PPL CORPORATION Poised for growth. Investing in our...

$Page 1: PPL CORPORATION Poised for growth. Investing in our future.pplweb.investorroom.com/download/Evercore+ISI+CEO... · 2017. 1. 10. · Moving to slide 3,\爀倀倀䰠ᤀ猀氀攀愀搀椀渀最$
© PPL Corporation 2016

PPL CORPORATION

Poised for growth. Investing in our future.

Evercore ISI Utility CEO Retreat, Palm Beach, FL• January 12 - 13, 2017


Cautionary statements and factors that may affect future results

1

Any statements made in this presentation about future operating results or other future events are forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from such forward-looking statements. A discussion of factors that could cause actual results or events to vary is contained in the Appendix to this presentation and in the Company’s SEC filings.


Investment proposition

2

(1) Projections based on the midpoint of the 2017 earnings guidance range of $2.05 - $2.25 per share. (2) Total annual return is the combination of projected annual EPS growth and dividend yield. (3) Subject to approval by the Board of Directors.

Pure-play regulated business

with seven high- performing utilities

Diverse assets in constructive

regulatory jurisdictions

Solid financial position with strong investment-grade

credit ratings

Competitive earnings and dividend growth from 2017 to 2020(1)

Annual Total Return(2)

8-10% EPS CAGR

5-6% Rate Base CAGR

5% Dividend increase

about 4% annually(3)

Presenter

Presentation Notes

Moving to Slide 2, Good morning. It’s great to be here today at EEI to talk about PPL’s investment proposition. PPL is a pure-play regulated utility investment made up of seven high-performing, award-winning and growing utility companies in the U.S. and the U.K. We have a diverse asset mix in terms of the type of assets we operate, the regions where we operate them and the regulatory environments we’re exposed to, with operations in PA, KY and the UK. Each utility operates in what we consider to be a premium jurisdiction. We have a strong business plan with significant rate base and earnings growth and a very competitive dividend. Our total return proposition is projected to be in the 8 -10% range over the 2017 – 2020 time period(EPS + Yield). Our expectation for annual compound growth for the same period is 5 - 6%. Domestic operations EPS growth of 6-8% UK is projected to be between 4-6% In addition, all of our utilities are investing heavily in infrastructure, producing robust rate base growth for PPL. Our strategy for growth includes investing over $12 billion in infrastructure over the next four years, about $3.0 billion a year, driving a 5% CAGR in our Rate Base. We are now targeting dividend growth of about 4 percent annually starting in 2017 and continuing through the end of the decade, And as we move forward in achieving this growth through 2020, we will continue to maintain a strong balance sheet and strong cash flows and our investment-grade credit ratings remain unchanged.


PPL offers leading energy delivery platform with scale and diversity

3

PENNSYLVANIA KENTUCKY UNITED KINGDOM

Customers 1.4M 1.2M (0.9M electric; 0.3M gas) 7.8M

Return on Equity No stated ROE for D base rates; 11.68% for T

No stated ROE for base rates; 10% and 9.8% for ECR(1)

Average expected earned ROE of 12-14%(2)

Rate Base as of 12/31/16 $6.0B $9.1B $8.8B

2017-2020 Rate Base CAGR 10% T; 3.2% D 3.2% 5.4%

Generation None 8GW (regulated capacity) None

% of EPS(3) 23% 28% 54%

D = Distribution T = Transmission ECR = Environmental Cost Recovery (1) The existing Environmental Cost Recovery Mechanism and Gas Line Tracker were awarded a 10% ROE. The $1 billion environmental plan approved in August 2016 was

awarded a 9.8% ROE. (2) Based on 2017-2020 Segment earnings projections. Capital structure adjusted to include debt of $750 million allocated for Segment reporting purposes. (3) Based on $2.15 midpoint of 2017 earnings forecast. Corporate and Other, not shown, accounts for -5% of 2017 EPS forecast.

Presenter

Presentation Notes

Moving to slide 3, PPL’s leading portfolio offers scale and diversity and our utilities prove themselves to be among the best in the industry. Combined, our operations serve more than 10 million customers worldwide. In the U.K., we have 4 distribution companies. In Pennsylvania, we operate both electric distribution and transmission businesses. And in Kentucky, our 2 electric utilities are fully integrated with generation, transmission and distribution and we also have a natural gas LDC in KY. We continue to invest in the future at each of these growing utilities, and this slide gives you a sense of their respective contributions to PPL’s combined rate base, earnings and customers. We feel this portfolio diversifies our regulatory risk, our macro-economic risks and our political risks. In short, I believe PPL’s portfolio is second to none in terms of its commitment to continuous improvement and offers a strong foundation for continued growth.


U.K. a premium regulatory jurisdiction

• Base revenues set for 8 years; commencing April 2015 through March 2023

• Offers real-time returns and provides certainty and visibility

• Revenues adjusted for inflation

• Incentives available for strong performance and innovation, with WPD a consistent top performer

• Fast-track incentive adds $35 million annually in revenue

• As the only fast-tracked DNOs, WPD companies able to retain 70% of cost efficiencies

• Regulation requires funding to support investment-grade credit ratings

• No equity needed from PPL to fund U.K. operations

4

Presenter

Presentation Notes

On Slide 4, I’ll cover a few key points on the UK regulatory framework and why it is a premium jurisdiction. First, in the UK, all distribution companies file their rate cases at the same time, which provides Ofgem, our regulator, full transparency and comparability across all the DNO’s. The current rate cycle, called RIIO-ED1, is for 8 years, and began April 1, 2015, so we have 7 more years under ED1. Revenues and RAV are indexed to Inflation, and are expected to increase from 2017 to 2020. It’s a revenue model, not a rate model, so our revenues get true-up if volumes are higher or lower than expected. This results in basically no regulatory lag, as we are earning our revenues as we spend the capital. It’s also an Incentive-based model, so the better you perform, the more revenues you can earn. WPD consistently has the top 4 performing DNO’s in the UK and consistently earns more incentive revenues than any other DNO, helping to drive ROE’s in the 12-14% range from 2017 through 2020. The framework also provides for additional revenues for companies that were fast-tracked through the regulatory process based on the quality of their business plans, for WPD this resulted in over $35 million of additional revenues per year. It also includes benefit sharing provisions in the event DNO’s are more efficient than their approved business plans, with those saving being shared between shareholders and customers; (As a fast-track company, WPD keeps 70% of any savings in delivering the business plans compared to the other DNO’s in the mid 50% range); and The regulation requires sufficient revenues to support investment grade credit ratings at the DNO level. WPD is completely self funding, requiring no equity support from PPL, and is a net contributor of cash back to the Parent company.


