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): February 25, 2015
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 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
As previously reported, in June 2014, PPL Corporation and PPL Energy Supply, LLC executed definitive agreements with affiliates of Riverstone Holdings LLC to combine their competitive power generation businesses into a new, stand-alone, publicly traded company named Talen Energy Corporation. PPL Corporation is filing herewith its unaudited pro forma condensed consolidated financial information giving effect to such transaction.
(d) | Exhibits |
99.1 | Unaudited Pro Forma Condensed Consolidated Financial Information of PPL Corporation, consisting of PPL Pro Forma Condensed Consolidated Balance Sheet (Unaudited) for December 31, 2014 and PPL Pro Forma Condensed Consolidated Statement of Income (Unaudited) for December 31, 2014, 2013 and 2012. |
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: February 25, 2015
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
In June 2014, PPL Corporation (PPL) and PPL Energy Supply, LLC (PPL Energy Supply) executed definitive agreements with affiliates of Riverstone Holdings LLC (Riverstone) to combine their competitive power generation businesses into a new, stand-alone, publicly traded company named Talen Energy Corporation (Talen Energy). Under the terms of the agreements, at closing, PPL will spin off to PPL shareowners a newly formed entity, Talen Energy Holdings, Inc. (Holdco), which at such time will own all of the membership interests of PPL Energy Supply and all of the common stock of Talen Energy. Immediately following the spinoff, Holdco will merge with a special purpose subsidiary of Talen Energy, with Holdco continuing as the surviving company to the merger and as a wholly owned subsidiary of Talen Energy and the sole owner of PPL Energy Supply. Substantially contemporaneous with the spinoff and merger, RJS Generation Holdings LLC, a limited liability company controlled by Riverstone, will be contributed by its owners to become a subsidiary of Talen Energy. Following completion of these transactions, PPL shareowners will own 65% of Talen Energy and affiliates of Riverstone will own 35%. PPL will have no continuing ownership interest in, control of, or affiliation with Talen Energy and PPLs shareowners will receive a number of Talen Energy shares at closing based on the number of PPL shares owned as of the spinoff record date. The spinoff will have no effect on the number of PPL common shares owned by PPL shareowners or the number of shares of PPL common stock outstanding. The transaction is intended to be tax-free to PPL and its shareowners for U.S. federal income tax purposes and is subject to customary closing conditions, including receipt of certain regulatory approvals.
The transaction is expected to close in the second quarter of 2015. As of the closing date, for PPLs historical consolidated financial statements, the transaction will be treated as a spinoff of PPL Energy Supply by PPL with PPL Energy Supplys assets and liabilities and results of operations being classified as discontinued operations. PPL Energy Supply substantially represents PPLs Supply segment and, upon completion of the anticipated spinoff, PPL will no longer have a Supply segment.
The Unaudited Pro Forma Condensed Consolidated Financial Information (the pro forma financial information) has been derived from the historical consolidated financial statements of PPL and PPL Energy Supply included in their 2014 Annual Reports on Form 10-K (the historical financial statements).
The Unaudited Pro Forma Condensed Consolidated Statements of Income (the pro forma statements of income) for the years ended December 31, 2014, 2013 and 2012 give effect to the spinoff of PPL Energy Supply as if it was completed on January 1, 2014. The Unaudited Pro Forma Condensed Consolidated Balance Sheet (the pro forma balance sheet) as of December 31, 2014 gives effect to the spinoff of PPL Energy Supply as if it was completed on December 31, 2014. The historical financial statements have been adjusted in the pro forma financial information to give effect to pro forma events that are: (i) directly attributable to the spinoff; (ii) factually supportable; and (iii) with respect to the 2014 statement of income, expected to have a continuing impact on results. The pro forma statements of income for the years ended December 31, 2013 and 2012 have been presented excluding the operating results of PPL Energy Supply, which have been reclassified as discontinued operations under Accounting Standards Codification (ASC) 205-20. The pro forma financial information: (a) excludes the results of operations of PPL Energy Supply, including, for the periods 2013 and 2012, interest allocated by PPL to its Supply segment, from the pro forma statements of income; (b) excludes the assets and liabilities of PPL Energy Supply, including goodwill allocated by PPL to its Supply segment, from the pro forma balance sheets; (c) adjusts for certain assets and liabilities that either are being reallocated between PPL and PPL Energy Supply or that are required to be settled as required by the spinoff related agreements; (d) includes adjustments to certain revenue and expenses associated with affiliated transactions, previously eliminated in PPLs consolidated statements of income, that will no longer be eliminated after the spinoff; (e) excludes certain expenses recorded by PPL in 2014 for third party transaction costs and adjustments to valuation allowances on deferred tax assets directly attributable to the spinoff, and (f) includes adjustments to allocate income tax expense between continuing and discontinued operations.
