Slide 1: Second Quarter Earnings Call August 1, 2008
Second Quarter Earnings Call August 1, 2008 Exhibit 99.2
Slide 2: Cautionary Statements And Factors That May Affect Future Results
Cautionary Statements And 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 may
Slide 3: Agenda
Agenda • Second Quarter 2008 Earnings and Review of 2008 and 2010 Earnings Forecast and Outlook • Second Quarter Segment Results and Financial Overview • Operational Review • Q&A J. H. Miller P. A. Farr W. H. Spence 2
Slide 4: Reported Earnings
Reported Earnings Year-to-Date Per share $1.41 $1.19 $0.00 $0.50 $1.00 $1.50 2007 2008 3 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share $0.88 $0.50 $0.00 $0.50 $1.00 2007 2008 Second Quarter
Slide 5: Ongoing Earnings
Ongoing Earnings Year-to-Date Per share $1.28 $1.11 $0.00 $0.50 $1.00 $1.50 2007 2008 4 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share $0.63 $0.50 $0.00 $0.50 $1.00 2007 2008 Second Quarter
Slide 6: Strong Long-Term Earnings Growth Forecast
$2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 2007A* 2008* 2010 Strong Long-Term Earnings Growth Forecast 5 *Earnings from ongoing operations – See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. $2.60 $2.25 $2.35 $4.00 $4.60 Per Share
Slide 7: Pennsylvania Update
Pennsylvania Update • Energy Fund approved • Conservation, DSM postponed until Fall • Procurement and mitigation also postponed; PPL Electric procurement plan for 2010 on schedule • Legislature returns September 15 6
Slide 8: Ongoing Earnings Overview
Ongoing Earnings Overview $(0.13)$0.63$0.50Total (0.10)0.260.16International Delivery 0.010.070.08Pennsylvania Delivery $(0.04)$0.30$0.26Supply Change Q2 2007 Q2 2008 7 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Slide 9: Supply Segment Earnings Drivers
Supply Segment Earnings Drivers (0.02)Depreciation (0.02)Synfuel (0.02)Income taxes and other $0.262008 EPS – Ongoing Earnings (0.04)Total 0.01Margins – West $ 0.01Margins – East $0.302007 EPS – Ongoing Earnings 2nd Quarter Note: See Appendix for the per share reconciliation of reported earnings and
Slide 10: Pennsylvania Delivery Segment Earnings Drivers
Pennsylvania Delivery Segment Earnings Drivers 0.01Income taxes and other $0.082008 EPS – Ongoing Earnings 0.01Total (0.01)O&M $0.01Delivery Margins $0.072007 EPS – Ongoing Earnings 2nd Quarter 9 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing opera
Slide 11: International Delivery Segment Earnings Drivers
International Delivery Segment Earnings Drivers (0.01)Other (0.03)Latin American Operations $0.162008 EPS – Ongoing Earnings (0.10)Total (0.08)Income taxes 0.01O&M $0.01Delivery Margins $0.262007 EPS – Ongoing Earnings 2nd Quarter 10 Note: See Appendix for the per share reconciliation of reported ea
Slide 12: Expected 2008 Earnings Contributions
Expected 2008 Earnings Contributions 11 * Earnings from ongoing operations – See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. **Midpoint of forecast $2.00 $2.25 $2.50 $2.75 $3.00 2007A* Per Share $2.60 Net Impact of Asset Divestiture ($0.08) O&
Slide 13: Cash Flow Forecast
Cash Flow Forecast Millions ($200) $0 $200 $400 $600 $800 $1,000 $1,200 2007A 2008E 2009E 2010E Free cash flow before dividends 12 Note: See Appendix for the reconciliation of cash flow measures.
