Q3 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- High confidence in growth plans with new large customers and potential incremental load of 500 to 1,000 megawatts, representing incremental tailwinds.
- Significant capital expenditure plans, including substantial solar investments coming online in 2027 and additional capital opportunities with potential new combined cycle gas turbine (CCGT) and combustion turbine (CT) plants, enhancing growth prospects.
- Expectation to grow in the top half of their 4% to 6% target range, with consistent execution and strategies to achieve this growth, which investors appreciate.
- Uncertainty in achieving growth targets due to dependence on securing additional large customers: The company's plan shows high confidence based on three large customers already announced, but signing additional loads would represent only incremental tailwinds.
- Future capital expenditures not yet included could increase financing needs: Certain projects like the Combined Cycle Gas Turbine (CCGT) and Combustion Turbine (CT) have not been included in the current plan, representing additional capital requirements.
- Variability in growth rates due to timing and lack of year-over-year guidance: The company has not provided year-over-year guidance and acknowledges there can be dynamics relating to timing, which may lead to inconsistency in growth expectations.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS | FY 2024 | $3.73 to $3.93 | $3.73 to $3.93 | no change |
Adjusted EPS | FY 2025 | no prior guidance | $3.92 to $4.12 | no prior guidance |
Long-Term Adjusted EPS Growth Target | 2025–2029 | no prior guidance | 4% to 6% CAGR | no prior guidance |
Dividend Growth | FY 2024 | no prior guidance | 4% increase to $2.67 annualized | no prior guidance |
Weather-Normalized Demand Growth | 2029 | no prior guidance | 2% to 3% CAGR | no prior guidance |
Rate Base Growth | 2029 | no prior guidance | 8% CAGR | no prior guidance |
Capital Investment Plan | 2025–2029 | no prior guidance | $16.2B | no prior guidance |
Equity Issuance Plan | 2025–2029 | no prior guidance | No issuance in 2025, $400M in 2026 & 2027, more in 2028 & 2029 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Large new customers (Google, Panasonic, Meta) driving 2%-3% weather-normalized demand growth | Discussed in Q2 2024 , Q1 2024 , Q4 2023 | Continuing 2%-3% growth forecast through 2029, with ~750 MW of collective load | Consistently mentioned |
Expanding capital investment plans (from ~$12.5B to $16.2B) to support rate base growth | Previously at ~$12.5B in Q2 2024, Q1 2024, and Q4 2023 | Newly expanded to $16.2B for 2025-2029, targeting 8% annual rate base growth | Newly expanded |
Potential equity issuance beyond 2026 to fund increasing capital expenditure needs | No equity needed through 2026 in Q2 2024, Q1 2024, and Q4 2023 | Equity issuance planned starting in 2026-2027 (~$400M each), increasing in 2028-2029 | Continued emphasis |
Regulatory and legislative developments shaping cost recovery and authorized returns | Ongoing in Q2 2024 , Q1 2024 , Q4 2023 | Focus on House Bill 2527, rate case cadence (~18 months), Kansas/Missouri proceedings | Ongoing priority |
Labor capitalization changes | Discussed in Q1 2024 regarding a decrease in labor capitalization | No mention | No longer mentioned |
3.6% industrial demand decline highlighted in Q4 2023 | Discussed in Q4 2023 as a temporary 3.6% decline , with slight references in Q2 2024 and Q1 2024 | No mention | No longer mentioned |
Additional data center negotiations for 500-1,000 MW of load | Not mentioned in prior calls | Negotiations ongoing, potentially adding significant load | Newly emerged |
Growing concern that higher capital spending may not fully translate into proportional EPS growth | Briefly noted in Q1 2024 , not explicit in Q2 or Q4 2023 | Analysts raised questions on why increased CapEx yields a modest EPS boost | Increasing caution |
Securing additional large customers and executing on expanded capex could significantly affect long-term earnings | Highlighted in Q2 2024 , Q1 2024 , Q4 2023 | Further load wins (6 GW pipeline) could provide material upside | High impact |
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Potential to Exceed Earnings Growth Guidance
Q: Could new deals push earnings growth above 4–6% range?
