Slide 1: Second Quarter Earnings Call
Second Quarter Earnings Call August 2, 2007
Slide 2: Cautionary Statements And Factors That May Affect Future Results
Cautionary Statements And Factors That May Affect Future Results &nbs p; 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 resu
Slide 3: Agenda
Agenda • Second Quarter 2007 Earnings and Review of Longer-Term Earnings and Outlook • Second Quarter Operating Results, 2007 Forecast and Financial Overview • Operational Review • Q&A J. H. Miller P. Farr W. H. Spence
Slide 4: Strong Second Quarter Results
Strong Second Quarter Results Earnings from Ongoing Operations Per share $0.53 $0.63 $0.00 $0.50 $1.00 2Q 2006 2Q 2007 3 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share < /font> $0.47 $0.88 $0.00 $0.50 $1.00 2Q 2006 2Q 2007 Reported Earn
Slide 5: Solid Year-to-Date Results
Solid Year-to-Date Results Earnings from Ongoing Operations Per share $1.21 $1.28 $0.00 $0.50 $1.00 $1.50 YTD 2006 YTD 2007 4 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share $1.19 $1.41 $0.00 $0.50 $1.00 $1.50 YTD 2006 YTD 2007 Reported
Slide 6: Strong Long-Term Earnings Growth Forecast
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. * Midpoint of $2.40 to $2.50 earnings forecast. $3.50 $2.25 $2.45 $0.00 $1.00 $2.00 $3.00 $4.00 2006A** 2007 2010
Slide 7: Ongoing Earnings Overview
Ongoing Earnings Overview 2 nd Quarter Total $0.63 $0.53 $0.10 International Delivery 0.26 0.20 0.06 Pennsylvania Delivery 0.07 0.08 (0.01) Supply $0.30 $0.25 $ 0.05 2007 2006 Change (Dollars per Share) 6 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongo
Slide 8: Supply Segment Earnings Drivers
Supply Segment Earnings Drivers Q2 2007 EPS – Ongoing Earnings $0.30 Total 0.05 O&M (0.02) Margins–West - Margins–East $0.07 Q2 2006 EPS – Ongoing Earnings $0.25 2 nd Quarter (Dollars per Share) 7 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing oper
Slide 9: Pennsylvania Delivery Segment Earnings Drivers
Pennsylvania Delivery Segment Earnings Drivers Q2 2007 EPS – Ongoing Earnings $0.07 Total (0.01) Income Taxes & Other (0.01) O&M (0.01) Delivery Margins $0.01 Q2 2006 EPS – Ongoing Earnings $0.08 2 nd Quarter 8 (Dollars per Share) Note: See Appendix for the per share reconciliation of reported earni
Slide 10: International Delivery Segment Earnings Drivers
International Delivery Segment Earnings Drivers Latin American Operations 0.03 Foreign currency translation 0.02 Q2 2007 EPS – Ongoing Earnings $0.26 Total 0.06 Income Taxes & Other 0.03 O&M (0.02) Delivery Margins - Q2 2006 EPS – Ongoing Earnings $0.20 2 nd Quarter (Dollars per Share) 9 Note: See A
Slide 11: 2007 Ongoing Earnings Forecast
2007 Ongoing Earnings Forecast EPS (Dollars per Share) $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 2005A 2006A 2007 Forecast $2.08 $2.25 $2.40 to $2.50 10 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Slide 12: Expected 2007 Ongoing Earnings Contributions
Expected 2007 Ongoing Earnings Contributions (Dollars per Share) 11 *Midpoint of forecast Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. $1.50 $2.00 $2.50 $3.00 2006A $2.25 Energy Margins $0.22 Latin Ame rican Operations ($0.03) U.K. Liquidations
Slide 13: Cash Flow Forecast
Cash Flow Forecast Millions -$300 -$100 $100 $300 $500 $700 $900 $1,100 2006A 2007 2008 2009 2010 Free cash flow before dividends 12 Note: See Appendix for the reconciliation of cash flow measures.
Slide 14: Annualized dividend per share
$0.82 $0.92 $1.00 $1.10 $1.22 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 2004 April 2005 October 2005 April 2006 April 2007* $/share Annualized *Annualized rate based on quarterly dividend declared in February 2007.
