Kentucky Monthly: How has the economy and, particularly, inflation and high interest rates affected your investment business in 2024?
Pamela Thompson, CFA, managing director, Mariner Wealth Advisors: Higher interest rates have made bond investments a more attractive part of portfolios over the past two years. While they carry risks in the event of an issuer defaulting or fluctuations in market interest rates, when investment-grade bonds are held until maturity, they can serve as a nice tool within a balanced portfolio for use as a buffer against the volatility of stocks.
The ongoing strength of the economy, together with the declining rate of inflation over the past two years, has fueled a strong stock market and produced above-average returns for investors. The combined result has helped investors feel more confident in making portfolio allocation decisions that are most appropriate for their risk tolerance, which is important in achieving their near-term and long-term goals.
KM: The stock market has reached an all-time high in 2024. What’s your forecast for 2025?
Thompson: While stocks have “earned” their recent returns thanks to companies growing their profits amid a still-expanding economy and a Fed that is now lowering its short-term interest rate, some valuations are getting a bit stretched. Stock returns for 2025 will depend on many different factors, but we wouldn’t be surprised to see those come in at more modest levels than over the past two years.
With the recent election results, there now seems to be a higher likelihood that the current lower corporate tax rate could remain in effect longer. As we transition to a new administration, there is a risk of new inflationary pressures that could result from actions that have been suggested with regard to international trade and immigration.
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KM: LG&E/KU’s goal is to be the U.S.’s “best utility company.” What’s your 2024 success story?
John R. Crockett III, president of LG&E/KU: At Louisville Gas and Electric Company and Kentucky Utilities Company, we are ensuring we have the right mix of generation and sustainable energy grid, allowing us to transition Kentucky’s energy future safely and reliably.
In 2024, we began work on a new 640-megawatt natural gas combined-cycle unit, a significant amount of solar, a 125-megawatt battery energy storage system, and the largest number of energy-efficiency programs in our history. We are investing in automated technologies on our transmission and distribution system and have installed more than a million advanced meters at customers’ homes and businesses. We’re also investing in research and development and, with parent company PPL Corporation, finalized an award for up to $72 million from the U.S. Department of Energy Office of Clean Energy Demonstrations to study carbon capture from an existing natural gas combined-cycle unit.
Our employees, company and foundation contributed nearly $7 million to nonprofit organizations in our service territories. Our economic development efforts helped attract additional jobs and business to the Commonwealth. Through September, more than 30 companies announced plans to invest approximately $1.4 billion in new or expanding operations and create nearly 1,800 new jobs. Nearly 50 percent of all announcements and additional jobs and nearly 40 percent of all investments in 2024 are within the LG&E and KU territories.
KM: What new projects are planned for 2025? And what challenges lie ahead in 2025?
Crockett: Kentucky has seen unprecedented growth, and it doesn’t appear to be slowing any time soon. Despite significant amounts of energy efficiency, customer-installed solar, and other energy-saving activities that are forecasted to reduce load by 3.5 percent by 2032, LG&E and KU expect economic development to increase system load by 30-45 percent by 2032. This load growth requires additional generation to provide the reliable electric service customers expect.
We are recommending building two new natural gas combined-cycle generation units (one in 2030 and another in 2031); installing 400 megawatts of battery storage in 2028 and 500 megawatts of battery storage and 500 megawatts of solar in 2035; adding a selective catalytic reduction system to a coal-fired unit in 2028 and environmental compliance technology at two generating stations by 2030.
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KM: Explain to our audience the term “liquid asset” as it relates to the Louisville Water Company’s role in economic development. How does LWC help attract businesses?
Spencer Bruce, P.E., president and CEO of Louisville Water Company: Louisville Water Company delivers water to 20 percent of Kentucky’s population. In every town, a reliable and high-quality supply of water is the anchor for a community’s quality of life and businesses. In 2025, the innovation that’s driven our mission for nearly 165 years will guide large transformational projects. We’re partnering with water providers in Hardin, Bullitt and Nelson counties to install miles of new water main that will support growth in manufacturing and distilling. Kentucky’s economic development boom impacts our work, and we are fortunate to have an abundant water supply from the Ohio River and drinking water that’s ranked as some of North America’s best.
