Q3 2025 Evergy Inc Earnings Call

Speaker #2: Good morning and welcome to Evergy's . Third quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .

Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .

Speaker #2: You will then hear an automated message advising your hand is raised . To withdraw your question , please press star one . One again .

Speaker #2: Please be advised that today's conference is being recorded . I would now like to hand the conference over to Peter Flynn , Senior Director of Investor Relations and Insurance .

Speaker #2: Please go ahead .

Speaker #3: Thank you , Hailey , and good morning , everyone . Welcome to Evergy, Inc. Third Quarter 2020 Earnings Conference call . Our webcast slides and supplemental financial information are available on our Investor Relations website at investor .

Speaker #3: Today's discussion will include forward looking information . Slide two . In the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations .

Speaker #3: 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 Bryan Buckler , executive vice president and chief financial officer .

Speaker #3: We'll cover third quarter highlights and provide updates on economic development activities and our regulatory agenda . Brian will cover our third quarter results .

Speaker #3: Retail sales trends and our financial outlook . Other members of management are with us and will be available during the Q&A portion of the call .

Speaker #3: I'll now turn the call over to David .

Speaker #4: Thanks , Pete , and good morning , everyone . I will begin on slide five . This morning we reported third quarter adjusted earnings of $2.03 per share , compared to $2.02 per share a year ago .

Speaker #4: The increase over last year was driven by a recovery of regulated investments and growth in weather . Normalized demand , partially offset by higher interest and depreciation expense and dilution from convertible debt .

Speaker #4: Our year to date adjusted earnings are 3.41 per share , compared to 3.46 per share a year ago . With these results year to date , we are narrowing our 2025 adjusted EPs guidance range , which is 3.92 to 4.02 per share from our original 2020 adjusted EPs guidance range of 3.92 to 412 per share .

Speaker #4: The lower mid-point is primarily due to weather headwinds from below normal cooling degree days in the second and third quarters , which negatively impacted our results by $0.13 per share .

Speaker #4: I would like to compliment the team for implementing mitigating actions across the business , offsetting more than half of the weather headwinds . However , we have not been able to offset the full magnitude in what has otherwise been a strong year of regulatory and operational execution while advancing our strategic objectives .

Speaker #4: Our fundamental long term outlook remains very strong , bolstered by tailwinds from a generational economic development opportunity and the investment needed to enable it .

Speaker #4: Brian will discuss the quarterly drivers and our earnings outlook in more detail in his remarks . We've achieved strong operational and reliability performance through September year to date .

Speaker #4: Our generation availability , as measured by the forced outage rate as well as our overall grid reliability as measured by safety , are both favorable to target .

Speaker #4: These results demonstrate the benefits of our continued infrastructure investments and the hard work of our operations teams . I'd also like to recognize Wolf Creek as it nears completion of our 27th refueling outage , with strong safety and overall performance .

Speaker #4: Wolfe Creek generates around 1200 megawatts of non-carbon emitting energy , enough to power more than 800,000 homes . I'd like to thank everyone on our nuclear team for their hard work and focus on sustaining the excellent operational performance of the plant .

Speaker #4: I'm happy to announce a 4% increase in our quarterly dividend , or $2.78 per share , on an annualized basis . This increase is consistent with our updated growth outlook and working toward the midpoint of our 60% to 70% target payout ratio .

Speaker #4: Looking ahead , we will provide a comprehensive financial outlook update on our year end call in February . We will include refreshed views on our load forecast based on large customer impacts .

Speaker #4: Our five year capital investment plan , the related financing plan , and our long term adjusted EPs growth outlook . The five year capital plan will incorporate expected generation investments to serve load and meet Sbp's , increasing reserve margin requirements , as well as transmission and distribution projects to support reliability .

Speaker #4: As Brian will discuss with respect to the long term update , we believe there are noteworthy tailwinds to our earnings power as we advance our plans to support growth and economic development that will benefit our Kansas and Missouri customers and communities .

Speaker #4: Slide six outlines our economic development pipeline and opportunities . Over 15GW , which relative to our size , represents one of the most robust backlogs in the country , reflecting the geographic advantages of our region .

Speaker #4: The overall pipeline is strong in both Kansas and Missouri , and we are well positioned to continue to attract new businesses . Large customer interest in the energy service territory remains very strong , focusing on the top three categories of the pipeline , we outlined a 4 to 6 gigawatt opportunity of large new customer load that represents the most active part of our CU .

Speaker #4: This tier one demand represents a transformative ten year growth opportunity for Evergy, Inc. . When executed , we expect these projects will deliver significant regional benefits across our states , supporting a leading edge digital economy , creating jobs , and expanding the tax base while enabling us to spread system costs over more megawatt hours , helping to maintain affordability for all customers .

Speaker #4: We continue to work closely with tier one large low to develop and implement transmission and distribution solutions to serve their expected ramp rates over the coming year .

Speaker #4: We are confident that we will be successful in winning and serving a large portion of this CU , which would in turn transform the size and growth of our company and enhance the economic prosperity of our region .

Speaker #4: The remaining pipeline , totaling well over ten additional gigawatts , highlights the robust activity and sustained interest in Kansas and Missouri . Many customers have already secured land or land rights , finalized site plans , and are actively participating in capacity studies .

Speaker #4: While not all of this load will ultimately be addressable , the ongoing dialogue underscores the depth of engagement and the readiness of customers to step in .

Speaker #4: Should others exit the CU . Slide seven expands upon the 4 to 6 gigawatt tier one large customer load opportunity , beginning with the actively building category .

Speaker #4: I'm happy to report that last week , Lambda announced its plan to transform an unoccupied data center located in Kansas City , Missouri , into a state of the art AI factory and data center .

Speaker #4: Their facility is expected to launch in early 2026 , with 24MW of capacity , and has the potential to scale up to more than 100GW , 100MW .

