Thank you for standing by and welcome to EVRG's Third Quarter earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator instructions] I will now like to hand the conference over to your host, Vice President Investor Relations and Treasurer, Lori Wright. Please go ahead.

Thank you, [Indiscernible]. Good morning, everyone and welcome to Evergy Third 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 continue with 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. evrg.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 third quarter highlights, recap our recent Investor Day, and provide an update on our near-term resource plan. Kirk will cover in more detail the third quarter results, the latest on sales and customer information, 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.

Thank you, Lori. And good morning, everyone. I'll begin on Slide 5 of our presentation. This morning, we reported third quarter adjusted earnings of $1.98 per share compared to a $1.73 per share a year ago, equal to a 14% increase. On a period-over-period basis, these results were driven primarily by favorable weather, higher transmission margin, higher other income, and lower income taxes, partially offset by a decline in weather-normalized demand. For year-to-date September 30th, adjusted earnings were $3.38 per share compared with $2.82 per share a year ago, equal to a 20% increase. As with the quarter, favorable weather is the most significant driver. With these strong results, we are raising and narrowing our adjusted EPS guidance range to $3.50 -- to $3.60 per share, an increase from $3.20 to $3.40 per share. I commend and thank our team's ability to execute and focus on providing safe and reliable electric service to our customers throughout the first 9 months of the year, notwithstanding the lingering pandemic impacts and a significant winter weather event in February. Kirk will detail the drivers of our financial performance that resulted in the upside guidance revisions. In addition, we are affirming our 2022, adjusted EPS guidance, of $3.43 to $3.63 share, as well as our targeted annual adjusted EPS growth target of 6%-8% through 2025, as we laid out during our Investor Day. Lastly, this morning, we also announced a 7% increase in our quarterly dividend to $57.25 per share, or $2.29 per share on an annualized basis. This increase is consistent with our growth trajectory and reflects our Board's confidence in the execution of our plan. Moving on to slide 6, I'll provide a brief recap of the business plan highlights from our recent Investor Day. As part of the event, we re-based…

Thanks, David. And good morning, everyone. I'll start with results for the quarter on Slide 10. For the third quarter of 2021, EVRG delivered adjusted earnings of $455 million or a $1.98 per share, compared to $393 million or a $1.73 per share in the third quarter of 2020. The 14% increase in third quarter adjusted EPS was driven by the following items, as shown on the chart from left to right. First, there were significantly more cooling degree days this past quarter as compared to the third quarter of 2020, resulting in $0.20 of favorable contribution from weather. Adjusting for milder than normal weather experienced in the third quarter of 2020, the third quarter of this year saw $0.13 of EPS versus normal weather assumed in our original plan. The strong favorable weather impacts this quarter was partially offset by 1.2% decline in weather-normalized demand or approximately $0.06 per share. Higher transmission revenue resulting from our ongoing investments to enhance our transmission infrastructure drove about $0.06 per share. Other income increased $0.04 per share, driven by higher investment earnings from some of our investments in early-stage energy solution companies. Income tax-related items, which include the impact of the Kansas incomes tax rate exemption effective this year, and higher amortization of excess deferred income taxes, partially offset by the timing of tax credit recognition, to maintain our effective income tax rate for the year, drove a net increase of $0.04 per share. And finally, other items, which consist primarily of higher depreciation and amortization and property tax expense, as well as the impact of shares issued to Bluescape in April, were partially offset by lower O&M, which when combined represent a net $0.03 decrease. I'll turn next to year-to-date results which you'll find on Slide 11. For the 9 months…

Thank you, Kirk. For everyone on the call, we appreciate your time with us today. And now we'd be happy to take your questions.

As a reminder, [Operator Instructions]. Please stand by while we compile the Q&A roster. Our first question comes from the line of Shar Pourreza of Guggenheim Partners. Your question, please.

Good morning, guys.

Good morning, Shar.

Just a couple of questions here if I may. First, the updated guidance for 2021, which obviously even as weaker weather-normalized demand is somewhat noticeably higher, right? Are you including any pull-forward of OpEx from '22? I'm just try to get a sense on potential flexibility in next year's guide, especially as we're seeing some demand drag continuing to -- into '22 versus your prior expectations.

So Shar, as Kirk mentioned, we do have a series of timing and phasing of operating costs, some of that's timing within this year, some of that's -- go forwards from the forward plan. And we're not adjusting our guidance for 2022, the only time you have the opportunity to do prudent managing your costs. You look at that across the four planned years and it can help [Indiscernible] execution. But given the size of the numbers, we're not changing our guidance for 2022, but as companies do in this circumstance with some favorable weather, we are certainly looking at how, and we'll continue to look at how. Are there pull-forward items, or are there items that we can address this year? There are limits in what you can do in that range. But as -- all companies look at that piece. So [Indiscernible] of it does relate to timing into our year in '21.

