PPL Corporation reports third-quarter earnings Company increases midpoint of 2012 earnings forecast range

ALLENTOWN, Pa., Nov. 8, 2012 /PRNewswire/ -- PPL Corporation (NYSE: PPL) announced on Thursday (11/8) third-quarter reported earnings of $355 million, or $0.61 per share, down from $444 million, or $0.76 per share, a year ago.

For the first nine months of 2012, PPL's reported earnings were $1.17 billion, or $2.00 per share, compared with $1.04 billion, or $1.91 per share, for the first nine months of 2011.

Adjusting for special items, PPL's third-quarter earnings from ongoing operations were $419 million, or $0.72 per share, compared with $439 million, or $0.76 per share, a year ago. For the first nine months of 2012, earnings from ongoing operations were $1.13 billion, or $1.93 per share, compared with $1.1 billion, or $2.02 per share, for the first nine months of 2011.

PPL's year-to-date earnings from ongoing operations reflect dilution of $0.14 per share, primarily due to the April 2011 common stock issuance to finance the WPD Midlands acquisition.

"Our solid performance through three quarters gives us the confidence to increase the midpoint of our earnings forecast range despite the previously announced turbine inspection outages at the Susquehanna nuclear power plant," said William H. Spence, PPL's chairman, president and chief executive officer.

Based on the results through nine months, PPL adjusted its 2012 forecast range to $2.30 to $2.40 per share in earnings from ongoing operations. The previous forecast range was $2.15 to $2.45 per share. The 2012 forecast range of reported earnings also has been adjusted to $2.37 to $2.47 per share, reflecting special items recorded through the third quarter of 2012. The previous range was $2.33 to $2.63 per share, reflecting special items recorded through the second quarter of 2012.

"We are delivering on the promises of PPL's transformational utility acquisitions in 2010 and 2011. As intended, the rate-regulated businesses are providing financial stability while commodity electricity pricing remains weak. The energy supply business is managing through significant challenges and our U.K. utilities continue to perform strongly," Spence said.

PPL's rate-regulated businesses account for the following percentages of earnings from ongoing operations: 64 percent in the third quarter of 2012, 68 percent in the first nine months of 2012, and 71 percent of the midpoint of the 2012 forecast.

Third-Quarter 2012 Earnings Details

PPL's reported earnings for the third quarter of 2012 include net special item charges of $0.11 per share. The charges include $0.16 per share for energy-related economic activity, $0.06 per share for foreign currency-related economic hedges, and $0.02 per share for coal contract modification payments. The charges were partially offset by a special item credit of $0.13 per share for a change in the U.K. corporate income tax rate.

Reported earnings are calculated in accordance with U.S. generally accepted accounting principles (GAAP). Earnings from ongoing operations, a non-GAAP financial measure, are adjusted for special items that include the impact of adjusted energy-related economic activity (principally changes in fair value of economic hedges and the ineffective portion of qualifying cash flow hedges), acquisition-related adjustments and other impacts fully detailed at the end of this news release. 

 (Dollars in millions, except for per share amounts)


3rd Quarter

3rd Quarter



2012

2011

% Change

Reported Earnings

$355

$444

-20%

Reported Earnings Per Share

$0.61

$0.76

-20%

Earnings from Ongoing Operations

$419

$439

-5%

Earnings from Ongoing Operations Per Share

$0.72

$0.76

-5%

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

Third-Quarter and Nine-Month 2012 Earnings by Business Segment

The following chart shows PPL's earnings by business segment for the third quarter and first nine months of 2012, compared with the same periods of 2011.

