Good day, and welcome to the PPL Corporation Third Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to hand the call over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining PPL Corporation's third quarter investor update. We provided presentation materials on the Investor section of our website. This morning, you'll hear from Vince Sorgi, PPL President and CEO, and Joe Bergstein, Chief Financial Officer. We'll conclude with a Q&A session following our prepared remarks. Before we get started, please turn to slide two for our cautionary statement. Today's presentation contains forward-looking statements subject to risks and uncertainties. Actual results may differ materially. Please refer to our SEC filings and the appendix for additional information. We will also refer to non-GAAP measures, including earnings from ongoing operations. Reconciliations to the corresponding GAAP measures are provided in the appendix. I'll now turn the call over to Vince.
Thank you, Andy, and good morning, everyone. Let's begin on slide four with the key takeaways from today's call: strong execution, a stronger base growth outlook, and clear path to meaningful upside, including today's Invitium and QTS announcement. We executed a strong third quarter where we delivered on our commitments to share owners, and Joe will discuss our 2026 results in detail in his remarks. We also updated our business plan today, which shows an even stronger long-term outlook. The investments we're making across our regulated businesses, combined with continued economic development in our service territories, give us even greater confidence in PPL's growth profile. As a result, we're raising and extending our long-term annual EPS growth target to 7%-9% through at least 2030, with growth expected to be in the top half of that higher range in each year beginning in 2027.
Our new capital plan totals $25 billion from 2027 through 2030, supporting 10% compound annual rate base growth from 2026 through 2030. Importantly, from an affordability perspective, the incremental investment supporting our higher growth outlook is expected to primarily be paid for by the large load customers driving those investments, rather than our existing customers. Beyond the stronger base plan, we also continue to see significant medium to long-term opportunities. Through 2032, additional capital investment opportunities could reach a total of $12 billion-$16 billion. This includes additional regulated generation investment in Kentucky required to meet continued increases in potential demand growth. This represents $6 billion-$7 billion of incremental investment opportunity through 2032, which includes $3.5 billion-$4.5 billion through 2030. This investment opportunity alone supports meaningful upside that could increase our EPS CAGR to over 9% through 2030.
In addition, we see at least $6 billion-$9 billion of potential future investment from Invitium Energy through 2032. These amounts reflect PPL's 51% ownership share and are based on 5 GW of executed reservation agreements for combined cycle natural gas turbines. Those investment opportunities exclude any bridge solutions such as fuel cells or battery storage. Invitium Energy also provides meaningful shareowner value potential. Focusing on Invitium Energy, we are pleased to announce that Invitium and QTS have agreed to collaborate on about 2 GW of generation capacity in Pennsylvania, which I will cover in more detail on the next slide. This represents a significant milestone for Invitium and an important step toward converting strong customer demand into tangible generation projects. Just as importantly, these projects help meet rising energy demand while strengthening the PJM grid and supporting long-term energy affordability.
Our updated business plan excludes any financial impacts of Invitium, including the QTS announcement. Let's turn to slide five to provide some additional details about the Invitium Energy announcement. Invitium signed a letter of intent with QTS to be their generation solution provider in portions of Pennsylvania. Under that LOI, we have agreed with QTS on all key commercial terms for approximately 2 GW of generation capacity for its Salem Township Data Center project, with a 20-year initial term allowing for multiple five-year renewals. We also signed a cost reimbursement agreement that provides reimbursement and risk mitigation for specified development costs and commitments in the event certain approvals and conditions for project development are not achieved. The proposed generation portfolio includes two combined cycle natural gas plants complemented by fuel cells and battery storage, or BESS, with the final technology mix between the fuel cells and BESS still being finalized.
Using current cost estimates of $2,500-$3,500 per KW, 2 GW of generation would represent an estimated $5 billion-$7 billion of total project investment, with PPL's 51% share representing approximately $2.5 billion-$3.5 billion. The fuel cell and BESS generation could be online as early as 2029, and the combined cycle plants are expected to be online in 2032 and 2033. This structure aligns with the White House's Ratepayer Protection Pledge and Governor Shapiro's clean and firm energy requirements under Pennsylvania's grid standards. The structure provides a regulated-like risk profile designed to deliver stable, predictable, and growing long-term earnings and cash flows. A fixed monthly payment with annual escalation covers the return of and on invested capital and fixed operating costs. Variable payments cover fuel and other operating costs when the plants run.
The ultimate data center customer will also be required to meet minimum credit ratings or credit support requirements, mitigating counterparty credit risk. In summary, the combination of the negotiated key commercial terms and the cost reimbursement agreement creates a durable foundation for disciplined investment, attractive long-term returns, and meaningful growth with appropriate risk protections, and provides for about 2 GW of new generation in Pennsylvania. It demonstrates the strength of the platform we are building and the growing momentum behind Invitium Energy, which is in active discussions with multiple counterparties for additional generation projects in Pennsylvania. Turning to slide six. This slide demonstrates how the updated plan has changed from our prior plan, and just as important, what hasn't changed. First, the key change is the 100 basis point increase in our annual EPS growth target.
