PPL Corporation Reports First-Quarter Earnings

--Announces solid increases in results from regulated businesses

--Finalizes remarketing plan for equity units; updates per-share earnings guidance to reflect accelerated recognition of common stock underlying equity units

--Announces reduction in future equity needs

--Affirms underlying 2013 forecast of net income

02 May, 2013, 07:00 ET from PPL Corporation

ALLENTOWN, Pa., May 2, 2013 /PRNewswire/ -- PPL Corporation (NYSE: PPL) announced first-quarter 2013 reported earnings on Thursday (5/2) of $413 million, or $0.65 per share, a decrease from $541 million, or $0.93 per share, a year ago.

Adjusting for special items, quarterly earnings from ongoing operations were $454 million, or $0.71 per share, an increase from $409 million, or $0.70 per share, in the first quarter of 2012.

First-quarter per-share reported and ongoing earnings reflect accelerated recognition of the common stock underlying the equity units issued to fund the company's 2010 and 2011 acquisitions in Kentucky and the United Kingdom. Excluding the impact of the accelerated share recognition, per-share earnings from ongoing operations would have been $0.06 higher.

"We delivered strong quarter-over-quarter growth in each of the regulated business segments, keeping us on track to achieve our 2013 net income target," said William H. Spence, PPL chairman, president and chief executive officer.

"Late in the first quarter we finalized our financing plans to remarket $2.1 billion of debt securities related to the equity units issued in 2010 and 2011," he said. As a result of those activities, effective Jan. 1, 2013, PPL is reflecting the full expected impact of common stock underlying both series of equity units in its calculation of earnings per share.

Terms of the equity units have not changed and the actual issuance of common stock under the equity units remains scheduled to occur July 1, 2013, and May 1, 2014, for the 2010 and 2011 Equity Units, respectively.

"Additionally, we are announcing today a reduction in future equity needs," Spence said. PPL has removed approximately $100 million per year in previously planned equity offerings from its financing plans for 2013 and beyond.

As a result of the accelerated recognition of common stock related to the equity units and the change in financing plans, PPL's 2013 earnings per share forecasts have been adjusted downward by $0.10 per share. The revised forecast of ongoing earnings is a range of $2.15 to $2.40 per share, with a midpoint of $2.27. The forecast of reported earnings is now $2.09 to $2.34 per share, reflecting special items recorded through the first quarter.

First-Quarter 2013 Earnings Details

PPL's reported earnings for the first quarter of 2013 included net special item charges of $41 million, or $0.06 per share, reflecting a charge of $0.18 per share for adjusted energy-related economic activity (primarily mark-to-market losses on commodity hedges), partially offset by a credit of $0.12 per share for foreign currency-related economic hedges.

Reported earnings are calculated in accordance with U.S. generally accepted accounting principles (GAAP). "Earnings from ongoing operations" is a non-GAAP financial measure that is adjusted for special items including the impact of adjusted energy-related economic activity, foreign currency-related economic hedges, as well as other impacts fully detailed at the end of this news release. 

(Dollars in millions, except for per share amounts)

1st Quarter

1st Quarter

2013

2012

% Change

Reported Earnings

$413

$541

-24%

Reported Earnings Per Share

$0.65

$0.93

-30%

Earnings from Ongoing Operations

$454

$409

11%

Earnings from Ongoing Operations Per Share

$0.71

$0.70

1%

 

(See the tables at the end of the news release for details as to the reconciliation of earnings from ongoing operations to reported earnings.)

First-Quarter Earnings by Business Segment

The following chart shows PPL's earnings per share by business segment for the first quarter of 2013 compared with the same period of 2012.

 

1st Quarter

Earnings from ongoing operations

2013

2012

Kentucky Regulated

$

0.14

$

0.06

U.K. Regulated

0.37

0.31

Pennsylvania Regulated

0.10

0.06

Supply

0.11

0.27

Corporate and Other1

(0.01)

    Total

$

0.71

$

0.70

Special items

Kentucky Regulated

$

$

0.01

U.K. Regulated

0.12

(0.03)

Pennsylvania Regulated

Supply

(0.18)

0.25

Corporate and Other1

    Total

$

(0.06)

$

0.23

Reported earnings

Kentucky Regulated

$

0.14

$

0.07

U.K. Regulated

0.49

0.28

Pennsylvania Regulated

0.10

0.06

Supply

(0.07)

0.52

Corporate and Other1

(0.01)

    Total

$

0.65

$

0.93

 

1 This category primarily includes unallocated corporate-level financing and other costs. Non-financing costs included in this category are not expected to be significant in 2013.

