Good day, ladies and gentlemen, and welcome to the Q2 2019 Evergy Inc. Earnings Conference Call. [Operator Instructions]. I would like to turn the call over to Lori Wright, you may begin..

Thank you, Michael. Good morning, everyone, and welcome to o Evergy's second quarter call. Thank you for joining us this morning. Today's discussion will include forward-looking information.

Slide 2 and the disclosure in our SEC filings containing list of some of the factors that could cause future results to differ materially from our expectations, and includes additional information on non-GAAP financial measures. We issued our second quarter 2019 earnings release and 10-Q after market close yesterday.

These items are available along with today's webcast slides and supplemental financial information for the quarter on the main page of our website at evergyinc.com. On the call today, we have Terry Bassham, President and Chief Executive Officer; and Tony Somma, Executive Vice President and Chief Financial Officer.

Other members of management are with us and will be available during the question-and-answer portion of the call. As summarized on Slide 3, Terry will recap the quarter and provide a business update. Tony will update you on the details of our latest financial results. With that, I'll hand the call to Terry..

Thanks, Lori, and good morning, everybody. I'll begin my comments on Slide 5. So, that's not, we reported second quarter GAAP earnings of $0.57 per share, compared to $0.56 per share earned in the second quarter of 2018. Adjusted earnings per share were $0.58 in second quarter of 2019, compared to adjusted $0.67 per share in the same period a year ago.

On a period-over-period basis, these results were driven by a large unfavorable weather swing offset by cost reduction efforts, rate case outcomes and changes in shares outstanding. Year-to-date, GAAP earnings per share were $0.96 compared to a $1 in the same period last year.

Adjusted EPS were $1 this year, compared to $1.0 a year ago, largely driven by the same items I just mentioned. I'm pleased with how our team is executed our plan and the corresponding results delivered midway through this year. This has allowed us to stay on pace with our plan and reaffirm our 2019 adjusted EPS guidance of $2.80 to $3.

In June, we celebrated the inaugural year of Evergy. This provided a natural time for us to reflect on a couple of our core objectives, merger savings and returning capital to our shareholders. First, on merger savings, during integration planning, we identified cumulative net savings of more than $550 million through 2023.

We're on target for our 2019 year in goal of $110 million in annual net merger savings. We are making the most of our increased scale and buying power as a larger company. We become more efficient by leveraging both companies' operating experiences and implementing best-in-class techniques.

We continue to deliver on our commitment of no involuntary layoffs as a result with merger and instead capitalizing on costs reductions through attrition as well to retire or leave the company. To put things in context, when we shook hands on the merger, there were over 6,300 budgeted positions between KCP&L, Westar and Wolf Creek.

Today Evergy and Wolf Creek combined have around 5,500 employees. Earlier this year, we kicked-off a large IT system consolidation project that will help us achieve additional back-office savings. Fortunately, both companies use the same platform, so while still a tall task to combined legacy systems, we are aligned on vendors.

We're also applying many of these same techniques at Wolf Creek, our nuclear facility. Wolf Creek has their own nuclear operating company and has operated as a standalone entity.

Now with Evergy owns 94% of the facility, we're consolidating many of the support functions like HR, IT, supply chain, finance and accounting and are integrating these into our Evergy operations. This also allows us to take advantage of natural attrition at the nuclear facility as well.

Again for context, current head count at Wolf Creek is about 200 positions lower today as compared to when we shook hands in the merger. These are just a few examples of the items that are allowing us to meet our targets.

Our team continues to look for incremental savings opportunities, to provide additional benefits to both our customers and our shareholders. Now turning to our focus on returning capital to shareholders.

Through Evergy's first year, we've returned almost $2.7 billion of capital comprised of about $500 million in the form of dividends and $2.2 billion through share repurchases. As of the end of June, we had completed just over 60% of our targeted share repurchased program.

We're still focused on a $1 cost average strategy and we're expecting to complete the repurchases of mid-2020. Now moving to Slide 6; I'll give you the latest on our regulatory and legislative proceedings. You may recall, Kansas Senate Bill 69 which call for a two-part study of electric rates was passed and signed into law earlier this year.

