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PPL Corporation Reports Strong 2012 Earnings, Increases Common Stock Dividend



PPL Corporation Reports Strong 2012 Earnings, Increases Common Stock Dividend

-- Reported earnings of $2.60 per share and earnings from ongoing operations
of $2.42 per share exceed 2012 forecast ranges

-- Annualized dividend increased to $1.47 per share, 11th increase in the past
12 years

-- Company announces 2013 earnings forecast

PR Newswire

ALLENTOWN, Pa., Feb. 14, 2013

ALLENTOWN, Pa., Feb. 14, 2013 /PRNewswire/ -- PPL Corporation (NYSE: PPL)
announced on Thursday (2/14) strong 2012 earnings that exceeded forecast
ranges, a 2013 earnings forecast range of $2.25 to $2.50 per share, and an
increase in its quarterly common stock dividend — the 11th such increase in
the past 12 years.

PPL's 2012 reported earnings were $1.526 billion, or $2.60 per share, compared
with $1.495 billion, or $2.70 per share in 2011. Per share earnings in 2012
include dilution of $0.14 per share because of common stock issued in April
2011 to fund the acquisition of the Midlands businesses in the United Kingdom.

Adjusting for special items, PPL's earnings from ongoing operations were
$1.417 billion, or $2.42 per share, in 2012 compared with $1.509 billion, or
$2.73 per share, in 2011.

The increase in the quarterly common stock dividend to $0.3675 per share is
payable April 1, 2013, to shareowners of record as of March 8, 2013.  On an
annualized basis, the dividend is $1.47 per share, up from $1.44 per share.
PPL has increased its dividend in 11 of the last 12 years; the new dividend
rate reflects a 177 percent increase over that 12-year period.

"Given the significant challenges of 2012, we are very pleased with the
earnings we are announcing today, which exceed our forecast ranges," said
William H. Spence, PPL's chairman, president and chief executive officer.
PPL's forecast ranges for 2012 were $2.37 to $2.47 per share for reported
earnings and $2.30 to $2.40 per share for earnings from ongoing operations.

"Our strong earnings — and steadily increasing dividends — deliver significant
value to shareowners. Our 2012 performance also demonstrates our ability to
meet the commitments we made regarding the major acquisitions in Kentucky and
the United Kingdom, and reflects the persistent efforts of PPL people to
manage through the challenges of the competitive wholesale power market,"
Spence said.

PPL's reported earnings for the fourth quarter of 2012 were $359 million, or
$0.60 per share, compared with $454 million, or $0.78 per share in the fourth
quarter of 2011. Adjusting for special items, fourth quarter earnings from
ongoing operations were $292 million, or $0.49 per share, compared with $410
million, or $0.71 per share in the fourth quarter of 2011.

PPL also announced its 2013 earnings forecast range of $2.25 to $2.50 per
share, with a midpoint of $2.37 per share. PPL is projecting that its
rate-regulated businesses will account for 85 percent of 2013 earnings,
compared with 72 percent of ongoing earnings in 2012 and 58 percent of ongoing
earnings in 2011.

"The 2013 earnings forecast reflects increased revenue from our three
regulated businesses and lower energy margins for our supply business
resulting largely from the roll-off of higher-priced hedges," Spence said.

PPL's 2013 earnings forecast also includes an additional scheduled outage at
the Susquehanna nuclear power plant in Pennsylvania that accelerates PPL's
plan to address turbine blade issues that have affected both Susquehanna
units.

"While the additional scheduled Susquehanna outage impacts projected 2013
earnings by about 5 cents per share, implementing a long-term solution sooner
than previously planned reduces future risk and minimizes the overall
financial effect on PPL," Spence said.

2012 Earnings Details

PPL's 2012 reported earnings include net special item credits of $109 million,
or $0.18 per share, compared with net special item charges of $14 million, or
$0.03 per share, in 2011.

The special item credits for 2012 include $0.13 per share to adjust a U.K.
liability related to line losses, $0.13 per share for a reduction in the U.K.
corporate income tax rate, and $0.07 per share for adjusted energy-related
economic activity. These special item credits were partially offset by special
item charges that include $0.06 per share for foreign currency-related
economic hedges, $0.03 per share for coal contract modification payments and
$0.03 per share for an impairment of an equity method investment in the
Kentucky Regulated segment.

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

 

(Dollars in millions, except for per share amounts)
                                                    2012   2011   % Change
Reported Earnings                                   $1,526 $1,495 2%
Reported Earnings Per Share                         $2.60  $2.70  -4%
Earnings from Ongoing Operations                    $1,417 $1,509 -6%
Earnings from Ongoing Operations Per Share          $2.42  $2.73  -11%

 

Fourth Quarter 2012 Earnings Details

PPL's reported earnings for the fourth quarter of 2012 include net special
item credits of $0.11 per share. The special item credits include $0.13 per
share to adjust a U.K. liability related to line losses and $0.02 per share
for adjusted energy-related economic activity. The credits were partially
offset by special item charges including $0.03 per share for an impairment of
an equity method investment in the Kentucky Regulated segment and $0.01 per
share for foreign currency-related economic hedges.

