Q4 2024 Evergy Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Q4 2024 Average 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.
David: 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.
David: Thanks, Pete and good morning, everyone I'll begin on slide five by first thanking our employees, who worked tirelessly throughout the year to advance our strategic objectives of affordability reliability and sustainability.
David: Proud and honored to lead the average you team and with respect to 2024 results I'm pleased to report that we had a solid year.
David: Overcoming weather headwinds in the fourth quarter and throughout the year, we reported adjusted earnings of $3 81 per share compared to $3 54 per share a year ago.
David: Strong cost management helped to offset the impact of the mild weather.
David: Brian will discuss earnings drivers in more detail as part of his remarks.
Speaker Change: In 2024, we also executed on our capital investment plan to improve reliability and resiliency investing $2 $3 billion in infrastructure to modernize our grid and replace aging equipment as.
Speaker Change: As we look ahead executing on our five year $17 5 billion capital plan is a great challenge and a great opportunity to support and enable the economic prosperity of our region.
Our success will come from the tremendous teamwork, we have within energy.
Speaker Change: 2024 also proved to be a strong year in regulatory execution and advancing initiatives that allow us to invest for growth in Kansas and Missouri to the benefit of the customers and communities we serve.
Speaker Change: In Kansas the passage of House, Bill $25 27 demonstrated the support of Kansas legislators regulators and stakeholders for infrastructure investment to power economic development.
Speaker Change: It also underscores the importance of a competitive and constructive regulatory framework.
Speaker Change: Helping to mitigate regulatory lag and supporting our credit profile.
Speaker Change: In Missouri, we were pleased to reach a unanimous settlement with stakeholders in Missouri West rate case, which included the addition of a joint ownership interest in the Dogwood Energy Center.
Speaker Change: Low cost energy solution for our customers.
Speaker Change: The settlement provided a balanced outcome for customers and communities, we serve and reflects the broad based alignment around our infrastructure investments, while ensuring we continue to provide reliable and affordable electric service.
Speaker Change: We also requested to go ahead to construct three new natural gas facilities and three solar farms.
Speaker Change: If approved by our Kansas and Missouri regulators. These will represent the first new dispatch of our resources, we built it in over 10 years and our first utility scale solar farms.
Speaker Change: You get these clients totaled just over 2100 megawatts.
Speaker Change: As we outlined in our 2024 integrated resource plans. Our overarching goal is to identify the most cost effective and resilient plan that reliably serve our customers.
Speaker Change: We expect to file our annual updates to our <unk> in March and April in Missouri, and Kansas, respectively.
Speaker Change: And targeting top tier performance and operations 2024 was another solid year.
Speaker Change: After achieving significant improvements in reliability in 2023, we matched and maintained that strong performance during the year with unusually severe weather.
Speaker Change: Through the summer, we experienced 10 severe storm events with wind gusts in excess of 50 miles per hour.
Speaker Change: Downing trees, and causing extensive damages extensive damage to equipment or structures across our territories.
Speaker Change: Our line crews, who are the bedrock of safely delivering affordable and reliable power to our customers worked tirelessly through the extreme weather to restore power to our customers and we thank them for their contributions.
Speaker Change: In November we raised our dividend, 4% to an annualized $2 67 <unk>.
Consistent with our 60% to 70% target payout ratio and gradually lowering the payout ratio within that range, which is a trend that we expect to continue.
Speaker Change: As noted on slide five we are reaffirming our 2025 adjusted EPS guidance range of $3 92 per cent per share to $4 12 per share with a midpoint of $4 <unk> per share.
Speaker Change: We're also reaffirming our long term growth target of 4% to 6% through 2029 based on the 2025 midpoint of $4 <unk> per share.
Speaker Change: 2026 to 2029, we anticipate being in the top half of its guidance range relative to 2025 baseline.
Speaker Change: Moving to slide six we highlight our three major economic development wins, Google Panasonic meta and two additional data centers in Missouri.
Speaker Change: In total there demand represents 800 megawatts of load.
Speaker Change: Based on these announcements we are reaffirming our weather normalized demand growth forecast of 2% to 3% through 2029.
Speaker Change: Additional large customers will be additive to this forecast.
Speaker Change: Slide seven describes our economic development pipeline in greater detail.
Speaker Change: Reflecting the economic vitality and geographic advantages of our region. The overall pipeline remains robust in both Kansas and Missouri and has grown from roughly six gigawatts to over 11, gigawatts, including the customers announced today.
Speaker Change: As a point of reference our projected peak summer demand for 2025 is approximately 10 six gigawatts.
Speaker Change: So relative to our size. This makes our backlog of growth opportunities one of the most robust in the country.
Speaker Change: Reflecting the competitiveness of our region.
Speaker Change: Of course, the environment for new economic development projects is competitive and we do not expect to win all projects in the queue.
As we discussed in our third quarter earnings call. We remain in advanced stages of negotiation with two large customers.
Speaker Change: Have identified generation and transmission solutions for both.
Speaker Change: We previously shared with you that the load from these projects could total 500 megawatts 1000 megawatts in aggregate, which we now anticipate will be.
Speaker Change: One six gigawatt gigawatts.
Speaker Change: One of these customers are evaluating our Kansas service territory and the other an existing data center customer is evaluating an expansion in Missouri.
Speaker Change: Subject to final agreements and product announcements, we expect to begin to see an impact on our demand growth from these customers in 2027 more in 2028 and into the next decade.
Speaker Change: It will be very excited to add these new projects and further establish our region as a leading player in the U S digital and advanced manufacturing economy.
Speaker Change: Both customers are tracking to share announcements regarding their plans later this year.
Speaker Change: In addition, we are actively working with customers, whose loads would represent approximately three gigawatts.
