PPL Q2 2022 Earnings Report

PPL EPS Results

• Actual EPS: $0.30
• Consensus EPS: $0.29
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

PPL Revenue Results

• Actual Revenue: $1.70 billion
• Expected Revenue: $1.43 billion
• Beat/Miss: Beat by +$264.21 million
• YoY Revenue Growth: N/A

PPL Announcement Details

• Quarter: Q2 2022
• Date: 8/3/2022
• Time: N/A
• Conference Call Date: Wednesday, August 3, 2022
• Conference Call Time: 12:25AM ET

PPL (NYSE:PPL) is an energy company that owns and operates electric transmission and distribution infrastructure and provides related customer services. The company’s core business centers on delivering electricity to residential, commercial and industrial customers through regulated utility operations, maintaining grid reliability, responding to outages and managing customer billing and account services.

PPL’s activities include construction and maintenance of distribution and transmission lines, meter and grid management, and programs to support energy efficiency and the interconnection of distributed resources. The company also invests in grid modernization initiatives—such as system hardening, automated outage restoration and technologies to accommodate renewables and distributed generation—to improve reliability and operational efficiency.

Headquartered in Allentown, Pennsylvania, PPL traces its roots to the region’s legacy electric utilities and has focused operations serving customers primarily in the United States, with an emphasis on regions where it maintains regulated utility franchises. As a regulated utility provider, the company operates within state and federal regulatory frameworks that shape rates, capital investment and service obligations.

PPL is managed as a utility-focused enterprise that balances investment in infrastructure and customer service with regulatory oversight. Its operations are oriented toward delivering reliable electricity and supporting transition efforts in the energy sector while complying with applicable environmental and safety standards.

PPL Q2 2022 Earnings Call Transcript

Key Takeaways

• PPL has completed the sale of its U.K. utility and the acquisition of Rhode Island Energy, creating a “compelling portfolio of domestic regulated utilities” and de-risking its business mix.
• Second-quarter adjusted earnings were $0.30/share (versus $0.19 last year), and PPL reaffirmed its full-year 2022 guidance of $1.30–$1.45/share, targeting 6–8% EPS and dividend growth through 2025.
• The company’s new plan focuses on $150 million of operational and shared-services savings by 2025—driven by replicating its Pennsylvania “playbook” in Kentucky and Rhode Island and centralizing IT and supply-chain functions.
• PPL envisions at least $27 billion of capital investment through 2030 (including a $12 billion five-year plan), with 55% of spend recovered via formula rates and riders to minimize regulatory lag and avoid equity issuances.
• In Kentucky, PPL plans to retire 1,000 MW of coal by 2028 (plus another 1,000 MW by 2035), has issued an RFP for replacement capacity (renewables, storage, gas) and is monitoring EPA rules that could accelerate ~500 MW of retirements.

Presentation

[Operator]

Good morning, and welcome to the PPL Corporation second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Andy Ludwig, VP Investor Relations. Please go ahead.

[Andy Ludwig, VP of Investor Relations at PPL Corporation]

Thank you. Good morning, everyone, and thank you for joining the PPL conference call on second quarter 2022 financial results. We've provided slides for this presentation in our earnings release issued this morning on the investor section of our website. We'll begin today's call with updates from Vince Sorgi, PPL President and CEO, and Joe Bergstein, Chief Financial Officer. Greg Dudkin, Chief Operating Officer, will also be available for the Q&A session following our prepared remarks. Before we get started, I'll draw your attention to slide two and a brief cautionary statement. 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.

[Andy Ludwig, VP of Investor Relations at PPL Corporation]

We will also refer to non-GAAP measures, including earnings from ongoing operations and adjusted gross margins on this call. For reconciliations to the comparable GAAP measures, please refer to the appendix. I'll now turn the call over to Vince.

