|
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 March 31, 2015 |
| 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 |
| 1-905 |
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 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 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 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 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, 668,107,248 shares outstanding at April 30, 2015. | |
| PPL Electric Utilities Corporation | Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at April 30, 2015. | |
| 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 April 30, 2015. | |
| Kentucky Utilities Company | Common stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC at April 30, 2015. |
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 ELECTRIC UTILITIES CORPORATION
LG&E and KU Energy LLC
Louisville Gas and Electric Company
Kentucky Utilities Company
FORM 10-Q
FOR THE QUARTER ENDED March 31, 2015
Table of Contents
This combined Form 10-Q is separately filed by the following Registrants in their individual capacity: PPL Corporation, 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. Beginning in the first quarter of 2015, PPL Energy Supply, LLC is filing a separate Form 10-Q.
Unless otherwise specified, references in this Report, individually, to PPL Corporation, 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.
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 EU Services - PPL EU Services Corporation, a subsidiary of PPL that, beginning in 2015, provides support services and corporate functions such as financial, supply chain, human resources and information technology services primarily to PPL Electric and its affiliates.
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 WPD Ltd - an indirect U.K. subsidiary of PPL Global. PPL WPD Ltd holds a liability for a closed defined benefit pension plan and a receivable with WPD Ltd.
Registrant(s) - refers to the Registrants named on the cover of this Report (each a "Registrant" and collectively, the "Registrants").
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Subsidiary Registrant(s) - Registrants that are direct or indirect wholly owned subsidiaries of PPL: PPL Energy Supply, PPL Electric, LKE, LG&E and KU.
WPD - refers to WPD Ltd and its subsidiaries together with a sister company PPL WPD Ltd.
WPD (East Midlands) - Western Power Distribution (East Midlands) plc, a British regional electricity distribution utility company.
WPD Ltd - Western Power Distribution Limited, an indirect U.K. subsidiary of PPL Global. Its principal indirectly owned subsidiaries are WPD (East Midlands), WPD (South Wales), WPD (South West) and WPD (West Midlands).
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.
2014 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2014 Form 10-K.
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.
Basis - when used in the context of derivatives and commodity trading, the commodity price differential between two locations, products or time periods.
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(s) - Coal Combustion Residual(s). CCRs include fly ash, bottom ash and sulfur dioxide scrubber wastes.
| ii |
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.
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.
DNO - Distribution Network Operator in the U.K.
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 - Edison Electric Institute, the association that represents U.S. investor-owned electric companies.
EPA - Environmental Protection Agency, a U.S. government agency.
EPS - earnings per share.
Equity Unit(s) - a PPL equity unit, issued in April 2011, consisting of a 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.
ERCOT - the Electric Reliability Council of Texas, operator of the electricity transmission network and electricity energy market in most of Texas.
E.W. Brown - a generating station in Kentucky with capacity of 1,594 MW.
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.
| iii |
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.
Holdco - Talen Energy Holdings, Inc., a Delaware Corporation, which was formed for the purposes of the spinoff transaction.
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 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.
Ironwood Facility - a natural gas combined-cycle unit in Lebanon, Pennsylvania with a summer rating of 660 MW.
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.
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.
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.
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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.
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 (RPI) 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, which will continue from April 2015 under RIIO-ED1. RAV is intended to represent expenditures that have a long-term benefit to WPD (similar to capital projects for the U.S. regulated businesses that are generally included in rate base).
RCRA - Resource Conservation and Recovery Act of 1976.
RECs - Renewable Energy Credits.
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." RIIO-ED1 refers to the initial eight-year rate review period applicable to WPD which commenced 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 Generation Holdings LLC, a Delaware limited liability company controlled by Riverstone, that owns the competitive power generation business to be contributed 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.
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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.
Talen Energy - Talen Energy Corporation, the Delaware corporation formed to be the publicly traded company and future owner of the competitive generation assets of PPL Energy Supply and certain affiliates of Riverstone.
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.
Total shareowner return - the change in market value of a share of the Company's common stock plus the value of all dividends paid on a share of the common stock during the applicable performance period, divided by the price of the common stock as of the beginning of the performance period. The price used for purposes of this calculation is the average share price for the 20 trading days at the beginning and end of the applicable period.
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.
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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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 2014 Form 10-K 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; |
| · | the effectiveness of our risk management techniques, including hedging; |
| · | the effect on our operations and ability to comply with new statutory and regulatory requirements related to derivative financial instruments; |
| · | our ability to attract and retain qualified employees; |
| · | 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; |
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| · | development of new projects, markets and technologies; |
| · | performance of new ventures; and |
| · | business dispositions or acquisitions, including the anticipated formation of Talen Energy via the spinoff of PPL Energy Supply and subsequent combination with Riverstone's competitive generation business and our ability to realize expected benefits from such business transactions. |
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.
