Operator:

Good day and welcome to the PPL Corporation Second Quarter 2024 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] Please note today’s event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President, Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy and good morning everyone. Welcome to our second quarter investor update. Let's start with our financial results and a few highlights from our second quarter performance on Slide 4. Today, we reported second quarter GAAP earnings of $0.26 per share. Adjusting for special items, second quarter earnings from ongoing operations were $0.38 per share. Backed by another strong quarter, today, we reaffirmed our 2024 ongoing earnings forecast of $1.63 to $1.75 per share, and expect to achieve at least the midpoint of our forecast range. In addition, we continue to make excellent progress in delivering on our 2024 priorities. We're on track to complete approximately $3.1 billion in infrastructure improvements this year to advance a reliable, resilient, affordable, and cleaner energy future for our customers. We're on pace to exit our remaining transition service agreements with National Grid in the coming weeks and to complete what has so far been a seamless integration of Rhode Island Energy into PPL. Lastly, we expect to achieve our annual O&M savings target of $120 million to $130 million this year, which is compared to our 2021 baseline O&M. Looking ahead, we're well positioned to achieve our projected 6% to 8% annual earnings per share and dividend growth to at least 2027. We remain as focused as ever on executing our capital plan, which includes $14.3 billion in infrastructure improvements from 2024 to 2027. And across PPL, we continue to drive efficiencies through our Utility of the Future strategy, keeping us on pace to achieve our annual O&M savings target of at least $175 million by 2026, again, compared to our 2021 baseline. Moving to Slide 5, I want to reiterate our Utility of the Future strategy, which in a nutshell is to deliver a net zero energy system by 2050, but one that continues to be reliable and affordable for our customers. The decarbonization strategy here in the U.S. and even globally, is to electrify as much of the economy as we can and generate the needed electricity with no or low carbon solutions. This will significantly increase the demand for electricity, currently estimated at 2 to 3 times our current levels. But it also requires the electricity grid to be significantly more reliable and resilient than it is today. Our Utility of the Future strategy addresses this challenge head on across multiple focus areas. First, we will improve the reliability and resiliency of our oil and gas networks through updated design criteria and system hardening to better protect against more frequent and severe storms; through automation, AI and smart grid technology that offers self-healing grid capabilities; through grid-enhancing technologies that help us extract the most from existing infrastructure; and through robust and ever-evolving cybersecurity that protects against present and future threats. At the same time, we will continue to advance the clean energy transition affordably and reliably. We'll achieve this by transitioning to a reliable, affordable and cleaner energy mix, one that includes an important role for dispatchable natural gas as we retire aging coal-fired duration. We'll do it by positioning the grid to connecting renewables, including behind-the-meter resources. And we'll do it by continuing to lead, partner and invest in R&D to accelerate the commercialization of low-carbon technologies needed to achieve net zero, technologies such as advanced nuclear, carbon capture, hydrogen and long duration energy storage. This includes the recent partnerships we've made with the Department of Energy to explore the feasibility of coal to nuclear transitions at some of our power plant sites in Kentucky, and a leading carbon capture R&D project at our Cane Run combined cycle gas plant. Our Utility of the Future strategy also includes driving sustainable efficiencies to keep energy affordable for our customers as we invest in the clean energy transition. For every dollar of O&M we can take out of the business, we can invest about $8 in capital without impacting our customers' bills. This is why becoming more efficient is such an important part of our strategy and helps to keep the transition more affordable for our customers. We are also focused on using AI and other advanced technologies more broadly, which will drive further efficiencies and improved results. We are starting to see firsthand the power of AI and how transformational this technology will be to our business. This includes balancing the grid in peak shaving, empowering our customers and enhancing their experience with our utilities, and further improving reliability while lowering our costs. The applications of AI technology are tremendous for our industry and we are extremely focused to unlock that potential to deliver real value. And finally, we'll continue to engage and lead discussions with a wide range of stakeholders to strengthen resource adequacy in the regions we serve, specifically including markets like PJM, which is even more critical following the capacity auction results that were just released this week. With increasing demand and tight supply, we need to do everything we can to protect our customers from such price volatility, including investing further in transmission upgrades to alleviate constrained zones, incorporating additional grid enhancing technologies to get as much as we can from existing lines, and advocating for legislative changes in Pennsylvania that would drive needed generation development, including authority that would support regulated utility investments in new generation. Collectively, these actions will not only maintain reliability, but also power economic development, while at the same time, support data center growth and expansion, which we consider critical to American competitiveness and national security. This is our Utility of the Future playbook to not only address the challenges of delivering a clean energy future that is affordable and reliable but to enable us to thrive and grow in that ever-changing energy landscape. Moving to Slide 6 and a deeper dive on our support for data centers. Starting with Pennsylvania, we truly believe our Pennsylvania service territory is uniquely positioned to service large-scale data center connections. First, we've invested $6.5 billion over the last decade in our transmission network, while leveraging advanced dynamic line rating technology, which together has improved the reliability of the network to top decile performance nationwide. Our advanced transmission network as well of connecting the current data center demand in our queue and we are confident we can support even further demand should it materialize. This means we can respond very quickly to develop our interconnection requests. Our team responds within six weeks. As a result, we now have a total of over 17 gigawatts of interconnection requests in Pennsylvania and new requests continue to come in each month. While it is likely that some of these requests are duplicative due to developers assessing multiple sites at the same time, we have nearly 5 gigawatts of potential data center demand in advanced stages of planning, up from the 3 gigawatts we discussed during our first quarter update in May. These projects all have signed agreements with developers, are in various stages of PJM's review process with some having already completed that review, and costs being incurred by PPL are reimbursable by the developers if they do not move forward with the projects. On the financial impact of data centers, the primary upside is in the form of additional returns on transmission investments through FERC formula rates. We estimate that the 5 gigawatts of potential demand in the advanced stages represents incremental PPL capital needs of $400 million to $450 million. And because we operate in PJM in Pennsylvania, this data center development will reduce net transmission costs for our existing retail customers. We estimate for every 1 gigawatt of data center demand that's connected to the grid, our residential customers would save about 10% on the transmission portion of their bill. For the average residential customer, that would represent about $3 a month in savings. For the 5 gigawatts in advanced stages of development, that would represent about $15 a month in savings for the average residential customer using 1,000 kilowatt hours a month of electricity. Turning to Kentucky, our service territory there is better suited for midsized data centers as we also have an abundance of land and water, have lower energy prices than much of the U.S., and provide for tax incentives in certain counties that we serve. We are also confident we can make the needed transmission and generation investments required to support continued data center and industrial growth in the Commonwealth. We continue to work with data center developers in our LG&E and KU service territories with active requests totaling more than 2 gigawatts in the 2027 to 2033 timeframe, with about 350 megawatts in advanced stages. As in Pennsylvania, any transmission upgrades in Kentucky would be additive to our capital plan, although the more significant capital investments in Kentucky would arise from any incremental generation investments. Once our new Mill Creek 5 combined Saskatchewan plant is operational in 2027, we estimate to have approximately 400 to 500 megawatts of generation capacity available to support further load growth, while maintaining our prudent reserve margins. With Kentucky coming off the best four-year period of economic growth in the state history, on top of this potential new data center demand, we continue to actively monitor our capacity needs to maintain a safe and reliable network for customers. Should new generation become necessary to serve higher electricity demand, we can use Mill Creek Unit 5 as a reference for pricing on potential new baseload generation. That unit, which was approved by the KPSC last year, has an expected cost of $1 billion. The updated integrated resource plan, which will be filed with the KPSC in October, will guide any further generation needs. Keep in mind, there are many factors that go into our generation planning and reserve margin analysis. We will fresh that analysis this fall and will include updated load projections and related supply needs. As we think about possibly needing to build a second combined cycle gas plant to meet that load growth, it's important to note that we still have a spot in the queue for a second gas turbine from our prior solicitation. It is important to highlight that our rate designs in both Pennsylvania and Kentucky protect our customers from undue burdens related to data center connections. In both jurisdictions, the data centers are under tariffs that will benefit our non-data center customer rates. Bottom-line, as I shared last quarter, we're ready and eager to support prospective data centers and we are well-positioned to serve their needs. And the good news is that our customers, shareowners, and the states which we serve all benefit from this development. Moving to Slide 7 and several key operational and regulatory updates. On July 11th, the Pennsylvania PUC approved PPL Electric Utilities' request to modify its current long-term infrastructure improvement plan, or LTIP. The decision grant permission to classify approximately $200 million of reliability investments through 2027 as capital eligible for recovery through the DSIC or the distribution system improvement charge. While the PUC denied our request to classify $84 million of planned investments in predictive failure technology as being DSIC eligible, the PUC viewed our predictive failure project favorably, and indicated PPL Electric may seek recovery of these project costs in a future base rate case. Overall, the approved modification to our LTIP represents a positive outcome that supports our continued investments to repair and replace aging infrastructure and strengthen grid reliability. Changes to the plant will be impacted during the current period, which extends through December 31st, 2027. Also in Pennsylvania, our DSIC waiver petition continues to proceed through the process as expected. In June, an ALJ was assigned and a procedural schedule was created, which we have provided in the appendix. Based on that schedule, we continue to expect the proceeding to conclude later this year with a decision in early 2025. Shifting to Kentucky. We recently kicked off construction of our planned 650-megawatt Mill Creek Unit 5 combined cycle natural gas plant following several months of prep work. The new unit is part of more than $2 billion in planned generation investments over several years to economically replace 600 megawatts of aging coal generation with a reliable, affordable, and cleaner energy mix. In addition, all long lead-time equipment deliveries remain on schedule. Overall, we're on track to complete construction and begin commercial operation of the unit in 2027. We will earn AFUDC on this capital project until it goes into commercial operations. In addition, we secured a site compatibility certificate from the KPSC in July for a planned 120-megawatt solar facility to be built in Mercer County, Kentucky. The approval helps pave the way for final site design and construction of the new facility, which we expect to begin commercial operation in 2026. Finally, just this week, we successfully completed another labor contract negotiation. This latest agreement covers about 60 employees in Kentucky and represents the fifth successful union negotiation over the last year, representing over 50% of our union workforce. We look forward to continued success in this area for years to come, balancing the needs of our employees and customers. That concludes my strategic and operational update. I'll now turn the call over to Joe for the financial update.

Vince Sorgi:

Thank you, Joe. In closing, we continued our strong track record of execution in the second quarter, further strengthening PPL's investment thesis. We are implementing our Utility of the Future strategy necessary to deliver a clean energy future affordably and reliably. We are securing constructive outcomes in key regulatory proceedings. We're achieving strong financial results, which positions us to deliver at least the midpoint of our targeted EPS growth this year and to grow earnings and dividends by 6% to 8% through at least 2027. We're maintaining one of the premier balance sheets in our sector that supports the growing investment needs across our jurisdictions. We're advancing the economic transition of our generation fleet in Kentucky, and we're continuing to power economic development that strengthens our communities, including the support of data center expansion. For all, we've made significant progress on our plans through the first half of the year. We're eager to build on this momentum in the back half of 2024 and beyond. And we look forward to once again delivering on our commitments to share owners, customers and the communities we serve. With that, operator, let's open it up for questions.

Shar Pourreza:

Hey guys, good morning. Good morning Vince. Vince, just trying to get a sense on the transmission side. Looking at 400 to 450 incremental for this update. We've also seen a blowout print capacity auction potentially foreshadowing more RTEP work. What does all this start to add up as we look at your $725 million placeholder for 2027, how should we think about the timing of the shape of that spend as we update our models for 2028 and beyond versus that 2027 placeholder you have in plan? Thanks.

Shar Pourreza:

And Vince, just on -- it's a good segue right to my follow-up. But just on the broader resource question to BR. A lot of your wires peers have commented on it this week you just did. We've had -- in the past, we've had similar attempts on this kind of reregulation of certain amount of generation over 13 years ago, right, in New Jersey and Maryland with the LCAP and MCAP program, which ultimately got struck down by the courts, it was a little bit more on the capacity side versus energy. But I guess what's different focusing on potential generation request by the wireless companies? Where are the conversations at with policymakers? Are they waiting for the IP piece to step up and build? What's your trigger point? Should we be watching a legislative window next year, I guess, just elaborate a little bit on some of the dialogue you guys are having?

Shar Pourreza:

Okay, perfect. I appreciate the additional color here. Congrats on the results and seriously, we'll see you soon.

Operator:

The next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Durgesh Chopra:

Hey, good morning Vince. Thank you for taking my questions. Hey, I just want to continue the discussion on the PJM auction results. You mentioned that IPPs probably want another signal before they can commit capital here. This is a pretty dramatic signal in terms of price increases. One of the things we're consistently getting asked from investors is what does it do to utility builds? Your peers kind of talked about double-digit increases in some of their services. I know this is not 9 times translates into that large a bill increase, but just maybe can you discuss that a bit what does this mean for customer bills?

Durgesh Chopra:

That's very helpful. I appreciate the detail there. Then just switching gears on the balance sheet. Just thinking about the $400 million to $450 million you mentioned and other opportunities across the different states. How should we think about your balance sheet capacity? What CapEx could be done with debt? And at what point you might consider equity as we think about you rolling forward your plan here into 2029 now?

Durgesh Chopra:

Thank you. Thank you, both. Appreciate the time.

Operator:

The next question comes from David Arcaro with Morgan Stanley. Please go ahead.

David Arcaro:

Hey good morning. Hey, thanks for taking my questions. Looking ahead to the Kentucky IRP in October. Just curious, does it look likely at this point that you'll need new generation as you're crafting that before you file it?

David Arcaro:

Yes, understood. That makes sense. I was also curious, do you have a view on how long -- just thinking about the PJM market, how tight that market has gotten here. How long does this does it take to build a new gas plant in PJM realistically? Like when could we actually see a supply response kind of from anybody as we look at supporting the supply/demand tightness?

David Arcaro:

Yes, got it. That makes sense. Tough problem to solve, but depending on which can you go. Maybe one last question from me. You've highlighted the TMO in the slides. And so looking at the O&M opportunities, I was wondering, have you taken a look at kind of beyond the 2026 targets? What are the -- what's the opportunity set here? Can you continue beyond your existing targets on O&M cost reductions?

David Arcaro:

Great. Thanks so much. Appreciate the color.

Operator:

The next question comes from Julien Dumoulin-Smith with Jefferies. Please go ahead.

Vince Sorgi:

What we're seeing with the current 5 gigs is that, that starts in 2026, we would expect to be at our first gig in 2027 and then probably added 1 gig each year thereafter.

Vince Sorgi:

Yes, it's about $3 a month per gigawatt. So, by the time we get the full 5 gigawatts, it would be about $15 a month in lower bills for the per residential customers.

Vince Sorgi:

Yes, sure. I mean in general, I mean, $84 million isn't going to necessarily impact our rate case timing, Julian. But -- so we'll look to continue to deploy that technology and seek recovery in our next base rate case. Joe, you can talk about timing on that?

Julien Dumoulin-Smith:

Got it. All right. Excellent. And then related here, your thoughts on -- just going back to that, I think you said October filing on the next IRP here. Just to the extent to which that you are able to move swiftly on that second combined cycle here, presumably as a piece of that. I mean how front-end loaded versus longer-dated could some of these opportunities prove themselves?

Julien Dumoulin-Smith:

Yes, probably, 2028 to 2030 there. All right. Cool. Excellent. Thank you guys. Appreciate it very much.

Vince Sorgi:

Hello Ryan.

Vince Sorgi:

Yes. So look, we're making good progress with the developers on all of those. We're working through the PJM planning process as well as the PUC processes, all of that is progressing well. I would say probably no change, Ryan, from what we talked about on the Q1 call. We still expect that any formal announcements would come kind of at the end of the year, beginning of next year. The data center companies are going to want to make sure we get through those full processes before they're announcing. So we would expect that to be really around the end of the year, beginning of next year.

Vince Sorgi:

That's all 5.

Vince Sorgi:

I mean, again, that's really very project specific. So, we'll update this quarterly so you have a sense of how we're progressing on overall data center demand in our jurisdictions, how much is in the queue, how much is in advanced stages. We'll try to provide updated CapEx estimates as we go along. But it'd be hard to again, we're talking $50 million to $150 million. So, that's a $100 million range depending on the project. So, we'll keep that disclosure updated as we go.

Vince Sorgi:

No, I mean this was really -- the decision to sell the building was a kind of post-COVID had way too much real estate from what we needed. It was underutilized. And so nothing to do with headcount.

Operator:

The next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Vince Sorgi:

Likewise.

Vince Sorgi:

Well, look, I think there's a number of things we're focused on, Anthony, right? There's resource adequacy overall in the market, in particular, in PJM. And so if those higher prices incentivize new generation and sure resource adequacy, that's a good thing, for all of us in PJM. We talked about the higher cost that will ultimately bear for our customers, which obviously is not great for our customers, but we're looking at all alternatives to see how we can bring that generation to bear in the most lease cost way, as you know. So, there are some puts and there are some takes, I would say, with that print.

Vince Sorgi:

Yes, that's why the range is $10 to $15. So, we have in the early part of 2025 where we've already procured that power. It wouldn't have as big of an impact as the back half when we're procuring additional power and those prices might be reflected in what we're buying. So, the next solicitation is October, 4th quarter of this year. So, we're suspecting that those prices will make its way into that solicitation.

Operator:

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Sorgi for any closing remarks.

Operator:

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator:

Good day, and welcome to the PPL Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

Andy Ludwig:

Good morning, everyone, and thank you for joining the PPL Conference Call on First Quarter 2024 Financial Results. We have provided slides for this presentation on the Investors section of our website.

Operator:

[Operator Instructions] And today's first question comes from Shahriar Pourreza with Guggenheim Partners.

