Earnings Call Transcript
Evergy, Inc. (EVRG)
Earnings Call Transcript - EVRG Q3 2021
Operator, Operator
Thank you for joining us for EVRG's Third Quarter earnings call. All participants are currently in listen-only mode. After the presentation, there will be an opportunity for questions. I now turn the conference over to your host, Vice President of Investor Relations and Treasurer, Lori Wright. Please proceed.
Lori Wright, Vice President Investor Relations and Treasurer
Thank you. Good morning, everyone and welcome to Evergy's Third Quarter call. Thank you for joining us this morning. Today's discussion will include forward-looking information. Slide two and the disclosure in our SEC filings continue with some of the factors that could cause future results to differ materially from our expectations, and include additional information on non-GAAP financial measures. The releases issued this morning along with today's webcast slides and supplemental financial information for the quarter are available on the main page of our website at investors.evrg.com. On the call today, we have David Campbell, Evergy's President and Chief Executive Officer, and Kirk Andrews, Executive Vice President and Chief Financial Officer. David will cover our third quarter highlights, recap our recent Investor Day, and provide an update on our near-term resource plan. Kirk will cover in more detail the third quarter results, the latest on sales and customer information, and our financial outlook for the remainder of the year. Other members of management are with us and will be available during the question-and-answer portion of the call. I will now turn the call over to David.
David Campbell, President and CEO
Thank you, Lori. And good morning, everyone. I'll begin on Slide 5 of our presentation. This morning, we reported third quarter adjusted earnings of $1.98 per share compared to $1.73 per share a year ago, equal to a 14% increase. On a period-over-period basis, these results were driven primarily by favorable weather, higher transmission margin, higher other income, and lower income taxes, partially offset by a decline in weather-normalized demand. For year-to-date September 30th, adjusted earnings were $3.38 per share compared with $2.82 per share a year ago, equal to a 20% increase. As with the quarter, favorable weather is the most significant driver. With these strong results, we are raising and narrowing our adjusted EPS guidance range to $3.50 to $3.60 per share, an increase from $3.20 to $3.40 per share. I commend and thank our team's ability to execute and focus on providing safe and reliable electric service to our customers throughout the first nine months of the year, notwithstanding the lingering pandemic impacts and a significant winter weather event in February. Kirk will detail the drivers of our financial performance that resulted in the upside guidance revisions. In addition, we are affirming our 2022 adjusted EPS guidance of $3.43 to $3.63 per share, as well as our targeted annual adjusted EPS growth target of 6% to 8% through 2025, as we laid out during our Investor Day. Lastly, this morning, we also announced a 7% increase in our quarterly dividend to $0.57 per share, or $2.29 per share on an annualized basis. This increase is consistent with our growth trajectory and reflects our Board's confidence in the execution of our plan. Moving on to slide 6, I'll provide a brief recap of the business plan highlights from our recent Investor Day. As part of the event, we re-based and extended our key targets through 2025. Our 5-year capital investments are estimated to be $10.4 billion through 2025, of which nearly $1.5 billion is for renewal projects. This spending plan drives our projected rate base growth of 5% to 6% annually over that same time period. We also extended our target for cost efficiencies and added nearly $20 million of savings in 2025, increasing our total estimated annual O&M savings from our 2018 base year to $345 million annually in 2025. This represents more than a 25% overall decline. Building on the strong performance and realized cost savings achieved over the last three years, this trajectory implies a 1% to 2% annualized cost productivity gain through the five-year forecast period. The planned beneficial infrastructure investment, and additional O&M savings, enable us to extend our top-tier 6% to 8% annual growth rate in adjusted earnings per share through 2025. We're able to fund this plan with significant cash flow and modest incremental debt, allowing us to maintain our strong balance sheet and credit metrics with no planned incremental equity through 2025. Lastly, we showcased our strong ESG profile, including our significant progress in clean energy and changing our generation mix. In 2020, 50% of our energy was emissions-free and we achieved a 51% reduction in EVRG CO2 emissions relative to 2005 levels. We stack up well relative to our Midwest peers in terms of both clean energy delivered to our customers and our reduction in carbon emissions. We have ambitious but achievable goals as we advance towards our target of net-zero carbon by 2045. Slide 7 outlines our resource plans through 2026. To further lower energy costs for customers and reduce emissions, we plan to add more than 1,300 megawatts of new