker Change: Renewables have low or negative marginal costs and no emissions, but they are intermittent depending on Mother Nature or large-scale storage deployment for reliability.

David Campbell: New and existing thermal resources emit emissions and have higher marginal costs for fuel and O&M, but they can be dispatched to meet customer demand when they are needed most. The ultimate goal of having a balanced mix is to ensure reliability and affordability for our customers as we advance a responsible fleet transition. This transition will require sustained investment over the coming years and will incorporate the most recent IRP and its higher levels of new generation when we provide an update to our capital plan on the third quarter earnings call.

Speaker Change: New and existing thermal resources are emitting and have higher marginal costs for fuel and O&M, but they can be dispatched to meet customer demand when they are needed most.

Speaker Change: The ultimate goal of having a balanced mix is to ensure reliability and affordability for our customers.

Speaker Change: as we advance a responsible fleet transition.

Speaker Change: This transition will require sustained investment over the coming years and will incorporate the most recent IRP and its higher levels of new generation when we provide an update to our capital plan on the third quarter earnings call.

David Campbell: Shifting back to the quarter, since the beginning of April, we experienced 10 severe wet storm events that produced wind gusts in excess of 50 miles per hour. Wind speeds at this level down countless trees and tree limbs and caused extensive damage to equipment and structures across our service territory.

Speaker Change: Shifting back to the quarter, since the beginning of April , we experienced 10 severe wet storm events that produced wind gusts in excess of 50 miles per hour.

Speaker Change: Wind speeds at this level down countless trees and tree limbs and cause extensive damage to equipment and structures across our service territory.

David Campbell: I'd like to thank our customers for their patience during outages caused by this unusually severe weather and thank our transmission and distribution teams, contractors, personnel from neighboring utilities, and our call center, and customer service employees for their hard work throughout our storm restoration effort. Our frontline employees are the bedrock of safely delivering affordable and reliable power to our customers and communities. We're extremely proud of their contributions, as they worked long shifts in hot and humid conditions.

Speaker Change: I'd like to thank our customers for their patience during outages caused by this unusually severe weather, and thank our transmission and distribution teams, contractors, personnel from neighboring utilities and our call center, and customer service employees for their hard work throughout our storm restoration efforts.

Speaker Change: Our frontline employees are the bedrock of safely delivering affordable and reliable power to our customers and communities.

Speaker Change: We're extremely proud of their contributions as they worked long shifts through hot and humid conditions.

David Campbell: Our team's execution has enabled solid performance in the first half of the year, and we are reaffirming our 2024 adjusted EPS guide, range of $3.73 to $3.93 cents per share, as well as our target long-term annual adjusted EPS growth target of 4% to 6% from 2023 to 2026. On slide six, we highlight three major economic development wins that we have highlighted. Google, Panasonic, and Meta.

Speaker Change: Our team's execution has enabled solid performance in the first half of the year, and we are reaffirming our 2024 adjusted EPS guidance.

Speaker Change: Range of $.373 to $.393 per share, as well as our target long-term annual adjusted EPS growth target of 4% to 6% from 2023 to 2026.

Speaker Change: On slide six, we highlight three major economic development wins that we have featured.

David Campbell: In aggregate, their demand represents approximately 750 megawatts of load, and each will be the largest customer in their respective jurisdiction by a wide margin. The overall economic development pipeline remains robust in both Kansas and Missouri, with projects representing more than six gigawatts of demand actively considering our service territory. As a reminder, our capital investment and load growth forecasts only reflect projects announced today. Now, many of you will ask us about timing.

Speaker Change: Google, Panasonic, and Meta. In aggregate, their demand represents approximately 750 megawatts of load and each will be the largest customer in their respective jurisdiction by a wide margin.

Speaker Change: The overall economic development pipeline remains robust in both Kansas and Missouri, with projects representing more than 6 gigawatts of demand actively considering our service territories.

Speaker Change: As a reminder, our capital investment and load growth forecasts only reflect projects announced to date.

David Campbell: As a general rule, we will announce specifics on these projects in tandem with customer announcements regarding their plans. Of course, the environment for new economic development projects is competitive. And while we do not expect to win all of these projects in our pipeline, we are excited by the very active dialogue we are having with these potential customers as they consider our reach. Our strategic focus on affordability and reliability and regional grade competitiveness are important contributors to this pipeline and provide a foundation for the tremendous potential in our region, building on our success with Panasonic, Meta, and Google.

Speaker Change: Many of you will ask us about timing. As a general rule, we will announce specifics on these projects in tandem with customer announcements regarding their plans.

Speaker Change: Of course, the environment for new economic development projects is competitive, and while we do not expect to win all of these projects in our pipeline, we are excited by the very active dialogue we are having with these potential customers as they consider our region.

Speaker Change: Our strategic focus on affordability and reliability and regional rate competitiveness are important contributors to this pipeline and provide a foundation for the tremendous potential in our region building on our success with Panasonic, Meta, and Google.

David Campbell: As part of the exercise, alongside the economic development rates that are in place in both Kansas and Missouri, we are looking at rate design elements to ensure that there is appropriate and adequate recovery associated with large new loads. Moving to slide 7, based on the announcements of Google's data center, Panasonic's EV battery manufacturing facility, and Meta's data center, along with other announced industrial projects, we expect a solid 2 to 3% weather-normalized demand growth through 2028.

Speaker Change: As part of the exercise, alongside the economic development rates that are in place in both Kansas and Missouri, we are looking at rate design elements to ensure that there is appropriate and adequate recovery associated with large new loads.

Speaker Change: Moving to slide 7, based on the announcements of Google's data center, Panasonic's EV battery manufacturing facility, and Meta's data center, along with other announced industrial projects, we expect a solid 2-3% weather normalized demand growth through 2028.

David Campbell: Moving to slide eight, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri. First, I'm pleased to highlight House Bill 2527 in Kansas, which became effective on July 1st this year. The bill incorporated multiple provisions to establish a competitive framework for electric infrastructure and vets, including the use of plant and service accounting, or PISA, and a construction work-in-progress mechanism that applies to new natural gas. The PISA provisions in HB 2527 serve to mitigate regulatory lag between rate cases very similarly to how it works in Missouri, but with a 90% deferral in Kansas.

Speaker Change: Moving to slide 8, I'll provide an update on our regulatory and legislative priorities in both Kansas and Missouri.

Speaker Change: First, I'm pleased to highlight House Bill 2527 in Kansas, which became effective on July 1st of this year.

Speaker Change: The bill incorporated multiple provisions to establish a competitive framework for electric infrastructure investment.

Speaker Change: including the use of plant and service accounting or PISA and a construction work-in-progress mechanism that applies to new natural gas units.

Speaker Change: The PISA provisions in HB 2527 serve to mitigate regulatory lag between rate cases very similar to how it works in Missouri, but with a 90% deferral in Kansas.

David Campbell: Overall, the passage of HB 2527 signals the support of Kansas legislators, regulators, and stakeholders for infrastructure investment in support of economic development and the importance of a competitive and constructive regulatory framework for infrastructure investment. It is an exciting time in our region, as reflected by our significantly higher sales growth forecast relative to recent history.

Speaker Change: Overall, the passage of HB 2527 signals the support of Kansas legislators, regulators, and stakeholders for infrastructure investment.

Speaker Change: In support of economic development and the importance of a competitive and constructive regulatory framework for infrastructure investment.

Speaker Change: It is an exciting time in our region as reflected by our significantly higher sales growth forecast.

David Campbell: We're also looking forward to our capital structure workshop in Kansas weeks, which we expect to occur in the fourth quarter. This workshop, which was born out of our legislative discussions with Kansas stakeholders earlier in the year, presents an opportunity for constructive dialogue around the importance of a clear and stable framework for regulatory capital structure and authorized returns outside the confines of a litigated process. This framework serves as an important backdrop for providers of capital to invest in Kansas and for Evergy to attract competitively priced capital, much like the structures that exist in Missouri and other neighboring states.

Speaker Change: relative to recent history.

Speaker Change: We're also looking forward to our Capital Structure Workshop in Kansas, which we expect to occur in the fourth quarter.

Speaker Change: This workshop, which was born out of our legislative discussions with Kansas stakeholders earlier in the year, presents an opportunity for constructive dialogue around the importance of a clear and stable framework for regulatory capital structure and authorized returns, outside the confines of a litigated proceeding.

Speaker Change: This framework serves as an important backdrop for providers of capital to invest in Kansas and for Evergy to attract competitively priced capital, much like the constructs that exist in Missouri and other neighboring states.

David Campbell: As always, we are committed to advancing the generational economic development opportunity ahead of us in concert with Kansas policymakers and stakeholders. Now pivoting to Missouri, we continue to work our way to our pending rate case in Missouri West. In late June, staff and other interveners filed direct testimony, and earlier this week, all parties filed rebuttal tests. Strouhop and Surrubuttle testimony will be followed in September.

Speaker Change: As always, we are committed to advancing the generational economic development opportunity ahead of us in concert with Kansas policymakers and stakeholders.

Speaker Change: Pivoting to Missouri, we continue to work our way to our pending rate case in Missouri West. In late June , staff and other interveners filed direct testimony. And earlier this week, all parties filed rebuttal testimony.

Speaker Change: True Up and True Rebuttal testimony will be filed on September 10th.

David Campbell: In our upcoming filings, we anticipate that our overall revenue request will decrease as a result of lower fuel and power costs, although reflecting lower commodity prices and higher market revenue. As a reminder, changes in fuel and power costs are not earnings drivers in the rate case. The expected reduction in fuel costs would be a pass-through benefit to customers in base rates. Any subsequent increases or decreases in these costs after the new base rates are set will be reflected in the fuel clause between rate cases. After true up and server bottle testimony are filed, a settlement conference will be held on September 23rd, followed by hearings beginning on September 30th and running through early October.

Speaker Change: In our upcoming filings, we anticipate that our overall revenue request will decrease as a result of lower fuel and power costs, reflecting lower commodity prices and higher market revenues.

Speaker Change: As a reminder, changes in fuel and power costs are not earnings drivers in the rate case.

Speaker Change: The expected reduction in fuel costs would be a pass-through benefit to customers in base rates.

Speaker Change: Any subsequent increases or decreases in these costs after the new base rates are set will be reflected in the fuel clause between rate cases.

Speaker Change: After true evidence and rebuttal testimony are filed, a settlement conference will be held on September 23rd, followed by hearings beginning on September 30th and running through early October .

David Campbell: Revised rates in Missouri will go into effect by January 1st, 2025. 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. As we've described, we expect our cadence of rate cases going forward to be roughly every other year, so that won't be true for every jurisdiction; some may be more frequent.

Speaker Change: Revised rates in Missouri will go into effect by January 1st, 2025.

Speaker Change: 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.

Speaker Change: As we've described, we expect our cadence of rate cases going forward to be roughly every other year. Though that won't be true for every jurisdiction, some may be more frequent, others less.

David Campbell: Others, less so. I'll conclude my remarks with slide nine, which highlights the core tenets of our strategy, affordability, reliability, and sustainability. On the affordability front, advancing regional rate competitiveness is one of our primary objectives. Our focus on delivering benefits to our customers is demonstrated by the comparative EIA data on rate trends across the central United States for the past five years. Kansas and Missouri stand out positively in that comparison.

Speaker Change: I'll conclude my remarks with slide 9, which highlights the core tenets of our strategy, affordability, reliability, and sustainability.

Speaker Change: On the affordability front, advancing regional rate competitiveness is one of our primary objectives.

Speaker Change: Our focus on delivering benefits to our customers is demonstrated in the comparative EIA data on rate trends across the Central United States for the past five years. Kansas and Missouri stand out positively in that comparison.

David Campbell: Our strategic plan is designed to sustain this positive trajectory by keeping our long-term rate trajectory at or below the rate of inflation. By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us. And lay the groundwork for continued support for the substantial economic potential within our state. Ensuring reliability is also a core element of our strategy and encompasses safety, grid resiliency, and public safety. This also includes a focus on metrics related to customer service, the commercial availability of our generation fleet, safety, and all elements of our operation, including Infrastructure Investment.

Speaker Change: Our strategic plan is designed to sustain this positive trajectory by keeping our long-term rate trajectory at or below the rate of inflation.

Speaker Change: By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us and lay the groundwork for continued support of the substantial economic potential within our states.

Speaker Change: Ensuring reliability is also a core element of our strategy and encompasses safety, grid resiliency, and public safety.

Speaker Change: This also includes a focus on metrics related to customer service, the commercial availability of our generation fleet, safety, and all elements of our operations.

David Campbell: With respect to sustainability, almost half the power generated by Evergy comes from emission-free resources. Since 2005, we have reduced carbon emissions by 53%. Sulfur Dioxide and Nitrogen Oxide emissions by 98% and 90%, respectively. Our integrated resource plan includes a balanced mix of resource additions going forward as we manage the responsible transition of our generation portfolio. Evergy is committed to delivering safe, reliable, affordable, and sustainable energy to customers while being a great place to work for a diverse workforce and supporting the communities we serve. With that, I will now turn the call over to Geoff.

