ML21127A248

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Operating Corp - Transmittal of 2020 Annual Financial Reports
ML21127A248
Person / Time
Site: Wolf Creek Wolf Creek Nuclear Operating Corporation icon.png
Issue date: 05/07/2021
From: Benham R
Wolf Creek
To:
Document Control Desk, Office of Nuclear Reactor Regulation
References
RA 21-0043
Download: ML21127A248 (234)


Text

Ron Benham Director Nuclear and Regulatory Affairs May 7, 2021 RA 21-0043 U. S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, DC 20555

Subject:

Docket No. 50-482: Transmittal of 2020 Annual Financial Reports Commissioners and Staff:

Wolf Creek Nuclear Operating Corporation (WCNOC) is transmitting one copy each of the enclosed 2020 annual reports, including financial statements, for its owners: Evergy Metro, Inc.

(formerly Kansas City Power & Light Company), Every Kansas South, Inc. (formerly Kansas Gas & Electric Company), and Kansas Electric Power Cooperative, Inc. (KEPCo).

Enclosure I provides the Evergy, Inc. 2020 Annual Report, which contains both the Evergy Metro, Inc. and the Evergy, Kansas South, Inc. information and Enclosure II provides the KEPCo Annual Report.

This information is being submitted in accordance with 10 CFR 50.71(b).

This letter contains no commitments. If you have any questions concerning this matter, please contact me at (620) 364-4204.

Sincerely, Ron Benham RDB/rlt

Enclosures:

I Evergy, Inc. 2020 Annual Report II Kansas Electric Power Cooperative 2020 Annual Report cc: S. S. Lee (NRC), w/e S. A. Morris (NRC), w/e N. OKeefe (NRC), w/e Senior Resident Inspector (NRC), w/e P.O. Box 411 l Burlington, KS 66839 l 620-364-8831

Enclosure I to RA 21-0043 Evergy, Inc. 2020 Annual Report (204 Pages)

Sustainable Transformation Connecting Purpose to Performance Evergy, Inc. 2020 Annual Report

FOCUSED ON VALUE CREATION Since its inception in 2018, Evergy has consistently exceeded anticipated merger savings.

The company is now positioned to take value creation to the next level. Evergys Sustainability Transformation Plan (STP) accelerates the companys work to create a forward-thinking, sustainable energy company. The plan seeks to modernize the grid, reduce costs and continue the companys efforts to reduce its carbon footprint, while maintaining reliability and affordability for customers.

Despite the challenges of a global pandemic, Evergy employees adapted to deliver strong financial results and reliable service in 2020.

The company is committed to a long-term earnings growth rate consistent with top-performing utilities. The STP positions Evergy to drive industry-leading performance across the companys operations, financial performance and customer service functions, while remaining dedicated to affordable electric rates and improving Evergys regional rate competitiveness.

STP Targeted Adjusted EPS Growth¹

$12.6b +6%

$4.25 6-8%

$3.87

$2.89 Market Capitalization 2019A 2024E Dividend increase (Market cap as of 12/31/20) in 4Q20

¹Adjusted EPS is a non-GAAP financial measure.

See 10-K Item 7 under the heading Non-GAAP Measures for reconciliation to most comparable GAAP information.

Year Ended December 31 2020 2019 2018(b)

(Dollars in millions except per share amounts)

EVERGY Operating Revenues 4,913 5,148 4,276 Net income 630 686 546 Net income attributable to Evergy, Inc. 618 670 536 Basic earnings per common share $2.72 $2.80 $2.50 Diluted earnings per common share $2.72 $2.79 $2.50 Total assets at year end 27,115 25,976 25,598 Total long-term obligations at year end(a) 9,785 9,200 7,472 Cash dividends per common share $2.05 $1.93 $1.735 (a)

Includes long-term debt, current maturities of long-term debt, finance leases, operating leases, long-term debt of VIEs and current maturities of long-term debt of VIEs. Obligations related to operating leases are only included beginning in 2019 due to Evergy's adoption of Topic 842, Leases. See Note 1 to the consolidated financial statements for additional information.

(b)

On June 4, 2018, Evergy completed the mergers contemplated by the Amended Merger Agreement. The results of Great Plains Energy's direct subsidiaries have been included in Evergy's results from the date of the closing of the merger and thereafter.

This document includes forward-looking information that is subject to risks and uncertainties. Please refer to the enclosed Annual Report on Form 10-K for additional information.

DEAR Shareholders, F

or all of us, 2020 tested our capacity and solutions to help make our work 6 percent to an indicated annual rate of for change and adaptability. A environment a more inclusive space. In $2.14 per share. We invested more than global pandemic and social unrest 2021, weve placed additional emphasis $1.5 billion to enhance customer reliability, taught us much about who we are and on our diversity, equity, and inclusion create jobs, and invest in our communities.

who we want to be, both as individuals initiatives internally, and were expanding and corporate citizens. our community presence related to equality That investment will continue with the for the people and communities we serve. Sustainability Transformation Plan (STP)

At Evergy, we addressed those challenges we announced in August 2020. The Board head on. We implemented pandemic Our employees performed well above unanimously approved pursuing the plan response plans resulting in more than expectations while coping with a year following a comprehensive, independent 2,000 employees working from home, of unprecedented challenges. Thanks to review by a committee that was created while those needed for onsite operations their ability to focus and adapt, we gained specifically to explore ways to enhance continued to provide essential services momentum and once again exceeded stakeholder value. The STP accelerates and changed their way of doing business, our net merger savings target of $145 our transformation toward a sustainable, adding preventative measures to ensure million, ending the year at $162 million, forward-thinking energy company. The the ongoing delivery of safe and reliable or roughly 12 percent above target - plans four tenets - grid modernization, power. We waived customer late fees and contributing significantly to our goal cost competitiveness, customer added payment options to help customers of providing cost-efficient and reliable experience, and generation transition relieve some of the strain caused by the service to customers. We reduced adjusted to cleaner energy - create value for all pandemic. We launched our Hometown operating and maintenance expense the stakeholders we serve and advance Economic Recovery Program, which (O&M)* over $120 million, or 10 percent, our goals of reliability, affordability, donated over $2 million dollars from in 2020 compared to 2019. In the two and sustainability.

our foundation to help local non-profits, full calendar years since creating Evergy, customers, and communities respond to we have reduced adjusted O&M over GRID MODERNIZATION and recover from the COVID-19 pandemic. $240 million, nearly 20 percent, delivering As technology breakthroughs transform the cost reduction opportunity our the energy industry, proactive grid When racial inequities sparked protests team envisioned. modernization is critical in preparing throughout the country, we gathered for the changes ahead. From enabling employees for a conversation moderated We achieved 7 percent year-over-year the grid to accept diverse generation to by leading change management experts adjusted EPS* growth and, consistent installing communications devices that to create dialogue and share thoughts with our guidance, we raised our dividend reduce restoration times and increase Adjusted EPS¹ 2020 Stock Price Movement EVRG UTY Index S&P 500

+7%

30% GAAP EPS

$3.10

$2.89

$2.79 $2.72 0%

2019 2020 2019 2020

-30% ¹Adjusted EPS is a non-GAAP financial measure.

See 10-K Item 7 under the heading Non-GAAP Measures for reconciliation to most comparable 12/31 1/28 2/25 3/24 4/21 5/19 6/16 7/14 8/11 9/8 10/6 11/3 12/1 12/29 GAAP information.

2020 Annual Report 1

Total CapEx

($ in millions)

Compelling Investment Thesis $1,880

  • Building upon proven track record of achieving cost reductions $1,560
  • Traditional, diverse capital expenditure plan without large project risk
  • No additional regulatory approvals required as STP is covered under existing recovery mechanisms with limited impact on customer bills
  • Targeting top-quartile earnings and dividend growth
  • Attractive total shareholder return proposition with upside potential from generation transition 2020A 2021E overall grid resiliency, our STP advances experience and drive cost efficiencies. When I accepted the opportunity to join grid modernization across the board. The STP enables automated outage the Evergy team toward the end of last Were planning capital investments to communications, expands digital year, the STP was a key factor in my replace aged infrastructure, enable grid communications, transactions, and decision. The opportunities this plan automation, data handling and analytics customer self-service options, and delivers are both exciting and challenging, capabilities, and build communications modernizes rate structures to offer and as I met my colleagues on the Evergy infrastructure. additional rate options tailored to team, it became clear they shared my different types of residential customers. perspective. During my first few months This plan is good news for our By focusing on the customer, well create at the company, Ive been most impressed communities, too, creating economic an omni-channel customer experience with the work ethic and strategic thought development opportunities. A that meets the customer where they of our Board, management, and employees.

technologically advanced grid helps are, when they need us, and grows Teams throughout Evergy are bringing the attract companies by improving performance-based revenue. STP to life and were seeing a continuation cost competitiveness, reliability, of the success we anticipated through and overall sustainability. GENERATION TRANSITION our merger.

Were continuing our transition toward COST COMPETITIVENESS more diverse and cleaner forms of Were gaining momentum, as well, with the AND VALUE CREATION energy. With more than half the energy recent addition of two outstanding Board Speaking of cost competitiveness, the we deliver to homes and businesses members in C. John Wilder of Bluescape STPs capital investments are targeted coming from emission-free sources, Energy Partners and Mary Landrieu, to enable long-term and sustainable were well on our way. In 2021, were former U.S. Senator and Chair of the cost savings in both non-fuel O&M and completing our triennial integrated Senate Energy Committee. Those moves, significant fuel and purchase power resource planning in both Kansas and as well as the hiring of Kirk Andrews, a savings. With substantial cost savings Missouri to evaluate our path forward. previous board member and well-known on top of our merger efficiencies, we can Our plan builds on Evergys focus on industry leader, as our new Chief Financial stabilize rate increases over the period sustainability with increased investment Officer, strengthen our team and add of the plan, which is expected to improve in renewable energy, including solar valuable expertise toward achieving regional rate competitiveness for our energy and battery storage, and our STP goals. Were positioned well to customers and communities. These expanded energy efficiency programs. successfully transform our business for efforts are reflective of our continuous Were also pursuing legislative and your benefit, as well as for our customers, improvement culture and our aspirations regulatory policy changes that would employees, and communities. Knowing to achieve top quartile performance. facilitate the generation transition you have many options for investing, we Improving reliability and quality of service through a phased retirement of coal appreciate your confidence in Evergy and while reducing costs creates value for all plants, while maintaining a balanced look forward to delivering the value we our stakeholders. energy mix to ensure reliability for our know the STP can provide.

customers. And, as I mentioned earlier, CUSTOMER EXPERIENCE investments in grid modernization will Were aiming to improve customer enable easier access to and development satisfaction through targeted investments of distributed generation and customer David A. Campbell that both improve the customer facing grid-edge technology. President and Chief Executive Officer

  • Adjusted operating and maintenance expense and adjusted EPS are non-GAAP financial measures.

See Page 5 of this document and 10-K Item 7 under the heading Non-GAAP Measures for reconciliation to most comparable GAAP information.

2 Evergy

Stakeholder Benefits The Sustainability Transformation Plan maximizes value and benefits all stakeholders by delivering superior shareholder value while enhancing reliability, affordability, and sustainability for our customers and the communities we serve.

Customers

+ Maintains affordability

+ Enhances customer experience

+ Improves reliability & resiliency Communities

+ Provides regionally competitive rates

+ Enhances economic development

+ Honors community commitments Environment

+ Delivers cleaner energy

+ Engages stakeholders for input on path toward a low-carbon, resilient utility Shareholders

+ Targets top-quartile total return profile

+ Provides attractive, traditional capital plan

+ Maintains strong credit profile

GRID Modernization Grid modernization plays a critical role in Evergys Sustainability Transformation Projected 2021-2025 CapEx

($ in millions)

Plan. As technologies evolve, our grid capabilities must evolve, as well. The $2,100 STP includes capital investments to $1,897

$1,880 replace aged infrastructure and to $1,835

$1,738 enable grid automation, data handling $1,560

$1,850 and analytics capabilities, and communications infrastructure that improves grid reliability, reduces restoration times, and increases overall grid resiliency. 2020A 2021E 2022E 2023E 2024E 2025E The capital expenditure plan includes Potential Additional CapEx about $9.2 billion toward transmission and distribution, generating facilities, and other areas.

$6 billionExpected ~$6b of T&D spend from 2021-2025 Transmission Lines Substations Distribution Lines Smart Devices Customer Distributed Energy & Electric Vehicles New infrastructure Smart connections to Smart assets are required Smart devices can Sensors & connectivity is required to unlock help manage power flows to further develop minimize disturbances will become essential to decarbonization and & monitor energy levels automation and outage on the grid and provide integrate new enhance communications management real-time data on customer choices equipment energy use and problems 4 Evergy

COST Competitiveness Since the merger of Great Plains Energy and Westar Energy formed Evergy Fuel & Purchased Power (F&PP) in 2018, the company has exceeded Fuel contract renegotiations, outage optimization & timing, flexible operations the efficiencies expected as a result of the merger. The STP builds on the merger savings progress, maintains Generation reliability and quality of service while Organizational efficiencies, operational improvements in the current fleet, reducing costs, stabilizes potential price supply chain and maintenance increases at or below expected inflation, and creates a robust structure toward identifying and tracking cost savings.