A: Management affirmed high confidence in achieving the top half of their 4% to 6% earnings growth range through 2029 with the current three announced customers. They indicated that landing additional loads would be an upside opportunity, potentially pushing growth even higher, depending on the size and rates of these deals. They see real tailwinds and have a big pipeline with a couple of very active discussions underway. -
Rate Base Growth vs. EPS Growth
Q: Why does 8% rate base growth only increase EPS growth by 0.5%?
A: Management explained that even though rate base growth increased to 8% from the previous 6%, the EPS CAGR guidance remains in the top half of 4% to 6% due to conservatism and the timing of capital investments. The significant capital investments are larger in the later years of the plan, amplifying profitability drivers over time. -
Equity Issuance and Funding Plans
Q: How will increased CapEx be funded, and what about equity issuance?
A: The company does not anticipate issuing new common equity in 2025. Equity needs are expected to begin in 2026 and 2027 due to the added capital in 2025 and 2026. Management aims to maintain a 15% FFO to debt target throughout and will be thoughtful about market conditions. -
Regulatory Lag Impact
Q: How should we think about regulatory lag over the 5-year plan?
A: Management is pleased to have PISA in both Kansas and Missouri to manage regulatory lag. PISA provides mechanisms like 90% deferral in Kansas (slightly ahead of Missouri's 85%). A regular cadence of rate cases, roughly every 18 months, will help stay current on investment recoveries and offer predictable impacts on customers. -
Inclusion of Gas Plants in Plan
Q: Why not include the CCGT now; is it tied to incremental load?
A: Management views the exclusion of the CCGT and CT as a level of conservatism. These gas plants, needed based on current load forecasts, are scheduled to come online in 2031 to 2032. There is broad support for these investments, but they wanted to present a plan they have high confidence in executing. -
Accelerating CapEx and Growth
Q: Does including the CCCT accelerate the plan further?
A: Adding the two gas plants would increase capital investment towards the back end of the plan, contributing to further rate base growth. These units come online in 2031 and 2032, aligning with a balanced generation mix and affordability priorities. -
Cost Estimates of Gas Plants
Q: Can you provide cost estimates for the gas plants?
A: Costs have risen since prior estimates due to market conditions. While specific numbers are confidential, management indicated that costs are in line with other utilities and that the majority of spending will follow predetermination. -
CapEx Allocation Between T&D and Generation
Q: How much of new CapEx is T&D versus generation?
A: Of the incremental CapEx, approximately $2.4 billion is allocated to generation, mainly for the gas plants, and about $1.3 billion is for distribution projects focused on reliability and growth. -
Impact of Regulatory Strategies on Earnings
Q: How will the capital structure workshop affect the 2025 rate case?
A: The workshop is an opportunity for dialogue on competitiveness and attracting capital in Kansas, influencing how the Kansas rate case advances next year. The general rate case filing in Kansas Central is planned for the first quarter of 2025, with rates effective in the fourth quarter. -
Additional Load Negotiations
Q: When might new large customer deals be announced?
A: Management is targeting to wrap up discussions with potential large customers in the next few months, possibly by year-end, but timing depends on both parties. There's strong interest and active discussions for incremental loads of 500 to 1,000 megawatts. -
Potential to Exceed 6% Growth with New Loads
Q: Could new deals push growth above 6%?
A: While successful negotiations with additional customers could provide upside, management emphasized high confidence in the current plan and potential tailwinds, but did not commit to exceeding the 6% growth ceiling. -
Timing and Impact of Solar Investments
Q: Are you uncertain about solar investments being PPAs or owned?
A: The company expects the upcoming solar investments, coming online in 2027, to be through PPAs. This reflects their conservative approach and desire to have high confidence in the plan's execution. -
Regulatory Lag Mitigation Strategies
Q: Are you modeling substantial improvement in regulatory lag?
A: With PISA provisions and regular rate case cadence, regulatory lag is less burdensome than in previous plans. However, there's still some lag, and it's important to stay current on investment recoveries given the large investment profile over the next five years. -
Rate Trajectory Expectations
Q: What are the expected rate impacts for customers through 2029?
A: The goal is to keep rate increases in line with inflation, maintaining and advancing regional rate competitiveness. The plan considers the balance between significant investments and customer affordability. -
Technology and Environmental Considerations
Q: Are the new gas plants incorporating advanced technologies like CCS?
A: The gas plants will utilize modern, efficient, and proven technologies but will not include carbon capture or sequestration at this time. Future developments may enable such technologies, but they are not part of the baseline plan.