| | | | | | | | | | | | | | | | | | | | | | | | | | |
| EVERGY KANSAS CENTRAL, INC. |
| Consolidated Statements of Income |
| (Unaudited) |
| | | | |
| | Three Months Ended
September 30 | | Year to Date
September 30 |
| | 2020 | | 2019 | | 2020 | | 2019 |
| | (millions) |
| OPERATING REVENUES | | $ | 733.6 | | | $ | 749.0 | | | $ | 1,864.5 | | | $ | 1,931.3 | |
| OPERATING EXPENSES: | | | | | | | | |
| Fuel and purchased power | | 128.6 | | | 144.9 | | | 329.9 | | | 375.3 | |
| SPP network transmission costs | | 66.1 | | | 62.4 | | | 197.8 | | | 188.7 | |
| Operating and maintenance | | 137.4 | | | 140.4 | | | 376.3 | | | 396.4 | |
| Depreciation and amortization | | 113.4 | | | 110.9 | | | 339.0 | | | 331.3 | |
| Taxes other than income tax | | 47.4 | | | 48.0 | | | 145.1 | | | 145.3 | |
| Total Operating Expenses | | 492.9 | | | 506.6 | | | 1,388.1 | | | 1,437.0 | |
| INCOME FROM OPERATIONS | | 240.7 | | | 242.4 | | | 476.4 | | | 494.3 | |
| OTHER INCOME (EXPENSE): | | | | | | | | |
| Investment earnings | | 1.0 | | | 0.6 | | | 3.4 | | | 3.0 | |
| Other income | | 2.7 | | | 2.3 | | | 11.3 | | | 13.0 | |
| Other expense | | (9.7) | | | (10.8) | | | (26.9) | | | (29.9) | |
| Total Other Expense, Net | | (6.0) | | | (7.9) | | | (12.2) | | | (13.9) | |
| Interest expense | | 40.3 | | | 41.7 | | | 127.7 | | | 134.1 | |
| INCOME BEFORE INCOME TAXES | | 194.4 | | | 192.8 | | | 336.5 | | | 346.3 | |
| Income tax expense | | 22.5 | | | 25.8 | | | 149.2 | | | 46.2 | |
| Equity in earnings of equity method investees, net of income taxes | | 1.2 | | | 1.2 | | | 3.4 | | | 3.6 | |
| NET INCOME | | 173.1 | | | 168.2 | | | 190.7 | | | 303.7 | |
| Less: Net income attributable to noncontrolling interests | | 3.0 | | | 4.1 | | | 8.7 | | | 12.9 | |
| NET INCOME ATTRIBUTABLE TO EVERGY KANSAS CENTRAL, INC. | | $ | 170.1 | | | $ | 164.1 | | | $ | 182.0 | | | $ | 290.8 | |
|
| | | | | | | | | | | | | | | | |
| EVERGY KANSAS CENTRAL, INC. |
| Consolidated Statements of Income |
| (Unaudited) |
| | | | | |
| | | Three Months Ended
September 30 | | Year to Date
September 30 |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| | | (millions) |
| OPERATING REVENUES | | $ | 749.0 |
| | $ | 764.8 |
| | $ | 1,931.3 |
| | $ | 2,015.9 |
|
| OPERATING EXPENSES: | | | | | | | | |
| Fuel and purchased power | | 144.9 |
| | 169.7 |
| | 375.3 |
| | 463.2 |
|
| SPP network transmission costs | | 62.4 |
| | 58.4 |
| | 188.7 |
| | 194.4 |
|
| Operating and maintenance | | 140.4 |
| | 141.7 |
| | 396.4 |
| | 491.4 |
|
| Depreciation and amortization | | 110.9 |
| | 95.9 |
| | 331.3 |
| | 281.6 |
|
| Taxes other than income tax | | 48.0 |
| | 42.2 |
| | 145.3 |
| | 128.8 |
|
| Total Operating Expenses | | 506.6 |
| | 507.9 |
| | 1,437.0 |
| | 1,559.4 |
|
| INCOME FROM OPERATIONS | | 242.4 |
| | 256.9 |
| | 494.3 |
| | 456.5 |
|
| OTHER INCOME (EXPENSE): | | | | | | | | |
| Investment earnings (loss) | | 0.6 |
| | — |
| | 3.0 |
| | (0.4 | ) |
| Other income | | 2.3 |
| | 1.3 |
| | 13.0 |
| | 4.9 |
|
| Other expense | | (10.8 | ) | | (15.2 | ) | | (29.9 | ) | | (36.1 | ) |
| Total Other Expense, Net | | (7.9 | ) | | (13.9 | ) | | (13.9 | ) | | (31.6 | ) |
| Interest expense | | 41.7 |
| | 43.9 |
| | 134.1 |
| | 132.1 |
|
| INCOME BEFORE INCOME TAXES | | 192.8 |
| | 199.1 |
| | 346.3 |
| | 292.8 |
|
| Income tax expense (benefit) | | 25.8 |
| | 22.4 |
| | 46.2 |
| | (22.0 | ) |
| Equity in earnings of equity method investees, net of income taxes | | 1.2 |
| | 1.3 |
| | 3.6 |
| | 3.7 |
|
| NET INCOME | | 168.2 |
| | 178.0 |
| | 303.7 |
| | 318.5 |
|
| Less: Net income attributable to noncontrolling interests | | 4.1 |
| | 2.6 |
| | 12.9 |
| | 7.6 |
|
| NET INCOME ATTRIBUTABLE TO EVERGY KANSAS CENTRAL, INC. | | $ | 164.1 |
| | $ | 175.4 |
| | $ | 290.8 |
| | $ | 310.9 |
|
The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | |
| EVERGY KANSAS CENTRAL, INC. | |
| Consolidated Statements of Cash Flows | |
| (Unaudited) | |
| |
| Year to Date September 30 | 2020 | | 2019 | | | |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: | (millions) | |
| Net income | $ | 190.7 | | | $ | 303.7 | | | | |
| Adjustments to reconcile income to net cash from operating activities: | | | | | | |
| Depreciation and amortization | 339.0 | | | 331.3 | | | | |
| Amortization of nuclear fuel | 21.6 | | | 21.2 | | | | |
| Amortization of deferred refueling outage | 9.5 | | | 9.7 | | | | |
| Amortization of corporate-owned life insurance | 14.8 | | | 16.5 | | | | |
| | | | | | |
| Net deferred income taxes and credits | 155.0 | | | 9.5 | | | | |
| Allowance for equity funds used during construction | (5.8) | | | 0 | | | | |
| Payments for asset retirement obligations | (2.1) | | | (9.5) | | | | |
| Equity in earnings of equity method investees, net of income taxes | (3.4) | | | (3.6) | | | | |
| Income from corporate-owned life insurance | (6.8) | | | (18.8) | | | | |
| Other | (4.1) | | | (4.1) | | | | |
| Changes in working capital items: | | | | | | |
| Accounts receivable | (124.4) | | | (55.4) | | | | |
| Accounts receivable pledged as collateral | (29.0) | | | (15.0) | | | | |
| Fuel inventory and supplies | (12.9) | | | 29.5 | | | | |
| Prepaid expenses and other current assets | 7.0 | | | 12.2 | | | | |
| Accounts payable | 88.4 | | | (10.4) | | | | |
| Accrued taxes | 61.9 | | | 92.8 | | | | |
| Other current liabilities | (47.1) | | | (5.8) | | | | |
| Changes in other assets | 33.3 | | | 23.8 | | | | |
| Changes in other liabilities | (35.8) | | | (31.1) | | | | |
| Cash Flows from Operating Activities | 649.8 | | | 696.5 | | | | |
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | | | | | | |
| Additions to property, plant and equipment | (494.2) | | | (418.4) | | | | |
| Purchase of securities - trusts | (16.7) | | | (12.6) | | | | |
| Sale of securities - trusts | 16.3 | | | 13.4 | | | | |
| Investment in corporate-owned life insurance | (15.6) | | | (16.4) | | | | |
| Proceeds from investment in corporate-owned life insurance | 60.6 | | | 97.4 | | | | |
| Other investing activities | (2.3) | | | (3.2) | | | | |
| Cash Flows used in Investing Activities | (451.9) | | | (339.8) | | | | |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | | | | | | |
| Short-term debt, net | (249.2) | | | (229.3) | | | | |
| Collateralized short-term debt, net | 29.0 | | | 15.0 | | | | |
| Proceeds from long-term debt | 493.0 | | | 294.7 | | | | |
| Retirements of long-term debt | (250.0) | | | (300.0) | | | | |
| Retirements of long-term debt of variable interest entities | (32.3) | | | (30.3) | | | | |
| | | | | | |
| Borrowings against cash surrender value of corporate-owned life insurance | 51.5 | | | 54.2 | | | | |
| Repayment of borrowings against cash surrender value of corporate-owned life insurance | (52.5) | | | (76.3) | | | | |
| Cash dividends paid | (120.0) | | | (110.0) | | | | |
| Distributions to shareholders of noncontrolling interests | 0 | | | (8.5) | | | | |
| Other financing activities | (4.2) | | | (3.0) | | | | |
| Cash Flows used in Financing Activities | (134.7) | | | (393.5) | | | | |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 63.2 | | | (36.8) | | | | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | | | | | | |
| Beginning of period | 5.2 | | | 44.5 | | | | |
| End of period | $ | 68.4 | | | $ | 7.7 | | | | |
|
| | | | | | | |
| EVERGY KANSAS CENTRAL, INC. |
| Consolidated Statements of Cash Flows |
| (Unaudited) |
| |
| Year to Date September 30 | 2019 | | 2018 |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: | (millions) |
| Net income | $ | 303.7 |
| | $ | 318.5 |
|
| Adjustments to reconcile income to net cash from operating activities: | | | |
| Depreciation and amortization | 331.3 |
| | 281.6 |
|
| Amortization of nuclear fuel | 21.2 |
| | 18.6 |
|
| Amortization of deferred refueling outage | 9.7 |
| | 10.5 |
|
| Amortization of corporate-owned life insurance | 16.5 |
| | 17.2 |
|
| Non-cash compensation | — |
| | 19.9 |
|
| Net deferred income taxes and credits | 9.5 |
| | (34.2 | ) |
| Allowance for equity funds used during construction | — |
| | (2.4 | ) |
| Payments for asset retirement obligations | (9.5 | ) | | (10.6 | ) |
| Equity in earnings of equity method investees, net of income taxes | (3.6 | ) | | (3.7 | ) |
| Income from corporate-owned life insurance | (18.8 | ) | | (2.1 | ) |
| Other | (4.1 | ) | | (3.9 | ) |
| Changes in working capital items: | | | |
| Accounts receivable | (55.4 | ) | | (50.6 | ) |
| Accounts receivable pledged as collateral | (15.0 | ) | | — |
|
| Fuel inventory and supplies | 29.5 |
| | 25.4 |
|
| Prepaid expenses and other current assets | 12.2 |
| | (7.0 | ) |
| Accounts payable | (10.4 | ) | | 36.2 |
|
| Accrued taxes | 92.8 |
| | 74.4 |
|
| Other current liabilities | (5.8 | ) | | 23.2 |
|
| Changes in other assets | 23.8 |
| | 22.9 |
|
| Changes in other liabilities | (31.1 | ) | | (26.7 | ) |
| Cash Flows from Operating Activities | 696.5 |
| | 707.2 |
|
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | |
| | |
|
| Additions to property, plant and equipment | (418.4 | ) | | (510.3 | ) |
| Purchase of securities - trusts | (12.6 | ) | | (96.1 | ) |
| Sale of securities - trusts | 13.4 |
| | 101.2 |
|
| Investment in corporate-owned life insurance | (16.4 | ) | | (16.2 | ) |
| Proceeds from investment in corporate-owned life insurance | 97.4 |
| | 6.5 |
|
| Other investing activities | (3.2 | ) | | (8.1 | ) |
| Cash Flows used in Investing Activities | (339.8 | ) | | (523.0 | ) |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | |
| | |
|
| Short term debt, net | (229.3 | ) | | 48.3 |
|
| Collateralized short-term debt, net | 15.0 |
| | — |
|
| Proceeds from long-term debt | 294.7 |
| | — |
|
| Retirements of long-term debt | (300.0 | ) | | — |
|
| Retirements of long-term debt of variable interest entities | (30.3 | ) | | (28.5 | ) |
| Borrowings against cash surrender value of corporate-owned life insurance | 54.2 |
| | 55.1 |
|
| Repayment of borrowings against cash surrender value of corporate-owned life insurance | (76.3 | ) | | (3.9 | ) |
| Cash dividends paid | (110.0 | ) | | (235.1 | ) |
| Distributions to shareholders of noncontrolling interests | (8.5 | ) | | — |
|
| Other financing activities | (3.0 | ) | | (20.2 | ) |
| Cash Flows used in Financing Activities | (393.5 | ) | | (184.3 | ) |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (36.8 | ) | | (0.1 | ) |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | | | |
| Beginning of period, including restricted cash of $0.0 and $0.1, respectively | 44.5 |
| | 3.5 |
|
| End of period, including restricted cash of $0.0 and $0.1, respectively | $ | 7.7 |
| | $ | 3.4 |
|
The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | | | | |
| EVERGY KANSAS CENTRAL, INC. |
| Consolidated Statements of Changes in Equity |
| (Unaudited) |
| | | | | |
| Evergy Kansas Central, Inc. Shareholder | | |
| Common stock shares | Common stock | Retained earnings | Non-controlling interests | Total equity |
| (millions, except share amounts) |
| Balance as of December 31, 2018 | 1 | | $ | 2,737.6 | | $ | 1,260.6 | | $ | (37.5) | | $ | 3,960.7 | |
| Net income | — | | — | | 64.4 | | 3.9 | | 68.3 | |
| Dividends declared on common stock | — | | — | | (110.0) | | — | | (110.0) | |
| Consolidation of noncontrolling interests | — | | — | | — | | 3.8 | | 3.8 | |
| Distributions to shareholders of noncontrolling interests | — | | — | | — | | (1.4) | | (1.4) | |
| Balance as of March 31, 2019 | 1 | | 2,737.6 | | 1,215.0 | | (31.2) | | 3,921.4 | |
| Net income | — | | — | | 62.3 | | 4.9 | | 67.2 | |
| Distributions to shareholders of noncontrolling interests | — | | — | | — | | (2.1) | | (2.1) | |
| Balance as of June 30, 2019 | 1 | | 2,737.6 | | 1,277.3 | | (28.4) | | 3,986.5 | |
| Net income | — | | — | | 164.1 | | 4.1 | | 168.2 | |
| Distributions to shareholders of noncontrolling interests | — | | — | | — | | (5.1) | | (5.1) | |
| Balance as of September 30, 2019 | 1 | | $ | 2,737.6 | | $ | 1,441.4 | | $ | (29.4) | | $ | 4,149.6 | |
| | | | | |
| Balance as of December 31, 2019 | 1 | | $ | 2,737.6 | | $ | 1,494.0 | | $ | (26.6) | | $ | 4,205.0 | |
| Net income | — | | — | | 52.4 | | 2.8 | | 55.2 | |
| Dividends declared on common stock | — | | — | | (60.0) | | — | | (60.0) | |
| Balance as of March 31, 2020 | 1 | | 2,737.6 | | 1,486.4 | | (23.8) | | 4,200.2 | |
| Net income (loss) | — | | — | | (40.5) | | 2.9 | | (37.6) | |
| Dividends declared on common stock | — | | — | | (60.0) | | — | | (60.0) | |
| Balance as of June 30, 2020 | 1 | | 2,737.6 | | 1,385.9 | | (20.9) | | 4,102.6 | |
| Net income | — | | — | | 170.1 | | 3.0 | | 173.1 | |
| | | | | |
| Balance as of September 30, 2020 | 1 | | $ | 2,737.6 | | $ | 1,556.0 | | $ | (17.9) | | $ | 4,275.7 | |
|
| | | | | | | | | | | | | | |
| EVERGY KANSAS CENTRAL, INC. |
| Consolidated Statements of Changes in Equity |
| (Unaudited) |
| | | | | | |
| | Evergy Kansas Central, Inc. Shareholders | | |
| | Common stock shares | Common stock | Retained earnings | Non-controlling interests | Total equity |
| | (millions, except share amounts) |
| Balance as of December 31, 2017 | 142,094,275 |
| $ | 2,734.8 |
| $ | 1,173.3 |
| $ | (47.7 | ) | $ | 3,860.4 |
|
| Net income | — |
| — |
| 60.5 |
| 2.4 |
| 62.9 |
|
| Issuance of stock for compensation and reinvested dividends, net of tax withholding | 138,828 |
| (3.7 | ) | — |
| — |
| (3.7 | ) |
| Dividends declared on common stock | — |
| — |
| (57.7 | ) | — |
| (57.7 | ) |
| Stock compensation expense | — |
| 2.5 |
| — |
| — |
| 2.5 |
|
| Balance as of March 31, 2018 | 142,233,103 |
| 2,733.6 |
| 1,176.1 |
| (45.3 | ) | 3,864.4 |
|
| Net income | — |
| — |
| 75.0 |
| 2.6 |
| 77.6 |
|
| Issuance of stock for compensation and reinvested dividends, net of tax withholding | 378,162 |
| (13.5 | ) | — |
| — |
| (13.5 | ) |
| Stock cancelled pursuant to Amended Merger Agreement | (142,611,264 | ) | — |
| — |
| — |
| — |
|
| Dividends declared on common stock | — |
| — |
| (57.8 | ) | — |
| (57.8 | ) |
| Stock compensation expense | — |
| 17.4 |
| — |
| — |
| 17.4 |
|
| Other | — |
| 0.1 |
| — |
| — |
| 0.1 |
|
| Balance as of June 30, 2018 | 1 |
| 2,737.6 |
| 1,193.3 |
| (42.7 | ) | 3,888.2 |
|
| Net income | — |
| — |
| 175.4 |
| 2.6 |
| 178.0 |
|
| Dividends declared on common stock | — |
| — |
| (66.0 | ) | — |
| (66.0 | ) |
| Balance as of September 30, 2018 | 1 |
| $ | 2,737.6 |
| $ | 1,302.7 |
| $ | (40.1 | ) | $ | 4,000.2 |
|
| | | | | | |
| Balance as of December 31, 2018 | 1 |
| $ | 2,737.6 |
| $ | 1,260.6 |
| $ | (37.5 | ) | $ | 3,960.7 |
|
| Net income | — |
| — |
| 64.4 |
| 3.9 |
| 68.3 |
|
| Dividends declared on common stock | — |
| — |
| (110.0 | ) | — |
| (110.0 | ) |
| Consolidation of noncontrolling interests | — |
| — |
| — |
| 3.8 |
| 3.8 |
|
| Distributions to shareholders of noncontrolling interests | — |
| — |
| — |
| (1.4 | ) | (1.4 | ) |
| Balance as of March 31, 2019 | 1 |
| 2,737.6 |
| 1,215.0 |
| (31.2 | ) | 3,921.4 |
|
| Net income | — |
| — |
| 62.3 |
| 4.9 |
| 67.2 |
|
| Distributions to shareholders of noncontrolling interests | — |
| — |
| — |
| (2.1 | ) | (2.1 | ) |
| Balance as of June 30, 2019 | 1 |
| 2,737.6 |
| 1,277.3 |
| (28.4 | ) | 3,986.5 |
|
| Net income | — |
| — |
| 164.1 |
| 4.1 |
| 168.2 |
|
| Distributions to shareholders of noncontrolling interests | — |
| — |
| — |
| (5.1 | ) | (5.1 | ) |
| Balance as of September 30, 2019 | 1 |
| $ | 2,737.6 |
| $ | 1,441.4 |
| $ | (29.4 | ) | $ | 4,149.6 |
|
The disclosures regarding Evergy Kansas Central included in the accompanying Unaudited Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | | | | | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Balance Sheets |
| (Unaudited) |
| | | |
| September 30 | | December 31 |
| | 2020 | | 2019 |
| ASSETS | (millions, except share amounts) |
| CURRENT ASSETS: | | | | | | | |
| Cash and cash equivalents | | $ | 224.3 | | | | | $ | 2.0 | | |
| Receivables, net of allowance for credit losses of $6.5 and $4.6, respectively | | 80.0 | | | | | 48.1 | | |
| Related party receivables | | 225.7 | | | | | 93.9 | | |
| Accounts receivable pledged as collateral | | 130.0 | | | | | 118.0 | | |
| Fuel inventory and supplies | | 173.2 | | | | | 163.0 | | |
| Income taxes receivable | | 0 | | | | | 8.7 | | |
| Regulatory assets | | 88.4 | | | | | 95.4 | | |
| Prepaid expenses | | 25.4 | | | | | 22.8 | | |
| Other assets | | 14.5 | | | | | 15.0 | | |
| Total Current Assets | | 961.5 | | | | | 566.9 | | |
| PROPERTY, PLANT AND EQUIPMENT, NET | | 7,027.1 | | | | | 6,839.0 | | |
| OTHER ASSETS: | | | | | | | |
| Regulatory assets | | 490.6 | | | | | 464.4 | | |
| Nuclear decommissioning trust fund | | 308.4 | | | | | 300.7 | | |
| Other | | 137.5 | | | | | 134.1 | | |
| Total Other Assets | | 936.5 | | | | | 899.2 | | |
| TOTAL ASSETS | | $ | 8,925.1 | | | | | $ | 8,305.1 | | |
|
| | | | | | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Balance Sheets |
| (Unaudited) |
| | | | |
| | September 30 | | December 31 |
| | 2019 | | 2018 |
| ASSETS | (millions, except share amounts) |
| CURRENT ASSETS: | | | | | | | |
| Cash and cash equivalents | | $ | 3.4 |
| | | | $ | 2.6 |
| |
| Receivables, net | | 84.2 |
| | | | 62.7 |
| |
| Related party receivables | | 90.9 |
| | | | 101.8 |
| |
| Accounts receivable pledged as collateral | | 130.0 |
| | | | 130.0 |
| |
| Fuel inventory and supplies | | 157.2 |
| | | | 177.6 |
| |
| Regulatory assets | | 79.3 |
| | | | 130.9 |
| |
| Prepaid expenses | | 21.7 |
| | | | 20.1 |
| |
| Other assets | | 15.9 |
| | | | 16.8 |
| |
| Total Current Assets | | 582.6 |
| | | | 642.5 |
| |
| PROPERTY, PLANT AND EQUIPMENT, NET | | 6,775.6 |
| | | | 6,688.1 |
| |
| OTHER ASSETS: | | |
| | | | |
| |
| Regulatory assets | | 628.6 |
| | | | 495.2 |
| |
| Nuclear decommissioning trust fund | | 282.5 |
| | | | 244.6 |
| |
| Other | | 138.9 |
| | | | 50.1 |
| |
| Total Other Assets | | 1,050.0 |
| | | | 789.9 |
| |
| TOTAL ASSETS | | $ | 8,408.2 |
| | | | $ | 8,120.5 |
| |
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | | | | | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Balance Sheets |
| (Unaudited) |
| |
| September 30 | | December 31 |
| | 2020 | | 2019 |
| LIABILITIES AND EQUITY | (millions, except share amounts) |
| CURRENT LIABILITIES: | | | | | | | |
| | | | | | | |
| Notes payable and commercial paper | | $ | 0 | | | | | $ | 199.3 | | |
| Collateralized note payable | | 130.0 | | | | | 118.0 | | |
| Accounts payable | | 163.9 | | | | | 233.6 | | |
| Related party payables | | 34.2 | | | | | 4.6 | | |
| Accrued taxes | | 104.3 | | | | | 38.8 | | |
| Accrued interest | | 38.2 | | | | | 26.7 | | |
| Regulatory liabilities | | 7.5 | | | | | 11.4 | | |
| Asset retirement obligations | | 33.0 | | | | | 36.1 | | |
| Accrued compensation and benefits | | 48.9 | | | | | 45.1 | | |
| Other | | 31.3 | | | | | 34.0 | | |
| Total Current Liabilities | | 591.3 | | | | | 747.6 | | |
| LONG-TERM LIABILITIES: | | | | | | | |
| Long-term debt, net | | 2,922.7 | | | | | 2,525.0 | | |
| Deferred income taxes | | 554.7 | | | | | 642.8 | | |
| Unamortized investment tax credits | | 118.7 | | | | | 119.6 | | |
| Regulatory liabilities | | 885.6 | | | | | 792.2 | | |
| Pension and post-retirement liability | | 561.5 | | | | | 499.7 | | |
| Asset retirement obligations | | 348.4 | | | | | 217.5 | | |
| Other | | 165.4 | | | | | 180.0 | | |
| Total Long-Term Liabilities | | 5,557.0 | | | | | 4,976.8 | | |
| Commitments and Contingencies (Note 11) | | | | | | | |
| EQUITY: | | | | | | | |
| Common stock - 1,000 shares authorized, without par value, 1 share issued, stated value | | 1,563.1 | | | | | 1,563.1 | | |
| Retained earnings | | 1,209.0 | | | | | 1,012.8 | | |
| Accumulated other comprehensive income | | 4.7 | | | | | 4.8 | | |
| Total Equity | | 2,776.8 | | | | | 2,580.7 | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 8,925.1 | | | | | $ | 8,305.1 | | |
|
| | | | | | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Balance Sheets |
| (Unaudited) |
| | |
| | September 30 | | December 31 |
| | 2019 | | 2018 |
| LIABILITIES AND EQUITY | (millions, except share amounts) |
| CURRENT LIABILITIES: | | | | | | | |
| Current maturities of long-term debt | | $ | — |
| | | | $ | 400.0 |
| |
| Notes payable and commercial paper | | 74.9 |
| | | | 176.9 |
| |
| Collateralized note payable | | 130.0 |
| | | | 130.0 |
| |
| Accounts payable | | 138.6 |
| | | | 211.1 |
| |
| Related party payables | | 0.6 |
| | | | — |
| |
| Accrued taxes | | 110.0 |
| | | | 39.7 |
| |
| Accrued interest | | 33.9 |
| | | | 28.9 |
| |
| Regulatory liabilities | | 13.0 |
| | | | 52.8 |
| |
| Asset retirement obligations | | 31.8 |
| | | | 29.2 |
| |
| Accrued compensation benefits | | 43.2 |
| | | | 52.5 |
| |
| Other | | 32.3 |
| | | | 17.2 |
| |
| Total Current Liabilities | | 608.3 |
| | | | 1,138.3 |
| |
| LONG-TERM LIABILITIES: | | |
| | | | |
| |
| Long-term debt, net | | 2,524.6 |
| | | | 2,130.1 |
| |
| Deferred income taxes | | 665.0 |
| | | | 631.8 |
| |
| Unamortized investment tax credits | | 119.9 |
| | | | 120.7 |
| |
| Regulatory liabilities | | 789.1 |
| | | | 794.3 |
| |
| Pension and post-retirement liability | | 673.1 |
| | | | 491.9 |
| |
| Asset retirement obligations | | 252.5 |
| | | | 231.8 |
| |
| Other | | 182.8 |
| | | | 81.8 |
| |
| Total Long-Term Liabilities | | 5,207.0 |
| | | | 4,482.4 |
| |
| Commitments and Contingencies (Note 11) | |
|
| | | |
|
| |
| EQUITY: | | |
| | | | |
| |
| Common stock - 1,000 shares authorized, without par value, 1 share issued, stated value | | 1,563.1 |
| | | | 1,563.1 |
| |
| Retained earnings | | 1,024.9 |
| | | | 932.6 |
| |
| Accumulated other comprehensive income | | 4.9 |
| | | | 4.1 |
| |
| Total Equity | | 2,592.9 |
| | | | 2,499.8 |
| |
| TOTAL LIABILITIES AND EQUITY | | $ | 8,408.2 |
| | | | $ | 8,120.5 |
| |
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Statements of Comprehensive Income |
| (Unaudited) |
| | | | |
| | Three Months Ended
September 30 | | Year to Date
September 30 |
| | 2020 | | 2019 | | 2020 | | 2019 |
| | (millions) |
| OPERATING REVENUES | | $ | 528.5 | | | $ | 568.8 | | | $ | 1,328.3 | | | $ | 1,431.2 | |
| OPERATING EXPENSES: | | | | | | | | |
| Fuel and purchased power | | 112.2 | | | 129.3 | | | 306.0 | | | 380.4 | |
| Operating and maintenance | | 101.3 | | | 111.2 | | | 305.7 | | | 341.2 | |
| Depreciation and amortization | | 79.4 | | | 80.2 | | | 243.6 | | | 239.0 | |
| Taxes other than income tax | | 31.2 | | | 32.6 | | | 92.4 | | | 96.3 | |
| Total Operating Expenses | | 324.1 | | | 353.3 | | | 947.7 | | | 1,056.9 | |
| INCOME FROM OPERATIONS | | 204.4 | | | 215.5 | | | 380.6 | | | 374.3 | |
| OTHER INCOME (EXPENSE): | | | | | | | | |
| Investment earnings | | 0.5 | | | 0.5 | | | 1.3 | | | 1.9 | |
| Other income | | 4.0 | | | 1.2 | | | 5.1 | | | 2.3 | |
| Other expense | | (6.9) | | | (4.9) | | | (20.2) | | | (15.7) | |
| Total Other Expense, Net | | (2.4) | | | (3.2) | | | (13.8) | | | (11.5) | |
| Interest expense | | 29.2 | | | 28.2 | | | 85.5 | | | 91.6 | |
| INCOME BEFORE INCOME TAXES | | 172.8 | | | 184.1 | | | 281.3 | | | 271.2 | |
| Income tax expense | | 25.1 | | | 32.2 | | | 5.1 | | | 43.9 | |
| NET INCOME | | $ | 147.7 | | | $ | 151.9 | | | $ | 276.2 | | | $ | 227.3 | |
| COMPREHENSIVE INCOME | | | | | | | | |
| NET INCOME | | $ | 147.7 | | | $ | 151.9 | | | $ | 276.2 | | | $ | 227.3 | |
| OTHER COMPREHENSIVE INCOME: | | | | | | | | |
| Derivative hedging activity | | | | | | | | |
| Reclassification to expenses, net of tax | | (0.2) | | | (0.1) | | | (0.1) | | | 0.7 | |
| Derivative hedging activity, net of tax | | (0.2) | | | (0.1) | | | (0.1) | | | 0.7 | |
| Total other comprehensive income (loss) | | (0.2) | | | (0.1) | | | (0.1) | | | 0.7 | |
| COMPREHENSIVE INCOME | | $ | 147.5 | | | $ | 151.8 | | | $ | 276.1 | | | $ | 228.0 | |
|
| | | | | | | | | | | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Statements of Comprehensive Income |
| (Unaudited) |
| | | | | |
| | | Three Months Ended
September 30 | | Year to Date
September 30 |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| | | (millions) |
| OPERATING REVENUES | | $ | 568.8 |
| | $ | 559.6 |
| | $ | 1,431.2 |
| | $ | 1,408.9 |
|
| OPERATING EXPENSES: | | | | | | |
| | |
|
| Fuel and purchased power | | 129.3 |
| | 142.4 |
| | 380.4 |
| | 392.4 |
|
| Operating and maintenance | | 111.2 |
| | 127.3 |
| | 341.2 |
| | 354.5 |
|
| Depreciation and amortization | | 80.2 |
| | 71.9 |
| | 239.0 |
| | 209.0 |
|
| Taxes other than income tax | | 32.6 |
| | 28.6 |
| | 96.3 |
| | 87.9 |
|
| Total Operating Expenses | | 353.3 |
| | 370.2 |
| | 1,056.9 |
| | 1,043.8 |
|
| INCOME FROM OPERATIONS | | 215.5 |
| | 189.4 |
| | 374.3 |
| | 365.1 |
|
| OTHER INCOME (EXPENSE): | | | | | | | | |
| Investment earnings | | 0.5 |
| | 0.7 |
| | 1.9 |
| | 2.1 |
|
| Other income | | 1.2 |
| | 0.2 |
| | 2.3 |
| | 1.7 |
|
| Other expense | | (4.9 | ) | | (9.0 | ) | | (15.7 | ) | | (22.9 | ) |
| Total Other Expense, Net | | (3.2 | ) | | (8.1 | ) | | (11.5 | ) | | (19.1 | ) |
| Interest expense | | 28.2 |
| | 33.0 |
| | 91.6 |
| | 100.6 |
|
| INCOME BEFORE INCOME TAXES | | 184.1 |
| | 148.3 |
| | 271.2 |
| | 245.4 |
|
| Income tax expense | | 32.2 |
| | 28.0 |
| | 43.9 |
| | 80.3 |
|
| NET INCOME | | $ | 151.9 |
| | $ | 120.3 |
| | $ | 227.3 |
| | $ | 165.1 |
|
| COMPREHENSIVE INCOME | | | | | | | | |
| NET INCOME | | $ | 151.9 |
| | $ | 120.3 |
| | $ | 227.3 |
| | $ | 165.1 |
|
| OTHER COMPREHENSIVE INCOME: | | | | | | | | |
| Derivative hedging activity | | | | | | | | |
| Reclassification to expenses, net of tax: | | (0.1 | ) | | 0.8 |
| | 0.7 |
| | 2.7 |
|
| Derivative hedging activity, net of tax | | (0.1 | ) | | 0.8 |
| | 0.7 |
| | 2.7 |
|
| Total other comprehensive income | | (0.1 | ) | | 0.8 |
| | 0.7 |
| | 2.7 |
|
| COMPREHENSIVE INCOME | | $ | 151.8 |
| | $ | 121.1 |
| | $ | 228.0 |
| | $ | 167.8 |
|
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | | |
| EVERGY METRO, INC. | | |
| Consolidated Statements of Cash Flows | | |
| (Unaudited) |
| | | | | | | |
| Year to Date September 30 | 2020 | | 2019 | | | | |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: | (millions) | | |
| Net income | $ | 276.2 | | | $ | 227.3 | | | | | |
| Adjustments to reconcile income to net cash from operating activities: | | | | | | | |
| Depreciation and amortization | 243.6 | | | 239.0 | | | | | |
| Amortization of nuclear fuel | 22.1 | | | 21.4 | | | | | |
| Amortization of deferred refueling outage | 9.5 | | | 9.7 | | | | | |
| Net deferred income taxes and credits | 3.0 | | | 2.5 | | | | | |
| Allowance for equity funds used during construction | (4.1) | | | (0.9) | | | | | |
| Payments for asset retirement obligations | (2.7) | | | (1.7) | | | | | |
| Other | (0.3) | | | 0.4 | | | | | |
| Changes in working capital items: | | | | | | | |
| Accounts receivable | (84.3) | | | (4.1) | | | | | |
| Accounts receivable pledged as collateral | (12.0) | | | 0 | | | | | |
| Fuel inventory and supplies | (10.2) | | | 20.4 | | | | | |
| Prepaid expenses and other current assets | (4.7) | | | 36.2 | | | | | |
| Accounts payable | (20.1) | | | (66.3) | | | | | |
| Accrued taxes | 74.2 | | | 70.3 | | | | | |
| Other current liabilities | 14.5 | | | (49.0) | | | | | |
| Changes in other assets | 37.7 | | | 32.7 | | | | | |
| Changes in other liabilities | 14.2 | | | 18.6 | | | | | |
| Cash Flows from Operating Activities | 556.6 | | | 556.5 | | | | | |
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | | | | | | | |
| Additions to property, plant and equipment | (384.9) | | | (313.0) | | | | | |
| Purchase of securities - trusts | (33.7) | | | (24.8) | | | | | |
| Sale of securities - trusts | 27.9 | | | 18.9 | | | | | |
| Net money pool lending | (78.0) | | | 0 | | | | | |
| Other investing activities | 2.5 | | | 5.1 | | | | | |
| Cash Flows used in Investing Activities | (466.2) | | | (313.8) | | | | | |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | | | | | | | |
| Short-term debt, net | (199.3) | | | (102.0) | | | | | |
| Collateralized short-term debt, net | 12.0 | | | 0 | | | | | |
| Proceeds from long-term debt | 396.4 | | | 393.2 | | | | | |
| Retirements of long-term debt | 0 | | | (400.0) | | | | | |
| | | | | | | |
| Cash dividends paid | (80.0) | | | (135.0) | | | | | |
| Other financing activities | 2.8 | | | 1.9 | | | | | |
| Cash Flows from (used in) Financing Activities | 131.9 | | | (241.9) | | | | | |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 222.3 | | | 0.8 | | | | | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | | | | | | | |
| Beginning of period | 2.0 | | | 2.6 | | | | | |
| End of period | $ | 224.3 | | | $ | 3.4 | | | | | |
|
| | | | | | | |
| EVERGY METRO, INC. |
| Consolidated Statements of Cash Flows |
| (Unaudited) |
| | | | |
| Year to Date September 30 | 2019 | | 2018 |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: | (millions) |
| Net income | $ | 227.3 |
| | $ | 165.1 |
|
| Adjustments to reconcile income to net cash from operating activities: | | | |
| Depreciation and amortization | 239.0 |
| | 209.0 |
|
| Amortization of nuclear fuel | 21.4 |
| | 18.7 |
|
| Amortization of deferred refueling outage | 9.7 |
| | 10.3 |
|
| Net deferred income taxes and credits | 2.5 |
| | 25.2 |
|
| Allowance for equity funds used during construction | (0.9 | ) | | (1.2 | ) |
| Payments for asset retirement obligations | (1.7 | ) | | (9.9 | ) |
| Other | 0.4 |
| | 2.7 |
|
| Changes in working capital items: | | | |
| Accounts receivable | (4.1 | ) | | (41.0 | ) |
| Fuel inventory and supplies | 20.4 |
| | 13.2 |
|
| Prepaid expenses and other current assets | 36.2 |
| | (3.6 | ) |
| Accounts payable | (66.3 | ) | | (97.7 | ) |
| Accrued taxes | 70.3 |
| | 97.9 |
|
| Other current liabilities | (49.0 | ) | | 8.5 |
|
| Changes in other assets | 32.7 |
| | 28.3 |
|
| Changes in other liabilities | 18.6 |
| | 79.0 |
|
| Cash Flows from Operating Activities | 556.5 |
| | 504.5 |
|
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | |
| | |
|
| Additions to property, plant and equipment | (313.0 | ) | | (310.6 | ) |
| Purchase of securities - trusts | (24.8 | ) | | (27.9 | ) |
| Sale of securities - trusts | 18.9 |
| | 22.5 |
|
| Other investing activities | 5.1 |
| | 3.4 |
|
| Cash Flows used in Investing Activities | (313.8 | ) | | (312.6 | ) |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | |
| | |
|
| Short term debt, net | (102.0 | ) | | 40.3 |
|
| Proceeds from long-term debt | 393.2 |
| | 319.5 |
|
| Retirements of long-term debt | (400.0 | ) | | (373.4 | ) |
| Cash dividends paid | (135.0 | ) | | (180.0 | ) |
| Other financing activities | 1.9 |
| | 2.9 |
|
| Cash Flows used in Financing Activities | (241.9 | ) | | (190.7 | ) |
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 0.8 |
| | 1.2 |
|
| CASH AND CASH EQUIVALENTS: | | | |
| Beginning of period | 2.6 |
| | 2.2 |
|
| End of period | $ | 3.4 |
| | $ | 3.4 |
|
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | | | | | | | | | |
| EVERGY METRO, INC |
| Consolidated Statements of Changes in Equity |
| (Unaudited) |
| |
| Common stock shares | Common Stock | Retained earnings | AOCI - Net gains (losses) on cash flow hedges | Total Equity |
| (millions, except share amounts) |
| Balance as of December 31, 2018 | 1 | | $ | 1,563.1 | | $ | 932.6 | | $ | 4.1 | | $ | 2,499.8 | |
| Net income | — | | — | | 16.0 | | — | | 16.0 | |
| | | | | |
| Derivative hedging activity, net of tax | — | | — | | — | | 0.9 | | 0.9 | |
| Balance as of March 31, 2019 | 1 | | 1,563.1 | | 948.6 | | 5.0 | | 2,516.7 | |
| Net income | — | | — | | 59.4 | | — | | 59.4 | |
| Dividends declared on common stock | — | | — | | (65.0) | | — | | (65.0) | |
| Derivative hedging activity, net of tax | — | | — | | — | | (0.1) | | (0.1) | |
| Balance as of June 30, 2019 | 1 | | 1,563.1 | | 943.0 | | 4.9 | | 2,511.0 | |
| Net income | — | | — | | 151.9 | | — | | 151.9 | |
| Dividends declared on common stock | — | | — | | (70.0) | | — | | (70.0) | |
| Balance as of September 30, 2019 | 1 | | $ | 1,563.1 | | $ | 1,024.9 | | $ | 4.9 | | $ | 2,592.9 | |
| | | | | |
| Balance as of December 31, 2019 | 1 | | $ | 1,563.1 | | $ | 1,012.8 | | $ | 4.8 | | $ | 2,580.7 | |
| Net income | — | | — | | 25.6 | | — | | 25.6 | |
| Dividends declared on common stock | — | | — | | (60.0) | | — | | (60.0) | |
| Derivative hedging activity, net of tax | — | | — | | — | | (0.1) | | (0.1) | |
| Balance as of March 31, 2020 | 1 | | 1,563.1 | | 978.4 | | 4.7 | | 2,546.2 | |
| Net income | — | | — | | 102.9 | | — | | 102.9 | |
| Dividends declared on common stock | — | | — | | (20.0) | | — | | (20.0) | |
| Derivative hedging activity, net of tax | — | | — | | — | | 0.2 | | 0.2 | |
| Balance as of June 30, 2020 | 1 | | 1,563.1 | | 1,061.3 | | 4.9 | | 2,629.3 | |
| Net income | — | | — | | 147.7 | | — | | 147.7 | |
| | | | | |
| Derivative hedging activity, net of tax | — | | — | | — | | (0.2) | | (0.2) | |
| Balance as of September 30, 2020 | 1 | | $ | 1,563.1 | | $ | 1,209.0 | | $ | 4.7 | | $ | 2,776.8 | |
|
| | | | | | | | | | | | | | |
| EVERGY METRO, INC |
| Consolidated Statements of Changes in Equity |
| (Unaudited) |
| | |
| | Common stock shares | Common Stock | Retained earnings | AOCI - Net gains (losses) on cash flow hedges | Total Equity |
| | (millions, except share amounts) |
| Balance as of December 31, 2017 | 1 |
| $ | 1,563.1 |
| $ | 949.7 |
| $ | 0.4 |
| $ | 2,513.2 |
|
| Net income | — |
| — |
| 20.2 |
| — |
| 20.2 |
|
| Dividends declared on common stock | — |
| — |
| (60.0 | ) | — |
| (60.0 | ) |
| Derivative hedging activity, net of tax | — |
| — |
| — |
| 0.9 |
| 0.9 |
|
| Balance as of March 31, 2018 | 1 |
| 1,563.1 |
| 909.9 |
| 1.3 |
| 2,474.3 |
|
| Net income | — |
| — |
| 24.6 |
| — |
| 24.6 |
|
| Dividends declared on common stock | — |
| — |
| (60.0 | ) | — |
| (60.0 | ) |
| Derivative hedging activity, net of tax | — |
| — |
| — |
| 1.0 |
| 1.0 |
|
| Balance as of June 30, 2018 | 1 |
| 1,563.1 |
| 874.5 |
| 2.3 |
| 2,439.9 |
|
| Net income | — |
| — |
| 120.3 |
| — |
| 120.3 |
|
| Dividends declared on common stock | — |
| — |
| (60.0 | ) | — |
| (60.0 | ) |
| Derivative hedging activity, net of tax | — |
| — |
| — |
| 0.8 |
| 0.8 |
|
| Balance as of September 30, 2018 | 1 |
| $ | 1,563.1 |
| $ | 934.8 |
| $ | 3.1 |
| $ | 2,501.0 |
|
| | | | | | |
| Balance as of December 31, 2018 | 1 |
| $ | 1,563.1 |
| $ | 932.6 |
| $ | 4.1 |
| $ | 2,499.8 |
|
| Net income | — |
| — |
| 16.0 |
| — |
| 16.0 |
|
| Derivative hedging activity, net of tax | — |
| — |
| — |
| 0.9 |
| 0.9 |
|
| Balance as of March 31, 2019 | 1 |
| 1,563.1 |
| 948.6 |
| 5.0 |
| 2,516.7 |
|
| Net income | — |
| — |
| 59.4 |
| — |
| 59.4 |
|
| Dividends declared on common stock | — |
| — |
| (65.0 | ) | — |
| (65.0 | ) |
| Derivative hedging activity, net of tax | — |
| — |
| — |
| (0.1 | ) | (0.1 | ) |
| Balance as of June 30, 2019 | 1 |
| 1,563.1 |
| 943.0 |
| 4.9 |
| 2,511.0 |
|
| Net income | — |
| — |
| 151.9 |
| — |
| 151.9 |
|
| Dividends declared on common stock | — |
| — |
| (70.0 | ) | — |
| (70.0 | ) |
| Balance as of September 30, 2019 | 1 |
| $ | 1,563.1 |
| $ | 1,024.9 |
| $ | 4.9 |
| $ | 2,592.9 |
|
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
EVERGY, INC.