PPL strategy focuses on sustainable, competitive growth

• Operate high-performing utilities in premium jurisdictions

• Deliver industry-leading customer service and reliability

• Invest responsibly in the future • Effectively manage O&M • Earn ROEs near authorized levels

and recover investments in a timely manner

• Maintain strong financial metrics

5

Presenter

Presentation Notes

Turning to slide 5, We are committed to best-in-sector operational performance by driving safety, reliability and customer service across our business. Our U.S. and U.K. operations stand out in the areas we serve. Our four U.K. distribution network operators are the country’s Top 4 performers for customer service. Here in the U.S., our Pennsylvania and Kentucky utilities claimed the 2016 J.D. Power awards for residential customer satisfaction in their regions. In total our US Utilities have earned over 40 J.D. Power awards We are focused on improving efficiencies and earning ROEs near our authorized levels.(~10% for PA, ~ 11% for KY and 12-14% for the U.K.)


Delivering strong performance in 2016

Well-positioned to deliver on 2016

EPS forecast

On pace to execute over $3 billion in

infrastructure investment

On track to achieve 2016/17 incentive targets

in the U.K.

Recipients of three new J.D. Power awards

for customer satisfaction

$471 million smart meter replacement project

began in PA

$1 billion Environmental Cost Recovery plan approved by KY PSC

6

Presenter

Presentation Notes

Moving to Slide 6, Based on PPL’s strong performance to date, we are well-position to meet our 2016 EPS forecast. In fact, we’ve just announced an increase in our 2016 guidance to $2.30 – $2.45, with a midpoint of $2.38 from $2.25 – $2.45, with midpoint of $2.35. Across the portfolio, we are executing on over $3 billion of capital expenditures. In the U.K., we continue to execute on our plans and while there is still considerable time left in the regulatory year, we are on pace to achieve our projected performance against the 2016/2017 incentive targets . In recognition of continued efforts to focus on the customer experience, LG&E ranked highest among mid-sized gas utilities in the Midwest in J.D. Power’s 2016 survey of residential customer satisfaction. The J.D. Power award is the third by a PPL utility this year demonstrating our commitment to provide our customers with the highest level of service. Just this year we began a $471 million initiative to replace 1.4 million meters in PA with smart meters over the next several years. The costs for the program will be recovered through a rider mechanism. And in KY, we recently received approval on a $1 billion environmental cost recovery filing which is primarily to comply with the new coal combustion residuals regulations. The projects will involve capping and closing remaining ash ponds at our coal-fired power plants, building process-water facilities, and completing the second phase of a dry-storage landfill project at our E.W. Brown generating station.


1.05 1.01 1.00 1.01 1.06

0.40 0.35 0.44 0.40 0.35

0.55 0.59 0.55 0.58 0.67

0.70 0.69 0.66 0.60 0.63

0.46 0.43 0.39 0.39 0.39

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

2016E 2017E 2018E 2019E 2020E

WPD LKE ECR LKE base PA Transmission PA Distribution

$3.16 $3.07 $3.04 $2.98 $3.10

(1) (2)

$15 billion in capital expenditures planned

7

(1) Based on assumed exchange rate of $1.37/£ for 2016 and $1.30/£ for 2017-2020. (2) Expect between 80% and 90% to receive timely returns via ECR mechanism based on historical experience and future projections.

($ in

Bill

ions

)

Presenter

Presentation Notes

On Slide 8, we show our CapEx plan, Our CapEx plan is designed to make the grid smarter, more reliable and more resilient. In PA, PPL Electric Utilities’ state-of-the-art automated power restoration system became fully operational in June. In KY, we’re still spending significant capital (about $1.5B) on environmental compliance for our coal plants. Our environ. spend is moving away from air compliance and more into waste and water compliance with CCR’s and ELG’s. And this CapEx plan does not include any spending that may be needed to comply with the Clean Power Plan. The UK Plan continues to be focused on asset replacement and fault management with the general goal of reinforcing the current network. To summarize, this is a low risk CapEx plan, within our existing service territories and we continue to explore additional growth opportunities within our U.S. operations, including; Transmission projects inside and outside of our existing service territories; Potential environment improvements in Kentucky, primarily associated with the Clean Power Plan; and We are exploring new ways to make our system more flexible and support the continue expansion of distributed generation.


$2.15

$2.56

5-6% COMPOUND ANNUAL EPS GROWTH

Investment opportunity and timely rate recovery drive EPS growth

(1) Based on midpoint of the 2017 earnings guidance range of $2.05 - $2.25 per share.

(2) Does not represent earnings forecast or guidance for 2020.

$2.49

$9.3 $10.9

$9.3 $10.3

$3.3 $3.5 $3.1

$4.3

2017E 2020E

STRONG REGULATED RATE BASE GROWTH

U.K. KY

PA-DISTRIBUTION PA-TRANSMISSION

5% CAGR

5-6% EPS Growth

71%

8%

21%

0-6 MONTHS

7-12 MONTHS

> 1 YEAR

REAL-TIME RECOVERY OF CAPEX

8

2017 E(1) 2020 E(2)

$25.0

$29.0

$ in billions

Presenter

Presentation Notes

Slide 7 demonstrates that our infrastructure investment continues to drive our earnings growth. We recently provided our 2017 EPS guidance range of $2.05 to $2.25 per share, with a midpoint of $2.15 per share and our long-term projected EPS growth rate of 5-6% from 2017 to 2020, off of that 2017 base of $2.15 per share. We expect strong compound annual rate base growth of about 5.0% from year-end 2016 through 2020, with rate base growing to $29 billion by 2020. That Rate Base growth, combined with the premium jurisdictions in which we operate, is what will deliver the 5-6% earnings growth. The constructive regulatory climate is key to our financial success, with about 80% of our $12 billion infrastructure investment over the period receiving near real-time recovery. As you can see, our core business is growing in support of our longer term growth projections.


