Deutsche Bank Gives An Update On PPL Corp.; Raises PT

PPL Corp's PPL announced acquisition of Central Networks, E.ON's UK distribution business, should complete the targeted transformation that began in April 2010 with the acquisition of E.ON's Kentucky utilities. Deutsche Bank views the acquisition favorably, given solid accretion and strategic opportunities. Despite a positive view of the transaction, Deutsche Bank maintains its Hold rating based on the upcoming equity issuance and potential concerns over UK earnings power in 2015 and beyond. As discussed previously, Deutsche Bank believes PPL's acquisition of Central Networks (CN) makes strategic sense given PPL's potential ability to bring CN's operational performance closer to that of WPD. PPL also highlighted the strong regulatory model in the UK as a key positive for the acquisition. Deutsche Bank notes that Ofgem is still developing the model for the next cycle, and it believes that there is some risk to earnings in 2015 and beyond. Deutsche Bank is increasing its price target to $28 from $26.50. The price target implies an ~11.7x P/E multiple on our proforma 2013 EPS estimate, a 3% discount to the target regulated utility multiple. Deutsche Bank continues to base its target on a sum-of-the-parts analysis. PPL closed Wednesday at $25.74