PPL Corporation

Good day and welcome to the PPL Corporation first quarter 2026 earnings call. All participants will be in 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 of Investor Relations. Please go ahead.

Good morning, and thank you for joining PPL Corporation's conference call on first quarter 2026 financial results. We provided presentation materials on the investor section of our website. This morning, you'll hear from Ben 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'll also refer to non-GAAP measures, including earnings from ongoing operations. Reconciliations 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 an overview of our first quarter performance. Overall, we delivered strong financial and operational results in the first quarter, reflecting disciplined execution across the enterprise. Today we reported first quarter gap earnings of $0.60 per share. Adjusting for special items, ongoing earnings were $0.63 per share. Based on these results and our outlook for the remainder of the year, we are reaffirming our 2026 ongoing earnings guidance of $1.90 to $1.98 per share with a midpoint of $1.94 per share. We also remain on track to complete approximately $5.1 billion of planned investments in 2026, supporting the delivery of safe, reliable, and affordable energy for our customers. Longer term, we continue to project approximately $23 billion of capital investment through 2029, resulting in average annual rate-based growth of 10.3%. This capital projection excludes any investments that may stem from our joint venture with Blackstone, which I'll provide an update on shortly. We're also reaffirming our long-term financial targets, including 6% to 8% annual EPS growth through at least 2029, with compound annual growth expected near the top end of that range. We also continue to target annual dividend growth of 4% to 6%, along with strong credit metrics throughout our plan period, which support a very compelling risk-adjusted total return for our share owners. Overall, our quarterly results position us well to deliver on our 2026 targets and beyond. Moving to slide five and some notable regulatory and business updates. During the quarter, PPL Electric Utilities reached a constructive settlement with the majority of the interveners in the distribution base rate case. Remember that we filed this rate case in the third quarter of last year, following more than 10 years since our last base rate case filing. Our filing reflected the results of effective cost efficiency and prudent investments over that period that have delivered significant value for our customers, while keeping O&M increases 25% below inflation. The settlement achieves a balance between our strong commitment to affordability and maintaining safe and reliable service for our customers, while supporting the significant demand growth in our service territory with large load customers. Importantly, The settlement would result in bill increases that are less than 4% across all customer classes, despite staying out for those 10 years. And it keeps our delivery rates among the lowest in the state. We've also agreed to a two-year stay out following implementation of the new base rates. The settlement also enhances support for vulnerable customers by increasing hardship fund bill credits, improving access to assistance programs, eliminating reconnection fees, streamlining return of security deposits, and boosting the annual low-income weatherization budget. We also created a new large load customer rate class and electric service tariff that includes key protections for our other customers, such as a 10-year load requirement and various financial commitments. The proposed tariff and rate class would also provide approximately $11 million annually in support of our residential low-income programs. Put together, the elements of this settlement would provide tremendous value for our customers by ensuring they receive safe, reliable, and affordable electric service. On April 17th, we were pleased that the administrative law judges recommended approval of the settlement without modification. We expect the final decision from the Pennsylvania PUC by the end of June with new rates effective July 1st. In Kentucky, LG&E and KU were granted reconsideration of decisions made by the Kentucky Public Service Commission regarding its base rate case earlier in Q1. As discussed in February, we expect the current decision by the KPSC will allow us to deliver on our overall plan objectives. However, as outlined in the reconsideration request, we continue to believe, along with many of the interveners, that our negotiated settlement was a better outcome for all parties, including our customers, and it should not have been modified. The reconsideration focuses on a limited number of substantive issues, including such modifications to KPSC made to the settlement and certain cost recovery and return determinations. Importantly, while LG&E and KU's petitions were granted rehearing by the KPSC, all intervener requests were denied. A procedural schedule has been set by the KPSC with the additional discovery projected to conclude by May 22nd. Parties have until May 26 to request the hearing or to ask for a decision based on the record in the case, and we hope to get a decision by the KPSC in the third quarter. Also in Kentucky, we're excited to announce a couple of new partnerships to explore innovative generation technologies in support of the increasing electricity demand in our service territory. Last month, we announced our partnership with Rye Development to evaluate a new 266-megawatt pump storage hydro project that RIE has