Slide 1: Third Quarter Earnings Call
Third Quarter Earnings Call October 31, 2007 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 • Third Quarter 2007 Earnings and Review of 2010 Earnings Forecast and Outlook • Third Quarter Segment Results, Revised Forecasts and Financial Overview • Operational Review, 2008 and 2010 Earnings Assumptions • Q&A J. H. Miller P. Farr W. H. Spence 2
Slide 4: Strong Third Quarter Results
Strong Third Quarter Results Earnings from Ongoing Operations Per share $0.58 $0.72 $0.00 $0.50 $1.00 3Q 2006 3Q 2007 3 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share $0.58 $0.84 $0.00 $0.50 $1.00 3Q 2006 3Q 2007 Reported Earnings
Slide 5: Outstanding Year-to-Date Results
Outstanding Year-to-Date Results Earnings from Ongoing Operations Per share $1.79 $2.00 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 YTD 2006 YTD 2007 4 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share $1.78 $2.25 $0.00 $0.50 $1.00 $1.50 $2.00 $2.
Slide 6: Strong Long-Term Earnings Growth Forecast
$2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 2007* 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 $2.50 $2.35 $2.45 $4.00 $4.60
Slide 7: Ongoing Earnings Overview 3rd Quarter
Ongoing Earnings Overview 3rd Quarter $0.14$0.58$0.72Total (0.02)0.150.13International Delivery -0.090.09Pennsylvania Delivery $ 0.16$0.34$0.50Supply Change20062007 (Dollars per Share) 6 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Slide 8: Supply Segment Earnings Drivers
Supply Segment Earnings Drivers 0.01Synfuel 0.03Income taxes and other $0.50Q3 2007 EPS – Ongoing Earnings 0.16Total 0.03Margins – West $0.09Margins – East $0.34Q3 2006 EPS – Ongoing Earnings 3rd Quarter (Dollars per Share) Note: See Appendix for the per share reconciliation of reported earnings and
Slide 9: Pennsylvania Delivery Segment Earnings Drivers
Pennsylvania Delivery Segment Earnings Drivers $0.09Q3 2007 EPS – Ongoing Earnings -Total (0.01)Income Taxes & Other 0.01O&M $ -Delivery Margins $0.09Q3 2006 EPS – Ongoing Earnings 3rd Quarter 8 (Dollars per Share) Note: See Appendix for the per share reconciliation of reported earnings and earnings
Slide 10: International Delivery Segment Earnings Drivers
International Delivery Segment Earnings Drivers (0.04)Latin American Operations 0.01Foreign currency translation $0.13Q3 2007 EPS – Ongoing Earnings (0.02)Total (0.01)Income Taxes & Other (0.01)O&M 0.03Delivery Margins $0.15Q3 2006 EPS – Ongoing Earnings 3rd Quarter (Dollars per Share) 9 Note: See A
Slide 11: 2007 and 2008 Earnings Forecasts
$2.00 $2.25 $2.50 $2.75 2006A* 2007* 2008 2007 and 2008 Earnings Forecasts Forecast 10 *Earnings from ongoing operations – See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. $2.25 $2.50 $2.60 $2.35 $2.45
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. $2.00 $2.25 $2.50 $2.75 2006A 2007E $2.25 Energy Margins $0.22 U.K. Liquidations ($0.07) O&M ($0.05) Internat
Slide 13: Expected 2008 Earnings Contributions
Expected 2008 Earnings Contributions (Dollars per Share) 12 *Midpoint of forecast Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. $2.00 $2.25 $2.50 $2.75 $3.00 2007E 2008E $2.55* PA Delivery Margins $0.06 Depreciation ($0.05) $2.40* Energy Margins
Slide 14: Expected 2010 Earnings Contributions
Expected 2010 Earnings Contributions (Dollars per Share) 13 *Midpoint of forecast $3.00 $3.50 $4.00 $4.50 $5.00 12/2005 Plan 10/2007 Plan $3.50* Increased Energy Margins $0.90 $4.30* Net Impact of Asset Divestitures $(0.06) WPD $0.05 Increased O&M $(0.09)
Slide 15: Cash Flow Forecast
Cash Flow Forecast Millions -$300 -$100 $100 $300 $500 $700 $900 2006A 2007 2008 2009 2010 Free cash flow before dividends 14 Note: See Appendix for the reconciliation of cash flow measures.
