Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

PPL Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars, except share data)

									Three Months Ended March 31,
															2022						2021
Operating Revenues															$	1,782					$	1,498
Operating Expenses
Operation
Fuel															212						177
Energy purchases															352						220
Other operation and maintenance															433						367
Depreciation															271						267
Taxes, other than income															60						52
Total Operating Expenses															1,328						1,083
Operating Income															454						415
Other Income (Expense) - net (Note 12)															—						—
Interest Expense															107						153
Income from Continuing Operations Before Income Taxes															347						262
Income Taxes															74						59
Income from Continuing Operations After Income Taxes															273						203
Loss from Discontinued Operations (net of income taxes) (Note 8)															—						(2,043)
Net Income (Loss)															$	273					$	(1,840)
Earnings Per Share of Common Stock:
Basic and Diluted
Income from Continuing Operations After Income Taxes															$	0.37					$	0.26
Loss from Discontinued Operations (net of income taxes)															—						(2.65)
Net Income (Loss) Available to PPL Common Shareowners															$	0.37					$	(2.39)
Weighted-Average Shares of Common Stock Outstanding (in thousands)
Basic															735,503						769,159
Diluted															736,184						770,710

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

PPL Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars)

									Three Months Ended March 31,
															2022						2021
Net income (loss)															$	273					$	(1,840)
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, ($80)															—						303
Qualifying derivatives, net of tax of $0, $16															—						(30)
Equity investees' other comprehensive income (loss), net of tax of $0, $0															1						—
Defined benefit plans:
Prior service costs, net of tax of $0, $0															(1)						—
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
Qualifying derivatives, net of tax of $0, ($14)															1						25
Defined benefit plans:
Prior service costs, net of tax of $0, $0															1						—
Net actuarial (gain) loss, net of tax of ($1), ($22)															3						40
Total other comprehensive income (loss)															5						338
Comprehensive income (loss)															$	278					$	(1,502)

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

PPL Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars)

			Three Months Ended March 31,
			2022						2021
Cash Flows from Operating Activities
Net income (loss)			$	273					$	(1,840)
Loss from discontinued operations (net of income taxes)			—						2,043
Income from continuing operations (net of income taxes)			273						203
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			271						267
Amortization			7						11
Deferred income taxes and investment tax credits			39						50
Stock-based compensation expense			11						6
Other			(4)						(1)
Change in current assets and current liabilities
Accounts receivable			(38)						(60)
Accounts payable			4						(42)
Unbilled revenues			28						76
Fuel, materials and supplies			42						41
Prepayments			(75)						(76)
Taxes payable			(4)						(25)
Regulatory assets and liabilities, net			(41)						29
Accrued interest			57						69
Other			(53)						(76)
Other operating activities
Defined benefit plans - funding			(3)						(33)
Other assets			(18)						(74)
Other liabilities			6						31
Net cash provided by operating activities - continuing operations			502						396
Net cash provided by operating activities - discontinued operations			—						267
Net cash provided by operating activities			502						663
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(427)						(471)
Other investing activities			—						(1)
Net cash provided by (used in) investing activities - continuing operations			(427)						(472)
Net cash provided by (used in) investing activities - discontinued operations			—						(263)
Net cash provided by (used in) investing activities			(427)						(735)
Cash Flows from Financing Activities
Payment of common stock dividends			(306)						(320)
Retirement of term loan			—						(300)
Retirement of commercial paper			—						(73)
Net increase (decrease) in short-term debt			916						752
Other financing activities			(7)						(4)
Net cash provided by (used in) financing activities - continuing operations			603						55
Net cash provided by (used in) financing activities - discontinued operations			—						(126)
Net cash provided by (used in) financing activities			603						(71)
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash included in Discontinued Operations			—						8
Net (Increase) Decrease in Cash, Cash Equivalents and Restricted Cash included in Discontinued Operations			—						114
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash			678						(21)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period			3,572						443
Cash, Cash Equivalents and Restricted Cash at End of Period			$	4,250					$	422
Supplemental Disclosures of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,			$	236					$	229

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

CONDENSED CONSOLIDATED BALANCE SHEETS

PPL Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Assets
Current Assets
Cash and cash equivalents			$	4,249					$	3,571
Accounts receivable (less reserve: 2022, $66; 2021, $65)
Customer			625						583
Other			44						58
Unbilled revenues (less reserve: 2022, $2; 2021, $2)			279						307
Fuel, materials and supplies			280						322
Prepayments			135						60
Other current assets			101						106
Total Current Assets			5,713						5,007
Property, Plant and Equipment
Regulated utility plant			30,679						30,477
Less: accumulated depreciation - regulated utility plant			6,599						6,488
Regulated utility plant, net			24,080						23,989
Non-regulated property, plant and equipment			278						266
Less: accumulated depreciation - non-regulated property, plant and equipment			41						41
Non-regulated property, plant and equipment, net			237						225
Construction work in progress			1,328						1,256
Property, Plant and Equipment, net			25,645						25,470
Other Noncurrent Assets
Regulatory assets			1,219						1,236
Goodwill			716						716
Other intangibles			340						343
Other noncurrent assets (less reserve for accounts receivable: 2022, $2; 2021 $2)			474						451
Total Other Noncurrent Assets			2,749						2,746
Total Assets			$	34,107					$	33,223

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

CONDENSED CONSOLIDATED BALANCE SHEETS

PPL Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Liabilities and Equity
Current Liabilities
Short-term debt			$	985					$	69
Long-term debt due within one year			474						474
Accounts payable			686						679
Taxes			92						96
Interest			138						81
Dividends			147						305
Regulatory liabilities			122						182
Other current liabilities			389						437
Total Current Liabilities			3,033						2,323
Long-term Debt			10,668						10,666
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			3,211						3,151
Investment tax credits			124						119
Accrued pension obligations			183						183
Asset retirement obligations			151						157
Regulatory liabilities			2,417						2,422
Other deferred credits and noncurrent liabilities			455						479
Total Deferred Credits and Other Noncurrent Liabilities			6,541						6,511
Commitments and Contingent Liabilities (Notes 6 and 10)
Equity
Common stock - $0.01 par value (a)			8						8
Additional paid-in capital			12,299						12,303
Treasury stock			(987)						(1,003)
Earnings reinvested			2,697						2,572
Accumulated other comprehensive loss			(152)						(157)
Total Equity			13,865						13,723
Total Liabilities and Equity			$	34,107					$	33,223

(a)1,560,000 shares authorized, 770,013 shares issued and 735,765 shares outstanding at March 31, 2022. 1,560,000 shares authorized, 769,890 shares issued and 735,112 shares outstanding at December 31, 2021.