 

 (Dollars in millions, except for per share amounts)

                                           4^th Quarter 4^th Quarter
                                           2012         2011         % Change
Reported Earnings                          $359         $454         -21%
Reported Earnings Per Share                $0.60        $0.78        -23%
Earnings from Ongoing Operations           $292         $410         -29%
Earnings from Ongoing Operations Per Share $0.49        $0.71        -31%

 

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

Annual and Fourth-Quarter 2012 Earnings by Segment

The following chart shows PPL's earnings by segment for 2012 and the fourth
quarter of 2012, compared with the same periods of 2011.

 

Per share                         Year                  4^th Quarter
Earnings from ongoing operations  2012      2011        2012      2011
Kentucky Regulated                $ 0.33     $ 0.40     $ 0.08     $ 0.06
U.K. Regulated                      1.19       0.87       0.29       0.28
Pennsylvania Regulated              0.22       0.31       0.05       0.10
Supply                              0.68       1.15       0.07       0.27
    Total                         $ 2.42     $ 2.73     $ 0.49     $ 0.71
Special items
Kentucky Regulated                $ (0.03)   $ –        $ (0.03)   $ –
U.K. Regulated                      0.18       (0.28)     0.12       (0.12)
Pennsylvania Regulated              –          –          –          –
Supply                              0.03       0.25       0.02       0.19
    Total                         $ 0.18     $ (0.03)   $ 0.11     $ 0.07
Reported earnings
Kentucky Regulated                $ 0.30     $ 0.40     $ 0.05     $ 0.06
U.K. Regulated                      1.37       0.59       0.41       0.16
Pennsylvania Regulated              0.22       0.31       0.05       0.10
Supply                              0.71       1.40       0.09       0.46
    Total                         $ 2.60     $ 2.70     $ 0.60     $ 0.78

 

(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 Segment Earnings from Ongoing Operations

Kentucky Regulated Segment

PPL's Kentucky Regulated segment primarily consists of the regulated
electricity and natural gas operations of Louisville Gas and Electric Company
and Kentucky Utilities Company.

Segment earnings from ongoing operations decreased in 2012 by $0.07 per share
compared to a year ago primarily due to higher operation and maintenance
expense, higher depreciation, higher property taxes, losses from an equity
method investment and dilution of $0.02 per share, partially offset by lower
income taxes. 

Segment earnings from ongoing operations in the fourth quarter of 2012
increased by $0.02 per share compared with the fourth quarter of 2011
primarily due to higher retail margins as a result of returns on new
environmental investments, increased residential sales due to customer growth,
and more seasonable weather than in 2011.

U.K. Regulated Segment

PPL's U.K. Regulated segment consists of the regulated electricity delivery
operations of Western Power Distribution, serving Southwest and Central
England and South Wales.

Segment earnings from ongoing operations in 2012 increased by $0.32 per share
compared to a year ago primarily due to four additional months of earnings
from the WPD Midlands businesses, higher delivery revenue and lower U.K.
income taxes, partially offset by higher U.S. income taxes, higher
depreciation, a less favorable currency exchange rate, and dilution of $0.07
per share.

Segment earnings from ongoing operations in the fourth quarter of 2012
increased by $0.01 per share compared with the fourth quarter of 2011
primarily due to higher delivery revenue, partially offset by higher operation
and maintenance expense and higher income taxes.

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 2012 decreased by $0.09 per share
compared to a year ago primarily due to higher operation and maintenance
expense, higher income and non-income taxes, lower distribution margins as a
result of mild weather early in the year, higher depreciation and dilution of
$0.01 per share, partially offset by higher transmission revenue and lower
financing costs due to the redemption of $250 million of preferred securities.

Segment earnings from ongoing operations in the fourth quarter of 2012
decreased by $0.05 per share compared with the fourth quarter of 2011
primarily due to higher operation and maintenance expense and higher income
and non-income taxes, partially offset by higher transmission revenue, higher
distribution margins due to colder weather and lower financing costs.

Supply Segment

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

Segment earnings from ongoing operations in 2012 decreased by $0.47 per share
compared to a year ago primarily due to lower Eastern energy margins resulting
from lower baseload energy and capacity prices, lower Western energy margins
resulting from an early 2012 contract termination related to the bankruptcy of
a large customer, higher operation and maintenance expense, higher
depreciation, higher income taxes, higher financing costs and dilution of
$0.04 per share. 

Segment earnings from ongoing operations in the fourth quarter of 2012
decreased by $0.20 per share compared with the fourth quarter of 2011
primarily due to lower nuclear and fossil-fuel generation output in the East,
lower Western energy margins, higher operation and maintenance expense, higher
income taxes and higher depreciation, partially offset by higher capacity
prices.