The As Reported column in the pro forma balance sheets and in the pro forma statements of income reflect PPLs historical financial statements for the periods presented and does not reflect any adjustments related to the spinoff and related events.
Assumptions and estimates underlying the Pro Forma Adjustments column are described in the accompanying notes.
1
The pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the results of operations and financial position that would have been achieved had the pro forma events taken place on the dates indicated, or the future consolidated results of operations or financial position of PPL.
The following pro forma financial information should be read in conjunction with:
| the accompanying notes to the pro forma financial information; and |
| the audited consolidated financial statements of PPL and PPL Energy Supply which were included in PPLs and PPL Energy Supplys annual report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2015. |
2
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
(Millions of dollars)
December 31, 2014 | ||||||||||||
PPL As Reported |
Pro Forma Adjustments (Note 2)(a) |
PPL Pro Forma |
||||||||||
Current Assets |
||||||||||||
Cash and cash equivalents |
$ | 1,751 | $ | (352 | ) | $ | 1,399 | |||||
Short-term investments |
120 | 120 | ||||||||||
Restricted cash and cash equivalents |
180 | (176 | ) | 4 | ||||||||
Accounts receivable |
1,094 | (232 | )(b) | 862 | ||||||||
Unbilled revenues |
735 | (218 | ) | 517 | ||||||||
Fuel, materials and supplies |
836 | (455 | ) | 381 | ||||||||
Prepayments |
87 | (12 | )(b) | 75 | ||||||||
Deferred income taxes |
129 | (12 | )(b) | 117 | ||||||||
Price risk management assets |
1,158 | (1,079 | ) | 79 | ||||||||
Regulatory assets |
37 | 37 | ||||||||||
Other current assets |
32 | (18 | )(b) | 14 | ||||||||
|
|
|
|
|
|
|||||||
Total Current Assets |
6,159 | (2,554 | ) | 3,605 | ||||||||
Investments |
||||||||||||
Nuclear plant decommissioning trust funds |
950 | (950 | ) | |||||||||
Other investments |
35 | (30 | ) | 5 | ||||||||
|
|
|
|
|
|
|||||||
Total Investments |
985 | (980 | ) | 5 | ||||||||
|
|
|
|
|
|
|||||||
Property, Plant and Equipment, net |
||||||||||||
Property, plant and equipment |
46,362 | (12,685 | )(b) | 33,677 | ||||||||
Less accumulated depreciation |
11,765 | (6,242 | ) | 5,523 | ||||||||
|
|
|
|
|
|
|||||||
Property, plant and equipment, net |
34,597 | (6,443 | ) | 28,154 | ||||||||
|
|
|
|
|
|
|||||||
Other Noncurrent Assets |
||||||||||||
Regulatory assets |
1,562 | 1,562 | ||||||||||
Goodwill |
4,005 | (338 | ) | 3,667 | ||||||||
Other intangibles |
925 | (257 | ) | 668 | ||||||||
Price risk management assets |
319 | (239 | ) | 80 | ||||||||
Other noncurrent assets |
312 | (75 | ) | 237 | ||||||||
|
|
|
|
|
|
|||||||
Total Other Noncurrent Assets |
7,123 | (909 | ) | 6,214 | ||||||||
|
|
|
|
|
|
|||||||
Total Assets |
$ | 48,864 | $ | (10,886 | ) | $ | 37,978 | |||||
|
|
|
|
|
|
See accompanying Unaudited Notes to Pro Forma Condensed Consolidated Financial Information.
