Thank you for standing by. And welcome to the Second 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] Please be advised that today's call is being recorded. [Operator Instructions] I would now like to hand the call over to Lori Wright, Vice President, Investor Relations and Treasurer. Please go ahead.

Thank you, Michelle. Good morning, everyone. And welcome to Evergy's second quarter call. Thank you for joining us this morning. Today's discussion will include forward-looking information. Slide two 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 releases 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 second quarter highlights, our latest regulatory and legislative priorities and preview our upcoming Investor Day. Kirk will cover in more detail the second quarter results, the latest on sales and customers and our financial outlook for the remainder of the year. Other members of management are with us and will be available during the question-and-answer portion of the call. I will now turn the call over to David.

Thanks, Lori. And good morning, everyone. I'll begin on slide five. This morning, we reported second quarter adjusted earnings of $0.85 per share compared to $0.68 per share a year ago, equal to a 25% increase. On a period-over-period basis, these results were primarily driven by higher transmission margin, an increase in weather-normalized demand, higher other income and income tax benefits. On our prior earnings call, I highlighted that our nuclear plant, Wolf Creek, had started its planned refueling outage. I'm pleased to report that the Wolf Creek team completed the outage under budget, continuing the excellent operational performance at the plant. Company-wide, we've maintained a steady trend of strong cost management as we strengthen our continuous improvement culture. Our team's execution has enabled a solid start to the year, and we are reaffirming our 2021 adjusted EPS guidance of $3.20 to $3.40 per share. We plan on giving an updated perspective on 2021 performance as part of our Investor Day next month. This morning, we're also reaffirming our target of compound annual EPS growth of 68% from 2019 through 2024. Moving on to slide six, I'll provide a summary of our regulatory and legislative priorities and recent activities. First, with respect to our sustainability transformation plan dockets. We completed the final STP workshops in Kansas and Missouri, wrapping up the items outlined in both procedural schedules. These dockets will remain open as we continue to file responsive follow-up information. As I've said before, this constructive process has been beneficial as it has allowed us to educate and inform our stakeholders on our strategic business plan, while also providing a channel for receiving constructive feedback from the parties. Another policy priority that we have identified is securitization legislation. While passage of this legislation was not critical to the near term…

Thanks, David. And good morning, everyone. I'll start with results for the quarter on slide 10. For the second quarter of 2021, Evergy delivered adjusted earnings of $195 million or $0.85 per share compared to $154 million or $0.68 per share in the second quarter of 2020. The 25% increase in second quarter adjusted EPS was driven by the following items as shown on the chart from left to right. First, although cooling degree days were relatively consistent versus the second quarter of 2020, we saw fewer heating degree days this past quarter, resulting in a $0.02 per share unfavorable contribution from weather versus 2020. This weather variance was more than offset by the following, a 3.4% increase in weather-normalized demand or approximately $0.03 per share, higher transmission revenue drove about $0.05 per share, resulting from our ongoing investments in transmission. O&M expense was approximately $11 million lower or $0.04 per share due to lower bad debt expense during the quarter as collections and aging of receivables improved. Other income increased $0.03 per share, driven by a $4 million increase in equity AFUDC, $5 million of higher investment earnings resulting from unrealized gains on equity investments and $2 million of higher COLI proceeds. Finally, we realized higher income tax benefits due to increased amortization of excess deferred income taxes, or EBIT, and the timing of tax credit recognition to maintain our projected annual effective tax rate. Adding to our first quarter results to these numbers, I'll turn next to year-to-date results, which you'll find on slide 11. For the six months ended June 30, 2021, adjusted earnings were $320 million or $1.40 per share compared to $248 million or $1.09 per share for the same period last year. Again, moving from left to right, our year-to-date adjusted EPS drivers versus…

Why don't we go ahead and shift to questions. Let's open up to Q&A.

[Operator Instructions] Our first question comes from Michael Lapides with Goldman Sachs. Your line is open.

Hey, guys. Thank you for taking my questions. I have two, totally unrelated to each other. First, on thinking about the long-term generation plan, I want to make sure I heard you correct, that your original plan, your STP did not incorporate securitization. How does securitization potentially impact the plan? And how do you think about the reliability needs of having solid fuel assets on the system, given just what your region and a large swath of the country over the last six months have experienced?

Good morning, Michael. So - and thank you for your question. That will give me an opportunity to clarify. So the securitization legislation didn't impact our financial plan outlook in '21 to '24. So the passage of the law didn't impact the growth rate that we teed up in our objectives during that time period. It has been a long-term objective and we view it as a pretty important enabler beyond that forecast period. So passage of law in both states, we think is going to be a helpful enabler, as we work the plan over the coming decades. Now we've published our Integrated Resource Plan. And in that, you'll see that the phasing and pacing of coal retirements is one that is relatively - it's done on a relatively steady basis, as opposed to accelerated over a near-term time frame. We do think that the utilization of coal will increase over time. But part of the factor impacting the phasing of retirement of coal and solid fuel reflects the factors that you identified, which is making sure that we can ensure reliability. The extreme weather that we saw in February and the first rolling outages in STP and then the extreme heat in parts of the country that we've seen, we haven't seen extremely in our part of the country that we have seen a couple of resource alerts in STP so far this summer. And obviously, in other parts of the country, it has been extreme and has led to some strains on the grid. All reinforce that making sure the even eye [ph] on reliability is very important as you work on the - as you think about the fleet transition, and we think securitization will help. All that said, we updated our emissions reduction targets, as part of our last quarter call. As you saw, we've got a 70% reduction by 2030 objective and a net zero target by 2045. So we think we're driving to strike the right balance, and we'll constantly be looking at that to make sure that we're balancing across affordability, reliability and sustainability. Hopefully, that gets to your question.