The Bill required a seven-member of Legislative Coordinating Council made up of five Republicans and two Democrats to reach consensus on a third-party performance study.

Legislative Council has selected a consultant to conduct the first part of the study, which will focus on the effectiveness of Kansas rate making practices, as well as options to maintain reasonably competitive rates, while providing the best combination of price, quality and service. Part one of the study is to be completed by early January.

Council is now working through a separate RFP, specifically for the second half of the study, which ultimately will be due by next summer. Part two will focus on the rate impact of energy matters like electric vehicle charging, microgrids, cyber and physical security. We're pleased that the study is moving forward and on track.

From the beginning, we've been on record a stating, we believe the results of a third-party study will yield very similar results to our rate study and the separate Kansas corporations staff study that were both presented to the legislature during the 2019 session.

Additionally, we continue to low our customer bills in Kansas by passing on to customers, we agreed upon merger credits. We also have our Kansas base rate moratorium, which will help keep bills and check. We still believe the creation of Evergy was an excellent solution for customers and rate competitive.

With that said, we'll continue to monitor activity in Kansas and work with all parties to fund energy solutions that move Kansas forward and further increased the competitiveness of our rates. Now switching the Missouri and the Sibley Complaint Docket.

In June, the Missouri Public Service Commission staff filed rebuttal testimony, which marked the first public record of their opinion on this man. Much of the staff testimony is aligned with arguments we've made from the beginning and accounting authority order does not make sense, because the retirement of Sibley is not an extraordinary event.

The hearings for the stock, it started yesterday and are slated to be completed by the end of the week. Schedule calls for [indiscernible] over the next few weeks and then we'll wait for a commission order, which we expect to be sometime in October. Moving to Slide 7; to wrap up before I turn things over to Tony.

The foundation of our near-term plan is unchanged and our execution thus far, has allowed us to reaffirm us to reaffirm our 2019 earnings guidance.

It also provides us with confidence in our expectations of compounded annual EPS growth, up 5% to 7% through 2023, using the midpoint of our 2019 guidance as a base, dividend growth commensurate with EPS growth.

We believe this is an attractive shareholder return profile with limited regulatory risk, given our commitment to no rate reviews over the next few years. The tenure treasury rate below 2%, we believe this positions us favorably as compared to the companies facing rate reviews in the next several years.

As we mentioned in our first quarter call, we're focused on preserving flexibility or keeping customer bills low, delivering a safe, reliable product and targeting competitive shareholder returns. We are working to further optimize our long-term spending plan, which includes shifting some of the spending between jurisdictions.

This allows us to target jurisdictions that have less lag and provide higher incentive for infrastructure investment. Although, we've not completed our work, our team has identified about $150 million of CapEx that we will look to shift from Kansas to Missouri through the 2022 time frame.

To be clear this preliminary number maintains our current $6 billion CapEx projects -- projections, but reallocate some portion from one jurisdiction to another. This reflects our plan to allocate capital to its highest and best use. We approach the second half of the year, we continue to look for incremental opportunities over the next few years.

Lastly, let me mention one important thing on the topic of Environmental, social and governance or ESG. We'll be updating our EEI, ESG template soon to include 2018 data. This will be the first time, our template will include the consolidated Evergy data whereas previously it was reported separately by our KCP&L and Westar utility.

We also be following our 2018 sustainability report, where you can find details on our focus areas such as reducing our impact on the environment, diversity inclusion and growing philanthropy efforts and to help our communities move forward. Both reports will be located in the sustainability section of our Investor website in the coming months.

Now with that, I'll turn the call over to Tony..

Thanks, Terry, and good morning, everyone. I'll start with the results on Slide 9 of the presentation. Last night, we reported second quarter 2019 GAAP earnings of $140 million or $0.57 per share, compared to $102 million or $0.56 per share in Q2 of 2018.

The increase in earnings is primarily due to the inclusion of KCP&L's and GMOs results for second quarter in 2019 compared to only a partial period of Evergy's second quarter 2018 results, due to the early June closing of the merger last year.

Adjusted non-GAAP earnings were $140 million or $0.58 per share, compared to $179 million or $0.67 per share in the same period a year ago.