Speaker #4: Excuse me , in the future . This product is a great example of a data center leveraging existing infrastructure with an ability to ramp load relatively quickly with minimal grid investment required and exemplifies why Missouri is an attractive destination for projects of all sizes .

Speaker #4: For the balance of our actively building customers , Panasonic and Meta are up and running , and our third largest customer is making good progress through its heavy construction phase , inclusive of Lambda .

Speaker #4: We now anticipate peak demand of 1.2GW from these customers , with over 500MW by 2029 , supporting our demand growth forecast of 2% to 3% .

Speaker #4: Moving to the finalizing agreements category , we remain in the final stages of negotiations with large customers for two data center projects subject to final agreements and and product announcements .

Speaker #4: We expect to see an impact on our demand growth from these customers in 2027 and 28 , and into the next decade , which would raise the overall company demand forecast to 4 to 5% load growth through 2029 .

Speaker #4: Approval of the tariffs in both states is a key next step for finalizing these negotiations . Additionally , we recently added a third data center to this category , reflecting significant progress and initial executed agreements .

Speaker #4: This project was previously in our advanced Discussions category and demonstrates the high interest from large customers in advancing their projects . We also remain in advanced discussions with multiple customers whose load would represent approximately 2 to 3 additional gigawatts of peak demand .

Speaker #4: These customers have secured land or land rights , shared site plans and in some cases , reached letters of agreement and provided financial commitments to move the evaluation forward .

Speaker #4: Load from these customers is not contemplated in our upside view of 4 to 5% annual load growth , and therefore would be incremental .

Speaker #4: Overall , we continue to see an incredible level of interest in our service territories , and we're making progress with potential new large customers across all stages of discussion .

Speaker #4: Each category represents reflects potential new entrants that will empower growth , investment and drive prosperity for our region . Now moving to slide eight .

Speaker #4: I'll touch on our latest regulatory developments . 2025 . As you know , has been a busy year for our regulatory team . And we've demonstrated considerable progress in advancing our strategic objectives .

Speaker #4: The team's results this year reflect the constructive policy framework and economic development opportunities in both states . As well as our ability to find alignment with broad groups of stakeholders and achieve constructive settlement agreements .

Speaker #4: Beginning with Kansas , we filed for and received approval of predetermination to own partial shares of two new combined cycle natural gas units and a solar farm , both are all in Kansas central .

Speaker #4: These projects were identified in our Integrated Resource Plan (IRP), preferred plan, and reflect our all-of-the-above approach to meeting growing customer demand and higher capacity margin requirements in the Service Voltage Profile (SVP). The Kansas Corporation Commission issued an order approving a unanimous settlement agreement for the Kansas Central Rate Case on September 25th.

Speaker #4: The settlement achieved a balanced outcome for all parties , including adequate recovery for the investments needed to provide reliable and affordable electric service .

Speaker #4: A key open agenda item in Kansas is unanimous settlement agreement . We filed in our large load power service tariff docket on August 18th .

Speaker #4: The proposed tariff applies to customers with demand exceeding 75MW and establishes a rate structure with a focus on large customers paying their fair share and being subject to additional protections that will describe later in my remarks .

Speaker #4: We believe the LPs establishes a competitive rate and positions Evergy to attract and serve large new loads , enabling growth and prosperity for our communities .

Speaker #4: We anticipate an order from the KCC on the settlement Agreement as part of the the Commission's business meeting . Later today . Pivoting to Missouri , we successfully advanced plans to construct new generating resources .

Speaker #4: The Mpsc approved settlement agreements in our CCN applications for two solar farms , partial ownership in two combined cycle natural gas units and full ownership of a simple cycle natural gas plant .

Speaker #4: We believe these projects form a cost effective package of reliable energy solutions for our customers , and this outcome demonstrates alignment with the Public Service Commission's interest in securing additional generation resources for our Missouri Utilities .

Speaker #4: Similar to Kansas , the large load Power Service tariff proceeding continues to advance in Missouri , parties filed a non-unanimous settlement agreement earlier this fall with terms similar to those filed in Kansas , including contractual protections provisions to ensure that large customers pay their fair share of system costs , and a competitive rate that supports economic development .

Speaker #4: We anticipate an order from the Mpsc by the end of the year . Last , the planning process for our upcoming Missouri metro rate case is underway , and we expect to file the case in February 2026 .

Speaker #4: Slide nine highlights legislation and regulatory mechanisms that support growth in our region and help to position Kansas and Missouri as premier destinations for infrastructure investment .

Speaker #4: To assure reliability and new advanced manufacturing facilities . Data centers and other large customers . These mechanisms are the product of broad based alignment between Evergy , the governor's Office , State legislators , our regulatory commissions and key stakeholders , as well as our shared commitment to seize on the growth opportunities ahead of us for our customers and communities .

Speaker #4: Constructive regulatory frameworks and enable that enable timely infrastructure investment to meet the needs of both existing and new customers , are critical to our success and the bills passed over the past two years in both states advance these priorities .

Speaker #4: This supportive landscape reinforces our region's position as a top destination for growth . Evergy is committed to delivering safe , affordable and reliable service to our 1.7 million customers as large new customers join our system , all stakeholders benefit from broader cost sharing and unprecedented economic development .

Speaker #4: I'll conclude my remarks with slide ten , which highlight the core tenets of our strategy . I'll focus specifically on affordability . Since the merger that created Evergy , we have achieved tremendous progress in affordability and regional competitiveness , driven by significant reductions to our cost structure and investing at a slower pace than peer utilities .

Speaker #4: Over that time , our rate trajectory has remained well below regional peers and far below inflation . This required hard decisions and the full focus and dedication of everyone in our company .

Speaker #4: I'm very proud of the results that this action , that these activities enable us to deliver for all of our customers . It is critical that we sustain this momentum as we enter a new era of growth and demand and economic development .

