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 September 30, 2014
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, 665,072,010 shares outstanding at October 31, 2014.
     
 
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 October 31, 2014.
     
 
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 October 31, 2014.
     
 
Kentucky Utilities Company
Common stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC at October 31, 2014.

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 SEPTEMBER 30, 2014


Table of Contents
 
This combined Form 10-Q is separately filed by the following Registrants in their individual capacity:  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 subsidiaries of PPL Corporation 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 in 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 subsidiaries 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
   
44
   
49
   
51
   
53
   
55
   
69
   
71
   
71
   
78
   
92
   
92
   
93
   
94
   
96
 
Item 2.  Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
  
   
98
     
98
     
100
     
101
       
101
       
102
       
103
   
107
     
108
     
119
     
122
     
124
     
126
     
128
   
130
     
130
     
137
     
140
     
141
     
141
     
141
   
144
   
144
 
145
 
145
 
 
 
 
PART II.  OTHER INFORMATION
  
 
145
 
145
 
146
 
147
149
150
 
156
 
168

 
 
 



























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GLOSSARY OF TERMS AND ABBREVIATIONS

PPL Corporation and its subsidiaries

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.

LKS - LG&E and KU Services Company, a subsidiary of LKE that provides services to 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.  Debt issued by PPL Capital Funding is guaranteed as to payment by PPL.

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 electricity supply to its 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 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.

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

PPL Susquehanna - PPL Susquehanna, LLC, a subsidiary of PPL Generation that owns a nuclear-powered generating station.

PPL WEM - PPL WEM Holdings Limited, an indirect U.K. subsidiary of PPL Global.

PPL WW - PPL WW Holdings Limited, an indirect U.K. subsidiary of PPL Global.

Registrant(s) - refers to the Registrants named on the cover of this Report (each a "Registrant" and collectively, the "Registrants").

Subsidiary Registrant(s) - Registrants that are direct or indirect wholly owned subsidiaries of PPL:  PPL Energy Supply, PPL Electric, LKE, LG&E and KU.

 
i
 



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.

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.

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 requiring 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 requiring holders to purchase shares of PPL common stock on or prior to May 1, 2014.

2013 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2013.

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 changes to the AEPS.

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.

 
ii
 



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 natural gas combined-cycle unit under construction in Kentucky, jointly owned by LG&E and KU, which is expected to provide additional electric generating capacity of 640 MW (141 MW and 499 MW to LG&E and KU) in 2015.

CCR - Coal Combustion Residuals.  CCRs include fly ash, bottom ash and sulfur dioxide scrubber wastes.

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

COBRA - Consolidated Omnibus Budget Reconciliation Act, which provides individuals the option to temporarily continue employer group health insurance coverage after termination of employment.

CPCN - Certificate of Public Convenience and Necessity.  Authority granted by the KPSC pursuant to Kentucky Revised Statute 278.020 to provide utility service to or for the public or the construction of certain plant, equipment, property or facility for the furnishing of utility service to the public.

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.

DNO - Distribution Network Operator.

DOJ - U.S. Department of Justice.

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

DPCR5 - Distribution Price Control Review 5, the U.K. five-year rate review period applicable to WPD that commenced April 1, 2010.

DRIP - Dividend Reinvestment and Direct Stock Purchase Plan.

DSIC - the 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 costs and revenues lost by implementing DSM 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 that apply to coal combustion wastes 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.

 
iii
 



EPS - earnings per share.

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

ERCOT - the Electric Reliability Council of Texas, operator of the electricity transmission network and electricity energy market in most of Texas.

ESOP - Employee Stock Ownership Plan.

FERC - Federal Energy Regulatory Commission, the U.S. 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 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, known as 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.

IBEW - International Brotherhood of Electrical Workers.

