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Good evening. Thanks for inviting me here today to talk about the major changes and growth we’ve had at our company. So, what does “PPL” stand for today? Many things. Reliable service. Hard-working employees. Environmental stewardship. Strong financial condition. National reputation. One thing it no longer stands for is “Pennsylvania Power & Light.” “ PP&L” is no more. Depending on your age, PP&L was your great-grandfather’s electricity company, your grandmother’s electricity company or your parents’ electricity company. The stylish and springy ampersand did its trusty job for the vast majority of our 87-year history. It linked geography to product to benefit. What caused the ampersand to disappear, and what that means for our company, makes for an interesting story. I will share it with you.
In many ways, we have come a long way from the days when we were known as PP&L. Back then, our only customers were in central and eastern Pennsylvania. Yes, we have grown. But we still retain the same values -- a belief in integrity and meeting customer needs. These values have made us one of the most successful electric utility companies in the country.
Today, we have operations on two continents. We generate electricity at power plants in six states in the Northeastern and Western United States. We sell electricity in key energy markets. And we deliver energy to about 4 million customers in the United States and the United Kingdom. The letters “PPL” are easy to remember. They represent our New York Stock Exchange symbol. It's how the investment community and Wall Street have referred to us for many years. People have always known us by the three letters -- PPL -- that we carry with us today around the world. We are proud of our heritage. The trusty ampersand may lurk behind the scenes these days. But it still reminds us of where we’ve come from and who brought us here.
Let’s take just a few minutes now to look at exactly where we’ve come from and who brought us here. In October 2006, Bill Hecht retired as chairman of PPL. Jim Miller, who previously served as the company’s chief operating officer, has assumed the role of chairman, president and chief executive officer. Jim Miller is only the eighth executive to lead us in the company’s history. This amazing statistic explains a lot about the importance of consistency and continuity in our operations. Ed Hall was named the first president of PP&L when the company was chartered in 1920. Hall led us until 1928. During his tenure, we pioneered the use of electric appliances and equipment. We also developed the Lake Wallenpaupack hydroelectric plant and created the well-known recreational lake there. To illustrate our growth since 1926, the power generated from the 44 megawatts at that station was 22 percent of the total power we generated then. Today, that same 44 megawatts is less than 1 percent of the total power we generate. For the 1920s, we were well ahead of our time. We helped to form the world’s first fully integrated power pool, the Pennsylvania-New Jersey Interconnection. Today, PJM operates the largest competitive wholesale electricity market in the world. It moves power to 13 states and the District of Columbia.
John Wise led us through the 1930s, The Great Depression, World War II and into the mid-1940s. During his tenure, we completed the Tower Building, our 23-story headquarters in downtown Allentown. We entered the natural gas business in the 1930s. In 1934, advertising mascot Reddy Kilowatt came onto the scene and remained as our symbol until 1981. Talk about continuity. He’s now immortalized in our symbolic hall of fame right next to the trusty ampersand. Charles Oakes led us as our president from 1945 through 1956 and continued as our chairman until 1967. Oakes presided over an enormous economic expansion following World War II. We added power plants in Pennsylvania, and our generating capacity tripled. Our customer base was nearly doubling as the baby boomers arrived. During these years, we were a major force in diversifying the economy of the anthracite region of Pennsylvania. We encouraged hundred of companies to relocate into this region and helped to create tens of thousands of jobs for local residents. Jack Busby was a key leader of ours from the time he became president in 1957 until his retirement as our chairman in 1979.Under Busby, we added several more large power plants in Pennsylvania, and we began construction of the Susquehanna nuclear power plant near Berwick. More than 5,000 people worked to design, build and test that plant. It remains the largest construction project in our history, and entered us in the nuclear age. During Busby’s tenure, our safety, our energy conservation and our environmental programs also became models for the utility industry nationwide.
Bob Campbell was our leader from 1979 to 1990. Campbell was instrumental in creating national task forces to deal with the Three Mile Island nuclear incident in 1979 at another electric utility. He also brought about the commercial operation of our Susquehanna nuclear power plant in 1983. During the 1980s, we surpassed the 1 million-customer level. Sadly, Campbell’s career with us was cut all too short when he died of liver cancer in June 1990. John Kauffman succeeded Bob Campbell as our leader and served until 1992. Kauffman was an employee of PP&L and a predecessor company for his entire career of over four decades. Tired of hearing about all that continuity yet? He was deeply involved in overseeing the construction and the startup of our Susquehanna nuclear power plant.
