Vincent Sorgi
President & Chief Executive Officer at PPL
Thank you Andy, and good morning everyone. We appreciate you joining us for our Second Quarter Investor update. Moving to Slide 3 in the agenda for today's call. I'll begin this morning with an overview of the exciting Quarter we've had here at PPL, including an update on our strategic repositioning, our newly announced net-zero emissions goal, along a brief operational update.
Joe will then provide a detailed review of Second Quarter financial results, and walk through some recent actions we've taken to strengthen PPL's balance sheet. And as always, we'll leave ample time for your questions. Turning to Slide 4, The Second Quarter has been a busy one, as we continue to advance the strategic repositioning of the Company. First, we completed the sale of our UK utility, achieving exceptional value for the business, and once again demonstrating our ability to deliver on our strategic priorities to maximize shareowner value. The sale resulted in net cash proceeds of $10.4 billion, which will support the repositioning of PPL as a high-growth U.S.-regulated utility Company.
As a reminder, we've earmarked $3.8 billion of those proceeds to acquire Narragansett Electric from National Grid. We also deployed some of the proceeds to achieve our previously stated objective of strengthening our balance sheet, utilizing $3.9 billion to retire $3.5 billion of outstanding holding Company debt, which will provide the Company with substantial financial flexibility.
Regarding the remaining proceeds, we continue to review various options as previously discussed, including investing incremental capital at our utilities or in renewable energy, as well as the repurchase of PPL shares. On the topic of share repurchases, our board recently authorized the Company to repurchase up to $3 billion in PPL common stock. We currently expect to repurchase about $500 million by year-end, while we continue to assess other opportunities to deploy proceeds to maximize shareowner value. The actual amount we apply to share repurchases will depend on various factors, including the determination of other uses for the proceeds. We believe our current plan provides a balance of efficient use of proceeds while still maintaining financial flexibility. I'll note that we are in the process of re-evaluating our capital plans for incremental investment opportunities for the benefit of our customers.
As a result, we have removed our prior capital and rate-based projection from our presentation. We'll provide further updates to our capital and rate-based plans after we complete this review. The UK sale represented an important first step in our strategic repositioning, simplifying our structure with a clear focus on U.S. rate-regulated utilities, and strengthening our balance sheet while providing much greater flexibility to support future growth. We're also making great progress in the acquisition of Narragansett Electric in Rhode Island. To date, we've satisfied our HSR and FCC requirements, and on July 16th, the Massachusetts Department of Public Utilities granted a waiver of jurisdiction over the sale, streamlining the overall path to regulatory approval for the acquisition. We continue to make progress on securing approvals from FERC and the Rhode Island Division of Public Utilities and Carriers, which are the two remaining approvals required for the transaction.
Looking ahead, we remain confident in our ability to close the transaction by March of next year, with hopes of closing before year-end. As we pursue the final regulatory approvals, we are working closely with National Grid on transition planning to ensure a seamless transition for Rhode Island customers and Narragansett employees upon closing. We've also announced our planned leadership team for the Rhode Island utility. Dave Bonenberger, who has nearly 4 decades of energy industry experience, including leading both the transmission and distribution businesses at PPL Electric Utilities, will serve as the Rhode Island President upon completion of the transaction. Dave is well-positioned to lead the execution of our operational strategy in Rhode Island, as we seek to drive significant value for Rhode Island customers and to support the state's decarbonization goals. Dave will be joined in Rhode Island by former National Grid employees in creating a strong, experienced, and local leadership team with a deep commitment to delivering energy safely and reliably to Rhode Island customers.
Moving to Slide 5. In addition to strong execution towards our strategic repositioning, we also continue to advance our clean energy transition strategy and announced the new net-zero carbon emissions goal this morning. This goal encompasses greenhouse gas emissions from our Kentucky generation, as well as other aspects of our business, as outlined in the footnote on the slide. PPL is fully committed to driving innovation to enable net-zero carbon emissions by 2050 and to ensure a balanced, responsible, and just transition for our employees, communities, and customers as we advance towards our clean energy goals. Our new goal reflects our continuous evaluation of our progress and opportunities through ongoing business and resource planning efforts.
Based on our latest reviews, we believe we are on a path to achieve 80% emissions reduction by 2040, a full decade ahead of our prior goal. As a result, in addition to today's announced net-zero emissions goal, we've also accelerated our previous interim goals, now targeting an 80% reduction by 2040 and a 70% reduction by 2035. In addition, we are undertaking an enterprise-wide effort to enhance our clean energy strategy and develop additional programs, metrics, and goals that will guide our path to net-zero emissions. We've hired an industry-leading global consulting firm to assist us in this endeavor. In addition to this strategic initiative, we are completing an updated scenario-based climate assessment, to evaluate the potential impacts to PPL from climate change and potential future requirements. Our last Climate Assessment Report was published in 2017. Our updated assessment, which we intend to publish later this year will analyze multiple scenarios, including a scenario tied to limiting the global temperature increase to no more than 1.5 degrees celsius. As we conduct our climate assessment, our efforts will be informed by our ongoing integrated resource planning activities in Kentucky. LG&E and KU submit an IRP once every three years to the Kentucky Public Service Commission, and the next IRP will be filed in October of this year.
Both the climate assessment and the IRP will serve as key inputs as we further define the pathway to achieving our emissions goal. Wrapping up this slide, we recognize that achieving these emissions reductions while maintaining reliability and affordability will require significant advances in clean energy technology and solutions that can be scaled economically to meet the country's energy needs. This is especially true as we support greater electrification of other sectors.
