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PPL misses earnings estimates, cuts dividend

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ALLENTOWN, PA. – PPL Corporation missed fourth quarter earnings estimates and reported a full year loss for 2021. Oh, and they announced that they cut their dividend by 52%.

It’s little wonder that PPL stock was down over 7.5% in mid-morning trading on Wall Street.

However, it’s likely that PPL management expected the less than stellar financial results because they were an outgrowth of a strategic shift undertaken by the utility in 2021.

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Here is how PPL president and chief executive officer Vince Sorgi explained the results during a webcast to stock analysts. “This was clearly a significant transition year for PPL. We took bold steps to strategically position PPL as a U.S. focused energy company.” 

The bold steps included completion of the sale of PPL’s former U.K. utility business and the planned acquisition of Narragansett Electric Company in Rhode Island. PPL said it anticipates receiving a final order from the Rhode Island Division of Public Utilities and Carriers by March 2022.

When a company takes actions like buying or selling a business, it frequently results in one-time negative hits to the financial statements that can be reversed by future positive results from the transactions. 

Operating Results

PPL's reported earnings losses in 2021 of $ 1.480 billion or $1.93 per share included special-item after-tax expenses of $2.29 billion, or $2.98 per share, primarily attributable to discontinued operations associated with the U.K. utility business, a U.K. tax rate change and a loss on the early extinguishment of debt. 

However, earnings from ongoing operations in 2021, which excludes special items, was $806 million, or $1.05 per share, compared to $774 million, or $1.00 per share, in 2020.

"2021 was a significant year for PPL as we strategically repositioned the company for future growth and success. With the sale of our U.K. business and the planned acquisition of Narragansett Electric, we are extremely excited about the future for our company, our customers and our shareowners,” said Sorgi in a statement.

He continued, "We provided energy safely, reliably and affordably to our customers, achieving award-winning customer satisfaction in the process. We continued to lead the way in deploying innovative smart grid solutions to improve resilience and enable increased distributed energy resources, including renewables. In addition, we made significant progress in advancing our clean energy strategy. This included adopting a net-zero carbon emissions goal and significantly ramping up our investment in clean energy research and development to achieve our goal."

PPL announced a quarterly common stock dividend of $0.20 per share, payable April 1, 2022, to shareowners of record as of March 10, 2022.  That’s down from $0.415 per share last quarter.  

The dividend payment is based on projected earnings per share from PPL's existing business operations in Pennsylvania and Kentucky and the company's targeted payout ratio of 60%-65%. Because earnings from the former U.K. operation are now excluded, using the targeted payout ratiothe dividend will be reduced.  

PPL's fourth-quarter 2021 reported earnings were $134 million, or $0.18 per share, compared with reported earnings of $290 million, or $0.38 per share, in 2020.

Adjusting for special items, primarily attributable to integration expenses associated with the planned acquisition of Narragansett Electric and discontinued operations associated with the U.K. utility business, fourth-quarter 2021 earnings from ongoing operations were $163 million, or $0.22 per share, compared with fourth-quarter 2020 earnings from ongoing operations of $181 million, or $0.23 per share.

PPL's reported earnings for the fourth quarter of 2021 included special-item after-tax expenses of $29 million, or $

Pennsylvania Regulated Segment

PPL's Pennsylvania Regulated segment consists of the regulated electricity delivery operations of PPL Electric Utilities.

Reported earnings in 2021 decreased by $0.07 per share compared with a year ago. Earnings from ongoing operations decreased by $0.04 per share compared to a year ago. Excluding special items, factors driving earnings included a reduction in the transmission formula rate return on equity, lower peak transmission demand and higher operation and maintenance expense, partially offset by returns on additional capital investments in transmission.

Reported earnings and earnings from ongoing operations in the fourth quarter of 2021 decreased by $0.01 per share compared with fourth quarter 2020. 

Kentucky Regulated Segment

PPL's Kentucky Regulated segment primarily consists of the regulated electricity and natural gas operations of Louisville Gas and Electric Company and the regulated electricity operations of Kentucky Utilities Company.

Reported earnings in 2021 increased by $0.08 per share compared with 2020. Earnings from ongoing operations in 2021 increased by $0.06 per share compared with a year ago. Excluding special items, factors driving earnings included higher retail rates effective July 1, 2021, and lower interest expense primarily due to interest costs allocated to the Kentucky Regulated segment in 2020 that were not allocated in 2021 and lower interest rates. These factors were partially offset by higher depreciation expense and higher operation and maintenance expense.

Reported earnings and earnings from ongoing operations in the fourth quarter of 2021 were comparable to a year ago. 

Corporate and Other

PPL's Corporate and Other category primarily includes unallocated corporate-level financing and other costs. 

Reported earnings in 2021 decreased by $0.81 per share compared with a year ago. Earnings from ongoing operations in 2021 increased by $0.03 per share compared with a year ago. Excluding special items, factors driving earnings primarily included lower interest expense.

Reported earnings in the fourth quarter of 2021 decreased by $0.02 per share compared with a year ago. Earnings from ongoing operations in the fourth quarter of 2021 were comparable to 2020. 

Headquartered in Allentown, Pennsylvania, PPL Corporation’s (NYSE: PPL) seven utilities and more than 12,000 employees serve more than 10 million customers in the U.S. and U.K.

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