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PPL Unit Completes $350M Reliability Project in the Poconos

Diversified utility PPL Corporation’s PPL unit, PPL Electric Utilities Corporation has completed the Northeast-Pocono Reliability project, located in Poconos, PA. The project will benefit the company’s customers across Lackawanna, Wayne, Pike and Luzerne counties. Notably, this $350 million project began commercial operations much ahead of its scheduled completion in late 2017.

We note that Northeast-Pocono is the second major transmission project completed by PPL Corp following the $648 million Susquehanna-Roseland transmission line which was brought online in early May 2015.

The Northeast-Pocono project covered the construction of three new substations, nearly 60 miles of new 230-kilovolt power lines and other upgrades. It is aimed to ensure grid stability as well as fewer and shorter power outages.

The company is also on track with the construction of a 95-mile transmission line, Project Compass, aimed to improve service reliability for consumers in Northeastern U.S. The project has an estimated capital cost of $500–$600 million.

Long-Term Plans

PPL Corporation is consistently investing in utility infrastructure upgrades and the expansion of its transmission business to improve service reliability and ensure customer retention. The company projects a total capital investment of $16 billion in the 2016–2020 time frame, comprising nearly $3.2–$3.3 billion for each year.

Based on the projected infrastructure spending, the company expects its rate base to grow by $4.3 billion between 2015 and 2018. Moreover, a rate increase approved by Pennsylvania Public Utility Commission is expected to generate additional revenues of $124 million in the first quarter of 2016 at PPL Electric Utilities, which in turn, will be deployed for the company’s modernization initiatives.

Meanwhile, with declining rates of unemployment and creation of new jobs, the U.S. economy is gradually recovering. This is leading to a strong real estate market and boosting the demand for utility services. This spike in demand should continue to benefit utility operators like PPL Corp.

Zacks Rank & Key Picks

PPL Corporation currently carries a Zacks Rank #2 (Buy). A top-ranked peer in the same space is Spark Energy, Inc. SPKE, sporting a Zacks Rank #1 (Strong Buy). Other well-ranked peers include CenterPoint Energy, Inc. CNP and CMS Energy Corp. CMS, carrying same Zacks Rank as PPL Corp.

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