PPL Q2 2023 Earnings Report

PPL EPS Results

• Actual EPS: $0.29
• Consensus EPS: $0.32
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: $0.30

PPL Revenue Results

• Actual Revenue: $1.82 billion
• Expected Revenue: $1.27 billion
• Beat/Miss: Beat by +$555.28 million
• YoY Revenue Growth: +7.50%

PPL Announcement Details

• Quarter: Q2 2023
• Date: 8/4/2023
• Time: Before Market Opens
• Conference Call Date: Friday, August 4, 2023
• Conference Call Time: 11:00AM 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 2023 Earnings Call Transcript

Key Takeaways

• PPL reaffirmed its full‐year 2023 EPS guidance of $1.50–$1.65 and 6–8% dividend growth through 2026, backed by a $12 billion capital plan and $175 million in targeted O&M savings.
• Second-quarter ongoing EPS were $0.29 versus $0.30 a year ago, with mild weather and storm activity depressing results by about $0.09 per share year-to-date.
• The company is tracking slightly ahead on its $50–$60 million 2023 O&M reduction target and expects further improvement in the second half despite elevated storm expenses.
• PPL’s Kentucky CPCN filing to retire 1,500 MW of coal and add combined-cycle gas, 1,000 MW of solar and 125 MW of storage is proceeding on schedule with hearings in August and a decision by November 6.
• Integration of Rhode Island Energy is on track, driving upside through early TSA exits, and a decision on the proposed advanced metering functionality filing is expected this fall.

Presentation

[Operator]

Good day, welcome to the PPL Corporation Second Quarter 2023 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 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then 1 on a touch-tone phone. To withdraw your question, please press Star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President, Investor Relations. Please go ahead.

[Andy Ludwig, Vice President, Investor Relations at PPL Corporation]

Good morning, everyone, and thank you for joining the PPL Corporation conference call on second quarter 2023 financial results. We have provided slides for this presentation 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, and we'll conclude with a Q&A session following our prepared remarks. Before we get started, I'll draw your attention to slide 2 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. We will also refer to non-GAAP measures, including earnings from ongoing operations on this call.

[Andy Ludwig, Vice President, Investor Relations at PPL Corporation]

For reconciliation to the comparable GAAP measures, please refer to the appendix. I'll now turn the call over to Vince.

[Vince Sorgi, President and CEO at PPL Corporation]

Thank you, Andy. Good morning, everyone. Welcome to our second quarter investor update. Let's start with our financial results and a few highlights from the quarter on slide 4. Today, we announced second quarter reported earnings of $0.15 per share. Adjusting for special items, second quarter earnings from ongoing operations were $0.29 per share, compared with $0.30 per share a year ago. Overall, second quarter results were in line with our expectations, apart from the continued mild weather and storm activity in Kentucky and Pennsylvania, as this has been one of the most active storm years we've ever experienced. Between the mild weather and storm O&M, our year-to-date results were negatively impacted by about $0.09 per share compared to our original plan.

[Vince Sorgi, President and CEO at PPL Corporation]

Despite these impacts, we remain confident in our ability to deliver on our 2023 ongoing earnings forecast of $1.50-$1.65 per share, with a midpoint of $1.58 per share. We have identified several areas in which we can offset the headwinds from weather and storms, and Joe will cover that in detail in his financial review. As you know, one area we remain extremely focused on is O&M, and we are on track to achieve the $50 million-$60 million targeted reductions this year. Despite the incremental storm expenses, we are tracking slightly ahead of our O&M forecast through June. We expect that trend to continue and improve through the second half of the year.

[Vince Sorgi, President and CEO at PPL Corporation]

In addition, today, we reaffirmed our projected earnings per share and dividend growth rates of 6%-8% through at least 2026, as we remain confident in our low-risk business plan. This will be supported by our $12 billion capital investment plan and targeted O&M savings of at least $175 million by 2026 to advance a reliable, resilient, affordable, and clean energy future. Turning to a few second-quarter operational highlights, we continue to deliver excellent reliability for our customers across our jurisdictions. Again, despite the increased storm activity in both Kentucky and Pennsylvania. This is a direct result of our ongoing investments, not only in system hardening that prevents outages, but also smart grid technology and automation that enables us to respond more quickly when outages do occur.