3
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
(Millions of dollars)
December 31, 2014 | ||||||||||||
PPL As Reported |
Pro Forma Adjustments (Note 2)(a) |
PPL Pro Forma |
||||||||||
Liabilities and Equity |
||||||||||||
Current Liabilities |
||||||||||||
Short-term debt |
$ | 1,466 | $ | (630 | ) | $ | 836 | |||||
Long-term debt due within one year |
1,535 | (535 | ) | 1,000 | ||||||||
Accounts payable |
1,356 | (361 | ) | 995 | ||||||||
Taxes |
230 | (22 | )(b) | 208 | ||||||||
Interest |
314 | (16 | ) | 298 | ||||||||
Dividends |
249 | 249 | ||||||||||
Price risk management liabilities |
1,126 | (1,024 | ) | 102 | ||||||||
Regulatory liabilities |
91 | 91 | ||||||||||
Other current liabilities |
1,076 | (136 | )(b) | 940 | ||||||||
|
|
|
|
|
|
|||||||
Total Current Liabilities |
7,443 | (2,724 | ) | 4,719 | ||||||||
|
|
|
|
|
|
|||||||
Long-term Debt |
18,856 | (1,683 | ) | 17,173 | ||||||||
|
|
|
|
|
|
|||||||
Deferred Credits and Other Noncurrent Liabilities |
||||||||||||
Deferred income taxes |
4,450 | (1,237 | )(b) | 3,213 | ||||||||
Investment tax credits |
159 | (27 | ) | 132 | ||||||||
Price risk management liabilities |
252 | (193 | ) | 59 | ||||||||
Accrued pension obligations |
1,756 | (348 | )(b) | 1,408 | ||||||||
Asset retirement obligations |
739 | (415 | ) | 324 | ||||||||
Regulatory liabilities |
992 | 992 | ||||||||||
Other deferred credits and noncurrent liabilities |
589 | (88 | )(b) | 501 | ||||||||
|
|
|
|
|
|
|||||||
Total Deferred Credits and Other Noncurrent Liabilities |
8,937 | (2,308 | ) | 6,629 | ||||||||
|
|
|
|
|
|
|||||||
Commitments and Contingent Liabilities |
||||||||||||
Equity |
13,628 | (4,171 | )(b) | 9,457 | ||||||||
|
|
|
|
|
|
|||||||
Total Liabilities and Equity |
$ | 48,864 | $ | (10,886 | ) | $ | 37,978 | |||||
|
|
|
|
|
|
See accompanying Unaudited Notes to Pro Forma Condensed Consolidated Financial Information.
4
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
(Millions of dollars, except share data)
For the Year Ended December 31, 2014 | ||||||||||||
PPL As Reported |
Pro Forma Adjustments (Note 2)(c) |
PPL Pro Forma |
||||||||||
Operating Revenues |
||||||||||||
Utility |
$ | 7,782 | $ | 3 | (d) | $ | 7,785 | |||||
Unregulated wholesale energy |
1,808 | (1,808 | ) | |||||||||
Unregulated retail energy |
1,239 | (1,239 | ) | |||||||||
Energy-related businesses |
670 | (600 | ) | 70 | ||||||||
|
|
|
|
|
|
|||||||
Total Operating Revenues |
11,499 | (3,644 | ) | 7,855 | ||||||||
|
|
|
|
|
|
|||||||
Operating Expenses |
||||||||||||
Operation |
||||||||||||
Fuel |
2,161 | (1,196 | ) | 965 | ||||||||
Energy purchases |
1,041 | (122 | )(d) | 919 | ||||||||
Other operation and maintenance |
2,803 | (1,001 | )(d) | 1,802 | ||||||||
Depreciation |
1,220 | (297 | ) | 923 | ||||||||
Taxes, other than income |
374 | (57 | ) | 317 | ||||||||
Energy-related businesses |
628 | (572 | ) | 56 | ||||||||
|
|
|
|
|
|
|||||||
Total Operating Expenses |
8,227 | (3,245 | ) | 4,982 | ||||||||
|
|
|
|
|
|
|||||||
Operating Income |
3,272 | (399 | ) | 2,873 | ||||||||
Other Income (Expense)-net |
118 | (13 | )(e) | 105 | ||||||||
Other-Than-Temporary Impairments |
2 | 2 | ||||||||||
Interest Expense |