Speaker Change: These are customers that have acquired land Orlando rights presented a site plan and in some cases signed letters of agreement to advance evaluation process.
Our remaining six gigawatts in our pipeline.
Speaker Change: Associated with preliminary conversations with potential customers.
Speaker Change: While all of this load may not be addressable the dialogue Nonetheless demonstrates the significant activity and interest in Kansas and Missouri.
Speaker Change: And customers, who stand ready if others drop out of the queue.
Speaker Change: We're very excited about the economic impact and prosperity that these large customers will bring including construction jobs permanent jobs and expanded tax base.
Speaker Change: And many other benefits such as helping us to advance our affordability and reliability goals.
Speaker Change: It is truly a transformative time for our company, reflecting and further advancing the vitality of Kansas and Missouri.
Speaker Change: As a reminder, our capital investment in load growth forecast only reflect the projects announced to date that are shown on slide six.
Speaker Change: Many of you will ask about the timing of revising our plan to reflect new large customers as.
Speaker Change: As a general rule, we went out specifics on these projects in tandem with customer announcements regarding their plans.
Speaker Change: Our focus on affordability and regional rate competitiveness is an important contributor to this pipeline.
Speaker Change: The foundation for support supporting the tremendous growth in our region.
Speaker Change: As part of the exercise alongside the economic development rates that are in place in both Kansas and Missouri, We have filed large load power service tariffs in both states to ensure that there is appropriate and adequate recovery associated large new loads.
Speaker Change: While the procedural schedules have not yet been finalized we anticipate resolution in both states in the third quarter.
Speaker Change: Slide eight lays out our updated capital expenditure forecast our latest rolling five year investment plan totals approximately $7 5 billion for 2025 to 2029.
Speaker Change: Which represents a $1 3 billion increase relative to the revised five year forecast, we provided on our third quarter earnings call.
Speaker Change: This quarter's update primarily reflects the assignment of one half of a combined cycle natural gas plant to Missouri West.
Speaker Change: Which was previously unallocated across our operating companies and excluded from our capital forecast.
Speaker Change: It also incorporates an updated cost estimate for the natural gas combustion turbine facility, we announced last year, along with some minor shifts across divisions.
Speaker Change: To summarize our revised capital forecast includes a significant portion of the 2024 integrated resource plans and.
Speaker Change: And we will continue to evaluate incremental projects.
Speaker Change: Pending our 2025, RFP updates, including a third combined cycle unit at Kansas Central and a combustion turbine unit at our metro jurisdiction.
Speaker Change: Our five year investment program is expected to result in eight 5% annualized rate base growth through 2029, which compares to our prior forecast of approximately 8%.
Speaker Change: We will take a prudent approach to financing the tremendous growth tremendous growth opportunity. This investment plan represents.
Speaker Change: Utilizing a balanced mix of debt equity and equity like securities as well as internally generated cash flow to support our balance sheet and strong investment grade credit rating.
Speaker Change: We'll take a flexible approach to equity financing with optionality around timing and execution options.
Speaker Change: Brian will provide more details on our financing strategy in his remarks.
Speaker Change: Alongside these new generation investments the majority of our five year capital plan is focused on transmission and distribution projects and other investments that advance our strategic objectives of affordability reliability and sustainability.
Speaker Change: And enable us to support economic prosperity and growth in our state.
Speaker Change: Turning to slide nine.
Speaker Change: We highlight our adjusted EPS growth outlook, which project, 4% to 6% growth off the 2025, adjusted EPS guidance midpoint of $4 <unk>.
Speaker Change: With an expectation to grow in the top half of the 4% to 6% range through 2029.
Speaker Change: The midpoint of 2025 guidance represents a 5% increase over the 2024 guidance midpoint consistent with our prior target.
Speaker Change: Our growth outlook is driven by a $17 5 billion five year capital plan, which includes the investments to serve the 2% to 3% load growth that we expect through 2020.
Speaker Change: We anticipate a regular cadence of rate case filings across our jurisdictions. Approximately every 18 months, so that won't be true every cycle or in every jurisdiction.
Speaker Change: <unk> our growth outlook only reflects the new customers announced today and any new announcements will be additive to this forecast.
Speaker Change: Moving to slide 10, I'll provide a brief update on our regulatory and legislative priorities in both Kansas and Missouri.
Speaker Change: In a nutshell, it's been a busy and productive start to the year.
Speaker Change: On January 31, we filed our average Kansas Central rate review requesting a $196 million revenue increase premised on a 10, 5% return on equity and approximate 52% equity ratio and a projected $6 $7 billion rate base as of the proposed March 31 'twenty.
Speaker Change: $25 for a period.
Speaker Change: We believe this rate request is straightforward and reflects the capital plan and infrastructure investment priorities.
Speaker Change: We've communicated a kansas regulators and stakeholders and workshops and other settings over the past few years.
Speaker Change: The principal items include recovery of and return on our grid modernization and infrastructure investments since our last rate review in 2023.
Speaker Change: The procedural schedule calls for staff and intervenor testimony by June six.
Speaker Change: Rebuttal testimony on July 3rd settlement conferences on July eight to nine and hearings beginning on July 21.
Speaker Change: As a reminder, Kansas rate cases run on an eight month clock.
Speaker Change: We look forward to working with our regulators and stakeholders over the coming months to achieve a constructive outcome for our Kansas customers.
Speaker Change: We also have pending request for pre determination on partial ownership of two combined cycle gas plants and a solar farm in Kansas.
Speaker Change: Next up in the Redetermination procedural schedule of staff testimony, which is due march 14th.
Speaker Change: Followed by rebuttal testimony on April 4th settled settlement conference on April nine.