[Vince Sorgi, President and CEO at PPL Corporation]

On the integration of Rhode Island Energy, we remain well positioned to complete our transition services with National Grid next year. We also continue to make progress on an important filing before the Rhode Island Public Utilities Commission, as we seek to deploy advanced metering functionality across our service territory and build a smarter grid that supports the state's leading climate goals. Hearings before the Rhode Island PUC were held in late July to review our business case and cost recovery proposals. We expect a decision on our AMF filing later this fall. We also remain on track with the Kentucky CPCN process, which I'll cover in more detail on the next slide. Finally, we continue to receive awards for our industry-leading approach in grid innovation, as both the Edison Electric Institute and the Southeastern Electric Exchange recognized PPL Electric Utilities for its groundbreaking use of dynamic line rating technology.

[Vince Sorgi, President and CEO at PPL Corporation]

PPL Electric is the first utility in the nation to integrate this technology with its transmission management system. DLR sensors provide real-time information that enables us to better utilize our existing transmission line capacity and reduce congestion on the grid. FERC has also recognized the value that this technology can bring to the industry in better managing congestion on the transmission network. Turning to slide five and an update on the CPCN process in Kentucky. We remain focused on advancing our generation investment plan as we seek to replace 1,500 MW of aging coal generation with an affordable, reliable, and cleaner energy mix by 2028. We remain confident our plan represents the best path forward for our Kentucky customers.

[Vince Sorgi, President and CEO at PPL Corporation]

As proposed, it would replace several 1970s era coal units with over 1,200 MW of new combined cycle natural gas generation, nearly 1,000 MW of solar generation and 125 megawatts of battery storage. In addition, it would establish more than 12 new energy efficiency programs. In May, the Kentucky Public Service Commission approved our request to consolidate the CPCN filing and our generation retirement request as required by Senate Bill 4. The commission approved the consolidation while keeping the CPCN procedural schedule largely unchanged. Per the schedule, intervener testimony was filed July 14th, with no real surprises. Next up is our rebuttal testimony, due August 9th, followed by an informal conference scheduled for August 15th to explore a potential settlement. Public hearings are then set to begin August 22nd and could last several days.

[Vince Sorgi, President and CEO at PPL Corporation]

Again, we are very confident that the plan we've proposed is in our customers' and the state's best interest, but we are also open to settlement discussions with the parties to the case. Ultimately, with or without a settlement, we anticipate a decision on our filings from the commission by November 6th. That concludes my strategic and operational update. I'll now turn the call over to Joe for the financial update.

[Joe Bergstein, CFO at PPL Corporation]

Thank you, Vince, and good morning, everyone. Let's turn to slide seven. As Vince mentioned, second quarter earnings from ongoing operations were $0.29 per share, compared to $0.30 per share in Q2 2022. Primary drivers of the $0.01 per share decline from last year were lower sales volumes in both Kentucky and Pennsylvania, driven by mild weather, and, as expected in our plan, higher interest expense due to increased borrowings at higher interest rates to fund our growth. Those factors were partially offset by lower O&M expense, driven by our continued focus on operating efficiency and improved earnings at the Rhode Island segment from 2 additional months of results in Q2 2023 compared to the prior year.

[Joe Bergstein, CFO at PPL Corporation]

Overall, our teams performed well for the quarter and results were slightly ahead of expectations, apart from the mild weather, which impacted results by $0.03 per share compared to our forecast. Degree days were lower by more than 20% in our Kentucky service territory and by over 35% in Pennsylvania. This resulted in lower actual electricity sales volumes of 4% in Kentucky and 8% in Pennsylvania compared to normal. Turning to the ongoing segment drivers for the quarter on Slide eight, our Pennsylvania regulated segment results decreased by $0.01 year-over-year. Results were primarily driven by lower sales volumes and higher interest expense, partially offset by higher transmission revenue and higher distribution rider recovery. Our Kentucky segment results decreased by $0.03 per share year-over-year.

