Q1 2024 PPL Corp Earnings Call
Operator: Good day, and welcome to the PPO Corporation First Quarter 2024 Earnings Conference 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 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, today's event is being recorded. I'd now like to turn the conference over to Andy Ludwig, Vice President, Investor Relations. Please go ahead.
Good day and welcome to the P. P O Corporation first quarter 2024 earnings Conference call.
All participants will be in listen only mode.
Operator: Should you need assistance, please save only conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Operator: Please note today's event is being recorded.
I'd now like to turn the conference over to Andy Ludwig Vice President of Investor Relations. Please go ahead. Good morning, everyone and thank you for joining the P. P. L conference call on first quarter 'twenty 'twenty four financial results we.
Andrew Ludwig: Good morning, everyone, and thank you for joining the PPL conference call on first quarter 2024 financial results. We have provided slides for this presentation in the investor section of our website. We will begin today's call with updates from Vince Sorgi, PPL President and CEO, and Joe Bergstein, Chief Financial Officer, and conclude with a Q&A session following our prepared remarks.
Andrew Ludwig: We have provided slides for this presentation on the investors section of our website.
Andrew Ludwig: Begin today's call with updates from Vince Sorgi, PPL, President and CEO.
Andrew Ludwig: And Joe Bergstein, Chief Financial Officer and.
Andrew Ludwig: And conclude with a Q&A session following our prepared remarks.
Andrew Ludwig: Before we get started, I'll draw your attention to slide two and a brief cautionary story. Our presentation today contains forward-looking statements about future operating results or other future events. Actual results may differ materially from these forward-looking statements. Please refer to the appendix of this presentation and PPL's SEC filings for a discussion of some of the factors that could cause actual results to differ from the forward-looking statements. We will also refer to non-GAAP measures, including earnings from ongoing operations or ongoing earnings on them. For reconciliations to the Comfortable Gap Measures, please refer to the. I'll now turn the call over to Vincent.
Speaker Change: Before we get started I'll draw your attention to slide two in our brief cautionary statement.
Vincent: Our presentation today contains forward looking statements about future operating results or other future events.
Andrew Ludwig: Actual results may differ materially from these forward looking statements.
Andrew Ludwig: 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.
Vincent: We will also refer to non-GAAP measures, including earnings from ongoing operations or ongoing earnings on this call.
Andrew Ludwig: A reconciliation to the comparable GAAP measures please refer to the appendix.
Andrew Ludwig: I'll now turn the call over to Vince.
Vincent Sorgi: Thank you, Andy, and good morning, everyone. Welcome to our First Quarter Investor Update. Let's start with our financial results and a few highlights from the quarter on slide four. Today we reported first quarter gap earnings of $0.42 per share. Adjusting for Special Items, first quarter earnings from ongoing operations were $0.54 per share, representing a 12.5% increase over ongoing earnings of $0.48 per share a year ago.
Vincent: Thank you Andy and good morning, everyone.
Vincent Sorgi: Welcome to our first quarter Investor update.
Vincent Sorgi: This increase was supported by additional returns on capital investments and higher sales volumes as we saw milder weather last year compared to this year. Looking ahead, we remain confident in our ability to deliver on our 2024 ongoing earnings forecast of $1.63 to $1.75 per share with a midpoint of $1.69 per share. We are also on track to complete approximately $3.1 billion in infrastructure improvements this year to strengthen grid reliability and resiliency and advance a cleaner energy mix without compromising on affordability for our customers.
Vincent Sorgi: Let's start with our financial results and a few highlights from the quarter on slide four.
Vincent Sorgi: Today, we reported first quarter GAAP earnings of 42 cents per share.
Vincent Sorgi: Adjusting for special items first.
Vincent Sorgi: First quarter earnings from ongoing operations were <unk> 54 cents per share representing a 12, 5% increase over ongoing earnings of 48 cents per share a year ago.
Vincent Sorgi: This increase was supported by additional returns on capital investments and higher sales volumes as we saw milder weather last year compared to this year.
Vincent Sorgi: Looking ahead, we remain confident in our ability to deliver on our 2020 for ongoing earnings forecast of $1 63 to $1 75 per share with a midpoint of $1 69 per share.
Vincent Sorgi: We are also on track to complete approximately $3 $1 billion in infrastructure improvements this year.
Vincent Sorgi: To strengthen grid reliability, and resiliency and advance a cleaner energy mix without compromising on affordability for our customers.
Vincent Sorgi: At the same time, we remain confident in our long-term business plan as we execute our strategy to create the utilities of the future. We're well positioned to achieve our projected 6 to 8% annual earnings per share and dividend growth through at least 2027.
Andrew Ludwig: At the same time, we remain confident in our long term business plan.
Vincent Sorgi: As we execute our strategy to create the utilities in the future.
Andrew Ludwig: We're well positioned to achieve our projected 6% to 8% annual earnings per share and dividend growth through at least 2027.
Vincent Sorgi: As we outlined in February, our capital plan includes $14.3 billion in infrastructure improvements from 2024 to 2027. And across PPL, we continue to drive greater efficiency through our utility of the future strategy to help keep energy affordable for our customers. With this in mind, we're on pace to achieve our annual O&M savings target of at least $175 million by 2026. Moving to slide five, with an operational and regulatory update. We were pleased to secure positive outcomes in our second annual Infrastructure Safety and Reliability, or ISR, proceedings before the Rhode Island PUC.
Andrew Ludwig: As we outlined in February our capital plan includes $14 $3 billion in infrastructure improvements from 2024 to 2027.
Andrew Ludwig: And across P. P. L. We continue to drive greater efficiency to our utility of the future strategy to help keep energy affordable for our customers.
Vincent Sorgi: With this in mind, we're on pace to achieve our annual O&M savings target of at least $175 million by 2026.
Andrew Ludwig: Moving to slide five with an operational and regulatory update.
Andrew Ludwig: We were pleased to secure a positive outcomes in our second annual infrastructure safety and reliability or ISR proceedings before the Rhode Island PUC.
