Evergy, Inc. (EVRG) FY 2023 MD&A

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 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 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, 2022.

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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.

•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 15,600 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 approximately $12.5 billion of expected base capital investments through 2028 including new generation of approximately $2.9 billion which is expected to be primarily renewable and other generation. See "Liquidity and Capital Resources; Capital Expenditures", for further information regarding Evergy's projected capital expenditures through 2028;

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•targeting a 70% reduction of owned generation CO2 emissions by 2030 (from 2005 levels) and net-zero CO2e emissions, for scope 1 and scope 2 emissions, by 2045 through the responsible transition of Evergy's generation fleet, including the continued growth of Evergy's renewable energy portfolio and the retirement of older and less efficient fossil fuel plants; achieving these emissions reductions is expected to be dependent on enabling technologies and supportive policies and regulations, among other external factors. See "Transitioning Evergy's Generation Fleet" in Part I, Item 1., Business, for additional information; and

•maintaining and continuing to advance the operating and maintenance expense reductions and efficiency gains achieved since the 2018 merger of Evergy Kansas Central and Great Plains Energy.

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

Evergy Missouri West 2024 Rate Case Proceeding

In February 2024, Evergy Missouri West filed an application with the MPSC to request an increase to its retail revenues of approximately $104 million. Evergy Missouri West's request reflected a return of equity of 10.5% (with a capital structure composed of 52% equity) and increases related to the recovery of infrastructure investments made to improve reliability and enhance customer service and the inclusion of costs related to Dogwood Energy Center (Dogwood) and Crossroads Energy Center (Crossroads), two natural gas plants. New rates are expected to be effective in January 2025.

Evergy Kansas Central and Evergy Metro 2023 Rate Case Proceeding

In April 2023, Evergy Kansas Central and Evergy Metro filed an application with the KCC to request an increase to their retail revenues. In September 2023, Evergy Kansas Central, Evergy Metro, the KCC staff and other intervenors reached a unanimous settlement agreement to settle all outstanding issues in the case. In November 2023, the KCC approved the unanimous settlement agreement. New rates were effective in December 2023. See Note 4 to the consolidated financial statements for additional information.

Renewable Generation Investment

In May 2023, Evergy Kansas Central closed on the purchase of Persimmon Creek, owner of an operational wind farm located in the state of Oklahoma with a generating capacity of approximately 199 MW, for $220.9 million, including costs incidental to the purchase of the plant. Evergy Kansas Central included the purchase of Persimmon Creek in its rate case application to the KCC which was filed in April 2023. The addition of Persimmon Creek is consistent with the preferred plan identified through Evergy Kansas Central’s integrated resource plan filed with the KCC in June 2023, which identified it as part of the lowest-cost resource plan to serve customers. In November 2023, the KCC approved the unanimous settlement agreement that included the purchase of Persimmon Creek in Evergy Kansas Central's rates through a levelized revenue requirement approach at a fixed annual rate of $18.6 million for the first 20 years, after which the levelized revenue requirement will be reevaluated. See Note 1 and Note 4 to the consolidated financial statements for additional information on Evergy Kansas Central's purchase of Persimmon Creek and rate case proceeding, respectively.

Convertible Debt Issuance

In December 2023, Evergy, Inc. issued $1.4 billion aggregate principal amount of 4.50% Convertible Notes (Convertible Notes), including $0.2 billion principal amount of Convertible Notes issued upon the full exercise by the initial purchasers of their over-allotment option. Proceeds from the offering were used to repay the $500.0 million borrowing under the Term Loan Facility, to repay a portion of the outstanding balance under the commercial paper program and for general corporate purposes. See Note 12 to the consolidated financial statements for additional information on Evergy, Inc.'s issuance of Convertible Notes.

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Natural Gas Plant Investment

In November 2023, Evergy Missouri West entered into an agreement to buy a joint ownership interest in Dogwood, representing approximately 145 MW in an operational natural gas combined cycle facility located in Missouri, for approximately $60 million. The purchase is subject to regulatory approvals and closing conditions, including the granting by the MPSC of a Certificate of Convenience and Necessity (CCN) with reasonably acceptable terms. In November 2023, Evergy Missouri West filed an application for a CCN.

