ALLENTOWN, Pa. – PPL Corp. can achieve a trifecta by keeping interest rates affordable, protecting the environment while still rewarding shareholders, Chief Executive Officer Vincent Sorgi said Thursday.
Sorgi discussed the strategy at PPL’s Investor Day, noting that the utility is now focused on Pennsylvania, Kentucky and Rhode Island. PPL sold its UK business to London-based National Grid in exchange for taking over the dominant utility in Rhode Island. Exiting the UK market reduces foreign exchange and regulatory risks, Sorgi said.
“The new PPL is now positioned to deliver enhanced growth at lower risk,” said Sorgi. He also announced a quarterly dividend increase from 20 to 22.5 cents, an annual rate of 90 cents, and set a target of 9% to 11% annual total return, based on dividends and earnings per share growth.
Sorgi and other senior executives stressed that PPL has a strong balance sheet and does not need to sell new stock to fund growth. PPL will support the ambitious outlook with $12 billion in capital investments over five years, Sorgi said.
Now that PPL has shifted its focus to the US, the Allentown-based company will apply its Pennsylvania model of investing in technology and prudent spending to its operations in Kentucky and Rhode Island.
“Our focus going forward is to maximize our resource allocation to the projects and activities that bring direct benefit to our customers,” said Sorgi.
That means keeping interest rates affordable, he said, which Sorgi said is essential in times of high inflation.
Sorgi reiterated PPL’s goal of achieving net-zero carbon emissions by 2050. Christine Martin, the company’s chief sustainability officer, said that PPL’s coal-burning facilities in Kentucky “account for almost all of our carbon emissions,” and most of these facilities will reach the end of their useful lives by the end of the next decade.
PPL also reduces CO2 emissions from its non-electricity generating sources such as vehicles and buildings.
“Our commitment to net-zero carbon emissions by 2050 is real,” said Martin. The company will stop burning “unabated” coal by this year; Unabated in this case means coal that is burned without capturing carbon emissions.
PPL can get away from burning coal in Kentucky while keeping supplies reliable and prices down, Martin said.
“It’s not just talk,” said Greg Dudkin, Chief Operating Officer, of PPL’s move toward clean energy. He also said the company’s investments in technology can keep energy reliable and affordable. The company uses weather-resistant materials like steel instead of wood to keep the energy flowing, replacing circuit breakers, transformers and other devices with digital models.
“Replaced equipment requires less maintenance and helps us ensure critical reliability,” said Dudkin. The state of Rhode Island has aggressive carbon emission reduction goals and the utility is poised to meet them at its new facility in the state, Dudkin said.
On the dollar-and-cent side, Chief Financial Officer Joe Bergstein said PPL has “financial flexibility that we haven’t had in more than a decade.” The company sees no need for tariff increases in the “short term”.
“We’ve been a company in transition for more than a year,” Bergstein said, referring to the sale of National Grid’s UK operations and subsequent purchase of Rhode Island assets. Now PPL is ready to move forward.
The company is forecasting 2022 earnings of $1.30 to $1.45 per share and assuming a full year of contributions from Rhode Island Energy, “pro forma” earnings are expected to be $1.40 to 1. $55 forecast. Rhode Island Energy was known as Narragansett Electric when owned by National Grid.
Sorgi said that now that the two major transactions with National Grid have been completed, PPL is moving forward and applying its Pennsylvania strategy to the other two states it serves.
“By the end of the decade, we see even greater opportunities,” he said, and the company is poised to invest billions.
PPL’s balance sheet and business outlook support “a best-in-class valuation” relative to similar companies, Sorgi said.
“We have proven that we can consistently deliver superior performance over a long period of time,” he said.
PPL serves approximately 3.5 million customers in Pennsylvania, Kentucky and Rhode Island with electricity and gas. Its shares trade on the New York Stock Exchange under the ticker symbol PPL. They were down 56 cents to $29.66 as of Thursday afternoon.
Over the last 52 weeks, PPL shares have traded as high as $30.72 and as low as $25.27. The company’s market capitalization (number of outstanding shares multiplied by the current price) is $21.8 billion.