UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2016
Commission File Number |
Registrant; State of Incorporation; Address and Telephone Number |
IRS Employer Identification No. |
1-11459 |
PPL Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151 |
23-2758192 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition
On April 28, 2016, PPL Corporation ("PPL") issued a press release announcing its financial results for the quarter ended March 31, 2016 and other business matters. A copy of the press release is furnished as Exhibit 99.1.
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure
On April 28, 2016, at 8:30 a.m. (Eastern Time), members of PPL's senior management will hold a teleconference and webcast with financial analysts to discuss PPL's financial results for the quarter ended March 31, 2016 and other business matters. A copy of the slides to be used during the webcast is furnished as Exhibit 99.2. The event will be available live, in audio format, along with the slides, on PPL's Internet Web site: www.pplweb.com. The webcast will be available for replay on PPL's Web site for 30 days.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(d) | Exhibits | ||
99.1 - | Press Release, dated April 28, 2016, announcing PPL's financial results for the quarter ended March 31, 2016, and other business matters. | ||
99.2 - | Slides to be used on the April 28, 2016 webcast among members of PPL's senior management and financial analysts. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PPL CORPORATION | |||
By: | /s/ Stephen K. Breininger | ||
Stephen K. Breininger Vice President and Controller |
Dated: April 28, 2016
Exhibit 99.1
Contacts: | For news media – Ryan Hill, 610-774-5997 |
For financial analysts – Lisa Pammer, 610-774-3316 |
PPL Corporation Reports First-Quarter Earnings
· | Reaffirms ongoing 2016 earnings forecast range of $2.25 to $2.45 per share. |
· | Reaffirms projected compound annual per-share
earnings growth rate of 5 to 6 percent through 2018. |
ALLENTOWN, Pa. (April 28, 2016) – PPL Corporation (NYSE: PPL) on Thursday (4/28) announced first-quarter 2016 reported earnings of $481 million, or $0.71 per share, compared with $647 million, or $0.96 per share, in 2015.
Adjusting for special items, first-quarter 2016 earnings from ongoing operations were $458 million, or $0.67 per share, compared with $519 million, or $0.77 per share, a year ago. As expected, this was driven primarily by lower earnings in the U.K. as a result of a revenue reset that occurred at the beginning of the new RIIO-ED1 price control period on April 1, 2015, and a lower average foreign currency exchange rate in 2016 compared to the first quarter of 2015. Higher domestic margins from rate increases effective July 1, 2015, in Kentucky and Jan. 1, 2016, in Pennsylvania were partially offset by lower sales volumes due to mild winter weather.
“Our first-quarter results were in line with our expectations despite the warmer than normal start to the year, and we remain on track to deliver on our 2016 earnings forecast,” said William H. Spence, PPL’s chairman, president and Chief Executive Officer.
“Moreover, we remain confident in our ability to achieve long-term, sustainable growth as we continue to make significant investments to build tomorrow’s energy infrastructure and make the power grid more reliable, resilient and secure.”
Spence said a prime example of PPL’s investments, and its ability to execute large capital projects, is its recently energized Northeast-Pocono transmission line in Pennsylvania. The $350 million project to strengthen reliability and reinforce the grid was energized this month, a year ahead of schedule. It included about 60 miles of new transmission lines, three new substations and additional improvements. In all, PPL plans to invest more than $16 billion in energy infrastructure over the next five years.
In announcing its quarterly earnings, PPL reaffirmed its 2016 forecast range for earnings from ongoing operations of $2.25 to $2.45 per share. The 2016 forecast for reported earnings is $2.29 to $2.49 per share, reflecting special items recorded through the first quarter.
The company also reaffirmed its expectation that it will achieve compound annual growth through 2018 of 5 to 6 percent off of 2014 earnings of $2.03 per share from ongoing operations (adjusted).
Spence said organic growth in the company’s U.S. utilities is among the strongest in the U.S. utility sector. Earnings from PPL’s operations in the U.S., including its corporate services organization, are expected to grow 11 to 13 percent through 2018, with 1 to 3 percent earnings growth expected in the U.K.
First-Quarter 2016 Earnings Details
PPL’s reported earnings for the first quarter of 2016 included net special-item after-tax benefits of $23 million, or $0.04 per share, primarily due to foreign currency-related economic hedges. Reported earnings for the first quarter of 2015 included net special-item after-tax benefits of $128 million, or $0.19 per share, primarily due to earnings from PPL’s former Supply segment and foreign currency-related economic hedges.
Reported earnings are calculated in accordance with U.S. GAAP (generally accepted accounting principles). “Earnings from ongoing operations” is a non-GAAP financial measure that is adjusted for special items, including the former Supply segment’s earnings for 2015. Special items are fully detailed at the end of this news release.
(Dollars in millions, except for per share amounts) | 1st Quarter | |||||||||||
2016 | 2015 | % Change | ||||||||||
Reported earnings | $ | 481 | $ | 647 | (26%) | |||||||
Reported earnings per share | $ | 0.71 | $ | 0.96 | (26%) | |||||||
1st Quarter | ||||||||||||
2016 | 2015 | % Change | ||||||||||
Earnings from ongoing operations | $ | 458 | $ | 519 | (12%) | |||||||
Earnings from ongoing operations per share | $ | 0.67 | $ | 0.77 | (13%) | |||||||
(See the tables at the end of this news release for a reconciliation of reported earnings (loss) to earnings from ongoing operations.)
First-Quarter 2016 Earnings by Segment
1st Quarter | ||||||||
Per share | 2016 | 2015 | ||||||
Earnings from ongoing operations | ||||||||
U.K. Regulated | $ | 0.39 | $ | 0.50 | ||||
Kentucky Regulated | 0.16 | 0.16 | ||||||
Pennsylvania Regulated | 0.14 | 0.13 | ||||||
Corporate and Other | (0.02 | ) | (0.02 | ) | ||||
Total | $ | 0.67 | $ | 0.77 | ||||
|
||||||||
2016 | 2015 | |||||||
Special items | ||||||||
Special items (expense) benefit: | ||||||||
U.K. Regulated | $ | 0.04 | $ | 0.06 | ||||
Kentucky Regulated | – | – | ||||||
Pennsylvania Regulated | – | – | ||||||
Corporate and Other | – | (0.01 | ) | |||||
Former Supply/Discontinued Operations | – | 0.14 | ||||||
Total Special items | $ | 0.04 | $ | 0.19 |
2016 | 2015 | |||||||
Reported earnings | ||||||||
U.K. Regulated | $ | 0.43 | $ | 0.56 | ||||
Kentucky Regulated | 0.16 | 0.16 | ||||||
Pennsylvania Regulated | 0.14 | 0.13 | ||||||
Corporate and Other | (0.02 | ) | (0.03 | ) | ||||
Former Supply/Discontinued Operations | – | 0.14 | ||||||
Total | $ | 0.71 | $ | 0.96 |
(See the reconciliation tables at the end of this news release for an itemization of special items.)
Key Factors Impacting Earnings from Ongoing Operations
U.K. Regulated Segment
PPL’s U.K. Regulated segment primarily consists of the regulated electricity delivery operations of Western Power Distribution (WPD), serving Southwest and Central England and South Wales.
Earnings from ongoing operations in the first quarter of 2016 decreased by $0.11 per share compared with a year ago. This decrease was primarily driven by the April 1, 2015 price decrease due to the beginning of the new eight-year price control period (RIIO-ED1), lower sales volumes due to unfavorable weather, and the effect of changes in British pound sterling to U.S. dollar exchange rates.
Kentucky Regulated Segment
PPL’s Kentucky Regulated segment primarily consists of the regulated electricity and natural gas operations of Louisville Gas and Electric Company and the regulated electricity operations of Kentucky Utilities Company.
Earnings from ongoing operations in the first quarter of 2016 were the same as a year ago. This was primarily due to higher base electricity rates effective July 1, 2015, and lower operation and maintenance expense, offset by lower sales volumes, due to unfavorable weather, and higher financing costs.
Pennsylvania Regulated Segment
PPL’s Pennsylvania Regulated segment consists of the regulated electricity delivery operations of PPL Electric Utilities.
Earnings from ongoing operations in the
first quarter of 2016 increased by $0.01 per share compared with a year ago, driven primarily by higher base electricity rates
for distribution effective Jan.1, 2016, and higher transmission margins, partially offset by lower sales volumes, due to unfavorable
weather, and higher operation and maintenance expense.
Corporate and Other
PPL’s Corporate and Other category primarily includes unallocated corporate-level financing and other costs. Corporate and Other in the first quarter of 2016 was the same as a year ago.