[Joe Bergstein, CFO at PPL Corporation]

Results were impacted primarily by the lower sales volumes and higher interest expense, partially offset by lower O&M expense. Our Rhode Island segment results increased by $0.02 per share year-over-year, reflecting the additional two months of earnings this quarter. Finally, results at Corporate and Other increased $0.01 per share compared to the prior year, primarily due to lower O&M expense and other factors that were not individually significant, partially offset by higher interest expense. Moving to Slide nine, our Q2 performance puts PPL's GAAP earnings at $0.54 per share year-to-date through June 30th. Adjusting for special items recorded through the second quarter, earnings from ongoing operations totaled $0.77 per share for the first half of 2023.

[Joe Bergstein, CFO at PPL Corporation]

The mild weather has unfavorably impacted our year-to-date results by a total of about $0.08 per share compared to our plan due to lower sales volumes. In addition, we've experienced higher storm-related costs of about $0.01 per share compared to our plan so far this year due to the significant storm activity. Importantly, we've been able to more than offset these increased storm costs, we are tracking favorably to plan on O&M through the second quarter. We remain confident in achieving our 2023 earnings forecast as we expect to offset the unfavorable weather and storm impacts due to the projected outperformance in several areas. First, the DIS mechanism in Pennsylvania is projected to offset the lower sales volumes and higher O&M experienced in that segment.

[Joe Bergstein, CFO at PPL Corporation]

Second, we are tracking favorably on our integration of Rhode Island Energy, which we expect to provide upside compared to our plan. Third, the convertible debt financing that we executed in the first quarter will reduce our annual interest expense relative to our plan. Finally, we continue to optimize our discretionary O&M. This includes contractor and consultant spend and the timing of filling open positions and other discretionary O&M spend. In total, these identified offsets present a clear path to achieving the midpoint of our 2023 earnings forecast of $1.50 per share. We have an excellent track record of achieving our financial targets, which we expect to continue in 2023.

[Joe Bergstein, CFO at PPL Corporation]

Looking ahead at our plans to achieve at least $175 million of O&M efficiencies by 2026, we established a Transformation Management Office, or TMO, to ensure we achieve our long-term efficiency objectives. The TMO, which I chair, with support from our chief operating officer and our chief information officer, and with the engagement from our employees across the entire company, is responsible for tracking our progress on savings initiatives, as well as identifying and verifying additional areas of possible savings. To date, we have identified over 100 initiatives with savings potential significantly above our $175 million target. This structure and rigorous process gives us even more confidence that we will achieve the targeted savings assumed in our long-term forecast. It will help us deliver a more affordable, clean energy transition for our customers. That concludes my prepared remarks.

[Joe Bergstein, CFO at PPL Corporation]

I'll turn the call back over to Vince.

[Vince Sorgi, President and CEO at PPL Corporation]

Thank you, Joe. In closing, we remain confident in achieving our goals for 2023. While mild weather and storms have created some headwinds, we have plans in place to overcome those challenges and deliver on our commitments to shareowners. We're also on target to complete more than $2.5 billion in infrastructure improvements to provide safe, reliable, and affordable energy for our customers. Our integration of Rhode Island Energy continues to go smoothly. We continue to progress our regulatory filings in both Kentucky and Rhode Island. Last but not least, we're solidly on track to deliver our targeted O&M savings as we execute our utility of the future playbook, incorporate more technology and automation, and centralize various functions across PPL to deliver better value for customers and shareowners alike. With that, operator, let's open it up for questions.

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Durgesh Chopra with Evercore ISI. Please go ahead.

[Durgesh Chopra, Analyst at Evercore ISI]

Hey, good morning. Hey, good morning. Good morning, guys. Pretty straightforward quarter here. I had two housekeeping questions. First, can you quantify what's the AMI ask in Rhode Island? How much investment that is?

[Vince Sorgi, President and CEO at PPL Corporation]

We're in the $200 million range, Durgesh.

[Durgesh Chopra, Analyst at Evercore ISI]

Got it. Over what timeframe?

[Vince Sorgi, President and CEO at PPL Corporation]

$2, $2.50, somewhere around there. Sorry, say that again?

[Durgesh Chopra, Analyst at Evercore ISI]

Sorry. Thank you. over what timeframe is that 200-250?

[Vince Sorgi, President and CEO at PPL Corporation]

We need to, we need to get that approved, right? We, we just went through the hearings late last month. We expect to have a decision by the commission up there in the fall of this year. That'll, that'll kind of dictate the timeframe over which we deploy that capital.

