form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2013
OR
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________ to ___________

Commission File
Number
Registrant; State of Incorporation;
Address and Telephone Number
IRS Employer
Identification No.
     
1-11459
PPL Corporation
(Exact name of Registrant as specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA  18101-1179
(610) 774-5151
23-2758192
     
1-32944
PPL Energy Supply, LLC
(Exact name of Registrant as specified in its charter)
(Delaware)
Two North Ninth Street
Allentown, PA  18101-1179
(610) 774-5151
23-3074920
     
1-905
PPL Electric Utilities Corporation
(Exact name of Registrant as specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA  18101-1179
(610) 774-5151
23-0959590
     
333-173665
LG&E and KU Energy LLC
(Exact name of Registrant as specified in its charter)
(Kentucky)
220 West Main Street
Louisville, KY  40202-1377
(502) 627-2000
20-0523163
     
1-2893
Louisville Gas and Electric Company
(Exact name of Registrant as specified in its charter)
(Kentucky)
220 West Main Street
Louisville, KY  40202-1377
(502) 627-2000
61-0264150
     
1-3464
Kentucky Utilities Company
(Exact name of Registrant as specified in its charter)
(Kentucky and Virginia)
One Quality Street
Lexington, KY  40507-1462
(502) 627-2000
61-0247570


 
 
 

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

 
PPL Corporation
Yes  X   
No        
  
 
PPL Energy Supply, LLC
Yes  X   
No        
  
 
PPL Electric Utilities Corporation
Yes  X   
No        
  
 
LG&E and KU Energy LLC
Yes  X   
No        
  
 
Louisville Gas and Electric Company
Yes  X  
No        
  
 
Kentucky Utilities Company
Yes  X   
No        
  

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

 
PPL Corporation
Yes  X   
No        
  
 
PPL Energy Supply, LLC
Yes  X   
No        
  
 
PPL Electric Utilities Corporation
Yes  X   
No        
  
 
LG&E and KU Energy LLC
Yes  X   
No        
  
 
Louisville Gas and Electric Company
Yes  X   
No        
  
 
Kentucky Utilities Company
Yes  X   
No        
  

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

   
Large accelerated
filer
Accelerated
filer
Non-accelerated
filer
Smaller reporting
company
 
PPL Corporation
[ X ]
[     ]
[     ]
[     ]
 
PPL Energy Supply, LLC
[     ]
[     ]
[ X ]
[     ]
 
PPL Electric Utilities Corporation
[     ]
[     ]
[ X ]
[     ]
 
LG&E and KU Energy LLC
[     ]
[     ]
[ X ]
[     ]
 
Louisville Gas and Electric Company
[     ]
[     ]
[ X ]
[     ]
 
Kentucky Utilities Company
[     ]
[     ]
[ X ]
[     ]

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

 
PPL Corporation
Yes        
No  X   
  
 
PPL Energy Supply, LLC
Yes        
No  X   
  
 
PPL Electric Utilities Corporation
Yes        
No  X   
  
 
LG&E and KU Energy LLC
Yes        
No  X   
  
 
Louisville Gas and Electric Company
Yes        
No  X   
  
 
Kentucky Utilities Company
Yes        
No  X   
  

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 
PPL Corporation
Common stock, $0.01 par value, 631,700,409 shares outstanding at July 31, 2013.
     
 
PPL Energy Supply, LLC
PPL Corporation indirectly holds all of the membership interests in PPL Energy Supply, LLC.
     
 
PPL Electric Utilities Corporation
Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at July 31, 2013.
     
 
LG&E and KU Energy LLC
PPL Corporation directly holds all of the membership interests in LG&E and KU Energy LLC.
     
 
Louisville Gas and Electric Company
Common stock, no par value, 21,294,223 shares outstanding and all held by LG&E and KU Energy LLC at July 31, 2013.
     
 
Kentucky Utilities Company
Common stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC at July 31, 2013.

This document is available free of charge at the Investor Center on PPL Corporation's website at www.pplweb.com.  However, information on this website does not constitute a part of this Form 10-Q.

 
 
 

PPL CORPORATION
PPL ENERGY SUPPLY, LLC
PPL ELECTRIC UTILITIES CORPORATION
LG&E AND KU ENERGY LLC
LOUISVILLE GAS AND ELECTRIC COMPANY
KENTUCKY UTILITIES COMPANY

FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2013


Table of Contents

This combined Form 10-Q is separately filed by the following individual registrants:  PPL Corporation, PPL Energy Supply, LLC, PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company.  Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf, and no registrant makes any representation as to information relating to any other registrant, except that information under "Forward-Looking Information" relating to PPL Corporation subsidiaries is also attributed to PPL Corporation and information relating to the subsidiaries of LG&E and KU Energy LLC is also attributed to LG&E and KU Energy LLC.

Unless otherwise specified, references within this Report, individually, to PPL Corporation, PPL Energy Supply, LLC, PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company are references to such entities directly or to one or more of their subsidiaries, as the case may be, the financial results of which are consolidated into such Registrants in accordance with GAAP.  This presentation has been applied where identification of particular subsidiaries is not material to the matter being disclosed, and to conform narrative disclosures to the presentation of financial information on a consolidated basis.
   
Page
     
i 
  
1
  
PART I.  FINANCIAL INFORMATION
    
 
Item 1.  Financial Statements
    
   
PPL Corporation and Subsidiaries
    
     
3
  
     
4
  
     
5
  
     
6
  
     
8
  
   
PPL Energy Supply, LLC and Subsidiaries
    
     
9
  
     
10
  
     
11
  
     
12
  
     
14
  
   
PPL Electric Utilities Corporation and Subsidiaries
    
     
16
  
     
17
  
     
18
  
     
20
  
   
LG&E and KU Energy LLC and Subsidiaries
    
     
22
  
     
23
  
     
24
  
     
26
  

 
 
 


   
Louisville Gas and Electric Company
  
     
28
     
29
     
30
     
32
   
Kentucky Utilities Company
  
     
34
     
35
     
36
     
38
 
Combined Notes to Condensed Financial Statements (Unaudited)
  
   
39
   
39
   
40
   
41
   
42
   
46
   
50
   
54
   
55
   
57
   
71
   
72
   
73
   
81
   
93
   
93
   
93
   
95
   
97
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
  
     
98
     
124
     
138
     
145
     
155
     
163
 
172
 
172
PART II.  OTHER INFORMATION
  
 
173
 
173
 
173
 
173
 
174
176
177
 
183
 
195


 
 
 

GLOSSARY OF TERMS AND ABBREVIATIONS

PPL Corporation and its current and former subsidiaries


Central Networks - collectively Central Networks East plc, Central Networks Limited and certain other related assets and liabilities.  On April 1, 2011, PPL WEM Holdings plc (formerly WPD Investment Holdings Limited) purchased all of the outstanding ordinary share capital of these companies from E.ON AG subsidiaries.  Central Networks West plc (subsequently renamed Western Power Distribution (West Midlands) plc), wholly owned by Central Networks Limited (subsequently renamed WPD Midlands Holdings Limited), and Central Networks East plc (subsequently renamed Western Power Distribution (East Midlands) plc) are British regional electricity distribution utility companies.

