Slide 1: PPL 2nd Quarter Earnings Call
PPL 2nd Quarter Earnings Call August 10, 2020
Slide 2: Cautionary Statements and Factors That May Affect Future Results
Cautionary Statements and Factors That May Affect Future Results Statements made in this presentation about future operating results or other future events, including the process to sell PPL’s U.K. business, are forward-looking statements under the Safe Harbor provisions of the Private Securities Li
Slide 3: Agenda
Agenda I. Strategic Announcement Vince Sorgi II. Second Quarter Review Vince Sorgi III. Q2 Financial Review Joe Bergstein IV. Closing Remarks Vince Sorgi V. Q&A PPL 2nd Quarter Earnings Call – August 10, 2020 3
Slide 4: Announced Process to Sell U.K. Business
Announced Process to Sell U.K. Business Strategic repositioning expected to be value accretive to shareowners and to better position the company for continued long-term value creation ➢ Positioning PPL as a purely U.S. utility holding company ▪ Simplifying its business mix and enhancing corporate cl
Slide 5: Second Quarter Review
Second Quarter Review Q2 Highlights Q2 Earnings Results (Earnings Per Share) ➢ Delivered Q2 2020 ongoing earnings $0.60 $0.58 $0.55 results of $0.55 per share vs. $0.58 per $0.45 share in Q2 2019 ➢ COVID-19 Update ▪ Remain diligent on safety and providing reliable service to customers 2019 Q2 2020 Q
Slide 6: Q2 2020 Financial Results
Q2 2020 Financial Results Q2 results reflect an estimated $0.06 per share unfavorable impact due to COVID-19 driven largely by lower sales volumes in the U.K. $0.04 per share of impact related to U.K. volumes is recoverable in the 2022-2023 regulatory year due to U.K. decoupling mechanism. (Earnings
Slide 7: COVID Implications on Sales by Segment
COVID Implications on Sales by Segment Stronger residential sales substantially mitigated impact in U.S.; Any impacts from lower sales volumes in U.K. to be recovered via decoupling mechanism Q2 2020 vs. Q2 2019 Weather-Normalized Load (GWh) Pennsylvania Regulated Kentucky Regulated U.K. Regulated (
Slide 8: Key Focus Areas
Key Focus Areas Clear focus on delivering long-term value for customers and shareowners ➢ Delivering safe and reliable service at an affordable price ▪ Underpinned by innovation and operational improvement that drive PPL’s premier customer service and satisfaction levels ▪ Leveraging culture of oper
Slide 9: Appendix
I: .tereee eee RR) Appendix A century of people powering life.
Slide 10: YTD 2020 Financial Results
YTD 2020 Financial Results (Earnings Per Share) $0.04 impact due to lower sales volumes to be recovered through decoupling mechanism in 2022-2023 $ 1 .27 $ 0 .00 $ 0 .02 $ 1 .22 $ 0 .04 $ 0 .29 ($ 0 .03) ($ 0 .06) ($ 0 .02) $ 0 .26 PA ($0.01) U.K. ($0.04) Adj. Margin ($0.02) Adj. Margin $0.04 Adj. M
Slide 11: Foreign Currency Update
Foreign Currency Update Foreign Currency Hedge Status Indicates percentage of ongoing earnings hedged 95% 8% 0% (1) 2020 2021 2022 Average Hedge Rate(2) $1.47/£ $1.32/£ - ➢ Increased 2020 hedge position to 95% from 79% at the end of the first quarter ➢ 2021 hedge position remains at about 8% ▪ No pl
Slide 12: U.K. Load Profile and Sensitivities
U.K. Load Profile and Sensitivities U.K. volume variances are NPV neutral; decoupled and trued-up in 2 years Key Considerations 2019A Margin Breakdown ➢ Any revenue under collection due 21% to volume declines, including Fixed Electric Customer Charge COVID, will be trued-up in tariff two Electric De