Vincent Sorgi: ISR plans are submitted annually in Rhode Island and outline proposed capital investments and related operating costs to strengthen the safety, reliability, and resiliency of our electric and gas distribution network. The plans approved this March address Rhode Island Energy's proposed spending from April 1st, 2024 to March 31st, 2025. In its decision, the PUC unanimously approved $326 million in planned spending and investment.
Vincent Sorgi: ISR plants are submitted annually in Rhode Island.
Vincent Sorgi: And outlined proposed capital investments and related operating costs to strength in safety reliability, and resiliency of our electric and gas distribution networks.
Andrew Ludwig: The plant's prove this March address Rhode Island Energy's proposed spending from April one 2024 to March 31 2025.
Andrew Ludwig: In its decision the PUC unanimously approved $326 million in planned spending and investment.
Vincent Sorgi: This includes approximately $300 million in capital investment, including $132 million for electric and $168 million for gas, and $26 million in operating costs for vegetation management, restoration paving on gas main replacement projects, system inspections, and other work. These investments are critical to maintaining and improving the safety and reliability of electricity and gas service for our customers in Rhode Island and will help to enable the clean energy transition in the state. Shifting to Pennsylvania.
Andrew Ludwig: This includes approximately $300 million in capital investments.
Andrew Ludwig: Including 132 million for electric and 168 million for gas.
Andrew Ludwig: And $26 million in operating costs for vegetation management restoration paving on gas main replacement projects.
Vincent Sorgi: Some inspections and other work.
Andrew Ludwig: These investments are critical to maintaining and improving the safety and reliability of electricity and gas service for our customers in Rhode Island.
Vincent Sorgi: And it will help to enable the clean energy transition in the state.
Andrew Ludwig: Shifting to Pennsylvania.
Vincent Sorgi: Last week, PPL Electric Utilities filed a petition with the Pennsylvania PUC to raise the company's distribution system improvement charge (DISC) cap from 5% to 9% of distribution revenues for bills rendered on or after January 1, 2025. The DISC accelerates the repair and replacement of aging infrastructure by allowing utilities to recover the costs of investments in eligible property. As we confront more frequent and powerful storms and aging infrastructure, we believe an increase is needed to maintain and improve reliability moving forward. We expect minimal impact on customer bills because of this change, and we look forward to engaging with the Commission as it considers our request. We expect a decision on this petition by year-end.
Andrew Ludwig: Last week PPL electric utilities filed a petition with the Pennsylvania PUC to raise the company's distribution system improvement charge cap from 5% to 9% of distribution revenues for bills rendered on or after January one 2025.
Vincent Sorgi: The desk accelerates the repair and replacement of aging infrastructure by allowing utilities to recover the cost of investments in eligible property.
Vincent Sorgi: As we confront more frequent and powerful storms and aging infrastructure. We believe an increase is needed to maintain and improve reliability moving forward.
Vincent Sorgi: We expect minimal impact to customer bills because of this change and we look forward to engaging with the commission as they consider our request we expect a decision on this petition by year end.
Vincent Sorgi: KPL Electric Utilities also recently filed its latest default service plan with the PAPU. The plan, which was filed in Q1, reflects our strong focus on energy affordability and outlines the company's strategy to procure generation supply for customers who don't choose a third-party energy supplier to best support our customers. The proposed plan includes modifications to lessen price volatility, improve affordability, support resource adequacy, and foster the growth and development of renewable generation in Pennsylvania. During the planned design, CPL Electric leveraged data analytics to optimize the proposed procurement strategy for affordability.
Vincent Sorgi: PPL Electric utilities also recently filed its latest default service plan with the PUC.
Vincent Sorgi: The plan, which was filed in Q1 reflects.
Vincent Sorgi: Our strong focus on energy affordability and outlines the company's strategy to procure generation supply our customers, who don't use a third party energy supplier.
Vincent Sorgi: To best support our customers. The proposed plan includes modifications to lessen price volatility.
Vincent Sorgi: Prove affordability support resource adequacy, and fosters the growth and development of renewable generation in Pennsylvania.
Vincent Sorgi: During the planned design PPL electric leverage data analytics to optimize the proposed procurement strategy for affordability.
Vincent Sorgi: We expect the modifications to result in lower supply costs for our customers during the term of the plan, which is from June 1, 2025 through May 31st, 2029. We expect a decision on this plan from the PAPUC by year-end as well. Moving to slide six.
Andrew Ludwig: We expect the modifications to result in lower supply cost for our customers. During the term of the plan, which is from June one 2025 through May 31 2029.
Vincent Sorgi: We expect a decision from the P. A P C. At this plan by year end as well.
Vincent Sorgi: Moving to slide six.
Vincent Sorgi: We continue to advance plans to support prospective data center development in both Pennsylvania and Kentucky. As we work with data center companies, we feel we are very well positioned to serve their needs for a variety of reasons. For starters, we have capacity on our grid such that the needed investment by the data centers is not too significant. This also enables connection to our grids in a timely manner, supporting their desired commercial operation date. In addition, our reliability is very strong, with top quartile reliability.
Vincent Sorgi: We continue to advance plans to support prospective data center development in both Pennsylvania and Kentucky.
Vincent Sorgi: As we work with data center companies, we feel we are very well positioned to serve their needs for a variety of reasons.
Vincent Sorgi: For starters, we have capacity on our grid such that the needed investment by the data centers is not too significant.
Vincent Sorgi: <unk> also enables connection to our grids in a timely manner supporting their desired commercial operation dates.
Vincent Sorgi: In addition, our reliability is very strong with top quartile reliability.
Vincent Sorgi: Our states also have an abundance of reasonably priced land available for these data sets. Furthermore, we are close to large metropolitan markets in New England and the Mid-Atlantic regions. And finally, we have programs in both states that provide incentives for data centers to locate in our service. Our current business plan does not reflect investments or load related to these large data center projects, so any meaningful deployment in this space would represent upside to the plan.
Vincent Sorgi: Our states also have an abundance of reasonably priced land available for these data centers.
Vincent Sorgi: Further we are close to large metropolitan markets in new England and mid Atlantic regions.
Vincent Sorgi: And finally, we have programs in both states that provide incentives for datacenters to locate in our service territories.
Vincent Sorgi: Our current business plan does not reflect any investments or load related to these large datacenter projects. So any meaningful deployment in this space would represent upside to the plan.
