01—Abstract
Summary
Summary of the 10-K filed February 18, 2021. Cited figures are marked; the original filing is the authoritative source.
PPL Corporation, along with its subsidiaries PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company, filed this combined Form 10-K for the year ended December 31, 2020.
PPL reported 2020 net income of $1.469 billiona, down from $1.746 billion in 2019, and operating revenues of $7.607 billion versus $7.769 billion. Earnings from Ongoing Operations, a non-GAAP measure, were $1.847 billion compared with $1.806 billion in 2019. The decline in GAAP net income was driven largely by $341 million of after-tax special items at the U.K.
Regulated segment, including a $216 millionb after-tax loss on foreign currency economic hedges and a $102 million charge from the U.K. tax rate change. The most significant strategic development is PPL's August 10, 2020 announcement that it initiated a formal process to sell its U.K. utility business (WPD). The filing states there can be no assurance of any specific outcome, and PPL is not providing future earnings guidance while the sale process is underway.
The filing notes that cash flow analyses for the U.K. business exceeded its carrying value, but a change in the sale outcomes could lead to a future impairment. Operating cash flow was $2.746 billionc in 2020, and capital expenditures are projected at $14.691 billion for 2021 through 2025. The U.S. regulated businesses are central to the outlook.
In Kentucky, LG&E and KU requested a combined increase of about $331 milliond in electricity and gas revenues in November 2020, with a requested 10.0% return on equity and rates expected to take effect July 1, 2021 if approved. PPL Electric faces a FERC complaint challenging its transmission formula rate base return on equity of 11.18%, and revenue earned from May 21, 2020 may be subject to refund. The filing also reports that PPL's external credit facilities had approximately $3.2 billion of combined unused capacity at year end.
02—Key points
Key Highlights
- Net income fell to $1.469 billion in 2020 from $1.746 billion in 2019, while Earnings from Ongoing Operations rose to $1.847 billion from $1.806 billion.
- PPL announced on August 10, 2020 a formal process to sell its U.K. utility business; the filing states there is no assurance of outcome, timing, or value, and no future earnings guidance is being provided.
- U.K. Regulated segment net income was $686 million in 2020 versus $977 million in 2019, reflecting $341 million of after-tax special items including a $216 million loss on foreign currency economic hedges.
- Total projected capital expenditures are $14.691 billion for 2021 through 2025, with distribution facilities at $9.629 billion of that total.
- LG&E and KU requested an increase of approximately $331 million in annual electricity and gas revenues from the KPSC, with a requested 10.0% authorized return on equity and an expected effective date of July 1, 2021.
- PPL Electric's FERC transmission formula rate base ROE of 11.18% is under challenge; a 50 basis point change would affect net income by about $12 million annually.
- Operating cash flow was $2.746 billion in 2020, up from $2.427 billion in 2019, and PPL's annual common dividend was $1.66 per share.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 18, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $5.43B$5.60B | −3.1% |
| Operating Income | $1.59B$1.53B | +3.9% |
| Interest Expense | $634.00M$621.00M | +2.1% |
| Net Income | $1.47B$1.75B | −15.9% |
| EPS (Basic) | $1.91$2.39 | −20.1% |
| EPS (Diluted) | $1.91$2.37 | −19.4% |
| Shares Outstanding (Basic) | 768.59M728.51M | +5.5% |
| Shares Outstanding (Diluted) | 769.38M736.75M | +4.4% |
05—Questions
Frequently Asked Questions
Why did PPL's net income decline in 2020?
Net income fell $277 million to $1.469 billion. The filing attributes much of the decline to $341 million of after-tax special items at the U.K. Regulated segment, including a $216 million loss on foreign currency economic hedges and a $102 million charge from the cancellation of the U.K. corporation tax rate reduction. Excluding special items, Earnings from Ongoing Operations rose $41 million to $1.847 billion.
What is the status of the potential sale of PPL's U.K. utility business?
PPL announced on August 10, 2020 that it initiated a formal process to sell the business. The filing states there can be no assurance of any specific outcome, including whether a transaction will be completed, its timing, or its terms. PPL assessed recoverability as of December 31, 2020 and found that cash flow estimates exceeded carrying value, but a change in sale outcomes could lead to a future impairment.
What regulatory matters could affect future revenues?
LG&E and KU filed a rate case in November 2020 seeking about $331 million in additional revenues, with a hearing expected in the second quarter of 2021. PPL Electric's transmission ROE is under FERC challenge, and revenue earned from May 21, 2020 may be subject to refund. The filing also notes that WPD expects to under-recover its cost of debt by approximately £300 million over RIIO-ED1.
How is PPL funding its capital plans?
The filing states that PPL's Registrants had approximately $3.2 billion of combined unused credit facility capacity at December 31, 2020, and that PPL Capital Funding, PPL Electric, LG&E and KU issued debt during 2020, including $1 billion of 4.125% Senior Notes due 2030 at PPL Capital Funding. Projected capital expenditures for 2021 through 2025 total $14.691 billion, and operating cash flow was $2.746 billion in 2020.
06—Continue