Document

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, 2016
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, 679,627,323 shares outstanding at October 26, 2016.
 
 
 
 
PPL Electric Utilities Corporation
Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at October 26, 2016.
 
 
 
 
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 26, 2016.
 
 
 
 
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 26, 2016.
 
This document is available free of charge at the Investors section of 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 September 30, 2016
 
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.
 
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.
 
 
Page
PART I.  FINANCIAL INFORMATION
 
 
Item 1.  Financial Statements
 
 
 
PPL Corporation and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PPL Electric Utilities Corporation and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LG&E and KU Energy LLC and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Louisville Gas and Electric Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kentucky Utilities Company
 
 
 
 
 
 
 
 
 
 
 
 
 


 
Combined Notes to Condensed Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.  Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II.  OTHER INFORMATION
 
 
 
 
 
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
 
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 

Table of Contents


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 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 Global and other subsidiaries.
 
PPL EU Services - PPL EU Services Corporation, a subsidiary of PPL that provides support services and corporate functions such as financial, supply chain, human resources and facilities management services primarily to PPL Electric and its affiliates.
 
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 Services - PPL Services Corporation, a subsidiary of PPL that provides administrative, management and support services to PPL and its subsidiaries.
 
PPL WPD Limited - an indirect U.K. subsidiary of PPL Global and parent to WPD plc.
 
WPD - refers to PPL WPD Limited and its subsidiaries.
 
WPD (East Midlands) - Western Power Distribution (East Midlands) plc, a British regional electricity distribution utility company.
 
WPD plc - Western Power Distribution plc, a direct U.K. subsidiary of PPL WPD Limited. 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.
 
 

i
Table of Contents


Other terms and abbreviations
 
£ - British pound sterling.
 
2015 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2015.
 
2001 Mortgage Indenture - PPL Electric's Indenture, dated as of August 1, 2001, to the Bank of New York Mellon (as successor to JPMorgan Chase Bank), as trustee, as supplemented.
 
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 Alternative Energy Portfolio Standard (AEPS).
 
Advanced Metering System - meters and meter reading systems that provide two-way communication capabilities, which communicate usage and other relevant data to LG&E and KU at regular intervals, but also are able to receive information from LG&E and KU, such as software upgrades and requests to provide meter readings in real time.

AOCI - accumulated other comprehensive income or loss.
 
Article 50 of the Lisbon Treaty - The Treaty of Lisbon is an international agreement which amends the two treaties which form the constitutional basis of the European Union, and came into force on December 1, 2009. Under Article 50 of this treaty, any member state of the European Union may decide to withdraw from the Union in accordance with its own constitutional requirements.

ARO - asset retirement obligation.
 
ATM Program - At-the-Market stock offering program.
 
BSER - Best System of Emission Reduction. The degree of emission reduction that EPA determines has been adequately demonstrated when taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements. 
 
CCR(s) - Coal Combustion Residual(s). 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.
 
Clean Water Act - federal legislation enacted to address certain environmental issues relating to water quality including effluent discharges, cooling water intake, and dredge and fill activities.
 
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 furnishing of utility service to the public.
 
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.
 
Distribution Automation - advanced grid intelligence enabling LG&E and KU to perform remote monitoring and control, circuit segmentation and self-healing of select distribution system circuits, improving grid reliability and efficiency.

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

ii
Table of Contents


DPCR5 - Distribution Price Control Review 5, the U.K. five-year rate review period applicable to WPD that commenced April 1, 2010.
 
DRIP - PPL Amended and Restated 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.
 
Earnings from Ongoing Operations - A non-GAAP financial measure of earnings adjusted for the impact of special items and used in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A).
 
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.
 
ELG(s) - Effluent Limitation Guidelines, regulations promulgated by the EPA.
 
EPA - Environmental Protection Agency, a U.S. government agency.
 
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.
 
GAAP - Generally Accepted Accounting Principles in the U.S.
 
GBP - British pound sterling.
 
GLT - Gas Line Tracker. The KPSC approved mechanism for LG&E's recovery of costs associated with gas service lines, gas risers, leak mitigation, and gas main replacements.

IRS - Internal Revenue Service, a U.S. government agency.
 
KPSC - Kentucky Public Service Commission, the state agency that has jurisdiction over the regulation of rates and service of utilities in Kentucky.
 