Vincent Sorgi:

Yes, sure, James. So just in terms of firmness, we do have signed agreements for that 3 gigawatts. So continuing to work through the process with multiple data center companies would probably be in a position or would not be in a position to make a public announcement either from them or us until kind of late this year, early next year. So still a little bit of ways to go on these, but we do have signed agreements with them all.

James Kennedy:

Okay. Got you. And then keeping it in Pennsylvania, if the DSIC waiver process were unsuccessful, I guess, how would that impact the rate case cycle plan and any impact to the distribution spend plan as it's laid out today?

Operator:

[Operator Instructions] Our next question comes from Durgesh Chopra with Evercore ISI.

Vincent Sorgi:

Yes, sure. So the agreements that we've signed basically enable us to start the development work of the projects, and it would result in reimbursement back to the company should we not move forward with the data center. So data center companies are really taking the risk on that. Overall, we feel good about our ability to get these projects approved through the regulatory process. But you're right, we do need to go through that process. But we are currently spending money on the development for the ones that at least we have the signed agreements, we're starting those now to be ready for a 2026 the initial service fee.

Vincent Sorgi:

I do. Yes, it is not tied to any specific generation. So ultimately the market through PJM and/or other means needs to continue to build new generation to keep up with this demand. But that will go through the general PJM process.

Vincent Sorgi:

There isn't, although we do expect to basically have a decision on both the DSIC waiver and the LTIP filing by the end of the year. So in general, the LTIP takes about 9 months, those types of filings, and we think it makes sense. Obviously, we requested the DSIC decision to be before the end of the year so that we could apply it for 2025.

Operator:

And our next question comes from Steve Fleishman with Wolfe Research.

Vincent Sorgi:

Yes. So I don't want to get into details around like deposits or anything like that [indiscernible], although I will say the agreement, again, that we are -- that we signed in Pennsylvania, those agreements permit us to start spending on these and then we would get recovery of those for some reason if we don't move forward. So I think the curiousness of the counterparties is there [indiscernible] clearly, right? And for all the reasons I talked about in my prepared remarks, I think we do bring a number of benefits to bear for these folks. Not the least of which is not only our capacity to connect them, but our ability to meet their in-service deadlines. So we can get this work done in time for 2026 in service states for these data centers.

Steven Fleishman:

Okay. And then just in terms of -- I mean, we're hearing data center growth in several other parts of the PJM market. And I'm just wondering, do you see the potential need for more transmission, not for necessarily your own data center, but just for all this broader growth potential in PJM that could create more need and obviously move power flows and the like. Any thoughts there.

Vincent Sorgi:

Yes. In general, certainly, where we can engage with the commission end up with something in between, sure, certainly.

Vincent Sorgi:

Thanks a lot. And I just want to thank everybody for joining us on today's call. I do want to remind everyone that this Saturday is the 150th running of the Kentucky Derby, which is the most exciting 2 minutes in sport. So enjoy the race, and we hope to see you soon. Thanks, everybody.

Operator:

Good day, and welcome to the PPL Corporation Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy and good morning everyone. Welcome to our fourth quarter and year end investor update. I'm excited for today's call as we closed out 2023 in strong fashion and our future continues to look very bright. And I look forward to highlighting why that is on today's call. Turning to Slide 4. I'm very proud of what our PPL team was able to accomplish in 2023. In short, it was a year of challenges met and promises kept. Most importantly, we delivered electricity and natural gas safely and reliably to our more than 3.5 million customers. This included top quartile T&D reliability at each of our utilities, including record reliability for our companies in Kentucky and Rhode Island and top decile performance in Pennsylvania. Our generation reliability in Kentucky was among the very best in the nation. We achieved all this despite heightened storm activity in each of our service territories. At the same time and despite over $0.10 per share impact from mild weather and storms, we delivered on every one of our financial commitments to our shareowners. Namely, we achieved ongoing earnings of $1.60 per share, exceeding the midpoint of our ongoing earnings forecast by $0.02 and delivering over 8% growth from pro forma 2022. We achieved this through our strong focus on operational efficiency and outperformance in key areas that Joe will cover in his financial review. We also executed $2.4 billion in planned capital spend on time and on budget to advance a reliable, resilient, affordable, and cleaner energy future. We exceeded our annual O&M savings target for 2023 through our strong enterprise-wide focus on technology and business transformation, achieving $75 million in savings from our 2021 baseline, reinforcing our continuous improvement mindset and putting us solidly on track to deliver our targeted $175 million in O&M savings by 2026. These operational and financial achievements were matched by strong results elsewhere in the business that position us for future success. Underpinned by sound planning and effective management of regulatory proceedings, we secured constructive regulatory outcomes in Kentucky and Rhode Island. In Kentucky, we secured approval for about $2 billion in generation replacement investments as part of our CPCN process that concluded in November of last year. The KPSC's decision ensures that we can continue to meet our customers' future energy needs safely, reliably, and affordably, while advancing a cleaner energy mix in the state. And in Rhode Island, we secured approval of our first infrastructure, safety, and reliability plans since acquiring Rhode Island Energy. In addition, we received the green light to deploy advanced metering functionality across Rhode Island, as we lay a foundation for a smarter, more resilient, more reliable, and more dynamic electric grid capable of supporting the state's leading climate goals. Finally, we continue to provide a smooth and seamless transition to PPL ownership for our Rhode Island Energy stakeholders, completing all planned 2023 integration milestones and keeping us on track to exit our remaining transition service agreements with National Grid in mid-2024. These achievements are a direct result of our focus on execution, our disciplined investment strategy, our ability to adjust when challenges arise, our experienced leadership team, and clarity of purpose across PPL as we pursue our Utilities of the Future Strategy. Looking ahead, we recognize we still have room to improve as we pursue our vision to be the best utility company in the US. And in 2024, we're determined to make continued progress as we seek to maximize long-term value for both our customers and shareowners. Turning to Slide 5. Today, we announced the results of our updated business plan, which extends our projected growth outlook through at least 2027. In connection with this update, today, we announced our 2024 ongoing earnings forecast range of $1.63 to $1.75 per share. The midpoint of this range, $1.69 per share, represents 7% growth from our 2023 ongoing earnings per share target, consistent with our long-term growth targets. In addition, today, we announced a quarterly common stock dividend of $0.2575 per share. This represents a 7.3% increase from the current quarterly dividend of $0.24 per share and aligns with our commitment to dividend growth in line with our EPS growth targets. We've extended our 6% to 8% annual EPS and dividend growth targets through at least 2027 based off the midpoint of our 2024 earnings forecast range. In addition to today's updated growth forecast, our updated capital plan includes $14.3 billion from 2024 to 2027 to strengthen grid reliability and resiliency and advance a cleaner energy mix without compromising on affordability. The new plan is expected to drive average annual rate base growth of 6.3% through 2027, up from the prior growth rate of 5.6%. We plan to fund these additional investments supported by our exceptional balance sheet as our credit metrics remain well within our targets throughout the planned period without the need for equity issuances through at least 2027. As I highlighted in my recap of 2023, we've made outstanding progress towards our multiyear target of at least $175 million in annual O&M savings by 2026. Based on the progress we made last year, we remain solidly on track to deliver our 2024 targeted savings of $120 million to $130 million. In terms of rate case timing in the plan, we do not anticipate any base rate case filings in 2024 in Pennsylvania, Kentucky, or Rhode Island. Looking beyond 2024, our current projections would have us filing a base rate case a bit sooner in Kentucky than previously anticipated due to several factors, including the CPCN decision and additional capital investment needs on the T&D side of the business. Currently, we believe the earliest we would file a rate case in Kentucky will be in the first half of 2025. For Rhode Island, the earliest we would file is late 2025, which is consistent with the prior plan. Finally, in Pennsylvania, recall that we have not been in for a base rate case since 2015 and we have no plans to go in again before 2026 at the earliest. The DSIC mechanism in Pennsylvania has operated as designed to support long-term infrastructure investment between rate cases. We do see an increased need to invest more to improve reliability on the distribution system and filed with the Pennsylvania PUC a request to modify our long-term infrastructure improvement plan, or LTIP, which includes an increase in planned DSIC eligible investment over a five-year period. We are considering filing a waiver request with the Pennsylvania PUC in the near future, requesting modifications to the DSIC mechanism to support accelerated replacement of aging infrastructure. As always, our focus is on maintaining affordability for our customers. And we will continue to evaluate the need for future rate cases based on a variety of factors, including capital plans, interest rates, market conditions, and regulatory lag. Turning to Slide 6. Our updated plan and business outlook supports our Utilities of the Future Strategy, which is core to everything we do. What does that mean to us? It means updating our design criteria and continuing to harden our transmission and distribution systems to protect against climate change and keep our systems and data secure again cyber threats. It means expanding our industry-leading use of technology, including smart grids, automation, data analytics, AI, and technologies that haven't even been invented yet to build a self-healing grid. It means investing in R&D to drive innovation to advance technologies that can be scaled safely, reliably, and affordably to meet our customers' evolving energy needs and to actually achieve net zero. Like the carbon capture project that was awarded a $72 million DOE grant at our Cane Run combined cycle plant in Kentucky. At the same time, it means expanding transmission and incorporating grid-enhancing technologies to connect more renewables and improve reliability for our customers; advancing a cleaner generation mix, while keeping energy safe, reliable and affordable; expanding our ability to reliably manage two-way power flows on the distribution network as we connect significant more distributed energy; driving operational efficiencies to support an affordable clean energy transition; partnering with our customers and state and local officials to enable growth and economic development in our communities; and lastly, expanding self-service options for our customers using digital tools to enhance the customer experience. Turning to Slide 7. As you can hear, creating the Utilities of the Future requires change across our entire business, and it requires significant investments to support a net zero economy. The industry and others are projecting a 200% to 300% increase in electricity demand, which will require additions of reliable generation unless we see unprecedented amounts of energy conservation. At the same time, aging fossil fuel plants in this country are being retired very rapidly without replacements of reliable, dispatchable generation capacity. And considering that fossil fuel generation represents more than 50% of our total capacity in the US, that presents a potentially major problem if this transition is not managed appropriately. The math simply doesn't add up when we don't have proven, scalable technology currently available to actually achieve net zero carbon emissions that customers can afford. Most technologies used in our industry took 40 years to commercialize from the demonstration phase. We need to cut that timeframe in half, at least to meet net zero by 2050 targets, especially as we think about the big four new potential technologies, nuclear SMRs, carbon capture and sequestration, long-duration energy storage, and hydrogen. In the meantime, we need to leverage commercially viable resources that exist today to reduce our carbon footprint, while maintaining reliability. Those that are dispatchable, can ramp up and down quickly and are vital to balancing the gaps left on the system by intermittent renewables. That is why natural gas generation is the key to achieving deep decarbonization in this country and it actually allows us to deploy more renewables than we would otherwise be able to do because of the reliability benefits of natural gas. In a nutshell, this is what makes the energy transition such a challenge being able to deliver the clean energy future in a way that maintains reliability and affordability for our customers. However, with every challenge brings opportunity. And that's why we know our Utilities of the Future strategy is the right approach for this dynamic energy landscape. It's why our generation transition plan in Kentucky is reasoned and delivered and ensures we can maintain the reliability and resiliency of our customers and public officials demand. We actually need to figure out a way to do the same in deregulated markets like PJM and ISO New England. And it's why becoming more efficient is such a critical component of our strategy because for every dollar of O&M we can take out of the business, we can spend $8 on capital without impacting the customer bill. The energy transition simply won't happen if customers cannot afford it. This is how we will achieve our long-term vision and how we intend to enhance the value we deliver for all stakeholders. It requires us to lead from the front and that is exactly what we've been doing and what we will continue to do in 2024 and beyond. Turning to Slide 8 and our priorities for 2024. In addition to advancing our Utilities of the Future Strategy, our 2024 priorities also include achieving at least the midpoint of our earnings per share forecast, executing $3.1 billion in infrastructure investments to maintain safe, reliable, and affordable energy for our customers and modernize the grid. Delivering on our 2024 O&M savings targets as we deploy scalable technologies across our portfolio, take advantage of economies of scale created by our centralization efforts, and continue to leverage data analytics to reduce costs and optimize asset planning and maintenance. Finally, we need to complete our integration of Rhode Island Energy and exit all remaining tranches and service agreements with National Grid. Bottom-line, we're eager to showcase PPL's strengths once again in 2024, and we are poised to lead on these very significant issues facing our industry. We have tremendous conviction in our strategy and business plan and in our ability to execute them both and we look forward to once again delivering on our commitments to customers and shareowners. That concludes my business and strategic update. I'll now turn the call over to Joe for the financial update.

Vince Sorgi:

Thank you, Joe. As I mentioned earlier, this is a pivotal time for our industry, a time that requires us to lead with strength. There is no shortage of challenges facing our industry and being able to deliver the clean energy transition safely, reliably, and affordably for our customers. This is what gets me out of bed every morning and why I'm so excited to be a part of this industry at this moment in time. I'm convinced we have the right strategy for the right time, a strategy that prioritizes efficiency and affordability built on our core strength and will maximize long-term value for customers and shareowners alike. We are well-positioned to continue our competitive and predictable long-term earnings growth of 6% to 8% a year. We've established a derisked and disciplined business plan that advances a safe, reliable, affordable, and sustainable energy future while providing investors with an attractive return proposition. And finally, we have an experienced leadership team that is 100% committed to delivering on these objectives and backed by a dedicated team of 6,500 strong across PPL. With that, operator, let's open it up for questions.

Shar Pourreza:

Hey guys.

Shar Pourreza:

Good morning Vince. So, just on the transmission side, I see you've added a couple of hundred million to the Pennsylvania plan. How much of that is tied to the recent RTEP Window 3 awards? The reason why I'm asking is we've seen some significant increases in transmission needs and transfer capability across utilities in Eastern PJM and EMAC. So, just trying to get a sense for what has started to trickle into your plan versus incremental? Thanks.

Shar Pourreza:

Got it. Perfect. And then just coming back to the Kentucky spend, the CPCN process, obviously, had deferred, but not quite closed the door to the second CCGT. Is that something like you could revisit and could the spend start to land in the outer years of the latest plan? Just kind of trying to get a sense for the next incremental focus. Thanks.

Shar Pourreza:

Perfect. That’s all the questions I had. Congrats on the execution, it's pretty notable. Appreciate it.

Operator:

The next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Durgesh Chopra:

Hey good morning Vince. Good morning. I just had a question on Pennsylvania. Maybe just can you elaborate on what you plan to do or any color you can share on the district itself? The reason why I ask is the -- your peer water utility in the state, their rate case is drawing a lot of attention, there are new commissioners at the commission. So, just maybe just talk to the regulatory environment in the state. And then what -- if you could share any color on what you might try to do with amending the DSIC mechanism, that would be great? Thank you.

Durgesh Chopra:

Perfect. I appreciate that color and congrats on the quarter guys. Thank you.

Operator:

The next question comes from Angie Storozynski with Seaport. Please go ahead.

Angie Storozynski:

Good morning. So, I -- it's a bit of an unfair question, I admit. So, we're waiting to see this potential large data center to be developed next to or -- directly next to the Susquehanna nuclear plant, which is obviously, your service territory and your former asset. So, I'm just wondering, so if that were to happen, if we were to have this almost 1,000 megawatts data center, what type of investments would that require from you guys from like a T&D perspective? And is it already embedded in your plan?

Angie Storozynski:

And can I ask about Kentucky. So, you mentioned that the grid is getting tighter from the power supply perspective. I mean, one, does it make you sort of reassess your plans about retirements of coal plants and/or additions of new gas plants in the state? And also, how do those data center providers actually look at thermal power from gas and coal versus, I don't know, nuclear or renewables? Does that matter? Do they really care about the carbon footprint or emissions? Or is it mostly the total cost and how cheap the power is?

Angie Storozynski:

Awesome. Thank you. Congrats.

Operator:

The next question comes from Paul Zimbardo with Bank of America. Please go ahead.

Vince Sorgi:

Good morning. Hey Paul.

Joe Bergstein:

Yes, sure. Hey Paul, it's Joe. So, first focusing on what drove the outperformance in 2023. As we noted, we achieved $75 million in savings compared to the $50 million to $60 million target that we had coming into the year. It was really driven by acceleration of some of the initiatives from 2024. When we started the TMO process, we have initiative owners for all these projects that will deliver these savings and we've set milestones and KPIs for all of them. And so what we saw bringing that rigor to the process has actually allowed us to accelerate in some areas, which gives us confidence in achieving the $120 million to $130 million next year and the $175 million overall. As we talked about -- as Vince talked about in his remarks, focused on the Utility of the Future and ensuring affordability for customers is key. And so from that perspective, we'll continue to look to get more efficient as we go through the plan. But where we are today is we're still holding that $175 million -- at least $175 million as we said. What I can say is the growth that we're talking about here and extending that into 2027 doesn't rely on further efficiencies. So, to the extent that we're successful in identifying more of that would be upside to the current plan.

Vince Sorgi:

Yes. Well, clearly, because we have no rate cases in 2024 across the board, we're able to assess the regulatory environment and the outcomes that our peers are getting. As we know, not every company gets the same outcome even under the same jurisdiction, so it wouldn't totally impact our decision. But clearly, it's something we will keep an eye on and feed into our decision-making. And again, the fact that we don't have anything for the -- certainly the rest of this year and likely the first one will be down in Kentucky sometime in 2025. I feel pretty good about our timing that we have in the plan right now.

Joe Bergstein:

Thank you.

Operator:

[Operator Instructions] The next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Joe Bergstein:

Hey Anthony, it's Joe. We're assuming 50 basis points load growth throughout our planning horizon.

Vince Sorgi:

Yes, it's the latter, Anthony. We have some modest value in the plan coming from the DSIC filing. I think the real benefit is it would enable us to stay out longer in Pennsylvania and make the investments that we had talked about. But yes, to your point, if for some reason that, that request does not get approved, we're comfortable we can manage that and still maintain the growth targets that we've talked about.

