
		Unaudited Consolidated Balance Sheets
~~Common Stock, par value $5.00 per share~~	~~142,094,176 shares~~
~~(Class)~~	~~(Outstanding at October 25, 2017)~~

~~TABLE OF CONTENTS~~




~~PART I. Financial Information~~		~~Page~~
~~Item 1.~~	~~Condensed Consolidated Financial Statements (Unaudited)~~
	~~Condensed Consolidated Balance Sheets~~	6
	~~Condensed~~Unaudited Consolidated Statements of Comprehensive Income	710
			~~Condensed~~Unaudited Consolidated Statements of Cash Flows		911
			~~Condensed~~Unaudited Consolidated Statements of Changes in Equity		1012
			Evergy Kansas Central, Inc.
			Unaudited Consolidated Balance Sheets		14
			Unaudited Consolidated Statements of Income		16
			Unaudited Consolidated Statements of Cash Flows		17
			Unaudited Consolidated Statements of Changes in Equity		18
			Evergy Metro, Inc.
			Unaudited Consolidated Balance Sheets		19
			Unaudited Consolidated Statements of Comprehensive Income		21
			Unaudited Consolidated Statements of Cash Flows		22
			Unaudited Consolidated Statements of Changes in Equity		23

			Combined Notes to ~~Condensed~~Unaudited Consolidated Financial Statements for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc.		1124
			Note 1:	~~1. Description~~Organization and Basis of ~~Business~~Presentation	1124
			Note 2:	~~2. Summary of Significant Accounting Policies~~Revenue	1128
			Note 3:	~~3. Pending Merger~~Receivables	1430
			Note 4:	4. Rate Matters and Regulation	1631
			Note 5:	~~5. Financial Instruments and Trading Securities~~Goodwill	1633
			Note 6:	~~6. Financial Investments~~Asset Retirement Obligations	1934
			Note 7:	~~7. Debt Financing~~Pension Plans and Post-Retirement Benefits	2134
			Note 8:	~~8. Taxes~~Short-Term Borrowings and Short-Term Bank Lines of Credit	2137
			Note 9:	~~9. Pension and Post-Retirement Benefit Plans~~Long-Term Debt	2238
			Note 10:	~~10. Wolf Creek Pension and Post-Retirement Benefit Plans~~Fair Value Measurements	2338
			Note 11:	~~11.~~ Commitments and Contingencies	2443
			Note 12:	~~12. Asset Retirement Obligations~~Related Party Transactions and Relationships	2746
			Note 13:	~~13. Legal Proceedings~~Taxes	2748
Item 2.			~~14. Variable Interest Entities~~		29
~~Item 2.~~	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	3151
Item 3.			Quantitative and Qualitative Disclosures About Market Risk		4369
Item 4.			Controls and Procedures		4370

~~PART II.~~Part II - Other Information

Item 1.			Legal Proceedings		4371
Item 1A.			Risk Factors		4471
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4473
Item 3.			Defaults Upon Senior Securities		4473
Item 4.			Mine Safety Disclosures		4473
Item 5.			Other Information		4573
Item 6.			Exhibits		4574

~~Signature~~Signatures					4675

CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION

Statements made in this report 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 our 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 prudency 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 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 the availability and ability of our 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 terrorist acts, including cyber terrorism; 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 increased costs of, or changes in, 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 our strategic plan, financial results or operations; 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.

This list of factors is not all-inclusive because it is not possible to predict all factors. Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Evergy Companies with the Securities and Exchange Commission (SEC). Reports filed by the Evergy Companies with the SEC should

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also be read for more information regarding risk factors. 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, www.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 tab on their website, www.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 Evergy's 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

AAO		Accounting authority order
ACE		Affordable Clean Energy
AEP		American Electric Power Company, Inc.
AFUDC		Allowance for funds used during construction
AMT		Alternative Minimum Tax
AROs		Asset retirement obligations


~~Abbreviation or Acronym~~		~~Definition~~
~~2016 Form 10-K~~BSER		~~Annual Report on Form 10-K for the year ended December 31, 2016~~Best system of emission reduction
~~AFUDC~~CAA		~~Allowance for funds used during construction~~
~~ARO~~	~~Asset retirement obligation~~
~~CAA~~	Clean Air Act Amendments of 1990
~~CCR~~CCRs		Coal combustion ~~residual~~residuals
CO₂		Carbon dioxide
COLI		Corporate-owned life insurance
~~CPP~~COVID-19		Coronavirus
CPP		Clean Power Plan
CWA		Clean Water Act
DOE		Department of Energy
~~ELG~~
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
~~FERC~~FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FMBs		First ~~mortgage bonds~~Mortgage Bonds
~~GHG~~GAAP		Generally Accepted Accounting Principles
GHG		Greenhouse gas
Great Plains Energy		Great Plains Energy Incorporated
~~HSR Act~~JEC		~~Hart-Scott-Rodino Antitrust Improvements Act~~
~~JEC~~	Jeffrey Energy Center
KCC		~~Kansas~~State Corporation Commission of the State of Kansas
~~KDHE~~		~~Kansas~~
kV		Kilovolt

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Abbreviation or Acronym		Definition
kWh		Kilowatt hour

MDNR		Missouri Department of ~~Health & Environment~~Natural Resources
~~KGE~~MECG		~~Kansas Gas and Electric Company~~Midwest Energy Consumers Group
~~La Cygne~~MEEIA		~~La Cygne Generating Station~~Missouri Energy Efficiency Investment Act
~~Merger~~MPSC		~~Pending merger of equals between Westar Energy, Inc. and Great Plains Energy Incorporated~~
~~MPSC~~	~~Missouri~~ Public Service Commission of the State of Missouri
~~NAAQS~~MW		Megawatt
MWh		Megawatt hour
NAAQS		National Ambient Air Quality Standards
NAV		Net ~~Asset Value~~asset value
~~NDT~~NOL		~~Nuclear Decommissioning Trust~~Net operating loss
~~NOx~~NRC		~~Nitrogen oxides~~
~~NRC~~	Nuclear Regulatory Commission
~~NSPS~~NSR		New ~~Source Performance Standard~~source review
PMOCI		~~Particulate matter~~Other comprehensive income
~~RECA~~OPC		~~Retail energy cost adjustment~~Office of the Public Counsel
~~RSU~~Prairie Wind		Prairie Wind Transmission, LLC, 50% owned by Evergy Kansas Central
RSU		Restricted share unit
RTO		Regional transmission organization
SO₂ SEC		~~Sulfur dioxide~~Securities and Exchange Commission
SPP		Southwest Power Pool, Inc.
~~TFR~~
TDC		Transmission delivery charge
TFR		Transmission formula rate
~~VIE~~Transource		Transource Energy, LLC and its subsidiaries, 13.5% owned by Evergy Transmission Company
VIE		Variable interest entity
Wolf Creek		Wolf Creek Generating Station
~~WOTUS~~	~~Waters of the United States~~

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~~FORWARD-LOOKING STATEMENTS~~

Certain matters discussed in this Form 10-Q are “forward-looking statements.” The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like we “believe,” “anticipate,” “target,” “expect,” “estimate,” “intend” and words of similar meaning. Forward-looking statements describe our future plans, objectives, expectations or goals. Such statements address future events and conditions concerning matters such as, but not limited to:


-	the pending merger of equals (merger) between Westar Energy, Inc. and Great Plains Energy Incorporated (Great Plains Energy), including the expected timing of closing the merger and costs expected to be incurred in connection with the merger,


-	~~amount, type and timing of capital expenditures,~~


-	~~earnings,~~


-	~~cash flow,~~


-	~~liquidity and capital resources,~~


-	~~litigation,~~


-	~~accounting matters,~~


-	~~compliance with debt and other restrictive covenants,~~


-	~~interest rates and dividends,~~


-	~~environmental matters,~~


-	~~regulatory matters,~~


-	~~nuclear operations, and~~


-	~~the overall economy of our service area and its impact on our customers’ demand for electricity and their ability to pay for service.~~

~~What happens in each case could vary materially from what we expect because of such things as:~~


-	risks related to operating in a heavily regulated industry that is subject to unpredictable political, legislative, judicial and regulatory developments, which can impact our operations, results of operations, and financial condition,


-	the difficulty of predicting the magnitude and timing of changes in demand for electricity, including with respect to emerging competing services and technologies and conservation and energy efficiency measures,


-	~~the impact of weather conditions, including as it relates to sales of electricity and prices of energy commodities,~~


-	~~equipment damage from storms and extreme weather,~~


-	~~economic and capital market conditions, including the impact of inflation or deflation, changes in interest rates, the cost and availability of capital and the market for trading wholesale energy,~~


-	~~the impact of changes in market conditions on employee benefit liability calculations and funding obligations, as well as actual and assumed investment returns on invested plan assets,~~


-	~~the impact of changes in estimates regarding our Wolf Creek Generating Station (Wolf Creek) decommissioning obligation,~~


-	~~the existence or introduction of competition into markets in which we operate,~~


-	~~the impact of changing laws and regulations relating to air and greenhouse gas (GHG) emissions, water emissions, waste management and other environmental matters,~~


-	risks associated with execution of our planned capital expenditure program, including timing and receipt of regulatory approvals necessary for planned construction and expansion projects as well as the ability to complete planned construction projects within the terms and time frames anticipated,


-	~~cost, availability and timely provision of equipment, supplies, labor and fuel we need to operate our business,~~


-	~~availability of generating capacity and the performance of our generating plants,~~


-	~~changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown or required modification of nuclear generating facilities,~~


-	~~uncertainties with respect to procurement of nuclear fuel and related services, which are dependent on a single supplier,~~


-	additional regulation due to the Nuclear Regulatory Commission (NRC) oversight to ensure the safe operation of Wolf Creek, either related to Wolf Creek’s performance, or potentially relating to events or performance at a nuclear plant anywhere in the world,


-	~~uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel storage and disposal,~~


-	~~homeland security and information and operating systems security considerations,~~


-	~~our inability to fully utilize expected tax credits,~~


-	~~changes in accounting requirements and other accounting matters,~~


-	changes in the energy markets in which we participate such as the development and implementation of real time and next day trading markets, and the effect of the retroactive repricing of transactions in such markets following execution because of changes or adjustments in market pricing mechanisms by regional transmission organizations (RTOs) and independent system operators,


-	~~reduced demand for coal-based energy because of actual or perceived climate impacts and the development of alternate energy sources,~~


-	~~current and future litigation, regulatory investigations, proceedings or inquiries,~~


-	~~cost of fuel used in generation and wholesale electricity prices,~~


-	~~certain risks and uncertainties associated with the merger, including, without limitation, those related to:~~


-	~~receipt of approval from our shareholders and shareholders of Great Plains Energy,~~


-	~~the timing of, and the conditions imposed by, regulatory approvals required for the merger,~~


-	~~the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement or could otherwise cause the failure of the merger to close,~~


-	~~the outcome of any legal proceedings, regulatory proceedings or enforcement matters that have been or may be instituted in connection with the merger,~~


-	~~the receipt of an unsolicited offer from another party to acquire our assets or capital stock (or those of Great Plains Energy) that could interfere with the proposed merger,~~


-	~~the timing to consummate the proposed merger,~~


-	~~disruption from the proposed merger making it more difficult to maintain relationships with customers, employees, regulators or suppliers,~~


-	~~the diversion of management time and attention on the merger,~~


-	~~the amount of costs, fees, expenses and charges related to the merger,~~


-	~~the possibility that the expected value creation from the merger will not be realized, or will not be realized within the expected time period,~~


-	~~difficulties related to the integration of the two companies,~~


-	~~the credit ratings of the combined company following the merger, and~~


-	~~the effect and timing of changes in laws or in governmental regulations (including environmental laws and regulations) that could adversely affect our participation in the merger, and~~


-	other factors discussed elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2016 (2016 Form 10-K), including in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other reports we file from time to time with the SEC.

These lists are not all-inclusive because it is not possible to predict all factors. This report should be read in its entirety and in conjunction with our 2016 Form 10-K and the other reports we file from time to time with the SEC. No one section of this report deals with all aspects of the subject matter and additional information on some matters that could impact our condensed consolidated financial results may be included in our 2016 Form 10-K and the other reports we file from time to time with the SEC. The reader should not place undue reliance on any forward-looking statement, as forward-looking statements speak only as of the date such statements were made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made.

