Good morning, and welcome to the PPL Corporation Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Andy Ludwig, Vice President, Investor Relations. Please go ahead.

Thank you, Gary. Good morning everyone and thank you for joining the PPL conference call on second quarter 2019 financial results. We provided slides for this presentation and our earnings release issued this morning on the Investors section of our website. Our presentation on earnings release, which we'll discuss during today's call, contains forward-looking statements about future operating results or other future events. Actual results may differ materially from these forward-looking statements. Please refer to the appendix of this presentation and PPL's SEC filings for a discussion of factors that could cause actual results to differ from the forward-looking statements. We will also refer to earnings from ongoing operations or ongoing earnings, a non-GAAP measure on this call. For reconciliations to the GAAP measure, you should refer to the appendix of this presentation and our earnings release. I'll now turn the call over to Bill Spence, PPL Chairman and CEO.

Thank you, Andy, and good morning everyone. We're pleased that you've joined us for our second quarter earnings call. With me today are Vince Sorgi, who was promoted to PPL President and Chief Operating Officer, effective July 1; Joe Bergstein who is promoted to PPL Chief Financial Officer, succeeding Vince in the CFO role; and Greg Dudkin; and Paul Thompson, the Heads of our U.S. Utility businesses; Philip Swift, the Head of our Western Power Distribution business in the U.K. is not able to join us this morning. Moving to slide three, our agenda this morning begins with highlights of our 2019 second quarter results and a brief review of operational and regulatory developments. Joe will then provide more detailed review of second quarter earnings as well as an update on our foreign currency hedging status. As always, we'll leave ample time to answer your questions. Turning to slide four, today, we announced second quarter reported earnings of $0.60 per share, resulting in a total of $1.24 per share through the first half of 2019. Adjusting for special items, primarily related to unrealized gains on our U.K. earnings hedges, second quarter earnings from ongoing operations were $0.58 per share compared with $0.55 per share a year ago. On a year-to-date basis through June, total ongoing earnings were $1.27 per share compared with $1.29 per share a year ago, which is in line with our expectations. Based on our solid financial results through June, we remained very confident in our ability to deliver on our 2019 guidance range of $2.30 to $2.50 per share with a midpoint of $2.40. In addition, we remained on track to invest $3.3 billion in infrastructure improvements during 2019 as we work to make the grid smarter, more reliable, and more resilient. Looking beyond 2019, today…

Thank you, Bill and good morning everyone. Let's move to slide five for an overview of the second quarter segment results. As Bill mentioned, PPL delivered second quarter 2019 earnings from ongoing operations of $0.58 per share, which was $0.03 higher compared to the second quarter of 2018 and in line with our expectations. Our strong second -- our strong results more than offset $0.02 from share dilution and $0.05 of weather-related variances compared to the prior period. $0.04 of the weather variance was related to strong volumes experienced in the second quarter of 2018 and weather was about $0.01 unfavorable compared to our forecast for the second quarter of 2019. Excluding dilution and weather, we saw higher earnings in each of our utility segments this quarter. Our U.K. regulated segment earned $0.36 per share, a $0.04 increase compared to the same period a year ago, excluding the impact of dilution and weather. The increase in the U.K. earnings was primarily due to higher adjusted gross margins from higher prices as a result of the April 1st, 2019, price increase partially offset by lower sales volume, higher other income due to higher pension income and higher realized foreign currency exchange rates compared to 2018 for the second quarter 2019 average rate of a $1.36 per pound compared to $1.33 in the second quarter of 2018. Moving to Pennsylvania, our Pennsylvania regulated segment earned $0.13 per share in the second quarter of 2019, a $0.03 increase compared to the second quarter of 2018, excluding weather. The increase was primarily due to higher adjusted gross margins, primarily due to returns on additional capital investments in transmission and the timing impact related to U.S. tax reform in 2018 and lower operation and maintenance expense primarily due to lower support cost. These factors were…

