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  • December 2001 (Revised April 2003)
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Financing PPL Corporation's Growth Strategy

By: Benjamin C. Esty and Carrie Ferman
  • Format:Print
  • | Pages:25
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Abstract

PPL Corp., an electric utility in Pennsylvania, needs to finance $1 billion of peaking plants as part of its new growth strategy. In February 2001, Steve May, director of finance for PPL's Global Division, is responsible for recommending a finance plan. After considering all the options, May decides that a synthetic lease is the best option, but he must decide whether to recommend a traditional or a limited recourse synthetic lease and how to structure the specific terms. The limited synthetic lease, in contrast to the traditional structure, requires a smaller corporate guarantee on the assets and has greater off-credit treatment, which is important given the company's growth strategy and limited debt capacity. However, finding investors willing to accept greater project risk will cost more and take more time. Timing is an issue for May because if he doesn't close the financing within the next two months, PPL will lose a valuable option to buy turbines for its peaking plants. Failure to exercise the option could delay the company's construction schedule, something PPL wants to avoid given the nationwide race to build new generating plants.

Keywords

Financial Management; Financial Instruments; Project Finance; Financial Strategy; Corporate Finance; Leasing

Citation

Esty, Benjamin C., and Carrie Ferman. "Financing PPL Corporation's Growth Strategy." Harvard Business School Case 202-045, December 2001. (Revised April 2003.)
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About The Author

Benjamin C. Esty

Finance
→More Publications

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More from the Authors
  • Bespoken Spirits: Disrupting Distilling By: Benjamin C. Esty and Daniel Fisher
  • Tempur Sealy International (A, B & C) By: Benjamin C. Esty and Daniel Fisher
  • MTN: Unlocking Value While Driving Socioeconomic Progress By: Benjamin C. Esty, Pippa Tubman Armerding and Dilyana Karadzhova Botha
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