Slide 14: Continued Dividend Growth
$0.82 $0.92 $1.00 $1.10 $1.22 $1.34 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 2004 April 2005 October 2005 2006 2007 2008 $/Share Annualized Continued Dividend Growth 13
Slide 15: Implications of CAIR Ruling
Implications of CAIR Ruling • DC Circuit Court decision invalidated U.S. EPA Eastern U.S. NOx/SO2 Reduction Program – Eliminates required additional reductions in sulfur dioxide in 2010 and 2015 – Annual NOx program vacated • Companies re-evaluating financial and operational implications – Scrubber
Slide 16: Scrubbers Expected to be Completed on Budget and on Schedule
Scrubbers Expected to be Completed on Budget and on Schedule Q2-09Brunner Island 1 & 2 Q4-08Brunner Island 3 In Service 5/17/2008Montour 1 In Service 3/8/2008 Montour 2 Scheduled In-Service Dates Montour Scrubber 15 June 2008
Slide 17: Power Market Update
Power Market Update • Natural gas and power prices have declined • Global demand for coal keeps upward pressure on U.S. coal prices • Emission allowance markets are still absorbing the negative implications of the DC Court ruling • Long-term fundamental market drivers support increasing value for ge
Slide 18: Current Hedge Positions - Electricity and Fuel
Current Hedge Positions -Electricity and Fuel 17 2008 2009 2010 Electricity Sales East 97% 98% 68% West 100% 81% 68% Total 98% 95% 68% Uranium 100% 100% 100% Coal East 100% 93% 78% West 100% 100% 100% Total 100% 95% 84% Unhedged Coal – (million tons) 0 0.5 1.0 (excludes Keystone & Conemaugh) Note: A
Slide 19: 2008 East Coal Hedges and Expected Impacts on Annual Coal Expense
2008 East Coal Hedges and Expected Impacts on Annual Coal Expense • Projected coal use – 9.3 million tons – 1.4 million tons for Keystone and Conemaugh – 7.9 million tons for Montour and Brunner Island (wholly- owned plants) • Percent of supply to wholly-owned plants at fixed base price – 77% • Perc
Slide 20: Key Driver of Fleet Value: Open EBITDA
Key Driver of Fleet Value: Open EBITDA 19 2010E Generation Output -millions of MWH 56.2 Implied Gross Margin -millions * 4,299 $ O&M - -millions (814) $ Open EBITDA -millions $ 3,485 Below-Market Value of Hedges -millions * (738) $ * Based on forward market prices as of June 30, 2008
Slide 21: Appendix
PPL
Slide 22: Market Prices
Market Prices EAST PJM On-Peak Off-Peak ATC (3) WEST Mid-Columbia On-Peak Off-Peak ATC (3) GAS (4) NYMEX TZ6NNY PJM MARKET HEAT RATE (5) Actual Forward (1) At 10/2007(2) 2007 2008 2009 2010 2010 9.4 $7.78 $6.86 $51 $45 $57 $57 $43 $73 8.8 $9.04 $8.08 $60 $53 $67 $64 $51 $79 8.38.18.0 $12.68$13.96$12
Slide 23: PPL Supply Business Overview
PPL Supply Business Overview 2008E Production GWH A-2 Gas/Oil 33% Coal 37% Nuclear 19% Hydro8% QFs 3% 2008E Installed Capacity MW Gas/ Oil 6% Coal 54% Nuclear 32% Hydro 8%
Slide 24: Load-following Components Example
0 20 40 60 80 100 120 2009 2009 2010 $/MWH Shaped Energy & Capacity Including Congestion Other Adders Line Losses GRT Load-following Components Example A-3 Total $105 $82.00* $45.47 Total $51.23 * Shaped price based on $63/MWH ATC energy price, $150/MW-Day capacity price, and congestion. $48.29 Tota
Slide 25: PPL's Generation Portfolio
PPL’s Generation Portfolio Total Domestic Generation: 11,358 MW Planned Uprate Projects: 331 MW * Reflects reduction of 60 MW expected loss due to increased plant usage during scrubber operation. Coal 3,483* Nuclear 2,117 Oil 1,795 Gas 1,503 Hydro 343 CTs 474 QFs 356 East 10,071 MW* Coal 683 Hydro 6
Slide 26: Nuclear Development Schedule
Nuclear Development Schedule Early 2009 (Estimate)Order Long Lead-Time Materials 2017 to 2019 (Estimate)Commercial Operation 2012 (Estimate)Begin Construction 2012 (Estimate)NRC Approval of COLA 2009Early Site Work Sept. 2008 (part I) Dec. 2008 (part II) Submit DOE Loan Application Oct. 2008Submit C
Slide 27: 2007 Synfuel and Divested Assets Ongoing Earnings Contributions