[Durgesh Chopra, Analyst at Evercore ISI]

Would that be incremental to your current CapEx plan, Vince? Do you have some data to-

[Vince Sorgi, President and CEO at PPL Corporation]

No, no. No, that's in the, that's in the current plan.

[Durgesh Chopra, Analyst at Evercore ISI]

Got it. Okay. Then just, in terms of, you know, the, you know, offsetting the year due to headwinds and weather and storm, and you mentioned prepared remarks, Joe mentioned, like, integration savings. Can you elaborate on that? How big is that pie? Obviously, sounds like a lot of opportunities in excess of $175 million. Maybe just like, you know, what's the upside on the integration and, you know, on Rhode Island, and what might be the other opportunities?

[Joe Bergstein, CFO at PPL Corporation]

Yeah, so the integration in Rhode Island, Durgesh, is going very well. Really, have been able to do is exit TSAs quicker than we had expected and at a lower cost, which is driving a lot of the outperformance we're seeing there. We're also, you know, mindful of the pace at which we're hiring some of the open positions we have there as we're fully staffing up that operations and looking to take over completely from grid. So those are the areas that driving, driving the Rhode Island integration. We would expect that to be about, you know, $0.01-$0.02 for the year. As far as the progress on the 175 and the establishment of the TMO, that's going extremely well.

[Joe Bergstein, CFO at PPL Corporation]

As I noted, we have over 100 initiatives, totaling more than $175 million. Really, it's driven by significant employee engagement as we're developing plans to implement and achieve the 175. The TMO also provides a forum for employees to share their ideas as areas that we could save on O&M and being more efficient across the company. I don't want to give a dollar amount on that yet at this point as to where we are. You know, part of the process of that brings a lot of rigor to the savings. We got to vet them all, you know, to complete business cases where we're needed.

[Joe Bergstein, CFO at PPL Corporation]

What I can tell you is that we are confident in achieving the 175, potentially more than that, and the development of the TMO really is even enhanced that confidence as we're working through this.

[Durgesh Chopra, Analyst at Evercore ISI]

Got it. Solid, guys. Thanks for the time.

[Vince Sorgi, President and CEO at PPL Corporation]

Thanks, Durgesh.

[Operator]

The next question comes from Paul Zimbardo with Bank of America. Please go ahead.

[Vince Sorgi, President and CEO at PPL Corporation]

Hey, Paul.

[Paul Zimbardo, Analyst at Bank of America]

Hi. Hi, good morning, team. Thanks.

[Vince Sorgi, President and CEO at PPL Corporation]

Morning.

[Paul Zimbardo, Analyst at Bank of America]

Just to, to follow up on that last question from Durgesh quickly, is the TMO and those savings more about de-risking and extending the outlook, or is that something that could be more incremental in the planning period?

[Joe Bergstein, CFO at PPL Corporation]

Yeah, we will have to go through all of those items. I mean, certainly de-risk and gives us confidence in the 175 through the planning period. Whether those items that, you know, are in excess of the 175, we'll, we'll have to see whether they come into this period for execution, whether they're longer-dated items. Look, there, there's headwinds that we have to offset as well. We still see inflation and interest rates. We have a bank of ideas and opportunities to execute on, should we see those headwinds persist or increase. Then that just gives us confidence in the near term to achieve the 175 and the 6%-8% earnings, earnings growth, and it gives us confidence in the longer term to continue to execute on the strategy.

[Vince Sorgi, President and CEO at PPL Corporation]

I would reiterate that, Paul. I think it gives us both, right? It certainly shores up the confidence in the 175, but likely gives us upside potential looking beyond that.

[Paul Zimbardo, Analyst at Bank of America]

Okay, great. Thank you. Very clear. Switching topics, I noticed the, the weather-normalized sales volumes were decently down in the quarter and now trailing 12 months, both Pennsylvania, Kentucky. Just could you give any color on what you're seeing on the ground and just expectations for the 2nd half of the year?

