Evergy, Inc. (EVRG) FY 2021 MD&A

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

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

The following MD&A generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 can be found in MD&A in Part II, Item 7, of the Evergy Companies' combined annual report on Form 10-K for the fiscal year ended December 31, 2020.

EVERGY, INC.

EXECUTIVE SUMMARY

Evergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below.

•Evergy Kansas Central is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has one active wholly-owned subsidiary with significant operations, Evergy Kansas South.

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

•Evergy Missouri West is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.

•Evergy Transmission Company owns 13.5% of Transource with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of AEP. Transource is focused on the development of

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competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.

Evergy Kansas Central also owns a 50% interest in Prairie Wind, which is a joint venture between Evergy Kansas Central and subsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the SPP. Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.

Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West conduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 15,400 MWs of owned generating capacity and renewable power purchase agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.6 million customers in the states of Kansas and Missouri. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment).

Strategy

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

•Affordability - working to keep rates affordable and improve regional rate competitiveness;

•Reliability - targeting top-tier performance in reliability, customer service and generation; and

•Sustainability - advancing ongoing CO2 emissions reductions and generation fleet transition.

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

•targeting an annual reduction of approximately $345 million of operating and maintenance expense by 2025 from 2018 adjusted operating and maintenance expense (non-GAAP) (see "Non-GAAP Measures" within this Executive Summary for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure);

•targeting approximately $10.7 billion of expected base capital investments through 2026 including approximately $2.0 billion in renewable generation. See "Liquidity and Capital Resources; Capital Expenditures", for further information regarding Evergy's projected capital expenditures through 2026; and

•targeting a 70% reduction of CO2 emissions by 2030 (from 2005 levels) and net-zero by 2045 through the continued growth of Evergy's renewable energy portfolio and the retirement of older and less efficient fossil fuel plants. See "Transitioning Evergy's Generation Fleet" in Part I, Item 1., Business, for additional information.

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

Regulatory Proceedings

In January 2022, Evergy Metro and Evergy Missouri West filed applications with the MPSC to request increases to their retail electric revenues of $43.9 million and $27.7 million, respectively, before rebasing fuel and purchased power expense, with a return on equity of 10%. The requests reflect increases related to higher property taxes and the recovery of infrastructure investments made to improve reliability and enhance customer service and were also partially offset by significant customer savings and cost reductions created since the Great Plains Energy and Evergy Kansas Central merger in 2018. Evergy Metro and Evergy Missouri West are also requesting the implementation of tracking mechanisms for both property tax expense and credit loss expense and the creation of a storm reserve as part of their requests with the MPSC.

See Note 4 to the consolidated financial statements for further information regarding the Missouri rate cases in addition to information on other regulatory proceedings.

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Evergy Equity Investment

From time to time, Evergy makes limited equity investments in early-stage energy solution companies. These investments have historically not had a significant impact on Evergy's results of operations. In October 2021, an equity investment in which Evergy held a minority stake through an initial investment of $3.7 million was acquired through a transaction involving a special purpose acquisition company (SPAC). As a result of its equity investment in the company that was acquired in the SPAC transaction, Evergy received shares of the resulting public company upon the closing of the transaction, which are subject to a restriction on sale for 150 days. Evergy recorded a $27.7 million unrealized gain in the fourth quarter of 2021 for the conversion of its shares into the newly formed public company and based on the closing share price as of December 31, 2021 adjusted to reflect the restriction on the sale of the shares. The fair value of Evergy's investment is largely dependent on the performance of the new public company's stock, which is subject to significant market volatility and also affected by the restriction on sale of the shares until March 2022, when the restriction expires. Evergy uses adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) to evaluate earnings and EPS without the gains or losses related to equity investments which are subject to a restriction on sale that can create period to period volatility. See "Non-GAAP Measures" within this Executive Summary for additional information.

LEC Unit 4 Securitization

In April 2021, the state of Kansas passed the Utility Financing and Securitization Act (UFSA) which allows certain public utilities, including Evergy Kansas Central and Evergy Metro, to securitize utility assets in order to recover energy transition costs relating to the early retirement of certain generating assets. To recover the energy transition costs through securitization as allowed in the UFSA, a public utility must obtain a predetermination order from the KCC finding that the retirement of the subject generation facility is reasonable. Upon the receipt of a successful predetermination order, the public utility must then file an application with the KCC for a financing order to issue securitized bonds to recover the energy transition costs. The UFSA also allows the pursuit of securitization to help finance qualified extraordinary expenses, such as fuel costs incurred during extreme weather events.

In September 2021, Evergy Kansas Central filed a predetermination request with the KCC for the ratemaking principles and treatment related to its planned investment in approximately 190 MW of solar generation and the planned retirement of coal-fired LEC Unit 4 and related coal-handling facilities for LEC Units 4 and 5, both of which are expected to occur between December 2023 and the first half of 2024. In February 2022, Evergy Kansas Central withdrew its predetermination request with the KCC in order to finalize definitive documentation associated with the solar investment and to develop additional information to enable the KCC to evaluate its predetermination request. Evergy Kansas Central anticipates refiling its predetermination request, including this additional information, later in 2022.

If the KCC finds that Evergy Kansas Central's planned retirement of LEC Unit 4 and investment in 190 MW of solar generation is prudent as part of a predetermination request, Evergy Kansas Central then plans to file an application with the KCC for a financing order authorizing the issuance of securitized bonds to recover energy transition costs associated with the retirement of LEC Unit 4 and the related coal-handling facilities for LEC Units 4 and 5.

