Evergy Inc. said Feb. 26 that it has linked up with two private equity firms and added members to its board of directors as part of an effort to implement a program to enable "the sustainable transformation" of the company's generation fleet.
The Kansas City, Mo.-headquartered utility holding company said it has entered into agreements with Bluescape Energy Partners LLC and Elliott Investment Management LP, as it hopes to intend to pursue its STP, or Sustainability Transformation Plan, over the next five years.
Bluescape is to invest approximately $115 million in Evergy by purchasing newly issued shares, with the option of purchasing additional shares over the next three years at a price 20% higher than the current share price, Evergy said.
The company's president and CEO, David Campbell, said Evergy has added John Wilder, who is Bluescape's executive chairman, and former U.S. Sen. Mary Landrieu to the company's board of directors.
In January 2020, Elliott Management, who according to S&P Global Market Intelligence data owns 4.65% of Evergy common shares, released a letter it wrote to the Evergy board outlining steps it believed would result in a higher share value.
The private equity firm argued that Evergy had "a collection of high-quality, 100% regulated utilities" across two states — Kansas and Missouri — and that it had the opportunity to deploy capital in transmission and distribution to facilitate greater renewables penetration and in generation to transition Evergy's aging coal fleet to renewable energy.
Evergy's Campbell told analysts, "Our geographic footprint is ideally suited for wind and well positioned for solar, which allow for a path to transform relatively high-cost fossil fuels into modern low-cost renewables, all while ensuring reliability."
He said during the fourth-quarter 2020 earnings call on Feb. 26 that Evergy has updated its five-year capital plan to remain "consistent with the targeted STP investments." It has projected 2020-2024 capex of $8.9 billion and said it expects to install 700 MW of new renewables over that time frame.
Campbell said the company is expecting an $18.4 billion to $19.3 billion rate base in 2024, compared to $14.4 billion in 2019.
The company presented to analysts its $9.2 billion 2021-2025 capex plan as well, saying its estimated investment in its utility generation over those years is expected to total $1.31 billion. It intends to put $3.03 billion into transmission over that same period and $675 million into renewables, the company said.
Cold weather and COVID-19
Calling the mid-February 2021 cold weather event that just passed the "worst in decades," with temperatures dipping as low as minus 21 degrees F, Campbell said the cost to the company for buying natural gas and purchasing power due to the cold "is estimated at $300 million." Evergy is in the Southwest Power Pool region.
That figure will likely be adjusted higher because purchased power expenses for Feb. 19 have not yet been determined and all power purchases are still subject to settlement by SPP, the company said.
In a COVID-19 update, Evergy said that weather-adjusted retail sales in the fourth quarter of 2020 were 2% lower compared to fourth-quarter 2019, with residential sales up 3% and industrial sales up 1% but commercial sales down 7%.
Residential usage represents a roughly 50% contribution to total retail earnings, the company noted.
Jeffrey Ryser is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.