Transmission and Distribution Vegetation management, field work force, fleet, office real estate optimization Information Technology Infrastructure and operating model efficiency, sourcing and procurement optimization Customer Ops Digital adoption and operating model efficiency, metering, contact center operations, account management Accounting and General Organization optimization through attrition and scale efficiencies, procurement, benefits, digital transformation Non-Fuel Adjusted O&M¹ GAAP to Non-GAAP

($ in millions) O&M Reconciliation¹

¹ Adjusted O&M is a non-GAAP financial

$1,306

-19% measure. See 10-K Item 7 under the 2019 ($ in millions) heading Non-GAAP Measures for 2019 GAAP O&M $1,219

$1,187 reconciliation to most comparable GAAP information. Severance expense & rebranding costs (32)

$1,064

$977 2019 Adjusted O&M (non-GAAP) $1,187

² Represents the mid-point of 2024 O&M forecast range of $966M to $988M. 2020 ($ in millions) 2020 GAAP O&M $1,163 Severance & advisor expenses (99) 2020 Adjusted O&M (non-GAAP) $1,064 2018A 2019A 2020A 2024E² 2020 Annual Report 5

GENERATION Transition Evergy is completing its triennial Integrated Resource Plan in 2021 to guide our ongoing generation transition. Already we have reduced carbon emissions by 51% from Generation Capacity by Fuel Type1,2 2005 levels and now provide half of our retail customers energy needs through emission free sources (renewable and 1%

nuclear). Evergy is home to the largest electric vehicle charging network in the 7% 7%

9%

United States and has one of the Top Ten wind portfolios of electric utilities 26% 39% 25% 35%

in the country. 52%

38%

28% 34%

2010 2020 2024E³ Coal Nuclear Natural Gas and Oil Renewables

¹Renewables include both owned and power purchase agreements.

2 Percentages may not add up to 100% due to rounding.

3 Ultimate resource plan and generation capacity will be defined through scenario analysis and in collaboration with stakeholders through IRP process.

4,214 3,586 3,386 3,092 2,510 1,560 1,211 1,151 1,151 Cumulative Retirements/

Additions MW 450 450 396 101 101 197 Renewable Additions¹ Fossil Retirements 61 61 61 61 61 228 228 228 667 837

¹Renewables include both owned 887 and power purchase agreements. 2,418 2,418 2,418 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 6 Evergy

CUSTOMER Experience Just as our grid is evolving, customer Growing the Business expectations are changing, too. Broader adoption of automated and digital Know Your Customers Drive regulated value-added customer service allows Evergy to customer solutions Build core sales, service provide better customer service at and marketing capabilities a lower cost. Through the STP, the Drive product development company will improve customers and value-added interactions by enabling automated customer solutions outage communications, and expanding digital communications, transactions, and customer service options. The plan modernizes rate structures to offer additional rate options tailored to different types of residential customers.

Stakeholder Value Creation Easy To Do Mastering Business the Basics Build digital Establish experience and organizational self-service efficiencies capabilities Planned Customer Experience Enhancements Account opening Billing Bill Inquiry Outage Management Usage Management or change

  • Online enrollment
  • eBill and online pay
  • Robotic process automation
  • Increase outage
  • High bill notifications
  • Adjusted incentives
  • Smart bill redesign
  • Standardized payment plans notification opt-in
  • Improved site search
  • Smart dispatch tool
  • Site optimization
  • Personalized video bill
  • Outage notifications functionality
  • Digital welcome packet
  • Fast authentication
  • Deployment on AMI
  • Agent AI support capabilities 2020 Annual Report 7

ESG METRICS Fostering sustainability, engagement, diversity and inclusion 51%

Since 2001, we have increased our renewable resources by over 3,900%

reduction in CO2 emissions from 2005 levels

$156,000,000 spent with diverse suppliers Directors' Race/Ethnicity Directors' Gender Directors' Independence Director Snapshot 7%

diverse 36%

female 86%

independent 70M Surpassed 70 million megawatt hours of wind More than 2,000 employees pledged nearly $2M to 133 30+

years active supplier energy generation in 2020. nonprofit organizations. diversity initiative

$2,200,000 Pledged $2.2 million in COVID community relief funds 8 Evergy

Sustainable Transformation 2020 Annual Report Form 10-K

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Directors & Officers BOARD OF DIRECTORS Mark A. Ruelle Richard L. Hawley Paul M. Keglevic Sandra J. Price Chairman of the Board, Former Executive Vice President Former Chief Executive Officer, Energy Former Senior Vice President former President and Chief Financial Officer Future Holdings Human Resources, and Chief Executive Officer of Nicor, Inc. and Nicor Gas Sprint Corporation Mary L. Landrieu of Westar Energy Thomas D. Hyde Senior Policy Advisor, S. Carl Soderstrom Jr.

David A. Campbell Former Executive Vice President Van Ness Feldman LLP and Former Senior Vice President President and Legal, Compliance, Ethics and Former U.S. Senator from Louisiana and Chief Financial Officer Chief Executive Officer Corporate Secretary of Wal-Mart for ArvinMeritor Sandra A.J. Lawrence Stores, Inc.

Mollie Hale Carter Former Executive Vice President John Arthur Stall Chairman, Chief Executive Officer B. Anthony Isaac and Chief Administrative Officer Former President NextEra and President of FirstSun Former Senior Vice President of Childrens Mercy Hospital Energy, Inc. - Nuclear Division Capital Bancorp; Chairman and Head of Select Service Strategy Ann D. Murtlow C. John Wilder of Sunflower Bank and Development at Hyatt Hotels President and Chief Executive Executive Chairman, Corporation Officer of the United Way Bluescape Resources of Central Indiana OFFICERS David Campbell Chuck Caisley John Bridson Jeff Martin President and Senior Vice President, Vice President, Vice President, Customer Chief Executive Officer Marketing, Public Affairs Generation and Community Operations and Chief Customer Officer Kirkland Andrews Steve Busser Kevin Noblet Executive Vice President, Heather Humphrey Vice President, Vice President, Chief Financial Officer Senior Vice President, Risk Management Safety and Operations Planning General Counsel and and Controller Kevin Bryant Cleve Reasoner Corporate Secretary Executive Vice President, Ellen Fairchild Vice President, Chief Operating Officer Charles King Vice President, Chief Nuclear Officer Senior Vice President, Chief Compliance Officer Greg Greenwood Lori Wright Chief Technology Officer Executive Vice President, Deb Grunst Vice President, Strategy and Chief Bruce Akin Vice President, Corporate Planning, Investor Relations Administrative Officer Vice President, Transmission Information Technology and Treasurer and Distribution Jerl Banning Darrin Ives Senior Vice President, Jeff Beasley Vice President, Chief People Officer Vice President, Regulatory Affairs Customer Operations Shareholder Information EVERGY, INC FORM 10-K COMMON STOCK DIVIDEND Evergy, Inc.s 2020 annual report on form 10-K filed with the Securities and Quarter 2020 2019 Exchange Commission can be found in the Investor Relations section of our First $0.5050 $0.4750 website, www.evergy.com. Second $0.5050 $0.4750 The 10-K is available at no charge upon written request to: Third $0.5050 $0.4750 Fourth $0.5350 $0.5050 Corporate Secretary Evergy, Inc. TWO-YEAR COMMON STOCK HISTORY P.O. Box 418679 2020 2019 Kansas City, MO 64141-9679 Quarter High Low High Low MARKET INFORMATION First $76.570 $42.010 $59.940 $54.570 Evergy, Inc. common stock is traded on the New York Stock Exchange Second $65.400 $50.640 $61.540 $56.330 under the ticker symbol EVRG. We had 21,838 registered shareholders Third $65.430 $48.610 $67.810 $59.540 of record as of December 31, 2020. Fourth $62.530 $50.190 $66.540 $61.970 WEBSITE ANNUAL MEETING OF SHAREHOLDERS We have a website at www.evergy.com. Our Investor Relations section includes Evergy, Inc.s annual meeting of shareholders will be held our SEC filings, news releases, stock quotes, community and environmental at 10:00 a.m., May 4, 2021 virtually, via a live audio webcast efforts, and information of general interest to investors. at www.virtualshareholdermeeting.com/EVRG2021.

The website's Corporate Governance section includes Documents & Charters and Committee Composition for the Board of Directors. These documents are REGISTERED SHAREHOLDER INQUIRIES &

available at no charge upon written request to the Corporate Secretary. TRANSFER AGENT & STOCK REGISTRANT For account information or assistance, including change of address, FINANCIAL COMMUNITY INQUIRIES stock transfer, dividend payments, duplicate accounts, or to report Securities analyst and investment professionals seeking information about a lost certificate, please contact our transfer agent, Computershare at:

Evergy, Inc. may contact Investor Relations at 785-575-8227. Computershare Trust Company, N.A., P. O. Box 505000, Louisville, KY 40233-5000, Telephone: 866-239-8177.

Enclosure II to RA 21-0043 Kansas Electric Power Cooperative 2020 Annual Report (28 Pages)

ANNUAL REPORT KANSAS ELECTRIC POWER COOPERATIVE 2020 DETERMINATION TE AM PERSEVERANCE RESILIENCE DEDICATION ENGAGEMENT GRIT ENDURANCE KEPCO PERSISTENCE DETERMINATION PURPOSE ENERGY POWER STABILIT Y HISTORIC STE ADY STRONGER SOLID STABLE COMMITMENT DECISION STRENGTH UNPRECEDENTED SURRE AL TOGETHER CHALLENGE INNOVATIVE HE ALTH SAFET Y DISCIPLINE TOOLS OPPORTUNIT Y TECHNOLOGY SUPPORT COOPERATIVE ENHANCEMENTS SUCCESSES ACCOMPLISHMENTS ADVOCATE TENACIT Y FORTITUDE RESOLVE UNCHARTED

GUIDING TABLE OF CONTENTS PRINCIPLES 3 l O U R STA F F SAFETY: We are devoted to a culture of safety to assure an accident-free, secure, and healthy work environment. 4 l B OA R D P R E S I D E N T & C E O M E SS AG E l

INNOVATION: We promote continuous learning, development, and creative thinking to encourage 6 K E P Co B OA R D O F T R U ST E E S l

innovative, proactive, cost-effective, and technologically relevant business and energy solutions.

8 L E G I S L AT I V E H I G H L I G H TS ENGAGEMENT: We strive to provide a positive, professional, and respectful 9 l K S I & K E P Co N E WS work environment for our employees and Members, and we are committed to building relationships based on genuine 10 l R U R A L D E V E LO P M E N T caring and understanding.

INTEGRITY: We expect our team to be completely transparent, open to new ideas, 11 l O U R D I V E R S E P OW E R S U P P LY l

honest, trustworthy, fully accountable, ethical, and to do the right thing for our Members, our industry partners, the 12 K E P Co N E WS l

general public, and each other.

FINANCIAL RESPONSIBILITY: We strive to provide power supply, support, 13 O P E R AT I N G STAT I ST I C S and services to our Members at the lowest possible cost, consistent with sound 14 l F I N A N C I A L R E P O RTS business practices, Board policies, and cooperative principles.

27 l A B O U T K E P Co OUR PURPOSE KEPCo strives for excellence in providing safe, reliable, economical, and environmentally responsible power supply, exceptional support, and innovative services to our Members and the Kansans they serve.

2 2 02 0 A N N U A L R E P O RT

OUR STAFF Suzanne Lane Mark Barbee Susan Cunningham Coleen Wells Executive Vice President & CEO Senior Vice President, Senior Vice President, Regulatory & Senior Vice President & CFO Engineering & Operations Government Affairs, and General Counsel Stephanie Anderson Jared Crotinger Chris Davidson Terry Deutscher Mark Doljac Finance & Benefits Analyst 2 Senior Operations Technician Engineer 3 Manager, SCADA & Meter Maintenance Executive Director, Regulatory Affairs

& Planning Rebecca Fowler Carol Gardner Shawn Geil Maurice Hall Robert Hammersmith Manager, Regulatory Affairs Operations Analyst 2 Executive Director, Technical & Energy Senior SCADA/Metering Senior SCADA/Metering Services Technician - Wichita Technician - Salina Rick Johnson Shari Koch Adam Lee Matt Ottman John Payne Executive Director, Engineering Finance & Accounts Payable/Payroll SCADA/Metering Technician II Information Systems Specialist 3 Senior Engineer Specialist 2 Kelsey Schrempp Paul Stone Missy Tew Phil Wages Luke Zahner Executive Assistant & Operations Specialist Administrative Assistant Director, Member Services, Government Engineer 1 Manager of Office Services Affairs & Business Development 2 02 0 A N N U A L R E P O RT 3

LET TER FROM THE BOARD STRONGER PRESIDENT AND EXECUTIVE VICE TOGETHER P R E S I D E N T/C E O So many words have been used to tariff, whereby our Member billing describe 2020. Unprecedented. Historic. mechanisms are more aligned with the Surreal. At KEPCo, we prefer to describe way we are billed by our suppliers. In 2020 with words and phrases like addition, we successfully implemented resilience, perseverance, stronger amendments to our Member load together, and innovative. In a year management program, focusing when concepts like working from on enhanced communications and home, mandatory masking, and social distributed generation reimbursement distancing became constant and crucial practices, which optimized cost savings reminders of the current state of affairs, opportunities for our Members.

our G&T cooperative was still able to With regard to our power supply, remain resilient, persevere through our owned and purchased resources Suzanne Lane adversity, and come out successful and once again performed in a very safe, Executive Vice President stronger as a result. reliable, and cost-effective manner.

