PPL is looking to sell its U.K.-based utility business and focus on its U.S. operations, company officials announced Monday during a second-quarter earnings call.

CEO Vincent Sorgi said in his presentation that the decision to sell Western Power Distribution (WPD) — the distribution utility for parts of England and Wales — followed a “comprehensive strategic review” by the company’s board of directors.

Sorgi said PPL believes the divestment of WPD will streamline the company and provide more “financial flexibility,” allowing it to concentrate on domestic infrastructure projects and growing clean energy technologies.

“We believe WPD represents the premier asset group with an extremely high-performing management team in the best energy subsector in the U.K., i.e., electric distribution,” Sorgi said. “We are more confident than ever that the road to net-zero carbon emissions in the U.K. will flow through electric distribution. And significant investment will be required in that sector if the U.K. is going to achieve its net-zero goals.”

WPD consists of four distribution network operators serving around 8 million customers in central and southwest England and South Wales. Sorgi said a near-term sale would provide the new owner of WPD the opportunity to affect its business plans for the U.K.’s next five-year price control period, which sets the revenue that electric distribution companies can earn from charges on consumer energy bills.

“The decision to sell WPD is in no way a negative reflection on our WPD team or the WPD business; in fact, it’s quite the opposite,” Sorgi said. “We are extremely proud of the financial and operational results that WPD has achieved over the past two decades, and we are confident they will continue to deliver in the future.”

Sorgi said PPL believed WPD that is undervalued by investors and that its sale price should be “higher than the sum of the parts” incorporated into the company’s stock price. He also said the sale will allow PPL to target an earnings-per-share growth rate “more in line with our U.S. utility peers.”

The company said it expects to begin evaluating offers for WPD’s sale, including deals involving all cash or a combination of cash and U.S. utility assets. PPL has chosen J.P. Morgan Securities to serve as its financial advisor to assist with the sale, intending to announce a deal sometime in the first half of 2021.

Sorgi said PPL has been “very transparent” with its investors that the company would not engage in mergers and acquisitions activities unless they could be completed in a way to create value for shareholders. He said the possibility of a WPD deal provided a perfect opportunity.

Earnings down

CFO Joseph Bergstein Jr. announced net income of $344 million ($0.45/share) for the quarter, a 22% decrease from its earnings of $441 million ($0.60/share) in the same period last year.

The company, however, posted a $83 million ($0.10/share) special-item loss “primarily from unrealized losses on foreign currency economic hedges and certain impacts related to COVID-19.” Adjusted earnings were actually up slightly for the quarter, from $422 million in 2019 to $427 million this year.

Total revenue for the quarter was $1.73 billion, a 3.5% year-over-year dip. PPL maintained its earnings-per-share guidance for 2020 of $2.40 to $2.60.