Speaker Change: And hearings beginning on April 21.
Speaker Change: We anticipate an order from the KCG by July seven.
Speaker Change: And as I mentioned earlier, we have filed a request to approve a large load power service tariffs that would apply to prospective data center customers.
Speaker Change: We are currently awaiting a procedural schedule and anticipate resolution in the third quarter we.
Speaker Change: We believe the tariff allows for adequate cost recovery associated with large new loads, while being competitive with rates in neighboring states.
Speaker Change: <unk> presents a strong framework that will advance the prosperity of our region and we look forward to working with <unk> staff and all of our stakeholders to be approval process.
Speaker Change: Yes.
Speaker Change: Now switching the Legislative front, we introduced house Bill 2107 in Kansas This year.
Speaker Change: If passed this bill would codify statute the legal framework around wildfire damages and call for a workshop for the KC to assess wildfire integration mitigation strategies and cost recovery.
Speaker Change: We view wildfire mitigation through the lens of safety and reliability, which are driving principles behind our transmission and distribution capital plan.
Speaker Change: Along with a limit on few minutes punitive damages the legislation requires potential lawsuits.
Speaker Change: Prove that a wildfire was caused by utility negligence and calls for a wildfire focus workshop at the KC, providing an opportunity for a constructive dialogue with canvas stakeholders to explore additional risk mitigation and cost recovery options.
Speaker Change: The bill passed unanimously out of committee.
Speaker Change: And was recommended favorably for passage in the house yesterday afternoon.
Speaker Change: Later today in fact, we expect the house to bring HB $21 seven up for final action in the house to.
Speaker Change: Bill will then be sent to the Senate.
Speaker Change: We appreciate the engagement from Legislative Committee members to Kansas Farm Bureau, Kansas Livestock Association and many others in advancing this legislation.
Speaker Change: Pivoting to Missouri earlier this week Senate Bill four cleared a major hurdle and was passed out of the Senate.
Speaker Change: It has now been sent to the house, where it awaits further action.
Speaker Change: Key provisions include amending the pizza statute to include new natural gas units and extension of the piece of Sunset to the end of 2025 as well as allowing for recovery of construction work in progress are <unk> from new natural gas plant investments in base rates similar to that in Kansas.
Speaker Change: Theyre also provisions that would streamline the generation resource planning process and ensure we have sufficient capacity to serve our customers.
Speaker Change: In addition, as before expand <unk> to all forms of generation as part of a new integrated resource planning process.
Speaker Change: Replacing a nearly 50 year old prohibition on C were put in place by a statewide vote way back in 1976.
Speaker Change: If passed this legislation will be transformative for the Missouri regulatory framework.
Speaker Change: We're grateful for the collaboration with Missouri Public Service Commission Legislative leadership, the Governor's Office Commission staff the office of public counsel, our utility partners and our key stakeholders and making a significant progress that we've achieved this far thus far.
Speaker Change: This build positions, Mr. Missouri to support infrastructure investment resource adequacy reliability and growth.
Speaker Change: As a reminder, the legislative session, Missouri is scheduled to wrap up in May.
Speaker Change: On the Missouri regulatory front, we have pending requests for certificates of convenience and necessity or CCN related to solar farms partial ownership and two combined cycle natural gas units and full ownership of a simple cycle natural gas plant all in Missouri West.
Speaker Change: Staff's recommendation of solar case is due on March 7th March 17, and staffs report in rebuttal and the natural gas cases due April 25.
Speaker Change: Similar to Kansas, We filed a request in Missouri to approve a large load power service tariff on February 14th and we are currently awaiting a procedural schedule.
Speaker Change: We anticipate resolution in the third quarter.
Speaker Change: I'll conclude my remarks, with slide 11, which highlights the core tenants of our strategy.
Speaker Change: Our efforts to enhance affordability have yielded significant progress in improving regional rate competitiveness over the past few years.
Speaker Change: Our strategic plan is designed to sustain this momentum by keeping our long term rate trajectory in line with the rate of inflation, while investing in infrastructure to support growth across our region.
Speaker Change: By prioritizing affordability, we can contribute to the robust economic development pipeline ahead of us and.
Speaker Change: In support of substantial economic potential within our states.
Speaker Change: As outlined in our capital plan, we will continue to invest in grid modernization to ensure reliability strong customer service and strong performance in safety safety public safety and grid resiliency. This.
Speaker Change: This includes a focus on metrics related to personnel safety customer service generation availability and infrastructure investment.
Speaker Change: Our primary sustainability goal is to lead our cost effective energy transition as reflected by our investments in new natural gas plants and solar farms in support of our Kansas, Missouri customers.
Speaker Change: We look forward to continuing to demands a balanced mix of resource additions over the coming years to support growth and prosperity in our states.
Brian: And with that I'll now turn the call over to Brian.
Brian: Thank you David Thank you Pete and good morning, everyone I'll start on Slide 13 review of 2020 for financial results for.
Brian: For the full year 2024 average delivered adjusted earnings of $878 million or $3 81 per share compared to $816 million or $3 53.
Brian: $3 54 per share for the same period last year as shown on the slide from left to right. The year over year increase in adjusted EPS was driven by a few factors first a cooler summer and mild winter weather drove a 5% decrease in cooling degree days and a 4% decrease in heating degree days, leading to a 13% decline.
Brian: And EPS versus 2023, when compared to normal weather drove an estimated 11 unfavorable impact.
Brian: <unk> growth was strong increasing one 1% driven by higher residential and commercial sales volumes, which added <unk> 14 per share.
Brian: Recovery and return on regulated investments driven by new retail rates in FERC regulated investments contributed 48 of EPS for the year.
