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Brexit Creating Income Opportunity in Unexpected Place

Concern about PPL's exposure to the United Kingdom is overblown, and gives investors a chance at a utility with cash flow clarity.


Andrew Bischof: PPL is a regulated utility with three key segments residing in the U.K., Pennsylvania, and Kentucky. The international regulated delivery segment operates distribution networks providing electricity service to customers in the U.K. The domestic Pennsylvania and Kentucky utilities are involved in regulated electricity generation, transmission, and distribution.

We believe the market is overly concerned about PPL's exposure to the U.K., where we see little impact from the recent Brexit decision. The regulatory construct that sets base revenue for the forward seven years and adjusts for inflation and volumes remains. Management hasn't changed its capital investment plans, which were previously approved by U.K. regulators, leaving the unit's growth prospects unchanged. Management's conservative hedging program should help alleviate currency volatility.

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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