David Campbell
President and Chief Executive Officer at Evergy
Thanks, Lori, and good morning, everyone. I'll begin on slide 5. This morning we reported full year 2021 GAAP earnings of $3.83 per share compared to $2.72 per share in 2020. Adjusted earnings per share were $3.54 in 2021 compared to $3.10 in 2020. These results reflect strong execution relative to our objectives for the year. We enter 2021 with the midpoint guidance of $3.30 per share, in line with our 6% to 8% target growth rate range. We were able to deliver $3.54 per share, representing a 14% increase over 2020 and a 7% increase over our initial guidance midpoint.
Kirk will discuss the drivers of this year's results as part of his remarks. A critical part of the Company's five-year sustainability transformation plan involves a comprehensive program to modernize our grid and invest in infrastructure. We advanced this capital plan in 2021 to $2.05 billion or $100 million higher than our Investor Day estimate to replace aging equipment and improve reliability resiliency and security. We also maintain our focus on advancing affordability and regional rate competitiveness. So, in 2017 we have delivered a 4.2% overall average rate reduction to our customers. At the same time, we have reduced our total operating and maintenance expenses by 18% since 2018, enabling us to pass on these cost savings in our upcoming Missouri and Kansas rate cases.
In 2021, our total CO2 emissions were 46% below 20 -- 2005 levels, reflecting strong progress relative to our long-term emissions reduction targets. And last but certainly not least, we continue to prioritize constructive interactions with our key regulatory and legislative stakeholders. In 2021, we wrapped up the STP dockets in both Missouri and Kansas and securitization legislation was enacted in both states. We expect that securitization will serve as a helpful tool in managing the Company's ongoing fleet transition in the coming years.
On slide 6, you'll see our recent earnings and dividend growth track, as we have emphasized over the past year and system execution remains at the forefront of everything we do. The $3.53 midpoint of our 2022 adjusted EPS guidance tracks with 7% compound annual growth rate from 2019, which was Evergy's first full year as a company. This is squarely in line with our targeted long-term annual earnings growth of 68%. Alongside the earnings, you'll see the attractive dividend growth that is tracked within our 60% to 70% dividend payout policy.
I'd like to thank my fellow Evergy employees for their continued focus and teamwork and driving these results, overcoming the challenges of another unprecedented year including extreme weather during winter storm Uri and the ongoing pandemic. We look forward to working together to further advance its track record of execution.
As noted on slide 7, we've made significant progress on emissions reductions as we transition our generation fleet over the last decade and a half. Since 2005 we reduced carbon emissions by nearly half while reducing sulfur dioxide and NOx emissions by 98% and 88% respectively. Our renewable energy portfolio is approaching 4.5 gigawatts and we responsibly retired nearly 2.5 gigawatts of fossil generation over the last 15 years. Our updated integrated resource plans, which were filed last spring outlined our intention to add nearly 4 gigawatts of renewable generation and retire nearly 2 gigawatts of coal over the next decade.
In 2021, nearly half of the electricity we provided to customers came from carbon-free sources and we are on pace to reach our goal of a 70% reduction in CO2 emissions from 2005 levels by 2030 with a long-term objective of net zero carbon by 2045.
Slide 8, summarizes our five-year capital expenditure plan, which totals $10.7 billion from 2022 to '26. On a comparative basis, the current 2021 to '25 plan is in line with what we presented at our Investor Day last September with some timing shifts reflected in higher base capex in 2021 and 2023 and slight reductions in the other years' netting to a roughly $100 million increase overall. With the addition of 2026, the rolling five-year capital expenditure plan is $235 million higher than the 2021 to '25 plan. The largest portion of our infrastructure investment is targeted towards transmission and distribution. The program is focused on replacing aging equipment and modernizing the grid, driving benefits for our customers by improving reliability, enhancing resiliency and the ability to withstand extreme weather, upgrading customer systems, and the customer experience and increasing security. As we advance the use of smart grid technologies and transition towards a lower cost, lower emissions generation fleet, our investments will also enable us to reduce cost to serve customers, which helps to create a virtuous circle as we pass on these savings.
Slide 9 summarizes our progress and driving cost savings and capturing efficiencies in how we work. Enabled by the 2018 merger and a comprehensive program across the business, we have reduced cost by $233 million or 18% since 2018. We're laser-focused on operational excellence as we leverage investments in technology to operate more effectively and efficiently. We're also building more and more flexibility into our generation operating model in the Southwest Power Pool market, which continues to see an increasing penetration of renewables generation. And we're not done, as we are targeting a further 11% reduction in total O&M by 2025 as part of our five-year plan.
Thus far, we've been able to manage the impacts of inflation on our O&M costs and we have developed plans to capture the vast majority of our targeted savings. The back half of 2021 brought increasing pressures on fuel and purchase power costs, as has been seen across the country, typically higher levels elsewhere than what we've seen in our jurisdictions. And it appears that those trends may continue in the current macro environment and geopolitical context. Affordability and improving regional rate competitiveness are core elements of Evergy's strategy.
As shown on slide 10, since 2017, Evergy has been able to reduce rates by an average of 4.2%, outpacing regional peers and at a level well below inflation. On the slide, we lay out how we've been able to deliver these savings across each of our four jurisdictions from 2017 to 2021. This topic remains at the forefront for our customers and stakeholders and going forward, maintaining affordable rates will continue to be features as a priority objective in our five-year plan.
