Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

PPL Corporation (NYSE:PPL)

Q4 2009 Earnings Call

February 5, 2010 9:00 am ET

Executives

Jim Miller - Chairman, President & Chief Executive Officer

Paul Farr - Chief Financial Officer

Bill Spence - Chief Operating Officer

Joe Bergstein - Manager of Investor Relations

Analysts

Paul Patterson - Glenrock Associates

[Riza Hatiti] - Decade Capital

Paul Ridzon - KeyBanc

Steve Fleishman - Bank of America

Travis Miller - Morningstar

Judd Arnold - King Street

Yiktat Fung - Zimmer Lucas Partners

Operator

Good morning and welcome to the PPL Corporation fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Mr. Joe Bergstein, Manager of Investor Relation, please begin.

Joe Bergstein

Good morning. Thank you for joining the PPL conference call on fourth quarter and 2009 results and our general business outlook. We are providing slides of this presentation on our website at www.pplweb.com. 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 filing.

At this time, I would like to turn the call over to Jim Miller, PPL Chairman, President and CEO.

Jim Miller

All right, thanks Joe. Good morning everyone. Thanks for getting on the call. As normal, we’ll start with a general business update, and talk a little bit about the fourth quarter and year end results and then go into a Q-and-A session. On the call this morning with me are Paul Farr, our Chief Financial Officer; and Bill Spence, Chief Operating Officer.

This morning as you know we released our fourth quarter and year end results, and for the fourth quarter we reported earnings of $0.40 a share on a GAAP basis, compared with earnings of $0.74 a share a year ago. Our 2009 full year GAAP results were $1.08 compared to $2.47 per share in 2008.

We are very pleased to report that our 2009 earnings from ongoing operations, based on our very strong fourth quarter, were $1.95 per share, well ahead of our forecast for the year, and the fourth quarter earnings from ongoing operations were $0.52 per share, versus $0.46 a year ago.

Our strong performance in some pretty difficult times I think speaks well of our assets and our overall model, and about our dedication of our employees to help us work our way through a pretty tough year in the economy. We are able to outperform a very challenging business plan for the year, and we had very solid operating performance, and some higher wholesale energy margins. We implemented a cost reduction initiative early in the year, and that was an important contributor to our strong results for 2009.

On the operating front we set annual electricity generation records at some of our power plants in Pennsylvania and Montana. Some of these 2009 accomplishments will drive longer term benefits for our share owners and customers.

We successfully transitioned to competition in Pennsylvania this year, and we completed a successful regulatory review process in the United Kingdom, that sets our electric delivery prices for the next five years. Decisions to move ahead with major hydroelectric expansions in Pennsylvania and Montana were made, and the NRC approved a 20 year renewal of our operating license for the two units at the Susquehanna nuclear plant.

Let’s move onto 2010; this morning we as well reaffirmed our 2010 earnings forecast of $3.10 to $3.50 a share. The mid point of our 2010 forecast represents nearly 70% increase over our 2009 earnings from ongoing operations. The main driver of the significant increase, of course, is the expected strong growth and energy margins in our supply business.

I would just like to briefly comment on a couple of public policy issues before we turn the call over to Paul and Bill. As you all are seeing out there in the news, it appears very unlikely that we’ll see congressional action regarding CO2 emissions in the near future. We do continue to believe that certainty would be beneficial as the industry moves down the road, but I am not real optimistic that there will be definitive legislation action anytime soon. Meanwhile, PPL and other utility companies will provide input as the environmental projection agency process moves forward.

In Pennsylvania, our rate caps have expired for the customers of PPL electric utilities. There has been substantial competitive retail supplier activity in the service area, and that benefits not only PPL, but its customers as well. As of this week, more than 288,000 of the company’s 1.4 million electric delivery customers have selected an alternate electricity provider. As a result more than 40% of the electricity being used and electric utility service territory is being supplied by alternative suppliers.