Joe Bergstein:

Yes, Anthony, we'll have to assess that as we get closer. Obviously, where interest rates are will play a big role in what we do there. So, I think it's a little early to tell on how we'll treat those. Our assumption is that we refi them.

Vince Sorgi:

Take care Anthony. Go Rangers.

Vince Sorgi:

Hey David. Good morning.

Joe Bergstein:

Yes.

Joe Bergstein:

Yes, I would just say we're comfortably in that 16% to 18% range. We -- in the early part of the plan, we continue to have integration cost for Rhode Island that obviously are -- impact the credit metric and those roll away. And then you see the CapEx increase later in the plan. So, we feel really good about where we are within that range and kind of operate comfortably around the midpoint.

Vince Sorgi:

Sure. So, a couple of opportunities there. Obviously, we have the RFP that we've issued in Rhode Island. We are not the owners of that, but we would be the offtaker of that generation. And so to your point, we have -- we do have in the plan the transmission required to the enhancements to transmission grid to handle that offshore wind load. We have talked in the past about our joint venture with wind grid to potentially provide wet transmission solutions more broadly up in Rhode Island or New England that we would partner with them on where we would not own the turbine -- the wind turbine generation, but we would build out a mesh network of sorts to lower the overall cost of the transmission build-out as we think about upwards of 30 gigs of offshore wind over the next, say, decade being built out there. That opportunity will highly depend on where the US Treasury ultimately comes out on their implementation provisions for the IRA. So, we are monitoring those regulations very closely. The initial regs that came out from the treasury, we think were in error in proposing that the regulations would limit the eligibility of the ITC credit for that wet transmission only if that transmission is owned by the same taxpayer that owns the wind turbines themselves. That limitation, if the final rules come out that way, would unnecessarily raise the cost of the offshore wind industry, which we know is quite challenged. And so we continue to engage with the administration and other policymakers to try to improve that final regulation and expand it to all taxpayers, not just ones that own the turbines and to try to bring the overall cost of offshore wind down so that we can get this very important clean energy source kind of up and running in the US. But I can't give you any assurance in terms of what that final rule is going to say. I can say we don't have any of that upside potential in our business plan. It's not in our growth projections at all at this point. I would say, kind of hinges on this. And then the states really coming together up there and partnering on this broader solution, which we believe will certainly bring the cost of offshore wind down.

Vince Sorgi:

Sure.

Vince Sorgi:

Just want to say thanks for joining us. Again, strong end to 2023, really looking forward to 2024 and beyond. I've spent quite a bit of time talking about the Utility of the Future strategy. We do think that's an area that differentiates us from our peers as well as the strength of our balance sheet and our overall dividend policy where we're growing the dividend in line with earnings. So, just appreciate everybody for calling us and -- for joining us and look forward to providing updates as we go through the year. Thanks so much.

Operator:

Good morning, and welcome to the PPL Corporation Third Quarter 2023 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.

Vincent Sorgi:

Thank you, Andy, and good morning, everyone. Welcome to our third quarter investor update. Let's start with an overview of our financial results on Slide 4. Today, we announced third quarter reported earnings of $0.31 per share. Adjusting for special items, third quarter earnings from ongoing operations were $0.43 per share compared with $0.41 per share a year ago. These results position us well to deliver our 2023 earnings guidance, despite the significant impact of mild weather and storms in the first half of the year.

Operator:

[Operator Instructions] Our first question will come from Nick Campanella of Barclays.

Joe Bergstein:

Yes. Hey Nick, it's Joe. Thanks for the question. Yes, we expect linear growth through our plan period, as we've talked about before. Obviously, there's market forces at place, as you mentioned, but we think that they're manageable and can deliver that linear growth.

Joe Bergstein:

Yes, sure. Well, you're right. In our current plan, we just have one rate case in Rhode Island in the back half of 2026. There's obviously a lot of factors that go into determining rate case timing, including -- and you named a few of them, capital plans, interest rates, regulatory lag on capital that doesn't run through some sort of mechanism and many, many more. We're going through our business planning process now, Nick, and we assess all of those factors as we do so. We'll provide views on what we think about rate case and potential timing when we give an update on our year-end call.

Joe Bergstein:

Yes. Great.

David Arcaro:

Let's see. With the CPCN, I was wondering, we've seen inflation across supply chains fairly broadly and a lot of components. Wondering if costs have risen for the solar that you're requesting and for the CCGTs that you've got in the plan in front of Kentucky since your initial filing.

David Arcaro:

Yes, makes sense. So it's still economic, and I presume, so a higher CapEx essentially for kind of the full plan that's in front of the commission now.

David Arcaro:

Yes. Okay. Yes. And then as you look forward toward rolling the capital plan forward a year, should we expect equity to be incorporated into the financing strategy? Or is there still balance sheet headroom as you look out to add more CapEx and rate base growth?

Joe Bergstein:

Yes, sure. So as I talked about in my prepared remarks, Dave, the balance sheet is strong, and we expect to operate in that 16% to 18% FFO or CFO to debt range that we've been talking about. Clearly, we can finance the current capital plan without any need for equity even in today's market. We'll see as we roll the plan forward what that looks like.

Operator:

Next question comes from Shar Pourreza of Guggenheim Partners.

Vincent Sorgi:

Well, overall, Shar, we're tracking very well against the $175 million. So obviously, we have that layered in '24, '25, '26. Joe, I'll let you cover a little more detail on kind of the outperformance for '23. Of course, when we're looking at the additional storm costs and weather, those are anomalistic. And so some of the areas that we targeted to help offset that are things like open positions looking at our maintenance schedules, et cetera. So some of those things will not be permanent, Shar, but we're tracking very well on the $50 million to $60 million, which obviously are permanent on our way to the $175 million.

Shahriar Pourreza:

Got it. Perfect. And then Vince, I know -- just to maybe reiterate our conversation from the prior call. I mean at this point, are you prepared to be flexible in your plans, depending on how the Kentucky PSC ultimately rules on the CPCN next week? Is that something, I guess, you will be prepared to talk about right after that at EEI? Or you have to wait for the 4Q update?

Operator:

The next question comes from Angie Storozynski of Seaport.

Vincent Sorgi:

Yes, Angie, no real update since our last call. As you know, the trial date has been set for February of next year. We're looking forward to that trial. As we said all along, we fully believe the distribution of those proceeds were in compliance with all applicable laws, and we stand ready to vigorously defend that position. So nothing really, really new. It being in bankruptcy court, not surprising that some of our motions were not accepted. So not surprising there, but still feel very confident in our case..

Paul Zimbardo:

Just to follow up a little bit on the transmission opportunity side. I know you addressed Kentucky pretty well, but what about the Eastern side, the PJM footprint? Like I think there was like a $145 million award. And just holistically, if you could talk about some of the opportunities from Pennsylvania, PJM broadly transmission.

Joe Bergstein:

We are, yes.

Anthony Crowdell:

Just one quick one. You talked about the RFP for offshore wind in Rhode Island. Just curious how committed the state is to offshore wind, as you've noticed some other states, particularly New York seems to be bulking at the higher power prices.

Ryan Levine:

Quick question. In terms of the 2.3% industrial load decline in Kentucky for the quarter on a weather-normalized basis, what was the driver of that? And what's your longer-term outlook for industrial growth in Kentucky ahead of the CPCN decision next Monday?

Operator:

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Sorgi for any closing remarks.

Operator:

Conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Operator:

Good day, and welcome to the PPL Corporation Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Note that this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President, Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy, and good morning, everyone. Welcome to our second quarter investor update. Let’s start with our financial results and a few highlights from the quarter on Slide 4. Today, we announced second quarter reported earnings of $0.15 per share. Adjusting for special items, second quarter earnings from ongoing operations were $0.29 per share compared with $0.30 per share a year ago. Overall, second quarter results were in line with our expectations apart from the continued mild weather and storm activity in Kentucky and Pennsylvania, as this has been one of the most active storm years we’ve ever experienced. Between the mild weather and storm O&M, our year-to-date results were negatively impacted by about $0.09 per share compared to our original plan. But despite these impacts, we remain confident in our ability to deliver on our 2023 ongoing earnings forecast of $1.50 to $1.65 per share with a midpoint of $1.58 per share. We have identified several areas in which we can offset the headwinds from weather and storms, and Joe will cover that in detail in his financial review. As you know, one area we remain extremely focused on is O&M, and we are on track to achieve the $50 million to $60 million targeted reductions this year. And despite the incremental storm expenses, we are tracking slightly ahead of our O&M forecast through June. We expect that trend to continue and improve through the second half of the year. In addition, today, we reaffirmed our projected earnings per share and dividend growth rate of 6% to 8% through at least 2026, as we remain confident in our low-risk business plan. This will be supported by our $12 billion capital investment plan and targeted O&M savings of at least $175 million by 2026 to advance a reliable, resilient, affordable and clean energy future. Turning to a few second quarter operational highlights. We continue to deliver excellent reliability for our customers across our jurisdiction, again, despite the increased storm activity in both Kentucky and Pennsylvania. This is a direct result of our ongoing investments, not only in system hardening that prevents outages, but also smart grid technology and automation that enables us to respond more quickly when outages do occur. On the integration of Rhode Island Energy, we remain well positioned to complete our transition services with National Grid next year. We also continue to make progress on an important filing before the Rhode Island Public Utilities Commission, as we seek to deploy advanced metering functionality across our service territory and build a smarter grid that supports the state’s leading climate goals. Hearings before the Rhode Island PUC were held in late July to review our business case and cost recovery proposals. We expect a decision on our AMF filing later this fall. We also remain on track with the Kentucky CPCN process, which I’ll cover in more detail on the next slide. Finally, we continue to receive awards for our industry-leading approach in grid innovation as both the Edison Electric Institute and the Southeastern Electric Exchange recognized PPL Electric Utilities for its groundbreaking use of dynamic line rating technology. PPL Electric is the first utility in the nation to integrate this technology with its transmission management system. DLR sensors provide real-time information that enables us to better utilize our existing transmission line capacity and reduce gestion on the grid. FERC has also recognized the value that this technology can bring to the industry and better managing congestion on the transmission network. Turning to Slide 5 and an update on the CPCN process in Kentucky. We remain focused on advancing our generation investment plan as we seek to replace 1,500 megawatt of aging coal generation with an affordable, reliable and cleaner energy mix by 2028. We remain confident our plan represents the best path forward for our Kentucky customers. As proposed, it would replace several 1970s era coal units with over 1,200 megawatts of new combined cycle natural gas generation, nearly 1,000 megawatts of solar generation and 125 megawatts of battery storage. In addition, it would establish more than a dozen new energy efficiency programs. In May, the Kentucky Public Service Commission approved our request to consolidate the CPCN filing and our generation retirement request as required by Senate Bill 4. The commission approved the consolidation while keeping the CPCN procedural schedule largely unchanged. For the schedule, intervenor testimony was filed July 14 with no real surprises. Next up is our rebuttal testimony due August 9, followed by an info conference scheduled for August 15 to explore a potential settlement. Public hearings are then set to begin August 22 and could last several days. Again, we are very confident that the plan we’ve proposed is in our customers and the state’s best interest but we are also open to settlement discussions with the parties to the case. Ultimately, with or without a settlement, we anticipate a decision on our filings from the commission by November 6. That concludes my strategic and operational update. I’ll now turn the call over to Joe for the financial update.

Vince Sorgi:

Thank you, Joe. In closing, we remain confident in achieving our goals for 2023. While mild weather and storms have created some headwinds, we have plans in place to overcome those challenges and deliver on our commitments to share owners. We’re also on target to complete more than $2.5 billion in infrastructure improvements to provide safe, reliable and affordable energy for our customers. Our integration of Rhode Island Energy continues to go smoothly. We continue to progress our regulatory filings in both Kentucky and Rhode Island. And last but not least, we’re solidly on track to deliver our targeted O&M savings as we execute our Utility of the Future playbook, incorporate more technology and automation and centralized various functions across PPL to deliver better value for customers and share owners alike. With that, operator, let’s open it up for questions.

Durgesh Chopra:

Hey, good morning, guys. Pretty straightforward quarter here. I had two housekeeping questions. First, can you quantify what’s the AMI ask in Rhode Island? How much investment that is?

Durgesh Chopra:

Got it. And over what time frame?

Durgesh Chopra:

Sorry. Thank you. Over what time frame is that $200 million to $250 million?

Durgesh Chopra:

Would that be incremental to your current CapEx plan wins? Or do you have some...

Durgesh Chopra:

Got it. Okay. And then just in terms of the offsetting the year-date headwinds and weather and storm, I think you mentioned in your prepared remarks, you mentioned like integration savings. Can you elaborate on that? How brings that pie obviously, it sounds like a lot of opportunities in excess of $175 million. But maybe just like what’s the upside on the integration and Rhode Island and what might be the other opportunities?

Durgesh Chopra:

Got it. Thanks for the time.

Operator:

The next question comes from Paul Zimbardo with Bank of America. Please go ahead.

Joe Bergstein:

Yes. So we will have to go through all of those items. I mean, it certainly de-risk and give us confidence in the $175 million through the planning period, whether those items that are in excess of the $175 million we will have to see whether they come into this period for execution, whether they are longer-dated items. And look, there is headwinds that we have to offset as well. We still see inflation and interest rates. So we have a bank of ideas and opportunities to execute on should we see those headwinds persist or increase, and then it just gives us confidence in the near-term to achieve the $175 and the 6% to 8% earnings growth, and it gives us confidence in the longer-term to continue to execute on the strategy.

Paul Zimbardo:

Okay. Great. Thank you. Very clear. And then switching topics. I noticed the weather-normalized sales volumes were decently down in the quarter and now trailing 12 months, both Pennsylvania, Kentucky. Just could you give any color on what you’re seeing on the ground and just expectations for the second half of the year?

Vince Sorgi:

Yes. We’re not concerned with volumes at all other than the impact on weather. I would say our volume story is really weather-driven.

Vince Sorgi:

Sure.

David Arcaro:

Hi. Good morning.

David Arcaro:

Hey, good morning. Thanks for taking my questions. Let’s see. I think just one here. I was curious, we are starting to see some easing of supply chain pressures in the solar industry, commodity costs coming down, module prices declining somewhat and PPA prices easing. I was just wondering if you think that could impact at all the outlook for your Kentucky, just the generation mix maybe longer term, or other opportunities to see lower PPA prices or lower costs in the current CPCN filing or if you’re thinking an analysis has evolved at all for the longer term generation mix there?

David Arcaro:

Okay. Got it. That’s helpful color. I didn’t appreciate that in the backdrop there. That’s all I had. Thanks.

Operator:

The next question comes from Shar Pourreza with Guggenheim Partners. Please go ahead.

Vince Sorgi:

Good morning Shar.

Vince Sorgi:

Well, look, I think you can appreciate, I don’t necessarily want to get into negotiating positions at this point on the call. But what I will say just around the process itself is we are actively engaged right now with various interveners. As you mentioned, the settlement conference is scheduled for the 15th, if that goes well, and we can get settlement on at least significant issues in the case with enough parties. Then we may be able to present a stipulation to the PSC for their consideration. As you know, the hearings are scheduled to begin on the 22nd of August. That could become a forum for the PSC to take up the settlement agreement, if we’re able to reach one. But at this point, I would say, Shar, it’s too early to tell if we will be able to reach a settlement. But if we don’t, of course, we are ready to defend the plan as filed, as we have been indicating all along. So, a little early at this point to tell if we can get there, but certainly, we are open to those discussions.

Vince Sorgi:

Well, look, I think the key takeaway is I am not sure I would expect whether we have a settlement or fully litigating our case that, that would have a material impact on either our capital plan or our EPS targets given the different buckets of CapEx, whether it’s building replacement generation or environmental spend or other types of CapEx that we might deploy in Kentucky and elsewhere across the fleet. If you look at the testimony and based on everything that’s been filed to-date, I don’t think the outcome, Shar, is going to be an all or nothing on the coal plant retirement. But when you look at the Good Neighbor Plan, which was consistent with what we were assuming in the CPCN, that would require SCRs on Gen 2, Mill Creek 1, Mill Creek 2, also a new cooling tower at Mill Creek 1. When you look at the MATS regs and the ELG regulations, especially the ELG regs, that could result in significant incremental investments if we were required to do so. So, even if it was a full rejection of the retirements, which again, I don’t think that will be the outcome. As we have talked in the past, that’s in the $500 million to $1.5 billion of environmental CapEx. That doesn’t even include the amount of maintenance capital we have to spend on those plants going forward. So, again, I am not sure the outcome necessarily impacts the CapEx and EPS trajectory. It might just be different buckets where we are spending that capital.

Vince Sorgi:

Some of that CapEx would have to – we would have to start spending that right away to continue to operate those plants. And that, to your point, that would be recoverable under the environmental cost recovery, which does not require a base rate case for recovery.

Vince Sorgi:

Thanks.

Vince Sorgi:

Hey Greg.

Vince Sorgi:

Not really, Gregg. I would say the testimony was as expected. I think we talked about expected intervener positions when we rolled out the plan that we filed. So, we knew the coal association would be against retiring coal. We knew the environmental intervenors would be pushing more renewables. Again, our plan, we think balances all of those interests. But more importantly, it complies with SB-4, it complies with our obligations to serve lease cost, reliable, safe energy. It is increasingly cleaner which we are hearing a lot from our customers and from our two major cities in Louisville and Lexington. So, we were extremely thoughtful and took a lot of actually intervene or input from the IRP process into coming up with what we proposed. As I have talked about, however, we are willing to engage in settlement discussions with the parties, and we will see if we can reach something here in the next couple of weeks going into the hearings beginning on the 22nd. So, I would say, as expected and we incorporated most, if not all of that into the original plan that we filed with the commission.