Investments focus on delivering a sustainable energy future

9

• Expanding, reinforcing and modernizing the grid

• Adding smart grid technology and automation

• Connecting more renewable energy

• Expanding solar offerings to customers

• Strengthening physical and cyber security

• Enhancing environmental controls • Improving efficiency

Presenter

Presentation Notes

Turning to slide 9 We are investing in tomorrow’s energy infrastructure by developing a more reliable, resilient and efficient grid that fosters continued progress and a cleaner energy future. In Pennsylvania, PPL Electric Utilities is on track to execute more than $1 billion in capital improvements to modernize the grid and strengthen reliability for its customers. Grid automation devices combined with central control systems have restored power within minutes to more than 58,000 customers since it became fully operational this June. And we continue to add new smart devices to extend these benefits and improve grid resiliency. Transmission expansion also continues, with additional investments focused on reinforcing, expanding and hardening the bulk power system, adding redundancy and making the grid more secure, protecting against cyber and physical attacks. We are also expanding our solar offerings to customers In PA, we’ve submitted an application to the DOE to build a new Distributed Energy Management System, which will integrate with PPL’s state of the art Distribution Management System to control and coordinate solar and other distributed energy resources, which we expect a decision on in Dec. In Kentucky we completed Kentucky’s a 10MW solar facility in June. We are also offering business and industrial customers individual renewable generation facilities. Plug-in electric fleet vehicles and unmanned aerial vehicles are providing new ways to improve efficiency, and save customers money. You can find more information on our sustainability efforts on at www.pplsustainability.com


“Leading the way” in the U.K.

10

• Connected or offered to connect 20 GW of renewable energy

• Connected approximately 200,000 private solar installations

• Offering innovative demand-side response solutions

• Conducting the world’s largest electric vehicle trial

• Adapting to role as a more active network operator

Presenter

Presentation Notes

Slide 10 Also in the U.K., we are leading the way, according to Ofgem, in connecting renewable generation to local distribution networks. To date, we’ve connected or offered to connect about 20 gigawatts of renewable power. We’ve already connected approximately 200,000 private solar installations, along with 7,500 commercial distributed generation facilities. The company has also launched the world’s largest electric vehicle trial to explore charging patterns and the ability of markets to influence those patterns. The project is a WPD initiative to develop the necessary smart charging solutions to help facilitate EV uptake on local electricity networks. This project is funded via Ofgem through its Network Innovation Allowance. The trial, involving up to 700 vehicles, will inform future network planning.


Kentucky rate review

11

KU LG&E

Electric Electric Gas

Revenue Increase Requested $103.1 million $93.6 million $13.8 million

Test Year 12-months ended 6/30/2018

12-months ended 6/30/2018

12-months ended 6/30/2018

Requested ROE(1) 10.23% 10.23% 10.23%

Jurisdictional Capitalization(2) $3.6 billion $2.4 billion $0.7 billion

(1) Potential changes in requested ROE of 10 basis points will result in a revised revenue increase requested of plus or minus $3.2 million for KU, $2.1 million for LG&E Electric, and $0.6 million for LG&E Gas.

(2) Does not include capitalization recovered via other rate mechanisms or other jurisdictions. Complete filings will be available at www.lge-ku.com/regulatory.asp on November 23rd, 2016.

Presenter

Presentation Notes

Moving to slide 6 … Kentucky Utilities and Louisville Gas and Electric have announced their intent to file rate requests on November 23rd with the Kentucky Public Service Commission. KU and LG&E expect to seek revenue increases of $103 million and $93 million, respectively, through adjustments to annual base electric rates. LG&E, meanwhile, anticipates seeking a revenue increase of $14 million in annual base gas rates. The requested increases are driven by additional capital investments that focus on enhanced reliability programs across the operational groups, along with technology and infrastructure investments in our customer service areas, which allow us to continue to provide safe and reliable electric and gas service to customers and meet federal regulations. As part of the rate case filing, they will be requesting approval to invest in an Advanced Metering System and a Distribution Automation program, which focuses on an enhanced service offering to customers and continued emphasis on our reliability programs. If approved by the Commission, the increases would take effect in July 2017.

http://www.lge-ku.com/regulatory.asp

Kentucky Rate Review Schedule

Timing Milestone 01/11/2017 1st Request for information received 01/25/2017 LG&E and KU responses filed 02/07/2017 Supplemental request for information received 02/20/2017 LG&E and KU responses filed 03/03/2017 Intervenor testimony filed 03/17/2017 Requests to intervenors submitted 03/31/2017 Intervenor responses filed 04/14/2017 LG&E/KU Rebuttal testimony filed TBD Public hearing in Frankfort 07/01/2017 New rates effective

Completed

12 © PPL Corporation 2017


Summary

13

• Growing, pure-play regulated business operating in premium jurisdictions

• 5-6% projected earnings growth from 2017 - 2020, with above-average dividend yield

• Strong dividend growth potential

• Targeting 8 - 10% total annual returns(1)

• Investing in the future and improving efficiency

• Confident in our ability to deliver on commitments to shareowners and customers

(1) Total annual return is the combination of annual EPS growth and dividend yield.

Presenter

Presentation Notes

In summary, PPL provides a very attractive investment proposition for U.S. Utility investors. We are committed to delivering 5-6% annual earnings growth from 2017 through 2020 with a dividend yield of over 4%, which is above average for the sector. And we are targeting dividend growth of about 4% annually from 2017 through the end of the decade as well. Our plan is reflective of the underlying growth of the business and the premium jurisdictions in which we operate and we are confident in our ability to deliver this growth. We continue to invest responsibly in the future. We remain focused on improving efficiency in all of our businesses and earning ROEs near authorized levels. And our financial and credit metrics remain strong. We will continue to build on this strong foundation, seeking additional ways to provide value to our shareowners and customers. With that, I thank you for this opportunity and I look forward to your questions.


APPENDIX

14


CORPORATE DATA

Ticker symbol and stock exchange PPL-NYSE

At December 31, 2016 Average daily trading volume (3 mos.) 4.69 million shares

Closing price $34.05

52-week price range $32.08 – $39.92

Annualized dividend per share $1.52 ($0.38/qtr)

Enterprise value ~$41.8 billion

Market cap ~$23.1 billion

At September 30, 2016 2016 Estimated earnings from ongoing operations per share (Non-GAAP)-Midpoint(1)

$2.38 per share

Total assets $38.0 billion

Common shares O/S 679.268 million

Book value per share(2) $14.69

Capitalization: ($ millions)

Total debt $19,148 66%

Common equity $ 9,975 34%

Total Capitalization $29,123 100%

Employees ~12,800

Long-term debt $18,512 million

Short-term debt $636 million

Letters of Credit and Commercial paper $486 million

ANALYST CONTACT: Investor Relations Joe Bergstein – Vice President-Investor Relations & Treasurer 610-774-5609 Lisa Pammer – Investor Relations Manager 610-774-3316 [email protected] WEB SITE: www.pplweb.com Download our IR APP: PPL Corporation Investor Relations

(1) See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations.

(2) Based on 679.268 million shares of common stock outstanding.