Vincent Sorgi: In Pennsylvania, we continue to see record numbers of requests within our service, including some very large centers that are projecting more than a gigawatt of load at full capacity. We currently have approximately 3 gigawatts of data center demand in advanced stages. The potential upside for PPL comes in the form of additional required investments in transmission and returns on the related rate base through the deferred formula rate. Currently, we estimate that each data center would require, on average, $50 to $150 million of capital investment, and that's PPL's share, depending on the size, location, and specific needs of the data. As a sensitivity, every 125 million dollars of PPL investment would result in about a penny of EPS.
Vincent Sorgi: In Pennsylvania.
Vincent Sorgi: We continue to see record numbers of requests within our service territory, including some very large centers that are projecting more than a gigawatt of load at full capacity.
Vincent Sorgi: We currently have approximately three gigawatts of data center demand in advanced stages.
Vincent Sorgi: The potential upside for P. P. L comes in the form of additional required investments in transmission and returns on the related rate base through the FERC formula rate.
Vincent Sorgi: Currently we estimate that each datacenter would require on average $50 million to $150 million of capital investment and that's P. P L share depending.
Vincent Sorgi: Depending on the size location specific needs of the datacenter.
Vincent Sorgi: As a sensitivity a $125 million of P. P. L investment would result in about a penny of EPS.
Vincent Sorgi: And despite this added investment, we expect that our retail customers in Pennsylvania will benefit as well, as the transmission component of the bill will decrease as it is spread over increased loom and Ken Paqui. We are also actively working with several large data centers. The data centers we're currently seeing in Kentucky range between 300 and 500 megawatts. Like Pennsylvania, any transmission upgrades would be additive to our capital plan, although those would be more modest than the levels we are currently seeing in Pennsylvania due to the smaller size of the data center.
Vincent Sorgi: And despite this added investment we expect that our retail customers in Pennsylvania will benefit as well.
Vincent Sorgi: As the transmission component of the Bill will decrease as they are spread over increase load.
Vincent Sorgi: In Kentucky.
Vincent Sorgi: We are also actively working with several large data centers.
Vincent Sorgi: Data centers, we're currently seeing in Kentucky range between 305 hundred megawatts each.
Vincent Sorgi: Like Pennsylvania, any transmission upgrades would be additive to our capital plan, although those will be more modest than the levels. We are currently seeing in Pennsylvania due to the smaller size of the data centers.
Vincent Sorgi: The more significant upside potential from additional data center demand is due to the vertically integrated nature of our Kentucky business, as a significant ramp in electricity demand could also result in incremental generation needs in our service territory. Any additional generation investment would also represent upside to our current capital. From a timing perspective, based on our ongoing dialogue, we would expect to have a better sense of these opportunities in the latter half of the year and into 2025. Ultimately, data centers are key to American competitiveness and AI deployment moving forward, and we are actively engaged to support them. Moving to slide seven and some items on the horizon.
Vincent Sorgi: The more significant upside potential from additional datacenter demand is due to the vertically integrated nature of our Kentucky business as a significant ramp in electricity demand could also result in incremental generation needs in our service territory any.
Vincent Sorgi: Any additional generation investment would also represent upside to our current capital plan.
Vincent Sorgi: From a timing perspective based on our ongoing dialog we would expect to have a better sense of these opportunities in the latter half of the year and into 2025.
Vincent Sorgi: Ultimately datacenters are key to American competitiveness, and AI deployment moving forward and we are actively engaged to support their expansion.
Vincent Sorgi: Moving to slide seven and some items on the horizon.
Vincent Sorgi: On April 25th, the EPA announced a suite of final rules related to fossil fuel-fired power. The four rules announced are Section 111 of the Greenhouse Gas CO2 Standards, which require that all coal-fired plants and new baseload gas-fired plants control 90% of their carbon pollution via carbon capture technology or other means by 2032. The Affluent Limitation Guidelines, which establishes more stringent discharge standards for three different wastewaters generated at coal-fired plants, coal combustion residuals, which requires additional coal ash management for inactive CCR units which were formerly exempt, and the Mercury in Air Toxic Sanders Rule, or MAT, which tightens the emission standard for toxic metals by 67% and finalizes a 70% reduction in the emission standard for mercury from We expect these rules to be challenged by various parties and that it will likely take years to go through the legal process.
Vincent Sorgi: On April 25th EPA announced a suite of final rules related to fossil fuel fired power plants.
Vincent Sorgi: The four rules announced our section 111 greenhouse gas C O two standards, which requires that all coal fired plants and new baseload gas fired plants control, 90% of their carbon pollution via carbon capture technology or other means by 2032.
Vincent Sorgi: The affluent limitation guidelines, which establishes more stringent discharge standards for three different wastewater generated at coal fired plants.
Vincent Sorgi: The coal combustion residuals rule.
Vincent Sorgi: Which requires additional coal ash management for inactive CCR units, which were formally exempt.
Vincent Sorgi: And the Mercury and air toxic standards rule or mats.
Vincent Sorgi: Which tightens the emission standard for toxic metals by 67% and finalizes, a 70% reduction in the emission standard for Mercury from coal fired plants.
Vincent Sorgi: We expect these rules to be challenged by various parties and that it will likely take years to go through the legal process.
Vincent Sorgi: Should these rules be upheld in the courts, they could exacerbate the resource adequacy concerns in the 2030s while resulting in significant incremental environmental capital investments and or additional capital needs for generation replacement in the latter part of our planning period and beyond. These rules will also be considered in the request for proposal recently issued by LG&E and KU for Renewable Energy. The RFP is seeking to evaluate alternatives to procure a lease cost, long-term supply of renewable energy to serve our customers.
Vincent Sorgi: Should these rules be upheld in the courts, they could exacerbate the resource adequacy concerns in the 'twenty thirties, while resulting in significant incremental environmental capital investments and or additional capital needs for generation replacement in the latter part of our planning period and beyond.
Vincent Sorgi: These rules will also be considered in the request for proposal recently issued by LG and <unk> and Ku for renewable energy.
Vincent Sorgi: The RFP is seeking to evaluate alternatives to procure lease cost long term supply of renewable energy to serve our customers.