Thanks Joe. In closing, all of our PPL companies continue to execute at an extremely high level as evidenced once again by the accolades earned from our customers and industry groups. We remained focused on delivering on our low-risk business plan to build tomorrow's infrastructure and advance a sustainable energy future. And our strong financial performance keeps us solidly on track to achieve our 2019 earnings forecast. These operational successes are underpinned by an exceptional workplace that cultivates an inclusive and diverse workforce. I'd like to briefly highlight a couple recent honors recognizing these efforts that exemplify the constructive culture and lifeblood of our company. In June, our Kentucky operations were rewarded the highest U.S. government honor to employers for providing exceptional support of National Guard and Reserve employees. The employer support of the Guard and Reserve are ESGR Freedom Award. We were one of 15 recipients of this prestigious award selected by the Department of Defense out of nearly 2,500 nominations this year. And just last month, PPL was named a Best Place to Work for People with Disabilities for the second straight year, earning a top score of 100% on the disability equality index for its commitment to creating and accommodating an exclusive environment for people with disabilities. At PPL, we want all individuals to reach their fullest potential and believe that our employees, colleagues, and friends in the community of all abilities help us grow and thrive. We're extremely honored and proud of these achievements and we will continue to advance in these efforts for an inclusive and powering environment for all employees to drive energy forward. With that, operator, let's open the call for questions, please.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ali Agha with SunTrust. Please go ahead.

Thank you. Good morning.

Good morning.

Good morning. First question, Joe, just to understand the Ofgem process from here onwards, so I know that in the schedule in this open letter that consultation they started currently that they'll have a decision on the open later in November, what is to be expected, what will they decide at that time in November? And when are you expecting that the key parameters, cost of equity, et cetera will be firmed up? Is that when the strategy consultation decision comes -- just like layout, what we should expect in November on this open letter decision?

Sure. So, in November, they're going to provide us with the framework and within that framework, there will be details and I'll let Vince maybe comment on this since he's been following this pretty closely in terms of what those details are likely to include. So, Vince?

Sure. How are doing Ali? The process really going forward around the open letter we would expect Ofgem to make certain decisions on the questions that they pose. So, confirming the five-year term of the next price control versus some other term, confirming that they're going to stick with CAPM similar to what they're using for gas and transmission, I would not expect that they would, in November, put forth any numbers in terms of what that CAPM process would result for electric distribution that we would project to see when they do the sector methodology consultation, which would kick off mid-next year. I think, they'll also talk about the framework that they're thinking about in terms of transitioning to DSO, what type of incentive mechanisms might be in place to drive the DNOs to that outcome discussion around whole system outcomes, so things like that as opposed to the actual return numbers that they would be expecting.

I think between now and November, what the process really is, is a collection of knowing the answers to the questions that they pose but also additional stakeholder feedback. We'll take all of that, they will then propose a broad framework with more specifics around what their thought is based on all that input and then that will carry forward into next year, which will provide much more specificity on things like ROE and center frameworks.

Okay. Second question I had, can you remind us how much of your earnings in this quarter and year-to-date have come from U.K. pension income, the non-cash pension income? And any update on how you're thinking about that as it opens up in 2021?

So, we had two sets of pension income in the quarter compared to higher pension income in the quarter compared to last year. As far as the process for pension deficit funding and the amount that's needed going forward, we're in the process of updating our assumptions and negotiating the expected funding levels with our pension trustees. We expect that to be completed by year end. We'll then work with Ofgem and the U.K. pension regulator off Ofgem's review and determination of future deficit funding will be known -- we expect by November 2020. But our expectations at this time, well, we haven't changed the year end and our 2021 forecast, we're expecting about $0.05 per share reduction in 2021 due to lower pension deficit funding needs.

Right. Last question Bill, as I look at the big picture in the U.K., you’ve got Brexit uncertainty, potentially political uncertainty; you've got the currency, obviously extremely weak. As you look at all of this, I mean is there much that you can do about it or are these macro-political factors that's going to play themselves out and PPL just hunkers down and waits for these events to unfold? Is there anything proactively PPL can do, given the backdrop that you have out there?