Speaker Change: including Infrastructure Investment.

Speaker Change: With respect to sustainability, almost half the power generated by Evergy comes from emission-free resources.

Speaker Change: Since 2005, we have reduced carbon emissions by 53% and sulfur dioxide and nitrogen oxide emissions by 98% and 90% respectively.

Speaker Change: Our integrated resource plan includes a balanced mix of resource additions going forward as we manage the responsible transition of our generation portfolio.

Speaker Change: Evergy is committed to delivering safe, reliable, affordable, and sustainable energy to customers while being a great place to work for a diverse workforce and supporting the communities we serve.

Geoffrey Ley: Thank you, David, and good morning, everyone. Before we go through our financial results, I wanted to take a moment to mention what an honor and privilege it is for me to have this opportunity to serve as the acting CFO for Evergy. The transition has been a smooth one due to the support that I've received throughout from David, our board, and the entire Evergy team, for which I am very grateful. I would be remiss if I also didn't thank my family for their continued support of my career.

Speaker Change: With that, I will now turn the call over to Jeff. Thank you, David. And good morning, everyone. Before we walk through our financial results, I wanted to take a moment to mention what an honor and privilege it is for me to have this opportunity to serve as the acting CFO for Evergy.

Jeff Way: The transition has been a smooth one due to the support that I have received throughout from David, our board, and the entire Evergy team, for which I am very grateful.

Speaker Change: I would be remiss if I also didn't thank my family for their continued support of my career.

Geoffrey Ley: Back to the business at hand, I'll start by turning to slide 11 with a review of our results for the quarter. For the second quarter of 2024, Evergy delivered adjusted earnings of $207 million, or 90 cents per share, compared to $186.1 million, or 81 cents per share, in the second quarter of 2023. As shown on the slide from left to right, the year-over-year increase in second quarter adjusted EPS was driven by the following.

Speaker Change: Back to the business at hand, I'll start by turning to slide 11 with a review of our results for the quarter.

Speaker Change: For the second quarter of 2024, Evergy delivered adjusted earnings of $207 million, or $0.90 per share, compared to $186.1 million, or $0.81 per share, in the second quarter of 2023.

Speaker Change: As shown on the slide from left to right, the year-over-year increase in second quarter adjusted EPS was driven by the following.

Geoffrey Ley: First, a warmer start to the summer resulted in increased cooling degree days, which drove a $0.03 increase in EPS when compared to the second quarter of 2023, and it was an estimated $0.06 above normal. Next, weather-normalized demand grew 2.2%, driven by growth in residential and commercial demand, which added six cents per share. Also, new retail rates in Kansas contributed six cents of increased EPS for the Corps. Another 6-10 increase was driven by higher transmission margin, resulting from ongoing investments to enhance our transmission and per-stress.

Speaker Change: First, a warmer start to the summer resulted in increased cooling degree days, which drove a 3 cent increase in EPS when compared to the second quarter of 2023, and it was an estimated 6 cents above normal.

Speaker Change: Next, weather normalized demand grew 2.2% driven by growth in residential and commercial demand which added $0.06 per share.

Speaker Change: Also, new retail rates in Kansas contributed six cents of increased EPS for the quarter.

Speaker Change: Another 6 cent increase was driven by higher transmission margin, resulting from ongoing investments to enhance our transmission infrastructure.

Geoffrey Ley: There was a three cent negative variance in EPS compared to Q2 2023 driven by higher O&M expense. Approximately one cent of this variance was driven by storm and outage restoration costs, which were related to the severe storms that impacted our service territory. The rest of the variance was due to the expected timing of expenditures compared to the second quarter of last year.

Speaker Change: There was a $0.03 negative variance in EPS compared to Q2 2023 driven by higher O&M expense.

Speaker Change: Approximately one cent of this variance was driven by storm and outage restoration costs, which were related to the severe storms that impacted our service territory. The rest of the variance was due to expected timing of expenditures compared to the second quarter of last year.

Geoffrey Ley: Next, higher depreciation and amortization expense due to increased infrastructure investment drove a four cent decrease. Additionally, higher interest expense drove a two cent decrease in EPS for the year. And finally, other items drove a two cent decrease as well. I'll turn next to the year-to-date results, which you'll find on slide 12. Through the first six months of 2024, Evergy delivered adjusted earnings of $331.7 million, or $1.44 per share, compared to $322.2 million, or $1.40 per share for the same period last year.

Speaker Change: Next, higher depreciation and amortization expense due to increased infrastructure investment drove a four-cent decrease.

Speaker Change: Additionally, higher interest expense drove a two-cent decrease in EPS for the quarter.

Speaker Change: And finally, other items drove a two-cent decrease as well.

Speaker Change: I'll turn next to the year-to-date results, which you'll find on slide 12.

Speaker Change: Through the first six months of 2024, Evergy delivered adjusted earnings of $331.7 million, or $1.44 per share, compared to $322.2 million, or $1.40 per share, for the same period last year.

Andrews: Andrews, 2024, Evergy Inc.

Unknown Executive: Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 11 again.

Geoffrey Ley: Again, moving from left to right on the slide, our year-over-year EPS drivers compared to the year-to-date period last year include the following. Weather contributed a 3 cent increase in EPS as a warmer start to the summer in Q2 was partially offset by warmer winter weather in Q1. When compared to normal, the impact of weather was a one-cent decrease in EPS for the year-to-date period. However, weather-normalized demand increased 0.8%, driven primarily by higher residential and commercial demand, adding six cents of EPS.

Speaker Change: Again, moving from left to right on the slide, our year-over-year EPS drivers compared to the year-to-date period last year include the following.

Speaker Change: Weather contributed a 3 cent increase in EPS as a warmer start to the summer in Q2 was partially offset by warmer winter weather in Q1.

Unknown Executive: Please be advised that today's conference is being recorded.

Speaker Change: When compared to normal, the impact of weather was a 1 cent decrease in EPS through the year-to-date period. Weather normalized demand increased 0.8 percent, driven primarily by higher residential and commercial demand, adding 6 cents of EPS.

Peter Flynn: I would now like to hand the conference over to your speaker today, Peter Flynn, Director of Investor Relations. Please go ahead. Thank you, Dee Dee. Good morning, everyone. Welcome to Evergy's second quarter, 2024 Earnings Conference Call. Our webcast slides and supplemental financial information are available on our investor relations website at investors.evergy.com. Today's discussion will include forward-looking information. Slide 2 and the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectation. They also include additional information on our non-GAAP financial measures. Joining us on today's call are David Campbell, Chairman and Chief Executive Officer, and Jeff Leigh, Acting Chief Financial Officer and Treasurer.

Geoffrey Ley: New retail rates in Kansas contributed 11 cents through the second quarter. Increased transmission margin resulting from beneficial investments in our transmission infrastructure drove a 10 cent increase. Higher O&M expense drove a 9-cent negative variance through the second quarter.

Speaker Change: New retail rates in Kansas contributed 11 cents through the second quarter.

David Campbell: David will cover second quarter highlights and an update on our regulatory and legislative agendas.

Speaker Change: Increased transmission margin resulting from beneficial investments in our transmission infrastructure drove a 10 cent increase.

Speaker Change: Higher O&M expense drove a nine-cent negative variance through the second quarter.

Geoffrey Ley: The timing of this variance was embedded in our four-year guidance and is primarily attributable to the implementation of an early retirement program, which significantly reduced O&M in the first half of 2023. We remain confident in our ability to manage costs in the context of our guidance. Next, we had an eight cent decrease from higher depreciation and amortization expense resulting from the infrastructure investment. In addition, there was a $0.06 decrease in EPS due to the increased interest. And finally, there are other items which collectively drove a three-cent decrease in EPS through the year-to-date period.

Speaker Change: The timing of this variance was embedded in our full year guidance.

Speaker Change: And it's primarily attributable to implementation of an early retirement program, which significantly reduced O&M in the first half of 2023. We remain confident in our ability to manage costs in the context of our guidance.

Speaker Change: Next, we had an eight cent decrease from higher depreciation and amortization expense resulting from infrastructure investments.

Speaker Change: In addition, there was a six-cent decrease in EPS due to the increased interest expense.

Jeff Leigh: Jeff will cover our second quarter 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.

Speaker Change: And finally, there are other items which collectively drove a three-cent decrease in EPS through the year-to-date period.

Geoffrey Ley: Turning to slide 13, I'll provide a brief update on our recent sales trend. On the left side of the screen, you'll see that weather-normalized retail sales increased 2.2% in the second quarter as compared to last year, primarily driven by increases in both residential and commercial use. Year-to-date weather normalized demand was up by approximately 0.8% with a similar pattern of residential and commercial demand driving growth. However, we continue to see lower demand from industrial customers, despite a recovery among those larger customers who had weaker demand in 2023.

David Campbell: I will now turn the call over to David. Thanks, Pete.

Speaker Change: Turning to slide 13, I'll provide a brief update on our recent sales trends.

David Campbell: Good morning, everyone. I'll begin on slide 5. This morning we reported second quarter adjusted earnings of $0.90 per share compared to $0.81 per share a year ago. The increase in adjusted earnings over last year was driven primarily by demand growth, weather, new retail rates, and higher transmission margin. Partially offset by higher operations and maintenance costs, DNA, and interest expense. Jeff will discuss these earnings drivers in more detail in his remarks.

Speaker Change: On the left side of the screen, you'll see that weather-normalized retail sales increased 2.2% in the second quarter as compared to last year, primarily driven by increases in both residential and commercial usage.

Speaker Change: Year-to-date weather normalized demand was up by approximately 0.8% with a similar pattern of residential and commercial demand driving growth.

Speaker Change: We continue to see lower demand from industrial customers despite a recovery among those larger customers who had weaker demand in 2023.

David Campbell: Now, as you all know, Kirk Andrews resigned from his role as Chief Financial Officer on June 4th. We were excited to appoint Jeff Leigh as Acting CSO on June 7th while we conduct an internal and external search. We expect to conclude the search this year. Jeff worked closely with Kirk and me and he brings an outstanding capability set to the role, which has enabled a smooth transition.

Geoffrey Ley: Overall, we expect industrial demand to recover as we continue to move through 2020. This will be further augmented as we expect load from large new customers resulting from recent economic developments when they start coming online later this year. We expect to see a more notable pickup in demand beyond 2024, as we anticipate Panasonic, Meta, and Google to reach their full run rates in 2026, 2027, and 2028, respectively. As David noted in his earlier remarks, we expect weather-normalized demand growth through 2028 to be up to 3% as these new large customer loads are added to our base customer demand growth.

Speaker Change: Overall, we expect industrial demand to recover as we continue to move through 2024.

Speaker Change: This will be further augmented as we expect load from large new customers resulting from recent economic development wins to start coming online later this year.

Speaker Change: We expect to see a more notable pickup in demand beyond 2024, as we anticipate Panasonic, Meta, and Google to reach their full run rates in 2026, 2027, and 2028, respectively.

David Campbell: We'd like to thank Kirk for his leadership, and we wish him all the best in his next chapter of his career closer to home.

David Campbell: In May, we filed our Triennial Integrated Resource Plan in Kansas, following a similar filing from Missouri in April. In aggregate, the 2024 preferred plan includes 5,800 megawatts of resource additions through 2033, representing an increase of 1,500 megawatts over the next 10 years.

Speaker Change: As David noted in his earlier remarks, we expect weather normalized demand growth through 2028 of 2-3% as these new large customer loads are added to our base customer demand growth.

Geoffrey Ley: The continued robust customer demand growth in our service territories is supported by a strong local labor market. As the Kansas City and Kansas Metro areas, unemployment rates remain below the national average of 4.1%.

Speaker Change: The continued robust customer demand growth in our service territories is supported by a strong local labor market. As the Kansas City metro in Kansas area's unemployment rates remain below the national average of 4.1%.

David Campbell: When compared to the 2023 preferred plan. Our IRP and its underlying analysis reflect the benefits of a diverse fuel mix. Renewables have a low or negative marginal cost and no emissions, but they are intermittent, depending on mother nature or large scale storage deployment for reliability. New and existing thermal resources are emitting and have higher marginal costs for fuel and O&M, but they can be dispatched to meet customer demand when they are needed most.

Geoffrey Ley: Finally, on slide 14, I'll wrap up with an overview of our long-term financial expectations. With our solid start to the year, we are reaffirming our 2024 adjusted EPS guidance range of $3.73 to $3.93 per share. We are also reaffirming our long-term adjusted EPS growth target of 4 to 6% through 2026, which is based on our original 2023 adjusted EPS guidance midpoint of $3.65 per share. Currently, our five-year capital investment plan includes $12.5 billion of infrastructure investment through 2028, with the expectation that we will fund this program without the need to issue new equity through 2026.

Speaker Change: Finally, on slide 14, I'll wrap up with an overview of our long-term financial expectations.

Speaker Change: With our solid start to the year, we are reaffirming our 2024 adjusted EPS guidance range of $3.73 to $3.93 per share.

