Q4 2024 Earnings Summary
- PPL maintains a strong balance sheet, which they consider a strategic advantage that allows them to finance growth while mitigating risks and uncertainties, positioning the company for long-term value creation for shareholders.
- PPL expects to deliver consistent EPS growth within the upper half of their 6% to 8% annual growth rate, especially after upcoming rate cases, indicating confidence in their growth trajectory and strong future earnings prospects.
- The potential for utility-owned generation in Pennsylvania could enable PPL to invest in new generation assets, temper capacity prices, and drive long-term earnings growth, benefiting from legislative changes that allow them to own generation again.
- Despite a significant increase in rate base growth from 6.3% to 9.8% annually, PPL's earnings growth remains at 6% to 8%, partly due to the planned issuance of $2.5 billion in equity through 2028, which may dilute existing shareholders and limit EPS growth. ,
- The substantial increase in capital investments may lead to higher customer rates, raising affordability concerns and potential regulatory pushback, even as PPL expects average bill increases to "generally remain within the rate of inflation." ,
- Higher holding company interest expenses are increasing corporate drag, and there are concerns that the loss of prior tax benefits may exacerbate this drag beyond 2025, potentially impacting future earnings. ,
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Ongoing Earnings Forecast | FY 2025 | “2024 Ongoing Earnings Forecast” had a midpoint of $1.70 per share with a range of $1.67–$1.73 | “2025 Ongoing Earnings Forecast” with a midpoint of $1.81 per share and a range of $1.75–$1.87 | raised |
Annual EPS & Dividend Growth | FY 2025 | Annual EPS growth of 6%–8% (and dividend growth expected to align) | Annual earnings and dividend growth of 6%–8% | no change |
Capital Investments | FY 2025 | Planned $14.3 billion in infrastructure improvements from 2024–2027 | Planned $20 billion in capital investments from 2025–2028 | raised |
Rate Base Growth | FY 2025 | Qualitatively described as a transition to a rate base growth–driven earnings profile | Expected annual rate base growth of 9.5%–10% through 2028 (up from 6.3%) | no prior guidance |
Equity Needs | FY 2025 | no prior guidance | Anticipated $2.5 billion of equity needed through 2028 | no prior guidance |
Credit Metrics | FY 2025 | no prior guidance | Targeting a 16%–18% FFO to debt ratio and a holding company to total debt ratio below 25% | no prior guidance |
Dividend | Q4 2024 | no prior guidance (quarterly dividend was not provided in Q3 2024) | Announced a quarterly dividend of $0.2725 per share—a 6% increase from the prior dividend | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Ongoing EPS | FY 2024 | $1.67–$1.73 per share | $1.20 (sum of Q1: 0.42, Q2: 0.25, Q3: 0.29, Q4: 0.24) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Maintaining a strong balance sheet | Q1 2024: Emphasized no equity needed, maintaining 16%-18% FFO-to-debt. Q2 2024: Reiterated balance sheet in “really good shape,” sustaining 16%-18% FFO-to-debt. | Q4 2024: Planning $2.5B in equity from 2025–2028, still stressing the balance sheet as a strategic advantage. | Consistent focus on leveraging strong credit metrics for growth. |
6% to 8% annual EPS growth | Q1 2024: Targeting 6%-8% EPS growth through at least 2027. Q2 2024: Confirmed 6%-8% growth outlook supported by $14.3B capital plan. | Q4 2024: Extended 6%-8% growth through 2028, aiming for the upper half after 2025. | Consistent messaging, reaffirmed and extended growth target. |
Potential new generation assets in Pennsylvania and Kentucky | Q1 2024: Pennsylvania focused on transmission, Kentucky may need additional combined-cycle gas. Q2 2024: Highlighted data center load in Pennsylvania; advancing 650 MW gas plant and 120 MW solar in Kentucky. | Q4 2024: Advocating for utility-owned generation in Pennsylvania, planning new gas plants and battery storage in Kentucky’s IRP. | Continued focus on resource adequacy and growth in both states. |
Shifting sentiment around capacity prices | Q1 2024: No mention. | Q2 2024: Capacity price hikes seen as cost concern but also potentially incentivizing new generation. | Q4 2024: Expecting auction prices could clear at the $325/MW-day cap, heightening worries for customers. |
Equity issuance plans raising dilution worries | Q1 2024: Stated no equity issuance needed through planning period. Q2 2024: Did not reiterate issuance plan, indicated financing decisions depend on multiple factors. | Q4 2024: Mentioned flexibility on timing/structure (e.g., hybrids), no direct dilution concerns emphasized. | Diminished emphasis compared to earlier caution. |
Data center demand in Pennsylvania | Q1 2024: 3 GW in advanced stages, potential $50M–$150M per data center in transmission. | Q4 2024: Monitoring data center growth, included $400M of possible $600M–$700M in transmission. | Remains a key driver for transmission investment, though less prominently discussed than Q1. |