Got it. See, you have some contingency there to cushion.

We're not changing our guidance in 2022 but we're -- we feel good about our ongoing execution trajectory.

Okay. Got it. And then just on the O&M side, obviously, some pretty sizable reductions you're expecting through '25. How do we sort of think about where you're currently guiding versus the overall opportunity set? You see more -- do you see more to squeeze, especially as you guys are shooting for Tier 1 utility status and even further, looking at asset-level transition opportunities. 25% reduction is a lot, the question is, can you do more?

That's great question, Shar. I know we've talked about this on prior calls. I think the Company has done a terrific job for Kirk, since my arrival coming in this year, a lot of cost savings achieved post-merger '19 and '20. Ongoing trajectory of those reductions. And we've [indiscernible] up as part of our Investor Day, we described how we think there's an ongoing opportunity for 1% to 2% productivity gains. So, we think it will be along the lines of executing the plan that we've laid out and then continuing to drive improvements across our business through a systematic process. I think that's how we view our opportunity set is really driving that continuous improvement over time, consistent with what we've laid out in the Investor Day plan.

Got it. And then just lastly for me, if I may just on the IRP how much did you file earlier this year, we've already seen multiple stakeholder groups make some noise in the Kansas docket. Staff made some positive and constructive comments. Um, what should we be watching for in the process for the balance of the year across the states. And more importantly, is there any concerns around the IRP related spending opportunities in light of some of the input cost pressures? We've seen in the renewable space. I mean, how do you price in these headwinds as we think about future generation opportunities through 26 and beyond. Thank you.

Thanks Shar on the and I'll ask Kirk to supplement the commentary we filed for predetermination relating to the 190 megawatts of solar. So we'll have the chance to review that spend program and in our planned addition as part of a regulatory fine before we advanced the process. Know part of why that program was sized down a little bit in scope from the initial estimates at 50 megawatts reflected the overall supply chain environment and maturity of the solar pipeline in SPP relative to the more mature pipeline on the wind side. We will continue to evaluate that, but we like that we have that opportunity to have that dialog proactively as part of the pre -determination process. And we've launched the RFP for wind in 2024, and 2025, as we described. So we'll see where those bids come out now. We'll see how long the supply chain pressures advance, but I noted that we've got a target for reaching agreements related the IRPs, at least for the first year and mid-2022. So we have a good sense what -- plenty of time to evaluate what we're seeing in the supply chain, to make sure that what we're achieving drives our objectives of reliability, affordability, and sustainability. Always keep a focus on that. I think the intervener comments and the IRP proceedings are relatively consistent with what you'd expect, which probably, reflects that we're striking a balance in what we're striving to do and we'll continue to do that, being mindful of the affordability impacts, as you note, of some of the supply chain pressures. And that's why we're trying to take a pretty systematic and diligent approach to how we tackle it. Kirk, anything to add?

Just building on that last point. Certainly we're -- my club and I'm not immune to seeing the cost and supply chain pressures. They're affecting across many sectors, including, but not limited to renewables. Part of the reason why we made the slight shift that we did rather magnitude of the solar and advancing wind. But beyond that as we indicated our Investor Day, we're looking at all facets of opportunities. Obviously, David mentioned we launched recently our RFP. That's our primary focus but we have some self-development opportunities. The potential around some of those PPA s buy-ins and repowering and given on -- given the existing dialogue around some of the aspects of the billback better framework, which is still a framework, but some of the potential for tax incentives, because that can be potential mitigants and help aid affordability, help offset some of that cost pressure for us. I think we've got a lot of levers and flexibility where that's concerned, but we're certainly laser-focused on finding the right blend from an affordability and a reliability standpoint on that -- on the renewables front.

I appreciate it. That's great color. Thanks, guys.

Thank you.

Thank you. Our next question comes from Julien Dumoulin-Smith, of Bank of America. Your question, please.

Hi. Good morning, this is Darius on for Julian. Thanks for taking my question. I just wanted to start off --

Good morning.

Good morning. Just wanted to start off on thinking about the average customer bills as we head into the heating season, obviously quite a bit of news out there about fuel volatility and the impact that could have on bills, do you have any quantified sort of your average estimate for how much bills could increase either on a percentage basis or on a dollar-per-customer basis? And could you perhaps maybe speak to how that compares to your regional neighbors? I know there's fuel mixed differences, so I think that might go in your favor, but if you could speak to that, please.