February 2021 Winter Weather Event

In February 2021, much of the central and southern United States, including the service territories of the Evergy Companies, experienced a significant winter weather event that resulted in extremely cold temperatures over a multi-day period (February 2021 winter weather event). The February 2021 winter weather event resulted in an increase in the demand for natural gas used by the Evergy Companies for generating electricity and also contributed to the limited availability of other generation resources, including coal and renewables, within the SPP Integrated Marketplace. As part of the February 2021 winter weather event, Evergy incurred natural gas and purchased power costs, net of wholesale revenues, of $365.5 million. This $365.5 million of net fuel and purchased power costs was primarily driven by $296.4 million of costs at Evergy Missouri West and $133.9 million of costs at Evergy Kansas Central, partially offset by $64.8 million of net wholesale revenues at Evergy Metro. The amount of purchased power costs incurred by the Evergy Companies during the February 2021 winter weather event is subject to resettlement activity and further review by the SPP. This review and any subsequent resettlement activity could

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result in increases or decreases to the final amount of purchased power costs incurred by the Evergy Companies during the February 2021 winter weather event and these changes could be material.

As of December 31, 2021, the Evergy Companies have deferred substantially all of the fuel and purchased power costs, net of wholesale revenues, related to the February 2021 winter weather event to a regulatory asset or liability pursuant to their fuel recovery mechanisms and an emergency AAO issued by the KCC in February 2021. Further, in June 2021, Evergy Metro and Evergy Missouri West filed a joint request for an AAO with the MPSC regarding the deferral and subsequent recovery or refund of the February 2021 winter weather event amounts. While the Evergy Companies expect to recover substantially all of any increased fuel and purchased power costs related to the February 2021 winter weather event from customers, the timing of the cost recovery could be delayed or spread over a longer than typical recovery timeframe by the KCC or the MPSC to help moderate monthly customer bill impacts given the extraordinary nature of the February 2021 winter weather event.

The Evergy Companies also engage in limited non-regulated energy marketing activities in various regional power markets that have historically not had a significant impact on the Evergy Companies' results of operations. These energy marketing margins are recorded net in operating revenues on the Evergy Companies' statements of income and comprehensive income. As a result of the elevated market prices experienced in regional power markets across the central and southern United States driven by the February 2021 winter weather event discussed above, Evergy and Evergy Kansas Central recorded $94.5 million of energy marketing margins in 2021 related to the February 2021 winter weather event, primarily driven by activities in the Electric Reliability Council of Texas (ERCOT).

See Notes 1 and 4 to the consolidated financial statements for additional information regarding the February 2021 winter weather event and related AAOs.

Bluescape Energy Partners, LLC (Bluescape) Securities Purchase Agreement

See Note 17 to the consolidated financial statements for information regarding Evergy's securities purchase agreement with an affiliate of Bluescape to purchase Evergy's common stock and a warrant that was completed in April 2021.

Impact of COVID-19

See Part I, Item 1A, Risk Factors for information regarding the impact of COVID-19 on the Evergy Companies.

Earnings Overview

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

Net income attributable to Evergy, Inc. increased in 2021, compared to 2020, primarily due to non-regulated energy marketing margins related to the February 2021 winter weather event, higher retail sales driven by favorable weather and demand, lower operating and maintenance expenses, higher equity allowance for funds used during construction (AFUDC), higher investment earnings and lower interest expense; partially offset by higher property taxes, higher depreciation expense and higher income tax expense.

Diluted EPS increased in 2021, compared to 2020, primarily due to the increase in net income attributable to Evergy, Inc. discussed above.

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

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Non-GAAP Measures

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

Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) for 2021 were $812.6 million or $3.54 per share, respectively. For 2020, Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) were $705.5 million or $3.10 per share, respectively. In addition to net income attributable to Evergy, Inc. and diluted EPS, Evergy's management uses adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) to evaluate earnings and EPS without the income or costs resulting from non-regulated energy marketing margins from the February 2021 winter weather event and gains or losses related to equity investments which are subject to a restriction on sale that can create period to period volatility, as well as costs resulting from executive transition, severance, advisor expenses, COVID-19 vaccine incentives and the revaluation of deferred tax assets and liabilities from the Kansas corporate income tax rate change.

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

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

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

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

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

(c)Reflects costs associated with executive transition including inducement bonuses, severance agreements and other transition expenses of which $10.5 million is included in operating and maintenance expense and $0.3 million is included in other expense in 2021 on the consolidated statements of comprehensive income.

(d)Reflects severance costs incurred associated with certain voluntary severance programs at the Evergy Companies and are included in operating and maintenance expense on the consolidated statements of comprehensive income.

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(e)Reflects advisor expenses incurred associated with strategic planning and are included in operating and maintenance expense on the consolidated statements of comprehensive income.

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

(g)Reflects gains related to equity investments which are subject to a restriction on sale and are included in investment earnings on the consolidated statements of comprehensive income.

(h)Reflects an income tax effect calculated at a statutory rate of approximately 22% in 2021 and 26% in 2020, with the exception of certain non-deductible items.

(i)Reflects the revaluation of Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's deferred income tax assets and liabilities from the Kansas corporate income tax rate change and are included in income tax expense on the consolidated statements of comprehensive income.

2018 Adjusted Operating and Maintenance Expense

The following table provides a reconciliation between 2018 operating and maintenance expense and 2018 pro forma operating and maintenance expense as determined in accordance with GAAP and 2018 adjusted operating and maintenance expense (non-GAAP). Evergy's 2018 adjusted operating and maintenance expense (non-GAAP) is used as the base for Evergy's targeted operating and maintenance expense reductions by 2025.

