Executive Summary / Key Takeaways

• Evergy is strategically positioned to capitalize on unprecedented economic development in its Kansas and Missouri service territory, driven by a robust pipeline of potential large customers exceeding 12 GW, including announced wins like Google (GOOGL), Panasonic (PCRFY), and Meta (META).
• A substantial $17.5 billion capital investment plan through 2029, focused on transmission, distribution, and new generation, is designed to support this growth, expected to drive an 8.5% annualized rate base CAGR.
• Constructive legislative and regulatory frameworks in both states, including new provisions for CWIP and expanded PISA, are crucial enablers for timely cost recovery and financing the significant infrastructure build-out.
• The company has reaffirmed its 2025 adjusted EPS guidance of $3.92 to $4.12 and set a long-term target of 4% to 6% growth through 2029 from the $4.02 midpoint, anticipating performance in the top half of the range with potential upside from securing additional large customer loads.
• While facing risks such as environmental compliance costs, litigation, and operational challenges from severe weather, Evergy's strategic focus on affordability, reliability, and a balanced energy transition underpins its investment thesis in a competitive utility landscape.

Powering the Heartland's Transformation

Evergy, Inc. (NASDAQ: EVRG), a public utility holding company established in 2017, stands at a pivotal moment, poised to leverage its position in the heartland to fuel significant growth. Operating primarily through its regulated electric utility subsidiaries across Kansas and Missouri, Evergy serves approximately 1.7 million customers, managing a diverse portfolio of generation, transmission, and distribution assets. The company's strategic pillars – Affordability, Reliability, and Sustainability – are not merely corporate buzzwords but are actively shaping its response to a burgeoning economic landscape and intensifying competitive pressures within the utility sector.

Historically, Evergy has focused on integrating its legacy operations, achieving notable improvements in system reliability in recent years. Its strategic planning is guided by a triennial Integrated Resource Plan (IRP) process, adapting its long-term supply strategy to evolving demand forecasts and regulatory requirements. This foundational approach has positioned Evergy to respond to the current wave of economic development sweeping through its service territory.

The competitive landscape for regulated utilities like Evergy involves both direct peers and indirect challenges. Direct competitors such as Ameren (AEE), Xcel Energy (XEL), Duke Energy (DUK), and CenterPoint Energy (CNP) operate under similar regulatory models and compete for investment capital, talent, and increasingly, large industrial and tech loads. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Evergy holds an estimated 2-3% of the U.S. electric utility market. Comparative analysis indicates that Evergy, with its diverse energy mix including significant renewables and nuclear capacity, demonstrates efficiency in low-emission generation relative to some peers. Its focus on localized energy solutions and customer-centric innovations like advanced metering infrastructure provides a degree of differentiation. However, larger peers like Duke and Xcel often benefit from greater scale, potentially leading to lower per-unit operating costs and faster technology deployment. Evergy's financial metrics, such as operating margins (18-22% vs. peers' 20-28%) and ROIC (7-9% vs. peers' 8-10%), suggest areas where scale and operational efficiency could be enhanced relative to top-performing competitors. Furthermore, Evergy's debt levels (Debt/Equity ratio of 1.45) are slightly higher than some peers, potentially impacting financial flexibility. Indirect competition stems from decentralized energy solutions like rooftop solar and battery storage offered by companies like Tesla (TSLA), which can present a cost-effective alternative for some customers, requiring utilities to adapt their service models and rate structures.

Evergy's technological approach is centered on building a balanced, resilient, and increasingly cleaner energy portfolio and modernizing its grid infrastructure. While the company does not highlight a single, proprietary technological differentiator in the vein of a unique manufacturing process, its strategy involves adopting and integrating advanced technologies across its operations. This includes investing in the "latest, most efficient new technologies for dispatchable generation," such as hydrogen-ready natural gas plants, and deploying utility-scale solar, marking its first ventures into company-owned large-scale solar facilities. On the grid side, investments in transmission and distribution infrastructure are focused on enhancing reliability and resiliency, incorporating technologies for grid modernization. Management emphasizes that this balanced portfolio approach, combining intermittent renewables with flexible dispatchable resources and a modernized grid, is crucial for ensuring reliability and affordability while advancing sustainability goals and enabling the integration of large new loads. This strategic integration of diverse generation technologies and grid modernization efforts is Evergy's primary technological response to the evolving energy landscape and competitive demands.