KU - Kentucky Utilities Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky.

LG&E - Louisville Gas and Electric Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas in Kentucky.

LKE - LG&E and KU Energy LLC, a subsidiary of PPL and the parent of LG&E, KU and other subsidiaries.  Within the context of this document, references to LKE also relate to the consolidated entity.

LKS - LG&E and KU Services Company, a subsidiary of LKE that provides services for LKE and its subsidiaries.

PPL - PPL Corporation, the parent holding company of PPL Electric, PPL Energy Funding, PPL Capital Funding, LKE and other subsidiaries.

PPL Brunner Island - PPL Brunner Island, LLC, a subsidiary of PPL Generation that owns generating operations in Pennsylvania.

PPL Capital Funding - PPL Capital Funding, Inc., a financing subsidiary of PPL that provides financing for the operations of PPL and certain subsidiaries.

PPL Electric - PPL Electric Utilities Corporation, a public utility subsidiary of PPL engaged in the regulated transmission and distribution of electricity in its Pennsylvania service area and that provides electric supply to retail customers in this area as a PLR.

PPL Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and the parent holding company of PPL Energy Supply, PPL Global and other subsidiaries.

PPL EnergyPlus - PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that markets and trades wholesale and retail electricity and gas, and supplies energy and energy services in competitive markets.

PPL Energy Supply - PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the parent company of PPL Generation, PPL EnergyPlus and other subsidiaries.

PPL Generation - PPL Generation, LLC, a subsidiary of PPL Energy Supply that owns and operates U.S. generating facilities through various subsidiaries.

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Funding that primarily, through its subsidiaries, owns and operates WPD, PPL's regulated electricity distribution businesses in the U.K.

PPL Ironwood - PPL Ironwood, LLC, an indirect subsidiary of PPL Generation that owns generating operations in Pennsylvania.

PPL Martins Creek - PPL Martins Creek, LLC, a subsidiary of PPL Generation that owns generating operations in Pennsylvania.

PPL Montana - PPL Montana, LLC, an indirect subsidiary of PPL Generation that generates electricity for wholesale sales in Montana and the Pacific Northwest.

PPL Montour - PPL Montour, LLC, a subsidiary of PPL Generation that owns generating operations in Pennsylvania.

 
i
 


PPL Services - PPL Services Corporation, a subsidiary of PPL that provides services for PPL and its subsidiaries.

PPL Susquehanna - PPL Susquehanna, LLC, the nuclear generating subsidiary of PPL Generation.

PPL WEM - PPL WEM Holdings plc (formerly WPD Investment Holdings Limited), an indirect, U.K. subsidiary of PPL Global.  PPL WEM indirectly owns both WPD (East Midlands) and WPD (West Midlands).

PPL WW - PPL WW Holdings Limited (formerly Western Power Distribution Holdings Limited), an indirect, U.K. subsidiary of PPL Global.  PPL WW Holdings indirectly owns WPD (South Wales) and WPD (South West).

WPD - refers to PPL WW and PPL WEM and their subsidiaries.

WPD (East Midlands) - Western Power Distribution (East Midlands) plc, a British regional electricity distribution utility company.  The company (formerly Central Networks East plc) was acquired and renamed in April 2011.

WPD Midlands - refers to WPD (East Midlands) and WPD (West Midlands), collectively.

WPD (South Wales) - Western Power Distribution (South Wales) plc, a British regional electricity distribution utility company.

WPD (South West) - Western Power Distribution (South West) plc, a British regional electricity distribution utility company.

WPD (West Midlands) - Western Power Distribution (West Midlands) plc, a British regional electricity distribution utility company.  The company (formerly Central Networks West plc) was acquired and renamed in April 2011.

WKE - Western Kentucky Energy Corp., a subsidiary of LKE that leased certain non-utility generating plants in western Kentucky until July 2009.


Other terms and abbreviations

£ - British pound sterling.

2010 Equity Unit(s) - a PPL equity unit, issued in June 2010, consisting of a 2010 Purchase Contract and, initially, a 5.0% undivided beneficial ownership interest in $1,000 principal amount of PPL Capital Funding 4.625% Junior Subordinated Notes due 2018.

2010 Purchase Contract(s) - a contract that is a component of a 2010 Equity Unit that requires holders to purchase shares of PPL common stock on or prior to July 1, 2013.

2011 Equity Unit(s) - a PPL equity unit, issued in April 2011, consisting of a 2011 Purchase Contract and, initially, a 5.0% undivided beneficial ownership interest in $1,000 principal amount of PPL Capital Funding 4.32% Junior Subordinated Notes due 2019.

2011 Purchase Contract(s) - a contract that is a component of a 2011 Equity Unit that requires holders to purchase shares of PPL common stock on or prior to May 1, 2014.

2012 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2012.

Act 11 - Act 11 of 2012 that became effective on April 16, 2012.  The Pennsylvania legislation authorizes the PUC to approve two specific ratemaking mechanisms:  the use of a fully projected future test year in base rate proceedings and, subject to certain conditions, a DSIC.

Act 129 - Act 129 of 2008 that became effective in October 2008.  The law amends the Pennsylvania Public Utility Code and creates an energy efficiency and conservation program and smart metering technology requirements, adopts new PLR electricity supply procurement rules, provides remedies for market misconduct and makes changes to the existing Alternative Energy Portfolio Standard.

 
ii
 

AEPS - Alternative Energy Portfolio Standard.

AFUDC - Allowance for Funds Used During Construction, the cost of equity and debt funds used to finance construction projects of regulated businesses, which is capitalized as part of construction costs.

AOCI - accumulated other comprehensive income or loss.

ARO - asset retirement obligation.

Baseload generation - includes the output provided by PPL's nuclear, coal, hydroelectric and qualifying facilities.

Basis - when used in the context of derivatives and commodity trading, the commodity price differential between two locations, products or time periods.

CAIR - the EPA's Clean Air Interstate Rule.