2013 Earnings Forecast by Segment

In the fourth quarter of 2012, PPL adopted a new consolidated financing
strategy that, beginning in 2013, will change the presentation of operating
results for purposes of assessing performance by PPL management. The segments
will continue to be Kentucky Regulated, U.K. Regulated, Pennsylvania Regulated
and Supply; however, certain corporate-level financing and other costs will
not be allocated or assigned to segments, but rather will be presented in a
separate category, Corporate and Other, to reconcile segment results to PPL's
consolidated results. Non-financing costs to be presented in this category are
not expected to be significant.

PPL's recent growth in rate-regulated businesses provides the organization
with an enhanced corporate level financing alternative, PPL Capital Funding,
Inc. (Cap Funding), that further enables PPL to support targeted credit
profiles cost effectively across all of PPL's rated companies. As a result,
PPL plans to further utilize Cap Funding in addition to continued direct
financing by the operating companies, as appropriate. 

Cap Funding participated significantly in the financing for the acquisitions
of LKE and WPD Midlands. The associated financing costs, as well as the
financing costs associated with prior issuances of certain other Cap Funding
securities, are and will continue to be assigned to the appropriate segments.
The financing costs associated with Cap Funding's $400 million of 3.5% Senior
Notes issued in October 2012, as well as future securities issuances at Cap
Funding, are not expected to be directly assignable or allocable to any
segment and will be reflected in Corporate and Other beginning in 2013.     

  

                       2013               2012 actual
Earnings per share
                       forecast midpoint   (ongoing earnings)
Kentucky Regulated     $ 0.47             $ 0.33
U.K. Regulated         1.25               1.19
Pennsylvania Regulated 0.29               0.22
Supply                 0.40               0.68
Corporate and Other    (0.04)             -
         Total         $ 2.37             $ 2.42

 

PPL expects lower earnings in 2013 compared with 2012, primarily due to lower
energy margins in the Supply segment, partially offset by higher earnings in
PPL's three regulated segments.  These projected earnings also reflect
dilution of $0.11 per share associated with 2013 common stock issuances
related to PPL's 2010 Equity Units and April 2012 forward stock sale.   

Kentucky Regulated Segment

PPL projects higher segment earnings in 2013 compared with 2012, primarily
driven by electric and gas base rate increases effective January 1, 2013,
returns on additional environmental capital investments and retail load
growth, partially offset by higher operation and maintenance expense. Dilution
for 2013 is expected to be $0.02 per share.

U.K. Regulated Segment

PPL projects higher segment earnings in 2013 compared with 2012, primarily
driven by higher electricity delivery revenue and lower income taxes,
partially offset by higher operation and maintenance expense, higher
depreciation and higher interest expense. Dilution for 2013 is expected to be
$0.06 per share.  

Pennsylvania Regulated Segment

PPL projects higher segment earnings in 2013 compared with 2012, primarily
driven by higher distribution revenues from a distribution base rate increase
effective January 1, 2013, and higher transmission margins, partially offset
by higher depreciation. Dilution for 2013 is expected to be $0.01 per share.

Supply Segment

PPL projects lower segment earnings in 2013 compared with 2012 primarily
driven by lower energy prices, higher fuel costs, higher operation and
maintenance expense, higher depreciation and higher financing costs, which are
partially offset by higher capacity prices and higher nuclear generation
output despite scheduled outages for both Susquehanna units to implement a
long-term solution to turbine blade issues. Dilution for 2013 is expected to
be $0.02 per share.

Corporate and Other

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

PPL Corporation (NYSE: PPL), with annual revenue of more than $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.)

Conference Call and Webcast

PPL invites interested parties to listen to a live Internet webcast of
management's teleconference with financial analysts about annual and fourth
quarter 2012 financial results at 9 a.m. (Eastern Time) Thursday, February 14.
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 702-696-4769
(ID#97396937).

"Earnings from ongoing operations" should not be considered as an alternative
to reported earnings, or net income attributable to PPL, 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:

  o Adjusted energy-related economic activity (as discussed below).
  o Foreign currency-related economic hedges.
  o Gains and losses on sales of assets not in the ordinary course of
    business.
  o Impairment charges (including impairments of securities in the company's
    nuclear decommissioning trust funds).
  o Workforce reduction and other restructuring impacts.
  o Acquisition-related adjustments.
  o Other charges or credits that are, in management's view, not reflective of
    the company's ongoing operations.

Adjusted energy-related economic activity includes the changes in fair value
of positions used economically to hedge a portion of the economic value of
PPL's generation assets, full-requirement sales contracts and retail
activities. This economic value is subject to changes in fair value due to
market price volatility of the input and output commodities (e.g., fuel and
power) prior to the delivery period that was hedged. Also included in adjusted
energy-related economic activity is the ineffective portion of qualifying cash
flow hedges, the monetization of certain full-requirement sales contracts and
premium amortization associated with options. This economic activity is
deferred, with the exception of the full-requirement sales contracts that were
monetized, and included in earnings from ongoing operations over the delivery
period of the item that was hedged or upon realization. Management believes
that adjusting for such amounts provides a better matching of earnings from
ongoing operations to the actual amounts settled for PPL's underlying hedged
assets. Please refer to the Notes to the Consolidated Financial Statements and
MD&A in PPL Corporation's periodic filings with the Securities and Exchange
Commission for additional information on adjusted energy-related economic
activity.