renewables split between over 500 megawatts of solar and 800 megawatts of wind through a series of yearly additions. We also plan to retire coal operations at our plant in Lawrence, Kansas. In September, we initiated a regulatory proceeding in Kansas called predetermination, seeking approval in advance for the Lawrence coal retirement and for the first 190 megawatts of solar generation. We expect to have an order in this proceeding by mid-2022. In October, we also issued a request for proposal for 800 megawatts of wind generation projects. We have sequenced these across 2024 and 2025 for the benefit of Kansas and Missouri customers. Bids are due later this month and we plan to select a shortlist of projects before the end of the year. We are targeting having negotiations completed by mid-2022. In parallel, we will continue to evaluate potential opportunities to buy in and repower existing power purchase agreements as initial production tax credits expire. Before handing it over to Kirk, I'll wrap up on Slide 8, which summarizes the EVRG value proposition. The left-hand side of the page covers what we're focused on and how we plan to execute our strategy, which I discussed in depth during our Investor Day. The core tenets of our strategy are 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 8 features what we believe are particularly attractive and distinctive features for our Company. First, we are an all-electric regulated utility with significant benefits delivered since the merger, and further opportunities that we will capture through continuous improvement, performance management, and sustained consistent execution. Second, we have significant opportunities ahead for the ongoing transition of our generation portfolio. And we can do so cost-effectively, given that we'll be replacing coal with low-cost renewables, which is a win-win for affordability and sustainability. Third, we are geographically advantaged given our proximity to world-class wind resources in Kansas. We are well-positioned to participate in the renewables and transmission build-out that will occur as part of the national transition to a clean energy economy. Finally, we are targeting a high performing 68% annual growth rate in adjusted earnings per share through 2025 at the top rank with our peers. We are very excited about the opportunities for our Company and we are deeply committed to the sustained effort required to deliver against our high-performance objectives. I will now turn the call over to Kirk.
Kirk Andrews, Executive Vice President and Chief Financial Officer
Thanks, David. And good morning, everyone. I'll start with results for the quarter on Slide 10. For the third quarter of 2021, EVRG delivered adjusted earnings of $455 million or $1.98 per share, compared to $393 million or $1.73 per share in the third quarter of 2020. The 14% increase in third quarter adjusted EPS was driven by the following items, as shown on the chart from left to right. First, there were significantly more cooling degree days this past quarter as compared to the third quarter of 2020, resulting in $0.20 of favorable contribution from weather. Adjusting for milder than normal weather experienced in the third quarter of 2020, the third quarter of this year saw $0.13 of EPS versus normal weather assumed in our original plan. The strong favorable weather impacts this quarter were partially offset by a 1.2% decline in weather-normalized demand or approximately $0.06 per share. Higher transmission revenue resulting from our ongoing investments to enhance our transmission infrastructure drove about $0.06 per share. Other income increased $0.04 per share, driven by higher investment earnings from some of our investments in early-stage energy solution companies. Income tax-related items, which include the impact of the Kansas income tax rate exemption effective this year, and higher amortization of excess deferred income taxes, partially offset by the timing of tax credit recognition, to maintain our effective income tax rate for the year, drove a net increase of $0.04 per share. Finally, other items, which consisted primarily of higher depreciation and amortization and property tax expenses, as well as the impact of shares issued to Bluescape in April, were partially offset by lower O&M, which when combined represents a net $0.03 decrease. I'll turn next to year-to-date results which you'll find on Slide 11. For the 9 months ended September 30th, 2021, adjusted earnings were $775 million or $3.38 per share compared to $642 million or $2.82 per share for the same period last year. Again, moving from left to right on the slide, our year-to-date adjusted EPS drivers versus 2020, include the following: favorable weather from the first half of the year when combined with the warm weather in the third quarter, contributed $0.25 year-to-date. When compared to normal weather assumed in our original 2021 plan, weather was $0.18 favorable. And although weather-normalized demand increased about 1% year-to-date, the margin impact of higher commercial and industrial sales was more than offset by an estimated 2% decline in residential sales, resulting in about a penny of lower margin versus the first 9 months of 2020. As expected, higher transmission revenues driven by our FERC