As detailed on the slide, adjusted EPS was driven primarily by less favorable weather and higher depreciation expense, partially offset by the impact of new retail rates, lower O&M and accretion from fewer shares outstanding.

Gross margins were down $75 million due primarily to lower sales, because of cooler weather offset by new retail rates, net of the 2018 provision for rate refund reflecting the lower corporate tax rate.

O&M, net of merger related costs was a healthy $52 million lower, driven by cost reduction efforts across our utilities while depreciation expense was $23 million higher, primarily from new depreciation rates that are reflected in our retail prices and higher plant balances.

For the quarter, pro forma residential commercial sales were down 21% and 7% respectively, reflecting a cooler and weather spring.

During the second quarter of last year, we experienced significantly favorable weather and this quarter was cooler than normal, which costs us a whopping $0.25 when compared to last year and about $0.04 when compared to normal. Pro forma industrial sales were up just under 1% compared to the same period last year.

Now on Slide 10; I'll touch base on year-to-date results. For the year GAAP earnings were $239 million or $0.96 per share, compared to $162 million or $1 per share for the same period last year. Again, GAAP not including KCP&L and GMO results prior to June of 2018 is a primary driver of the earnings variance.

Adjusted earnings were $251 million or $1.01 per share compared to a year-to-date 2018 adjusted earnings of $271 million or $1 per share. As you can see on the slide primary drivers compared to last year include unfavorable weather and higher depreciation expense offset by new retail rates, O&M reductions and accretion from fewer shares outstanding.

For the year gross margins were down $55 million, O&M was $84 million lower, and depreciation is around $52 million higher. Like second quarter sales and due largely to the weather swing, pro forma year-to-date residential commercial sales were down about 8.7% and 3% respectively.

We estimate weather cost us $0.21 when compared to last year, and it was probably a benefit of a $0.01 or $0.02 when compared to normal. Pro forma industrial sales were down 1.4% compared to the same period last year, driven primarily by a large customer and the chemical sector that saw decreased demand at their plants earlier this year.

Now turning to the economy; unemployment rate in our service area remains 30 basis points to 40 basis points below the national average, signaling a steady economy in the areas we serve. In June, the USDA announced the selection of Kansas City for the home offices of its Economic Research Service and National Institute of Food and Agriculture.

They look to ramp up operations this fall will bring about 600 new jobs to the area. This site selection reinforces the Kansas City region as a hub for all things agriculture culture and answer the significant concentration of the animal health industry.

Additionally, you may have seen in the news, where our company is looking at the potential looking a large data center in our service territory in Missouri. Over the years, we worked hard to put in place the right economic development tariffs, coupled with access to the abundant, affordable wind resources found in our backyard.

We believe we often attractive value proposition when it comes to clean affordable energy coupled with a modest cost of living standard. Moving on to Slide 11; let me touch on our latest financing activities. In June, we had $300 million of first mortgage bonds that matured.

We issued commercial paper to pay off those bonds we'd like to reissue that $300 million later this year. Also in June, we borrowed a second $500 million tranche of the $1 billion term loan that we put in place in March.

We expect to issue around $1.5 billion of long-term holding company debt later this year to pay down the term loan and buy back more shares. This financing activity will allow us to continue making progress on our 60 million share repurchase target.

As of the end of June, we purchased over 36 million shares or 60% of our total 60 million target and we still have an ASR yet to close. The ultimate number and timing of shares repurchased depends on the market factors and the financial outlook of the company. Now wrapping up on Slide 12.

In summary, as Terry said, we're happy with the progress one year after the merger close. We've reaffirmed our 2019 adjusted EPS guidance of $2.80 to $3 per share.

We're expecting year-over-year EPS growth in the second half to be driven primarily by cost reduction efforts, accretion from lower shares and lower income tax expense consistent with the tax rate published in our earnings drivers earlier this year. With that, I'll turn the call back over to Terry..

All right. And I think we're ready for questions..

[Operator Instructions]. Our first question comes from Greg Gordon of Evercore ISI. Your line is open..

Thanks, good morning..

Good morning, Greg..

Good morning, Greg..

So, it looks like the business plan you've laid out on the Q4 call with regard to how you achieve your earnings growth aspirations as well providing the benefits of the merger to your customer.