PART I.I - FINANCIAL INFORMATION

ITEM ~~I. CONDENSED CONSOLIDATED~~1. FINANCIAL STATEMENTS

~~WESTAR ENERGY, INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Dollars in Thousands, Except Par Values)~~

~~(Unaudited)~~

As of As of
September 30, 2017 December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,388
$ 3,066
Accounts receivable, net of allowance for doubtful accounts of $4,658 and $6,667, respectively 308,275
288,579
Fuel inventory and supplies 285,074
300,125
Taxes receivable —
13,000
Prepaid expenses 15,781
16,528
Regulatory assets 94,777
117,383
Other 25,754
29,701
Total Current Assets 733,049
768,382
PROPERTY, PLANT AND EQUIPMENT, NET 9,494,023
9,248,359
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET 178,058
257,904
OTHER ASSETS:
Regulatory assets 748,934
762,479
Nuclear decommissioning trust 229,927
200,122
Other 241,384
249,828
Total Other Assets 1,220,245
1,212,429
TOTAL ASSETS $ 11,625,375
$ 11,487,074
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ —
$ 125,000
Current maturities of long-term debt of variable interest entities 28,534
26,842
Short-term debt 189,100
366,700
Accounts payable 147,933
220,522
Accrued dividends 53,770
52,885
Accrued taxes 114,317
85,729
Accrued interest 64,851
72,519
Regulatory liabilities 14,068
15,760
Other 74,273
81,236
Total Current Liabilities 686,846
1,047,193
LONG-TERM LIABILITIES:
Long-term debt, net 3,686,852
3,388,670
Long-term debt of variable interest entities, net 81,433
111,209
Deferred income taxes 1,866,583
1,752,776
Unamortized investment tax credits 208,597
210,654
Regulatory liabilities 237,065
223,693
Accrued employee benefits 497,298
512,412
Asset retirement obligations 397,505
323,951
Other 84,296
83,326
Total Long-Term Liabilities 7,059,629
6,606,691
COMMITMENTS AND CONTINGENCIES (See Notes 11 and 13)

EQUITY:
Westar Energy, Inc. Shareholders’ Equity:
Common stock, par value $5 per share; authorized 275,000,000 shares; issued and outstanding 142,094,176 shares and 141,791,153 shares, respective to each date 710,471
708,956
Paid-in capital 2,022,072
2,018,317
Retained earnings 1,196,460
1,078,602
Total Westar Energy, Inc. Shareholders’ Equity 3,929,003
3,805,875
Noncontrolling Interests (50,103 ) 27,315
Total Equity 3,878,900
3,833,190
TOTAL LIABILITIES AND EQUITY $ 11,625,375
$ 11,487,074


EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)

	September 30			December 31
	2020			2019
ASSETS	(millions, except share amounts)
CURRENT ASSETS:
Cash and cash equivalents		$	361.6		$	23.2

Receivables, net of allowance for credit losses of $15.2 and $10.5, respectively		318.5			228.5
Accounts receivable pledged as collateral		395.0			339.0
Fuel inventory and supplies		512.1			481.6
Income taxes receivable		53.9			85.5
Regulatory assets		205.9			231.7
Prepaid expenses and other assets		67.7			78.2
Total Current Assets		1,914.7			1,467.7
PROPERTY, PLANT AND EQUIPMENT, NET		19,624.1			19,184.4
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET		156.7			162.0
OTHER ASSETS:
Regulatory assets		1,734.1			1,740.5
Nuclear decommissioning trust fund		587.5			573.2
Goodwill		2,336.6			2,336.6
Other		527.5			511.5
Total Other Assets		5,185.7			5,161.8
TOTAL ASSETS		$	26,881.2		$	25,975.9

The accompanying ~~notes~~Notes to Unaudited Consolidated Financial Statements are an integral part of these ~~condensed consolidated financial~~ statements.

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~~WESTAR ENERGY, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~(Unaudited)~~

Three Months Ended September 30,
2017 2016
REVENUES $ 794,327
$ 764,654
OPERATING EXPENSES:
Fuel and purchased power 189,804
155,673
SPP network transmission costs 62,578
57,939
Operating and maintenance 79,856
86,758
Depreciation and amortization 94,668
84,972
Selling, general and administrative 65,630
60,582
Taxes other than income tax 41,815
48,154
Total Operating Expenses 534,351
494,078
INCOME FROM OPERATIONS 259,976
270,576
OTHER INCOME (EXPENSE):
Investment earnings 2,593
2,619
Other income 3,849
13,353
Other expense (6,493 ) (5,887 )
Total Other (Expense) Income (51 ) 10,085
Interest expense 43,458
40,897
INCOME BEFORE INCOME TAXES 216,467
239,764
Income tax expense 55,743
81,211
NET INCOME 160,724
158,553
Less: Net income attributable to noncontrolling interests 2,418
3,833
NET INCOME ATTRIBUTABLE TO WESTAR ENERGY, INC. $ 158,306
$ 154,720
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. (See Note 2):
Basic earnings per common share $ 1.11
$ 1.09
Diluted earnings per common share $ 1.11
$ 1.08
AVERAGE EQUIVALENT COMMON SHARES OUTSTANDING:
Basic 142,472,987
142,090,706
Diluted 142,516,049
142,577,945
DIVIDENDS DECLARED PER COMMON SHARE $ 0.40
$ 0.38


EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)

	September 30			December 31
	2020			2019
LIABILITIES AND EQUITY	(millions, except share amounts)
CURRENT LIABILITIES:
Current maturities of long-term debt		$	353.5		$	251.1
Current maturities of long-term debt of variable interest entities		18.8			32.3
Notes payable and commercial paper		200.0			561.9
Collateralized note payable		395.0			339.0
Accounts payable		358.9			528.8

Accrued taxes		305.8			145.1
Accrued interest		118.6			122.3
Regulatory liabilities		35.1			63.3
Asset retirement obligations		66.5			71.3
Accrued compensation and benefits		69.9			59.2
Other		176.1			161.6
Total Current Liabilities		2,098.2			2,335.9
LONG-TERM LIABILITIES:
Long-term debt, net		9,276.4			8,746.7
Long-term debt of variable interest entities, net		0			18.8
Deferred income taxes		1,682.9			1,744.4
Unamortized investment tax credits		188.3			375.4
Regulatory liabilities		2,589.8			2,248.3
Pension and post-retirement liability		1,047.8			1,017.6
Asset retirement obligations		882.3			602.8
Other		331.3			340.7
Total Long-Term Liabilities		15,998.8			15,094.7
Commitments and Contingencies (Note 11)
EQUITY:
Evergy, Inc. Shareholders' Equity:
Common stock - 600,000,000 shares authorized, without par value 226,832,410 and 226,641,443 shares issued, stated value		7,077.0			7,070.4
Retained earnings		1,773.5			1,551.5
Accumulated other comprehensive loss		(48.4)			(50.0)
Total Evergy, Inc. Shareholders' Equity		8,802.1			8,571.9
Noncontrolling Interests		(17.9)			(26.6)
Total Equity		8,784.2			8,545.3
TOTAL LIABILITIES AND EQUITY		$	26,881.2		$	25,975.9

The accompanying ~~notes~~Notes to Unaudited Consolidated Financial Statements are an integral part of these ~~condensed consolidated financial~~ statements.

~~WESTAR ENERGY, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~(Unaudited)~~

Nine Months Ended September 30,
2017 2016
REVENUES $ 1,976,222
$ 1,955,552
OPERATING EXPENSES:
Fuel and purchased power 415,449
374,361
SPP network transmission costs 185,015
173,925
Operating and maintenance 248,211
250,135
Depreciation and amortization 277,322
252,838
Selling, general and administrative 182,367
192,762
Taxes other than income tax 126,421
145,529
Total Operating Expenses 1,434,785
1,389,550
INCOME FROM OPERATIONS 541,437
566,002
OTHER INCOME (EXPENSE):
Investment earnings 8,384
6,916
Other income 5,672
26,212
Other expense (14,457 ) (14,338 )
Total Other (Expense) Income (401 )
18,790
Interest expense 128,232
121,011
INCOME BEFORE INCOME TAXES 412,804
463,781
Income tax expense 112,559
160,376
NET INCOME 300,245
303,405
Less: Net income attributable to noncontrolling interests 10,213
10,760
NET INCOME ATTRIBUTABLE TO WESTAR ENERGY, INC. $ 290,032
$ 292,645
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. (See Note 2):
Basic earnings per common share $ 2.03
$ 2.06
Diluted earnings per common share $ 2.03
$ 2.05
AVERAGE EQUIVALENT COMMON SHARES OUTSTANDING:
Basic 142,458,586
142,039,320
Diluted 142,495,896
142,413,189
DIVIDENDS DECLARED PER COMMON SHARE $ 1.20
$ 1.14

Table of Contents


EVERGY, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
	Three Months Ended September 30				Year to Date September 30
	2020		2019		2020		2019
	(millions, except per share amounts)
OPERATING REVENUES	$	1,517.6	$	1,577.6	$	3,819.0	$	4,016.2
OPERATING EXPENSES:
Fuel and purchased power	316.2		357.3		832.5		978.9
SPP network transmission costs	66.1		62.4		197.8		188.7
Operating and maintenance	304.6		311.6		865.5		907.1
Depreciation and amortization	218.0		216.1		658.1		645.1
Taxes other than income tax	91.0		91.5		274.2		276.4
Total Operating Expenses	995.9		1,038.9		2,828.1		2,996.2
INCOME FROM OPERATIONS	521.7		538.7		990.9		1,020.0
OTHER INCOME (EXPENSE):
Investment earnings	1.7		1.8		4.0		7.6
Other income	7.1		2.8		17.0		17.1
Other expense	(20.1)		(19.7)		(57.7)		(57.2)
Total Other Expense, Net	(11.3)		(15.1)		(36.7)		(32.5)
Interest expense	94.8		90.8		290.5		277.3
INCOME BEFORE INCOME TAXES	415.6		432.8		663.7		710.2
Income tax expense	50.0		65.5		93.8		99.2
Equity in earnings of equity method investees, net of income taxes	1.9		3.6		6.1		7.9
NET INCOME	367.5		370.9		576.0		618.9
Less: Net income attributable to noncontrolling interests	3.0		4.1		8.7		12.9
NET INCOME ATTRIBUTABLE TO EVERGY, INC.	$	364.5	$	366.8	$	567.3	$	606.0
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO EVERGY, INC. (see Note 1)
Basic earnings per common share	$	1.60	$	1.56	$	2.50	$	2.49
Diluted earnings per common share	$	1.60	$	1.56	$	2.49	$	2.49
AVERAGE COMMON SHARES OUTSTANDING
Basic	227.3		234.6		227.2		243.5
Diluted	227.5		235.0		227.5		243.8
COMPREHENSIVE INCOME
NET INCOME	$	367.5	$	370.9	$	576.0	$	618.9
Derivative hedging activity
Loss on derivative hedging instruments	0		(29.4)		0		(64.4)
Income tax benefit	0		7.5		0		16.5
Net loss on derivative hedging instruments	0		(21.9)		0		(47.9)
Reclassification to expenses, net of tax	1.4		0.2		1.7		0.2
Derivative hedging activity, net of tax	1.4		(21.7)		1.7		(47.7)
Defined benefit pension plans



Amortization of net losses included in net periodic benefit costs, net of tax	0		0		(0.1)		0
Change in unrecognized pension expense, net of tax	0		0		(0.1)		0
Total other comprehensive income (loss)	1.4		(21.7)		1.6		(47.7)
COMPREHENSIVE INCOME	368.9		349.2		577.6		571.2
Less: comprehensive income attributable to noncontrolling interest	3.0		4.1		8.7		12.9
COMPREHENSIVE INCOME ATTRIBUTABLE TO EVERGY, INC.	$	365.9	$	345.1	$	568.9	$	558.3

The accompanying ~~notes~~Notes to Unaudited Consolidated Financial Statements are an integral part of these ~~condensed consolidated financial~~ statements.

