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Fitch: PPL's Sale of Montana Hydro Assets a Credit Positive

  Fitch: PPL's Sale of Montana Hydro Assets a Credit Positive

Business Wire

NEW YORK -- September 27, 2013

Fitch Ratings considers PPL Corp.'s (PPL: 'BBB', Outlook Stable) planned sale
of its Montana Hydro assets to be modestly credit positive for both PPL and
its merchant generation subsidiary PPL Energy Supply, LLC (Supply: 'BBB',
Outlook Negative). This reflects Fitch's expectation that a majority of the
proceeds will be used to reduce borrowing requirements over the next two
years.

On Sept. 26, 2013, PPL announced that it will sell PPL Montana's 633 MW of
hydroelectric generation assets for approximately $900 million to NorthWestern
Corporation. The sale is subject to review by the Montana Public Service
Commission (MPSC) and the Federal Energy Regulatory Commission (FERC) and is
likely to take a year to close. PPL Montana is an indirect subsidiary of
Supply that generates electricity for wholesale sales in Montana and the
Pacific Northwest. The final regulatory approvals for the sale are expected in
the second half of 2014.

PPL will receive net proceeds of approximately $623 million after paying $271
million to terminate a sale lease back arrangement for its interest in the
Colstrip coal-fired facility. Although it remains unclear how the sale
proceeds will be specifically allocated, Fitch expects that substantially all
will be used to reduce future borrowing needs at PPL and/or Supply. The
resolution of the Negative Outlook for Supply could partially depend upon what
percentage of the proceeds will be allocated to Supply. If Fitch assumes all
proceeds will used to reduce debt at Supply, the FFO/Debt could potentially be
lifted by approximately 3%.

PPL Supply's operating environment continues to be challenging. The hydro
portfolio only represents 6% of the competitive generation capacity at Supply.
PPL Supply continues to have substantial wholesale presence in PJM East where
power price continues to be weak and depressed by Marcellus gas basis. The
Colstrip unit 4 will not be operational until 2014, following a six month
outage, which will require additional repair expenditure and further reduce
earnings.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012);

--'Rating North American Utilities, Power, Gas and Water Companies' (May 16,
2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Recovery Ratings and Notching Criteria for Utilities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693750

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Julie Jiang, +1 212-908-0708
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Robert Hornick, +1 212-908-0523
Senior Director
or
Committee Chairperson
Glen Grabelsky, +1 212-908-0977
Managing Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com
 
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