Q2 2021 PPL Corp Earnings Call
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Good day and why.
Welcome to the PPL Corp, second quarter earnings conference call on.
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I would now like to turn the conference over to Andy Ludwig Vice President of Investor Relations. Please go ahead Sir.
Thank you.
Everyone and thank you for joining the PPL Corporation second quarter Investor update.
We've provided slides for this presentation and our earnings release issued this morning on.
On the investors section of our website.
Before we get started I'll draw your attention to slide 2 and a brief cautionary statement.
Our presentation and earnings release.
Which we will discuss during today's call.
Contain 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 SEC filings for.
For a discussion of some other 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.
Participating on our call. This morning are Vince Sorgi, PPL, President and CEO.
Joe Bergstein, Chief Financial Officer, and Greg Duggan, Chief operating officer.
With that I'll now turn the call over to Vince.
Thank you Andy and good morning, everyone. We appreciate you joining us for our second quarter Investor update.
Moving to slide 3 and the agenda for today's call.
I'll begin this morning with an overview of the exciting quarter, we've had here at PPL, including an update on our strategic repositioning our newly announced net zero emissions goal along with a brief operational update.
Joe will then provide a detailed review of second quarter financial results and walk through some recent actions we've taken to strengthen <unk> balance sheet.
And as always we'll leave ample time for your questions.
Turning to slide 4.
The second quarter has been a busy 1 as we continue to advance the strategic repositioning of the company.
First we completed the sale of our UK utility achieving exceptional value for the business and once again, demonstrating our ability to deliver on our strategic priorities to maximize shareowner value.
The sale resulted in net cash proceeds of $10.4 billion.
Which will support the repositioning of PPL as a high growth.
U S regulated utility company.
As a reminder, we've earmarked $3.8 million of those proceeds to acquire Narragansett electric from National grid.
We also deployed some of the proceeds to achieve our previously stated objective of strengthening our balance sheet.
Utilizing $3.9 billion to retire $3.5 billion of.
Standing holding company debt, which will provide the company with substantial financial flexibility.
Regarding the remaining proceeds we continue to review various options as previously discussed.
Including investing incremental capital at our utilities are in renewable energy.
And as well as the repurchase of PPL shares.
On the topic of share repurchases, our board recently authorized the company to repurchase up to $3 billion and PPL common stock.
We currently expect to repurchase about $500 million by year, and while we continue to assess other opportunities to deploy proceeds to maximize shareowner value.
The actual amount we apply to share repurchases will depend on various factors, including the determination of other uses for the proceeds.
We believe our current plan provides a balance of inefficient use of proceeds while still maintaining financial flexibility.
I'll note that we are and the process of reevaluating our capital plans for incremental investment opportunities for the benefit of our customers.
As a result, we have removed our prior capital and rate base projections from our presentation.
We will provide further updates to our capital and rate base plans. After we complete this review.
The U K sales represented an important first step and our strategic repositioning.
Simplifying our structure with a clear focus on U S rate regulated utilities, and strengthening our balance sheet, while providing much greater flexibility to support future growth.
We're also making great progress and the acquisition of Narragansett Electric and Rhode Island.
To date, we've satisfied our HSR and FCC requirements.
And on July 16th the Massachusetts Department of public utilities.
And at a waiver of jurisdiction over the sale streamlining the overall path to regulatory approval for the acquisition.
We continue to make progress on securing approvals from FERC and the Rhode Island Division of public utilities and carriers.
Which are the 2 remaining approvals required for the transaction.
Looking ahead, we remain confident and our ability to close the transaction by March of next year.
With hopes of closing before year end.
As we pursue the final regulatory approvals, we are working closely with national grid on transition planning.
To ensure a seamless transition for Rhode Island customers and Narragansett employees upon closing.
We've also announced our planned leadership team for the Rhode Island and <unk>.
Dave Bonenberger, who has nearly 4 decades of energy industry experience, including leading both the transmission and distribution businesses at PPL Electric utilities, who will serve as the Rhode Island President upon completion of the transaction.
