Good day, and welcome to the PPL Corporation Second Quarter 2023 Earnings Conference Call. Note that this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President, Investor Relations. Please go ahead.

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

Thank you, Andy, and 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. But despite these impacts, we remain confident in our ability to deliver on our 2023 ongoing earnings forecast of $1.50 to $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 to $60 million targeted reductions this year. And 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. In addition, today, we reaffirmed our projected earnings per share and dividend growth rate of 6% to 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 jurisdiction, 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. 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. 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 and better managing congestion on the transmission network. Turning to Slide 5 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 megawatts 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. As proposed, it would replace several 1970s era coal units with over 1,200 megawatts of new combined cycle natural gas generation, nearly 1,000 megawatts of solar generation and 125 megawatts of battery storage. In addition, it would establish more than a dozen 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. For the schedule, intervenor testimony was filed July 14 with no real surprises. Next up is our rebuttal testimony due August 9, followed by an info conference scheduled for August 15 to explore a potential settlement. Public hearings are then set to begin August 22 and could last several days. 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 6. That concludes my strategic and operational update. I’ll now turn the call over to Joe for the financial update.

Thank you, Vince, and good morning, everyone. Let’s turn to Slide 7. As Vince mentioned, second quarter earnings from ongoing operations were $0.29 per share compared to $0.30 per share in Q2 2022. The 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 two additional months of results in Q2 2023 compared to the prior year. 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% Pennsylvania compared to normal. Turning to the ongoing segment drivers for the quarter on Slide 8. 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. 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 & 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 9. Our Q2 performance puts PPL’s GAAP earnings at $0.54 per share year-to-date through June 30. Adjusting for special items recorded through the second quarter, earnings from ongoing operations totaled $0.77 per share for the first half of 2023. 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 have 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 and we are tracking favorably to plan on O&M through the second quarter, and 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 disc mechanism in Pennsylvania is projected to offset the lower sales volumes and higher O&M experience in that segment. 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. And 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 $1.58 per share. We have an excellent track record of achieving our financial targets, which we expect to continue in 2023. Looking ahead and 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 of 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 give us even more confidence that we will achieve the targeted savings assumed in our long-term forecast and it will help us deliver a more affordable clean energy transition for our customers. That concludes my prepared remarks. I’ll turn the call back over to Vince.

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 shareholders. 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. And 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 shareholders alike. With that, operator, let’s open it up for questions.

The first question today comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Hey, 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?

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

Got it. And over what time frame?

$250 million, somewhere around there. Sorry, say that again?

Sorry. Thank you. Over what time frame is that $200 million to $250 million?

Well, we need to get that approved, right? So 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. And then that will kind of dictate the time frame over which we deploy that capital.

Would that be incremental to your current CapEx plan wins? Or do you have some...

No, that’s in the current plan.

Got it. Okay. And then just in terms of the offsetting the year-date headwinds and weather and storm, I think you mentioned in your prepared remarks, you mentioned like integration savings. Can you elaborate on that? How brings that pie obviously, it sounds like a lot of opportunities in excess of $175 million. But maybe just like what’s the upside on the integration and Rhode Island and what might be the other opportunities?

Yes. So the integration in Rhode Island, Durgesh, is going very well. Really, what we’ve 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 mindful of the pace at which we’re hiring some of the open positions we have there. So we’re fully staffing up that operations and looking to take over completely from Grid. And so those are the areas that are driving the Rhode Island integration. We would expect that to be about $0.01 to $0.02 for the year. As far as the progress on the $175 million and the establishment of the TMO, that’s going extremely well. 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 million. The TMO also provides a forum for employees to share their ideas, areas that we could save on O&M and be more efficient across the company. So I don’t want to give a dollar amount on that yet at this point as to where we are. We – part of the process of that brings a lot of rigor to the savings; we’ve got to vet them all to complete business cases where needed. What I can tell you is that we are confident in achieving the $175 million and potentially more than that and the development of the TMO really enhances that confidence as we’re working through this.

Got it. Thanks for the time.

Thanks, Durgesh.

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

Hi, good morning, team. Thanks. Just to follow-up on that last question of Durgesh quickly. Is the TMO and those savings more about derisking and extending the outlook? Or is that something that could be incremental in the planning period?

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

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

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

Yes, sure. So, well, from a second half of the year, we would expect we have in our forecast normal weather. From our longer-term forecast, we continue with 50 basis points of sale 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 decline in commodity prices already this year, and we would expect longer-term to see growth in residential usage as electric vehicles and electrification become more prevalent. Lower industrial sales in Kentucky have not really impacted our margins. Those customers are more demand-driven than usage. As we think about the longer-term, there are a number of factors that give us confidence in our assumptions. We 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 '21 and '22. That includes the Ford EV battery plant initiative, which we’ve talked a lot about. That’s broken ground and is well under construction. The state is targeting another $8 billion of investment for 2023. So when we look at the 10 years prior to this period from 2010 to 2020, there was an average of about $4 billion per year in economic development. So to see $10 billion in each of '21 and '22 and projecting $8 billion this year highlights that Kentucky is a great place to do business and continue economic development there in support of our growth assumptions. But we continue to see strong industrial growth in manufacturing and agricultural sectors as well.

Yes. We’re not concerned with volumes at all other than the impact on weather. I would say our volume story is really weather-driven.

Okay. Great. Thanks for the detailed answer. Appreciate it.

Sure.

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

Hi. Good morning.

Hi, David. Good morning.

Hey, good morning. Thanks for taking my questions. Let’s see. I think just one here. I was curious, we are 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 think that could impact at all the outlook for Kentucky, just the generation mix maybe longer term, or other opportunities to see lower PPA prices or lower costs in the current CPCN filing or if you’re thinking an analysis has evolved at all for the longer term generation mix there?