In February 2024, Evergy Missouri West, staff of the MPSC and other intervenors reached a unanimous stipulation and agreement recommending the MPSC grant Evergy Missouri West a CCN, subject to the terms and conditions included within the agreement. Among these terms and conditions, Evergy Missouri West shall be allowed to recover in rates a return of and return on the original cost, net of accumulated depreciation, of Dogwood. Evergy Missouri West shall also be allowed to recover in rates over two years a return of, but not a return on, the amount of the purchase price paid in excess of the original cost, net of accumulated depreciation, of Dogwood. In addition, net revenues generated from Evergy Missouri West's ownership of Dogwood from the date of closing to the date new rates become effective in Evergy Missouri West's current rate case shall not impact rates and shall be retained by Evergy Missouri West and reduce the amount of the purchase price paid in excess of the original cost, net of accumulated depreciation, of Dogwood to be recovered from customers. A decision by the MPSC and the closing of the transaction are expected by the end of second quarter of 2024.

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).

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. As of December 31, 2023 and 2022, the value of Evergy Missouri West's February 2021 winter weather event regulatory asset was $323.8 million and $309.0 million, respectively. Evergy Missouri West continued to record carrying charges on its February 2021 winter weather event regulatory asset until it issued the securitized bonds in February 2024.

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. In September 2023, the Missouri Court of Appeals, Western District, affirmed the November 2022 MPSC revised financing order. In October 2023, the Missouri Court of Appeals, Western District, rejected the OPC's request for rehearing. The OPC did not file an appeal with the Supreme Court of the State of Missouri by the mid-November 2023 deadline and therefore the financing order is final and nonappealable. In February 2024, Evergy Missouri West issued the securitized bonds. See Note 12 to the consolidated financial statements for additional information regarding the issuance of the securitized bonds.

Regulatory Proceedings

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

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Earnings Overview

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

Net income attributable to Evergy, Inc. decreased in 2023, compared to 2022, primarily due to higher depreciation and interest expense in 2023, recording a $96.5 million deferral of revenues in 2023 for future refund of amounts previously collected from customers related to corporate-owned life insurance (COLI) rate credits and lower retail sales driven by unfavorable weather; partially offset by lower operating and maintenance expenses, new Evergy Metro and Evergy Missouri West retail rates effective in January 2023, the refund obligation of amounts collected from customers for the return on investment of Sibley Station recorded in 2022, lower income tax expense, the 2022 ordered refund to customers of certain transmission revenues and an increase due to Evergy Metro's Earnings Review and Sharing Plan (ERSP).

Diluted EPS decreased in 2023, compared to 2022, 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.

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 the 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)

Management believes that adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are representative measures of Evergy's recurring earnings, assists in the comparability of results and is consistent with how management reviews performance.

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Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) for 2023 were $815.6 million or $3.54 per share. For 2022, Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) were $853.8 million or $3.71 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 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 deferral of the cumulative amount of prior year revenues collected from customers since December 2018 for the return on investment of the retired Sibley Station in 2022 for future refunds to customers;

iv.the mark-to-market impacts of economic hedges related to Evergy Kansas Central's 8% ownership share of JEC;

v.costs resulting from executive transition, severance and advisor expenses;

vi.the deferral of the cumulative amount of transmission revenues collected from customers since 2018 through Evergy Kansas Central's FERC TFR to be refunded to customers in accordance with a December 2022 FERC order;

vii.the impairment loss on Sibley Unit 3 and other regulatory disallowances;

viii.the 2023 deferral of the cumulative amount of prior year revenues collected since October 2019 for costs related to an electric subdivision rebate program to be refunded to customers in accordance with a June 2020 KCC order; and

ix.the deferral of revenues for future refund of amounts previously collected from customers related to COLI rate credits in accordance with a September 2023 KCC rate case unanimous settlement agreement.

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.

The following table provides a reconciliation between net income attributable to Evergy, Inc. and diluted EPS as determined in accordance with GAAP and adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP), respectively.

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(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 the deferral of the cumulative amount of prior year revenues collected from customers since December 2018 for the return on investment of the retired Sibley Station for future refunds to customers 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 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 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.

(i)Reflects 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.

(j)Reflects the deferral of the cumulative amount of prior year transmission revenues collected from customers since 2018 through Evergy Kansas Central's transmission formula rate to be refunded to customers in accordance with a December 2022 Federal Energy Regulatory Commission order that are included in operating revenues on the consolidated statements of comprehensive income.

