PPL Corporation

Good day, and welcome to the PPL Corporation fourth quarter and full year 2025 earnings 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 a touch-tone phone. 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 Andy Ludwig, Vice President, Investor Relations. Please go ahead.

Andy Ludwig Good morning, and thank you for joining the PPL Corporation fourth quarter and full year 2025 earnings call. We provided presentation materials on the investor section of our website. This morning, you'll hear from Vince Sorge, PPL President and CEO, and Joe Bergstein, Chief Financial Officer. We'll conclude with a Q&A session following our prepared remarks. Before we get started, please turn to slide two for our cautionary statement. Today's presentation contains forward-looking statements subject to risks and uncertainties. Actual results may differ materially. Please refer to our SEC filings and the appendix for additional information. We will also refer to non-GAAP measures, including earnings from ongoing operations. Reconciliation to the corresponding GAAP measures are provided in the appendix. I'll now turn the call over to Vince.

Thank you, Andy, and good morning, everyone. Let's begin on slide four with a look back at 2025. I'm proud to report that we finished the year exactly where we said we would, delivering safe and reliable electricity and natural gas service to more than 3.5 million customers and achieving our stated financial targets for investors. Operationally, our teams performed at an extremely high level across the company, directly resulting from years of intentional investment in our infrastructure, combined with strong day-to-day execution by our workforce. We achieved first quartile or near first quartile T&D reliability in all of our jurisdictions and top decile generation performance in Kentucky. I will say, first quartile T&D performance is trending worse overall for the industry as a result of more frequent and severe storms, as well as more extreme weather events. This is causing utilities across the country to increase their capital investment plans significantly to combat Mother Nature. And the same applies here at PPL. During 2025, we continue to clearly focus on innovation, as this will be a significant source of continued operating efficiency across our business in support of customer affordability. We are developing several digital solutions to improve customer service, including an agentic AI digital customer service agent and a recently released customer app at PPL Electric Utilities. We will expand the rollout of these and other digital solutions across our business in the coming years, and we're really excited about the digital future for utilities. From a financial perspective, we achieved ongoing earnings of $1.81 per share, 7.1% growth from our prior year results, and in line with the midpoint of our forecast. From a capital investment standpoint, we executed $4.4 billion of planned investments focused on grid hardening and modernization, advanced metering, pipeline replacement in our natural gas businesses, and the initial stages of building new generation in Kentucky. These investments directly support reliability, resilience, and long-term affordability for our customers. On the cost efficiency front, we outperformed our O&M savings target by about $20 million, achieving approximately $170 million in run rate savings from our 2021 baseline, about a year ahead of our $175 million target for the end of 2026. Our O&M efficiency strategy has been a key component of our affordability strategy here at PPL, and that will continue to be the case as we move forward beyond 2026. Finally, we engaged extensively with a wide range of stakeholders to power economic development in our territories. These actions have supported the growth of our significant data center pipeline while fueling some of the largest economic development projects our territories have seen. including the $3.5 billion advanced manufacturing investment by Eli Lilly, announced earlier this month right here in Allentown, Pennsylvania. In summary, this past year reflects what we strive for as a company, consistently high levels of execution, disciplined financial performance, a forward-looking strategy, and results that create value for both customers and share owners. Let's turn to slide five. Building off our strong year in 2025, today we announced an updated business plan that extends our growth outlook while keeping customer affordability and our strong credit profile front and center. For 2026, we're issuing ongoing earnings guidance of $1.90 to $1.98 per share, with a midpoint of $1.94 per share, representing 7.2% growth from 2025. We're extending our 6% to 8% annual EPS growth target through at least 2029, expecting the EPS CAGR through 2029 to be near the top end of that range based off of our 2025 ongoing earnings. We're expecting stronger growth beginning in 2027 and continuing through 2029 compared to the midpoint of our 2026 growth range since the full-year impacts of our current rate cases don't kick in until next year. Importantly, beyond this strong base plan, we see several identifiable upside opportunities to further enhance or extend our earnings growth over time. These include earnings from competitive transmission projects, additional transmission and