Statements contained in this news release, including statements with respect
to future earnings, cash flows, financing, regulation and corporate strategy,
are "forward-looking statements" within the meaning of the federal securities
laws. Although PPL Corporation believes that the expectations and assumptions
reflected in these forward-looking statements are reasonable, these statements
are subject to a number of risks and uncertainties, and actual results may
differ materially from the results discussed in the statements. The following
are among the important factors that could cause actual results to differ
materially from the forward-looking statements: market demand and prices for
energy, capacity and fuel; weather conditions affecting customer energy usage
and operating costs; competition in power markets; the effect of any business
or industry restructuring; the profitability and liquidity of PPL Corporation
and its subsidiaries; new accounting requirements or new interpretations or
applications of existing requirements; operating performance of plants and
other facilities; the length of scheduled and unscheduled outages at our
plants; environmental conditions and requirements and the related costs of
compliance, including environmental capital expenditures and emission
allowance and other expenses; system conditions and operating costs;
development of new projects, markets and technologies; performance of new
ventures; asset or business acquisitions and dispositions, and PPL
Corporation's ability to realize the expected benefits from acquired
businesses, including the 2010 acquisition of Louisville Gas and Electric
Company and Kentucky Utilities Company and the 2011 acquisition of the Central
Networks electricity distribution businesses in the U.K.; any impact of
hurricanes or other severe weather on our business, including any impact on
fuel prices; receipt of necessary government permits, approvals, rate relief
and regulatory cost recovery; capital market conditions and decisions
regarding capital structure; the impact of state, federal or foreign
investigations applicable to PPL Corporation and its subsidiaries; the outcome
of litigation against PPL Corporation and its subsidiaries; stock price
performance; the market prices of equity securities and the impact on pension
income and resultant cash funding requirements for defined benefit pension
plans; the securities and credit ratings of PPL Corporation and its
subsidiaries; political, regulatory or economic conditions in states, regions
or countries where PPL Corporation or its subsidiaries conduct business,
including any potential effects of threatened or actual terrorism or war or
other hostilities; foreign exchange rates; new state, federal or foreign
legislation, including new tax legislation; and the commitments and
liabilities of PPL Corporation and its subsidiaries. Any such forward-looking
statements should be considered in light of such important factors and in
conjunction with PPL Corporation's Form 10-K and other reports on file with
the Securities and Exchange Commission.

 

PPL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (a)
Condensed Consolidated Balance Sheets (Unaudited)
(Millions of Dollars)
                                                    December 31,  December 31,
                                                    2012          2011
Assets
Cash and cash equivalents                           $   901       $   1,202
Price risk management assets - current                  1,525         2,548
Other current assets                                    2,642         2,676
Investments                                             759           718
Property, Plant and Equipment
  Regulated utility plant                               25,196        22,994
  Less: Accumulated depreciation - regulated            4,164         3,534
  utility plant
          Regulated utility plant, net                  21,032        19,460
  Non-regulated property, plant and equipment           12,545        11,608
  Less: Accumulated depreciation - non-regulated        5,942         5,676
  property, plant and equipment
          Non-regulated property, plant and             6,603         5,932
          equipment, net
  Construction work in progress                         2,397         1,874
  Property, Plant and Equipment, net                    30,032        27,266
Regulatory assets                                       1,483         1,349
Goodwill and other intangibles                          5,083         5,179
Price risk management assets - noncurrent               572           920
Other noncurrent assets                                 637           790
Total Assets                                        $   43,634    $   42,648
Liabilities and Equity
Short-term debt                                     $   652       $   578
Long-term debt due within one year                      751
Accounts payable                                        1,252         1,150
Price risk management liabilities - current             1,065         1,570
Other current liabilities                               1,905         1,957
Long-term debt                                          18,725        17,993
Deferred income taxes and investment tax credits        3,715         3,611
Price risk management liabilities - noncurrent          629           840
Accrued pension obligations                             2,076         1,313
Regulatory liabilities                                  1,010         1,010
Other noncurrent liabilities                            1,356         1,530
Common stock and additional paid-in-capital             6,942         6,819
Earnings reinvested                                     5,478         4,797
Accumulated other comprehensive loss                    (1,940)       (788)
Noncontrolling interests                                18            268
Total Liabilities and Equity                        $   43,634    $   42,648

 

    The Financial Statements in this news release have been condensed and
(a) 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    Year Ended