Dave is well positioned to lead the execution of our operational strategy and Rhode Island, as we seek to drive significant value for Rhode Island customers and to support the state's decarbonization goals.
Dave will be joined and Rhode Island by former National Great employees and crew.
Creating a strong experienced and local leadership team with a deep commitment to delivering energy safely and reliably to Rhode Island customers.
Moving to slide 5.
In addition to strong execution towards our strategic repositioning. We also continue to advance our clean energy transition strategy.
And announced a new net zero carbon emissions call. This morning.
This goal encompasses greenhouse gas emissions from our Kentucky generation as well as other aspects of our business as outlined in the footnote on the slide.
PPL is fully committed to driving innovation to enable net zero carbon emissions by 2050.
And to ensure a balanced responsible and just transition for our employees communities and customers as we advance towards our clean energy goals.
Our new goal reflects our continuous evaluation of our progress and opportunities through ongoing business and resource planning efforts.
Based on our latest reviews.
We believe we are on a path to achieve 80% emissions reduction by 2040.
Full decade ahead of our prior goal.
As a result in addition to today's announced net zero emissions call. We've.
We've also accelerated our previous interim goals.
Now targeting and 80% reduction by 2040, and a 70% reduction by 2035.
In addition, we are undertaking and enterprise wide effort to enhance our clean energy strategy and develop additional programs metrics and goals that will guide our path to net zero emissions.
We've hired and industry, leading global consulting firm to assist us in this endeavor.
In addition to the strategic initiative, we are completing an updated scenario based climate assessment to evaluate the potential impacts to PPL from climate change and potential future requirements.
Our last climate Assessment report was published in 2017.
Our updated assessment, which we intend to publish later this year.
We will analyze multiple scenarios, including a scenario tied to limiting the global temperature increase to no more than 1.5 degree Celsius.
And as we conduct our climate assessment RF.
Our efforts will be informed by our ongoing integrated resource planning activities and Kentucky.
And <unk> and Ku submit and IRB. Once every 3 years to the Kentucky Public Service Commission.
And the next IRB will be filed in October of this year.
Both the climate assessment and the AARP, who will serve as key inputs as we further define the pathway to achieving our emissions goals.
Wrapping up this slide.
We recognize that achieving these emissions reductions, while maintaining reliability and affordability will.
We will require significant advances and clean energy technology and solutions that can be scaled economically to meet the country's energy needs.
This is especially true as we support greater electrification of other sectors.
With that in mind.
Investing in research and development is a key pillar of our clean energy strategy and.
And we continue to look for opportunities to engage in this area to drive the innovation and solutions necessary to achieve net zero.
PPL for example is and anchor sponsor of the low carbon resources initiative being led by <unk> and the gas Technology Institute and I Chair <unk> Board working group.
We also recently joined energy impact partners Global investment platform.
Which brings together leading companies and entrepreneurs worldwide to foster innovation towards a sustainable energy future.
Through our participation and the AIP platform.
<unk> will support up to $50 million and investments.
Aimed at accelerating the shift to a low carbon future.
And driving commercial scale solutions needed to deliver deep economy wide de carbonization.
Apart from El Cri, and Vips and investment platform we.
We also continue to engage and a number of other R&D efforts related to clean energy technologies and enhancing the power grid.
These collaborative efforts provide PPL greater visibility into emerging technologies that.
And that can be leveraged to advance the clean energy transition and we will continue to look for opportunities to expand our work and support in this area.
Moving to slide 6.
We've outlined our updated path to net zero carbon emissions on this slide along with our current expectations on coal fired generation capacity and Kentucky.
As consistent with the generation planning and analysis study included and our recently approved rate case filings.
It's clear that we will need to advance technology to achieve net zero emissions by 2050, as we balance the need for affordable reliable and sustainable energy for our customers.
Based on these current factors and consistent with our most recent rate case filings and Kentucky.
We currently expect to achieve a reduction and our coal fired capacity of 70% by 2035 <unk>.
And 90% by 2040, and 95% by 2050 from our baseline and 2010.
We anticipate having about 550 megawatts of remaining coal fired generation in 2015.
Due to our highly efficient and relatively new Trimble County unit, 2 that started commercial operation in 2011.
