10-Q 1 ppl-9302018x10q.htm 10-Q 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, 2018.
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 every Interactive Data File required to be submitted 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 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, smaller reporting companies or emerging growth companies. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated
filer
Accelerated
filer
Non-accelerated
filer
Smaller reporting
company
Emerging growth 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 ]
[     ]
[     ]

If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
PPL Corporation
[     ]
 
 
 
 
PPL Electric Utilities Corporation
[     ]
 
 
 
 
LG&E and KU Energy LLC
[     ]
 
 
 
 
Louisville Gas and Electric Company
[     ]
 
 
 
 
Kentucky Utilities Company
[     ]
 
 
 
 
 
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, 720,199,922 shares outstanding at October 25, 2018.
 
 
PPL Electric Utilities Corporation
Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at October 25, 2018.
 
 
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 25, 2018.
 
 
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 25, 2018.

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, 2018
 
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' financial statements 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
 



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GLOSSARY OF TERMS AND ABBREVIATIONS
 
PPL Corporation and its subsidiaries
 
KU - Kentucky Utilities Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky.
 
LG&E - Louisville Gas and Electric Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas in Kentucky.
 
LKE - LG&E and KU Energy LLC, a subsidiary of PPL and the parent of LG&E, KU and other subsidiaries.
 
LKS - LG&E and KU Services Company, a subsidiary of LKE that provides administrative, management, and support services primarily 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 administrative, management and support services primarily to PPL Electric.
 
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. Following a reorganization in October 2015 and October 2017, PPL WPD Limited is an indirect parent to WPD plc having previously been a sister company.
 
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, an indirect 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.
 

i


WKE - Western Kentucky Energy Corp., a subsidiary of LKE that leased certain non-regulated utility generating plants in western Kentucky until July 2009.
  
Other terms and abbreviations
 
£ - British pound sterling.
 
2017 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2017.
 
Act 11 - Act 11 of 2012 that became effective on April 16, 2012. The Pennsylvania legislation authorized 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 amended the Pennsylvania Public Utility Code and created an energy efficiency and conservation program and smart metering technology requirements, adopted new PLR electricity supply procurement rules, provided remedies for market misconduct and changed the Alternative Energy Portfolio Standard (AEPS).

Act 129 Smart Meter program - PPL Electric's system wide meter replacement program that installs wireless digital meters that provide secure communication between PPL Electric and the meter as well as all related infrastructure.

Adjusted Gross 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).
 
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, and are also able to receive information from LG&E and KU, such as software upgrades and requests to provide meter readings in real time.

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.
 
ATM Program - at-the-market stock offering program.
 
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.

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

CPCN - Certificate of Public Convenience and Necessity. Authority granted by the KPSC pursuant to Kentucky Revised Statute 278.020 to provide utility service to or for the public or the construction of certain plant, equipment, property or facility for furnishing of utility service to the public.
 
CPIH - Consumer Price Index including owner-occupiers' housing costs. An aggregate measure of changes in the cost of living in the U.K., including a measure of owner-occupiers' housing costs.

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.

ii


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

DNO - Distribution Network Operator in the U.K.
 
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 programs proposed by any utility under its jurisdiction. DSM programs consist of energy efficiency programs intended to reduce peak demand and delay the investment in additional power plant construction, provide customers with tools and information regarding their energy usage and support energy efficiency.

DUoS - Distribution Use of System, the charge to licensed third party energy suppliers who are WPD's customers and use WPD's networks to deliver electricity to their customers, the end-users.
 
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 byproducts 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.

EPS - earnings per share.
 
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.

GHG(s) - greenhouse gas(es).
 
GLT - gas line tracker. The KPSC approved mechanism for LG&E's recovery of costs associated with gas transmission lines, gas service lines, gas risers, leak mitigation, and gas main replacements.

HB 487 - House Bill 487. Comprehensive Kentucky state tax legislation enacted on April 27, 2018.

IBEW - International Brotherhood of Electrical Workers.

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

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

kV - kilovolt.

kWh - kilowatt hour, basic unit of electrical energy.

iii


LIBOR - London Interbank Offered Rate.

Mcf - one thousand cubic feet, a unit of measure for natural gas.

Moody's - Moody's Investors Service, Inc., a credit rating agency.
 
