Nov 4, 2008
PPL Corporation Reports Third-Quarter 2008 Earnings
- Decline in wholesale electricity margins reduces quarterly earnings
- Revised outlook for 2010 remains strong
- Company revises 2008 forecast, initiates 2009 forecast
PRNewswire-FirstCall
ALLENTOWN, Pa.
PPL Corporation (NYSE: PPL) on Tuesday (11/4) reported declines in both third-quarter and nine-month earnings for 2008, compared with the same periods of 2007.
Contributing to the declines were lower wholesale electricity margins, partially offset by improved earnings from PPL's electricity delivery business in the United Kingdom.
PPL's reported earnings in the most recent quarter were $0.54 per share, compared with $0.84 per share a year ago. For the first nine months of 2008, PPL's reported earnings were $1.73 per share, compared with $2.25 per share a year ago.
Third-quarter earnings from ongoing operations also declined, to $0.45 per share, compared with $0.72 per share a year ago. For the first nine months of 2008, earnings from ongoing operations were $1.56 per share, compared with $2.00 per share a year ago.
"While our quarterly results have been affected by a significant drop in wholesale energy margins, PPL's underlying fundamentals remain very strong," said James H. Miller, PPL's chairman, president and chief executive officer. "We are confident that our strategy of focusing on the efficient operation of our high quality generating assets and the marketing of the output from these assets, combined with effective operation of our regulated electricity delivery systems, will continue to provide significant long-term value for our shareowners.
"During the third quarter of 2008, we saw unprecedented levels of volatility in the energy commodities market, a rapid decline in the capital devoted to energy markets by a range of market participants and a substantial drop in wholesale electricity prices," Miller said. "As a consequence, we experienced unrealized losses in certain of our energy positions that, along with extended outages at two of our large coal-fired plants in Pennsylvania, resulted in third-quarter energy margins that are much lower than a year ago."
Miller said PPL continues to forecast very strong earnings growth for 2010 with a new forecast range of $3.60 to $4.20 per share. This new range is down from the prior 2010 forecast range of $4.00 to $4.60 per share.
"While forward energy prices have declined from earlier in the year, we remain extremely well positioned for 2010 and beyond because we sold forward a significant portion of our available power at the higher prices and have fuel contracts in place that are significantly below current market prices," Miller said.
Miller added that the company remains focused on maintaining a strong credit profile and liquidity position, with more than $4.2 billion in credit facilities supporting its energy supply business. "We have significant available capacity under our facilities that puts us in a strong position to deal with the volatile market conditions we are likely to continue to face," he said. In fact, Miller said PPL Energy Supply has no need to issue commercial paper or access the debt capital market for the foreseeable future.
For the remainder of 2008 and 2009, however, Miller said PPL's earnings will continue to be under significant pressure. The company's revised estimate for 2008 earnings from ongoing operations is $2.00 to $2.05 per share, compared with its prior forecast range of $2.17 to $2.27 per share. The revised estimate is primarily driven by lower energy margins, partially offset by improved earnings in PPL's U.K. business. PPL's 2008 estimate of reported earnings is $2.17 to $2.22 per share, reflecting special items recorded through Sept. 30, 2008.
The company also initiated its 2009 earnings forecast of $1.60 to $1.90 per share. "Many of the pressures that affected our results in 2008 also are expected to continue into 2009, including ongoing cost pressures, fixed generation prices in Pennsylvania and higher financing costs. Given the ongoing uncertainty in financial and power markets, PPL will be focused on aggressively managing risks and preserving capital without jeopardizing our significant increase in earnings and cash flow expected for 2010 and beyond," Miller said.
