Allentown, Pennsylvania-based PPL Corporation (PPL) has successfully closed its previously announced acquisition of E.ON AG’s electricity distribution business, the Central Networks. PPL Corp. bought Central Networks, the second-largest such business in the United Kingdom, for GBP 3.6 billion ($5.7 billion) in cash and GBP 500 million ($800 million) in debt.
PPL Corp. financed a portion of the transaction using committed acquisition financing under a syndicated bridge facility arranged by two banks. The company also used permanent financing including a combination of common stock, equity units and debt.
PPL expects to complete the permanent equity financing in the second quarter of 2011 and the debt financing by the end of the year.
PPL Corp. completed this acquisition through its U.K. subsidiary, Western Power Distribution (WPD), which operates as WPD South West and WPD South Wales. With this expansion, PPL now owns and operates the largest network of electricity delivery companies in the United Kingdom in terms of regulated asset value for a combined GBP 4.9 billion ($7.8 billion).
PPL Corp., along with its subsidiaries, will now provide regulated utility services to about 10 million customers in England, Wales, Pennsylvania, Kentucky, Virginia and Tennessee. Prior to this acquisition, the company served nearly 5.3 million utility customers in the U.S. and U.K.
Through this acquisition, PPL Corp. said it has further expanded its regulated electricity business in a way that enhances shareowner value. The company also expects this strategic, transformational transaction to be accretive to 2011 earnings and cash flow.
Following the closing, PPL raised its 2011 earnings guidance to $2.50 to $2.75 per share, from the prior forecast of $2.40 to $2.60 per share, excluding the transaction-related costs. The company also said it expects to retain dividends at the current annualized level of $1.40 per share.
Going forward, PPL Corp. expects its highly successful, best-in-class U.K. management team to efficiently implement operational and other improvements that will benefit customers and contribute additional accretion to PPL earnings in 2012 and beyond.
PPL Corporation is a diversified utility company, primarily generating energy from power plants, marketing wholesale or retail energy and delivering electricity to customers in Pennsylvania, Kentucky, Virginia, Tennessee and the U.K., while also supplying natural gas in Kentucky. The company primarily competes with FirstEnergy Corp. (FE) and Exelon Corp. (EXC).
We maintain our ‘Neutral’ recommendation on PPL shares. PPL Corp. currently has a short term Zacks #3 Rank (Hold).
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