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    PPL
    Earnings call· Dec 2024(Q4 FY24)

    PPL Corp PPL

    Feb 13, 2025 Source

    Executive summary

    PPL Q4 FY24 — Strong Capital Plan Drives Rate Base Growth and Extends EPS/Dividend Growth Targets

    PPL delivered solid Q4 FY24 results, meeting its original earnings guidance despite mild weather impacts. The company unveiled an updated business plan featuring a significantly increased capital expenditure program and higher rate base growth projections, extending its long-term earnings and dividend growth targets. Management emphasized continued focus on operational efficiency and customer affordability while navigating substantial infrastructure investments and regulatory proceedings across its jurisdictions.

    Highlights

    5

    • Delivered ongoing earnings of $1.69 per share for FY24, meeting the midpoint of original guidance.

    • Executed $3.1 billion of planned infrastructure investments on time and on budget in 2024.

    • Achieved the top end of cumulative annual O&M savings target of $130 million from a 2021 baseline.

    • Announced an updated business plan with $20 billion in infrastructure investments from 2025-2028, driving 9.5-10% annual rate base growth.

    • Extended 6-8% annual earnings and dividend growth targets through at least 2028, expecting to achieve the top half of the EPS growth range.

    Concerns

    5

    • FY24 ongoing earnings of $1.69 per share fell $0.01 short of the increased guidance midpoint of $1.70 per share due to mild weather.

    • Increased vegetation management spending compared to plan to combat more frequent and severe storms.

    • Rhode Island segment results decreased by $0.03 per share in Q4 2024 compared to Q4 2023.

    • Corporate and Other segment results are projected to decrease by $0.02 per share in 2025 primarily due to higher interest expense.

    • Expect to need $2.5 billion of equity through 2028 to support capital plan, with dividend growth remaining at the lower end of the 6-8% range.

    Guidance & targets

    10
    CategoryTargetConfidence
    Ongoing Earnings per Share
    $1.75 to $1.87 per share (midpoint $1.81)
    high materiality
    High
    Annual Earnings per Share Growth
    6% to 8%
    high materiality
    High
    Annual Dividend Growth
    6% to 8%
    medium materiality
    High
    Annual Rate Base Growth
    9.5% to 10%
    high materiality
    High
    Cumulative Annual O&M Savings
    at least $175 million
    medium materiality
    High
    Equity Needs
    $2.5 billion
    high materiality
    High
    FFO to Debt Ratio
    16% to 18%
    medium materiality
    High
    Holding Company to Total Debt Ratio
    below 25%
    medium materiality
    High
    Quarterly Common Stock Dividend
    $0.2725 per share
    medium materiality
    High
    Equity Issuance
    $400 million to $500 million
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Kentucky
    Q4 2024 results driven by higher sales volumes (favorable weather) offset by higher operating costs (vegetation management). 2025 projection driven by higher sales volumes (return to normal weather, modest weather-normalized growth), lower operating costs, and higher AFUDC income related to new generation and AMI projects, partially offset by higher interest expense.
    Q4 2024 EPS impact: flat vs Q4 20232025 EPS projection: increase by $0.05 per share
    		—flat——
    Pennsylvania Regulated
    Q4 2024 results primarily driven by higher transmission revenues offset by higher operating costs (increased vegetation management, uncollectibles). 2025 projection driven by returns on additional capital investments in transmission and lower operating costs, partially offset by higher interest expense.
    Q4 2024 EPS impact: flat vs Q4 20232025 EPS projection: increase by $0.05 per share
    		—flat——
    Rhode Island
    Q4 2024 decrease primarily driven by lower transition and distribution revenues, which included a favorable annual ISR true-up recognized in Q4 2023. 2025 projection driven by increased rider revenue from capital investments and lower operating costs, partially offset by higher interest expense.
    Q4 2024 EPS impact: decreased by $0.03 per share vs Q4 20232025 EPS projection: increase by $0.04 per share
    		—-$0.03 per share——
    Corporate and Other
    Q4 2024 decrease primarily due to higher interest expense from increased holding company debt balances and higher income taxes (higher tax credits recognized in prior year). 2025 projection primarily due to higher interest expense.
    Q4 2024 EPS impact: decreased by $0.03 per share vs Q4 20232025 EPS projection: decrease by $0.02 per share
    		—-$0.03 per share——

    Operational metrics

    32
    Customers served
    3.5 million
    FY24

    Customers in Pennsylvania, Kentucky, Rhode Island, and Virginia.

