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PPL Corporation Reports First-Quarter Earnings

- Earnings from ongoing operations up 15 percent from 2013, driven by increases in all three regulated business segments.

- Company increases midpoint of 2014 forecast of earnings from ongoing operations to $2.23 per share.

05-01-2014

ALLENTOWN, Pa., May 1, 2014 /PRNewswire/ -- PPL Corporation (NYSE: PPL) on Thursday (5/1) announced first-quarter 2014 reported earnings of $316 million, or $0.49 per share, a decrease from $413 million, or $0.65 per share in the first quarter of 2013.

Adjusting for special items, quarterly earnings from ongoing operations were $523 million, or $0.80 per share, an increase compared with the first quarter of 2013.  For the first quarter of 2013, earnings from ongoing operations were $454 million, or $0.71 per share.

"Our 15 percent increase in earnings from ongoing operations was driven by strong operational performance at all of the business segments, along with the positive effect of weather across our domestic regulated utilities and competitive generation business," said William H. Spence, PPL chairman, president and Chief Executive Officer.

That strong performance led PPL to increase its 2014 forecast of earnings from ongoing operations to a range of $2.15 to $2.30 per share, with a midpoint of $2.23 per share. The previous forecast of earnings from ongoing operations was a range of $2.05 to $2.25 per share, with a midpoint of $2.15 per share. The forecast for reported earnings is a range of $1.84 to $1.99 per share, reflecting special items recorded in the first quarter.

"All three regulated businesses outperformed 2013 results, as our capital investments in regulated infrastructure continue to provide benefits to customers and shareowners," Spence said. "The unusually cold winter weather resulted in increased sales to customers in Pennsylvania and Kentucky, and our competitive generating plants in the PJM Interconnection operated well during the periods of high electricity demand.  In the U.K., we benefited from higher rates and bonus revenues that we earned through best-in-class performance."

First-Quarter 2014 Earnings Details

PPL's reported earnings for the first quarter of 2014 included net special item charges of $207 million, or $0.31 per share, primarily reflecting charges of $0.20 per share for adjusted energy-related economic activity, $0.08 per share for an increase in the accrued liability for U.K. line losses, and $0.02 per share for an impairment following an arbitration decision regarding PPL Montana's Kerr hydroelectric project.

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 that are fully detailed at the end of this news release.

 

(Dollars in millions, except for per share amounts)


1st Quarter





2014


2013


% Change












Reported Earnings


$

316



$

413



(23)%

Reported Earnings Per Share


$

0.49



$

0.65



(25)%

Earnings from Ongoing Operations


$

523



$

454



15%

Earnings from Ongoing Operations Per Share


$

0.80



$

0.71



13%

 

(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

 



1st Quarter

Per share


2014


2013

Earnings from ongoing operations









U.K. Regulated


$

0.41



$

0.37


Kentucky Regulated



0.16




0.14


Pennsylvania Regulated



0.13




0.10


Supply



0.11




0.11


Corporate and Other1



(0.01)




(0.01)


    Total


$

0.80



$

0.71











Special items









U.K. Regulated


$

(0.09)



$

0.12


Kentucky Regulated







Pennsylvania Regulated







Supply



(0.22)




(0.18)


Corporate and Other1







    Total


$

(0.31)



$

(0.06)











Reported earnings









U.K. Regulated


$

0.32



$

0.49


Kentucky Regulated



0.16




0.14


Pennsylvania Regulated



0.13




0.10


Supply



(0.11)




(0.07)


Corporate and Other1



(0.01)




(0.01)


    Total


$

0.49



$

0.65


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

(For additional details 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

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 2014 increased by $0.04 per share compared with a year ago. This increase was primarily due to higher utility revenues driven by an April 1, 2013 price increase, and lower pension expense, partially offset by lower sales volumes due to weather, and higher depreciation.

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 2014 increased by $0.02 per share compared with a year ago. This increase was primarily due to higher sales volumes due to unusually cold weather and returns from additional environmental capital investments, partially offset by higher operation and maintenance expense.

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 2014 increased by $0.03 per share compared with a year ago. This increase was primarily due to higher transmission margins from additional capital investments, higher distribution margins due to unusually cold weather, and a benefit from a change in estimate of a regulatory liability.

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 2014 were the same as a year ago. This was primarily due to higher capacity prices, net benefits from unusually cold weather and lower interest expense, offset by lower baseload energy prices and the timing of a planned outage at the Susquehanna nuclear power plant.

