Ppl Corporation · NYSE:PPL
Ppl — EEI Financial Conference 2005
46 slides from Ppl's conference presentation, November 2005
Slide 1: EEI Financial Conference
Slide 2: PPL Facts
PPL Facts PPL Corporation (NYSE: PPL) is a Fortune 500 company with headquarters in Allentown, Pa. The Company’s integrated corporate strategy is to achieve disciplined growth in energy supply margins while limiting volatility in both cash flows and earnings and to achieve stable, long-term growth i
Slide 3: PPL Facts (cont.)
PPL Facts (cont.) Financial and Operating Information (Unaudited) ($ in millions, except per share amounts) 12 Months Ended Sept. 2005 Sept. 2004 Common Equity $4,305 $4,166 Preferred Equity 51 51 Short-Term Debt 112 88 Long-Term Debt 6,766 7,860 Total Capitalization $11,234 $12,165 Total Assets $17
Slide 4: Table of Contents
Table of Contents Cautionary Statements And Risk Factors That May Affect Future Results…………………………………………… 1 Why Own PPL Stock………………………………………………………………………………………………………… 2 Strong Third Quarter 2005 Results ………………………………………………………………………………………. 3 Solid Year-to-Date 2005 Results ………………………………………………………………………………
Slide 5: Table of Contents (cont.)
Table of Contents (cont.) Appendix Per Share Earnings from Ongoing Operations by Segment ………………………………………………………… A-1 Market Prices – Electricity ………………………………………………………………………………………………. A-2 Current Hedge Positions – Electricity and Fuel ………………………………………………………………………. A-3 Generation Portfolio Focused on Tw
Slide 6: Cautionary Statements And Risk Factors That May Affect Future Results
Cautionary Statements And Risk Factors That May Affect Future Results 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
Slide 7: Why Own PPL Stock
Why Own PPL Stock - ’ 10) (’0 5 C A GR 6-7% $2.75 $3.00 $2.20 * $2.05 * $1.87 $2.00 $1.00 $0.00 2004A 2005 2006 2010 *Midpoint of forecast Target Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. 2
Slide 8: Strong Third Quarter 2005 Results
Strong Third Quarter 2005 Results Earnings from Ongoing Operations Millions Per share $0.60 $0.56 $250 $216 $0.52 $196 $200 $0.40 $150 $100 $0.20 $50 $0 $0.00 3Q 2004 3Q 2005 3Q 2004 3Q 2005 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. 3
Slide 9: Solid Year-To-Date 2005 Results
Solid Year-To-Date 2005 Results Earnings from Ongoing Operations Millions Per share $600 $597 $2.00 $513 $500 $1.56 $1.50 $1.40 $400 $300 $1.00 $200 $0.50 $100 $0 $0.00 YTD 9/30/04 YTD 9/30/05 YTD 9/30/04 YTD 9/30/05 Note: See Appendix for the reconciliation of reported earnings and earnings from on
Slide 10: Reaffirming 2005 Forecast – 10% Increase in Earnings From Ongoing Operations
Reaffirming 2005 Forecast – 10% Increase in Earnings From Ongoing Operations (Dollars per Share) EPS $2.50 $2.00 - $2.10 $2.00 $1.87 $1.50 YTD 9/30 YTD 9/30 $1.56 $1.00 $1.40 $0.50 $0.00 2004 2005 Forecast Note: See Appendix for the per share reconciliation of reported earnings and earnings from ong
Slide 11: 2006 Earnings Drivers
2006 Earnings Drivers POLR price increase Improved power plant availability Full year benefit of Sundance sale Increased fuel and fuel transportation costs Lower earnings from delivery segments Uncertainty around synfuels 6
Slide 12: Reaffirming 2006 Forecast – 7.3% Increase in Earnings From Ongoing Operations
Reaffirming 2006 Forecast – 7.3% Increase in Earnings From Ongoing Operations (Dollars per Share) EPS $2.15 $2.50 $2.00 to to $2.25 $2.10 $2.00 $1.87 $1.50 $1.00 $0.50 $0.00 2004* 2005* 2006 *Earnings from ongoing operations Forecast Note: See Appendix for the per share reconciliation of reported ea
Slide 13: Strong Dividend Growth
