Ppl Corporation · NYSE:PPL
Ppl — Q1 2007 Earnings Presentation
38 slides from Ppl's earnings presentation, May 3, 2007
Slide 1: First Quarter Earnings Call
First Quarter Earnings Call May 3,
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 J. H. Miller P. Farr W. H. Spence • First Quarter 2007 Earnings and Review of Longer-Term Earnings and Outlook • First Quarter Operating Results, Forecast and Financial Overview • Operational Review • Q&A
Slide 4: Solid First Quarter Results
Solid First Quarter Results Earnings from Ongoing Operations Per share Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share Reported Earnings
Slide 5: Strong Long-Term Earnings Growth
Strong Long-Term Earnings Growth Forecast * * Midpoint of $2.30 to $2.40 earnings forecast. ** Earnings from ongoing operations – See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations
Slide 6: Ongoing Earnings Overview
Ongoing Earnings Overview 1st Quarter Variance Supply $0.32 $0.32 $ - Pennsylvania Delivery 0.15 0.15 - International Delivery 0.18 0.21 (0.03) Total $0.65 $0.68 $(0.03) (Dollars per Share) Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Slide 7: Supply Segment Earnings Drivers 1st Quarter
Supply Segment Earnings Drivers 1 st Quarter Q1 2006 EPS – Ongoing Earnings $0.32 Margins – East ($0.01) Margins – West (0.01) Synfuel 0.03 Income Taxes & Other (0.01) Total 0.00 Q1 2007 EPS – Ongoing Earnings $0.32 (Dollars per Share) Note: See Appendix for the per share reconciliation of reported
Slide 8: Pennsylvania Delivery Segment Earnings Drivers 1st Quarter
Pennsylvania Delivery Segment Earnings Drivers 1 st Quarter Q1 2006 EPS – Ongoing Earnings $0.15 Delivery Margins $0.02 O&M (0.01) Income Taxes & Other (0.01) Total 0.00 Q1 2007 EPS – Ongoing Earnings $0.15 (Dollars per Share) Note: See Appendix for the per share reconciliation of reported earnings
Slide 9: International Delivery Segment Earnings Drivers 1st Quarter
International Delivery Segment Earnings Drivers 1 st Quarter Q1 2006 EPS – Ongoing Earnings $0.21 Delivery Margins ($0.02) O&M (0.01) Income Taxes & Other (0.02) Foreign currency translation 0.02 Total (0.03) Q1 2007 EPS – Ongoing Earnings $0.18 (Dollars per Share) Note: See Appendix for the per sha
Slide 10: 2007 Ongoing Earnings Forecast
2007 Ongoing Earnings Forecast EPS $2.08 (Dollars per Share) $2.25 $2.30 to $2.40 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Slide 11: 2007 Ongoing Earnings Contributions
2007 Ongoing Earnings Contributions $2.25 Energy Margins $0.22 International Delivery Margins $0.07 U.K. Liquidations ($0.07) O&M ($0.03) Depreciation ($0.05) Income Taxes & Other ($0.04) $2.35* (Dollars per Share) *Midpoint of forecast Note: See Appendix for the reconciliation of reported earnings
Slide 12: Cash Flow Forecast
Cash Flow Forecast Millions Note: See Appendix for the reconciliation of cash flow measures.
Slide 13: Dividend Payout Ratio Greater than 50% after 2006
Dividend Payout Ratio Greater than 50% after 2006 $/share Annualized *Annualized rate based on quarterly dividend declared in February 2007.
Slide 14: Operational Update
Operational Update • Scrubbers expected to be completed on schedule and on budget • Generation uprates remain on schedule • PUC action expected shortly regarding PPL Electric Utilities’ POLR transition proposal • PPL EU filed for $83.6 million rate increase • Continued strength of customer service a
Slide 15: Key Drivers of Margin Growth
Key Drivers of Margin Growth $1,675 $1,818 $1,845 $1,984 $2,748 Supply Margins (Millions)
Slide 16: Growing Constrained Region in PJM Increases Value of PPL Generation
Existing Constraint Constrained Region Constrained Region PJM Projected Constrained Region Beginning in 2009 Growing Constrained Region in PJM Increases Value of PPL Generation Montour Brunner Island Holtwood Wallenpaupack Martins Creek Keystone Conemaugh Safe Harbor Lower Mt. Bethel PA Combustion T
Slide 17: RPM Auction Provided Robust Prices
saw som ‘200.0 steom0 steoc0 svo0 sreoo tooo 000 soo sroo0 somo x00 RPM Auction Provided Robust Prices PJM 2007/08 Planning Year ‘PUMMarket Trial Resuits Rltid sim ‘@April2007 Auction Results srs ser + 08109 Planning year auction — July 2007 + 09M0 Planning year auction — Oct. 2007 + 101 Planning ye
Slide 18: Slide 18
Slide 19: Market Prices
2010 2006 2007 2008 2010 Market Prices EAST PJM On-Peak Off-Peak ATC (2) WEST Mid-Columbia On-Peak Off-Peak ATC (2) GAS NYMEX Price (3) (1) Market prices based on the average of broker quotes as of 3/30/2007. (2) 24-hour average. (3) NYMEX forward gas price on 3/30/2007. (4) Prices at 12/2005 when 2
Slide 20: Current Hedge Positions - Electricity and Fuel