[Vincent Sorgi, President and CEO at PPL Corporation]

Thank you, Andy, and good morning everyone. Welcome to our second quarter investor update. Turning to slide four. As we shared with you in June, we are extremely excited about PPL's compelling investment proposition, which is driven by our strategic repositioning. The completion of the sale of our U.K. utility business and acquisition of Rhode Island Energy has de-risked the company and created a compelling portfolio of domestic regulated utilities. Our company has one of the best operating track records in the industry. This operating expertise enables us to further optimize our new portfolio to deliver growth and create shareholder value. The result is a strategy and a new business plan that is anchored in operational efficiencies in the near term, with stronger rate-based growth driving our earnings growth later in the decade with a total capital investment need of at least $27 billion through 2030.

[Vincent Sorgi, President and CEO at PPL Corporation]

This strategy also keeps affordability front and center as we've committed to stay out of rate cases in Kentucky and Rhode Island until at least mid-2025. We expect our optimization strategy to deliver at least $150 million of O&M savings through 2025. I'll discuss these savings opportunities in more detail during today's presentation, but I want to emphasize that these optimization initiatives were the starting point for our new business plan. We believe this is an effective strategy for the company to manage risks associated with high inflation and high commodity costs, which have increased the cost of energy for our customers. At the same time, our plans support top-tier EPS and dividend growth of 6%-8% per year, with levers that mitigate risk and potentially provide upside.

[Vincent Sorgi, President and CEO at PPL Corporation]

These include incremental O&M savings above the targeted $150 million and higher sales growth relative to the assumptions that we modeled in our plan. We also developed the capital investment plans required to deliver a more reliable and resilient network and to advance a clean energy future for our customers while earning near our allowed returns by 2025. We see potential opportunities to invest more than our $12 billion capital plan over the next five years, with incremental upside opportunities stemming from the Federal Infrastructure Investment and Jobs Act, or the IIJA. Importantly, about 55% of our current five-year CapEx plan is expected to be recovered from riders and formula rates, significantly mitigating regulatory lag and supporting our credit metrics. This positions us to maintain a strong balance sheet, which will fuel organic growth without the need for equity issuances throughout our plan period.

[Vincent Sorgi, President and CEO at PPL Corporation]

We also have an opportunity to lead the clean energy transition as we move through the plan period and begin to make the necessary investments to effectively transition our coal-fired generation fleet in Kentucky. This is a massive opportunity for both customers and share owners and is a pivotal part of our broader clean energy strategy. In addition to delivering the utilities of the future, utilities that are designed to efficiently enable and manage distributed energy resources and large-scale renewables connected to our networks. We're on the leading edge of these efforts with the work we've done in Pennsylvania and are confident this proven strategy will continue to drive further savings and capital investment opportunities moving forward, even in Pennsylvania, where it is already well underway. We've combined this innovative approach with our culture of delivering operational excellence.

[Vincent Sorgi, President and CEO at PPL Corporation]

We have a superior track record, which we demonstrated with the Pennsylvania playbook slide on our Investor Day call. In summary, we're excited to translate our track record of best-in-class operational excellence into top-tier returns for our share owners. The actions we've taken over the past 18 months were designed to do just that, and I'm confident they will. We've hit the ground running with the new PPL. My team and I are ready and committed to deliver for our customers and our share owners. Turning to slide 5 and the highlights of our second quarter results. Today, we announced second quarter reported earnings of $0.16 per share. Adjusting for special items, second quarter earnings from ongoing operations were $0.30 per share, compared with $0.19 per share a year ago.

[Vincent Sorgi, President and CEO at PPL Corporation]

The strong second quarter earnings have us solidly on track to achieve the earnings guidance we shared during our Investor Day. Today, we reaffirmed our 2022 ongoing earnings forecast range of $1.30-1.45 per share with a midpoint of $1.37 per share. This forecast reflects a partial year estimate of contributions from Rhode Island Energy following our completion of the acquisition on 25th May. Today, we also reaffirmed our projected compound annual earnings per share and dividend growth rates of 6%-8% through at least 2025. Our per share growth target is based off the midpoint of our 2022 pro forma forecast range of $1.40-1.55 per share or $1.48 per share. The pro forma forecast range reflects a full year of earnings contributions from Rhode Island Energy.

