Evergy, Inc. · NASDAQ:EVRG
Evergy — Q2 2020 Earnings Presentation
31 slides from Evergy's earnings presentation, Aug 5, 2020
Slide 1: Sustainability Transformation Plan Second Quarter 2020 Results
Sustainability Transformation Plan Second Quarter 2020 Results August 5, 2020
Slide 2: Important Information
Important Information Forward Looking Statements Statements made in this presentation that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, statemen
Slide 3: Agenda
Agenda Terry Bassham, President & CEO • Sustainability Transformation Plan • Second quarter overview • Regulatory and legislative update Tony Somma, EVP & CFO • Second quarter results • Liquidity and finance activities • 2020 outlook 3
Slide 4: Building on Our Success: Sustainability Transformation Plan (STP)
Building on Our Success: Sustainability Transformation Plan (STP) Driving Value and Creating Meaningful Stakeholder Benefits FORMED COMMITTEE Strategic Review & Operations Committee (“SROC”) comprised Key Considerations 1 of four Board members, including two new Independent Directors SROC retain
Slide 5: STP Shareholder Value Proposition
STP Shareholder Value Proposition Increased Capital Plan and Rate Base Growth Commitment to Disciplined Cost Reduction Plan to invest $8.9B in CapEx from 2020-2024 ~$330M, or 25%, reduction to O&M cost expected through 2024 1, while improving safety and reliability Targeting Five-Year Rate Bas
Slide 6: STP Financial Highlights
STP Financial Highlights Targeted Capital Expenditures Targeted Rate Base Growth $ in millions $ in billions ~$19.3 5 – 6% CAGR ~ $18.4 $14.4 $2,240 $1,726 $1,852 $1,586 $1,501 2020E 2021E 2022E 2023E 2024E 2019A 2024E Targeted Non-Fuel O&M Reductions 1 Targeted EPS Growth 2 $ in millions ~25% $4.25
Slide 7: Driving Incremental Investment…
Driving Incremental Investment… Incremental ~$1.4B CapEx supports 5% to 6% STP rate base growth March 2020: ~$7.6B CapEx Plan August 2020 STP: ~$8.9B CapEx Plan Targeted Rate Base Growth (prior plan) Targeted Rate Base Growth (current plan) 1 $ in billions $ in billions 20 $17 - $18 20 $18.4 - $19.3
Slide 8: Through Critical Infrastructure Investments and an Accelerated Transition to Cleaner Energy…
Through Critical Infrastructure Investments and an Accelerated Transition to Cleaner Energy… Incremental $1.4B in STP capital spend vs. prior plan funds value-added investments Change in Five-Year Capital Plan Ending 2024 $ in millions ~$8,905 $612 ~$7,552 $438 $1,863 Key Highlights of CapEx plan: $
Slide 9: While Maintaining a Strong Credit Profile
While Maintaining a Strong Credit Profile No planned equity required for STP Current Credit Ratings S&P Moody’s Evergy Outlook Stable Stable Corporate Credit Rating A- N/A Senior Unsecured Debt BBB+ Baa2 Evergy Kansas Central / Evergy Kansas South Outlook Stable Stable Senior Secured Debt A A2 Comme
Slide 10: Stakeholder Benefit of the STP
Stakeholder Benefit of the STP CUSTOMERS COMMUNITY ENVIRONMENT Maintains Affordability Provides Regionally Delivers Cleaner Energy Capital investments targeted to enable long- Competitive Rates A Long-Term Energy Plan that builds on term and sustainable cost savings of an Evergy’s focus on
Slide 11: Attractive Investment Outlook
Attractive Investment Prior Targeted STP Outlook Adjusted EPS Targeted Adjusted • 2020 adjusted EPS1 guidance: $2.90 – $3.10 Growth1 EPS Growth1 • Targeting EPS CAGR of 6–8% through 2024, using 2019 5–7% CAGR 6–8% CAGR adjusted EPS1 of $2.89 $4.25 − Previously 5–7% CAGR from 2019 through 2023 $3.80
Slide 12: STP: Maximizing Value and Benefitting All Stakeholders
STP: Maximizing Value and Benefitting All Stakeholders Targets creating a top-quartile EPS growth, high-performance electric utility Delivers on the terms of prior regulatory and merger commitments Invests in infrastructure that creates operational savings, continues to modernize the electrical grid
Slide 13: Business Update
Business Update Terry Bassham President & CEO
Slide 14: Second Quarter Results
2Q20 Results 2Q20 Results Second Quarter Results GAAP EPS Adjusted EPS1 • 2Q20 vs 2Q19 Drivers + Favorable weather $0.68 + Cost reduction efforts + Lower shares outstanding $0.57 $0.59 $0.58 - Negative sales impact of COVID-19 - Non-cash tax adjustment due to Kansas income tax rate change • Announce
Slide 15: Legislative and Regulatory Update
Legislative and Regulatory Update Legislative Targeted Net Merger Savings ($mm)2 • Kansas House Bill 2585 - Allows for special economic development rates similar to Missouri - Makes Kansas public utilities income tax exempt on January 1, 2021 • Part-two of Kansas Rate Study was filed in July Regulat
Slide 16: Financial Update
Financial Update Tony Somma EVP & CFO
Slide 17: Second Quarter Results
