Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PPL Corp | form8k.htm |
| EX-99.1 - EXHIBIT 99.1 - PPL Corp | form8k-exhibit99_1.htm |
Third Quarter Earnings Call October 29,
2009 Exhibit 99.2
Cautionary
Statements and Factors That May Affect Future Results Any
statements made in this presentation about future operating results or other
future events are forward-looking statements under the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of
1995. Actual results may differ materially from such forward-looking
statements. A discussion of factors that could cause actual results or events to
vary is contained in the Appendix to this presentation and in the Company’s SEC
filings. 1
Agenda • Third Quarter 2009
Earnings, 2009 and 2010 Earnings Forecast and
Outlook • Segment Results and
Financial Overview • Operational Review •
Q&A J. H. Miller P. A. Farr W. H.
Spence 2
Earnings Results Third Quarter Earnings
from Ongoing
Operations $0.45 $0.52 $0.00 $0.50 $1.00 3Q
2008 3Q 2009 Per
Share $0.54 $0.05 $0.00 $0.50 $1.00 3Q
2008 3Q 2009 Per Share Third Quarter Reported
Earnings Note: See Appendix for the reconciliation of reported
earnings and earnings from ongoing
operations. $1.73 $0.67 $0.00 $0.50 $1.00 $1.50 $2.00 3Q
2008 3Q 2009 Per
Share $1.56 $1.43 $0.00 $0.50 $1.00 $1.50 $2.00 3Q
2008 3Q 2009 Per Share Year-to-Date Reported
Earnings Year-to-Date Earnings from Ongoing
Operations 3
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 2008A*
2009* 2010 Strong Expected Earnings
Growth Forecast 4 * Earnings from ongoing
operations – See Appendix for the per share reconciliation of reported earnings
and earnings from ongoing
operations. $2.02 $3.50 Per
Share $1.90 $1.60 $3.10
Ongoing Earnings Overview $
0.07$0.45$0.52Total (0.08)0.200.12International
Delivery (0.02)0.090.07Pennsylvania Delivery $
0.17$0.16$0.33Supply Change Q3 2008 Q3 2009 5 Note:
See Appendix for the per share reconciliation of reported earnings and earnings
from ongoing operations.
Supply Segment Earnings
Drivers 0.01Margins –
West (0.02)O&M (0.01)Depreciation $0.332009
EPS – Ongoing Earnings 0.17Total 0.19Margins –
East $0.162008 EPS – Ongoing Earnings 3rd
Quarter Note: See Appendix for the per share reconciliation of
reported earnings and earnings from ongoing
operations. 6
Pennsylvania
Delivery Segment Earnings Drivers (0.01)Delivery
Margins $0.072009 EPS – Ongoing
Earnings (0.02)Total (0.01)Financing
Costs $0.092008 EPS – Ongoing Earnings 3rd
Quarter 7 Note: See Appendix for the per share
reconciliation of reported earnings and earnings from ongoing
operations.
International Delivery Segment Earnings
Drivers (0.03)Effect of Exchange Rates 0.02Financing
Costs $0.122009 EPS – Ongoing
Earnings (0.08)Total (0.08)Income Taxes &
Other 0.01O&M $0.202008 EPS – Ongoing
Earnings 3rd Quarter 8 Note: See Appendix for
the per share reconciliation of reported earnings and earnings from ongoing
operations.