~~WESTAR ENERGY, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Dollars in Thousands)~~

~~(Unaudited)~~

Nine Months Ended September 30,
2017 2016
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income $ 300,245
$ 303,405
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 277,322
252,838
Amortization of nuclear fuel 24,150
22,518
Amortization of deferred regulatory gain from sale leaseback (4,121 ) (4,121 )
Gain on lease modification (3,500 ) —
Amortization of corporate-owned life insurance 15,744
13,779
Non-cash compensation 6,777
7,025
Net deferred income taxes and credits 126,986
160,429
Allowance for equity funds used during construction (1,094 ) (7,894 )
Changes in working capital items:
Accounts receivable (19,696 ) (64,100 )
Fuel inventory and supplies 15,515
11,680
Prepaid expenses and other current assets 61,287
(385 )
Accounts payable (10,044 ) 9,736
Accrued taxes 35,631
40,711
Other current liabilities (108,503 ) (61,879 )
Changes in other assets 20,085
(4,377 )
Changes in other liabilities 5,538
13,208
Cash Flows from Operating Activities 742,322
692,573
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Additions to property, plant and equipment (564,622 ) (821,936 )
Purchase of securities - trusts (15,262 ) (43,252 )
Sale of securities - trusts 15,896
44,326
Investment in corporate-owned life insurance (13,875 ) (14,648 )
Proceeds from investment in corporate-owned life insurance 265
24,242
Investment in affiliated company —
(655 )
Other investing activities (3,411 ) (3,095 )
Cash Flows used in Investing Activities (581,009 ) (815,018 )
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Short-term debt, net (177,732 ) (67,402 )
Proceeds from long-term debt 296,215
396,472
Proceeds from long-term debt of variable interest entities —
162,048
Retirements of long-term debt (125,000 ) (50,000 )
Retirements of long-term debt of variable interest entities (26,840 ) (190,357 )
Repayment of capital leases (2,592 ) (2,327 )
Borrowings against cash surrender value of corporate-owned life insurance 53,422
55,952
Repayment of borrowings against cash surrender value of corporate-owned life insurance —
(22,921 )
Issuance of common stock 659
2,003
Distributions to shareholders of noncontrolling interests (5,760 ) (2,551 )
Cash dividends paid (166,340 ) (152,787 )
Other financing activities (7,023 ) (4,979 )
Cash Flows (used in) from Financing Activities (160,991 ) 123,151
NET INCREASE IN CASH AND CASH EQUIVALENTS 322
706
CASH AND CASH EQUIVALENTS:
Beginning of period 3,066
3,231
End of period $ 3,388
$ 3,937

Table of Contents


EVERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)

Year to Date September 30	2020		2019
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:	(millions)
Net income	$	576.0	$	618.9
Adjustments to reconcile income to net cash from operating activities:
Depreciation and amortization	658.1		645.1
Amortization of nuclear fuel	43.8		42.6
Amortization of deferred refueling outage	19.1		19.4
Amortization of corporate-owned life insurance	14.8		16.5
Non-cash compensation	12.1		12.9
Net deferred income taxes and credits	136.5		111.4
Allowance for equity funds used during construction	(9.9)		(0.9)
Payments for asset retirement obligations	(11.0)		(11.6)
Equity in earnings of equity method investees, net of income taxes	(6.1)		(7.9)
Income from corporate-owned life insurance	(6.8)		(19.5)
Other	0.7		(3.6)
Changes in working capital items:
Accounts receivable	(68.6)		(68.4)
Accounts receivable pledged as collateral	(56.0)		(30.0)
Fuel inventory and supplies	(30.0)		57.0
Prepaid expenses and other current assets	20.9		65.7
Accounts payable	(87.5)		(111.5)
Accrued taxes	192.3		155.3
Other current liabilities	(43.9)		(77.7)
Changes in other assets	88.4		56.1
Changes in other liabilities	(21.2)		(22.5)
Cash Flows from Operating Activities	1,421.7		1,447.3
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Additions to property, plant and equipment	(1,058.1)		(849.1)
Purchase of securities - trusts	(50.3)		(37.4)
Sale of securities - trusts	44.2		32.3
Investment in corporate-owned life insurance	(16.4)		(17.2)
Proceeds from investment in corporate-owned life insurance	60.6		99.1

Other investing activities	(9.9)		0.2
Cash Flows used in Investing Activities	(1,029.9)		(772.1)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Short-term debt, net	(361.9)		(378.0)
Proceeds from term loan facility	0		1,000.0
Repayment of term loan facility	0		(1,000.0)
Collateralized short-term borrowings, net	56.0		30.0
Proceeds from long-term debt	889.3		2,374.0

Retirements of long-term debt	(251.1)		(701.1)
Retirements of long-term debt of variable interest entities	(32.3)		(30.3)
Payment for settlement of interest rate swap accounted for as a cash flow hedge	0		(69.8)
Borrowings against cash surrender value of corporate-owned life insurance	54.5		57.2
Repayment of borrowings against cash surrender value of corporate-owned life insurance	(52.5)		(77.4)
Cash dividends paid	(343.6)		(347.5)
Repurchase of common stock under repurchase plan	0		(1,628.7)
Distributions to shareholders of noncontrolling interests	0		(8.5)
Other financing activities	(11.8)		(5.3)
Cash Flows used in Financing Activities	(53.4)		(785.4)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	338.4		(110.2)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	23.2		160.3
End of period	$	361.6	$	50.1

The accompanying ~~notes~~Notes to Unaudited Consolidated Financial Statements are an integral part of these ~~condensed consolidated financial~~ statements.

~~WESTAR ENERGY, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~(Unaudited)~~

Table of ~~their estimated useful lives.~~Contents

~~Earnings Per Share~~

~~Following is a summary of our net income and basic EPS.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change 2017 2016 Change
(Dollars In Thousands, Except Per Share Amounts)
Net income attributable to Westar Energy, Inc. $ 158,306
$ 154,720
$ 3,586
$ 290,032
$ 292,645
$ (2,613 )
Earnings per common share, basic 1.11
1.09
0.02
2.03
2.06
(0.03 )

Net income and basic EPS increased for the three months ended September 30, 2017, compared to the same period in 2016, due primarily to lower income tax expense of $25.5 million. Partially offsetting the lower income tax expense were lower retail sales attributable principally to milder weather, recording $10.1 million less in corporate-owned life insurance (COLI) benefits, and recording $9.7 million more in depreciation due in part to placing Western Plains Wind Farm in service.

Net income and basic EPS decreased for the nine months ended September 30, 2017, compared to the same period in 2016, due primarily to lower retail sales. The lower retail sales were attributable principally to milder weather. We also recorded $16.7 million less in corporate-owned life insurance (COLI) benefits and $24.5 million more in depreciation due in part to placing Western Plains Wind Farm in service. Partially offsetting these decreases to net income and basic EPS was a decrease in income tax expense of $47.8 million. Refer to Note 8 of the Notes to Condensed Consolidated Financial Statements, “Taxes,” for additional information on income tax expense.

~~Current Trends~~

EVERGY RESULTS OF OPERATIONS

The following ~~is an update to and is to be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2016 Form 10-K.~~

~~Environmental Regulation~~

We are subject to various federal, state and local environmental laws and regulations. Environmental laws and regulations affecting our operations are overlapping, complex, subject to changes, have generally become more stringent over time and are expensive to implement. There are a variety of final and proposed laws and regulations that could have a material adverse effect on our operations and condensed consolidated financial results. See Note 11 of the Notes to Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for a discussion of environmental costs, laws, regulations and other contingencies.

~~CRITICAL ACCOUNTING ESTIMATES~~

~~Our discussion and analysis of financial condition and~~table summarizes Evergy's comparative results of ~~operations are based on our condensed consolidated~~operations.


	Three Months Ended September 30						Year to Date September 30
	2020		Change		2019		2020		Change		2019
	(millions)
Operating revenues	$	1,517.6	$	(60.0)	$	1,577.6	$	3,819.0	$	(197.2)	$	4,016.2
Fuel and purchased power	316.2		(41.1)		357.3		832.5		(146.4)		978.9
SPP network transmission costs	66.1		3.7		62.4		197.8		9.1		188.7
Operating and maintenance	304.6		(7.0)		311.6		865.5		(41.6)		907.1
Depreciation and amortization	218.0		1.9		216.1		658.1		13.0		645.1
Taxes other than income tax	91.0		(0.5)		91.5		274.2		(2.2)		276.4
Income from operations	521.7		(17.0)		538.7		990.9		(29.1)		1,020.0
Other expense, net	(11.3)		3.8		(15.1)		(36.7)		(4.2)		(32.5)
Interest expense	94.8		4.0		90.8		290.5		13.2		277.3
Income tax expense	50.0		(15.5)		65.5		93.8		(5.4)		99.2
Equity in earnings of equity method investees, net of income taxes	1.9		(1.7)		3.6		6.1		(1.8)		7.9
Net income	367.5		(3.4)		370.9		576.0		(42.9)		618.9
Less: Net income attributable to noncontrolling interests	3.0		(1.1)		4.1		8.7		(4.2)		12.9
Net income attributable to Evergy, Inc.	$	364.5	$	(2.3)	$	366.8	$	567.3	$	(38.7)	$	606.0

Evergy Utility Gross Margin and MWh Sales

Utility gross margin is a financial ~~statements, which have been prepared~~measure that is not calculated in ~~conformity~~accordance with GAAP. Utility gross margin, as used by the instructions to Form 10-Q and Article 10 of Regulation S-X. Note 2 of the Notes to Condensed Consolidated Financial Statements, “Summary of Significant Accounting Policies,” contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions by management. The policies highlighted in our ~~2016~~ ~~Form 10-K have an impact on our reported results that may be material due to the levels of judgment and subjectivity necessary to account for uncertain matters or their susceptibility to change.~~

~~From December 31, 2016, through September 30, 2017, we did not experience any significant changes in our critical accounting estimates. For additional information, see our~~ ~~2016~~ ~~Form 10-K.~~

~~OPERATING RESULTS~~

~~We evaluate operating results based on EPS. We have various classifications of revenues,~~Evergy Companies, is defined as ~~follows:~~

~~Retail:~~ Sales of electricity to residential, commercial and industrial customers. Classification of customers as residential, commercial or industrial requires judgment and our classifications may be different from other companies. Assignment of tariffs is not dependent on classification. Other retail sales of electricity include lighting for public streets and highways, net of revenue subject to refund.

~~Wholesale:~~ Sales of electricity to electric cooperatives, municipalities and other electric utilities and RTOs, the prices for which are either based on cost or prevailing market prices as prescribed by FERC authority. Revenues from these sales are either included in the RECA or used in the determinations of base rates at the time of our next general rate review.

~~Transmission:~~ ~~Reflects transmission~~operating revenues ~~including those based on tariffs with the SPP.~~

~~Other:~~ Miscellaneous electric revenues including ancillary service revenues and rent from electric property leased to others. This category also includes transactions unrelated to the production of our generating assets and fees we earn for services that we provide for third parties.

Electric utility revenues are impacted by things such as rate regulation, fuel costs, technology, customer behavior, the economy and competitive forces. Changing weather also affects the amount of electricity our customers use as electricity sales are seasonal. As a summer peaking utility, the third quarter typically accounts for our greatest electricity sales. 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. Our wholesale revenues are impacted by, among other factors, demand, cost and availability ofless fuel and purchased power ~~price volatility, available generation capacity,~~costs and amounts billed by the SPP for network transmission ~~availability and weather.~~

~~Three and Nine Months Ended September 30, 2017, Compared to Three and Nine Months Ended September 30, 2016~~

~~Below we discuss our operating results~~costs. Expenses for ~~the three and nine months ended~~ ~~September 30, 2017~~, compared to the results for the three and nine months ended September 30, 2016. Significant changes in results of operations shown in the table immediately below are further explained in the descriptions that follow.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars In Thousands, Except Per Share Amounts)
REVENUES:
Residential $ 278,138
$ 282,272
$ (4,134 ) (1.5 ) $ 642,449
$ 664,400
$ (21,951 ) (3.3 )
Commercial 219,414
218,377
1,037
0.5
557,232
572,247
(15,015 ) (2.6 )
Industrial 117,721
106,021
11,700
11.0
324,227
314,723
9,504
3.0
Other retail 149
7,883
(7,734 ) (98.1 ) (22,293 ) (23,002 ) 709
3.1
Total Retail Revenues 615,422

614,553
869
0.1
1,501,615
1,528,368
(26,753 ) (1.8 )
Wholesale 102,113
86,421
15,692
18.2
242,524
220,520
22,004
10.0
Transmission 69,504
58,462
11,042
18.9
209,097
188,996
20,101
10.6
Other 7,288
5,218
2,070
39.7
22,986
17,668
5,318
30.1
Total Revenues 794,327
764,654
29,673
3.9
1,976,222
1,955,552
20,670
1.1
OPERATING EXPENSES:
Fuel and purchased power 189,804
155,673
34,131
21.9
415,449
374,361
41,088
11.0
SPP network transmission costs 62,578
57,939
4,639
8.0
185,015
173,925
11,090
6.4
Operating and maintenance 79,856
86,758
(6,902 ) (8.0 ) 248,211
250,135
(1,924 ) (0.8 )
Depreciation and amortization 94,668
84,972
9,696
11.4
277,322
252,838
24,484
9.7
Selling, general and administrative 65,630
60,582
5,048
8.3
182,367
192,762
(10,395 ) (5.4 )
Taxes other than income tax 41,815
48,154
(6,339 ) (13.2 ) 126,421
145,529
(19,108 ) (13.1 )
Total Operating Expenses 534,351
494,078
40,273
8.2
1,434,785
1,389,550
45,235
3.3
INCOME FROM OPERATIONS 259,976
270,576
(10,600 ) (3.9 ) 541,437
566,002
(24,565 ) (4.3 )
OTHER INCOME (EXPENSE):
Investment earnings 2,593
2,619
(26 ) (1.0 ) 8,384
6,916
1,468
21.2
Other income 3,849
13,353
(9,504 ) (71.2 ) 5,672
26,212
(20,540 ) (78.4 )
Other expense (6,493 ) (5,887 ) (606 ) (10.3 ) (14,457 ) (14,338 ) (119 ) (0.8 )
Total Other (Expense) Income (51 ) 10,085
(10,136 ) (100.5 ) (401 ) 18,790
(19,191 ) (102.1 )
Interest expense 43,458
40,897
2,561
6.3
128,232
121,011
7,221
6.0
INCOME BEFORE INCOME TAXES 216,467
239,764
(23,297 ) (9.7 ) 412,804
463,781
(50,977 ) (11.0 )
Income tax expense 55,743
81,211
(25,468 ) (31.4 ) 112,559
160,376
(47,817 ) (29.8 )
NET INCOME 160,724
158,553
2,171
1.4
300,245
303,405
(3,160 ) (1.0 )
Less: Net income attributable to noncontrolling interests 2,418
3,833
(1,415 ) (36.9 ) 10,213
10,760
(547 ) (5.1 )
NET INCOME ATTRIBUTABLE TO WESTAR ENERGY, INC. $ 158,306
$ 154,720
$ 3,586
2.3
$ 290,032
$ 292,645
$ (2,613 ) (0.9 )
BASIC EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. $ 1.11
$ 1.09
$ 0.02
1.8
$ 2.03
$ 2.06
$ (0.03 ) (1.5 )
DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO WESTAR ENERGY, INC. $ 1.11
$ 1.08
$ 0.03
2.8
$ 2.03
$ 2.05
$ (0.02 ) (1.0 )

