Kentucky Stakeholders Could Slow PPL’s Transition Away From Coal

We expect PPL PPL to spend $12 billion at its U.S. utilities through 2026. These regulated utility growth opportunities support our expectations for 7% annual earnings growth, in line with management’s 6%-8% earnings growth target.

In 2021, PPL exited its U.K. business at what we viewed as an attractive price. Amid regulatory and political uncertainty, we think management’s decision to exit the business was the right one. As part of the exit from its U.K. business, PPL agreed to acquire National Grid’s U.S. utility, Narragansett Electric, at what we considered a rich price.

Management allocated the remaining proceeds to additional regulated investment opportunities, strengthening the company’s balance sheet, stock repurchases, and dividend growth. Overall, we believe these capital allocation decisions were in the best interest of shareholders.

Narragansett Electric provides the most growth opportunities among PPL’s portfolio of companies. We forecast 10% annual rate base growth supported by a constructive regulatory environment and investments across the unit’s electric and gas operations.

In Kentucky, the company recently announced plans to expedite its transition away from coal power generation. However, Kentucky legislation put the early coal retirements at risk. PPL continues to work with key stakeholders to gain support for its long-term generation investment plan, including replacing 1.5 gigawatts of coal generation retirements with 1.2 GW of natural gas generation and 1 GW of solar generation and battery storage.

Numerous stakeholder discussions put the plan in doubt, particularly PPL’s proposed timeline of coal generation retirements. A decision is expected in November and could lead to lower capital investment opportunities at PPL’s Kentucky unit.

We view Pennsylvania regulation as constructive. We expect PPL’s rate base growth in the state to be in line with its growth in Kentucky.

The company entered into a strategic partnership with Elia Energy to provide transmission solutions for offshore wind projects in the Northeast. Potential investment opportunities would come beyond 2026.