Evergy, Inc. (EVRG) Earnings Call Transcript & Summary

Good morning, and welcome to Evergy's 2021 Annual Shareholder Meeting. I will now turn the call over to Evergy.

Good morning. I'm Mark Ruelle, Chairman of the Evergy Board of Directors. Welcome, and thank you for joining us for our 2021 Annual Shareholders meeting. We appreciate the willingness to adapt to the online format we're using again this year to support the health and well-being of our shareholders and the communities we serve. Our shareholders can vote and ask questions using the web portal instead of the typical in-person ballot and discussion period. As we get started, we'd like to take a moment to thank and honor the tireless and brave workers in our company, our communities and our country, who have kept things running and doing their best to keep people safe during the pandemic. Please join me in expressing our heartfelt appreciation to all frontline workers. Today's agenda is reflected on the web portal. The rules of conduct that govern our meeting are available there as well. Regarding the order of our meeting, after a safety moment, we'll make introductions and then conduct the business portion of our meeting. And then afterwards, our President and CEO, David Campbell, will share remarks, then we'll entertain your questions at the end of the meeting. Evergy promotes an unwavering commitment to safety and emphasizes that commitment by opening all of our meetings with a safety reminder. Today, our virtual meeting is an indicator of our safety mindset and the importance of staying vigilant during the pandemic. The vaccine rollout is a game changer for our company, our communities and our country. Please continue to adhere to appropriate safety measures and encourage others to do the same until the pandemic is behind us. With the progress we've made, we're optimistic this will all soon be behind us. I'm immensely proud of our employees' response to the pandemic. Our plant employees, linemen and field employees have performed a vital role on the front lines this past year. They successfully implemented extra safety precautions to keep the lights on for our customers, helping many of them work from home in a model that so much of our economy adopted. Simply put, without a reliable power grid, the remote working model would have been impossible. At the same time, our own customer care, information technology and office employees successfully deployed work from home technology to keep our customer systems business and business processes up and running. I'm pleased to report that our employees rose to the challenge of COVID-19 and adapted as needed to ensure uninterrupted service to our customers while protecting their own health and safety and that of their families and our communities. The Board of Directors set March 18, 2021, as the record date for determining shareholders entitled to vote at this meeting. An affidavit has been delivered, confirming that materials for this meeting were mailed beginning on March 24, 2021, to all identified shareholders as of the record date and that the documents also were made available electronically to shareholders via the Internet. The shareholder list shows that as of the record date, approximately 227 million shares of common stock were outstanding and entitled to vote at this meeting. Our inspectors of election inform us that a quorum is present for purposes of transacting business. Most, if not all of you, I surmise, have already voted. Shareholders who sent in proxies or voted via telephone or Internet need not take any further action unless they wish to change their vote. If you have not yet voted, or if you wish to change your vote, you may do so now by clicking on the voting button on the web portal and following the instructions there at any time before the polls close. While the polls remain open, I'd like to introduce the Evergy Board of Directors and senior officers attending today's meeting: David Campbell, Molly Hale Carter, Thomas Hyde, B. Anthony Isaac, Paul Keglevic, Mary Landrieu, Sandra Lawrence, Anne Murtlow, Sandra Price, S. Carl Soderstrom Jr., John Arthur Stall and C. John Wilder. We welcome Senator Mary Landrieu and John Wilder, both of whom recently joined the Board to their first Evergy shareholder meeting. At the same time, we say farewell to a director who is retiring from the Board. Today, we thank an Honor Richard Hawley for his excellent service. We appreciate the significant contributions and broad executive experience Rick shared with the company, and in particular, lending is exceptional accounting and auditing experience as a member of our Audit committee. I'll also note that Kirk Andrews relinquished his board seat in February as he started his new role as our Executive Vice President and Chief Financial Officer. Kirk, we thank you for your able Board service as well and look forward to your leadership as our CFO. I'd like to introduce our other senior officers. They are Kevin Bryant, Executive Vice President and Chief Operating Officer; Greg Greenwood, Executive Vice President, Strategy and Chief Administrative Officer; Jerl Banning, Senior Vice President and Chief People Officer; Chuck Caisley, Senior Vice President, Marketing and Public Affairs and Chief Customer Officer; Heather Humphrey, Senior Vice President, General Counsel and Corporate Secretary; and Charles King, Senior Vice President and Chief Technology Officer. Also joining us today are Kim Felker and others from Deloitte & Touche, Evergy's independent public accounting firm. Finally, the company has appointed Nancy HoffMan and Peter Scheibelein of Broadridge Financial services to act as independent inspectors of election. They are with us today. They took the oath of inspection before the meeting. The inspectors of election will certify the voting results after the meeting, and those data will be filed with the Securities and Exchange Commission. As I mentioned a few moments ago, after we adjourn the formal meeting, we will provide time for general questions related to today's meeting. Validated shareholders may ask questions in the designated field on the web portal. Out of consideration for others, please limit yourself to one question. Our business meeting is now called to order. I will present the matters to be voted upon. The first item of business is the election of directors. The proxy statement listed 13 nominees for election to our Board of Directors to hold office until the 2022 annual meeting of shareholders or until their successors are duly elected and qualified: David Campbell, Molly Hale Carter, Thomas D. Hyde, B. Anthony Isaac, Paul M. Keglevic, Mary L. Landrieu, Sandra A J. Lawrence, Ann D. Murtlow, Sandra J. Price, Mark A. Ruelle, S. Carl Soderstrom Jr., John Arthur Stall and C. John Wilder. The Board has recommended a vote for the election of all the nominees. The second item is the advisory nonbinding resolution, approving the 2020 compensation of our named executive officers as disclosed in our proxy statement. The Board has recommended a vote for this proposal. The third item is the ratification of Deloitte & Touche as our independent public accountants for 2021. The Board has recommended a vote for the ratification. If you are still planning to vote on the web portal, please do so now. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2021 Evergy Annual Shareholder meeting closed. We have been informed by the inspectors of election that the preliminary vote report shows that the nominees for election to the Board have been duly elected, the compensation of the named executive Officers has been approved by advisory vote, and Deloitte & Touche has been ratified as the independent registered accountants for the company for 2021. As I mentioned, we will report the final vote results with the Securities and Exchange Commission. Thank you. With no further business to address, the business portion of this morning's meeting is hereby adjourned. Now I'm pleased to introduce David Campbell, our President and Chief Executive Officer, to tell you more about the progress of our company. David?