~~Gross Margin~~

~~Fuel~~fuel and purchased power costs, ~~fluctuate with electricity~~offset by wholesale sales ~~and unit costs. As permitted by regulators, we adjust our retail prices~~margin, are subject to reflect changes in the costs of fuel and purchased power. Fuel and purchased power costs for wholesale customers are recovered at prevailing market prices or based on a predetermined formula with a pricerecovery through cost adjustment ~~approved by FERC.~~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 ~~primarily~~ to investments by ~~us and other~~SPP members ~~of the SPP~~ 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 ~~we charge~~charged to customers with minimal impact on net income. ~~For~~

Management believes that utility gross margin provides a meaningful basis for evaluating the Evergy Companies' operations across periods because utility gross margin excludes the revenue effect of fluctuations in these ~~reasons, we believe~~expenses. Utility gross margin is ~~useful~~used internally to measure performance against budget and in reports for ~~understanding~~management and ~~analyzing changes in our operating performance from one period to~~ the ~~next. We calculate~~Evergy Board. Utility gross margin should be viewed as a ~~non-GAAP measure, as total revenues, including transmission revenues, less the sum of fuel~~supplement to, and ~~purchased power costs and amounts billed by the SPP~~not a substitute for, ~~network transmission costs. Accordingly, gross margin reflects transmission revenues and costs on a net basis. The following table summarizes our gross margin for the three and nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars In Thousands)
Revenues $ 794,327
$ 764,654
$ 29,673
3.9
$ 1,976,222
$ 1,955,552
$ 20,670
1.1
Less: Fuel and purchased power expense 189,804
155,673
34,131
21.9
415,449
374,361
41,088
11.0
SPP network transmission costs 62,578
57,939
4,639
8.0
185,015
173,925
11,090
6.4
Gross Margin $ 541,945
$ 551,042
$ (9,097 ) (1.7 ) $ 1,375,758
$ 1,407,266
$ (31,508 ) (2.2 )

~~The following table reflects changes in electricity sales for the three and nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016. No electricity sales are shown for transmission or other as they are not directly related to the amount of electricity we sell.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Thousands of MWh)
ELECTRICITY SALES:
Residential 2,081

2,209
(128 ) (5.8 ) 4,828
5,097
(269 ) (5.3 )
Commercial 2,156

2,230
(74 ) (3.3 ) 5,588
5,763
(175 ) (3.0 )
Industrial 1,563

1,444
119
8.2
4,319
4,137
182
4.4
Other retail 12

19
(7 ) (36.8 ) 56
60
(4 ) (6.7 )
Total Retail 5,812
5,902
(90 ) (1.5 ) 14,791
15,057
(266 ) (1.8 )
Wholesale 3,128
2,389
739
30.9
7,612
5,960
1,652
27.7
Total 8,940
8,291
649
7.8
22,403
21,017
1,386
6.6

Gross margin decreased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, due primarily to lower retail sales. The lower retail sales were attributable principally to more mild weather, which particularly impacts residential and commercial customers. During the three and nine months ended September 30, 2017, compared to the same period in 2016, there were approximately 11% and 12%, respectively, fewer cooling degree days. During the nine months ended September 30, 2017, compared to the same period in 2016, there were approximately 7% fewer heating degree days. Partially offsetting the impact of less favorable weather for both periods was improved sales to industrial customers due partially to a few of our larger, lower margin chemical and oil customers who experienced improved global demand for their products as well as improved sales to the construction segment taking advantage of the more mild weather.

~~Income~~income from operations, which ~~is calculated and presented in accordance with GAAP in our condensed consolidated statements of income,~~ is the most directly comparable financial measure ~~to our presentation~~prepared in accordance with GAAP. The Evergy Companies' definition of ~~gross margin. Our presentation of gross margin should not be considered in isolation or as a substitute for income from operations. Additionally, our presentation of~~utility gross margin may ~~not be comparable to similarly titled measures reported~~differ from similar terms used by other companies.

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The following ~~table reconciles~~tables summarize Evergy's utility gross margin and MWhs sold and provide a reconciliation of utility gross margin to income from ~~operations with~~operations.


	Revenues and Expenses						MWhs Sold
Three Months Ended September 30	2020		Change		2019		2020	Change	2019
Retail revenues	(millions)						(thousands)
Residential	$	636.4	$	(16.6)	$	653.0	4,813	(124)	4,937
Commercial	499.5		(39.6)		539.1		4,914	(337)	5,251
Industrial	166.8		(8.5)		175.3		2,273	(99)	2,372
Other retail revenues	9.5		(6.5)		16.0		34	—	34
Total electric retail	1,312.2		(71.2)		1,383.4		12,034	(560)	12,594
Wholesale revenues	85.0		(11.3)		96.3		3,507	(177)	3,684
Transmission revenues	80.7		0.3		80.4		N/A	N/A	N/A
Other revenues	39.7		22.2		17.5		N/A	N/A	N/A
Operating revenues	1,517.6		(60.0)		1,577.6		15,541	(737)	16,278
Fuel and purchased power	(316.2)		41.1		(357.3)
SPP network transmission costs	(66.1)		(3.7)		(62.4)
Utility gross margin (a)	1,135.3		(22.6)		1,157.9
Operating and maintenance	(304.6)		7.0		(311.6)
Depreciation and amortization	(218.0)		(1.9)		(216.1)
Taxes other than income tax	(91.0)		0.5		(91.5)
Income from operations	$	521.7	$	(17.0)	$	538.7


	Revenues and Expenses						MWhs Sold
Year to Date September 30	2020		Change		2019		2020	Change	2019
Retail revenues	(millions)						(thousands)
Residential	$	1,515.6	$	(20.7)	$	1,536.3	12,114	(49)	12,163
Commercial	1,272.9		(118.3)		1,391.2		12,974	(1,035)	14,009
Industrial	446.7		(32.2)		478.9		6,171	(357)	6,528
Other retail revenues	29.2		(6.1)		35.3		99	(6)	105
Total electric retail	3,264.4		(177.3)		3,441.7		31,358	(1,447)	32,805
Wholesale revenues	195.8		(55.9)		251.7		10,242	(630)	10,872
Transmission revenues	238.5		5.0		233.5		N/A	N/A	N/A
Other revenues	120.3		31.0		89.3		N/A	N/A	N/A
Operating revenues	3,819.0		(197.2)		4,016.2		41,600	(2,077)	43,677
Fuel and purchased power	(832.5)		146.4		(978.9)
SPP network transmission costs	(197.8)		(9.1)		(188.7)
Utility gross margin (a)	2,788.7		(59.9)		2,848.6
Operating and maintenance	(865.5)		41.6		(907.1)
Depreciation and amortization	(658.1)		(13.0)		(645.1)
Taxes other than income tax	(274.2)		2.2		(276.4)
Income from operations	$	990.9	$	(29.1)	$	1,020.0
(a) Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin above.

Evergy's utility gross margin ~~for the three and nine months ended September 30, 2017 and 2016.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars In Thousands)
Income from operations $ 259,976
$ 270,576
$ (10,600 ) (3.9 ) $ 541,437
$ 566,002
$ (24,565 ) (4.3 )
Plus: Operating and maintenance expense 79,856
86,758
(6,902 ) (8.0 ) 248,211
250,135
(1,924 ) (0.8 )
Depreciation and amortization expense 94,668
84,972
9,696
11.4
277,322
252,838
24,484
9.7
Selling, general and administrative expense 65,630
60,582
5,048
8.3
182,367
192,762
(10,395 ) (5.4 )
Taxes other than income tax 41,815
48,154
(6,339 ) (13.2 ) 126,421
145,529
(19,108 ) (13.1 )
Gross margin $ 541,945
$ 551,042
$ (9,097 ) (1.7 ) $ 1,375,758
$ 1,407,266
$ (31,508 ) (2.2 )

~~Operating Expenses and Other Income and Expense Items~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Operating and maintenance expense $ 79,856
$ 86,758
$ (6,902 ) (8.0 ) $ 248,211
$ 250,135
$ (1,924 ) (0.8 )

~~Operating and maintenance expense~~ decreased $22.6 million for the three months ended September 30, ~~2017,~~2020, compared to the same period in ~~2016,~~2019, driven by:

•a $33.3 million decrease primarily due ~~primarily to:~~to lower retail sales driven by unfavorable weather (cooling degree days decreased 17%), partially offset by an increase in weather-normalized residential demand; partially offset by

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•a ~~$5.5~~$3.9 million increase in revenue recognized for the Missouri Energy Efficiency Investment Act (MEEIA) earnings opportunity in 2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Metro's and Evergy Missouri West's MEEIA programs;

•a $3.8 million decrease in ~~distribution operations~~the amount of revenue deferred in the third quarter of 2020 related to the granting of an AAO by the MPSC in October 2019 requiring Evergy Missouri West to record a regulatory liability for the estimated amount of revenues it has collected from customers for certain costs related to Sibley Station since its retirement in November 2018 as the amount of revenues deferred in the third quarter of 2019 included revenues collected for costs related to Sibley Station since its retirement from November 2018 to September 2019; and ~~maintenance expense due primarily to executing our vegetation management strategy earlier in 2017;~~

•a ~~$1.7 million decrease in nuclear operating and maintenance costs; and~~

~~a $1.5 million decrease in steam generation operating and maintenance costs; however,~~

~~partially offsetting these decreases was a $2.4~~$3.0 million increase ~~due~~in Evergy Metro's and Evergy Missouri West's MEEIA throughput disincentive in 2020 primarily driven by the cumulative amount of customer energy savings achieved in the second and third cycles of Evergy Metro's and Evergy Missouri West's MEEIA programs.

Evergy's utility gross margin decreased $59.9 million year to ~~the start of operation of our Western Plains Wind Farm in March 2017.~~

~~Operating and maintenance expense decreased for the nine months ended~~date September 30, ~~2017,~~2020, compared to the same period in ~~2016,~~2019, driven by:

•a $64.9 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 7% and heating degree days decreased 11%) and a decrease in weather-normalized commercial and industrial demand primarily ~~to:~~due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand;

•a $2.3 million decrease related to Evergy Kansas Central's and Evergy Metro's TDC riders in 2020; and

•a ~~$7.7~~$5.7 million decrease in ~~nuclear~~revenue recognized for the MEEIA earnings opportunity in 2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Metro's and Evergy Missouri West's MEEIA programs; partially offset by

•a $7.0 million increase for recovery of programs costs for energy efficiency programs under MEEIA in 2020, which have a direct offset in operating and maintenance ~~costs due primarily to receiving~~ expense; and

•a ~~legal settlement for Wolf Creek; and~~

~~a $1.8 million decrease in distribution operations and maintenance expense; however,~~

~~partially offsetting these decreases was a $6.3 million increase due to the start of operation of our Western Plains Wind Farm in March 2017; and~~

~~a $1.6~~$6.0 million increase in ~~steam generation~~Evergy Metro's and Evergy Missouri West's MEEIA throughput disincentive in 2020 primarily driven by the cumulative amount of customer energy savings achieved in the second and third cycles of Evergy Metro's and Evergy Missouri West's MEEIA programs.