[Joe Bergstein, CFO at PPL Corporation]

Yeah, sure. Well, from a, from a second half of the year, we would expect, we have in our forecast normal weather. From our longer-term forecast, we continue 50 basis points of sale of load growth in our plans in total, and we continue to believe that that's an achievable growth forecast. Some of the near-term impact that we're seeing, particularly on the residential side, has been due to energy conservation with the rising commodity prices. I would expect that to be a shorter-term anomaly, given that we've seen a significant, significant decline in commodity prices already this year. We would expect longer term to see growth in residential usage as electric vehicles and electrification becomes more prevalent. Lower industrial sales in Kentucky have not really impacted our margins.

[Joe Bergstein, CFO at PPL Corporation]

Those customers more on are demand-driven than usage. As we think about longer term, there's a number of factors that give us confidence in our assumptions. We can continue to see positive economic factors in Pennsylvania and Kentucky, including continued low unemployment rates and strong GDP growth. As we've discussed numerous times in Kentucky, we're coming off of back-to-back record years of economic development of over $10 billion of announced investments in each of 2021 and 2022. That includes the Ford EV battery plant initiative, which we've talked a lot about. That's broken ground and well under construction. The state's targeting another $8 billion of investment for 2023. When we look at the 10 years prior to this period, from 2010-2020, there was an average of about $4 billion per year in economic development.

[Joe Bergstein, CFO at PPL Corporation]

To see $10 billion in each in 2021 and 2022 and projecting $8 billion this year highlights the, you know, Kentucky is a great place to do business and continued economic development there in support of our growth assumptions. We continue to see strong industrial growth in manufacturing and agricultural sectors as well.

[Vince Sorgi, President and CEO at PPL Corporation]

Yeah, we're not concerned with volumes at all, other than the impact on weather. I, I would say our, our volume story is really weather-driven.

[Paul Zimbardo, Analyst at Bank of America]

Okay, great. Thanks for the detailed answer. Appreciate it.

[Joe Bergstein, CFO at PPL Corporation]

Sure.

[Operator]

The next question comes from David Arcaro with Morgan Stanley. Please go ahead.

[Joe Bergstein, CFO at PPL Corporation]

Hey, Dave.

[David Arcaro, Analyst at Morgan Stanley]

Hey, good morning. Hey, morning.

[Joe Bergstein, CFO at PPL Corporation]

Morning.

[David Arcaro, Analyst at Morgan Stanley]

Thanks for taking my questions. Let's see. I think just one here. You know, I was curious, we're starting to see some easing of supply chain pressures in the solar industry, commodity costs coming down, module prices declining somewhat and PPA prices easing. I was just wondering if you if you think that could impact at all the outlook for your Kentucky, just the generation mix, maybe longer term, or are there, are there opportunities to see lower PPA prices or lower costs in the current CPCN filing, or if your thinking and analysis has evolved at all for the longer-term generation mix there?

[Vince Sorgi, President and CEO at PPL Corporation]

Yeah, I-- look, I think the, the bigger issue in getting our solar deployed in Kentucky is more siting and permitting, Dave, as opposed to necessarily the com-- the supply chain issues. Although, you're right, they, they have been an issue, across the industry, and that is starting to abate. In our case, though, I think it is more siting and permitting, which I think the, the company-owned solutions, make that much easier, because, because we can navigate that easier than third-party developers have been able to so far. As you know, our, our CPCN has a combination of company-owned and, and PPAs in it.

[Vince Sorgi, President and CEO at PPL Corporation]

We'll continue to look at the, the executability of those PPAs, and if we continue to see issues there, that could actually push us more to recommending more company-owned, where we have a higher degree of confidence that we can get them built.

[David Arcaro, Analyst at Morgan Stanley]

Okay, gotcha. That's helpful color. Didn't appreciate that in the, in the backdrop there. That's all I had. Thanks.

[Joe Bergstein, CFO at PPL Corporation]

Welcome.

[Operator]

The next question comes from Shar Pourreza with Guggenheim Partners. Please go ahead.

[Joe Bergstein, CFO at PPL Corporation]

Hey, Shar.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Good morning, guys.

[Joe Bergstein, CFO at PPL Corporation]

Morning.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Good morning. Vince, I just want to starting with the Kentucky CPCN filing. I mean, obviously, thanks for the incremental color and the preparedness on the timeline. As we look ahead to the prospects for settlement, you mentioned August 15th's informal conference. What could that look like? Is it partial, maybe the gas, but not the renewables? Just any additional color on how to think about that would be great.