MPR - Mid-period review, which is a review of output requirements in RIIO-ED1 that can be initiated by Ofgem halfway through the price control covering material changes to existing outputs that can be justified by clear changes in government policy or new outputs that may be needed to meet the needs of consumers and other network users. On April 30, 2018, Ofgem decided not to engage in a mid-period review of the RIIO-ED1 price-control period.

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.

New Source Review - a Clean Air Act program that requires industrial facilities to install updated pollution control equipment when they are built or when making a modification that increases emissions beyond certain allowable thresholds.
 
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.

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 capacities of 2,120 MW.

Performance unit - stock-based compensation award that represents a variable number of shares of PPL common stock that a recipient may receive based on PPL's attainment of (i) total shareowner return (TSR) over a three-year performance period as compared to companies in the Philadelphia Stock Exchange Utility Index; or (ii) corporate return on equity (ROE) based on the average of the annual ROE for each year of the three-year performance period.

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.

PPL Energy Supply - prior to the June 1, 2015 spinoff, PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the indirect parent company of PPL Montana, LLC.
 
PUC - Pennsylvania Public Utility Commission, the state agency that regulates certain ratemaking, services, accounting and operations of Pennsylvania utilities.


iv


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. RAV additions have been and continue to be based on a percentage of annual total 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 - Ofgem's framework for setting U.K. regulated gas and electric utility price controls which stands for "Revenues = Incentive + Innovation + Outputs." RIIO-1 refers to the first generation of price controls under the RIIO framework. RIIO-ED1 refers to the RIIO regulatory price control applicable to the operators of U.K. electricity distribution networks, the duration of which is April 2015 through March 2023. RIIO-2 refers to the second generation of price controls under the RIIO framework. RIIO-ED2 refers to the second regulatory price control applicable to the operators of U.K. electricity distribution networks, which will begin in April 2023.

Riverstone - Riverstone Holdings LLC, a Delaware limited liability company and, as of December 6, 2016, ultimate parent company of the entities that own the competitive power generation business contributed to Talen Energy.

RPI - retail price index, is a measure of inflation in the United Kingdom published monthly by the Office for National Statistics.
 
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.
 
SCRs - selective catalytic reduction, a pollution control process for the removal of nitrogen oxide from exhaust gas.

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.

S&P - Standard & Poor's Ratings Services, a credit rating agency.
 
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 owner of the competitive generation assets of PPL Energy Supply and certain affiliates of Riverstone.


v


TCJA - Tax Cuts and Jobs Act. Comprehensive U.S. federal tax legislation enacted on December 22, 2017.

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.

U.K. Finance Acts - refers to U.K. Finance Act of 2015 and 2016, enacted in November 2015 and September 2016 respectively, which collectively reduced the U.K. statutory corporate income tax rate from 20% to 19%, effective April 1, 2017 and from 19% to 17%, effective April 1, 2020.

VEBA - Voluntary Employee Beneficiary Association. A tax-exempt trust under the Internal Revenue Code Section 501(c)(9) used by employers to fund and pay eligible medical, life and similar benefits.

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

vi


Forward-looking Information
 
Statements contained in this Form 10-Q concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements 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 2017 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 and adversely from the forward-looking statements:
 
the outcome of rate cases or other cost recovery or revenue proceedings;
changes in U.S. state or federal, or U.K. tax laws or regulations, including the TCJA;
effects of cyber-based intrusions or natural disasters, threatened or actual terrorism, war or other hostilities;
significant decreases in demand for electricity in the U.S.;
expansion of alternative and distributed sources of electricity generation and storage;
changes in foreign currency exchange rates for British pound sterling and the related impact on unrealized gains and losses on PPL's foreign currency economic hedges;
the effectiveness of our risk management programs, including foreign currency and interest rate hedging;
non-achievement by WPD of performance targets set by Ofgem;
the effect of changes in RPI on WPD's revenues and index linked debt;
developments related to ongoing negotiations regarding the U.K.'s intent to withdraw from the European Union and any actions in response thereto;
defaults by counterparties or suppliers for energy, capacity, coal, natural gas or key commodities, goods or services;
capital market conditions, including the availability of capital or credit, changes in interest rates and certain economic indices, and decisions regarding capital structure;
a material decline in the market value of PPL's equity;
significant decreases 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, ARO liabilities and interest payable on certain debt securities;
volatility in or the impact of other changes in financial markets and economic conditions;
the potential impact of any unrecorded commitments and liabilities of the Registrants and their subsidiaries;
new accounting requirements or new interpretations or applications of existing requirements;
changes in the corporate credit ratings or securities analyst rankings of the Registrants and their securities;
any requirement to record impairment charges pursuant to GAAP with respect to any of our significant investments;
laws or regulations to reduce emissions of GHGs or the physical effects of climate change;
continuing ability to access fuel supply for LG&E and KU, as well as the 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 and other conditions affecting generation, transmission and distribution operations, operating costs and customer energy use;
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 and approvals;
new state, federal or foreign legislation or regulatory developments;
the impact of any state, federal or foreign investigations applicable to the Registrants and their subsidiaries and the energy industry;
our ability to attract and retain qualified employees;
the effect of any business or industry restructuring;
development of new projects, markets and technologies;
performance of new ventures;
business dispositions or acquisitions and our ability to realize expected benefits from such business transactions;
collective labor bargaining negotiations; and
the outcome of litigation against the Registrants and their subsidiaries.