That growth is supported by a larger investment program, primarily paid for by our large load customers. Our base capital plan is $2 billion more than the prior plan, primarily from an additional CCGT in Kentucky. Rate base CAGR over the plan period remains at about 10%. We are also maintaining strong cost discipline, with overall planned O&M growth at roughly 0.5% annually through 2030 to benefit our customers. Our financial foundation also remains strong. We continue to target an FFO to debt ratio of 16%-18%, and the plan has our credit metrics improving towards the midpoint of that range over the plan period. Our dividend commitment is also unchanged, as we are targeting the low end of our 4%-6% annual dividend growth range while we fund our significant CapEx plan.
The bottom line is that we have a stronger growth outlook, continue to focus on affordability and efficiency for our customers, and are exercising the same financial discipline you have come to expect from us. Beyond the strong base plan, we have the additional capital investment opportunities I discussed, stemming from the potential for additional Kentucky generation and Invitium Energy. Let's turn to slide seven for a brief regulatory update. In Kentucky, the Public Service Commission partially granted our request for reconsideration of its decision in LG&E and KU's 2025 rate cases. The commission approved several elements of our request, resulting in an additional $7 million in annual revenues. In total, LG&E and KU received approval for an aggregate increase of approximately $240 million in annual electric and gas revenues.
While the commission granted part of our reconsideration request, the sharing mechanism that would have allowed us to stay out through 2028 was not approved. As a result, LG&E and KU expect to file base rate cases in the coming months. In Rhode Island, new base rates became effective September 1st, with the commission approving $138 million annual revenue increase following Rhode Island Energy's first base rate review since 2017. The order is a constructive outcome that supports our capital plan to modernize Rhode Island's electric and gas networks. We were also successful in securing a settlement for our hold harmless commitment, which provides $163 million in bill credits to our electric and gas customers from October 2026 to September 2027. These are meaningful savings for our customers during the winter heating season and help to offset the base rate increases.
While the Rhode Island PUC approved an increase in annual revenues, it did not approve our requested second-year revenue increase. As a result, Rhode Island Energy plans to file another rate case as early as next year. As a reminder, PPL Electric's rate case settlement became effective July 1st, with a positive outcome for both customers and share owners. The approved increase of $275 million supported critical investments we are making while reflecting less than a 4% increase across all of our rate classes. The settlement also included a two-year stay-out provision, but we expect to be able to stay out longer than the two years agreed to in the settlement. Across all our jurisdictions, our focus remains consistent: investing responsibly in the infrastructure needed to support reliability and economic growth, engaging constructively with regulators, and maintaining a strong focus on affordability for our customers.
Turning to slide eight, speaking of customer affordability. Keeping customer bills affordable remains one of our top priorities, and it shapes how we run our business and execute our plan. Through constructive regulatory outcomes, along with a steady focus on cost efficiency, we have kept the average residential bill at each of our utilities below the relevant state or regional averages. Across our utilities, the portion of the bills that we control are about 10% lower than our state averages. In Rhode Island, we are lower by about 16% compared to the rest of New England. We expect that trend to continue, even including the results of our recent rate case outcomes. Importantly, we are also ensuring that growth pays for growth, reducing cost pressures on our existing customers.
Our large load tariffs, the first of their kind by investor-owned utilities in Pennsylvania and Kentucky, require data centers to cover the cost of serving them, so existing customers don't bear that burden. We are looking to build on those protections even further. In September, PPL Electric filed a proposed Customer Protection Transmission Rider, or CPTR, to further strengthen our protections around large load growth. The benefits of additional load will be felt every year over the next five years, and this has measurable affordability value for our existing customers. At the full 11.4 GW currently under ESAs, we estimate that our customer protection framework could reduce the average residential customer's annual transmission costs by $300. We expect a decision by the commission on our CPTR filing in the summer of 2027, targeting implementation in Q1 2028. Finally, we continue to remain focused on cost.
This includes holding our O&M growth to about a half a percent on a compound annual basis through 2030. We are not planning on stopping there. We continue to see AI as a game-changer for the utility industry, one that will come with significant cost savings. While broad deployment of AI is a key part of our Utility of the Future strategy, we have taken a conservative approach in our planning process and have not baked significant AI-related savings into this updated plan. We see this as a meaningful opportunity which could further enhance system reliability and the customer experience at a lower cost, further supporting our customer affordability strategy. Turning to slide nine. Data center development in Pennsylvania continues to progress. The pipeline of projects in advanced stages increased for the 11th consecutive quarter to 35.3 GW, up 3.5 GW from the second quarter.
We are also continuing to see projects advance within that pipeline. Load converting to signed ESAs increased by 300 MW from the second quarter to approximately 11.4 GW. Of that data center load, approximately 8.5 GW are now under construction, an increase of 2 GW from last quarter. We have already connected two data centers, and to date have energized 300 MW of that contracted load, which will ultimately ramp to about 2 GW. This progression of the pipeline is critically important. As projects move from initial agreements to ESAs and then into construction, we gain greater visibility into the infrastructure and generation that will ultimately be needed to serve this load. This continued data center interest in Pennsylvania also further supports new generation opportunities at Invitium. Turning to slide 10.