David Campbell: First. The ultimate goal of having a bounce mixed is to mix is to ensure reliability and affordability for our customers as we advance a responsible fleet transition. This transition requires sustained investment over the coming years and will incorporate the most recent IRP and the higher levels of new generation when we provide an update to our capital plan on the third quarter earnings call. Shifting back to the quarter, since the beginning of April, we experienced 10 severe storm events that produce wind gusts and excess of 50 miles per hour.

Speaker Change: We are also reaffirming our Long-Term Adjusted EPS Growth Target of 4-6% through 2026, which is based on our original 2023 Adjusted EPS Guidance Midpoint of $3.65 per share.

Speaker Change: Currently, our five-year capital investment plan includes $12.5 billion of infrastructure investment through 2028, with the expectation that we will fund this program without the need to issue new equity through 2026.

David Campbell: Wind speeds to this level down countless trees and tree limbs and cause extensive damage to equipment and structures across our service territory. I'd like to thank our customers for their patience during outages caused by this unusually severe weather and thank our transmission and distribution teams, contractors, personnel from neighboring utilities in our call center and customer service employees for their hard work throughout our storm restoration efforts. Our frontline employees are the bedrock of safely delivering affordable and reliable power to our customers and communities. We're extremely proud of their contributions as it worked long shifts through hot and humid conditions.

Geoffrey Ley: This $12.5 billion investment plan does not yet incorporate the impact of changes related to our 2024 IRP filed in the second quarter or other changes in our planned investments since the beginning of the year. On our third quarter earnings call, we will provide updated capital investment and financing plans, which will incorporate these developments. While we are excited about these investments, which are expected to support a generational economic development opportunity for our region, we remain focused on consistent execution of our operational and financial goals as we advance our strategic objectives of ensuring affordability, reliability, and sustainability for our customers. And with that, we will open up the call to questions. Thank you. As a reminder,

Speaker Change: This $12.5 billion investment plan does not yet incorporate the impact of changes related to our 2024 IRP filed in the second quarter.

Speaker Change: or other changes in our planned investments since the beginning of the year.

Speaker Change: On our third quarter earnings call, we will provide updated capital investment and financing plans, which will incorporate these developments.

Speaker Change: Well, we are excited for these investments, which are expected to support a generational economic development opportunity for our region.

Speaker Change: We remain focused on consistent execution of our operational and financial goals as we advance our strategic objectives of maturing affordability, reliability, and sustainability for our customers.

David Campbell: Our team's execution has enabled solid performance in the first half of the year and we are reaffirming our 2024 Adjusted EPS guidance, range of 373 to 393 cents per share as well as our target long-term annual Adjusted EPS growth target of 4 to 6 percent from 2023 to 2026. On slide six, we highlight three major economic development winds that we have featured, Google Panasonic and Meta. In aggregate, their demand represents approximately 750 megawatts of load and each will be the largest customer in their respective jurisdiction by a wide margin.

Operator: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster for a moment. And our first question comes from James Kennedy of Guggenheim Partners. Your line is open. Hey guys.

Speaker Change: And with that, we will open up the call for questions.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment.

Speaker Change: And our first question comes from James Kennedy of Guggenheim Partners. Your line is open. Hey guys, good morning.

James Kennedy: Hey, guys. Good morning. Good morning.

David Campbell: So I guess, just starting with the upcoming Kansas workshop, can you speak a little more about your approach to the event? I guess, you know, what should we expect in terms of outputs? How could this carry forward into the case next year? I guess, you know, we get a report that could be filed in direct testimony, just, you know, kind of how to think about the workshop. Thanks.

Speaker Change: Morning.

David Campbell: The overall economic development pipeline remains robust in both Kansas and Missouri with projects representing more than six gigawatts of demand actively considering our service territories. As a reminder, our capital investment and load growth forecasts only reflect projects announced today.

James Kennedy: So I guess just starting with the upcoming Kansas workshop, can you speak a little more to your approach for the event? I guess, you know, what should we expect in terms of outputs? How could this carry forward into the case next year, I guess, you know, we get a report that could be filed in direct testimony, just, you know, kind of how to think about the workshop. Thanks.

David Campbell: Now many of you will ask us about timing as a general rule. We will announce specifics on these projects in tandem with customer announcements regarding their plans. Of course, the environment for new economic development projects is competitive and while we do not expect to win all of these projects in our pipeline, we are excited by the very active dialogue we are having with these potential customers as they consider our region. Our strategic focus on affordability and reliability and regional great competitiveness are important contributors to this pipeline and provide a foundation for the tremendous potential in our region, building on our success with Panasonic, Meta, and Google.

David Campbell: It's a great question, and obviously that's something that we're going to work collaboratively with KCC staff in particular on the approach. Our objective in the workshop is to really discuss with all parties and ground ourselves in what's the best way for Kansas to have a competitive approach to attracting capital. So we anticipate this is going to be a workshop, not a decision-oriented meeting, but a workshop that enables a robust discussion of the underlying facts in terms of approaches across the country and in Kansas, the competitive landscape, how it impacts the strength of the relative utility and our ability to attract capital.

Speaker Change: It's a great question and obviously that's something that we're going to work collaboratively with.

Speaker Change: Case to see staff in particular on the approach. Our objective in the workshop is outside the context of a litigated proceeding to really discuss with all parties and ground ourselves in what's

Speaker Change: The Best Way for Kansas to Have a Competitive Approach to Attracting Capital.

Speaker Change: So we anticipate this is going to be a workshop, not a decision-oriented meeting, but a workshop that enables a robust discussion.

Speaker Change: The underlying facts in terms of approaches across the country and in Kansas, the competitive landscape, how it impacts the strength of the relative utility and our ability to attract capital. So we really think it's a good dialogue to help level set.

David Campbell: As part of the exercise alongside the economic development rates that are in place in both Kansas and Missouri, we are looking at rate design elements to ensure that there is appropriate and adequate recovery associated with large new loads. Moving to slide seven based on the announcements of Google Data Center, Panasonic's EV Battery Manufacturing Facility, and Meta Data Center, along with other announced industrial projects, we expect a solid two to three percent weather-normalized demand growth through 2028.

David Campbell: So we really think it's a good dialogue to help set the level, not leading to a decision, but to help have a level playing field of approach and how we best position Kansas to attract capital competitively, and doing that before the race case, outside of the race case, meaning it's the best way to have a good dialogue around it. And the details will be forthcoming, obviously, as we finalize them, so I won't get ahead of that. We do expect it to occur in the force.

Speaker Change: Not leading to a decision, but to help have a level setting of approach and how we best position Kansas to attractively

Speaker Change: to attract capital competitively, and doing that before the rate case, outside of a rate case, I think is the best way to have a good dialogue around it. And the details will be forthcoming, obviously, as we finalize them, so I won't get ahead of that. We do expect it to occur in the fourth quarter.

David Campbell: Moving to slide eight, I'll provide an update on our regulatory legislative priorities in both Kansas and Missouri. First, I'm pleased to highlight House Bill 2527 in Kansas, which became effective on July 1st of this year. The bill incorporated multiple provisions to establish a competitive framework for electric infrastructure investment, including the use of plant and service accounting or pizza and a construction work in progress mechanism that applies to new natural gas units.

David Campbell: Okay, any timing expectations within 4Q?

David Campbell: Yokel.

Speaker Change: Okay, any timing expectations within 4Q at this point?

David Campbell: There'll be a massive notice when the dates are set. We're not trying to, I don't think it's really just lining up the calendar. So we're going to...

David Campbell: The piece of provisions in HB 2527 served to mitigate regulatory lag between rate cases, which is very similar to how it works in Missouri, though with the 90% deferral in Kansas. Overall, the passage of HB 2527 signals the support of Kansas legislators, regulators and stakeholders for infrastructure investment in support of economic development and the importance of a competitive and constructive regulatory framework for infrastructure investment.

Speaker Change: There'll be advance notice when the dates are set. We're not trying to have anything, it's really just lining up calendars that we're going through at this time.

David Campbell: Okay, perfect. And then just on the data center side, a few of your peers this quarter gave rules of thumb regarding, you know, large interconnections and, you know, associated residential transmission savings. I guess, is that something you'll see on your system and any kind of quantification there as you get these interconnections online?

Speaker Change: David.

David Campbell: Okay, perfect. And then just on the data center side, a few of your peers this quarter gave rules of thumb regarding, you know, large interconnections and, you know, associated residential transmission savings. I guess, is that something you'll see on your system and any kind of quantification there as you get these interconnections online?

Speaker Change: Yeah, the approach we're taking is really specific to each

Speaker Change: situation because it really varies frankly based on location matters a lot based on availability within the trans transmission system what kind of upgrades may be required so

Speaker Change: Particularly with the large loads, we found a rule of thumb is it's such a wide range that it's not especially helpful as a rule of thumb. So we generally are linking that to the project. So we'll update our capital plan to reflect the products that have been announced and the specific impacts that they have.

David Campbell: So, we generally are linking that to the project. For example, we'll update our capital plan to reflect the products that have been announced and the specific impact that they have. So, for example, in our capital plan update, which we'll do in the 3rd quarter, the Google announcement was subsequent to our last capital filing. We'll incorporate the impacts of the Google announcement and its impact on our T&D system in that update. But the rule of thumb, it really varies significantly based on the size of the customer.

David Campbell: It is an exciting time in our region as reflected by our significantly higher sales growth forecast relative to recent history. We're also looking forward to our capital structure workshop in Kansas, which we expect to occur in the fourth quarter. This workshop, which was born out of our legislative discussions with Kansas state holders earlier in the year, presents an opportunity for constructive dialogue around the importance of a clear and stable framework for regulatory capital structure and authorized returns outside the confines of litigated proceeding.

Speaker Change: So, for example, in our capital plan update we'll do in the third quarter, the Google announcement was subsequent to our last capital filing. We'll incorporate the impacts of the Google

Speaker Change: Announcement and its impact on our T&D system in that update. But the rule of thumb really varies significantly based on size of customer and

David Campbell: We did mention that its folks are interested in the quantification of size. Now, we were comfortable describing how projects representing more than six gigawatts were in active discussions with those parties, but, of course, we're at the end of the earnings season, and we've seen a lot of different companies discussing very large numbers. There's no doubt that different counterparties are talking to various utilities. That said, we're excited about it.

Speaker Change: We did mention, I know that folks are interested in the quantification of size, you know, we were comfortable describing how projects representing more than 6 gigawatts were in active discussions with those parties, but, of course,

David Campbell: This framework serves an important backdrop for providers of capital to invest in Kansas. Kansas and forever to attract competitively priced capital much like the constructs that exist in Missouri and other neighboring states. As always, we are committed to advancing the generational economic development opportunity ahead of us in concert with Kansas policy makers and stakeholders.

Speaker Change: We're at being at the end of the earnings season. We've seen a lot of different companies have discussed very large numbers.

Speaker Change: There's no doubt that different counterparties are talking to various utilities. That said, we're excited about it. We're having very active and specific discussions, so we look forward to advancing those in the coming months. And our approach will be to really announce specifics when customers are ready to announce at the same time.

David Campbell: We're very active in specific discussions, so we look forward to advancing those in the coming months. And our approach will be to really announce specifics when customers are ready to announce. Excellent. Thanks, guys. Appreciate it. Take care.

David Campbell: Now pivoting to Missouri, we continue to work our way toward pending rate case in Missouri West. In late June, staff and other interveners filed direct testimony and earlier this week, all parties filed rebuttal testimony. True up and surrebuttal testimony will be filed in September 10th. In our upcoming filings, we anticipate that our overall revenue request will decrease as a result of lower fuel and power costs, reflecting lower commodity prices and higher market revenue.

David Campbell: Excellent. Thanks, guys. I appreciate it. Take care. Thank you.

Speaker Change: Excellent. Thanks guys. I appreciate it. Take care. Thank you. Thank you.

Nicholas Campanella: Our next question comes from Nicholas Campanella of Barclays. Your line is open.

Speaker Change: Our next question comes from Nicholas Campanella of Barclays. Your line is open.

Nicholas Campanella: Hey, good morning. Happy Friday. Morning, Nick. Hopefully, you can hear me.

David Campbell: As a reminder, changes in fuel and power costs are not earnings drivers in the rate case. The expected reduction in fuel costs would be a pass-through benefit to customers in base rates. Any subsequent increases or decreases in these costs after the new base rates are set will be reflected in the fuel clause between rate cases.

Nicholas Campanella: Hey, good morning.

David Campbell: Morning. So, hey, just to follow up on the data center discussion. You know, outside of that six gigs, you know, it's only Google that's included in the IRP today. So if any of this additional comes to fruition, you would have to revisit the capital plan. Is that the right understanding? That's one. And then the second is just on the rate tariff, David, that you talked about for large loads. Just maybe expand on what the process looks like for that. Do you have to do it? Would you do that in a formal rate case? And, you know, how should we think about that? Thanks.

Nick: Morning, Nick.

Nicholas Campanella: Hopefully, you can hear me. Morning. So, hey, just to follow up on the data center discussion, just...

