Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2021 Evergy, 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. [Operator Instructions] I would now like to hand the conference over to your speaker today Ms. Lori Wright, Vice President Corporate Planning, Investor Relations and Treasurer. Ma'am, the floor is yours.

Thank you, Lauren. Good morning, everyone, and welcome to Evergy's first quarter call. Thank you for joining us this morning. Today's discussion will include forward-looking information. Slide 2 and the disclosure in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations and include additional information on non-GAAP financial measures. The release was issued this morning, along with today's webcast slides and supplemental financial information for the quarter, are available on the main page of our website at investors.evergy.com. On the call today, we have David Campbell, Evergy's President and Chief Executive Officer; and Kirk Andrews, Executive Vice President and Chief Financial Officer. David will cover our first quarter highlights, our latest regulatory and legislative priorities, and our enhanced ESG profile. Kirk will cover in more detail the first quarter results, the latest on sales and customers and our financial outlook. Other members of management are with us and will be available during the question-and-answer portion of the call. I will now call -- turn the call over to David.

Thank you, Lori, and good morning, everyone. I'll begin on slide 5. Evergy delivered strong first quarter results and remains well positioned to meet our objectives for the year. Adjusted earnings per share for the quarter were $0.55 compared to $0.41 a year ago. As Kirk will describe in his remarks, the increase in adjusted earnings was driven by favorable weather, income tax benefits and higher other income. With a solid start to the year, we are affirming our 2021 adjusted EPS guidance of $3.20 to $3.40 per share. We are also reaffirming our targeted long-term annual EPS growth of 68% from 2019 through 2024. As we discussed during last quarter's call, in February, our region in the Southwest Power Pool experienced the most intense and sustained extreme weather event that we've seen in decades. The February extreme weather event resulted in significantly higher natural gas and purchased power costs, net of wholesale revenues, which totaled approximately $340 million. We provide a breakdown of this total amount by utility jurisdiction in our 10-Q. Of note, this number remains subject to resettlement activity and further review by SPP. We expect to be able to recover substantially all of these costs through multiple potential regulatory mechanisms. In selecting the path forward, we will work with regulators to implement solutions that smooth the impact for our customers. In Kansas, the KCC already issued an accounting authority order or AAO, which allows for the creation of a regulatory asset to track these incremental costs associated with the weather event. We expect to have resolution to the path and time line for recovery later this year. In Missouri, we have filed a notice that we intend to seek AAO treatment for the net fuel and purchase power costs incurred through the extreme weather event at…

Thanks, David, and good morning everyone. I'll start with the results for the quarter on slide 11. We reported first quarter 2021 adjusted earnings of $0.55 per share compared to $0.41 per share in the first quarter of 2020. As David mentioned earlier, the unusually high margins achieved by our power marketing business during the winter weather event in February contributed approximately $0.41 per share of pretax GAAP earnings and we have excluded the after-tax impact of this item from our adjusted EPS for the first quarter. Remaining adjusted items for the quarter were consistent with our expectations. As shown in the chart from left to right, adjusted EPS was driven higher by a number of items as compared to the first quarter of 2020, including favorable weather with an 11% increase in heating degree days versus 2020; weather-normalized demand increase of 1.1% or approximately $0.02 per share, partially offset as expected by a slight increase in O&M driven by planned outages; approximately $6 million primarily from higher-equity AFUDC; and we realized higher income tax benefits due to increased amortization of excess deferred income taxes or EDIT; and the timing of tax credit recognition to maintain our projected annual effective tax rate. This latter item which represents approximately $0.04 per share merely reflects a shift in intra-year timing. With higher earnings in the first quarter, we recognized more of our expected annual benefit from tax credits and will thereby recognize less of that benefit over the balance of the year. As I mentioned, heating degree days were higher versus 2020. However, despite the extremely cold February weather, heating degree days for the full quarter were in line with historic levels due to a mild January and March resulting in little impact from weather compared to normal. Thus, the weather impact…

I will open up for questions.

[Operator Instructions] Your first question comes from the line of Julien Dumoulin.

Hey, good morning. This is Dariusz Lozny on for Julien. I just wanted to ask about your Missouri IRP. If you anticipate pushback from customer groups that have historically been focused on the trajectory of rates and specifically two-year plan of keeping coal plants open for longer, while adding renewables sequentially, just curious how you think about balancing those impacts of obviously shifting to renewables but at the same time maintaining a customer build trajectory?

