PPL Corporation Q10 Earnings Call Transcript

PPL Corporation Q10 Earnings Call Transcript
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PPL Corporation (PPL)

Q10 Earnings Call

May 6, 2010 9:00 am ET

Executives

Joe Bergstein - Manager, IR

Jim Miller - Chairman, President & CEO

Paul Farr - EVP and CFO

Bill Spence - EVP, COO; President-PPL Generation

Analysts

Jonathan Arnold - Deutsche Bank

Steve Fleishman - Bank of America/Merrill Lynch

Reza Hatefi - Decade Capital

Paul Patterson - Glenrock Associates

Brain Chin - Citi

Presentation

Operator

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Good morning. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to the PPL Corporation first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Mr. Joe Bergstein, Manager of Investor Relations, please begin.

Joe Bergstein

Good morning. Thank you for joining the PPL conference call on first quarter results and our general business outlook. We are providing slides of this presentation on our website at www.pplweb.com. The company's forecasted financial information in this presentation does not reflect any impact of the recently announced agreement to acquire E.ON US, including the required financing related to that acquisition.

Any statements made in this presentation about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from such forward-looking statements. A discussion of factors that could cause actual results or events to vary is contained in the appendix to this presentation and in the company’s SEC filing.

At this time, I’d like to turn the call over to Jim Miller, PPL Chairman, President and CEO.

Jim Miller

Good morning, everyone. Thank you, Joe and thanks to all of you for joining us for the second time in a week to hear some more pertinent information about our quarter and other items. We’ll start today’s call of course with our general session and commentary on first quarter and then we’ll get right into questions. And with me today Paul Farr, our Chief Financial Officer, and Bill Spence, our Chief Operating Officer.

This morning, we reported GAAP earnings of $0.66 a share with $0.64 per share in the first quarter of 2009. Earnings from ongoing operations for the first quarter were up substantially from a year ago, $0.94 per share this year versus $0.60 per share in 2009. As we fully expected, we did achieve dramatically higher earnings from our supply segment in 2010 following the expiration of a decade-long contract with our electric delivery company in Pennsylvania.

Supply segment earnings from ongoing operations were nearly triple what they were in the first quarter of last year. 2010 supply segment earnings are benefiting from the fact that we locked in wholesale energy crisis that are much higher than the current market crisis. The substantial gains we saw on our supply segment for the quarter were somewhat offset by lower earnings in both our delivery businesses in Pennsylvania and the United Kingdom.

This morning, we also reaffirmed our 2010 forecast of $3.10 to $3.50 per share in earnings from ongoing operations. And our forecast for GAAP earnings for the year reflected special items that were recorded in the first quarter now stand at $2.82 to $3.22 per share.

Although, challenges still persist in our sector, including low energy prices, lower electricity demand and some lingering economic uncertainty, we are well positioned, because we’ve hedged virtually 100% of our expected generation out for the year. And Paul will outline the other major drivers of our 2010 earnings forecast in just a moment.

We continue to expect the performance of our supply business for the year will overcome lower returns from our delivery businesses, which have been pressured by somewhat higher O&M costs.

Just a couple of brief comments on the announcements last week regarding our plans to acquire E.ON US. As I said at the time, the transformational transaction for PPL, the one that creates a stronger, more diversified enterprise that retains the considerable upsides from our high quality supply business from the inevitable improvements in wholesale power prices. So our plan to close this transaction by the end of the year and we’ll keep you informed regarding our progress on that effort.

One more item to highlight before turning the call over to Paul and Bill. In late March, we did file a request with the Pennsylvania PUC for a 2.4% increase in revenues at PPL Electric Utilities, which would be effective January 1, 2011. So the PUC review process is underway and we expect a decision on a request late this year.

Meanwhile, the transition to a competitive electricity market in the PPL Electric Utilities service area has been very successful. More than 410,000 customers have selected an alternative energy supplier and at this point nearly half of the electricity being used by PPL Electric Utilities customers is being provided by alternatives suppliers.

With that I’ll turn the call over to Paul for more details.

Paul Farr

Thanks Jim, and good morning everyone. I definitely missed being here last week for the major announcements, but my wife and I had a personal acquisition to complete in China which was successful. I very much look forward to discuss in the Kentucky transaction with you as we work through the approval process and the implementation of the ultimate financing plan for that acquisition.

Let's move to slide five. Earnings from our supply business increased significantly in the first quarter as the polar contract between PPL Electric Utilities and PPL EnergyPlus expired at the end of last year. The supply business is clearly benefiting from the hedges we entered into at prices that are higher than current market prices. Partially offsetting the supply segment performance were lower earnings in both our Pennsylvania and International Delivery segments.

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