First Quarter Earnings Call May 2, 2008 Exhibit 99.2
Cautionary Statements And Factors That May Affect Future Results Any statements made in this presentation about future operating results or other future events are forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from such forward-looking statements. A discussion of factors that could cause actual results or events to vary is contained in the Appendix to this presentation and in the Company’s SEC filings. 1
Agenda • First Quarter 2008 Earnings and Review of 2008 and 2010 Earnings Forecast and Outlook • First Quarter Segment Results and Financial Overview • Operational Review • Q&A J. H. Miller P. A. Farr W. H. Spence 2
First Quarter Results Earnings from Ongoing Operations Per share $0.65 $0.61 $0.00 $0.50 $1.00 1Q 2007 1Q 2008 3 Note: See Appendix for the reconciliation of reported earnings and earnings from ongoing operations. Per share $0.52 $0.69 $0.00 $0.50 $1.00 1Q 2007 1Q 2008 Reported Earnings
$2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 2007A* 2008* 2010 Strong Long-Term Earnings Growth Forecast 4 *Earnings from ongoing operations – See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. $2.60 $2.35 $2.45 $4.00 $4.60 Per Share
Pennsylvania Update • Legislative discussions continuing in four areas: – Demand management, conservation – Procurement – Rate Mitigation – Energy Independence fund • PPL efforts – Continuing discussions with legislators, regulators, administration, other utilities --many areas of agreement – One-half of 2010 needs now under contract – Phase-in plan approval delayed 5
Ongoing Earnings Overview $(0.04)$0.65$0.61Total 0.080.180.26International Delivery 0.010.150.16Pennsylvania Delivery $(0.13)$0.32$0.19Supply Change Q1 2007 Q1 2008 6 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Supply Segment Earnings Drivers (0.03)O&M (0.08)Synfuel 0.01Income taxes and other $0.192008 EPS – Ongoing Earnings (0.13)Total (0.01)Margins – West $(0.02)Margins – East $0.322007 EPS – Ongoing Earnings 1st Quarter Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. 7
Pennsylvania Delivery Segment Earnings Drivers $0.162008 EPS – Ongoing Earnings 0.01Total (0.02)O&M $0.03Delivery Margins $0.152007 EPS – Ongoing Earnings 1st Quarter 8 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
International Delivery Segment Earnings Drivers (0.03)Latin American Operations $0.262008 EPS – Ongoing Earnings 0.08Total 0.05Income Taxes & Other 0.02O&M $0.04Delivery Margins $0.182007 EPS – Ongoing Earnings 1st Quarter 9 Note: See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations.
Expected 2008 Earnings Contributions 10 * Earnings from ongoing operations – See Appendix for the per share reconciliation of reported earnings and earnings from ongoing operations. **Midpoint of forecast $2.00 $2.25 $2.50 $2.75 $3.00 2007A* $2.60 Energy Margins $0.10 Net Impact of Asset Divestiture ($0.08) O&M $0.04 International Tax Benefit ($0.08) $2.40** Depreciation ($0.05) Delivery Margins $0.06 Synfuels ($0.18) Other ($0.01) Per Share 2008E*
$2.00 $3.00 $4.00 $5.00 2008E* 2010E Expected 2010 Earnings Contributions 11 * Earnings from ongoing operations – See Appendix for the per share reconciliation of report earnings and earnings from ongoing operations ** Midpoint of forecast $2.40** Increased Energy Margins $2.28 $4.30** Increased O&M $(0.15) Increased Interest $(0.10) Increased Depreciation $(0.07) Other $(0.06) Per Share
Cash Flow Forecast Millions ($200) $0 $200 $400 $600 $800 $1,000 2007A 2008E 2009E 2010E Free cash flow before dividends 12 Note: See Appendix for the reconciliation of cash flow measures.