Forecast of Earnings from Ongoing Operations by Business Segment

 


2014

forecast
midpoint


2013

actual

Per share






U.K. Regulated

$ 1.34



$ 1.32


Kentucky Regulated

0.45



0.48


Pennsylvania Regulated

0.39



0.31


Supply

0.11



0.39


Corporate and Other1

(0.06)



(0.05)


    Total

$ 2.23



$ 2.45


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

PPL expects lower earnings from ongoing operations in 2014 compared with 2013, primarily due to lower energy margins in the Supply segment.

U.K. Regulated Segment
PPL projects higher segment earnings in 2014 compared with 2013, driven primarily by higher electricity delivery revenue and lower pension expense, offset partially by higher income taxes, higher depreciation and higher financing costs.

Kentucky Regulated Segment
PPL projects lower segment earnings in 2014 compared with 2013, driven primarily by higher operation and maintenance expense, higher depreciation and higher financing costs, offset partially by returns on additional environmental capital investments and increased sales volumes.

Pennsylvania Regulated Segment
PPL projects higher segment earnings in 2014 compared with 2013, driven primarily by higher transmission margins and returns on distribution improvement capital spending, offset partially by higher financing costs and higher income taxes.

Supply Segment
PPL projects lower segment earnings in 2014 compared with 2013, driven primarily by lower energy and capacity prices, offset partially by the net realized benefits from unusually cold winter weather, lower financing costs and lower income taxes.

PPL Corporation (NYSE: PPL), with 2013 revenues of $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 2014 financial results at 8:30 a.m. Eastern Time on Thursday, May 1. 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 866-652-5200. International participants should call 1-412-317-6060.

"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).
  • Unrealized gains or losses on 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 the 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. Adjusted energy-related economic activity also includes the ineffective portion of qualifying cash flow hedges and premium amortization associated with options. This economic activity is deferred 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 generating plants and other facilities; the length of scheduled and unscheduled outages at our generating 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; 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,






2014


2013


Assets








Cash and cash equivalents


$

1,256


$

1,102


Price risk management assets - current



1,087



942


Accounts receivable



1,211



1,020


Unbilled revenues



874



835


Fuel, materials and supplies



607



702


Other current assets



1,059



552


Investments



918



907


Property, Plant and Equipment









Regulated utility plant



28,616



27,755



Less: Accumulated depreciation - regulated utility plant



5,108



4,873



  Regulated utility plant, net



23,508



22,882



Non-regulated property, plant and equipment



13,384



13,306



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



6,283



6,172



  Non-regulated property, plant and equipment, net



7,101



7,134



Construction work in progress



3,165



3,071



Property, Plant and Equipment, net



33,774



33,087


Regulatory assets - noncurrent



1,245



1,246


Goodwill and other intangibles



5,241



5,172


Price risk management assets - noncurrent



344



337


Other noncurrent assets



357



357


Total Assets


$

47,973


$

46,259












Liabilities and Equity








Short-term debt


$

1,579


$

701


Long-term debt due within one year



304



315


Accounts payable



1,345



1,308


Price risk management liabilities - current



1,302



829


Other current liabilities



1,846



1,759


Long-term debt



20,514



20,592


Deferred income taxes and investment tax credits



4,377



4,270


Price risk management liabilities - noncurrent



450



415


Accrued pension obligations



1,159



1,286


Asset retirement obligations



701



687


Regulatory liabilities - noncurrent



1,037



1,048


Other noncurrent liabilities



642



583


Common stock and additional paid-in capital



8,358



8,322


Earnings reinvested



5,788



5,709


Accumulated other comprehensive loss



(1,429)



(1,565)


Total Liabilities and Equity


$

47,973


$

46,259






(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,







2014


2013













Operating Revenues








  Utility


$

2,162


$

1,950


  Unregulated wholesale energy (a)



(1,429)



143


  Unregulated retail energy



349



237


  Energy-related businesses



141



127


  Total Operating Revenues



1,223



2,457













Operating Expenses








  Operation








    Fuel



758



529


    Energy purchases (b)



(1,494)



57


    Other operation and maintenance



697



676


  Depreciation



305



284


  Taxes, other than income



104



96


  Energy-related businesses



138



122


  Total Operating Expenses



508



1,764













Operating Income



715



693













Other Income (Expense) - net



(23)



122













Interest Expense



264



251













Income Before Income Taxes



428



564













Income Taxes



112



151













Net Income Attributable to PPL Shareowners


$

316


$

413













Earnings Per Share of Common Stock:








  Basic


$

0.50


$

0.70


  Diluted


$

0.49


$

0.65













Weighted-Average Shares of Common Stock Outstanding








  (in thousands)








    Basic



630,749



582,640


    Diluted



663,939



657,020











 

(a) 2014 includes significant realized and unrealized losses on physical and financial commodity sales contracts due to the unusually cold weather.