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

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

PPL Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars)

			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Treasury stock						Earnings reinvested						Accumulated other comprehensive loss						Total
December 31, 2021			735,112						$	8					12,303						$	(1,003)					$	2,572					$	(157)					$	13,723
Common stock issued			123												4																								4
Treasury stock issued			530																		16																		16
Stock-based compensation															(8)																								(8)
Net income (loss)																											273												273
Dividends and dividend equivalents (b)																											(148)												(148)
Other comprehensive income (loss)																																	5						5
March 31, 2022			735,765						$	8					$	12,299					$	(987)					$	2,697					$	(152)					$	13,865
December 31, 2020			768,907						$	8					12,270						$	—					$	5,315					$	(4,220)					$	13,373
Common stock issued			520												16																								16
Stock-based compensation															(13)																								(13)
Net income (loss)																											(1,840)												(1,840)
Dividends and dividend equivalents (b)																											(320)												(320)
Other comprehensive income (loss)																																	338						338
March 31, 2021			769,427						$	8					$	12,273					$	—					$	3,155					$	(3,882)					$	11,554

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

(b)Dividends declared per share of common stock were $0.200 and $0.415 for the three months ended March 31, 2022 and March 31, 2021.

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

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

PPL Electric Utilities Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars)

									Three Months Ended March 31,
															2022						2021
Operating Revenues															$	775					$	605
Operating Expenses
Operation
Energy purchases															256						149
Other operation and maintenance															160						128
Depreciation															98						108
Taxes, other than income															37						32
Total Operating Expenses															551						417
Operating Income															224						188
Other Income (Expense) - net (Note 12)															6						5
Interest Income from Affiliate															2						—
Interest Expense															39						43
Income Before Income Taxes															193						150
Income Taxes															50						37
Net Income (a)															$	143					$	113

(a)Net income equals comprehensive income.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

PPL Electric Utilities Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars)

			Three Months Ended March 31,
			2022						2021
Cash Flows from Operating Activities
Net income			$	143					$	113
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			98						108
Amortization			3						6
Defined benefit plans - expense (income)			(6)						(3)
Deferred income taxes and investment tax credits			41						13
Other			(4)						(4)
Change in current assets and current liabilities
Accounts receivable			(52)						(37)
Accounts payable			20						(9)
Unbilled revenues			14						37
Prepayments			(72)						(78)
Regulatory assets and liabilities, net			(43)						39
Taxes payable			(15)						(7)
Other			2						(7)
Other operating activities
Defined benefit plans - funding			—						(21)
Other assets			(2)						(27)
Other liabilities			(5)						(2)
Net cash provided by operating activities			122						121
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(188)						(223)
Notes receivable from affiliates			203						—
Other investing activities			—						1
Net cash provided by (used in) investing activities			15						(222)
Cash Flows from Financing Activities
Return of capital to parent			(40)						—
Payment of common stock dividends to parent			(72)						(115)
Net increase in short-term debt			—						205
Net cash provided by (used in) financing activities			(112)						90
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash			25						(11)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period			21						40
Cash, Cash Equivalents and Restricted Cash at End of Period			$	46					$	29
Supplemental Disclosure of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,			$	153					$	143

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

CONDENSED CONSOLIDATED BALANCE SHEETS

PPL Electric Utilities Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Assets
Current Assets
Cash and cash equivalents			$	46					$	21
Accounts receivable (less reserve: 2022, $33; 2021, $31)
Customer			333						305
Other			27						22
Accounts receivable from affiliates			9						11
Notes receivable from affiliate			296						499
Unbilled revenues (less reserve: 2022, $1; 2021, $2)			115						129
Materials and supplies			64						61
Prepayments			85						13
Regulatory assets			13						22
Other current assets			28						21
Total Current Assets			1,016						1,104
Property, Plant and Equipment
Regulated utility plant			14,177						14,082
Less: accumulated depreciation - regulated utility plant			3,396						3,386
Regulated utility plant, net			10,781						10,696
Construction work in progress			641						581
Property, Plant and Equipment, net			11,422						11,277
Other Noncurrent Assets
Regulatory assets			475						488
Intangibles			270						270
Pension benefit asset			67						50
Other noncurrent assets (less reserve for accounts receivable: 2022, $2; 2021, $2)			124						113
Total Other Noncurrent Assets			936						921
Total Assets			$	13,374					$	13,302

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

CONDENSED CONSOLIDATED BALANCE SHEETS

PPL Electric Utilities Corporation and Subsidiaries

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Liabilities and Equity
Current Liabilities
Long-term debt due within one year			$	474					$	474
Accounts payable			411						367
Accounts payable to affiliates			82						56
Taxes			16						31
Interest			45						35
Regulatory liabilities			101						153
Other current liabilities			108						108
Total Current Liabilities			1,237						1,224
Long-term Debt			4,011						4,010
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			1,716						1,668
Regulatory liabilities			555						559
Other deferred credits and noncurrent liabilities			88						105
Total Deferred Credits and Other Noncurrent Liabilities			2,359						2,332
Commitments and Contingent Liabilities (Notes 6 and 10)
Equity
Common stock - no par value (a)			364						364
Additional paid-in capital			4,214						4,254
Earnings reinvested			1,189						1,118
Total Equity			5,767						5,736
Total Liabilities and Equity			$	13,374					$	13,302

(a)170,000 shares authorized; 66,368 shares issued and outstanding at March 31, 2022 and December 31, 2021.

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

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, 2021			66,368						$	364					$	4,254					$	1,118					$	5,736
Net income																					143						143
Return of capital to parent															(40)												(40)
Dividends declared on common stock																					(72)						(72)
March 31, 2022			66,368						$	364					$	4,214					$	1,189					$	5,767
December 31, 2020			66,368						$	364					$	3,753					$	1,007					$	5,124
Net income																					113						113
Dividends declared on common stock																					(115)						(115)
March 31, 2021			66,368						$	364					$	3,753					$	1,005					$	5,122

(a)Shares in thousands. All common shares of PPL Electric stock are owned by PPL Energy Holdings.

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

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CONDENSED STATEMENTS OF INCOME

Louisville Gas and Electric Company

(Unaudited)

(Millions of Dollars)

									Three Months Ended March 31,
															2022						2021
Operating Revenues
Retail and wholesale															$	481					$	421
Electric revenue from affiliate															12						7
Total Operating Revenues															493						428
Operating Expenses
Operation
Fuel															81						67
Energy purchases															91						66
Energy purchases from affiliate															2						5
Other operation and maintenance															100						96
Depreciation															74						66
Taxes, other than income															12						11
Total Operating Expenses															360						311
Operating Income															133						117
Other Income (Expense) - net															(1)						(2)
Interest Expense															20						21
Income Before Income Taxes															112						94
Income Taxes															19						19
Net Income (a)															$	93					$	75

(a)Net income equals comprehensive income.