EVERGY KANSAS CENTRAL, INC.
EVERGY METRO, INC.
Combined Notes to Unaudited Consolidated Financial Statements
The notes to unaudited consolidated financial statements that follow are a combined presentation for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc., all registrants under this filing. The terms "Evergy," "Evergy Kansas Central," "Evergy Metro" and "Evergy Companies" are used throughout this report. "Evergy" refers to Evergy, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Kansas Central" refers to Evergy Kansas Central, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Metro" refers to Evergy Metro, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Companies" refers to Evergy, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group. The Evergy Companies' interim financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in the opinion of management, for a fair presentation of the results for the interim periods presented.
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Evergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below. In September 2019, these wholly-owned direct subsidiaries were rebranded and renamed under the Evergy brand name.
•Evergy Kansas Central, Inc. (Evergy Kansas Central), formerly known as Westar Energy, Inc., is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has 1 active wholly-owned subsidiary with significant operations, Evergy Kansas South, Inc. (Evergy Kansas South), formerly known as Kansas Gas and Electric Company..
•Evergy Metro, Inc. (Evergy Metro), formerly known as Kansas City Power & Light Company, is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.
•Evergy Missouri West, Inc. (Evergy Missouri West), formerly known as KCP&L Greater Missouri Operations Company, is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.
•Evergy Transmission Company, LLC (Evergy Transmission Company), formerly known as GPE Transmission Holding Company, LLC, owns 13.5% of Transource Energy, LLC (Transource) with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of American Electric Power Company, Inc. (AEP). Transource is focused on the development of competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.
Evergy Kansas Central also owns a 50% interest in Prairie Wind Transmission, LLC (Prairie Wind), which is a joint venture between Evergy Kansas Central and affiliatessubsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the Southwest Power Pool, Inc. (SPP). Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.
Since the rebranding in September 2019, Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West have been conductingconduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 14,700 MWs of owned generating capacity and renewable purchased power agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.6 million customers in the states of Kansas and Missouri.
Evergy was incorporated in 2017 as Monarch Energy Holding, Inc. (Monarch Energy), a wholly-owned subsidiary of Great Plains Energy Incorporated (Great Plains Energy). Prior to the closing of the merger transactions, Monarch Energy changed its name to Evergy and did not conduct any business activities other than those required for its formation and matters contemplated by the Amended and Restated Agreement and Plan of Merger, dated as of July 9, 2017, by and among Great Plains Energy, Evergy Kansas Central, Monarch Energy and King Energy, Inc. (King Energy), a wholly-owned subsidiary of Monarch Energy (Amended Merger Agreement). On June 4, 2018, in accordance with the Amended Merger Agreement, Great Plains Energy merged into Evergy, with Evergy surviving the merger and King Energy merged into Evergy Kansas Central, with EvergyKansas Central surviving the merger. These merger transactions resulted in Evergy becoming the parent entity of Evergy Kansas Central and the direct subsidiaries of Great Plains Energy, including Evergy Metro and Evergy Missouri West. As a result of the closing of the merger transactions, each outstanding share of Great Plains Energy common stock was converted into 0.5981 shares of Evergy common stock, resulting in the issuance of 128.9 million shares. Additionally, each outstanding share of Evergy Kansas Central common stock was converted into 1 share of Evergy common stock.
Basis of Presentation
These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements and should be read in conjunction with the consolidated financial statements in the Evergy Companies' combined 20182019 Form 10-K.
These unaudited consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary to fairly present the unaudited consolidated financial statements for each of the Evergy Companies for these interim periods. In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Principles of Consolidation
Evergy Kansas Central was determined to be the accounting acquirer in the merger and thus, the predecessor of Evergy. Evergy had separate operations for the period beginning with the quarter ended June 30, 2018, and references to amounts for periods after the closing of the merger relate to Evergy. The results of Great Plains Energy's direct subsidiaries have been included in Evergy's results of operations from June 4, 2018, the date of the closing of the merger, and thereafter.
Each of Evergy's, Evergy Kansas Central's and Evergy Metro's unaudited consolidated financial statements includes the accounts of their subsidiaries and variable interest entities (VIEs) of which they are the primary beneficiary. Undivided interests in jointly-owned generation facilities are included on a proportionate basis. Intercompany transactions have been eliminated. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in 1 segment).
Fuel Inventory and Supplies
The Evergy Companies record fuel inventory and supplies at average cost. The following table separately states the balances for fuel inventory and supplies.
| | | | | | | | | | | | | | | | | | | | |
| |
| | September 30
2020 | | | December 31
2019 | |
| Evergy | | (millions) | |
| Fuel inventory | | $ | 153.7 | | | | $ | 146.4 | | |
| Supplies | | 358.4 | | | | 335.2 | | |
| Fuel inventory and supplies | | $ | 512.1 | | | | $ | 481.6 | | |
| Evergy Kansas Central | | | | | | |
| Fuel inventory | | $ | 84.9 | | | | $ | 80.2 | | |
| Supplies | | 194.9 | | | | 186.2 | | |
| Fuel inventory and supplies | | $ | 279.8 | | | | $ | 266.4 | | |
| Evergy Metro | | | | | | |
| Fuel inventory | | $ | 47.5 | | | | $ | 46.1 | | |
| Supplies | | 125.7 | | | | 116.9 | | |
| Fuel inventory and supplies | | $ | 173.2 | | | | $ | 163.0 | | |
|
| | | | | | | | | | |
| | September 30 | December 31 |
| | | 2019 | | | 2018 | |
| Evergy | | (millions) | |
| Fuel inventory | | $ | 118.5 |
| | | $ | 168.9 |
| |
| Supplies | | 335.9 |
| | | 342.1 |
| |
| Fuel inventory and supplies | | $ | 454.4 |
| | | $ | 511.0 |
| |
| Evergy Kansas Central | | | |
| Fuel inventory | | $ | 64.8 |
| | | $ | 87.8 |
| |
| Supplies | | 182.9 |
| | | 189.0 |
| |
| Fuel inventory and supplies | | $ | 247.7 |
| | | $ | 276.8 |
| |
| Evergy Metro | | |
| | | |
| |
| Fuel inventory | | $ | 37.1 |
| | | $ | 57.8 |
| |
| Supplies | | 120.1 |
| | | 119.8 |
| |
| Fuel inventory and supplies | | $ | 157.2 |
| | | $ | 177.6 |
| |
Property, Plant and Equipment
The following tables summarize the property, plant and equipment of Evergy, Evergy Kansas Central and Evergy Metro.
| | | September 30, 2019 | | Evergy | | Evergy Kansas Central | | Evergy Metro | |
| September 30, 2020 | | September 30, 2020 | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| | | (millions) | | (millions) | |
| Electric plant in service | | $ | 27,492.5 |
| | $ | 13,414.4 |
| | $ | 10,673.6 |
| Electric plant in service | | $ | 28,670.5 | | | $ | 13,947.2 | | | $ | 11,110.9 | | |
| Electric plant acquisition adjustment | | 740.6 |
| | 740.6 |
| | — |
| Electric plant acquisition adjustment | | 724.3 | | | 724.3 | | | 0 | | |
| Accumulated depreciation | | (10,136.6 | ) | | (4,872.5 | ) | | (4,208.5 | ) | Accumulated depreciation | | (10,849.4) | | | (5,210.0) | | | (4,487.3) | | |
| Plant in service, net | | 18,096.5 |
| | 9,282.5 |
| | 6,465.1 |
| Plant in service, net | | | 18,545.4 | | | 9,461.5 | | | 6,623.6 | | |
| Construction work in progress | | 747.2 |
| | 404.9 |
| | 244.4 |
| Construction work in progress | | 946.6 | | | 527.1 | | | 337.6 | | |
| Nuclear fuel, net | | 131.4 |
| | 65.3 |
| | 66.1 |
| Nuclear fuel, net | | 131.2 | | | 65.3 | | | 65.9 | | |
Plant to be retired, net(a) | | 1.0 |
| | 1.0 |
| | — |
| Plant to be retired, net(a) | | 0.9 | | | 0.9 | | | 0 | | |
| Property, plant and equipment, net | | $ | 18,976.1 |
| | $ | 9,753.7 |
| | $ | 6,775.6 |
| Property, plant and equipment, net | | | $ | 19,624.1 | | | $ | 10,054.8 | | | $ | 7,027.1 | | |
| | | | | | | | | | | | | |
| December 31, 2018 | | Evergy | | Evergy Kansas Central | | Evergy Metro | |
| December 31, 2019 | | December 31, 2019 | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| | | (millions) | | (millions) | |
| Electric plant in service | | $ | 26,916.7 |
| | $ | 13,176.7 |
| | $ | 10,439.1 |
| Electric plant in service | | $ | 27,768.8 | | | $ | 13,538.1 | | | $ | 10,776.5 | | |
| Electric plant acquisition adjustment | | 740.6 |
| | 740.6 |
| | — |
| Electric plant acquisition adjustment | | 740.6 | | | 740.6 | | | 0 | | |
| Accumulated depreciation | | (9,694.1 | ) | | (4,642.8 | ) | | (4,022.4 | ) | Accumulated depreciation | | (10,293.7) | | | (4,951.5) | | | (4,272.0) | | |
| Plant in service, net | | 17,963.2 |
| | 9,274.5 |
| | 6,416.7 |
| Plant in service, net | | | 18,215.7 | | | 9,327.2 | | | 6,504.5 | | |
| Construction work in progress | | 685.2 |
| | 376.7 |
| | 204.4 |
| Construction work in progress | | 839.2 | | | 472.8 | | | 269.9 | | |
| Nuclear fuel, net | | 133.1 |
| | 66.1 |
| | 67.0 |
| Nuclear fuel, net | | 128.5 | | | 63.9 | | | 64.6 | | |
Plant to be retired, net(a) | | 1.0 |
| | 1.0 |
| | — |
| Plant to be retired, net(a) | | 1.0 | | | 1.0 | | | 0 | | |
| Property, plant and equipment, net | | $ | 18,782.5 |
| | $ | 9,718.3 |
| | $ | 6,688.1 |
| Property, plant and equipment, net | | | $ | 19,184.4 | | | $ | 9,864.9 | | | $ | 6,839.0 | | |
(a) As of September 30, 2019,2020 and December 31, 2018,2019, represents the planned retirement of Evergy Kansas Central analog meters prior to the end of their remaining useful lives.
Other Income (Expense), Net
The table below shows the detail of other expense for each of the Evergy Companies.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30 | | Year to Date
September 30 | | |
| 2020 | | 2019 | | 2020 | | 2019 | | |
| Evergy | (millions) |
| Non-service cost component of net benefit cost | $ | (13.7) | | | $ | (13.7) | | | $ | (43.7) | | | $ | (40.9) | | | |
| Other | (6.4) | | | (6.0) | | | (14.0) | | | (16.3) | | | |
| Other expense | $ | (20.1) | | | $ | (19.7) | | | $ | (57.7) | | | $ | (57.2) | | | |
| Evergy Kansas Central | | | | | | | | | |
| Non-service cost component of net benefit cost | $ | (4.1) | | | $ | (4.9) | | | $ | (14.1) | | | $ | (14.5) | | | |
| Other | (5.6) | | | (5.9) | | | (12.8) | | | (15.4) | | | |
| Other expense | $ | (9.7) | | | $ | (10.8) | | | $ | (26.9) | | | $ | (29.9) | | | |
| Evergy Metro | | | | | | | | | |
| Non-service cost component of net benefit cost | $ | (6.5) | | | $ | (5.0) | | | $ | (19.7) | | | $ | (15.3) | | | |
| Other | (0.4) | | | 0.1 | | | (0.5) | | | (0.4) | | | |
| Other expense | $ | (6.9) | | | $ | (4.9) | | | $ | (20.2) | | | $ | (15.7) | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30 | | Year to Date
September 30 |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Evergy | (millions) |
| Non-service cost component of net benefit cost | $ | (13.7 | ) | | $ | (17.6 | ) | | $ | (40.9 | ) | | $ | (32.8 | ) |
| Other | (6.0 | ) | | (13.2 | ) | | (16.3 | ) | | (22.4 | ) |
| Other expense | $ | (19.7 | ) | | $ | (30.8 | ) | | $ | (57.2 | ) | | $ | (55.2 | ) |
| Evergy Kansas Central | | | | | | | |
| Non-service cost component of net benefit cost | $ | (4.9 | ) | | $ | (7.2 | ) | | $ | (14.5 | ) | | $ | (19.0 | ) |
| Other | (5.9 | ) | | (8.0 | ) | | (15.4 | ) | | (17.1 | ) |
| Other expense | $ | (10.8 | ) | | $ | (15.2 | ) | | $ | (29.9 | ) | | $ | (36.1 | ) |
Evergy Metro(a) | | | | | | | |
| Non-service cost component of net benefit cost | $ | (5.0 | ) | | $ | (6.7 | ) | | $ | (15.3 | ) | | $ | (19.7 | ) |
| Other | 0.1 |
| | (2.3 | ) | | (0.4 | ) | | (3.2 | ) |
| Other expense | $ | (4.9 | ) | | $ | (9.0 | ) | | $ | (15.7 | ) | | $ | (22.9 | ) |
(a)Table of ContentsEvergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter.
Earnings Per Share
To compute basic earnings per share (EPS), Evergy divides net income attributable to Evergy, Inc. by the weighted average number of common shares outstanding. Diluted EPS includes the effect of issuable common shares resulting from restricted share units (RSUs), performance shares and restricted stock. Evergy computes the dilutive effects of potential issuances of common shares using the treasury stock method.
The following table reconciles Evergy's basic and diluted EPS.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30 | | Year to Date
September 30 |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Income | (millions, except per share amounts) |
| Net income | $ | 370.9 |
| | $ | 357.6 |
| | $ | 618.9 |
| | $ | 524.9 |
|
| Less: net income attributable to noncontrolling interests | 4.1 |
| | 2.6 |
| | 12.9 |
| | 7.6 |
|
| Net income attributable to Evergy, Inc. | $ | 366.8 |
| | $ | 355.0 |
| | $ | 606.0 |
| | $ | 517.3 |
|
| Common Shares Outstanding | | | | | |
| | |
|
| Weighted average number of common shares outstanding - basic | 234.6 |
| | 268.6 |
| | 243.5 |
| | 197.9 |
|
| Add: effect of dilutive securities | 0.4 |
| | 0.2 |
| | 0.3 |
| | 0.1 |
|
| Weighted average number of common shares outstanding - dilutive | 235.0 |
| | 268.8 |
| | 243.8 |
| | 198.0 |
|
| Basic and Diluted EPS | $ | 1.56 |
| | $ | 1.32 |
| | $ | 2.49 |
| | $ | 2.61 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30 | | Year to Date
September 30 |
| 2020 | | 2019 | | 2020 | | 2019 |
| Income | (millions, except per share amounts) |
| Net income | $ | 367.5 | | | $ | 370.9 | | | $ | 576.0 | | | $ | 618.9 | |
| Less: Net income attributable to noncontrolling interests | 3.0 | | | 4.1 | | | 8.7 | | | 12.9 | |
| Net income attributable to Evergy, Inc. | $ | 364.5 | | | $ | 366.8 | | | $ | 567.3 | | | $ | 606.0 | |
| Common Shares Outstanding | | | | | | | |
| Weighted average number of common shares outstanding - basic | 227.3 | | | 234.6 | | | 227.2 | | | 243.5 | |
| Add: Effect of dilutive securities | 0.2 | | | 0.4 | | | 0.3 | | | 0.3 | |
| Weighted average number of common shares outstanding - dilutive | 227.5 | | | 235.0 | | | 227.5 | | | 243.8 | |
| Basic EPS | $ | 1.60 | | | $ | 1.56 | | | $ | 2.50 | | | $ | 2.49 | |
| Diluted EPS | $ | 1.60 | | | $ | 1.56 | | | $ | 2.49 | | | $ | 2.49 | |
There were 0 anti-dilutive securitiesAnti-dilutive shares excluded from the computation of diluted EPS for the three months ended and year to date September 30, 20192020, were 124,136 RSUs with performance measures. There were 0 anti-dilutive securities excluded from the computation of diluted EPS for the three months ended and 2018.year to date September 30, 2019.
Dividends Declared
In November 2019,2020, Evergy's Board of Directors (Evergy Board) declared a quarterly dividend of $0.505$0.535 per share on Evergy's common stock. The common dividend is payable December 20, 2019,21, 2020, to shareholders of record as of November 27, 2019.20, 2020.
In November 2019,2020, Evergy Kansas Central's Board of Directors declared a cash dividend payable to Evergy of $40.0 million, payable on December 18, 2020.
In November 2020, Evergy Metro's Board of Directors declared a cash dividend payable to Evergy of up to $40.0 million, payable no later than on December 19, 2019.18, 2020.
Supplemental Cash Flow Information
| | | | | | | | | | | | | | |
| Evergy | | | | |
| Year to Date September 30 | | 2020 | | 2019 |
| Cash paid for (received from): | | (millions) |
| Interest, net of amounts capitalized | | $ | 267.8 | | | $ | 240.8 | |
| Interest of VIEs | | 0.8 | | | 1.6 | |
| Income taxes, net of refunds | | (73.8) | | | (13.1) | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | 4.1 | | | 3.0 | |
| Right-of-use assets obtained in exchange for new finance lease liabilities | | 5.0 | | | 2.3 | |
| Non-cash investing transactions: | | | | |
| Property, plant and equipment additions | | 371.0 | | | 99.4 | |
| | | | |
| Non-cash financing transactions: | | | | |
| Issuance of stock for compensation and reinvested dividends | | 0.9 | | | (0.3) | |
|
| | | | | | | | |
| Year to Date September 30 | | 2019 | | 2018 |
| Evergy | | (millions) |
| Cash paid for (received from): | | | | |
| Interest, net of amounts capitalized | | $ | 240.8 |
| | $ | 148.7 |
|
| Interest of VIEs | | 1.6 |
| | 2.3 |
|
| Income taxes, net of refunds | | (13.1 | ) | | 0.6 |
|
| Non-cash investing transactions: | | | | |
| Property, plant and equipment additions (reductions) | | 99.4 |
| | (24.8 | ) |
| Non-cash financing transactions: | | | | |
| Issuance of stock for compensation and reinvested dividends | | (0.3 | ) | | 0.4 |
|
| Evergy Kansas Central | | |
| Cash paid for (received from): | | | | |
| Interest, net of amounts capitalized | | $ | 109.4 |
| | $ | 110.5 |
|
| Interest of VIEs | | 1.6 |
| | 2.3 |
|
| Income taxes, net of refunds | | 1.8 |
| | — |
|
| Non-cash investing transactions: | | | | |
| Property, plant and equipment additions (reductions) | | 35.3 |
| | (42.0 | ) |
Evergy Metro(a) | | |
| Cash paid for (received from): | | | | |
| Interest, net of amounts capitalized | | $ | 83.5 |
| | $ | 87.6 |
|
| Income taxes, net of refunds | | 32.8 |
| | 28.4 |
|
| Non-cash investing transactions: | | | | |
| Property, plant and equipment additions | | 60.8 |
| | 15.2 |
|
(a) Evergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter.
See Note 15 for supplemental cash flow information regarding the Evergy Companies' leases.
New Accounting Standards
Intangibles - Internal-Use Software
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for recording implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. An entity in a hosting arrangement that is a service contract will need to determine to which project stage (that is, preliminary project stage, application development stage or post-implementation stage) an implementation activity relates. Costs for implementation activities in the application development stage are recorded as a prepaid asset depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities occur. Costs that are recorded to a prepaid asset are to be expensed over the term of the hosting arrangement. The new guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The new guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The Evergy Companies early adopted ASU No. 2018-15 prospectively as of January 1, 2019. The adoption of ASU No. 2018-15 did not have a material impact on the Evergy Companies.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires an entity that is a lessee to record a right-of-use asset and a lease liability for lease payments on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of
| | | | | | | | | | | | | | |
| Evergy Kansas Central | | | | |
| Year to Date September 30 | | 2020 | | 2019 |
| Cash paid for (received from): | | (millions) |
| Interest, net of amounts capitalized | | $ | 114.1 | | | $ | 109.4 | |
| Interest of VIEs | | 0.8 | | | 1.6 | |
| Income taxes, net of refunds | | (6.4) | | | 1.8 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | 3.8 | | | 0.6 | |
| Right-of-use assets obtained in exchange for new finance lease liabilities | | 3.7 | | | 2.3 | |
| Non-cash investing transactions: | | | | |
| Property, plant and equipment additions | | 183.8 | | | 35.3 | |
| | | | |
| | | | |
expense recognition in the income statement. Lessor accounting remains largely unchanged. In January 2018, the FASB issued ASU No. 2018-01, Leases: Land Easement Practical Expedient | | | | | | | | | | | | | | |
| Evergy Metro | | | | |
| Year to Date September 30 | | 2020 | | 2019 |
| Cash paid for (received from): | | (millions) |
| Interest, net of amounts capitalized | | $ | 73.3 | | | $ | 83.5 | |
| Income taxes, net of refunds | | (7.3) | | | 32.8 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | 0.3 | | | 2.4 | |
| Right-of-use assets obtained in exchange for new finance lease liabilities | | 1.3 | | | 0 | |
| Non-cash investing transactions: | | | | |
| Property, plant and equipment additions | | 165.6 | | | 60.8 | |
Non-cash property, plant and equipment additions year to date September 30, 2020 for Transition to Topic 842, which permits entities to elect an optional transition practical expedient to not evaluate, under Topic 842, land easements that exist or expired before the entity's adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which updates narrow aspects of the guidance issued in ASU No. 2016-02. Also in July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which provides an optional transition method that allows entities to initially apply Topic 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. In December 2018, the FASB issued ASU No. 2018-20, Leases: Narrow-Scope Improvements for Lessors, which is expected to reduce a lessor's implementation and ongoing costs associated with applying ASU No. 2016-02. In March 2019, the FASB issued ASU No. 2019-01, Leases: Codification Improvements, which clarifies certain lessor accounting and interim reporting requirements. ASU No. 2016-02 and the subsequent amendments are effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition approach with an option to either adjust or not adjust comparative periods.
The Evergy Companies adopted the new guidance on January 1, 2019, without adjusting comparative periods for all leases existing as of January 1, 2019, by electing the optional transition method permitted by ASU No. 2018-11. As a result, Evergy, Evergy Kansas Central and Evergy Metro recorded an increase to assets and liabilities of approximately $110 million, $40 million and $80 million, respectively, as of January 1, 2019. Evergy Kansas Central and Evergy Metro have certain lease transactions between them for which theinclude a non-cash addition related assets and liabilities are eliminated at consolidated Evergy. The adoption of Topic 842 did not have a material impact on the Evergy Companies' consolidated statements of income and comprehensive income and there was no cumulative-effect adjustment recorded to the opening balancerevision in estimate of retained earnings. The Evergy Companies also elected a practical expedient to forgo reassessing existing or expired contracts as leases to determine whether each isthe Wolf Creek Generating Station (Wolf Creek) asset retirement obligation (ARO) liability in scopethe third quarter of Topic 842 and to forgo reassessing lease classification for existing and expired leases.
2020. See Note 156 for additional disclosures about the Evergy Companies' leases.more details.
2. MERGER OF GREAT PLAINS ENERGY AND EVERGY KANSAS CENTRAL
Description of Merger Transaction
On June 4, 2018, Evergy completed the mergers contemplated by the Amended Merger Agreement. As a result of the mergers, Great Plains Energy merged into Evergy, with Evergy surviving the merger and King Energy merged into Evergy Kansas Central, with Evergy Kansas Central surviving the merger. Following the completion of these mergers, Evergy Kansas Central and the direct subsidiaries of Great Plains Energy, including Evergy Metro and Evergy Missouri West, became wholly-owned subsidiaries of Evergy.
The merger was structured as a merger of equals in a tax-free exchange of shares that involved no premium paid or received with respect to either Great Plains Energy or Evergy Kansas Central. As a result of the closing of the merger transaction, each outstanding share of Great Plains Energy common stock was converted into 0.5981 shares of Evergy common stock and each outstanding share of Evergy Kansas Central common stock was converted into 1 share of Evergy common stock.
Purchase Price Allocation
Based on an evaluation of the provisions of Accounting Standards Codification (ASC) 805, Business Combinations, Evergy Kansas Central was determined to be the accounting acquirer in the merger. Pursuant to the Amended Merger Agreement, Great Plains Energy's common stock shares were exchanged for Evergy common stock shares at the fixed exchange rate of 0.5981. The total consideration transferred of $6,975.7 million, including $12.5 million for the fair value of equity compensation awards, was based on the closing price of Evergy Kansas Central on June 4, 2018.
The fair value of Great Plains Energy's assets acquired and liabilities assumed as of June 4, 2018, was determined based on significant estimates and assumptions that are judgmental in nature. Third-party valuation specialists were engaged to assist in the valuation of these assets and liabilities.
The significant assets and liabilities recorded at fair values as of the merger date include long-term debt, asset retirement obligations, pension and post-retirement plans, accumulated deferred income tax liabilities and certain other long-term assets and liabilities.
The majority of Great Plains Energy's operations were subject to the rate-setting authority of the Public Service Commission of the State of Missouri (MPSC), the State Corporation Commission of the State of Kansas (KCC) and the Federal Energy Regulatory Commission (FERC) and were accounted for pursuant to GAAP, including the accounting guidance for regulated operations. The rate-setting and cost recovery provisions for Great Plains Energy's regulated operations provided revenue derived from costs including a return on investment of assets and liabilities included in rate base. Except for the significant assets and liabilities for which valuation adjustments were made as discussed above, the fair values of Great Plains Energy's tangible and intangible assets and liabilities subject to these rate-setting provisions approximated their carrying values and the assets and liabilities did not reflect any adjustments to these amounts other than for amounts not included in rate base. The difference between the fair value and pre-merger carrying amounts for Great Plains Energy's long-term debt, asset retirement obligations and pension and post-retirement plans that were related to regulated operations were recorded as a regulatory asset or liability. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed were recognized as goodwill as of the merger date.
The final purchase price allocation to Great Plains Energy's assets and liabilities as of June 4, 2018, is detailed in the following table.
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| Current assets | | $ | 2,151.7 |
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| Property, plant and equipment, net | | 9,179.7 |
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| Goodwill | | 2,336.6 |
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| Other long-term assets, excluding goodwill | | 1,235.9 |
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| Total assets | | $ | 14,903.9 |
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| Current liabilities | | 1,673.9 |
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| Long-term liabilities, excluding long-term debt | | 2,895.7 |
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| Long-term debt, net | | 3,358.6 |
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| Total liabilities | | $ | 7,928.2 |
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| Total purchase price | | $ | 6,975.7 |
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The purchase price allocation in the table above reflects refinements made to the preliminary fair values of long-term liabilities, excluding long-term debt included in the Evergy Companies' combined 2018 Form 10-K. These refinements include adjustments associated with deferred income taxes that resulted in a decrease to goodwill of $2.3 million.
3. REVENUE
Evergy's, Evergy Kansas Central's and Evergy Metro's revenues disaggregated by customer class are summarized in the following tables.
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| Three Months Ended September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Revenues | (millions) |
| Residential | $ | 653.0 |
| | $ | 268.9 |
| | $ | 249.2 |
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| Commercial | 539.1 |
| | 219.3 |
| | 234.1 |
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| Industrial | 175.3 |
| | 111.3 |
| | 40.8 |
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| Other retail | 16.0 |
| | 5.6 |
| | 7.0 |
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| Total electric retail | $ | 1,383.4 |
| | $ | 605.1 |
| | $ | 531.1 |
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| Wholesale | 96.3 |
| | 67.7 |
| | 23.5 |
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| Transmission | 80.4 |
| | 67.7 |
| | 7.8 |
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| Industrial steam and other | 6.2 |
| | 1.7 |
| | 0.6 |
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| Total revenue from contracts with customers | $ | 1,566.3 |
| | $ | 742.2 |
| | $ | 563.0 |
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| Other | 11.3 |
| | 6.8 |
| | 5.8 |
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| Operating revenues | $ | 1,577.6 |
| | $ | 749.0 |
| | $ | 568.8 |
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| Year to Date September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Revenues | (millions) |
| Residential | $ | 1,536.3 |
| | $ | 640.4 |
| | $ | 575.5 |
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| Commercial | 1,391.2 |
| | 556.4 |
| | 613.5 |
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| Industrial | 478.9 |
| | 308.5 |
| | 106.7 |
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| Other retail | 35.3 |
| | 15.8 |
| | 12.3 |
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| Total electric retail | $ | 3,441.7 |
| | $ | 1,521.1 |
| | $ | 1,308.0 |
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| Wholesale | 251.7 |
| | 182.5 |
| | 54.7 |
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| Transmission | 233.5 |
| | 205.5 |
| | 14.0 |
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| Industrial steam and other | 18.9 |
| | 4.6 |
| | 2.3 |
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| Total revenue from contracts with customers | $ | 3,945.8 |
| | $ | 1,913.7 |
| | $ | 1,379.0 |
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| Other | 70.4 |
| | 17.6 |
| | 52.2 |
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| Operating revenues | $ | 4,016.2 |
| | $ | 1,931.3 |
| | $ | 1,431.2 |
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| Three Months Ended September 30, 2020 | Evergy | Evergy Kansas Central | Evergy Metro |
| Revenues | | (millions) | |
| Residential | | $ | 636.4 | | | | $ | 262.9 | | | | $ | 241.2 | | |
| Commercial | | 499.5 | | | | 205.2 | | | | 213.3 | | |
| Industrial | | 166.8 | | | | 105.7 | | | | 36.6 | | |
| Other retail | | 9.5 | | | | 4.4 | | | | 2.7 | | |
| Total electric retail | | $ | 1,312.2 | | | | $ | 578.2 | | | | $ | 493.8 | | |
| Wholesale | | 85.0 | | | | 68.7 | | | | 9.7 | | |
| Transmission | | 80.7 | | | | 72.9 | | | | 3.5 | | |
| Industrial steam and other | | 5.6 | | | | 0.9 | | | | 0.8 | | |
| Total revenue from contracts with customers | | $ | 1,483.5 | | | | $ | 720.7 | | | | $ | 507.8 | | |
| Other | | 34.1 | | | | 12.9 | | | | 20.7 | | |
| Operating revenues | | $ | 1,517.6 | | | | $ | 733.6 | | | | $ | 528.5 | | |
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| Year to Date September 30, 2020 | Evergy | Evergy Kansas Central | Evergy Metro |
| Revenues | | (millions) | |
| Residential | | $ | 1,515.6 | | | | $ | 627.5 | | | | $ | 572.2 | | |
| Commercial | | 1,272.9 | | | | 511.0 | | | | 558.1 | | |
| Industrial | | 446.7 | | | | 284.6 | | | | 99.6 | | |
| Other retail | | 29.2 | | | | 13.3 | | | | 8.9 | | |
| Total electric retail | | $ | 3,264.4 | | | | $ | 1,436.4 | | | | $ | 1,238.8 | | |
| Wholesale | | 195.8 | | | | 168.1 | | | | 16.7 | | |
| Transmission | | 238.5 | | | | 215.2 | | | | 10.4 | | |
| Industrial steam and other | | 16.8 | | | | 2.1 | | | | 2.7 | | |
| Total revenue from contracts with customers | | $ | 3,715.5 | | | | $ | 1,821.8 | | | | $ | 1,268.6 | | |
| Other | | 103.5 | | | | 42.7 | | | | 59.7 | | |
| Operating revenues | | $ | 3,819.0 | | | | $ | 1,864.5 | | | | $ | 1,328.3 | | |
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| Three Months Ended September 30, 2019 | Evergy | Evergy Kansas Central | Evergy Metro |
| Revenues | | (millions) | |
| Residential | | $ | 653.0 | | | | $ | 268.9 | | | | $ | 249.2 | | |
| Commercial | | 539.1 | | | | 219.3 | | | | 234.1 | | |
| Industrial | | 175.3 | | | | 111.3 | | | | 40.8 | | |
| Other retail | | 16.0 | | | | 5.6 | | | | 7.0 | | |
| Total electric retail | | $ | 1,383.4 | | | | $ | 605.1 | | | | $ | 531.1 | | |
| Wholesale | | 96.3 | | | | 67.7 | | | | 23.5 | | |
| Transmission | | 80.4 | | | | 67.7 | | | | 7.8 | | |
| Industrial steam and other | | 6.2 | | | | 1.7 | | | | 0.6 | | |
| Total revenue from contracts with customers | | $ | 1,566.3 | | | | $ | 742.2 | | | | $ | 563.0 | | |
| Other | | 11.3 | | | | 6.8 | | | | 5.8 | | |
| Operating revenues | | $ | 1,577.6 | | | | $ | 749.0 | | | | $ | 568.8 | | |
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| Year to Date September 30, 2019 | Evergy | Evergy Kansas Central | Evergy Metro |
| Revenues | | (millions) | |
| Residential | | $ | 1,536.3 | | | | $ | 640.4 | | | | $ | 575.5 | | |
| Commercial | | 1,391.2 | | | | 556.4 | | | | 613.5 | | |
| Industrial | | 478.9 | | | | 308.5 | | | | 106.7 | | |
| Other retail | | 35.3 | | | | 15.8 | | | | 12.3 | | |
| Total electric retail | | $ | 3,441.7 | | | | $ | 1,521.1 | | | | $ | 1,308.0 | | |
| Wholesale | | 251.7 | | | | 182.5 | | | | 54.7 | | |
| Transmission | | 233.5 | | | | 205.5 | | | | 14.0 | | |
| Industrial steam and other | | 18.9 | | | | 4.6 | | | | 2.3 | | |
| Total revenue from contracts with customers | | $ | 3,945.8 | | | | $ | 1,913.7 | | | | $ | 1,379.0 | | |
| Other | | 70.4 | | | | 17.6 | | | | 52.2 | | |
| Operating revenues | | $ | 4,016.2 | | | | $ | 1,931.3 | | | | $ | 1,431.2 | | |
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| Three Months Ended September 30, 2018 | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Revenues | (millions) |
| Residential | $ | 647.1 |
| | $ | 270.5 |
| | $ | 243.5 |
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| Commercial | 530.5 |
| | 217.4 |
| | 231.1 |
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| Industrial | 173.4 |
| | 111.9 |
| | 39.1 |
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| Other retail | 10.9 |
| | 5.4 |
| | 2.7 |
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| Total electric retail | $ | 1,361.9 |
| | $ | 605.2 |
| | $ | 516.4 |
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| Wholesale | 118.5 |
| | 82.4 |
| | 29.9 |
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| Transmission | 80.6 |
| | 72.2 |
| | 3.8 |
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| Industrial steam and other | 6.0 |
| | 1.5 |
| | 0.7 |
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| Total revenue from contracts with customers | $ | 1,567.0 |
| | $ | 761.3 |
| | $ | 550.8 |
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| Other | 15.5 |
| | 3.5 |
| | 8.8 |
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| Operating revenues | $ | 1,582.5 |
| | $ | 764.8 |
| | $ | 559.6 |
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| Year to Date September 30, 2018 | Evergy | | Evergy Kansas Central | | Evergy Metro(a) |
| Revenues | (millions) |
| Residential | $ | 1,169.4 |
| | $ | 671.9 |
| | $ | 585.4 |
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| Commercial | 945.0 |
| | 542.8 |
| | 609.2 |
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| Industrial | 375.5 |
| | 297.2 |
| | 105.4 |
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| Other retail | 21.5 |
| | 15.3 |
| | 7.7 |
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| Total electric retail | $ | 2,511.4 |
| | $ | 1,527.2 |
| | $ | 1,307.7 |
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| Wholesale | 302.4 |
| | 263.7 |
| | 38.5 |
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| Transmission | 227.6 |
| | 216.3 |
| | 11.0 |
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| Industrial steam and other | 10.0 |
| | 4.6 |
| | 3.0 |
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| Total revenue from contracts with customers | $ | 3,051.4 |
| | $ | 2,011.8 |
| | $ | 1,360.2 |
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| Other | 24.7 |
| | 4.1 |
| | 48.7 |
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| Operating revenues | $ | 3,076.1 |
| | $ | 2,015.9 |
| | $ | 1,408.9 |
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(a)Evergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter.
4.3. RECEIVABLES
The Evergy Companies' receivables are detailed in the following table.