(k)Reflects the deferral of the cumulative amount of prior year revenues collected since October 2019 for costs related to an electric subdivision rebate program to be refunded to customers in accordance with a June 2020 KCC order that are included in operating revenues on the consolidated statements of comprehensive income.

(l)Reflects the deferral of revenues for future refund of amounts previously collected from customers related to COLI rate credits in accordance with a September 2023 KCC rate case unanimous settlement agreement reached between Evergy, the KCC staff and other intervenors that are included in operating revenues on the consolidated statements of comprehensive income.

(m)Reflects an income tax effect calculated at a statutory rate of approximately 22%.

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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.

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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 2023, Evergy's pension expense was $8.5 million under GAAP and $102.5 million for ratemaking. The impact on 2024 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, 2023 and 2022.

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, 2023. 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, 2023 and 2022, Evergy had recorded AROs of $1,203.1 million and $1,153.2 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.

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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).

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Evergy's gross margin (GAAP) decreased $118.9 million in 2023, compared to 2022, and Evergy's utility gross margin (non-GAAP) decreased $4.1 million in 2023, compared to 2022, both measures were driven by:

•a $96.5 million decrease due to the deferral of revenues at Evergy Kansas Central in 2023 for future refund to customers of amounts previously collected from customers related to COLI rate credits;

•an $83.1 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased by 6% and heating degree days decreased by 13%), partially offset by higher weather-normalized residential and commercial demand;

•a $19.9 million decrease due to mark-to-market 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 8% ownership share of JEC; and

•a $10.3 million decrease in operating revenue related to non-regulated energy marketing activity at Evergy Kansas Central; partially offset by

•a $71.0 million increase from new Evergy Metro and Evergy Missouri West retail rates effective in January 2023;

•a $51.4 million increase due to the 2022 deferral of the cumulative amount of prior year revenues collected from customers since December 2018 for the return on investment of the retired Sibley Station for future refund to customers;

•a $32.8 million increase in transmission revenues due to the 2022 deferral of revenues as a result of receiving a December 2022 FERC order requiring Evergy Kansas Central to refund through its TFR amounts related to overcollections related to the calculation of Evergy Kansas Central's capital structure for rate years 2018 through 2022;

•a $27.8 million increase due to recording an estimated $16.7 million refund obligation under Evergy Metro's ERSP in 2022 and an $11.1 million reduction to the estimated refund obligation which was ordered and recorded in 2023. See Note 4 of the consolidated financial statements for additional information; and

•a $22.7 million increase 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.

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

•a $147.1 million increase in depreciation and amortization primarily driven by a change in depreciation rates at Evergy Metro and Evergy Missouri West and capital additions as described further below; and

•an $8.5 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; offset by

•a $40.8 million decrease in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by an $18.6 million decrease in operating and maintenance expense at fossil-fuel generating units, a $16.7 million decrease in transmission and distribution operating and maintenance expense and a $6.1 million decrease in operating and maintenance expense at Wolf Creek as described further below.

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Operating and Maintenance

Evergy's operating and maintenance expense decreased $140.0 million in 2023, compared to 2022, primarily driven by:

•a $34.1 million decrease in administrative labor and employee benefits expenses primarily due to lower employee headcount in 2023;

•a $27.6 million decrease in various administrative and general operating and maintenance expenses primarily due to lower regulatory amortizations at Evergy Metro and Evergy Missouri West as a result of their 2022 rate cases;

•an $18.6 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to an $14.9 million decrease at Evergy Kansas Central resulting principally from a major outage at JEC Unit 3 in 2023;

•a $16.7 million decrease in transmission and distribution operating and maintenance expenses driven by a $19.9 million decrease in labor expense primarily due to an increase in labor capitalization and lower employee headcount; partially offset by $5.8 million of costs at Evergy Metro incurred from storms that occurred in July 2023;

•a $6.1 million decrease in plant operating and maintenance expense at Wolf Creek at Evergy Kansas Central and Evergy Metro primarily due to lower refueling outage amortization in 2023; and

•$5.4 million of advisor expenses incurred in 2022 associated with strategic planning.