It seems like it's -- it's on pretty much on track, but can you talk a little bit more about on the margin, why you're making the small allocation shift from Kansas to Missouri in terms of the capital allocation?.

Yes, Greg, it's, -- it's part of an ongoing process for us to continue to look at jurisdictions where opportunities exist, that may be done in the others and look for additional opportunities and the latter years is our five-year plan we've talked about that we continue to work on.

In particular, Missouri has a piece of opportunity, where we can invest additional dollars without creating additional lag during this period without rate cases, a mechanism that Kansas doesn't have.

So, it's an obvious first step in that process and we're going to continue to look for additional opportunities both from that perspective and from just a long-term growth..

Right..

That makes sense?.

In terms of the synergy uptake, I mean you said that you're on track to hit your numbers, but can you talk about -- you talked about some pretty robust statistics vis-a-vis head count just from normal attrition?.

Yes..

As you look, as you look at the overall opportunity for cost optimization, which obviously flows one way or another to customers through lower rates over time.

Do you see the synergy targets sort of being the end of the line? Or do you see an opportunity over the long-term to continue to optimize the cost structure of the business perhaps when the rate moratorium period ends by deploying capital into lower cost generation resources like winds and solar and moving to a greener portfolio that and this kind age is actually has or better or more economic than some of the preexisting infrastructure that you may have when you look out five years?.

Yes, let me hit a couple of those points. The first is, we feel really good and maybe one of the benefits of spending a two year period on the approval processes is that we feel really good about our execution on the synergy savings.

And I think, as we've reflected in the results, the first half of the year, not only we're executing as expected, but we're finding some additional ones. Again some scale opportunities as we do some synergy work and expansion on our RFP processes that we have been very happy with.

So, we've seen some flexibility there on the upside, just from a synergy side and will continue to work on that. Long-term no, we don't expect that to stop.

We would expect to continue to find opportunities that we were either hopeful or our plan to evaluate, but didn't have a number attached to, and I will also complement our teams throughout the company for working together hard to find those very things that may be from scale, maybe just finding the right way to do something between the two companies and that route way may be neither way we did it before in those companies, but drives efficiency both in headcount, an opportunity.

I mentioned I think in my comments that we've got a new customer information system we're working on. We expect that to drive additional efficiencies over time.

And then finally, to your point on future opportunities, yes, we continue to see our -- as Tony mentioned, our geographic location through Western Kansas as a strategic advantage to us, as we all try to look to be more green and satisfy our customer desire for more green results, which are also very cost efficient at this point..

Thanks. Congratulations on a great first half..

Thank you very much..

Our next question comes from Ali Agha of SunTrust. Your line is open..

Thank you. Good morning..

Good morning..

Good morning..

Good morning. My first question, Terry in your comments, you alluded to the fact that you're also looking at in your planning process, opportunities for incremental capex.

Can you give us some rough sense of on a cumulative basis, how much that could be and when would you plan to update us on that?.

Well, probably the most appropriate thing to say at this point, because we haven't finished our work, as if you just calculate a cap on what piece that would allow. It could be just shy of $1 billion. Again, before we come out with a plan related to that, we want to talk about timing, and process, and projects and be very definitive.

We've said before that, that would be our plan all along. So, yes, you could see a number up to that amount, that would make sense and still fit within the piece of and other requirements under Missouri.

We would expect over the course, probably the next six months to be able to talk about what our later year plans would be and our overall piece of plans would be..

Okay. And then secondly, once all of these studies are done in Kansas, even the Phase 2, one is done.

Any sense on where the legislature wants to go with that or would that be the end of it and so on? What are you hearing or what are -- what's your read there?.

Well, I think -- I think an independent review. And again, we've said the data speaks for itself and I think both the Commission staff and we providing our initial reports that were very similar reflected, that we would see confirmation from an end of in that party that shows kind of where we stand and an explanation of how we got here.

So, first of all, the reflection of where we sit from a competitive spent, standpoint is reflective of a lot of spin that both companies had to make over a 10-year period. But the merger provides exactly the strategy to attack that issue over the next four or five years as we don't have to increase rates, and in fact will lower our costs.