Operator:

[Operator Instructions] The next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Vince Sorgi:

Good morning.

Vince Sorgi:

I don’t know that they have a preference one way or the other. Anthony, to be honest with you, they are going to uphold their obligation to ensure whether it’s a settlement or our case that it meets the requirements of SB-4 and again, our obligation to serve in a lease cost reliable way. So, they are going to do their duty regardless of what’s in front of them, whether it’s a settlement or our case. Not sure if they have a preference on which one is in front of them. I mean they will take a settlement as evidence in the case. They don’t have to approve the settlement, but they will certainly take it as evidence in the case. The authority really lies with them in terms of whether or not to accept that or not.

Vince Sorgi:

So, you are right. Generally, we have been able to reach settlement with the parties to our cases. The commission has modified them slightly in the past, nothing to material. At times, they have accepted them as filed. And other times, they have modified them, I would say, slightly.

Vince Sorgi:

Thank you, Anthony.

Vince Sorgi:

I just want to say thanks for joining us on the call. Feeling good about our progress so far year-to-date, looking forward to the second half of the year. And have a great weekend everyone and we will see you soon at the next conference.

Operator:

Good day, and welcome to the PPL Corporation, First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Andy Ludwig, Vice President and Investor Relations. Please go ahead, sir.

Vince Sorgi:

Thank you, Andy, and good morning, everyone. Welcome to our first quarter Investor Update. Let's start with our financial results and a few highlights from the quarter on Slide 4. Today, we announced first quarter reported earnings of $0.39 per share. Adjusting for special items, first quarter earnings from ongoing operations were $0.48 per share compared with $0.41 per share a year ago. This increase was supported by solid results from our newly acquired Rhode Island business, as well as lower O&M expenses, partially offset by lower sales volumes due to the mild winter weather and higher interest expense. We remain confident in our ability to deliver on our 2023 ongoing earnings forecast of $1.50 to $1.65 per share with a midpoint of $1.58 per share. Joe will speak to this more in his detailed review of our financial results. In addition to solid financial performance, we continue to execute on our commitment to provide safe and reliable electric and gas service to our more than 3.5 million customers. This includes managing several significant storms at our utilities, including a severe March wind storm in Kentucky, the third most significant weather event in the last 20 years in our service territory. Our teams, with the help of mutual assistance from several of our peers, restored power to more than 400,000 LG&E and KU customers. I thank each one of our men and women, as well as all those that provided mutual assistance for their dedication, commitment to safety, and demonstrated operational excellence. From a financial perspective, we received approval to treat nearly $20 million of Q1 O&M costs related to this extraordinary event as a regulatory asset. These types of events emphasize the importance of the investments we are making across our company to harden and improve the resiliency of our networks. As the frequency of these events continues to increase, it becomes even more critical to ensure we are taking proactive steps to prepare our distribution and transmission networks. And we look forward to delivering on that goal in the most affordable way possible for our customers. We've also made significant progress during the first quarter in several areas that will improve our operating efficiency, deliver our clean energy strategy and improve service to our customers. First, we continue to execute our plan in transitioning Rhode Island Energy to PPL Systems and remain on track to exit the remaining transition services with National Grid in 2024. We also advanced several key regulatory proceedings, which I'll discuss further on the next couple of slides. Further, we successfully executed more than $3 billion of financings in the first quarter, reducing our interest rate exposure and strengthening our ability to achieve our top-tier earnings growth targets. And finally, our execution of approximately $600 million in capital investments during the first quarter keeps us on track to invest nearly $2.5 billion in infrastructure investments this year. These investments benefit both customers and share owners as we continue to advance our strategy to create the utilities of the future. As a result, today, we are reaffirming our plans to invest nearly $12 billion in infrastructure improvements through 2026, to modernize our electric and gas networks and replace retiring generation in Kentucky. Looking forward, we remain confident in the low-risk business plan we outlined in January and reaffirmed our projected compound annual earnings per share and dividend growth rates, 6% to 8% through at least 2026. Turning to Slide 5, we were pleased to secure a positive outcome in our first infrastructure, safety and reliability proceedings before the Rhode Island Public Utilities Commission. ISR plans are submitted annually in Rhode Island and outline proposed capital investments and related operating costs to strengthen safety, reliability and resiliency of our electric and gas distribution networks. The approved plans address Rhode Island Energy's proposed spending from April 1, 2023, to March 31, 2024. In its decision, the Public Utilities Commission approved $290 million of the approximately $350 million Rhode Island Energy proposed in its ISR filing. This allowed investments on the electric side that were largely tied to grid modernization and associated improvements. On the gas side, most of the disallowed investment related to roughly 10 miles of leak-prone pipe replacement. While we believe the disallowed investments are the right projects to better serve our customers, we understand the Commission's desire to complete reviews of our grid modernization and advanced meter filings and to make further progress in the future of gas stakeholder proceedings before approving additional spending in those areas. The investments not approved in this year's ISR plans may be recoverable in future proceedings subject to regulatory approval. This could be through future ISR filings, new base rate cases, and/or re-opener provisions within the base rate cases that we are currently operating under, particularly related to the grid modernization and AMF projects. Ultimately, we look forward to continued engagement on these matters with the Commission, the Division of Public Utilities and Carriers and other stakeholders in Rhode Island. Turning to Slide 6, we continue to progress our Generation Investment Plan in Kentucky and remain confident that this plan is the best path forward for our customers as we plan for the state's energy future. Our plan is more affordable, maintains reliability and represents significantly cleaner energy resources for our customers than continuing to operate the coal units that we have proposed to retire by 2028. In fact, we estimate that our plan provides nearly $600 million of net present value benefits for our customers compared to continuing to operate these coal units. As we shared in March when Senate Bill 4 became law, we're confident that the generation replacement plan we filed in December exceeds the standards set by the new law, and as a result, we have not changed our CPCN strategy. As proposed, our plan would replace 1,500 megawatts of aging coal generation, with over 1,200 megawatts of new combined cycle natural gas generation, nearly 1,000 megawatts of solar generation, and 125 megawatts of battery storage. In addition, our plan proposes the implementation of more than a dozen new energy efficiency programs by 2028. Altogether, the plan represents a $2.1 billion investment in Kentucky's energy future and the lease cost option to reliably meet the needs of our Kentucky customers 24 hours a day, 365 days a year. As an added benefit, our proposed plan would cut our carbon emissions nearly 25% from current levels while further diversifying our generation fleet. To comply with the new law, we expect to file our retirement request with the KPSC by May 10. Given the law provides the KPSC 180 days to issue a decision on retirement requests, this timing essentially aligns the retirement ruling with the expected decision on our CPCN filing. The decision on our filings is expected by November 6. Again, we're confident the plan we proposed offers the best path forward for the customers and communities we serve. We don't see any signs of federal environmental mandates easing over time, and we believe investing hundreds of millions of dollars in environmental control, continue operating aging, uneconomic coal plants is not in our customers' best interest. However, should we be required to make such investments? We do have the Environmental Cost Recovery Mechanism or ECR in place. That would enable recovery of these investments outside of base rate cases. We’ll continue to actively engage with stakeholders in Kentucky throughout the CPCN process to demonstrate how our plans best meet the needs of our customers. That concludes my strategic and operational update. I'll now turn the call over to Joe for the financial update.

Vince Sorgi :

Thank you, Joe. In closing, we remain solidly on track to deliver the midpoint of our 2023 earnings forecast, and we remain well positioned to deliver top tier earnings and dividend growth of 6% to 8% annually through at least 2026. We're off to a strong start in 2023, executing on our $2.4 billion capital plan, continuing the integration of Rhode Island Energy, advancing our plans in Kentucky and Rhode Island to deliver lease cost reliable energy for our customers and remaining on track with our first leg of achieving at least $175 million in O&M savings by 2026. As we pursue our strategy to create the utilities of the future, we are as strong as we've been in years and I'm convinced we're only getting stronger. With that operator, let's open it up for questions.

Durgesh Chopra:

Hey, team, good morning. Thanks for giving me time.

Durgesh Chopra:

Good morning, Vince. A lot of investor discussion went around just the legislation in Kentucky. Can you just share some initial feedback if you have any from your filings? A lot of investors are looking at this legislation thinking about what the, what it may mean for you and whether the state is actually going to accept your application to retire these coal plans, so just any additional color that you can share that would be appreciated.

Durgesh Chopra:

Got it, that's helpful, Vince. Is there a middle road here perhaps and I know this is early innings, but like not your plan in entirety, but a portion of your plan might get accepted and you have alternatives for the balance of the plan. I'm just thinking about the risks, because it's a significant portion of your CapEx, which is included in your plan as you go into the CPCN filings, and whether there's a sort of a collaborative approach here to get some of it, if not all of it approved.

Durgesh Chopra :

That's great color, Vince. Thank you so much.

Operator:

The next question will come from David Arcaro with Morgan Stanley. Please go ahead.

David Arcaro:

Hey, guys, thanks so much for taking my questions. Let's see, I'm wondering if you could just maybe give an update on your confidence level in achieving your previously planned cost cuts for this year, what you're seeing for inflationary pressures. And I guess how hard of a stretch is it to dig deeper and also offset the weather headwinds that you're facing?

Joe Bergstein:

Yeah sure, hey Dave. Well, first of all for the O&M targets that we've set for this year, we are on track to achieve those, and we feel really good about our ability to do so. As far as offsets for this year and the weather impact that we saw in the first quarter, I hit a number of them during my prepared remarks, but those include the benefits from the strong execution of the convert that we issued earlier this year, and that's about $0.01 to $0.02 better than our expectations. We're also anticipating that this mechanism in Pennsylvania provides additional earnings. It could be about another $0.01 to $0.02 there, and then any potential outperformance on the integration of Rhode Island Energy, and we're very focused on that integration process there and always trying to do better than our plan, and that could be another $0.001, maybe $0.02. And then, so if you're looking beyond that, we always have the ability to flex our O&M spending, which we could do on top of that.

David Arcaro:

Yeah, great. Yeah, you anticipated my other question, which was to get a little more clarity on those other levers, so that's really helpful. And then, I was just wondering if you could touch on Rhode Island and just following the ISR decision. Maybe one, do you think there's still interest in pursuing those projects by the Commission that didn't get approval? And then just wondering maybe more holistically, are there other opportunities that you would look for additional CapEx upside in Rhode Island more broadly?

David Arcaro:

Okay. Excellent! I appreciate it. Thanks so much.

Operator:

The next question will come from Paul Zimbardo with Bank of America. Please go ahead.

Paul Zimbardo :

Hi! Good morning. Thank you, team. And thank you for the call on Kentucky in particular. Just if I add up the pieces that you mentioned, is it fair to say that in a worst-case scenario you could offset the majority of that 2.1 generation plan with other spending if you needed to?

Paul Zimbardo :

Okay, thank you. That's good context as well, I appreciate it. And then switching topics, Joe mentioned that the outperformance of the Rhode Island integration could be a penny or two favorable for 2023. Should we think of that as more of a timing element or if you're successful there, would that accrue to 2024 plus? Thank you.

Joe Bergstein:

Yeah, no. I think it's more on just our overall performance against our expectations there and being able to integrate at a lower cost than we expect. The TSA period goes through 2024. So my comments were really focused on ‘23 and our ability to offset the negative weather start to the year.

Joe Bergstein:

Sure.

Angie Storozynski:

Thank you. So first maybe something completely different. So we're probably halfway through the earnings season and we haven't yet heard from any utility about some additional O&M efficiencies associated with reduced office space. Is that even something that you guys are considering? I mean it seems like this hybrid work model has persisted even in your industry and I just wonder if that's, it's a lever that you might pull in the future from an O&M perspective or it's not something that you're currently considering?

Angie Storozynski:

Okay. And then just taking it one step further, are you seeing any sort of a slowdown among commercial customers, again, somehow linked to office buildings and downsizing or any other signs of economic slowdown, like any leading indicators that you see among your customers, not only on the commercial side, but also industrial?

Joe Bergstein:

Yeah, sure. Hey Angie, it's Joe. We are – we continue to see a number of positive economic factors in both of our jurisdictions in Pennsylvania and Kentucky, including continued low unemployment rates and strong GDP growth. And in Kentucky, as we've talked about a number of times, we saw back-to-back record years of economic development with over $10 billion of announced investments in each of 2021 and 2022. That includes the 4DV battery plant initiative that we've talked about a number of times. That's recently broken ground and well under construction. And we continue to see strong industrial growth, primarily in the manufacturing and agriculture sectors. So we have not seen that in our territories, and Rhode Island's decoupled and less reliant on those things.

Angie Storozynski:

Okay. And then just one last follow-up on Kentucky. And again, I should know that, so I mean the purpose of the bill was to basically continue the usage of the coal that is mined in Kentucky or is it continued operations of the coal plants? I mean it might be a subtle difference, but how about just running these coal plants on gas and that's checking that box of continued operations of these plants while sourcing energy from those new gas plants, which given the gas price environment just became even more beneficial to the end user?

Angie Storozynski:

Great. Thank you.

Operator:

The next question will come from Paul Patterson with Glenrock Associates. Please go ahead.

Vince Sorgi:

Good morning, Paul.

Vince Sorgi:

Yeah, I think there's a number of factors that go into that, Paul. One is the cost of electrification. The second is the reliability of supplying electricity if the bulk of the economy is or the vast majority of the economy becomes electrified and then ultimately, the benefits of fuel diversity by having natural gas in addition to electricity. Obviously the state has targets to be economy-wide net zero by 2050. On the electricity side, net basically 100% renewable driven by 2033. Our investment plans on the T&D networks are geared towards that 2033, 100% renewable date. We are actively engaged with numerous stakeholders in Rhode Island, including the PUC on the future of gas docket. And so we are actively engaged with doing analysis on various scenarios on how we could see the future of the Rhode Island Energy sector feeding the economy there and how the natural gas system will ultimately be used or not. We would expect to have our initial view of that and issue a report to the PUC late fall of this year. In the spring of next year, the PUC would then target issuing its report to the government agency that's in charge of implementing the Act on climate rules within the state and then we would expect that organization, EC4, to issue their report in 2025. So, a great question. There's a lot of work and actually a formal docket within the commission to exactly answer that question. And I think you could see various possibilities there, right, whether or not we're blending different molecules through the pipes, maybe it's not all natural gas, we're using more renewable natural gas, we're using hydrogen in combination of those things. So really, we're right in the middle of it right now Paul, and more to come as I think we make progress on that analysis and ultimately those reports coming out of those various agencies.

Vince Sorgi:

I would say yes to all of that. This is an area that I spend a lot of time thinking about and we're starting to formulate our strategy along the lines of many of the things that you just mentioned. So to your point, PJM themselves I think are very concerned about 40 to 45 gigawatts of thermal generation announced to be retired between now and 2030. That's an incredible amount of very reliable, dispatchable generation that is scheduled to come out of the ISO, out of the gen stack. The vast majority, almost all of the replacement generation are intermittent renewables and developers are having a hard time getting the siting and permitting or getting any of it built. So even if it does get built, which there's a lot of, I think concern in terms of the timing of when this replacement generation gets built, you're replacing very reliable, dispatchable energy with intermittent energy. And so I do think PJM is concerned as they're looking at their generation stack and thinking about the ISO itself, which of course then makes me focus on how do we ensure we have electrons flowing through our wires in Pennsylvania and Rhode Island. So yeah, we are absolutely focused on this, laser focused on this I would say. And some of the things that you had mentioned, I would say all of those I think are areas that we think we can take a look at to try to shore up the gen supply in our own jurisdictions. Great question.

Vince Sorgi:

I think it's new. This is a new topic for them. We will be engaging with not only our legislators, but our regulators, just to make sure that we're all on the same page as we look at security of energy going forward. But we have flexibility within the current rules to do a lot of what you suggested. So, not all of this requires legislative change and so we'll certainly use as much of the levers within current legislation and regulation to shore up gen supply. But to your point, if we need to go beyond that, that might require legislative change. I can't handicap today the likelihood of that.

Vince Sorgi:

Sure.

Ross Fowler:

Good morning.

Ross Fowler:

Most of my questions have been asked and answered, but maybe let me ask this one. And apologies if I drag out the past here, but can you sort of give us the context or at least the contention in this fraudulent conveyance claim against PPL Hydro that's out there with Talen, and sort of if there's any process here or timeline around actually resolving that?

Ross Fowler:

Yeah, that's a fantastic update, Vince. Thank you.

Operator:

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Vince Sorgi for any closing remarks. Please go ahead, sir.