(For more details and a breakout of special items by segment, see the reconciliation tables at the end of this news release.)

Key Factors Impacting Business Segment Earnings from Ongoing Operations

Kentucky Regulated Segment    PPL's Kentucky Regulated segment primarily consists of the regulated electricity and natural gas operations of Louisville Gas and Electric Company and Kentucky Utilities Company.

Segment earnings from ongoing operations in the first quarter of 2013 increased by $0.08 per share compared with a year ago. This increase was primarily due to new electric and gas rates that went into effect Jan. 1, and higher sales volumes due to weather, partially offset by dilution of $0.01 per share.

U.K. Regulated Segment     PPL's U.K. Regulated segment primarily consists of the regulated electricity delivery operations of Western Power Distribution, serving Southwest and Central England and South Wales.

Segment earnings from ongoing operations in the first quarter of 2013 increased by $0.06 per share compared with a year ago. This increase was primarily due to higher delivery revenue as a result of higher prices, and lower income taxes, partially offset by dilution of $0.04 per share. 

Pennsylvania Regulated Segment    PPL's Pennsylvania Regulated segment consists of the regulated electricity delivery operations of PPL Electric Utilities.

Segment earnings from ongoing operations in the first quarter of 2013 increased by $0.04 per share compared with a year ago. This increase was primarily due to higher delivery revenues as a result of new distribution rates that went into effect Jan. 1, higher sales volumes due to weather, and lower operation and maintenance expense, partially offset by dilution of $0.01 per share.

Supply Segment   PPL's Supply segment consists primarily of the competitive domestic electricity generation and energy marketing operations of PPL Energy Supply.

Segment earnings from ongoing operations in the first quarter of 2013 decreased by $0.16 per share compared with a year ago. This decrease was primarily due to lower Eastern energy margins due to lower baseload energy prices, which were partially offset by higher baseload unit availability, higher capacity prices and higher margins on intermediate and peaking units; lower Western energy margins due to lower prices; higher income taxes; and dilution of $0.01 per share.

2013 Earnings from Ongoing Operations Forecast by Business Segment

                 Forecast

Earnings per share

2013 original

midpoint

2013 revised midpoint

2012 Actual

Kentucky Regulated

$0.47

$ 0.46

$ 0.33

U.K. Regulated

1.25

1.20

1.19

Pennsylvania Regulated

0.29

0.27

0.22

Supply

0.40

0.37

0.68

Corporate and Other

(0.04)

(0.03)

-

         Total

$2.37

$ 2.27

$ 2.42

 

PPL expects lower earnings per share in 2013 compared with 2012, primarily due to lower earnings in the Supply segment, higher earnings in the three regulated segments and dilution of $0.21 per share associated with shares related to the 2010 and 2011 Equity Units and the April 2012 forward stock sale that settles in 2013.

Kentucky Regulated Segment   PPL expects higher segment earnings in 2013 compared with 2012, primarily driven by electric and gas base rate increases, returns on additional environmental capital investments, and load growth, partially offset by higher operation and maintenance expense. Dilution is expected to be $0.03 per share.

U.K. Regulated Segment   PPL expects higher segment earnings in 2013 compared with 2012, primarily driven by higher electricity delivery revenue and lower income taxes, partially offset by higher operation and maintenance expense, higher depreciation and higher interest expense. Dilution is expected to be $0.10 per share.  

Pennsylvania Regulated Segment   PPL expects higher segment earnings in 2013 compared with 2012, primarily driven by higher distribution revenues from a distribution base rate increase and higher transmission margins, partially offset by higher depreciation. Dilution is expected to be $0.03 per share.

