Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Evergy Inc (EVRG, Financial) reported second quarter adjusted earnings of $0.90 per share, up from $0.81 per share a year ago.
- The increase in earnings was driven by demand growth, favorable weather, new retail rates, and higher transmission margins.
- The company reaffirmed its 2024 adjusted EPS guidance range of $3.73 to $3.93 per share and its long-term annual adjusted EPS growth target of 4% to 6% from 2023 to 2026.
- Evergy Inc (EVRG) highlighted significant economic development wins with Google, Panasonic, and Meta, representing approximately 750 megawatts of load.
- The company expects a solid 2% to 3% weather-normalized demand growth through 2028, driven by new large customer loads and a strong local labor market.
Negative Points
- Higher operations and maintenance costs, depreciation and amortization expenses, and interest expenses partially offset the earnings growth.
- The resignation of Chief Financial Officer Kirk Andrews and the ongoing search for a permanent replacement could create some uncertainty.
- Severe weather events caused extensive damage to equipment and structures, leading to increased restoration costs.
- Industrial demand remains lower despite a recovery among larger customers, which could impact overall demand growth.
- The company faces regulatory and legislative challenges, including the need for constructive dialogue around capital structure and authorized returns in Kansas.
Q & A Highlights
Q: Can you speak a little more to your approach for the upcoming Kansas workshop? What should we expect in terms of outputs?
A: Our objective in the workshop is to discuss with all parties the best way for Kansas to attract capital competitively. It will be a workshop, not a decision-oriented meeting, enabling a robust discussion on approaches across the country and in Kansas. We anticipate it will occur in the fourth quarter.
Q: Any timing expectations within 4Q for the Kansas workshop?
A: There will be advance notice when the dates are set. We are currently lining up calendars.
Q: On the data center side, will you see residential transmission savings with large interconnections?
A: The approach varies based on location and availability within the transmission system. We generally link it to specific projects and will update our capital plan to reflect the impacts of new announcements like Google.
Q: Outside of the 6 gigawatts of demand, is only Google included in the IRPs today? Would additional projects require revisiting the capital plan?
A: The capital plan published in February did not include Google. The IRP published in April and May did reflect Google but was not incorporated in the capital plan refresh. Any subsequent announcements will be incorporated in future updates.
Q: What should we expect in the upcoming capital refresh in the third quarter?
A: We will focus on the CapEx plan and rate base growth, as well as the associated financing plan. Our typical cadence for discussing earnings is the fourth quarter.
Q: Does the inability to extend PISA to include dispatchable generation in Missouri impact your IRP or earned returns?
A: The IRP reflects current mechanisms in Missouri. New natural gas generation is important, and we look forward to advancing the dialogue in the next legislative session.
Q: Can you confirm the 2% to 3% weather-normalized sales growth is more back-end loaded?
A: Yes, the ramp-up of Panasonic, Meta, and Google will contribute more significantly from 2026 to 2028. Google is committed to the region, and site work is underway.
Q: Can we expect a supplemental IRP in 2025 as potential loads materialize?
A: Yes, we have a triennial update and an annual refresh process. New loads will be reflected in our annual updates.
Q: What are the potential offsets to growth given the positives you've outlined?
A: The timing of when positives are manifested in the underlying trajectory and the need for a financing strategy are key factors. We are systematically working through our plan with positive tailwinds from economic development.
Q: What is the demand growth expectation in the 4% to 6% number?
A: We expect 2% to 3% weather-normalized demand growth through 2028, with a base demand growth projection of 0.5% to 1%.
Q: Can you clarify the purpose of the capital structure workshop in Kansas?
A: The workshop is to discuss the competitiveness of Kansas in attracting capital outside of a rate case. It was agreed upon during the legislative process and aims to level set on prevalent practices and impacts.
Q: How should we think about the rate design for new projects?
A: We have economic development rates and rate structures that reflect incremental costs. We aim to ensure that rates cover the overall cost of the system when adding new loads.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