$0.82 $0.92 $1.00 $1.10 $1.22 $1.34 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 2004 April 2005 October 2005 2006 2007 2008 $/Share Annualized Continued Dividend Growth 713
PPL EU Completed Third RFP for 2010 14 • Solicitation for 850 MWs of residential and small commercial and industrial load • 50% of 2010 expected load now under contract • PUC approval of winning bids received March 27, 2008 • Prices contracted in the third auction were about $3/MWH higher than the previous auction • Fourth solicitation bids due September 29, PUC approval expected October 2
Scrubbers Expected to be Completed on Budget and on Schedule Q2-09Brunner Island 1 & 2 Q4-08Brunner Island 3 Being commissioned Montour 1 In Service 3/8/2008 Montour 2 Scheduled In-Service Dates December, 2006 March, 2008 Montour Scrubber Construction 1115
Expansion of Generation Portfolio • Agreed to acquire long-term tolling agreement of 664 MW natural-gas combined-cycle plant in PJM • Susquehanna Unit 1 uprate, phase 1, is now completed • Progressing on other previously announced uprate projects • Investing in renewable energy projects 16
Nuclear Development Schedule Late 2008 (Estimate)Order Long Lead-Time Materials 2016 to 2018 (Estimate)Commercial Operation 2011 (Estimate)Begin Construction 2011 (Estimate)NRC Approval of COLA 2009Early Site Work Sept. 2008Submit DOE Loan Application Sept. 2008Submit COLA 13PPL has not yet decided to move forward with construction. 17
RPM Update • In April 2008, FERC denied PJM request to increase CONE price in capacity pricing formula beginning with the 2011/2012 RPM auction • FERC issued a separate April 2008 order regarding Duquesne, which stated that PJM may grant network transmission rights to capacity resources in the Duquesne zone for 2011/2012 RPM auction • On April 29, PPL, CEG and MIR filed with FERC requesting clarification of the Duquesne order • The impact of including Duquesne’s capacity resources is expected to reduce capacity prices for 2011/2012RPM auction in May 2008 and possibly future auctions • There could be an offsetting positive impact on heat rates 18
Hedge and Supply Update • Recent supply and demand events have produced higher coal prices • PPL consumes approximately 9.2 million tons of coal in the east, and 3.3 million tons of coal in the west – In the west, 100% hedged 2008-2010 – In the east, 89% hedged 2008-2010 • Our 1,600 fleet rail cars have been helpful in maintaining our deliveries • Evaluating options to blend other coal sources at eastern units 19
Current Hedge Positions -Electricity and Fuel 20 2008 2009 2010 Electricity Sales East 98% 97% 66% West 100% 81% 66% Total 99% 94% 66% Uranium 100% 100% 100% Coal East 99% 91% 77% West 100% 100% 100% Total 99% 93% 83% Average Delivered Coal Price Increase 10%-15% 10%-15% 3%-7% Note: As of 3/31/2008
Key Driver of Fleet Value: Open EBITDA 21 2010E Generation Output -millions of MWH 56.2 Implied Gross Margin -millions * 3,698 $ O&M - -millions (814) $ Open EBITDA -millions $ 2,884 Below-Market Value of Hedges -millions * (240) $ * Based on forward market prices as of March 31, 2008