LCIDA - Lehigh County Industrial Development Authority.
 
LIBOR - London Interbank Offered Rate.

Margins - A non-GAAP financial measure of performance used in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A).

MATS - Mercury and Air Toxics Standards, regulations promulgated by the EPA.
 
Moody's - Moody's Investors Service, Inc., a credit rating agency.
 
MW - megawatt, one thousand kilowatts.
 
NAAQS - National Ambient Air Quality Standards periodically adopted pursuant to the Clean Air Act.
 
NERC - North American Electric Reliability Corporation.
 
NGCC - Natural gas-fired combined-cycle generating plant.
 

iii
Table of Contents


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.
 
NSR - The new source review provisions of the Clean Air Act that impose stringent emission control requirements on new and modified sources of air emissions that result in emission increases beyond thresholds allowed by the Clean Air Act.
 
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.
 
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.
 
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.
 
PPL EnergyPlus - prior to the June 1, 2015 spinoff of PPL Energy Supply, PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that marketed and traded wholesale and retail electricity and gas, and supplied energy and energy services in competitive markets.  
 
PPL Energy Supply - prior to the June 1, 2015 spinoff, PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the parent company of PPL EnergyPlus and other subsidiaries.
 
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 have continued 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.
 
Registrant(s) - refers to the Registrants named on the cover of this Report (each a "Registrant" and collectively, the "Registrants").
 
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 contributed to Talen Energy other than the competitive power generation business contributed by virtue of the spinoff of a newly formed parent of PPL Energy Supply.
 
RPI - Retail Price Index, is a measure of inflation in the United Kingdom published monthly by the Office for National Statistics.
 

iv
Table of Contents


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

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.
 
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.
 
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 owner of the competitive generation assets of PPL Energy Supply and certain affiliates of Riverstone.
 
Talen Energy Marketing - Talen Energy Marketing, LLC, the new name of PPL EnergyPlus subsequent to the spinoff of PPL Energy Supply.
 
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.
 
VSCC - Virginia State Corporation Commission, the state agency that has jurisdiction over the regulation of Virginia corporations, including utilities.

v
Table of Contents


(THIS PAGE LEFT BLANK INTENTIONALLY.)

vi
Table of Contents


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 2015 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.
 
•
challenges by intervenors to the return on equity granted in existing rate structures;
•
fuel supply and cost;
•
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 transmission and distribution operations, and customer energy use;
•
availability and operating costs of existing generation facilities;
•
the duration of and cost associated with outages at our generating facilities;
•
generation, transmission and distribution system conditions, and operating costs;
•
expansion of alternative and distributed sources of electricity generation and storage;
•
collective labor bargaining negotiations;
•
laws or regulations to reduce emissions of "greenhouse" gases or physical effects of climate change;
•
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 effect of changes in RPI on WPD's revenues and index linked debt;
•
the effectiveness of our risk management programs, including foreign currency and interest rate hedging;
•
the effect of the June 23, 2016 referendum in the U.K. to withdraw from the European Union;
•
our ability to attract and retain qualified employees;
•
volatility in demand for electricity;
•
market prices of commodity inputs for ongoing capital expenditures or key operational needs;
•
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;
•
defaults by counterparties or suppliers for energy, capacity, coal, natural gas or key commodities, goods or services;
•
volatility in the fair value of debt and equity securities and its impact on the value of assets in defined benefit plans, and the potential cash funding requirements if fair value declines;
•
interest rates and their effect on pension and retiree medical liabilities and interest payable on certain debt securities;
•
volatility in or the impact of other changes in financial 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;
•
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 achievement of performance targets set by Ofgem;
•
the impact of any state, federal or foreign investigations applicable to the Registrants and their subsidiaries and the energy industry;
•
the effect of any business or industry restructuring;
•
development of new projects, markets and technologies;
•
performance of new ventures; and
•
business dispositions or acquisitions and our ability to realize expected benefits from such business transactions.


