The PPL Corporation held a conference call to discuss their second quarter 2024 financial results. The call was led by Vice President of Investor Relations, Andy Ludwig, and featured updates from President and CEO Vince Sorgi and Chief Financial Officer Joe Bergstein. The presentation contained forward-looking statements and referred to non-GAAP measures. In the second quarter, the company reported GAAP earnings of $0.26 per share and ongoing earnings of $0.38 per share after adjusting for special items.

PPL has reaffirmed its 2024 earnings forecast and is making progress on its 2024 priorities, including completing infrastructure improvements, exiting transition service agreements, and achieving O&M savings targets. They are well positioned for 6-8% annual earnings and dividend growth through 2027 and are focused on executing their capital plan and driving efficiencies through their Utility of the Future strategy. This strategy aims to deliver a net zero energy system by 2050 while maintaining reliability and affordability for customers. The decarbonization strategy involves electrifying the economy and increasing demand for electricity, requiring a more reliable and resilient grid.

The Utility of the Future strategy aims to improve the reliability and resiliency of oil and gas networks through various measures such as automation, smart grid technology, and cybersecurity. It also focuses on transitioning to a reliable, affordable, and cleaner energy mix, including natural gas and renewable energy sources. The strategy also includes partnerships and investments in R&D for low-carbon technologies. Additionally, driving sustainable efficiencies is a key aspect to keep energy affordable for customers while investing in the clean energy transition.

The company is also focused on utilizing AI and other advanced technologies to improve efficiency and results. They see the potential for AI to transform their business and are working on implementing it in various areas such as balancing the grid, enhancing customer experience, and improving reliability while reducing costs. The company is also working on strengthening resource adequacy in the regions they serve, including advocating for legislative changes to support new generation development. These efforts not only support reliability but also economic development and the growth of data centers, which the company sees as crucial for American competitiveness and national security. This is part of their "Utility of the Future" strategy to address the challenges of delivering clean energy while also thriving and growing in the changing energy landscape.

PPL's transmission network in Pennsylvania is well-equipped to handle the demand for data center connections. They have invested in advanced technology and have a fast response time for interconnection requests. Currently, they have over 17 gigawatts of interconnection requests and 5 gigawatts in advanced stages of planning. This represents a potential capital need of $400 million to $450 million, which will result in additional returns on transmission investments. This development will also benefit existing retail customers by reducing net transmission costs.

The company estimates that for every 1 gigawatt of data center demand connected to the grid, residential customers would save 10% on their transmission bill, representing about $3 a month in savings for the average customer. In Kentucky, the company is well-equipped to support midsized data centers and is confident in their ability to make necessary investments to support growth. They are currently working with data center developers in their service territories and estimate to have 400-500 megawatts of generation capacity available to support future load growth. If new generation is needed, they can use their new Mill Creek 5 plant as a reference for pricing.

The KPSC approved a unit with a cost of $1 billion last year, and an updated integrated resource plan will guide any further generation needs. The company will conduct a new analysis this fall to consider updated load projections and supply needs. They may need to build a second gas plant, but they already have a spot in the queue for a gas turbine. The company's rate designs in Pennsylvania and Kentucky protect customers from data center connection costs. On July 11th, the Pennsylvania PUC approved PPL Electric Utilities' request to modify its infrastructure improvement plan, allowing for recovery of $200 million in reliability investments through the DSIC. The PUC also viewed the predictive failure project favorably and indicated that costs may be recovered in a future base rate case.

The approved modification to the LTIP is a positive outcome that supports investments in infrastructure and grid reliability. The DSIC waiver petition in Pennsylvania is expected to conclude later this year with a decision in early 2025. Construction has begun on the Mill Creek Unit 5 combined cycle natural gas plant in Kentucky, which is part of a larger plan to replace aging coal generation with cleaner energy sources. A site compatibility certificate was also secured for a planned solar facility in Kentucky. A new labor contract was successfully negotiated in Kentucky, marking the fifth successful union negotiation in the past year.

In the financial update, Joe Bergstein reports that PPL's second quarter GAAP earnings were $0.26 per share, with special items of $0.12 per share due to the acquisition of Rhode Island Energy. Adjusted for these special items, earnings from ongoing operations were $0.38 per share, an increase of $0.09 per share compared to the same period last year. This was primarily driven by returns on capital investments and higher sales volumes due to normal weather conditions. However, higher interest expense partially offset these positive drivers. Year-to-date, PPL's GAAP earnings were $0.67 per share, with ongoing earnings at $0.92 per share, an improvement of $0.15 per share compared to the first half of 2023. Weather has been favorable, but slightly below normal conditions for the first six months of 2024. More details can be found in the appendix.