We're seeing similar momentum in Kentucky, with another quarter of strong economic development growth and increasing conversion of projects in the pipeline. Our total economic development pipeline has increased another gigawatt since the second quarter to 14.7 GW of potential load growth through 2032. Data center load has increased to 12.8 GW, while the non-data center load remains at approximately 2 GW. Importantly, we're also seeing significant progress in converting that pipeline into more committed projects, with 2.3 GW of load under reimbursement agreements, up from 1.3 GW at the end of the second quarter. In addition, projects with a probability of success of 50% or greater have increased to 4 GW of additional peak demand, with the average probability for these projects sitting at almost 85%. The generation investments in the updated plan that I discussed earlier support approximately 2.4 GW of that demand.
Additional generation needed to serve the remaining 1.6 GW represents $3.5 billion-$4.5 billion of investment needs through 2030. Bottom line, we continue to see a significant opportunity in Kentucky to support economic development and invest in the generation needed to serve that growth. Importantly, these incremental investments are expected to be primarily paid for by large load customers and not our existing customers. Our next CPCN filing will occur once we have signed a data center ESA, which is currently anticipated in Q1 2027. These opportunities are good for the state, good for our existing customers, and create additional long-term value for our share owners. With that, I'll turn the call over to Joe for the financial update.
Thank you, Vince, and good morning, everyone. Let's turn to slide 12. PPL's third quarter GAAP earnings were $0.49 per share, compared to $0.43 per share in Q3 2025. We recorded special items of $0.05 per share during the third quarter, primarily due to system and other integration-related costs and PPL's Rhode Island hold harmless commitment. Adjusting for these special items, third quarter earnings from ongoing operations were $0.54 per share, an improvement of $0.06 per share compared to the same period a year ago. This increase was primarily supported by base rate recovery resulting from rate case outcomes in all three of our jurisdictions, timely recovery of capital investments through tracking mechanisms, and higher sales volumes. These favorable drivers were partially offset by higher depreciation expense from additional plant and service, higher operating costs, and higher interest expense.
As we look at the first nine months of 2026, our ongoing earnings increased by over 7% compared with the same period in 2025. As we head into the final quarter of the year, we've narrowed our 2026 ongoing earnings forecast range to $1.92-$1.96 per share, and are on track to achieve at least a midpoint of $1.94 per share. We also have continued to execute on our capital investment program, having deployed $3.6 billion of investments through the end of the third quarter. This is more than a 20% increase from what we deployed during the first nine months of 2025, including great progress on our major generation projects in Kentucky, which remain on time and on budget. Moving to slide 13. Building off our strong momentum in 2026, our updated business plan supports strong EPS growth heading into next year.
For 2027, we are forecasting earnings of $2.06-$2.14 per share, with a midpoint of $2.10 per share, representing 8.2% growth from the midpoint of our current 2026 ongoing earnings forecast. That puts us squarely in the top half of our new 7%-9% growth target from the outset of the plan, and we expect to be in the top half of the range annually. Growth in 2027 is expected to be driven by improved rate recovery from rate case outcomes approved earlier this year, and higher revenues associated with recovery of ongoing capital investments. We expect these drivers to be partially offset by higher operating costs in Kentucky, as well as higher depreciation and higher financing costs across all segments. Moving to slide 14, we have a high degree of confidence in our updated base plan, which supports our higher EPS growth targets.
That outlook does not depend on any of the upside opportunities that we discussed this morning. Beyond our updated base plan, we see additional generation investment opportunities to serve 1.6 GW of Kentucky demand. Those investments could support an EPS CAGR over 9% through 2030. The upside case includes two additional natural gas combined cycle plants, the 266 MW Lewis Ridge Pumped Storage Project, and 400 MW of additional battery storage that bridge power to data centers coming online in our territory. Based on this case, we estimate that earnings contributions could start as early as 2028, ramping as the units come online. Critically, these incremental investments would be primarily paid for by large load customers driving the need, and not our existing customers. We will begin to add these opportunities into the formal plan once we have signed agreements with these large load customers.
This provides a visible and credible path to extend growth beyond our updated base plan. Turning to slide 15, our updated capital plan totals $25 billion of customer-focused investments through 2030, approximately $2 billion more than our prior four-year plan. As we roll the plan forward to 2027 through 2030, the $5.2 billion of capital investments in 2026 rolls off, and we add a projected $5.7 billion in 2030. On a comparable 2027 to 2029 basis, investment is $1.5 billion higher, primarily reflecting the expected need for another natural gas combined cycle unit with a commercial operation date of 2032. From a generation standpoint, our business plan now includes four NGCCs totaling over 2.5 GW, 240 MW of solar projects, and 525 MW of battery storage.
