01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
PPL Corporation, headquartered in Allentown, Pennsylvania, is an energy and utility holding company that generates electricity, markets wholesale and retail energy, and delivers electricity to customers in Pennsylvania, Kentucky, Virginia, Tennessee and the U.K., and natural gas in Kentucky.
In 2011 it completed two acquisitions: WPD Midlands, acquired April 1, 2011 for cash consideration of $5.8 billiona, and LG&E and KU Energy LLC (LKE), acquired November 1, 2010 for cash of $6.8 billion. At December 31, 2011, PPL reported $12.7 billion in operating revenues, about 10.5 million end-users, approximately 19,000 MW of generation and approximately 18,000 full-time employees. The filing states that approximately 70% of PPL's assets are now in regulated businesses following the acquisitions.
Net income attributable to PPL Corporation was $1.5 billionb in 2011, compared with $938 million in 2010 and $407 million in 2009, and diluted EPS was $2.70 versus $2.17 in 2010. Operating income rose to $3.1 billion from $1.9 billion. Operating cash flow was $2.5 billion, and capital expenditure projections for 2012 through 2016 total approximately $18.7 billion.
The company declared an increase in its annualized dividend to $1.44c per share in February 2012, from $1.40. Key items in the year included a $39 million expense from an adverse U.S. Court of Appeals ruling on U.K. Windfall Profits Tax creditability, a $63 million after-tax impact from turbine blade replacements at the Susquehanna nuclear plant, and a reversal of an $89 million Montana hydroelectric litigation loss accrual after a February 2012 U.S. Supreme Court decision.
The filing also covers the combined reporting of PPL Energy Supply, PPL Electric Utilities, LKE, Louisville Gas and Electric and Kentucky Utilities. Energy Supply net income was $768 milliond in 2011, Pennsylvania-regulated PPL Electric net income available to PPL was $173 million, and environmental capital requirements for LG&E and KU include projected expenditures of about $3.1 billion over the next five years. Pending items include the Ironwood facility acquisition agreed in February 2012 for cash of $87 million plus assumption of about $217 million of net project debt.
02—Key points
Key Highlights
- Net income attributable to PPL Corporation was $1.5 billion in 2011, up from $938 million in 2010; diluted EPS was $2.70 versus $2.17.
- Operating revenues reached $12.7 billion in 2011, versus $8.5 billion in 2010, reflecting the LKE and WPD Midlands acquisitions.
- Approximately 70% of PPL's assets are now in regulated businesses following the LKE and WPD Midlands acquisitions.
- Cash from operations was $2.5 billion in 2011, and projected capital expenditures for 2012-2016 total approximately $18.7 billion.
- The annualized common dividend was $1.40 per share in 2011 and was increased to $1.44 in February 2012.
- Net income was affected by a $39 million expense after the Third Circuit reversed a Tax Court ruling on the U.K. Windfall Profits Tax, and a $89 million Montana hydroelectric loss accrual was reversed after a February 2012 U.S. Supreme Court decision.
- PPL Energy Supply agreed in February 2012 to acquire the 705 MW Ironwood facility for $87 million in cash plus assumption of about $217 million of net project debt.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $12.74B$8.52B | +49.5% |
| Operating Income | $3.10B$1.87B | +66.2% |
| Interest Expense | $898.00M$593.00M | +51.4% |
| Net Income | $1.50B$938.00M | +59.4% |
| EPS (Basic) | $2.71$2.17 | +24.9% |
| EPS (Diluted) | $2.70$2.17 | +24.4% |
| Shares Outstanding (Basic) | 550.39M431.35M | +27.6% |
| Shares Outstanding (Diluted) | 550.95M431.57M | +27.7% |
05—Questions
Frequently Asked Questions
What drove the increase in PPL's 2011 earnings?
Net income attributable to PPL Corporation rose to $1.5 billion from $938 million in 2010, largely reflecting the full-year inclusion of LKE and the eight months of WPD Midlands results, along with growth in Kentucky Regulated and International Regulated segment earnings. The filing notes that results are not comparable to periods before the acquisitions.
How did the acquisitions change PPL's business mix?
The filing states the acquisitions increased the regulated portion of PPL's business, with approximately 70% of assets now in regulated businesses. It also states that the regulated investments provide earnings stability compared with the competitive energy supply business, whose earnings are subject to market conditions.
What are the main risks the filing highlights for future earnings?
The filing cites commodity price volatility in the wholesale power business, the outcome of pending environmental regulations such as the CSAPR, a possible reduction in the Supreme Court and Montana litigation items, the Susquehanna-Roseland transmission line delay to 2015, and ratings downgrades that could raise borrowing costs.
What are the company's capital spending plans?
PPL's projected capital expenditures for 2012 through 2016 total approximately $18.7 billion, including projected costs for LKE environmental projects, PPL Electric's asset optimization program and the PJM-approved transmission line expansion. The filing notes plans are revised periodically for changing conditions.
What does the filing say about dividends and capital structure?
PPL declared a dividend of $1.40 per share for 2011 and increased the annualized rate to $1.44 in February 2012. The filing states PPL expects to continue paying dividends consistent with maintaining investment grade credit ratings and notes that no interest deferrals on junior subordinated notes have occurred.
06—Continue