Therefore, our objective is to continue to explore innovative ways to our R&D efforts.
Economically drive these reductions further while supporting our customers and local communities.
We are also assess the implications of advancing these goals even further.
Our internal view of what it could take to achieve 100% carbon free generation by 2035 as proposed by the bite and administration.
Using current technologies would create significant affordability issues for our customers.
Our new commitment to achieve net zero carbon emissions by 2050.
Is backed by the actions that we are and will continue to take.
To support our low carbon energy system that is affordable and reliable and provides the time needed for technology to advance.
Next on slide 7 and I'll cover the details of the Kentucky rate cases.
On June 30th.
PSC approved the settlement that LG and <unk> and Ku had reached with parties to the rate reviews with certain modifications.
At a high level the orders support continued investment to modernize our energy infrastructure strengthen grid resilience and upgrade LG and <unk> natural gas system to enhance safety and reliability for those we serve.
Effective July 1.
The K PSC authorized a combined $199 million increase and annual revenue for LG and <unk> and Ku.
With and allowed base Roe of 9.4% 5%.
And a 935% ROE for the environmental cost recovery and gas line tracker mechanisms.
In addition, the PSC approved a $53 million economic relief Circ credit that was proposed by LG and <unk> and Ku to help mitigate the impact of rate adjustments until mid 2022.
Importantly, the.
And the Commission's order authorized full deployment of advanced metering infrastructure, which.
Which will empower customers with detailed energy usage information.
Enable LG <unk> and <unk> to respond more quickly to power outages and improve operational efficiency.
We continue to believe the resulting O&M savings from installing advanced meters will exceed the cost of this investment for the benefit of our customers.
The $350 million capital cost of the proposed <unk> investment is not included in the new rates that took effect July 1.
Instead, we will record our investment in the Ams project on <unk> and.
And <unk> during the projects' implementation period.
The <unk> also approved a very constructive retired asset recovery rider.
And to provide recovery of and a return on the remaining net book values of retire generation assets as well as associated inventory and decommissioning costs.
The rider will provide cost recovery over a 10 year period upon retirement of such assets.
As well as return on those investments at the utilities and weighted average cost of capital.
As we announced in January Mill Creek unit, 1 is expected to retire and 2024.
Mill Creek unit, 2 and EW Brown unit 3.
And I expect it to be retired in 2028 and as they reach the end of their economic useful lives.
These units represent a combined 1000 megawatts of coal fired generating capacity.
The retired asset recovery rider balances the interests of all stakeholders and provide certainty of recovery for the prudent investments made and these coal plants.
Pursuant to the settlement agreements approved by the PSC elg.
<unk> and Ku have committed that they will not increase the new base rates for at least 4 years subject to certain exceptions.
And before leaving this slide I would note that and approving the settlement agreement. The commission adjusted the proposed base ROE downward from 9.5% to 9.4% to 5% and.
And disallowed recovery of certain legal costs.
These modifications reduced the annual revenue requirements proposed and the settlements by approximately $20 million.
We have filed a request for a limited rehearing on these matters.
And finally, turning to slide 8.
And other highlights across PPL, we continue to achieve recognition for our strong commitment to diversity equity and inclusion innovation and safety.
During the second quarter PPL was recognized by diversity, Inc, and 2 distinct areas.
<unk> is 1 of the top utilities and the nation for workforce diversity.
And second is 1 of the top 50 companies per ESG determined by several factors, including our programs and practices surrounding talent and the workforce.
Social responsibility and philanthropy.
Supplier diversity programs and overall leadership and governance.
PPL was also named a best place to work for disability inclusion for the fourth consecutive year.
Earning a perfect score on the 2021 disability equality index.
And finally, PPL electric utilities received the south Eastern and electric changes Chairman's award for its groundbreaking technology that safely and automatically cuts power to down power lines.
These awards reflect our corporate strategy focused on creating value for all stakeholders.
And is grounded in our 5 strategic priorities.
These include achieving industry, leading performance and safety reliability customer satisfaction and operational efficiency.