Bill Hecht became our president in 1991 and added the roles of chairman and chief executive officer in 1993. Each of Hecht’s predecessors as leaders of our company faced his own unique set of challenges and opportunities, as you have seen. But the 1990s really became the “monster” decade for our company. The federal government started the ball rolling in 1992 by ruling that transmission lines were the equivalent of public highways and that they should be open to any company that wanted to generate electricity – not just traditional utilities. A few years later, Pennsylvania became one of the first states in the country to start electricity deregulation. Our company also led the way, as the first electric utility in Pennsylvania to endorse deregulation. We saw tremendous benefits for customers in this development – and opportunity for our company. In fact, it was the turning point in PPL’s transformation.
Pennsylvania and our company got deregulation right, as few other states have. Every electricity customer in Pennsylvania has the option of choosing his or her electricity supplier. Every electricity customer in Pennsylvania has saved money – a total of more than $5 billion, according to the Pennsylvania Public Utility Commission. Pennsylvania’s electricity supplies and cost are an attraction for new business and industry. And Pennsylvania’s new power plants will be built with investors taking the risks rather than ratepayers. Unfortunately, events in the early part of this decade connected with California and with Enron have complicated the electricity deregulation movement in the United States. I’ll return to this subject in a few minutes to tell you how we’ve used our corporate strategy to avoid some of the pitfalls of deregulation. PPL really does stand apart as a solid organization with a great reputation, thanks in large part to our excellent leadership. We moved decisively in the 1990s and in the current decade to prosper during this period of enormous change. We’ve built a strong business model and a platform for continued success.
For the next few minutes, I’d like to share with you some details of our business model, our business platform and our expansion, both in the U.S. and overseas, over the past dozen years or so. We’ve come a long way since the days of Reddy Kilowatt and the ampersand. In 1994, the trusty ampersand took a step toward semi-retirement when we formed a holding company, called PP&L Resources. It was a parent to the regulated electric utility and to a new, unregulated subsidiary called Power Markets Development Company. We formed this latter company to invest in power projects in the U.S. and overseas. In the year 2000, PP&L Resources became PPL Corporation, and Power Markets Development Company became PPL Global. And the ampersand moved into its much deserved spot in our symbolic PPL hall of fame. Also in the year 2000, we realigned the corporation to legally separate our competitive operations from our regulated operations. This change moved the deregulated businesses of generating electricity and marketing electricity out of the regulated business of distributing or delivering the electricity to homes, businesses and institutions.
Since this realignment in 2000, PPL Corporation continues to have four major business lines: PPL Generation is a deregulated business line. It operates our fleet of power plants in the U.S. These plants are in Pennsylvania, Montana, Maine, Connecticut, New York and Illinois. These power plants run on coal, natural gas and oil, uranium and water. In producing electricity from these fuels, we work very hard to balance our commitment to be good stewards of the environment. PPL Generation sells its output of electricity to another of our deregulated businesses, PPL EnergyPlus. PPL EnergyPlus sells wholesale electricity to other utilities, municipalities, energy marketers and large customers. It also procures the fuel for our power plants. PPL EnergyPlus sells electricity to our deregulated business in Pennsylvania for the overwhelming majority of our customers who choose not to shop around for their electricity. That regulated business, which you all know very well, is PPL Electric Utilities. It delivers electricity and award-winning service to 1.4 million customers in 29 counties of central and eastern Pennsylvania. On a much smaller scale, PPL Gas Utilities provides natural gas to about 76,000 customers in Pennsylvania and Maryland. It also has about 32,000 propane customers in Pennsylvania. Our fourth major business line is PPL Global. You may not know much about PPL Global. It owns and operates locally regulated electricity distribution companies in England and Wales. Combined, these companies serve about 2.6 million customers. We have local managers on the ground running these companies, but we are not passive investors in these companies. I also should mention that we have a specialized unit, called PPL Development Group. It assesses opportunities for us, very selectively, to acquire or to divest businesses or business lines. PPL also has an internal services company to provide a range of support services such as legal, human resources and information technology.
I’d like to spend a minute to talk about our geographic expansion in the U.S., beyond Pennsylvania, since the 1990s. In 1998 and 1999, we purchased coal and hydroelectric plants in Maine and Montana. We followed those purchases in later years with new power plant development projects in Pennsylvania, Connecticut, Illinois and New York State. We’ve also upgraded our turbines to generate additional electricity at our Susquehanna nuclear plant. We are very judicious in our expansion activities. We know when to say “no” and when to retreat tactfully. For example, in late 2001, we were one of the first energy companies in the U.S. to understand the negative implications from the downfall of Enron. We cut back on our expansion plans for domestic power plants at that time. We currently believe that a growing economy needs new electricity-generating capacity in specific regions of the northeastern and western United States. And, as I said earlier, under electricity deregulation, those new power plants would be built with investors taking the risks rather than ratepayers.
Now, I’d like to spend another minute to talk about our international expansion since the 1990s. It’s really easy to envision Reddy Kilowatt feeling right at home in our companies in the United Kingdom. Our experiences in the United Kingdom have been nothing short of spectacular. Following our initial investment in England and Wales in 1996, we have increased our presence there. We are now the sole owner of regulated, and highly successful, electricity distribution businesses in south west England and in South Wales. These businesses are rated tops for customer service and deliver electricity to about 2.6 million people. We made our initial international investment in Latin America in 1995. In the following six years, we first tested the waters with minority investments. And we later gained management control of regulated electric distribution companies in Chile, Bolivia, El Salvador and Brazil. Our most significant international presence in Latin America is in Chile. It is one of the most economically stable and well-governed countries in that region of the world. As with our domestic expansion plans, we know when to retreat tactfully. PPL exited Brazil in 2002. Although the remaining Latin American companies were solid contributors to earnings, PPL was interested in changing its mix of businesses going forward. The regulated electricity delivery operations in Chile, El Salvador and Bolivia were sold in 2007. Our international businesses are part of our diversified business model of energy generation, energy marketing, Pennsylvania energy delivery and international energy delivery. In years when one business line might hit difficult times, another business line can step in and pick up the slack.
At PPL, we are convinced that electricity deregulation continues to be the most efficient way to meet our country’s growing power needs. At PPL, we have anticipated the ongoing value of all of our business lines. Unlike PPL, many of our competitors sold off some of their power plants and some of their other subsidiaries. Some of our competitors have failed. And some have gone bankrupt focusing their corporate strategies too narrowly. We have studied the negative results of these specialized competitors. Ours is a diversified strategy. It has a healthy mix of regulated and unregulated businesses. And it has a healthy mix of domestic and international businesses. Our commitment to integrity also is a very important part of our corporate strategy. The highest possible ethical standards are a way of life at all of the PPL companies. We have developed a comprehensive code of conduct and standards at PPL. We communicate that code to all employees. And we reinforce that code through constant training. And we have a strong reputation on Wall Street for complete, honest and timely financial reporting.
We have met the challenges of change since the early- to mid-1990s and the potentially harmful challenges posed by Enron, California and other developments in the energy industry and the financial markets. We are sharing best practices and learning from one another in the United States and in the United Kingdom. So, we really do have to redefine and constantly re-examine the way we do business. Companies like PPL employ smart people to figure out the future and to adjust business strategies and operations accordingly. Good companies like PPL find the right way to prosper, even when the rules are constantly changing. Our success story that I have shared with you today is one that still is being written by more than 12,000 PPL people on two continents. Together, these are all of the keys to our ongoing success. I know Reddy Kilowatt and the ampersand are nodding in approval from their symbolic sacred spots in our PPL hall of fame. The secret is out. They are both with us still. They’re still inspiring us from behind the scenes. On their behalf, and on behalf of our active employees, I thank you for your continued interest in PPL. I will try to answer your questions now if there are any.
<ul><li>Operations on three continents </li></ul><ul><li>Generating electricity at power plants in the Northeastern and Western United States </li></ul><ul><li>Selling electricity in key U.S. markets </li></ul><ul><li>Delivering energy to customers in the United States, United Kingdom and Latin America </li></ul>PPL now &