Q3 2021 PPL Corp Earnings Call
Good morning, and welcome to the P. P. L Corporation third quarter earnings Conference all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be an opportunity to ask questions.
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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.
Thank you.
Good morning, everyone and thank you for joining the P. P. L conference call on third quarter 2021 financial results.
Provided slides for this presentation and our earnings release issued this morning on the investors section of our website.
Before we get started.
Draw your attention to slide two and a brief cautionary statement.
Our presentation and earnings release, which we will discuss during today's call.
Any forward looking statements about future operating results and 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.
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 Doug can 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 third quarter Investor update.
Moving to slide three the agenda for todays call.
I'll begin this morning with an update on the progress we continue to make in advancing our strategic repositioning.
I'll also share some current initiatives underway to advance Ppl's clean energy strategy and provide a brief operational and regulatory update.
Joe will then provide a financial update including a detailed review of third quarter financial results.
As always we'll leave ample time for your questions.
Turning to slide four.
We continue to make excellent progress on our key initiatives to strategically reposition PPL for long term growth and success.
In September we received FERC approval for our planned acquisition of Narragansett electric.
With <unk> approval, we now have four of the five approvals necessary to close on the transaction.
We continue to make progress on securing the final approval from the Rhode Island Division of public utilities and carriers.
And its procedural schedule. The division has established February 25th is the target date for a decision.
This would put PPL and national grid on a path to close on the transaction by March of next year as originally expected.
We've included a slide with the division's procedural schedule in the appendix of today's presentation.
As we pursue the final regulatory approval, we continue working closely with national grid on planning to ensure a smooth transition for Rhode Island customers and Narragansett employees upon closing.
Together, we've collaborated through 30 functional integration teams to plan and execute a safe effective and minimally disruptive transition of the Rhode Island operations.
These teams have built robust day, one integration plans to execute on identified business requirements.
Drafted transition service agreements that will be key to providing a stable seamless transition for customers.
Redesigned critical business processes to enable the TSA is to effectively operate.
Designed to new Rhode Island, operating model and organization from the ground up with over 1100 national grid employees accepting employment offers pending the close of the transaction.
We've initiated an integrated change management and communication strategy to engage our future employees customers and Rhode Island stakeholders to begin to build relationships for the long term.
And all three labor unions have ratified there new contracts that will be effective under ppl's ownership.
As we work to secure final approval.
Look forward to partnering with the talented team in Rhode Island to deliver safe reliable affordable and sustainable energy.
And we are very excited about the opportunity the acquisition presents to build one of the nation's most advanced clean energy, enabling grids in support of Rhode island's ambitious de carbonization goals.
Finally on this slide I'm excited to highlight a new valuable addition to Ppl's board of directors Heather retina.
Heather is the co founder and managing partner of flying fish partners, a venture capital firm that invests in early stage artificial intelligence and machine learning startups, including energy related applications.
She brings expertise in disruptive technologies industry transformation energy development in energy technology at a time when PPL is squarely focused on driving innovation and positioning our company for growth in the clean energy transition.
I am confident that Heather will be a fantastic addition to our diverse and experienced board.
With Heathers addition, our board now has 10 directors.
60% of whom are diverse and.
And 30% of whom are women.
Turning to slide five.
And advancing our strategic repositioning we also continue to make progress in deploying proceeds from the sale of our UK assets to maximize shareowner value.
And while we recognize cash is fungible.
We are showing the major buckets for the use of proceeds on this slide and today, we've announced two updates.
First as we continue to develop our business plans.
Identified at least $1 billion in incremental capital investments in Pennsylvania, and Kentucky to 2025.
To support grid resilience and modernization and advance a sustainable energy future for our customers.
Yes identified capex opportunities predominantly in the T&D areas include continued application of smart grid technologies, which improve overall system reliability and reduce O&M costs at the same time.
It also includes further hardening of the system to support reliability and resilience in the face of more frequent and stronger storms.
We will look to make these same types of investments in Rhode Island once we close the transaction.
And work with Rhode Island stakeholders on the pace of change to the clean energy economy in the state keeping in mind the cost impacts for customers.
In addition to our updates on Capex opportunities.
We've also revised our expectations for share repurchases and have allocated an additional 500 million to buybacks.
We now expect to repurchase a total of approximately $1 billion of PPL common stock by yearend.
Effectively doubling the amount previously announced on our Q2 call.
We've already completed $550 million in share repurchases through October 31.
We're pleased about the progress we've made in evaluating our capital plans and look forward to sharing additional details at an analyst day following the closing of the Narragansett acquisition.
