PPL(PPL) - 2024 Q3 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for PPL Corporation and its key subsidiaries (PPL Electric, LG&E, KU) for the third quarter ended September 30, 2024, including income statements, balance sheets, cash flow statements, and statements of equity PPL Corporation (Consolidated) PPL Corporation reported a Q3 2024 net income of $214 million, a decrease from $230 million in Q3 2023, while nine-month net income increased to $711 million from $627 million, with diluted EPS rising to $0.96 from $0.85 PPL Corporation Consolidated Financial Highlights (in Millions) | Financial Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $2,066 | $2,043 | $6,251 | $6,281 | | Operating Income | $428 | $437 | $1,363 | $1,240 | | Net Income | $214 | $230 | $711 | $627 | | Diluted EPS | $0.29 | $0.31 | $0.96 | $0.85 | PPL Corporation Cash Flow Summary (Nine Months Ended Sep 30, in Millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,829 | $1,648 | | Net cash used in investing activities | $(1,944) | $(1,739) | | Net cash provided by financing activities | $316 | $88 | PPL Corporation Balance Sheet Summary (in Millions) | Balance Sheet Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $40,472 | $39,236 | | Total Liabilities | $26,380 | $25,303 | | Total Equity | $14,092 | $13,933 | PPL Electric Utilities Corporation PPL Electric's net income increased to $142 million in Q3 2024 and significantly to $441 million for the nine-month period, driven by higher operating income despite decreased operating revenues PPL Electric Financial Highlights (in Millions) | Financial Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $716 | $737 | $2,159 | $2,295 | | Operating Income | $230 | $225 | $706 | $646 | | Net Income | $142 | $136 | $441 | $384 | - For the nine months ended Sep 30, 2024, PPL Electric's net cash from operating activities was $689 million, while investing activities used $1,240 million, primarily for property, plant, and equipment expenditures and notes to affiliates[75] Louisville Gas and Electric Company (LG&E) LG&E's Q3 2024 net income remained flat at $77 million, but nine-month net income increased to $232 million from $210 million, driven by higher operating income LG&E Financial Highlights (in Millions) | Financial Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $397 | $398 | $1,239 | $1,227 | | Operating Income | $119 | $124 | $361 | $338 | | Net Income | $77 | $79 | $232 | $210 | Kentucky Utilities Company (KU) KU's Q3 2024 net income slightly decreased to $98 million, but nine-month net income substantially grew to $283 million from $240 million, propelled by increased operating income KU Financial Highlights (in Millions) | Financial Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $509 | $505 | $1,498 | $1,439 | | Operating Income | $153 | $157 | $446 | $393 | | Net Income | $98 | $101 | $283 | $240 | Notes to Financial Statements The notes detail accounting policies, segment performance, revenue recognition, regulatory matters, financing activities, and commitments, highlighting ongoing regulatory proceedings and debt management strategies PPL Segment Net Income (Loss) (YTD 2024 vs YTD 2023, in Millions) | Segment | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | | Kentucky Regulated | $493 | $432 | | Pennsylvania Regulated | $441 | $384 | | Rhode Island Regulated | $90 | $70 | | Corporate and Other | $(313) | $(259) | | Total Net Income | $711 | $627 | - PPL Electric reached a Settlement Agreement with the PAPUC's Bureau of Investigation & Enforcement regarding 2022-2023 billing issues, including a $1 million contribution to its hardship fund and remedial system improvements, with terms now final[168][169] - LG&E and KU are constructing a new 640 MW Natural Gas Combined Cycle (NGCC) unit at Mill Creek Generating Station, with an estimated total project cost of $1.0 billion, expected to be commercially operational in mid-2027[188] - In connection with the acquisition of RIE, PPL incurred transition services agreement (TSA) costs of $129 million for the nine months ended Sep 30, 2024, with the TSA completed in Q3 2024[186] Management's Discussion and Analysis (MD&A) Management discusses PPL's financial results and condition, highlighting year-to-date earnings growth driven by capital investments and favorable weather, strong liquidity, and ongoing regulatory and grid modernization initiatives Overview PPL's strategy focuses on industry-leading performance, clean energy transition, and shareholder value, with key developments including the completion of the RIE Transition Services Agreement and ongoing environmental compliance efforts - PPL's strategy is to achieve industry-leading performance, advance a clean energy transition while maintaining affordability and reliability, and create long-term shareholder value[309] - The Transition Services Agreement (TSA) with National Grid, related to the RIE acquisition, was completed in Q3 2024, with TSA costs totaling $129 million for the first nine months of 2024[311] - LG&E plans to retire Mill Creek Unit 1 (300 MW) in 2024 and Unit 2 (297 MW) in 2027 due to environmental requirements and aging infrastructure, with a cost recovery request for Unit 1 pending before the KPSC[315][316] PPL Results of Operations PPL's nine-month net income increased by $84 million