Pennsylvania 1-11459 23-2758192
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
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Pennsylvania 1-905 23-0959590
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
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ITEM 2. DISPOSITION OF ASSETS (PPL ELECTRIC UTILITIES CORPORATION);
ITEM 5. OTHER EVENTS (PPL CORPORATION)
Reference is made to the Annual Report on Form 10-K of PPL Corporation ("PPL") and PPL Electric Utilities Corporation ("PPL Utilities") for the year ended December 31, 1999 for information on deregulation and increasing competition in the electric utility industry, including the Pennsylvania Electricity Generation Customer Choice and Competition Act (the "Act"), which was adopted to restructure Pennsylvania's electric utility industry to create retail access to a competitive market for generation of electricity, and PPL Utilities' 1998 restructuring proceeding before the Pennsylvania Public Utility Commission under the Act.
On July 1, 2000, PPL and PPL Utilities completed a corporate realignment in order to effectively separate PPL Utilities' regulated transmission and distribution businesses from its recently deregulated generation businesses and to better position the companies and their affiliates in the new competitive market-place. Exhibit 99.1 illustrates the relevant elements of the corporate organization immediately before and after the realignment. The corporate realignment included the following key features:
o PPL Utilities transferred its generating and certain other related assets, along with associated liabilities, to new unregulated generating company subsidiaries of PPL Generation, LLC ("PPL Generation). In connection with the transfer, PPL Energy Funding Corporation ("PPL Energy Funding"), the parent company of PPL Generation, assumed $670 million aggregate principal amount of PPL Utilities' debt issued to affiliated companies.
o PPL Utilities also transferred assets constituting its wholesale energy marketing business, along with associated liabilities, to its wholly-owned subsidiary, PPL EnergyPlus, LLC ("PPL EnergyPlus"), and transferred its interest in PPL EnergyPlus to PPL Energy Funding.
o PPL Utilities distributed, as a distribution on common stock in a "tax-free spin-off," all of the outstanding shares of stock of PPL Energy Funding to PPL, which resulted in PPL Energy Funding becoming a wholly-owned subsidiary of PPL.
o PPL's independent power subsidiary, PPL Global, LLC ("PPL Global"), also transferred its U.S. electric generating subsidiaries to PPL Generation.
o PPL Utilities entered into power sales agreements with PPL EnergyPlus for the purchase of electricity to meet PPL Utilities' obligations as a Provider of Last Resort ("PLR") for customers who have not selected an alternative supplier under the Act.
As a result of the corporate realignment, PPL Utilities' principal business is the transmission and distribution of electricity to serve retail customers in its franchised territory in eastern and central Pennsylvania; PPL Generation's principal business is owning and operating U.S. generating facilities through various subsidiaries; PPL EnergyPlus' principal business is wholesale and retail energy marketing; and PPL Global's principal business is the acquisition and development of both U.S. and international energy projects and ownership of international energy projects. PPL Energy Funding serves as the parent company for virtually all of PPL's unregulated businesses, including PPL
The corporate realignment followed receipt of various regulatory approvals, including approvals from the Pennsylvania Public Utility Commission, the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Corporate Organization Before and After Realignment 99.2 Unaudited Pro Forma Consolidated Financial Information of PPL Electric Utilities Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
By: /s/ Joseph J. McCabe ------------------------------------- Joseph J. McCabe Vice President and Controller |
Dated: July 14, 2000
Before Realignment
PPL Corporation
PPL Electric Utilities Corporation
PPL Transition Bond Company, LLC
PPL Capital Trust
PPL Capital Trust II
PPL Energy Funding Corporation
CEP Delaware, Inc.
After Realignment
PPL Corporation
PPL Electric Utilities Corporation
PPL Transition Bond Company, LLC
PPL Capital Trust
PPL Capital Trust II
CEP Commerce, LLC
PPL Energy Funding Corporation
PPL Global, LLC
PPL EnergyPlus, LLC
PPL Synfuel Investments, LLC
PPL Spectrum, Inc.
PPL ELECTRIC UTILITIES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The pro forma information that follows is presented to give effect to the corporate realignment on the balance sheet and income statement of PPL Utilities. The pro forma results are based on assumptions set forth in the Notes to Unaudited Pro Forma Consolidated Financial Information below and are not necessarily indicative of the results of operations which would actually have occurred if the transactions had occurred in such periods, or which may exist or occur in the future.
The corporate realignment is described in Item 2 of this Current Report on Form 8-K, of which this Exhibit 99.2 is a part. From the perspective of PPL Utilities, the realignment involves the disposition and transfer of assets and liabilities associated with the generating and marketing portions of its existing business, as well as certain corporate assets and liabilities. The assets and liabilities were transferred to unregulated subsidiaries of PPL, the parent of PPL Utilities.