distribution investments to support the significant economic development that we're seeing in both Pennsylvania and Kentucky, and additional generation needs in Kentucky. It also includes earnings from our joint venture with Blackstone. which I'll cover in more detail in a few slides. Our earnings growth is supported by our capital investment plan. We project capital investment needs of $23 billion from 2026 through 2029, up from $20 billion in our prior plan period. Our updated plan includes the critical investments that strengthen our networks against those more frequent and severe storms and other extreme weather impacts. These investments will accelerate our ability to restore power when storms do strike and deliver the new generation resources approved by the Kentucky Public Service Commission last year, ensuring we continue to deliver safe, reliable, and affordable energy for our customers. The result of these investments is an estimated rate-based CAGR of about 10.3%, providing a strong foundation for predictable and durable earnings growth. Our updated plan supports PPL's strong credit metrics, including 16% to 18% FFO to debt throughout the plan period. In support of our expected capital expenditures, the plan reflects total equity needs of about $3 billion from 2026 to 2029. Importantly, we already executed about $1 billion of that equity need last year, leaving about $2 billion of equity to be issued going forward in support of this updated plan. Finally, in connection with the updated capital needs, We modified our annual dividend growth rate target to 4% to 6% while we are issuing equity to fund our capital plan. Overall, our updated business plan balances growth, affordability, and financial discipline while continuing to provide top-tier returns for share owners relative to our peers. Turning to slide six and an update on the final Kentucky rate case orders that were issued earlier this week. Overall, the outcome of these cases allows us to deliver on the business plan we've outlined for you today. The Commission approved an aggregate increase of approximately $233 million in annual electric and gas revenues, which is within $2 million of the stipulation we had agreed upon with most interveners in the case. In addition, the KPSC approved allowed ROEs of 9.775% for both utilities, with 9.675 percent for our capital-related mechanisms. These ROEs are 35 and 32.5 basis points higher, respectively, than our previously approved levels. Importantly, the Commission approved the pilot generation recovery mechanism, which enables recovery of and a return on investments associated with new generation and energy storage projects that were previously authorized by the Commission. This mechanism supports improving reliability and resilience of our networks, as well as our ability to meet growing demand on the system. The mechanism also provides for the recovery of and on certain costs related to keeping the Mill Creek Unit 2 plant online beyond its original retirement date, which was originally scheduled for 2027. We were also pleased to receive approval for our extremely high load factor tariff, which is designed to protect existing customers from the impacts of large data center loads. One element not approved was the proposed earning sharing mechanism, which had been tied to our agreement to stay out of rate cases through mid-2028. As a result, we are reassessing the timing of our next Kentucky rate case to ensure we continue to balance customer affordability and the capital required to support system needs. While we are disappointed that the Commission modified a settlement that we and the intervening parties worked very hard to achieve, Overall, the revenue requirement remained effectively unchanged from the stipulation. From here, we will move forward with implementing the new rates, issuing required refunds related to interim rates, and filing a motion for reconsideration with the KPSC on several items. Moving to slide seven, we continue to advance progress on our ongoing rate case in Pennsylvania. Earlier this week, evidentiary hearings were held and concluded in one day. We are also actively working towards a settlement with interveners. If we cannot agree to a settlement, we remain very confident in the strength of our case and are well prepared to fully litigate if necessary. Our case balances PPL Electric's need to make critical distribution system and IT investments to maintain and improve reliability, customer service, and storm response. while providing important customer protections and maintaining affordable rates for our customers. A decision is expected in June, with new rates effective on July 1st, 2026. Continuing with Rhode Island regulatory updates on slide eight, in the fourth quarter, Rhode Island Energy filed its first base rate request since 2017, seeking a two-year phased increase aligned with the cost of delivering safe, reliable energy while supporting critical infrastructure improvements and affordability programs. This includes a redesigned low income rate, offering deeper targeted support for those in greatest need, importantly without raising costs for our other customers. The decision is expected this summer with new rates effective on September 1st, 2026. We also filed our annual electric and gas ISR plans in late December. totaling about $350 million, which