PPL Electric Utilities Corp. is redeeming all of its outstanding 9 1/4% series first mortgage bonds, due 2019, on April 1, 2000. This redemption is being made pursuant to the maintenance and replacement fund provisions of the 9 1/4% bonds at a price of 100% of the principal amount. PPL Electric Utilities Corp. is a subsidiary of PPL Corporation (NYSE: PPL).
PPL Electric Utilities first announced its intention to take this action in July 1999, in conjunction with the launch of the company's successful debt tender offer at that time. The completion of this tender offer, using a portion of the proceeds from the sale of transition bonds, resulted in the purchase and subsequent retirement of about $1.5 billion of the company's high coupon mortgage debt, including about $187 million of the $215 million of 9 1/4% bonds outstanding at that time.
John R. Biggar, PPL's senior vice president and chief financial officer, noted that, upon the retirement of the remaining $28 million of 9 1/4% bonds, the company will have reduced the weighted average interest rate on its outstanding fixed-rate debt from approximately 7.1% in July 1999 to approximately 6.6%. "This reduction in the company's weighted average interest rate translates into an annual savings in interest expense of about $21 million. In our increasingly competitive marketplace, driving down the company's borrowing costs is contributing directly toward the company's future earnings growth," Biggar said.
As previously announced, PPL forecasts earnings per share of $2.60 to $2.65 for 2000 and $2.95 to $3.00 per share for 2001. The forecast for 2001 earnings represents an increase of about 27 percent over record 1999 adjusted earnings of $2.35 per share and about a 13 percent increase over forecasted 2000 earnings per share.
Biggar said the key drivers for earnings growth in 2000 and 2001 include:
--Continued growth in retail electric sales and revenues;
--Increased earnings contributions from unregulated investments;
--Improved output at PPL's generating facilities; and
--Lower operation and maintenance expenses than previously forecast.
Biggar added, "The reduction of the company's weighted average interest rate on fixed-rate debt is reflected in its earnings forecasts and results from the successful completion of a financial strategy that included both the restructuring of the company's debt portfolio, using proceeds from the sale of $2.4 billion in transition bonds in August 1999, and the simultaneous implementation of an interest rate hedging program."
According to Biggar, the hedging program helped the company to lock in the low interest rates experienced during the first half of 1999, in anticipation of the large amount of securities sales in the second half of last year and the first quarter of this year.
Certain statements contained in this news release, including statements with respect to future earnings and expenses, are "forward-looking statements" within the meaning of the federal securities laws. Although PPL Corp. believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements involve a number of risks and uncertainties and actual results may differ materially from the results discussed in the statements. The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: market demand and prices for energy, capacity and fuel; weather variations affecting customer energy usage; competition in retail and wholesale power markets; the effect of any business or industry restructuring; the profitability and liquidity of PPL Corp. and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of plants and other facilities; environmental conditions and requirements; system conditions and operating costs; performance of new ventures; political, regulatory or economic conditions in countries where PPL Corp. or its subsidiaries conduct business; foreign exchange rates; and the commitments and liabilities of PPL Corp. and its subsidiaries. Any such forward-looking statements should be considered in light of such factors and in conjunction with PPL Corp.'s Form 10-K and other reports on file with the SEC.