PPL (PPL) Q4 2005 earnings summary

Executive summary

• FY05 revenue rose to $6.219B from $5.794B; net income was $678M versus $698M, and diluted EPS was $1.77 versus $1.89.

• Operating income was $1.346B versus $1.400B; results included several unusual charges, notably the Sundance sale loss and Martins Creek ash-basin remediation.

• Strategy centered on matching generation with contracted demand while pursuing stable growth in regulated delivery; 2006 supply margins were projected higher.

Financial highlights

• Operating revenue increased to $6.219B from $5.794B; operating income declined to $1.346B from $1.400B.

• Net income was $678M, down from $698M; income from continuing operations increased to $737M from $713M.

• Adjusted for notable one-time items, 2005 included a $47M after-tax Sundance sale loss, $31M after-tax Martins Creek remediation charge and $6M after-tax NorthWestern settlement charge.

• Operating cash flow was $1.388B, down 7% YoY, mainly on higher tax payments and fuel expenditures; financing cash use was $676M.

Outlook and guidance

• 2006 Supply margins were projected higher, led by an 8.4% increase in PLR generation prices, higher output, replacement contracts at higher prices and lower purchased-power costs; fuel, O&M and lower synfuel earnings were offsets.

• International Delivery 2006 O&M was expected to rise on U.K. pension costs; higher U.S. income taxes and potentially unfavorable FX were also cited.

• Pennsylvania Delivery revenue was projected flat in 2006, reflecting modest load growth and unusually warm-weather-driven higher 2005 sales; O&M was expected to increase.

• Expected 2006 year-end cash, cash equivalents and short-term investments were ~$400M, with ~$3.3B of credit facilities maintained.