Cane Run Unit 7 - a combined-cycle natural gas unit under construction in Kentucky, jointly owned by LG&E and KU, which is expected to provide additional electric generating capacity of 141 MW and 499 MW to LG&E and KU by 2015.

Clean Air Act - federal legislation enacted to address certain environmental issues related to air emissions, including acid rain, ozone and toxic air emissions.

COLA - license application for a combined construction permit and operating license from the NRC for a nuclear plant.

CSAPR - Cross-State Air Pollution Rule.

Customer Choice Act - the Pennsylvania Electricity Generation Customer Choice and Competition Act, legislation enacted to restructure the state's electric utility industry to create retail access to a competitive market for generation of electricity.

Depreciation not normalized - the flow-through income tax impact related to the state regulatory treatment of depreciation-related timing differences.

DPCR4 - Distribution Price Control Review 4, the U.K. 5-year rate review period applicable to WPD that commenced April 1, 2005.

DRIP - Dividend Reinvestment and Direct Stock Purchase Plan.

DSIC - a distribution system improvement charge authorized under Act 11, which is an alternative ratemaking mechanism providing more-timely cost recovery of qualifying distribution system capital expenditures.

DSM - Demand Side Management.  Pursuant to Kentucky Revised Statute 278.285, the KPSC may determine the reasonableness of DSM plans proposed by any utility under its jurisdiction.  Proposed DSM mechanisms may seek full recovery of DSM programs and revenues lost by implementing those programs and/or incentives designed to provide financial rewards to the utility for implementing cost-effective DSM programs.  The cost of such programs shall be assigned only to the class or classes of customers which benefit from the programs.

ECR - Environmental Cost Recovery.  Pursuant to Kentucky Revised Statute 278.183, Kentucky electric utilities are entitled to the current recovery of costs of complying with the Clean Air Act, as amended, and those federal, state or local environmental requirements which apply to coal combustion and by-products from the production of energy from coal.

EEI - Electric Energy, Inc., owns and operates a coal-fired plant and a natural gas facility in southern Illinois.  KU's 20% ownership interest in EEI is accounted for as an equity method investment.

EPA - Environmental Protection Agency, a U.S. government agency.

EPS - earnings per share.

Equity Units - refers collectively to the 2011 and 2010 Equity Units.

ESOP - Employee Stock Ownership Plan.

 
iii
 


Euro - the basic monetary unit among participating members of the European Union.

FERC - Federal Energy Regulatory Commission, the federal agency that regulates, among other things, interstate transmission and wholesale sales of electricity, hydroelectric power projects and related matters.

Fitch - Fitch, Inc., a credit rating agency.

FTRs - financial transmission rights, which are financial instruments established to manage price risk related to electricity transmission congestion that they entitle the holder to receive compensation or require the holder to remit payment for certain congestion-related transmission charges based on the level of congestion between two pricing locations (source and sink).

GAAP - Generally Accepted Accounting Principles in the U.S.

GBP - British pound sterling.

GHG - greenhouse gas(es).

GLT - Gas Line Tracker.  The KPSC approved LG&E's recovery of costs associated with gas service lines, gas risers, leak mitigation, and gas main replacements.  Rate recovery became effective on January 1, 2013.

If-Converted Method - A method applicable for calculating diluted EPS when a company has convertible debt outstanding.  The method is applied as follows: Interest charges (after tax) applicable to the convertible debt shall be added back to net income and the convertible debt shall be assumed to have been converted to equity at the beginning of the period and the resulting common shares shall be included with outstanding shares.  Both adjustments are only done for purposes of calculating diluted EPS.  This method was applied to PPL's Equity Units beginning in the first quarter of 2013.

Intermediate and peaking generation - includes the output provided by PPL's competitive oil- and natural gas-fired units.

Ironwood Acquisition - In April 2012, PPL Ironwood Holdings, LLC, an indirect, wholly owned subsidiary of PPL Energy Supply, completed the acquisition from a subsidiary of The AES Corporation of all of the equity interests of AES Ironwood, L.L.C. (subsequently renamed PPL Ironwood, LLC) and AES Prescott, L.L.C. (subsequently renamed PPL Prescott, LLC), which own and operate, respectively, a natural gas-fired power plant in Lebanon, Pennsylvania.

IRS - Internal Revenue Service, a U.S. government agency.

KPSC - Kentucky Public Service Commission, the state agency that has jurisdiction over the regulation of rates and service of utilities in Kentucky.

LIBOR - London Interbank Offered Rate.

LTIIP - Long Term Infrastructure Improvement Plan.

MATS - Mercury and Air Toxics Standards.

MDEQ - Montana Department of Environmental Quality.

MEIC - Montana Environmental Information Center.

MMBtu - One million British Thermal Units.

Montana Power - The Montana Power Company, a Montana-based company that sold its generating assets to PPL Montana in December 1999.  Through a series of transactions consummated during the first quarter of 2002, Montana Power sold its electricity delivery business to NorthWestern.

Moody's - Moody's Investors Service, Inc., a credit rating agency.

MW - megawatt, one thousand kilowatts.

MWh - megawatt-hour, one thousand kilowatt-hours.

 
iv
 


NDT - PPL Susquehanna's nuclear plant decommissioning trust.

NERC - North American Electric Reliability Corporation.

NorthWestern - NorthWestern Corporation, a Delaware corporation, and successor in interest to Montana Power's electricity delivery business, including Montana Power's rights and obligations under contracts with PPL Montana.

NPDES - National Pollutant Discharge Elimination System.

NPNS - the normal purchases and normal sales exception as permitted by derivative accounting rules.  Derivatives that qualify for this exception receive accrual accounting treatment.

NRC - Nuclear Regulatory Commission, the federal agency that regulates nuclear power facilities.

OCI - other comprehensive income or loss.

Ofgem - Office of Gas and Electricity Markets, the British agency that regulates transmission, distribution and wholesale sales of electricity and related matters.

Opacity - the degree to which emissions reduce the transmission of light and obscure the view of an object in the background.  There are emission regulations that limit the opacity in power plant stack gas emissions.

OVEC - Ohio Valley Electric Corporation, located in Piketon, Ohio, an entity in which LKE indirectly owns an 8.13% interest (consists of LG&E's 5.63% and KU's 2.50% interests), which is accounted for as a cost-method investment.  OVEC owns and operates two coal-fired power plants, the Kyger Creek plant in Ohio and the Clifty Creek plant in Indiana, with combined nameplate capacities of 2,390 MW.