So this really reinforces that this competitive marketplace is working well for the customers in Pennsylvania as was intended. Needless to say, we’re continuing to provide customers with information about their supply options and on ways they can use their energy more wisely.

So with that, I’ll turn the call over to Paul Farr.

Paul Farr

Thanks Jim, and good morning everyone. I’d like to begin by reminding everyone that 2008 earnings from ongoing operations includes the operating results of the gas delivery business, but excludes special items related to its divestiture last year.

As Jim mentioned, our fourth quarter earnings from ongoing operations were higher than last year, primarily driven by higher energy margins in the supply segment, and higher delivery margins at WPD. Lower earnings in our Pennsylvania delivery segment were a slight drag on the quarter. I will summarize the key earnings drivers by segment for 2009, and then get into our 2010 earnings forecast.

Let’s start with the supply segment performance for 2009 on slide seven. The supply segment earned $0.88 per share in 2009, a $0.07 increase over 2008 results. Clearly the single biggest drive of the comparative margins was the $0.20 in trading losses in 2008 that we incurred when the market experienced a dramatic decline in wholesale energy prices and power market liquidity.

Other positive drivers of energy margins for the supply business segment in 2009 included higher value from our generation portfolio, partially offset by lower net margins from lower following agreements and due to lower customer demand, higher operations and maintenance expenses and higher depreciation.

Turning to slide eight, our Pennsylvania delivery segment earned $0.35 per share in 2009, a $0.09 decline compared to 2008. This decrease was the net result of lower delivery margins primarily due to milder weather and the weak economy, as well as higher financing costs due to the pre-funding of a portion of PPL electric utilities 2009 debt maturity in October of 2008.

Turning to slide nine, our international delivery segment earned $0.72 per share in 2009, a $0.05 decline compared to 2008. The decrease was primarily driven by less favorable currency exchange rates in 2009 compared with 2008. The FX impact was partially offset by higher delivery margins, primarily driven by higher prices due to inflation and a more favorable customer mix; lower O&M primarily driven by lower pension expense; lower interest expense and WPD’s indexed bonds and lower U.K. income taxes.

Turning to slide 10, as previously mentioned we are reaffirming our 2010 earnings forecast of $3.10 to $3.50 per share. The higher expected earnings are driven by strong growth in energy margins from the generation portfolio, and primarily based on hedge power and fuel prices, as well as established capacity prices and PJM for this year.

These higher energy margins are expected to be partially offset by lower earnings at WPD, primarily driven by higher income taxes, higher pension expense and higher financing costs, which are in turn expected to be partially offset by higher delivery margins and more favorable currency exchange rates.

Higher O&M in the Pennsylvania delivery business segment did increase funding for customer programs, increased management and expected high [uncollectible] expenses as well as higher depreciation. Factoring in all these drivers, we expect approximately 77% of our 2010 earnings will come from our supply segment, international to contribute 15%, and the Pennsylvania delivery segment 8%.

On slide 11, we’ve updated our free cash flow before dividend numbers, which will reflect 2009 actual results, as well as a few minor changes for 2010. The variances to 2009 from the numbers presented during the third quarter call primarily result some increased earnings, moving anticipated closing of the sale of the Long Island assets to 2010, and changes in the working capital.

We do expect the Long Island sale to close very soon. The 2010 forecast for the international segment reflects adjustments to CapEx, resulting from the completion of DPCR5, as well as more current projections of exchange rate.

Now I’d like to turn the call over to Bill for an update on operations.

Bill Spence

Thanks Paul, and good morning everyone. Let us turn to slide 12, and I’m going to start with an update on our delivery businesses. Last month the Pennsylvania public utility commission conducted a binding poll, which indicates their intent to approve the PPL electric utility’s portion of the Susquehanna-Roseland 500 Kv transmission line. A final order from the PUC is expected later this month.

We continue to work with the National Park Service to secure the relevant approvals for a small section of an existing line that would be upgraded as part of this project. PJM continues to support the need for this line in a May 2012 in service date.