                                    December 31,          December 31,
                                    2012       2011       2012 (a)   2011 (a)
Operating Revenues
  Utility                           $ 1,796    $ 1,597    $ 6,808    $ 6,292
  Unregulated retail electric and     224        209        844        726
  gas (b)
  Wholesale energy marketing
        Realized                      1,066      1,130      4,433      3,807
        Unrealized economic           11         1,178      (311)      1,407
        activity (b)
  Net energy trading margins          (3)        (16)       4          (2)
  Energy-related businesses           128        120        508        507
  Total Operating Revenues            3,222      4,218      12,286     12,737
Operating Expenses
  Operation
        Fuel (b)                      432        454        1,837      1,946
        Energy purchases
              Realized                744        663        2,997      2,130
              Unrealized economic     (22)       1,074      (442)      1,123
              activity (b)
        Other operation and           740        626        2,835      2,667
        maintenance
  Depreciation                        287        263        1,100      960
  Taxes, other than income            98         88         366        326
  Energy-related businesses           121        116        484        484
  Total Operating Expenses            2,400      3,284      9,177      9,636
Operating Income                      822        934        3,109      3,101
Other Income (Expense) - net          (8)        6          (39)       4
Other-Than-Temporary Impairments      26                    27         6
Interest Expense                      247        220        961        898
Income from Continuing Operations     541        720        2,082      2,201
Before Income Taxes
Income Taxes                          181        262        545        691
Income from Continuing Operations     360        458        1,537      1,510
After Income Taxes
Income (Loss) from Discontinued                             (6)        2
Operations (net of income taxes)
Net Income                            360        458        1,531      1,512
Net Income Attributable to            1          4          5          17
Noncontrolling Interests
Net Income Attributable to PPL      $ 359      $ 454      $ 1,526    $ 1,495
Shareowners
Amounts Attributable to PPL
Shareowners
  Income from Continuing            $ 359      $ 454      $ 1,532    $ 1,493
  Operations After Income Taxes
  Income (Loss) from Discontinued                           (6)        2
  Operations (net of income taxes)
  Net Income                        $ 359      $ 454      $ 1,526    $ 1,495
Earnings Per Share of Common Stock
- Basic
  Net Income Available to PPL       $ 0.61     $ 0.78     $ 2.61     $ 2.71
  Common Shareowners
Earnings Per Share of Common Stock
- Diluted (c)
  Earnings from Ongoing Operations  $ 0.49     $ 0.71     $ 2.42     $ 2.73
  Special Items                       0.11       0.07       0.18       (0.03)
  Net Income Available to PPL       $ 0.60     $ 0.78     $ 2.60     $ 2.70
  Common Shareowners
Weighted-Average Shares of Common
Stock Outstanding
  (in thousands)
  Basic                               581,492    578,153    580,276    550,395
  Diluted                             583,644    579,347    581,626    550,952

 

    The results of operations for 2012 are not comparable with 2011 due to the
(a) acquisition of WPD Midlands.  WPD Midlands' results are consolidated on a
    one-month lag, and includes eight months of results in 2011, as the date
    of the acquisition was April 1, 2011.
    Includes activity from energy-related contracts to hedge future cash flows
(b) that are not eligible for hedge accounting, or for which hedge accounting
    was not elected.
    Earnings in 2012 and 2011 were impacted by several special items, as
(c) described in the text and tables of this news release.  Earnings from
    ongoing operations exclude the impact of these special items.

 

 PPL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Millions of Dollars)
                                               2012       2011 (a)   2010 (a)
Cash Flows from Operating Activities
 Net income                                    $ 1,531    $ 1,512    $ 959
 Adjustments to reconcile net income to net
 cash provided by operating activities
     Depreciation                                1,100      961        567
     Amortization                                186        254        213
     Defined benefit plans - expense             166        205        102
     Deferred income taxes and investment tax    441        582        241
     credits
     Impairment of assets                        28         13         120
     Unrealized (gains) losses on
     derivatives, and other hedging              27         (314)      542
     activities
     Provision for Montana hydroelectric                    (74)       66
     litigation
 Change in current assets and current
 liabilities
     Prepayments                                 (5)        294        (318)
     Counterparty collateral                     (34)       (190)      (18)
     Other                                       (26)       56         (20)
 Other operating activities
     Defined benefit plans - funding             (607)      (667)      (396)
     Other operating activities                  (91)       (125)      (25)
             Net cash provided by operating      2,716      2,507      2,033
             activities
Cash Flows from Investing Activities
 Expenditures for property, plant and            (3,057)    (2,487)    (1,597)
 equipment
 Proceeds from the sale of certain non-core                 381
 generation facilities
 Proceeds from the sale of the Long Island                             124
 generation business
 Proceeds from the sale of the Maine                                   38
 hydroelectric generation business
 Ironwood Acquisition, net of cash acquired      (84)
 Acquisition of WPD Midlands                                (5,763)
 Acquisition of LKE, net of cash acquired                              (6,812)
 Purchases of nuclear plant decommissioning      (154)      (169)      (128)
 trust investments
 Proceeds from the sale of nuclear plant         139        156        114
 decommissioning trust investments
 Proceeds from the sale of other investments     20         163
 Net (increase) decrease in restricted cash      96         (143)      85
 and cash equivalents
 Other investing activities                      (35)       (90)       (53)
             Net cash used in investing          (3,075)    (7,952)    (8,229)
             activities
Cash Flows from Financing Activities
 Issuance of long-term debt                      1,223      5,745      4,642
 Retirement of long-term debt                    (108)      (1,210)    (20)
 Issuance of common stock                        72         2,297      2,441
 Payment of common stock dividends               (833)      (746)      (566)
 Redemption of preference stock of a             (250)                 (54)
 subsidiary
 Debt issuance and credit facility costs         (17)       (102)      (175)
 Contract adjustment payments on Equity Units    (94)       (72)       (13)
 Net increase (decrease) in short-term debt      74         (125)      70
 Other financing activities                      (19)       (20)       (18)
             Net cash provided by financing      48         5,767      6,307
             activities
Effect of Exchange Rates on Cash and Cash        10         (45)       13
Equivalents
Net Increase (Decrease) in Cash and Cash         (301)      277        124
Equivalents
Cash and Cash Equivalents at Beginning of        1,202      925        801
Period
Cash and Cash Equivalents at End of Period     $ 901      $ 1,202    $ 925