& CEO Not only do we have many things Our jointly-owned Wolf Creek for which to be thankful regarding Generating Station experienced the health and safety of our team, another tremendous operational our Members, and our families, but year, highlighted by the plants we are also thankful for the many inaugural implementation of a flexible accomplishments fulfilled on behalf of power operations program. As for and for our Member-Owners this year. our other resources, the Iatan 2 While certain electric loads decreased coal plant performed well overall, as a result of the COVID-19 pandemic, continuing to be a valuable, reliable a majority of KEPCos Members loads asset for the Southwest Power Pool are residential consumer-based and, (SPP) market. Our Southwest Power Doug Jackson therefore, KEPCos peak demand only Administration and Western Area Board President decreased about 4.4% from the 2020 Power Administration hydro resources budgeted demand and only 5.0% from continued to be low-cost, reliable the 2020 actual demand. The mild power supply sources; a continued weather also contributed, as Kansas did benefit to our Members was that not see the extreme, sustained summer low-cost, supplemental energy heat to which we are often accustomed. was available, which provided our Although the decrease in Member Members additional, cost-effective sales impacted our 2020 year-end energy supply. KEPCos solar farm, margin, we were proud to maintain Prairie Sky, continued to produce stable average rates for our Members. as expected, and our diesel-fueled In fact, we ended the year with a similar Sharpe Generating Station was called average Member rate as 2020, and the to operate even more hours than second lowest average rate in over a the record-setting prior year to help decade. Many activities contributed the SPP. Also on the topic of power to maintaining stable rates, including supply, in 2020 we entered a new, cost-the successful implementation of reducing power purchase agreement a Member-focused revision to our for the years 2021-2026, which will 4 2 02 0 A N N U A L R E P O RT

continue our ever-present efforts of finding cost- plan and focus areas desired by savings opportunities for our Members. our Members. We proposed As for additional member-focused activities and received approval from and advocacy efforts, we are proud to have many the Board to have a new to report in 2020. For the first time in over 20 purpose statement and guiding years, we were able to retire about $700,000 in principles, as depicted in this capital credits, which offered timely assistance annual report. In a time when to our Members during the pandemic. We remote working was essential supported our Members additional distributed to assure safety, we remained generation projects by providing guidance, engaged and connected process enhancements, technical assistance, and by having a multitude of amending policies and practices. We advocated creative, innovative employee for our Members in legislative and congressional events, training sessions, and fronts, with key components involving the Kansas informational meetings. We Senate Bill No. 69 electric rate study and the established KEPCos first Safety Committee, which need for Rural Utilities Service debt refinancing. led the effort to completely revamp our Safety These proud advocacy efforts also earned us Manual in 2020. We completed our first employee status as an NRECA 5-Star Co-op. We completed survey in 2020, learning how we can provide our KEPCos first all-inclusive risk identification and employees with an optimal work experience, and assessment process, which paves the way for we held our first supervisors summit to assure all a robust, crucial risk management policy. We of our front-line supervisors have the support and continued our advocacy and engagement at SPP, tools they need to lead successfully.

the Southwestern Power Resources Association, Our engineering services company, KEPCo and the Loveland Area Customer Association. We Services, Inc. (KSI), is fully staffed and completed were a key player in generation and transmission a significant amount of engineering and technical cost-related cases before the Federal Energy work in 2020 on behalf of the Members who Regulatory Commission, collaboratively reaching utilize these engineering services. And last or attempting to reach results that are in the best but not least, while exhibiting the cooperative interest of KEPCo and our Members. And we principle associated with concern for community, were proud to facilitate our first member survey, we proudly supported our local community by receiving meaningful feedback that will help us volunteering for organizations and contributing grow and assure we are providing our Members over $27,000 (including CoBanks matching funds) with the best experience possible. to local charities.

KEPCos many successes in 2020 were only While we had unparalleled challenges and possible because of the support, guidance, and experienced uncharted territory in 2020, our oversight of the Board of Trustees, and the resilience, perseverance, and dedication to our dedication, hard work, member-focus, and team Members helped drive us to many successes.

spirit of KEPCo employees. With regard to our We are honored and blessed to be part of this team, there are many key accomplishments amazing cooperative family and to serve each of to highlight in this report. First and foremost, our Members, our Members teams, and the nearly we completed 2020 with a stellar safety and 300,000 rural Kansans our Members serve.

cybersecurity record, completing our 11th Thank you to the entire Board for the support consecutive year without a lost-time injury. Every and dedication to KEPCo, and to the KEPCo team employee had a new, customized goal plan that for going above and beyond each and every day assured we were all aligned with the strategic to serve our Members.

... our G&T cooperative was still able to remain resilient, persevere through adversity, and come out successful and stronger ...

2 02 0 A N N U A L R E P O RT 5

2020 KEPCo BOARD OF TRUSTEES Executive Committee Members DOUGLAS JACKSON LARRY FROESE CHARLES GOECKEL KIRK THOMPSON President Secretary Executive Committee Member Executive Committee Member STEVEN FOSS BRYAN COOVER MICHAEL MORTON Vice President Treasurer Executive Committee Member EXECUTIVE COMMITTEE Michael Morton, Trustee, Manager Gary Buss, Alternate Kevin Compton, Trustee Jim Currie, Alternate, Manager Bluestem Electric Cooperative, Inc. Bluestem Electric Cooperative, Inc. Brown-Atchison Electric Cooperative Assn., Inc. Brown-Atchison Electric Cooperative Assn., Inc.

EXECUTIVE COMMITTEE Kirk Thompson, Trustee, Manager Linda Tomlinson, Alternate Dean Allison, Trustee Tim Power, Alternate, Manager CMS Electric Cooperative, Inc. CMS Electric Cooperative, Inc. DSO Electric Cooperative, Inc. DSO Electric Cooperative, Inc.

Mark Scheibe, Trustee, Manager H.H. Stockebrand, Alternate Paul Unruh, Trustee Teresa Miller, Alternate, Manager Heartland Rural Electric Cooperative, Inc. Heartland Rural Electric Cooperative, Inc. Ninnescah Rural Electric Cooperative Assn., Inc. Ninnescah Rural Electric Cooperative Assn., Inc.

Donald Metzen, Trustee Scott Ayres, Alternate, Manager Coni Adams, Trustee, Manager John Schon, Alternate Sedgwick County Electric Cooperative Assn., Inc. Sedgwick County Electric Cooperative Assn., Inc. Sumner-Cowley Electric Cooperative, Inc. Sumner-Cowley Electric Cooperative, Inc.

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SECRETARY Dennis Svanes, Trustee, Manager Tom Ayers, Alternate Larry Froese, Trustee Jackie Holmberg, Alternate, Manager 4 Rivers Electric Cooperative, Inc. 4 Rivers Electric Cooperative, Inc. Ark Valley Electric Cooperative Assn., Inc. Ark Valley Electric Cooperative Assn., Inc.

Dale Short, Trustee, Manager Ron Oelkers, Alternate Dan Hubert, Trustee Allen Zadorozny, Alternate, Manager Butler Rural Electric Cooperative Assn., Inc. Butler Rural Electric Cooperative Assn., Inc. Caney Valley Electric Cooperative Assn., Inc. Caney Valley Electric Cooperative Assn., Inc.

EXECUTIVE COMMITTEE VICE PRESIDENT Charles Goeckel, Trustee, Manager Terry Olsen, Alternate Steven Foss, Trustee, Manager Harlan Hunt, Alternate Flint Hills Rural Electric Cooperative Assn., Inc. Flint Hills Rural Electric Cooperative Assn., Inc. FreeState Electric Cooperative, Inc. FreeState Electric Cooperative, Inc.

PRESIDENT William Peterson, Trustee Chuck Look, Alternate, Manager Douglas Jackson, Trustee, Manager Paul Wilson, Alternate Prairie Land Electric Cooperative, Inc. Prairie Land Electric Cooperative, Inc. Rolling Hills Electric Cooperative, Inc. Rolling Hills Electric Cooperative, Inc.

TREASURER Bryan Coover, Trustee Angie Erickson, Alternate, Manager Shane Laws, Trustee, Manager Daryl Tieben, Alternate Twin Valley Electric Cooperative, Inc. Twin Valley Electric Cooperative, Inc. The Victory Electric Cooperative Assn., Inc. The Victory Electric Cooperative Assn., Inc.

2 02 0 A N N U A L R E P O RT 7

LEGISLATIVE REVIEW The 2020 legislative session was not results to the Senate and House Washington, D.C., were held virtually immune to the effects of COVID-19. utilities committees, reviewing topics due to COVID-19. In September, a The session was dramatically shortened, that included rate-making principles, virtual meeting was held at KEPCos with the first adjournment occurring in performance-based rates, integrated headquarters, where KEPCo managers, mid-March, which proved to be the last resource planning, renewable Board of Trustees members, and time the legislature would meet, other generation, the development of a staff along with other cooperative than one final day of debating bills and state energy plan, energy efficiency, representatives and the government formal adjournment in late May. and securitization, to name a few. relations team at Kansas Electric The session was anticipated to be Subsequent to the LEI presentations, Cooperatives, Inc. (KEC) discussed busy with several utility-related bills Kansas utilities and other interested with the delegation a variety of and initiatives to be examined. One stakeholder groups provided testimony issues, including COVID-19 response topic expected to be discussed was to both committees on their efforts to protect electric cooperative Kansas electric rates. For the past few respective opinions of the study. employees and communities, years, considerable attention has been Phase 2 of the study was awarded broadband deployment, rural economic given to the view that electric rates in to AECOM, an engineering firm development, and the need for USDA Kansas are unfavorable in comparison specializing in utility infrastructure, and Rural Utilities Service loan repricing.

its partner, Energeia USA (AECOM). As part of our advocacy efforts, AECOM focused its review on such KEPCo participated in the Co-ops Vote topics as electric vehicles, advanced events organized by KEC and sponsored energy solutions, battery storage, by our Member cooperatives. Each event transmission investments, economic was attended by cooperative employees, development, cybersecurity, and city and county officials, state legislators, generation fuel costs. AECOM and congressional candidates. These submitted its report to the Kansas events allow electric cooperatives the Corporation Commission in July, which opportunity to meet with elected also included policy recommendations officials and educate them on issues of related to the study topics. importance to electric cooperatives and In early March, in anticipation of a the communities they serve.

shortened session, bills were prioritized The opportunity to interact with for debate by the full bodies of the local, state, and national elected legislature. Only one utility bill was officials, in an informal but informative considered, Senate Substitute for House setting, is an invaluable asset as issues to neighboring and regional states, thus Bill No. 2585, a bill that eliminates the are debated at the state and national making it difficult to attract and retain collection of state income tax from levels, said Susan Cunningham, KEPCo businesses in Kansas. In the 2019 session, consumers by investor-owned electric SVP of Regulatory and Government advocates of this viewpoint introduced and natural gas utility companies. Affairs & General Counsel.

legislation, which authorized an Another provision in the bill allows the Co-ops Vote is a nonpartisan independent rate study to be conducted KCC to approve certain electric contract program that strives to inform both to assist legislative and regulatory efforts rates and associated cost recovery from cooperative Members and the in reviewing and crafting energy policies all rate classes outside the context of candidates about issues important to that lead to regionally competitive a general rate proceeding. The bill was Americas electric cooperatives and electric rates while maintaining reliable passed by the Senate early in the final the communities they serve, from the electric service. day of the session and, after a lengthy continued need for affordable and Through a request for proposal and heated debate, was concurred by reliable electricity to broadband access process, London Economics the House. and other rural economic development International (LEI) was selected to At the national level, the traditional issues. Through participation in Co-complete the first phase of the two- in-person meetings of Kansas ops Vote events and other advocacy phase, 29-topic study. Early in the cooperative representatives with the efforts, KEPCo earned the 5-Star Co-2020 session, LEI presented its study Kansas congressional delegation in op designation from NRECA.

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KEPCo BOARD KEPCo SERVICES, INC. ELECTS NEW COMPLETES 23 YEARS PRESIDENT OF OPERATIONS At its November meeting, the KEPCo Board of Trustees unanimously elected MR. DOUGLAS JACKSON as Board President. Jackson is Manager of Rolling Hills Electric Cooperative, Inc. in Beloit. Prior KEPCo Services, to his election as President, Jackson served as KEPCos Inc. (KSI), a Secretary in 2017 and 2018 and Vice President in 2019.

wholly owned Jackson has 40 years of experience in the subsidiary of electric utility industry. His career began in 1981 KEPCo, completed with the City of Belleville municipal utility. In its 23rd year of 1987, he joined operations. KSI NCK Electric offers a diverse Cooperative, Inc.

array of technical (NCK) in Belleville and engineering and became services for manager of NCK in KEPCo Members and non-member electric cooperatives. KSI provides 1992. NCK merged value-added engineering services while creatively finding solutions that with Jewell-Mitchell facilitate the goals and objectives of its clients. KSI places paramount Cooperative importance on integrity, transparency, innovation, servant leadership, Electric Company, and commitment to excellence. Inc. (Mankato)

In 2020, KSI was involved in over 49 projects for 15 KEPCo Members and Smoky Hill and two non-member cooperatives. KSI persevered through the Electric Cooperative uncertainty of the COVID-19 pandemic and continued to provide its Association, Inc. (Ellsworth) in 2002, resulting services without interruption. Some of the more substantive projects in the formation of Rolling Hills Electric included: project management activities for the CMS Jupiter Project and Cooperative, Inc., which Jackson has managed the Brown-Atchison 75 Highway line relocation project; sectionalizing since the merger.

studies for DSO and Rolling Hills; construction work plans for Rolling I am honored by the KEPCo Board of Hills and Flint Hills; FEMA M1901 application support for Bluestem; Trustees to have the confidence and trust in Pony Meadows relay/control upgrade project for Butler; and arc-flash me to lead such a wonderful organization.

assessments for Sedgwick and Heartland. A description of KSIs current Affordable, safe, and reliable electricity is services is available on KEPCos website. crucial to the economic vitality in rural Kansas, Late in the year, Senior Engineer John Payne announced his and I look forward to working with the other retirement after 15 years of service, effective January 2021. In addition KEPCo member cooperatives and KEPCo staff to his significant contributions at KEPCo in the areas of transmission in continuing to provide such a valued service, service and NERC compliance, John also supported projects for KSI said Jackson.

and provided expertise to the KSI team, specifically in the relay and Jackson succeeds Dale Short, former manager control discipline. of Butler Rural Electric Cooperative Assn., Inc.