Per share


3rd Quarter


Year to Date

Earnings from ongoing operations


2012


2011


2012


2011


















Kentucky Regulated


$

0.12



$

0.13



$

0.26



$

0.34


U.K. Regulated



0.28




0.22




0.90




0.58


Pennsylvania Regulated



0.06




0.05




0.16




0.21


Supply



0.26




0.36




0.61




0.89



















    Total


$

0.72



$

0.76



$

1.93



$

2.02



















Special items


































Kentucky Regulated


$



$



$



$


U.K. Regulated



0.07




0.02




0.06




(0.16)


Pennsylvania Regulated













Supply



(0.18)




(0.02)




0.01




0.05



















    Total


$

(0.11)



$



$

0.07



$

(0.11)



















Reported earnings


































Kentucky Regulated


$

0.12



$

0.13



$

0.26



$

0.34


U.K. Regulated



0.35




0.24




0.96




0.42


Pennsylvania Regulated



0.06




0.05




0.16




0.21


Supply



0.08




0.34




0.62




0.94



















    Total


$

0.61



$

0.76



$

2.00



$

1.91


(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 third quarter of 2012 decreased by $0.01 per share compared with a year ago. This decrease was primarily due to lower retail margins.

Segment earnings from ongoing operations decreased during the first nine months of 2012 by $0.08 per share compared to a year ago. This decrease was primarily due to lower retail volumes as a result of mild weather early in the year, higher operation and maintenance expense, higher depreciation, higher property taxes, losses from an equity method investment and dilution of $0.02 per share. 

U.K. Regulated Segment
PPL's U.K. regulated segment 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 third quarter of 2012 rose by $0.06 per share compared with a year ago. This increase was primarily due to higher delivery revenue and lower U.K. income taxes, partially offset by higher U.S. income taxes and a less favorable currency exchange rate. 

Segment earnings from ongoing operations during the first nine months of 2012 increased by $0.32 per share compared to a year ago. This increase was primarily due to four additional months of earnings from the WPD Midlands utilities, higher delivery revenue, lower U.K. income taxes and lower financing costs. These positive drivers were partially offset by higher U.S. income taxes, higher operation and maintenance expense, a less favorable currency exchange rate and dilution of $0.07 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 third quarter of 2012 increased by $0.01 per share compared with a year ago. This increase was primarily due to higher distribution margins and lower financing costs, partially offset by higher operation and maintenance expense.

Segment earnings from ongoing operations during the first nine months of 2012 decreased by $0.05 per share compared to a year ago. This decrease was primarily due to lower retail sales as a result of mild weather early in the year, higher operation and maintenance expense, higher depreciation and dilution of $0.01 per share. This decline was partially offset by higher transmission revenue and lower financing costs.

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

Segment earnings from ongoing operations in the third quarter of 2012 decreased by $0.10 per share compared with a year ago. This decrease was the result of lower Eastern energy margins primarily due to lower hedged baseload energy prices, lower Western energy margins as a result of lower wholesale volumes, higher operation and maintenance expense, higher depreciation and higher financing costs.

Segment earnings from ongoing operations during the first nine months of 2012 decreased by $0.28 per share compared to a year ago. This decrease was the result of lower Eastern energy margins primarily due to lower hedged baseload energy prices and lower capacity prices, partially offset by higher nuclear generation volumes. Also contributing to the decline were lower Western energy margins primarily due to lower wholesale volumes, higher operation and maintenance expense primarily at the Susquehanna nuclear station, higher depreciation, higher financing costs and dilution of $0.04 per share.

2012 Earnings from Ongoing Operations Forecast by Business Segment

Earnings per share

2012

Forecast

midpoint


2011

Actual







Kentucky Regulated

$0.32


$0.40


U.K. Regulated

1.15


0.87


Pennsylvania Regulated                           

0.21


0.31


Supply

0.67


1.15


         Total

$2.35


$2.73


PPL projects lower earnings in 2012 compared with 2011, primarily due to lower energy margins in the supply segment, partially offset by a full year of earnings from the WPD Midlands utilities. These projected earnings also reflect dilution of $0.14 per share associated with PPL's April 2011 common stock issuance to finance the WPD Midlands acquisition. 