And so as we get that end then I think the second phase is targeted at the other things that are happening in our industry. Like an electric vehicle charging and other things like that, that we welcome an opportunity to have this conversation. So, I think it's a good educational process.

I think Kansas independent party or work to provide the legislature with a view of not only their commissioners, but their utility and consultant that will allow us to have a good conversation around what would be the kinds of policy issues in Kansas, we look forward to addressing..

One last question, can you remind us how much COLI income if any have you booked in the first half and conceptually, would you consider excluding COLI earnings from your adjusted numbers going forward?.

Good morning, Ali, this is Tony. I believe the COLI numbers for the quarter were about $2.5 million and year-to-date were around $9 million.

Now, as far as the, the second part of your question, what we issue are our drivers, earnings drivers, we will list out separately what kind of the assumptions are for COLI and we'll leave it up to the investment community, whether or not they want to keep the numbers in our keep or -- take them out.

And as we said all along, these are just timing differences..

Thank you..

You're welcome..

Thank you..

Our next question comes from Michael Lapides of Goldman Sachs. Your line is open..

Thanks for taking my question. I actually have a couple here. First of all, when thinking about O&M savings from the merger and I'm kind of looking back at Slide 19.

Are you saying that you think you could get upside as soon as may be next year, meaning upside to the $145 million target? Or is it more upside that comes in the back end of the plan meeting upside of the $160 million run rate and kind of the out-year of 2022?.

Michael, this is Tony. Well this is -- this is something that we are continually reviewing and looking at. Now specifically to your question, the answer is possibly, yes on both, right, because we're trying to look at ways to get better, ways to be more efficient.

Terry mentioned the billing system in the back office system, in accounting, we're also looking at RPA and big data. We use big data, it helps us on turbine vibration, on substations etc. So, we're obviously trying to beat those numbers that we have laid out on the page..

Got it. Thanks, Tony.

And then in Missouri when I think about your EPS guidance growth rate, the multi-year, what are you assuming in the next couple of years you do in terms of piece of filings, meaning, I'm trying to think about how much capital you're likely to invest in Missouri, if I look at your CapEx Slide on Page 18 or the segment-by-segment capex, I think you guys given the 10-K.

How should we think about how much of that CapEx is actually PISA [ph] eligible and what's in the EPS growth rate in terms of how much kind of the revenue increases or the deferrals tied to PISA [ph]?.

So, the Missouri CapEx and I'll just -- I'm looking at Slide 18 as well. Michael, it's probably 75% would be eligible for the PISA election and that would be our intention obviously. And to the extent that is deferring some regulatory drag, that is built into our assumptions in our -- our drivers in the out years that's hitting our EPS CAGR..

Got it.

And am I remembering how the rule works rather low works that you defer the DNA, but you continue to book the AFUDC?.

So you get to differ. I think 85% of the depreciation and the interest expense. If I remember right.

If that answers your question?.

Yes. Okay, thank you. And -- Oh, I'm sorry.

Hey, Tony, how do you treat the equity component of AFUDC? Do you stop booking once in service?.

So, the equity component will get brought into earnings at the time of your next rate case over a 20-year period..

Got it, okay. Thank you. Much appreciate it, guys..

You're welcome..

Our next question comes from Julien Dumoulin-Smith of Bank of America. Your line is open..

Good morning. I just wanted to follow-up quickly up on the last set of questions here on PISA eligibility and just had a line up against your staff.

Can you remind us a little bit more with respect to how you think about how soon you could start deploying capital given the fact that as you say, it's only 85% deferral of depreciation and interest expense? Maybe the extent to which that affords an opportunity, how early could you start spending given the fact that you stay out is through 2022?.

Well, we're spending today..

Well, sorry. Yes. The incrementally rather is the way I should clarify..

Well, as Terry said, we're going through the process and over the next six months, we'll be able to update folks on where we stand and where we end up on that process..

Yes. Remember that we've elected, so, we're in and so as Tony said, we could be spending today on things that qualified. But in terms of reallocating, we're working on our long-term plan and our plan for next year in particular and so we could have been making changes along that line..

Got it. But to clarify, with the fact that you have a stay out impede your ability to accelerate through this mechanism. I mean to a certain extent but....

No. Remember -- yes remember, technically we don't have a stay out in Missouri. Remember that the way Missouri worked in Kansas we're different.