Slide 15: Operational Update
Operational Update •Scrubbers expected to be completed on schedule and on budget •Generation uprates continue to progress •PPL Electric Utilities completed first solicitation for 2010 generation supply •Continue to work through process of PPL EU rate increase •Divestiture of non-core businesses 14
Slide 16: PPL EU Completed First RFP for 2010
PPL EU Completed First RFP for 2010 •Solicitation for 850 MWs of residential and small commercial and industrial load •PUC approval of winning bids received July 26, 2007 •Based on first solicitation results, residential bills could increase by approximately 28% •Second solicitation bids due October
Slide 17: PPL Electric Utilities Distribution Rate Case Facts
PPL Electric Utilities Distribution Rate Case Facts Dist ribution rate base $2,020 million $2,015 million $2,017 million (est.) Common equity 43.1% 43.1% 43.1% Return on equity 11.5% 9.36% 10.13% Revenue increase $77.0 million $27.0 million $49.0 million (est.) Office of Trial Staff < /font> Office
Slide 18: Growing Constrained Region in PJM Increases Value of PPL Generation
Growing Constrained Region in PJM Increases Value of PPL Generation 17 CCoonnssttrraainineedd R Reeggioionn CCoonnssttrraainineedd R Reeggioionn Montour Brunner Island Holtwood Wallenpaupack Martins Creek Keystone Conemaugh Safe Harbor PA Combustion Turbines Lower Mt. Bethel Susquehanna EExxisisttin
Slide 19: RPM Auction Provided Robust Prices
RPM Auction Provided Robust Prices 18 $111.92 $148.80 $210.11 $188.54 $197.67 $40.80 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00 $200.00 $220.00 Rest of Pool Eastern MAAC Southwest MAAC April 2007 Auction Results - 07/08 Planning Year July 2007 Auction Results - 08/09 P
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Slide 21: Market Prices
Market Prices (1) Market prices based on the average of broker quotes as of 6/29/2007 . (2) 24-hour average. (3) NYMEX and TZ6NNY forward gas prices on 6/29/2007 . (4) Prices at 12/2005 when 2010 earnings forecast of $3.50 was developed. (5) Market Heat Rate = PJM on-peak power price divided by TZ6N
Slide 22: Current Hedge Positions - Electricity and Fuel
Current Hedge Positions - Electricity and Fuel A-2 Total 97% 86% 78% Coal East 96% 80% 70% West 100% 100% 100% Total 98% 97% 94% West 100% 100% 77% East 97% 97% 97% Electricity Sales 2007 2008 2009
Slide 23: PPL's Generation Portfolio
PPL’s Generation Portfolio Oil 52 Hydro 44 Total Domestic Generation: 11,196 MW Planned Uprate Projects: 355 MW Coal 3,454* Nuclear 2,120 Oil 1,722 Gas 1,524 Hydro 337 CTs 451 QFs 299 East 9,907 MW* Nuclear Uprate (2008-2010) 143 Hydro Uprate (2011) 125 Coal Uprate (2007-2009) 37 Coal 687 Hydro 602
Slide 24: PPL's Generation Portfolio / Supply Business Overview
PPL’s Generation Portfolio Oil 52 H ydro 44 Total Domestic Generation: 11,196 MW Planned Uprate Projects: 355 MW Coal 3,454* Nuclear 2,120 Oil 1,722 Gas 1,524 Hydro 337 CTs 451 QFs 299 East 9,907 MW* Nuclear Uprate (2008-2010) 143 < /strong> Hydro Uprate (2011) 125 Coal Uprate (2007-2009) 37 Coal 68
Slide 25: Proactive Coal Supply Management Supports Growth in Margins
Proactive Coal Supply Management Supports Growth in Margins Projected 2007 Coal Supply • Supply region diversity • Fleet trains (1600 cars) • Average delivered costs – 4%-5% annual increase 2006 to 2010 A-5 Central PA 16% PRB 6% Montana Mine-mouth 21% Central Appalachia 12% Southwest PA 45%
Slide 26: Key Drivers/Challenges Through 2010
Key Drivers/Challenges Through 2010 • Increased prices for POLR sales • Expiration of supply contracts remarketed at current forward prices • Power plant uprates • Net economic benefits from the installation of scrubbers at the Montour and Brunner Island coalfired power plants • Increased fuel and O
Slide 27: Increasing Prices Under the POLR Contract
Increasing Prices Under the POLR Contract $42.30 $42.70 $43.30 $44.10 $47.80 $48.40 $49.10 $50.20 0 10 20 30 40 50 60 2002 2003 2004 2005 2006 2007 2008 2009 $/MWh A-7 Note: Includes Gross Receipts Tax (GRT) at a rate of 4.4%.