Specifically, PPL Utilities transferred generating, marketing and certain related assets and liabilities (including its investments in PPL EnergyPlus, LLC, PPL Interstate Energy Company, Realty Company of Pennsylvania, and Pennsylvania Mines Corporation) to its wholly-owned subsidiary, PPL Energy Funding. PPL Utilities then distributed its investment in PPL Energy Funding to PPL in a "tax-free spin-off."
PPL Utilities distributed certain other corporate assets (net of associated liabilities) to PPL, which PPL then contributed to PPL Services Corporation ("PPL Services"), a new subsidiary of PPL.
The distribution reflects the transfer of these assets and liabilities at book value, and will be recorded effective July 1. The actual distribution will be reflected in PPL Utilities' Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
The pro forma balance sheet gives effect to the distribution of PPL Utilities' investment in PPL Energy Funding as if the distribution was made on March 31, 2000. The adjustments are applied to the balance sheet at March 31, 2000, as set forth in PPL Utilities' Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. Actual transfers will necessarily be dependent on account balances and capital structures at July 1, 2000. The adjusted balances at March 31, 2000 reflect the pro forma balances for the remaining business of PPL Utilities, principally the transmission and distribution of electricity to retail customers in its franchised territory in eastern and central Pennsylvania. The adjusted balance sheet also reflects the consolidated accounts of PPL Transition Bond Company, LLC, a wholly-owned subsidiary formed to issue
Pro forma adjustments are also provided to the income statements for 1999 and for the three months ended March 31, 2000. The adjustments are to the income statements filed in the PPL Utilities' Annual Report on Form 10-K for the year ended December 31, 1999, and in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. The pro forma adjustments assume that the transfer was consummated at the beginning of the income statement periods. The adjusted income statements are intended to reflect the pro forma consolidated operations of the remaining portions of PPL Utilities.
The Notes to Unaudited Pro Forma Consolidated Financial Information provide additional descriptions of the balance sheet and income statement adjustments.
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $37 $97 1) $134
Accounts receivable, net ........................... 328 (36) 1) 292
Unbilled revenues................................... 287 (35) 1) 252
Fuel, materials and supplies - at average cost...... 164 (136) 1) 28
Prepayments......................................... 171 0 1) 171
Unrealized energy trading gains..................... 48 (48) 1) 0
Other............................................... 131 (20) 1) 111
----------- ----------- -----------
1,166 (178) 988
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INVESTMENTS
Loan to parent and its affiliates................... 476 (312) 2) 164
Nuclear plant decommissioning trust fund............ 269 (269) 3) 0
Investment in unconsolidated affiliate at equity.... 17 (17) 4) 0
Other............................................... 12 (5) 5) 7
----------- ----------- -----------
774 (603) 171
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PROPERTY, PLANT AND EQUIPMENT
Electric utility plant in service - net
Transmission and distribution..................... 2,187 (37) 6) 2,150
Generation........................................ 1,628 (1,628) 6) 0
General........................................... 210 (33) 6) 177
----------- ----------- -----------
4,025 (1,698) 2,327
Construction work in progress - at cost............. 132 (66) 6) 66
Nuclear fuel owned and leased - net ................ 136 (136) 6) 0
----------- ----------- -----------
Electric utility plant - net...................... 4,293 (1,900) 2,393
Gas and oil utility plant - net..................... 26 (26) 6) 0
Other property - net................................ 20 (16) 6) 4
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4,339 (1,942) 2,397
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REGULATORY ASSETS AND OTHER NONCURRENT ASSETS
Recoverable transition costs........................ 2,591 0 2,591
Other............................................... 344 (10) 7) 334
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2,935 (10) 2,925
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$9,214 ($2,733) $6,481
=========== =========== ===========
|
See Notes to Unaudited Pro Forma Consolidated Financial Information.