2 02 0 A N N U A L R E P O RT 9

RURAL DEVELOPMENT PROVIDES RESILIENCE FOR COMMUNITIES Economic development is vital to the continued prosperity and resilience of rural Kansas, with the goal of improving the quality of life and economic well-being of people living in rural areas. The economic well-being of rural communities is also necessary to stimulate the overall economic expansion of the nation. Small-scale entrepreneurship is the one economic development strategy that consistently works in rural communities, as over half of all new jobs created in most rural areas come from small, off-farm business ventures. schools, hospitals, implement dealers, e-commerce, For nearly three decades, KEPCo and its Member and retail establishments, just to name a few.

cooperatives have been actively involved in the Introducing business owners and entrepreneurs to USDA Rural Economic Development Loan and a cost-effective method of financing has proven Grant (REDLG) program. The REDLG program to be a successful formula in creating and retaining provides zero-interest loans for projects in rural businesses and jobs in rural Kansas.

areas that create or retain employment. For the Economic development is also a top priority 2019-2020 USDA fiscal year, $1.72 million in loan for Kansas Governor Laura Kelly and her funds were brought into rural Kansas, resulting in administration. The state of Kansas has not had 78 jobs either being added or saved. a comprehensive strategy for economic growth KEPCo is proud to work with and assist our since 1986. This year, under the governors Member cooperatives in obtaining REDLG loans leadership, the Department of Commerce that benefit rural Kansas communities, said convened a group of stakeholders, including Susan Cunningham, KEPCo SVP of Regulatory and business leaders and economic development Government Affairs & General Counsel. Over professionals from across the state, along with the years, the types of businesses that have members of academia and Department of taken advantage of this program include dentists, Commerce staff, to develop the Kansas Framework manufacturing facilities, agriculture production, for Growth, which is a comprehensive economic development plan that recognizes various industry sectors, geographic differences, changing Introducing business owners and demographics, and economic trends, with the goal of developing a strategy to spur economic growth entrepreneurs to a cost-effective in Kansas.

Creation of the Kansas Framework for Growth method of "nancing has proven to will occur in three phases: assessment and benchmarking, recommendations and best be a successful formula in creating practices, and implementation planning. KEPCo applauds the development of this initiative, as and retaining businesses and jobs the integration of this plans development within in rural Kansas. state agencies, local government, and private interests is essential to develop a vision and strategic plan for Kansas.

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In an effort to create a long-term, reliable, economic power supply for its members, KEPCo has built a diverse power supply ...

OUR DIVERSE POWER SUPPLY In an effort to a create long-term, reliable, economic power supply for its Members, KEPCo has built a diverse power supply that includes nuclear, hydro, coal, wind, natural gas, diesel, and solar resources. As part of its power supply strategy, KEPCo seeks to maintain a diversified and balanced power supply, which includes a mix of owning generation when prudent, purchasing power using a combination of long- and short-term contracts, adding renewables when cost effective, and incorporating demand side technology in power supply planning processes through Member load management programs. Proudly, KEPCos current portfolio minimizes greenhouse gas emissions with approximately 67% of its supply from non-greenhouse gas emitting sources.

In addition to its owned generation and long-term hydro allocations, KEPCo purchases its remaining requirements from regional utilities for base, intermediate, and peaking power supply. These contracts provide KEPCo with power from coal, natural gas, and wind resources.

100 MEGAWATTS of hydropower purchases from the Southwestern Power Administration 70 MEGAWATTS of owned generation from the Wolf Creek Generating Station 32 MEGAWATTS of owned generation from the Iatan 2 Generating Plant 20 MEGAWATTS of peaking power from the Sharpe Generating Station 13 MEGAWATTS of hydropower purchases from the Western Area Power Administration 1 MEGAWATT of solar power from the Prairie Sky Solar Farm 2 02 0 A N N U A L R E P O RT 11

KEPCo STAFF SUPPORTS KEPCo LOCAL CHARITIES RETIRES CAPITAL For many years, KEPCo and KEPCo staff have supported local charitable organizations in a variety of ways, from personal volunteerism to financial support.

CREDITS This involvement is an example of the seventh Cooperative Principle Concern for Community, which states cooperatives work for the sustainable development of their communities through policies supported by the membership. The time, The sixth Cooperative Principle is talent, goods and services, and financial resources that are donated to community Cooperation Among Cooperatives, which organizations hold significant value to our employees, as well as the communities states that by working together through impacted. Through their support of local charities, KEPCo employees benefit from local, national, regional, and international supporting community activities, expanding their social connections, and increasing structures, cooperatives improve services, their personal sense of well-being.

bolster local economies, and deal more KEPCo is proud to be an active participant in our local communities. It effectively with social and community is fulfilling to be part of an organization that helps in bringing tangible and needs. One significant way in which KEPCo sustainable benefits to the communities in which we live and work, said Suzanne was able to demonstrate its support for Lane, KEPCo Executive Vice President & CEO.

and cooperation with its Members was This year, unfortunately, the COVID-19 pandemic did not afford in-person through a capital credit retirement. community engagement activities as in prior years. Nonetheless, KEPCo employees, through KEPCos Charitable Giving Program, donated nearly $16,000 to local charities. With Co-Banks matching funds, KEPCo and its employees contributed 6 COOPERATION AMONG COOPERATIVES Co-ops serve their members most over $27,000 in total in 2020. The charities chosen by KEPCo staff were TARC, Topeka Rescue Mission, Ronald McDonald House, CASA, Harvesters, and the Salvation Army. These charities perform a valuable service in our communities and KEPCo staff is proud to support their efforts.

effectively and strengthen the co-op movement by working together through local, national, regional and international structures.

IN MEMORY OF PAUL STONE At its May meeting, the KEPCo Board PAUL A. STONE, KEPCo Operations Specialist, of Trustees approved the retirement of passed away on December 11 at the age of 67.

approximately $700,000 in capital credits. Paul worked in the rural electric cooperative The retirement was slated to occur in industry for 47 years, with 23 of those years August, but KEPCos strong financial position spent dutifully serving KEPCo and its Member enabled the retirement to be distributed in cooperatives. He worked in numerous capacities June, which offered timely assistance to our during his electric cooperative career, ranging Members during the pandemic. from tree trimmer to engineering manager to Its nice to be in a position to retire load management and metering support. His these capital credits sooner than expected experience and knowledge were respected at and take some financial pressure off our KEPCo and throughout the industry.

Members, said Coleen Wells, KEPCos Senior Originally from Meade, Kansas, Paul lived with Vice President & CFO. his wife, Janice, in Ozawkie, Kansas, at the time of his passing. In addition to his The retirement, the first in over 20 years, wife, Paul is survived by one son, Jay D. (Mindy) Stone, Spring Hill, Kansas, and one reflects a cash distribution based on 25% of daughter, Gretchyn Anne Messale, also of Ozawkie, seven grandchildren, and three KEPCos 2019 net margin. great grandchildren. Paul is greatly missed by his KEPCo family.

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OPERATING STATISTICS AV E R AG E M E M B E R R AT E ANNUAL COINCIDENT PEAK DEMAND ANNUAL ENERGY SALES TO MEMBERS 2,300,000 0.085 2,218,433 2,200,424 450 2,101,917 2,130,532 2,083,646 0.075 427 0.0763 425 Megawatt Hours 414 418 0.0735 0.0733 400

$ per kWh Megawatts 0.0693 0.0695 0.065 398 1,800,000 350 0.055 0.045 300 1,300,000 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Year Year Year Proudly, KEPCos current portfolio minimizes greenhouse gas emissions with approximately 60% of its supply from non-greenhouse gas emitting sources.

0.2% 1.4% 1.8%

2.5%

2.5%

Purchased Power 4.8% Wolf Creek Operations and Maintenance &

5.3% Administrative and General Depreciation and Amortization 6.4% Interest OPERATING KEPCo Operations and Maintenance

& Administrative and General EXPENSES 10.0%

Nuclear Fuel 67.6%

Iatan 2 Fuel Iatan 2 Operations and Maintenance

& Administrative and General Diesel Fuel 2 02 0 A N N U A L R E P O RT 13

INDEPENDENT AUDITORS REPORT BOARD OF TRUSTEES KANSAS ELECTRIC POWER COOPERATIVE, INC. TOPEKA, KANSAS Report on the Financial Statements We have audited the accompanying consolidated financial statements of Kansas Electric Power Cooperative, Inc. (KEPCo) and its wholly owned subsidiary KEPCo Services, Inc. (KSI), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of margin and comprehensive income (loss), patronage capital, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of KEPCo as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we also have issued our report dated April 6, 2021, on our consideration of KEPCos internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the effectiveness of KEPCos internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering KEPCos internal control over financial reporting and compliance.

OKLAHOMA CITY, OKLAHOMA APRIL 6, 2021 14 2 02 0 A N N U A L R E P O RT

F I N A N C I A L S TAT E M E N T S Consolidated Balance Sheets Patronage Capital and Liabilities December 31, 2020 and 2019 2020 2019 Assets 2020 2019 PATRONAGE CAPITAL Memberships $3,200 $3,200 UTILITY PLANT Patronage capital 85,864,241 86,591,026 In-service $367,179,511 $365,036,667 Accumulated other comprehensive loss (9,407,007) (8,468,072)

Less allowance for depreciation (190,546,232) (181,555,754) Total patronage capital 76,460,434 78,126,154 Net in-service 176,633,279 183,480,913 LONG-TERM DEBT 148,867,073 144,545,734 Construction work in progress 10,408,117 8,515,002 Nuclear fuel (less accumulated amortization of OTHER LONG-TERM LIABILITIES

$29,740,968 and $26,061,652 for 2020 and 2019, WCNOC decommissioning regulatory liability 11,770,366 7,633,876 respectively) 9,840,540 8,075,506 WCNOC decommissioning liability 18,123,937 17,000,455 WCNOC pension and postretirement benefit plans 12,091,282 10,994,841 Total utility plant 196,881,936 200,071,421 WCNOC provision for injuries 46,689 23,339 WCNOC deferred compensation 1,250,433 1,381,339 RESTRICTED ASSETS Other deferred credits 222,274 181,795 Investments in NRUCFC 11,042,120 11,316,855 Decommissioning fund 35,564,951 30,527,216 Total other long-term liabilities 43,504,981 37,215,645 Investments in other associated organizations 320,561 284,225 CURRENT LIABILITIES Total restricted assets 46,927,632 42,128,296 Current maturities of long-term debt 8,698,761 9,251,502 Accounts payable 15,486,695 12,321,308 CURRENT ASSETS Payroll and payroll-related liabilities 337,757 322,596 Cash and cash equivalents 16,598,637 20,369,872 Member investments 7,061,900 6,903,704 Short-term investments 13,000,000 - Accrued property taxes 824,342 947,749 Member accounts receivable 13,078,522 9,921,216 Accrued interest payable 409,221 432,259 Materials and supplies inventory 7,119,212 6,802,071 Current provision for pension and postretirement Other assets and prepaid expenses 949,083 924,034 benefit plans 1,479,574 1,192,753 Total current assets 50,745,454 38,017,193 Total current liabilities 34,298,250 31,371,871 OTHER LONG-TERM ASSETS Deferred charges Total patronage capital and liabilities $303,130,738 $291,259,404 WCNOC disallowed costs (less accumulated amortization of $19,986,167 and $19,662,718 for 2020 and 2019, respectively) 5,999,066 6,322,515 Deferred incremental outage costs 506,726 1,841,056 Southwest Power Pool charges 366,373 854,871 Other deferred charges (less accumulated amortization of $180,942 and $177,877 for 2020 and 2019, respectively) 152,752 297,807 Other assets 1,266,040 1,310,059 Prepaid pension cost 284,759 416,186 Total long-term assets 8,575,716 11,042,494 Total assets $303,130,738 $291,259,404 CONTINUED ON NEXT PAGE 2 02 0 A N N U A L R E P O RT 15

CONTINUED Consolidated Statements of Margin and Consolidated Statements of Patronage Capital Comprehensive Income (Loss) Years Ended December 31, 2020 and 2019 Years Ended December 31, 2020 and 2019 Accumulated 2020 2019 Memberships Patronage Other Total OPERATING REVENUES Capital Comprehensive Sale of electric energy $148,382,873 $153,016,979 Loss BALANCE, JANUARY 1, 2019 $3,200 $83,794,567 $(8,693,156) $75,104,611 OPERATING EXPENSES Net margin - 2,796,459 - 2,796,459 Power purchased 101,312,388 102,408,677 Defined benefit pension plans Nuclear fuel 3,683,704 3,243,368 Net loss arising during the year on Plant operations 15,261,398 16,453,641 pension obligation - - (422,520) (422,520)

Plant maintenance 4,633,010 4,875,888 Amortization of prior year service Administrative and general 6,159,875 6,243,466 costs and actuarial gains included in Amortization of deferred charges 326,513 330,693 net periodic benefit costs - - 647,604 647,604 Depreciation and decommissioning 9,876,498 9,597,289 BALANCE, DECEMBER 31, 2019 3,200 86,591,026 (8,468,072) 78,126,154 Total operating expenses 141,253,386 143,153,022 Net margin - (27,671) - (27,671)

Patronage capital retirement Defined benefit pension plans - (699,114) - (699,114)

NET OPERATING REVENUES 7,129,487 9,863,957 Net loss arising during the year on pension obligation - - (1,275,966) (1,275,966)

INTEREST AND OTHER DEDUCTIONS Plan amendments - - (544,426) (544,426)

Interest on long-term debt 7,584,356 7,878,690 Amortization of prior year service Other deductions 384,347 159,366 costs and actuarial gains included in net periodic benefit costs - - 881,457 881,457 Total interest and other deductions 7,968,703 8,038,056 BALANCE, DECEMBER 31, 2020 $3,200 $85,864,241 $(9,407,007) $76,460,434 OPERATING MARGIN (839,216) 1,825,901 OTHER INCOME (EXPENSE)