As Jim mentioned, more than 288,000 PPL electric utilities customers have selected an alternate competitive electric supplier for 2010. There are about 27 different retail suppliers providing electricity supply in the PPL EU territory, seven of them are focused on residential customers.

We have continued to encourage our customers to take advantage of opportunities, as well as the many options that PPL provides for reducing electric usage. I do want to stress that the effects of customer switching will have no material financial impact on PPL as a result of our 2010 generation hedging strategy. For PPL electric utilities of course this is just a pass through of cost, and therefore it does not affect that business segment at all.

Our supply segment is not materially affected as it sold only 3% of its 2010 expected generation in the load falling type transaction. This of course includes transactions with PPL electric utilities.

Let me also provide a brief update on the electric utilities 2011 to mid 2013 Polar Procurement Process. PPL electric utilities recently completed their third solicitation, which covered the 11 month period from January 1, 2011 through November 30, 2011, and thus far approximately one-third of the 2011 polar supplies having contracted by electric utilities under their PUC approved procurement plan.

One final note on the PPL electric utilities side; retail sales of the utility in the fourth quarter were 2.9% lower than the fourth quarter of 2008 on the weather normalize basis. This decrease was driven by lower industrial sales which dropped by 9.6% for the quarter. For the full year retail sales were down 3.1%, driven by lower industrial sales of 11.9%.

Even though electric utility sales are down, distribution revenue has not declined significantly because of their rate structure for industrial customers, which is largely based on customer demand charges rather than kilowatt hour charges. For 2010 we are expecting 1.7% low recovery compared to 2009.

Turning to slide 13; in our international segment, as Jim mentioned, Ofgem the U.K. Regulator has issued its final proposals for their fifth price control view period. We feel it’s fair and produced a constructive outcome for WPD. The result allows for an average increase in revenues of 6.9% per year plus inflation. The high revenues are the result of achieving an approved plan which forecast a capital spending increase of 31%, and operating expense increase as the 14%.

Additionally the exceptional performance by WPD has earned us additional revenue of over $240 million, with the potential to earn above this under the Ofgem incentive programs. The components of the revenue bonus are outlined for you on this slide.

Now moving onto supply; I’m pleased to report that as the direct result of hard work by our dedicated employees, the Susquehanna nuclear station set a generation record in 2009. The plant safely and reliably generated almost 19.50 million megawatt hours last year, and unit one set its own generation record, producing almost 10.50 million megawatt hours.

The station also received NRC approval for 20 year operating license extensions for both the units. We also set new generation records for our hydro output in Montana and our Brunner Island station in Pennsylvania. On the hydroelectric front, PPL receive FERC approval to expand our Holtwood hydro plant in Pennsylvania. Construction on its 125 megawatt expansion has already begun, and we expect to finish the work in the spring of 2013.

In Montana we also have begun construction to expand the Rainbow hydro plant. That expansion and redevelopment will replace several small units with the combined capacity of 37 megawatts, with a single 60 megawatt unit. Construction is expected to be completed in 2012.

In the fourth quarter we also completed our final scrubber construction project, when we placed the second scrubber at the Brunner Island plant in service. All the scrubbers, including those at the Montour facility, were successfully completed on time, safely and within budget. This was over a five year, $1.4 billion effort, and again, just a great job by our employees. Finally in November we completed the sale of majority of our hydro assets in Main for about $81 million.

Moving onto an update of our hedge program on slide 15, we have updated our hedge positions as of December 31. These levels have not changed substantially from the update we provided you at the end of the third quarter. We continue to hedge our 2010 through 2012 expected economic generation, primarily through option collars, to protect against downer price movements and allow some up side as market prices recover.

This collared approach protects the base load generation from the volumetric risk associated with low falling contracts, as well as the associated price risk. In addition, all of our capacity has been hedged, primarily through selling forward capacity in our PM auctions.

On the fuel side, we’ve contracted for 100% of our uranium needs through 2012 as shown on slide 16; and for 2010, our wholly owned plans are fully hedged for coal, with only a small open position at Keystone & Conemaugh.