PADEP - the Pennsylvania Department of Environmental Protection, a state government agency.

PJM - PJM Interconnection, L.L.C., operator of the electric transmission network and electric energy market in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

PLR - Provider of Last Resort, the role of PPL Electric in providing default electricity supply to retail customers within its delivery area who have not chosen to select an alternative electricity supplier under the Customer Choice Act.

PP&E - property, plant and equipment.

PUC - Pennsylvania Public Utility Commission, the state agency that regulates certain ratemaking, services, accounting and operations of Pennsylvania utilities.

Purchase Contract(s) - refers collectively to the 2010 and 2011 Purchase Contracts (which are components of the 2010 and 2011 Equity Units.)

RAV - regulatory asset value.  This term is also commonly known as RAB or regulatory asset base.

RECs - renewable energy credits.

Regional Transmission Line Expansion Plan - PJM conducts a long-range Regional Transmission Expansion Planning process that identifies what changes and additions to the grid are needed to ensure future needs are met for both the reliability and the economic performance of the grid.  Under PJM agreements, transmission owners are obligated to build transmission projects that are needed to maintain reliability standards and that are reviewed and approved by the PJM Board.

Registrants - PPL, PPL Energy Supply, PPL Electric, LKE, LG&E and KU, collectively.

Regulation S-X - SEC regulation governing the form and content of and requirements for financial statements required to be filed pursuant to the federal securities laws.

RFC - Reliability First Corporation, one of eight regional entities with delegated authority from NERC that work to safeguard the reliability of the bulk power systems throughout North America.

 
v
 


RMC - Risk Management Committee.

S&P - Standard & Poor's Ratings Services, a credit rating agency.

Sarbanes-Oxley - Sarbanes-Oxley Act of 2002, which sets requirements for management's assessment of internal controls for financial reporting.  It also requires an independent auditor to make its own assessment.

SCR - selective catalytic reduction, a pollution control process for the removal of nitrogen oxide from exhaust gases.

Scrubber - an air pollution control device that can remove particulates and/or gases (primarily sulfur dioxide) from exhaust gases.

SEC - the U.S. Securities and Exchange Commission, a U.S. government agency whose primary mission is to protect investors and maintain the integrity of the securities markets.

SERC - SERC Reliability Corporation, one of eight regional entities with delegated authority from NERC that work to safeguard the reliability of the bulk power systems throughout North America.

SIFMA Index - the Securities Industry and Financial Markets Association Municipal Swap Index.

Smart meter - an electric meter that utilizes smart metering technology.

Smart metering technology - technology that can measure, among other things, time of electricity consumption to permit offering rate incentives for usage during lower cost or demand intervals.  The use of this technology also has the potential to strengthen network reliability.

SMGT - Southern Montana Electric Generation & Transmission Cooperative, Inc., a Montana cooperative and purchaser of electricity under a long-term supply contract with PPL EnergyPlus that was terminated effective April 1, 2012.

SNCR - selective non-catalytic reduction, a pollution control process for the removal of nitrogen oxide from exhaust gases using ammonia.

Spark Spread - a measure of gross margin representing the price of power on a per MWh basis less the equivalent measure of the natural gas cost to produce that power.  This measure is used to describe the gross margin of PPL and its subsidiaries' competitive natural gas-fired generating fleet.  This term is also used to describe a derivative contract in which PPL and its subsidiaries sell power and buy natural gas on a forward basis in the same contract.

Superfund - federal environmental legislation that addresses remediation of contaminated sites; states also have similar statutes.

TC2 - Trimble County Unit 2, a coal-fired plant located in Kentucky with a net summer capacity of 732 MW.  LKE indirectly owns a 75% interest (consists of LG&E's 14.25% and KU's 60.75% interests) in TC2 or 549 MW of the capacity.

Tolling agreement - agreement whereby the owner of an electric generating facility agrees to use that facility to convert fuel provided by a third party into electricity for delivery back to the third party.

VaR - value-at-risk, a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level.

VIE - variable interest entity.

Volumetric risk - the risk that the actual load volumes provided under full-requirement sales contracts could vary significantly from forecasted volumes.

VSCC - Virginia State Corporation Commission, the state agency that has jurisdiction over the regulation of Virginia corporations, including utilities.

 
vi
 

FORWARD-LOOKING INFORMATION

Statements contained in this Form 10-Q concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical fact are "forward-looking statements" within the meaning of the federal securities laws.  Although the Registrants believe that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct.  Forward-looking statements are subject to many risks and uncertainties, and actual results may differ materially from the results discussed in forward-looking statements.  In addition to the specific factors discussed in each Registrant's 2012 Form 10-K and in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q, the following are among the important factors that could cause actual results to differ materially from the forward-looking statements.

·
fuel supply cost and availability;
·
continuing ability to recover fuel costs and environmental expenditures in a timely manner at LG&E and KU, and natural gas supply costs at LG&E;
·
weather conditions affecting generation, customer energy use and operating costs;
·
operation, availability and operating costs of existing generation facilities;
·
the duration of and cost, including lost revenue, associated with scheduled and unscheduled outages at our generating facilities;
·
transmission and distribution system conditions and operating costs;
·
expansion of alternative sources of electricity generation;
·
laws or regulations to reduce emissions of "greenhouse" gases or the physical effects of climate change;
·
collective labor bargaining negotiations;
·
the outcome of litigation against the Registrants and their subsidiaries;
·
potential effects of threatened or actual terrorism, war or other hostilities, cyber-based intrusions or natural disasters;
·
the commitments and liabilities of the Registrants and their subsidiaries;
·
volatility in market demand and prices for energy, capacity, transmission services, emission allowances and RECs;
·
competition in retail and wholesale power and natural gas markets;
·
liquidity of wholesale power markets;
·
defaults by counterparties under energy, fuel or other power product contracts;
·
market prices of commodity inputs for ongoing capital expenditures;
·
capital market conditions, including the availability of capital or credit, changes in interest rates and certain economic indices, and decisions regarding capital structure;
·
stock price performance of PPL;
·
volatility in the fair value of debt and equity securities and its impact on the value of assets in the NDT funds and in defined benefit plans, and the potential cash funding requirements if fair value declines;
·
interest rates and their effect on pension, retiree medical, nuclear decommissioning liabilities and interest payable on certain debt securities;
·
volatility in or the impact of other changes in financial or commodity markets and economic conditions;
·
new accounting requirements or new interpretations or applications of existing requirements;
·
changes in securities and credit ratings;
·
changes in foreign currency exchange rates for British pound sterling;
·
current and future environmental conditions, regulations and other requirements and the related costs of compliance, including environmental capital expenditures, emission allowance costs and other expenses;
·
legal, regulatory, political, market or other reactions to the 2011 incident at the nuclear generating facility at Fukushima, Japan, including additional NRC requirements;
·
changes in political, regulatory or economic conditions in states, regions or countries where the Registrants or their subsidiaries conduct business;
·
receipt of necessary governmental permits, approvals and rate relief;
·
new state, federal or foreign legislation or regulatory developments;
·
the outcome of any rate cases or other cost recovery filings by PPL Electric, LG&E, KU or WPD;
·
the impact of any state, federal or foreign investigations applicable to the Registrants and their subsidiaries and the energy industry;
·
the effect of any business or industry restructuring;
·
development of new projects, markets and technologies;
·
performance of new ventures; and
·
business dispositions or acquisitions and our ability to successfully operate acquired businesses and realize expected benefits from business acquisitions.