In the meantime, we will continue to review our business plans for additional opportunities that will drive value for both customers and shareowners.
We are also providing an update on the timing of an expected change to ppl's dividend and reiterate the planned dividend policy. Following the closing of the Narragansett acquisition.
The dividend has and will remain an important part of Ppl's total shareowner return proposition.
Given the procedural schedule in place for the required regulatory approval in Rhode Island, we.
We expect to maintain the current quarterly dividend rate through the January <unk> 2022 payments.
After that date, we plan to realign the dividend targeting a payout ratio of 60% to 65% of the reposition PPL earnings as previously communicated.
The final decision regarding the dividend will be made by the board of directors after the Narragansett closings.
Moving to slide six.
We continue to advance our clean energy strategy as we pursue our goal of net zero carbon emissions by 2050.
In October our Kentucky utilities filed renewable power purchase agreements with the Kentucky Public Service Commission to provide.
A combined 125 megawatts of solar power to five major customers.
Under the 20 year agreements, which will support customer participation in LG <unk> Green tariff.
<unk> and Ku will procure 100% of the power from the new solar facility that will be built in western Kentucky.
The agreements reflect our continued efforts to support the growth of renewable energy and economic development in the state.
And another notable third quarter development, we announced in September that we've joined an expanding coalition of U S utilities committed to supporting the growth of electric vehicles as we seek additional opportunities to enable third party de carbonization.
The electric Highway coalition will focus on development of our seamless network of rapid electric vehicle charging stations connecting major highway systems from the northeast to the Midwest down to Texas.
Our goal is to create convenient options for long distance travel to reduce ranging value for consumers.
We also continue to expand investments in R&D needed to achieve net zero.
Our Kentucky utilities recently announced a partnership to study the capture of carbon dioxide emissions.
The partnership with the University of Kentucky Center for applied energy research or care.
We will seek to develop cost effective scalable technology to capture carbon dioxide from a natural gas combined cycle plant.
We will be working with care and using the carbon capture infrastructure, we've already built at our Brown coal facility in 2014 to.
To stimulate emissions from our natural gas plant.
The project will also support a study aimed at direct air capture of Cotwo potentially.
Potentially creating a negative emissions power plant.
In addition to capturing Cotwo the system aims to produce two value added streams hydrogen and oxygen that can be sold to offset the cost of capturing and storing the C O two.
Additional partners in this R&D initiative include Vanderbilt University.
And apprehend GTI to their low carbon resources initiatives.
The carbon capture unit, we've built at the Brown plant is one of only a few carbon capture systems in operation today at power plants in the United States.
Furthering our R&D related efforts PPL recently acquired an ownership interest in the Sioux Green projects.
350 mile underground transmission project that seeks to connect the MISO and PJM power markets and support growing demand for clean energy.
We recognize that expanding the nation's transmission grid will be critical to connecting more wind and solar power and reducing greenhouse gas emissions.
Breaking through siting permitting and other barriers to build this transmission quickly and cost effectively will be key.
Two green seeks to tackle these challenges by developing high voltage transmission lines underground along major rail corridors.
<unk> investment in the Green project will enable us to gain valuable insight into this innovative approach.
We look forward to lending our capabilities in transmission expertise to support this project success.
Turning to slide seven.
On October 19th LGD Ku submitted their triangle joint integrated resource plan to the Kentucky Public Service Commission.
The AARP provides the commission with information regarding our potential generation sources over the next 15 years to.
To meet forecasted energy demand in our lease cost manner.
The AARP is submitted for informational purposes and represents a moment in time look at ongoing resource planning using current business assumptions and long term forecast.
<unk> 2021, ERP projects, a significant reduction in calls contribution to our generation mix.
Declining from over 80% of the expected electricity produced in 2021.
About half of the total power produced in 2036.
And our base case scenario for load and fuel prices.
We show the retirement of nearly 2000 megawatts of coal capacity as we economically advance our clean energy transition.
These projected retirements are consistent with the depreciation study filed in our last rate case as.
As well as the estimates used in developing our net zero goal announced last quarter.
The AARP based demand and base fuel price scenario envisions solar power, playing a growing role in meeting our customers' demand for energy over the next 15 years accounting for nearly 20% of all the power we supply to our Kentucky customers by 2036.
This scenario shows an additional 2100 megawatts of solar combined.
Combined with 200 megawatts of battery storage, along with simple cycle gas units needed for reliability purposes by the end of the planning period to replace that 2000 megawatts of expected coal plant retirements.
We've also added a high case scenario to this slide which reflects the implications of higher demand and higher fuel prices due to several factors.