Third-Quarter 2008 Earnings Details
PPL's reported earnings in the third quarter of 2008 included net special- item credits of $0.09 per share. The company reported special-item credits of $0.18 per share in the quarter related to mark-to-market impacts of energy- related, non-trading economic hedges, offset by special-item charges of $0.09 per share: $0.07 per share related to the impairment of nitrogen oxide emission allowances as a result of a federal court decision invalidating the Environmental Protection Agency's Clean Air Interstate Rule; $0.01 per share related to the sale of PPL's natural gas distribution and propane businesses; and $0.01 per share related to an impairment of nuclear decommissioning trust investments. The third quarter of 2007 reflected net special-item credits of $0.12 per share.
Reported earnings are calculated in accordance with generally accepted accounting principles (GAAP). Earnings from ongoing operations is a non-GAAP financial measure that excludes special items. Special items include charges or credits that are unusual or nonrecurring. Special items also include the mark-to-market impact of energy-related, non-trading economic hedges and impairments of securities in PPL's nuclear decommissioning trust funds.
(Dollars in millions, except for per share amounts)
3rd Quarter
2008 2007 % Change
Reported Earnings $203 $322 -37%
Reported Earnings per Share $0.54 $0.84 -36%
Earnings from Ongoing Operations $168 $276 -39%
Per Share Earnings from Ongoing Operations $0.45 $0.72 -38%
(See the tables at the end of this news release for details as to the reconciliation of reported earnings versus earnings from ongoing operations.)
Third-Quarter and Nine-Month Earnings by Business Segment
The following chart shows PPL's earnings by business segment for the third quarter and first nine months of 2008, compared with the same periods of 2007.
3rd Quarter Year to Date
2008 2007 2008 2007
Per share earnings from ongoing operations
Supply $0.16 $0.50 $0.60 $1.12
Pennsylvania Delivery 0.09 0.09 0.34 0.31
International Delivery 0.20 0.13 0.62 0.57
Total $0.45 $0.72 $1.56 $2.00
Special Items
Supply $0.10 $0.03 $0.18 $0.05
Pennsylvania Delivery (0.01) (0.06) (0.01) (0.06)
International Delivery - 0.15 - 0.26
Total $0.09 $0.12 $0.17 $0.25
Reported earnings
Supply $0.26 $0.53 $0.78 $1.17
Pennsylvania Delivery 0.08 0.03 0.33 0.25
International Delivery 0.20 0.28 0.62 0.83
Total $0.54 $0.84 $1.73 $2.25
(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 Supply Segment
PPL's supply business segment consists primarily of the domestic energy generation and marketing operations of PPL Energy Supply.
Earnings from ongoing operations for PPL's supply business segment declined $0.34 per share, or 68 percent, in the third quarter of 2008 compared with a year ago. The decrease was primarily driven by unrealized trading losses in the quarter, resulting from the combination of a dramatic decline in energy prices and the lack of liquidity in the wholesale power markets. In addition, PPL experienced significantly lower base load generation due to unplanned outages at two Eastern coal-fired stations; higher average fuel prices; higher operating costs; and the loss in synfuel-related earnings of $0.03 per share. Partially offsetting these negative results were higher margins from various supply contracts.
Earnings from ongoing operations for PPL's supply business segment during the first nine months of 2008 decreased $0.52 per share, or 46 percent, compared with a year ago. This decrease primarily resulted from the same factors that impacted the third quarter of 2008, including the loss of $0.13 per share in synfuel-related earnings.
Pennsylvania Delivery Segment
PPL's Pennsylvania delivery business segment includes the regulated electric delivery operations of PPL Electric Utilities and the delivery operations of PPL Gas Utilities, which was sold on Oct. 1, 2008.
Per share earnings from ongoing operations for PPL's Pennsylvania delivery business segment were unchanged in the third quarter of 2008 compared with a year ago. Higher delivery revenues resulting from PPL Electric Utilities' Jan. 1, 2008, base rate increase and load growth were offset by higher operating expenses.
Per share earnings from ongoing operations for PPL's Pennsylvania delivery business segment during the first nine months of 2008 increased $0.03, or 10 percent, compared with a year ago. This increase resulted primarily from higher delivery revenues, partially offset by higher operating expenses.
