# EDGAR Filing Document

**Accession Number:** 0001711269
**File Stem:** 0001140361-23-013070
**Filing Date:** 2023-3
**Character Count:** 438078
**Document Hash:** d42d67484a8b5004e0770f16615a376d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001140361-23-013070.hdr.sgml**: 20230322

**ACCESSION NUMBER**: 0001140361-23-013070

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230322

**DATE AS OF CHANGE**: 20230322

**EFFECTIVENESS DATE**: 20230322

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Evergy, Inc.
- **CENTRAL INDEX KEY:** 0001711269
- **STANDARD INDUSTRIAL CLASSIFICATION:** ELECTRIC & OTHER SERVICES COMBINED [4931]
- **IRS NUMBER:** 822733395
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38515
- **FILM NUMBER:** 23753179

**BUSINESS ADDRESS:**
- **STREET 1:** 1200 MAIN STREET
- **CITY:** KANSAS CITY
- **STATE:** MO
- **ZIP:** 64105
- **BUSINESS PHONE:** 8165562200

**MAIL ADDRESS:**
- **STREET 1:** 1200 MAIN STREET
- **CITY:** KANSAS CITY
- **STATE:** MO
- **ZIP:** 64105

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Monarch Energy Holding, Inc.
- **DATE OF NAME CHANGE:** 20170707

### Attached PDF Documents

**Attachment 1:** `ny20006042x3_ars.pdf`

![Evergy logo]() **evergy** 2022 Annual Report

# Why Evergy?

Cover: Flat Ridge Wind Farm

![img-0.jpeg](img-0.jpeg)

## Contents

| 02 | CEO's Message | 06 | Keeping energy rates affordable | 10 | Committed to a responsible energy transition |
| --- | --- | --- | --- | --- | --- |
| 04 | Delivering on our word | 08 | Targeting top-tier reliability | 13 | Directors & Officers |

# 2022 Statistics

7%

Adjusted EPS Growth
(year-over-year)

7%

Dividend Increase in
Fourth Quarter 2022

52%

Reduction in OSHA
Recordables Since 2018

$2.2B

Total Infrastructure
Investment

# Operating Territory

![img-1.jpeg](img-1.jpeg)

Kansas Central

Kansas Metro

Missouri West

Missouri Metro

# 4.4 GW

Renewable Generation Added Since 2005

# 44%

Reduction in CO$_{2}$ Emissions from 2005 Levels

# 2.7%

Cumulative Increase in Rates Since 2017\*

# 12%

Total Spend Sourced from Diverse Suppliers

EVERGY AT A GLANCE

## Financial Highlights

| Year Ended December 31 (Dollars in millions except per share amounts) | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| EVERGY |  |  |  |
| Operating Revenues | 5,859 | 5,587 | 4,913 |
| Net Income | 765 | 892 | 630 |
| Net Income Attributable To Evergy, Inc | 753 | 880 | 618 |
| Basic Earnings Per Common Share | $3.27 | $3.84 | $2.72 |
| Diluted Earnings Per Common Share | $3.27 | $3.83 | $2.72 |
| Total Assets At Year End | 29,513 | 28,521 | 27,115 |
| Total Liabilities | 16,010 | 16,176 | 16,041 |
| Cash Dividends Per Common Share | $2.33 | $2.18 | $2.05 |

\* Evergy has limited cumulative rate increases to 2.7 percent from 2017 through November 2022, the most recent reference point for comparisons based on EIA data.

# With Good Reason

GOOD REASON NO. 1:

## We're delivering on our word.

We are creating greater value for customers and stakeholders, by remaining focused on executing our plan and advancing our strategic objectives of affordability, reliability and sustainability.

GOOD REASON NO. 2:

## We're keeping energy rates affordable.

We are benefitting customers and supporting economic development by improving regional rate competitiveness and keeping energy affordable.

GOOD REASON NO. 3:

## We're targeting top-tier performance in reliability.

In a changing energy industry, we are making smart investments and targeting new technologies to provide consistent, top-tier reliability and service for customers.

GOOD REASON NO. 4:

## We're committed to a responsible energy transition.

With our growing portfolio of renewables, we are progressing toward our goals of 70 percent carbon reduction by 2030 and net-zero carbon emissions by 2045.

2022 Energy Annual Report | 01

![img-2.jpeg](img-2.jpeg)

President and Chief Executive Officer

## Dear fellow shareholders,

Our mission at Evergy is to empower a better future, and in 2022 - meeting the additional challenges brought by historically volatile economic conditions and inflation - we delivered another solid year of effective business execution. We remain laser-focused on advancing our strategic objectives of affordability, reliability and sustainability through the key initiatives that drive our mission.

### We Deliver

Our results for 2022 are strong, hitting our financial and operational targets and building on our track record for consistently and effectively executing our business plan.

In 2022, our adjusted earnings per share were $3.71, up 7 percent over our $3.46

adjusted earnings per share in 2021, and well above our adjusted earnings guidance range of $3.43 to $3.63 per share entering the year. In addition, we increased our quarterly dividend by 7 percent to $0.6125 per share, raising it to $2.45 per share on an annualized basis. The increase is within our targeted dividend-to-earnings payout ratio of 60 percent to 70 percent and consistent with our target of annual growth in adjusted earnings per share of 6 percent to 8 percent.

Our regional economy remained healthy in 2022, with unemployment in both Kansas and Missouri continuing to track below the national average. Weather-normalized retail demand increased by approximately 1.1 percent, driven mostly by a robust increase in industrial demand from the

chemical and gas sectors. Including the impact of weather, retail demand was up 3.5 percent over last year.

With another solid year and a track record of consistently and effectively executing our business strategy, our focus is on advancing that performance and continuing to move energy forward. We have an ongoing emphasis on being well-positioned for the future and enabling innovation that drives ongoing improvements in affordability, reliability and sustainability, all of which are vital to meeting the needs of our stakeholders.

### Providing Greater Affordability

Ensuring regional rate competitiveness and the affordability of the electricity we provide to our customers is of utmost importance.

02 | 2022 Evergy Annual Report

Our rates are regionally competitive, and we strive to maintain affordability for our customers despite the economic volatility and inflation pressures currently impacting our entire nation.

Since 2017, our rates have increased 2.7 percent while regional rates rose double-digits and inflation rose 18 percent. Energy prices paid by our customers in Kansas and Missouri are either lower than or have narrowed the gap relative to those in our regional peer states.

In 2022, we found common ground with stakeholders in our Missouri rate case settlement, resulting in a balanced outcome for our customers. In 2023, the rate cases we file in Kansas - which will be the first requests for new base rates in Kansas since Energy was formed in 2018 - will be guided by our strategic objectives of affordability, reliability and sustainability for our Kansas customers and communities.

In both Missouri and Kansas, we will continue our focus on ongoing constructive working relationships with regulators and all our other stakeholders.

Regional rate competitiveness also helps attract business development that provides economic benefits for our region. In 2022 Panasonic broke ground in eastern Kansas on a new $4 billion electric vehicle battery plant that is expected to provide 4,000 jobs, and Meta announced plans for a new $800 million hyperscale data center in Kansas City, Missouri. Energy rates that attract these large customers drive benefits for all of our customers.

Inflation and volatile natural gas prices have posed significant challenges throughout our industry, but our relative inflation affecting customers has been lower than for many other utilities because of our relatively lower level of natural gas exposure. Natural gas typically comprises 5 percent or less of our generation fuel mix annually.

#### **Achieving Top Performance in Reliability**

Our focus on operational excellence includes making the most effective and efficient use of our diverse generation fleet and investing

to meet the requirements of a changing energy industry. Having diverse generation resources provides the flexibility essential to meeting energy demand during peak seasons as well as when unusual events cause spikes in demand, rapid increases in commodity prices, or extraordinary challenges.

In 2022, our entire Energy team worked together to provide safe and reliable power to our customers and communities through an especially hot summer and early fall, as well as through some extreme wind conditions.

Our investments to upgrade and replace our aging transmission and distribution system - approximately 45 percent of which is more than 50 years old - will improve the resiliency of our system and prepare it to meet the changing demands brought on by the proliferation of large-scale renewable generation and the retirement of legacy fossil plants.

I'd like to recognize and thank our entire Energy team of employees who work together day in and day out to provide safe, reliable power to our customers and communities, especially in meeting the challenges of extreme conditions. We place a strong emphasis on our safety culture. We open every year with a company-wide safety roadshow event, and in 2022, our employees achieved a 39 percent reduction in OSHA recordable injuries and a 35 percent reduction in events that required time away from regular duties.

#### **Advancing Sustainability**

We remain committed to sustainability and responsibly transitioning our generation portfolio to include more renewable resources, powering a cleaner and greener future while balancing our strategic objectives of affordability and sustainability. As a result of our sustainability plan, we aim to achieve a 70 percent carbon reduction by 2030 and net-zero carbon emissions by 2045, assuming that enabling technologies and supportive public policies are in place. We are well on the way, as our 2022 carbon emissions were 44 percent lower than 2005. Over the next 10 years, we plan to add more than 3,800 megawatts of renewable energy and retire

more than 1,900 megawatts of coal-based fossil generation.

These investments will build on the substantial momentum that we've already achieved in our portfolio transition. In 2022, our current portfolio of 4,400 megawatts of owned and contracted wind generation surpassed 100 million megawatt-hours of cumulative wind energy production.

The Inflation Reduction Act of 2022, passed by the U.S. Congress in August - while its full impact is still being evaluated - is consequential legislation providing a longer-term opportunity to cost-effectively serve customers with the abundant renewable energy from our region.

#### **Why Energy?**

With our performance in 2022, we advanced our track record of successful, effective business execution that enables us to consistently and reliably hit our financial and operational targets and that positions us well for the future.

As I said at the beginning of this letter, going forward we remain laser-focused on executing our plan and advancing our strategic objectives of affordability, reliability and sustainability. Our strategy drives our mission to empower a better future and gives us the flexibility to innovate while building on the successful foundation established since the merger.

This continues to be an extraordinary time to be in the energy business as our industry and nation work toward a cleaner and greener future. We have high performance objectives that we are committed to deliver against, and we are excited about the opportunities we see ahead to create value for our customers, communities and shareholders.

That's why Energy.

Thank you for your continued confidence in our company.

President and Chief Executive Officer

2022 Energy Annual Report | 03

![img-3.jpeg](img-3.jpeg)

04 | 2022 Evergy Annual Report

GOOD REASON

No. 1

# We're delivering on our word

Our business strategy remains focused on executing our plan and advancing our strategic objectives of affordability, reliability and sustainability to drive our mission of empowering a better future for our customers and all our stakeholders.

## Achieving Strong Results

Our results for 2022 are strong, hitting our financial and operational targets and building on our track record for consistently and effectively executing our business plan.

In 2022, our adjusted earnings per share were $3.71, up 7.2 percent over our $3.46 adjusted earnings per share in 2021, and well above our adjusted earnings guidance range of $3.43 to $3.63 per share entering the year. We reaffirmed our target range for annual earnings per share growth rate of 6 percent to 8 percent from 2021 to 2025.

In addition, we increased our quarterly dividend by 7 percent to $0.6125 per share, raising it to $2.45 per share on an annualized basis. The increase is consistent with our growth trajectory and long-term financial goals and within our targeted dividend-to-earnings payout ratio of 60 percent to 70 percent.

## Driving Continual Improvements

Consistently, effectively executing our business strategy produces the successful results that enable the ongoing innovation that helps drive continual improvements in affordability, reliability and sustainability - vital to meeting the needs of our stakeholders - which in turn demonstrate and advance our effective business execution.

We are planning $11.6 billion of infrastructure investment through 2027. Investments in our transmission and distribution system will help prepare it to meet the new challenges brought by increasingly harsh weather events and the changing energy marketplace presence of large-scale renewables. We'll also be upgrading technology throughout our system and improving platforms to serve our customers more effectively and efficiently.

In adding new renewable generation as called for in our integrated resource plan, we will continue to use a detailed sourcing process to drive our decisions on whether specific ownership opportunities or purchase power agreements will provide the best total benefits to our customers.

All our efforts are focused on balancing affordability, reliability and sustainability to benefit and create value for our customers, communities and shareholders.

Investment in advanced technology supports Evergy's commitment to reliability in applications including (left) the use of tablets on the turbine deck at Jeffrey Energy Center, St. Marys, Kansas, and (right) predictive maintenance programs that signal equipment replacement needs.

![img-4.jpeg](img-4.jpeg)

# 18%

Adjusted operating and maintenance* reduction since 2018

# $232M

Annual adjusted operating and maintenance* savings since 2018

* Adjusted operating and maintenance expense is a non-GAAP financial measure. See 10-K Item 7 under the heading 'Non-GAAP Measures' and page 38 of this report for reconciliation to most comparable GAAP information.

2022 Evergy Annual Report | 05

GOOD REASON

No. 2

# We're keeping energy rates affordable

Ensuring regional rate competitiveness and the affordability of the electricity we provide to our customers is of utmost importance. Our rates are regionally competitive, and we strive to maintain affordability for our customers despite the economic volatility and inflation pressures currently impacting our entire nation.

Since 2017, our rates have increased 2.7 percent while regional rates rose double-digits and inflation was 18 percent. Energy prices paid by our customers in Kansas and Missouri are either lower or more competitive than those in our regional peer states, including Iowa, Minnesota, North Dakota, South Dakota, Arkansas, Oklahoma, Texas and Colorado.

## Producing Economic Benefits for Our Customers and Stakeholders

Advancing the regional rate competitiveness of our system includes optimizing our fleet availability, upgrading technology and infrastructure needed to take advantage of operational efficiencies, and helping generate business development that produces economic benefits for the region we serve.

Optimizing our fleet operations means having lower cost generation available as much as possible and running higher cost generation only when needed. Our diverse generation mix has insulated our customers from the significant increase in natural gas prices.

## Expanding Operational Efficiencies

Investing in technology and infrastructure to keep rates affordable and regionally competitive requires deliberate balance and effective execution. While we're making the investments necessary to improve reliability and sustainability, we are managing them efficiently so that our overall level of investments is among the lowest of our peer group utilities.

Our ongoing process of standardization and organizational streamlining, software consolidation, predictive maintenance and vegetation management optimization, customer operations and billing assimilation, and advanced technology enabling automation and process improvements all contribute to our operational efficiencies.

Regional rate competitiveness is a factor in successful business development that provides economic benefits for our region. In 2022, Panasonic broke ground in eastern Kansas on a new $4 billion electric vehicle battery plant that is expected to provide 4,000 jobs. And Meta announced plans for a new $800 million hyperscale data center in Kansas City, Missouri.

Online tools put customers in control of their energy use. In addition to account transactions, customers can analyze their energy use including identifying trends in energy use, seeing their use by the hour, comparing rate options and forecasting their monthly bill.

06 | 2022 Energy Annual Report

![img-5.jpeg](img-5.jpeg)

![img-0.jpeg](img-0.jpeg)

**2.7%**

Cumulative increase in rates since 2017

**$345M**

Targeted annual operating and maintenance savings by 2025 relative to 2018 adjusted operating and maintenance expense\*

\* Adjusted operating and maintenance expense is a non-GAAP financial measure. See 10-K Item 7 under the heading 'Non-GAAP Measures' and page 38 of this report for reconciliation to most comparable GAAP information

2022 Evergy Annual Report | 07

![img-1.jpeg](img-1.jpeg)

08 | 2022 Evergy Annual Report

![img-2.jpeg](img-2.jpeg)

GOOD REASON | No. 3

## We're targeting top-tier performance in reliability

Our focus on operational excellence includes making the most effective and efficient use of our diverse generation resources and investing to meet the requirements of our changing energy industry - efforts aimed at achieving top-tier performance in reliability and affordability for our customers.

**22,178**

Distribution poles replaced

**4,128**

Overhead distribution transformers replaced

![img-3.jpeg](img-3.jpeg)

### Making the Necessary Investments

Our investments include an emphasis on updating our aging transmission and distribution system - which costs more to maintain and fails more often and approximately 45 percent of which is more than 50 years old - to support reliability, flexibility, public safety and resiliency improvements. Importantly, our efforts are aimed at meeting the changing demands brought on by harsh weather events and by the proliferation of large-scale renewables and the retirement of legacy fossil plants.

We'll be implementing new technology to advance preventive maintenance capability that will reduce customer restoration times and more costly reactive maintenance. Building the grid of the future means deploying thousands of communicating, automated devices across our service territory - as well as new software - that will unlock key new capabilities that will increase the resiliency of the system.

Other programs will target critical assets - including underground cable replacement and wood pole life-extension and replacement - to proactively address issues in order to prevent potential service interruptions.

### Enhancing Our Service Capabilities

Continuing to build on investments already made will reinforce our foundation for future customer experience and security improvements. We're enhancing our service capabilities with advances in customer care and billing, customer self-service, customer relationship management, outage management, integrated voice response, and with other meter device, operational device and knowledge management systems. Another emphasis is sharpening our efforts - analyzing interruption data, determining root causes, and taking appropriate corrective action - for customers who experience multiple service interruptions over a set period of time.

Additional investments address the growing requirements of regulatory and other compliance, data storage and handling, systems integration, and security enhancements, as well as the increased maintenance costs and inadequacy of older legacy systems.

**Energy plans to invest $6.6 billion in our transmission and delivery infrastructure over the next five years. This investment will help to replace aging lines - about 45 percent of which are more than 50 years old - and to implement new communicating, automated devices that will support reliability by expanding advanced predictive maintenance capabilities.**

2022 Energy Annual Report | 09

GOOD REASON | No. 4

# We're committed to cleaner, greener solutions

Our sustainability focus is achieving significant progress, moving energy forward by contributing to a cleaner, greener, and better future.

As part of our sustainability plan, we aim to achieve 70 percent carbon reduction by 2030 and net-zero carbon emissions by 2045, assuming enabling technologies and supportive public policies are in place. In addition, we reached the milestone of 100 million megawatt-hours of cumulative wind energy production from our portfolio of 4,400 megawatts of owned and contracted wind generation.

## Growing Our Renewables

Our integrated resource plan emphasizes owning and operating a portfolio of renewable generation that includes adding 300 megawatts of renewables by 2024.

Working toward those goals, in August 2022 we announced a $250 million purchase agreement to acquire Persimmon Creek Wind Farm, a 199-megawatt operating wind farm in western Oklahoma. Subject to regulatory approval, Persimmon Creek will deliver low-cost, renewable energy to our customers, support our carbon reduction goal, and take us two-thirds of the way to our renewable fleet addition goal for 2024.

## Meeting the Needs of Our Stakeholders

Advancing our sustainability objectives with ongoing emissions reductions helps to meet the needs of our many diverse stakeholders. Adding new cleaner energy sources contributes to reducing costs and emissions, and further diversifies our existing generation portfolio. We will continue to work toward optimizing the opportunities we have to meet ongoing demand growth by harnessing the renewable resources in Kansas and Missouri and surrounding regions.

## Taking Advantage of Federal Tax Incentives

The Inflation Reduction Act of 2022, passed by the U.S. Congress in August, is consequential legislation that will enhance our ability to serve customers with the abundant renewable energy from our region.

This new Act provides longer term certainty for significant renewable energy tax credits and emerging technologies, as well as a nuclear production tax credit that potentially benefits our Wolf Creek nuclear plant. It will help us deliver savings to our customers by using renewable energy to replace that produced from resources with higher costs.

**(Top left)** Evergy employees volunteered nearly 25,000 hours in our communities in 2022, lending their knowledge and skills to efforts that include environmental projects like planting native trees. Our responsible transition toward more sustainable energy is under way. In 2022, Evergy surpassed 100 million megawatt hours of wind energy produced for our customers. Flat Ridge Wind Energy Center, Zenda, Kansas, **(bottom left)** and Greenwood Energy Center, Greenwood, Missouri, **(right)** are among renewable energy facilities that serve Evergy customers. About half the electricity we provide to the homes and business we serve is from carbon-free sources.

![img-4.jpeg](img-4.jpeg)

![img-5.jpeg](img-5.jpeg)

10 | 2022 Evergy Annual Report

![img-6.jpeg](img-6.jpeg)

4.4 GW

Renewable generation added
since 2005

3.8 GW

Planned increase in renewables
over the next 10 years

2022 Evergy Annual Report | 11

# Shareholder Value

![img-7.jpeg](img-7.jpeg)

![img-8.jpeg](img-8.jpeg)

* Adjusted EPS is a non-GAAP financial measure. See 10-K Item 7 under the heading 'Non-GAAP Measures' and page 38 of this report for reconciliation to most comparable GAAP information.

12 | 2022 Evergy Annual Report

# Directors & Officers

## BOARD OF DIRECTORS

### **Mark A. Ruelle**

Chairman of the Board, former President and Chief Executive Officer of Westar Energy

### **David A. Campbell**

President and Chief Executive Officer of Evergy

### **Thomas D. Hyde**

Former Executive Vice President Legal, Compliance, Ethics and Corporate Secretary of Wal-Mart Stores, Inc.

### **B. Anthony Isaac**

Former Senior Vice President and Head of Select Service Strategy and Development of Hyatt Hotels Corporation

### **Paul M. Keglevic**

Former Chief Executive Officer of Energy Future Holdings

### **Senator Mary L. Landrieu**

Senior Policy Advisor of Van Ness Feldman LLP and Former U.S. Senator from Louisiana

### **Sandra A.J. Lawrence**

Former Executive Vice President and Chief Administrative Officer of Children's Mercy Hospital

### **Ann D. Murtlow**

President and Chief Executive Officer of the United Way of Central Indiana

### **Sandra J. Price**

Former Senior Vice President Human Resources of Sprint Corporation

### **S. Carl Soderstrom Jr.**

Former Senior Vice President and Chief Financial Officer of ArvinMeritor

### **James Scarola**

Former Senior Vice President and Chief Nuclear Officer of Progress Energy

### **C. John Wilder**

Executive Chairman of Bluescape Resources

## OFFICERS

### **David Campbell**

President and Chief Executive Officer

### **Kirkland Andrews**

Executive Vice President, Chief Financial Officer

### **Kevin Bryant**

Executive Vice President, Chief Operating Officer

### **Chuck Caisley**

Senior Vice President, Public Affairs and Chief Customer Officer

### **Lesley Elwell**

Senior Vice President, Chief Human Resources Officer and Chief Diversity Officer

### **Heather Humphrey**

Senior Vice President, General Counsel and Corporate Secretary

### **Charles King**

Senior Vice President, Chief Technology Officer

### **John Bridson**

Vice President, Generation

### **Steve Busser**

Vice President, Chief Accounting Officer

### **Jason Humphrey**

Vice President, Development and Assistant Treasurer

### **Darrin Ives**

Vice President, Regulatory Affairs

### **Kara Larson**

Vice President, Chief Ethics Officer and Assistant General Counsel

### **Geoff Ley**

Vice President, Corporate Planning and Treasurer

### **Jeff Martin**

Vice President, Customer Operations

### **Kayla Messamore**

Vice President, Strategy and Long-Term Planning

### **Ryan Mulvany**

Vice President, Distribution

### **Cleve Reasoner**

Vice President, Chief Nuclear Officer

### **Steve Vetsch**

Vice President, Transmission

2022 Evergy Annual Report | 13

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# **FORM 10-K**

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended **December 31, 2022**

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ______ to ______

![img-9.jpeg](img-9.jpeg)

| Commission File Number | Exact name of registrant as specified in its charter, state of incorporation, address of principal executive offices and telephone number | I.R.S. Employer Identification Number |
| --- | --- | --- |
| 001-38515 | EVERGY, INC. (a Missouri corporation) 1200 Main Street Kansas City, Missouri 64105 (816) 556-2200 | 82-2733395 |
| 001-03523 | EVERGY KANSAS CENTRAL, INC. (a Kansas corporation) 818 South Kansas Avenue Topeka, Kansas 66612 (785) 575-6300 | 48-0290150 |
| 000-51873 | EVERGY METRO, INC. (a Missouri corporation) 1200 Main Street Kansas City, Missouri 64105 (816) 556-2200 | 44-0308720 |

**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 | The Nasdaq Stock Market LLC |

Securities registered pursuant to Section 12(g) of the Act: Evergy Kansas Central, Inc. Common Stock $0.01 par value and Evergy Metro, Inc. Common Stock without par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

| Evergy, Inc. | Yes ☑ | No ☐ |
| --- | --- | --- |
| Evergy Kansas Central, Inc. | Yes ☐ | No ☑ |
| Evergy Metro, Inc. | Yes ☐ | No ☑ |

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

| Evergy, Inc. | Yes ☐ | No ☑ |
| --- | --- | --- |
| Evergy Kansas Central, Inc. | Yes ☐ | No ☑ |
| Evergy Metro, Inc. | Yes ☐ | No ☑ |

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 ☑ | No ☐ |
| --- | --- | --- |
| Evergy Kansas Central, Inc. | Yes ☑ | No ☐ |
| Evergy Metro, Inc. | Yes ☑ | No ☐ |

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

| Evergy, Inc. | Yes ☑ | No ☐ |
| --- | --- | --- |
| Evergy Kansas Central, Inc. | Yes ☑ | No ☐ |
| Evergy Metro, Inc. | Yes ☑ | No ☐ |

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 ☐ |
| --- | --- | --- | --- | --- | --- |
| Evergy Kansas Central, Inc. | Large Accelerated Filer ☐ | Accelerated Filer ☐ | Non- accelerated Filer ☑ | Smaller Reporting Company ☐ | Emerging Growth Company ☐ |
| Evergy Metro, Inc. | Large Accelerated Filer ☐ | Accelerated Filer ☐ | Non- accelerated Filer ☑ | Smaller Reporting Company ☐ | Emerging Growth Company ☐ |

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

| Evergy, Inc. | Yes ☑ | No ☐ |
| --- | --- | --- |
| Evergy Kansas Central, Inc. | Yes ☐ | No ☑ |
| Evergy Metro, Inc. | Yes ☐ | No ☑ |

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 provided pursuant to Section 13(a) of the Exchange Act.

| Evergy, Inc. | ☐ |
| --- | --- |
| Evergy Kansas Central, Inc. | ☐ |
| Evergy Metro, Inc. | ☐ |

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

| Evergy, Inc. | Yes ☐ | No ☑ |
| --- | --- | --- |
| Evergy Kansas Central, Inc. | Yes ☐ | No ☑ |
| Evergy Metro, Inc. | Yes ☐ | No ☑ |

The aggregate market value of the voting and non-voting common equity held by non-affiliates of Evergy, Inc. (based on the closing price of its common stock on the New York Stock Exchange on June 30, 2022) was approximately $14,786,156,340. All of the common equity of Evergy Kansas Central, Inc. and Evergy Metro, Inc. is held by Evergy, Inc.

On February 17, 2023, Evergy, Inc. had 229,568,060 shares of common stock outstanding.

On February 17, 2023, Evergy Kansas Central, Inc. and Evergy Metro, Inc. each had one share of common stock outstanding and held by Evergy, Inc.

**Evergy Kansas Central, Inc. and Evergy Metro, Inc. meet the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format.**

#### **Documents Incorporated by Reference**

Portions of the 2023 annual meeting proxy statement of Evergy, Inc. to be filed with the Securities and Exchange Commission are incorporated by reference in Part III of this report.

This combined annual report on Form 10-K is provided by the following registrants: Evergy, Inc. (Evergy), Evergy Kansas Central, Inc. (Evergy Kansas Central) and Evergy Metro, Inc. (Evergy Metro) (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.

# TABLE OF CONTENTS

|  | Page Number |
| --- | --- |
| Cautionary Statements Regarding Certain Forward-Looking Information | 3 |
| Glossary of Terms | 5 |
| PART I |  |
| Item 1. Business | 7 |
| Item 1A. Risk Factors | 16 |
| Item 1B. Unresolved Staff Comments | 28 |
| Item 2. Properties | 29 |
| Item 3. Legal Proceedings | 32 |
| Item 4. Mine Safety Disclosures | 32 |
| PART II |  |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 33 |
| Item 6. Selected Financial Data | 34 |
| Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 34 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 62 |
| Item 8. Financial Statements and Supplementary Data | 65 |
| Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 160 |
| Item 9A. Controls and Procedures | 160 |
| Item 9B. Other Information | 164 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 164 |
| PART III |  |
| Item 10. Directors, Executive Officers and Corporate Governance | 164 |
| Item 11. Executive Compensation | 165 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 165 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 166 |
| Item 14. Principal Accounting Fees and Services | 166 |
| PART IV |  |
| Item 15. Exhibits and Financial Statement Schedules | ## |
| Signatures | 175 |

2

# CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION

Statements made in this document 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 Evergy's strategic plan, including, without limitation, those related to earnings per share, dividend, operating and maintenance expense and capital investment goals; the outcome of legislative efforts and regulatory and legal proceedings; future energy demand; future power prices; plans with respect to existing and potential future generation resources; the availability and cost of generation resources and energy storage; target emissions reductions; and other matters relating to expected financial performance or affecting future operations. Forward-looking statements are often accompanied by forward-looking words such as 'anticipates,' 'believes,' 'expects,' 'estimates,' 'forecasts,' 'should,' 'could,' 'may,' 'seeks,' 'intends,' 'proposed,' 'projects,' 'planned,' 'target,' 'outlook,' 'remain confident,' 'goal,' 'will' or other words of similar meaning. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking information.

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Evergy Companies are providing a number of risks, uncertainties and other factors that could cause actual results to differ from the forward-looking information. These risks, uncertainties and other factors include, but are not limited to: economic and weather conditions and any impact on sales, prices and costs; changes in business strategy or operations; the impact of federal, state and local political, legislative, judicial and regulatory actions or developments, including deregulation, re-regulation, securitization and restructuring of the electric utility industry; decisions of regulators regarding, among other things, customer rates and the prudence of operational decisions such as capital expenditures and asset retirements; 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; the impact of climate change, including increased frequency and severity of significant weather events and the extent to which counterparties are willing to do business with, finance the operations of or purchase energy from the Evergy Companies due to the fact that the Evergy Companies operate coal-fired generation; prices and availability of electricity and natural gas in wholesale markets; market perception of the energy industry and the Evergy Companies; the impact of the Coronavirus (COVID-19) pandemic on, among other things, sales, results of operations, financial condition, liquidity and cash flows, and also on operational issues, such as supply chain issues and the availability and ability of the Evergy Companies' employees and suppliers to perform the functions that are necessary to operate the Evergy Companies; 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; 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 London Interbank Offered Rate (LIBOR) benchmark interest rate; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of physical and cybersecurity breaches, criminal activity, terrorist attacks, acts of war and other disruptions to the Evergy Companies' facilities or information technology infrastructure or the facilities and infrastructure of third-party service providers on which the Evergy Companies rely; impact of the Russian, Ukrainian conflict on the global energy market, ability to carry out marketing and sales plans; cost, availability, quality and timely provision of equipment, supplies, labor and fuel; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays and cost increases of generation, transmission, distribution or other projects; the Evergy Companies' ability to 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 those related to the Evergy Companies' ability to attract and retain qualified personnel, maintain satisfactory relationships with their labor unions and manage costs of, or changes in, wages, retirement, health care and other benefits; disruption, costs and uncertainties caused by or related to the actions of individuals or entities, such as activist shareholders or special interest groups, that seek to influence Evergy's strategic plan, financial results or operations; the impact of changing expectations and demands of the Evergy Companies' customers, regulators, investors and stakeholders, including heightened emphasis on environmental, social and governance concerns; the possibility that strategic initiatives, including mergers, acquisitions and divestitures, and long-term financial plans, may not create the value that they are expected to achieve in a timely manner or at all; difficulties in maintaining relationships with customers, employees, regulators or suppliers; and other risks and uncertainties.

3

This list of factors is not all-inclusive because it is not possible to predict all factors. You should also carefully consider the information contained in the Evergy Companies' other filings with the Securities and Exchange Commission (SEC). Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Evergy Companies with the SEC. 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, except as required by law.

## AVAILABLE INFORMATION

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at sec.gov. Additionally, information about the Evergy Companies, including their combined annual reports on Form 10-K, combined quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with the SEC, is also available through the Evergy Companies' website, http://investors.evergy.com. Such reports are accessible at no charge and are made available as soon as reasonably practical after such material is filed with or furnished to the SEC.

Investors should note that the Evergy Companies announce material financial information in SEC filings, press releases and public conference calls. In accordance with SEC guidelines, the Evergy Companies also use the Investor Relations section of their website, http://investors.evergy.com, to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on the Evergy Companies' website is not part of this document.

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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

| Abbreviation or Acronym | Definition |
| --- | --- |
| AAO | Accounting authority order |
| ACE | Affordable Clean Energy |
| AEP | American Electric Power Company, Inc. |
| AFUDC | Allowance for funds used during construction |
| AOCI | Accumulated other comprehensive income |
| AROs | Asset retirement obligations |
| BSER | Best system of emission reduction |
| CAA | Clean Air Act |
| CCRs | Coal combustion residuals |
| CO 2 | Carbon dioxide |
| COLI | Corporate-owned life insurance |
| COVID-19 | Coronavirus |
| CPP | Clean Power Plan |
| CSAPR | Cross-State Air Pollution |
| 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, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group |
| Evergy Kansas Central | Evergy Kansas Central, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries |
| Evergy Kansas South | Evergy Kansas South, Inc., a wholly-owned subsidiary of Evergy Kansas Central |
| Evergy Metro | Evergy Metro, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries |
| Evergy Missouri West | Evergy Missouri West, Inc., a wholly-owned subsidiary of Evergy |
| Evergy Transmission Company | Evergy Transmission Company, LLC |
| Exchange Act | The Securities Exchange Act of 1934, as amended |
| February 2021 winter weather event | Significant winter weather event in February 2021 that resulted in extremely cold temperatures over a multi-day period across much of the central and southern United States |
| FERC | Federal Energy Regulatory Commission |
| FMBs | First Mortgage Bonds |
| GAAP | Generally Accepted Accounting Principles |
| GHG | Greenhouse gas |
| Great Plains Energy | Great Plains Energy Incorporated |
| JEC | Jeffrey Energy Center |
| KCC | State Corporation Commission of the State of Kansas |
| KDHE | Kansas Department of Health & Environment |

5

# **Abbreviation or Acronym**

# **Definition**

| kV | Kilovolt |
| --- | --- |
| MDNR | Missouri Department of Natural Resources |
| MECG | Midwest Energy Consumers Group |
| MPSC | Public Service Commission of the State of Missouri |
| MW | Megawatt |
| MWh | Megawatt hour |
| NAAQS | National Ambient Air Quality Standards |
| NAV | Net asset value |
| NOL | Net operating loss |
| OCI | Other comprehensive income |
| OPC | Office of the Public Counsel |
| Prairie Wind | Prairie Wind Transmission, LLC, 50% owned by Evergy Kansas Central |
| RSU | Restricted share unit |
| RTO | Regional transmission organization |
| SEC | Securities and Exchange Commission |
| SIP | State implementation plan |
| SPP | Southwest Power Pool, Inc. |
| TDC | Transmission delivery charge |
| Term Loan Facility | Term Loan Credit Agreement |
| TFR | Transmission formula rate |
| Transource | Transource Energy, LLC and its subsidiaries, 13.5% owned by Evergy Transmission Company |
| VIE | Variable interest entity |
| Wolf Creek | Wolf Creek Generating Station |

6

# PART I

# ITEM 1. BUSINESS

# General

Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc. are separate registrants filing this combined annual report on Form 10-K. The terms "Evergy," "Evergy Kansas Central," "Evergy Metro" and "Evergy Companies" are used throughout this report. "Evergy" refers to Evergy, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Kansas Central" refers to Evergy Kansas Central, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Metro" refers to Evergy Metro, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Companies" refers to Evergy, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group.

Information in other Items of this report as to which reference is made in this Item 1 is hereby incorporated by reference in this Item 1. The use of terms such as "see" or "refer to" shall be deemed to incorporate into this Item 1 the information to which such reference is made.

# EVERGY, INC.

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 kilovolt (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. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment). Evergy serves approximately 1,652,200 customers located in Kansas and Missouri. Customers include approximately 1,444,900 residences, 199,500 commercial firms and 7,800 industrials, municipalities and other electric utilities. Evergy is significantly impacted by seasonality with approximately one-third of its retail revenues recorded in the third quarter.

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Evergy expects to continue operating its integrated utilities within the currently existing regulatory frameworks and is focused on empowering a better future for its customers, communities, employees and shareholders. The core tenets of Evergy's strategy are as follows:

- Affordability - operating the business cost-effectively and investing in technology and infrastructure to keep rates affordable and improve regional rate competitiveness; mitigating fuel and purchased power volatility by investing in a diverse generation fleet;
- Reliability - targeting transmission and distribution infrastructure investment to support reliability, flexibility, public safety, and resiliency; deploying new technology to improve preventive maintenance and customer restoration times; and
- Sustainability - investing at sustainable capital expenditure levels to maintain reliability and customer affordability for the long-term and balancing clean energy investment to continue fuel diversification and enable a responsible generation portfolio transition.

See Item 7, Management's Discussion and Analysis of Financial Operations (MD&A) - Executive Summary - Strategy, for additional information.

The table below summarizes the percentage of Evergy's revenues by customer classification.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Residential | 37% | 34% | 39% |
| Commercial | 32% | 30% | 33% |
| Industrial | 12% | 11% | 12% |
| Wholesale | 9% | 13% | 5% |
| Transmission | 6% | 6% | 6% |
| Other | 4% | 6% | 5% |
| Total | 100% | 100% | 100% |

The table below summarizes the percentage of Evergy's retail electricity sales by customer class.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Residential | 38% | 37% | 38% |
| Commercial | 42% | 42% | 42% |
| Industrial | 20% | 21% | 20% |
| Total | 100% | 100% | 100% |

## Regulation

Evergy Kansas Central's and Evergy Metro's Kansas operations are regulated by the State Corporation Commission of the State of Kansas (KCC) and Evergy Metro's Missouri operations and Evergy Missouri West are regulated by the Public Service Commission of the State of Missouri (MPSC), in each case with respect to retail rates, certain accounting matters, standards of service and, in certain cases, the issuance of securities, certification of facilities and service territories. The Evergy Companies are also subject to regulation by the Federal Energy Regulatory Commission (FERC) with respect to transmission, wholesale sales and rates, the issuance of securities in certain cases and other matters. Evergy has an indirect 94% ownership interest in Wolf Creek Generating Station (Wolf Creek), which is subject to regulation by the Nuclear Regulatory Commission (NRC) with respect to licensing, operations and safety-related requirements.

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The table below summarizes the rate orders in effect for Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's retail rate jurisdictions.

|  | Regulator | Allowed Return on Equity | Rate-Making Equity Ratio | Effective Date |
| --- | --- | --- | --- | --- |
| Evergy Kansas Central (a) | KCC | 9.3% | 51.46% | September 2018 |
| Evergy Metro - Kansas | KCC | 9.3% | 49.09% | December 2018 |
| Evergy Metro - Missouri | MPSC | (b) | (b) | January 2023 |
| Evergy Missouri West | MPSC | (b) | (b) | January 2023 |

$^{(a)}$ The KCC establishes rates for Evergy Kansas Central and Evergy Kansas South on a consolidated basis.

$^{(b)}$ Evergy Metro's and Evergy Missouri West's current MPSC rate orders do not contain an allowed return on equity or rate-making equity ratio.

Evergy expects its 2023 Kansas and Missouri jurisdictional retail revenues to be approximately 60% and 40%, respectively, based on historical averages of Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's total retail revenues.

See Item 7, MD&A, Critical Accounting Policies section, and Note 4 to the consolidated financial statements for additional information concerning regulatory matters.

## Competition

Missouri and Kansas continue to operate on the fully integrated and regulated retail utility model. As a result, the Evergy Companies do not compete with others to supply and deliver electricity in their franchised service territories in exchange for agreeing to have their terms of service regulated by state regulatory bodies. If Missouri or Kansas were to pass and implement legislation authorizing or mandating retail choice, Evergy may no longer be able to apply regulated utility accounting principles to deregulated portions of its operations, which may require a surcharge to recover certain costs from legacy customers or could lead to a write-off of certain regulatory assets and liabilities.

Evergy competes in the wholesale market to sell power in circumstances when the power it generates is not required for retail customers in its service territory. This competition primarily occurs within the SPP Integrated Marketplace, in which Evergy Kansas Central, Evergy Metro and Evergy Missouri West are participants. This marketplace determines which generating units among market participants should run, within the operating constraints of a unit, at any given time for maximum regional cost-effectiveness.

The SPP Integrated Marketplace is similar to other RTO or Independent System Operator (ISO) markets currently operating in other regions of the United States.

## Power Supply

Evergy has approximately 15,400 megawatts (MWs) of owned generating capacity and renewable power purchase agreements. Evergy's owned generation and power purchases from others, as a percentage of total megawatt hours (MWhs) generated and purchased, was approximately 70% and 30%, respectively, over the last three years. Evergy purchases power to meet its customers' needs, to satisfy firm power commitments or to meet renewable energy standards. Management believes Evergy will be able to meet its future power purchase needs due to the coordination of planning and operations in the SPP region and existing power purchase agreements; however, price and availability of power purchases may be impacted during periods of high demand or reduced supply.

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Evergy's total capacity by fuel type, including both owned generating capacity and power purchase agreements, is detailed in the table below.

| Fuel Type | Estimated 2023 MW Capacity | Percent of Total Capacity |
| --- | --- | --- |
| Coal | 5,916 | 38% |
| Wind (a) | 4,326 | 28 |
| Natural gas and oil | 3,998 | 26 |
| Uranium | 1,106 | 7 |
| Solar, landfill gas and hydroelectric (b) | 78 | 1 |
| Total capacity | 15,424 | 100% |

$^{(a)}$ MWs are based on nameplate capacity of the wind facility. Includes owned generating capacity of 579 MWs and long-term power purchase agreements of approximately 3,747 MWs of wind generation that expire from 2028 through 2048. See Item 2, Properties, for additional information.

$^{(b)}$ Includes a long-term power purchase agreement for approximately 66 MWs of hydroelectric generation that expires in 2023.

Evergy's projected peak summer demand for 2023 is approximately 10,200 MWs. Evergy expects to meet its projected capacity requirements for 2023 with its existing generation assets and power purchases. See 'Transitioning Evergy's Generation Fleet' below for further information regarding Evergy's long-term strategy with regards to its generating assets and power purchases.

Evergy Kansas Central, Evergy Metro and Evergy Missouri West are members of the SPP. The SPP is a FERC-approved RTO with the responsibility to ensure reliable power supply, adequate transmission infrastructure and competitive wholesale electricity prices in the region. As SPP members, Evergy Kansas Central, Evergy Metro and Evergy Missouri West are required to maintain a minimum reserve margin of 15%. This net positive supply of capacity is maintained through generation asset ownership, capacity agreements, power purchase agreements and peak demand reduction programs. The reserve margin is designed to support reliability of the region's electric supply.