Depreciation and Amortization

Evergy's depreciation and amortization increased $147.1 million in 2023, compared to 2022, primarily driven by:

•a $76.3 million increase primarily due to a change in depreciation rates and the rebasing of PISA depreciation deferrals as a result of Evergy Metro's and Evergy Missouri West's 2022 rate cases effective in January 2023; and

•a $70.8 million increase primarily due to capital additions.

Taxes Other Than Income Tax

Evergy's taxes other than income tax increased $8.5 million in 2023, compared to 2022, 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 Note 1 of the consolidated financial statements for additional information.

Other Income (Expense), Net

Evergy's other expense, net decreased $53.2 million in 2023, compared to 2022, primarily driven by:

•a $21.9 million decrease due to recording higher Evergy Kansas Central COLI benefits;

•a $20.3 million decrease due to higher investment earnings primarily driven by a $16.3 million loss related to Evergy's equity investment in an early-stage energy solutions company that was sold in 2022 through a share forward agreement and a $7.4 million increase to other income due to net realized losses becoming net unrealized gains in Evergy Kansas Central's rabbi trust; and

•an $11.7 million decrease in pension non-service costs; partially offset by

•an $11.6 million decrease in equity allowance for funds used during construction (AFUDC) principally driven by higher short-term debt balances in 2023.

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Interest Expense

Evergy's interest expense increased $121.8 million in 2023, compared to 2022, primarily driven by:

•an $84.4 million increase in interest expense on short-term borrowings primarily due to higher short-term debt balances and weighted-average interest rates in 2023;

•an $18.2 million increase due to the issuance of Evergy Kansas Central's $400.0 million of 5.70% FMBs in March 2023;

•a $14.3 million increase due to the issuance of Evergy Missouri West's $300.0 million of 5.15% FMBs in December 2022; and

•a $4.2 million increase due to the issuance of Evergy, Inc.'s $1.4 billion of 4.50% Convertible Notes in December 2023; partially offset by

•a $23.5 million decrease due to higher debt AFUDC primarily driven by higher short-term debt balances and higher weighted-average interest rates in 2023.

Income Tax Expense

Evergy's income tax expense decreased $31.9 million in 2023, compared to 2022, primarily driven by:

•a $15.9 million decrease primarily due to higher wind and other income tax credits in 2023 principally driven by the acquisition of the Persimmon Creek wind farm;

•a $10.7 million decrease primarily due to lower Evergy Kansas Central and Evergy Metro pre-tax income in 2023; and

•a $4.7 million decrease primarily due to higher amortization of excess deferred income taxes authorized by Evergy Metro's and Evergy Missouri West's 2022 rate case.

EVERGY SIGNIFICANT BALANCE SHEET CHANGES

(December 31, 2023 compared to December 31, 2022)

•Evergy's receivables, net decreased $58.4 million primarily driven by a $50.6 million decrease at Evergy Kansas Central in wholesale sales accounts receivable driven by higher SPP pricing in December 2022 and a decrease in power sold to the SPP in 2023.

•Evergy's fuel and supplies inventory increased $103.3 million primarily due to a $69.3 million increase in coal inventories driven by lower coal burn, improved railroad performance and higher average coal prices in 2023 and a $26.7 million increase in materials and supplies primarily driven by higher costs and higher overall levels of inventory to mitigate longer supply chain lead times.

•Evergy's regulatory assets - current decreased $75.9 million primarily driven by a $97.9 million decrease related to Evergy Missouri West's fuel recovery mechanism recoveries, partially offset by the reclassification of $18.6 million from regulatory assets - long-term related to deferred fuel and purchased power costs at Evergy Kansas Central expected to be recovered in the next 12 months related to the February 2021 winter weather event.

•Evergy's nuclear decommissioning trust funds increased $113.1 million primarily driven by realized and unrealized gains on investments at Evergy Kansas Central's and Evergy Metro's nuclear decommissioning trusts.

•Evergy's current maturities of long-term debt increased $360.9 million primarily due to the reclassification of Evergy's $800.0 million of 2.45% Senior Notes from long-term to current, partially offset by the repayments of Evergy Metro's $300.0 million of 3.15% Senior Notes in March 2023, Evergy Metro's $79.5 million of 2.95% Environmental Improvement Revenue Refunding (EIRR) bonds in December 2023, Evergy Kansas South's $50.0 million of 6.15% FMBs in May 2023, Evergy Missouri West's $7.0 million of 7.17% Series Medium Term Notes in December 2023 and Evergy Missouri West's $3.0 million of 7.33% Series Medium Term Notes in November 2023.

