PPL Corp. said Wednesday it may book a third-quarter impairment charge related to emissions allowances worth about $100 million after a recent court ruling invalidated the Clean Air Interstate Rule, or CAIR.
In a Form 8-K filed with the Securities and Exchange Commission, the energy and utility holding company said its PPL EnergyPlus LLC unit had purchased additional sulfur dioxide allowances beyond those required under the CAIR acid rain program. The company also had bought annual nitrogen oxide allowances under CAIR's nitrogen oxide program.
Earlier this month, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the Environmental Protection Agency overstepped its authority by instituting CAIR, a key part of President Bush's clean air policies. CAIR included cap-and-trade provisions, which allow companies that exceed emissions caps to buy credits from companies that do not.
PPL said it "now anticipates that all of the annual nitrogen oxide allowances PPL EnergyPlus had purchased may be impaired because the CAIR rule has been vacated and therefore these allowances are no longer required."
The approximately $100 million amount, the combined book value of the emission allowances on June 30, excludes season nitrogen oxide allowances unaffected by the ruling, the company said.
PPL said it is still evaluating the impact of the court's decision and said the allowances may be impaired in the third quarter. The amount of any charge will be based on market prices at the end of the quarter in September, an assessment of the emission allowances PPL expects to consume in the future, and other factors
The company added that the market prices of sulfur dioxide allowances has fallen "dramatically" since the court's decision.
"PPL cannot predict the outcome of the legal proceedings related to the court's decision, what action the EPA will take in response to this decision and the timing of such action, or the ultimate impact on PPL of these proceedings and resulting regulatory and other actions," PPL said.
Shares of the Allentown, Pa., company fell $1.26, or 2.5 percent, to $48.88 in midday trading. So far this year, the stock is down 3 percent.
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