Advancing our clean energy transition and while maintaining affordability and reliability.
Maintaining a strong financial foundation, and creating long term value for our shareowners.
Fostering a diverse and exceptional workplace.
And building strong communities and the areas we serve.
I'll now turn the call over to Joe for the financial update Jeff.
Thank you Vince and good morning, everyone.
Turning to slide 10 today, we announced second quarter reported earnings of <unk> <unk> per share.
This reflects special items net losses of 16 and per share primarily related to a UK tax rate change and a loss on the early extinguishment of debt, partially offset by earnings from the UK utility business that had been recorded as discontinued operations.
I'll note that the tax related items was a noncash adjustment prior to the completion of the sale of WPZ in June.
Adjusting for these special items.
Second quarter earnings from ongoing operations were <unk> 19 per share compared with 20 per share a year ago.
We remain encouraged by the economic recovery from the pandemic and both our Pennsylvania, and Kentucky jurisdictions, which has resulted and continuously improving commercial and industrial sales.
These higher sales were offset by several factors.
Which I'll cover on the next slide.
So let's move to slide 11 for a more detailed look at our second quarter segment results.
As a reminder, we've adjusted the 2020 corporate and other amount to reflect certain costs previously reflected in the UK regulated segment, which was primarily interest expense.
The total amount of these costs was about <unk> <unk> per share for the quarter.
Turning to the ongoing segment results, our Pennsylvania regulated segment results were <unk> <unk> per share lower compared to a year ago.
The decrease was primarily due to lower adjusted gross margins.
Driven by lower peak transmission demand as discussed in Q1, and consistent with our expectations and an increase and the reserve recorded as a result of a challenge to the transmission base return on equity.
Partially offsetting these negative variances were increased returns on additional capital investments.
We also experienced and additional <unk> decline due to favorable tax related items recorded in the second quarter of 2020.
Turning to our Kentucky regulated segment.
<unk> were <unk> <unk> per share higher and our comparable results and Q2.2020.
The increase was primarily driven by higher commercial and industrial demand revenue as we experienced strong recovery in 2021 and these sectors from the significant impacts of COVID-19.
And lower interest expense, primarily due to the interest costs previously allocated to the Kentucky regulated segment and 2020 that are now reflected in corporate and other.
Partially offsetting these items was higher operation and maintenance expense, primarily at our generation plants.
Results of corporate and other were flat compared with a year ago.
Higher interest costs of a penny a share related to the corporate debt previously allocated to the Kentucky segment were offset by several factors there were not individually significant.
Turning to slide 12, I'll cover some notable financing related updates.
First following the sale of the UK utility business, we successfully completed a series of financing activities and June and July led to a significant reduction and holding company debt.
The result was a total reduction of PPL capital funding debt.
About $3.5 billion.
Which was in line with our previously discussed targets.
Through these actions we've reduced total holding company debt to about 20% of Ppl's total outstanding debt.
Effectively clearing all near term maturities at PPL capital funding through 2025.
We've provided a detailed breakdown of these actions and the appendix of today's presentation.
In addition to the activity at PPL capital funding, we redeemed at par $250 million, and LG and <unk> and Ku energy and July which was part of our original financing plan for the year and order to simplify the capital structure of the company by eliminating intermediate holding company debt.
That was the final remaining outside outstanding debt security at the <unk> entity and therefore, we have day registered okay. As we no longer expect to issue debt out of this entity.
We expect PPL capital funding will be the financing entity at the holding company level to provide support to all of our operating subsidiaries.
The successful execution of liability management vs PPL, well positioned and on track to achieve our targeted credit metrics post closing of the Narragansett Electric acquisition.
In addition to these notable financing updates we also reduced outstanding short term debt is an efficient use of available cash until we fully deploy the remaining proceeds from the sale of WPZ.
That concludes my prepared remarks, and I'll turn the call back over to Vince.
Thank you Joe.
In summary, as we continue to execute our strategic priorities I am incredibly excited about PPL future.
We continued to deliver electricity and natural gas safely reliably and affordably for our customers.
We continue to evolve our clean energy strategy and to drive innovation across our company.
