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    PPL (PPL)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$27.46Last close (Apr 30, 2024)
    Post-Earnings Price$27.70Open (May 1, 2024)
    Price Change
    $0.24(+0.87%)

    What went well

    • PPL has signed agreements for 3 gigawatts of data center demand in Pennsylvania, with in-service dates starting in 2026, representing significant upside to their current capital plan.
    • PPL is on track to invest $3.1 billion in infrastructure improvements this year and $14.3 billion from 2024 to 2027, supporting their projected 6% to 8% annual EPS and dividend growth through at least 2027.
    • PPL reported a 12.5% increase in first-quarter ongoing earnings per share, from $0.48 in Q1 2023 to $0.54 in Q1 2024, and remains confident in delivering their 2024 earnings forecast of $1.63 to $1.75 per share.

    What went wrong

    • Potential impact on rate case timing due to uncertainty around the DSIC waiver process in Pennsylvania, which could affect earnings projections.
    • The data center projects, while representing potential upside, are still in early stages with signed agreements but no public announcements, indicating uncertainty in execution and timing.
    • Regulatory approvals are needed for data center projects and related investments, posing execution risks due to possible delays or obstacles in the approval process.

    Q&A Summary

    1. Data Center Agreements in Pennsylvania
      Q: What is the timing and firmness of the data center investments in Pennsylvania?
      A: PPL has signed agreements for 3 gigawatts of data center projects in Pennsylvania, with in-service dates starting in 2026 and extending through 2028. While unable to make public announcements until late this year or early next, the agreements are firm, and PPL is preparing to invest accordingly.

    2. Transmission Investment Opportunities
      Q: Are there new generation needs or transmission investments tied to these data center contracts?
      A: In Pennsylvania, PPL's opportunity lies in transmission investments, expecting to invest $50 million to $150 million per data center, with the data centers making similar investments. These projects are not tied to specific new generation; the PJM market will address any generation needs to meet increased demand. PPL is confident in securing necessary approvals and meeting the 2026 in-service dates.

    3. Likelihood of Data Center Projects Proceeding
      Q: How confident is PPL in the likelihood of these data center projects moving forward?
      A: While specific details on deposits are undisclosed, PPL's agreements allow them to start development and recover costs if projects don't proceed. The counterparties are serious, and PPL would be disappointed if they didn't secure at least one data center in their service territories, expecting more than that.

    4. Additional Generation Needs in Kentucky
      Q: Will data center growth require new generation capacity in Kentucky?
      A: The substantial industrial and data center growth in Kentucky may necessitate additional generation. Current reserve margins are approximately 23%, targeting a range of 17% to 24%. PPL is considering building a second combined cycle gas turbine (CCGT) unit, for which they hold a position in the queue, enabling relatively quick development.

    5. Impact of DSIC Waiver on Rate Case Timing
      Q: If the DSIC waiver is unsuccessful, how will it affect rate case timing and capital plans?
      A: An unsuccessful DSIC waiver would not alter PPL's necessary distribution capital plans. However, it may impact the timing of the next rate case, potentially moving it up to as early as 2026, depending on the commission's decision.

    6. Procedural Schedule for DSIC Application
      Q: Is there a procedural schedule or specific timelines for the DSIC application?
      A: While there isn't a specific schedule, PPL anticipates decisions on both the DSIC waiver and LTIP filing by year-end. The LTIP process generally takes about nine months, and PPL has requested a DSIC decision before year-end to apply it for 2025.

    7. Settlement Potential for DSIC Waiver Filing
      Q: Could the DSIC waiver filing result in a settlement, or does the commission need to decide?
      A: PPL is open to engaging with the commission to reach a mutually agreeable solution, potentially arriving at an outcome between the requested and existing terms.

    8. Broader Transmission Opportunities in PJM
      Q: Are there broader transmission investment opportunities due to data center growth in PJM?
      A: Yes, PPL foresees continued transmission opportunities driven by data center expansion in PJM. Previously, PPL won a $100 million to $150 million project in the Dominion zone to alleviate congestion from data center loads. As data centers tend to expand and form hubs, the demand for transmission infrastructure is expected to increase.

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