(a)Reflects pro forma adjustments made in accordance with Article 11 of Regulation S-X and ASC 805 - Business Combinations. See Note 2 to the consolidated financial statements in the Evergy Companies' combined 2018 Annual Report on Form 10-K for further information regarding these adjustments.

(b)Reflects severance costs incurred associated with certain voluntary severance programs at the Evergy Companies and are included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 Annual Report on Form 10-K.

(c)Reflects the portion of the $47.8 million deferral of merger transition costs to a regulatory asset in June 2018 that related to costs incurred prior to 2018. The remaining merger transition costs included within the $47.8 million deferral were both incurred and deferred in 2018 and did not impact earnings. This item is included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 Annual Report on Form 10-K.

(d)Reflects obsolete inventory write-offs for Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center, Units 1 and 2 at Gordon Evans Energy Center, Evergy Metro's Montrose Station and Evergy Missouri West's Sibley Station and are included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 Annual Report on Form 10-K.

Wolf Creek Refueling Outage

Wolf Creek's most recent refueling outage began in March 2021 and the unit returned to service in May 2021. Wolf Creek's next refueling outage is planned to begin in the third quarter of 2022.

ENVIRONMENTAL MATTERS

See Note 14 to the consolidated financial statements for information regarding environmental matters.

RELATED PARTY TRANSACTIONS

See Note 16 to the consolidated financial statements for information regarding related party transactions.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Pensions

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

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

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

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

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

In 2021, Evergy's pension expense was $153.7 million under GAAP and $171.0 million for ratemaking. The impact on 2022 pension expense in the table above reflects the impact on GAAP pension costs. Under the Evergy Companies' rate agreements, any increase or decrease in GAAP pension expense is deferred to a regulatory asset or

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liability for future ratemaking treatment. See Note 9 to the consolidated financial statements for additional information regarding the accounting for pensions.

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

Revenue Recognition

Evergy recognizes revenue on the sale of electricity to customers over time as the service is provided in the amount it has the right to invoice. Revenues recorded include electric services provided but not yet billed by Evergy. Unbilled revenues are recorded for kWh usage in the period following the customers' billing cycle to the end of the month. This estimate is based on net system kWh usage less actual billed kWhs. Evergy's estimated unbilled kWhs are allocated and priced by regulatory jurisdiction across the rate classes based on actual billing rates. Evergy's unbilled revenue estimate is affected by factors including fluctuations in energy demand, weather, line losses and changes in the composition of customer classes. See Note 3 to the consolidated financial statements for the balance of unbilled receivables for Evergy as of December 31, 2021 and 2020.

Regulatory Assets and Liabilities

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

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

Impairments of Assets and Goodwill

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

Accounting rules require goodwill to be tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. The goodwill impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. In the event that the carrying amount exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference between the carrying amount of the reporting unit and its fair value. Evergy's consolidated operations are considered one reporting unit for assessment of impairment, as management assesses financial performance and allocates resources on a consolidated basis. The annual impairment test for the $2,336.6 million of goodwill from the Great Plains Energy and Evergy Kansas Central merger was conducted as of May 1, 2021. The fair value of the reporting unit substantially exceeded the carrying amount, including goodwill. As a result, there was no impairment of goodwill.

The determination of fair value for the reporting unit consisted of two valuation techniques: an income approach consisting of a discounted cash flow analysis and a market approach consisting of a determination of reporting unit invested capital using a market multiple derived from the historical earnings before interest, income taxes, depreciation and amortization and market prices of the stock of peer companies. The results of the two techniques

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were evaluated and weighted to determine a point within the range that management considered representative of fair value for the reporting unit, which involves a significant amount of management judgment.

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

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

Income Taxes

Income taxes are accounted for using the asset/liability approach. Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Deferred investment tax credits are amortized ratably over the life of the related property. Deferred tax assets are also recorded for net operating losses, capital losses and tax credit carryforwards. Evergy is required to estimate the amount of taxes payable or refundable for the current year and the deferred tax liabilities and assets for future tax consequences of events reflected in Evergy's consolidated financial statements or tax returns. Actual results could differ from these estimates for a variety of reasons including changes in income tax laws, enacted tax rates and results of audits by taxing authorities. This process also requires management to make assessments regarding the timing and probability of the ultimate tax impact from which actual results may differ. Evergy records valuation allowances on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized. See Note 19 to the consolidated financial statements for additional information.

Asset Retirement Obligations

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

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

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corresponding to the period of expected settlement activities and is adjusted for the associated bond rates Evergy would be charged to borrow for the specific time period. Any change in these assumptions could have a significant impact on Evergy's AROs reflected on its consolidated balance sheets.

As of December 31, 2021 and 2020, Evergy had recorded AROs of $960.1 million and $941.9 million, respectively. See Note 6 to the consolidated financial statements for more information regarding Evergy's AROs.

EVERGY RESULTS OF OPERATIONS

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

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

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

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

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

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

The Evergy Companies' taxes other than income taxes, of which property taxes are a significant component, can fluctuate significantly due to a variety of factors, including changes in taxable values and property tax rates. Evergy Kansas Central and Evergy Metro's Kansas jurisdiction have property tax surcharges that allow them to defer and subsequently recover or refund, through customer rates, substantially all of the variance in property tax costs from the amounts set in base rates without a general rate case proceeding.

