PPL (PPL) has utility operations spread over the eastern United States as well as in the United Kingdom. PPL derives more than half of its earnings from its UK operations under the name PPL International.
The company’s management has recently upgraded its performance expectations for its UK segment. UK segment earnings are now expected to grow by 1%–3% in the next few years after initial flat earnings forecasts by management.
The chart above shows the quarterly changes in net income of PPL’s reportable segments.
PPL’s Kentucky regulated and Pennsylvania regulated segments both posted slight falls in earnings influenced by unfavorable weather conditions during 4Q15.
The Kentucky regulated segment’s earnings were positively impacted due to higher margins resulting from rate increases. Kentucky regulators passed PPL’s electric and gas base rate case, which came into effect on July 1, 2015. The increase was partially offset by lower volumes due to warmer weather during 4Q15 compared to the previous year.
PPL’s earnings from its UK operations improved in 2015 based on lower US income taxes. Lower depreciation expenditure due to asset life extension also contributed positively. PPL’s management is expanding its regulated operations in the United Kingdom, with a planned capital investment of $1.3 billion in 2016. Management expects rate base growth of 5.7% annually through 2018 for its UK operations.
PPL’s peer Xcel Energy (XEL) reported its 4Q15 results last week. XEL’s earnings were in-line with analysts’ estimates, but its revenues missed. Utilities (VPU) Sempra Energy (SRE) and DTE Energy (DTE) are set to report their 4Q15 earnings on February 25 and February 10, 2016, respectively.