If-Converted Method - A method applied to calculate diluted EPS for a company with outstanding convertible debt.  The method is applied as follows:  Interest charges (after tax) applicable to the convertible debt are added back to net income and  the convertible debt is assumed to have been converted to equity at the beginning of the period, and the resulting common shares are treated as outstanding shares.  Both adjustments are made only for purposes of calculating diluted EPS.  This method was applied in 2013 and 2014 to PPL's Equity Units prior to settlement.

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

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

ISO – Independent System Operator.

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.

 
iv
 



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

MPSC - Montana Public Service Commission.

MW - megawatt, one thousand kilowatts.

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

NDT - PPL Susquehanna's nuclear plant decommissioning trust.

NERC - North American Electric Reliability Corporation.

NGCC - Natural gas-fired combined-cycle generating plant.

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.

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

NRC - Nuclear Regulatory Commission, the U.S. 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 of 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 summer rating capacities of 2,120 MW.

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

PJM - PJM Interconnection, L.L.C., operator of the electricity transmission network and electricity 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 within its delivery area to retail customers 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, used within the U.K. regulatory environment, is also commonly known as RAB or regulatory asset base.  RAV is based on historical investment costs at time of privatization, plus subsequent allowed additions less annual regulatory depreciation, and represents the value on which DNOs earn a return in accordance with the regulatory cost of capital.  RAV is indexed to Retail Price Index in order to allow for the effects of inflation.  Since the beginning of DPCR5 in April 2010, RAV additions have been based on a percentage of annual total expenditures.

RCRA - Resource Conservation and Recovery Act of 1976.

 
v
 



RECs - renewable energy credits.

Regional Transmission Expansion Plan - PJM conducts a long-range Regional Transmission Expansion Planning process that identifies changes and additions to the grid necessary 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 assigned to them by the PJM Board.

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 - ReliabilityFirst 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.

RIIO-ED1 - RIIO represents "Revenues = Incentive + Innovation + Outputs - Electricity Distribution."  RIIO-ED1 refers to the initial eight-year rate review period applicable to WPD commencing April 1, 2015.

Riverstone - Riverstone Holdings LLC, a Delaware limited liability company and ultimate parent company of the entities that own the competitive power generation business to be contributed to Talen Energy other than the competitive power generation business to be contributed by virtue of the spinoff of a newly formed parent of PPL Energy Supply.

RJS Power - RJS Power Holdings LLC, a Delaware limited liability company controlled by Riverstone, that owns the competitive power generation business to be contributed, directly or indirectly, by its owners to Talen Energy other than the  competitive power generation business to be contributed by virtue of the spinoff of a newly formed parent of PPL Energy Supply.

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.

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 primarily responsible 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.

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 statute that addresses remediation of contaminated sites; states also have similar statutes.

 
vi
 



Talen Energy - Talen Energy Corporation, the Delaware corporation formed to be the publicly traded company and owner of the competitive generation assets of PPL Energy Supply and certain affiliates of Riverstone.

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 electricity generating facility agrees to use that facility to convert fuel provided by a third party into electricity for delivery back to the third party.

TRA - Tennessee Regulatory Authority, the state agency that has jurisdiction over the regulation of rates and service of utilities in Tennessee.

Treasury Stock Method - A method applied to calculate diluted EPS that assumes any proceeds that could be obtained upon exercise of options and warrants (and their equivalents) would be used to purchase common stock at the average market price during the relevant period.

USWA – United Steelworkers of America.

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.

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.

 
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viii
 

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 that 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 2013 Form 10-K and Form 10-Q for the period ended June 30, 2014 and in "Item 2. Combined 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 or revenue 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, including the PPL Energy Supply spinoff transaction with Riverstone and the anticipated formation of Talen Energy and our ability to realize expected benefits from such business transactions.