Under the high case scenario, we would expect there to be significantly more energy needed by 2036, requiring additional capacity.
Based on our assumptions that would primarily be met with an additional 5500 megawatts of incremental renewable and storage resources above the base case scenario through that time period.
Further that would result in more than twice as much output from renewable resources by 2036.
Collecting approximately 40% of generation output, primarily replacing natural gas from the base case scenario.
We've provided a slide in the appendix of today's presentation that outlines the differences in the assumptions for the base and high case scenarios.
We expect the next IRB, which will be filed in 2024.
To be an extremely important plan based on the current timing of our next coal plant retirements, which are expected to begin again in 2024.
Moving to slide eight.
On August 20th of PPL Electric utilities announced a constructive settlement with an alliance of industrial and municipal customers that had challenged the company's FERC approved base transmission return on equity.
The settlement, which must be approved by FERC.
With change PPL Electric's base ROE from 11, 8% to.
To nine 9% from May 2020 to May 2022.
With the rate stepping up to 10% by June 2023.
The settlement also updates the equity component of PPL Electric's capital structure to be the lower of its actual equity component calculated in accordance with the formula rate template or 56%.
The settlement also allows PPL electric to modify the current formula rate, which is based on a historic test year and move the company to a projected rate year.
Further ppl's formula rate could also be modified to be based on the calendar year moving forward.
Rather than the current rate year that begins June one.
We expect these changes to help reduce regulatory lag as we continue to make additional investments in transmission infrastructure.
Overall, the settlement is expected to reduce net income by approximately $25 million to $30 million per year.
The details of the FERC transmission ROE settlement are included in the appendix of today's presentation.
And other operational developments, our utilities continued to be recognized for our award winning customer service and innovation.
PPL electric utilities, and Kentucky utilities, where once again listed as two of the most trusted utility brands in the United States.
Based on a recent study performed by human behavior firm escalate.
The results of the study showed that communications played a vital role in building brand trust between utilities and our customers in 2020 during the pandemic.
It was the third consecutive year PPL electric received this recognition and the second consecutive year for Kentucky utilities.
Also the association of Edison illuminating companies selected PPL electric utilities as a winter of one of their 2021 achievement awards for Revolutionary work and vegetation management.
Trees are a common cause of outages.
Within PPL electric utility service territory, it's estimated that about a third of distribution outages over the past five years were caused by trees contacting overhead wires.
By using a new approach that leverages data analytics and other new technologies.
Electric utilities found ways to trim and remove the right trees at the right times across 28000 miles of overhead lines to.
To help prevent outages.
This has led to improved reliability, despite an increase in more severe weather without increasing overall vegetation management costs.
Additionally, public utilities fortnightly has named PPL electric utilities is a top innovator for 2021.
Thanks to its industry, leading use of dynamic line rating or DLR technology on its transmission lines.
By using smart sensors that collect real time information like wind speed and lying temperature operators can relieve transmission congestion and increase the electricity sent over those lines.
PPL electric utilities has been recognized for its leading edge approach to integrating DLR into core operations.
And using data from the centers to make prudent investment decisions.
And finally, we continue our efforts to support economic development in the regions we serve.
One recent major development in this area is sports announcement of plans to construct a $6 billion electric battery complex within our LGD and Ku service territory.
It is one of if not the largest economic development announcement in Kentucky history, and will have far reaching positive impacts on communities around the Commonwealth.
In fact 2021 has been a record year for Kentucky in terms of economic development growth with over $10 billion in new investments being announced within the state.
Other recent developments in addition to Ford's announcement include a $460 million investment by Toyota.
And a $450 million investment by GE at its appliance park in Louisville.
These decisions exemplify the strengths that Kentucky has to offer large industrial customers.
Specifically, we are known for exceptional reliability to deliver energy 24 hours a day 365 days a year.
Further we have some of the lowest retail rates in the country and important characteristic for large industrial customers and something we remain keenly focused on maintaining.
Kentucky also has the third lowest business costs in the country and is home to three global shipping hubs.
And our Kentucky service territories are located in a centralized region that is well protected from intensifying coastal storms and other natural disasters.
We are excited to support the energy needs of these developments and their perspective impact on our surrounding communities.
Before we move to the next slide in the broader context I would also note that Kentucky Governor Andy per share in the state's office of energy policy.
Unveiled a new energy strategy on October 20th called EQT.
This strategy considers three he's has key pillars to the strategic vision of a resilient economy in the state.
Energy the environment and economic development.
And this strategy aligns very well with Ppl's clean energy transition strategy.
We're encouraged by several areas included in the strategy, where our utilities will play a vital role and we expect will provide future opportunities.