 
1
 


Any such forward-looking statements should be considered in light of such important factors and in conjunction with other documents of the Registrants on file with the SEC.

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for the Registrants to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement.  Any forward-looking statement speaks only as of the date on which such statement is made, and the Registrants undertake no obligation to update the information contained in such statement to reflect subsequent developments or information.

 
2
 

PART I.  FINANCIAL INFORMATION
ITEM 1. Financial Statements
                               
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Corporation and Subsidiaries
(Unaudited)
                        
(Millions of Dollars, except share data)
            
                               
         
Three Months Ended
  
Six Months Ended
         
June 30,
  
June 30,
         
2013 
  
2012 
  
2013 
  
2012 
Operating Revenues
                    
 
Utility
  
$
 1,655 
  
$
 1,605 
  
$
 3,605 
  
$
 3,319 
 
Unregulated retail electric and gas
    
 257 
    
 179 
    
 494 
    
 402 
 
Wholesale energy marketing
                        
   
Realized
    
 811 
    
 1,083 
    
 1,787 
    
 2,291 
   
Unrealized economic activity (Note 14)
    
 590 
    
 (458)
    
 (232)
    
 394 
 
Net energy trading margins
    
 
    
 10 
    
 (11)
    
 18 
 
Energy-related businesses
    
 137 
    
 130 
    
 264 
    
 237 
 
Total Operating Revenues
    
 3,450 
    
 2,549 
    
 5,907 
    
 6,661 
                         
Operating Expenses
                        
 
Operation
                        
   
Fuel
    
 441 
    
 411 
    
 970 
    
 835 
   
Energy purchases
                        
     
Realized
    
 572 
    
 787 
    
 1,263 
    
 1,670 
     
Unrealized economic activity (Note 14)
    
 479 
    
 (442)
    
 (155)
    
 149 
   
Other operation and maintenance
    
 698 
    
 739 
    
 1,374 
    
 1,445 
 
Depreciation
    
 286 
    
 271 
    
 570 
    
 535 
 
Taxes, other than income
    
 86 
    
 87 
    
 182 
    
 178 
 
Energy-related businesses
    
 130 
    
 124 
    
 252 
    
 226 
 
Total Operating Expenses
    
 2,692 
    
 1,977 
    
 4,456 
    
 5,038 
                               
Operating Income
    
 758 
    
 572 
    
 1,451 
    
 1,623 
                               
Other Income (Expense) - net
    
 13 
    
 30 
    
 135 
    
 13 
                         
Other-Than-Temporary Impairments
    
 
    
 1 
    
 
    
 1 
                               
Interest Expense
    
 258 
    
 236 
    
 509 
    
 466 
                               
Income from Continuing Operations Before Income Taxes
    
 513 
    
 365 
    
 1,077 
    
 1,169 
                               
Income Taxes
    
 109 
    
 88 
    
 260 
    
 347 
                               
Income from Continuing Operations After Income Taxes
    
 404 
    
 277 
    
 817 
    
 822 
                               
Income (Loss) from Discontinued Operations (net of income taxes)
    
 1 
    
 (6)
    
 1 
    
 (6)
                               
Net Income
    
 405 
    
 271 
    
 818 
    
 816 
                               
Net Income Attributable to Noncontrolling Interests
    
 
    
 
    
 
    
 4 
                               
Net Income Attributable to PPL Shareowners
  
$
 405 
  
$
 271 
  
$
 818 
  
$
 812 
                               
Amounts Attributable to PPL Shareowners:
                        
 
Income from Continuing Operations After Income Taxes
  
$
 404 
  
$
 277 
  
$
 817 
  
$
 818 
 
Income (Loss) from Discontinued Operations (net of income taxes)
    
 1 
    
 (6)
    
 1 
    
 (6)
 
Net Income
  
$
 405 
  
$
 271 
  
$
 818 
  
$
 812 
                               
Earnings Per Share of Common Stock:
                        
 
Income from Continuing Operations After Income Taxes Available to PPL
    
 
 Common Shareowners:
                        
   
Basic
  
$
0.68 
  
$
0.47 
  
$
 1.39 
  
$
1.40 
   
Diluted
  
$
0.63 
  
$
0.47 
  
$
 1.28 
  
$
1.40 
 
Net Income Available to PPL Common Shareowners:
                        
   
Basic
  
$
0.68 
  
$
0.46 
  
$
1.39 
  
$
1.39 
   
Diluted
  
$
0.63 
  
$
0.46 
  
$
1.28 
  
$
1.39 
                               
Dividends Declared Per Share of Common Stock
  
$
0.3675 
  
$
0.36 
  
$
0.735 
  
$
0.72 
                               
Weighted-Average Shares of Common Stock Outstanding (in thousands)
                        
   
Basic
    
 589,834 
    
 579,881 
    
 586,683 
    
579,462 
   
Diluted
    
 664,615 
    
 580,593 
    
 661,263 
    
580,062 
                               
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

 
3
 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
                               
         
Three Months Ended
  
Six Months Ended
         
June 30,
  
June 30,
         
2013 
  
2012 
  
2013 
  
2012 
                               
Net income
  
$
 405 
  
$
 271 
  
$
 818 
  
$
 816 
                               
Other comprehensive income (loss):
                        
Amounts arising during the period - gains (losses), net of tax (expense)
                        
 
benefit:
                        
   
Foreign currency translation adjustments, net of tax of ($1), ($2), ($7), $0
    
 (7)
    
 (179)
    
 (252)
    
 (103)
   
Available-for-sale securities, net of tax of ($2), $8, ($27), ($18)
    
 2 
    
 (7)
    