 
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
  
Nine Months Ended
         
September 30,
  
September 30,
         
2014
  
2013
  
2014
  
2013
Operating Revenues
                    
 
Utility
  
$
1,860
  
$
1,739
  
$
5,852
  
$
5,344
 
Unregulated wholesale energy
    
1,109
    
913
    
203
    
2,380
 
Unregulated retail energy
    
282
    
263
    
909
    
755
 
Energy-related businesses
    
198
    
159
    
512
    
423
 
Total Operating Revenues
    
3,449
    
3,074
    
7,476
    
8,902
                               
Operating Expenses
                        
 
Operation
                        
   
Fuel
    
452
    
494
    
1,701
    
1,464
   
Energy purchases
    
859
    
555
    
(284)
    
1,663
   
Other operation and maintenance
    
684
    
658
    
2,082
    
2,009
 
Depreciation
    
307
    
284
    
913
    
845
 
Taxes, other than income
    
92
    
86
    
283
    
261
 
Energy-related businesses
    
186
    
151
    
492
    
403
 
Total Operating Expenses
    
2,580
    
2,228
    
5,187
    
6,645
                               
Operating Income
    
869
    
846
    
2,289
    
2,257
                               
Other Income (Expense) - net
    
144
    
(117)
    
38
    
18
                               
Interest Expense
    
258
    
244
    
775
    
747
                               
Income from Continuing Operations Before Income Taxes
    
755
    
485
    
1,552
    
1,528
                               
Income Taxes
    
265
    
81
    
520
    
329
                               
Income from Continuing Operations After Income Taxes
    
490
    
404
    
1,032
    
1,199
                               
Income (Loss) from Discontinued Operations (net of income taxes)
    
7
    
7
    
10
    
30
                               
Net Income
    
497
    
411
    
1,042
    
1,229
                               
Net Income Attributable to Noncontrolling Interests
    
 
    
1
    
 
    
1
                               
Net Income Attributable to PPL Shareowners
  
$
497
  
$
410
  
$
1,042
  
$
1,228
                               
Amounts Attributable to PPL Shareowners:
                        
 
Income from Continuing Operations After Income Taxes
  
$
490
  
$
403
  
$
1,032
  
$
1,198
 
Income (Loss) from Discontinued Operations (net of income taxes)
    
7
    
7
    
10
    
30
 
Net Income
  
$
497
  
$
410
  
$
1,042
  
$
1,228
                               
Earnings Per Share of Common Stock:
                        
 
Income from Continuing Operations After Income Taxes Available to PPL
    
 
 Common Shareowners:
                        
   
Basic
  
$
0.73
  
$
0.64
  
$
1.58
  
$
1.98
   
Diluted
  
$
0.73
  
$
0.61
  
$
1.56
  
$
1.86
 
Net Income Available to PPL Common Shareowners:
                        
   
Basic
  
$
0.74
  
$
0.65
  
$
1.60
  
$
2.03
   
Diluted
  
$
0.74
  
$
0.62
  
$
1.57
  
$
1.90
                               
Dividends Declared Per Share of Common Stock
  
$
0.3725
  
$
0.3675
  
$
1.1175
  
$
1.1025
                               
Weighted-Average Shares of Common Stock Outstanding (in thousands)
                        
   
Basic
    
664,432
    
631,046
    
649,561
    
601,275
   
Diluted
    
666,402
    
664,343
    
665,501
    
662,094

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
  
Nine Months Ended
         
September 30,
  
September 30,
         
2014
  
2013
  
2014
  
2013
                               
Net income
  
$
 497
  
$
 411
  
$
 1,042
  
$
 1,229
                               
Other comprehensive income (loss):
                        
Amounts arising during the period - gains (losses), net of tax (expense)
                        
 
benefit:
                        
   
Foreign currency translation adjustments, net of tax of ($9), $8, ($3), $1
    
 (48)
    
 87
    
 80
    
 (165)
   
Available-for-sale securities, net of tax of $1, ($15), ($20), ($42)
    
 (1)
    
 15
    
 18
    
 40
   
Qualifying derivatives, net of tax of $2, $2, $31, ($41)
    
 (5)
    
 (9)
    
 (52)
    
