PPL facing several major milestones in 2015

Having divested a hydroelectric fleet in 2014, PPL (NYSE:PPL) is scheduled to consummate the Talen Energy spinoff and conclude a key rate case in Kentucky during 2015, officials noted during a Feb. 5 earnings call.

In November PPL completed the sale of the PPL Montana hydro fleet to Northwestern (NYSE: NWE) for almost $900m.

“2014 was another very successful year for PPL. Not only did we achieve strong earnings results in our regulated utility and competitive supply segments, but we made significant progress in the spinoff of our Supply business, which is designed to unlock significant value for our shareowners,” said PPL Chairman, President and CEO William Spence.

During the call, Spence touted various infrastructure investments, including electric transmission in Pennsylvania.

“Also, our Supply business performance was very strong in a turbulent market in 2014, providing further evidence that Talen Energy will be an important, resilient player in the U.S. merchant power sector,” Spence said.

The company is spinning off PPL Energy Supply, which will be combined with Riverstone‘s competitive generation business to form a new publicly traded company called Talen Energy.

Spence said regulatory approvals are going as expected. PPL and Riverstone have accepted the Federal Energy Regulatory Commission (FERC)’s additional market mitigation measures, which the parties believe will not have a materially different impact on the future operating results of Talen than the original proposal.

Talen has filed its registration statement with the Securities and Exchange Commission (SEC) so company is in a “quiet period,” PPL officials said. The spinoff could be completed in the second quarter of this year.

Also during the second half of this year, PPL’s regulated subsidiaries, Louisville Gas & Electric (LG&E) and Kentucky Utilities (KU), should have new rate structures approved by the Kentucky Public Service Commission.

An increase in base rates has been requested in both regulated utilities in Kentucky. The commission proceedings should conclude and new rates go into effect in July, according to PPL earning materials.

In Kentucky the utility subsidiaries have invested in environmental controls recently at the Ghent and Mill Creek stations. The company is doing various coal-related environmental spending in Kentucky, including the closure of some ash ponds.

Also progress is going well on construction of the Cane Run combined-cycle natural gas plant in Kentucky should begin operation in May of this year, Spence said.

In Kentucky, capital expenditure of $1.3bn expected through 2017. “Minimal” load growth is expected in both Pennsylvania and Kentucky.

PPL saw a strong performance by its regulated utilities. PPL is developing major transmission infrastructure in Pennsylvania, such as the Susquehanna-Roseland project and the Northeast/Pocono project, Spence said.

PPL is also doing a lot of modernization, automation and wood pole replacement in the Northeast. A number of smart meters are “smart switches” are also being installed, officials said during the call.

“We expect the transmission business to be the fastest growing part of our business for the foreseeable future,” Spence said.

During the question-and-answer session with analysts, PPL officials said they didn’t see investing in natural gas pipelines soon, given the amount of investment it is making in electric transmission lines. At the same time, PPL is investing the shale gas revolution by building electric lines to gas plants using shale gas.

PPL announced reported earnings for 2014 of $1.74bn, or $2.61 per share, compared with $1.13bn, or $1.76 per share in 2013.

Earnings from ongoing operations, which exclude special items, were $1.63bn, or $2.45 per share. That result was at the top end of the 2014 forecast range for earnings from ongoing operations of $2.37 to $2.47 per share. Earnings from ongoing operations in 2013 were $1.59bn, or $2.45 per share.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.