Interest income 951,063 1,345,913 Other income 519,402 294,124 Postretirement benefit expense (658,920) (669,479)

Total other income (expense) 811,545 970,558 NET MARGIN (27,671) 2,796,459 Other Comprehensive Income (Loss)

Net loss arising during the year on pension obligation (1,275,966) (422,520)

Plan amendments (544,426)

Amortization of prior year service costs and actuarial gains included in net periodic benefit costs 881,457 647,604 Comprehensive Income (Loss) (966,606) 3,021,543 16 2 02 0 A N N U A L R E P O RT

F I N A N C I A L S TAT E M E N T S Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Years Ended December 31, 2020 and 2019 Years Ended December 31, 2020 and 2019 2020 2019 2020 2019 Increase (Decrease) in Cash and Cash Equivalents $(3,771,235) $8,411,967 OPERATING ACTIVITIES Cash and Cash Equivalents, Beginning of Year 20,369,872 11,957,905 Net margin Cash and Cash Equivalents, End of Year $16,598,637 $20,369,872 Adjustments to reconcile net margin to net cash Supplemental Cash Flows Information provided by operating activities $(27,671) $2,796,459 Interest paid $7,607,394 $7,901,006 Depreciation 9,408,389 9,131,591 Change in defined benefit pension plans - losses $(1,275,966) $(422,520)

Amortization of nuclear fuel 3,679,316 3,219,404 Change in fair value of decommissioning trust $3,611,702 $4,244,837 Amortization of deferred charges 619,925 619,924 Amortization of deferred incremental outage costs 1,619,583 1,623,886 NOTE 1: NATURE OF OPERATIONS AND

SUMMARY

OF Net periodic benefit costs 1,630,862 1,617,453 SIGNIFICANT ACCOUNTING POLICIES Patronage capital credits allocated (518,389) (525,298)

NATURE OF OPERATIONS Loss on sale of property and equipment 54,003 54,666 Kansas Electric Power Cooperative, Inc. and its wholly owned subsidiary (KEPCo),

Changes in headquartered in Topeka, Kansas, was incorporated in 1975 as a tax-exempt generation and Member accounts receivable (3,157,306) 1,372,186 transmission cooperative (G&T). KEPCo was granted a limited certificate of convenience Materials and supplies (317,141) 304,937 and authority by the Kansas Corporation Commission (KCC) in 1980 to act as a G&T public Other long-term assets and prepaid expenses 1,304,804 (1,286,835) utility. It is KEPCos responsibility to procure an adequate and reliable power supply for its Accounts payable 3,165,387 (890,768) 18 distribution rural electric cooperative members pursuant to all requirements of contracts Payroll and payroll-related liabilities 15,161 54,707 with its members. KEPCo is governed by a board of trustees representing each of its 18 Accrued property taxes (123,407) (86,910) members, which collectively serve approximately 120,000 electric meters in rural Kansas.

Accrued interest payable (23,038) (22,316) SYSTEM OF ACCOUNTS Other long-term liabilities (1,253,612) (2,199,037) KEPCo maintains its accounting records substantially in accordance with the Federal Energy Regulatory Commissions (FERC) uniform system of accounts as modified and adopted by Net cash provided by operating activities 16,076,866 15,784,049 the U.S. Department of Agriculture (USDA) Rural Utilities Service (RUS) and in accordance with accounting practices prescribed by the KCC.

INVESTING ACTIVITIES In accordance with generally accepted accounting principles (GAAP) and FERC guidelines, Additions to electrical plant (3,962,186) (5,065,919) KEPCo also maintains its accounts in accordance with Accounting Standards Codification Additions to nuclear fuel (5,444,350) (2,941,349) (ASC) 980, Regulated Operations.

Purchases of investments (13,000,000) - RATES Proceeds from investments in Under a 2009 change in Kansas law, KEPCo has elected to be exempt from KCC regulation decommissioning fund assets 1,399,479 103,332 for most purposes, including the setting of rates. Rates are set by action of the Board Purchases of investments in of Trustees, subject only to statutory review by the KCC if requested by four or more decommissioning fund assets (2,825,512) (1,380,174) members. KEPCos rates were last set by the KCC by an order effective September 1, 2008.

Investments in associated organizations 756,788 779,720 KEPCos rates now include an Energy Cost Adjustment (ECA) mechanism and an annual Demand Cost Adjustment (DCA) mechanism allowing KEPCo to pass along increases and Net cash used in investing activities (23,075,781) (8,504,390) decreases in certain energy and demand costs to its member cooperatives. Additionally, KEPCo implemented a Margin Stabilization Adjustment (MSA) in 2011, which is a mechanism FINANCING ACTIVITIES to refund (or collect) a portion of KEPCos margin when the total margin exceeds (or falls short of) the amount necessary to cover KEPCos financial obligations.

Principal payments on long-term debt (10,577,675) (9,033,456)

Proceeds from issuance of long-term debt 10,183,249 4,110,126 PRINCIPLES OF CONSOLIDATION Principal payments on NRUCFC line of credit - (1,205,000) The accompanying consolidated financial statements include the accounts of Kansas Proceeds from draw downs on NRUCFC line of Electric Power Cooperative, Inc. and its wholly owned subsidiary, KEPCo Services, Inc.

credit - 1,205,000 Undivided interests in jointly owned generation facilities are consolidated on a pro Retirement of capital credits (699,114) - rata basis. All material intercompany accounts and transactions have been eliminated Change in cushion of credit 158,196 4,087,395 in consolidation.

Change in member investments 4,163,024 1,968,243 IATAN 2 Iatan 2 is an 850 MW high efficiency coal-fired power plant utilizing state-of-the-art Net cash provided by financing activities 3,227,680 1,132,308 environmental controls that became commercially operational December 31, 2010. KEPCo owns a 3.53% share of Iatan 2, or 30 MW. Iatan 2, located in Weston, Missouri, is operated and majority owned by Evergy, Inc. KEPCos undivided interest in Iatan 2 is consolidated on CONTINUED ON NEXT PAGE 2 02 0 A N N U A L R E P O RT 17

CONTINUED a pro rata basis. KEPCo is entitled to a proportionate share of the capacity and energy from expected to result from the use and eventual disposition of the asset are less than the Iatan 2, which is used to supplement a portion of KEPCos members requirements. KEPCo is carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss billed on a daily basis for 3.53% of the operations, maintenance, administrative, and general is recognized as the amount by which the carrying amount of a long-lived asset exceeds its costs, and cost of plant additions related to Iatan 2. Each owner is responsible for providing fair value.

its own financing for all costs incurred at the plant. No asset impairment was recognized during the years ended December 31, 2020 KEPCos utility plant in service for its 3.53% share of Iatan 2 was approximately and 2019.

$83,100,000 and $82,600,000 with an allowance for depreciation of approximately

$21,400,000 and $19,000,000 and construction work in progress of approximately $600,000 NUCLEAR FUEL and $300,000 at December 31, 2020 and 2019, respectively. The cost of nuclear fuel in the process of refinement, conversion, enrichment, and fabrication is recorded as a utility plant asset at original cost and is amortized to WOLF CREEK NUCLEAR OPERATING CORPORATION nuclear fuel expenses based upon the quantity of heat produced for the generation KEPCo owns 6% of Wolf Creek Nuclear Operating Corporation (WCNOC), which is located of electric power.

near Burlington, Kansas. The remainder is owned by Evergy, Inc. KEPCos undivided interest in WCNOC is consolidated on a pro rata basis. KEPCo is entitled to a proportionate share NUCLEAR DECOMMISSIONING of the capacity and energy from WCNOC, which is used to supplement a portion of Nuclear decommissioning is a nuclear industry term for the permanent shutdown of KEPCos members requirements. KEPCo is billed on a daily basis for 6% of the operations, a nuclear power plant and the removal of radioactive components in accordance with maintenance, administrative, and general costs, and cost of plant additions related to NRC requirements. The NRC will terminate a plants license and release the property for WCNOC. Each owner is responsible for providing its own financing for all costs incurred at unrestricted use when a company has reduced the residual radioactivity of a nuclear plant the plant. to a level mandated by the NRC. The NRC requires companies with nuclear plants to KEPCos utility plant in service for its 6% share of WCNOC was approximately prepare formal financial plans to fund nuclear decommissioning. These plans are designed

$271,100,000 and $269,500,000 with an allowance for depreciation of approximately so that sufficient funds required for nuclear decommissioning will be accumulated prior

$155,400,000 and $149,100,000 and construction work in progress of approximately to the expiration of the license of the related nuclear power plant. WCNOC files a

$9,700,000 and $8,100,000 at December 31, 2020 and 2019, respectively. nuclear decommissioning site study with the KCC every three years.

WCNOCs operating license expires in 2045. WCNOC is regulated by the Nuclear The KCC reviews nuclear decommissioning plans in two phases. Phase one is the Regulatory Commission (NRC) with respect to licensing, operations, and safety-related approval of the revised nuclear decommissioning study, including the estimated costs requirements. to decommission the plant. Phase two involves the review and approval of a funding WCNOC disposes of all classes of its low-level radioactive waste at existing third- schedule prepared by the owner of the plant detailing how it plans to fund the future-party repositories. Should disposal capability become unavailable, WCNOC is able to year dollar amount of its pro rata share of the decommissioning costs.

store its low-level radioactive waste in an on-site facility for up to three years under In 2017, the triennial nuclear decommissioning study was revised. Based on the study, current regulations. KEPCos share of decommissioning costs, including decontamination, dismantling, and site restoration, is estimated to be approximately $65,600,000. This amount does not ESTIMATES compare to the prior site study estimate of $45,900,000 due to a KCC order requiring The preparation of consolidated financial statements in conformity with GAAP requires a new method of calculating the decommissioning costs. The new method, called management to make estimates and assumptions that affect the reported amounts of SAFSTOR, requires long-term storage of spent fuel on-site for 60 years after the plant is assets and liabilities and disclosure of contingent assets and liabilities at the date of the decommissioned. The site study cost estimate represents the estimate to decommission consolidated financial statements and the reported amounts of revenues and expenses WCNOC as of the site study year. The actual nuclear decommissioning costs may during the reporting period. Actual results could differ from those estimates. vary from the estimates because of changes in regulations and technologies as well as changes in costs for labor, materials, and equipment.

UTILITY PLANT AND DEPRECIATION KEPCo is allowed to recover nuclear decommissioning costs in its prices over a period Utility plant is stated at cost. Costs and additions to utility plant include contractual work, equal to the operating license of WCNOC, which is through 2045. The NRC requires that direct labor, materials, and interest on funds used during construction. No interest has been funds sufficient to meet nuclear decommissioning obligations be held in a trust. KEPCo capitalized in 2020 or 2019. The costs of repairs and minor replacements are charged to believes that the KCC-approved funding level will also be sufficient to meet the NRC operating expenses as appropriate. The original cost of utility plant retired and the cost of requirement. The consolidated financial results would be materially affected if KEPCo removal less salvage are charged to accumulated depreciation. was not allowed to recover in its prices the full amount of the funding requirement.

The composite depreciation rate for electric generation plant for the years ended KEPCo recovered in its prices and deposited in an external trust fund for nuclear December 31, 2020 and 2019, is 4.67% and 4.45%, respectively. decommissioning approximately $544,000 in 2020 and 2019. KEPCo records its investment The provision for depreciation computed on a straight-line basis for electric and other in the nuclear decommissioning trust (NDT) at fair value, which approximated components of utility plant is as follows: $35,565,000 and $30,527,000 at December 31, 2020 and 2019, respectively. The change in the fair value of investments in the NDT was approximately $3,612,000 and $4,245,000 Transportation and equipment 25-33 years for the years ended December 31, 2020 and 2019, respectively, and is included in WCNOC Office furniture and fixtures 10-20 years decommissioning regulatory liability on the accompanying consolidated balance sheets.

Leasehold improvements 20 years ASSET RETIREMENT OBLIGATION Transmission equipment (metering, communication, and SCADA) 10 years KEPCo recognizes and estimates the legal obligation associated with the cost to decommission WCNOC. KEPCo initially recognized an asset retirement obligation at fair LONG-LIVED ASSET IMPAIRMENT value for the estimated cost with a corresponding amount capitalized as part of the cost of KEPCo evaluates the recoverability of the carrying value of long-lived assets whenever the related long-lived asset and depreciated over the useful life.

events or circumstances indicate the carrying amount may not be recoverable. If a long-A reconciliation of the asset retirement obligation for the years ended December 31 is lived asset is tested for recoverability and the undiscounted estimated future cash flows as follows:

18 2 02 0 A N N U A L R E P O RT

F I N A N C I A L S TAT E M E N T S 2019 2020 REVENUE RECOGNITION Balance, beginning of year $17,000,455 $15,945,308 Revenue is recognized when control of the promised goods or services is transferred Accretion 1,123,482 1,055,147 to KEPCos members or customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The amount and timing Balance, end of year $18,123,937 17,000,455 of revenue recognition varies based on the nature of the goods or services provided and Any net margin effects are deferred in the WCNOC decommissioning regulatory liability the terms and conditions of the customer contract. See Note 7 for additional information and will be collected from or returned to members in future electric rates. about KEPCos revenue.

CASH AND CASH EQUIVALENTS INCOME TAXES All highly liquid investments purchased with an original maturity of three months or less are As a tax-exempt cooperative, KEPCo is exempt from income taxes under Section 501(c)(12) considered to be cash equivalents and are stated at cost, which approximates fair value. At of the Internal Revenue Code of 1986, as amended. Accordingly, provisions for income taxes December 31, 2020 and 2019, cash equivalents consisted primarily of a repurchase agreement have not been reflected in the accompanying consolidated financial statements.

and commercial paper. KEPCo Services, Inc., a subsidiary of KEPCo is not exempt from income taxes.