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| | September 30 | December 31 |
| | | 2019 | | | 2018 | |
| Evergy | | (millions) | |
| Customer accounts receivable - billed | | $ | 19.5 |
| | | $ | 16.7 |
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| Customer accounts receivable - unbilled | | 155.9 |
| | | 91.2 |
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| Other receivables | | 102.3 |
| | | 95.0 |
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| Allowance for doubtful accounts | | (8.9 | ) | | | (9.2 | ) | |
| Total | | $ | 268.8 |
| | | $ | 193.7 |
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| Evergy Kansas Central | | | |
| Customer accounts receivable - billed | | $ | — |
| | | $ | — |
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| Customer accounts receivable - unbilled | | 60.7 |
| | | 16.6 |
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| Other receivables | | 83.4 |
| | | 71.6 |
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| Allowance for doubtful accounts | | (3.4 | ) | | | (3.9 | ) | |
| Total | | $ | 140.7 |
| | | $ | 84.3 |
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| Evergy Metro | | |
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| Customer accounts receivable - billed | | $ | 9.1 |
| | | $ | 7.8 |
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| Customer accounts receivable - unbilled | | 65.0 |
| | | 42.9 |
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| Other receivables | | 14.0 |
| | | 15.8 |
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| Allowance for doubtful accounts | | (3.9 | ) | | | (3.8 | ) | |
| Total | | $ | 84.2 |
| | | $ | 62.7 |
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| | September 30
2020 | | December 31
2019 |
| Evergy | | (millions) |
| Customer accounts receivable - billed | | $ | 8.6 | | | $ | 7.2 | |
| Customer accounts receivable - unbilled | | 143.9 | | | 104.0 | |
| Other receivables | | 181.2 | | | 127.8 | |
| Allowance for credit losses | | (15.2) | | | (10.5) | |
| Total | | $ | 318.5 | | | $ | 228.5 | |
| Evergy Kansas Central | | | | |
| Customer accounts receivable - billed | | $ | 0 | | | $ | 0 | |
| Customer accounts receivable - unbilled | | 55.3 | | | 49.7 | |
| Other receivables | | 206.7 | | | 94.5 | |
| Allowance for credit losses | | (5.5) | | | (3.8) | |
| Total | | $ | 256.5 | | | $ | 140.4 | |
| Evergy Metro | | | | |
| Customer accounts receivable - billed | | $ | 4.9 | | | $ | 3.1 | |
| Customer accounts receivable - unbilled | | 56.9 | | | 26.5 | |
| Other receivables | | 24.7 | | | 23.1 | |
| Allowance for credit losses | | (6.5) | | | (4.6) | |
| Total | | $ | 80.0 | | | $ | 48.1 | |
Evergy's, Evergy Kansas Central's and Evergy Metro's other receivables at September 30, 20192020 and December 31, 2018,2019, consisted primarily of receivables from partners in jointly-owned electric utility plants, and wholesale sales receivables. As of September 30, 2019,receivables and receivables related to alternative revenue programs. The Evergy Companies' other receivables for Evergy, Evergy Kansas Central and Evergy Metroalso included receivables from contracts with customers of $45.3 million, $41.3 million and $0.8 million, respectively. As of December 31, 2018, other receivables for Evergy, Evergy Kansas Central and Evergy Metro included receivables from contracts with customers of $65.8 million, $55.9 million and $5.5 million, respectively.
The Evergy Companies recorded bad debt expense related to contracts with customers as summarized in the following table.
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| September 30
2020 | | December 31
2019 | | | | |
| (millions) | | | | | | |
| Evergy | $ | 58.8 | | | $ | 42.0 | | | | | | | |
| Evergy Kansas Central | 49.9 | | | 37.7 | | | | | | | |
| Evergy Metro | 6.1 | | | 1.2 | | | | | | | |
Allowance for Credit Losses
Historical loss information generally provides the basis for the Evergy Companies' assessment of expected credit losses. The Evergy Companies use an aging of accounts receivable method to assess historical loss information. When historical experience may not fully reflect the Evergy Companies' expectations about the future, the Evergy Companies will adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information.
Receivables are charged off when they are deemed uncollectible, which is based on a number of factors including specific facts surrounding an account and management's judgment.
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| | Three Months Ended
September 30 | | Year to Date
September 30 |
| | 2019 | | 2018 | | 2019 | | 2018 |
| | (millions) |
| Evergy | $ | 11.4 |
| | $ | 4.5 |
| | $ | 22.0 |
| | $ | 10.6 |
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| Evergy Kansas Central | 2.0 |
| | 1.1 |
| | 5.4 |
| | 6.2 |
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Evergy Metro (a) | 6.8 |
| | 3.9 |
| | 11.6 |
| | 7.5 |
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(a) Evergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter. | | | | | | | | | | | |
| 2020 | | 2019 |
| Evergy | (millions) |
| Beginning balance January 1 | $ | 10.5 | | | $ | 9.2 | |
| Credit loss expense | 15.5 | | | 22.4 | |
| Write-offs | (20.8) | | | (31.9) | |
| Recoveries of prior write-offs | 10.0 | | | 9.2 | |
| Ending balance September 30 | $ | 15.2 | | | $ | 8.9 | |
| Evergy Kansas Central | | | |
| Beginning balance January 1 | $ | 3.8 | | | $ | 3.9 | |
| Credit loss expense | 6.9 | | | 5.6 | |
| Write-offs | (7.3) | | | (8.8) | |
| Recoveries of prior write-offs | 2.1 | | | 2.7 | |
| Ending balance September 30 | $ | 5.5 | | | $ | 3.4 | |
| Evergy Metro | | | |
| Beginning balance January 1 | $ | 4.6 | | | $ | 3.8 | |
| Credit loss expense | 5.5 | | | 11.7 | |
| Write-offs | (8.9) | | | (16.2) | |
| Recoveries of prior write-offs | 5.3 | | | 4.6 | |
| Ending balance September 30 | $ | 6.5 | | | $ | 3.9 | |
Sale of Accounts Receivable
Evergy Kansas Central, Evergy Metro and Evergy Missouri West sell an undivided percentage ownership interest in their retail electric accounts receivable to independent outside investors. These sales of the undivided percentage ownership interests in accounts receivable to independent outside investors are accounted for as secured borrowings with accounts receivable pledged as collateral and a corresponding short-term collateralized note payable recognized on the balance sheets. At September 30, 2019 and December 31, 2018, Evergy'sThe Evergy Companies' accounts receivable pledged as collateral and the corresponding short-term collateralized note payable were $395.0 million and $365.0 million, respectively. At September 30, 2019 and December 31, 2018, Evergy Kansas Central's accounts receivable pledged as collateral andare summarized in the corresponding short-term collateralized note payable were $200.0 million andfollowing table.
$185.0 million, respectively. At September 30, 2019 and December 31, 2018, Evergy Metro's accounts receivable pledged as collateral and the corresponding short-term collateralized note payable were $130.0 million. | | | | | | | | | | | | | | | | | |
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| September 30
2020 | | December 31
2019 | | | | |
| (millions) | | | | | | |
| Evergy | $ | 395.0 | | | $ | 339.0 | | | | | | | |
| Evergy Kansas Central | 200.0 | | | 171.0 | | | | | | | |
| Evergy Metro | 130.0 | | | 118.0 | | | | | | | |
Each receivable sale facility expires in September 2020.2021. Evergy Kansas Central's facility allows for $185.0 million in aggregate outstanding principal amount of borrowings from mid-October through mid-June and then $200.0 million from mid-June through mid-October. Evergy Metro's facility allows for $130.0 million in aggregate outstanding principal amount of borrowings at any time. Evergy Missouri West's facility allows for $50.0 million in aggregate outstanding principal amount of borrowings from mid-November through mid-June and then $65.0 million from mid-June through mid-November.
5.4. RATE MATTERS AND REGULATION
KCC Proceedings
Evergy Kansas Central 20192020 Transmission Delivery Charge (TDC)
In March 2019,2020, the KCCState Corporation Commission of the State of Kansas (KCC) issued an order adjusting Evergy Kansas Central's retail prices to include updated transmission costs as reflected in the FERCFederal Energy Regulatory Commission (FERC) transmission formula rate (TFR). The new prices were effective in April 20192020 and are expected to decreaseincrease Evergy Kansas Central's annual retail revenues by $7.7 million.$3.5 million when compared to 2019.
Evergy Metro 20192020 TDC
In April 2019,2020, the KCC issued an order adjusting Evergy Metro's retail prices to include updated transmission costs as reflected in the FERC TFR. The new prices were effective in May 20192020 and are expected to decrease Evergy Metro's annual retail revenues by $8.3 million.
Evergy Kansas Central Retail Energy Cost Adjustment (RECA) Recovery of 8% of Jeffrey Energy Center (JEC)
As part of the non-unanimous stipulation and agreement approved by the KCC in September 2018 in Evergy Kansas Central's 2018 rate case, it was agreed that in the event that Evergy Kansas Central purchased the 8% ownership interest in JEC that it had historically leased from a trust it would be entitled$2.7 million when compared to file a request with the KCC to recover operating and maintenance and capital costs associated with the 8% ownership through its RECA as these amounts were not reflected in Evergy Kansas Central's rates established as part of the 2018 rate case.
In the first quarter of 2019, Evergy Kansas Central entered into an agreement with the trust to extend its lease of the 8% interest in JEC from the previous expiration date of January 2019 to August 2019 and to then purchase the 8% ownership interest from the trust at the time the lease expired. Pursuant to the agreement, Evergy Kansas Central's purchase of the 8% ownership interest of JEC closed in August 2019.
In March 2019, Evergy Kansas Central filed an application with the KCC to request recovery through the RECA of deferred lease expense and operating and maintenance expense incurred during the lease extension and future operating and maintenance expense subsequent to the purchase of the 8% ownership interest in JEC. In September 2019, the KCC issued an order finding that the lease extension and subsequent purchase of the 8% ownership interest by Evergy Kansas Central were not prudent and disallowed the recovery from retail customers of all associated capital and operating costs that were incurred during the lease extension and will be incurred in the future. The KCC order also provided that Evergy Kansas Central be allowed to retain any wholesale electricity sales associated with the 8% ownership interest of JEC.
As a result of the KCC order in September 2019, Evergy and Evergy Kansas Central recorded an $8.4 million pre-tax loss to operating and maintenance expense in their consolidated statements of income and comprehensive income for the three months ended and year to date September 30, 2019 associated with the write-off of a regulatory asset for the deferred lease expense and other operating expenses.
Evergy Kansas Central and Evergy Metro Earnings Review and Sharing Plan (ERSP)
As part of their merger settlement agreement with the KCC, Evergy Kansas Central and Evergy Metro agreed to participate in an ERSP for the years 2019 through 2022. Under the ERSP, Evergy Kansas Central's and Evergy Metro's Kansas jurisdiction are required to refund to customers 50% of annual earnings in excess of their authorized return on equity of 9.3% to the extent the excess earnings exceed the amount of Evergy Kansas Central's and Evergy Metro's annual merger bill credits for the year being measured.
annual earnings did not exceed their authorized return on equity of 9.3% and therefore did not result in any customer refund obligations. These calculations were filed with the KCC in April 2020. As of September 30, 2019,2020, Evergy Kansas Central and Evergy Metro estimate their 20192020 annual earnings will not result in a refund obligation. Evergy Kansas Central and Evergy Metro expect to file their 2019 earnings calculations with the KCC in March 2020. The final refund obligation,obligations for 2020, if any, will be decided by the KCC and could vary from the current estimate.estimates.
Evergy Kansas Central and Evergy Metro COVID-19 Accounting Authority Order (AAO) Request
In May 2020, Evergy Kansas Central and Evergy Metro filed a joint request for an AAO with the KCC that would allow for the extraordinary costs and lost revenues incurred by the companies, net of any COVID-19-related savings, as a result of the COVID-19 pandemic to be considered for future recovery from customers as part of their next rate cases.
In July 2020, the KCC granted Evergy Kansas Central's and Evergy Metro's request for an AAO as discussed above. As a result of the KCC's order, Evergy Kansas Central and Evergy Metro will record to a regulatory asset all net incremental costs incurred associated with the COVID-19 pandemic for consideration in their next rate cases, which are expected to be completed no later than the end of 2023. Additionally, the KCC order states that the KCC will also consider granting the recovery of Evergy Kansas Central's and Evergy Metro's lost revenues associated with the COVID-19 pandemic as part of their next rate cases. If granted, these lost revenues would be recognized prospectively as billed to customers in future rates.
MPSC Proceedings
Evergy Missouri West Other Proceedings
In December 2018, the Office of the Public Counsel (OPC) and the Midwest Energy Consumers Group (MECG) filed a petition with the MPSCPublic Service Commission of the State of Missouri (MPSC) requesting an accounting authority order (AAO)AAO that would require Evergy Missouri West to record a regulatory liability for all revenues collected from customers for return on investment, non-fuel operations and maintenance costs, taxes including accumulated deferred income taxes, and all other costs associated with Sibley Station following the station’s retirement in November 2018.
In October 2019, the MPSC granted OPC's and MECG's request for an AAO and required Evergy Missouri West to record to a regulatory liability the revenues discussed above for consideration in Evergy Missouri West's next rate case, which is expected to be completed no later than 2022. Depending on the MPSC's decision in this next rate case, Evergy Missouri West could be required to refund to customers all or a portion of amounts collected in revenue for Sibley Station since December 2018 or, alternatively, could be required to make no refunds.
As a result of the MPSC order, Evergy has recorded a regulatory liability of $6.5$18.3 million as of September 30, 20192020 for the estimated amount of revenues that Evergy Missouri West has collected from customers for Sibley Station since December 2018 that Evergy has determined is probable of refund andrefund. Evergy expects that it will continue to defer such amounts as collected from customers until new rates become effective in Evergy Missouri West's next rate case.
The accrual for this estimated amount does not include certain revenues collected related to Sibley Station that Evergy has determined to not be probable of refund in the next rate case based on the relevant facts and
circumstances. While Evergy has determined these additional revenues to not be probable of refund, the ultimate resolution of this matter in Evergy Missouri West's next rate case is uncertain and could result in an estimated loss of up to approximately $15$12 million per year in excess of the amount accrued per year until Evergy Missouri West's new rates become effective. Evergy's regulatory liability for probable refunds as of September 30, 20192020 and estimated loss in excess of the amount accrued represent estimates that could change significantly based on ongoing developments including as a result of an appeal of the MPSC order, decisions in other regulatory proceedings that establish precedent applicable to this matter and positions of parties on this issue in a future Evergy Missouri West rate case.
Evergy Metro and Evergy Missouri West also expectsCOVID-19 AAO Request
In May 2020, Evergy Metro and Evergy Missouri West filed a joint request for an AAO with the MPSC that would allow for the MPSC's decision in itsextraordinary costs and lost revenues incurred by the companies, net of any COVID-19-related savings, as a result of the COVID-19 pandemic to be considered for future recovery from customers as part of their next rate case could impactcases. In October 2020, Evergy Metro and Evergy Missouri West entered into a non-unanimous stipulation and agreement with the valuation of its $131.6 millionMPSC staff and other intervenors that would allow Evergy Metro and Evergy Missouri West to defer to a regulatory asset as of September 30, 2019certain net incremental costs incurred associated with the COVID-19 pandemic for retired generation facilities. This regulatory assetconsideration in their next rate cases. A decision by the MPSC regarding the non-unanimous stipulation and agreement is reduced by approximately $7 million of annual amortization expense which is an amount equal to the annual depreciation expense for the asset reflectedexpected in retail rates. See "Plant to be Retired, Net" within Note 1 to the consolidated financial statements of the Evergy Companies' 2018 Form 10-K for more information.January 2021.
FERC Proceedings
Evergy Kansas Central TFR
Evergy Kansas Central's TFR, effective in January 2019, includes projected 2019 transmission capital expenditures and operating costs and is expected to decrease annual transmission revenues by $11.2 million when compared to 2018. This updated rate provided the basis for Evergy Kansas Central's request with the KCC to adjust its retail prices to include updated transmission costs as discussed above.
Evergy Kansas Central's TFR, effective in January 2020, includes projected 2020 transmission capital expenditures and operating costs and is expected to decreaseincrease annual transmission revenues by $13.6$6.8 million when compared to 2019. This updated rate will provideis the basismost significant component in the retail rate calculation for any subsequent requests by Evergy Kansas CentralCentral's annual request with the KCC to adjust its retail prices to include updated transmission costs.costs through the TDC.
Evergy Metro TFR
Evergy Metro'sKansas Central's TFR, effective in January 2019,2021, includes projected 20192021 transmission capital expenditures and operating costs and is expected to decreaseincrease annual transmission revenues by $2.8$32.4 million when compared to 2018.
2020. The increase was primarily driven by higher projected capital expenditures and a lower prior year true-up adjustment in 2021. This updated rate providedis the basismost significant component in the retail rate calculation for Evergy Metro'sKansas Central's annual request with the KCC to adjust its retail prices to include updated transmission costs as discussed above.through the TDC.
Evergy Metro TFR
Evergy Metro's TFR, effective in January 2020, includes projected 2020 transmission capital expenditures and operating costs and is expected to decrease annual transmission revenues by $1.7 million when compared to 2019. This updated rate will provideis the basismost significant component in the retail rate calculation for any subsequentEvergy Metro's annual request by Evergy Metro with the KCC to adjust its retail prices to include updated transmission costs.costs through the TDC.
Evergy Metro's TFR, effective in January 2021, includes projected 2021 transmission capital expenditures and operating costs and is expected to decrease annual transmission revenues by $3.9 million when compared to 2020. This rate is the most significant component in the retail rate calculation for Evergy Metro's annual request with the KCC to adjust retail prices to include updated transmission costs through the TDC. 6.
5. GOODWILL
Accounting rules require goodwill to be tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. Evergy's impairment test for the $2,336.6 million of goodwill that was recorded as a result of the Great Plains Energy Incorporated (Great Plains Energy) and Evergy Kansas Central merger was conducted as of May 1, 2019.2020. The goodwill impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. In the event that the carrying amount exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference between the carrying amount of the reporting unit and its fair value. Evergy's consolidated operations are considered 1 reporting unit for assessment of impairment, as management assesses financial performance and allocates resources on a consolidated basis. The determination of fair value of the reporting unit consisted of two valuation techniques: an income approach consisting of a discounted cash flow analysis and a market approach
consisting of a determination of reporting unit invested capital using a market multiple derived from the historical earnings before interest, income taxes, depreciation and amortization and market prices of the stock of peer companies. The results of the two techniques were evaluated and weighted to determine a point within the range that management considered representative of fair value for the reporting unit. The fair value of the reporting unit exceeded the carrying amount, including goodwill. As a result, there was no impairment of goodwill.
6. ASSET RETIREMENT OBLIGATIONS
AROs associated with tangible long-lived assets are legal obligations that exist under enacted laws, statutes and written or oral contracts, including obligations arising under the doctrine of promissory estoppel. These liabilities are recognized at estimated fair value as incurred with a corresponding amount capitalized as part of the cost of the related long-lived assets and depreciated over their useful lives. Accretion of the liabilities due to the passage of time is recorded to a regulatory asset and/or liability. Changes in the estimated fair values of the liabilities are recognized when known.
Evergy Kansas Central, Evergy Metro and Evergy Missouri West have AROs related to asbestos abatement and the closure and post-closure care of ponds and landfills containing coal combustion residuals (CCRs). In addition, Evergy Kansas Central and Evergy Metro have AROs related to decommissioning Wolf Creek and the retirement of wind generation facilities.
The MPSC and KCC require the owners of Wolf Creek, including Evergy Kansas South and Evergy Metro with their respective 47% ownership shares, to submit an updated decommissioning cost study every three years. The most recent study was submitted to the MPSC and KCC in September 2020. As a result of changes in estimates related to the study, Evergy, Evergy Kansas Central and Evergy Metro recorded increases to their AROs to decommission Wolf Creek of $259.1 million, $140.7 million and $118.4 million, respectively, in the third quarter of 2020.
The following table summarizes the change in the Evergy Companies' AROs for the periods ending September 30, 2020 and December 31, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Evergy | | | Evergy Kansas Central | | | Evergy Metro | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| | (millions) | |
| Beginning balance January 1 | | $ | 674.1 | | | | $ | 687.1 | | | | $ | 272.9 | | | | $ | 281.1 | | | | $ | 253.6 | | | | $ | 261.0 | | |
| | | | | | | | | | | | | | | | | | |
Revision in timing and/or
estimates | | 257.0 | | | | (22.3) | | | | 136.9 | | | | (12.4) | | | | 118.4 | | | | (9.9) | | |
| Settlements | | (11.0) | | | | (17.8) | | | | (2.1) | | | | (14.8) | | | | (2.7) | | | | (2.5) | | |
| Accretion | | 28.7 | | | | 27.1 | | | | 14.2 | | | | 19.0 | | | | 12.1 | | | | 5.0 | | |
| Ending balance | | $ | 948.8 | | | | $ | 674.1 | | | | $ | 421.9 | | | | $ | 272.9 | | | | $ | 381.4 | | | | $ | 253.6 | | |
| Less: current portion | | (66.5) | | | | (71.3) | | | | (23.3) | | | | (23.3) | | | | (33.0) | | | | (36.1) | | |
Total noncurrent asset
retirement obligation | | $ | 882.3 | | | | $ | 602.8 | | | | $ | 398.6 | | | | $ | 249.6 | | | | $ | 348.4 | | | | $ | 217.5 | | |
7. PENSION PLANS AND POST-RETIREMENT BENEFITS
Evergy and certain of its subsidiaries maintain, and Evergy Kansas Central and Evergy Metro participate in, qualified non-contributory defined benefit pension plans covering the majority of Evergy Kansas Central's and Evergy Metro's employees as well as certain non-qualified plans covering certain active and retired officers. Evergy is also responsible for its indirect 94% ownership share of Wolf Creek Generating Station's (Wolf Creek)Creek's defined benefit plans, consisting of Evergy Kansas Central'sSouth's and Evergy Metro's respective 47% ownership shares.
For the majority of employees, pension benefits under these plans reflect the employees' compensation, years of service and age at retirement. However, for the plan covering Evergy Kansas Central's employees, the benefits for non-union employees hired between 2002 and the second quarter of 2018 and union employees hired beginning in 2012 are derived from a cash balance account formula. The plan was closed to future non-union employees in
2018. For the plans covering Evergy Metro's employees, the benefits for union employees hired beginning in 2014 are derived from a cash balance account formula and the plans were closed to future non-union employees in 2014.
Evergy and its subsidiaries also provide certain post-retirement health care and life insurance benefits for substantially all retired employees of Evergy Kansas Central and Evergy Metro and their respective shares of Wolf Creek's post-retirement benefit plans.
The Evergy Companies record pension and post-retirement expense in accordance with rate orders from the KCC and MPSC that allow the difference between pension and post-retirement costs under GAAP and costs for ratemaking to be recognized as a regulatory asset or liability. This difference between financial and regulatory accounting methods is due to timing and will be eliminated over the life of the plans.
For the three months ended and year to date September 30, 2020, Evergy and Evergy Metro recorded pension settlement charges of $10.0 million and $12.7 million, respectively. For the three months ended and year to date September 30, 2019, Evergy and Evergy Metro recorded pension settlement charges of $14.5 million and $20.8 million, respectively, as arespectively. These settlement charges were the result of accelerated pension distributions related to voluntary severance programs. Evergy and Evergy Metro deferred substantially all of the charges to a regulatory asset and expectsexpect to recover these amounts over future periods pursuant to regulatory agreements.
The following tables provide the components of net periodic benefit costs prior to the effects of capitalization and sharing with joint owners of power plants.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Post-Retirement Benefits |
| Three Months Ended September 30, 2020 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 20.1 | | | $ | 6.8 | | | $ | 13.3 | | | $ | 0.7 | | | $ | 0.3 | | | $ | 0.4 | |
| Interest cost | 24.0 | | | 11.7 | | | 12.1 | | | 2.3 | | | 1.2 | | | 1.1 | |
| Expected return on plan assets | (26.3) | | | (13.3) | | | (13.5) | | | (2.4) | | | (1.7) | | | (0.7) | |
| Prior service cost | 0.4 | | | 0.4 | | | 0.2 | | | 0.1 | | | 0.1 | | | 0 | |
| Recognized net actuarial (gain)/loss | 12.1 | | | 8.5 | | | 11.6 | | | 0.1 | | | 0 | | | (0.1) | |
| Settlement and special termination benefits | 10.0 | | | 0 | | | 12.7 | | | 0 | | | 0 | | | 0 | |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 40.3 | | | 14.1 | | | 36.4 | | | 0.8 | | | (0.1) | | | 0.7 | |
| Regulatory adjustment | (0.4) | | | 0.4 | | | (11.3) | | | (1.0) | | | (0.7) | | | (0.2) | |
| Intercompany allocations | 0 | | | 1.6 | | | (5.8) | | | 0 | | | 0.1 | | | (0.1) | |
| Net periodic benefit costs (income) | $ | 39.9 | | | $ | 16.1 | | | $ | 19.3 | | | $ | (0.2) | | | $ | (0.7) | | | $ | 0.4 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Post-Retirement Benefits |
| Three Months Ended September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 19.1 |
| | $ | 7.3 |
| | $ | 11.8 |
| | $ | 0.6 |
| | $ | 0.2 |
| | $ | 0.4 |
|
| Interest cost | 27.5 |
| | 13.4 |
| | 14.1 |
| | 2.6 |
| | 1.4 |
| | 1.2 |
|
| Expected return on plan assets | (27.0 | ) | | (13.7 | ) | | (12.3 | ) | | (2.5 | ) | | (1.7 | ) | | (0.8 | ) |
| Prior service cost | 0.5 |
| | 0.5 |
| | 0.2 |
| | 0.1 |
| | 0.1 |
| | — |
|
| Recognized net actuarial (gain)/loss | 6.9 |
| | 6.2 |
| | 12.2 |
| | (0.3 | ) | | (0.1 | ) | | (0.3 | ) |
| Settlement and special termination benefits | 14.5 |
| | — |
| | 20.8 |
| | — |
| | — |
| | — |
|
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 41.5 |
| | 13.7 |
| | 46.8 |
| | 0.5 |
| | (0.1 | ) | | 0.5 |
|
| Regulatory adjustment | 4.9 |
| | 0.5 |
| | (14.7 | ) | | (0.8 | ) | | (0.7 | ) | | 0.1 |
|
| Intercompany allocations | — |
| | — |
| | (13.6 | ) | | — |
| | — |
| | (0.2 | ) |
| Net periodic benefit costs (income) | $ | 46.4 |
| | $ | 14.2 |
| | $ | 18.5 |
| | $ | (0.3 | ) | | $ | (0.8 | ) | | $ | 0.4 |
|
| | | | | | | | | | | | |
| | Pension Benefits | | Post-Retirement Benefits |
| Year to Date September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 57.3 |
| | $ | 21.8 |
| | $ | 35.5 |
| | $ | 1.9 |
| | $ | 0.8 |
| | $ | 1.1 |
|
| Interest cost | 82.4 |
| | 40.3 |
| | 42.1 |
| | 7.9 |
| | 4.2 |
| | 3.7 |
|
| Expected return on plan assets | (80.9 | ) | | (41.1 | ) | | (36.9 | ) | | (7.5 | ) | | (5.0 | ) | | (2.5 | ) |
| Prior service cost | 1.5 |
| | 1.3 |
| | 0.7 |
| | 0.3 |
| | 0.3 |
| | — |
|
| Recognized net actuarial (gain)/loss | 20.6 |
| | 19.0 |
| | 36.7 |
| | (0.9 | ) | | (0.4 | ) | | (1.1 | ) |
| Settlement and special termination benefits | 14.5 |
| | — |
| | 20.8 |
| | — |
| | — |
| | — |
|
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 95.4 |
| | 41.3 |
| | 98.9 |
| | 1.7 |
| | (0.1 | ) | | 1.2 |
|
| Regulatory adjustment | 30.4 |
| | 1.5 |
| | (15.9 | ) | | (2.5 | ) | | (2.2 | ) | | 0.3 |
|
| Intercompany allocations | — |
| | — |
| | (27.6 | ) | | — |
| | — |
| | (0.3 | ) |
| Net periodic benefit costs (income) | $ | 125.8 |
| | $ | 42.8 |
| | $ | 55.4 |
| | $ | (0.8 | ) | | $ | (2.3 | ) | | $ | 1.2 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Post-Retirement Benefits |
| Year to Date September 30, 2020 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) | | | | | | | | | | |
| Service cost | $ | 59.2 | | | $ | 20.4 | | | $ | 38.8 | | | $ | 2.1 | | | $ | 0.9 | | | $ | 1.2 | |
| Interest cost | 72.9 | | | 35.2 | | | 37.1 | | | 6.9 | | | 3.6 | | | 3.3 | |
| Expected return on plan assets | (79.7) | | | (39.9) | | | (41.5) | | | (7.0) | | | (5.0) | | | (2.0) | |
| Prior service cost | 1.3 | | | 1.2 | | | 0.6 | | | 0.3 | | | 0.3 | | | 0 | |
| Recognized net actuarial (gain)/loss | 34.8 | | | 25.4 | | | 34.2 | | | 0.2 | | | 0 | | | (0.4) | |
| Settlement and special termination benefits | 10.0 | | | 0 | | | 12.7 | | | 0 | | | 0 | | | 0 | |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 98.5 | | | 42.3 | | | 81.9 | | | 2.5 | | | (0.2) | | | 2.1 | |
| Regulatory adjustment | 18.6 | | | 1.1 | | | (9.2) | | | (2.9) | | | (2.1) | | | (0.3) | |
| Intercompany allocations | 0 | | | (0.1) | | | (17.0) | | | 0 | | | 0.1 | | | (0.1) | |
| Net periodic benefit costs (income) | $ | 117.1 | | | $ | 43.3 | | | $ | 55.7 | | | $ | (0.4) | | | $ | (2.2) | | | $ | 1.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Post-Retirement Benefits |
| Three Months Ended September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 19.1 | | | $ | 7.3 | | | $ | 11.8 | | | $ | 0.6 | | | $ | 0.2 | | | $ | 0.4 | |
| Interest cost | 27.5 | | | 13.4 | | | 14.1 | | | 2.6 | | | 1.4 | | | 1.2 | |
| Expected return on plan assets | (27.0) | | | (13.7) | | | (12.3) | | | (2.5) | | | (1.7) | | | (0.8) | |
| Prior service cost | 0.5 | | | 0.5 | | | 0.2 | | | 0.1 | | | 0.1 | | | 0 | |
| Recognized net actuarial (gain)/loss | 6.9 | | | 6.2 | | | 12.2 | | | (0.3) | | | (0.1) | | | (0.3) | |
| Settlement and special termination benefits | 14.5 | | | 0 | | | 20.8 | | | 0 | | | 0 | | | 0 | |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 41.5 | | | 13.7 | | | 46.8 | | | 0.5 | | | (0.1) | | | 0.5 | |
| Regulatory adjustment | 4.9 | | | 0.5 | | | (14.7) | | | (0.8) | | | (0.7) | | | 0.1 | |
| Intercompany allocations | 0 | | | 0 | | | (13.6) | | | 0 | | | 0 | | | (0.2) | |
| Net periodic benefit costs (income) | $ | 46.4 | | | $ | 14.2 | | | $ | 18.5 | | | $ | (0.3) | | | $ | (0.8) | | | $ | 0.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Post-Retirement Benefits |
| Year to Date September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 57.3 | | | $ | 21.8 | | | $ | 35.5 | | | $ | 1.9 | | | $ | 0.8 | | | $ | 1.1 | |
| Interest cost | 82.4 | | | 40.3 | | | 42.1 | | | 7.9 | | | 4.2 | | | 3.7 | |
| Expected return on plan assets | (80.9) | | | (41.1) | | | (36.9) | | | (7.5) | | | (5.0) | | | (2.5) | |
| Prior service cost | 1.5 | | | 1.3 | | | 0.7 | | | 0.3 | | | 0.3 | | | 0 | |
| Recognized net actuarial (gain)/loss | 20.6 | | | 19.0 | | | 36.7 | | | (0.9) | | | (0.4) | | | (1.1) | |
| Settlement and special termination benefits | 14.5 | | | 0 | | | 20.8 | | | 0 | | | 0 | | | 0 | |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 95.4 | | | 41.3 | | | 98.9 | | | 1.7 | | | (0.1) | | | 1.2 | |
| Regulatory adjustment | 30.4 | | | 1.5 | | | (15.9) | | | (2.5) | | | (2.2) | | | 0.3 | |
| Intercompany allocations | 0 | | | 0 | | | (27.6) | | | 0 | | | 0 | | | (0.3) | |
| Net periodic benefit costs (income) | $ | 125.8 | | | $ | 42.8 | | | $ | 55.4 | | | $ | (0.8) | | | $ | (2.3) | | | $ | 1.2 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Post-Retirement Benefits |
| Three Months Ended September 30, 2018 | Evergy | | Evergy Kansas Central | | Evergy Metro | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 20.2 |
| | $ | 8.0 |
| | $ | 12.2 |
| | $ | 0.7 |
| | $ | 0.4 |
| | $ | 0.5 |
|
| Interest cost | 26.3 |
| | 12.7 |
| | 12.0 |
| | 2.5 |
| | 1.2 |
| | 1.2 |
|
| Expected return on plan assets | (27.0 | ) | | (13.9 | ) | | (13.9 | ) | | (2.5 | ) | | (1.8 | ) | | (0.7 | ) |
| Prior service cost | 0.3 |
| | 0.2 |
| | 0.2 |
| | 0.1 |
| | 0.1 |
| | — |
|
| Recognized net actuarial (gain)/loss | 8.1 |
| | 8.1 |
| | 10.9 |
| | (0.1 | ) | | (0.1 | ) | | — |
|
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 27.9 |
| | 15.1 |
| | 21.4 |
| | 0.7 |
| | (0.2 | ) | | 1.0 |
|
| Regulatory adjustment | 2.6 |
| | 2.8 |
| | 0.7 |
| | (0.4 | ) | | (0.4 | ) | | 0.1 |
|
| Intercompany allocations | — |
| | — |
| | (4.9 | ) | | — |
| | — |
| | (0.2 | ) |
| Net periodic benefit costs (income) | $ | 30.5 |
| | $ | 17.9 |
| | $ | 17.2 |
| | $ | 0.3 |
| | $ | (0.6 | ) | | $ | 0.9 |
|
| | | | | | | | | | | | |
| | Pension Benefits | | Post-Retirement Benefits |
| Year to Date September 30, 2018 | Evergy | | Evergy Kansas Central | | Evergy Metro(a) | | Evergy | | Evergy Kansas Central | | Evergy Metro(a) |
| Components of net periodic benefit costs | (millions) |
| Service cost | $ | 40.4 |
| | $ | 24.1 |
| | $ | 36.5 |
| | $ | 1.5 |
| | $ | 1.0 |
| | $ | 1.5 |
|
| Interest cost | 56.2 |
| | 38.1 |
| | 37.4 |
| | 5.4 |
| | 3.7 |
| | 3.6 |
|
| Expected return on plan assets | (59.3 | ) | | (41.9 | ) | | (41.6 | ) | | (6.2 | ) | | (5.2 | ) | | (2.1 | ) |
| Prior service cost | 0.6 |
| | 0.5 |
| | 0.5 |
| | 0.3 |
| | 0.3 |
| | — |
|
| Recognized net actuarial (gain)/loss | 24.4 |
| | 24.4 |
| | 33.8 |
| | (0.4 | ) | | (0.4 | ) | | (0.1 | ) |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 62.3 |
| | 45.2 |
| | 66.6 |
| | 0.6 |
| | (0.6 | ) | | 2.9 |
|
| Regulatory adjustment | 8.4 |
| | 8.4 |
| | 2.1 |
| | (1.3 | ) | | (1.3 | ) | | (0.2 | ) |
| Intercompany allocations | — |
| | — |
| | (17.1 | ) | | — |
| | — |
| | (0.8 | ) |
| Net periodic benefit costs (income) | $ | 70.7 |
| | $ | 53.6 |
| | $ | 51.6 |
| | $ | (0.7 | ) | | $ | (1.9 | ) | | $ | 1.9 |
|
(a)
Evergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter.
The components of net periodic benefit costs other than the service cost component are included in other expense on the Evergy Companies' consolidated statements of income and comprehensive income.
Year to date September 30, 2019,2020, Evergy, Evergy Kansas Central and Evergy Metro made pension contributions of $54.6$54.3 million, $36.0$45.7 million and $18.6$8.6 million, respectively. Evergy expects to make additional pension contributions of $73.7$78.4 million in 20192020 to satisfy the Employee Retirement Income Security Act of 1974, as amended (ERISA) funding requirements and KCC and MPSC rate orders, of which $7.1 million is expected to be paid by Evergy Kansas Central and $66.6 million is expected to be paid by Evergy Metro.
Year to date September 30, 2019,2020, Evergy, Evergy Kansas Central and Evergy Metro made post-retirement benefit contributions of $2.2$0.6 million, $1.1$0.3 million and $1.1$0.3 million, respectively. Evergy, Evergy Kansas Central and Evergy Metro expect to make additional contributions in 2020 of $1.4$3.1 million, in 2019$0.4 million and $2.7 million, respectively, to the post-retirement benefit plans.
8. SHORT-TERM BORROWINGS AND SHORT-TERM BANK LINES OF CREDIT
Evergy's $2.5 billion master credit facility expires in 2023. Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West have borrowing capacity under the master credit facility with specific sublimits for each borrower. These sublimits can be unilaterally adjusted by Evergy for each borrower provided the sublimits remain within minimum and maximum sublimits as specified in the facility. A default by any borrower under the facility or one of theirits significant subsidiaries on other indebtedness totaling more than $100.0 million constitutes a default by that borrower under the facility. Under the terms of this facility, each of Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West is required to maintain a total indebtedness to total capitalization ratio, as defined in the facility, of not greater than 0.65 to 1.00 at all times. As of September 30, 2019,2020, Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West were in compliance with this covenant.
The following table summarizes the committed credit facilities (excluding receivable sale facilities discussed in Note 4)3) available to the Evergy Companies as of September 30, 20192020 and December 31, 2018.2019.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Amounts Drawn | | | |
| Master Credit Facility | Commercial Paper | Letters of Credit | Cash Borrowings | Available Borrowings | | Weighted Average Interest Rate on Short-Term Borrowings |
| September 30, 2020 | (millions) | | |
| Evergy, Inc. | $ | 450.0 | | n/a | $ | 0.7 | | $ | 200.0 | | $ | 249.3 | | | 1.42% |
| Evergy Kansas Central | 1,000.0 | | 0 | | 18.6 | | 0 | | 981.4 | | | 0% |
| Evergy Metro | 600.0 | | 0 | | 0 | | 0 | | 600.0 | | | 0% |
| Evergy Missouri West | 450.0 | | 0 | | 2.0 | | 0 | | 448.0 | | | 0% |
| Evergy | $ | 2,500.0 | | $ | 0 | | $ | 21.3 | | $ | 200.0 | | $ | 2,278.7 | | | |
| | | | | | | |
| December 31, 2019 | | | | | | | |
| Evergy, Inc. | $ | 450.0 | | n/a | $ | 0.7 | | $ | 20.0 | | $ | 429.3 | | | 2.99% |
| Evergy Kansas Central | 1,000.0 | | 249.2 | | 14.2 | | 0 | | 736.6 | | | 2.07% |
| Evergy Metro | 600.0 | | 199.3 | | 0 | | 0 | | 400.7 | | | 2.02% |
| Evergy Missouri West | 450.0 | | 93.4 | | 2.1 | | 0 | | 354.5 | | | 2.02% |
| Evergy | $ | 2,500.0 | | $ | 541.9 | | $ | 17.0 | | $ | 20.0 | | $ | 1,921.1 | | | |
|
| | | | | | | | | | | | | | | | | |
| | | Amounts Drawn | | | |
| | Credit Facility | Commercial Paper | Letters of Credit | Cash Borrowings | Available Borrowings | | Weighted Average Interest Rate on Short-Term Borrowings |
| September 30, 2019 | (millions) | | |
| Evergy, Inc. | $ | 450.0 |
| n/a | $ | 1.0 |
| $ | — |
| $ | 449.0 |
| | —% |
| Evergy Kansas Central | 1,000.0 |
| 182.4 |
| 9.2 |
| — |
| 808.4 |
| | 2.29% |
| Evergy Metro | 600.0 |
| 74.9 |
| — |
| — |
| 525.1 |
| | 2.28% |
| Evergy Missouri West | 450.0 |
| 103.3 |
| 2.1 |
| — |
| 344.6 |
| | 2.30% |
| Evergy | $ | 2,500.0 |
| $ | 360.6 |
| $ | 12.3 |
| $ | — |
| $ | 2,127.1 |
| | |
| | | | | | | | |
| December 31, 2018 | | | | | | | |
| Evergy, Inc. | $ | 450.0 |
| n/a | $ | 1.0 |
| $ | — |
| $ | 449.0 |
| | —% |
| Evergy Kansas Central | 1,000.0 |
| 411.7 |
| 18.3 |
| — |
| 570.0 |
| | 3.08% |
| Evergy Metro | 600.0 |
| 176.9 |
| 2.7 |
| — |
| 420.4 |
| | 2.95% |
| Evergy Missouri West | 450.0 |
| 150.0 |
| 2.1 |
| — |
| 297.9 |
| | 3.00% |
| Evergy | $ | 2,500.0 |
| $ | 738.6 |
| $ | 24.1 |
| $ | — |
| $ | 1,737.3 |
| |
|
In March 2019, Evergy entered into a $1.0 billion, 6-month term loan credit agreement with a group of banks to provide short-term financing for its common stock repurchase program. The agreement allowed for 2 term loans during the 6-month term of the agreement, in an aggregate principal amount not to exceed the credit limit of the agreement. At closing, Evergy borrowed $500.0 million under the agreement, allowing for 1 additional term loan borrowing in a principal amount up to $500.0 million. In June 2019, Evergy borrowed the remaining $500.0 million allowed under the agreement. In September 2019, Evergy repaid its $1.0 billion of borrowings under the term loan credit agreement with proceeds from its issuance of $1.6 billion of senior notes in September 2019.