In the second quarter, PPL's Kentucky segment saw an increase in results due to higher sales volumes and lower operating costs. The Pennsylvania Regulated segment also saw an increase in results due to higher transmission revenues and sales volumes. The Rhode Island segment saw a small increase in results due to higher distribution and transmission revenues, offset by higher operating costs and property taxes. The corporate and other segment saw a decrease in results due to higher interest expense. Overall, PPL is on track to meet its 2024 earnings forecast and is executing its Utility of the Future strategy successfully.

The company is maintaining a strong balance sheet and is focused on economic development in their communities. They have made progress in the first half of the year and are looking to continue this momentum in the future. The company is also planning to make significant investments in transmission, with a $725 million placeholder for 2027, and there is potential for additional investments in PJM.

The company has been successful in winning projects in Maryland and Virginia, which could lead to more opportunities. The company is also working with the state of Pennsylvania and other EDCs to address resource adequacy concerns in PJM. They will continue to invest in transmission and grid-enhancing technologies and advocate for legislative change to lower electricity prices and reduce volatility. The company is having conversations with policymakers about potential generation requests and may see a legislative window next year. The biggest difference is the amount of projects in the queue.

The speaker discusses the issue of dispatchable generation being retired without enough new dispatchable generation coming on, leading to concerns about resource adequacy. They mention several factors they are keeping an eye on, including auction results and the potential for new dispatchable generation to enter the market. The speaker emphasizes the importance of resource adequacy and the need for state involvement in addressing the issue. They congratulate the company on their results and express their interest in working with stakeholders to address the issue in Pennsylvania.

Vince Sorgi discusses the potential impact of the PJM auction results on customer bills, estimating a $10-15 increase in the generation portion of the bill starting in 2025. However, the company is taking actions to mitigate this increase, including the potential impact of a new data center. Sorgi also mentions the company's plans to use $400-450 million for various opportunities across different states.

Joe Bergstein, Executive Vice President and Chief Financial Officer of LG&E and KU Energy, discusses the company's balance sheet capacity and potential for debt and equity financing. He notes that the balance sheet is in good shape and they expect to maintain a FFO to debt range of 16% to 18%. However, financing needs will also be influenced by interest rates, inflation, efficiency strategies, and rate case outcomes. The company will also consider potential additions for data centers and other opportunities as they update their business plan. The Kentucky IRP will be updated in October, and while it is too early to determine if new generation will be needed, a full load forecast update will be conducted to assess customer growth and needs.

The company will conduct a comprehensive load forecast to determine their generation needs, taking into account factors such as energy efficiency programs, distributed energy resources, and electric vehicles. They may need to add dispatchable resources, like a combined cycle natural gas plant, as well as solar or renewable resources and batteries. The timing for building a new gas plant in the PJM market varies depending on factors such as the type of plant and if turbines are already owned. The company also mentioned the TMO in their presentation.

Julien Dumoulin-Smith asks about the potential for cost reductions in data centers beyond 2026. Joe Bergstein and Vince Sorgi mention the potential for AI and other use cases to drive efficiency, and state that they are focused on achieving the $175 million target but will continue to look for opportunities beyond that timeframe. They also mention that the current plan is to add 1 gigawatt each year starting in 2027, and that this could result in a $3 reduction in monthly costs.

Vince Sorgi and Julien Dumoulin-Smith discuss the benefits of compounding technology, which could potentially save customers $15 per month in lower bills. They also mention the impact of predictive failure technology on rate case timing in Pennsylvania, which may not occur until 2026 at the earliest. They plan to deploy this technology and seek recovery in the next rate case. The October filing for the next IRP may include opportunities for near-term transmission upgrades.

The company is currently working on several projects in Kentucky that range from $10 million to $75 million each. These projects are expected to be completed by 2030 and will involve both transmission and generation. The company is also in talks with data center companies for a 5 gigawatt opportunity, with a decision expected to be made by the end of the year or beginning of next year.

Vince Sorgi discusses the Pennsylvania CapEx and the potential for scaling beyond the current 5 megawatt investment. He mentions that the company will provide updates on data center demand and CapEx estimates quarterly. The decision to sell the headquarters building was due to post-COVID underutilization, not headcount. Vince also talks about the potential for higher capacity prices and the added investment in transmission infrastructure, but emphasizes that the company is focused on multiple factors.

The speaker discusses the current state of resource adequacy in the market, particularly in PJM, and how higher prices can incentivize new generation. They mention the potential impact on customers and their efforts to mitigate this through hedging strategies. They also mention an upcoming solicitation for power and the potential impact of current prices on that. The speaker thanks the audience for joining and mentions an upcoming conference in New York.

This summary was generated with AI and may contain some inaccuracies.