[Vince Sorgi, President and CEO at PPL Corporation]

Well, look, I think you can appreciate, I don't necessarily want to get into negotiating positions at this point on the call. What, what I'll say just around the process itself is we're actively engaged right now with various interveners. As you, as you mentioned, the, the settlement conference is scheduled for the 15th. If that goes well and, and we can get settlement on at least significant issues in the case with enough parties, then we may be able to present a stipulation to the PSC for their consideration. As you know, the hearings are scheduled to begin on the 22nd of August. That could become a forum for the PSC to take up the settlement agreement, if we're able to reach one.

[Vince Sorgi, President and CEO at PPL Corporation]

At this point, I'd say, Shar, it's too early to tell if we'll be able to reach a settlement. But if we don't, of course, you know, we're ready to defend the plan as filed, as we've been indicating all along. A little early at this point to tell if we can get there, but.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Mm-hmm.

[Vince Sorgi, President and CEO at PPL Corporation]

Certainly we are, we're open to those discussions.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Let me let me just drill down a little bit on the defending side. You know, in, in the off chance there are issues with the CPCN, right? do you I guess, Vince, do you have avenues either through pollution control or T&D work to offset that space in your CapEx plan, I guess, in.

[Vince Sorgi, President and CEO at PPL Corporation]

Yeah

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

... in, in a scenario where there's issues? Then do me a favor, could you just maybe frame how much of that CapEx you could see being backfilled, right, in that worst case scenario?

[Vince Sorgi, President and CEO at PPL Corporation]

Well, look, I think the key takeaway is I'm not sure I would expect, you know, whether we have a settlement or, you know, fully litigating our case, that that would have a material impact on either our capital plan or, or our EPS targets, given the different buckets of, of CapEx. Whether it's building replacement generation or, you know, environmental spend or, or other types of CapEx that we might deploy in Kentucky, and elsewhere across the fleet. You know, if you look at the testimony and based on everything that's been filed to date, I don't think the outcome, Char, is going to be an all or nothing on the coal plant retirements.

[Vince Sorgi, President and CEO at PPL Corporation]

When you look at, you know, the Good Neighbor Plan, which was consistent with what we were assuming in the CPCN, that would require, you know, SCRs on Ghent 2, Mill Creek 1, Mill Creek 2, also a new cooling tower at Mill Creek 1. When you look at the MATS regs and the ELG regulations, especially the ELG regs, that could result in significant incremental investments if we were required to do so. Even if it was, you know, a full rejection of the retirements, which again, I don't, I don't think that'll be the outcome. You know, as we've talked in the past, that's, you know, in the $500 million-$1.5 billion of environmental CapEx, that doesn't even include the amount of maintenance capital we'd have to spend on those plants going forward.

[Vince Sorgi, President and CEO at PPL Corporation]

Again, I'm not sure the outcome necessarily impacts the CapEx and EPS trajectory. It might just be different buckets where we're spending that capital.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Just lastly, that bucket that you're going to be spending that capital. This is obviously a worst case scenario, no one's really assuming this. In the case that it does turn out to be negative, that incremental capital doesn't have a timing lag, right? You can go ahead and recognize it fairly immediately, where we wouldn't see divots in your earnings growth in the near term.

[Vince Sorgi, President and CEO at PPL Corporation]

Well, some of that CapEx we would have to start spending that right away to continue to operate.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Got it.

[Vince Sorgi, President and CEO at PPL Corporation]

those plants. That to your point, that would be recoverable under the environmental cost recovery, which does not require a base rate case for recovery.

[Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners]

Got it. Perfect. Thank you, guys. Have a great weekend. Appreciate it.

[Vince Sorgi, President and CEO at PPL Corporation]

Great. Thanks.

[Operator]

The next question comes from Gregg Orrill with UBS. Please go ahead.

[Vince Sorgi, President and CEO at PPL Corporation]

Hey, Greg.

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

Hey, yeah, thanks. This may be repetitive. I, I know you, you said that the testimony from interveners was kind of in line with expectations. Did, did you, did you learn anything about, you know, their, their positions that was, you know, incremental to the process that or the process itself that you're willing to share?

