SEC Filing | Evergy, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _______to_______

https://cdn.kscope.io/6bb86f2c2826ed896fd8ca55a1404791-evergylogoa14.jpg



	Exact name of registrant as specified in its charter,
Commission	state of incorporation, address of principal	I.R.S. Employer
File Number	executive offices and telephone number	Identification Number

001-38515	EVERGY, INC.	82-2733395

(a Missouri corporation)

1200 Main Street

Kansas City, Missouri 64105

(816) 556-2200




001-03523	WESTAR ENERGY, INC.	48-0290150

(a Kansas corporation)

818 South Kansas Avenue

Topeka, Kansas 66612

(785) 575-6300




000-51873	KANSAS CITY POWER & LIGHT COMPANY	44-0308720

(a Missouri corporation)

1200 Main Street

Kansas City, Missouri 64105

(816) 556-2200



	Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Evergy, Inc. common stock	EVRG	New York Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Evergy, Inc.

Yes

☐

Westar Energy, Inc.

Yes

☐

Kansas City Power & Light Company

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Evergy, Inc.

Yes

☐

Westar Energy, Inc.

Yes

☐

Kansas City Power & Light Company

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Evergy, Inc.

Large Accelerated Filer

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

Westar Energy, Inc.

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

Kansas City Power & Light Company

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Evergy, Inc.

☐

Westar Energy, Inc.

☐

Kansas City Power & Light Company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Evergy, Inc.

Yes

☐

Westar Energy, Inc.

Yes

☐

Kansas City Power & Light Company

Yes

☐

On August 2, 2019, Evergy, Inc. had 235,467,484 shares of common stock outstanding. On August 2, 2019, Kansas City Power & Light Company and Westar Energy, Inc. each had one share of common stock outstanding and held by Evergy, Inc.

Westar Energy, Inc. and Kansas City Power & Light Company meet the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format.

This combined Quarterly Report on Form 10-Q is provided by the following registrants: Evergy, Inc. (Evergy), Westar Energy, Inc. (Westar Energy) and Kansas City Power & Light Company (KCP&L) (collectively, the Evergy Companies). Information relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

This report should be read in its entirety. No one section of the report deals with all aspects of the subject matter. It should be read in conjunction with the consolidated financial statements and related notes and with the management's discussion and analysis of financial condition and results of operations included in the 2018 Form 10-K for each of Evergy, Westar Energy and KCP&L.

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TABLE OF CONTENTS
			Page Number
Cautionary Statements Regarding Certain Forward-Looking Information			4
Glossary of Terms			5

Part I - Financial Information

Item 1.	Financial Statements
	Evergy, Inc.
	Unaudited Consolidated Balance Sheets		7
	Unaudited Consolidated Statements of Comprehensive Income		9
	Unaudited Consolidated Statements of Cash Flows		10
	Unaudited Consolidated Statements of Changes in Equity		11
	Westar Energy, Inc.
	Unaudited Consolidated Balance Sheets		12
	Unaudited Consolidated Statements of Income		14
	Unaudited Consolidated Statements of Cash Flows		15
	Unaudited Consolidated Statements of Changes in Equity		16
	Kansas City Power & Light Company
	Unaudited Consolidated Balance Sheets		17
	Unaudited Consolidated Statements of Comprehensive Income		19
	Unaudited Consolidated Statements of Cash Flows		20
	Unaudited Consolidated Statements of Changes in Equity		21

	Combined Notes to Unaudited Consolidated Financial Statements for Evergy, Inc., Westar Energy, Inc. and Kansas City Power & Light Company		22
	Note 1:	Organization and Basis of Presentation	22
	Note 2:	Merger of Great Plains Energy and Westar Energy	27
	Note 3:	Revenue	29
	Note 4:	Receivables	31
	Note 5:	Rate Matters and Regulation	32
	Note 6:	Goodwill	33
	Note 7:	Pension Plans and Post-Retirement Benefits	33
	Note 8:	Short-Term Borrowings and Short-Term Bank Lines of Credit	36
	Note 9:	Long-Term Debt	36
	Note 10:	Fair Value Measurements	37
	Note 11:	Commitments and Contingencies	42
	Note 12:	Related Party Transactions and Relationships	46
	Note 13:	Shareholders' Equity	47
	Note 14:	Taxes	48
	Note 15:	Leases	51
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		55
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		70
Item 4.	Controls and Procedures		70

Part II - Other Information

Item 1.	Legal Proceedings		71
Item 1A.	Risk Factors		72
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		72
Item 3.	Defaults Upon Senior Securities		72
Item 4.	Mine Safety Disclosures		72
Item 5.	Other Information		72
Item 6.	Exhibits		73

Signatures			74

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CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION

Statements made in this report that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, statements relating to the expected financial and operational benefits of the merger of Great Plains Energy Incorporated (Great Plains Energy) and Westar Energy that resulted in the creation of Evergy (including cost savings, operational efficiencies and the impact of the merger on earnings per share), cost estimates of capital projects, dividend growth, share repurchases, balance sheet and credit ratings, rebates to customers, the outcome of regulatory and legal proceedings, employee issues and other matters affecting future operations.