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.

1



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


2


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, except share data)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Operating Revenues
$
1,872

 
$
1,845

 
$
5,846

 
$
5,521

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Operation
 
 
 
 
 
 
 
Fuel
206

 
202

 
609

 
576

Energy purchases
149

 
143

 
538

 
494

Other operation and maintenance
479

 
438

 
1,453

 
1,340

Depreciation
275

 
257

 
817

 
745

Taxes, other than income
77

 
69

 
234

 
214

Total Operating Expenses
1,186

 
1,109

 
3,651

 
3,369

 
 
 
 
 
 
 
 
Operating Income
686

 
736

 
2,195

 
2,152

 
 
 
 
 
 
 
 
Other Income (Expense) - net
106

 
(35
)
 
297

 
(112
)
 
 
 
 
 
 
 
 
Interest Expense
244

 
230

 
718

 
669

 
 
 
 
 
 
 
 
Income Before Income Taxes
548

 
471

 
1,774

 
1,371

 
 
 
 
 
 
 
 
Income Taxes
103

 
116

 
362

 
321

 
 
 
 
 
 
 
 
Net Income
$
445

 
$
355

 
$
1,412

 
$
1,050

 
 
 
 
 
 
 
 
Earnings Per Share of Common Stock:
 
Net Income Available to PPL Common Shareowners:
 
 
 
 
 
 
 
Basic
$
0.63

 
$
0.52

 
$
2.02

 
$
1.53

Diluted
$
0.62

 
$
0.51

 
$
2.01

 
$
1.53

 
 
 
 
 
 
 
 
Dividends Declared Per Share of Common Stock
$
0.41

 
$
0.395

 
$
1.23

 
$
1.185

 
 
 
 
 
 
 
 
Weighted-Average Shares of Common Stock Outstanding
(in thousands)
 
 
 
 
 
 
 
Basic
703,730

 
686,563

 
699,117

 
683,783

Diluted
710,517

 
688,746

 
702,305

 
686,081

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

3


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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
445

 
$
355

 
$
1,412

 
$
1,050

 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 

 
 

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

 
 

 
 
 
 
Foreign currency translation adjustments, net of tax of $0, $0, ($2), ($1)
(187
)
 
(12
)
 
(321
)
 
195

Qualifying derivatives, net of tax of ($5), $0, ($5), $7
22

 
1

 
21

 
(29
)
Defined benefit plans:
 

 


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

 

 
(1
)
 

Net actuarial gain (loss), net of tax of $3, $2, $3, $9
(8
)
 
(3
)
 
(9
)
 
(14
)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
 

 
 

 
 
 
 
Qualifying derivatives, net of tax of $3, $1, $4, ($6)
(14
)
 

 
(21
)
 
24

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

 

 

 
1

Defined benefit plans:
 

 
 

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

 

 
1

 
1

Net actuarial (gain) loss, net of tax of ($8), ($10), ($26), ($28)
34

 
34

 
104

 
97

Total other comprehensive income (loss)
(153
)
 
20

 
(226
)
 
275

 
 
 
 
 
 
 
 
Comprehensive income
$
292

 
$
375

 
$
1,186

 
$
1,325

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


4


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash Flows from Operating Activities
 

 
 