And so, we expect to stay out given our earnings and savings projections, but the way the piece of works, we're not affected by that, are actually driver for the next rate case in Missouri would be fuel any kind of right after that PISA true up.

So, it's a little different in Missouri and no, none of that would keep us from moving forward with PISA investment greater than we've talked about. already..

Got it. Okay, thank you for that. And then, if I can hear back to another question that was asked, just to clarify a little bit further here just even on the first part of the study.

I mean, when you say effectiveness of Kansas rate making practices, can you clarify a little bit more what exact -- what parts of rate making practices would be deemed to be evaluated for quote, unquote effectiveness. Just trying to understand with the scope of this effort more than anything else.

I think, Ali might have been asking something similar, but if you could elaborate?.

Well, I think you probably have as much specificity as they exist. I think there is some concern by some parties that our rates are -- have risen faster than the national average. And even though, they're at the national average, or higher than they would like.

And as a result, when you look at things effectiveness, what they're really looking at is what cause them to be that. And so being able to explain, how we got there and where are we at is what our studies did.

And what I think the first step in the independent study will do, and into second half will be higher effective other things and that could range to should we have more EV charging throughout the state. And if so, how should that be done and provided for.

We've not done a lot of electric vehicle charging stations in Kansas because of kind of our processes there. So, it could range -- I think originally to focus is cost, which again I think we've talked about how the merger helps address that.

And secondly, there could be other particular folks interested in particular policies, that have or have not been adopted in Kansas, in the past. That's probably about as much as we've got now in terms of where that could hit..

That's fair enough, I'll leave it there. Thank you all, very much, and good luck..

Thank you..

Thank you..

Our next question comes from Charles Fishman of Morningstar Research. Your line is open..

Thank you. Terry, this ES -- combined ESG disclosure before EEI.

Do you envision that as something based on what I've seen other utilities do either through the ESG of course, IRPs? Do you see that as possibly an opening for some accelerated coal plant retirements? And would that provide you another step towards further saving O&M savings beyond just the merger savings you've outlined and looks like you're going to hit?.

Well, our ESG filing first of all, should reflect, again the format and template the EEI has work together, so that investors can kind of see a similar accounting if you will and a similar positioning of those efforts.

And it will reflect our current retirements and our current wind activities, which show that over -- up to an over 50% of our energy comes from nuclear and wind, totaling over 50% of our total kilowatt-hour sales or energy. And that's a very positive message.

As far as moving forward, we're now at a position where we've got our larger more efficient units and capacity, obviously becomes an issue and we want to be sure we're cautious about those kind of things. But it would help inform investors and help inform our commission, so that those kind of conversations can continue going forward.

But we always have to remember to provide capacity to our customers is an important part of the remainder of our portfolio..

Well, I realize your renewable percentage over on the Kansas side is very high and I guess what I was anticipating is maybe you would use this as an opportunity to maybe push that on the Missouri jurisdiction?.

Yes. Remember....

Is that a possibility?.

Well, remember, although located in Western Kansas, we jurisdictionally allocate all our generation based on usage customers, those kind of metrics. So from our percentage perspective, they're basically the same. There are some unique assets, but they are pretty small and our wind in particular is allocated over the jurisdiction.

So, it's very similar actually..

Okay. And that's the way the ESG of the presentation will be done.

We're consolidating both jurisdictions?.

Yes..

Okay. Got it, thank you. That's all, I have..

You bet you. Thank you..

Our next question comes from Paul Patterson of Glenrock Associates. Your line is open..

Hey, good morning. So, I'm afraid I am going to have to ask -- okay, I've got this CapEx and I apologize for being a little confused here. When you're talking about the incremental opportunity or you talking about the incremental opportunity, in total CapEx spending or in terms of shifting CapEx from Kansas into Missouri into the PISA kind of thing.

If you could just -- I apologize, if you could just elab -- just clarify that a little bit for me?.

Yes, that's okay. It's both. So first, the $150 million we mentioned specifically is a reallocation. And so, it would not change our total $6 billion estimate that we provided. So that's number one.