Supply Segment    PPL expects lower segment earnings in 2013 compared with 2012, primarily driven by lower energy prices, higher fuel costs, higher operation and maintenance expense, higher depreciation, and higher financing costs, partially offset by higher capacity prices and higher nuclear generation output despite scheduled outages for both Susquehanna units to implement a long-term solution to turbine blade issues. Dilution is expected to be $0.05 per share.

Corporate and Other    This category primarily includes unallocated corporate-level financing and other costs.

PPL Corporation (NYSE: PPL), with annual revenue of more than $12 billion, is one of the largest companies in the U.S. utility sector. The PPL family of companies delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom, owns more than 18,000 megawatts of generating capacity in the United States and sells energy in key U.S. markets. More information is available at www.pplweb.com.

(Note: All references to earnings per share in the text and tables of this news release are stated in terms of diluted earnings per share unless otherwise noted.)

Conference Call and Webcast

PPL invites interested parties to listen to a live Internet webcast of management's teleconference with financial analysts about first-quarter 2013 financial results at 8:30 a.m. Eastern Time on Thursday, May 2. The meeting is available online live, in audio format, along with slides of the presentation, on PPL's website: www.pplweb.com. The webcast will be available for replay on the PPL website for 30 days. Interested individuals also can access the live conference call via telephone at 702-696-4769 (ID#57179671).

"Earnings from ongoing operations," also referred to as "ongoing earnings," should not be considered as an alternative to reported earnings, or net income attributable to PPL shareowners, which is an indicator of operating performance determined in accordance with U.S. generally accepted accounting principles (GAAP). PPL believes that "earnings from ongoing operations," although a non-GAAP financial measure, is also useful and meaningful to investors because it provides management's view of PPL's fundamental earnings performance as another criterion in making investment decisions. PPL's management also uses "earnings from ongoing operations" in measuring certain corporate performance goals. Other companies may use different measures to present financial performance.

"Earnings from ongoing operations" is adjusted for the impact of special items. Special items include:

  • Adjusted energy-related economic activity (as discussed below).
  • Foreign currency-related economic hedges.
  • Gains and losses on sales of assets not in the ordinary course of business.
  • Impairment charges (including impairments of securities in the company's nuclear decommissioning trust funds).
  • Workforce reduction and other restructuring effects.
  • Acquisition-related adjustments.
  • Other charges or credits that are, in management's view, not reflective of the company's ongoing operations.

Adjusted energy-related economic activity includes the changes in fair value of positions used to economically hedge a portion of the economic value of PPL's competitive generation assets, full-requirement sales contracts and retail activities. This economic value is subject to changes in fair value due to market price volatility of the input and output commodities (e.g., fuel and power) prior to the delivery period that was hedged. Also included in adjusted energy-related economic activity is the premium amortization associated with options and the ineffective portion of qualifying cash flow hedges and economic activity realized associated with the monetization of certain full-requirement sales contracts in 2010. This economic activity is deferred, with the exception of the full-requirement sales contracts that were monetized, and included in earnings from ongoing operations over the delivery period of the item that was hedged or upon realization. Management believes that adjusting for such amounts provides a better matching of earnings from ongoing operations to the actual amounts settled for PPL's underlying hedged assets. Please refer to the Notes to the Consolidated Financial Statements and MD&A in PPL Corporation's periodic filings with the Securities and Exchange Commission for additional information on adjusted energy-related economic activity.