Operating and Maintenance

Evergy's operating and maintenance ~~costs.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Depreciation and amortization expense $ 94,668
$ 84,972
$ 9,696
11.4 $ 277,322
$ 252,838
$ 24,484
9.7

Depreciation and amortization expense increased during the three and nine months ended September 30, 2017, compared to the same periods in 2016, due in part to the start of operation of our Western Plains Wind Farm in March 2017.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Selling, general and administrative expense $ 65,630
$ 60,582
$ 5,048
8.3 $ 182,367
$ 192,762
$ (10,395 ) (5.4 )

~~Selling, general and administrative expense increased during the three months ended September 30, 2017, compared to the same period in 2016, due primarily to:~~

•~~an increase of merger-related expenses of $5.9 million; however,~~

~~partially offsetting this increase was a decrease in outside services of $1.8 million.~~

~~Selling, general and administrative~~ expense decreased ~~during the nine months ended September 30, 2017, compared to the same period in 2016, due primarily to:~~

•~~a decrease in outside services of $5.0 million;~~

•~~a decrease in employee benefit costs of $2.0~~$7.0 million ~~attributable partially to our having fewer employees; and~~

•~~a decrease of merger-related expenses of $1.2 million.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Taxes other than income tax $ 41,815
$ 48,154
$ (6,339 ) (13.2 ) $ 126,421
$ 145,529
$ (19,108 ) (13.1 )

Taxes other than income tax decreased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, due primarily to a decrease of $6.3 million and $18.9 million, respectively, in property tax expense amortization. This represents the amortization of the regulatory asset comprised of actual costs incurred for property taxes in the prior year in excess of amounts collected in our prices in the prior year. These decreases are mostly offset in retail revenues.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Other income $ 3,849
$ 13,353
$ (9,504 ) (71.2 ) $ 5,672
$ 26,212
$ (20,540 ) (78.4 )

~~Other income decreased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, due primarily to:~~

•~~our having recorded $10.1 million and $16.7 million, respectively, less in COLI benefits; and~~

•~~a decrease in equity AFUDC of $2.3 million and $6.8 million, respectively, however,~~

~~partially offsetting these decreases was an increase of $3.5 million related to the deconsolidation of the trust holding our 8% interest in JEC.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Interest expense $ 43,458
$ 40,897
$ 2,561
6.3 $ 128,232
$ 121,011
$ 7,221
6.0

~~Interest expense increased~~ for the three months ended September 30, ~~2017,~~2020, compared to the same period in ~~2016, due~~2019, primarily to driven by:

•a $19.7 million decrease in ~~debt AFUDC~~various administrative and general operating and maintenance expenses primarily driven by a $7.9 million decrease in credit loss expense primarily due to lower levels of ~~$1.3 million. Interest~~customer disconnections in 2020 at Evergy Metro and a $7.8 million decrease in labor and employee benefits expense ~~increased~~that included lower employee headcount in 2020;

•a $10.2 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to an $8.4 million write-off of a regulatory asset for costs incurred during the ~~nine months ended~~JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020;

•an $8.1 million decrease in transmission and distribution operating and maintenance expense primarily due to lower labor expense in 2020 and a $2.6 million decrease primarily due to the timing of vegetation management projects at Evergy Kansas Central and Evergy Metro in 2020; and

•$4.7 million of external costs incurred to rebrand the legacy Westar and KCP&L utility brands to Evergy in the third quarter of 2019; partially offset by

•a $28.0 million increase in voluntary severance expenses at Evergy Kansas Central, Evergy Metro and Evergy Missouri West primarily related to Evergy voluntary exit programs in 2020; and

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•$9.7 million of advisor expenses incurred in the third quarter of 2020 by Evergy associated with strategic planning.

Evergy's operating and maintenance expense decreased $41.6 million year to date September 30, ~~2017,~~2020, compared to the same period in ~~2016,~~2019, primarily driven by:

•a $38.2 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to:

◦a $23.4 million decrease at Evergy Kansas Central primarily driven by an $11.2 million decrease from maintenance outages at JEC Unit 2 and La Cygne Unit 2 in the first half of 2019, an $8.4 million write-off of a regulatory asset for costs incurred during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020; and

◦a $10.8 million decrease at Evergy Metro primarily driven by a $10.6 million decrease from outages at Hawthorn Station, Iatan Station and La Cygne Unit 2 and lower employee headcount in 2020;

•a $33.9 million decrease in transmission and distribution operating and maintenance expense primarily due to an$13.1 million of costs at Evergy Metro and Evergy Missouri West incurred from storms that occurred in January 2019, a $2.7 million decrease due to the timing of vegetation management projects at Evergy Kansas Central and Evergy Metro in 2020 and lower labor expense in 2020;

•a $28.9 million decrease in various administrative and general operating and maintenance expenses primarily driven by:

◦a $12.0 million decrease in labor and employee benefits expense that included lower employee headcount in 2020;

◦a $6.9 million decrease in credit loss expense primarily due to lower levels of customer disconnections in 2020 at Evergy Metro; and

◦a $3.7 million decrease in property insurance expense due to a higher annual refund of nuclear insurance premiums received by Evergy Kansas Central and Evergy Metro in 2020 related to their ownership interest in Wolf Creek; and

•$4.7 million of external costs incurred to rebrand the legacy Westar and KCP&L utility brands to Evergy in 2019; partially offset by

•a $39.4 million increase in ~~interest expense on long-term debt~~voluntary severance expenses due to a $32.6 million increase at Evergy Kansas Central, Evergy Metro and Evergy Missouri West related to Evergy voluntary exit programs in 2020 and $6.8 million of ~~$5.1~~voluntary severance expenses incurred in 2020 by Evergy Kansas Central and Evergy Metro related to Wolf Creek voluntary exit programs;

•$26.1 million ~~primarily as~~ of advisor expenses incurred in 2020 by Evergy associated with strategic planning; and

•a ~~result of the issuance of FMBs during March 2017~~$7.0 million increase in program costs for energy efficiency programs under MEEIA in 2020, which have a direct offset in revenue.

Depreciation and ~~a decrease in debt AFUDC of $2.9 million.~~Amortization

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change % Change 2017 2016 Change % Change
(Dollars in Thousands)
Income tax expense $ 55,743
$ 81,211
$ (25,468 ) (31.4 ) $ 112,559
$ 160,376
$ (47,817 ) (29.8 )

~~Income tax expense decreased~~Evergy's depreciation and amortization increased $1.9 million for the three ~~and nine~~ months ended September 30, ~~2017,~~2020, compared to the same ~~periods~~period in ~~2016,~~2019, primarily driven by capital additions at Evergy Kansas Central.

Evergy's depreciation and amortization increased $13.0 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by capital additions at Evergy Kansas Central and Evergy Metro.

Other Expense, Net

Evergy's other expense, net decreased $3.8 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by a $4.8 million decrease due to higher Evergy Kansas Central and Evergy Metro equity AFUDC in 2020 primarily ~~to:~~due to lower short-term borrowings; partially offset by a $1.5 million increase due to recording lower Evergy Kansas Central COLI benefits in the third quarter of 2020.

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Evergy's other expense, net increased $4.2 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:

•a ~~reduction~~$7.0 million increase due to recording lower Evergy Kansas Central COLI benefits in 2020;

•a $3.6 million increase due to lower investment earnings primarily due to a loss from equity investments in 2020; and

•a $2.8 million increase due to higher Evergy Metro pension non-service costs in 2020; partially offset by

•a $9.0 million decrease due to higher Evergy Kansas Central and Evergy Metro equity AFUDC in 2020.

Interest Expense

Evergy's interest expense increased $4.0 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by:

•a $10.4 million increase due to the issuance of Evergy's $1.6 billion of senior notes in September 2019;

•a $4.3 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; and

•a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020; partially offset by

•a $13.0 million decrease primarily due to Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019 and lower commercial paper balances and weighted-average interest rates on short-term borrowings at Evergy Kansas Central and Evergy Metro in 2020.

Evergy's interest expense increased $13.2 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:

•a $35.3 million increase due to the issuance of Evergy's $1.6 billion of senior notes in September 2019;

•an $8.2 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020;

•a $6.1 million increase due to the issuance of Evergy Kansas Central's $300.0 million of 3.25% FMBs in August 2019; and

•a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020; partially offset by

•a $26.5 million decrease primarily due to Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019 and lower commercial paper balances and weighted-average interest rates on short-term borrowings at Evergy Kansas Central and Evergy Metro in 2020;

•a $9.2 million decrease due to the repayment of Evergy Kansas South's $300.0 million of 6.70% FMBs at maturity in June 2019; and

•a $4.6 million net decrease due to the repayment of Evergy Metro's $400.0 million of 7.15% Mortgage Bonds at maturity in April 2019, which decreased interest expense by $8.5 million, partially offset by a $3.9 million increase due to Evergy Metro's issuance of $400.0 million of 4.125% Mortgage Bonds in March 2019.

Income Tax Expense

Evergy's income tax expense decreased $15.5 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by a $5.0 million decrease due to lower Evergy Kansas Central, Evergy Metro and Evergy Missouri West pre-tax income in 2020, a $3.7 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021, a $3.3 million decrease due to flow-through items primarily driven by higher amortization of ~~$9.2~~excess deferred income taxes and a $2.6 million decrease due to higher wind and ~~$20.1 million, respectively, from lower~~other income ~~before income taxes;~~

~~an increase of $5.1 million and $16.6 million, respectively, in tax benefits from production~~ tax credits ~~largely from placing~~in 2020.

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Evergy's income tax expense decreased $5.4 million year to date September 30, 2020, compared to the ~~Western Plains Wind Farm~~same period in ~~service;~~2019, primarily driven by a $12.7 million decrease due to lower Evergy Kansas Central, Evergy Metro and

Evergy Missouri West pre-tax income in 2020, a ~~favorable~~$5.4 million decrease due to lower deferred income tax ~~true-up~~expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021, a $3.8 million decrease due to flow-through items primarily driven by higher amortization of ~~$7.6~~excess deferred income taxes and a $3.3 million decrease due to higher wind and other income tax credits in 2020; partially offset by a $13.8 million net increase due to the revaluation of deferred income tax assets and liabilities in the second quarter of 2020 due to the change in the Kansas corporate income tax rate and a $7.9 million valuation allowance reversal in 2019 primarily related to ~~plant differences.~~ alternative minimum tax (AMT) credits and the expiration of certain state net operating loss (NOL) carryforwards.

See Note 13 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate.

~~FINANCIAL CONDITION~~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. See the Evergy Companies' combined 2019 Form 10-K for more information on Evergy's sources and uses of cash.

~~A number of factors affected amounts recorded on our balance sheet as~~As of September 30, ~~2017, compared to December 31, 2016.~~

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Property, plant and equipment of variable interest entities, net $ 178,058
$ 257,904
$ (79,846 ) (31.0 )

Property, plant and equipment of variable interest entities, net decreased due primarily to deconsolidating the trust holding our 8% interest in JEC. See Note 14 of the Notes to Condensed Consolidated Financial Statements, “Variable Interest Entities” for additional information.

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Regulatory assets $ 843,711
$ 879,862
$ (36,151 ) (4.1 )
Regulatory liabilities 251,133
239,453
11,680
4.9
Net regulatory assets $ 592,578
$ 640,409
$ (47,831 ) (7.5 )

~~Total regulatory assets decreased due primarily to the following items:~~

~~a $25.7 million decrease in deferred employee benefit costs;~~

~~a $12.2 million decrease in amounts collected from our customers for the deferred cost of fuel and purchased power;~~

~~a $11.2 million decrease in amounts due from customers for future income taxes; and~~

~~a $10.5 million decrease in amounts deferred for Wolf Creek refueling and maintenance outages; however,~~

~~partially offsetting these decreases was spending $20.9 million more than collected for the cost to remove retired plant assets; and~~

~~a $15.9 million increase in AROs. See Note 12 of the Notes to Condensed Consolidated Financial Statements, “Asset Retirement Obligations,” for additional information.~~

~~Total regulatory liabilities increased due primarily to a $29.8 million increase in the fair value of the NDT. This increase was partially offset by the following items:~~

~~approximately $10.0 million for accreting the Wolf Creek ARO and depreciating the capitalized Wolf Creek asset retirement cost;~~

~~spending $5.7 million more than collected for the cost to remove retired plant assets; and~~

~~amortizing $4.1~~2020, Evergy had $361.6 million of ~~a deferred regulatory gain from a sale-leaseback of Unit 2 of the La Cygne generating station.~~

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Short-term debt $ 189,100
$ 366,700
$ (177,600 ) (48.4 )

Short-term debt decreased due primarily to Westar Energy issuing $300.0 million in principal amount of FMBs, the proceeds for which were used to repay a portion of commercial paper borrowings, and us retiring $125.0 million in principal amount of FMBs. See Note 7 of the Notes to Condensed Consolidated Financial Statements, “Debt Financing” for additional information. Partially offsetting the decrease was issuances of commercial paper primarily used to fund capital expenditures.

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Current maturities of long-term debt $ —
$ 125,000
$ (125,000 ) (100.0 )
Long-term debt, net 3,686,852
3,388,670
298,182
8.8
Total long-term debt $ 3,686,852
$ 3,513,670
$ 173,182
4.9

In 2017, Westar Energy issued $300.0 million in principal amount of FMBs and retired $125.0 million in principal amount of FMBs. See Note 7 of the Notes to Condensed Consolidated Financial Statements, “Debt Financing” for additional information.

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Current maturities of long-term debt of variable interest entities $ 28,534
$ 26,842
$ 1,692
6.3
Long-term debt of variable interest entities 81,433
111,209
(29,776 ) (26.8 )
Total long-term debt of variable interest entities $ 109,967
$ 138,051
$ (28,084 ) (20.3 )

Total long-term debt of VIEs decreased due primarily to the VIE that holds the La Cygne leasehold interests having made principal payments totaling $26.8 million. See Note 14 of the Notes to Condensed Consolidated Financial Statements, “Variable Interest Entities,” for additional information.

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Deferred income taxes $ 1,866,583
$ 1,752,776
$ 113,807
6.5

~~Deferred income taxes increased due primarily to the use of bonus and accelerated depreciation methods for income tax purposes.~~

As of As of
September 30, 2017 December 31, 2016 Change % Change
(Dollars in Thousands)
Asset retirement obligations $ 397,505
$ 323,951
$ 73,554
22.7

AROs increased due primarily to revisions for asbestos and nuclear decommissioning of $25.2 million and $19.4 million, respectively, and a new obligation estimated at $13.5 million related to the completion of Western Plains Wind Farm. See Note 12 of the Notes to Condensed Consolidated Financial Statements, “Asset Retirement Obligations” for additional information.