1
Table of Contents


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
Table of Contents


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 September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Operating Revenues
$
1,889

 
$
1,878

 
$
5,685

 
$
5,889

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Operation
 
 
 
 
 
 
 
Fuel
227

 
228

 
607

 
695

Energy purchases
151

 
177

 
531

 
676

Other operation and maintenance
417

 
482

 
1,292

 
1,405

Depreciation
232

 
226

 
692

 
658

Taxes, other than income
76

 
79

 
229

 
241

Total Operating Expenses
1,103

 
1,192

 
3,351

 
3,675

 
 
 
 
 
 
 
 
Operating Income
786

 
686

 
2,334

 
2,214

 
 
 
 
 
 
 
 
Other Income (Expense) - net
49

 
75

 
284

 
61

 
 
 
 
 
 
 
 
Interest Expense
223

 
221

 
671

 
645

 
 
 
 
 
 
 
 
Income from Continuing Operations Before Income Taxes
612

 
540

 
1,947

 
1,630

 
 
 
 
 
 
 
 
Income Taxes
139

 
144

 
510

 
432

 
 
 
 
 
 
 
 
Income from Continuing Operations After Income Taxes
473

 
396

 
1,437

 
1,198

 
 
 
 
 
 
 
 
Income (Loss) from Discontinued Operations (net of income taxes) (Note 8)
—


(3
)
 
—

 
(915
)
 
 
 
 
 
 
 
 
Net Income
$
473

 
$
393

 
$
1,437

 
$
283

 
 
 
 
 
 
 
 
Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
Income from Continuing Operations After Income Taxes:
 
Basic
$
0.70

 
$
0.59

 
$
2.12

 
$
1.78

Diluted
$
0.69

 
$
0.59

 
$
2.11

 
$
1.78

Net Income:
 
 
 
 
 
 
 
Basic
$
0.70

 
$
0.58

 
$
2.12

 
$
0.42

Diluted
$
0.69

 
$
0.58

 
$
2.11

 
$
0.42

 
 
 
 
 
 
 
 
Dividends Declared Per Share of Common Stock
$
0.38

 
$
0.3775

 
$
1.14

 
$
1.1225

 
 
 
 
 
 
 
 
Weighted-Average Shares of Common Stock Outstanding (in thousands)
 
 
 
 
 
 
 
Basic
678,114

 
670,763

 
676,905

 
668,731

Diluted
680,348

 
673,702

 
679,969

 
671,254

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

3
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Net income
$
473

 
$
393

 
$
1,437

 
$
283

 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 

 
 

 
 
 
 
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
 

 
 

 
 
 
 
Foreign currency translation adjustments, net of tax of ($2), ($3), ($4), ($2)
(641
)
 
52

 
(837
)
 
(97
)
Available-for-sale securities, net of tax of $0, $0, $0, ($9)
—

 
—

 
—

 
7

Qualifying derivatives, net of tax of ($16), $11, ($9), $4
62

 
(19
)
 
57

 
8

Defined benefit plans:
 

 


 
 
 
 
Prior service costs, net of tax of $0, $0, $0, $4
—

 
—

 
—

 
(6
)
Net actuarial gain (loss), net of tax of $4, $0, $3, ($36)
(6
)
 
—

 
(4
)
 
52

Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
 

 
 

 
 
 
 
Available-for-sale securities, net of tax of $0, $0, $0, $2
—

 
—

 
—

 
(2
)
Qualifying derivatives, net of tax of $17, ($3), $15, ($23)
(69
)
 
10

 
(62
)
 
20

Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $1
—

 
—

 
(1
)
 
(1
)
Defined benefit plans:
 

 
 

 
 
 
 
Prior service costs, net of tax of ($1), $0, ($1), $0
—

 
—

 
1

 
—

Net actuarial loss, net of tax of ($10), ($10), ($27), ($35)
31

 
35

 
94

 
111

Total other comprehensive income (loss)
(623
)
 
78

 
(752
)
 
92

 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
(150
)
 
$
471

 
$
685

 
$
375

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


4
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
 
Nine Months Ended September 30,
 
2016
 
2015
Cash Flows from Operating Activities
 

 
 

Net income
$
1,437

 
$
283

(Income) Loss from discontinued operations (net of income taxes)
—

 
915

Income from continuing operations (net of income taxes)
1,437

 
1,198

Adjustments to reconcile Income from continuing operations (net of taxes) to net cash provided by operating activities - continuing operations
 

 
 

Depreciation
692

 
658

Amortization
54

 
46

Defined benefit plans - expense (income)
(29
)
 
44

Deferred income taxes and investment tax credits
436

 
359

Unrealized (gains) losses on derivatives, and other hedging activities
107

 
(17
)
Stock-based compensation expense
23

 
26

Other
(12
)
 