KM: What new projects are underway and what challenges lie ahead in 2025?
Bruce: Elevating the consumer’s experience with Louisville Water is a priority. Digital innovation will improve how customers manage their water usage, pay their bill and communicate with us. In Louisville, the consumer experience includes a look at our history. Coming on the heels of a massive restoration, the Louisville Water Tower and WaterWorks Museum are open for tours and events. The tower is the oldest standing water tower in the U.S. and the site where we began operations in 1860.
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KM: What are the key value propositions that Somerset-Pulaski Economic Development Authority (SPEDA) pitches to prospective companies to relocate to the Lake Cumberland area?
Chris Girdler, president and CEO of SPEDA: The last five years in the capital of Lake Cumberland and throughout the region have been record breaking, and we are grateful for the success. It has been a period of growth, where we have announced more than $500 million in new and existing business expansions and over 1,000 new jobs, and have seen our tourism levels increase year after year. Through changing the definition of economic development to include things such as education, workforce development, arts and entertainment, and tourism, we have led the way in Kentucky and have seen “quality of life” become the new catchphrase. We sell our high quality of life along with a low cost of living, which has proven successful.
KM: What are reasons for optimism in 2025? And what challenges lie ahead in 2025?
Girdler: While much can happen at the national and worldwide level, we work on what we can control, and that is our local community’s collaboration and positive mindset to grow our community and lay the foundation for future generations. While we are optimistic, workforce issues will remain a constant concern. We have made strides, but we still have a long way to go. Kentucky, as a whole, is primed for more success.
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KM: Provide an update on your hospital system’s footprint growth within the state and ease-of-access initiative.
Gerard Colman, Baptist Health CEO: In the last year, Baptist Health opened its 10th hospital, the 40-bed Baptist Health Rehabilitation Hospital in Louisville, a joint venture with Encompass Health. Baptist Health Hamburg opened in Lexington with a cancer center, outpatient facilities, and ER and surgery center, while Baptist Health Hardin just cut the ribbon on its healthplex with a comprehensive cancer center, surgery suites, a cath lab and medical offices. Baptist Health La Grange opened an 11-bed behavioral health unit—mirroring a similar-size unit at Baptist Health Richmond—and is homebase for the system’s centralized pharmacy. Behavioral health services—offered at all nine acute-care hospitals, many physician offices, and virtually—are a growing focus for Baptist Health, which saw a nearly 500 percent increase in those outpatients, from 22,000 visits in 2020 to 128,000 in 2024. Based on the success of our current ER/urgent-care hybrid locations, Baptist Health broke ground on a third site in southeastern Jefferson County, with more on the horizon.
KM: What are reasons for optimism in 2025?
Colman: The U.S. Department of Health and Human Services is expanding access to health-care services, including mental health and substance use disorder. This supports Baptist Health’s efforts in a state with one of the nation’s highest opioid overdose mortality rates, and where more than 3 million people live in a community with limited mental health professionals.
KM: What challenges lie ahead in 2025?
Colman: Reimbursements lagging behind expenses, combined with inflation, drives up costs for labor and supply. Decreasing staff provides some financial relief, but attracting and retaining health-care workers remains a challenge. Cybersecurity also is high on the list.
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KM: Murray State University is one of many state schools where enrollment has increased. What has contributed to this recent uptick?
Dr. Bob Jackson, MSU president: Recent accolades such as the “#1 Best Value School” in the South Region by U.S. News and World Report, “Best Bang for the Buck” by Washington Monthly, and a “Best College” by The Wall Street Journal are significant, as we offer nationally recognized academic quality while emphasizing access and affordability, and a focus on recruiting Kentucky students.
KM: With your upcoming retirement, what challenges lie ahead for the next president?