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 2008A*
2009* 2010 Strong Expected Earnings
Growth Forecast 9 * Earnings from ongoing
operations – See Appendix for the per share reconciliation of reported earnings
and earnings from ongoing
operations. $2.02 $3.50 Per
Share $1.90 $1.60 $3.10
($605) $189 ($318) $523 $367 $266 ($21) ($180) $1 ($800) ($600) ($400) ($200) $0 $200 $400 $600 $800 2008A
2009E 2010E Supply Segment PA Delivery Segment International Delivery
Segment Free Cash Flow before Dividends
Forecast Millions 10 Note: See Appendix for
reconciliation of cash from operations to free cash flow before
dividends
PA and International Delivery Segment Operational
Update PA Delivery • Sixth and final RFP for 2010 POLR
load completed on October 8 – Solicitations resulted in a total
increase of 29.7% for average residential customers •
Second solicitation completed for the 2011 to mid-2013 Procurement •
PA PUC completed evidentiary hearings regarding PPL Electric
Utilities application to build the Pennsylvania portion of the
Susquehanna-Roseland 500-kilovolt transmission line •
Received $19 million federal grant to deploy smart grid
technology International Delivery • Distribution Price
Control Review (DPCR 5) – Initial proposals issued in August 2009 and
updated by OFGEM in October – Final proposals will be issued in
November 2009 and will take effect April 1, 2010 11
Supply Segment Operational Update • Brunner
Island’s Unit 1 passed a record run mark of 165 consecutive
days • PPL Montana began work on the Rainbow hydroelectric
plant – Upon completion in 2012, project will
increase amount of clean, renewable power generated by
the facility by 70 percent • Expect to begin construction
of 120 MW Holtwood hydro plant shortly 12
Supply Segment Asset Hedge Positions 2009 2010 2011
2012 Baseload Expected Generation* (1,000 MWhs) 51.4 52.0
52.2 53.4 East 42.9 43.5 43.9 45.0 West 8.5 8.5 8.3
8.4 Current Hedges (%) 99% 99% 89% 58% East 99% 100% 90%
55% West 96% 90% 83% 73% Average Hedged Price (Energy
Only) ($/MWh) $46 $59 $59 $61 East $46 $60 $60 $62 West
$47 $50 $56 $57 Expected Average Price (Fully Loaded) ($/MWh) $46 $70
$67 $68 East** $46 $72 $70 $71 West $47 $50 $56
$57 %Hedged Through Swaps/Options Energy Transactions 22% 96% 89%
58% % Hedged Through Load-following Transactions 77% 3% 0%
0% Intermediate/Peaking Expected Generation (1,000 MWhs)
5.8 5.2 5.2 5.3 Current Hedges (%) 88% 17% 0%
0% 13 As of September 30, 2009 *Represents
expected sales based on current forecasted assumption for
2009-2012 **Represents energy, capacity, congestion and other
revenues
Current Fuel Hedge Positions (1)Base prices for
East wholly owned plants which include Montour & Brunner Island but not
Keystone & Conemaugh. (2)Excludes contracts subject to
mining-related oil surcharges and/or price collars. Note: As of
9/30/2009 2009 2010 2011 2012 Uranium 100% 100% 100%
100% Coal East 100% 97% 83% 60% West 100% 100%
100% 90% Total 100% 98% 88%
68% 14 $35 $40 $45 $50 $55 Balance
of 2009 2010 2011 max collar price fixed base
price min collar price
Weighted Average $/Ton at Mine
(1) 7%11% % Diesel Surcharge 78% 5%0%%
Collars 88% 89% % Fixed Base Price
(2)22% 0%
ppl
Market
Prices ELECTRIC PJM On-Peak Off-Peak ATC(2) Mid-Columbia On-Peak Off-Peak ATC(2) GAS(3) NYMEX TZ6NNY PJM
MARKET HEAT RATE(4) CAPACITY PRICES (Per
MWD) EQA Actual 2008 2009 2010 2011
2012 $81 $44 $59 $63 $65 $49 $32 $39 $41
$43 $69 $38 $48 $52 $53 $65 $36 $52 $56 $57 $51
$29 $41 $45 $45 $59 $33 $47 $51 $51 $8.84 $4.04 $6.21
$6.87 $7.02 $9.85 $4.79 $7.01 $7.69 $7.80 8.2 9.2 8.4 8.2
8.3 $82.00 $158.24 $181.39 $136.79 $123.63 89.6% 89.5%
91.6% 88.6% 91.1% Forward(1) (1) Market prices based on
the average of broker quotes as of 9/30/2009 (2) 24-hour
average (3) NYMEX and TZ6NNY forward gas prices on
9/30/2009 (4) Market Heat Rate = PJM on-peak power price divided by
TZ6NNY gas price A-1
PPL Supply Business
Overview 2009E Production
GWh A-2 Gas/Oil 38% Coal 34% Nuclear 18% Hydro8% QFs 2% 2009E Installed
Capacity
MW Gas/Oil 10% Coal 49% Nuclear 32% Hydro 9% Note:
Graphs include tolling agreements
PPL’s Generation Portfolio Total Domestic
Generation: 12,181 MW Planned Uprate Projects or Additions: 208
MW (1) Reflects reduction of 60 MW expected loss due to increased
plant usage during scrubber operation. (2) Includes tolling agreement
and renewable energy projects (3) Includes MWs associated with the
proposed sale of Shoreham, Edgewood and the PPL Maine hydro assets.
