Exhibit 99.2
PPL ELECTRIC UTILITIES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
------------------------------------------------------
The pro forma information that follows is presented to give effect to the
corporate realignment on the balance sheet and income statement of PPL
Utilities. The pro forma results are based on assumptions set forth in the Notes
to Unaudited Pro Forma Consolidated Financial Information below and are not
necessarily indicative of the results of operations which would actually have
occurred if the transactions had occurred in such periods, or which may exist or
occur in the future.
The corporate realignment is described in Item 2 of this Current Report on Form
8-K, of which this Exhibit 99.2 is a part. From the perspective of PPL
Utilities, the realignment involves the disposition and transfer of assets and
liabilities associated with the generating and marketing portions of its
existing business, as well as certain corporate assets and liabilities. The
assets and liabilities were transferred to unregulated subsidiaries of PPL, the
parent of PPL Utilities.
Specifically, PPL Utilities transferred generating, marketing and certain
related assets and liabilities (including its investments in PPL EnergyPlus,
LLC, PPL Interstate Energy Company, Realty Company of Pennsylvania, and
Pennsylvania Mines Corporation) to its wholly-owned subsidiary, PPL Energy
Funding. PPL Utilities then distributed its investment in PPL Energy Funding to
PPL in a "tax-free spin-off."
PPL Utilities distributed certain other corporate assets (net of associated
liabilities) to PPL, which PPL then contributed to PPL Services Corporation
("PPL Services"), a new subsidiary of PPL.
The distribution reflects the transfer of these assets and liabilities at book
value, and will be recorded effective July 1. The actual distribution will be
reflected in PPL Utilities' Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
The pro forma balance sheet gives effect to the distribution of PPL Utilities'
investment in PPL Energy Funding as if the distribution was made on March 31,
2000. The adjustments are applied to the balance sheet at March 31, 2000, as set
forth in PPL Utilities' Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000. Actual transfers will necessarily be dependent on account
balances and capital structures at July 1, 2000. The adjusted balances at March
31, 2000 reflect the pro forma balances for the remaining business of PPL
Utilities, principally the transmission and distribution of electricity to
retail customers in its franchised territory in eastern and central
Pennsylvania. The adjusted balance sheet also reflects the consolidated accounts
of PPL Transition Bond Company, LLC, a wholly-owned subsidiary formed to issue
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transition bonds under the Act; PPL Capital Trust and PPL Capital Trust II, two
Delaware statutory business trusts formed to issue preferred securities; and CEP
Commerce, LLC.
Pro forma adjustments are also provided to the income statements for 1999 and
for the three months ended March 31, 2000. The adjustments are to the income
statements filed in the PPL Utilities' Annual Report on Form 10-K for the year
ended December 31, 1999, and in the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000. The pro forma adjustments assume that the transfer
was consummated at the beginning of the income statement periods. The adjusted
income statements are intended to reflect the pro forma consolidated operations
of the remaining portions of PPL Utilities.
The Notes to Unaudited Pro Forma Consolidated Financial Information provide
additional descriptions of the balance sheet and income statement adjustments.
