Q3 2024 Earnings Summary
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Ongoing EPS Forecast | FY 2024 | $1.63 – $1.75 | $1.67 – $1.73 | raised (midpoint ↑) |
Annual EPS Growth | Through 2027 | 6% – 8% | 6% – 8% | no change |
Capital Investments | 2024–2027 | $14.3B | $14.3B | no change |
O&M Savings | FY 2024 | $120M – $130M | $120M – $130M | no change |
O&M Savings | 2026 | ≥ $175M | ≥ $175M | no change |
Dividend Growth | Through 2027 | no prior guidance | 6% – 8% | no prior guidance |
Rate Base Growth | future plans | no prior guidance | transition to rate base growth | no prior guidance |
Demand Growth | Through 2032 | no prior guidance | annual load growth > 3% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data center load growth in Pennsylvania | Previously noted 5 GW in Q2 2024 and 3 GW in Q1 2024 in advanced stages; strong infrastructure and location advantages were also highlighted in Q4 2023. | 39 GW potential demand, with 8 GW in advanced stages; potential $600–$700 million in incremental capital not in current plan. One GW could yield a 10% transmission bill reduction for residential customers. | Significant expansion |
Data center load growth in Kentucky | Previously at 2 GW total with 350 MW in advanced stages in Q2 2024; smaller transmission needs relative to Pennsylvania mentioned in Q1 and Q4 2023. | 400 MW in advanced stages, potentially rising to 1 GW; active requests near 3 GW total. Capital requirements more focused on new generation than transmission. | Growing demand |
Strong balance sheet and financial flexibility | Previously cited no equity issuances needed through 2027 and 16–18% FFO-to-debt ratio target in Q2, Q1, and Q4 2023. | Emphasized as one of the strongest in the sector; issued $750 million in senior notes at 5.25% due 2034; highlighted capacity to fund growth without diluting returns. | Consistent strength |
Capital investments (grid, resiliency, digital) | Mentioned $14.3 billion plan for 2024–2027 in Q2 and Q4 2023; focused on upgrades, resiliency, and clean energy integration; also repeated emphasis on digitization. | Additional investments identified for grid modernization and digital transformation; rate base growth has increased by 100 bps in each plan update. | Continued focus |
Rate base growth and 6%–8% EPS target | Same 6%–8% target reiterated in Q2, Q1, and Q4 2023; underpinned by capital investments and O&M efficiencies. | Reaffirmed 6%–8% annual EPS growth target through at least 2027, largely driven by rate base growth. | Ongoing commitment |
O&M cost reductions and AI-driven efficiencies | Prior calls referenced AI as a key tool for operational efficiency. Targets of $175 million by 2026 appeared in Q2, Q1, and Q4 2023. | On track to achieve $120–$130 million O&M savings in 2024 and at least $175 million by 2026; no explicit AI mention this quarter. | Efficiency focus remains |
Potential equity issuance and EPS dilution risk | Historically stated no equity issuances needed through 2027 in Q2, Q1, and Q4 2023; stable plan to avoid EPS dilution. | Management still evaluating financing needs given higher capital opportunities; strong credit position cited for flexibility; no explicit mention of dilution risk. | No immediate issuance |
Resource adequacy and new generation capacity | Q2, Q1, and Q4 2023 calls noted resource adequacy concerns in PJM; concept of additional gas units in Kentucky and retirements of older coal assets. | Discussed IRP scenarios given uncertain environmental regs; planning 900 MW battery storage, expansion to replace coal, and a new 640 MW gas combined cycle. | Continued focus on reliability |
Regulatory risk and rate case uncertainties | Similar rate case timing in Q2, Q1, and Q4 2023; ongoing DSIC and IRP filings, but no immediate major regulatory surprises. | Rate cases possible in Kentucky (2025), Rhode Island (late 2025), Pennsylvania (2026+); confidence in constructive outcomes. | Stable outlook |
Interest rate and financing uncertainties | Cited good position with limited near-term maturities in Q2, Q1, and Q4 2023; focusing on 16%–18% FFO-to-debt and proactive refinancing. | Highlighted higher interest expense due to recent debt issuance; issued $750 million at 5.25%; strong demand cited credit strength. | Managed but rising costs |
Environmental and EPA regulation impacts | Limited or no mention in Q2 or Q4 2023; Q1 2024 flagged newly issued EPA regs could increase capital or drive coal retirements. | IRP assumes four scenarios for current contested EPA rules; $6–$7 billion for coal retrofits through 2035 including ELG and NOx controls. | Heightened planning |
Transmission expansion opportunities | Discussed PJM, FERC Order 1000, and $400–$450 million potential in Pennsylvania for data centers in Q2 and earlier calls; also emphasis on Dominion zone project in Q1. | Submitted projects to PJM RTEP; decisions by early 2025 could provide incremental upside; also focusing on modernization and data center-driven upgrades. | Ongoing incremental prospects |
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Data Center Load Growth
Q: How is data center demand impacting your investment plans?