2007 Synfuel and Divested Assets Ongoing Earnings Contributions A-6 Synfuel Q1 Q2 Q3 Q4 2007 Synfuel Earnings $0.07 $0.01 $0.02 $0.04 $0.14 Fuel Costs 0.01 0.01 0.01 0.01 0.04 Total Synfuel Contribution $0.08 $0.02 $0.03 $0.05 $0.18 Net Impact of Asset Divestitures $0.03 $0.03 $0.02 $0.00 $0.08
Slide 28: 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) A-7 $1,032$58($68)$513Free Cash Flow before Dividends (15)(15)47937Other Investing Activities-net (1,490)(1,456)(1,609)(1,685)Capital Expenditures --(310)(310)Transition Bond Repayment Increase/(Decrease)
Slide 29: Capital Expenditures by Segment
Millions $1,043 $1,030 $824 $750 $692 $514 $302 $281 $305 $404 $521 $511 $340 $298 $327 $336 $343 $351 $0 $400 $800 $1,200 $1,600 $2,000 2007A 2008E 2009E 2010E 2011E 2012E Supply PA Delivery International Delivery $1,685 $1,556 $1,376 $1,490$1,456 $1,609 Capital Expenditures by Segment A-8
Slide 30: Reconciliation of Second Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Second Quarter Reported Earnings and Earnings from Ongoing Operations A-9 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending June 30, 2008 Reported earnings $97 $31 $62 $190 Special Items: MTM adj's from energy-related, non- trading economic
Slide 31: Reconciliation of Second Quarter Reported Earnings and Earnings from Ongoing Operations (Per Share)
Pennsylvania International Supply Delivery Delivery Total Qtr. Ending June 30, 2008 Reported earnings $0.26 $0.08 $0.16 $0.50 Special Items: MTM adj's from energy-related, non-trading economic hedges 0.01 0.01 Impairment of nuclear decom. trust investments (0.01) (0.01) Earnings from ongoing operati
Slide 32: Reconciliation of Year-to-Date Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Year-to-Date Reported Earnings and Earnings from Ongoing Operations A-11 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Year-to-Date June 30, 2008 Reported earnings $199 $91 $160 $450 Special Items: MTM adj's from energy-related, non- trading econom
Slide 33: Reconciliation of Year-to-Date Reported Earnings and Earnings from Ongoing Operations (Per Share)
Pennsylvania International Supply Delivery Delivery Total Year-to-Date June 30, 2008 Reported earnings $0.53 $0.24 $0.42 $1.19 Special Items: MTM adj's from energy-related, non-trading economic hedges 0.14 0.14 Impairment of nuclear decom. trust investments (0.01) (0.01) Colstrip groundwater litigat
Slide 34: Reconciliation of PPL's Reported Earnings and Earnings from Ongoing Operations
Reconciliation of PPL’s Reported Earnings and Earnings from Ongoing Operations High Low 2008 2008 2007 2006 Per Share Earnings from Ongoing Operations $2.35 $2.25 $2.60 $2.25 Special items (net of taxes): economic hedges 0.14 0.14 0.08 (0.03) Reversal of cost recovery - Hurricane Isabel (0.02) Impai
Slide 35: Credit Ratings
Credit Ratings A-14 BBB Issuer Rating AAA Aaa Tax-Exempt Bonds* STABLE STABLE STABLE Outlook A-A-A3Senior Secured Debt F-2A-2P-2Commercial Paper BBBBBBBaa3Preferred Stock BBBA-Baa1Issuer Rating A-A-A3First Mortgage Bonds AA/A*** Aa3/Baa1***Tax-Exempt Bonds** BBBBBBBaa3Preference Stock PPL Electric U
Slide 36: Credit Ratings (cont.)
Credit Ratings (cont.) A-15 A-3Commercial Paper A-BBB+ Baa1Senior Unsecured Debt F2A-2P-2Commercial Paper POSITIVESTABLE STABLE Outlook BBB+ BBB+ Baa1Issuer Rating A-BBB+ Baa1Senior Unsecured Debt F2A-2Commercial Paper POSITIVESTABLE STABLE Outlook Western Power Distribution (South West) PLC BBB+ BB
Slide 37: Forward-Looking Information Statement
Forward-Looking Information Statement A-16 Statements contained in this presentation, including statements with respect to future earnings, energy prices, margins, sales and supply, marketing performance, growth, revenues, expenses, rates, regulation, cash flows, credit profile, financing, dividends
Slide 38: Definitions of Financial Measures
Definitions of Financial Measures A-17 “Earnings from ongoing operations” excludes the impact of special items. Special items include charges, credits or gains that are unusual or nonrecurring. Special items also include the mark-to-market impact of energy-related, non-trading economic hedges and im