Tags: PPL | power | gas | utility

PPL Aims for Predictable Power Rates

By    |   Friday, 23 Sep 2011 03:00 PM

Power and gas utility holding company PPL Corporation (PPL), through some strategic acquisitions, has increased the size of its business and significantly changed the structure of the company's streams of revenue. The stock market seems to like what is sees in PPL’s future.

PPL holds a handful of public utility companies in several U.S. states and in the United Kingdom. Other companies under the holding company are in less regulated energy generation and wholesale electric power. PPL owns 19,000 megawatts of power production capacity.

Two recent, large acquisitions have significantly changed PPL’s business. In the 2010 fourth quarter, the company completed the purchase of two major Kentucky utilities. In the first half of 2011, the acquisition of an electric distribution company in central U.K. expanded the company's regulated international utility business. The two acquisitions were funded with the issue of additional common stock, significantly diluting earnings per share from mid 2010 through the second quarter of 2011.

The result of the acquisitions is that PPL significantly has increased the portion of its business which is rate-regulated. For full year 1010, just 27 percent of PPL earnings from operations were from its regulated businesses. Now the company estimates that 60 percent of 2011 earnings from operations will be rate-regulated, and the proportion will grow to 75 percent by 2013.

Seeking regulation

Management considers this to be a positive shift. Typically, regulated rates allow a utility to earn a specific positive rate of return on its assets. Regulated rates for PPL are expected to grow at a 9 percent compounded annual rate through at least 2015.

As a utility company, PPL has paid an attractive and slowly increasing dividend. These changes to the business model are designed to allow the dividend rate to continue to increase, possibly at a faster pace.

The analysts at Ticonderoga Securities have issued the most recent rating on PPL, maintaining their buy rating on the stock. In the spring analysts at both Barclays Capital and FBR capital upgraded the stock to overweight and outperform, respectively. The company reports next on Oct. 27.

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Power and gas utility holding company PPL Corporation (PPL), through some strategic acquisitions, has increased the size of its business and significantly changed the structure of the company's streams of revenue. The stock market seems to like what is sees in PPL s...
PPL,power,gas,utility
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2011-00-23
Friday, 23 Sep 2011 03:00 PM
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