 

    LKE's cash flows are consolidated for two months in 2010, as the date of
(a) acquisition was November 1, 2010.  WPD Midlands' cash flows are
    consolidated on a one-month lag, and includes eight months of results in
    2011, as the date of acquisition was April 1, 2011.

 

Key Indicators (Unaudited)
                                                            12 Months Ended
                                                            December 31,
Financial                                                   2012       2011
Dividends declared per share                                $ 1.44     $ 1.40
Book value per share (a)                                    $ 18.01    $ 18.72
Market price per share (a)                                  $ 28.63    $ 29.42
Dividend yield (a)                                          5.0%       4.8%
Dividend payout ratio (b)                                   55%        52%
Dividend payout ratio - earnings from ongoing operations    60%        51%
(c)
Price/earnings ratio (a)(b)                                 11.0       10.9
Price/earnings ratio - earnings from ongoing operations     11.8       10.8
(a)(c)
Return on average common equity                             13.76%     14.93%
Return on average common equity - earnings from ongoing     12.78%     15.08%
operations (c)
(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.
Operating - Domestic & International Electricity Sales (Unaudited)
                     3 Months Ended December 31,  12 Months Ended December 31,
                                         Percent                       Percent
(GWh)                2012      2011      Change   2012      2011       Change
Domestic Retail
Delivered
    PPL Electric     8,917     8,854     0.7%     36,023    36,908     (2.4%)
    Utilities (a)
    LKE              7,215     7,119     1.3%     30,908    30,898     0.0%
          Total      16,132    15,973    1.0%     66,931    67,806     (1.3%)
Domestic Retail
Supplied (b)
    PPL EnergyPlus   2,938     2,537     15.8%    11,471    9,249      24.0%
    LKE              7,215     7,119     1.3%     30,908    30,898     0.0%
          Total      10,153    9,656     5.1%     42,379    40,147     5.6%
International
Delivered
    United Kingdom   19,518    19,487    0.2%     77,467    58,245     33.0%
    (c)
Domestic Wholesale
Supplied
    PPL EnergyPlus   10,405    13,427    (22.5%)  46,585    51,804     (10.1%)
    - East
    PPL EnergyPlus   2,173     2,465     (11.8%)  7,413     10,327     (28.2%)
    - West
    LKE (d)          595       1,039     (42.7%)  2,304     3,550      (35.1%)
          Total      13,173    16,931    (22.2%)  56,302    65,681     (14.3%)
(a)  Prior period volumes were restated to include unbilled volumes.
(b)  Represents GWh supplied by PPL EnergyPlus to PPL Electric Utilities as
PLR, and to other retail customers in Pennsylvania, New Jersey, Montana,
Delaware and Maryland.  Also includes GWh supplied by LKE to retail customers
in Kentucky, Virginia and Tennessee.
(c)  The WPD Midlands acquisition occurred April 1, 2011 and sales volumes are
reported on a one-month lag.  The twelve months ended December 31, 2012 and
2011 include 51,603 GWh and 31,900 GWh delivered by WPD Midlands.
(d)  Represents FERC-regulated municipal and unregulated off-system sales.