Slide 25 in the appendix of today's presentation provides additional details on the generation units assumed in the business plan. As Vince noted, continued conversion of the Kentucky economic development pipeline could support another $3.5 billion-$4.5 billion of generation investment through 2030, which could increase our EPS CAGR to 9%+, as discussed on the prior slide. Turning to slide 16, our rate base is projected to grow from about $33 billion this year to nearly $48 billion in 2030, a 10% compound annual rate. That growth is driven by the $25 billion capital plan and is the foundation of our 7%-9% EPS growth target. This is the base plan only. It does not include the Kentucky generation upside opportunity outlined on the prior slides, which would be incremental. Moving to slide 17.
Our financing plan is designed to fund our growth while preserving balance sheet strength and strong credit ratings. We continue to target 16%-18% FFO to debt, with the ratio improving towards the midpoint of the range over the plan period, while maintaining holding company debt below 25% of total debt. We expect approximately $3 billion of equity needs through 2030, beyond the more than $1.5 billion we have already executed on a forward basis. This $3 billion covers the unissued equity under the previous plan, and the remaining $2 billion supports our updated capital plan, which includes additional AFUDC versus the prior plan, and to support our current credit ratings. We expect to use our ATM program as a primary funding vehicle for this equity, while opportunistically evaluating other equity-like structures that offer an attractive cost of capital.
We are also targeting annual dividend growth at the low end of our 4%-6% range, with a payout ratio expected to be about 50% by 2030. Together, these actions provide a balanced path to fund our $25 billion capital plan, maintain strong credit quality, and support stronger, durable earnings growth. This concludes my prepared remarks. I will now turn the call back over to Vince.
Thanks, Joe. Let me close by summarizing the investment proposition we have outlined today. At its foundation is a stronger base business. Our $25 billion capital plan supports 10% annual rate base growth and annual EPS growth of 7%-9% through at least 2030, with results expected to be in the top half of that range beginning in 2027. We are supporting that growth with disciplined financing and a strong balance sheet. We also continue to target annual dividend growth at the low end of our 4%-6% range, retaining capital to help fund all of this growth. Just as importantly, we are delivering this growth while keeping customers at the center of our strategy. Our investments support safe and reliable service, and our cost discipline and rate case strategies help maintain affordability.
This is demonstrated through the portion of the bills we control being about 10% lower than our state and regional averages. Moving forward, our large load tariff protections are designed to ensure that growth pays for growth, further supporting customer affordability. Together, these elements support a compelling 10%-13% total return proposition from the base plan. Beyond that base plan, we have meaningful potential upside. Continued conversion of the Kentucky economic development pipeline could drive further regulated generation investment and support our EPS CAGR to over 9% through 2030. Invitium provides another source of potentially significant value, beginning with the QTS collaboration we announced today. In short, we have a stronger base plan, a disciplined customer-focused approach to funding growth, and significant opportunities to outperform the commitments we made today.
We are confident in our ability to execute this plan and are excited about the long-term value these opportunities can create for both our customers and our share owners. With that, operator, let's open the line for questions.
We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble the roster. Our first question will come from Shar Pourreza of Wells Fargo. Please go ahead.
Hey, guys. Good morning.
Good morning, Shar.
Morning, Vince. Firstly, obviously you got the $2 billion increase in the base plan that's driving the CAGR raise. I guess, what gives confidence to put that into plan without the CPCN? At that point, why not the additional $3.5 billion-$4.5 billion? When these upsides hit, do you stick with the 9%+, or would you move to a whole new range? Thanks.
Yeah. Well, let me start with the confidence in the plan and what we put in there. I think adding the additional combined cycle unit is really, we did that based on what we're seeing in terms of economic development and the pipeline we have there. I think it's prudent that we put some of the needed generation in our updated plan. If you look at that pipeline, what we have in the plan from generation perspective can meet the load from what we would consider to be very high probability load, so load that has over a 90% probability of coming online. Then obviously, we discussed a lot in our prepared remarks that we believe we'll have an even greater need from even what's in there in this base plan that obviously drives the upside to the capital and the earnings over 9% that you referenced.
When we do make the regulatory filings, we fully expect to have a load forecast that supports at least the level of generation that we have in this plan, if not some of that upside.
Got it. Joe, do you stick with the 9%? Sorry. Yeah, sorry.
Well, the nine plus has been for about an hour now, so we'll assess that as we move through time and see whether we change that to a range or keep the plus.
Got it. All right, perfect. Vince, congrats on the first deal with gas, at least in PJM. Just on the 2 GW Invitium deal. Yeah, it's a big announcement, obviously. A lot of people have been waiting on it. Just on the 2 GW deal, you have a term sheet, you have a CRA. I guess, what's left to get you to a full form ESSA? Do you have more than a typical term sheet to get you this comfortable? There isn't a lot left out there to do, so you feel good. Then just want to get a sense on the risks there, because we've seen these type of announcements in the past, and there's been different market reactions to them. What gives you confidence in this one? Thanks.