Kentucky Regulated Segment
PPL projects lower segment earnings in 2012 compared with 2011, primarily driven by higher operation and maintenance expense, higher depreciation, higher property taxes and losses from an equity method investment. Dilution for 2012 is expected to be $0.02 per share.

U.K. Regulated Segment
PPL projects higher segment earnings in 2012 compared with 2011, primarily driven by four additional months of earnings from the WPD Midlands utilities and higher electricity delivery revenue. Partially offsetting these positive earnings drivers are higher operation and maintenance expense, higher depreciation, higher interest expense, higher income taxes and a less favorable currency exchange rate. Dilution for 2012 is expected to be $0.07 per share.  

Pennsylvania Regulated Segment
PPL projects lower segment earnings in 2012 compared with 2011, primarily driven by higher operation and maintenance expense, higher depreciation and lower distribution revenue, which are expected to be partially offset by higher transmission revenue, lower financing costs and lower income taxes. Dilution for 2012 is expected to be $0.01 per share.

Supply Segment
PPL projects lower segment earnings in 2012 compared with 2011. The decrease is primarily driven by lower energy margins as a result of lower energy and capacity prices and lower generation volumes, higher operation and maintenance expense and higher depreciation. Dilution for 2012 is expected to be $0.04 per share. 

PPL Corporation, headquartered in Allentown, Pa., owns or controls about 19,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom. 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.)

Conference Call and Webcast

PPL invites interested parties to listen to a live Internet webcast of management's teleconference with financial analysts about third-quarter 2012 financial results at 9 a.m. (EST) Thursday, November 8. 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 web site for 30 days. Interested individuals also can access the live conference call via telephone at 702-696-4769 (ID#59068461).

"Earnings from ongoing operations" 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 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 impacts.
  • 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 economically to hedge a portion of the economic value of PPL's 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 ineffective portion of qualifying cash flow hedges, the monetization of certain full-requirement sales contracts and premium amortization associated with options. 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)














September 30,


December 31,





2012


2011

Assets







Cash and cash equivalents


$

946


$

1,202

Price risk management assets - current



1,768



2,548

Other current assets



2,513



2,676

Investments



778



718

Property, Plant and Equipment








Regulated utility plant



24,415



22,994


Less: Accumulated depreciation - regulated utility plant



4,011



3,534



Regulated utility plant, net



20,404



19,460


Non-regulated property, plant and equipment



12,412



11,608


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



5,875



5,676



Non-regulated property, plant and equipment, net



6,537



5,932


Construction work in progress



2,106



1,874


Property, Plant and Equipment, net



29,047



27,266

Regulatory assets - noncurrent



1,323



1,349

Goodwill and other intangibles



5,043



5,179

Price risk management assets - noncurrent



860



920

Other noncurrent assets



962



790

Total Assets


$

43,240


$

42,648










Liabilities and Equity







Short-term debt


$

526


$

578

Long-term debt due within one year



313




Accounts payable



1,071



1,214

Price risk management liabilities - current



1,184



1,570

Other current liabilities



1,793



1,893

Long-term debt - noncurrent



18,711



17,993

Deferred income taxes and investment tax credits



4,020



3,611

Price risk management liabilities - noncurrent



884



840

Accrued pension obligations



1,086



1,313

Regulatory liabilities - noncurrent



999



1,010

Other noncurrent liabilities



1,421



1,530

Common stock and additional paid-in capital



6,918



6,819

Earnings reinvested



5,335



4,797

Accumulated other comprehensive loss



(1,039)



(788)

Noncontrolling interests



18



268

Total Liabilities and Equity


$

43,240


$

42,648



(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 September 30,


Nine Months Ended September 30,






2012


2011


2012 (a)


2011 (a)

















Operating Revenues














Utility


$

1,693


$

1,675


$

5,012


$

4,695


Unregulated retail electric and gas (b)



218



189