Sure. it's, obviously, something we track closely. And we have a much smaller natural gas position than some of our neighbors. I can't comment on where their bill trajectory will go, but I'm sure you've been able to to note the relative mix of gas relative to others. We about -- in 2020, only about 5% of our fuel and purchase power was natural gas related. Natural gas price movements have not had a significant impact. We do have a relatively sizable amount of coal, so the 40% range, and it has certainly been moving in PRB pricing. We've got some protection around that from a hedging perspective over the near term. If those pricing pressures persist all the way through 2022, then obviously we will have to see what those impacts are and see what the net impacts are in the wholesale market of course as well, we have a very sizable wind portfolio. And that wind portfolio will benefit relatively from higher prices when their fuel prices don't move, of course, on the wind side. So, our net we are in a lower general bill season where our enterprise is summer heavy. So the highest customer bills are typically in the summer. So in the fall, we're rolling into what are typically significantly lower customer bills. But it's something we're very focused on. Again, net relative to those who are more natural gas intensive, they are like to be facing more intensive fuel costs. But again, all depends on what their hedge approaches. But on a relative mix basis, we don't have the same exposure natural gases haves.

Okay, great. Thank you for that detail. Just on the predetermination filing in Kansas that you referred to in the opening remarks, could we potentially see -- I know you talked about the time-frame for when you expect an order. I think you said mid '22. Should we expect to see a securitization filings that shortly thereafter, assuming you get a favorable order in that predetermination docket?

Yes. So that proceeding includes asking for securitization relating to the retirement of the coal facilities in Lawrence, since the retirement of Lawrence unit 4, as well as the shared coal handling facilities. It's relatively modest in size, but we would expect six securitization relating to that assuming that proceeding goes as planned.

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

Thank you.

Thank you. And next question comes from Michael Sullivan of Wolfe Research. Your question, please.

Hey, everyone. Good morning.

Good Morning, Michael.

Kirk, I just wanted to follow-up on some of the comments you made a little bit ago on the Biden Build Back Better plan, if maybe you just want to give a little more color on what some of the changes there could mean for you guys in terms of the Wind RFP, the PPA buy-ins, and then maybe also direct pay. Just how we should be thinking about some of the puts and takes there.

Sure, Michael. Starting on the wind side, obviously the prospects of an extension in returning to full power, if you will, on the production tax credit side, that is certainly a net positive. Both in the context as I've mentioned before, from an affordability standpoint, which we're very focused on. The magnitude of those tax credits and the reliability of over a longer period of time being more robust. I think, that's added benefit in terms of meeting our objectives around affordability. It also speaks to greater flexibility in terms of the cadence, and pace, and mix of renewable investment. And as you'll recall, we pulled forward. Some of our wind investments to take advantage, or at least to in account for the existing expiry of the production tax credits. Obviously an extension thereof, and an increase thereof would give us greater flexibility where that's concerned. And I think the knock-on effect areas, as we mentioned, certainly the buy-in of PPA is one thing but combining those PPAs with repowering’s and those repowering’s are going to be certainly depended upon taking advantage of those production tax credits. That gives us a greater tailwind on the latter portion of that two-pronged strategy about that PPA buy-in combining of repowering the last piece of it, I would say is on the solar side where the investment tax credit is concerned. Certainly in the prospects of direct pay, for example, which is a more efficient way to deal with that ITC, which we have to deal with all-in-one lump sum. Also, a benefit on the solar side to us, again, from the affordability standpoint. and how that's reflected in rates. A lot of details to come. There are certain requirements there around that, but we need to see more details on -- in terms of things like wage fairness and domestic content. But we feel optimistic that, both on the solar and wind side, that certainly creates a tailwind for us, both in terms of flexibility and affordability for our customers, as we make good on our renewable’s objectives.

Great, super helpful. And just a follow-up there. Any thoughts on potential cash flow or balance sheet impact from things like direct pay?

To some extent, yes. I think in terms of the direct pay aspect of things that I mentioned before, obviously, as we reached the middle of the decade, we gain a greater appetite for cash taxes and obviously the ITC is an offset to that, to the extent to which it becomes direct pay and that isn't as directly impact on our cash flows. But an increase in the magnitude of the PTCs can help offset it's just another form through which we can take advantage of that tax appetite. Net again, I'd see that's certainly a positive. Maybe it's just a different mix and probably, or take advantage of our increasing tax appetite once we reached the middle of the decade and thereafter.

Great. And just the last one, kind of small, but on the Power Marketing benefit that you guys are realizing in '21, that's in the new guide that that's separate from?EW3? and just anymore color on that?

Sure. Yes, that's correct. Good question. As you recall, we did have some Power Marketing margins that we earned during the winter weather event. Those remain and have been excluded from our adjusted EPS. The upside or the out-performance as I termed it, is in addition to, or above and beyond that item that we'd excluded from our adjusted earnings. So we had certain expectations going into the year. And the Power Marketing businesses has just exceeded those expectations. Again, above and beyond the excluded item there.