Brian: Unfavorable variances for the year included operations and maintenance expense, which drove a <unk> <unk> negative variance for the year as expected O&M costs were approximately one 8% higher than the prior year, demonstrating the continued excellence and cost management.
Brian: And higher depreciation and interest expense due to increased infrastructure investment drove a 17.
Brian: Decrease in EPS.
Brian: Turning to slide 14, I'll provide a brief update on sales trends as I mentioned 2020 for weather normalized retail sales increased one 1%. This trend has been primarily driven by solid growth in both residential and commercial usage, including vote results that are beginning to benefit from the startup of matters data Center operations.
Brian: At a macro level the continued robust customer demand in our service areas is supported by a strong labor market as the Missouri, Kansas and Kansas City Metro area unemployment rates remain below the national average.
Brian: As referenced on the slide our 2025 below demand growth forecast contemplates a two 4% growth relative to 2024. This includes solid contributions from all customer classes and.
Brian: And reflects the resilient growth of our local economies.
Brian: We expect matter and Panasonic operations to contribute a little less than half of this 2025 total load growth.
Brian: Panasonic expecting substantial operations to begin by mid year.
Brian: As David noted in his earlier remarks, we expect weather normalized demand growth through 2029, 2% to 3% when factoring in the impact of the announced new large customers with upside potential as additional customer wins come to fruition.
Brian: Let's move to slide 15, the layout, how we expect to deliver on our previously announced 2025 EPS guidance midpoint of $4 <unk>.
Brian: Starting on the left hand side and beginning with 2024 adjusted EPS of $3 81.
Brian: We've modeled a reversion to normal weather in 2024, which would add <unk> 11 per share next we expect a 19% increase from weather normalized load growth in 2025, reflecting the $2 four increase in kilowatt hour sales.
Brian: 19, <unk>, we expect a contribution of about <unk> <unk> from the new commercial and industrial large load customers as meta and Panasonic began to come online.
Brian: <unk> and return on our regulated investments from new rates is expected to contribute 41 of EPS for the year.
Brian: Primarily related to new rates that came into effect January one related to last year's Missouri West rate case.
Brian: As well as the recovery of FERC regulated infrastructure investments.
Brian: Offsetting these improvements in earnings is an expected increase in O&M as well as the combined impact of higher depreciation and interest expense net of <unk>, which.
Brian: Which is expected to drive a 31 unfavorable impact.
Brian: Lastly, we assume four cents of drag related to our $1 4 billion of convertible debt that matures in December 2027. This reflects our assumption around share price higher than the threshold price into convertible note option, which would increase diluted shares outstanding for accounting purposes.
The impact of this dilution is reflected in our long term forecast.
Brian: As a reminder, we continue to soon to assume no common stock capital market issuances in our 2025 guidance.
Brian: In relation to the entirety of this 2025 EPS forecast. We believe this financial plan is highly achievable.
Brian: <unk> across the company are hard at work on its effective implementation, including the deploying deployment up to 2025 infrastructure investments to the benefit of our customers and communities.
Brian: Let's now turn to our updated financing plan on slide 16.
Brian: As David mentioned, our projected capital investments over the five years through 2029 now stand at $17 5 billion, which is $1 3 billion higher than the plan, we discussed in our third quarter call.
Brian: This plan now reflects the addition of 355 megawatts of our Mac, new combined cycle, which is being assigned to Missouri West along with the updated cost estimates for our mall and Creek <unk> unit.
Brian: We plan to fund our investments prudently targeting an <unk> to debt ratio of approximately 15% throughout the forecast period.
Brian: Our strong cash flows from operations will be supplemented by the issuance of debt equity and equity content instruments.
Brian: As a result of the $1 $3 billion increase in capital investments are forecasted equity issuances across 2026 to 2029 is now forecasted to be $2 8 billion.
Brian: This represents a $600 million increase over our previous forecast equal to approximately 50% of the capital investment increase which.
Brian: Which is consistent with the approach we described on our third quarter call.
Brian: As stated earlier, the EPS and financing plan, we are sharing with you today only includes load growth expectations from the first set of large customer additions.
Brian: We are optimistic that our equity needs will be lower for this for the $17 5 billion to our capital plan. If additional large customers begin to come online by 2028, which has previously discussed is becoming increasingly likely.
Brian: In short our customer pipeline has the potential to not only increase <unk> earnings power, but it would also provide a substantial benefit to operating cash flow, allowing us to moderate equity issuances in the future.
Speaker Change: As I stated earlier, our 2025 guidance does not contemplate new equity issuances. This year that being said you may soon see a setup the structure to begin to address our future equity needs. This could include an ATM program and equity distribution agreement of up to $1 2 billion.
Speaker Change: Representing <unk> and half of our five year need MSI is roughly equivalent to our expected issuances in 2006 and 2027 combined.
Speaker Change: We would expect any activity in 2025 under such a program to settle no earlier than 2026.
Speaker Change: These steps will allow us to be nimble in our approach to accessing the capital markets.
Speaker Change: And one last reminder, on equity, while we have conservatively forecasted common stock as a form of equity to be issued we will continue to evaluate other forms of equity content instruments as we execute on the plan in the years ahead.
Speaker Change: I'll close on slide 17, with a recap of our financial expectations.
Speaker Change: We are reaffirming our 2025 of adjusted EPS guidance range at $1.
Speaker Change: 92.
Speaker Change: To $4 12 per share.
Speaker Change: From the baseline midpoint of $4 <unk> in 2025, we expect to grow in the top half of our 4% to 6% adjusted EBITDA EPS target range through 2029 was tailwind student plan, including potential additional wins from our large customer pipeline.