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The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
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| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||
| PPL Corporation and Subsidiaries | |||||||||
| (Unaudited) | |||||||||
| (Millions of Dollars) | |||||||||
| Three Months Ended March 31, | |||||||||
| 2015 | 2014 | ||||||||
| Net income | $ | 647 | $ | 316 | |||||
| Other comprehensive income (loss): | |||||||||
| Amounts arising during the period - gains (losses), net of tax (expense) benefit: | |||||||||
| Foreign currency translation adjustments, net of tax of ($5), $1 | (66) | 131 | |||||||
| Available-for-sale securities, net of tax of ($6), ($6) | 5 | 5 | |||||||
| Qualifying derivatives, net of tax of $4, $25 | 6 | (46) | |||||||
| Defined benefit plans: | |||||||||
| Net actuarial gain (loss), net of tax of $0, $0 | (1) | ||||||||
| Reclassifications from AOCI - (gains) losses, net of tax expense (benefit): | |||||||||
| Available-for-sale securities, net of tax of $1, $1 | (1) | (1) | |||||||
| Qualifying derivatives, net of tax of $4, ($4) | (17) | 19 | |||||||
| Equity investees' other comprehensive (income) loss, net of | |||||||||
| tax of $1, $0 | (1) | ||||||||
| Defined benefit plans: | |||||||||
| Prior service costs, net of tax of $0, ($1) | 1 | ||||||||
| Net actuarial loss, net of tax of ($13), ($9) | 38 | 27 | |||||||
| Total other comprehensive income (loss) | (37) | 136 | |||||||
| Comprehensive income (loss) | $ | 610 | $ | 452 | |||||
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 4 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 5 |
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) | |||||||||
| March 31, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| Liabilities and Equity | |||||||||
| Current Liabilities | |||||||||
| Short-term debt | $ | 1,595 | $ | 1,466 | |||||
| Long-term debt due within one year | 1,535 | 1,535 | |||||||
| Accounts payable | 1,128 | 1,356 | |||||||
| Taxes | 274 | 230 | |||||||
| Interest | 345 | 314 | |||||||
| Dividends | 249 | 249 | |||||||
| Price risk management liabilities | 1,073 | 1,126 | |||||||
| Regulatory liabilities | 109 | 91 | |||||||
| Other current liabilities | 909 | 1,076 | |||||||
| Total Current Liabilities | 7,217 | 7,443 | |||||||
| Long-term Debt | 18,772 | 18,856 | |||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||
| Deferred income taxes | 4,627 | 4,450 | |||||||
| Investment tax credits | 157 | 159 | |||||||
| Price risk management liabilities | 333 | 252 | |||||||
| Accrued pension obligations | 1,457 | 1,756 | |||||||
| Asset retirement obligations | 739 | 739 | |||||||
| Regulatory liabilities | 987 | 992 | |||||||
| Other deferred credits and noncurrent liabilities | 596 | 589 | |||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 8,896 | 8,937 | |||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||
| Equity | |||||||||
| Common stock - $0.01 par value (a) | 7 | 7 | |||||||
| Additional paid-in capital | 9,480 | 9,433 | |||||||
| Earnings reinvested | 6,860 | 6,462 | |||||||
| Accumulated other comprehensive loss | (2,311) | (2,274) | |||||||
| Total Equity | 14,036 | 13,628 | |||||||
| Total Liabilities and Equity | $ | 48,921 | $ | 48,864 | |||||
| (a) | 780,000 shares authorized; 667,713 and 665,849 shares issued and outstanding at March 31, 2015 and December 31, 2014. |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| 7 |
| (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 |
(THIS PAGE LEFT BLANK INTENTIONALLY.)
| 9 |
| (a) | Net income approximates comprehensive income. |
The
accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| 10 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 11 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 12 |
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| PPL Electric Utilities Corporation and Subsidiaries | |||||||||
| (Unaudited) | |||||||||
| (Millions of Dollars, shares in thousands) | |||||||||
| March 31, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| Liabilities and Equity | |||||||||
| Current Liabilities | |||||||||
| Short-term debt | $ | 85 | |||||||
| Long term debt due within one year | 100 | $ | 100 | ||||||
| Accounts payable | 301 | 325 | |||||||
| Accounts payable to affiliates | 70 | 70 | |||||||
| Taxes | 90 | 85 | |||||||
| Interest | 26 | 34 | |||||||
| Regulatory liabilities | 85 | 76 | |||||||
| Other current liabilities | 80 | 103 | |||||||
| Total Current Liabilities | 837 | 793 | |||||||
| Long-term Debt | 2,503 | 2,502 | |||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||
| Deferred income taxes | 1,497 | 1,483 | |||||||
| Accrued pension obligations | 182 | 212 | |||||||
| Regulatory liabilities | 26 | 18 | |||||||
| Other deferred credits and noncurrent liabilities | 66 | 60 | |||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 1,771 | 1,773 | |||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||
| Equity | |||||||||
| Common stock - no par value (a) | 364 | 364 | |||||||
| Additional paid-in capital | 1,653 | 1,603 | |||||||
| Earnings reinvested | 793 | 750 | |||||||
| Total Equity | 2,810 | 2,717 | |||||||
| Total Liabilities and Equity | $ | 7,921 | $ | 7,785 | |||||
| (a) | 170,000 shares authorized; 66,368 shares issued and outstanding at March 31, 2015 and December 31, 2014. |
The accompanying Notes to Condensed Financial
Statements are an integral part of the financial statements.
| 13 |
| (a) | Shares in thousands. All common shares of PPL Electric stock are owned by PPL. |
The
accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| 14 |
(THIS PAGE LEFT BLANK INTENTIONALLY.)