Good morning. Thanks for the question. We do think that we're – the IRP that we developed in Missouri reflects a balanced approach. And it's focused on as you know rates and also reliability as well as sustainability. So we've got a paced and phased approach adding renewables. The first retirement, we're going to do is our Lawrence plant in Kansas, and our first solar addition will be – it's planned to the Kansas side as well. And you'll see that we phase in over time. We do expect that, you will see ongoing reductions in the amount of energy produced from our coal fleet. That will result in lower fuel and O&M costs as it's energy produced renewables resources, obviously is effectively zero marginal cost. So we do think it strikes a good balance. We have got a tremendous base of resources to pull from. So you'll note that, we're adding wind. In 2025 and 2026 we're planning to. There's no better place to add wind in a more cost-effective place to have wind in our jurisdiction. So we think we do strike that balance. One thing that we saw and our constituents saw as well through the winter weather events is that we need to make sure that we balance reliability. So we can further reduce the energy produced from coal reduce costs in that way, but help to maintain reliability with the phased report approach to retirements.

Great. Thank you. And one more, just a housekeeping question, if I could. It looks like the 500 megawatts of wind that are in your IRP proposal are not in your CapEx slide in the latest presentation. Just curious at what point in the IRP process, do you anticipate gaining enough confidence in order to be able to add that CapEx in 2025?

I'm sure that we'll talk about that as part of our Analyst Day in September, but it's part of the dialogue that we had. You saw that, we included a range for 2025 and that range was reflective of our baseline transmission/distribution infrastructure. But when we put out that plan, we hadn't yet completed the IRP exercise. It's obviously a dialogue that, we have. The most certainty in any integrated resource plan is in that first three year implementation period. We even had much discussion about the IRP that, we filed three years ago for example. I don't know, if many of you all are that familiar with this detail. So we know it's dynamic. Nevertheless, it is our expectation that the renewables investments will continue, and we'll talk more about that in our Analyst Day. But obviously, it's important to go through the process. We haven't yet filed the IRP. We still haven't filed the IRP in Kansas. So we want to make sure we respect the dialogue and the input that we received. And intervening information is important, as we saw with the winter weather event. So we'll say more about that at our Analyst Day. But as a technical matter, we did not include that in the range that we show for 2025 in our year-end call.

Excellent. Thank you very much.

Thank you.

Your next question comes from the line of Shar Pourreza. Your line is open.

Hey, good morning.

Good morning, Shar.

So just a couple of quick ones. Obviously, the February storm and kind of the Biden administration's goals seem to have a real high interest in transmission. Just obviously, given Evergy's position on a seam and really the proximity of some great wind resources do you guys see additional opportunities for transmission spend in the near term, or would you even consider partnering with others? And I'm thinking similar projects like the Greenbelt D.C. line. So, how are you sort of thinking about that?

I think that, the transmission dialogue is going to be an important one. We already have a partnership in place on the transmission side, with AEP and that's a partnership in which we participated for many years and will continue to. I think there will be incremental opportunities for transmission. And the SPP has a process that they go through. So when it relates to rebuilding our lines, we obviously will drive that. And if there are lines where there's potential competitive opportunity that we need to participate in the process, which in our current set, we would do in our -- through our partnership. Greenbelt is a project that, as you know, has been around for -- I think it's at least a decade or longer. And it's recently been taken on by Invenergy, which is a very capable organization and has got tremendous experience. It's a merchant project, so a different kind of investment. You'd have to make sure that it would work from a rates perspective overall and would work from a regulators perspective, so something that we would continue to evaluate. But obviously any project of that scale and scope and size, as different as it is, requires a lot of review. But it's -- Invenergy is very capable and it could well be part of the mix going forward. I think as we clarify federal policies and potential carbon regulation, that will help to inform what the path forward is going to be for transmission overall. And so, we look forward to continuing to evaluate opportunities in that space.

Got it. In the early September Analyst Day is that the right podium to maybe provide additional visibility?

Yes. Potentially. And we haven't set a specific time line. I don't think we're going to have the Analyst Day on Labor Day, but we haven't set the date to September. Mid to late in the month, but we'll see.

Got it, got it. And then, David, any sort of color you can share on how Bluescape's involvement is driving any change? And any line of sight to incremental impacts that you can maybe discuss from this relationship, i.e., maybe from the generation side and efficiently managing the assets versus prior to the relationship? So what's the incremental things you're seeing from that relationship, I guess?