Vincent Sorgi: These potential additions would help to address load growth, diversification of the generation portfolio, and the newly issued EPA regulations. The proposals are due back by the end of the second quarter, and we expect to complete our review in the fourth quarter. Looking ahead in Kentucky, LG&E and KU expect to file their tri-annual integrated resource plan, a comprehensive review of electricity supply and demand within our service territories over a 15-year planning horizon, in the fourth quarter of this year.
Vincent Sorgi: These potential additions would help to address load growth diversification of the generation portfolio and the newly issued EPA regulations.
Vincent Sorgi: Poses are due back by the end of the second quarter and we expect to complete our review in the fourth quarter.
Vincent Sorgi: Looking ahead in Kentucky L. Genie K, you expect to file their triangle integrated resource plan in the fourth quarter of this year.
Vincent Sorgi: <unk> will be a comprehensive review of electricity supply and demand within our service territories over a 15 year planning horizon.
Vincent Sorgi: We'll also update our load forecast for our service territories, which will include updated assumptions for electrification, industrial growth, and potential data-centered development as well as any updates to energy efficiency. The supply forecast will include the results of our recently approved CPCN late last year to retire 600 megawatts of coal generation and replace that with a combination of efficient combined cycle natural gas, solar, and battery storage capacity. It will also include recommendations received from the KPSC during our last IRP, including updates to our demand-side management and energy efficiency programs, transmission needs, and recently issued environmental regulations. Following our IRP filing, we'll then conduct another climate assessment and expect to publish an updated report in 2025. That concludes my strategic and operational update. I'll now turn the call over to Joe for the financials.
Vincent Sorgi: We'll also update our load forecast for our service territories, which will include updated assumptions for electrification industrial growth and potential datacenter development as well as any updates to energy efficiency trends.
Joe: The supply forecast will include the results of our recently approved CPC and late last year to retire 600 megawatts of coal generation and replace that with a combination of efficient combined cycle natural gas solar and battery storage capacity.
Joe: It will also include recommendations received from the K P. S. C. During our last IRB filings, including updates to our demand side management and energy efficiency programs transmission needs and recently issued environmental regulations.
Joe: Following our IOP filing will then conduct another climate assessment and expect to publish an updated report in 2025.
Joe: That concludes my strategic and operational update.
Vincent Sorgi: Now I'll turn the call over to Joe for the financial update.
Joseph P. Bergstein: Thank you, Vince, and good morning, everyone. Let's turn to slide 9.
Joe: Thank you Vince and good morning, everyone, let's turn to slide nine.
Joseph P. Bergstein: PPL's first quarter gap earnings were $0.42 per share compared to $0.39 per share in Q1 2023. We recorded special items of 12 cents per share during the first quarter, primarily due to integration and related expenses associated with the acquisition of Rhode Island Energy. Adjusting for these special items, first quarter earnings from ongoing operations were $0.54 per share, an improvement of $0.06 per share compared to Q1 2023. The primary drivers of this increase were returns on capital investments, higher sales volumes, and lower operating costs partially offset by higher interest expenses.
Joe: <unk> first quarter GAAP earnings were <unk> 42 per share compared to 39 cents per share in Q1 2023.
Joseph P. Bergstein: We recorded special items of <unk> 12 per share during the first quarter, primarily due to integration and related expenses associated with the acquisition of Rhode Island Energy.
Joseph P. Bergstein: Adjusting for these special items first quarter earnings from ongoing operations were 54 per share an improvement of <unk> <unk> per share compared to Q1 2023.
Joseph P. Bergstein: The primary drivers of this increase were returns on capital investments higher sales volumes and lower operating costs, partially offset by higher interest expense.
Joseph P. Bergstein: Our solid first quarter results keep us on track to achieve at least the midpoint of our 2024 earnings forecast of $1.69 per share. During the quarter, we issued a combined $1.2 billion of debt in two separate offerings. We were focused on early execution of the financing plan, which allowed us to take advantage of rates lower than the current market and de-risk for the remainder of the year. In January, we issued $650 million of first mortgage bonds at PPL Electric Utilities at 4.85%.
Joseph P. Bergstein: Our solid first quarter results keep us on track to achieve at least the midpoint of our 2024 earnings forecast of $1 69 per share.
Joseph P. Bergstein: During the quarter, we issued a combined $1.2 billion of debt in two separate offerings.
Joseph P. Bergstein: We were focused on early execution of the financing plan, which allowed us to take advantage of rates lower than the current market and derisk for the remainder of the year.
Joseph P. Bergstein: In January we issued $650 million of first mortgage bonds at PPL electric utilities at 4.85%.
Joseph P. Bergstein: And in March, we issued $500 million of senior unsecured notes at Rhode Island Energy at 5.35%, which represented the first debt offering for Rhode Island Energy since our acquisition. We saw tremendous demand for both transactions and were able to execute them at efficient prices given the relative market conditions. BPL's balance sheet remains among the very best in our sector and provides the company with significant financial flexibility. We continue to project a 16-18% FFO to debt ratio throughout our planning period, maintaining a holding company to total debt ratio below 25 percent.
Joseph P. Bergstein: And in March we issued $500 million of senior unsecured notes, our Rhode Island energy at 5.35%, which represented the first debt offering for Rhode Island energy since our acquisition.
Joseph P. Bergstein: We saw a tremendous demand for both transactions and we're able to execute them at efficient prices given the relative market conditions.
Joseph P. Bergstein: <unk> balance sheet remains among the very best in our sector and provides the company with significant financial flexibility.
Joseph P. Bergstein: We continued to project, a 16% to 18% <unk> to debt ratio the router planning period.
Joseph P. Bergstein: Maintaining a holding company to total debt ratio below 25%.
Joseph P. Bergstein: As of the end of the first quarter, our floating rate debt exposure remains at just about 5%, and we have limited near-term refinancing risk. Finally, we remain uniquely positioned in the sector to continue to fund our growth without the need for equity throughout our planning period.
Joseph P. Bergstein: As of the end of the first quarter, our floating rate debt exposure remains at just about 5% and we have limited near term refinancing risk.