    Special items per share
    $0.10
    Q4 2024

    Primarily due to integration and related expenses associated with the acquisition of Rhode Island Energy and IT transformation costs.

    Original 2023 forecast midpoint
    $1.58
    FY23

    Achieved 7% growth from this midpoint.

    Kentucky segment EPS increase
    $0.05
    FY25

    Projected increase in segment results.

    Pennsylvania segment EPS increase
    $0.05
    FY25

    Projected increase in segment results.

    Rhode Island segment EPS increase
    $0.04
    FY25

    Projected increase in segment results.

    Corporate and Other segment EPS decrease
    $0.02
    FY25

    Projected decrease in segment results, primarily due to higher interest expense.

    Floating rate debt exposure
    5%
    year-end

    Of total long-term debt.

    Utility maturities
    $550 million
    2025

    Limited near-term refinancing risk.

    Total return proposition
    9% to 12%
    long-term

    Combination of PPL's EPS growth and current dividend yield.

    O&M to CapEx funding ratio
    8:1
    ongoing

    For every dollar of O&M savings, $8 of capital can be funded without impacting customer bill.

    Summer reserve margins
    20%
    current

    Just over 20%.

    Winter reserve margins
    27%
    current

    Around 27-ish percent.

    Capacity auction cap
    $325
    next 2 auctions

    Negotiated settlement with PJM.

    Capacity auction floor
    $175
    next 2 auctions

    Negotiated settlement with PJM.

    Dividend increase
    6%
    Q1 2025

    Approximately 6% increase from current quarterly dividend.

    Annualized dividend
    $1.09vs $1.03 prior
    Q1 2025

    Compared to prior annualized dividend of $1.03 per share.

    Ongoing EPS
    $1.69fell $0.01 short of $1.70 midpoint
    FY24

    Midpoint of original 2024 guidance, but fell $0.01 short of the increased ongoing earnings midpoint guidance of $1.70 per share due to mild weather.

    Ongoing EPS midpoint
    $1.817% growth from original 2024 forecast midpoint
    FY25

    Midpoint of 2025 forecast range.

    Cumulative annual O&M savings achieved
    $130 million
    FY24

    Achieved the top end of target from a 2021 baseline.

    Infrastructure investments executed
    $3.1 billion
    FY24

    Executed on time and on budget.

    Capital investments increase vs. prior plan
    $5.7 billion
    2025-2028

    Increase compared to the prior 4-year plan.

    Capital investments increase (2025-2027)
    $4 billion
    2025-2027

    Most of the $5.7 billion increase is expected to occur in this timeframe.

    Additional investments in Kentucky
    $1.3 billion
    2025-2028

    Related to new generation to support growing demands and additional environmental retrofits on coal fleet.

    Additional T&D investment in Kentucky
    $500 million
    2025-2028

    To strengthen and modernize the grid, critical given more intense and frequent storms.

    Additional distribution system investment in Pennsylvania
    $1 billion
    2025-2028

    Needed to support grid resiliency.

    Transmission investments for data center growth in Pennsylvania
    $200 million
    2025-2028

    To support data center growth.

    IT investments
    $600 million
    2025-2028

    Across the enterprise for cybersecurity, customer experience, and back office efficiency.

    Capital investments forecast
    $5 billion
    FY28

    Forecast for the end of the decade, including investments for aging infrastructure, reliability, and new generation in Kentucky.

    Coal generation rate base percentage
    11%down from 16% today
    end of 2028

    Expected to be less than 11% by the end of 2028, down from about 16% today.

    Coal generation rate base percentage
    16%
    current

    Current percentage of total rate base related to coal generation.

