Evergy - Earnings Call - Q2 2019
August 8, 2019
Transcript
Speaker 0
Good day, ladies and gentlemen, and welcome to the Q2 twenty nineteen Evergy Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will begin at that time. As a reminder, this call is being recorded.
I would now like to turn the call over to Lori Wright. You may begin.
Speaker 1
Thank you, Michelle. Good morning, everyone, and welcome to Evergy's second quarter call. Thank you for joining us this morning. Today's discussion will include forward looking information. Slide two and the disclosure in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations and include additional information on non GAAP financial measures.
We issued our second quarter twenty nineteen earnings release and 10 Q after market closed yesterday. These items are available along with today's webcast slides and supplemental financial information for the quarter on the main page of our website at evergyinc.com. On the call today, we have Terry Bassam, President and Chief Executive Officer and Tony Soma, Executive Vice President and Chief Financial Officer. Other members of management are with us and will be available during the question and answer portion of the call. As summarized on Slide three, Terry will recap the quarter and provide a business update.
Tony will update you on the details of our latest financial results. With that, I'll hand the call to Terry.
Speaker 2
Thanks, Lori, and good morning, everybody. I'll begin my comments on Slide five. Last night, we reported second quarter GAAP earnings of $0.57 per share compared to $0.56 per share earned in the second quarter of twenty eighteen. Adjusted earnings per share were $0.58 in second quarter twenty nineteen compared to adjusted $0.67 per share in the same period a year ago. On a period over period basis, these results were driven by a large unfavorable weather swing offset by cost reduction efforts, rate case outcomes and changes in shares outstanding.
Year to date, GAAP earnings per share were $0.96 compared to $1 in the same period last year. Adjusted EPS were $1.01 this year compared to $1 a year ago, largely driven by the same items I just mentioned. I'm pleased with how our team has executed our plan and the corresponding results delivered midway through this year. This has allowed us to stay on pace with our plan and reaffirm our 2019 adjusted EPS guidance of $2.8 to $3 In June, we celebrated the inaugural year of Evergy. This provided a natural time for us to reflect on a couple of our core objectives, merger savings and returning capital to our shareholders.
First, on merger savings. During integration planning, we identified cumulative net savings of more than $550,000,000 through 2023. We're on target for our twenty nineteen year end goal of $110,000,000 in annual net merger savings. We're making the most of our increased scale and buying power as a larger company. And we've become more efficient by leveraging both companies' operating experiences and implementing best in class techniques.
We continue to deliver on our commitment of no involuntary layoffs as a result of the merger, instead capitalizing on cost reductions through attrition as folks retire or leave the company. To put things in context, when we shook hands on the merger, there were over 6,300 budgeted positions between KCPL, Westar and Wolf Creek. Today, Evergy and Wolf Creek combined have around 5,500 employees. Earlier this year, we kicked off a large IT system consolidation project that will help us achieve additional back office savings. Fortunately, both companies use the same platform, so while still a tall task to combine legacy systems, we are aligned on vendors.
We're also applying many of these same techniques at Wolf Creek, our nuclear facility. Wolf Creek has their own nuclear operating company and has operated as a standalone entity. Now that Evergy owns 94% of the facility, we're consolidating many of the support functions like HR, IT, supply chain, finance and accounting and are integrating these into our Evergy operations. This also allows us to take advantage of natural attrition at the nuclear facility as well. Context, current headcount at Wolf Creek is about 200 positions lower today as compared to when we shook hands on the merger.
These are just a few examples of the items that are allowing us to meet our targets. Our team continues to look for incremental savings opportunities to provide additional benefit to both our customers and our shareholders. Now turning to our focus on returning capital to shareholders. Through Evergy's first year, we returned almost $2,700,000,000 of capital comprised of about $500,000,000 in the form of dividends and 2,200,000,000 through share repurchases. As of the June, we had completed just over 60% of our targeted share repurchase program.
We're still focused on a dollar cost average strategy and we're expecting to complete the repurchases by mid-twenty twenty. Now moving to Slide six, I'll give you the latest on our regulatory and legislative proceedings. You may recall Kansas Senate Bill 69, which called for a two part study of electric rates, passed and signed into law earlier this year. The bill required a seven member legislative coordinating council made up of five Republicans and two Democrats to reach consensus on a third party to perform the study. The Legislative Council has selected a consultant to conduct the first part of the study, which will focus on the effectiveness of Kansas rate making practices, as well as options to maintain reasonably competitive rates, while providing the best combination of price, quality and service.