Now I’d like to turn the call back Jim Miller for Q-and-A. Jim.

Jim Miller

Thanks Bill. Alright operator, let’s open up for questions please.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from Paul Patterson - Glenrock Associates.

Paul Patterson - Glenrock Associates

The trading and marketing impact for the fourth quarter, could you elaborate a little bit more on that? I missed the quantification of it, I’m sorry, and just if you could review what it was for the year, what your outlook again is for 2010?

Jim Miller

We ended up just a bit short because of the lower marketing volumes on the $85 million target and we have decreased that expectation number down to $35 million for 2010, based upon the back log that we’ve got on marketing deals, and where we expect customer demand levels to be.

Paul Patterson - Glenrock Associates

Okay, then taxes for the fourth quarter, there was still a little bit low to me, could you just elaborate a little bit more on that, and just refresh our memory for what it should be for 2010?

Jim Miller

It was primarily driven in the fourth quarter by settlement of some items with the U.K. Inland Revenue that went in our favor, as well as year end dividend planning that we implemented. I would expect next year that we would experience it.

I referenced it in my points primarily related to the international segment. I think we ended 2009 in the upper teens from an effective tax rate prospective in international, that we’d be in the 27%, 28% range for next year, bringing corporate to something around 36%.

Paul Patterson - Glenrock Associates

Okay, so what was the impact of the settlement and the other thing that you described earlier in the fourth quarter?

Jim Miller

It was around a total of $0.08, was around $0.03 from dividend planning and around $0.03 or $0.04 from settlement of the Inland Revenue item.

Paul Patterson - Glenrock Associates

Okay. Then just in terms of customer migration; shopping, what’s your latest numbers on that, and your expectations? I mean, I know that you guys don’t have a lot of exposure there, I don’t believe you do. You guys don’t have a lot of the forward contract, but could you just give us a little more favor as to what you’re seeing there in your service territory?

Paul Farr

Sure Paul. I mentioned in my comments and I think Jim as well, that we have right now about 288,000 customers shopping. That represents about 41% of the total retail load in the PPL Electric Utility Territory. That continues to grow. About 20% of the customers have now engaged in shopping, and if you recall, we had about 10% of the customers that had taken advantage of the electric utilities prepaid, post pays-in program.

So you have right now about a third of the customers that have taken proactive steps to manage their electric bill, and we expect that to continue; but you’re right, it does not have a material impact on our supply business, and of course no impact on the electric utility business, because it’s just the cost pass through.

Paul Patterson - Glenrock Associates

You know who’s getting the majority of your load? Do you know who the competitors are there that seem to be capturing most of that load, and who has the pole that might be following off the most or who has the most exposure there. Obviously you guys don’t, so who would it be do you think?

Jim Miller

I can’t really say, I don’t know specifically for one thing, and even if I did know specifically, I wouldn’t be able to tell you under the confidentiality provisions under which suppliers are bound, so sorry for that.

Paul Farr

This is Paul again; that impact on taxes for the quarter, I was off. I was thinking versus budget. It was just $0.03 versus prior year in the quarter. The rest had been booked before that in Q4.

Paul Patterson - Glenrock Associates

What was it for the full year I guess?

Paul Farr

The total for the full year, year-on-year was $0.06 I believe in net movement. So tax planning that was more beneficial in ‘09 over ‘08, which also had some effective tax planning in it as well.

Paul Patterson - Glenrock Associates

Then just finally back on the customer migration, how much do you think will be? I mean of course a lot of people may not be getting around the total sources now. How much do you think in the end or do you have any projections to how much actually might end up shopping?

Paul Farr

We don’t have a specific projection Paul, but I think certainly the industrial and the commercial accounts are pretty much set in my mind, because they were most aware and most concerned, and are targeted by the larger group of marketers in the region; it was 27 that I mentioned.