Speaker #4: This new era will require the same level of dedication and focus from our company . And that's exactly what we intend to deliver .

Speaker #4: As part of that focus, we will continue to invest in infrastructure and operate our business in a way that maintains reliability and benefits all of our communities.

Speaker #4: Higher levels of investment to serve new , large customers must be fairly borne by those customers . And we designed our large load power service tariffs exactly that .

Speaker #4: Under the proposed tariff , new large customers will pay a higher rate than that paid by our existing large customers . As a result , the revenues from new customers will directly mitigate future rate increases for our existing customers as we able to spread the fixed costs of our system over a broader base .

Speaker #4: In short, new large customers will pay a reasonable premium to the cost to serve them, while also maintaining a competitive rate overall.

Speaker #4: Customers will benefit from a to do grid and new , highly efficient generation resources . The tariffs are also designed with key safeguards in place .

Speaker #4: These include , among others , customer commitments of 12 to 17 year terms and 80% minimum monthly bill requirement . Exit fees . Upon early termination and collateral posting .

Speaker #4: It's important to note that this tariff structure is consistent with the intent of our large new customers to be good stewards as part of our Kansas and Missouri communities and the dockets they were active participants throughout the process and along with many other stakeholders , contributed to and signed on to the settlement agreements .

Speaker #4: As I noted earlier , these agreements are currently pending approval by the Kansas Corporation Commission and Missouri Public Service Commission with the KCS decision expected later today .

Speaker #4: Collaboration with large customers does not stop at paying their fair share . Their products will create construction jobs , permanent jobs and expanded property tax base and community development benefits .

Speaker #4: As an example , one of our customers announced it will bring its skilled trades and readiness , or star program , to the Kansas City area .

Speaker #4: The company is collaborating with Missouri Works Initiative and the Urban League to help increase the entry level pipeline and skilled trades , with a focus on underrepresented communities .

Speaker #4: All star pre programs are paid training programs and offer networking opportunities to help participants move directly into employment on local construction projects . We hope and expect this example will be just one of many .

Speaker #4: The vitality of our region has made it an attractive destination for advanced manufacturing and data center customers , and their investments , in turn , have tremendous potential to drive a virtuous cycle of growth and prosperity in Kansas and Missouri for years to come .

Speaker #4: I will now turn the call over to Brian .

Speaker #5: Thank you . David . Thank you Pete . And good morning , everyone . Let's begin on slide 12 with a review of our results for the quarter .

Speaker #5: For the third quarter of 2025 , Evergy delivered adjusted earnings of $475 million , or $2.03 per share , compared to $465 million , or $2.02 per share , in the third quarter of 2020 .

Speaker #5: For . As shown on the slide from left to right , the year over year drivers are as follows . First , a 2% increase in weather normalized demand growth drove the majority of the increase of $0.06 per share in the margin shown on the slide and recovery of and return on regulated investments contributed an additional $0.11 of EPs .

Speaker #5: Offsetting these favorable drivers or higher depreciation and interest expense related to our infrastructure investments , leading to a seven cent decrease in EPs and dilution from our convertible notes led to a three cent decrease for the quarter .

Speaker #5: Turning to slide 13 . I'll provide more detail on our sales trends . On the left hand side of the page , you'll see weather normalized , demand increased by 2% in the third quarter as compared to last year , following the 1.4% year over year increase .

Speaker #5: We experienced in the second quarter . This continued strong momentum was driven by increases in both residential and commercial usage , including load from the meta data center in Missouri that is reflected in our commercial customer class at a macro level , the continued robust customer demand in our service areas is supported by a strong labor market .

Speaker #5: As the Missouri , Kansas , and Kansas City metro area unemployment rates remain below the national average of 4.3% . Moving to slide 14 , I'll provide some further detail on our expectations for full year 2025 results .

Speaker #5: As David mentioned , we are narrowing our guidance range to $3.92 to $4.02 as compared to the original guidance range of $3.92 to $4.12 .

Speaker #5: Our mitigation efforts of approximately $0.10 of EPs benefit are expected to offset a substantial portion of the $0.13 of headwinds experienced by below normal cooling degree days in the second and third quarters .

Speaker #5: In addition , we now anticipate an incremental $0.02 of dilution related to our convertible notes . Given our recent strong stock performance , we have forecasted incremental dilution from the convertible notes in our 2026 EPs modeling and continue to expect to achieve the top half of 4 to 6% growth in EPs in 2026 off of the midpoint of our 2025 original guidance range .

Speaker #5: As I'll discuss shortly , Evergy's fundamental long term outlook remains stronger than it has been in decades , bolstered by tailwinds from a generational economic development opportunity and an investment needed to enable it , which will benefit all future years in our financial plan .

Speaker #5: Slide 15 outlines a recap of our long term financial expectations and considerations for our comprehensive growth update . We will share with you during our fourth quarter call in February .

Speaker #5: First , we highlight our tier one customer opportunity of 4 to 6GW of peak load . As a reminder , our current five year plan incorporates load growth of 2 to 3% annually through 2029 , reflecting solid growth in our current customer base and buoyed by the Panasonic , Meta and Google projects .

Speaker #5: This load growth expectation is further bolstered by rapid development data centers such as DeLand facility , discussed by David earlier , which is able to scale more quickly , more quickly than the Mega data centers via the use of existing buildings and existing electric infrastructure .

Speaker #5: Also , we are nearing final agreements with two data center customers that could drive an incremental 600MW by 2029 , which would raise our load growth forecast substantially to 4 to 5% on a kegger basis through 2029 .

Speaker #5: We've also made great progress with customers in the advanced discussions category , which represents a 2 to 3 gigawatt opportunity , driving even more load growth toward the back half of our five year plan .

Speaker #5: We certainly believe we have one of the most compelling customer growth opportunities in the entire industry that we expect will drive robust growth , not just in our five year forecast , but into the next decade .