Speaker Change: You know outside of that six gigs, you know, it's only Google that's included in the IRPs today So if any of this additional comes to fruition You would have to revisit the capital plan. Is that the right understanding? that's one and then the secondly is just

David Campbell: After true up and surrebuttal testimony are filed, a settlement conference will be held on September 23rd, followed by hearings beginning on September 30th and running through early October. Revived rates in Missouri will go into effect by January 1st, 2025. 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.

David Campbell: On the rate tariff, David, that you talked about for large loads, just maybe expand on what the process looks like for that. Do you have to do, would you do that in a formal rate case? And, you know, how should we think about that? Thanks.

David Campbell: Good question. I'm packing several elements into that.

Speaker Change: Good question. I'm packing several elements there, and thank you for clarifying on the capital plan refresh, because good point. So the capital plan we published

David Campbell: And thank you for clarifying on the capital plan refresh, because good point. So the capital plan we published back in February did not include the Google search. The IRP that we published in April and May did reflect the Google announcement, but it was not incorporated. The IRP refresh was also not reflected in the Capital Fund refresh.

David Campbell: As we described, we expect our cadence of rate cases going forward to be roughly every other year, so that won't be true for every jurisdiction. Some may be more frequent, others less.

Speaker Change: back in February did not include the Google announcement.

Speaker Change: The IRP that we published in April and May did reflect the Google announcement, but was not incorporated. The IRP refresh was also not reflected in the Capital Fund refresh. So, any subsequent announcements?

David Campbell: I'll conclude my remarks to slide 9 which highlights the core tenets of our strategy, affordability, reliability and sustainability. On the affordability front, advancing regional rate competitiveness is one of our primary objectives. Cooperative. Our focus on delivering benefits to our customers is demonstrated in the comparative EIA data on rate trends across the century and United States of the past five years. And as Missouri stand out positively in that comparison. Our strategic plan is designed to sustain this positive trajectory by keeping our long-term rate trajectory at or below the rate of inflation. By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us and lay the groundwork for continued support of the substantial economic potential within our states.

David Campbell: So any subsequent announcements would not only be incorporated in the capital and refresh, but also be incorporated in any of our resource planning going forward. So hopefully that's clear as mud. But it's so again, that capital plan refresh is going to reflect both Google and the new IRP. But any further announcements beyond the three that we mentioned will entail incremental resource additions because we're, like many, we're really hitting our capacity constraints.

Speaker Change: would not only be incorporated in the Capital Plan Refresh, but also be incorporated in any of our resource planning going forward. So hopefully that's clear as mud. So again, the Capital Plan Refresh is going to reflect both Google and the new IRP.

Speaker Change: But any any further announcements beyond the three that we mentioned will entail incremental resource additions because we're like many we're really hitting our capacity constraints.

David Campbell: The six gigabytes that we described are and reflect not only data centers, but there's a large range of on-shoring manufacturing opportunities. It's certainly fair to say that data centers are the largest, but there's a range of different industries that are looking in our region, as reflected by the Panasonic announcement because it's a very big player too.

Speaker Change: The six gigs that we described are, and reflect not only data centers, but there's a large range of on-shoring manufacturing opportunities. It's certainly fair to say that data centers are the largest, but there's a range of different industries that are looking at our region.

David Campbell: Ensuring reliability is also a core element of our strategy and compasses of safety, safety, grid resiliency and public safety. This also includes a focus on metrics related to customer service, the commercial availability of our generation fleet, safety and all elements of our operations, including infrastructure investment. With respect to sustainability, almost half the power generated by Evergy comes from a mission-free resources. Since 2005, we have reduced carbon emissions by 53% and sulfur dioxide and nitrogen oxide emissions by 98% and 90% respectively. Our integrated resource plan includes a balance mix of resource additions going forward as we manage the responsible transition of our generation portfolio.

David Campbell: So six gigabits incorporates a diverse set of industries. In terms of tariffs, we've got a pretty good set of tariffs that we can leverage within our system today. So it's a little bit TBD, but we anticipate that we'll be moving forward largely leveraging the existing tariff structures that we have in both of our tariff books because we've got an array of things already on the books. We'll consider, I know in some other jurisdictions, folks have launched specific proceedings around tailored rates, but we like the different structures that we have in place.

Speaker Change: You know, frankly, as reflected by the Panasonic announcement, because it's a very big player too. So, Six Gigs incorporates a diverse set of industries.

Speaker Change: In terms of tariffs, we've got a pretty good set of tariffs that we can leverage within our system today. So, it's a little bit TBD, but we anticipate that we'll be moving forward, largely leveraging the existing tariff structures that we have in both of our states.

David Campbell: How we're thinking about it is just to make sure that the economic development rates that were put in place are there for a reason; they're there to attract. Bye, of Economic Development. But if the size of the potential loads we're talking about and the resource additions they may entail, you know, for the incremental loads that we're looking at, thinking about how do we make sure that we've got a rate structure that takes account of the incremental costs that are being incurred. So it's a fair approach. It really benefits everyone because we think there's a win-win all around.

Speaker Change: because we've got an array of things already on the books.

Speaker Change: We'll consider, I know in some other jurisdictions folks have launched specific proceedings around tailored rates, but we like the different structures that we have in place. How we're thinking about it is just to make sure that the economic development rates that were put in place are there for a reason, they're there to attract.

Speaker Change: economic development

David Campbell: Evergy is committed to delivering safe, reliable, affordable and sustainable energy to customers, while being a great place to work for diverse workforce and supporting the communities we serve.

Speaker Change: But it's the size of the potential loads we're talking about and the resource additions they may entail. You know, for the incremental loads that we're looking at, thinking about how do we make sure that we've got a rate structure that

Jeff Leigh: With that, I will now turn the call over to Jeff. Thank you, David, and good morning, everyone.

Speaker Change: It takes account of the incremental costs for being incurred, so it's a fair approach that really benefits everyone, because we think there's a win-win all around.

Jeff Leigh: Before we walk through our financial results, I wanted to take a moment to mention what an honor and privilege it is for me to have this opportunity to serve as the acting CFO for Evergy. The transition has been a smooth one due to the support that I have received throughout from David, our board and the entire Evergy team, for which I am very grateful. I would be remiss if I also didn't thank my family for their continued support of my career.

Nicholas Campanella: Hey, that's great. I appreciate that.

Speaker Change: Hey, that's great. I appreciate that. And then just on the upcoming capital refresh into the third quarter.

Speaker Change: Just wanted to be clear on what to expect, you know, we'll obviously get the new CapEx plan Would you be giving rate-based growth as well? And then as EPS guidance and and you know the five-year CAGR more fourth quarter call item Just what are you planning to deliver on? Thank you

David Campbell: And then just on the upcoming capillary fresh into the third quarter, just wanted to be clear on what to expect. You know, we'll obviously get the new CapEx plan. Would you be giving great base growth as well? And then there is EPS guidance and, you know, the five-year K or more fourth quarter call item. Just what are you planning to build on? Thank you.

Jeff Leigh: Back to the business at hand, I'll start by turning to slide 11 with the review of our results for the quarter. For the second quarter of 2024, Evergy delivered adjusted earnings of $207 million or 90 cents per share compared to $186.1 million or 81 cents per share in the second quarter of 2023. As shown on the slide from left to right, the year-over-year increase in second quarter adjusted EPS was driven by the following.

Speaker Change: Thank you, Nick. We anticipate that we'll really focus on the CAPEX plan and rate-based growth in the third quarter call, as well as the associated financing plan. So those are the elements that we expect to cover in the third quarter.

Nicholas Campanella: Thank you, Nick. We anticipate that we'll really focus on the CapEx plan and rate-based growth on the third quarter call, as well as the associated financing plan. So those are the elements that we expect to cover in the third quarter. And, you know, our typical cadence and timeout earnings are in the fourth quarter, but we're absolutely going to go through, you know, as we talk about the CapEx plan. In conjunction with that, I think rate-based growth and our financing plan will be the focus on that call. Okay, thanks so much.

Speaker Change: And, you know, our typical cadence and timeout earnings is the fourth quarter, but we're absolutely going to go through, you know, as we talk about the CapEx plan in conjunction with that, I think rate-based growth and our financing plan will be the focus on that, on that call.

Nicholas Campanella: Okay, thanks so much. Have a great weekend. Thank you.

Jeff Leigh: First, a warmer start to the summer resulted in increased cooling degree days, which drove a 3 cents increase in EPS when compared to the second quarter of 2023, and it was an estimated 6 cents above normal. Next, whether normalized demand grew 2.2% driven by growth in residential and commercial demand, which added 6 cents per share. Also, new retail rates in Kansas contributed 6 cents of increased EPS for the quarter. Another 6 cents increase was driven by higher transmission margin, resulting from ongoing investments to enhance our transmission and for structure.

Speaker Change: Okay, thanks so much. Have a great weekend. Thank you.

Speaker Change: Thank you.

Julian DeMolin Smith: Our next question comes from Julian DeMolin Smith of Jeffrey's. Your line is open.

Speaker Change: Our next question comes from Julian DeMolin-Smith of Jeffrey's, your line is open.

Brian Russo: Yeah, it's actually Brian Russo on for Julian.

Speaker Change: Yeah, it's actually Brian Russo on for Julian.

Brian Russo: Good morning, and welcome to the team.

David Campbell: Hey, just in Missouri, the inability at the legislature to extend PISA to include dispatchable generation, does that at all impact, I think, what's in the IRP, you know, and or your earned returns in Missouri and, you know, cadence of rate cases or, you know, do you think this is likely to be picked up at the next legislature and then that gives you more than enough time, you know, when any dispatchable generation is planned in the IRP?

Brian Russo: Good morning and welcome to the team.

Speaker Change: Hey, just in Missouri, the inability at the legislature to extend PISA to include dispatchable generation.

Speaker Change: Does that all impact, I think, what's in the IRP, you know, and or your earned returns in Missouri and, you know, cadence of rate cases or, you know, do you think this is likely to be picked up at the next legislature and then that gives you more than enough time, you know, when any dispatchable generation is planned in the IRP?

Jeff Leigh: There was a 3 cent negative variance in EPS compared to Q2-223 driven by higher O&M expense. Approximately one cent of this variance was driven by storm and outage restoration costs, which were related to the severe storms that impacted our service territory. The rest of the variance was due to expected timing of expenditures compared to the second quarter of last year. Next, higher depreciation and amortization expense due to increased infrastructure investment, drove a four-cent decrease. Additionally, higher interest expense drove a two-cent decrease in EPS for the quarter. And finally, other items drove a two-cent decrease as well.

David Campbell: So thank you for your question. The IRP that we put forward obviously reflects the mechanisms that are in place in Missouri today. So you'll see that we and the other large utilities in the state are planning to build new generation, including new natural gas that's in our integrated resource plan. I think it will be very important to find ways to do that in a way that's particularly effective from a credit metric and cash flow perspective so that the construction work in progress, mechanism, and a piece of extension.

Speaker Change: Good morning.

Speaker Change: So, thank you for your question.

Speaker Change: The IRP that we put forward obviously reflects the mechanisms that are in place in Missouri today. So you'll see that we and the other large utilities in the state are planning to build new generation, including a new natural gas that's in our integrated resource plans.

Speaker Change: I think it will be very important to find ways to do that in a way that's particularly effective from a credit metric and cash flow perspective so that the construction work in progress mechanism and a piece of extension.

Jeff Leigh: I'll turn next to the year-to-date results which we'll find on slide 12. Through the first $1.7 million, or $1.44 per share, compared to $322.2 million, or $1.40 per share for the same period last year. Again, moving from left to right on the slide, our year-over-year EPS drivers compared to the year-to-date period last year include the following. Weather contributed a three-cent increase in EPS as a warmer start to the summer in Q2 was partially offset by warmer winter weather in Q1.

David Campbell: The inclusion of new natural gas will be helpful in enabling Missouri to be competitive in sourcing natural gas plants. We thought there was a great dialogue around those provisions. In the last legislative session, at the end of the day, there was new legislation passed, but the range of stakeholders who were supportive of new natural gas generation and having new dispatchable generation in the state. That was a broad and diverse set of folks who were supportive of that.

Speaker Change: To include new natural gas will be helpful in enabling Missouri to be competitive in sourcing natural gas plants.

Speaker Change: We thought there was a great dialogue around those provisions.

Speaker Change: In the last legislative session, at the end of the day, there was a new legislation passed, but the range of stakeholders who were supportive of new natural gas generation and

Speaker Change: Having new dispatchal generation in the state.

Speaker Change: That was a broad and diverse set of folks who are supportive of that. So we look forward with.

David Campbell: So we look forward to other utilities and other stakeholders being supportive of advancing that dialogue in the upcoming session. And we won't have the same general election dynamics present in the next session, so we'll really be able to focus on the merits of those provisions. We think there's broad-based support, but I do think new generation is important for Missouri to take advantage of the growth that is on the Missouri side of the state line. Both Google and Meta, for example, are in our Missouri jurisdiction. So we look forward to advancing that dialogue because having a diverse portfolio, and growing that portfolio, is important to support the growth that we expect we can attract into Missouri.