[Vincent Sorgi, President and CEO at PPL Corporation]

In addition to delivering strong quarterly results, we've also been hard at work enabling the asset optimization and centralization plans that will drive our O&M savings targets. I'll discuss the details of these initiatives on the next slide. The final major highlight I'll note this morning is the RFP that LG&E and KU recently issued for replacement generation in Kentucky. As a reminder, companies expect to retire at least 1,000 MW of coal-fired generation by 2028. The RFP is open to a variety of generation sources, which I'll touch on further in a few minutes. Turning to slide six. As I mentioned, our strategy moving forward focuses on efficiency and affordability as we build the networks and make the investments necessary to deliver a clean energy future. Today, we're providing more detail on the savings opportunities that support our strategy.

[Vincent Sorgi, President and CEO at PPL Corporation]

We expect to deliver $50-60 million or about a third of the savings target in 2023. As our investments in technology take shape, we expect the savings to step up to a cumulative total of $120-130 million by the end of 2024, achieving the full $150 million of targeted savings by the end of 2025. The timing and ranges reflect our planned implementation of various systems and processes, including the further use of data science to become more efficient. Turning to the right side of the slide, there are two key areas to this optimization strategy, operations and shared services.

[Vincent Sorgi, President and CEO at PPL Corporation]

Regarding operations, the first piece is replicating our Pennsylvania playbook for electric T&D operations across Kentucky and Rhode Island, which we expect will drive about $80 million of savings by 2025. To accomplish this objective, we will deploy smart grid technology to enhance reliability and reduce costs and leverage data science to maximize our resource allocation. We're also improving our vegetation management approach, leveraging models and satellite imagery to assess individual predictions of risk, such as when a tree canopy is expected to reach a certain power line and will need to be trimmed or cut down. We've spent several years honing our PA playbook, and we've built our electric T&D operating model to be scalable.

[Vincent Sorgi, President and CEO at PPL Corporation]

Over the past decade, we grew our Pennsylvania rate base and earnings at about 10% a year, all while keeping O&M relatively flat, offsetting about $100 million of inflation over that period and driving significant improvements in reliability and customer satisfaction. At the same time, we built one of the nation's most advanced energy networks, one that incorporates self-healing technology and supports the growth of renewable energy. We believe the best is yet to come as we replicate our PA playbook enterprise-wide with additional upside as we continue to find ways to scale technology and drive further innovation. Another key source of O&M savings in our T&D operations will be the opportunity to leverage advanced technologies in our customer service function. This includes expanding and improving convenient self-service options for customers that reduces call handling and improves customer satisfaction.

[Vincent Sorgi, President and CEO at PPL Corporation]

We're also projecting lower O&M in other areas of our operations, including the generation and gas LDC businesses, totaling about $35 million by 2025. We see the majority of this opportunity through greater efficiency in our generation fleet, including outage optimization and coal plant retirements. The second area of focus is the centralization of shared services, which includes the consolidation of our supply chain function and IT systems and platforms. We expect to drive savings in this area of about $35 million by 2025. By deploying common systems and platforms across our operations, we expect to reduce software and licensing costs and improve overall operating efficiency. This also includes leveraging our increased buying power from centralized supply chain operations, procure equipment and materials enterprise-wide, as well as other savings from consolidating our other shared services functions.

[Vincent Sorgi, President and CEO at PPL Corporation]

In summary, we believe our strategy, which leverages operating efficiency, data science, and advanced technology, differentiates PPL by supporting competitive earnings and dividend growth of 6%-8% while remain focused on affordability as we make the investments needed to deliver the clean energy transition. We're confident we will achieve our O&M reduction targets as they are driven by a proven operating model, are technology-driven, and are spread over several areas of the business over several years with achievable targets and plans in each area. Turning to slide seven. We continue to evaluate opportunities to advance the transition of our Kentucky generation fleet, which presents an exceptional investment opportunity. Under our current plan, we expect to retire 1,000 MW of coal by 2028 and an additional 1,000 MW by 2035.