 77
   
Defined benefit plans:
                        
     
Net actuarial gain (loss), net of tax of ($1), $0, $1, $0
    
 (1)
    
 
    
 (3)
    
 
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
                        
   
Available-for-sale securities, net of tax of $4, $1, $6, $2
    
 (3)
    
 
    
 (5)
    
 (2)
   
Qualifying derivatives, net of tax of $3, $11, $4, $68
    
 (12)
    
 (6)
    
 2
    
 (122)
   
Equity investees' other comprehensive (income) loss, net of
                        
     
tax of $0, $0, $0, $0
    
 
    
 (1)
    
 
    
 (1)
   
Defined benefit plans:
                        
     
Prior service costs, net of tax of ($1), ($1), ($3), ($3)
    
 1
    
 2
    
 3
    
 5
     
Net actuarial loss, net of tax of ($9), ($12), ($26), ($37)
    
 29
    
 33
    
 84
    
 101
Total other comprehensive income (loss) attributable to PPL
                        
 
Shareowners
    
 (40)
    
 121
    
 127
    
 (67)
                               
Comprehensive income (loss)
    
 457
    
 532
    
 1,169
    
 1,162
   
Comprehensive income attributable to noncontrolling interests
    
 
    
 1
    
 
    
 1
Comprehensive income (loss) attributable to PPL Shareowners
  
$
 457
  
$
 531
  
$
 1,169
  
$
 1,161

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)
                   
         
Nine Months Ended September 30,
         
2014
  
2013
Cash Flows from Operating Activities
            
 
Net income
  
$
 1,042
  
$
 1,229
 
Adjustments to reconcile net income to net cash provided by operating activities
            
   
Depreciation
    
 930
    
 859
   
Amortization
    
 168
    
 164
   
Defined benefit plans - expense
    
 71
    
 135
   
Deferred income taxes and investment tax credits
    
 266
    
 301
   
Unrealized (gains) losses on derivatives, and other hedging activities
    
 117
    
 126
   
Adjustment to WPD line loss accrual
    
 65
    
 45
   
Stock compensation expense
    
 52
    
 45
   
Other
    
 38
    
 2
 
Change in current assets and current liabilities
            
   
Accounts receivable
    
 (29)
    
 (79)
   
Accounts payable
    
 (126)
    
 (140)
   
Unbilled revenues
    
 163
    
 197
   
Fuel, materials and supplies
    
 (60)
    
 (14)
   
Counterparty collateral
    
 (18)
    
 (77)
   
Taxes payable
    
 208
    
 76
   
Uncertain tax positions
    
 1
    
 (104)
   
Other
    
 (5)
    
 (89)
 
Other operating activities
            
   
Defined benefit plans - funding
    
 (322)
    
 (505)
   
Other assets
    
 8
    
 (59)
   
Other liabilities
    
 59
    
 111
     
Net cash provided by operating activities
    
 2,628
    
 2,223
Cash Flows from Investing Activities
            
 
Expenditures for property, plant and equipment
    
 (2,878)
    
 (2,768)
 
Expenditures for intangible assets
    
 (74)
    
 (61)
 
Purchases of nuclear plant decommissioning trust investments
    
 (124)
    
 (102)
 
Proceeds from the sale of nuclear plant decommissioning trust investments
    
 112
    
 92
 
Proceeds from the receipt of grants
    
 164
    
 5
 
Net (increase) decrease in restricted cash and cash equivalents
    
 (187)
    
 13
 
Other investing activities
    
 13
    
 33
     
Net cash provided by (used in) investing activities
    
 (2,974)
    
 (2,788)
Cash Flows from Financing Activities
            
 
Issuance of long-term debt
    
 296
    
 862
 
Retirement of long-term debt
    
 (545)
    
 (309)
 
Repurchase of common stock
    
 
    
 (74)
 
Issuance of common stock
    
 1,037
    
 1,409
 
Payment of common stock dividends
    
 (718)
    
