PPL's CEO Discusses Q4 2011 Results - Earnings Call Transcript

PPL (PPL)

Q4 2011 Earnings Call

February 10, 2012 9:00 am ET

Executives

Joe Bergstein -

James H. Miller - Chairman and Chairman of Executive Committee

William H. Spence - Chief Executive Officer, President and Director

Paul Farr - Chief Financial Officer and Executive Vice President

Analysts

Marc de Croisset - FBR Capital Markets & Co., Research Division

Ameet I. Thakkar - BofA Merrill Lynch, Research Division

Paul B. Fremont - Jefferies & Company, Inc., Research Division

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Julien Dumoulin-Smith - UBS Investment Bank, Research Division

Andrew Bischof - Morningstar Inc., Research Division

Kevin Cole - Crédit Suisse AG, Research Division

Geoffrey K. Dancey - Cutler Capital Management LLC

Presentation

Operator

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Good morning. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the PPL Corporation Fourth Quarter Conference Call. [Operator Instructions] Joe Bergstein, Director of Investor Relations, you may begin your conference.

Joe Bergstein

Thank you. Good morning. Thank you for joining the PPL conference call on fourth quarter results and our general business outlook. We are providing slides of this presentation on our website at www.pplweb.com. 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 filings. At this time, I'd like to turn the call over to Jim Miller, PPL Chairman.

James H. Miller

Thanks, Joe, and good morning, everyone. Thanks for participating in the call today. As most of you -- I think all of you know, I'll be retiring from PPL at the end of March, so this will be my last earnings call with you. Obviously, it's been a real thrill with serving PPL for the last 6 or so years as Chairman and CEO, and it certainly has been a highlight of my career. A lot have changed, a lot of interesting transactions throughout the sector and certainly, many, many, many challenges that we've tried to seek, finding the opportunities within that realm of challenge.

I would say that PPL is fundamentally a very strong company, and we've made significant progress over the past few years in further strengthening the foundation, which we can continue to grow the value for the share-owners. And I am real confident that you're going to see the best years of PPL ahead as a result of the work we've done over the last several years. We've got a great team in place under Bill Spence's leadership. I'm sure he'll turn that confidence into a reality. So I thank all of you on the phone for your interest in the company and for your diligence in assessing PPL's performance over the years of my tenure.

So I wish each of you continued success and good fortune in your areas out there. And again, I think you'll see PPL flourish under its new portfolio structure, and a lot of opportunities lie out there ahead for us.

So today I'll talk a little, just a little bit about the overview of 2011 results and talk a little bit about our positioning for the future. Then Bill will provide an overview of our '11 operational performance, a review of future prospects for each of our business segments, and a bit of discussion on our 2012 earnings forecast. And then Paul Farr, our Chief Financial Officer, will provide very detailed financial review before we turn to your questions.

As you saw in the announcement, fourth quarter earnings of $0.69 per share compared with $0.73 in the fourth quarter of 2010. Earnings from ongoing operations for the fourth quarter were $0.70 per share compared with $0.83 in the same period a year ago. Our reported earnings and our earnings from ongoing operations were each $0.13 per share lower than a year ago due to dilution from the April 11 common stock issuance. For the quarter, both reported earnings and ongoing earnings were pressured by lower wholesale electricity margins at our Supply segment.

Turning to the year-end results, we announced 2011 reported earnings of $2.61 per share, an increase of $0.44 per share over 2010. Our 2011 earnings from ongoing operations were $2.72 per share compared with $3.13 per share in 2010. Now the '11 earnings from ongoing operations reflect dilution of $0.75 per share due to the June 2010 and the April 2011 issuances of common stock to fund the Kentucky and U.K. acquisitions. Strong '11 results were driven by solid performance in each of our business segments, and I'm also pleased that we're able to announce this morning a rough 3% increase in our annualized dividend. Our quarterly dividend will now be $0.36 per share. The increase is further indication of our continued confidence in the strength of our portfolio and our prospects for future growth of the company.

Before turning the call over to Bill and Paul, I'd like to review some of the significant factors that position us well for the future. Clearly, we think our business mix has shifted significantly towards rate-regulated earnings, providing us stability and security to our earnings forecast, dividend and credit ratings.

Approximately 70% of our projected 2012 earnings per share will come from regulated businesses, and we expect compound annual rate base growth in these businesses of nearly 8% over the next 5 years. That growth would result in an $8.1 billion increase in the asset base of our regulated companies by 2016, the equivalent of adding another large regulated utility to the portfolio. Much of this rate base growth comes from planned CapEx, that's already been reviewed by various regulators with very little lag in earning a return for shareowners.

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