ALLENTOWN, Pa.---PP&L Resources, Inc. (NYSE: PPL) Wednesday (7/28) reported 1999 second quarter earnings of 40 cents per share, 25 percent higher than for the same period one year ago.
Earnings per share for the second quarter last year, excluding extraordinary items, were 32 cents per share. The reported loss of $5.34 per share for that period reflected a one-time charge related to the settlement of the company's restructuring case before the Pennsylvania Public Utility Commission and another competition-related case before the Federal Energy Regulatory Commission.
"The significant growth in earnings per share for the second quarter compared with last year is one more indication that PP&L Resources' integrated business growth strategy is bearing fruit," said John R. Biggar, senior vice president and chief financial officer.
Biggar said the second quarter earnings per share improvement reflects increased use by PP&L, Inc.'s 1.3 million electric delivery customers in central and eastern Pennsylvania, higher margins on wholesale energy marketing and trading activities, and lower depreciation in connection with the transition from a regulated to a deregulated market. He also cited benefits from additional overseas investments, lower operating expenses and fewer shares of common stock outstanding resulting from a 17 million-share stock repurchase program in the third quarter of 1998.
PP&L, Inc.'s electricity delivery increase, which totaled more than 4 percent for the quarter, included an increased use of more than 5 percent by commercial and industrial customers. During the quarter, electricity supply sales to commercial and industrial customers, which include energy sold in Pennsylvania's competitive electricity generation market, increased by about 13 percent when compared to the same period a year ago, according to Biggar.
"Our strategy to grow retail and wholesale energy sales through aggressive marketing, to expand our generation operations in the United States, to provide high-quality energy delivery services at excellent prices and to expand into overseas markets continues to dramatically improve the company's earnings performance," said Biggar.
Biggar pointed out several examples of the company's strategy in action during the quarter. The acquisition of most of the electric generating assets and certain transmission rights of Bangor Hydro-Electric Company in Maine is part of the company's corporate strategy to more than double its electricity generating capacity in five years, to 20,000 megawatts, in key regions of the United States. During the quarter, the company also announced the acquisition of the marketing operation of The Montana Power Company to maximize the value of the generation assets the company is acquiring there.
Overseas, the company increased its investment in Empresas Emel S.A., one of Chile's largest electricity distribution companies, by over 29 percent to 66.7 percent. This area is one of the fastest growing and most stable economies in Latin America.
The company expects even further earnings improvement as the result of the securitization of its transition costs. PP&L, Inc., the company's electric utility subsidiary, plans to securitize about $2.4 billion of transition costs, to be announced separately. Securitization is expected to create savings that improve future earnings for shareowners and result in lower rates for PP&L, Inc.'s customers.
The company experienced improved earnings performance in the second quarter despite the effects of a 4 percent rate reduction for electricity delivery customers in Pennsylvania for 1999, higher purchased power costs and the loss of customers who shopped for alternate suppliers for their electricity generation supply under Pennsylvania's customer choice program.
"We're continuing our sales growth by taking advantage of new opportunities in the evolving competitive generation market," said Biggar. "In fact, since competition has come to our marketplace, we have increased our retail electricity supply sales while others are seeing a deterioration of such sales." The company has experienced lower levels of customer shopping than originally estimated and, through its retail marketing subsidiary, PP&L EnergyPlus Co., LLC, has experienced higher sales volumes in the competitive market than previously projected.
PP&L Resources also reported earnings of $1.16 per share for the first six months of 1999, compared with $0.92 per share a year ago, excluding extraordinary items. This earnings improvement represents an increase of 26 percent from last year. The earnings contributors and offsets for the first six months of 1999 were similar to those for the second quarter. Earnings per share in both years were adversely impacted by mild weather, but to a larger extent in 1998.
The company reported 12-month-ended June 30, 1999, earnings per share of $2.54, compared with a loss of $4.08 for the same period a year ago. Excluding the effects of one-time adjustments and other restructuring impacts, earnings per share for the 12 months ended June 30, 1999, were $2.12. The $2.12 figure is a 16 percent increase over similarly adjusted earnings of $1.82 per share for the same period a year ago.
The investment community has recognized the company's improving results and the value of its corporate strategies. As an example, shares of PP&L Resources common stock reflected a total return, defined as stock price appreciation plus reinvestment of dividends, of more than 40 percent for the 12 months ended June 30, 1999.