Including ensuring a transmission grid that supports growing renewable resources.
Ensuring electric distribution grid that is self healing self sufficient and auto sensing.
Supporting a diversified energy supply that as fuel secure sustainable and resilient.
Incentivising sustainable business investments, including hydrogen and other renewable fuels.
Supporting the development of carbon capture utilization and sequestration industries and supporting alternative fuel transportation infrastructure.
<unk> and Ku participated in working groups associated with affordability and economic development in the lead up to the state announcing its strategy.
We believe the strategic framework represents a comprehensive approach to positioning Kentucky for success in a changing energy landscape.
We look forward to engaging with the Kentucky administration and other stakeholders as the state further develops its strategy to support sustainability.
<unk> competitiveness and spur job growth and innovation in local and regional economies.
I'll now turn the call over to Joe for the financial update Jeff.
Thanks, Vince and good morning, everyone.
Let's turn to slide nine.
Today, we announced third quarter reported earnings of 27 per share.
This reflects special items of <unk> <unk> per share primarily.
Related to losses on the early extinguishment of debt associated with the recapitalization of the balance sheet post the sale of W. P D.
Adjusting for special items third quarter earnings from ongoing operations were 36 per share compared with 30 per share a year ago.
Our third quarter results brings our year to date earnings from ongoing operations to <unk> 83 per share.
Details on our year to date earnings are available in the appendix to today's presentation.
Now, let's move to slide 10 for a more detailed look at our third quarter segment results.
Our Pennsylvania regulated segment recorded 16 cents per share for the third quarter.
Which was <unk> <unk> per share lower compared to a year ago.
The decrease was primarily due to higher operation and maintenance expense, primarily related to higher storm and support costs and.
And a reserve recorded for a reduction to the return on equity and the transmission formula rate.
Partially offsetting these items were returns on additional capital investments in transmission.
Turning to our Kentucky regulated segment.
Third quarter results were <unk> 21 per share a <unk> <unk> per share increase compared to Q3 2020 results.
The increase was primarily driven by higher base retail rates effective July one.
And lower interest expense, primarily due to interest costs that were previously allocated to the Kentucky regulated segment.
Partially offsetting this increase was higher operation and maintenance expense.
To support and generation related cost factors, there were not individually significant.
Results at corporate and other were a loss of <unk> <unk> per share, which was <unk> <unk> higher compared to a year ago.
The increase was primarily driven by lower interest expense due to less outstanding long term holding company debt.
That concludes my prepared remarks, and I'll turn the call back over to Vince.
Thank you Joe in summary, as we work to complete our strategic repositioning I remain incredibly excited about our future. We continue to build momentum throughout 2021 and executing our strategic objectives.
And I am confident we will emerge from our transformation, a leading U S energy company stronger more agile and better positioned to advance the clean energy transition to.
To deliver utilities, so the future and to drive long term value for all of our stakeholders.
With that operator, let's open the call for questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the Q2.
Your question. Please press Star then two.
Our first question today comes from Shar <unk> with Guggenheim partners.
Hey, guys.
Yes sure.
Just a couple.
Questions here, Vince how should we think about the allocation of that $1 billion in new Capex, both geographic and shaping overtime and will you be able to guide on Rhode Island Capex right out of the gate in February and March when the deal closes or whether it needs to be.
A bit more time to get your plan in motion.
Yeah, I'll have I'll have Greg talk about where we're seeing the $1 billion.
That we've identified to date and again, we continue to review the business plans and so.
As we put on the slide we think.
That will come in at about $1 billion to $2 billion as we finalize the plans on the on the Rhode Island signed Char I. Thank you.
Hitting the nail right on the head that that's an area, where I think we will have.
Pretty good sense.
And what the opportunity is in Rhode Island, as we think about.
The clean energy transition on what we've done in Pennsylvania.
Bringing that grid to Rhode Island to support the renewable ambitions within the state of course, there's going to be offshore wind opportunities that we need to get ready for as well as <unk>.
Significant DPR in the state. There's also a lot of transmission opportunity. So there I think we'll have a pretty good sense of what needs to be done the question will be.
And we will have to work with the state on how quickly.
They want to get too to the new clean energy transition.
Especially keeping just keeping rates in check which of course, we do across all of our jurisdictions. So I think.
It's probably a little premature to provide too much detail on that right now but.
Qualitatively I would say I think we'll have a pretty good sense of.
The opportunity when it happens we will need to engage with the state but.