On the residential side, I think customer shopping will continue as more and more retailed suppliers come into the territory. I wouldn’t be surprised to see us up at the 30% total level when all is said and done, but we don’t have a specific projection, so that’s just my best guess at this point.

Operator

Your next question comes from [Riza Hatiti] - Decade Capital.

Riza Hatiti - Decade Capital

Could you talk about, I guess with WPD, what the earnings trajectory is for that segment going forward over the next few years. I guess given that it’s a U.K. company it’s tough to kind of model it out.

Jim Miller

You’ve got the midpoint number in the press release as it relates to 2010, and you can see some of the net effect of the degradation that I talked about from the movement in pension and interest expense and the benefit being offset by the revenue.

I will say that, when you look at the comment that Bill made about the north of 6% average increase over the five years, inland revenue did shape that, so that the up front impact to the consumer was lower, so that when we look at the shape of the margins, we are much more benefited at the back end of the five year plans, specifically in 13, 14, than we are at the front end.

So that kept down the headline rate to the consumer that allowed the companies to earn over the five years, what we think was a fair return, a fair trade off for the items that they did change. So I think we don’t have a forecast out beyond 2010, but I’ll expect an earnings profile that would grow through the five years off of the 2010 number.

Riza Hatiti - Decade Capital

The 6% revenue increase per year, some of that gets offset I guess with increased cost and interest and things of that nature?

Jim Miller

Well they do, but again both grow. We did get a 14% increase in OpEx versus the prior five year to go along with that higher level of CapEx spending, and both the rate base and O&M costs are allowed to grow by inflation. So there is some netting down with the natural hedge of the inflation index bonds that we used to finance the entity, but both the rate base and O&M benefit by inflation each year. So some of that natural increase is built in and offset through the rate making process itself.

Riza Hatiti - Decade Capital

I also noticed that your 2012 generation volumes went up, especially the east base load went up I think by around 2.5 or so terawatt hours, what does that due to?

Jim Miller

There’s a couple of things driving that, but the biggest of those is the start of a contract with the Longview coal plants; it’s under construction in West Virginia where we have an off take agreement there. There was some outage timing that positively impacts 12, and then the full year of the Susquehanna Nuclear Plant Unit 2 upgrade, it comes into play in that year as well. So those are the three drivers.

Paul Farr

Riza, we had previously accounted for, I’ll use that term loosely, the Longview project as a marketing asset that’s similar to the rest of the generation assets, including the pulls on Ironwood; that’s now all in the generation book. So we’re reflecting that there. It just previously wasn’t categorized as that internally.

Riza Hatiti - Decade Capital

This Longview, how should we think about the cost to you? Obviously, you have it in your expected generation and you have the average hedge price and whatever is open gets market price, but what is the cost to PPL?

Paul Farr

The cost is confidential pursuant to the contract, but what I would say is that it’s basically a West Hub financial swap. So we basically get West Hub price power, and the price pursuant to the contract today versus forward prices is not materially different. It’s been significantly in the money, but its power price has come down. It’s still in our favor, but not as significantly as it was.

Riza Hatiti - Decade Capital

Just lastly on slide 16, you have your coal hedges; am I reading this correctly, that for example in 2012 you’re 62% hedged in east, and of the 62%, 5% is fixed base and 95% is scholars.

Paul Farr

Yes, you’re reading it correct, that’s right.

Operator

Your next question comes from Paul Ridzon - KeyBanc.

Paul Ridzon - KeyBanc

You talked through guidance for ‘09; can you talk about drivers that got you there and any implications as to what you’re thinking; either end of your 2010 guidance, and then just what you think the big variables to watch in 2010 are. You’ve obviously got some pretty wide guidance out there.

Paul Farr

When you say guidance for 2009, the actual performance versus if you were where we ended up.

Paul Ridzon - KeyBanc

Yes, you talked to the top end of your guidance. What got you there and does that carry through to ‘10?