been working on in Bell County. The project converts formal coal mine land in eastern Kentucky into a reliable energy storage facility, providing up to eight hours of storage upon COD currently projected for 2031. RIE has secured preliminary federal permits at this stage with final licensing projected for the second quarter of 2027. The project's initial cost estimates are approximately $1.3 billion. which excludes potential eligibility for a 50% investment tax credit. This project is not in our current capital plan or earnings projections. If constructed, this would be the first project of its kind in Kentucky and one of the first newly built pumped storage projects in the United States in more than 30 years. I'm also excited to highlight our collaboration with Xenergy, a leading designer of advanced nuclear reactor technology and manufacturer of advanced nuclear fuels. which we announced just last week. This collaboration will explore deploying X-Energy's XE-100 small modular reactor in Kentucky to support large load customers, including data centers, with long-term reliable and carbon-free electricity. Through this collaboration, we aim to support the significant activity and interest in Kentucky to explore nuclear generation, bolstered by some recently enacted legislation supporting nuclear development. This legislation supports early site development through a $75 million grant program that helps fund development costs for up to three sites across the state at $25 million per site. It also enables utilities to apply for recovery of other early site work that is not covered by the grant program. We currently expect early site permitting will cost less than $75 million to complete, most of which is anticipated to be funded through the grant process as well as our project partners. As you would expect, we're approaching potential new nuclear development in Kentucky with a disciplined, phased approach. That means starting with early stage evaluation and site readiness work, closely aligned with state policy support, clear customer demand and financial support, particularly from large load customers, and cost recovery frameworks that protect customers and share owners. Any decision to move forward would be gated by economics, regulatory certainty, and our longstanding commitment to capital discipline. Both the RIE development and X Energy partnerships reflect innovative approaches to bring large carbon-free electricity generation to Kentucky in a manner that supports customer affordability and long-term system reliability as electricity demand continues to grow. Turning to Rhode Island updates on slide six. Rhode Island Energy received approval for over $330 million of critical infrastructure investments through its latest annual electric and gas ISR plans. The approval represents the vast majority of what the company requested in its original filings. Recovery of and on these investments began on April 1st of this year, with Rider Recovery helping to limit regulatory lag. The latest plans fund core investment in vegetation management work to strengthen day-to-day reliability and system resilience. And it's clear these investments are providing tangible benefits to customers as reflected in our excellent operational performance, including Rhode Island Energy's ongoing top quartile reliability metrics and its strong execution during this winter's major storms. During the region's most severe storm of the season in late February, which brought nearly 40 inches of snow and hurricane force winds, the Rhode Island Energy Team excelled, performing better than any other utility in New England. Electric crews restored power to 99% of customers within 48 hours, while our gas crews responded to hundreds of emergency calls to ensure customers had gas service for heat during record-setting winter demand. These efforts did not go unnoticed, as our teams were honored by the Rhode Island House of Representatives in March for their response to this historic blizzard. These results reinforced the strong connection between sustained investments and outcomes that matter most to our customers, and that's precisely what our Rhode Island-based rate case is about. The rate case was filed in the fourth quarter of 2025, requesting a revenue requirement increase over two years, $181 million in year one and an additional $49 million in year two. The proceeding remains on track with intervener testimony filed in April and evidentiary hearings planned for June and July. New rates are expected to become effective September 1st. In addition, Rhode Island Energy recently filed a new hold harmless commitment proposal that is expected to provide bill credits that would significantly offset the impact of the proposed base rate increase for our customers. As a reminder, this proposal addresses PPL's deferred tax hold harmless commitment arising from the acquisition of Rhode Island Energy, accelerating the payment of related bill credits to support affordability in the near term. We expect new bill credits to be provided to customers starting in the first quarter of 2027. This approach is representative of how we engage across our jurisdictions, using the tools available to us to support affordability today, while continuing to attract the investment needed to maintain a safe, reliable energy system for our customers. Turning to slide seven, and a data center update in Pennsylvania. We continue to see significant growth in data center development across our PPL electric utility service territory, driven by location, access to power, and an advanced transmission system that enables speed to market for hyperscalers. Projects