Speaker #5: For Evergy and for the communities we serve . Next , I'll discuss our capital expenditure and rate base growth forecast , the foundational earnings power of the company will be fortified by our capital investment program , our levels of infrastructure investment are needed for grid modernization and incremental generation capacity to support expansion of our existing customer base and new large load customers .

Speaker #5: These are tailwinds to our current $17.5 billion capital plan , and corresponding 8.5% rate base growth through 2029 . On the regulatory front , to maintain the credit profile of our utilities and to incorporate the affordability benefits of large loads , which allow us to spread system costs over a broader base , we plan to be on a somewhat regular cadence of rate case proceedings with a large infrastructure plan comes regulatory lag , and over the past couple of years , the states in which we operate have taken proactive steps to help utilities better manage elevated depreciation and interest expense through the use of plant and service accounting mechanisms .

Speaker #5: We also utilize natural gas sealift provisions in both Kansas and Missouri . These constructed mechanisms help to reinforce our solid credit profile during this phase of significant infrastructure build out .

Speaker #5: We will utilize equity and equity content financing options to fund a portion of our capital requirements and to support our strong investment grade credit rating and FFO to debt threshold of 14% .

Speaker #5: It is important for you all to know that we will continually evaluate the overall level of equity funding needs , recognizing that large load customers in our pipeline could significantly improve our cash flows from operations beginning in 2026 and accelerating throughout the next several years .

Speaker #5: Thus , there is a real opportunity to moderate our equity needs for the current $17.5 billion capital investment plan . Now , our company can only be successful when our communities thrive and we maintain affordability for our customers .

Speaker #5: We are committed to staying laser focused throughout the years ahead on affordability for our current customers , and we believe our long term plan will be successful in doing so .

Speaker #5: As we look to roll out our updated five year plan in February , I'll mention again the many tailwinds to our current adjusted EPs growth .

Speaker #5: Growth outlook , and a transformational opportunity for us here at Evergy . We're excited for what's to come and look forward to sharing details with you on our year end call .

Speaker #5: And with that , we will open up the call for your questions .

Speaker #2: Thank you . At this time , we will conduct the question and answer session . As a reminder to ask a question , you will need to press star one one on your telephone and wait for your name to be announced .

Speaker #2: To draw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question comes from the line of Paul Zimbardo from Jefferies .

Speaker #2: Your line is now open .

Speaker #6: Hi . Good morning team . Thank you very much .

Speaker #4: Morning .

Speaker #5: Morning , Paul .

Speaker #6: And thank you for the time . The first one I wanted to touch on , just as we think about 2026 and Missouri legislative session .

Speaker #6: Obviously, there's been a lot of progress in recent years for all the different flavors of utilities. Do you have any priorities or anticipate efforts for 2026?

Speaker #6: And could this influence the rate case cadence ?

Speaker #4: You know , Paul , we were really pleased to work closely with many stakeholders last year in Missouri . It had a list .

Speaker #4: Obviously , the commission chair , Hahn , the governor's office , legislative leadership , the utilities of key stakeholders . So there's a lot of progress made in before a lot of next year will be around implementing and following through on the elements of Sb4 and related Rulemakings .

Speaker #4: So I don't anticipate there's , you know , I always talk with the team . We always talk with the team about ways that we continue to advance constructive mechanisms .

Speaker #4: But after such a busy year and such consequential legislation last year , I think it might be a little lighter . Calendar . In 2026 .

Speaker #4: But important steps . Excuse me to undertake to advance forward on the constructive mechanisms on sb4 .

Speaker #6: Okay , understood . Thank you very much . And then obviously you've got the big refresh coming ahead . Just to maybe a little bit of a sneak peek .

Speaker #6: Not so much on the numbers , but even just the cadence in the current plan , it's slower up front . And then accelerates with whatever .

Speaker #6: To the extent you do change the growth rate , should we think about that as kind of a linear profile or also accelerating as you move towards the end of the decade ?

Speaker #4: It's hard to answer that question without getting into what will be in our year end update . So , you know , I think that Brian did a nice job of describing the multiple tailwinds that are make us so excited about the prospects for growth in our region and all that's going to bring for our customers and communities .

Speaker #4: And that's both the low growth element and the investments needed to make sure that we can serve that load and meet Sbp's higher reserve margin requirements and the beneficial impacts it can have on the financing plan .

Speaker #4: So the our prior capital plan , we laid that out by year . We'll lay it out by year in our upcoming capital plan .

Speaker #4: There's obviously a significant amount of investment . You can see what that is by year . But there's also low growth that helps to mitigate any regulatory lag .

Speaker #4: So you know , we're really excited about the tailwinds around it . And I won't get ahead around the profile . I think Brian did describe for 2026 itself , we got we're reaffirming our confidence in the top half of 26 .

Speaker #4: And then we'll be talking about the how those tailwinds manifest themselves in the upgraded , updated set of an updated financial plan that will outline the year in column .

Speaker #6: Okay , I understand . Thank you . I had to try .

Speaker #7: Yep . We're we're excited Paul , as you know because .

Speaker #4: It's we're excited because of the benefit is going to bring to our to our region our customers and communities . And it's it's a comprehensive set of factors that are driving that excitement .

Speaker #6: Absolutely. Thank you, team.

Speaker #4: Thank you .

Speaker #2: Thank you . Our next question comes from the line of Travis Miller from Morningstar . Line is now open .

Speaker #8: Good morning . Thank you .

Speaker #5: Good morning .

Speaker #8: It seems like Kansas and Missouri have been working pretty well together here over the last few years . Wondering within your service territory how much competition is there at the local level in terms of attracting some of these large loads ?

Speaker #8: I got to think just the way all states work , that there might be some competition here , either legislatively , politically local to try to get some of this economic development .

