Evergy (EVRG) to Gain From Strategic Acquisitions & Investments
Evergy, Inc.’s EVRG planned investments and strategic acquisitions should further help expand its operations in the transmission market. The company intends to add more renewable assets which are likely to boost its overall performance.
However, any unplanned outages in transmission and distribution assets could impact Evergy’s operations.
Tailwinds
Evergy’s long-term investment plans are focused on transmission, distribution infrastructure upgrades and customer-facing platforms to improve reliability. In 2023, the company invested $2.3 billion in infrastructure to modernize the grid. The company is targeting nearly $12.5 billion of expected base capital investments through 2028, including a new generation of around $2.9 billion, which is expected to be primarily a renewable generation addition.
The planned capital expenditures of Evergy are in sync with its new Integrated Resource Plan, which intends to achieve net-zero emissions by 2045, with an interim goal of 70% reduction in carbon dioxide emissions by 2030.
The company aims to lower emissions through the shutdown of fossil-fuel-based plants and the addition of new efficient units of clean power generation. The usage of more advanced technology to produce electricity from efficient renewable units is also reducing operating costs and boosting margins.
The company is focused on expanding its existing operations through partnerships, systematic acquisitions and collaborations. Evergy has a joint venture with American Electric Power, named Transource Energy, which will be focused on developing a competitive transmission project. EVRG, with a 13.5% interest in the venture, is well-poised for sustainable and long-term growth in the transmission market.
Headwinds
Despite maintenance, the old equipment might fail, causing unplanned outages and service disruptions, which may force the company to purchase power from others at unpredictable and potentially higher costs, which might lower profitability.
Electricity sales are seasonal and changing weather conditions play a pivotal role in the overall performance of the company. Mild winter and summer seasons can reduce the demand for electricity, impacting the performance of the company.
Transition in Energy Space
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Most of the companies target replacing fossil fuels with renewables and believe in the development of new technologies. They have pledged to deliver 100% clean energy and achieve the zero-emission target in the coming years.
To reap the benefits of the expanding renewable energy market, certain companies from the industry, such as Xcel Energy Inc. XEL, PPL Corp. PPL and Dominion Energy D, are also transitioning faster toward clean energy.
Xcel Energy aims to spend $39 billion during the 2024-2028 time frame. These investments are aimed at strengthening and expanding its transmission, distribution, electric generation and renewable projects.
The company is reducing coal usage and targets to lower emissions by at least 80% by 2030 and achieve carbon neutrality by 2050. Xcel Energy’s high-quality wind farms lowered emissions and generated nearly $3 billion of fuel-related customer savings and production tax credits since 2017.
PPL’s strategic investments will further expand its renewable-generation capacity. PPL expects a regulated capital investment plan of $14.3 billion during 2024-2027. The new four-year plan is $2.4 billion higher than the previous four-year plan.
PPL plans to achieve its carbon emissions target of 70% by 2035 and 80% by 2040 from its 2010 levels. It will do so through the introduction of new carbon capture technology and adding more renewable sources to the generation portfolio.
Dominion Energy has a well-chalked-out long-term capital expenditure plan to strengthen and expand its infrastructure. It has plans to invest $11.8 billion in its various segments in 2024 to strengthen its existing operations.
Dominion Energy’s long-term objective is to add 24 gigawatts of battery storage, solar, hydro and wind (offshore as well as onshore) projects by 2036 and increase the renewable energy capacity by more than 15% per year, on average, over the next 15 years. It aims to attain net-zero carbon and methane emissions from its electric generation and natural gas infrastructure by 2050. The company aims to cut emissions by 70-80% by 2035 from the level of 2005.
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