Slide 16: Operational Update – Delivery Segment
Operational Update – Delivery Segment • Reached a settlement agreement on distribution rate increase; approval recommended by PUC Judge • Completed two solicitations for one-third of 2010 generation supply • Designing options to help customers mitigate price increases • Divesting of gas and propane
Slide 17: PPL EU Completed Second RFP for 2010
PPL EU Completed Second RFP for 2010 • Solicitation for 850 MWs of residential and small commercial and industrial load • PUC approval of winning bids received October 4, 2007 • Based on two solicitation results, residential bills could increase by approximately 34.5% • Third solicitation bids due M
Slide 18: PPL Electric Utilities Customer Initiatives
PPL Electric Utilities Customer Initiatives • Complete the transition from generation rate caps • Rate design strategies • Energy efficiency and DSM programs • Education and outreach • Proposal to smooth impact of rate cap expiration 17
Slide 19: PPL Electric Utilities Phase-in Plan Proposal
PPL Electric Utilities Phase-in Plan Proposal 18 54-Month Phase-In Plan Average Residential Customer - 1,000 kWh per month $1,000.00 $1,100.00 $1,200.00 $1,300.00 $1,400.00 $1,500.00 $1,600.00 $1,700.00 $1,800.00 1/1/2008 7/1/2008 2009 2010 2011 2012 Annualized Electric Cost ~6% ~6% ~7% ~6% ~6%
Slide 20: Operational Update – Supply Segment
Operational Update – Supply Segment • Scrubbers expected to be completed on schedule and on budget • Generation uprates continue to progress • PJM completed 2009/2010 planning year RPM auction • Divestiture of non-core businesses • Asset expansion 19
Slide 21: RPM Auction Continues to Provide Robust Prices
$188.54 $111.92 $111.92 $148.80 $210.11 $40.80 $40.80 $197.67 $191.32 $191.32 $102.04 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00 $200.00 $220.00 $240.00 $260.00 Rest of Pool MAAC/APS Eastern MAAC Southwest MAAC April 2007 Auction Results - 07/08 Planning Year July 2007
Slide 22: Expected Changes in Margins 2007 to 2008
Expected Changes in Margins -2007 to 2008 21 *Includes power prices and spark spread changes as well as value from portfolio management. 1700 1800 1900 2000 2007A 2008E $1,818 $1,866 Improved Power Value* $110 Higher Nuclear Generation $34 Higher Coal Generation $17 Higher Hydro Generation $10 Highe
Slide 23: Expected 2008 to 2010 Margin Walk
Expected 2008 to 2010 Margin Walk 22 1700 2100 2500 2900 3300 3700 2008E 2010E $1,866 $3,307 Improved Power Value* $969 Higher Capacity Value $540 Higher Nuclear Generation $61 Higher Fuel Costs ($80) Increased Environmental Costs ($49) *Includes power prices and spark spread changes as well as valu
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 23 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 Total
Slide 25: Key Driver to Fleet Value: Open EBITDA
Key Driver to Fleet Value: Open EBITDA 24 2010E Generation Output - millions of MWh 56.2 Unhedged Gross Margin - millions * 3,450 $ O&M - millions (810) $ Open EBITDA - millions 2,640 $ Market value of Hedges - millions * (143) $ * Based on forward market prices as of mid-October 2007
Slide 26: 2010 Margin Sensitivities
2010 Margin Sensitivities • PJM electricity price change of $1/MWh = ±$23M (Based on average ATC price of $64/MWh) • PJM capacity price change of $1/MWD = ±$1.7M (Based on PJM capacity price of $191/MWD) • Baseload generation availability changed by 1% = ±$20M (Based on an EQA of 91%) 25
Slide 27: PPL
PPL
Slide 28: 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 12/05 (2) 2006 2007 2008 2010 2010 8.5 $7.30 $7.25 $45 $39 $50 $51 $37 $62 8.0 $9.01 $8.00 $58 $52 $62 $59 $48 $72 8.88.79.0 $9.04$8.87$7.80
Slide 29: Current Hedge Positions - Electricity and Fuel
Current Hedge Positions -Electricity and Fuel A-2 2007 2008 2009 2010 Electricity Sales East 98% 94% 90% 47% West 100% 100% 80% 64% Total 98% 95% 89% 49% Coal East 100% 92% 79% 69% West 100% 100% 100% 100% Total 100% 94% 84% 77%
Slide 30: Growing Constrained Region in PJM Increases Value of PPL Generation
Growing Constrained Region in PJM Increases Value of PPL Generation Constrained Region Constrained Region Montour Brunner Island Holtwood Wallenpaupack Martins Creek Keystone Conemaugh Safe Harbor Lower Mt. Bethel PA Combustion Turbines Susquehanna Existing Constraint PJM Constrained Region (MAAC +
Slide 31: 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 – 5% to 6% annual increase in 2007 to 2010 A-4 Central PA 16% PRB 6% Montana Mine-mouth 20% Central Appalachia 13% Southwest PA 45%
Slide 32: PPL Supply Business Overview
PPL Supply Business Overview 2007 Production GWh A-5 Gas/Oil 33% Coal 37% Nuclear 19% Hydro8% QFs 3% 2007 Installed Capacity MW* Gas/ Oil 5% Coal 56% Nuclear 31% Hydro 8% *Excludes Martins Creek Units 1&2, which were retired in September 2007.