Joseph P. Bergstein: Finally, we remain uniquely positioned in the sector to continue to fund our growth without the need for equity throughout our planning period.
Joseph P. Bergstein: Turning to the ongoing segment drivers for the first quarter, on slide 10, our Kentucky segment results increased by 3 cents per share compared to the first quarter of 2023. The improvement in Kentucky's results was primarily driven by higher sales volumes, primarily due to the extremely mild weather experienced during the first quarter last year. Our Pennsylvania regulated segment results increased by three cents per share compared to the same period a year ago.
Joseph P. Bergstein: Turning to the ongoing segment drivers for the first quarter on slide 10.
Joseph P. Bergstein: Our Kentucky segment results increased by <unk> <unk> per share compared to the first quarter of 2023.
Joseph P. Bergstein: Proven and Kentucky's results was primarily driven by higher sales volumes, primarily due to the extremely mild weather experienced during the first quarter last year.
Joseph P. Bergstein: Our Pennsylvania regulated segment results increased by <unk> <unk> per share compared to the same period a year ago.
Joseph P. Bergstein: The increase was primarily driven by higher transmission revenue and lower operating costs. Rhode Island segment results increased by one cent per share compared to the same period a year ago. This increase was primarily driven by higher distribution revenue from capital investments, higher transmission revenue, and lower operating costs, partially offset by higher interest expense. Finally, results at corporate and other decreased by one cent per share compared to the prior period, primarily due to factors that were not individually significant. I am extremely pleased with our financial performance for the quarter as we continue to execute our plan.
Joseph P. Bergstein: The increase was primarily driven by higher transmission revenue and lower operating costs.
Joseph P. Bergstein: Our Rhode Island segment results increased by one cents per share compared to the same period a year ago.
Joseph P. Bergstein: This increase was primarily driven by higher distribution revenue from capital investments higher transmission revenue and lower operating costs, partially offset by higher interest expense.
Joseph P. Bergstein: Finally results of corporate and other decreased by one cents per share compared to the prior period, primarily due to factors that were not individually significant.
Joseph P. Bergstein: I'm extremely pleased with our financial performance for the quarter as we continued to execute our plan. This concludes my prepared remarks, I'll now turn the call back over to Vince.
Speaker Change: Thank you Joe.
Joseph P. Bergstein: In closing, our strong performance in the first quarter keeps us squarely on track to deliver on our 2024 commitments to ShareOwners. As we continue to execute our strategy of the future, we're well positioned to achieve or exceed the midpoint of our 2024 ongoing earnings guidance. We're off to a strong start in executing our capital plans, keeping us on track to invest $3.1 billion in infrastructure improvements this year. The newly issued EPA regulations, while they present some real reliability concerns for the industry, represent only further upside to our long-term outlook for the business.
Joseph P. Bergstein: In closing our strong performance in the first quarter keeps us squarely on track to deliver on our 2024 commitments to shareowners.
Joseph P. Bergstein: As we continue to execute our utility of the future strategy, we're well positioned to achieve or exceed the midpoint of our 2020 for ongoing earnings guidance.
Joseph P. Bergstein: We're off to a strong start in executing our capital plans keeping us on track to invest $3 $1 billion in infrastructure improvements this year.
Joseph P. Bergstein: The newly issued EPA regulations, while they present, some real reliability concerns for the industry represent only further upside to our long term outlook for the business.
Joseph P. Bergstein: We continue to make good progress in integrating Rhode Island energy into PPL, keeping us on pace to exit our remaining transition service agreements with National Grid this year. And finally, we remain laser focused on driving efficiency through our utility of the future strategy, centralization efforts, and asset optimization to keep energy affordable for our customers. All in all, we're well positioned to continue our strong track record of execution this year. And with that, Operator, let's open it up to questions.
Joseph P. Bergstein: We continue to make good progress in integrating Rhode Island energy into P. P. L. Keeping us on pace to exit our remaining transition service agreements with national grid. This year.
Joseph P. Bergstein: And finally, we remain laser focused on driving efficiency through our utility the future strategy centralization efforts and asset optimization to keep energy affordable for our customers.
Joseph P. Bergstein: All in all we are well positioned to continue our strong track record of execution this year and with that operator, let's open it up for questions.
Operator: Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the key.
Speaker Change: Thank you.
Joseph P. Bergstein: To ask a question. Please press Star then one on your telephone keypad.
Operator: If you are using a speaker phone we ask you. Please pickup your handset before pressing the keys.
Operator: To withdraw your question, please press star then 2. Once again, that's star number one if you have a question. And today's first question comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead.
Operator: To withdraw your question. Please press Star then two.
Shahriar Pourreza: Once again Thats Star then one.
Operator: Yeah.
Shahriar Pourreza: And today's first question comes from sharp Rosa with Guggenheim Partners. Please go ahead.
James Kennedy: Hey guys, good morning. It's actually James on, for sure.
Operator: Hey, guys. Good morning, it's actually James on for sure. Thanks for the time, Hey, Thanks, Good morning.
Vincent Sorgi: Thanks for the time. Hey James, good morning. Good morning.
James Kennedy: Maybe starting on the data center side, thanks for all the details on the backdrop across the two jurisdictions there. Can you just give us maybe a little bit more color on the timing of the spend for those three gigawatts in Pennsylvania as it relates kind of to the current plan through 27? And then, secondly, what kind of firm is that advanced stage at that point at this point for those guys?
Vincent Sorgi: Good morning.
James Kennedy: Maybe starting on the datacenter side. Thanks for all the details on the backdrop across the two jurisdictions. There can you just give us maybe a little bit more color on the timing of the spend for those three gigawatts in Pennsylvania.
James Kennedy: As it relates to the current plan through 2007, and then secondly, how kind of program is our advanced stages at that point at this point the logos.
Vincent Sorgi: Yeah, sure, James. So just in terms of firmness, we do have signed agreements for that 3 gigawatts, so continuing to work through the process with [inaudible]. These would be for in-service dates beginning in 2026. So, thanks, you know, 26, 27, 28. And then again, we would be making the bulk of our investments right in time for those initial in-service dates.
Speaker Change: Yeah sure James So just in terms of firmness, we do have.
Vincent Sorgi: Signed agreements for that three gigawatts.
