PPL Growth Strategy and Financing Policies
Pennsylvania Power and Light Company (PPL) was originally incorporated in 1920 as holding company. 1920-1994 PPL operated as a vertically integrated utility. In 1994 the company’s management recognizing and anticipating changes to the electric utility industry chose to changes it strategy by creating a subsidiary PPL Global “to pursue business opportunities in the unregulated electricity marketplace” (Esty, Ferman3). Senior management recognizing the need to create a more competitive environment within the company began a restructuring process from 1994-2000. In 1999 the company announced it intended to double its generation capacity by 2005 “through acquisition of existing plants and development of new plants” (Esty, Ferman 4). Jim Abel and PPL’s Finance team determined that in order to execute this new strategy PPL needed to maintain access to large amounts of capital at low cost while maintaining the financial soundness of the corporate balance sheet. This culminated in the separation of its unregulated generation businesses from its regulated distribution and transmission businesses in 2000(Esty, Ferman 4). The environment PPL was operating in during this time was not conducive to PPL Global using Corporate Finance to raise the billions of dollars needed to fund the expansion of the company’s generation portfolio. To use Corporate Finance would result in a burden on the company as a whole while putting the PPL at risk of credit downgrades resulting in it becoming increasingly difficult to raise additional needed capital. Thus, the finance team evaluated raising funds at the PPL Global level through project financing and Leasing structures to provide the financial flexibility needed to raise capital while maintaining a sound financial soundness to the corporate balance sheet. Jim Abel expressed that initial