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

Evergy Utility Gross Margin and MWh Sales

Utility gross margin is a financial measure that is not calculated in accordance with GAAP.  Utility gross margin, as used by the Evergy Companies, is defined as operating revenues less fuel and purchased power costs and amounts billed by the SPP for network transmission costs. Expenses for fuel and purchased power costs, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms.  As a result, changes in fuel and purchased power costs are offset in operating revenues with minimal impact on net income. In addition, SPP network transmission costs fluctuate primarily due to investments by SPP members for upgrades to the transmission grid within the SPP RTO.  As with fuel and purchased power costs, changes in SPP network transmission costs are mostly reflected in the prices charged to customers with minimal impact on net income. See Note 2 to the consolidated financial statements for additional information regarding the manner in which the Evergy Companies' reflect SPP revenues and expenses.

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 expenses.  Utility gross margin is used internally to measure performance against budget and in reports for management and the Evergy Board.  Utility gross margin should be viewed as a supplement to, and not a substitute for, income from operations, which is the most directly comparable financial measure prepared in accordance with GAAP. The Evergy Companies' definition of utility gross margin may differ from similar terms used by other companies.

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The following table summarizes Evergy's utility gross margin and MWhs sold.

(a) Utility gross margin is a non-GAAP financial measure.  See explanation of utility gross margin above.

Evergy's utility gross margin increased $188.1 million in 2021, compared to 2020, driven by:

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

•an $84.1 million increase primarily due to higher retail sales driven by favorable weather (cooling degree days increased 13%, partially offset by a 5% decrease in heating degree days) and an increase in weather-normalized commercial and industrial demand partially offset by a decrease in weather-normalized residential demand;

•a $38.3 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC transmission formula rate (TFR) effective in January 2021; and

•a $1.4 million net increase due to other impacts from the February 2021 winter weather event driven by:

◦a $33.8 million increase at Evergy Kansas Central driven by higher utility gross margin at its non-regulated 8% ownership share of Jeffrey Energy Center (JEC) due to higher wholesale sales prices and MWhs sold in February 2021; partially offset by

◦a $21.0 million decrease at Evergy Missouri West driven by $14.8 million of increased fuel and purchased power costs in February 2021 that are not currently recoverable from customers through its fuel recovery mechanism and a $6.2 million decrease related to a special requirements contract with an industrial customer; and

◦an $11.4 million decrease at Evergy Metro primarily driven by jurisdictional allocation differences currently present between its fuel recovery mechanisms in Missouri and Kansas regarding its refund to customers for the net increase in wholesale revenues in February 2021; partially offset by

•a $30.2 million decrease in revenues at Evergy Kansas Central and Evergy Metro due to rate reductions beginning January 1, 2021, in Kansas to reflect their exemption from Kansas corporate income taxes.

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Operating and Maintenance

Evergy's operating and maintenance expense decreased $55.5 million in 2021, compared to 2020, primarily driven by:

•a $63.5 million decrease in voluntary severance expenses due to a $55.9 million decrease at Evergy Kansas Central, Evergy Metro and Evergy Missouri West related to Evergy voluntary exit programs in 2020 and a $7.6 million decrease in voluntary severance expenses incurred at Evergy Kansas Central and Evergy Metro related to Wolf Creek voluntary exit programs in 2020;

•a $20.7 million decrease in advisor expenses incurred in 2021 associated with strategic planning; and

•an $8.8 million decrease in various transmission and distribution operating and maintenance expenses primarily due to lower labor and contractor costs primarily driven by a higher mix of transmission capital projects in 2021; partially offset by

•$10.5 million of costs associated with executive transition in 2021, including inducement bonuses, severance agreements and other transition expenses;

•$7.9 million of costs at Evergy Kansas Central related to non-regulated energy marketing margins recognized during the February 2021 winter weather event;

•a $6.7 million increase in plant operating and maintenance expense at fossil-fuel generating units primarily due to a $6.3 million increase at Evergy Kansas Central primarily driven by a major maintenance outage at JEC in 2021 and higher material and supplies costs; and

•a $2.7 million increase in property insurance expense due to a lower annual refund of nuclear insurance premiums received by Evergy Kansas Central and Evergy Metro in 2021 related to their ownership interests in Wolf Creek.

Depreciation and Amortization

Evergy's depreciation and amortization increased $16.3 million in 2021, compared to 2020, primarily driven by higher capital additions at Evergy Kansas Central in 2021.

Taxes Other Than Income Tax

Evergy's taxes other than income tax increased $16.3 million in 2021, compared to 2020, driven by an increase in property taxes in Missouri and Kansas primarily due to higher assessed property tax values.

Other Income (Expense), Net

Evergy's other expense, net in 2020 became other income, net, in 2021 as a result of a $54.9 million increase in net other income items, primarily driven by:

•$49.1 million of higher investment earnings primarily driven by a $27.7 million unrealized gain in the fourth quarter of 2021 due to the change in fair value related to Evergy's investment in an early-stage energy solutions company and $14.0 million in realized gains from the sale of various equity investments in 2021;

•$12.2 million of higher Evergy Kansas Central and Evergy Metro equity AFUDC primarily driven by higher construction work in progress balances at Evergy Kansas Central and Evergy Metro and lower short-term debt balances at Evergy Metro in 2021; and

•$6.1 million of other income recorded in 2021 related to contract termination fees; partially offset by

•$4.8 million of lower Evergy Kansas Central corporate-owned life insurance (COLI) benefits in 2021.

Interest Expense

Evergy's interest expense decreased $11.3 million in 2021, compared to 2020, primarily driven by:

•a $12.7 million decrease due to the redemption of Evergy's $350.0 million of 4.85% Senior Notes in April 2021;

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•a $10.2 million decrease in interest expense on short-term borrowings primarily due to lower weighted-average interest rates for the Evergy Companies in 2021; and

•a $2.2 million net decrease due to the redemption of Evergy Kansas Central's $250.0 million of 5.10% first mortgage bonds (FMBs) in May 2020, which decreased interest expense by $6.8 million, partially offset by a $4.6 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; partially offset by

•a $10.3 million increase due to the issuance in a private placement of Evergy Missouri West's $500.0 million of Series A, B and C Senior Notes in April 2021; and

•a $3.6 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020.