Greg do you want to touch on the 1 billion that we've already identified yeah sure Vince So from a high level that 1 billion is split between Pennsylvania, and Kentucky and the focus is on grid modernization automation resiliency hardening projects.
As well as projects to enable more.
In renewables on our grid I would also add that we anticipate.
Technology related spend within this period of time.
As far as the shaping.
I would say at a high level at this point, we're still working through the plan on that but it's probably going to be fairly level across the.
Our next five years.
Got it that's helpful. And then just lastly, the board is obviously allocated.
Significant amount of the remaining W. P. D proceeds to buybacks, obviously, you're talking about another $1 billion of Capex from two utilities is that incremental upside from from Rhode Island.
You just get a refresh on how you and the border thinking through maybe the remaining unallocated portion between more capex your buybacks in light of kind of where the stock trades.
Our organic moves still a possibility Vince what's the timing of how you and the board may allocate more thanks again.
Yes, sure did you say organic or inorganic moves.
Well I guess inorganic.
I just wanted to make sure I heard your question properly.
So.
Look I would I would say in general as we think about the capital allocation investing in the utilities.
As is our is our priority and our bias, especially as we try to.
Make sure that we're delivering the grid set of our customers need as we as we look at the transition to a clean energy future. So.
So being able to fund that in a way that.
Requires little to no equity issuances over the foreseeable future.
It's incredibly important to us which is.
Really how Joe and the team identified the.
Right the $3 5 billion of debt that we bought down with part of the proceeds and getting the balance sheet in that position, where we can fund not only this billion, but even incremental capital to your point.
With Rhode Island, and other potential opportunities that we may identify without issuing equity. So that's kind of the first.
Component of that in terms of the stock buybacks themselves.
We're looking at that versus.
Other potential opportunities.
And you mentioned inorganic.
Talked about last quarter, we don't need.
M&A to hit.
The growth profile that we've communicated of course, we will be opportunistic.
As we always have been with M&A.
But our I would say our focus in the M&A area right now Shar is too.
Those Rhode Island get the integration.
Underway and really ensure that we have a smooth transition there and then as we've talked about before and working with the state on the pace of change.
For the clean energy transition up in Rhode Island, and then making sure that we're supporting that with.
With the capital investment plans so.
Our focus I would say on M&A right now is squarely on that.
But as I always say you never say never if there is an opportunity that presents itself that we think would create incremental shareholder value above our organic growth plans.
Certainly it's something that we would we would.
Consider as we've done in the past, but it's not the core of our strategy right now.
That's perfect I appreciate it seems like you guys are.
Tightening up that gap between rate base and earnings Thats. Good. Thank you appreciate it.
Alright. Thanks.
Our next question comes from Paul Zimbardo with Bank of America.
Hey, good morning good.
Good morning.
Thank you for the time either of.
Two part question just to clarify slide five.
Should we be adjusting that utility capex category for effectively 50% equity content or just kind of a way that you built and balance sheet strength.
It also has it also effectively a toggle that for every incremental dollar of utility capex it reduces buyback capacity.
Yes, Joe wants to talk about how are you.
We're thinking about that yes, so so paul.
Clearly, what we announced today was a $1 billion.
Total buybacks by year end at least the $1 billion of incremental capital investments in.
We've identified some more potential beyond that but we need to continue the analysis and work through the the.
The business plan. The range that you have you see on that slide are really just to provide some context to you on the remaining proceeds in those buckets and so as we think about cash and the use of that cash theres other considerations that we have.
Think about credit timing of that spend regulatory mechanisms.
Broader efficiencies across the larger domestic platform and all of that will go into our full plan. So I think once.
We will be in a better position post the close of Narragansett to discuss the additional details, including how we deploy that remaining proceeds and what falls into each of those buckets.
Okay.
Yeah.
And then you mentioned the incremental capital primarily transmission and distribution just wondering if you could frame the Kentucky generation opportunity through <unk>.
<unk> 2026, and 2031 from the <unk> base case at present.
Sure so for.
Through 2028, I would say.
Certainly through 'twenty, four which is our which is our next projected coal plant retirement, we don't think.
We require.
Significant if any replacement generation.
For our 24 retirement, so really the reserve margins start to tighten.
When we start to get into the 22008 timeframe.
And so as you can see in the.
On slide 18, which is the IOP megawatts that were talking about under the base case and then the high case.
Over the 15 year period, which is really where again, it's post 28 when you see.
More significant.
<unk> and then ultimate replacement for the increase in energy that we're projecting both in the base case and then in the high case.
So we're thinking in the base case, theres, probably around $3 billion of investment.
Opportunity over that 15 year period.
Significantly more in the high case, obviously youre seeing.