Forecast of Earnings from Ongoing Operations
2016 forecast midpoint |
2015 actual | ||||
Per share | |||||
U.K. Regulated | $ 1.43 | $ 1.44 | |||
Kentucky Regulated | 0.57 | 0.51 | |||
Pennsylvania Regulated | 0.47 | 0.37 | |||
Corporate and Other | (0.12 | ) | (0.11 | ) | |
Total | $ 2.35 | $ 2.21 |
(See the tables at the end of this news release for a reconciliation of reported earnings to earnings from ongoing operations.)
The midpoint of PPL’s 2016 earnings from ongoing operations forecast of $2.35 per share represents an increase of more than 6 percent compared to 2015 earnings from ongoing operations. This increase is primarily attributable to increases in the Pennsylvania Regulated and Kentucky Regulated segments.
U.K. Regulated Segment
PPL projects relatively flat segment earnings in 2016 compared with 2015, due to higher gross margins and lower operation and maintenance expense, including pension expense, offset by higher financing costs, depreciation, taxes and other expenses and lower British pound sterling to U.S. dollar exchange rates.
The remaining 2016 foreign currency exposure for this segment is 93 percent hedged at an average rate of $1.54 per pound, compared to an average hedged rate of $1.57 per pound in 2015.
Kentucky Regulated Segment
PPL projects higher segment earnings in 2016 compared with 2015, primarily driven by electric and gas base rate increases effective July 1, 2015, and higher returns on additional environmental capital investments, partially offset by higher depreciation and higher financing costs.
Pennsylvania Regulated Segment
PPL projects higher segment earnings in 2016 compared with 2015, primarily driven by higher base electricity rates for distribution effective Jan. 1, 2016, and higher transmission margins, partially offset by higher depreciation, higher financing costs and a benefit received in 2015 from the release of a gross receipts tax reserve.
Corporate and Other
PPL projects costs to be relatively flat in this category in 2016 compared with 2015.
Headquartered in Allentown, Pa., PPL Corporation (NYSE: PPL) is one of the largest companies in the U.S. utility sector. PPL’s seven high-performing, award-winning utilities serve 10 million customers in the U.S. and United Kingdom. The company and its 13,000 employees are dedicated to providing exceptional customer service and reliability and delivering superior value for shareowners. To learn more, visit www.pplweb.com.
# # #
(Note: All references to earnings per share in the text and tables of this news release are stated in terms of diluted earnings per share unless otherwise noted.)
Conference Call and Webcast
PPL invites interested parties to listen to a live Internet webcast of management’s teleconference with financial analysts about first-quarter 2016 financial results at 8:30 a.m. Eastern Standard Time on Thursday, April 28. The call will be webcast live, in audio format, along with slides of the presentation. For those who are unable to listen to the live webcast, a replay with slides will be accessible at www.pplweb.com/investors for 30 days after the call. Interested individuals can access the live conference call via telephone at 1-888-317-6003. International participants should call 1-412-317-6061. Participants in Canada should call 1-866-284-3684. Participants will need to enter the following “Elite Entry” number in order to join the conference: 2306854.
# # #
Management utilizes “Earnings from ongoing operations” as a non-GAAP financial measure, and it should not be considered as an alternative to reported earnings, or net income, which is an indicator of operating performance determined in accordance with GAAP. PPL believes that earnings from ongoing operations is useful and meaningful to investors because it provides management’s view of PPL’s earnings performance as another criterion in making investment decisions. PPL's management also uses earnings from ongoing operations in measuring certain corporate performance goals. Other companies may use different measures to present financial performance.
“Earnings from ongoing operations” is adjusted for the impact of special items. Special items include:
• | Unrealized gains or losses on foreign currency-related economic hedges (as discussed below). |
• | Supply segment discontinued operations. |
• | Gains and losses on sales of assets not in the ordinary course of business. |
• | Impairment charges. |
• | Workforce reduction and other restructuring effects. |
• | Acquisition and divestiture-related adjustments. |
• | Other charges or credits that are, in management’s view, not reflective of the company’s ongoing operations. |
Unrealized gains or losses on foreign currency-related economic hedges include the changes in fair value of foreign currency contracts used to economically hedge British-pound-sterling-denominated anticipated earnings. The changes in fair value of these contracts each period are recognized immediately within GAAP earnings. Management believes that excluding these amounts from earnings from ongoing operations until settlement of the contracts provides a better matching of the financial impacts of those contracts with the economic value of PPL’s underlying hedged earnings.
Statements contained in this news release, including statements with respect to future earnings, cash flows, financing, regulation and corporate strategy, are “forward-looking statements” within the meaning of the federal securities laws. Although PPL Corporation believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results
discussed in the statements. The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: market demand for energy in our service territories; weather conditions affecting customer energy usage and operating costs; the effect of any business or industry restructuring; the profitability and liquidity of PPL Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of our facilities; the length of scheduled and unscheduled outages at our generating plants; environmental conditions and requirements and the related costs of compliance; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures; asset or business acquisitions and dispositions; any impact of severe weather on our business; receipt of necessary government permits, approvals, rate relief and regulatory cost recovery; capital market conditions and decisions regarding capital structure; the impact of state, federal or foreign investigations applicable to PPL Corporation and its subsidiaries; the outcome of litigation against PPL Corporation and its subsidiaries; stock price performance; the market prices of equity securities and the impact on pension income and resultant cash funding requirements for defined benefit pension plans; the securities and credit ratings of PPL Corporation and its subsidiaries; political, regulatory or economic conditions in states, regions or countries where PPL Corporation or its subsidiaries conduct business, including any potential effects of threatened or actual terrorism or war or other hostilities; British pound sterling to U.S. dollar exchange rates; new state, federal or foreign legislation, including new tax legislation; and the commitments and liabilities of PPL Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such important factors and in conjunction with PPL Corporation’s Form 10-K and other reports on file with the Securities and Exchange Commission.
Note to Editors: Visit our media website at www.pplnewsroom.com for additional news and background about PPL Corporation.
PPL CORPORATION AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (a) | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
(Millions of Dollars) | ||||||||
March 31, | December 31, | |||||||
2016 | 2015 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 814 | $ | 836 | ||||
Accounts receivable | 777 | 732 | ||||||
Unbilled revenues | 419 | 453 | ||||||
Fuel, materials and supplies | 332 | 357 | ||||||
Current price risk management assets | 183 | 139 | ||||||
Other current assets | 188 | 129 | ||||||
Property, Plant and Equipment | ||||||||
Regulated utility plant | 33,849 | 34,399 | ||||||
Less: Accumulated depreciation - regulated utility plant | 5,731 | 5,683 | ||||||
Regulated utility plant, net | 28,118 | 28,716 | ||||||
Non-regulated property, plant and equipment | 476 | 516 | ||||||
Less: Accumulated depreciation - non-regulated property, plant and equipment | 144 | 165 | ||||||
Non-regulated property, plant and equipment, net | 332 | 351 | ||||||
Construction work in progress | 1,382 | 1,315 | ||||||
Property, Plant and Equipment, net | 29,832 | 30,382 | ||||||
Noncurrent regulatory assets | 1,747 | 1,733 | ||||||
Goodwill and other intangibles | 4,003 | 4,229 | ||||||
Noncurrent price risk management assets | 254 | 156 | ||||||
Other noncurrent assets | 160 | 155 | ||||||
Total Assets | $ | 38,709 | $ | 39,301 | ||||
Liabilities and Equity | ||||||||
Short-term debt | $ | 1,265 | $ | 916 | ||||
Long-term debt due within one year | 485 | 485 | ||||||
Accounts payable | 707 | 812 | ||||||
Other current liabilities | 1,609 | 1,663 | ||||||
Long-term debt | 18,074 | 18,563 | ||||||
Deferred income taxes and investment tax credits | 3,687 | 3,568 | ||||||
Accrued pension obligations | 1,183 | 1,405 | ||||||
Asset retirement obligations | 517 | 536 | ||||||
Noncurrent regulatory liabilities | 942 | 945 | ||||||
Other noncurrent liabilities | 478 | 489 | ||||||
Common stock and additional paid-in capital | 9,736 | 9,694 | ||||||
Earnings reinvested | 3,185 | 2,953 | ||||||
Accumulated other comprehensive loss | (3,159) | (2,728) | ||||||
Total Liabilities and Equity | $ | 38,709 | $ | 39,301 |
(a) | The Financial Statements in this news release have been condensed and 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 March 31, | ||||||||||
2016 | 2015 (a) | |||||||||
Operating Revenues | $ | 2,011 | $ | 2,230 | ||||||
Operating Expenses | ||||||||||
Operation | ||||||||||
Fuel | 197 | 253 | ||||||||
Energy purchases | 233 | 329 | ||||||||
Other operation and maintenance | 450 | 456 | ||||||||
Depreciation | 229 | 216 | ||||||||
Taxes, other than income | 79 | 86 | ||||||||
Total Operating Expenses | 1,188 | 1,340 | ||||||||
Operating Income | 823 | 890 | ||||||||
Other Income (Expense) - net | 61 | 88 | ||||||||
Interest Expense | 224 | 209 | ||||||||
Income from Continuing Operations Before Income Taxes | 660 | 769 | ||||||||
Income Taxes | 179 | 217 | ||||||||
Income from Continuing Operations After Income Taxes | 481 | 552 | ||||||||
Income (Loss) from Discontinued Operations (net of income taxes) | 95 | |||||||||
Net Income | $ | 481 | $ | 647 | ||||||
Earnings Per Share of Common Stock: | ||||||||||
Income from Continuing Operations After Income Taxes: | ||||||||||
Basic | $ | 0.71 | $ | 0.83 | ||||||
Diluted | $ | 0.71 | $ | 0.82 | ||||||
Net Income: | ||||||||||
Basic | $ | 0.71 | $ | 0.97 | ||||||
Diluted | $ | 0.71 | $ | 0.96 | ||||||
Weighted-Average Shares of Common Stock Outstanding (in thousands) | ||||||||||
Basic | 675,441 | 666,974 | ||||||||
Diluted | 678,817 | 668,732 |
(a) Amounts have been reclassified to reflect the Supply segment as a discontinued operation.