transmission investments resulted in a $0.12 increase. Other income was also $0.12 higher, driven primarily by an increase in investment earnings due to a realized gain from the monetization of an investment in the first half of the year, combined with investment gains in the third quarter, as well as higher AFUDC. The impact from the Kansas income tax exemption and higher amortization of excess deferred income taxes contributed $0.11 of favorability year-to-date. Finally, higher depreciation and amortization, property taxes, and a slight increase in share count were partially offset by lower O&M and interest expense leading to a net decrease of $0.03 per share. Turning next to slide 12, I'll provide a brief update on recent sales on customer trends. Weather-normalized retail sales decreased 1.2% during the third quarter compared to last year. This was primarily driven by lower residential sales down 3% compared to last year with fewer customers working from home compared to 2020. Weather-normalized commercial sales were up slightly, reflecting the slow, steady return to normal. Industrial sales were flat with some ups and downs across multiple sectors. The Ford plant in our jurisdiction is still experiencing headwinds from chip shortages, which have slowed down production, and in turn electricity usage. On the positive side, extensive oil refineries and pipelines in our jurisdictions are seeing a surge in usage as the commodity market drives higher demand for their products. The pandemic recovery continues to be slower than we originally planned, and year-to-date weather-normalized demand has only increased about 1%, compared to our original expectations of around 2%. As I mentioned during our Investor Day in September, we adjusted our demand expectations for the balance of 2021, likely due to the resurgence of COVID-19 over the summer. We now expect some of the recovery to more normal demand mix to take place in 2022. Turning next to Slide 13, I'll provide greater details on the drivers of our increased and narrowed guidance range for 2021, starting with our previous guidance range to the left of the slide and moving again from left to right. Due to the shift in expected demand recovery from 2021 to 2022, the earnings contribution of weather-normalized sales is about $0.14 per share lower than our original expectations. However, favorable weather through the first three quarters, which we estimate contributed $0.18, has more than offset the delay in normalized demand recovery. The net of these two items is a positive $0.04 in total sales compared to our original plan. Continuing across the chart, the remaining positive drivers of our revised guidance include $0.09 from income tax benefits, driven by higher excess deferred income tax amortization, $0.07 from higher AFUDC, and lower interest expense. Finally, our revised guidance includes the impact of the amount by which we'd expect our non-regulated businesses to exceed our original 2021 plan. Specifically, Evergy Ventures, the entity through which we make investments in early-stage energy solution companies, as well as our Power Marketing business, are on track to contribute greater than normal earnings in 2021. This is partially offset by the timing and phasing of certain costs, resulting in a net increase of $0.05 versus our prior guidance. Together, these items lead to our revised 2021 adjusted EPS guidance of $3.50 to $3.60 per share. Of note, although I mentioned our Evergy Ventures business's outperformance as one of our contributing factors for our revised guidance, this outperformance is primarily based on year-to-date results. In October, an equity investment in which we own a minority stake went public through an acquisition by a Special Purpose Acquisition Company (SPAC), and EVRG received shares in the public company at closing, subject to a lock-up. As a result, we expect to record an unrealized gain on this investment in the fourth quarter. Although this fourth quarter item is not yet reflected in our revised guidance, we expect this impact to be positive. Depending on the fair value accounting for the investment, it could cause our results for the year to even exceed our updated guidance range. However, we consider any potential gain from this investment, which we expect to monetize in 2022 when the lock-up expires to be additional non-recurring earnings for the year relative to our ongoing expectations for this part of our business. Lastly, we also recognize our updated 2021 guidance implies a lower fourth quarter compared to last year. So on the right-hand side of the slide, we've included the key drivers which will impact the expected year-over-year fourth-quarter results. These drivers include the following; Given our strong year-to-date and expected earnings, we've made a few changes in the timing and phasing of certain cost items, which are expected to drive about $0.06 per share in the quarter. Although we've seen favorable bad debt expenses in 2021, largely due to lower write-offs resulting from an extended moratorium on disconnections that expired in May, we've now begun to see write-offs increase and believe this temporary trend is likely to continue, resulting in the realization of write-offs later in the year than we originally expected. As a result, we