Emergence of AI-driven operational efficiencies | Q1 2024: No mention. | Q2 2024: AI seen as transformational, driving efficiency and reliability. | Q4 2024: Highlighted IT transformation and AI to optimize planning, maintenance, and customer experience. |
Large capital investments with regulatory pushback | Q1 2024: $14.3B through 2027, DSIC waiver in Pennsylvania facing scrutiny. Q2 2024: Continuing $14.3B plan, some PUC denials on cost recovery. | Q4 2024: Raised to $20B (2025–2028), concerns on DSIC cap and CPCN in Kentucky. | Increasing spending levels, with ongoing regulatory hurdles. |
Regulatory and rate case uncertainties | Q1 2024: Earliest Pennsylvania rate case in 2026 if DSIC waiver is unsuccessful. Q2 2024: Monitoring DSIC waiver outcome, cost recovery in next rate case. | Q4 2024: Still anticipating next base rate actions in 2026, caution on regulatory lag. | Persistent timing and approval challenges for forthcoming cases. |
Cost-reduction initiatives (O&M savings) | Q1 2024: Aiming for $175M annual O&M savings by 2026. Q2 2024: Reiterated efficiency goals; AI to drive further cuts. | Q4 2024: Achieved $130M, aiming to extend beyond $175M by 2026 for affordability. | Continued reliance on efficiency for funding growth. |
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Equity Issuance Plans
Q: What are your plans for equity issuance timing?
A: PPL plans to issue $2.5 billion in equity financing, with $400–$500 million in 2025, tracking the capital plan. They may complement the ATM with other equity-like financing structures, being flexible and opportunistic based on market conditions. -
Kentucky Generation Expansion
Q: Update on Kentucky CPCN filing and investments?
A: PPL updated its capital plan, adding about $2.5 billion for generation in Kentucky, including two new combined-cycle plants (in-service dates 2030 and 2031), 400 MW of additional battery storage (in-service dates in 2028), and additional environmental spend on the coal fleet. They'll file the CPCN by end of Q1 and expect a decision by Q4. -
Pennsylvania Legislation on Generation Ownership
Q: What's the outlook for PA resource adequacy legislation?
A: PPL is engaged with Pennsylvania stakeholders on energy policy that may allow utilities to invest in and own generation assets again. Proposed legislation could come as early as spring or summer, potentially including utility ownership and incentives for generation development to support PJM resource adequacy. -
Customer Bill Affordability
Q: How will increased CapEx impact customer bills?
A: PPL believes it can execute the updated capital plan without unduly impacting affordability, expecting average bill increases to remain within the rate of inflation. They continue to focus on driving efficiencies, maintaining an 8:1 ratio of CapEx funded per dollar of O&M reduced. -
Earnings Growth vs. Rate Base Growth
Q: Why isn't earnings growth matching rate base growth?
A: Despite significant rate base growth, PPL's earnings growth doesn't proportionally increase due to additional equity financing needs. Maintaining a strong balance sheet is strategic, positioning the company to deliver long-term value while mitigating risks. -
EPS Growth Trajectory
Q: What's your EPS growth cadence through 2025?
A: PPL expects linear EPS growth, delivering 7% growth in 2025, the last year of rate case stay-outs. Growth will shift from O&M efficiencies to more rate-base-driven beyond 2025, potentially exceeding current projections once back to a normal rate case cycle. -
HoldCo Drag and Tax Impacts
Q: Will tax benefits affect HoldCo drag beyond 2025?
A: The increase in HoldCo drag from 2023 to 2024 is due to prior tax benefits from transferability of tax credits, particularly around the sale of WPD. This is a year-on-year variance that isn't expected to exacerbate the drag beyond 2025. -
Kentucky Load Growth and Generation Needs
Q: Can you serve more load if Kentucky demand grows?
A: With current plans, PPL can accommodate the 400 MW of data center load but not much more. Additional load growth would require more generation, highlighting the need for planned CCGTs and battery storage in the resource plan. -
ROE Assumptions in Outlook
Q: What ROEs are assumed for KY and PA?
A: PPL has maintained ROEs at or near allowed levels by managing O&M and keeping rates affordable. With increased capital plans, there will be pressure on ROEs, and they expect some lag between rate cases but aim to minimize it and earn around allowed returns. -
DSIC Waiver Decision Timing
Q: Any update on the DSIC waiver decision?
A: PPL is still awaiting the commission's decision on the DSIC waiver with no scheduled date. There are no issues from the commission's perspective, and they continue to wait for the outcome.
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