<PAGE>
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Millions of Dollars)
<TABLE>
<CAPTION>
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Unaudited)
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................... $37 $97 1) $134
Accounts receivable, net ........................... 328 (36) 1) 292
Unbilled revenues................................... 287 (35) 1) 252
Fuel, materials and supplies - at average cost...... 164 (136) 1) 28
Prepayments......................................... 171 0 1) 171
Unrealized energy trading gains..................... 48 (48) 1) 0
Other............................................... 131 (20) 1) 111
----------- ----------- -----------
1,166 (178) 988
----------- ----------- -----------
INVESTMENTS
Loan to parent and its affiliates................... 476 (312) 2) 164
Nuclear plant decommissioning trust fund............ 269 (269) 3) 0
Investment in unconsolidated affiliate at equity.... 17 (17) 4) 0
Other............................................... 12 (5) 5) 7
----------- ----------- -----------
774 (603) 171
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant in service - net
Transmission and distribution..................... 2,187 (37) 6) 2,150
Generation........................................ 1,628 (1,628) 6) 0
General........................................... 210 (33) 6) 177
----------- ----------- -----------
4,025 (1,698) 2,327
Construction work in progress - at cost............. 132 (66) 6) 66
Nuclear fuel owned and leased - net ................ 136 (136) 6) 0
----------- ----------- -----------
Electric utility plant - net...................... 4,293 (1,900) 2,393
Gas and oil utility plant - net..................... 26 (26) 6) 0
Other property - net................................ 20 (16) 6) 4
----------- ----------- -----------
4,339 (1,942) 2,397
----------- ----------- -----------
REGULATORY ASSETS AND OTHER NONCURRENT ASSETS
Recoverable transition costs........................ 2,591 0 2,591
Other............................................... 344 (10) 7) 334
----------- ----------- -----------
2,935 (10) 2,925
----------- ----------- -----------
$9,214 ($2,733) $6,481
=========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information.
<PAGE>
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Millions of Dollars)
<TABLE>
<CAPTION>
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Unaudited)
LIABILITIES AND EQUITY
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Short-term debt..................................... $116 $0 $116
Short-term debt payable to affiliate................ 279 (264) 8) 15
Long-term debt...................................... 357 0 357
Above market NUG contracts.......................... 98 (98) 9) 0
Accounts payable.................................... 228 (46) 10) 182
Taxes and interest accrued.......................... 209 (96) 10) 113
Dividends payable................................... 6 0 6
Unrealized energy trading losses.................... 54 (54) 10) 0
Other............................................... 130 (36) 11) 94
----------- ----------- -----------
1,477 (594) 883
----------- ----------- -----------
LONG-TERM DEBT........................................ 3,087 0 3,087
----------- ----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Deferred income taxes and investment tax credits.... 1,528 (779) 12) 749
Above market NUG purchases.......................... 651 (651) 9) 0
Other............................................... 735 (509) 13) 226
----------- ----------- -----------
2,914 (1,939) 975
COMMITMENTS AND CONTINGENT LIABILITIES 0
----------- ----------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY COMPANY DEBENTURES................... 250 0 250
----------- ----------- -----------
PREFERRED STOCK
With sinking fund requirements...................... 47 0 47
Without sinking fund requirements................... 50 0 50
----------- ----------- -----------
97 97
----------- ----------- -----------
SHAREOWNER'S COMMON EQUITY
Common stock........................................ 1,476 0 1,476
Additional paid-in capital.......................... 55 0 55
Treasury stock...................................... (632) 0 (632)
Earnings reinvested................................. 512 (200) 14) 312
Accumulated other comprehensive income.............. (6) 0 (6)
Capital stock expense and other..................... (16) 0 (16)
----------- ----------- -----------
1,389 (200) 1,189
----------- ----------- -----------
$9,214 ($2,733) $6,481
=========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information.