9. LONG-TERM DEBT
Mortgage Bonds
In March 2019,April 2020, Evergy MetroKansas Central issued, collateral mortgage bonds secured by the General Mortgage Indenture and Deed of Trust dated as of December 1, 1986, as supplemented (Evergy Metro Mortgage Indenture) to serve as collateral for Evergy Metro's obligations under the following outstanding unsecured senior notes:
$300.0at a discount, $500.0 million of 3.15% Series,3.45% First Mortgage Bonds (FMBs), maturing in 2023;
$350.02050 and issued a notice of redemption for its $250.0 million of 3.65% Series, maturing in 2025;
$250.05.10% FMBs, which had an original maturity date of July 2020. The proceeds from the issuance of Evergy Kansas Central's $500.0 million of 6.05% Series, maturing in 2035;
$400.03.45% FMBs were used to redeem the $250.0 million of 5.30% Series, maturing5.10% FMBs in 2041;May 2020 and for general corporate purposes.
$300.0 million of 4.20% Series, maturing in 2047; and
$300.0 million of 4.20% Series, maturing in 2048.
The collateral mortgage bonds were issued to the trustee for the unsecured senior notes, are only payable if Evergy Metro defaults on the underlying unsecured senior notes and do not increase the amount of outstanding debt for Evergy Metro.
As a result of the above transactions, Evergy Metro's outstanding senior notes have effectively become secured by the mortgage lien of the Evergy Metro Mortgage Indenture and will rank equally and ratably with all of Evergy Metro's mortgage bonds, regardless of series, from time to time issued and outstanding under the Evergy Metro Mortgage Indenture.
Also in March 2019,In May 2020, Evergy Metro issued, at a discount, $400.0 million of 4.125%2.25% Mortgage Bonds, maturing in 2049.2030. The proceeds from the issuance of Evergy Metro also repaid itsMetro's $400.0 million of 7.15%2.25% Mortgage Bonds at maturity in April 2019.were used to repay a portion of Evergy Metro's borrowings under the master credit facility and for general corporate purposes.
In June 2019, Evergy Kansas South repaid its $300.0 million of 6.70% First Mortgage Bonds at maturity.
In August 2019, Evergy Kansas Central issued, at a discount, $300.0 million of 3.25% First Mortgage Bonds, maturing in 2049.
Senior Notes
In March 2019, Evergy Missouri West issued $100.0 million of 3.74% Senior Notes, maturing in 2022, under a note purchase agreement.
In September 2019, Evergy issued, at a discount, $800.0 million of 2.45% Senior Notes, maturing in 2024 and $800.0 million of 2.90% Senior Notes, maturing in 2029.
10. FAIR VALUE MEASUREMENTS
Values of Financial Instruments
GAAP establishes a hierarchical framework for disclosing the transparency of the inputs utilized in measuring assets and liabilities at fair value. Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy levels. In addition, the Evergy Companies measure certain investments that do not have a readily determinable fair value at net asset value (NAV), which are not included in the fair value hierarchy. Further explanation of these levels and NAV is summarized below.
Level 1 – Quoted prices are available in active markets for identical assets or liabilities. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on public exchanges.
Level 2 – Pricing inputs are not quoted prices in active markets but are either directly or indirectly observable. The types of assets and liabilities included in Level 2 are certain marketable debt securities, financial instruments traded in less than active markets or other financial instruments priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing have little or no transparency. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation.
NAV - Investments that do not have a readily determinable fair value are measured at NAV. These investments do not consider the observability of inputs and, therefore, they are not included within the fair value hierarchy. The Evergy Companies include in this category investments in private equity, real estate and alternative investment funds that do not have a readily determinable fair value. The underlying alternative investments include collateralized debt obligations, mezzanine debt and a variety of other investments.
The Evergy Companies record cash and cash equivalents, accounts receivable and short-term borrowings on their consolidated balance sheets at cost, which approximates fair value due to the short-term nature of these instruments.
Interest Rate Derivatives
The Evergy Companies are exposed to market risks arising from changes in interest rates and may use derivative instruments to manage these risks. From time to time, risk management activities may include entering into interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. These interest rate swap agreements can be designated as cash flow hedges, in which case gains and losses on the interest rate swaps are deferred in other comprehensive income to be recognized as an adjustment to interest expense over the same period that the hedged interest payments affect earnings. The Evergy Companies classify all cash inflows and outflows for interest rate swap agreements accounted for as cash flow hedges of forecasted debt transactions as financing activities on their consolidated statements of cash flows.
In September 2019, Evergy issued $800.0 million of 2.90% Senior Notes maturing in 2029 and paid $69.8 million to settle an interest rate swap agreement with a notional amount of $500.0 million that was designated as a cash flow hedge of interest payments on the debt issuance. Evergy entered into the interest rate swap agreement in December 2018. The $69.8 million pre-tax loss was recorded in accumulated
other comprehensive loss on Evergy's consolidated statements of comprehensive incomebalance sheet and is being reclassified from accumulated other comprehensive loss to interest expense over the ten-year term of the debt. For the three months ended and year to date September 30, 2019, a $0.22020, $1.8 million loss has beenand ($0.4) million were reclassified from accumulated other comprehensive loss to interest expense and income tax expense, respectively, on Evergy's consolidated statements of comprehensive income. Year to date September 30, 2020, $5.3 million and ($3.6) million were reclassified from accumulated other comprehensive loss to interest expense and income tax expense, respectively, on Evergy's consolidated statements of comprehensive income. As of September 30, 2019,2020, Evergy expects to amortize $5.2$5.3 million to earnings from accumulated other comprehensive loss over the next twelve months.
Fair Value of Long-Term Debt
The Evergy Companies measure the fair value of long-term debt using Level 2 measurements available as of the measurement date. The book value and fair value of the Evergy Companies' long-term debt and long-term debt of variable interest entities is summarized in the following table.
| | | | | September 30, 2019 | | December 31, 2018 | | September 30, 2020 | | December 31, 2019 |
| | | Book Value | | Fair Value | | Book Value | | Fair Value | | Book Value | | Fair Value | | Book Value | | Fair Value |
Long-term debt(a) | | (millions) | Long-term debt(a) | | (millions) |
Evergy(b) | | $ | 9,000.3 |
| | $ | 9,843.1 |
| | $ | 7,341.7 |
| | $ | 7,412.1 |
| Evergy(b) | | $ | 9,629.9 | | | $ | 11,126.4 | | | $ | 8,997.8 | | | $ | 9,750.2 | |
| Evergy Kansas Central | | 3,685.6 |
| | 4,139.0 |
| | 3,689.8 |
| | 3,771.3 |
| Evergy Kansas Central | | 3,931.1 | | | 4,711.5 | | | 3,686.1 | | | 4,078.8 | |
| Evergy Metro | | 2,524.6 |
| | 2,962.7 |
| | 2,530.1 |
| | 2,637.5 |
| Evergy Metro | | 2,922.7 | | | 3,555.6 | | | 2,525.0 | | | 2,932.2 | |
Long-term debt of variable interest entities(a) | | | | | | | | | Long-term debt of variable interest entities(a) | |
| Evergy | | $ | 51.1 |
| | $ | 51.3 |
| | $ | 81.4 |
| | $ | 81.3 |
| Evergy | | $ | 18.8 | | | $ | 19.3 | | | $ | 51.1 | | | $ | 51.5 | |
| Evergy Kansas Central | | 51.1 |
| | 51.3 |
| | 81.4 |
| | 81.3 |
| Evergy Kansas Central | | 18.8 | | | 19.3 | | | 51.1 | | | 51.5 | |
(a) Includes current maturities.
(b) Book value as of September 30, 20192020 and December 31, 2018,2019, includes $129.2$114.1 million and $144.8$125.5 million, respectively, of fair value adjustments recorded in connection with purchase accounting for the Great Plains Energy and Evergy Kansas Central merger, which are not part of future principal payments and will amortize over the remaining life of the associated debt instrument.
Recurring Fair Value Measurements
The following tables include the Evergy Companies' balances of financial assets and liabilities measured at fair value on a recurring basis.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | September 30, 2020 | | Level 1 | | Level 2 | Level 3 | NAV |
| Evergy Kansas Central | | (millions) |
| Assets | | | | | | | | | | | | | | | |
Nuclear decommissioning trust(a) | | | | | | | | | | | | | | | |
| Domestic equity funds | | $ | 90.9 | | | | $ | 83.5 | | | | $ | 0 | | | | $ | 0 | | | | $ | 7.4 | | |
| International equity funds | | 55.2 | | | | 55.2 | | | | 0 | | | | 0 | | | | 0 | | |
| Core bond fund | | 39.6 | | | | 39.6 | | | | 0 | | | | 0 | | | | 0 | | |
| High-yield bond fund | | 23.0 | | | | 23.0 | | | | 0 | | | | 0 | | | | 0 | | |
| Emerging markets bond fund | | 18.8 | | | | 18.8 | | | | 0 | | | | 0 | | | | 0 | | |
| Combination debt/equity/other fund | | 18.2 | | | | 18.2 | | | | 0 | | | | 0 | | | | 0 | | |
| Alternative investments fund | | 20.2 | | | | 0 | | | | 0 | | | | 0 | | | | 20.2 | | |
| Real estate securities fund | | 12.8 | | | | 0 | | | | 0 | | | | 0 | | | | 12.8 | | |
| Cash equivalents | | 0.4 | | | | 0.4 | | | | 0 | | | | 0 | | | | 0 | | |
| Total nuclear decommissioning trust | | 279.1 | | | | 238.7 | | | | 0 | | | | 0 | | | | 40.4 | | |
| Rabbi trust | | | | | | | | | | | | | | | |
| Core bond fund | | 25.3 | | | | 0 | | | | 0 | | | | 0 | | | | 25.3 | | |
| Combination debt/equity/other fund | | 6.3 | | | | 0 | | | | 0 | | | | 0 | | | | 6.3 | | |
| Cash equivalents | | 0.2 | | | | 0.2 | | | | 0 | | | | 0 | | | | 0 | | |
| Total rabbi trust | | 31.8 | | | | 0.2 | | | | 0 | | | | 0 | | | | 31.6 | | |
| Total | | $ | 310.9 | | | | $ | 238.9 | | | | $ | 0 | | | | $ | 0 | | | | $ | 72.0 | | |
| Evergy Metro | | | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
Nuclear decommissioning trust(a) | | | | | | | | | | | | | | | |
| Equity securities | | $ | 208.0 | | | | $ | 208.0 | | | | $ | 0 | | | | $ | 0 | | | | $ | 0 | | |
| Debt securities | | | | | | | | | | | | | | | |
| U.S. Treasury | | 48.1 | | | | 48.1 | | | | 0 | | | | 0 | | | | 0 | | |
| U.S. Agency | | 0.5 | | | | 0 | | | | 0.5 | | | | 0 | | | | 0 | | |
| State and local obligations | | 3.7 | | | | 0 | | | | 3.7 | | | | 0 | | | | 0 | | |
| Corporate bonds | | 40.9 | | | | 0 | | | | 40.9 | | | | 0 | | | | 0 | | |
| Foreign governments | | 0.1 | | | | 0 | | | | 0.1 | | | | 0 | | | | 0 | | |
| Cash equivalents | | 7.1 | | | | 7.1 | | | | 0 | | | | 0 | | | | 0 | | |
| Other | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | |
| Total nuclear decommissioning trust | | 308.4 | | | | 263.2 | | | | 45.2 | | | | 0 | | | | 0 | | |
Self-insured health plan trust(b) | | | | | | | | | | | | | | | |
| Equity securities | | 1.1 | | | | 1.1 | | | | 0 | | | | 0 | | | | 0 | | |
| Debt securities | | 8.6 | | | | 3.2 | | | | 5.4 | | | | 0 | | | | 0 | | |
| Cash and cash equivalents | | 3.3 | | | | 3.3 | | | | 0 | | | | 0 | | | | 0 | | |
| Total self-insured health plan trust | | 13.0 | | | | 7.6 | | | | 5.4 | | | | 0 | | | | 0 | | |
| Total | | $ | 321.4 | | | | $ | 270.8 | | | | $ | 50.6 | | | | $ | 0 | | | | $ | 0 | | |
| Other Evergy | | | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
| Rabbi trusts | | | | | | | | | | | | | | | |
| Fixed income fund | | $ | 13.1 | | | | $ | 0 | | | | $ | 0 | | | | $ | 0 | | | | $ | 13.1 | | |
| Cash and cash equivalents | | 0.6 | | | | 0.6 | | | | 0 | | | | 0 | | | | 0 | | |
| Total rabbi trusts | | $ | 13.7 | | | | $ | 0.6 | | | | $ | 0 | | | | $ | 0 | | | | $ | 13.1 | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Evergy | | | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
Nuclear decommissioning trust(a) | | $ | 587.5 | | | | $ | 501.9 | | | | $ | 45.2 | | | | $ | 0 | | | | $ | 40.4 | | |
| Rabbi trusts | | 45.5 | | | | 0.8 | | | | 0 | | | | 0 | | | | 44.7 | | |
Self-insured health plan trust(b) | | 13.0 | | | | 7.6 | | | | 5.4 | | | | 0 | | | | 0 | | |
| Total | | $ | 646.0 | | | | $ | 510.3 | | | | $ | 50.6 | | | | $ | 0 | | | | $ | 85.1 | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | Description | September 30, 2019 | | Level 1 | | Level 2 | Level 3 | NAV | Description | December 31, 2019 | Level 1 | Level 2 | Level 3 | NAV | |
| Evergy Kansas Central | | (millions) | Evergy Kansas Central | | (millions) | |
| Assets | | | | | | | | | | | | Assets | |
Nuclear decommissioning trust(a) | | | | | | | | | | | | Nuclear decommissioning trust(a) | |
| Domestic equity funds | | $ | 84.0 |
| | $ | 77.5 |
| | $ | — |
| | $ | — |
| | $ | 6.5 |
| | Domestic equity funds | | $ | 86.1 | | | $ | 78.6 | | | $ | 0 | | | $ | 0 | | | $ | 7.5 | | |
| International equity funds | | 46.7 |
| | 46.7 |
| | — |
| | — |
| | — |
| | International equity funds | | 52.0 | | | 52.0 | | | 0 | | | 0 | | | 0 | | |
| Core bond fund | | 36.6 |
| | 36.6 |
| | — |
| | — |
| | — |
| | Core bond fund | | 39.3 | | | 39.3 | | | 0 | | | 0 | | | 0 | | |
| High-yield bond fund | | 21.3 |
| | 21.3 |
| | — |
| | — |
| | — |
| | High-yield bond fund | | 22.3 | | | 22.3 | | | 0 | | | 0 | | | 0 | | |
| Emerging markets bond fund | | 17.2 |
| | 17.2 |
| | — |
| | — |
| | — |
| | Emerging markets bond fund | | 19.4 | | | 19.4 | | | 0 | | | 0 | | | 0 | | |
| Combination debt/equity/other fund | | 15.4 |
| | 15.4 |
| | — |
| | — |
| | — |
| | Combination debt/equity/other fund | | 16.4 | | | 16.4 | | | 0 | | | 0 | | | 0 | | |
| Alternative investments fund | | 24.8 |
| | — |
| | — |
| | — |
| | 24.8 |
| | Alternative investments fund | | 23.9 | | | 0 | | | 0 | | | 0 | | | 23.9 | | |
| Real estate securities fund | | 12.4 |
| | — |
| | — |
| | — |
| | 12.4 |
| | Real estate securities fund | | 12.6 | | | 0 | | | 0 | | | 0 | | | 12.6 | | |
| Cash equivalents | | 0.1 |
| | 0.1 |
| | — |
| | — |
| | — |
| | Cash equivalents | | 0.5 | | | 0.5 | | | 0 | | | 0 | | | 0 | | |
| Total nuclear decommissioning trust | | 258.5 |
| | 214.8 |
| | — |
| | — |
| | 43.7 |
| | Total nuclear decommissioning trust | | 272.5 | | | 228.5 | | | 0 | | | 0 | | | 44.0 | | |
| Rabbi trust | | | | | | | | | | | | Rabbi trust | | |
| Core bond fund | | 25.5 |
| | — |
| | — |
| | — |
| | 25.5 |
| | Core bond fund | | 25.3 | | | 0 | | | 0 | | | 0 | | | 25.3 | | |
| Combination debt/equity/other fund | | 6.1 |
| | — |
| | — |
| | — |
| | 6.1 |
| | Combination debt/equity/other fund | | 6.3 | | | 0 | | | 0 | | | 0 | | | 6.3 | | |
| Cash equivalents | | 0.2 |
| | 0.2 |
| | — |
| | — |
| | — |
| | Cash equivalents | | 0.1 | | | 0.1 | | | 0 | | | 0 | | | 0 | | |
| Total rabbi trust | | 31.8 |
| | 0.2 |
| | — |
| | — |
| | 31.6 |
| | Total rabbi trust | | 31.7 | | | 0.1 | | | 0 | | | 0 | | | 31.6 | | |
| Total | | $ | 290.3 |
| | $ | 215.0 |
| | $ | — |
| | $ | — |
| | $ | 75.3 |
| | Total | | $ | 304.2 | | | $ | 228.6 | | | $ | 0 | | | $ | 0 | | | $ | 75.6 | | |
| Evergy Metro | | | | | | | | | | | | Evergy Metro | |
| Assets | | | | | | | | | | | | Assets | | | | | | | | | |
Nuclear decommissioning trust(a) | | | | | | | | | | | | Nuclear decommissioning trust(a) | | | | | | | |
| Equity securities | | $ | 193.7 |
| | $ | 193.7 |
| | $ | — |
| | $ | — |
| | $ | — |
| | Equity securities | | $ | 211.1 | | | $ | 211.1 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | |
| Debt securities | |
|
| | | | | | | | | | Debt securities | | | | | | | | | | | |
| U.S. Treasury | | 50.1 |
| | 50.1 |
| | — |
| | — |
| | — |
| | U.S. Treasury | | 50.3 | | | 50.3 | | | 0 | | | 0 | | | 0 | | |
| U.S. Agency | | 0.4 |
| | — |
| | 0.4 |
| | — |
| | — |
| | U.S. Agency | | 0.4 | | | 0 | | | 0.4 | | | 0 | | | 0 | | |
| State and local obligations | | 2.2 |
| | — |
| | 2.2 |
| | — |
| | — |
| | State and local obligations | | 2.2 | | | 0 | | | 2.2 | | | 0 | | | 0 | | |
| Corporate bonds | | 33.0 |
| | — |
| | 33.0 |
| | — |
| | — |
| | Corporate bonds | | 33.2 | | | 0 | | | 33.2 | | | 0 | | | 0 | | |
| Foreign governments | | 0.1 |
| | — |
| | 0.1 |
| | — |
| | — |
| | Foreign governments | | 0.1 | | | 0 | | | 0.1 | | | 0 | | | 0 | | |
| Cash equivalents | | 2.6 |
| | 2.6 |
| | — |
| | — |
| | — |
| | Cash equivalents | | 3.1 | | | 3.1 | | | 0 | | | 0 | | | 0 | | |
| Other | | 0.4 |
| | — |
| | 0.4 |
| | — |
| | — |
| | Other | | 0.3 | | | 0 | | | 0.3 | | | 0 | | | 0 | | |
| Total nuclear decommissioning trust | | 282.5 |
| | 246.4 |
| | 36.1 |
| | — |
| | — |
| | Total nuclear decommissioning trust | | 300.7 | | | 264.5 | | | 36.2 | | | 0 | | | 0 | | |
Self-insured health plan trust(b) | | | | | | | | | | | | Self-insured health plan trust(b) | | |
| Equity securities | | 0.5 |
| | 0.5 |
| | — |
| | — |
| | — |
| | Equity securities | | 0.5 | | | 0.5 | | | 0 | | | 0 | | | 0 | | |
| Debt securities | | 6.1 |
| | 1.3 |
| | 4.8 |
| | — |
| | — |
| | Debt securities | | 6.7 | | | 1.4 | | | 5.3 | | | 0 | | | 0 | | |
| Cash and cash equivalents | | 3.7 |
| | 3.7 |
| | — |
| | — |
| | — |
| | Cash and cash equivalents | | 2.7 | | | 2.7 | | | 0 | | | 0 | | | 0 | | |
| Total self-insured health plan trust | | 10.3 |
| | 5.5 |
| | 4.8 |
| | — |
| | — |
| | Total self-insured health plan trust | | 9.9 | | | 4.6 | | | 5.3 | | | 0 | | | 0 | | |
| Total | | $ | 292.8 |
| | $ | 251.9 |
| | $ | 40.9 |
| | $ | — |
| | $ | — |
| | Total | | $ | 310.6 | | | $ | 269.1 | | | $ | 41.5 | | | $ | 0 | | | $ | 0 | | |
| Other Evergy | | | | | | | | | | | | Other Evergy | |
| Assets | | | | | | | | | | | | Assets | |
| Rabbi trusts | | | | | | | | | | | | Rabbi trusts | |
| Fixed income fund | | $ | 13.3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 13.3 |
| | Fixed income fund | | $ | 13.3 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 13.3 | | |
| Cash and cash equivalents | | 0.5 |
| | 0.5 |
| | — |
| | — |
| | — |
| | Cash and cash equivalents | | 0.5 | | | 0.5 | | | 0 | | | 0 | | | 0 | | |
| Total rabbi trusts | | $ | 13.8 |
| | $ | 0.5 |
| | $ | — |
| | $ | — |
| | $ | 13.3 |
| | Total rabbi trusts | | $ | 13.8 | | | $ | 0.5 | | | $ | 0 | | | $ | 0 | | | $ | 13.3 | | |
| | Evergy | | |
| | |
| | |
| | |
| | | | Evergy | | | | | | | | | |
| Assets | | |
| | |
| | |
| | |
| | | | Assets | | | | | | | | | |
Nuclear decommissioning trust(a) | | $ | 541.0 |
| | $ | 461.2 |
| | $ | 36.1 |
| | $ | — |
| | $ | 43.7 |
| | Nuclear decommissioning trust(a) | | $ | 573.2 | | | $ | 493.0 | | | $ | 36.2 | | | $ | 0 | | | $ | 44.0 | | |
| Rabbi trusts | | 45.6 |
| | 0.7 |
| | — |
| | — |
| | 44.9 |
| | |
| Rabbi trust | | Rabbi trust | | 45.5 | | | 0.6 | | | 0 | | | 0 | | | 44.9 | | |
Self-insured health plan trust(b) | | 10.3 |
| | 5.5 |
| | 4.8 |
| | — |
| | — |
| | Self-insured health plan trust(b) | | 9.9 | | | 4.6 | | | 5.3 | | | 0 | | | 0 | | |
| Total | | $ | 596.9 |
| | $ | 467.4 |
| | $ | 40.9 |
| | $ | — |
| | $ | 88.6 |
| | Total | | $ | 628.6 | | | $ | 498.2 | | | $ | 41.5 | | | $ | 0 | | | $ | 88.9 | | |
|
(b)Fair value is based on quoted market prices of the investments held by the trust. Debt securities classified as Level 1 are comprised of U.S. Treasury securities. Debt securities classified as Level 2 are comprised of corporate bonds, U.S. Agency, state and local obligations, and other asset-backed securities.
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | December 31, 2018 | Level 1 | Level 2 | Level 3 | NAV |
| Evergy Kansas Central | | (millions) |
| Assets | | | | | | | | | | | | | | | |
Nuclear decommissioning trust(a) | | | | | | | | | | | | | | | |
| Domestic equity funds | | $ | 70.6 |
| | | $ | 63.9 |
| | | $ | — |
| | | $ | — |
| | | $ | 6.7 |
| |
| International equity funds | | 36.2 |
| | | 36.2 |
| | | — |
| | | — |
| | | — |
| |
| Core bond fund | | 37.5 |
| | | 37.5 |
| | | — |
| | | — |
| | | — |
| |
| High-yield bond fund | | 18.9 |
| | | 18.9 |
| | | — |
| | | — |
| | | — |
| |
| Emerging markets bond fund | | 15.4 |
| | | 15.4 |
| | | — |
| | | — |
| | | — |
| |
| Combination debt/equity/other fund | | 12.9 |
| | | 12.9 |
| | | — |
| | | — |
| | | — |
| |
| Alternative investments fund | | 24.1 |
| | | — |
| | | — |
| | | — |
| | | 24.1 |
| |
| Real estate securities fund | | 11.8 |
| | | — |
| | | — |
| | | — |
| | | 11.8 |
| |
| Cash equivalents | | 0.1 |
| | | 0.1 |
| | | — |
| | | — |
| | | — |
| |
| Total nuclear decommissioning trust | | 227.5 |
| | | 184.9 |
| | | — |
| | | — |
| | | 42.6 |
| |
| Rabbi trust | | | | | | | | | | | | | | | |
| Core bond fund | | 24.8 |
| | | — |
| | | — |
| | | — |
| | | 24.8 |
| |
| Combination debt/equity/other fund | | 5.6 |
| | | — |
| | | — |
| | | — |
| | | 5.6 |
| |
| Cash equivalents | | 0.2 |
| | | 0.2 |
| | | — |
| | | — |
| | | — |
| |
| Total rabbi trust | | 30.6 |
| | | 0.2 |
| | | — |
| | | — |
| | | 30.4 |
| |
| Total | | $ | 258.1 |
| | | $ | 185.1 |
| | | $ | — |
| | | $ | — |
| | | $ | 73.0 |
| |
| Evergy Metro | | | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
Nuclear decommissioning trust(a) | | | | | | | | | | | | | | | |
| Equity securities | | $ | 166.6 |
| | | $ | 166.6 |
| | | $ | — |
| | | $ | — |
| | | $ | — |
| |
| Debt securities | | |
| | | |
| | | |
| | | |
| | | |
| |
| U.S. Treasury | | 42.1 |
| | | 42.1 |
| | | — |
| | | — |
| | | — |
| |
| U.S. Agency | | 0.4 |
| | | — |
| | | 0.4 |
| | | — |
| | | — |
| |
| State and local obligations | | 2.1 |
| | | — |
| | | 2.1 |
| | | — |
| | | — |
| |
| Corporate bonds | | 30.9 |
| | | — |
| | | 30.9 |
| | | — |
| | | — |
| |
| Foreign governments | | 0.1 |
| | | — |
| | | 0.1 |
| | | — |
| | | — |
| |
| Cash equivalents | | 1.7 |
| | | 1.7 |
| | | — |
| | | — |
| | | — |
| |
| Other | | 0.7 |
| | | 0.7 |
| | | — |
| | | — |
| | | — |
| |
| Total nuclear decommissioning trust | | 244.6 |
| | | 211.1 |
| | | 33.5 |
| | | — |
| | | — |
| |
Self-insured health plan trust(b) | | | | | | | | | | | | | | | |
| Equity securities | | 0.5 |
| | | 0.5 |
| | | — |
| | | — |
| | | — |
| |
| Debt securities | | 3.9 |
| | | 0.3 |
| | | 3.6 |
| | | — |
| | | — |
| |
| Cash and cash equivalents | | 8.0 |
| | | 8.0 |
| | | — |
| | | — |
| | | — |
| |
| Total self-insured health plan trust | | 12.4 |
| | | 8.8 |
| | | 3.6 |
| | | — |
| | | — |
| |
| Total | | $ | 257.0 |
| | | $ | 219.9 |
| | | $ | 37.1 |
| | | $ | — |
| | | $ | — |
| |
| Other Evergy | | | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
| Rabbi trusts | | | | | | | | | | | | | | | |
| Fixed income fund | | $ | 13.2 |
| | | $ | — |
| | | $ | — |
| | | $ | — |
| | | $ | 13.2 |
| |
| Total rabbi trusts | | $ | 13.2 |
| | | $ | — |
| | | $ | — |
| | | $ | — |
| | | $ | 13.2 |
| |
| Liabilities | | | | | | | | | | | | | | | |
Interest rate swaps(c) | | $ | 5.4 |
| | | $ | — |
| | | $ | 5.4 |
| | | $ | — |
| | | $ | — |
| |
| Total | | $ | 5.4 |
| | | $ | — |
| | | $ | 5.4 |
| | | $ | — |
| | | $ | — |
| |
| Evergy | | |
| | | |
| | | |
| | | |
| | | | |
| Assets | | |
| | | |
| | | |
| | | |
| | | | |
Nuclear decommissioning trust(a) | | $ | 472.1 |
| | | $ | 396.0 |
| | | $ | 33.5 |
| | | $ | — |
| | | $ | 42.6 |
| |
| Rabbi trust | | 43.8 |
| | | 0.2 |
| | | — |
|
|
| — |
| | | 43.6 |
| |
Self-insured health plan trust(b) | | 12.4 |
| | | 8.8 |
| | | 3.6 |
| | | — |
| | | — |
| |
| Total | | $ | 528.3 |
| | | $ | 405.0 |
| | | $ | 37.1 |
| | | $ | — |
| | | $ | 86.2 |
| |
| Liabilities | | | | | | | | | | | | | | | |
Interest rate swaps(c) | | $ | 5.4 |
| | | $ | — |
| | | $ | 5.4 |
| | | $ | — |
| | | $ | — |
| |
| Total | | $ | 5.4 |
| | | $ | — |
| | | $ | 5.4 |
| | | $ | — |
| | | $ | — |
| |
| |
(a)
| Fair value is based on quoted market prices of the investments held by the trust and/or valuation models. |
| |
(b)
| Fair value is based on quoted market prices of the investments held by the trust. Debt securities classified as Level 1 are comprised of U.S. Treasury securities. Debt securities classified as Level 2 are comprised of corporate bonds, U.S. Agency, state and local obligations, and other asset-backed securities. |
| |
(c)
| The fair value of interest rate swaps are determined by calculating the net present value of expected payments and receipts under the interest rate swaps using observable market inputs including interest rates and LIBOR swap rates. |
Certain Evergy and Evergy Kansas Central investments included in the table above are measured at NAV as they do not have readily determinable fair values. In certain situations, these investments may have redemption restrictions.
The following table provides additional information on these Evergy and Evergy Kansas Central investments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 | | September 30, 2020 |
| Fair | | Unfunded | | Fair | | Unfunded | | Redemption | | Length of |
| Value | | Commitments | | Value | | Commitments | | Frequency | | Settlement |
| Evergy Kansas Central | (millions) | | | | |
| Nuclear decommissioning trust: | | | | | |
| Domestic equity funds | $ | 7.4 | | | $ | 2.5 | | | $ | 7.5 | | | $ | 3.3 | | | (a) | | (a) |
Alternative investments fund(b) | 20.2 | | | 0 | | | 23.9 | | | 0 | | | Quarterly | | 65 days |
Real estate securities fund(b) | 12.8 | | | 0 | | | 12.6 | | | 0 | | | Quarterly | | 65 days |
| Total | $ | 40.4 | | | $ | 2.5 | | | $ | 44.0 | | | $ | 3.3 | | | | | |
| Rabbi trust: | | | | | | | | | | | |
| Core bond fund | $ | 25.3 | | | $ | 0 | | | $ | 25.3 | | | $ | 0 | | | (c) | | (c) |
| Combination debt/equity/other fund | 6.3 | | | 0 | | | 6.3 | | | 0 | | | (c) | | (c) |
| Total | $ | 31.6 | | | $ | 0 | | | $ | 31.6 | | | $ | 0 | | | | | |
| Other Evergy | | | | | | | | | | | |
| Rabbi trust: | | | | | | | | | | | |
| Fixed income fund | $ | 13.1 | | | $ | 0 | | | $ | 13.3 | | | $ | 0 | | | (c) | | (c) |
| Total Evergy investments at NAV | $ | 85.1 | | | $ | 2.5 | | | $ | 88.9 | | | $ | 3.3 | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2019 | | December 31, 2018 | | September 30, 2019 |
| | Fair | | Unfunded | | Fair | | Unfunded | | Redemption | | Length of |
| | Value | | Commitments | | Value | | Commitments | | Frequency | | Settlement |
| Evergy Kansas Central | (millions) | | | | |
| Nuclear decommissioning trust: | | | | | |
| Domestic equity funds | $ | 6.5 |
| | $ | 3.6 |
| | $ | 6.7 |
| | $ | 4.3 |
| | (a) | | (a) |
Alternative investments fund(b) | 24.8 |
| | — |
| | 24.1 |
| | — |
| | Quarterly | | 65 days |
Real estate securities fund(b) | 12.4 |
| | — |
| | 11.8 |
| | — |
| | Quarterly | | 65 days |
| Total | $ | 43.7 |
| | $ | 3.6 |
| | $ | 42.6 |
| | $ | 4.3 |
| | | | |
| Rabbi trust: | | | | | | | | | | | |
| Core bond fund | $ | 25.5 |
| | $ | — |
| | $ | 24.8 |
| | $ | — |
| | (c) | | (c) |
| Combination debt/equity/other fund | 6.1 |
| | — |
| | 5.6 |
| | — |
| | (c) | | (c) |
| Total | $ | 31.6 |
| | $ | — |
| | $ | 30.4 |
| | $ | — |
| | | | |
| Other Evergy | | | | | | | | | | | |
| Rabbi trusts: | | | | | | | | | | | |
| Fixed income fund | $ | 13.3 |
| | $ | — |
| | $ | 13.2 |
| | $ | — |
| | (c) | | (c) |
| Total Evergy investments at NAV | $ | 88.6 |
| | $ | 3.6 |
| | $ | 86.2 |
| | $ | 4.3 |
| | | | |
| |
(a)(a)This investment is in 5 long-term private equity funds that do not permit early withdrawal. Investments in these funds cannot be distributed until the underlying investments have been liquidated, which may take years from the date of initial liquidation. NaN funds have begun to make distributions. The initial investment in the fourth and fifth funds occurred in 2016 and 2018, respectively. The fourth fund's term is 15 years, subject to the general partner's right to extend the term for up to 3 additional one-year periods. The fifth fund's term is 15 years, subject to additional extensions approved by a fund advisory committee to provide for an orderly liquidation of fund investments and dissolution of the fund.
| This investment is in 5 long-term private equity funds that do not permit early withdrawal. Investments in these funds cannot be distributed until the underlying investments have been liquidated, which may take years from the date of initial liquidation. NaN funds have begun to make distributions. The initial investment in the fourth and fifth fund occurred in the second quarter of 2016 and first quarter of 2018, respectively. The fourth fund's term is 15 years, subject to the general partner's right to extend the term for up to 3 additional one-year periods. The fifth fund's term will be 15 years after the initial closing date, subject to additional extensions approved by a fund advisory committee to provide for an orderly liquidation of fund investments and dissolution of the fund. |
| |
(b)
| There is a holdback on final redemptions. |
| |
(c)
| This investment can be redeemed immediately and is not subject to any restrictions on redemptions. |
The Evergy Companies hold equity and debt investments classified as securities in various trusts including for the purposes of funding the decommissioning of Wolf Creek and for the benefit of certain retired executive officers of Evergy Kansas Central. The Evergy Companies record net realized and unrealized gains and losses on the nuclear decommissioning trusts in regulatory liabilities on their consolidated balance sheets and record net realized and unrealized gains and losses on the Evergy Companies' rabbi trusts in the consolidated statements of income and comprehensive income.
The following table summarizes the net unrealized gains (losses) for the Evergy Companies' nuclear decommissioning trusts and rabbi trusts.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30 | | Year to Date
September 30 | | |
| | 2020 | | 2019 | | 2020 | | 2019 | | |
| Evergy | | (millions) |
| Nuclear decommissioning trust - equity securities | | $ | 27.5 | | | $ | (0.3) | | | $ | (8.5) | | | $ | 50.9 | | | |
| Nuclear decommissioning trust - debt securities | | 0.1 | | | 1.5 | | | 5.4 | | | 5.9 | | | |
| Rabbi trusts - equity securities | | 0.8 | | | 0.9 | | | 1.6 | | | 2.4 | | | |
| Total | | $ | 28.4 | | | $ | 2.1 | | | $ | (1.5) | | | $ | 59.2 | | | |
| Evergy Kansas Central | | | | | | | | | | |
| Nuclear decommissioning trust - equity securities | | $ | 16.2 | | | $ | 0.2 | | | $ | 0.2 | | | $ | 26.2 | | | |
| Rabbi trust - equity securities | | 0.6 | | | 0.5 | | | 1.1 | | | 2.7 | | | |
| Total | | $ | 16.8 | | | $ | 0.7 | | | $ | 1.3 | | | $ | 28.9 | | | |
| Evergy Metro | | | | | | | | | | |
| Nuclear decommissioning trust - equity securities | | $ | 11.3 | | | $ | (0.5) | | | $ | (8.7) | | | $ | 24.7 | | | |
| Nuclear decommissioning trust - debt securities | | 0.1 | | | 1.5 | | | 5.4 | | | 5.9 | | | |
| Total | | $ | 11.4 | | | $ | 1.0 | | | $ | (3.3) | | | $ | 30.6 | | | |
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | Year to Date
September 30 |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| Evergy Kansas Central | | (millions) |
| Nuclear decommissioning trust - equity securities | | $ | 0.2 |
| | $ | 6.5 |
| | $ | 26.2 |
| | $ | (6.4 | ) |
| Rabbi trust - equity securities | | 0.5 |
| | 3.7 |
| | 2.7 |
| | 3.2 |
|
| Total | | $ | 0.7 |
| | $ | 10.2 |
| | $ | 28.9 |
| | $ | (3.2 | ) |
Evergy Metro(a) | | | | | | | | |
| Nuclear decommissioning trust - equity securities | | $ | (0.5 | ) | | $ | 8.6 |
| | $ | 24.7 |
| | $ | 9.1 |
|
| Nuclear decommissioning trust - debt securities | | 1.5 |
| | (0.5 | ) | | 5.9 |
| | (2.8 | ) |
| Total | | $ | 1.0 |
| | $ | 8.1 |
| | $ | 30.6 |
| | $ | 6.3 |
|
| Evergy | | | | | | | | |
| Nuclear decommissioning trust - equity securities | | $ | (0.3 | ) | | $ | 15.1 |
| | $ | 50.9 |
| | $ | 1.1 |
|
| Nuclear decommissioning trust - debt securities | | 1.5 |
| | (0.5 | ) | | 5.9 |
| | (0.8 | ) |
| Rabbi trusts - equity securities | | 0.9 |
| | 3.7 |
| | 2.4 |
| | 3.1 |
|
| Total | | $ | 2.1 |
| | $ | 18.3 |
| | $ | 59.2 |
| | $ | 3.4 |
|
(a) Evergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter.
11. COMMITMENTS AND CONTINGENCIES
Environmental Matters
Set forth below are descriptions of contingencies related to environmental matters that may impact the Evergy Companies' operations or their financial results. Management's assessment of these contingencies, which are based on federal and state statutes and regulations, and regulatory agency and judicial interpretations and actions, has evolved over time. These laws, regulations, interpretations and actions can also change, restrict or otherwise impact the Evergy Companies' operations or financial results. The failure to comply with these laws, regulations, interpretations and actions could result in the assessment of administrative, civil and criminal penalties and the imposition of remedial requirements. The Evergy Companies believe that all of their operations are in substantial compliance with current federal, state and local environmental standards.
There are a variety of final and proposed laws and regulations that could have a material adverse effect on the Evergy Companies' operations and consolidated financial results. Due in part to the complex nature of environmental laws and regulations, the Evergy Companies are unable to assess the impact of potential changes that may develop with respect to the environmental contingencies described below.
Cross-State Air Pollution Update Rule
In September 2016, the Environmental Protection Agency (EPA) finalized the Cross-State Air Pollution (CSAPR) Update Rule (CSAPR).Rule. The final rule addresses interstate transport of nitrogen oxides emissions in 22 states including Kansas, Missouri and Oklahoma during the ozone season and the impact from the formation of ozone on downwind states with respect to the 2008 ozone National Ambient Air Quality Standards (NAAQS). Starting with the 2017 ozone season, the final rule revised the existing ozone season allowance budgets for Missouri and Oklahoma and established an ozone season budget for Kansas. In December 2018, the EPA finalized a determination, known as the CSAPR Close-Out Rule, which determined thatdemonstrating the existing CSAPR Update Rule fully addresses applicableaddressed certain upwind states' interstate pollution transport obligations for the 2008 ozone NAAQS. Therefore, the EPA is proposing no additional reduction in the current ozone season allowance budgets in order to address obligations for the 2008 ozone NAAQS.NAAQS interstate transport obligations. Various states and others have challenged both the ruleCSAPR Update Rule and the CSAPR Close-Out Rule in the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit). In Septemberthe fourth quarter of 2019, the D.C. Circuit granted these petitions and remanded a portion of the CSAPR Update Rule back to EPA.the EPA and vacated the CSAPR Close-Out Rule in its entirety.
In October 2020, the EPA issued a proposed rule to modify the CSAPR Update Rule. The D.C. Circuit foundproposed rule finds that nine of the rule does not establish deadlines for upwind states to eliminate emission impacts on
downwind states' nonattainment areas. This is only applicable to those upwind states determined to have a significant impact on the applicable nonattainment areas. Duesubject to the uncertainty in what the future CSAPR Update Rule, will include, the Evergy Companies cannot determine the impact on their operations or consolidated financial results, but the impacts could be material.