| 15 |
| (a) | Net income approximates comprehensive income. |
The
accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| 16 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 17 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 18 |
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| LG&E and KU Energy LLC and Subsidiaries | |||||||||
| (Unaudited) | |||||||||
| (Millions of Dollars) | |||||||||
| March 31, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| Liabilities and Equity | |||||||||
| Current Liabilities | |||||||||
| Short-term debt | $ | 484 | $ | 575 | |||||
| Long-term debt due within one year | 900 | 900 | |||||||
| Notes payable with affiliates | 40 | 41 | |||||||
| Accounts payable | 350 | 399 | |||||||
| Accounts payable to affiliates | 3 | 2 | |||||||
| Customer deposits | 52 | 52 | |||||||
| Taxes | 25 | 36 | |||||||
| Price risk management liabilities | 5 | 5 | |||||||
| Price risk management liabilities with affiliates | 122 | 66 | |||||||
| Regulatory liabilities | 24 | 15 | |||||||
| Interest | 60 | 23 | |||||||
| Other current liabilities | 115 | 131 | |||||||
| Total Current Liabilities | 2,180 | 2,245 | |||||||
| Long-term Debt | 3,667 | 3,667 | |||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||
| Deferred income taxes | 1,324 | 1,241 | |||||||
| Investment tax credits | 130 | 131 | |||||||
| Accrued pension obligations | 256 | 305 | |||||||
| Asset retirement obligations | 266 | 274 | |||||||
| Regulatory liabilities | 961 | 974 | |||||||
| Price risk management liabilities | 47 | 43 | |||||||
| Other deferred credits and noncurrent liabilities | 270 | 268 | |||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 3,254 | 3,236 | |||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||
| Member's equity | 4,342 | 4,248 | |||||||
| Total Liabilities and Equity | $ | 13,443 | $ | 13,396 | |||||
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 19 |
The accompanying Notes to Condensed Financial
Statements are an integral part of the financial statements.
| 20 |
(THIS PAGE LEFT BLANK INTENTIONALLY.)
| 21 |
| (a) | Net income equals comprehensive income. |
The
accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| 22 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 23 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 24 |
| CONDENSED BALANCE SHEETS | |||||||||
| Louisville Gas and Electric Company | |||||||||
| (Unaudited) | |||||||||
| (Millions of Dollars, shares in thousands) | |||||||||
| March 31, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| Liabilities and Equity | |||||||||
| Current Liabilities | |||||||||
| Short-term debt | $ | 216 | $ | 264 | |||||
| Long-term debt due within one year | 250 | 250 | |||||||
| Accounts payable | 222 | 240 | |||||||
| Accounts payable to affiliates | 20 | 20 | |||||||
| Customer deposits | 25 | 25 | |||||||
| Taxes | 12 | 19 | |||||||
| Price risk management liabilities | 5 | 5 | |||||||
| Price risk management liabilities with affiliates | 61 | 33 | |||||||
| Regulatory liabilities | 14 | 10 | |||||||
| Interest | 15 | 6 | |||||||
| Other current liabilities | 37 | 42 | |||||||
| Total Current Liabilities | 877 | 914 | |||||||
| Long-term Debt | 1,103 | 1,103 | |||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||
| Deferred income taxes | 735 | 700 | |||||||
| Investment tax credits | 36 | 36 | |||||||
| Accrued pension obligations | 34 | 57 | |||||||
| Asset retirement obligations | 64 | 66 | |||||||
| Regulatory liabilities | 454 | 458 | |||||||
| Price risk management liabilities | 47 | 43 | |||||||
| Other deferred credits and noncurrent liabilities | 110 | 111 | |||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 1,480 | 1,471 | |||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||
| Stockholder's Equity | |||||||||
| Common stock - no par value (a) | 424 | 424 | |||||||
| Additional paid-in capital | 1,521 | 1,521 | |||||||
| Earnings reinvested | 259 | 229 | |||||||
| Total Equity | 2,204 | 2,174 | |||||||
| Total Liabilities and Equity | $ | 5,664 | $ | 5,662 | |||||
| (a) | 75,000 shares authorized; 21,294 shares issued and outstanding at March 31, 2015 and December 31, 2014. |
The accompanying Notes to Condensed Financial
Statements are an integral part of the financial statements.
| 25 |
| (a) | Shares in thousands. All common shares of LG&E stock are owned by LKE. |
The accompanying Notes to Condensed Financial
Statements are an integral part of the financial statements.
| 26 |
(THIS PAGE LEFT BLANK INTENTIONALLY.)
| 27 |
| (a) | Net income approximates comprehensive income. |
The
accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| 28 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 29 |
The accompanying
Notes to Condensed Financial Statements are an integral part of the financial statements.
| 30 |
| CONDENSED BALANCE SHEETS | |||||||||
| Kentucky Utilities Company | |||||||||
| (Unaudited) | |||||||||
| (Millions of Dollars, shares in thousands) | |||||||||
| March 31, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| Liabilities and Equity | |||||||||
| Current Liabilities | |||||||||
| Short-term debt | $ | 193 | $ | 236 | |||||
| Long-term debt due within one year | 250 | 250 | |||||||
| Accounts payable | 114 | 141 | |||||||
| Accounts payable to affiliates | 33 | 47 | |||||||
| Customer deposits | 27 | 27 | |||||||
| Taxes | 13 | 14 | |||||||
| Price risk management liabilities with affiliates | 61 | 33 | |||||||
| Regulatory liabilities | 10 | 5 | |||||||
| Interest | 30 | 11 | |||||||
| Other current liabilities | 48 | 41 | |||||||
| Total Current Liabilities | 779 | 805 | |||||||
| Long-term Debt | 1,841 | 1,841 | |||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||
| Deferred income taxes | 933 | 884 | |||||||
| Investment tax credits | 94 | 95 | |||||||
| Accrued pension obligations | 44 | 59 | |||||||
| Asset retirement obligations | 202 | 208 | |||||||
| Regulatory liabilities | 507 | 516 | |||||||
| Other deferred credits and noncurrent liabilities | 101 | 101 | |||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 1,881 | 1,863 | |||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||
| Stockholder's Equity | |||||||||
| Common stock - no par value (a) | 308 | 308 | |||||||
| Additional paid-in capital | 2,596 | 2,596 | |||||||
| Accumulated other comprehensive income (loss) | (1) | ||||||||
| Earnings reinvested | 350 | 302 | |||||||
| Total Equity | 3,253 | 3,206 | |||||||
| Total Liabilities and Equity | $ | 7,754 | $ | 7,715 | |||||
| (a) | 80,000 shares authorized; 37,818 shares issued and outstanding at March 31, 2015 and December 31, 2014. |
The accompanying Notes to Condensed Financial
Statements are an integral part of the financial statements.