Vincent Sorgi: So continuing to work through the process with <unk>.
Vincent Sorgi: Multiple data center companies would probably be in a position.
Vincent Sorgi: Or would not be in a position to make a public announcement either.
Vincent Sorgi: From them or us until kind of late this year early next year.
Vincent Sorgi: So still a little bit a bit have ways to go on these but we do have signed agreements with them all.
Vincent Sorgi: These would be for in service states beginning in 2026.
Vincent Sorgi: So thanks for that $26 28.
Vincent Sorgi: And then again, we would be making the bulk of our investments right in time for those initial in service dates.
James Kennedy: Okay got you.
James Kennedy: Okay, gotcha. And then, keeping it in Pennsylvania, if the DISC waiver process were unsuccessful, I guess, how would that impact the rate case cycle plan and any impact on the distribution spend plan as it's laid out today? Thanks.
Speaker Change: And then keeping it in Pennsylvania, if the disk waiver process were unsuccessful I guess, how would that impact the rate case cycle plan and any impact to the distribution spend plan as it's laid out today.
Joseph P. Bergstein: Yeah, James, this is Joe. First, it wouldn't impact our distribution capital plans. Those are necessary investments that we'll continue to make. What it would do is potentially impact the timing of our next rate case, although, you know, as we've said, no rate case in Pennsylvania this year or next, so the really likely timing could be as early as 26, but again, we'll have to see the outcome of that petition and what the Commission decides on that.
James Kennedy: Thanks.
James Kennedy: Yes, James this is Joe.
Joseph P. Bergstein: Firstly, it wouldn't impact our distribution capital plans those are necessary investments.
Joseph P. Bergstein: <unk> continued to make what it would do is potentially impact the timing of our next rate case, although.
Joseph P. Bergstein: As we've said no rate case in Pennsylvania. This year back so really likely timing could be as early as 2006, but again well see the outcome of that.
Joseph P. Bergstein: Oh that petition and what the commission decides on there.
James Kennedy: Perfect. Thanks, guys. Take care.
Speaker Change: Perfect. Thanks, guys take care.
James Kennedy: Thanks.
Operator: And as a reminder, ladies and gentlemen, if you'd like to ask a question, please press star then 1. Our next question comes from Durgesh Chopra with Evercore ISI.
Speaker Change: And as a reminder, ladies and gentlemen, if you wanted to ask a question. Please press Star then one.
Durgesh Chopra: Our next question comes from <unk> Chopra Evercore ISI. Please go ahead.
Durgesh Chopra: Hey team, good morning; thanks for giving me time. Hey, good morning, Vince.
Durgesh Chopra: Hey, Jim Good morning, Thanks for giving me time.
Durgesh Chopra: Just wondering if you guys.
Vincent Sorgi: Just on the data center topic, I know the opportunity set is in the transmission investment for you, but maybe can you help us kind of frame the question, is there new generation or additional generation attached to these contracts, if you can talk about that? And then secondly, you mentioned the 26 to 28 timeline. How are you thinking about the construction timeline and any sort of risks with approvals? I'm thinking FERC approvals or any other approvals that you may need to get the projects going.
Durgesh Chopra: Hey, good morning, Vince.
Durgesh Chopra: Just on the data center topic.
Vincent Sorgi: No the opportunity set is and the transmission investment for you or maybe can you help us kind of frame.
Vincent Sorgi: Frame is there a new new generation or additional generation attached.
Vincent Sorgi: Do these contracts.
Vincent Sorgi: If you can talk to that and then secondly, you mentioned 26 or 28 timeline. How are you thinking about that the construction timeline and any.
Vincent Sorgi: What sort of risks on approvals I'm thinking for approvals or any other approvals that you may you may you may need to get the the projects going.
Durgesh Chopra: Yeah, sure. The agreements that we've signed basically enable us to start the development work of the projects, and it would result in reimbursement back to the company should we not move forward with the data center. So, data center companies are really taking the risk on that. Overall, we feel good about our ability to get these projects approved through the regulatory process, but you're right, we do need to go through that process. But we are currently spending money on the development of the ones for which we at least have the signed agreements. We're starting those now to be ready for 2026, the initial service date.
Speaker Change: Yeah sure so.
Durgesh Chopra: The agreements that we've signed basically enable us to start the <unk>.
Durgesh Chopra: The development work.
Durgesh Chopra: Work on the projects and it would.
Durgesh Chopra: Salt in reimbursement back to the company should should we not move forward with the data center. So.
Durgesh Chopra: Data center companies are really taking the risk on that overall, we feel good about our ability to get these prop.
Durgesh Chopra: Projects approved through the regulatory process.
Durgesh Chopra: Youre right, we do need to go through that process, but we are we are currently.
Durgesh Chopra: Now spending money on the development for the ones that at least we have the signed agreements we're starting starting dose now.
Durgesh Chopra: To be ready for 2026.
Durgesh Chopra: The initial uncertainty.
Vincent Sorgi: On the generation side, so yeah, the investment opportunity is really twofold. In Pennsylvania, it's really just the T transmission investment that we need to make. These are large centers, so they're connecting to T. Again, we're in the $50 to $150 million per data center range. That's our share, so the data center is also picking up similar-sized investments on each of these. So that's kind of the investment opportunity in PA. Kentucky, again, not as big of data centers, at least the initial ones that we are engaged with there.
Durgesh Chopra: On the generation side.
Vincent Sorgi: So yes, the investment opportunity is really.
Vincent Sorgi: Two fold in in.
Vincent Sorgi: In Pennsylvania.
Vincent Sorgi: Really just the transmission investment that we need to make these are large centers, so they're connecting to tea.
Vincent Sorgi: Again, there were in the 50 to 150.
Vincent Sorgi: Per data center range.
Vincent Sorgi: That's our share so the data center is also picking up.
Vincent Sorgi: Similar sized investments on each of these.
Vincent Sorgi: So so that's kind of the investment opportunity in Kentucky.
Vincent Sorgi: Not as big of Datacenters or at least the initial ones that we are engaged with their set of investment opportunities are a little bit smaller around the $25 million to $75 million.