 

Reconciliation of Segment Earnings from Ongoing Operations to Reported
Earnings
(After Tax)
(Unaudited)
4th Quarter 2012         (millions of dollars)
                         Kentucky   U.K.       Pennsylvania
                         Regulated  Regulated  Regulated     Supply  Total
Earnings from Ongoing    $  44      $  172     $    37       $ 39    $ 292
Operations
Special Items:
Adjusted energy-related                                        15      15
economic activity, net
Foreign
currency-related                       (5)                             (5)
economic hedges
Impairments:
      Other asset           (15)                               (1)     (16)
      impairments
Acquisition-related
adjustments:
      WPD Midlands
      Separation                       (2)                             (2)
      benefits
Other:
      Change in U.K.                   1                               1
      tax rate
      Line loss                        74                              74
      adjustment
Total Special Items         (15)       68                      14      67
Reported Earnings        $  29      $  240     $    37       $ 53    $ 359
                         (per share - diluted)
                         Kentucky   U.K.       Pennsylvania
                         Regulated  Regulated  Regulated     Supply  Total
Earnings from Ongoing    $  0.08    $  0.29    $    0.05     $ 0.07  $ 0.49
Operations
Special Items:
Adjusted energy-related                                        0.02    0.02
economic activity, net
Foreign
currency-related                       (0.01)                          (0.01)
economic hedges
Impairments:
      Other asset           (0.03)                                     (0.03)
      impairments
Other:
      Line loss                        0.13                            0.13
      adjustment
Total Special Items         (0.03)     0.12                    0.02    0.11
Reported Earnings        $  0.05    $  0.41    $    0.05     $ 0.09  $ 0.60

 

Reconciliation of Segment Earnings from Ongoing Operations to Reported Earnings
(After Tax)
(Unaudited)
Year-to-Date             (millions of dollars)
December 31, 2012
                         Kentucky   U.K.           Pennsylvania
                         Regulated  Regulated (a)  Regulated     Supply    Total
Earnings from Ongoing    $  193     $    696       $    132      $ 396     $ 1,417
Operations
Special Items:
Adjusted energy-related                                            38        38
economic activity, net
Foreign
currency-related                         (33)                                (33)
economic hedges
Impairments:
    Adjustments -
    nuclear                                                        2         2
    decommissioning
    trust investments
    Other asset             (15)                                   (1)       (16)
    impairments
Acquisition-related
adjustments:
    WPD Midlands
    Separation benefits                  (11)                                (11)
    Other
    acquisition-related                  2                                   2
    adjustments
    LKE
    Net operating loss
    carryforward and        4                                                4
    other tax-related
    adjustments
Other:
    LKE discontinued        (5)                                              (5)
    operations
    Change in U.K. tax                   75                                  75
    rate
    Counterparty                                                   (6)       (6)
    bankruptcy
    Wholesale supply                                               1         1
    cost reimbursement
    Ash basin leak
    remediation                                                    1         1
    adjustment
    Coal contract
    modification                                                   (17)      (17)
    payments
    Line loss                            74                                  74
    adjustment
Total Special Items         (16)         107                       18        109
Reported Earnings        $  177     $    803       $    132      $ 414     $ 1,526
                         (per share - diluted)
                         Kentucky   U.K.           Pennsylvania
                         Regulated  Regulated (a)  Regulated     Supply    Total
Earnings from Ongoing    $  0.33    $    1.19      $    0.22     $ 0.68    $ 2.42
Operations
Special Items:
Adjusted energy-related                                            0.07      0.07
economic activity, net
Foreign
currency-related                         (0.06)                              (0.06)
economic hedges
Impairments:
    Other asset             (0.03)                                           (0.03)
    impairments
Acquisition-related
adjustments:
    WPD Midlands
    Separation benefits                  (0.02)                              (0.02)
    LKE
    Net operating loss
    carryforward and        0.01                                             0.01
    other tax-related
    adjustments
Other:
    LKE discontinued        (0.01)                                           (0.01)
    operations
    Change in U.K. tax                   0.13                                0.13
    rate
    Counterparty                                                   (0.01)    (0.01)
    bankruptcy
    Coal contract
    modification                                                   (0.03)    (0.03)
    payments
    Line loss                            0.13                                0.13
    adjustment
Total Special Items         (0.03)       0.18                      0.03      0.18
Reported Earnings        $  0.30    $    1.37      $    0.22     $ 0.71    $ 2.60
    The results of operations for 2012 are not comparable with 2011 due to the
(a) acquisition of WPD Midlands.  WPD Midlands' results are consolidated on a
    one-month lag, and include eight months of results in 2011, as the date of
    acquisition was April 1, 2011.

 

