01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Evergy, Inc. (NYSE: EVRG) and its subsidiaries Evergy Kansas Central, Inc. and Evergy Metro, Inc. filed this combined 2020 annual report on Form 10-K.
Evergy is a public utility holding company headquartered in Kansas City, Missouri, serving approximately 1,620,400 customers in Kansas and Missouri, with approximately 15,400 MWs of owned generating capacity and renewable power purchase agreements. Evergy reported 2020 operating revenues of $4,913.4 milliona and net income attributable to Evergy, Inc. of $618.3 million, or $2.72 diluted EPS, down from $669.9 million and $2.79 in 2019, primarily due to unfavorable weather, lower commercial and industrial demand from COVID-19 restrictions, and higher depreciation, interest and voluntary severance costs. Adjusted EPS (non-GAAP) was $3.10 in 2020 versus $2.89 in 2019.
Management highlighted its five-year Sustainability Transformation Plan (STP), announced in August 2020, which targets about $330 millionb of operating and maintenance expense reduction by 2024 versus 2018 adjusted levels and approximately $8.9 billion of base capital investments through 2024. The company reports a 2020 CO2 reduction of about 50% from 2005 levels, with a goal of 80% by 2050. In February 2021, Evergy agreed to sell 2,269,447 common shares to an affiliate of Bluescape Energy Partners for approximately $113.2 million, with a warrant for up to 3,950,000 additional shares at $64.70, and entered into agreements with Elliott Investment Management that add two directors to the board effective March 1, 2021.
The filing also describes the February 2021 winter weather event, which the company estimates increased net natural gas and purchased power costs by approximately $300 millionc, a figure it describes as preliminary; the company expects to recover substantially all of these costs through fuel recovery mechanisms, though timing could be delayed. Cash flows from operations were $1,753.8 million in 2020, and capital expenditures were $1,560.3 million.
02—Key points
Key Highlights
- Net income attributable to Evergy, Inc. was $618.3 million ($2.72 diluted EPS) in 2020, down from $669.9 million ($2.79) in 2019; adjusted EPS (non-GAAP) was $3.10 versus $2.89.
- Operating revenues were $4,913.4 million in 2020 versus $5,147.8 million in 2019, driven by lower retail sales from unfavorable weather and reduced commercial and industrial demand during COVID-19.
- The Sustainability Transformation Plan targets roughly $330 million of operating and maintenance expense reduction by 2024 and approximately $8.9 billion of base capital investments through 2024.
- Capital expenditures were $1,560.3 million in 2020, and cash flows from operations were $1,753.8 million.
- Bluescape agreed to buy 2,269,447 shares for approximately $113.2 million, with a warrant for up to 3,950,000 additional shares at $64.70 exercisable over three years.
- The February 2021 winter weather event is estimated to have increased net fuel and purchased power costs by approximately $300 million; this is a preliminary estimate, and the company expects substantially all costs to be recovered from customers.
- Evergy's regulated utilities had 2020 CO2 emissions roughly 50% below 2005 levels, with a goal of an 80% reduction by 2050.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $4.91B$5.15B | −4.6% |
| Operating Expenses | $3.77B$3.96B | −4.9% |
| Operating Income | $1.14B$1.19B | −3.5% |
| Interest Expense | $383.90M$374.00M | +2.6% |
| Net Income | $618.30M$669.90M | −7.7% |
| EPS (Basic) | $2.72$2.80 | −2.9% |
| EPS (Diluted) | $2.72$2.79 | −2.5% |
| Shares Outstanding (Basic) | 227.20M239.50M | −5.1% |
| Shares Outstanding (Diluted) | 227.50M239.90M | −5.2% |
05—Questions
Frequently Asked Questions
Why did Evergy's 2020 earnings decline compared with 2019?
The filing attributes the decline in net income attributable to Evergy, Inc. (from $669.9 million to $618.3 million) primarily to lower retail sales from unfavorable weather and a decrease in weather-normalized commercial and industrial demand due to COVID-19 business closures and capacity limits. Higher depreciation and interest expense also contributed, partly offset by lower operating and maintenance expenses. Excluding non-GAAP items, adjusted EPS rose to $3.10 from $2.89.
What is the Sustainability Transformation Plan and what does it target?
Announced in August 2020, the five-year STP aims to optimize value for shareholders, customers, communities and employees. Its stated targets include reducing operating and maintenance expense by about $330 million by 2024 from 2018 adjusted levels, reducing fuel and purchased power expense by about $145 million between 2019 and 2024, and targeting approximately $8.9 billion of base capital investments through 2024. The plan also has the potential to reduce CO2 emissions by up to 85% by 2030 compared with 2005.
What were the terms of the February 2021 Bluescape investment?
Under a securities purchase agreement dated February 25, 2021, Bluescape Energy Partners agreed to buy 2,269,447 shares of Evergy common stock for about $113.2 million and receive a three-year warrant to purchase up to 3,950,000 additional shares at $64.70 per share. Closing is subject to customary conditions, including expiration of the Hart-Scott-Rodino waiting period. C. John Wilder and Mary L. Landrieu are to join the board effective March 1, 2021.
How significant is the February 2021 winter weather event for Evergy?
Evergy estimates that the event increased net natural gas and purchased power costs by approximately $300 million, which it describes as a preliminary estimate. The company has fuel recovery mechanisms in Kansas and Missouri that allow it to defer substantially all of these increased costs for future recovery from customers, and the KCC issued an emergency order allowing deferral of extraordinary costs. The filing notes recovery timing could be delayed, and the full financial statement impact cannot yet be estimated.
What is Evergy's dividend and dividend policy?
In February 2021, Evergy's board declared a quarterly dividend of $0.535 per share, payable March 22, 2021 to shareholders of record as of March 8, 2021. Cash dividends per common share were $2.05 in 2020 versus $1.93 in 2019. Evergy targets a long-term dividend payout ratio of 60% to 70% of earnings, although the amount and timing of dividends remain at the board's discretion.
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