Slide 13: Pennsylvania Load Profile and Sensitivities
Pennsylvania Load Profile and Sensitivities Fixed charges and formula rates make up a significant percentage of margin Key Considerations 2019A Margin Breakdown ➢ Approx. 40% of margins are from 13% Transmission business, under 39% Transmission Distribution (Fixed) FERC-Formula rates 31% Distributio
Slide 14: Kentucky Load Profile and Sensitivities
Kentucky Load Profile and Sensitivities Revenue diversity, fixed and demand charges reduce sensitivity to load Key Considerations 2019A Margin Breakdown ➢ Approx. 25% of margins are from 9% 10% 9% Fixed Electric Customer Charge fixed customer charges, riders and Electric Energy Charge formula rates
Slide 15: 2020 – 2024 Capital Plan by Utility
2020 – 2024 Capital Plan by Utility ($ in billions) Additional Opportunities $3.3 •AMI (KY) •EV/Decarbonization (U.K.) •Resiliency investment (all) $0.4 $3.0 $0.4 $2.5 $2.5 $2.5 $0.7 $0.4 $0.3 $0.3 $0.4 $0.3 $0.3 $0.3 $1.0 $1.1 $0.7 $0.6 $0.7 $1.2 $1.2 $1.3 $1.1 $1.1 2020E 2021E 2022E 2023E 2024E (1
Slide 16: Projected Rate Base by Utility
Projected Rate Base by Utility ($ in billions) 2019A-2024E CAGR Breakdown $33.4 $34.2 $32.7 $31.4 $29.9 $28.3 5.4% $12.2 $12.7 $13.4 $11.5 $10.9 $10.3 4.1% $4.0 $4.2 $4.2 $4.4 $3.6 $3.9 $4.7 $5.0 $5.2 $5.2 5.4% $4.0 $4.3 $5.3 $5.7 $6.1 $6.3 $6.5 $6.6 4.5% $5.1 $5.1 $5.1 $5.0 $4.8 $4.6 (2.0%) 2019A 2
Slide 17: U.K. Regulated Incentive Revenues
U.K. Regulated Incentive Revenues WPD continues to demonstrate how premier network operators deliver value for customers and shareowners Incentive Revenues (1) Excellent Customer Satisfaction Ratings Customer Service Rating (10 point scale) $100 $105 $105 9 .1 9 .0 9 .0 9 .0 9 .2 9 .1 9 .1 9 .1 $94
Slide 18: U.K. Regulated: True-up Mechanisms
U.K. Regulated: True-up Mechanisms ➢ TRU Adjustment ▪ Tariffs are set using a forecasted RPI as determined by HM Treasury ▪ Forecasted RPI is trued up to actuals and the corresponding revenue adjustment is collected from or returned to customers two regulatory years later ➢ MOD Adjustment ▪ On an an
Slide 19: U.K. Regulated: RIIO-2 Projected Timelines
U.K. Regulated: RIIO-2 Projected Timelines Proposed Electricity Distribution Timeline (1) RIIO-ED2 RIIO-ED2 RIIO-ED2 Open Letter Sector Methodology RIIO-ED2 Final Consultation Consultation Draft Business Plan Determination (August) ✓ (July) ✓ Submission (July) (December) RIIO-ED2 RIIO-ED2 RIIO-ED2 F
Slide 20: Dividend Profile
Dividend Profile PPL’s dividend is an important component to total shareowner return 10-Year Dividend History PPL Dividend Yield vs. Large Cap Utilities (2) ($ per share) Large Cap Utility Average: 4.0% $1.64 $1.65 $1.66 $1.58 6.2% $1.52 $1.47 $1.49 $1.51 $1.44 4.7% 4.6% 4.6% 4.6% $1.40 $1.40 4.0% 4
Slide 21: Debt Maturities
Debt Maturities 2025 and ($ in Millions) 2020 2021 2022 2023 2024 Beyond Total PPL Capital Funding $0 $0 $900 $600 $350 $3,780 $5,630 PPL Electric Utilities (1) $0 $400 $474 $90 $0 $3,075 $4,039 LG&E and KU Energy $475 $250 $0 $0 $0 $0 $725 Louisville Gas & Electric (1) $0 $292 $0 $0 $0 $1,732 $2,02
Slide 22: Liquidity Profile
Liquidity Profile Letters of C redit & C om m ercial Unused Ex piration C apacity Borrow ed Paper Issued C apacity Entity F acility Date (M illions) (M illions) (M illions) (M illions) PPL C apital F unding Syndicated Credit Facility Jan-2024 $1,450 $0 $0 $1,450 Term Loan Credit Facility Mar-2022 10
Slide 23: PPL’s Credit Ratings