9

Change in current assets and current liabilities
 

 
 

Accounts receivable
(29
)
 
(5
)
Accounts payable
(40
)
 
(180
)
Unbilled revenues
32

 
91

Fuel, materials and supplies
8

 
60

Prepayments
(34
)
 
(43
)
Taxes payable
40

 
(142
)
Regulatory assets and liabilities, net
(32
)
 
46

Other
(21
)
 
(5
)
Other operating activities
 
 
 
Defined benefit plans - funding
(345
)
 
(396
)
Settlement of interest rate swaps
—

 
(88
)
Other assets
18

 
(42
)
Other liabilities
(75
)
 
69

Net cash provided by operating activities - continuing operations
2,230

 
1,688

Net cash provided by operating activities - discontinued operations
—

 
343

Net cash provided by operating activities
2,230

 
2,031

Cash Flows from Investing Activities
 

 
 

Expenditures for property, plant and equipment
(2,073
)
 
(2,560
)
Expenditures for intangible assets
(23
)
 
(32
)
Proceeds from the sale of other investments
2

 
136

Other investing activities
28

 
(7
)
Net cash provided by (used in) investing activities - continuing operations
(2,066
)
 
(2,463
)
Net cash provided by (used in) investing activities - discontinued operations
—

 
(149
)
Net cash provided by (used in) investing activities
(2,066
)
 
(2,612
)
Cash Flows from Financing Activities
 

 
 

Issuance of long-term debt
1,241

 
1,137

Retirement of long-term debt
(905
)
 
—

Settlement of cross-currency swaps
46

 
—

Issuance of common stock
133

 
145

Payment of common stock dividends
(772
)
 
(750
)
Net increase (decrease) in short-term debt
(268
)
 
(271
)
Other financing activities
(33
)
 
(30
)
Net cash provided by (used in) financing activities - continuing operations
(558
)
 
231

Net cash provided by (used in) financing activities - discontinued operations
—

 
(546
)
Net cash distributions to parent from discontinued operations
—

 
132

Net cash provided by (used in) financing activities
(558
)
 
(183
)
Effect of Exchange Rates on Cash and Cash Equivalents
(26
)
 
(6
)
Net (Increase) Decrease in Cash and Cash Equivalents included in Discontinued Operations
—

 
352

Net Increase (Decrease) in Cash and Cash Equivalents
(420
)
 
(418
)
Cash and Cash Equivalents at Beginning of Period
836

 
1,399

Cash and Cash Equivalents at End of Period
$
416

 
$
981


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

5
Table of Contents


CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

 
September 30,
2016
 
December 31,
2015
Assets
 

 
 

 
 
 
 
Current Assets
 

 
 

Cash and cash equivalents
$
416

 
$
836

Accounts receivable (less reserve: 2016, $48; 2015, $41)
 

 
 

Customer
687

 
673

Other
45

 
59

Unbilled revenues
393

 
453

Fuel, materials and supplies
346

 
357

Prepayments
97

 
66

Price risk management assets
78

 
139

Other current assets
37

 
63

Total Current Assets
2,099

 
2,646

 
 
 
 
Property, Plant and Equipment
 

 
 

Regulated utility plant
34,427

 
34,399

Less:  accumulated depreciation - regulated utility plant
5,938

 
5,683

Regulated utility plant, net
28,489

 
28,716

Non-regulated property, plant and equipment
451

 
516

Less:  accumulated depreciation - non-regulated property, plant and equipment
155

 
165

Non-regulated property, plant and equipment, net
296

 
351

Construction work in progress
1,184

 
1,315

Property, Plant and Equipment, net
29,969

 
30,382

 
 
 
 
Other Noncurrent Assets
 

 
 

Regulatory assets
1,765

 
1,733

Goodwill
3,175

 
3,550

Other intangibles
693

 
679

Price risk management assets
185

 
156

Other noncurrent assets
152

 
155

Total Other Noncurrent Assets
5,970

 
6,273

 
 
 
 
Total Assets
$
38,038

 
$
39,301

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


6
Table of Contents


CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

 
September 30,
2016
 
December 31,
2015
Liabilities and Equity
 

 
 

 
 
 
 
Current Liabilities
 

 
 