A-3 Coal 3,500 Nuclear 2,210 Oil
1,817 Gas 2,282 Hydro 369 CTs
462 QFs 254 Coal 683 Hydro 604 West
1,287 MW Hydro Uprate (2012) 28 Nuclear Uprate (2010-2011)
44 Hydro Uprate (2013) 125 Coal Uprate (2009)
11 (1) East 10,894 MW (2)
(3) (3) (3)
Millions $939 $753 $892 $936
$809 $649 $286 $295 $568 $801 $664 $719 $278 $251 $428 $448 $460 $477 $0 $400 $800 $1,200 $1,600 $2,000 $2,400 2008A
2009E 2010E 2011E 2012E 2013E Supply PA Delivery International
Delivery $1,503 $2,185 $1,888 $1,299 Capital
Expenditures by
Segment $1,933 $1,845 A-4
Millions $833 $1,093 $1,358 $1,569 $1,791
$1,998 $2,173 $2,349 $2,549 $2,721 $2,888 $3,093 $0 $1,000 $2,000 $3,000 $4,000 $5,000 2008A
2009E 2010E 2011E 2012E 2013E Transmission Distribution &
Other Pennsylvania Delivery Rate
Base $3,442 $3,907 $4,290 $4,679 $5,091 $3,006 A-5
• Due dates for bids: PPL Electric Utilities 2011
to mid-2013 Procurement Plan
Schedule A-6 August 11, 2009 July 19,
2011 October 20, 2009 October 18, 2011 January 19, 2010
January 9, 2012 April 20, 2010 April 3, 2012 July 20, 2010
July 17, 2012 October 19, 2010 October 16, 2012 April 18,
2011 January 22, 2013 .. .. ..Completed
$1.00 $1.10 $1.22 $1.34
$1.38 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 2005
2006 2007 2008
2009 $/Share Annualized Continued Dividend
Growth A-7
Debt Maturities (1) PPL Capital Funding $201
million maturity paid off in March 2009 (2) PPL Electric Utilities
$486 million maturity paid off in August 2009 Note: As of
9/30/2009 A-8 2009 2010 2011 2012 2013 PPL
Energy Supply $0 $0 $500 $0 $737 PPL Capital
Funding 0 (1) 0 0 0 0 PPL Electric Utilities 0 (2) 0 0 0
500 WPD Group 0 0 0 0 0 Total $0 $0
$500 $0 $1,237 (Millions)
Liquidity Profile (1) Reported as of
9/30/2009 Domestic facilities consist of a diverse bank group, with
no bank and its affiliates providing an aggregate commitment of more
than 15% of the total committed
capacity. A-9 Institution
Facility Expiration Date Total Facility (Millions) Letters
of Credit Outstanding (1) (Millions) Drawn
(1) (Millions) Availability (Millions) PPL
Energy Supply 5-year Credit Facility Jun-2012 $3,225 $455 $285
$2,485 Bilateral Credit Facility Mar-2010 200 4 0
196 5-year Structured Credit Facility Mar-2011 300 230 0
70 364-day Credit Facility Sep-2010 400 0 0 400 $4,125
$689 $285 $3,151 PPL Electric Utilities 5-year Credit Facility
May-2012 $190 $5 $0 $185 Asset-backed Credit Facility Jul-2010 150 0
0 150 $340 $5 $0 $335 WPD 3-year Credit Facility Jul-2012
£210 £0 £54 £156 5-year Credit Facility Jan-2013 150 0 127
23 Uncommitted Credit Facilities 60 0 21 39 Letter of
Credit Facility Mar-2010 3 3 0 0 £423 £3 £202 £218
PPL Energy Supply Collateral
Profile A-10 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 Jul-08
Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09
Jul-09 Aug-09 Sep-09 Letters of Credit Borrowings/CP Outstanding Cash
Posted Available Credit Capacity Millions
Supply Segment Reconciliation of Cash from
Operations to Free Cash Flow before
Dividends A-11 39216Asset Sales (203)Investment
in Energy Project $523$189($605)Free Cash Flow before
Dividends (61)(15)(58)Other Investing
Activities-net (892)(753)(939)Capital
Expenditures Increase/(Decrease) in cash due
to: $1,437$741$595Cash from
Operations 201020092008 (Millions) Actual
Projected Note: Asset Sales in 2009 include the anticipated proceeds
from the announced pending sale of most of the Maine
