EUR 850.00 For Business Accounts Only

Morningstar | PPL Updated Forecasts and Estimates from 02 Nov 2018

PPL has attractive regulated growth opportunities that could produce 6% annual rate base growth through 2022, supported by PPL's operations in constructive regulatory jurisdictions. During the next five years, PPL plans to spend $15.4 billion at its regulated utilities and on additional transmission opportunities. This supports our projected 5.5% annual earnings growth from 2018 through 2022.PPL's international delivery segment operates four electricity distribution networks in the United Kingdom, making it the largest distribution utility in the U.K. by regulated asset value. However, the unit also enhances shareholder risk compared with PPL's regulated domestic peers. U.K. politicians are pressuring regulators to reduce the region's high power prices.Recently, U.K. regulators put in place elements of the next regulatory framework, RIIO-2. The framework supports our long-term expectation that the U.K. will remain a constructive regulatory environment. Positives of the framework include a calculation of regulated asset value and returns that remains economically similar to the current structure; no change in the economic asset life for depreciation; and an option for fast-track eligibility, for which PPL qualified under the last framework. We consider the proposed cut in the price control period to five years from eight years less constructive. PPL has achieved constructive rate outcomes in the past in Pennsylvania and Kentucky, and we think this will continue. Returns at PPL's Pennsylvania distribution and transmission segment have improved with recent rate increases. Higher returns on transmission investments, combined with projected 15% rate base growth through 2022, will drive subsidiary earnings growth.In Kentucky, the constructive regulatory environment allows for minimal lag on capital expenditures. PPL's recent rate cases should support earned returns at LG&E and KU. PPL filed for a rate review in Kentucky at its KU and LG&E subsidiaries, requesting $172 million of rate increases at a 10.42% return on equity. The rate increase is based on a forward April 2020 test year, with new rates to be effective in May 2019.