Yes. Look, I think the bigger issue in getting our solar deployed in Kentucky is citing and permitting days as opposed to necessarily the supply chain issues, although you are right, they have been an issue across the industry, and that is starting to abate. In our case, though, I think it is more citing and permitting, which I think the company-owned solutions make that much easier because we can navigate that easier than third-party developers have been able to so far. So, as you know, our CPCN has a combination of company-owned and PPAs in it. We will continue to look at the executability of those PPAs, and if we continue to see issues there, that could actually push us more toward recommending more company-owned solutions where we have a higher degree of confidence that we can get them built.

Okay. Got it. That’s helpful color. I didn’t appreciate that in the backdrop there. That’s all I had. Thanks.

You’re welcome.

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

Hey. Good morning, guys.

Good morning, Shar.

Good morning. So, Vince, I just want to – starting with the Kentucky CPCN filing. I mean, obviously, thanks for the incremental color in the prepared remarks on the timeline. As we look ahead to the prospects for settlement, you mentioned August 15th formal conference. I guess 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.

Well, look, I think you can appreciate, I don’t necessarily want to get into negotiating positions at this point on the call. But what I will say just around the process itself is we are actively engaged right now with various interveners. As you mentioned, the settlement conference is scheduled for the 15th; if that goes well, 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. But at this point, I would say, Shar, it’s too early to tell if we will be able to reach a settlement. But if we don’t, of course, we are ready to defend the plan as filed, as we have been indicating all along. So, a little early at this point to tell if we can get there, but certainly, we are open to those discussions.

So, let me just drill down a little bit on the defending side. 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 a scenario where there are issues. And then do me a favor, could you just maybe frame what – how much of that CapEx you could see being backfilled, right, in that worst-case scenario?

Well, look, I think the key takeaway is I am not sure I would expect whether we have a settlement or are fully litigating our case that that would have a material impact on either our capital plan or our EPS targets given the different buckets of CapEx, whether it’s building replacement generation or environmental spend or other types of CapEx that we might deploy in Kentucky and elsewhere across the fleet. If you look at the testimony and based on everything that’s been filed to date, I don’t think the outcome, Shar, is going to be an all or nothing on the coal plant retirement. But when you look at the Good Neighbor Plan, which was consistent with what we were assuming in the CPCN, that would require SCRs on Gen 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. So, even if it was a full rejection of the retirements, which again, I don’t think that will be the outcome. As we have talked in the past, that’s in the $500 million to $1.5 billion of environmental CapEx. That doesn’t even include the amount of maintenance capital we have to spend on those plants going forward. So, again, I am not sure the outcome necessarily impacts the CapEx and EPS trajectory. It might just be different buckets where we are spending that capital.

And then just lastly, that bucket you are going to be spending that capital. This is obviously the worst case scenario, so no one's are assuming this. But in the case that it does turn out to be negative, that incremental capital doesn’t have a timing lag, right? So, you can go ahead and recognize it fairly immediately where we wouldn’t keep divits in your earnings growth in the near-term.

Some of that CapEx we would have to start spending right away to continue to operate those plants. And that, to your point, that would be recoverable under the environmental cost recovery, which does not require a base rate case for recovery.

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

Thanks.

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

Hey, Greg.

Hey, Greg.

Hey. Yes. Thanks. This may be repetitive. I know you said that the testimony from intervenors was kind of in line with expectations. Did you learn anything about their positions that was incremental to the process that – or the process itself that you are willing to share?

Not really, Gregg. I would say the testimony was as expected. I think we talked about expected intervener positions when we rolled out the plan that we filed. So, we knew the coal association would be against retiring coal. We knew the environmental intervenors 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 least cost, reliable, safe energy. It is increasingly cleaner which we are hearing a lot from our customers and from our two major cities in Louisville and Lexington. So, we were extremely thoughtful and took a lot of input from the IRP process into coming up with what we proposed. As I have talked about, however, we are willing to engage in settlement discussions with the parties, and we will see if we can reach something here in the next couple of weeks going into the hearings beginning on the 22nd. So, I would say, as expected and we incorporated most, if not all of that into the original plan that we filed with the commission.

Alright. Thanks.

The next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Good morning, Vince. Good morning, Joe.

Good morning.

I just wanted to follow-up on Shar’s question just one, and I am not sure you can answer it. Do you know if the commission in Kentucky would prefer the parties reach a settlement or given maybe with the closure of plants or whatever, that they are more buyers or they prefer a fully litigated track to have maybe a stronger record?

I don’t know that they have a preference one way or the other, Anthony, to be honest with you. They are going to uphold their obligation to ensure whether it’s a settlement or our case that it meets the requirements of SB-4 and again, our obligation to serve in a least cost reliable way. So, they are going to do their duty regardless of what’s in front of them, whether it’s a settlement or our case. I am not sure if they have a preference on which one is in front of them. I mean they will take a settlement as evidence in the case. They don’t have to approve the settlement, but they will certainly take it as evidence in the case. The authority really lies with them in terms of whether or not to accept that or not.

Great. And then just lastly, I believe the company has been successful in reaching settlements in the past in Kentucky. Has – I guess my memory is getting a little foggy. I believe the commission has approved those settlements and not modified them. Is that accurate?

So, you are right. Generally, we have been able to reach settlements with the parties to our cases. The commission has modified them slightly in the past, nothing too material. At times, they have accepted them as filed. And other times, they have modified them, I would say, slightly.

Good. Thanks for taking my questions. Appreciate it.

Thank you, Anthony.

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

I just want to say thanks for joining us on the call. Feeling good about our progress so far year-to-date, looking forward to the second half of the year. And have a great weekend, everyone, and we will see you soon at the next conference.

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