PPL Corporation’s international operations
The changing dynamics of the US power industry is driving utilities toward stable business mixes. One good example is PPL Corporation (PPL), which turned into a pure-play regulated utility in 2015 and draws more than 60% of its consolidated earnings from operations in the UK. The diversified geographical presence of PPL indeed offers a balanced regulatory environment along with an extended customer base. PPL also has a healthy combination of electric and gas distribution.
Boon or bane?
Duke Energy (DUK) and Sempra Energy (SRE) have an international presence in Latin American States, but their international presence exposes them to currency risks. It should be noted that PPL’s exposure to the pound is hedged through 2018.
PPL’s earnings are expected to grow by 4%–6% annually in the next few years, which will be driven by its regulated operations. Its regulated operations are spread over Kentucky, Pennsylvania, and the UK. In 2015, PPL spun off its merchant power generation segment and formed Talen Energy. This separation reduced PPL’s earnings volatility to an extent. Riverstone Holdings, a New York buyout firm, is said to be in talks to buy Talen Energy. It already owns 35% stake in Talen Energy.
Notably, PPL continues to offer one of the highest dividend yields in the sector. PPL’s total returns in the past twelve months were more than 25%.
In this series, we’ll discuss PPL’s operations and financials in detail. Let’s start by discussing whether it will continue to please investors in the near future.