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PPL Corporation Reports First-Quarter Earnings
- Reaffirms ongoing 2016 earnings forecast range of $2.25 to $2.45 per share.
- Reaffirms projected compound annual per-share earnings growth rate of 5 to 6 percent through 2018.

 

ALLENTOWN, Pa., April 28, 2016 /PRNewswire/ -- PPL Corporation (NYSE: PPL) on Thursday (4/28) announced first-quarter 2016 reported earnings of $481 million, or $0.71 per share, compared with $647 million, or $0.96 per share, in 2015.

Adjusting for special items, first-quarter 2016 earnings from ongoing operations were $458 million, or $0.67 per share, compared with $519 million, or $0.77 per share, a year ago. As expected, this was driven primarily by lower earnings in the U.K. as a result of a revenue reset that occurred at the beginning of the new RIIO-ED1 price control period on April 1, 2015, and a lower average foreign currency exchange rate in 2016 compared to the first quarter of 2015.  Higher domestic margins from rate increases effective July 1, 2015, in Kentucky and Jan. 1, 2016, in Pennsylvania were partially offset by lower sales volumes due to mild winter weather.

"Our first-quarter results were in line with our expectations despite the warmer than normal start to the year, and we remain on track to deliver on our 2016 earnings forecast," said William H. Spence, PPL's chairman, president and Chief Executive Officer.

"Moreover, we remain confident in our ability to achieve long-term, sustainable growth as we continue to make significant investments to build tomorrow's energy infrastructure and make the power grid more reliable, resilient and secure."

Spence said a prime example of PPL's investments, and its ability to execute large capital projects, is its recently energized Northeast-Pocono transmission line in Pennsylvania. The $350 million project to strengthen reliability and reinforce the grid was energized this month, a year ahead of schedule. It included about 60 miles of new transmission lines, three new substations and additional improvements. In all, PPL plans to invest more than $16 billion in energy infrastructure over the next five years.

In announcing its quarterly earnings, PPL reaffirmed its 2016 forecast range for earnings from ongoing operations of $2.25 to $2.45 per share. The 2016 forecast for reported earnings is $2.29 to $2.49 per share, reflecting special items recorded through the first quarter.

The company also reaffirmed its expectation that it will achieve compound annual growth through 2018 of 5 to 6 percent off of 2014 earnings of $2.03 per share from ongoing operations (adjusted).

Spence said organic growth in the company's U.S. utilities is among the strongest in the U.S. utility sector. Earnings from PPL's operations in the U.S., including its corporate services organization, are expected to grow 11 to 13 percent through 2018, with 1 to 3 percent earnings growth expected in the U.K.

First-Quarter 2016 Earnings Details

PPL's reported earnings for the first quarter of 2016 included net special-item after-tax benefits of $23 million, or $0.04 per share, primarily due to foreign currency-related economic hedges. Reported earnings for the first quarter of 2015 included net special-item after-tax benefits of $128 million, or $0.19 per share, primarily due to earnings from PPL's former Supply segment and foreign currency-related economic hedges.

Reported earnings are calculated in accordance with U.S. GAAP (generally accepted accounting principles). "Earnings from ongoing operations" is a non-GAAP financial measure that is adjusted for special items, including the former Supply segment's earnings for 2015. Special items are fully detailed at the end of this news release.

 

 

(See the tables at the end of this news release for a reconciliation of reported earnings (loss) to earnings from ongoing operations.)

 

First-Quarter 2016 Earnings by Segment

 

(See the reconciliation tables at the end of this news release for an itemization of special items.)

Key Factors Impacting 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 (WPD), serving Southwest and Central England and South Wales.

Earnings from ongoing operations in the first quarter of 2016 decreased by $0.11 per share compared with a year ago. This decrease was primarily driven by the April 1, 2015 price decrease due to the beginning of the new eight-year price control period (RIIO-ED1), lower sales volumes due to unfavorable weather, and the effect of changes in British pound sterling to U.S. dollar exchange rates.

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 the regulated electricity operations of Kentucky Utilities Company.

Earnings from ongoing operations in the first quarter of 2016 were the same as a year ago. This was primarily due to higher base electricity rates effective July 1, 2015, and lower operation and maintenance expense, offset by lower sales volumes, due to unfavorable weather, and higher financing costs.              