Yes, it is a challenging political and regulatory backdrop at the moment but there are some efforts that we have -- had underway in the U.K. to basically educate many of those Ministers of Parliament that may not be familiar with specifically with the electricity networks, great track record and that track record includes much lower cost than when the systems were nationalized, better reliability, much better reliability to the tune of about 60% better reliability than when they were under state control. And also customer satisfaction, which is at the highest level it's ever been. So, we have a great story to tell and another data point is, which is on a positive side is that the Labour Party has really continued to lose momentum politically, and as you know they were one of the -- one of the only political party that had proposed bringing some of the networks back under state control as well as rail and mail and so forth and water [ph]. So, we think that the risk, while it was already very low is even lower than it previously was as the Labour Party has really failed to gain any momentum politically, and certainly there is always a probability that they could regain some of their footing but in our view very unlikely. So, the other thing that we've been doing is we have a political consulting firm that we use in the U.K. It's been very helpful for us to reach out to some of the other stakeholders outside the parliament to again, educate and inform local community and leaders and so forth. So, I think we're doing what we can to combat some of the broader political forces at play, but it is rather challenging.

Understood. Thank you.

You're welcome Ali.

The next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Good morning. Joe and Vince congratulations on the promotions.

Thank you.

First question, I guess, if I could think of the guidance for 2021 of $2.50 to $2.80 what is the assumption of pension deficit revenues in the $2.50 and $2.80 number or that's the same -- or pension deficit revenues have not change in that range?

We've assumed a $0.05 reduction in the range for -- at the midpoint of pension deficit -- at the midpoint of the 2021 forecast is a $0.05 reduction in the pension deficit funding.

At the low end of the range though is there a bigger decline in pension deficit revenues?

No, not materially. The range is really driven by FX rates.

Got it. If I could think about repatriation of cash from the U.K., what are you repatriating now? And I guess is there a sensitivity on currency or on the exchange rate with that?

Right now our forecast through the planning period has an expectation of $300 million to $500 million per year. So, when we think about the impact on currency relative to our cash repatriation and cash position, it's really very minor. So, even at current levels of the pound in the low $1.20, it's only about a $40 million impact to our cash repatriation. So, really very minor and very manageable in the grand scheme of our cash position.

Great. And lastly, just the company gives out -- we have I guess 5% to 6% growth rate through the 2020. When can we expect to get growth rate post-2020, given the U.K. planning goes out till 2023 could we expect something sooner to find out what the growth is post-2020?

Well, I think, we'll have to consider the currency situation and where we are in the Brexit process and if there's any clarity around that because as you are aware currency is obviously a big driver of our forecast. So, we'll have to wait and see when we provide that longer term guidance Anthony, given the currency situation of the political backdrop.

Great. Thanks for taking my questions Joe.

Sure.

[Operator Instructions] The next question comes from Shar Pourreza with Guggenheim Partners. Please go ahead.

Hey guys. it's actually James for Shar.

Good morning James.

Good morning. I just wanted to ask could you remind us whether or not tell us under the hedging program when we have to start for 2021?

Sure. Go ahead, Joe.

Yes. Well, we have flexibility under our hedging program and as I stated in the prepared remarks at this point we're not required to add any additional hedges throughout October, so we can really see how Brexit plays out as we approach October, end of October deadline.

Okay. And then are you still assuming a range, I think it was $1.35 to $1.60 in your 2021 guidance?

We are independent analyst forecast continue to support that range and there was in the range that we provided when we provided that guidance. So, we're maintaining that at this point.

Got you. And I guess just stateside in Kentucky, any updated thoughts on going back for AMI?

I'll ask Paul Thompson who heads up our LG&E and KU Business to answer that.

Yes. We continue to evaluate that and we have under the prior-commission ruling expanded our testing -- our pilot-testing work in both LG&E and KU, so we have now over 10,000 AMI meters in each utility. And to your question, really, we would anticipate currently that the next rate case, whenever that might be, maybe the time that we would put the AMI back into the request for approval on that.

Got it. Thanks guys. That's all I had.

Thanks James.

This concludes our question-and-answer session. I would like to turn the conference back over to Bill Spence for any closing remarks.

Thank you, operator, and thanks for joining us today, and we look forward to speaking with everyone on the third quarter earnings call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.