## Environmental Matters

The Evergy Companies are subject to extensive and evolving federal, state and local environmental laws, regulations and permit requirements relating to air and water quality, waste management and hazardous substance disposal, protected natural resources (such as wetlands, endangered species and other protected wildlife) and health and safety. For example, Evergy Kansas Central, Evergy Metro and Evergy Missouri West combust large amounts of fossil fuels in the production of electricity, which results in significant emissions of carbon dioxide (CO$_{2}$) and other greenhouse gases (GHG). Federal legislation regulates the emission of GHGs and numerous states and regions have adopted programs to stabilize or reduce GHG emissions. The Environmental Protection Agency (EPA), the Kansas Department of Health and Environment (KDHE) and the Missouri Department of Natural Resources (MDNR) regulate emissions under the Clean Air Act (CAA), water under the Clean Water Act (CWA) and waste management under the Resource Conservation and Recovery Act (RCRA), among other laws and regulations. See Note 15 to the consolidated financial statements for additional information. There have been, and management believes there will continue to be, policy, legal and regulatory efforts to influence climate change, such as efforts to reduce GHG emissions, impose a tax on emissions and create incentives for low-carbon generation and energy efficiency. These efforts, and climate change itself, have the potential to adversely affect the Evergy Companies' results of operations, financial position and cash flows. See Part I, Item 1A, Risk Factors, for additional information.

The Evergy Companies have taken, and will continue to take, proactive measures to mitigate the impact of climate change on its businesses. For example, the Evergy Companies regularly conduct preparedness exercises for a variety of disruptive events, including storms, which may become more frequent or intense due to climate change. In addition, the Evergy Companies have invested, and will continue to invest, in grid resiliency. Much of the Evergy Companies' infrastructure is aged, and grid resiliency efforts include building additional transmission and distribution lines, replacing aged infrastructure and proactively managing the vegetation that can damage systems

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during severe weather. The Evergy Companies also monitor water conditions at their generating facilities and focus on water conservation at these facilities to address resource depletion.

### Transitioning Evergy's Generation Fleet

The Evergy Companies are committed to a long-term strategy to reduce CO2 emissions in a cost-effective and reliable manner. In 2022, Evergy achieved a reduction of CO2 emissions by nearly half from 2005 levels. Evergy has a goal to achieve net-zero CO2 emissions by 2045 with an interim goal of a 70% reduction of CO2 emissions from 2005 levels by 2030. The trajectory and timing of reaching the net-zero goal are dependent on many external factors, including enabling technology developments, the reliability of the power grid, availability of transmission capacity, supportive energy policies and regulations, and other factors. See "Cautionary Statements Regarding Certain Forward-Looking Information" and Part I, Item 1A, Risk Factors, for additional information.

Public attention is currently focused on transitioning to a low carbon future, including reducing GHG emissions and closing coal-fired generating units. Diversity of fuel supply has historically provided cost and reliability benefits. For example, because renewable generation is intermittent, diversity of baseload generation, including a mix of coal and natural gas, has helped to maintain a consistent availability of power. In addition, the Evergy Companies must prudently utilize the generation assets that regulators have allowed the Evergy Companies to include in rates. The Evergy Companies use a triennial integrated resource plan, which is a detailed analysis that estimates factors that influence the future supply and demand for electricity, to inform the manner in which they supply electricity. The integrated resource plan considers forecasts of future electricity demand, fuel prices, transmission improvements, new generating capacity, cost of environmental compliance, integration of renewables, energy storage, energy efficiency and demand response initiatives. Strategies that the Evergy Companies are pursuing to reduce emissions include:

- retiring fossil fuel generation;
- developing renewable energy facilities;
- collaborating with regulators to offer customers the opportunity to procure electricity produced with renewable resources; and
- investing in customer energy efficiency programs.

Since 2005, the Evergy Companies have added over 4,400 MWs of renewable generation, while retiring more than 2,400 MWs of fossil generation. See Item 2, Properties, for additional information regarding the Evergy Companies' renewable generation resources. The Evergy Companies are also committed to transparency. On its website, http://investors.evergy.com, Evergy provides quantitative and qualitative data regarding various environmental, social and governance matters, including information related to emissions, waste and water. The contents of the website, including reports and documents contained therein, are not incorporated into this filing.

See Note 15 to the consolidated financial statements for information regarding environmental matters.

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## Fuel

The fuel sources for Evergy's owned generation and power purchase agreements are coal, wind and other renewable sources, uranium and natural gas and oil. The actual 2022 fuel mix and fuel cost in cents per net kilowatt hour (kWh) delivered are outlined in the following table.

| Fuel | Fuel Mix (a) | Fuel cost in cents per net kWh delivered |
| --- | --- | --- |
|  | Actual 2022 | Actual 2022 |
| Coal | 48% | 2.33¢ |
| Wind, hydroelectric, landfill gas and solar (b) | 31 | 2.20 |
| Uranium | 16 | 0.66 |
| Natural gas and oil | 5 | 9.26 |
| Total | 100% | 2.36 |

$^{(a)}$ Fuel mix based on percent of net MWhs generated by owned resources and delivered under renewable power purchase agreements.

$^{(b)}$ Fuel cost in cents per net kWh delivered includes costs associated with renewable power purchase agreements.

### Coal

During 2023, Evergy's generating units, including jointly-owned units, are projected to use approximately 17 million tons of coal. Evergy Kansas Central, Evergy Metro and Evergy Missouri West have entered into coal-purchase contracts with various suppliers in Wyoming's Powder River Basin (PRB), the nation's principal supply region of low-sulfur coal, and with local suppliers. The coal to be provided under these contracts is expected to satisfy approximately 65%, 15% and 5% of the projected coal requirements for 2023, 2024 and 2025, respectively. The remainder of the coal requirements is expected to be fulfilled through entering into additional contracts or spot market purchases.

Evergy Kansas Central, Evergy Metro and Evergy Missouri West have also entered into rail transportation contracts with various railroads to transport coal from the PRB and local suppliers to their generating units. The transportation services to be provided under these contracts are expected to satisfy almost all of the projected transportation requirements for 2023, 2024 and 2025. The contract rates adjust for changes in railroad costs.

### Nuclear Fuel

Evergy Kansas South and Evergy Metro each owns 47% of Wolf Creek, which is Evergy's only nuclear generating unit. Wolf Creek purchases uranium and has it processed for use as fuel in its reactor. This process involves conversion of uranium concentrates to uranium hexafluoride, enrichment of uranium hexafluoride and fabrication of nuclear fuel assemblies. The owners of Wolf Creek have on hand or under contract all the uranium, uranium enrichment and conversion services needed to operate Wolf Creek through the first quarter of 2030. The owners also have under contract all the uranium fabrication services required to operate Wolf Creek through 2045.

### Natural Gas

Evergy purchases natural gas for use in its generating units primarily through spot market purchases. From time to time, Evergy also may enter into contracts, including the use of derivatives, in an effort to manage the cost of natural gas. For additional information about Evergy's exposure to commodity price risks, see Item 7A., Quantitative and Qualitative Disclosures About Market Risk.

Evergy Kansas Central, Evergy Metro and Evergy Missouri West maintain natural gas transportation arrangements with Southern Star Central Gas Pipeline, Inc. The Southern Star Central Gas Pipeline, Inc. arrangement expires based on the generating unit being served with expiration dates from 2023 to 2030.

12

## Customer Energy Efficiency Programs

The Evergy Companies have implemented, and continue to offer, energy efficiency programs to help customers with their energy efficiency needs and to help manage energy costs. Both Missouri and Kansas have passed legislation promoting the implementation of cost-effective demand-side management programs and allowing for the recovery of these program costs from customers, along with the potential to earn performance incentives based upon certain criteria.

In Missouri, Evergy Metro and Evergy Missouri West currently offer a suite of energy efficiency programs for customers under the Missouri Energy Efficiency Investment Act (MEEIA). The current portfolio of programs was approved by the MPSC in 2019 for the years 2020 through 2022 and provides for the recovery of program costs, throughput disincentive and the opportunity to earn a performance incentive based upon demand and energy savings achieved. The costs of the programs are recovered from customers through a rider mechanism. Evergy Metro and Evergy Missouri West requested an extension of these programs and in May 2022 the MPSC approved the extension through 2023.

In Kansas, Evergy Kansas Central and Evergy Metro requested KCC authorization in December 2021 for a suite of energy efficiency programs for customers under the Kansas Energy Efficiency Investment Act (KEEIA). The requested portfolio of programs would provide for the recovery of program costs, throughput disincentive and the opportunity to earn a performance incentive based upon demand and energy savings achieved. The costs of the program would be recovered from customers through a rider mechanism. Evergy Kansas Central's and Evergy Metro's proposed programs would be effective in 2023 through 2026. The KCC's decision on Evergy Kansas Central's and Evergy Metro's KEEIA request is expected in the first half of 2023.

## Human Capital Resources

At December 31, 2022, the Evergy Companies had 4,512 employees, including 2,406 represented by five local unions of the International Brotherhood of Electrical Workers (IBEW) and one local union of the United Government Security Officers of America (UGSOA). The Evergy Companies currently have labor agreements with each of these unions that expire at varying times in 2024 through 2026. The Evergy Companies employ 1,579 generation employees, 1,388 transmission and distribution employees and 1,545 support employees that work primarily in the states of Kansas and Missouri.

Evergy's mission is to empower a better future and a key component of this mission is maintaining a culture that emphasizes safety, integrity, ownership and adaptability.

Safety is a crucial part of Evergy's values. The components of Evergy's safety program include a strong management commitment to a safety-conscious work environment, hazard recognition and control, worksite analysis, contractor safety management and training. Evergy also conducts regular safety audits and assessments. During the COVID-19 pandemic, Evergy has prioritized the safety of its employees while continuing to serve its customers and community by providing appropriate personal protective equipment, establishing additional training and protocols and allowing employees to work remotely when possible.

Evergy is also working to build a more diverse and inclusive workforce through recruiting and hiring practices, performance management, training and data analysis and reporting initiatives. As of December 31, 2022, Evergy's workforce was 78% male and 22% female, and women represented 25% of Evergy's officer team. The ethnicity of Evergy's workforce was 85% White, 5% Black, 4% Hispanic and 6% other.

Evergy offers a competitive package of compensation and benefits to attract and retain talented employees, including market-competitive pay, healthcare and retirement benefits, paid time off, family leave and tuition reimbursement. Evergy also allows employees to participate in a comprehensive well-being program that includes health and wellness-related activities and incentives, business resource groups, gym membership reimbursement, paid volunteer hours, charitable donation match and free access to an employee assistance program.

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## Information About Evergy's Executive Officers

Set forth below is information relating to the executive officers of Evergy, Inc. Each executive officer holds the same position with each of Evergy Kansas Central, Inc., Evergy Metro, Inc., Evergy Kansas South, Inc. and Evergy Missouri West, Inc. as the executive officer holds with Evergy, Inc. Executive officers serve at the pleasure of the board of directors. There are no family relationships among any of the executive officers, nor any arrangements or understandings between any executive officer and other persons pursuant to which he or she was appointed as an executive officer.

| Name | Age | Current Position(s) | Year First Assumed an Officer Position |
| --- | --- | --- | --- |
| David A. Campbell (a) | 54 | President and Chief Executive Officer | 2021 |
| Kirkland B. Andrews (b) | 54 | Executive Vice President and Chief Financial Officer | 2021 |
| Kevin E. Bryant (c) | 47 | Executive Vice President and Chief Operating Officer | 2006 |
| Lesley L. Elwell (d) | 52 | Senior Vice President, Chief Human Resources Officer and Chief Diversity Officer | 2021 |
| Charles A. Caisley (e) | 49 | Senior Vice President, Public Affairs and Chief Customer Officer | 2011 |
| Heather A. Humphrey (f) | 52 | Senior Vice President, General Counsel and Corporate Secretary | 2010 |
| Charles L. King (g) | 58 | Senior Vice President and Chief Technology Officer | 2013 |
| Steven P. Busser (h) | 54 | Vice President and Chief Accounting Officer | 2014 |

(a) Mr. Campbell was appointed President and Chief Executive Officer of Evergy, Inc. in January 2021. Mr. Campbell previously served as Executive Vice President and Chief Financial Officer of Vistra Energy Corp. (2019-2020), as President and Chief Executive Officer of InfraREIT, Inc. and President of Hunt Utility Services (2014-2019) and as President and Chief Executive Officer of Sharyland Utilities, LLC (2016-2019), and in various roles with TXU Corp. and its affiliated entities (2004-2013).

(b) Mr. Andrews was appointed Executive Vice President and Chief Financial Officer of Evergy, Inc. in February 2021. Mr. Andrews previously served as Executive Vice President and Chief Financial Officer of NRG Energy, Inc. (2011-2021) and as Executive Vice President, Chief Financial Officer of Clearway Energy, Inc. (2012-2016). Mr. Andrews also served as Managing Director and Co-Head Investment Banking, Power and Utilities - Americas at Deutsche Bank Securities, Inc. (2009-2011), and in several capacities at Citigroup Global Markets Inc., including Managing Director, Group Head, North American Power (2007-2009) and Head of Power, Mergers and Acquisitions (2005-2007).

(c) Mr. Bryant was appointed Executive Vice President and Chief Operating Officer of Evergy, Inc. in June 2018. Mr. Bryant previously served as Senior Vice President - Finance and Strategy and Chief Financial Officer of Great Plains Energy, Evergy Metro and Evergy Missouri West (2015-2018). He previously served as Vice President - Strategic Planning of Great Plains Energy Incorporated (Great Plains Energy), Evergy Metro and Evergy Missouri West (2014). He served as Vice President - Investor Relations and Strategic Planning and Treasurer of Great Plains Energy, Evergy Metro and Evergy Missouri West (2013). He served as Vice President - Investor Relations and Treasurer of Great Plains Energy, Evergy Metro and Evergy Missouri West (2011-2013). He was Vice President - Strategy and Risk Management of Evergy Metro and Evergy Missouri West (2011) and Vice President - Energy Solutions of Evergy Metro (2006-2011) and Evergy Missouri West (2008-2011).

(d) Ms. Elwell was appointed Senior Vice President, Chief Human Resources Officer and Chief Diversity Officer of Evergy, Inc. in January 2023. Ms. Elwell previously served as Senior Vice President and Chief Human Resources Officer of Evergy, Inc. (2021-2023). Ms. Elwell previously served as Chief People Officer at J.E. Dunn Construction Company (2017-2021), as Vice President People Strategy / HR Business Partner of Walmart Corporation (2016-2017), as Vice President HR Business Partner Operations at DIRECTV, Inc. (2012-2015), and in various roles of increasing responsibility, including as Vice President, with Sprint Corporation (1997-2012; 2015-2016).

(e) Mr. Caisley was appointed Senior Vice President, Public Affairs and Chief Customer Officer of Evergy, Inc. in August 2021. He previously served as Senior Vice President, Marketing and Public Affairs and Chief Customer Officer of Evergy, Inc. (2018-2021). Mr. Caisley served as Vice President - Marketing and Public Affairs of Great Plains Energy, Evergy

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Metro and Evergy Missouri West (2011-2018). He was Senior Director of Public Affairs (2008-2011) and Director of Governmental Affairs of Evergy Metro (2007-2008).

(f) Ms. Humphrey was appointed Senior Vice President, General Counsel and Corporate Secretary of Evergy, Inc. in June 2018. Ms. Humphrey previously served as Senior Vice President - Corporate Services and General Counsel of Great Plains Energy, Evergy Metro and Evergy Missouri West (2016-2018). She previously served as General Counsel (2010-2016) and Senior Vice President - Human Resources of Great Plains Energy, Evergy Metro and Evergy Missouri West (2012-2016). She served as Vice President - Human Resources of Great Plains Energy, Evergy Metro and Evergy Missouri West (2010-2012). She was Senior Director of Human Resources and Interim General Counsel of Great Plains Energy, Evergy Metro and Evergy Missouri West (2010) and Managing Attorney of Evergy Metro (2007-2010).

(g) Mr. King was appointed Senior Vice President and Chief Technology Officer of Evergy, Inc. in February 2020. He previously served as Senior Vice President, Information Technology and Chief Information Officer (2019) and Vice President, Information Technology and Chief Information Officer (2018-2019) of Evergy, Inc. Prior to that, he served as Vice President - Information Technology (2013-2018), as Senior Director of Information Technology Applications and Delivery (2013) and Director of Information Technology Applications (2011-2013) of Evergy Metro and Evergy Missouri West. Mr. King also served in various roles, including leadership roles, with Dish Network, CenturyLink, Sprint and Accenture.

(h) Mr. Busser was appointed Vice President and Chief Accounting Officer of Evergy, Inc. in February 2022. He previously served as Vice President - Risk Management and Controller of Evergy, Inc. (2018-2022). Mr. Busser was appointed Vice President - Risk Management and Controller of Great Plains Energy, Evergy Metro and Evergy Missouri West in 2016. He previously served as Vice President - Business Planning and Controller of Great Plains Energy, Evergy Metro and Evergy Missouri West (2014-2016). He served as Vice President - Treasurer of El Paso Electric Company (2011-2014). Prior to that, he served as Vice President - Treasurer and Chief Risk Officer (2006-2011) and Vice President - Regulatory Affairs and Treasurer (2004-2006) of El Paso Electric Company.

### **Evergy Kansas Central, Inc.**

Evergy Kansas Central, a Kansas corporation incorporated in 1924 and headquartered in Topeka, Kansas, is an integrated, regulated electric utility that engages in the generation, transmission, distribution and sale of electricity. Evergy Kansas Central serves approximately 734,300 customers located in central and eastern Kansas. Customers include approximately 634,700 residences, 94,200 commercial firms, and 5,400 industrials, municipalities and other electric utilities. Evergy Kansas Central's retail revenues averaged approximately 73% of its total operating revenues over the last three years. Wholesale firm power, bulk power sales, transmission and miscellaneous electric revenues accounted for the remainder of Evergy Kansas Central's revenues. Evergy Kansas Central is significantly impacted by seasonality with approximately one-third of its retail revenues recorded in the third quarter.

### **Evergy Metro, Inc.**

Evergy Metro, a Missouri corporation incorporated in 1922 and headquartered in Kansas City, Missouri, is an integrated, regulated electric utility that engages in the generation, transmission, distribution and sale of electricity. Evergy Metro serves approximately 576,700 customers located in western Missouri and eastern Kansas. Customers include approximately 510,000 residences, 64,800 commercial firms, and 1,900 industrials, municipalities and other electric utilities. Evergy Metro's retail revenues averaged approximately 85% of its total operating revenues over the last three years. Wholesale firm power, bulk power sales and miscellaneous electric revenues accounted for the remainder of Evergy Metro's revenues. Evergy Metro is significantly impacted by seasonality with approximately one-third of its retail revenues recorded in the third quarter. Missouri and Kansas jurisdictional retail revenues for Evergy Metro averaged approximately 55% and 45%, respectively, of total retail revenues over the last three years.

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# ITEM 1A. RISK FACTORS

## Utility Regulatory Risks:

#### *Prices are established by regulators and may not be sufficient to recover costs or provide for a return on investment.*

The prices that the FERC, KCC and MPSC authorize the utility subsidiaries of Evergy to charge significantly influence the Evergy Companies' results of operations, financial position and cash flows.

In general, utilities are allowed to recover in customer rates costs that were prudently incurred to provide utility service, plus a reasonable return on invested capital. There can be no assurance, however, that regulators will determine costs to have been prudently incurred. Further, the amounts approved by the regulators may not be sufficient to allow for a recovery of costs or provide for an adequate return on and of capital investments. Also, amounts that were approved by regulators may be appealed, modified, limited or eliminated by subsequent regulatory or legislative actions. A failure to recover costs or earn a reasonable return on invested capital could have a material adverse effect on the results of operations, financial position and cash flows of Evergy and its utility subsidiaries.

The Evergy Companies are also exposed to cost-recovery shortfalls due to the inherent 'regulatory lag' in the rate-setting process. This is because utility rates are generally based on historical information and, except for certain situations where regulators allow for recovery of expenses through use of a formula that tracks costs, are not subject to adjustment between rate cases. Evergy Kansas Central and Evergy Metro agreed to a five-year base rate moratorium in Kansas beginning in December 2018. In addition, Evergy Metro and Evergy Missouri West utilize a plant-in service accounting (PISA) legislative mechanism in Missouri, which limits the extent to which prices can increase after a general rate case to approximately 3% on an annualized basis. Evergy Metro and Evergy Missouri West each filed rate cases in 2022 under the PISA constraints described above and new rates became effective in January 2023. These and other factors may result in under-recovery of costs or failure to earn the authorized return on investment, or both.

Furthermore, during 2021 and 2022, the United States' economy experienced a substantial rise in the inflation rate compared to recent historical inflation rates. While the Federal Reserve Bank has announced certain measures to combat rising inflation, there remains uncertainty in the near-term outlook as to whether inflation will continue and whether actions by the Federal Reserve Bank will result in a recession. Increases in inflation raise the Evergy Companies' costs for labor, materials and services. Furthermore, a failure to recover increased capital costs could result in under-recovery of costs.

Failure to timely recover the full investment costs of capital projects, the impact of renewable energy and energy efficiency programs, other utility costs and expenses due to regulatory disallowances, regulatory lag or other factors could lead to lowered credit ratings, reduced access to capital markets, increased financing costs, lower flexibility due to constrained financial resources and increased collateral security requirements or reductions or delays in planned capital expenditures. In response to competitive, economic, political, legislative, public perception and regulatory pressures, Evergy's utility subsidiaries may be subject to rate moratoriums, rate refunds, limits on rate increases, lower allowed returns on investments or rate reductions, including phase-in plans designed to spread the impact of rate increases over an extended period for the benefit of customers. In addition, Transource, which Evergy owns a 13.5% interest, is focused on the development of competitive electric transmission projects across the United States and faces similar risks with respect to projects located in regulatory jurisdictions outside of Kansas and Missouri. Any of these results could have a material adverse effect on the results of operations, financial condition and cash flows of the Evergy Companies.

#### *Legislative and regulatory requirements may increase costs and result in compliance penalties.*

FERC, the North American Electric Reliability Corporation (NERC) and SPP have implemented and enforce an extensive set of transmission system reliability, cybersecurity and critical infrastructure protection standards that apply to public utilities. The MPSC and KCC have the authority to implement utility operational standards and

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requirements, such as vegetation management standards, facilities inspection requirements and quality of service standards. In addition, Evergy is also subject to health, safety and other requirements enacted by the Occupational Safety and Health Administration, the Department of Transportation, the Department of Labor and other federal and state agencies. As discussed more fully below, the Evergy Companies are also subject to numerous environmental laws and regulations, as well as laws and regulations related to nuclear power generation. The costs of complying with existing, new or modified regulations, standards and other requirements could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies. Furthermore, regulatory changes could result in operational changes that increase costs or adversely impact the Evergy Companies' prospects. In addition, failure to meet quality of service, reliability, cybersecurity, critical infrastructure protection, operational or other standards and requirements could expose the Evergy Companies to penalties, additional compliance costs or adverse rate consequences, any of which could have a material adverse impact on their results of operations, financial position and cash flows.

## Environmental Risks:

*Costs to comply with environmental laws and regulations, including those relating to air and water quality, waste management and hazardous substance disposal, protected natural resources and health and safety, are significant and may adversely impact operations and financial results.*

The Evergy Companies are subject to extensive and evolving federal, state and local environmental laws, regulations and permit requirements relating to air and water quality, waste management and hazardous substance disposal, protected natural resources (such as wetlands, endangered species and other protected wildlife) and health and safety. See Item 1. Business - Environmental Matters and Note 15 to the consolidated financial statements for additional information. In general, over time these laws and regulations have become and continue to become increasingly stringent and compliance with these laws and regulations require an increasing share of capital and operating resources, which may reduce the amount of resources available for other business objectives, including capital investments.

Compliance with these laws, regulations and requirements requires significant capital and operating resources. Regulators may also disagree with the Evergy Companies' interpretation or application of these laws, regulations and requirements. The failure to comply with these laws, regulations and requirements could result in substantial fines, injunctive relief and other sanctions. For example, Evergy Kansas Central recently decommissioned the Tecumseh Energy Center and removed all coal combustion residuals (CCRs) from a surface impoundment in a manner it believed complied with federal law, but the EPA has reviewed and determined Evergy Kansas Central should have taken additional or alternative actions, even though the facility is closed. A resulting consent order with the EPA has been agreed to by Evergy Kansas Central and additional groundwater monitoring activities have been initiated at the site.

The EPA has begun issuing CCR Part A and Part B rule extension application determinations for companies that applied for approval to operate unlined or clay-lined impoundments past April 2021. The Evergy Companies did not apply for an extension, however, these proposed determinations include extensive CCR rule interpretations and compliance expectations that may impact all owners of CCR units. The new interpretations could require modified compliance plans such as different methods of CCR unit closure. Additionally, more stringent remediation requirements for units that are in corrective action or forced to go into corrective action could result in substantial costs or operational impacts.

In January 2022, the EPA announced changes following a tour by the EPA administrator conducted in the second half of 2021 to address environmental justice issues in communities that are marginalized, underserved and overburdened by pollution. These changes will include additional unannounced inspections of suspected non-compliant facilities, deploying new assets to monitor air pollution and a general increase in overall monitoring and oversight. The EPA's announcement focused on industries in Louisiana, Mississippi and Texas but includes similar agency-wide action in parallel. The Evergy Companies have multiple power plants located in communities that would be considered a higher priority by the EPA based on existing demographics. These sites could be subject to additional monitoring and unannounced inspections in the future. In September 2022, the EPA and the Missouri

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Department of Natural Resources (MDNR) conducted a CAA environmental justice inspection of the Evergy Companies' Hawthorn Generating Station. No CAA noncompliance issues were found.

Environmental permits are subject to periodic renewal, which may result in more stringent permit conditions and limits. New facilities, or modifications of existing facilities, may require new environmental permits or amendments to existing permits. Delays in the environmental permitting process, public opposition and challenges, denials of permit applications, limits or conditions imposed in permits and the associated uncertainty may materially adversely affect the cost and timing of projects, and thus materially adversely affect the results of operations, financial position and cash flows of the Evergy Companies. In addition, compliance with environmental laws, regulations and requirements could alter the way assets are managed, which in turn could result in retiring assets earlier than expected, recording asset retirement obligations (AROs) or having a regulator disallow recovery of costs that had been prudently incurred in connection with those assets. There is also a risk of lawsuits alleging violations of environmental laws, regulations or requirements, claiming creation of a public nuisance or other matters, and seeking injunctions or monetary damages or other relief.

Costs of compliance with environmental laws, regulations and requirements, or fines, penalties or negative lawsuit outcomes, if not recovered in rates from customers, could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies.

### **Financial Risks:**

#### ***Financial market volatility or declines in the Evergy Companies' credit ratings may increase financing costs and limit access to the credit markets, which may adversely affect liquidity and financial results.***

The Evergy Companies rely on funds from operations and access to the capital and credit markets to fund capital expenditures and for working capital and liquidity. Volatility in capital or credit markets, increases in interest rates, deterioration in the financial condition of the financial institutions on which the Evergy Companies rely, credit rating downgrades, delays in regulatory approvals for certain refinancings, a decrease in the market price of Evergy's common stock or a decrease or disappearance in the demand for debt securities issued by the Evergy Companies or subsidiaries could have material adverse effects on the Evergy Companies. These effects could include, among others: reduced access to capital and increased cost of borrowed funds and collateral requirements; dilution resulting from equity issuances at reduced prices; increased nuclear decommissioning trust and pension and other post-retirement benefit plan funding requirements; reduced ability to pay dividends; rate case disallowance of costs of capital; reductions in or delays of capital expenditures; delayed access to the capital markets at opportune times; and limitations in the ability of Evergy to provide credit support for its subsidiaries.

The Evergy Companies plan to make significant capital investments in renewable generation and to enhance the customer experience, improve reliability and resiliency and improve efficiency, which are expected to be funded with cash flows from operations and debt. If cash flows from operations are lower than expected or the costs of these capital investments are higher than expected, additional debt will be required to fund the investments, which, in turn, may create pressure on the Evergy Companies' credit ratings or result in a ratings downgrade and increase their cost of capital. In 2021, a credit ratings agency assigned the Evergy Companies a negative outlook, while affirming ratings, due to perceived risk related to increased capital expenditures and the ability to earn a return of and on those investments through upcoming rate cases. Further, Evergy Kansas Central and Evergy Metro have outstanding tax-exempt bonds that may be put back to the respective issuer at the option of the holders, which could adversely impact liquidity. Additionally, the appeal by the Office of the Public Counsel (OPC) of the financing order for Evergy Missouri West to recover costs incurred in connection with the February 2021 winter weather event through the issuance of securitized bonds will result in a delay of such issuance and may increase financing costs. Finally, market disruption and volatility could have an adverse impact on Evergy's lenders, suppliers and other counterparties or customers, causing them to fail to meet their obligations.

#### ***Evergy is a holding company and relies on the earnings of its subsidiaries to meet its financial obligations.***

Evergy is a holding company with no significant operations of its own. The primary source of funds for payment of dividends to its shareholders and its other financial obligations is dividends paid to it by its direct subsidiaries,

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particularly Evergy Kansas Central, Evergy Metro and Evergy Missouri West. Evergy's subsidiaries are separate legal entities and have no obligation to provide Evergy with funds. The ability of Evergy's subsidiaries to pay dividends or make other distributions, and accordingly, Evergy's ability to pay dividends on its common stock and meet its financial obligations, principally depends on the earnings and cash flows, capital requirements and general financial position of its subsidiaries, as well as regulatory factors, financial covenants, general business conditions and other matters.

In addition, the Evergy Companies are subject to certain corporate and regulatory restrictions and financial covenants that could affect their ability to pay dividends. Under the Federal Power Act, Evergy Kansas Central, Evergy Metro and Evergy Missouri West generally can pay dividends only out of retained earnings. Each of Evergy Metro and Evergy Missouri West has committed to Missouri regulators to not pay dividends to Evergy if its credit rating falls below BBB- for S&P Global Ratings or Baa3 for Moody's Investor Services. Each of Evergy Kansas Central and Evergy Metro has committed to Kansas regulators to not pay dividends to Evergy if (i) the payment would result in an increase in the utility's debt level (excluding short-term debt and debt due within one year) above 60 percent of its total capitalization, absent approval from the KCC or (ii) if its credit rating falls below BBB- for S&P Global Ratings or Baa3 for Moody's Investor Services. Under various debt agreements, the Evergy Companies are also required to maintain a consolidated indebtedness to consolidated total capitalization ratio of not more than 0.65 to 1.00, which could restrict the amount of dividends the Evergy Companies are permitted to pay. Evergy cannot guarantee dividends will be paid in the future or that, if paid, dividends will satisfy announced targets or investor expectations or be paid with the same frequency as in the past.

In addition, from time to time Evergy has in the past and may in the future guarantee debt obligations of its subsidiaries. Under the financing agreements to which Evergy is a party, a guarantee of debt may be considered indebtedness for purposes of complying with financial covenants that dictate the extent to which Evergy can borrow money, and any guarantee payments could adversely affect Evergy's liquidity and ability to service its own debt obligations.

# ***Supply chain disruptions and inflation could negatively impact the Evergy Companies' operations and corporate strategy.***

The operations and business plans of the Evergy Companies depend on the global supply chain to procure the equipment, materials and other resources necessary to build and provide services in a safe and reliable manner. The delivery of components, materials, equipment and other resources that are critical to the Evergy Companies' business operations and corporate strategy has been restricted by domestic and global supply chain upheaval. This has resulted in the shortage of critical items. International tensions, including the ramifications of regional conflict, could further exacerbate the global supply chain upheaval. These disruptions and shortages could adversely impact business operations and corporate strategy. The constraints in the supply chain could restrict the availability and delay the construction, maintenance or repair of items that are needed to support normal operations or are required to execute on the Evergy Companies' corporate strategy for continued capital investment in utility equipment. These disruptions and constraints could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies.

Supply chain disruptions have contributed to higher prices of components, materials, equipment and other needed commodities and these higher prices may continue in the future. The economy in the United States has encountered a material level of inflation and that has contributed to increased uncertainty in the outlook of near term economic activity, including whether inflation will continue and at what rate. Increases in inflation raise costs for labor, materials and services. The Evergy Companies typically recover increases in costs from customers through rates. Failure to recover increased costs could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies.

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# ***Public health crises, epidemics, or pandemics could adversely affect the Energy Companies' business functions, financial condition, liquidity, and results of operations.***

Public health crises, epidemics, or pandemics and any related government responses may adversely impact the economy and financial markets and could have a variety of adverse impacts on the Energy Companies, including a decrease in revenues, increased credit loss expense; increases in past due accounts receivable balances; and access to the capital markets at unreasonable terms or rates.

Public health crises, epidemics, or pandemics and any related government responses could also impair the Energy Companies' ability to develop, construct, and operate facilities. Risks include extended disruptions to supply chains and inflation, resulting in increased costs for labor, materials, and services, which could adversely impact the Energy Companies' ability to implement their corporate strategy. The Energy Companies may also be adversely impacted by labor disruptions and productivity as a result of infections, employee attrition, and a reduced ability to replace departing employees as a result of employees who leave or forego employment to avoid any required precautionary measures.

Despite the Energy Companies' efforts to manage the impacts of public health crises, epidemics, or pandemics that may occur in the future, the extent to which they may affect them depends on factors beyond their knowledge or control. As a result, the Energy Companies are unable to determine the potential impact any such public health crises, epidemics, or pandemics may have on their business plans and operations, liquidity, financial condition, and results of operations.

# ***Increasing costs associated with defined benefit retirement and postretirement plans, health care plans and other employee benefits could adversely affect Energy's financial position and liquidity.***

Energy maintains defined benefit retirement and other post-retirement employee benefit plans for certain current and former employees. The costs of these plans depend on a number of factors, including the rates of return on plan assets, the level and nature of the provided benefits, discount rates, the interest rates used to measure required minimum funding levels, changes in benefit design, changes in laws or regulations and the amount of any required or voluntary contributions to the plans. The Energy Companies have substantial unfunded liabilities under these plans. Also, if the rate of retirements exceeds planned levels, these plans experience adverse market returns on investments or interest rates fall, required or voluntary contributions to the plans could be material. In addition, changes in accounting rules and assumptions related to future costs, returns on investments, interest rates and other actuarial assumptions, including projected retirements, could have a significant adverse impact on the results of operations, financial position and cash flows of the Energy Companies.

The costs of providing health care benefits to employees and retirees have increased in recent years and may continue to rise in the future. Future legislative changes related to health care could also cause significant changes to benefit programs and costs. The increasing costs associated with health care plans could have a significant adverse impact on the results of operations, financial position and cash flows of the Energy Companies.

# ***The Energy Companies are subject to commodity and other risks associated with energy markets.***

The Energy Companies are required to maintain generation capacity that satisfies regulatory mandates and are obligated to provide power when required by the SPP or pursuant to contractual obligations. Although the Energy Companies generally have regulatory mechanisms that allow them to recover the cost of fuel and purchased power necessary to satisfy these requirements, regulatory or legislative actions could limit, eliminate or delay recovery of these expenses after the expenses have been incurred.

The Energy Companies engage in the wholesale and retail sale of electricity and the wholesale purchase of electricity as part of their regulated electric operations in addition to energy marketing activities and the management of third-party generation facilities. These activities expose the Energy Companies to risks associated with the price of electricity and other energy-related products, as well as credit exposure to their counterparties. Exposure to these risks is affected by a number of factors, including the availability and cost of fuel and power that the Energy Companies purchase on the wholesale markets to serve customer load or to satisfy their regulatory or contractual obligations, the ability or effectiveness of strategies utilized by the Energy Companies to hedge these risks, the extent to which the Energy Companies may be required to post collateral for the benefit of third parties

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and the risk that counterparties fail to fulfill their obligations to the Evergy Companies. Market volatility can increase or create unanticipated risks. Regional transmission organizations and independent system operators may also retroactively reprice transactions following execution.

Subject to certain regulatory constraints, the Evergy Companies use derivative instruments, such as transmission congestion rights (TCRs), swaps, options, futures and forwards, to manage commodity and financial risks. Losses could be recognized as a result of volatility in the market values of these contracts, if a counterparty fails to perform or if the underlying transactions, which the derivative instruments are intended to hedge, fail to materialize. The valuation of these financial instruments can involve management's judgment or the use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts. The Evergy Companies cannot assure that their risk management practices will be effective or will mitigate all risks.

The results of operations, financial position and liquidity of the Evergy Companies could be materially adversely affected if the Evergy Companies fail to recover, or experience a delay in the recovery of, fuel and purchased power expenses; if the Evergy Companies fail to adequately hedge or mitigate commodity or energy market risks; if the Evergy Companies are required to provide collateral in amounts greater than planned; if energy marketing transactions are retroactively repriced; or if counterparties fail to fulfill obligations to the Evergy Companies.

# ***Tax legislation and an inability to utilize tax credits could adversely impact results of operations, financial position and liquidity.***

Tax laws and regulations can adversely affect, among other things, financial results, liquidity, credit ratings and the valuation of assets, such as deferred income tax assets. The Evergy Companies regularly assess their ability to utilize tax benefits, including those in the form of net operating loss (NOL), tax credit and other tax carryforwards, that are recorded as deferred income tax assets on their balance sheets to determine whether a valuation allowance is necessary. A reduction in, or disallowance of, these tax benefits could have an adverse impact on the financial results and liquidity of the Evergy Companies.

Additionally, changes in corporate tax rates or policy changes, as well as any inability to generate enough taxable income in the future to utilize all tax benefits before they expire, could have an adverse impact on the results of operations, financial position and liquidity of the Evergy Companies. In addition, the Evergy Companies construct and operate renewable energy facilities that generate tax credits that reduce federal income tax obligations. The amount of tax credits is dependent on several factors, including the amount of electricity produced and the applicable tax credit rate. A variety of factors, including transmission constraints, the ability to timely complete construction of renewable energy facilities, adverse weather conditions and breakdown or failure of equipment, could significantly reduce these tax credits, which could have an adverse impact on the results of operations and financial position of the Evergy Companies.

# ***The anticipated benefits of the Evergy Companies' strategy may not be realized.***

The Evergy Companies' strategy includes significant planned reductions in operating and maintenance expense and significant planned increases in capital investments. The Evergy Companies' strategy also includes a different mix of capital investments than has been pursued in the past, including significant capital investments in renewable generation. The Evergy Companies' strategy also includes the planned retirement of coal-fired generation resources. If regulators determine that the retirement of coal generation facilities was not prudent, they could prohibit the Evergy Companies from recovering, or earning a return on, the investments in those facilities that were prudent when the investments were originally made. This concept is known as a 'stranded asset,' and generation retirements outside of those contemplated in the integrated resource plan increase the risk that regulators will disallow the recovery of otherwise prudent investments. In addition, the Evergy Companies may utilize legislative mechanisms known as securitization to facilitate the retirement of coal-fired generation, which will eliminate future returns on the investment that was originally made by the Evergy Companies in those coal-fired generating facilities and reduce the Evergy's Companies results of operations and financial position.

No assurance can be given that the Evergy Companies will be successful in implementing their strategy in a timely manner or at all, and a failure to do so could have a material adverse effect on the results of operations, financial

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position and cash flows of the Evergy Companies and have an adverse impact on the price of Evergy's common stock.

# ***The price of Evergy common stock may experience volatility.***

The price of Evergy common stock may be volatile. Some of the factors that could affect the price of Evergy common stock are Evergy's earnings; the ability of the Evergy Companies to implement their strategic plan; the ability of Evergy to deploy capital; actions by regulators; and statements in the press or investment community about the Evergy Companies' strategy, earnings per share or growth prospects, financial condition or results of operations. Negative perceptions or publicity from increasing scrutiny of environmental, social and governance practices could also adversely impact Evergy's stock price. Also, individuals or entities, such as activist shareholders and special interest groups, may seek to influence the Evergy Companies' strategic plan or take other actions that could disrupt the Evergy Companies' business, financial results or operations and could adversely impact Evergy's stock price. In addition, the Evergy Companies operate almost exclusively in Kansas and Missouri and this concentration may increase exposure to risks arising from unique local or regional factors. Furthermore, domestic and international market conditions and economic factors and political events unrelated to the performance of Evergy (including the COVID-19 pandemic and the Russia-Ukraine conflict) may also affect Evergy's stock price. For these reasons, shareholders should not rely on historical trends in the price of Evergy common stock to predict the future price of Evergy's common stock.

# ***Evergy has recorded goodwill that could become impaired and adversely affect financial results.***

As required by generally accepted accounting principles (GAAP), Evergy recorded a significant amount of goodwill on its balance sheet in connection with completion of the merger that resulted in the formation of Evergy. Evergy assesses goodwill for impairment on an annual basis or whenever events or circumstances occur that would indicate a potential for impairment. If goodwill is deemed to be impaired, Evergy may be required to incur non-cash charges that could materially adversely affect its results of operations.

# **Customer and Weather-Related Risks:**

# ***Changes in electricity consumption could have a material adverse effect on Evergy's results of operations, financial position and cash flows.***

Change in customer behaviors in response to energy efficiency programs, changing conditions and preferences or changes in the adoption of technologies could affect the consumption of energy by customers. Federal and state programs exist to influence the way customers use energy and regulators have mandates to promote energy efficiency. Conservation programs and customers' level of participation in the programs could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies.

Technological advances, energy efficiency and other energy conservation measures have reduced and will continue to reduce customer electricity consumption. The Evergy Companies generate electricity at central station power plants to achieve economies of scale and produce electricity at a competitive cost. Self-generation and distributed generation technologies, including microturbines, wind turbines, fuel cells and solar cells, as well as those related to the storage of energy produced by these systems, have become economically competitive with the manner and price at which the Evergy Companies sell electricity. There is also a perception that generating or storing electricity through these technologies is more environmentally friendly than generating electricity with fossil fuels. Increased adoption of these technologies could reduce electricity demand and the pool of customers from whom fixed costs are recovered, resulting in under recovery of the fixed costs of the Evergy Companies. Increased self-generation and the related use of net energy metering, which allows self-generating customers to receive bill credits for surplus power, could put upward price pressure on remaining customers. If the Evergy Companies are unable to adjust to reduced electricity demand and increased self-generation and net energy metering, their financial condition and results of operations could be adversely affected.

Changes in customer electricity consumption due to sustained financial market disruptions, downturns or sluggishness in the economy or other factors may also adversely affect the results of operations, financial position and cash flows of the Evergy Companies.

