PPL To Acquire U.S. Utility With Electric, Natural Gas Choice Programs -- EnergyChoiceMatters.com

PPL To Acquire U.S. Utility With Electric, Natural Gas Choice Programs

PPL Says Acquisition Positions Company To Invest In Sustainable Energy Solutions, "Eager" To Assist In State's Decarbonization Goals

March 18, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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PPL Corporation announced that it has entered into definitive agreements to sell its U.K. utility business, Western Power Distribution (WPD), to National Grid plc for £7.8 billion and, in a separate transaction, to acquire National Grid's Rhode Island utility business, The Narragansett Electric Company, for $3.8 billion.

Narragansett Electric operates an electric and natural gas utility with choice programs for both commodities

"The strategic repositioning will transform PPL into a high-growth, purely U.S.-focused energy company with a strong balance sheet," PPL said

Vincent Sorgi, PPL president and chief executive officer, said that the transactions, "will refocus our business mix squarely on strong, rate-regulated U.S. utilities; strengthen our credit metrics; enhance long-term earnings growth and predictability; and provide us with greater financial flexibility to invest in sustainable energy solutions for those we serve."

"[W]e're eager to play a key role in advancing Rhode Island's decarbonization goals. We believe our experience in automating electricity networks can help the state achieve its target of 100% renewable energy by 2030," said Sorgi

Under the terms of the agreements, PPL will sell its U.K. subsidiary holding the interests in WPD to National Grid in an all-cash transaction valued at £14.4 billion, including the assumption of approximately £6.6 billion of debt. The sale is expected to result in net cash proceeds of approximately $10.2 billion, reflecting taxes and fees and based on a foreign currency exchange rate of $1.35/£, inclusive of currency hedges executed by PPL to date.

Separately, PPL will acquire Narragansett Electric from National Grid in a transaction valued at $5.3 billion, including the assumption of approximately $1.5 billion of Narragansett Electric debt. The company plans to use a portion of the proceeds from the sale of WPD to finance the acquisition.

At the conclusion of both transactions, PPL will serve approximately 3.5 million electricity and gas customers across the U.S. This includes approximately 780,000 customers from Narragansett Electric's electricity transmission and distribution (T&D) and gas distribution businesses in Rhode Island.

"PPL intends to use the net cash proceeds from the transactions to further strengthen its balance sheet and enhance opportunities for strategic growth. The company will continue to evaluate the best use of the remaining proceeds to maximize shareowner value. This includes potentially investing incremental capital at PPL's utilities or in renewables, and repurchasing shares," PPL said

"PPL also expects to maintain a strong balance sheet with an improved credit profile supporting strong, investment-grade credit ratings from Moody's and S&P with no planned equity issuances required. PPL is targeting a cash from operations to total debt ratio of 16%-18% post transactions, while its Holding Company Debt to Total Debt ratio is expected to decrease below 25%," PPL said

The transactions require customary approvals in the U.S. and U.K., as well as National Grid shareowner approval for the acquisition of WPD. PPL shareowner approval is not required for either transaction.

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