Speaker Change: Other utilities and the other stakeholders were supportive to advance that dialogue in the upcoming session.

Speaker Change: We won't have the same general election dynamics present in the next session, so we'll really be able to focus in on the merits of those provisions, we think there's broad-based support. But I do think new generation is important for Missouri to take advantage of the growth that we're seeing.

Jeff Leigh: When compared to normal, the impact of weather was a one-cent decrease in EPS through the year-to-date period. Weather normalized demand increased 0.8 percent, driven primarily by higher residential and commercial demand, adding six cents of EPS. New retail rates in Kansas contributed 11 cents through the second quarter. Increased transmission margin resulting from beneficial investments in our transmission infrastructure, drove a 10-cent increase. Higher O&M expense drove a nine-cent negative variance through the second quarter.

Speaker Change: is on the Missouri side of the state line, both Google and Meta, for example, are in our Missouri jurisdiction. So we look forward to advancing that dialogue because having a diverse portfolio, growing that portfolio is important to support the growth that we expect we can attract into Missouri.

Brian Russo: Okay, great. And then just to confirm the two to 3% weather normalized sales growth, it seems clear that it's more back end loaded. Do you think it's going to kind of track, you know, that 26 to 28% time period for Google, Panasonic, and Meta? And then is Google still, you know, on track and on schedule? Has that broken ground yet, or is it still in the development stage?

Jeff Leigh: The timing of this variance was embedded in our four-year guidance, and is primarily attributable to implementation of an early retirement program which significantly reduced O&M in the first half of 2023. We remain confident in our ability to manage cost in the context of our guidance. Next, we had an eight-cent decrease from higher depreciation and amortization expense resulting from infrastructure investments. In addition, there was a six-cent decrease in EPS due to increased interest expense. And finally, there are other items which collectively drove a three-cent decrease in EPS through the year-to-date period.

Speaker Change: Okay, great. And then just to confirm the two to three percent with the normalized sales growth, it seems clear that it's more back-end loaded. Do you think it's going to kind of track, you know, that 26 to 28?

Speaker Change: time period for Google, Panasonic and Meta. And then is, is Google still, you know, on track and on schedule? Has that broke ground yet? Or is it still in the development stage?

Geoffrey Ley: I can cover the first part on demand, Brian. As we think about demand going forward, as I mentioned, we have the ramp of Panasonic, Meta, and Google kind of in order over the 26 through 2028 period. So we'll see a light ramp-up of some of those in 2024, but you'll see more contributing in 2025, and it'll continue to build momentum as we move through the period through 2028. So you will see that continue to build, but you should see year over year increases in that growth rate as we move forward through that 2 to 3% range that we discussed.

Speaker Change: I can cover the first part on the on the demand, Brian .

Speaker Change: As we think about the demand going forward, as I mentioned, we have the ramp of Panasonic, Meta, and Google kind of in order over the 26 through 2028 period.

Jeff Leigh: Turning to slide 13, I'll provide a brief update in our recent sales trends. On the left side of the screen, you'll see that weather normalized retail sales increased 2.2 percent in the second quarter as compared to last year, primarily driven by increases in both residential and commercial usage. Year-to-date weather normalized demand was up by approximately 0.8 percent with a similar pattern of residential and commercial demand driving growth.

David Campbell: Yeah, the approach for taking is really specific to the eat, situation because it really varies, frankly, based on location matters a lot based on availability within the transmission system, and what kind of upgrades may be required. Particularly with the large loads, we found a rule of thumb is it's such a wide range, and it's not especially helpful as a rule of thumb.

Speaker Change: So we'll see a light ramp up of some of those in 2024, but you'll see more contributing in 2025, and it'll continue to build momentum.

Speaker Change: As we move through the period through 2028. So you will see that continue to build, but you should see year over year increases in that growth rate as we move forward through that through that 2 to 3% range that we discussed.

David Campbell: On the Google side, their commitment is very high. They had a public announcement with a very broad set of stakeholders, the mayor and state officials from Missouri are present, so they've lined up the land and the site, so I think site work is underway. I don't think the data center construction has yet started, but Google's very committed to the region, as reflected by their public announcement there, so we're excited by Google's excitement about building that facility in our region.

Speaker Change: On the Google side, their commitment is very high. They had a public announcement with a very broad set of stakeholders, the mayor and state officials from Missouri are present, so they've lined up the land and the site.

Jeff Leigh: We continue to see lower demand from industrial customers despite a recovery among those larger customers who had weaker demand in 2023. Overall, we expect industrial demand to recover as we continue to move through 2024. This will be further augmented as we expect load from large new customers resulting from recent economic development wins start coming online later this year. We expect to see a more notable pickup in demand beyond 2024 as we anticipate Panasonic, Meta, and Google to reach their full run rates in 2026, 2027, and 2028 respectively.

Speaker Change: So I think site work is underway. I don't think the data center construction has yet started, but Google is very committed to the region as reflected by their public announcement there. So we're excited by Google's excitement about building that facility in our region.

Brian Russo: Okay, and then just lastly, on the IRPs, can we expect kind of a supplemental IRP, possibly, you know, in 2025, if some of this six gigawatts of potential load materializes? So in the process, in both of our states, we have a

Speaker Change: Okay, and then just lastly on the IRPs, can we expect kind of a supplemental IRP, possibly, you know, in 2025, if some of this six gigawatts of potential load materializes?

Jeff Leigh: As David noted in his earlier remarks, we expect weather normalized demand growth through 2028 up to 3 percent as these new large customer loads are added to our base customer demand growth. The continued robust customer demand growth in our service territories is supported by a strong local labor market. As the Kansas City and Kansas Metro, Kansas areas, unemployment rates remain below the national average of 4.1%.

David Campbell: So in the process in both of our states, we have a triennial update, but we have an annual refresh. So, yes, in practice, you'll have an update next at the same time next year, April and one May and the other, and the triennial updates historically with a more significant one. It was a process in Missouri, it's still a relatively new process in Kansas, but with so much happening on the demand side.

Speaker Change: So in the process in both of our states, we have a tri-annual update, but we have an annual refresh.

Speaker Change: So, yes, in practice, you'll have an update in the same timing next year, April , and one May and the other. And the triennial updates, historically, were the more significant ones.

Speaker Change: It was a process in Missouri, it's still a relatively new process in Kansas, but with so much happening on the demand side.

David Campbell: A lot of changes are now happening year to year. So, yes, we'll have an annual process, and as new loads emerge and we add them to our plans, those will be reflected in our annual update. Thank you very much.

Jeff Leigh: Finally, on slide 14, I'll wrap up with an overview of our long-term financial expectations. With our solid start to the year, we are reaffirming our 2024 adjusted EPS guidance range of $3.73 to $3.93 per share. We are also reaffirming our long-term adjusted EPS growth target of 4% to 6% through 2026, which is based on our original 2023 adjusted EPS guidance midpoint of $3.65 per share.

Speaker Change: A lot of changes are now happening year to year. So, yes, we'll have an annual process and we'll, so as new loads emerge and we add them to our plans, those will be reflected in our annual updates.

Speaker Change: Okay, great. Thank you very much.

Speaker Change: Thank you. Thank you.

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

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

Michael Sullivan: Hey David, I just wanted to go back to Nick's question just in terms of like expectations for the Q3 call update. In terms of financing needs, are you all still planning to stick with kind of that, I guess, mismatch of a three-year view on financing versus five-year view on CapEx.

Michael Sullivan: Hey, good morning.

Jeff Leigh: Currently, our five-year capital investment plan includes $12.5 billion of infrastructure investment through 2028. With the expectation that we will fund this program without the need for to issue new equity through 2026, this $12.5 billion investment plan does not yet incorporate the impact of changes related to our 2024 IRP filed in the second quarter, or other changes in our planned investments since the beginning of the year.

Michael Sullivan: Morning, Michael. Hey, David. I just wanted to go back to Nick's question just in terms of like expectations for the Q3 call update. In terms of financing needs, are you all still planning to stick with kind of that

Speaker Change: I guess mismatch of three-year view on financing versus five-year on CapEx.

David Campbell: So Michael, I know that you're missing your fellow demon deacon on this call. So we're gonna have to know inside Wake Forest comments this time, but the what we expect, and you know, Pete gave me a little elbow, and my response to Nick will, of course, comment on our earnings growth expectations in the third quarter call. So I will focus on what the CapEx plan update will be, but we're planning to talk about the financing strategy because obviously, if you make changes to a CapEx plan, you've got to talk about your plans for financing that. And we'll talk about our financing plans through the period of the CapEx refresh. So if it's a five-year update on the CapEx plan, we'll talk about our financing plan.

Speaker Change: So, and Michael, I know that you're missing your fellow Demon Deacon on this call, so we're going to have to no inside Wake Forest comments this time, but the

Jeff Leigh: On our third quarter earnings call, we will provide updated capital investment financing plans, which will incorporate these developments. While we are excited for these investments, which are expected to support a generational economic development opportunity for our region, we remain focused on consistent execution of our operational and financial goals, as we advance our strategic objectives of nurturing affordability, reliability, and sustainability for our customers.

Speaker Change: We expect, and Pete gave me a little elbow in my response to Nick, we'll of course comment on our earnings growth expectations in the third quarter calls. Our focus is on...

Speaker Change: what the CAPEX plan update will be but we're

Speaker Change: We're planning to talk about the financing strategy that because obviously if you put changes to a CapEx plan you've got to talk about your plans for financing that and we'll talk about our financing plans through the through the period of the

Unknown Executive: And with that, we will open up the call for questions. Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster one moment.

Speaker Change: of the CapEx refresh. So a five-year update on the CapEx plan. We'll talk about our financing plan through that period.

David Campbell: Okay, great. That's not how it is today, though, right? So that is kind of different.

Speaker Change: Okay, great. That's not how it is today though, right? So that is kind of different. You talk about no equity through.

Michael Sullivan: You talk about no equity through when I'm 26. You're right, it's a, yeah, what we said. What we said was we knew equity would be required in the future. No equity needs through 26. We weren't specific on what happens after 26. So I guess there was something implicit in those comments.

Speaker Change: Twenty-six.

Speaker Change: You're right, it's a, yeah, what we, what.

David Campbell: What Geoff described today, and we wanted to frame it clearly, so we'll be right here, is that our current capital plan is $12.5 billion. We articulated with that expectation that we wouldn't be issuing equity through 2026. As we update that capital plan, you know, we'll update our financing expectations through the five-year period at the same time. Hopefully, that makes sense. That makes a ton of sense. And this is definitely helpful. Okay, sorry to belabor that.

James Kennedy: And our first question comes from James Kennedy of Guggenheim Partners. Your line is open. Hey guys, good morning. Morning. So I guess just starting with the upcoming Kansas workshop, can you speak a little more to your approach for the event? What should we expect in terms of outputs? How could this carry forward into the case next year? I guess we get a report that could be filed in direct testimony, just how to think about the workshop. Thanks.

Speaker Change: Our past comments, we really didn't, what we said was we know equity would be required in the future, know equity needs to be 26, we weren't specific on.

Speaker Change: What happens after 26, so I guess there was something implicit in those comments

Speaker Change: Now frame it clearly so we'll hear is that our current capital plan is $12.5 billion. We articulated with that expectation we wouldn't be issuing equity through 2026.

Speaker Change: As we update that capital plan, we'll update our financing expectations through the five-year period at the same time. Hopefully that makes sense.

David Campbell: It's a great question and obviously that's something that we're going to work collaboratively with HCC staff in particular on the approach. Our objective in the workshop is outside the context of a litigated proceeding to really discuss with all parties and ground ourselves in what's the best way for Kansas to have a competitive approach to attracting capital. So we anticipate it's going to be a workshop, not a decision-oriented meeting, but a workshop that enables a robust discussion of the underlying facts in terms of approaches across the country in Kansas, the competitive landscape, how it impacts the strengths of the relative utility and our ability to attract capital.

David Campbell: Um, no, no, it's good. Appreciate your asking. Yeah, okay. No, great to clear that up. And then, um, can you give us any sense of, you know, next year's rate case outlook? I know you said kind of every other year, but it could be different. How should we think about which subsidiaries are going to be in next year?

Speaker Change: That makes a ton of sense and is definitely helpful. Okay, sorry to belabor that. No, no, it's good. Appreciate your asking.

David Campbell: So we really think it's a good dialogue to help level set, not leading to a decision, but to have a level setting of approach and how we best position Kansas to attractably, to attract capital competitively and doing that before the race case, outside of a race case, meaning it's the best way to have a good dialogue around it. And the details will be forthcoming, obviously, as we finalize them, so I won't get ahead of that.

Speaker Change: Yeah, okay. No, great to clear that up. And then, can you give us any sense of, you know, next year's rate case outlook? I know you said kind of every other year, but it could be different. How to think about which subsidiaries are going to be in next year?

