Reported earnings are calculated in accordance with generally accepted accounting principles (GAAP). Earnings from ongoing operations is a non-GAAP financial measure that excludes unusual items. The reconciliation tables at the end of this news release provide a detailed description of all unusual items for all time frames and business segments. Per share amounts from prior periods have been adjusted to reflect PPL's 2-for-1 common stock split completed in August 2005.

Fourth-quarter 2005 Earnings Results

For the fourth quarter of 2005, PPL announced reported earnings of $0.48 per share, a 2 percent increase over the same period of 2004. During the fourth quarter of 2005, the company recorded an unusual after-tax charge of $0.02 per share to comply with new accounting rules for conditional asset retirement obligations. The company also recorded an unusual after-tax charge of $0.02 per share for additional off-site cleanup costs associated with the previously announced ash basin leak at its Martins Creek coal-fired power plant in eastern Pennsylvania. PPL recorded an initial after-tax charge of $0.05 per share related to the Martins Creek off-site remediation in the third quarter of 2005. The additional fourth-quarter charge was considered necessary due to changes in the scope of the remediation effort and other factors.

The company's earnings from ongoing operations for the quarter were $0.52 per share, an increase of nearly 11 percent over the fourth quarter of 2004. This increase for the quarter was due primarily to the same drivers that contributed to the increase for the full year 2005.

Earnings by Business Segment

The following chart shows earnings contributions from PPL's business segments for the year and for the fourth quarter of 2005, compared with the same periods of 2004.

Key Earnings Factors by Business Segment

Supply Segment

PPL's supply business segment primarily consists of the domestic energy marketing and generation operations of PPL Energy Supply.

Per share earnings from ongoing operations for PPL's supply business segment in the fourth quarter of 2005 were lower than for the same period in 2004. This decrease was primarily due to lower energy margins in the eastern United States because of increased supply costs resulting from higher sales associated with PPL's fixed-price supply obligations, coupled with higher fuel and purchased power expenses as a result of the outages at PPL's Susquehanna nuclear plant and the coal-fired units at Martins Creek, and higher coal expense. Other factors that negatively affected the quarter were higher operation and maintenance expense due to the Susquehanna maintenance outage and more planned outages at major coal-fired plants in 2005.

Per share earnings from ongoing operations for PPL's supply business segment for 2005 were also lower than in 2004. The decrease was primarily driven by the same factors that contributed to lower energy margins in the eastern United States in the fourth quarter, along with dilution from increased shares outstanding and lower energy margins in the western U.S. These negative earnings drivers were partially offset by higher synfuel earnings due to higher production volumes and unrealized gains on options purchased by PPL to economically hedge a portion of the risk associated with synfuel tax credits.

Pennsylvania Delivery Segment

PPL's Pennsylvania delivery business segment includes the regulated electric and gas delivery operations of PPL Electric Utilities and PPL Gas Utilities.

The key earnings driver for PPL's Pennsylvania delivery business segment for both the fourth quarter of 2005 and the year was the 7.1 percent increase in distribution rates and transmission charges effective Jan. 1, 2005.  This segment also benefited in both periods of 2005 from increased retail electricity sales among residential, commercial and industrial customers.

International Delivery Segment

PPL's international delivery business segment primarily includes investments in electric distribution companies in the United Kingdom and Latin America.

Key earnings drivers for PPL's international delivery business segment for both the fourth quarter and the year were higher electricity delivery revenues in the U.K., resulting from an incentive award from the regulator for outstanding customer service and an improved customer mix; higher electricity delivery revenues in Latin America due to increased sales volumes; and lower income tax expense on foreign earnings. Partially offsetting these positive earnings drivers for PPL's international delivery business segment was higher pension cost in the U.K.

PPL is reaffirming its 2006 earnings forecast of $2.15 to $2.25 per share. PPL expects its supply business segment to provide about 60 percent of the corporation's per share earnings, with the balance almost evenly distributed between its Pennsylvania delivery and international delivery segments.

Supply Segment

Based on current forward energy prices, PPL is projecting higher energy margins for its supply business segment in 2006, primarily driven by the 8.4 percent increase in the generation prices under the Pennsylvania Public Utility Commission (PUC)-approved contract between PPL Electric Utilities and PPL EnergyPlus for customers who choose not to shop for an energy supplier. Higher generation output, higher-priced wholesale energy contracts that replace expiring contracts, and lower purchased power costs also are expected to improve energy margins. These benefits are expected to be partially offset by increased fuel and fuel transportation expenses. The 2006 supply business segment earnings also are expected to be affected by higher operation and maintenance expenses and reduced synfuel earnings.

Pennsylvania Delivery Segment

PPL projects the Pennsylvania delivery business segment will have flat delivery revenues due to a combination of projected modest load growth in 2006 and higher sales in 2005 as a result of unusually warm weather. This business segment also is expected to experience increased operation and maintenance expenses.

International Delivery Segment

PPL projects that its international delivery business segment will experience increased operation and maintenance expenses, due primarily to higher pension costs at PPL's electricity distribution companies in the United Kingdom; higher U.S. income taxes; and unfavorable currency effects in 2006.

2007 Earnings Forecast

Based on its preliminary forecast, PPL expects that earnings per share will increase by 4 percent to 5 percent in 2007 compared with 2006, driven primarily by the replacement of expiring fixed-price supply obligations with higher-margin wholesale energy contracts, indicated by current forward energy prices; an increase in generation prices under the PUC-approved contract between PPL Electric Utilities and PPL EnergyPlus for customers who choose not to shop for an energy supplier; and higher generation output in the western U.S. Partially offsetting these factors is a modest increase in fuel-related expenses and an expected increase in operation and maintenance expenses.