50, 650 ish 5600 additional megawatts.
Significantly more renewables in that case and so.
So the investment opportunity under the high case would be.
Call it around $10 billion.
Plus or minus so that's a significant opportunity.
As we I should clarify that like the board announcement and some of the other announcements I talked about we're.
We're not necessarily in the base case.
They don't necessarily get us to the high case.
As again the high case has easy.
EV assumptions and electric heat assumptions very high gas prices over the sustained period. So obviously all of that is still.
Still to be determined, but I would say the positive thing with the board and the other announcements I talked about at least on the major new customer additions were certainly trending towards the high case.
Versus the base case, so the investment opportunity call it.
Three to 10 billion, depending on the cases.
Not a significant amount in the next five years you might start to see some in 2026 as we plan for the 2028 retirements.
But it's really I would say just following that time period is when you'll see more significant investment.
Okay. Thank you that's very helpful plus a Florida comment looking for continue all virtually next week hopefully in person next year. Thanks again.
Alright. Thanks.
Our next question comes from Doug <unk> Chopra with Evercore ISI.
Andrew.
Hey, good morning.
I had one question all of the other stuff has been.
And you answered those just previously you've highlighted sort of a.
Potential perspective range of EPS growth trajectory, comparing sort of PPL is forward looking.
My name is growth rate to peers I mean, obviously you know you.
Talked about the additional equity share buybacks.
Capex line is higher just.
Can you share your thoughts there.
On what my bet trajectory like the range that EPS growth might.
Bollinger.
Yes, I would just reiterate I think what we've talked about in the past so.
We said, we expect to have a competitive <unk>.
<unk> growth rate off of our 22 mid point, when we come out with that and.
As you know that range is kind of in anywhere from 4% to 8%.
But.
But.
I would say most of the ranges within that or even tighter than the 5% to 7% range and so we would expect to be solidly in that range.
Okay. Thanks, and just really one quick one.
So but after this announcement of the 500 million here, an additional share buyback and the $1 billion in Capex, we're left with roughly $1 billion in proceeds that still need to be deployed is that accurate.
Yeah. So we increased the share repurchases from $500 billion to $1 billion.
And so it's that have a $1 billion last night.
With the $1 billion of capital Youre kind of around $1 billion round numbers, but.
But we'll continue to evaluate.
The use of that $1 billion.
More details will be.
After the close of Narragansett.
Excellent. Thanks, So one thing Joe I appreciate the time.
Sure. Thanks.
Our next question comes from Paul Patterson with Glen Rock Associates.
Hey, good morning.
Good morning, Paul.
No.
Wanted to ask you about the Green project.
What is the size of the investments that you guys are making in that.
Yeah, Paul we're not disclosing the investment but it's it's.
It is not significant this project and I'll, let <unk>.
Its mission and so.
For us it's not about the size of the investment it's for it's really a way for us to be part of an innovative project that hopefully can cut through some of those issues that we all know.
The plague.
Any transmission projects and so.
We're really trying to.
Our expertise to the project.
I hear you on that and in fact, I'm somewhat familiar with the project and it does sound sounds awesome frankly in terms of just what you talked about I mean, it sounds it sounds great that there are two issues.
I wanted to ask you about in terms of the project and that is there are these two complaints that they filed at FERC.
<unk> I think one is the PJM interconnection.
So in other words, just what you said the project sounds fascinating it's merchant its underground.
With everything you are talking about.
But they seem to be complaining, though about is that PJM has this.
Some impact still.
Stuff that.
That's delaying stuff as you know.
I mean this thing it could be up to three years and the other one is this capacity complaint that they've got.
About about how theyre going to be treated as an external resource.
In the capacity market and so my question I guess is with respect to those two because I assume you guys have done due diligence.
Even though it may not be that big a project and so you guys I would think.
More insight than I do.
How about what you think how you think those two complaints.
Full because it seems like they do have.
The potential to have a significant impact on the economics of the project or at least at the timing of the project.
And I've been following this case.
They've had testimony to go back and forth and what have you and I just was wondering if if.
If you guys had any.
Any.
Any insight in terms of how you guys are viewing.
Those complaints.
Regarding regarding those two issues the system impact study and I think its facility study one and two this external capacity treatment that there that they are seeking to get.
Yes, Greg I don't know if theres anything specific regarding those issues that you are willing and able to talk to yes, really not too much to talk about but I guess from a high level Paul.
For us too.
For the United States to really get too.
Being much more green and really reducing the carbon footprint.
Fair enough.
Yeah.
Hi.
This sounds like an exciting project I, just thought I thought I'd be able to pick your brain a little bit.