Michael Sullivan: Well, we had Kansas rate cases in 2023. So on a, if we're on a typical cadence of every other year, I would expect that, you know, we'll be revisiting Kansas next And we've seen that, you know, with the PISA framework, and again, I think that the every company is different, every situation is different, but we see some other utilities who operate in PISA environments, and they've established a cadence that's typically, Often in an 18-month time frame, there are pros and cons to more frequent cases.

Speaker Change: Well, we had Kansas rate cases in 2023, so if we're on a typical cadence of every other year, I would expect that we'll be revisiting Kansas next year.

Speaker Change: And we've seen that, you know, with the PISA framework, and again, I think that every company is different, every situation is different, but we see some other utilities who operate in PISA environments, and they've established a cadence that's typically

Speaker Change: Often in an 18 month time frame, you know, we want to, there are pros and cons to more frequent cases, but of course with the investment levels that we all have.

Michael Sullivan: But of course, with the investment levels that we all have, a more regular cadence of rate cases helps with respect to keeping up with that level of investment but also helps with the level of predictability, fewer step function changes for customers. So I think they're balancing the workload with the benefits of a kind of steady progress. That's why I mentioned that while we expect every other year, some will be more frequent, some less, but we certainly have seen in parts of jurisdictions where some players have established a cadence sort of that 18, 24-month time frame is often pretty effective and efficient.

David Campbell: We do expect it to occur in the fourth quarter. Okay. Any timing expectations within 4Q at this point? There'll be advanced notice when the dates are set, we're not trying to, I think it's really just lining up calendar, so we're going to resist it. Okay, perfect.

Speaker Change: More regular cadence of rate cases helps with respect to keeping up with that level of investment, but also helps with the level of predictability, fewer step function changes for customers. So I think they're balancing the workload with the benefits of a kind of a steady progress.

David Campbell: And then just on the data center side, a few of your peers, this quarter, gave rules of thumb regarding large interconnections and associated residential transmission savings. I guess is that something you'll see on your system and any kind of quantification there as you get these interconnections online? Yeah, the approach we're taking is really specific to each situation because it really varies, frankly, based on location matters a lot, based on availability within the transmission system, what kind of upgrades may be required.

Speaker Change: Yeah, that's why I mentioned that what we expect every other year, some will be more frequent, some less, but we certainly have seen in piece of jurisdictions where some players have established a cadence, sort of that 18, 24 month timeframe is often pretty effective and efficient.

David Campbell: Okay, that makes sense. And so do you think you can get what you need out of the workshops and anything to file that comes from that before you actually kick off the next rate cases at the beginning of next year, presumably? Or could there be some overlap?

Speaker Change: Okay, that makes sense, and so do you think you can get what you need out of the workshops and anything to file that come from that before you actually kick off the next rate cases at the beginning of next year, presumably, or could there be some overlap?

David Campbell: So, particularly with the large loads, we found a rule of thumb is such a wide range and it's not especially helpful as the rule of thumb. So we generally are linking that to their project. So we'll update our capital plan and reflect the projects that have been announced and the specific impacts that they have. So for example, in our capital plan update, we'll do in the third quarter. The Google announcement was subsequent to our last capital filing.

David Campbell: You know, it's a I think the workshop process will largely conclude, and our expectation is it will wrap up before we get into the rate case. Michael.

Speaker Change: You know, it's a we

Speaker Change: I think the workshop process will largely conclude, our expectation is it will wrap up before we get into the rate case.

David Campbell: And we don't want to overstate it, but we also want to understate it: the workshop is really to enable a dialogue around what's a pretty important provision and feature for the competitiveness of Kansas and attracting capital. But it's a dialogue we want to have with our stakeholders in Kansas. There's one thing that I've learned in my time these past few years, and it reinforces my experience in the industry. We just want to be on the same page with and alongside our regulators and key stakeholders in our states. We think our Kansas regulators and constituents recognize the importance of the economic development opportunity we have and the importance of being competitive in attracting capital.

Speaker Change: Michael, and it's, we don't want to overstate, but we also want to understate, the workshop is really to enable a dialogue around what's a pretty important provision and feature.

David Campbell: We'll incorporate the impacts of the Google announcement and its impact on our TND system in that update. But the rules on a really very significantly based on size of customer and specific location. We did mention, I know that it's folks are interested in the quantification of size. You know, we were comfortable describing how projects are representing more than six gigawatts. We're an active discussion with those parties. But of course, we're at being at the end of the earnings season.

Speaker Change: for the competitiveness of Kansas and attracting capital. But it's a dialogue we want to have with our stakeholders in Kansas. There's one thing that I've learned in my time these few years, and it reinforces my experience in the industry.

Speaker Change: We just want to be on the same page with and being alongside our regulators and key stakeholders in our states. We think our Kansas regulators and constituents recognize the importance of the economic development opportunity we have.

Michael Sullivan: So we need a dialogue will help to set the stage for that. But it's, and our goal is that we have that workshop in the fourth quarter. We think it will wrap up before we get. Okay, thanks for all the responses. I appreciate it.

David Campbell: We've seen a lot of different companies have discussed very large numbers. There's no doubt that different counter parties are talking to various utilities. That said, we're excited about where we're very active and specific discussions. So we look forward to advancing those in the coming months. And our approach will be to a really now specific when customers are ready to announce the same time.

Speaker Change: and the importance of being competitive in attracting capital. So we need a dialogue will help to level set for that. But it's in our goal is that we have that workshop in the fourth quarter, we think it will wrap up before we get into the race.

Speaker Change: Okay, thanks for all the responses. I appreciate it.

Travis Miller: Our next question comes from Travis Miller of Morningstar. Your line is open.

Unknown Executive: Excellent. Thanks guys. I appreciate it. Take care. Thank you.

Speaker Change: Our next question comes from Travis Miller of Morningstar. Your line is open.

Travis Miller: Good morning. Thank you. Good morning. Good morning.

Travis Miller: Good morning. Thank you.

Nicholas Campanella: Our next question comes from Nicholas Campanella of Barclays. Your line is open. Hey, good morning. Happy Friday. Good morning, Nick. Hopefully you can hear me. Morning, so hey, just a follow up on the data center discussion, just outside of that six gigs, you know, it's only Google that's included in the IRP today. So if any of this additional comes to fruition, you would have to revisit the capital plan. Is that the right understanding?

Travis Miller: You just answered my question on the Kansas regulatory environment and the timing there. So I'll ask more broadly, just this 4 to 6 percent. You're outlining a lot of positives here in terms of growth and demands. If you go with the Kansas rate case, you would have something presumably in rates in 2026 or so. The CapEx update sounds like it's going to be more positive. What are perhaps the offsets that would keep you at that 4 to 6% versus going to a 5 to 7, or potentially even higher? What are potential offsets to growth, given all the positives that you've been outlining here?

Travis Miller: Good morning. Good morning. You just answered my question on the Kansas regulatory environment and the timing there. So, I'll ask more broadly, just this 4 to 6 percent, you're outlining a lot of positives here in terms of growth, the demands.

Speaker Change: You do go with the Kansas rate case, you would have something presumably in rates 2026 or so.

Speaker Change: The CapEx update sounds like it's going to be more positive

Speaker Change: So, what are perhaps the offsets that would keep you at that 4 to 6 percent versus going to a 5 to 7 or potentially even higher? What are potential offsets to growth given all the positives that you've been outlining here?

Nicholas Campanella: That's one. And then the second is just on the rate tariff, David, that you talked about for large loads, just maybe expand on what the process looks like for that. Do you have to do? Would you do that in a formal rate case? And, you know, how should we think about that? Thanks. Good question. I'm packing several elements there. And thank you for clarifying on the capital plan refresh because good point.

David Campbell: Well, I would reinforce your comment. I think there are a lot of positive dynamics that we're seeing in our jurisdiction. Our level of rate-based growth is low relative to our peers. So 6% rate-based growth, we looked across all our peers, and I'm sure you have noticed that there's typically a gap between what that rate-based growth level is and what the earnings trajectory is because you have to finance that growth, and there's often a little bit of lag. PISA is a very effective mechanism for mitigating lag, but it still has some limitations.

Speaker Change: Well, I would reinforce your comment. I think there are a lot of positive dynamics that we're seeing in our jurisdictions, our level of rate-based growth.

Nicholas Campanella: So the capital plan we published back in February did not include the good one. Announcement. The IRP that we published in April and May did reflect the Google Announcement, but was not incorporated. The IRP refresh was also not reflected in the Capaclin refresh. So any subsequent announcements would not only be incorporated to the Capaclin refresh, but also be incorporated in any of our resource planning going forward. So hopefully that's clear this month.

Speaker Change: is low relative to our peers. So, 6% rate-based growth. We've looked across all our peers. I'm sure you have as well that there's typically a gap between what that rate-based growth level is and

Speaker Change: What the earnings trajectory is because you have to finance that growth and it's often a little bit of lag. PISA is a very effective mechanism for mitigating lag, but it still has some.

David Campbell: So, what we want to get into the cadence of is the level of investment, the pace at which we're, if we are increasing our investment, the pace at which we increase investment, then that's going to have to roll through into rates on rate cases. Part of it is the timing of when these positives are manifested in the underlying trajectory. You also have to have a financing strategy and make sure that the financing strategy is incorporated into the math.

Speaker Change: What we want to get in the cadence of is the level of investment, the pace at which we're, if we are increasing our investment, the pace at which we increase investment, then that's going to have to roll through into rates on rate cases. So part of it is.

Nicholas Campanella: But it's, so again, the Capaclin refresh is going to reflect both Google and the new IRP. But any further announcements beyond the three that we mentioned will entail incremental resource additions, because we're like many, we're really hitting our capacity constraints. The six gigs that we described are and reflects not only data centers, but there's a large range of ensuring manufacturing opportunities. It's certainly fair to say that data centers are the largest, but there's a range of different industries that are looking in our region.

Speaker Change: The timing of when these positives are manifested in the underlying trajectory. You also have to have a financing strategy and make sure that the financing strategy is incorporated on the map. In other words, turning the ship.

David Campbell: In other words, turning the ship in a regulated industry, you don't turn it overnight, but I think there are a lot of positive dynamics. When I say, "not turn it overnight," because you do have to roll through the cadence of rate cases, getting that investment in your rate base, and then getting it into rates.

Speaker Change: In a regulated industry, you don't turn it overnight, but I think there are a lot of positive dynamics. When I say not turn it overnight, because you do have to roll through the cadence of rate cases, getting that investment in your rate base and then getting them into rates. But the dynamics that are the tailwinds, the economic development opportunity that supports.

David Campbell: But the dynamics that are the tailwinds, the economic development opportunity that supports infrastructure investment, because you're adding new loads, you can spread those fixed costs. Those are real positives, as you noted. So we think those are nice tailwinds for us as we systematically work through our plan. And we don't plan to get ahead of our regulars and stakeholders on that. We'll be working with our constituents, but we think we are all aligned and very excited about the economic development opportunity, which is the fundamental tailwind behind it.

Nicholas Campanella: Frankly, I was reflected by the Panasonic Announcement, because it's a very big player too. So six gigs are in corporate, so a diverse set of industries. In terms of tariffs, we've got a pretty good set of tariffs that we can leverage within our system today. So it's a little bit TBD, but we anticipate that we'll be moving forward largely leveraging the existing tariff structures that we have in both of our states, because we've got an array of things already on the books.

Speaker Change: Infrastructure investment because you're adding new loads so you can spread those fixed costs. Those are real positives as you noted so we we think those are nice tailwinds for us.

Speaker Change: As we systematically work through our plan, and we don't plan to get ahead of our regulators and stakeholders on that. We'll be working with our constituents, but we think we are all aligned in being very excited about the economic development opportunity, which is the fundamental tailwind behind us.

Nicholas Campanella: We'll consider, I know in some other jurisdictions, folks, of launch specific proceedings around tailored rates, but we like the different structures that we have in place. How we're thinking about it is just to make sure that the economic development rates that we're put in place are there for reason? They're there to attract economic development, but at the size of the potential lows we're talking about and the resource additions they may entail.

David Campbell: Sure. Okay, great. And then, Brooklyn, can you remind us what the demand growth expectation is in that four to six percent number?

Speaker Change: Sure. Okay, great. And then, real quick, can you remind us what demand growth expectation is in that four to six percent number?

David Campbell: So it's, as we noted in our materials, a two to 3% weather normalized demand growth through 2028, is reflective. While we're getting our earnings growth target through 26, with Shah, Michael indirectly teed up that he'd like to see that go longer. But it's, you know, we've given the earnings growth rate to 2026 for that sales growth rate, we've extended through 2028.

Speaker Change: So it's, as we noted in our materials, a two to three percent weather normalized demand growth through 2028.

Speaker Change: is reflected. While we begin our earnings growth, targets are 26.

Nicholas Campanella: For the incremental lows that we're looking at thinking about how do we make sure that we've got a rate structure that takes account of the incremental costs for being incurred. So it's fair approach that really benefits everyone, because we're going to go as a win-win all around. Hey, that's great. I appreciate that. And then just on the upcoming capitol refresh into the third quarter, just wanted to be clear on what to expect.

Speaker Change: That was shot.