International Delivery Segment
PPL's international delivery business segment primarily includes investments in regulated electric distribution companies in the United Kingdom and included the operating results of the Latin American electricity distribution businesses prior to their divestitures in 2007.
Earnings from ongoing operations for PPL's international delivery business segment increased in the third quarter of 2008 by $0.07 per share, or 54 percent, compared with a year ago. This increase was the result of lower U.S. and U.K. income taxes and lower operating expenses, partially offset by the loss of $0.03 per share in earnings from PPL's Latin American businesses following their divestitures throughout 2007.
Earnings from ongoing operations for PPL's international delivery business segment during the first nine months of 2008 increased $0.05 per share, or 9 percent, compared with a year ago. This increase resulted from higher electricity delivery revenue due to higher rates from the annual regulatory adjustment for inflation, lower operating expenses and lower U.K. income taxes. Partially offsetting these positive factors was a loss of $0.10 per share in earnings from PPL's divested Latin American businesses and higher U.S. income taxes.
2008 Forecast by Business Segment
Earnings from Ongoing Operations 2008 2007
(per share) (forecast) (actual)
Supply $0.82 $1.42
Pennsylvania Delivery 0.43 0.40
International Delivery 0.77 0.78
Total $2.02 $2.60
Supply Segment
PPL projects lower earnings from ongoing operations in its supply business segment in 2008 compared with 2007 as a result of the loss of $0.18 per share in synfuel-related tax benefits, higher coal commodity and transportation costs, lower expected base load generation, higher financing costs, and lower expected margins from marketing and trading activities. Although the decrease in wholesale energy margins and lack of liquidity in the power markets significantly impacted PPL's third-quarter results, the company has taken measures to reduce its exposure to the potential effect of any further decline in market prices on future trading margins.
Pennsylvania Delivery Segment
PPL projects higher earnings from ongoing operations for its Pennsylvania delivery business segment driven by higher revenues as a result of PPL Electric Utilities' Jan. 1, 2008 distribution rate increase, partially offset by higher operating expenses.
International Delivery Segment
PPL now projects the 2008 earnings from ongoing operations of its international delivery business segment to approximate the results of 2007.
2009 Earnings Forecast
The company's 2009 forecasted earnings of $1.60 to $1.90 per share reflects an expected decrease in PPL's international business segment earnings as a result of certain U.K. income tax benefits included in 2008 earnings, which are not expected to recur in 2009, and a less favorable currency exchange rate in the U.K.; higher operation and maintenance expenses; and higher depreciation and financing costs. PPL expects these reductions to be partially offset by higher energy margins, despite higher expected coal expense, as a result of higher base load generation; higher Western energy sales prices; and higher expected margins from its marketing and trading activities.
Revised 2010 Earnings Forecast
The full-requirements supply contract between PPL EnergyPlus and PPL Electric Utilities will expire at the end of 2009. As a result of hedging more than 80 percent of its base load generation over the past few years, PPL continues to forecast strong growth in energy margins for 2010 over 2009. However, the decline in value of the open power positions; projected increases in operating expenses in PPL's supply and Pennsylvania delivery business segments; higher financing costs; and a reduction in projected earnings from PPL's U.K. businesses, primarily driven by less favorable exchange rates, are expected to negatively affect 2010 earnings. As a result, PPL has revised its 2010 earnings forecast to a range of $3.60 to $4.20 per share from its prior 2010 forecast range of $4.00 to $4.60 per share.
The expected strong margins that drive the 2010 earnings forecast are based on the following key assumptions:
-- Hedged power and fuel positions and end-of-September wholesale prices,
observed in competitive markets and used to value unhedged positions.
-- Capacity prices in the PJM Interconnection based on the Reliability
Pricing Model auction results for 2010.
-- Strong power plant performance.
-- Increased nuclear power output through the previously announced planned
uprates.
-- Increased fuel and operation and maintenance expenses.