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•Evergy's commercial paper decreased $380.5 million primarily due to a $541.7 million decrease at Evergy Kansas Central due to the repayment of commercial paper with the proceeds from its issuance of $400.0 million of 5.70% FMBs in March of 2023 and $300.0 million of 5.90% FMBs in November 2023; partially offset by a $312.3 million increase at Evergy Metro due to borrowings for capital expenditures and for general corporate purposes.

•Evergy's long-term debt, net increased $1,147.6 million primarily driven by Evergy's issuance of $1.4 billion of 4.50% Convertible Notes in December 2023. The net proceeds were used to repay the $500.0 million outstanding under the Term Loan, to repay a portion of the Evergy Companies' outstanding commercial paper borrowings and for general corporate purposes.

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 $1,980.2 million, $1,801.9 million and $1,351.7 million in 2023, 2022 and 2021, respectively.

Short-Term Borrowings

As of December 31, 2023, Evergy had $1.5 billion of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $299.3 million for Evergy, Inc., $518.6 million for Evergy Kansas Central, $326.7 million for Evergy Metro and $401.9 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 with an original expiration date 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 $500.0 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. In December 2023, Evergy repaid its $500.0 million Term Loan Facility with a portion of the proceeds from Evergy's issuance of $1.4 billion of 4.50% Convertible Notes.

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.

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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, 2023 and 2022, Evergy's capital structure, excluding short-term debt, was as follows:

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, 2023, 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 28, 2024, the major credit rating agencies rated the Evergy Companies' securities as detailed in the following table.

(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, 2023.

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. Also, Evergy Metro's long-term financing activities are subject to the authorization of the MPSC. In February 2024, Evergy Metro filed an application requesting MPSC approval to issue up to $300.0 million of long-term debt through December 2024. Evergy Metro requested a final order from the MPSC no later than March 15, 2024.

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, 2023, $518.6 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, 2023, approximately $2,878.6 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, 2023, approximately $5,548.5 million principal amount of additional Evergy Metro mortgage bonds could be issued under the most restrictive provisions in the mortgage.

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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, 2023, approximately $2,158.7 million principal amount of additional Evergy Missouri West mortgage bonds could be issued under the most restrictive provisions in the mortgage.

Cash and Cash Equivalents

As of December 31, 2023, Evergy had approximately $27.7 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 CO2 emissions and net-zero CO2e emissions, for scope 1 and scope 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 $2,334.0 million, $2,166.5 million and $1,972.5 million in 2023, 2022 and 2021, 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 forecast 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.

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 projections, 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.

(a)    Evergy expects to make contributions to the pension and other post-retirement plans beyond 2028 but the amounts are not yet determined.

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Long-term debt includes current maturities. Long-term debt principal excludes $106.0 million of unamortized net discounts and debt issuance costs and a $87.0 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, 2023.

Evergy expects to contribute $46.0 million to the pension and other post-retirement plans in 2024, of which the majority is expected to be paid by Evergy Kansas Central and Evergy Metro. Additional contributions to the plans are expected beyond 2028 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 2024 are estimates based on information available in determining the amount for 2024. Actual amounts for years after 2024 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.

As of December 31, 2023, 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 2024.

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.

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Cash Flows

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

Cash Flows from Operating Activities

Evergy's cash flows from operating activities increased $178.3 million in 2023, compared to 2022, primarily driven by:

•a $121.9 million increase in fuel recovery mechanism net collections, primarily at Evergy Missouri West; and

•$24.8 million in payments made for a Wolf Creek refueling outage in 2022.

Cash Flows used in Investing Activities

Evergy's cash flows used in investing activities increased $319.5 million in 2023, compared to 2022, primarily driven by:

•the acquisition of Persimmon Creek Wind Farm for $217.9 million, net of cash acquired, in 2023; and

•a $167.5 million increase in additions to property, plant and equipment, primarily due to increased spending for a variety of capital projects including transmission and distribution projects related to grid resiliency and other infrastructure improvements, primarily at Evergy Kansas Central; partially offset by

•an $83.5 million increase in proceeds from COLI investments, primarily from Evergy Kansas Central due to a higher number of policy settlements in 2023.