Short-term debt
$
636

 
$
916

Long-term debt due within one year
443

 
485

Accounts payable
741

 
812

Taxes
117

 
85

Interest
315

 
303

Dividends
259

 
255

Customer deposits
302

 
326

Regulatory liabilities
120

 
145

Other current liabilities
479

 
549

Total Current Liabilities
3,412

 
3,876

 
 
 
 
Long-term Debt
18,069

 
18,563

 
 
 
 
Deferred Credits and Other Noncurrent Liabilities
 

 
 

Deferred income taxes
3,810

 
3,440

Investment tax credits
133

 
128

Accrued pension obligations
878

 
1,405

Asset retirement obligations
413

 
536

Regulatory liabilities
911

 
945

Other deferred credits and noncurrent liabilities
437

 
489

Total Deferred Credits and Other Noncurrent Liabilities
6,582

 
6,943

 
 
 
 
Commitments and Contingent Liabilities (Notes 6 and 10)


 


 
 
 
 
Equity
 

 
 

Common stock - $0.01 par value (a)
7

 
7

Additional paid-in capital
9,824

 
9,687

Earnings reinvested
3,624

 
2,953

Accumulated other comprehensive loss
(3,480
)
 
(2,728
)
Total Equity
9,975

 
9,919

 
 
 
 
Total Liabilities and Equity
$
38,038

 
$
39,301

 
(a)
1,560,000 shares authorized; 679,268 shares issued and outstanding at September 30, 2016; 780,000 shares authorized; 673,857 shares issued and outstanding at December 31, 2015.

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


7
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)  

 
Common
stock
shares
outstanding (a)
 
Common
stock
 
Additional
paid-in
capital
 
Earnings
reinvested
 
Accumulated
other
comprehensive
loss
 
Total
December 31, 2015
673,857

 
$
7

 
$
9,687

 
$
2,953

 
$
(2,728
)
 
$
9,919

Common stock issued
5,411

 


 
168

 
 
 
 
 
168

Stock-based compensation
 
 
 
 
(31
)
 
 
 
 
 
(31
)
Net income
 
 
 
 
 
 
1,437

 
 
 
1,437

Dividends and dividend equivalents
 
 
 
 
 
 
(773
)
 
 
 
(773
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
(752
)
 
(752
)
Adoption of stock-based compensation guidance cumulative effect adjustment (Note 2)
 
 
 
 
 
 
7

 
 
 
7

September 30, 2016
679,268

 
$
7

 
$
9,824

 
$
3,624

 
$
(3,480
)
 
$
9,975

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
665,849

 
$
7

 
$
9,433

 
$
6,462

 
$
(2,274
)
 
$
13,628

Common stock issued
5,943

 
 

 
183

 
 

 
 

 
183

Stock-based compensation
 

 
 

 
14

 
 

 
 

 
14

Net income
 

 
 

 
 

 
283

 
 

 
283

Dividends and dividend equivalents
 

 
 

 
 

 
(754
)
 
 

 
(754
)
Distribution of PPL Energy Supply (Note 8)
 
 
 
 
 
 
(3,200
)
 
(24
)
 
(3,224
)
Other comprehensive income (loss)
 

 
 

 
 

 
 

 
92

 
92

September 30, 2015
671,792

 
$
7

 
$
9,630

 
$
2,791

 
$
(2,206
)
 
$
10,222

 
(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
Table of Contents


(THIS PAGE LEFT BLANK INTENTIONALLY.)

9
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Operating Revenues
$
539

 
$
519

 
$
1,619

 
$
1,625

 
 
 
 
 
 
 
 
Operating Expenses
 

 
 

 
 
 
 
Operation
 

 
 

 
 
 
 
Energy purchases
129

 
154

 
414

 
519

Energy purchases from affiliate
—

 
—

 
—

 
14

Other operation and maintenance
144

 
162

 
431

 
435

Depreciation
64

 
55

 
185

 
158

Taxes, other than income
26

 
27

 
79

 
87

Total Operating Expenses
363

 
398

 
1,109

 
1,213

 
 
 
 
 
 
 
 
Operating Income
176

 
121

 
510

 
412

 
 
 
 
 
 
 
 
Other Income (Expense) - net
4

 
1

 
12

 
5

 
 
 
 
 
 
 
 
Interest Expense
32

 
32

 
97

 
96

 
 
 
 
 
 
 
 
Income Before Income Taxes
148

 
90

 
425

 
321

 
 
 
 
 
 
 
 
Income Taxes
58

 
35

 
162

 
130

 
 
 
 
 
 
 
 
Net Income (a)
$
90

 
$
55

 
$
263

 
$
191

 
(a)
Net income equals comprehensive income.

