01—Abstract
Summary
Summary of the 10-K filed February 22, 2019. Cited figures are marked; the original filing is the authoritative source.
Evergy, Inc. (filed as Evergy, Inc.; formed in 2017 as Monarch Energy Holding) filed this combined 2018 Form 10-K with Westar Energy, Inc. and Kansas City Power & Light Company.
Evergy became the parent of Westar Energy and Great Plains Energy's subsidiaries, including KCP&L and KCP&L Greater Missouri Operations, when the merger closed on June 4, 2018. Westar Energy was the accounting acquirer, so 2017 and 2016 results reflect Westar alone. Consolidated operating revenues were $4,275.9 milliona in 2018, up from $2,571.0 million in 2017, and net income attributable to Evergy was $535.8 million, or $2.50 diluted EPS, versus $323.9 million and $2.27 in 2017.
The company reported $1,042 millionb of share repurchases in 2018 under a 60 million share program expected to be completed by mid-2020, and it recorded $2,338.9 million of goodwill from the merger, with the first impairment test scheduled for May 1, 2019. The filing describes a fully regulated utility model serving about 1,588,300 customers in Kansas and Missouri, with roughly 14,500 MW of owned generating capacity and renewable purchased power agreements. Total long-term debt including current maturities was $7.34 billion at year-end, and cash flows from operations were $1,497.8 million.
Evergy's board declared a quarterly dividend of $0.475c per share in February 2019, and the company targets a long-term payout ratio of 60% to 70% of earnings. Several rate orders took effect in late 2018 that include a five-year base rate moratorium in Kansas beginning December 2018, the reduction of federal tax-related revenue, and one-time customer bill credits tied to the merger and the TCJA. Key risk areas disclosed include regulatory lag and rate review outcomes, environmental compliance costs for greenhouse gas and coal combustion residual rules, nuclear operations at the 94%-owned Wolf Creek plant, and financing costs tied to the buyback program and credit ratings.
02—Key points
Key Highlights
- Revenue rose to $4,275.9 million in 2018 from $2,571.0 million in 2017, primarily reflecting the inclusion of KCP&L and GMO beginning June 4, 2018.
- Net income attributable to Evergy was $535.8 million, or $2.50 diluted EPS, compared with $323.9 million, or $2.27, in 2017.
- Evergy repurchased about $1,042 million of common stock in 2018, including 16.4 million shares, under a 60 million share authorization expected to be completed by mid-2020.
- Goodwill of $2,338.9 million from the merger will face its first impairment test on May 1, 2019.
- Evergy's board declared a quarterly dividend of $0.475 per share in February 2019, and the company targets a 60% to 70% long-term payout ratio.
- A five-year base rate moratorium in Kansas took effect in December 2018, and KCP&L and GMO elected PISA effective January 1, 2019.
- Credit ratings as of February 21, 2019 were A- (S&P) for Evergy's corporate credit rating and Baa2 (Moody's) for its senior unsecured debt.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 22, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.28B$2.57B | +66.3% |
| Operating Expenses | $3.34B$1.89B | +76.6% |
| Operating Income | $933.60M$678.80M | +37.5% |
| Interest Expense | $279.60M$171.00M | +63.5% |
| Net Income | $535.80M$323.90M | +65.4% |
| EPS (Basic) | $2.50$2.27 | +10.1% |
| EPS (Diluted) | $2.50$2.27 | +10.1% |
| Shares Outstanding (Basic) | 213.90M142.50M | +50.1% |
| Shares Outstanding (Diluted) | 214.10M142.60M | +50.1% |
05—Questions
Frequently Asked Questions
What drove the large increase in Evergy's 2018 results compared with 2017?
The filing attributes the increase mainly to the inclusion of KCP&L's and GMO's results from June 4, 2018, the merger closing date, which added $1,181.5 million of utility gross margin. Higher Westar Energy retail sales from favorable weather and lower income tax expense also contributed, partly offset by merger-related costs of $69.5 million and a $69.8 million rate refund provision tied to the TCJA.
How is Evergy returning capital to shareholders?
Evergy paid cash dividends of $475.0 million in 2018 and repurchased $1,042.3 million of common stock. The board authorized up to 60 million shares in July 2018, with no expiration date, and expects to complete the program by mid-2020. Evergy anticipates issuing debt in 2019 to support the buyback.
What are the main regulatory developments investors should know about?
Westar Energy's Kansas rate case settled at a 9.3% return on equity and a 51.46% equity ratio, with rates effective September 27, 2018. KCP&L's Kansas case settled at 9.3% and 49.09%, and its Missouri and GMO rate orders took effect December 6, 2018. Missouri Senate Bill 564 allows PISA deferrals, and the company also committed to a Kansas base rate moratorium through December 2023.
What is the company's exposure to nuclear and environmental risks?
Evergy owns 94% of Wolf Creek Generating Station, with Westar Energy and KCP&L each holding 47%. The filing notes potential NRC action, decommissioning funding shortfalls, and retrospective insurance assessments. On the environmental side, the company cites evolving greenhouse gas rules, including the proposed Affordable Clean Energy rule, coal combustion residual requirements, and water discharge permit issues at KCP&L's Hawthorn Station. The company states it cannot predict the final impact of these rules.
06—Continue