ORGANIZATION AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2021

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.

•Evergy Kansas Central, Inc. (Evergy Kansas Central) 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, Inc. (Evergy Kansas South).

•Evergy Metro, Inc. (Evergy Metro) 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) is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.

•Evergy Transmission Company, LLC (Evergy Transmission Company) 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 subsidiaries 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.

Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West conduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 15,400 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.

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 2020 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

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 one 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.



	March 31 2021		December 31 2020
Evergy	(millions)
Fuel inventory	$	127.5	$	145.0
Supplies	364.8		359.5
Fuel inventory and supplies	$	492.3	$	504.5
Evergy Kansas Central
Fuel inventory	$	75.5	$	79.3
Supplies	195.7		197.1
Fuel inventory and supplies	$	271.2	$	276.4
Evergy Metro
Fuel inventory	$	36.6	$	44.9
Supplies	130.9		125.5
Fuel inventory and supplies	$	167.5	$	170.4

Property, Plant and Equipment

The following tables summarize the property, plant and equipment of Evergy, Evergy Kansas Central and Evergy Metro.


March 31, 2021	Evergy			Evergy Kansas Central			Evergy Metro
		(millions)
Electric plant in service		$	29,378.9		$	14,239.8		$	11,414.0
Electric plant acquisition adjustment		724.3			724.3			—
Accumulated depreciation		(11,146.4)			(5,356.6)			(4,597.8)
Plant in service, net		18,956.8			9,607.5			6,816.2
Construction work in progress		999.8			565.8			300.5
Nuclear fuel, net		144.7			72.2			72.5
Plant to be retired, net(a)		0.9			0.9			—
Property, plant and equipment, net		$	20,102.2		$	10,246.4		$	7,189.2

December 31, 2020	Evergy			Evergy Kansas Central			Evergy Metro
		(millions)
Electric plant in service		$	28,914.8		$	14,095.1		$	11,161.8
Electric plant acquisition adjustment		724.3			724.3			—
Accumulated depreciation		(10,998.4)			(5,293.5)			(4,532.7)
Plant in service, net		18,640.7			9,525.9			6,629.1
Construction work in progress		1,153.5			589.1			433.9
Nuclear fuel, net		155.9			77.7			78.2
Plant to be retired, net(a)		0.9			0.9			—
Property, plant and equipment, net		$	19,951.0		$	10,193.6		$	7,141.2

(a) As of March 31, 2021 and December 31, 2020, 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 March 31	2021		2020
Evergy	(millions)
Non-service cost component of net benefit cost	$	(14.8)	$	(16.2)
Other	(6.1)		(6.5)
Other expense	$	(20.9)	$	(22.7)
Evergy Kansas Central
Non-service cost component of net benefit cost	$	(3.6)	$	(5.6)
Other	(5.6)		(5.9)
Other expense	$	(9.2)	$	(11.5)
Evergy Metro
Non-service cost component of net benefit cost	$	(7.9)	$	(6.9)
Other	(0.5)		(0.5)
Other expense	$	(8.4)	$	(7.4)

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, restricted stock and a warrant. 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 March 31	2021		2020
Income	(millions, except per share amounts)
Net income	$	194.6	$	72.2
Less: Net income attributable to noncontrolling interests	3.0		2.8
Net income attributable to Evergy, Inc.	$	191.6	$	69.4
Common Shares Outstanding
Weighted average number of common shares outstanding - basic	227.3		227.1
Add: Effect of dilutive securities	0.3		0.4
Weighted average number of common shares outstanding - dilutive	227.6		227.5
Basic and Diluted EPS	$	0.84	$	0.31

Anti-dilutive shares excluded from the computation of diluted EPS for the three months ended March 31, 2021, were 353,806 RSUs with performance measures and 3,950,000 common shares issuable pursuant to a warrant. Anti-dilutive shares excluded from the computation of diluted EPS for the three months ended March 31, 2020, were 175,991 RSUs with performance measures and 58,714 RSUs with only service requirements.

Dividends Declared

In May 2021, Evergy's Board of Directors (Evergy Board) declared a quarterly dividend of $0.535 per share on Evergy's common stock. The common dividend is payable June 21, 2021, to shareholders of record as of May 21, 2021.