Speaker Change: Our updated five year capital plan for 2025 through 2029 totaled $17 5 billion.
Speaker Change: Allowing us to build the infrastructure for a resilient and reliable grid with capacity for strong economic development in Kansas and Missouri.
Speaker Change: Our rate base growth trends upward throughout the five year period with average rate base growth of approximately eight 5% from 2024 to 2029.
Speaker Change: This is the plan on which we have high confidence our employees are focused on consistent execution of our customer operational and financial goals as we advance our strategic objectives of ensuring affordability and reliability and driving a sustainable business model for the long term prosperity of our customers and communities.
Speaker Change: Thank you for joining us today, we will now open the line for your questions.
Speaker Change: Thank you Brian at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Speaker Change: Please standby, while we compile the Q&A roster.
Shar: First question comes from the line of Shar <unk> with Guggenheim Partners Go ahead. Your line is open.
Speaker Change: Hey, guys good morning.
Speaker Change: Good morning, Good morning, Good morning, David.
David: Obviously really good update.
David: What's the timeline for these one six gigs of finalizing agreements and then just more broadly what is the podium for revisiting the growth rate is that the quarterly update later this year wait until the next for Q just any more color on how all of this is interacting with your thoughts on updating the street, just maybe elaborate a little bit on the <unk>.
David: Repaired.
David: Sure.
Thank you Shar, so with respect to the.
David: Pipeline, we wanted to provide a bit of detail around how it breaks down, which obviously would reflect on slide seven.
David: These discussions are advancing well and we filed our large load power tariff.
David: Earlier this month in both states.
Large customers over time, we have seen many customers there and as is the case with those who are actively building many of them are advancing their work advancing our plans while the tariffs are being finalized in parallel it's actually pretty common we saw it settling with Panasonic.
David: Ever.
David: Part of that facility, it's an amazing incredible facility and much of that was felt from the tariff were done so we expect announcements.
David: Later, this year where are tracking for that.
David: We're working with our Counterparties on that and what the way we've approached things in terms of when we are incorporating into our guidance are.
David: I know theres a range of approaches of our peer utilities, but we thought it made the most sense to include it once our customers have made their announcements so.
David: We're not specifying when exactly risk quarterly call that will be.
David: Because it will depend a little bit on the customer activity, we do expect.
David: These agreements to be finalized over the course of the year.
David: Typically we give updates on our plan in the third quarter call and then Theres often refreshes of our year end call.
David: So it could be that timeline, but obviously we will.
David: Be nimble based on when we finalize the agreements with the customers.
David: That makes sense.
David: No it totally does and I appreciate the conservative stance.
David: Just on the <unk> in Kansas, We just saw the commission reject the cap structure legal analysis request I guess, what does the next for the what's next step for the cap structure or is it going to go through the normal testimony process.
David: More importantly, this is something you want to get finality on or could we see it wrapped up in another settlement like last time. Thanks.
David: It's a good question shar, thanks for raising that so I would characterize the proceeding.
David: Really it was a procedural step that we took back asking whether the capital structure issue could be considered on a purely legal grounds.
David: The commission ultimately decided that from a procedural basis are posing a substantive issues they want to address it in the body of the rate case, which we think is fine and does the typical place where it is addressed.
David: We are glad to be able to advance the legal arguments because a lot of the issues here are more legal in nature, but there are substantive issue. So we look forward to addressing them with staff and the parties in the rate case.
David: With respect to resolution.
David: We typically like most parties really drive towards trying to seek a constructive settlement, we were able to reset last time around so I would expect that that will be our focus is whether we can get a constructive settlement. This time around and that'll be one of the important issue that we addressed as part of that as part of the settlement, but we will be seeking us out here.
Speaker Change: Got it that's perfect congrats to you and Mr. Butler I appreciate it.
Speaker Change: Thank you sure. Thanks Shar.
Speaker Change: Standby for our next question.
Speaker Change: The next question comes from the line of Julien Dumoulin Smith sorry.
Speaker Change: Alright, Julian Smith. Please go ahead your line is open.
Speaker Change: Hey, good morning team, congratulations really nicely done guys seriously.
Speaker Change: With that said, obviously you gave some sense of timeline here, but how do you think about the timeline to develop that associated generation.
Speaker Change: You, specifically cognos slides here 26 to 29 as you think about serving that need some of those potentially going to be co located and there'll be self served by the potential client or is this something potentially you think along the lines of short term ppas just thinking through how this could filter into the capex from a timing risk.
Speaker Change: Active as you think about that generation Belden correspondingly, how do you think about that tariff.
Speaker Change: Filing too just given how compressed the potential demand.
Speaker Change: Is here.
Julien: So Julien I think we.
Speaker Change: We really have.
Speaker Change: I've been thoughtful on how we have advanced our <unk> relative to the loads have been announced so.
Speaker Change: <unk>.
Speaker Change: And for the customers who are in the actively building and finalizing agreements categories. We think we got a good plan to serve them from both the transmission and generation perspective.
Speaker Change: As we advance additional customers.
Speaker Change: Yes, we will need to make sure. We've got we're working in tandem with the generation plans are for those as we discussed.
Speaker Change: On our call.
Speaker Change: In the third quarter.
Speaker Change: The forward capital plan at that time.
Speaker Change: Did not include about 1000 megawatts of generation.
Speaker Change: In our 2020 for IOP of gas generation those are the CCT coming online in 2031 in <unk> in 2032.
Speaker Change: So as we advance we need to be factoring those in our plans, we did add though and this.
Speaker Change: Update 50% of the CCT Thats coming online in 2030, so that is part of the forward capital plans. So we do think that we've got.