Statements contained in this news release, including statements with respect to future earnings, cash flows, financing, regulation and corporate strategy, are "forward-looking statements" within the meaning of the federal securities laws. Although PPL Corporation believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results discussed in the statements. The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: market demand and prices for energy, capacity and fuel; weather conditions affecting customer energy usage and operating costs; competition in power markets; the effect of any business or industry restructuring; the profitability and liquidity of PPL Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of plants and other facilities; the length of scheduled and unscheduled outages at our plants; environmental conditions and requirements and the related costs of compliance, including environmental capital expenditures and emission allowance and other expenses; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures; asset or business acquisitions and dispositions, and PPL Corporation's ability to realize the expected benefits from acquired businesses, including the 2010 acquisition of Louisville Gas and Electric Company and Kentucky Utilities Company and the 2011 acquisition of the Central Networks electricity distribution businesses in the U.K.; any impact of hurricanes or other severe weather on our business, including any impact on fuel prices; receipt of necessary government permits, approvals, rate relief and regulatory cost recovery; capital market conditions and decisions regarding capital structure; the impact of state, federal or foreign investigations applicable to PPL Corporation and its subsidiaries; the outcome of litigation against PPL Corporation and its subsidiaries; stock price performance; the market prices of equity securities and the impact on pension income and resultant cash funding requirements for defined benefit pension plans; the securities and credit ratings of PPL Corporation and its subsidiaries; political, regulatory or economic conditions in states, regions or countries where PPL Corporation or its subsidiaries conduct business, including any potential effects of threatened or actual terrorism or war or other hostilities; foreign exchange rates; new state, federal or foreign legislation, including new tax legislation; and the commitments and liabilities of PPL Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such important factors and in conjunction with PPL Corporation's Form 10-K and other reports on file with the Securities and Exchange Commission.

 

PPL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL INFORMATION (a)

Condensed Consolidated Balance Sheets (Unaudited)

(Millions of Dollars)

March 31,

December 31,

2013

2012

Assets

Cash and cash equivalents

$

853

$

901

Price risk management assets - current

1,284

1,525

Other current assets

2,852

2,642

Investments

812

759

Property, Plant and Equipment

Regulated utility plant

25,054

25,196

Less: Accumulated depreciation - regulated utility plant

4,258

4,164

Regulated utility plant, net

20,796

21,032

Non-regulated property, plant and equipment

12,948

12,545

Less: Accumulated depreciation - non-regulated property, plant and equipment

6,039

5,942

Non-regulated property, plant and equipment, net

6,909

6,603

Construction work in progress

2,270

2,397

Property, Plant and Equipment, net

29,975

30,032

Regulatory assets - noncurrent

1,464

1,483

Goodwill and other intangibles

4,905

5,083

Price risk management assets - noncurrent

598

572

Other noncurrent assets

598

637

Total Assets

$

43,341

$

43,634

Liabilities and Equity

Short-term debt

$

1,061

$

652

Long-term debt due within one year

751

751

Accounts payable

1,071

1,252

Price risk management liabilities - current

972

1,065

Other current liabilities

1,795

1,905

Long-term debt - noncurrent

18,881

18,725

Deferred income taxes and investment tax credits

3,917

3,715

Price risk management liabilities - noncurrent

533

629

Accrued pension obligations

1,596

2,076

Regulatory liabilities - noncurrent

1,016

1,010

Other noncurrent liabilities

1,206

1,356

Common stock and additional paid-in capital

6,994

6,942

Earnings reinvested

5,676

5,478

Accumulated other comprehensive loss

(2,146)

(1,940)

Noncontrolling interests

18

18

Total Liabilities and Equity

$

43,341

$

43,634

 

(a)

The Financial Statements in this news release have been condensed and summarized for purposes of this presentation.  Please refer to PPL Corporation's periodic filings with the Securities and Exchange Commission for full financial statements, including note disclosure.

 

 PPL CORPORATION AND SUBSIDIARIES

 Condensed Consolidated Statements of Income (Unaudited)

(Millions of Dollars, Except Share Data)

Three Months Ended March 31,

2013

2012

Operating Revenues

Utility

$

1,950

$

1,714

Unregulated retail electric and gas (a)

237

223

Wholesale energy marketing

Realized

976

1,208

Unrealized economic activity (a)

(822)

852

Net energy trading margins

(11)

8

Energy-related businesses

127

107

Total Operating Revenues

2,457

4,112

Operating Expenses

Operation

Fuel (a)

529

424

Energy purchases

Realized

691

883

Unrealized economic activity (a)

(634)

591

Other operation and maintenance

676

706

Depreciation

284

264

Taxes, other than income

96

91

Energy-related businesses

122

102

Total Operating Expenses

1,764

3,061

Operating Income

693

1,051

Other Income (Expense) - net

122

(17)

Interest Expense

251

230

Income Before Income Taxes

564

804

Income Taxes

151

259

Net Income

413

545

Net Income Attributable to Noncontrolling Interests

4

Net Income Attributable to PPL Shareowners

$

413

$

541

Earnings Per Share of Common Stock

Basic

$

0.70

$

0.93

Diluted

$

0.65

$

0.93

Weighted-Average Shares of Common Stock Outstanding

  (in thousands)

Basic

582,640

579,041

Diluted

657,020

579,527

 

(a)

Includes activity from energy-related contracts to hedge future cash flows that are not eligible for hedge accounting, or for which hedge accounting was not elected.