 (645)
 
Debt issuance and credit facility costs
    
 (21)
    
 (37)
 
Contract adjustment payments
    
 (21)
    
 (72)
 
Net increase (decrease) in short-term debt
    
 398
    
 (148)
 
Other financing activities
    
 (7)
    
 (20)
     
Net cash provided by (used in) financing activities
    
 419
    
 966
Effect of Exchange Rates on Cash and Cash Equivalents
    
 13
    
 (11)
Net Increase (Decrease) in Cash and Cash Equivalents
    
 86
    
 390
Cash and Cash Equivalents at Beginning of Period
    
 1,102
    
 901
Cash and Cash Equivalents at End of Period
  
$
 1,188
  
$
 1,291

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)
         
September 30,
  
December 31,
         
2014
  
2013
Assets
            
                   
Current Assets
            
 
Cash and cash equivalents
  
$
 1,188
  
$
 1,102
 
Restricted cash and cash equivalents
    
 274
    
 83
 
Accounts receivable (less reserve:  2014, $48; 2013, $64)
            
   
Customer
    
 911
    
 923
   
Other
    
 139
    
 97
 
Unbilled revenues
    
 676
    
 835
 
Fuel, materials and supplies
    
 763
    
 702
 
Prepayments
    
 117
    
 153
 
Deferred income taxes
    
 242
    
 246
 
Price risk management assets
    
 732
    
 942
 
Assets of discontinued operations
    
 647
    
 
 
Regulatory assets
    
 28
    
 33
 
Other current assets
    
 43
    
 37
 
Total Current Assets
    
 5,760
    
 5,153
                   
Investments
            
 
Nuclear plant decommissioning trust funds
    
 911
    
 864
 
Other investments
    
 36
    
 43
 
Total Investments
    
 947
    
 907
                   
Property, Plant and Equipment
            
 
Regulated utility plant
    
 30,169
    
 27,755
 
Less:  accumulated depreciation - regulated utility plant
    
 5,315
    
 4,873
   
Regulated utility plant, net
    
 24,854
    
 22,882
 
Non-regulated property, plant and equipment
            
   
Generation
    
 11,179
    
 11,881
   
Nuclear fuel
    
 624
    
 591
   
Other
    
 869
    
 834
 
Less:  accumulated depreciation - non-regulated property, plant and equipment
    
 6,323
    
 6,172
   
Non-regulated property, plant and equipment, net
    
 6,349
    
 7,134
 
Construction work in progress
    
 3,194
    
 3,071
 
Property, Plant and Equipment, net
    
 34,397
    
 33,087
                   
Other Noncurrent Assets
            
 
Regulatory assets
    
 1,253
    
 1,246
 
Goodwill
    
 4,187
    
 4,225
 
Other intangibles
    
 936
    
 947
 
Price risk management assets
    
 366
    
 337
 
Other noncurrent assets
    
 343
    
 357
 
Total Other Noncurrent Assets
    
 7,085
    
 7,112
                   
Total Assets
  
$
 48,189
  
$
 46,259

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)
         
September 30,
  
December 31,
         
2014
  
2013
Liabilities and Equity
            
                   
Current Liabilities
            
 
Short-term debt
  
$
 1,099
  
$
 701
 
Long-term debt due within one year
    
 235
    
 315
 
Accounts payable
    
 1,208
    
 1,308
 
Taxes
    
 281
    
 114
 
Interest
    
 354
    
 325
 
Dividends
    
 248
    
 232
 
Price risk management liabilities
    
 897
    
 829
 
Regulatory liabilities
    
 92
    
 90
 
Other current liabilities
    
 998
    
 998
 
Total Current Liabilities
    
 5,412
    
 4,912
                   
Long-term Debt
    
 20,522
    
 20,592
                   
Deferred Credits and Other Noncurrent Liabilities
            
 
Deferred income taxes
    
 4,423
    
 3,928
 
Investment tax credits
    
 161
    
 342
 
Price risk management liabilities
    
 377
    
 415
 
Accrued pension obligations
    
 952
    
 1,286
 
Asset retirement obligations
    
 739
    
 687
 
Regulatory liabilities
    
 1,028
    
 1,048
 
Other deferred credits and noncurrent liabilities
    
 601
    
 583
 
Total Deferred Credits and Other Noncurrent Liabilities
    
 8,281
    
 8,289
                   
Commitments and Contingent Liabilities (Notes 6 and 10)
            