Paul Farr

From our quarterly prospective, I think as we assess performance for the year, we’re kind of built on performance throughout the year. We had a very solid fourth quarter. We went into the quarter a little short from a power prospective as we saw prices decline and recognized that we had a natural edge in the load-following deals that we had. So if power crises would have risen, and that would have logically been driven by customer demand, there was a natural offset.

So at the front end of the quarter we got some benefit by being a little bit short in our power book, and then as we got to the month of December at the very back end of the quarter, we saw some very good customer demand pickup as a result of the cold whether, and that clearly benefited the load-following deals, and that’s continued a bit into obviously January.

The cost reduction initiative that Jim outlined at the very beginning of the year, a whole series of things that we did to try to address costs early looked like marketing was going to start to comedown in a meaningful way for us. It got us probably in the $0.12 to $0.13 land for the year, and then I think we handled the demand destruction extremely well, through a whole series of initiatives that the guys took in the various books, the generation book and the marketing book.

Then as well strong generation performance; really throughout the year, ex the loss of a unit at coal strip that we had, but ultimately in Q3 and Q4 we did get some insurance recovery from a business continuity prospective. I think it was a steady performance Paul throughout the year, and cap-stoned again by very strong generation performance and a very strong marketing and trading prospective in the last quarter as well.

Paul Ridzon - KeyBanc

You anticipate some of these impacts flowing into ‘10?

Paul Farr

We did factor where we were able to reiterate guidance for these last couple of quarters. Now when you say a wide range, we’re still exposed a bit, to obviously operating performance, the more hedges that we get, we’re exposed to interest rates, the currency exchange rates. I mean it would take a lot of things moving negative on us to get to the bottom end of the range.

If we get beneficial weather, if the generation continues to perform strongly, which it has as we’ve entered this year, we clearly expect that we can outperform the midpoint. So all of those items have really been kind of factored into the range when we said it, and as we’ve been able to reiterate it. So we feel very good about 2010.

Operator

Your next question comes from Steve Fleishman - Bank of America.

Steve Fleishman - Bank of America

If you look at your Pennsylvania delivery forecast for 2010, could you give us a sense what earned ROE you would have in Pennsylvania based on that, and assuming it is pretty low, which I think it is. What is your plan for getting some rate relief at this point?

Paul Farr

Yes, the ROE for ‘09 was right around 8%. It will be in the lower 6% for 2010, and as we’ve kind of said in the past, we expect that we’d be filing a rate case probably near the end of Q1 here for new rates to be effective on January 1, 2011. So that would be the mechanism to get the earned back to a more acceptable level.

Steve Fleishman - Bank of America

Then one other question; just curious, I think Bill mentioned the load forecast is up 1.7%. I assume some of that is just normal weather helping as well, but I know in Pennsylvania they’re starting to implement a lot of new energy efficiency initiatives, and I am curious, kind of what you are expecting the impact of energy efficiency to be on kind of just the deliveries in 2010 and beyond.

Bill Spence

Sure yes, I did mention the 1.7%, and that on a weather normalized basis, that’s the net. Yes, we do expect on the energy efficiency side around a percent or so of load reduction as a result of those initiatives, so it really needs to get 2.7% let’s say, then down to 1% for energy efficiency, but we did build that into our forecast.

Operator

Your next question comes from Travis Miller - Morningstar

Travis Miller - Morningstar

A question on your hedge position; it looks like you haven’t done too much with it since maybe first half of 2009, and I was wondering if you could just talk through, especially that 2012 on the energy pricing side. Is there something you see right now in the market or should we expect it’ll kind of forward hedge roll on here in the next couple of quarters to move that ratio up.

Paul Farr

I do think that over the next couple of quarters you’ll see it start to layer in hedges for 2012. We’ve been obviously with the downturn in the natural gas prices and the economy. We’ve been waiting for hopefully a rebound to give us some opportunity to layer in some more favorable hedges, but as we get closer to ’12, we will want to start to lock some of that in.