PPL fact sheet

15

http://www.pplweb.com/

https://itunes.apple.com/us/app/ppl-corporation-investor-relations/id874387567?mt=8

https://play.google.com/store/apps/details?id=com.theirapp.ppl

Learn more about PPL’s Sustainability Efforts Visit www.pplsustainability.com



$0.00

$1.00

$2.00

$3.00

2015A Previous 2016E Revised 2016E 2017E

$/Sh

are

$2.21

Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations.

(1) Excludes any earnings from the former Supply segment, which was part of PPL Corporation’s consolidated reported earnings for the first five months of 2015.

(2) Forecast assumes $1.30/£ exchange rate on remaining unhedged earnings for 2016 through 2019. See slide 8 for further details.

Segment

2015A Earnings from

Ongoing Operations

Previous 2016E Earnings from

Ongoing Operations (Midpoint)

Revised 2016E Earnings from

Ongoing Operations (Midpoint)

2017E

Earnings (Midpoint)

U.K. Regulated $1.44 $1.41 $1.41 $1.17

Kentucky Regulated 0.51 0.57 0.58 0.59

PA Regulated 0.37 0.47 0.49 0.49

Corporate and Other (0.11) (0.10) (0.10) (0.10)

Total $2.21 $2.35 $2.38 $2.15

$2.45

$2.25

(2)

$2.25

$2.05

(1)

(2) (2)

$2.45

$2.30

5-6% Compound Annual EPS Growth from 2017 to 2020

Targeting annual dividend growth of about 4% in 2017 through 2020

Increasing 2016 earnings forecast

17


$0.06 $0.01 $0.02 $0.00 ($0.06)

$1.41 $1.41

$0.57 $0.58

$0.47 $0.49

($0.10) ($0.10) $(0.20)

$0.20

$0.60

$1.00

$1.40

$1.80

$2.20

$2.60

2016 PreviousMidpoint

U.K.Regulated

KYRegulated

PARegulated

Corp &Other

Other 2016 RevisedMidpoint

$/Sh

are

U.K. Regulated KY Regulated PA Regulated Corp & Other

$2.38

Margins. $.02 O&M: $.03 Interest: $.01 Taxes: $.02 Currency: ($.02)

Margins: ($.02) O&M: $.02 Depreciation: $.01

Margins: $.01 O&M: ($.01) Interest: $.02

FX Restrikes: ($.06)

2016 prior guidance to current forecast walk

$2.35

18

Note: See Appendix for the reconciliation of reported earnings (loss) to earnings from ongoing operations and definition of Non-GAAP financial measures.


Summary of drivers to achieve 5-6% EPS growth from 2017 through 2020

Key Earnings Growth Assumptions: • Updated in June for foreign currency, interest rates, RPI and lower discount rates • Dividend secure with targeted growth of about 4% through 2020(1)

6 - 8% Domestic Utilities Earnings Growth: • Domestic rate base growth of ~5% from 2017 through 2020 • Minimal load growth • PA Transmission Cap Ex of $1.9 billion at 11.68% base ROE • KY Environmental investment of $1.2 billion at ~10% ROE 4 - 6% U.K. Regulated Earnings Growth: • No volumetric risk • $1.30/£ foreign currency rate assumed for all unhedged positions • Expected RAV growth of 5.4% from 2017 through 2020 • Average expected segment ROE’s of 12 – 14%(2)

• Incentive revenue assumptions: 2017: $85M; 2018: $80M - $100M; and 2019 - 2020: $95M - $115M • RPI (inflation rate) – 2.9% for 2017; 3.1% for 2018 - 2019; and 3.2% for 2020 • Effective tax rate of approximately 17%

(1) Subject to approval by the Board of Directors. (2) Based on 2017-2020 Segment earnings projections. Capital structure adjusted to include debt of $750 million that is allocated

for Segment reporting purposes.

19

$8.8 $9.3 $9.8 $10.4 $10.9

$9.1 $9.3 $9.6 $9.9 $10.3

$3.1 $3.3 $3.4 $3.4 $3.5 $2.9 $3.1 $3.5

$4.0 $4.3

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

2016E 2017E 2018E 2019E 2020E

WPD LKE PA - Distribution PA - Transmission

($ in

Bill

ions

)

(1) Based on assumed exchange rate of $1.30/£ for all years. (2) Represents utility capitalization for LKE. Represents Regulatory Asset Value (RAV) for WPD.

Strong rate base growth drives EPS growth

19

(2)

$23.9 $25.0

$26.3 $27.7

$29.0

(1)



Equity Ratio(1) Allowed ROE

PPL Electric Utilities 51.66% D: N/A T: 11.68%(2)

LG&E 52.75%

10.00%(3)

9.80%(3)

Kentucky Utilities 53.02%

10.00%(3)

9.80%(3)

EU LG&E KU

Environmental Cost Recovery

DSIC

Forward test year methodology

CWIP included in rate base (4)(5)

Gas Line Tracker

Pass through of Purchased Power

Fuel and Gas Supply Adj. Clause

Storm Recovery (6)

Smart Meter Rider

Tracker/Mechanism

Transmission Formula Rate

Transmission Incentive Adder(2)

Energy Efficiency/DSM

(1) As filed in most recent completed rate cases. (2) Allowed ROE of 12.93% for Susquehanna-Roseland project. (3) No stated ROE for Kentucky base rates. The existing Environmental Cost Recovery Mechanism and Gas Line Tracker were awarded a 10% ROE. The

$1 billion environmental plan approved in August 2016 was awarded a 9.8% ROE. (4) CWIP included in forward test year rate base for LG&E and KU. (5) For PPL EU Transmission, CWIP included for Northeast Pocono reliability project totaling ~$350 million in capital investment – Completed Q2 2016. (6) LG&E and KU have historically been able to recover costs from extraordinary storms, but no formal tracker is in place.

Constructive U.S. regulatory framework supports robust financial performance

21


Projected Transmission Rate Base Growth

• Projected 10% CAGR in transmission rate base through 2020 • Base ROE of 11.68% and return on CWIP for approved projects • No volumetric risk • Project Compass offers potential incremental opportunity beyond 2020(1)

PA 26%

Total: $25.0 billion Total: $6.4 billion

(1) Subject to regulatory approvals.

