PPL Corporation Q3 FY2025 earnings call

Financial Performance Highlights: Reported third quarter GAAP earnings of $0.43 per share; adjusting for special items, earnings from ongoing operations were $0.48 per share. Narrowed 2025 ongoing earnings forecast range to $1.78 to $1.84 per share, midpoint at $1.81 per share. On track to complete ~$4.3 billion in infrastructure improvements this year, with $20 billion in infrastructure investments projected from 2025-2028, driving average annual rate base growth of 9.8%. Aim for 6%-8% annual EPS and dividend growth through 2028, with EPS growth in the top half. Maintain strong credit profile with FFO to debt ratio 16%-18% and holding company to total debt ratio below 25%.

Regulatory Updates: In Kentucky, LG&E and KU reached a proposed settlement agreement with intervenors, including a revised aggregate increase of ~$235 million in annual revenues and authorized ROE of 9.9%, with a base rate stay-out provision through August 1, 2028. Also, LG&E and KU received approval for much of the July 2025 CPCN stipulation agreement, including construction of new natural gas combined cycle units. In Pennsylvania, PPL Electric Utilities filed a request to increase annual base distribution revenues for grid upgrades. In Rhode Island, expected to file a distribution base rate request by year-end.

Data Center Updates: In Pennsylvania, interconnection requests to transmission network jumped over 40% to 20.5 gigawatts in advanced stages, with over 11 gigawatts publicly announced. Updated CapEx estimates for 20.5 gigawatts to at least $1 billion. In Kentucky, economic development pipeline totals just under 10 gigawatts of electricity demand, including ~8.7 gigawatts from data centers.

Affordability Initiatives: Deploy smart grid technologies, optimize outages, centralize shared services to reduce O&M costs. In Rhode Island, agreed to credit customers nearly $155 million in early 2026-2027. In Pennsylvania, support legislation to incentivize new generation build.

The Kentucky segment results increased by $0.02 per share compared to Q3 2024, driven by higher sales volumes, lower operating costs, and higher earnings from additional capital investments, partially offset by higher interest expense. The Pennsylvania regulated segment results increased by $0.02 per share compared to the same period a year ago, primarily due to higher transmission revenue from additional capital investments and higher distribution rider recovery, partially offset by higher interest expense. The Rhode Island segment results increased by $0.01 per share compared to the same period a year ago, with the primary driver being lower operating costs. Results at Corporate and Other increased by $0.01 per share compared to the prior period due to several factors that were not individually significant.

Forward-Looking Statements: - Narrowed 2025 ongoing earnings forecast range to $1.78 to $1.84 per share, midpoint at $1.81 per share. - Project $20 billion in infrastructure investments from 2025-2028, driving average annual rate base growth of 9.8%. - Aim for 6%-8% annual EPS and dividend growth through 2028, with EPS growth in the top half. - Maintain strong credit profile with FFO to debt ratio 16%-18% and holding company to total debt ratio below 25%.

Risks: - Regulatory decisions such as the rejection of certain cost recovery mechanisms for Mill Creek 2 and 6, which were denied without prejudice but require refiling. - Potential issues with load forecasting and generation overbuilding if not managed properly, as highlighted in discussions about PJM load forecasting processes.

Q: Shahriar Pourreza with Wells Fargo asked about the Kentucky CPCN case where tracking mechanisms for Mill Creek 2 stay open cost and Mill Creek 6 were rejected, seeking info on missing info and near-term EPS impact.

A: Vincent Sorgi responded that for Mill Creek 6, no earnings impact as it's in construction through 2031 and mechanisms were denied without prejudice. For Mill Creek 2, they're addressing recovery in current rate proceedings as they're spending money to operate beyond 2027 and need recovery of costs.

Q: Jeremy Tonet with JPMorgan inquired about the Pennsylvania pipeline's 20.5 gigawatts, seeking more details on sizing and cadence of formalizing the pipeline.

A: Vincent Sorgi mentioned the appendix has ramp rates, highlighted the rapid growth of the pipeline since Q1 of the previous year, and noted the quality of PPL's transmission grid allows quick connection of large loads.

Q: Paul Zimbardo with Jefferies asked about the linearity of growth rate in the plan regarding Kentucky and Pennsylvania rate cases.

A: Joe Bergstein stated it's not front-end loaded as there's significant capital investment with riders in jurisdictions for recovery. Vincent Sorgi added Pennsylvania rate case is midyear.

Q: Steven Fleishman with Wolfe Research questioned details on the 11 gigawatts of publicly announced data centers and comparison to PJM load forecasts.

A: Vincent Sorgi said confidentiality prevents naming specific data centers, provided capital investment details for announced data centers, and mentioned PJM discounts utility load forecasts by up to 30%.

Q: Agnieszka Storozynski with Seaport asked about transmission spending for data centers and the joint venture with Blackstone regarding gas plants.

A: Vincent Sorgi explained transmission spending for data centers may overlap with existing plan upgrades, and the joint venture with Blackstone is focused on addressing resource adequacy concerns, with potential for buying existing assets but core strategy is new build for data centers under long-term contracts.

Q: Anthony Crowdell with Mizuho asked about concern over revenue concentration from data centers offsetting regulatory balance.

A: Vincent Sorgi responded that protections in tariff structures and ESAs for large loads mitigate risk, and proper protections are in place to avoid overconcentration issues, with PUC proposing large load tariff in Pennsylvania that includes safeguards.