The operator welcomes listeners to the Q1 2024 Evergy, Inc. Earnings Conference Call and introduces the first speaker, Pete Flynn, Director of Investor Relations. The discussion will include forward-looking information and the webcast slides and supplemental financial information can be found on the Investor Relations website. CEO David Campbell and CFO Kirk Andrews will discuss first quarter highlights, the updated integrated resource plan, regulatory and legislative priorities, and financial results and outlook. Other members of management will be available for the Q&A portion. The first quarter adjusted earnings were $0.54 per share, driven by higher expenses and warm weather.

In the paragraph, the speaker discusses the earnings drivers for the company and mentions their good start to the year in terms of reliability. They also mention the completion of a nuclear refueling outage and reaffirm their adjusted EPS guidance and long-term growth targets. They then discuss their triennial Integrated Resource Plan, which reflects updates to their expected load growth and considers environmental rules, including the newly issued rules by the Environmental Protection Agency.

Evergy's main goal in the IRP process is to find the most cost-effective and resilient plan to serve customers, which includes adding renewable and natural gas resources. They are also considering the potential impact of new EPA rules, which may require significant investment and are expected to face legal challenges. However, Evergy already generates nearly half of its energy from carbon-free resources and has invested in ensuring its fossil units meet environmental standards and operate reliably.

The company's IRP includes new solar, wind, and natural gas resources, along with retirements of coal plants. The 2024 preferred plan includes 5,800 megawatts of resource additions over the next 10 years. The company is focused on achieving a balance between renewables and thermal resources to ensure reliability and affordability for customers. The company will provide an update on their capital plan in the third quarter earnings call. The company has secured major economic development wins with Google, Panasonic, and Meta, representing approximately 750 megawatts of load. The economic development pipeline in Kansas and Missouri shows promise with $10 billion in potential projects considering locating in the service territories.

The company is focusing on economic development and affordability in both Kansas and Missouri, and is seeing significant growth in new loads, including the recently announced Google Data Center. They are also providing an update on their regulatory and legislative priorities, including the passage of House Bill 2527 in Kansas, which supports infrastructure investment and reduces regulatory lag. This will have a positive financial impact for the company.

The new law in Kansas will have a minimal impact on the company's earnings, estimated at $0.03 to $0.04 per share in the first year and $0.10 in the second year. The passage of this legislation reflects the state's support for investment and economic development. The company also highlights the passage of another bill that provides a property tax exemption for natural gas units. The company will file its 2024 IRP in Kansas and is currently working on a general rate case in Missouri West.

The parties involved in the Missouri West rate case will file testimony and have a settlement conference in September, with hearings and revised rates going into effect in January 2025. Ameren is also working on legislative initiatives to amend a statute and extend the sunset to 2035. Their strategy focuses on affordability, reliability, and sustainability, with efforts to improve regional rate competitiveness and ensure reliability. They also prioritize sustainability by transitioning their generation fleet.

In the first quarter of 2024, Evergy's carbon emissions have been reduced significantly and they continue to strive for sustainability. The company's adjusted earnings for the quarter were $124.7 million, a decrease from the previous year due to milder weather, lower retail sales, and higher O&M and depreciation expenses. However, new retail rates and higher transmission margins contributed positively to the quarter. Overall, the company's mission is to lead the responsible energy transition while maintaining affordability and reliability.

The company experienced a decrease in earnings due to higher interest expenses, but they expect it to remain on target for the full year. There was also a decrease in sales, primarily in the industrial sector, but they anticipate a recovery as temporary events subside and new customers come online. The company forecasts a 2-3% growth in demand through 2028, supported by a strong local labor market. Overall, the company maintains a positive outlook for their long-term financial performance.

The company is reaffirming its adjusted EPS guidance range for 2024 and its long-term adjusted EPS growth target. Its capital investment plan does not yet reflect changes in its 2024 IRP, and an update on the capital plan will be provided on the third quarter earnings call. The company expects to achieve its financial targets and advance its objectives through its investment plan. The load growth is expected to continue into 2028, and the company's current expectation for rate base growth through 2028 is 6%. An update on the capital expenditure plan will be provided in the third quarter.

The company plans to update its capital expenditure plan to reflect the higher level of generation additions and economic development activities. This will involve an upward bias, but the company takes a balanced approach. They are excited to invest in opportunities in their region. The company's credit metrics are trending well and they successfully securitized the Missouri West Murray cost.

The speaker discusses the company's projected surplus for 2024 and how it will be used to fund capital investments without sacrificing credit ratios. They also mention that economic development, particularly data centers, is a key focus for the company and that the amount of transmission investments needed for these sites varies depending on location and load size.

The company typically does not have a lot of spare capacity, so adding 400 megawatts of load will require some incremental costs. The company has already included the Meta and Panasonic deals in their CapEx plan, but the Google deal has not yet been included. The rates for the Google deal are subject to agreements and the company is working on rate design to ensure that large new loads are considered. Google will still be a customer of the company and the megawatts they receive will be from the company. The Google deal will function as a virtual PPA with the company as the supplier and the asset will become another generation resource in the Southwest Power Pool.