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# ***Weather is a major driver of the results of operations, financial position and cash flows of the Evergy Companies and the Evergy Companies are subject to risks associated with climate change.***

Weather conditions directly influence the demand for and price of electricity. The Evergy Companies are significantly impacted by seasonality, and, due to energy demand created by air conditioning load, highest revenues are typically recorded in the third quarter. Unusually mild winter or summer weather can adversely affect sales. In addition, severe weather and events, including tornadoes, snow, fire, rain, flooding, drought and ice storms, can be destructive and cause outages and property damage that can result in increased expenses, lower revenues and additional restoration costs. Storm reserves established by the Evergy Companies may be insufficient and rates may not be adjusted in a timely manner, or at all, to recover these costs. Additionally, because many of the Evergy Companies' generating stations utilize water for cooling, low water and flow levels can increase maintenance costs at these stations, result in limited power production and require modifications to plant operations. High water conditions can also impair planned deliveries of fuel to generating stations or otherwise adversely impact the ability of the Evergy Companies to operate these stations. Climate change may produce more frequent or severe weather events, such as storms, droughts or floods. These events could lead to unforeseen changes in water supply quality and create additional costs related to water treatment and complying with environmental discharge requirements. Climate change events could also impact the economic health of the Evergy Companies' service territories. An increase in the frequency or severity of extreme weather events or a deterioration in the economic health of the Evergy Companies' service territories could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies.

In addition, policy, legal and regulatory efforts to influence climate change, such as efforts to reduce GHG emissions, impose a tax on emissions and create incentives for low-carbon generation and energy efficiency, could result in reduced sales and require significant costs to respond to such efforts. These efforts could also result in the early retirement of generation facilities, which could result in stranded costs if regulators disallow recovery of investments that were prudent when originally made and included in rates. Evergy has a goal to achieve net-zero CO2 emissions by 2045 with an interim goal of a 70% reduction of CO2 emissions from 2005 levels by 2030. The trajectory and timing of reaching the net-zero goal are dependent on many external factors, including enabling technology developments, the reliability of the power grid, availability of transmission capacity, supportive energy policies and regulations, and other factors. These external factors are outside of Evergy's control, and without these enabling factors Evergy cannot be confident in achieving its net-zero carbon reduction goal. In addition, any of the foregoing could adversely affect the results of operations, financial position and cash flows of the Evergy Companies and the market prices of Evergy's common stock.

# ***New climate disclosure rules proposed by the SEC may increase the Evergy Companies' costs of compliance and adversely impact their business.***

On March 21, 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks. The Evergy Companies are currently assessing the proposed rule, but at this time they cannot predict the costs of implementation or any potential adverse impacts resulting from the rule. To the extent this rule is finalized as proposed, the Evergy Companies could incur increased costs relating to the assessment and disclosure of climate-related risks. The Evergy Companies may also face increased litigation risks related to disclosures made pursuant to the rule if finalized as proposed. In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors.

# **Operational Risks:**

# ***Operational risks may adversely affect the Evergy Companies.***

The operation of electric generation, transmission, distribution and information systems involves many risks, including breakdown or failure of equipment; aging infrastructure; employee error or contractor or subcontractor failure; problems that delay or increase the cost of returning facilities to service after outages; limitations that may be imposed by equipment conditions or environmental, safety or other regulatory requirements; fuel supply or fuel transportation reductions or interruptions; labor disputes; difficulties with the implementation or operation of information systems; transmission scheduling constraints; and catastrophic events such as fires, floods, droughts,

23

explosions, terrorism or acts of war, severe weather, pandemics or other similar occurrences. Many of the Evergy Companies' generation, transmission and distribution resources are aged, which increases the risk of unplanned outages, reduced generation output and higher maintenance expense. Any equipment or system outage or constraint can, among other things, reduce sales, increase costs and affect the ability to meet regulatory service metrics, customer expectations and regulatory reliability and security requirements.

The Evergy Companies have general liability and property insurance to cover a portion of their facilities, but such policies do not cover transmission or distribution systems, are subject to certain limits and deductibles and do not include business interruption coverage. Insurance coverage may not be available in the future at reasonable costs or on commercially reasonable terms, and the insurance proceeds received for any loss of, or any damage to, any facilities may not be sufficient to restore the loss or damage. Certain insurers are also choosing to limit their exposure to companies with coal-fired generation, which may result in increased premiums and reduced scope of coverage. These and other operating events may reduce revenues or increase costs, or both, and may materially affect the results of operations, financial position and cash flows of the Evergy Companies.

*Physical and cybersecurity breaches, criminal activity, terrorist attacks, acts of war and other disruptions to facilities or information technology infrastructure could interfere with operations, expose the Evergy Companies or their customers or employees to a risk of loss, expose the Evergy Companies to legal or regulatory liability and cause reputational and other harm.*

The Evergy Companies rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including the generation, transmission and distribution of electricity, supply chain functions and the invoicing and collection of payments from customers. The Evergy Companies also use information technology networks and systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with financial reporting, legal and tax requirements. These networks and systems are in some cases owned or managed by third-party service providers. In the ordinary course of business, the Evergy Companies collect, store and transmit sensitive data including operating information, proprietary business information and personal information belonging to customers and employees.

The Evergy Companies' information technology networks and infrastructure, as well as the networks and infrastructure belonging to third-party service providers, are vulnerable to damage, disruptions or shutdowns due to attacks or breaches by hackers or other unauthorized third parties; error or malfeasance by employees, contractors or service providers; unintended consequences related to software or hardware upgrades, additions or replacements; malicious software code; vulnerabilities in third-party software code; telecommunication failures; the lack of availability of qualified employees and contractors; natural disasters or other catastrophic events; or criminal activity, terrorist attacks or acts of war. Driven in part by the COVID-19 pandemic, the Evergy Companies have adopted the use of technology to enable remote-working arrangements, which may increase or expose previously unknown vulnerabilities. Public reports have indicated an increase in cyberattacks in general since the start of the pandemic due, in part, to the increase in the number of employees working remotely and the proliferation of the different ways in which people interact with their information technology infrastructure.

The occurrence of any of these events could, among other things, impact the reliability or safety of the Evergy Companies' generation, transmission and distribution systems and information systems; result in the erasure of data or render the Evergy Companies' equipment, or the equipment of third-party service providers, unusable; impact the Evergy Companies' ability to conduct business in the ordinary course; reduce sales; expose the Evergy Companies and their customers, employees and vendors to a risk of loss or misuse of information; result in legal claims or proceedings, liability or regulatory penalties; damage the Evergy Companies' reputation; or otherwise harm the Evergy Companies' results of operations, financial position and cash flows. The Evergy Companies can provide no assurance that they will be able to identify and remediate all security or system vulnerabilities or that unauthorized access or error will be identified and remediated.

The Evergy Companies are subject to laws and rules issued by multiple government agencies concerning cybersecurity and safeguarding their customer and business information. For example, NERC has issued comprehensive regulations and standards surrounding the security of the bulk power system, including both

24

physical and cybersecurity, and continually evaluates the necessity for updates and new requirements with which the Energy Companies must comply. The Energy Companies are subject to recurring, independent, third-party audits with respect to adherence to these regulations and standards. The NRC also has issued regulations and standards related to the protection of critical digital assets at nuclear power plants. Compliance with NERC and NRC rules and standards, and rules and standards promulgated by other regulatory agencies from time to time or future legislation, will increase the Energy Companies' compliance costs and their exposure to the potential risk of violations of these rules, standards or future legislation, which includes potential financial penalties. Furthermore, the non-compliance by other utilities subject to similar regulations or the occurrence of a serious security event at other utilities could result in increased regulation or oversight, both of which could increase the Energy Companies' costs and adversely impact their financial results.

Additionally, the Energy Companies cannot predict the impact that any future information technology or malicious attack may have on the energy industry in general. The electric utility industry, both within the United States and internationally, has experienced physical and cybersecurity attacks on energy infrastructure such as power plants, substations and related assets in the past, and there will likely be more attacks in the future. Geopolitical matters, including terrorist attacks and acts of war, may increase the likelihood of such attacks. The Energy Companies have been subject to attempted cyber attacks from time to time, and will likely continue to be subject to such attempted attacks, but these prior attacks have not had a material impact on their operations. However, because technology is increasingly complex and cyber-attacks are increasingly sophisticated and more frequent, there can be no assurance that such incidents will not have a material adverse effect on the Energy Companies in the future. The Energy Companies' facilities and systems could be direct targets or indirect casualties of such attacks. The effects of such attacks could include disruption to the Energy Companies' generation, transmission and distribution, and information systems or to the electrical grid in general, reduced sales and could increase the cost of insurance coverage. Furthermore, although the Energy Companies maintain information security risk insurance coverage, such insurance may not be adequate to cover any associated losses. Any of the foregoing could have a material adverse impact on the Energy Companies' results of operations, financial position and cash flows.

# ***The cost and schedule of capital projects may materially change and expected performance may not be achieved.***

The Energy Companies' business is capital intensive and includes significant construction projects. The risks of any capital project include: actual costs may exceed estimated costs; regulators may disallow, limit or delay the recovery of all or part of the cost of, or a return on, a capital project; increased inflation may render previously estimated costs to be inaccurate; risks associated with the capital and credit markets to fund projects; delays in receiving, or failure to receive, necessary permits, approvals and other regulatory authorizations; unforeseen engineering problems or changes in project design or scope; the failure of suppliers and contractors to perform as required under their contracts; inadequate availability or increased cost of labor or materials, including commodities such as steel, copper and aluminum that may be subject to uncertain or increased tariffs; inclement weather; new or changed laws, regulations and requirements, including environmental and health and safety laws, regulations and requirements; and other events beyond the Energy Companies' control may occur that may materially affect the schedule, cost and performance of these projects.

The Energy Companies' strategy includes a significant amount of planned capital investments. The Energy Companies' ability to implement these investments depend, in part, on the availability of adequate internal and external resources, such as employees and qualified contractors and the availability of materials. In this regard, the global COVID-19 pandemic has caused disruptions to the global supply chain and the availability of qualified labor, which, in turn, has increased inflationary pressures.

These and other risks could cause the Energy Companies to defer or limit capital expenditures, materially increase the costs of capital projects, delay the in-service dates of projects, adversely affect the performance of the projects and require the purchase of electricity on the wholesale market, at potentially more expensive prices, until the projects are completed. These risks may significantly affect the Energy Companies' results of operations, financial position and cash flows.

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*Failure to attract and retain an appropriately qualified workforce or to maintain satisfactory collective bargaining agreements could negatively impact the Evergy Companies' business and operations and adversely impact the Evergy Companies' results of operations, financial position and cash flows.*

The Evergy Companies' workforce includes professional, managerial and technical employees. Failure to attract and retain qualified talent, successfully transition retirements with adequate replacements, or source qualified contractors could impede the Evergy Companies' strategy and/or adversely impact the Evergy Companies' ability to execute on their strategy. For example, certain skills, such as those related to construction, maintenance and repair of transmission and distribution systems are in high demand and have a limited supply. Evergy competes for qualified employees with these skills on a national level.

A significant portion of the Evergy Companies' workforce is represented by five local unions of the IBEW and one local union of the UGSOA. The Evergy Companies currently have labor agreements with each of these unions that expire at varying times in 2024 through 2026. A failure to successfully negotiate these collective bargaining agreements could result in a labor disruption and have a significant adverse impact on the Evergy Companies' operations and results of operations.

The Evergy Companies' strategic plan includes enhanced technology and transmission and distribution investments and a reduction in reliance on coal-fired generation. The Evergy Companies will need to attract and retain personnel that are qualified to implement the Evergy Companies' strategy and may need to retrain or reskill certain employees to support the Evergy Companies' long-term objectives. A failure to attract and retain qualified employees, retrain or reskill existing employees and maintain satisfactory collective bargaining agreements could have a significant adverse impact on the results of operations, financial position and cash flows of the Evergy Companies.

*The Evergy Companies are exposed to risks associated with the ownership and operation of a nuclear generating unit, which could adversely impact the Evergy Companies' business and financial results.*

Evergy indirectly owns 94% of Wolf Creek, with Evergy Kansas South and Evergy Metro each owning 47% of the nuclear plant. Such ownership exposes the Evergy Companies to various risks unique to the nuclear industry. Damages, decommissioning or other costs could exceed the Evergy Companies' ability to recover such costs through rates or other mechanisms such as decommissioning trust assets or through external insurance coverage, including statutorily required nuclear incident insurance. The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities, including Wolf Creek. In the event of non-compliance, the NRC has the authority to impose fines, shut down the facilities, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Additionally, the non-compliance of other nuclear facility operators with applicable regulations or the occurrence of a serious nuclear incident anywhere in the world could result in increased regulation of the nuclear industry. Such events could increase Wolf Creek's costs and impact the financial results of the Evergy Companies or result in a shutdown of Wolf Creek.

An extended outage of Wolf Creek, whether resulting from NRC action, an incident at the plant or otherwise, could have a material adverse effect on the results of operations, financial position and cash flows of the Evergy Companies in the event replacement power, damages, and other costs exceed or are not recovered through rates, insurance or decommissioning trust assets. If a long-term outage occurred, the state regulatory commissions could reduce rates by excluding the Wolf Creek investment from rate base. Wolf Creek commenced operations in 1985 and the age of Wolf Creek may increase the risk of unplanned outages and may result in higher maintenance costs.

On an annual basis, Evergy Kansas South and Evergy Metro are required to contribute money to tax-qualified trusts that were established to pay for decommissioning costs at the end of the unit's life. The amount of contributions varies depending on estimates of decommissioning expenses and projected return on trust assets. If the actual return on trust assets is below the projected level or actual decommissioning costs are higher than estimated, Evergy Kansas South and Evergy Metro could be responsible for the balance of funds required and may not be allowed to recover the balance through rates.

The Evergy Companies are also exposed to other risks associated with the ownership and operation of a nuclear generating unit, including, but not limited to, (i) potential liability associated with the potential harmful effects on

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the environment and human health resulting from the operation of a nuclear generating unit, (ii) the storage, handling, disposal and potential release (by accident, through third-party actions or otherwise) of radioactive materials and (iii) uncertainties with respect to contingencies and assessments if insurance coverage is inadequate. Under the structure for insurance among owners of nuclear generating units, Evergy Kansas South and Evergy Metro are also liable for potential retrospective premium assessments (subject to a cap) per incident at any commercial reactor in the country and losses in excess of insurance coverage.

In addition, Wolf Creek is reliant on a sole supplier for fuel and related services. The supplier has in the past been the subject of Chapter 11 reorganization proceedings, and an extended outage of Wolf Creek could occur if the supplier is not able to perform under its contracts with Wolf Creek. Switching to another supplier could take an extended amount of time and would require NRC approval. An extended outage at Wolf Creek could affect the amount of Wolf Creek investment included in customer rates and could have a material impact on the Evergy Companies' financial results.

*The structure of the regional power market in which the Evergy Companies operate could have an adverse effect on their results of operations, financial position and cash flows.*

Evergy Kansas Central, Evergy Metro and Evergy Missouri West are members of the SPP regional transmission organization, and each has transferred operational authority (but not ownership) of their transmission facilities to the SPP. The SPP's Integrated Marketplace determines which generating units among market participants should run, within the operating constraints of a unit, at any given time. The SPP's rules are primarily designed to provide for maximum cost-effectiveness, but in certain respects the rules also provide preferential treatment for certain resources based on public policy initiatives, such as increasing the deployment of renewable generation. If Evergy Kansas Central's, Evergy Metro's or Evergy Missouri West's generating resources are not dispatched, each could experience decreased levels of wholesale electricity sales.

The Evergy Companies' strategic plan includes adding a significant amount of renewable generation. Transmission constraints and delays in the transmission planning and construction processes could impair the ability of the Evergy Companies to sell and transmit electricity generated by these renewable generation facilities, which could have an adverse impact on the results of operations and financial position of the Evergy Companies.

In addition, the rules governing the various regional power markets, including the SPP, may change from time to time and such changes could impact the costs and revenues of the Evergy Companies.

## Litigation Risks:

*The outcome of legal proceedings cannot be predicted. An adverse finding could have a material adverse effect on the Evergy Companies' results of operations, financial position and cash flows.*

The Evergy Companies are parties to various lawsuits and regulatory proceedings in the ordinary course of their respective businesses. The outcome of these matters cannot be determined, nor, in many cases, can the liability that could potentially result from each case be reasonably estimated. The liability that the Evergy Companies may incur with respect to any of these cases may be in excess of amounts currently accrued and insured against with respect to such matters and could adversely impact the financial results for the Evergy Companies.

## Environmental, Social and Governance Risks:

*The Evergy Companies are subject to risks relating to environmental, social and governance (ESG) matters that could adversely affect their reputation, business, financial condition and results of operations.*

The Evergy Companies are subject to a variety of risks, including reputational risk, associated with ESG issues. The public holds diverse and often conflicting views on ESG topics. The Evergy Companies have multiple stakeholders, including their shareholders, customers, associates, federal and state regulatory authorities and the communities in which they operate, and these stakeholders will often have differing priorities and expectations regarding ESG issues. If the Evergy Companies take action in conflict with one or another of those stakeholders' expectations, they could experience an increase in customer complaints, a loss of business or reputational harm. The Evergy Companies could also face negative publicity or reputational harm based on the identity of those with

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whom they choose to do business. Any adverse publicity in connection with ESG issues could damage their reputation, ability to attract new customers and retain employees, compete effectively and grow their business.

In addition, proxy advisory firms and certain institutional investors who manage investments in public companies are increasingly integrating ESG factors into their investment analysis. The consideration of ESG factors in making investment and voting decisions is relatively new. Accordingly, the frameworks and methods for assessing ESG policies are not fully developed, vary considerably among the investment community and will likely continue to evolve over time. Moreover, the subjective nature of methods used by various stakeholders to assess a company with respect to ESG criteria could result in erroneous perceptions or a misrepresentation of the Energy Companies' actual ESG policies and practices. Organizations that provide ratings information to investors on ESG matters may also assign unfavorable ratings to the Energy Companies. If the Energy Companies fail to comply with specific ESG-related investor or stakeholder expectations and standards, or to provide the disclosure relating to ESG issues that any third parties may believe is necessary or appropriate (regardless of whether there is a legal requirement to do so), their reputation, business, financial condition and/or results of operations could be negatively impacted.

#### **ITEM 1B. UNRESOLVED STAFF COMMENTS**

None.

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## ITEM 2. PROPERTIES

### Generation Resources

| Station | Unit No. | Location | Year Completed | Fuel | Unit Capability (MW) By Owner (a) |  |  |  |  | Total Generation and Renewable Purchased Power |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  | Evergy Kansas Central | Evergy Metro | Evergy Missouri West | Total Company Generation | Renewable Purchased Power |  |
| Renewable Generation: |  |  |  |  |  |  |  |  |  |  |
| Central Plains |  | Kansas | 2009 | Wind | 99 | - | - | 99 | - | 99 |
| Flat Ridge |  | Kansas | 2009 | Wind | 50 | - | - | 50 | 44 (b) | 94 |
| Flat Ridge 3 |  | Kansas | 2021 | Wind | - | - | - | - | 128 (b) | 128 |
| Western Plains |  | Kansas | 2017 | Wind | 281 | - | - | 281 | - | 281 |
| Meridian Way |  | Kansas | 2008 | Wind | - | - | - | - | 96 (b) | 96 |
| Ironwood |  | Kansas | 2012 | Wind | - | - | - | - | 168 (b) | 168 |
| Post Rock |  | Kansas | 2012 | Wind | - | - | - | - | 201 (b) | 201 |
| Cedar Bluff |  | Kansas | 2015 | Wind | - | - | - | - | 199 (b) | 199 |
| Kay Wind |  | Oklahoma | 2015 | Wind | - | - | - | - | 200 (b) | 200 |
| Soldier Creek |  | Kansas | 2020 | Wind | - | - | - | - | 300 (b) | 300 |
| Ninnescah |  | Kansas | 2016 | Wind | - | - | - | - | 208 (b) | 208 |
| Kingman 1 |  | Kansas | 2016 | Wind | - | - | - | - | 37 (b) | 37 |
| Kingman 2 |  | Kansas | 2016 | Wind | - | - | - | - | 103 (b) | 103 |
| Rolling Meadows |  | Kansas | 2010 | Landfill Gas | - | - | - | - | 6 (b) | 6 |
| Hutch Solar |  | Kansas | 2017 | Solar | - | - | - | - | 1 (b) | 1 |
| Ponderosa |  | Oklahoma | 2020 | Wind | - | - | - | - | 178 (c) | 178 |
| Cimarron II |  | Kansas | 2012 | Wind | - | - | - | - | 131 (d) | 131 |
| Cimarron Bend III |  | Kansas | 2020 | Wind | - | - | - | - | 150 (e) | 150 |
| Spearville 1 |  | Kansas | 2006 | Wind | - | 101 | - | 101 | - | 101 |
| Spearville 2 |  | Kansas | 2010 | Wind | - | 48 | - | 48 | - | 48 |
| Spearville 3 |  | Kansas | 2012 | Wind | - | - | - | - | 101 (d) | 101 |
| Gray County |  | Kansas | 2001 | Wind | - | - | - | - | 110 (f) | 110 |
| Ensign |  | Kansas | 2012 | Wind | - | - | - | - | 99 (f) | 99 |
| Waverly |  | Kansas | 2016 | Wind | - | - | - | - | 200 (d) | 200 |
| Slate Creek |  | Kansas | 2015 | Wind | - | - | - | - | 150 (d) | 150 |
| Rock Creek |  | Missouri | 2017 | Wind | - | - | - | - | 300 (g) | 300 |
| Osborn |  | Missouri | 2016 | Wind | - | - | - | - | 201 (g) | 201 |
| Pratt |  | Kansas | 2018 | Wind | - | - | - | - | 243 (g) | 243 |
| Greenwood Solar |  | Missouri | 2016 | Solar | - | - | 3 | 3 | - | 3 |
| Prairie Queen |  | Kansas | 2019 | Wind | - | - | - | - | 200 (g) | 200 |
| CNPPID (NE) - Hydro |  | Nebraska | 1941 | Hydro | - | - | - | - | 66 (d) | 66 |
| St Joseph Landfill |  | Missouri | 2012 | Landfill Gas | - | - | 2 | 2 | - | 2 |
| Total Renewable Generation: |  |  |  |  | 430 | 149 | 5 | 584 | 3,820 | 4,404 |

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| Station | Unit No. | Location | Year Completed | Fuel | Unit Capability (MW) By Owner (a) |  |  |  |  | Total Generation and Renewable Purchased Power |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  | Evergy Kansas Central | Evergy Metro | Evergy Missouri West | Total Company Generation | Renewable Purchased Power |  |
| Nuclear: |  |  |  |  |  |  |  |  |  |  |
| Wolf Creek | 1 (h) | Kansas | 1985 | Uranium | 553 | 553 | - | 1,106 | - | 1,106 |
| Total Nuclear: |  |  |  |  | 553 | 553 | - | 1,106 | - | 1,106 |
| Coal: |  |  |  |  |  |  |  |  |  |  |
| Jeffrey Energy Center |  | Kansas |  |  |  |  |  |  |  |  |
| Steam Turbines | 1-3 (h) |  | 1978, 1980 & 1983 | Coal | 2,007 | - | 175 | 2,182 | - | 2,182 |
| Lawrence Energy Center |  | Kansas |  |  |  |  |  |  |  |  |
| Steam Turbines | 4 & 5 |  | 1960, 1971 | Coal | 485 | - | - | 485 | - | 485 |
| La Cygne |  | Kansas |  |  |  |  |  |  |  |  |
| Steam Turbines | 1 & 2 (h)(i) |  | 1973, 1977 | Coal | 713 | 713 | - | 1,426 | - | 1,426 |
| Iatan |  | Missouri |  |  |  |  |  |  |  |  |
| Steam Turbines | 1 & 2 (h) |  | 1980, 2010 | Coal | - | 983 | 288 | 1,271 | - | 1,271 |
| Hawthorn |  | Missouri |  |  |  |  |  |  |  |  |
| Steam Turbines | 5 (j) |  | 1969 | Coal | - | 552 | - | 552 | - | 552 |
| Total Coal: |  |  |  |  | 3,205 | 2,248 | 463 | 5,916 | - | 5,916 |
| Gas and Oil: |  |  |  |  |  |  |  |  |  |  |
| Emporia Energy Center |  | Kansas |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 7 |  | 2008 - 2009 | Natural Gas | 654 | - | - | 654 | - | 654 |
| Gordon Evans Energy Center |  | Kansas |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 3 |  | 2000 - 2001 | Natural Gas | 294 | - | - | 294 | - | 294 |
| Hutchinson Energy Center |  | Kansas |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 3 |  | 1974 | Natural Gas | 166 | - | - | 166 | - | 166 |
|  | 4 |  | 1975 | Oil | 70 | - | - | 70 | - | 70 |
| Spring Creek Energy Center |  | Oklahoma |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 4 |  | 2001 | Natural Gas | 281 | - | - | 281 | - | 281 |
| State Line |  | Missouri |  |  |  |  |  |  |  |  |
| Combined Cycle | 2-1, 2-2 & 2-3 (h) |  | 2001 | Natural Gas | 205 | - | - | 205 | - | 205 |
| Hawthorn |  | Missouri |  |  |  |  |  |  |  |  |
| Combined Cycle | 6/9 |  | 2000 | Natural Gas | - | 235 | - | 235 | - | 235 |
| Combustion Turbines | 7 & 8 |  | 2000 | Natural Gas | - | 153 | - | 153 | - | 153 |

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| Station | Unit No. | Location | Year Completed | Fuel | Unit Capability (MW) By Owner (a) |  |  |  |  | Total Generation and Renewable Purchased Power |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  | Evergy Kansas Central | Evergy Metro | Evergy Missouri West | Total Company Generation | Renewable Purchased Power |  |
| Gas and Oil (continued): |  |  |  |  |  |  |  |  |  |  |
| West Gardner |  | Kansas |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 4 |  | 2003 | Natural Gas | - | 309 | - | 309 | - | 309 |
| Osawatomie |  | Kansas |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 |  | 2003 | Natural Gas | - | 75 | - | 75 | - | 75 |
| Ralph Green |  | Missouri |  |  |  |  |  |  |  |  |
| Combustion Turbines | 3 |  | 1981 | Natural Gas | - | - | 69 | 69 | - | 69 |
| Nevada |  | Missouri |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 |  | 1974 | Oil | - | - | 16 | 16 | - | 16 |
| Lake Road |  | Missouri |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 3 |  | 1951, 1958 & 1962 | Natural Gas | - | - | 49 | 49 | - | 49 |
|  | 5 - 7 |  | 1974, 1989 & 1990 | Oil | - | - | 88 | 88 | - | 88 |
| Steam Turbines | 4 |  | 1967 | Natural Gas | - | - | 95 | 95 | - | 95 |
| Northeast |  | Missouri |  |  |  |  |  |  |  |  |
| Combustion Turbines | 11 - 18 |  | 1972 - 1977 | Oil | - | 382 | - | 382 | - | 382 |
| South Harper |  | Missouri |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 3 |  | 2005 | Natural Gas | - | - | 313 | 313 | - | 313 |
| Greenwood Energy Center |  | Missouri |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 4 |  | 1975 - 1979 | Natural Gas | - | - | 249 | 249 | - | 249 |
| Crossroads Energy Center |  | Mississippi |  |  |  |  |  |  |  |  |
| Combustion Turbines | 1 - 4 |  | 2002 | Natural Gas | - | - | 295 | 295 | - | 295 |
| Total Gas and Oil |  |  |  |  | 1,670 | 1,154 | 1,174 | 3,998 | - | 3,998 |
| Total |  |  |  |  | 5,858 | 4,104 | 1,642 | 11,604 | 3,820 | 15,424 |

$^{(a)}$ Capability (except for wind generating facilities) represents estimated 2023 net generating capacity. Capability for wind generating facilities represents the nameplate capacity. Due to the intermittent nature of wind generation, these facilities are associated with a total of 996 MW of accredited generating capacity pursuant to SPP reliability standards.

$^{(b)}$ Evergy Kansas Central renewable power purchase agreement.

$^{(c)}$ Evergy Kansas Central and Evergy Metro renewable power purchase agreement.

$^{(d)}$ Evergy Metro renewable power purchase agreement.

$^{(e)}$ Evergy Kansas Central and Evergy Missouri West renewable power purchase agreement.

$^{(f)}$ Evergy Missouri West renewable power purchase agreement.

$^{(g)}$ Evergy Metro and Evergy Missouri West renewable power purchase agreement.

$^{(h)}$ Share of a jointly owned unit.

$^{(i)}$ In 1987, Evergy Kansas South entered into a sale-leaseback transaction involving its 50% interest in the La Cygne Unit 2. Evergy and Evergy Kansas Central consolidate the leasing entity as a variable interest entity (VIE). See Note 19 to the consolidated financial statements for more information.

$^{(j)}$ Although the plant was completed in 1969, a new boiler, air quality control equipment and an uprated turbine were placed in service at the Hawthorn Generating Station in 2001.

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### Transmission and Distribution Resources

Evergy's electric transmission system interconnects with systems of other utilities for reliability and to permit wholesale transactions with other electricity suppliers. Evergy has approximately 10,100 circuit miles of transmission lines, 44,900 circuit miles of overhead distribution lines and 15,800 circuit miles of underground distribution lines in Missouri and Kansas. Evergy has all material franchise rights necessary to sell electricity within its retail service territory. Evergy's transmission and distribution systems are routinely monitored for adequacy to meet customer needs. Management believes the current system has adequate capacity to serve customers.

### General

Evergy's generating plants are located on property owned (or co-owned) by the Evergy Companies, except for certain facilities that are located on easements or are contractually controlled. Evergy's headquarters, service centers, electric substations and a portion of its transmission and distribution systems are located on property owned or leased by Evergy. Evergy's transmission and distribution systems are for the most part located above or underneath highways, streets, other public places or property owned by others. Evergy believes that it has satisfactory rights to use those places or properties in the form of permits, grants, easements, licenses or franchise rights; however, it has not necessarily undertaken efforts to examine the underlying title to the land upon which the rights rest.

Substantially all of the fixed property and franchises of the Evergy Companies, which consist principally of electric generating stations, electric transmission and distribution lines and systems, and buildings (subject to exceptions, reservations and releases), are subject to mortgage indentures pursuant to which bonds have been issued and are outstanding. See Note 12 to the consolidated financial statements for more information.

### ITEM 3. LEGAL PROCEEDINGS

The Evergy Companies are parties to various lawsuits and regulatory proceedings in the ordinary course of their respective businesses. For information regarding material lawsuits and proceedings, see Notes 4 and 15 to the consolidated financial statements. Such information is incorporated herein by reference.

### ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

32

## PART II

### ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

#### EVERGY, INC.

Evergy's common stock is listed on the Nasdaq Stock Market LLC under the symbol 'EVRG.' At February 17, 2023, Evergy's common stock was held by 17,419 shareholders of record.

#### Performance Graph

The following graph compares the performance of Evergy's common stock during the period that began on June 5, 2018 (the first day that Evergy's common stock traded), and ended on December 31, 2022, to the performance of the Standard & Poor's 500 Index (S&P 500) and the Standard & Poor's Electric Utility Index (S&P 500 Electric Utilities). The graph assumes a $100 investment in Evergy's common stock and in each of the indices at the beginning of the period and a reinvestment of dividends paid on such investments throughout the period.

**Based on an initial investment of $100 on June 5, 2018, with dividends reinvested**

![img-0.jpeg](img-0.jpeg)

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## Purchases of Equity Securities

The following table provides information regarding purchases by Evergy of its equity securities that are registered pursuant to Section 12 of the Exchange Act during the three months ended December 31, 2022.

| Month | Issuer Purchases of Equity Securities |  |  |  |
| --- | --- | --- | --- | --- |
|  | Total Number of Shares (or Units) Purchased (a) | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
| October 1 - 31 | - | - | - | - |
| November 1 - 30 | 427 | $61.25 | - | - |
| December 1 - 31 | 11,217 | $63.26 | - | - |
| Total | 11,644 | $63.18 | - | - |

$^{(a)}$ Represents shares Evergy purchased for withholding taxes related to the vesting of restricted stock or restricted stock units.

## Dividend Restrictions

For information regarding dividend restrictions, see Note 18 to the consolidated financial statements.

## ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following combined MD&A should be read in conjunction with the consolidated financial statements and accompanying notes in this combined annual report on Form 10-K. None of the registrants make any representation as to information related solely to Evergy, Evergy Kansas Central or Evergy Metro other than itself.

The following MD&A generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 can be found in MD&A in Part II, Item 7, of the Evergy Companies' combined annual report on Form 10-K for the fiscal year ended December 31, 2021. Year-to-year comparisons of Evergy's gross margin (GAAP) and Evergy's utility gross margin (non-GAAP) between 2021 and 2020 can be found in the Evergy Results of Operations section within this MD&A.

## EVERGY, INC.

### EXECUTIVE SUMMARY

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 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.
- Evergy Metro is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.
- Evergy Missouri West is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.

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• Evergy Transmission Company owns 13.5% of Transource with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of 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, 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 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 power purchase agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.7 million customers in the states of Kansas and Missouri. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment).

## Strategy

Evergy expects to continue operating its integrated utilities within the currently existing regulatory frameworks and is focused on empowering a better future for its customers, communities, employees and shareholders. The core tenets of Evergy's strategy are as follows:

- Affordability - operating the business cost-effectively and investing in technology and infrastructure to keep rates affordable and improve regional rate competitiveness; mitigating fuel and purchased power volatility by investing in a diverse generation fleet;
- Reliability - targeting transmission and distribution infrastructure investment to support reliability, flexibility, public safety, and resiliency; deploying new technology to improve preventive maintenance and customer restoration times; and
- Sustainability - investing at sustainable capital expenditure levels to maintain reliability and customer affordability for the long-term and balancing clean energy investment to continue fuel diversification and enable a responsible generation portfolio transition.

Significant elements of Evergy's plan to achieve its strategic objectives include:

- targeting ongoing reductions of operating and maintenance expense consistent with savings already achieved since the 2018 merger of Evergy Kansas Central and Great Plains Energy;
- targeting approximately $11.6 billion of expected base capital investments through 2027 including new generation of approximately $2.1 billion which is expected to be primarily renewable generation. See "Liquidity and Capital Resources; Capital Expenditures", for further information regarding Evergy's projected capital expenditures through 2027; and
- targeting a 70% reduction of CO2 emissions by 2030 (from 2005 levels) and net-zero by 2045 through the continued growth of Evergy's renewable energy portfolio and the retirement of older and less efficient fossil fuel plants. See "Transitioning Evergy's Generation Fleet" in Part I, Item 1., Business, for additional information.

See "Cautionary Statements Regarding Certain Forward-Looking Information" and Part I, Item 1A, Risk Factors, for additional information.

35

## **Sibley Station**

Evergy Missouri West retired its Sibley Station in 2018 and the retirement of Sibley Unit 3 met the criteria to be considered an abandonment. Evergy has classified the remaining net book value of Sibley Unit 3 as retired generation facilities within regulatory assets on its consolidated balance sheet. In October 2019, the MPSC issued an AAO requiring Evergy Missouri West to defer to a regulatory liability all revenues collected from customers for return on investment, non-fuel operations and maintenance costs, taxes including accumulated deferred income taxes and all other costs associated with Sibley Station following its retirement in November 2018 to be considered in Evergy Missouri West's 2022 rate case.

In January 2022, Evergy Missouri West filed an application with the MPSC requesting an increase to its retail revenues including the full return of and return on its unrecovered investment related to the 2018 retirement of Sibley Station. In December 2022, the MPSC issued an amended final rate order which addressed the treatment of Evergy Missouri West's unrecovered investment in Sibley Station. The order determined that Evergy Missouri West will be allowed to collect $182.3 million ($173.6 million attributable to Sibley Unit 3) from customers over a period of eight years as a recovery of its existing investment in Sibley Station but will not be allowed to collect the return on its unrecovered investment in Sibley Station. The order also required Evergy Missouri West to refund to customers all revenues collected from customers for return on investment, non-fuel operations and maintenance costs and other costs associated with Sibley Station following its retirement in November 2018 over a period of four years.

As a result of the amended final order, Evergy recorded a $68.0 million reduction to operating revenues on its consolidated statements of comprehensive income in 2022 and a corresponding increase to its Sibley AAO regulatory liability for revenues collected from customers for return on investment in Sibley Station since December 2018, which had not previously been recorded as they were not determined to be probable of refund, and a $26.7 million impairment loss on Sibley Unit 3. As of December 31, 2022, the remaining net book value of Sibley Unit 3 was $146.3 million, which is representative of the $173.6 million unrecovered investment in Sibley Unit 3 determined by the MPSC in its December 2022 order less the 2022 impairment loss recorded and other amortization expense. As of December 31, 2022, Evergy's Sibley AAO regulatory liability was $108.0 million. See 'Abandoned Plant' in Note 1 and 'Evergy Missouri West Other Proceedings' in Note 4 to the consolidated financial statements for additional information.

## **Evergy Kansas Central FERC Transmission Formula Rate (TFR) Refund**

In December 2022, FERC issued an order upholding in part, and denying in part, a formal challenge of Evergy Kansas Central's TFR by certain customers. As a result of this order, Evergy and Evergy Kansas Central recorded a $32.8 million decrease to operating revenues on their consolidated statements of income and comprehensive income for 2022 for the deferral to a regulatory liability of the estimated refund of TFR revenue over-collections related to the calculation of Evergy Kansas Central's capital structure for rate years 2018 - 2022. Evergy Kansas Central currently expects that the refund of the 2020, 2021 and 2022 over-collections will occur as part of its 2023 TFR, subject to an approval by FERC. See Note 4 to the consolidated financial statements for additional information.

## **Evergy Missouri West February 2021 Winter Weather Event Securitization**

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 (February 2021 winter weather event). See Note 1 to the consolidated financial statements for additional information. In March 2022, Evergy Missouri West filed a petition for a financing order with the MPSC requesting authorization to finance its extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event, including carrying costs, through the issuance of securitized bonds. Evergy Missouri West requested to repay the securitized bonds and collect the related amounts from customers over a period of approximately 15 years from the date of issuance of the securitized bonds.

36

In November 2022, the MPSC issued a revised financing order authorizing Evergy Missouri West to issue securitized bonds to recover its extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event. As part of the order, the MPSC found that Evergy Missouri West's costs were prudently incurred, that it should only be allowed to recover 95% of its extraordinary fuel and purchased power costs consistent with the 5% sharing provision of its fuel recovery mechanism, that it should be allowed to recover carrying costs incurred since February 2021 at Evergy Missouri West's long-term debt rate of 5.06% and approved a 15 year repayment period for the bonds with a 17 year legal maturity. In the third quarter of 2022, Evergy Missouri West recorded an increase of $15.0 million to its February 2021 winter weather event regulatory asset for the recovery of carrying charges granted in the MPSC's financing order. As of December 31, 2022 and 2021, the value of Evergy Missouri West's February 2021 winter weather event regulatory asset was $309.0 million and $281.6 million, respectively. Evergy Missouri West will continue to record carrying charges on its February 2021 winter weather event regulatory asset until it issues the securitized bonds.

In January 2023, the OPC filed an appeal with the Missouri Court of Appeals, Western District, challenging the financing order regarding the treatment of income tax deductions, carrying costs and discount rates related to the financing of the extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event. A final nonappealable financing order is required prior to the issuance of securitized bonds. A decision by the Missouri Court of Appeals, Western District, is currently expected in the second half of 2023, though the timeline for the decision is uncertain.

### **Inflation Reduction Act**

In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law by President Biden. The IRA extends tax credits for renewable energy technologies intended to reduce the impacts of climate change. The Production Tax Credit (PTC) and Investment Tax Credit (ITC) have been extended or reinstated for certain renewable energy projects beginning before January 1, 2025. The definition of property eligible for the ITC has been expanded to include standalone energy storage with a capacity of at least 5kWh. Both tax credits make a bonus credit available if certain prevailing wage, apprenticeship and domestic content requirements are met. The IRA modified and extended the Alternative Fuel Refueling Property Credit to include property placed in service before December 31, 2032 and it also removes the limitation per location. The IRA created a Nuclear Power Production Tax Credit for taxable years beginning on or after January 1, 2024 through December 31, 2032. For taxable years beginning after December 31, 2022, certain renewable energy tax credits may be transferred to third parties. The IRA also implemented a new 15% corporate minimum tax based on modified GAAP net income and a 1% excise tax on stock buybacks.

The Evergy Companies anticipate utilizing the PTC and ITC for future renewable generation projects and are evaluating the Nuclear Power Production Tax Credit in connection with operations at Wolf Creek. The new corporate minimum tax and excise tax on stock buybacks are not expected to have a material impact on the Evergy Companies' operations or consolidated financial results and the Evergy Companies continue to evaluate the remaining IRA provisions for the effect on their future financial results.

### **Missouri Property Tax Tracker**

In June 2022, Missouri Senate Bill (S.B.) 745 was signed into law by the Governor of Missouri and became effective in August 2022. Among other items, S.B. 745 includes a provision requiring Missouri electric utilities to defer to a regulatory asset or regulatory liability, as appropriate, any difference between state or local property tax expenses incurred and the amounts included in rates. Any amounts deferred to a regulatory asset or liability under this provision would be included in the electric utility's revenue requirement in subsequent rate cases and recovered over a reasonable period of time to be determined by the MPSC. Evergy Metro and Evergy Missouri West began deferring the amounts associated with S.B. 745 in the third quarter of 2022.

37

## Renewable Generation Investment

In August 2022, Evergy Missouri West entered into an agreement with a renewable energy development company to purchase for approximately $250 million an operational wind farm located in the state of Oklahoma with a generating capacity of approximately 199 MW. The purchase is subject to regulatory approvals and closing conditions, including the granting of a Certificate of Convenience and Necessity (CCN) by the MPSC. In January 2023, the MPSC staff recommended the MPSC reject Evergy Missouri West's application for a CCN and allow it to file a new application with updated economic analyses of the renewable generation investment or alternatively extend the procedural schedule to allow the MPSC staff time to evaluate the current economic analyses prepared by Evergy Missouri West. A final decision by the MPSC is expected in the first half of 2023.

## Regulatory Proceedings

See Note 4 to the consolidated financial statements for information regarding regulatory proceedings.

## Wolf Creek Refueling Outage

Wolf Creek's most recent refueling outage began in October 2022 and the unit returned to service in November 2022. Wolf Creek's next refueling outage is planned to begin in the first quarter of 2024.

## Earnings Overview

The following table summarizes Evergy's net income and diluted earnings per share (EPS).

|  | 2022 | Change | 2021 |
| --- | --- | --- | --- |
|  | (millions, except per share amounts) |  |  |
| Net income attributable to Evergy, Inc. | $752.7 | $(127.0) | $879.7 |
| Earnings per common share, diluted | 3.27 | (0.56) | 3.83 |

Net income attributable to Evergy, Inc. decreased in 2022, compared to 2021, primarily due to non-regulated energy marketing margins related to the February 2021 winter weather event, an impairment loss and other regulatory disallowances related to Evergy Missouri West's and Evergy Metro's final rate order received from the MPSC in December 2022, lower realized and unrealized gains from various equity investments, higher depreciation expense, higher interest expense, the ordered refund to customers of certain transmission revenues and the recording of an estimated refund obligation to customers related to Evergy Metro's Earnings Review and Sharing Plan (ERSP); partially offset by higher retail sales in 2022 driven by favorable weather and higher weather-normalized demand, lower income tax expense, higher transmission revenue and higher interest income.