Credit Profile and Liquidity Position

PPL's equity to total capitalization ratio as of Dec. 31, 2005, was 38 percent, up from 36 percent a year ago, using debt and equity as presented on PPL's balance sheet. PPL's adjusted equity to total capitalization ratio as of Dec. 31, 2005, was 51 percent, up from 50 percent a year ago. The adjusted ratio for Dec. 31, 2005, excludes $892 million of transition bonds and $2.2 billion of debt of international affiliates, which are non-recourse to PPL.

PPL's equity to total capitalization ratio as of Dec. 31, 2006, is forecast to grow to about 43 percent, again using debt and equity as presented on PPL's balance sheet. This reflects a $375 million reduction of debt, a planned sale of $250 million in preferred securities and an approximate $450 million increase in common equity, primarily through growth in retained earnings. PPL's adjusted equity to total capitalization ratio for the same period is forecast to increase to about 55 percent. The adjusted ratio excludes $605 million of non-recourse transition bonds and $2.1 billion of non-recourse debt of international affiliates.

Based on the continued strengthening of its credit profile, PPL expects to be in a position to repurchase a portion of its common stock beginning in 2009.

At Dec. 31, 2005, PPL had $2.8 billion of available capacity under its $3.5 billion of bank credit facilities. The following table reflects PPL's projected free cash flow before dividends for 2006 and actual cash flows for 2005.

The forecasted change in cash from operations between periods is primarily due to a projection of higher net income in 2006. PPL's projection of increased capital expenditures in 2006 is primarily driven by the construction of pollution-control equipment at the Montour and Brunner Island power plants.

As previously announced, PPL is installing sulfur dioxide scrubbers at two of its power plants in Pennsylvania. The scrubbers at both units of PPL's Montour coal-fired power plant and at Unit 3 of its Brunner Island coal-fired power plant are expected to be in service during 2008. The company also plans to install a scrubber at Units 1 and 2 of the Brunner Island plant, expected to be in service in 2009. PPL has received its air permit and has started construction of the Montour scrubbers. PPL expects to have air permits for the Brunner Island scrubbers around mid-2006, with construction scheduled to start shortly thereafter.

PPL plans to finance the $1.5 billion of pollution-control equipment as part of its overall capital expenditure program with cash from operations and, when necessary, the issuance of debt securities. The company has no plans to issue any common stock during this period to fund its current capital expenditure program.

Future Outlook

PPL's ability to grow its energy supply margins through the end of 2009 is limited to some degree because a substantial portion of its generation in the Eastern U.S. is being sold through Dec. 31, 2009, under the PUC-approved contract between PPL EnergyPlus and PPL Electric Utilities for customers who choose not to shop for an energy supplier. Sales of energy for delivery after the expiration of that contract are expected to be made at the forward market prices in effect for the specified delivery period at the time those sales commitments are made.

"The increase in PPL's forecast for its compound annual growth rate in earnings per share to 11 percent through 2010 reflects the significant increase in 2010 energy prices over the last six months," Hecht said. "This forecast incorporates our current view of 2010 forward energy prices, fuel and emission allowance prices, fuel transportation costs and other costs associated with operating the business. We cannot predict the exact level of these prices or costs until such time as the commitments are made. They could be higher or lower than those projected in our current forecast."

However, Hecht stated that underlying forces -- such as rising fuel costs, increasing emission allowance prices and, especially, declining generation reserve margins in the PJM, combined with anticipated costs for new base load generation -- suggest that 2010 energy prices will be substantially higher than the current out-of-the-market prices being received by PPL EnergyPlus under its long-term contract with PPL Electric Utilities. PPL has started to layer in 2010 sales at the current forward prices to the extent that the market has liquidity for such contracts.

PPL's previously announced dividend policy provided for PPL to grow its common stock dividend at a rate that exceeded the projected growth rate in per share earnings from ongoing operations until the dividend payout ratio reached the 50 percent level, which is expected to occur in 2006. Hecht said PPL expects that the growth rate of its dividends over the next few years will continue to exceed the growth rate in the company's earnings per share and, therefore, result in a dividend payout ratio above 50 percent after 2006. All future dividend decisions, Hecht noted, are subject to the board of directors' quarterly dividend declarations based on the company's financial position and other relevant considerations at the time.

PPL increased the annualized dividend rate on its common stock twice during 2005. On October 1, 2005, PPL raised the rate by 8.7 percent to $1.00 per share. This and one other dividend action early in 2005 resulted in a total increase of 22 percent in the annualized dividend rate for the year.

Hecht identified the following visible growth elements through 2010:

·	Annual increases in the supply prices under the PUC-approved contract, expiring at the end of 2009, between PPL Electric Utilities and PPL EnergyPlus for PPL Electric Utilities customers who choose not to shop for an energy supplier.
·	The opportunity to improve margins from wholesale electricity sales as certain long-term contracts expire over the next several years.
·	Incremental capacity increases of about 260 megawatts at several existing generating facilities.
·	The benefits from the installation of scrubbers at the Montour and Brunner Island coal-fired power plants.

In addition to increased environmental capital expenditures, Hecht also identified several challenges for PPL's growth outlook through 2010: increased fuel and operations and maintenance cost pressures, including increased pension costs; the expiration of synfuel tax credits after 2007; and the potential phase-out of such credits before that time due to higher oil prices.

Hecht also mentioned the following factors, not currently in PPL's long-term earnings forecast, that have the potential to benefit future earnings: higher capacity prices, higher equivalent availability at PPL's power plants, and higher wholesale electricity prices. The long-term forecast does not depend upon new assets being added to the company's portfolio.

PPL Corporation, headquartered in Allentown, Pa., controls about 12,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to about 5 million customers in Pennsylvania, the United Kingdom and Latin America. More information is available at www.pplweb.com.

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