Part one of the study is to be completed by early January. Council is now working through a separate RFP specifically for the second half of the study, which ultimately will be due by next summer. Part two will focus on the rate impact of our energy matters like electric vehicle charging, microgrids, cyber and physical security. We're pleased that the study is moving forward and on track. From the beginning, we've been on record as stating we believe the results of a third party study will yield very similar results to our rate study and the separate Kansas Corporation staff study that were both presented to the legislature during the 2019 session.
Additionally, we continue to lower our customers' bills in Kansas by passing on to customers the agreed upon merger credit. We also have our Kansas base rate moratorium, which will help keep bills in check. We still believe the creation of Evergy was an excellent solution for customers and rate competitiveness. With that said, we'll continue to monitor activity in Kansas and work with all parties to find energy solutions that move Kansas forward and further increase the competitiveness of our rates. Switching to Missouri and the Sibley complaint docket.
In June, the Missouri Public Service Commission staff filed rebuttal testimony, which marked the first public record of their opinion on this matter. Much of the staff's testimony is aligned with arguments we've made from the beginning that an accounting authority order does not make sense because the retirement of Sibley is not an extraordinary event. The hearings for this docket started yesterday and are slated to be completed by the end of the week. Schedule calls for briefs and plot briefs over the next few weeks and then we'll wait for a commission order, which we expect to be sometime in October. Moving to Slide seven to wrap up before I turn things over to Tony.
The foundation of our near term plan is unchanged and our execution thus far has allowed us to reaffirm our 2019 earnings guidance. It also provides us with confidence in our expectations of compounded annual EPS growth of 5% to 7% through 2023, using the midpoint of our 2019 guidance as a base, dividend growth commensurate with EPS growth. We believe this is an attractive shareholder return profile with limited regulatory risk given our commitment to no rate reviews over the next few years. With the ten year treasury rate below 2%, we believe this positions us favorably as compared to company spacing rate reviews in the next several years. As we mentioned in our first quarter call, we're focused on preserving flexibility while keeping customer bills low, delivering a safe, reliable product and targeting competitive shareholder returns.
We are working to further optimize our long term spending plan, which include shifting some of the spending between jurisdictions. This allows us to target jurisdictions that have less lag and provide higher incentive for infrastructure investment. Although we've not completed our work, our team has identified about $150,000,000 of CapEx that we will look to shift from Kansas to Missouri through the 2022 timeframe. To be clear, this preliminary number maintains our current $6,000,000,000 CapEx projection, but reallocates a portion from one jurisdiction to another. This reflects our plan to allocate capital to its highest and best use.
We approach the second half of the year, we continue to look for incremental opportunities over the next few years. Lastly, let me mention one important thing on the topic of Environmental, Social and Governance or ESG. We'll be updating our EEI ESG template soon to include twenty eighteen data. This will be the first time our template will include consolidated Evergy data, whereas previously it was reported separately by our KCPL and Westar utility. We'll also be filing our 2018 sustainability report, where you can find details on focus areas such as reducing our impact on the environment, diversity and inclusion and growing philanthropy efforts and to help our communities move forward.
Both reports will be located in the sustainability section of our investor website in the coming weeks. Now with that, I'll turn the call over to Tony.
Speaker 3
Thanks, Terry, good morning, everyone. I'll start with results on Slide nine of the presentation. Last night, we reported second quarter twenty nineteen GAAP earnings of $140,000,000 or $0.57 per share compared to $102,000,000 or $0.56 per share in Q2 of twenty eighteen. The increase in earnings is primarily due to the inclusion of KCPLs and Gmail's results for full second quarter in 2019 compared to only partial period of Evergy's second quarter twenty eighteen results due to the early June closing of the merger last year. Adjusted non GAAP earnings were $140,000,000 or $0.58 per share compared to 179,000,000 or $0.67 per share in the same period a year ago.
As detailed on the slide, adjusted EPS was driven primarily by less favorable weather and higher depreciation expense, partially offset by the impact of new retail rates, lower O and M and accretion from fewer shares outstanding. Gross margins were down $75,000,000 due primarily to lower sales because of cooler weather offset by new retail rates, net of the 2018 provision for rate refund reflecting the lower corporate tax rate. O and M net of merger related costs was a healthy $52,000,000 lower driven by cost reduction efforts across our utilities, while depreciation expense was $23,000,000 higher primarily from new depreciation rates that are reflected in our retail prices and higher plant balances. For the quarter, pro form a residential and commercial sales were down 217% respectively, reflecting a cooler and wetter spring. During the second quarter last year, we experienced significantly favorable weather and this quarter was cooler than normal, which cost us a whopping $0.25 when compared to last year and about $04 when compared to normal.
