(Adds Fitch downgrade, updated stock prices.)
DOW JONES NEWSWIRES
PPL Corp.'s (PPL) fourth-quarter net income fell 34% due to
lower margins and weaker international results, while fellow
electricity producer NiSource Inc. (NI) said its net more than
doubled amid a charge from the early extinguishment of debt.
NiSource also projected 2009 earnings below analysts'
expectations and cut planned capital spending by at least 20% to
$800 million. PPL reiterated its profit view.
"Make no mistake about it," said PPL Chairman and Chief
Executive James H. Miller, "2008 was a difficult year, and we
expect this very challenging business environment to continue in
2009."
The economic downturn and slumping demand are forcing power
providers to cut spending and to ask regulators to allow rates
increases. Utilities are especially vulnerable to changes in demand
as they base their rates on the expectation that energy sales will
increase.
At PPL, the Pennsylvania-based seller of electricity to about
four million customers in Pennsylvania and the U.K., posted net
income of $277 million, or 74 cents a share, down from $418
million, or $1.12 a share, a year earlier. Excluding gains,
operating earnings fell to 46 cents from 60 cents.
Revenue jumped 36% to $2.51 billion as the company recorded
another $695 million in revenue from unrealized economic activity
such as fuel hedging. In the third quarter, the top line was also
boosted by $1.16 billion in similar revenue.
Analysts polled by Thomson Reuters expected earnings of 46 cents
on revenue of $1.48 billion.
Earnings in PPL's supply business segment dropped 28% on lower
wholesale energy margin amid higher average fuel prices from a year
earlier. Generation did increase, though. Profit at the
Pennsylvania delivery business rose 10% but dropped 1%
internationally
At NiSource, the natural-gas and electricity utility posted net
income of $127 million, or 46 cents a share, up from $59.5 million,
or 21 cents a share, a year earlier. The debt-extinguishment costs
cut prior-year earnings by 20 cents.
Revenue increased 5.5% to $2.37 billion.
Analysts expected earnings of 43 cents on revenue of $2.15
billion.
NiSource's operating profit rose 7.2% at its gas-distribution
segment while the electricity business reported a 4.1% increase.
The company completed the sale of some of its utilities to Unitil
Corp. (UTL) for nearly $200 million during the quarter as it looks
to focus more closely on its core regulated businesses.
Later Wednesday, Fitch Ratings cut its credit ratings on the
company to the verge of junk status, citing its challenging
operating and financial conditions and a potential weakening in
credit metrics this year.
The ratings firm, which lowered its issuer default rating on
NiSource by one notch to BBB-, also said future earnings will be
hurt by increasing pension costs.
NiSource forecast 2009 earnings of $1 to $1.10 a share amid
increased pension and interest costs and the economic downturn.
Analysts expected $1.16.
Shares of PPL traded recently up 2.2% at $31.22 while NiSource
jumped 9% to $10.63.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com