Turning to slide 11, I'll give an update on our ongoing Missouri rate reviews, we filed in January. Starting on the left hand side with Missouri Metro, we have requested a $44 million rate increase, including the rebates -- excuse me, excluding the rebates of fuel based on a 10% return on equity, a 51.2% common equity ratio and a projected $3.1 billion rate base as of the proposed May 31, 2022 crew update. The primary drivers of the rate request include our increased infrastructure investments which improve reliability, enhanced customer service and enable the Company's transition to cleaner energy resources, updated depreciation rates that better align with the estimated remaining lives or assets and increased property taxes. These increases are significantly offset by roughly $55 million of lower annual operating cost, savings that we are pleased to be able to pass on the customers.
Moving onto Missouri West, we requested a $28 million rate increase excluding the rebates of fuel and based on a 10% return on equity of 51.8% common equity ratio and a projected $2.5 billion rate base as of the proposed crude update. Missouri West rate request drivers are similar and include an increase from infrastructure investments, updated depreciation rates and increased property taxes, partially offset by ongoing customer savings and cost reductions of roughly $57 million per year. These savings effectively lower the rate increase request by more than 60%.
The Missouri West case also includes the handling of our previously retired Sibley power plant. We've been deferring the revenues associated with the foregone O&M resulting from the plants retirement in 2018. As part of this case, we've offered to return these revenues back to customers over the next four years, which would reduce annual revenues by roughly $10 million but with no impact on earnings.
To summarize, we believe that the pending Missouri rate reviews are relatively typical and straightforward with two main elements, first passing on the benefits of cost savings, and second, adding infrastructure and grid modernization investments that are consistent with and advance the objectives of Missouri policymakers and stakeholders. We're excited about the benefits of these investments will deliver to our Missouri customers. And the procedural schedule is not yet final, on the bottom of slide 11, you'll see our estimated timeline from here. We expect staff and intervenor testimony will be filed in June, with rebuttal testimony in July, potential hearings in early September, and finally commission orders in November. If approved as filed excluding fuel, the rate request which represent an increase of 5.2% for Missouri metro customers and a 3.8% increase for Missouri West customers, both of which are well below the rate of inflation we've seen since our last rate cases.
Moving to slide 12, I'll provide an update on other regulatory and legislative priorities, beginning with our pre-determination docket in Kansas. As a reminder, last September, we initiated a proceeding to approve the elimination of coal at the Lawrence Energy Center, retirement of Lawrence Unit 4 with recovery through securitization and the addition of 190 megawatts of solar generation in Kansas. Later in the year, last year we filed a request to temporarily suspend the procedural schedule to allow time to develop more clarity on solar tariffs, potential for tax incentives to improve customer economics and the resolution of supply chain and customs issues that could impact pricing and availability.
Given the lingering uncertainty around those issues rather than keeping this docket on hold, we have withdrawn the filing and plan to file a new application, once definitive agreements are reached with the solar developer. The elements of the plan are unchanged and we still expect to seek predetermination approval for the cessation of coal, retirement of Lawrence 4 and the addition of 190 megawatts of solar. While this may impact the timing of the solar farm addition, it does not have a meaningful impact on our earnings expectations as the structure for the new solar farm was expected to contribute less than a $0.01 to annual adjusted EPS in both 2024 and 2025. This is due to the market based rate construct that was pursued in this case, under which the earnings profile is tied to the time that Evergy can monetize the value of the ITC tax benefits of the project in the back half of this decade.
In parallel, we are in the process of evaluating competitive proposals for up to 1 gigawatt of new owned wind resources that would come online in the 2024 to '25 timeframe. Kirk and his team are overseeing our renewables efforts and he will highlight our priorities in his remarks. Other regulatory items include recovery of costs incurred during the winter storm Uri. In Missouri, we are awaiting Commission approval of our request to defer approximately $300 million at Missouri West with plans to securitize the costs and smooth the impact on customers over multiple years. We are also seeking approval to differ on return approximately $25 million of net benefits to Missouri Metro customers.
We expect to reach resolution on the deferral request in the second or third quarter and a commission decision on the securitization of the Missouri West cost by the end of the year. In Kansas last month the KCC staff filed its recommendation to approve our recovery plan of approximately $115 million of Uri costs in Kansas Central and the return of approximately $35 million of benefits in Kansas Metro. We are working closely with all parties and we expect to finalize the details of the path forward in the first half of this year.
In 2021, we filed our integrated resource plans in Missouri and Kansas, providing an updated 20-year road map for our generation fleet transition in conjunction with our announcement of our long-term emissions reduction targets. We will file our annual update to the IRP in both states by July 1. I'll wrap up this slide with the legislative update focusing on Missouri. Bills have been introduced to extend and update legislation that was passed in 2018, while we referred to as plant and service accounting or PISA.
We've been utilizing this legislation from 2019, supporting our investments in grid modernization and improved reliability. We believe that the bill is good policy and enjoys wide support, but whether it ultimately advances this year will depend, most likely on unrelated issues that may receive the bulk of legislative attention. We are focused on working with key stakeholders to advance the PISA extension in the spring, but given the provisions of the currently existing PISA legislation, this is an initiative that we would also be able to pursue next year. In addition, in Missouri, we are pursuing mechanisms to enable the efficient recovery of costs outside of our control notably, property taxes.
Before handing it over to Kirk, I'll wrap up on slide 13, which summarizes the Evergy value proposition. Left side of the page covers a core tenants of our strategy to advance affordability, reliability, and sustainability. Through a relentless focus on our customers supported by stakeholder collaboration, sustainable investment, and financial and operational excellence. The right hand side of slide 13 features what we believe are particularly attractive and distinctive features for Evergy, given our business mix and geographic location. We are excited about the opportunities for our Company and we are committed that the sustained effort required to deliver against our high performance objectives.
I will now turn the call over to Kirk.