PPL CORPORATION AND SUBSIDIARIES | |||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||||
(Millions of Dollars) | |||||||||
Three Months Ended March 31, | |||||||||
2016 | 2015 (a) | ||||||||
Cash Flows from Operating Activities | |||||||||
Net income | $ | 481 | $ | 647 | |||||
(Income) loss from discontinued operations (net of income taxes) | (95) | ||||||||
Income from continuing operations (net of income taxes) | 481 | 552 | |||||||
Adjustments to reconcile Income from continuing operations (net of taxes) to net cash provided by operating activities - continuing operations | |||||||||
Depreciation | 229 | 216 | |||||||
Amortization | 18 | 11 | |||||||
Defined benefit plans - expense (income) | (13) | 16 | |||||||
Deferred income taxes and investment tax credits | 162 | 111 | |||||||
Unrealized gains on derivatives, and other hedging activities | (34) | (52) | |||||||
Stock-based compensation expense | 13 | 14 | |||||||
Other | (5) | (3) | |||||||
Change in current assets and current liabilities | |||||||||
Accounts receivable | (62) | (128) | |||||||
Accounts payable | (43) | (49) | |||||||
Other current liabilities | (66) | (124) | |||||||
Other | (10) | 42 | |||||||
Other operating activities | |||||||||
Defined benefit plans - funding | (123) | (197) | |||||||
Other | 10 | 43 | |||||||
Net cash provided by operating activities - continuing operations | 557 | 452 | |||||||
Net cash provided by operating activities - discontinued operations | 221 | ||||||||
Net cash provided by operating activities | 557 | 673 | |||||||
Cash Flows from Investing Activities | |||||||||
Expenditures for property, plant and equipment | (656) | (833) | |||||||
Expenditures for intangible assets | (6) | (10) | |||||||
Purchase of other investments | (15) | ||||||||
Other investing activities | 1 | (2) | |||||||
Net cash used in investing activities - continuing operations | (661) | (860) | |||||||
Net cash used in investing activities - discontinued operations | (130) | ||||||||
Net cash used in investing activities | (661) | (990) | |||||||
Cash Flows from Financing Activities | |||||||||
Issuance of long-term debt | 224 | ||||||||
Retirement of long-term debt | (224) | ||||||||
Issuance of common stock | 42 | 35 | |||||||
Payment of common stock dividends | (255) | (250) | |||||||
Net increase in short-term debt | 351 | 163 | |||||||
Other financing activities | (23) | (14) | |||||||
Net cash provided by (used in) financing activities - continuing operations | 115 | (66) | |||||||
Net cash used in financing activities - discontinued operations | (222) | ||||||||
Net cash distributions to parent from discontinued operations | 191 | ||||||||
Net cash provided by (used in) financing activities | 115 | (97) | |||||||
Effect of Exchange Rates on Cash and Cash Equivalents | (33) | (2) | |||||||
Net Decrease in Cash and Cash Equivalents included in Discontinued Operations | 131 | ||||||||
Net Decrease in Cash and Cash Equivalents | (22) | (285) | |||||||
Cash and Cash Equivalents at Beginning of Period | 836 | 1,399 | |||||||
Cash and Cash Equivalents at End of Period | $ | 814 | $ | 1,114 |
(a) | Amounts have been reclassified to reflect the Supply segment as a discontinued operation. |
Key Indicators (Unaudited) | ||||||||||||||
12 Months Ended | ||||||||||||||
March 31, | ||||||||||||||
Financial | 2016 | 2015 | ||||||||||||
Dividends declared per share of common stock | $1.5075 | $1.49 | ||||||||||||
Book value per share (a)(b)(c) | $14.43 | $21.02 | ||||||||||||
Market price per share (a) | $38.07 | $33.66 | ||||||||||||
Dividend yield | 4.0% | 4.4% | ||||||||||||
Dividend payout ratio (d)(e) | 198.4% | 48.2% | ||||||||||||
Dividend payout ratio - earnings from ongoing operations (d)(f) | 71.4% | 69.3% | ||||||||||||
Price/earnings ratio (d)(e) | 50.1 | 10.9 | ||||||||||||
Price/earnings ratio - earnings from ongoing operations (d)(f) | 18.0 | 15.7 | ||||||||||||
Return on common equity (e) | 4.3% | 15.5% | ||||||||||||
Return on common equity - earnings from ongoing operations (f)(g) | 14.3% | 15.3% |
(a) End of period.
(b) Based on 676,384 and 667,713 shares of common stock outstanding (in thousands) at March 31, 2016 and March 31, 2015.
(c) 2016 reflects the impact of the spinoff of the Supply segment and a $3.2 billion related dividend.
(d) Based on diluted earnings per share.
(e) 2016 includes two months of Supply segment earnings, compared to twelve months in 2015.
(f) | Calculated using earnings from ongoing operations, which is a non-GAAP financial measure that includes adjustments described in the text and tables of this news release. |
(g) Adjusted to exclude the equity of PPL Energy Supply, LLC as that business was spun off in 2015.
Operating - Domestic & International Electricity Sales (Unaudited) | |||||||||
3 Months Ended March 31, | |||||||||
Percent | |||||||||
(GWh) | 2016 | 2015 | Change | ||||||
Domestic Retail Delivered | |||||||||
PPL Electric Utilities | 9,680 | 10,661 | (9.2%) | ||||||
LKE | 7,689 | 8,296 | (7.3%) | ||||||
Total | 17,369 | 18,957 | (8.4%) | ||||||
Domestic Retail Supplied | |||||||||
LKE (a) | 7,689 | 8,296 | (7.3%) | ||||||
International Delivered | |||||||||
United Kingdom | 20,292 | 20,793 | (2.4%) | ||||||
Domestic Wholesale | |||||||||
LKE (b) | 506 | 684 | (26.0%) |
(a) Represents GWh supplied by LKE to retail customers in Kentucky, Virginia and Tennessee.
(b) Represents FERC-regulated municipal and unregulated off-system sales.
Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations | ||||||||||||||||
(After-Tax) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(millions of dollars) | Year-to-Date March 31, 2016 | |||||||||||||||
U.K. | KY | PA | Corp. | |||||||||||||
Reg. | Reg. | Reg. | & Other | Total | ||||||||||||
Reported Earnings (Loss) | $ | 289 | $ | 112 | $ | 94 | $ | (14) | $ | 481 | ||||||
Less: Special Items (expense) benefit: | ||||||||||||||||
Foreign currency-related economic hedges | 24 | 24 | ||||||||||||||
Spinoff of the Supply segment | (1) | (1) | ||||||||||||||
Total Special Items | 24 | (1) | 23 | |||||||||||||
Earnings from Ongoing Operations | $ | 265 | $ | 112 | $ | 94 | $ | (13) | $ | 458 | ||||||
(per share - diluted) | Year-to-Date March 31, 2016 | |||||||||||||||
U.K. | KY | PA | Corp. | |||||||||||||
Reg. | Reg. | Reg. | & Other | Total | ||||||||||||
Reported Earnings (Loss) | $ | 0.43 | $ | 0.16 | $ | 0.14 | $ | (0.02) | $ | 0.71 | ||||||
Less: Special Items (expense) benefit: | ||||||||||||||||
Foreign currency-related economic hedges | 0.04 | 0.04 | ||||||||||||||
Total Special Items | 0.04 | 0.04 | ||||||||||||||
Earnings from Ongoing Operations | $ | 0.39 | $ | 0.16 | $ | 0.14 | $ | (0.02) | $ | 0.67 |
Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations | |||||||||||||||||||
(After-Tax) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
(millions of dollars) | Year-to-Date March 31, 2015 | ||||||||||||||||||
U.K. | KY | PA | Corp. | Disc. | |||||||||||||||
Reg. | Reg. | Reg. | & Other | Ops. | Total | ||||||||||||||
Reported Earnings (Loss) | $ | 375 | $ | 109 | $ | 87 | $ | (19) | $ | 95 | $ | 647 | |||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency-related economic hedges | 37 | 37 | |||||||||||||||||
Spinoff of the Supply segment: | |||||||||||||||||||
Discontinued operations | 95 | 95 | |||||||||||||||||
Employee transitional services | (2) | (2) | |||||||||||||||||
Transition and transaction costs | (3) | (3) | |||||||||||||||||
Separation benefits | (1) | (1) | |||||||||||||||||
WPD Midlands acquisition-related adjustment | 2 | 2 | |||||||||||||||||
Total Special Items | 39 | (6) | 95 | 128 | |||||||||||||||
Earnings from Ongoing Operations | $ | 336 | $ | 109 | $ | 87 | $ | (13) | $ | $ | 519 | ||||||||
(per share - diluted) | Year-to-Date March 31, 2015 | ||||||||||||||||||
U.K. | KY | PA | Corp. | Disc. | |||||||||||||||
Reg. | Reg. | Reg. | & Other | Ops. | Total | ||||||||||||||
Reported Earnings (Loss) | $ | 0.56 | $ | 0.16 | $ | 0.13 | $ | (0.03) | $ | 0.14 | $ | 0.96 | |||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency-related economic hedges | 0.06 | 0.06 | |||||||||||||||||
Spinoff of the Supply segment: | |||||||||||||||||||
Discontinued operations | 0.14 | 0.14 | |||||||||||||||||
Transition and transaction costs | (0.01) | (0.01) | |||||||||||||||||
Total Special Items | 0.06 | (0.01) | 0.14 | 0.19 | |||||||||||||||
Earnings from Ongoing Operations | $ | 0.50 | $ | 0.16 | $ | 0.13 | $ | (0.02) | $ | $ | 0.77 |
Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations | |||||||||||||||||||
(After-Tax) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Year-to-Date December 31, 2015 | (per share - diluted) | ||||||||||||||||||
U.K. | KY | PA | Corp. & | Disc. | |||||||||||||||
Reg. | Reg. | Reg. | Other | Ops.(a) | Total | ||||||||||||||
Reported Earnings (Loss) | $ | 1.66 | $ | 0.48 | $ | 0.37 | $ | (0.14) | $ | (1.36) | $ | 1.01 | |||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency-related economic hedges | 0.08 | 0.08 | |||||||||||||||||
Spinoff of the Supply segment: | |||||||||||||||||||
Discontinued operations | (1.36) | (1.36) | |||||||||||||||||
Transition and transaction costs | (0.02) | (0.02) | |||||||||||||||||
Employee transitional services | (0.01) | (0.01) | |||||||||||||||||
Other: | |||||||||||||||||||
Change in U.K. tax rate | 0.11 | 0.11 | |||||||||||||||||
Settlement of certain income tax positions | 0.03 | 0.03 | |||||||||||||||||
Certain valuation allowances | (0.02) | (0.02) | |||||||||||||||||
LKE acquisition-related adjustment | (0.01) | (0.01) | |||||||||||||||||
Total Special Items | 0.22 | (0.03) | (0.03) | (1.36) | (1.20) | ||||||||||||||
Earnings from Ongoing Operations | $ | 1.44 | $ | 0.51 | $ | 0.37 | $ | (0.11) | $ | $ | 2.21 | ||||||||
Year-to-Date December 31, 2014 | (per share - diluted)(b) | ||||||||||||||||||
U.K. | KY | PA | Corp. & | Disc. | |||||||||||||||
Reg. | Reg. | Reg. | Other(c) | Ops.(c) | Total | ||||||||||||||
Reported Earnings (Loss) | $ | 1.48 | $ | 0.47 | $ | 0.39 | $ | (0.18) | $ | 0.45 | $ | 2.61 | |||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency-related economic hedges | 0.19 | 0.19 | |||||||||||||||||
Spinoff of the Supply segment: | |||||||||||||||||||
Supply segment earnings | 0.46 | 0.46 | |||||||||||||||||
Discontinued operations adjustments | (0.01) | 0.01 | |||||||||||||||||
Change in tax valuation allowances | (0.07) | (0.07) | |||||||||||||||||
Transition and transaction costs | (0.02) | (0.02) | |||||||||||||||||
Separation benefits | (0.02) | (0.02) | |||||||||||||||||
Other: | |||||||||||||||||||
Change in WPD line loss accrual | (0.08) | (0.08) | |||||||||||||||||
Separation benefits | (0.01) | (0.01) | |||||||||||||||||
Total Special Items | 0.11 | (0.01) | (0.10) | 0.45 | 0.45 | ||||||||||||||
Dissynergies-spinoff of Supply segment | |||||||||||||||||||
expense (benefit): (d) | |||||||||||||||||||
Indirect operation and maintenance | 0.07 | 0.07 | |||||||||||||||||
Interest expense | 0.05 | 0.05 | |||||||||||||||||
Depreciation | 0.01 | 0.01 | |||||||||||||||||
Total dissynergies-spinoff of Supply segment | 0.13 | 0.13 | |||||||||||||||||
Earnings from Ongoing Operations (Adjusted) | $ | 1.37 | $ | 0.47 | $ | 0.40 | $ | (0.21) | $ | $ | 2.03 | ||||||||
(a) | Includes an $879 million charge reflecting the difference between PPL's recorded value for the Supply segment and the estimated fair | ||||||||||||||||||
value determined in accordance with applicable accounting rules under GAAP. | |||||||||||||||||||
(b) | The "If-Converted Method" has been applied to PPL's 2011 Equity Units, resulting in $9 million of interest charges (after-tax) being | ||||||||||||||||||
added back to earnings and approximately 11 million shares of PPL common stock being treated as outstanding. Both adjustments are | |||||||||||||||||||
only for purposes of calculating diluted earnings per share. | |||||||||||||||||||
(c) | Certain amounts have been reclassified to reflect the Supply segment as a discontinued operation. | ||||||||||||||||||
(d) | Represents 2014 costs allocated to the Supply segment that remained with PPL after the spinoff of the Supply segment. |
Reconciliation of PPL's Forecast of Reported Earnings (Loss) to Earnings from Ongoing Operations | |||||||||||||||||||||
(After-Tax) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Forecast (per share - diluted) | |||||||||||||||||||||
2016 Midpoint | |||||||||||||||||||||
U.K. | KY | PA | Corp. | High | Low | ||||||||||||||||
Reg. | Reg. | Reg. | & Other | Total | 2016 | 2016 | |||||||||||||||
Reported Earnings (Loss) | $ | 1.47 | $ | 0.57 | $ | 0.47 | $ | (0.12) | $ | 2.39 | $ | 2.49 | $ | 2.29 | |||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||||