Pro form a industrial sales were up just under 1% compared to the same period last year. Now on slide 10, I'll touch base on year to date results. For the year, GAAP earnings were $239,000,000 or $0.96 per share compared to $162,000,000 or $1 per share for the same period last year. Again, GAAP not including KCP and LGMOR results prior to June 2018 is a primary driver of the earnings variance. Adjusted earnings were $251,000,000 or $1.01 per share compared to year to date 2018 adjusted earnings of $271,000,000 or $1 per share.
As you can see on the slide, primary drivers compared to last year include unfavorable weather and higher depreciation expense offset by new retail rates, O and M reductions and accretion from previous shares outstanding. For the year, gross margins were down $55,000,000 O and M was $84,000,000 lower and depreciation is around $52,000,000 higher. Like second quarter sales and due largely to the weather swing, pro form a year to date residential and commercial sales were down about 8.73% respectively. We estimate weather cost is $0.21 when compared to last year and it was probably a benefit of $0 or $02 when compared to normal. Pro form a industrial sales were down 1.4% compared to the same period last year, driven primarily by a large customer in the chemical sector that saw decreased demand at their plants earlier this year.
Now turning to the economy. Unemployment rate in our service area remains 30 to 40 basis points below the national average, signaling a steady economy in the areas we serve. In June, the USDA announced the selection of Kansas City for the home offices of its Economic Research Service and National Institute of Food and Agriculture. They look to ramp up operations this fall and will bring about 600 new jobs to the area. This site selection reinforces the Kansas City region as a hub for all things agriculture and answer the significant concentration of the animal health industry.
Additionally, you may have seen in the news where a company is looking at the potential of locating a large data center in our service territory in Missouri. Over the years, we worked hard to put in place the right economic development tariffs coupled with access to the abundant affordable wind resources found in our backyard. We believe we offer an attractive value proposition when it comes to clean affordable energy coupled with a modest cost of living standard. Moving on to Slide 11, let me touch on our latest financing activities. In June, we had $300,000,000 of first mortgage bonds that matured.
We issued commercial paper to pay off those bonds and look to reissue that $300,000,000 later this year. Also in June, we borrowed a second $500,000,000 tranche of the $1,000,000,000 term loan that we put in place in March. We expect to issue around $1,500,000,000 of long term holding company debt later this year to pay down the term loan and buy back more shares. This financing activity will allow us to continue making progress on our 60,000,000 share repurchase target. As of the June, we purchased over 36,000,000 shares or 60% of our total $60,000,000 target and we still have an ASR yet to close.
The ultimate number and timing of shares repurchased depends on market factors and the financial outlook of the company. Now wrapping up on Slide 12, in summary, as Terry said, we're happy with the progress one year after the merger closed. We've reaffirmed our 2019 adjusted EPS guidance of $2.8 to $3 per share. We're expecting year over year EPS growth in the second half to be driven primarily by cost reduction efforts, accretion from lower shares and lower income tax expense consistent with the tax rate published in our earnings drivers earlier this year. With that, I will turn the call back over to Terry.
Speaker 2
All right. I think we're ready for questions.
Speaker 0
Our first question comes from Greg Gordon of Evercore ISI. Your line is open.
Speaker 4
Thanks. Good morning.
Speaker 5
Good morning, So
Speaker 4
it looks like the business plan you've laid out on the Q4 call with regard to your how you achieve your earnings growth aspirations while providing the benefits of the merger to your customers.
Speaker 2
It seems like
Speaker 4
it's on pretty much on track. But can you talk a little bit more about on the margin why you're making this small allocation shift from Kansas to Missouri in terms of the capital allocation?
Speaker 2
Yes. Greg, it's part of an ongoing process for us to continue to look at jurisdictions where opportunities exist that maybe don't in the others and look for additional opportunities in the latter years of our five year plan that we've talked about that we continue to work on. In particular, Missouri has a PISA opportunity where we can invest additional dollars without creating additional lag during this period without rate cases, a mechanism that Kansas doesn't have. So it's an obvious first step in that process and we're going to continue to look for additional opportunities both from that perspective and from just a long term growth. That makes sense.