National Ambient Air Quality Standards
Under the Clean Air Act Amendments of 1990 (CAA), the EPA set NAAQS for certain emissions known as the "criteria pollutants" considered harmful to public healthincluding Kansas and the environment, including two classes of particulate matter (PM), ozone, nitrogen dioxide (NO2) (a precursor to ozone), carbon monoxide and sulfur dioxide (SO2), which result from fossil fuel combustion. Areas meeting the NAAQS are designated attainment areas while those thatMissouri, do not meet the NAAQS are considered nonattainment areas. Each state must develop a plansignificantly contribute to bring nonattainment areas into compliance with the NAAQS. NAAQS must be reviewed by the EPA at five-year intervals.
In October 2015, the EPA strengtheneddownwind states' ability to achieve attainment during the ozone NAAQS by lowering the standards from 75 ppbseason. Evergy will continue to 70 ppb. In November 2017, the EPA designated all countiesmonitor this proposed rule as any changes to NOx ozone season allowances in the State of Kansas as well as the Missouri counties in Evergy Metro's and Evergy Missouri West's service territories as attainment/unclassifiable. It is not expected that this change willfuture could have a material impact on the Evergy Companies' consolidated financial results.
If areas surrounding the Evergy Companies' facilities are designated in the future as nonattainment and/or it is required to install additional equipment to control emissions at facilities of the Evergy Companies, it could have a material impact on the operations and consolidated financial resultsresults.
Greenhouse Gases
Burning coal and other fossil fuels releases carbon dioxide (CO2) and other gases referred to as greenhouse gases (GHG). Various regulations under the federal CAAClean Air Act Amendments of 1990 (CAA) limit CO2 and other GHG emissions, and in addition, other measures are being imposed or offered by individual states, municipalities and regional agreements with the goal of reducing GHG emissions.
In October 2015, the EPA published a rule establishing new source performance standards (NSPS) for GHGs that limit CO2 emissions for new, modified and reconstructed coal and natural gas fueled electric generating units to various levels per MWh depending on various characteristics of the units. Legal challenges to the GHG NSPS have been filed in the D.C. Circuit by various states and industry members. Also, in October 2015, the EPA published a rule establishing guidelines for states to regulate CO2 emissions from existing power plants. The standards for existing plants are known as the Clean Power Plan (CPP). Under the CPP, achievement of interim emissions performance rates would have been required beginning in 2022 and final emissions performance rates would have been required by 2030. Legal challenges to the CPP were filed by groups of states and industry members, including Evergy Kansas Central, in the D.C. Circuit. The CPP was stayed by the Supreme Court in February 2016 and the D.C. Circuit has subsequently held the litigation in abeyance. Accordingly, the CPP was not implemented by the states.
In April 2017, the EPA published in the Federal Register a notice of withdrawal of the proposed CPP federal plan, proposed model trading rules and proposed Clean Energy Incentive Program design details. Also, in April 2017, the EPA published a notice in the Federal Register that it was initiating administrative reviews of the CPP and the GHG NSPS.
In October 2017, the EPA issued a proposed rule to repeal the CPP. The proposed rule indicates the CPP exceeds the EPA’s authority. The EPA solicited comments on the legal interpretations contained in this rulemaking.
In August 2018, the EPA published in the Federal Register proposed regulations, which contained (1) emission guidelines for GHG emissions from existing electric utility generating units (EGUs), (2) revisions to emission guideline implementing regulations and (3) revisions to the new source review (NSR) program. These emission guidelines are better known as the Affordable Clean Energy (ACE) Rule. In July 2019, the EPA published in the Federal Register the final ACE Rule with one significant change from the proposal. The NSR program revisions
were not included in the final version of the ACE Rule and are expected to be addressed in a future rulemaking. The ACE Rule establishes emission guidelines for states to use in the development of plans to reduce GHG emissions from existing coal-fired EGUs. This rule defines the "best system of emission reduction" (BSER) for GHG emissions from existing coal-fired EGUs as on-site, heat-rate efficiency improvements. The final rule also provides states with a list of candidate technologies that can be used to establish standards of performance and incorporate these performance standards into state plans. In order for the states to be able to effectively implement the emission guidelines contained in the ACE Rule, the EPA is finalizing new regulations under Section 111(d) of the CAA to help clarify this process. The ACE Rule became effective in September 2019. In conjunction with the finalization of the ACE Rule, the EPA also repealed the CPP.its previously adopted Clean Power Plan (CPP). Also, in September 2019, the D.C. Circuit granted motions to dismiss challenges to the CPP and challenges to EPA's denial of reconsideration of the CPP.
In December 2018, the EPA released a proposed rule to revise the existing GHG NSPS for new, modified and reconstructed fossil fuel-fired EGUs, which was issued in October 2015. This proposed rule would determine that BSER for new EGUs is "the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units) in combination with the best operating practices." This replaces the current determination that BSER for these units is the use of partial carbon capture and sequestration technology. The EPA is also proposing to address, in potential future rule making, existing operational limitations imposed by the rule on aero-derivative simple cycle combustion turbines.
Due to uncertainty regarding what future state implementation plans will require for compliance with the ACE Rule as well as legal challenges that have been filed, the Evergy Companies cannot determine the impact of the rule on their operations or consolidated financial results, but the cost to comply with the ACE Rule, should it be upheld and implemented in its current or a substantially similar form, could be material.
Water
The Evergy Companies discharge some of the water used in generation and other operations. This water may containoperations containing substances deemed to be pollutants. A November 2015 EPA rule establishes effluent limitations guidelines (ELG) and standards for wastewater discharges, including limits on the amount of toxic metals and other pollutants that can be discharged. Implementation timelines for this 2015 rule vary from 2018 to 2023. In April 2017, the EPA announced it is reconsidering the ELG rule. In September 2017, the EPA finalized a rule to postpone the compliance dates for the new, more stringent, effluent limitations and pretreatment standards for bottom ash transport water and flue gas desulfurization wastewater. These compliance dates have been postponed for two years while the EPA completes its administrative reconsideration of the ELG rule. In April 2019, the U.S. Court of Appeals for the 5th Circuit (5th Circuit) issued a ruling that vacates and remands portions of the original ELG rule. The 5th Circuit ruled in favor of environmental groups who argued that EPA did not set appropriate limitsDue to this ruling, future ELG modifications for the best available technology economically achievable for the discharge of legacy waste waterwastewater and leachate. The Evergy Companiesleachate are evaluating the 5th Circuit ruling, the existing ELG rule and related developments and cannot predict the resulting impact on their operations or consolidated financial results but believe costs to comply could be material if the rule is implemented in its current or substantially similar form.likely.
On November 4, 2019,In October 2020, the EPA released a pre-publication version of a proposed modification topublished the final ELG reconsideration rule. The proposedThis rule modifiesadjusts numeric limits for flue gas desulfurization (FGD) wastewater and adds a 10% volumetric purge limit for bottom ash transport water. The timeline for final FGD wastewater compliance is also delayed by two years tonow as soon as possible on or after one year following publication of the final rule in the Federal Register but no later than December 31, 2025. The Evergy Companies are in the process of reviewing the proposed rule and the costs to comply with these changes could be material.
In October 2014, the EPA's final standards for cooling water intake structures at power plants to protect aquatic life took effect. The standards, based on Section 316(b) of the federal Clean Water Act (CWA), require subject facilities to choose among seven best available technology options to reduce fish impingement. In addition, some facilities must conduct studies to assist permitting authorities to determine whether and what site-specific controls, if any, would be required to reduce entrainment of aquatic organisms. The Evergy Companies' current analysis indicates this rule will not have a significant impact on their coal plants that employ cooling towers or cooling lakes that can be classified as closed cycle cooling and do not expect the impact from this rule to be material. Plants without
closed cycle cooling are under evaluation for compliance with these standards and may require additional controls, thatthe costs of which could be material.
Evergy Metro holds a permit from the Missouri Department of Natural Resources (MDNR) covering water discharge from its Hawthorn Station. The permit authorizes Evergy Metro to, among other things, withdraw water from the Missouri River for cooling purposes and return the heated water to the Missouri River. Evergy Metro has applied for a renewal of this permit and the EPA has submitted an interim objection letter regarding the allowable amount of heat that can be contained in the returned water. Until this matter is resolved, Evergy Metro continues to operate under its current permit. Evergy and Evergy Metro cannot predict the outcome of this matter; however, while less significant outcomes are possible, this matter may require a reduction in generation, installation of cooling towers or other technology to cool the water, or both, any of which could have a material impact on Evergy's and Evergy Metro's operations and consolidated financial results.
In June 2015,April 2020, the EPA along withU.S. District Court for the District of Montana (District Court of Montana) ruled that the U.S. Army Corps of Engineers issuedEngineers' (Corps) reissuance of Nationwide Permit 12 (NWP 12) in 2017 violated the Endangered Species Act (ESA). The District Court of Montana determined that the Corps failed to initiate consultation under ESA to ensure that discharge activities under NWP 12 complied with the ESA. As a final rule, effective August 2015, definingresult, the WatersDistrict Court of Montana remanded NWP 12 to the Corps, vacated NWP 12 pending completion of the United States (WOTUS) for purposesESA consultation process and enjoined the Corps from authorizing any dredge or fill activities under NWP 12. The Evergy Companies utilize NWP 12 in the regulatory approval of various types of projects and the ruling and resulting actions of the CWA. Various statesCorps could have a material impact on the Evergy Companies' operations and others filed lawsuits challengingconsolidated financial results. In May 2020, the WOTUS rule.District Court of Montana amended the previous ruling such that the vacatur only applies to new oil and gas pipelines and that NWP 12 remains in place for non-pipeline activities, which would include activities performed by the Evergy Companies. The Corps followed that action with a request to the U.S. Supreme Court (Supreme Court) to stay the District Court of Montana's order. In February 2018,July 2020, the EPASupreme Court granted in part and denied in part the Corps' request to stay. The Supreme Court ruled that the request was granted and the U.S. Army Corps of Engineers finalized a rule adding an applicability dateorder stayed except as it applies to the 2015 rule, which madeKeystone XL pipeline. As such, the implementation date oforiginal NWP 12 ruling would no longer apply to the rule February 2020. In October 2019,Evergy Companies' activities and it is not believed that the EPAruling will have a material impact on the Evergy Companies’ operations and the U.S. Army Corps of Engineers issued a final rule that will repeal the 2015 rule effective in December 2019. This new rule recodifies the regulatory definition of WOTUS that existed before the 2015 rule.consolidated financial results.
Regulation of Coal Combustion Residuals
In the course of operating their coal generation plants, the Evergy Companies produce coal combustion residuals (CCRs), including fly ash, gypsum and bottom ash. Some of this ash production is recycled, principally by selling to the aggregate industry. The EPA published a rule to regulate CCRs in April 2015 which will requirethat requires additional CCR handling, processing and storage equipment and closure of certain ash disposal units. The Water Infrastructure Improvements for the Nation (WIIN) Act allows states to achieve delegated authority for CCR rules from the EPA. The Kansas Department of Health and Environment (KDHE) and MDNR have both determined that they will wait before proceeding with plans to regulate CCRs until current legal action associated with the CCR rule is final and planned upcoming modifications to the CCR rule are complete.
On July 30, 2018, the EPA published in the Federal Register a final rule called the Phase I, Part I CCR Remand Rule in order to modify portions of the 2015 rulemaking. The Phase I, Part I rule provides a timeline extension for unlined impoundments and landfills that must close due to groundwater impacts or location restriction and sets risk-based limits for certain groundwater constituents where a maximum contaminant level did not previously exist.
On August 21, 2018, the D.C. Circuit issued a ruling in the CCR rule litigation between the Utility Solid Waste Activities Group, the EPA and environmental organizations. Portions of the rule were vacated and were remanded back to the EPA for modification. Potential revisions to remanded sections will force all unlined surface impoundments to close regardless of groundwater conditions. Any changes to the rule based on this court decision will require additional rulemaking from the EPA.
In October 2018, a coalition of environmental groups (including Sierra Club) filed a petition for review in the D.C. Circuit challenging the Phase I, Part I revisions to the CCR Rule. In November 2018, this coalition requested the EPA to stay the October 31, 2020, deadline extension for initiating closure for unlined impoundments and landfills that must close due to groundwater impacts or location restrictions. The EPA rejected this request and the coalition filed a petition with the D.C. Circuit for a similar stay. In response, the EPA filed a motion with the D.C. Circuit to voluntarily remand the Part I, Phase I rule. In March 2019, the D.C. Circuit issued a ruling to grant the EPA's motionrequest to remand the rule. This ruling maintains the current October 31, 2020, deadline extension. As the EPA works on a rule modification, it is possible that this October 31, 2020, deadline will be modified. If the date is accelerated, some CCR units in the Evergy Companies' fleet could have to initiate closure on an earlier timeline than currently planned, the results of which could be material.
On August 14, 2019, the EPA published in the Federal Register a proposed rule called the Phase II CCR Rule. This rule modifies the currentI, Part I CCR rule in response to a prior court remandsruling requiring the EPA to address un-lined surface impoundment closure requirements. In August 2020, the EPA published the Part A CCR Rule. This rule reclassified clay-lined surface impoundments from "lined" to "un-lined" and EPA settlements stemming from litigation involving the original rule. This proposedestablished a deadline of April 11, 2021 to initiate closure. The prior rule in its current form, is not expectedincluded a deadline of October 31, 2020 for un-lined impoundments to have a material impact on the Evergy Companies' operations or consolidated financial results.
On November 4, 2019,initiate closure. In October 2020, the EPA released a pre-publication version of a proposed rule modification called the "Phase Afinal Part B CCR Rule." This proposal addresses the D.C. Circuit-ruled vacatur from August 2018 along with the voluntary remand that occurred in March 2019. The proposal requiresrule includes a deadline of August 31, 2020 for unlined and clay-lined surface impoundmentsprocess to stop receiving waste and to initiate closure compared with the existing deadline of October 31, 2020. There is also an option for a 90-day extension on a case-by-case basis. The proposal also allows these surfaceallow un-lined impoundments to continue operating until October 2028to operate if therea demonstration is a commitmentmade to retireprove that the associated coal-fired boiler(s).un-lined impoundments are not adversely impacting groundwater, human health or the environment. The Evergy Companies are in the process of reviewing the proposed rulePart A and Part B CCR rules and the costs to comply with these changes could be material.
The Evergy Companies have recorded asset retirement obligations (AROs)AROs for their current estimates for the closure of ash disposal ponds, but the revision of these AROs may be required in the future due to changes in existing CCR regulations, the results of groundwater monitoring of CCR units or changes in interpretation of existing CCR regulations or changes in the timing or cost to close ash disposal ponds. If revisions to these AROs are necessary, the impact on the Evergy Companies' operations or consolidated financial results could be material.
Storage of Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982, the Department of Energy (DOE) is responsible for the permanent disposal of spent nuclear fuel. In 2010, the DOE filed a motion with the Nuclear Regulatory Commission (NRC) to withdraw its application to construct a national repository for the disposal of spent nuclear fuel and high-level radioactive waste at Yucca Mountain, Nevada. The NRC has not yet issued a final decision on the matter.
Wolf Creek has elected to build a dry cask storage facility to expand its existing on-site spent nuclear fuel storage, which is expected to provide additional capacity in 2021. The Evergy Companies expect that the DOE will reimburse the majority of the costs to construct the dry cask storage facility that would not have otherwise been incurred had the DOE begun accepting spent nuclear fuel. The Evergy Companies cannot predict, when, or if, an off-site storage site or alternative disposal site will be available to receive Wolf Creek's spent nuclear fuel and will continue to monitor this activity.
12. RELATED PARTY TRANSACTIONS AND RELATIONSHIPS
In the normal course of business, Evergy Kansas Central, Evergy Metro and Evergy Missouri West engage in related party transactions with one another. A summary of these transactions and the amounts associated with them is provided below. Transactions between Evergy Kansas Central and either Evergy Metro or Evergy Missouri West prior to June 4, 2018, the date of the merger, are not reflected below.
Jointly-Owned Plants and Shared Services
Employees of Evergy Kansas Central and Evergy Metro employees manage Evergy Missouri West's business and operate its facilities at cost, including Evergy Missouri West's 18% ownership interest in Evergy Metro's Iatan Nos. 1 and 2. The operating expenses and capital costs billed from Evergy Metro to Evergy Missouri West were $41.6 million and $125.8 million for the three months ended and year to date September 30, 2019, respectively. These costs totaled $43.4 million and $139.6 million for the three months ended and year to date September 30, 2018, respectively.
Employees of Evergy Kansas Central employees manage JECJeffrey Energy Center (JEC) and operate its facilities at cost, including Evergy Missouri West's 8% ownership interest in JEC. The operating expenses and capital costs billed fromEmployees of Evergy Kansas Central to Evergy Missouri West for JEC and other various business activities were $4.5 million and $17.2 million for the three months ended and year to date September 30, 2019, respectively. These costs totaled $0.8 million and $4.5 million for the three months ended and year to date September 30, 2018, respectively.
Evergy Metro employees manage La Cygne Station and operate its facilities at cost, including Evergy Kansas Central's 50% interest in La Cygne Station. Employees of Evergy Metro and Evergy Kansas Central employees also provide one another with shared service support, including costs related to human resources, information technology, accounting and legal services.
The operating expenses and capital costs billed from Evergy Metro to Evergy Kansas Central were $33.0 millionfor jointly-owned plants and $108.8 million forshared services are detailed in the three months ended and year to date September 30, 2019, respectively. These costs totaled $35.5 million and $50.8 million for the three months and year to date September 30, 2018, respectively. The operating and capital costs billed from Evergy Kansas Central to Evergy Metro were $9.7 million and $26.0 million for the three months ended and year to date September 30, 2019, respectively. These costs totaled $4.8 million and $10.8 million for the three months ended and year to date September 30, 2018, respectively.following table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30 | | Year to Date
September 30 | | |
| | 2020 | | 2019 | | 2020 | | 2019 | | |
| | (millions) | | |
| Evergy Kansas Central billings to Evergy Missouri West | | $ | 13.1 | | | $ | 4.5 | | | $ | 27.4 | | | $ | 17.2 | | | |
| Evergy Metro billings to Evergy Missouri West | | 46.5 | | | 41.6 | | | 121.8 | | | 125.8 | | | |
| Evergy Kansas Central billings to Evergy Metro | | 5.4 | | | 9.7 | | | 24.9 | | | 26.0 | | | |
| Evergy Metro billings to Evergy Kansas Central | | 26.9 | | | 33.0 | | | 94.5 | | | 108.8 | | | |
Money Pool
Evergy Metro and Evergy Missouri West are also authorized to participate in the Evergy, Inc. money pool, which is an internal financing arrangement in which funds may be lent on a short-term basis to Evergy Metro and Evergy
Missouri West from Evergy, Inc. and between Evergy Metro and Evergy Missouri West. At September 30, 20192020, Evergy Metro had a $78.0 million outstanding receivable from Evergy Missouri West and 0 outstanding payables under the money pool. At December 31, 2018,2019, Evergy Metro had 0 outstanding receivables or payables under the money pool.
Related Party Net Receivables and Payables
The following table summarizes Evergy Kansas Central's and Evergy Metro's related party net receivables and payables.
|
| | | | | | | | | | |
| | | September 30 | | | December 31 | |
| | | 2019 | | | 2018 | |
| Evergy Kansas Central | | (millions) | |
| Net receivable from Evergy Missouri West | | $ | 1.7 |
| | | $ | 2.6 |
| |
| Net payable to Evergy Metro | | (6.9 | ) | | | (13.5 | ) | |
| Net payable to Evergy | | (0.3 | ) | | | (1.4 | ) | |
| | | | | | | |
| Evergy Metro | | | | | | |
| Net receivable from Evergy Missouri West | | $ | 66.7 |
| | | $ | 72.6 |
| |
| Net receivable from Evergy Kansas Central | | 6.9 |
| | | 13.5 |
| |
| Net receivable from Evergy | | 16.7 |
| | | 15.7 |
| |
| | | | | | | | | | | | | | |
| | |
| | September 30 | | December 31 |
| | 2020 | | 2019 |
| Evergy Kansas Central | | (millions) |
| Net receivable from (payable to) Evergy | | $ | (0.2) | | | $ | 6.9 | |
| Net payable to Evergy Metro | | (15.4) | | | (14.9) | |
| Net receivable from Evergy Missouri West | | 4.5 | | | 3.1 | |
| | | | |
| Evergy Metro | | | | |
| Net receivable from (payable to) Evergy | | $ | 16.1 | | | $ | (4.3) | |
| Net receivable from Evergy Kansas Central | | 15.4 | | | 14.9 | |
| Net receivable from Evergy Missouri West | | 160.0 | | | 78.7 | |
Tax Allocation Agreement
Evergy files a consolidated federal income tax return as well as unitary and combined income tax returns in several state jurisdictions with Kansas and Missouri being the most significant. Income taxes for consolidated or combined subsidiaries are allocated to the subsidiaries based on separate company computations of income or loss. As of September 30, 20192020 and December 31, 2018,2019, Evergy Kansas Central had income taxes receivable from Evergy of $6.1$29.3 million and $42.7$37.9 million, respectively. As of September 30, 20192020 and December 31, 2018,2019, Evergy Metro had income taxes payable to Evergy of $10.6$0.6 million and $2.0$14.1 million, respectively.
Leases
Evergy Metro leases certain transmission equipment from Evergy Kansas Central. This lease was entered into prior to the merger in an arms-length transaction and is accounted for as an operating lease. As of September 30, 2019, Evergy Metro had aThe right-of-use asset of $29.6 millionrelated to this lease is recorded within other long-term assets $0.6 million ofand the current and long-term lease liabilityliabilities are recorded inwithin other current liabilities and $29.0 million of lease liability recorded in other long-term liabilities, respectively, on itsthe consolidated balance sheet related to this lease.sheet. The assets and liabilities related to this lease between Evergy Kansas Central and Evergy Metro are eliminated at consolidated Evergy.
13. SHAREHOLDERS' EQUITY
Common Stock Repurchase Program
In July 2018, the Evergy Board authorized the repurchase of up to 60 million shares of Evergy's common stock. Although this repurchase authorization has no expiration date, Evergy expects to repurchase approximately 60 million shares by mid-2020. Evergy is utilizing and plans to continue to utilize various methods to effectuate the share repurchase program, including but not limited to, a series of transactions that may include accelerated share repurchases (ASRs), open market transactions or other means, subject to market conditions and applicable legal requirements. The repurchase program may be suspended, discontinued or resumed at any time. Year to date September 30, 2019, Evergy had total repurchases of common stock of $1,628.7 million and had repurchased 27.5 million shares under the repurchase program. Since its inception, Evergy has made total repurchases of common stock of approximately $2.7 billion and has repurchased 43.9 million shares under the repurchase program. These repurchase totals include shares repurchased under ASR agreements, one of which had not reached final settlement as of September 30, 2019, and are discussed further below.
In November 2018, Evergy entered into an ASR agreement with a financial institution to purchase $475.0 million of Evergy common stock. In December 2018, the financial institution delivered to Evergy 6.4 million shares of common stock, representing a partial settlement of the contract, based on then-current market prices and Evergy
paid a total of $475.0 million. The ASR agreement reached final settlement in February 2019 and resulted in the delivery of an additional 1.9 million shares to Evergy based on the average daily volume weighted-average price of Evergy common stock during the term of the ASR agreement, less a negotiated discount.
In March 2019, Evergy entered into an ASR agreement with a financial institution to purchase $450.0 million of Evergy common stock. In March 2019, the financial institution delivered to Evergy 6.3 million shares of common stock, representing a partial settlement of the contract, based on then-current market prices and Evergy paid a total of $450.0 million. The ASR agreement reached final settlement in June 2019 and resulted in the delivery of an additional 1.5 million shares to Evergy based on the average daily volume weighted-average price of Evergy common stock during the term of the ASR agreement, less a negotiated discount.
In June 2019, Evergy entered into an ASR agreement with a financial institution to purchase $500.0 million of Evergy common stock. In June 2019, the financial institution delivered to Evergy 7.1 million shares of common stock, representing a partial settlement of the contract, based on then-current market prices and Evergy paid a total of $500.0 million. The ASR agreement reached final settlement in September 2019 and resulted in the delivery of an additional 1.0 million shares to Evergy based on the average daily volume weighted-average price of Evergy common stock during the term of the ASR agreement, less a negotiated discount.
In September 2019, Evergy entered into an ASR agreement with a financial institution to purchase $500.0 million of Evergy common stock. In September 2019, the financial institution delivered to Evergy 6.6 million shares of common stock, representing a partial settlement of the contract, based on then-current market prices and Evergy paid a total of $500.0 million. The final number of shares of Evergy common stock that Evergy may receive or be required to remit upon settlement of the ASR agreement will be based on the average daily volume weighted-average price of Evergy common stock during the term of the ASR agreement, less a negotiated discount. Final settlement of the ASR agreement will occur by December 2019, but may occur earlier at the option of the financial institution. Evergy expects that the final settlement of the ASR agreement will result in the delivery of additional shares of common stock to Evergy at no additional cost.
Evergy reflects ASRs as a repurchase of common stock in the period the shares are delivered for purposes of calculating earnings per share and as forward contracts indexed to its own common stock. Evergy's ASRs have met all of the applicable criteria for equity classification and therefore are not accounted for as derivative instruments.
Dividend Restrictions
Evergy depends on its subsidiaries to pay dividends on its common stock. The Evergy Companies have certain restrictions stemming from statutory requirements, corporate organizational documents, covenants and other conditions that could affect dividend levels or the ability to pay dividends.
The KCC order authorizing the merger transaction requires Evergy to maintain consolidated common equity of at least 35% of total consolidated capitalization.
Under the Federal Power Act, Evergy Kansas Central, Evergy Metro and Evergy Missouri West generally can pay dividends only out of retained earnings. Certain conditions in the MPSC and KCC orders authorizing the merger transaction also require Evergy Kansas Central and Evergy Metro to maintain consolidated common equity of at least 40% of total capitalization. Other conditions in the MPSC and KCC merger orders require Evergy Kansas Central, Evergy Metro and Evergy Missouri West to maintain credit ratings of at least investment grade. If Evergy Kansas Central's, Evergy Metro's or Evergy Missouri West's credit ratings are downgraded below the investment grade level as a result of their affiliation with Evergy or any of Evergy's affiliates, the impacted utility shall not pay a dividend to Evergy without KCC or MPSC approval or until the impacted utility's investment grade credit rating has been restored.
The master credit facility of Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West and the note purchase agreements for certain Evergy Missouri West senior notes contain covenants requiring the respective company to maintain a consolidated indebtedness to consolidated total capitalization ratio of not more than 0.65 to 1.00 at all times.
As of September 30, 2019, all of Evergy's and Evergy Kansas Central's retained earnings and net income were free of restrictions and2020, Evergy Metro had a retained earnings restrictionright-of-use asset of $120.0 million. Evergy's subsidiaries$29.1 million, a current lease liability of $0.7 million and a long-term lease liability of $28.4 million on its consolidated balance sheet related to this lease. As of December 31, 2019, Evergy Metro had restricted net assetsa right-of-use asset of approximately $5.0 billion as$29.5 million, a current lease liability of September 30, 2019. These restrictions are not expected$0.6 million and a long-term lease liability of $28.9 million on its consolidated balance sheet related to affect the Evergy Companies' ability to pay dividends at the current level for the foreseeable future.this lease.
14.
13. TAXES
Components of income tax expense are detailed in the following tables.
| | | | | | | | | | | | | | | | | | | | |
| Evergy | | |
| Three Months Ended
September 30 | Year to Date
September 30 |
| 2020 | | 2019 | 2020 | | 2019 |
| Current income taxes | (millions) |
| Federal | $ | (16.4) | | | $ | (31.2) | | $ | (35.0) | | | $ | (10.6) | |
| State | (0.4) | | | (0.8) | | (7.7) | | | (1.6) | |
| Total | (16.8) | | | (32.0) | | (42.7) | | | (12.2) | |
| Deferred income taxes | | | | | | |
| Federal | 46.6 | | | 75.5 | | 83.4 | | | 78.0 | |
| State | 21.5 | | | 23.0 | | 57.7 | | | 36.5 | |
| Total | 68.1 | | | 98.5 | | 141.1 | | | 114.5 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Investment tax credit amortization | (1.3) | | | (1.0) | | (4.6) | | | (3.1) | |
| Income tax expense | $ | 50.0 | | | $ | 65.5 | | $ | 93.8 | | | $ | 99.2 | |
| | | Evergy | | |
| Evergy Kansas Central | | Evergy Kansas Central | | | | |
| | Three Months Ended
September 30 | Year to Date
September 30 | | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | 2019 | | 2018 | | 2020 | | 2019 | 2020 | | 2019 |
| Current income taxes | (millions) | Current income taxes | (millions) |
| Federal | $ | (31.2 | ) | | $ | (30.3 | ) | $ | (10.6 | ) | | $ | (21.5 | ) | Federal | $ | (4.6) | | | $ | 11.2 | | $ | 7.5 | | | $ | 39.1 | |
| State | (0.8 | ) | | 1.5 |
| (1.6 | ) | | 1.9 |
| State | (6.4) | | | (1.2) | | (13.3) | | | (2.4) | |
| Total | (32.0 | ) | | (28.8 | ) | (12.2 | ) | | (19.6 | ) | Total | (11.0) | | | 10.0 | | (5.8) | | | 36.7 | |
| Deferred income taxes | | | | |
| | |
| Deferred income taxes | | | | |
| Federal | 75.5 |
| | 70.6 |
| 78.0 |
| | 86.0 |
| Federal | 17.9 | | | 4.6 | | (10.7) | | | (9.3) | |
| State | 23.0 |
| | 23.3 |
| 36.5 |
| | (35.7 | ) | State | 16.6 | | | 12.0 | | 169.4 | | | 21.1 | |
| Total | 98.5 |
| | 93.9 |
| 114.5 |
| | 50.3 |
| Total | 34.5 | | | 16.6 | | 158.7 | | | 11.8 | |
| | Investment tax credit amortization | (1.0 | ) | | (1.0 | ) | (3.1 | ) | | (2.4 | ) | Investment tax credit amortization | (1.0) | | | (0.8) | | (3.7) | | | (2.3) | |
| Income tax expense | $ | 65.5 |
| | $ | 64.1 |
| $ | 99.2 |
| | $ | 28.3 |
| Income tax expense | $ | 22.5 | | | $ | 25.8 | | $ | 149.2 | | | $ | 46.2 | |
| | | | | | | | | | | | | | | | | | | | |
| Evergy Metro | | |
| Three Months Ended
September 30 | Year to Date
September 30 |
| 2020 | | 2019 | 2020 | | 2019 |
| Current income taxes | (millions) |
| Federal | $ | (8.9) | | | $ | (2.2) | | $ | (8.4) | | | $ | 32.1 | |
| State | 9.5 | | | 3.9 | | 10.5 | | | 9.3 | |
| Total | 0.6 | | | 1.7 | | 2.1 | | | 41.4 | |
| Deferred income taxes | | | | | | |
| Federal | 22.2 | | | 26.3 | | 38.9 | | | 1.4 | |
| State | 2.6 | | | 4.5 | | (35.1) | | | 1.9 | |
| Total | 24.8 | | | 30.8 | | 3.8 | | | 3.3 | |
| | | | | | |
| | | | | | |
| Investment tax credit amortization | (0.3) | | | (0.3) | | (0.8) | | | (0.8) | |
| | | | | | |
| Income tax expense | $ | 25.1 | | | $ | 32.2 | | $ | 5.1 | | | $ | 43.9 | |
|
| | | | | | | | | | | | | | |
| Evergy Kansas Central | | | | | | |
| | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | 2019 | | 2018 |
| Current income taxes | (millions) |
| Federal | $ | 11.2 |
| | $ | 8.0 |
| $ | 39.1 |
| | $ | 18.9 |
|
| State | (1.2 | ) | | (9.2 | ) | (2.4 | ) | | (6.7 | ) |
| Total | 10.0 |
| | (1.2 | ) | 36.7 |
| | 12.2 |
|
| Deferred income taxes | | | | |
| | |
|
| Federal | 4.6 |
| | 12.3 |
| (9.3 | ) | | 15.4 |
|
| State | 12.0 |
| | 12.0 |
| 21.1 |
| | (47.6 | ) |
| Total | 16.6 |
| | 24.3 |
| 11.8 |
| | (32.2 | ) |
| Investment tax credit amortization | (0.8 | ) | | (0.7 | ) | (2.3 | ) | | (2.0 | ) |
| Income tax expense (benefit) | $ | 25.8 |
| | $ | 22.4 |
| $ | 46.2 |
| | $ | (22.0 | ) |
|
| | | | | | | | | | | | | | |
Evergy Metro(a) | | |
| | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | 2019 | | 2018 |
| Current income taxes | (millions) |
| Federal | $ | (2.2 | ) | | $ | 20.7 |
| $ | 32.1 |
| | $ | 43.5 |
|
| State | 3.9 |
| | 6.8 |
| 9.3 |
| | 11.6 |
|
| Total | 1.7 |
| | 27.5 |
| 41.4 |
| | 55.1 |
|
| Deferred income taxes | |
| | |
| |
| | |
|
| Federal | 26.3 |
| | (1.9 | ) | 1.4 |
| | (23.4 | ) |
| State | 4.5 |
| | 2.7 |
| 1.9 |
| | 49.4 |
|
| Total | 30.8 |
| | 0.8 |
| 3.3 |
| | 26.0 |
|
| Investment tax credit amortization | (0.3 | ) | | (0.3 | ) | (0.8 | ) | | (0.8 | ) |
| Income tax expense | $ | 32.2 |
| | $ | 28.0 |
| $ | 43.9 |
| | $ | 80.3 |
|
(a)Evergy Metro amounts are included in consolidated Evergy from June 4, 2018, the date of the closing of the merger, and thereafter.
Effective Income Tax Rates
Effective income tax rates reflected in the financial statements and the reasons for their differences from the statutory federal rates are detailed in the following tables.
| | | | | | | | | | | | | | | | | | | | |
| Evergy | | | | | | |
| Three Months Ended
September 30 | Year to Date
September 30 |
| 2020 | | 2019 | 2020 | | 2019 |
| Federal statutory income tax rate | 21.0 | % | | 21.0 | % | 21.0 | % | | 21.0 | % |
| Effect of: | | | | | | |
| COLI policies | (1.6) | | | (1.6) | | (1.6) | | | (1.7) | |
| State income taxes | 3.5 | | | 4.0 | | 3.4 | | | 3.9 | |
| Flow through depreciation for plant-related differences | (4.9) | | | (3.1) | | (4.8) | | | (3.2) | |
| Federal tax credits | (4.6) | | | (3.9) | | (4.6) | | | (3.9) | |
| Non-controlling interest | (0.3) | | | (0.4) | | (0.3) | | | (0.4) | |
| AFUDC equity | (0.2) | | | 0 | | (0.3) | | | 0 | |
| Amortization of federal investment tax credits | (0.7) | | | (0.5) | | (0.7) | | | (0.5) | |
| Changes in uncertain tax positions, net | 0 | | | (0.4) | | 0 | | | (0.3) | |
| State tax rate change | 0 | | | 0 | | 2.0 | | | 0 | |
| Valuation allowance | (0.4) | | | 0 | | (0.2) | | | (1.1) | |
| Stock compensation | 0 | | | 0.3 | | (0.1) | | | 0.2 | |
| Officer compensation limitation | 0.2 | | | 0.1 | | 0.2 | | | 0.1 | |
| Other | 0 | | | (0.5) | | — | | | (0.3) | |
| Effective income tax rate | 12.0 | % | | 15.0 | % | 14.0 | % | | 13.8 | % |
| | | Evergy | | | | | | |
| Evergy Kansas Central | | Evergy Kansas Central | | | | |
| | Three Months Ended
September 30 | Year to Date
September 30 | | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | 2019 | | 2018 | | 2020 | | 2019 | 2020 | | 2019 |
| Federal statutory income tax rate | 21.0 | % | | 21.0 | % | 21.0 | % | | 21.0 | % | Federal statutory income tax rate | 21.0 | % | | 21.0 | % | 21.0 | % | | 21.0 | % |
| Effect of: | | | | | | Effect of: | |
| COLI policies | (1.6 | ) | | (2.4 | ) | (1.7 | ) | | (2.4 | ) | COLI policies | (2.9) | | | (2.8) | | (2.9) | | | (3.0) | |
| State income taxes | 4.0 |
| | 4.6 |
| 3.9 |
| | 4.7 |
| State income taxes | 2.3 | | | 4.4 | | 2.9 | | | 4.2 | |
| Flow through depreciation for plant-related differences | (3.1 | ) | | (1.5 | ) | (3.2 | ) | | (1.6 | ) | Flow through depreciation for plant-related differences | (0.4) | | | 0.8 | | (0.2) | | | 0.5 | |
| Federal tax credits | (3.9 | ) | | (7.5 | ) | (3.9 | ) | | (7.5 | ) | Federal tax credits | (6.8) | | | (6.2) | | (6.8) | | | (6.1) | |
| Non-controlling interest | (0.4 | ) | | (0.4 | ) | (0.4 | ) | | (0.4 | ) | Non-controlling interest | (0.7) | | | (0.8) | | (0.6) | | | (0.8) | |
| AFUDC equity | — |
| | (0.1 | ) | — |
| | (0.1 | ) | AFUDC equity | 0.1 | | | (0.1) | | (0.4) | | | (0.1) | |
| Amortization of federal investment tax credits | (0.5 | ) | | (0.6 | ) | (0.5 | ) | | (0.6 | ) | Amortization of federal investment tax credits | (1.1) | | | (0.7) | | (1.0) | | | (0.7) | |
| Changes in uncertain tax positions, net | (0.4 | ) | | — |
| (0.3 | ) | | — |
| Changes in uncertain tax positions, net | 0 | | | (0.9) | | 0 | | | (0.5) | |
| State tax rate change | — |
| | 0.1 |
| — |
| | (9.5 | ) | State tax rate change | 0 | | | 0 | | 32.0 | | | 0 | |
| Valuation allowance | — |
| | — |
| (1.1 | ) | | 0.4 |
| Valuation allowance | 0 | | | 0 | | 0 | | | (0.5) | |
| Stock compensation | 0.3 |
| | — |
| 0.2 |
| | (0.5 | ) | Stock compensation | 0 | | | 0 | | (0.1) | | | (0.1) | |
| Officer compensation limitation | 0.1 |
| | 1.2 |
| 0.1 |
| | 1.2 |
| |
| | Other | (0.5 | ) | | 0.8 |
| (0.3 | ) | | 0.4 |
| Other | 0 | | | (1.4) | | 0 | | | (0.7) | |
| Effective income tax rate | 15.0 | % | | 15.2 | % | 13.8 | % | | 5.1 | % | Effective income tax rate | 11.5 | % | | 13.3 | % | 43.9 | % | | 13.2 | % |
Evergy's | | | | | | | | | | | | | | | | | | | | |
| Evergy Metro | | | | | | |
| Three Months Ended
September 30 | Year to Date
September 30 |
| 2020 | | 2019 | 2020 | | 2019 |
| Federal statutory income tax rate | 21.0 | % | | 21.0 | % | 21.0 | % | | 21.0 | % |
| Effect of: | | | | | | |
| COLI policies | (0.2) | | | (0.1) | | (0.2) | | | (0.1) | |
| State income taxes | 5.5 | | | 3.6 | | 4.5 | | | 3.2 | |
| Flow through depreciation for plant-related differences | (9.1) | | | (6.1) | | (9.1) | | | (6.1) | |
| Federal tax credits | (2.4) | | | (1.3) | | (2.4) | | | (1.4) | |
| AFUDC equity | (0.5) | | | 0 | | (0.3) | | | 0 | |
| Amortization of federal investment tax credits | (0.4) | | | (0.3) | | (0.4) | | | (0.3) | |
| State tax rate change | 0 | | | 0 | | (11.4) | | | 0 | |
| | | | | | |
| Stock compensation | 0 | | | 0 | | (0.4) | | | 0 | |
| Officer compensation limitation | 0.5 | | | 0.3 | | 0.5 | | | 0.3 | |
| Other | 0.1 | | | 0.4 | | 0 | | | (0.4) | |
| Effective income tax rate | 14.5 | % | | 17.5 | % | 1.8 | % | | 16.2 | % |
Tax Reform
In May 2020, the state tax rate change for year to date September 30, 2018, is due to the revaluation of Kansas exempted certain public utilities, including Evergy Kansas Central'sCentral and Evergy Metro, from Kansas corporate income tax beginning in 2021 and authorized the KCC to approve changes in rates related to increases or decreases in federal or state income tax rates.