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Overview~~

Available sources of funds to operate our business include internally generated cash, short-term borrowings under Westar Energy’s commercial paper program and revolving credit facilities and access to capital markets. We expect to meet our day-to-day cash requirements including, among other items, fuel and purchased power, dividends, interest payments, income taxes and pension contributions, using primarily internally generated cash and ~~short-term borrowings. To meet the~~ cash ~~requirements~~equivalents on hand and $2.3 billion of available borrowing capacity under its master credit facility. Evergy believes that its existing cash on hand and available borrowing capacity under its master credit facility provide sufficient liquidity for ~~our~~its existing capital investments, we expect to use internally generated cash, short-term borrowings, and proceeds from the issuance of debt and equity securities in the capital markets. When such balances are of sufficient size and it makes economic sense to do so, we also use proceeds from the issuance of long-term debt and equity securities to repay short-term borrowings, which are principally related to investments in capital equipment and the redemption of bonds and for working capital and general corporate purposes. Uncertainties affecting our ability to meet cash requirements include, among others, factors affecting revenues described in “—Operating Results” above, economic conditions, regulatory actions, compliance with environmental regulations and conditions in the capital markets.requirements.

Short-Term Borrowings

~~Westar Energy maintains a~~As of September 30, 2020, Evergy had $2.3 billion of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $249.3 million for Evergy, Inc., $981.4 million for Evergy Kansas Central, $600.0 million for Evergy Metro and $448.0 million for Evergy Missouri West. Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's borrowing capacity under the master credit facility also supports their issuance of commercial paper. See Note 8 to the consolidated financial statements for more information regarding the master credit facility. 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 ~~program pursuant~~ to ~~which it may issue commercial paper up~~meet its day-to-day cash flow requirements.

Significant Debt Issuances

See Note 9 to ~~a maximum aggregate~~the consolidated financial statements for information regarding significant debt issuances.

Regulatory Authorizations

The following table summarizes the regulatory short-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 September 30, 2020.

Type of Authorization

Commission

Expiration Date

Authorization Amount

Available Under Authorization

Evergy Kansas Central & Evergy Kansas South

(in millions)

Short-Term Debt

FERC

December 2020

$1,250.0

Evergy Metro

Short-Term Debt

FERC

December 2020

$1,250.0

Evergy Missouri West

Short-Term Debt

FERC

December 2020

$750.0

$672.0

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In October 2020, Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West filed requests with FERC to have outstanding at any one time ~~of $1.0 billion. This program~~up to $1,250.0 million (combined for both Evergy Kansas Central and Evergy Kansas South), $1,250.0 million and $750.0 million in short-term debt instruments, respectively, through December 2022. FERC is ~~supported~~expected to issue an order regarding this request by November 30, 2020.

Capital Expenditures

Evergy requires significant capital investments and ~~cannot exceed the capacity available under Westar Energy’s revolving credit facilities. Maturities of commercial paper issuances may~~expects to need cash primarily for utility construction programs designed to improve and expand facilities related to providing electric service, which include, but are not ~~exceed 365 days from the date of issuance~~limited to, expenditures to develop new transmission lines and ~~proceeds from such issuances will be used~~improvements to ~~temporarily fund~~power plants, transmission and distribution lines and equipment. Evergy's capital expenditures were $1,210.1 million, $1,069.7 million and $764.6 million in 2019, 2018 and 2017, respectively.

In August 2020, Evergy announced its new Sustainability Transformation Plan, which includes, among other things, approximately $8.9 billion of expected base capital investments through 2024, or $1.4 billion more than Evergy's prior plan. See "Executive Summary; Strategy", above for further information regarding the Sustainability Transformation Plan. Capital expenditures projected for the next five years pursuant to ~~redeem debt on an interim basis, for working capital and/or for other general corporate purposes. As~~the new plan, excluding AFUDC and including costs of ~~October 25, 2017, Westar Energy had $167.2 million of commercial paper issued and outstanding.~~

~~Westar Energy has two revolving credit facilities~~removal, are detailed in the amounts of $730.0 million and $270.0 million. The $730.0 million facility will expire in September 2019, $20.7 million of which expired in September 2017. The $270.0 million credit facility will expire in February 2018. As long as therefollowing table. This capital expenditure plan is no default under the facilities, the $730.0 million and $270.0 million facilities may be extended an additional year and the aggregate amount of borrowings under the $730.0 million and $270.0 million facilities may be increased to $1.0 billion and $400.0 million, respectively, subject to ~~lender participation. All borrowings under the facilities are secured by KGE FMBs. Total combined borrowings under the revolving credit facilities~~continual review and ~~the commercial paper program may not exceed $1.0 billion at any given time. As~~change.


		2020		2021		2022		2023		2024
	(millions)
Generating facilities		$	453	$	280	$	767	$	494	$	262
Transmission and distribution facilities		893		1,314		1,336		1,252		1,131
General facilities and other		240		132		137		106		108
Total capital expenditures		$	1,586	$	1,726	$	2,240	$	1,852	$	1,501

Pensions

Year to date September 30, 2020, Evergy made pension contributions of ~~October 25, 2017, no amounts were borrowed and $11.8~~$54.3 million. Evergy expects to make additional pension contributions of $78.4 million in ~~letters~~2020 to satisfy ERISA funding requirements and KCC and MPSC rate orders, which is expected to be paid by Evergy Metro. Also in 2020, Evergy expects to make additional contributions of ~~credit had been issued under~~$3.1 million to the ~~$730.0 million facility. No amounts were borrowed and no letters of credit were issued under the $270.0 million facility as of the same date.~~

~~Long-Term Debt Financing~~

~~In January 2017, Westar Energy retired $125.0 million in principal amount of FMBs bearing a stated interest at 5.15% maturing January 2017.~~

~~In March 2017, Westar Energy issued $300.0 million in principal amount of FMBs bearing a stated interest at 3.10% and maturing April 2027.~~

post-retirement benefit plans.

Debt Covenants

~~We were~~As of September 30, 2020, Evergy was in compliance with ~~our~~all debt covenants asunder the master credit facility and certain debt instruments that contain restrictions that require the maintenance of certain capitalization and leverage ratios. See Note 8 to the consolidated financial statements for more information.

Off-Balance Sheet Arrangement

Evergy's off-balance sheet arrangements were reported in the Evergy Companies' combined 2019 Form 10-K. As of September 30, ~~2017.~~2020, there have been no material changes with regards to these off-balance sheet arrangements.

~~Impact of Credit Ratings on Debt Financing~~

Moody’s and S&P are independent credit-rating agencies that rate our debt securities. These ratings indicate each agency’s assessment of our ability to pay interest and principal when due on our securities.

In general, more favorable credit ratings increase borrowing opportunities and reduce the cost of borrowing. Under Westar Energy’s revolving credit facilities and commercial paper program, our cost of borrowings is determined in part by credit ratings. However, Westar Energy’s ability to borrow under the credit facilities and commercial paper program are not conditioned on maintaining a particular credit rating. We may enter into new credit agreements that contain credit rating conditions, which could affect our liquidity and/or our borrowing costs.

Factors that impact our credit ratings include a combination of objective and subjective criteria. Objective criteria include typical financial ratios, such as funds from operations to total debt and operating cash flow to debt, among others, future capital expenditures and our access to liquidity including committed lines of credit. Subjective criteria include such items as the quality and credibility of management, the political and regulatory environment we operate in and an assessment of our governance and risk management practices.

~~As of October 25, 2017, our ratings with the agencies are as shown in the table below.~~



	~~Westar~~ ~~Energy~~ ~~First~~ ~~Mortgage~~ ~~Bond~~ ~~Rating~~	~~KGE~~ ~~First~~ ~~Mortgage~~ ~~Bond~~ ~~Rating~~	~~Westar Energy Commercial Paper~~	~~Rating~~ ~~Outlook~~
~~Moody’s~~	A2	A2	~~P-2~~	~~Stable~~
~~S&P (a)~~	A	A	~~A-2~~	~~Positive~~

~~_______________~~


~~(a)~~	In July 2017, following the public announcement of the amended and restated agreement and plan of merger with Great Plains Energy, S&P revised its outlook for Westar Energy and KGE to positive from negative, pending the outcome of the merger.

~~Summary of~~ Cash Flows

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



Year to Date September 30	2020		2019
	(millions)
Cash Flows from Operating Activities	$	1,421.7	$	1,447.3
Cash Flows used in Investing Activities	(1,029.9)		(772.1)
Cash Flows used in Financing Activities	(53.4)		(785.4)

Nine Months Ended September 30,
2017 2016 Change % Change
(Dollars In Thousands)
Cash flows from (used in):
Operating activities $ 742,322
$ 692,573
$ 49,749
7.2
Investing activities (581,009 ) (815,018 ) 234,009
28.7
Financing activities (160,991 ) 123,151
(284,142 ) (230.7 )
Net change in cash and cash equivalents $ 322
$ 706
$ (384 ) (54.4 )

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Cash Flows from Operating Activities

~~Cash~~Evergy's cash flows from operating activities ~~increased due principally~~decreased $25.6 million year to ~~our having received $39.9 million more for wholesale power sales and transmission services, receiving a $13.0 million refund for income taxes~~date September 30, 2020, compared to ~~paying $13.0 million for~~ the same period in ~~2016,~~2019, primarily driven by:

•a $102.0 million decrease in cash receipts for retail electric sales in 2020 primarily driven by lower sales as a result of unfavorable weather and ~~paying $8.0~~a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19;

•a $27.0 million ~~less~~increase in interest payments in 2020 primarily due to payments made in March and September of 2020 on Evergy's $1.6 billion of senior notes issued in September 2019; and

•$19.9 million in cash payments to advisors associated with strategic planning; partially offset by

•a $64.3 million one-time refund made to certain Evergy Metro and Evergy Missouri West customers in 2019 reflecting customer benefits associated with the Tax Cuts and Jobs Act; and

•a $60.7 million increase in cash receipts for ~~coal and natural gas. Partially offsetting these increases was our paying $22.8~~net tax refunds in 2020 primarily driven by a $57.2 million ~~more~~increase in ~~purchased power and transmission services.~~refunds related to federal AMT credits.

Cash Flows used in Investing Activities

~~Cash~~Evergy's cash flows used in investing activities ~~decreased due~~increased $257.8 million year to date September 30, 2020, compared to the same period in 2019, primarily ~~to our having invested $257.3~~driven by:

•a $209.0 million ~~less~~increase in additions to property, plant and equipment due to increases at Evergy Kansas Central, Evergy Metro and Evergy Missouri West of $75.8 million, $71.9 million and $61.3 million, respectively, primarily ~~related~~due to ~~the completion~~increased spending for a variety of ~~construction~~capital projects including transmission infrastructure additions, customer meters and a customer billing system; and

•a decrease of ~~Western Plains Wind Farm; partially offset by our having received $24.0~~$38.5 million ~~fewer~~in proceeds from ~~our investment~~COLI investments, primarily from Evergy Kansas Central due to a higher number of policy settlements in ~~COLI.~~2019.

Cash Flows used in Financing Activities

~~Cash~~Evergy's cash flows used in financing activities ~~increased due principally~~decreased $732.0 million year to ~~our having issued $162.0~~date September 30, 2020, compared to the same period in 2019, primarily driven by:

•$1,628.7 million ~~less~~of common stock repurchased as a result of Evergy's share repurchase program in 2019;

•a $450.0 million decrease in retirements of long-term debt, net due to Evergy Metro's repayment of ~~VIEs,~~$400.0 million of 7.15%% Mortgage Bonds in April 2019 and Evergy Kansas South's repayment of its $300.0 million of 6.70% FMBs in June 2019; partially offset by Evergy Kansas Central's repayment of its $250.0 million of 5.10% FMBs in May 2020;

•a $69.8 million payment for the settlement of an interest rate swap accounted for as a cash flow hedge of Evergy's $800.0 million of 2.90% Senior Notes issued ~~$110.3~~in September 2019; and

•a $24.9 million ~~less~~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 2019; partially offset by

•a $1,484.7 million decrease in proceeds from long-term debt, net primarily due to Evergy's issuance of $800.0 million of 2.45% Senior Notes and $800.0 million of 2.90% Senior Notes in September 2019.

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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 (H)(2)(a) to Form 10-Q.

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



Year to Date September 30	2020		Change		2019
	(millions)
Operating revenues	$	1,864.5	$	(66.8)	$	1,931.3
Fuel and purchased power	329.9		(45.4)		375.3
SPP network transmission costs	197.8		9.1		188.7
Operating and maintenance	376.3		(20.1)		396.4
Depreciation and amortization	339.0		7.7		331.3
Taxes other than income tax	145.1		(0.2)		145.3
Income from operations	476.4		(17.9)		494.3
Other expense, net	(12.2)		1.7		(13.9)
Interest expense	127.7		(6.4)		134.1
Income tax expense	149.2		103.0		46.2
Equity in earnings of equity method investees, net of income taxes	3.4		(0.2)		3.6
Net income	190.7		(113.0)		303.7
Less: Net income attributable to noncontrolling interests	8.7		(4.2)		12.9
Net income attributable to Evergy Kansas Central, Inc.	$	182.0	$	(108.8)	$	290.8

Evergy Kansas Central Utility Gross Margin and MWh Sales

The following table summarizes Evergy Kansas Central's utility gross margin and MWhs sold and provides a reconciliation of utility gross margin to income from operations.