Supplemental Cash Flow Information


Evergy
Three Months Ended March 31	2021		2020
Cash paid for (received from):	(millions)
Interest, net of amounts capitalized	$	78.6	$	86.5
Interest of VIEs	0.2		0.6
Income taxes, net of refunds	2.6		0.2
Right-of-use assets obtained in exchange for new operating lease liabilities	2.2		2.6
Right-of-use assets obtained in exchange for new finance lease liabilities	0.2		3.1
Non-cash investing transactions:
Property, plant and equipment additions	104.4		75.7

Non-cash financing transactions:
Issuance of stock for compensation and reinvested dividends	0.7		0.9


Evergy Kansas Central
Three Months Ended March 31	2021		2020
Cash paid for (received from):	(millions)
Interest, net of amounts capitalized	$	31.2	$	37.4
Interest of VIEs	0.2		0.6
Income taxes, net of refunds	2.6		0.2
Right-of-use assets obtained in exchange for new operating lease liabilities	1.5		2.6
Right-of-use assets obtained in exchange for new finance lease liabilities	0.2		1.9
Non-cash investing transactions:
Property, plant and equipment additions	45.4		52.5


Evergy Metro
Three Months Ended March 31	2021		2020
Cash paid for (received from):	(millions)
Interest, net of amounts capitalized	$	18.6	$	18.7
Income taxes, net of refunds	(1.6)		—
Right-of-use assets obtained in exchange for new operating lease liabilities	0.7		—
Right-of-use assets obtained in exchange for new finance lease liabilities	—		1.2
Non-cash investing transactions:
Property, plant and equipment additions	34.6		17.8

February 2021 Winter Weather Event

In February 2021, much of the central and southern United States, including the service territories of the Evergy Companies, experienced a significant winter weather event that resulted in extremely cold temperatures over a multi-day period. This winter weather event resulted in an increase in the demand for natural gas used by the Evergy Companies for generating electricity and also contributed to the limited availability of other generation resources, including coal and renewables, within the SPP Integrated Marketplace. The Evergy Companies are members of the SPP and, as a result, principally sell and purchase power for the Evergy Companies' retail electric customers through the SPP Integrated Marketplace. These circumstances resulted in higher than normal market prices for both natural gas and power for the duration of the winter weather event. These higher than normal market prices also included make-whole payments calculated by the SPP to compensate natural gas generators within the SPP Integrated Marketplace for costs incurred in excess of revenues. As part of the winter weather event and inclusive of the aforementioned items, Evergy incurred natural gas and purchased power costs, net of wholesale revenues, of $341.3 million. This $341.3 million of net fuel and purchased power costs was primarily driven by $297.3 million of costs at Evergy Missouri West and $120.7 million of costs at Evergy Kansas Central, partially offset by $76.7 million of net wholesale revenues at Evergy Metro. The amount of purchased power costs incurred by the Evergy Companies during the winter weather event is subject to resettlement activity and further review by the SPP. This review and any subsequent resettlement activity could result in increases to the final amount of purchased power costs incurred by the Evergy Companies during the winter weather event and these increases could be material.

The Evergy Companies have fuel recovery mechanisms in their Kansas and Missouri jurisdictions, as applicable, that allow them to defer substantially all of any increased fuel and purchased power costs, net of wholesale revenues, to a regulatory asset or liability for future recovery from or refund to customers. Further, in February 2021, the State Corporation Commission of the State of Kansas (KCC) issued an emergency Accounting Authority Order (AAO) that allowed Evergy Kansas Central and Evergy Metro's Kansas jurisdiction to defer to a regulatory asset any extraordinary costs, including carrying costs, incurred to provide electric service during the winter weather event for consideration in future rate proceedings. See Note 4 for additional information regarding the AAO.

As of March 31, 2021, the Evergy Companies have deferred substantially all of the fuel and purchased power costs, net of wholesale revenues, related to the winter weather event to a regulatory asset or liability pursuant to the mechanisms discussed above. While the Evergy Companies expect to recover substantially all of any increased fuel and purchased power costs related to the winter weather event from customers, the timing of the cost recovery could be delayed or spread over a longer than typical recovery timeframe by the KCC or the Public Service Commission of the State of Missouri (MPSC) given the extraordinary nature of the winter weather event and to help moderate monthly customer bill impacts.

The Evergy Companies also engage in limited non-regulated energy marketing activities in various regional power markets that have historically not had a significant impact on the Evergy Companies' results of operations. These energy marketing margins are recorded net in operating revenues on the Evergy Companies' statements of income and comprehensive income. As a result of the elevated market prices experienced in regional power markets in February 2021 across the central and southern United States driven by the winter weather event discussed above,

Evergy and Evergy Kansas Central recorded $96.5 million of energy marketing margins in the first quarter of 2021 related to the winter weather event.