1,024 | (124 | ) | 900 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations Before Income Taxes |
2,364 | (288 | )(d)(e)(f) | 2,076 | ||||||||
Income Taxes |
781 | (164 | ) | 617 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations After Income Taxes Attributable to PPL Shareowners |
$ | 1,583 | $ | (124 | ) | $ | 1,459 | |||||
|
|
|
|
|
|
|||||||
Pro Forma Earnings Per Share of Common Stock: | ||||||||||||
Income from Continuing Operations After Income Taxes Available to PPL Common Shareowners: |
||||||||||||
Basic |
$ | 2.41 | $ | 2.22 | ||||||||
Diluted |
$ | 2.38 | $ | 2.19 | ||||||||
Weighted-Average Shares of Common Stock Outstanding (in thousands) |
||||||||||||
Basic |
653,504 | 653,504 | ||||||||||
Diluted |
665,973 | 665,973 |
See accompanying Unaudited Notes to Pro Forma Condensed Consolidated Financial Information.
5
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
(Millions of dollars, except share data)
For the Year Ended December 31, 2013 | ||||||||||||
PPL As Reported |
Pro Forma Adjustments (Note 2)(c) |
PPL Pro Forma |
||||||||||
Operating Revenues |
||||||||||||
Utility |
$ | 7,201 | $ | 3 | (d) | $ | 7,204 | |||||
Unregulated wholesale energy |
2,909 | (2,909 | ) | |||||||||
Unregulated retail energy |
1,023 | (1,023 | ) | |||||||||
Energy-related businesses |
588 | (520 | ) | 68 | ||||||||
|
|
|
|
|
|
|||||||
Total Operating Revenues |
11,721 | (4,449 | ) | 7,272 | ||||||||
|
|
|
|
|
|
|||||||
Operating Expenses |
||||||||||||
Operation |
||||||||||||
Fuel |
1,944 | (1,049 | ) | 895 | ||||||||
Energy purchases |
1,967 | (1,117 | )(d) | 850 | ||||||||
Other operation and maintenance |
2,779 | (1,018 | )(d) | 1,761 | ||||||||
Loss on lease termination |
697 | (697 | ) | |||||||||
Depreciation |
1,142 | (299 | ) | 843 | ||||||||
Taxes, other than income |
351 | (53 | ) | 298 | ||||||||
Energy-related businesses |
563 | (511 | ) | 52 | ||||||||
|
|
|
|
|
|
|||||||
Total Operating Expenses |
9,443 | (4,744 | ) | 4,699 | ||||||||
|
|
|
|
|
|
|||||||
Operating Income |
2,278 | 295 | 2,573 | |||||||||
Other Income (Expense)-net |
(23 | ) | (34 | ) | (57 | ) | ||||||
Other-Than-Temporary Impairments |
1 | 1 | ||||||||||
Interest Expense |
994 | (216 | )(g) | 778 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations Before Income Taxes |
1,260 | 477 | 1,737 | |||||||||
Income Taxes |
163 | 199 | (d)(f)(g) | 362 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations After Income Taxes |
1,097 | 278 | 1,375 | |||||||||
Income from Continuing Operations After Income Taxes Attributable to Noncontrolling Interests |
1 | (1 | ) | |||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations After Income Taxes Attributable to PPL Shareowners |
$ | 1,096 | $ | 279 | $ | 1,375 | ||||||
|
|
|
|
|
|
|||||||
Pro Forma Earnings Per Share: |
||||||||||||
Income from Continuing Operations After Income Taxes Available to PPL Common Shareowners: |
||||||||||||
Basic |
$ | 1.79 | $ | 2.25 | ||||||||
Diluted |
$ | 1.71 | $ | 2.13 | ||||||||
Weighted-Average Shares of Common Stock Outstanding (in thousands) |
||||||||||||
Basic |
608,983 | 608,983 | ||||||||||
Diluted |
663,073 | 663,073 |
See accompanying Unaudited Notes to Pro Forma Condensed Consolidated Financial Information.