	Revenues and Expenses						MWhs Sold
Year to Date September 30	2020		Change		2019		2020	Change	2019

Retail revenues	(millions)						(thousands)
Residential	$	627.5	$	(12.9)	$	640.4	5,110	7	5,103
Commercial	511.0		(45.4)		556.4		5,266	(407)	5,673
Industrial	284.6		(23.9)		308.5		3,911	(375)	4,286
Other retail revenues	13.3		(2.5)		15.8		31	(4)	35
Total electric retail	1,436.4		(84.7)		1,521.1		14,318	(779)	15,097
Wholesale revenues	168.1		(14.4)		182.5		5,775	184	5,591
Transmission revenues	215.2		9.7		205.5		N/A	N/A	N/A
Other revenues	44.8		22.6		22.2		N/A	N/A	N/A
Operating revenues	1,864.5		(66.8)		1,931.3		20,093	(595)	20,688
Fuel and purchased power	(329.9)		45.4		(375.3)
SPP network transmission costs	(197.8)		(9.1)		(188.7)
Utility gross margin (a)	1,336.8		(30.5)		1,367.3
Operating and maintenance	(376.3)		20.1		(396.4)
Depreciation and amortization	(339.0)		(7.7)		(331.3)
Taxes other than income tax	(145.1)		0.2		(145.3)
Income from operations	$	476.4	$	(17.9)	$	494.3

(a)Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin under Evergy's Results of Operations.

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Evergy Kansas Central's utility gross margin decreased $30.5 million year to date September 30, 2020, compared to the same period in 2019, driven by:

•a $24.8 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 6% and heating degree days decreased 10%) and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand; and

•a $5.7 million decrease related to Evergy Kansas Central's TDC rider in 2020.

Evergy Kansas Central Operating and Maintenance

Evergy Kansas Central's operating and maintenance expense decreased $20.1 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:

•a $23.4 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to an $11.2 million decrease from maintenance outages at JEC Unit 2 and La Cygne Unit 2 in the first half of 2019, an $8.4 million write-off of a regulatory asset for costs incurred during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020;

•an $11.9 million decrease in various administrative and general operating and maintenance expenses primarily driven by an $11.6 million decrease in labor and employee benefits expense that included lower employee headcount in 2020 and a $1.9 million decrease in property insurance expense due to a higher annual refund of nuclear insurance premiums received by Evergy Kansas Central related to its indirect ownership interest in Wolf Creek; and

•a $9.1 million decrease in transmission and distribution operating and maintenance expense primarily due to lower labor expense in 2020; partially offset by

•an $18.9 million increase in voluntary severance expenses due to a $15.5 million increase related to Evergy voluntary exit programs in 2020 and $3.4 million of voluntary severance expenses incurred in 2020 related to Wolf Creek voluntary exit programs.

Evergy Kansas Central Depreciation and Amortization

Evergy Kansas Central's depreciation and amortization expense increased $7.7 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by capital additions.

Evergy Kansas Central Interest Expense

Evergy Kansas Central's interest expense decreased $6.4 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:

•a $10.1 million decrease due to lower commercial paper ~~issued $100.3~~balances and weighted-average interest rates on short-term borrowings in 2020; and

•a $9.2 million ~~less~~decrease due to the repayment of Evergy Kansas South's $300.0 million of 6.70% FMBs at maturity in ~~long-term debt~~June 2019; partially offset by

•an $8.2 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; and ~~redeemed $75.0~~

•a $6.1 million ~~more~~increase due to the issuance of Evergy Kansas Central's $300.0 million of 3.25% FMBs in ~~long-term debt. Partially offsetting these decreases was our having redeemed $163.5~~August 2019.

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Evergy Kansas Central Income Tax Expense

Evergy Kansas Central's income tax expense increased $103.0 million ~~less in long-term debt of VIEs.~~

~~Pension Contribution~~

~~During the nine months ended~~year to date September 30, ~~2017, we contributed $20.6 million~~2020, compared to the ~~Westar Energy pension trust. We funded $12.0~~same period in 2019, primarily driven by a $109.0 million net increase due to the revaluation of deferred income tax assets and liabilities in the second quarter of 2020 due to the change in the Kansas corporate income tax rate, partially offset by a $3.9 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021 and a $2.7 million decrease due to lower pre-tax income in 2020.

See Note 13 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate.

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 (H)(2)(a) to Form 10-Q.

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



Year to Date September 30	2020		Change		2019
	(millions)
Operating revenues	$	1,328.3	$	(102.9)	$	1,431.2
Fuel and purchased power	306.0		(74.4)		380.4
Operating and maintenance	305.7		(35.5)		341.2
Depreciation and amortization	243.6		4.6		239.0
Taxes other than income tax	92.4		(3.9)		96.3
Income from operations	380.6		6.3		374.3
Other expense, net	(13.8)		(2.3)		(11.5)
Interest expense	85.5		(6.1)		91.6
Income tax expense	5.1		(38.8)		43.9
Net income	$	276.2	$	48.9	$	227.3

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Evergy Metro Utility Gross Margin and MWh Sales

The following table summarizes Evergy Metro's utility gross margin and MWhs sold and provides a reconciliation of utility gross margin to income from operations.


	Revenues and Expenses						MWhs Sold
Year to Date September 30	2020		Change		2019		2020	Change	2019

Retail revenues	(millions)						(thousands)
Residential	$	572.2	$	(3.3)	$	575.5	4,249	(12)	4,261
Commercial	558.1		(55.4)		613.5		5,360	(468)	5,828
Industrial	99.6		(7.1)		106.7		1,279	(24)	1,303
Other retail revenues	8.9		(3.4)		12.3		54	(3)	57
Total electric retail	1,238.8		(69.2)		1,308.0		10,942	(507)	11,449
Wholesale revenues	16.7		(38.0)		54.7		3,690	(995)	4,685
Transmission revenues	10.4		(3.6)		14.0		N/A	N/A	N/A
Other revenues	62.4		7.9		54.5		N/A	N/A	N/A
Operating revenues	1,328.3		(102.9)		1,431.2		14,632	(1,502)	16,134
Fuel and purchased power	(306.0)		74.4		(380.4)
Utility gross margin (a)	1,022.3		(28.5)		1,050.8
Operating and maintenance	(305.7)		35.5		(341.2)
Depreciation and amortization	(243.6)		(4.6)		(239.0)
Taxes other than income tax	(92.4)		3.9		(96.3)
Income from operations	$	380.6	$	6.3	$	374.3

(a)Utility gross margin is a non-GAAP financial measure. See explanation of utility gross margin under Evergy's Results of Operations.

Evergy Metro's utility gross margin decreased $28.5 million year to date September 30, 2020, compared to the same period in 2019, driven by:

•a $31.3 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 7% and heating degree days decreased 12%) and a decrease in weather-normalized commercial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand; and

•a $3.8 million decrease in revenue recognized for the MEEIA earnings opportunity in 2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Metro's MEEIA program; partially offset by

•a $3.4 million increase in MEEIA throughput disincentive in 2020 primarily driven by the cumulative amount of customer energy savings achieved in the second and third cycles of Evergy Metro's MEEIA program; and

•a $3.2 million increase for recovery of programs costs for energy efficiency programs under MEEIA, which have a direct offset in operating and maintenance expense.

Evergy Metro Operating and Maintenance

Evergy Metro's operating and maintenance expense decreased $35.5 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:

•a $23.1 million decrease in transmission and distribution operating and maintenance expense primarily due to $11.7 million of costs incurred from storms that occurred in January 2019, a $3.1 million decrease due to the timing of vegetation management projects in 2020 and lower labor expense in 2020;

•an $11.0 million decrease in various administrative and general operating and maintenance expenses primarily due to a $6.2 million decrease in credit loss expense due to lower levels of customer disconnections in 2020 and a $1.8 million decrease in property insurance expense due to a higher annual

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refund of nuclear insurance premiums received by Evergy Metro related to its ownership interest in Wolf ~~Creek’s pension plan contributions during~~Creek in the first quarter of 2020; and

•a $10.8 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily driven by a $10.6 million decrease primarily due from outages at Hawthorn Station, Iatan Station and La Cygne Unit 2 and lower employee headcount in 2020; partially offset by

•a $15.3 million increase in voluntary severance expenses due to an $11.9 million increase related to Evergy voluntary exit programs in 2020 and $3.4 million of voluntary severance expenses incurred in 2020 related to Wolf Creek voluntary exit programs; and

•a $3.2 million increase in program costs for energy efficiency programs under MEEIA, which have a direct offset in revenue.

Evergy Metro Depreciation and Amortization

Evergy Metro's depreciation and amortization increased $4.6 million year to date September 30, 2020, compared to the same ~~period.~~period in 2019, primarily driven by capital additions.

Evergy Metro Other Expense, Net

~~OFF-BALANCE SHEET ARRANGEMENTS~~

~~From December 31, 2016, through~~ Evergy Metro's other expense, net increased $2.3 million year to date September 30, ~~2017, our off-balance sheet arrangements did not change materially. For additional information, see our 2016 Form 10-K.~~2020, compared to the same period in 2019, primarily driven by:

•a $4.4 million increase in pension non-service costs in 2020; partially offset by

•a $3.2 million increase in equity AFUDC in 2020 primarily due to lower short-term borrowings.

Evergy Metro Interest Expense

~~CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS~~

~~From~~ ~~December 31, 2016, through~~ Evergy Metro's interest expense decreased $6.1 million year to date September 30, ~~2017, our contractual obligations~~2020, compared to the same period in 2019, primarily driven by:

•a $2.9 million decrease due to lower commercial ~~commitments did not~~paper balances and weighted-average interest rates on short-term borrowings in 2020; partially offset by

•a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020.

Evergy Metro Income Tax Expense

Evergy Metro's income tax expense decreased $38.8 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by a $32.2 million net decrease due to the revaluation of deferred income tax assets and liabilities in the second quarter of 2020 due to the change ~~materially outside~~in the ~~ordinary course~~Kansas corporate income tax rate and a $6.2 million decrease due to flow-through items primarily driven by higher amortization of ~~business. For additional information, see our 2016 Form 10-K.~~excess deferred income taxes; partially offset by a $2.6 million increase due to higher pre-tax income in 2020.

~~OTHER INFORMATION~~

~~Changes in Prices~~

See Note ~~4 of~~13 to the ~~Notes to Condensed Consolidated Financial Statements, “Rate Matters and Regulation,”~~consolidated financial statements for more information ~~on our prices.~~ regarding the change in the Kansas corporate income tax rate.

~~New Accounting Pronouncements~~

~~See Note 2 of the Notes to Condensed Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for information on accounting pronouncements.~~

ITEM 3. 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 discussed elsewhere in this document as well as in the Evergy Companies' combined 2019 Form 10-K and therefore are not represented here.

~~We are exposed to~~

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Evergy's interim period disclosures about market risk ~~including~~included in quarterly reports on Form 10-Q address material changes, if any, from the most recently filed annual report on Form 10-K. Therefore, these interim period disclosures should be read in ~~commodity prices, counterparty credit, interest rates, and debt and equity instrument values. From~~ ~~December 31, 2016, to September 30, 2017, no significant changes occurred in our market risk exposure. See “Item 7A.~~conjunction with Part II, Item 7A, Quantitative and Qualitative Disclosures About Market ~~Risk”~~Risk included in ~~our~~ ~~2016~~the Evergy Companies' combined 2019 Form ~~10-K for additional information.~~10-K.

ITEM 4. CONTROLS AND PROCEDURES

~~We maintain a set~~EVERGY

Disclosure Controls and Procedures

Evergy carried out an evaluation of its disclosure controls and procedures ~~designed to ensure that information required to be disclosed~~(as defined in ~~reports that we file or submit~~Rules 13a-15(e) and 15d-15(e) under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. In addition, the disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reportsAct). This evaluation was conducted under the ~~Exchange Act is accumulated~~supervision, and ~~communicated to~~with the participation, of Evergy's management, including the chief executive officer and ~~the~~ chief financial officer, ~~allowing timely decisions regarding required disclosure. As~~and Evergy's disclosure committee. Based upon this evaluation, the chief executive officer and chief financial officer of Evergy have concluded as of the end of the period covered by this report ~~based on~~that the disclosure controls and procedures of Evergy were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in Evergy’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarterly period ended September 30, 2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

EVERGY KANSAS CENTRAL

Disclosure Controls and Procedures

Evergy Kansas Central carried out an evaluation ~~carried out~~of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). This evaluation was conducted under the supervision, and with the participation, of Evergy Kansas Central's management, including the chief executive officer and ~~the~~ chief financial officer, ~~of the effectiveness of our~~and Evergy Kansas Central's disclosure ~~controls and procedures,~~committee. Based upon this evaluation, the chief executive officer and ~~the~~ chief financial officer of Evergy Kansas Central have concluded as of the end of the period covered by this report that ~~our~~the disclosure controls and procedures of Evergy Kansas Central were ~~effective.~~effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There ~~were~~has been no ~~changes~~change in ~~our~~Evergy Kansas Central’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the ~~three months~~quarterly period ended September 30, ~~2017,~~2020, that has materially affected, or ~~are~~is reasonably likely to materially affect, ~~our~~its internal control over financial reporting.