Net income
$
1,412

 
$
1,050

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

 
 

Depreciation
817

 
745

Amortization
56

 
72

Defined benefit plans - (income)
(146
)
 
(69
)
Deferred income taxes and investment tax credits
255

 
284

Unrealized (gains) losses on derivatives, and other hedging activities
(129
)
 
194

Stock-based compensation expense
21

 
30

Other
(12
)
 
(8
)
Change in current assets and current liabilities
 

 
 

Accounts receivable
38

 
25

Accounts payable
(55
)
 
(93
)
Unbilled revenues
129

 
81

Fuel, materials and supplies
25

 
35

Prepayments
(38
)
 
(37
)
Taxes payable
20

 
6

Regulatory assets and liabilities, net
39

 
(3
)
Accrued interest
48

 
49

Other current liabilities
(36
)
 
(53
)
Other
(21
)
 
5

Other operating activities
 
 
 
Defined benefit plans - funding
(284
)
 
(558
)
Proceeds from transfer of excess benefit plan funds
65

 

Other assets
(38
)
 
4

Other liabilities
44

 
(5
)
Net cash provided by operating activities
2,210

 
1,754

Cash Flows from Investing Activities
 

 
 

Expenditures for property, plant and equipment
(2,344
)
 
(2,152
)
Purchase of available-for-sale securities
(65
)
 

Other investing activities
(57
)
 
(16
)
Net cash used in investing activities
(2,466
)
 
(2,168
)
Cash Flows from Financing Activities
 

 
 

Issuance of long-term debt
602

 
1,088

Retirement of long-term debt
(277
)
 
(60
)
Issuance of common stock
678

 
275

Payment of common stock dividends
(846
)
 
(800
)
Net increase in short-term debt
481

 
269

Other financing activities
(20
)
 
(34
)
Net cash provided by financing activities
618

 
738

Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash
(9
)
 
7

Net Increase in Cash, Cash Equivalents and Restricted Cash
353

 
331

Cash, Cash Equivalents and Restricted Cash at Beginning of Period
511

 
365

Cash, Cash Equivalents and Restricted Cash at End of Period
$
864

 
$
696

 
 
 
 
Supplemental Disclosures of Cash Flow Information
 
 
 
Significant non-cash transactions:
 
 
 
Accrued expenditures for property, plant and equipment at September 30,
$
311

 
$
373

Accrued expenditures for intangible assets at September 30,
$
70

 
$
60


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

5


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

 
September 30,
2018
 
December 31,
2017
Assets
 

 
 

 
 
 
 
Current Assets
 

 
 

Cash and cash equivalents
$
842

 
$
485

Accounts receivable (less reserve: 2018, $54; 2017, $51)
 

 
 

Customer
684

 
681

Other
58

 
100

Unbilled revenues
411

 
543

Fuel, materials and supplies
295

 
320

Prepayments
103

 
66

Price risk management assets
91

 
49

Other current assets
61

 
50

Total Current Assets
2,545

 
2,294

 
 
 
 
Property, Plant and Equipment
 

 
 

Regulated utility plant
39,144

 
38,228

Less:  accumulated depreciation - regulated utility plant
7,196

 
6,785

Regulated utility plant, net
31,948

 
31,443

Non-regulated property, plant and equipment
365

 
384

Less:  accumulated depreciation - non-regulated property, plant and equipment
111

 
110

Non-regulated property, plant and equipment, net
254

 
274

Construction work in progress
1,816

 
1,375

Property, Plant and Equipment, net
34,018

 
33,092

 
 
 
 
Other Noncurrent Assets
 

 
 

Regulatory assets
1,525

 
1,504

Goodwill
3,242

 
3,258

Other intangibles
700

 
697

Pension benefit asset
615

 
284

Price risk management assets
206

 
215

Other noncurrent assets
191

 
135

Total Other Noncurrent Assets
6,479

 
6,093

 
 
 
 
Total Assets
$
43,042

 
$
41,479

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


6


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

 
September 30,
2018
 
December 31,
2017
Liabilities and Equity
 

 
 

 
 
 
 
Current Liabilities
 

 
 

Short-term debt
$
1,549

 
$
1,080

Long-term debt due within one year
330

 
348

Accounts payable
814

 
924

Taxes
121

 
105

Interest
326

 
282

Dividends
287

 
273

Customer deposits
265

 
292

Regulatory liabilities
136

 
95

Other current liabilities
555

 
624

Total Current Liabilities
4,383

 
4,023

 
 