Foreign currency-related economic hedges | 0.04 | 0.04 | 0.04 | 0.04 | |||||||||||||||||
Total Special Items | 0.04 | 0.04 | 0.04 | 0.04 | |||||||||||||||||
Earnings from Ongoing Operations | $ | 1.43 | $ | 0.57 | $ | 0.47 | $ | (0.12) | $ | 2.35 | $ | 2.45 | $ | 2.25 | |||||||
© PPL Corporation 2016 DRAFT 1st Quarter Earnings Call –4th DRAFT PPL Corporation April 28, 2016 Exhibit 99.2
© PPL Corporation 2016 DRAFT Cautionary Statements and Factors That May Affect Future Results Anystatementsmadeinthispresentationaboutfutureoperating resultsorotherfutureeventsareforward-lookingstatements under the Safe Harbor Provisions of the Private Securities LitigationReformActof1995.Actualresultsmaydiffermaterially fromsuchforward-lookingstatements.Adiscussionoffactors thatcouldcauseactualresultsoreventstodifferiscontainedin theAppendixtothispresentationandintheCompany’sSEC filings. 2
© PPL Corporation 2016 DRAFT 1 st Quarter 2016 Earnings Resultsand Operational Overview U.K. Incentive Revenues Update Segment Results and Financial Overview Q&A W. H. Spence V. Sorgi Agenda 3 R. Symons
© PPL Corporation 2016 DRAFT $0.96 $0.71 ($0.75) ($0.25) $0.25 $0.75 $1.25 $1.75 $2.25 $2.75 1Q 2015 1Q 2016 First Quarter Reported Earnings P e r S h a r e Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. Earnings Results $0.77 $0.67 ($0.75) ($0.25) $0.25 $0.75 $1.25 $1.75 $2.25 $2.75 1Q 2015 1Q 2016 First Quarter Earnings from Ongoing Operations P e r S h a r e 4
© PPL Corporation 2016 DRAFT $0.00 $1.00 $2.00 $3.00 2014 Adj 2015A 2016E $2.25 $2.21 P e r S h a r e 2016 Earnings Forecast $2.03 Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. (1) For 2014, earnings from ongoing operations reflects the full impact of dissynergies related to the spinoff of the Supply segment: Indirect O&M ($0.07), Interest ($0.05) and Depreciation ($0.01). (2) Earnings presented here exclude any earnings from the Supply segment. However, the Supply segment was part of PPL Corporation’s consolidated reported earnings for the first five months of 2015. Segment 2014 Adjusted Ongoing 2015A Ongoing 2016E Ongoing U.K. Regulated $1.37 $1.44 $1.43 Kentucky Regulated 0.47 0.51 0.57 PA Regulated 0.40 0.37 0.47 Corporate and Other (0.21) (0.11) (0.12) Total (2) $2.03 $2.21 $2.35 $2.45 (1) 5
© PPL Corporation 2016 DRAFT Pennsylvania • $350M Northeast Pocono Transmission Line In-Service Kentucky • Environmental Update • Construction projects progressing as scheduled U.K. • Strong performance against RIIO-ED1 incentive targets Operational Update 6
© PPL Corporation 2016 DRAFT U.K. Incentive Revenues –Summary • Annual performance above or below the Ofgem targets for Customer Minutes Lost (CML), Customer Interruptions (CI) and the Broad Measure of Customer Satisfaction Survey is rewarded or penalized on a 2-year lag (i.e. 2015/2016 earned performance is received in 2017/2018 revenue) • Rewards/penalties shown on the following slides from the Fast-track Determination are stated in 2012/2013 prices; therefore, we adjust for RPI as necessary • WPD outperformed its 2015/2016 incentive targets and our estimate for total 2015/2016 incentive revenues is $107 million compared to our prior estimate of between $xx million • Based on actual performance, PPL would expect to earn incentive revenues for 2017 and 2018 as follows: 2017 2018 Estimate: $115M $85M -$115M(previously $75M-$105M) 7
© PPL Corporation 2016 DRAFT U.K. Incentive Revenue 8 In the 2015/16 regulatory year, WPD improved performance by xx%over prior year which resulted in earning 77% of the maximum payout. Based on assumed exchange rate of $1.60/£. Subject to Ofgem audit in November 2016. Max. Payout Actual Max. Payout Earned Target Performance Award Award Customer Minutes Loss South Wales 11.2 20.7 $11.6 $4.8 South West 18.6 29.0 17.2 6.8 East Midlands 23.4 19.9 24.1 24.1 West Midlands 35.2 28.5 25.1 25.1 Total $78.0 $60.8 Customer Interruptions South Wales 35.3 43.8 $4.2 $1.8 South West 40.0 47.8 6.4 3.2 East Midlands 38.8 41.7 8.9 6.9 West Midlands 72.6 63.3 9.1 9.1 Total $28.6 $21.0 Broad Measure of Customer Service South Wales $4.8 $3.9 South West 7.1 5.6 East Midlands 10.2 8.1 West Midlands 10.2 7.7 Total $32.2 $25.3 Total U.K. Incentive Revenue $138.8 $107.1
© PPL Corporation 2016 DRAFT Summary Financial Highlights 9
© PPL Corporation 2016 DRAFT Q1 2016 Q1 2015 Change Pennsylvania Regulated $0.14 $0.13 $0.01 Kentucky Regulated 0.16 0.16 0.00 U.K. Regulated 0.39 0.50 (0.11) Corporate and Other (0.02) (0.02) 0.00 Total $0.67 $0.77 $(0.10) Ongoing Earnings Overview Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. 10
© PPL Corporation 2016 DRAFT 1 st Quarter 2015 EPS –Ongoing Earnings $0.13 Gross margins 0.03 Operation and maintenance (0.02) Depreciation (0.01) Income Taxes 0.01 Total 0.01 2016 EPS –Ongoing Earnings $0.14 Pennsylvania Regulated Segment Earnings Drivers Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. 11
© PPL Corporation 2016 DRAFT 1 st Quarter 2015 EPS –Ongoing Earnings $0.16 Operation and maintenance 0.01 Financing costs (0.01) Total 0.00 2016 EPS –Ongoing Earnings $0.16 Kentucky Regulated Segment Earnings Drivers Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. 12
© PPL Corporation 2016 DRAFT 1 st Quarter 2015 EPS –Ongoing Earnings $0.50 Gross margins (0.08) Operation and maintenance 0.01 Depreciation (0.01) Financing Costs (0.01) Taxes and Other 0.01 Currency (0.03) Total (0.11) 2016 EPS –Ongoing Earnings $0.39 U.K. Regulated Segment Earnings Drivers Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. 13
© PPL Corporation 2016 DRAFT Foreign Currency Hedging Status 14 Note: FX hedging status as of 4/11/2016. (1) FX sensitivities do not reflect the potential risk mitigation from restriking existing hedges. GBP Foreign Currency 2016 2017 2018 Percentage Hedged 93% 89% 41% Hedged Rate (GBP/USD) $1.54 $1.58 $1.56 Budgeted Rate on Open Position (GBP/USD) $1.60 $1.60 $1.60 EPS Sensitivities: Decrease in Rate (USD/GBP) (1) 0.05 $0.00 ($0.01) ($0.03) 0.10 ($0.01) ($0.01) ($0.06) 0.15 ($0.02) ($0.02) ($0.09) Change in EPS
© PPL Corporation 2016 DRAFT RPI Update and Sensitivity 15 RPI (Regulatory Year) 2015/16 2016/17 2017/18 2018/19 Budget RPI assumption 1.3% 2.3% 3.1% 3.1% Current RPI actual/forecast (1,3) 1.1% 2.3% 3.1% 3.2% RPI (Calendar Year) 2015 2016 2017 2018 Budget RPI assumption 1.5% 2.0% 2.8% 3.1% Current RPI actual/forecast (2,3) 1.2% 2.1% 3.0% 3.2% EPS Sensitivities: Decrease in 2015/2016 RPI (budget assumption 1.3%) (4,5) 0.5% $0.00 $0.00 ($0.02) ($0.01) Change in EPS (1) Represents the average RPI index for April 2015 –March 2016 (2015/16). Source: Office of National Statistics: https://www.ons.gov.uk/economy/inflationandpriceindicies/bulletins/comsumerpriceinflation/mar2016 (2) Represents 2015 actual. Source: Office of National Statistics: https://www.ons.gov.uk/economy/inflationandpriceindicies/bulletins/consumerpriceinflation/dec2015 (3) Represents March 2016 forecast. Source: U.K. HM Treasury RPI forecast: https://www.gov.uk/government/collections/data-forecasts (4) Sensitivities include the net effect on revenue, O&M and interest expense on index-linked debt. (5) 2015/2016 tariff was set using 2.6% RPI, subject to true-up in 2017/18 regulatory year. Amounts are reflected in the earnings forecast for the period.