 

 PPL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Millions of Dollars)

Three Months Ended March 31,

2013

2012

Cash Flows from Operating Activities

Net income

$

413

$

545

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation

284

264

Amortization

64

55

Defined benefit plans - expense

51

42

Deferred income taxes and investment tax credits

80

257

Unrealized (gains) losses on derivatives, and other hedging activities

98

(235)

Other

30

20

Change in current assets and current liabilities

Accounts receivable

(187)

32

Counterparty collateral

(64)

65

Other

(70)

(82)

Other operating activities

Defined benefit plans - funding

(429)

(208)

Other

(26)

(27)

Net cash provided by operating activities

244

728

Cash Flows from Investing Activities

Expenditures for property, plant and equipment

(828)

(682)

Purchases of nuclear plant decommissioning trust investments

(28)

(38)

Proceeds from the sale of nuclear plant decommissioning trust investments

24

34

Proceeds from the sale of other investments

16

Net (increase) decrease in restricted cash and cash equivalents

(52)

(22)

Other investing activities

(15)

(19)

Net cash used in investing activities

(899)

(711)

Cash Flows from Financing Activities

Issuance of long-term debt

450

Retirement of long-term debt

(8)

Issuance of common stock

20

16

Payment of common stock dividends

(210)

(203)

Debt issuance and credit facility costs

(18)

(3)

Contract adjustment payments

(24)

(23)

Net increase (decrease) in short-term debt

416

93

Other financing activities

(5)

(4)

Net cash provided by (used in) financing activities

621

(124)

Effect of Exchange Rates on Cash and Cash Equivalents

(14)

8

Net Increase (Decrease) in Cash and Cash Equivalents

(48)

(99)

Cash and Cash Equivalents at Beginning of Period

901

1,202

Cash and Cash Equivalents at End of Period

$

853

$

1,103

 

Key Indicators (Unaudited)

12 Months Ended

March 31,

Financial

2013

2012

Dividends declared per share 

$ 1.4475

$ 1.41

Book value per share (a)(b)

$ 18.04

$ 19.44

Market price per share (a)

$ 31.31

$ 28.26

Dividend yield (a)

4.6%

5.0%

Dividend payout ratio (c)

62%

50%

Dividend payout ratio - earnings from ongoing operations (c)(d)

59%

54%

Price/earnings ratio (a)(c)

13.4

10.0

Price/earnings ratio - earnings from ongoing operations (a)(c)(d)

12.8

10.8

Return on average common equity

12.84%

15.35%

Return on average common equity - earnings from ongoing operations (d)

13.44%

14.19%

(a) End of period.

(b) Based on 583,214 and 579,520 shares of common stock outstanding (in thousands) at March 31, 2013 and March 31, 2012.

(c) Based on diluted earnings per share.

(d) Calculated using earnings from ongoing operations, which is a non-GAAP financial measure that excludes the

impact of special items, as described in the text and tables of this news release.

Operating - Domestic & International Electricity Sales (Unaudited)

3 Months Ended March 31,

Percent

(GWh)

2013

2012

Change

Domestic Retail Delivered

PPL Electric Utilities (a)

9,883

9,368

5.5%

LKE

8,000

7,505

6.6%

Total

17,883

16,873

6.0%

Domestic Retail Supplied (b)

PPL EnergyPlus

3,281

2,702

21.4%

LKE

8,000

7,505

6.6%

Total

11,281

10,207

10.5%

International Delivered

United Kingdom

21,752

21,423

1.5%

Domestic Wholesale

PPL EnergyPlus - East

14,457

12,418

16.4%

PPL EnergyPlus - West

1,910

1,918

(0.4%)

LKE (c)

575

589

(2.4%)

Total

16,942

14,925

13.5%

(a) Prior period volumes were restated to include unbilled volumes.

