The process for PPL Corp. to sell its U.K. business, Western Power Distribution PLC, remains on track, and the company expects to announce a deal in the first half of 2021, PPL President and CEO Vincent Sorgi said Nov. 5.
The Allentown, Pa.-headquartered company put Western Power Distribution up for sale in August, saying the move, among other things, would simplify PPL's business mix and provide the company greater financial flexibility.
During a call to discuss PPL's third-quarter 2020 earnings, company officials said they could not divulge any details about the process. But Sorgi recalled that he expected Western Power Distribution to draw "quite a bit of interest" from prospective buyers, given the quality of the business' assets and management team.
"And again, we think electric distribution is the premier sector in the utility industry in the U.K., given its role in where it's going to play in the decarbonization efforts to get to net zero in the U.K.," he said. "So at this point, I would say nothing that I'm seeing would kind of alter that view, and things are progressing as we had expected."
PPL earlier on Nov. 5 reported third-quarter earnings from ongoing operations of $450 million, or 58 cents per share, compared with $445 million, or 61 cents per share, a year earlier.
PPL CFO Joseph Bergstein said the estimated impact of the COVID-19 pandemic on the company's third-quarter results was about 4 cents per share, primarily due to lower sales volumes in the U.K. and lower demand revenue in Kentucky. The Bluegrass State is home to PPL subsidiaries Louisville Gas and Electric Co. and Kentucky Utilities Co.
Still, that figure is less than the 6-cents-per-share impact PPL saw during the second quarter. The improvement is due to increasing electricity demand, Bergstein said. While commercial and industrial demand is still below levels seen in 2019, the segment is improving as COVID-19 restrictions have been lifted, Bergstein said.
In Pennsylvania, home to PPL Electric Utilities Corp., commercial and industrial load in the third quarter was down 4% compared to the same time period a year earlier, after falling 10.5% year over year in the second quarter, according to a presentation. In Kentucky, commercial and industrial load for the third quarter fell 6.7% versus the prior year, an improvement from the 14.4% year-over-year drop seen in the second quarter.
Meanwhile, in the U.K., commercial and industrial load saw a 14.3% year-over-year decline in the third quarter. Again, that is an improvement on the 20.1% year-over-year decline seen in the previous quarter, Bergstein said. While demand is not recovering as sharply overseas as it is in PPL's U.S. service territories, Bergstein noted, impacts from lower sales volumes in the U.K. can be recovered through a decoupling mechanism.
"We remain encouraged by the recovery we have observed in each of our service territories during the third quarter, but we'll continue to monitor load impacts as we move into the winter months, including the impact of additional temporary lockdowns, should they arise, such as the lockdowns we are currently experiencing in England and Wales," he said.
Bergstein said at the moment, the lockdown is not as stringent as the one in place earlier in the year, since individuals who are unable to do their jobs from home can go to work this time and many retail establishments still can provide takeaway options.
He added that "strong" residential demand is expected to continue to act as a hedge for lower commercial and industrial demand. For instance, the presentation shows that residential demand was up 4.9% for the quarter in Pennsylvania and the U.K. and up 7.1% in Kentucky, compared to the previous time period a year ago.