6
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
(Millions of dollars, except share data)
For the Year Ended December 31, 2012 | ||||||||||||
PPL As Reported |
Pro Forma Adjustments (Note 2)(c) |
PPL Pro Forma |
||||||||||
Operating Revenues |
||||||||||||
Utility |
$ | 6,808 | $ | 3 | (d) | $ | 6,811 | |||||
Unregulated wholesale energy |
3,976 | (3,976 | ) | |||||||||
Unregulated retail energy |
840 | (840 | ) | |||||||||
Energy-related businesses |
508 | (447 | ) | 61 | ||||||||
|
|
|
|
|
|
|||||||
Total Operating Revenues |
12,132 | (5,260 | ) | 6,872 | ||||||||
|
|
|
|
|
|
|||||||
Operating Expenses |
||||||||||||
Operation |
||||||||||||
Fuel |
1,837 | (965 | ) | 872 | ||||||||
Energy purchases |
2,555 | (1,740 | )(d) | 815 | ||||||||
Other operation and maintenance |
2,791 | (1,010 | )(d)(f) | 1,781 | ||||||||
Depreciation |
1,087 | (272 | ) | 815 | ||||||||
Taxes, other than income |
352 | (55 | ) | 297 | ||||||||
Energy-related businesses |
484 | (436 | )(f) | 48 | ||||||||
|
|
|
|
|
|
|||||||
Total Operating Expenses |
9,106 | (4,478 | ) | 4,628 | ||||||||
|
|
|
|
|
|
|||||||
Operating Income |
3,026 | (782 | ) | 2,244 | ||||||||
Other Income (Expense)-net |
(39 | ) | (21 | ) | (60 | ) | ||||||
Other-Than-Temporary Impairments |
27 | 27 | ||||||||||
Interest Expense |
951 | (212 | )(g) | 739 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations Before Income Taxes |
2,009 | (591 | ) | 1,418 | ||||||||
Income Taxes |
518 | (241 | )(d)(f)(g) | 277 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations After Income Taxes |
1,491 | (350 | ) | 1,141 | ||||||||
Income from Continuing Operations After Income Taxes Attributable to Noncontrolling Interests |
5 | (1 | ) | 4 | ||||||||
|
|
|
|
|
|
|||||||
Income from Continuing Operations After Income Taxes Attributable to PPL Shareowners |
$ | 1,486 | $ | (349 | ) | $ | 1,137 | |||||
|
|
|
|
|
|
|||||||
Pro Forma Earnings Per Share: |
||||||||||||
Income from Continuing Operations After Income Taxes Available to PPL Common Shareowners: |
||||||||||||
Basic |
$ | 2.55 | $ | 1.95 | ||||||||
Diluted |
$ | 2.54 | $ | 1.94 | ||||||||
Weighted-Average Shares of Common Stock Outstanding (in thousands) |
||||||||||||
Basic |
580,276 | 580,276 | ||||||||||
Diluted |
581,626 | 581,626 |
See accompanying Unaudited Notes to Pro Forma Condensed Consolidated Financial Information.
7
Unaudited Notes to Pro Forma Condensed Consolidated Financial Information
(Millions of Dollars, except share data)
Note 1. Basis of Pro Forma Presentation
The pro forma financial information has been derived from the historical consolidated financial statements of PPL (the historical financial statements).
The pro forma statements of income for the years ended December 31, 2014, 2013 and 2012 give effect to the spinoff of PPL Energy Supply as if it was completed on January 1, 2014. The pro forma balance sheet gives effect to the spinoff of PPL Energy Supply as if it was completed on December 31, 2014.
