Good morning and welcome to the PPL Corporation fourth quarter earnings conference call. All participants will be in listen-only mode. Please note, today's event is being recorded. I would now like to turn the conference over to Joe Bergstein, Vice President, Investor Relations. Please go ahead, sir.

Thank you. Good morning, everyone. Thank you for joining the PPL conference call on fourth quarter and year-end 2017 results as well as our general business outlook. We're providing slides with this presentation on our website at www.pplweb.com. Any statements made in this presentation about future operating results or other future events are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from the forward-looking statements. A discussion of the factors that could cause actual results to differ is contained in the appendix to this presentation and in the company's SEC filings. We will refer to earnings from ongoing operations or ongoing earnings, a non-GAAP measure for this call. For reconciliations to the GAAP measure, you should refer to the press release, which has been posted on our website and furnished to the SEC. At this time, I'd like to turn the call over to Bill Spence, PPL Chairman, President and CEO.

Thank you, Joe, and good morning, everyone. We're pleased that you've joined us. With me on the call today are Vince Sorgi, PPL's Chief Financial Officer, and the heads of our U.S. and UK utility businesses. From Kentucky, that includes Vic Staffieri, LG&E and KU Energy Chairman and CEO, and Paul Thompson, President and Chief Operating Officer of our Kentucky segment. As we announced in early January, Vic will be retiring in March after 17 years at the helm of LG&E and KU and 26 years with those businesses. Paul, who joined LG&E in 1991, will succeed Vic. Vic has provided outstanding leadership to our Kentucky segment, and he's been a very valued member of PPL's senior leadership team. We appreciate his many contributions to PPL. With our strong focus on succession planning, Paul is more than ready to step into this role, and we're pleased to have him joining us on today's earnings call. Congratulations to you both. Moving to slide 3, our agenda for this morning begins with highlights of our 2017 results and a look at 2018 and beyond in light of U.S. tax reform. I'll discuss the strength of our dividend and our commitment to dividend growth, I will also provide an update on the UK regulatory environment. Vince will then review our 2017 segment earning results and provide a more detailed financial overview of our updated financial outlook. As always, we'll leave time to answer your questions. On slide 4, very briefly I'd like to start with the state of our business in light of U.S. tax reform. Tax reform will be beneficial to our domestic customers, as lower corporate income taxes will be reflected in rates. The credit impacts of tax reform on PPL were more than we were expecting given the enacted tax…

Thank you, Bill, and good morning, everyone. Let's move to slide 10 for a review of our financial results. Today, we announced fourth quarter 2017 reported earnings of $0.11 per share, compared with $0.68 per share a year ago. Full-year 2017 reported earnings were $1.64 per share, compared to $2.79 per share a year ago. Lower reported earnings for the quarter and the year reflect a current-year non-cash loss of $321 million or $0.47 per share, due to the impact of U.S. tax reform legislation enacted in December of 2017. This loss was driven by a reduction to deferred tax assets related to net operating loss carry-forward of about $120 million, and pension and other compensation related liabilities of about $90 million, to reflect the decrease in the U.S. corporate income tax rate from 35% to 21%. In addition, we established a valuation allowance of about $100 million related to foreign tax credits associated with the transition from a worldwide to a territorial approach to taxing foreign earnings. Adjusting for special items, including the effects of tax reform, fourth quarter 2017 earnings from ongoing operations were $0.55 per share, compared with $0.60 per share a year ago. The $0.05 per share decrease was driven by lower earnings from the UK regulated segment of $0.11, primarily due to higher income taxes due to a benefit recorded in the fourth quarter of 2016 for the utilization of foreign tax credit and lower foreign currency exchange rates in 2017. The lower UK results were partially offset by higher domestic gross margins in both Pennsylvania and Kentucky, and lower operation and maintenance expense in Pennsylvania. Moving to the bottom table, full-year earnings from ongoing operations were $2.25 per share, placing us at the top of our 2017 ongoing earnings guidance range, compared with $2.45…

Thanks, Vince. Before turning to your questions, I want to reiterate a couple things. First, we believe that we have a solid low-risk organic growth plan that we can deliver on. Delivering on this plan in fact has been our strategic focus since the spinoff of our competitive generation business, and that focus has not changed. Our attention is squarely on delivering long-term earnings growth, on strengthening our balance sheet, and on reaching a positive resolution on the mid-period review in the UK, all of which we are making progress towards. We believe PPL continues to be a very compelling investment opportunity within our sector. The underlying fundamentals of our business are strong. Nothing we see on the horizon changes that view. We continue to project competitive earnings growth and a secure and growing dividend even post-tax reform. We continue to demonstrate an ability to mitigate challenges that affect our business, as we did with Brexit last year, and now again with U.S. tax reform. Our utilities remain among the very best in the regions they serve, and we're continuing to invest responsibly to make the grid smarter, more reliable, more resilient, and to advance a cleaner energy future. The bottom line is we will continue to deliver on our commitments to customers and share owners, and we will continue to deliver long-term value to those who invest in PPL. With that, operator, let's open the call up for some questions.

