PPL Corp Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Infrastructure Investments: Executed $3.1 billion of planned infrastructure investments in 2024 to strengthen grid reliability and resilience.
• Integration: Completed integration of Rhode Island Energy into PPL, exiting transition services agreement with National Grid.
• Business Plan Update: Announced updated business plan with 2025 ongoing earnings forecast range of $1.75 to $1.87 per share, extending 6%-8% annual EPS and dividend growth to 2028.
• Capital Plan: $20 billion expected infrastructure investments from 2025-2028, up from $14.3 billion prior, driving 9.5%-10% annual rate base growth.
• Dividend: Declared quarterly common stock dividend of 27.25 cents per share, ~6% increase from current dividend.
• IT Transformation: Kicked off IT transformation initiative to align systems across PPL.
• Generation Strategy: Implemented generation replacement plan in Kentucky, including new gas plants and battery storage; engaged in data center build-outs.
• Regulatory: Advanced regulatory proceedings in Kentucky, Pennsylvania, and Rhode Island, including IRP reviews and rate case preparations.

Segment Performance

• Kentucky segment: Results flat compared to Q4 2023. Driven by higher sales volumes offset by higher operating costs, including increased vegetation management costs.
• Pennsylvania regulated segment: Results flat year-over-year. Higher transmission revenues offset by higher operating costs in areas like vegetation management and uncollectibles.
• Rhode Island segment: Decreased by $0.03 per share compared to same period a year ago. Primarily due to lower transmission and distribution revenues, including a favorable annual ISR true-up in Q4 2023.
• Corporate and other: Decreased by $0.03 per share. Due to higher interest expense from increased holding company debt and higher income taxes from tax credits recognized in prior year.

Guidance

• 2025 Earnings: Ongoing earnings forecast range $1.75 to $1.87 per share, midpoint $1.81, 7% growth from 2024.
• Long-Term Growth: Extended 6%-8% annual EPS growth target to 2028, expecting growth in upper half of range.
• Capital Investment: $20 billion infrastructure investments from 2025-2028, driving 9.5%-10% annual rate base growth.
• O&M Savings: Expect cumulative annual O&M savings of at least $175 million through 2026.
• Equity Needs: Plan to raise $2.5 billion of equity by 2028, using ATM program and other equity-like financing structures.

Risks

• Weather Impacts: Frequent and severe storms requiring increased vegetation management spending to enhance reliability.
• Regulatory Uncertainties: Delays or challenges in regulatory approvals for rate cases and generation projects.
• Interest Expense: Higher interest expense due to increased holding company debt balances.
• Project Delays: Potential delays in generation projects and regulatory approvals affecting timeline and costs.

Question and Answer

• Q: On Kentucky CPCN and equity issuance A: Vince Sorgi noted Kentucky CPCN filing by end of Q1, with $2.5 billion equity needed by 2028, using ATM program and other equity-like financing.
• Q: On equity-like financing structures A: Joe Bergstein explained hybrids with 50% equity treatment from agencies, providing flexibility in equity financing.
• Q: On Kentucky generation and data centers A: Vince Sorgi discussed reserve margins in Kentucky and timeline for new generation, including combined cycle plants and battery storage.
• Q: On Pennsylvania resource adequacy A: Vince Sorgi discussed legislative efforts in Pennsylvania to address energy shortfalls, advocating for utility-owned generation.
• Q: On customer bills and EPS growth A: Vince Sorgi and Joe Bergstein discussed affordability and linear EPS growth, with 2025 being the last year in stay-out periods.
• Q: On new generation and DISC A: Vince Sorgi and Joe Bergstein discussed capacity auctions, legislation timeline, and ongoing DISC proceedings.
• Q: On ROEs and gas costs A: Joe Bergstein and Vince Sorgi discussed ROE assumptions in rate cases and general ballpark of new gas generation costs in Kentucky.