 
 
Long-term Debt
19,924

 
19,847

 
 
 
 
Deferred Credits and Other Noncurrent Liabilities
 

 
 

Deferred income taxes
2,717

 
2,462

Investment tax credits
127

 
129

Accrued pension obligations
649

 
800

Asset retirement obligations
279

 
312

Regulatory liabilities
2,739

 
2,704

Other deferred credits and noncurrent liabilities
441

 
441

Total Deferred Credits and Other Noncurrent Liabilities
6,952

 
6,848

 
 
 
 
Commitments and Contingent Liabilities (Notes 7 and 10)


 


 
 
 
 
Equity
 

 
 

Common stock - $0.01 par value (a)
7

 
7

Additional paid-in capital
11,001

 
10,305

Earnings reinvested
4,423

 
3,871

Accumulated other comprehensive loss
(3,648
)
 
(3,422
)
Total Equity
11,783

 
10,761

 
 
 
 
Total Liabilities and Equity
$
43,042

 
$
41,479

 
(a)
1,560,000 shares authorized; 719,702 and 693,398 shares issued and outstanding at September 30, 2018 and December 31, 2017.

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


7


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

 
Common
stock
shares
outstanding (a)
 
Common
stock
 
Additional
paid-in
capital
 
Earnings
reinvested
 
Accumulated
other
comprehensive
loss
 
Total
December 31, 2017
693,398

 
$
7

 
$
10,305

 
$
3,871

 
$
(3,422
)
 
$
10,761

Common stock issued
26,304

 


 
699

 
 
 
 
 
699

Stock-based compensation
 
 
 
 
(3
)
 
 
 
 
 
(3
)
Net income
 
 
 
 
 
 
1,412

 
 
 
1,412

Dividends and dividend equivalents
 
 
 
 
 
 
(860
)
 
 
 
(860
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
(226
)
 
(226
)
September 30, 2018
719,702

 
$
7

 
$
11,001

 
$
4,423

 
$
(3,648
)
 
$
11,783

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
679,731

 
$
7

 
$
9,841

 
$
3,829

 
$
(3,778
)
 
$
9,899

Common stock issued
8,402

 
 

 
303

 
 

 
 

 
303

Stock-based compensation
 

 
 

 
(22
)
 
 

 
 

 
(22
)
Net income
 

 
 

 
 

 
1,050

 
 

 
1,050

Dividends and dividend equivalents
 

 
 

 
 

 
(813
)
 
 

 
(813
)
Other comprehensive income (loss)
 

 
 

 
 

 
 

 
275

 
275

September 30, 2017
688,133

 
$
7

 
$
10,122

 
$
4,066

 
$
(3,503
)
 
$
10,692

 
 
 
 
 
 
 
 
 
 
 
 
(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 INTENTIONALLY LEFT BLANK.

9


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,
 
2018
 
2017
 
2018
 
2017
Operating Revenues
$
548

 
$
547

 
$
1,704

 
$
1,620

 
 
 
 
 
 
 
 
Operating Expenses
 

 
 

 
 
 
 
Operation
 

 
 

 
 
 
 
Energy purchases
127

 
121

 
403

 
374

Other operation and maintenance
127

 
133

 
419

 
435

Depreciation
89

 
77

 
262

 
228

Taxes, other than income
27

 
27

 
81

 
79

Total Operating Expenses
370

 
358

 
1,165

 
1,116

 
 
 
 
 
 
 
 
Operating Income
178

 
189

 
539

 
504

 
 
 
 
 
 
 
 
Other Income (Expense) - net
5

 
4

 
18

 
8

 
 
 
 
 
 
 
 
Interest Income from Affiliate
4

 
2

 
5

 
3

 
 
 
 
 
 
 
 
Interest Expense
41

 
36

 
117

 
105

 
 
 
 
 
 
 
 
Income Before Income Taxes
146

 
159

 
445

 
410

 
 
 
 
 
 
 
 
Income Taxes
35

 
64

 
111

 
159

 
 
 
 
 
 
 
 
Net Income (a)
$
111

 
$
95

 
$
334

 
$
251

 
(a)
Net income equals comprehensive income.