Vincent Sorgi: So the investment opportunities are a little bit smaller, around the 25 to 75 million per data center range there. But as your question kind of highlights, I think the biggest opportunity from an investment perspective is really the need for additional generation in Kentucky. Our current reserve margins are in the 23% range. We kind of target a 17 to 24% range down there with the solar projects that we have and that we're building. We would expect, absent anything else, to be a little bit over 25%.
Vincent Sorgi: Our data center a range there.
Vincent Sorgi: But as your question.
Vincent Sorgi: Kind of highlights I think the biggest opportunity from an investment perspective is really on the need for additional generation in Kentucky.
Vincent Sorgi: Our current reserve margins are in the 23% range.
Vincent Sorgi: We kind of target a 17% to 24%.
Vincent Sorgi: Range down there with the solar projects that we have and that we're building we would expect.
Vincent Sorgi: Absent anything else to be a little bit over 25%.
Vincent Sorgi: So, obviously, we keep all of this in mind as we put together the IRP, so we'll be updating our full load forecast, including potential data centers but all the other industrial load that's coming from economic development activities, but we also have to look at energy efficiency and DER and everything else that's a counterbalancing there, and then determine if we need additional generation. I will say, importantly, as we think about the possibility of needing to build a second combined cycle unit down there, whether it's for the data centers or just industrial growth in general, I think it's important to note that we do still have a spot in the queue for that second CCGT from our prior solicitation, so our ability to build that relatively quickly is there.
Vincent Sorgi: So obviously keeping all of this in mind as we put together the AARP. So we'll be updating our full load forecast, including potential data centers with all the other industrial loads that are coming from the economic development activity, but we also have to look at energy efficiency in the yard and everything else that.
Vincent Sorgi: That's a counterbalancing there and then and then determine if we need additional generation I will say importantly, as we think about the possibility of needing to build the second combined cycle unit down there.
Vincent Sorgi: Whether to the Datacenters or just industrial growth in general I think it's important to note that we do still have a spot in Q4 that second CGT from our prior solicitation. So.
Vincent Sorgi: Our ability to build that relatively quickly is there.
Durgesh Chopra: That's very, very helpful Vince, but can I just go back to Pennsylvania and the way you structure this transmission agreement? Is that tied to a new generation source? I know that's not an opportunity for you, but I'm just curious from a sort of Pennsylvania State perspective, supply and demand perspective: is that a new generation source, or are you basically getting power from an existing generation source? I don't know if that makes sense. Do you understand the question I'm asking?
Speaker Change: That's very very helpful. Vince, but can I just go back to Pennsylvania, and the way you structure. This transmission agreement.
Durgesh Chopra: Is that tied to a new generation source I know, that's not an opportunity for you, but I'm just curious from a sort of a Pennsylvania state perspective supply demand perspective is that a new generation source or are you basically getting power from an existing generation source I don't know that it makes sense do you get the question I'm asking you.
Vincent Sorgi: I do, yeah. It is not tied to any specific generation. So, you know, ultimately, the market through PJM and other means needs to continue to build new generations to keep up with this. But that will go through the general PJM process.
Vince: Yeah, it's not it is not tied to any specific generation. So.
Vincent Sorgi: Ultimately the market through to PJM and or other means needs too.
Vincent Sorgi: When you build new generation to keep up with this demand, but that that will go to the general PJM process.
Durgesh Chopra: Got it. That's perfect. And then just one quick one, and I'll get back in the queue. Is there a procedural schedule for the DSIC application, the raising of the cap, or any sort of specific timelines for us to watch?
Speaker Change: Got it.
Vincent Sorgi: That's perfect and then just one quick one and I'll get back into queue is there a procedural schedule on the basic application.
Durgesh Chopra: The raising cap or sort of specific timelines for us to watch.
Vincent Sorgi: There isn't one, although we do expect to basically have a decision on both the DISC waiver and the LTIP filing by the end of the year. So, in general, the LTIP takes about nine months, those types of filings, and we think it makes sense. Obviously, we requested the DISC decision to be before the end of the year so that we could apply it for 2025.
Durgesh Chopra: There is no although we do expect to.
Vincent Sorgi: To basically have a decision on it.
Vincent Sorgi: With this waiver and the SEC filings.
Vincent Sorgi: At the end of the year. So in general the Altair. It takes about nine months those types of filings.
Vincent Sorgi: And we think it makes sense, obviously, we requested the desk.
Vincent Sorgi: Session to be before the end of the year. So that we can apply for 2025.
Durgesh Chopra: Okay, thank you. I also want to echo James's thanks and comments on the data center information. Really helpful, and congrats on a great quarter here. Thank you again.
Speaker Change: Okay. Thank you I also want to Echo James is Oh, Thanks, and comments on the data center information really helpful and congrats on a great quarter here. Thank you again.
Speaker Change: Thanks again.
Operator: And our next question comes from Steve Fleischman with Wolf Research. Please go ahead.
Durgesh Chopra: And our next question comes from Steve Fleishman with Wolfe Research. Please go ahead.
Steven Isaac Fleishman: Good morning. Hey, good morning. Thanks. So, just to kind of... Because we're hearing a lot about data centers, could you give us any sense of just like how meaningful the deposits are for you to be pursuing this in terms of just the scheme of, scale up the whole thing? Just as it kind of helps to assess just the likelihood, I guess.
Steven Isaac Fleishman: Hey, Steve Good morning.
Steven Isaac Fleishman: Hey, good morning. Thanks.
Steven Isaac Fleishman: So just just to kind of because we're hearing a lot about data centers could you give us any sense of just how meaningful the deposits are for you to be pursuing this in terms of just the scheme of.
Steven Isaac Fleishman: Scale the whole thing.
Steven Isaac Fleishman: Just as he is kind of helps to assess just likelihood I guess.
Steven Isaac Fleishman: Yeah.
Vincent Sorgi: Yeah. So, I don't want to get into details about deposits or anything like that being made, although I will say the, you know, the agreement that we are, that we've signed in Pennsylvania, those agreements permit us to start spending on these and that we would get recovery of those for some reason if we don't move forward. So I think the seriousness of the counterparties is their seed, clearly. Right?
Speaker Change: So don't want to get into details around.