Strong Dividend Growth $/share Annualized 17% CAGR since 2001 $1.25 * $1.00 $0.92 $1.00 $0.82 $0.77 $0.72 $0.75 $0.53 $0.50 $0.25 $0.00 2001 2002 2003 2004 April October 2005* 2005** Expect to reach 50% payout in 2006 * Annualized rate beginning with the dividend payable April 1, 2005 **Annualized r
Slide 14: Key Drivers of Margin Growth
Key Drivers of Margin Growth Supply Margins (Millions) $2,150 POLR expiration in 2009 Plant uprates and availability New wholesale contracts $2,000 Annual POLR price increases 2005 Base $1,820 $1,790 $1,730 $1,680 $1,530 $1,500 2005 2006 2007 2008 2009 2010 9
Slide 15: Emission Controls Are Economically Compelling
Emission Controls Are Economically Compelling 1200 SO2 Emission Allowance 10/21/05 1000 Price 8/2/05 800 Annual savings $/Ton 600 > $100M by 2010 400 200 0 2008 2009 2010 O&M Return of and return on invested capital including equity, based on a 50/50 debt/equity capitalization ratio 10
Slide 16: Scrubber Timetable
Scrubber Timetable Brunner Brunner Montour Island Island Units 1 & 2 Unit 3 Units 1 & 2 Award contracts 3 3 3 Air permit 3 Q2-06 Q2-06 Groundbreaking Nov-05 Q2-06 Q2-06 Construction start Apr-06 Q1-07 Q1-07 Major construction complete Aug-07 Q2-08 Q2-08 Start-up and testing Aug-07 Q2-08 Q4-08 In ser
Slide 17: Improving Cash from Operations
Improving Cash from Operations Millions $1,600 $1,400 $1,200 $1,000 $800 $600 2005 2006 2007 2008 2009 2010 Cash from operations related to transition bond maturities Cash from operations available to meet corporate cash needs Note: See Appendix for the reconciliation of cash flow measures. 12
Slide 18: Cash Flow Forecast
Cash Flow Forecast Millions $900 $700 $500 $300 $100 -$100 2005 2006 2007 2008 2009 2010 Free cash flow before dividends $1.9 Billion of available credit facilities Note: See Appendix for the reconciliation of cash flow measures. 13
Slide 19: Strengthening Balance Sheet
Strengthening Balance Sheet Through 2010 Total debt reduced by $330 million Equity grows by $2.1 billion 14
Slide 20: Why Own PPL Stock
Why Own PPL Stock - ’10) R ( ’05 CA G $3.00 6-7% $2.75 $2.20 * $2.05 * $1.87 $2.00 $1.00 $0.00 2004A 2005 2006 2010 *Midpoint of forecast Target Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. 15
Slide 21: Appendix
Appendix
Slide 22: Per Share Earnings from Ongoing Operations by Segment
Per Share Earnings from Ongoing Operations by Segment 100% 21% 20% 26% 26% 75% 6% 12% 20% 23% 50% 73% 62% 60% 25% 51% 0% 2003 2004 2005 2006 $1.86 $1.87 $2.00 - $2.10 $2.15 - $2.25 Forecast Forecast Supply PA Delivery International Delivery Note: See Appendix for the reconciliation of reported earni
Slide 23: Market Prices - Electricity
Market Prices - Electricity (1) Actual Forward Actual 2005 2005 2004 (Jan-Sep) (Oct-Dec) 2006 2007 Jun-05 Sep-05 Jun-05 Sep-05 Jun-05 Sep-05 EAST PJM On-Peak $50 $71 $58 $98 $68 $97 $66 $83 Off-Peak $35 $38 $37 $55 $42 $50 $40 $44 (2) ATC $42 $54 $47 $76 $54 $73 $53 $63 WEST Mid-Columbia On-Peak $45
Slide 24: Current Hedge Positions - Electricity and Fuel
Current Hedge Positions - Electricity and Fuel 2005 2006 2007 Electricity Sales East 100% 90% 85% West 100% 90% 75% Total 100% 90% 83% Coal East 100% 90% 85% West 100% 100% 100% Total 100% 95% 90% A-3
Slide 25: Generation Portfolio Focused on Two Markets
Generation Portfolio Focused on Two Markets Total Domestic Generation: 11,822 MW Upgrade Projects Planned: 255 MW Montana 1,259 MW Montana 28 MW Maine 96 MW Coal 683 Oil 52 Coal (2005-2008) 28 Hydro 576 Hydro 44 Connecticut 243 MW Gas (CTs) 243 New York 159 MW Gas (CTs) 159 Pennsylvania 9,225 MW Coa