Yeah. Thanks, Shar. Look, our decision to announce today, it really speaks to the robustness of the negotiations that occurred between the parties, Invitium and QTS. As I said, all key commercial terms have been agreed to in the term sheet. Again, significant negotiations in coming up with those terms. I would say it also speaks to the commitment that both parties have as it relates to this project, and our collective confidence that both parties can complete the CPs that are included in the documents, which I would characterize as very customary CPs for a deal like this. Then when you look at the CRA, the cost reimbursement agreement, that just adds a whole another level of confidence in moving this project forward.
QTS could be on the hook for material dollars, which they would not have signed that CRA if they weren't confident in the overall project. Then, of course, QTS just has an excellent track record, right? They're among the largest data center developers globally. Certainly, based on our experience with them, we think they consistently develop data centers the right way. We've talked a lot about what it means to do this stuff the right way, and they do, including the way they engage effectively with the local communities. In fact, there's a lot in PA that references, in particular, this Salem Township project as the right way to do data center development.
Given the extensiveness of the negotiations and the confidence that all the parties have in moving the project forward, we didn't see a need to wait to get to the formal ESSA for an announcement.
Got it. Perfect. Appreciate the disclosures, and congrats to the team. See you in a day or two. Bye.
Thank you.
The next question comes from Michael Lonegan of Barclays. Please go ahead.
Hi, good morning. Thanks for taking my question.
Yeah, good morning, Mike.
Morning. You said the data center agreement has a utility risk profile. Just anything you could say about the returns you are expecting on this project, and also whether this is a Phase 1, if there is an expansion opportunity. I know you said you expected one or more data center announcements by year-end. That was your expectation that you laid out last quarter. Are we still looking at that, or sometime in 2027?
Sure. There is a few different questions there. We are not going to get into disclosing the specific returns, as you would expect, for competitive reasons, Mike, but I can tell you, for Invitium overall, and in particular with this project, we targeted attractive risk-adjusted returns. They are higher than utility returns, lower than pure IPP returns, given the contracted nature. But we feel very confident that the return profile in this contract is commensurate with the risk profile that we are taking. In terms of, I think your second question was, is this Phase 1 or could there be more? I would say that the agreements that we announced today really cover QTS's current vision for the Salem Township site. We cannot comment whether or not that they are considering upsizing the project or not, and if so, whether that would result in additional generation needs from Invitium.
Having said that, I would say our relationship continues to strengthen with QTS. To the extent that they develop additional data center projects in PA, whether at this site or different sites, I would fully expect that Invitium will have the opportunity to supply the needed generation. Again, not saying there is a guarantee, but certainly I would expect the opportunity to be part of that discussion. Was there a third point?
Oh, sorry. I think previously you said you expected one or more announcements by year-end. Is that still the expectation?
Oh, yeah. As I said, we are in active discussions with multiple counterparties, so it is certainly possible that we could have another announcement by year-end, but really not putting a timeline on it. This announcement was one of the ones we were contemplating when I made that remark on the second quarter.
Thank you. The capital investment opportunity excludes the bridge solutions, the fuel cells and storage. Just wondered if you could help us understand the investment opportunity set there.
Yeah. There's a couple pieces to this, right? The broader $6 billion-$9 billion that we're talking about, the upside opportunity from Invitium overall, let's separate that from the QTS announcement, right? That just has the 5 GW of executed CCGTs at $2,500-$3,500. The $2.5 billion-$3.5 billion that we're talking about, our share related to Invitium, includes all three technologies, so the CCGTs and then some mix of batteries and fuel cells. That mix continues to be finalized in terms of how much would be batteries and how much would be fuel cells. I think it's safe to say it'll be a combination of those two, in addition to the two CCGTs. That's in the $2.5 billion-$3.5 billion.
Great. Thanks for taking my question.
Sure.
The next question comes from Jeremy Tonet of JPMorgan. Please go ahead.
Hey, Jeremy.
Good morning. This is Diana Niles on the call for Jeremy Tonet, actually. Appreciate the time today and taking our questions.
Sure.
For the Invitium LOI, looking forward, how should we think about the cash flow assumptions under the current payment structure? If you could think about how we should think about implications for financing not incorporated in today's plan.
Yeah, so from a financing perspective, as we've talked about, at least during the construction phase, we would expect to use construction period structures that are typical for deals like this, that will largely be off-balance sheet, and we'll determine the precise financing structure for when the units come online, as we move through the full contracting terms and have broader discussions with the rating agencies now that we have a deal to talk to. I think more to come on the financing front.
Just the cash flow. Maybe talk about the delta between, right, this and, say, a regulated utility.
Yeah, sure. On the cash flow and financial structure of this, yeah, I mean, it is different than a regulated utility. I would say rate base math doesn't necessarily work for deals like this. The economics are dependent on each of the project's contractual terms, structure, timing of the financing, and really the escalation of the fixed payments. While it is a regulated-like risk profile, it's not a utility subject to utility accounting. As I said, rate base math doesn't really work here. As you know, a traditional utility, when an asset's placed in service, that's when it has its highest value and earnings, and it declines from there. Given the escalation clause in the contract that we have here, it's effectively the opposite of that, where revenues, earnings, and cash flows grow throughout the contract term.