primarily relates to capital investments to sustain and enhance the safety and reliability of our electric and gas distribution systems. We expect a PUC decision on the ISR filings by the end of March. Finally, we remain committed to reaching a new hold harmless settlement in Rhode Island to provide meaningful near-term rate relief to our customers. As a reminder, the settlement that we reached with the division last year provided for about $70 a month credit to combined electric and gas customers in the winter months of 2026 and 2027. So very meaningful credits in the months where energy bills tend to be the highest. We'll be engaging with the division and the PUC on a new settlement in parallel with the base rate case proceeding currently underway. Moving to slide nine and an update on our Pennsylvania data center pipelines. PPL Electric Utilities Service Territory continues to see rapid growth in data center interconnection requests. As of today's update, projects in advanced stages, meaning they have executed agreements and have meaningful financial commitments attached to them, now total approximately 25.2 gigawatts, up another 23% since our last quarterly update. We now expect at least 10 gigawatts to be under ESAs by the end of the first quarter. About 5 gigawatts remain under construction, which is consistent with our last update. That said, we believe all of the 25.2 gigawatts of projects have a high probability of completion. And our ESAs include strong customer protections, such as prepayments and credit support, as well as minimum load requirements for data center customers to pay approximately 80% of forecasted load until the costs incurred to extend service are fully recovered. So data center developers will bear the financial risk of a data center project not getting completed versus our existing customers. Turning our attention to Kentucky on slide 10, economic development overall remains strong. Our current pipeline reflects more than nine gigawatts of potential new load through the early 2030s. Load related to data centers exceeds eight gigawatts, and about four gigawatts of these requests are considered highly active with 500 megawatts under construction. The development pipeline also includes 1.1 gigawatts of advanced manufacturing and other non-data center requests, up about 150 megawatts from our prior update. We are continuing to see robust economic development, with several major manufacturers announcing almost a half a billion dollars of new investments in our service territories, including Toyota, Foxconn, GE, and Anthro Energy. Our probability-weighted demand growth projections remain at about 2.8 gigawatts, or about a gigawatt more than what was reflected in the load forecast in our 2025 CPCN. If this potential growth continues to materialize, additional generation resources will absolutely be required. In summary, continued strong interest from both data centers and manufacturing customers validates our long-term generation planning and the recent CPCN approvals in Kentucky. Turning to slide 11, as we've been discussing for several years now, affordability remains a core commitment across everything we do. It has been a foundational element of the new PPL strategy since 2022. Since that time, we have reduced O&M by nearly 3 percent annually, reaching $170 million in run rate savings by the end of 2025. About $100 million of those savings benefited our Kentucky customers alone and directly reduced the increases needed in our most recent Kentucky rate cases. In the end, residential bill increases were in the 5% to 11% range after roughly five years without base rate increases. This is significantly below the level of inflation over the same period and reflects the tangible benefits of sustained cost discipline. The $170 million of total O&M savings that we've achieved has helped to fund approximately $1.4 billion of capital investment without incremental pressure on customer bills, enabling longer intervals between base rate cases. It's been 10 years in Pennsylvania, 8 years in Rhode Island, and as I said, about 5 years in Kentucky, without requesting base rate increases, a direct result of this strategy. Looking ahead, cost discipline will remain a critical component of our affordability strategy. In our updated plan, we project O&M growth of approximately 1% annually, well below inflation. We expect additional structural savings as we continue to harden the grid and deploy smart grid technologies and improve overall system efficiency. We also see AI as an incremental but meaningful driver of efficiency across customer service, grid operations, and back office functions. Beyond cost control, Continued economic development across our jurisdictions also supports customer affordability. Over time and under the tariff structures we've put in place, incremental load growth, including large load data centers and smaller distribution connected customers, improves system utilization and helps moderate costs for existing customers. We also continue to support targeted customer assistance programs to help our customers afford their energy bills. For example, PPL Electric's Operation Help leaned in during the 2025 government shutdown to support low-income customers when LIHEAP grants were unavailable. In addition to the low-income program I talked about as part