PPL Corporation (PPL) announced the successful completion of the acquisition of E.ON U.S. LLC, the parent company of Kentucky’s two major utilities – Louisville Gas and Electric Company (LG&E) and Kentucky Utilities Company (KU). The company paid $7.6 billion, including assumed debt, to E.ON AG for the acquisition.
The addition of LG&E and KU to PPL’s assets has enhanced its business mix by adding a significant amount of regulated delivery and generation assets. The newly acquired utilities provide electricity services to 943,000 customers, mostly in Kentucky, with some customers in Virginia and Tennessee. LG&E also provides natural gas delivery services to 321,000 customers in Kentucky.
The acquisition has resulted in the creation of a larger and more diverse energy company that is well-positioned to continue delivering excellent services to its customers, attractive returns for shareowners and solid benefits for the communities it serves.
Following the acquisition, PPL will serve roughly 5.2 million utility customers, including 2.6 million in the United Kingdom, 1.4 million in Pennsylvania and 1.2 million in Kentucky. The company now has about 19,000 megawatts of generation capacity, with annual revenues estimated to cross $10 billion (up from $7.6 billion recorded in 2009). The company will now employ 13,500 people, including about 3,100 in Kentucky.
PPL Corp. financed the equity portion of the acquisition by selling roughly $3.5 billion worth of shares and equity units in late June. The equity sale was significantly oversubscribed, a favorable indication of investor sentiment toward the acquisition and its perceived value. The balance of the purchase price was paid using existing lines of credit, as well as cash on hand.
The acquisition announced six months ago received speedy approvals from the Kentucky Public Service Commission, the Virginia State Corporation Commission, the Tennessee Regulatory Authority and the Federal Energy Regulatory Commission. It has also received antitrust clearance from the Federal Trade Commission and the U.S. Department of Justice.
Going forward, management sees PPL as a stronger company with excellent prospects for further growth. Management expects PPL’s overall business to benefit from the acquisition as it enhances the company’s financial strength and provides improved financial stability.
Based on expected infrastructure investments in all three of the company’s regulated utility operations, PPL expects the size of its rate-regulated businesses, in terms of rate base, to triple by 2014.
On its earnings conference call, PPL projected its operating earnings for 2010 to be in the range of $2.80 to $2.95 per share, reflecting dilution associated with the equity financing for the acquisition, but excluding any earnings impact from closing the acquisition prior to year-end. The company’s reported earnings guidance for 2010 is in the range of $1.94 – $2.09 per share.
Furthermore, the company expects to provide its 2011 earnings forecast after a detailed review of the Kentucky companies’ 2011 business plan.
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