We'll ultimately give you all of the relevant financial guidance at the appropriate time once these elements are finalized. I would just think about from your cash flow perspective that those will grow as we move through the contract period.
Got it. Thank you. Am I mistaken that in the prior quarter there was maybe some upside from solar for Kentucky Generation? If I didn't see it in the slides today, is that just the nature of shifting preference in resources, or does that still represent upside, if I'm not mistaken?
Yeah, we'll continue to assess solar in Kentucky. We are running an RFP for that as we contemplate our next CPCN filing. As you know, solar is more of an energy resource as opposed to resources that are bringing energy and capacity. Of course, we do have the battery strategy there that we can marry up with solar. We are looking at that in real time, Diana, so appreciate the comment. I would say if we went that route, that could potentially be upside. Again, we view that as an energy-only product and would look at it as such in the CPCN process.
Understood. Thank you for the answer.
Sure. Thank you.
The next question comes from Julien Dumoulin-Smith of Jefferies. Please go ahead.
Hey, good morning, team. Nicely done. Got to hand it to you guys.
Hey, Julien.
Maybe just to follow—
Thanks, Julien.
Hey, good morning. Well, Vince, maybe just to, and Joe, just to follow up on that last question, actually, to pick up on it. Can you talk about the profile of earnings and cash flow potentially on the earlier side of this contract, inasmuch as you say, it's not tethered to rate base math. So conceptually, you could be receiving earnings ahead of in-service these assets. Then maybe if I can layer into that as well, you made allusion in the slides to sort of fuel cell-based kind of maybe an interim solution. I'm not sure that the profile of what that earnings could look like, inasmuch as that could come online as early as 2029. So that could boost your It's not just the nine plus, but the timing of when you accelerate your earnings here is critically important too.
Yeah, sure, Julien. I would not expect any earnings before the units come online. That is not what I was or cash flows. That is not what I was suggesting there. But as you think about the bridge solutions that we outlined today, I would say that it is possible that they could provide accretion in the back part of the plan. We still have to finalize some details around those. But really, as we have been saying, that would not be material, as the material accretion and value comes really from the CCGTs coming online.
Yeah. Okay. Duly noted, and very much hear that. If I can needle you a little bit further about the scope of expansion, maybe one sub-component here would be, how do you think about that Salem site here? I mean, can it actually accommodate more? I mean, 2 GW seems fairly large to begin with. Any thoughts about that? And then separately, the expansion piece, the extent to which Invitium Energy, et cetera, how do you think about timing on any of that? I do not want to get ahead of myself too much, but just if you can speak to how those conversations are going, et cetera. I mean, some of these IRS, et cetera, have rolled off here. Where are you in being able to advance a multitude of opportunities?
Yeah, so maybe on the site itself, I do not want to speak for QTS right there in the middle of getting their approvals for this phase of the project. So I would say that is probably a better question for them. But as I responded to the earlier question, what we announced today really addresses kind of their initial vision for that Salem site. It is a large site, but again, as I said, they do things the right way and making sure we have adequate setbacks and taking the local community stakeholder engagement and feedback into account as they design their data center campuses and how much they want to put on a given site. I will say, maybe to the point of your comment, if they were to expand or do more on that site, by the way, they could also do other sites, Julien.
They are not locked in just to that Salem site. We stand ready to help serve them in any additional generation needs that they may have, whether it is at this site or a different site.
Yeah, indeed. Are there any other sites that are active or ready that one should be, if those are publicly disclosed or whatever, whether it's in Pennsylvania or even Kentucky, maybe?
You're talking about with QTS?
Yeah, presumably. I don't know if you were trying to get us something there. Yeah.
No, no. I was just saying, given the relationship that we continue to develop and strengthen with QTS, that if they look to expand on that Salem site and/or develop a different site, I would expect that we would be engaged in that process. That's all I was referring to.
Yeah. Excellent, Vince. Thank you, guys. All the best. Nicely done.
Thanks, Julien. We will see you soon.
The next question comes from Steve Fleishman of Wolfe Research. Please go ahead.
Yeah. Hi, good morning. Thanks for the time. Sorry to harp on the Invitium announcement again, but terms and conditions with these things tend to matter. I know you got the commercial terms, but the other non-commercial terms, what are some of the things that are not finalized, and what is a rough timing to have a binding agreement?
Yeah. I mean, the vast majority of the terms have been agreed to. I would say, Steve, the extensive nature at which we negotiated the term sheet and the CRA will enable, and the teams are now working on what we're calling the long-form ESSA. Basically all of the major provisions that will make it into the ESSA have been negotiated in the term sheet. This is a very robust term sheet. It covers financial terms as well as non-financial terms, to your point, whether that's availability, requirements, et cetera. Operating parameters as well. We've negotiated all of that. It's been a very robust and extensive negotiation. In terms of how quickly we can get to the ESSA, I won't put a specific timeframe on it other than that the teams will actively work on that.