    Annual rate base growth (prior plan)
    6.3%
    2023 to 2027

    Annual rate base growth in prior plan period.

    Industry KPIs

    6
    MetricValueDetails
    Ffo to debt16% to 18%%
    Retail sales growthhigher
    Regulatory rate base growth9.8%%
    Rto market structure reviewnegotiated settlement with PJM to cap auctions
    New gas generation builds upgrades640 MWMW
    Contracted large load capacity esas loas400 MWMW

    Orderbook & backlog

    3
    Pennsylvania Data Center Interconnection Queue56 GWQ4 FY24

    Total in queue; likely duplication.

    Pennsylvania Data Center Projects in Advanced Stages9 GWQ4 FY24

    Higher degree of confidence for these projects.

    Kentucky Data Center Potential Demand Queue6 GWQ4 FY24

    doubled since Q3 call

    Potential demand in queue.

    Deals & partnerships

    2
    National GridIntegration of Rhode Island Energy after acquisition2 years

    Completed integration of Rhode Island Energy into PPL, exiting over 130 transition services by September 2024.

    Powerhouse Data Centers and PoP companiesDevelopment of a 400 MW data center campus

    First hyperscale data center customer in Jefferson County, Louisville, Kentucky.

    Capital programs

    4
    Multi-year Capital Investment Planunderway$20 billion
    Funding: equity ($2.5 billion) + debt
    Start: 2025

    Benefit: 9.5-10% annual rate base growth

    Represents a $5.7 billion increase compared to the prior 4-year plan ($14.3 billion). Includes investments for grid strengthening, reliability, and cleaner energy mix. Most of the increase ($4 billion) is expected between 2025 and 2027.

    Kentucky New Generation Investmentsplanned$2.5 billion

    Benefit: 2 combined-cycle natural gas plants (2030, 2031 in-service), 400 MW battery storage (2028), additional environmental retrofits on coal fleet

    Aligns with recommended resource plan in IRP. Includes Mill Creek 5 (640 MW CCGT) expected in-service 2027. $1.3 billion of this is additional investment compared to prior plan.

    Rhode Island Electric Infrastructure Safety and Reliability Planfiled$260 million
    Start: April 2025

    Benefit: Infrastructure investments, including nearly $90 million for advanced metering functionality

    Filed in late December for fiscal year 2026. Hearings in March with a decision expected by April 1.

    Rhode Island Gas Infrastructure Safety and Reliability Planfiled$225 million
    Start: April 2025

    Benefit: Sustain and enhance safety and reliability of gas distribution system

    Filed in late December for fiscal year 2026. Hearings in March with a decision expected by April 1.

    Risks & headwinds

    5
    Mild weather impact on earningsQ4 2024

    $0.01 per share shortfall from increased FY24 ongoing earnings guidance midpoint of $1.70

    Mitigation: Increased vegetation management spending compared to plan to enhance reliability and reduce storm-related outages.

    Increased operating costsQ4 2024

    Offset favorable sales volumes in Kentucky and transmission revenues in Pennsylvania in Q4 2024

    Mitigation: Continued focus on improving operational efficiency across the enterprise to fund capital without impacting customer bills.

    Regulatory lagOver the planning period (2025-2028)

    Expected to experience some regulatory lag

    Mitigation: Shifting to growth primarily driven by rate base growth; laser-focused on optimizing execution of capital and financing plans, regulatory outcomes, O&M management, and storm response.

    Higher interest expenseQ4 2024 and FY25

    Decreased Corporate and Other segment results by $0.03 per share in Q4 2024 and projected $0.02 per share decrease in 2025

    Mitigation: Maintaining strong credit metrics (16-18% FFO to debt, holding company to total debt below 25%) and limited floating rate debt exposure (5% at year-end).

    Supply constraints for new generationLong-term

    3 to 5 years to get generation built

    Mitigation: Advancing plans for new generation and battery storage, including Mill Creek CCGT and two additional CCGTs by 2030/2031, and 400 MW of batteries by 2028.