generating assets and all of the Long Island generating assets.
Closing of the sale of the Maine assets is expected on or
about November 1, 2009. Closing on the sale of the Long Island assets
is expected later in 2009 or in the first quarter of 2010. Asset
sales in 2010 include the anticipated proceeds from the announced pending sale
of the remaining Maine generating assets.
PA Delivery Segment Reconciliation of Cash
from Operations to Free Cash Flow before
Dividends (Millions) A-12 303Asset Sales &
Other ($318)$266$367Free Cash Flow before
Dividends (568)(295)(286)Capital Expenditures (293)Less
Transition Bond Repayment Increase/(Decrease) in cash due
to: $250$561$643Cash from
Operations 201020092008 Note: Asset Sales in 2008 includes
the net proceeds from the sale of gas and propane businesses Actual
Projected
International Delivery Segment Reconciliation of
Cash from Operations to Free Cash Flow before
Dividends (Millions) A-13 ($180)($21)$1Free
Cash Flow before Dividends (428)(251)(278)Capital
Expenditures Increase/(Decrease) in cash due
to: $248$230$279Cash from
Operations 201020092008 Actual Projected
Pennsylvania International Supply Delivery Delivery
Total Quarter Ending September 30, 2009 Reported earnings*
($31) $27 $24 $20 Special Items: Unrealized losses from
energy-related, non-trading economic hedges (130) (130) Unrealized
gains from foreign currency economic hedges 4 4 Income taxes - Latin
American businesses (24) (24) Changes in tax accounting method (25)
(25) (155) (20) (175) Earnings from ongoing operations
$124 $27 $44 $195 Quarter Ending September 30,
2008 Reported earnings* $98 $32 $73 $203 Special
Items: Unrealized gains from energy-related, non-trading economic
hedges 67 67 Impairments & other impacts - emission allowances
(27) (27) Adjustments - nuclear decommissioning trust investments (1)
(1) Sale of gas and propane businesses (4) (4) 39 (4)
35 Earnings from ongoing operations $59 $36 $73
$168 Change excluding special items $65 ($9) ($29) $27 *
Represents net income attributable to PPL Corporation. Reconciliation
of Third Quarter Reported Earnings and Earnings from Ongoing
Operations A-14 (Millions)
Pennsylvania International Supply Delivery Delivery
Total Quarter Ending September 30, 2009 Reported earnings
($0.08) $0.07 $0.06 $0.05 Special Items: Unrealized losses
from energy-related, non-trading economic hedges (0.34) (0.34) Income
taxes - Latin American businesses (0.06) (0.06) Changes in tax
accounting method (0.07) (0.07) (0.41) (0.06)
(0.47) Earnings from ongoing operations $0.33 $0.07 $0.12
$0.52 Quarter Ending September 30, 2008 Reported earnings
$0.26 $0.08 $0.20 $0.54 Special Items: Unrealized gains
from energy-related, non-trading economic hedges 0.18
0.18 Impairments & other impacts -emission allowances (0.07)
(0.07) Adjustments - nuclear decommissioning trust investments (0.01)
(0.01) Sale of gas and propane businesses (0.01)
(0.01) 0.10 (0.01) 0.09 Earnings from ongoing operations
$0.16 $0.09 $0.20 $0.45 Change excluding special items $0.17 ($0.02)
($0.08) $0.07 Note: Per share amounts are based on diluted shares
outstanding. Reconciliation of Third Quarter
Reported Earnings and Earnings from Ongoing
Operations A-15 (Dollars Per Share)
Pennsylvania International Supply Delivery Delivery
Total Year-to-Date September 30, 2009 Reported earnings*