Income Tax Expense

Evergy's income tax expense increased $15.2 million in 2021, compared to 2020, primarily driven by:

•a $72.5 million increase due to higher Evergy Kansas Central and Evergy Metro pre-tax income in 2021;

•a $6.6 million increase due to lower wind and other income tax credits in 2021, primarily driven by the expiration of production tax credits at Evergy Metro's Spearville 2 wind facility in the fourth quarter of 2020 and lower research and development tax credits in 2021;

•a $5.5 million increase due to lower expected COLI proceeds for 2021; and

•a $4.0 million increase due to higher non-deductible officer compensation in 2021; partially offset by

•a $43.9 million decrease as a result of the state of Kansas exempting certain public utilities, including Evergy Kansas Central and Evergy Metro, from Kansas corporate income tax beginning in January 2021;

•a $15.6 million decrease due to flow-through items primarily driven by higher amortization of excess deferred income taxes at Evergy Kansas Central; and

•a $13.8 million decrease related to the revaluation of deferred income tax assets and liabilities in 2020 due to the change in Kansas corporate income tax rate.

See Note 19 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate.

EVERGY SIGNIFICANT BALANCE SHEET CHANGES

(December 31, 2021 compared to December 31, 2020)

•Evergy's cash and cash equivalents decreased $118.7 million primarily due to the use of funds for capital expenditures at Evergy Kansas Central, Evergy Metro and Evergy Missouri West, the repayment of certain short-term borrowings and other general corporate purposes.

•Evergy's receivables, net decreased $52.3 million primarily driven by a $21.5 million decrease in retail electric accounts receivable driven by lower sales in December 2021 due to unfavorable weather and a $13.6 million increase in the allowance for credit losses primarily driven by higher credit loss expense recognized in 2021 largely due to the economic impact of the COVID-19 pandemic and a lower level of actual write-offs incurred primarily due to timing as a result of customer support measures taken by Evergy during 2021 including disconnection moratoriums and payment plans.

•Evergy's accounts receivable pledged as collateral decreased $41.0 million primarily driven by Evergy's decrease in retail electric accounts receivable balances in December 2021, resulting in a lower level of retail electric receivables available for sale through Evergy's receivable sales facilities.

•Evergy's fuel and supplies inventory increased $62.2 million primarily driven by a $46.3 million increase in materials and supply inventory primarily due to an increase in transmission and distribution capital projects related to grid resiliency and other infrastructure improvement in addition to maintaining higher overall levels of inventory to mitigate longer supply chain lead times.

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•Evergy's income taxes receivable decreased by $34.9 million primarily due to Evergy's receipt of a $46.0 million federal alternative minimum tax (AMT) tax credit refund in the fourth quarter of 2021.

•Evergy's regulatory assets - current increased $217.9 million primarily driven by a $161.1 million increase at Evergy Kansas Central due to a $119.6 million increase related to Evergy Kansas Central's fuel recovery mechanism as a result of net under-collections and a $45.6 million increase related to deferred fuel and purchased power costs expected to be recovered in the next 12 months related to the February 2021 winter weather event; and a $54.6 million increase at Evergy Missouri West related to its fuel recovery mechanism as a result of net-under-collections.

•Evergy's other assets - current increased $51.7 million primarily due to a $31.4 million investment in an early-stage energy solutions company. See "Evergy Equity Investment" in Note 1 to the consolidated financial statements for additional information.

•Evergy's nuclear decommissioning trust funds increased $116.6 million primarily driven by realized and unrealized gains on investments at Evergy Kansas Central's and Evergy Metro's nuclear decommissioning trusts.

•Evergy's collateralized note payable decreased $41.0 million primarily driven by Evergy's decrease in retail electric accounts receivable balances in December 2021, resulting in a lower level of retail electric receivables available for sale through Evergy's receivable sales facilities.

•Evergy's notes payable and commercial paper increased $844.3 million due to a $158.0 million increase at Evergy, Inc., a $356.0 million increase at Evergy Kansas Central and a $330.3 million increase at Evergy Missouri West primarily due to borrowings for capital expenditures, costs related to the February 2021 winter weather event and for general corporate purposes.

•Evergy's regulatory liabilities - current increased $44.6 million primarily due to $34.0 million of deferred wholesale revenues at Evergy Metro expected to be refunded to customers in the next 12 months related to the February 2021 winter weather event.

•Evergy's pension and post-retirement liability decreased $270.3 million primarily due to a decrease in benefit obligations driven by $284.0 million of pension settlements in 2021 as a result of accelerated pension distributions as a result of employee retirements and annuity purchases for certain plan participants.

LIQUIDITY AND CAPITAL RESOURCES

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

Capital Sources

Cash Flows from Operations

Evergy's cash flows from operations are driven by the regulated sale of electricity. These cash flows are relatively stable but the timing and level of these cash flows can vary based on weather and economic conditions, future regulatory proceedings, the timing of cash payments made for costs recoverable under regulatory mechanisms and the time such costs are recovered, and unanticipated expenses such as unplanned plant outages and storms. Evergy's cash flows from operations were $1,351.7 million, $1,753.8 million and $1,749.0 million in 2021, 2020 and 2019, respectively.

