Slide 1: RIIO-ED1 Business Plan Review
Exhibit 99.2 RIIO-ED1 Business Plan Review July 1, 2013 © PPL Corporation 2013
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 Opening Remarks Bill Spence PPL Chairman, President and CEO RIIO-ED1 Business Plan Process & Overview Robert Symons CEO, Western Power Distribution RIIO-ED1 Business Plan Financial Review Paul Farr PPL Executive VP and CFO Closing Remarks Bill Spence PPL Chairman, President and CEO Q&A © PPL
Slide 4: RIIO-ED1
RIIO-ED1 • Revenue = Incentives + Innovation + Outputs (Electricity Distribution 1) • It covers the eight-year period 2015 - 2023 • The key challenges are: – Replacing aging infrastructure and maintaining the high level of security of supply that customers expect – The timing and scale of the work n
Slide 5: What's New?
What’s New? • Outputs – Greater focus on the delivery of outputs with higher returns for well- performing efficient companies • Stakeholder engagement – Greater emphasis on a wide ranging consultation program • Well-justified business plans – Requirement to submit a high-quality, long-term “Well-Jus
Slide 6: Price Review Process
Price Review Process • The review determines the allowed revenues for all electricity distribution companies for the period April 1, 2015 to March 31, 2023 • Ofgem will decide whether to accept the plan as submitted and fast-track the plan, or whether to subject the plan to further examination • Ofg
Slide 7: Well-Justified Business Plan
Well-Justified Business Plan • Ofgem has set out in detail what the plan should contain • The submitted plan should have been subject to and reflect the results of significant stakeholder engagement • Ofgem has also specified certain assumptions to ensure comparability between companies • All amount
Slide 8: Benefits of Fast-track
Benefits of Fast-track • The benefits of fast-tracking for WPD: – 2.5% of total expenditures (totex) reward (~$35 million annual average) – All costs submitted are allowed – Fast-tracked companies will keep more of the annual savings achieved than other companies – Fast-tracked companies conclude re
Slide 9: WPD Approach to RIIO-ED1
WPD Approach to RIIO-ED1 WPD will demonstrate that it is a company capable of being fast-tracked by: • Delivering what was promised during DPCR5 – Continuing to be efficient – Outperforming other Distribution Network Operators (DNOs) • Submitting a well-justified business plan – A long-term plan cap
Slide 10: Plan Preparation
Plan Preparation • 13 Ofgem RIIO-ED1 working groups plus sub-groups, 300 meetings attended • 2,000 pages of Ofgem documents analyzed and responded to – 66-page requirements schedule and associated compliance audits • 120 Ofgem one-on-one meetings • 12 meetings at director level • More than 200 cost
Slide 11: The Stakeholder Engagement Program
The Stakeholder Engagement Program Stage 1: Stage 2: Stage 3: Stage 4: Stage 5: Preliminary Willingness to Pay Business Plan Business Plan Review of our engagement Customer Research consultation outcome delivery – 24 stakeholder workshops – 7 customer panel meetings – 8 focus groups (domestic custom
Slide 12: Stakeholder Engagement - Key Messages
Stakeholder Engagement - Key Messages • Reliability - #1 priority for customers – Continue to reduce the number and duration of power outages – Improve service for worst served customers – Improve network resilience to severe weather events • Customers – A quicker connections service – Multiple comm
Slide 13: Uncertainty Mechanisms
Uncertainty Mechanisms • In order to address the uncertainty in the 8-year RIIO-ED1 period, Ofgem has included uncertainty mechanisms • WPD is not proposing any additional mechanisms • There will also be a mid-period review that is intended to cover external factors affecting the operation of the RI
Slide 14: WPD's Plan
WPD’s Plan • The plan shows a 10.9% reduction in customer bills between 2014/15 and 2015/16 before inflation • Despite this reduction among other improvements: – Network investment will increase by 7% – Network operating costs will decrease by 15% – Overheads, business support and non-operational ca
Slide 15: WPD's Plan - 75 Outputs
WPD’s Plan - 75 Outputs • We commit to additional voluntary output measures within each of the six categories: Customer Social Category Safety Reliability Environment Connections Satisfaction Obligations Measures 10 8 14 10 16 17 Stakeholder View ► ▲ ▲ ▲ ► ▲ Reduce the Reduce the duration of amount
Slide 16: WPD's Plan - Stakeholder Endorsement
WPD’s Plan - Stakeholder Endorsement • A series of six workshops were held across WPD in April 2013 • Stakeholders were given an overview of the draft plan and key outputs were presented in packages and discussed in detail • Electronic voting was used to calibrate the package of outputs and gauge ov
Slide 17: WPD's Plan - Stakeholder Headlines