Reconciliation of Segment Earnings from Ongoing Operations to Reported
Earnings
(After Tax)
(Unaudited)
4th Quarter 2011       (millions of dollars)
                       Kentucky   U.K.       Pennsylvania
                       Regulated  Regulated  Regulated     Supply    Total
Earnings from Ongoing  $   36     $  164     $    58       $ 152     $ 410
Operations
Special Items:
Adjusted
energy-related                                               69        69
economic activity,
net
Foreign
currency-related                     (3)                               (3)
economic hedges
Acquisition-related
adjustments:
  WPD Midlands
  Separation benefits                (7)                               (7)
  Other
  acquisition-related                (21)                              (21)
  costs
Other:
  Montana
  hydroelectric                                              47        47
  litigation
  Windfall profits                   (39)                              (39)
  tax litigation
  Counterparty                                               (6)       (6)
  bankruptcy
  Wholesale supply                                           4         4
  cost reimbursement
Total Special Items                  (70)                    114       44
Reported Earnings      $   36     $  94      $    58       $ 266     $ 454
                       (per share - diluted)
                       Kentucky   U.K.       Pennsylvania
                       Regulated  Regulated  Regulated     Supply    Total
Earnings from Ongoing  $   0.06   $  0.28    $    0.10     $ 0.27    $ 0.71
Operations
Special Items:
Adjusted
energy-related                                               0.11      0.11
economic activity,
net
Acquistion-related
adjustments:
  WPD Midlands
  Separation benefits                (0.01)                            (0.01)
  Other
  acquisition-related                (0.04)                            (0.04)
  costs
Other:
  Montana
  hydroelectric                                              0.08      0.08
  litigation
  Windfall profits                   (0.07)                            (0.07)
  tax litigation
  Counterparty                                               (0.01)    (0.01)
  bankruptcy
  Wholesale supply                                           0.01      0.01
  cost reimbursement
Total Special Items                  (0.12)                  0.19      0.07
Reported Earnings      $   0.06   $  0.16    $    0.10     $ 0.46    $ 0.78

 

Reconciliation of Segment Earnings from Ongoing Operations to Reported Earnings
(After Tax)
(Unaudited)
Year-to-Date             (millions of dollars)
December 31, 2011
                         Kentucky   U.K.           Pennsylvania
                         Regulated  Regulated (a)  Regulated     Supply    Total
Earnings from Ongoing    $   220    $    482       $    173      $ 634     $ 1,509
Operations
Special Items:
Adjusted energy-related      1                                     72        73
economic activity, net
Foreign
currency-related                         5                                   5
economic hedges
Impairments:
    Emission allowances                                            (1)       (1)
    Renewable energy                                               (3)       (3)
    credits
Acquisition-related
adjustments:
    WPD Midlands
    2011 Bridge                          (30)                                (30)
    Facility costs
    Foreign currency
    loss on 2011 Bridge                  (38)                                (38)
    Facility
    Net hedge gains                      38                                  38
    Hedge                                (9)                                 (9)
    ineffectiveness
    U.K. stamp duty tax                  (21)                                (21)
    Separation benefits                  (75)                                (75)
    Other
    acquisition-related                  (57)                                (57)
    costs
    LKE
    Sale of certain
    non-core generation                                            (2)       (2)
    facilities
Other:
    Montana
    hydroelectric                                                  45        45
    litigation
    Litigation
    settlement - spent                                             33        33
    nuclear fuel
    storage
    Change in U.K. tax                   69                                  69
    rate
    Windfall profits                     (39)                                (39)
    tax litigation
    Counterparty                                                   (6)       (6)
    bankruptcy
    Wholesale supply                                               4         4
    cost reimbursement
Total Special Items          1           (157)                     142       (14)
Reported Earnings        $   221    $    325       $    173      $ 776     $ 1,495
                         (per share - diluted)
                         Kentucky   U.K.           Pennsylvania
                         Regulated  Regulated (a)  Regulated     Supply    Total
Earnings from Ongoing    $   0.40   $    0.87      $    0.31     $ 1.15    $ 2.73
Operations
Special Items:
Adjusted energy-related                                            0.12      0.12
economic activity, net
Foreign
currency-related                         0.01                                0.01
economic hedges
Impairments:
    Renewable energy                                               (0.01)    (0.01)
    credits
Acquisition-related
adjustments:
    WPD Midlands
    2011 Bridge                          (0.05)                              (0.05)
    Facility costs
    Foreign currency
    loss on 2011 Bridge                  (0.07)                              (0.07)
    Facility
    Net hedge gains                      0.07                                0.07
    Hedge                                (0.02)                              (0.02)
    ineffectiveness
    U.K. stamp duty tax                  (0.04)                              (0.04)
    Separation benefits                  (0.13)                              (0.13)
    Other
    acquisition-related                  (0.10)                              (0.10)
    costs
Other:
    Montana
    hydroelectric                                                  0.08      0.08
    litigation
    Litigation
    settlement - spent                                             0.06      0.06
    nuclear fuel
    storage
    Change in U.K. tax                   0.12                                0.12
    rate
    Windfall profits                     (0.07)                              (0.07)
    tax litigation
    Counterparty                                                   (0.01)    (0.01)
    bankruptcy
    Wholesale supply                                               0.01      0.01
    cost reimbursement
Total Special Items                      (0.28)                    0.25      (0.03)
Reported Earnings        $   0.40   $    0.59      $    0.31     $ 1.40    $ 2.70
    The results of operations for 2012 are not comparable with 2011 due to the
(a) acquisition of WPD Midlands.  WPD Midlands' results are consolidated on a
    one-month lag, and include eight months of results in 2011, as the date of the
    acquisition was April 1, 2011.

 

 

SOURCE PPL Corporation

Website: http://www.pplweb.com
Contact: For news media - George C. Lewis, +1-610-774-5997; For financial
analysts - Joseph P. Bergstein, +1-610-774-5609
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