We completed the sale of our UK utility business, achieving outstanding value for our shareowners.
We're on track to close on our Narragansett acquisition within the expected Timeframes.
And the new PPL will emerge from our strategic repositioning as a much stronger company 1 poised for long term growth and success.
With that operator, let's open the call for questions.
Thank you we will now begin the question and answer session.
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Today's first question comes from Shar <unk> with Guggenheim Partners. Please go ahead.
Hey, good morning, guys.
Good morning, Sean.
So first off looking at the 2 and $5 billion debt remains unallocated after the 'twenty 1 buyback how should we think about the timing of the allocation decision, making process and maybe put differently, how long will it take to evaluate the capex on opportunity set across the flip.
Correct.
What are the trigger points there if that is the Kentucky ERP is Rhode Island closure I guess, Vince how long will you sit on it and is the door completely closed on and out by regulated utility acquisition. At this point, maybe just give us a little bit of a sense on the background on the process that you just went through that thanks.
Sure.
You hit a lot and that question Shar on terms of timing I would say that we're not really setting and arbitrary timeline to complete this we want to make sure that.
We're going through this process and it does.
And intelligent way as we as we always do so.
Not really setting and artificial timeline on that.
But to your point you mentioned many of the factors that really are going into the process right. So.
And the middle right now of.
Assessing the capital plan.
Including for Rhode Island, once acquired and we do see additional T&D opportunities across the utilities again, including Rhode Island.
For the benefit of our customers to drive improved efficiency and resiliency of the network as well as additional gas LDC investments to further enhance the safety and operations.
And again from a capital deployment perspective, we think deploying capital into the utilities and crew.
<unk> significant value for all of our customers and our shareowners.
So a lot of work going on right now.
Going through that you mentioned.
Moving to closure, Rhode Island, and that's obviously a key.
The components of how we think about capital deployment and moving forward and the utility.
No.
In terms of timing.
And we will want to see.
The closure of the deal on you.
You also mentioned and the IRB and Kentucky that as well as the climate assessment report and those will be key inputs into our clean energy strategy going forward, there could be some capital deployment opportunities coming out of that.
So yes, I think you hit all the points in terms of the areas.
The areas that we're looking at and that will ultimately.
Dry on the organic use.
The remaining proceeds.
In terms of M&A.
And I would just say that first of all we don't need M&A to hit the targets that were.
And we are we're targeting from both on earnings and a growth perspective.
And we will continue to be disciplined.
And so when you look at M&A opportunities actually always have been.
I'll, just say that current valuations that we're seeing and the market are quite high.
Early.
Our trading quite extensively right now, we we can pay anywhere near some of those.
Valuations for Rhode Island, and we continue to think and Rhode Island assets.
Paul will drive value.
And our shareowners and that'll be earnings accretive.
On credit accretive and value accretive for our share on Michelle again from our perspective and maintain discipline is incredibly important and will continue.
Got it and that to paraphrase it sounds like your organic capex opportunities.
The best use of the residual cash flows versus coming out and doing something inorganic and and this.
It's kind of a market.
Well again, I would say never say never but.
It's not impossible and create value at these valuations, but it's it's tough so we will continue to look at.
And opportunities strategic opportunities that again, maintaining that discipline.
As we think about capital deployment opportunities organically as I talked about but also share buybacks as well.
Got it and then just lastly from me then what is the boards.
<unk> mean for maybe the timing of the dividend adjustment and just remind us on the targeted payout range and the long term. Thank you.
Yes, so we'll come out with the dividend guidance and.
And all of that once we close the Rhode Island and transaction.
Right at that point and time will be able to come out with our earnings guidance with a growth rate and narrowed the range on the growth rate for earnings as we've indicated we expect once we adjust the.
The dividend 2 to a targeted payout of around 60% to 65%.
We would expect to be able to grow that going forward in line with with our earnings and and all of that will be.
And communicated once we close on that.
Yes.
Perfect. Thanks, a lot and congrats on the execution and I'll pass it to someone else. Thank you.
Thanks, John.
And our next question today comes from they're going to show growth with Evercore ISI. Please go ahead.