 

(b) 2014 includes significant realized and unrealized gains on physical and financial commodity purchase contracts due to the unusually cold weather.














 


PPL CORPORATION AND SUBSIDIARIES











Condensed Consolidated Statements of Cash Flows (Unaudited)

(Millions of Dollars)
















Three Months Ended March 31,






2014


2013

Cash Flows from Operating Activities








Net income


$

316


$

413


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









Depreciation



305



284



Amortization



60



64



Defined benefit plans - expense



21



51



Deferred income taxes and investment tax credits



(26)



80



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



241



98



Adjustment to WPD line loss accrual



65






Other



33



30


Change in current assets and current liabilities









Accounts receivable



(185)



(187)



Accounts payable



93



(138)



Unbilled revenues



(33)



137



Prepayments



(70)



(117)



Taxes payable



126



122



Other



47



(138)


Other operating activities









Defined benefit plans - funding



(135)



(429)



Other



73



(26)




Net cash provided by operating activities



931



244

Cash Flows from Investing Activities








Expenditures for property, plant and equipment



(892)



(828)


Purchases of nuclear plant decommissioning trust investments



(32)



(28)


Proceeds from the sale of nuclear plant decommissioning trust investments



27



24


Proceeds from the receipt of grants



56



1


Net increase in restricted cash and cash equivalents



(334)



(52)


Other investing activities



(8)



(16)




Net cash used in investing activities



(1,183)



(899)

Cash Flows from Financing Activities








Issuance of long-term debt






450


Retirement of long-term debt



(239)



(8)


Payment of common stock dividends



(234)



(210)


Net increase in short-term debt



878



416


Other financing activities



(13)



(27)




Net cash provided by financing activities



392



621

Effect of Exchange Rates on Cash and Cash Equivalents



14



(14)

Net Increase (Decrease) in Cash and Cash Equivalents



154



(48)

Cash and Cash Equivalents at Beginning of Period



1,102



901

Cash and Cash Equivalents at End of Period


$

1,256


$

853

 


Key Indicators (Unaudited)




























12 Months Ended













March 31,

Financial






2014


2013
















Dividends declared per share of common stock






$ 1.475


$ 1.4475

Book value per share (a)(b)






$ 20.14


$ 18.04

Market price per share (a)






$ 33.14


$ 31.31

Dividend yield






4.5%


4.6%

Dividend payout ratio (c)






92%


62%

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






58%


59%

Price/earnings ratio (c)






20.7


13.4

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






13.0


12.8

Return on average common equity






8.65%


12.70%

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






13.89%


13.30%
















(a)  End of period.

(b)  Based on 631,417 and 583,214 shares of common stock outstanding (in thousands) at March 31, 2014 and March 31, 2013.

(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)








2014


2013


Change
















Domestic Retail Delivered














PPL Electric Utilities








10,630


9,947


6.9%


LKE








8,495


8,000


6.2%



Total








19,125


17,947


6.6%
















Domestic Retail Supplied (a)














PPL EnergyPlus








3,777


3,281


15.1%


LKE








8,495


8,000


6.2%



Total








12,272


11,281


8.8%
















International Delivered














United Kingdom








21,015


21,752


(3.4%)
















Domestic Wholesale














PPL EnergyPlus - East








15,747


14,457


8.9%


PPL EnergyPlus - West








1,379


1,652


(16.5%)


LKE (b)








730


575


27.0%



Total








17,856


16,684


7.0%
















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

       Jersey, Montana, Delaware, Maryland, Ohio and Washington, D.C.  Also includes GWh supplied by LKE to retail customers in Kentucky,

       Virginia and Tennessee.

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



 


 

Reconciliation of Segment Earnings from Ongoing Operations to Reported Earnings

(After-Tax)

(Unaudited)





























































1st Quarter 2014


(millions of dollars)




U.K. 