Diluted EPS decreased in 2022, compared to 2021, primarily due to the decrease in net income attributable to Evergy, Inc. discussed above.

For additional information regarding the change in net income, refer to the Evergy Results of Operations section within this MD&A.

## Non-GAAP Measures

### *Evergy Utility Gross Margin (non-GAAP)*

Utility gross margin (non-GAAP) is a financial measure that is not calculated in accordance with GAAP. Utility gross margin (non-GAAP), as used by the Evergy Companies, is defined as operating revenues less fuel and purchased power costs and amounts billed by the SPP for network transmission costs. Expenses for fuel and purchased power costs, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms. As a result, changes in fuel and purchased power costs are offset in operating revenues with minimal impact on net income. In addition, SPP network transmission costs fluctuate primarily due to investments by SPP members for upgrades to the transmission grid within the SPP RTO. As with fuel and purchased power costs, changes in SPP network transmission costs are mostly reflected in the prices charged to customers with minimal impact on net income. The Evergy Companies' definition of utility gross margin (non-GAAP) may differ from similar terms used by other companies.

38

Utility gross margin (non-GAAP) is intended to aid an investor's overall understanding of results. Management believes that utility gross margin (non-GAAP) provides a meaningful basis for evaluating the Evergy Companies' operations across periods because utility gross margin (non-GAAP) excludes the revenue effect of fluctuations in fuel and purchased power costs and SPP network transmission costs. Utility gross margin (non-GAAP) is used internally to measure performance against budget and in reports for management and Evergy's Board of Directors (Evergy Board). Utility gross margin (non-GAAP) should be viewed as a supplement to, and not a substitute for, gross margin, which is the most directly comparable financial measure prepared in accordance with GAAP. Gross margin under GAAP is defined as the excess of sales over cost of goods sold.

Utility gross margin (non-GAAP) differs from the GAAP definition of gross margin due to the exclusion of operating and maintenance expenses determined to be directly attributable to revenue-producing activities, depreciation and amortization and taxes other than income tax. See the Evergy Companies' Results of Operations for a reconciliation of utility gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.

### *Adjusted Earnings (non-GAAP) and Adjusted EPS (non-GAAP)*

Effective in the third quarter of 2022, the calculation of adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) excludes the revenues collected from customers for the return on investment of the retired Sibley Station in the current period and the 2022 deferral of the cumulative amount of revenues collected since December 2018 to be refunded to customers. See 'Sibley Station' within this Executive Summary for additional information. Effective in the fourth quarter of 2022, the calculation of adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) excludes the transmission revenues collected from customers in the current period and the 2022 deferral of the cumulative amount of transmission revenues collected since 2018 through Evergy Kansas Central's FERC TFR to be refunded to customers as a result of a December 2022 FERC order. See 'Evergy Kansas Central FERC TFR Refund' within this Executive Summary for additional information. Management believes that this is a representative measure of Evergy's recurring earnings, assists in the comparability of results and is consistent with how management reviews performance. Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) for 2021 have been recast, as applicable, to conform to the current year presentation.

Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) for 2022 were $853.8 million or $3.71 per share. For 2021, Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) were $795.2 million or $3.46 per share.

In addition to net income attributable to Evergy, Inc. and diluted EPS, Evergy's management uses adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) to evaluate earnings and EPS without i.) the income or costs resulting from non-regulated energy marketing margins from the February 2021 winter weather event; ii.) gains or losses related to equity investments subject to a restriction on sale; iii.) the revenues collected from customers for the return on investment of the retired Sibley Station in the current period and the 2022 deferral of the cumulative amount of revenues collected since December 2018 for future refunds to customers; iv.) the estimated impairment loss on Sibley Unit 3 and other regulatory disallowances; v.) the mark-to-market impacts of economic hedges related to Evergy Kansas Central's non-regulated 8% ownership share of Jeffrey Energy Center (JEC); vi.) the transmission revenues collected from customers through Evergy Kansas Central's FERC TFR to be refunded to customers in accordance with a December 2022 FERC order; and vii.) costs resulting from executive transition, severance, advisor expenses and COVID-19 vaccine incentives.

Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are intended to aid an investor's overall understanding of results. Management believes that adjusted earnings (non-GAAP) provides a meaningful basis for evaluating Evergy's operations across periods because it excludes certain items that management does not believe are indicative of Evergy's ongoing performance or that can create period to period earnings volatility.

Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are used internally to measure performance against budget and in reports for management and the Evergy Board. Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are financial measures that are not calculated in accordance with GAAP and may not be comparable to other companies' presentations or more useful than the GAAP information provided elsewhere in this report.

39

|  | Earnings (Loss) | Earnings (Loss) per Diluted Share | Earnings (Loss) | Earnings (Loss) per Diluted Share |
| --- | --- | --- | --- | --- |
|  | 2022 |  | 2021 |  |
| (millions, except per share amounts) |  |  |  |  |
| Net income attributable to Evergy, Inc. | $752.7 | $3.27 | $879.7 | $3.83 |
| Non-GAAP reconciling items: |  |  |  |  |
| Non-regulated energy marketing margin related to February 2021 winter weather event, pre-tax (a) | 2.1 | 0.01 | (94.5) | (0.41) |
| Sibley Station return on investment, pre-tax (b) | 51.4 | 0.22 | (12.4) | (0.05) |
| Mark-to-market impact of JEC economic hedges, pre-tax (c) | (11.2) | (0.05) | - | - |
| Non-regulated energy marketing costs related to February 2021 winter weather event, pre-tax (d) | 1.3 | 0.01 | 7.9 | 0.03 |
| Executive transition costs, pre-tax (e) | 2.2 | 0.01 | 10.8 | 0.05 |
| Severance costs, pre-tax (f) | 2.3 | 0.01 | 2.8 | 0.01 |
| Advisor expenses, pre-tax (g) | 5.4 | 0.02 | 11.6 | 0.05 |
| COVID-19 vaccine incentive, pre-tax (h) | - | - | 1.2 | 0.01 |
| Sibley impairment loss and other regulatory disallowances, pre-tax (i) | 34.9 | 0.15 | - | - |
| Restricted equity investment losses (gains), pre-tax (j) | 16.3 | 0.07 | (27.7) | (0.12) |
| TFR refund, pre-tax (k) | 25.0 | 0.11 | (9.9) | (0.05) |
| Income tax (benefit) expense (l) | (28.6) | (0.12) | 25.7 | 0.11 |
| Adjusted earnings (non-GAAP) | $853.8 | $3.71 | $795.2 | $3.46 |

$^{(a)}$ Reflects non-regulated energy marketing margins related to the February 2021 winter weather event that are included in operating revenues on the consolidated statements of comprehensive income.

$^{(b)}$ Reflects revenues collected from customers for the return on investment of the retired Sibley Station in the current period and the 2022 deferral of the cumulative amount of revenues collected since December 2018 that are included in operating revenues on the consolidated statements of comprehensive income.

$^{(c)}$ Reflects mark to market gains or losses related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's non-regulated 8% ownership share of JEC that are included in operating revenues on the consolidated statements of comprehensive income.

$^{(d)}$ Reflects non-regulated energy marketing incentive compensation costs related to the February 2021 winter weather event that are included in operating and maintenance expense on the consolidated statements of comprehensive income.

$^{(e)}$ Reflects costs associated with executive transition including inducement bonuses, severance agreements and other transition expenses that are included in operating and maintenance expense on the consolidated statements of comprehensive income.

$^{(f)}$ Reflects severance costs incurred associated with certain severance programs at the Evergy Companies that are included in operating and maintenance expense on the consolidated statements of comprehensive income.

$^{(g)}$ Reflects advisor expenses incurred associated with strategic planning that are included in operating and maintenance expense on the consolidated statements of comprehensive income.

$^{(h)}$ Reflects incentive compensation costs incurred associated with employees becoming fully vaccinated against COVID-19 that are included in operating and maintenance expense on the consolidated statements of comprehensive income.

$^{(i)}$ Reflects the impairment loss on Sibley Unit 3 and costs related to certain meter replacements that were disallowed in the 2022 Evergy Metro and Evergy Missouri West rate cases that are included in Sibley Unit 3 impairment loss and other regulatory disallowances on the consolidated statements of comprehensive income.

$^{(j)}$ Reflects (gains) losses related to equity investments which were subject to a restriction on sale that are included in investment earnings on the consolidated statements of comprehensive income.

$^{(k)}$ Reflects transmission revenues collected from customers in the current period and the 2022 deferral of the cumulative amount of transmission revenues collected since 2018 through Evergy Kansas Central's FERC TFR to be refunded to customers in accordance with a December 2022 FERC order that are included in operating revenues on the consolidated statements of comprehensive income.

$^{(l)}$ Reflects an income tax effect calculated at a statutory rate of approximately 22%, with the exception of certain non-deductible items.

40

## **ENVIRONMENTAL MATTERS**

See Note 15 to the consolidated financial statements for information regarding environmental matters.

## **RELATED PARTY TRANSACTIONS**

See Note 17 to the consolidated financial statements for information regarding related party transactions.

## **CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate, or different estimates that could have been used, could have a material impact on Evergy's results of operations and financial position. Management has identified the following accounting policies as critical to the understanding of Evergy's results of operations and financial position. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Evergy Board.

### **Pensions**

Evergy incurs significant costs in providing non-contributory defined pension benefits. The costs are measured using actuarial valuations that are dependent upon numerous factors derived from actual plan experience and assumptions of future plan experience.

Pension costs are impacted by actual employee demographics (including age, life expectancies, compensation levels and employment periods), earnings on plan assets, the level of contributions made to the plan, and plan amendments. In addition, pension costs are also affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the discount rates used in determining the projected benefit obligation and pension costs.

The assumed rate of return on plan assets was developed based on the weighted-average of long-term returns forecast for the expected portfolio mix of investments held by the plan. The assumed discount rate was selected based on the prevailing market rate of fixed income debt instruments with maturities matching the expected timing of the benefit obligation. These assumptions, updated annually at the measurement date, are based on management's best estimates and judgment; however, material changes may occur if these assumptions differ from actual events. See Note 9 to the consolidated financial statements for information regarding the assumptions used to determine benefit obligations and net costs.

The following table reflects the sensitivities associated with a 0.5% increase or a 0.5% decrease in key actuarial assumptions for Evergy's qualified pension plans. Each sensitivity reflects the impact of the change based on a change in that assumption only.

| Actuarial assumption | Change in Assumption | Impact on Projected Benefit Obligation | Impact on 2023 Pension Expense |
| --- | --- | --- | --- |
|  |  | (millions) |  |
| Discount rate | 0.5 % increase | $(76.4) | $(6.7) |
| Rate of return on plan assets | 0.5 % increase | N/A | (5.9) |
| Rate of compensation | 0.5 % increase | 16.9 | 3.5 |
| Discount rate | 0.5 % decrease | 84.7 | 7.3 |
| Rate of return on plan assets | 0.5 % decrease | N/A | 5.9 |
| Rate of compensation | 0.5 % decrease | (15.8) | (3.3) |

41

Pension expense for Evergy Kansas Central, Evergy Metro and Evergy Missouri West is recorded in accordance with rate orders from the KCC and MPSC. The orders allow the difference between pension costs under GAAP and pension costs for ratemaking to be recorded as a regulatory asset or liability with future ratemaking recovery or refunds, as appropriate.

In 2022, Evergy's pension expense was $144.5 million under GAAP and $159.2 million for ratemaking. The impact on 2023 pension expense in the table above reflects the impact on GAAP pension costs. Under the Evergy Companies' rate agreements, any increase or decrease in GAAP pension expense is deferred to a regulatory asset or liability for future ratemaking treatment. See Note 9 to the consolidated financial statements for additional information regarding the accounting for pensions.

Market conditions and interest rates significantly affect the future assets and liabilities of the plan. It is difficult to predict future pension costs, changes in pension liability and cash funding requirements due to the inherent uncertainty of market conditions.

### **Revenue Recognition**

Evergy recognizes revenue on the sale of electricity to customers over time as the service is provided in the amount it has the right to invoice. Revenues recorded include electric services provided but not yet billed by Evergy. Unbilled revenues are recorded for kWh usage in the period following the customers' billing cycle to the end of the month. This estimate is based on net system kWh usage less actual billed kWhs. Evergy's estimated unbilled kWhs are allocated and priced by regulatory jurisdiction across the rate classes based on actual billing rates. Evergy's unbilled revenue estimate is affected by factors including fluctuations in energy demand, weather, line losses and changes in the composition of customer classes. See Note 3 to the consolidated financial statements for the balance of unbilled receivables for Evergy as of December 31, 2022 and 2021.

### **Regulatory Assets and Liabilities**

Evergy has recorded assets and liabilities on its consolidated balance sheets resulting from the effects of the ratemaking process, which would not otherwise be recorded under GAAP. Regulatory assets represent incurred costs that are probable of recovery from future revenues. Regulatory liabilities represent future reductions in revenues or refunds to customers.

Management regularly assesses whether regulatory assets and liabilities are probable of future recovery or refund by considering factors such as decisions by the MPSC, KCC or FERC in Evergy's rate case filings; decisions in other regulatory proceedings, including decisions related to other companies that establish precedent on matters applicable to Evergy; and changes in laws and regulations. If recovery or refund of regulatory assets or liabilities is not approved by regulators or is no longer deemed probable, these regulatory assets or liabilities are recognized in the current period results of operations. Evergy's continued ability to meet the criteria for recording regulatory assets and liabilities may be affected in the future by restructuring and deregulation in the electric industry or changes in accounting rules. In the event that the criteria no longer applied to all or a portion of Evergy's operations, the related regulatory assets and liabilities would be written off unless an appropriate regulatory recovery mechanism were provided. Additionally, these factors could result in an impairment on utility plant assets. See Note 4 to the consolidated financial statements for additional information.

### **Impairments of Assets and Goodwill**

Long-lived assets are required to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed under GAAP.

Accounting rules require goodwill to be tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. The goodwill impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. In the event that the carrying amount exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference between the carrying amount of the reporting unit and its fair value. Evergy's consolidated operations are considered one reporting unit for assessment of impairment, as management assesses financial performance and allocates resources on a consolidated basis. The annual impairment test for the $2,336.6 million of goodwill from

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the Great Plains Energy and Evergy Kansas Central merger was conducted as of May 1, 2022. The fair value of the reporting unit substantially exceeded the carrying amount, including goodwill. As a result, there was no impairment of goodwill.

The determination of fair value for the reporting unit consisted of two valuation techniques: an income approach consisting of a discounted cash flow analysis and a market approach consisting of a determination of reporting unit invested capital using a market multiple derived from the historical earnings before interest, income taxes, depreciation and amortization and market prices of the stock of peer companies. The results of the two techniques were evaluated and weighted to determine a point within the range that management considered representative of fair value for the reporting unit, which involves a significant amount of management judgment.

The discounted cash flow analysis is most significantly impacted by two assumptions: estimated future cash flows and the discount rate applied to those cash flows. Management determines the appropriate discount rate to be based on the reporting unit's weighted average cost of capital (WACC). The WACC takes into account both the return on equity authorized by the KCC and MPSC and after-tax cost of debt. Estimated future cash flows are based on Evergy's internal business plan, which assumes the occurrence of certain events in the future, such as the outcome of future rate filings, future approved rates of return on equity, anticipated returns of and earnings on future capital investments, continued recovery of cost of service and the renewal of certain contracts. Management also makes assumptions regarding the run rate of operations, maintenance and general and administrative costs based on the expected outcome of the aforementioned events. Should the actual outcome of some or all of these assumptions differ significantly from the current assumptions, revisions to current cash flow assumptions could cause the fair value of the Evergy reporting unit under the income approach to be significantly different in future periods and could result in a future impairment charge to goodwill.

The market approach analysis is most significantly impacted by management's selection of relevant peer companies as well as the determination of an appropriate control premium to be added to the calculated invested capital of the reporting unit, as control premiums associated with a controlling interest are not reflected in the quoted market price of a single share of stock. Management determines an appropriate control premium by using an average of control premiums for recent acquisitions in the industry. Changes in results of peer companies, selection of different peer companies and future acquisitions with significantly different control premiums could result in a significantly different fair value of the Evergy reporting unit.

## Income Taxes

Income taxes are accounted for using the asset/liability approach. Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Deferred investment tax credits are amortized ratably over the life of the related property. Deferred tax assets are also recorded for net operating losses, capital losses and tax credit carryforwards. Evergy is required to estimate the amount of taxes payable or refundable for the current year and the deferred tax liabilities and assets for future tax consequences of events reflected in Evergy's consolidated financial statements or tax returns. Actual results could differ from these estimates for a variety of reasons including changes in income tax laws, enacted tax rates and results of audits by taxing authorities. This process also requires management to make assessments regarding the timing and probability of the ultimate tax impact from which actual results may differ. Evergy records valuation allowances on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized. See Note 20 to the consolidated financial statements for additional information.

## Asset Retirement Obligations

Evergy has recognized legal obligations associated with the disposal of long-lived assets that result from the acquisition, construction, development or normal operation of such assets. Concurrent with the recognition of the liability, the estimated cost of the ARO incurred at the time the related long-lived assets were either acquired, placed in service or when regulations establishing the obligation became effective is also recorded to property, plant and equipment, net on the consolidated balance sheets. The recording of AROs for regulated operations has no income statement impact due to the deferral of the adjustments through the establishment of a regulatory asset or an offset to a regulatory liability.

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Evergy initially recorded AROs at fair value for the estimated cost to decommission Wolf Creek (94% indirect share), retire wind generating facilities, dispose of asbestos insulating material at its power plants, remediate ash disposal ponds and close ash landfills, among other items. ARO refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement may be conditional on a future event that may or may not be within the control of the entity. In determining Evergy's AROs, assumptions are made regarding probable future disposal costs and the timing of their occurrence. The results of these assumptions are discounted using credit-adjusted risk-free rates (CARFR). The CARFR is determined as the current U.S. Treasury bonds rates corresponding to the period of expected settlement activities and is adjusted for the associated bond rates Evergy would be charged to borrow for the specific time period. Any change in these assumptions could have a significant impact on Evergy's AROs reflected on its consolidated balance sheets.

As of December 31, 2022 and 2021, Evergy had recorded AROs of $1,153.2 million and $960.1 million, respectively. See Note 6 to the consolidated financial statements for more information regarding Evergy's AROs.

## **EVERGY RESULTS OF OPERATIONS**

Evergy's results of operations and financial position are affected by a variety of factors including rate regulation, fuel costs, weather, customer behavior and demand, the economy and competitive forces.

Substantially all of Evergy's revenues are subject to state or federal regulation. This regulation has a significant impact on the price the Evergy Companies charge for electric service. Evergy's results of operations and financial position are affected by its ability to align overall spending, both operating and capital, within the frameworks established by its regulators and to mitigate the impacts of inflationary pressures.

Wholesale revenues are impacted by, among other factors, demand, cost and availability of fuel and purchased power, price volatility, available generation capacity, transmission availability and weather.

The Evergy Companies use coal, uranium and gas for the generation of electricity for their customers and also purchase power through renewable power purchase agreements or on the open market. The prices for fuel used in generation or the market price of power purchases can fluctuate significantly due to a variety of factors including supply, demand, weather and the broader economic environment. Evergy Kansas Central, Evergy Metro and Evergy Missouri West have fuel recovery mechanisms in their Kansas and Missouri jurisdictions, as applicable, that allow them to defer and subsequently recover or refund, through customer rates, substantially all of the variance in net energy costs from the amount set in base rates without a general rate case proceeding.

Weather significantly affects the amount of electricity that Evergy's customers use as electricity sales are seasonal. As summer peaking utilities, the third quarter typically accounts for the greatest electricity sales by the Evergy Companies. Hot summer temperatures and cold winter temperatures prompt more demand, especially among residential and commercial customers, and to a lesser extent, industrial customers. Mild weather reduces customer demand.

Energy efficiency investments by customers and the Evergy Companies also can affect the demand for electric service. Through MEEIA, Evergy Metro and Evergy Missouri West offer energy efficiency and demand side management programs to their Missouri retail customers and recover program costs, throughput disincentive, and as applicable, certain earnings opportunities in retail rates through a rider mechanism.

The Evergy Companies' taxes other than income taxes, of which property taxes are a significant component, can fluctuate significantly due to a variety of factors, including changes in taxable values and property tax rates. Evergy Kansas Central, Evergy Metro and Evergy Missouri West have property tax surcharges or trackers that allow them to defer and subsequently recover or refund, through customer rates, substantially all of the variance in property tax costs from the amounts set in base rates.

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The following table summarizes Evergy's comparative results of operations.

|  | 2022 | Change | 2021 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Operating revenues | $5,859.1 | $272.4 | $5,586.7 |
| Fuel and purchased power | 1,821.2 | 264.2 | 1,557.0 |
| SPP network transmission costs | 323.0 | 32.6 | 290.4 |
| Operating and maintenance | 1,085.3 | (22.2) | 1,107.5 |
| Depreciation and amortization | 929.4 | 33.0 | 896.4 |
| Taxes other than income tax | 398.1 | 17.6 | 380.5 |
| Sibley Unit 3 impairment loss and other regulatory disallowances | 34.9 | 34.9 | - |
| Income from operations | 1,267.2 | (87.7) | 1,354.9 |
| Other income (expense), net | (58.0) | (76.8) | 18.8 |
| Interest expense | 404.0 | 31.4 | 372.6 |
| Income tax expense | 47.5 | (69.9) | 117.4 |
| Equity in earnings of equity method investees, net of income taxes | 7.3 | (0.9) | 8.2 |
| Net income | 765.0 | (126.9) | 891.9 |
| Less: Net income attributable to noncontrolling interests | 12.3 | 0.1 | 12.2 |
| Net income attributable to Evergy, Inc. | $752.7 | $(127.0) | $879.7 |

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## Gross Margin (GAAP) and Utility Gross Margin (non-GAAP)

The following tables summarize Evergy's gross margin (GAAP) and MWhs sold and reconcile Evergy's gross margin (GAAP) to Evergy's utility gross margin (non-GAAP). See "Executive Summary - Non-GAAP Measures" for additional information regarding gross margin (GAAP) and utility gross margin (non-GAAP).

|  | Revenues and Expenses |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | Change | 2021 | Change | 2020 |
| Retail revenues | (millions) |  |  |  |  |
| Residential | $2,168.2 | $249.9 | $1,918.3 | $9.1 | $1,909.2 |
| Commercial | 1,888.5 | 207.2 | 1,681.3 | 39.6 | 1,641.7 |
| Industrial | 686.2 | 89.2 | 597.0 | 8.3 | 588.7 |
| Other retail revenues | (32.1) | (65.2) | 33.1 | (5.4) | 38.5 |
| Total electric retail | 4,710.8 | 481.1 | 4,229.7 | 51.6 | 4,178.1 |
| Wholesale revenues | 509.9 | (207.3) | 717.2 | 453.2 | 264.0 |
| Transmission revenues | 343.7 | (13.1) | 356.8 | 38.3 | 318.5 |
| Other revenues | 294.7 | 11.7 | 283.0 | 130.2 | 152.8 |
| Operating revenues | 5,859.1 | 272.4 | 5,586.7 | 673.3 | 4,913.4 |
| Fuel and purchased power | (1,821.2) | (264.2) | (1,557.0) | (458.0) | (1,099.0) |
| SPP network transmission costs | (323.0) | (32.6) | (290.4) | (27.2) | (263.2) |
| Operating and maintenance (a) | (542.6) | (6.9) | (535.7) | 12.4 | (548.1) |
| Depreciation and amortization | (929.4) | (33.0) | (896.4) | (16.3) | (880.1) |
| Taxes other than income tax | (398.1) | (17.6) | (380.5) | (16.3) | (364.2) |
| Gross margin (GAAP) | 1,844.8 | (81.9) | 1,926.7 | 167.9 | 1,758.8 |
| Operating and maintenance (a) | 542.6 | 6.9 | 535.7 | (12.4) | 548.1 |
| Depreciation and amortization | 929.4 | 33.0 | 896.4 | 16.3 | 880.1 |
| Taxes other than income tax | 398.1 | 17.6 | 380.5 | 16.3 | 364.2 |
| Utility gross margin (non-GAAP) | $3,714.9 | $(24.4) | $3,739.3 | $188.1 | $3,551.2 |

(a) Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $542.7 million, $571.8 million and $614.9 million for 2022, 2021 and 2020, respectively.

| MWhs Sold | 2022 | Change | 2021 | Change | 2020 |
| --- | --- | --- | --- | --- | --- |
| Retail sales | (thousands) |  |  |  |  |
| Residential | 16,494 | 779 | 15,715 | 232 | 15,483 |
| Commercial | 18,176 | 517 | 17,659 | 664 | 16,995 |
| Industrial | 8,782 | 174 | 8,608 | 365 | 8,243 |
| Other retail | 131 | - | 131 | (1) | 132 |
| Total electric retail sales | 43,583 | 1,470 | 42,113 | 1,260 | 40,853 |
| Wholesale sales | 17,103 | 1,187 | 15,916 | 1,056 | 14,860 |
| Total | 60,686 | 2,657 | 58,029 | 2,316 | 55,713 |

Evergy's gross margin (GAAP) decreased $81.9 million in 2022, compared to 2021 and Evergy's utility gross margin (non-GAAP) decreased $24.4 million in 2022, compared to 2021, both measures were driven by:

- a $96.6 million decrease in non-regulated energy marketing margins recognized at Evergy Kansas Central related to the February 2021 winter weather event;
- a $68.0 million decrease due to the deferral of revenues in 2022 for the ordered refund of amounts collected from customers since December 2018 for the return on investment of the retired Sibley Station;

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- a $32.8 million decrease in transmission revenues collected from Evergy Kansas Central's customers through its FERC TFR which is to be refunded to customers in accordance with a December 2022 FERC order;
- a $22.7 million decrease in transmission revenues related to the amortization of excess deferred income taxes authorized by FERC in December 2022 and which is offset in income tax expense;
- a $16.7 million reduction to Evergy Metro's operating revenues due to recording an estimated refund obligation to customers related to Evergy Metro's ERSP. See Note 4 of the consolidated financial statements for additional information;
- a $1.4 million net decrease due to other impacts from the February 2021 winter weather event driven by:
  - a $33.8 million decrease at Evergy Kansas Central driven by higher wholesale sales at its non-regulated 8% ownership share of JEC due to higher wholesale sales prices and MWhs sold in February 2021; partially offset by
  - a $21.0 million increase at Evergy Missouri West driven by $14.8 million of increased fuel and purchased power costs in February 2021 that are not recoverable from customers through its fuel recovery mechanism and a $6.2 million decrease related to a special requirements contract with an industrial customer; and
  - an $11.4 million increase at Evergy Metro primarily driven by jurisdictional allocation differences currently present between its fuel recovery mechanisms in Missouri and Kansas regarding its refund to customers for the net increase in wholesale revenues in February 2021; partially offset by
- a $138.2 million increase primarily due to higher retail sales driven by favorable weather (cooling degree days increased 7% and heating degree days increased by 12%) and an increase in weather-normalized demand;
- a $42.5 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2022;
- an $11.2 million increase due to mark to market gains related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's non-regulated 8% ownership share of JEC;
- an $11.0 million increase due to higher revenues collected at Evergy Kansas Central and Evergy Metro related to property taxes and which has a direct offset in taxes other than income tax; and
- a $10.9 million increase due to the cessation of annual bill credits recorded by Evergy Kansas Central and Evergy Metro through January 2022 as a result of the expiration of conditions in the KCC order granting the 2018 merger of Evergy Kansas Central and Great Plains Energy.

Additionally, the decrease in Evergy's gross margin (GAAP) was also driven by:

- a $33.0 million increase in depreciation and amortization primarily driven by higher capital additions at Evergy Kansas Central and Evergy Metro in 2022 as described further below;
- a $17.6 million increase in taxes other than income taxes driven by an increase in property taxes in Missouri and Kansas primarily due to higher assessed property tax values as described further below; and
- a $6.9 million increase in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by a $10.5 million increase in transmission and distribution operating and maintenance expense as described further below.

Evergy's gross margin (GAAP) increased $167.9 million in 2021, compared to 2020 and Evergy's utility gross margin (non-GAAP) increased $188.1 million in 2021, compared to the same period in 2020, both measures were driven by:

- a $94.5 million of non-regulated energy marketing margins recognized at Evergy Kansas Central related to the February 2021 winter weather event;

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- an $84.1 million increase primarily due to higher retail sales driven by favorable weather (cooling degree days increased 13%, partially offset by a 5% decrease in heating degree days) and an increase in weather-normalized commercial and industrial demand partially offset by a decrease in weather-normalized residential demand;
- a $38.3 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2021; and
- a $1.4 million net increase due to other impacts from the February 2021 winter weather event driven by:
  - a $33.8 million increase at Evergy Kansas Central driven by higher wholesale sales at its non-regulated 8% ownership share of JEC due to higher wholesale sales prices and MWhs sold in February 2021; partially offset by
  - a $21.0 million decrease at Evergy Missouri West driven by $14.8 million of increased fuel and purchased power costs in February 2021 that are not recoverable from customers through its fuel recovery mechanism and a $6.2 million decrease related to a special requirements contract with an industrial customer; and
  - an $11.4 million decrease at Evergy Metro primarily driven by jurisdictional allocation differences currently present between its fuel recovery mechanisms in Missouri and Kansas regarding its refund to customers for the net increase in wholesale revenues in February 2021; partially offset by
- a $30.2 million decrease in revenues at Evergy Kansas Central and Evergy Metro due to rate reductions beginning January 1, 2021, in Kansas to reflect their exemption from Kansas corporate incomes taxes.

Additionally, the increase in Evergy's gross margin (GAAP) was also driven by:

- a $12.4 million decrease in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by a $16.9 million decrease in transmission and distribution operating and maintenance expenses; offset by
- a $16.3 million increase in depreciation and amortization primarily driven by higher capital additions at Evergy Kansas Central in 2021; and
- a $16.3 million increase in taxes other than income taxes driven by an increase in property taxes in Missouri and Kansas primarily due to higher assessed property tax values.

## Operating and Maintenance

Evergy's operating and maintenance expense decreased $22.2 million in 2022, compared to 2021, primarily driven by:

- a $11.9 million decrease in credit loss expense at Evergy Metro and Evergy Missouri West primarily due to resuming collection activities for accounts with lower balances due;
- an $8.6 million decrease in costs recorded in 2022 associated with executive transition, including inducement bonuses, severance agreements and other transition expenses;
- a $6.6 million decrease in costs incurred in 2022 at Evergy Kansas Central related to non-regulated energy marketing margins recognized during the February 2021 winter weather event; and
- a $6.2 million decrease in advisor expenses incurred in 2022 associated with strategic planning; partially offset by
- a $10.5 million increase in various transmission and distribution operating and maintenance expenses primarily driven by higher contractor costs, a $2.0 million increase in engineering and environmental outside service fees and a $3.0 million increase in vegetation management costs in 2022.

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## Depreciation and Amortization

Evergy's depreciation and amortization increased $33.0 million in 2022, compared to 2021, primarily driven by higher capital additions at Evergy Kansas Central and Evergy Metro in 2022.

## Taxes Other Than Income Tax

Evergy's taxes other than income tax increased $17.6 million in 2022, compared to 2021, driven by an increase in property taxes in Missouri and Kansas primarily due to higher assessed property tax values.

## Sibley Unit 3 Impairment Loss and Other Regulatory Disallowances

Evergy recorded a $26.7 million impairment loss on Evergy Missouri West's regulatory asset for retired generation facilities related to Sibley Unit 3 in 2022 and $5.5 million and $2.7 million losses at Evergy Metro and Evergy Missouri West, respectively, in accordance with the amended final rate order from the MPSC in their 2022 rate cases which disallowed the recovery of costs associated with the replacement of certain electric meters. See Notes 1 and 4 of the consolidated financial statements for additional information.

## Other Income (Expense), Net

Evergy's other income, net in 2021 became other expense, net, in 2022 as a result of a $76.8 million increase in net other expense items, primarily driven by:

- a $66.7 million increase primarily due to a $27.7 million unrealized gain in 2021 due to the change in fair value related to Evergy's equity investment in an early-stage energy solutions company, a $16.3 million realized loss related to this equity investment that was sold in 2022 through a share forward agreement, $14.0 million in realized gains from the sale of various equity investments in 2021 and a $9.9 million increase due to lower unrealized gains from various equity investments in 2022;
- a $7.3 million increase primarily due to higher pension non-service costs at Evergy Kansas Central and Evergy Metro in 2022;
- $6.4 million of lower Evergy Kansas Central equity allowance for funds used during construction (AFUDC) primarily driven by higher short-term debt balances in 2022; and
- $6.1 million of other income recorded in 2021 related to contract termination fees; partially offset by
- a $20.2 million increase in interest income primarily due to $15.0 million of carrying charges recorded by Evergy Missouri West in the third quarter of 2022 associated with its regulatory asset for fuel and purchased power costs related to the February 2021 winter weather event, driven by an MPSC order allowing for their recovery as part of Evergy Missouri West's securitization financing request.

## Interest Expense

Evergy's interest expense increased $31.4 million in 2022, compared to 2021, primarily driven by:

- a $42.3 million increase in interest expense on short-term borrowings primarily due to higher short-term debt balances and weighted-average interest rates for Evergy, Inc., Evergy Kansas Central and Evergy Missouri West in 2022; and
- a $7.4 million increase due to the issuance of Evergy Missouri West's $250.0 million of 3.75% First Mortgage Bonds (FMBs) in March 2022; partially offset by
- an $8.3 million decrease due to the repayment of Evergy's $287.5 million of 5.292% Senior Notes at maturity in June 2022; and
- a $5.8 million decrease due to the repayment of Evergy Missouri West's $80.9 million of 8.27% Senior Notes at maturity in November 2021.

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## **Income Tax Expense**

Evergy's income tax expense decreased $69.9 million in 2022, compared to 2021, primarily driven by:

- a $42.7 million decrease primarily due to lower Evergy Kansas Central and Evergy Missouri West pre-tax income in 2022; and
- a $17.9 million decrease primarily due to higher amortization of excess deferred income taxes authorized by FERC in December 2022.

## **EVERGY SIGNIFICANT BALANCE SHEET CHANGES**

**(December 31, 2022 compared to December 31, 2021)**

- Evergy's receivables, net increased $93.7 million primarily driven by a $52.1 million increase in retail electric accounts receivable and a $48.3 million increase in wholesale sales accounts receivable driven by higher sales in December 2022 due to favorable weather.
- Evergy's accounts receivable pledged as collateral increased $40.0 million primarily driven by Evergy's increase in retail electric accounts receivable balances in December 2022, resulting in a higher level of retail electric receivables available for sale through Evergy's receivable sales facilities.
- Evergy's fuel and supplies inventory increased $106.2 million primarily driven by an $86.4 million increase in materials and supply inventory primarily due to an increase in transmission and distribution capital projects related to grid resiliency and other infrastructure improvement in addition to maintaining higher overall levels of inventory to mitigate longer supply chain lead times.
- Evergy's income taxes receivable decreased by $18.7 million primarily due to the application of Evergy's 2021 overpayment of income taxes to Evergy's 2022 income tax payments.
- Evergy's other assets - current decreased $30.9 million primarily due to a $31.4 million investment in an early-stage energy solutions company that was sold in 2022. See "Evergy Equity Investment" in Note 1 to the consolidated financial statements for additional information.
- Evergy's nuclear decommissioning trust funds decreased $115.4 million primarily driven by realized and unrealized losses on investments at Evergy Kansas Central's and Evergy Metro's nuclear decommissioning trusts.
- Evergy's current maturities of long-term debt increased $49.8 million primarily due to the reclassification of Evergy Metro's $300.0 million of 3.15% Senior Notes and $79.5 million of 2.95% Environmental Improvement Revenue Refunding (EIRR) bonds and Evergy Kansas Central's $50.0 million of 6.15% of FMBs from long-term to current, partially offset by the repayments of Evergy's $287.5 million of 5.292% of Senior Notes and Evergy Missouri West's $100.0 million of 3.74% Senior Notes.
- Evergy's collateralized note payable increased $40.0 million primarily driven by Evergy's increase in retail electric accounts receivable balances in December 2022, resulting in a higher level of retail electric receivables available for sale through Evergy's receivable sales facilities.
- Evergy's regulatory liabilities - current increased $84.7 million primarily due to $48.4 million ordered to be refunded to TFR customers in the next 12 months for over-collections related to the calculation of Evergy Kansas Central's capital structure for the rate years 2020 - 2022 and the amortization of excess deferred income taxes, and a $26.4 million increase in the current portion of Evergy Missouri West's Sibley AAO regulatory liability. See "Evergy Kansas Central TFR Formal Challenge" in Note 4 to the consolidated financial statements for additional information.
- Evergy's asset retirement obligations - current increased $20.9 million primarily due to changes in estimates and the expected timing of remediation at several Evergy Kansas Central and Evergy Metro ponds and landfills containing CCRs.
- Evergy's pension and post-retirement liability decreased $420.7 million primarily due to a decrease in benefit obligations driven by $160.4 million and $145.9 million decreases due to actuarial

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remeasurements at Evergy Metro and Evergy Kansas Central, respectively, and pension contributions of $46.9 million and $21.0 million at Evergy Metro and Evergy Kansas Central, respectively.

- Evergy's asset retirement obligations - long-term increased $172.2 million primarily due to changes in the estimates of several Evergy Kansas Central and Evergy Metro ponds and landfills containing CCRs. See Note 6 to the consolidated financial statements for additional information.

## LIQUIDITY AND CAPITAL RESOURCES

Evergy relies primarily upon cash from operations, short-term borrowings, debt and equity issuances and its existing cash and cash equivalents to fund its capital requirements. Evergy's capital requirements primarily consist of capital expenditures, payment of contractual obligations and other commitments and the payment of dividends to shareholders.

### Capital Sources

#### *Cash Flows from Operations*

Evergy's cash flows from operations are driven by the regulated sale of electricity. These cash flows are relatively stable but the timing and level of these cash flows can vary based on weather and economic conditions, future regulatory proceedings, the timing of cash payments made for costs recoverable under regulatory mechanisms and the time such costs are recovered, and unanticipated expenses such as unplanned plant outages and storms. Evergy's cash flows from operations were $1,801.9 million, $1,351.7 million and $1,753.8 million in 2022, 2021 and 2020, respectively.

#### *Short-Term Borrowings*

As of December 31, 2022, Evergy had $1.2 billion of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $449.3 million for Evergy, Inc., $227.9 million for Evergy Kansas Central, $239.0 million for Evergy Metro and $250.8 million for Evergy Missouri West. The Evergy Companies' borrowing capacity under the master credit facility also supports their issuance of commercial paper. See Note 11 to the consolidated financial statements for more information regarding the master credit facility.

In February 2022, Evergy, Inc. entered into a $500.0 million unsecured Term Loan Facility that originally expired in February 2023. In February 2023, Evergy, Inc. amended the $500.0 million Term Loan Facility to expire in February 2024. As a result of the amendment, Evergy, Inc. demonstrated its intent and ability to refinance the Term Loan Facility and reflected this $500 million borrowing within long-term debt, net, on Evergy's consolidated balance sheets as of December 31, 2022. Evergy's borrowings under the Term Loan Facility were used for, among other things, working capital, capital expenditures and general corporate purposes.

Along with cash flows from operations and receivable sales facilities, Evergy generally uses borrowings under its master credit facility and the issuance of commercial paper to meet its day-to-day cash flow requirements. Evergy believes that its existing cash on hand and available borrowing capacity under its master credit facility provide sufficient liquidity for its existing capital requirements.

#### *Long-Term Debt and Equity Issuances*

From time to time, Evergy issues long-term debt and equity to repay short-term debt, refinance maturing long-term debt and finance growth. As of December 31, 2022 and 2021, Evergy's capital structure, excluding short-term debt, was as follows:

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Common equity | 48% | 49% |
| Long-term debt, including VIEs | 52% | 51% |

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Under stipulations with the MPSC and KCC, Evergy, Evergy Kansas Central and Evergy Metro are required to maintain common equity at not less than 35%, 40% and 40%, respectively, of total capitalization. The master credit facility and certain debt instruments of the Evergy Companies also contain restrictions that require the maintenance of certain capitalization and leverage ratios. As of December 31, 2022, the Evergy Companies were in compliance with these covenants.

#### ***Significant Debt Issuances***

See Note 12 to the consolidated financial statements for information regarding significant debt issuances.

#### ***Equity Issuance***

See Note 18 to the consolidated financial statements for information regarding Evergy's securities purchase agreement with Bluescape to purchase Evergy's common stock in 2021.

#### ***Credit Ratings***

The ratings of the Evergy Companies' debt securities by the credit rating agencies impact the Evergy Companies' liquidity, including the cost of borrowings under their master credit facility and in the capital markets. The Evergy Companies view maintenance of strong credit ratings as vital to their access to and cost of debt financing and, to that end, maintain an active and ongoing dialogue with the agencies with respect to results of operations, financial position and future prospects. While a decrease in these credit ratings would not cause any acceleration of the Evergy Companies' debt, it could increase interest charges under the master credit facility. A decrease in credit ratings could also have, among other things, an adverse impact, which could be material, on the Evergy Companies' access to capital, the cost of funds, the ability to recover actual interest costs in state regulatory proceedings, the type and amounts of collateral required under supply agreements and Evergy's ability to provide credit support for its subsidiaries.

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As of February 23, 2023, the major credit rating agencies rated the Evergy Companies' securities as detailed in the following table.

|  | Moody's Investors Service (a) | S&P Global Ratings (a) |
| --- | --- | --- |
| Evergy |  |  |
| Outlook | Stable | Negative |
| Corporate Credit Rating | -- | A- |
| Senior Unsecured Debt | Baa2 | BBB+ |
| Commercial Paper | P-2 | A-2 |
| Evergy Kansas Central |  |  |
| Outlook | Stable | Negative |
| Corporate Credit Rating | Baa1 | A- |
| Senior Secured Debt | A2 | A |
| Commercial Paper | P-2 | A-2 |
| Evergy Kansas South |  |  |
| Outlook | Stable | Negative |
| Corporate Credit Rating | Baa1 | A- |
| Senior Secured Debt | A2 | A |
| Short-Term Rating | P-2 | A-2 |
| Evergy Metro |  |  |
| Outlook | Stable | Negative |
| Corporate Credit Rating | Baa1 | A |
| Senior Secured Debt | A2 | A+ |
| Senior Unsecured Debt | -- | A |
| Commercial Paper | P-2 | A-1 |
| Evergy Missouri West |  |  |
| Outlook | Stable | Negative |
| Corporate Credit Rating | Baa2 | A- |
| Senior Secured Debt | A3 | A |
| Commercial Paper | P-2 | A-2 |

$^{(a)}$A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.