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

Earnings from ongoing operations in the first quarter of 2016 increased by $0.01 per share compared with a year ago, driven primarily by higher base electricity rates for distribution effective Jan.1, 2016, and higher transmission margins, partially offset by lower sales volumes, due to unfavorable weather, and higher operation and maintenance expense.

Corporate and Other
PPL's Corporate and Other category primarily includes unallocated corporate-level financing and other costs. Corporate and Other in the first quarter of 2016 was the same as a year ago.

Forecast of Earnings from Ongoing Operations

 

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

The midpoint of PPL's 2016 earnings from ongoing operations forecast of $2.35 per share represents an increase of more than 6 percent compared to 2015 earnings from ongoing operations. This increase is primarily attributable to increases in the Pennsylvania Regulated and Kentucky Regulated segments.

U.K. Regulated Segment  

PPL projects relatively flat segment earnings in 2016 compared with 2015, due to higher gross margins and lower operation and maintenance expense, including pension expense, offset by higher financing costs, depreciation, taxes and other expenses and lower British pound sterling to U.S. dollar exchange rates. 

The remaining 2016 foreign currency exposure for this segment is 93 percent hedged at an average rate of $1.54 per pound, compared to an average hedged rate of $1.57 per pound in 2015.

Kentucky Regulated Segment 
PPL projects higher segment earnings in 2016 compared with 2015, primarily driven by electric and gas base rate increases effective July 1, 2015, and higher returns on additional environmental capital investments, partially offset by higher depreciation and higher financing costs.

Pennsylvania Regulated Segment
PPL projects higher segment earnings in 2016 compared with 2015, primarily driven by higher base electricity rates for distribution effective Jan. 1, 2016, and higher transmission margins, partially offset by higher depreciation, higher financing costs and a benefit received in 2015 from the release of a gross receipts tax reserve.

Corporate and Other
PPL projects costs to be relatively flat in this category in 2016 compared with 2015.

Headquartered in Allentown, Pa., PPL Corporation (NYSE: PPL) is one of the largest companies in the U.S. utility sector. PPL's seven high-performing, award-winning utilities serve 10 million customers in the U.S. and United Kingdom. The company and its 13,000 employees are dedicated to providing exceptional customer service and reliability and delivering superior value for shareowners. To learn more, visit 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 2016 financial results at 8:30 a.m. Eastern Daylight Time on Thursday, April 28. The call will be webcast live, in audio format, along with slides of the presentation. For those who are unable to listen to the live webcast, a replay with slides will be accessible at www.pplweb.com/investors for 30 days after the call. Interested individuals can access the live conference call via telephone at 1-888-317-6003. International participants should call 1-412-317-6061. Participants in Canada should call 1-866-284-3684. Participants will need to enter the following "Elite Entry" number in order to join the conference: 2306854.

Management utilizes "Earnings from ongoing operations" as a non-GAAP financial measure, and it should not be considered as an alternative to reported earnings, or net income, which is an indicator of operating performance determined in accordance with GAAP. PPL believes that earnings from ongoing operations is useful and meaningful to investors because it provides management's view of PPL's 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:

  • Unrealized gains or losses on foreign currency-related economic hedges (as discussed below).
  • Supply segment discontinued operations.
  • Gains and losses on sales of assets not in the ordinary course of business.
  • Impairment charges.
  • Workforce reduction and other restructuring effects.
  • Acquisition and divestiture-related adjustments.
  • Other charges or credits that are, in management's view, not reflective of the company's ongoing operations.

Unrealized gains or losses on foreign currency-related economic hedges include the changes in fair value of foreign currency contracts used to economically hedge British-pound-sterling-denominated anticipated earnings.  The changes in fair value of these contracts each period are recognized immediately within GAAP earnings.  Management believes that excluding these amounts from earnings from ongoing operations until settlement of the contracts provides a better matching of the financial impacts of those contracts with the economic value of PPL's underlying hedged earnings.

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 for energy in our service territories; weather conditions affecting customer energy usage and operating costs; 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 our facilities; the length of scheduled and unscheduled outages at our generating plants; environmental conditions and requirements and the related costs of compliance; 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 severe weather on our business; 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; British pound sterling to U.S. dollar 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.

Note to Editors: Visit our media website at www.pplnewsroom.com for additional news and background about PPL Corporation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

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