I appreciate the time and congratulations on the ROE settlement that seems like a pretty good deal you've got you guys negotiated there.
The Pennsylvania transmission or are we so so thats it for me. Thanks, so much.
Great. Thanks, Paul.
Our next question comes from Ryan Levine with Citi.
Good morning.
What's what's the average price of the $500 million share buyback to date that you were able to buy in shares.
Under 29 months.
Alright, great.
Yes.
And then as Youre looking at it you mentioned that you are moving towards the high case.
Kentucky.
From what Youre seeing is there a way to kind of quantify the load upside from the additional development within your service territory and are you seeing any early indications of what post COVID-19 load patterns are in your footprint.
Farm some of those days.
Yes, so just in general on the load I think what we're seeing.
Alright, so NPA.
We're.
We're seeing kind of C&I come back to pretty close to pre COVID-19 levels, they're a little bit short.
As you have.
Slides in the deck that show the load.
And Thats really things that youre seeing across the.
The country, so retail and hospitality those have not fully come back yet we're seeing the same same thing down in Kentucky on that with the commercial.
Industrial in Kentucky.
Of course, just a lot of the shutdown issues that we had.
During COVID-19, that's that's all recovered but with the ship.
<unk> shortages in some of the supply chain issues you were seeing.
Some of the factories being turned back so that's why a little bit.
Sure on the C&I side, and then on the residential.
We're just seeing in Pennsylvania, a lot more.
Workers are still working from home and what we're seeing in Kentucky. So for the most part Kentucky is back to pre Covid again, it's a little bit positive, but in Ta were still quite a bit positive so will.
We're still waiting to see how much of that remains permanent Ryan in terms of load in terms with hybrid work schedules and just more flexibility that that companies are providing their workforce. So.
I guess, our expectation would be that residential.
Stays slightly above.
That remains to be seen and then in terms of the announcements that we talked about.
Probably a little premature to talk about the low the exact load impacts on those and when they will come and when that will show up we really.
In the case of the Ford plant the final designs need to be.
Yes.
Prepared and released and so I think.
While certainly qualitatively this is positive for our jurisdiction in the state and.
In general and I think it will be.
We'll actually fuel additional announcements and opportunities for folks that want to come into the state again on top of the <unk>.
Energy strategy that the Governor announced I think this is this all bodes very well for.
Economic development opportunities within Kentucky, which I think qualitatively is good.
For our jurisdictions in our service areas, but.
Putting that into say a megawatt.
Of of load I think it's a little premature for that but as soon as we can do that we will.
We'll get that disclosure out.
I appreciate the color and then last one for me you mentioned some of them you highlighted some of the supply chain issues that are impacting some of the manufacturers in your service territory, but in terms of kind of implementation of the acceleration of Capex are you seeing.
Any limitations from supply chain that it could.
Kind of pace or change the pace of implementation of your some of your spending.
Yes, I'll, let Greg talk about that yeah, we're starting to see some extended lead times on some select material and equipment, but we've been able across our footprint to expand the supplier base and mitigate that to some degree, but we're really not experiencing.
Significant delays and current projects and don't expect.
And impact on our increased capital plan going forward.
I appreciate the color.
Okay.
Thanks, Brian.
Our next question comes from Steve Fleishman with Wolfe Research.
Hello, Good morning, Hey, Vince.
So couple of questions first of all.
You, obviously did not win AEP, Kentucky, nor do I know if you even bid for it so.
Just in terms of kind of your thinking on.
Assets.
Could you maybe just.
It's just a good way to maybe kind of talk about.
Why that wasn't something that.
You were interested in.
Yes, Steve I don't think its appropriate to talk about.
Specific M&A opportunities in the market.
Or even hypotheticals for that for that matter. So I would just say.
On the M&A front, we're focused on Rhode Island, and getting that not only just completed but then.
The transition to happen in a very smooth way and then.
Off the TSA and get fully under our ownership so that's where our focus is.
Okay.
Secondly, just going back to that slide five.
I'm just trying to make sure I understand what you are.
Showing here.
So the additional utility capex.
That's an asset number that's not an equity number only half of that would be equity. So.
Roughly so just.
Im not sure Youre actually using all $10 4 billion of cash proceeds when you do.
This stuff up then.
How do I interpret.
Because it kind of mixing asset with equity.
Yes, I'll, let I'll, let Joe talk to them so.
So I understand the premise of your question Steven.
Similar Paul's question earlier.
But you need to you need to factor in the full transition of the company and the balance sheet. After the sale of W. P. D. So.
If you think about the use of proceeds you need.