    What to watch in Q1 FY25

    5

    Kentucky CPCN Filing and Decision

    Q1 2025, mid-July 2025, Q4 2025
    CurrentIRP under review, CPCN to be filed by end of Q1 2025.
    TargetCPCN filed, IRP decision by mid-July, CPCN decision by Q4 2025.

    Why it matters

    This will finalize the resource plan and associated capital investments for Kentucky, impacting future rate base growth and earnings.

    We'll file that by the end of the first quarter, we would expect a decision by the fourth quarter.

    Q&A highlights

    7

    Seeking updated thoughts on the Kentucky CPCN filing, including megawatts, capital investment, and expected decision timeline.

    The updated capital plan reflects the recommended resource plan from the IRP, including $2.5 billion for generation (2 new combined-cycle plants by 2030/2031, 400 MW battery storage by 2028) and additional environmental spend. The CPCN will be filed by end of Q1, with a decision expected by Q4.

    “In total for generation in the plan, we've added about $2.5 billion that includes 2 new combined-cycle plants with a 2030 and 2031 in in-service date includes 400 megawatts of additional battery storage projects within service dates in the 2028 time frame.”

    asked by Durgesh Chopra · answered by Vincent Sorgi

    2 min read5 chapters

    Detailed Narrative

    01

    Utility of the Future Strategy & Technology

    PPL is executing its Utility of the Future strategy, restructuring business units, and realigning departments to enhance operational efficiencies and drive continuous improvement. An IT transformation initiative is underway, engaging leading technology companies to apply cutting-edge solutions, including AI, for asset planning, maintenance, grid management, and customer service, aiming for better results at lower costs. The company is also developing common design and operation standards across its utilities to bring advanced technologies and robust engineering specifications for future grid designs.

    02

    Kentucky Generation Replacement

    The company has begun its planned generation replacement strategy in Kentucky, breaking ground on a new 640-megawatt combined-cycle natural gas plant at Mill Creek and advancing plans for 240 megawatts of new company-owned solar and 125 megawatts of battery storage. This is part of a broader plan to replace aging coal generation with a mix of natural gas, renewables, and energy storage solutions, with the next significant tranche of retirements expected in the mid-2030s. The plan includes two new combined-cycle plants with 2030 and 2031 in-service dates and 400 megawatts of battery storage by 2028.

    03

    Regulatory Landscape

    PPL is actively engaged in several regulatory proceedings. In Kentucky, LG&E and KU are advancing their Integrated Resource Plan (IRP), with a public hearing scheduled for May 13, and expect to file a Certificate of Public Convenience and Necessity (CPCN) request and a base rate case later in the summer. In Pennsylvania, PPL Electric Utilities awaits a PUC decision on its petition to increase the Distribution System Improvement Charge (DSIC) cap to 9% of revenue, and is evaluating the timing of📎 its next base rate case. Rhode Island Energy filed its annual electric and gas infrastructure safety and reliability plans for FY26, with decisions expected by April 1, and plans a base rate case in Q4 2025.

    04

    Economic Development & Data Centers

    PPL is committed to driving economic development, particularly supporting data center growth. Pennsylvania has over 56 GW in its interconnection queue, with nearly 9 GW in advanced stages, potentially requiring $600M-$700M in transmission capital, of which $400M is included in the updated plan. Kentucky announced its first hyperscale data center customer (a 400 MW campus) in Louisville, with 130 MW online by October 2026, and has nearly 6 GW of potential demand in its queue, doubling since the Q3 call. The company sees robust demand and expects data center connections to lower transmission costs for customers in Pennsylvania.

    05

    Resource Adequacy in PA/PJM

    PPL is engaging stakeholders to strengthen resource adequacy in PA/PJM, advocating for a state-focused 'no-regret' strategy. This includes allowing regulated electric utilities to invest in and own generation to complement the competitive market and address energy shortfalls, price volatility, and reliability concerns. The company believes this could help temper capacity auction pricing, especially given the governor's negotiated settlement with PJM to cap auctions at $325 per megawatt day for the next two auctions, which are expected to clear at the caps.

    AI-generated summary of the company’s earnings call. Not investment advice.