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


10
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
 
Nine Months Ended September 30,
 
2016
 
2015
Cash Flows from Operating Activities
 

 
 

Net income
$
263

 
$
191

Adjustments to reconcile net income to net cash provided by operating activities
 

 
 

Depreciation
185

 
158

Amortization
19

 
19

Defined benefit plans - expense
9

 
13

Deferred income taxes and investment tax credits
151

 
127

Other
(14
)
 
(9
)
Change in current assets and current liabilities
 

 
 

Accounts receivable
(6
)
 
18

Accounts payable
(1
)
 
(140
)
Unbilled revenue
10

 
28

Prepayments
29

 
(17
)
Regulatory assets and liabilities
(41
)
 
46

Taxes payable
(6
)
 
(50
)
Other
(13
)
 
13

Other operating activities
 

 
 

Defined benefit plans - funding
—

 
(33
)
Other assets
15

 
(6
)
Other liabilities
(5
)
 
15

Net cash provided by operating activities
595

 
373

 
 
 
 
Cash Flows from Investing Activities
 

 
 

Expenditures for property, plant and equipment
(739
)
 
(758
)
Expenditures for intangible assets
—

 
(9
)
Other investing activities
(1
)
 
3

Net cash provided by (used in) investing activities
(740
)
 
(764
)
 
 
 
 
Cash Flows from Financing Activities
 

 
 

Issuance of long-term debt
224

 
—

Retirement of long-term debt
(224
)
 
—

Contributions from parent
200

 
275

Payment of common stock dividends to parent
(193
)
 
(140
)
Net increase (decrease) in short-term debt
130

 
68

Other financing activities
(3
)
 
—

Net cash provided by (used in) financing activities
134

 
203

 
 
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
(11
)
 
(188
)
Cash and Cash Equivalents at Beginning of Period
47

 
214

Cash and Cash Equivalents at End of Period
$
36

 
$
26

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

11
Table of Contents


CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

 
September 30,
2016
 
December 31,
2015
Assets
 

 
 

 
 
 
 
Current Assets
 

 
 

Cash and cash equivalents
$
36

 
$
47

Accounts receivable (less reserve: 2016, $22; 2015, $16)
 

 
 

Customer
290

 
286

Other
12

 
10

Unbilled revenues
81

 
91

Materials and supplies
28

 
34

Prepayments
37

 
66

Other current assets
15

 
21

Total Current Assets
499

 
555

 
 
 
 
Property, Plant and Equipment
 

 
 

Regulated utility plant
9,360

 
8,734

Less: accumulated depreciation - regulated utility plant
2,698

 
2,573

Regulated utility plant, net
6,662

 
6,161

Construction work in progress
657

 
530

Property, Plant and Equipment, net
7,319

 
6,691

 
 
 
 
Other Noncurrent Assets
 

 
 

Regulatory assets
991

 
1,006

Intangibles
247

 
244

Other noncurrent assets
14

 
15

Total Other Noncurrent Assets
1,252

 
1,265

 
 
 
 
Total Assets
$
9,070

 
$
8,511

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


12
Table of Contents


CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

 
September 30,
2016
 
December 31,
2015
Liabilities and Equity
 

 
 

 
 
 
 
Current Liabilities
 

 
 

Short-term debt
$
130

 
$
—

Long-term debt due within one year
224

 
—

Accounts payable
357

 
288

Accounts payable to affiliates
33

 
35

Taxes
18

 
24

Interest
31

 
37

Regulatory liabilities
94

 
113

Customer deposits
22

 
31

Other current liabilities
69

 
77

Total Current Liabilities
978

 
605

 
 
 
 
Long-term Debt
2,607

 
2,828

 
 
 
 
Deferred Credits and Other Noncurrent Liabilities
 

 
 

Deferred income taxes
1,823

 
1,663

Accrued pension obligations
185

 
183

Regulatory liabilities
—

 
22

Other deferred credits and noncurrent liabilities
88

 
91

Total Deferred Credits and Other Noncurrent Liabilities
2,096

 
1,959

 
 
 
 
Commitments and Contingent Liabilities (Notes 6 and 10)


 


 
 
 
 
Equity
 

 
 

Common stock - no par value (a)
364

 
364

Additional paid-in capital
2,134

 
1,934

Earnings reinvested
891

 
821

Total Equity
3,389

 
3,119

 
 
 
 
Total Liabilities and Equity
$
9,070

 
$
8,511

 
(a)
170,000 shares authorized; 66,368 shares issued and outstanding at September 30, 2016 and December 31, 2015.