| 31 |
| (a) | Shares in thousands. All common shares of KU stock are owned by LKE. |
The accompanying Notes to Condensed Financial
Statements are an integral part of the financial statements.
| 32 |
Combined Notes to Condensed Financial Statements (Unaudited)
1. Interim Financial Statements
(All Registrants)
Capitalized terms and abbreviations appearing in the unaudited combined notes to condensed financial statements are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for their related activities and disclosures. Within combined disclosures, amounts are disclosed for any Registrant when significant.
The accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation in accordance with GAAP are reflected in the condensed financial statements. All adjustments are of a normal recurring nature, except as otherwise disclosed. Each Registrant's Balance Sheet at December 31, 2014 is derived from that Registrant's 2014 audited Balance Sheet. The financial statements and notes thereto should be read in conjunction with the financial statements and notes contained in each Registrant's 2014 Form 10-K. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015 or other future periods, because results for interim periods can be disproportionately influenced by various factors, developments and seasonal variations.
The classification of certain prior period amounts has been changed to conform to the presentation in the March 31, 2015 financial statements.
(PPL)
"Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income includes the activities of PPL Montana's hydroelectric generating facilities sold in the fourth quarter of 2014. See Note 8 for additional information. The Statements of Cash Flows do not separately report the cash flows of the Discontinued Operations.
2. Summary of Significant Accounting Policies
(All Registrants)
The following accounting policy disclosures represent updates to Note 1 in each Registrant's 2014 Form 10-K and should be read in conjunction with those disclosures.
Accounts Receivable (PPL and PPL Electric)
In accordance with a PUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers (including PPL EnergyPlus) at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. The purchased accounts receivable are initially recorded at fair value using a market approach based on the purchase price paid and are classified as Level 2 in the fair value hierarchy. During the three months ended March 31, 2015, PPL Electric purchased $331 million of accounts receivable from unaffiliated third parties and $93 million from PPL EnergyPlus. During the three months ended March 31, 2014, PPL Electric purchased $362 million of accounts receivable from unaffiliated third parties and $105 million from PPL EnergyPlus.
Depreciation (PPL)
Effective January 1, 2015, after completing a review of the useful lives of its distribution network assets, WPD extended the weighted average useful lives of these assets to 69 years from 55 years. For the three months ended March 31, 2015, this change in useful lives resulted in lower depreciation of $20 million ($16 million after-tax or $0.02 per share).
| 33 |
New Accounting Guidance Adopted (All Registrants)
Reporting of Discontinued Operations
Effective January 1, 2015, the Registrants prospectively adopted accounting guidance that changes the criteria for determining what should be classified as a discontinued operation and the related presentation and disclosure requirements. A discontinued operation may include a component of an entity or a group of components of an entity, or a business activity.
A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results when any of the following occurs: (1) The components of an entity or group of components of an entity meets the criteria to be classified as held for sale, (2) The component of an entity or group of components of an entity is disposed of by sale, or (3) The component of an entity or group of components of an entity is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spinoff).
The initial adoption of this guidance did not have a significant impact on the Registrants but will impact the amounts presented as discontinued operations and will enhance the related disclosure requirements related to future disposals or held for sale classifications.
3. Segment and Related Information
(PPL)
See Note 2 in PPL's 2014 Form 10-K for a discussion of reportable segments and related information.
In June 2014, PPL and PPL Energy Supply, which substantially represents PPL's Supply segment, executed definitive agreements with affiliates of Riverstone to combine their competitive power generation businesses into a new, stand-alone, publicly traded company named Talen Energy. The transaction is expected to occur on June 1, 2015. Upon completion of this transaction, PPL will no longer have a Supply segment. See Note 8 for additional information.
Financial data for the segments and reconciliation to PPL's consolidated results for the periods ended March 31 are:
| Three Months | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Income Statement Data | ||||||||||||||||
| Revenues from external customers | ||||||||||||||||
| U.K. Regulated | $ | 697 | $ | 648 | ||||||||||||
| Kentucky Regulated | 899 | 934 | ||||||||||||||
| Pennsylvania Regulated | 630 | 591 | ||||||||||||||
| Supply (a) | 937 | (982) | ||||||||||||||
| Corporate and Other | 2 | 3 | ||||||||||||||
| Total | $ | 3,165 | $ | 1,194 | ||||||||||||
| Intersegment electric revenues | ||||||||||||||||
| Supply | $ | 9 | $ | 27 | ||||||||||||
| Net Income | ||||||||||||||||
| U.K. Regulated (a) | $ | 375 | $ | 206 | ||||||||||||
| Kentucky Regulated | 109 | 107 | ||||||||||||||
| Pennsylvania Regulated | 87 | 85 | ||||||||||||||
| Supply (a) | 95 | (75) | ||||||||||||||
| Corporate and Other (b) | (19) | (7) | ||||||||||||||
| Total | $ | 647 | $ | 316 | ||||||||||||
| March 31, | December 31, | ||||||
| 2015 | 2014 | ||||||
| Balance Sheet Data | |||||||
| Assets | |||||||
| U.K. Regulated | $ | 16,275 | $ | 16,005 | |||
| Kentucky Regulated | 13,109 | 13,062 | |||||
| Pennsylvania Regulated | 7,921 | 7,785 | |||||
| Supply | 10,631 | 11,025 | |||||
| Corporate and Other (c) | 985 | 987 | |||||
| Total assets | $ | 48,921 | $ | 48,864 | |||
| (a) | Includes unrealized gains and losses from economic activity. See Note 14 for additional information. |
| (b) | 2015 includes most of the transaction and transition costs related to the anticipated spinoff of PPL Energy Supply. See Note 8 for additional information. |
| (c) | Primarily consists of unallocated items, including cash, PP&E and the elimination of inter-segment transactions. |
| 34 |
(PPL)
Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the applicable period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding, increased by incremental shares that would be outstanding if potentially dilutive non-participating securities were converted to common shares as calculated using the Treasury Stock Method or the If-Converted Method, as applicable. Incremental non-participating securities that have a dilutive impact are detailed in the table below.
Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the period ended March 31 used in the EPS calculation are:
| Three Months | |||||||||||||||
| 2015 | 2014 | ||||||||||||||
| Income (Numerator) | |||||||||||||||
| Income from continuing operations after income taxes | $ | 647 | $ | 324 | |||||||||||
| Less amounts allocated to participating securities | 3 | 2 | |||||||||||||
| Income from continuing operations after income taxes available to PPL common shareowners - Basic | 644 | 322 | |||||||||||||
| Plus interest charges (net of tax) related to Equity Units (a) | 9 | ||||||||||||||
| Income from continuing operations after income taxes available to PPL common shareowners - Diluted | $ | 644 | $ | 331 | |||||||||||
| Income (loss) from discontinued operations (net of income taxes) available to PPL common shareowners - Basic | |||||||||||||||
| and Diluted | $ | $ | (8) | ||||||||||||
| Net income | $ | 647 | $ | 316 | |||||||||||
| Less amounts allocated to participating securities | 3 | 2 | |||||||||||||
| Net income available to PPL common shareowners - Basic | 644 | 314 | |||||||||||||
| Plus interest charges (net of tax) related to Equity Units (a) | 9 | ||||||||||||||
| Net income available to PPL common shareowners - Diluted | $ | 644 | $ | 323 | |||||||||||
| Shares of Common Stock (Denominator) | |||||||||||||||
| Weighted-average shares - Basic EPS | 666,974 | 630,749 | |||||||||||||
| Add incremental non-participating securities: | |||||||||||||||
| Share-based payment awards | 1,758 | 1,511 | |||||||||||||
| Equity Units (a) | 31,679 | ||||||||||||||
| Weighted-average shares - Diluted EPS | 668,732 | 663,939 | |||||||||||||
| Basic EPS | |||||||||||||||
| Available to PPL common shareowners: | |||||||||||||||
| Income from continuing operations after income taxes | $ | 0.97 | $ | 0.51 | |||||||||||
| Income (loss) from discontinued operations (net of income taxes) | (0.01) | ||||||||||||||
| Net Income Available to PPL common shareowners | $ | 0.97 | $ | 0.50 | |||||||||||
| Diluted EPS | |||||||||||||||
| Available to PPL common shareowners: | |||||||||||||||
| Income from continuing operations after income taxes | $ | 0.96 | $ | 0.50 | |||||||||||
| Income (loss) from discontinued operations (net of income taxes) | (0.01) | ||||||||||||||
| Net Income Available to PPL common shareowners | $ | 0.96 | $ | 0.49 | |||||||||||
| (a) | In 2014, the If-Converted Method was applied to the Equity Units prior to the March 2014 settlement. |
For the periods ended March 31, PPL issued common stock related to stock-based compensation plans as follows (in thousands):
| Three Months | ||||||||||||||
| 2015 | 2014 | |||||||||||||
| Stock-based compensation plans (a) | 1,445 | 1,096 | ||||||||||||
| DRIP | 419 | |||||||||||||
| (a) | Includes stock options exercised, vesting of performance units, vesting of restricted stock and restricted stock units and conversion of stock units granted to directors. |
For the periods ended March 31, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive.
