PPL Corporation (NYSE: PPL) on Thursday (10/29) announced declines in both third-quarter and nine-month reported earnings for 2009, compared with the same periods of 2008. PPL’s earnings from ongoing operations, which exclude the effect of special items, rose in the third quarter but remained lower for the nine-month period, compared with a year ago.
PPL’s reported earnings for the most recent quarter were $0.05 per share, compared with $0.54 per share a year ago. For the first nine months of 2009, PPL’s reported earnings were $0.67 per share, compared with $1.73 per share a year ago.
The primary drivers of the 2009 reported earnings declines versus 2008 were special item charges for certain economic hedge activity and the impact of two non-recurring income tax matters in the current quarter, as well as an impairment for the pending sale of generation assets on Long Island, N.Y., announced last quarter. The special item charges for the third quarter of 2009 totaled $0.47 per share, compared with net special item credits of $0.09 per share a year ago. PPL’s reported earnings for the first nine months of 2009 included special item charges of $0.76 per share, compared with net special item credits of $0.17 per share for the same period of 2008.
Earnings from ongoing operations were $0.52 per share in the third quarter of 2009, compared with $0.45 per share a year ago. For the first nine months of 2009, earnings from ongoing operations were $1.43 per share, compared with $1.56 per share a year ago.
“At this point in the year, we are pleased with our financial performance and our ability to track ahead of plan, despite ongoing pressure on wholesale energy prices and customer demand due to the continuing weak economy and mild weather,” said James H. Miller, PPL’s chairman, president and chief executive officer. “Our relatively strong ongoing earnings results for the quarter reflect the continued benefits of cost-control actions we took early in the year.”
PPL reaffirmed its 2009 forecast of $1.60 to $1.90 per share in earnings from ongoing operations. PPL’s 2009 forecast of reported earnings is $0.84 to $1.14 per share, reflecting special items recorded through Sept. 30, 2009.
The 2009 forecast of reported earnings does not reflect the expected gain on the sale of PPL’s Maine hydroelectric business. As previously announced, the sale of six hydroelectric facilities to an affiliate of ArcLight Capital Partners, LLC is expected to result in a special after-tax gain of approximately $0.06 per share in the fourth quarter of 2009. This figure excludes an additional special after-tax gain of $0.02 per share in contingent consideration from ArcLight that would be realized upon completion of PPL’s previously announced sale of three other hydroelectric facilities to the Penobscot River Restoration Trust.
PPL also reaffirmed its 2010 earnings forecast of $3.10 to $3.50 per share. “We expect the significant increase in earnings that we forecast for 2010 to come almost entirely from increased margins in the company’s supply business,” Miller said.
“We remain convinced that our hedge programs, aggressively executed when forward power prices for 2010 were much higher than they are today, will provide greater earnings and cash flow predictability,” he said.
Third-Quarter 2009 Earnings Details
PPL’s reported earnings in the third quarter of 2009 included special item charges of $0.47 per share: $0.34 per share related to certain economic hedge activity; $0.07 per share related to a change in the method of accounting for certain expenditures for income tax purposes; and $0.06 per share for additional tax expense related to the 2007 sales of its Latin American businesses. The tax accounting change, for which IRS consent was received, is expected to provide a cash flow benefit of approximately $200 million in 2009, as well as smaller cash flow benefits in future periods.