<PAGE>
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(Millions of Dollars)
<TABLE>
<CAPTION>
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Audited)
OPERATING REVENUES
<S> <C> <C> <C> <C>
Electric............................................ $2,513 ($416) 1) $2,097
Wholesale energy marketing and trading.............. 1,420 (1,420) 2) 0
Energy related businesses........................... 19 (10) 3) 9
----------- ----------- -----------
Total............................................... 3,952 (1,846) 2,106
----------- ----------- -----------
OPERATING EXPENSES
Operation
Electric fuel..................................... 445 (445) 4) 0
Energy purchases for retail load and wholesale.... 1,367 (492) 5) 875
Other............................................. 621 (407) 6) 214
Amortization of recoverable transition costs...... 172 0 172
Maintenance......................................... 195 (126) 6) 69
Depreciation and amortization ...................... 233 (132) 7) 101
Taxes, other than income ........................... 153 (53) 8) 100
Energy related businesses........................... 17 (9) 9) 8
----------- ----------- -----------
Total .............................................. 3,203 (1,664) 1,539
----------- ----------- -----------
OPERATING INCOME ..................................... 749 (182) 567
Other Income.......................................... 97 (66) 10) 31
----------- ----------- -----------
INCOME BEFORE INTEREST AND INCOME TAXES............... 846 (248) 598
Interest Expense...................................... 214 (47) 11) 167
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS.... 632 (201) 431
Income Taxes ......................................... 151 (74) 12) 77
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS
AND DIVIDENDS ON PREFERRED STOCK.................... $481 ($127) $354
=========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
<PAGE>
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(Millions of Dollars)
<TABLE>
<CAPTION>
PRO FORMA NOTE
AS REPORTED ADJUSTMENTS REF AS ADJUSTED
------------ ---------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric............................................ $722 $(134) 1) $588
Natural gas......................................... 11 (11) 1) 0
Wholesale energy marketing and trading.............. 388 (388) 2) 0
Energy related businesses........................... 6 (2) 3) 4
----------- ----------- -----------
Total............................................... 1,127 (535) 592
----------- ----------- -----------
OPERATING EXPENSES
Operation
Electric fuel..................................... 112 (112) 4) 0
Energy purchases for retail load and wholesale.... 391 (133) 5) 258
Other............................................. 135 (88) 6) 47
Amortization of recoverable transition costs...... 63 0 63
Maintenance......................................... 39 (25) 6) 14
Depreciation and amortization....................... 58 (34) 7) 24
Taxes, other than income ........................... 55 (24) 8) 31
Energy related businesses .......................... 6 (2) 9) 4
----------- ----------- -----------
Total............................................... 859 (418) 441
----------- ----------- -----------
OPERATING INCOME ..................................... 268 (117) 151
----------- ----------- -----------
Other Income.......................................... 11 (3) 10) 8
----------- ----------- -----------
INCOME BEFORE INTEREST AND INCOME TAXES............... 279 (120) 159
Interest Expense...................................... 61 (13) 11) 48
----------- ----------- -----------
INCOME BEFORE INCOME TAXES............................ 218 (107) 111
Income Taxes ......................................... 81 (43) 12) 38
----------- ----------- -----------
INCOME BEFORE DIVIDENDS ON PREFERRED STOCK............ $137 ($64) $73
=========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
<PAGE>
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
---------------------------------------------------------------
BALANCE SHEET ADJUSTMENTS
1) Adjustment reflects the transfer of current assets as part of the
distribution, including fuel, spare parts and other inventories used in
generation of electricity, as well as the asset positions of energy trading
activities. The adjustment to cash and cash equivalents also reflects an
additional $125 million from a note payable to PPL Capital Funding issued
subsequent to March 31, 2000.
2) Adjustment reflects the transfer of notes and other receivables on the
books of certain subsidiaries of PPL Energy Funding.
3) Adjustment reflects the transfer of the two nuclear decommissioning trust
funds, which fund the future decommissioning of the Susquehanna generating
station. The corresponding liability for accrued nuclear decommissioning
costs is included in the adjustment of other non-current liabilities.
4) Adjustment reflects the transfer of the equity investment in Safe Harbor
Water Power Corporation to PPL Holtwood, LLC.
5) Adjustment reflects the transfer of other investments as part of the
distribution.
6) Adjustments reflect the transfer of steam, hydro and combustion-turbine
generating plant, net of accumulated reserves for depreciation. Also
reflected in the adjustment are generation-related transformers, leads, and
circuit breakers; the balances of generation-related construction projects
in progress; nuclear fuel; and oil/gas pipeline property.
7) Adjustment reflects the transfer of miscellaneous deferred debits for
benefits and payroll.
8) Adjustment reflects the assumption by PPL Energy Funding of notes payable
to affiliated companies. At March 31, 2000, PPL Utilities had a $300
million note payable to CEP Reserves, Inc., a wholly-owned subsidiary of
PPL Energy Funding. This debt is being assumed by PPL Energy Funding as
part of the realignment. At March 31, 2000, PPL Utilities had a $245
million note payable to PPL Capital Funding. PPL Utilities issued an
additional $125 million note payable to PPL Capital Funding subsequent to
March 31, 2000. This total $370 million debt to PPL Capital Funding is also
being assumed by PPL Energy Funding. PPL Utilities' $300 million note
payable to CEP Reserves, Inc. is intercompany debt that was eliminated in
PPL Utilities' consolidated 'as reported' balance sheet at March 31, 2000.