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

CONDENSED STATEMENTS OF CASH FLOWS

Louisville Gas and Electric Company

(Unaudited)

(Millions of Dollars)

			Three Months Ended March 31,
			2022						2021
Cash Flows from Operating Activities
Net income			$	93					$	75
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			74						66
Amortization			(1)						2
Defined benefit plans - expense			—						1
Deferred income taxes and investment tax credits			(4)						(1)
Other			1						—
Change in current assets and current liabilities
Accounts receivable			4						(1)
Accounts receivable from affiliates			2						(3)
Accounts payable			(1)						8
Accounts payable to affiliates			(10)						(5)
Unbilled revenues			10						19
Fuel, materials and supplies			42						28
Regulatory assets and liabilities, net			5						(10)
Taxes payable			—						4
Accrued interest			17						18
Other			(6)						(17)
Other operating activities
Defined benefit plans - funding			—						(1)
Expenditures for asset retirement obligations			(6)						(6)
Other assets			(1)						—
Other liabilities			(1)						4
Net cash provided by operating activities			218						181
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(99)						(111)
Net increase in notes receivable with affiliates			(4)						—
Net cash used in investing activities			(103)						(111)
Cash Flows from Financing Activities
Net decrease in notes payable to affiliates			(324)						—
Net increase in short-term debt			284						31
Retirement of commercial paper			—						(41)
Payment of common stock dividends to parent			(75)						(60)
Net cash used in financing activities			(115)						(70)
Net Increase (Decrease) in Cash and Cash Equivalents			—						—
Cash and Cash Equivalents at Beginning of Period			9						7
Cash and Cash Equivalents at End of Period			$	9					$	7
Supplemental Disclosure of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,			$	30					$	46

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

CONDENSED BALANCE SHEETS

Louisville Gas and Electric Company

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Assets
Current Assets
Cash and cash equivalents			$	9					$	9
Accounts receivable (less reserve: 2022, $3; 2021, $3)
Customer			133						130
Other			12						25
Unbilled revenues (less reserve: 2022, $0; 2021, $0)			70						80
Accounts receivable from affiliates			29						31
Notes receivable from affiliates			4						—
Fuel, materials and supplies			95						137
Prepayments			14						14
Regulatory assets			31						33
Other current assets			—						2
Total Current Assets			397						461
Property, Plant and Equipment
Regulated utility plant			7,245						7,192
Less: accumulated depreciation - regulated utility plant			1,208						1,172
Regulated utility plant, net			6,037						6,020
Construction work in progress			226						242
Property, Plant and Equipment, net			6,263						6,262
Other Noncurrent Assets
Regulatory assets			329						337
Goodwill			389						389
Other intangibles			28						30
Other noncurrent assets			118						113
Total Other Noncurrent Assets			864						869
Total Assets			$	7,524					$	7,592

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

CONDENSED BALANCE SHEETS

Louisville Gas and Electric Company

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Liabilities and Equity
Current Liabilities
Short-term debt			$	353					$	69
Notes payable to affiliates			—						324
Accounts payable			127						163
Accounts payable to affiliates			21						31
Customer deposits			32						32
Taxes			34						34
Price risk management liabilities			1						1
Regulatory liabilities			14						21
Interest			32						15
Asset retirement obligations			10						10
Other current liabilities			30						37
Total Current Liabilities			654						737
Long-term Debt			2,006						2,006
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			756						751
Investment tax credits			32						32
Price risk management liabilities			13						17
Asset retirement obligations			69						74
Regulatory liabilities			820						818
Other deferred credits and noncurrent liabilities			77						78
Total Deferred Credits and Other Noncurrent Liabilities			1,767						1,770
Commitments and Contingent Liabilities (Notes 6 and 10)
Stockholder's Equity
Common stock - no par value (a)			424						424
Additional paid-in capital			1,997						1,997
Earnings reinvested			676						658
Total Equity			3,097						3,079
Total Liabilities and Equity			$	7,524					$	7,592

(a)75,000 shares authorized; 21,294 shares issued and outstanding at March 31, 2022 and December 31, 2021.

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

CONDENSED STATEMENTS OF EQUITY

Louisville Gas and Electric Company

(Unaudited)

(Millions of Dollars)

			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Earnings reinvested						Total
December 31, 2021			21,294						$	424					$	1,997					$	658					$	3,079
Net income																					93						93
Cash dividends declared on common stock																					(75)						(75)
March 31, 2022			21,294						$	424					$	1,997					$	676					$	3,097
December 31, 2020			21,294						$	424					$	1,923					$	601					$	2,948
Net income																					75						75
Cash dividends declared on common stock																					(60)						(60)
March 31, 2021			21,294						$	424					$	1,923					$	616					$	2,963

(a)Shares in thousands. All common shares of LG&E stock are owned by LKE.

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

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CONDENSED STATEMENTS OF INCOME

Kentucky Utilities Company

(Unaudited)

(Millions of Dollars)

									Three Months Ended March 31,
															2022						2021
Operating Revenues
Retail and wholesale															$	523					$	464
Electric revenue from affiliate															2						5
Total Operating Revenues															525						469
Operating Expenses
Operation
Fuel															131						110
Energy purchases															5						5
Energy purchases from affiliate															12						7
Other operation and maintenance															113						115
Depreciation															95						89
Taxes, other than income															11						10
Total Operating Expenses															367						336
Operating Income															158						133
Other Income (Expense) - net															—						1
Interest Expense															27						27
Income Before Income Taxes															131						107
Income Taxes															24						21
Net Income (a)															$	107					$	86

(a)Net income equals comprehensive income.

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

CONDENSED STATEMENTS OF CASH FLOWS

Kentucky Utilities Company

(Unaudited)

(Millions of Dollars)

			Three Months Ended March 31,
			2022						2021
Cash Flows from Operating Activities
Net income			$	107					$	86
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			95						89
Amortization			4						2
Defined benefit plans - expense			(1)						—
Deferred income taxes and investment tax credits			(3)						(2)
Other			2						—
Change in current assets and current liabilities
Accounts receivable			(6)						2
Accounts receivable from affiliates			—						1
Accounts payable			—						(7)
Accounts payable to affiliates			(12)						2
Unbilled revenues			4						20
Fuel, materials and supplies			3						15
Regulatory assets and liabilities, net			(3)						—
Taxes payable			20						13
Accrued interest			26						25
Other			(5)						(17)
Other operating activities
Expenditures for asset retirement obligations			(6)						(9)
Other assets			(6)						—
Other liabilities			—						4
Net cash provided by operating activities			219						224
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(129)						(127)
Net cash used in investing activities			(129)						(127)
Cash Flows from Financing Activities
Net decrease in notes payable to affiliates			(290)						—
Net increase (decrease) in short-term debt			285						(23)
Retirement of commercial paper			—						(32)
Payment of common stock dividends to parent			(90)						(56)
Net cash used in financing activities			(95)						(111)
Net Decrease in Cash and Cash Equivalents			(5)						(14)
Cash and Cash Equivalents at Beginning of Period			13						22
Cash and Cash Equivalents at End of Period			$	8					$	8
Supplemental Disclosure of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,			$	49					$	40

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

CONDENSED BALANCE SHEETS

Kentucky Utilities Company

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Assets
Current Assets
Cash and cash equivalents			$	8					$	13
Accounts receivable (less reserve: 2022, $2; 2021, $3)
Customer			154						144
Other			6						12
Unbilled revenues (less reserve: 2022, $0; 2021, $0)			87						91
Fuel, materials and supplies			121						124
Prepayments			15						15
Regulatory assets			14						9
Other current assets			—						2
Total Current Assets			405						410
Property, Plant and Equipment
Regulated utility plant			9,272						9,219
Less: accumulated depreciation - regulated utility plant			1,995						1,929
Regulated utility plant, net			7,277						7,290
Construction work in progress			409						378
Property, Plant and Equipment, net			7,686						7,668
Other Noncurrent Assets
Regulatory assets			415						411
Goodwill			607						607
Other intangibles			22						23
Other noncurrent assets			158						153
Total Other Noncurrent Assets			1,202						1,194
Total Assets			$	9,293					$	9,272