Number two, what we've talked about is that we're working on future plans that we'll be talking about later in the year or early next year around what our additional spend might be. And so that's not included in the current plans and we've not given specific guidance of any sort as to what that amounts -- amount not be. So that's the difference.

The $150 million does not relate to an increase in total spend. We have future expectations of providing guidance that would discuss any additional spend later in the year, early next year..

Okay, great. And then you mentioned sort of the education process for lack of better term in Kansas with respect to how rate making sort of works if you follow me or how utility investment and what have you does.

I'm just wondering, when we look at the PISA and obviously that's an opportunity and what have you or how confident are you that the policymakers actually sort of understand what the -- that as investment actually will costs? In other words, is there any concern that you might see situation which sort of has developed in Kansas, whether it's sort of a question mark how do we get here, maybe replicating itself potentially in a jurisdiction like Missouri.

I just asked that because legislators don't often this is really the details of -- this is really what they're proving and we do have a useful mechanism here.

But I was just sort of wondering, if there is any, anything that you guys are looking at going forward in terms of maybe a similar situation or the avoidance of a similar situation that is occurring in Kansas happening in Missouri.

Do you follow me?.

I do. What I would say is -- the common sense and I don't -- to say it, but in every state, every legislature, they have their focus based on what's happening in that jurisdiction.

And clearly, Missouri has been focused on infrastructure spend, and jobs, and the opportunity to improve our infrastructure and that was the basis for PISA, it was a basis for other things across the state as well. But in particular with our electric utilities, it was a focus on spending for infrastructure improvement.

Kansas has been stayed more focused in this last discussion and it's a pretty recent discussion. We have not had this discussion in this session before on the level of -- our level of rates.

And so, they come from a different position I would say, and that's why we believe using and accessing the PISA opportunity which the state of Missouri clearly would like us to do to spend more on infrastructure in Missouri is an opportunity to reallocate dollars, because in Kansas, they're more concerned in holding total cost down.

So it serves both purposes from that perspective. Could the discussion in either state begin to happen in the other state? Sure, but that's not the focus of the states at this point and we're confident in our ability to discuss each in the relative jurisdiction..

Awesome..

Okay, great answer. And then the other thing just a sort of quick sort of housekeeping question. I was looking through the 10-Q and everything, I just had a little difficulty finding this, what's the organics weather adjusted sales growth numbers that you've had for the first half.

Organic, in other words, obviously the mergers changed a few things, do you follow what I'm saying in the respective jurisdictions, how should we think about what weather adjusted sales growth has been year-to-date?.

Paul, good morning. What we've said is, we are targeting total sales growth roughly flat to 50 basis points..

Right..

And that has occurred..

And how has it been for the first half? How does that come in? How is the -- how the actual has been weather adjusted?.

It's been largely in line with our expectations. Things are growing with gangbusters, but we're not seeing any contraction as well..

Okay, that's it from me. Thanks, so much..

Thank you..

Thank you. Our next question comes from Gregg Orrill of UBS. Your line is open..

Just a follow-up on the PISA spending.

Do you have any plans at this point, how it might impact your growth -- EPS growth guidance?.

Well, obviously we -- our plan would be that it would improve it to the extent that we did that, but we don't have a range yet, because we haven't finished our work on the total dollar amounts. But certainly, that would give us some opportunity for additional growth in spend and EPS that we currently don't have in the plan..

Thanks..

Our next question comes from [indiscernible]. Your line is open..

Just back on the PISA CapEx.

Again is the incremental opportunity, the total $1 billion or is it the $1 billion, less the $150 million that you've already reallocated?.

The $1 billion is really a total number. So it's, -- it includes that $150 million reallocation and that's the way it worked..

Okay.

And if you ultimately sought to do the incremental $850 million, would you need any additional equity financing for it?.

That's not currently the plan..

Currently in the plan, we have to look at the financial projections in the model and see what our credit metrics look like..

And if the legislation is written to allow you to do the incremental $850 million, what is that would keep you from going up to the cap?.

Just overall, ability to get it done, you got to have projects. But we believe we have that ability and obviously we're impacting customers rates. So, we'd be watching how that affected as well. But other than, good business judgment around those two things, nothing, that's really what the caps therefore..

And just to confirm the current CapEx plan as it is right now through the forecast period put you at the midpoint of the earnings guidance range?.