PPL’s Credit Ratings PPL Corporation PPL Capital Funding Credit Rating S&P Moody’s Credit Rating S&P Moody’s Secured NR NR Secured NR NR Unsecured NR NR Unsecured BBB+ Baa2 Long-term Issuer A- Baa2 Long-term Issuer A- NR Outlook Stable Stable Outlook Stable Stable WPD Holding Company LKE Holding Com
Slide 24: Voluntary ESG Disclosures
Voluntary ESG Disclosures Extensive and transparent reporting keeps stakeholders informed ➢ TCFD, SASB disclosure mapping (1) (2) ➢ CPA-Zicklin political disclosure (3) ➢ Responsive to Sustainalytics, MSCI, ISS, and other ratings (1) TCFD: Task Force on Climate-related Financial Disclosures. (2) SAS
Slide 25: Reconciliation of Segment Reported Earnings to Earnings From Ongoing Operations
Reconciliation of Segment Reported Earnings to Earnings From Ongoing Operations After-Tax (Unaudited) 2nd Quarter Year-to-Date (millions of dollars) June 30, 2020 June 30, 2020 U.K. KY PA Corp. & U.K. KY PA Corp. & Total Total Reg. Reg. Reg. Other Reg. Reg. Reg. Other Reported Earnings $ 179 $ 74 $
Slide 26: Reconciliation of Segment Reported Earnings to Earnings From Ongoing Operations
Reconciliation of Segment Reported Earnings to Earnings From Ongoing Operations After-Tax 2nd Quarter Year-to-Date (millions of dollars) June 30, 2019 June 30, 2019 U.K. KY PA Corp. & U.K. KY PA Corp. & Total Total Reg. Reg. Reg. Other Reg. Reg. Reg. Other Reported Earnings $ 284 $ 97 $ 94 $ (34) $
Slide 27: Adjusted Gross Margins Summary
Adjusted Gross Margins Summary (Unaudited) Three Months Ended June 30, (millions of dollars, except share data) Per Share Diluted 2020 2019 Change (after-tax) U.K. Adjusted Gross Margins $ 439 $ 500 $ (61) $ (0.07) Less: Impact of changes in foreign currency exchange rates (24) (0.03) U.K. Adjusted
Slide 28: Reconciliation of Adjusted Gross Margins to Operating Income
Reconciliation of Adjusted Gross Margins to Operating Income (Unaudited) Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 (millions of dollars) U.K. KY PA U.K. KY PA Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted Gross Gross Gross Operating Gross Gross Gross Operating Margins M
Slide 29: Reconciliation of PPL’s Earnings Forecast
Reconciliation of PPL’s Earnings Forecast 2020 Forecast After-Tax (Unaudited) 2020 Forecast Range (per share - diluted) Midpoint High Low Estimate of Reported Earnings $ 2.45 $ 2.55 $ 2.35 (1) Less: Special Items (expense) benefit: Foreign currency economic hedges (0.03) (0.03) (0.03) (2) COVID-19 i
Slide 30: Forward-Looking Information Statement
Forward-Looking Information Statement Statements contained in this presentation, including statements with respect to future earnings, cash flows, dividends, financing, regulation and corporate strategy, including the process to sell PPL Corporation’s U.K. business, are “forward-looking statements”
Slide 31: Definitions of non-GAAP Financial Measures
Definitions of non-GAAP Financial Measures Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to reported earnings, or net income, an indicator of operating performance determined in accordance with GAAP. PPL believe
Slide 32: Definitions of non-GAAP Financial Measures
Definitions of non-GAAP Financial Measures Management also utilizes the following non-GAAP financial measures as indicators of performance for its businesses: "U.K. Adjusted Gross Margins" is a single financial performance measure of the electricity distribution operations of the U.K. Regulated segm