Speaker Change: The game plan now that transmission generation capacity to serve the customers in this category, but it's a set of dynamic discussions and youre, absolutely right and I laid out some of the customers.
Speaker Change: Have in particular renewable generation options are bringing the table to the extent those are solar or involve store storage. They bring more capacity than if it's only wind. So that's part of the dynamic in the discussions you have with various counterparties and some have that some don't but.
Speaker Change: But we are developing a transmission and generation plan to be able to serve that load.
And we're excited about it and it's obviously an integrated set of discussions that got it that has to consider all of those factors.
Speaker Change: On the tariff I think we're on a good schedule. So while the procedural schedule has been finalized we do expect those resolved in the third quarter, we've had good discussions with.
Our counterparties in advance of and in tandem with those filings and then some of.
Speaker Change: I have it as well so of course those will be involved process, but we think we've got a good framework for approaching nose and from what I've read of other states I think it's pretty similar it's got the <unk>.
Speaker Change: <unk> set of protections you'd want to look for for our existing customers because I think there's a real win win here.
Speaker Change: For both existing and new customers and for the company.
Speaker Change: Excellent just a quick clarification there in terms of IRB would you be going back and amending that and then subsequently going out with some sort of new procurement effort here.
Speaker Change: In terms of process on that front, yes, so I think you've probably seen with a number of our peers as well.
Speaker Change: <unk> are a little more dynamic than they might have been back in the day. When you can do triennial filings with modest annual updates we have a regularly scheduled update to our ERP.
Speaker Change: Build in March and April So you can expect that to incorporate the changes that we think makes sense.
Speaker Change: There's mechanisms through updates on an interim basis, but our next IOP filings.
Speaker Change: Our in March and April and are two states. So you can expect it doesn't reflect the latest view of our expectations and to extent there is additional generation capacity on a timeline that requires actions sooner rather than later youll see associated action with that we were happy with.
Speaker Change: As you May recall Julien when we initially had cct's in our integrated resource plans for example, or is it a time when.
Speaker Change: Many companies, we're still more focused on <unk> I think we've.
Speaker Change: Our team has advanced the ERP and thoughtful about staying locked step with what we expect from a DRAM perspective, so it's a very dynamic environment, but we have that integrated long term planning viewers. We have these discussions.
Speaker Change: Awesome guys Congrats again.
John: Thanks, John Thank.
Speaker Change: Thank you our next.
Speaker Change: Question.
<unk> Chopra: The next question comes from the line of <unk> Chopra with Evercore ISI go ahead. Your line is open.
Chopra: Hey, Deane good morning, Thanks for giving me time.
<unk> Chopra: Julian.
Speaker Change: Hey, Good morning, David David I wanted to continue the discussion on the large low tariff.
Speaker Change: Can you share some additional color you mentioned protections for existing customers.
Speaker Change: Customers, maybe just compare and contrast.
Speaker Change: That tariff do what is in place today, what protections are you seeking just little more color would be helpful. There. Thank you sure.
Speaker Change: So great question. So we're really trying to get a well balanced tariff that is designed to cover the incremental cost to serve the customers.
Speaker Change: And in consideration of the fixed cost of the system.
Speaker Change: So that was set up as a win win for the for the existing customers as well now that various protections that we've teed up and these will be subject to the discretion of course, but they're pretty consistent.
Speaker Change: And we've obviously been looking at to see what has been happening on the jurisdiction. So that kind of protection that we're talking about our minimum bill requirements.
Speaker Change: Contract period, our filing references 15 years, a lot of those you see typically in the 10 to 20 year timeframe, but so our contract period and exit fees and protections like that.
Speaker Change: In general in speaking with our big customers. They are interested in knowing that we have the capacity to serve them.
Speaker Change: I want to move quickly and they want to have a clear framework as well. So we think we've.
Speaker Change: Got to set up their prevents that presents a well balanced framework for existing and for the new customers.
Speaker Change: That's very helpful and teams consistent.
Speaker Change: With some of the other filings we have seen in other states.
Speaker Change: Okay, and then just a quick follow up would you need sort of the Green light from the commission on these tariffs before you announce something as it relates to the one <unk>.
Speaker Change: Fixed gigawatt opportunity or are those two independent paths.
Speaker Change: It's a great. It's a great question. So for example, we've had some large customers in the past including.
Speaker Change: An example would be Panasonic or others, who have announced and started building I haven't got an oil down the path with the tariffs are renegotiated in parallel some of their customers want to wait and have more clarity, it's actually not uncommon to have a lot of activity underway. While the tariffs are advancing because theres a lot of there's a pretty clear framework for out goes so.
Speaker Change: We haven't.
Speaker Change: We'll see when the timeline is for making the announcements, but it's not dependent.
Speaker Change: Any cases on actually having the terra finalized and we've certainly seen that in our history, including our recent history.
Speaker Change: Very clear okay. Thank you so much again.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: The next question comes from the line of Michael Sullivan with Wolfe. Please go ahead. Your line is open.
Michael Sullivan: Hey, good morning.
Michael Sullivan: Good morning, Michael Good morning, Hey, Hey, Dave anything Brian wanted to start with.
Speaker Change: SB four in Missouri, I think you referred to as potentially transformative can you maybe just give a sense of.
Speaker Change: Timeline for that to get passed in likelihood there and then also if it does what it actually means for your plan.
Speaker Change: So I think the law.
Speaker Change: This was there was a tremendous week for the legislation this week and reflected a ton of hard work. So really appreciate the leadership of the commission.
Speaker Change: And a lot of players and advancing at the legislative leaders involved because often in Missouri as you know Michael Youre soon to the state.
Speaker Change: Getting through the Senate is a very involved exercise because theres, a significant filibuster rules or otherwise so it's.