KEPCo has invested $0 and $19,000,000 in National Rural Utilities Cooperative Finance Corporation (NRUCFC), a related party, commercial paper with an original maturity of EQUITY INVESTMENTS three months or less at December 31, 2020 and 2019, respectively. The commercial paper is KEPCo measures equity securities, other than investments that qualify for the equity exposed to credit risk and is not federally insured. method of accounting, at fair value with changes recognized in net margin. Under ASC 980, KEPCos repurchase agreement has collateral pledged by a financial institution, which is KEPCo has elected to defer changes to all unrealized gains and losses of equity investments securities that are backed by the federal government. with readily determinable fair market values. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

SHORT-TERM INVESTMENTS Equity securities and equity investments without a readily determinable fair value Short-term investments are investments with an original maturity greater than three are measured at cost, minus impairment, if any, plus or minus changes resulting from months, but less than 12 months, in select notes issued by NRUCFC maturing in April 2021 observable price changes for the identical or a similar investment.

with interest at 0.4%. The select notes are exposed to credit risk. As of December 31, 2020, For equity securities and equity investments measured under the practicability KEPCo has invested $13,000,000 in short-term investments. exception, KEPCo performs a qualitative assessment for equity investments without readily determinable fair values considering impairment indicators to evaluate whether ACCOUNTS RECEIVABLE an impairment exists. If an impairment exists, KEPCo will recognize a loss based on the Accounts receivable are stated at the amount of consideration from members and difference between carrying value and fair value.

customers, of which KEPCo has an unconditional right to receive. KEPCo provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, INVESTMENTS IN ASSOCIATED ORGANIZATIONS historical collection information, and existing economic conditions. No allowance was KEPCo has equity ownership in the form of patronage capital through various lenders recorded at December 31, 2020 or 2019. and other associated organizations (see Note 3). Patronage capital equity is increased as Accounts receivable are ordinarily due 15 days after the issuance of the invoice. patronage is allocated to KEPCo and decreased as patronage is retired and cash received.

Delinquent receivables are written off based on individual credit evaluation and specific These investments are considered equity investments without readily determinable circumstances of the member or customer. fair values and are accounted for at cost, minus impairment, if any, plus or minus During the years ended December 31, 2020 and 2019, there were no impairment losses changes resulting from observable price changes in orderly transactions for an on doubtful accounts receivable where collectibility is not reasonably assured. identical or a similar investment. No impairment or observable price changes were recorded during 2020 and 2019.

MATERIALS AND SUPPLIES INVENTORY Materials and supplies inventory is valued at average cost. WCNOC DISALLOWED COSTS Effective October 1, 1985, the KCC issued a rate order relating to KEPCos investment in CASH SURRENDER VALUE OF LIFE INSURANCE CONTRACTS WCNOC, which disallowed $26,000,000 of KEPCos investment in WCNOC. A subsequent The following amounts related to WCNOC corporate-owned life insurance contracts, rate order, effective February 1, 1987, allows KEPCo to recover these disallowed costs primarily with one highly rated major insurance company, are included in other long-term and other costs related to the disallowed portion (recorded as deferred charges) for the assets in the accompanying consolidated balance sheets:

period from September 3, 1985 through January 31, 1987, over a 27.736-year period starting 2020 2019 February 1, 1987. Pursuant to a KCC rate order dated December 30, 1998, the disallowed Cash surrender value of contracts $8,536,464 $8,293,065 portions recovery period was extended to a 37-year period. The disallowed costs are Borrowings against contracts (8,241,381) (8,006,818) being recovered through the use of straight-line amortization over the period required

$295,083 $286,247 by the KCC.

Borrowings against contracts include a prepaid interest charge. KEPCo pays interest on these COMPREHENSIVE INCOME (LOSS) borrowings at a rate of 5.00% for the years ended December 31, 2020 and 2019. Comprehensive income (loss) consists of net margin and other comprehensive income (loss).

MEMBER INVESTMENTS Other comprehensive income (loss) includes plan amendments and changes in the funded KEPCo has a member investment program whereby members can invest funds with status of the WCNOC pension and postretirement plans (see Note 8).

KEPCo. KEPCo pays interest on the balance of these funds. The member investments are payable back to the member upon demand or can be used to pay the balance due on the NOTE 2: FACTORS THAT COULD AFFECT members power bill.

FUTURE OPERATING RESULTS KEPCo currently applies accounting standards that recognize the economic effects of CONTINUED ON NEXT PAGE 2 02 0 A N N U A L R E P O RT 19

CONTINUED rate regulation and, accordingly, has recorded regulatory assets and liabilities related $900,000, respectively. Accumulated amortization as of December 31, 2020 and 2019, was to its G&T operations in accordance with ASC 980. In the event KEPCo determines approximately $2,100,000 and $1,500,000, respectively.

that it no longer meets the criteria of ASC 980, the accounting impact could be a noncash charge to operations in an amount that would be material. Criteria that NOTE 5: LINES OF CREDIT could give rise to the discontinuance of ASC 980 include: 1) increasing competition At December 31, 2020 and 2019, KEPCo has a $10,000,000 line of credit available with that restricts KEPCos ability to establish prices to recover specific costs and 2) a CoBank, ACB. There were no funds borrowed against the line of credit at December 31, significant change in the manner in which rates are set by regulators from a cost-based 2020 or 2019. Interest rate options, as selected by KEPCo, are a weekly quoted variable rate regulation to another form of regulation. KEPCo periodically reviews these criteria in which CoBank establishes a rate on the first business day of each week or a London to ensure the continuing application of ASC 980 is appropriate. Any changes that InterBank Offered Rate (LIBOR) option at a fixed rate equal to LIBOR plus 1.6%. This line of would require KEPCo to discontinue the application of ASC 980 due to increased credit expires January 2021 and was subsequently renewed through July 2021 and is secured competition, regulatory changes, or other events may significantly impact the by substantially all of KEPCos assets.

valuation of KEPCos investment in utility plant, WCNOC, and Iatan 2 and necessitate KEPCo has two lines of credit available from the NRUCFC totaling $20,000,000, of which the write-off of regulatory assets. At this time, the effect of competition and the no funds were borrowed against at December 31, 2020 and 2019. One line is for $10,000,000 amount of regulatory assets that could be recovered in such an environment cannot and matures March 2023. Interest varies as determined by the lender and was 2.45% and be predicted. 3.25% at December 31, 2020 and 2019, respectively. The line requires an annual pay-down The 1992 Energy Policy Act began the process of restructuring the United States electric of the line or it becomes immediately callable at the discretion of the NRUCFC. The other utility industry by permitting FERC to order electric utilities to allow third parties to sell line is for $10,000,000 and matures December 2049. Interest varies as determined by the electric power to wholesale customers over their transmission systems. KEPCo has elected lender and was 2.25% and 2.85% at December 31, 2020 and 2019, respectively. The lines are to deregulate its rate-making for sales to its members under recent statutory amendments. collateralized by substantially all of KEPCos assets.

Subject to the possibility of KCC review, KEPCos member rates are now set by action of the Board of Trustees. KEPCos ability to timely recover its costs is enhanced by this change.

NOTE 6: LONG-TERM DEBT Long-term debt consists of mortgage notes payable to the United States of America acting NOTE 3: INVESTMENTS IN ASSOCIATED ORGANIZATIONS through the Federal Financing Bank (FFB), NRUCFC, and others. Substantially all of KEPCos At December 31, investments in associated organizations consisted of the following: assets are pledged as collateral. The terms of the notes as of December 31 are as follows:

2020 2019 2020 2019 NRUCFC Mortgage notes payable to the FFB at fixed rates varying from Memberships $1,000 $1,000 0.759% to 4.46%, payable in quarterly installments through 2043 $84,823,634 $79,645,170 Capital term certificates, bearing interest of 5.0% and maturing in RUS cushion of credit (A) (3,004,187) (7,167,211) 395,970 395,970 2080 (A)

FFB mortgage notes payable, net of cushion of credit 81,819,447 72,477,959 Patronage capital certificates 2,847,674 2,613,206 Note payable to CoBank at a rate of 3.03%, payable in quarterly Equity term certificates, bearing interest of 3.16% to 6.0% and installments through 2023 330,851 470,904 7,797,476 8,306,679 maturing from 2021 through 2045 (A) Mortgage notes payable, equity certificate loans, and member Total NRUCFC 11,042,120 11,316,855 capital security notes to NRUCFC at fixed rates of 3.80% to Other 320,561 284,225 7.50%, payable quarterly through 2045 75,415,536 80,848,373 Total investments in associated organizations $11,362,681 $11,601,080 157,565,834 153,797,236 (A) KEPCo is required to maintain these investments pursuant to certain loan Less current maturities (8,698,761) (9,251,502) agreements. $148,867,073 $144,545,734 NOTE 4: DEFERRED CHARGES (A) RUS cushion of credit funds are required to be applied to the debt service requirements of the FFB mortgage notes payable and are, therefore, reflected net in the DEFERRED INCREMENTAL OUTAGE COSTS related balances in the accompanying consolidated balance sheets. The RUS cushion of In 1991, the KCC issued an order that allowed KEPCo to defer its 6% share of the credit is offered by the USDA and earns interest annually at a rate approved by the USDA.

incremental operating, maintenance, and replacement power costs associated with the KEPCo has approximately $11,300,000 of unadvanced loan funds with the FFB as of periodic refueling of WCNOC. Operating and maintenance costs are being amortized December 31, 2020.

over the approximate 18-month operating cycle coinciding with the recognition of the related revenues. Additions to the deferred incremental outage costs were approximately Aggregate maturities of long-term debt are as follows:

$300,000 and $2,200,000 in 2020 and 2019, respectively. The current year amortization of 2021 $8,698,761 the deferred incremental outage costs was approximately $1,600,000 for the years ended 2022 8,854,436 December 31, 2020 and 2019. 2023 8,888,280 SOUTHWEST POWER POOL CHARGES 2024 7,969,628 During 2016, KEPCo was assessed historical charges in the amount of approximately 2025 7,449,654

$2,442,000 from Southwest Power Pool related to a Z2 billing issue for generation Thereafter 115,705,075 system upgrades from 2008 through 2016. The total amount of historical charges was $157,565,834 paid in October 2016 and will be amortized over a five-year period ending October 2021. The balance as of December 31, 2020 and 2019, was approximately $400,000 and 20 2 02 0 A N N U A L R E P O RT

F I N A N C I A L S TAT E M E N T S Restrictive covenants related to the NRUCFC and FFB debt require KEPCo to design KEPCo participates in the NRECA Retirement and Security Program (RS Plan) for its rates that would enable it to maintain a times-interest earned ratio of at least 1.05 employees. The NRECA RS Plan is a defined benefit pension plan qualified under Section and debt service coverage ratio of at least 1.0, on average, in the two best years out 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. It is a multi-of the three most recent calendar years. The covenants also prohibit distribution of employer plan under the accounting standards. The plan sponsors Employer Identification net patronage capital or margins until, after giving effect to any such distribution, Number is 53-0116145 and the Plan Number is 333.

total patronage capital equals or exceeds 20% of total assets, unless such distribution A unique characteristic of a multi-employer plan compared to a single-employer is approved by the RUS or NRUCFC. KEPCo was in compliance with such restrictive plan is that all plan assets are available to pay benefits of any plan participant. Separate covenants as of December 31, 2020 and 2019. asset accounts are not maintained for participating employers. This means that assets The RUS cushion of credit account is an interest-bearing account and is restricted for contributed by one employer may be used to provide benefits to employees of other the debt service of RUS-guaranteed debt and cannot be withdrawn. During 2020 and 2019, participating employers.

KEPCo made principal and interest payments to FFB and RUS with funds held in the RUS KEPCos contributions to the NRECA RS Plan in 2020 and 2019 represented less than 5%

cushion of credit account of $4,460,688 and $4,565,724, respectively. The balance in this of the total contributions made to the plan by all participating employers. KEPCo made account at December 31, 2020 and 2019, was $3,004,187 and $7,167,211, respectively. contributions to the NRECA RS Plan of approximately $570,000 and $470,000 for the years Restrictive covenants related to the CoBank debt require KEPCo to design ended December 31, 2020 and 2019, respectively. There have been no significant changes rates that would enable it to maintain a debt service coverage ratio, as defined by that affect the comparability of 2020 and 2019 contributions.

CoBank, of at least 1.10. KEPCo was in compliance with the restrictive covenants as of For the NRECA RS Plan, a zone status determination is not required, and thus not December 31, 2020 and 2019. determined, under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the NRECA RS Plan was more than 80% funded at January 1, 2020 and NOTE 7: REVENUE FROM CONTRACTS WITH CUSTOMERS 2019, based on the PPA funding target and PPA actuarial value of assets on those dates.

PERFORMANCE OBLIGATIONS - OPERATING REVENUES Because the provisions of the PPA do not apply to the NRECA RS Plan, funding The majority of KEPCos revenues are derived primarily from the sale of electric power improvement plans and surcharges are not applicable. Future contribution requirements are to members. Members consist of distribution cooperatives within dedicated territories determined each year as part of the actuarial valuation of the plan and may change as a in Kansas. result of plan experience.