Thank you. We will now begin the question-and-answer session. Today's first question comes from Julien Dumoulin-Smith of Bank of America Merrill Lynch. Please go ahead.

Hi, good morning.

Good morning, Julien.

Hey, so perhaps let me just start off on the obvious questions around tax reform and FFO-to-debt. Can you elaborate a little bit more about the longer term here? So obviously you're targeting 13% here in the medium term. How do you think about that in a longer-term sense? Is this still the right range for you to think about? And then in tandem with that, can you comment a little bit about equity needs beyond just the next few years here?

Sure. So I do think that getting back to about 13% by next year is very important to maintain the current ratings that we have, which we think is important for the overall strength of the business. So we do believe that credit, FFO-to-debt metrics in particular, will continue to improve even beyond 2019. As far as equity needs post-2020, we think they're going to be very minimal, probably just the DRIP [Dividend Reinvestment Plan] of $100 million or less per year. So in effect, we've accelerated a lot of the $350 million a year that we would have had otherwise in 2021 and 2022, so that's been pulled forward. And as we indicated, well, we're very confident that even at the high end of the equity range that we gave for 2019 and 2020, that we can still achieve the midpoint of our 5% to 6% earnings per share growth.

But 13% is – you alluded to some improvement beyond the end of 2019. How much better do you think you're getting as you look at your plan over the forecasted period?

I'd say, it'd probably be another 100 basis points by the end of the period as we get out in time.

Got it, and that's a more sustainable level in your mind over the long-term?

I think certainly north of 13% would be a sustainable level that we're targeting.

Got it. And then just to follow up...

Hey, Julien, it's Vince. So, as Bill said, the credit metric will continue to improve once we get to 13% in 2019 and 2020. We think it's important to continue to show strength in the FFO-to-debt as we move towards that taxpaying status of 2022-2023 because we don't want to drop below 13% at that time and have to issue additional equity. So I think building up a little strength as we go through the next five years will certainly serve us well longer term.

Right, excellent. And just perhaps following from there real quickly, as you think about the near years, you've got a 5% to 6% through 2020, but you've got a rate base CAGR that goes through the 2022 period. What are the kind of puts and takes if you're not ready to kind of roll forward your EPS CAGR in the next couple years? Obviously, you've got the dynamics in the UK, but can you talk about maybe the FX and any other kind of puts and takes there? (39:41).

Yeah. Sure. So FX is probably one of the key ones, and the forward curve currently for 2021 is $1.49. So clearly that's $0.09 above where we're currently projecting 2020 earnings, or based our earnings on 2020 at $1.40. So there's clearly significant upside should the forward curve continue to show that kind of strength. In terms of other puts and takes, you mentioned the rate base growth. That will continue. I believe over the entire period it's just above 6%. That, in the 5% to 6%, range will continue beyond 2020. So that's going to be a key driver of earnings, as well as just, I would say overall cost management, cost containment, which we've done a really good job of managing over time. So I think those are a couple of the key factors.

Great, excellent. I'll leave it there. Best of luck.

Thank you, Julien.

And ladies and gentlemen, our next question today comes from Ali Agha of SunTrust. Please go ahead.

Thank you, good morning.

Good morning.

First question, the extra $650 million of equity that you're planning for this year, will that be covered from internal program like DRIP, ATM, or would that require some kind of block issuance? What's the thought there?

Our thought is the DRIP and ATM would be probably the most efficient. And we think that given the incremental $650 million is not that significant, overall, we could issue probably much more than $1 billion overall for the year under the ATM and DRIP programs. So we think it's very doable. And as always, we'll look at other means and use the most efficient means, but ATM is the most likely mechanism.

I see. And then, Bill, you made this point in your slide. This is the eighth consecutive year where you've actually exceeded the midpoint of your guidance. Should we assume, given that track record and trend, that there is a healthy dose of conservatism built into your 2018 guidance?

Well, I think certainly we have had a track record that's been very positive of delivering above our midpoint of our earnings guidance. I think we put together what we believe are very solid business plans. They have proven to be conservative I guess in the past, if you look back at the track record. But one of the reasons we gave you a range for the equity issuances for 2019 and 2020 of $500 million to $1 billion was the fact that we have delivered in excess of the midpoint. So taking that into account, as well as some of the other moving parts, for example, we don't have the regulatory outcomes yet in Pennsylvania nor at FERC, we think that there is some upside there; not only just been delivering, but that $500 million is probably achievable in terms of the equity in 2019 and 2020 if things fall in place as they could. So again, kind of being conservative. We wanted to point out that even at the very high end, the $1 billion of equity in each of the three years, we can still meet the midpoint of the 5% to 6%. And if we can lower the equity raise, then we're going to be above that range.

Okay. And then lastly, just clarifying your comments (43:32) so you laid out your 2020-2022 CapEx plan which equate to a 5.4% CAGR on rate base, per your math. And as you point out, the forward exchange rates are much higher today than the $1.40 that you're budgeting. So given conditions as they are today, is it fair to say that that 5% to 6% should be sustainable through 2022 given what we know today?