As a result of the exemption from Kansas corporate income tax, the Evergy Companies revalued their deferred income tax assets and liabilities based on thein May 2020. Evergy compositedecreased its net deferred income tax rate asliabilities by $233.8 million, primarily consisting of a result of the merger.
|
| | | | | | | | | | |
| Evergy Kansas Central | | | | | | |
| | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | 2019 | | 2018 |
| Federal statutory income tax rate | 21.0 | % | | 21.0 | % | 21.0 | % | | 21.0 | % |
| Effect of: | | | | | | |
| COLI policies | (2.8 | ) | | (4.0 | ) | (3.0 | ) | | (4.0 | ) |
| State income taxes | 4.4 |
| | 1.1 |
| 4.2 |
| | 3.3 |
|
| Flow through depreciation for plant-related differences | 0.8 |
| | 1.5 |
| 0.5 |
| | 0.3 |
|
| Federal tax credits | (6.2 | ) | | (11.8 | ) | (6.1 | ) | | (11.7 | ) |
| Non-controlling interest | (0.8 | ) | | (0.6 | ) | (0.8 | ) | | (0.7 | ) |
| AFUDC equity | (0.1 | ) | | (0.1 | ) | (0.1 | ) | | (0.1 | ) |
| Amortization of federal investment tax credits | (0.7 | ) | | (0.8 | ) | (0.7 | ) | | (0.8 | ) |
| Changes in uncertain tax positions, net | (0.9 | ) | | 0.1 |
| (0.5 | ) | | 0.1 |
|
| State tax rate change | — |
| | — |
| — |
| | (17.7 | ) |
| Valuation allowance | — |
| | — |
| (0.5 | ) | | 0.6 |
|
| Stock compensation | — |
| | — |
| (0.1 | ) | | (0.9 | ) |
| Officer compensation limitation | — |
| | 1.9 |
| — |
| | 1.9 |
|
| Other | (1.4 | ) | | 2.9 |
| (0.7 | ) | | 1.3 |
|
| Effective income tax rate | 13.3 | % | | 11.2 | % | 13.2 | % | | (7.4 | )% |
Evergy Kansas Central's state tax rate change$400.4 million adjustment for year to date September 30, 2018, is due to the revaluation of Evergy Kansas Central's state deferred income tax assets and liabilities basedincluded in rate base and a $31.7 million tax gross-up adjustment on this amount for ratemaking purposes and $13.8 million of income tax expense primarily related to the Evergy compositerevaluation of deferred income taxes that will not be recovered from customers in future rates; partially offset by a decrease to unamortized investment tax rate as a resultcredits of the merger.
|
| | | | | | | | | | |
| Evergy Metro | | | | | | |
| | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | 2019 | | 2018 |
| Federal statutory income tax rate | 21.0 | % | | 21.0 | % | 21.0 | % | | 21.0 | % |
| Effect of: | | | | | | |
| COLI policies | (0.1 | ) | | (0.2 | ) | (0.1 | ) | | (0.2 | ) |
| State income taxes | 3.6 |
| | 5.0 |
| 3.2 |
| | 5.1 |
|
| Flow through depreciation for plant-related differences | (6.1 | ) | | (4.9 | ) | (6.1 | ) | | (4.9 | ) |
| Federal tax credits | (1.3 | ) | | (1.9 | ) | (1.4 | ) | | (1.8 | ) |
| AFUDC equity | — |
| | — |
| — |
| | (0.1 | ) |
| Amortization of federal investment tax credits | (0.3 | ) | | (0.4 | ) | (0.3 | ) | | (0.4 | ) |
| State tax rate change | — |
| | — |
| — |
| | 14.5 |
|
| Officer compensation limitation | 0.3 |
| | 0.7 |
| 0.3 |
| | 0.5 |
|
| Other | 0.4 |
| | (0.4 | ) | (0.4 | ) | | (1.0 | ) |
| Effective income tax rate | 17.5 | % | | 18.9 | % | 16.2 | % | | 32.7 | % |
Evergy Metro's state tax rate change for year to date September 30, 2018, is$183.6 million due to the revaluation of certain Kansas income tax credits and a $16.9 million tax gross-up adjustment on this amount for ratemaking purposes.
Evergy Metro's stateKansas Central decreased its net deferred income tax liabilities by $17.6 million, primarily consisting of a $293.7 million adjustment for the revaluation of deferred income tax assets and liabilities basedincluded in rate base and a $17.3 million tax gross-up adjustment on the Evergy composite tax rate as a result of the merger,this amount for ratemaking purposes; partially offset by a decrease to unamortized investment tax credits of $183.6 million due to the revaluation of certain Kansas income tax credits and a $16.9 million tax gross-up adjustment on this amount for ratemaking purposes and $109.0 million of income tax expense primarily related to the revaluation of deferred income taxes that will not be recovered from customers in future rates.
Evergy Metro's stateMetro decreased its net deferred income tax liabilities by $152.9 million, primarily consisting of a $106.7 million adjustment for the revaluation of deferred income tax assets and liabilities asincluded in rate base and a result$14.4 million tax gross-up adjustment on this amount for ratemaking purposes and $32.2 million of income tax benefit primarily related to the revaluation of deferred income taxes that will not be refunded to customers in future rates.
The changes to the Evergy Companies' net deferred income tax liabilities included in rate base were offset by corresponding changes in regulatory liabilities. The net regulatory liabilities will be refunded to customers in future rates by amortizing the amounts related to plant assets over the remaining useful life of the enactmentassets, and amortizing the amounts related to other items over a period to be determined in a future rate case. The changes to the Evergy Companies' unamortized investment tax credits were related to the portion of Missouri statecertain Kansas income tax reform in June 2018.
15. LEASES
credits that are not expected to be used after December 31, 2020. The amounts of income tax expense (benefit) recognized by the Evergy Companies lease office buildings, computer equipment, vehicles, rail cars, generating plantrelated to the revaluation of deferred income taxes that will not be recovered from or
refunded to customers in future rates primarily pertain to deferred tax adjustments related to the difference between Evergy's consolidated tax rate and other property and equipment, including rail cars to serve jointly-owned generating units wherethe statutory tax rates used for setting rates at Evergy Kansas Central, or
Evergy Metro is the managing partner and is reimbursed by other joint-owners for the other owners' proportionate share of the costs. Under GAAP, a contract is or contains a lease if the contract conveys the rightEvergy Missouri West as well as deferred income tax adjustments related to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Evergy Companies assess a contract as being or containing a lease if the contract identifies property, plant and equipment, provides the lessee the right to obtain substantially all of the economic benefits from use of the property, plant and equipment and provides the lessee the right to direct the use of the property, plant and equipment.non-regulated operations.
The Evergy Companies have entered several agreements to purchase energy through renewable purchase power agreements accounted for as leases that commenced prior to the application of Topic 842.Due to the intermittent nature of renewable generation, these leases have significant variable lease payments not included in the initial and subsequent measurement of the lease liability. Variable lease payments are expensed as incurred. In addition, certain other contracts contain payment for activity that transfers a separate good or service such as utilities or common area maintenance. The Evergy Companies have elected a practical expedient permitted by GAAP to not separate such components of the lease from other lease components for all leases.
The Evergy, Evergy Kansas Central and Evergy Metro leases have remaining terms rangingcurrently recover the cost of Kansas corporate income taxes in rates from their customers at the statutory rate of 7% that will be effective until 2021, when the income tax exemption established by the state of Kansas takes effect. In accordance with the provisions of the income tax exemption, Evergy Metro and Evergy Kansas Central filed a joint application with the KCC in July 2020 to reduce their retail rates to reflect their exemption from Kansas corporate income taxes. In the joint application, Evergy Metro requested to implement its rate reduction in one phase, effective January 1, 2021, and Evergy Kansas Central requested to 20 years,implement its rate reduction in three phases, effective January 1 to 20 yearsin each of 2021, 2022 and 2 to 27 years, respectively. Leases that have original lease terms of twelve months or less are not recognized2023. A decision on the Evergy Companies’ balance sheets. Some leases have options to renewjoint application from the lease or terminate early at the election of the Evergy Companies. JudgmentKCC is applied at lease commencement to determine the reasonably certain lease term based on then-current assumptions about use of the leased asset, market conditions and termsexpected in the contract. The judgment applied to determine the lease term can significantly impact the measurementfourth quarter of the lease liability and right-of-use asset and lease classification.2020.
The Evergy Companies typically discount lease payments over the term of the lease using their incremental borrowing rates at lease commencement to measure its initial and subsequent lease liability. For leases that existed at the initial application of Topic 842, the Evergy Companies used the incremental borrowing rates that corresponded to the remaining lease term as of January 1, 2019.
Leases may be classified as either operating leases or finance leases. The lease classification is based on assumptions of the lease term and discount rate, as discussed above, and the fair market value and economic life of the leased asset. Operating leases recognize a consistent expense each period over the lease term, while finance leases will result in the separate presentation of interest expense on the lease liability and amortization of the right-of-use asset. Finance leases are treated as operating leases for rate-making purposes and as such, the Evergy Companies defer to a regulatory asset or liability any material differences between expense recognition and the timing of payments in order to match what is being recovered in customer rates.
The Evergy Companies’ lease expense is detailed in the following table.
|
| | | | | | | | | | | | |
| Three Months Ended September 30, 2019 | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Finance lease costs | | (millions) |
| Amortization of right-of-use assets | | $ | 2.3 |
| | $ | 2.4 |
| | $ | — |
|
| Interest on lease liabilities | | 1.0 |
| | 0.9 |
| | — |
|
| Operating lease costs | | 4.8 |
| | 2.0 |
| | 2.4 |
|
| Short-term lease costs | | 0.8 |
| | 0.3 |
| | 0.5 |
|
| Variable lease costs for renewable purchase power agreements | | 71.3 |
| | 30.3 |
| | 29.0 |
|
| Total lease costs | | $ | 80.2 |
| | $ | 35.9 |
| | $ | 31.9 |
|
| | | | | | | |
| Year to Date September 30, 2019 | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Finance lease costs | | (millions) |
| Amortization of right-of-use assets | | $ | 4.0 |
| | $ | 3.9 |
| | $ | 0.1 |
|
| Interest on lease liabilities | | 2.3 |
| | 2.1 |
| | 0.1 |
|
| Operating lease costs | | 17.9 |
| | 9.9 |
| | 6.9 |
|
| Short-term lease costs | | 2.3 |
| | 0.6 |
| | 1.6 |
|
| Variable lease costs for renewable purchase power agreements | | 222.1 |
| | 94.3 |
| | 91.0 |
|
| Total lease costs | | $ | 248.6 |
| | $ | 110.8 |
| | $ | 99.7 |
|
Supplemental cash flow information related to the Evergy Companies' leases is detailed in the following table.
|
| | | | | | | | | | | |
| Year to Date September 30, 2019 | Evergy | | Evergy Kansas Central | | Evergy Metro |
| Cash paid for amounts included in the measurement of lease liabilities: | (millions) |
| Operating cash flows from operating leases | $ | 17.4 |
| | $ | 10.2 |
| | $ | 7.2 |
|
| Operating cash flows from finance leases | 2.0 |
| | 1.9 |
| | 0.1 |
|
| Financing cash flows from finance leases | 3.3 |
| | 3.2 |
| | 0.1 |
|
| Right-of-use assets obtained in exchange for new operating lease liabilities | 3.0 |
| | 0.6 |
| | 2.4 |
|
| Right-of-use assets obtained in exchange for new finance lease liabilities | 2.3 |
| | 2.3 |
| | — |
|
Finance Leases
Right-of-use assets for finance leases are included in property, plant and equipment on the Evergy Companies’ balance sheets. Lease liabilities for finance leases are included in other current and other long-term liabilities.Payments for finance leases as of September 30, 2019, are detailed in the following table.
|
| | | | | | | | | | | | |
| | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| | | (millions) |
| October 2019 through December 2019 | | $ | 1.8 |
| | $ | 1.7 |
| | $ | 0.1 |
|
| 2020 | | 7.0 |
| | 6.6 |
| | 0.2 |
|
| 2021 | | 6.5 |
| | 6.0 |
| | 0.2 |
|
| 2022 | | 5.7 |
| | 5.2 |
| | 0.2 |
|
| 2023 | | 4.8 |
| | 4.4 |
| | 0.2 |
|
| After 2023 | | 48.4 |
| | 46.4 |
| | 1.0 |
|
| Total finance lease payments | | 74.2 |
| | 70.3 |
| | 1.9 |
|
| Amounts representing imputed interest | | (25.9 | ) | | (24.8 | ) | | (0.5 | ) |
| Present value of lease payments | | 48.3 |
| | 45.5 |
| | 1.4 |
|
| Less: current portion | | (4.8 | ) | | (4.6 | ) | | (0.1 | ) |
| Total long-term obligations under finance leases | | $ | 43.5 |
| | $ | 40.9 |
| | $ | 1.3 |
|
| | | | | | | |
| Weighted-average remaining lease term (years) | | 15.3 |
| | 15.7 |
| | 8.9 |
|
| Weighted-average discount rate | | 5.8 | % | | 5.7 | % | | 7.6 | % |
Estimated future commitments under finance leases as of December 31, 2018, are detailed in the following table.
|
| | | | | | | | | | | | |
| | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| | | (millions) |
| 2019 | | $ | 6.4 |
| | $ | 6.0 |
| | $ | 0.2 |
|
| 2020 | | 5.8 |
| | 5.4 |
| | 0.2 |
|
| 2021 | | 5.3 |
| | 4.9 |
| | 0.2 |
|
| 2022 | | 4.7 |
| | 4.3 |
| | 0.2 |
|
| 2023 | | 4.0 |
| | 3.6 |
| | 0.2 |
|
| After 2023 | | 48.6 |
| | 46.4 |
| | 1.1 |
|
| Total finance lease payments | | 74.8 |
| | 70.6 |
| | 2.1 |
|
| Amounts representing imputed interest | | (25.8 | ) | | (24.6 | ) | | (0.6 | ) |
| Present value of net minimum lease payments under finance leases | | 49.0 |
| | 46.0 |
| | 1.5 |
|
| Less: current portion | | (3.9 | ) | | (3.7 | ) | | (0.1 | ) |
| Total long-term obligations under finance leases | | $ | 45.1 |
| | $ | 42.3 |
| | $ | 1.4 |
|
Operating Leases
Right-of-use assets for operating leases are included in other long-term assets on the Evergy Companies’ balance sheets. Lease liabilities for operating leases are included in other current and other long-term liabilities.Lease payments for operating leases as of September 30, 2019, are detailed in the following table.
|
| | | | | | | | | | | | |
| | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| | | (millions) |
| October 2019 through December 2019 | | $ | 5.0 |
| | $ | 2.8 |
| | $ | 2.7 |
|
| 2020 | | 18.9 |
| | 10.3 |
| | 10.7 |
|
| 2021 | | 15.4 |
| | 7.4 |
| | 10.1 |
|
| 2022 | | 12.4 |
| | 5.2 |
| | 9.3 |
|
| 2023 | | 9.4 |
| | 2.7 |
| | 8.8 |
|
| After 2023 | | 52.5 |
| | 2.8 |
| | 91.3 |
|
| Total operating lease payments | | 113.6 |
| | 31.2 |
| | 132.9 |
|
| Amounts representing imputed interest | | (18.9 | ) | | (2.1 | ) | | (36.5 | ) |
| Present value of lease payments | | 94.7 |
| | 29.1 |
| | 96.4 |
|
| Less: current portion | | (15.2 | ) | | (9.2 | ) | | (6.8 | ) |
| Total long-term obligations under operating leases | | $ | 79.5 |
| | $ | 19.9 |
| | $ | 89.6 |
|
| | | | | | | |
| Weighted-average remaining lease term (years) | | 9.1 |
| | 3.7 |
| | 15.9 |
|
| Weighted-average discount rate | | 3.9 | % | | 3.4 | % | | 4.2 | % |
Estimated future commitments under operating leases as of December 31, 2018, are detailed in the following table.
|
| | | | | | | | | | | | |
| | | Evergy | | Evergy Kansas Central | | Evergy Metro |
| | | (millions) |
| 2019 | | $ | 24.2 |
| | $ | 14.0 |
| | $ | 10.2 |
|
| 2020 | | 20.7 |
| | 10.1 |
| | 10.6 |
|
| 2021 | | 18.4 |
| | 8.1 |
| | 10.3 |
|
| 2022 | | 15.2 |
| | 5.2 |
| | 10.0 |
|
| 2023 | | 12.4 |
| | 2.8 |
| | 9.6 |
|
| After 2023 | | 95.0 |
| | 3.1 |
| | 91.8 |
|
| Total operating lease payments | | $ | 185.9 |
| | $ | 43.3 |
| | $ | 142.5 |
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the consolidated financial statements and accompanying notes in this combined Quarterly Report on Form 10-Q and the Evergy Companies' combined 20182019 Form 10-K. None of the registrants make any representation as to information related solely to Evergy, Evergy Kansas Central or Evergy Metro other than itself.
EVERGY, INC.
EXECUTIVE SUMMARY
Evergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below. In September 2019, these wholly-owned direct subsidiaries were rebranded and renamed under the Evergy brand name.
•Evergy Kansas Central formerly known as Westar Energy, Inc., is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has one active wholly-owned subsidiary with significant operations, Evergy Kansas South, formerly known as Kansas Gas and Electric Company.South.
•Evergy Metro formerly known as Kansas City Power & Light Company, is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.
•Evergy Missouri West formerly known as KCP&L Greater Missouri Operations Company, is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.
•Evergy Transmission Company formerly known as GPE Transmission Holding Company LLC, owns 13.5% of Transource with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of AEP. Transource is focused on the development of competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.
Evergy Kansas Central also owns a 50% interest in Prairie Wind, which is a joint venture between Evergy Kansas Central and affiliatessubsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the SPP. Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.
Since the rebranding in September 2019, Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West have been conductingconduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 14,700 MWs of owned generating capacity and renewable purchased power agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.6 million customers in the states of Kansas and Missouri. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment).
Strategy
Evergy expects to continue operating its integrated utilities within the currently existing regulatory frameworks. In March 2020, the Evergy Board announced the creation of a Strategic Review & Operations Committee, whose mandate was to explore ways to enhance long-term shareholder value (taking into account applicable legal and regulatory requirements and any other relevant considerations), including through a potential strategic combination or an enhanced long-term standalone operating plan and strategy. The committee completed its review and unanimously recommended to the Evergy Board that Evergy pursue an enhanced long-term standalone operating plan and strategy and the Evergy Board subsequently unanimously concurred with the recommendation. This "Sustainability Transformation Plan" is a five-year plan to optimize and enhance value creation for shareholders, customers, communities and employees. Significant elements of the plan include:
•targeting a reduction of approximately $330 million of operating and maintenance expense by 2024 from 2018 adjusted operating and maintenance expense (non-GAAP) (see "Non-GAAP Measures" within this Executive Summary for a reconciliation of this non-GAAP measure to the most comparable GAAP measure);
•targeting a reduction of approximately $145 million of fuel and purchased power expense between 2019 and 2024; and
•approximately $8.9 billion of expected base capital investments through 2024, or $1.4 billion more than Evergy's prior plan. Of this amount, Evergy expects approximately $2.8 billion to qualify for plant-in-service accounting in Missouri, and approximately $1.8 billion to be focused on FERC-jurisdictional improvements. See "Liquidity and Capital Resources; Capital Expenditures", for further information regarding Evergy's projected capital expenditures through 2024.
The plan also enhances Evergy's efforts to mitigate future strategic risk through responsible, accelerated decarbonization. Evergy has already reduced carbon dioxide emissions by 45% from 2005 levels and, earlier in 2020 Evergy announced a goal to achieve an 80% reduction from 2005 levels by 2050. The Sustainability Transformation Plan has the potential to reduce carbon dioxide emissions 85% by 2030 compared to 2005 levels. The new plan expedites carbon dioxide emission reductions by pursuing constructive regulatory recovery mechanisms that would be necessary to economically retire aging, coal-fired generation and expanding Evergy's wind and solar footprint. The pace of decarbonization will ultimately be defined in continued collaboration with stakeholders, including in the remainder of 2020 as part of Evergy's triennial integrated resource plan.
See "Cautionary Statements Regarding Certain Forward-Looking Information" and Part II, Item 1A, Risk Factors, for additional information.
Impact of COVID-19
The COVID-19 pandemic has had, and may continue to have, a significant impact on the way that the Evergy Companies conduct their operations, including the implementation of social distancing and other preventative protocols and the direction of employees to work remotely when possible. Further, the spread of COVID-19 has resulted in efforts to contain the virus, such as quarantines, restrictions on travel, closures and the reduced operations of businesses, governmental agencies and other institutions. The pandemic, along with the efforts to contain the virus, has caused and could continue to cause an economic slowdown or recession, result in significant disruptions or reductions in various public, commercial or industrial activities and cause employee absences. In the states of Missouri and Kansas as well as certain counties and municipalities within the Evergy Companies' service territory, "stay-at-home" orders were in effect for substantially all of April 2020 and expired in early May 2020.
Following the expiration of the "stay-at-home" orders in early May 2020, much of the Evergy Companies' service territory was subject to phased reopening guidelines that limited the operations of businesses, governmental agencies and other institutions. Certain of these restrictions continue to remain in effect and a substantial portion of the Evergy Companies' service territory is also now required to utilize preventative measures such as the wearing of face coverings while in public areas. Management cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can it predict the severity and duration of its impact.
During 2020, Evergy has experienced an overall reduction in demand and the shifting of usage away from customers with relatively higher load requirements, such as industrial and commercial customers, towards customers with relatively lower load requirements, such as residential customers. Year to date September 30, 2020, approximately 40% of Evergy's total revenues came from residential customers and approximately 45% came from commercial and industrial customers, compared with approximately 37% from residential customers and 47% from commercial and industrial customers in 2019. The KCC and MPSC have established different prices for the Evergy Companies' residential, commercial and industrial customers and a similar change in demand across each customer class will have a different impact on earnings. Management estimates that a 1% change in demand for residential, commercial and industrial customers will impact Evergy's 2020 earnings by approximately $10 million, $8 million and $2 million, respectively. As a result, the impacts to Evergy's earnings from a reduction in demand from industrial and commercial customers have been partially offset by an increase in demand from residential customers.
The Evergy Companies have also temporarily implemented policies, and in the future may implement additional policies, that are intended to ease the financial burden of the pandemic on customers. These policies, such as temporarily extending payment options and offering incentives for customer payments on overdue balances as well as the elimination of late payment fees and disconnections for non-payment through July 15, 2020, could lead to lower levels of operating cash flows compared to historical levels for the Evergy Companies. In addition, these policies, along with lower electric sales as a result of the overall reduction in demand discussed above, could also lead to the additional repayment of portions of the Evergy Companies' borrowings under receivable sale facilities.
Finally, the Evergy Companies have incurred, and will continue to incur, expenses related to monitoring the COVID-19 pandemic and modifying operations in response to the pandemic that are recorded in operating and maintenance expense.
In May 2020, Evergy Kansas Central, Merger
Evergy was incorporated in 2017 as Monarch Energy, a wholly-owned subsidiary of Great Plains Energy. Prior to the closing of the merger transactions, Monarch Energy changed its name to Evergy and did not conduct any business activities other than those required for its formation and matters contemplated by the Amended Merger Agreement. On June 4, 2018, in accordance with the Amended Merger Agreement, Great Plains Energy merged into Evergy, with Evergy surviving the merger and King Energy merged into Evergy Kansas Central, with Evergy Kansas Central surviving the merger. These merger transactions resulted in Evergy becoming the parent entity of Evergy Kansas Central and the direct subsidiaries of Great Plains Energy, including Evergy Metro and Evergy Missouri West. AsWest filed joint requests for AAOs with the KCC and MPSC, as applicable, that would allow for the extraordinary costs and lost revenues incurred by the companies, net of any COVID-19-related savings, as a result of the closing of the merger transactions, each outstanding share of Great Plains Energy common stock was converted into 0.5981 shares of Evergy common stock, resulting in the issuance of 128.9 million shares. Additionally, each outstanding share of Evergy Kansas Central common stock was converted into 1 share of Evergy common stock.
Evergy Kansas Central was determinedCOVID-19 pandemic to be considered for future recovery from customers as part of their next rate cases. The KCC approved the accounting acquirerAAO request in July 2020.
In October 2020, Evergy Metro and thus, the predecessor of Evergy. Evergy had separate operations for the period beginningMissouri West entered into a non-unanimous stipulation and agreement with the quarter ended June 30, 2018,MPSC staff and referencesother intervenors that would allow Evergy Metro and Evergy Missouri West to amountsdefer to a regulatory asset certain net incremental costs incurred associated with the COVID-19 pandemic for periods afterconsideration in their next rate cases. A decision by the closingMPSC regarding the non-unanimous stipulation and agreement is expected in January 2021.
Evergy's management is actively monitoring, and will continue to monitor, the evolving impact of the merger relate to Evergy. The results of Great Plains Energy's direct subsidiaries have been included in Evergy'sCOVID-19 on its results of operations from June 4, 2018,and any developments affecting its workforce and suppliers and will take additional actions as it believes are warranted. The situation is changing rapidly and future impacts may materialize that are not yet known. Accordingly, the dateextent to which COVID-19 and the factors noted above may impact the results of operations, financial condition, cash flows and liquidity of the closingEvergy Companies will depend on future developments that are highly uncertain and cannot be predicted, including new information concerning the severity and duration of the merger,COVID-19 outbreak and thereafter.the actions taken to contain it or to seek recovery of its impact, among others.
Common Stock Repurchase Program
In July 2018, the Evergy Board authorized the repurchase of up to 60 million shares of Evergy's common stock. Although this repurchase authorization has no expiration date, Evergy expects to repurchase approximately 60 million shares by mid-2020. Evergy is utilizingSee "Cautionary Statements Regarding Certain Forward-Looking Information" and plans to continue to utilize various methods to effectuate the share repurchase program, including but not limited to a series of transactions that may include ASRs, open market transactions or other means, subject to market conditions and applicable legal requirements. The repurchase program may be suspended, discontinued or resumed at any time. Year to date September 30, 2019, Evergy had total repurchases of common stock of $1,628.7 million and had repurchased 27.5 million shares under the repurchase program. Since its inception, Evergy has made total repurchases of common stock of approximately $2.7 billion and has repurchased 43.9 million shares under the repurchase program. These repurchase totals include shares repurchased under ASR agreements, one of which had not reached final settlement as of September 30, 2019.
See Note13 to the consolidated financial statementsPart II, Item 1A, Risk Factors, for more information regarding Evergy's common stock repurchase program.additional information.
Regulatory Proceedings
See Note 54 to the consolidated financial statements for information regarding regulatory proceedings.
Earnings Overview
The following table summarizes Evergy's net income and diluted EPS.
| | | | Three Months Ended
September 30 | | Year to Date
September 30 | | Three Months Ended
September 30 | Year to Date
September 30 |
| | 2019 | | 2018 | | Change | | 2019 | | 2018 | | Change | | 2020 | | Change | | 2019 | | 2020 | | Change | | 2019 |
| | (millions, except per share amounts) | | (millions, except per share amounts) |
| Net income attributable to Evergy, Inc. | $ | 366.8 |
| | $ | 355.0 |
| | $ | 11.8 |
| | $ | 606.0 |
| | $ | 517.3 |
| | $ | 88.7 |
| Net income attributable to Evergy, Inc. | $ | 364.5 | | | $ | (2.3) | | | $ | 366.8 | | | $ | 567.3 | | | $ | (38.7) | | | $ | 606.0 | |
| Earnings per common share, diluted | 1.56 |
| | 1.32 |
| | 0.24 |
| | 2.49 |
| | 2.61 |
| | (0.12 | ) | Earnings per common share, diluted | 1.60 | | | 0.04 | | | 1.56 | | | 2.49 | | | — | | | 2.49 | |
Net income attributable to Evergy, Inc. increaseddecreased for the three months ended September 30, 2019,2020, compared to the same period in 2018,2019, primarily due to newlower retail rates for Evergy Kansas Central, Evergy Metrosales driven by unfavorable weather that were partially offset by an increase in weather-normalized residential demand; partially offset by lower operating and Evergy Missouri West effectivemaintenance expenses in 2018, net of a provision for rate refund recorded in the third quarter of 2018 for2020; and lower income tax expense primarily due to lower pre-tax income and lower deferred income tax expense on temporary differences due to the change in the Kansas corporate income tax rate caused by the Tax Cut and Jobs Act (TCJA).rate.
Diluted EPS increased for the three months ended September 30, 2019,2020, compared to the same period in 2018,2019, primarily due to the increase in net income attributable to Evergy, Inc. discussed above and a lower number of diluted weighted average common shares outstanding in 2019,2020, which increased EPS by $0.20$0.05 for the three months ended September 30, 2019. The lower number of diluted weighted average common shares in 2019 was due to shares repurchased under Evergy's common stock repurchase program.2020.
Net income attributable to Evergy, Inc. increaseddecreased year to date September 30, 2019,2020, compared to the same period in 2018,2019, primarily due to the inclusion of Evergy Metro's and Evergy Missouri West's earnings in the first five months of 2019, merger-related costs and reductions of revenue for customer bill credits incurred in June 2018 following the consummation of the merger, lower operating and maintenance expenses at coal-fired generating units and lower administrative and general expenses, partially offset by lower retail sales driven by unfavorable weather and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures as a result of COVID-19 that were partially offset by an increase in weather-normalized residential demand; higher depreciation expense.expense; and higher interest expense; partially offset by lower operating and maintenance expenses in 2020 and lower income tax expense primarily due to lower pre-tax income partially offset by impacts from the Kansas corporate income tax rate change.
Diluted EPS decreasedwas impacted year to date September 30, 2019,2020, compared to the same period in 2018, primarily due to2019, by a higherlower number of diluted weighted average common shares outstanding in 2019,2020, which dilutedincreased EPS by $0.58$0.16 year to date September 30, 2019, partially offset by the increase to net income attributable to Evergy, Inc. discussed above. The higher number of diluted weighted average common shares in 2019 was due to the issuance of common shares to shareholders as a result of the merger in June 2018, partially offset by shares repurchased under Evergy's common stock repurchase program.
For additional information regarding the change in net income, refer to the Evergy Results of Operations section within this MD&A.
Adjusted Earnings (non-GAAP) and Adjusted Earnings Per ShareEPS (non-GAAP)
Evergy's adjusted earnings (non-GAAP) and adjusted earnings per shareEPS (non-GAAP) for the three months ended and year to date September 30, 2020, were $393.3 million or $1.73 per share and $641.7 million or $2.82 per share, respectively. For the three months ended and year to date September 30, 2019, Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) were $369.8$369.8 million or $1.57 per share and $621.2 million or $2.55 per share, respectively. For the three months ended and year to date September 30, 2018, Evergy's adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP) were $370.9 million and $1.38 per share and $641.9 million or $2.36 per share, respectively. In addition to net income attributable to Evergy, Inc., and diluted earnings per common share, pro forma net income attributable to Evergy, Inc. and pro forma diluted earnings per common share as prepared in accordance with GAAP,EPS, Evergy's management uses adjusted earnings (non-GAAP) and adjusted earnings per shareEPS (non-GAAP) to evaluate earnings and earnings per shareEPS without the non-recurring costs and/or benefits resulting from rebranding, voluntary severance, advisor expenses and significant items related to the Great Plains Energyrevaluation of deferred tax assets and Evergyliabilities from the Kansas Central merger.corporate income tax rate change.
Non-GAAP Measures
Adjusted Earnings and Adjusted EPS
Adjusted earnings (non-GAAP) and adjusted earnings per shareEPS (non-GAAP) are intended to enhance an investor's overall understanding of results. Adjusted earnings (non-GAAP) and adjusted earnings per shareEPS (non-GAAP) are used internally to measure performance against budget and in reports for management and the Evergy Board. Adjusted earnings (non-GAAP) and adjusted earnings per shareEPS (non-GAAP) are financial measures that are not calculated in accordance with GAAP and may not be comparable to other companies' presentations or more useful than the GAAP information provided elsewhere in this report.
The following tables provide a reconciliation between net income attributable to Evergy, Inc., and diluted earnings per common share, pro forma net income attributable to Evergy, Inc. and pro forma diluted earnings per common shareEPS as determined in accordance with GAAP and adjusted earnings (non-GAAP) and adjusted earnings per shareEPS (non-GAAP).
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (Loss) | | Earnings (Loss) per Diluted Share | | Earnings (Loss) | | Earnings (Loss) per Diluted Share |
| Three Months Ended September 30 | 2020 | | 2019 |
| (millions, except per share amounts) |
| Net income attributable to Evergy, Inc. | $ | 364.5 | | | $ | 1.60 | | | $ | 366.8 | | | $ | 1.56 | |
| Non-GAAP reconciling items: | | | | | | | |
Rebranding costs, pre-tax(a) | — | | | — | | | 3.6 | | | 0.01 | |
Voluntary severance costs, pre-tax(b) | 28.7 | | | 0.13 | | | 0.4 | | | — | |
Advisor expenses, pre-tax(c) | 9.7 | | | 0.04 | | | — | | | — | |
Income tax benefit(d) | (9.6) | | | (0.04) | | | (1.0) | | | — | |
| | | | | | | |
| Adjusted earnings (non-GAAP) | $ | 393.3 | | | $ | 1.73 | | | $ | 369.8 | | | $ | 1.57 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (Loss) | | Earnings (Loss) per Diluted Share | | Earnings (Loss) | | Earnings (Loss) per Diluted Share |
| Year to Date September 30 | 2020 | | 2019 |
| (millions, except per share amounts) |
| Net income attributable to Evergy, Inc. | $ | 567.3 | | | $ | 2.49 | | | $ | 606.0 | | | $ | 2.49 | |
| Non-GAAP reconciling items: | | | | | | | |
Rebranding costs, pre-tax(a) | — | | | — | | | 4.7 | | | 0.02 | |
Voluntary severance costs, pre-tax(b) | 55.3 | | | 0.24 | | | 15.1 | | | 0.06 | |
Advisor expenses, pre-tax(c) | 26.1 | | | 0.12 | | | — | | | — | |
Income tax benefit(d) | (20.8) | | | (0.09) | | | (4.6) | | | (0.02) | |
Kansas corporate income tax change(e) | 13.8 | | | 0.06 | | | — | | | — | |
| Adjusted earnings (non-GAAP) | $ | 641.7 | | | $ | 2.82 | | | $ | 621.2 | | | $ | 2.55 | |
(a)Reflects external costs incurred to rebrand the legacy Westar Energy and KCP&L utility brands to Evergy and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(b)Reflects severance costs incurred associated with certain voluntary severance programs at the Evergy Companies and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(c)Reflects advisor expenses incurred associated with strategic planning and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(d)Reflects an income tax effect calculated at a statutory rate of approximately 26%, with the exception of certain non-deductible items.
(e)Reflects the revaluation of Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's deferred income tax assets and liabilities from the Kansas corporate income tax rate change and are included in income tax expense on the consolidated statements of comprehensive income.
|
| | | | | | | | | | | | | | | |
| | Earnings (Loss) | | Earnings (Loss) per Diluted Share | | Earnings (Loss) | | Earnings (Loss) per Diluted Share |
| Three Months Ended September 30 | 2019 | | 2018 |
| | (millions, except per share amounts) |
| Net income attributable to Evergy, Inc. | $ | 366.8 |
| | $ | 1.56 |
| | $ | 355.0 |
| | $ | 1.32 |
|
Pro forma adjustments(a): | | | | | | | |
| Non-recurring merger costs and other | — |
| | — |
| | 3.9 |
| | 0.02 |
|
| Pro forma net income attributable to Evergy, Inc. | $ | 366.8 |
| | $ | 1.56 |
| | $ | 358.9 |
| | $ | 1.34 |
|
| Non-GAAP reconciling items: | | | | | | | |
Rebranding costs, pre-tax(b) | 3.6 |
| | 0.01 |
| | — |
| | — |
|
Voluntary severance costs, pre tax(c) | 0.4 |
| | — |
| | 16.3 |
| | 0.06 |
|
Income tax benefit (g) | (1.0 | ) | | — |
| | (4.3 | ) | | (0.02 | ) |
| Adjusted earnings (non-GAAP) | $ | 369.8 |
| | $ | 1.57 |
| | $ | 370.9 |
| | $ | 1.38 |
|
The following table provides a reconciliation between 2018 operating and maintenance expense and 2018 pro forma operating and maintenance expense as determined in accordance with GAAP and 2018 adjusted operating and maintenance expense (non-GAAP). |
| | | | | | | | | | | | | | |
| | Earnings (Loss) | | Earnings (Loss) per Diluted Share | Earnings (Loss) | | Earnings (Loss) per Diluted Share |
| Year to Date September 30 | 2019 | 2018 |
| | (millions, except per share amounts) |
| Net income attributable to Evergy, Inc. | $ | 606.0 |
| | $ | 2.49 |
| $ | 517.3 |
| | $ | 2.61 |
|
Pro forma adjustments(a): | | | | | | |
| Great Plains Energy earnings prior to merger | — |
| | — |
| 94.4 |
| | 0.35 |
|
| Great Plains Energy shares prior to merger | n/a |
| | — |
| n/a |
| | (0.71 | ) |
| Non-recurring merger costs and other | — |
| | — |
| 82.8 |
| | 0.30 |
|
| Pro forma net income attributable to Evergy, Inc. | $ | 606.0 |
| | $ | 2.49 |
| $ | 694.5 |
| | $ | 2.55 |
|
| Non-GAAP reconciling items: | | | | | | |
Rebranding costs, pre-tax(b) | 4.7 |
| | 0.02 |
| — |
| | — |
|
Voluntary severance costs, pre tax(c) | 15.1 |
| | 0.06 |
| 16.3 |
| | 0.06 |
|
Composite tax rate change(d) | — |
| | — |
| (52.6 | ) | | (0.19 | ) |
Deferral of merger transition costs, pre-tax(e) | — |
| | — |
| (28.5 | ) | | (0.10 | ) |
Inventory write-off at retiring generating units, pre-tax(f) | — |
| | — |
| 12.3 |
| | 0.04 |
|
Income tax expense (benefit)(g) | (4.6 | ) | | (0.02 | ) | (0.1 | ) | | — |
|
| Adjusted earnings (non-GAAP) | $ | 621.2 |
| | $ | 2.55 |
| $ | 641.9 |
| | $ | 2.36 |
|
| | | | | |
| (millions) |
| 2018 Operating and maintenance expense | $ | 1,115.8 | |
Pro forma adjustments(a): | |
Reflects pro forma adjustments made in accordance with Article 11 of Regulation S-XGreat Plains Energy operating and ASC 805 - Business Combinations. See Note 2maintenance expense prior to the consolidated financial statements in the Evergy Companies' Quarterly Report on Form 10-Q for the quarterly period ended September 30, merger | 317.9 | |
| Non-recurring merger costs and other | (101.3) | |
2018 for further information regarding these adjustments.Pro forma operating and maintenance expense | $ | 1,332.4 | |
| Non-GAAP reconciling items: | |
Voluntary severance costs(b) | (23.5) | |
Reflects externalDeferral of merger transition costs incurred to rebrand the legacy Westar Energy and KCP&L utility brands to Evergy and are included in(c)
| 28.5 | |
Inventory write-offs at retiring generating units(d) | (31.0) | |
2018 Adjusted operating and maintenance expense on the consolidated statements of comprehensive income.(non-GAAP) | $ |
| 1,306.4 | |
(c)
| Reflects voluntary severance costs incurred associated with certain severance programs at the Evergy Companies and are included in operating and maintenance expense on
|
(a)Reflects pro forma adjustments made in accordance with Article 11 of Regulation S-X and ASC 805 - Business Combinations. See Note 2 to the consolidated financial statements of comprehensive income.
| |
(d)
| Reflects the revaluation of Evergy Kansas Central's deferred income tax assets and liabilities based on the Evergy composite tax rate as a result of the merger in June 2018 and are included in income tax expense on the consolidated statements of comprehensive income.
|
| |
(e)
| Reflects the portion of the $47.8 million deferral of merger transition costs to a regulatory asset in June 2018 that related to costs incurred prior to 2018. The remaining merger transition costs included within the $47.8 million deferral were both incurred and deferred in 2018 and did not impact earnings. This item is included in operating and maintenance expense on the consolidated statements of comprehensive income.
|
| |
(f)
| Reflects obsolete inventory write-offs for Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center and Units 1 and 2 at Gordon Evans Energy Center, which were committed to be retired upon the consummation of the merger, and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
|
| |
(g)
| Reflects an income tax effect calculated at a 26.1% statutory rate, with the exception of certain non-deductible items.
|
Wolf Creek Refueling Outage
Wolf Creek's most recent refueling outage began in September 2019 and the unit is expected to return to service in November 2019. Wolf Creek's next refueling outage is planned to begin in the first quarterEvergy Companies' combined 2018 annual report on Form 10-K for further information regarding these adjustments.
(b)Reflects severance costs incurred associated with certain voluntary severance programs at the Evergy Companies and are included in operating and maintenance expense on the 2018 consolidated statements of 2021.comprehensive income in the Evergy Companies' combined 2018 annual report on Form 10-K.
(c)Reflects the portion of the $47.8 million deferral of merger transition costs to a regulatory asset in June 2018 that related to costs incurred prior to 2018. The remaining merger transition costs included within the $47.8 million deferral were both incurred and deferred in 2018 and did not impact earnings. This item is included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 annual report on Form 10-K. (d)Reflects obsolete inventory write-offs for Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center, Units 1 and 2 at Gordon Evans Energy Center, Evergy Metro's Montrose Station and Evergy Missouri West's Sibley Station and are included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 annual report on Form 10-K.
ENVIRONMENTAL MATTERS
See Note 11 to the consolidated financial statements for information regarding environmental matters.
RELATED PARTY TRANSACTIONS
See Note 12 to the consolidated financial statements for information regarding related party transactions.