to $711 million due to higher operating income and lower energy purchases, despite a Q3 2024 net income decrease from higher O&M and interest expenses PPL Net Income Change (YTD 2024 vs YTD 2023, in Millions) | Component | Change | | :--- | :--- | | Operating Revenues | $(30) | | Total Operating Expenses | $(153) | | Operating Income | $123 | | Other Income (Expense) - net | $35 | | Interest Expense | $55 | | Income Taxes | $19 | | Net Income | $84 | - The decrease in nine-month operating revenues was primarily due to lower PLR revenues at PPL Electric ($262 million decrease), partially offset by higher distribution prices and volumes across segments[332] - The increase in nine-month Other O&M expense of $125 million was driven by higher storm costs at PPL Electric ($40 million), RIE gas maintenance ($45 million), and RIE transition costs ($57 million)[335][336] Reconciliation of Net Income to Earnings from Ongoing Operations (YTD 2024, in Millions) | Description | Amount | | :--- | :--- | | Net Income | $711 | | Less: Special Items (expense) benefit | (283) | | Earnings from Ongoing Operations | $994 | PPL Electric Results of Operations PPL Electric's nine-month net income increased by $57 million to $441 million, driven by a $60 million rise in operating income as reduced operating expenses offset declining operating revenues - For the nine months ended Sep 30, 2024, operating revenues decreased by $136 million, mainly due to a $262 million reduction from lower PLR prices, partially offset by a $48 million increase from distribution prices and a $40 million increase from transmission formula rates[375] - Energy purchases for the nine-month period decreased by $244 million, driven by lower PLR prices ($222 million) and lower PLR volumes ($19 million)[376] - Other O&M expenses increased by $57 million year-to-date, primarily due to higher storm costs ($40 million), vegetation management ($11 million), bad debts ($11 million), and Act 129 program expenses ($14 million)[377] LG&E Results of Operations LG&E's nine-month net income increased by $22 million to $232 million, primarily due to a $23 million rise in operating income from higher revenues and lower operating expenses - For the nine months ended Sep 30, 2024, operating revenues increased by $12 million, mainly due to a $31 million increase from higher volumes (weather-related), partially offset by a $15 million decrease from the ECR mechanism adjustment[382] - Other O&M expenses for the nine-month period decreased by $16 million, primarily due to lower ECR-related expenses[385] KU Results of Operations KU's nine-month net income increased by $43 million to $283 million, driven by a $53 million rise in operating income from increased revenues and only a slight increase in operating expenses - For the nine months ended Sep 30, 2024, operating revenues increased by $59 million, driven by a $37 million increase from higher volumes (weather-related), a $10 million increase from fuel and energy purchase recoveries, and a $6 million increase in demand charges[387] - Fuel expense for the nine-month period increased by $19 million, mainly due to higher volumes from weather, partially offset by lower commodity costs[389] Financial Condition PPL maintains strong liquidity with $542 million in cash and significant unused credit facilities, supported by increased operating cash flow and strategic financing activities for capital expenditures and debt management Cash and Debt Position (in Millions) | Registrant | Cash & Equivalents (Sep 30, 2024) | Short-term Debt (Sep 30, 2024) | Short-term Debt (Dec 31, 2023) | | :--- | :--- | :--- | :--- | | PPL | $542 | $0 | $992 | | PPL Electric | $35 | $0 | $509 | | LG&E | $10 | $0 | $0 | | KU | $16 | $0 | $93 | PPL Cash Flow Summary (Nine Months Ended Sep 30, in Millions) | Cash Flow Activity | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $1,829 | $1,648 | $181 | | Investing activities | $(1,944) | $(1,739) | $(205) | | Financing activities | $316 | $88 | $228 | - PPL and its subsidiaries maintain a total of $2.9 billion in committed external credit facilities, with $2.899 billion of unused capacity as of September 30, 2024[412] Part II. Other Information Legal Proceedings The company refers to its 2023 Form 10-K and specific notes in this Form 10-Q for information on legal, regulatory, and environmental proceedings, with no new material legal proceedings reported - For information on legal proceedings, the report directs readers to the 2023 10-K and Notes 5, 6, 8, and 10 of the current financial statements[456] Risk Factors There have been no material changes to the risk factors previously disclosed in the Registrants' 2023 Form 10-K - The company states that there have been no material changes in its risk factors from those disclosed in the 2023 Form 10-K[457] Other Information This section discloses the adoption of Rule 10b5-1 trading plans by two company executives, David J. Bonenberger and John R. Crockett III, for the sale of PPL common stock - On August 15, 2024, David J. Bonenberger (SVP and COO–Utilities) adopted a Rule 10b5-1 trading plan to sell up to 26,973 shares of PPL common stock[458] - On August 20, 2024, John R. Crockett III (President of LG&E and KU Energy) adopted a Rule 10b5-1 trading plan to sell up to 10,750 shares of PPL common stock[459]