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PPL tops utility profitability by recurring EBITDA margin

Allentown, Pa.-headquartered PPL Corp. dethroned NextEra Energy Inc. as the most profitable utility by recurring EBITDA margin in Canada and the U.S. in the fourth quarter of 2018. PPL also ranked first in the same period in 2017.

PPL had a recurring EBITDA margin of 54.0% of recurring revenues, an increase from 53.2% a year ago, according to S&P Global Market Intelligence data. The company reported lower earnings from ongoing operations in the 2018 fourth quarter, which still beat the consensus estimate.

PPL sees a potential upside for its U.K. subsidiary, Western Power Distribution PLC, as British regulators plan to finalize the next round of price controls for electricity network operators. The company said its U.K. regulated segment contributed $1.36 per share to PPL's $2.40 per share earnings result in 2018.

NextEra, which came in second, had a recurring EBITDA margin of 52.2% of recurring revenues in the 2018 fourth quarter, compared to 51.9% in the prior-year period.

The company, which officially confirmed its bid for South Carolina utility Santee Cooper in January, reported higher adjusted earnings of $1.49 per share in the fourth quarter of 2018. The result, however, missed the consensus estimate.

"Dating back to 2005, we have now delivered compound annual growth in adjusted earnings per share of more than 8.5 percent. In 2018, we delivered a total shareholder return of more than 14 percent, outperforming the S&P 500 Index by nearly 19 percent and the S&P 500 Utilities Index by more than 10 percent," NextEra Energy Chairman Jim Robo said in the earnings release.

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Dominion Energy Inc. ranked third on the list with a recurring EBITDA margin of 50.6%, compared to 49.4% in the same period of 2017. During the 2018 fourth quarter, Dominion completed its $8 billion debt reduction plan with the sale of its 50% interest in the Blue Racer Midstream LLC joint venture.

Ohio Edison Co., a subsidiary of FirstEnergy Corp., saw the largest positive year-over-year change of 5 percentage points. The utility had a recurring EBITDA margin of 38.3% of recurring revenues in the 2018 fourth quarter, compared with 33% in the prior-year period.

On the opposite end, Berkshire Hathaway Energy subsidiary Nevada Power Co. recorded the largest negative change of 4 percentage points. Nevada Power had a recurring EBITDA margin of 36.4% of recurring revenues, compared with 40.2% a year ago.

Berkshire Hathaway also had a lower recurring EBITDA margin of 36.5% of recurring revenues, compared with 37.2% in the year-ago quarter.

Duke Energy Corp., Pinnacle West Capital Corp. and El Paso Electric Co. were also among companies that saw year-over-year declines in their recurring EBITDA margin.