We're confident that we'll be able to finalize an ESSA with QTS, again, given their track record, the CPs set will kind of carry us to the ESSA, and what both parties have to do that and our collective confidence in being able to do that. No concerns that we'll be able to get to the ESSA. Again, those terms, financial and non-financial, have been negotiated already.
Okay. Then, just as we think about, let's say you have the ESSA and you get that full run rate, 2032, 2033. Are you thinking then you might look to kind of move the growth rate out longer term to capture that, kind of like NiSource has done? Are you going to wait for what gets into your window? Is finalizing that when you kind of put it into your growth rate plan?
Yeah, I think that's right, Steve. When we finalize all of those terms and have all that nailed down, I think that's when we can provide more of the financial guidance around this, and then obviously extending the forecast to Horizon so that you know what that means from an impact of overall PPL Corporation.
Yeah, Steve, I would say it's probably more in conjunction with the final notice to proceed, the FNTP, which we would need the ESSA signed to get to FNTP. That is where we have the equipment contracts locked down, the EPC contracts locked down. That is where we true up the cost of the project based on those contracts being executed. Obviously, the ESSA being executed is a key step in order to then get the financing, which is all needed to get to FNTP. That is when we kind of lock everything down. Then we are finishing the development and the construction of the project.
Got it. One other question, sorry, different topic. We just had the elections, and I think Pennsylvania Senate went Democrat majority. Just any kind of sense on whether the Governor is going to bring back the grid plan law. Just how to think about potential legislation next year.
Yeah. Well, first of all, I would say I do not really have any concerns in terms of the, at least on the data center side and the pipeline that we have. I actually think that the national election results could actually support our pipelines that we have both in Pennsylvania and Kentucky. Not just Governor Shapiro, but both of our governors have signed executive orders for developing data centers and doing it the right way. They are actually similar in terms of the requirements of those EOs with having a stakeholder engagement at the local level. No harm to power and water customers, et cetera. So, neither have put a moratorium on data center development, so I do not see that really coming as a result of the election results.
I say that because I think both of the EOs really protect our existing customers and the communities, especially when you combine them with the large load tariffs that we have in both states. So, I do think some of the election results could, in some other states, potentially have a chilling impact, which could drive some of those projects or future development projects to both Pennsylvania and Kentucky, where we have pretty significant pipelines and have demonstrated the ability to work those. So, at least on that side, no major concerns. I think on just general legislative agendas, in particular in PA, which I think is what you were hitting at, again, we just have a long history of working with both Democrats and Republicans in Pennsylvania. Fully expect that that will continue following the results.
I would expect affordability and energy policy to continue to be important issues here in PA, but I think there's policy and legislative areas that we actually have mutual agreement on. We've talked about a lot of ideas, some of which we've expressed on these earnings calls on how we could improve affordability in the state of PA, and we believe that the new legislative session may actually provide a more receptive environment to advance some of those ideas. Again, we're open to working with whoever's in power in our states, and we share a lot of the same goals and look forward to engaging with them to achieve what's in the best interest for our states, our customers, and our communities. No overarching concerns, Steve.
Great. Thanks so much.
Sure.
The next question comes from Richard Sunderland of Truist. Please go ahead.
Hey. Good morning. Can you hear me?
Hey, Rich. Yeah, good morning.
Great. Thank you. Thank you. Following up on some of those points at the end around affordability, there's been a lot in motion on the PJM side. Just curious what you have an eye to right now from progress or lack thereof over the past few months, both from a PPL Electric perspective and also from a competitive landscape for Invitium perspective.
Yeah. Well, look, I think this announcement today, we're putting our money where our mouth is on helping to support the affordability concerns in PJM, and ultimately get generation built not just within PJM, but within Pennsylvania. I think that's very positively viewed by our governor, our commission, ultimately the legislature. Again, I think Invitium fits right in with pushing for more generation to improve that supply-demand dynamic that we've been talking a lot about in PJM. For PPL Electric, again, I think PPL Electric has been leading the way on affordability, the affordability agenda in Pennsylvania, again, with the large load tariff. We talked about the CPTR filing, which will just take that another level in bringing additional bill support to our customers. Again, the support of the utility-owned generation in the state to try to balance the supply-demand.
Again, I think PPL Electric continues to play a leadership role. We have the PUC working group on rate-making. I expect we'll have an active role in that. Again, I think we're a trusted source in the state. We've earned that position, and I would expect us to play a role in that as well. In fact, we look forward to doing that, because again, I think we share the same goals on bringing a reliable service to our customers, making sure that it's affordable, but at the same time ensuring that the utilities are financially strong to be able to invest in the grids that deliver all of those services for our customers. We look forward to bringing all of that to the discussion with the PUC working group.
Again, a broader affordability agenda that we've been focused on has been core to our strategy, not just in P.A., but across all of our jurisdictions. I would even throw in the hold harmless settlement, which was a way to help with affordability up in Rhode Island on the heels of the rate case increases. So, look forward to engaging in all of our states on affordability discussions, because I think we lead in each of our jurisdictions on that topic.
