PPL Corporation (PPL)

PPL 
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PPL Corporation (PPL)

Q2 2010 Earnings Call Transcript

August 5, 2010 9:00 am ET

Executives

Joe Bergstein – Manager, IR

Jim Miller – Chairman, President and CEO

Paul Farr – EVP and CFO

Bill Spence – EVP and COO; President of PPL Generation

Analysts

Paul Patterson – Glenrock Associates

Greg Gordon – Morgan Stanley

Ashar Khan – Visium Asset Management

Yiktak Fung – Zimmer Lucas Partners

Edward Heyn – Catapult

Brian Chin – Citigroup

Julien Dumoulin-Smith – UBS

Jonathan Arnold – Deutsche Bank

Presentation

Operator

Good morning. My name is Celeste and I will be your conference operator today. At this time, I would like to welcome everyone to the PPL Corporation’s second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)

I would now like to turn today’s call over to Mr. Joe Bergstein. Please go ahead, sir.

Joe Bergstein

Thank you. Thank you for joining the PPL conference call on second quarter results and our general business outlook. We are providing slides of this presentation on our Web site at www.pplweb.com.

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 differ materially from such forward-looking statements. A discussion of factors that could cause actual results or events to vary is contained in the appendix to this presentation and in the Company’s SEC filing.

At this time, I would like to turn the call over to Jim Miller, PPL Chairman, President and CEO.

Jim Miller

Thanks, Joe. Good morning, everyone. We’ll start today’s call with the general business update and we’ll also, obviously, include a summary of the status of the E.ON U.S. transaction and commentary on our quarterly results, and then we’ll take all your questions.

Joining me on the call are Paul Farr, Chief Financial Officer; and Bill Spence, Chief Operating Officer. This morning we reported quarterly GAAP earnings of $0.22 a share compared with a loss of $0.02 a share in the second quarter of 2009. Earnings from ongoing operations for the second quarter were $0.62 per share this year compared with $0.32 per share in 2009.

For the first six months of the year, our reported earnings were $0.88 per share, $0.26 higher than a year ago. Our earnings from ongoing operations for this period were $1.56 a share, $0.65 higher than last year.

As expected, Energy Supply segment earnings drove the improvement in our financial performance for the second quarter and for the first half of the year. These results and our forecast for the balance of the year put us on target to achieve significantly improved earnings in 2010 compared to our 2009 results.

Before we move on to a discussion of the earnings forecast for 2010, I’ll take a minute to update you on our proposed acquisition of E.ON U.S. As you all know, in late June we successfully completed the equity portion of our financing requirements for the acquisition, raising $3.5 billion in net proceeds through the sale of common stock and equity units. The equity offering was significantly oversubscribed, which we believe validates our strategy and the decision to pursue this acquisition for our shareowners.

Also, we’re on schedule to obtain all the regulatory approvals related to the transaction. These include change in control filings with the Kentucky Public Service Commission, state regulators in Virginia and Tennessee and the Federal Energy Regulatory Commission.

In Kentucky, the PSC has scheduled hearings for early September, which is consistent with the timing we had anticipated. Additionally, the Federal Trade Commission and U.S. Department of Justice have granted early termination for both of the notices that were required under Hart-Scott-Rodino Act. Clearly, we remain on track to close this important transaction later this year.

You also may have read that late last week the Kentucky PSC approved $189 million increase in rates for LG&E and Kentucky Utilities, accepting a settlement agreement to buy most of the intervening parties. The Commission also reiterated its position that the PPL transaction did not preclude a proper analysis of these rate increase requests, which were filed in January, well before the announcement of our proposed acquisition.

We remain confident that this acquisition will increase shareowner value in the long term by growing the size of our regulated businesses, while retaining the upside from competitive market opportunities as energy markets fundamentals improve.

Now, let’s turn to our 2010 earnings forecast. As indicated on this slide, we’ve adjusted our 2010 ongoing earnings per share forecast to reflect the dilution associated with the recent common stock and equity unit issuances.

It’s important to emphasize that the change in the forecast range is based solely on the dilutive effect of the new equity. Factoring in about a half year waiting for the 103.5 million new shares and the interest cost of the equity units, our forecast for 2010 earnings from ongoing operations is now $2.70 to $3.05 per share.

While we don’t provide guidance on a quarterly basis, I’d note that the results we will report for the third and fourth quarters will obviously reflect a 100% weighting of the shares and interest expense for those periods. Our forecast for GAAP earnings for the year reflects special items recorded through the first half of the year and the dilutive effect of the new equity, now, $2.10 to $2.45 per share.

Read the rest of this transcript for free on seekingalpha.com