Vincent Sorgi
President and Chief Executive Officer at PPL
Thank you, Andy, and good morning, everyone. Welcome to our second quarter investor update.
Turning to Slide 4, 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 UK Utility business and acquisition of Rhode Island Energy has derisked 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 shareowner value. The result is a strategy and a new business plan that is anchored in operational efficiencies in the near term with stronger rate base growth driving our earnings growth later in the decade, with a total capital investment need of at least $27 billion through 2030. 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 plan support top tier EPS and dividend growth of 6% to 8% per year, with levers that mitigate risk and potentially provide upside. 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 develop the capital investment plans required to deliver a more reliable and resilient network, and to advance 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 rate, 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.
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 shareowners, 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. And we have a superior track record, which we demonstrated with the Pennsylvania playbook slides 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 shareowners. 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 shareowners.
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. Strong second quarter earnings have us solidly on track to achieve the earnings guidance we shared during our Investor Day. And today, we reaffirmed our 2022 ongoing earnings forecast range of $1.30 to $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 May 25.
Today, we also reaffirmed our projected compound annual earnings per share and dividend growth rates of 6% to 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 to $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. 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, company is expected to retire at least 1,000 megawatts 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 6. 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. We expect to deliver $50 million to $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 million to $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. 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. I just want to treat Canopy is expected to reach a certain power line and we'll need to be trimmed or cut down. We spent several years honing our PA playbook and we've built our Electric T&D operating model to be scalable. 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 network, one that incorporate 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 and our customer service function. This includes expanding and improving convenient self service options for customers that reduces call handling and improved customer satisfaction. We're also projecting lower O&M in other areas of our operations, including the Generation & 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 in 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 operation, procure equipment and materials enterprise wide as well as other savings from consolidating our other Shared Services function.
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% to 8%, while remaining 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 our spread over several areas of the business over several years, with achievable targets and plans in each area.
Turning to Slide 7. 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 megawatts of coal by 2028, and an additional 1,000 megawatts by 2035. 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 baseload 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. 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 shareowners. 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.
Lastly on this slide, I would note that we continue to closely monitor the EPA's proposed regulations for potential impacts to our transition plan including the Good Neighbor Rule. The Good Neighbor Rule could potentially advanced nearly 500 megawatts of coal-fired retirement from 2034 into the 2026 to 2028 timeframe. 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?