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Unaudited)
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term debt..................................... $116 $0 $116
Short-term debt payable to affiliate................ 279 (264) 8) 15
Long-term debt...................................... 357 0 357
Above market NUG contracts.......................... 98 (98) 9) 0
Accounts payable.................................... 228 (46) 10) 182
Taxes and interest accrued.......................... 209 (96) 10) 113
Dividends payable................................... 6 0 6
Unrealized energy trading losses.................... 54 (54) 10) 0
Other............................................... 130 (36) 11) 94
----------- ----------- -----------
1,477 (594) 883
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LONG-TERM DEBT........................................ 3,087 0 3,087
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DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Deferred income taxes and investment tax credits.... 1,528 (779) 12) 749
Above market NUG purchases.......................... 651 (651) 9) 0
Other............................................... 735 (509) 13) 226
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2,914 (1,939) 975
COMMITMENTS AND CONTINGENT LIABILITIES 0
----------- ----------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY COMPANY DEBENTURES................... 250 0 250
----------- ----------- -----------
PREFERRED STOCK
With sinking fund requirements...................... 47 0 47
Without sinking fund requirements................... 50 0 50
----------- ----------- -----------
97 97
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SHAREOWNER'S COMMON EQUITY
Common stock........................................ 1,476 0 1,476
Additional paid-in capital.......................... 55 0 55
Treasury stock...................................... (632) 0 (632)
Earnings reinvested................................. 512 (200) 14) 312
Accumulated other comprehensive income.............. (6) 0 (6)
Capital stock expense and other..................... (16) 0 (16)
----------- ----------- -----------
1,389 (200) 1,189
----------- ----------- -----------
$9,214 ($2,733) $6,481
=========== =========== ===========
|
See Notes to Unaudited Pro Forma Consolidated Financial Information.
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Audited)
OPERATING REVENUES
Electric............................................ $2,513 ($416) 1) $2,097
Wholesale energy marketing and trading.............. 1,420 (1,420) 2) 0
Energy related businesses........................... 19 (10) 3) 9
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Total............................................... 3,952 (1,846) 2,106
----------- ----------- -----------
OPERATING EXPENSES
Operation
Electric fuel..................................... 445 (445) 4) 0
Energy purchases for retail load and wholesale.... 1,367 (492) 5) 875
Other............................................. 621 (407) 6) 214
Amortization of recoverable transition costs...... 172 0 172
Maintenance......................................... 195 (126) 6) 69
Depreciation and amortization ...................... 233 (132) 7) 101
Taxes, other than income ........................... 153 (53) 8) 100
Energy related businesses........................... 17 (9) 9) 8
----------- ----------- -----------
Total .............................................. 3,203 (1,664) 1,539
----------- ----------- -----------
OPERATING INCOME ..................................... 749 (182) 567
Other Income.......................................... 97 (66) 10) 31
----------- ----------- -----------
INCOME BEFORE INTEREST AND INCOME TAXES............... 846 (248) 598
Interest Expense...................................... 214 (47) 11) 167
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS.... 632 (201) 431
Income Taxes ......................................... 151 (74) 12) 77
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS
AND DIVIDENDS ON PREFERRED STOCK.................... $481 ($127) $354
=========== =========== ===========
|
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Unaudited)
OPERATING REVENUES
Electric............................................ $722 $(134) 1) $588
Natural gas......................................... 11 (11) 1) 0
Wholesale energy marketing and trading.............. 388 (388) 2) 0
Energy related businesses........................... 6 (2) 3) 4
----------- ----------- -----------
Total............................................... 1,127 (535) 592
----------- ----------- -----------
OPERATING EXPENSES
Operation
Electric fuel..................................... 112 (112) 4) 0
Energy purchases for retail load and wholesale.... 391 (133) 5) 258
Other............................................. 135 (88) 6) 47
Amortization of recoverable transition costs...... 63 0 63
Maintenance......................................... 39 (25) 6) 14
Depreciation and amortization....................... 58 (34) 7) 24
Taxes, other than income ........................... 55 (24) 8) 31
Energy related businesses .......................... 6 (2) 9) 4
----------- ----------- -----------
Total............................................... 859 (418) 441
----------- ----------- -----------
OPERATING INCOME ..................................... 268 (117) 151
----------- ----------- -----------
Other Income.......................................... 11 (3) 10) 8
----------- ----------- -----------
INCOME BEFORE INTEREST AND INCOME TAXES............... 279 (120) 159
Interest Expense...................................... 61 (13) 11) 48
----------- ----------- -----------
INCOME BEFORE INCOME TAXES............................ 218 (107) 111
Income Taxes ......................................... 81 (43) 12) 38
----------- ----------- -----------
INCOME BEFORE DIVIDENDS ON PREFERRED STOCK............ $137 ($64) $73
=========== =========== ===========
|
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
BALANCE SHEET ADJUSTMENTS
1) Adjustment reflects the transfer of current assets as part of the
distribution, including fuel, spare parts and other inventories used in
generation of electricity, as well as the asset positions of energy trading
activities. The adjustment to cash and cash equivalents also reflects an
additional $125 million from a note payable to PPL Capital Funding issued
subsequent to March 31, 2000.