Slide 33: Key Drivers/Challenges Through 2010 and Beyond
Key Drivers/Challenges Through 2010 and Beyond • 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 coal-fired power plants • Continue
Slide 34: 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 35: Shrinking Reserve Margins Create Potential Value for PPL
Shrinking Reserve Margins Create Potential Value for PPL 5% 10% 15% 20% 2007 2008 2009 2010 PJM Mid-Atlantic Expected Reserve Margin PJM Required 15% Reserve Margin A-8
Slide 36: PPL's Generation Portfolio
PPL’s Generation Portfolio Total Domestic Generation: 11,196 MW Planned Uprate Projects: 355 MW *Reflects reduction of 300 MW at Martins Creek that PPL retired in September 2007 and 60 MW expected loss due to increased plant usage during scrubber operation. A-9 Coal 3,454* Nuclear 2,120 Oil 1,722 Ga
Slide 37: 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-10 Q2-09Brunner Island 1 & 2 Q4-08Brunner Island 3 Q2-08Montour 2 Q1-08Montour 1 Scheduled In-Service Dates
Slide 38: Continued Dividend Growth
$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 Continued Dividend Growth A-11 *Annualized rate based on quarterly dividend declared in February 2007.
Slide 39: PPL Electric Utilities Distribution Rate Case Settlement
PPL Electric Utilities Distribution Rate Case Settlement $2,020 million Distribution rate base 43.1%Common equity 11.5%Return on equity $55.0 million$77.0 million Revenue increase Global Settlement PPL Electric Utilities Request A-12 October 2007 ALJ recommended settlement approval (non-binding) By
Slide 40: 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-13 $907$169$(180)$491$167Free Cash Flow before Dividends (15)10124198385Other Investing Activities-net (1,468)(1,446)(1,621)(1,747)(1,394)Capital Expenditures --(310)(301)(282)Transition Bond Repayment
Slide 41: Capital Expenditures by Segment
Millions $746 $1,121 $1,036 $822 $746 $689 $309 $315 $282 $297 $386 $474 $339 $311 $303 $327 $336 $342 $0 $400 $800 $1,200 $1,600 $2,000 2006A 2007E 2008E* 2009E* 2010E* 2011E* Supply PA Delivery International Delivery $1,394 $1,468 $1,505$1,446 $1,621 $1,747 Capital Expenditures by Segment A-14 *Ca
Slide 42: Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations A-15 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending September 30, 2007 Reported earnings $205 $9 $108 $322 Special Items: MTM adj's from energy-related, nontrading econ
Slide 43: Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of Third Quarter Reported Earnings and Earnings from Ongoing Operations A-16 Pennsylvania International Supply Delivery Delivery Total Qtr. Ending September 30, 2007 Reported earnings $0.53 $0.03 $0.28 $0.84 Special Items: MTM adj's from energy-related, nontrading economic hedges (0.0
Slide 44: 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-17 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Year-to-Date September 30, 2007 Reported earnings $454 $97 $319 $870 Special Items: MTM adj's from energy-related, nontrading eco
Slide 45: 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-18 Pennsylvania International Supply Delivery Delivery Total Year-to-Date September 30, 2007 Reported earnings $1.17 $0.25 $0.83 $2.25 Special Items: MTM adj's from energy-related, nontrading economic hedges 0.05
Slide 46: 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 $2.60 $2.50 $2.25 $2.08 Special items (net of taxes): economic hedges 0.05 0.05 (0.03) Write-off of Hurricane Isabel regulatory asset (0.02) Synfuels
Slide 47: Credit Ratings
Credit Ratings A-20 STABLE STABLE STABLE Outlook AAA3Senior Secured Debt F-2A-2P-2Commercial Paper BBB+ BBBBaa3Preferred Stock ABaa1Issuer Rating AAA3First Mortgage Bonds AAAAaa Pollution Control Bonds* BBBBBBBaa3Preference Stock PPL Electric Utilities BBBBBBBaa2Senior Unsecured Debt BBBBB+ Baa3Subo
Slide 48: Credit Ratings (cont.)
Credit Ratings (cont.) A-21 A-3Commercial Paper ABBB+ Baa1Senior Unsecured Debt F2A-2P-2Commercial Paper STABLE STABLE STABLE Outlook BBB+ BBB+ Baa1Issuer Rating ABBB+ Baa1Senior Unsecured Debt F2A-2Commercial Paper STABLE STABLE STABLE Outlook Western Power Distribution (South West) PLC BBB+ BBB+ I
Slide 49: 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, regulation, cash flows, credit profile, financing, dividends, bus
Slide 50: Definitions of Financial Measures
Definitions of Financial Measures A-23 “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