Q4 2023 Earnings Summary
- PPL announced a 7.3% increase in their quarterly cash dividend to $0.2575 per share, resulting in an annualized dividend of $1.03 per share, aligning future dividend growth with their 6%-8% earnings growth targets and providing an attractive total return proposition of 9%-12%.
- PPL exceeded their 2023 O&M savings target, achieving $75 million in savings compared to the initial target of $50-$60 million, and are confident in achieving $120 million to $130 million in O&M savings in 2024, solidly on track to deliver their $175 million savings target by 2026, potentially providing further upside to earnings growth.
- PPL projects an annual rate base growth of 6.3% from 2023 to 2027, up from the prior growth rate of 5.6%, supported by an updated $14.3 billion capital investment plan focused on grid modernization, reliability, and resiliency enhancements, which is expected to drive earnings growth and maximize value for customers and shareholders.
- Increased capital expenditures may pressure credit metrics and refinancing plans. PPL acknowledged that capital expenditures will increase later in the plan, which, along with integration costs from Rhode Island, could impact credit metrics. Additionally, uncertainty in interest rates could affect their refinancing of financing vehicles in 2026.
- Regulatory risks could affect future rate cases and financial outcomes. PPL is monitoring regulatory environments as not every company gets the same outcome even under the same jurisdiction, and future rate cases, particularly in Pennsylvania, could present challenges.
- Uncertainty in government regulations may limit growth opportunities in offshore wind projects. PPL cannot provide assurance on the outcome of U.S. Treasury regulations regarding Investment Tax Credit eligibility for offshore wind transmission, which could unnecessarily raise the cost of the offshore wind industry and limit PPL's growth in this area.
-
O&M Savings Outperformance
Q: You exceeded 2023 O&M savings targets by $20 million; will you increase future targets?
A: We achieved $75 million in O&M savings in 2023, surpassing our target of $50–$60 million. This was due to accelerating initiatives from 2024. While we're confident in achieving $120–$130 million in savings next year and at least $175 million overall, we're holding current targets for now. Any additional efficiencies would be upside to our plan. -
Data Center Load Growth Opportunities
Q: Are potential large data centers included in your capex and load forecasts?
A: We're seeing significant interest from data centers requiring up to 1,000 MW in Pennsylvania and Kentucky. Our territories offer strong reliability and ample transmission capacity. These are not yet included in our load forecasts or capex plans , but if realized, they could impact our IRP and future investments. -
DSIC Waiver Request and LTIP Increase
Q: What's your plan for amending the DSIC mechanism in Pennsylvania?
A: We filed to modify our LTIP, increasing planned investment from $500 million to $800 million. This includes predictive failure technology and distribution reliability projects. We intend to file a DSIC waiver request soon to potentially raise the DSIC cap. -
Credit Metrics and FFO to Debt Ratio
Q: Where do you stand on FFO to debt, and what's the outlook?
A: We're comfortably within our target 16%–18% FFO to debt range, operating around the midpoint. Early plan integration costs for Rhode Island will roll off, and capex increases later in the plan are manageable. -
Second CCGT in Kentucky Plans
Q: Will you revisit adding a second CCGT in Kentucky?
A: Yes, we're planning to file a CPCN for a second CCGT with an in-service date in 2030. This will be informed by our updated IRP filed this year, considering load and generation economics. -
Offshore Wind Transmission Opportunities
Q: What are your opportunities from offshore wind solicitations?
A: We have transmission enhancements in our plan to handle offshore wind load in Rhode Island. Potential joint ventures for wet transmission solutions depend on U.S. Treasury regulations and are not included in our growth projections. -
Load Growth Assumptions
Q: What's your load growth forecast for 2024?
A: We're assuming 0.5% load growth throughout our planning horizon. -
Rate Case Timing Strategy
Q: How does peer rate case outcomes affect your rate case timing?
A: While peer outcomes are informative, they don't significantly impact our decision. We have no rate cases planned for 2024, with the next likely in Kentucky in 2025. -
Financing Vehicles and Maturities
Q: What's your plan for financing vehicle maturities in 2026?
A: We'll assess options as we get closer, but our assumption is to refinance them. Interest rates at that time will influence our decision. -
Transmission Capex Increase in Pennsylvania
Q: How much of the added Pennsylvania transmission capex is from recent RTEP awards?
A: About half of the increase is driven by recent PJM window awards.
Research analysts covering PPL.