Speaker Change: Michael indirectly teed up that he'd like to see that go longer, but it's, you know, we've given the earnings growth rate through the 2026, but that sales growth rate we've extended through 2028.

David Campbell: Okay. And again, just to clarify, I'm not going to say a lot, but some of that was 2027 and 28 when you see some of these large loads. Come on, so we have to assume that 2023 to 26 is less than 2 to 3% in terms of demand growth.

Speaker Change: Okay. And again, just to clarify, I'm not going to say a lot, but some of that was 2027 and 28 when you see some of these large loads. Command loads, we have to assume that 2023 to 26 is less than...

Nicholas Campanella: We'll obviously get the new capitol plan. Would you be giving late-based growth as well and then as ETS guidance and the five-year keg or more fourth quarter call item? What are you planning to build on? Thank you. Thank you, Nick. We anticipate that we're really focused on the CapEx plan and rate-based growth in the third quarter call as well as the associated financing plan. So those are the elements that we expect to cover in the third quarter.

Travis Miller: Yep, Travis, and I think if you look at our disclosure on the slide, you'll see that our base demand growth projection was 0.5 to 1%. And then when we add on these new large loads through 2028, we see that growing to 2 to 3%. So I think in that interim timeframe, you would see us moving from one range to the other range over time.

Speaker Change: 2-3% in terms of demand growth.

Travis Miller: Yep, Travis, and I think if you if you look at our disclosure on the slide, you'll see that our base demand growth projection was 0.5 to 1%. And then when we add on these new new large loads through 2028, we see that growing to 2 to 3%. So I think in that interim timeframe, you would see us moving.

Travis Miller: So the short answer is yes. I think you've got the sense of it. We're pleased about the growth trends in the first half of the year and, obviously, as we showed in the slides, have been a robust, perfect, nice, robust group.

Speaker Change: from one range to the other range over time. So the short answer is yes. I think you've got the sense of it. We're pleased about the growth trends in the first half of the year, obviously, as we showed in the slides. It's been a robust, nice, robust growth.

Nicholas Campanella: And our typical cadence and time utterances is the fourth quarter, but we're absolutely going to go through, you know, as we talk about the CapEx plan and conjunction with that, I think, rate-based growth and our financing plan will be to focus on that on that call. Okay, thanks so much. Have a great week on. Thank you.

Travis Miller: Yeah, that's very helpful. I appreciate all the details. Thank you so much.

Travis Miller: Yeah, that's very helpful. I appreciate all the details. Thank you.

Speaker Change: Yeah, that's very helpful. Appreciate all the details. Thanks so much.

Speaker Change: Thank you. Thank you.

Paul Patterson: Our next question comes from Paul Patterson of Glenrock Associates. Your line is open. Hey, good morning, guys.

Speaker Change: Our next question comes from Paul Patterson of Glen Rock Associates. Your line is open.

Brian Russo: Our next question comes from Julian de Merlin Smith of Jeffries. Your line is open. Yeah, it's actually Brian Russo on for Julian.

Paul Patterson: For Paul? Almost all my questions have been answered, but I apologize for being a little dense on this. Capital Structure. Workshop. This is a purely regulatory thing, or are you guys expecting sort of legislation or something? Amen. I mean, you have had rape cases and stuff, and you guys are pretty effective in portraying your views.

Paul Patterson: Hey, good morning, guys.

Paul Patterson: Oriba,

Paul Patterson: Almost all my questions have been answered, but I apologize for being a little dense on this capital structure.

David Campbell: Good morning. Welcome. Thank you. You're the team. Hey, just in Missouri, the inability at the legislature to extend pieces to include dispatchable generation, does that all impact, I think, what's in the IRP? You know, Andrew, or your earned returns in Missouri and cadence of re-cases or, you know, do you think this is likely to be picked up with the next legislature? And then that gives you more than enough time, you know, when any dispatchable generation is planned in the IRP.

Speaker Change: Workshop. This is a purely regulatory thing or are you guys expecting sort of legislation or something?

Speaker Change: I mean, you have had rape cases and stuff, and you guys are pretty effective in portraying your views. I'm just sort of...

Paul Patterson: I'm just not exactly gathering what exactly, I'm missing something, and I apologize. I just haven't really grasped what the purpose of this workshop in this context is, or what it's supposed to achieve. I assume you guys want a higher equity ratio and the purpose of this is sort of to have a discussion about it, but why is it that this workshop you see as being a more effective way of dealing with this issue then? Than the normal course of business, or is there something else, like I said, like maybe legislation or something you're thinking about?

Speaker Change: I'm just not exactly gathering what, exactly, I'm missing something and I apologize. I just haven't really...

Speaker Change: Grasp what the how this workshop in this context is what it's supposed to achieve I assume you guys want a higher equity ratio and and

David Campbell: So, thank you for your question. The RAP that we put forward obviously reflects the mechanisms in replace in Missouri today. So, you'll see that we and the other large utilities in the state are planning to build new generation, including a new natural gas that's in our integrated resource plans. I think it will be very important to find ways to do that in a way that's particularly effective from a credit metric and cashflow perspective so that the construction work and progress mechanism and a peace extension to include new natural gas will be helpful in enabling Missouri to be competitive and sourcing natural gas plants.

Speaker Change #100: The purpose of this is sort of to have a discussion about it, but why is it that this workshop you see as being a more effective way of dealing with the, with this issue then?

Speaker Change #101: Than the normal course of business, or is there something else, like I said, like maybe legislation or something you're thinking about?

David Campbell: So thank you, Paul, for the question. As you recall, in our rate case last year, there was voluminous testimony filed on the topic. Ultimately, we were able to, All parties were able to reach a settlement that was approved by the commission, so it was an item that was settled. It was also an item that was part of the legislation that was advanced earlier this year. Ultimately, it was removed from the legislation, so HB 2527 included PISA with a 90% deferral and included a construction work-in-progress mechanism for new natural gas plants.

Speaker Change #102: Thank you, everybody. Thank you.

Speaker Change #103: So thank you, Paul, for the question. We, as you recall, in our rate case last year, there was voluminous testimony.

Speaker Change #103: I filed on the on the topic. Ultimately we were able to

David Campbell: We thought there was a great dialogue around those provisions in the last legislative session at the end of the day. There was a new legislation passed but the ranges, stakeholders who were supportive of new natural gas generation and having new despatial generation in the state, there was a broad and diverse set of folks who are supportive of that. So, we look forward with other utilities and the other stakeholders who are supportive to advance that dialogue in the upcoming session.

Speaker Change #103: All parties were able to reach a settlement that was approved by the Commission, so it was an item that was settled.

Speaker Change #103: It was also an item that was part of the legislation that was advanced earlier this year. Ultimately, it was removed from the legislation, so HB 2527 included PISA with a 90% deferral and included a construction work-in-progress mechanism for new natural gas plants.

David Campbell: But we with the parties agree that on the capital structure issue, removing it from the legislation, let's have a dialogue around it later this year. So our objective, and I think it's pretty straightforward, is really to have a discussion around that outside the context of a contested case, a litigated proceeding, and really try to level the playing field on what is the prevailing practice. How does Kansas stack up in terms of competitiveness, where to, you know, how to... How does it typically impact a company's credit and other factors?

David Campbell: We won't have the same general election dynamics present in the next session so we'll really be able to focus in on the merits of those provisions we think is broad based support. But I do think new generation is important for Missouri to take advantage of the growth that is on the Missouri side of the state line. Both Google and Meta for example are in our Missouri jurisdiction so we look forward to advancing that dialogue because having a diverse portfolio, growing that portfolio is important to support the growth that we expect we can attract into Missouri.

Speaker Change #104: But we with the parties agree that on the capital structure issue, moving from the legislation, let's have a dialogue around it later this year. So our objective, and I think it's pretty straightforward, it's really to have a discussion around that outside the context of a contested case, a litigated proceeding.

Speaker Change #104: and really try to level set on what is the prevailing practice, how does Kansas stack up in terms of competitiveness, where to, you know, how to...

Speaker Change #104: How does it typically impact the company's credit and other factors? So it's really just an opportunity to have a dialogue around an important issue that drives the competitiveness and attracting capital outside of a rate case. Now in the next rate case.

David Campbell: So it's really just an opportunity to have a dialogue around an important issue that drives competitiveness and attracts capital outside of a rate case. Now, in the next rate case, Smith.

David Campbell: Okay, great. And then just to confirm the two to three percent whether normalized sales growth, it seems clear that it's more back-and-loaded. Do you think it's going to kind of track that 26 to 28 time period for Google Panasonic and Meta? And then is Google still on track and on schedule? Has that broke ground yet or is it still in the development stage? I can cover the first part on the demand, Brian.

Speaker Change #104: Return on Equity, Capital Structure, other things will of course be part of those proceedings, but we think having this dialogue on a topic that was the gear of focus in 23

David Campbell: Thank you. Thank you. Thank you. Thank you. When we were tying up the importance of being competitive and attracting capital, you know, the parties agreed in the legislative process as a workshop. So, not overstating what we're seeking to accomplish, but it's an important topic, and we look forward to a dialogue outside of a rate kit. Okay.

Speaker Change #104: When we were teeing up the importance of being competitive and attracting capital, you know, the parties agreed in the legislative process at the workshop. So not overstating what we're seeking to accomplish, but it's an important topic and we look forward to a dialogue outside of a red cap.

Paul Patterson: Okay, great. Thank you. I apologize for not picking up on it quick enough. So, finally, just to sort of clarify, with respect to rate design and what have you, when we think about these new projects, it sounds to me that you expect these new projects to essentially carry the cost, the incremental cost of supplying them. Is that how we should think about the attractive opportunities that are coming up here, or do you see these as being some mix of economic development? A subsidized kind of situation or something? I just wanted to make sure I understood that

Speaker Change #105: Okay, great. Thank you. Apologize for not picking up on it quick enough.

David Campbell: Because we think about the demand going forward as I mentioned, we have the ramp of Panasonic Meta and Google kind of in order over the 26th through 2028 period. So we'll see a light ramp up of some of those in 2024 but you'll see more contributing in 2025 and it'll continue to build momentum as we move through the period through 2028. So you will see that continue to build but you should see year-over-year increases in that growth rate as we move forward.

Speaker Change #106: On the, just finally on, just to sort of clarify, with respect to rate design and what have you, when we think about these new projects, it sounds to me that you expect these new projects to essentially carry the

Speaker Change #106: Is that how we should think about the attractive opportunities that are coming up here or do you see these as being some mix of economic development?

David Campbell: Do that two to three percent range that we discuss? On the Google side, there, Google is very high. They had a very public announcement of the very broad set of stakeholders, the mayor and state officials from his earlier presence. They've lined up the land and the site. So I think site work is underway. I don't think the data center construction has yet started but Google is very committed to the region as reflected by their public announcement there. So we're excited by Google's excitement about building and facilitating our region.

Speaker Change #107: subsidized kind of situation or something. I just wanted to make sure I understood that.

David Campbell: So I think that the rates that there are economic development rates that are available, but there's also a series of rate structures that are around to contemplate incremental costs being incurred. So, I think our view is that, particularly at the size of loads, 6 gigawatts, up to up to six gigawatts or more, you want to make sure that the rates that you're including are ones that reflect the incremental costs.

Speaker Change #107: So I think that the

Speaker Change #108: The rates that there are economic development rates that are available, but there's also a series of rate structures that are around the contemplating incremental costs are being incurred. So, I think our view is that, particularly at the size of loads.

Speaker Change #108: You know, six gigawatts up to up to six gigawatts or more, you want to make sure that the rates that you're including are ones that

David Campbell: Okay, and then just lastly on the IRP, can we expect kind of a supplemental IRP possibly in 2025 if some of the six gigawatts of potential load materialized? So in the process in both our states, we have a triennial update, but we have an annual refresh. So, yes, in practice, you'll have an update next in the same timing next year, April and one May and the other. And the triennial updates historically with a more significant ones.

David Campbell: But it doesn't mean that every rate structure is only based on incremental costs in a number of jurisdictions where the rates are based on the average cost across the system. Because in some instances, the incremental cost of a new generation may be higher than the average installed base. Not always the case. We're just trying to make sure, and this is a great thing about having a set of structures that are already in place, that the rates that are in place don't end up where a huge burden is shifted to other existing customers. And we think there's a path to get there.

Speaker Change #108: Reflect the Incremental

Speaker Change #108: Costs, but it doesn't mean that every rate structure is only based on incremental costs in a number of jurisdictions where the rates are based on the average cost across the system.

Speaker Change #108: Because in some instances, right, the incremental costs of a new generation may be higher than the average installed base. Not always the case. We're just trying to make sure, and this is a great thing about having a set of structures that are already in place.

David Campbell: I think that's very similar to what other jurisdictions are grappling with at the same time. Again, when you're in a situation where it's 20 megawatts of incremental load, you've got excess capacity in the system. Those, in the past, were often priced on marginal costs. It's a different context here, but I think the answer is actually probably pretty similar across different jurisdictions. It's finding a set of rate structures that make sure that you're adequately covering the overall cost of the system when you've added that much new load.