Rates charged for electric power sales to members are established at least annually In 2012, NRECA approved an option to allow participating cooperatives in the NRECA by the Board. KEPCo provides energy and demand to members as one stand-ready RS Plan to make a contribution prepayment and reduce future required contributions. The performance obligation. Electric power revenue is recognized by KEPCo upon transfer of prepayment amount is a cooperatives share, as of January 1, 2013, of future contributions control of the promised services to members in an amount that reflects the consideration required to fund the NRECA RS Plans unfunded value of benefits earned to date using KEPCo expects to receive in exchange for those services. KEPCo transfers control of the NRECA RS Plan actuarial valuation assumptions. The prepayment amount will typically equal electric power to members at each members meter point and the members simultaneously approximately 2.5 times a cooperatives annual NRECA RS Plan required contribution as receive and consume the benefits of the energy provided. Electric power provided of January 1, 2013. After making the prepayment, for most cooperatives, the billing rate is to members is accounted for as a series of performance obligations. Progress toward reduced by approximately 25%, retroactive to January 1 of the year in which the amount is completion is measured using the output method. Meter readings are taken at the end of paid to the NRECA RS Plan. The 25% differential in billing rates is expected to continue for each month for billing purposes, and the quantity of energy transferred is determined after approximately 15 years from January 1, 2013. However, changes in interest rates, asset returns, the meter readings. Customers are billed monthly and KEPCo accrues for unbilled amounts. and other plan experiences different from expected; plan assumption changes; and other Payments from members are received in accordance with each members contract, which is factors may have an impact on the differential in billing rates and the 15-year period. KEPCo less than 30 days from the invoice date. participated in the prepayment program and is amortizing the $1,314,273 over a 10-year Revenue associated with the electric power performance obligation to members is period through 2023. This balance is included in prepaid pension cost in other long-term recorded as sales of electric energy in the accompanying consolidated statements of margin assets on the accompanying consolidated balance sheets.

and comprehensive income (loss).

KEPCo has determined that the nature, amount, timing, and uncertainty of revenue and NRECA SAVINGS 401(K) PLAN All employees of KEPCo are eligible to participate in the NRECA Savings 401(k) Plan.

cash flows are not materially affected by any factors, such as the geography of the service Under the plan, KEPCo contributes an amount not to exceed 5%, dependent upon each location, customer type, or service line.

employees level of participation and completion of one year of service, of the respective ACCOUNTING POLICIES AND PRACTICAL EXPEDIENTS ELECTED employees base pay to provide additional retirement benefits. KEPCo contributed KEPCo has applied an accounting policy election that allows an entity to exclude from approximately $135,000 and $121,000 to the NRECA Savings 401(k) Plan for the years ended revenue any amounts collected from customers on behalf of third parties, such as sales December 31, 2020 and 2019, respectively.

taxes and other similar taxes KEPCo collects concurrent with revenue-producing activities.

Therefore, revenue is presented net of sales taxes and similar revenue-based taxes.

WCNOC PENSION AND POSTRETIREMENT PLANS KEPCo has an obligation to the WCNOC retirement plan, supplemental retirement plan, KEPCo has also elected to use the right to invoice practical expedient. This practical and postretirement medical plan (collectively, the Plans) for its 6% ownership interest expedient allows an entity to recognize revenue in the amount of consideration to which in WCNOC. The Plans provide for benefits upon retirement, normally at age 65. In the entity has the right to invoice when the amount that the entity has the right to invoice accordance with the Employee Retirement Income Security Act of 1974, KEPCo has corresponds directly to the value transferred to the customer.

satisfied its minimum funding requirements. Benefits under the Plans reflect the employees compensation, years of service, and age at retirement.

NOTE 8: BENEFIT PLANS WCNOC uses a measurement date of December 31 for the Plans.

NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION (NRECA)

RETIREMENT AND SECURITY PROGRAM CONTINUED ON NEXT PAGE 2 02 0 A N N U A L R E P O RT 21

CONTINUED Information about KEPCos 6% share of the Plans funded status follows obligation and the following years pension expense is based on a bond selection-Pension Benefits Postretirement Benefits settlement portfolio approach. This approach develops a discount rate by selecting 2020 2019 2020 2019 a portfolio of high quality, non-callable corporate bonds that generate a sufficient Change in benefit obligation cash flow to provide for the projected benefit payments of the plan. After the bond Beginning of year $35,905,327 $32,123,209 $904,303 $883,170 portfolio is selected, a single interest rate is determined that equates the present Service cost 953,320 931,676 18,622 16,298 value of the plans projected benefit payments discounted at this rate with the market Interest cost 1,299,924 1,406,986 29,957 35,839 value of the bonds selected.

Plan participants contributions - - 188,011 195,382 Postretirement Pension Benefits Benefits Plan amendments 484,292 - 60,134 -

2020 2019 2020 2019 Benefits paid (2,940,010) (1,968,736) (325,379) (399,263) Components of net periodic benefit costs Actuarial losses 3,622,476 3,412,192 60,816 172,877 Service cost $953,320 $931,676 $18,622 $16,298 End of year 39,325,329 35,905,327 936,464 904,303 Interest cost 1,299,924 1,406,986 29,957 35,839 Change in fair value of plan assets Expected return on plan assets (1,552,419) (1,420,950) - -

Prior service cost amortization 6,722 6,807 - -

Beginning of year 24,593,562 19,916,182 51,813 35,225 Actuarial loss amortization 863,139 641,205 11,597 (408)

Actual return on plan assets 3,959,744 4,583,499 - - Net periodic benefit costs 1,570,686 1,565,724 60,176 51,729 Employer contributions 1,092,000 2,028,000 61,182 213,000 Other changes in plan obligations recognized in other comprehensive income (loss)

Plan participants contributions - - 159,564 191,140 Current year actuarial loss 1,215,151 249,643 60,815 172,877 Benefits paid (2,905,392) (1,934,119) (272,559) (387,552)

Amortization of actuarial loss (gain) (863,138) (641,205) (11,597) 408 Amortization of prior service cost (6,722) (6,807) 60,134 -

End of year 26,739,914 24,593,562 - 51,813 Total recognized in other comprehensive Funded status, end of year $(12,585,415) $(11,311,765) $(936,464) $(852,490) 345,291 (398,369) 109,352 173,285 income (loss)

Total recognized in net periodic benefit costs and other comprehensive income $1,915,977 $1,167,355 $169,528 $225,014 Amounts recognized in the accompanying consolidated balance sheets: (loss) 2020 2019 Other long-term liabilities Weighted-average actuarial assumptions used to determine net periodic benefit costs WCNOC pension and postretirement benefit plans $12,091,282 $10,994,841 Discount rate 3.48% 3.61% 2.76% 3.42%

WCNOC provision for injuries $46,689 $23,339 Expected long-term return on plan assets 6.70% 6.70% N/A N/A Compensation rate increase 3.75% 3.75% N/A N/A Current liabilities Current provision for pension and postretirement benefit plans $1,479,574 $1,192,753 KEPCo estimates it will amortize the following amounts into net periodic benefit costs in 2021:

Amounts recognized in accumulated other comprehensive loss not yet recognized as Pension Benefits Postretirement Benefits components of net periodic benefit costs consist of:

Actuarial loss $993,333 $14,822 Pension Benefits Postretirement Benefits Prior service cost 49,515 4,661 2020 2019 2020 2019 Total $1,042,848 $19,483 Net loss $(8,616,167) $(8,264,153) $(217,160) $(167,941)

Prior service cost (513,546) (35,978) (60,134) -

The expected long-term rate of return on plan assets is based on historical and

$(9,129,713) $(8,300,131) $(277,294) $(167,941) projected rates of return for current and planned asset classes in the plans investment portfolios. Assumed projected rates of return for each asset class were selected after Information for the pension and postretirement benefit plans with an accumulated analyzing long-term historical experience and future expectations of the volatility of the benefit obligation in excess of plan assets: various asset classes. Based on target asset allocations for each asset class, the overall Pension Benefits Postretirement Benefits expected rate of return for the portfolios was developed, adjusted for historical and 2020 2019 2020 2019 expected experience of active portfolio management results compared to benchmark Projected benefit obligation $39,325,329 $35,905,327 $936,464 $904,303 returns and for the effect of expenses paid from plan assets.

Fair value of plan assets $26,739,914 $24,593,562 $- $51,813 For measurement purposes, the assumed annual health care cost trend rates were as follows:

2020 2019 Weighted-average actuarial assumptions used to determine the net periodic benefit obligation: Health care cost trend rate assumed for next year 6.25% 6.25%

Postretirement Rate to which the health care cost trend rate is assumed to decline 4.50% 4.50%

Pension Benefits Year the health care cost trend rate reaches the ultimate trend rate 2027 Benefits 2027 2020 2019 2020 2019 Discount rate 3.61% 4.34% 2.76% 3.42% WCNOCs pension plan investment strategy is to manage assets in a prudent manner Annual salary increase rate 3.75% 4.14% N/A N/A with regard to preserving principal while providing reasonable returns. It has adopted a WCNOC uses a measurement date of December 31 for its pension and long-term investment horizon such that the chances and duration of investment losses postretirement benefit plans. The discount rate to determine the current year pension are carefully weighed against the long-term potential for appreciation of assets. Part 22 2 02 0 A N N U A L R E P O RT

F I N A N C I A L S TAT E M E N T S of its strategy includes managing interest rate sensitivity of plan assets relative to Fair Value Measurements Using the associated liabilities. The primary objective of the pension plan is to provide a Fair Value Level 1 Level 2 Level 3 NAV source of retirement income for its participants and beneficiaries, and the primary 2020 financial objective of the plan is to improve its funded status. The primary objective Cash equivalents $182,152 $182,152 $- $- $-

of the postretirement benefit plan is growth in assets and preservation of principal, Equity securities while minimizing interim volatility, to meet anticipated claims of plan participants.

U.S. 7,084,961 - - - 7,084,961 WCNOC delegates the management of its pension benefit plan assets to independent International 8,605,847 - - - 8,605,847 investment advisors who hire and dismiss investment managers based upon various factors. The investment advisors are instructed to diversify investments across asset Debt securities classes, sectors, and manager styles to minimize the risk of large losses, based upon Core bonds 3,761,131 - - - 3,761,131 objectives and risk tolerance specified by WCNOC, which include allowable and/or Alternative investments 7,105,823 - - - 7,105,823 prohibited investment types. It measures and monitors investment risk on an ongoing Total investments $26,739,914 $182,152 $- $- $26,557,762 basis through quarterly investment portfolio reviews and annual liability measurements. 2019 The target allocations for WCNOCs pension plan assets are 31% to international equity Cash equivalents Equity securities $135,489 $135,489 $- $- $-

securities, 25% to domestic equity securities, 25% to debt securities, 5% to commodity U.S. 6,314,393 - - - 6,314,393 investments, and 14% to other investments. The investments in both international and International 7,778,190 - - - 7,778,190 domestic equity include investments in large-, mid-, and small-cap companies and Debt securities investment funds with underlying investments similar to those previously mentioned. The Core bonds 6,211,176 - - - 6,211,176 investments in debt include core and high-yield bonds. Core bonds include funds invested Alternative investments 4,154,314 - - - 4,154,314 in investment grade debt securities of corporate entities, obligations of U.S. and foreign governments and their agencies, and private debt securities. High-yield bonds include a Total investments $24,593,562 $135,489 $- $- $24,458,073 fund with underlying investments in non-investment grade debt securities of corporate Estimated future benefit payments as of December 31, 2020, for the Plans, which reflect entities, private placements, and bank debt. Real estate securities include funds invested expected future services, are as follows:

in commercial and residential real estate properties while commodity investments include Other Postretirement Pension Benefits funds invested in commodity-related instruments. Benefits EXPECTED CONTRIBUTIONS PENSION PLAN ASSETS 2021 $1,398,000 $81,574 All of WCNOCs pension plan assets are recorded at fair value using daily net asset values as reported by the trustee.

EXPECTED BENEFIT PAYMENTS 2021 $2,188,775 $81,574 Similar to other assets measured at fair value, GAAP establishes a hierarchal framework for disclosing the transparency of the inputs utilized in measuring pension and 2022 $2,243,006 $77,146 postretirement benefit plan assets at fair value. From time to time, the WCNOC pension 2023 $2,356,310 $70,259 trust may buy and sell investments resulting in changes within the hierarchy. Where 2024 $2,321,966 $66,557 quoted market prices are available in an active market, plan assets are classified within 2025 $2,316,938 $60,044 Level 1 of the valuation hierarchy. Level 1 plan assets include cash equivalents. If quoted 2026-2030 $11,852,936 $255,465 market prices are not available, then fair values are estimated by using pricing models, quoted prices of plan assets with similar characteristics, or discounted cash flows. In certain cases where Level 1 or Level 2 inputs are not available, plan assets are classified within NOTE 9: COMMITMENTS AND CONTINGENCIES Level 3 of the hierarchy. Significant inputs and valuation techniques used in measuring CURRENT ECONOMIC CONDITIONS Level 3 fair values include market discount rates, projected cash flows, and the estimated KEPCo considers current economic conditions when planning for future power supply value into perpetuity. Investments that do not have a readily determinable fair value are and liquidity needs. The current economic climate may also affect KEPCos ability to measured at net asset value (NAV). These investments do not consider the observability of obtain financing.

inputs; therefore, they are not included within the fair value hierarchy. WCNOC includes Given the volatility of current economic conditions, the values of assets and liabilities investments in private equity, real estate, and alternative investment funds that do not have recorded in the accompanying consolidated financial statements could change rapidly, a readily determinable fair value in this category. The underlying alternative investments resulting in material future adjustments that could negatively impact KEPCos ability to meet include collateralized debt obligations, mezzanine debt, and a variety of other investments.

debt covenants or maintain sufficient liquidity. Currently under state statutes, KEPCos rate-The following table provides the fair value of KEPCos 6% share of WCNOCs pension making is deregulated and, therefore, KEPCo expects to be able to recover any economic plan assets and the corresponding level within the fair hierarchy as of December 31:

losses through future rates.

