PPL Corp. has agreed to sell its natural gas distribution subsidiary, PPL Gas Utilities Corp., and propane subsidiary, Penn Fuel Propane LLC, to UGI Utilities Inc., it said last week, noting the move allows it to focus on its power generation and electricity delivery businesses.
PPL said last summer that it would sell the businesses (see NGI, Aug 6, 2007). UGI Utilities has agreed to pay about $268 million in cash plus working capital, under a stock purchase agreement and following the receipt of necessary regulatory approvals. PPL expects the sale to close before the end of 2008.
The businesses represented about 1% of PPL's earnings in 2007, it said. The gas utility serves about 76,000 customers in 35 counties throughout Pennsylvania and a small area of Maryland. It operates about 3,800 miles of pipeline and owns underground gas storage capacity in three separate reservoirs in north-central Pennsylvania. The propane subsidiary buys propane wholesale and stores, delivers and sells it to about 33,000 industrial, commercial and residential customers in Pennsylvania, Delaware, Maryland and West Virginia.
"We expect the financial results of PPL Gas to be accretive to earnings in the first full year of our ownership," said UGI Corp. Chairman Lon R. Greenberg. UGI expects to fund the purchase and related costs with a combination of balance sheet cash and long term debt issued by UGI Utilities. Upon completion of the acquisition, UGI Utilities intends to sell the assets of Penn Fuel to AmeriGas Partners LP, of which UGI owns 44% through a subsidiary.
"These businesses have been operationally and financially successful, but their relative size and earnings contributions limited their strategic value to PPL's future growth," said PPL COO William H. Spence. During 2007 PPL completed the sales of its Latin American electricity delivery businesses and its telecommunications operations.
"All of these steps position us to focus on growth opportunities in our core businesses of power generation, energy marketing and electricity delivery -- bringing the most value to our shareowners," Spence said.
UGI is a holding company with propane marketing, utility and energy marketing subsidiaries. Subsidiary UGI Utilities delivers natural gas to approximately 478,000 customers in 28 Pennsylvania counties, including the cities of Allentown, Bethlehem, Easton, Harrisburg, Lancaster, Lebanon, Reading, Scranton, Wilkes-Barre and Williamsport. UGI Utilities delivers electricity to approximately 62,000 customers in two northeastern Pennsylvania counties near Wilkes-Barre.
PPL is headquartered in Allentown and controls more than 11,000 MW of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to about 4 million customers in Pennsylvania and the United Kingdom.
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