Fueling a Generational Opportunity

The most compelling narrative for Evergy today is the transformative economic development opportunity unfolding across its service territory. The company boasts a robust pipeline of potential large customers, which has grown to exceed 12 gigawatts of demand. This includes significant announced wins totaling approximately 800 MW, such as Google's data center, Panasonic's EV battery manufacturing facility, and Meta's data center, along with two traditional data centers. These projects alone are expected to contribute approximately 500 MW of new load by 2029, with the remainder ramping up into the early 2030s. Beyond these, Evergy is in advanced discussions with customers representing another 1.6 GW (the "finalizing agreements" category), with about 600 MW potentially coming online by 2029, and a further 3 GW in "advanced discussions" where customers have already acquired land or presented site plans.

This influx of large, energy-intensive customers is a game-changer for a regulated utility. It provides a significant boost to demand growth, moving the company's weather-normalized demand growth forecast to 2% to 3% through 2029 based only on announced projects, with the potential to reach 4% to 5% if customers in the "finalizing agreements" category materialize. Crucially, these large loads help spread the fixed costs of the utility system over a broader base, which can contribute to keeping rates affordable for all customers – a key strategic objective for Evergy and a factor in attracting further economic development.

To meet this burgeoning demand and reinforce system reliability, Evergy is embarking on a substantial capital investment program. The updated rolling five-year plan for 2025-2029 totals an impressive $17.5 billion, a significant increase from prior forecasts. This investment is heavily weighted towards modernizing the transmission and distribution grid to enhance reliability and resiliency, but also includes over 2.1 GW of new generation. Announced generation additions include two combined-cycle natural gas plants in Kansas (~705 MW each, expected 2029/2030), a simple-cycle gas plant in Missouri (440 MW, expected 2030), and three utility-scale solar facilities (totaling 325 MW, expected 2027). These additions reflect the company's "all of the above" strategy, aiming for a balanced mix that provides both emissions-free energy and reliable, dispatchable power needed to support a modern grid and meet peak demand, especially as intermittent renewables grow.

Financing this ambitious capital plan is supported by constructive legislative and regulatory developments in both Kansas and Missouri. Kansas House Bill 2527, effective July 2024, introduced Plant-in-Service Accounting (PISA) with a 90% deferral and a Construction Work in Progress (CWIP) mechanism for new natural gas units. Similarly, Missouri Senate Bill 4, signed into law in April 2025, established new cost recovery mechanisms for natural gas units, extended PISA provisions, and enabled CWIP for new gas plants. Management has described these legislative outcomes as transformative, providing essential tools to mitigate regulatory lag and support the company's credit profile as it undertakes significant construction projects. The company plans a regular cadence of rate case filings, approximately every 18 months, to ensure timely recovery of its investments, balancing the need for financial stability with the goal of predictable rate impacts for customers.

Performance, Outlook, and Financial Strength

Evergy's recent financial performance reflects the early impacts of its strategic initiatives and the evolving operating environment. For the first quarter of 2025, the company reported adjusted earnings of $0.54 per share, flat compared to the prior year period. Results were influenced by the recovery of regulated investments, which helped offset lower industrial demand (partially due to a temporary customer outage), higher interest expense (driven by increased debt levels), and increased depreciation and amortization. While absolute retail demand grew 2.7% in Q1 2025, the benefit to margin from colder weather was limited by declining block pricing structures in winter months. Full-year 2024 adjusted earnings were $3.81 per share, an increase from $3.54 in 2023, demonstrating the company's ability to manage costs effectively despite weather headwinds. Weather-normalized retail sales showed positive trends in 2024, particularly in the residential and commercial sectors, with initial contributions from the Meta data center.

Looking ahead, Evergy has reaffirmed its 2025 adjusted EPS guidance range of $3.92 to $4.12 per share, with a midpoint of $4.02. Management expressed confidence in achieving this target, citing strong underlying operations, ongoing cost management efforts, and an expected rebound in weather-normalized demand in the latter half of the year, supplemented by revenue from regulated investments. The company has also established a long-term adjusted EPS growth target of 4% to 6% through 2029, based on the 2025 midpoint. Management anticipates performing in the top half of this range from 2026 to 2029, driven by the $17.5 billion capital plan and the expected ramp-up of large customer loads. They explicitly note that this forecast does not include potential upside from securing additional customers from the extensive pipeline beyond those already announced.

Financially, Evergy aims to maintain a prudent balance sheet, targeting an FFO to debt ratio of approximately 15% throughout the forecast period. The capital plan will be funded through a mix of cash flow from operations, debt, and equity. The company anticipates approximately $2.8 billion in equity issuances across 2026-2029, with around $1.2 billion expected in 2026 and 2027 combined. Notably, the 2025 guidance does not contemplate new equity issuances this year. Management suggests that securing additional large customer wins could provide a substantial benefit to operating cash flow, potentially moderating future equity needs for the current capital plan.