| 35 |
| Three Months | ||||||||||||
| 2015 | 2014 | |||||||||||
| Stock options | 1,473 | 2,540 | ||||||||||
| Performance units | 146 | |||||||||||
| Restricted stock units | 123 | |||||||||||
Reconciliations of income taxes for the periods ended March 31 are:
| (PPL) | ||||||||||||||||
| Three Months | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Federal income tax on Income from Continuing Operations Before | ||||||||||||||||
| Income Taxes at statutory tax rate - 35% | $ | 320 | $ | 153 | ||||||||||||
| Increase (decrease) due to: | ||||||||||||||||
| State income taxes, net of federal income tax benefit | 25 | 3 | ||||||||||||||
| Valuation allowance adjustments | 3 | |||||||||||||||
| Impact of lower U.K. income tax rates | (62) | (44) | ||||||||||||||
| U.S. income tax on foreign earnings - net of foreign tax credit | (1) | 11 | ||||||||||||||
| Intercompany interest on U.K. financing entities | (8) | (2) | ||||||||||||||
| Other | (9) | (7) | ||||||||||||||
| Total increase (decrease) | (52) | (39) | ||||||||||||||
| Total income taxes | $ | 268 | $ | 114 | ||||||||||||
| (PPL Electric) | ||||||||||||||||
| Three Months | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 51 | $ | 48 | ||||||||||||
| Increase (decrease) due to: | ||||||||||||||||
| State income taxes, net of federal income tax benefit | 10 | 8 | ||||||||||||||
| Other | (2) | (3) | ||||||||||||||
| Total increase (decrease) | 8 | 5 | ||||||||||||||
| Total income taxes | $ | 59 | $ | 53 | ||||||||||||
| (LKE) | ||||||||||||||||
| Three Months | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 68 | $ | 64 | ||||||||||||
| Increase (decrease) due to: | ||||||||||||||||
| State income taxes, net of federal income tax benefit | 7 | 7 | ||||||||||||||
| Valuation allowance adjustments | 3 | |||||||||||||||
| Other | (2) | (2) | ||||||||||||||
| Total increase (decrease) | 8 | 5 | ||||||||||||||
| Total income taxes | $ | 76 | $ | 69 | ||||||||||||
| (LG&E) | ||||||||||||||||
| Three Months | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 30 | $ | 29 | ||||||||||||
| Increase (decrease) due to: | ||||||||||||||||
| State income taxes, net of federal income tax benefit | 3 | 3 | ||||||||||||||
| Other | (2) | |||||||||||||||
| Total increase (decrease) | 3 | 1 | ||||||||||||||
| Total income taxes | $ | 33 | $ | 30 | ||||||||||||
| 36 |
| (KU) | ||||||||||||||||
| Three Months | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 44 | $ | 43 | ||||||||||||
| Increase (decrease) due to: | ||||||||||||||||
| State income taxes, net of federal income tax benefit | 4 | 4 | ||||||||||||||
| Other | (1) | (1) | ||||||||||||||
| Total increase (decrease) | 3 | 3 | ||||||||||||||
| Total income taxes | $ | 47 | $ | 46 | ||||||||||||
In February 2015, PPL and the IRS Appeals division reached a settlement on the amount of PPL's refund from its open audits for the years 1998 - 2011. The settlement was required to be reviewed and approved by the Joint Committee on Taxation (JCT) before it is considered final. In April 2015, PPL was notified that the JCT approved PPL's settlement. Subject to a final determination of interest on the refund, PPL expects to record a tax benefit in the range of $20 million to $30 million in the second quarter of 2015 related to the settlement of previously unrecognized tax benefits.
(All Registrants)
The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.
| PPL | PPL Electric | ||||||||||||
| March 31, | December 31, | March 31, | December 31, | ||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| Current Regulatory Assets: | |||||||||||||
| Environmental cost recovery | $ | 10 | $ | 5 | |||||||||
| Gas supply clause | 1 | 15 | |||||||||||
| Fuel adjustment clause | 4 | 4 | |||||||||||
| Transmission service charge | 6 | $ | 6 | ||||||||||
| Other | 8 | 7 | $ | 3 | 6 | ||||||||
| Total current regulatory assets | $ | 23 | $ | 37 | $ | 3 | $ | 12 | |||||
| Noncurrent Regulatory Assets: | |||||||||||||
| Defined benefit plans | $ | 705 | $ | 720 | $ | 367 | $ | 372 | |||||
| Taxes recoverable through future rates | 317 | 316 | 317 | 316 | |||||||||
| Storm costs | 116 | 124 | 42 | 46 | |||||||||
| Unamortized loss on debt | 76 | 77 | 48 | 49 | |||||||||
| Interest rate swaps | 182 | 122 | |||||||||||
| Accumulated cost of removal of utility plant | 117 | 114 | 117 | 114 | |||||||||
| AROs | 87 | 79 | |||||||||||
| Other | 10 | 10 | |||||||||||
| Total noncurrent regulatory assets | $ | 1,610 | $ | 1,562 | $ | 891 | $ | 897 | |||||
| Current Regulatory Liabilities: | |||||||||||||
| Generation supply charge | $ | 26 | $ | 28 | $ | 26 | $ | 28 | |||||
| Demand side management | 13 | 2 | |||||||||||
| Gas supply clause | 6 | 6 | |||||||||||
| Transmission formula rate | 49 | 42 | 49 | 42 | |||||||||
| Storm damage expense | 7 | 3 | 7 | 3 | |||||||||
| Gas line tracker | 2 | 3 | |||||||||||
| Other | 6 | 7 | 3 | 3 | |||||||||
| Total current regulatory liabilities | $ | 109 | $ | 91 | $ | 85 | $ | 76 | |||||
| Noncurrent Regulatory Liabilities: | |||||||||||||
| Accumulated cost of removal of utility plant | $ | 695 | $ | 693 | |||||||||
| Coal contracts (a) | 49 | 59 | |||||||||||
| Power purchase agreement - OVEC (a) | 90 | 92 | |||||||||||
| Net deferred tax assets | 25 | 26 | |||||||||||
| Act 129 compliance rider | 26 | 18 | $ | 26 | $ | 18 | |||||||
| Defined benefit plans | 16 | 16 | |||||||||||
| Interest rate swaps | 84 | 84 | |||||||||||
| Other | 2 | 4 | |||||||||||
| Total noncurrent regulatory liabilities | $ | 987 | $ | 992 | $ | 26 | $ | 18 | |||||
| 37 |
| LKE | LG&E | KU | |||||||||||||||||