-- Higher costs of environmental compliance.
This forecast does not depend upon new assets being added to the company's portfolio and assumes PPL Electric Utilities will be able to fully recover its purchased power costs resulting from the ongoing solicitation process approved by the Pennsylvania Public Utility Commission.
PPL Corporation, headquartered in Allentown, Pa., controls more than 11,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to more than 4 million customers in Pennsylvania 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 the live webcast of management's teleconference with financial analysts about third-quarter 2008 financial results at 9 a.m. EST Tuesday, Nov. 4. The meeting is available online live, in audio format, along with slides of the presentation, on PPL's Web site: 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# 68964535).
PPL CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (a)
Condensed Consolidated Balance Sheet (Unaudited)
(Millions of Dollars)
Sept. 30, 2008 Dec. 31, 2007
Assets
Cash and cash equivalents $349 $430
Price risk management assets - current 630 319
Assets held for sale 328 318
Other current assets 2,043 2,101
Investments 572 608
Property, plant and equipment
Electric plant 20,321 20,109
Gas and oil plant 68 66
Other property 184 202
20,573 20,377
Less: accumulated depreciation 7,871 7,772
12,702 12,605
Recoverable transition costs 357 574
Goodwill and other intangibles 1,439 1,326
Price risk management assets - noncurrent 970 587
Other noncurrent assets 1,116 1,104
Total assets $20,506 $19,972
Liabilities and Equity
Short-term debt (including current portion
of long-term debt) $1,275 $770
Price risk management liabilities - current 722 423
Liabilities held for sale 40 68
Other current liabilities 1,468 1,621
Long-term debt (less current portion) 6,714 6,890
Deferred income taxes and investment tax credits 2,006 2,192
Price risk management liabilities - noncurrent 1,144 916
Other noncurrent liabilities 1,233 1,216
Minority interest 19 19
Preferred securities of a subsidiary 301 301
Earnings reinvested 3,725 3,448
Common stock and capital in excess of par value 2,189 2,176
Accumulated other comprehensive loss (330) (68)
Total liabilities and equity $20,506 $19,972
(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.
Condensed Consolidated Income Statement (Unaudited)
(Millions of Dollars, Except per Share Data)
3 Months Ended 9 Months Ended
Sept. 30, Sept. 30,
2008(a) 2007(a)(b) 2008(a) 2007(a)(b)
Operating Revenues
Utility $1,007 $1,016 $3,108 $3,074
Unregulated retail electric
and gas 43 28 110 73
Wholesale energy marketing ( c )
Realized 758 517 1,639 1,244
Unrealized economic activity 1,157 0 361 (99)
Net energy trading margins (132) 20 (82) 38
Energy-related businesses 148 193 395 563
2,981 1,774 5,531 4,893
Operating Expenses
Fuel 267 257 718 692
Energy purchases ( c )
Realized 500 228 1,126 677
Unrealized economic
activity 1,058 7 173 (127)
Other operation and
maintenance 364 324 1,101 996
Amortization of recoverable
transition costs 73 78 217 229
Depreciation 117 108 347 334
Taxes, other than income 77 73 224 223
Energy-related businesses 134 178 361 581
2,590 1,253 4,267 3,605
Operating Income 391 521 1,264 1,288
Other Income - net 1 23 17 71
Interest Expense 120 117 338 357
Income from Continuing
Operations Before Income
Taxes, Minority Interest
and Dividends on Preferred
Securities of a Subsidiary 272 427 943 1,002
Income Taxes 59 88 285 188
Minority Interest 0 1 1 2
Dividends on Preferred
Securities of a Subsidiary 5 5 14 14
Income from Continuing
Operations 208 333 643 798
(Loss) Income from
Discontinued Operations
(net of income taxes) (5) (11) 10 72
Net Income $203 $322 $653 $870
Earnings per share of common
stock - basic
Earnings from ongoing
operations $0.45 $0.73 $1.57 $2.03
Special items 0.09 0.12 0.18 0.24
Net Income $0.54 $0.85 $1.75 $2.27
Earnings per share of common
stock - diluted
Earnings from ongoing
operations $0.45 $0.72 $1.56 $2.00
Special items 0.09 0.12 0.17 0.25
Net Income $0.54 $0.84 $1.73 $2.25
Average shares outstanding
(thousands)
Basic 374,291 379,896 373,394 383,036
Diluted 376,685 384,575 376,582 387,658
(a) Earnings in the 2008 and 2007 periods were impacted by several
special items, as described in the text and tables of this news
release. Earnings from ongoing operations excludes the impact of
these special items.