Short-Term Borrowings

As of December 31, 2021, Evergy had $1.3 billion of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $341.3 million for Evergy, Inc., $343.9 million for Evergy Kansas Central, $350.0 million for Evergy Metro and $304.7 million for Evergy Missouri West. The Evergy Companies' borrowing capacity under the master credit facility also supports their issuance of

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commercial paper. See Note 11 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 to meet its day-to-day cash flow requirements. Evergy believes that its existing cash on hand and available borrowing capacity under its master credit facility provide sufficient liquidity for its existing capital requirements.

Long-Term Debt and Equity Issuances

From time to time, Evergy issues long-term debt and equity to repay short-term debt, refinance maturing long-term debt and finance growth. As of December 31, 2021 and 2020, Evergy’s capital structure, excluding short-term debt, was as follows:

Under stipulations with the MPSC and KCC, Evergy, Evergy Kansas Central and Evergy Metro are required to maintain common equity at not less than 35%, 40% and 40%, respectively, of total capitalization. The master credit facility and certain debt instruments of the Evergy Companies also contain restrictions that require the maintenance of certain capitalization and leverage ratios. As of December 31, 2021, the Evergy Companies were in compliance with these covenants.

Significant Debt Issuances

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

Equity Issuance

See Note 17 to the consolidated financial statements for information regarding Evergy's securities purchase agreement with Bluescape to purchase Evergy's common stock in 2021.

Credit Ratings

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

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As of February 24, 2022, the major credit rating agencies rated the Evergy Companies' securities as detailed in the following table.

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

Shelf Registration Statements and Regulatory Authorizations

Evergy

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

Evergy Kansas Central

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

Evergy Metro

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

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The following table summarizes the regulatory short-term and long-term debt financing authorizations for Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West and the remaining amount available under these authorizations as of December 31, 2021.

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

Under the Evergy Kansas Central mortgage, the issuance of FMBs is subject to limitations based on the amount of bondable property additions. In addition, so long as any bonds issued prior to January 1, 1997, remain outstanding, the mortgage prohibits additional FMBs from being issued, except in connection with certain refundings, unless Evergy Kansas Central’s unconsolidated net earnings available for interest, depreciation and property retirement (which, as defined, does not include earnings or losses attributable to the ownership of securities of subsidiaries), for a period of 12 consecutive months within 15 months preceding the issuance, are not less than the greater of twice the annual interest charges on or 10% of the principal amount of all FMBs outstanding after giving effect to the proposed issuance. As of December 31, 2021, $998.9 million principal amount of additional FMBs could be issued under the most restrictive provisions in the mortgage, except in connection with certain refundings.

Under the Evergy Kansas South mortgage, the amount of FMBs authorized is limited to a maximum of $3.5 billion and the issuance of FMBs is subject to limitations based on the amount of bondable property additions. In addition, the mortgage prohibits additional FMBs from being issued, except in connection with certain refundings, unless Evergy Kansas South's net earnings before income taxes and before provision for retirement and depreciation of property for a period of 12 consecutive months within 15 months preceding the issuance are not less than either two and one-half times the annual interest charges on or 10% of the principal amount of all Evergy Kansas South FMBs outstanding after giving effect to the proposed issuance. As of December 31, 2021, approximately $2,828.6 million principal amount of additional Evergy Kansas South FMBs could be issued under the most restrictive provisions in the mortgage, except in connection with certain refundings.

Under the General Mortgage Indenture and Deed of Trust dated as of December 1, 1986, as supplemented (Evergy Metro Mortgage Indenture), additional Evergy Metro mortgage bonds may be issued on the basis of 75% of property additions or retired bonds. As of December 31, 2021, approximately $5,075.8 million principal amount of additional Evergy Metro mortgage bonds could be issued under the most restrictive provisions in the mortgage.

Cash and Cash Equivalents

At December 31, 2021, Evergy had approximately $26.2 million of cash and cash equivalents on hand.

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Capital Requirements

Capital Expenditures

Evergy requires significant capital investments and expects to need cash for its long-term strategy of transitioning its generation fleet to be more sustainable by reducing CO2 emissions as well as executing other utility construction programs designed to improve reliability and expand facilities related to providing electric service, which include, but are not limited to, expenditures to develop new transmission lines and improvements to power plants, transmission and distribution lines and equipment. See "Executive Summary - Strategy", above for further information regarding Evergy's strategy. Evergy's capital expenditures were $1,972.5 million, $1,560.3 million and $1,210.1 million in 2021, 2020 and 2019, respectively.

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

Significant Contractual Obligations and Other Commitments

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

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

(a)    Evergy expects to make contributions to the pension and other post-retirement plans beyond 2026 but the amounts are not yet determined.

Long-term debt includes current maturities. Long-term debt principal excludes $80.5 million of unamortized net discounts and debt issuance costs and a $97.9 million fair value adjustment recorded in connection with purchase accounting for the Great Plains Energy and Evergy Kansas Central merger that was completed in 2018. Variable rate interest obligations are based on rates as of December 31, 2021.

Evergy expects to contribute $95.1 million to the pension and other post-retirement plans in 2022, of which the majority is expected to be paid by Evergy Kansas Central and Evergy Metro. Additional contributions to the plans are expected beyond 2026 in amounts at least sufficient to meet the greater of Employee Retirement Income Security Act of 1974, as amended (ERISA) or regulatory funding requirements; however, these amounts have not yet been determined. Amounts for years after 2022 are estimates based on information available in determining the

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amount for 2022. Actual amounts for years after 2022 could be significantly different than the estimated amounts in the table above.

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

At December 31, 2021, Evergy has other insignificant commitments as well as other insignificant long-term liabilities recorded on its consolidated balance sheet, which are not included in the table above.

