PPL (PPL) Q4 2010 earnings summary

Executive summary

• The November acquisition of LKE for $7.6 billion expanded regulated utility operations; regulated businesses were projected to provide 50% of 2011 net income and a significant majority of annual earnings and operating cash flow by 2013.

• Regulated rate-base growth was projected to exceed 8% annually over five years; the Central Networks transaction was expected to add U.K. customers and earnings accretion.

Financial highlights

• 2010 operating revenue was $8.521 billion vs. $7.449 billion; operating income was $1.866 billion vs. $896 million.

• Net income attributable to PPL was $938 million vs. $407 million; earnings from ongoing operations were $1.358 billion vs. $738 million.

• Diluted EPS was $2.17 vs. $1.08; ongoing diluted EPS was $3.13 vs. $1.95. Ongoing earnings are a non-GAAP measure excluding special items.

• Capital expenditures were $1.644 billion vs. $1.265 billion; 2010 results included two months of LKE operating results.

Outlook and guidance

• 2011 Supply earnings were projected lower YoY on lower eastern energy and capacity prices, higher average fuel costs, and higher O&M expense.

• Excluding special items, 2011 Kentucky Regulated earnings were expected to be driven by utility performance and rate increases; the segment was projected to contribute ~20% of 2011 earnings.

• Excluding special items, 2011 Pennsylvania Regulated earnings were projected higher on the distribution rate increase effective Jan. 1; International Regulated earnings were projected comparable with 2010.

• 2011 capital spending was projected at $2.542 billion; 2011–2015 capital expenditure projections totaled ~$15.1 billion.