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Market Prices EAST PJM On-Peak Off-Peak ATC (3) WEST Mid-Columbia On-Peak Off-Peak ATC (3) GAS (4) NYMEX TZ6NNY PJM MARKET HEAT RATE (5) Actual Forward (1) At 10/2007(2) 2007 2008 2009 2010 2010 9.4 $7.78 $6.86 $51 $45 $57 $57 $43 $73 8.8 $9.04 $8.08 $60 $53 $67 $64 $51 $79 8.58.48.4 $10.20$10.93$10.92 $9.04$9.74$9.87 $68$71$71 $60$62$63 $75$78$78 $72$76$76 $59$62$61 $87$91$92 (1) Market prices based on the average of broker quotes as of 3/31/2008. (2) Prices at 10/2007 when 2010 earnings forecast of $4.00-$4.60 was developed. (3) 24-hour average. (4) NYMEX and TZ6NNY forward gas prices on 3/31/2008. (5) Market Heat Rate = PJM on-peak power price divided by TZ6NNY gas price. A-1
PPL Supply Business Overview 2008E Production GWH A-2 Gas/Oil 33% Coal 37% Nuclear 19% Hydro8% QFs 3% 2008E Installed Capacity MW Gas/ Oil 8% Coal 54% Nuclear 31% Hydro 7%
Key Drivers/Challenges Through 2010 and Beyond • Increased prices for POLR sales • Expiration of supply contracts remarketed at current forward prices • Power plant uprates and planned levels of equivalent availability of generation • Net economic benefits from the installation of scrubbers at the Montour and Brunner Island coal-fired power plants • Continued growth of marketing and trading activities • Increased fuel and O&M costs • Cost of compliance with evolving environmental regulation • Stable electricity regulatory environment at Federal and State levels A-3
Summary of Completed RFP’s Small Commercial and Residential Customers Industrial Customers Round 1 (July 2007) Retail Price Per MWH $101.77 $105.11 Round 2 (October 2007) Retail Price Per MWH $105.08 $105.75 Round 3 (March 2008) Retail Price Per MWH $108.80 $108.76 Average Retail Price Per MWH Increase in 2010 $105.22 34.4% $106.54 23.8% to 42.8% A-4
62.00 64.00 66.00 68.00 70.00 72.00 74.00 76.00 1-Jan4-Jan7-Jan10-Jan13-Jan16-Jan19-Jan22-Jan25-Jan28-Jan31-Jan3-Feb6-Feb9-Feb12-Feb15-Feb18-Feb21-Feb24-Feb27-Feb1-Mar4-Mar7-Mar10-Mar13-Mar16-Mar19-Mar22-Mar25-Mar 7.00 7.50 8.00 8.50 9.00 9.50 10.00 $/MWH 2008 PJM Power & Natural Gas Prices West Hub 2010 ATC Power 2010 NYMEX Natural Gas $/MMBtu 9 A-5 3/24 – Bids due for PPL EU 3rd RFP
0 20 40 60 80 100 120 2009 2009 2010 $/MWH Shaped Energy & Capacity Including Congestion Other Adders Line Losses GRT Load-following Components Example A-6 Total $105 $82.00* $45.47 Total $51.23 * Shaped price based on $63/MWH ATC energy price, $150/MW-Day capacity price, and congestion. $48.29 Total $54.41 Residential and Small C&I Residential and Small C&I All Customers 50.20 $10 Volumetric Risk Credit Ancillary Green $8 $5
PPL’s Generation Portfolio Total Domestic Generation: 11,358 MW Planned Uprate Projects: 331 MW * Reflects reduction of 60 MW expected loss due to increased plant usage during scrubber operation. A-7 Coal 3,483* Nuclear 2,117 Oil 1,716 Gas 1,582 Hydro 343 CTs 474 QFs 356 East 10,071 MW* Coal 683 Hydro 604 West 1,287 MW Coal Uprate (2008) 6 Hydro Uprate (2011) 28 Nuclear Uprate (2008-2010) 143 Hydro Uprate (2009, 2011) 128 Coal Uprate (2008-2009) 26 *
Reconciliation of Cash from Operations to Free Cash Flow before Dividends (Millions of Dollars) A-8 $972 $153 ($29) $513Free Cash Flow before Dividends (65) 74 66 937 Other Investing Activities-net (1,490) (1,456) (1,609) (1,685) Capital Expenditures --(310) (310) Transition Bond Repayment Increase/(Decrease) in cash due to: $2,527 $1,535 $1,824 $1,571 Cash from Operations 2010 2009 2008 2007 Note: 2007 free cash flow before dividends includes the net proceeds from the disposition of Latin American and domestic telecommunication operations. 2008 forecast includes expected net proceeds from the disposition of gas and propane businesses, as well as the investment in the Ironwood tolling agreement.
