Sign in

    Evergy Inc (EVRG)

    Q4 2023 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$50.51October 1, 2023
    Final Price$52.20December 31, 2023
    Price Change$1.69
    % Change+3.35%

    What went well

    • Evergy expects 2% to 3% annual weather-normalized demand growth through 2026, driven by large new industrial customers like Panasonic and Meta coming online, which is above the traditional base planning assumption of 0.5% to 1%.
    • Evergy has an updated capital expenditure plan totaling $12.5 billion over 2024-2028, implying rate base growth of approximately 6%, focusing on investments in transmission, distribution, and new generation resources, which supports long-term growth.
    • Evergy anticipates no need to issue new equity through 2026 and maintains a target dividend payout ratio of 60% to 70%, which supports its capital plan funding while providing returns to investors.

    What went wrong

    • Industrial demand decreased by 3.6% in 2023, and even though a partial recovery is expected in 2024, it is not expected to return to 2022 levels, potentially impacting revenue growth.
    • Incremental demand from large industrial customers may not significantly boost earnings due to rate incentives and special contracts; thus, the expected 2% to 3% demand growth may not translate into proportional earnings growth.
    • The company anticipates the need to issue new equity beyond 2026 to fund capital investments and maintain credit ratios, potentially leading to shareholder dilution.

    Q&A Summary

    1. Equity Needs Beyond 2026
      Q: Will you need to issue equity after 2026?
      A: We expect to fund our capital investment program without issuing new equity through 2026, utilizing surplus from transmission investments and robust operating cash flow. Beyond 2026, we may pivot to equity needs, but we'll proceed prudently to maintain EPS growth and credit ratios.

    2. CapEx Plans and Kansas Legislation
      Q: Will legislative outcomes affect your CapEx plans?
      A: Yes, our capital investment in Kansas could increase if we reach a constructive legislative compromise supporting infrastructure investment. We're evaluating opportunities and will proceed with full transparency to stakeholders and the market.

    3. Industrial Load Growth Impact
      Q: What's the earnings impact of new industrial customers?
      A: Large industrial customers add load, but their earnings impact is less than residential and commercial customers due to rate incentives. We expect a tailwind that builds over time, with modest contributions starting in 2024 and reaching pace into 2026.

    4. 2028 CapEx Spike
      Q: Why is there a big CapEx increase in 2028?
      A: The increase is driven by planned investments in new dispatchable generation, particularly natural gas plants. This entails building CWIP balances, and we're seeking timely recovery on CWIP through legislative initiatives.

    5. Missouri West Rate Case Outlook
      Q: Any major concerns in the Missouri West case?
      A: It's a straightforward rate case focused on capital additions and higher cost of capital. We've settled on the Dogwood plant, and we don't anticipate significant pushback on other issues.

    6. Dividend Growth and EPS
      Q: Will a lower dividend increase help EPS growth?
      A: Marginally. Aligning dividend growth with our earnings growth helps fund capital expenditures and maintain credit ratios. We target a payout ratio of 60%–70%.

    7. Industrial Load Earnings Sensitivity
      Q: What's the rate impact of industrial load growth?
      A: Industrial load helps cover fixed costs, but savings are shared through rate cases. Growth benefits customers and has some EPS impact.

    Related Publications