Speaker 4
And in terms of the synergy uptake, I mean, you say that you're on track to your numbers, but can you talk about, you talked about some pretty robust statistics just from normal attrition. As you look at the overall opportunity for cost optimization, which obviously flows one way or another to customers through lower rates over time, Do you see the synergy targets as sort of being the end of the line? Or do you see an opportunity over the long term to continue to optimize the cost structure of the business perhaps when the rate moratorium period ends by deploying capital into lower cost generation resources like winds and solar and moving to a greener portfolio that in this day and age is actually as or better or more economic than some of the pre existing infrastructure that you may have when you look out five years?
Speaker 6
Yes, let me hit a
Speaker 2
couple of those points. The first is we feel really good and maybe one of the benefits of spending a two year period on the approval process is that we feel really good about our execution on the synergy savings. And I think as we've reflected in the results the first half of the year, not only are we executing as expected, but we're finding some additional ones. Again, some scale opportunities as we do some synergy work and expansion on our RFP processes that we have been very happy with. So we've seen some flexibility there on the upside just from the synergy side, and we'll continue to work on that.
Long term, no, we don't expect that to stop. We would expect to continue to find opportunities that we were either hopeful or plan to evaluate, but didn't have a number attached to. And I will also complement our teams throughout the company for working together hard to find those very things that maybe from scale, maybe just finding the right way to do something between the two companies. And that right way may be either way we did it before in those companies, but drives efficiency both in headcount and opportunity. I mentioned, I think, in my comments that we've got a new customer information system we're working on.
We expect that to drive additional efficiencies over time. And then finally, to your point on future opportunities, yes, we continue to see our as Tony mentioned, our geographic location to Western Kansas as a strategic advantage to us as we all try to look to be more green and satisfy our customers' desire for more green results, which are also very cost efficient at this point.
Speaker 4
Thanks. Congratulations on a great first half.
Speaker 2
Thank you very much.
Speaker 0
Our next question comes from Ali Agha of SunTrust. Your line is open.
Speaker 7
Thank you. Good morning.
Speaker 3
Good morning. Good morning. My
Speaker 7
first question, Terry, in your comments, you alluded to the fact that you're also looking at in your planning process opportunities for incremental CapEx. Can you give us some rough sense of on a cumulative basis, how much that could be? And when would you plan to update us on that?
Speaker 2
Well, probably the most appropriate thing to say at this point because we haven't finished our work is if you just calculated a cap on what PISA would allow, it could be just shy of $1,000,000,000 Again, before we come out with a plan related to that, we'd want to talk about timing and process and projects and be very definitive. We've said before that that would be our plan all along. So yes, you could see a number up to that amount that would make sense and still fit within the PISA and other requirements under Missouri. We would expect over the course probably the next six months to be able to talk about what our later year plans would be and our overall PISA plans would be.
Speaker 7
Okay. And then secondly, once all of these studies are done in Kansas, even the Phase two one is done, any sense on where the legislature wants to go with that? Or would that be the end of it and so on? What are you hearing? Or what's your read there?
Speaker 6
Well, I
Speaker 2
think an independent review and again, we've said that the data speaks for itself and I think both the commission staff and we providing our initial reports that were very similar reflected that we would see confirmation from an independent party that shows kind of where we stand and an explanation of how we got here. So first of all, the reflection of where we sit from a competitive standpoint is reflective of a lot of spin that both companies had to make over a ten year period. But the merger provides exactly the strategy to attack that issue over the next four or five years as we don't have to increase rates. And in fact, we'll lower our costs. And so as we get that in, then I think the second phase is targeted at the other things that are happening in our industry like electric vehicle charging and other things like that, that we welcome an opportunity to have those conversations.
So I think it's a good educational process. I think having an independent party will work to provide the legislature with a view of not only their commissioners, but their utility and consultant that will allow us to have
Speaker 6
a good
Speaker 2
conversation around what would be the kinds of policy issues in Kansas we look forward to addressing.
Speaker 7
One last question. Can you remind us how much COLI income, if any, have you booked in the first half? And conceptually, would you consider excluding COLI earnings from your adjusted numbers going forward?