### ***Shelf Registration Statements and Regulatory Authorizations***

#### **Evergy**

In September 2021, Evergy filed an automatic shelf registration statement providing for the sale of unlimited amounts of securities with the SEC, which expires in September 2024.

#### **Evergy Kansas Central**

In September 2021, Evergy Kansas Central filed an automatic shelf registration statement providing for the sale of unlimited amounts of unsecured debt securities and FMBs with the SEC, which expires in September 2024.

#### **Evergy Metro**

In September 2021, Evergy Metro filed an automatic shelf registration statement providing for the sale of unlimited amounts of unsecured notes and mortgage bonds with the SEC, which expires in September 2024.

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The following table summarizes the regulatory short-term and long-term debt financing authorizations for Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West and the remaining amount available under these authorizations as of December 31, 2022.

| Type of Authorization | Commission | Expiration Date | Authorization Amount | Available Under Authorization |
| --- | --- | --- | --- | --- |
| Evergy Kansas Central & Evergy Kansas South |  |  |  |  |
|  |  |  | (in millions) |  |
| Short-Term Debt | FERC | December 2024 | $1,250.0 | $477.9 |
| Evergy Metro |  |  |  |  |
| Short-Term Debt | FERC | December 2024 | $1,250.0 | $1,139.0 |
| Evergy Missouri West |  |  |  |  |
| Short-Term Debt | FERC | December 2024 | $750.0 | $240.3 |
| Long-Term Debt | FERC | October 2024 | $600.0 | $300.0 |

In addition to the above regulatory authorizations, the Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West mortgages each contain provisions restricting the amount of FMBs or mortgage bonds, as applicable, that can be issued by each entity. Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West must comply with these restrictions prior to the issuance of additional FMBs, mortgage bonds or other secured indebtedness.

Under the Evergy Kansas Central mortgage, the issuance of FMBs is subject to limitations based on the amount of bondable property additions. In addition, so long as any bonds issued prior to January 1, 1997, remain outstanding, the mortgage prohibits additional FMBs from being issued, except in connection with certain refundings, unless Evergy Kansas Central's unconsolidated net earnings available for interest, depreciation and property retirement (which, as defined, does not include earnings or losses attributable to the ownership of securities of subsidiaries), for a period of 12 consecutive months within 15 months preceding the issuance, are not less than the greater of twice the annual interest charges on or 10% of the principal amount of all FMBs outstanding after giving effect to the proposed issuance. As of December 31, 2022, $416.4 million principal amount of additional FMBs could be issued under the most restrictive provisions in the mortgage, except in connection with certain refundings.

Under the Evergy Kansas South mortgage, the amount of FMBs authorized is limited to a maximum of $3.5 billion and the issuance of FMBs is subject to limitations based on the amount of bondable property additions. In addition, the mortgage prohibits additional FMBs from being issued, except in connection with certain refundings, unless Evergy Kansas South's net earnings before income taxes and before provision for retirement and depreciation of property for a period of 12 consecutive months within 15 months preceding the issuance are not less than either two and one-half times the annual interest charges on or 10% of the principal amount of all Evergy Kansas South FMBs outstanding after giving effect to the proposed issuance. As of December 31, 2022, approximately $2,828.6 million principal amount of additional Evergy Kansas South FMBs could be issued under the most restrictive provisions in the mortgage, except in connection with certain refundings.

Under the General Mortgage Indenture and Deed of Trust dated as of December 1, 1986, as supplemented (Evergy Metro Mortgage Indenture), additional Evergy Metro mortgage bonds may be issued on the basis of 75% of property additions or retired bonds. As of December 31, 2022, approximately $5,254.1 million principal amount of additional Evergy Metro mortgage bonds could be issued under the most restrictive provisions in the mortgage.

Under the First Mortgage Indenture and Deed of Trust, dated as of March 1, 2022 (Evergy Missouri West Mortgage Indenture), additional Evergy Missouri West mortgage bonds may be issued on the basis of 75% of property additions or retired bonds. As of December 31, 2022, approximately $1,905.0 million principal

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amount of additional Evergy Missouri West mortgage bonds could be issued under the most restrictive provisions in the mortgage.

### *Cash and Cash Equivalents*

At December 31, 2022, Evergy had approximately $25.2 million of cash and cash equivalents on hand.

### **Capital Requirements**

#### *Capital Expenditures*

Evergy expects to need cash for its long-term strategy of transitioning its generation fleet to be more sustainable by reducing CO$_{2}$ emissions as well as executing other utility construction programs required to maintain Evergy's electric utility operations, improve reliability and expand facilities related to providing electric service. These capital expenditures could include, but are not limited to, expenditures to develop new transmission lines and make improvements to power plants, transmission and distribution lines and equipment. See 'Executive Summary - Strategy', above for further information regarding Evergy's strategy. Evergy's capital expenditures were $2,166.5 million, $1,972.5 million and $1,560.3 million in 2022, 2021 and 2020, respectively.

Capital expenditures projected for the next five years, excluding AFUDC and including costs of removal, are detailed in the following table. This capital expenditure plan is subject to management's discretion and continual review and could change. See Part I, Item 1A, Risk Factors for information regarding potential risks to Evergy's capital expenditure plan.

|  | 2023 | 2024 | 2025 | 2026 | 2027 |
| --- | --- | --- | --- | --- | --- |
|  | (millions) |  |  |  |  |
| Generating facilities - new renewable/other generation | $375.0 | $89.0 | $670.0 | $603.0 | $400.0 |
| Generating facilities - other | 414.0 | 354.0 | 335.0 | 290.0 | 364.0 |
| Transmission facilities | 662.0 | 694.0 | 598.0 | 629.0 | 678.0 |
| Distribution facilities | 697.0 | 622.0 | 669.0 | 642.0 | 715.0 |
| General facilities | 258.0 | 247.0 | 189.0 | 195.0 | 218.0 |
| Total capital expenditures | $2,406.0 | $2,006.0 | $2,461.0 | $2,359.0 | $2,375.0 |

#### *Significant Contractual Obligations and Other Commitments*

In the course of its business activities, the Evergy Companies enter into a variety of contracts and commercial commitments. Some of these result in direct obligations reflected on Evergy's consolidated balance sheets while others are commitments, some firm and some based on uncertainties, not reflected in Evergy's underlying consolidated financial statements.

The information in the following table is provided to summarize Evergy's significant cash obligations and commercial commitments.

| Payment due by period | 2023 | 2024 | 2025 | 2026 | 2027 | After 2027 | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Long-term debt | (millions) |  |  |  |  |  |  |
| Principal | $439.5 | $1,300.0 | $636.0 | $350.0 | $621.9 | $6,984.9 | $10,332.3 |
| Interest | 356.8 | 345.1 | 325.3 | 304.7 | 292.0 | 3,572.3 | 5,196.2 |
| Pension and other post-retirement plans (a) | 32.0 | 32.0 | 32.0 | 32.0 | 32.0 | (a) | 160.0 |
| Purchase commitments |  |  |  |  |  |  |  |
| Fuel | 308.6 | 157.5 | 130.4 | 132.9 | 57.1 | 148.3 | 934.8 |
| Power | 62.7 | 57.1 | 57.5 | 57.5 | 57.5 | 275.2 | 567.5 |

$^{(a)}$ Evergy expects to make contributions to the pension and other post-retirement plans beyond 2027 but the amounts are not yet determined.

Long-term debt includes current maturities. Long-term debt principal excludes $79.6 million of unamortized net discounts and debt issuance costs and a $92.1 million fair value adjustment recorded in connection with purchase accounting for the Great Plains Energy and Evergy Kansas Central merger that was completed in 2018. Variable rate interest obligations are based on rates as of December 31, 2022.

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Evergy expects to contribute $32.0 million to the pension and other post-retirement plans in 2023, of which the majority is expected to be paid by Evergy Kansas Central and Evergy Metro. Additional contributions to the plans are expected beyond 2027 in amounts at least sufficient to meet the greater of Employee Retirement Income Security Act of 1974, as amended (ERISA) or regulatory funding requirements; however, these amounts have not yet been determined. Amounts for years after 2023 are estimates based on information available in determining the amount for 2023. Actual amounts for years after 2023 could be significantly different than the estimated amounts in the table above.

Fuel commitments consist of commitments for nuclear fuel, coal and coal transportation costs. Power commitments consist of certain commitments for renewable energy under power purchase agreements, capacity purchases and firm transmission service.

At December 31, 2022, Evergy has other insignificant commitments as well as other insignificant long-term liabilities recorded on its consolidated balance sheet, which are not included in the table above.

### Common Stock Dividends

The amount and timing of dividends payable on Evergy's common stock are within the sole discretion of the Evergy Board. The amount and timing of dividends declared by the Evergy Board will be dependent on considerations such as Evergy's earnings, financial position, cash flows, capitalization ratios, regulation, reinvestment opportunities and debt covenants. Evergy targets a long-term dividend payout ratio of 60% to 70% of earnings. See Note 1 to the consolidated financial statements for information on the common stock dividend declared by the Evergy Board in February 2023.

The Evergy Companies also have certain restrictions stemming from statutory requirements, corporate organizational documents, covenants and other conditions that could affect dividend levels. See Note 18 to the consolidated financial statements for further discussion of restrictions on dividend payments.

### Cash Flows

The following table presents Evergy's cash flows from operating, investing and financing activities.

|  | 2022 | 2021 |
| --- | --- | --- |
|  | (millions) |  |
| Cash flows from operating activities | $1,801.9 | $1,351.7 |
| Cash flows used in investing activities | (2,152.2) | (1,913.8) |
| Cash flows from financing activities | 349.3 | 443.4 |

### Cash Flows from Operating Activities

Evergy's cash flows from operating activities increased $450.2 million in 2022, compared to 2021, primarily driven by:

- a $382.7 million increase in cash receipts for retail electric sales in 2022 primarily driven by favorable weather and an increase in weather-normalized demand; and
- $365.5 million of cash payments for net fuel and purchased power costs during the February 2021 winter weather event; partially offset by
- a $104.8 million decrease in cash payments in 2022 primarily due to the timing of payments made to taxing authorities for property tax payments as well as various suppliers and service providers for goods and services purchased in the ordinary course of business; and
- $89.9 million of cash receipts related to non-regulated energy marketing margins earned during the February 2021 winter weather event.

### Cash Flows used in Investing Activities

Evergy's cash flows used in investing activities increased $238.4 million in 2022, compared to 2021, primarily driven by a $194.0 million increase in additions to property, plant and equipment due to increases at Evergy Kansas

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Central, Evergy Metro and Evergy Missouri West of $83.2 million, $98.0 million and $17.0 million, respectively, primarily due to increased spending for a variety of capital projects including transmission and distribution projects related to grid resiliency and other infrastructure improvements.

### *Cash Flows from Financing Activities*

Evergy's cash flows from financing activities decreased $94.1 million in 2022, compared to 2021, primarily driven by:

- • a \$167.6 million decrease in short-term debt borrowings primarily driven by:
  - ◦ a \$275.5 million decrease at Evergy Missouri West due primarily to \$296.4 million of fuel and purchased power costs related to the February 2021 winter weather event; partially offset by
  - ◦ a \$111.0 million increase at Evergy Metro primarily due to increased borrowings in 2022 driven by higher cash capital expenditures; and
- • \$112.5 million of Evergy common stock issued in April 2021 pursuant to a securities purchase agreement with an affiliate of Bluescape Energy Partners, LLC (Bluescape); partially offset by
- • an \$81.0 increase in collateralized short-term debt, net primarily due to Evergy's increase in retail electric accounts receivable balances in 2022, resulting in a higher level of retail electric receivables available for sale through Evergy's receivable sales facilities;
- • a \$70.4 million increase in proceeds from long-term debt, net primarily due to Evergy Missouri West's issuance of \$300.0 million of 5.15% FMBs in December 2022 and Evergy Missouri West's issuance of \$250.0 million of 3.75% FMBs in March 2022; partially offset by Evergy Missouri West's issuance of \$500.0 million of Series A, B and C Senior Notes in April 2021; and
- • a \$34.3 million decrease in the repayment of borrowings against cash surrender value of corporate-owned life insurance primarily due to a higher number of policy settlements in 2021.

## **EVERGY KANSAS CENTRAL, INC.**

### **MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS**

The below results of operations and related discussion for Evergy Kansas Central is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) to Form 10-K.

The following table summarizes Evergy Kansas Central's comparative results of operations.

|  | 2022 | Change | 2021 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Operating revenues | $3,055.9 | $208.6 | $2,847.3 |
| Fuel and purchased power | 855.5 | 216.8 | 638.7 |
| SPP network transmission costs | 323.0 | 32.6 | 290.4 |
| Operating and maintenance | 536.3 | 5.5 | 530.8 |
| Depreciation and amortization | 484.6 | 17.4 | 467.2 |
| Taxes other than income tax | 216.5 | 12.6 | 203.9 |
| Income from operations | 640.0 | (76.3) | 716.3 |
| Other expense, net | (29.0) | (21.4) | (7.6) |
| Interest expense | 181.8 | 21.5 | 160.3 |
| Income tax expense | 12.3 | (39.4) | 51.7 |
| Equity in earnings of equity method investees, net of income taxes | 4.0 | - | 4.0 |
| Net income | 420.9 | (79.8) | 500.7 |
| Less: Net income attributable to noncontrolling interests | 12.3 | 0.1 | 12.2 |
| Net income attributable to Evergy Kansas Central, Inc. | $408.6 | $(79.9) | $488.5 |

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## Evergy Kansas Central Gross Margin (GAAP) and Utility Gross Margin (non-GAAP)

The following table summarizes Evergy Kansas Central's gross margin (GAAP) and MWhs sold and reconciles Evergy Kansas Central's gross margin (GAAP) to Evergy Kansas Central's utility gross margin (non-GAAP). See "Executive Summary - Non-GAAP Measures" for additional information regarding gross margin (GAAP) and utility gross margin (non-GAAP).

|  | Revenues and Expenses |  |  | MWhs Sold |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | Change | 2021 | 2022 | Change | 2021 |
| Retail revenues | (millions) |  |  | (thousands) |  |  |
| Residential | $980.1 | $156.0 | $824.1 | 6,954 | 389 | 6,565 |
| Commercial | 822.9 | 128.8 | 694.1 | 7,296 | 184 | 7,112 |
| Industrial | 465.7 | 74.0 | 391.7 | 5,658 | 125 | 5,533 |
| Other retail revenues | 17.9 | 0.8 | 17.1 | 40 | - | 40 |
| Total electric retail | 2,286.6 | 359.6 | 1,927.0 | 19,948 | 698 | 19,250 |
| Wholesale revenues | 389.9 | (63.2) | 453.1 | 11,037 | 862 | 10,175 |
| Transmission revenues | 305.0 | (17.9) | 322.9 | N/A | N/A | N/A |
| Other revenues | 74.4 | (69.9) | 144.3 | N/A | N/A | N/A |
| Operating revenues | 3,055.9 | 208.6 | 2,847.3 | 30,985 | 1,560 | 29,425 |
| Fuel and purchased power | (855.5) | (216.8) | (638.7) |  |  |  |
| SPP network transmission costs | (323.0) | (32.6) | (290.4) |  |  |  |
| Operating and maintenance (a) | (261.6) | 2.5 | (264.1) |  |  |  |
| Depreciation and amortization | (484.6) | (17.4) | (467.2) |  |  |  |
| Taxes other than income tax | (216.5) | (12.6) | (203.9) |  |  |  |
| Gross margin (GAAP) | 914.7 | (68.3) | 983.0 |  |  |  |
| Operating and maintenance (a) | 261.6 | (2.5) | 264.1 |  |  |  |
| Depreciation and amortization | 484.6 | 17.4 | 467.2 |  |  |  |
| Taxes other than income tax | 216.5 | 12.6 | 203.9 |  |  |  |
| Utility gross margin (non-GAAP) | $1,877.4 | $(40.8) | $1,918.2 |  |  |  |

$^{(a)}$ Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $274.7 million and $266.7 million for 2022 and 2021, respectively.

Evergy Kansas Central's gross margin (GAAP) decreased $68.3 million in 2022, compared to 2021, and Evergy Kansas Central's utility gross margin (non-GAAP) decreased $40.8 million in 2022, compared to 2021, both measures were driven by:

- a $96.6 million decrease in non-regulated energy marketing margins recognized at Evergy Kansas Central related to the February 2021 winter weather event;
- a $33.8 million decrease related to other impacts from the February 2021 winter weather event driven by higher wholesale sales at Evergy Kansas Central's non-regulated 8% ownership share of JEC due to higher wholesale prices and MWhs sold in February 2021;
- a $32.8 million decrease in transmission revenues collected from customers through Evergy Kansas Central's FERC TFR which is to be refunded to customers in accordance with a December 2022 FERC order; and
- a $22.7 million decrease in transmission revenues related to the amortization of excess deferred income taxes authorized by FERC in December 2022 and which is offset in income tax expense; partially offset by
- an $80.2 million increase primarily due to higher retail sales driven by favorable weather (cooling degree days increased by 15% and heating degree days increased by 12%) and higher weather-normalized commercial and industrial demand; partially offset by lower weather-normalized residential demand;

58

- a $37.6 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2022;
- an $11.2 million increase due to mark to market gains related to forward contracts for natural gas and electricity entered into as economic hedges against fuel price volatility related to Evergy Kansas Central's non-regulated 8% ownership share of JEC;
- an $8.3 million increase due to higher revenues collected related to property taxes which has a direct offset in taxes other than income tax; and
- a $7.8 million increase due to the cessation of annual bill credits recorded by Evergy Kansas Central through January 2022 as a result of the expiration of conditions in the KCC order granting the 2018 merger of Evergy Kansas Central and Great Plains Energy.

Additionally, the decrease in Evergy Kansas Central's gross margin (GAAP) was also driven by:

- a $17.4 million increase in depreciation and amortization expense as described further below; and
- a $12.6 million increase in taxes other than income taxes as described further below.

### **Evergy Kansas Central Operating and Maintenance**

Evergy Kansas Central's operating and maintenance expense increased $5.5 million in 2022, compared to 2021, primarily driven by:

- an $8.7 million increase in costs billed for common use assets in 2022 from Evergy Metro related to facilities and software assets;
- a $5.8 million increase in certain labor and employee benefits expenses;
- a $2.2 million increase in various administrative and general operating and maintenance expenses primarily due to increases in regulatory assessments from the KCC;
- a $1.5 million increase in various transmission and distribution operating and maintenance expenses primarily due to higher contractor costs; partially offset by a $3.5 million decrease in vegetation management costs in 2022;
- a $1.1 million increase in credit loss expense primarily due to a lower level of assumed uncollectible accounts and higher level of write-offs in 2022; and
- a $0.9 million increase in plant operating and maintenance expense at fossil-fuel generating units primarily driven by maintenance outages at La Cygne Station and JEC in 2022; partially offset by a maintenance outage at Lawrence Energy Center in 2021; partially offset by
- a $6.8 million decrease in costs recorded in 2022 associated with executive transition, including inducement bonuses, severance agreements and other transition expenses;
- a $6.6 million decrease in costs incurred in 2022 related to non-regulated energy marketing margins recognized during the February 2021 winter weather event; and
- a $3.0 million decrease in advisor expenses incurred in 2022 associated with strategic planning.

### **Evergy Kansas Central Depreciation and Amortization**

Evergy Kansas Central's depreciation and amortization expense increased $17.4 million in 2022, compared to 2021, primarily driven by higher capital additions in 2022.

### **Evergy Kansas Central Taxes Other Than Income Tax**

Evergy Kansas Central's taxes other than income tax increased $12.6 million in 2022, compared to 2021, driven by an increase in property taxes in Kansas primarily due to higher assessed property tax values.

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### **Evergy Kansas Central Other Expense, Net**

Evergy Kansas Central's other expense, net increased $21.4 million in 2022, compared to the same period in 2021, primarily driven by:

- a $6.4 million increase due to lower equity AFUDC primarily driven by higher average short-term debt balances in 2022;
- a $5.1 million increase due to lower investment earnings primarily driven by $4.0 million of higher net unrealized losses in Evergy Kansas Central's rabbi trust in 2022;
- $2.8 million of other income recorded in 2021 related to contract termination fees;
- a $2.3 million increase due to recording lower corporate-owned life insurance (COLI) benefits in 2022; and
- a $1.5 million increase due to higher pension non-service costs in 2022.

### **Evergy Kansas Central Interest Expense**

Evergy Kansas Central's interest expense increased $21.5 million in 2022, compared to 2021, primarily driven by a $15.8 million increase in interest expense on short-term borrowings primarily due to higher short-term debt balances and weighted-average interest rates in 2022.

### **Evergy Kansas Central Income Tax Expense**

Evergy Kansas Central's income tax expense decreased $39.4 million in 2022, compared to 2021, primarily driven by:

- a $24.9 million decrease due to lower pre-tax income in 2022; and
- a $16.5 million decrease primarily due to higher amortization of excess deferred income taxes authorized by FERC in December 2022.

## **EVERGY METRO, INC.**

### **MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS**

The below results of operations and related discussion for Evergy Metro is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) to Form 10-K.

The following table summarizes Evergy Metro's comparative results of operations.

|  | 2022 | Change | 2021 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Operating revenues | $1,970.6 | $56.9 | $1,913.7 |
| Fuel and purchased power | 630.7 | 17.2 | 613.5 |
| Operating and maintenance | 334.4 | (31.0) | 365.4 |
| Depreciation and amortization | 337.8 | 16.8 | 321.0 |
| Taxes other than income tax | 130.0 | 3.8 | 126.2 |
| Other regulatory disallowances | 5.5 | 5.5 | - |
| Income from operations | 532.2 | 44.6 | 487.6 |
| Other expense, net | (15.8) | (2.7) | (13.1) |
| Interest expense | 110.7 | 0.9 | 109.8 |
| Income tax expense | 50.3 | (2.1) | 52.4 |
| Net income | $355.4 | $43.1 | $312.3 |

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## Evergy Metro Gross Margin (GAAP) and Utility Gross Margin (non-GAAP)

The following table summarizes Evergy Metro's gross margin (GAAP) and MWhs sold and reconciles Evergy Metro's gross margin (GAAP) to Evergy Metro's utility gross margin (non-GAAP). See "Executive Summary - Non-GAAP Measures" for additional information regarding gross margin (GAAP) and utility gross margin (non-GAAP).

|  | Revenues and Expenses |  |  | MWhs Sold |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | Change | 2021 | 2022 | Change | 2021 |
| Retail revenues | (millions) |  |  | (thousands) |  |  |
| Residential | $746.4 | 54.5 | $691.9 | 5,733 | 216 | 5,517 |
| Commercial | 758.6 | 45.3 | 713.3 | 7,464 | 178 | 7,286 |
| Industrial | 127.0 | 5.0 | 122.0 | 1,701 | 32 | 1,669 |
| Other retail revenues | 11.5 | 2.3 | 9.2 | 71 | 1 | 70 |
| Total electric retail | 1,643.5 | 107.1 | 1,536.4 | 14,969 | 427 | 14,542 |
| Wholesale revenues | 111.9 | (130.7) | 242.6 | 5,751 | 228 | 5,523 |
| Transmission revenues | 18.2 | 1.1 | 17.1 | N/A | N/A | N/A |
| Other revenues | 197.0 | 79.4 | 117.6 | N/A | N/A | N/A |
| Operating revenues | 1,970.6 | 56.9 | 1,913.7 | 20,720 | 655 | 20,065 |
| Fuel and purchased power | (630.7) | (17.2) | (613.5) |  |  |  |
| Operating and maintenance (a) | (203.6) | (0.9) | (202.7) |  |  |  |
| Depreciation and amortization | (337.8) | (16.8) | (321.0) |  |  |  |
| Taxes other than income tax | (130.0) | (3.8) | (126.2) |  |  |  |
| Gross margin (GAAP) | 668.5 | 18.2 | 650.3 |  |  |  |
| Operating and maintenance (a) | 203.6 | 0.9 | 202.7 |  |  |  |
| Depreciation and amortization | 337.8 | 16.8 | 321.0 |  |  |  |
| Taxes other than income tax | 130.0 | 3.8 | 126.2 |  |  |  |
| Utility gross margin (non-GAAP) | $1,339.9 | $39.7 | $1,300.2 |  |  |  |

$^{(a)}$ Operating and maintenance expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP. These amounts exclude general and administrative expenses not directly attributable to revenue-producing activities of $130.8 million and $162.7 million for 2022 and 2021, respectively.

Evergy Metro's gross margin (GAAP) increased $18.2 million in 2022, compared to 2021 and Evergy Metro's utility gross margin (non-GAAP) increased $39.7 million in 2022, compared to 2021, both measures were driven by:

- a $41.9 million increase primarily due to higher retail sales driven by favorable weather (heating degree days increased by 12%) and higher weather-normalized demand;
- an $11.4 million increase due to impacts from the February 2021 winter weather event driven by jurisdictional allocation differences currently present between Evergy Metro's fuel recovery mechanisms in Missouri and Kansas regarding its refund to customers for the net increase in wholesale revenues in February 2021; and
- a $3.1 million increase due to the cessation of annual bill credits recorded by Evergy Metro through January 2022 as a result of the expiration of conditions in the KCC order granting the 2018 merger of Evergy Kansas Central and Great Plains Energy; partially offset by
- a $16.7 million reduction to operating revenues due to recording an estimated refund obligation to customers related to Evergy Metro's ERSP. See Note 4 of the consolidated financial statements for additional information.

Additionally, the increase in Evergy Metro's gross margin (GAAP) was also partially offset by:

- a $16.8 million increase in depreciation and amortization expense as described further below; and
- a $3.8 million increase in taxes other than income taxes as described further below.

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## **Evergy Metro Operating and Maintenance**

Evergy Metro's operating and maintenance expense decreased $31.0 million in 2022, compared to 2021, primarily driven by:

- a $10.1 million decrease in certain labor and employee benefits expenses;
- an $8.8 million decrease in credit loss expense primarily due to resuming collection activities for accounts with lower balances due;
- a $7.9 million decrease due to higher costs billed for common use assets in 2022, primarily to Evergy Kansas Central related to facilities and software assets; and
- a $1.3 million decrease in costs recorded in 2021 associated with executive transition, including inducement bonuses, severance agreements and other transition expenses; partially offset by
- a $4.3 million increase in various transmission and distribution operating and maintenance expenses primarily due to higher contractor costs and a $3.0 million increase in vegetation management costs in 2022.

## **Evergy Metro Depreciation Expense**

Evergy Metro's depreciation and amortization expense increased $16.8 million in 2022, compared to 2021, primarily driven by higher capital additions in 2022.

## **Evergy Metro Taxes Other Than Income Tax**

Evergy Metro's taxes other than income tax increased $3.8 million in 2022, compared to 2021, driven by an increase in property taxes in Missouri and Kansas primarily due to higher assessed property tax values.

## **Evergy Metro Other Expense, Net**

Evergy Metro's other expense, net increased $2.7 million in 2022, compared to 2021, primarily driven by:

- a $4.3 million increase due to higher pension non-service costs in 2022; and
- $2.4 million of other income recorded in 2021 related to contract termination fees; partially offset by
- a $2.7 million decrease due to higher investment earnings primarily due to an increase in interest income from money pool lending; and
- a $1.6 million decrease due to higher equity AFUDC in 2022 primarily driven by higher construction work in progress balances in 2022.

## **ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

In the ordinary course of business, Evergy faces risks that are either non-financial or non-quantifiable. Such risks principally include business, legal, operational and credit risks and are not represented in the following analysis. See Part I, Item 1A, Risk Factors and Part II, Item 7, MD&A for further discussion of risk factors.

The Evergy Companies are exposed to market risks associated with commodity price and supply, interest rates and security prices. Commodity price risk is the potential adverse price impact related to the purchase or sale of electricity and energy-related products, including natural gas and coal. Credit risk is the potential adverse financial impact resulting from non-performance by a counterparty of its contractual obligations. Interest rate risk is the potential adverse financial impact related to changes in interest rates. In addition, Evergy's investments in trusts to fund nuclear plant decommissioning and non-qualified retirement benefits give rise to security price risk.

Management has established risk management policies and strategies to reduce the potentially adverse effects that the volatility of the markets may have on Evergy's operating results. During the ordinary course of business, the Evergy Companies' hedging strategies are reviewed to determine the hedging approach deemed appropriate based upon the circumstances of each situation. Though management believes its risk management practices are effective, it is not possible to identify and eliminate all risk. Evergy could experience losses, which could have a material adverse effect on its results of operations or financial position, due to many factors, including unexpectedly large or

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rapid movements or disruptions in the energy markets, regulatory-driven market rule changes and/or bankruptcy or non-performance of customers or counterparties, and/or failure of underlying transactions that have been hedged to materialize.

### Hedging Strategies

From time to time, Evergy utilizes derivative instruments to execute risk management and hedging strategies. Derivative instruments, such as futures, forward contracts, swaps or options, derive their value from underlying assets, indices, reference rates or a combination of these factors. These derivative instruments include negotiated contracts, which are referred to as over-the-counter derivatives, and instruments listed and traded on an exchange.

### Commodity Price Risk

The Evergy Companies engage in the wholesale and retail sale of electricity as part of their regulated electric operations in addition to non-regulated energy marketing activities. These activities expose the Evergy Companies to risks associated with the price of electricity and other energy-related products. Exposure to these risks is affected by a number of factors including the quantity and availability of fuel used for generation and the quantity of electricity customers consume, as well as the wholesale market prices received by the Evergy Companies' generation resources and the wholesale market prices paid to procure power to serve customer load or satisfy regulatory or contractual obligations. Customers' electricity usage could also vary from year to year based on the weather or other factors. Quantities of fossil fuel used for generation vary from year to year based on the availability, price and deliverability of a given fuel type as well as planned and unplanned outages at facilities that use fossil fuels. Evergy's exposure to fluctuations in these factors is limited by the cost-based regulation of its regulated operations in Kansas and Missouri as these operations are typically allowed to recover substantially all of these costs through fuel recovery mechanisms. While there may be a delay in timing between when these costs are incurred and when they are recovered through rates, changes from year to year generally do not have a material impact on operating results. The majority of derivative instruments used to manage Evergy's commodity price exposure are either not designated as hedges or do not qualify for hedge accounting. Mark-to-market changes for these instruments entered into by regulated businesses are reflected as regulatory assets or regulatory liabilities on Evergy's consolidated balance sheets. Derivative instruments entered into for non-regulated energy marketing activities are marked-to-market each period, with changes in the fair value of the derivative instruments reflected in earnings. See Note 13 to the consolidated financial statements for more information.

### Value at Risk (VaR) Associated with Energy Marketing Activities

Management uses a risk measurement model, which calculates VaR to measure Evergy's commodity price risk associated with its trading portfolio related to non-regulated energy marketing activities. The VaR is calculated using historical 30 day exponentially weighted volatilities and correlations and assumes a 95% confidence level and a one-day holding period. Based on this VaR analysis, as of December 31, 2022, a near term typical change in commodity prices is not expected to materially impact net income, cash flows or financial condition.

The following table shows the end, high, average and low market risk associated with its trading portfolio related to non-regulated energy marketing activities as measured by VaR for the periods indicated.

| VaR Model Trading Portfolio |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Year Ended December 31, 2022 |  |  |  |  | Year Ended December 31, 2021 |  |  |  |
| End | High | Average | Low |  | End | High | Average | Low |
| (millions) |  |  |  |  | (millions) |  |  |  |
| $0.3 | $1.9 | $0.6 | $ - |  | $0.3 | $1.3 | $0.4 | $0.1 |

Management back-tests VaR results against performance due to actual price movements. Based on the assumed 95% confidence interval, the performance due to actual price movements would be expected to exceed the VaR at least once every 20 trading days.

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## Interest Rate Risk

Evergy manages interest rate risk and short- and long-term liquidity by limiting its exposure to variable interest rate debt and debt-like financial instruments to a percentage of total debt, diversifying maturity dates and, from time to time, entering into interest rate hedging transactions. At December 31, 2022, 17.1% of Evergy's total debt (including short-term borrowings consisting of short-term debt in excess of utility construction work in progress balances that is not eligible for capitalization as AFUDC and borrowings under Evergy's receivable sale facilities) were exposed to interest rate risk. Evergy computes and presents information regarding the sensitivity to changes in interest rates for variable rate debt, short-term borrowings and current maturities of fixed rate debt by assuming a 100-basis-point change in the current interest rates applicable to such debt over the remaining time the debt is outstanding.

At December 31, 2022, Evergy had $1,903.1 million of short-term borrowings, variable rate debt and current maturities of fixed rate debt exposed to variable interest rate sensitivity. A 100-basis-point change in interest rates applicable to this debt would impact Evergy's income before income taxes on an annualized basis by approximately $17.1 million, net of AFUDC borrowed funds which represents the allowed cost of capital used to finance utility construction activity and is a reduction of interest expense.

## Credit Risk

Evergy is exposed to counterparty credit risk largely in the form of accounts receivable from its retail and wholesale electric customers and through executory contracts with market risk exposure. The credit risk associated with accounts receivable from retail and wholesale customers is largely mitigated by Evergy's large number of individual customers spread across diverse customer classes and the ability to recover bad debt expense in customer rates. The Evergy Companies maintain credit policies and employ credit risk control mechanisms, such as letters of credit, when necessary to minimize their overall credit risk and monitor exposure. Credit risk of the Evergy Companies' derivative instruments relates to the potential adverse financial impact resulting from non-performance by a counterparty of its contractual obligations. See Note 13 to the consolidated financial statements for more information on potential loss on counterparty exposure for derivative instruments as of December 31, 2022.

## Investment Risk

Evergy maintains trust funds, as required by the NRC, to fund its 94% share of decommissioning the Wolf Creek nuclear power plant and also maintains trusts to fund pension benefits as well as certain non-qualified retirement benefits. As of December 31, 2022, these funds were primarily invested in a diversified mix of equity and debt securities and reflected at fair value on Evergy's balance sheet. The equity securities in the trusts are exposed to price fluctuations in equity markets and the value of debt securities are exposed to changes in interest rates and other market factors.

As nuclear decommissioning costs are currently recovered in customer rates, Evergy defers both realized and unrealized gains and losses for these securities as an offset to its regulatory liability for decommissioning Wolf Creek and as such, fluctuations in the value of these securities do not impact earnings. A significant decline in the value of pension or non-qualified retirement assets could require Evergy to increase funding of its pension plans in future periods, which could adversely affect cash flows in those periods. In addition, a decline in the fair value of these plan assets, in the absence of additional cash contributions to the plans by Evergy, could increase the amount of pension cost required to be recorded in future periods by Evergy.

In addition to Evergy's investments in debt and equity securities in its nuclear decommissioning and pension trusts, Evergy also makes limited equity investments in early-stage energy solution companies. These limited equity investments are often in privately-owned companies that do not have reasonably determinable fair values. However, from time to time, these investments could have changes in fair value as a result of acquisitions, mergers, initial public offerings, or observable market transactions for similar investments. Evergy typically seeks to liquidate its position in these companies as soon as practicable following the occurrence of an exit event such as an acquisition or initial public offering (including after the expiration of any related lock-up provisions), which serves to largely mitigate any ongoing market risk related to the investments.

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# ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

| Evergy, Inc. | 66 |
| --- | --- |
| Evergy Kansas Central, Inc. | 69 |
| Evergy Metro, Inc. | 72 |

Evergy, Inc.

| Consolidated Statements of Comprehensive Income | 75 |
| --- | --- |
| Consolidated Balance Sheets | 76 |
| Consolidated Statements of Cash Flows | 78 |
| Consolidated Statements of Changes in Equity | 79 |

Evergy Kansas Central, Inc.

| Consolidated Statements of Income | 80 |
| --- | --- |
| Consolidated Balance Sheets | 81 |
| Consolidated Statements of Cash Flows | 83 |
| Consolidated Statements of Changes in Equity | 84 |

Evergy Metro, Inc.

| Consolidated Statements of Comprehensive Income | 85 |
| --- | --- |
| Consolidated Balance Sheets | 86 |
| Consolidated Statements of Cash Flows | 88 |
| Consolidated Statements of Changes in Equity | 89 |

Combined Notes to Consolidated Financial Statements

| Note 1: Summary of Significant Accounting Policies | 90 |
| --- | --- |
| Note 2: Revenue | 93 |
| Note 3: Receivables | 101 |
| Note 4: Rate Matters and Regulation | 102 |
| Note 5: Goodwill | 112 |
| Note 6: Asset Retirement Obligations | 112 |
| Note 7: Property, Plant & Equipment | 113 |
| Note 8: Jointly-Owned Electric Utility Plants | 114 |
| Note 9: Pension Plans and Post-Retirement Benefits | 115 |
| Note 10: Equity Compensation | 128 |
| Note 11: Short-Term Borrowings and Short-Term Bank Lines of Credit | 130 |
| Note 12: Long-Term Debt | 131 |
| Note 13: Derivative Instruments | 134 |
| Note 14: Fair Value Measurements | 138 |
| Note 15: Commitments and Contingencies | 143 |
| Note 16: Guarantees | 148 |
| Note 17: Related Party Transactions and Relationships | 149 |
| Note 18: Shareholders' Equity | 150 |
| Note 19: Variable Interest Entities | 151 |
| Note 20: Taxes | 152 |
| Note 21: Leases | 157 |

65

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Evergy, Inc.

## Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Evergy, Inc. and subsidiaries (the 'Company') as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedules listed in the Index at Item 15 (collectively referred to as the 'financial statements'). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

## Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

### Rate Matters and Regulation - Impact of Rate Regulation on the Financial Statements - Refer to Notes 1 and 4 to the financial statements

#### Critical Audit Matter Description

The Company is subject to rate regulation by the Kansas Corporation Commission and by the Missouri Public Service Commission (collectively the 'Commissions'), which have jurisdiction with respect to the rates of electric distribution companies in Kansas and Missouri, respectively. Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial

66

statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures.

The Company's rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates are determined and approved in regulatory proceedings based on an analysis of the Company's costs to provide utility service and a return on, and recovery of, the Company's investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The Commissions' regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the Commissions in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the Commissions will not approve (1) full recovery of the costs of providing utility service or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

When the Company retires a regulated plant, the Company must assess the probability of recovery of the regulated plant, which is dependent upon amounts that may be recovered through regulated rates, including any return. Pending receipt of regulatory approval for the retirement and/or recovery of the affected plants, accounting for early retirements of regulated plants involves judgment related to the nature of the early retirement and the likelihood that the Company will recover its remaining investment in these retired generating plants with a return. Auditing the judgments related to the nature and likelihood of the retirement and the probability of recovering the generating plant investment with a return involves especially subjective and complex judgment.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) probability of potential charges related to the abandonment of regulated plants, and (3) a refund to customers. Given that management's accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

#### *How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

- We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities.
- We tested the effectiveness of management's controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates, including Company management's determination of the likelihood of recovery of the full investment of certain regulated plants and probability of refunding amounts previously collected from customers related to certain regulated plants.
- We evaluated the Company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
- We evaluated external information and compared it to management's recorded regulatory asset and liability balances for completeness. Such external information included relevant regulatory orders issued by the Commissions for the Company and other public utilities in Kansas and Missouri, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available

67

information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions' treatment of similar costs under similar circumstances.

- • For regulatory matters in process, including those that could impact the early retirement of regulated plants, we inspected the Company's filings with the Commissions and the filings with the Commissions by intervenors that may impact the Company's future rates, for any evidence that might contradict management's assertions.
- • We evaluated the reasonableness of management's judgments for potential indicators of abandonment by performing the following:
  - ◦ We inquired of management about property, plant, and equipment that may be abandoned.
  - ◦ We inspected the capital projects budget and construction-in-process listings and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life.
  - ◦ We inspected minutes of the board of directors and regulatory orders and other filings with the Commissions to identify any evidence that may contradict management's assertion regarding probability of an abandonment.
- • We compared actual spend for projects that have been capitalized to property, plant, and equipment to budget. We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects. For significant projects that were over budget or if full recovery of project costs is being challenged by intervenors, we evaluated management's assessment of the probability of a disallowance. We tested selected costs included in the capitalized project costs for completeness and accuracy.
- • We evaluated management's analysis, and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management's assertion that amounts are probable of recovery or a future reduction in rates.
- • We evaluated management's conclusions for the probable recovery of the retired regulated plant investment with a return. We evaluated management's conclusions regarding the accounting for the abandonment of certain regulated plants and the impact of recent rate orders on the accounting.

/s/ DELOITTE & TOUCHE LLP

Kansas City, Missouri

February 23, 2023

We have served as the Company's auditor since 2002.

68

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Evergy Kansas Central, Inc.

## Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Evergy Kansas Central, Inc. and subsidiaries (the 'Company') as of December 31, 2022 and 2021, the related consolidated statements of income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the 'financial statements'). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

## Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

### *Rate Matters and Regulation - Impact of Rate Regulation on the Financial Statements - Refer to Notes 1 and 4 to the financial statements*

#### *Critical Audit Matter Description*

The Company is subject to rate regulation by the Kansas Corporation Commission (the 'Commission'), which has jurisdiction with respect to the rates of electric distribution companies in Kansas. Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures.

69

The Company's rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates are determined and approved in regulatory proceedings based on an analysis of the Company's costs to provide utility service and a return on, and recovery of, the Company's investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The Commission's regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the Commission will not approve (1) full recovery of the costs of providing utility service or (2) recovery of all amounts invested in the utility business and a reasonable return on that investment.

When the Company retires a regulated plant, the Company must assess the probability of recovery of the regulated plant, which is dependent upon amounts that may be recovered through regulated rates, including any return. Pending receipt of regulatory approval for the retirement and/or recovery of the affected plants, accounting for early retirements of regulated plants involves judgment related to the nature of the early retirement and the likelihood that the Company will recover its remaining investment in these retired generating plants with a return. Auditing the judgments related to the nature and likelihood of the retirement and the probability of recovering the generating plant investment with a return involves especially subjective and complex judgment.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) probability of potential charges related to the abandonment of regulated plants, and (3) a refund to customers. Given that management's accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

#### *How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the uncertainty of future decisions by the Commission included the following, among others:

- • We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities.
- • We tested the effectiveness of management's controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
- • We evaluated the Company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
- • We evaluated external information and compared it to management's recorded regulatory asset and liability balances for completeness. Such external information included relevant regulatory orders issued by the Commission for the Company and other public utilities in Kansas, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commission's treatment of similar costs under similar circumstances.
- • For regulatory matters in process, we inspected the Company's filings with the Commission and the filings with the Commission by intervenors that may impact the Company's future rates, for any evidence that might contradict management's assertions.
- • We evaluated the reasonableness of management's judgments for potential indicators of abandonment by performing the following:

70

- ◦ We inquired of management about property, plant, and equipment that may be abandoned.
- ◦ We inspected the capital projects budget and construction-in-process listings and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life.
- ◦ We inspected minutes of the board of directors and regulatory orders and other filings with the Commission to identify any evidence that may contradict management's assertion regarding probability of an abandonment.
- • We compared actual spend for projects that have been capitalized to property, plant, and equipment to budget. We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects. For significant projects that were over budget or if full recovery of project costs is being challenged by intervenors, we evaluated management's assessment of the probability of a disallowance. We tested selected costs included in the capitalized project costs for completeness and accuracy.
- • We evaluated management's analysis, and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management's assertion that amounts are probable of recovery or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Kansas City, Missouri

February 23, 2023

We have served as the Company's auditor since 2002.