EVERGY RESULTS OF OPERATIONS
The following table summarizes Evergy's comparative results of operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30 | | Year to Date
September 30 |
| 2020 | | Change | | 2019 | | 2020 | | Change | | 2019 |
| | (millions) |
| Operating revenues | $ | 1,517.6 | | | $ | (60.0) | | | $ | 1,577.6 | | | $ | 3,819.0 | | | $ | (197.2) | | | $ | 4,016.2 | |
| Fuel and purchased power | 316.2 | | | (41.1) | | | 357.3 | | | 832.5 | | | (146.4) | | | 978.9 | |
| SPP network transmission costs | 66.1 | | | 3.7 | | | 62.4 | | | 197.8 | | | 9.1 | | | 188.7 | |
| Operating and maintenance | 304.6 | | | (7.0) | | | 311.6 | | | 865.5 | | | (41.6) | | | 907.1 | |
| Depreciation and amortization | 218.0 | | | 1.9 | | | 216.1 | | | 658.1 | | | 13.0 | | | 645.1 | |
| Taxes other than income tax | 91.0 | | | (0.5) | | | 91.5 | | | 274.2 | | | (2.2) | | | 276.4 | |
| Income from operations | 521.7 | | | (17.0) | | | 538.7 | | | 990.9 | | | (29.1) | | | 1,020.0 | |
| Other expense, net | (11.3) | | | 3.8 | | | (15.1) | | | (36.7) | | | (4.2) | | | (32.5) | |
| Interest expense | 94.8 | | | 4.0 | | | 90.8 | | | 290.5 | | | 13.2 | | | 277.3 | |
| Income tax expense | 50.0 | | | (15.5) | | | 65.5 | | | 93.8 | | | (5.4) | | | 99.2 | |
| Equity in earnings of equity method investees, net of income taxes | 1.9 | | | (1.7) | | | 3.6 | | | 6.1 | | | (1.8) | | | 7.9 | |
| Net income | 367.5 | | | (3.4) | | | 370.9 | | | 576.0 | | | (42.9) | | | 618.9 | |
| Less: Net income attributable to noncontrolling interests | 3.0 | | | (1.1) | | | 4.1 | | | 8.7 | | | (4.2) | | | 12.9 | |
| Net income attributable to Evergy, Inc. | $ | 364.5 | | | $ | (2.3) | | | $ | 366.8 | | | $ | 567.3 | | | $ | (38.7) | | | $ | 606.0 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30 | | Year to Date
September 30 |
| | 2019 | | Change | | 2018 | | 2019 | | Change | | 2018 |
| | (millions) |
| Operating revenues | $ | 1,577.6 |
| | $ | (4.9 | ) | | $ | 1,582.5 |
| | $ | 4,016.2 |
| | $ | 940.1 |
| | $ | 3,076.1 |
|
| Fuel and purchased power | 357.3 |
| | (26.4 | ) | | 383.7 |
| | 978.9 |
| | 230.0 |
| | 748.9 |
|
| SPP network transmission costs | 62.4 |
| | 4.0 |
| | 58.4 |
| | 188.7 |
| | (5.7 | ) | | 194.4 |
|
| Other operating expenses | 403.1 |
| | (10.3 | ) | | 413.4 |
| | 1,183.5 |
| | 245.8 |
| | 937.7 |
|
| Depreciation and amortization | 216.1 |
| | 22.2 |
| | 193.9 |
| | 645.1 |
| | 233.5 |
| | 411.6 |
|
| Income from operations | 538.7 |
| | 5.6 |
| | 533.1 |
| | 1,020.0 |
| | 236.5 |
| | 783.5 |
|
| Other expense, net | (15.1 | ) | | 9.2 |
| | (24.3 | ) | | (32.5 | ) | | 11.2 |
| | (43.7 | ) |
| Interest expense | 90.8 |
| | 1.7 |
| | 89.1 |
| | 277.3 |
| | 86.0 |
| | 191.3 |
|
| Income tax expense | 65.5 |
| | 1.4 |
| | 64.1 |
| | 99.2 |
| | 70.9 |
| | 28.3 |
|
| Equity in earnings of equity method investees, net of income taxes | 3.6 |
| | 1.6 |
| | 2.0 |
| | 7.9 |
| | 3.2 |
| | 4.7 |
|
| Net income | 370.9 |
| | 13.3 |
| | 357.6 |
| | 618.9 |
| | 94.0 |
| | 524.9 |
|
| Less: Net income attributable to noncontrolling interests | 4.1 |
| | 1.5 |
| | 2.6 |
| | 12.9 |
| | 5.3 |
| | 7.6 |
|
| Net income attributable to Evergy, Inc. | $ | 366.8 |
| | $ | 11.8 |
| | $ | 355.0 |
| | $ | 606.0 |
| | $ | 88.7 |
| | $ | 517.3 |
|
Evergy Utility Gross Margin and MWh Sales
Utility gross margin is a financial measure that is not calculated in accordance with GAAP. Utility gross margin, as used by the Evergy Companies, is defined as operating revenues less fuel and purchased power costs and amounts billed by the SPP for network transmission costs. Expenses for fuel and purchased power costs, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms. As a result, changes in fuel and purchased power costs are offset in operating revenues with minimal impact on net income. In addition, SPP network transmission costs fluctuate primarily due to investments by SPP members for upgrades to the transmission grid within the SPP Regional Transmission Organization (RTO).RTO. As with fuel and purchased power costs, changes in SPP network transmission costs are mostly reflected in the prices charged to customers with minimal impact on net income.
Management believes that utility gross margin provides a meaningful basis for evaluating the Evergy Companies' operations across periods compared with operating revenues because utility gross margin excludes the revenue effect of fluctuations in these expenses. Utility gross margin is used internally to measure performance against budget and in reports for management and the Evergy Board. Utility gross margin should be viewed as a supplement to, and not a substitute for, income from operations, which is the most directly comparable financial measure prepared in accordance with GAAP. The Evergy Companies' definition of utility gross margin may differ from similar terms used by other companies.
The following tables summarize Evergy's utility gross margin and MWhs sold.sold and provide a reconciliation of utility gross margin to income from operations. | | | | Revenues and Expenses | | MWhs Sold | | Revenues and Expenses | | MWhs Sold |
| Three Months Ended September 30 | 2019 | | Change | | 2018 | | 2019 | | Change | | 2018 | Three Months Ended September 30 | 2020 | | Change | | 2019 | | 2020 | | Change | | 2019 |
| Retail revenues | (millions) | | (thousands) | Retail revenues | (millions) | | (thousands) |
| Residential | $ | 653.0 |
| | $ | 5.9 |
| | $ | 647.1 |
| | 4,937 |
| | 98 |
| | 4,839 |
| Residential | $ | 636.4 | | | $ | (16.6) | | | $ | 653.0 | | | 4,813 | | | (124) | | | 4,937 | |
| Commercial | 539.1 |
| | 8.6 |
| | 530.5 |
| | 5,251 |
| | (8 | ) | | 5,259 |
| Commercial | 499.5 | | | (39.6) | | | 539.1 | | | 4,914 | | | (337) | | | 5,251 | |
| Industrial | 175.3 |
| | 1.9 |
| | 173.4 |
| | 2,372 |
| | 7 |
| | 2,365 |
| Industrial | 166.8 | | | (8.5) | | | 175.3 | | | 2,273 | | | (99) | | | 2,372 | |
| Other retail revenues | 16.0 |
| | 5.1 |
| | 10.9 |
| | 34 |
| | (6 | ) | | 40 |
| Other retail revenues | 9.5 | | | (6.5) | | | 16.0 | | | 34 | | | — | | | 34 | |
| Total electric retail | 1,383.4 |
| | 21.5 |
| | 1,361.9 |
| | 12,594 |
| | 91 |
| | 12,503 |
| Total electric retail | 1,312.2 | | | (71.2) | | | 1,383.4 | | | 12,034 | | | (560) | | | 12,594 | |
| Wholesale revenues | 96.3 |
| | (22.2 | ) | | 118.5 |
| | 3,684 |
| | (199 | ) | | 3,883 |
| Wholesale revenues | 85.0 | | | (11.3) | | | 96.3 | | | 3,507 | | | (177) | | | 3,684 | |
| Transmission revenues | 80.4 |
| | (0.2 | ) | | 80.6 |
| | N/A |
| | N/A |
| | N/A |
| Transmission revenues | 80.7 | | | 0.3 | | | 80.4 | | | N/A | | N/A | | N/A |
| Other revenues | 17.5 |
| | (4.0 | ) | | 21.5 |
| | N/A |
| | N/A |
| | N/A |
| Other revenues | 39.7 | | | 22.2 | | | 17.5 | | | N/A | | N/A | | N/A |
| Operating revenues | 1,577.6 |
| | (4.9 | ) | | 1,582.5 |
| | 16,278 |
| | (108 | ) | | 16,386 |
| Operating revenues | 1,517.6 | | | (60.0) | | | 1,577.6 | | | 15,541 | | | (737) | | | 16,278 | |
| Fuel and purchased power | (357.3 | ) | | 26.4 |
| | (383.7 | ) | | | |
|
| | | Fuel and purchased power | (316.2) | | | 41.1 | | | (357.3) | | |
| SPP network transmission costs | (62.4 | ) | | (4.0 | ) | | (58.4 | ) | | | |
|
| | | SPP network transmission costs | (66.1) | | | (3.7) | | | (62.4) | | |
Utility gross margin (a) | $ | 1,157.9 |
| | $ | 17.5 |
| | $ | 1,140.4 |
| | | |
|
| | | Utility gross margin (a) | 1,135.3 | | | (22.6) | | | 1,157.9 | | |
| Operating and maintenance | | Operating and maintenance | (304.6) | | | 7.0 | | | (311.6) | | |
| Depreciation and amortization | | Depreciation and amortization | (218.0) | | | (1.9) | | | (216.1) | | |
| Taxes other than income tax | | Taxes other than income tax | (91.0) | | | 0.5 | | | (91.5) | | |
| Income from operations | | Income from operations | $ | 521.7 | | | $ | (17.0) | | | $ | 538.7 | | |
| | | | | | | | | | | | | | | | | |
| | Revenues and Expenses | | MWhs Sold | | Revenues and Expenses | | MWhs Sold |
| Year to Date September 30 | 2019 | | Change | | 2018 | | 2019 | | Change | | 2018 | Year to Date September 30 | 2020 | | Change | | 2019 | | 2020 | | Change | | 2019 |
| Retail revenues | (millions) | | (thousands) | Retail revenues | (millions) | | (thousands) |
| Residential | $ | 1,536.3 |
| | $ | 366.9 |
| | $ | 1,169.4 |
| | 12,163 |
| | 3,116 |
| | 9,047 |
| Residential | $ | 1,515.6 | | | $ | (20.7) | | | $ | 1,536.3 | | | 12,114 | | | (49) | | | 12,163 | |
| Commercial | 1,391.2 |
| | 446.2 |
| | 945.0 |
| | 14,009 |
| | 4,215 |
| | 9,794 |
| Commercial | 1,272.9 | | | (118.3) | | | 1,391.2 | | | 12,974 | | | (1,035) | | | 14,009 | |
| Industrial | 478.9 |
| | 103.4 |
| | 375.5 |
| | 6,528 |
| | 1,183 |
| | 5,345 |
| Industrial | 446.7 | | | (32.2) | | | 478.9 | | | 6,171 | | | (357) | | | 6,528 | |
| Other retail revenues | 35.3 |
| | 13.8 |
| | 21.5 |
| | 105 |
| | 30 |
| | 75 |
| Other retail revenues | 29.2 | | | (6.1) | | | 35.3 | | | 99 | | | (6) | | | 105 | |
| Total electric retail | 3,441.7 |
| | 930.3 |
| | 2,511.4 |
| | 32,805 |
| | 8,544 |
| | 24,261 |
| Total electric retail | 3,264.4 | | | (177.3) | | | 3,441.7 | | | 31,358 | | | (1,447) | | | 32,805 | |
| Wholesale revenues | 251.7 |
| | (50.7 | ) | | 302.4 |
| | 10,872 |
| | 1,083 |
| | 9,789 |
| Wholesale revenues | 195.8 | | | (55.9) | | | 251.7 | | | 10,242 | | | (630) | | | 10,872 | |
| Transmission revenues | 233.5 |
| | 5.9 |
| | 227.6 |
| | N/A |
| | N/A |
| | N/A |
| Transmission revenues | 238.5 | | | 5.0 | | | 233.5 | | | N/A | | N/A | | N/A |
| Other revenues | 89.3 |
| | 54.6 |
| | 34.7 |
| | N/A |
| | N/A |
| | N/A |
| Other revenues | 120.3 | | | 31.0 | | | 89.3 | | | N/A | | N/A | | N/A |
| Operating revenues | 4,016.2 |
| | 940.1 |
| | 3,076.1 |
| | 43,677 |
| | 9,627 |
| | 34,050 |
| Operating revenues | 3,819.0 | | | (197.2) | | | 4,016.2 | | | 41,600 | | | (2,077) | | | 43,677 | |
| Fuel and purchased power | (978.9 | ) | | (230.0 | ) | | (748.9 | ) | | | | | | | Fuel and purchased power | (832.5) | | | 146.4 | | | (978.9) | | |
| SPP network transmission costs | (188.7 | ) | | 5.7 |
| | (194.4 | ) | | | | | | | SPP network transmission costs | (197.8) | | | (9.1) | | | (188.7) | | |
Utility gross margin (a) | $ | 2,848.6 |
| | $ | 715.8 |
| | $ | 2,132.8 |
| | | | | | | Utility gross margin (a) | 2,788.7 | | | (59.9) | | | 2,848.6 | | |
| Operating and maintenance | | Operating and maintenance | (865.5) | | | 41.6 | | | (907.1) | | |
| Depreciation and amortization | | Depreciation and amortization | (658.1) | | | (13.0) | | | (645.1) | | |
| Taxes other than income tax | | Taxes other than income tax | (274.2) | | | 2.2 | | | (276.4) | | |
| Income from operations | | Income from operations | $ | 990.9 | | | $ | (29.1) | | | $ | 1,020.0 | | |
(a) Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin above. | (a) Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin above. | (a) Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin above. |
Evergy's utility gross margin increased $17.5decreased $22.6 million for the three months ended September 30, 2019,2020, compared to the same period in 20182019, driven by:
•a $24.2$33.3 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 17%), partially offset by an increase in weather-normalized residential demand; partially offset by
•a $3.9 million increase from newin revenue recognized for the Missouri Energy Efficiency Investment Act (MEEIA) earnings opportunity in 2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Kansas Central, Evergy MetroMetro's and Evergy Missouri West retail rates effectiveWest's MEEIA programs;
•a $3.8 million decrease in 2018, netthe amount of a $63.3 million provision for rate refund recordedrevenue deferred in the third quarter of 20182020 related to the granting of an AAO by the MPSC in October 2019 requiring Evergy Missouri West to record a regulatory liability for the changeestimated amount of revenues it has collected from customers for certain costs related to Sibley Station since its retirement in November 2018 as the amount of revenues deferred in the corporate income tax rate causedthird quarter of 2019 included revenues collected for costs related to Sibley Station since its retirement from November 2018 to September 2019; and
•a $3.0 million increase in Evergy Metro's and Evergy Missouri West's MEEIA throughput disincentive in 2020 primarily driven by the TCJA;cumulative amount of customer energy savings achieved in the second and third cycles of Evergy Metro's and Evergy Missouri West's MEEIA programs.
a $5.4Evergy's utility gross margin decreased $59.9 million increase primarily dueyear to higher retail sales driven by warmer weather. For the three months endeddate September 30, 2019,2020, compared to the same period in 2018, cooling2019, driven by:
•a $64.9 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days increased 4%;decreased 7% and heating degree days decreased 11%) and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand;
•a $12.1$2.3 million decrease related to Evergy Kansas Central's and Evergy Metro's TDC riders.riders in 2020; and
Evergy's utility gross margin increased $715.8•a $5.7 million year to date September 30, 2019, compareddecrease in revenue recognized for the MEEIA earnings opportunity in 2020 related to the same periodachievement of certain customer energy savings levels in 2018 driven by:
a $674.4 million increase due to the inclusionsecond cycle of Evergy Metro's and Evergy Missouri West's utility gross marginMEEIA programs; partially offset by
•a $7.0 million increase for recovery of programs costs for energy efficiency programs under MEEIA in the first five months of 2019;2020, which have a direct offset in operating and maintenance expense; and
a $59.7$6.0 million increase in revenue due to one-time bill credits recorded by Evergy Kansas Central, Evergy MetroMetro's and Evergy Missouri WestWest's MEEIA throughput disincentive in June 2018 as a result2020 primarily driven by the cumulative amount of conditionscustomer energy savings achieved in the KCCsecond and MPSC merger orders; and
a $39.6 million increase from newthird cycles of Evergy Kansas Central, Evergy MetroMetro's and Evergy Missouri West retail rates effective in 2018, net of an $111.5 million provision for rate refund recorded year to date September 30, 2018 for the change in the corporate income tax rate caused by the TCJA; partially offset byWest's MEEIA programs.
a $48.6 million decrease primarily due to lower Evergy Kansas Central, Evergy MetroOperating and Evergy Missouri West retail sales driven by cooler weather in the second quarter of 2019. Year to date September 30, 2019, compared to the same period in 2018, cooling degree days decreased 16%; andMaintenance
a $9.3 million decrease related to Evergy Kansas Central's and Evergy Metro's TDC riders.
Other Operating Expenses (includingEvergy's operating and maintenance expense and taxes other than income tax)
Evergy's other operating expenses decreased $10.3$7.0 million for the three months ended September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
•a $14.5$19.7 million decrease in various administrative and general operating and maintenance expenses primarily driven by $10.6a $7.9 million decrease in credit loss expense primarily due to lower levels of voluntary severance expenses incurredcustomer disconnections in the third quarter of 2018 by Evergy Kansas Central and2020 at Evergy Metro related toand a Wolf Creek voluntary exit program as well as$7.8 million decrease in labor and employee benefits expense that included lower labor expense; andemployee headcount in 2020;
an $8.2•a $10.2 million decrease in plant operating and maintenance expense at coal-firedfossil-fuel generating units primarily due to:
| |
◦ | an $8.8 million decrease due to the retirement of Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center, Units 1 and 2 at Gordan Evans Energy Center, Evergy Metro's Montrose Station and Evergy Missouri West's Sibley Station in the fourth quarter of 2018; and |
| |
◦ | $5.2 million of voluntary severance expenses incurred in the third quarter of 2018 by Evergy Kansas Central, Evergy Metro and Evergy Missouri West related to their Local 1523 and Local 412 union voluntary exit programs; partially offset by |
| |
◦ | an $8.4 million increase due to a write-off of a regulatory asset for costs incurred during the JEC lease extension, see Note 5 to the consolidated financial statements; partially offset by |
an $8.5$8.4 million increasewrite-off of a regulatory asset for costs incurred during the JEC lease extension in taxes other than income taxes primarily due to increased Evergy Kansas Central property taxes;the third quarter of 2019 and lower employee headcount in 2020;
a $1.9•an $8.1 million increasedecrease in Evergy Kansas Central transmission and distribution operating and maintenance expense.expense primarily due to lower labor expense in 2020 and a $2.6 million decrease primarily due to the timing of vegetation management projects at Evergy Kansas Central and Evergy Metro in 2020; and
•$4.7 million of external costs incurred to rebrand the legacy Westar and KCP&L utility brands to Evergy in the third quarter of 2019; partially offset by
•a $28.0 million increase in voluntary severance expenses at Evergy Kansas Central, Evergy Metro and Evergy Missouri West primarily related to Evergy voluntary exit programs in 2020; and
•$9.7 million of advisor expenses incurred in the third quarter of 2020 by Evergy associated with strategic planning.
Evergy's other operating expenses increased $245.8and maintenance expense decreased $41.6 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
•a $279.9 million increase in operating and maintenance expense due to the inclusion of Evergy Metro's and Evergy Missouri West's operating and maintenance expenses in the first five months of 2019;
a $75.7 million increase in taxes other than income taxes due to the inclusion of Evergy Metro and Evergy Missouri West amounts in the first five months of 2019;
a $17.2 million increase in taxes other than income taxes primarily due to increased Evergy Kansas Central property taxes; and
$7.8 million of Evergy Kansas Central voluntary severance expenses incurred in 2019; partially offset by
$64.6 million of merger-related costs incurred year to date September 30, 2018, consisting of:
| |
◦ | $47.0 million of merger consulting fees and fees for other outside services incurred, primarily consisting of merger success fees; |
| |
◦ | $40.7 million of Evergy Kansas Central change in control payments, voluntary severance and the recording of unrecognized equity compensation costs and the incremental fair value associated with the vesting of outstanding Evergy Kansas Central equity compensation awards in accordance with the Amended Merger Agreement; and |
| |
◦ | $24.7 million of unconditional charitable contributions and community support recorded by Evergy in accordance with conditions in the KCC and MPSC merger orders; partially offset by |
| |
◦ | a $47.8 million decrease in operating and maintenance expense due to the deferral of merger transition costs to a regulatory asset in June 2018 for future recovery by Evergy Kansas Central, Evergy Metro and Evergy Missouri West in accordance with the KCC and MPSC merger orders; |
a $30.1$38.2 million decrease in plant operating and maintenance expense at coal-firedfossil-fuel generating units primarily due to:
| |
◦ | an $11.9 million decrease due to the retirement of Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center, Units 1 and 2 at Gordan Evans Energy Center and Evergy Metro's Montrose Station and Evergy Missouri West's Sibley Station in the fourth quarter of 2018; |
| |
◦ | $12.3 million of Evergy Kansas Central obsolete inventory write-offs at retiring coal-fired units in June 2018; and |
| |
◦ | $5.2 million of voluntary severance expenses incurred in the third quarter of 2018 by Evergy Kansas Central, Evergy Metro and Evergy Missouri West related to their Local 1523 and Local 412 union voluntary exit programs; partially offset by |
| |
◦ | an $8.4 million increase due to a write-off of a regulatory asset for costs incurred during the JEC lease extension, see Note 5 to the consolidated financial statements; |
◦a $29.3$23.4 million decrease at Evergy Kansas Central primarily driven by an $11.2 million decrease from maintenance outages at JEC Unit 2 and La Cygne Unit 2 in the first half of 2019, an $8.4 million write-off of a regulatory asset for costs incurred during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020; and
◦a $10.8 million decrease at Evergy Metro primarily driven by a $10.6 million decrease from outages at Hawthorn Station, Iatan Station and La Cygne Unit 2 and lower employee headcount in 2020;
•a $33.9 million decrease in transmission and distribution operating and maintenance expense primarily due to $13.1 million of costs at Evergy Metro and Evergy Missouri West incurred from storms that occurred in January 2019, a $2.7 million decrease due to the timing of vegetation management projects at Evergy Kansas Central and Evergy Metro in 2020 and lower labor expense in 2020;
•a $28.9 million decrease in various administrative and general operating and maintenance expenses primarily driven by:
◦a $12.0 million decrease in labor and employee benefits expense that included lower employee headcount in 2020;
◦a $6.9 million decrease in credit loss expense primarily due to lower levels of customer disconnections in 2020 at Evergy Metro; and
◦a $3.7 million decrease in property insurance expense due to a higher annual refund of nuclear insurance premiums received by $10.6Evergy Kansas Central and Evergy Metro in 2020 related to their ownership interest in Wolf Creek; and
•$4.7 million of external costs incurred to rebrand the legacy Westar and KCP&L utility brands to Evergy in 2019; partially offset by
•a $39.4 million increase in voluntary severance expenses due to a $32.6 million increase at Evergy Kansas Central, Evergy Metro and Evergy Missouri West related to Evergy voluntary exit programs in 2020 and $6.8 million of voluntary severance expenses incurred in the third quarter of 20182020 by Evergy Kansas Central and Evergy Metro related to a Wolf Creek voluntary exit programs;
•$26.1 million of advisor expenses incurred in 2020 by Evergy associated with strategic planning; and
•a $7.0 million increase in program and lower labor and employee benefit expensecosts for energy efficiency programs under MEEIA in 2019; and
2020, which have a $13.6 million decreasedirect offset in transmission and distribution operating and maintenance expense primarily due to a higher level of Evergy Kansas Central vegetation management activity in the first half of 2018.revenue.
Depreciation and Amortization
Evergy's depreciation and amortization increased$22.2 $1.9 million for the three months ended September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
a $14.6 million increase primarily due to a change in depreciation rates as a result ofby capital additions at Evergy Kansas Central's and Evergy Metro's rate cases effective in 2018; andCentral.
a $7.6 million increase primarily due to capital additions.
Evergy's depreciation and amortization increased$233.5 $13.0 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
a $173.4 million increase due to the inclusion ofby capital additions at Evergy Metro'sKansas Central and Evergy Missouri West's depreciation expense in the first five months of 2019;
a $39.0 million increase primarily due to a change in depreciation rates as a result of Evergy Kansas Central's and Evergy Metro's rate cases effective in 2018; and
a $21.1 million increase primarily due to capital additions.
Other Expense, Net
Evergy's other expense, net decreased $9.2$3.8 million for the three months ended September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by:
by a $3.9 million decrease primarily due to a decrease in Evergy Kansas Central pension non-service costs; and
a $2.0$4.8 million decrease due to recording higher Evergy Kansas Central corporate-owned life insurance (COLI)and Evergy Metro equity AFUDC in 2020 primarily due to lower short-term borrowings; partially offset by a $1.5 million increase due to recording lower Evergy Kansas Central COLI benefits in 2019.the third quarter of 2020.
Evergy's other expense, net decreased $11.2increased $4.2 million year to date September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by:
•a $10.7$7.0 million decreaseincrease due to recording higherlower Evergy Kansas Central COLI benefits in 2019; and2020;
•a $6.0$3.6 million decreaseincrease due to lower investment earnings primarily due to a decreaseloss from equity investments in Evergy Kansas Central pension non-service costs; partially offset by2020; and
•a $9.5$2.8 million increase due to the inclusion ofhigher Evergy Metro pension non-service costs in 2020; partially offset by
•a $9.0 million decrease due to higher Evergy Kansas Central and Evergy Missouri West amountsMetro equity AFUDC in the first five months of 2019.2020.
Interest Expense
Evergy's interest expense increased $1.7$4.0 million for the three months ended September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by:
•a $5.6$10.4 million increase due to the issuance of Evergy's $1.6 billion of senior notes in September 2019;
•a $4.3 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; and
•a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020; partially offset by
•a $13.0 million decrease primarily due to a higher average commercial paper balance at Evergy Kansas Central in 2019 and Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019;2019 and lower commercial paper balances and weighted-average interest rates on short-term borrowings at Evergy Kansas Central and Evergy Metro in 2020.
Evergy's interest expense increased $13.2 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
•a $4.1$35.3 million increase due to the issuance of Evergy's $1.6 billion of senior notes in September 2019;
•an $8.2 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020;
•a $6.1 million increase due to the issuance of Evergy Kansas Central's $300.0 million of 3.25% FMBs in August 2019; and
•a $3.1 million increase due to the issuance of Evergy Metro's issuance of $400.0 million of 4.125%2.25% Mortgage Bonds in March 2019;May 2020; partially offset by
an $8.6•a $26.5 million decrease primarily due to Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019 and lower commercial paper balances and weighted-average interest rates on short-term borrowings at Evergy Kansas Central and Evergy Metro in 2020;
•a $9.2 million decrease due to the repayment of Evergy Kansas South's $300.0 million of 6.70% FMBs at maturity in June 2019; and
•a $4.6 million net decrease due to the repayment of Evergy Metro's $400.0 million of 7.15% Mortgage Bonds at maturity in April 2019.
Evergy's2019, which decreased interest expense increased $86.0by $8.5 million, year to date September 30, 2019, compared to the same period in 2018, primarily driven by:
partially offset by a $77.2 million increase due to the inclusion of Evergy Metro's and Evergy Missouri West's interest expense and Evergy's interest expense associated with the assumption of legacy Great Plains Energy debt in the first five months of 2019;
a $10.1 million increase primarily due to a higher average commercial paper balance at Evergy Kansas Central in 2019 and Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019; and
a $5.5$3.9 million increase due to Evergy Metro's issuance of $400.0 million of 4.125% Mortgage Bonds in March 2019; partially offset by
an $11.4 million decrease due to the repayment of Evergy Metro's $400.0 million of 7.15% Mortgage Bonds at maturity in April 2019.
Income Tax Expense
Evergy's income tax expense increased $70.9decreased $15.5 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by a $5.0 million decrease due to lower Evergy Kansas Central, Evergy Metro and Evergy Missouri West pre-tax income in 2020, a $3.7 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021, a $3.3 million decrease due to flow-through items primarily driven by higher amortization of excess deferred income taxes and a $2.6 million decrease due to higher wind and other income tax credits in 2020.
Evergy's income tax expense decreased $5.4 million year to date September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by:
by a $52.6$12.7 million decrease due to lower Evergy Kansas Central, Evergy Metro and Evergy Missouri West pre-tax income in 2020, a $5.4 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021, a $3.8 million decrease due to flow-through items primarily driven by higher amortization of excess deferred income taxes and a $3.3 million decrease due to higher wind and other income tax credits in 2020; partially offset by a $13.8 million net increase relateddue to the revaluation of Evergy Kansas Central's deferred income tax assets and liabilities based onin the Evergy compositesecond quarter of 2020 due to the change in the Kansas corporate income tax rate asand a result$7.9 million valuation allowance reversal in 2019 primarily related to alternative minimum tax (AMT) credits and the expiration of certain state net operating loss (NOL) carryforwards.
See Note 13 to the mergerconsolidated financial statements for more information regarding the change in 2018; andthe Kansas corporate income tax rate.
a $15.2 million increase due to higher Evergy Kansas Central pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Evergy relies primarily upon cash from operations, short-term borrowings, debt and equity issuances and its existing cash and cash equivalents to fund its capital requirements. Evergy's capital requirements primarily consist of capital expenditures, payment of contractual obligations and other commitments and the payment of dividends to shareholders and the repurchase of common shares.shareholders. See the Evergy Companies' combined 20182019 Form 10-K for more information on Evergy's sources and uses of cash.
As of September 30, 2020, Evergy had $361.6 million of cash and cash equivalents on hand and $2.3 billion of available borrowing capacity under its master credit facility. Evergy believes that its existing cash on hand and available borrowing capacity under its master credit facility provide sufficient liquidity for its existing capital requirements.
Short-Term Borrowings
As of September 30, 2019,2020, Evergy had $2.1$2.3 billion of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $449.0$249.3 million for Evergy, Inc., $808.4$981.4 million for Evergy Kansas Central, $525.1$600.0 million for Evergy Metro and $344.6$448.0 million for Evergy Missouri West. Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's borrowing capacity under the master credit facility also supports their issuance of commercial paper. See Note 8 to the consolidated financial statements for more information regarding the master credit facility. Along with cash flows from operations and receivable sales facilities, Evergy generally uses borrowings under its master credit facility and the issuance of commercial paper to meet its day-to-day cash flow requirements. Evergy also had short-term borrowings under a term loan credit agreement that was repaid in September 2019 and is discussed further below.
In March 2019, Evergy entered into a $1.0 billion, 6-month term loan credit agreement with a group of banks to provide short-term financing for its common stock repurchase plan. The agreement allowed for two term loans during the 6-month term of the agreement, in an aggregate principal amount not to exceed the credit limit of the agreement. At closing, Evergy borrowed $500.0 million under the agreement, allowing for one additional term loan borrowing in a principal amount up to $500.0 million. In June 2019, Evergy borrowed the remaining $500.0 million allowed under the agreement. In September 2019, Evergy repaid its $1.0 billion of borrowings under the term loan credit agreement with proceeds from its issuance of $1.6 billion of senior notes in September 2019.
Significant Debt Issuances
See Note 9 to the consolidated financial statements for information regarding significant debt issuances.
Regulatory Authorizations
The following table summarizes the regulatory short-term debt financing authorizations for Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West and the remaining amount available under these authorizations as of September 30, 2020.
| | | | | | | | | | | | | | |
| Type of Authorization | Commission | Expiration Date | Authorization Amount | Available Under Authorization |
| Evergy Kansas Central & Evergy Kansas South | | | (in millions) |
| Short-Term Debt | FERC | December 2020 | $1,250.0 | $1,250.0 |
| Evergy Metro | | | | |
| Short-Term Debt | FERC | December 2020 | $1,250.0 | $1,250.0 |
| Evergy Missouri West | | | | |
| Short-Term Debt | FERC | December 2020 | $750.0 | $672.0 |
In October 2020, Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West filed requests with FERC to have outstanding at any one time up to $1,250.0 million (combined for both Evergy Kansas Central and Evergy Kansas South), $1,250.0 million and $750.0 million in short-term debt instruments, respectively, through December 2022. FERC is expected to issue an order regarding this request by November 30, 2020.
Capital Expenditures
Evergy requires significant capital investments and expects to need cash primarily for utility construction programs designed to improve and expand facilities related to providing electric service, which include, but are not limited to, expenditures to develop new transmission lines and improvements to power plants, transmission and distribution lines and equipment. Evergy's capital expenditures were $1,210.1 million, $1,069.7 million and $764.6 million in 2019, 2018 and 2017, respectively.
In August 2020, Evergy announced its new Sustainability Transformation Plan, which includes, among other things, approximately $8.9 billion of expected base capital investments through 2024, or $1.4 billion more than Evergy's prior plan. See "Executive Summary; Strategy", above for further information regarding the Sustainability Transformation Plan. Capital expenditures projected for the next five years pursuant to the new plan, excluding AFUDC and including costs of removal, are detailed in the following table. This capital expenditure plan is subject to continual review and change.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | |
| (millions) |
| Generating facilities | | $ | 453 | | | $ | 280 | | | $ | 767 | | | $ | 494 | | | $ | 262 | | |
| Transmission and distribution facilities | | 893 | | | 1,314 | | | 1,336 | | | 1,252 | | | 1,131 | | |
| General facilities and other | | 240 | | | 132 | | | 137 | | | 106 | | | 108 | | |
| Total capital expenditures | | $ | 1,586 | | | $ | 1,726 | | | $ | 2,240 | | | $ | 1,852 | | | $ | 1,501 | | |
Pensions
Year to date September 30, 2019,2020, Evergy made pension contributions of $54.6$54.3 million. Evergy expects to make additional pension contributions of $73.7$78.4 million in 20192020 to satisfy ERISA funding requirements and KCC and MPSC rate orders, of which $7.1 million is expected to be paid by Evergy Kansas Central and $66.6 million is expected to be paid by Evergy Metro.
Year to date September 30, 2019, Evergy made post-retirement benefit contributions of $2.2 million. Also in 2020, Evergy expects to make additional contributions of $1.4$3.1 million to the post-retirement benefit plans in 2019.plans.
Common Stock Repurchase Program
In July 2018, the Evergy Board authorized the repurchase of up to 60 million shares of Evergy's common stock. Although this repurchase authorization has no expiration date, Evergy expects to repurchase approximately 60 million shares by mid-2020. Year to date September 30, 2019, Evergy had total repurchases of common stock of $1,628.7 million and had repurchased 27.5 million shares under the repurchase program. Since its inception, Evergy has made total repurchases of common stock of approximately $2.7 billion and has repurchased 43.9 million shares under the repurchase program. These repurchase totals include shares repurchased under ASR agreements, one of which had not reached final settlement as of September 30, 2019.
See Note13 to the consolidated financial statements for more information regarding Evergy's common stock repurchase program.
Debt Covenants
As of September 30, 2019,2020, Evergy was in compliance with all debt covenants under the master credit facility and certain debt instruments that contain restrictions that require the maintenance of certain capitalization and leverage ratios. See Note 8 to the consolidated financial statements for more information.
Off-Balance Sheet Arrangement
Evergy's off-balance sheet arrangements were reported in the Evergy Companies' combined 20182019 Form 10-K. As of September 30, 2019,2020, there have been no material changes with regards to these off-balance sheet arrangements.
Cash Flows
The following table presents Evergy's cash flows from operating, investing and financing activities.
| | | | | | | | |
| | |
| Year to Date September 30 | 2020 | 2019 |
| (millions) |
| Cash Flows from Operating Activities | $ | 1,421.7 | | $ | 1,447.3 | |
| Cash Flows used in Investing Activities | (1,029.9) | | (772.1) | |
| Cash Flows used in Financing Activities | (53.4) | | (785.4) | |
|
| | | | | | |
| Year to Date September 30 | 2019 | 2018 |
| | (millions) |
| Cash flows from operating activities | $ | 1,447.3 |
| $ | 1,191.6 |
|
| Cash flows from (used in) investing activities | (772.1 | ) | 574.8 |
|
| Cash flows used in financing activities | (785.4 | ) | (1,090.1 | ) |
Cash Flows from Operating Activities
Evergy's cash flows from operating activities increased $255.7decreased $25.6 million year to date September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by:
•a $102.0 million decrease in cash receipts for retail electric sales in 2020 primarily driven by lower sales as a result of unfavorable weather and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19;
•a $27.0 million increase in interest payments in 2020 primarily due to payments made in March and September of 2020 on Evergy's $1.6 billion of senior notes issued in September 2019; and
•$19.9 million in cash payments to advisors associated with strategic planning; partially offset by
•a $64.3 million one-time refund made to certain Evergy Metro and Evergy Missouri West customers in 2019 reflecting customer benefits associated with the Tax Cuts and Jobs Act; and
•a $60.7 million increase in cash receipts for net tax refunds in 2020 primarily driven by a $252.3$57.2 million increase duein refunds related to the inclusion of Evergy Metro's and Evergy Missouri West's cash flows from operating activities in the first five months of 2019 and $35.6 million of merger success fees paid by Evergy and Evergy Kansas Central upon the completion of the merger in June 2018.federal AMT credits.
Cash Flows from (used in)used in Investing Activities
Evergy's cash flows used in investing activities increased $1,346.9$257.8 million year to date September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by $1,154.2 million of cash acquired from Great Plains Energy in June 2018; by:
•a $243.6$209.0 million increase in additions to property, plant and equipment due to the inclusion ofincreases at Evergy Kansas Central, Evergy Metro and Evergy Missouri West activity in the first five months of 2019; $140.6$75.8 million, $71.9 million and $61.3 million, respectively, primarily due to increased spending for a variety of capital projects including transmission infrastructure additions, customer meters and a customer billing system; and
•a decrease of $38.5 million in proceeds from the settlement of deal contingent interest rate swaps in June 2018; partially offset by an increase of $92.6 million in proceedsCOLI investments, primarily from Evergy Kansas Central COLI investmentsdue to a higher number of policy settlements in 2019.
Cash Flows used in Financing Activities
Evergy's cash flows used in financing activities decreased $304.7$732.0 million year to date September 30, 2019,2020, compared to the same period in 2018,2019, primarily driven by:
•$1,628.7 million of common stock repurchased as a result of Evergy's share repurchase program in 2019;
•a $450.0 million decrease in retirements of long-term debt, net due to Evergy Metro's repayment of $400.0 million of 7.15%% Mortgage Bonds in April 2019 and Evergy Kansas South's repayment of its $300.0 million of 6.70% FMBs in June 2019; partially offset by Evergy Kansas Central's repayment of its $250.0 million of 5.10% FMBs in May 2020;
•a $2,351.1$69.8 million increasepayment for the settlement of an interest rate swap accounted for as a cash flow hedge of Evergy's $800.0 million of 2.90% Senior Notes issued in September 2019; and
•a $24.9 million decrease in the repayment of borrowings against cash surrender value of corporate-owned life insurance primarily due to a higher number of policy settlements in 2019; partially offset by
•a $1,484.7 million decrease in proceeds from long-term debt, net as further described in Note 9 to the consolidated financial statements; partially offset by a $1,142.6 million increase of repurchased common stock as a part of Evergy's common stock repurchase program as further described in Note 13 to the consolidated financial statements; a $573.7 million increase in retirement of long-term debt as further described in Note 9 to the consolidated financial statements; and a $211.3 million decrease in short-term debt, net primarily due to an increaseEvergy's issuance of $800.0 million of 2.45% Senior Notes and $800.0 million of 2.90% Senior Notes in repayments of commercial paper by Evergy Kansas Central of $277.6 million in 2019 with funds from operations.
EVERGY KANSAS CENTRAL, INC.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The below results of operations and related discussion for Evergy Kansas Central is presented in a reduced disclosure format in accordance with General Instruction (H)(2)(a) to Form 10-Q.