The historical financial statements have been adjusted in the pro forma financial information to give effect to pro forma events that are: (i) directly attributable to the spinoff; (ii) factually supportable; and (iii) with respect to the statements of income for 2014, expected to have a continuing impact on results. The pro forma statements of income for the years ended December 31, 2013 and 2012 have been presented excluding the operating results of PPL Energy Supply, which have been reclassified as discontinued operations under ASC 205-20. The pro forma financial information: (a) excludes the results of operations of PPL Energy Supply, including, for the periods 2013 and 2012, interest allocated by PPL to its Supply segment, from the pro forma statements of income; (b) excludes the assets and liabilities of PPL Energy Supply, including goodwill allocated by PPL to its Supply segment, from the pro forma balance sheets; (c) adjusts for certain assets and liabilities that either are being reallocated between PPL and PPL Energy Supply or that are required to be settled as required by the spinoff related agreements; (d) includes adjustments to certain revenue and expenses associated with affiliated transactions, previously eliminated in PPLs consolidated statements of income, that will no longer be eliminated after the spinoff; (e) excludes certain expenses recorded by PPL in 2014 for third party transaction costs and adjustments to valuation allowances on deferred tax assets directly attributable to the spinoff, and (f) includes adjustments to allocate income tax expense between continuing and discontinued operations.
Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes.
Note 2. Pro Forma Adjustments
Adjustments - Pro Forma Condensed Consolidated Balance Sheet
(a) | Amounts represent adjustments to reflect a distribution to PPL shareholders of the assets and liabilities of PPL Energy Supply, including goodwill allocated by PPL to its Supply segment, except as otherwise indicated in the following notes. |
(b) | Includes adjustments to certain assets and liabilities associated with income taxes (to reflect settlement with a non-affiliate subsequent to the spinoff), pension and post-retirement benefits (to reflect separation of the plan obligations and allocation of plan assets as required by ERISA), other items as required by the spinoff agreements and related deferred taxes. The following table presents the composition of those items: |
Balance Sheet Line Item |
Debit (Credit) | |||
Accounts receivable |
$ | 57 | ||
Prepayments |
58 | |||
Deferred income taxes (assets) |
(12 | ) | ||
Other current assets |
8 | |||
Property, plant and equipment |
(15 | ) | ||
Taxes |
(6 | ) | ||
Other current liabilities |
(110 | ) | ||
Deferred income taxes (liabilities) |
14 | |||
Accrued pension obligations |
49 | |||
Other deferred credits and noncurrent liabilities |
(35 | ) | ||
Equity |
(8 | ) |
8
Adjustments - Pro Forma Condensed Consolidated Statements of Income
(c) | Amounts represent adjustments to exclude the results of operations of PPL Energy Supply from the pro forma statements of income, except as indicated in the following notes. |
(d) | Includes adjustments to certain revenue and expenses associated with historical affiliate transactions between PPL Energy Supply subsidiaries and PPL subsidiaries, previously eliminated in PPLs consolidated statements of income, that are expected to continue and will no longer be eliminated after the spinoff (including related income taxes). |
Income Statement Line Item Debit (Credit) |
2014 | 2013 | 2012 | |||||||||
Utility revenue |
$ | (3 | ) | $ | (3 | ) | $ | (3 | ) | |||
Energy purchases |
84 | 51 | 78 | |||||||||
Other operation and maintenance |
1 | 7 | 1 | |||||||||
Income Taxes |
(34 | ) | (23 | ) | (32 | ) |
(e) | Includes adjustments to remove certain expenses recorded in 2014 that were incurred and directly associated with the spinoff transaction (including related income taxes). |
Income Statement Line Item |
Debit (Credit) | |||||
Other Income (Expense)-Net |
$ | (19 | ) | Remove third party investment bank advisory, legal and accounting fees incurred to facilitate the spinoff. | ||
Income Taxes |
7 | Adjust income taxes for above transaction. | ||||
Income Taxes |
(50 | ) | Remove an adjustment to increase valuation allowances on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the future earnings of PPL Energy Supply. |