Operator:

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator:

Good morning and welcome to the PPL Corporation Fourth Quarter and Year-end 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy and good morning everyone. Welcome to our fourth quarter and year end investor update. We'll keep our remarks brief this morning given the comprehensive update we shared with you on January 11th. We continue to be extremely excited for PPL's bright future and the value we intend to deliver for our customers and shareowners. Turning to slide four, 2022 was a remarkable year in PPL's history, one that has completely redefined our company. It marks the beginning of a new era as we are now positioned as a premier pure-play US regulated utility holding company. Our strategic repositioning began with the sale of our UK business in 2021 and concluded in May of 2022 with the addition of Rhode Island Energy and its almost 800,000 customers. I'm very proud of the execution from our team to close this transaction and complete the transition activities to-date with National Grid. We are on schedule to complete all of the TSAs in 2024 as originally planned. The acquisition of Rhode Island Energy also enhances our scale and enables PPL to be a leader in our sector for years to come. This includes positioning our company to deliver top-tier 6% to 8% earnings and dividend growth through at least 2026, with one of the best credit profiles in our sector, our balance sheet can support our growth without equity issuances throughout the planning horizon. And while we executed on our strategic repositioning, we remain steadfast in our pursuit of delivering excellent financial and operational results in 2022. First and foremost, we achieved ongoing earnings of $1.41 per share, beating the midpoint of our forecast, which we had increased in November. This is a fantastic accomplishment considering all the extra work our teams completed this past year in connection with our strategic repositioning. In addition to delivering solid financial results, we also laid the groundwork for capital investments we need to make for years to come, in our pursuit of delivering an exceptional customer experience at an affordable price. Specifically, we presented a balanced investment plan in Kentucky to replace nearly 1,500 megawatts of retiring coal generation. This plan best positions our utilities in Kentucky to serve our customers with safe, reliable, affordable and sustainable energy while the state fosters significant economic development and growth. We also designed a series of plans for our newly acquired Rhode Island Energy, strategies to deliver the energy grids necessary to achieve the state's impressive clean energy goal of 100% renewable energy by 2033. These plans include advanced metering, grid modernization and our first infrastructure safety and reliability plans under our ownership. These plans emphasize just some of the robust investment opportunities at our utilities. We're also looking at potential regulated investment opportunities beyond our four utilities, leveraging our expertise in transmission development to open new doors for potential growth. This includes our strategic partnership with WindGrid, an Elia subsidiary, where we are exploring offshore transmission solutions in New England. Any investment opportunity stemming from this partnership, are not included in our capital forecast and represent potential upside to our long-term growth plan. On the operational front, during 2022, we maintained our top quartile reliability in Pennsylvania and Kentucky, despite the increased frequency and severity of storms in our service territories. And in just a few months of ownership, Rhode Island Energy has experienced a marked improvement in reliability and exceeded 2022 expectations by more than 10%. One example of this excellent performance was during Winter Storm Elliott. Rhode Island Energy was the first major New England utility to achieve full customer restoration in the early morning of Christmas Day. We also maintained our top quartile customer satisfaction at PPL Electric Utilities and Kentucky Utilities. And while we're proud of these achievements, we are sympathetic to the concerns of our Pennsylvania customers who experienced increases in their December bills as a result of higher energy prices. While we don't control the price of electricity supply, we know that it can have a meaningful impact on our customers. And while the default rate for PPL Electric's non-shopping customers increased in December, many of our customers who have chosen third-party suppliers saw even higher price increases and are paying significantly more than our default rate of approximately $0.145. Our most recent review of shopping results found that in November, over 40% of our residential shopping customers paid a higher rate than our default rate. Over 100,000 customers paid a rate between 25% and 100% more than the default rate and nearly 20,000 customers paid more than double our default rate. For the last two years, PPL Electric has been a vocal advocate, on behalf of our customers, for greater safeguards and other actions to protect them from overpaying for their electricity supply. We proposed various consumer protection reforms with our Pennsylvania legislators and regulators and are again having discussions with them for the benefit of our customers. In addition to higher bills from these increased energy prices, a large number of our PPL Electric Utilities customers received estimated bills in December due to a technical issue. The timing of higher electricity bills and the increased number of estimated bills created some confusion and concern for customers. We have since fixed the technical issue and have temporarily doubled the resources at our call centers to address customer questions and significantly reduce call wait times. And in further support of our customers, we've waived late fees and expanded our no-shutoff practice over the winter to include all residential and small business customers. We're also focused on communicating even more with our customers about high energy prices and what customers can do to minimize their energy bills. While this is an important topic for us and our customers that I wanted to address today, I want to be clear that we do not expect this matter to have a significant impact on our financial results. As we've discussed at length, one of the key aspects of our strategy is to drive operating efficiencies across the entire business. In developing our strategy, we anticipated affordability being a key area of focus for customers and regulators, even before we saw the effects of inflation and high commodity costs. We all know the energy grids need significant investment to ensure reliability and resiliency while preparing for renewables, DERs and more electrification. This is why our plan best positions PPL to achieve our goals while focusing on affordability for our customers. Turning to Slide 5. PPL's outlook for 2023 is one that is simply focused on executing our utility of the future strategy. In my 2022 recap, I discussed that we are on track with our integration activities with Rhode Island Energy. An obvious top priority for 2023 is to remain on track with our Rhode Island integration, setting us up for completion in 2024. We have a $2.4 billion capital plan that improves the safety, reliability and resiliency of our networks while addressing our customers' evolving needs. We're on track to deliver the first leg of our $175 million O&M savings target by 2026 with $50 million to $60 million of savings in 2023 as we deploy our playbook and continue to optimize our operations. These savings will provide a strong basis for us to deliver the midpoint of our 2023 earnings forecast of $1.58 per share. Recall, this forecast represents a 7% increase from our pro forma 2022 forecast of $1.48 per share. We will also focus on the regulatory filings in Kentucky and Rhode Island to deliver lease cost and reliable energy for our customers and help to advance the clean energy transition. Turning to Slide 6. As we executed our strategic repositioning over the past few years, we took a hard look at how we wanted to be defined as a company and management team. Simply put, we want to be the best utility company in the US, the best set of learning safe, reliable, affordable and sustainable energy to our customers and competitive long-term returns to our shareowners. We've included on the right side of the slide, the categories that we'll use to measure our success against our peers. In short, we will be targeting top decile or top quartile performance and safety, reliability, customer satisfaction and cost efficiency, while at the same time, targeting a premium stock valuation. While we're not there yet in all categories, I firmly believe we are on the right path to get there. And I'm excited to see us advance down this path. With that, I'll now turn the call over to Joe for the financial update. Joe?

Vince Sorgi:

Thank you, Joe. Over the past two years, we've taken bold steps to transform PPL for long-term growth and success and to improve shareowner return, while building on our core strengths. Since then, we have continued to deliver on the goals we set, exceeding the midpoint of our 2022 earnings forecast, advancing industry-leading grid modernization, providing highly reliable electricity and gas service and economically advancing our clean energy strategy. And our plan provides investors with an attractive return proposition, one that the entire management team and I intend to deliver. With that, operator, let's open it up for questions.

Shar Pourreza:

Hey, team.

Shar Pourreza:

Hey, Vince. Just two quick ones here after you guys obviously had a comprehensive update a little while ago. But just -- I know you guys are obviously targeting $50 million to $60 million of O&M savings this year, but it's been kind of a super mild winter, Q1 looks to be a little bit rough. I guess how comfortable are you around the 158 midpoint when you're also layering in sort of interest expense pressures and some of the externalities we're seeing out there. So I guess if the tail risks don't abate can you sort of pull forward some of that incremental $70 million in O&M savings next year into this year? I guess, can you just talk a little bit about the contingencies here? Thanks.

Shar Pourreza:

Great. And then just lastly, Vince, that's helpful. Just on the Kentucky CPCN process, interveners are obviously starting to line up, looks like there's been some delays on solar PPAs and the PSC just engaged a consultant, right, to do an analysis earlier this week. Can you just speak to the process a little bit more broadly and what we should be watching for interveners and procedurally between now and your next update in the spring? Thanks.

Shar Pourreza:

Got it. Terrific. Fantastic. That’s all I had and congrats and we’ll be seeing you real soon. Appreciate it.

Operator:

The next question comes from Durgesh Chopra of Evercore ISI. Please go ahead.

Durgesh Chopra:

Hey, good morning. Good morning team. And Vince very helpful. Thank you for your commentary on the Pennsylvania billing issue, we were getting some questions on that, so I appreciate the color. I just had one quick follow-up, rest, everything is pretty clear. The -- you've asked for AFUDC in Kentucky, is that part of this CPCN filing, or is that a separate decision? What should we be looking for there and how to track that specifically?

Durgesh Chopra:

Got it. Okay, perfect. Thank you so much. And go Eagles for 2024.

Operator:

The next question comes from Paul Patterson of Glenrock Associates. Please go ahead.

Paul Patterson:

Hey, how is it going? On the call, I think you were -- in your prepared remarks, you were talking about like discussions with regulators about affordability and what have you. I was just wondering if you could give a little bit more color as to what they might be looking at and if you have a little bit more discussion about Kentucky and I guess, Pennsylvania, what you're hearing there?

Paul Patterson:

Okay. That makes a lot of sense. This is kind of a problem that's sort of plagued choice -- retail choice jurisdictions around the country, I mean, if you look over the years, there are some places that are talking about actually limiting customer choice to more sophisticated customers. In other words, there just doesn't seem to be a lot of value that's being driven by these third-party providers in many cases. And is there any talk about that? And anywhere in any of the areas that you operate?

Paul Patterson:

Okay. Awesome. Thanks so much. Have a great one.

Operator:

The next question comes from Angie Storozynski of Seaport. Please, go ahead.

Angie Storozynski:

Hi. How are you? So I have a question about Kentucky. And it's -- I understand it's a bit premature, I guess. But given the time line for the approval by FERC of the Kentucky Power sale, I think it's increasingly likely that, that transaction doesn't happen. And I'm just wondering, if this asset stays within AP, they're probably going to try to boost its growth profile, which -- that could result in additional coal plant retirements or plans to retire coal plants. And I'm just wondering, how do you think that could impact your pending proposal? I mean, we've been hearing some noise in newspapers in the state about reliability concerns on the back of coal plant retirements? And again, just thinking bigger picture if there were to be more large state utilities with a similar growth path or towards the coal plant retirements, if that could actually derail the process, or do you think actually that could be helpful?

Angie Storozynski:

Okay. And then secondly, assuming that you do get the approval, the certificate of -- the certificates from the Kentucky Commission, would you then file a rate case to recover the investment, or the plan would be either see a rider recovery or basically further cut costs to pay for the capital spending and the return on it? Yes. So we do -- we are requesting AFUDC coverage for the capital investments we would be making under the CPCN. So that would provide us with the earnings aspect of making those investments before they go in service. From a cash perspective, again, one of the reasons why we have the balance sheet that we have is it enables us to engage with our regulators to mitigate near-term rate impacts, but at the same time, get the investments done that we know we need to get done. And then we would pick that up in a rate case sometime in the 2026 or later time frame.

Vince Sorgi:

Yes, you would think so, Angie. So our price to compare is about $0.0145. There are suppliers out there that are below $0.10 exactly to your point. We've had to procure that power over six, 12, 18 months time horizons in accordance with the PUC process. So yes, so we're not necessarily getting the immediate impact of the precipitous decline in energy prices over the last month or two. Some of our suppliers are, which they're able to provide, like I said, $0.10 contracts, it makes it interesting that many of our customers were paying $0.20 and over $0.30 in December for their third-party supplier energy. So great point.

Vince Sorgi:

Sure.

David Arcaro:

Hey, good morning. Thanks for taking my questions. A couple of minor questions here. I just wanted to check on the reallocation of the Kentucky Holdco drag, I was just wondering, are there any implications there either from a regulatory perspective or from like a debt refinancing perspective as you shift that into corporate and other, or is it really just as simple as moving around that EPS drag?

David Arcaro:

Okay. Got it. Great. That's helpful. And then I was just curious, would you expect any ongoing elevated costs or personnel activity or anything like that on the back of the billing issues in Pennsylvania in terms of the call center resources or anything like that, or is it going to be just temporary in terms of response there?

David Arcaro:

Okay, understood. That’s all I had. Thanks so much.

Greg Orrill:

Yes, thank you. Just with regard to the CPCN, how does the impact of inflation play into that with inflation/supply constraints?

Greg Orrill:

All right. Congratulations.

Operator:

The next question comes from Paul Zimbardo of Bank of America. Please go ahead.

Vince Sorgi:

Good morning Paul.

Vince Sorgi:

Yes. So, it's -- we're early in that process, Paul, as you know. We did put a capital plan together to ensure the safety and reliability of the gas network while we work with the state on the future of gas docket, that will take some time to get through. Again, as we think about the gas networks, not only in Rhode Island, but across the country. We certainly see a future for those as to folks like EPRI and other independent research agencies in terms of the fuel that's flowing through those LDCs may be different. They may not be 100% natural gas. could have renewable natural gas, hydrogen, we could have other sources of fuel flowing through them, but there are certain processes that just don't lend themselves to electrification. And so long-term, while we certainly support and expect there to be a lot more electrification, we also expect there to be a need and a use for gas LDC networks. And so making sure that those networks are safe and reliable now continues to be a top priority, but we will certainly be engaged with the state on the long-term future of that network.

Vince Sorgi:

Yes. There is actually -- we are entering into mediation next week on February 22. That will be before one of the judges in the Texas bankruptcy court. So, yes, there is an update there. We'll be heading into mediation next week.

Vince Sorgi:

Yes.

Neil Kalton:

Hi, guys. Just a question on Rhode Island. Yes. It looks like based on the guidance for 2023 that, if my math is right, it might not be, that you will be significantly under-earning the ROE. So my question is, are the cost savings coming in as expected thus far? And then, in terms of bridging that gap? Is this something that is ultimately going to require regulatory relief in 2026, or can it be accomplished faster?

Neil Kalton:

Okay. Understood. And do you think by 2025, we're going to be earning close to the allowed there, or is -- it might take a little bit more?

Neil Kalton:

Got it. Thank you.

Vince Sorgi:

Thanks, Neil.

Vince Sorgi:

Thanks, everybody, for joining us. I just want to reiterate, again, really pleased with our 2022 results where we ultimately came in, what we accomplished in 2022 to set us up for 2023 and beyond and just, really remain confident in our ability to deliver on what we've laid out for you all. And I can tell you the entire management team is aligned around the new strategy, and we're really looking forward to delivering it. So, with that, hopefully, we'll see you guys on some of the conference circuits or on MDRs and look forward to chatting with you then.

Operator:

Good day, and welcome to the PPL Corporation Third Quarter Earnings Conference Call [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy, and good morning, everyone. Welcome to our third quarter investor update. Turning to Slide 4. We had another solid quarter of financial results as we execute our Utility of the Future strategy. Today, we announced third quarter reported earnings of $0.24 per share. Adjusting for special items, third quarter earnings from ongoing operations were $0.41 per share compared with $0.36 per share a year ago. Based on our strong financial performance year-to-date, today, we increased the midpoint of our earnings forecast from $1.37 per share to $1.40 per share, and narrowed our earnings forecast range to $1.35 to $1.45 per share. Our 2022 earnings guidance reflects a partial year estimate of contributions from Rhode Island Energy, which we acquired on May 25th. Today, we also reaffirmed our projected compound annual earnings per share and dividend growth rates of 6% to 8% through at least 2025. Our per share growth target is based off the midpoint of our pro forma 2022 forecast range of $1.40 to $1.55 per share or $1.48 per share. The pro forma forecast reflects a full year of earnings contribution from Rhode Island Energy. We remain confident in our ability to achieve our growth projections, even in the current macro environment of rising interest rates, high inflation and high commodity costs. At a time when affordability is paramount for our customers, our strategy and strong balance sheet provide PPL significant resilience. Namely, our current business plan does not rely on rate cases to achieve our stated growth targets. We expect to recover about 55% of our current five year CapEx plan through riders and formularate, reducing regulatory lag and supporting continued strong credit metrics. And our strong balance sheet will support growth without the need for equity issuances over the planned period, while providing financial flexibility to effectively manage market volatility. We also continue to execute our business transformation initiatives, focused on driving efficiency, affordability and improved reliability for our customers. As we outlined in our Q2 call, this includes hardening the system, deploying smart grid technology and leveraging data science across our T&D operations, optimizing our generation outage schedules and nonoutage maintenance costs and centralizing shared services while deploying common systems and platforms. We remain confident that we will achieve our planned O&M savings of at least $150 million through 2025 with the potential for additional upside beyond 2025. Bottom line, we believe we are well positioned to weather current economic conditions while driving substantial value for both customers and shareowners. Shifting to a few operational highlights on Slide 5. In Kentucky, we continue to evaluate opportunities to advance the transition of our generation fleet, transition that will offer long term value for our customers and help deliver the clean energy transition in Kentucky. We continue to expect to retire 1,000 megawatts of coal fired generation by 2028, with the potential to retire an additional 500 megawatts due to EPA's Good Neighbor rule. In connection with these expected retirements and following the RFP completed earlier this year, we're targeting a mid-December filing with the Kentucky Public Service Commission, which would include requests for Certificates of Public Convenience and Necessity, or CPCN, for any supply side assets that would be owned by us. We're also updating our load forecast to reflect the recent economic development in our service territories, including Ford's EV battery plant as well as updating demand side management and energy efficiency programs to fully address the demand side of the equation. As we evaluate our supply options, we're focusing on solutions that are lease cost and will ensure the reliability our customers need and expect. We anticipate these lease cost solutions will be a combination of company owned resources and power purchase agreements and will include solar, energy storage and combined cycle natural gas. We also expect this generation replacement strategy to significantly improve the carbon intensity of our Kentucky generation fleet. Our mid-December filing will begin a regulatory review process that will conclude with an order from the KPSC. While there is no statutory timing requirement for the KPSC to review a CPCN filing, we would expect to conclude the regulatory review process by the end of 2023. In other updates, our Rhode Island Energy subsidiary expects to file several plans with the Rhode Island Public Utilities Commission by the end of Q4 that will support our customers' evolving energy needs. We've already filed our annual energy efficiency plan in late September, which is critical to our reliability, customer satisfaction, affordability and sustainability objectives. Within the next couple of months, we'll file the company's annual infrastructure, safety and reliability plans for both electric and gas, which will outline our plans to enhance the reliability of state's energy infrastructure while at the same time, preparing the electric grid for more renewable energy, including offshore wind and distributed energy resources. Costs approved through the ISR plan will be recoverable through the ISR rider mechanism, which reduces regulatory lag for these investments between base rate cases. By the end of the year, we also expect to file our advanced metering plans at the Rhode Island PUC, outlining the deployment of advanced meters to our electricity and gas customers in the state. PPL has experience installing almost 3 million advanced meters and realizing the benefits that those meters can provide. We will leverage this experience in Rhode Island and deliver this value for our Rhode Island customers as well. Our advanced metering plan will be foundational for our grid modernization plan, which we also plan to file by year end. The GMP is a longer term strategic initiative we're developing in support of the needs of our customers as we deliver the grid capable of connecting 100% renewable energy by 2033, which is now a law in Rhode Island. And finally, in late October, we announced a strategic partnership with the Elia Group to support the development of transmission solutions for offshore wind in the New England region. Specifically, PPL and Elia signed a memorandum of understanding to jointly develop and propose innovative transmission solutions to integrate offshore wind to the onshore grid. We believe PPL and Elia are uniquely suited to support New England in this regard. Elia has been a clear pioneer in developing offshore transmission grid solutions through its subsidiaries in Belgium and Germany as the company has connected 14 offshore wind farms to the onshore grid. Meanwhile, PPL has established a proven track record of successfully citing, building and operating large transmission projects here in the US. Both of our companies are clear leaders in grid innovation and reliability. And we both share a strong focus on advancing the clean energy future, while keeping energy safe, reliable and affordable. Together, we recently responded to a request for information issued by five New England states that are seeking input on potential transmission system changes and upgrades to integrate future offshore wind generation with current estimates of as much as 30 gigawatts by 2050. Moving forward, we anticipate forming a joint venture with Elia to pursue any potential offshore transmission opportunities that may arise after the RFI. We expect an RFP for proposed transmission projects in New England could be issued as early as third quarter 2023. Many offshore transmission projects stemming from this effort are expected to drive investments beyond 2026, and would be expected to be FERC jurisdictional projects under FERC formula rates. And while we are in the early stages of this process, we're excited to be participating in the process and are optimistic that PPL and Elia can develop innovative and cost effective offshore transmission solutions for New England. Any investments made through this partnership would be incremental to the $27 billion of capital investment opportunities through 2030 that we highlighted at our Investor Day. With that, I'll now turn the call over to Joe for the financial update. Joe?