Jackson: We have welcomed a record freshman class, along with other recruiting and retention successes. Through the state legislature, nearly $100 million of asset preservation and deferred maintenance funding has been spent in order to enhance our campus. In addition, the pending construction of a new School of Nursing and Health Professions building, funding for a new Veterinary Sciences building and Learning Commons/Residence Hall, and new funding for our Program of Distinction in Cybersecurity and Network Management will continue to advance MSU. We are nearing the completion of a successful $100 million capital campaign in which 50 percent of funds raised will go toward scholarships and need-based aid for students.
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KM: What has contributed to the Kentucky Community and Technical College System’s recent uptick in enrollment?
Dr. Ryan Quarles, president of KCTCS: Enrollment was up by over 8 percent for fall 2024. Our colleges are welcoming nearly 85,000 students to our campuses, resulting in a 10-year high for the system. This increase partially comes from a growth in high school students seeking to jumpstart their college careers through dual-credit classes. We’ve seen a more than 10 percent increase in non-traditional students ages 25 and over, reflecting interest in both transfer pathways and career-focused education among adult learners. KCTCS’s alignment with Kentucky’s high-demand industry sectors, along with increased support and funding for the Work Ready Kentucky Scholarship, have attracted students to fields such as health care, advanced manufacturing and other skilled trade-related programs.
KM: What are reasons for optimism in 2025? And what challenges lie ahead in 2025?
Quarles: I’ve spent a lot of time during my first year at KCTCS visiting our campuses and speaking with staff, faculty and the community. Their commitment to support our mission assures me that 2025 has the potential to be our best year yet. It looks to be a time of reform and reset for KCTCS and our colleges. KCTCS will continue to work to improve and advance the system in response to [2024] Senate Joint Resolution 179. We look to provide a roadmap of how we can better serve students, employers and Kentucky’s future workforce.
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KM: To what do you attribute Kentucky’s high ranking in new capital investment projects?
Jeff Noel, secretary of the Kentucky Cabinet for Economic Development: We have built on longstanding corporate partnerships—such as those with Ford, Toyota and GE—while creating new connections with growing companies. The result has been a diverse economy that’s ready for the future.
KM: What are reasons for optimism in 2025? And what challenges lie ahead in 2025?
Noel: We have a spot-on plan: Win the automotive transformation, lead the manufacturing renaissance, attract our share of business and professional service jobs, grow tourism and its impact on attracting talent, and leverage our aerospace and ag-tech opportunities.
Gov. Andy Beshear and our state legislature have committed funds toward site and building development efforts, we are a leader in the manufacturing renaissance, and our talented workforce continues to evolve to meet the needs of any business within any sector.
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KM: What was PNC focused on in 2024 to enhance their customer relationship experience?
Kristen Byrd, PNC regional president for Kentucky: From my vantage point, 2024 was a year of leaning into our commitment to deliver the qualities customers want from their financial institution: stability, consistency and dependability. We launched a new brand campaign, Brilliantly Boring Banking, which acknowledges the reality that while these characteristics may sound less than exciting, they are foundational to our efforts to help clients achieve their financial goals.
We observed a significant milestone in 2024 with the 20th anniversary of PNC Grow Up Great, PNC’s $500 million, bilingual, signature philanthropic initiative to help prepare children for success in school and life. The PNC Foundation awarded grant funding to establish outdoor play and learning environments in communities throughout our footprint.
KM: How will the increasing use of artificial intelligence change banking?
Byrd: AI represents an area of great interest and potential for many sectors, including banking and the industries banks serve. Broadly speaking, the landscape for AI is both dynamic and capital-intensive. What that means for the banking industry is that it’s important to consider the value proposition and use cases for AI-enabled technologies in the context of factors and frameworks that are taking shape, including the regulatory landscape, audit readiness and talent strategy for upskilling.
In PNC Bank’s Inside the Minds of CFOs survey, conducted during the summer of 2024, only half the respondents indicated their companies have invested in AI projects. That told us that, while there is a lot of discussion around AI, there is still some level of caution in its implementation. At this early stage, it can be costly to implement and difficult to quantify return on investment.