of our Rhode Island energy rate case, we've also created a new employee-funded assistance program that provides support to Rhode Island customers that meet various income thresholds. And as mentioned earlier, we remain committed to a solution on a hold harmless settlement in Rhode Island and to get those credits reflected in customer bills. In deregulated states like Pennsylvania and Rhode Island, we do not control every aspect of the customer bill, but we are focused on lowering those costs as well. So let's move to slide 12 and talk about what we're doing in this regard. As an example, more than half of the customer bill in Pennsylvania comes from costs we do not control, with energy supply costs being the largest component. For several years, we have been sounding the alarm on a worsening generation supply situation in PJM, which has been the primary driver of higher customer bills. Since December of 2020, energy supply costs have increased by roughly 200%. And over that time, PPL Electric's average monthly residential bill has increased by about $68, with approximately $50 of that increase coming from energy supply costs alone. The takeaway is straightforward. The single biggest driver of long-term affordability in PJM will be increasing generation supply. And with the scale of data center growth we're seeing, we absolutely need to build new, reliable generation to meet that demand. The recent call by President Trump and the state governors in PJM for an emergency auction to spur construction of generation, that's a clear acknowledgement of what we've been saying for years. At PPL, we're focused on supporting the build-out of new generation in a number of ways. First, we formed a strategic partnership with Blackstone to build, own, and operate new electric generating stations to directly power data centers. Second, we're actively supporting legislation that's been proposed in Pennsylvania to allow regulated utilities to enter into long-term resource adequacy agreements with independent power producers. The legislation would also permit utilities, where appropriate, to build and own generation to support reliability and affordability. At the same time, we continue to invest in a robust transmission grid, capable of quickly connecting both new large load customers and generation. At PPL, our grid will not be what stalls either new generation or data center development. I'll note that even with the emergency auction envisioned by President Trump and the governors, a lot more generation will be needed. we estimate the auction, if it comes to fruition, could produce about 6 to 7 gigawatts. This, however, wouldn't address the expected data center demand in PPL electric service territory, let alone data center demand across all of PJM. What the auction does signal, however, is increased pressure on data centers to bring their own generation to market or at least pay for the new generation required to power their data centers. And building new generation will directly lower capacity prices in PJM by increasing supply, thus lowering customer bills over time. Bilateral arrangements to bring new generation online will continue to play a key role here as well. And our joint venture with Blackstone is perfectly positioned to enter those agreements now without needing to wait for future PJM reforms. And that brings me to an update on the joint venture on slide 13. We've made meaningful progress over the past year as momentum within the PJM market continues to build. Hyperscalers are increasingly seeking bring-your-own-generation solutions, and their sense of urgency is significantly higher now. We're extremely well-positioned to support this need given our expertise in PJM and the significant generation fleet we operate in our building in Kentucky. Recent market developments are only increasing pressure on large low customers to secure dedicated generation solutions. And we've uniquely positioned the JV to deliver speed to market at scale, which we all know is the number one priority for these customers. In support of this need, we have diligently executed contracts for several strategic land parcels over the past year and are securing natural gas capacity. We've also evolved our generation solutions in the past few months to meet hyperscalers' changing needs. In addition to natural gas combined cycle units, which take about five years to come online, we now offer alternate generation solutions to enable new generation to come online more commensurate with the ramping requirements of data centers. While we do not have a hyperscaler agreement to announce on our call today, it is important to note that we have not embedded any earnings contributions or CapEx from the JV in our updated business plan. However, depending on the timing of executing these agreements and the generation mix selected by hyperscalers, we could see earnings contributions as early as the back end of our updated planning horizon. Taken together, the policy signals, the market response, the engagement we're seeing from hyperscalers and other data center developers, and all the legwork that we've done over the past year, our joint venture is perfectly positioned for this moment. and we look forward to providing you with more updates as contracts are finalized. I'll now turn the call over to Joe for our financial update. Joe?