 25 
    
 17 
   
Qualifying derivatives, net of tax of ($23), $7, ($43), ($43)
    
 24 
    
 2 
    
 86 
    
 80 
   
Equity investees' other comprehensive income (loss), net of
                        
     
tax of $0, $0, $0, $2
    
 
    
 1 
    
 
    
 (3)
   
Defined benefit plans:
                        
     
Net actuarial gain (loss), net of tax of $0, $28, $0, $28
    
 
    
 (85)
    
 
    
 (85)
Reclassifications from AOCI - (gains) losses, net of tax expense
                        
 
(benefit):
                        
   
Available-for-sale securities, net of tax of $0, $1, $1, $1
    
 (1)
    
 (1)
    
 (2)
    
 (6)
   
Qualifying derivatives, net of tax of $22, $84, $57, $159
    
 (36)
    
 (140)
    
 (116)
    
 (274)
   
Defined benefit plans:
                        
     
Prior service costs, net of tax of ($1), ($2), ($2), ($3)
    
 2 
    
 2 
    
 3 
    
 5 
     
Net actuarial loss, net of tax of ($12), ($7), ($25), ($11)
    
 34 
    
 17 
    
 68 
    
 37 
Total other comprehensive income (loss) attributable to PPL
                        
 
Shareowners
    
 18 
    
 (390)
    
 (188)
    
 (332)
                               
Comprehensive income (loss)
    
 423 
    
 (119)
    
 630 
    
 484 
   
Comprehensive income attributable to noncontrolling interests
    
 
    
 
    
 
    
 4 
                               
Comprehensive income (loss) attributable to PPL Shareowners
  
$
 423 
  
$
 (119)
  
$
 630 
  
$
 480 
                               
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

 
4
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
                   
         
Six Months Ended June 30,
         
2013 
  
2012 
Cash Flows from Operating Activities
            
 
Net income
  
$
 818 
  
$
 816 
 
Adjustments to reconcile net income to net cash provided by operating activities
            
   
Depreciation
    
 570 
    
 535 
   
Amortization
    
 113 
    
 88 
   
Defined benefit plans - expense
    
 91 
    
 84 
   
Deferred income taxes and investment tax credits
    
 291 
    
 364 
   
Unrealized (gains) losses on derivatives, and other hedging activities
    
 (11)
    
 (209)
   
Other
    
 50 
    
 25 
 
Change in current assets and current liabilities
            
   
Accounts receivable
    
 (189)
    
 21 
   
Accounts payable
    
 (75)
    
 (126)
   
Unbilled revenues
    
 144 
    
 72 
   
Prepayments
    
 (64)
    
 (97)
   
Counterparty collateral
    
 (61)
    
 57 
   
Taxes
    
 128 
    
 29 
   
Uncertain tax positions
    
 (98)
    
 (4)
   
Accrued interest
    
 (119)
    
 (87)
   
Other
    
 (113)
    
 (67)
 
Other operating activities
            
   
Defined benefit plans - funding
    
 (468)
    
 (493)
   
Other assets
    
 (64)
    
 (16)
   
Other liabilities
    
 4 
    
 (45)
     
Net cash provided by operating activities
    
 947 
    
 947 
Cash Flows from Investing Activities
            
 
Expenditures for property, plant and equipment
    
 (1,797)
    
 (1,309)
 
Ironwood Acquisition, net of cash acquired
    
 
    
 (84)
 
Purchases of nuclear plant decommissioning trust investments
    
 (66)
    
 (85)
 
Proceeds from the sale of nuclear plant decommissioning trust investments
    
 59 
    
 79 
 
Net (increase) decrease in restricted cash and cash equivalents
    
 (17)
    
 54 
 
Other investing activities
    
 (13)
    
 (8)
     
Net cash provided by (used in) investing activities
    
 (1,834)
    
 (1,353)
Cash Flows from Financing Activities
            
 
Issuance of long-term debt
    
 450 
    
 575 
 
Repurchase of common stock
    
 (28)
    
 
 
Issuance of common stock
    
 259 
    
 35 
 
Payment of common stock dividends
    
 (426)
    
 (413)
 
Redemption of preference stock of a subsidiary
    
 
    
 (250)
 
Debt issuance and credit facility costs
    
 (33)
    
 (9)
 
Contract adjustment payments
    
 (48)
    
 (48)
 
Net increase (decrease) in short-term debt
    
 563 
    
 311 
 
Other financing activities
    
 (27)
    
 (10)
     
Net cash provided by (used in) financing activities
    
 710 
    
 191 
Effect of Exchange Rates on Cash and Cash Equivalents
    
 (13)
    
 (6)
Net Increase (Decrease) in Cash and Cash Equivalents
    
 (190)
    
 (221)
Cash and Cash Equivalents at Beginning of Period
    
 901 
    
 1,202 
Cash and Cash Equivalents at End of Period
  
$
 711 
  
$
 981 
                   
                   
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
 
 
5
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
         
June 30,
  
December 31,
         
2013 
  
2012 
Assets
            
                   
Current Assets
            
 
Cash and cash equivalents
  
$
 711 
  
$
 901 
 
Restricted cash and cash equivalents
    
 84 
    
 54 
 
Accounts receivable (less reserve:  2013, $66; 2012, $64)
            
   
Customer
    
 879 
    
 745 
   
Other
    
 129 
    
 79 
 
Unbilled revenues
    
 701 
    
 857 
 
Fuel, materials and supplies
    
 642 
    
 673 
 
Prepayments
    
 198 
    
 166 
 
Price risk management assets
    
 1,334 
    
 1,525 
 
Regulatory assets
    
 34 
    
 19 
 
Other current assets
    
 63 
    
 49 
 
Total Current Assets
    
 4,775 
    
 5,068 
                   
Investments
            
 
Nuclear plant decommissioning trust funds
    
 771 
    
 712 
 
Other investments
    
 47 
    
 47 
 
Total Investments
    
 818 
    
 759 
                   
Property, Plant and Equipment
            
 
Regulated utility plant
    
 25,620 
    
 25,196 
 
Less:  accumulated depreciation - regulated utility plant
    
 4,424 
    
 4,164 
   
Regulated utility plant, net
    
 21,196 
    
 21,032 
 
Non-regulated property, plant and equipment
            
   
Generation
    
 11,594 
    
 11,295 
   
Nuclear fuel
    
 590 
    
 524 
   
Other
    
 758 
    
 726 
 
Less:  accumulated depreciation - non-regulated property, plant and equipment
    
 6,063 
    
 5,942 
   
Non-regulated property, plant and equipment, net
    
 6,879 
    
 6,603 
 
Construction work in progress
    
 2,525 
    
 2,397 
 
Property, Plant and Equipment, net (a)
    