                   
Equity
            
   
Common stock - $0.01 par value (a)
    
 7
    
 6
   
Additional paid-in capital
    
 9,388
    
 8,316
   
Earnings reinvested
    
 6,017
    
 5,709
   
Accumulated other comprehensive loss
    
 (1,438)
    
 (1,565)
 
Total Equity
    
 13,974
    
 12,466
                   
Total Liabilities and Equity
  
$
 48,189
  
$
 46,259

(a)
780,000 shares authorized; 664,653 and 630,321 shares issued and outstanding at September 30, 2014 and December 31, 2013.        

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
                                             
June 30, 2014
  
 664,018
  
$
 7
  
$
 9,358
  
$
 5,768
  
$
 (1,398)
    
 
  
$
 13,735
Common stock issued
  
 635
    
 
    
 21
                      
 21
Stock-based compensation
              
 9
                      
 9
Net income
                    
 497
          
 
    
 497
Dividends and dividend
                                      
 
 
equivalents
              
 
    
 (248)
          
 
    
 (248)
Other comprehensive
                                      
 
 
income (loss)
                          
 (40)
          
 (40)
September 30, 2014
  
 664,653
  
$
 7
  
$
 9,388
  
$
 6,017
  
$
 (1,438)
    
 
  
$
 13,974
                                             
December 31, 2013
  
 630,321
  
$
 6
  
$
 8,316
  
$
 5,709
  
$
 (1,565)
    
 
  
$
 12,466
Common stock issued
  
 34,332
    
 1
    
 1,048
                      
 1,049
Stock-based compensation
              
 24
                      
 24
Net income
                    
 1,042
          
 
    
 1,042
Dividends and dividend
                                        
 
equivalents
              
 
    
 (734)
          
 
    
 (734)
Other comprehensive
                                        
 
income (loss)
                          
 127
          
 127
September 30, 2014
  
 664,653
  
$
 7
  
$
 9,388
  
$
 6,017
  
$
 (1,438)
    
 
  
$
 13,974
                                             
June 30, 2013
  
 591,622
  
$
 6
  
$
 7,195
  
$
 5,863
  
$
 (2,128)
  
$
 18
  
$
 10,954
Common stock issued
  
 40,117
    
 
    
 1,151
                      
 1,151
Common stock repurchased
  
 (1,500)
          
 (46)
                      
 (46)
Stock-based compensation
              
 5
                      
 5
Net income
                    
 410
          
 1
    
 411
Dividends and dividend
                                        
 
equivalents
              
 
    
 (233)
          
 (1)
    
 (234)
Other comprehensive
                                        
 
income (loss)
                          
 121
          
 121
September 30, 2013
  
 630,239
  
$
 6
  
$
 8,305
  
$
 6,040
  
$
 (2,007)
  
$
 18
  
$
 12,362
                                             
December 31, 2012
  
 581,944
  
$
 6
  
$
 6,936
  
$
 5,478
  
$
 (1,940)
  
$
 18
  
$
 10,498
Common stock issued
  
 50,725
    
 
    
 1,433
                      
 1,433
Common stock repurchased
  
 (2,430)
          
 (74)
                      
 (74)
Cash settlement of equity forward
                                        
 
agreements
              
 (13)
                      
 (13)
Stock-based compensation
              
 23
                      
 23
Net income
                    
 1,228
          
 1
    
 1,229
Dividends and dividend
                                        
 
equivalents
              
 
    
 (666)
          
 (1)
    
 (667)
Other comprehensive
                                        
 
income (loss)
                          
 (67)
          
 (67)
September 30, 2013
  
 630,239
  
$
 6
  
$
 8,305
  
$
 6,040
  
$
 (2,007)
  
$
 18
  
$
 12,362

(a)
Shares in thousands.  Each share entitles the holder to one vote on any question presented at any shareowners' meeting.   