Speaker 3
Morning, Aliyah. This Tony. I believe the COLI numbers for the quarter were about $2,500,000 and year to date were around $9,000,000 Now as far as the second part of your question, when we issue our drivers or earnings drivers, we will list out separately what kind of the assumptions are for COLI and we will leave it up to the investment community whether or not they want to keep the numbers in or take them out. And as said all along, these are just timing differences.
Speaker 6
Thank you. You're welcome. Thank you.
Speaker 0
Our next question comes from Michael Lapides of Goldman Sachs. Your line is open.
Speaker 8
Hey guys, thanks for taking my question. I actually have a couple here. First of all, when thinking about O and M savings from the merger and I'm kind of looking back at Slide 19, Are you saying that you think you could get upside as soon as maybe next year, meaning upside to the $145,000,000 target? Or is it more upside that comes in the back end of the plan, meaning upside of the $160,000,000 run rate in kind of the out year of 2022?
Speaker 3
Michael, this is Tony. Well, is something that we are continually reviewing and looking at. Now specifically to your question, the answers are possibly yes on both, right, because we're trying to look at ways to get better, ways to be more efficient. Terry mentioned the billing system and the back office system and accounting. We're also looking at RPA and big data.
We use big data to help us on turbine vibration and substations, etcetera. So we're obviously trying to beat those numbers that we have laid out on the page.
Speaker 8
Got it. Thanks, Tony. And then in Missouri, when I think about your EPS guidance growth rate, the multiyear, what are you assuming in the next couple of years you do in terms of PISA filings? Meaning, I'm trying to think about how much capital you're likely to invest in Missouri if I look at your CapEx slide on Page 18 or the segment by segment CapEx. I think you guys given the 10 Ks.
How should we think about how much of that CapEx is actually PISA eligible? And what's in the EPS growth rate in terms of how much kind of the revenue increases or the deferrals tied to PISA?
Speaker 3
So the Missouri CapEx, and I'll just I'm looking at Slide 18 as well, Michael, it's probably 75% would be eligible for the PISA election and that would be our intent obviously. And to the extent that it's deferring some regulatory drag that is built into our assumptions and our drivers in the out years that's hitting our EPS CAGR.
Speaker 8
Got it. And am I remembering how the rule works or how the law works that you defer the D and A, but you continue to book the AFUDC?
Speaker 3
So you get to defer, I think, 85% of the depreciation and the interest expense, if I remember right, if that answers your question.
Speaker 8
Yes. Okay. Thank you. And oh, I'm sorry. Hey, Tony, how do you treat the equity component of AFUDC?
Do you stop booking So once in
Speaker 3
the equity component will get brought into earnings at the time of your next rate case over a twenty year period.
Speaker 8
Got it. Okay. Thank you. Much appreciate it guys.
Speaker 6
You're welcome.
Speaker 0
Our next question comes from Julien Dumoulin Smith of Bank of America. Your line is open.
Speaker 9
JULIEN Hey guys, good morning. I just wanted to follow quickly up on the last set of questions here on PISA eligibility and just how that lines up against your staff. You remind us a little bit more with respect to how you think about how soon you could start deploying capital given the fact that as you say, it's only an 85% deferral of depreciation and interest expense. Mean, to the extent to which that affords an opportunity, how early could you start spending given the fact that your stay out is through 2022?
Speaker 3
Well, we're spending today.
Speaker 9
Well, sorry. Yes, incrementally rather is the way I should clarify.
Speaker 3
Well, as Terry said, we're going through the process. And over the next six months, we'll be able to update folks on where we stand and where we end up on that process.
Speaker 2
Yes. Remember that we've elected, so we're in. And so as Tony said, we could be spending today on things that qualify. But in terms of reallocating, we're working on our long term plan and our plan for next year in particular. And so we could be making changes along that line.
Speaker 9
Got it. But to clarify, the fact that you have a stay out impede your ability to accelerate through this mechanism? I mean, I imagine to a certain extent,
Speaker 2
No. Remember, technically, don't have a stay out in Missouri. Remember that the way Missouri worked in Kansas were different. And so we expect to stay out given our earnings and savings rejections. But the way the PISA works, we're not affected by that.
Our actually driver for the next rate case in Missouri would be fuel and then kind of right after that PISA true up. So it's a little different in Missouri and no, none of that would keep us from moving forward PISA investment greater than we talked about already.