($ in

bill

ions

)

Pennsylvania: Transmission

Trans 48% Dist

PA 26%

KY

WPD

22

2017E PA Regulated Rate Base

Transmission strategy overview Provide top-quartile reliable, resilient, safe, cost-effective service to customers while

delivering sustainable growth and investment for stakeholders


257 138 124 114 162

122 213 171

87 90

320 343 364

397 379

System Total 2005 2010 2015 2020

Total System Line Mileage 5,007 5,019 5,171 5,179

Rebuilt/New Line Mileage N/A 36 279 1,467

Average System Age (yrs) 45 49 51 40

Line Miles >75 Years 856 (17%) 927 (19%) 902 (17%) 254 (5%)

Line Miles >50 Years 1,694 (34%) 1,861 (37%) 1,936 (37%) 969 (19%)

Line Miles >25 Years 4,344 (87%) 4,534 (90%) 4,486 (87%) 3,227 (62%)

Wood/Total Structures 57% 55% 47% 29%

Steel/Total Structures 43% 45% 53% 71%

Transmission Reliability

5 Year Historical Average 2016 Forecast

IEEE SAIFI - Transmission 0.35 0.07

IEEE MAIFI - Transmission 0.83 0.51

Four Focus Areas: • Compliance with NERC and PJM Criteria • Security Improvements • Increase System Reliability • Sustainability and Survivability

Total of $3.28 billion $700 $694 $660

$599 $630

($ in

milli

ons)

Rebuild and Reinforce the 69kV & 138kV System

New Facilities & Bulk Electric System Enhancements

Substation Rebuilds


• Susquehanna – Roseland — Approximately $650 million project with 12.93% ROE — 150 miles from PA to NJ, including through the National Park Service — Partnership with neighboring NJ utility — Cooperation with multiple agencies — Stronger reliability for millions — Economic development; 2,200 jobs

• Northeast Pocono Reliability Project — Approximately $350 million project completed one year ahead of schedule — 58 miles of transmission lines and substations

• Additional reliability projects to strengthen transmission system ― About $2 billion invested over the last three years

Proven track record of transmission capability

24


Proposed First Segment: • 95-mile initial segment from Blakely, PA to Ramapo, NY

— Interconnection request filed with NYISO in October 2015 — Estimated cost of $400 - $500 million — Estimated in-service date in 2023

• Benefits as proposed include: — Substantial annual savings for NY customers — Economic development benefits — Grid reliability — Increase renewable market

Full Project Current Plan: • 475-mile transmission line from Western PA to Southeastern NY • Estimated cost of $3 – $4 billion

Project Compass summary

25


Project Compass

26


PA 26%

KY

WPD

• Projected 3.2% CAGR in distribution rate base through 2020

• Constructive jurisdiction reduces regulatory lag; should extend rate case cycles — DSIC and Smart Meter mechanisms (<6 months lag on qualifying investments) — No projected base rate cases through 2020 — ~60% of distribution gross margin subject to minimal or no volumetric risk

Projected Distribution Rate Base Growth

Total: $25.0 billion Total: $6.4 billion

2017E PA Regulated Rate Base

Dist 52

($ in

bill

ions

) Trans Dist 52%

Pennsylvania: Distribution

27


PA

KY 37%

WPD

• Constructive jurisdiction provides a timely return on planned Cap Ex — Environmental Cost Recovery (ECR): $1.5 billion estimated spend on projects approved, or

subject to KPSC approval; $0.8 billion with 10.0% ROE and $0.7 billion with 9.8% ROE – virtually no regulatory lag

— Other supportive recovery mechanisms Return mechanisms include CWIP for ECR and Gas Line Tracker Pass through clauses include Purchased Power, Fuel and Gas Supply Adjustment and Energy

Efficiency/Demand Side Management recovery

• Cap Ex plans exclude spending that may be required under the Clean Power Plan

Projected Rate Base Growth

Total: $25.0 billion

KY 36 %

($ in

bill

ions

)

Kentucky Regulated

28

2017E KY Regulated Rate Base


Low Nox Burners

SCR/SNCR ScrubbersClosed Cycle

Cooling TowerDry Handling/ Disposal/

Beneficial UseBaghouses

Mw of Capacity

NOx NOx SO2 Water Intake Coal Combustion Residuals (CCRs) Particulates and

Hg (with PAC injection)

Unit 1 370 (2) (1)

Unit 2 549 (2) (1)

Unit 1 474 (4) Unit 2 493 (3) (4) Unit 3 485 (4) Unit 4 465 (4)

Unit 1 106 (3) (1) (3)Unit 2 166 (3) (1) (3)Unit 3 409 (1)

Unit 1 300 (3) (5) (6) Unit 2 297 (3) (6) Unit 3 391 (6) Unit 4 477 (6)

Control Device

Addresses

Trim

ble

Coun

tyG

hent

Brow

nM

ill C

reek

Kentucky environmental controls

29

(1) CCR Dry Handling/Disposal construction is approved by KPSC at Trimble and Brown. CCR Dry Handling is permitted, commenced construction and operations are pending at Trimble and Brown. Disposal permitted and commenced construction at Brown; permitting and construction are pending at Trimble. (2) Ratings represent LKE’s 75% ownership of Trimble Units 1 & 2. (3) Standard(s) are based on station wide or company wide limit(s). LG&E and KU comply without Control Device (4) Portions of Ghent CCR systems are operational at this time; other CCR system construction activity continues. (5) Performing required data gathering (2015-2016) to assess compliance options under the new standards. Scheduled to submit a plan to Kentucky Division

of Water in 2017. (6) Dry fly ash is in service. Bottom Ash handling project to convert from wet sluice to dry handling is being developed.

= Installed

The U.K.: a premium regulatory jurisdiction

The U.K. Ofgem’s RIIO framework (Revenue = Incentives + Innovation + Outputs) allows Distribution Network Operators (DNOs) to earn premium returns for strong performance and innovation

WPD Investment Advantage

Regulatory cycle

Fast track incentive

Benefit sharing

Inflation – adjusted revenues

• Base revenues set for 8 year period, commencing April 2015 through March 2023

• No volumetric risk in amount of electricity delivered

• Ability to collect additional annual revenue equivalent to 2.5% of total annual expenditures

• Ability to retain 50% - 70% of cost efficiencies; with benefits shared with customers

• Retail Price Index (RPI) Indexation of allowed revenues and Regulatory Asset Value (RAV)

• Provides certainty and visibility

• Ofgem accepted business plan spend over 8 years drives RAV growth

• WPD only 4 DNOs awarded fast-track status

• Estimated $35 million of annual fast-track revenue

• Fast-track status allows WPD to retain 70% of cost efficiencies (O&M and Capital savings), compared to only 53% to 58% for the slow track DNOs

• RPI plan assumptions – 2.4% for 2016/17; 3.1% for 2017/18 & 2018/19 (20 year historical average for RPI is ~3%)

Funding & leverage

• Regulation requires funding to support investment grade credit ratings

• Debt leverage set at 65% of Debt/RAV at the DNO level

• U.K. is a self-funding operation; does not require any equity from PPL

• Holding company structure provides for higher earned ROEs

• Target WPD consolidated Debt/RAV below 85% to maintain investment grade credit ratings