© PPL Corporation 2016 DRAFT Appendix 16
© PPL Corporation 2016 DRAFT Note: Corporate and Other capital expenditures average approximately $10 million per year. (1) Based on assumed exchange rate of $1.60/£. (2) Expect between 80% and 90% to receive timely returns via ECR mechanism based on historical experience and future projections. Significant Ongoing Capital Expenditure Program ($ in billions) ~$16 billion of Capital Expenditures from 2016 –2020 to strengthen safety and reliability of T&D systems and address environmental regulations in Kentucky. • Over 80% of Regulated capital expenditures earn returns subject to minimal or no lag • PA –Implementation of $471 million Smart Meter Program to be recovered through a rider mechanism (~$406 million of Capital; ~$65 million O&M) • PA and KY –Continued focus on improving reliability in both Transmission and Distribution systems • KY –Environmental spending in response to regulations for Mercury, SO2, NOX, Ozone, Particulates, Water Intake and Discharge and CCRs (does not include Clean Power Plan) • U.K. –Continued focus on asset replacement, faults and overheads and general system reinforcement 17 (1) (2) $3.39 $3.25 $3.23 $3.19 $3.32
© PPL Corporation 2016 DRAFT ( $ i n b i l l i o n s ) (1) Based on assumed exchange rate of $1.60/£ for 2016 -2020. (2) Represents utility capitalization for LKE. Represents Regulatory Asset Value (RAV) for WPD. Strong regulated rate base growth will drive EPS growth. Capital Plan is Driving Rate Base Growth 18 (2) $24.3 $26.0 $27.2 $28.6 $30.0 $31.5 (1)
© PPL Corporation 2016 DRAFT Note: Total includes Residential, Commercial and Industrial customer classes as well as “Other”, which is not depicted on the charts above. U.S. Regulated Volume Variances 19 Residential Commercial Industrial Total Residential Commercial Industrial Total Weather-Normalized (charted) -2.2% -0.4% 0.7% -0.3% -1.2% 0.9% -0.4% 0.0% Actual -17.2% -3.8% 0.7% -9.2% -7.3% 0.3% -0.4% -2.8% Residential Commercial Industrial Total Residential Commercial Industrial Total Weather-Normalized (charted) -3.5% 1.7% -2.9% -1.8% -2.7% 0.3% -2.8% -1.7% Actual -12.7% -2.9% -4.7% -7.3% -6.8% -0.6% -3.4% -3.6%
© PPL Corporation 2016 DRAFT 20 Proposed First Segment: • 95-mile initial segment from Blakely, PA to Ramapo, NY —PPL Electric filed interconnection request with NYISO on October 27th —Estimated cost of $500 -$600 million —Estimated in-service date in 2023 • Benefits as proposed include: —Substantial annual savings for NY customers —Economic development benefits —Grid reliability Full Project Current Plan: 475-mile transmission line from Western PA to Southeastern NY at an estimated cost of $3 –$4 billion. Project Compass Summary
© PPL Corporation 2016 DRAFT Project Compass 21
© PPL Corporation 2016 DRAFT Low Nox Burners SCR/SNCR Scrubbers Closed Cycle Cooling Tower Dry Handling/ Disposal/ Beneficial Use Baghouses Mw of Capacity NO x NO x SO 2 Water Intake Coal Combustion Residuals (CCRs) Particulates and Hg (with PAC injection) Unit 1 383 (2) x x x x (1) x Unit 2 549 (2) x x x x (1) x Unit 1 474 x x x x x x Unit 2 495 x x x x x x Unit 3 485 x x x x x x Unit 4 465 x x x x x x Unit 1 106 x (4) x x (1) (4) Unit 2 166 x (4) x x (1) (4) Unit 3 410 x x x x (1) x Unit 1 300 x (4) x (4) x x Unit 2 297 x (4) x x x x Unit 3 391 x x x x x (3) Unit 4 477 x x x x x x Control Device Addresses Trimble County Ghent Brown Mill Creek Kentucky Environmental Controls 22 (1) Dry handling disposal construction approved by KPSC and permitting or construction underway at Trimble and Brown. Portions of Ghentsystems are operational at this time as other construction activity continues. (2) Ratings represent LKE's 75% ownership of Trimble Units 1&2 (3) Mill Creek 3's commissioning scheduled to start in June 2016. (4) Standards are station-and/or company-based. KU and LG&E Systems are already in compliance. x = Installed
© PPL Corporation 2016 DRAFT U.K. Regulated Segment EPS Projection ($ Per Share) Note: Assumes foreign currency exchange rate of $1.60/£ for 2016E and 2017E on open positions. (1) 2015 represents earnings from ongoing operations. See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations. 23 (1)
© PPL Corporation 2016 DRAFT U.K. Regulated Segment Cash Repatriation Note: Assumes foreign currency exchange rate of $1.60/£ for 2016E and 2017E. ($ in millions) Flexible strategy for meaningful U.K. cash repatriation. 24
© PPL Corporation 2016 DRAFT 2014A (1) 2015A (2) 2016E Domestic Cash from Operations $2,145 $1,546 $1,615 Domestic Maintenance Capex (3) (900) (640) (707) Dividend From UK Regulated 263 319 400 Cash Available for Distribution $1,508 $1,225 $1,308 Common Dividend (967) (1,004) (1,025) Cash Available for Reinvestment $541 $221 $283 Domestic Growth Capex ($1,816) ($1,650) ($1,407) Debt Maturities ($546) ($1,000) $0 Debt Issuances and Change in Cash (4) (71) 2,139 1,076 Equity Issuances 1,063 175 80 Other Investing & Financing Activities 829 115 (32) Additional Funding Sources for Domestic Growth Capex $1,275 $1,429 $1,124 Funding the Growth Strong domestic operating cash flows plus the U.K. dividend sufficient to fund the PPL dividend. Domestic debt and equity issuances fund domestic utility growth. 25 (5) Note: Information provided on this slide to be updated on an annual basis. See appendix for the Reconciliation of Domestic Cash Flows. (1) Includes results of PPL Energy Supply, LLC. (2) Actuals for 2015 do not include activity related to PPL Energy Supply, LLC for any portion of the year, except a planned $191million dividend. (3) Represents book depreciation. (4) Includes domestic issuances (short and long term), net of issue costs. (5) Includes approximately $900 million of proceeds from sale of the Montana hydros.
© PPL Corporation 2016 DRAFT ($ in millions) 2016 2017 2018 2019 2020 PPL Capital Funding $0 $0 $250 $0 $0 PPL Electric Utilities (1) 0 224 0 0 100 LG&E and KU Energy 0 0 0 0 475 Louisville Gas & Electric (2) 25 194 98 40 0 Kentucky Utilities 0 0 0 0 500 WPD 460 100 0 0 209 Total $485 $518 $348 $40 $1,284 Debt Maturities Note: As of March 31, 2016. (1) PPL Electric Utilities has municipal bonds that may be put by the holders before the bonds’ final maturities. These amountsreflect the timing of any put option in 2017. (2) Louisville Gas & Electric has several municipal bonds that may be put by the holders before the bonds’ final maturities. These amounts reflect the timing of any put option in 2016 through 2019. 26
© PPL Corporation 2016 DRAFT Liquidity Profile Note: As of March 31, 2016. (1) In March 2016, PPL amended and extended the credit facility agreement to March 2017. Entity Facility Expiration Date Capacity (Millions) Letters of Credit & Commercial Paper Issued (Millions) Borrowed (Millions) Unused Capacity (Millions) PPL Capital Funding Syndicated Credit Facility Nov-2018 $300 $73 $0 $227 Syndicated Credit Facility Jan-2021 700 700 0 0 Bilateral Credit Facility Mar-2017 (1) 150 17 0 133 $1,150 $790 $0 $360 PPL Electric Utilities Syndicated Credit Facility Jan-2021 $400 $126 $0 $274 LG&E and KU Energy (LKE) Syndicated Credit Facility Oct-2018 $75 $0 $0 $75 Louisville Gas & Electric Syndicated Credit Facility Dec-2020 $500 $82 $0 $418 Kentucky Utilities Syndicated Credit Facility Dec-2020 $400 $34 $0 $366 Letter of Credit Facility Oct-2017 198 198 0 0 $598 $232 $0 $366 WPD WPD plc Syndicated Credit Facility Jan-2021 £210 £0 £138 £72 WPD (South West) Syndicated Credit Facility Jul-2020 245 0 0 245 WPD (East Midlands) Syndicated Credit Facility Jul-2020 300 0 37 263 WPD (West Midlands) Syndicated Credit Facility Jul-2020 300 0 0 300 Uncommitted Credit Facilities 40 4 0 36 £1,095 £4 £175 £916 Strong liquidity position to fund current operations and growth. 27
© PPL Corporation 2016 DRAFT WPD Holding Company LKE Holding Company PPL Electric UtilitiesLKE Operating Companies PPL Capital Funding Credit Rating Secured Unsecured Long-term Issuer Outlook S&P NR BBB+ NR Stable Moody’s NR Baa2 NR Stable Credit Rating Secured Unsecured Long-term Issuer Outlook S&P NR BBB+ A- Stable Moody’s NR Baa3 Baa3 Stable WPD Operating Companies Credit Rating Secured Unsecured Long-term Issuer Outlook S&P NR A- A- Stable Moody’s NR Baa1 Baa1 Stable Credit Rating Secured Unsecured Long-term Issuer Outlook S&P A NR A- Stable Moody’s A1 NR A3 Stable Credit Rating Secured Unsecured Long-term Issuer Outlook S&P NR BBB+ A- Stable Moody’s NR Baa1 Baa1 Stable Credit Rating Secured Unsecured Long-term Issuer Outlook S&P A NR A- Stable PPL Corporation Credit Rating Secured Unsecured Long-term Issuer Outlook S&P NR NR A- Stable Moody’s NR NR Baa2 Stable Strong Credit Ratings Strong credit profile at our utilities, holding companies and PPL Corporation. Moody’s A1 NR A3 Stable 28
© PPL Corporation 2016 DRAFT 29 Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations After-Tax (Unaudited) (millions of dollars) Reported Earnings (Loss) $ 289 $ 112 $ 94 $ (14) $ 481 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 24 24 Spinoff of the Supply segment (1) (1) Total Special Items 24 (1) 23 Earnings from Ongoing Operations $ 265 $ 112 $ 94 $ (13) $ 458 After-Tax (Unaudited) (per share - diluted) Reported Earnings (Loss) $ 0.43 $ 0.16 $ 0.14 $ (0.02) $ 0.71 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 0.04 0.04 Total Special Items 0.04 0.04 Earnings from Ongoing Operations $ 0.39 $ 0.16 $ 0.14 $ (0.02) $ 0.67 U.K. Reg. KY Reg. PA Reg. U.K. Reg. KY Reg. PA Reg. Corp. & Other Total Corp. Corp. & Other Year-to-Date March 31, 2016 Year-to-Date March 31, 2016 Total Corp.