expect to make a change in our receivable reserve calculation in the fourth quarter, which will lead to about $0.03 of additional bad debt expense. These two factors, combined with other items, including the expiry of certain tax credits in 2021, lead to the implied difference in expected fourth-quarter earnings versus 2020. Finally, turning to our affirmed 2022 adjusted EPS guidance on Slide 14. We've updated the bridge from our revised 2021 adjusted EPS guidance range of $3.50 to $3.60, to our 2022 adjusted EPS guidance range of $3.43 to $3.63. Starting on the left-hand side of the slide with our 2021 guidance, we normalized $0.18 of favorable weather and roughly $0.05 of earnings primarily from power marketing and Evergy Ventures. Although we expect these businesses to continue to contribute earnings going forward, this adjustment is merely associated with the outperformance in 2021, shifting their expected run rate contribution in our 2022 guidance. After adjusting for these items, the drivers of our 2022 guidance midpoint were largely unchanged from the walk we provided on Investor Day, and include: $0.12 of increased retail demand, about two-thirds of which reflects the realization of more normal demand in 2022, which we originally expected to occur this year. This shift is due to the observed delay in returning to normal demand mix due to lingering COVID effects in 2021. The remaining portion is about a third of this $0.12 demand impact reflecting normal year-over-year load growth in 2022. We expect approximately $0.09 of additional earnings from transmission revenue as we continue to make investments to improve transmission infrastructure. Next, additional O&M savings are expected to add around $0.05 as we continue to progress for Tier-1 cost efficiency and our more robust long-term O&M savings objective. Now representing over a 25% reduction in O&M from 2018 to 2025. The remaining drivers include the impact of expiring merger-related bill credits, a slight increase in interest savings, and AFUDC equity, all of which are offset by depreciation expenses not yet reflected in rates and a penny of other items. With that, I'll hand the call back to David.
David Campbell, President and CEO
Thank you, Kirk. For everyone on the call, we appreciate your time with us today. And now we'd be happy to take your questions.
Operator, Operator
As a reminder, please stand by while we compile the Q&A roster. Our first question comes from Shar Pourreza of Guggenheim Partners. Your question, please.
Shar Pourreza, Analyst
Good morning, guys.
David Campbell, President and CEO
Good morning, Shar.
Shar Pourreza, Analyst
Just a couple of questions here if I may. First, the updated guidance for 2021, which obviously even as weaker weather-normalized demand is somewhat noticeably higher, right? Are you including any pull-forward of OpEx from '22? I'm just trying to get a sense on potential flexibility in next year's guide, especially as we're seeing some demand drag continuing into '22 versus your prior expectations.
David Campbell, President and CEO
So Shar, as Kirk mentioned, we do have a series of timing and phasing of operating costs. Some of that's timing within this year, some of that's going forward from the forward plan. And we're not adjusting our guidance for 2022, the only time you have the opportunity to do prudent managing your costs. You look at that across the four planned years and it can help influence execution. But given the size of the numbers, we're not changing our guidance for 2022. But as companies do in this circumstance with some favorable weather, we are certainly looking at how, and we'll continue to look at how. Are there pull-forward items, or are there items that we can address this year? There are limits to what you can do in that range. But as all companies look at that piece. So some of it does relate to timing into our year in '21.
Shar Pourreza, Analyst
Got it. So you have some contingency there to cushion.
David Campbell, President and CEO
We're not changing our guidance in 2022, but we feel good about our ongoing execution trajectory.
Shar Pourreza, Analyst
Okay. Got it. And then just on the O&M side, obviously, you expect considerable reductions through '25. How should we think about where you're currently guiding versus the overall opportunity set? Do you see more to squeeze, especially as you are shooting for Tier 1 utility status and looking at asset-level transition opportunities? A 25% reduction is a lot; the question is, can you do more?
David Campbell, President and CEO
That's a great question, Shar. I know we've discussed this on prior calls. I think the Company has done a terrific job since my arrival coming in this year at achieving a lot of cost savings post-merger in '19 and '20. Ongoing trajectory of those reductions, and we've indicated as part of our Investor Day, we described how we think there's an ongoing opportunity for 1% to 2% productivity gains. So, we think it will be along the lines of executing the plan that we've laid out and then continuing to drive improvements across our business through a systematic process. I think that's how we view our opportunity set is really driving that continuous improvement over time, consistent with what we've laid out in the Investor Day plan.
