PPL Corporation Reports Second-Quarter Earnings

ALLENTOWN, Pa., Aug. 3, 2015 /PRNewswire/ -- Reflecting a $1 billion loss, or $1.50 per share, from discontinued operations associated with the June 1 spinoff of its competitive supply business, PPL Corporation PPL on Monday (8/3) reported a second-quarter 2015 loss of $757 million, or $1.13 per share. The loss from discontinued operations included an $879 million loss reflecting the fair value of the supply business at the time of the spinoff compared to the recorded value of that segment. For the second quarter of 2014, the company's reported earnings were $229 million, or $0.34 per share.

The reported loss for the first six months of 2015 was $110 million, or $0.17 per share, which includes a loss from discontinued operations of $912 million, or $1.36 per share. The company's reported earnings for the first half of 2014 were $545 million, or $0.83 per share.

Adjusting for special items, including results from discontinued operations of PPL's former Supply segment, second-quarter 2015 earnings from ongoing operations were $329 million, or $0.49 per share, an increase of more than 11 percent from $296 million in earnings from ongoing operations (adjusted), or $0.44 per share, in the second quarter of 2014.

Earnings from ongoing operations for the first half of 2015 were $848 million, or $1.26 per share. This compares to earnings from ongoing operations (adjusted) of $722 million, or $1.10 per share, in the first half of 2014, representing a 15 percent increase on a per-share basis.

"Based on the strong performance of PPL's seven regulated utility businesses in both the U.S. and the U.K., the continued rate base growth from our significant infrastructure investment, and our solid business plan to grow earnings per share, we are increasing the midpoint of our 2015 earnings forecast," said William H. Spence, PPL chairman, president and Chief Executive Officer.

The company narrowed its 2015 forecast range for earnings from ongoing operations to $2.15 to $2.25 per share from $2.05 to $2.25 per share, increasing the midpoint from $2.15 to $2.20 per share. The 2015 forecast for reported earnings is $0.72 to $0.82 per share, reflecting special items recorded through the second quarter.

Bolstered by the solid performance through the first half of the year, Spence announced that the company is increasing its common stock dividend to $0.3775 per share on a quarterly basis. The increased dividend will be payable Oct. 1 to shareowners of record as of Sept. 10. The increase, PPL's 13th in 14 years, raises the annualized dividend from $1.49 per share to $1.51 per share.

Spence also said the company is confident it can achieve its previous projection of 4-6 percent compound annual earnings growth through at least 2017.

"The new PPL Corporation – with its strong growth profile, a solid dividend and diverse mix of holdings – is a unique and very compelling investment option in the U.S. utility sector," said Spence.

Second-Quarter and Year-to-Date 2015 Earnings Details

PPL's reported earnings for the second quarter of 2015 included net special item after-tax charges of $1.09 billion, or $1.62 per share, primarily due to a loss from discontinued operations of $1 billion, or $1.50 per share, associated with the spinoff of the Supply segment. The loss from discontinued operations included an $879 million charge that reflected the difference between PPL's recorded value for the Supply segment and its estimated fair value as of the spinoff date, determined in accordance with applicable accounting rules under U.S. generally accepted accounting principles (GAAP).

Reported earnings for the second quarter of 2014 included net special item after-tax charges of $87 million, or $0.13 per share, primarily reflecting charges of $0.07 per share for an increase in tax valuation allowances related to the then anticipated spinoff of the Supply segment and $0.05 per share for foreign currency related economic hedges.

Reported earnings are calculated in accordance with U.S. GAAP. "Earnings from ongoing operations" is a non-GAAP financial measure that is adjusted for special items, including the Supply segment's earnings and the loss from discontinued operations associated with the spinoff of the Supply segment. In addition, 2014 has been adjusted to reflect the impact of dissynergies related to the spinoff of the Supply segment. Special items and the dissynergies are fully detailed at the end of the news release.

 

 

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

 

 

 

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

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, serving Southwest and Central England and South Wales.

Earnings from ongoing operations in the second quarter of 2015 increased by $0.03 per share compared with a year ago. This increase was primarily due to lower depreciation expense and lower income taxes, partially offset by lower utility revenues primarily driven by an April 1, 2015, price decrease associated with the beginning of a new eight-year price control period (RIIO-ED1).