| March 31, | December 31, | March 31, | December 31, | March 31, | December 31, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| Current Regulatory Assets: | |||||||||||||||||||
| Environmental cost recovery | $ | 10 | $ | 5 | $ | 7 | $ | 4 | $ | 3 | $ | 1 | |||||||
| Gas supply clause | 1 | 15 | 1 | 15 | |||||||||||||||
| Fuel adjustment clause | 4 | 4 | 4 | 2 | 2 | ||||||||||||||
| Other | 5 | 1 | 5 | 1 | |||||||||||||||
| Total current regulatory assets | $ | 20 | $ | 25 | $ | 12 | $ | 21 | $ | 8 | $ | 4 | |||||||
| Noncurrent Regulatory Assets: | |||||||||||||||||||
| Defined benefit plans | $ | 338 | $ | 348 | $ | 208 | $ | 215 | $ | 130 | $ | 133 | |||||||
| Storm costs | 74 | 78 | 41 | 43 | 33 | 35 | |||||||||||||
| Unamortized loss on debt | 28 | 28 | 18 | 18 | 10 | 10 | |||||||||||||
| Interest rate swaps | 182 | 122 | 121 | 89 | 61 | 33 | |||||||||||||
| AROs | 87 | 79 | 30 | 28 | 57 | 51 | |||||||||||||
| Other | 10 | 10 | 4 | 4 | 6 | 6 | |||||||||||||
| Total noncurrent regulatory assets | $ | 719 | $ | 665 | $ | 422 | $ | 397 | $ | 297 | $ | 268 | |||||||
| Current Regulatory Liabilities: | ||||||||||||||||||||
| Demand side management | $ | 13 | $ | 2 | $ | 5 | $ | 1 | $ | 8 | $ | 1 | ||||||||
| Gas supply clause | 6 | 6 | 6 | 6 | ||||||||||||||||
| Gas line tracker | 2 | 3 | 2 | 3 | ||||||||||||||||
| Other | 3 | 4 | 1 | 2 | 4 | |||||||||||||||
| Total current regulatory liabilities | $ | 24 | $ | 15 | $ | 14 | $ | 10 | $ | 10 | $ | 5 | ||||||||
| Noncurrent Regulatory Liabilities: | ||||||||||||||||||||
| Accumulated cost of removal | ||||||||||||||||||||
| of utility plant | $ | 695 | $ | 693 | $ | 304 | $ | 302 | $ | 391 | $ | 391 | ||||||||
| Coal contracts (a) | 49 | 59 | 21 | 25 | 28 | 34 | ||||||||||||||
| Power purchase agreement - OVEC (a) | 90 | 92 | 62 | 63 | 28 | 29 | ||||||||||||||
| Net deferred tax assets | 25 | 26 | 24 | 24 | 1 | 2 | ||||||||||||||
| Defined benefit plans | 16 | 16 | 16 | 16 | ||||||||||||||||
| Interest rate swaps | 84 | 84 | 42 | 42 | 42 | 42 | ||||||||||||||
| Other | 2 | 4 | 1 | 2 | 1 | 2 | ||||||||||||||
| Total noncurrent regulatory liabilities | $ | 961 | $ | 974 | $ | 454 | $ | 458 | $ | 507 | $ | 516 | ||||||||
| (a) | These liabilities were recorded as offsets to certain intangible assets that were recorded at fair value upon the acquisition of LKE by PPL. |
U. K. Activities (PPL)
RIIO-ED1
On April 1, 2015, the RIIO-ED1 eight-year price control period commenced for WPD's four DNOs. See "Item 1. Business - Segment Information - U. K. Regulated Segment" of PPL's 2014 Form 10-K for additional information on RIIO-ED1.
Ofgem Review of Line Loss Calculation
In March 2014, Ofgem issued its final decision on the DPCR4 line loss incentives and penalties mechanism. As a result, during the first quarter of 2014 WPD increased its liability by $65 million for over-recovery of line losses with a reduction to "Utility" revenues on the Statement of Income. The liability at March 31, 2015 of $97 million will be refunded to customers from April 1, 2015 through March 31, 2019.
Kentucky Activities (PPL, LKE, LG&E and KU)
Rate Case Proceedings
On November 26, 2014, LG&E and KU filed requests with the KPSC for increases in annual base electricity rates for LG&E's electric and gas operations and KU's electric operations. On April 20, 2015, LG&E and KU, and the other parties to the proceeding, filed a unanimous settlement agreement with the KPSC. Among other things, the proposed settlement provides for increases in the annual revenue requirements associated with KU base electric rates of $125 million and LG&E base gas rates of $7 million. The annual revenue requirement associated with base electric rates at LG&E will not increase. The settlement did not establish a specific return on equity with respect to the base rates, however an authorized 10% return on equity will be utilized in the ECR and GLT mechanisms. The settlement agreement provides for deferred recovery of
| 38 |
costs associated with Green River Units 3 and 4 through their retirement. The new regulatory asset will be amortized over three years. The settlement also provides regulatory asset treatment for the difference between pension expense currently booked in accordance with LG&E and KU's pension accounting policy and such an expense using a 15 year amortization period for actuarial gains and losses. The proposed settlement remains subject to KPSC approval. If approved, the new rates and all elements of the settlement would be effective July 1, 2015.
Pennsylvania Activities (PPL and PPL Electric)
Rate Case Proceeding
On March 31, 2015, PPL Electric filed a request with the PUC for an increase in its annual distribution revenue requirement of approximately $167.5 million. The proposal would result in a rate increase of 3.9% on a total bill basis and is expected to become effective on January 1, 2016. PPL Electric's application includes a request for an authorized return-on-equity of 10.95%. The application is based on a fully projected future test year of January 1, 2016 through December 31, 2016. PPL Electric cannot predict the outcome of this proceeding.
Distribution System Improvement Charge (DSIC)
Act 11 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, the use of a DSIC. Such alternative ratemaking procedures and mechanisms provide opportunity for accelerated cost-recovery and, therefore, are important to PPL Electric as it is in a period of significant capital investment to maintain and enhance the reliability of its delivery system, including the replacement of aging distribution assets.