Speaker 9
Got it. Okay. Thank you for that. And then if I can turn back to another question that was asked just to clarify a little bit further here. Just even on the first part of the study, I mean, when you say effectiveness of Kansas rate making practices, just can you clarify a little bit more what exact what parts of rate making practices would be deemed to be evaluated for effectiveness?
Just trying to understand more the scope of this effort more than anything else. I think Ali might have been asking something similar, but if you could elaborate.
Speaker 2
Well, I think you probably have as much specificity as there exists. I think there is some concern by some parties that our rates are have risen faster than the national average and even though they're at the national average are higher than they would like. And as a result, when you look at things that are effectiveness, what they're really looking at is what caused them to be that. And so being able to explain how we got there and where are we at is what our studies did and what I think the first step in the independent study will do. And then the second half will be how are effective other things and that could range to should we have more EV charging throughout the state.
And if so, how should that be done and provided for We've not done a lot of electric vehicle charging stations in Kansas because of kind of our processes there. So it could range. I think originally the focus is cost, which again I think we've talked about how the merger helps address that. And secondly, there could be other particular folks interested in particular policies that have or have not been adopted in Kansas in the past. That's probably about as much as we've got now in terms of where that could head.
Speaker 9
Fair enough. I'll leave it there. Thank you all very much and good luck.
Speaker 2
You bet. Thank you. Thank you.
Speaker 0
Our next question comes from Charles Fishman of Morningstar Research. Your line is open.
Speaker 5
Thank you.
Speaker 10
Terry, this combined ESG disclosure before EEI, do you envision that as something based on what I've seen other utilities do either through the ESG or through, of course, IRPs. Do you see that as possibly an opening accelerated coal plant retirements? And would that provide you another step towards further saving O and M savings beyond just the merger savings you've outlined and look like you're going to hit?
Speaker 2
Well, our ESG filing, first of all, should reflect again the format and template that the EEI has worked together so that investors can kind of see a similar accounting, if you will, and a similar positioning of those efforts. And it will reflect our current retirements and our current wind activities, which show that over up to and over 50% of our energy comes from nuclear and wind totaling over 50% of our total kilowatt hour sales or energy. And that's a very positive message. As far as moving forward, we're now at a position where we've got our larger, more efficient units and capacity obviously becomes an issue. And we want to be sure we're cautious about those kind of things.
But it would help inform investors and help inform our commission so that those kind of conversations can continue going forward. But we always have to remember to provide capacity to our customers is an important part of the remainder of our portfolio.
Speaker 10
Well, realize your renewable percentage over on the Kansas side is very high. And I guess what I was anticipating is maybe you would use this as an opportunity to maybe push that on the Missouri jurisdiction. Yes. Well, remember, that a
Speaker 2
although located in Western Kansas, we jurisdictionally allocate all our generation based on usage customers, those kind of metrics. So from a percentage perspective, they're basically the same. There are some unique assets, but they're pretty small. And our wind, in particular, is allocated over the jurisdiction. So it's very similar actually.
Speaker 10
Okay. And that's the way the ESG presentation will be done. We're consolidating both jurisdictions?
Speaker 3
Yes.
Speaker 10
Okay, got it. Thank you. That's all I have.
Speaker 2
You bet you. Thank you.
Speaker 0
Our next question comes from Paul Patterson of Glenrock Associates. Your line is open.
Speaker 2
Hey, good morning. Good morning. Good morning. So
Speaker 5
I'm afraid I'm going to have to ask again about this CapEx. I apologize for being a little confused here. When you're talking about the incremental opportunity, are you talking about the incremental opportunity in total CapEx spending or in terms of shifting CapEx from Kansas into Missouri into the PISA kind of thing? If you could just I apologize, if you could just clarify that a little bit for me.
Speaker 2
Yes. That's okay. It's both. So first, the 150,000,000 we mentioned specifically is a reallocation. And so it would not change our total $6,000,000,000 estimate that we provided.
So that's number one. Number two, what we've talked about is that we're working on future plans that we'll be talking about later in the year or early next year around what our additional spend might be. And so that's not included in the current plans. And we've not given specific guidance of any sort as to what that amount might be. So that's the difference.
The 150,000,000 does not relate to an increase in total spend. We have future expectations of providing guidance that would discuss any additional spend later in the year or early next year.