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
  
Nine Months Ended
         
September 30,
  
September 30,
         
2014
  
2013
  
2014
  
2013
Operating Revenues
                        
 
Unregulated wholesale energy
  
$
1,109
  
$
913
  
$
203
  
$
2,380
 
Unregulated wholesale energy to affiliate
    
20
    
11
    
68
    
37
 
Unregulated retail energy
    
283
    
265
    
913
    
758
 
Energy-related businesses
    
189
    
143
    
469
    
378
 
Total Operating Revenues
    
1,601
    
1,332
    
1,653
    
3,553
                               
Operating Expenses
                        
 
Operation
                        
   
Fuel
    
212
    
258
    
953
    
780
   
Energy purchases
    
708
    
389
    
(893)
    
1,088
   
Other operation and maintenance
    
232
    
232
    
746
    
714
 
Depreciation
    
74
    
75
    
225
    
223
 
Taxes, other than income
    
14
    
14
    
45
    
40
 
Energy-related businesses
    
172
    
138
    
451
    
366
 
Total Operating Expenses
    
1,412
    
1,106
    
1,527
    
3,211
                               
Operating Income
    
189
    
226
    
126
    
342
                               
Other Income (Expense) - net
    
10
    
1
    
23
    
17
                               
Interest Expense
    
31
    
37
    
95
    
123
                               
Income from Continuing Operations Before Income Taxes
    
168
    
190
    
54
    
236
                               
Income Taxes
    
74
    
71
    
16
    
91
                               
Income from Continuing Operations After Income Taxes
    
94
    
119
    
38
    
145
                               
Income (Loss) from Discontinued Operations (net of income taxes)
    
7
    
6
    
10
    
28
                               
Net Income
    
101
    
125
    
48
    
173
                               
Net Income Attributable to Noncontrolling Interests
    
 
    
1
    
 
    
1
                               
Net Income Attributable to PPL Energy Supply Member
  
$
101
  
$
124
  
$
48
  
$
172
                               
Amounts Attributable to PPL Energy Supply Member:
                        
 
Income from Continuing Operations After Income Taxes
  
$
94
  
$
118
  
$
38
  
$
144
 
Income (Loss) from Discontinued Operations (net of income taxes)
    
7
    
6
    
10
    
28
 
Net Income
  
$
101
  
$
124
  
$
48
  
$
172

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
  
Nine Months Ended
         
September 30,
  
September 30,
         
2014
  
2013
  
2014
  
2013
                               
Net income
  
$
 101
  
$
 125
  
$
 48
  
$
 173
                               
Other comprehensive income (loss):
                        
Amounts arising during the period - gains (losses), net of tax (expense)
                        
 
benefit:
                        
   
Available-for-sale securities, net of tax of $1, ($15), ($20), ($42)
    
 (1)
    
 15
    
 18
    
 40
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
                        
   
Available-for-sale securities, net of tax of $4, $1, $6, $2
    
 (3)
    
 
    
 (5)
    
 (2)
   
Qualifying derivatives, net of tax of $2, $19, $11, $63
    
 (5)
    
 (29)
    
 (18)
    
 (96)
   
Defined benefit plans:
                        
     
Prior service costs, net of tax of ($1), ($1), ($2), ($2)
    
 1
    
 1
    
 2
    
 3
     
Net actuarial loss, net of tax of $0, ($2), ($2), ($7)
    
 1
    
 3
    
 4
    
 11
Total other comprehensive income (loss) attributable to