WPD’s Plan - Stakeholder Headlines Very high overall endorsement for WPD’s plan: • 96% agree with WPD’s plans for customer service & complaints • 94% agree with WPD’s plans for customer communication • 94% agree with WPD’s plans to improve connections communications • 91% agree with WPD’s plans to e
Slide 18: Joint statement from WPD's Customer Panel - June 2013
Joint statement from WPD’s Customer Panel - June 2013 © PPL Corporation 2013 18 Joint statement from WPD’s Customer Panel – June 2013 [Some minor edits suggested –was this a public statement? ] Western Power Distribution (WPD) was the first DNO to adopt "open and enduring stakeholder engagement, lon
Slide 19: WPD's Plan - Total Projected Expenditure Summary
WPD’s Plan - Total Projected Expenditure Summary Core expenditure funded through DUoS West (£m)East South South Midlands Midlands Wales West Total Reinforcement of the 198.0 267.2 48.6 84.7 598.5 network Non-load network 664.2 587.3 396.9 575.1 2,223.5 investment Network operating 354.3 370.0 193.8
Slide 20: WPD's Plan - Financial Assumptions
WPD’s Plan - Financial Assumptions Parameter Value* Details Cost of Debt 2.92% As specified by Ofgem (10-year trailing average iBoxx rate) Cost of Equity 6.7% The same as DPCR5 and RIIO-GD1 (Gas Distribution 1) Gearing 65% The same as DPCR5 Vanilla WACC 4.24% Derived from cost of debt and cost of eq
Slide 21: U.K. Regulated Segment - PPL Adjustments to the Ofgem Submitted Business Plan
U.K. Regulated Segment - PPL Adjustments to the Ofgem • Ofgem Submitted has required Business that the business Plan based on its plan be submitted set of regulatory assumptions • Converting the regulatory assumptions to PPL’s U.K. Regulated Segment projected earnings requires a number of adjustment
Slide 22: Incentives
Incentives • Incentives (and penalties) are a fundamental element of the RIIO framework • Available incentives include: – Fast-track award equivalent to 2.5% of annual total expenditures (totex) – Interruptions Incentive Scheme (annual performance against targets for the number and duration of inter
Slide 23: RIIO-ED1 Utility Revenue Walk - PPL Adjusted Plan
RIIO-ED1 Utility Revenue Walk - PPL Adjusted Plan 2.8% assumed * Assumes foreign currency exchange rate of $1.58/£. Note: Projections are presented based on Ofgem required assumptions, PPL adjustments and assumed receipt of certain incentives. Actual results may differ materially. © PPL Corporation
Slide 24: U.K. Regulated Segment EPS from Ongoing Operations
U.K. Regulated Segment EPS from Ongoing OperationsStrong Projection earnings continue in RIIO-ED1 Assumes foreign currency exchange rate of $1.58/£. See Appendix for the reconciliation of earnings from ongoing operations to reported earnings. Note: Projections are presented based on Ofgem required a
Slide 25: Cash Repatriation Projection
Cash Repatriation Projection Significant and stable cash flow to parent Assumes foreign currency exchange rate of $1.58/£. Note: Projections are presented based on Ofgem required assumptions, PPL adjustments and assumed receipt of certain incentives. Actual results may differ materially. © PPL Corpo
Slide 26: Concluding Remarks
Concluding Remarks • WPD well-positioned to be fast-tracked • RIIO-ED1 business plan reflects continuation of WPD's standard of: – Cost efficiency – Excellent customer service – Network reliability • Strong stakeholder support for business plan © PPL Corporation 2013 26
Slide 27: Appendix
Appendix © PPL Corporation 2013 27
Slide 28: U.K. Electricity Distribution Price Control Review Schedule
U.K. Electricity Distribution Price Control Review Schedule RIIO-ED1 Timetable Provisional Timing Milestone P September 2012 Publication of Strategy Consultation P March 2013 Strategy decision published P July 2013 DNOs submit and publish business plans November 2013 Initial assessment and fast-trac
Slide 29: Reconciliation of U.K. Regulated Segment Earnings from Ongoing Operations to Reported Earnings
Reconciliation of U.K. Regulated Segment Earnings from Ongoing Operations to Reported Earnings © PPL Corporation 2013 29 Reconciliation of U. K. Regulated Segment Earnings from Ongoing Operations to Reported Earnings (Per Share - Dilute d) Forecast Earnings from Ongoing Operations Special Items: For
Slide 30: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures Earnings from ongoing operations should not be considered as an alternative to reported earnings, or net income attributable to PPL shareowners, which is an indicator of operating performance determined in accordance with U.S. generally accepted accounting
Slide 31: Forward-Looking Information Statement
Forward-Looking Information Statement Statements contained in this presentation, including statements with respect to future earnings, cash flows, financing, regulation and corporate strategy are "forward-looking statements" within the meaning of the federal securities laws. Although PPL Corporation