Vince Sorgi:

Thank you, Joe. In closing, I'm proud of how we continue to execute the strategy we outlined at our Investor Day in June. Across PPL, we are laser focused on creating technology enabled utilities of the future, on delivering the clean energy transition reliably and affordably and on driving long term value for our customers and our shareowners. Our strategy delivers top tier earnings and dividend growth of 6% to 8% annually. And as we said, we remain confident in our ability to deliver this growth. Our growth is supported by $27 billion in investment opportunities through 2030 and one of the strongest balance sheets in our sector. It's anchored in operational efficiencies in the near term with stronger rate base growth driving earnings growth later in the decade. And we firmly believe it's the right strategy at the right time to effectively manage the risks associated with the current macroeconomic environment, while continuing to deliver real value for our customers and shareowners. Across our company, we continue to execute our plans for the new PPL and we're as excited as we've ever been about our future. With that, operator, let's open it up for questions.

Shar Pourreza:

So just a couple of quick ones here. You mentioned again today that a CCGT and some renewables would be leading candidates for new energy and capacity. Has the IRA kind of changed the calculus on your potential ownership of the latter, so being renewables? And I guess, how should we think about scale there?

Shar Pourreza:

And then just on the Rhode Island filings, Vince, are these sort of the gating mechanisms to maybe potentially narrow that CapEx range you have there? I mean, when you rolled out your plan, the out years had a roughly $200 million range between the bottom and top end. Now that you've been on the system, is this something we could see narrowed or even raised next year?

Operator:

The next question comes from Durgesh Chopra with Evercore ISI.

Vince Sorgi:

So for Kentucky, I would say the opportunity is probably in the $1.5 billion to $2.5 billion range, Durgesh, in total. The piece that could pull into the five year period would probably be in the $1 billion to $2 billion. So as you know, we had generation replacement in the $15 billion bucket, the $27 billion to $30 billion bucket of our $27 billion. And so as we look at what we're seeing now with the CPCN filing where I think we're going to see some of that pull into '25, '26 as we prepare for '27, 2028 in service dates for some of these options. So $1.5 billion to $2.5 billion total, $1 billion to $2 billion moving potentially into the five year period.

Vince Sorgi:

I think the ranges that we provided incorporate what we're talking about with these current filings. And again, once we get through, I think, this first round in the state, we'll be able to narrow that range following next year's -- in next year's update.

Vince Sorgi:

Yes. We resized the balance sheet to not only fund the CapEx we had in the plan but those two upsides as well, yes.

David Arcaro:

I was just wondering, would you be able to talk about or size the potential upside in transmission CapEx that's outside of the offshore transmission opportunities, if you're seeing any?

David Arcaro:

More generally, I was thinking.

David Arcaro:

And then wondering if you could give an update, just a level of kind of execution risk in achieving the O&M cost cuts in terms of the backdrop that you're seeing right now? And just looking over the next 12 months, what's your level of confidence in being able to kick things off aggressively on that path?

Operator:

Next question comes from Michael Lapides with Goldman Sachs.

Vince Sorgi:

So the transformation initiatives in Kentucky are really not, I would say, directly tied to -- well, they're certainly not tied to accelerating our coal plant retirement. So our existing retirement dates other than one unit that we had in 2034 that we think may need to be pulled up into the 2020s as a result of the EPA Good Neighbor rule. But other than that, our existing end-of-life depreciation dates are what's in the plan, Michael. On the transformation initiatives or the O&M reduction initiatives, we're just -- that's enabling us to just be more prudent in how we're looking at outage scheduling and overall O&M on those plants that we’ll be retiring in 2024 and 2028. So there's some linkage there, but I wouldn't say it's really dependent. And then in terms of overall acceleration of coal plant retirements, we're really not factoring that into our update today, again, other than that one 2034 plant and the potential for that to get pulled in. But again, as we see economics continue to change, freight regulation continue to change, that's certainly something that we will continue to keep an eye on. But our existing depreciation dates are really what's driving the CapEx opportunity there.

Vince Sorgi:

I don't necessarily want to speculate on that, Michael. I think we're kind of finishing the analysis right now for the CPCN. We'll make that filing with the commission and then we'll go through the regulatory process there. So would rather not speculate on what is like that until we get through the process with the commission.

Vince Sorgi:

Absolutely. So we're updating the load forecast. So we're including all of the economic development that we're seeing in the state. So that's an increased load. We're updating our DSM and energy efficiency plan. So that will be a decrease to load. So we'll have a full blown updated load forecast. We'll look at all the capacity that's retiring and then the amount of the capacity and energy required to meet that load on a 24/7 basis. So yes, all of that will be included in the filing, that will all be public on the KPSC's Web site. You'll see all of the input and output assumptions that we made from the modeling that we've done. The only thing we'll do is we'll see confidential protection on any commercially sensitive information like the actual bid prices from the RFP. But other than that, you'll get a very clear picture of the supply need and the lease cost solution to solve that.

Paul Zimbardo:

Just want to check on the interest rate side of the house. I know in the past, you've been active on hedging. And just have you added any new additional swaps, hedges, anything like that? Just broadly, if you could comment on comfort about the variable rate exposure?

Joe Bergstein:

So from a variable rate exposure, about 15% of our consolidated long term debt portfolio is floating rate. So the total debt portfolio is about $13 billion. We feel comfortable with that level of floating rate exposure and really don't see any material impact to the plan from fluctuations that we've seen to date in interest rates. And so maybe I could just make a couple of comments overall on interest rates broadly even outside of the floating rate exposure. We still feel very good about our plan despite the recent rise in interest rates. And obviously, we reaffirmed our long term growth forecast this morning. We've discussed several times and on our Investor Day that we've developed a plan that's low risk and contemplated the macro headwinds that we see, including interest rates. And there are several factors that we have and levers that we have within our plan to help offset the higher rates. Those are tracking mechanisms that we have in our jurisdictions to help mitigate exposure, 55% of our capital runs through some form of tracker or rider. Obviously, we're very focused on operational efficiencies. We have the potential to outperform on our savings targets within this plan period. And then from a load perspective, we've not incorporated any load growth in our current business plan. And we do continue to see load growth in both Pennsylvania and Kentucky. And in Kentucky, we have known incremental upside as well with the economic development that's been announced recently within the state. And then just on Rhode Island, we are decoupled there, so load is not a factor.

Vince Sorgi:

So I would say in both jurisdictions, the general economy continues to be strong. You're seeing that in Pennsylvania C&I load, even in Kentucky C&I -- commercial is up. Industrial is down in Kentucky really due to one steel manufacturer and this is really just a year-over-year anomaly where last year, there was a lot of pent up demand coming out of the pandemic. And so the production was higher than we've ever seen it. And so we've kind of, I would say, normalized back to normal levels for that one steel customer. And then on -- so really no underlying issues with the economy there. And then you're right, on the residential, we saw a bit of a dip in the third quarter versus last year. We really think that, that's related to just customers' immediate response to the high commodity prices that we're seeing now flow through our bills. So the wholesale prices are up and where we're adjusting our prices accordingly. And so we think there's some level of just conservation going on within the residentials to try to manage their bills there. But again, no underlying impacts around the general economy, and I think that continues to look strong.

Nick Campanella:

So I just wanted to ask on the credit side. And I'm sorry if I'm making you repeat yourself. I don't know if I heard it, but just as we think about the kind of potential megawatt additions that you're contemplating in Kentucky. Can you execute on those without additional, call it, growth equity capital?

Nick Campanella:

And then just how does IRA kind of affect your credit stance, if at all?

Operator:

The next question comes from Paul Patterson with Glenrock Associates.

Vince Sorgi:

The way the final law came out on that, Paul, was that we were only able to earn that remuneration up until 2026. And if you look at the -- when those contracts will actually come online that would not happen within the window that was allotted in the law. So there really wasn't any reason to try to go after any remuneration when the reality is we wouldn't be able to pick up any given the timing constraints in the law.

Vince Sorgi:

Well, I certainly don't want to talk about where we think our competitive advantages would be versus competing bidders in that process. But again, I would just say, given Elia's deep expertise in offshore and our deep expertise in onshore and ISO, understanding of the ISOs and siting, operating and building transmission here in the US. I think our partnership creates a great opportunity for us to bring innovative solutions to New England. But I don't want to get into any more detail on that.

Vince Sorgi:

Potentially, there could be opportunity there. Obviously, the New England opportunity is in front of us right now, and that's where we're focused. But again, I think the opportunity for a long term partnership with Elia is certainly there. And given our two skill sets, it's not unique to necessarily to just New England. But clearly, that's where our focus is right now.

Anthony Crowdell:

Quick following up on Paul's question earlier on load. You gave some nice detail and I know Rhode Island is decoupled, so it really doesn't matter. But you mentioned you are seeing some residential load cutback maybe because of high builds. Just thought on where you're forecasting load growth in '24 or even in your five year period, if you've provided that.

Anthony Crowdell:

Does the change in residential cause concern on your plan, or do you think it's going to be more temporary and that you'll be able to hit your plan [on fly]?

Anthony Crowdell:

And just lastly, you gave some great detail earlier on, on a lot of CapEx opportunities. if I could just take a step back and wonder. Do you think there's any ability within the current five year plan of changes to the rate base growth rate, or that if those plans come to fruition that, that's more something on the back end of the decade? You talked about AMI, you talked about some RFP in Kentucky. Just is that the ability for that to maybe hit the five year plan?

Operator:

The next question comes from David Paz with Wolfe Research.

Vince Sorgi:

Joe, do you want to talk to that?

Vince Sorgi:

David, I would just say that update will be a fulsome update. So we will not just update it for Kentucky CapEx related to generation, but across the portfolio where we see incremental capital needs. Again, we've talked about transmission in prior questions. So we'll do a fulsome update to Joe's point, that will help close the gap between the two.

Vince Sorgi:

Great. Thank you. Just want to thank everybody for joining us today, and we're looking forward to seeing everybody at EEI. Stay safe, and we'll see you soon.

Operator:

Good morning and welcome to the PPL Corporation’s Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Andy Ludwig, VP, Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy and good morning everyone. Welcome to our second quarter investor update. Turning to Slide 4, as we shared with you in June, we are extremely excited about PPL’s compelling investment proposition, which is driven by our strategic repositioning. The completion of the sale of our UK Utility business and acquisition of Rhode Island Energy has derisked the company and created a compelling portfolio of domestic regulated utilities. Our company has one of the best operating track records in the industry. And this operating expertise enables us to further optimize our new portfolio to deliver growth and create shareowner value. The result is a strategy and a new business plan that is anchored in operational efficiencies in the near-term, with stronger rate base growth driving our earnings growth later in the decade, with a total capital investment need of at least $27 billion through 2030. This strategy also keeps affordability front and center as we have committed to stay out of rate cases in Kentucky and Rhode Island until at least mid-2025. We expect our optimization strategy to deliver at least $150 million of O&M savings through 2025. I will discuss these savings opportunities in more detail during today’s presentation, but I want to emphasize that these optimization initiatives were the starting point for our new business plan. We believe this is an effective strategy for the company to manage risks associated with high inflation and high commodity costs, which have increased the cost of energy for our customers. At the same time, our plans support top tier EPS and dividend growth of 6% to 8% per year, with levers that mitigate risk and potentially provide upside. These include incremental O&M savings above the targeted $150 million and higher sales growth relative to the assumptions that we modeled in our plan. We also developed the capital investment plans required to deliver a more reliable and resilient network and to advance a clean energy future for our customers, while earning near our allowed returns by 2025. We see potential opportunities to invest more than our $12 billion capital plan over the next 5 years with incremental upside opportunity stemming from the federal Infrastructure Investment and Jobs Act or the IIJA. Importantly, about 55% of our current 5-year CapEx plan is expected to be recovered from riders and formula rates, significantly mitigating regulatory lag and supporting our credit metrics. This positions us to maintain a strong balance sheet, which will fuel organic growth without the need for equity issuances throughout our plan period. We also have an opportunity to lead the clean energy transition as we move through the plan period and begin to make the necessary investments to effectively transition our coal-fired generation fleet in Kentucky. This is a massive opportunity for both customers and shareowners and is a pivotal part of our broader clean energy strategy. In addition to delivering the utilities of the future, utilities that are designed to efficiently enable and manage distributed energy resources and large-scale renewables connected to our networks. We are on the leading edge of these efforts with the work we have done in Pennsylvania and are confident this proven strategy will continue to drive further savings and capital investment opportunities moving forward, even in Pennsylvania where it is already well underway. We have combined this innovative approach with our culture of delivering operational excellence. And we have a superior track record, which we demonstrated with the Pennsylvania playbook slides on our Investor Day call. In summary, we are excited to translate our track record of best-in-class operational excellence into top-tier returns for our shareowners. The actions we have taken over the past 18 months were designed to do just that, and I am confident they will. We have hit the ground running with the new PPL. My team and I are ready and committed to deliver for our customers and our shareowners. Turning to Slide 5 and the highlights of our second quarter results. Today, we announced second quarter reported earnings of $0.16 per share. Adjusting for special items, second quarter earnings from ongoing operations were $0.30 per share compared with $0.19 per share a year ago. The strong second quarter earnings have us solidly on track to achieve the earnings guidance we shared during our Investor Day. And today, we reaffirmed our 2022 ongoing earnings forecast range of $1.30 to $1.45 per share with a midpoint of $1.37 per share. This forecast reflects a partial year estimate of contributions from Rhode Island Energy following our completion of the acquisition on May 25. Today, we also reaffirmed our projected compound annual earnings per share and dividend growth rates of 6% to 8% through at least 2025. Our per-share growth target is based off the midpoint of our 2022 pro forma forecast range of $1.40 to $1.55 per share or $1.48 per share. The pro forma forecast range reflects a full year of earnings contributions from Rhode Island Energy. In addition to delivering strong quarterly results, we have also been hard at work, enabling the asset optimization and centralization plans that will drive our O&M savings targets. I will discuss the details of these initiatives on the next slide. The final major highlight, I’ll note this morning is the RFP that LG&E and KU recently issued for replacement generation in Kentucky. As a reminder, the companies expect to retire at least 1,000 megawatts of coal-fired generation by 2028. The RFP is open to a variety of generation sources, which I will touch on further in a few minutes. Turning to Slide 6. As I mentioned, our strategy moving forward focuses on efficiency and affordability, as we build the networks and make the investments necessary to deliver a clean energy future. Today, we are providing more detail on the savings opportunities that support our strategy. We expect to deliver $50 million to $60 million or about a third of the savings target in 2023. As our investments in technology take shape, we expect the savings to step up to a cumulative total of $120 million to $130 million by the end of 2024, achieving the full $150 million of targeted savings by the end of 2025. The timing and ranges reflect our planned implementation of various systems and processes, including the further use of data science to become more efficient. Turning to the right side of the slide, there are two key areas to this optimization strategy, operations and shared services. Regarding operations, the first piece is replicating our Pennsylvania playbook for electric T&D operations across Kentucky and Rhode Island, which we expect will drive about $80 million of savings by 2025. To accomplish this objective, we will deploy smart grid technology to enhance reliability and reduce costs and leverage data science to maximize our resource allocation. We are also improving our vegetation management approach, leveraging models and satellite imagery to assess individual predictions of risk, such as when a tree canopy is expected to reach a certain power line, it will need to be trimmed or cut down. We have spent several years honing our PA playbook and we’ve built our electric T&D operating model to be scalable. Over the past decade, we grew our Pennsylvania rate base and earnings at about 10% a year, all while keeping O&M relatively flat, offsetting about $100 million of inflation over that period and driving significant improvements in reliability and customer satisfaction. At the same time, we built one of the nation’s most advanced energy network, one that incorporates self-healing technology and supports the growth of renewable energy. We believe the best is yet to come as we replicate our PA playbook enterprise-wide, with additional upside as we continue to find ways to scale technology and drive further innovation. Another key source of O&M savings in our T&D operations will be the opportunity to leverage advanced technologies and our customer service function. This includes expanding and improving convenient self-service options for customers that reduces call handling and improves customer satisfaction. We’re also projecting lower O&M in other areas of our operations, including the generation and gas LDC businesses, totaling about $35 million by 2025. We see the majority of this opportunity through greater efficiency in our generation fleet, including outage optimization and coal plant retirements. The second area of focus is the centralization of shared services, which includes the consolidation of our supply chain function and IT systems and platforms. We expect to drive savings in this area of about $35 million by 2025. By deploying common systems and platforms across our operations, we expect to reduce software and licensing costs and improve overall operating efficiency. This also includes leveraging our increased buying power from centralized supply chain operations to procure equipment and materials enterprise-wide, as well as other savings from consolidating our other shared services functions. In summary, we believe our strategy, which leverages operating efficiency, data science and advanced technology, differentiates PPL by supporting competitive earnings and dividend growth of 6% to 8%, while remaining focused on affordability as we make the investments needed to deliver the clean energy transition. We’re confident we will achieve our O&M reduction targets, as they are driven by a proven operating model, are technology driven and are spread over several areas of the business over several years, with achievable targets and plans in each area. Turning to Slide 7. We continue to evaluate opportunities to advance the transition of our Kentucky generation fleet, which presents an exceptional investment opportunity. Under our current plan, we expect to retire 1,000 megawatts of coal by 2028 and an additional 1,000 megawatts by 2035. As we plan for the future, we continue to evaluate supply options and technologies that will best deliver value for our customers over the long-term, while advancing cleaner sources and maintaining secure, reliable and low-cost energy in the state, which is key to supporting Kentucky’s robust economic development. As I noted earlier, LG&E and KU recently issued an RFP for replacement generation to address potential EPA regulations, load growth, coal plant retirements, and greater diversification of our Kentucky generation portfolio. The RFP is open to a variety of generation sources, including renewables, battery storage and peaking or baseload natural gas. We’re seeking proposals for capacity and energy to be available, no earlier than 2025. Proposals are due in mid-August, and we expect to complete our evaluation by the end of October. This will allow us to submit our required regulatory filings either in Q4 of this year or Q1 of 2023. Results from the RFP will also inform further analysis we’re undertaking regarding the transition of our coal-fired fleet to cleaner sources, based on our continued engagement with shareowners. This analysis will include various clean energy scenarios, including an assessment of the financial and operational implications of achieving an 80% clean energy portfolio by 2030. We expect to complete the analysis and share our results by the end of the year. As you know, we issued two significant reports in the fall of 2021 with our Integrated Resource Plan and Climate Assessment report. This latest analysis, to be completed later this year, reflects our continued evaluation of clean energy transition options. Lastly, on this slide, I would note that we continue to closely monitor the EPA’s proposed regulations for potential impacts to our transition plan, including the Good Neighbor rule. The Good Neighbor rule could potentially advance nearly 500 megawatts of coal-fired retirements from 2034 into the 2026 to 2028 time frame. As a result, we are closely monitoring that regulation, which we expect will become final later this year or in 2023. With that, I’ll now turn the call over to Joe for the financial update. Joe?