Shar Pourreza, Analyst
Got it. And then lastly for me, if I may just on the IRP. How much did you file earlier this year? We've already seen multiple stakeholder groups make some noise in the Kansas docket. Staff made some positive and constructive comments. What should we be watching for in the process for the balance of the year across the states? And more importantly, is there any concern around the IRP-related spending opportunities in light of some of the input cost pressures we've seen in the renewable space? How do you price in these headwinds as we think about future generation opportunities through '26 and beyond? Thank you.
David Campbell, President and CEO
Thanks, Shar. I'll ask Kirk to supplement the commentary we filed for predetermination relating to the 190 megawatts of solar. So we'll have the chance to review that spend program and our planned addition as part of a regulatory fine before we advance the process. Part of why that program was sized down a little bit in scope from the initial estimates at 50 megawatts reflected the overall supply chain environment and maturity of the solar pipeline in SPP relative to the more mature pipeline on the wind side. We will continue to evaluate that, but we're pleased that we have that opportunity to engage proactively as part of the pre-determination process. We've also launched the RFP for wind in 2024 and 2025, as we described. So we'll see where those bids come out now. We'll see how long the supply chain pressures advance, but I noted that we've got a target for reaching agreements related to the IRPs, at least for the first year, by mid-2022. So we have a good sense of, and plenty of time to evaluate what we're seeing in the supply chain to ensure that what we're achieving drives our objectives of reliability, affordability, and sustainability. Always keeping a focus on that. I think the intervener comments in the IRP proceedings are relatively consistent with what you'd expect, which probably reflects that we're striking a balance in what we're striving to do and we'll continue to do that, being mindful of the affordability impacts as you note, of some of the supply chain pressures. And that's why we're trying to take a systematic and diligent approach to how we tackle it. Kirk, anything to add?
Kirk Andrews, Executive Vice President and Chief Financial Officer
Just building on that last point, certainly we're not immune to seeing the cost and supply chain pressures. They're affecting various sectors, including, but not limited to renewables. Part of the reason why we made the slight shift was the magnitude of the solar and advancing wind. But beyond that, as we indicated on our Investor Day, we're looking at all facets of opportunities. Obviously, David mentioned we recently launched our RFP. That's our primary focus, but we have some self-development opportunities. The potential around some of those PPA buy-ins and repowering, given the existing dialogue around some of the aspects of the Build Back Better framework, which is still a framework, but some of the potential for tax incentives, could be mitigants that help offset some of that cost pressure for us. I think we've got a lot of levers and flexibility where that's concerned, but we're certainly laser-focused on finding the right blend from an affordability and a reliability standpoint on the renewables front.
Shar Pourreza, Analyst
I appreciate it. That's great color. Thanks, guys.
David Campbell, President and CEO
Thank you.
Darius Anderson, Analyst
Hi. Good morning, this is Darius on for Julian. Thanks for taking my question. I just wanted to start off.
David Campbell, President and CEO
Good morning.
Darius Anderson, Analyst
Good morning. Just wanted to start off on thinking about the average customer bills as we head into the heating season, obviously there’s quite a bit of news out there about fuel volatility and the impact that could have on bills. Do you have any quantified sort of your average estimate for how much bills could increase either on a percentage basis or on a dollar-per-customer basis? And could you perhaps maybe speak to how that compares to your regional neighbors? I know there's fuel mixed differences, so I think that might go in your favor, but if you could speak to that, please.
David Campbell, President and CEO
Sure. It's obviously something we track closely. And we have a much smaller natural gas position than some of our neighbors. I can't comment on where their bill trajectory will go, but I'm sure you've noted the relative mix of gas versus others. We, about, in 2020, only about 5% of our fuel and purchase power was natural gas related. Natural gas price movements have not had a significant impact. We do have a relatively sizable amount of coal, so the 40% range, and it has certainly been moving in PRB pricing. We've got some protection around that from a hedging perspective over the near term. If those pricing pressures persist all the way through 2022, then obviously we will have to see what those impacts are and the net impacts in the wholesale market as well. We have a very sizable wind portfolio. And that wind portfolio will benefit relatively from higher prices when fuel prices don't increase, of course, on the wind side. Our net we are in a lower general bill season where our enterprise is summer heavy. So the highest customer bills are typically in the summer. In the fall, we're rolling into what are typically significantly lower customer bills. But it's something we're very focused on. Again, net relative to those who are more natural gas intensive, they are likely to face more intensive fuel costs. But again, all depends on what their hedge approach is. On a relative mix basis, we don't have the same exposure that natural gases have.