Speaker #8: Is that happening there ?

Speaker #4: That's a that's a great question . It's and as a person , I'm now nearly five years in the this region . And I've been very impressed .

Speaker #4: And of course our service territory extends over to central Kansas and Wichita . So we're it's much broader than just Kansas City area .

Speaker #4: And there are parts of the states that are more distant from the state line . But if ask the question narrowly about our region .

Speaker #4: I'm vice chair of a group called the Kansas City Area Development Council . It represents counties on both sides of the state line , extending all the way from Topeka to Kansas City and eastward to northward and southward .

Speaker #4: So it's in it's a collaborative approach . There's actually been legislative truces in the past to mitigate potential poaching of it might go on across state lines .

Speaker #4: So they really do a nice job of collaborating . The , you know , in the great state of Texas , I live 250 miles from the state lines , and I was reasonably close to them here .

Speaker #4: I'm a quarter mile from the state line , and it's the collaboration that that happens when you've got that kind of seamless integration .

Speaker #4: I've been very impressed to see I've got an older brother . There are times when within a family you might have dynamics and that can happen , but in general , the teamwork is strong and the collaboration side .

Speaker #8: Okay , okay , well we'll hear more family stories later on .

Speaker #4: Indeed , they often involve sports .

Speaker #8: Yeah . And then other question in terms of that 17.5 billion CapEx with assuming that you get the large low tariff there , you've got you'll have that , you'll have the pizza , the quip , how much of that ?

Speaker #8: 17.5 would actually be subject to a typical rate case filing , right . Essentially , how much of that can you recover without going through a regular rate case , as you call it a cadence of base rate cases ?

Speaker #4: Yeah . So there's ultimately all of our investments are subject to reviews of to make sure they're prudent and reasonable . There's a set of different mechanisms that help to mitigate the cash regulatory lag .

Speaker #4: You know , with Pisa in both states , that mitigates the earnings lag . But , you know , we've got riders in place in both states .

Speaker #4: They go all the way from property taxes to pension to other elements . And the quip will help with our new natural gas plants .

Speaker #4: We lay out the different parts of our capital plan . And in the appendix . So the the new generation component is shown .

Speaker #4: I think it's on slide 21 . So that could give you a good measure for what which pieces of the capital plan are in .

Speaker #4: The more traditional category versus what's in the new generation category ? The mechanism is slightly different between Kansas and Missouri , but in both states we were pleased to get that those provisions introduced it was in Kansas in 24 and Missouri and 25 , reflecting the support in both states for building new natural gas generation .

Speaker #4: And recognizing that , hey , that with the investment programs of that size is important to have some against the lag . So that's out of our total capital plan .

Speaker #4: You'll see that new generation is about a third and two thirds is in the traditional categories grid modernization , ensuring reliability , keeping the lights on and providing great service to our customers .

Speaker #8: Okay , that makes sense . So then the the other one transmission would be obviously Ferc . So pull that out . So it would be the the three buckets of potential base rate would be legacy generation distribution in general .

Speaker #4: Yeah . And most of our transmission in Kansas side , you've got that right .

Speaker #8: Yep . Okay . Very good . That's all ahead . Thanks .

Speaker #4: Thank you .

Speaker #2: Thank you . Our next question comes from the line of Nicholas Nicholas Carpinella from Barclays . Your line is now open .

Speaker #9: Hey , everybody , it's actually Nathan Richardson on for Nick .

Speaker #4: Good morning Nathan .

Speaker #9: Good morning . I just have a quick one for you . So I was wondering if you could talk a little bit about third data center .

Speaker #9: You mentioned and and given the 4 to 5% sales growth guidance , I was wondering how impactful that third data center specifically could be in moving the needle for the sales growth .

Speaker #4: You know , Nathan , that's a great question , and I'm glad you asked it . So the as you know , we've included our financial plan that we provided last year or 2 to 3% annual growth , but we have quantified that the the two customers in the actively billing category have potential to raise that annual growth to 4 to 5% .

Speaker #4: The addition of the third , I'm sorry , the the addition of the third customer . And this is in the finalizing agreements category , and I'm mixing up the categories so that 2 to 3% load growth is from the actively building category .

Speaker #4: The potential to go to 4 to 5% is from the first two customers in the finalizing agreements category . You're absolutely right . That third data center customer we've now added the finalizing agreements category would be additive to the 4 to 5% .

Speaker #4: As with the customers in the advanced discussions category . So thank you for that clarification .

Speaker #9: Is there any any quantification there or just that it's incremental ?

Speaker #4: No . You know , the bulk of that we expect would be , you know , post 2029 . But we've not quantified it .

Speaker #4: But that will be part of our obviously updating the year end call with the overall view is on load growth tailwinds . We added it to the category of finalizing givens .

Speaker #4: Just the sheer amount of progress we've made with that customer in terms of advancing discussions , advancing agreements , and commitments related to those .

Speaker #4: So it's it made sense to include it in that category . We've not quantified the incremental analysis . We've just noted that it's those additional customers beyond the two that are in the final agreements category , would actually be additive to the 4 to 5% annual load growth potential .

Speaker #9: Okay . Got it . Thank you .

Speaker #4: Thank you .

Speaker #2: Thank you . Our next question comes from the line of Steve Danbury from RBC Capital Markets . Your line is now open .

Speaker #10: Hey , David . Hey , Brian . Thanks for taking my question . Good morning . Good morning . Yeah , I just had a quick one on the LPs tariff discussions .

Speaker #10: You know , given you guys have a settlement . I know it's not unanimous , but can you just talk about , like , effectively at a high level ?

Speaker #10: What's left there? What are the main sticking points, and what do you think the timeline for resolution around some of this stuff is? I'm pretty sure there's a settlement conference coming up.

Speaker #10: And then expected timeline is the end of February . But just want to hear about that . And then how that works into kind of moving some of these finalizing agreement buckets into the actively building bucket or signing ESA's associated with it .