($12) $93 $173 $254 Special Items: Unrealized losses from
energy-related, non-trading economic hedges (168) (168) Unrealized
losses from foreign currency economic hedges (2) (2) Adjustments -
nuclear decommissioning trust investments (1) (1) Impairments &
other impacts - emission allowances (15) (15) Impairments - assets
held for sale & other (36) (1) (1) (38) Workforce reduction (6)
(5) (2) (13) Income taxes - Latin American businesses (24)
(24) Changes in tax accounting method (25) (25) (251) (6)
(29) (286) Earnings from ongoing operations $239 $99 $202
$540 Year-to-Date September 30, 2008 Reported earnings*
$297 $123 $233 $653 Special Items: Unrealized gains from
energy-related, non-trading economic hedges 121 121 Impairments &
other impacts - emission allowances (27) (27) Adjustments - nuclear
decommissioning trust investments (5) (5) Off-site remediation of ash
basin leak 1 1 Sale of gas and propane businesses (5)
(5) Montana basin seepage litigation (5) (5) Synfuel tax
adjustment (13) (13) 72 (5) 67 Earnings from ongoing
operations $225 $128 $233 $586 Change excluding special items $14
($29) ($31) ($46) * Represents net income attributable to PPL
Corporation. Reconciliation of Year-to-Date
Reported Earnings and Earnings from Ongoing
Operations A-16 (Millions)
Pennsylvania International Supply Delivery Delivery
Total Year-to-Date September 30, 2009 Reported earnings
($0.04) $0.25 $0.46 $0.67 Special Items: Unrealized losses
from energy-related, non-trading economic hedges (0.45)
(0.45) Unrealized losses from foreign currency economic hedges (0.01)
(0.01) Impairments & other impacts - emission allowances (0.04)
(0.04) Impairments -assets held for sale & other (0.10)
(0.10) Workforce reduction (0.01) (0.01) (0.01)
(0.03) Income taxes - Latin American businesses (0.06)
(0.06) Changes in tax accounting method (0.07)
(0.07) (0.67) (0.01) (0.08) (0.76) Earnings from ongoing
operations $0.63 $0.26 $0.54 $1.43 Year-to-Date September 30,
2008 Reported earnings $0.78 $0.33 $0.62 $1.73 Special
Items: Unrealized gains from energy-related, non-trading economic
hedges 0.32 0.32 Impairments & other impacts - emission
allowances (0.07) (0.07) Adjustments - nuclear decommissioning trust
investments (0.02) (0.02) Sale of gas and propane businesses (0.01)
(0.01) Montana basin seepage litigation (0.01)
(0.01) Synfuel tax adjustment (0.04) (0.04) 0.18 (0.01)
0.17 Earnings from ongoing operations $0.60 $0.34 $0.62
$1.56 Change excluding special items $0.03 ($0.08) (0.08) $
($0.13) Note: Per share amounts are based on diluted shares
outstanding. Reconciliation of Year-to-Date
Reported Earnings and Earnings from Ongoing
Operations A-17 (Dollars Per Share)
Reconciliation of Third Quarter Operating Income
and Energy Margins A-18 2009 2008 Change Per
Share (after-tax) Eastern U.S., pre-tax $391 $269 $122
$0.19 Western U.S., pre-tax 85 75 10 0.01 Domestic gross
energy margins, pre-tax $476 $344 $132 $0.20 2009
2008 Operating Income $181
$384 Adjustments: Energy-related businesses, net (8)
(14) Other operation and maintenance 317 361 Amortization
of recoverable transition costs 73 73 Depreciation 120
117 Taxes, other than income 70 77 Revenue adjustments (a)
(168) (1,683) Expense adjustments (a) (109) 1,029 Domestic
gross energy margins $476 $344 Three Months Ended September
30, Three Months Ended September
30, (Millions) (a) See additional information on the
following slide.
