PPL acquisition financing sources include equity, bonds and cash

By Jennifer Chiou

New York, April 29 - PPL Corp. plans to use up to $2.9 billion of bonds and up to $1 billion of high-equity-content securities for the acquisition of E.ON U.S. LLC for $6.7 billion in cash and through the assumption of $925 million of tax-exempt debt.

PPL entered into the definitive agreement with E.ON AG on Thursday.

The bond component of the financing is made up of $800 million of unsecured corporate debt and $2.1 billion of first mortgage bonds, which are at E.ON U.S.'s two major utilities, Louisville Gas & Electric Co. and Kentucky Utilities Co.

The company's permanent financing plan also involves roughly $250 million to $750 million of cash on hand, the previously mentioned $750 million to $1 billion of the high-equity-content securities as well as $2.2 billion to $2.6 billion of common stock, according to PPL's Thursday report on the acquisition and James H. Miller, PPL's chairman, president and chief executive officer.

PPL said that the permanent financing will replace the committed bridge financing that it has in place from Bank of America Merrill Lynch and Credit Suisse.

The company added that it may fund certain amounts prior to closing depending on market conditions.

Further, Miller said that proceeds from the sale of PPL non-core assets may be used to fund a portion of the transaction.

All in all, PPL is acquiring E.ON U.S. for $7.625 billion and will receive tax benefits with a present value of about $450 million as part of the transaction.

The transaction is expected to close by the end of the year.

Miller noted in the release that PPL intends to operate the company as a wholly owned subsidiary, retaining the headquarters in Louisville, as has been the case with E.ON AG ownership.

Based in Allentown, Pa., PPL owns or controls nearly 12,000 megawatts of generating capacity in the United States. E.ON U.S., through two major utilities, provides electricity service to 941,000 customers, mostly in the state of Kentucky, with some customers in Virginia and Tennessee.

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