Speaker 5
Okay, great. And then you mentioned sort of the education process for lack of a better term in Kansas with respect to how rate making sort of works, if you follow me or how utility investment and what have you does. I'm just wondering when we look at the piece and obviously that's an opportunity and what have you, how confident are you that policymakers actually sort of understand what the that this investment actually will cost? In other words, is there any concern that you might see a situation which sort of has developed in Kansas where there's sort of a question mark, how do we get here, maybe replicating itself potentially in a jurisdiction like Missouri? I just ask that because legislators don't often necessarily know the details of necessarily what they're approving and we do have a useful mechanism here.
But I'm just sort of wondering if there's anything that you guys are looking at going forward in terms of maybe a similar situation or the avoidance of a similar situation that is occurring in Kansas happening in Missouri? Do you follow me?
Speaker 2
I do. What I would say is common sense and I don't to say it, but every state, every legislature, they have their focus based on what's happening in that jurisdiction. And clearly, Missouri has been focused on infrastructure spend and jobs and the opportunity to improve our infrastructure. And that was the basis for PISA. It was a basis for other things across the state as well.
But in particular, with our electric utilities, it was a focus on spending for infrastructure improvement. Kansas has been instead more focused in this last discussion and it's a pretty recent discussion. We had not had this discussion this session before on the level level of of rates. And so they come from a different position, would say. And that's why we believe using and accessing the PISA opportunity, which the state of Missouri clearly would like us to do to spend more on infrastructure in Missouri is an opportunity to reallocate dollars because in Kansas, they're more concerned in holding total costs down.
So it serves both purposes from that perspective. Could the discussion in either state begin to happen in the other state? Sure. That's not the focus of the states at this point, and we're confident in our ability to discuss each in the relative jurisdiction.
Speaker 5
Awesome. Okay, great answer. And then the other thing, just a sort of quick sort of housekeeping question. I was looking through the 10 Q and everything. I just I had a little difficulty finding this.
What's the organic weather adjusted sales growth numbers that you've had for the first half? Organic, in other words, obviously, mergers changed a few things. But you follow what I'm saying, in the respective jurisdictions, how should we think about what weather adjusted sales growth has been year to date?
Speaker 3
Paul, good morning. What we've said is we're targeting total sales growth roughly flat to 50 basis points And in that ZIP
Speaker 5
how has it been for the first half? How has that come in? How the actual has been weather adjusted?
Speaker 3
They've been largely in line with our expectations. Things aren't growing as gangbusters, but we're not seeing any contraction as well.
Speaker 0
Our next question comes from Greg Orrill of UBS. Your line is open.
Speaker 3
Hi. Just a follow-up on the PISA spending. Do you have any sense at this point how it might impact your growth EPS growth guidance?
Speaker 2
Well, we our plan would be that it would improve it to the extent that we did that, but we don't have a range yet because we haven't finished our work on the total dollar amounts. But certainly, that would give us some opportunity for additional growth in spend and EPS that we currently don't have in the plan.
Speaker 3
Thanks.
Speaker 2
You bet.
Speaker 0
Our next question comes from Kevin Fallon of Citadel. Your line is open.
Speaker 11
Yes. Hi. Just back on the PISA CapEx again. Is the incremental opportunity the total $1,000,000,000 or is it the $1,000,000,000 less the $150,000,000 that you've already reallocated?
Speaker 2
The $1,000,000,000 is really a total number. So it includes that 150,000,000 reallocation if that's the way it worked.
Speaker 11
Okay. And if you ultimately sought to do the incremental $850,000,000 additional equity financing for it?
Speaker 2
That's not currently the plan.
Speaker 3
Not currently in the plan. We'd have to look at the financial projections in the model and see what our credit metrics look like.
Speaker 11
And if the legislation is written to allow you to do the incremental $850,000,000 what is that would keep you from going up to the cap?
Speaker 2
Just overall ability to get it done. You got to have projects, But we believe we have that ability. And obviously, we're impacting customers' rates. So we'd be watching how that affected as well. But other than good business judgment around those two things, that's nothing.
That's really what the cap's there for. And
Speaker 11
just to confirm, the current CapEx plan as is right now through the forecast period puts you at the midpoint of the earnings guidance range?
Speaker 3
We haven't said where the CapEx plan places us within the guidance range.
Speaker 5
Okay. You're talking mid term
Speaker 3
or long term or both?
Speaker 11
All right. Listen, thank you very much.
Speaker 2
Yes. Thank you.
Speaker 0
Our next question is a follow-up from Michael Lapides with Goldman Sachs. Your line is open.