[Vincent Sorgi, President and CEO at PPL Corporation]

As we plan for the future, we continue to evaluate supply options and technologies that will best deliver value for our customers over the long term, while advancing cleaner sources and maintaining secure, reliable and low cost energy in the state, which is key to supporting Kentucky's robust economic development. As I noted earlier, LG&E and KU recently issued an RFP for replacement generation to address potential EPA regulations, load growth, coal plant retirements, and greater diversification of our Kentucky generation portfolio. The RFP is open to a variety of generation sources, including renewables, battery storage, and peaking or base load natural gas. We're seeking proposals for capacity and energy to be available no earlier than 2025. Proposals are due in mid-August, and we expect to complete our evaluation by the end of October.

[Vincent Sorgi, President and CEO at PPL Corporation]

This will allow us to submit our required regulatory filings either in Q4 this year or Q1 of 2023. Results from the RFP will also inform further analysis we're undertaking regarding the transition of our coal-fired fleet to cleaner sources based on our continued engagement with share owners. This analysis will include various clean energy scenarios, including an assessment of the financial and operational implications of achieving an 80% clean energy portfolio by 2030. We expect to complete the analysis and share our results by the end of the year. As you know, we issued two significant reports in the fall of 2021 with our integrated resource plan and climate assessment report. This latest analysis to be completed later this year reflects our continued evaluation of clean energy transition options.

[Vincent Sorgi, President and CEO at PPL Corporation]

Lastly, on this slide, I would note that we continue to closely monitor the EPA's proposed regulations for potential impacts to our transition plans, including the Good Neighbor Rule. The Good Neighbor Rule could potentially advance nearly 500 MW of coal-fired retirements from 2034 into the 2026 to 2028 time frame. As a result, we are closely monitoring that regulation, which we expect will become final later this year or in 2023. With that, I'll now turn the call over to Joe for the financial update. Joe.

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

Thank you, Vince, and good morning, everyone. Turning to slide nine, as Vince noted, we reported 2022 second quarter GAAP earnings of $0.16 per share. Special items in the second quarter were $0.14 per share, primarily due to integration expenses associated with the acquisition of Rhode Island Energy. Adjusting for these special items, second quarter earnings from ongoing operations were $0.30 per share, an improvement of $0.11 per share compared to last year. The strong quarter brings our year-to-date GAAP earnings to $0.53 per share. Adjusting for special items of $0.18 per share, our ongoing earnings results are $0.71 per share through the first half of 2022, compared to $0.47 in the first half of 2021.

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

As Vince mentioned, these results put us firmly on track to achieve our 2022 earnings forecast of $1.30-1.45 per share. Turning to the ongoing segment drivers on slide 10. Our Pennsylvania regulated segment results improved by $0.03 year-over-year, excluding accretion. The increased earnings in Pennsylvania were primarily driven by higher peak transmission demand and returns on additional capital investments in transmission. Our Kentucky segment also improved by $0.03 per share year-over-year, excluding accretion. The increase was primarily due to higher base retail rates effective 1st July 2021, and higher sales volumes, primarily due to favorable weather. Partially offsetting these increases were higher O&M expenses, primarily due to plant outages and storm restoration costs, and higher depreciation due to additions to PP&E.

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

Our Rhode Island segment earned $0.01 per share for the quarter, reflecting our 1 month of ownership. Results at Corporate and Other were $0.03 higher compared to the prior year, driven by lower interest expense, primarily resulting from the recapitalization of the balance sheet following the sale of WPD. Finally, we experienced $0.01 increase in our second quarter 2022 EPS due to share accretion resulting from the $1 billion of buybacks completed in 2021. That concludes my prepared remarks, and I'll turn the call back over to Vince.

