Fayette County

Kentucky Utilities parent to be sold to Pa. corporation

ALLENTOWN, Pa. — Power company PPL Corp. said Wednesday it has agreed to acquire the Louisville-based parent company of Kentucky Utilities and Louisville Gas & Electric Co. for $6.7 billion in cash.

PPL also will assume $925 million of debt and get a tax benefit of $540 million when it buys E.On U.S. LLC from German power company E.On AG. PPL said it might sell some non-core assets to pay for part of the deal.

The company said it will leave the utilities' main headquarters in Louisville, and it indicated that it did not expect to lay off workers in Kentucky.

After the acquisition, expected to close by the end of the year, PPL said it predicts annual revenue to total $10 billion. The company expects to serve nearly 5 million electricity customers in the United States and United Kingdom.

The acquisition is expected to increase earnings by 2013.

The buyout requires approvals by state regulators and the Federal Energy Regulatory Commission.

Andrew Melnykovych, spokesman for the Kentucky Public Service Commission, said that as of Wednesday afternoon, nothing had been filed with the commission on a transfer of control.

The commission would have 60 to 120 days from the date of application to approve or deny the sale based on criteria laid out in a statute, including whether it is in the public's interest.

Melnykovych said the attorney general has a statutory right to intervene and that others, including local governments and consumer advocates, have petitioned and been granted the right to intervene on the behalf of ratepayers in the past.

KU serves 518,000 customers in 77 counties in Kentucky and five counties in Virginia, according to the E.ON U.S. Web site. LG&E serves 318,000 natural gas and 390,000 electricity customers in Louisville and 16 surrounding counties. Together, the two can generate more than 8,000 megawatts of power.

PPL owns or controls about 12,000 megawatts of power generation, of which 34 percent is coal-fired and 18 percent is nuclear. PPL has 1.4 million Pennsylvania customers and 2.6 million British customers.

"Consolidation in this industry makes sense," said Paul Patterson, an analyst at Glenrock Associates in New York. "There are a large number of smaller utilities, when combined together, that could drive operational efficiencies."

Phil Adams, a credit analyst with Gimme Credit in Chicago, wrote Wednesday in a report to clients: "We're going to try to keep an open mind about this but really preferred PPL as a standalone company, at least until there's more clarity on carbon regulation."

E.ON, based in Dusseldorf, Germany, is seeking to sell more than $13 billion in assets by the end of the year after being saddled with debt from acquiring power plants and customers from Spain to Siberia.

It already has raised almost $8 billion selling high-voltage power lines, about 20 percent of its electricity generation capacity in Germany and a holding company for stakes in local energy suppliers, according to a March 10 presentation. E.ON's net debt was $59 billion as of Dec. 31.

KU was based in Lexington until 1998, when it merged with the larger LG&E. In 2000, a British company, Powergen, bought KU and LG&E for $3.2 billion. In 2002, E.On acquired Powergen for nearly $15 billion.

PPL also released preliminary financial results for the first quarter Wednesday. The power company said it earned 94 cents a share on an adjusted basis, compared with 60 cents a share in the first quarter of 2009. Analysts predict earnings of 86 cents a share, according to a Thomson Reuters poll.

For the full year, PPL maintained its guidance for adjusted net income of $3.10 to $3.50 a share. Analysts forecast income of $3.33 a share.

The company is scheduled to report its quarterly earnings on May 6.

Shares of PPL fell $2.13, or 7.7 percent, to close at $25.60. They earlier hit a 52-week low of $25.54 ahead of the announcement.

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