Thank you, Mark. Good morning, everyone, and thank you for joining us for Evergy's Third Annual Shareholder meeting. Before I begin, I would like to reiterate how honored I am to be part of the Evergy team. I'm very excited and optimistic about Evergy's future. As we have our first quarter earnings conference call in a couple of days, I'll keep my comments brief and focus on key achievements from last year. In the midst of a pandemic, 2020 was both eventful and successful for Evergy. The company's solid performance is a testament to my predecessor, Terry Bassham, and all of our employees remaining laser-focused and continuing to deliver strong financial and operational results despite the unprecedented challenges posed by the pandemic. Like most companies, we had to adjust our normal day-to-day operations to ensure that our work environment remained highly productive, it also remained as safe as possible. We are happy to report that we minimize disruptions and continue to provide safe and reliable power to the efforts of our operations team. Our colleagues at our power plants and operating our transmission and distribution systems adopted new procedures to ensure safety and provided critical frontline services throughout the past year. We also shifted over 2,000 employees to working remotely from home, keeping our key customer systems and business processes running. In 2020, we improved our customer reliability. I'm also pleased to report that with respect to personnel safety, we had one of the safest years in our company's history. And with respect to financial results, we achieved 7% year-over-year growth in our adjusted earnings per share in 2020, hitting the high end of our guidance range for the year. In November, we raised our dividend by 6% to an indicated annual rate of $2.14 per share. We reduced our adjusted operating and maintenance expense by another 8% in 2020. In total, our adjusted O&M expense has declined by nearly 20% since 2018, enabling us to fulfill our pledge to freeze rates following the merger that created Evergy, and in that way, deliver significant and immediate benefits to our customers. In 2020, we invested more than $1.5 billion in our infrastructure to improve reliability and customer service. At the same time, we continue to reduce our carbon emissions. We've cut those emissions by more than 50% since 2005. This is far ahead of most of our utility peers. Additionally, more than half of the energy that we deliver to our retail customers was generated with 0 carbon emissions, which also compares favorably within our industry. In other key areas of environmental performance, we've slashed emissions of sulfur dioxide by 98% and nitrogen oxide by 89%, again, demonstrating results that compare favorably to our industry peers for these very important goals. Lastly, we work closely with customers and regulators to minimize the financial impacts that pandemic has had on many of our customers by waiving customer late fees and designing more flexible customer payment options. We also donated over $2 million to our hometown economic recovery program to help those most in need. These accomplishments in 2020 are a testament to our employees, remaining focused on safety, customer service, operational execution and managing expenditures with a close eye. In 2021, we're continuing to capitalize on that momentum and maintaining our commitment to build the best energy company for our shareholders, customers, employees and the communities that we serve. And with that, we'll move to our question-and-answer time.