[Vincent Sorgi, President and CEO at PPL Corporation]

Thank you, Joe. As I said at the outset of my remarks, I'm excited about the prospects for the new PPL. Through our strategic transactions, we've positioned the company to deliver consistent, sustainable, top-tier returns for our share owners and exceptional results for our customers. We look forward to seeing many of you during our upcoming marketing events over the next few months as we continue to share our story. With that, operator, let's open it up for questions.

[Operator]

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

[Operator]

The first question will be from Durgesh Chopra from Evercore ISI. Please go ahead.

[Durgesh Chopra, Managing Director at Evercore ISI]

Hey.

[Vincent Sorgi, President and CEO at PPL Corporation]

Morning, Durgesh.

[Durgesh Chopra, Managing Director at Evercore ISI]

Good morning. Good morning, Vince. Thanks for the update. Hey, just wanted to kick things off with the Inflation Reduction Act. You know, your peers have kind of talked about implications. Maybe, you know, I know it's pretty early, but just, you know, what are you thinking of the tax credits, the generation tax credits, and then the impacts on cash taxes of the alternative minimum tax?

[Vincent Sorgi, President and CEO at PPL Corporation]

Yeah, sure. For the most part, we think the act is positive for the company. First, you know, the ability to elect the production tax credit instead of the ITC for solar will improve the economics of our self-build options as we look at renewables as a potential source of replacement generation in Kentucky. In addition, the extension of the renewable tax credits should lower the cost of renewables overall. That'll be good for not only our RFP process in Kentucky, but also our customers in Rhode Island as we procure clean energy to meet the 100% renewable energy by 2033 requirement that was just enacted into law up in Rhode Island.

[Vincent Sorgi, President and CEO at PPL Corporation]

As you know, we are now a federal cash taxpayer, so we're not anticipating the 15% AMT provision to have a significant impact on our business. So no real headwind there. I just think the transferability provisions around tax credits also makes it more likely that renewables will be built, and that'll also be good in general for the industry and for you know, accelerating our clean energy transition. Simplifies the structure of the deals significantly.

[Durgesh Chopra, Managing Director at Evercore ISI]

Got it. What effective cash tax rate are you currently at?

[Vincent Sorgi, President and CEO at PPL Corporation]

Yeah. Joe, do you wanna-

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

Yeah.

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

Talk to that?

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

Sure. I would, yeah, kind of expect to be around the 15% range through the planning period.

[Durgesh Chopra, Managing Director at Evercore ISI]

Got it. Okay. All right. The AMT is not gonna impact the cash flow sort of metrics in the plan. Just switching gears. By the way, thank you for sharing the details on slide six on the O&M trajectory. That's really helpful by year. Just switching to slide seven really quickly on the Kentucky RFP. What are the next steps in terms of after the regulatory filing that is in Q4 this year or early next year? What do we expect a formal approval from the commission, or what are the kind of things that we should be watching for?

[Vincent Sorgi, President and CEO at PPL Corporation]

Yeah. There could be various filings that we'll need to make. It will really depend, Durgesh, on the generation replacement strategy. To the extent we are going to be building generation, we will need a CPCN for that, and that will go into the commission. There'll be a, you know, period of months approval process. There's no statutory requirement on that, but it'll take some months for the commission to get through that. If it's through PPAs for renewable energy, those contracts also require approval from the commission. The form of the filings will take shape depending on the ultimate, you know, generation source that we come up with in terms of that replacement generation. Both generally will require filings.

[Durgesh Chopra, Managing Director at Evercore ISI]

Got it. Just one last one, and I'll pass the opportunity for others to ask questions. Is any of this CapEx coming out of these RFPs incremental to your current plan, correct?

[Vincent Sorgi, President and CEO at PPL Corporation]

It's incremental to the $12 billion in the five-year CapEx plan. We do have, you know, $1-2 billion of CapEx for generation replacement in the $27 billion that we showed through 2030.

[Durgesh Chopra, Managing Director at Evercore ISI]

All right. Thanks, guys.

[Vincent Sorgi, President and CEO at PPL Corporation]

Sure.