Speaker 8
That's hilarious. Hey, guys. Easy question for you, Tony. How of the $110,000,000 of merger synergies for 2019, how much have you realized year to date? What's the E and O and M and G and A year to date?
Speaker 3
Boy, I know year over year variances like year to date were $84,000,000 better than we were last year and $52,000,000 for the quarter. We're ahead of our targets for the synergies. I just don't know the exact number. So it was an easy question, I struck
Speaker 8
out. Yes.
Speaker 2
I'd say, obviously, the total number is not ratable. So but I would say that at midpoint, given all we know, we're, as Tony said, ahead of plan.
Speaker 8
Got it. Okay, guys. Thank you. I'll follow-up offline.
Speaker 6
You bet.
Speaker 0
Our next question comes from Andrew Levi of ExodusPoint. Your line is open.
Speaker 6
Hey guys, how are you? Good. Yourself? I'm doing really well. Just some follow-up questions.
Just on the $850,000,000 of incremental CapEx, when would begin to happen? Would that be next year, 2021, 2022?
Speaker 2
Again, we don't have a plan for that yet. There is nothing to prohibit us from beginning construction and spend as the projects are available and we could start those as appropriate. So obviously, we would map out the plan around our annual plans and budgets and what kind of projects and how long they took to execute on. So but there's no time limitation on how quickly we could get started if we had those plans in place.
Speaker 6
And I'm sorry, maybe I missed it earlier. That $850,000,000 would be spent over what time frame, like how many years?
Speaker 2
We don't really have a time line except for there's a true up of PISA that's a four year true up, fourth year true up. So we're talking about a context of over a time period, but when and how it would be spent, again, haven't developed or published.
Speaker 3
So some maybe parameters handy would be all else being equal, we would be filing a rate case in Missouri for new rates effective in the first part of twenty twenty three. So you back up from that, we'd file and call it early twenty twenty two and you would update a test year kind of the June timeframe of 2022. So that would kind of be ideal. But it doesn't mean we would stop necessarily. It depends on the projects and it depends on the runway and lead time and all that.
But those are just some things you should consider.
Speaker 6
Or is there another parameter where kind of your maximum maximum spend on a year based on how the pizza is written?
Speaker 3
So I believe it's a 3% CAGR.
Speaker 6
So what would that be CapEx wise you think?
Speaker 3
Well, it's the $1,000,000,000 number that we've thrown out.
Speaker 6
We gave you the I'm total saying on an annual basis.
Speaker 2
Yes, it depends on the projects, it depends on the amounts, but there is a 3% cap.
Speaker 6
Okay. And then just the last question, if you were to start spending next year and it's a follow-up with somebody else's question. Let's just assume you start spending next year 'twenty one and then you bought back 36,000,000 shares and then you have this accelerated purchase of another $500,000,000 that I guess is kind of like, I don't know, 46,000,000. Doing dumb math. But instead of, I guess, issuing equity, you could just buy back less shares and that kind of would fund this.
Wouldn't that make more sense versus buying back shares and issuing shares if you needed to, assuming you need to?
Speaker 3
So those are the things that we obviously be looking at, Andy, right, as we're going through the planning horizon and working with operations and the financial modeling team.
Speaker 6
Okay. And I assume we'll get an update at EEI, is that kind of the way to think about it?
Speaker 2
We'll obviously update you at EEI with what we have. And obviously, we'll be working on plans for 2021 around that time. But we traditionally would give earnings guidance and those kind of things at the first of the year.
Speaker 6
Okay. And then the last thing is, just kind of based on what you had said before, I guess, politically, you feel much more comfortable about raising CapEx. There obviously are more cost savings too. So maybe that helps as far as customer bills. But I guess you feel better politically about kind of what's going on to be able to do that.
Is that correct?
Speaker 2
Yes. Again, in Missouri, they specifically put this mechanism in place to encourage us, if you will, allow us to spend additional and feel comfortable with our ability to recover. Same mechanism is not in place in Kansas. And in fact, the discussions are on the current level of rates and concerns around those. So those are two different places with two different focuses as we speak.
Speaker 6
Perfect. Thank you guys very much.
Speaker 2
You bet. Thank you.
Speaker 0
There are no further questions. I'd to turn the call back over to Terry Bassam for any closing remarks.
Speaker 2
All right. Thank you very much. Thank you for joining us and hope everybody has a good rest of the summer. Thank you.
Speaker 0
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.