Common Stock Dividends

The amount and timing of dividends payable on Evergy's common stock are within the sole discretion of the Evergy Board. The amount and timing of dividends declared by the Evergy Board will be dependent on considerations such as Evergy's earnings, financial position, cash flows, capitalization ratios, regulation, reinvestment opportunities and debt covenants. Evergy targets a long-term dividend payout ratio of 60% to 70% of earnings. See Note 1 to the consolidated financial statements for information on the common stock dividend declared by the Evergy Board in February 2022.

The Evergy Companies also have certain restrictions stemming from statutory requirements, corporate organizational documents, covenants and other conditions that could affect dividend levels. See Note 17 to the consolidated financial statements for further discussion of restrictions on dividend payments.

Cash Flows

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

Cash Flows from Operating Activities

Evergy's cash flows from operating activities decreased $402.1 million in 2021, compared to 2020, primarily driven by:

•$365.5 million of cash payments for net fuel and purchased power costs during the February 2021 winter weather event;

•a $182.3 million increase in cash payments in 2021 primarily due to the timing of payments made to taxing authorities for property tax payments as well as various suppliers and service providers for goods and services purchased in the ordinary course of business; and

•$35.4 million in payments made for a Wolf Creek refueling outage in 2021; partially offset by

•a $194.9 million increase in cash receipts for retail electric sales in 2021 primarily driven by favorable weather and an increase in weather-normalized commercial and industrial demand; and

•$89.9 million of cash receipts related to non-regulated energy marketing margins earned during the February 2021 winter weather event.

Cash Flows used in Investing Activities

Evergy's cash flows used in investing activities increased $380.1 million in 2021, compared to 2020, primarily driven by:

•a $412.2 million increase in additions to property, plant and equipment due to increases at Evergy Kansas Central, Evergy Metro and Evergy Missouri West of $116.7 million, $117.5 million and $176.6 million,

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respectively, primarily due to increased spending for a variety of capital projects including transmission and distribution projects related to grid resiliency and other infrastructure improvements; partially offset by

•an increase of $11.1 million in proceeds from COLI investments at Evergy Kansas Central due to a higher number of policy settlements in 2021.

Cash Flows from (used in) Financing Activities

Evergy's cash flows from (used in) financing activities increased $541.8 million in 2021, compared to 2020, primarily driven by:

•a $1,087.4 million increase in short-term debt borrowings primarily driven by:

◦a $553.2 million increase at Evergy Kansas Central primarily due to the repayment of $199.2 million of commercial paper in 2020 and increased borrowing in 2021 driven by $133.9 million of fuel and purchased power costs related to the February 2021 winter weather event and higher cash capital expenditures in 2021; and

◦a $357.8 million increase at Evergy Missouri West primarily due to $296.4 million of fuel and purchased power costs related to the February 2021 winter weather event, the repayment of $80.9 million of Evergy Missouri West's 8.27% Senior Notes in November 2021 and higher cash capital expenditures in 2021; and

•$112.5 million of Evergy common stock issued in April 2021 pursuant to a securities purchase agreement with an affiliate of Bluescape; partially offset by

•a $391.5 million decrease in proceeds from long-term debt, net due to Evergy Kansas Central's issuance of $500.0 million of 3.45% FMBs in April 2020 and Evergy Metro's issuance of $400.0 million of 2.25% Mortgage Bonds in May 2020; partially offset by Evergy Missouri West's issuance of $500.0 million of Series A, B and C Senior Notes in April 2021;

•a $180.9 million increase in retirements of long-term debt, net due to Evergy's repayment of $350.0 million of 4.85% Senior Notes in April 2021 and Evergy Missouri West's repayment of $80.9 million of 8.27% Senior Notes in November 2021; partially offset by Evergy Kansas Central's repayment of $250.0 million of 5.10% FMBs in May 2020; and

•a $7.5 million increase in the repayment of borrowings against cash surrender value of corporate-owned life insurance primarily due to a higher number of policy settlements in 2021.

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EVERGY KANSAS CENTRAL, INC.

MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

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

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

Evergy Kansas Central Utility Gross Margin and MWh Sales

The following table summarizes Evergy Kansas Central's utility gross margin and MWhs sold.

(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 increased $190.9 million in 2021, compared to 2020, driven by:

•$94.5 million of non-regulated energy marketing margins recognized during the February 2021 winter weather event;

•a $42.9 million increase primarily due to higher retail sales driven by favorable weather (cooling degree days increased by 5%, partially offset by a 3% decrease in heating degree days) and an increase in weather-normalized commercial and industrial demand;

•a $35.6 million increase in transmission revenue primarily due to updated transmission costs reflected in Evergy Kansas Central's FERC TFR effective in January 2021;

•a $33.8 million increase due to other impacts from the February 2021 winter weather event driven by higher utility gross margin at Evergy Kansas Central's non-regulated 8% ownership share of JEC due to higher wholesale sales prices and MWhs sold in February 2021; and

•a $5.7 million increase related to Evergy Kansas Central's TDC rider in 2021; partially offset by

•a $21.6 million decrease in revenues due to rate reductions beginning January 1, 2021, in Kansas to reflect the exemption of Evergy Kansas Central from Kansas corporate income taxes.