71

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Evergy Metro, Inc.

## Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Evergy Metro, Inc. and subsidiaries (the 'Company') as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the 'financial statements'). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

## Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

### *Rate Matters and Regulation - Impact of Rate Regulation on the Financial Statements - Refer to Notes 1 and 4 to the financial statements*

#### *Critical Audit Matter Description*

The Company is subject to rate regulation by the Kansas Corporation Commission and by the Missouri Public Service Commission (collectively the 'Commissions'), which have jurisdiction with respect to the rates of electric distribution companies in Kansas and Missouri, respectively. Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures.

72

The Company's rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates are determined and approved in regulatory proceedings based on an analysis of the Company's costs to provide utility service and a return on, and recovery of, the Company's investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The Commissions' regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the Commissions will not approve (1) full recovery of the costs of providing utility service or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

When the Company retires a regulated plant, the Company must assess the probability of recovery of the regulated plant, which is dependent upon amounts that may be recovered through regulated rates, including any return. Pending receipt of regulatory approval for the retirement and/or recovery of the affected plants, accounting for early retirements of regulated plants involves judgment related to the nature of the early retirement and the likelihood that the Company will recover its remaining investment in these retired generating plants with a return. Auditing the judgments related to the nature and likelihood of the retirement and the probability of recovering the generating plant investment with a return involves especially subjective and complex judgment.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) probability of potential charges related to the abandonment of regulated plants, and (3) a refund to customers. Given that management's accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

#### *How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

- • We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities.
- • We tested the effectiveness of management's controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
- • We evaluated the Company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
- • We evaluated external information and compared it to management's recorded regulatory asset and liability balances for completeness. Such external information included relevant regulatory orders issued by the Commissions for the Company and other public utilities in Kansas and Missouri, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions' treatment of similar costs under similar circumstances.
- • For regulatory matters in process, we inspected the Company's filings with the Commissions and the filings with the Commissions by intervenors that may impact the Company's future rates, for any evidence that might contradict management's assertions.

73

- • We evaluated the reasonableness of management's judgments for potential indicators of abandonment by performing the following:
  - ◦ We inquired of management about property, plant, and equipment that may be abandoned.
  - ◦ We inspected the capital projects budget and construction-in-process listings and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life.
  - ◦ We inspected minutes of the board of directors and regulatory orders and other filings with the Commissions to identify any evidence that may contradict management's assertion regarding probability of an abandonment.
- • We compared actual spend for projects that have been capitalized to property, plant, and equipment to budget. We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects. For significant projects that were over budget or if full recovery of project costs is being challenged by intervenors, we evaluated management's assessment of the probability of a disallowance. We tested selected costs included in the capitalized project costs for completeness and accuracy.
- • We evaluated management's analysis, and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management's assertion that amounts are probable of recovery, or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Kansas City, Missouri

February 23, 2023

We have served as the Company's auditor since 2002.

74

# **EVERGY, INC.**  
 **Consolidated Statements of Comprehensive Income**

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions, except per share amounts) |  |  |  |
| OPERATING REVENUES | $5,859.1 | $5,586.7 | $4,913.4 |
| OPERATING EXPENSES: |  |  |  |
| Fuel and purchased power | 1,821.2 | 1,557.0 | 1,099.0 |
| SPP network transmission costs | 323.0 | 290.4 | 263.2 |
| Operating and maintenance | 1,085.3 | 1,107.5 | 1,163.0 |
| Depreciation and amortization | 929.4 | 896.4 | 880.1 |
| Taxes other than income tax | 398.1 | 380.5 | 364.2 |
| Sibley Unit 3 impairment loss and other regulatory disallowances | 34.9 | - | - |
| Total Operating Expenses | 4,591.9 | 4,231.8 | 3,769.5 |
| INCOME FROM OPERATIONS | 1,267.2 | 1,354.9 | 1,143.9 |
| OTHER INCOME (EXPENSE): |  |  |  |
| Investment earnings | 9.4 | 59.9 | 10.8 |
| Other income | 29.9 | 46.3 | 31.3 |
| Other expense | (97.3) | (87.4) | (78.2) |
| Total Other Income (Expense), Net | (58.0) | 18.8 | (36.1) |
| Interest expense | 404.0 | 372.6 | 383.9 |
| INCOME BEFORE INCOME TAXES | 805.2 | 1,001.1 | 723.9 |
| Income tax expense | 47.5 | 117.4 | 102.2 |
| Equity in earnings of equity method investees, net of income taxes | 7.3 | 8.2 | 8.3 |
| NET INCOME | 765.0 | 891.9 | 630.0 |
| Less: Net income attributable to noncontrolling interests | 12.3 | 12.2 | 11.7 |
| NET INCOME ATTRIBUTABLE TO EVERGY, INC. | $752.7 | $879.7 | $618.3 |
| BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO EVERGY, INC. (see Note 1) |  |  |  |
| Basic earnings per common share | $3.27 | $3.84 | $2.72 |
| Diluted earnings per common share | $3.27 | $3.83 | $2.72 |
| AVERAGE COMMON SHARES OUTSTANDING |  |  |  |
| Basic | 229.9 | 229.0 | 227.2 |
| Diluted | 230.3 | 229.6 | 227.5 |
| COMPREHENSIVE INCOME |  |  |  |
| NET INCOME | $765.0 | $891.9 | $630.0 |
| Derivative hedging activity |  |  |  |
| Reclassification to expenses, net of tax | 5.5 | 5.5 | 3.0 |
| Derivative hedging activity, net of tax | 5.5 | 5.5 | 3.0 |
| Defined benefit pension plans |  |  |  |
| Net gain (loss) arising during period | 5.0 | (0.1) | (3.0) |
| Income tax (expense) benefit | (1.2) | - | 0.7 |
| Net gain (loss) arising during period, net of tax | 3.8 | (0.1) | (2.3) |
| Amortization of net losses included in net periodic benefit costs, net of tax | 0.2 | - | (0.1) |
| Change in unrecognized pension expense, net of tax | 4.0 | (0.1) | (2.4) |
| Total other comprehensive income | 9.5 | 5.4 | 0.6 |
| COMPREHENSIVE INCOME | 774.5 | 897.3 | 630.6 |
| Less: Comprehensive income attributable to noncontrolling interest | 12.3 | 12.2 | 11.7 |
| COMPREHENSIVE INCOME ATTRIBUTABLE TO EVERGY, INC. | $762.2 | $885.1 | $618.9 |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

75

# **EVERGY, INC.**  
 **Consolidated Balance Sheets**

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions, except share amounts) |  |  |
| ASSETS |  |  |
| CURRENT ASSETS: |  |  |
| Cash and cash equivalents | $25.2 | $26.2 |
| Receivables, net of allowance for credit losses of $31.4 and $32.9, respectively | 315.3 | 221.6 |
| Accounts receivable pledged as collateral | 359.0 | 319.0 |
| Fuel inventory and supplies | 672.9 | 566.7 |
| Income taxes receivable | 9.3 | 28.0 |
| Regulatory assets | 368.0 | 424.1 |
| Prepaid expenses | 47.8 | 49.3 |
| Other assets | 44.5 | 75.4 |
| Total Current Assets | 1,842.0 | 1,710.3 |
| PROPERTY, PLANT AND EQUIPMENT, NET | 22,136.5 | 21,002.6 |
| PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET | 140.7 | 147.8 |
| OTHER ASSETS: |  |  |
| Regulatory assets | 1,846.3 | 1,991.1 |
| Nuclear decommissioning trust fund | 653.3 | 768.7 |
| Goodwill | 2,336.6 | 2,336.6 |
| Other | 534.5 | 563.4 |
| Total Other Assets | 5,370.7 | 5,659.8 |
| TOTAL ASSETS | $29,489.9 | $28,520.5 |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

76

# **EVERGY, INC.**  
 **Consolidated Balance Sheets**

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions, except share amounts) |  |  |
| LIABILITIES AND EQUITY |  |  |
| CURRENT LIABILITIES: |  |  |
| Current maturities of long-term debt | $439.1 | $389.3 |
| Notes payable and commercial paper | 1,332.3 | 1,159.3 |
| Collateralized note payable | 359.0 | 319.0 |
| Accounts payable | 600.8 | 639.7 |
| Accrued taxes | 163.0 | 150.4 |
| Accrued interest | 124.3 | 118.8 |
| Regulatory liabilities | 155.4 | 70.7 |
| Asset retirement obligations | 40.4 | 19.5 |
| Accrued compensation and benefits | 81.1 | 51.6 |
| Other | 198.4 | 184.6 |
| Total Current Liabilities | 3,493.8 | 3,102.9 |
| LONG-TERM LIABILITIES: |  |  |
| Long-term debt, net | 9,905.7 | 9,297.9 |
| Deferred income taxes | 1,996.6 | 1,861.9 |
| Unamortized investment tax credits | 174.6 | 181.4 |
| Regulatory liabilities | 2,566.8 | 2,705.0 |
| Pension and post-retirement liability | 458.4 | 879.1 |
| Asset retirement obligations | 1,112.8 | 940.6 |
| Other | 287.9 | 310.0 |
| Total Long-Term Liabilities | 16,502.8 | 16,175.9 |
| Commitments and Contingencies (Note 15) |  |  |
| EQUITY: |  |  |
| Evergy, Inc. Shareholders' Equity: |  |  |
| Common stock - 600,000,000 shares authorized, without par value 229,546,105 and 229,299,900 shares issued, stated value | 7,219.7 | 7,205.5 |
| Retained earnings | 2,298.5 | 2,082.9 |
| Accumulated other comprehensive loss | (34.5) | (44.0) |
| Total Evergy, Inc. Shareholders' Equity | 9,483.7 | 9,244.4 |
| Noncontrolling Interests | 9.6 | (2.7) |
| Total Equity | 9,493.3 | 9,241.7 |
| TOTAL LIABILITIES AND EQUITY | $29,489.9 | $28,520.5 |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

77

# **EVERGY, INC.**  
 **Consolidated Statements of Cash Flows**

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: |  |  |  |
| Net income | $765.0 | $891.9 | $630.0 |
| Adjustments to reconcile income to net cash from operating activities: |  |  |  |
| Depreciation and amortization | 929.4 | 896.4 | 880.1 |
| Amortization of nuclear fuel | 55.5 | 51.4 | 58.3 |
| Amortization of deferred refueling outage | 22.3 | 25.1 | 25.4 |
| Amortization of corporate-owned life insurance | 25.0 | 24.1 | 20.1 |
| Non-cash compensation | 18.8 | 15.6 | 16.0 |
| Net deferred income taxes and credits | 7.3 | 102.2 | 126.9 |
| Allowance for equity funds used during construction | (22.5) | (29.4) | (17.2) |
| Payments for asset retirement obligations | (13.0) | (22.6) | (18.4) |
| Equity in earnings of equity method investees, net of income taxes | (7.3) | (8.2) | (8.3) |
| Income from corporate-owned life insurance | (5.6) | (14.2) | (8.2) |
| Sibley Unit 3 impairment loss and other regulatory disallowances | 34.9 | - | - |
| Other | 0.7 | (13.8) | 0.8 |
| Changes in working capital items: |  |  |  |
| Accounts receivable | (59.8) | 69.9 | (4.9) |
| Accounts receivable pledged as collateral | (40.0) | 41.0 | (21.0) |
| Fuel inventory and supplies | (105.6) | (61.6) | (22.3) |
| Prepaid expenses and other current assets | (3.1) | (299.8) | 16.9 |
| Accounts payable | 2.1 | (55.1) | 134.3 |
| Accrued taxes | 32.2 | 41.4 | 6.7 |
| Other current liabilities | 0.8 | (19.4) | (98.9) |
| Changes in other assets | 81.0 | (251.5) | 119.5 |
| Changes in other liabilities | 83.8 | (31.7) | (82.0) |
| Cash Flows from Operating Activities | 1,801.9 | 1,351.7 | 1,753.8 |
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: |  |  |  |
| Additions to property, plant and equipment | (2,166.5) | (1,972.5) | (1,560.3) |
| Purchase of securities - trusts | (50.5) | (158.2) | (65.6) |
| Sale of securities - trusts | 27.3 | 115.7 | 56.5 |
| Investment in corporate-owned life insurance | (16.5) | (14.2) | (19.1) |
| Proceeds from investment in corporate-owned life insurance | 35.2 | 77.0 | 65.9 |
| Other investing activities | 18.8 | 38.4 | (11.1) |
| Cash Flows used in Investing Activities | (2,152.2) | (1,913.8) | (1,533.7) |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |  |  |  |
| Short-term debt, net | 172.9 | 840.5 | (246.9) |
| Proceeds from term loan facility | 500.0 | - | - |
| Collateralized short-term borrowings, net | 40.0 | (41.0) | 21.0 |
| Issuance of common stock | - | 112.5 | - |
| Proceeds from long-term debt | 567.7 | 497.3 | 888.8 |
| Retirements of long-term debt | (410.9) | (432.0) | (251.1) |
| Retirements of long-term debt of variable interest entities | - | (18.8) | (32.3) |
| Borrowings against cash surrender value of corporate-owned life insurance | 53.5 | 54.4 | 55.5 |
| Repayment of borrowings against cash surrender value of corporate-owned life insurance | (28.0) | (62.3) | (54.8) |
| Cash dividends paid | (534.8) | (497.9) | (465.0) |
| Other financing activities | (11.1) | (9.3) | (13.6) |
| Cash Flows from (used in) Financing Activities | 349.3 | 443.4 | (98.4) |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1.0) | (118.7) | 121.7 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |  |  |  |
| Beginning of period | 26.2 | 144.9 | 23.2 |
| End of period | $25.2 | $26.2 | $144.9 |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

78

# **EVERGY, INC.**
**Consolidated Statements of Changes in Equity**

|  | Evergy, Inc. Shareholders |  |  |  | Non-controlling interests | Total equity |
| --- | --- | --- | --- | --- | --- | --- |
|  | Common stock shares | Common stock | Retained earnings | AOCI |  |  |
| (millions, except share amounts) |  |  |  |  |  |  |
| Balance as of December 31, 2019 | 226,641,443 | $7,070.4 | $1,551.5 | $(50.0) | $(26.6) | $8,545.3 |
| Net income | - | - | 618.3 | - | 11.7 | 630.0 |
| Issuance of stock compensation and reinvested dividends, net of tax withholding | 195,227 | (5.9) | - | - | - | (5.9) |
| Dividends declared on common stock ($2.05 per share) | - | - | (465.0) | - | - | (465.0) |
| Dividend equivalents declared | - | - | (2.0) | - | - | (2.0) |
| Stock compensation expense | - | 16.0 | - | - | - | 16.0 |
| Derivative hedging activity, net of tax | - | - | - | 3.0 | - | 3.0 |
| Change in unrecognized pension expense, net of tax | - | - | - | (2.4) | - | (2.4) |
| Other | - | (0.5) | - | - | - | (0.5) |
| Balance as of December 31, 2020 | 226,836,670 | 7,080.0 | 1,702.8 | (49.4) | (14.9) | 8,718.5 |
| Net income | - | - | 879.7 | - | 12.2 | 891.9 |
| Issuance of stock, net of issuance costs | 2,269,447 | 112.5 | - | - | - | 112.5 |
| Issuance of stock compensation and reinvested dividends, net of tax withholding | 139,729 | (2.4) | - | - | - | (2.4) |
| Issuance of restricted common stock | 54,054 | 2.9 | - | - | - | 2.9 |
| Dividends declared on common stock ($2.178 per share) | - | - | (497.9) | - | - | (497.9) |
| Dividend equivalents declared | - | - | (1.7) | - | - | (1.7) |
| Stock compensation expense | - | 13.8 | - | - | - | 13.8 |
| Unearned compensation |  |  |  |  |  |  |
| Issuance of restricted common stock | - | (2.9) | - | - | - | (2.9) |
| Compensation expense recognized | - | 1.8 | - | - | - | 1.8 |
| Derivative hedging activity, net of tax | - | - | - | 5.5 | - | 5.5 |
| Change in unrecognized pension expense, net of tax | - | - | - | (0.1) | - | (0.1) |
| Other | - | (0.2) | - | - | - | (0.2) |
| Balance as of December 31, 2021 | 229,299,900 | 7,205.5 | 2,082.9 | (44.0) | (2.7) | 9,241.7 |
| Net income | - | - | 752.7 | - | 12.3 | 765.0 |
| Issuance of stock compensation and reinvested dividends, net of tax withholding | 246,205 | (5.2) | - | - | - | (5.2) |
| Dividends declared on common stock ($2.33 per share) | - | - | (534.8) | - | - | (534.8) |
| Dividend equivalents declared | - | - | (2.3) | - | - | (2.3) |
| Stock compensation expense | - | 18.1 | - | - | - | 18.1 |
| Unearned compensation |  |  |  |  |  |  |
| Compensation expense recognized | - | 0.7 | - | - | - | 0.7 |
| Derivative hedging activity, net of tax | - | - | - | 5.5 | - | 5.5 |
| Change in unrecognized pension expense, net of tax | - | - | - | 4.0 | - | 4.0 |
| Other | - | 0.6 | - | - | - | 0.6 |
| Balance as of December 31, 2022 | 229,546,105 | $7,219.7 | $2,298.5 | $(34.5) | $9.6 | $9,493.3 |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

79

# **EVERGY KANSAS CENTRAL, INC.**  
 **Consolidated Statements of Income**

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| OPERATING REVENUES | $3,055.9 | $2,847.3 | $2,418.1 |
| OPERATING EXPENSES: |  |  |  |
| Fuel and purchased power | 855.5 | 638.7 | 427.6 |
| SPP network transmission costs | 323.0 | 290.4 | 263.2 |
| Operating and maintenance | 536.3 | 530.8 | 513.6 |
| Depreciation and amortization | 484.6 | 467.2 | 453.1 |
| Taxes other than income tax | 216.5 | 203.9 | 193.3 |
| Total Operating Expenses | 2,415.9 | 2,131.0 | 1,850.8 |
| INCOME FROM OPERATIONS | 640.0 | 716.3 | 567.3 |
| OTHER INCOME (EXPENSE): |  |  |  |
| Investment earnings (loss) | (3.8) | 1.3 | 4.8 |
| Other income | 14.4 | 27.0 | 21.4 |
| Other expense | (39.6) | (35.9) | (38.9) |
| Total Other Expense, Net | (29.0) | (7.6) | (12.7) |
| Interest expense | 181.8 | 160.3 | 167.6 |
| INCOME BEFORE INCOME TAXES | 429.2 | 548.4 | 387.0 |
| Income tax expense | 12.3 | 51.7 | 155.8 |
| Equity in earnings of equity method investees, net of income taxes | 4.0 | 4.0 | 4.6 |
| NET INCOME | 420.9 | 500.7 | 235.8 |
| Less: Net income attributable to noncontrolling interests | 12.3 | 12.2 | 11.7 |
| NET INCOME ATTRIBUTABLE TO EVERGY KANSAS CENTRAL, INC. | $408.6 | $488.5 | $224.1 |

The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

80

# **EVERGY KANSAS CENTRAL, INC.**  
 **Consolidated Balance Sheets**

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| ASSETS | (millions, except share amounts) |  |
| CURRENT ASSETS: |  |  |
| Cash and cash equivalents | $8.7 | $3.1 |
| Receivables, net of allowance for credit losses of $16.9 and $13.0, respectively | 249.4 | 201.6 |
| Related party receivables | 7.9 | 21.2 |
| Accounts receivable pledged as collateral | 185.0 | 153.0 |
| Fuel inventory and supplies | 349.5 | 283.2 |
| Income taxes receivable | - | 9.6 |
| Regulatory assets | 121.9 | 257.3 |
| Prepaid expenses | 18.7 | 19.4 |
| Other assets | 28.8 | 21.6 |
| Total Current Assets | 969.9 | 970.0 |
| PROPERTY, PLANT AND EQUIPMENT, NET | 11,080.8 | 10,548.9 |
| PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET | 140.7 | 147.8 |
| OTHER ASSETS: |  |  |
| Regulatory assets | 590.0 | 753.6 |
| Nuclear decommissioning trust fund | 318.8 | 368.4 |
| Other | 268.1 | 286.9 |
| Total Other Assets | 1,176.9 | 1,408.9 |
| TOTAL ASSETS | $13,368.3 | $13,075.6 |

The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

81

# **EVERGY KANSAS CENTRAL, INC.**  
 **Consolidated Balance Sheets**

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions, except share amounts) |  |  |
| LIABILITIES AND EQUITY |  |  |
| CURRENT LIABILITIES: |  |  |
| Current maturities of long-term debt | $50.0 | $ - |
| Notes payable and commercial paper | 772.1 | 406.0 |
| Collateralized note payable | 185.0 | 153.0 |
| Accounts payable | 247.3 | 232.2 |
| Related party payables | 28.9 | 27.5 |
| Accrued taxes | 125.5 | 106.1 |
| Accrued interest | 72.6 | 71.5 |
| Regulatory liabilities | 72.1 | 12.8 |
| Asset retirement obligations | 21.3 | 7.3 |
| Accrued compensation and benefits | 39.4 | 13.8 |
| Other | 135.0 | 126.3 |
| Total Current Liabilities | 1,749.2 | 1,156.5 |
| LONG-TERM LIABILITIES: |  |  |
| Long-term debt, net | 3,886.9 | 3,934.2 |
| Deferred income taxes | 844.5 | 867.9 |
| Unamortized investment tax credits | 57.3 | 61.7 |
| Regulatory liabilities | 1,368.9 | 1,469.4 |
| Pension and post-retirement liability | 244.7 | 435.6 |
| Asset retirement obligations | 543.8 | 436.6 |
| Other | 165.6 | 172.2 |
| Total Long-Term Liabilities | 7,111.7 | 7,377.6 |
| Commitments and Contingencies (Note 15) |  |  |
| EQUITY: |  |  |
| Evergy Kansas Central, Inc. Shareholder's Equity: |  |  |
| Common stock - 1,000 shares authorized, $0.01 par value, 1 share issued | 2,737.6 | 2,737.6 |
| Retained earnings | 1,760.2 | 1,806.6 |
| Total Evergy Kansas Central, Inc. Shareholder's Equity | 4,497.8 | 4,544.2 |
| Noncontrolling Interests | 9.6 | (2.7) |
| Total Equity | 4,507.4 | 4,541.5 |
| TOTAL LIABILITIES AND EQUITY | $13,368.3 | $13,075.6 |

The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

82

# **EVERGY KANSAS CENTRAL, INC.**  
 **Consolidated Statements of Cash Flows**

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: |  |  |  |
| Net income | $420.9 | $500.7 | $235.8 |
| Adjustments to reconcile income to net cash from operating activities: |  |  |  |
| Depreciation and amortization | 484.6 | 467.2 | 453.1 |
| Amortization of nuclear fuel | 27.6 | 25.6 | 28.8 |
| Amortization of deferred refueling outage | 10.6 | 12.6 | 12.7 |
| Amortization of corporate-owned life insurance | 25.0 | 24.1 | 20.1 |
| Net deferred income taxes and credits | (87.4) | (1.4) | 146.6 |
| Allowance for equity funds used during construction | (8.5) | (14.9) | (9.1) |
| Payments for asset retirement obligations | (6.9) | (6.2) | (2.2) |
| Equity in earnings of equity method investees, net of income taxes | (4.0) | (4.0) | (4.6) |
| Income from corporate-owned life insurance | (5.6) | (14.2) | (8.2) |
| Other | (5.5) | (5.5) | (5.5) |
| Changes in working capital items: |  |  |  |
| Accounts receivable | (11.0) | 23.5 | (33.8) |
| Accounts receivable pledged as collateral | (32.0) | 27.0 | (9.0) |
| Fuel inventory and supplies | (65.7) | (6.2) | (9.4) |
| Prepaid expenses and other current assets | 102.7 | (196.1) | 10.0 |
| Accounts payable | 2.9 | (39.1) | 111.6 |
| Accrued taxes | 29.0 | 20.3 | (6.7) |
| Other current liabilities | 22.8 | (55.0) | (95.5) |
| Changes in other assets | 42.3 | (48.3) | 42.9 |
| Changes in other liabilities | 4.0 | (10.0) | (30.2) |
| Cash Flows from Operating Activities | 945.8 | 700.1 | 847.4 |
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: |  |  |  |
| Additions to property, plant and equipment | (918.9) | (835.7) | (719.0) |
| Purchase of securities - trusts | (24.9) | (129.9) | (20.2) |
| Sale of securities - trusts | 11.2 | 97.5 | 18.6 |
| Investment in corporate-owned life insurance | (16.4) | (14.2) | (18.3) |
| Proceeds from investment in corporate-owned life insurance | 35.2 | 77.0 | 63.8 |
| Other investing activities | 11.0 | 26.5 | (2.2) |
| Cash Flows used in Investing Activities | (902.8) | (778.8) | (677.3) |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |  |  |  |
| Short-term debt, net | 366.1 | 354.0 | (199.2) |
| Collateralized short-term debt, net | 32.0 | (27.0) | 9.0 |
| Proceeds from long-term debt | - | - | 492.7 |
| Retirements of long-term debt | - | - | (250.0) |
| Retirements of long-term debt of variable interest entities | - | (18.8) | (32.3) |
| Borrowings against cash surrender value of corporate-owned life insurance | 51.6 | 51.4 | 52.7 |
| Repayment of borrowings against cash surrender value of corporate-owned life insurance | (28.0) | (62.3) | (53.7) |
| Cash dividends paid | (455.0) | (240.0) | (160.0) |
| Other financing activities | (4.1) | (4.2) | (5.8) |
| Cash Flows from (used in) Financing Activities | (37.4) | 53.1 | (146.6) |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 5.6 | (25.6) | 23.5 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |  |  |  |
| Beginning of period | 3.1 | 28.7 | 5.2 |
| End of period | $8.7 | $3.1 | $28.7 |

The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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# **EVERGY KANSAS CENTRAL, INC.**
**Consolidated Statements of Changes in Equity**

|  | Evergy Kansas Central, Inc. Shareholder |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Common stock shares | Common stock | Retained earnings | Non- controlling interests | Total equity |
| (millions, except share amounts) |  |  |  |  |  |
| Balance as of December 31, 2019 | 1 | $2,737.6 | $1,494.0 | $(26.6) | $4,205.0 |
| Net income | - | - | 224.1 | 11.7 | 235.8 |
| Dividends declared on common stock | - | - | (160.0) | - | (160.0) |
| Balance as of December 31, 2020 | 1 | 2,737.6 | 1,558.1 | (14.9) | 4,280.8 |
| Net income | - | - | 488.5 | 12.2 | 500.7 |
| Dividends declared on common stock | - | - | (240.0) | - | (240.0) |
| Balance as of December 31, 2021 | 1 | 2,737.6 | 1,806.6 | (2.7) | 4,541.5 |
| Net income | - | - | 408.6 | 12.3 | 420.9 |
| Dividends declared on common stock | - | - | (455.0) | - | (455.0) |
| Balance as of December 31, 2022 | 1 | $2,737.6 | $1,760.2 | $9.6 | $4,507.4 |

The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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# **EVERGY METRO, INC.**  
 **Consolidated Statements of Comprehensive Income**

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| OPERATING REVENUES | $1,970.6 | $1,913.7 | $1,705.6 |
| OPERATING EXPENSES: |  |  |  |
| Fuel and purchased power | 630.7 | 613.5 | 416.1 |
| Operating and maintenance | 334.4 | 365.4 | 407.5 |
| Depreciation and amortization | 337.8 | 321.0 | 326.1 |
| Taxes other than income tax | 130.0 | 126.2 | 121.6 |
| Other regulatory disallowances | 5.5 | - | - |
| Total Operating Expenses | 1,438.4 | 1,426.1 | 1,271.3 |
| INCOME FROM OPERATIONS | 532.2 | 487.6 | 434.3 |
| OTHER INCOME (EXPENSE): |  |  |  |
| Investment earnings | 2.9 | 0.2 | 1.4 |
| Other income | 15.2 | 16.1 | 9.2 |
| Other expense | (33.9) | (29.4) | (25.5) |
| Total Other Expense, Net | (15.8) | (13.1) | (14.9) |
| Interest expense | 110.7 | 109.8 | 113.6 |
| INCOME BEFORE INCOME TAXES | 405.7 | 364.7 | 305.8 |
| Income tax expense | 50.3 | 52.4 | 7.1 |
| NET INCOME | $355.4 | $312.3 | $298.7 |
| COMPREHENSIVE INCOME |  |  |  |
| NET INCOME | $355.4 | $312.3 | $298.7 |
| OTHER COMPREHENSIVE INCOME: |  |  |  |
| Derivative hedging activity |  |  |  |
| Reclassification to expenses, net of tax | (0.3) | (0.3) | (0.2) |
| Derivative hedging activity, net of tax | (0.3) | (0.3) | (0.2) |
| Total other comprehensive loss | (0.3) | (0.3) | (0.2) |
| COMPREHENSIVE INCOME | $355.1 | $312.0 | $298.5 |

The disclosures regarding Evergy Metro included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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# **EVERGY METRO, INC.**  
 **Consolidated Balance Sheets**

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions, except share amounts) |  |  |
| ASSETS |  |  |
| CURRENT ASSETS: |  |  |
| Cash and cash equivalents | $3.1 | $2.1 |
| Receivables, net of allowance for credit losses of $9.3 and $13.3, respectively | 37.8 | 31.0 |
| Related party receivables | 170.4 | 277.8 |
| Accounts receivable pledged as collateral | 124.0 | 116.0 |
| Fuel inventory and supplies | 240.6 | 211.0 |
| Income taxes receivable | 0.2 | - |
| Regulatory assets | 42.3 | 86.3 |
| Prepaid expenses | 22.4 | 22.6 |
| Other assets | 11.0 | 19.7 |
| Total Current Assets | 651.8 | 766.5 |
| PROPERTY, PLANT AND EQUIPMENT, NET | 7,844.2 | 7,474.9 |
| OTHER ASSETS: |  |  |
| Regulatory assets | 331.5 | 410.7 |
| Nuclear decommissioning trust fund | 334.5 | 400.3 |
| Other | 87.2 | 104.4 |
| Total Other Assets | 753.2 | 915.4 |
| TOTAL ASSETS | $9,249.2 | $9,156.8 |

The disclosures regarding Evergy Metro included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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# **EVERGY METRO, INC.**  
 **Consolidated Balance Sheets**

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions, except share amounts) |  |  |
| LIABILITIES AND EQUITY |  |  |
| CURRENT LIABILITIES: |  |  |
| Current maturities of long-term debt | $379.5 | $ - |
| Notes payable and commercial paper | 111.0 | - |
| Collateralized note payable | 124.0 | 116.0 |
| Accounts payable | 252.3 | 305.2 |
| Related party payables | 0.9 | 0.1 |
| Accrued taxes | 40.5 | 38.6 |
| Accrued interest | 27.9 | 26.4 |
| Regulatory liabilities | 55.3 | 54.6 |
| Asset retirement obligations | 17.1 | 11.0 |
| Accrued compensation and benefits | 41.7 | 37.8 |
| Other | 49.2 | 48.8 |
| Total Current Liabilities | 1,099.4 | 638.5 |
| LONG-TERM LIABILITIES: |  |  |
| Long-term debt, net | 2,547.1 | 2,925.0 |
| Deferred income taxes | 720.9 | 606.1 |
| Unamortized investment tax credits | 114.7 | 117.2 |
| Regulatory liabilities | 872.8 | 954.2 |
| Pension and post-retirement liability | 196.6 | 420.9 |
| Asset retirement obligations | 427.1 | 370.0 |
| Other | 84.3 | 103.7 |
| Total Long-Term Liabilities | 4,963.5 | 5,497.1 |
| Commitments and Contingencies (Note 15) |  |  |
| EQUITY: |  |  |
| Common stock - 1,000 shares authorized, without par value, 1 share issued, stated value | 1,563.1 | 1,563.1 |
| Retained earnings | 1,619.2 | 1,453.8 |
| Accumulated other comprehensive income | 4.0 | 4.3 |
| Total Equity | 3,186.3 | 3,021.2 |
| TOTAL LIABILITIES AND EQUITY | $9,249.2 | $9,156.8 |

The disclosures regarding Evergy Metro included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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# **EVERGY METRO, INC.**  
 **Consolidated Statements of Cash Flows**

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: |  |  |  |
| Net income | $355.4 | $312.3 | $298.7 |
| Adjustments to reconcile income to net cash from operating activities: |  |  |  |
| Depreciation and amortization | 337.8 | 321.0 | 326.1 |
| Amortization of nuclear fuel | 27.9 | 25.8 | 29.5 |
| Amortization of deferred refueling outage | 11.7 | 12.6 | 12.7 |
| Net deferred income taxes and credits | 68.1 | 10.0 | (3.5) |
| Allowance for equity funds used during construction | (14.2) | (12.6) | (8.0) |
| Payments for asset retirement obligations | (5.3) | (7.4) | (7.5) |
| Other regulatory disallowances | 5.5 | - | - |
| Other | (0.4) | (0.4) | (0.4) |
| Changes in working capital items: |  |  |  |
| Accounts receivable | 5.1 | 43.2 | (13.2) |
| Accounts receivable pledged as collateral | (8.0) | 14.0 | (12.0) |
| Fuel inventory and supplies | (29.6) | (40.6) | (7.4) |
| Prepaid expenses and other current assets | (6.2) | (16.3) | (7.9) |
| Accounts payable | (43.2) | (1.1) | 24.6 |
| Accrued taxes | 1.7 | 6.9 | 1.6 |
| Other current liabilities | (30.6) | 44.0 | 2.4 |
| Changes in other assets | 59.1 | 61.5 | 59.1 |
| Changes in other liabilities | (3.7) | (38.7) | (47.3) |
| Cash Flows from Operating Activities | 731.1 | 734.2 | 647.5 |
| CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: |  |  |  |
| Additions to property, plant and equipment | (780.9) | (682.9) | (565.4) |
| Purchase of securities - trusts | (25.6) | (28.3) | (45.4) |
| Sale of securities - trusts | 16.1 | 18.2 | 37.9 |
| Net money pool lending | 124.0 | (55.0) | (100.0) |
| Other investing activities | 6.2 | 6.8 | 4.6 |
| Cash Flows used in Investing Activities | (660.2) | (741.2) | (668.3) |
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |  |  |  |
| Short-term debt, net | 111.0 | - | (199.3) |
| Collateralized short-term debt, net | 8.0 | (14.0) | 12.0 |
| Proceeds from long-term debt | 23.4 | - | 396.2 |
| Retirements of long-term debt | (23.4) | - | - |
| Cash dividends paid | (190.0) | (50.0) | (120.0) |
| Other financing activities | 1.1 | 1.5 | 1.5 |
| Cash Flows from (used in) Financing Activities | (69.9) | (62.5) | 90.4 |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 1.0 | (69.5) | 69.6 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |  |  |  |
| Beginning of period | 2.1 | 71.6 | 2.0 |
| End of period | $3.1 | $2.1 | $71.6 |

The disclosures regarding Evergy Metro included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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# **EVERGY METRO, INC**
**Consolidated Statements of Changes in Equity**

|  | Common stock shares | Common Stock | Retained earnings | AOCI - Net gains (losses) on cash flow hedges | Total Equity |
| --- | --- | --- | --- | --- | --- |
| (millions, except share amounts) |  |  |  |  |  |
| Balance as of December 31, 2019 | 1 | $1,563.1 | $1,012.8 | $4.8 | $2,580.7 |
| Net income | - | - | 298.7 | - | 298.7 |
| Dividends declared on common stock | - | - | (120.0) | - | (120.0) |
| Derivative hedging activity, net of tax | - | - | - | (0.2) | (0.2) |
| Balance as of December 31, 2020 | 1 | 1,563.1 | 1,191.5 | 4.6 | 2,759.2 |
| Net income | - | - | 312.3 | - | 312.3 |
| Dividends declared on common stock | - | - | (50.0) | - | (50.0) |
| Derivative hedging activity, net of tax | - | - | - | (0.3) | (0.3) |
| Balance as of December 31, 2021 | 1 | 1,563.1 | 1,453.8 | 4.3 | 3,021.2 |
| Net income | - | - | 355.4 | - | 355.4 |
| Dividends declared on common stock | - | - | (190.0) | - | (190.0) |
| Derivative hedging activity, net of tax | - | - | - | (0.3) | (0.3) |
| Balance as of December 31, 2022 | 1 | $1,563.1 | $1,619.2 | $4.0 | $3,186.3 |

The disclosures regarding Evergy Metro included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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**EVERGY, INC.**
**EVERGY KANSAS CENTRAL, INC.**
**EVERGY METRO, INC.**

**Combined Notes to Consolidated Financial Statements**

The notes to consolidated financial statements that follow are a combined presentation for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc., all registrants under this filing. The terms "Evergy," "Evergy Kansas Central," "Evergy Metro" and "Evergy Companies" are used throughout this report. "Evergy" refers to Evergy, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Kansas Central" refers to Evergy Kansas Central, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Metro" refers to Evergy Metro, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Companies" refers to Evergy, Evergy Kansas Central and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group.

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**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 power purchase agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.7 million customers in the states of Kansas and Missouri.

**Principles of Consolidation**

Each of Evergy's, Evergy Kansas Central's and Evergy Metro's 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).

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Evergy Metro elected not to apply 'push-down accounting' related to the Great Plains Energy Incorporated (Great Plains Energy) and Evergy Kansas Central merger in 2018, whereby the adjustments of assets and liabilities to fair value and the resulting goodwill would be recorded on the financial statements of the acquired subsidiary. These adjustments for Evergy Metro, as well as those related to the acquired assets and liabilities of Great Plains Energy and its other direct subsidiaries, are only reflected on Evergy's consolidated financial statements.

### Use of Estimates

The process of preparing financial statements in conformity with generally accepted accounting principles (GAAP) requires the use of estimates and assumptions that affect the reported amounts of certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

### Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with original maturities of three months or less at acquisition.

### 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.

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions) |  |  |
| Evergy |  |  |
| Fuel inventory | $180.7 | $160.9 |
| Supplies | 492.2 | 405.8 |
| Fuel inventory and supplies | $672.9 | $566.7 |
| Evergy Kansas Central |  |  |
| Fuel inventory | $97.2 | $74.3 |
| Supplies | 252.3 | 208.9 |
| Fuel inventory and supplies | $349.5 | $283.2 |
| Evergy Metro |  |  |
| Fuel inventory | $59.0 | $62.0 |
| Supplies | 181.6 | 149.0 |
| Fuel inventory and supplies | $240.6 | $211.0 |

### Property, Plant and Equipment

The Evergy Companies record the value of property, plant and equipment, including that of VIEs, at cost. For plant, cost includes contracted services, direct labor and materials, indirect charges for engineering and supervision and an allowance for funds used during construction (AFUDC). AFUDC represents the allowed cost of capital used to finance utility construction activity. AFUDC equity funds are included as a non-cash item in other income and AFUDC borrowed funds are a reduction of interest expense. AFUDC is computed by applying a composite rate to qualified construction work in progress. The rates used to compute gross AFUDC are compounded semi-annually.

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The amounts of the Evergy Companies' AFUDC for borrowed and equity funds are detailed in the following table.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| Evergy |  |  |  |
| AFUDC borrowed funds | $15.8 | $14.7 | $16.5 |
| AFUDC equity funds | 22.5 | 29.4 | 17.2 |
| Total | $38.3 | $44.1 | $33.7 |
| Evergy Kansas Central |  |  |  |
| AFUDC borrowed funds | $6.9 | $7.1 | $8.5 |
| AFUDC equity funds | 8.5 | 14.9 | 9.1 |
| Total | $15.4 | $22.0 | $17.6 |
| Evergy Metro |  |  |  |
| AFUDC borrowed funds | $6.5 | $6.0 | $6.0 |
| AFUDC equity funds | 14.2 | 12.6 | 8.0 |
| Total | $20.7 | $18.6 | $14.0 |

The average rates used in the calculation of AFUDC are detailed in the following table.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Evergy Kansas Central | 3.1% | 4.9% | 4.7% |
| Evergy Metro | 5.7% | 5.6% | 5.2% |
| Evergy Missouri West | 2.3% | 2.6% | 3.5% |

When property units are retired or otherwise disposed, the original cost, net of salvage, is charged to accumulated depreciation. Repair of property and replacement of items not considered to be units of property are expensed as incurred, except for planned refueling and maintenance outages at Wolf Creek Generating Station (Wolf Creek). As authorized by regulators, the incremental maintenance cost incurred for such outages is deferred and amortized to expense ratably over the period between planned outages.

### Depreciation and Amortization

Depreciation and amortization of utility plant other than nuclear fuel is computed using the straight-line method over the estimated lives of depreciable property based on rates approved by state regulatory authorities. Annual depreciation rates average approximately 3%. See Note 7 for more details. Nuclear fuel is amortized to fuel expense based on the quantity of heat produced during the generation of electricity.

The depreciable lives of Evergy's, Evergy Kansas Central's and Evergy Metro's property, plant and equipment are detailed in the following table.

|  | Evergy |  |  | Evergy Kansas Central |  |  | Evergy Metro |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | (years) |  |  |  |  |  |  |  |  |
| Generating facilities | 8 | to | 87 | 8 | to | 87 | 20 | to | 60 |
| Transmission facilities | 15 | to | 94 | 36 | to | 94 | 15 | to | 70 |
| Distribution facilities | 8 | to | 73 | 19 | to | 73 | 8 | to | 55 |
| Other | 5 | to | 84 | 7 | to | 84 | 5 | to | 50 |

### Abandoned Plant

When the Evergy Companies retire utility plant, the original cost, net of salvage, is charged to accumulated depreciation. However, when it becomes probable an asset will be retired significantly in advance of its original expected useful life and in the near term, the cost of the asset and related accumulated depreciation is recognized as a separate asset and a probable abandonment. If the asset is still in service, the net amount is classified as plant to

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be retired, net on the consolidated balance sheets. If the asset is no longer in service, the net amount is classified as a regulatory asset on the consolidated balance sheets.

The Evergy Companies must also assess the probability of full recovery of the remaining net book value of the abandonment. The net book value that may be retained as an asset on the balance sheet for the abandonment is dependent upon amounts that may be recovered through regulated rates, including any return. An impairment charge, if any, would equal the difference between the remaining net book value of the asset and the present value of the future revenues expected from the asset.