Darius Anderson, Analyst
Thank you for that detail. Regarding the predetermination filing in Kansas you mentioned earlier, could we possibly see the expected order timeframe in mid '22? Should we anticipate securitization filings shortly after that, provided you receive a favorable order in the predetermination docket?
David Campbell, President and CEO
Yes. So that proceeding includes asking for securitization relating to the retirement of the coal facilities in Lawrence, since the retirement of Lawrence unit 4, as well as the shared coal handling facilities. It's relatively modest in size, but we would expect six securitization relating to that assuming that proceeding goes as planned.
Darius Anderson, Analyst
Okay, great. I'll leave it there. Thank you very much.
David Campbell, President and CEO
Thank you.
Michael Sullivan, Analyst
Hey, everyone. Good morning.
David Campbell, President and CEO
Good morning, Michael.
Michael Sullivan, Analyst
Kirk, I just wanted to follow up on some of the comments you made a little bit ago on the Biden Build Back Better plan. If you could give a little more color on what some of the changes there could mean for you guys in terms of the Wind RFP, the PPA buy-ins, and then maybe also direct pay. Just how we should be thinking about some of the puts and takes there.
Kirk Andrews, Executive Vice President and Chief Financial Officer
Sure, Michael. Starting on the wind side, obviously the prospects of an extension in returning to full power on the production tax credit side is certainly a net positive, both in the context from an affordability standpoint, which we're very focused on. The magnitude of those tax credits and the reliability of over a longer period of time being more robust is an added benefit in terms of meeting our objectives around affordability. It also speaks to greater flexibility in terms of the cadence, pace, and mix of renewable investment. As you'll recall, we pulled forward some of our wind investments to take advantage, or at least to account for the existing expiry of the production tax credits. Obviously, an extension and an increase would give us greater flexibility there. I think the knock-on effect areas, as we mentioned, certainly the buy-in of PPAs and repowering are going to be dependent on taking advantage of those production tax credits. That gives us a greater tailwind on the latter portion of that two-pronged strategy. The last piece I would say is on the solar side where the investment tax credit is concerned. Certainly in the prospects of direct pay, for example, which is a more efficient way to deal with that ITC, which we have to deal with in one lump sum. Also, a benefit on the solar side to us from the affordability standpoint and how that's reflected in rates. There are a lot of details to come. There are certain requirements around that. We need to see more details in terms of things like wage fairness and domestic content. But we feel optimistic that, both on the solar and wind side, that certainly creates a tailwind for us, both in terms of flexibility and affordability for our customers as we make good on our renewable objectives.
Michael Sullivan, Analyst
Great, super helpful. And just a follow-up there. Any thoughts on potential cash flow or balance sheet impact from things like direct pay?
Kirk Andrews, Executive Vice President and Chief Financial Officer
To some extent, yes. I think in terms of the direct pay aspect of things that I mentioned before, as we reach the middle of the decade, we gain a greater appetite for cash taxes and the ITC is an offset to that. To the extent to which it becomes direct pay, that isn't as direct an impact on our cash flows. But an increase in the magnitude of the PTCs can help offset its just another form to take advantage of that tax appetite. Net again, I'd see that's certainly positive. Maybe it's just a different mix and probably taking advantage of our increasing tax appetite once we reach the middle of the decade and thereafter.
Michael Sullivan, Analyst
Great. And just the last one, kind of small, but on the Power Marketing benefit that you guys are realizing in '21, that's in the new guide that that's separate from Evergy Ventures, and just any more color on that?
Kirk Andrews, Executive Vice President and Chief Financial Officer
Sure. Yes, that's correct. Good question. As you recall, we had some Power Marketing margins that we earned during the winter weather event. Those remain and have been excluded from our adjusted EPS. The upside or the outperformance as I termed it, is in addition to or above and beyond that item that we excluded from our adjusted earnings. So we had certain expectations going into the year, and the Power Marketing business has just exceeded those expectations. Again, above and beyond the excluded item there.
David Campbell, President and CEO
It still makes up a small portion of our overall business, but if you consider power marketing, Evergy Ventures, Tran source, and Prairie Wind together, it's reflected in the revised guidance with the improved performance, which accounts for a bit under 5% of the earnings.