[Vince Sorgi, President and CEO at PPL Corporation]

Not really, Greg. I would say the testimony was, was as expected. I think we talked about expected intervener positions when we, when we rolled out the plan that we filed. We knew the Coal Association would be against retiring coal. We knew the environmental interveners would be pushing more renewables. Again, our plan, we think, balances all of those interests, but more importantly, it complies with SB 4. It complies with our obligations to serve these costs, reliable, safe energy. It is increasingly cleaner, which we're hearing a lot from our customers and from our two major cities in Louisville and Lexington. We were, we were extremely thoughtful and, and took a lot of actually intervener input in from the IRP process into coming up with what we proposed.

[Vince Sorgi, President and CEO at PPL Corporation]

As I talked about, however, we are willing to engage in settlement discussions with the parties, and we'll see if we can reach something here in the next couple weeks, going into the, you know, the hearings beginning on the 22nd. I would say as expected, and we incorporated most, if not all of that, into the original plan that we filed with the commission.

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

All right, thanks.

[Vince Sorgi, President and CEO at PPL Corporation]

Great.

[Operator]

As a reminder, if you have a question, please press star, then 1 to enter the question queue. The next question comes from Anthony Crowdell with Mizuho. Please go ahead.

[Anthony Crowdell, Senior Analyst at Mizuho]

Good morning, Vince. Good morning, Joe.

[Vince Sorgi, President and CEO at PPL Corporation]

Good morning, Anthony.

[Anthony Crowdell, Senior Analyst at Mizuho]

Good morning.

[Anthony Crowdell, Senior Analyst at Mizuho]

I just wanted to follow up on Char's question, just one, and I'm not sure you can answer it. Do you know, do you know if the Commission in Kentucky would, would prefer the parties reach a settlement? Given maybe with the closure of plants or whatever, that they're more biased, or they prefer a fully litigated track to have maybe a, a stronger record?

[Vince Sorgi, President and CEO at PPL Corporation]

I don't know that they have a preference one way or the other, Anthony, to be honest with you. They're, they're gonna uphold their obligation to ensure whether it's a settlement or our case, that it meets the requirements of SB 4, again, our obligation to serve in a, in a least cost, reliable way. They're gonna, they're gonna do their duty regardless of what's in front of them, whether it's a settlement or our case. Not sure if they have a preference on, on which one is, is in front of them. I mean, they'll, they'll take a settlement as evidence in the case. You know, they don't, they don't have to approve the settlement, they will certainly take it as evidence in the case.

[Vince Sorgi, President and CEO at PPL Corporation]

The authority really lies with them in terms of whether or not to accept that or not.

[Anthony Crowdell, Senior Analyst at Mizuho]

Great. Then just lastly, I, I believe the company has been successful in reaching settlements in, in the past, in Kentucky. My memory is getting a little foggy. I believe the commission has approved those settlements, not modified them. Is that accurate?

[Vince Sorgi, President and CEO at PPL Corporation]

You're right. Generally, we have been able to reach settlement with the parties to our cases. The commission has modified them slightly in the past, nothing too material. At times they've accepted them as filed, and other times they've modified them, I would say slightly.

[Anthony Crowdell, Senior Analyst at Mizuho]

Great. Thanks for taking my questions. Appreciate it.

[Vince Sorgi, President and CEO at PPL Corporation]

Sure thing, Anthony.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Vince Sorgi for any closing remarks.

[Vince Sorgi, President and CEO at PPL Corporation]

Just want to say thanks for, thanks for joining us on the call. Feeling good about our progress so far, year to date. Looking forward to the, the second half of the year. Have a great weekend, everyone, and we'll, we'll see you soon at the next conference.

Participants

Executives

• Andy Ludwig, Vice President, Investor Relations
• Joe Bergstein, CFO
• Vince Sorgi, President and CEO

Analysts

• Anthony Crowdell, Senior Analyst at Mizuho
• David Arcaro, Analyst at Morgan Stanley
• Durgesh Chopra, Analyst at Evercore ISI
• Gregg Orrill, Executive Director and Equity Analyst at UBS
• Paul Zimbardo, Analyst at Bank of America
• Shar Pourreza, Senior Managing Director and Senior Equity Analyst at Guggenheim Partners