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Evergy Companies are providing a number of important factors that could cause actual results to differ materially from the provided forward-looking information. These important factors include: future economic conditions and any related impact on sales, prices and costs; prices and availability of electricity in wholesale markets; market perception of the energy industry and the Evergy Companies; changes in business strategy or operations; the impact of unpredictable federal, state and local political, legislative, judicial and regulatory actions or developments, including deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates that Westar Energy and KCP&L (or other regulated subsidiaries of Evergy) can charge for electricity; changes in applicable laws, regulations, rules, principles or practices, or the interpretations thereof, governing tax, accounting and environmental matters, including air and water quality and waste management and disposal; changes in the energy trading markets in which the Evergy Companies participate, including retroactive repricing of transactions by regional transmission organizations (RTO) and independent system operators; the impact of climate change, including reduced demand for coal-based energy because of actual or perceived climate impacts and the development of alternate energy sources; financial market conditions and performance, including changes in interest rates and credit spreads and in availability and cost of capital and the effects on derivatives and hedges, nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; the transition to a replacement for the LIBOR benchmark interest rate; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of terrorist acts, including cyber terrorism; ability to carry out marketing and sales plans; weather conditions, including weather-related damage and the impact on sales, prices and costs; cost, availability, quality and timely provision of equipment, supplies, labor and fuel; the inherent uncertainties in estimating the effects of weather, economic conditions, climate change and other factors on customer consumption and financial results; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of generation, transmission, distribution or other projects; the Evergy Companies' ability to successfully manage their transmission and distribution development plans and transmission joint ventures; the inherent risks associated with the ownership and operation of a nuclear facility, including environmental, health, safety, regulatory and financial risks; workforce risks, including increased costs of retirement, health care and other benefits; the possibility that the expected value creation from the merger will not be realized, or will not be realized within the expected time period; difficulties related to the integration of the two companies; disruption from the merger making it more difficult to maintain relationships with customers, employees, regulators or suppliers; the diversion of management time; and other risks and uncertainties.

This list of factors is not all-inclusive because it is not possible to predict all factors. Part II, Item 1A, Risk Factors included in this report, together with the risk factors included in the Evergy Companies' combined 2018 Form 10-K under Part I, Item 1A, should be carefully read for further understanding of potential risks for the Evergy Companies. Other sections of this report and other periodic reports filed by the Evergy Companies with the Securities and Exchange Commission (SEC) should also be read for more information regarding risk factors. Each forward-looking statement speaks only as of the date of the particular statement. The Evergy Companies undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.



Abbreviation or Acronym		Definition

ACE		Affordable Clean Energy
AEP		American Electric Power Company, Inc.
AFUDC		Allowance for Funds Used During Construction
Amended Merger Agreement		Amended and Restated Agreement and Plan of Merger, dated as of July 9, 2017, by and among Great Plains Energy, Westar Energy, Monarch Energy Holding, Inc. and King Energy, Inc.
AROs		Asset Retirement Obligations
ASC		Accounting Standards Codification
ASR		Accelerated share repurchase
ASU		Accounting Standards Update
BSER		Best system of emission reduction
CCRs		Coal combustion residuals
CAA		Clean Air Act Amendments of 1990
CO₂		Carbon dioxide
COLI		Corporate-owned life insurance
CPP		Clean Power Plan
CWA		Clean Water Act
D.C. Circuit		U.S. Court of Appeals for the D.C. Circuit
EGU		Electric utility generating unit
ELG		Effluent limitations guidelines
EPA		Environmental Protection Agency
EPS		Earnings per common share
ERISA		Employee Retirement Income Security Act of 1974, as amended
ERSP		Earnings Review and Sharing Plan
Evergy		Evergy, Inc. and its consolidated subsidiaries
Evergy Board		Evergy Board of Directors
Evergy Companies		Evergy, Westar Energy, and KCP&L, collectively, which are individual registrants within the Evergy consolidated group
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
GAAP		Generally Accepted Accounting Principles
GHG		Greenhouse gas
GMO		KCP&L Greater Missouri Operations Company, a wholly-owned subsidiary of Evergy
GPETHC		GPE Transmission Holding Company LLC, a wholly-owned subsidiary of Evergy
Great Plains Energy		Great Plains Energy Incorporated
KCC		State Corporation Commission of the State of Kansas
KCP&L		Kansas City Power & Light Company, a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries
KCP&L Mortgage Indenture		KCP&L General Mortgage Indenture and Deed of Trust dated as of December 1, 1986, as supplemented
KDHE		Kansas Department of Health & Environment
KGE		Kansas Gas and Electric Company, a wholly-owned subsidiary of Westar Energy

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Abbreviation or Acronym		Definition

King Energy		King Energy, Inc., a wholly-owned subsidiary of Evergy
MDNR		Missouri Department of Natural Resources
MECG		Midwest Energy Consumers Group
MEEIA		Missouri Energy Efficiency Investment Act
Monarch Energy		Monarch Energy Holding, Inc.
MPSC		Public Service Commission of the State of Missouri
MW		Megawatt
MWh		Megawatt hour
NAAQS		National Ambient Air Quality Standards
NAV		Net Asset Value
NO₂		Nitrogen dioxide
NSR		New source review
OPC		Office of the Public Counsel
PM		Particulate matter
Prairie Wind		Prairie Wind Transmission, LLC, 50% owned by Westar Energy
RSU		Restricted share unit
RTO		Regional transmission organization
SEC		Securities and Exchange Commission
SO₂		Sulfur dioxide
SPP		Southwest Power Pool, Inc.
TCJA		Tax Cuts and Jobs Act
TFR		Transmission formula rate
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