(b) Certain amounts from 2007 have been reclassified to conform to the
current year presentation.
( c ) PPL enters into certain non-trading energy or energy-related
contracts to hedge future cash flows that are not eligible for hedge
accounting, or where hedge accounting is not elected. Consistent
with the treatment of the hedged item, unrealized and realized gains
and losses on these transactions are reflected in "Wholesale energy
marketing" or "Energy purchases."
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Millions of Dollars)
9 Months Ended
Sept. 30,
2008 2007
Cash Flows from Operating Activities
Net income $653 $870
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 347 345
Amortization-recoverable transition costs
and other 286 327
Pre-tax gain from the sale of a Latin
American business 0 (94)
Deferred income taxes and investment tax
credits (56) (95)
Impairment of assets 65 98
Gain on the sale of emission allowances (1) (85)
Unrealized gain on derivatives and other
hedging activities (83) (68)
Changes in working capital (69) (31)
Other 19 (15)
Net cash provided by operating activities 1,161 1,252
Cash Flows from Investing Activities
Expenditures for property, plant and equipment (979) (1,119)
Proceeds from the sale of Latin American
businesses 0 191
Proceeds from the sale of telecommunication
operations 0 47
Net (expenditures for) sales of intangible
assets (272) 62
Net (purchases) sales of other investments (14) 58
Net increase in restricted cash and cash
equivalents (70) (35)
Other investing activities (15) (1)
Net cash used in investing activities (1,350) (797)
Cash Flows from Financing Activities
Net issuances (retirements) of long-term debt 400 (49)
Repurchase of common stock (38) (565)
Payment of common stock dividends (365) (343)
Net increase in short-term debt 109 150
Other financing activities 10 8
Net cash provided by (used in) financing
activities 116 (799)
Effect of Exchange Rates on Cash and Cash
Equivalents (5) 2
Net Decrease in Cash and Cash Equivalents (78) (342)
Cash and cash equivalents at beginning of period 430 794
Cash and cash equivalents included in assets
held for sale (3) (13)
Cash and cash equivalents at end of period $349 $439
Key Indicators
Financial
12 Months Ended 12 Months Ended
Sept. 30, 2008 Sept. 30, 2007
Dividends declared per share $1.31 $1.19
Book value per share (a) $14.91 $13.75
Market price per share (a) $37.02 $46.30
Dividend yield (a) 3.5% 2.6%
Dividend payout ratio (b) 46% 44%
Dividend payout ratio - earnings from
ongoing operations (b)( c ) 61% 48%
Price/earnings ratio (a)(b) 13.0 17.1
Price/earnings ratio - earnings from
ongoing operations (a)(b)( c ) 17.1 18.8
Return on average common equity 19.68% 20.08%
Return on average common equity - earnings
from ongoing operations ( c ) 15.62% 18.29%
(a) End of period.
(b) Based on diluted earnings per share.
( c ) Calculated using earnings from ongoing operations, which excludes
the impact of special items, as described in the text and tables of
this news release.