Speaker Change: Clearing the Senate is often the most significant step to get through in Missouri now has to get approved in the house, but it's it's was passed and fall out of the Senate and house moving out of the house for action.
Speaker Change: Governor as office, we believe is fully supportive. So obviously they are key players in the dialogue in the legislature and ultimately in signing so the legislative session wraps up by May so.
Speaker Change: We'll know pretty soon but to get through the Senate.
Speaker Change: The way it did reflects widespread support.
Speaker Change: Widespread alignment around the provisions we think it's transformative.
Speaker Change: Really the elements of how it approaches.
Speaker Change: How new generation is treated inclusion in natural gas.
Speaker Change: And PS there.
Speaker Change: The provision for the commission being able to grant <unk> for new natural gas plant investments.
Speaker Change: Creation of a new <unk>.
Speaker Change: We have a new integrated resource planning process that would allow <unk> for all forms of generation as part of that process in Missouri for 50 years, you have been able to get see with so I think the how is transformative and theres. Some other provisions of well of course, including funding for commission and <unk>.
Speaker Change: But it's transformative in the sense that it's.
Speaker Change: Really signaling and putting in place provisions that are supportive of new generation investments, helping to make sure that those are can be done in a way that is protective of the credit of.
Speaker Change: The utility with <unk>, but also.
Speaker Change: Better, enabling planning with a better or a little more certainty.
Speaker Change: So it really positions, Missouri to support infrastructure investment and help support growth. So we think it's a.
A very important bill and we're confident that it will get passed in.
We'll know in the coming months, because it's a pretty tight legislative calendar.
Speaker Change: Okay I appreciate all the thoughts there.
Speaker Change: Just back to the kind of load and supply side I know you've made a lot of comments, there and apologies if I'm just not following along right, but if we just look at.
Speaker Change: <unk>.
Speaker Change: The new builds that you are planning I think you gave a list on slide 28, how do we think about that matching up with.
Speaker Change: The economic development pipeline you show on slide seven.
Speaker Change: How much.
Speaker Change: Of the loans covered by the generation projects and currently have out there.
Speaker Change: And what about it.
Speaker Change: B to come.
Speaker Change: Following.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: I appreciate the feedback I think.
Speaker Change: Yes.
Speaker Change: Well I think it's very important and we tried to lay this out so let me talk through this in a couple of.
Speaker Change: Different lenses and Steve have covered your question. So as noted on slide seven Michael We've included approximately 500 megawatts of demand through 2029 from customers, who we get are categorized in the actively building category.
Speaker Change: Now if you add in the finalizing agreements category to that amount.
Speaker Change: It's a total of about two four gigawatts of the pipeline.
Speaker Change: We've received estimates for <unk>.
Speaker Change: From these customers in total.
Speaker Change: Net expect.
Speaker Change: Low to ramp up to about $1. One gigawatts by the end of 2029, So thats 500 megawatts from the activity building 600 megawatts from the finalizing agreements category. So it's about $1 one gigawatts by the end of 'twenty nine.
Speaker Change: We've only included the 500 megawatts in that 2% to 3% load forecast. So obviously it would be additive if we got up at one one gigawatts by the end of 2021.
Speaker Change: We believe that we've got we've done.
Speaker Change: Done a lot of analysis, so that we expect to have a transmission and generation capacity to serve that load by that timeline.
Speaker Change: And of course, the remainder of the.
Speaker Change: Load ramp.
Speaker Change: Would be in the.
Speaker Change: 2030, and nearly 2000 thirty's.
Speaker Change: Both of our existing ERP and the ERP that we're going to file in March and April lay out the solutions, we have to serve those customers and again, we think we've got good line of sight for how we're going to serve them as I mentioned and what our capital plan does not yet include is the <unk> in 2031 in the <unk> in 2032, as we added an additional cuts.
Speaker Change: I think you would expect.
Speaker Change: To see those plants be add to the mix and of course, we'll have an IRB update in March and April and May have some further refinements, but that's how I'd describe it in terms of the timing of the ramp rate and the incremental generation requirements because of the 'twenty, one and 2032 plants that I mentioned about 1000 gigawatts of gas helping that.
Speaker Change: Ramp rate in the early 2000 <unk>.
Speaker Change: Okay.
Speaker Change: Okay. Thanks, Thanks for holding my answering accurately helpful.
Michael Sullivan: Thank you Mike.
Speaker Change: Okay.
Speaker Change: The next question comes from the line of Travis Miller with Morningstar Go ahead. Your line is open.
Speaker Change: Good morning, Thank you.
Speaker Change: Good morning.
Speaker Change: Just another clarification here marrying kind of slide six and seven so that that 800 megawatts of actively building does that correspond to the 800 megawatts.
Speaker Change: On slide six or is there some mixing and matching.
Speaker Change: They're.
Speaker Change: I'm trying to.
Speaker Change: I understand exactly whats in that 800 megawatts of actively building.
Speaker Change: Yes, so active 800 megawatts of act. We building is the 800 megawatts at prescribed on slide six so it's the three.
Speaker Change: Google Panasonic in meta as well as two additional data centers.
Speaker Change: That are comprised of that category. So that's that sort of tap top bar. The actively building category shown on slide seven and I know theres, a confusing timing element of that too. It's about 500 megawatts out of that 800, we expect.
Speaker Change: To be.
Speaker Change: So they are full load.
Speaker Change: In 2029, they haven't ramped up fully up to 800 megawatts in that 500 megawatts and are included in the demand forecast for 2029.
Speaker Change: Okay, great. So the 300 delta would be beyond 2029.