Slide 28: Distribution Rate Case Timetable
Distribution Rate Case Timetable June 2007 Public input hearings January 1, 2008 New distribution rates effective December 2007 PUC adopts and enters final order Administrative Law Judge issues recommended decision (non-binding) October 2007 August 2007 Evidentiary hearings May 30, 2007 Rate case su
Slide 29: Scrubbers Expected to be Completed on Budget and on Schedule
Scrubbers Expected to be Completed on Budget and on Schedule Montour Unit #2 Absorber A-9 Brunner Island 1 & 2 Q2-09 Brunner Island 3 Q4-08 Montour 2 Q2-08 Montour 1 Q1-08 In-Service Dates
Slide 30: 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-10 Free Cash Flow before Dividends $167 $(89) $90 $391 $832 Other Investing Activities-net 85 310 19 (2) 34 Capital Expenditures (1,394) (1,747) (1,398) (1,286) (1,284) Transition Bond Repayment (282) (
Slide 31: Capital expenditures by segment
Millions $738 $1,121 $819 $643 $570 $603 $340 $315 $291 $348 $409 $469 $316 & nbsp; $311 $288 $295 $305 $311 $0 $400 $800 $1,200 $1,600 $2,000 2006A 2007E 2008E 2009E 2010E 2011E Supply PA Delivery International Delivery $1,394 $1,284 $1,383 $1, 286 $1,398 $1,747 A-11 ;
Slide 32: Reconciliation of Second Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Second Quarte r Reported Earnings and Earnings from Ongoing Operations A-12 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending June 30, 2007 Reported earnings $132 $30 $183 $345 Special Items: MTM adj's from energy-related, nontrading econom
Slide 33: Reconciliation of Second Quarter Reported Earnings and Earnings from Ongoing Operations (Per Share)
econciliation of Second Quarter Reported Earnings and Earnings from Ongoing Operations A-13 (Dollars Per Share) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending June 30, 2007 Reported earnings $0.34 $0.07 $0.47 $0.88 Special Items: MTM adj's from energy-related, non-trading econ
Slide 34: 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-14 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Year-to-Date June 30, 2007 Reported earnings $249 $88 $211 $548 Special Items: MTM adj's from energy-related, nontrading economic
Slide 35: Reconciliation of Year-to-Date Reported Earnings and Earnings from Ongoing Operations (Per Share)
Reconciliation of Year-to-Date Reported Earnings and Earnings from Ongoing Operations A-15 (Dollars Per Share) Pennsylvania International Supply Delivery Delivery Total Year-to-Date June 30, 2007 Reported earnings $0.64 $0.23 $0.54 $1.41 Special Items: MTM adj's from energy-related, non-trading econ
Slide 36: Reconciliation of PPL's Reported Earnings and Earnings from Ongoing Operations
Reconciliation of PPL’s Reported Earnings and Earnings from Ongoing Operations High Low 2007 2007 2006 2005 Per Share Earnings from Ongoing Operations $2.50 $2.40 $2.25 $2.08 Special items (net of taxe s): economic hedges 0.07 0.07 (0.03) Write-off of Hurricane Isabel regulatory asset (0.02) Synfuel
Slide 37: Credit Ratings
Credit Ratings A-17 Outlook STABLE STABLE STABLE Senior Secured Debt A3 A- ACommercial Paper P-2 A-2 F-2 Preferred Stock Baa3 BBB BBB+ Issuer Rating Baa1 AFirst Mortgage Bonds A3 A- AP ollution Control Bonds* Aaa AAA Preference Stock Baa3 BBB BBB PPL Electric Utilities Senior Unsecured Debt Baa2 BBB
Slide 38: Credit Ratings (cont.)
Credit Ratings (cont.) A-18 Commercial Paper A-3 Issuer Rating Baa1 BBB+ BBB+ Senior Unsecured Debt Baa1 BBB+ ACommercial Paper P-2 A-2 F2 Outlook STABLE STABLE STABLE Western Power Distribution (South West) PLC Issuer Rating BBB+ BBB+ Senior Unsecured Debt Baa1 BBB+ ACommercial Paper A-2 F2 Outlook
Slide 39: Forward-Looking Information Statement
Forward-Looking Information Statement Statements contained in this news release, including statements with respect to future earnings, energy prices, margins, sales and supply, marketing performance, growth, revenues, expenses, rates, cash flows, credit profile, financing, div idends, business dispo
Slide 40: Definitions of Financial Measures
Definitions of Financial Measures A-20 “Earnings from ongoing operations” excludes the impact of special items. Special items include charges, credits or gains that are unusual or non-recurring and the mark-to-market impact of energy-related, non-trading economic hedges. The mark-to-market impact of