Vince Sorgi:

Thank you, Joe. As I said at the outset of my remarks, I’m excited about the prospects for the new PPL. Through our strategic transactions, we’ve positioned the company to deliver consistent, sustainable, top-tier returns for our share owners, and exceptional results for our customers. We look forward to seeing many of you during our upcoming marketing events over the next few months, as we continue to share our story. With that, operator, let’s open it up for questions.

Vince Sorgi:

Good morning, Durgesh.

Vince Sorgi:

Yes, sure. So for the most part, we think the act is positive for the company. First, the ability to elect the production tax credit instead of the ITC for solar will improve economics of our self-build options as we look at renewables as a potential source of replacement generation in Kentucky. In addition, the extension of the renewable tax credit should lower the cost of renewables overall. That will be good for not only our RFP process in Kentucky, but also our customers in Rhode Island as we procure clean energy to meet the 100% renewable energy by 2033 requirement that was just enacted into law up in Rhode Island. As you know, we are now a federal cash taxpayer. So we’re not anticipating the 15% AMT provision to have a significant impact on our business, so no real headwind there. And then I just think the transferability provisions around tax credits, also makes it more likely that renewables will be built. And that will also be good in general for the industry and for accelerating our clean energy transition, simplifies the structure of the deals significantly.

Vince Sorgi:

Yes, Joe, do you want to?

Durgesh Chopra:

Got it. Okay. Alright. So the EMT is not going to impact the cash flow sort of metrics in the plan. Okay. Then just switching gears to the – and by the way, thank you for sharing the details on Slide 6 on the O&M trajectory. That’s really helpful by year. Just switching to Slide 7 really quickly on the Kentucky RFP, so what are the next steps in terms of after the regulatory filing that is in Q4 this year or early next year? What do we expect a form of approval for the Commission, or what are the kind of things that we should be watching for?

Durgesh Chopra:

Got it. And then just one last one, and I will pass the opportunity for others to ask questions. Any of this CapEx coming out of these RFPs would be incremental to your current line, correct?

Durgesh Chopra:

Got it. Thanks guys.

Operator:

And the next question is from Ryan Greenwald from Bank of America. Please go ahead.

Vince Sorgi:

Hi Ryan.

Vince Sorgi:

I mean obviously, it will help the economics around that business. Again, it’s a very small component of our overall business. So, I don’t see it turning Safari into a material driver of our earnings in the near-term. But obviously, it will simplify the deal structures and make those projects more economic.

Vince Sorgi:

Yes. I will let Joe talk about the specifics on that. I mean the reduction going from 9.99% to 4.99% is over a period of years. I think it concludes in 2031. So, in any 1 year, the impact isn’t too significant. But Joe, do you want to talk to that?

Vince Sorgi:

But it’s good. We are glad to see the reduction in the rate just for general business purposes. It’s good to see for sure.

Vince Sorgi:

Great. Thanks Ryan.

Michael Lapides:

Hey guys. Congrats on a good quarter. I look forward to seeing you next week. I had a question about O&M savings, which is you used the language in today’s slide deck of at least $150 million targeted by 2025. Do you see upside to that $150 million? And if so, kind of where do you think that upside kind of which of the buckets could that emerge from?

Michael Lapides:

Got it. Thank you for that. And then one question, the Good Neighbor Rule. Can you just walk us through how you think about whether – if the rule was finalized as proposed by the EPA, and I know we are still in the comment period and so forth, so we have some time. But just curious, how you are thinking about – does that impact energy that would come from existing coal plants, or do you think more of it as it would drive more of your existing coal plants into retirement and therefore, create a need for both energy and capacity?

Michael Lapides:

Got it. And if I think about just the timeline of this, the RFPs that are already underway in Kentucky, probably don’t address the incremental potential coal retirement that could get moved up that you would either – if you needed to replace that coal plant, you would either have to host another RFP sometime next year or the following?

Michael Lapides:

Got it. And the incremental megawatts is just an extra 500 megawatts?

Michael Lapides:

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

Operator:

[Operator Instructions] The next question comes from Gregg Orrill with UBS. Please go ahead.

Gregg Orrill:

Hey. Thank you. Just a follow-up on if you might be able to do at a state what the Pennsylvania regulatory strategy is, or do you have a rate case that you are thinking about?

Gregg Orrill:

Alright. Thanks. Congratulations.

Operator:

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Vince Sorgi for any closing remarks.

Operator:

Thank you, sir. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator:

Good morning, everyone, and welcome to the PPL Corporation's First Quarter Earnings Conference Call. [Operator Instructions]. At this time, I would like to turn the conference call over to Andy Ludwig, Vice President of Investor Relations. Sir, please go ahead.

Vincent Sorgi:

Thank you, Andy, and good morning, everyone. We appreciate you joining us for our first quarter investor update. Moving to Slide 3 and the agenda for today's call. I'll begin this morning with highlights of our first quarter performance and an update on the status of our planned acquisition of Narragansett Electric in Rhode Island. Joe will then provide a detailed review of first quarter financial results. And as always, we'll leave ample time for your questions. Turning to Slide 4. Today, we announced first quarter reported earnings of $0.37 per share. Adjusting for special items, first quarter earnings from ongoing operations were $0.41 per share compared with $0.28 per share a year ago. These results were in line with our expectations and provide a strong start to the year as we remain focused on repositioning PPL for long-term growth and success. Moving to Rhode Island, we received approval in late February from the Rhode Island division of Public Utilities and Carriers to acquire Narragansett Electric from National Grid. In its detailed decision, the division found that PPL met the statutory standard for approval. The Rhode Island Attorney General's office appealed the division's order to the state's Superior Court and obtained a stay of the approval until the appeal could be heard. On April 26, the superior court heard oral arguments on the Attorney General's appeal. The Attorney General contends that the division misapplied the statutory standard for approval and in particular, the state's public interest requirement. The Attorney General also contends that the division failed to adequately consider Rhode Island's act on climate in its analysis decision. We disagree and believe the extensive record and evidence in this case demonstrate that the division properly applied the statutory standard and correctly approved the transaction. At the April 26 hearing, the Attorney General's office asked Judge Stern to remand the matter back to the division with instructions to address the issues raised by the Attorney General. The Attorney General's office did not ask the judge to reverse or vacate the decision. We anticipate Judge Stern will issue a decision on the appeal relatively soon because he publicly stated that a quick and timely resolution of this matter is in the best interest of all parties. In the meantime, we are actively engaged in settlement discussions with the Attorney General's office and remain prepared to close promptly with National Grid. As we've shared all along, we are eager and excited about the opportunity to work with the talented team at Narragansett Electric to drive significant value for Rhode Island customers and support the state's decarbonization efforts. We continue to believe Narragansett Electric is an excellent for PPL and that PPL is an excellent fit for the state of Rhode Island. We remain confident that we will reach a positive outcome in the proceeding. Given the pending litigation, we are not in a position to provide additional details at this time. And I have said all I can say about this matter on today's call. I appreciate you respecting the process when we get to the Q&A session. Turning to Slide 5 and a few operational highlights. Our Kentucky Utilities continue to seek opportunities to advance clean energy options and support Kentucky's growing economic development. In late February, LG&E and KU joined the state's new Hydrogen Hub initiative, which focuses on making hydrogen a low-carbon solution for the future. The initiative is part of a new energy strategy announced last fall by Kentucky Governor, Andy Beshear and the Kentucky Energy and Environment Cabinet. LG&E and KU's commitment to promote hydrogen supports a key pillar of PPL's clean energy strategy, which is to drive digital innovation and R&D to enable new technologies. The commitment is also consistent with our sponsorship of EPRI's Low-Carbon Resources Initiative, and LG&E and KU's partnership with the University of Kentucky Center for Applied Energy Research. EPRI's Low-Carbon Resources Initiative seeks to advance clean energy technology and low carbon energy carriers such as hydrogen. Meanwhile, LG&E and KU's carbon capture partnership with the University of Kentucky, includes a novel project focused on capturing CO2 from natural gas combined cycle plants and directly from the air as well as producing hydrogen and oxygen as value-added streams. We're excited to join this new Hydrogen Hub initiative and we will continue to engage with the Kentucky administration and other stakeholders as the state's clean energy strategy evolves. We're also very excited to support continued economic development in Kentucky, which is coming off a banner year for attracting new business and manufacturing in the state. As we highlighted on our third quarter call, Kentucky's success in 2021 included Ford's announcement that it will build a $6 billion battery manufacturing complex within our LG&E and KU service territories. The complex to be built in Glendale, Kentucky will help put the state at the forefront of the auto industry's transformation to electric vehicles, and the state has called it the single-largest economic development project in its history. In support of this effort in Glendale, Kentucky Utilities recently requested regulatory approval to build 2 345 kv and 2 138 kv power lines and 2 new substations. LG&E plans to construct an interconnection gas regulation facility and nearly half mile of gas lines to serve the Glendale project. The estimated capital cost to support the Glendale economic development project is $150 million to $200 million. The Kentucky Public Service Commission has set a procedural schedule that will support our ability to meet Ford's construction time line. In addition to these initiatives, we also remain focused on advancing technology and innovation. Each of our utilities were recently recognized for these efforts by EPRI, winning technology transfer awards. In Pennsylvania, PPL Electric Utilities received this award for application of an adaptive tool, which, through automation, further increases the overall safety, reliability and efficiency of the electric grid. This tool expands on one of the most advanced grids in the nation as we continue to develop a safer, smarter, self-healing grid of the future. In Kentucky, LG&E and KU were recognized for the use of EPRI's electrification portfolio assessment tool to identify high-impact electrification technologies to reduce natural gas use and related emissions. This technology research project identified more than 1 million-megawatt hours of electrification opportunities for LG&E and KU industrial and commercial customers to reduce emissions and lower costs. These awards are just another example of our continued efforts to lead in the research and development space while progressing towards our sustainability goals. Across our businesses, we are also very focused on improving the customer experience by expanding self-service options, and our progress in this area continues to be well received by our customers. In February, PPL Electric Utilities ranked first in J.D. Power's annual Utility Digital Experience Study. The study assesses how customers interact online and through mobile apps with the 36th largest electric, natural gas and water utilities in the U.S. PPL Electric's score in the study improved significantly in 2022, while the majority of the companies surveyed experienced declining scores. Improving customers' digital experience is yet another way we continue to use technology to drive value for our customers. Shifting to our final update on Slide 5. We continue to make progress across PPL in advancing key environmental, social and governance initiatives. On April 14, we published our annual sustainability report, which addresses our approach to a wide range of ESG issues and highlights our 2021 performance and progress. As highlighted in the report, we have expanded on our commitment to achieve net-zero carbon emissions by committing to not burn unabated coal by 2050. This new commitment reflects our continued discussion and expectations around the future of our coal fleet and its transition. Based on our current retirement schedule, we expect our coal capacity to be reduced from just over 4,700 megawatts today to approximately 550 megawatts in 2050. The 550 megawatts are associated with our highly efficient Trimble County 2 coal-fired facility, which was completed in 2011. There are any number of technology developments, regulatory mandates or circumstances that could impact the timing of the end of this plant's economic life. We believe that research and development is key to our clean energy future and fully expect that innovation, technological advances and the relative economics of other cleaner energy sources will support the company's commitment to not burn unabated coal at this facility by 2050. In other highlights from our sustainability report, we created and filled a new Chief Diversity Officer position to lead our DEI strategy enterprise-wide and build on the progress we made in 2021. Finally, I would note that we have added political contributions to the oversight function of our Board's Governance, Nominating and Sustainability Committee. PPL's transparent disclosures in this area have earned us a trendsetter ranking by the CPA Zicklin Index, which benchmarks the political disclosures and accountability policies and practices of leading U.S. public companies. Oversight by the Governance, Nominating and Sustainability Committee will further strengthen our governance in this area. That concludes my strategic and operational overview. I'll now turn the call over to Joe for the financial update. Joe?

Vincent Sorgi:

Thank you, Joe. As I noted earlier in my remarks, we continue to work diligently through the state appeals process in Rhode Island. While the appeal has delayed the closing of the acquisition, we are confident we will complete this transaction, and we look forward to introducing a new PPL, a PPL that is built for the future, an innovative, best-in-class utility operator positioned to deliver competitive earnings and dividend growth, backed by one of the strongest balance sheets in our sector, employees to lead the clean energy transition, while keeping energy service affordable and reliable for our customers. And we continue to look forward to sharing a strategic update, including long-term growth projections at an Investor Day following the Rhode Island closing. With that, operator, let's open the call for Q&A.

Shahriar Pourreza:

So Vince, starting, I guess, with Rhode Island, if the Superior Court rules in favor -- in your favor, I guess, the AG could appeal to the state Supreme Court. Any general thoughts on timing if that were to occur? Is it an immediate filing? And then would you wait for the court to deny your stay? I assume you would not close while this process is still underway, right?

Shahriar Pourreza:

No, that's fair. I appreciate that. And then just maybe a question for Joe on housekeeping. Can you just remind us on what the approximate unallocated cash balance is at this point, following the buybacks, which you just highlighted in the 3Q CapEx increase that you had? I guess how are you thinking about the toggle between buybacks and more CapEx as we approach the finish line here in Rhode Island?

Shahriar Pourreza:

Okay. Got it. And then just one last one for me and I'll jump back in the queue. It's just as we're thinking about the Analyst Day, the topic of Kentucky does pop up here and there. And obviously, there's a trajectory that's out there with the prior IRP that's filed. But is there an opportunity to maybe take a slightly more aggressive approach as you're thinking about the coal outlook within that state versus what you just recently filed?

Shahriar Pourreza:

No, that's helpful. I mean I think there's some trepidations around what the base earnings could be and what you would grow off of that. So it would be very welcome.

Operator:

Our next question comes from Nicholas Campanella from Credit Suisse.

Vincent Sorgi:

Yes. So on the retirements, we have the 2024 retirement and then additional retirements in 2028 and then the next round are in kind of the mid-2030s as outlined in the IRP. We are actively engaged with the commission and other parties responding to questions around the IRP. But as we think about really the 2028 retirements going from kind of the theoretical that was in the IRP, again, that's a point in time analysis, to actually putting together the generation replacement plan, we're actively working on that now. That will become part of the interaction that we have with various stakeholders around the IRP. Ultimately, that will culminate in a CPCN probably within the next year around what we think that generation replacement will look like. But Nick, to your point, there's opportunity to look at those retirement dates and potentially pull those in, but those will all be part of the CPCN request that we'll be working on here in the near term. Joe, anything you want to add on the rest of his question?

Nicholas Campanella:

Okay, $5 billion. I appreciate that. And then just core business today, what are you seeing in terms of just inflation impacts? How are you feeling on labor pressures, financing costs and just how should we kind of be thinking about how that affects the base business today?

Operator:

Our next question comes from Steve Fleishman from Wolfe Research.