The company retains flexibility in its financing approach, including potentially establishing an ATM program in 2025 for issuances settling in future years. Recent debt activity includes the issuance of $300 million in First Mortgage Bonds and $300 million in Notes by Evergy Kansas Central in March 2025. While Moody's recently adjusted Evergy Missouri West's credit outlook and ratings in April 2025, Evergy remains in compliance with its debt covenants.

Comparing Evergy's financial health to its peers using TTM data reveals a mixed picture. Evergy's Gross Profit Margin (47.48%) and EBITDA Margin (45.43%) are competitive, suggesting solid operational efficiency in energy production and delivery. Its Operating Profit Margin (25.50%) is also respectable within the sector. However, its Net Profit Margin (14.86%) and Return on Equity (ROE of 9-10% based on historical data, TTM 9%) are in line with or slightly below some higher-performing peers like Duke (Net Margin 15%, ROE 11-13%). The Debt/Equity ratio (TTM 1.45) is somewhat higher than some competitors, which, combined with rising interest rates, contributes to increased interest expense and could constrain financial flexibility compared to peers with stronger balance sheets. Cash flow generation, particularly Free Cash Flow per Share (TTM -$0.85), reflects the significant capital investment cycle, which is common in the industry but highlights the funding requirements. The P/E ratio (TTM 17.71) suggests a valuation broadly in line with the sector, while the Dividend Yield (TTM 3.93%) offers an attractive income component. The "so what" for investors is that while Evergy is executing a growth strategy that should improve future financial metrics, its current profitability and balance sheet leverage metrics suggest it is not yet at the top tier of the utility sector, requiring careful execution to realize the full potential of the capital plan and economic development opportunities.

Risks and Considerations

Despite the compelling growth narrative, Evergy faces several pertinent risks that could impact its ability to execute its plan and achieve its financial targets. Regulatory risk remains significant; outcomes of rate cases, predetermination filings, and CCN applications must be constructive to ensure timely recovery of and return on the substantial capital investments. Decisions by state commissions regarding authorized returns, capital structure, and the prudency of expenditures are critical.

Environmental risks pose potential material costs. Compliance with evolving regulations related to Ozone Interstate Transport, Particulate Matter NAAQS, Regional Haze Rule, and Greenhouse Gases could require significant future investments in emission controls or changes to generation operations. The management of Coal Combustion Residuals (CCRs) also presents ongoing compliance costs and potential liabilities, including litigation risks such as the lawsuits related to the Montrose Station CCRs landfill. While Evergy intends to vigorously defend itself against these claims, the outcome and potential damages are uncertain.

Operational risks include the impact of severe weather events, which can cause significant damage, outages, and restoration costs, as experienced in Q2 2024. Supply chain disruptions, labor availability, and the performance of the generation fleet (including planned and unplanned outages, such as the Wolf Creek refueling outage planned for Q4 2025) can affect operational efficiency and costs. Financial risks include volatility in interest rates, which impacts borrowing costs, and maintaining access to capital markets to fund the large investment plan. While recent legislative changes and the growth outlook are supportive, adverse changes in credit ratings could increase financing costs. Litigation, such as the patent infringement lawsuit filed by Birchtech Corp. in early 2025, also presents potential financial and operational risks.

From a competitive standpoint, while Evergy is well-positioned with its pipeline, the environment for attracting large loads is competitive. Other states and utilities are also vying for these projects, and Evergy must remain competitive on rates, reliability, and service offerings. The successful development and integration of new generation and transmission infrastructure are essential to meet the specific needs and timelines of these large customers.

Conclusion

Evergy is embarking on a transformative period, driven by a confluence of factors including a robust economic development pipeline, a substantial capital investment plan, and supportive legislative and regulatory frameworks. The company's strategy, centered on affordability, reliability, and sustainability, is directly aligned with the needs of its growing service territory and positions it to capitalize on the increasing demand for electricity. The $17.5 billion infrastructure push, coupled with new generation additions and grid modernization efforts, provides a clear path for rate base growth and future earnings.

While challenges and risks, particularly related to environmental compliance, regulatory outcomes, and operational execution, must be actively managed, the potential upside from securing additional large customer loads beyond those already announced represents a significant tailwind for the long-term growth trajectory. Evergy's commitment to a balanced energy transition and its efforts to enhance regional rate competitiveness are crucial in navigating the competitive landscape and ensuring sustainable growth. For investors, the story is one of a regulated utility leveraging its geographic advantages and strategic investments to deliver consistent earnings growth, with the potential for accelerated performance as the heartland's economic transformation continues to unfold.