PPL Corporation (NYSE: PPL) announced today that it is initiating a formal process to sell its U.K. utility business in order to position PPL as a purely U.S.-focused utility holding company and create additional shareowner value. The decision to proceed with the sale process follows a comprehensive strategic review by PPL's Board of Directors that assessed the company's business mix and future growth opportunities.
"We believe there is an opportunity to unlock significant value for PPL shareowners through the sale of Western Power Distribution (WPD) and the strategic repositioning of PPL's portfolio to be fully U.S.-based," said Vincent Sorgi, PPL president and chief executive officer.
"WPD is a very strong business that continues to perform exceptionally well as the premier distribution network operator (DNO) group in the U.K., but we believe it continues to be undervalued by the market as part of PPL. We believe that greater value can be achieved for PPL shareowners through a sale of the U.K. business and use of proceeds that would be focused on strengthening PPL's balance sheet and enhancing the company's long-term earnings growth, which could include supporting strategic growth opportunities in the U.S. and returning capital to shareowners.
"Ultimately, we believe the divestment of WPD will simplify PPL's business mix, provide the company greater financial flexibility and create a sharpened focus on building tomorrow's energy infrastructure and advancing a cleaner energy future in the U.S.," said Sorgi.
The company said it expects to evaluate a variety of offers for the purchase of WPD, including all cash or a combination of cash and U.S. utility assets.
WPD consists of four DNOs in the U.K. that have outstanding track records of performance, earning more performance incentive revenues under U.K. regulation than every other DNO group in the U.K. WPD, which serves about 8 million customers in central and southwest England and south Wales, is expected to play a critical role in supporting the U.K.'s transition to net-zero carbon emissions by 2050, providing significant future investment opportunities and regulated asset value growth.
PPL noted that a sale of WPD in the near term would provide the new owner an opportunity to influence WPD's business plans for RIIO-ED2, the next U.K. price control period for electric distribution companies. The business plans are expected to be filed with the U.K. regulator, Ofgem, in mid-2021. RIIO-ED2 will begin in April 2023 and ends in March 2028.
PPL has engaged JP Morgan Securities LLC to act as its financial advisor to assist with the sale process, with the intent to announce a transaction in the first half of 2021. PPL noted that there can be no assurance of any specific outcome, including whether the announcement will result in the completion of any potential transaction, the timing or terms thereof, the value or benefits that may be realized from any potential transaction, or the effect that any potential transaction will have on future financial results. The company does not intend to provide interim updates on the progress of this process unless and until a definitive agreement is signed or the company believes disclosure is appropriate.
Headquartered in Allentown, Pa., PPL Corporation (NYSE: PPL) is one of the largest companies in the U.S. utility sector. PPL's seven high-performing, award-winning utilities serve more than 10 million customers in the U.S. and United Kingdom. With more than 12,000 employees, the company is dedicated to providing exceptional customer service and reliability and delivering superior value for shareowners. To learn more, visit www.pplweb.com.