Speaker Change: Exactly right, yes, they are ramping up over time, and we just have to load forecast that we've only done a five year forecast. So you got it exactly right.
Speaker Change: Okay very good thanks, and then higher level.
Speaker Change: To your peers.
Speaker Change: They used to view, let's say areas thinking about a genco type of structure, where they again like <unk> like <unk> been talking about two very specific large load contracts.
Speaker Change: Some of the generation into a separate entity are regulated.
Speaker Change: Is your thought in terms of maybe a different or additional corporate.
Speaker Change: Type structure, all regulated or maybe not regulated.
Speaker Change: To handle some of the large investment.
Speaker Change: At some level I think I should respond by upsizing the size of the pipeline that we have in the large load opportunities for all of the companies in the U S are leading to more creativity.
Speaker Change: And I think a lot of that makes sense, you'll see in our largely power tariff for example.
Speaker Change: Have provisions that could accommodate a folks bring their own renewable generation because that is.
Speaker Change: Relatively comment that some of the larger companies that have direct relationships with renewable developers even own some on their own bring some generation there.
Speaker Change: It's been less comment historically to bring dispatch flow generation, but we certainly seen.
Speaker Change: Different approaches in different places.
Speaker Change: How you would bring dispatch will generation like gas.
Speaker Change: So, particularly as you go deeper into the pipeline Thats, certainly something we could consider whether it be a genco type structure, I mean, who knows I won't comment or speculate on what.
Speaker Change: What's the structure might be but.
Speaker Change: The size of the growth opportunities will likely result in some creativity and I think still unexplored are still untapped potential maybe some kind of.
Speaker Change: The demand response or load flexibility elements are leveraging backup generation at some of these players have so the various elements that.
Speaker Change: From a more traditional approach of.
Speaker Change: Leveraging renewable generation they may bring I think those elements could be part, particularly part of the solution, particularly as you go deeper and deeper into the pipeline.
Speaker Change: On the specific question, we have not announced nor are we.
Speaker Change: Currently advancing that we'd said anything about plans around the genco type infrastructure.
Speaker Change: Okay, Great no that's very helpful. I appreciate the thoughts.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: The next question comes from the line of Nicholas Campanella with Barclays. Go ahead. Your line is open.
Nicholas Campanella: Hey, good morning.
Speaker Change: All right.
Speaker Change: Good morning, So just the comment for equity Brian just that it doesn't include CFO from finalizing some of these agreements that we've been talking about just.
Speaker Change: What's the magnitude or a ratio there if you will.
Speaker Change: To bring one 500 megawatt customer.
Speaker Change: Online.
Speaker Change: How does that impact the equity needs is that like hundreds of millions of that figure or how would you kind of frame that thanks.
Nicholas Campanella: Yeah, Hey, Nik.
Speaker Change: Good morning, David talk about the the ramp rate if you will or this I'll call. It next set of customers.
Nicholas Campanella: On slide seven.
Nicholas Campanella: Let me make sure I guess, the exact wording right, but we're calling it and they're finalizing agreements stage.
That obviously has some really robust gigawatts of P code that will come on over time, there is a ramp right now for that second category. What we described as that could be.
Nicholas Campanella: Another 600 megawatts that could come online by 2029, So we talked about 500 megawatts for the first steps and then another.
Nicholas Campanella: 600 megawatts that could come on on premise second set by 2029, so that's pretty substantial.
Nicholas Campanella: Think about our load growth today that we're projecting through 2029 is 2% to 3%.
Nicholas Campanella: If we were able to bring in.
Nicholas Campanella: That portion of the next set of customers that could take that low growth upwards to 4% four 5%. So that's pretty substantial growth with that comps.
Nicholas Campanella: Margins from serving that load of course.
Nicholas Campanella: We're probably not going to give you exact numbers yet because we want to let this play out a bad but it's it would be hundreds of millions of dollars of glass equity need.
Nicholas Campanella: Over that five year period.
Nicholas Campanella: If these will play out the way, we hope and expect them to.
Nicholas Campanella: That's very helpful.
Nicholas Campanella: And then I guess just to.
Nicholas Campanella: To tie it altogether you were already biased higher in the range.
Nicholas Campanella: And the communication I think last quarter.
Nicholas Campanella: And.
Nicholas Campanella: Now youre delivering a capex increase net of some equity.
Nicholas Campanella: And obviously you have more upside to these large load customers. So.
What are we missing in the math or like the offset that we should kind of be contemplating on why you wouldn't be kind of above.
Nicholas Campanella: The 6% growth rate here, if everything kind of comes to fruition. Thanks.
Speaker Change: Thanks, Greg I guess I'll take that one so.
Speaker Change: As we described we're going to layer in the impacts of.
Speaker Change: Incremental customer announcements once those are made so we have not included those those will be additive to the plan.
Speaker Change: We have increased Capex is primarily in the out years of the plan, but that will over time.
Speaker Change: The higher capital and most of it's related to adding this to 50% share of the CCT, which comes on line.
Speaker Change: By 2030.
Speaker Change: Over time, you'll see those impacts flowing through so I think it's really just a matter of.
When we tried to be very clear that as we get the incremental customer announcements.
Speaker Change: As we advance through time.
Speaker Change: We will provide updates on what that growth rate. So we're very confident in the current plan and we see some really nice tailwind behind them, but we're trying to take a systematic approach as we see those cuts investments will layer in what the impact is in the plan.
Speaker Change: Okay, that's great have a great day.
Speaker Change: Thank you. Thank you.
Speaker Change: This concludes our question and answer session I would now like to turn it back to David Campbell for closing remarks.
David Campbell: Thank you Joe and thank you everyone for your time and interest in <unk> have a great day that concludes the call.
David Campbell: Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.
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