01—Abstract
Summary
Summary of the 10-K filed February 29, 2008. Cited figures are marked; the original filing is the authoritative source.
PPL Corporation, headquartered in Allentown, PA, is an energy and utility holding company that generates electricity in the northeastern and western U.S. and delivers electricity to approximately 4 million customers in Pennsylvania and the U.K.
Net income rose to $1.288 billiona in 2007 from $865 million in 2006, and diluted EPS was $3.35 versus $2.24, with income from discontinued operations of $275 million reflecting the sales of its Latin American businesses. The company sold its El Salvadoran, Bolivian and Chilean businesses and its domestic telecommunications operations in 2007, and announced plans to sell its natural gas distribution and propane businesses in the second half of 2008. Segment net income was $568 million for Supply, $610 million for International Delivery and $110 million for Pennsylvania Delivery.
The filing highlights regulatory uncertainty for PPL Electric after its capped-rate PLR contracts with PPL EnergyPlus expire at the end of 2009. PPL Electric has contracted one-third of its expected 2010 supply through competitive solicitations, and the filing states that an average residential bill in 2010 would rise about 34.5%b over 2009 levels if recent prices held. Pennsylvania legislators have proposed extending rate caps, which PPL says could cause severe financial impacts.
Capital expenditure projections for 2008 through 2012 total approximately $7.5 billionc, largely for pollution control equipment and transmission. The company repurchased 14,929,892 shares for $712 million under a $750 million program authorized in June 2007, and it expects to repurchase additional shares beginning in 2009.
Quarterly common dividends increased to 30.5 cents in 2007 and to 33.5 cents effective April 1, 2008. Credit ratings were stable at all major rating agencies, with PPL Corporation's issuer rating at Baa2 from Moody's and BBB from S&P and Fitch at year-end 2007.
02—Key points
Key Highlights
- Net income of $1.288 billion in 2007, up from $865 million in 2006; basic EPS $3.39 and diluted EPS $3.35 versus $2.27 and $2.24 a year earlier.
- Income from continuing operations was $1.013 billion, and discontinued operations contributed $275 million, driven by gains on the sales of the Chilean, El Salvadoran and Bolivian businesses.
- Sold Latin American utilities (DelSur, Elfec, Integra and Emel) and PPL Telcom in 2007; Chilean sale for $660 million in cash, and El Salvadoran sale for $180 million.
- PLR contracts with PPL EnergyPlus expire at the end of 2009; PPL Electric has contracted one-third of its 2010 supply, and PUC-approved bids averaged $101.77 to $105.08 per MWh for residential customers.
- Plans to sell natural gas distribution and propane businesses (PPL Gas Utilities) in the second half of 2008, with assets held for sale of $318 million at year-end 2007.
- Capital expenditure projections of approximately $7.5 billion for 2008 through 2012, with environmental (scrubber) spending of about $1.6 billion through 2012, of which $0.9 billion was already spent.
- Repurchased 14,929,892 common shares for $712 million under a $750 million authorization, with further repurchases expected beginning in 2009.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 29, 2008Financial Statements
| Revenue | $6.46B |
| Operating Income | $1.66B |
| Interest Expense | $472.00M |
| Net Income | $1.29B |
| EPS (Basic) | $3.37 |
| EPS (Diluted) | $3.34 |
| Shares Outstanding (Basic) | 380.56M |
| Shares Outstanding (Diluted) | 383.49M |
05—Questions
Frequently Asked Questions
How did PPL's earnings change in 2007?
Net income was $1.288 billion in 2007 compared with $865 million in 2006, and diluted EPS was $3.35 versus $2.24. Income from continuing operations rose to $1.013 billion from $839 million, and discontinued operations, mainly the Latin American sales, added $275 million.
What is the main regulatory risk facing PPL Electric?
PPL Electric's rate-capped PLR supply contracts with PPL EnergyPlus expire at the end of 2009. Post-2009 supply costs depend on PUC procurement rules and pending Pennsylvania legislation. The filing says legislation to extend rate caps could cause operating losses and significant cash flow shortfalls for PPL Electric.
What are PPL's plans for capital returns to shareholders?
PPL repurchased 14,929,892 shares for $712 million in 2007 under a $750 million program and expects to repurchase additional shares beginning in 2009, subject to Board approval. The quarterly common dividend rose to 30.5 cents in 2007 and to 33.5 cents effective April 1, 2008.
How large is PPL's capital spending plan?
Projected capital expenditures total approximately $7.5 billion for 2008 through 2012. Environmental expenditures, mostly for scrubbers and pollution control equipment, are projected at $461 million in 2008 and decline thereafter, and the filing notes PPL Electric's share of the Susquehanna-Roseland transmission line is estimated at $300 million to $500 million.
What is the status of PPL's credit ratings?
At December 31, 2007, PPL's issuer ratings were Baa2 from Moody's, BBB from S&P and BBB from Fitch, with stable outlooks. PPL Electric was rated A3 on first mortgage bonds by Moody's and A- by S&P and Fitch. The filing states that a downgrade could increase borrowing costs.
06—Continue