Kentucky 


Pennsylvania 





Corporate






Regulated 


Regulated 


Regulated 


Supply 



and Other


Total 

Earnings from Ongoing Operations


$

264


$

107


$

85


$

74


$

(7)


$

523

Special Items:



















Adjusted energy-related economic activity, net












(139)






(139)

Foreign currency-related economic hedges



(6)















(6)

Kerr Dam Project impairment












(10)






(10)

Other:




















Change in WPD line loss accrual



(52)















(52)

Total Special Items



(58)









(149)






(207)

Reported Earnings


$

206


$

107


$

85


$

(75)


$

(7)


$

316
































































(per share - diluted) (a)




U.K. 


Kentucky 


Pennsylvania 





Corporate






Regulated 


Regulated 


Regulated 


Supply 



and Other


Total 

Earnings from Ongoing Operations


$

0.41


$

0.16


$

0.13


$

0.11


$

(0.01)


$

0.80

Special Items:



















Adjusted energy-related economic activity, net












(0.20)






(0.20)

Foreign currency-related economic hedges



(0.01)















(0.01)

Kerr Dam Project impairment












(0.02)






(0.02)

Other:




















Change in WPD line loss accrual



(0.08)















(0.08)

Total Special Items



(0.09)









(0.22)






(0.31)

Reported Earnings


$

0.32


$

0.16


$

0.13


$

(0.11)


$

(0.01)


$

0.49









































(a)  The "If-Converted Method" has been applied to PPL's 2011 Equity Units resulting in $9 million of interest charges (after-tax) being added

       back to earnings and approximately 32 million shares of PPL Common Stock being treated as outstanding.  Both adjustments are only for

       purposes of calculating diluted earnings per share.

 


Reconciliation of Segment Earnings from Ongoing Operations to Reported Earnings

(After-Tax)

(Unaudited)





























































1st Quarter 2013


(millions of dollars)




U.K. 


Kentucky 


Pennsylvania 




Corporate 






Regulated 


Regulated 


Regulated 


Supply 


and Other 


Total 

Earnings from Ongoing Operations


$

238


$

84


$

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



75



1






(117)






(41)

Reported Earnings


$

313


$

85


$

64


$

(46)


$

(3)


$

413
































































(per share - diluted) (a)




U.K. 


Kentucky 


Pennsylvania 




Corporate 






Regulated 


Regulated 


Regulated 


Supply 


and Other 


Total 

Earnings from Ongoing Operations


$

0.37


$

0.14


$

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


$

0.49


$

0.14


$

0.10


$

(0.07)


$

(0.01)


$

0.65









































(a)  The "If-Converted Method" has been applied to PPL's Equity Units prior to settlement, resulting in $15 million of interest charges (after-tax)

       being added back to earnings and approximately 72 million shares of PPL Common Stock being treated as outstanding.  Both adjustments

       are only for purposes of calculating diluted earnings per share.

 

Reconciliation of PPL's Forecast of Earnings from Ongoing Operations to Reported Earnings







(After-Tax)







(Unaudited)























































































Forecast (per share - diluted)




2014 Midpoint






U.K. 


Kentucky 


Pennsylvania 




Corporate 




High 


Low 




Regulated 


Regulated 


Regulated 


Supply 


and Other 


Total 


2014


2014

Earnings from Ongoing Operations


$

1.34


$

0.45


$

0.39


$

0.11


$

(0.06)


$

2.23


$

2.30


$

2.15

Special Items:

























Adjusted energy-related economic activity, net












(0.20)






(0.20)



(0.20)



(0.20)

Foreign currency-related economic hedges



(0.01)















(0.01)



(0.01)



(0.01)

Kerr Dam Project impairment












(0.02)






(0.02)



(0.02)



(0.02)

Other:


























Change in WPD line loss accrual



(0.08)















(0.08)



(0.08)



(0.08)

Total Special Items



(0.09)









(0.22)






(0.31)



(0.31)



(0.31)

Reported Earnings


$

1.25


$

0.45


$

0.39


$

(0.11)


$

(0.06)


$

1.92


$

1.99


$

1.84





















































 

For further information: For news media - George C. Lewis, 610-774-5997; For financial analysts - Joseph P. Bergstein, 610-774-5609, PPL Corporation


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