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

CONDENSED BALANCE SHEETS

Kentucky Utilities Company

(Unaudited)

(Millions of Dollars, shares in thousands)

			March 31, 2022						December 31, 2021
Liabilities and Equity
Current Liabilities
Short-term debt			$	285					$	—
Notes payable to affiliates			4						294
Accounts payable			91						108
Accounts payable to affiliates			52						64
Customer deposits			33						32
Taxes			39						19
Regulatory liabilities			7						8
Interest			44						18
Asset retirement obligations			20						22
Other current liabilities			42						47
Total Current Liabilities			617						612
Long-term Debt			2,619						2,618
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			870						865
Investment tax credits			86						87
Asset retirement obligations			82						83
Regulatory liabilities			1,042						1,045
Other deferred credits and noncurrent liabilities			32						34
Total Deferred Credits and Other Noncurrent Liabilities			2,112						2,114
Commitments and Contingent Liabilities (Notes 6 and 10)
Stockholder's Equity
Common stock - no par value (a)			308						308
Additional paid-in capital			2,957						2,957
Earnings reinvested			680						663
Total Equity			3,945						3,928
Total Liabilities and Equity			$	9,293					$	9,272

(a)80,000 shares authorized; 37,818 shares issued and outstanding at March 31, 2022 and December 31, 2021.

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

CONDENSED STATEMENTS OF EQUITY

Kentucky Utilities Company

(Unaudited)

(Millions of Dollars)

			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Earnings reinvested												Total
December 31, 2021			37,818						$	308					$	2,957					$	663											$	3,928
Net income																					107												107
Cash dividends declared on common stock																					(90)												(90)
March 31, 2022			37,818						$	308					$	2,957					$	680											$	3,945
December 31, 2020			37,818						$	308					$	2,857					$	617											$	3,782
Net income																					86												86
Cash dividends declared on common stock																					(56)												(56)
March 31, 2021			37,818						$	308					$	2,857					$	647											$	3,812

(a)Shares in thousands. All common shares of KU stock are owned by LKE.

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

Combined Notes to Condensed Financial Statements (Unaudited)

Index to Combined Notes to Condensed Financial Statements

The notes to the condensed financial statements that follow are a combined presentation. The following list indicates the Registrants to which the notes apply:

						Registrant
						PPL						PPL Electric						LG&E						KU
1. Interim Financial Statements						x						x						x						x
2. Segment and Related Information						x						x						x						x
3. Revenue from Contracts with Customers						x						x						x						x
4. Earnings Per Share						x
5. Income Taxes						x						x						x						x
6. Utility Rate Regulation						x						x						x						x
7. Financing Activities						x						x						x						x
8. Acquisitions, Development and Divestitures						x
9. Defined Benefits						x						x						x						x
10. Commitments and Contingencies						x						x						x						x
11. Related Party Transactions												x						x						x
12. Other Income (Expense) - net						x						x
13. Fair Value Measurements						x						x						x						x
14. Derivative Instruments and Hedging Activities						x						x						x						x
15. Asset Retirement Obligations						x												x						x
16. Accumulated Other Comprehensive Income (Loss)						x

1. Interim Financial Statements

(All Registrants)

Capitalized terms and abbreviations appearing in the unaudited combined notes to condensed financial statements are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for each Registrant's related activities and disclosures. Within combined disclosures, amounts are disclosed for any Registrant when significant.

The accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation in accordance with GAAP are reflected in the condensed financial statements. All adjustments are of a normal recurring nature, except as otherwise disclosed. Each Registrant's Balance Sheet at December 31, 2021 is derived from that Registrant's 2021 audited Balance Sheet. The financial statements and notes thereto should be read in conjunction with the financial statements and notes contained in each Registrant's 2021 Form 10-K. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or other future periods, because results for interim periods can be disproportionately influenced by various factors, developments and seasonal variations.

(PPL*)*

On March 17, 2021, PPL WPD Limited entered into a share purchase agreement to sell PPL's U.K. utility business, which prior to its sale substantially represented PPL's U.K. Regulated segment, to a subsidiary of National Grid plc. The sale was completed on June 14, 2021. The results of operations of the U.K. utility business are classified as Discontinued Operations on PPL's Statements of Income for the three months ended March 31, 2021. PPL has elected to separately report the cash flows of

continuing and discontinued operations on the Statements of Cash Flows for the three months ended March 31, 2021. Unless otherwise noted, the notes to these financial statements exclude amounts related to discontinued operations. See Note 8 for additional information.

2. Segment and Related Information

(PPL)

See Note 2 in PPL's 2021 Form 10-K for a discussion of reportable segments and related information.

Income Statement data for the segments and reconciliation to PPL's consolidated results for the periods ended March 31 are as follows:

									Three Months
															2022						2021
Operating Revenues from external customers
Kentucky Regulated															$	1,004					$	885
Pennsylvania Regulated															775						605
Corporate and Other															3						8
Total															$	1,782					$	1,498
Net Income (Loss)
Kentucky Regulated															$	179					$	146
Pennsylvania Regulated															143						113
Corporate and Other															(49)						(56)
Discontinued Operations (a)															—						(2,043)
Total															$	273					$	(1,840)

(a)See Note 8 for additional information on the sale of the U.K. utility business.

The following provides Balance Sheet data for the segments and reconciliation to PPL's consolidated Balance Sheets as of:

			March 31, 2022						December 31, 2021
Assets
Kentucky Regulated			$	16,317					$	16,360
Pennsylvania Regulated			13,374						13,336
Corporate and Other (a)			4,416						3,527
Total			$	34,107					$	33,223

(a)Primarily consists of unallocated items, including cash, PP&E, goodwill, the elimination of inter-segment transactions as well as the assets of Safari Energy.

(PPL Electric, LG&E and KU)

PPL Electric has two operating segments, distribution and transmission, which are aggregated into a single reportable segment. LG&E and KU are individually single operating and reportable segments.

3. Revenue from Contracts with Customers

(All Registrants)

See Note 3 in the Registrants' 2021 Form 10-K for a discussion of the principal activities from which the Registrants and PPL’s segments generate their revenues.

The following tables reconcile "Operating Revenues" included in each Registrant's Statement of Income with revenues generated from contracts with customers for the periods ended March 31.

			2022 Three Months
			PPL						PPL Electric						LG&E						KU
Operating Revenues (a)			$	1,782					$	775					$	493					$	525
Revenues derived from:
Alternative revenue programs (b)			(27)						(36)						6						3
Other (c)			(7)						(4)						(2)						(1)
Revenues from Contracts with Customers			$	1,748					$	735					$	497					$	527
			2021 Three Months
			PPL						PPL Electric						LG&E						KU
Operating Revenues (a)			$	1,498					$	605					$	428					$	469
Revenues derived from:
Alternative revenue programs (b)			24						22						—						2
Other (c)			(6)						—						(3)						(3)
Revenues from Contracts with Customers			$	1,516					$	627					$	425					$	468

(a)PPL Electric represents revenues from external customers reported by the Pennsylvania Regulated segment and LG&E and KU, net of intercompany power sales and transmission revenues, represent revenues from external customers reported by the Kentucky Regulated segment. See Note 2 for additional information.

(b)Alternative revenue programs include the transmission formula rate for PPL Electric, the ECR and DSM programs for LG&E and KU, the GLT program and gas supply clause incentive mechanism for LG&E, and the generation formula rate for KU. This line item shows the over/under collection of these rate mechanisms with over-collections of revenue shown as positive amounts in the table above and under-collections shown as negative amounts. For PPL Electric, the three months ended March 31, 2022, includes $44 million related to the amortization of the regulatory liability recorded in 2021 for a reduction in the transmission formula rate return on equity that is reflected in rates in 2022. The three months ended March 31, 2021, included a $27 million revenue reduction recorded as a result of the challenge to the transmission formula rate return on equity. See Note 6 for additional information.

(c)Represents additional revenues outside the scope of revenues from contracts with customers, such as lease and other miscellaneous revenues.

The following tables show revenues from contracts with customers disaggregated by customer class for the periods ended March 31.

			2022 Three Months
			Residential						Commercial						Industrial						Other (a)						Wholesale - municipality						Wholesale - other (b)						Transmission						Revenues from Contracts with Customers
PPL
PA Regulated			$	453					$	108					$	15					$	12					$	—					$	—					$	147					$	735
KY Regulated			478						270						154						83						6						19						—						1,010
Corp and Other			—						—						—						3						—						—						—						3
Total PPL			$	931					$	378					$	169					$	98					$	6					$	19					$	147					$	1,748
PPL Electric			$	453					$	108					$	15					$	12					$	—					$	—					$	147					$	735
LG&E			$	246					$	146					$	45					$	39					$	—					$	21					$	—					$	497
KU			$	232					$	124					$	109					$	44					$	6					$	12					$	—					$	527

			2021 Three Months
			Residential						Commercial						Industrial						Other (a)						Wholesale - municipality						Wholesale - other (b)						Transmission						Revenues from Contracts with Customers
PPL
PA Regulated			$	361					$	82					$	12					$	12					$	—					$	—					$	160					$	627
KY Regulated			413						231						140						71						6						20						—						881
Corp and Other			—						—						—						8						—						—						—						8
Total PPL			$	774					$	313					$	152					$	91					$	6					$	20					$	160					$	1,516
PPL Electric			$	361					$	82					$	12					$	12					$	—					$	—					$	160					$	627
LG&E			$	205					$	121					$	46					$	34					$	—					$	19					$	—					$	425
KU			$	208					$	110					$	94					$	37					$	6					$	13					$	—					$	468

(a)Primarily includes revenues from pole attachments, street lighting, other public authorities and other non-core businesses.

(b)Includes wholesale power and transmission revenues. LG&E and KU amounts include intercompany power sales and transmission revenues, which are eliminated upon consolidation at the Kentucky Regulated segment.

As discussed in Note 2 in PPL's 2021 Form 10-K, PPL segments its business by geographic location. Revenues from external customers for each segment/geographic location are reconciled to revenues from contracts with customers in the footnotes to the tables above.

Contract receivables from customers are primarily included in "Accounts receivable - Customer", "Unbilled revenues", and "Other noncurrent assets" on the Balance Sheets.

The following table shows the accounts receivable and unbilled revenues balances that were impaired for the periods ended March 31.

									Three Months
															2022						2021
PPL															$	7					$	2
PPL Electric															5						1
LG&E															1						—
KU															1						1

The following table shows the balances and certain activity of contract liabilities resulting from contracts with customers.

			PPL						PPL Electric						LG&E						KU
Contract liabilities at December 31, 2021			$	42					$	25					$	6					$	6
Contract liabilities at March 31, 2022			33						17						4						5
Revenue recognized during the three months ended March 31, 2022 that was included in the contract liability balance at December 31, 2021			22						10						6						6
Contract liabilities at December 31, 2020			$	40					$	23					$	5					$	6
Contract liabilities at March 31, 2021			33						16						5						5
Revenue recognized during the three months ended March 31, 2021 that was included in the contract liability balance at December 31, 2020			21						9						5						6

Contract liabilities result from recording contractual billings in advance for customer attachments to the Registrants' infrastructure and payments received in excess of revenues earned to date. Advanced billings for customer attachments are generally recognized as revenue ratably over the quarterly billing period. Payments received in excess of revenues earned to date are recognized as revenue as services are delivered in subsequent periods.

At March 31, 2022, PPL had $46 million of performance obligations attributable to Corporate and Other that have not been satisfied. Of this amount, PPL expects to recognize approximately $30 million within the next 12 months.

4. Earnings Per Share

(PPL)

Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the applicable period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding, increased by incremental shares that would be outstanding if potentially dilutive share-based payment awards were converted to common shares as calculated using the Two-Class Method or Treasury Stock Method.

Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the periods ended March 31 used in the EPS calculation are:

									Three Months
															2022						2021
Income (Numerator)
Income from continuing operations after income taxes available to PPL common shareowners - Basic and Diluted															$	273					$	203
Loss from discontinued operations (net of income taxes) available to PPL common shareowners - Basic and Diluted															$	—					$	(2,043)
Net income (loss) available to PPL common shareowners - Basic and Diluted															$	273					$	(1,840)
Shares of Common Stock (Denominator)
Weighted-average shares - Basic EPS															735,503						769,159
Add: Dilutive share-based payment awards															681						1,551
Weighted-average shares - Diluted EPS															736,184						770,710
Basic and Diluted EPS
Available to PPL common shareowners:
Income from continuing operations after income taxes															$	0.37					$	0.26
Loss from discontinued operations (net of income taxes)															—						(2.65)
Net Income (Loss) available to PPL common shareowners															$	0.37					$	(2.39)

For the periods ended March 31, PPL issued common stock related to stock-based compensation plans as follows (in thousands):

									Three Months
															2022						2021
Stock-based compensation plans															124						520

See Note 7 for common stock repurchased under an authorized share repurchase program.

For the periods ended March 31, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive.

									Three Months
															2022						2021
Stock-based compensation awards															154						233

5. Income Taxes

Reconciliations of income tax expense (benefit) for the periods ended March 31 are as follows.

(PPL)
									Three Months
															2022						2021
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 21%															$	73					$	55
Increase (decrease) due to:
State income taxes, net of federal income tax benefit															21						12
Valuation allowance adjustments															3						8
Amortization of investment tax credit including deferred taxes on basis adjustment															(3)						(1)
Depreciation and other items not normalized															(3)						(2)
Amortization of excess deferred federal and state income taxes															(18)						(12)
Other															1						(1)
Total increase (decrease)															1						4
Total income tax expense (benefit)															$	74					$	59

(PPL Electric)
									Three Months
															2022						2021
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%															$	41					$	32
Increase (decrease) due to:
State income taxes, net of federal income tax benefit															16						12
Depreciation and other items not normalized															(3)						(2)
Amortization of excess deferred federal income taxes															(3)						(3)
Other															(1)						(2)
Total increase (decrease)															9						5
Total income tax expense (benefit)															$	50					$	37

(LG&E)
									Three Months
															2022						2021
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%															$	24					$	20
Increase (decrease) due to:
State income taxes, net of federal income tax benefit															4						4
Amortization of excess deferred federal and state income taxes															(7)						(3)
Other															(2)						(2)
Total increase (decrease)															(5)						(1)
Total income tax expense (benefit)															$	19					$	19

(KU)
									Three Months
															2022						2021
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%															$	28					$	22
Increase (decrease) due to:
State income taxes, net of federal income tax benefit															5						4
Amortization of excess deferred federal and state income taxes															(6)						(4)
Other															(3)						(1)
Total increase (decrease)															(4)						(1)
Total income tax expense (benefit)															$	24					$	21

6. Utility Rate Regulation

(All Registrants)

The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.

			PPL												PPL Electric
			March 31, 2022						December 31, 2021						March 31, 2022						December 31, 2021
Current Regulatory Assets:
Gas supply clause			$	22					$	21					$	—					$	—
Smart meter rider			7						11						7						11
Fuel adjustment clause			15						11						—						—
Other			14						21						6						11
Total current regulatory assets (a)			$	58					$	64					$	13					$	22
Noncurrent Regulatory Assets:
Defined benefit plans			$	509					$	523					$	248					$	256
Plant outage costs			51						54						—						—
Storm costs			12						11						—						—
Unamortized loss on debt			23						24						3						4
Interest rate swaps			14						18						—						—
Terminated interest rate swaps			68						70						—						—
Accumulated cost of removal of utility plant			224						228						224						228
AROs			302						302						—						—
Other			16						6						—						—
Total noncurrent regulatory assets			$	1,219					$	1,236					$	475					$	488

			PPL												PPL Electric
			March 31, 2022						December 31, 2021						March 31, 2022						December 31, 2021
Current Regulatory Liabilities:
Generation supply charge			$	9					$	10					$	9					$	10
Transmission service charge			23						21						23						21
Universal service rider			4						17						4						17
TCJA customer refund			19						22						19						22
Act 129 compliance rider			15						10						15						10
Transmission formula rate return on equity (b)			30						73						30						73
Economic relief billing credit			13						27						—						—
Other			9						2						1						—
Total current regulatory liabilities			$	122					$	182					$	101					$	153
Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant			$	647					$	639					$	—					$	—
Power purchase agreement - OVEC			33						35						—						—
Net deferred taxes			1,574						1,591						523						531
Defined benefit plans			101						95						32						28
Terminated interest rate swaps			62						62						—						—
Total noncurrent regulatory liabilities			$	2,417					$	2,422					$	555					$	559

			LG&E												KU
			March 31, 2022						December 31, 2021						March 31, 2022						December 31, 2021
Current Regulatory Assets:
Gas supply clause			$	22					$	21					$	—					$	—
Gas line tracker			—						3						—						—
Generation formula rate			—						—						1						2
Fuel adjustment clause			4						4						11						7
Other			5						5						2						—
Total current regulatory assets			$	31					$	33					$	14					$	9
Noncurrent Regulatory Assets:
Defined benefit plans			$	160					$	164					$	101					$	103
Storm costs			8						8						4						3
Unamortized loss on debt			12						12						8						8
Interest rate swaps			14						18						—						—
Terminated interest rate swaps			40						41						28						29
AROs			75						75						227						227
Plant outage costs			14						15						37						39
Other			6						4						10						2
Total noncurrent regulatory assets			$	329					$	337					$	415					$	411

			LG&E												KU
			March 31, 2022						December 31, 2021						March 31, 2022						December 31, 2021
Current Regulatory Liabilities:
Demand side management			$	—					$	—					$	3					$	—
Gas line tracker			3						—						—						—
Economic relief billing credit			10						21						3						6
Other			1						—						1						2
Total current regulatory liabilities			$	14					$	21					$	7					$	8
Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant			$	268					$	262					$	379					$	377
Power purchase agreement - OVEC			23						24						10						11
Net deferred taxes			487						491						564						569
Defined benefit plans			11						10						58						57
Terminated interest rate swaps			31						31						31						31
Total noncurrent regulatory liabilities			$	820					$	818					$	1,042					$	1,045

(a)For PPL, these amounts are included in "Other current assets" on the Balance Sheets.

(b)See “Regulatory Matters - Federal Matters - PPL Electric Transmission Formula Rate Return on Equity” below for additional information.

Regulatory Matters

Federal Matters

PPL Electric Transmission Formula Rate Return on Equity (PPL and PPL Electric)

In May 2020, PP&L Industrial Customer Alliance (PPLICA) filed a complaint with the FERC alleging that PPL Electric’s base return on equity (ROE) used to determine PPL Electric’s formula transmission rate was unjust and unreasonable. In August 2021, PPL Electric entered into a settlement agreement (the Settlement) with PPLICA and all other parties, including intervenors. The key aspects of the Settlement include changes to PPL Electric’s base ROE, changes to the equity component of PPL Electric’s capital structure, allowing modification of the current rate year to a calendar year and allowing modification of the current formula rate based on a historic test year to a projected test year. The settlement was approved by the FERC in November 2021. The interim rates reflecting the agreed-to-base ROE in the Settlement were effective December 1, 2021.

In the first quarter of 2021, PPL and PPL Electric recorded a revenue reduction on the Statement of Income of $19 million after-tax representing an estimate of the revenue subject to refund from the date of the complaint through March 31, 2021. Of this amount, $13 million related to 2020.

As of December 31, 2021, PPL and PPL Electric had a regulatory liability on the Balance Sheet of $73 million, which represents revenue subject to refund based on the difference between charges that were calculated using the ROE in effect at the time and charges calculated using the revised ROE provided for in the Settlement, plus interest at the FERC interest rate. During the three months ended March 31, 2022, $44 million of revenue was refunded to customers. The remaining balance will be refunded to customers through May 31, 2022.

FERC Transmission Rate Filing (PPL, LG&E and KU)

In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc. (MISO), a regional transmission operator and energy market. The application sought termination of LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation for certain horizontal market power concerns arising out of the 1998 LG&E and KU merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or credits granted to a limited number of Kentucky municipalities for either certain LG&E and KU or MISO transmission charges incurred for transmission service received. In 2019, the FERC granted LG&E's and KU's request to remove the ongoing credits, conditioned upon the implementation by LG&E and KU of a transition mechanism for certain existing power supply arrangements, which was subsequently filed, modified, and approved by the FERC in 2020 and 2021. In 2020, LG&E and KU and other parties filed appeals with the D.C. Circuit Court of Appeals regarding FERC's orders on the

elimination of the mitigation and required transition mechanism. Oral arguments in the appellate proceeding occurred on February 14, 2022. LG&E and KU cannot predict the outcome of the respective appellate and FERC proceedings. LG&E and KU currently receive recovery of the waivers and credits provided through other rate mechanisms and such rate recovery would be anticipated to be adjusted in future rate proceedings consistent with potential changes or terminations of the waivers and credits, as such become effective.

Other

Purchase of Receivables Program (PPL and PPL Electric)

In accordance with a PUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. Accounts receivable that are acquired are initially recorded at fair value on the date of acquisition. During the three months ended March 31, 2022 and 2021, PPL Electric purchased $348 million and $324 million of accounts receivable from alternative suppliers.

7. Financing Activities

Credit Arrangements and Short-term Debt

(All Registrants)

The Registrants maintain credit facilities to enhance liquidity, provide credit support and act as a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, PPL's arrangements listed below include the credit facilities and commercial paper programs of PPL Electric, LG&E and KU. The amounts listed in the borrowed column below are recorded as "Short-term debt" on the Balance Sheets. The following credit facilities were in place at:

			March 31, 2022																														December 31, 2021
			Expiration Date						Capacity						Borrowed						Letters of Credit and Commercial Paper Issued						Unused Capacity						Borrowed						Letters of Credit and Commercial Paper Issued
PPL
PPL Capital Funding
Syndicated Credit Facility			Dec. 2026						$	1,250					$	—					$	347					$	903					$	—					$	—
Bilateral Credit Facility			Mar. 2023						100						—						—						100						—						—
Bilateral Credit Facility			Mar. 2023						100						—						15						85						—						15
Total PPL Capital Funding Credit Facilities									$	1,450					$	—					$	362					$	1,088					$	—					$	15
PPL Electric
Syndicated Credit Facility			Dec. 2026						$	650					$	—					$	1					$	649					$	—					$	1
LG&E
Syndicated Credit Facility			Dec. 2026						$	500					$	—					$	353					$	147					$	—					$	69
KU
Syndicated Credit Facility			Dec. 2026						$	400					$	—					$	285					$	115					$	—					$	—

(PPL)

In March 2022, PPL Capital Funding amended and restated its two existing $50 million bilateral credit facilities to extend the termination dates from March 9, 2022 to March 6, 2023 and to increase the borrowing capacity under each facility to $100 million.

(All Registrants)

PPL Capital Funding, PPL Electric, LG&E and KU maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facilities. The following commercial paper programs were in place at:

			March 31, 2022																								December 31, 2021
			Weighted - Average Interest Rate						Capacity						Commercial Paper Issuances						Unused Capacity						Weighted - Average Interest Rate						Commercial Paper Issuances
PPL Capital Funding			0.84%						$	1,350					$	347					$	1,003											$	—
PPL Electric									650						—						650												—
LG&E			0.72%						425						353						72						0.31%						69
KU			0.78%						350						285						65												—
Total									$	2,775					$	985					$	1,790											$	69

(PPL Electric, LG&E, and KU)

See Note 11 for discussion of intercompany borrowings.

(PPL)

Equity Securities

Share Repurchase

In August 2021, PPL's Board of Directors authorized share repurchases of up to $3 billion of PPL common shares. In 2021, PPL repurchased approximately $1 billion of PPL common shares. There were no share repurchases during the three months ended March 31, 2022. The actual additional amounts to be repurchased pursuant to this authority will depend on various factors, including PPL’s share price, market conditions, and the determination of other uses for the proceeds from the sale of the U.K. utility business, including for incremental capital expenditures. PPL may purchase shares on each trading day subject to market conditions and principles of best execution.

Dividends

In February 2022, PPL declared a quarterly common stock dividend, payable April 1, 2022, of 20.0 cents per share.

8. Acquisitions, Development and Divestitures

(PPL)

Discontinued Operations

Sale of the U.K. Utility Business

On June 14, 2021, PPL WPD Limited completed the sale of PPL's utility business to National Grid Holdings One plc (National Grid U.K.), a subsidiary of National Grid plc. The transaction resulted in cash proceeds of $10.7 billion inclusive of foreign currency hedges executed by PPL. PPL received net proceeds, after taxes and fees, of $10.4 billion. PPL WPD Limited agreed to indemnify National Grid U.K. for certain tax related matters. See Note 10 for additional information. PPL has not had and will not have any significant involvement with the U.K. utility business since completion of the sale.

Summarized Results of Discontinued Operations

The operations of the U.K. utility business are included in "Loss from Discontinued Operations (net of income taxes)" on the Statement of Income for the period ended March 31, 2021 as follows:

															Three Months
Operating Revenues																					$	634
Operating Expenses																					252
Other Income (Expense) - net																					66
Interest Expense (a)																					93
Income before income taxes																					355
Loss on sale																					(1,647)
Income taxes																					751
Loss from Discontinued Operations (net of income taxes)																					$	(2,043)

(a)No interest from corporate level debt was allocated to discontinued operations.

Acquisitions

Share Purchase Agreement to Acquire Narragansett Electric

On March 17, 2021, PPL and its subsidiary, PPL Energy Holdings, entered into a share purchase agreement (Narragansett SPA) with National Grid USA (National Grid U.S.), a subsidiary of National Grid plc to acquire 100% of the outstanding shares of common stock of Narragansett Electric for approximately $3.8 billion in cash. On May 3, 2021, an Assignment and Assumption Agreement was entered into by PPL, PPL Energy Holdings, PPL Rhode Island Holdings and National Grid U.S. whereby certain interests of PPL Energy Holdings in the Narragansett SPA were assigned to and assumed by PPL Rhode Island Holdings. Pursuant to that Assignment and Assumption Agreement, PPL Rhode Island Holdings became the purchasing entity under the Narragansett SPA. The acquisition is expected to be funded with proceeds from the sale of the U.K. utility business. PPL has agreed to guarantee all obligations of PPL Energy Holdings and PPL Rhode Island Holdings under the Narragansett SPA and the related Assignment and Assumption Agreement.

The closing of the acquisition is subject to the receipt of certain U.S. regulatory approvals or waivers, including, among others, authorizations or waivers from the Rhode Island Division of Public Utilities and Carriers (RIDPU), the Massachusetts Department of Public Utilities (MDPU), the Federal Communications Commission (FCC), and the FERC, as well as review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary conditions to closing, including the execution and delivery of certain related transaction documents.

• The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (HSR) with respect to the acquisition, expired on June 2, 2021. The HSR approval expires on June 2, 2022.

• On July 14, 2021, the FCC consented to the Transfer of Control Application for the transfer of control of certain communications licenses held by Narragansett Electric from National Grid U.S. to PPL. The FCC consent was originally set to expire on January 17, 2022, but has been extended for 180 days and is currently set to expire on July 16, 2022.