Reconciliation of Business Segment Earnings from Ongoing Operations and
Reported Earnings (Diluted)
3rd Quarter 2008 (millions of dollars)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $59 $36 $73 $168
Special Items
MTM adj's from energy-related,
non-trading economic hedges 67 67
Impairment of emission allowances (27) (27)
Impairment of nuclear
decommissioning trust investments (1) (1)
Sale of gas and propane businesses (4) (4)
Total special items 39 (4) 35
Reported earnings $98 $32 $73 $203
(per share)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $0.16 $0.09 $0.20 $0.45
Special Items
MTM adj's from energy-related,
non-trading economic hedges 0.18 0.18
Impairment of emission allowances (0.07) (0.07)
Impairment of nuclear
decommissioning trust investments (0.01) (0.01)
Sale of gas and propane businesses (0.01) (0.01)
Total special items 0.10 (0.01) 0.09
Reported earnings $0.26 $0.08 $0.20 $0.54
Year-to-Date Sept. 30, 2008 (millions of dollars)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $225 $128 $233 $586
Special Items
MTM adj's from energy-related,
non-trading economic hedges 121 121
Impairment of emission allowances
(Q3, '08) (27) (27)
Impairment of nuclear decom. trust
investments (Q2, '08; Q3, '08) (5) (5)
Sale of gas and propane businesses
(Q2, '08; Q3, '08) (5) (5)
Off-site remediation of ash basin
leak (Q2, '08) 1 1
Colstrip groundwater litigation
(Q1, '08; Q2, '08) (5) (5)
Synfuel tax adjustment (Q1, '08) (13) (13)
Total special items 72 (5) 67
Reported earnings $297 $123 $233 $653
Year-to-Date Sept. 30, 2008 (per share)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $0.60 $0.34 $0.62 $1.56
Special Items
MTM adj's from energy-related,
non-trading economic hedges 0.32 0.32
Impairment of emission allowances
(Q3, '08) (0.07) (0.07)
Impairment of nuclear decom. trust
investments (Q2, '08; Q3, '08) (0.02) (0.02)
Sale of gas and propane businesses
(Q2, '08; Q3, '08) (0.01) (0.01)
Off-site remediation of ash basin
leak (Q2, '08)
Colstrip groundwater litigation
(Q1, '08; Q2, '08) (0.01) (0.01)
Synfuel tax adjustment (Q1, '08) (0.04) (0.04)
Total special items 0.18 (0.01) 0.17
Reported earnings $0.78 $0.33 $0.62 $1.73
12 Months Ended Sept. 30, 2008 (millions of dollars)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $333 $163 $315 $811
Special Items
MTM adj's from energy-related,
non-trading economic hedges 133 133
Impairment of emission allowances
(Q3, '08) (27) (27)
Impairment of nuclear decom. trust
investments (Q2, '08; Q3,'08) (5) (5)
Sale of gas and propane businesses
(Q4, '07; Q2, '08; Q3, '08) (26) (26)
Off-site remediation of ash basin
leak (Q2, '08) 1 1
Colstrip groundwater litigation
(Q1, '08; Q2, '08) (5) (5)
Synfuel tax adjustment (Q1, '08) (13) (13)
Workforce reduction (Q4, '07) (4) (1) (4) (9)
Sale of Latin American businesses
(Q4, '07) 213 213
Impairment of certain transmission
rights (Q4, '07) (1) (1)
Total special items 79 (27) 209 261
Reported earnings $412 $136 $524 $1,072
12 Months Ended Sept. 30, 2008 (per share)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $0.90 $0.43 $0.83 $2.16
Special Items
MTM adj's from energy-related,
non-trading economic hedges 0.35 0.35
Impairment of emission allowances
(Q3, '08) (0.07) (0.07)
Impairment of nuclear decom. trust
investments (Q2, '08; Q3,'08) (0.02) (0.02)
Sale of gas and propane businesses
(Q4, '07; Q2, '08; Q3, '08) (0.07) (0.07)
Off-site remediation of ash basin
leak (Q2, '08)
Colstrip groundwater litigation
(Q1, '08; Q2, '08) (0.01) (0.01)
Synfuel tax adjustment (Q1, '08) (0.04) (0.04)