Given what we know today and the forward curve at $1.49, we could maintain the 5% to 6%, yes. But we're not issuing formal guidance right now. But with those assumptions that you outlined, that would be achievable, correct.

Okay, thank you.

You're welcome.

And our next question today comes from Jonathan Arnold of Deutsche Bank. Please go ahead.

Good morning, guys.

Good morning, Jonathan. <: Just one question. Can you give us a little sense of what your most likely option for executing on the equity is?

Sure, I think it would be the combination of ATM and DRIP. And we think that that's very doable in the current environment. And particularly as we get beyond the mid-period review and some of the initial RIIO-2 framework, we think we'll see some strength in the stock and some of the uncertainty removed. And so I think ATM for now is our assumption and probably a pretty good one from our perspective.

Okay. And the DRIP I think you said is about $100 million?

That's correct.

Okay. And then I had a question on the walk from 2017 to 2018 that was on slide 16.

Yes.

I'm sure this is obvious, and I apologize for the question if so. But why is it that Kentucky, the impact of tax reform on Kentucky is negative, but that on Pennsylvania is positive?

Vince, do you want to?

Sure. So, Jonathan, Kentucky has holding company debt as well, where PA has none. So they in addition to cap funding are losing the tax shield on going from 35% to 21% on their holding company debt.

But that's encompassed within the number you've given for overall holding company debt impact, but it's just in that segment. Is that correct?

It's in the $0.06 that I talked about on that first bucket for the lower tax shield on HoldCo interest. It's in that $0.06 that's cap funding MLP.

Okay, so it's a segment allocation thing. Okay. I think that's – and then I just have one other question. On the 13% you're talking about around FFO-to-debt, is that the threshold that you currently have, or is that where you feel you need to be to be comfortable? I just want to be clear whether – because I guess we didn't see you guys put on negative outlook, so we don't have a clearer sense of exactly where your threshold might be.

So the threshold previously as indicated by Moody's was 12% to 15% FFO-to-debt. With tax reform, we would be skating at the bottom of that range, and we felt that was probably not the best place to be. And in conversations with the rating agencies, we felt that it was probably most prudent to add some more equity into the plan. And given we had the hedge value that we could utilize to maintain our EPS growth rates, we felt that that was the best way to do it.

Perfect.

Jonathan, that is one of the open items as we think about the $500 million to $1 billion for 2019 and 2020. We've had initial discussions with the agencies, but I would not say we've had fulsome discussions in detail with either of them, and so we need to do that. And so ultimately, we'll flesh out where that ultimately needs to be to maintain our credit ratings with both agencies. But at this point we're assuming 13% will be a comfortable area.

Great, thank you. Just to be sure I fully understood you on equity, we're saying in 2019 and 2020 it's at least $500 million each year, but it could be up to $1 billion each year.

That's correct.

It is. But if we're at the $500 million, that will simply be pulling forward 2021 and 2022 because we're going from $350 million to basically less than $100 million in those years.

Okay, perfect. Thank you very much.

You're welcome.

Today's next question comes from Michael Lapides of Goldman Sachs. Please go ahead. Michael Lapides - Goldman Sachs & Co. LLC: Hey, guys, just a bigger picture question. Given a few factors, meaning tax reform in the U.S., higher interest rates overall, how do you think those two things change your competitive positioning relative to other U.S. and European utilities? And how does that trickle into your view of whether further consolidation on either continent is both value-added and worthwhile?

Let me try to – let me take the last part of your question first, Michael. On the M&A front, I don't really think that tax reform overall is going to have a significant effect within our sector, whether that's in the EU or here in the U.S. I think the one effect it could have is it does remove the uncertainty about what tax reform might have been. So from that perspective, it might create some more opportunity for some. But I don't think the fundamentals of the business overall have changed much because everyone is pretty much on the same level playing field. Now having said that, for PPL specifically, because 50% of our business is in the UK and 50% is here, as interest rates rise in the U.S., we've got somewhat of a hedge against rising interest rates here vis-à-vis the UK. So to the extent that the UK interest rates remain much lower than they are here in the U.S., that could be a positive to the stock. And I think overall, we don't see a whole lot of change from the PPL perspective and our view of M&A. So what we've said in the past is that we can be successful with the organic growth plan that we have. We don't need M&A to be successful. I think we've been pretty transparent that as we think about M&A, our objective has been to strengthen our EPS growth rate and credit metrics if we were to engage in M&A. Said another way, I'm unaware of any transaction that would meet these objectives today. Our focus is clearly on delivering long-term earnings growth, which we can do organically. I'd also mention that currently we think our stock is undervalued, and we believe that transaction multiples are currently – continue to be pretty excessive and would not allow us to achieve our objectives in any M&A kind of scenario. Michael Lapides - Goldman Sachs & Co. LLC: Got it. Thank you, guys. Thank you, Bill, much appreciated for that.

You're welcome, Michael.

That is the end of our question-and-answer session. Please go ahead, sir.

Okay. I was just going to say, seeing no other names in the queue, we'll just say thanks to everyone for joining us today, and we'll catch up with you on the next earnings call, if not before. Thank you.

And thank you, sir. Today's conference has now concluded. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.