Got it. Thanks for running through all of that. Then switching gears to Kentucky, the 1.6 GW and $3.5 billion-$4.5 billion upside, are those the numbers to key into with the CPCN filing next quarter? I guess I'm trying to read the tea leaves of the data center and economic development pipeline overall relative to what gets you to that 9%+ side of the EPS growth range.
Yeah, I think it's early to know for sure what we're going to put into that CPCN filing. We have 4 GW of load that we talked about that has 50% or higher probability. Actually, the overall probability of those projects is close to 85%. So, we'll parse through that to determine how comfortable we are putting some or all of that into the next CPCN. Of course, we'll put some of that. The plan has 2- 2.5, that's 90% or above in that group of projects. So, feel very confident about what's in the plan.
Going above and beyond that, look, I personally think we're going to be building generation for the foreseeable future in Kentucky, just given what we see with the quarter-over-quarter movement in the pipeline, even within the pipeline, projects moving to more mature stages, just knowing what other things we have going on in the state that are not in the 14.7 GW of total pipeline. I just think we're going to be building gen for a long time in Kentucky. With the supply chain constraints and the cost pressures, the sooner we lock those prices in and get that generation built, the better our customers will be, and the less they will have to pay for those assets. We saw that with the original CPCN we filed. We didn't get everything approved. The second one was about $1 billion more than the first one.
We want to try to stave that off. Of course, the commission is going to be diligent in their review of all of that, but conservatism is not cost-free. Sometimes being overly conservative in regulatory outcomes ends up costing our customers, and we've seen that in the past. I clearly want to try to stave that off in this next CPCN. We may end up putting more in there than less, but we're still working on that.
Very clear. Thank you.
Sure. Thanks for the question.
The next question comes from David Arcaro of Morgan Stanley. Please go ahead.
David.
Oh, hey. Hey, thanks. Good morning. Most of my question's been answered. I guess, I was just going to ask about the O&M growth trajectory. I mean, keeping it at half percent through 2030 is very low, very impressive considering the inflationary backdrop. I wonder if you could give color around confidence level in doing that and any improvements even from there that you're working on.
Yeah, sure, David. It's Joe. I mean, look, cost discipline is something that the team here has been focused on for a long time, and it's really become part of how we run the business day-to-day. We've worked hard over the last several years, as you've known, to find efficiencies across the organization, and I think that the effort is showing up in the results. I would say it's really just that relentless focus to improve operating costs and get more efficient and support customer affordability. Inflation, as you mentioned, it's certainly a factor that we're mindful of, and we've tried to be realistic about that in our planning. But I think, given the path that we're on or the focus that the entire organization has had, the success over the last several years in driving costs out of the business, that this approach is sustainable.
We'll, of course, continue to balance cost management with reliability and service for our customers. Beyond the half a percent that we have in here, I think there's further opportunity, as we mentioned during the prepared remarks, from AI deployment, which we don't have anything materially baked into the plan from that perspective, but I think that's another opportunity, and one where we're focused across the organization on how we can use AI to drive better results, get more efficient, and work at a lower operating cost.
Yeah, David, I would just add that the grid hardening and grid automation parts of the capital plan, which are significant in the T&D aspects of the plan, right, they harden the grid, right, which reduces the amount of customers that go out per storm event, less truck rolls, less O&M, et cetera. So, the capital plan itself continues to drive O&M out of the business, in particular the grid hardening and automation pieces of it.
Yeah, no, good point. Thanks for that. That is all I had. Leave it there.
Great. Thanks.
The next question comes from Nicolas Woods of Bank of America. Please go ahead.
Good morning. Thanks for taking my questions. Good morning. On the incremental Kentucky generation, you mentioned earnings could begin in 2028. How much of the contribution through 2030 would come from AFUDC versus the earnings coming into service?
Yeah, from an incremental perspective, over the last plan, it would be AFUDC as those units don't come online during the plan period.
Got it. My second question is, on the Kentucky 9%+ EPS CAGR illustration, does that incorporate any associated financing costs and equity dilution for that plan? If so, could you give me a broad sense of what the mix is between cash flow, debt, and equity?
Yeah, it certainly assumes full financing for those assets in that 9%+. I mean, look, from an overall financing perspective, we would keep our credit metrics in mind as we're doing that and making sure that we stay in that 16%-18% range. It's traditional utility CapEx, so expect roughly a 30%-40% equity to support capital programs. I don't really think it'd be different. Obviously, we'd have to see ultimately the mix of the units when they come online, when they produce cash flows, but that's generally how I think about it today.
Got it. Those are all the questions I had. Thank you.
Great. Thanks.
Great. Thanks.
This concludes our question and answer session. I would like to turn the call over to Vince Sorgi for any closing remarks.
Great. Thanks for joining us, everybody. Really excited about the update we provided today, including the Invitium announcement with QTS. I think that is the start of, again, a lot of momentum within the Invitium business, and looking forward to building on that. I look forward to seeing everybody in a couple days at the EEI Conference. We will see you soon.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.