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


10


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash Flows from Operating Activities
 

 
 

Net income
$
334

 
$
251

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

 
 

Depreciation
262

 
228

Amortization
17

 
25

Defined benefit plans - expense
2

 
10

Deferred income taxes and investment tax credits
77

 
129

Other
(13
)
 
(8
)
Change in current assets and current liabilities
 

 
 

Accounts receivable
22

 
7

Accounts payable
(46
)
 
(38
)
Unbilled revenues
45

 
30

Prepayments
(25
)
 
(31
)
Regulatory assets and liabilities, net
(25
)
 

Taxes payable
(1
)
 
10

Other
12

 
(9
)
Other operating activities
 

 
 

Defined benefit plans - funding
(28
)
 
(24
)
Other assets
(37
)
 
(2
)
Other liabilities
54

 
(3
)
Net cash provided by operating activities
650

 
575

 
 
 
 
Cash Flows from Investing Activities
 

 
 

Expenditures for property, plant and equipment
(835
)
 
(851
)
Net decrease in notes receivable from affiliate

 
(2
)
Other investing activities
(2
)
 
(5
)
Net cash used in investing activities
(837
)
 
(858
)
 
 
 
 
Cash Flows from Financing Activities
 

 
 

Issuance of long-term debt
398

 
470

Contributions from parent
429

 
575

Payment of common stock dividends to parent
(271
)
 
(231
)
Net decrease in short-term debt

 
(295
)
Other financing activities
(4
)
 
(6
)
Net cash provided by financing activities
552

 
513

 
 
 
 
Net Increase in Cash, Cash Equivalents and Restricted Cash
365

 
230

Cash, Cash Equivalents and Restricted Cash at Beginning of Period
51

 
15

Cash, Cash Equivalents and Restricted Cash at End of Period
$
416

 
$
245

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Significant non-cash transactions:
 
 
 
Accrued expenditures for property, plant and equipment at September 30,
$
171

 
$
190


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

11


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

 
September 30,
2018
 
December 31,
2017
Assets
 

 
 

 
 
 
 
Current Assets
 

 
 

Cash and cash equivalents
$
414

 
$
49

Accounts receivable (less reserve: 2018, $26; 2017, $24)
 

 
 

Customer
309

 
279

Other
18

 
71

Accounts receivable from affiliates
11

 

Unbilled revenues
82

 
127

Materials and supplies
26

 
34

Prepayments
31

 
6

Regulatory assets
18

 
16

Other current assets
10

 
6

Total Current Assets
919

 
588

 
 
 
 
Property, Plant and Equipment
 

 
 

Regulated utility plant
11,332

 
10,785

Less: accumulated depreciation - regulated utility plant
2,848

 
2,778

Regulated utility plant, net
8,484

 
8,007

Construction work in progress
643

 
508

Property, Plant and Equipment, net
9,127

 
8,515

 
 
 
 
Other Noncurrent Assets
 

 
 

Regulatory assets
738

 
709

Intangibles
260

 
259

Other noncurrent assets
52

 
11

Total Other Noncurrent Assets
1,050

 
979

 
 
 
 
Total Assets
$
11,096

 
$
10,082

 
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)

 
September 30,
2018
 
December 31,
2017
Liabilities and Equity
 

 
 

 
 
 
 
Current Liabilities
 

 
 

Accounts payable
$
384

 
$
386

Accounts payable to affiliates
25

 
31

Taxes
7

 
8

Interest
43

 
36

Regulatory liabilities
72

 
86

Other current liabilities
99

 
98

Total Current Liabilities
630

 
645

 
 
 
 
Long-term Debt
3,693

 
3,298

 
 
 
 
Deferred Credits and Other Noncurrent Liabilities
 

 
 

Deferred income taxes
1,258

 
1,154

Accrued pension obligations
210

 
246

Regulatory liabilities
686

 
668

Other deferred credits and noncurrent liabilities
135

 
79

Total Deferred Credits and Other Noncurrent Liabilities
2,289

 
2,147

 
 
 
 
Commitments and Contingent Liabilities (Notes 7 and 10)


 


 
 
 
 
Equity
 

 
 

Common stock - no par value (a)
364

 
364

Additional paid-in capital
3,158

 
2,729

Earnings reinvested
962

 
899

Total Equity
4,484

 
3,992

 
 
 
 
Total Liabilities and Equity
$
11,096

 
$
10,082

 
(a)
170,000 shares authorized; 66,368 shares issued and outstanding at September 30, 2018 and December 31, 2017.