Jim Miller

Now I mean when you say go back to Q2, as prices started to comedown, even the hedges that we did back then are in the money, given additional price deterioration. We did hedge really to almost the upper end of our three year hedging program, limits at 100%, 90% and 60%. So at that point in time there wasn’t much of a view, but today as Bill said, we’re hopeful that there will be some recovery in prices as customer demand picks back up.

So the hedge positions are, we think very strong; we’re glad we put them on, and we would be looking over the year as utilities bid load following. As the market presents some better opportunities we will like to hedge that up a bit as we make our way throughout the year.

Travis Miller - Morningstar

I suppose that correspondence to a more bullish viewpoint on demand on the delivery side, as well in the area or in the state across the region?

Jim Miller

Yes, I think we’re certainly expecting some recovery, how quick is anyone’s guess. I did mention in my prepared remarks that we are using, and continue to use scholars to retain some of the up side in our hedging program.

Operator

Your next question comes from Judd Arnold - King Street.

Judd Arnold - King Street

Just following up on Riza’s question, I think you guys said you moved Longview and Ironwood into generation for marketing. I was wondering, is there any impact this quarter? When I look at marketing, the change in gross margin, is that impacted at all by that move.

Jim Miller

No.

Judd Arnold - King Street

That’s just go forward?

Jim Miller

That’s correct.

Judd Arnold - King Street

My second question, Exelon made some comments at the CSB conference this week, talking about the 2012 or the next RPM auction that they think we’re going to start to see impacts of guides with smaller and efficient coal plants withholding capacity or pricing that capacity at a big premium to just offset some of the ongoing environmental costs; do you think that’s a true statement or can you add a color to that?

Jim Miller

Well, certainly those types of plants are going to be more challenged depending on how the EPA deals with the variety of regulations that could impact coal stations, and we’ve seen through the economy and other pressures that capacity factors on some of those less efficient units have gone down significantly.

Having said that, when we look at the next RPM auction, and look at the planning parameters that have been adjusted, we really just see it kind of as a flat to slightly positive impact due to the updating of the cost to new entry numbers, the cones, they went from three to five zones, as well as some transmission constraints that are projected down in that timeframe. So I wouldn’t say that we’re projecting any material impact to the upside in that timeframe, not to say it couldn’t happen.

Bill Spence

It’s not likely that the environmental issues will have revealed themselves at that point in time, not that they won’t or can’t in the future, but at that point in time they will not have self revealed.

Operator

(Operator Instructions) Your next question comes from Yiktat Fung - Zimmer Lucas Partners.

Yiktat Fung - Zimmer Lucas Partners

I’d just like to clarify; on slide 13, there’s additional benefit at WTE. Are these amounts per year or are they for the entire five year plan?

Jim Miller

Total over the five year plan.

Yiktat Fung - Zimmer Lucas Partners

Are they more backend loaded or are they spread evenly?

Jim Miller

I think as Paul mentioned, a lot of the benefits that we see in the outcome from the recent price review will be backend loaded.

Operator

Your final question comes from Paul Ridzon - KeyBanc.

Paul Ridzon - KeyBanc

Can you quantify the weather impact versus normal for the year?

Jim Miller

The weather impact on electric utilities for the year?

Paul Ridzon - KeyBanc

Yes.

Jim Miller

It was a total of $0.04 between the weather and shopping, a little less than $0.02.

Paul Ridzon - KeyBanc

For the negative?

Jim Miller

For the negative, yes.

Operator

At this time, there are no further questions.

Jim Miller

All right. Well I think we’re completing a solid year in 2009. I think as Paul and Bill mentioned, we are looking forward to a solid 2010. We tried to outline for you what issues and areas that certainly let us to a sound performance in ’09, and we’re going to be working very hard to capitalize on those areas in ‘10 to keep strong earnings and forecast out there for 2010. So thank you for participating in the call. Thank you, operator.

Operator

Thank you ladies and gentleman for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: PPL Corporation Q4 2009 Earnings Call Transcript
This Transcript
All Transcripts