Speaker #4: You bet . I'm glad you asked a question , because I'll clarify , because I think you may be thinking about the timeline that's occurring on a on a different side of the state in Missouri .

Speaker #4: So for us , we have two LPs proceedings . One is in Kansas . We have a unanimous settlement agreement that we signed in Kansas , and there's already been a briefing on that .

Speaker #4: And it's actually we expect a decision on that by the Kansas Corporation Commission later today . It's on the docket for today . So given that they've already had a hearing on that unanimous settlement agreement , we actually anticipate a decision in Kansas later today .

Speaker #4: And that was a unanimous agreement covering all issues, including all parties in our Missouri LPs proceeding. We did have a partial settlement.

Speaker #4: We have gone through a hearing . Not all parties were alignment on that . The structure of the settlement that included many parties , but not all , has terms that are very similar to the ones in Kansas .

Speaker #4: So it has protections . It has a rate that is higher for the LPs customers , and it's a structure that ultimately , like as we saw in Kansas , was a result of robust dialogue and included the large customers .

Speaker #4: So I think it's a competitive rate as well . We think it aligns with the governor's policy in the state and support for growth and development .

Speaker #4: And with the commission's overall focus on that . But we'll have a decision on that . We expect by the end of the year , in our case , there are other proceedings in Missouri for other utilities that are a little behind ours .

Speaker #4: We filed our first , so hopefully that makes sense with respect to the different context in Kansas .

Speaker #10: That's helpful . And so basically the the comment on the slide that talks about announcements expected after LPs tariffs are finalized to the extent the facilities are in Kansas , that could be freed up as early as tomorrow .

Speaker #10: And then we'll see when Missouri gets done , hopefully by the end of the year . Is that those are the kind of the gating items from a timeline perspective .

Speaker #11: I like your thinking .

Speaker #4: I've got some team members in the room now . I'll tell if they need to be . No , all kidding aside , yes , I think the LPs being signed is a very important enabling step .

Speaker #4: So that's and we do hope you know , Kansas has always been a little bit ahead of schedule wise . But Missouri is not far behind .

Speaker #4: So we think that the timeline sets us up well for what we know is going to be an important update in the year end call , but it's important for these customers as well .

Speaker #4: The Q is a very active one . Folks are eager to come online . A big chunk of why we have a such a big Q is because we've got customers lined up .

Speaker #4: If for any reason , and we don't see those reasons happening . There's tremendous interest in the customers who are interactively building and finalizing category .

Speaker #4: A lot of momentum . But we've got folks lined up behind them . So we believe that LPs decisions being on the timeline they are should enable us to move on the timeline .

Speaker #4: We're hoping to achieve .

Speaker #10: Okay , that's all I had . Thanks very much for the time . Appreciate it .

Speaker #4: You bet .

Speaker #5: Thank you . Thanks , Steve .

Speaker #2: Thank you . Our next question comes from line of Paul Patterson from Glenrock Associates . Your line is now open .

Speaker #12: Hey good morning .

Speaker #5: Good morning .

Speaker #12: Just on the on the financing plan and the the 2.8 billion . And I see the four , you know the the we obviously have the forward and what have you .

Speaker #12: But I'm just wondering how we should think about this . I mean you're also mentioning obviously the potential for , for which you guys mentioned earlier about the cash coming from these , these potential new agreements being finalized .

Speaker #12: How should

Speaker #12: we if you could just quantify , like how that how that how much that you think that would impact the the 2.8 and sort of , you know , the sort of timing or if you could just elaborate a little bit more on , on how we should think about the finalizing of those agreements and , and what have you .

Speaker #5: Hey , Paul , it's Brian , thanks for the question . You know , as , as a reminder for everyone , our current capital investment plan , five years is 17.5 billion in total .

Speaker #5: We believe that'll be funded in part by up to 2.8 billion of equity and equity content capital market instruments such as Jason's Junior subordinated notes .

Speaker #5: I do think it's important for you to know that we'll continually evaluate the overall level of equity funding needed , recognizing that , as you say , that energy usage from customers in our pipeline could significantly improve our cash flows from operations beginning in earnest in 2026 and then accelerating throughout the next several years .

Speaker #5: Thus , there's the real opportunity to bring that level of equity down by what I've said before . Hundreds of millions of dollars .

Speaker #5: I should also mention , you know , that we continue to see upside bias in our capital investment needs to serve our existing and expected new customers in the year ahead , which will also necessitate a somewhat balanced approach to debt and equity financing .

Speaker #5: Does that help ? Paul .

Speaker #12: Yeah , that does I mean , but but just so just to sort of clarify . So that would be something that would obviously have require more capital needs and therefore might be an offset to some of this cash flow that that you'd be seeing as well , is that how should we should think about it .

Speaker #5: Yeah , that's that's the way to think of it . For for modeling for sure .

Speaker #12: Okay , okay . And I guess we'll get more clarity obviously as time goes on . But and then I guess I wanted to on the $0.10 of mitigation measures that you guys had with respect to the the earnings , how should we think about those mitigation measures going forward ?

Speaker #12: Do those are those are timing issue and they'll show up next year or are those things that you found that you think are more ongoing or some mixture of the two ?

Speaker #4: Could Paul described those are those are in year mitigation measures . So obviously we are the size of the weather headwinds and a little bit of incremental headwind from the convert was we would hope we offset could offset all of it , but we were able to offset $0.10 of it .

Speaker #4: But that's really in your mitigation measures . It doesn't impact our fundamental long term outlook . I've now been in this is my fifth year at the company .

Speaker #4: There were two years where we had really warm weather and adjusted the range upwards . Didn't change our long term fundamentals . This is a year where we're at weather headwinds , so it's going to impact our performance this year .