Slide 26: Proactive Coal Supply Management Supports Growth in Margins
Proactive Coal Supply Management Supports Growth in Margins 2005 Coal Supply Powder River Basin Montana Supply region diversity Mine-mouth Central PA 5% Fleet trains (>1200 cars) 27% 20% Average delivered costs 10% increase from Central 10% Appalachia 2005 to 2006 4% annual increase 38% 20
Slide 27: Capital Expenditures by Segment
Capital Expenditures by Segment Million $1,600 $1,361 $1,231 $1,200 $282 $1,143 $290 $284 $907 $870 $247 $734 $222 $800 $290 $286 $234 $279 $203 $249 $400 $832 $196 $719 $625 $381 $368 $259 $0 2004 2005 2006 2007 2008 2009 Supply PA Delivery International Delivery A-6
Slide 28: Increasing Prices Under the POLR Contract
Increasing Prices Under the POLR Contract 60 $48.40 $49.10 $50.20 50 $47.80 $44.10 $42.30 $42.70 $43.30 40 30 $/MWh 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 A-7
Slide 29: Key Drivers/Assumptions Through 2010
Key Drivers/Assumptions Through 2010 Increased prices and volume for POLR sales Capacity additions and improved capacity factors Increased fuel and O&M costs Loss of synfuel tax credits after 2007 Expiration of supply contracts provides opportunity to remarket generation at higher prices A
Slide 30: Reconciliation of GAAP and Adjusted Equity to Total Capitalization Ratios
Reconciliation of GAAP and Adjusted Equity to Total Capitalization Ratios Forecast Forecast 12/31/04 9/30/05 12/31/05 12/31/06 GAAP Equity to Total Capitalization Ratio 36% 39% 39% 42% Adjustments to Debt (millions of dollars) Less Non-Recourse Debt: Transition Bonds $1,158 $955 $892 $605 Internatio
Slide 31: Reconciliation of Cash from Operations to Free Cash Flow before Dividends
Reconciliation of Cash from Operations to Free Cash Flow before Dividends (Millions of Dollars) 2005 2006 2007 2008 2009 2010 Cash from Operations $1,375 $1,515 $1,600 $1,630 $1,520 $1,600 Plus: Proceeds from Asset Sales 190 - - - - - Subtotal 1,565 1,515 1,600 1,630 1,520 1,600 Less: Transition Bon
Slide 32: Increased Per Share Earnings From Ongoing Operations - Third Quarter
Increased Per Share Earnings From Ongoing Operations - Third Quarter (Dollars per Share) Quarter Ending September 30 2005 2004 Change Supply $0.34 $0.39 ($0.05) Pennsylvania Delivery 0.13 0.03 0.10 International Delivery 0.09 0.10 (0.01) $0.56 $0.52 $0.04 Note: See Appendix for the per share reconci
Slide 33: Supply Segment Third Quarter Earnings Drivers
Supply Segment Third Quarter Earnings Drivers (Dollars per Share) Q3 2004 Earnings from Ongoing Operations $0.39 Earnings Drivers: Margins - East $(0.04) O&M (0.02) Synfuel 0.03 Dilution (0.01) Income Taxes & Other (0.01) (0.05) Q3 2005 Earnings from Ongoing Operations $0.34 Note: See Appendix for t
Slide 34: Pennsylvania Delivery Segment Third Quarter Earnings Drivers
Pennsylvania Delivery Segment Third Quarter Earnings Drivers (Dollars per Share) Q3 2004 Earnings from Ongoing Operations $0.03 Earnings Drivers: Electric Delivery Margins $0.09 O&M 0.02 Income Taxes & Other (0.01) 0.10 Q3 2005 Earnings from Ongoing Operations $0.13 Note: See Appendix for the per sh
Slide 35: International Delivery Segment Third Quarter Earnings Drivers
International Delivery Segment Third Quarter Earnings Drivers (Dollars per Share) Q3 2004 Earnings from Ongoing Operations $0.10 Earnings Drivers: Electric Delivery Margins $0.03 Pension (0.02) Income Taxes & Other (0.02) (0.01) Q3 2005 Earnings from Ongoing Operations $0.09 Note: See Appendix for t