Hey, good morning, Dave and thanks for the update today, maybe just going back to the use of proceeds.
And.
Can you just talk about what other things the press release day assays winters like the.
Opportunities organically.
With your current assets, maybe can you just elaborate on them, where do you see those opportunities, Pennsylvania, Kentucky, Rhode Island, all 3 maybe just a little bit more color.
Yes, yes, yes, I think we see opportunity across the entire portfolio and once we acquire Rhode Island of course.
We need to get through the regulatory process and Rhode Island, we will be meeting with.
With.
With the governor and the legislature out there as well as the commission and the regulatory bodies on putting together what.
We think the best investment plan moving forward for Rhode Island will abate and we've talked about.
The.
The clean energy aspiration that the state has the other.
And quite aggressive when you when you compare them to 2 other states, which we completely.
And I think we can support with what we've been able to accomplish and Pennsylvania and be able to replicate that day or so.
I think for us free cash, it's really about working with.
The state stakeholders and identify how quickly they want and move on that and then.
How quickly can we deploy our operating model and.
And Keith and affordable for our customers and so we see tremendous opportunity up there, but that's something that we'll be working on lumps and closed the deal.
Having said that I think we see continued opportunities and vault and Pennsylvania, and Kentucky to continue too.
And bring those utilities along to the utility of the future curve and.
Continuing to make investments and <unk>.
And Kentucky as well so those are those are the activities, we're going through right now over the summer and William.
And positioned to communicate that again.
Rhode Island deal closes and we come out on the whole story.
Got it looks like looks like.
And opportunities throughout your sort of existing platform.
And then maybe just I'm curious a 500 million this.
This year and <unk>.
Share buybacks Wi $500 million.
Yes, we just thought that it.
Struck a nice balance in terms of deploying the proceeds and inefficient manner do some buybacks and also provide us.
With the financial flexibility to continue to assess alternatives against further by that.
So we just felt that that was a nice balance cash.
And again, well and we'll continue to look at the other opportunities.
Between now and certainly closing the deal flow potentially moving after that.
Got it Okay, and then just to be clear like you had roughly between $1 billion and proceeds left after dinner and damn good acquisition. So with the 500 million share back you would have roughly 3 billion and excess cash can be deployed is that is that correct.
No I think it's closer to 2 to 2 and a half done.
Right after the liability management.
And about and the buybacks subject so after that day by hockey on right.
Excluding the liability Matt.
So 2.2 to 2 and a half.
Right Okay.
Okay. Thank you very much.
And our next question today comes from Ryan Greenwald.
Please go ahead.
Hey, guys, it's Julian on.
Thanks again for the moment here.
If I can go back and clarify the last couple of questions here just on timing just to make sure we heard you right.
Clearly you specifically designated and half a billion for 'twenty, 1 or at least the balance of the year here as well as as you think about the next few months are you should start to get some clarity on the Capex right. So when you think about that available capital here it really youre going to get the clarity of what is sort of critical and remaining in the not too distant future.
And I just want to make sure at least from a visibility capital available visibility perspective, Youll know pretty soon.
I mean, certainly we'll we'll be working that through the summer and through the business planning process.
Julien right.
And of course need to <unk>.
Take all of that to the board and all of that approved and so in terms of.
Publicly being able to disclose and announce that.
And I'm still I think that that will coincide with.
And the closing of the deal.
If that happens before our year end on.
Earnings call as you know, we normally would provide and update on the capital plans at our year end call.
If the deal goes beyond <unk>.
Year end call day.
Certainly we would expect to provide that update that but again if the deal closes prior to the call I think you could expect it in concert with the deal announcement and.
Coming out with a new story of steel.
Got it and just to clarify here I mean, how do you think a rank transmission assets versus distribution versus other assets.
Types I know, we've talked about and as before but obviously the market's been fairly volatile and obviously your comments really elevated across a number of these asset classes. So curious if that has.
Driven any rethink.
As well as our you opened a minority ownership and and assets I suspect that.
Equally robust in terms of valuations, but just figured I would throw it out there.
So T vs D versus other.
On transmission.