• Annually repatriate $100 - $200 million of cash back to the U.S. in a tax efficient manner

Incentive regulation • WPD has a proven track record of outperformance

• Additional opportunity to improve earned ROEs; 12-14% earned ROEs(1) expected from 2017 through 2020

9

• Incentive revenues available for exceeding customer service and reliability targets

RIIO-ED1 Framework

(1) Based on 2017-2020 Segment earnings projections. Capital structure is adjusted to include the debt of $750 million that is allocated for Segment reporting. 30 © PPL Corporation 2017

Presenter

Presentation Notes

On Slide 9, I’ll cover the UK regulatory framework, which we believe is actually stronger than the US regulatory framework. First, in the UK, all distribution companies file their rate cases at the same time, which provides Ofgem, our regulator, full transparency and comparability across all the DNO’s. The current rate cycle, called RIIO-ED1, is for 8 years, and began April 1, 2015, so we have 7 more years under ED1. Revenues and RAV are indexed to Inflation, and are expected to increase from 2017 to 2020. It’s a revenue model, not a rate model, so our revenues get true-up if volumes are higher or lower than expected. This results in basically no regulatory lag, as we are earning our revenues as we spend the capital. It’s also an Incentive-based model, so the better you perform, the more revenues you can earn. The framework also provides for additional revenues for companies that were fast-tracked through the regulatory process based on the quality of their business plans. It also includes benefit sharing provisions in the event DNO’s are more efficient than their approved business plans, with those saving being shared between shareholders and customers; and The regulation requires sufficient revenues to support investment grade credit ratings at the DNO level. And while this regulatory regime is very constructive in its own right, WPD’s position within this construct also provides us with additional benefits: WPD consistently has the top 4 performing DNO’s in the UK and consistently earns more incentive revenues than any other DNO, helping to drive ROE’s in the 12-14% range from 2017 through 2020. WPD has the only 4 DNO’s to be fast tracked by OFGEM, resulting in over $35M of additional fast track revenue per year. As a fast-track company, WPD keeps 70% of any savings in delivering the business plans compared to the other DNO’s in the mid 50% range; and WPD is completely self funding, requiring no equity support from PPL, and is a net contributor of cash back to the Parent company.


2017E U.K. Regulated Rate Base

• Highly attractive regulated business

— Expected earned Segment ROEs in the 12% - 14%(1) range from 2017 through 2020, including holding company leverage

— Total spend of ~$17 billion over 8-year RIIO-ED1, of which ~$9 billion will drive growth in RAV

— Incremental financial adjustments to base revenues covering inflation, tax, pension and cost of debt

— Real-time return of and return on capital investment

— No volumetric risk

• Annually repatriates $100 million - $200 million in tax-efficient manner

• Earned more than $635(2) million in annual performance awards over the past decade

Projected RAV Growth

($ in

bill

ions

)

WPD: Top performing electricity distribution business in the U.K.

PA

KY

WPD 37%

Total: $25.0 billion

31

Note: Based on assumed exchange rate of $1.30/£ for 2016-2020. (1) Based on 2017-2020 Segment earnings projections. Capital structure adjusted to include debt of $750 million that is allocated for Segment reporting purposes. (2) 2006/07 – 2015/16 regulatory years.


Current Hedge Status

GBP Foreign Currency 2016 2017 2018 1.20 1.15

Percentage Hedged 91% 94% 93% 100% 73%

Hedged Rate (GBP/USD) 1.29 1.25 1.42 1.30 1.30

Budgeted Rate on Open Position (GBP/USD) 1.30 1.30 1.30 1.30 1.30

Market Rate EPS Sensitivity on Open Position EPS Sensitivity on(GBP/USD) 2016 2017 2018

1.45 - $0.01 $0.04 - $0.041.40 - $0.01 $0.04 - $0.031.35 - - $0.02 - $0.01

1.25 - - - - ($0.01)1.20 - ($0.01) ($0.01) - ($0.03)1.15 - ($0.01) ($0.01) - ($0.04)

2019 Hedge AttainmentMarket Rate (GBP/USD)

2019 Open Position

Foreign currency hedging status

Note: FX hedging status as of 10/21/2016. (1) 2018 hedges are a combination of average-rate forwards and zero-cost collars. Average hedge rates based on the average forward rate and the

average floor in the collars.

Have ability to utilize about 12 cents of 2018 hedge gains to hedge 2019 exposure

(1)

32


• 3-year forward hedging program to manage PPL’s GBP vs. USD earnings translation risk

• The program consists of declining hedge percentage ratios on a “rolling” 36-month basis allocated into 12-month periods

• Hedge bands provide flexibility for management decisions

• Defined minimum hedge percentages require disciplined hedging

• Program reduces volatility and results in a more predictable USD earnings stream that meets investor expectations

Foreign currency risk management

33


• Revenue:

— In November 2015, tariffs for 2016/2017 and 2017/2018 were set using the forecasted RPI for the next two regulatory years

— In November 2016 and going forward, one additional year of tariffs will be set. Therefore 2018/2019 tariffs will be set using the November 2016 forecasted RPI for that period.

— In addition, the 2017/2018 revenues will include a true-up for the actual vs. forecasted RPI for the 2015/2016 regulatory year

• O&M impacted primarily by RPI adjustments to wages, including contract labor with a compounding effect realized in future periods

• Approximately 10% of total U.K. debt is RPI index-linked debt. The lower the RPI, the lower the interest expense and vice versa.

RPI affects 3 primary financial drivers for WPD: Revenues, O&M and Interest Expense

Retail Price Index - RPI

34


RPI update and sensitivity

(1) Represents October 2016 forecast. Source: U.K. HM Treasury RPI forecast: https://www.gov.uk/government/collections/data-forecasts (2) Sensitivities include the net effect on revenue, O&M and interest expense on index-linked debt.

35

RPI (Regulatory Year) 2016/17 2017/18 2018/19

Forecast RPI assumption 2.4% 3.1% 3.1%Current RPI forecast (1) 2.3% 2.9% 3.0%

RPI (Calendar Year) 2016 2017 2018

Forecast RPI assumption 2.0% 2.9% 3.1%Current RPI forecast (1) 1.9% 2.7% 3.0%

Increase in 2016/2017 RPI (forecast assumption 2.0%) (2)

0.5% $0.00 $0.00 $0.02

EPS Sensitivity

https://www.gov.uk/government/collections/data-forecasts


U.K. incentive revenues • Annual performance above or below the Ofgem targets for Customer

Minutes Lost (CML), Customer Interruptions (CI) and the Broad Measure of Customer Satisfaction Survey is rewarded or penalized on a 2-year lag

• WPD projects to receive incentive revenues as follows at $1.30/£:

2016(1) 2017 2018

Current Estimate $120M $ 85M $80M - $100M

• The following slides provide WPD’s current and projected performance for the 2016/2017 regulatory year for quality of service and customer satisfaction incentive mechanisms

(1) 2016 estimate at average hedged rate of $1.46/£.