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


13
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Common
stock
shares
outstanding
(a)
 
Common
stock
 
Additional
paid-in
capital
 
Earnings
reinvested
 
Total
December 31, 2015
66,368

 
$
364

 
$
1,934

 
$
821

 
$
3,119

Net income


 


 


 
263

 
263

Capital contributions from PPL


 


 
200

 


 
200

Dividends declared on common stock


 


 


 
(193
)
 
(193
)
September 30, 2016
66,368

 
$
364

 
$
2,134

 
$
891

 
$
3,389

 
 
 
 
 
 
 
 
 
 
December 31, 2014
66,368

 
$
364

 
$
1,603

 
$
750

 
$
2,717

Net income


 


 


 
191

 
191

Capital contributions from PPL (b)


 


 
322

 


 
322

Dividends declared on common stock


 


 


 
(140
)
 
(140
)
September 30, 2015
66,368

 
$
364

 
$
1,925

 
$
801

 
$
3,090

 
(a)
Shares in thousands. All common shares of PPL Electric stock are owned by PPL.
(b)
Includes non-cash contributions of $47 million.

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















14
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Operating Revenues
$
835

 
$
801

 
$
2,382

 
$
2,414

 
 
 
 
 
 
 
 
Operating Expenses
 

 
 

 
 

 
 

Operation
 

 
 

 
 

 
 

Fuel
227

 
228

 
607

 
695

Energy purchases
24

 
23

 
118

 
143

Other operation and maintenance
197

 
202

 
603

 
625

Depreciation
102

 
97

 
301

 
286

Taxes, other than income
16

 
14

 
46

 
43

Total Operating Expenses
566

 
564

 
1,675

 
1,792

 
 
 
 
 
 
 
 
Operating Income
269

 
237

 
707

 
622

 
 
 
 
 
 
 
 
Other Income (Expense) - net
(3
)
 
(1
)
 
(9
)
 
(3
)
 
 
 
 
 
 
 
 
Interest Expense
50

 
43

 
147

 
127

 
 
 
 
 
 
 
 
Interest Expense with Affiliate
4

 
—

 
12

 
1

 
 
 
 
 
 
 
 
Income Before Income Taxes
212

 
193

 
539

 
491

 
 
 
 
 
 
 
 
Income Taxes
79

 
73

 
202

 
194

 
 
 
 
 
 
 
 
Net Income
$
133

 
$
120

 
$
337

 
$
297

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


15
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)


Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Net income
$
133

 
$
120

 
$
337

 
$
297

 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
 
 
 
 
 
 
 
Defined benefit plans:
 
 
 
 
 
 
 
Net actuarial gain (loss), net of tax of $0, $0, ($1), $5
—

 
—

 
1

 
(8
)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
 
 
 
 
 
 
 
Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $1
—

 
—

 
(1
)
 
(1
)
Defined benefit plans:
 
 
 
 
 
 
 
Prior service costs, net of tax of ($1), $0, ($1), $0
—

 
—

 
1

 
1

Net actuarial loss, net of tax of $0, $0, ($1), ($1)
1

 
1

 
3

 
2

Total other comprehensive income (loss)
1

 
1

 
4

 
(6
)
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
134

 
$
121

 
$
341

 
$
291


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


16
Table of Contents


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Nine Months Ended September 30,
 
2016
 
2015
Cash Flows from Operating Activities
 

 
 

Net income
$
337

 
$
297

Adjustments to reconcile net income to net cash provided by operating activities
 

 
 

Depreciation
301

 
286

Amortization
21

 
18

Defined benefit plans - expense
20

 
29

Deferred income taxes and investment tax credits
212

 
199

Other
—

 
29

Change in current assets and current liabilities
 

 
 

Accounts receivable
(43
)
 
(1
)
Accounts payable
7

 
(34
)
Accounts payable to affiliates
4

 
(7
)
Unbilled revenues