Reconciliation of Third Quarter Operating Income
and Energy Margins A-19 2009 2008 Revenue
adjustments WPD utility revenue ($165) $ (195) Domestic
delivery component of utility revenue (302) (325) Other utility
revenue (17) (12) Unrealized (gains) losses from economic hedge
activity 307 (1,160) Margins from Supply segment discontinued
operations 9 9 Total revenue adjustments ($168)
($1,683) Expense adjustments Unrealized gains (losses)
from economic hedge activity $ 86 $ (1,044) Domestic electric
ancillaries (10) (15) Gross receipts tax 27 28 Other 6
2 Total expense adjustments $109 ($1,029) September
30, Three Months Ended (Millions)
Reconciliation of PPL’s Reported Earnings
and Earnings from Ongoing Operations High
Low 2009 2009 2008 2007 Earnings from Ongoing Operations
per share of common stock $1.90 $1.60 $2.02 $2.60 Special items (net
of taxes): economic hedges (0.45) (0.45) 0.67
0.08 Unrealized losses from foreign currency economic hedges (0.01)
(0.01) Adjustments -nuclear decommissioning trust investments
(0.04) Sale of Latin American businesses 0.67 Sale of
telecommunication operations (0.06) Sale of gas and propane
businesses (0.01) (0.11) Settlement of Wallingford cost-based rates
0.09 Impairment of transmission rights (0.04) Change in
U.K. tax rate 0.14 Workforce reductions (0.03) (0.03)
(0.02) Synfuel tax adjustment (0.04) Montana basin seepage
litigation (0.01) Impairments & other impacts - emission
allowances (0.04) (0.04) (0.07) Impairments - assets held for sale
& other (0.10) (0.10) (0.05) Taxes - Latin American businesses
(0.06) (0.06) Changes in tax accounting method (0.07)
(0.07) (0.76) (0.76) 0.45 0.75 Reported Earnings per share
of common stock $1.14 $0.84 $2.47 $3.35 Note: Per share amounts are
based on diluted shares outstanding. Unrealized gains (losses) from
energy-related, non-trading Forecast
Actual A-20
Credit Ratings A-21 BBB Issuer
Rating AAA Aaa Tax-Exempt Bonds (1) STABLE NEGATIVE
NEGATIVE Outlook A-A-A3Senior Secured
Debt F-2A-2P-2Commercial Paper BBB BBB Baa3 Preferred
Stock BBBA-Baa1 Issuer Rating A-A-A3 First Mortgage
Bonds A/A-A3/Baa1 Tax-Exempt Bonds (2) BBB BBB Baa3
Preference Stock PPL Electric Utilities BBB BBB-Baa2
Senior Unsecured Debt BBB-BB+ Baa3 Subordinated
Debt STABLE NEGATIVE Outlook PPL Capital
Funding BBB BBB Issuer Rating BBB+ BBBBaa2Senior
Notes STABLE NEGATIVE STABLE Outlook PPL Energy
Supply STABLE NEGATIVE NEGATIVE Outlook BBB BBB Baa2Issuer
Rating PPL Corporation Fitch Standard & Poor’s
Moody’s (1) Letter of Credit-Backed Security (2) Includes
both Insured and Non-Insured Securities
Credit Ratings (cont.) A-22 Commercial
Paper A-BBB+ Baa1Senior Unsecured Debt F2A-2P-2Commercial
Paper POSITIVENEGATIVESTABLE Outlook BBB+ BBB+ Baa1Issuer
Rating A-BBB+ Baa1Senior Unsecured Debt F2A-2Commercial
Paper POSITIVENEGATIVESTABLE Outlook Western Power
Distribution (South West) PLC BBB+ BBB+ Issuer
Rating Western Power Distribution (South Wales)
PLC POSITIVENEGATIVESTABLE Outlook POSITIVE
Outlook BBB Issuer Rating WPD Holdings
LLP BBB-BBB-Baa3Issuer Rating BBB BBB-Baa3 Senior
Unsecured Debt A-3 Commercial Paper WPD Holdings
Limited BBB BBB-Baa3 Pass-Through Certificates STABLE
STABLE Outlook PPL Montana Fitch Standard & Poor’s
Moody’s
Forward-Looking Information
Statement A-23 Statements contained in this presentation,