Looks like we have a couple of questions. The first being, Mr. Chairman, the Carpenter pension funds hold a total of 233,759 shares of the company's stock. Would you or the chair of the compensation Committee speak to whether Evergy might be better served by an executive compensation plan to meet its long-term strategic business plan?

This is Mark Ruelle, Chairman of the Board. Thank you for your question, and thank you for being a shareholder. The compensation committee and the Board of Directors wholeheartedly agrees with what we believe to be the premise of your question, and that is the importance of making sure that our compensation structure for executives is aligned with the long-term interest of our shareholders. So for example, in the case of our CEO's compensation, about 2/3 of his design compensation is in the form of equity, which is a long-term incentive as opposed to either short-term incentives or base salary. And the same holds structurally throughout the executive team, which is a substantial portion of their compensation as approved by the compensation committee is in the form of long-term compensation, focusing on the company's long-term interest and making sure that Executive's personal interests are aligned with the shareholders' interest.

Next question is Carpenter Funds would ask that you discuss the Board's perspective on the concept of stakeholder capitalism and what principles the Board would use to balance the interest of varied stakeholders as it develops and implements the company's long-term business strategy.

Thank you for the question. I think that a balanced stakeholder approach is at the core of what we do as a regulated utility in serving our customers, I think it has been for a long time for Evergy and will continue to be at the forefront. We serve of course, our shareholders, to more leading today. But we have a very important relationship with our customers, the communities that we serve, the regions and states in which we operate, and more broadly, the environment that we impact. A broad-based approach to serving our set of stakeholders is enshrined in the regulatory compact we have and is critical to the development of our long-term strategic plan, as we've described as the sustainability transformation plan, which explicitly seeks to advance the objectives of serving various stakeholders, and importantly, our employees as well. So we think about that broad set of stakeholders that we serve, and advancing the objectives of reliability, affordability and sustainability. It's at the core of what our employee base broadly does, and I think a very important concept for us in all that we do.

Third question. When we get back to in-person meetings, will they be moved around to different cities to enable more shareholders to attend? Thank you, John and Davis Wichita.

Thank you again for your question. This is Mark. We have in the past done that, and we'll just -- we'll have to see. We're certainly eager to get back to in-person meetings, I think everybody is. And in the past, that has enabled other people to visit, and we'll certainly take your question under advisement and perhaps our past tradition is a good one to continue.

Yes. There's no more questions.

Great. Well, thank you. If we do receive any additional questions that coming later, we'll post responses on our website. I want to thank all of you for joining us this morning -- this afternoon, and thank you for your support of Evergy.

Thank you, everyone. That is the conclusion of today's meeting. You may now disconnect. Have a great day.