 30,600 
    
 30,032 
                   
Other Noncurrent Assets
            
 
Regulatory assets
    
 1,443 
    
 1,483 
 
Goodwill
    
 3,991 
    
 4,158 
 
Other intangibles
    
 907 
    
 925 
 
Price risk management assets
    
 599 
    
 572 
 
Other noncurrent assets
    
 613 
    
 637 
 
Total Other Noncurrent Assets
    
 7,553 
    
 7,775 
             
Total Assets
  
$
 43,746 
  
$
 43,634 

(a)
At June 30, 2013 and December 31, 2012, includes $416 million and $428 million of PP&E, consisting primarily of "Generation," including leasehold improvements from the consolidation of a VIE that is the owner/lessor of the Lower Mt. Bethel plant.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
 
6
 
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
         
June 30,
  
December 31,
         
2013 
  
2012 
Liabilities and Equity
            
                   
Current Liabilities
            
 
Short-term debt
  
$
 1,206 
  
$
 652 
 
Long-term debt due within one year
    
 751 
    
 751 
 
Accounts payable
    
 1,114 
    
 1,252 
 
Taxes
    
 144 
    
 90 
 
Interest
    
 197 
    
 325 
 
Dividends
    
 218 
    
 210 
 
Price risk management liabilities
    
 887 
    
 1,065 
 
Regulatory liabilities
    
 54 
    
 61 
 
Other current liabilities
    
 971 
    
 1,219 
 
Total Current Liabilities
    
 5,542 
    
 5,625 
                   
Long-term Debt
    
 18,875 
    
 18,725 
                   
Deferred Credits and Other Noncurrent Liabilities
            
 
Deferred income taxes
    
 3,704 
    
 3,387 
 
Investment tax credits
    
 350 
    
 328 
 
Price risk management liabilities
    
 514 
    
 629 
 
Accrued pension obligations
    
 1,551 
    
 2,076 
 
Asset retirement obligations
    
 545 
    
 536 
 
Regulatory liabilities
    
 1,052 
    
 1,010 
 
Other deferred credits and noncurrent liabilities
    
 659 
    
 820 
 
Total Deferred Credits and Other Noncurrent Liabilities
    
 8,375 
    
 8,786 
                   
Commitments and Contingent Liabilities (Notes 5, 6 and 10)
            
                   
Equity
            
 
PPL Shareowners' Common Equity
            
   
Common stock - $0.01 par value (a)
    
 6 
    
 6 
   
Additional paid-in capital
    
 7,195 
    
 6,936 
   
Earnings reinvested
    
 5,863 
    
 5,478 
   
Accumulated other comprehensive loss
    
 (2,128)
    
 (1,940)
   
Total PPL Shareowners' Common Equity
    
 10,936 
    
 10,480 
 
Noncontrolling Interests
    
 18 
    
 18 
 
Total Equity
    
 10,954 
    
 10,498 
                   
Total Liabilities and Equity
  
$
 43,746 
  
$
 43,634 

(a)
780,000 shares authorized; 591,622 and 581,944 shares issued and outstanding at June 30, 2013 and December 31, 2012.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
 
7
 
 
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
       
PPL Shareowners
            
       
Common
                                    
       
 stock
                      
Accumulated
            
       
shares
          
Additional
          
other
    
Non-
      
       
outstanding
    
Common
    
paid-in
    
Earnings
    
comprehensive
    
controlling
      
       
(a)
    
stock
    
capital
    
reinvested
    
loss
    
interests
    
Total
                                       
March 31, 2013 (b)
  
 583,214 
  
$
 6 
  
$
 6,988 
  
$
 5,676 
  
$
 (2,146)
  
$
 18 
  
$
 10,542 
Common stock issued (c)
  
 9,338 
    
 
    
 245 
    
 
    
 
    
 
    
 245 
Common stock repurchased (d)
  
 (930)
    
 
    
 (28)
    
 
    
 
    
 
    
 (28)
Cash settlement of equity forward
                                        
 
agreements (d)
  
 
    
 
    
 (13)
    
 
    
 
    
 
    
 (13)
Stock-based compensation (e)
  
 
    
 
    
 3 
    
 
    
 
    
 
    
 3 
Net income
  
 
    
 
    
 
    
 405 
    
 
    
 
    
 405 
Dividends, dividend equivalents,
                                      
 
 
redemptions and distributions (f)
  
 
    
 
    
 
    
 (218)
    
 
    
 
    
 (218)
Other comprehensive
                                      
 
 
income (loss)
  
 
    
 
    
 
    
 
    
 18 
    
 
    
 18 
June 30, 2013 (b)
  
 591,622 
  
$
 6 
  
$
 7,195 
  
$
 5,863 
  
$
 (2,128)
  
$
 18 
  
$
 10,954 
                                             
December 31, 2012 (b)
  
 581,944 
  
$
 6 
  
$
 6,936 
  
$
 5,478 
  
$
 (1,940)
  
$
 18 
  
$
 10,498 
Common stock issued (c)
  
 10,608 
    
 
    
 282 
    
 
    
 
    
 
    
 282 
Common stock repurchased (d)
  
 (930)
    
 
    
 (28)
    
 
    
 
    
 
    
 (28)
Cash settlement of equity forward
                                        
 
agreements (d)
  
 
    
 
    
 (13)
    
 
    
 
    
 
    
 (13)
Stock-based compensation (e)
  
 
    
 
    
 18 
    
 
    
 
    
 
    
 18 
Net income
  
 
    
 
    
 
    
 818 
    
 
    
 
    
 818 
Dividends, dividend equivalents,
                                        
 
redemptions and distributions (f)
  
 
    
 
    
 
    
 (433)
    
 
    
 
    
 (433)
Other comprehensive
                                        
 
income (loss)
  
 
    
 
    
 
    
 
    
 (188)
    
 
    
 (188)
June 30, 2013 (b)
  
 591,622 
  
$
 6 
  
$
 7,195 
  
$
 5,863 
  
$
 (2,128)
  
$
 18 
  
$
 10,954 
                                             
March 31, 2012
  
 579,520 
  
$
 6 
  
$
 6,862 
  
$
 5,129 
  
$
 (730)
  
$
 268 
  
$
 11,535 
Common stock issued (c)
  
 693 
    
 
    
 18 
    
 
    
 
    
 
    
 18 
Stock-based compensation (e)
  
 
    