Workforce reduction (Q4, '07) (0.01) (0.01) (0.02)
Sale of Latin American
businesses (Q4, '07) 0.57 0.57
Impairment of certain transmission
rights (Q4, '07)
Total special items 0.20 (0.07) 0.56 0.69
Reported earnings $1.10 $0.36 $1.39 $2.85
Reconciliation of Business Segment Earnings from Ongoing Operations and
Reported Earnings (Diluted)
3rd Quarter 2007 (millions of dollars)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $193 $32 $51 $276
Special Items
MTM adj's from energy-related,
non-trading economic hedges (6) (6)
Sale of Latin American businesses 3 3
Sale of domestic telecommunication
operations (3) (3)
Sale of gas and propane businesses (23) (23)
Settlement of Wallingford
cost-based rates 33 33
Impairment of certain transmission
rights (12) (12)
Change in U.K. tax rate 54 54
Total special items 12 (23) 57 46
Reported earnings $205 $9 $108 $322
3rd Quarter 2007 (per share)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $0.50 $0.09 $0.13 $0.72
Special Items
MTM adj's from energy-related,
non-trading economic hedges (0.02) (0.02)
Sale of Latin American businesses 0.01 0.01
Sale of domestic telecommunication
operations (0.01) (0.01)
Sale of gas and propane businesses (0.06) (0.06)
Settlement of Wallingford
cost-based rates 0.09 0.09
Impairment of certain transmission
rights (0.03) (0.03)
Change in U.K. tax rate 0.14 0.14
Total special items 0.03 (0.06) 0.15 0.12
Reported earnings $0.53 $0.03 $0.28 $0.84
Year-to-Date Sept. 30, 2007 (millions of dollars)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $437 $120 $219 $776
Special Items
MTM adj's from energy-related,
non-trading economic hedges 20 20
Sale of gas and propane businesses
(Q3, '07) (23) (23)
Settlement of Wallingford
cost-based rates (Q3, '07) 33 33
Impairment of certain transmission
rights (Q3, '07) (12) (12)
Change in U.K. tax rate (Q3, '07) 54 54
Sale of Latin American businesses
(Q1, '07; Q2, '07; Q3, '07) 46 46
Sale of domestic telecommunication
operations (Q1, '07; Q2, '07;
Q3, '07) (23) (23)
PJM billing dispute (Q1, '07) (1) (1)
Total special items 17 (23) 100 94
Reported earnings $454 $97 $319 $870
Year-to-Date Sept. 30, 2007 (per share)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $1.12 $0.31 $0.57 $2.00
Special Items
MTM adj's from energy-related,
non-trading economic hedges 0.05 0.05
Sale of gas and propane businesses
(Q3, '07) (0.06) (0.06)
Settlement of Wallingford
cost-based rates (Q3, '07) 0.09 0.09
Impairment of certain transmission
rights (Q3, '07) (0.03) (0.03)
Change in U.K. tax rate (Q3, '07) 0.14 0.14
Sale of Latin American businesses
(Q1, '07; Q2, '07; Q3, '07) 0.12 0.12
Sale of domestic telecommunication
operations (Q1, '07; Q2, '07;
Q3, '07) (0.06) (0.06)
PJM billing dispute (Q1, '07)
Total special items 0.05 (0.06) 0.26 0.25
Reported earnings $1.17 $0.25 $0.83 $2.25
12 Months Ended Sept. 30, 2007 (millions of dollars)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $536 $150 $268 $954
Special Items
MTM adj's from energy-related,
non-trading economic hedges 23 23
Sale of gas and propane businesses
(Q3, '07) (23) (23)
Settlement of Wallingford
cost-based rates (Q3, '07) 33 33
Impairment of certain transmission
rights (Q3, '07) (12) (12)
Change in U.K. tax rate (Q3, '07) 54 54
Sale of Latin American businesses
(Q1, '07; Q2, '07; Q3, '07) 46 46
Sale of domestic telecommunication
operations (Q1, '07; Q2, '07;
Q3, '07) (23) (23)
PJM billing dispute (Q4, '06;
Q1, '07) (18) 20 2
Sale of interest in Griffith
(Q4, '06) 1 1
Workforce reduction (Q4, '06) (3) (3)
Impairment of nuclear decom.