Cash Flows from Financing Activities

Evergy's cash flows from financing activities increased $144.7 million in 2023, compared to 2022, primarily driven by:

•a $1,877.1 million increase in proceeds from long-term debt primarily due to Evergy Kansas Central's issuance of $400.0 million of 5.70% FMBs in March 2023, Evergy Metro’s issuance of $300.0 million of 4.95% Mortgage Bonds in April 2023, Evergy Kansas Central's issuance of $300.0 million of 5.90% FMBs in November 2023, Evergy Metro’s issuance of $79.5 million of 4.30% Series 2023 tax-exempt notes in December 2023 and Evergy's issuance of $1.4 billion of 4.50% Convertible Notes in December 2023; partially offset by Evergy Missouri West's issuance of $250.0 million of 3.75% FMBs in March 2022 and Evergy Missouri West's issuance of $300.0 million of 5.15% FMBs in December 2022; partially offset by

•a $1,554.8 million decrease in short-term debt borrowings primarily due to the repayments of Evergy's $500.0 million Term Loan Facility and $759.9 million of commercial paper borrowings with the proceeds from its issuance of $1.4 billion of 4.50% Convertible Notes in December 2023 and the $500.0 million Term Loan Facility proceeds in 2022; partially offset by Evergy Kansas South's repayment of $50.0 million of 6.15% FMBs in May 2023 with commercial paper borrowings;

•a $61.8 million increase in the repayment of borrowings against the cash surrender value of COLI primarily due to a higher number of policy settlements in 2023; and

•a $57.0 million decrease in collateralized short-term debt, net primarily due to Evergy's decrease in retail electric accounts receivable balances in 2023 compared to an increase in retail electric accounts receivable balances in 2022, resulting in a lower level of retail electric receivables available for sale through Evergy's receivable sales facilities.

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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.

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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).

Evergy Kansas Central's gross margin (GAAP) decreased $77.3 million in 2023, compared to 2022, and Evergy Kansas Central's utility gross margin (non-GAAP) decreased $74.2 million in 2023, compared to 2022, both measures were driven by:

•a $96.5 million decrease due to the deferral of revenues in 2023 for future refund to customers of amounts previously collected from customers related to COLI rate credits;

•a $38.6 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased by 3% and heating degree days decreased by 14%); and

•a $19.9 million decrease due to mark-to-market 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 8% ownership share of JEC; partially offset by

•a $32.8 million increase in transmission revenues due to the 2022 deferral of revenues as a result of receiving a December 2022 FERC order requiring Evergy Kansas Central to refund through its TFR amounts related to overcollections related to the calculation of Evergy Kansas Central's capital structure for rate years 2018 through 2022;

•a $25.3 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2023 and revised in March 2023; and

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•a $22.7 million increase 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.

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

•a $30.9 million increase in depreciation and amortization expense as described further below; partially offset by

•a $31.1 million decrease in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by a $14.9 million decrease in operating and maintenance expense at fossil-fuel generating units, a $14.0 million decrease in transmission and distribution operating and maintenance expenses and a $2.9 million decrease in operating and maintenance expense at Wolf Creek as described further below.

Evergy Kansas Central Operating and Maintenance

Evergy Kansas Central's operating and maintenance expense decreased $59.0 million in 2023, compared to 2022, primarily driven by:

•a $17.3 million decrease in administrative labor and employee benefits expenses primarily due to lower employee headcount in 2023;

•a $14.9 million decrease in plant operating and maintenance expense at fossil-fuel generating units resulting principally from a major outage at JEC Unit 3 in 2023;

•a $14.0 million decrease in various transmission and distribution operating and maintenance expenses primarily due to lower labor costs driven by an increase in labor capitalization and lower employee headcount, partially offset by a $3.6 million increase in vegetation management costs; and

•a $2.9 million decrease in plant operating and maintenance expense at Wolf Creek primarily due to lower refueling outage amortization in 2023; partially offset by

•a $4.5 million increase in costs billed for common use assets in 2023 from Evergy Metro related to facilities and software assets.

Evergy Kansas Central Depreciation and Amortization

Evergy Kansas Central's depreciation and amortization expense increased $30.9 million in 2023, compared to 2022, primarily driven by capital additions.

