PPL (PPL) Q4 2006 earnings summary

Executive summary

• Record 2006 earnings from ongoing operations of $858 million, or $2.22 diluted EPS, despite mild weather, plant outages and storm costs; GAAP net income was $865 million.

• Strategy combines competitive generation and marketing with regulated delivery businesses; management targets 2010 EPS 90% above 2004.

• Total shareowner return exceeded 26% in 2006; 10-year return was 373%, versus 124% for the S&P 500.

Financial highlights

• Operating revenue was $6.899 billion in 2006, up from $6.179 billion; operating income was $1.599 billion, versus $1.349 billion.

• Net income was $865 million versus $678 million; diluted EPS was $2.24 versus $1.77. Earnings from ongoing operations were $858 million, or $2.22 diluted EPS, versus $798 million, or $2.08.

• Operating cash flow rose to $1.758 billion from $1.388 billion; capital expenditures increased to $1.394 billion from $811 million.

• 2006 unusual items included a $21 million after-tax Black Lung Trust benefit, $16 million loss on the Griffith sale and $6 million synfuel impairment; adjusted ongoing earnings exclude unusual items.

Outlook and guidance

• 2007 diluted EPS forecast midpoint was $2.35; the $1.22 annualized dividend equaled 52% of that midpoint.

• 2007 Supply earnings expected to rise on higher energy margins; planned outages, Martins Creek unit retirements and higher fuel and O&M costs are offsets.

• International Delivery earnings expected to decline in 2007; higher margins are expected to be offset by operating costs and a higher U.K. tax rate. Pennsylvania Delivery earnings expected to be flat.

• 2010 EPS plan was 90% above 2004; projections assume higher generation output, planned capacity additions and scrubber benefits, alongside higher O&M costs.

• Planned 2007–2011 capital expenditures totaled $6.8 billion; expected capacity additions were 349 MW.