SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 2002
PPL Energy Supply, LLC
----------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 333-74794 23-3074920
-------- --------- ----------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
Two North Ninth Street, Allentown, Pennsylvania 18101-1179
----------------------------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: (610) 774-5151
--------------
(Former name or former address if changed since last report)
ITEM 5. OTHER EVENTS.
-------------
On January 30, 2002, PPL Energy Supply, LLC ("PPL Energy Supply")
reported updated information regarding its Brazilian and United Kingdom electric
delivery businesses and summary consolidated income statement information for
2001.
BRAZILIAN OPERATIONS
As previously announced, PPL Corporation, PPL Energy Supply's parent
company, has been evaluating the business and regulatory situation in Brazil to
determine what actions should be taken with respect to PPL Energy Supply's CEMAR
electricity delivery company. PPL Energy Supply has determined that a prolonged
drought, electricity rationing, an unfavorable regulatory climate and the
associated disruption of Brazil's wholesale electricity markets have reduced the
value of CEMAR. In addition, CEMAR has been unable to obtain in-country
financing necessary to fund its operations and PPL Energy Supply does not intend
to provide additional funding to CEMAR. As a result, PPL Energy Supply has taken
a $217 million charge to 2001 earnings. Certain accounting rules limit PPL
Energy Supply's ability to write off the entire CEMAR investment in 2001, and an
additional write-off of approximately $100 million, up to the full value of the
investment, is expected to be taken in the first quarter of 2002. Prior to the
2001 write-off, as of December 31, 2001, PPL Energy Supply's net investment in
CEMAR was approximately $317 million.
UNITED KINGDOM OPERATIONS
Through its subsidiary, PPL Global, LLC ("PPL Global"), and through PPL
Global's 51 percent investment in WPD Holdings UK ("WPDH"), an affiliate that
delivers electricity in England and Wales, PPL Energy Supply had an investment
in the 1,875 MW Teesside Power Station ("Teesside"), located in northern
England. Enron Corporation ("Enron") participated, through affiliates, as an
owner, operator and power purchaser of the project. As a result of Enron's
bankruptcy and its default on its obligations under the power purchase
agreements, PPL Energy Supply recorded a charge in 2001 of $20.8 million for its
share of the impairment loss associated with Teesside. In addition to the
write-off associated with the Teesside investment, PPL Energy Supply
evaluated the carrying value of its investment in WPDH. PPL Energy Supply has
determined to take a $117 million impairment charge in 2001 to bring the
carrying value of WPDH in line with its fair market value.
SUMMARY 2001 CONSOLIDATED INCOME STATEMENT INFORMATION
Set forth below is certain unaudited summary consolidated income
statement information for PPL Energy Supply for the year ended December 31,
2001. In addition to the charges described above, 2001 earnings were impacted by
a charge associated with the cancellation of certain generation development
projects in light of continuing low wholesale energy prices. PPL Energy Supply
also recorded after-tax charges of $7.6 million in 2001 related to the
termination of certain electricity and gas contracts with Enron as a result of
Enron's bankruptcy.
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
YEAR ENDED
DECEMBER 31, 2001
-----------------
(Millions of Dollars)
OPERATING REVENUES............................................................ $4,402
OPERATING EXPENSES............................................................ 3,494
OPERATING INCOME.............................................................. 908
OTHER INCOME (DEDUCTIONS AND EXPENSE)
Write-down of international energy projects.............................. (336)
Cancellation of generation projects...................................... (150)
Interest Expense......................................................... (52)
Other.................................................................... 73
------
Total other income (expense)............................................. (465)
------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST.............................. 443
Income Tax Expense............................................................ 274
Minority Interest............................................................. (2)
------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE........... 171
Cumulative Effect of a Change in Accounting Principle (net of income taxes)... 3
------
NET INCOME.................................................................... $ 174
======
* * * *
Certain statements contained in this filing, including statements with
respect to future earnings, energy and capital markets, corporate strategy,
subsidiary performance and results, growth, project development, liquidity,
revenues, capital expenditures, operating expense, regulatory developments, and
accounting impacts, are "forward-looking statements" within the meaning of the
federal securities laws. Although PPL Energy Supply 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 variations affecting
customer energy usage; competition in retail and wholesale power markets; the
effect of any business or industry restructuring; the profitability and
liquidity of PPL Energy Supply and its subsidiaries; new accounting requirements
or new interpretations or applications of existing requirements; operating
performance of plants and other facilities; environmental conditions and
requirements; system conditions and operating costs; development of new
projects, markets and technologies; performance of new ventures; political,
regulatory or economic conditions in countries where PPL Energy Supply or its
subsidiaries conduct business; receipt of necessary governmental approvals;
capital market conditions; foreign exchange rates; and the commitments and
liabilities of PPL Energy Supply and its subsidiaries. Any such forward-looking
statements should be considered in light of such factors and in conjunction with
PPL Energy Supply's other filings with the Securities and Exchange Commission.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PPL ENERGY SUPPLY, LLC
By: /s/ Joseph J. McCabe
--------------------
Joseph J. McCabe
Controller
Dated: January 31, 2002