trust investments (Q4, '06) (3) (3)
Total special items (2) (3) 100 95
Reported earnings $534 $147 $368 $1,049
12 Months Ended Sept. 30, 2007 (per share)
PA Int'l
Supply Delivery Delivery Total
Earnings from Ongoing Operations $1.38 $0.39 $0.69 $2.46
Special Items
MTM adj's from energy-related,
non-trading economic hedges 0.06 0.06
Sale of gas and propane businesses
(Q3, '07) (0.06) (0.06)
Settlement of Wallingford
cost-based rates (Q3, '07) 0.09 0.09
Impairment of certain transmission
rights (Q3, '07) (0.03) (0.03)
Change in U.K. tax rate (Q3, '07) 0.14 0.14
Sale of Latin American businesses
(Q1, '07; Q2, '07; Q3, '07) 0.12 0.12
Sale of domestic telecommunication
operations (Q1, '07; Q2, '07;
Q3, '07) (0.06) (0.06)
PJM billing dispute (Q4, '06;
Q1, '07) (0.04) 0.05 0.01
Sale of interest in Griffith
(Q4, '06)
Workforce reduction (Q4, '06) (0.01) (0.01)
Impairment of nuclear decom. trust
investments (Q4, '06) (0.01) (0.01)
Total special items (0.01) 0.26 0.25
Reported earnings $1.38 $0.38 $0.95 $2.71
Operating - Domestic and International Electricity Sales
(millions of kwh)
3 Months Ended Sept. 30, 9 Months Ended Sept. 30,
Percent Percent
2008 2007 Change 2008 2007 Change
Domestic Retail
Delivered (a) 9,624 9,699 (0.8%) 29,025 28,880 0.5%
Supplied 10,207 10,249 (0.4%) 30,732 30,486 0.8%
International
Delivered
United Kingdom 6,186 6,326 (2.2%) 20,889 20,891 0.0%
Domestic Wholesale
East 8,783 6,826 28.7% 21,246 15,637 35.9%
West
NorthWestern Energy 633 569 11.2% 1,869 2,238 (16.5%)
Other West 3,602 3,251 10.8% 10,488 8,696 20.6%
(a) Electricity delivered to retail customers represents the kwh delivered
to customers within PPL Electric Utilities Corporation's service
territory.
"Earnings from ongoing operations" excludes the impact of special items. Special items include charges, credits or gains that are unusual or nonrecurring. Special items also include the mark-to-market impact of energy- related, non-trading economic hedges and impairments of securities in PPL's nuclear decommissioning trust funds. The mark-to-market impact of these hedges is economically neutral to the company because the mark-to-market gains or losses on the energy hedges will reverse as the hedging contracts settle in the future. Earnings from ongoing operations should not be considered as an alternative to reported earnings, or net income, 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 measure, is also useful and meaningful to investors because it provides them with PPL's underlying earnings performance as another criterion in making their 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.
Statements contained in this news release, including statements with respect to future earnings, energy prices, margins and sales, growth, revenues, expenses, financing, credit, liquidity, cash flow, capital, marketing performance and strategy, regulation, corporate strategy, and generating capacity and performance, 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 involve 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; 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 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 and rate relief; 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.
First Call Analyst:
FCMN Contact: gebiechler@pplweb.com
SOURCE: PPL Corporation
CONTACT: Media, George Biechler, +1-610-774-5997; Financial Analysts, Tim
Paukovits, +1-610-774-4124
Web site: http://www.pplweb.com/
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