A: PPL is experiencing significant data center load growth, particularly in Pennsylvania, with 8 GW of advanced-stage projects likely to proceed. This growth provides a competitive advantage, as adding more data centers reduces per-unit costs over time. PPL is confident in its ability to support and connect this load, both on the transmission and generation side. -
Equity Financing Needs
Q: Will you need to issue equity due to increased capital expenditures?
A: PPL is evaluating its financing needs in light of additional capital investments for grid modernization, transmission to support data centers, and other growth opportunities. Given its strong balance sheet, PPL has flexibility and does not currently intend to issue equity or alter its dividend growth to fund these investments. -
Kentucky Generation Plans
Q: What are your plans for new generation in Kentucky related to the IRP?
A: PPL plans to file a CPCN in the first quarter, likely including a second combined-cycle gas turbine (CCGT) to be in service by 2030, and possibly additional resources like batteries to meet near-term demand increases from data centers. This is driven by the need to address supply constraints and support significant load growth in the region. -
Resource Adequacy Legislation in Pennsylvania
Q: How are you addressing resource adequacy issues in Pennsylvania?
A: PPL continues discussions with state decision-makers on solutions, including permitting utilities to invest in generation, providing low-interest loans, and offering incentives for long-term power purchase agreements. The delay in the PJM capacity auction reinforces the need for state action, and legislation is expected sometime in early 2025. -
Rate Case Timing
Q: When are your upcoming rate cases in your jurisdictions?
A: Based on the current plan, PPL may file a rate case in Kentucky in the first half of next year, after a stay-out provision ends in June. In Rhode Island, a rate case is likely in the fourth quarter of 2025, and in Pennsylvania, not before 2026 at the earliest. -
Transmission Opportunities in PJM
Q: How significant are the transmission opportunities in PJM for PPL?
A: PPL has submitted several projects to address issues identified in the recent PJM window and expects to learn which are selected by December or January. Regardless of the outcome, PPL anticipates significant transmission opportunities in Pennsylvania due to strong economic development and resource needs, viewing these projects as incremental opportunities. -
Dividend Growth vs. EPS Growth
Q: Will you consider lowering dividend growth to support higher EPS growth?
A: PPL does not intend to alter its dividend growth to fund capital investments, citing its strong balance sheet. The company has seen peers make such moves when they lacked balance sheet strength, but PPL does not face that issue. -
Execution Challenges
Q: Are there concerns about executing large projects amid labor constraints?
A: PPL acknowledges that supply chain constraints and labor availability extend the timeline for major projects like CCGT plants, now taking around five years instead of three. However, there are no concerns about executing smaller projects, such as installing batteries by 2028. -
Relationship with Kentucky Commission
Q: How is your relationship with the new Kentucky commission?
A: PPL's relationship with the Kentucky commission remains constructive. The company has met with the new commissioners and expects the positive dynamic to continue, with no indications of change. -
Quantification of Transmission Benefits
Q: Can you retain transmission benefits, and how does this impact earnings?
A: Transmission benefits from data center load growth are not an earnings driver for PPL, as it's capped on returns for existing transmission assets. However, this provides customers with bill room to absorb rising energy and capacity prices. -
Earnings Growth Outlook
Q: What could keep earnings growth at or below the midpoint of guidance?
A: PPL's earnings growth is transitioning to be driven more by rate base growth rather than cost efficiencies. While additional capital investments may be necessary, PPL expects to achieve its earnings growth targets, continuing the trend seen since its strategic repositioning. -
Impact of Resource Adequacy Conference
Q: How will the resource adequacy conference influence legislation?
A: The Pennsylvania PUC's engagement on resource adequacy is constructive, as it will play an active role in administering potential legislation. The commission is preparing accordingly, although no specific law is currently on the books. -
Data Center Competitiveness
Q: Do you have a competitive advantage in attracting data centers?
A: Yes, PPL's location in an oversupplied zone within PJM, along with strong relationships with power companies and data centers, gives it a competitive advantage. The company is confident in attracting more data centers, which tend to operate in clusters. -
Formal Data Center Announcements
Q: When can we expect formal data center deal announcements?
A: PPL anticipates making the first large data center announcement by the end of the year, which could prompt others to follow. Competitive considerations, especially among hyperscalers, influence the timing of public disclosures. -
Customer Bill Impact
Q: How will new investments impact customer bills in Kentucky?
A: PPL will address bill impacts in the CPCN filing. Factors like coal plant retirements and the use of the retired asset recovery mechanism provide headroom to keep bill impacts within inflationary amounts. The company is mindful of affordability as it implements its investment plans. -
Mid-Load Demand Confidence
Q: How confident are you in the mid-load demand scenario in Kentucky?
A: PPL is confident in the mid-load demand curve presented in the IRP, which includes 1 GW of data center load in advanced stages. While overall interest totals 3 GW, including 400 MW in advanced discussions, the company feels good about the 1 GW included in the mid-load case.
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