Power company PPL Corp. (PPL) swung to a second-quarter loss on hedging write-downs and asset sales, while earnings excluding items came in below analysts' expectations.

The Allentown, Penn.-based company also cut its outlook for next year's earnings to $3.10 to $3.50 a share from about $3.60, saying it expected lower margins and a continued price decline. Shares fell 12% on the miss and lowered forecast.

Falling electricity prices and reduced power demand because of the recession are forcing power providers to cut spending. The company has cut some non-union jobs and has begun selling off some non-core assets. In May, the company said it had agreed to sell its Long Island, N.Y., generation business to a unit of Tokyo-based Electric Power Development Co. (9513.TO) for about $135 million and last month PPL signed a pact to sell most of its hydroelectric generation business in Maine for $95 million.

PPL said earnings were also hurt by lower wholesale margins, unfavorable exchange rates and lower domestic electricity sales.

"The combination of a weak economy and mild weather pressured wholesale energy prices and energy demand," Chairman and Chief Executive James Miller said.

PPL, with about 4 million customers in Pennsylvania and the U.K., posted a loss of $7 million, or 2 cents a share, compared with year-earlier income of $190 million, or 50 cents a share, a year earlier. Excluding items such as the hedging and divestiture impacts, earnings in the latest quarter would have been 32 cents. Analysts surveyed by Thomson Reuters expected 40 cents.

Revenue increased 65% to $1.67 billion on realized hedging gains.

PPL's supply business' earnings fell 65% in the second quarter on lower marketing and trading margins in the eastern U.S. and higher average fuel prices, while the Pennsylvania delivery business posted a 38% decline in earnings on lower delivery revenue.

Miller said that 98% of the company's baseload generation is hedged for 2010, adding this would lower the company's expectations for its marketing and trading business.

"Given the significant economic uncertainty, challenging market conditions and lower regional customer demand for electricity, we took aggressive action to further lower our 2010 earnings risk," Miller said in a press release.

Shares of PPL were recently down $4.01 at $29.97, and are down 34% from the 52-week high hit last August.

-By Kerry Grace Benn and Mark Long, Dow Jones Newswires; 212-416-2353; kerry.benn@dowjones.com