We need to consider the financial strength that provides the ability to execute a more robust business plan without any equity needs.
Returning capital to shareowners to the buyback of course.
Acquisition of Narragansett, but really at this point, we have not finalized our business plans. So in the interim we're trying to provide you some broad buckets of the opportunities that we have until we complete the acquisition of Narragansett and are able to provide you a full forecast so I kind of get your question, but we need to get through the full price.
<unk>.
Think about Rhode Island, and the plan.
Paul.
Options of opportunities.
<unk> laid out for you a little bit of color.
What we're trying to give you were trying to give you some incremental data here until we can get to that point, but Steve I think to your point I think to your point and just.
Solidify what Joe's, saying, so when we look at that one to 2 billion and this is kind of to your point I think.
We can fund that.
That range without additional equity going forward so absolutely.
And that I think that variety of tier that's kind of to your point I think.
Kind of.
Yes.
Another way to ask a question the question is.
I think you targeted your debt pay down is this to pretty strong.
Hi, Triple B metrics.
Hum.
For the amount of debt pay down so you have a lot of debt paydown.
Then the.
The investment of the additional equity.
Proceeds you got kind of feathers in over time.
So you.
If you use 22 as a base.
Youre, not really kind of putting all this money to work.
And it makes it like almost like a little bit of a.
Not really the base in a way.
So in theory, if youre growing the same as other utilities off that base like you should be growing just because you haven't put a lot of your money to work yet or something some chunk of your money.
Back to work.
I'm just trying to think about.
If youre going to base the growth off of 'twenty two.
Not really.
New base.
Yeah.
Well certainly we're putting we'll put the money to work on the acquisition of of Narragansett. The buybacks are our competitor buyback.
And the debt reductions complete so.
It's significantly behind us and so if you think about the opportunity I don't know there is different than any other utility that has a forward capital plan that.
That hasnt hasnt deployed the capital yet so I do think it is the base.
We have transition.
TSA and other costs that are in there that are a little different but as far as utilizing the proceeds I expect that the lion's share of those would be utilized by the time, we get to the close of.
Of Narragansett and provide a forecast in a base here and a growth rate.
Okay.
Fair enough. Thank you.
Thanks Robert.
Yeah.
Our next question comes from Anthony <unk> with Mizuho.
Hey, good afternoon, Vince good afternoon, Joe.
Hey, Anthony how are you.
Good Vince this may be a year of 6% to I know it's early though.
Yes.
If I could follow up on Steves question I apologize for going back to slide five.
If I just think about that slide and the additional Capex you announced today $1 billion in their share buybacks totaled $1 billion a year. What's left of the proceeds is $700 million am I thinking of that correctly.
Yes, that's correct yep.
So then.
Do you have.
The ability to do $2 billion of share buybacks, if what's left is $700 million.
Yes, I think I think we do but again with the intent of this page was to get broad buckets of how we're thinking about the opportunity with the proceeds and so I think this is al.
What kind of questions could get back to the same point I have to reiterate that we're not through with our business plan. Yet. So we're we're trying to provide some level of detail.
To you in the interim as we think about this and we work through the plans putting the.
Vince talked about this putting those proceeds if you will to the capital.
We think there's a better use of that capital ultimately too.
The work that we need to do on the system.
Provide the network of customers need and do it in an affordable way, so, but we're not done and we just need to work through the before of the plan.
Okay.
I'm not just thinking like share buyback, even if you had an incremental utility capex up to $2 billion. Another 1 billion. So you got the two.
You hit that too that would be greater than the proceeds to 10 four is that accurate.
Yeah, but but but again the balance sheet is set up so that we can fund.
Our capex growth.
Alright without without issuing equity so the balance sheet is strong enough to fund all of that.
Anthony.
Got it and then just last question I guess one of the earlier questions I think talked about maybe the timing of the incremental Capex I think it's split evenly between.
Pennsylvania and Kentucky.
It just.
Talked about thinking about getting that capex into rates I believe in Kentucky you.
You did have a stay out for a couple of years.
Just talk about how do you get that additional capex into rates.
Yes.
I think Greg said it was.
Relatively evenly split across the years not between.
P J in Kentucky, I think this.
Initial billions, we've identified is actually more.
Weighted to Pennsylvania than it is Kentucky.
Great.
Thanks, So much for taking my question guys and looking forward to seeing that.
Great. Thanks. Thanks.
This concludes our question and answer session I would like to turn the call back over to Vince for some closing remarks.
Great just want to thank everyone for joining us on the call and we're looking forward to engaging with everybody next week at EI. So thanks everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.