Well first of all we think.
As long as the capital deployment.
Serves our customers well and is providing value to our customers.
And we think.
And that's a good use of capital across all of the business segments and returns are still strong and all 3.
Oh really transmission and distribution cost per generation down and.
And Kentucky, as well as gas, but transmission and still has.
Slightly higher Roe and.
And distributions, but again, we're not straying from our <unk>.
And ability to finance capital perspective, so it's on.
Right.
And whether we're going to do transmission versus distribution.
Got it and and last 1 just to clarify. This you obviously went through your portfolio just now on the call a little bit, but the Kentucky power Mitchell update here.
Any read throughs at all to your planning just just want to make sure.
Okay.
Yeah.
Okay, all right excellent. Thank you all very much all the best and.
Look forward to seeing what you have to say.
Sure. Thanks Julie.
And our next question today comes from Paul Patterson with 1 rock Associates. Please go ahead.
Hey, good morning.
Hey, Paul.
Just first of all on Rhode Island, do we have a procedural schedule and I haven't been able to locate 1 I was just wondering do we have a do you guys have been and key dates.
On.
Coming up here in Rhode Island.
We do not.
Innovation has not yet put out the procedural schedule, Paul Youre, not youre not missing it.
Okay.
And then just finally on the.
On the VIP aims.
And your discussion on the call about technology and the need to sort of find affordable solutions and wondering if you could just elaborate a little bit further on this I mean, the the $50 million investment.
Is that in this zone.
Is that all and the elevate fund and and just how should we think about the the accounting on this are you guys going to be expensing. This we're capitalizing it or.
How do we think about that.
Sure so the non Paul going in the elevate fund it is across multiple funds.
And that are driving really the some other funds are focused on utility and the future.
And innovation in that space Smart technologies and others.
Sure.
Their focus on de Carbonization technologies.
EPS or energy storage or things like that so really it cuts across multiple funds within the IP platform.
And from our from our perspective on the bench.
And on that Paul is that we get.
And not only has VIP demonstrated positive returns and the funding.
Which takes what traditionally would be a cost center for our company with R&D efforts and potentially turn that into neutral too.
On a positive return.
Really the strategic value of getting and there is that we and we get board seats. So we have visibility into the technologies that are encouraging and and all of these different areas as we think about potential for demonstration projects for <unk>.
Just where we think the next breakthrough and technology will come whether that's on carbon capture or energy storage and long duration storage technologies.
Various different areas that we're looking at as we think about getting to net zero for predominantly and a fleet but.
Economy wide.
So this should we think about this as being a primary vehicle for looking at technology.
Emerging technology, R&D or you mentioned and some other things on that I apologize, but it was slightly distracted when you were talking about it.
You mentioned I think equity and some other things I mean is there are you looking for additional investments in this area or I mean, how should we just.
Just wondering how much of and initiatives you are putting into this and.
And also if theres any particular technology.
And that's are you, finding particularly interesting and exciting.
Well I would say that VIP is part of it I wouldn't say, it's necessarily the primary R&D Avenue that certainly is.
As part of our strategy here and you talked about.
And the low carbon resources initiatives. So I've just recently taken over.
The board working group chair role periphery and so.
Integrally involved with.
And the expertise and equity and looking at various different technologies.
Again as it relates to carbon capture.
New nuclear hydrogen and ammonia.
All different.
And then on types of de Carbonization technology and.
<unk> is focused on what what are the technology breakthroughs.
And that are currently being the technologies emerging technologies that are currently being looked at.
But there are also assessing.
Alternatives to those and then identify and demonstration projects down the road to try and commercialized.
Some of these newer technologies and so we are actively engaged with them on all of that depending on.
How those things evolve.
Other its hydrogen for storage or even hydrogen blending for gas ldcs are combined cycle generation and Theres a ways to go and I think to prove all that out for hydrogen, but theres a lot of work and a lot of activity going on there a carbon capture sequestration continues to be and area again about 80% of the <unk>.
World Energy is coming from fossil fuel sales sales force for the growth to get to net zero and at some point.
Thank carbon capture will have to play a role and that and so after you're spending some time on that as well.