Second Quarter Results Adjusted EPS1 GAAP EPS: 2Q20 $0.59 vs 2Q19 $0.57 Variance Drivers + Lower O&M + Favorable weather + Lower shares outstanding Gross Margin $10M lower due - Lower gross margin driven primarily from COVID-19 impact primarily to the impact of COVID- 19 and partially offset by favo
Slide 18: Year to Date Results
Year to Date Results Adjusted EPS1 GAAP EPS: YTD20 $0.89 vs YTD19 $0.96 Variance Drivers - Lower gross margin primarily from Covid-19 impact - Lower other income O&M $62M lower driven by cost - Impact from Kansas income tax exemption reduction efforts, costs incurred in January 2019 winter storm and
Slide 19: Retail Sales
Retail Sales Residential usage represents ~50% contribution to total retail earnings COVID-19 had less impact on sales as the Annual Estimated Annual Retail Sales1 Earnings Contribution quarter progressed by Customer Type by Customer Type 10% Total Retail Sales - Weather Normalized 21% 36% 2020 vs 2
Slide 20: Limited Capital Market Needs
Limited Capital Market Needs • Evergy Kansas Central issued $500M of 30-yr mortgage bonds at 3.45% • Evergy Metro issued $400M of 10-yr mortgage bonds at 2.25% • No refinancing needs for remainder of the year • Remain committed to maintaining current strong credit ratings and metrics • No planned eq
Slide 21: 2020 Outlook
2020 Outlook 2020 GAAP EPS Guidance of $2.66 - $2.86; Adjusted EPS1 Guidance of $2.90 - $3.10 Key Driver Considerations: • We expect a decline in weather normalized sales in 2020 due to COVID-19 Retail electric sales: • We expect a slow, steady recovery in third and fourth quarter Adjusted O&M expen
Slide 22: Appendix
Appendix
Slide 23: Disciplined Cost Management
Disciplined Cost Management Net Merger Savings1 vs O&M Reductions2 Original Merger Targets Annual EPS Growth ($ in millions) ($ in millions) $160 Target of 6% - 8%1 Exceeded 2019 $150 $150 $145 target by ~9% ~36% Reduction $110 $1,306 $87 8% - 11% YTD $1,187 $1,092 Reduction 6/30 to $1,056 $30 $23 2
Slide 24: Yielding a More Modern, Reliable Grid and Greener Generation Profile…
Yielding a More Modern, Reliable Grid and Greener Generation Profile… Investment Categories Total Capital (2020-2024)1 Description Customer Benefits Higher reliability and grid safety through reduced Upgrade and replace distribution assets including outages frequency and duration; Distribution Grid
Slide 25: ~$8.9B in Utility Investment through 2024
~$8.9B in Utility Investment through 2024 Rate Base by Jurisdiction $18.4B - $19.3B Projected 2020-2024 CapEx by Jurisdiction ~17% $14.4B 12% ~33% 21% 32% 42% 37% ~50% 56% 2019A 2024E Kansas Missouri FERC Kansas Missouri FERC 25
Slide 26: Long-Term Energy Plan (LTEP)
Long-Term Energy Plan (LTEP) Stakeholder input on the STP and our upcoming LTEP process will better inform the level and timing of future renewable investments and coal retirements beyond 2024 Key Milestones Discuss / Refine Work with Results with Discuss Inputs with Modeling and Stakeholders to Sta
Slide 27: Moving toward Accelerated, Responsible Decarbonization…
Moving toward Accelerated, Responsible Decarbonization… LTEP has the potential to reduce CO2 emissions 85% by 2030 from 2005 levels Paths to Decarbonization • Broad stakeholder engagement in and support for planning CO2 Emission Reductions1 0 process 10 • Constructive policy outcomes which support P
Slide 28: GAAP to Non-GAAP EPS Reconciliation
GAAP to Non-GAAP EPS Reconciliation1 2020 EPS Guidance2 2020 GAAP EPS $2.66 - $2.86 Voluntary severance expense 0.16 Advisor expense 0.08 Income tax benefit (0.06) Kansas corporate income tax change 0.06 2020 Adjusted EPS (non-GAAP) $2.90 - $3.10 2019 EPS 2019 GAAP EPS $2.79 Rebranding 0.05 Severanc
Slide 29: GAAP to Non-GAAP O&M Reconciliation
GAAP to Non-GAAP O&M Reconciliation1 2018 O&M 2019 O&M ($ in millions) ($ in millions) 2018 GAAP O&M $1,116 2019 GAAP O&M $1,219 Great Plains Energy O&M prior to the merger 318 Severance expense and rebranding costs (32) Non-recurring merger-related costs (101) 2019 Adjusted O&M (non-GAAP) $1,187 Pr
Slide 30: GAAP to Non-GAAP O&M Reconciliation
GAAP to Non-GAAP O&M Reconciliation1 YTD YTD ($’s in millions) 2Q 2020 2Q 2019 2Q 2020 2Q 2019 GAAP O&M $272.7 $288.6 $560.9 $595.5 Rebranding costs - (0.9) - (1.1) Voluntary severance costs 0.4 0.1 (26.6) (14.7) Advisor expenses (9.8) - (16.4) - Adjusted O&M (non-GAAP) $263.3 $287.8 $517.9 $579.7 N
Slide 31: 2019/2020 EPS: GAAP to Non-GAAP Reconciliation
2019/2020 EPS: GAAP to Non-GAAP Reconciliation1 (a) Reflects external costs incurred to rebrand the legacy Westar Energy and KCP&L utility brands to Evergy and are included in operating and maintenance expense on the consolidated statements of comprehensive income. (b) Reflects severance costs incur