36

U.K. incentive revenue quality of service

37

2016/2017 Year-to-date Performance

Projected 2016/2017 Performance

Ofgem WPD Ofgem WPDMax. Max. Max. Max.

Reward / Reward Target Penalty Projected Reward / Reward Target Penalty ProjectedPenalty CMLs CMLs CMLs Performance Penalty CIs CIs CIs Performance

Customer Minutes Lost Customer Interruptions

South Wales +/- £6.0M 11.2 27.5 43.8 20.7 South Wales +/- £2.2M 35.1 49.9 64.7 43.8

South West +/- £8.9M 18.4 35.6 52.8 29.0 South West +/- £3.3M 39.7 55.4 71.1 47.8

East Midlands +/- £12.5M 23.2 37.6 52.0 19.9 East Midlands +/- £4.6M 38.0 51.1 64.2 41.7

West Midlands +/- £12.9M 34.3 50.3 66.3 28.5 West Midlands +/- £4.7M 70.9 85.0 99.1 63.3

Total (2012/13 prices) £40.3M £-40.3M £31.4M Total (2012/13 prices) £14.8M £-14.8M £10.4M

A measurement of the cumulative amount of minutes customers are without electricity. A measurement of the cumulative amount of interruptions in a customer's electricity supply, per 100 customers.

Ofgem Target62.5

01020304050607080

Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Customer Interruptions (per 100 customers)

OfgemTarget39.8

01020304050607080

Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Customer Minutes Lost

CML and Ofgem target are based on a weighted average of all four DNOs. CI and Ofgem target are based on a weighted average of all four DNOs.



U.K. incentive revenue customer satisfaction

• The Broad Measure of Customer Satisfaction Survey rewards or penalizes DNOs for the levels of customer satisfaction

• Through September 2016, WPD performance is near or at the max reward levels. WPD projects 2016/2017 performance of £11.3M (in 2012/2013 prices).

South West South Wales East Midlands West Midlands Total Max reward/penalty +/-£2.8 +/-£1.9 +/-£4.0 +/-£4.0 +/-£12.7

Max Reward

Breakeven

Max Penalty

38


Summary of prior cash repatriation strategy: • Previous guidance of $300 to $500 million cash repatriation annually from the U.K.;

midpoint of $400 million represented £250 million at $1.60/£ exchange rate • £250 million translated at $1.30/£ results in U.S. dollar cash of $325 million per year • $450 million gains on currency hedges cover approximately 5 - 6 years of cash shortfall at

$1.30/£ exchange rate Further optimization of cash repatriation strategy from $325 million to $100 – $200 million per year: • Minimizes translation impact of historically low GBP exchange rates on repatriated cash • Shift in borrowing from the U.K. to the U.S. captures tax rate differential • Lower distribution levels extend tax efficient cash repatriation strategy • Continued flexibility to evaluate most efficient repatriation strategy going forward taking

into account future market conditions

Optimizing annual cash repatriation from the U.K. $100 - $200 million near term, with flexibility up to $500 million per year.

U.K. cash repatriation strategy

39


Two new adjustments to annual allowed revenue introduced in RIIO-ED1: • TRU Adjustment

― Tariffs are set using a forecasted RPI as determined by HM Treasury

― Forecasted RPI is trued up to actuals and the corresponding revenue adjustment is collected from or returned to customers two regulatory years later

• MOD Adjustment ― On an annual basis, certain components of base demand revenue are updated for financial

adjustments including tax, pension, cost of debt and legacy price control adjustments

― MOD adjustment also includes the Totex Incentive Mechanism which allows WPD to retain 70% of any cost savings against the RIIO-ED1 business plan and bear 70% of any cost over-runs

― Similar to TRU, most MOD components result in a revenue adjustment two regulatory years later

Adjustments included in current forecast ($ in millions, pre-tax) 2016 2017

TRU $0 ($27)

MOD $5 ($4)

Total $5 ($31)

TRU and MOD adjustments

40


2015A(1) 2016E

Domestic Cash from Operations $1,546 $2,006

Domestic Maintenance Capex(3) (640) (695) Dividend From UK Regulated 319 357 Cash Available for Distribution $1,225 $1,668Common Dividend (1,004) (1,030) Cash Available for Reinvestment $221 $639

Domestic Growth Capex ($1,650) ($1,288)

Debt Maturities ($1,000) ($445)

Debt Issuances and Change in Cash(4) 2,139 1,046Equity Issuances 175 159

Other Investing & Financing Activities 115 (111) Additional Funding Sources for Domestic Growth Capex $1,429 $650

Strong U.S. operating cash flows plus U.K. dividend sufficient to fund PPL dividend. U.S. debt and equity issuances fund domestic utility growth. U.K. business completely self-funding.

(2)

Funding growth

41

Note: Information provided on this slide to be updated on an annual basis. See appendix for the reconciliation of Domestic Cash from Operations.(1) Actuals for 2015 do not include activity related to the former PPL Energy Supply, LLC for any portion of the year, except a planned $191 million dividend(2) Includes $310 million of net proceeds from 2017 and 2018 monetized U.K. earnings hedges(3) Represents book depreciation (4) Includes domestic issuances (short and long term), net of issue costs

WPD Holding Company LKE Holding Company

PPL Electric Utilities LKE Operating Companies

PPL Capital Funding

Credit Rating

Secured Unsecured Long-term Issuer Outlook

S&P

NR BBB+ A- Stable

Moody’s

NR Baa2 NR Stable

Credit Rating


S&P

NR BBB+ A- Stable

Moody’s

NR Baa3 Baa3 Stable

WPD Operating Companies

Credit Rating


S&P

NR A- A- Stable

Moody’s

NR Baa1 Baa1 Stable

Credit Rating


S&P

A NR A- Stable

Moody’s

A1 NR A3 Stable

Credit Rating


S&P

NR BBB+ A- Stable

Moody’s

NR Baa1 Baa1 Stable

Credit Rating


S&P

A NR A- Stable

PPL Corporation

Credit Rating


S&P

NR NR A- Stable

Moody’s

NR NR Baa2 Stable

Strong credit profile at our utilities, holding companies and PPL Corporation.

Moody’s

A1 NR A3 Stable

Strong credit ratings



Manageable maturity schedule and strong liquidity profile provide financial flexibility.