Millions $1,043 $1,030 $824 $750 $692 $514 $302 $281 $305 $404 $521 $511 $340 $298 $327 $336 $343 $351 $0 $400 $800 $1,200 $1,600 $2,000 2007A 2008E 2009E 2010E 2011E 2012E Supply PA Delivery International Delivery $1,685 $1,556 $1,376 $1,490$1,456 $1,609 Capital Expenditures by Segment A-9
Reconciliation of First Quarter Reported Earnings and Earnings from Ongoing Operations A-10 (Millions of Dollars) Pennsylvania International Supply Delivery Delivery Total Qtr. Ending March 31, 2008 Reported earnings $102 $60 $98 $260 Special Items: MTM adj's from energy-related, non- trading economic hedges 50 50 Synfuel tax adjustment (13) (13) Colstrip groundwater litigation (5) (5) 32 32 Earnings from ongoing operations $70 $60 $98 $228 Qtr. Ending March 31, 2007 Reported earnings $117 $58 $28 $203 Special Items: MTM adj's from energy-related, non- trading economic hedges 10 10 PJM billing dispute (1) (1) Sale of Latin American businesses (40) (40) Sale of domestic telecommunication operations (18) (18) (9) (40) (49) Earnings from ongoing operations $126 $58 $68 $252 Change excluding special items ($56) $2 $30 ($24)
Reconciliation of First Quarter Reported Earnings and Earnings from Ongoing Operations A-11 Pennsylvania International Supply Delivery Delivery Total Qtr. Ending March 31, 2008 Reported earnings $0.27 $0.16 $0.26 $0.69 Special Items: MTM adj's from energy-related, non- trading economic hedges 0.13 0.13 Synfuel tax adjustment (0.04) (0.04) Colstrip groundwater litigation (0.01) (0.01) 0.08 0.08 Earnings from ongoing operations $0.19 $0.16 $0.26 $0.61 Qtr. Ending March 31, 2007 Reported earnings $0.30 $0.15 $0.07 $0.52 Special Items: MTM adj's from energy-related, non- trading economic hedges 0.03 0.03 Sale of Latin American businesses (0.11) (0.11) Sale of domestic telecommunication operations (0.05) (0.05) (0.02) (0.11) (0.13) Earnings from ongoing operations $0.32 $0.15 $0.18 $0.65 Change excluding special items ($0.13) $0.01 $0.08 ($0.04) (Dollars Per Share)
Reconciliation of PPL’s Reported Earnings and Earnings from Ongoing Operations High Low 2008 2008 2007 2006 Per Share Earnings from Ongoing Operations $2.45 $2.35 $2.60 $2.25 Special items (net of taxes): economic hedges 0.13 0.13 0.08 (0.03) Reversal of cost recovery - Hurricane Isabel (0.02) Impairment of synfuel-related assets (0.01) Sale of interest in Griffith (0.04) Reduction in Enron reserve 0.03 Off-site remediation of ash basin leak 0.02 PJM billing dispute 0.01 Realization of benefits related to Black Lung Trust assets 0.05 Susquehanna workforce reduction (0.01) Impairment of nuclear decom. trust investments (0.01) Sale of Latin American businesses 0.67 Sale of domestic telecommunication operations (0.06) Sale of gas and propane businesses (0.11) Settlement of Wallingford cost-based rates 0.09 Impairment of certain transmission rights (0.04) Change in U.K. tax rate 0.14 Workforce reductions (0.02) Synfuel tax adjustment (0.04) (0.04) Colstrip ground water litigation (0.01) (0.01) 0.08 0.08 0.75 (0.01) Reported Earnings Per Share $2.53 $2.43 $3.35 $2.24 Note: Per share amounts are based on diluted shares outstanding. Forecast MTM adj's from energy-related, non-trading Actual A-12
Credit Ratings A-13 BBB Issuer Rating AAAAaa Tax-Exempt Bonds* STABLE STABLE STABLE Outlook A-A-A3Senior Secured Debt F-2A-2P-2Commercial Paper BBBBBBBaa3Preferred Stock BBBA-Baa1Issuer Rating A-A-A3First Mortgage Bonds AAA/A Aaa/Baa1***Tax-Exempt Bonds** BBBBBBBaa3Preference Stock PPL Electric Utilities BBBBBB-Baa2Senior Unsecured Debt BBB-BB+ Baa3Subordinated Debt STABLE STABLE STABLE Outlook PPL Capital Funding BBBBBB Issuer Rating BBB+ BBBBaa2Senior Notes F-2A-2P-2Commercial paper STABLE STABLE STABLE Outlook PPL Energy Supply STABLE STABLE STABLE Outlook BBBBBBBaa2Issuer Rating PPL Corporation Fitch Standard & Poor’s Moody’s * Letter of Credit-Backed Security ** Insured Security *** Ratings may differ for each issuance due to differences on Bond Insurer Ratings
Credit Ratings (cont.) A-14 A-3Commercial Paper A-BBB+ Baa1Senior Unsecured Debt F2A-2P-2Commercial Paper STABLE STABLE STABLE Outlook BBB+ BBB+ Baa1Issuer Rating A-BBB+ Baa1Senior Unsecured Debt F2A-2Commercial Paper STABLE STABLE STABLE Outlook Western Power Distribution (South West) PLC BBB+ BBB+ Issuer Rating Western Power Distribution (South Wales) PLC STABLE STABLE STABLE Outlook STABLE STABLE Outlook BBBBBB-Issuer Rating WPD Holdings LLP BBB-BBB-Baa3Issuer Rating BBBBBB-Baa3Senior Unsecured Debt A-3Commercial Paper WPD Holdings Limited BBBBBB-Baa3Pass-Through Certificates STABLE STABLE Outlook PPL Montana AAAAAAAaa Transition Bonds PPL Transition Bond Co. Fitch Standard & Poor’s Moody’s