[Operator]

The next question is from Ryan Greenwald from Bank of America. Please go ahead.

[Ryan Greenwald, Equity Analyst at Bank of America]

Hey, good morning, everyone.

[Vincent Sorgi, President and CEO at PPL Corporation]

Good morning. Appreciate the time.

[Ryan Greenwald, Equity Analyst at Bank of America]

Just to maybe piggyback on Durgesh's question around the IRA, how does this kind of influence the way you guys think about unregulated renewables?

[Vincent Sorgi, President and CEO at PPL Corporation]

I mean, obviously, it'll help the economics around that business. Again, it's a very small component of our overall business, so I don't see it turning Safari into a material driver of our earnings in the near term. Obviously, it'll simplify the deal structures and make those projects, you know, more economic.

[Ryan Greenwald, Equity Analyst at Bank of America]

Understood. Thank you. Any initial expectations on benefits that could accrue to you guys from the recent move by the governor to reduce the tax rate in Pennsylvania, and how that could kind of factor into rate case dynamics and how long you guys are able to stay out?

[Vincent Sorgi, President and CEO at PPL Corporation]

Yeah. I'll let Joe talk about the specifics on that. I mean, the reduction going from 999 to 499 is over a period of years. I think it concludes in 2031. In any one year, the impact isn't too significant. Joe, do you wanna talk to that?

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

Yeah, sure. The current corporate income tax rate in Pennsylvania is 9.99%. That's gonna be reduced to 8.99% on 1 January 2023.

[Joseph P. Bergstein, Jr., CFO at PPL Corporation]

From there, it decreases by half a percentage point annually until it reaches 4.99% in 2031, it's been said. The impact is not material. I don't think that it would impact our rate case timing or strategy around that. Certainly we'll have to see what the PUC would do regarding the reduction, but it's not a material impact to the business.

[Vincent Sorgi, President and CEO at PPL Corporation]

It's good. We're glad to see the reduction in the rate, just for general business purposes. It's good to see, for sure.

[Ryan Greenwald, Equity Analyst at Bank of America]

Absolutely. I will leave it there. Thanks so much.

[Vincent Sorgi, President and CEO at PPL Corporation]

Great. Thanks, Ryan.

[Operator]

The next question is from Michael Lapides from Goldman Sachs. Please go ahead.

[Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs]

Hey, guys. Congrats on a good quarter, and I look forward to seeing you next week. I had a question about O&M savings, which is you used the language in today's slide deck of at least $150 million targeted by 2025. Do you see upside to that $150 million? And if so, kind of where do you think that upside, kind of which of the buckets could that emerge from?

[Vincent Sorgi, President and CEO at PPL Corporation]

Yeah. As we've discussed. You know, if you look at the disclosure that we provided on the Investor Day, and you take the benchmarking metrics that we had just for the T&D operations, where EU was just outside the top quartile, Kentucky and Rhode Island were in the third quartile. The ability to move Rhode Island and Kentucky to where EU is today, and then of course, we're projecting to move EU into the first quartile. That is worth more than $150 million. In addition to that, we have the generation reductions that we're disclosing today. The opportunity is more than the $150 million.

[Vincent Sorgi, President and CEO at PPL Corporation]

The $150 through 2025 is what we believe is achievable through 2025, given the integration efforts that are ongoing in Rhode Island, which takes a significant amount of attention and resources from both our company and National Grid to get all that done in the two-year timeframe. That's why we've indicated we believe there's further optimization opportunity beyond 2025. If there's opportunity to extract more than that through 2025, we could see that either being used as a potential offset to inflationary pressures if that continues to persist and ultimately has an impact on our plan.

[Vincent Sorgi, President and CEO at PPL Corporation]

To date, it hasn't had a material impact, but if that were to shift, we think that upside could help offset that, or it could provide upside to the EPS growth rate.

[Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs]

Got it. Thank you for that. Then one question, the Good Neighbor Rule. Can you just walk us through how you think about whether if the rule is finalized as proposed by the EPA, and I know we're still in the comment period and so forth, so we have some time. But just curious how you're thinking about, does that rule impact the energy that would come from existing coal plants? Or do you think more of it as it would drive more of your existing coal plants into retirement, therefore create a need for both energy and capacity?

[Vincent Sorgi, President and CEO at PPL Corporation]

Yeah. The Good Neighbor Rule is basically the Cross-State Air Pollution Rule.

[Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs]

Mm-hmm.

[Vincent Sorgi, President and CEO at PPL Corporation]

From our perspective, it's really around back-end technology and the need for. We still have a plant that's scheduled to retire in 2034 that would require some back-end pollution control equipment under this proposed rule. Michael, what we would have to do based on the final language in that is determine right the most economic way to address that regulation. It could drive that plant being retired sooner, or it could require some other solution. We really need to wait for that rule to be finalized to determine the best way in which we would address that. It certainly could drive us, you know, potentially to retire that plant sooner than 2034.

[Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs]

Got it. If I think about just the timeline of this, the RFPs that are already underway in Kentucky probably don't address the incremental potential coal retirement that could get moved up. If you needed to replace that coal plant, you'd either have to host another RFP sometime next year or the following.

[Vincent Sorgi, President and CEO at PPL Corporation]

I don't think so. I mean, we're getting a number of responses. Really, I think what you're describing is are we replacing 1,000 MW or 1,500 MW of coal capacity, and we'll just stack the responses accordingly to come up with the most economic way to address either 1,000 or 1,500 MW. That's how we're thinking about it. I don't think we'd have to run another RFP.

[Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs]

Got it. The incremental megawatts is just an extra 500.

[Vincent Sorgi, President and CEO at PPL Corporation]

It's, yeah, it's just shy of 500 MW is the capacity of that plant, yeah.

[Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs]

Got it. Thank you, guys. Much appreciated, Vince.

[Vincent Sorgi, President and CEO at PPL Corporation]

Sure. Thanks, Michael.

[Operator]

Again, if you have a question, please press star then one. Next question comes from Gregg Orrill with UBS. Please go ahead.

[Vincent Sorgi, President and CEO at PPL Corporation]

Hey, Gregg.

[Gregg Orrill, Executive Director and Equity Analyst at UBS]

Hey, thank you. Just a follow-up on if you might be able to sort of state what the Pennsylvania regulatory strategy is, or do you have a rate case that you're thinking about?

[Vincent Sorgi, President and CEO at PPL Corporation]

As I think Joe discussed on our Investor Day call, we don't have an imminent rate case in the plan for Pennsylvania. That is something we always look at when we look at all of our jurisdictions. Of course, we've committed to staying out of base rate cases both in Rhode Island and Kentucky, at least till mid-2025. We do not have that commitment in Pennsylvania. Again, based on the optimization strategy, we think we can hold off a bit in PA. You know, that's something that we're always looking at, when the best time to go in is. Just reiterate what Joe said, we don't have anything imminent in the plan.

[Gregg Orrill, Executive Director and Equity Analyst at UBS]

All right. Thanks. Congratulations.

[Vincent Sorgi, President and CEO at PPL Corporation]

Great. Thanks, Greg.

[Operator]

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Vincent Sorgi for any closing remarks.

[Vincent Sorgi, President and CEO at PPL Corporation]

Great. Thanks everyone for joining the call, and we look forward to seeing many of you as we're out doing marketing over the next couple of months. Thanks again for joining.

[Operator]

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Andy Ludwig, VP of Investor Relations
• Joseph P. Bergstein, Jr., CFO
• Vincent Sorgi, President and CEO

Analysts

• Durgesh Chopra, Managing Director at Evercore ISI
• Gregg Orrill, Executive Director and Equity Analyst at UBS
• Michael Lapides, VP, Head of Energy Infrastructure Equity Research at Goldman Sachs
• Ryan Greenwald, Equity Analyst at Bank of America