Evergy Missouri West retired its Sibley Station in 2018 and the retirement of Sibley Unit 3 met the criteria to be considered an abandonment. Evergy has classified the remaining net book value of Sibley Unit 3 as retired generation facilities within regulatory assets on its consolidated balance sheet. In October 2019, the MPSC issued an accounting authority order (AAO) requiring Evergy Missouri West to defer to a regulatory liability all revenues collected from customers for return on investment, non-fuel operations and maintenance costs, taxes including accumulated deferred income taxes and all other costs associated with Sibley Station following its retirement in November 2018 to be considered in Evergy Missouri West's 2022 rate case. See Note 4 for additional information regarding the AAO and Evergy Missouri West's 2022 rate case.

### **Nuclear Plant Decommissioning Costs**

Nuclear plant decommissioning cost estimates are based on either the immediate dismantlement method or the deferred dismantling method as determined by the State Corporation Commission of the State of Kansas (KCC) and MPSC and include the costs of decontamination, dismantlement and site restoration. Based on these cost estimates, Evergy Kansas Central and Evergy Metro each contribute to a tax-qualified trust fund to be used to decommission Wolf Creek. Related liabilities for decommissioning are included on Evergy's, Evergy Kansas Central's and Evergy Metro's consolidated balance sheets in asset retirement obligations (AROs).

As a result of the authorized regulatory treatment and related regulatory accounting, differences between the fair value of the assets held in the nuclear decommissioning trust and the amounts recorded for the accumulated accretion and depreciation expense associated with the decommissioning ARO are recorded as a regulatory liability on Evergy's, Evergy Kansas Central's and Evergy Metro's consolidated balance sheets. See Note 6 for discussion of AROs including those associated with nuclear plant decommissioning costs.

### **Regulatory Accounting**

Accounting standards are applied that recognize the economic effects of rate regulation. Accordingly, regulatory assets and liabilities have been recorded when required by a regulatory order or based on regulatory precedent. See Note 4 for additional information concerning regulatory matters.

### **Cash Surrender Value of Life Insurance**

Amounts related to corporate-owned life insurance (COLI) are recorded on the consolidated balance sheets in other long-term assets and are detailed in the following table for Evergy. Substantially all of Evergy's COLI-related balances relate to Evergy Kansas Central's COLI activity.

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Evergy | (millions) |  |
| Cash surrender value of policies | $1,387.4 | $1,363.0 |
| Borrowings against policies | (1,256.6) | (1,232.3) |
| Corporate-owned life insurance, net | $130.8 | $130.7 |

Increases in cash surrender value and death benefits are recorded in other income in the Evergy Companies' consolidated statements of income and comprehensive income. Interest expense incurred on policy loans is offset against the policy income. Income from death benefits is highly variable from period to period.

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## Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of the following financial instruments for which it was practicable to estimate that value.

*Nuclear decommissioning trust fund* - The Evergy Companies' nuclear decommissioning trust fund assets are recorded at fair value based on quoted market prices of the investments held by the fund and/or valuation models.

*Derivative instruments* - The Evergy Companies' derivative instruments are recorded at fair value based on quoted market prices for exchange-traded derivative instruments, quoted prices for similar contracts and/or valuation models.

*Pension plans* - For financial reporting purposes, the market value of plan assets is the fair value based on quoted market prices of the investments held by the fund and/or valuation models.

## Derivative Instruments

The Evergy Companies record derivative instruments on the balance sheet at fair value in accordance with GAAP. The Evergy Companies enter into derivative contracts to manage risk exposure to commodity price and interest rate fluctuations and also for trading purposes. See Note 13 for additional information regarding derivative financial instruments and hedging activities.

## Revenue Recognition

The Evergy Companies recognize revenue on the sale of electricity to customers over time as the service is provided in the amount they have the right to invoice. Revenues recorded include electric services provided but not yet billed by the Evergy Companies. Unbilled revenues are recorded for kWh usage in the period following the customers' billing cycle to the end of the month. This estimate is based on net system kWh usage less actual billed kWhs. The Evergy Companies' estimated unbilled kWhs are allocated and priced by regulatory jurisdiction across the rate classes based on actual billing rates. The Evergy Companies' unbilled revenue estimate is affected by factors including fluctuations in energy demand, weather, line losses and changes in the composition of customer classes. See Note 3 for the balance of unbilled receivables for each of Evergy, Evergy Kansas Central and Evergy Metro as of December 31, 2022 and 2021.

The Evergy Companies also collect sales taxes and franchise fees from customers concurrent with revenue-producing activities that are levied by state and local governments. These items are excluded from revenue, and thus are not reflected on the consolidated statements of income and comprehensive income for Evergy, Evergy Kansas Central and Evergy Metro.

See Note 2 for additional details regarding revenue recognition from sales of electricity by the Evergy Companies.

## Allowance for Credit Losses

Historical loss information generally provides the basis for the Evergy Companies' assessment of expected credit losses. The Evergy Companies use an aging of accounts receivable method to assess historical loss information. When historical experience may not fully reflect the Evergy Companies' expectations about the future, the Evergy Companies will adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information.

Receivables are charged off when they are deemed uncollectible, which is based on a number of factors including specific facts surrounding an account and management's judgment.

## Asset Impairments

Long-lived assets and finite-lived intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the undiscounted expected future cash flows from an asset to be held and used is less than the carrying value of the asset, an asset impairment must be recognized in the financial statements. The amount of impairment recognized is the excess of the carrying value of the asset over its fair value.

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Goodwill and indefinite lived intangible assets are tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. The annual test must be performed at the same time each year. The goodwill impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. In the event that the carrying amount exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference between the carrying amount of the reporting unit and its fair value. See Note 5 for additional details on goodwill.

## Income Taxes

Income taxes are accounted for using the asset/liability approach. Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.

The Evergy Companies recognize tax benefits based on a 'more-likely-than-not' recognition threshold. In addition, the Evergy Companies recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Evergy files a consolidated federal income tax return as well as unitary and combined income tax returns in several state jurisdictions with Kansas and Missouri being the most significant. Income taxes for consolidated or combined subsidiaries are allocated to the subsidiaries based on separate company computations of income or loss. Evergy Kansas Central's and Evergy Metro's income tax provisions include taxes allocated based on their separate company's income or loss.

The Evergy Companies have established a net regulatory liability for future refunds to be made to customers for amounts collected from customers in excess of income taxes in current rates. Tax credits are recognized in the year generated except for certain Evergy Kansas Central, Evergy Metro and Evergy Missouri West investment tax credits that have been deferred and amortized over the remaining service lives of the related properties.

## Other Income (Expense), Net

In 2022 and 2021, Evergy's investment earnings included a realized loss of $16.3 million and unrealized gain of $27.7 million, respectively, related to Evergy's equity investment in an early-stage energy solutions company. See 'Evergy Equity Investment' within this Note 1 for further information.

The Evergy Companies' other income includes income from AFUDC equity funds. See 'Property, Plant and Equipment' within this Note 1 for these amounts for 2022, 2021 and 2020.

The table below shows the detail of other expense for each of the Evergy Companies.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| Evergy |  |  |  |
| Non-service cost component of net benefit cost | $(62.9) | $(55.6) | $(58.6) |
| Other | (34.4) | (31.8) | (19.6) |
| Other expense | $(97.3) | $(87.4) | $(78.2) |
| Evergy Kansas Central |  |  |  |
| Non-service cost component of net benefit cost | $(17.1) | $(15.6) | $(21.2) |
| Other | (22.5) | (20.3) | (17.7) |
| Other expense | $(39.6) | $(35.9) | $(38.9) |
| Evergy Metro |  |  |  |
| Non-service cost component of net benefit cost | $(31.0) | $(26.7) | $(24.2) |
| Other | (2.9) | (2.7) | (1.3) |
| Other expense | $(33.9) | $(29.4) | $(25.5) |

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## 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), restricted stock and a warrant. Evergy computes the dilutive effects of potential issuances of common shares using the treasury stock method or the contingently issuable share method, as applicable.

The following table reconciles Evergy's basic and diluted EPS.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions, except per share amounts) |  |  |  |
| Income |  |  |  |
| Net income | $765.0 | $891.9 | $630.0 |
| Less: Net income attributable to noncontrolling interests | 12.3 | 12.2 | 11.7 |
| Net income attributable to Evergy, Inc. | $752.7 | $879.7 | $618.3 |
| Common Shares Outstanding |  |  |  |
| Weighted average number of common shares outstanding - basic | 229.9 | 229.0 | 227.2 |
| Add: effect of dilutive securities | 0.4 | 0.6 | 0.3 |
| Diluted average number of common shares outstanding | 230.3 | 229.6 | 227.5 |
| Basic EPS | $3.27 | $3.84 | $2.72 |
| Diluted EPS | $3.27 | $3.83 | $2.72 |

Anti-dilutive securities excluded from the computation of diluted EPS for 2022 were 3,950,000 common shares issuable pursuant to a warrant. There were no anti-dilutive securities excluded from the computation of diluted EPS for 2021. Anti-dilutive shares excluded from the computation of diluted EPS for 2020 were 127,884 RSUs.

## Supplemental Cash Flow Information

| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| Evergy |  |  |  |
| Cash paid for (received from): |  |  |  |
| Interest, net of amount capitalized | $393.7 | $356.9 | $367.6 |
| Interest of VIEs | - | 0.2 | 0.8 |
| Income taxes, net of refunds | 21.6 | (19.6) | (46.5) |
| Non-cash investing transactions: |  |  |  |
| Property, plant and equipment additions | 354.7 | 269.3 | 463.3 |
| Non-cash financing transactions: |  |  |  |
| Issuance of stock for compensation and reinvested dividends | - | 0.7 | 0.9 |
| Year Ended December 31 | 2022 | 2021 | 2020 |
| (millions) |  |  |  |
| Evergy Kansas Central |  |  |  |
| Cash paid for (received from): |  |  |  |
| Interest, net of amount capitalized | $170.2 | $149.3 | $157.5 |
| Interest of VIEs | - | 0.2 | 0.8 |
| Income taxes, net of refunds | 79.8 | 37.5 | 4.7 |
| Non-cash investing transactions: |  |  |  |
| Property, plant and equipment additions | 203.9 | 101.9 | 235.4 |

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| Year Ended December 31 | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Evergy Metro | (millions) |  |  |
| Cash paid for (received from): |  |  |  |
| Interest, net of amount capitalized | $114.6 | $110.8 | $109.9 |
| Income taxes, net of refunds | (15.2) | 36.6 | 4.8 |
| Non-cash investing transactions: |  |  |  |
| Property, plant and equipment additions | 125.8 | 102.2 | 192.5 |

Non-cash property, plant and equipment additions in 2022 and 2020 for Evergy, Evergy Kansas Central and Evergy Metro include a non-cash addition related to the revision in estimate of various ARO liabilities in the fourth quarter of 2022 and the Wolf Creek ARO liability in the third quarter of 2020. See Note 6 for more details.

### **Dividends Declared**

In February 2023, Evergy's Board of Directors (Evergy Board) declared a quarterly dividend of $0.6125 per share on Evergy's common stock. The common dividend is payable March 22, 2023, to shareholders of record as of March 9, 2023.

### **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 (February 2021 winter weather event). These circumstances resulted in higher than normal market prices within the SPP Integrated Marketplace for both natural gas and power for the duration of the February 2021 winter weather event. As part of the February 2021 winter weather event and inclusive of the aforementioned items, Evergy incurred natural gas and purchased power costs, net of wholesale revenues, of $367.9 million. This $367.9 million of net fuel and purchased power costs incurred was primarily driven by $296.6 million of costs at Evergy Missouri West and $134.3 million of costs at Evergy Kansas Central, partially offset by $63.0 million of net wholesale revenues at Evergy Metro.

The Evergy Companies deferred substantially all of the fuel and purchased power costs, net of wholesale revenues, related to the February 2021 winter weather event to a regulatory asset or liability for recovery or refund through the respective fuel recovery mechanisms of Evergy Kansas Central and Evergy Metro and through a securitization financing order at Evergy Missouri West. See Note 4 for additional information regarding these regulatory proceedings.

The Evergy Companies also engage in non-regulated energy marketing activities in various regional power markets. The energy marketing margins related to these non-regulatory energy marketing activities 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 across the central and southern United States driven by the February 2021 winter weather event discussed above, Evergy and Evergy Kansas Central recorded $94.5 million of energy marketing margins in 2021, related to the February 2021 winter weather event, primarily driven by activities in the Electric Reliability Council of Texas (ERCOT).

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## Evergy Equity Investment

From time to time, Evergy makes limited equity investments in early-stage energy solution companies. These investments have historically not had a significant impact on Evergy's results of operations. In October 2021, an equity investment in which Evergy held a minority stake through an initial investment of $3.7 million was acquired through a transaction involving a special purpose acquisition company (SPAC). As a result of its equity investment in the company that was acquired in the SPAC transaction, Evergy received shares of the resulting public company upon the closing of the transaction, which were subject to a restriction on sale for 150 days. Evergy recorded a $27.7 million unrealized gain in the fourth quarter of 2021 for the conversion of its shares into the newly formed public company and based on the closing share price as of December 31, 2021 adjusted to reflect the restriction on the sale of shares. The equity investment had a fair value of $31.4 million as of December 31, 2021.

In March 2022, Evergy sold its shares in the equity investment to a financial institution through a share forward agreement following the expiration of the restriction on sale. As part of the share forward agreement, Evergy delivered its shares to the financial institution in exchange for a series of cash settlements totaling $15.1 million based primarily on the volume-weighted average price (VWAP) of the shares over the term of the agreement, which was completed in June 2022. As a result of the completion of the share forward agreement, Evergy no longer has an equity investment in the company.

In 2022, Evergy recorded a pre-tax loss of $16.3 million in investment earnings on its consolidated statements of comprehensive income related to the decrease in market value of its equity investment prior to sale and the settlement of the share forward agreement.

## Renewable Generation Investment

In August 2022, Evergy Missouri West entered into an agreement with a renewable energy development company to purchase for approximately $250 million an operational wind farm located in the state of Oklahoma with a generating capacity of approximately 199 MW. The purchase is subject to regulatory approvals and closing conditions, including the granting of a Certificate of Convenience and Necessity (CCN) by the MPSC. In January 2023, the MPSC staff recommended the MPSC reject Evergy Missouri West's application for a CCN and allow it to file a new application with updated economic analyses of the renewable generation investment or alternatively extend the procedural schedule to allow the MPSC staff time to evaluate the current economic analyses prepared by Evergy Missouri West. A final decision by the MPSC is expected in the first half of 2023.

## 2. REVENUE

Evergy's, Evergy Kansas Central's and Evergy Metro's revenues disaggregated by customer class are summarized in the following tables.

| Evergy | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Revenues |  |  |  |
| Residential | $2,168.2 | $1,918.3 | $1,909.2 |
| Commercial | 1,888.5 | 1,681.3 | 1,641.7 |
| Industrial | 686.2 | 597.0 | 588.7 |
| Other retail | (32.1) | 33.1 | 38.5 |
| Total electric retail | $4,710.8 | $4,229.7 | $4,178.1 |
| Wholesale | 509.9 | 717.2 | 264.0 |
| Transmission | 343.7 | 356.8 | 318.5 |
| Industrial steam and other | 24.8 | 25.4 | 21.0 |
| Total revenue from contracts with customers | 5,589.2 | 5,329.1 | 4,781.6 |
| Other | 269.9 | 257.6 | 131.8 |
| Operating revenues | $5,859.1 | $5,586.7 | $4,913.4 |

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Evergy's other retail electric revenues in 2022 include a $68.0 million deferral of revenues to a regulatory liability for the expected refund of amounts collected from customers since December 2018 for the return on investment of the retired Sibley Station. See 'Evergy Missouri West Other Proceedings' in Note 4 for additional information.

#### Evergy Kansas Central

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| Revenues |  |  |  |
| Residential | $980.1 | $824.1 | $801.2 |
| Commercial | 822.9 | 694.1 | 665.6 |
| Industrial | 465.7 | 391.7 | 379.9 |
| Other retail | 17.9 | 17.1 | 17.7 |
| Total electric retail | $2,286.6 | $1,927.0 | $1,864.4 |
| Wholesale | 389.9 | 453.1 | 215.4 |
| Transmission | 305.0 | 322.9 | 287.3 |
| Other | 2.2 | 2.2 | 2.3 |
| Total revenue from contracts with customers | $2,983.7 | $2,705.2 | $2,369.4 |
| Other | 72.2 | 142.1 | 48.7 |
| Operating revenues | $3,055.9 | $2,847.3 | $2,418.1 |

#### Evergy Metro

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| Revenues |  |  |  |
| Residential | $746.4 | $691.9 | $714.7 |
| Commercial | 758.6 | 713.3 | 717.1 |
| Industrial | 127.0 | 122.0 | 128.8 |
| Other retail | 11.5 | 9.2 | 11.7 |
| Total electric retail | $1,643.5 | $1,536.4 | $1,572.3 |
| Wholesale | 111.9 | 242.6 | 35.0 |
| Transmission | 18.2 | 17.1 | 13.9 |
| Other | 0.9 | 3.6 | 2.6 |
| Total revenue from contracts with customers | $1,774.5 | $1,799.7 | $1,623.8 |
| Other | 196.1 | 114.0 | 81.8 |
| Operating revenues | $1,970.6 | $1,913.7 | $1,705.6 |

#### Retail Revenues

The Evergy Companies' retail revenues are generated by the regulated sale of electricity to their residential, commercial and industrial customers within their franchised service territories. The Evergy Companies recognize revenue on the sale of electricity to their customers over time as the service is provided in the amount they have a right to invoice. Retail customers are billed monthly at the tariff rates approved by the KCC and MPSC based on customer kWh usage.

Revenues recorded include electric services provided but not yet billed by the Evergy Companies. Unbilled revenues are recorded for kWh usage in the period following the customers' billing cycle to the end of the month. This estimate is based on net system kWh usage less actual billed kWhs. The Evergy Companies' estimated unbilled kWhs are allocated and priced by regulatory jurisdiction across the rate classes based on actual billing rates.

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The Evergy Companies also collect sales taxes and franchise fees from customers concurrent with revenue-producing activities that are levied by state and local governments. These items are excluded from revenue, and thus not reflected on the statements of income and comprehensive income, for Evergy, Evergy Kansas Central and Evergy Metro.

### **Wholesale Revenues**

The Evergy Companies' wholesale revenues are generated by the sale of wholesale power and capacity in circumstances when the power that the Evergy Companies generate is not required for customers in their service territory. These sales primarily occur within the SPP Integrated Marketplace. The Evergy Companies also purchase power from the SPP Integrated Marketplace and record sale and purchase activity on a net basis in wholesale revenue or fuel and purchased power expense. In addition, the Evergy Companies sell wholesale power and capacity through bilateral contracts to other counterparties, such as electric cooperatives, municipalities and other electric utilities.

For both wholesale sales to the SPP Integrated Marketplace and through bilateral contracts, the Evergy Companies recognize revenue on the sale of wholesale electricity to their customers over time as the service is provided in the amount they have a right to invoice.

Wholesale sales within the SPP Integrated Marketplace are billed weekly based on the fixed transaction price determined by the market at the time of the sale and the MWh quantity purchased. Wholesale sales from bilateral contracts are billed monthly based on the contractually determined transaction price and the kWh quantity purchased.

### **Transmission Revenues**

The Evergy Companies' transmission revenues are generated by the use of their transmission networks by the SPP. To enable optimal use of the diverse generating resources in the SPP region, the Evergy Companies, as well as other transmission owners, allow the SPP to access and operate their transmission networks. As new transmission lines are constructed, they are included in the transmission network available to the SPP. In exchange for providing access, the SPP pays the Evergy Companies consideration determined by formula rates approved by the Federal Energy Regulatory Commission (FERC), which include the cost to construct and maintain the transmission lines and a return on investment. The price for access to the Evergy Companies' transmission networks are updated annually based on projected costs. Projections are updated to actual costs and the difference is included in subsequent year's prices.

The Evergy Companies have different treatment for their legacy transmission facilities within the SPP, which results in different levels of transmission revenue being received from the SPP. Evergy Kansas Central's transmission revenues from SPP include amounts that Evergy Kansas Central pays to the SPP on behalf of its retail electric customers for the use of Evergy Kansas Central's legacy transmission facilities. These transmission revenues are mostly offset by SPP network transmission cost expense that Evergy Kansas Central pays on behalf of its retail customers. Evergy Metro and Evergy Missouri West do not pay the SPP for their retail customers' use of the Evergy Metro and Evergy Missouri West legacy transmission facilities and correspondingly, their transmission revenues also do not reflect the associated transmission revenue from the SPP.

The Evergy Companies recognize revenue on the sale of transmission service to their customers over time as the service is provided in the amount they have a right to invoice. Transmission service to the SPP is billed monthly based on a fixed transaction price determined by FERC formula transmission rates along with other SPP-specific charges and the MW quantity purchased.

### **Industrial Steam and Other Revenues**

Evergy's industrial steam and other revenues are primarily generated by the regulated sale of industrial steam to Evergy Missouri West's steam customers. Evergy recognizes revenue on the sale of industrial steam to its customers over time as the service is provided in the amount that it has the right to invoice. Steam customers are billed on a monthly basis at the tariff rate approved by the MPSC based on customer MMBtu usage.

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### 3. RECEIVABLES

The Evergy Companies' receivables are detailed in the following table.

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions) |  |  |
| Evergy |  |  |
| Customer accounts receivable - billed | $8.9 | $13.7 |
| Customer accounts receivable - unbilled | 136.9 | 80.1 |
| Other receivables | 200.9 | 160.7 |
| Allowance for credit losses | (31.4) | (32.9) |
| Total | $315.3 | $221.6 |
| Evergy Kansas Central |  |  |
| Customer accounts receivable - billed | $ - | $9.7 |
| Customer accounts receivable - unbilled | 71.4 | 26.4 |
| Other receivables | 194.9 | 178.5 |
| Allowance for credit losses | (16.9) | (13.0) |
| Total | $249.4 | $201.6 |
| Evergy Metro |  |  |
| Customer accounts receivable - billed | $ - | $2.7 |
| Customer accounts receivable - unbilled | 25.5 | 25.9 |
| Other receivables | 21.6 | 15.7 |
| Allowance for credit losses | (9.3) | (13.3) |
| Total | $37.8 | $31.0 |

The Evergy Companies' other receivables at December 31, 2022 and 2021, consisted primarily of receivables from partners in jointly-owned electric utility plants, wholesale sales receivables and receivables related to alternative revenue programs. The Evergy Companies' other receivables also included receivables from contracts with customers as summarized in the following table.

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions) |  |  |
| Evergy | $113.0 | $63.7 |
| Evergy Kansas Central | 110.8 | 62.6 |
| Evergy Metro | 1.3 | 0.5 |

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The change in the Evergy Companies' allowance for credit losses is summarized in the following table.

|  | 2022 | 2021 |
| --- | --- | --- |
| (millions) |  |  |
| Evergy |  |  |
| Beginning balance January 1 | $32.9 | $19.3 |
| Credit loss expense | 16.1 | 28.0 |
| Write-offs | (28.8) | (26.4) |
| Recoveries of prior write-offs | 11.2 | 12.0 |
| Ending balance December 31 | $31.4 | $32.9 |
| Evergy Kansas Central |  |  |
| Beginning balance January 1 | $13.0 | $7.5 |
| Credit loss expense | 13.1 | 12.0 |
| Write-offs | (13.7) | (11.0) |
| Recoveries of prior write-offs | 4.5 | 4.5 |
| Ending balance December 31 | $16.9 | $13.0 |
| Evergy Metro |  |  |
| Beginning balance January 1 | $13.3 | $8.1 |
| Credit loss expense | 1.7 | 10.5 |
| Write-offs | (10.2) | (10.6) |
| Recoveries of prior write-offs | 4.5 | 5.3 |
| Ending balance December 31 | $9.3 | $13.3 |

#### Sale of Accounts Receivable

Evergy Kansas Central, Evergy Metro and Evergy Missouri West sell an undivided percentage ownership interest in their retail electric accounts receivable to independent outside investors. These sales are accounted for as secured borrowings with accounts receivable pledged as collateral and a corresponding short-term collateralized note payable recognized on the balance sheets. The Evergy Companies' accounts receivable pledged as collateral and the corresponding short-term collateralized note payable are summarized in the following table.

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (millions) |  |  |
| Evergy | $359.0 | $319.0 |
| Evergy Kansas Central | 185.0 | 153.0 |
| Evergy Metro | 124.0 | 116.0 |

Each receivable sale facility expires in 2024. Evergy Kansas Central's facility allows for $185.0 million in aggregate outstanding principal amount of borrowings from mid-October through mid-June and then $200.0 million from mid-June through mid-October. Evergy Metro's facility allows for $130.0 million in aggregate outstanding principal amount of borrowings at any time. Evergy Missouri West's facility allows for $50.0 million in aggregate outstanding principal amount of borrowings from mid-November through mid-June and then $65.0 million from mid-June through mid-November.

## 4. RATE MATTERS AND REGULATION

### KCC Proceedings

#### *Evergy Kansas Central 2022 Transmission Delivery Charge (TDC)*

In March 2022, the KCC issued an order adjusting Evergy Kansas Central's retail prices to include updated transmission costs as reflected in the FERC transmission formula rate (TFR). The new prices were effective in April 2022 and are expected to increase Evergy Kansas Central's annual retail revenues by $20.4 million when compared to 2021.

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### ***Evergy Metro 2022 TDC***

In April 2022, the KCC issued an order adjusting Evergy Metro's retail prices to include updated transmission costs as reflected in the FERC TFR. The new prices were effective in May 2022 and are expected to increase Evergy Metro's annual retail revenues by $7.9 million when compared to 2021.

### ***Evergy Kansas Central and Evergy Metro Earnings Review and Sharing Plan (ERSP)***

As part of their merger settlement agreement with the KCC, Evergy Kansas Central and Evergy Metro agreed to participate in an ERSP for the years 2019 through 2022. Under the ERSP, Evergy Kansas Central's and Evergy Metro's Kansas jurisdiction are required to refund to customers 50% of annual earnings in excess of their authorized return on equity of 9.3% to the extent the excess earnings exceed the amount of annual bill credits that Evergy Kansas Central and Evergy Metro agreed to provide in connection with the merger that resulted in the formation of Evergy.

Evergy Kansas Central's and Evergy Metro's 2021 calculations of annual earnings did not result in a refund obligation. These calculations were filed with the KCC in March 2022. As of December 31, 2022, Evergy Kansas Central estimates its 2022 annual earnings will not result in a refund obligation. As of December 31, 2022, Evergy Metro estimates its 2022 annual earnings will result in a $16.7 million refund obligation, which was recorded as a reduction of operating revenues in the fourth quarter of 2022 on Evergy's and Evergy Metro's consolidated statements of consolidated income and comprehensive income. The final refund obligations for 2022 will be decided by the KCC and could vary from the current estimates.

### ***Evergy Kansas Central and Evergy Metro February 2021 Winter Weather Event AAO***

In February 2021, the KCC issued an emergency AAO directing all Kansas-jurisdictional natural gas and electric utilities, including Evergy Kansas Central and Evergy Metro, to defer to a regulatory asset or regulatory liability any extraordinary costs or revenues, including carrying costs, to provide electric service during the February 2021 winter weather event for consideration in future rate proceedings.

Evergy Kansas Central recognized a regulatory asset pursuant to the AAO of approximately $120 million related to its costs incurred during the February 2021 winter weather event, primarily consisting of increased fuel, purchased power, and associated carrying costs. Evergy Metro's Kansas jurisdiction recognized a regulatory liability of approximately $40 million related to its increased wholesale revenues during the February 2021 winter weather event and associated carrying costs.

In July 2021, Evergy Kansas Central and Evergy Metro made a joint filing with the KCC regarding the timing and method of recovery or refund for costs and revenues deferred pursuant to the February 2021 winter weather event AAO. In the filing, Evergy Kansas Central and Evergy Metro requested to recover or refund, as appropriate, their deferred February 2021 winter weather event amounts to customers through their fuel recovery mechanisms over two years and one year, respectively, beginning in April 2023. As part of the filing, Evergy Metro also requested a decrease to its February 2021 winter weather event refund to Kansas customers, not currently reflected in its regulatory liability for the February 2021 winter weather event, for jurisdictional allocation differences in its Kansas and Missouri fuel recovery mechanisms.

In April 2022, Evergy Kansas Central, Evergy Metro, KCC staff and other intervenors filed a non-unanimous stipulation and agreement with the KCC that resolved all issues regarding the timing and method of recovery for costs and revenues deferred pursuant to the February 2021 winter weather event AAO. As part of the non-unanimous stipulation and agreement, Evergy Kansas Central and Evergy Metro agreed to recover or refund, as appropriate, their deferred February 2021 winter weather amounts to customers through their fuel recovery mechanisms over two years and one year, respectively, beginning in April 2023, and to use the rate of 1.00% to apply carrying charges to these deferred amounts. The non-unanimous stipulation and agreement also permitted Evergy Metro to request the future recovery in its next Kansas rate case of an approximately $5 million under-recovery related to its February 2021 winter weather event refund to Kansas customers for jurisdictional allocation differences in its Kansas and Missouri fuel recovery mechanisms.

In June 2022, the KCC issued an order approving the non-unanimous stipulation and agreement.

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## **MPSC Proceedings**

### ***Evergy Metro 2022 Rate Case Proceeding***

In January 2022, Evergy Metro filed an application with the MPSC to request an increase to its retail revenues of $43.9 million before rebasing fuel and purchased power expense, with a return on equity of 10% and a rate-making equity ratio of 51.19%. The request reflected increases related to higher property taxes and the recovery of infrastructure investments made to improve reliability and enhance customer service and were also partially offset by significant customer savings and cost reductions created since the Great Plains Energy and Evergy Kansas Central merger in 2018. Evergy Metro also requested an additional $3.8 million increase associated with rebasing fuel and purchased power expense as well as the implementation of tracking mechanisms for both property tax expense and credit loss expense and the creation of a storm reserve as part of its application with the MPSC.

During the third quarter of 2022, Evergy Metro, MPSC staff and other intervenors in the case reached several non-unanimous partial stipulations and agreements to settle certain issues in the case. In September 2022, the MPSC issued an order approving the partial non-unanimous stipulations and agreements.

In December 2022, the MPSC issued an amended final rate order settling the remaining issues in the case. The order and prior partial stipulations and agreements approved by the MPSC provide for an increase to Evergy Metro's retail revenues of $25.0 million after rebasing fuel and purchased power expense. Also included in the final order was a disallowance related to the recovery of costs associated with the replacement of certain electric meters. As a result of this disallowance, Evergy and Evergy Metro recorded a loss of $5.5 million within other regulatory disallowances on their consolidated statements of comprehensive income for 2022. The rates established by the final rate order took effect in January 2023.

### ***Evergy Missouri West 2022 Rate Case Proceeding***

In January 2022, Evergy Missouri West filed an application with the MPSC to request an increase to its retail revenues of $27.7 million before rebasing fuel and purchased power expense, with a return on equity of 10% and a rate-making equity ratio of 51.81%. The request reflected increases related to higher property taxes and the recovery of infrastructure investments made to improve reliability and enhance customer service and were also partially offset by significant customer savings and cost reductions created since the Great Plains Energy and Evergy Kansas Central merger in 2018. Evergy Missouri West also requested an additional $32.1 million increase associated with rebasing fuel and purchased power expense, the implementation of tracking mechanisms for both property tax expense and credit loss expense, the creation of a storm reserve, and the full return of and return on its unrecovered investment related to the 2018 retirement of Sibley Station as part of its application with the MPSC.

During the third quarter of 2022, Evergy Missouri West, MPSC staff and other intervenors in the case reached several non-unanimous partial stipulations and agreements to settle certain issues in the case. In September 2022, the MPSC issued an order approving the partial non-unanimous stipulations and agreements.

In December 2022, the MPSC issued an amended final rate order settling the remaining issues in the case, including the treatment of Evergy Missouri West's unrecovered investment in Sibley Station. The order and prior partial stipulations and agreements approved by the MPSC provide for an increase to Evergy Missouri West's retail revenues of $30.1 million after rebasing fuel and purchased power expense. The order determined that Evergy Missouri West will be allowed to collect $182.3 million ($173.6 million attributable to Sibley Unit 3) from customers over a period of eight years as a recovery of its existing investment in Sibley Station but will not be allowed to collect the return on its unrecovered investment in Sibley Station. The order also required Evergy Missouri West to refund to customers all revenues collected from customers for return on investment, non-fuel operations and maintenance costs and other costs associated with Sibley Station following its retirement in November 2018 over a period of four years. Also included in the final order was a disallowance related to the recovery of costs associated with the replacement of certain electric meters.

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As a result of the amended final order, Evergy recorded a $68.0 million reduction to operating revenues and a corresponding increase to its Sibley AAO regulatory liability for revenues collected from customers for return on investment in Sibley Station since December 2018, which had not previously been recorded as they were not determined to be probable of refund, a $26.7 million impairment loss on Sibley Unit 3 and a $2.7 million other regulatory disallowance related to the recovery of costs associated with the replacement of certain meters on its consolidated statement of comprehensive income for 2022. As of December 31, 2022, the remaining net book value of Sibley Unit 3 was $146.3 million, which is representative of the $173.6 million unrecovered investment in Sibley Unit 3 determined by the MPSC in its December 2022 order less the 2022 impairment loss recorded and other amortization expense. As of December 31, 2022, Evergy's Sibley AAO regulatory liability was $108.0 million. The rates established by this order took effect in January 2023.

### *Evergy Missouri West Other Proceedings*

In December 2018, the Office of the Public Counsel (OPC) and the Midwest Energy Consumers Group (MECG) filed a petition with the MPSC requesting an AAO that would require Evergy Missouri West to record a regulatory liability for all revenues collected from customers for return on investment, non-fuel operations and maintenance costs, taxes including accumulated deferred income taxes, and all other costs associated with Sibley Station following the station's retirement in November 2018.

In October 2019, the MPSC granted OPC's and MECG's request for an AAO and required Evergy Missouri West to record a regulatory liability for the revenues discussed above for consideration in Evergy Missouri West's current rate case. Subsequent to the MPSC order in 2019, Evergy recorded a regulatory liability for the estimated amount of revenues that Evergy Missouri West had collected from customers for Sibley Station since December 2018 that Evergy had determined was probable of refund. This regulatory liability did not include revenues collected related to the return on investment in Sibley Station as Evergy determined that they were not probable of refund based on the relevant facts and circumstances. As of December 31, 2021, this Sibley AAO regulatory liability was $29.3 million.

As a result of the Evergy Missouri West current rate case determination, Evergy recorded an additional $68.0 million deferral to its Sibley AAO regulatory liability in 2022 for revenues collected from customers for return on investment in Sibley Station since December 2018. See 'Evergy Missouri West 2022 Rate Case Proceeding' within this Note 4 for additional information.

### *Evergy Metro and Evergy Missouri West February 2021 Winter Weather Event AAO*

In June 2021, Evergy Metro and Evergy Missouri West filed a joint request for an AAO with the MPSC that would allow Evergy Metro and Evergy Missouri West to defer to a regulatory asset or regulatory liability any extraordinary costs or revenues, including carrying costs, to provide electric service during the February 2021 winter weather event for consideration in future proceedings.

Evergy Metro and Evergy Missouri West initially deferred substantially all of their fuel and purchased power costs, net of wholesale revenues, related to the February 2021 winter weather event to a regulatory asset or liability pursuant to their ability to recover or refund these amounts through their fuel recovery mechanisms, which allow for the recovery or refund of 95% of increases in fuel and purchased power costs, net of wholesale revenues, above the amount included in base rates to customers. This AAO request is intended to address the recovery or refund of the February 2021 winter weather event amounts separate from the normal fuel recovery mechanism process given the extraordinary nature of the February 2021 winter weather event and to help moderate customer bill impacts. Evergy Metro's Missouri jurisdiction recognized a regulatory liability of approximately $25 million related to its increased wholesale revenues during the February 2021 winter weather event. Evergy Missouri West recognized a regulatory asset of approximately $280 million related to its costs incurred during the February 2021 winter weather event, primarily consisting of increased fuel and purchased power costs.

In the AAO filing, Evergy Metro requested to refund its deferred February 2021 winter weather event amounts to customers through its fuel recovery mechanism over one year, beginning in April 2022. In the same AAO filing, Evergy Missouri West requested to exclude its deferred February 2021 winter weather event amounts from recovery through its fuel recovery mechanism and indicated its intent to recover them through issuing securitized bonds

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pursuant to the securitization legislation signed into law in Missouri in July 2021. As part of the filing, Evergy Metro also requested an approximately $5 million decrease to its February 2021 winter weather refund to Missouri customers, which is not currently reflected in its regulatory liability for the February 2021 winter weather event, for jurisdictional allocation differences in its Kansas and Missouri fuel recovery mechanisms and for the portion of net wholesale revenues not traditionally refundable because of the 5% sharing provision of its fuel recovery mechanism. Evergy Missouri West requested an approximately $15 million increase to its February 2021 winter weather event recovery from Missouri customers, which is not currently reflected in its regulatory asset for the February 2021 winter weather event, for the portion of net fuel and purchased power costs not traditionally recoverable because of the 5% sharing provision of its fuel recovery mechanism.

In March 2022, the MPSC ordered Evergy Metro in a separate regulatory proceeding to file an adjustment to its fuel recovery mechanism in order to allow its wholesale revenues from the February 2021 winter weather event to be refunded to customers beginning in April 2022. The approximately $5 million decrease to the refund of February 2021 winter weather amounts requested by Evergy Metro due to jurisdictional allocation differences in its Kansas and Missouri fuel recovery mechanisms was not included in the adjustment.

In April 2022, the MPSC staff filed a motion to suspend the February 2021 winter weather event AAO procedural schedule for Evergy Metro and Evergy Missouri West pending the resolution of Evergy Missouri West's petition for a securitization financing order discussed below. The MPSC granted the motion to suspend the AAO procedural schedule in April 2022. Evergy Metro began refunding the Missouri portion of its wholesale revenues from the February 2021 winter weather event to customers through its fuel recovery mechanism in April 2022.

### ***Evergy Missouri West February 2021 Winter Weather Event Securitization***

In March 2022, Evergy Missouri West filed a petition for financing order with the MPSC requesting authorization to finance its extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event, including carrying costs, through the issuance of securitized bonds. Evergy Missouri West requested to repay the securitized bonds and collect the related amounts from customers over a period of approximately 15 years from the date of issuance of the securitized bonds.

In November 2022, the MPSC issued a revised financing order authorizing Evergy Missouri West to issue securitized bonds to recover its extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event. As part of this order, the MPSC found that Evergy Missouri West's costs were prudently incurred, that it should only be allowed to recover 95% of its extraordinary fuel and purchased power costs consistent with the 5% sharing provision of its fuel recovery mechanism, that it should be allowed to recover carrying costs incurred since February 2021 at Evergy Missouri West's long-term debt rate of 5.06% and approved a 15 year repayment period for the bonds with a 17 year legal maturity. In the third quarter of 2022, Evergy Missouri West recorded an increase of $15.0 million to its February 2021 winter weather event regulatory asset for the recovery of carrying charges granted in the MPSC's financing order. As of December 31, 2022 and 2021, the value of Evergy Missouri West's February 2021 winter weather event regulatory asset was $309.0 million and $281.6 million, respectively. Evergy Missouri West will continue to record carrying charges on its February 2021 winter weather event regulatory asset until it issues the securitized bonds.

In January 2023, the OPC filed an appeal with the Missouri Court of Appeals, Western District, challenging the financing order regarding the treatment of income tax deductions, carrying costs and discount rates related to the financing of the extraordinary fuel and purchased power costs incurred as part of the February 2021 winter weather event. A final nonappealable financing order is required prior to the issuance of securitized bonds. A decision by the Missouri Court of Appeals, Western District, is currently expected in the second half of 2023, though the timeline for the decision is uncertain.

### **FERC Proceedings**

In October of each year, Evergy Kansas Central and Evergy Metro post an updated TFR that includes projected transmission capital expenditures and operating costs for the following year. This rate is the most significant component in the retail rate calculation for Evergy Kansas Central's and Evergy Metro's annual request with the KCC to adjust retail prices to include updated transmission costs through the TDC.

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### *Evergy Kansas Central TFR Annual Update*

In the most recent three years, the updated TFR was expected to adjust Evergy Kansas Central's annual transmission revenues by approximately:

- $38.7 million increase effective in January 2023;
- $33.2 million increase effective in January 2022; and
- $32.4 million increase effective in January 2021.

### *Evergy Kansas Central TFR Formal Challenge*

In March 2022, certain Evergy Kansas Central TFR customers submitted a formal challenge regarding the implementation of Evergy Kansas Central's TFR, specifically with regards to how Evergy Kansas Central's capital structure was calculated as part of determining the Annual Transmission Revenue Requirement (ATRR). As part of this challenge, the customers requested that Evergy Kansas Central make refunds for over-collections in rate years 2018, 2019, 2020, 2021 and 2022 as a result of the calculation of its capital structure included in the TFR. Evergy Kansas Central disputed that any refunds for 2018 - 2022 were required as Evergy Kansas Central was following its approved TFR formula.

In December 2022, FERC issued an order upholding in part, and denying in part, the formal challenge of Evergy Kansas Central's TFR by certain customers. The order required Evergy Kansas Central to refund over-collections related to the calculation of its capital structure for the rate years 2020, 2021 and 2022, with interest. The order also denied approving the refund of 2018 and 2019 amounts as part of the formal challenge on a procedural basis but indicated that the customers could pursue a refund of over collections for these rate years through a separate FERC filing. As a result of this order, Evergy and Evergy Kansas Central recorded a $32.8 million decrease to operating revenues on their consolidated statements of income and comprehensive income for 2022 for the deferral to a regulatory liability of the estimated refund of TFR revenue over-collections related to the calculation of Evergy Kansas Central's capital structure for rate years 2018 - 2022. Evergy Kansas Central currently expects that the refund of the 2020, 2021 and 2022 over-collections will occur as part of its 2023 TFR. Evergy Kansas Central's calculation of its estimated refund to TFR customers must still be reviewed and approved by FERC, and that estimate could change based on that review.

### *Evergy Metro TFR Annual Update*

In the most recent three years, the updated TFR was expected to adjust Evergy Metro's annual transmission revenues by approximately:

- $8.6 million increase effective in January 2023;
- $18.1 million increase effective in January 2022; and
- $3.9 million decrease effective in January 2021.

### **Regulatory Assets and Liabilities**

The Evergy Companies have recorded assets and liabilities on their consolidated balance sheets resulting from the effects of the ratemaking process, which would not otherwise be recorded if they were not regulated. Regulatory assets represent incurred costs that are probable of recovery from future revenues. Regulatory liabilities represent future reductions in revenues or refunds to customers.