So we -- thank you, Shar, for the question. I think we've got a very capable Board with a balanced set of experiences. So we added Senator Mary Landrieu and John Wilder as part of the changes that were implemented in February. And both of them bring, I think, significant additional and complementary capabilities: Senator Landrieu with her national network and experience in Washington; and John Wilder obviously with his vast experience in the space. And both Kirk Andrews and I have personal experience with John in prior context. John is now chairing our Finance Committee. I would characterize that John is helping us to implement our Sustainability Transformation Plan along with the other Board members and taking a systematic approach to setting high-performance targets in each of the areas of our business. So you cited generation. But I think the discipline that John and the Board are seeking for us to show is on driving performance in each part of our business, to make sure that we drive benefits for customers, for all our key stakeholders, that we're achieving efficiency gains, that we're achieving reliability improvements and we're driving benefits from our investments. So I think it's a systematic disciplined approach that the Board is complementing. I think our team is bringing, but I think the Board is further complementing that effort. And we value John's input and experience, as we do all our Board members and I think it's been a very -- partnership is off to a great start.

Got it. And then, just lastly for me. Obviously, we're all watching the FERC ROE reforms really closely. Maybe just, if you could provide a FERC ROE sensitivity, if we do see those adders get cut.

So you're talking about the 50 basis points that --

Correct.

-- under contemplation? Yes. Shar, we estimate that the impact of that is in the range of $0.02 to $0.03 per share.

Got it.

In the 2023-2024 time frame.

Great. That was it. Terrific. And congrats on the regulatory and legislative initiatives. It's terrific. Thanks very much.

Thank you, Shar. Thank you.

[Operator Instructions] Your next question comes from the line of Paul Patterson. Your line is open.

Hey, good morning, guys. Good morning, Paul. So just some quick questions the -- just with Missouri and the securitization legislation. Is there any significant difference between these two competing -- well, I don't know about competing bills, but these two different bills, one in the House, one in the Senate that is of any significance or -- from our perspective?

No. Paul, they're pretty close. I think it's just the typical process to go through to make sure all the words match, but there are not any material differences. So we're -- I think we're as well positioned as we could be. But in general, the provisions are very similar. And we expect that -- we're optimistic. Obviously, we've got to work through the process, but we're optimistic. And either way, we'll know within the next week, but we think we're well positioned.

Okay, great. And then, with respect to the -- you guys called out the -- in Kansas, the utilities discretion of reinvesting securitization proceeds. And I sort of think of funds being fungible. So I'm just sort of wondering how should we think about that? I mean is there some prudency predetermination, or I guess, why are you guys calling that out, I guess? I'm not completely clear as to what the concern was or just if you could elaborate a little bit more on that benefit.

So, Paul, I think that's a good question, a good point. I think we were -- it's really more to say that there aren't restrictions as opposed to saying that, that will dictate how the funds are used. Just know that it's not always the case of securitization that there's discretionary of funds. But to your point broadly, all I was saying is that it's -- there are not restrictions that we do plan to use those proceeds, as you note in the general purpose. We do have the opportunity for predetermination on plants that we're seeking to retire, just as we do predetermination for new investments. We like that approach, because that is a separate matter that allows us to get a read on things before taking action. But to your note, there's nothing special about the flexibility, other than its allowed for us.

Okay. And then just, in terms of the size of the -- the potential size of securitization that we're thinking about, I guess, during the sort of -- maybe during the STP process or whatever, you mean, in the next few years or something, how should we think about what the potential -- do you guys have -- or maybe I don't know if you -- maybe you guys are -- haven't come up with one that you want to share. But do we have any idea that you could share with us about what the size of the securitization might be that can come out of this?

Sure. So we'll -- and obviously, if we do a predetermination filing we have a very good sense for it in advance. But the planned retirement of the Lawrence plant in late 2023 is about $350 million, that would go through the -- we anticipate would go to the application for the securitization as part of that process. So it will be roughly that amount. As I noted in my remarks, through the retirement through the general transition of our rate-base given relative investment in T&D, we do expect that coal as a share rate base will get down to the low 20s, by 2024.

Okay. So just to understand that $350 is sort of what we're thinking about, the Lawrence plant -- other than the Lawrence plant we're not thinking of anything else there being securitized, at least at this point?

Not during the three-year implementation phase. As we know that we see, the retirements that are later in the 20s. And obviously, we'll continue to assess timing in the overall plan as market conditions evolve. But we would anticipate if securitization is an option in both, Missouri and Kansas that would be used for the future retirements in the IRP as well.