Therefore, the total adjustment represents the remaining $370 million of
debt assumed by PPL Energy Funding, net of the $125 million debt incurred
subsequent to March 31, 2000, plus the transfer of additional debt on the
books of certain subsidiaries of PPL Energy Funding.
9) Adjustment reflects the transfer of a loss accrual to PPL EnergyPlus. PPL
Utilities will continue to purchase power from non-utility generators under
pre-existing contracts, at prices currently above market. PPL Utilities
will then sell this power to PPL EnergyPlus at the same prices.
<PAGE>
10) Adjustment reflects the transfer of current liabilities, including: (1)
accounts payable for fuel, spare parts and other inventories used in the
generation of electricity; (2) accrued taxes and interest associated with
unregulated activities; and (3) liability positions of energy trading
activities.
11) Adjustment reflects the transfer of various accrued liabilities including
payroll and benefit-related liabilities, air pollution control emission
fees, and nuclear decommissioning fees.
12) Adjustment reflects the transfer of deferred income taxes associated with
the transferred generating plant and related assets.
13) Adjustment reflects the transfer of deferred credits for nuclear
decommissioning to a PPL Generation subsidiary and certain retirement plans
liabilities to PPL Services.
14) Reflects net distribution to common stockholder of investment in PPL Energy
Funding, as well as the transfer of certain assets and liabilities to PPL
Services.
<PAGE>
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
---------------------------------------------------------------
INCOME STATEMENT ADJUSTMENTS
1) Adjustment reflects the elimination of revenues from unregulated retail
electricity and gas sales by PPL EnergyPlus. Remaining retail revenues are
from the transmission and distribution of electricity in PPL Utilities'
franchised territory in Pennsylvania, as well as from providing electricity
as a PLR for customers who have not selected an alternate supplier under
the Act.
2) Adjustment reflects the elimination of the revenues associated with the
unregulated wholesale marketing business transferred to PPL EnergyPlus.
3) Adjustment reflects the elimination of revenues from energy-related
businesses of PPL Interstate Energy Company.
4) Adjustment reflects the elimination of expenses for fuel to operate the
generating stations. After realignment, fuel expense will be incurred by
the generating subsidiaries of PPL Generation.
5) Adjustment reflects the elimination of external purchases of energy to meet
retail and wholesale load, as well as for energy trading purposes. After
realignment, these expenses will be incurred by PPL EnergyPlus. This
reduction is partially offset by additional expense for the purchase of
electricity from PPL EnergyPlus to meet PPL Utilities' obligation as a PLR.
This intercompany purchase by PPL Utilities under a power sales agreement
is valued at the applicable shopping credits plus nuclear decommissioning
costs minus state taxes.
6) Adjustment reflects the elimination of other operation and maintenance
expenses associated with generation and marketing functions. These amounts
reflect the direct expenses incurred by these functions, direct corporate
support, and allocations of corporate overheads.
7) Adjustment reflects the elimination of depreciation expense associated with
generation facilities.
8) Adjustment reflects the elimination of PPL EnergyPlus' gross receipts tax
related to its retail sales and of PPL Energy Funding's share of other
taxes.
9) Adjustment reflects the elimination of expenses from energy-related
businesses of PPL Interstate Energy Company and PPL EnergyPlus.
10) Adjustment reflects the elimination of the pre-tax gain on the sale of the
Sunbury fossil generating station in 1999 and other non-operating income of
businesses transferred out of PPL Utilities.
11) Adjustment reflects the elimination of interest expense associated with
debt assumed by unregulated affiliates as part of the realignment.
12) Adjustment reflects the elimination of income taxes associated with the
generation and marketing functions, including taxes on the sale of the
Sunbury station in 1999.
