01—Abstract
Summary
Summary of the 10-K filed March 1, 2004. Cited figures are marked; the original filing is the authoritative source.
PPL Corporation, an energy and utility holding company, reports that for 2003 it generated net income of $734 milliona (EPS diluted $4.24), up from $208 million in 2002, on operating revenues of $5.587 billion.
Results were lifted by unusual items, including a $63 millionb after-tax cumulative effect from adopting SFAS 143 and the complete ownership of WPD, and were affected by a $27 million after-tax charge for FIN 46 consolidation. Operating income rose to $1.340 billion from $1.246 billion. Net cash provided by operating activities was $1.340 billion.
Total assets were $17.123 billionc, long-term debt $7.859 billion, and shareowners' common equity $3.259 billion. The company operates three segments (Supply, Delivery and International). Its Supply segment includes 11,527 MW of generation capacity, and PPL Electric provides delivery service to about 1.3 million customers in Pennsylvania.
The International segment includes WPD in the U.K. and distribution companies in Chile, El Salvador and Bolivia. PPL expects to file a distribution rate increase request with the PUC in March 2004, with new rates effective January 2005 when the rate cap expires. Credit ratings were downgraded by Moody's in May 2003 and S&P has a negative outlook on several entities.
The filing also discloses material legal and regulatory matters, including the NorthWestern Corporation litigation, a Montana Hydroelectric lawsuit, California and western markets proceedings, PJM capacity transaction complaints, and a DOE spent-fuel suit filed January 22, 2004. Management states it cannot predict the outcome of these matters, some of which may be material.
02—Key points
Key Highlights
- Net income rose to $734 million in 2003 from $208 million in 2002; diluted EPS was $4.24 versus $1.36.
- Operating revenues were $5.587 billion in 2003, up from $5.481 billion, and operating income was $1.340 billion versus $1.246 billion.
- Unusual items included a $63 million after-tax cumulative effect gain from adopting SFAS 143 and a $27 million after-tax charge from FIN 46 consolidation.
- Total assets grew to $17.123 billion from $15.552 billion, with long-term debt at $7.859 billion, including $681 million of long-term debt with affiliate trusts.
- PPL expects to file a distribution rate increase request with the PUC in March 2004, with rates effective January 2005 when the cap expires.
- Moody's downgraded PPL, PPL Electric and PPL Energy Supply ratings in May 2003; S&P and Fitch placed several entities on negative outlook.
- PPL Energy Supply's PLR contract with PPL Electric accounted for 34% of its consolidated revenues in 2003, and about 80% of expected 2004–2008 generation is committed under contracts.
03—Questions
Frequently Asked Questions
How did PPL's earnings change in 2003?
Net income was $734 million, or $4.24 diluted EPS, compared with $208 million, or $1.36 diluted EPS, in 2002. The filing attributes the change in part to unusual items, including a $63 million after-tax gain from the SFAS 143 adoption and the benefit of complete ownership of WPD.
What are the main risks flagged for investors?
The filing cites wholesale electricity price risk, fuel supply and price risk, power plant performance, and counterparty credit risk. It also flags the possibility that PPL may be unable to recover its investment in new gas-fired generation, possible future goodwill impairments, and a downgrade in credit ratings that could raise financing costs.
What is PPL's exposure to the DOE spent-fuel dispute?
On January 22, 2004, PPL Susquehanna filed suit in the U.S. Court of Federal Claims for unspecified damages from the DOE's breach of its contract to accept spent nuclear fuel. PPL states it cannot predict the outcome of this dispute.
What is the status of the NorthWestern litigation?
NorthWestern sued PPL Montana in 2002 seeking specific performance of a Colstrip Transmission System purchase or damages. NorthWestern filed for Chapter 11 in September 2003, which stayed PPL Montana's counterclaims. The matter is scheduled for trial in mid-2005, and PPL cannot predict the outcome.
What dividend change did PPL announce?
In February 2004, PPL announced an increase in its quarterly common stock dividend, payable April 1, 2004, to 41 cents per share, equivalent to $1.64 per year. Dividends for 2003 were $1.54 per share.
04—Continue