(f) | Primarily includes adjustments to certain direct expenses associated with PPLs Supply segment and adjustments to allocate income tax expense between continuing and discontinued operations in accordance with ASC 740-270-45. |
Income Statement Line Item Debit (Credit) |
2014 | 2013 | 2012 | |||||||||
Other operation and maintenance |
$ | (17 | ) | |||||||||
Energy-related businesses expense |
(5 | ) | ||||||||||
Income Taxes |
$ | (1 | ) | $ | 19 | (21 | ) |
(g) | Includes an adjustment to decrease Interest Expense by $57 million for the year ended December 31, 2013 and $54 million for the year ended December 31, 2012, which reflects the additional amount of PPL interest expense allocated to its Supply segment and to discontinued operations related to debt directly attributed to the Supply segment in accordance with ASC 205-20. These adjustments resulted in an associated increase in Income Taxes of $23 million for the year ended December 31, 2013 and $22 million for the year ended 2012. |
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Note 3. Items Excluded from the Unaudited Pro Forma Financial Information and Unusual Items Included in the Unaudited Pro Forma Financial Information
The unaudited pro forma financial information does not reflect:
(a) | The additional $33 million to $43 million (pre-tax) of third party transaction and transition costs that are expected to be incurred and recognized related to the spinoff transaction. |
(b) | Any adjustments to historical corporate cost allocations. Throughout the periods covered by the pro forma financial information, the operations of PPL Energy Supplys business were conducted and accounted for as part of PPL. As a result, the PPL Energy Supply historical financial statements reflect significant allocations of corporate costs and expenses. All of the allocation and estimates in these historical financial statements are based on assumptions that the management of PPL believes are reasonable. Management also believes these historical allocated costs are representative of the costs associated with corporate services employees transferred to PPL Energy Supply in 2015 related to the anticipated spinoff and corporate service costs to be billed by PPL to PPL Energy Supply under transition services agreements. |
The unaudited pro forma financial information includes the following items:
(a) | Other operation and maintenance includes $20 million ($13 million after-tax) of employee separation expenses that resulted from the need to resize and restructure PPL after the announcement of the spinoff and $8 million ($5 million after-tax) of consulting and other third party transition costs incurred to ready the new Talen Energy organization and to reconfigure the remaining PPL service functions in 2014. In addition, Other operation and maintenance includes separation benefits unrelated to this transaction of $3 million ($2 million after-tax) in 2014, $5 million ($4 million after-tax) in 2013 and $15 million ($11 million after-tax) in 2012. |
(b) | Other Income (Expense)-net includes unrealized gains on foreign currency-related economic hedges of $195 million ($127 million after-tax) in 2014, and unrealized losses on foreign currency-related economic hedges of $44 million ($29 million after-tax) in 2013 and $51 million ($33 million after-tax) in 2012. |
(c) | Utility revenues were decreased by $65 million ($52 million after-tax) in 2014, $45 million ($35 million after-tax) in 2013 and increased by $97 million ($74 million after-tax) in 2012 as a result of changes to WPDs line loss accrual. |
(d) | Income Taxes were reduced by $84 million in 2013 and by $75 million in 2012 as a result of changes in the U.K. income tax rate. Income Taxes were also reduced in 2013 by $43 million as a result of a Supreme Court ruling on Windfall Profits Tax litigation. |
(e) | 2013s results included $10 million of acquisition related expenses ($8 million after-tax) which were recorded on several income statement line items, and 2012s results included $6 million (after-tax) of acquisition related expenses that were recorded to Income Taxes and Other operation and maintenance. |
(f) | Other-Than-Temporary Impairments included a $25 million ($15 million after-tax) impairment of an equity method investment in 2012. |
(g) | Interest Expense of $57 million ($34 million after-tax) in 2014 that will be allocated to discontinued operations for historical income statement presentation purposes but is associated with debt that will remain at PPL. |
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