PPL CEO sees more fast growth in merchant unit
NEW YORK, March 25 (Reuters) - PPL Corp (PPL.N) expects unregulated merchant activities to grow quickly from about half the company's business now to about 90 percent by 2010, Chief Executive Officer Jim Miller told reporters on Tuesday.
To meet that goal, Miller said Allentown, Pennsylvania-based PPL was looking to build or buy new power plants or a company that owns generating assets. The other 10 percent of PPL's business would come from regulated distribution in Pennsylvania and the United Kingdom.
Miller, who is also president and chairman of PPL, said it would be difficult to buy a company with generating assets primarily because regulators have sought concessions that would reduce the value from such a merger.
He pointed to failed mergers between Chicago's Exelon Corp (EXC.N) and New Jersey's Public Service Enterprise Group Inc (PEG.N) and Florida's FPL Group Inc (FPL.N) and Baltimore's Constellation Energy Group Inc (CEG.N).
With building or buying new power plants the more feasible option, the company is seeking U.S. Federal Energy Regulatory Commission approval to expand its 109-megawatt Holtwood hydropower plant in Pennsylvania by 125 MW.
PPL also plans to seek a license for a third reactor at its 2,275 MW Susquehanna nuclear plant in Pennsylvania.
In 2007, PPL contracted with an affiliate of UniStar Nuclear Energy, a joint venture between Constellation Energy and France's EDF (EDF.PA), to prepare the application.
While PPL has not yet decided to move forward with the construction of a reactor, it plans to file with the Nuclear Regulatory Commission by the end of 2008 to build one of Areva SA's (CEPFi.PA) 1,600 MW Evolutionary Power Reactors (EPR).
Miller estimated it would take about 2-1/2 years to gain NRC approval of a license and another 4-1/2 years to build the reactor, making it available for service in the 2016 timeframe.
NEW REACTOR
Miller said the high cost of a new reactor made it risky for PPL, the seventh largest power company in the United States with a market cap of about $17.2 billion, to build a nuclear plant without partners and help from the federal government.
He estimated it would cost about $10 billion to build the reactor. He said PPL wanted a debt-to-equity ratio of 80-20, meaning PPL and partners would put up about $2 billion and get the rest from project finance with federal loan guarantees.
He said federal loan guarantees were needed because Wall Street probably would not loan the money without them. He said Washington should expand and extend the loan guarantee program, which now will allocate $18.5 billion to build new reactors.
He said nuclear is key to U.S. needs for new baseload generation, citing global warming and other environmental concerns as obstacles to new coal and hydro plants.
Baseload power plants operate around the clock. (Reporting by Scott DiSavino; Editing by David Gregorio)