© PPL Corporation 2016 DRAFT Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations 30 After-Tax (Unaudited) (millions of dollars) Reported Earnings (Loss) $ 375 $ 109 $ 87 $ (19) $ 95 $ 647 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 37 37 Spinoff of the Supply segment: Discontinued operations 95 95 Employee transitional services (2) (2) Transition and transaction costs (3) (3) Separation benefits (1) (1) WPD Midlands acquisition-related adjustment 2 2 Total Special Items 39 (6) 95 128 Earnings from Ongoing Operations $ 336 $ 109 $ 87 $ (13) $ $ 519 After-Tax (Unaudited) (per share - diluted) Reported Earnings (Loss) $ 0.56 $ 0.16 $ 0.13 $ (0.03) $ 0.14 $ 0.96 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 0.06 0.06 Spinoff of the Supply segment: Supply segment earnings 0.14 0.14 Transition and transaction costs (0.01) (0.01) Total Special Items 0.06 (0.01) 0.14 0.19 Earnings from Ongoing Operations $ 0.50 $ 0.16 $ 0.13 $ (0.02) $ $ 0.77 Corp. & Other Ops. Disc. U.K. Reg. KY Reg. PA Reg. Corp. & Other Year-to-Date March 31, 2015 Disc. Total Corp.Ops. U.K. Reg. KY Reg. PA Reg. Year-to-Date March 31, 2015 Total Corp.
© PPL Corporation 2016 DRAFT 31 Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations (1)Includes an $879 million charge reflecting the difference between PPL's recorded value for the Supply segment and the estimated fair value determined in accordance with applicable accounting rules under GAAP. After-Tax (Unaudited) Year-to-Date December 31, 2015 Reported Earnings (Loss) $ 1.66 $ 0.48 $ 0.37 $ (0.14) $ (1.36) $ 1.01 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 0.08 0.08 Spinoff of the Supply segment: Discontinued operations (1.36) (1.36) Transition and transaction costs (0.02) (0.02) Employee transitional services (0.01) (0.01) Other: Change in U.K. tax rate 0.11 0.11 Settlement of certain income tax positions 0.03 0.03 Certain valuation allowances (0.02) (0.02) LKE acquisition-related adjustment (0.01) (0.01) Total Special Items 0.22 (0.03) (0.03) (1.36) (1.20) Earnings from Ongoing Operations $ 1.44 $ 0.51 $ 0.37 $ (0.11) $ $ 2.21 Disc. Total Corp. Reg. Reg. Reg. Ops. (1) U.K. KY PA Corp. & Other (per share - diluted)
© PPL Corporation 2016 DRAFT Reconciliation of Segment Reported Earnings (Loss) to Earnings from Ongoing Operations (Adjusted) (1) The "If-Converted Method" has been applied to PPL's 2011 Equity Units, resulting in $9 million of interest charges (after-tax) being added back to earnings and approximately 11 million shares of PPL Common Stock being treated as outstanding. Both adjustments are only for purposes of calculating diluted earnings per share. (2) Certain amounts have been reclassified to reflect the Supply segment as a discontinued operation. (3) Represents 2014 costs allocated to the Supply segment that remained with PPL after the spinoff of the Supply segment. 32 After-Tax (Unaudited) Year-to-Date December 31, 2014 Reported Earnings (Loss) $ 1.48 $ 0.47 $ 0.39 $ (0.18) $ 0.45 $ 2.61 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 0.19 0.19 Spinoff of the Supply segment: Supply segment earnings 0.46 0.46 Discontinued operations adjustments (0.01) 0.01 Change in tax valuation allowances (0.07) (0.07) Transition and transaction costs (0.02) (0.02) Separation benefits (0.02) (0.02) Other: Change in WPD line loss accrual (0.08) (0.08) Separation benefits (0.01) (0.01) Total Special Items 0.11 (0.01) (0.10) 0.45 0.45 Dissynergies-spinoff of Supply segment expense (benefit): (3) Indirect operation and maintenance 0.07 0.07 Interest expense 0.05 0.05 Depreciation 0.01 0.01 Total dissynergies-spinoff of Supply segment 0.13 0.13 Earnings from Ongoing Operations (Adjusted) $ 1.37 $ 0.47 $ 0.40 $ (0.21) $ $ 2.03 (per share - diluted) (1) U.K. KY PA Disc. Total Corp. Reg. Reg. Reg. Ops. (2) Corp. & Other (2)
© PPL Corporation 2016 DRAFT Reconciliation of PPL's Forecast of Reported Earnings (Loss) to Earnings from Ongoing Operations 33 After-Tax (Unaudited) Reported Earnings (Loss) $ 1.47 $ 0.57 $ 0.47 $ (0.12) $ 2.39 $ $ 2.29 Less: Special Items (expense) benefit: Foreign currency-related economic hedges 0.04 0.04 0.04 Total Special Items 0.04 0.04 0.04 Earnings from Ongoing Operations $ 1.43 $ 0.57 $ 0.47 $ (0.12) $ 2.35 $ $ 2.25 Reg. KY Reg. PA Reg. Corp. & Other U.K. Forecast (per share - diluted) 2016 Midpoint 2.45 0.04 2.49 0.04 Total High 2016 Low 2016
© PPL Corporation 2016 DRAFT Gross Margins Summary $ 557 $ 657 $ (100) $ (0.12) Impact of changes in foreign currency exchange rates (31) (0.04) $ (69) $ (0.08) $ 525 $ 522 $ 3 $ - Distribution $ 258 $ 242 $ 16 $ 0.02 Transmission 107 93 14 0.01 $ 365 $ 335 $ 30 $ 0.03 Total KY Gross Margins PA Gross Delivery Margins Change in U.K. Gross Margins excluding impact of foreign currency exchange rates (Unaudited) (millions of dollars, except share data) U.K. Gross Margins Three Months Ended March 31, Per Share Diluted 2016 2015 Change (after-tax) 34
© PPL Corporation 2016 DRAFT Reconciliation of First Quarter Margins to Operating Income $ 584 $ 826 $ 585 $ 16 $ 2,011 $ 686 $ 899 $ 630 $ 15 $ 2,230 198 (1) 197 253 253 66 167 233 92 227 10 329 9 (9) 27 24 25 374 450 29 24 26 377 456 12 217 229 7 209 216 1 28 50 79 1 33 52 86 Total Operating Expenses 27 301 220 640 1,188 29 377 295 639 1,340 $ 557 $ 525 $ 365 $ (624) $ 823 $ 657 $ 522 $ 335 $ (624) $ 890 Operating Three Months Ended March 31, 2016 Other Income Margins Other Income Operating Gross Delivery Kentucky PA Gross KentuckyU.K. Gross Margins (Unaudited) PA Gross Margins Three Months Ended March 31, 2015 U.K. Gross Margins (millions of dollars) Margins Margins Gross Delivery Operating Revenues Total Operating Expenses Fuel Energy purchases Other operation and maintenance Depreciation Taxes, other than income Energy purchases from affiliate 35
© PPL Corporation 2016 DRAFT Reconciliation of Domestic Cash Flows 36 Year Ended December 2015 Additional (Millions of Dollars) Domestic Domestic Funding Sources PPL Consolidated Cash from Cash Available Cash Available Growth for Domestic Statement of Operations for Distribution for Reinvestment Capex Growth Capex PPL Global, LLC Other Cash Flows Net cash provided by operating activities - continuing operations 1,546$ (1) 871$ (183)$ (1) 2,234$ Net cash used in investing activities - continuing operations (640)$ (1,650)$ 115$ (1,226) (3,401) Net cash provided by financing activities - continuing operations (1,004)$ 707 533 246 (2) 482 Net cash distributions to parent from discontinued operations 132 132 Effect of exchange rates on cash and cash equivalents (10) (10) Domestic (increase) decrease in cash and cash equivalents 319 (3) 607 (4) (926) 1,546$ 1,546 1,225$ 1,225 Total 221$ (1,650)$ 1,429$ 168$ (731)$ (563)$ Year Ended December 2014 Additional (Millions of Dollars) Domestic Domestic Funding Sources PPL Consolidated Cash from Cash Available Cash Available Growth for Domestic Statement of Operations for Distribution for Reinvestment Capex Growth Capex PPL Global, LLC Other Cash Flows Net cash provided by operating activities 2,145$ (5) 1,184$ 74$ (5) 3,403$ Net cash used in investing activities (900)$ (1,816)$ 829$ (1,442) (3,329) Net cash provided by financing activities (967)$ 1,451 (86) 185 (2) 583 Effect of exchange rates on cash and cash equivalents (8) (8) Domestic (increase) decrease in cash and cash equivalents 263 (3) (1,005) (4) 742 2,145$ 2,145 1,508$ 1,508 Total 541$ (1,816)$ 1,275$ (352)$ 1,001$ 649$ Reconciling Items Reconciling Items Note: For 2016, due to the generalized and forward-looking nature of this information, the Company has not reconciled the presented non-GAAP financial measures to the most directly comparable GAAP financial measures. (1) Domestic Cash from Operations includes a $191 million PPL Energy Supply, LLC dividend and realized gains of $37 million on U.K. earnings hedges, partially offset by $45 million of discontinued hedges associated with the spinoff of the Supply segment. (2) Primarily represents PPL Global, LLC items that eliminate in PPL's consolidation. (3) Represents dividend from U.K. Regulated and the realized impact of associated net investment hedges. (4) Represents domestic change in cash and cash equivalents, and excludes the adjustments to Domestic Cash from Operations referenced here. (5) Domestic Cash from Operations includes realized losses of $74 million on U.K. earnings hedges.