Slide 36: Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending September 30, 2005 Reported earnings $112 $49 $36 $197 Unusual Items: Off-site remediation of ash basin leak (19) (19) (1
Slide 37: Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations (Dollars per Share) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending September 30, 2005 Reported earnings $0.29 $0.13 $0.09 $0.51 Unusual Items: Off-site remediation of ash basin leak (0.05) (
Slide 38: Year-to-Date Segment Per Share Earnings from Ongoing Operations
Year-to-Date Segment Per Share Earnings from Ongoing Operations (Dollars per Share) YTD September 30 2005 2004 Change Supply $0.82 $0.88 ($0.06) Pennsylvania Delivery 0.34 0.15 0.19 International Delivery 0.40 0.37 0.03 $1.56 $1.40 $0.16 A-17
Slide 39: Reconciliation of YTD Reported Earnings and Earnings from Ongoing Operations
Reconciliation of YTD Reported Earnings and Earnings from Ongoing Operations (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total YTD Ending September 30, 2005 Reported earnings $238 $103 $152 $493 Unusual Items: PJM billing dispute (27) (27) NorthWestern litigation (6) (6
Slide 40: Reconciliation of YTD Reported Earnings and Earnings from Ongoing Operations
Reconciliation of YTD Reported Earnings and Earnings from Ongoing Operations (Dollars per Share) Pennsylvania International Supply Delivery Delivery Total YTD Ending September 30, 2005 Reported earnings $0.62 $0.27 $0.40 $1.29 Unusual Items: PJM billing dispute (0.07) (0.07) NorthWestern litigation
Slide 41: Reconciliation of PPL's Reported Earnings and Earnings from Ongoing Operations
Reconciliation of PPL’s Reported Earnings and Earnings from Ongoing Operations Forecast Actual High Low 2005 2005 2004 2003 2002 Per Share Earnings from Ongoing Operations $2.10 $2.00 $1.87 $1.86 $1.77 Unusual Items (net of taxes) Stock-based compensation adjustment (0.01) (0.01) Goodwill impairment
Slide 42: Earnings Per Share Reconciliation for Periods Ending September 30, 2005 and 2004
Earnings Per Share Reconciliation for Periods Ending September 30, 2005 and 2004 3 Months Ended 9 Months Ended 12 Months Ended 9/30/05 9/30/04 9/30/05 9/30/04 9/30/05 9/30/04 Per Share Earnings from Ongoing Operations $0.56 $0.52 $1.56 $1.40 $2.02 $1.88 Unusual Items (net of tax): Off-site remediati
Slide 43: Credit Ratings
Credit Ratings Moody's Standard & Poor's Fitch PPL Corporation Issuer Rating BBB Subordinated Debt BBB- Senior Unsecured Baa3 BBB- BBB Short-term debt Outlook STABLE STABLE STABLE PPL Energy Supply Issuer Rating BBB Senior Notes Baa2 BBB BBB+ Commercial Paper P-2 A-2 F-2 Outlook STABLE STABLE STABLE
Slide 44: Credit Ratings (cont.)
Credit Ratings (cont.) Moody's Standard & Poor's Fitch PPL Transition Bond Co. Transition Bonds Aaa AAA AAA PPL Montana Pass-Through Certificates Baa3 BBB- BBB Outlook STABLE STABLE WPD Holdings Limited Issuer Rating Baa3 BBB- Senior Unsecured Debt Baa3 BBB- BBB- Commercial Paper A-3 Preferred Stock
Slide 45: Forward-Looking Information Statement
Forward-Looking Information Statement Statements contained in this news release, including statements with respect to future earnings, energy prices, margins and sales, growth, revenues, expenses and pension costs, cash flows, cash from operations, dividends, credit profile, capital expenditures and
Slide 46: Definitions of Financial Measures
Definitions of Financial Measures “Earnings from ongoing operations” excludes the impact of unusual items. Earnings from ongoing operations should not be considered as an alternative to net income, or reported earnings, which is an indicator of operating performance determined in accordance with GAA