We haven't said where the CapEx plan places within the guidance range..

Okay..

You're talking to....

Exactly..

Long-term or both?.

Okay. All right. Listen, thank you, very much..

Yes, thank you..

Our next question is a follow-up from Michael Lapides. Lapides with Goldman Sachs. Your line is open..

That's hilarious. Hey guys, easy question for your Tony.

How over the $110 million in merger synergies for 2019, how much have you realized year-to-date? What's an O&M and G&A year-to-date?.

Well, I know -- I know, a year-over-year variances like year-to-date were $84 million better than we were last year and $52 million for the quarter. We are ahead of our targets for the synergies. I just don't know the exact number. So, it was an easy question, but I struck out..

Yes, I'd say obviously, the total number is not ratable. So, but I would say that at midpoint given all we know, we're -- as Tony said ahead of plan..

Got it. Okay, guys. Thank you. I'll follow-up offline..

You bet..

Our next question comes from Andrew Levi of ExodusPoint. Your line is open..

Hey guys.

How are you?.

Good.

Yourself?.

I'm doing really well. Just some follow-up questions, just on the $850 million of incremental capex.

When would that spend begin to happen? Is that the next year, '21, '22?.

Again, we don't have a plan for that yet. There is nothing to prohibit us from beginning construction and spend as the projects are available and we could start those as appropriate. So, obviously, we would map out the plan around our annual plans and budgets and what kind of projects and how long they took to execute on.

So, but there is no time limitation on how quickly we could get started, if we had those plans in place..

And I'm sorry, maybe I missed it earlier that $850 million, would be spent over what time frame, like how many years?.

We don't really have a timeline except far, there is a true-up of PISA that it's a 4-year -- 4-year true-up -- fourth year true-up. So we're talking about a context of over a time period, but when and how it would be spent again, we haven't developed or published..

Some may be parameters handy would be all else being equal. We will be filing a rate case in Missouri for new rates effective the first part of 2023. So you back up from that, we've filed and call it early '22 and you would update a test year kind of the June time frame of 2022.

So that would kind of be ideal, but it doesn't mean we would stop necessarily. It depends on the projects and it depends on the runway and lead time and all that. But those are just some things you should consider..

Or is there another parameter were kind of your maximum spend on a year-based on how the PISA is written?.

So, I believe, it's a 3% CAGR..

So what would that be CapEx wise you think?.

Well, it's the $1 billion number that we've thrown out. We gave you the total number..

I'm saying on an annual basis?.

Yes. It depends on the projects, it depends on the amount, but there is a -- there is a 3% cap..

Okay. And then, just a last question; if you were to start spending next year as a follow-up of somebody else's question.

Let's just assume, you start spending next year and '21 and then you've bought back 36 million shares that you have this accelerated purchase of another $500 million and I guess to the current like $46 million [indiscernible] but it's sort of I guess issue of equity, you could just buyback our shares and that kind of would -- that make more sense versus buying back shares and that issuing shares if you needed to assuming you need to?.

So those are the other things that we obviously looking at Andy, right. As we're going through the planning horizon, we work with the operations in the financial modeling team..

Okay.

And I assume we'll get an updated EEI kind of the way we think about it?.

We'll obviously, will update you EEI what we have and obviously we'll be working on plans for 2021 around that time. But we traditionally would give earnings guidance in those kind of things at the first of the year..

Okay. And then the last thing is just kind of based on what you have said before, you I guess politically you feel much more comfortable about raising capex. Obviously, you have a more cost savings to maybe that helps as far as customer bills. I guess you feel better politically about kind of what's going on to be able to do that.

Is that correct?.

Yes. Again in Missouri, they specifically put this mechanism in place to encourages if you will allow us to spend additional and feel comfortable with our ability to recover. Same mechanism is not in place in Kansas and in fact the discussions are on the current level of rate and concerns around those.

So, those are two different places with two different focuses as we speak..

Perfect. Thank you, guys, very much..

You bet. Thank you..

There are no further questions. I would like to turn the call back over to Terry Bassham for any closing remarks..

All right. Thank you very much. Thank you for joining us. And, hope everybody has a good rest of the summer. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day..