EVERGY METRO

Disclosure Controls and Procedures

Evergy Metro carried out an evaluation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). This evaluation was conducted under the supervision, and with the participation, of Evergy Metro's management, including the chief executive officer and chief financial officer, and Evergy Metro's disclosure committee. Based upon this evaluation, the chief executive officer and chief financial officer of Evergy Metro have concluded as of the end of the period covered by this report that the disclosure controls and procedures of Evergy Metro were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in Evergy Metro’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarterly period ended September 30, 2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting

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PART ~~II.~~II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other Proceedings

~~Information on legal~~The Evergy Companies are parties to various lawsuits and regulatory proceedings ~~is set forth~~ in the ordinary course of their respective businesses. For information regarding material lawsuits and proceedings, see Notes 114 and ~~13 of~~11 to the ~~Notes to Condensed Consolidated Financial Statements, “Commitments and Contingencies” and “Legal Proceedings,” respectively, which are~~consolidated financial statements. Such information is incorporated herein by reference.

ITEM 1A. RISK FACTORS

~~Our 2016 Form 10-K contains descriptions~~Actual results in future periods for the Evergy Companies could differ materially from historical results and the forward-looking statements contained in this report. The business of ~~risk~~the Evergy Companies is influenced by many factors ~~relating~~that are difficult to ~~us, as required by~~predict, involve uncertainties that may materially affect actual results and are often beyond their control. Additional risks and uncertainties not presently known or that management currently believes to be immaterial may also adversely affect the Evergy Companies. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item ~~503(c) of Regulation S-K. The risk factors under the heading “Risks Relating to the Pending Merger”~~1A, Risk Factors included in the ~~2016~~2019 Form 10-K ~~Item 1A. Risk Factors, were replaced with the risk factors contained in Item 1A. Risk Factors in our~~for each of Evergy, Evergy Kansas Central and Evergy Metro, as well as Quarterly ~~Report~~Reports on Form 10-Q ~~for the quarter ended June 30, 2017.~~and Current Reports on Form 8-K filed by Evergy, Evergy Kansas Central and Evergy Metro. Except as ~~indicated~~set forth below, orthere have been no material changes with regards to those risk factors. This information, as ~~otherwise described~~well as the other information included in ~~filings we make from time to time~~this report and in the other documents filed with the SEC, should be carefully considered before making an investment in the securities of the Evergy Companies. Risk factors of Evergy Kansas Central and Evergy Metro are also risk factors of Evergy.

The spread of COVID-19 and resulting impact on business and economic conditions could negatively affect the Evergy Companies' business and operations.

The COVID-19 pandemic has had, and may continue to have, a significant impact on the way that the Evergy Companies conduct their operations and could adversely impact their results of operations, financial condition, cash flows and liquidity. Further, the spread of COVID-19 has resulted in efforts to contain the virus, such as quarantines, restrictions on travel, closures and reduced operations of businesses, governmental agencies and other institutions. The pandemic, along with the efforts to contain the virus, has caused and could continue to cause an economic slowdown or recession, result in significant disruptions or reductions in various public, commercial or industrial activities and cause employee absences, which could interfere with the Evergy Companies' operations or the operations of their customers. In addition, the COVID-19 pandemic led to disruption and volatility in the financial markets in the first quarter of 2020 and in the event that further market disruptions occur, the Evergy Companies could experience an increase in their cost of capital or an impairment in their ability to access the capital markets.

The COVID-19 pandemic has altered electricity usage patterns, including ~~our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, there were no material~~an overall reduction in demand and shifting usage away from customers with relatively higher load requirements, such as industrial and commercial customers, toward customers with relatively lower load requirements, such as residential customers. These changes in ~~our risk~~electricity usage patterns, their duration and the extent to which some of these shifts could become long-term or permanent could result in a significant decrease in the Evergy Companies' sales of electricity.

The Evergy Companies have also incurred, and will continue to incur, expenses related to monitoring the COVID-19 pandemic and modifying operations in response to the pandemic. In July 2020, the KCC authorized Evergy Kansas Central and Evergy Metro to record to a regulatory asset all net incremental costs incurred with respect to their Kansas operations associated with the COVID-19 pandemic for consideration in their next Kansas rate cases, which are expected to be completed no later than the end of 2023. Additionally, the KCC order states that the KCC will also consider granting the recovery of Evergy Kansas Central's and Evergy Metro's lost revenues associated with the COVID-19 pandemic as part of their next Kansas rate cases. In October 2020, Evergy Metro and Evergy Missouri West entered into a non-unanimous stipulation and agreement with the MPSC staff and other intervenors that would allow Evergy Metro and Evergy Missouri West to defer to a regulatory asset certain net incremental costs incurred associated with the COVID-19 pandemic for consideration in their next rate cases. A

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decision by the MPSC regarding the non-unanimous stipulation and agreement is expected in January 2021. Notwithstanding the foregoing, regulators might not allow for recovery of these amounts in a timely manner, or at all. In addition, Evergy Metro and Evergy Missouri West elected into plant-in service accounting (PISA) in Missouri effective as of January 1, 2019, which, by law, requires each company to keep base rates constant for three years following Evergy Metro's and Evergy Missouri West's last general rate case. These and other factors may result in under-recovery of costs or failure to earn the authorized return on investment, or both.

The Evergy Companies have also temporarily implemented policies, and in the future may implement additional policies, that are intended to ease the financial burden of the pandemic on customers, such as temporarily extending payment options and offering incentives for customer payments on overdue balances as well as the elimination of late payment fees and disconnections for non-payment through July 15, 2020. There is also the possibility that legislation or regulations could be enacted at the federal or state level that would further restrict the Evergy Companies' ability to discontinue service to customers in the event of non-payment or to collect amounts owed from ~~December 31, 2016, through September 30, 2017.~~

~~Pending litigation against us and Great Plains Energy~~customers for service provided. These measures could result in an ~~injunction preventing~~overall increase in customer non-payment or delay in the ~~consummation~~timely receipt of customer payments, which could result in a significant increase in the Evergy Companies' credit loss expense or significant decrease in operating cash flows.

Evergy Kansas Central, Evergy Metro and Evergy Missouri West sell retail electric accounts receivable to independent outside investors as a source of liquidity. These arrangements include covenants that limit the extent to which accounts receivable can be delinquent or unpaid. A decrease in the amount of, or a delay in receiving, customer collections due to the COVID-19 pandemic or otherwise could, absent a waiver or amendment, result in a breach of these accounts receivable financing arrangements and require the borrowers to repay any outstanding loans. Further, in 2020, the Evergy Companies have experienced lower retail electric sales as a result of decreases in weather-normalized commercial and industrial demand. To the extent that the Evergy Companies continue to experience lower electric sales, they may not have sufficient eligible receivables to maximize their borrowing capacity under their receivables sales facilities or could be required to repay additional portions of their borrowings under the facilities.

The Evergy Companies are planning to make significant capital expenditures in 2020 and beyond, and they regularly conduct maintenance on their facilities. The pandemic could disrupt the supply chains that provide services and equipment to the Evergy Companies as part of their capital expenditures or maintenance efforts. If the Evergy Companies' supply chains are disrupted, the Evergy Companies may be unable to perform necessary maintenance, which could result in increased costs as the Evergy Companies implement contingency plans to allow them to continue to operate. Supply chain interruptions may also increase the cost of maintenance and capital expenditures or result in the delay or cancellation of planned projects, any of which could have a material adverse impact on the Evergy Companies' results of operations.

The Evergy Companies also have a significant amount of NOLs, tax credits and other tax carryforwards that are recorded as deferred income tax assets on their balance sheets. These tax benefits have various expiration dates and other limitations on the extent to which the benefits can be realized. The Evergy Companies regularly assess their future ability to utilize tax benefits to determine whether a valuation allowance is necessary. A significant reduction in the Evergy Companies' taxable income due to the impacts of the ~~proposed merger~~COVID-19 pandemic or otherwise could require the Evergy Companies to record a valuation allowance against a portion of those tax assets, which in turn reduces earnings, and the Evergy Companies may in general not be able to utilize these tax benefits.

Public reports have also 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 employees and third parties interact with our information technology infrastructure. A successful attack could result in disruption to the Evergy Companies' generation, transmission and distribution systems or to the electrical grid in general, reduce sales and could increase the cost of insurance coverage or result in a decline in the U.S. economy.

Any of these circumstances, or other impacts of the pandemic, could adversely affect customer demand or revenues, impact the ~~combined company’s business, financial condition~~ability of the Evergy Companies' suppliers, vendors or contractors to perform, or cause other

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unpredictable events, which could have a significant adverse impact on the results of operations, ~~following the merger.~~

~~Following the announcement~~financial condition, liquidity and cash flows of the original merger agreement, a putative derivative lawsuit was filed in the District Court of Shawnee County, Kansas against the members of our board of directors, Great Plains Energy and a subsidiary of Great Plains Energy, alleging breaches of various fiduciary duties by members of our board of directors in connection with the original proposed transaction and alleging that Great Plains Energy and a subsidiary of Great Plains Energy aided and abetted such alleged breaches of fiduciary duties. The putative derivative petition was refiled in October 2017. Also following the announcement of the original merger agreement, two putative class action lawsuits (which were consolidated and superseded by a consolidated complaint) were filed in the District Court of Shawnee County, Kansas against Westar Energy, the members of our board of directors and Great Plains Energy, alleging breaches of various fiduciary duties by the members of our board of directors in connection with the proposed merger and alleging that we and Great Plains Energy aided and abetted such alleged breaches of fiduciary duties. In September 2017, the lead plaintiffs moved to amend the class action petition with allegations similar to those made regarding the original merger agreement but focusing on the revised merger. Also in September 2017, a putative class action lawsuit was filed in the United States District Court for the District of Kansas challenging the merger and alleged disclosure violations under sections 14(a) and 20(a) of the Exchange Act. In October 2017, another putative class action lawsuit was filed in the United States District Court for the District of Kansas. This federal class action complaint challenges the merger and alleges violations of sections 14(a) and 20(a) of the Exchange Act.Evergy Companies.

Among other remedies, the plaintiffs seek to enjoin the proposed transaction, rescind the merger agreement, remedy alleged disclosure deficiencies, and unspecified damages and reimbursement of costs. The outcome of litigation is inherently uncertain, and we cannot predict how existing litigation will progress, or whether additional claims may result from the amended and restated merger agreement. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger closes may adversely affect the combined company’s business, financial condition or results of operations. See Note 13 of the Notes to Condensed Consolidated Financial Statements, “Legal Proceedings,” for additional information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Available Information

Investors should note that wethe Evergy Companies announce material financial information in SEC filings, press releases and public conference calls. In accordance with SEC ~~guidance, we may~~guidelines, the Evergy Companies also use the Investor Relations ~~section of our~~tab on their website, (~~http://www.WestarEnergy.com, under “Investors”)~~www.evergy.com, to communicate with ~~investors about our company.~~investors. It is possible that the financial and other information ~~we post~~posted there could be deemed to be material information. The information on ~~our~~Evergy's website is not part of this document.

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ITEM 6. EXHIBITS

Exhibit

Number

Description of Document

Registrant

Amended and Restated Merger Agreement, dated as of July 9, 2017, by and among Westar Energy, Inc., Great Plains Energy Incorporated, Monarch Energy Holding, Inc., King Energy, Inc. and, solely for the purposes set forth therein, GP Star, Inc. (filed as Exhibit 2.1 to the Form 8-K filed on July 10, 2017)

~~31(a)~~

31.1

Rule 13a-14(a)/15d-14(a) Certification of ~~Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the period ended September 30, 2017~~Terry Bassham.

Evergy

~~31(b)~~

31.2

Rule 13a-14(a)/15d-14(a) Certification of ~~Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the period ended September 30, 2017~~Anthony D. Somma.

Evergy

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the quarter ended September 30, 2017 (furnished and not to be considered filed as part of the Form 10-Q)

~~101.INS~~31.3

Rule 13a-14(a)/15d-14(a) Certification of Terry Bassham.

Evergy Metro

31.4

Rule 13a-14(a)/15d-14(a) Certification of Anthony D. Somma.

Evergy Metro

31.5

Rule 13a-14(a)/15d-14(a) Certification of Terry Bassham.

Evergy Kansas Central

31.6

Rule 13a-14(a)/15d-14(a) Certification of Anthony D. Somma.

Evergy Kansas Central

32.1

Section 1350 Certifications.

Evergy

32.2

Section 1350 Certifications.

Evergy Metro

32.3

Section 1350 Certifications.

Evergy Kansas Central

101.INS

XBRL Instance ~~Document~~Document.

n/a

~~101.SCH~~

101.SCH

Inline XBRL Taxonomy Extension Schema ~~Document~~Document.