And again nuclear looking at different forms of nuclear.
Modular units et cetera can also play a role.
But we're making those units smaller and more adaptable so a lot of things going on there Paul.
I think we're on.
Our strategy is to make sure that we keep our finger on the pulse there again, it will be will be retiring coal plants.
This decade and next.
And so could there be potential opportunities for demonstration projects on time on those plants.
Work with the state to see if theres opportunities there as we think about again triple counting 2 which went in service and 2011 and so.
On last things change at the federal level.
Where that plant.
And we will be forced to be shut our current projection is that it will continue to be economic.
And 2050, and so identifying these technological advancements to <unk>.
It drives specifically that plant and net zero.
But again youre going to have a combined cycle fleet debt.
Our part of the transition strategy that as you heard on me and Mike.
So again.
We play a role I think items. So it's basically a finger on the pulse kind of thing is how we should think about this as opposed to feeling that we're gonna see impacting earnings in any significant way.
The next few years is that probably the best way to think about it yes.
Yes, I think so certainly in the near term okay.
And I do appreciate it thanks, so much.
Sure.
And ladies and gentlemen, as a reminder to ask a question. Please press Star then 1 on <unk>.
Question comes from Steve Fleishman with Wolfe Research. Please go ahead.
Okay.
Hi, good morning. Thanks.
And so just and thinking about I.
I guess 2 things 1 is.
And thinking about the potential for more.
Organic capital plan.
You have this multiyear deal that you just did and Kentucky, and so I'm just kind of curious.
And the regulatory mechanisms you have to kind of recover.
And increase in Capex, if that happens over this period and then secondly.
The.
How long are you willing to hold.
And sometimes it's hard to kind of raise capex total like later in the plan.
And you have this money upfront and then.
Actually if you turn it into an actual rate base number 2 and a half billion is 5 billion and rate base. It's a lot of rate base. So.
How should we think about.
And how long you are willing to wait.
To put the money to work.
Hmm.
Speak here.
Sure.
So I think the maybe I'll answer your second question first again.
Don't want to put on.
Hey.
And artificial timeline on.
On the use of proceeds right. So the first step I think is getting through the.
And the detailed process of identifying and the organic growth opportunities and putting those plans together and to your point and when do they get staged and in terms of 'twenty 2 maybe vs.
Potential.
Moving into the back part of the 5 year plan and I think even beyond that.
So I would just say where the first step is to get through that and then.
We will assess the timing of when that cash is needed and then see exactly how much.
Is really fitting into the scenario and what youre talking about.
In terms of the mechanisms and while we're staying out first of all I would just say that.
Again and in Pennsylvania, we've been very successful at.
Growing our rate base and our earnings despite staying on rate cases and.
We haven't had a distribution rate case since January 1.2016.
But over that time and I think.
And this is just distribution.
And we've grown our rate base, 67% CAGR over that time period and our net.
Net income CAGR has pretty much.
On.
Stayed in line with that rate base growth and the way that debt.
You are able to do that is obviously, we have some some mechanisms within the different jurisdictions that.
And that reduce regulatory lag, whether it's the desk and PAA or the ECR and gasoline and tracker in Kentucky and of course, we have some in Rhode Island as well around capital planning.
But also when you deploy.
On the capital and.
In many cases, you will see operational efficiencies as a result, and so those operational efficiencies can drive the return on that capital lease and what youre staying on our rate cases.
I will say and then are we don't think the right answer just because we're staying out of rate cases is not to invest and the networks.
Incredibly important and we continue to reinvest and networks and then making sure that we do that and a way.
That drives efficiency for our customers and drives our return on what we're staying out.
We have experience and San Francis actually on that and Pennsylvania, So we'll look to replicate that but.
Just because we're standing out and we don't think that that means that there won't be right based on our earnings growth and opportunity.
Great. Thank you.
Sure.
And ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to the management team and for any final remarks.
Great. Thanks to everybody for your participation. Thanks for your questions.
Have a great day and look forward to the next time, we get and Kevin. Thanks, So much.
And thank you Sir This concludes today's conference call and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.