LETTER OF CREDIT KEPCo has an open letter of credit with NRUCFC in the amount of $1,500,000 that automatically renews every year. The letter of credit is intended to provide financial security to Southwest Power Pool pursuant to its credit policy.

NUCLEAR LIABILITY INSURANCE Pursuant to the Price-Anderson Act, liability insurance includes coverage against public nuclear liability claims resulting from nuclear incidents to the required limit of public liability, which is approximately $13,800,000,000. This limit of liability consists of the CONTINUED ON NEXT PAGE 2 02 0 A N N U A L R E P O RT 23

CONTINUED maximum available commercial insurance of $500,000,000, and the financing for costs incurred by Iatan 2. KEPCos share of anticipated remaining $13,300,000,000 is provided through mandatory participation costs for ongoing coal fuel for Iatan 2 is estimated to be approximately in an industry-wide retrospective assessment program. Under this $13,600,000 for the next five years.

retrospective assessment program, the owners of WCNOC are jointly and severally subject to an assessment of up to $137,600,000 (KEPCos PURCHASE POWER COMMITMENTS share is $8,300,000), payable at no more than$20,500,000 (KEPCos share KEPCo has supply contracts with various utility companies to purchase is $1,200,000) per incident per year per reactor for any commercial U.S. power to supplement generation in given service areas. KEPCo has provided nuclear reactor qualifying incident. Both the total and yearly assessments the Southwest Power Pool a letter of credit of $1.500,000 to help ensure are subject to an inflationary adjustment based on the Consumer Price power is available if needed.

Index and applicable premium taxes. In addition, Congress could impose additional revenue-raising measures to pay claims. NOTE 10: SIGNIFICANT ESTIMATES AND The owners of WCNOC carry nuclear accident decontamination CONCENTRATIONS liability, premature nuclear decommissioning liability, and property damage GAAP requires disclosure of certain significant estimates and current insurance for WCNOC totaling approximately$2,800,000,000 (KEPCos share vulnerabilities due to certain concentrations. Those matters include the is $168,000,000). In the event of a nuclear accident, insurance proceeds following:

must first be used for reactor stabilization and site decontamination in accordance with a plan mandated by the NRC. The owners share of any LITIGATION remaining proceeds can be used to pay for property damage or, if certain KEPCo is subject to claims and lawsuits that arise primarily in the ordinary requirements are met, including decommissioning the plant, toward a course of business. It is the opinion of management that the disposition shortfall in the NDT. or ultimate resolution of such claims and lawsuits will not have an adverse The owners also carry additional insurance with Nuclear Electric effect on the consolidated financial position, results of operations, and cash Insurance Limited (NEIL) to help cover costs of replacement power and flows of KEPCo.

other extra expenses incurred during a prolonged outage resulting from There is a provision in the WCNOC operating agreement whereby the accidental property damage at WCNOC. If significant losses were incurred owners treat certain claims and losses arising out of the operations of at any of the nuclear plants insured under the NEIL policies, the owners WCNOC as a cost to be borne by the owners separately (but not jointly) may be subject to retrospective assessments under the current policies of in proportion to their ownership shares. Each of the owners has agreed to approximately $33,200,000 (KEPCos share is$2,000,000) in 2020 and 2019. indemnify the others in such cases.

Although KEPCo maintains various insurance policies to provide coverage for potential losses and liabilities resulting from an accident or an extended DEFERRED COMPENSATION AGREEMENT outage, KEPCos insurance coverage may not be adequate to cover the The amount of annual expense accrued for deferred compensation is based costs that could result from a catastrophic accident or extended outage on an estimate of the total amounts payable under the contract over the at WCNOC. Any substantial losses not covered by insurance, to the extent lifetimes of the beneficiaries.

not recoverable in KEPCos prices, would have a material effect on KEPCos ASSET RETIREMENT OBLIGATION consolidated financial results. As described in NOTE 1, KEPCo has recorded a liability for its DECOMMISSIONING INSURANCES conditional asset retirement obligation related to the WCNOC plant KEPCo carries premature decommissioning insurance that has several decommissioning costs.

restrictions, one of which can only be used if WCNOC incurs an accident PENSION AND OTHER POSTRETIREMENT BENEFIT exceeding $500,000,000 in expenses to safely stabilize the reactor and OBLIGATIONS decontaminate the reactor and reactor station site in accordance with a KEPCo, through its 6% share in WCNOC, has a noncontributory defined plan approved by the NRC and pay for on-site property damages.

benefit pension and postretirement medical plan whereby it agrees to Once the NRC property rule requiring insurance proceeds to be provide certain postretirement benefits to eligible employees. The benefit used first for stabilization and decontamination has been complied obligation is the actuarial present value of all benefits attributed to service with, the premature decommissioning coverage could pay for the rendered prior to the valuation date based on the projected unit credit decommissioning fund shortfall in the event an accident at WCNOC cost method. It is reasonably possible that events could occur that would exceeds $500,000,000 in covered damages and causes WCNOC to be change the estimated amount of this liability materially in the near term.

prematurely decommissioned.

INVESTMENTS NUCLEAR FUEL COMMITMENTS KEPCo invests in various investment securities in its NDT. Investment KEPCo owns a 6% undivided interest in WCNOC and provides its own securities are exposed to various risks, such as interest rate, market, financing for costs incurred by WCNOC. KEPCos share of anticipated and credit risks. Due to the level of risk associated with certain costs for ongoing nuclear fuel for WCNOC is estimated to be investment securities, it is at least reasonably possible that changes approximately $20,452,000 for the next five years. KEPCo has provided in the values of investment securities will occur in the near term and a letter of credit of approximately $2,068,000 in connection with that such changes could materially affect the amounts reported in the nuclear fuel costs.

accompanying consolidated balance sheets.

COAL COMMITMENTS KEPCo owns a 3.53% undivided interest in Iatan 2 and provides its own 24 2 02 0 A N N U A L R E P O RT

F I N A N C I A L S TAT E M E N T S NOTE 11: DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then LIABILITIES fair values are estimated by using quoted prices of securities with similar characteristics or ASC 820, Fair Value Measurements, defines fair value as the price that would be received independent asset pricing services and pricing models, the inputs of which are market-to sell an asset or paid to transfer a liability in an orderly transaction between market based or independently sourced market parameters, including, but not limited to, yield participants at the measurement date.

curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections, and ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the cash flows. Such securities are classified within Level 2 of the valuation hierarchy. In certain use of observable inputs and minimize the use of unobservable inputs when measuring fair cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 value. The standard describes three levels of inputs that may be used to measure fair value:

of the hierarchy.

LEVEL 1 - Quoted prices in active markets for identical assets or liabilities LEVEL 2 - Observable inputs other than Level 1 prices, such as quoted prices for FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS similar assets or liabilities, quoted prices in markets that are not active, or other inputs that The estimated fair values of KEPCos other financial instruments at December 31 are as are observable or can be corroborated by observable market data for substantially the full follows:

term of the assets or liabilities 2020 2019 LEVEL 3 - Unobservable inputs supported by little or no market activity and Carrying Estimated Carrying Estimated significant to the fair value of the assets or liabilities Amount Fair Value Amount Fair Value Following is a description of the valuation methodologies used for assets and Cash and cash equivalents $16,598,637 $16,598,637 $20,369,872 $20,369,872 liabilities measured at fair value on a recurring basis and recognized in the accompanying Short-term investments $13,000,000 $13,000,000 $- $-

consolidated balance sheets, as well as the general classification of such assets and liabilities Investments in associated organizations $11,362,681 $11,362,681 $11,601,080 $11,601,080 pursuant to the valuation hierarchy.

DECOMMISSIONING FUND AND SHORT-TERM INVESTMENTS The following methods were used to estimate the fair value of all other financial The decommissioning fund consists of various mutual funds where fair value is determined instruments not recognized in the accompanying consolidated balance sheets.

by quoted market prices in an active market and, as such, are classified within Level 1 of CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS the valuation hierarchy. Short-term investments are investments with an original maturity The carrying amount approximates fair value.

greater than three months, but less than 12 months, in commercial paper issued by NRUCFC maturing in April 2021 and are classified within Level 2 of the valuation hierarchy. INVESTMENTS IN ASSOCIATED ORGANIZATIONS The following tables present the fair value measurements of assets recognized in the Management was not able to estimate the fair value of investments that represent KEPCos accompanying consolidated balance sheets measured at fair value on a recurring basis and investment in memberships and other associated organizations and they remain at their the level within the ASC 820 fair value hierarchy in which the fair value measurements fall cost, minus impairment, if any, plus or minus changes resulting from observable price at December 31: changes in orderly transactions for the identical or a similar investment of the same issuer.

Fair Value Measurements Quoted Prices In Active Significant Significant NOTE 12: PATRONAGE CAPITAL Other In accordance with KEPCos bylaws, KEPCos current margins are to be allocated to members.

Markets For Unobservable Fair Value Observable KEPCos current policy is to allocate to members based on revenues collected from the Identical Inputs Inputs Assets (Level 3) members as a percentage of total revenues. If KEPCos consolidated financial statements (Level 2)

(Level 1) were no longer prepared under the regulatory basis of accounting as prescribed by ASC 2020 NUCLEAR DECOMMISSIONING TRUST 980, total patronage capital would be substantially less. Patronage capital distributions of Equity securities $699,114 were made to members in 2020. No patronage capital distributions were made to Domestic fund $20,731,690 $20,731,690 $- $- members in 2019.

International fund 2,195,993 2,195,993 - -

Domestic bond fund 12,458,624 12,458,624 - - NOTE 13: SUBSEQUENT EVENTS Money market 178,644 178,644 - - Subsequent events have been evaluated through April 6, 2021, which is the date the Total nuclear decommissioning trust 35,564,951 35,564,951 - - consolidated financial statements were available to be issued.

Internal Investments 13,000,000 - 13,000,000 - WINTER STORM URI Short-term investments Total Investments $48,564,951 $35,564,951 $13,000,000 $- In February 2021, the entire Southwest Power Pool region, which includes KEPCos members service territory, experienced a winter storm that resulted in record low temperatures, causing a substantial increase in energy and natural gas usage throughout the region. This 2019 NUCLEAR DECOMMISSIONING TRUST high demand, coupled with strained natural gas supply and low wind generation availability, Equity securities resulted in extraordinarily high natural gas and market energy prices. KEPCos Board of Domestic fund $17,014,773 $17,014,773 $- $-

Directors has elected to defer the excess costs of the winter storm and amortize them into International fund 1,981,101 1,981,101 - - its rates over two years.

Domestic bond fund 10,636,865 10,636,865 - -

Money market 894,477 894,477 - -

Total $30,527,216 $30,527,216 - -

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CONTINUED REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITORS REPORT BOARD OF TRUSTEES, KANSAS ELECTRIC POWER COOPERATIVE, INC. TOPEKA, KANSAS We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States, the consolidated financial statements of Kansas Electric Power Cooperative, Inc. and its wholly owned subsidiary (KEPCo),

which comprise the consolidated balance sheet as of December 31, 2020, and the related consolidated statements of margin and comprehensive income (loss), patronage capital, and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated April 6, 2021.

Internal Control over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered KEPCos internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of KEPCos internal control. Accordingly, we do not express an opinion on the effectiveness of KEPCos internal control.

A DEFICIENCY IN INTERNAL CONTROL exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A MATERIAL WEAKNESS is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entitys financial statements will not be prevented, or detected and corrected, on a timely basis. A SIGNIFICANT DEFICIENCY is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses.

However, material weaknesses may exist that have not been identified.

Compliance and Other Matters As part of obtaining reasonable assurance about whether KEPCos consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the consolidated financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under GOVERNMENT AUDITING STANDARDS.

Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entitys internal control or on compliance. This report is an integral part of an audit performed in accordance with GOVERNMENT AUDITING STANDARDS in considering the entitys internal control and compliance.

Accordingly, this communication is not suitable for any other purpose.

OKLAHOMA CITY, OKLAHOMA APRIL 6, 2021 26 2 02 0 A N N U A L R E P O RT

ABOUT KEPCo Kansas Electric Power Cooperative, Inc. (KEPCo),

headquartered in Topeka, Kansas, was incorporated KEPCo strives for excellence in in 1975 as a not-for-profit generation and transmission cooperative (G&T). KEPCo strives for providing safe, reliable, economical, excellence in providing safe, reliable, economical and environmentally responsible and environmentally responsible power supply, exceptional support, and innovative services to power supply, exceptional support, our Members and the Kansans they serve.

In addition to its core mission, KEPCo also assists and innovative services our Member cooperatives on such important Generating Station; 32 MW of owned generation activities as rural economic development, from Iatan 2 Generating Plant; 20 MW of owned electric appliance rebates, load and power cost generation from Sharpe Generating Station; forecasting, and system enhancement projects. hydro allocations consisting of 100 MW from the Governed by an 18-member Board of Trustees, Southwestern Power Administration and 13 MW KEPCos Members collectively serve over 80,000 from the Western Area Power Administration; 1 consumer-members in the eastern two-thirds MW of owned generation from Prairie Sky Solar of Kansas, which represents more than 200,000 Farm; and partial requirement power purchases rural Kansans. The Board of Trustees establishes from regional utilities.

policies and acts on issues that often include KEPCo is a Touchstone Energy Cooperative, recommendations from working committees of a national network of electric cooperatives the Board and KEPCo staff. The Board also elects across 46 states that provides resources and a seven-person Executive Committee, which leverages partnerships to engage and serve their includes the president, vice president, secretary, members. By working together, Touchstone Energy treasurer, and three additional members. cooperatives stand as a source of power and KEPCos power supply resources consist of: information to their 32 million consumer-members 70 MW of owned generation from Wolf Creek every day.

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600 SW Corporate View PO Box 4877 Topeka, KS 66615 785-273-7010 www.kepco.org