Still a small proportion of our total business -- Oh, yes. -- But, I think, we are -- if you look across power marketing Evergy Ventures, Tran source, Prairie Wind, altogether, it's, even in the revised guidance with the stronger performance, a little under 5% -- or less than 5% of the earnings.

Okay, great, thanks a lot. Go [Indiscernible], Kirk.

Thank you. Your mouth to God's ear. Thank you.

Okay. Moving on from the [Indiscernible] inner joke circle, other questions?

Our next question comes from Michael Lapides of Goldman Sachs. Please go ahead.

Hey, guys. Thank you for taking my question. A high-level one about the re-powering opportunity. Can you remind us, how many megawatts of wind do you have under PPA currently? And how many of those are contracts that are, call it ten years old or older?

Sure Michael. It's Kirk. It's about 3.8 gigawatts, in total, in terms of our PPA portfolio. And as we had laid out, I think on the Investor Day in one of our slides, which kind of showed the roll-off and we're very focused on the subset of that portion in terms of contracts. Those contracts really don't begin expiring till just after the middle of the decade. But our focus here is on the expiry of the PTCs. We've got a little more than 1.2 gigawatts of that or almost 1.3 gigawatts of that 3.8 gigawatts, who's PPA or PTCs rather the production tax credits, are expiring between now and the middle of the decade. As those PPA or PTCs expire, we think that's probably the most meaningful subset of those 3.8 gigawatts PPAs that we're focused on in the near-term while re-powering and buying opportunities. Because our counter parties have obviously taken full advantage of that point of all in PTCs. And I think that's probably the targets that we're looking at, if that helps.

Got it. And if you do a buy-in, a couple of things. First of all, that's not embedded in your capex guidance. So the annual rate base guidance that would be upside to that. And then the second question, lots of those projects have project debt. How would you -- would you just basically take out the project debt or assume -- or most of those on -- have project debt, that was an amortizing loan so you're near the tail end of that debt? I'm just curious about taking a project off the books of a non-regulated developer and putting into a utilities rate base.

Yeah good question. I think we probably would not look to transfer obviously, the project debt because it's relatively fully amortized. It would probably be a full buy-in and so we purchased this on an unlevered basis and obviously some of those proceeds would go to take out the existing project debt. Think about it as a pure rate base investment on the PPA buy-in side.

And Michael, your -- first part of question, you are correct that none of this is in our current capex styles that was PPA buying a repowering would -- wherever we get those negotiated, those would be upside or in addition to our current guidance. Yes.

Got it. Thank you, guys. Much appreciated.

Thank you.

Your next question comes from Paul Patterson of Glenrock Associates. Your line is open.

Good morning.

Morning, Paul.

Just -- It's just -- I apologize, but if we could just go over the investment income and the expectations for 2022. When I'm looking at slide 14, I assume that the investment income will -- let me ask this. So what are you -- and I apologize for not just completely getting this. But in 2021, what is the expected investment income in total? I've used $0.12 so far today, so just today. But what would the stack and everything else that you're talking about -- where is it going to start of come in in 2021?

Sure. In 2021 on the Power Marketing side, we've probably got up about $0.05 of total impact from investment income that comes from a couple of sources. Some of that is, we like a lot of other utilities invest in other funds, Energy Impact Partners is 1 of those. So some of that is the market. Some of that is, as I mentioned before earlier in the year, on a direct investment side, we actually had an actual monetization of that and that's probably the disproportionate share of that. Through the first half of the year is that monetization events or the combination of those 2 things. Obviously, that contributed to exceeding our expectations on the upside, obviously.

And I'll just clarify. Kirk [Indiscernible] Power Marketing, but that's the average events. [Indiscernible]

Evergy Ventures. Sorry. Of Evergy Ventures, the investor mark. Thanks, David. And then if you look forward into 2022, and beyond, as I mentioned before, that $0.05 is out-performance. On an ongoing basis, certainly in our '22 guidance, it's more like a penny or two. On the Evergy Ventures contribution.

Okay. Great. Okay. And then the rest of my questions have been answered. hanks so much.

Thank you, Paul.

Thank you. Our next question comes from Travis Miller of Morning Star. Your question, please. Travis, please make sure your line is immediate and if in a speakerphone lift the handset., All right. At this time, I'd like to turn the call back over to David Campbell for closing remarks. Sir?

Great. Thank you very much. We appreciate all of you joining us this morning. And we look forward to seeing many of you in person next week at EI. Signing off.

This concludes today's conference call. Thank you for participating. You may now disconnect.