Yeah, that helps. That helps a ton. Follow-up, O&M has averaged about year-over-year, down about $12 million, $13 million a quarter. Kirk, should we assume a similar run rate when we think about the second half of the year? And then the pace of O&M reductions as you enter 2022, do you still see a pretty sizable cost savings opportunity for 2022 and beyond?

Thanks. Michael, we do. Just as a reminder, when you think about the year-to-date results or year-over-year differences, as I noted, one of those contributing factors, at least this year, we saw some favourability on bad debt expense, which is certainly a positive. Overall, our outlook for the year remains unchanged from the indications I gave on the fourth quarter call when we first introduced guidance. One of the key success factors that having joined the company in 2021 as the CFO, I can take little credit for, but the management team, as you'll recall, was able to deliver a cadence of O&M in 2020, which actually was in line with our 2021 objective. So we - if you think about it that way, we got a year ahead on our savings pace. So therefore, our expectation, as a reminder, as I indicated when we provided guidance initially was our year-over-year 2020 to '21 O&M, total O&M, we expect to be relatively flat, and we're on pace to deliver that. A little bit of intra-year timing is largely the contribution to what we're seeing year-to-date. But we do expect a good continued cadence of O&M reductions as we move forward into '21, '23. Going toward that target to be well comfortably below $1 billion a year by the time we get to 2024.

Okay, Kirk. So I want to make sure I followed. Just for the second half of '21, you don't expect to see similar savings that you've seen year-over-year relative to the first half of '21?

No. And that would align with our expectation, which continues to be relatively flat year-over-year overall in O&M.

Got it. Thanks, Kirk.

You bet.

Our next question comes from Julien Doumoulin-Smith of Bank of America. Your line is open.

Hey, good morning. This is Darius on for Julien. Just wanted to ask about the retail customer count that you guys highlighted on one of your slides. It's pretty impressive at over 1% year-to-date. Just curious if you could talk a little bit about the composition of that, and perhaps how it compares against your expectations for the year? And perhaps how that might look on a prospective basis as well?

So sure, it's Kirk. Our customer growth, while it's certainly a good indicator year-over-year, the mix, I can't quote that off the top of the head, but largely in line with our expectations. However, as I also indicated, despite the fact we've got an increase in customer account, our overall utilization per customer is down year-over-year. That's in line with our expectations because we expected the impact of stay from home, which was most acute in the second quarter of last year to abate as people kind of return to work. That level of abatement has been a slower pace, right. So the stay at home effect on a utilization perspective, notwithstanding in fact, we did see that nice year-over-year increase in customers has been elevated relative to our expectations. And that certainly understand we expect that to continue a little longer now that we've got the impact of the Delta variant on the stay at home. But overall, despite the fact that we're certainly pleased with the overall increase in customer count. As we expected, the utilization rates per customer comparable year-over-year is down again due to that COVID effect.

Great. Thank you. And one more, if I can. On your '25 CapEx, you've had the potential for a $250 million increase in your last couple of slide deck. Just curious if you could maybe discuss the puts and takes, as far as what is driving or what will drive the decision as far as when to formally include that in the plan?

So thanks for the question, and we look - we're glad to clarify that. So we plan to lay that out as part of our Investor Day and just be more specific around it. So we work through our annual planning process with our operating team. We also consider, of course, the renewables plans that we have, and we're going to plan on giving you - giving the Street a more firm view of that as part of our Investor Day, just rolling forward into the next year.

Okay, great. I'll leave it there. Thank you very much.

Thank you.

[Operator Instructions] There are no further questions. I'd like to turn the call back over to David Campbell for your closing remarks.

Okay. Great. So I'll close with a comment on 2021, and sort of implicit in some of the questions we received, just so I'll go ahead and hit at this. As I mentioned, and as Kirk noted, we're maintaining our guidance range. There are some items in the first half. And as a general matter, Q3 is our biggest quarter - just some timing into the first half. Q3 is our biggest quarter. COLI had some uncertainty. We'll, of course, continue to model the impact of the pandemic. But all that said, given where we are now, we would be disappointed if our results in 2021 don't end up in the top half for the full year. We'll point to provide an update on 2021 as part of our Analyst Day in September. But we're pleased with our solid start. And we appreciate your time with us today. And we wish you a good day. Thank you.

This does conclude the program. You may all disconnect. Everyone, have a great day.