Liquidity Profile as of September 30, 2016

Debt Maturity Distribution 2016 - 2020 as of September 30, 2016

Note: GBP debt maturities and credit facilities converted at GBP/USD rate of $1.30/£.

Strong financial foundation

43

($ in

mill

ions

)

($ in

mill

ions

)


Reconciliation of forecasted reported earnings (loss) to earnings from ongoing operations

44


Reconciliation of segment reported earnings (loss) to earnings from ongoing operations

(1) Includes an $879 million charge reflecting the difference between PPL's recorded value for the Supply segment and the estimated fair value determined in accordance with applicable accounting rules under GAAP.

45


Reconciliation of domestic cash flows

46


Statements contained in this presentation, including statements with respect to future earnings, cash flows, dividends, financing, regulation and corporate strategy are "forward-looking statements" within the meaning of the federal securities laws. Although PPL Corporation believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results discussed in the statements. The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: market demand for energy in our service territories, weather conditions affecting customer energy usage and operating costs; the effect of any business or industry restructuring, including the ability of PPL Corporation to realize all or a significant portion of the anticipated cost savings from the corporate restructuring following the Supply business spinoff; the profitability and liquidity of PPL Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of our facilities; the length of scheduled and unscheduled outages at our generating plants; environmental conditions and requirements and the related costs of compliance; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures; asset or business acquisitions and dispositions; any impact of hurricanes or other severe weather on our business; receipt of necessary government permits, approvals, rate relief and regulatory cost recovery; capital market conditions and decisions regarding capital structure; the impact of state, federal or foreign investigations applicable to PPL Corporation and its subsidiaries; the outcome of litigation against PPL Corporation and its subsidiaries; stock price performance; the market prices of equity securities and the impact on pension income and resultant cash funding requirements for defined benefit pension plans; the securities and credit ratings of PPL Corporation and its subsidiaries; political, regulatory or economic conditions in states, regions or countries where PPL Corporation or its subsidiaries conduct business, including any potential effects of threatened or actual terrorism or war or other hostilities; British pound sterling to U.S. dollar exchange rates; new state, federal or foreign legislation, including new tax legislation; and the commitments and liabilities of PPL Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such important factors and in conjunction with PPL Corporation's Form 10-K and other reports on file with the Securities and Exchange Commission.

Forward-looking information statement

47


Definitions of non-GAAP financial measures

48

Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to reported earnings, or net income, an indicator of operating performance determined in accordance with GAAP. PPL believes that Earnings from Ongoing Operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. In addition, PPL's management uses Earnings from Ongoing Operations in measuring achievement of certain corporate performance goals, including targets for certain executive incentive compensation. Other companies may use different measures to present financial performance. Earnings from Ongoing Operations is adjusted for the impact of special items. Special items are presented in the financial tables on an after-tax basis with the related income taxes on special items separately disclosed. Income taxes on special items, when applicable, are calculated based on the effective tax rate of the entity where the activity is recorded. Special items include:

• Unrealized gains or losses on foreign currency-related economic hedges (as discussed below). • Supply segment discontinued operations. • Gains and losses on sales of assets not in the ordinary course of business. • Impairment charges. • Workforce reduction and other restructuring effects. • Acquisition and divestiture-related adjustments. • Other charges or credits that are, in management's view, non-recurring or otherwise not reflective of the company's ongoing

operations. Unrealized gains or losses on foreign currency economic hedges include the changes in fair value of foreign currency contracts used to hedge British-Pound-Sterling-denominated anticipated earnings. The changes in fair value of these contracts are recognized immediately within GAAP earnings. Management believes that excluding these amounts from Earnings from Ongoing Operations until settlement of the contracts provides a better matching of the financial impacts of those contracts with the economic value of PPL's underlying hedged earnings.


Definitions of non-GAAP financial measures

49

Management also utilizes the following non-GAAP financial measures as indicators of performance for its businesses. "U.K. Gross Margins" is a single financial performance measure of the electricity distribution operations of the U.K. Regulated segment. In calculating this measure, direct costs such as connection charges from National Grid, who owns and manages the electricity transmission network in England and Wales, and Ofgem license fees (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from operating revenues, as they are costs passed through to customers. As a result, this measure represents the net revenues from the delivery of electricity across WPD's distribution network in the U.K. and directly related activities. "Kentucky Gross Margins" is a single financial performance measure of the electricity generation, transmission and distribution operations of the Kentucky Regulated segment, LKE, LG&E and KU, as well as the Kentucky Regulated segment's, LKE's and LG&E's distribution and sale of natural gas. In calculating this measure, fuel, energy purchases and certain variable costs of production (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from revenues. In addition, certain other expenses, recorded in "Other operation and maintenance", "Depreciation" and "Taxes, other than income" on the Statements of Income, associated with approved cost recovery mechanisms are offset against the recovery of those expenses, which are included in revenues. These mechanisms allow for direct recovery of these expenses and, in some cases, returns on capital investments and performance incentives. As a result, this measure represents the net revenues from electricity and gas operations. "Pennsylvania Gross Delivery Margins" is a single financial performance measure of the electricity transmission and distribution delivery operations of the Pennsylvania Regulated segment and PPL Electric. In calculating this measure, utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset with minimal impact on earnings. Costs associated with these mechanisms are recorded in "Energy purchases," "Other operation and maintenance," (which are primarily Act 129 and Universal Service program costs), and "Taxes, other than income," which is primarily gross receipts tax. This performance measure includes PLR energy purchases by PPL Electric from PPL EnergyPlus, which are reflected in "Energy purchases from affiliate" in the reconciliation tables. As a result of the June 2015 spinoff of PPL Energy Supply and the formation of Talen Energy, PPL EnergyPlus (renamed Talen Energy Marketing) is no longer an affiliate of PPL Electric. PPL Electric's purchases from Talen Energy Marketing subsequent to May 31, 2015 are reflected in "Energy Purchases" in the reconciliation tables. This measure represents the net revenues from the Pennsylvania Regulated segment's and PPL Electric's electricity delivery operations. These measures are not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance. Other companies may use different measures to analyze and report their results of operations. Management believes these measures provide additional useful criteria to make investment decisions. These performance measures are used, in conjunction with other information, by senior management and PPL's Board of Directors to manage operations and analyze actual results compared with budget. Reconciliations of margins for future periods are not provided as certain items excluded from Operating Income are inherently subject to change and are not significant.

Date post:	22-Aug-2020
Category:	Documents
Upload:	others
View:	3 times
Download:	0 times

PPL CORPORATION Poised for growth. Investing in our...

Documents