Evergy Kansas Central Operating and Maintenance

Evergy Kansas Central's operating and maintenance expense increased $17.2 million in 2021, compared to 2020, primarily driven by:

•a $22.9 million increase in various administrative and general operating and maintenance expenses driven by an increase in costs billed for common use assets from Evergy Metro in 2021 primarily related to software assets placed into service in the third quarter of 2020;

•$7.9 million of costs related to non-regulated energy marketing margins recognized during the February 2021 winter weather event;

•$7.6 million of costs associated with executive transition in 2021, including inducement bonuses, severance agreements and other transition expenses;

•a $6.3 million increase in plant operating and maintenance expense at fossil-fuel generating units primarily driven by a major maintenance outage at JEC in 2021 and higher material and supplies costs;

•a $3.5 million increase in advisor expenses incurred in 2021 associated with strategic planning; and

•a $1.4 million increase in property insurance expense due to a lower annual refund of nuclear insurance premiums received by Evergy Kansas Central in 2021 related to its ownership interest in Wolf Creek; partially offset by

•a $31.2 million decrease in voluntary severance expenses due to a $27.4 million decrease related to Evergy voluntary exit programs in 2020 and $3.8 million decrease in voluntary severance expenses related to Wolf Creek voluntary exit programs in 2020; and

•a $4.8 million decrease in various transmission and distribution operating and maintenance expenses primarily due to lower labor and contractor costs primarily driven by a higher mix of transmission capital projects in 2021.

Evergy Kansas Central Depreciation and Amortization

Evergy Kansas Central's depreciation and amortization expense increased $14.1 million in 2021, compared to 2020, primarily driven by higher capital additions in 2021.

Evergy Kansas Central Other Expense, Net

Evergy Kansas Central's other expense, net decreased $5.1 million in 2021, compared to 2020, primarily driven by:

•a $5.8 million decrease due to higher equity AFUDC primarily driven by higher construction work in progress balances in 2021; and

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•$2.8 million of other income recorded in 2021 related to contract termination fees; partially offset by

•$4.8 million of lower COLI benefits in 2021.

Evergy Kansas Central Interest Expense

Evergy Kansas Central's interest expense decreased $7.3 million in 2021, compared to 2020, primarily driven by:

•a $6.4 million decrease in interest expense on short-term borrowings primarily due to lower weighted-average interest rates in 2021; and

•a $2.2 million net decrease due to the redemption of Evergy Kansas Central's $250.0 million of 5.10% FMBs in May 2020, which decreased interest expense by $6.8 million, partially offset by a $4.6 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020.

Evergy Kansas Central Income Tax Expense

Evergy Kansas Central's income tax expense decreased $104.1 million in 2021, compared to 2020, primarily driven by:

•a $109.0 million net decrease 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;

•a $30.2 million decrease as a result of the state of Kansas exempting certain public utilities, including Evergy Kansas Central, from Kansas corporate income tax beginning in January 2021; and

•a $15.7 million decrease due to flow-through items primarily driven by higher amortization of excess deferred income taxes; partially offset by

•a $42.7 million increase due to higher pre-tax income in 2021;

•a $5.1 million increase due to lower expected COLI proceeds for 2021; and

•a $1.5 million increase due to lower wind and other income tax credits in 2021.

See Note 19 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 (I)(2)(a) to Form 10-K.

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

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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.

(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 increased $10.7 million in 2021, compared to 2020, driven by:

•a $30.7 million increase primarily due to higher retail sales driven by favorable weather (cooling degree days increased 20%, partially offset by a 5% decrease in heating degree days), partially offset by a decrease in weather-normalized residential and industrial demand; partially offset by

•an $11.4 million decrease due to impacts from the February 2021 winter weather event primarily driven by jurisdictional allocation differences currently present between Evergy Metro's fuel recovery mechanisms in Missouri and Kansas regarding its refund to customers for the net increase in wholesale revenues in February 2021; and

•an $8.6 million decrease in revenues due to a rate reduction beginning January 1, 2021, in Kansas to reflect Evergy Metro's exemption from Kansas corporate income taxes.

Evergy Metro Operating and Maintenance

Evergy Metro's operating and maintenance expense decreased $42.1 million in 2021, compared to 2020, primarily driven by:

•a $23.5 million decrease in voluntary severance expenses due to a $19.7 million decrease related to Evergy voluntary exit programs in 2020 and a $3.8 million decrease in voluntary severance expenses related to Wolf Creek voluntary exit programs in 2020; and

•a $20.6 million decrease in various administrative and general operating and maintenance expenses driven by an increase in costs billed for common use assets to Evergy Kansas Central in 2021 primarily related to software assets placed into service in the third quarter of 2020; partially offset by

•$2.1 million of costs associated with executive transition in 2021, including inducement bonuses, severance agreements and other transition expenses; and

•a $1.3 million increase in property insurance expense due to a lower annual refund of nuclear insurance premiums received in 2021 by Evergy Metro related to its ownership interest in Wolf Creek.

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Evergy Metro Interest Expense

Evergy Metro's interest expense decreased $3.8 million in 2021, compared to 2020, primarily due to lower interest expense on short-term borrowings driven by lower weighted-average interest rates and lower commercial paper balances in 2021.

Evergy Metro Income Tax Expense

Evergy Metro's income tax expense increased $45.3 million in 2021, compared to 2020, primarily driven by:

•a $32.2 million increase related 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;

•a $15.1 million increase due to higher pre-tax income in 2021;

•a $5.0 million increase due to lower wind and other income tax credits in 2021, primarily driven by the expiration of production tax credits at the Spearville 2 wind facility in the fourth quarter of 2020 and lower research and development tax credits in 2021; and

•a $2.8 million increase due to higher non-deductible officer compensation in 2021; partially offset by

•a $14.1 million decrease as a result of the state of Kansas exempting certain public utilities, including Evergy Metro from Kansas corporate income tax beginning in January 2021.

See Note 19 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate.