PPL Corporation

Good day and welcome to the PPL Corporation first quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Andy Ludwig, Vice President in Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining the PPL Corporation conference call on first quarter 2023 financial results. We have provided slides for this presentation on the investor section of our website. We'll begin today's call with updates from Vince Sorge, PPL president and CEO, and Joe Bergstein, chief financial officer, and conclude with a Q&A session following our prepared remarks. Before we get started, I'll draw your attention to slide two and a brief cautionary statement. Our presentation today contains forward-looking statements about future operating results or other future events. Actual results may differ materially from these forward-looking statements. Please refer to the appendix of this presentation and PPL's SEC filings for a discussion of some of the factors that could cause actual results to differ from the forward-looking statements. We will also refer to non-GAAP measures, including earnings from ongoing operations and adjusted gross margins on this call. For reconciliations to the comparable GAAP measures, please refer to the appendix. I'll now turn the call over to Vince.

Thank you, Andy, and good morning, everyone. Welcome to our first quarter investor update. Let's start with our financial results and a few highlights from the quarter on slide four. Today we announced first quarter reported earnings of $0.39 per share. Adjusting for special items, first quarter earnings from ongoing operations were $0.48 per share, compared with $0.41 per share a year ago. This increase was supported by solid results from our newly acquired Rhode Island business, as well as lower O&M expenses, partially offset by lower sales volumes due to the mild winter weather and higher interest expense. We remain confident in our ability to deliver on our 2023 ongoing earnings forecast of $1.50 to $1.65 per share with a midpoint of $1.58 per share. Joe will speak to this more in his detailed review of our financial results. In addition to solid financial performance, we continue to execute on our commitment to provide safe and reliable electric and gas service to our more than 3.5 million customers. This includes managing several significant storms at our utilities, including a severe March windstorm in Kentucky, the third most significant weather event in the last 20 years in our service territory. Our teams, with the help of mutual assistance from several of our peers, restored power to more than 400,000 LG&E KU customers. I thank each one of our men and women, as well as all those that provided mutual assistance for their dedication, commitment to safety, and demonstrated operational excellence. From a financial perspective, we received approval to treat nearly $20 million of Q1 O&M costs related to this extraordinary event as a regulatory asset. These types of events emphasize the importance of the investments we are making across our company to harden and improve the resiliency of our network. As the frequency of these events continues to increase, it becomes even more critical to ensure we are taking proactive steps prepare our distribution and transmission networks. And we look forward to delivering on that goal in the most affordable way possible for our customers. We've also made significant progress during the first quarter in several areas that will improve our operating efficiency, deliver our clean energy strategy, and improve service to our customers. First, we continue to execute our plan in transitioning Rhode Island Energy to PPL systems, and remain on track to exit the remaining transition services with National Grid in 2024. We also advanced several key regulatory proceedings, which I'll discuss further on the next couple of slides. Further, we successfully executed more than $3 billion of financings in the first quarter, reducing our interest rate exposure and strengthening our ability to achieve our top tier earnings growth targets. And finally, Our restitution of approximately $600 million in capital investments during the first quarter keeps us on track to invest nearly $2.5 billion in infrastructure investments this year. These investments benefit both customers and share owners as we continue to advance our strategy to create the utilities of the future. As a result, today we are reaffirming our plans to invest nearly $12 billion in infrastructure improvements through 2026 to modernize our electric and gas networks and replace retiring generation in Kentucky. Looking forward, we remain confident in the low-risk business plan we outlined in January and reaffirmed our projected compound annual earnings per share and dividend growth rates of 6% to 8% through at least 2026. Turning to slide five, we were pleased to secure a positive outcome in our first infrastructure, safety, and reliability proceeding before the Rhode Island Public Utilities Commission. ISR plans are submitted annually in Rhode Island and outline proposed capital investments and related operating costs to strengthen safety, reliability, and resiliency of our electric and gas distribution networks. The approved plans address Rhode Island Energy's proposed spending from April 1, 2023 to March 31, 2024. In its decision, the Public Utilities Commission approved $290 million of the approximately $350 million Rhode Island Energy proposed in its ISR filing. Disallowed investments on the electric side were largely tied to grid modernization and associated improvements. On the gas side, most of the disallowed investment related to roughly 10 miles of leak-prone pipe replacement. While we believe the disallowed investments are the right projects to better serve our We understand the Commission's desire to complete reviews of our grid modernization and advanced meter filings and to make further progress in the future of gas stakeholder proceeding before approving additional spending in those areas. The investments not approved in this year's ISR plans may be recoverable in future proceedings subject to regulatory approval. This could be through future ISR filings, new base rate cases, and or reopener provisions within the base rate cases that we are currently operating under. particularly related to the grid modernization and AMF projects. Ultimately, we look forward to continued engagement on these matters with the Commission, the Division of Public Utilities and Carriers, and other stakeholders in Rhode Island. Turning to slide six, we continue to progress our generation investment plan in Kentucky and remain confident that this plan is the best path forward for our customers as we plan for the state's energy future. Our plan is more affordable, maintains reliability and represents significantly cleaner energy resources for our customers than continuing to operate the coal units that we have proposed to retire by 2028. In fact, we estimate that our plan provides nearly $600 million of net present value benefits for our customers compared to continuing to operate these coal units. As we shared in March when Senate Bill 4 became law, we're confident that the generation replacement plan we filed in December exceeds the standards set by the new law, and as a result, we have not changed our CPCN strategy. As proposed, our plan would replace 1,500 megawatts of aging coal generation with over 1,200 megawatts of new combined cycle natural gas generation, nearly 1,000 megawatts of solar generation, and 125 megawatts of battery storage. In addition, our plan proposes the implementation of more than a dozen new energy efficiency programs by 2028. Altogether, the plan represents a $2.1 billion investment in Kentucky's energy future and the least cost option to reliably meet the needs of our Kentucky customers 24 hours a day, 365 days a year. As an added benefit, our proposed plan would cut our carbon emissions nearly 25% from current levels while further diversifying our generation fleet. To comply with the new law, we expect to file our retirement request with the KPSC by May 10th. Given the law provides the KPSC 180 days to issue a decision on retirement requests, this timing essentially aligns the retirement ruling with the expected decision on our CPCN filing. A decision on our filings is expected by November 6th. Again, we're confident the plan we propose offers the best path forward for the customers and communities we serve. We don't see any signs of federal environmental mandates easing over time, and we believe investing hundreds of millions of dollars in environmental control, continue operating aging, uneconomic coal plants is not in our customers' best interest. However, should we be required to make such investments, we do have the Environmental Cost Recovery Mechanism, or ECR, in place. That would enable recovery of these investments outside of base rate cases. We'll continue to actively engage with stakeholders in Kentucky throughout the CPCM process to demonstrate how our plans best meet the needs of our customers. That concludes my strategic and operational update. I'll now turn the call over to Joe for the financial update.