Michael Lapides, Analyst
Hey, guys. Thank you for taking my question. A high-level one about the repowering opportunity. Can you remind us, how many megawatts of wind do you have under PPA currently? And how many of those are contracts that are, call it ten years old or older?
Kirk Andrews, Executive Vice President and Chief Financial Officer
Sure, Michael. It's Kirk. It's about 3.8 gigawatts in total in terms of our PPA portfolio. As we laid out on the Investor Day in one of our slides, we have been very focused on the subset of that portion in terms of contracts. Those contracts really don't begin expiring until just after the middle of the decade. But our focus here is on the expiry of the PTCs. We've got a little more than 1.2 gigawatts of that, or almost 1.3 gigawatts of that 3.8 gigawatts, whose PPA or PTCs, rather the production tax credits, are expiring between now and the middle of the decade. As those PPAs or PTCs expire, we think that's probably the most meaningful subset of those 3.8 gigawatts PPAs that we're focused on in the near term while repowering and buying opportunities. Because our counterparties have obviously taken full advantage of that point of all in PTCs. I think that's probably the targets that we're looking at.
Michael Lapides, Analyst
Understood. If you initiate a buy-in, there are a couple of considerations. Firstly, this isn't included in your capex guidance, meaning that the annual rate base guidance would be an additional benefit. Secondly, many of those projects come with project debt. Would you essentially pay off the project debt, or would you assume that most of them have project debt that is nearing the end of an amortizing loan? I'm interested in the process of removing a project from a non-regulated developer's books and integrating it into a utilities rate base.
Kirk Andrews, Executive Vice President and Chief Financial Officer
Yeah, good question. I think we probably would not look to transfer obviously, the project debt because it's relatively fully amortized. It would probably be a full buy-in, so we'd purchase this on an unlevered basis and obviously, some of those proceeds would go to take out the existing project debt. Think about it as a pure rate base investment on the PPA buy-in side.
David Campbell, President and CEO
And Michael, regarding your first question, you are correct that none of this is included in our current capex plans. The PPA buying and repowering, wherever we can negotiate those, would be an additional benefit or enhancement to our current guidance.
Michael Lapides, Analyst
Got it. Thank you, guys. Much appreciated.
David Campbell, President and CEO
Thank you.
Paul Patterson, Analyst
Good morning.
David Campbell, President and CEO
Morning, Paul.
Paul Patterson, Analyst
I apologize, but could we discuss the investment income and expectations for 2022? Referring to slide 14, I assume the investment income will be... Let me ask this: What is the expected total investment income for 2021? I've been using $0.12 so far today, but where will the components you mentioned come in for 2021?
Kirk Andrews, Executive Vice President and Chief Financial Officer
Sure. In 2021 on the Power Marketing side, we've probably got up about $0.05 of total impact from investment income that comes from a couple of sources. Some of that is, like a lot of other utilities we invest in other funds, Energy Impact Partners is one of those. Some of that is the market. Some of that is, as I mentioned before earlier in the year, on a direct investment side, we actually had a monetization of that and that's probably the disproportionate share of that through the first half of the year is that monetization events or the combination of those two things. Obviously, that contributed to exceeding our expectations on the upside.
David Campbell, President and CEO
And I'll just clarify. Kirk mentioned Power Marketing, but that's the average events.
Kirk Andrews, Executive Vice President and Chief Financial Officer
Evergy Ventures. Sorry. Of Evergy Ventures, the investor market. Thanks, David. If you look forward into 2022 and beyond, as I mentioned before, that $0.05 is outperformance. On an ongoing basis, certainly in our '22 guidance, it's more like a penny or two on the Evergy Ventures contribution.
Paul Patterson, Analyst
Okay. Great. Okay. And then the rest of my questions have been answered. Thanks so much.
David Campbell, President and CEO
Thank you, Paul.
Operator, Operator
Thank you. Our next question comes from Travis Miller of Morning Star. Your question, please. Travis, please make sure your line is open. If in a speaker phone, lift the handset. All right. At this time, I'd like to turn the call back over to David Campbell for closing remarks. Sir?
David Campbell, President and CEO
Great. Thank you very much. We appreciate all of you joining us this morning. And we look forward to seeing many of you in person next week at EI. Signing off.
Operator, Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.