Earnings from ongoing operations during the first six months of 2015 increased by $0.12 per share compared with a year ago. This increase was primarily due to lower depreciation expense, lower income taxes and higher utility revenue driven by an April 1, 2014, price increase, which was partially offset by lower prices driven by an April 1, 2015, price decrease due to the commencement of RIIO-ED1.

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.

Earnings from ongoing operations in the second quarter of 2015 were the same as a year ago. Earnings from ongoing operations during the first six months of 2015 also were the same as a year ago. This was primarily due to returns on additional environmental capital investments, offset by lower sales volumes and higher operations and maintenance expense associated with the retirement of coal-fired generation at the segment's Cane Run facility.

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 second quarter of 2015 decreased by $0.01 per share compared with a year ago. This was primarily due to higher operations and maintenance expense and higher depreciation expense, partially offset by higher margins from additional transmission capital investments.

Earnings from ongoing operations during the first six months of 2015 decreased by $0.01 per share compared with a year ago, driven primarily by higher depreciation expense, higher operation and maintenance expense, higher financing costs and a benefit recorded in the first quarter of 2014 for a change in the estimate of a regulatory liability, partially offset by higher margins from additional transmission capital investments, returns on distribution improvement capital investments and favorable effects of weather.

Corporate and Other
PPL's Corporate and Other category primarily includes unallocated corporate-level financing and other costs.

Corporate and Other improved by $0.03 per share in the second quarter of 2015 compared to the second quarter of 2014 (adjusted) and by $0.05 per share for the first six months of 2015 compared to a year ago. This was primarily due to the benefits of the corporate restructuring.

 

 

See the tables at the end of this news release for a reconciliation of reported earnings to 2014 earnings from ongoing operations (adjusted).

The midpoint of PPL's 2015 forecast earnings from ongoing operations of $2.20 per share represents an increase of 8.4 percent compared to 2014 earnings from ongoing operations (adjusted). This increase is primarily attributed to increases in the U.K. Regulated and Kentucky Regulated segments and lower Corporate and Other charges as detailed below.

U.K. Regulated Segment 
PPL projects higher segment earnings in 2015 compared with 2014, primarily driven by lower income taxes and lower depreciation expense, partially offset by lower utility revenue as Western Power Distribution transitions to a new eight-year price control period (RIIO-ED1) effective April 1, 2015. The remaining 2015 foreign currency earnings exposure for this segment is fully hedged.

Kentucky Regulated Segment 
PPL projects higher segment earnings in 2015 compared with 2014, primarily driven by electric and gas base rate increases effective July 1, 2015, and returns on additional environmental capital investments, partially offset by higher operation and maintenance expense, higher depreciation and higher financing costs.

Pennsylvania Regulated Segment 
PPL projects lower segment earnings in 2015 compared with 2014, primarily driven by higher operation and maintenance expense, higher depreciation, higher financing costs, and a benefit recorded in the first quarter of 2014 for a change in estimate of a regulatory liability, partially offset by higher transmission margins and returns on distribution improvement capital investments. 

Corporate and Other
PPL projects lower costs in this category in 2015 compared with 2014, primarily driven by the reduction of dissynergies related to the Supply business spinoff through corporate restructuring efforts and lower income taxes.

Headquartered in Allentown, Pa., PPL Corporation 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 second-quarter 2015 financial results at 8:30 a.m. Eastern time on Monday, Aug. 3. 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: 6332528.

"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 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 earnings excluding the Supply segment, as the spinoff was completed June 1, 2015. Other companies may use different measures to present financial performance. "Earnings from ongoing operations" is adjusted for the impact of special items as described below, which includes the Supply segment's earnings now reflected in discontinued operations, as PPL completed the spinoff of the Supply segment on June 1, 2015. Also included in special items is the loss on spinoff resulting from the fair value of the Supply segment being less than PPL's recorded value as of June 1, 2015, the date of the spinoff.  "Earnings from ongoing operations (adjusted)" for 2014 also reflects, within the Corporate and Other category, the impact of spinoff dissynergies that would remain with PPL after the completion of the transaction, if left unmitigated.

"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.
• Supply segment earnings.
• Loss on the spinoff of the Supply segment.
• 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.

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, including the ability of PPL Corporation to realize all or a significant portion of the anticipated  cost savings from the corporate restructuring efforts following the Supply business spinoff; 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 hurricanes or other 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.

Contacts: For news media – Ryan Hill, 610-774-5997
               For financial analysts – Joseph P. Bergstein, 610-774-5609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE PPL Corporation