Speaker #4: But its both the weather impacts and the mitigation measures are really within the context of this calendar year . Are the drivers for our fundamental plan , as Brian mentioned , are you on 2026 and then the drivers for our long term plan remain intact and sort of unaffected by the vagaries of weather ?

Speaker #12: Okay . And then with respect to the the Lambda deal , which which seemed sort of interesting here , I'm just wondering , would that I guess , first of all , when would it go ?

Speaker #12: At what timeframe would it go from 25 to , to the 100 , I guess 25 ? It sounds like it would . The 25MW would be beginning of next year , but then it goes to 100 .

Speaker #12: I'm just wondering , how long does that ramp up take ? I'm just curious . Or is it known ?

Speaker #4: Yeah . We as I described , it's the in the 25 megawatt range starting next year . And it's over the next 4 to 5 years .

Speaker #4: It gets to that potential overall size . Really excited about that project . It's neat company deploying advanced technology in there . Data center and AI factory as they describe it .

Speaker #4: So it's a we were pleased to see that announcement . It was timed well with some economic development meetings here in town . And reflects how attractive our region is .

Speaker #4: And I was really impressed by how they leveraged an existing building, an existing infrastructure, largely. And that's how they were able to ramp up to that level.

Speaker #4: Historically , a 25 megawatt customer would be considered very large on the new era . That is a new era , but it's still obviously a creative approach , and we're pleased to have a advanced facility like that taking advantage of a building like that .

Speaker #12: Right . That sounds kind of unique . I guess what I also wondered was like , in terms of the context of these large low tariffs , that that you were describing , since it's under 75MW , and then going to 100MW , would a scenario like that be subject to obviously , this hypothetical hasn't been approved , but but just I'm just wondering how in the context of these settlements that you've had with these large low tariffs , how would a customer like that be treated ?

Speaker #12: Would that be a large load since it came in initially below the 75MW , but , but but would grow to 100MW before what I'm saying .

Speaker #12: Or or would it be because it's final number is 100 . It would be a large load . Does that make sense ?

Speaker #4: Yeah . Typically these customers are focused on what their ultimate load level is going to be because they want to make sure that they've got the infrastructure and capacity to get there .

Speaker #4: And this is an example . So that the tariff addresses . As you ramp up getting up to those higher levels and again , these customers , the ones that go into the large load , definitely want to make sure they've got the capacity and ability to do that .

Speaker #4: So they know in our contemplating getting up to the LPs , if ultimately stayed in the 25 megawatt range would be a different tariff level .

Speaker #4: But the ones that you , these customers are very interested in , those higher levels of load , and they know that as they get there , they get to that that tariff rate , right .

Speaker #12: So it's what they ultimately get to it . Wouldn't it be one of these like , okay , I got you . I think I understand .

Speaker #12: Thanks so much . I really appreciate it . Okay .

Speaker #11: Thank you .

Speaker #5: Thanks .

Speaker #11: Paul .

Speaker #2: Thank you . Our next question comes from the line of Anthony Kuroda from Mizuho . Your line is now open .

Speaker #13: Hey, good morning, Kim. If I could follow up, I think, on Steve's question earlier on slide seven, which is the actively building category.

Speaker #13: Is that what's currently in the 4 to 6% EPs growth rate and the finalizing an advanced discussion is what's not included in the current growth rate ?

Speaker #4: Yeah , the actively building that was probably my fault for how I answered it earlier . So if you look at slide seven , good place to go .

Speaker #4: The actively building , which is Panasonic and Meta and a third customers in the heavy near completion of construction , that's in the 2 to 3% low growth rate .

Speaker #4: And that's .

Speaker #13: In the 4 to 6. Right now.

Speaker #4: The 4 to 6 , you get to if you include the two data center customers that are in the finalizing agreements category .

Speaker #11: Yeah .

Speaker #4: This is the annual low growth rate . You're talking about . If you're talking about the earnings growth rate of 4 to 6% .

Speaker #11: Sorry .

Speaker #4: The earnings growth rate of 4 to 6% that we said we're targeting the top half . And then we're going to update the year end call .

Speaker #4: That is reflected in the the two that are in the actively building category .

Speaker #13: Great . Just the two not to third .

Speaker #4: Correct .

Speaker #13: Great . And then I think when when I look at your spread between your rate base growth and your earnings kegger , it's roughly about 250 basis points .

Speaker #13: Is that a good spread going forward, or the adoption of the large low tariff or the additional load? If you expect that to change?

Speaker #13: Where's a good place to think where that settles out ?

Speaker #4: Yeah . So we haven't given guidance on that specific range . But I think if you look at our the 17.5 billion capital plan , it , you know , going back in time , there were higher levels of capital in the out years in that , in that plan .

Speaker #4: We know that we we will be presenting as part of the year end call and integrated financial plan that reflects the relationship between rate base growth .

Speaker #4: Incremental load growth is obviously helping help in reducing regulatory lag and the relationship that you see between that rate base growth and earnings growth .

Speaker #4: And there's a range that you see across different companies , and there's no reason why we would be outside that range . So obviously links as well to what the phasing is of both the low growth and the capital in the plan .

Speaker #4: So we would we know that that's a question that we'll be addressing as part of our year end update . And the load growth .

Speaker #4: And , you know , as we move into higher years in our capital plan , that will be reflected in the update that we provide .

Speaker #13: And then just lastly , you talked earlier , I think in your five years there , you've seen some big weather swings . I think for 3 to 5 years this year , you know , very mild weather .

Speaker #13: You ended up lowering 25 as you work on rolling out a new capital plan with a new load . Does the the very big swings in weather will that cause you either to give a wider range or bake in more conservatism in your plan , given you've seen how much of a swing weather could be in your yearly performance ?

Speaker #4: Yeah , I think a very insightful question . I think it's something , you know , really like having Brian and Pete join the team .