Speaker Change #108: That the rates that are in place don't end up where a huge burden is shifted to other existing customers. And we think there's a path to get there.

David Campbell: There was a process in Missouri, it's still relatively new process in Kansas, but with so much happening on the demand side. A lot of changes are happening now happening year to year. So, yes, we'll have an annual process, and we'll, so it has new loads emerge in our, we add them to our, to our plans that will, those will be reflected in our annual update.

Speaker Change #108: I think it's very similar to what other jurisdictions are grappling with at the same time, again, when you're in a situation where it's 20 megawatts of incremental load, you've got excess capacity in the system.

Speaker Change #108: Those often, in the past, were priced on marginal costs. It's a different context here, but I think the answer is actually probably pretty similar across different jurisdictions. It's finding a set of rate structures that make sure that you're adequately covering the overall cost of the system when you've added that much new load.

Unknown Executive: Okay, great. Thank you very much. Thank you.

Paul Patterson: Awesome. Thanks so much, guys. I really appreciate it. Have a great weekend.

Michael Sullivan: Our next question comes from Michael Sullivan of Wolfe. Your line is open. Hey, good morning. Water, Michael. Hey, David, I just wanted to go back to the next question just in terms of like expectations for the Q3 call update. In terms of financing needs, are you all still planning to stick with kind of that, I guess mismatch of three year view on financing versus five year on catbacks.

Speaker Change #109: Awesome. Thanks so much, guys. Really appreciate it. Have a great weekend.

David Campbell: Thank you. I'm showing no further questions at this time. I'd like to turn it back to David Campbell for closing remarks.

Speaker Change #109: Thank you. You too. Thank you. I'm showing no further questions at this time. I'd like to turn it back to David Campbell for closing remarks.

David Campbell: Great. Thanks, D.D. Thanks, everyone, for your interest in Evergy. Have a great day, and have a great weekend.

David Campbell: Great, thanks D.D. Thanks everyone for your interest in Evergy. Have a great day and have a great weekend. That concludes the call.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

Speaker Change #110: This concludes today's conference call. Thank you for participating and you may now disconnect.

Michael Sullivan: So, and Michael, I know that you're missing your fellow demon deacon on this call, so we're going to have to know inside Wake Forest comments this time. But the, we expect and I, you know, P gave me a little elbow and I'm my response to Nick. We'll of course comment on our earnings growth expectations of the third quarter calls. So I will, our focus is on. What the capex plan update will be, but we're, we're planning to talk about the financing strategy that's because, obviously, if you.

Michael Sullivan: With changes to a capex plan, you've got to talk about your plans for financing that. And we'll talk about our financing plans through the, through the period of the, of the capex refresh. So I, if it's five year update on the capex plan, we'll talk about our financing plan to that period. Okay, great. That's not how it is today though, right? So that is kind of different. You talk about no equity through 26.

Michael Sullivan: You're right to say, yeah, what we, what our past comments, we really didn't comment what we said was we know what would be required in the future, no equity to 26. We weren't specific on what happens after 26. So I guess there was something implicit in those comments. What, what Jeff described today and we wanted to frame it clearly, so we'll read here is that our current capital plans is $12.5 billion.

Michael Sullivan: We articulated with that expectation, we wouldn't be issuing equity through 2026. As we update that capital plan, you know, we'll update our financing expectations through the five year period at the same time. Hopefully that makes sense. That makes time sense and it is definitely helpful. Okay, sorry to believe in that. No, no, it's good appreciate your asking. Yeah, okay, no, great to clear that up. And then can you give us any sense of, you know, next year's recase outlook.

Michael Sullivan: I know you said kind of every other year, but it could be different. How to think about which city areas are going to be in next year. Well, we had Kansas rate cases in 2023. So I want to, if we're on a typical cadence of every other year, I would expect that, you know, we were visiting Kansas next year, last year. And we've seen that, you know, with the piece of framework, and again, I think that the every company is different, every situation is different, but we see some other utilities who operate in peace environments, and they're, they've established a cadence that's typically, uh, often in an 18 month timeframe.

Michael Sullivan: You know, we want to, the, their pros and cons to more frequent cases, but of course, with the investment levels that we all have, um, uh, more regular cadence of rate cases helps with respect to, um, keeping up with that level investment, but also helps with the level of predictability. If your step function changes for customers, so I think they're bouncing to workload with the benefits of a kind of a steady progress.

Michael Sullivan: Yeah, that's why I mentioned that what we expect every other year, some will be more frequent, some less, but we certainly have seen in, in piece of jurisdictions, where some, some players have established a cadence, sort of that 18, 24 month timeframe is often pretty effective in efficient. Okay, that makes sense. And so do you think you can get what you need out of the workshops and anything to fire, um, that come from that before you actually kick off the next re cases at the beginning of next year, presumably, or could there be some overlap?

Michael Sullivan: Um, you know, it's a, we, I think the workshop process will largely conclude our expectations who will wrap up before we get in the rate case. Michael, and it's, uh, we don't want to overstate, but we also want to understate that workshop is really to enable a dialogue around what's a pretty important provision and feature for the competitiveness of Kansas and attracting capital. Um, but it's a dialogue we want to have with our stakeholders in Kansas.

Michael Sullivan: There's one thing that I've learned in my time these, these few years and it reinforces my experience in the industry. We just want to be on the same page with and, and being in alongside our, our regulators and key stakeholders in our states. Um, we think our Kansas regulators and constituents recognize the importance of the economic development opportunity we have and the importance of being competitive, uh, in attracting capital. So we need a dialogue.

Michael Sullivan: We'll help to level set for that. But it's a, and our goal is that we have that workshop in the fourth quarter. And we think it will wrap up before we get in the rate case. Okay. Thanks, thanks for all the responses. I appreciate it. You bet. Thank you, Michael. Thank you.

Travis Miller: Our next question comes from Travis Miller of Morningstar. Your line is open. Good morning. Thank you. Good morning. You just answered my question on the Kansas regulatory environment and the timing there. So I'll ask more broadly just this four to six percent of you. You're outlining a lot of positives here in terms of growth, the demands. If you do go with the Kansas rate case, you would have something presumably in rates 2026 or so. The cat backs update sounds like it's going to be more positive.

David Campbell: What are perhaps the offsets that would keep you at that four to six percent versus going to a five to seven or potentially even higher? What are potential offsets the growth given all the positives that you've been outlining here? I would reinforce your comment. I think there are a lot of positive dynamics that we're seeing in our jurisdictions. Our level of great big growth, is low relative to our peers. So 6% rate-based growth, we've looked across all our peers, I'm sure you have as well, that there's typically a gap between what that rate-based growth level is and what the earnings trajectory is, because you have to finance that growth and it's often a little bit of lag.

David Campbell: Pieces of very effective mechanism for mitigating lag, but it still has some. So what we want again in the cadence of is the level of investment, the pace at which we're, if we are increasing our investment, the pace at which we increase investment, then that's going to have to roll through into rates on rate cases. So part of it is the timing of when these positives are manifested in the online trajectory.

David Campbell: You also have to have a financing strategy in making sure that the financing strategy is incorporated on the math. In other words, turning the ship in a regulated industry, you don't turn it overnight, but I think there are a lot of positive dynamics. And I say not turn it overnight because you do have to roll through the cadence of rate cases, getting that investment in your rate base and then getting them into rates.

David Campbell: But the dynamics that are the tailwinds, the economic development opportunity that supports infrastructure investment, because you're adding new loads. You can spread those fixed costs. Those are real positives as you noted. So we, we think those are nice tailwinds for us, as we systematically work for our plan. And, you know, we don't plan to get ahead of our, our regulars and stakeholders on that. We'll be working with our constituents, but we think we are all aligned and being very excited about the economic development opportunity, which is the fundamental tailwind bonus. Sure. Okay, great.

David Campbell: And then we're going to, can you remind us what demands growth expectation is in that four to six percent number? So it's as we noted in our materials, a two to three percent, whether normalized demand growth through 2028 is reflective. While we get an earnings growth target through 26, which Michael indirectly teed up that he likes to see that go longer, but it's a, you know, we've given the earnings growth rate to the 2026, but that sales growth rate we've extended through 2028.

David Campbell: Okay. And again, there's the clarifies, I'm not going to say a lot, but some of that was 2027 and 28 when you see some of these large loads. Come on, so the set to assume the 2023 to 26 is less than two to three percent in terms of demand growth. Yeah, Travis said, I think if you, if you look at our disclosure on the slide, you'll see that our base demand growth projection was 0.5 to 1%.

David Campbell: And then when we add on these new, new large loads through 2028, we see that growing to two to three percent. So I think in that interim timeframe, you would see us moving from one range to the other range over time. So the answer is yes. I think you've got the sense of it. We're pleased about the growth trends in the first half of the year, obviously, as we've shown the slides in a robust, perfect. So nice robust growth. Yeah, that's very helpful. Appreciate all the details. Thank you so much.

Unknown Executive: Thank you.

Paul Patterson: Our next question comes from Paul Patterson of Sloan Rock Associates. The line is open.

David Campbell: Very good morning, guys. Or Paul? Almost all my questions didn't answer, but I'm apologist for being a little dense on this capital structure workshop. This is a purely regulatory thing or you guys expecting sort of legislation or something, and I mean, you have had raycases and stuff and you guys are pretty effective in portraying your views. I'm just sort of, I'm just not exactly gathering what exactly, I'm missing something and I apologize.

David Campbell: I just haven't really grasped what those have this workshop in this context is what it's supposed to achieve. I assume you guys want a higher equity ratio and the purpose of this is sort of to have a discussion about it. But why is it that this workshop EC is being a more effective way of dealing with the, with this issue then, then then the normal course of business, or is there something else like I said, like maybe legislation or something you're thinking about.

David Campbell: So thank you, Paul, for the question. We, as you recall, that in our rate case last year, there's voluminous testimony filed on the, on the topic. Ultimately, we were able to, all parties were able to reach a settlement that was approved by the commission. So it was an item that was settled. It was also an item that was part of the legislation in advance to earlier this year. Ultimately, it was removed from the legislation.

David Campbell: So HB 25, 27 included, pizza with a 90% deferral included a construction work and progress mechanism for new natural gas plants. But we with the parties agree that on the capital structure issue, moving from the legislation, let's have a dialogue around it later this year. So our objective, and I think it's pretty straightforward. It's really to have a discussion around that outside the context of a, of the contested case, the litigated proceeding and really try to level set on.

David Campbell: And what, what is the prevailing practice? How does Kansas stack up in terms of competitiveness? Where to, you know, how to, how does it typically impact the company's credit and other factors. So it's really just an opportunity to have a dialogue around an important issue that drives the competitiveness and the fact in capital outside of a rate case. Now, in the next rate case, return on equity, capital structure, other things will of course be part of those proceedings.

David Campbell: So we think having this dialogue on a topic that was bigger of focus in 23. When we were seeing up the importance of being competitive and attracting capital, you know, the parties agreed and let's set a process out of the workshop. So not overstating what we're seeing accomplished, but it's an important topic and we look forward to dialogue outside of a rate case.

David Campbell: So on the, just finally on just to sort of clarify with these are to rate design and what have you. When we think about these new projects, it sounds to me that you expect these new projects to essentially carry the cost, the incremental cost of supplying them. Is that how we should think about the, you know, the attractive opportunities that are coming up here or do you see these as being some mix of economic development?

David Campbell: Subsidize kind of situation or something. I just wanted to make sure I understood that. So I think that the rates that there are economic development rates that are available, but there's also serious rate structures that are around the contemplating incremental costs are being incurred. So I think our view is that particularly at the size of loads. Chris, you know, six gigawatts up to six gigawatts or more. You want to make sure that the rates that you're including are ones that reflect the incremental cost, but it doesn't mean that every rate structure is only based on incremental costs.

David Campbell: You know, a number of jurisdictions where the rates are based on the average cost across the system. Because in some instances, right, the incremental cost of a new generation may be higher than the average installed base, not always the case. We're just trying to make sure, and this is a great thing about having a set of structures that are already in place, that the rates that are in place don't end up where a huge burden has shifted to other existing customers.

David Campbell: And we think there's a path to get there. I guess very similar to what other jurisdictions are grappling with the same time. Again, when you're in a situation where it's 20 megawatts of incremental load, you've had an excess capacity in the system, those often in the past or price on marginal costs is a different context here. But I think the answer is actually probably pretty similar across different jurisdictions. It's finding a set of rate structures that make sure that you're actively covering the overall cost of the system when you've added that much below.

Unknown Executive: Awesome. Thanks so much, guys. Really appreciate it.

Unknown Executive: Have a great weekend. Thank you, you too. Thank you.

Unknown Executive: I'm showing no further questions at this time.

David Campbell: I'd like to turn it back to David Campbell for closing remarks. Great. Thanks, Edie. Thanks, everyone, for your interest in energy. Have a great day and have a great weekend.

Unknown Executive: That concludes the call. This concludes today's conference call. Thank you for participating and you may now disconnect.

Unknown Executive: Thank you.