including statements with respect to future earnings, energy prices, margins and
sales, growth, revenues, expenses, cash flow, asset disposition,
marketing performance, hedging, 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 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; 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,
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.
Definitions of
Non-GAAP Financial Measures A-24 “Earnings from ongoing
operations” excludes the impact of special items. Special items include charges
or credits that are unusual or nonrecurring. Special items also
include unrealized gains and losses from energy-related, non-trading economic
hedges, foreign currency-related economic hedges and impairments of
securities in PPL’s nuclear decommissioning trust funds. The
energy-related, non-trading economic hedges are used to hedge a
portion of the economic value of PPL’s generation assets and PPL’s
load-following 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). Also included in this
special item is the ineffective portion of qualifying cash flow hedges.
The foreign currency-related economic hedges are used to hedge a
portion of the net income of the international delivery business
segment. This economic value in U.S. dollars is subject to changes in
the British Pound Sterling to U.S. dollar exchange rate.
Management believes that the exclusion of such amounts provides a
better matching of ongoing earnings to the actual amounts settled for
our underlying hedged assets. 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 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. “Free cash flow before dividends” is derived by
deducting capital expenditures and other investing activities-net, as well as
the repayment of transition bonds, from cash flow from operations.
Free cash flow before dividends should not be considered as
an alternative to cash flow from operations, which is determined in
accordance with GAAP. PPL believes that free cash flow
before dividends, although a non-GAAP measure, is an important
measure to both management and investors since it is an indicator of
the company’s ability to sustain operations and growth without
additional outside financing beyond the requirement to fund maturing
debt obligations. Other companies may calculate free cash flow before
dividends in a different manner. "Domestic Gross Energy Margins" is
intended to supplement the investors' understanding of PPL’s domestic
non-trading and trading activities by combining applicable income
statement line items and related adjustments to calculate a single financial
measure. PPL believes that "Domestic Gross Energy Margins" is useful
and meaningful to investors because it provides them with the results of
PPL's domestic non-trading and trading activities as another
criterion in making their investment decisions. "Domestic Gross Energy
Margins" is not intended to replace "Operating Income," which is
determined in accordance with GAAP, as an indicator of overall
operating performance. PPL's management also uses "Domestic Gross
Energy Margins" in measuring certain corporate performance goals
used in determining variable compensation. Other companies may use
different measures to present the results of their non-trading
and trading activities.