With that in mind, investing in research and development is a key pillar of our clean energy strategy. And we continue to look for opportunities to engage in this area, to drive the innovation and solutions necessary to achieve net-zero. PPL, for example, is an anchor sponsor of the Low-Carbon Resources Initiative being led by EPRI and the Gas Technology Institute, and I chair EPRI's LCRI board working group. We also recently joined Energy Impact Partners global investment platform, which brings together leading companies and entrepreneurs worldwide to foster innovation towards a sustainable energy future. Through our participation in the EIP platform, PPL will support up to $50 million in investments aimed at accelerating the shift to a low-carbon future and driving commercial-scale solutions needed to deliver deep economy-wide decarbonization.
Apart from LCRI and EIPs investment platform, we also continue to engage in some other R&D efforts related to Clean Energy Technologies and enhancing the power grid. These collaborative efforts provide PPL greater visibility into emerging technologies, that can be leveraged to advance to Clean Energy Transition, and we will continue to look for opportunities to expand our work and support in this area.
Moving to Slide 6. We've outlined our updated path to net-zero carbon emissions on this slide, along with our current expectations on coal fire generation capacity in Kentucky, which is consistent with the generation planning and analysis study included in our recently approved rate case filings. We'll need to advance technology to achieve net-zero emissions by 2050 as we balance the need for affordable, reliable, and sustainable energy for our customers. Based on these current factors and consistent with our most recent rate case filings in Kentucky, we currently expect to achieve a reduction in our coal-fired capacity of 70% by 2035, 90% by 2040, and 95% by 2050 from our baseline in 2010. We anticipate having about 550 megawatts of remaining coal-fired generation in 2050 due to our highly efficient and relatively new Trimble County Unit 2 that started commercial operation in 2011. Therefore, our objective is to continue to explore innovative ways through our R&D efforts to economically drive these reductions further, while supporting our customers and local communities. We have also assessed the implications of advancing these goals even further.
Our internal view of what it could take to achieve 100% carbon-free generation by 2035, as proposed by the Biden administration, using current technologies would create significant affordability issues for our customers. Our new commitment to achieve net-zero carbon emissions by 2050, is backed by the actions that we are and will continue to take to support a low carbon energy system that is affordable, and reliable, and provides the time needed for the technology to advance. Next on Slide 7, I'll cover the details of the Kentucky rate cases.
On June 30, the KPSC approved the settlements that LG&E and KU had reached with parties to their rate reviews with certain modifications. At a high level, the order support continued investment to modernize our energy infrastructure, strengthen grid resilience, and upgrade LG&E 's natural gas system to enhance safety and reliability for those we serve. Effective July 1, the KPSC authorized a combined $199 million increase in annual revenue for LG&E and KU, within the allowed base ROE of 9.425%, and a 9.35% ROE for the environmental cost recovery and gas line tracker mechanisms. In addition, the KPSC approved a $53 million economic release sur-credit that was proposed by LG&E and KU, to help mitigate the impact of rate adjustments until mid-2022.
Importantly, the commission's order authorized the full deployment of advanced metering infrastructure, which will empower customers with detailed energy usage information, enable LG&E and KU to respond more quickly to power outages, and improve operational efficiency. We continue to believe the resulting O&M savings from installing advanced meters will exceed the cost of this investment for the benefit of our customers. The $350 million capital costs of the proposed AMI investment are not included in the new rates that took effect July 1st. Instead, we will record our investment in the AMI projects as SEAWIP and accrue AFUDC during the projects implementation period. The KPSC also approved a very constructive retired asset recovery rider to provide recovery of and a return on the remaining net book values of retired generation assets as well as associated inventory and decommissioning costs. The rider will provide cost recovery over 10 years upon retirement of such assets as well as a return on those investments at the utilities than the weighted average cost of capital. As we announced in January, Mill Creek Unit 1 is expected to retire in 2024. Mill Creek Unit 2 and E.W. Brown Unit 3 are expected to be retired in 2028 as they reach the end of their economic useful lives. These units represent a combined 1,000 megawatts of coal-fired generating capacity.
The Retired Asset Recovery Rider balances the interests of all stakeholders and provides certainty of recovery for the prudent investments made in these coal plants. Under the settlement agreements approved by the KPSC, LG&E and KU have committed that they will not increase the new base rates for at least 4 years, subject to certain exceptions. And before leaving this slide, I would note that in approving the settlement agreements, the Commission adjusted the proposed base ROE downward from 9.55% to 9.425%, and disallowed the recovery of certain legal costs. These modifications reduced the annual revenue requirements proposed in the settlements by approximately $20 million. We have filed a request for a limited rehearing on these matters. And finally, turning to Slide 8. In other highlights across PPL, we continue to achieve recognition for our strong commitment to diversity, equity, and inclusion, innovation, and safety.
During the second quarter, PPL was recognized by Diversity Inc. in two distinct areas; first, as one of the top utilities in the nation for workforce diversity, and second, as one of the top 50 companies for ESG, determined by several factors including our programs and practices surrounding talent in the workforce, corporate social responsibility and philanthropy, supplier diversity programs, and overall leadership and governance. PPL has also been named the best place to work for disability inclusion for the fourth consecutive year, earning a perfect score on the 2021 disability equality index. And finally, PPL Electric Utilities received the South Eastern Electric Changes Chairman's Award for its groundbreaking technology that safely and automatically cuts power to downed power lines. These awards reflect a corporate strategy focused on creating value for all stakeholders as grounded in our five strategic priorities. These include achieving industry-leading performance and safety, reliability, customer satisfaction, and operational efficiency advancing a clean energy transition while maintaining affordability and reliability, maintaining a strong financial foundation and creating long-term value for our shareholders, fostering a diverse and exceptional workplace, and building strong communities in the areas we serve.
I'll now turn the call over to Joe for the financial update, Joe.