Current Hedge Positions - Electricity and Fuel A-2 Electricity Sales East 96% 100% 97% West 100% 100% 77% Total 97% 100% 94% Coal East 96% 82% 74% West 100% 100% 78% Total 97% 87% 75%
Slide 21: PPL's Generation Portfolio
PPL’s Generation Portfolio [Total Domestic Generation: 11,196 MW ] Planned Uprate Projects: _355 MW. 9,907 Mave Coal Nuclear oil Gas Hydro cts Fs Coal Hydro “Reflects reduction of 300 MW at Martins Creek that PPL has agreed to shut dawn by Soptomber 2007 and 60 MW expoctod loss due to increased plan
Slide 22: PPL Supply Business Overview
PPL Supply Business Overview Gas/Oil 32% Coal 39% Gas/ Oil 6% Coal 56% n In 2007, 94% of our owned generation output is expected to be produced at a fuel cost of approximately $16/MWh or less. Production GWh A-4 Nuclear 18% Hydro 8% QFs 3% Installed Capacity MW Nuclear 30% Hydro 8%
Slide 23: Proactive Coal Supply Management Supports Growth in Margins
Proactive Coal Supply Management Supports Growth in Margins Montana Mine-mouth 21% Central Appalachia 11% Projected 2007 Coal Supply A-5 Central PA 17% PRB 6% Southwest PA 45% • Supply region diversity • Fleet trains (1600 cars) • Average delivered costs – 4%-5% annual increase to 2010
Slide 24: Hedging accounting example
• PPL enters into a sales contract to deliver 100 MWs per hour ATC from January through June 2007 for $75/MWh. This contract receives accrual accounting. • On October 1, 2006, PPL enters into a corresponding forward purchase at $65/Mwh to “lock in” a gross margin of $10/MWh. Assumed market prices at
Slide 25: Key Drivers/Challenges Through 2010
Key Drivers/Challenges Through 2010 A-7 • 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 • Increased fuel
Slide 26: Increasing Prices Under the POLR Contract
Increasing Prices Under the POLR Contract A-8
Slide 27: 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 In-Service Dates Montour Q1-08 Montour Q2-08 Brunner Island Q4-08 Brunner Island 1 & 2 Q2-09
Slide 28: PPL Proposal to Transition to Competitive Electricity Markets
PPL Proposal to Transition to Competitive Electricity Markets A-10 • Conduct procurements for 2010 POLR supply in March and September of 2007, 2008 and 2009 • Reduce the risk of customer exposure to price spikes in wholesale markets • PUC approval would remove risk for PPL Electric Utilities by ensu
Slide 29: PPL Electric Utilities Distribution Rate Case Facts
PPL Electric Utilities Distribution Rate Case Facts Amount of distribution revenue increase request $83.6 million % Total revenue increase 2.7% % Distribution revenue increase 13% 12/31/2006 Proposed Distribution rate base $1,925 million $2,023 million Rate of return on rate base 6.62% 8.36% Common
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-12 Cash from Operations $1,758 $1,642 $1,779 $1,679 $2,082 Increase/(Decrease) in cash due to: Transition Bond Repayment (282) (294) (310) - - Capital Expenditures (1,394) (1,732) (1,397) (1,212) (1,168
Slide 31: Capital Expenditures by Segment
Capital Expenditures by Segment Millions $1,394 $1,168 $1,271 $1,212 $1,397 $811 $1,732 A-13
Slide 32: Reconciliation of First Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of First Quarter Reported Earnings and Earnings from Ongoing Operations A-14 (Millions of Dollars)
Slide 33: Reconciliation of First Quarter Reported Earnings and Earnings from Ongoing Operations
Reconciliation of First Quarter Reported Earnings and Earnings from Ongoing Operations A-15 (Dollars Per Share)
Slide 34: Reconciliation of PPL's Reported Earnings and Earnings from Ongoing Operations
Reconciliation of PPL’s Reported Earnings and Earnings from Ongoing Operations A-16
Slide 35: Credit Ratings
PPL Corporation Issuer Rating Outioak PPL Energy Supply Issuer Rang Senior Notes Canmercial paper Outloak PPL Capital Funding Senior Unsecured Debt Subordinated Debt Medium-Term Notes Outioak PPL Electric Utilities Issuer Rating First Martgage Bonds Pollan Contral Bands* Senior Secured Debt Corrmerc
Slide 36: Credit Ratings (cont.)
Credit Ratings (cont.) Moody's Standard & Poor's Fitch PPL Transition Bond Co. Transttin Bonds Aaa AAA ANN PPL Montana Pass-Through Certificates Baad Es BBS Outloak STABLE STABLE WPD Holdings Limited Issuer Rang Baad Boe BEE Senior Unsecured Debt Baad BBE BBE Commercial Paner 3 Outlook STABLE STABLE
Slide 37: Forward-Looking Information Statement
Forward-Looking Information Statement Statements contained in this presentation, including statements with respect to future earnings, energy prices, margins and sales, marketing performance, regulatory action, growth, rates, revenues, expenses, cash flows, cash from operations, dividends, credit pr
Slide 38: 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