in advanced stages of planning now total 28.3 gigawatts, up another 12% from the 25.2 gigawatts we discussed on our year-end update call. As a reminder, projects in advanced stages have executed agreements, either letters of agreement or electric service agreements, with meaningful financial commitments from developers attached to them. Of that total, about 10 gigawatts now have signed ESAs consistent with our expectations. This includes contracts with some of the leading companies in this space, including QTS, AWS, Powerhouse, Core, Weave, and others. Meanwhile, five gigawatts of the projects in advanced stages are already under construction. These are critical proof points that demand is not only real, but continues to grow and progress forward. As we've discussed on prior calls, Our ESAs include strong customer protections such as prepayments, credit support, and minimum load obligations to ensure that developers, not existing customers, bear the financial risk if projects don't proceed as planned. Those same principles are reflected in the proposed new large load customer rate class and the electric service tariff in PPL Electric's rate case settlement. And importantly, under our tariff structure, the incremental load growth improves system utilization and lowers transmission costs for existing customers. Taken together, this reflects our balanced approach to data centers and our firm belief that data center development can strengthen the grid and lower costs for all customers, all while delivering significant local benefits, including jobs, tax revenue, and community investments. Let's turn to slide eight. Kentucky continues to experience strong economic development activity as well, driven by both data centers and advanced manufacturing. The Commonwealth overall, and LG&E and KU service territories in particular, remain a highly attractive environment for energy-intensive growth, supported by our competitive energy costs and reliable service. Our current Kentucky development pipeline now reflects 12.9 gigawatts of potential new load through 2032, an increase of nearly 4 gigawatts from our year-end update. New data center requests make up the majority of the increase, with 13 new projects expressing interest in our service territory. In total, we have active requests for almost 12 gigawatts of data center demand. Roughly a third of those projects are considered highly active with transmission service studies underway of which about 650 megawatts are currently under construction or agreement. At the same time, we're also seeing continued growth in manufacturing, automotive, and other non-data center projects, adding important diversity to the mix. During the first quarter, Global Laser Enrichment and Toyota Motor Manufacturing announced approximately $2.6 billion in combined investment plans within our service territories. Based on our updated planning assumptions, we now project approximately 3.5 gigawatts of expected new load by 2032, compared to about 1.8 gigawatts assumed in our most recent CPCN forecast. As new load materializes, additional generation resources will be required to maintain reliability. And LG&E and KU could be in a position to file another CPCN as early as this year. We remain focused on ensuring that new demand is paired with timely resource additions, protecting customers, supporting reliability, and positioning the system to serve the Commonwealth's long-term economic development needs. Turning to slide nine and an update on our joint venture. Momentum continues to build around our Blackstone joint venture. This is driven by the rapid data center growth in Pennsylvania that I just discussed. combined with increasing expectations that large load customers need to bring dedicated generation solutions online in support of their load requirements. This is also supported by the ratepayer protection pledges made by both hyperscalers and some of the large third-party data center developers. Our joint venture was intentionally built for this moment. Interest from hyperscalers and developers remains high, and as I previously mentioned, we are working with all the major customers in this space. The joint venture continues to do much of the upfront development and coordination work so it can move quickly once commercial arrangements are finalized with the hyperscalers. We're engaged in strategic discussions with key gas pipeline companies focused on ensuring access to low-cost Marcellus shale gas for our future generation projects. Based on the progress to date with the hyperscalers, we are executing multiple gas turbine reservation agreements and have submitted requests for multiple generation projects into PJM's interconnection queue for certain land sites currently under our control. And we're continuing to evaluate additional strategic land parcels to expand access to key sites for further generation development. We are doing all of this with deliberate financial and execution discipline. As we've shared previously, We will not build without signed energy supply services agreements, or ESSAs, and our commercial structures will continue to support a utility-like risk profile through long-term contracts. Our JV continues to be a discipline generation platform to help meet significant new demand while supporting customer affordability and system reliability. While our current business plan does not include earnings contributions or capital investments from the joint venture, the progress to date meaningfully increases the probability of JV own generation over time. We're excited about the progress we've made and 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.