Evergy Kansas Central Other Expense, Net

Evergy Kansas Central's other expense, net decreased $28.0 million in 2023, compared to 2022, primarily driven by:

•a $21.9 million decrease due to recording higher COLI benefits in 2023; and

•a $7.4 million decrease due to net unrealized losses becoming net unrealized gains in Evergy Kansas Central's rabbi trust.

Evergy Kansas Central Interest Expense

Evergy Kansas Central's interest expense increased $32.8 million in 2023, compared to 2022, primarily driven by:

• a $25.7 million increase in interest expense on short-term borrowings primarily due to higher short-term debt balances and weighted-average interest rates in 2023; and

•an $18.2 million increase due to the issuance of $400.0 million of 5.70% FMBs in March 2023; partially offset by

•a $15.4 million decrease due to higher debt AFUDC primarily due to higher short-term debt balances and higher weighted-average interest rates in 2023.

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Evergy Kansas Central Income Tax Expense

Evergy Kansas Central's income tax expense decreased $18.2 million in 2023, compared to 2022, primarily driven by:

• a $12.9 million decrease primarily due to higher wind and other income tax credits in 2023 principally driven by the acquisition of the Persimmon Creek wind farm;

•an $11.6 million decrease due to lower pre-tax income in 2023; and

•a $4.4 million decrease primarily due to higher COLI proceeds in 2023; partially offset by

•a $10.8 million increase primarily due to lower 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.

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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).

Evergy Metro's gross margin (GAAP) decreased $59.3 million in 2023, compared to 2022, and Evergy Metro's utility gross margin (non-GAAP) increased $18.2 million in 2023, compared to 2022, both measures were driven by:

•a $27.8 million increase due to recording an estimated $16.7 million refund obligation under Evergy Metro's ERSP in 2022 and an $11.1 million reduction to the estimated refund obligation which was ordered and recorded in 2023. See Note 4 of the consolidated financial statements for additional information; and

•a $22.2 million increase from new Evergy Metro retail rates effective in January 2023; partially offset by

•a $31.8 million decrease primarily due to unfavorable weather (cooling degree days decreased by 10% and heating degree days decreased by 13%); partially offset by higher retail sales driven by higher weather-normalized residential and commercial demand.

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

•a $78.8 million increase in depreciation and amortization expense as described further below; partially offset by

•a $4.1 million decrease in operating and maintenance expenses which are determined to be directly attributable to revenue producing activities primarily driven by a $3.2 million decrease in plant operating and maintenance expense at Wolf Creek as further described below.

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Evergy Metro Operating and Maintenance

Evergy Metro's operating and maintenance expense decreased $50.3 million in 2023, compared to 2022, primarily driven by:

•an $18.8 million decrease in various administrative and general operating and maintenance expenses primarily driven by lower regulatory amortizations as a result of Evergy Metro's 2022 rate case;

•a $10.5 million decrease in administrative labor and employee benefits expenses primarily due to lower employee headcount in 2023;

•a $9.8 million decrease due to higher costs billed primarily to Evergy Kansas Central and Evergy Missouri West for common use assets related to facilities and software assets; and

•a $3.2 million decrease in plant operating and maintenance expense at Wolf Creek primarily due to lower refueling outage amortizations in 2023; partially offset by

•$5.8 million of costs incurred from storms that occurred in July 2023.

Evergy Metro Depreciation Expense

Evergy Metro's depreciation and amortization expense increased $78.8 million in 2023, compared to 2022, primarily driven by:

•a $46.7 million increase primarily due to a change in depreciation rates and the rebasing of PISA depreciation deferrals as a result of Evergy Metro's 2022 rate case effective in January 2023; and

•a $32.1 million increase primarily due to capital additions.

Evergy Metro Interest Expense

Evergy Metro's interest expense increased $25.1 million in 2023, compared to 2022, primarily driven by an $18.7 million increase in interest expense on short-term borrowings primarily due to higher short-term debt balances and higher weighted-average interest rates in 2023.

Evergy Metro Income Tax Expense

Evergy Metro's income tax expense decreased $11.1 million in 2023, compared to 2022, primarily driven by:

•a $7.6 million decrease due to lower pre-tax income in 2023; and

•a $6.4 million decrease primarily due to higher amortization of excess deferred income taxes authorized by Evergy Metro's 2022 rate case.