Management regularly assesses whether regulatory assets and liabilities are probable of future recovery or refund by considering factors such as decisions by the MPSC, KCC or FERC in Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's rate case filings; decisions in other regulatory proceedings, including decisions related to other companies that establish precedent on matters applicable to the Evergy Companies; and changes in laws and regulations. If recovery or refund of regulatory assets or liabilities is not approved by regulators or is no longer deemed probable, these regulatory assets or liabilities are recognized in the current period results of operations. The Evergy Companies continued ability to meet the criteria for recording regulatory assets and liabilities may be affected in the future by restructuring and deregulation in the electric industry or changes in accounting rules. In the event that the criteria no longer applied to any or all of the Evergy Companies' operations, the related regulatory

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assets and liabilities would be written off unless an appropriate regulatory recovery mechanism were provided. Additionally, these factors could result in an impairment on utility plant assets.

The Evergy Companies' regulatory assets and liabilities are detailed in the following tables.

|  | 2022 |  |  | 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
|  | December 31 |  |  |  |  |  |
|  | (millions) |  |  |  |  |  |
| Regulatory Assets |  |  |  |  |  |  |
| Pension and post-retirement costs | $137.3 | $54.9 | $ - | $567.2 | $265.6 | $213.3 |
| Debt reacquisition costs | 87.7 | 80.9 | 6.0 | 94.4 | 86.7 | 6.7 |
| Debt fair value adjustment | 92.1 | - | - | 96.5 | - | - |
| Asset retirement obligations fair value adjustment | 119.4 | - | - | 117.9 | - | - |
| Depreciation | 159.1 | 47.2 | 57.1 | 98.5 | 50.1 | 27.0 |
| Cost of removal | 346.8 | 158.2 | 140.6 | 257.5 | 141.0 | 90.2 |
| Asset retirement obligations | 127.5 | 54.5 | 53.4 | 119.3 | 52.3 | 49.1 |
| Analog meter unrecovered investment | 12.6 | 12.6 | - | 18.4 | 18.4 | - |
| Treasury yield hedges | 19.2 | 19.2 | - | 20.4 | 20.4 | - |
| Iatan No. 1 and common facilities | 6.2 | - | 2.6 | 6.5 | - | 2.7 |
| Iatan No. 2 construction accounting costs | 24.0 | - | 12.0 | 24.7 | - | 12.4 |
| Property taxes | 51.4 | 33.0 | 15.8 | 39.6 | 31.6 | 8.0 |
| Disallowed plant costs | 13.9 | 13.9 | - | 14.2 | 14.2 | - |
| La Cygne environmental costs | 10.0 | 7.9 | 2.1 | 11.2 | 9.0 | 2.2 |
| Deferred customer programs | 14.3 | 6.5 | 6.7 | 18.7 | 6.4 | 7.8 |
| Fuel recovery mechanisms | 188.5 | - | 13.5 | 202.5 | 120.8 | 19.8 |
| February 2021 winter weather event | 430.9 | 121.9 | - | 403.1 | 121.5 | - |
| Solar rebates | 15.6 | - | - | 20.2 | - | - |
| Transmission delivery charge | 1.5 | - | 1.5 | - | - | - |
| Wolf Creek outage | 22.8 | 11.4 | 11.4 | 20.4 | 10.2 | 10.2 |
| Pension and other post-retirement benefit non-service costs | 75.3 | 24.8 | 30.7 | 65.6 | 23.0 | 29.6 |
| Retired generation facilities | 146.3 | - | - | 123.4 | - | - |
| Merger transition costs | 28.1 | 13.3 | 10.5 | 32.7 | 15.6 | 12.1 |
| Other regulatory assets | 83.8 | 51.7 | 9.9 | 42.3 | 24.1 | 5.9 |
| Total | 2,214.3 | 711.9 | 373.8 | 2,415.2 | 1,010.9 | 497.0 |
| Less: current portion | (368.0) | (121.9) | (42.3) | (424.1) | (257.3) | (86.3) |
| Total noncurrent regulatory assets | $1,846.3 | $590.0 | $331.5 | $1,991.1 | $753.6 | $410.7 |

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|  | December 31 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 |  |  | 2021 |  |  |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Regulatory Liabilities |  |  |  |  |  |  |
| Taxes refundable through future rates | $1,866.6 | $1,084.2 | $586.6 | $1,969.5 | $1,143.7 | $616.1 |
| Deferred regulatory gain from sale leaseback | 37.1 | 37.1 | - | 42.6 | 42.6 | - |
| Emission allowances | 38.2 | - | 38.2 | 42.1 | - | 42.1 |
| Nuclear decommissioning | 246.3 | 103.4 | 142.9 | 400.1 | 175.7 | 224.4 |
| Pension and post-retirement costs | 98.4 | 23.0 | 72.5 | 44.4 | 23.2 | 15.9 |
| Jurisdictional allowance for funds used during construction | 25.9 | 24.2 | 1.7 | 27.5 | 25.8 | 1.7 |
| La Cygne leasehold dismantling costs | 29.6 | 29.6 | - | 29.6 | 29.6 | - |
| Kansas tax credits | 23.5 | 23.5 | - | 16.7 | 16.7 | - |
| Purchase power agreement | 4.1 | 4.1 | - | 5.8 | 5.8 | - |
| Fuel recovery mechanisms | 4.7 | 4.5 | 0.2 | 6.5 | - | 6.5 |
| February 2021 winter weather event | 37.8 | - | 37.8 | 65.1 | - | 65.1 |
| Sibley AAO | 108.0 | - | - | 29.3 | - | - |
| TFR refunds | 55.5 | 55.5 | - | - | - | - |
| Other regulatory liabilities | 146.5 | 51.9 | 48.2 | 96.5 | 19.1 | 37.0 |
| Total | 2,722.2 | 1,441.0 | 928.1 | 2,775.7 | 1,482.2 | 1,008.8 |
| Less: current portion | (155.4) | (72.1) | (55.3) | (70.7) | (12.8) | (54.6) |
| Total noncurrent regulatory liabilities | $2,566.8 | $1,368.9 | $872.8 | $2,705.0 | $1,469.4 | $954.2 |

The following summarizes the nature and period of recovery for each of the regulatory assets listed in the table above.

**Pension and post-retirement costs:** Represents unrecognized gains and losses and prior service costs that will be recognized in future net periodic pension and post-retirement costs, pension settlements amortized over various periods and financial and regulatory accounting method differences that will be eliminated over the life of the pension plans. Of these amounts, $116.3 million and $54.9 million for Evergy and Evergy Kansas Central, respectively, are not included in rate base and are amortized over various periods. Additionally, $201.0 million, $(5.6) million and $126.2 million for Evergy, Evergy Kansas Central and Evergy Metro, respectively, represent differences between pension and post-retirement costs under GAAP and pension and post-retirement costs for ratemaking that will be recovered or refunded in future rates and differences in accumulated unrecognized gains and losses and prior service costs between Evergy and Evergy Metro due to Evergy Metro electing not to apply 'push-down accounting' related to the Great Plains Energy and Evergy Kansas Central merger.

**Debt reacquisition costs:** Includes costs incurred to reacquire and refinance debt. These costs are amortized over the term of the new debt or the remaining lives of the old debt issuances if no new debt was issued and are not included in rate base.

**Debt fair value adjustment:** Represents purchase accounting adjustments recorded to state the carrying value of Evergy Metro and Evergy Missouri West long-term debt at fair value in connection with the Great Plains Energy and Evergy Kansas Central merger. Amount is amortized over the life of the related debt and is not included in rate base.

**Asset retirement obligations fair value adjustment:** Represents purchase accounting adjustments recorded to state the carrying value of Evergy Metro and Evergy Missouri West AROs at fair value in connection with the Great Plains Energy and Evergy Kansas Central merger. Amount is amortized over the life of the related plant and is not included in rate base.

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**Depreciation:** Represents the difference between regulatory depreciation expense and depreciation expense recorded for financial reporting purposes. These assets are included in rate base and the difference is amortized over the life of the related plant.

**Cost of removal:** Represents amounts spent, but not yet collected, to dispose of plant assets. This asset will decrease as removal costs are collected in rates and is included in rate base.

**Asset retirement obligations:** Represents amounts associated with AROs as discussed further in Note 6. These amounts are recovered over the life of the related plant and are not included in rate base.

**Analog meter unrecovered investment:** Represents the deferral of unrecovered investment of retired analog meters. Of this amount, $10.1 million is not included in rate base for Evergy and Evergy Kansas Central and is being amortized over a five-year period.

**Treasury yield hedges:** Represents the effective portion of treasury yield hedge transactions. Amortization of this amount will be included in interest expense over the term of the related debt and is not included in rate base.

**Iatan No. 1 and common facilities:** Represents depreciation and carrying costs related to Iatan No. 1 and common facilities. These costs are included in rate base and amortized over various periods.

**Iatan No. 2 construction accounting costs:** Represents the construction accounting costs related to Iatan No. 2. These costs are included in rate base and amortized through 2059.

**Property taxes:** Represents actual costs incurred for property taxes in excess of amounts collected in revenues in both Kansas and Missouri. These costs are expected to be recovered over various periods and are not included in rate base.

**Disallowed plant costs:** The KCC originally disallowed certain costs related to the Wolf Creek plant. In 1987, the KCC revised its original conclusion and provided for recovery of an indirect disallowance with no return on investment. This regulatory asset represents the present value of the future expected revenues to be provided to recover these costs, net of the amounts amortized.

**La Cygne environmental costs:** Represents the deferral of depreciation and amortization expense and associated carrying charges related to the La Cygne Station environmental project. This amount will be amortized over the life of the related asset and is included in rate base.

**Deferred customer programs:** Represents costs related to various energy efficiency programs that have been accumulated and deferred for future recovery. Of these amounts, $7.2 million for Evergy and $6.1 million for Evergy Metro are not included in rate base and are amortized over various periods.

**Fuel recovery mechanisms:** Represents the actual cost of fuel consumed in producing electricity and the cost of purchased power in excess of the amounts collected from customers. This difference is expected to be recovered over a one-year period and is not included in rate base.

**February 2021 winter weather event:** Represents deferred extraordinary fuel and purchased power costs incurred to provide electric service as a result of the February 2021 winter weather event. Of these amounts, $121.9 million for Evergy and Evergy Kansas Central is not included in rate base.

**Solar rebates:** Represents costs associated with solar rebates provided to retail electric customers. These amounts are not included in rate base and are amortized over various periods.

**Transmission delivery charge:** Represents costs associated with the transmission delivery charge. The amounts are not included in rate base and are amortized over a one-year period.

**Wolf Creek outage:** Represents deferred expenses associated with Wolf Creek's scheduled refueling and maintenance outages. These expenses are amortized during the period between planned outages and are not included in rate base.

**Pension and other post-retirement benefit non-service costs:** Represents the non-service component of pension and post-retirement net benefit costs that are capitalized as authorized by regulators. The amounts are included in rate base and are recovered over the life of the related asset.

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**Retired generation facilities:** Represents amounts to be recovered for facilities that have been retired and are probable of recovery.

**Merger transition costs:** Represents recoverable transition costs related to the merger. The amounts are not included in rate base and are recovered from retail customers through 2028.

**Other regulatory assets:** Includes various regulatory assets that individually are small in relation to the total regulatory asset balance. These amounts have various recovery periods and are not included in rate base.

The following summarizes the nature and period of amortization for each of the regulatory liabilities listed in the table above.

**Taxes refundable through future rates:** Represents the obligation to return to customers income taxes recovered in earlier periods when corporate income tax rates were higher than current income tax rates. A large portion of this amount is related to depreciation and will be returned to customers over the life of the applicable property.

**Deferred regulatory gain from sale leaseback:** Represents the gain Evergy Kansas South recorded on the 1987 sale and leaseback of its 50% interest in La Cygne Unit 2. The gain is amortized over the term of the lease.

**Emission allowances:** Represents deferred gains related to the sale of emission allowances to be returned to customers.

**Nuclear decommissioning:** Represents the difference between the fair value of the assets held in the nuclear decommissioning trust and the amount recorded for the accumulated accretion and depreciation expense associated with the asset retirement obligation related to Wolf Creek.

**Pension and post-retirement costs:** Includes pension and post-retirement benefit obligations and expense recognized in setting prices in excess of actual pension and post-retirement expense.

**Jurisdictional allowance for funds used during construction:** Represents AFUDC that is accrued subsequent to the time the associated construction charges are included in prices and prior to the time the related assets are placed in service. The AFUDC is amortized to depreciation expense over the useful life of the asset that is placed in service.

**La Cygne leasehold dismantling costs:** Represents amounts collected but not yet spent on the contractual obligation to dismantle a portion of La Cygne Unit 2. The obligation will be discharged as the unit is dismantled.

**Kansas tax credits:** Represents Kansas tax credits on investment in utility plant. Amounts will be credited to customers subsequent to the realization of the credits over the remaining lives of the utility plant giving rise to the tax credits.

**Purchase power agreement:** Represents the amount included in retail electric rates from customers in excess of costs incurred under purchase power agreements. Amounts are amortized over a five-year period.

**Fuel recovery mechanisms:** Represents the amount collected from customers in excess of the actual cost of fuel consumed in producing electricity and the cost of purchased power. This difference is expected to be refunded over a one-year period and is not included in rate base.

**February 2021 winter weather event:** Represents the deferral of increased wholesale revenues earned during the February 2021 winter weather event.

**Sibley AAO:** These amounts were collected in connection with an AAO granted by the MPSC in October 2019 and represent revenues that Evergy Missouri West collected from customers for the return on its unrecovered investment in Sibley Station, non-fuel operations and maintenance costs and other costs associated with Sibley Station following its retirement in November 2018. The amended final order in Evergy Missouri West's 2022 rate case required Evergy Missouri West to refund these revenues to customers over a four-year period.

**TFR refunds:** Represents the amount ordered to be refunded to TFR customers for over-collections related to the calculation of Evergy Kansas Central's capital structure for the rate years 2020 - 2022. This difference is expected to be refunded as a part of its 2023 TFR. In addition, this includes amounts probable of refund for similar issues for years 2018 - 2019 and amounts related to the amortization of excess deferred income taxes authorized by FERC in

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December 2022. See 'Evergy Kansas Central TFR Formal Challenge' within this Note 4 for additional information.

**Other regulatory liabilities:** Includes various regulatory liabilities that individually are relatively small in relation to the total regulatory liability balance. These amounts will be credited over various periods.

## 5. GOODWILL

GAAP requires goodwill to be tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. Evergy's impairment test for the $2,336.6 million of goodwill that was recorded as a result of the Great Plains Energy and Evergy Kansas Central merger was conducted as of May 1, 2022. The goodwill impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. In the event that the carrying amount exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference between the carrying amount of the reporting unit and its fair value. Evergy's consolidated operations are considered one reporting unit for assessment of impairment, as management assesses financial performance and allocates resources on a consolidated basis. The determination of fair value of the reporting unit consisted of two valuation techniques: an income approach consisting of a discounted cash flow analysis and a market approach consisting of a determination of reporting unit invested capital using a market multiple derived from the historical earnings before interest, income taxes, depreciation and amortization and market prices of the stock of peer companies. The results of the two techniques were evaluated and weighted to determine a point within the range that management considered representative of fair value for the reporting unit. The fair value of the reporting unit exceeded the carrying amount, including goodwill. As a result, there was no impairment of goodwill.

## 6. ASSET RETIREMENT OBLIGATIONS

AROs associated with tangible long-lived assets are legal obligations that exist under enacted laws, statutes and written or oral contracts, including obligations arising under the doctrine of promissory estoppel. These liabilities are recognized at estimated fair value as incurred with a corresponding amount capitalized as part of the cost of the related long-lived assets and depreciated over their useful lives. Accretion of the liabilities due to the passage of time is recorded to a regulatory asset and/or liability. Changes in the estimated fair values of the liabilities are recognized when known.

Evergy Kansas Central, Evergy Metro and Evergy Missouri West have AROs related to asbestos abatement and the closure and post-closure care of ponds and landfills containing coal combustion residuals (CCRs). In addition, Evergy Kansas Central and Evergy Metro have AROs related to decommissioning Wolf Creek and the retirement of wind generation facilities.

The following table summarizes the change in the Evergy Companies' AROs for the periods ending December 31, 2022 and 2021.

|  | Evergy |  | Evergy Kansas Central |  | Evergy Metro |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| (millions) |  |  |  |  |  |  |
| Beginning balance January 1 | $960.1 | $941.9 | $443.9 | $427.2 | $381.0 | $378.9 |
| Revision in timing and/or estimates | 161.8 | 13.5 | 103.1 | 3.8 | 51.3 | 9.5 |
| Settlements | (13.0) | (38.7) | (6.9) | (10.6) | (5.3) | (24.4) |
| Accretion | 44.3 | 43.4 | 25.0 | 23.5 | 17.2 | 17.0 |
| Ending balance | $1,153.2 | $960.1 | $565.1 | $443.9 | $444.2 | $381.0 |
| Less: current portion | (40.4) | (19.5) | (21.3) | (7.3) | (17.1) | (11.0) |
| Total noncurrent asset retirement obligation | $1,112.8 | $940.6 | $543.8 | $436.6 | $427.1 | $370.0 |

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In 2022, the Evergy Companies completed an engineering study that resulted in recording revisions in estimates for AROs at ponds and landfills containing CCRs, primarily at La Cygne Station and JEC, driven by higher cost estimates primarily due to increased scope of surface area remediation, cost inflation and changes in assumed method of closure at certain sites, among other factors.

## 7. PROPERTY, PLANT AND EQUIPMENT

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

| December 31, 2022 | Evergy | Evergy Kansas Central | Evergy Metro |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Electric plant in service | $32,129.3 | $15,376.9 | $12,343.3 |
| Electric plant acquisition adjustment | 724.3 | 724.3 | - |
| Accumulated depreciation | (12,304.9) | (5,922.9) | (5,065.3) |
| Plant in service | 20,548.7 | 10,178.3 | 7,278.0 |
| Construction work in progress | 1,421.2 | 819.5 | 482.6 |
| Nuclear fuel, net | 165.8 | 82.2 | 83.6 |
| Plant to be retired, net (a) | 0.8 | 0.8 | - |
| Net property, plant and equipment | $22,136.5 | $11,080.8 | $7,844.2 |

| December 31, 2021 | Evergy | Evergy Kansas Central | Evergy Metro |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Electric plant in service | $30,289.9 | $14,686.3 | $11,656.9 |
| Electric plant acquisition adjustment | 724.3 | 724.3 | - |
| Accumulated depreciation | (11,515.5) | (5,590.8) | (4,733.7) |
| Plant in service | 19,498.7 | 9,819.8 | 6,923.2 |
| Construction work in progress | 1,350.6 | 652.2 | 475.3 |
| Nuclear fuel, net | 152.5 | 76.1 | 76.4 |
| Plant to be retired, net (a) | 0.8 | 0.8 | - |
| Net property, plant and equipment | $21,002.6 | $10,548.9 | $7,474.9 |

$^{(a)}$ As of December 31, 2022 and 2021, represents the planned retirement of Evergy Kansas Central analog meters prior to the end of their remaining useful lives.

The following table summarizes the property, plant and equipment of VIEs for Evergy and Evergy Kansas Central.

|  | December 31 |  |
| --- | --- | --- |
|  | 2022 | 2021 |
|  | (millions) |  |
| Electric plant of VIEs | $392.1 | $392.1 |
| Accumulated depreciation of VIEs | (251.4) | (244.3) |
| Net property, plant and equipment of VIEs | $140.7 | $147.8 |

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## Depreciation Expense

The Evergy Companies' depreciation expense is detailed in the following table.

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
|  | (millions) |  |  |
| Evergy (a) | $836.1 | $813.6 | $804.7 |
| Evergy Kansas Central (a) | 468.2 | 450.3 | 435.1 |
| Evergy Metro | 261.7 | 255.9 | 269.5 |

$^{(a)}$ Approximately $7.1 million of depreciation expense in each of 2022, 2021 and 2020 was attributable to property, plant and equipment of VIEs.

## 8. JOINTLY-OWNED ELECTRIC UTILITY PLANTS

Evergy's, Evergy Kansas Central's and Evergy Metro's share of jointly-owned electric utility plants at December 31, 2022, are detailed in the following tables.

| Evergy |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Wolf Creek Unit | La Cygne Units (a) | Iatan No. 1 Unit | Iatan No. 2 Unit | Iatan Common | Jeffrey Energy Center | State Line |
|  | (millions, except MW amounts) |  |  |  |  |  |  |
| Evergy's share | 94% | 100% | 88% | 73% | 79% | 100% | 40% |
| Electric plant in service | $4,132.4 | $2,251.9 | $773.6 | $1,409.5 | $508.2 | $2,546.9 | $115.0 |
| Accumulated depreciation | 2,124.5 | 874.2 | 269.0 | 506.2 | 132.4 | 1,102.3 | 89.9 |
| Nuclear fuel, net | 165.8 | - | - | - | - | - | - |
| Construction work in progress | 209.1 | 25.9 | 19.8 | 5.3 | 11.2 | 60.1 | 26.9 |
| 2023 accredited capacity-MWs | 1,106 | 1,426 | 618 | 653 | n/a | 2,182 | 205 |

$^{(a)}$ The VIE consolidated by Evergy and Evergy Kansas Central holds its 50% leasehold interest in La Cygne Unit 2. This 50% leasehold interest in La Cygne Unit 2 is reflected in the information provided above. See Note 19 for additional information.

| Evergy Kansas Central |  |  |  |  |
| --- | --- | --- | --- | --- |
|  | Wolf Creek Unit | La Cygne Units (a) | Jeffrey Energy Center | State Line |
|  | (millions, except MW amounts) |  |  |  |
| Evergy Kansas Central's share | 47% | 50% | 92% | 40% |
| Electric plant in service | $2,070.5 | $1,052.3 | $2,331.3 | $115.0 |
| Accumulated depreciation | 1,036.1 | 503.6 | 1,006.7 | 89.9 |
| Nuclear fuel, net | 82.2 | - | - | - |
| Construction work in progress | 99.9 | 10.0 | 55.2 | 26.9 |
| 2023 accredited capacity-MWs | 553 | 713 | 2,007 | 205 |

$^{(a)}$ The VIE consolidated by Evergy and Evergy Kansas Central holds its 50% leasehold interest in La Cygne Unit 2. This 50% leasehold interest in La Cygne Unit 2 is reflected in the information provided above. See Note 19 for additional information.

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## *Evergy Metro*

|  | Wolf Creek Unit | La Cygne Units | Iatan No. 1 Unit | Iatan No. 2 Unit | Iatan Common |
| --- | --- | --- | --- | --- | --- |
| (millions, except MW amounts) |  |  |  |  |  |
| Evergy Metro's share | 47% | 50% | 70% | 55% | 61% |
| Electric plant in service | $2,061.9 | $1,199.6 | $601.0 | $1,068.9 | $403.2 |
| Accumulated depreciation | 1,088.4 | 370.6 | 219.6 | 431.0 | 111.5 |
| Nuclear fuel, net | 83.6 | - | - | - | - |
| Construction work in progress | 109.2 | 15.9 | 15.8 | 4.0 | 8.5 |
| 2023 accredited capacity-MWs | 553 | 713 | 492 | 491 | n/a |

Each owner must fund its own portion of the plant's operating expenses and capital expenditures. The Evergy Companies' share of direct expenses are included in the appropriate operating expense classifications in Evergy's, Evergy Kansas Central's and Evergy Metro's consolidated financial statements.

## **9. PENSION PLANS AND POST-RETIREMENT BENEFITS**

Evergy and certain of its subsidiaries maintain, and Evergy Kansas Central and Evergy Metro participate in, qualified non-contributory defined benefit pension plans covering the majority of Evergy Kansas Central's and Evergy Metro's employees as well as certain non-qualified plans covering certain active and retired officers. Evergy is also responsible for its indirect 94% ownership share of Wolf Creek's defined benefit plans, consisting of Evergy Kansas South's and Evergy Metro's respective 47% ownership shares.

For the majority of employees, pension benefits under these plans reflect the employees' compensation, years of service and age at retirement. However, for the plan covering Evergy Kansas Central's employees, the benefits for non-union employees hired between 2002 and the second quarter of 2018 and union employees hired beginning in 2012 are derived from a cash balance account formula. The plan was closed to future non-union employees in 2018. For the plans covering Evergy Metro's employees, the benefits for union employees hired beginning in 2014 are derived from a cash balance account formula and the plans were closed to future non-union employees in 2014.

Evergy and its subsidiaries also provide certain post-retirement health care and life insurance benefits for substantially all retired employees of Evergy Kansas Central and Evergy Metro and their respective shares of Wolf Creek's post-retirement benefit plans.

The Evergy Companies record pension and post-retirement expense in accordance with rate orders from the KCC and MPSC that allow the difference between pension and post-retirement costs under GAAP and costs for ratemaking to be recognized as a regulatory asset or liability. This difference between financial and regulatory accounting methods is due to timing and will be eliminated over the life of the plans.

For 2022, Evergy, Evergy Kansas Central and Evergy Metro recorded pension and post-retirement special termination benefits of $59.5 million, $17.0 million and $42.5 million, respectively. For 2021, Evergy, Evergy Kansas Central and Evergy Metro recorded pension settlement charges of $34.3 million, $25.6 million and $13.7 million, respectively. For 2020, Evergy and Evergy Metro recorded pension settlement charges of $11.2 million and $14.3 million, respectively. These settlement charges and special termination benefits were the result of accelerated and enhanced pension distributions as a result of employee retirements and annuity purchases for certain plan participants. Evergy, Evergy Kansas Central and Evergy Metro deferred substantially all of the charges to a regulatory asset and expect to recover these amounts over future periods pursuant to regulatory agreements.

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The following pension benefits tables provide information relating to the funded status of all defined benefit pension plans on an aggregate basis as well as the components of net periodic benefit costs. For financial reporting purposes, the market value of plan assets is the fair value. Net periodic benefit costs reflect total plan benefit costs prior to the effects of capitalization and sharing with joint owners of power plants.

|  | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Change in projected benefit obligation (PBO) |  |  |  |  |  |  |
| PBO at January 1, 2022 | $2,561.7 | $1,264.4 | $1,273.5 | $258.4 | $133.9 | $124.5 |
| Service cost | 79.7 | 30.7 | 49.0 | 3.0 | 1.5 | 1.5 |
| Interest cost | 79.3 | 38.8 | 39.8 | 7.9 | 4.1 | 3.8 |
| Contribution by participants | - | - | - | 6.9 | 1.0 | 5.8 |
| Plan amendments | 0.6 | 0.3 | 0.3 | - | - | - |
| Actuarial gain | (717.9) | (334.3) | (378.6) | (58.1) | (28.7) | (29.4) |
| Benefits paid | (189.4) | (100.1) | (88.0) | (23.1) | (10.2) | (12.9) |
| Special termination benefits | 52.8 | 15.6 | 37.2 | 6.7 | 1.4 | 5.3 |
| Other | (16.3) | (3.7) | (12.6) | - | - | - |
| PBO at December 31, 2022 | $1,850.5 | $911.7 | $920.6 | $201.7 | $103.0 | $98.6 |
| Change in plan assets |  |  |  |  |  |  |
| Fair value of plan assets at January 1, 2022 | $1,714.7 | $835.7 | $879.0 | $242.3 | $124.0 | $118.3 |
| Actual return on plan assets | (192.6) | (97.1) | (95.5) | (34.9) | (19.2) | (15.7) |
| Contributions by employer and participants | 88.4 | 31.2 | 57.2 | 7.0 | 1.1 | 5.9 |
| Benefits paid | (185.0) | (97.6) | (87.4) | (21.5) | (9.7) | (11.8) |
| Other | (16.3) | (3.7) | (12.6) | - | - | - |
| Fair value of plan assets at December 31, 2022 | $1,409.2 | $668.5 | $740.7 | $192.9 | $96.2 | $96.7 |
| Funded status at December 31, 2022 | $(441.3) | $(243.2) | $(179.9) | $(8.8) | $(6.8) | $(1.9) |
|  | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Amounts recognized in the consolidated balance sheets |  |  |  |  |  |  |
| Non-current asset | $ - | $ - | $ - | $16.8 | $ - | $16.8 |
| Current pension and other post-retirement liability | (7.2) | (4.7) | (1.3) | (1.3) | (0.6) | (0.7) |
| Noncurrent pension liability and other post-retirement liability | (434.1) | (238.5) | (178.6) | (24.3) | (6.2) | (18.0) |
| Net amount recognized before regulatory treatment | (441.3) | (243.2) | (179.9) | (8.8) | (6.8) | (1.9) |
| Accumulated OCI or regulatory asset/liability | (140.2) | 50.3 | (180.3) | (24.5) | (12.8) | (18.4) |
| Net amount recognized at December 31, 2022 | $(581.5) | $(192.9) | $(360.2) | $(33.3) | $(19.6) | $(20.3) |
| Amounts in accumulated OCI or regulatory asset/liability not yet recognized as a component of net periodic benefit cost: |  |  |  |  |  |  |
| Actuarial (gain) loss | $(153.8) | $35.0 | $(179.0) | $(25.3) | $(13.2) | $(13.1) |
| Prior service cost | 13.6 | 15.3 | (1.3) | 0.8 | 0.4 | (5.3) |
| Net amount recognized at December 31, 2022 | $(140.2) | $50.3 | $(180.3) | $(24.5) | $(12.8) | $(18.4) |

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|  | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Change in projected benefit obligation (PBO) |  |  |  |  |  |  |
| PBO at January 1, 2021 | $2,901.1 | $1,429.6 | $1,446.5 | $280.4 | $146.8 | $133.6 |
| Service cost | 82.6 | 29.1 | 53.5 | 3.3 | 1.7 | 1.6 |
| Interest cost | 84.2 | 41.0 | 42.5 | 7.8 | 4.0 | 3.8 |
| Contribution by participants | - | - | - | 9.0 | 1.4 | 7.6 |
| Actuarial gain | (119.0) | (50.0) | (68.3) | (17.2) | (9.4) | (7.8) |
| Benefits paid | (93.5) | (54.8) | (37.5) | (24.9) | (10.6) | (14.3) |
| Settlements | (284.0) | (126.2) | (157.8) | - | - | - |
| Other | (9.7) | (4.3) | (5.4) | - | - | - |
| PBO at December 31, 2021 | $2,561.7 | $1,264.4 | $1,273.5 | $258.4 | $133.9 | $124.5 |
| Change in plan assets |  |  |  |  |  |  |
| Fair value of plan assets at January 1, 2021 | $1,799.1 | $887.0 | $912.1 | $248.3 | $125.8 | $122.5 |
| Actual return on plan assets | 145.5 | 83.4 | 62.1 | 5.2 | 6.5 | (1.3) |
| Contributions by employer and participants | 148.7 | 46.5 | 102.2 | 11.8 | 1.7 | 10.1 |
| Benefits paid | (89.4) | (52.3) | (37.1) | (23.0) | (10.0) | (13.0) |
| Settlements | (279.5) | (124.6) | (154.9) | - | - | - |
| Other | (9.7) | (4.3) | (5.4) | - | - | - |
| Fair value of plan assets at December 31, 2021 | $1,714.7 | $835.7 | $879.0 | $242.3 | $124.0 | $118.3 |
| Funded status at December 31, 2021 | $(847.0) | $(428.7) | $(394.5) | $(16.1) | $(9.9) | $(6.2) |

|  | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Amounts recognized in the consolidated balance sheets |  |  |  |  |  |  |
| Non-current asset | $ - | $ - | $ - | $21.5 | $ - | $21.5 |
| Current pension and other post-retirement liability | (4.4) | (2.4) | (0.7) | (1.1) | (0.6) | (0.6) |
| Noncurrent pension liability and other post-retirement liability | (842.6) | (426.3) | (393.8) | (36.5) | (9.3) | (27.1) |
| Net amount recognized before regulatory treatment | (847.0) | (428.7) | (394.5) | (16.1) | (9.9) | (6.2) |
| Accumulated OCI or regulatory asset/liability | 317.2 | 263.6 | 84.6 | (11.4) | (9.6) | (10.5) |
| Net amount recognized at December 31, 2021 | $(529.8) | $(165.1) | $(309.9) | $(27.5) | $(19.5) | $(16.7) |
| Amounts in accumulated OCI or regulatory asset/liability not yet recognized as a component of net periodic benefit cost: |  |  |  |  |  |  |
| Actuarial (gain) loss | $302.4 | $246.6 | $86.4 | $(12.6) | $(10.5) | $(3.8) |
| Prior service cost | 14.8 | 17.0 | (1.8) | 1.2 | 0.9 | (6.7) |
| Net amount recognized at December 31, 2021 | $317.2 | $263.6 | $84.6 | $(11.4) | $(9.6) | $(10.5) |

Actuarial gains for the Evergy Companies' pension benefit plans for 2022 and 2021 were primarily driven by an increase in the discount rate used to measure the benefit obligation as a result of higher market interest rates. See the weighted average assumptions used to determine the benefit obligations within this Note 9 for further information.

As of December 31, 2022 and 2021, Evergy's pension benefits include non-qualified benefit obligations of $37.8 million and $49.2 million, respectively, which are funded by trusts containing assets of $34.1 million and $44.2 million, respectively. As of December 31, 2022 and 2021, Evergy Kansas Central's pension benefits include non-

117

qualified benefit obligations of $19.6 million and $25.4 million, respectively, which are funded by trusts containing assets of $24.9 million and $31.7 million, respectively. The assets in the aforementioned trusts are not included in the table above. See Note 14 for more information on these amounts.

| Year Ended December 31, 2022 | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Components of net periodic benefit costs |  |  |  |  |  |  |
| Service cost | $79.7 | $30.7 | $49.0 | $3.0 | $1.5 | $1.5 |
| Interest cost | 79.3 | 38.8 | 39.8 | 7.9 | 4.1 | 3.8 |
| Expected return on plan assets | (104.0) | (51.2) | (56.4) | (10.2) | (6.5) | (3.7) |
| Prior service cost | 1.9 | 2.0 | - | 0.5 | 0.4 | (1.4) |
| Recognized net actuarial (gain) loss | 34.8 | 25.6 | 38.6 | (0.3) | (0.2) | (0.7) |
| Settlement and special termination benefits | 52.8 | 15.6 | 37.2 | 6.7 | 1.4 | 5.3 |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 144.5 | 61.5 | 108.2 | 7.6 | 0.7 | 4.8 |
| Regulatory adjustment | 14.7 | 0.7 | (12.1) | (7.1) | (3.6) | (1.3) |
| Intercompany allocations | n/a | 2.9 | (18.4) | n/a | 0.3 | (0.6) |
| Net periodic benefit costs (income) | 159.2 | 65.1 | 77.7 | 0.5 | (2.6) | 2.9 |
| Other changes in plan assets and benefit obligations recognized in OCI or regulatory assets/liabilities |  |  |  |  |  |  |
| Current year net gain | (421.4) | (186.1) | (226.7) | (13.0) | (3.0) | (10.0) |
| Amortization of gain (loss) | (34.7) | (25.6) | (38.6) | 0.4 | 0.2 | 0.7 |
| Prior service cost | 0.6 | 0.4 | 0.4 | - | - | - |
| Amortization of prior service cost | (1.9) | (2.0) | - | (0.5) | (0.4) | 1.4 |
| Total recognized in OCI or regulatory asset/liability | (457.4) | (213.3) | (264.9) | (13.1) | (3.2) | (7.9) |
| Total recognized in net periodic benefit costs and OCI or regulatory asset/liability | $(298.2) | $(148.2) | $(187.2) | $(12.6) | $(5.8) | $(5.0) |

| Year Ended December 31, 2021 | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Components of net periodic benefit costs |  |  |  |  |  |  |
| Service cost | $82.6 | $29.1 | $53.5 | $3.3 | $1.7 | $1.6 |
| Interest cost | 84.2 | 41.0 | 42.5 | 7.8 | 4.0 | 3.8 |
| Expected return on plan assets | (103.5) | (52.8) | (55.7) | (8.9) | (6.3) | (2.6) |
| Prior service cost | 2.0 | 2.1 | - | 0.5 | 0.5 | (1.0) |
| Recognized net actuarial (gain) loss | 54.1 | 36.0 | 43.8 | 1.4 | 0.6 | (0.1) |
| Settlement and special termination benefits | 34.3 | 25.6 | 13.7 | - | - | - |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 153.7 | 81.0 | 97.8 | 4.1 | 0.5 | 1.7 |
| Regulatory adjustment | 17.3 | (13.1) | 4.2 | (4.8) | (3.3) | 0.4 |
| Intercompany allocations | n/a | 3.2 | (25.9) | n/a | - | (0.4) |
| Net periodic benefit costs (income) | 171.0 | 71.1 | 76.1 | (0.7) | (2.8) | 1.7 |
| Other changes in plan assets and benefit obligations recognized in OCI or regulatory assets/liabilities |  |  |  |  |  |  |
| Current year net gain | (195.3) | (106.3) | (88.4) | (13.6) | (9.6) | (3.9) |
| Amortization of gain (loss) | (52.4) | (36.0) | (43.9) | (1.3) | (0.5) | 0.1 |
| Amortization of prior service cost | (2.0) | (2.1) | - | (0.5) | (0.5) | 1.0 |
| Total recognized in OCI or regulatory asset/liability | (249.7) | (144.4) | (132.3) | (15.4) | (10.6) | (2.8) |
| Total recognized in net periodic benefit costs and OCI or regulatory asset/liability | $(78.7) | $(73.3) | $(56.2) | $(16.1) | $(13.4) | $(1.1) |

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| Year Ended December 31, 2020 | Pension Benefits |  |  | Post-Retirement Benefits |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Evergy | Evergy Kansas Central | Evergy Metro | Evergy | Evergy Kansas Central | Evergy Metro |
| (millions) |  |  |  |  |  |  |
| Components of net periodic benefit costs |  |  |  |  |  |  |
| Service cost | $78.9 | $27.1 | $51.8 | $2.7 | $1.1 | $1.6 |
| Interest cost | 96.8 | 47.0 | 49.1 | 9.2 | 4.8 | 4.4 |
| Expected return on plan assets | (105.6) | (53.1) | (54.7) | (9.3) | (6.6) | (2.7) |
| Prior service cost | 1.8 | 1.6 | 0.8 | 0.5 | 0.5 | - |
| Recognized net actuarial loss | 46.4 | 33.9 | 45.7 | 0.2 | - | (0.6) |
| Settlement and special termination benefits | 11.2 | - | 14.3 | - | - | - |
| Net periodic benefit costs before regulatory adjustment and intercompany allocations | 129.5 | 56.5 | 107.0 | 3.3 | (0.2) | 2.7 |
| Regulatory adjustment | 29.6 | 5.9 | (11.6) | (4.0) | (3.0) | (0.2) |
| Intercompany allocations | n/a | (0.2) | (22.6) | n/a | 0.1 | (0.3) |
| Net periodic benefit costs (income) | 159.1 | 62.2 | 72.8 | (0.7) | (3.1) | 2.2 |
| Other changes in plan assets and benefit obligations recognized in OCI or regulatory assets/liabilities |  |  |  |  |  |  |
| Current year net loss | 169.7 | 80.4 | 89.3 | 8.2 | 3.9 | 4.3 |
| Amortization of gain (loss) | (59.2) | (33.8) | (60.0) | (0.2) | - | 0.6 |
| Prior service cost | 4.1 | 8.1 | (3.9) | 0.9 | 0.5 | 0.4 |
| Amortization of prior service cost | (1.8) | (1.6) | (0.8) | (0.5) | (0.5) | - |
| Total recognized in OCI or regulatory asset/liability | 112.8 | 53.1 | 24.6 | 8.4 | 3.9 | 5.3 |
| Total recognized in net periodic benefit costs and OCI or regulatory asset/liability | $271.9 | $115.3 | $97.4 | $7.7 | $0.8 | $7.5 |

For financial reporting purposes, the estimated prior service cost and net actuarial (gain) loss for the defined benefit plans are amortized from accumulated other comprehensive income (OCI) or a regulatory asset into net periodic benefit cost. The Evergy Companies amortize prior service cost on a straight-line basis over the average future service of the active employees (plan participants) benefiting under the plan. Evergy and Evergy Kansas Central amortize the net actuarial (gain) loss on a straight-line basis over the average future service of active plan participants benefiting under the plan without application of an amortization corridor. Evergy Metro amortizes the net actuarial (gain) loss on a rolling five-year average basis.

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Pension and other post-retirement benefit plans with the PBO, accumulated benefit obligation (ABO) or accumulated other post-retirement benefit obligation (APBO) in excess of the fair value of plan assets at year-end are detailed in the following tables.

| December 31, 2022 | Evergy | Evergy Kansas Central | Evergy Metro |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| ABO for all defined benefit pension plans | $1,687.3 | $844.4 | $824.6 |
| Pension plans with the PBO in excess of plan assets |  |  |  |
| Projected benefit obligation | $1,850.5 | $911.7 | $920.6 |
| Fair value of plan assets | 1,409.2 | 668.5 | 740.7 |
| Pension plans with the ABO in excess of plan assets |  |  |  |
| Accumulated benefit obligation | $1,687.3 | $844.4 | $824.6 |
| Fair value of plan assets | 1,409.2 | 668.5 | 740.7 |
| Other post-retirement benefit plans with the APBO in excess of plan assets |  |  |  |
| Accumulated other post-retirement benefit obligation | $201.7 | $103.0 | $98.6 |
| Fair value of plan assets | 192.9 | 96.2 | 96.7 |

| December 31, 2021 | Evergy | Evergy Kansas Central | Evergy Metro |
| --- | --- | --- | --- |
| (millions) |  |  |  |
| ABO for all defined benefit pension plans | $2,229.1 | $1,124.2 | $1,081.1 |
| Pension plans with the PBO in excess of plan assets |  |  |  |
| Projected benefit obligation | $2,561.7 | $1,264.4 | $1,273.5 |
| Fair value of plan assets | 1,714.7 | 835.7 | 879.0 |
| Pension plans with the ABO in excess of plan assets |  |  |  |
| Accumulated benefit obligation | $2,229.1 | $1,124.2 | $1,081.1 |
| Fair value of plan assets | 1,714.7 | 835.7 | 879.0 |
| Other post-retirement benefit plans with the APBO in excess of plan assets |  |  |  |
| Accumulated other post-retirement benefit obligation | $258.4 | $133.9 | $124.5 |
| Fair value of plan assets | 242.3 | 124.0 | 118.3 |

The expected long-term rate of return on plan assets represents the Evergy Companies' estimate of the long-term return on plan assets and is based on historical and projected rates of return for current and planned asset classes in the plans' investment portfolios. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns of various asset classes. Based on the target asset allocation for each asset class, the overall expected rate of return for the portfolios was developed and adjusted for the effect of projected benefits paid from plan assets and future plan contributions.

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