Speaker #4: Brian's worked with a couple different utilities. I know in my background I like being able to describe investors. Here are the factors that we can't control.

Speaker #4: Here are the factors that are clearly outside of our control and are readily quantifiable . But recognize that the number of our peer utilities and there's a , you know , like the investors can like say , hey , you can offset even if it's a something easily to easily track and identifiable , like whether and you find mechanisms in your plan or build in an approach in the plan that can offset that .

Speaker #4: So we'll continue to have that discussion internally because . We recognize that that feedback , will always be very transparent . Plan will be very transparent with are because they as I mentioned , they didn't impact the fundamentals when they were positive .

Speaker #4: They're not can impact the fundamentals when it's a year , when it's a little more mild , it's a very mild August in particular .

Speaker #4: Here . But it's a it's something that we'll consider and you know , Brian will be a real helpful thought partner as we consider what the best approach is there .

Speaker #4: But again , we'll we're very excited about the long term fundamentals . We're certainly not overreacting to the was demonstrably a very mild Q2 and Q3 , recognizing that we needed a implement , the offsets that we did , and we're certainly always going to strive to be within you know , hitting our targets and hitting our ranges .

Speaker #4: So it's a good question . We'll continue to think about it .

Speaker #13: Great . See you guys at EEI . Appreciate you taking my questions .

Speaker #4: CDI .

Speaker #2: Thank you . Our final question comes from Paul Fremont from Ledenberg . Your line is now open .

Speaker #14: Thank you very much. I guess my first question is, I just want to get a sense of the type of data center developments that are in your service territory.

Speaker #14: When the largest of those sort of out how how , how much , how many megawatts is that in terms of demand for the largest of the of your customers right now ?

Speaker #14: build

Speaker #15: You know , we haven't given a size by customer , though I suppose you can .

Speaker #4: If you go back to our last . Well , we've said it's three customers in the finalizing agreements category . Our

Speaker #4: 1.5 to 2GW . So that gives you a pretty good sense for the average size . That's , you know , a good indicator for us .

Speaker #4: We haven't given more specificity in terms of size by customer, but that math will give you a pretty good roadmap for what the size typically is.

Speaker #4: There's some variability by customer, of course, but clearly large. That's three large customers making up that 1.5 to 2 gigs.

Speaker #14: Okay . Because I mean , it does seem like the the size is smaller than in some of the neighboring states . And I was just wondering , you know , is there oh , some factor that is causing sort of the size of your facilities to be to be more modest ?

Speaker #15: You know , most of our customers .

Speaker #4: Want to expand their regional peak once up some of these , you know , projects are similar customers involved . So I don't think there's a fundamental dynamic there for most of the , you know , we obviously track what the other customer announcements are , and there are a couple of very unique large ones out there .

Speaker #4: But we're , you know , it's a an average size that is in the 600 or 700 megawatt range is still a very , very large customer and very large data center .

Speaker #4: And as I noted , the most want to expand past the original peak . If we're able to accommodate it . But we like some diversification and customers and sites .

Speaker #4: Which is reflected in having a robust Q that helps keep everyone motivated as well.

Speaker #14: And then at what point would you need to build new generation in terms of , I guess , the three categories that you've outlined actively building , finalizing , and advanced discussions ?

Speaker #15: So we .

Speaker #4: That's a great question . And as we noted , that's a going to be one of the factors . That's a driver for our plan update that we plan to give our integrated resource plan that we filed in 25 .

Speaker #4: And we outlined in the appendix , which projects the Integrated resource plan . We're in last year's capital plan , which we're not , as we develop that integrated resource plan , we included , because track this information , we included the two customers that were in the finalizing agreements category .

Speaker #4: You will see in that IRP from last year , significant amount of incremental generation required to serve that load that was not yet included in the plan .

Speaker #4: So we have taken steps in terms of long lead time, equipment, and actions we need to take to be able to serve the customers that we've lined up.

Speaker #4: So we have some flexibility to do that . But I'd also note that we're going to be the next update to our capital plan and our integrated resource plan is going to factor in not only load growth expectations and the plants we need to serve those Sbp's reserve margin requirements , but also changes in federal and local policies , impacting renewables .

Speaker #4: If renewables are less economic or harder to build , for example , we'll look at market capacity options , we'll look at potential retirement delays .

Speaker #4: We're going to look at the whole package to make sure that we are driving reliability and affordability for our customers . But at the end of the day , there's some investments that we expect are going to need to be made , but we're going to look at that package of things in terms of what's that right mix of generation , and how do we make sure we ensure reliability , take advantage of the growth opportunity , but also always keep an eye on affordability .

Speaker #4: .

Speaker #14: And last question for me , you know , taking into consideration all of the legislative and regulatory changes , what estimate would you have for for regulatory lag on a go forward basis in your jurisdictions ?

Speaker #5: Yeah . You know , Paul , this is this is Brian . You know , we we haven't given , you know , a exact number for regulatory lag .

Speaker #5: We expect , you know , compared to allowed or authorized rose in our states , you know , things we point to is that historically , you've seen us earn have some pretty low Roes .

Speaker #5: But the pizza and see what legislation certainly help in that regard . We also have load growth that we haven't seen in many years .

Speaker #5: And we think it's going to be at a level that we haven't seen in many decades , which will help us kind of bridge that gap and get , we hope , very close to our authorized level of ROE .

Speaker #5: So that's that's directionally what I would give you . And , you know , we'll share more details in February .

Speaker #14: Great . Thank you very much .

Speaker #11: Thank you . Thank you .

Speaker #2: Thank you . This concludes the question and answer session . I would now like to turn it back over to David Campbell for closing remarks .

Speaker #15: Hey , thanks .

Speaker #4: Thank you, everyone, for joining the call today. We look forward to seeing all of you at EEI this weekend and next week. And that concludes today's call.

Speaker #4: Thank you .