Forward-Looking Information Statement Statements contained in this presentation, including statements with respect to future earnings, energy prices, margins, sales and supply, marketing performance, growth, revenues, expenses, rates, regulation, cash flows, credit profile, financing, dividends, business disposition, corporate strategy, capital additions and expenditures, and generating capacity and performance, are “forward-looking statements” within the meaning of the federal securities laws. Although PPL Corporation 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 conditions affecting generation production, customer energy usage and operating costs; competition in retail and wholesale power markets; liquidity of wholesale power markets; the effect of any business or industry restructuring; the profitability and liquidity, including access to capital markets and credit facilities of PPL Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operation and availability of existing generation facilities and operating costs; transmission and distribution system conditions and operating costs; current and future environmental conditions and requirements and the related costs of compliance, including environmental capital expenditures and emission allowance and other expenses; significant delays in the planned installation of pollution control equipment at certain coal-fired generating units in Pennsylvania due to weather conditions, contractor performance or other reasons; development of new projects, markets and technologies; performance of new ventures; asset acquisitions and dispositions; political, regulatory or economic conditions in states, regions or countries where PPL Corporation or its subsidiaries conduct business; any impact of hurricanes or other severe weather on PPL and its subsidiaries, including any impact on fuel prices; receipt of necessary governmental permits, approvals and rate relief; new state, federal or foreign legislation, including new tax legislation; state, federal and foreign regulatory developments; any impact of state, federal or foreign investigations applicable to PPL Corporation and its subsidiaries and the energy industry; capital markets conditions, including changes in interest rates, and decisions regarding capital structure; stock price performance of PPL Corporation; the market prices of equity securities and the impact on pension costs and resultant cash funding requirements for defined benefit pension plans; securities and credit ratings; disposition proceeds; foreign currency exchange rates; the outcome of litigation against PPL Corporation and its subsidiaries; potential effects of threatened or actual terrorism or war or other hostilities; and the commitments and liabilities of PPL Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such important factors and in conjunction with PPL Corporation’s Form 10-K and other reports on file with the Securities and Exchange Commission. A-15
Definitions of Financial Measures A-16 “Earnings from ongoing operations” excludes the impact of special items. Special items include charges, credits or gains that are unusual or non-recurring and the mark-to-market impact of energy-related, non-trading economic hedges. The mark-to-market impact of these hedges is economically neutral to the company because the mark-to-market gains or losses on the energy hedges will reverse as the hedging contracts settle in the future. Earnings from ongoing operations should not be considered as an alternative to reported earnings, or net income, which is an indicator of operating performance determined in accordance with generally accepted accounting principles (GAAP). PPL believes that earnings from ongoing operations, although a non-GAAP measure, is also useful and meaningful to investors because it provides them with PPL’s underlying earnings performance as another criterion in making their investment decisions. PPL’s management also uses earnings from ongoing operations in measuring certain corporate performance goals. Other companies may use different measures to present financial performance. “Free cash flow before dividends” is derived by deducting capital expenditures and other investing activities-net, as well as the repayment of transition bonds, from cash flow from operations. Free cash flow before dividends should not be considered as an alternative to cash flow from operations, which is determined in accordance with GAAP. PPL believes that free cash flow before dividends, although a non-GAAP measure, is an important measure to both management and investors since it is an indicator of the company’s ability to sustain operations and growth without additional outside financing beyond the requirement to fund maturing debt obligations. Other companies may calculate free cash flow before dividends in a different manner.