The following table summarizes Evergy Kansas Central's comparative results of operations.
| | | Year to Date September 30 | 2019 | | Change | | 2018 | Year to Date September 30 | 2020 | | Change | | 2019 |
| | (millions) | | (millions) |
| Operating revenues | $ | 1,931.3 |
| | $ | (84.6 | ) | | $ | 2,015.9 |
| Operating revenues | $ | 1,864.5 | | | $ | (66.8) | | | $ | 1,931.3 | |
| Fuel and purchased power | 375.3 |
| | (87.9 | ) | | 463.2 |
| Fuel and purchased power | 329.9 | | | (45.4) | | | 375.3 | |
| SPP network transmission costs | 188.7 |
| | (5.7 | ) | | 194.4 |
| SPP network transmission costs | 197.8 | | | 9.1 | | | 188.7 | |
| Other operating expenses | 541.7 |
| | (78.5 | ) | | 620.2 |
| |
| Operating and maintenance | | Operating and maintenance | 376.3 | | | (20.1) | | | 396.4 | |
| Depreciation and amortization | 331.3 |
| | 49.7 |
| | 281.6 |
| Depreciation and amortization | 339.0 | | | 7.7 | | | 331.3 | |
| Taxes other than income tax | | Taxes other than income tax | 145.1 | | | (0.2) | | | 145.3 | |
| Income from operations | 494.3 |
| | 37.8 |
| | 456.5 |
| Income from operations | 476.4 | | | (17.9) | | | 494.3 | |
| Other expense, net | (13.9 | ) | | 17.7 |
| | (31.6 | ) | Other expense, net | (12.2) | | | 1.7 | | | (13.9) | |
| Interest expense | 134.1 |
| | 2.0 |
| | 132.1 |
| Interest expense | 127.7 | | | (6.4) | | | 134.1 | |
| Income tax expense (benefit) | 46.2 |
| | 68.2 |
| | (22.0 | ) | |
| Income tax expense | | Income tax expense | 149.2 | | | 103.0 | | | 46.2 | |
| Equity in earnings of equity method investees, net of income taxes | 3.6 |
| | (0.1 | ) | | 3.7 |
| Equity in earnings of equity method investees, net of income taxes | 3.4 | | | (0.2) | | | 3.6 | |
| Net income | 303.7 |
|
| (14.8 | ) | | 318.5 |
| Net income | 190.7 | | | (113.0) | | | 303.7 | |
| Less: Net income attributable to noncontrolling interests | 12.9 |
| | 5.3 |
| | 7.6 |
| Less: Net income attributable to noncontrolling interests | 8.7 | | | (4.2) | | | 12.9 | |
| Net income attributable to Evergy Kansas Central, Inc. | $ | 290.8 |
|
| $ | (20.1 | ) | | $ | 310.9 |
| Net income attributable to Evergy Kansas Central, Inc. | $ | 182.0 | | | $ | (108.8) | | | $ | 290.8 | |
Evergy Kansas Central Utility Gross Margin and MWh Sales
The following table summarizes Evergy Kansas Central's utility gross margin and MWhs sold.sold and provides a reconciliation of utility gross margin to income from operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Revenues and Expenses | MWhs Sold |
| Year to Date September 30 | 2020 | | Change | | 2019 | | 2020 | | Change | | 2019 |
| | | | | | | | | | | |
| Retail revenues | (millions) | (thousands) |
| Residential | $ | 627.5 | | | $ | (12.9) | | | $ | 640.4 | | | 5,110 | | | 7 | | | 5,103 | |
| Commercial | 511.0 | | | (45.4) | | | 556.4 | | | 5,266 | | | (407) | | | 5,673 | |
| Industrial | 284.6 | | | (23.9) | | | 308.5 | | | 3,911 | | | (375) | | | 4,286 | |
| Other retail revenues | 13.3 | | | (2.5) | | | 15.8 | | | 31 | | | (4) | | | 35 | |
| Total electric retail | 1,436.4 | | | (84.7) | | | 1,521.1 | | | 14,318 | | | (779) | | | 15,097 | |
| Wholesale revenues | 168.1 | | | (14.4) | | | 182.5 | | | 5,775 | | | 184 | | | 5,591 | |
| Transmission revenues | 215.2 | | | 9.7 | | | 205.5 | | | N/A | | N/A | | N/A |
| Other revenues | 44.8 | | | 22.6 | | | 22.2 | | | N/A | | N/A | | N/A |
| Operating revenues | 1,864.5 | | | (66.8) | | | 1,931.3 | | | 20,093 | | | (595) | | | 20,688 | |
| Fuel and purchased power | (329.9) | | | 45.4 | | | (375.3) | | | | | | | |
| SPP network transmission costs | (197.8) | | | (9.1) | | | (188.7) | | | | | | | |
Utility gross margin (a) | 1,336.8 | | | (30.5) | | | 1,367.3 | | | | | | | |
| Operating and maintenance | (376.3) | | | 20.1 | | | (396.4) | | | | | | | |
| Depreciation and amortization | (339.0) | | | (7.7) | | | (331.3) | | | | | | | |
| Taxes other than income tax | (145.1) | | | 0.2 | | | (145.3) | | | | | | | |
| Income from operations | $ | 476.4 | | | $ | (17.9) | | | $ | 494.3 | | | | | | | |
(a)Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin under Evergy's Results of Operations.
|
| | | | | | | | | | | | | | | | | | | | |
| | Revenues and Expenses | MWhs Sold |
| Year to Date September 30 | 2019 | | Change | | 2018 | | 2019 | | Change | | 2018 |
| Retail revenues | (millions) | (thousands) |
| Residential | $ | 640.4 |
| | $ | (31.5 | ) | | $ | 671.9 |
| | 5,103 |
| | (246 | ) | | 5,349 |
|
| Commercial | 556.4 |
| | 13.6 |
| | 542.8 |
| | 5,673 |
| | (124 | ) | | 5,797 |
|
| Industrial | 308.5 |
| | 11.3 |
| | 297.2 |
| | 4,286 |
| | 11 |
| | 4,275 |
|
| Other retail revenues | 15.8 |
| | 0.5 |
| | 15.3 |
| | 35 |
| | (10 | ) | | 45 |
|
| Total electric retail | 1,521.1 |
| | (6.1 | ) | | 1,527.2 |
| | 15,097 |
| | (369 | ) | | 15,466 |
|
| Wholesale revenues | 182.5 |
| | (81.2 | ) | | 263.7 |
| | 5,591 |
| | (1,969 | ) | | 7,560 |
|
| Transmission revenues | 205.5 |
| | (10.8 | ) | | 216.3 |
| | N/A |
| | N/A |
| | N/A |
|
| Other revenues | 22.2 |
| | 13.5 |
| | 8.7 |
| | N/A |
| | N/A |
| | N/A |
|
| Operating revenues | 1,931.3 |
| | (84.6 | ) | | 2,015.9 |
| | 20,688 |
| | (2,338 | ) | | 23,026 |
|
| Fuel and purchased power | (375.3 | ) | | 87.9 |
| | (463.2 | ) | | | | | | |
| SPP network transmission costs | (188.7 | ) | | 5.7 |
| | (194.4 | ) | | | | | | |
Utility gross margin (a) | $ | 1,367.3 |
| | $ | 9.0 |
| | $ | 1,358.3 |
| | | | | | |
| |
| Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin under Evergy's Results of Operations. |
Evergy Kansas Central's utility gross margin increased $9.0decreased $30.5 million year to date September 30, 2019,2020, compared to the same period in 20182019, driven by:
•a $24.5 million increase from new retail rates effective in September 2018, net of a $66.3 million provision for rate refund recorded year to date September 30, 2018 for the change in the corporate income tax rate caused by the TCJA; and
a $23.1 million increase in revenue due to one-time bill credits recorded in June 2018 as a result of conditions in the KCC merger order; partially offset by
a $27.3$24.8 million decrease primarily due to lower retail sales driven by coolerunfavorable weather in the second quarter of 2019. Year to date September 30, 2019, compared to the same period in 2018, cooling(cooling degree days decreased 14%;6% and heating degree days decreased 10%) and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand; and
an $11.3•a $5.7 million decrease related to Evergy Kansas Central's TDC rider.rider in 2020.
Evergy Kansas Central Other Operating Expenses (includingand Maintenance
Evergy Kansas Central's operating and maintenance expense and taxes other than income tax)
Evergy Kansas Central's other operating expenses decreased $78.5$20.1 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
$47.8•a $23.4 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to an $11.2 million decrease from maintenance outages at JEC Unit 2 and La Cygne Unit 2 in the first half of merger-related2019, an $8.4 million write-off of a regulatory asset for costs incurred year to date September 30, 2018, consisting of:during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020;
| |
◦ | $40.7 million of change in control payments, voluntary severance and the recording of unrecognized equity compensation costs and the incremental fair value associated with the vesting of outstanding equity compensation awards in accordance with the Amended Merger Agreement; and |
| |
◦ | $20.4 million of merger consulting fees and fees for other outside services incurred, primarily consisting of merger success fees; partially offset by |
| |
◦ | a $13.3 million decrease in operating and maintenance expense due to the net reallocation of incurred merger transition costs between Evergy Kansas Central, Evergy, Evergy Metro and Evergy Missouri West and the subsequent deferral of these transition costs to a regulatory asset in June 2018 for future recovery by Evergy Kansas Central in accordance with the KCC merger order; |
a $19.7•an $11.9 million decrease in various administrative and general operating and maintenance expenses primarily driven by $5.3an $11.6 million of voluntary severance expenses incurreddecrease in 2018 related to a Wolf Creek voluntary exit program and lower labor and employee benefitbenefits expense that included lower employee headcount in 2019;
2020 and a $17.5$1.9 million decrease in plant operatingproperty insurance expense due to a higher annual refund of nuclear insurance premiums received by Evergy Kansas Central related to its indirect ownership interest in Wolf Creek; and maintenance expense at coal-fired generating units primarily due to:
| |
◦ | $12.3 million of obsolete inventory write-offs at retiring coal-fired units in June 2018; |
| |
◦ | a $7.0 million decrease due to the retirement of Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center and Units 1 and 2 at Gordan Evans Energy Center in the fourth quarter of 2018; and |
| |
◦ | $0.7 million of voluntary severance expenses incurred in the third quarter of 2018 related to the Local 1523 union voluntary exit program; partially offset by |
| |
◦ | an $8.4 million increase due to a write-off of a regulatory asset for costs incurred during the JEC lease extension, see Note 5 to the consolidated financial statements; and |
•a $12.2$9.1 million decrease in transmission and distribution operating and maintenance expense primarily due to a higher level of vegetation management activitylower labor expense in the first half of 2018;2020; partially offset by
a $16.5•an $18.9 million increase in taxes other than income taxes primarilyvoluntary severance expenses due to increased property taxes;a $15.5 million increase related to Evergy voluntary exit programs in 2020 and
$7.8 $3.4 million of voluntary severance expenses incurred in 2019.2020 related to Wolf Creek voluntary exit programs.
Evergy Kansas Central Depreciation and Amortization
Evergy Kansas Central's depreciation and amortization expense increased $49.7$7.7 million year to date September 30, 2019,2020, compared to the same period in 2018 primarily due to a change in depreciation rates effective in September 2018 as a result of Evergy Kansas Central's 2018 rate case.
Evergy Kansas Central Other Expense, Net
Evergy Kansas Central's other expense, net decreased $17.7 millionyear to dateSeptember 30, 2019,, compared to the same period in 2018 primarily driven by:
a $10.7 million decrease due to recording higher COLI benefits in 2019; and
a $4.5 million decrease due to a decrease in pension non-service costs.by capital additions.
Evergy Kansas Central Interest Expense
Evergy Kansas Central's interest expense increased$2.0decreased $6.4 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by by:
•a higher average$10.1 million decrease due to lower commercial paper balancebalances and weighted-average interest rates on short-term borrowings in 2020; and
•a $9.2 million decrease due to the repayment of Evergy Kansas South's $300.0 million of 6.70% FMBs at maturity in June 2019; partially offset by
•an $8.2 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; and
•a $6.1 million increase due to the issuance of Evergy Kansas Central's $300.0 million of 3.25% FMBs in August 2019.
Evergy Kansas Central Income Tax Expense
Evergy Kansas Central's income tax expense increased$68.2 $103.0 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
by a $52.6$109.0 million net increase relateddue to the revaluation of deferred income tax assets and liabilities based onin the Evergy compositesecond quarter of 2020 due to the change in the Kansas corporate income tax rate, aspartially offset by a result of the merger in June 2018; and
a $15.2$3.9 million increasedecrease due to higherlower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021 and a $2.7 million decrease due to lower pre-tax income.income in 2020.
See Note 13 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate. EVERGY METRO, INC.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The below results of operations and related discussion for Evergy Metro is presented in a reduced disclosure format in accordance with General Instruction (H)(2)(a) to Form 10-Q.
The following table summarizes Evergy Metro's comparative results of operations.
|
| | | | | | | | | | | |
| Year to Date September 30 | 2019 | | Change | | 2018 |
| | (millions) |
| Operating revenues | $ | 1,431.2 |
| | $ | 22.3 |
| | $ | 1,408.9 |
|
| Fuel and purchased power | 380.4 |
| | (12.0 | ) | | 392.4 |
|
| Other operating expenses | 437.5 |
| | (4.9 | ) | | 442.4 |
|
| Depreciation and amortization | 239.0 |
| | 30.0 |
| | 209.0 |
|
| Income from operations | 374.3 |
| | 9.2 |
|
| 365.1 |
|
| Other expense, net | (11.5 | ) | | 7.6 |
| | (19.1 | ) |
| Interest expense | 91.6 |
| | (9.0 | ) | | 100.6 |
|
| Income tax expense | 43.9 |
| | (36.4 | ) | | 80.3 |
|
| Net income | $ | 227.3 |
| | $ | 62.2 |
|
| $ | 165.1 |
|
| | | | | | | | | | | | | | | | | |
| | | | | |
| Year to Date September 30 | 2020 | | Change | | 2019 |
| | (millions) |
| Operating revenues | $ | 1,328.3 | | | $ | (102.9) | | | $ | 1,431.2 | |
| Fuel and purchased power | 306.0 | | | (74.4) | | | 380.4 | |
| Operating and maintenance | 305.7 | | | (35.5) | | | 341.2 | |
| Depreciation and amortization | 243.6 | | | 4.6 | | | 239.0 | |
| Taxes other than income tax | 92.4 | | | (3.9) | | | 96.3 | |
| Income from operations | 380.6 | | | 6.3 | | | 374.3 | |
| Other expense, net | (13.8) | | | (2.3) | | | (11.5) | |
| Interest expense | 85.5 | | | (6.1) | | | 91.6 | |
| Income tax expense | 5.1 | | | (38.8) | | | 43.9 | |
| Net income | $ | 276.2 | | | $ | 48.9 | | | $ | 227.3 | |
Evergy Metro Utility Gross Margin and MWh Sales
The following table summarizes Evergy Metro's utility gross margin and MWhs sold.sold and provides a reconciliation of utility gross margin to income from operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Revenues and Expenses | | MWhs Sold |
| Year to Date September 30 | 2020 | | Change | | 2019 | | 2020 | | Change | | 2019 |
| | | | | | | | | | | |
| Retail revenues | (millions) | | (thousands) |
| Residential | $ | 572.2 | | | $ | (3.3) | | | $ | 575.5 | | | 4,249 | | | (12) | | | 4,261 | |
| Commercial | 558.1 | | | (55.4) | | | 613.5 | | | 5,360 | | | (468) | | | 5,828 | |
| Industrial | 99.6 | | | (7.1) | | | 106.7 | | | 1,279 | | | (24) | | | 1,303 | |
| Other retail revenues | 8.9 | | | (3.4) | | | 12.3 | | | 54 | | | (3) | | | 57 | |
| Total electric retail | 1,238.8 | | | (69.2) | | | 1,308.0 | | | 10,942 | | | (507) | | | 11,449 | |
| Wholesale revenues | 16.7 | | | (38.0) | | | 54.7 | | | 3,690 | | | (995) | | | 4,685 | |
| Transmission revenues | 10.4 | | | (3.6) | | | 14.0 | | | N/A | | N/A | | N/A |
| Other revenues | 62.4 | | | 7.9 | | | 54.5 | | | N/A | | N/A | | N/A |
| Operating revenues | 1,328.3 | | | (102.9) | | | 1,431.2 | | | 14,632 | | | (1,502) | | | 16,134 | |
| Fuel and purchased power | (306.0) | | | 74.4 | | | (380.4) | | | | | | | |
Utility gross margin (a) | 1,022.3 | | | (28.5) | | | 1,050.8 | | | | | | | |
| Operating and maintenance | (305.7) | | | 35.5 | | | (341.2) | | | | | | | |
| Depreciation and amortization | (243.6) | | | (4.6) | | | (239.0) | | | | | | | |
| Taxes other than income tax | (92.4) | | | 3.9 | | | (96.3) | | | | | | | |
| Income from operations | $ | 380.6 | | | $ | 6.3 | | | $ | 374.3 | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Revenues and Expenses | | MWhs Sold |
| Year to Date September 30 | 2019 | | Change | | 2018 | | 2019 | | Change | | 2018 |
| Retail revenues | (millions) | | (thousands) |
| Residential | $ | 575.5 |
| | $ | (9.9 | ) | | $ | 585.4 |
| | 4,261 |
| | (219 | ) | | 4,480 |
|
| Commercial | 613.5 |
| | 4.3 |
| | 609.2 |
| | 5,828 |
| | (103 | ) | | 5,931 |
|
| Industrial | 106.7 |
| | 1.3 |
| | 105.4 |
| | 1,303 |
| | (30 | ) | | 1,333 |
|
| Other retail revenues | 12.3 |
| | 4.6 |
| | 7.7 |
| | 57 |
| | 1 |
| | 56 |
|
| Total electric retail | 1,308.0 |
| | 0.3 |
| | 1,307.7 |
| | 11,449 |
| | (351 | ) | | 11,800 |
|
| Wholesale revenues | 54.7 |
| | 16.2 |
| | 38.5 |
| | 4,685 |
| | 932 |
| | 3,753 |
|
| Transmission revenues | 14.0 |
| | 3.0 |
| | 11.0 |
| | N/A |
| | N/A |
| | N/A |
|
| Other revenues | 54.5 |
| | 2.8 |
| | 51.7 |
| | N/A |
| | N/A |
| | N/A |
|
| Operating revenues | 1,431.2 |
| | 22.3 |
| | 1,408.9 |
| | 16,134 |
| | 581 |
| | 15,553 |
|
| Fuel and purchased power | (380.4 | ) | | 12.0 |
| | (392.4 | ) | | | | | | |
Utility gross margin (a) | $ | 1,050.8 |
| | $ | 34.3 |
| | $ | 1,016.5 |
| | | | | | |
| |
(a)(a)Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin under Evergy's Results of Operations.
| Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin under Evergy's Results of Operations. |
Evergy Metro's utility gross margin increased $34.3decreased $28.5 million year to date September 30, 2019,2020, compared to the same period in 20182019, driven by:
•a $37.7$31.3 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 7% and heating degree days decreased 12%) and a decrease in weather-normalized commercial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase from new retail rates effective in December 2018, net of weather-normalized residential demand; and
•a $64.5$3.8 million provision for rate refund recorded year to date September 30, 2018decrease in revenue recognized for the changeMEEIA earnings opportunity in the corporate income tax rate caused by the TCJA;
a $22.4 million increase in revenue due to one-time bill credits recorded in June 2018 as a result of conditions in the KCC and MPSC merger orders; and
a $4.1 million increase in Missouri Energy Efficiency Investment Act (MEEIA) earnings opportunity2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Metro's MEEIA program; partially offset by
•a $19.3$3.4 million decreaseincrease in MEEIA throughput disincentive in 2020 primarily due to lower retail sales driven by cooler weatherthe cumulative amount of customer energy savings achieved in the second quarterand third cycles of 2019. Year to date September 30, 2019, compared to the same period in 2018, cooling degree days decreased 17%;Evergy Metro's MEEIA program; and
•a $10.6$3.2 million decreaseincrease for recovery of programs costs for energy efficiency programs under MEEIA, which have a direct offset in operating and maintenance expense.
Evergy Metro Other Operating Expenses (includingand Maintenance
Evergy Metro's operating and maintenance expense and taxes other than income tax)
Evergy Metro's other operating expenses decreased $4.9$35.5 millionyear to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
•a $23.1 million decrease in transmission and distribution operating and maintenance expense primarily due to $11.7 million of costs incurred from storms that occurred in January 2019, a $3.1 million decrease due to the timing of vegetation management projects in 2020 and lower labor expense in 2020;
a $16.1•an $11.0 million decrease in various administrative and general operating and maintenance expenses primarily driven by $5.3 million of voluntary severance expenses incurred in 2018 relateddue to a Wolf Creek voluntary exit program and a $2.6$6.2 million decrease in injuries and damagescredit loss expense primarily due to an increaselower levels of customer disconnections in estimated workers compensation losses recorded2020 and a $1.8 million decrease in property insurance expense due to a higher annual
refund of nuclear insurance premiums received by Evergy Metro related to its ownership interest in Wolf Creek in the secondfirst quarter of 2018;2020; and
•a $13.5$10.8 million decrease in plant operating and maintenance expense at coal-firedfossil-fuel generating units primarily driven by:
| |
◦ | a $6.5 million decrease due to the retirement of Evergy Metro's Montrose Station in December 2018; and |
| |
◦ | $3.2 million of voluntary severance expenses incurred in the third quarter of 2018 related to the Local 412 union voluntary exit program; |
by a $10.6 million decrease primarily due from outages at Hawthorn Station, Iatan Station and La Cygne Unit 2 and lower employee headcount in 2020; partially offset by
•a $15.3 million increase in voluntary severance expenses due to an $11.9 million increase related to Evergy voluntary exit programs in 2020 and $3.4 million of voluntary severance expenses incurred in 2020 related to Wolf Creek voluntary exit programs; and
•a $3.2 million increase in program costs for energy efficiency programs under MEEIA, which have a direct offset in revenue; andrevenue.
$1.7 million of merger-related costs incurred year to date September 30, 2018; offset by
a $23.9 million increase in operating and maintenance expense due to the net reallocation of incurred merger transition costs between Evergy Metro, Evergy, Evergy Kansas Central and Evergy Missouri West and the subsequent deferral of these transition costs to a regulatory asset in June 2018 for future recovery by Evergy Metro in accordance with the KCC and MPSC merger orders;
an $8.4 million increase in taxes other than income taxes primarily due to an increase in property taxes;
a $6.3 million increase in transmission and distribution operating and maintenance expense primarily due to costs incurred from storms that occurred in January 2019; and
$5.2 million of voluntary severance expenses incurred in the first quarter of 2019.
Evergy Metro Depreciation and Amortization
Evergy Metro's depreciation and amortization increased $30.0$4.6 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by capital additions.
Evergy Metro Other Expense, Net
Evergy Metro's other expense, net increased $2.3 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
•a $16.8$4.4 million increase in pension non-service costs in 2020; partially offset by
•a $3.2 million increase in equity AFUDC in 2020 primarily due to capital additions; and
a $13.2 million increase due to a change in depreciation rates effective in December 2018 as a result of Evergy Metro's 2018 Kansas rate case.lower short-term borrowings.
Evergy Metro Interest Expense
Evergy Metro's interest expense decreased $9.0$6.1 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven byby:
•a $4.6 million net decrease due to the repayment of Evergy Metro's $400.0 million of 7.15% Mortgage Bonds at maturity in April 2019, and itswhich decreased interest expense by $8.5 million, partially offset by a $3.9 million increase due to Evergy Metro's issuance of $400.0 million of 4.125% Mortgage Bonds in March 2019.2019; and
•a $2.9 million decrease due to lower commercial paper balances and weighted-average interest rates on short-term borrowings in 2020; partially offset by
•a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020.
Evergy Metro Income Tax Expense
Evergy Metro's income tax expense decreased$36.4 $38.8 million year to date September 30, 2019,2020, compared to the same period in 20182019, primarily driven by:
by a $51.0$32.2 million net decrease relateddue to the revaluation of deferred income tax assets and liabilities based onin the Evergy compositesecond quarter of 2020 due to the change in the Kansas corporate income tax rate asand a result$6.2 million decrease due to flow-through items primarily driven by higher amortization of the merger in June 2018;excess deferred income taxes; partially offset by
a $15.5$2.6 million increase relateddue to higher pre-tax income in 2020.
See Note 13 to the revaluation of deferredconsolidated financial statements for more information regarding the change in the Kansas corporate income tax assets and liabilities as a result of the enactment of Missouri state income tax reform in June 2018.rate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of business, Evergy faces risks that are either non-financial or non-quantifiable. Such risks principally include business, legal, operational and credit risks and are discussed elsewhere in this document as well as in the Evergy Companies' combined 20182019 Form 10-K and therefore are not represented here.
Evergy's interim period disclosures about market risk included in quarterly reports on Form 10-Q address material changes, if any, from the most recently filed annual report on Form 10-K. Therefore, these interim period disclosures should be read in conjunction with Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk included in the Evergy Companies' combined 20182019 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
EVERGY
Disclosure Controls and Procedures
Evergy carried out an evaluation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). This evaluation was conducted under the supervision, and with the participation, of Evergy's management, including the chief executive officer and chief financial officer, and Evergy's disclosure committee. Based upon this evaluation, the chief executive officer and chief financial officer of Evergy have concluded as of the end of the period covered by this report that the disclosure controls and procedures of Evergy were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in Evergy’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarterly period ended September 30, 2019,2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
EVERGY KANSAS CENTRAL
Disclosure Controls and Procedures
Evergy Kansas Central carried out an evaluation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). This evaluation was conducted under the supervision, and with the participation, of Evergy Kansas Central's management, including the chief executive officer and chief financial officer, and Evergy Kansas Central's disclosure committee. Based upon this evaluation, the chief executive officer and chief financial officer of Evergy Kansas Central have concluded as of the end of the period covered by this report that the disclosure controls and procedures of Evergy Kansas Central were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in Evergy Kansas Central'sCentral’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarterly period ended September 30, 2019,2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
EVERGY METRO
Disclosure Controls and Procedures
Evergy Metro carried out an evaluation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). This evaluation was conducted under the supervision, and with the participation, of Evergy Metro's management, including the chief executive officer and chief financial officer, and Evergy Metro's disclosure committee. Based upon this evaluation, the chief executive officer and chief financial officer of Evergy Metro have concluded as of the end of the period covered by this report that the disclosure controls and procedures of Evergy Metro were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in Evergy Metro'sMetro’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarterly period ended September 30, 2019,2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.reporting
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other Proceedings
The Evergy Companies are parties to various lawsuits and regulatory proceedings in the ordinary course of their respective businesses. For information regarding material lawsuits and proceedings, see Notes 2, 54 and 11 to the consolidated financial statements. Such information is incorporated herein by reference.
ITEM 1A. RISK FACTORS
Actual results in future periods for the Evergy Companies could differ materially from historical results and the forward-looking statements contained in this report. The business of the Evergy Companies is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond their control. Additional risks and uncertainties not presently known or that management currently believes to be immaterial may also adversely affect the Evergy Companies. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A, Risk Factors included in the 20182019 Form 10-K for each of Evergy, Evergy Kansas Central and Evergy Metro, as well as Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed by Evergy, Evergy Kansas Central and Evergy Metro. ThereExcept as set forth below, there have been no material changes with regards to those risk factors. This information, as well as the other information included in this report and in the other documents filed with the SEC, should be carefully considered before making an investment in the securities of the Evergy Companies. Risk factors of Evergy Kansas Central and Evergy Metro are also risk factors of Evergy.
The spread of COVID-19 and resulting impact on business and economic conditions could negatively affect the Evergy Companies' business and operations.
The COVID-19 pandemic has had, and may continue to have, a significant impact on the way that the Evergy Companies conduct their operations and could adversely impact their results of operations, financial condition, cash flows and liquidity. Further, the spread of COVID-19 has resulted in efforts to contain the virus, such as quarantines, restrictions on travel, closures and reduced operations of businesses, governmental agencies and other institutions. The pandemic, along with the efforts to contain the virus, has caused and could continue to cause an economic slowdown or recession, result in significant disruptions or reductions in various public, commercial or industrial activities and cause employee absences, which could interfere with the Evergy Companies' operations or the operations of their customers. In addition, the COVID-19 pandemic led to disruption and volatility in the financial markets in the first quarter of 2020 and in the event that further market disruptions occur, the Evergy Companies could experience an increase in their cost of capital or an impairment in their ability to access the capital markets.
The COVID-19 pandemic has altered electricity usage patterns, including an overall reduction in demand and shifting usage away from customers with relatively higher load requirements, such as industrial and commercial customers, toward customers with relatively lower load requirements, such as residential customers. These changes in electricity usage patterns, their duration and the extent to which some of these shifts could become long-term or permanent could result in a significant decrease in the Evergy Companies' sales of electricity.
The Evergy Companies have also incurred, and will continue to incur, expenses related to monitoring the COVID-19 pandemic and modifying operations in response to the pandemic. In July 2020, the KCC authorized Evergy Kansas Central and Evergy Metro to record to a regulatory asset all net incremental costs incurred with respect to their Kansas operations associated with the COVID-19 pandemic for consideration in their next Kansas rate cases, which are expected to be completed no later than the end of 2023. Additionally, the KCC order states that the KCC will also consider granting the recovery of Evergy Kansas Central's and Evergy Metro's lost revenues associated with the COVID-19 pandemic as part of their next Kansas rate cases. In October 2020, Evergy Metro and Evergy Missouri West entered into a non-unanimous stipulation and agreement with the MPSC staff and other intervenors that would allow Evergy Metro and Evergy Missouri West to defer to a regulatory asset certain net incremental costs incurred associated with the COVID-19 pandemic for consideration in their next rate cases. A
decision by the MPSC regarding the non-unanimous stipulation and agreement is expected in January 2021. Notwithstanding the foregoing, regulators might not allow for recovery of these amounts in a timely manner, or at all. In addition, Evergy Metro and Evergy Missouri West elected into plant-in service accounting (PISA) in Missouri effective as of January 1, 2019, which, by law, requires each company to keep base rates constant for three years following Evergy Metro's and Evergy Missouri West's last general rate case. These and other factors may result in under-recovery of costs or failure to earn the authorized return on investment, or both.
The Evergy Companies have also temporarily implemented policies, and in the future may implement additional policies, that are intended to ease the financial burden of the pandemic on customers, such as temporarily extending payment options and offering incentives for customer payments on overdue balances as well as the elimination of late payment fees and disconnections for non-payment through July 15, 2020. There is also the possibility that legislation or regulations could be enacted at the federal or state level that would further restrict the Evergy Companies' ability to discontinue service to customers in the event of non-payment or to collect amounts owed from customers for service provided. These measures could result in an overall increase in customer non-payment or delay in the timely receipt of customer payments, which could result in a significant increase in the Evergy Companies' credit loss expense or significant decrease in operating cash flows.
Evergy Kansas Central, Evergy Metro and Evergy Missouri West sell retail electric accounts receivable to independent outside investors as a source of liquidity. These arrangements include covenants that limit the extent to which accounts receivable can be delinquent or unpaid. A decrease in the amount of, or a delay in receiving, customer collections due to the COVID-19 pandemic or otherwise could, absent a waiver or amendment, result in a breach of these accounts receivable financing arrangements and require the borrowers to repay any outstanding loans. Further, in 2020, the Evergy Companies have experienced lower retail electric sales as a result of decreases in weather-normalized commercial and industrial demand. To the extent that the Evergy Companies continue to experience lower electric sales, they may not have sufficient eligible receivables to maximize their borrowing capacity under their receivables sales facilities or could be required to repay additional portions of their borrowings under the facilities.
The Evergy Companies are planning to make significant capital expenditures in 2020 and beyond, and they regularly conduct maintenance on their facilities. The pandemic could disrupt the supply chains that provide services and equipment to the Evergy Companies as part of their capital expenditures or maintenance efforts. If the Evergy Companies' supply chains are disrupted, the Evergy Companies may be unable to perform necessary maintenance, which could result in increased costs as the Evergy Companies implement contingency plans to allow them to continue to operate. Supply chain interruptions may also increase the cost of maintenance and capital expenditures or result in the delay or cancellation of planned projects, any of which could have a material adverse impact on the Evergy Companies' results of operations.
The Evergy Companies also have a significant amount of NOLs, tax credits and other tax carryforwards that are recorded as deferred income tax assets on their balance sheets. These tax benefits have various expiration dates and other limitations on the extent to which the benefits can be realized. The Evergy Companies regularly assess their future ability to utilize tax benefits to determine whether a valuation allowance is necessary. A significant reduction in the Evergy Companies' taxable income due to the impacts of the COVID-19 pandemic or otherwise could require the Evergy Companies to record a valuation allowance against a portion of those tax assets, which in turn reduces earnings, and the Evergy Companies may in general not be able to utilize these tax benefits.
Public reports have also indicated an increase in cyberattacks in general since the start of the pandemic due, in part, to the increase in the number of employees working remotely and the proliferation of the different ways in which employees and third parties interact with our information technology infrastructure. A successful attack could result in disruption to the Evergy Companies' generation, transmission and distribution systems or to the electrical grid in general, reduce sales and could increase the cost of insurance coverage or result in a decline in the U.S. economy.
Any of these circumstances, or other impacts of the pandemic, could adversely affect customer demand or revenues, impact the ability of the Evergy Companies' suppliers, vendors or contractors to perform, or cause other
unpredictable events, which could have a significant adverse impact on the results of operations, financial condition, liquidity and cash flows of the Evergy Companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity SecuritiesNone.
The following table provides information regarding purchases by Evergy of its equity securities that are registered pursuant to Section 12 of the Exchange Act during the three months ended September 30, 2019.
|
| | | | | | | | |
| Issuer Purchases of Equity Securities |
| Month | | Total Number of Shares (or Units) Purchased(a) | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(a) |
| July 1 - 31 | | — |
| — | — |
| 23,668,657 |
|
| August 1 - 31 | | — |
| — | — |
| 23,668,657 |
|
| September 1 - 30 | | 7,569,200 |
| (b) | 7,569,029 |
| 16,099,628 |
|
| Total | | 7,569,200 |
| | 7,569,029 |
| 16,099,628 |
|
(a)In July 2018, the Evergy Board authorized the repurchase of up to 60 million shares of Evergy's common stock with no expiration date. Evergy expects to repurchase the 60 million shares by mid-2020. See Note 13 to the consolidated financial statements for additional information on Evergy's common stock repurchase program.
(b)In September 2019, the June 2019 ASR agreement was settled which resulted in the delivery of 1,018,474 additional shares of Evergy common stock at no additional cost. In total, 8,081,794 shares were delivered under this ASR at an average price paid per share of $61.87. In September 2019, Evergy entered into a new ASR agreement to purchase $500.0 million of Evergy common stock and through which 6,550,555 shares were delivered in September 2019. The final number of shares of Evergy common stock that will ultimately be delivered to Evergy, and therefore the average price paid per share, will be determined at the final settlement of the ASR by December 2019. In September 2019, Evergy also purchased 171 shares for withholding taxes related to restricted stock vesting at an average price of $65.68.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Available Information
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at sec.gov. Additionally, information about the Evergy Companies, including their combined annual reports on Form 10-K, combined quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with the SEC, is also available through the Evergy Companies' website, www.evergy.com. Such reports are accessible at no charge and are made available as soon as reasonably practical after such material is filed with or furnished to the SEC.
Investors should note that the Evergy Companies announce material financial information in SEC filings, press releases and public conference calls. In accordance with SEC guidelines, the Evergy Companies also use the
Investor Relations tab on their website, (http://www.evergy.com)www.evergy.com, to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on Evergy's website is not part of this document.
On November 6, 2019, the Compensation and Leadership Development Committee (Committee) of the Evergy Board approved the Evergy Executive Severance Plan (Severance Plan). Pursuant to the Severance Plan, Evergy’s Chief Executive Officer, Chief Financial Officer, President and Chief Operating Officer and any Vice President of Evergy who is appointed by the Evergy Board is entitled to certain benefits if the eligible officer’s employment is terminated by Evergy without “cause,” as that term is defined in the Severance Plan.Subject to the terms of the Severance Plan, if an eligible officer’s employment is terminated by Evergy without cause, the officer would be entitled to accrued but unpaid compensation and other benefits, as well as a cash amount equal to the aggregate sum of:
one (or two for the Chief Executive Officer) times the officer’s annual base salary in effect on the date of termination; plus
one (or two for the Chief Executive Officer) times the officer’s target annual incentive award with respect to the fiscal year in which the termination occurs; plus
a cash amount equal to the pro rata portion of the officer’s target annual incentive award for the fiscal year in which the termination occurs, to the extent not theretofore paid; plus
a cash amount equal to twelve (12) (or twenty-four (24) for the Chief Executive Officer) times Evergy’s monthly COBRA premium cost to cover the officer, and if applicable his or her beneficiaries, under Evergy’s health, vision and dental plans.
In addition to the cash lump sum payment described above, an officer will vest in a pro rata portion of any outstanding time-based and performance-based long-term incentive awards (e.g., equity awards). Performance-based long-term incentive awards will only vest pro rata following completion of the applicable performance period. The officer is also eligible to receive outplacement counseling services during the twelve-month period following termination, up to a $25,000 limit.
Benefits under the Severance Plan will only be provided if the officer is not also receiving benefits under a change-in-control agreement and benefits pursuant to the Severance Plan will supersede any other severance policies, plans or programs (other than a change-in-control agreement) available to an officer.
Any benefits payable under the Severance Plan are subject to execution of an agreement by the officer releasing claims against Evergy as well as the officer’s compliance with certain covenants contained in the Severance Plan, including confidentiality, non-solicitation of employees, non-disparagement and assistance to Evergy with respect to any disputes.
Evergy may amend or terminate the Severance Plan, in whole or in part, at any time and in any way except that, without the consent of the officer, no amendment that materially reduces an officer’s rights or potential benefits under the Severance Plan may become effective before the 90th calendar day after such amendment or termination is approved by the administrator.
The description of the Severance Plan does not purport to be complete and is qualified in its entirety by reference to the Severance Plan included as Exhibit 10.1.
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| | | | | | | | | | | | | |
Exhibit Number | | Description of Document | | Registrant |
| | | | |
| | | | |
3.1 | | | | Evergy Metro |
| | | | |
3.2 | | | | Evergy Metro |
| | | | |
3.3 | | | | Evergy Kansas Central |
| | | | |
3.4 | | | | Evergy Kansas Central |
| | | | |
4.1 | * | | | Evergy |
| | | | |
4.2 | * | | | Evergy
Evergy Kansas Central |
| | | | |
10.1 | + | | | Evergy |
| | | | |
31.1 | | | | Evergy |
| | | | |
31.2 | | | | Evergy |
| | | | |
31.3 | | | | Evergy Metro |
| | | | |
31.4 | | | | Evergy Metro |
| | | | |
31.5 | | | | Evergy Kansas Central |
| | | | |
31.6 | | | | Evergy Kansas Central |
| | | | |
32.1 | ** | | | Evergy |
| | | | |
32.2 | ** | | | Evergy Metro |
| | | | |
32.3 | ** | | | Evergy Kansas Central |
| | | | |
101.INS | *** | XBRL Instance Document. | | n/a |
| | | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
101.LAB | | Inline XBRL Taxonomy Extension Labels Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
|
| | | | |
Exhibit
31.1 | | | | Description of Document | | Registrant
Evergy |
| | | | |
| 31.2 | | | | Evergy |
101.PRE | | | | |
| 31.3 | | | | Evergy Metro |
| | | | |
| 31.4 | | | | Evergy Metro |
| | | | |
| 31.5 | | | | Evergy Kansas Central |
| | | | |
| 31.6 | | | | Evergy Kansas Central |
| | | | |
| 32.1 | * | | | Evergy |
| | | | |
| 32.2 | * | | | Evergy Metro |
| | | | |
| 32.3 | * | | | Evergy Kansas Central |
| | | | |
| 101.INS | ** | XBRL Instance Document. | | n/a |
| | | | |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
| 101.LAB | | Inline XBRL Taxonomy Extension Labels Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | Evergy
Evergy Kansas Central
Evergy Metro |
| | | | |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document). | | Evergy
Evergy Kansas Central
Evergy Metro |
* Filed with the SEC as exhibits to prior SEC filings and are incorporated herein by reference and made a part hereof. The SEC filings and the exhibit number of the documents so filed, and incorporated herein by reference, are stated in parenthesis in the description of such exhibit.
** Furnished and shall not be deemed filed for the purpose of Section 18 of the Exchange Act. Such document shall not be incorporated by reference into any registration statement or other document pursuant to the Exchange Act or the Securities Act of 1933, as amended, unless otherwise indicated in such registration statement or other document.
*** The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
+ Indicates management contract or compensatory plan or arrangement.
Copies of any of the exhibits filed with the SEC in connection with this document may be obtained from Evergy, Evergy Kansas Central or Evergy Metro, as applicable, upon written request.
The registrants agree to furnish to the SEC upon request any instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of total assets of such registrant and its subsidiaries on a consolidated basis.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc. have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
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| | | | | | | |
| | EVERGY, INC. |
| | |
| Dated: | November 6, 20194, 2020 | By: /s/ Anthony D. Somma |
| | (Anthony D. Somma) |
| | (Executive Vice President and Chief Financial Officer) |
|
| | | | | | | |
| | EVERGY KANSAS CENTRAL, INC. |
| | |
| Dated: | November 6, 20194, 2020 | By: /s/ Anthony D. Somma |
| | (Anthony D. Somma) |
| | (Executive Vice President and Chief Financial Officer) |
|
| | | | | | | |
| | EVERGY METRO, INC. |
| | |
| Dated: | November 6, 20194, 2020 | By: /s/ Anthony D. Somma |
| | (Anthony D. Somma) |
| | (Executive Vice President and Chief Financial Officer) |