© PPL Corporation 2016 DRAFT Statementscontainedinthispresentation,includingstatementswithrespecttofutureearnings,cashflows,financing,regulationandcorporate strategyare"forward-lookingstatements"withinthemeaningofthefederalsecuritieslaws.AlthoughPPLCorporationbelievesthatthe expectationsandassumptionsreflectedintheseforward-lookingstatementsarereasonable,thesestatementsaresubjecttoanumberofrisksand uncertainties,andactualresultsmaydiffermateriallyfromtheresultsdiscussedinthestatements.Thefollowingareamongtheimportantfactors thatcouldcauseactualresultstodiffermateriallyfromtheforward-lookingstatements:marketdemandforenergyinourserviceterritories, weatherconditionsaffectingcustomerenergyusageandoperatingcosts;theeffectofanybusinessorindustryrestructuring,includingtheability ofPPLCorporationtorealizeallorasignificantportionoftheanticipatedcostsavingsfromthecorporaterestructuringfollowingtheSupply businessspinoff;theprofitabilityandliquidityofPPLCorporationanditssubsidiaries;newaccountingrequirementsornewinterpretationsor applicationsofexistingrequirements;operatingperformanceofourfacilities;thelengthofscheduledandunscheduledoutagesatourgenerating plants;environmentalconditionsandrequirementsandtherelatedcostsofcompliance;systemconditionsandoperatingcosts;developmentof newprojects,marketsandtechnologies;performanceofnewventures;assetorbusinessacquisitionsanddispositions;anyimpactofhurricanesor othersevereweatheronourbusiness;receiptofnecessarygovernmentpermits,approvals,ratereliefandregulatorycostrecovery;capitalmarket conditionsanddecisionsregardingcapitalstructure;theimpactofstate,federalorforeigninvestigationsapplicabletoPPLCorporationandits subsidiaries;theoutcomeoflitigationagainstPPLCorporationanditssubsidiaries;stockpriceperformance;themarketpricesofequitysecurities andtheimpactonpensionincomeandresultantcashfundingrequirementsfordefinedbenefitpensionplans;thesecuritiesandcreditratingsof PPLCorporationanditssubsidiaries;political,regulatoryoreconomicconditionsinstates,regionsorcountrieswherePPLCorporationorits subsidiariesconductbusiness,includinganypotentialeffectsofthreatenedoractualterrorismorwarorotherhostilities;Britishpoundsterlingto U.S.dollarexchangerates;newstate,federalorforeignlegislation,includingnewtaxlegislation;andthecommitmentsandliabilitiesofPPL Corporationanditssubsidiaries.Anysuchforward-lookingstatementsshouldbeconsideredinlightofsuchimportantfactorsandinconjunction withPPLCorporation'sForm10-KandotherreportsonfilewiththeSecuritiesandExchangeCommission. Forward-Looking Information Statement 37
© PPL Corporation 2016 DRAFT Definitions of Non-GAAP Financial Measures Management utilizes "Earnings from ongoing operations" as a non-GAAP financial measure, and it should not be considered as an alternative to reported earnings, or net income, which is an indicator of operating performance determined in accordance with U.S. generally accepted accounting principles (GAAP).PPL believes that earnings from ongoing operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. PPL's management also uses earnings from ongoing operations in measuring certain corporate performance goals. Other companies may use different measures to present financial performance. "Earnings from ongoing operations" is adjusted for the impact of special items. Special items include: • Unrealized gains or losses on foreign currency-related economic hedges (as discussed below). • Supply segment discontinued operations. • Gains and losses on sales of assets not in the ordinary course of business. • Impairment charges. • Workforce reduction and other restructuring effects. • Acquisition and divestiture-related adjustments. • Other charges or credits that are, in management's view, not reflective of the company's ongoing operations. Unrealized gains or losses on foreign currency-related economic hedges include the changes in fair value of foreign currency contracts used to economically hedge British-pound-sterling-denominated anticipated earnings. The changes in fair value of these contracts each period are recognized immediately within GAAP earnings. Management believes that excluding these amounts from earnings from ongoing operations until settlement of the contracts provides a better matching of the financial impacts of those contracts with the economic valueof PPL’s underlying hedged earnings. 38
© PPL Corporation 2016 DRAFT Definitions of Non-GAAP Financial Measures Managementalsoutilizesthefollowingnon-GAAPfinancialmeasuresasindicatorsofperformanceforitsbusinesses. "U.K.GrossMargins"isasinglefinancialperformancemeasureoftheelectricitydistributionoperationsoftheU.K.Regulatedsegment.Incalculating thismeasure,directcostssuchasNationalGridconnectionchargesandOfgemlicensefees(recordedin"Otheroperationandmaintenance"onthe StatementsofIncome)aredeductedfromoperatingrevenues,astheyarecostspassedthroughtocustomers.Asaresult,thismeasurerepresentsthe netrevenuesfromthedeliveryofelectricityacrossWPD'sdistributionnetworkintheU.K.anddirectlyrelatedactivities. "KentuckyGrossMargins"isasinglefinancialperformancemeasureoftheelectricitygeneration,transmissionanddistributionoperationsofthe KentuckyRegulatedsegment,LKE,LG&EandKU,aswellastheKentuckyRegulatedsegment's,LKE'sandLG&E'sdistributionandsaleofnaturalgas. Incalculatingthismeasure,fuel,energypurchasesandcertainvariablecostsofproduction(recordedin"Otheroperationandmaintenance"onthe Statementsof Income) arededucted fromrevenues. In addition,certainotherexpenses,recordedin"Otheroperationand maintenance", "Depreciation"and"Taxes,otherthanincome"ontheStatementsofIncome,associatedwithapprovedcostrecoverymechanismsareoffsetagainst therecoveryofthoseexpenses,whichareincludedinrevenues. Thesemechanismsallowfordirectrecoveryoftheseexpensesand,insomecases, returnsoncapitalinvestmentsandperformanceincentives.Asaresult,thismeasurerepresentsthenetrevenuesfromelectricityandgasoperations. "PennsylvaniaGrossDeliveryMargins"isasinglefinancialperformancemeasureoftheelectricitytransmissionanddistributiondeliveryoperationsof thePennsylvaniaRegulatedsegmentandPPLElectric. Incalculatingthismeasure,utilityrevenuesandexpensesassociatedwithapprovedrecovery mechanisms,includingenergyprovidedasaPLR,areoffsetwithminimalimpactonearnings.Costsassociatedwiththesemechanismsarerecordedin "Energypurchases,""Otheroperationandmaintenance,"(whichareprimarilyAct129andUniversalServiceprogramcosts),and"Taxes,otherthan income,"whichisprimarilygrossreceiptstax.ThisperformancemeasureincludesPLRenergypurchasesbyPPLElectricfromPPLEnergyPlus,whichare reflectedin"Energypurchasesfromaffiliate"inthereconciliationtables.AsaresultoftheJune2015spinoffofPPLEnergySupplyandtheformationof TalenEnergy,PPLEnergyPlus(renamedTalenEnergyMarketing)isnolongeranaffiliateofPPLElectric. PPLElectric'spurchasesfromTalenEnergy MarketingsubsequenttoMay31,2015arereflectedin"EnergyPurchases"inthereconciliationtables.Thismeasurerepresentsthenetrevenuesfrom thePennsylvaniaRegulatedsegment'sandPPLElectric'selectricitydeliveryoperations. Thesemeasuresarenotintendedtoreplace"OperatingIncome,"whichisdeterminedinaccordancewithGAAP,asanindicatorofoveralloperating performance. Othercompaniesmayusedifferentmeasurestoanalyzeandreporttheirresultsofoperations. Managementbelievesthesemeasures provideadditionalusefulcriteriatomakeinvestmentdecisions. Theseperformancemeasuresareused,inconjunctionwithotherinformation,by seniormanagementandPPL'sBoardofDirectorstomanageoperationsandanalyzeactualresultscomparedwithbudget. 39
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