(Adds Fitch downgrade, updated stock prices.)

 
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PPL Corp.'s (PPL) fourth-quarter net income fell 34% due to lower margins and weaker international results, while fellow electricity producer NiSource Inc. (NI) said its net more than doubled amid a charge from the early extinguishment of debt.

NiSource also projected 2009 earnings below analysts' expectations and cut planned capital spending by at least 20% to $800 million. PPL reiterated its profit view.

"Make no mistake about it," said PPL Chairman and Chief Executive James H. Miller, "2008 was a difficult year, and we expect this very challenging business environment to continue in 2009."

The economic downturn and slumping demand are forcing power providers to cut spending and to ask regulators to allow rates increases. Utilities are especially vulnerable to changes in demand as they base their rates on the expectation that energy sales will increase.

At PPL, the Pennsylvania-based seller of electricity to about four million customers in Pennsylvania and the U.K., posted net income of $277 million, or 74 cents a share, down from $418 million, or $1.12 a share, a year earlier. Excluding gains, operating earnings fell to 46 cents from 60 cents.

Revenue jumped 36% to $2.51 billion as the company recorded another $695 million in revenue from unrealized economic activity such as fuel hedging. In the third quarter, the top line was also boosted by $1.16 billion in similar revenue.

Analysts polled by Thomson Reuters expected earnings of 46 cents on revenue of $1.48 billion.

Earnings in PPL's supply business segment dropped 28% on lower wholesale energy margin amid higher average fuel prices from a year earlier. Generation did increase, though. Profit at the Pennsylvania delivery business rose 10% but dropped 1% internationally

At NiSource, the natural-gas and electricity utility posted net income of $127 million, or 46 cents a share, up from $59.5 million, or 21 cents a share, a year earlier. The debt-extinguishment costs cut prior-year earnings by 20 cents.

Revenue increased 5.5% to $2.37 billion.

Analysts expected earnings of 43 cents on revenue of $2.15 billion.

NiSource's operating profit rose 7.2% at its gas-distribution segment while the electricity business reported a 4.1% increase. The company completed the sale of some of its utilities to Unitil Corp. (UTL) for nearly $200 million during the quarter as it looks to focus more closely on its core regulated businesses.

Later Wednesday, Fitch Ratings cut its credit ratings on the company to the verge of junk status, citing its challenging operating and financial conditions and a potential weakening in credit metrics this year.

The ratings firm, which lowered its issuer default rating on NiSource by one notch to BBB-, also said future earnings will be hurt by increasing pension costs.

NiSource forecast 2009 earnings of $1 to $1.10 a share amid increased pension and interest costs and the economic downturn. Analysts expected $1.16.

Shares of PPL traded recently up 2.2% at $31.22 while NiSource jumped 9% to $10.63.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; kerry.grace@dowjones.com