Vincent Sorgi:

Sorry, Steve, you cut out when you stated your range or number. Say it again.

Vincent Sorgi:

Yes. Well, that's consistent with what we see as well, yes.

Anthony Crowdell:

Vince, tough outcome on Tuesday. So hopefully, get better luck tonight. Just, I guess, quickly on, I guess, Slide 4. And I don't know if you could answer this, and if you can't, just please tell me, but on one of the bullets you highlighted the Attorney General is requesting just, I guess, remand with instruction versus vacating the approval decision. I guess what is the distinction there that you're trying to make on that bullet?

Anthony Crowdell:

So they're -- so am I -- fair to say from that bullet, that there's actually no challenge to actually -- there's no challenge to the DPUC approval, but the DPUC approved the transaction, and right now, there's no pending legal, I guess, matter that's challenging that approval that DPUC gave?

Anthony Crowdell:

Great. And then lastly, if I can just pivot, I guess, to maybe Pennsylvania. It's on kind of like customer bill impact and will load growth be impacted. If I think in Pennsylvania, I think customers maybe had an increase in December due to higher commodity prices. And then I believe new rates go into effect in June, so you get a kind of a pancake of maybe a sizable increase. I guess one is, what level of increase are you forecasting customers may face in Pennsylvania in June versus maybe a year ago? And then do you think that could impact either customer load growth looks very attractive when I look on the slides or maybe if it postpones any CapEx, and I'll leave it at that.

Gregory Dudkin:

Yes. So to Vince's point, compared to June of last year, the overall bill for residential will go up about 30%. And again, it's driven by basically a doubling of the generation costs. So the impact on sales going forward, we'll have to see, but it's -- that's a big impact. We are really pushing for -- because we're a competitive state, there may be generation providers that have a lower rate than that. So in our communication to customers, we're really pushing for them to go shop. And if there's a lower generation charge or deal out there, they should sign up for it.

Paul Zimbardo:

First, I just want to clarify quick with the affordability questions. There's no plans in moderating the capital plans in Pennsylvania or Kentucky that you put out before?

Paul Zimbardo:

Okay. Great. I just wanted to check on that. And then just since all the inflation questions, what is the long-term O&M targets for Pennsylvania and Kentucky, just as you're seeing more pressures change the rate case plans in Pennsylvania?

Gregory Dudkin:

Yes. Just that you had mentioned PPL Electric Utilities, so there's no plans in the immediate future for a rate case there for today.

Michael Lapides:

Guys, easy question for you. Just curious if -- I thought you had a stay out in Kentucky for a number of years. So if you ramp up capital spend there, do you have to wait until that next case to get cash recovery of it? Or are there mechanisms you can utilize that would enable interim rate increases before that next case? And can you remind me when do you file that next case there?

Michael Lapides:

Got it. And can you remind me, do you have -- like how much in the way of near term, call it, next 3 to 5 years, coal, ash or ELT-related spend you have to do in Kentucky?

Operator:

And ladies and gentlemen, with that, we will be concluding today's question-and-answer session. I'd like to turn the floor back over to the management team for any closing remarks.

Operator:

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

Operator:

Good morning and welcome to the PPL Corporation Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.

Vince Sorgi:

Thank you, Andy and good morning everyone. We appreciate you joining us for our 2021 year end earnings call. Moving to Slide 3 and the agenda for today’s call, I will begin this morning with an overview of 2021 and what was clearly a significant transition year for PPL. I will highlight key achievements we made throughout the year, including our progress in strategically repositioning PPL for future growth and success. Joe will provide a financial update including the previously discussed reset of our first quarter dividend we announced this morning and a detailed overview of our 2021 financial results. And as always, we will leave ample time for your questions. Turning to Slide 4, I am incredibly proud of how our team performed in what was truly a remarkable year for PPL. As we began a new century in our company’s history, we took bold steps to strategically reposition PPL as a U.S. focused energy company, committed to sustainable growth and well-positioned to lead the clean energy transition, while maintaining affordability and reliability for our customers. We completed the sale of our UK utility business in June, achieving exceptional value at almost $11 billion while eliminating risks associated with foreign operations. We then took steps to strengthen PPL’s balance sheet by reducing $3.5 billion of our holding company debt, which provides us with significant financial flexibility going forward. We advanced our planned acquisition of Narragansett Electric, which will expand and diversify our U.S. presence, add another high-quality regulated utility to our portfolio, and create additional opportunities to leverage our proven operating model to drive value for customers and shareowners. We anticipate receiving a final order from the Rhode Island division of public utilities and carriers with respect to the acquisition by March of 2022. While the strategic repositioning was a key priority in 2021 to set PPL up for long-term success, we also remained focused on achieving our near-term objectives. In 2021, we continued our track record of earning equity returns that were in line with those allowed by our regulators. We also achieved constructive regulatory outcomes in 2021, with the settlements on the Pennsylvania FERC ROE challenge and the rate case in Kentucky, which will provide added stability and predictability to our plan over the next several years. We also returned over $2 billion to shareowners through dividends as well as share repurchases, which included the completion of our targeted $1 billion in share buybacks through December 31. And true to our mission, we delivered energy safely, reliably and affordably for our 2.5 million customers in the United States. And as the pandemic refused to yield, we stayed resilient, acted responsibly to protect our employees and remained focused on continuous improvement. From Kentucky to Pennsylvania, we delivered exceptional service throughout 2021. We maintained transmission and distribution reliability as well as generation availability that was among the best in the industry. Despite PPL Electric Utilities experiencing significant storms during 2021, it maintained top quartile performance for Seifi, which measures the average number of outages our customers experience. Meanwhile, our Kentucky operations posted their second best year on record for safety. When severe weather struck either in Pennsylvania or Kentucky, we responded quickly and effectively. For example, after December tornadoes, tour through portions of our service territory in Kentucky, damaging or destroying more than 500 transmission and distribution poles, we restored power to most customers within 48 hours. Similarly, when the remnants of Hurricane Ida swept through our Pennsylvania service territory, knocking out power to tens of thousands of customers, we mobilized quickly and effectively to get the lights back on as soon as possible. Our restoration performance in the wake of Hurricane Ida was recognized with an EEI Emergency Response Award. This performance is the result of the investments we have made in our grid and our dedicated employees who pride themselves on delivering the superior level of service each day. And that service was once again reflected in our customer satisfaction scores. We were honored to receive 4 new J.D. Power awards in 2021 for electric utility residential and business customer satisfaction, with PPL Electric Utilities and Kentucky Utilities both ranking highest among similarly sized utilities in their respective regions. And following an independent survey of customers at 140 of the largest utilities in the U.S., PPL Electric and Kentucky Utilities were recognized by Escalent as two of the most trusted utility brands in the nation. Across PPL, we also continue to foster a culture of innovation, investing in advanced technology and data analytics to deliver industry leading reliability and enterprise-wide cost efficiencies. This resulted in multiple industry awards in 2021, including the use of dynamic line rating, technology and the use of data analytics to better target vegetation management. With an eye towards keeping reliability strong and empowering our customers, we also continue to invest in the future. This included executing more than $2 billion in infrastructure improvements to further strengthen grid resilience, modernize our network, incorporate advanced technology and pave the way for increased electrification and renewable energy in our service territories. Turning to Slide 5, over the past year, we also delivered on our commitments to deliver a sustainable PPL for our shareowners, employees and the communities we serve. We made significant progress in advancing our clean energy strategy. We adopted a net zero carbon emissions goal, accelerated our interim emissions reduction targets to 70% from 2010 levels by 2035, and 80% by 2040. And we also accelerated our coal plant retirement schedule. Separately, we announced a commitment of over $50 million in new investments to fund research and development in the clean energy space with our planned investments in EIP and EPRI’s low carbon resources initiative. We also launched a new partnership to study carbon capture at natural gas combined cycle power plants and reached new agreements to provide an additional 125 megawatts of solar power to major Kentucky customers. In November, we published our latest Comprehensive Climate Assessment report, which highlights the risks associated with climate change and the opportunities in responding to it and evaluate potential of future emissions under multiple scenarios. This included a scenario consistent with limiting global warming to 1.5 degrees Celsius. Our climate assessment outlines our clean energy strategy and goals to enable a responsible transition that balances our commitments to the environment, our customers, our employees and our communities. LG and KU also submitted their Triannual Joint Integrated Resource Plan, which reflected a significant increase in projected renewable additions in the 15-year planning horizon compared to our prior plan. We expect the trend of a more rapid decarbonization of our generation fleet in Kentucky to continue with further improvements in cost and technology for renewables as well as other clean energy technologies. In addition to our focus on advancing our clean energy transition, we also remained very engaged in the communities we serve and with our employees throughout 2021. We continue to move PPL forward by creating a more diverse and inclusive workplace. We implemented an enterprise-wide diversity, equity and inclusion strategy, adopted DEI commitments, increased diversity within our leadership rank, overall workforce and the board and we expanded our support for social justice and equity initiatives in the communities we serve. In addition, we continue to create new opportunities through business resource groups for employees of all backgrounds and experiences to collaborate, share perspectives and contribute to PPL’s success. Our strong commitment to diverse and inclusion received recognition for multiple organizations in 2021, with PPL being named the Best Place to Work for LGBTQ Equality and Disability Inclusion as well as a top company for ESG. In this January, PPL once again was named a Best Place to Work for LGBTQ Equality, marking the sixth straight year PPL has received this recognition. During our fall giving campaigns, PPL employees and retirees collectively raised more money than ever before, more than $7 million in individual pledges and corporate matching contributions that will help lift individuals, families and communities. And in the aftermath of the Kentucky tornadoes, we responded quickly providing financial support to assist Kentucky families and businesses. In other highlights, we continued to build an exceptional management team that we believe will lead PPL to its best years to come. We promoted Greg Dudkin to Chief Operating Officer and are leveraging his experience in building one of the most advanced utilities in the nation in PPL Electric Utilities to drive further value for stakeholders across all of PPL’s operating companies. We are extremely excited to have Wendy Stark on our team as our new General Counsel. Wendy’s extensive experience in regulatory matters and her deep knowledge of our industry have made her a great addition to PPL. We named two new utility presidents in Pennsylvania and Kentucky, with Stephanie Raymond in Pennsylvania and John Crockett in Kentucky. Stephanie is the first female utility president in our company’s 100-year history. We also named a highly qualified and experienced leadership team in Rhode Island led by Dave Bonenberger from PPL and numerous talented employees from National Grid to lead our electric and gas operations pending the completion of the acquisition. We also took steps to strengthen our corporate governance during the year. Our Board of Directors appointed an outstanding leader and experienced board member as Independent Board Chair in Craig Rogerson, reflecting PPL’s continued commitment to strong corporate governance and independent oversight by a diverse, engaged board. And Heather Redman, Co-Founder and Managing Partner of Flying Fish Partners was a welcomed addition to our highly experienced Board of Directors and brings a wealth of expertise in disruptive technologies and the energy industry. In summary, across our business, we made tremendous progress in 2021 as we pursued our strategy to deliver sustainable value for all stakeholders and position PPL for future growth and success. With that, I will now turn the call over to Joe for the financial update. Joe?

Vince Sorgi:

Thank you, Joe. As I mentioned at the outset of my remarks, 2021 was very much a transition year for PPL. It was about reimagining PPL and laying a firm foundation for the company’s future growth and success, and I believe we achieved just that. Looking forward, our focus is on completing the acquisition of Narragansett Electric and introducing a new PPL to shareowners, a PPL that is committed to delivering sustainable value for share owners, backed by one of the strongest balance sheets in the U.S. utility sector, distinguished by its best-in-class customer service. Committed to net-zero carbon emissions and well positioned to lead the clean energy transition, while maintaining affordable, reliable service for our customers. We look forward to sharing further details on our strategy and the exciting growth prospects for the new PPL at our Investor Day.

Operator:

[Operator Instructions] And our first question will come from Shar Pourreza of Guggenheim Partners. Please go ahead.

Vince Sorgi:

Good morning, Shar.

Vince Sorgi:

Yes, sure. First of all, let me just say that we think we’ve met the standard for approval in the state, and we are looking forward to the decision coming out from the division. And Again, as we stated really from the outset of this process, we believe that PPL is uniquely positioned to serve lot customers at this point in time. When you look at our long history of providing energy safely, reliably, affordably for our customers, we consistently rank among the very best for customer satisfaction. We’ve been a clear leader in developing and deploying the kind of smart grid technology that’s going to be critical to helping Rhode Island meet their very ambitious decarbonization goals. And with the additional commitments that we’ve made, we believe the transaction is clearly in the public interest in Rhode Island. So I’ll just reiterate that we believe we’ve met the standard, and we’re looking forward to the decision.

Vince Sorgi:

Yes, Shar. I would say we don’t have a detailed update on that. We will provide a full update at the Investor Day. Really it’s important that we get through the regulatory process in Rhode Island, of course, we’ve made some commitments as part of the process to mainly to make sure we factor all of that into the proteins discussion, and we will update with the full update on the Investor Day call.

Vince Sorgi:

Well, Shar, as you know, we are not going to comment on market rumors, so...

Operator:

The next question comes from Paul Zimbardo of Bank of America. Please go ahead.

Vince Sorgi:

Good morning.

Vince Sorgi:

Yes, sure, Paul. While it’s certainly possible that we will receive the decision as early as next week from the division, we’re not certain in that, and we are still in the middle of the regulatory approval process. And as we discussed on the third quarter call, we did want to reduce the uncertainty related to the anticipated reset of the dividend following the UK sale. And just without the firm time line for the Rhode Island transaction, we just felt it was appropriate to keep our normal cadence, which as you know, we would normally announce our first quarter dividend on our call, on our year end call. And so as we were contemplating whether to move from that normal cadence and potentially hold off the call. We also realized that if we didn’t do it today, we actually risk ended up doing it in 8K, which would not be the preferred approach, of course. So we wanted to make sure that we could provide an opportunity for questions around what we’ve said. And that was really the nature of the decision to announce it today versus leading. And then in terms of the second part of your question, as Joe noted, the Q1 dividend is based on our current operations only, and we would plan to increase that following the closing of the Narragansett transaction. And again, we will provide that full update once we close the deal and then conduct the Analyst Day for the investor call.

Vince Sorgi:

Joe, you want to…

Paul Zimbardo:

Okay. Great. Thank you, have a nice weekend.

Vince Sorgi:

Thanks, Paul

Durgesh Chopra:

Hi, team. Good morning. Thank you for taking my question. I know there is – good morning. I know there is an update coming post the Narragansett transaction. But just so we have the numbers right. Am I right that with the share buybacks, and I’m focused on the leftover cash. With the share buybacks and the additional CapEx announced at the U.S. utilities, you still have roughly about $1 billion left to allocate? Do I have that number right?

Durgesh Chopra:

Okay, that’s fair. And then just one, and you may not be able to answer this also, but I’ll just ask, is the sort of 2022 going to be the base year for any term – any long-term projections that you give out or long-term earnings growth target that you gave out?

Durgesh Chopra:

Okay, thank you, guys. Appreciate the time.

Operator:

The next question comes from Paul Patterson of Glenrock Associates. Please go ahead.

Vince Sorgi:

Yes, we can.

Vince Sorgi:

Yes, Paul, I don’t really want to talk about some hypotheticals. We are really focused. Again, I will just go back to what I said to Shar, we think we have clearly met the standard for approval in the state with what we bring to the table in terms of our operating experience, the financial strength of our company, of course, commitments that we have made throughout the process there. So, we and National Grid are very focused on getting to closing. We spent the last year on transition planning, integration planning, hiring or getting 1,100 people like NFI and ready to start on day one. We are all very focused on getting this deal over the goal line and bringing real value to our line.

Vince Sorgi:

Yes. Look, Paul, I think based on the schedule that we have, right, the targeted decision date is the 25th. But we just – we recognize that there is a lot in this case through the written testimony Greece, the oral hearings. We just want to recognize the fact that the 25th is a target. And there is a lot that the hearing officer and the division need to get through. And so there has been no change in the 25th as the target. But we are just trying to be realistic that there is no guarantee that we are going to get.

Operator:

The next question comes from Michael Lapides of Goldman Sachs. Please go ahead.

Vince Sorgi:

Sure. So, we have the next round of retirements, you may recall, in 2024. Based on our reserve margins, we don’t anticipate a significant need to replace generation for those retirements. The next group would be in 2028. We would need to replace the 2028 retirements. And so probably see capital start to be spent in the 2026-ish timeframe for that. And then the next round of retirements are this side of 2035. So, I think in 2034, ‘35-ish. And so you will see the capital in the early ‘30s to prepare for those.

Vince Sorgi:

Yes. So, it’s a good question. So, as you know, we are incredibly focused on decarbonizing the overall generation fleet. But we you bring up a good point around the cost of natural gas versus the cost of coal. So, as we think about it, Michael, we will continue to look at how we best utilize the fleet to ensure reliability for the lowest cost for customers, but at the same time, decarbonizing, so that could be additional renewables – renewable PPAs or on renewals. We are always looking at – does it make sense to shift between natural gas and coal or so. And those are all things that we continue to iterate as we look at the decarbonization – the overall decarbonization strategy for the quality.

Vince Sorgi:

Yes. So, we have done two rounds of smart meter deployment in Pennsylvania. We are doing our initial deployment in Kentucky. We are expecting that to be completed in 2026. And then you haven’t asked, but in Rhode Island, they don’t have smart meters, but that would be something we would be deploying very quickly after acquisition in as well.

Vince Sorgi:

Sure.

Steve Fleishman:

Thanks. I appreciate it. I have got a few questions, Vince. So, I guess first of all, I thought you had said in the past that you were going to use like a pro forma base for your growth rate, including like a full year of it NEC, not just 2022. Is that correct, or are you going to use 2022 calendar year?