On March 31, 2015, PPL Electric filed a petition requesting a waiver of the DSIC cap of 5% of billed revenues and approval to increase the maximum allowable DSIC from 5% to 7.5% for service rendered after January 1, 2016. PPL Electric filed the petition concurrently with its 2015 rate case and is requesting that the PUC consolidate these two proceedings. PPL Electric cannot predict the outcome of this proceeding.
Storm Damage Expense Rider (SDER)
In its December 28, 2012 final rate case order, the PUC directed PPL Electric to file a proposed SDER. The SDER is a reconcilable automatic adjustment clause under which PPL Electric annually will compare actual storm costs to storm costs allowed in base rates and refund or recoup any differences from customers. In March 2013, PPL Electric filed its proposed SDER with the PUC and, as part of that filing, requested recovery of the 2012 qualifying storm costs related to Hurricane Sandy. PPL Electric proposed that the SDER become effective January 1, 2013 at a zero rate with qualifying storm costs incurred in 2013 and the 2012 Hurricane Sandy costs included in rates effective January 1, 2014. In April 2014, the PUC issued a final order approving the SDER with a January 1, 2015 effective date and initially including actual storm costs compared to collections for December 2013 through November 2014. As a result, PPL Electric reduced its regulatory liability by $12 million in March 2014. Also, as part of the April 2014 order, PPL Electric was authorized to recover Hurricane Sandy storm damage costs through the SDER of $29 million over a three-year period beginning January 1, 2015.
On June 20, 2014, the Office of Consumer Advocate (OCA) filed a petition with the Commonwealth Court of Pennsylvania requesting that the Court reverse and remand the April 2014 order permitting PPL Electric to establish the SDER. This matter remains pending before the Commonwealth Court. On January 15, 2015, the PUC issued a final order closing an investigation related to an OCA complaint concerning PPL Electric's October 2014 preliminary SDER calculation and modified the effective date of the SDER to February 1, 2015.
Smart Meter Rider (SMR)
Act 129 requires installation of smart meters for new construction, upon the request of consumers and at their cost, or on a depreciation schedule not exceeding 15 years. Under Act 129, EDCs are able to recover the costs of providing smart metering technology. All of PPL Electric's metered customers currently have advanced meters installed at their service locations capable of many of the functions required under Act 129. PPL Electric conducted pilot projects and technical evaluations of its current advanced metering technology and concluded that the current technology does not meet all of the requirements of Act 129. PPL Electric recovered the cost of its evaluations through a cost recovery mechanism, the Smart Meter Rider. In August 2013, PPL Electric filed with the PUC an annual report describing the actions it was taking under its Smart Meter Plan during 2013 and its planned actions for 2014. PPL Electric also submitted revised SMR charges that became effective January 1, 2014. On June 30, 2014, PPL Electric filed its final Smart Meter Plan with the PUC. In that plan, PPL Electric proposes to replace all of its current meters with advanced meters that meet the Act 129 requirements. Full deployment of the new meters is expected to be complete by the end of 2019. The total cost of the project is estimated to
| 39 |
be approximately $450 million. PPL Electric proposes to recover these costs through the SMR which the PUC previously has approved for recovery of such costs. On April 30, 2015, the Administrative Law Judge assigned by the PUC to review PPL Electric's Smart Meter Plan issued a recommended decision approving the plan with minor modifications. The recommended decision is subject to final approval by and remains pending before the PUC.
Federal Matters
FERC Wholesale Formula Rates (LKE and KU)
In September 2013, KU filed an application with the FERC to adjust the formula rate under which KU provides wholesale requirements power sales to 12 municipal customers. Among other changes, the application requests an amended formula whereby KU would charge cost-based rates with a subsequent true-up to actual costs, replacing the current formula which does not include a true-up. KU's application proposed an authorized return on equity of 10.7%. Certain elements, including the new formula rate, became effective April 23, 2014, subject to refund. In April 2014, nine municipalities submitted notices of termination, under the original notice period provisions, to cease taking power under the wholesale requirements contracts. Such terminations are to be effective in 2019, except in the case of one municipality with a 2017 effective date. In addition, a tenth municipality which has a previously settled termination date of 2016 has given notice that it will transfer service in June 2015. In July 2014, KU agreed on settlement terms with the two municipal customers that did not provide termination notices and filed the settlement proposal with the FERC for its approval. In August 2014, the FERC issued an order on the interim settlement agreement allowing the proposed rates to become effective pending a final order. If approved, the settlement agreement will resolve the rate case with respect to these two municipalities, including an authorized return on equity of 10% or the return on equity awarded to other parties in this case, whichever is lower. Also in July 2014, KU made a contractually required filing with the FERC that addressed certain rate recovery matters affecting the nine terminating municipalities during the remaining term of their contracts. KU and the terminating municipalities continue settlement discussions in this proceeding. KU cannot currently predict the outcome of its FERC applications regarding its wholesale power agreements with the municipalities.
Credit Arrangements and Short-term Debt
(All Registrants)
The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, the credit facilities and commercial paper programs of PPL Electric, LKE, LG&E and KU also apply to PPL and the credit facilities and commercial paper programs of LG&E and KU also apply to LKE. The amounts borrowed below are recorded as "Short-term debt" on the Balance Sheets. The following credit facilities were in place at:
| March 31, 2015 | December 31, 2014 | |||||||||||||||||||||||||
| Letters of | Letters of | |||||||||||||||||||||||||
| Credit | Credit | |||||||||||||||||||||||||
| and | < | |||||||||||||||||||||||||