(b) Represents GWh supplied by PPL EnergyPlus to PPL Electric Utilities as PLR, and to other retail customers in Pennsylvania, New Jersey,

  Montana, Delaware and Maryland.  Also includes GWh supplied by LKE to retail customers in Kentucky, Virginia and Tennessee.

(c) Represents FERC-regulated municipal and unregulated off-system sales.

 

Reconciliation of Segment Earnings from Ongoing Operations to Reported Earnings

(After Tax)

(Unaudited)

1st Quarter 2013

(millions of dollars)

Kentucky

U.K.

Pennsylvania

Corporate

Regulated

Regulated

Regulated

Supply

and Other

Total

Earnings from Ongoing Operations

$

84

$

238

$

64

$

71

$

(3)

$

454

Special Items:

Adjusted energy-related economic activity, net

(117)

(117)

Foreign currency-related economic hedges

78

78

Acquisition-related adjustments:

WPD Midlands

Separation benefits

(1)

(1)

Other acquisition-related adjustments

(2)

(2)

Other:

EEI adjustments

1

1

Total Special Items

1

75

(117)

(41)

Reported Earnings

$

85

$

313

$

64

$

(46)

$

(3)

$

413

(per share - diluted) (a)

Kentucky

U.K.

Pennsylvania

Corporate

Regulated

Regulated

Regulated

Supply

and Other

Total

Earnings from Ongoing Operations

$

0.14

$

0.37

$

0.10

$

0.11

$

(0.01)

$

0.71

Special Items:

Adjusted energy-related economic activity, net

(0.18)

(0.18)

Foreign currency-related economic hedges

0.12

0.12

Total Special Items

0.12

(0.18)

(0.06)

Reported Earnings

$

0.14

$

0.49

$

0.10

$

(0.07)

$

(0.01)

$

0.65

(a)  The "If-Converted Method" was applied to PPL's Equity Units beginning in the first quarter of 2013, resulting in $15 million of interest

charges (after tax) being added back to net income and approximately 72 million shares of PPL Common Stock being treated as

outstanding.  Both adjustments are only done for purposes of calculating earnings per share diluted.

 

Reconciliation of Segment Earnings from Ongoing Operations to Reported Earnings

(After Tax)

(Unaudited)

1st Quarter 2012

(millions of dollars)

Kentucky

U.K.

Pennsylvania

Regulated

Regulated

Regulated

Supply

Total

Earnings from Ongoing Operations

$

38

$

183

$

33

$

155

$

409

Special Items:

Adjusted energy-related economic activity, net

150

150

Foreign currency-related economic hedges

(14)

(14)

Impairments:

Adjustments - nuclear decommissioning trust investments

1

1

Acquisition-related adjustments:

WPD Midlands

Separation benefits

(4)

(4)

LKE

Net operating loss carryforward and other tax-related adjustments

4

4

Other:

Counterparty bankruptcy

(6)

(6)

Ash basin leak remediation adjustment

1

1

Total Special Items

4

(18)

146

132

Reported Earnings

$

42

$

165

$

33

$

301

$

541

(per share - diluted)

Kentucky

U.K.

Pennsylvania

Regulated

Regulated

Regulated

Supply

Total

Earnings from Ongoing Operations

$

0.06

$

0.31

$

0.06

$

0.27

$

0.70

Special Items:

Adjusted energy-related economic activity, net

0.26

0.26

Foreign currency-related economic hedges

(0.02)

(0.02)

Acquisition-related adjustments:

WPD Midlands

Separation benefits

(0.01)

(0.01)

LKE

Net operating loss carryforward and other tax-related adjustments

0.01

0.01

Other:

Counterparty bankruptcy

(0.01)

(0.01)

Total Special Items

0.01

(0.03)

0.25

0.23

Reported Earnings

$

0.07

$

0.28

$

0.06

$

0.52

$

0.93

 

SOURCE PPL Corporation



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