Vincent Sorgi: Like deposits or anything like that yet, although I will say.
Vincent Sorgi: Yes.
Vincent Sorgi: Agreement again that we are.
Vincent Sorgi: That we signed in Pennsylvania.
Vincent Sorgi: Those agreements permit.
Vincent Sorgi: To start spending on these you can.
Vincent Sorgi: Recovery of those for some reason.
Vincent Sorgi: We don't move forward. So I think the seriousness of the Counterparties is they are seeing clearly yes.
Steven Isaac Fleishman: And for all the reasons I talked about in my prepared remarks, I think we do bring a number of benefits to bear for these folks, not the least of which is not only our capacity to connect them but our ability to meet their in-service deadlines. So we can get work done in time for 2026 in service dates for these data centers. So as of right now, again, to your point, it's never done until it's done, and I appreciate that. But as of now, I'd be pretty disappointed if we didn't get at least one data center in our service territories. I would expect more than that.
Vincent Sorgi: Right and for all the reasons I talked about in my prepared remarks, I think you Brian.
Steven Isaac Fleishman: A number of benefits to bear for these folks.
Steven Isaac Fleishman: Uh huh.
Steven Isaac Fleishman: Not the least of which is not only our capacity.
Steven Isaac Fleishman: To connect to them, but our ability to meet their in service deadline. So we can we can get work done in time for 2026 service centers.
Steven Isaac Fleishman: As of right now.
Steven Isaac Fleishman: To your point, it's never done until it's done and I appreciate that.
Steven Isaac Fleishman: But as of now I'd be pretty disappointed if we didn't get at least one data.
Steven Isaac Fleishman: Data center in our service territories I would expect.
Steven Isaac Fleishman: Uh huh.
Steven Isaac Fleishman: Okay.
Vincent Sorgi: And then just in terms of, I mean, we're hearing Data Center growth in several other parts of the PJM market. And I'm just wondering, do you see the potential need for more transmission, not necessarily for your own data center but just for all this broader growth potential in PJM that could..., you know, create more need and, you know, obviously move power flows and the like. Any thoughts?
Steven Isaac Fleishman: And then just in terms of.
Vincent Sorgi: I mean, we're hearing a data center.
Vincent Sorgi: Growth in several other parts of the PJM market.
Vincent Sorgi: And I'm just wondering do you see do you see the potential need for more.
Vincent Sorgi: Transmission not for necessarily your own data center, but just for.
Vincent Sorgi: All of this broader growth potential in PJM that could.
Vincent Sorgi: You know create more data and you know obviously move.
Vincent Sorgi: Move power flows and the like any thoughts yeah, absolutely yeah, absolutely and you saw some of that we won.
Steven Isaac Fleishman: Yeah, absolutely. Yeah, absolutely. And you saw some of that, you know, we won, in a FERC 1000 process last year to build into the Dominion zone for some of the data center load down there. So yeah, to your point, depending on where these pockets set up, because generally... You know as we're talking with with these data center companies It's not necessarily just one and done if they can build one their their intention is to expand upon that And so I think you'll start to see these data center hubs start to get created around the country obviously, there's economies of scale if they're if they're kind of bundling together and to your point that creates a demand for transmission into those areas and Again in the Dominion zone, you know, we ended up winning It was like a hundred to one hundred fifty million dollar project to help handle that congestion.
Steven Isaac Fleishman: In our FERC 1000.
Steven Isaac Fleishman: <unk> last year to build into the Dominion zone or some of the data center down there so yes to your point.
Steven Isaac Fleishman: Depending on where these pockets setup is generally.
Steven Isaac Fleishman: We're talking with with these data center companies, it's not necessarily just one and done if they can build one there their intention is to expand upon that and so I think youll start to see these data center hubs start to get created around the country.
Steven Isaac Fleishman: Obviously theres economies of scale if there.
Steven Isaac Fleishman: If theyre kind of bundle them together and to your point that creates demand for transmission into those areas.
Steven Isaac Fleishman: Again in the Dominion Zone, we ended up winning and it was like $100 million to $150 million project to help handle that congestion so.
Steven Isaac Fleishman: So Yes, I do think that's continued opportunity indeed. Okay, then a different topic just in Pennsylvania on the disk waiver filing. Is this something that could be a settlable thing, or is this something really where the commission just needs to decide?
Speaker Change: Yes, I do think that's continued opportunities dnb.
Speaker Change: Okay, and then a different topic just in Pennsylvania on the on the desk waiver filing is this something that is something that could be.
Steven Isaac Fleishman: Ah settle bowl thing or is this something really where the commission just needs to.
Steven Isaac Fleishman: Syed.
Vincent Sorgi: Yeah, in general, certainly where we can engage with the commission, we end up with something in between.
Steven Isaac Fleishman: Yeah.
Steven Isaac Fleishman: In general certainly.
Vincent Sorgi: Where we can engage with the commission.
Vincent Sorgi: With something in between sure sure.
Vincent Sorgi: Okay.
Steven Isaac Fleishman: Great, thank you.
Speaker Change: Great. Thank you.
Steven Isaac Fleishman: Yeah.
Speaker Change: Great. Thank you.
Vincent Sorgi: And ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to Vincent Sorgi for closing remarks.
Steven Isaac Fleishman: This concludes the question and answer session Afirma conference back over to Vince Forlenza for closing remarks.
Vincent Sorgi: Thanks a lot. And I just want to thank everybody for joining us on today's call. I do want to remind everyone that this Saturday is the 150th running of the Kentucky Derby, which is the most exciting two minutes in sport. So enjoy the race, and we hope to see you soon. Thanks, everybody.
Vincent Sorgi: Thanks, a lot.
Vincent Sorgi: Just want to thank everybody.
Vincent Sorgi: For joining us on today's call I do want to remind everyone that this Saturday.
Vincent Sorgi: You have running of the Kentucky Derby, which are which is the most exciting two minutes and sports so enjoy the race and we hope to see some thanks everybody.
Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: Thank you this concludes today's.
Vincent Sorgi: The conference call. We thank you all for attending today's presentation.
Operator: You may now disconnect your lines and have a wonderful day.
Operator: Okay.
Operator: Yeah.
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Operator: Yeah.
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