PPL's Q3 2025: Contradictions Emerge on Pennsylvania Resource Adequacy, Kentucky Generation Plans, and Rate Case Financing Strategies

Business Commentary:

• Financial Performance and Earnings Guidance:
• PPL Corporation reported third-quarter GAAP earnings of $0.43 per share, adjusting to $0.48 per share for ongoing operations.
• The company narrowed its 2025 ongoing earnings forecast range to $1.78 to $1.84 per share, maintaining a midpoint of $1.81 per share.

• This performance was driven by higher revenues from formula rates and rider recovery mechanisms, as well as lower operating costs.

• Regulatory Approvals and Infrastructure Investments:

• In Kentucky, LG&E and KU reached a settlement with a revised aggregate increase of $235 million in annual revenues and an authorized ROE of 9.9%.
• The agreement also features a base rate stay-out provision through 2028, supporting continued investment in Kentucky's energy infrastructure.

• These regulatory approvals are part of PPL's strategy to maintain reliable, resilient, and affordable energy networks.

• Data Center Growth and Infrastructure Support:

• PPL's data center pipeline in Pennsylvania has grown significantly, with the number of projects in advanced stages increasing from 14.4 gigawatts to 20.5 gigawatts.
• The company is investing in infrastructure with a projected $20 billion in infrastructure investments from 2025 through 2028 to support growing demand.

• This growth is attributed to PPL's strong transmission grid and positive regulatory environment, which attract large load customers.

• Capital Management and Financial Discipline:

• PPL completed forward contracts to sell approximately $1 billion of equity, derisking a significant portion of its equity financing needs.
• The company remains focused on disciplined execution and strategic investments to support future growth while maintaining a strong credit profile.
• This financial discipline is evident in the company's ongoing commitment to cost management and operational efficiency.
  

Contradiction Point 1

Resource Adequacy Solutions in Pennsylvania

It involves differing perspectives on potential solutions for addressing resource adequacy in Pennsylvania, which affects future investment strategies and regulatory policies.

Are you concerned about resource adequacy in Pennsylvania given the pending bills in the House and Senate? Can transmission companies and IPPs reach a compromise on long-term resource adequacy agreements? - Shahriar Pourreza(Wells Fargo Securities, LLC, Research Division)

2025Q3: We're open to finding a solution with IPPs. We aim to stabilize capacity prices and ensure adequate supply. - Vincent Sorgi(CEO)

What are the advantages of IOUs versus IPPs in addressing resource adequacy, and do you plan to build or incentivize others to build? - Shar Pourreza(Guggenheim Partners)

2025Q1: PPL is capable of building and owning generation in Pennsylvania if allowed. PPAs under default service provisions are limited and not the best solution for solving resource adequacy gaps. - Vincent Sorgi(CEO)

Contradiction Point 2

Kentucky Load Growth and Generation Investment

It involves differing perspectives on the need for additional generation investment in Kentucky, which could impact capital expenditure plans and regulatory strategies.

Should we include the full gigawatt load in Kentucky's new capital plan rollout? - Paul Zimbardo(Jefferies LLC, Research Division)

2025Q3: We continue to assess additional load beyond the CPCN forecast. Probability-weighted growth estimate is 2.8 gigawatts. Additional generation investment beyond our current plans would be required for this load. - Joe Bergstein(CFO)

Can you update the pro forma for Kentucky's stipulation agreement and discuss the required incremental generation capacity? - Paul Zimbardo(Jefferies)

2025Q2: If load growth materializes, we may need to refile for additional generation, possibly a battery, to meet demand. Additional demand could arise from data centers and other loads, potentially leading to another CPCN to increase capacity. - Vincent Sorgi(CEO)

Contradiction Point 3

Kentucky CPCN and Resource Adequacy Mechanisms

It involves the status of the Kentucky CPCN and the mechanisms denied without prejudice, which could impact resource adequacy and regulatory outcomes.

In the Kentucky CPCN case, which mechanisms were denied without prejudice and what information was missing? Can you elaborate on the near-term EPS impact? - Shahriar Pourreza(Wells Fargo Securities, LLC, Research Division)

2025Q3: No earnings impact from Mill Creek 6 denial as the AFUDC treatment is approved, and the mechanism wouldn't have taken effect until service. Mill Creek 2 is more pressing as we seek cost recovery for continued operation. We'll address this in the ongoing rate case hearings. The commission encouraged refiling in future proceedings. - Vincent Sorgi(CEO)

Update on the Kentucky CPCN, specifically megawatt capital investment and timing for the final decision? - Durgesh Chopra(Evercore ISI)

2024Q4: We updated our capital plan with new generation investments, including two combined cycle plants (2030 and 2031) and 400 MW of battery storage by 2028. This plan aligns with our IRP recommendations. We'll file the CPCN by the end of Q1, expecting a decision by Q4. - Vincent Sorgi(CEO)

Contradiction Point 4

Kentucky Rate Case and Equity Financing

It involves the approach to Kentucky rate case filings and the use of equity issuance to finance capital investments, which are key financial and regulatory strategies.

With the Kentucky and Pennsylvania rate case filings, how does the growth rate in the plan look? - Paul Zimbardo(Jefferies LLC, Research Division)

2025Q3: The rate case proceeds as planned, and we are in early stages of rate case preparation. This is consistent with regulatory timelines, and we expect the rate case to be filed in the fourth quarter of this year. - Joe Bergstein(CFO)

What are the equity-linked debt options mentioned, and how do they reduce equity financing needs? - Paul Zimbardo(Jefferies)

2024Q4: We plan to issue equity ratably over the period, with about $400 million to $500 million expected this year. We'll complement the ATM with other equity-like financing structures and remain flexible based on market conditions. - Joseph Bergstein(CFO)

Contradiction Point 5

Pennsylvania Resource Adequacy and Data Center Load

It involves the approach to addressing resource adequacy in Pennsylvania and the impact of data center load growth on resource requirements.

What are your thoughts on Pennsylvania's resource adequacy given the pending bills in the House and Senate? Can utilities and IPPs reach a compromise on long-term resource adequacy agreements? - Shahriar Pourreza(Wells Fargo Securities, LLC, Research Division)

2025Q3: Budget impasse and REGI are gating issues for legislative progress. Discussions are ongoing, but it's early, with focus on committees. Our goal is to incentivize new generation, and we're open to finding a solution with IPPs. We aim to stabilize capacity prices and ensure adequate supply. - Vincent Sorgi(CEO)

What is the pathway for resource adequacy in Pennsylvania? - James Kennedy(Guggenheim Securities LLC)

2024Q4: Legislation is expected in the current session, possibly by spring or summer. It could include utilities investing in generation, long-term PPAs, or low-cost financing for new generation. We expect some legislation to support resource adequacy in PA. - Vincent Sorgi(CEO)