Shahriar Pourreza asks about the impact of EPA regulations on the company's IRPs and gas generation plans. David Campbell explains that the recently released rules were not included in the IRP, but will be factored into future plans. He anticipates that the plans to build new gas units will not change, but the type of units and their capacity factors may be affected. The EPA rules set limits on capacity factors for gas turbines and will impact the company's resource plans, especially regarding coal retirement.

The speaker discusses the impact of House Bill 2527 on their company, stating that it will help reduce the gap between their authorized return and realized return, mitigating regulatory lag. They estimate a $0.03 to $0.04 increase in earnings in the first year after filing a rate case, and clarify that this year's impact will be half of that due to the bill's effective date in July. They also mention the importance of gas in meeting customer demand and ensuring reliability.

In the second full year after a rate case, the impact on reducing regulatory lag is roughly $0.10. This is due to the doubling of the asset base. The realized returns in Kansas Central were lower than authorized due to a 5-year stay out, but with a more regular cadence of rate cases, this impact can be eliminated. The company expects to have rate cases every other year. As for retail sales, they were flat in 2023 and 0.5% lower in the first quarter of 2024, but the company is projecting 2-3% growth by the end of the year due to significant new load coming online.

The speaker discusses the industrial sector's lower margins and the impact of a few unique customer circumstances on demand in 2023. They express confidence in the robustness of the residential and commercial sectors and mention large new customers coming online, such as a battery manufacturing plant and a data center. The speaker also mentions ongoing work and the potential for future developments in Kansas.

The company is working with stakeholders in Kansas and Missouri to respond to economic development opportunities and ensure the best frameworks are in place. They are pleased with the broad-based support for investments in both states and plan to have a workshop on capital structure and ROE in Kansas. In Missouri, there is support for legislation related to building natural gas plants for reliability. The company looks forward to continuing a constructive dialogue with regulators, legislators, and other intervenors in both states.

Travis Miller asks David Campbell about the work step for legislative and regulatory sessions, and Campbell expects it to happen later this year. Miller also asks about EPS growth and why it isn't higher, but Campbell says they won't get ahead of the CapEx plan or earnings forecast. Campbell explains that their lower rate base growth leads to a lower earnings growth target, but they are focused on investing at the right level for economic development, reliability, and customer demand.

The speaker discusses the potential for increased capital investment and how it will benefit customers and strategic objectives. They also mention a decrease in labor capitalization and its impact on the rest of the year. The sales growth numbers for the quarter reflect leap year. The speaker also mentions the PISA legislation in Missouri and their lack of opportunity for the House Bill and the Senate Bill.

The speaker discusses the PISA provisions and language, as well as changes related to natural gas investments. They mention that there is broad-based support for these provisions, but the tight timeline of the session may make it difficult to pass anything. They also mention that the session in Missouri ends on the 17th and that the next IRP will reflect the impact of EPA rules. There is uncertainty around depreciation and asset life with these rules and they will need to work with stakeholders to address affordability and reliability impacts.

The speaker discusses potential outs in the rules regarding carbon capture and sequestration, and mentions the need for analysis and discussions with regulators. They also mention the potential affordability and reliability impacts and the need for systematic analysis. They highlight over $10 billion worth of new development projects in Kansas and Missouri and mention the industries and service territories that are represented in that number. They also mention the potential for loan opportunities.

The company has a significant presence in data centers, advanced manufacturing, and aerospace industries. They are excited about the potential for growth in these areas, but have not yet quantified the exact impact. The company is not exclusively focused on data centers and is also interested in attracting large manufacturing companies to their territories. They see both data centers and manufacturing as positive for their business, with data centers bringing in less jobs but still providing benefits. The company is currently working on resource planning and the recent favorable legislation in Kansas may help with their growth, but there may be nonfinancial constraints, particularly on the gas generation side, that could limit their ability to serve incremental load.

David Campbell discusses the challenges that utilities face when adding new customers and increasing demand for energy. He mentions the need for adequate transmission and distribution infrastructure, as well as capacity constraints, which can impact resource planning. He also notes that there may be grid constraints and capacity constraints when building new gas plants, due to EPA rules and the need for efficient gas turbines.

The team is evaluating new gas sites and taking into consideration existing gas and grid infrastructure. It takes years to get these sites up and running due to the permitting and interconnection process. However, they are confident that they will be able to get it done. In regards to the mild weather at the start of the year, the company is focused on cost management and has various levers to offset any impacts. The upcoming CapEx refresh will cover a 5-year period, but the IRP outlines capacity upside over a 10-year period.

During the Q&A portion of the call, an analyst asks about the company's capital expenditure plans and how they relate to the recently released Integrated Resource Plan (IRP). David Campbell, the speaker, explains that the IRP will likely lead to an increase in capital spending due to the addition of gas plants and other factors such as economic development and grid modernization efforts. He also mentions that the company will provide more details on their capital plan in the third quarter. The call ends with closing remarks from Campbell.

This summary was generated with AI and may contain some inaccuracies.