2) Adjustment reflects the transfer of notes and other receivables on the
books of certain subsidiaries of PPL Energy Funding.
3) Adjustment reflects the transfer of the two nuclear decommissioning trust
funds, which fund the future decommissioning of the Susquehanna generating
station. The corresponding liability for accrued nuclear decommissioning
costs is included in the adjustment of other non-current liabilities.
4) Adjustment reflects the transfer of the equity investment in Safe Harbor
Water Power Corporation to PPL Holtwood, LLC.
5) Adjustment reflects the transfer of other investments as part of the
distribution.
6) Adjustments reflect the transfer of steam, hydro and combustion-turbine
generating plant, net of accumulated reserves for depreciation. Also
reflected in the adjustment are generation-related transformers, leads, and
circuit breakers; the balances of generation-related construction projects
in progress; nuclear fuel; and oil/gas pipeline property.
7) Adjustment reflects the transfer of miscellaneous deferred debits for
benefits and payroll.
8) Adjustment reflects the assumption by PPL Energy Funding of notes payable
to affiliated companies. At March 31, 2000, PPL Utilities had a $300
million note payable to CEP Reserves, Inc., a wholly-owned subsidiary of
PPL Energy Funding. This debt is being assumed by PPL Energy Funding as
part of the realignment. At March 31, 2000, PPL Utilities had a $245
million note payable to PPL Capital Funding. PPL Utilities issued an
additional $125 million note payable to PPL Capital Funding subsequent to
March 31, 2000. This total $370 million debt to PPL Capital Funding is also
being assumed by PPL Energy Funding. PPL Utilities' $300 million note
payable to CEP Reserves, Inc. is intercompany debt that was eliminated in
PPL Utilities' consolidated 'as reported' balance sheet at March 31, 2000.
Therefore, the total adjustment represents the remaining $370 million of
debt assumed by PPL Energy Funding, net of the $125 million debt incurred
subsequent to March 31, 2000, plus the transfer of additional debt on the
books of certain subsidiaries of PPL Energy Funding.
9) Adjustment reflects the transfer of a loss accrual to PPL EnergyPlus. PPL
Utilities will continue to purchase power from non-utility generators under
pre-existing contracts, at prices currently above market. PPL Utilities
will then sell this power to PPL EnergyPlus at the same prices.
INCOME STATEMENT ADJUSTMENTS
1) Adjustment reflects the elimination of revenues from unregulated retail
electricity and gas sales by PPL EnergyPlus. Remaining retail revenues are
from the transmission and distribution of electricity in PPL Utilities'
franchised territory in Pennsylvania, as well as from providing electricity
as a PLR for customers who have not selected an alternate supplier under
the Act.
2) Adjustment reflects the elimination of the revenues associated with the
unregulated wholesale marketing business transferred to PPL EnergyPlus.
3) Adjustment reflects the elimination of revenues from energy-related
businesses of PPL Interstate Energy Company.
4) Adjustment reflects the elimination of expenses for fuel to operate the
generating stations. After realignment, fuel expense will be incurred by
the generating subsidiaries of PPL Generation.
5) Adjustment reflects the elimination of external purchases of energy to meet
retail and wholesale load, as well as for energy trading purposes. After
realignment, these expenses will be incurred by PPL EnergyPlus. This
reduction is partially offset by additional expense for the purchase of
electricity from PPL EnergyPlus to meet PPL Utilities' obligation as a PLR.
This intercompany purchase by PPL Utilities under a power sales agreement
is valued at the applicable shopping credits plus nuclear decommissioning
costs minus state taxes.
6) Adjustment reflects the elimination of other operation and maintenance
expenses associated with generation and marketing functions. These amounts
reflect the direct expenses incurred by these functions, direct corporate
support, and allocations of corporate overheads.
7) Adjustment reflects the elimination of depreciation expense associated with
generation facilities.
8) Adjustment reflects the elimination of PPL EnergyPlus' gross receipts tax
related to its retail sales and of PPL Energy Funding's share of other
taxes.
9) Adjustment reflects the elimination of expenses from energy-related
businesses of PPL Interstate Energy Company and PPL EnergyPlus.
10) Adjustment reflects the elimination of the pre-tax gain on the sale of the
Sunbury fossil generating station in 1999 and other non-operating income of
businesses transferred out of PPL Utilities.
11) Adjustment reflects the elimination of interest expense associated with
debt assumed by unregulated affiliates as part of the realignment.
12) Adjustment reflects the elimination of income taxes associated with the
generation and marketing functions, including taxes on the sale of the
Sunbury station in 1999.