 
    
 6 
    
 
    
 
    
 
    
 6 
Net income
  
 
    
 
    
 
    
 271 
    
 
    
 
    
 271 
Dividends, dividend equivalents
                                        
 
redemptions and distributions (f)
  
 
    
 
    
 
    
 (210)
    
 
    
 (250)
    
 (460)
Other comprehensive
                                        
 
income (loss)
  
 
    
 
    
 
    
 
    
 (390)
    
 
    
 (390)
June 30, 2012
  
 580,213 
  
$
 6 
  
$
 6,886 
  
$
 5,190 
  
$
 (1,120)
  
$
 18 
  
$
 10,980 
                                             
December 31, 2011
  
 578,405 
  
$
 6 
  
$
 6,813 
  
$
 4,797 
  
$
 (788)
  
$
 268 
  
$
 11,096 
Common stock issued (c)
  
 1,808 
    
 
    
 50 
    
 
    
 
    
 
    
 50 
Stock-based compensation (e)
  
 
    
 
    
 23 
    
 
    
 
    
 
    
 23 
Net income
  
 
    
 
    
 
    
 812 
    
 
    
 4 
    
 816 
Dividends, dividend equivalents
                                      
 
 
redemptions and distributions (f)
  
 
    
 
    
 
    
 (419)
    
 
    
 (254)
    
 (673)
Other comprehensive
                                        
 
income (loss)
  
 
    
 
    
 
    
 
    
 (332)
    
 
    
 (332)
June 30, 2012
  
 580,213 
  
$
 6 
  
$
 6,886 
  
$
 5,190 
  
$
 (1,120)
  
$
 18 
  
$
 10,980 

(a)
Shares in thousands.  Each share entitles the holder to one vote on any question presented at any shareowners' meeting.
(b)
See Note 18 for disclosure of balances of each component of AOCI.
(c)
Each period includes shares of common stock issued through various stock and incentive compensation plans.  The 2013 periods include the April issuance of shares of common stock.  See Note 7 for additional information.
(d)
See Note 7 for additional information.
(e)
The three and six months ended June 30, 2013 include $8 million and $36 million and the three and six months ended June 30, 2012 include $6 million and $35 million of stock-based compensation expense related to new and existing unvested equity awards.  The three and six months ended June 30, 2013 include $(5) million and $(18) million and the six months ended June 30, 2012 includes $(12) million related primarily to the reclassification from "Stock-based compensation" to "Common stock issued" for the issuance of common stock after applicable equity award vesting periods and tax adjustments related to stock-based compensation.
(f)
"Earnings reinvested" includes dividends and dividend equivalents on PPL common stock and restricted stock units.  "Noncontrolling interests" includes dividends, redemptions and distributions to noncontrolling interests.  In June 2012, PPL Electric redeemed all of its outstanding preference stock at par value, which was classified as noncontrolling interest.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
 
8
 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
            
(Millions of Dollars)
            
                               
         
Three Months Ended
  
Six Months Ended
         
June 30,
  
June 30,
         
2013 
  
2012 
  
2013 
  
2012 
Operating Revenues
                        
 
Wholesale energy marketing
                        
   
Realized
  
$
 811 
  
$
 1,083 
  
$
 1,787 
  
$
 2,291 
   
Unrealized economic activity (Note 14)
    
 590 
    
 (458)
    
 (232)
    
 394 
 
Wholesale energy marketing to affiliate
    
 12 
    
 17 
    
 26 
    
 38 
 
Unregulated retail electric and gas
    
 257 
    
 180 
    
 495 
    
 404 
 
Net energy trading margins
    
 
    
 10 
    
 (11)
    
 18 
 
Energy-related businesses
    
 122 
    
 112 
    
 235 
    
 208 
 
Total Operating Revenues
    
 1,792 
    
 944 
    
 2,300 
    
 3,353 
                               
Operating Expenses
    
 
                  
 
Operation
    
 
                  
   
Fuel
    
 224 
    
 196 
    
 522 
    
 407 
   
Energy purchases
    
 
                  
     
Realized
    
 418 
    
 635 
    
 852 
    
 1,294 
     
Unrealized economic activity (Note 14)
    
 479 
    
 (442)
    
 (155)
    
 149 
   
Energy purchases from affiliate
    
 1 
    
 
    
 2 
    
 1 
   
Other operation and maintenance
    
 270 
    
 294 
    
 505 
    
 549 
 
Depreciation
    
 79 
    
 69 
    
 157 
    
 133 
 
Taxes, other than income
    
 16 
    
 17 
    
 33 
    
 35 
 
Energy-related businesses
    
 118 
    
 109 
    
 228 
    
 201 
 
Total Operating Expenses
    
 1,605 
    
 878 
    
 2,144 
    
 2,769 
                               
Operating Income
    
 187 
    
 66 
    
 156 
    
 584 
                               
Other Income (Expense) - net
    
 12 
    
 6 
    
 16 
    
 11 
                               
Other-Than-Temporary Impairments
    
 
    
 1 
    
 
    
 1 
                               
Interest Expense
    
 46 
    
 43 
    
 92 
    
 80 
                               
Income Before Income Taxes
    
 153 
    
 28 
    
 80 
    
 514 
                               
Income Taxes
    
 67 
    
 9 
    
 32 
    
 186 
                               
Net Income Attributable to PPL Energy Supply Member
  
$
 86 
  
$
 19 
  
$
 48 
  
$
 328 
                               
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
 
 
9
 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
                               
         
Three Months Ended
  
Six Months Ended
         
June 30,
  
June 30,
         
2013 
  
2012 
  
2013 
  
2012 
                               
Net income
  
$
 86 
  
$
 19 
  
$
 48 
  
$
 328 
                               
Other comprehensive income (loss):
                        
Amounts arising during the period - gains (losses), net of tax (expense)
                        
 
benefit:
                        
   
Available-for-sale securities, net of tax of ($2), $8, ($27), ($18)
    
 2 
    
 (7)
    
 25 
    
 17 
   
Qualifying derivatives, net of tax of $0, $5, $0, ($40)
    
 
    
 (9)
    
 
    
 59 
Reclassifications from AOCI - (gains) losses, net of tax expense
                        
 
(benefit):
                        
   
Available-for-sale securities, net of tax of $0, $1, $1, $1
    
 (1)
    
 (1)
    
 (2)
    
 (6)
   
Qualifying derivatives, net of tax of $23, $75, $44, $156
    
 (37)
    
 (108)
    
 (67)
    
 (259)
   
Defined benefit plans: