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Spin-Off Should Stabilize This Energy Company's Earnings

We believe PPL is a good candidate at the right price for a core holding in an income portfolio.

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 PPL (PPL) recently announced plans to spin off its competitive energy business, PPL Energy Supply, and merge it with the generation assets of Riverstone Holdings. The publicly traded company, to be named Talen Energy, will comprise 15,320 megawatts of generation capacity and be the third-largest independent power producer behind NRG Energy (NRG) and Calpine (CPN).

We've increased our PPL fair value estimate to $37 per share from $36 to reflect the incremental value we estimate shareholders will receive for PPL's 65% stake in Talen when incorporating our bullish outlook for earnings from Riverstone's assets.

Andrew Bischof does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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