Okay. Thanks for that. And then, in terms of the STP it looks like you guys got some sort of favorable remarks from staff. And what have you at least, talked about being a little bit of refinement or whatever suggestion. But what's not clear to me, I guess in the STP process is, is there an eventual sign-off from the commission on that? I mean, it's not a -- it's a little bit of a -- not a standard I guess, proceeding if you follow-up at least from my perspective. So you've -- when do you expect to have sort of this STP thing wrapped up, I guess in Kansas?

So as you know, it's an innovative process and we appreciate the opportunity that the commissions have provided for us to go through the plan and get -- and receive feedback. But they are informational. There's not a formal sign-up that will result from the proceedings. In terms of the procedural calendar the next step for us in Kansas will be we're going to file responsive comments. I think, its next week. And then, we'll have a session on May 24. So it will be an interactive workshop and dialogue. And that's currently the next remaining step in the process, but it could -- obviously it could be adjusted. But it's informational. And we appreciate the comments. We think that the comments overall reflect that we have a balanced plan. And we've seen that reflected generally in the comments we saw in both, Missouri and Kansas. In Missouri, we expect to have a similar sort of wrap-up workshop in early June. Again, because they're informational dockets the timeline could evolve, but the current schedule has us wrapping in the late May or early June timeframe.

Awesome, thanks so much guys.

Thank you.

Your next question comes from the line of Michael Sullivan. Your line is open.

Hey guys. Good morning.

Good morning Mike.

Just a question on the IRP, curious to the extent you guys -- I mean, you got a pretty good example of a stress test situation back in February. And was the conclusion there basically, we could do without Lawrence, but we pretty much needed everything else in terms of dispatchable resources. And then, that kind of factored into the decision to keep the rest of the plants around a little longer?

Mike, I think that it's fair to say that the review across STP is still an ongoing process right? The -- I think that we and the entire system have a lot to learn and the analysis is not yet done. As a technical matter, we have a, accredited capacity requirement that we need to meet. And we can -- with the retirement of Lawrence we are within our buffer. So you're right in looking at it that way. And the more we retire, the more we're going to have to look at replacement capacity. But I think it's also fair to say, that the event reinforced that a lot of the rules and approaches are geared towards summer peaks and not necessarily towards winter peaks. So the IRP exercise is much a balanced one of thinking about okay, if we are factoring in reliability along with affordability and sustainability, a measured approach to retirements is it makes the most sense, because your additions of renewables particularly wind. But also solar which is -- is less effective in dealing with winter peaks you need to factor that in as you're considering, how you're going to be ensuring the reliability part of the equation. So it did -- the winter weather event at least factored into the dialogue overall. But I think it's fair to say that it's going to be an ongoing evaluation and not just in our area. We'll be able to learn across our system and other systems as well. But I think it is certainly fair to say that, as we consider the event we do believe, the energy production from coal will continue to decline. And in that way you will see ongoing benefits for customers' lower O&M and fuel costs. But there will be a reliability benefit of keeping them in the system until you've certainly got sufficient replacements to ensure reliability. So, some of that thing is reflected in the plan. But of course, we'll -- the IRP is most certain for the three-year implementation period. And as market conditions and technology evolves, there's no doubt that we'll continue to look at it. But we think this plan reflects the right balance for now.

Okay. Yeah. I was kind of -- you kind of answered it, but my other question was just going to be how soon could this be -- like, can anything change as soon as the Analyst Day potentially, or I would think that definitely before the next triennial IRP, or just how do you think about the cadence of providing further updates on...

Yeah. The -- on the IRP calendar, there's a -- so file Kansas effectively sooner than July one deadline but there's still a Kansas filing of course. Then you give an annual update before the triennial filings. So will the next IRP get it updates will be in a year's time. Then there'll be a formal triennial update in three years. But gosh I think for everybody if you look back last year or two years ago or three years ago there's, been a lot of changes to the IRPs, because it's a pretty dynamic environment. So, hard to predict the future, I think you're right about the Analyst Day. I don't expect fundamental changes to the IRP per se. But in the next year two years, three years, I'd be surprised, frankly there are changes for everyone just, because the landscape continues to change, as you know well.

Got it. Thanks so much. I appreciate it.

Yeah. Thanks, Michael.

Excuse me, presenters. There are no more phone questions. Mr. David Campbell, turning it back to you.

Great. Well, thanks everyone for your interest in Evergy. Stay safe. And have a great day. Thank you.

This concludes today's conference call. You may now disconnect.