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


13


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, 2017
66,368

 
$
364

 
$
2,729

 
$
899

 
$
3,992

Net income


 


 


 
334

 
334

Capital contributions from parent


 


 
429

 


 
429

Dividends declared on common stock


 


 


 
(271
)
 
(271
)
September 30, 2018
66,368

 
$
364

 
$
3,158

 
$
962

 
$
4,484

 
 
 
 
 
 
 
 
 
 
December 31, 2016
66,368

 
$
364

 
$
2,154

 
$
873

 
$
3,391

Net income


 


 


 
251

 
251

Capital contributions from parent


 


 
575

 


 
575

Dividends declared on common stock


 


 


 
(231
)
 
(231
)
September 30, 2017
66,368

 
$
364

 
$
2,729

 
$
893

 
$
3,986

 
(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


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,
 
2018
 
2017
 
2018
 
2017
Operating Revenues
$
802

 
$
818

 
$
2,417

 
$
2,350

 
 
 
 
 
 
 
 
Operating Expenses
 

 
 

 
 

 
 

Operation
 

 
 

 
 

 
 

Fuel
206

 
202

 
609

 
576

Energy purchases
22

 
22

 
135

 
120

Other operation and maintenance
216

 
197

 
632

 
594

Depreciation
119

 
114

 
354

 
324

Taxes, other than income
18

 
17

 
53

 
49

Total Operating Expenses
581

 
552

 
1,783

 
1,663

 
 
 
 
 
 
 
 
Operating Income
221

 
266

 
634

 
687

 
 
 
 
 
 
 
 
Other Income (Expense) - net

 
(1
)
 
(2
)
 
(9
)
 
 
 
 
 
 
 
 
Interest Expense
52

 
49

 
154

 
148

 
 
 
 
 
 
 
 
Interest Expense with Affiliate
7

 
5

 
18

 
13

 
 
 
 
 
 
 
 
Income Before Income Taxes
162

 
211

 
460

 
517

 
 
 
 
 
 
 
 
Income Taxes
32

 
79

 
102

 
195

 
 
 
 
 
 
 
 
Net Income
$
130

 
$
132

 
$
358

 
$
322

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


15


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,
 
2018
 
2017
 
2018
 
2017
Net income
$
130

 
$
132

 
$
358

 
$
322

 
 
 
 
 
 
 
 
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, $0, $7

 
(1
)
 

 
(12
)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
 
 
 
 
 
 
 
Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $0

 

 

 
1

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

 

 
2

 
1

Net actuarial (gain) loss, net of tax of $0, $0, ($1), ($2)
1

 
1

 
2

 
3

Total other comprehensive income (loss)
2

 

 
4

 
(7
)
 
 
 
 
 
 
 
 
Comprehensive income
$
132

 
$
132

 
$
362

 
$
315


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


16


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash Flows from Operating Activities
 

 
 

Net income
$
358

 
$
322

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

 
 

Depreciation
354

 
324

Amortization
13

 
19

Defined benefit plans - expense
12

 
19

Deferred income taxes and investment tax credits
71

 
173

Other
(2
)
 
1

Change in current assets and current liabilities
 

 
 

Accounts receivable
8

 
18

Accounts payable
4

 
(30
)
Accounts payable to affiliates
7

 
3

Unbilled revenues
54

 
19

Fuel, materials and supplies
17

 
34

Regulatory assets and liabilities, net
62

 
(3
)
Taxes payable
(11
)
 
13

Accrued interest
41

 
41

Other
(36
)
 
2

Other operating activities
 

 
 

Defined benefit plans - funding
(126
)
 
(32
)
Expenditures for asset retirement obligations
(46
)
 
(22
)
Other assets
(1
)
 
5

Other liabilities
8

 
14

Net cash provided by operating activities
787

 
920

Cash Flows from Investing Activities
 

 
 

Expenditures for property, plant and equipment
(826
)
 
(579
)
Other investing activities
1

 
4

Net cash used in investing activities
(825
)
 
(575
)
Cash Flows from Financing Activities
 

 
 

Net increase (decrease) in notes payable with affiliate