• On September 23, 2021, the FERC issued an order authorizing, as consistent with the public interest, the disposition of jurisdictional facilities that will result in PPL Rhode Island Holdings, LLC, acquiring 100% of the outstanding shares of common stock of Narragansett Electric.

• On July 16, 2021, the MDPU granted a waiver of jurisdiction with respect to the acquisition, finding that the acquisition would not adversely impact Massachusetts ratepayers. On March 3, 2022, the Massachusetts Supreme Judicial Court (SJC) issued a stay of the waiver order. On March 25, 2022, National Grid and the Massachusetts Attorney General filed with the SJC a Joint Stipulation of Voluntary Dismissal of Appeal and Motion to Lift the Court's March 3, 2022 Order of Stay, and on March 29, 2022, the SJC issued an order dismissing the appeal with prejudice and vacating the stay that it had previously entered.

• On February 23, 2022, the RIDPU issued an order authorizing the disposition of jurisdictional facilities that will result in PPL Rhode Island acquiring 100% of the outstanding shares of common stock of Narragansett Electric. The Rhode Island Attorney General subsequently appealed the RIDPU order approving the transaction to the Rhode Island Superior Court and requested a stay of the RIDPU order pending resolution of the appeal. On April 1, 2022, the Rhode Island Superior Court granted a stay of the RIDPU order, and oral arguments on the appeal were held on April 26, 2022. Favorable resolution of the appeals process in Rhode Island is the final pending approval needed to close the transaction.

PPL Energy Holdings and PPL Rhode Island Holdings and National Grid U.S. have each made customary representations, warranties and covenants in the Narragansett SPA, including, among others, customary indemnification provisions and covenants by National Grid U.S. to conduct the Narragansett Electric business in the ordinary course between the execution of

the Narragansett SPA and the closing of the acquisition. The consummation of the transaction is not subject to a financing condition.

In connection with the acquisition, National Grid U.S. and one or more of its subsidiaries and Narragansett Electric will enter into a transition services agreement, pursuant to which National Grid U.S. and/or one or more of its affiliates will agree to provide certain transition services to Narragansett Electric and its affiliates to facilitate the operation of Narragansett Electric following the consummation of the acquisition and the transition of operations to PPL, as agreed upon in the Narragansett SPA.

9. Defined Benefits

(PPL)

Certain net periodic defined benefit costs are applied to accounts that are further distributed among capital, expense, regulatory assets and regulatory liabilities, including certain costs allocated to applicable subsidiaries for plans sponsored by PPL Services and LKE. Following are the net periodic defined benefit costs (credits) of the plans sponsored by PPL and its subsidiaries for the periods ended March 31:

															Pension Benefits
									Three Months
															2022						2021
PPL
Service cost															$	12					$	13
Interest cost															32						32
Expected return on plan assets															(64)						(61)
Amortization of:
Prior service cost															2						2
Actuarial loss															12						25
Net periodic defined benefit costs (credits)															$	(6)					$	11

															Other Postretirement Benefits
									Three Months
															2022						2021
PPL
Service cost															$	1					$	2
Interest cost															4						4
Expected return on plan assets															(6)						(5)
Net periodic defined benefit costs (credits)															$	(1)					$	1

(All Registrants)

The non-service cost components of net periodic defined benefit costs (credits) (interest cost, expected return on plan assets, amortization of prior service cost and amortization of actuarial gain and loss) are presented in "Other Income (Expense) - net" on the Statements of Income. See Note 12 for additional information.

10. Commitments and Contingencies

Legal Matters

(All Registrants)

PPL and its subsidiaries are involved in legal proceedings, claims and litigation in the ordinary course of business. PPL and its subsidiaries cannot predict the outcome of such matters, or whether such matters may result in material liabilities, unless otherwise noted.

Talen Litigation (PPL)

Background

In September 2013, one of PPL's former subsidiaries, PPL Montana entered into an agreement to sell its hydroelectric generating facilities. In June 2014, PPL and PPL Energy Supply, the parent company of PPL Montana, entered into various definitive agreements with affiliates of Riverstone to spin off PPL Energy Supply and ultimately combine it with Riverstone's competitive power generation businesses to form a stand-alone company named Talen Energy. In November 2014, after executing the spinoff agreements but prior to the closing of the spinoff transaction, PPL Montana closed the sale of its hydroelectric generating facilities. Subsequently, on June 1, 2015, the spinoff of PPL Energy Supply was completed. Following the spinoff transaction, PPL had no continuing ownership interest in or control of PPL Energy Supply. In connection with the spinoff transaction, PPL Montana became Talen Montana, LLC (Talen Montana), a subsidiary of Talen Energy. Talen Energy Marketing also became a subsidiary of Talen Energy as a result of the June 2015 spinoff of PPL Energy Supply. Talen Energy has owned and operated both Talen Montana and Talen Energy Marketing since the spinoff. At the time of the spinoff, affiliates of Riverstone acquired a 35% ownership interest in Talen Energy. Riverstone subsequently acquired the remaining interests in Talen Energy in a take private transaction in December 2016.

Talen Montana Retirement Plan and Talen Energy Marketing, LLC, Individually and on Behalf of All Others Similarly Situated v. PPL Corporation et al.

On October 29, 2018, Talen Montana Retirement Plan and Talen Energy Marketing filed a putative class action complaint on behalf of current and contingent creditors of Talen Montana who allegedly suffered harm or allegedly will suffer reasonably foreseeable harm as a result of a November 2014 distribution of proceeds from the sale of then-PPL Montana's hydroelectric generating facilities. The action was filed in the Sixteenth Judicial District of the State of Montana, Rosebud County, against PPL and certain of its affiliates and current and former officers and directors (Talen Putative Class Action). Plaintiff asserts claims for, among other things, fraudulent transfer, both actual and constructive; recovery against subsequent transferees; civil conspiracy; aiding and abetting tortious conduct; and unjust enrichment. Plaintiff is seeking avoidance of the purportedly fraudulent transfer, unspecified damages, including punitive damages, the imposition of a constructive trust, and other relief. In December 2018, PPL removed the Talen Putative Class Action from the Sixteenth Judicial District of the State of Montana to the United States District Court for the District of Montana, Billings Division (MT Federal Court). In January 2019, the plaintiff moved to remand the Talen Putative Class Action back to state court, and dismissed without prejudice all current and former PPL Corporation directors from the case. In September 2019, the MT Federal Court granted plaintiff's motion to remand the case back to state court. Although, the PPL defendants petitioned the Ninth Circuit Court of Appeals to grant an appeal of the remand decision, in November 2019, the Ninth Circuit Court of Appeals denied that request and in December 2019, Talen Montana Retirement Plan filed a Second Amended Complaint in the Sixteenth Judicial District of the State of Montana, Rosebud County, which removed Talen Energy Marketing as a plaintiff. In January 2020, PPL defendants filed a motion to dismiss the Second Amended Complaint or, in the alternative, to stay the proceedings pending the resolution of the below mentioned Delaware Action. The Court held a hearing on June 24, 2020 regarding the motions. On September 11, 2020, the Court granted PPL defendants' alternative Motion for a Stay of the proceedings.

PPL Corporation et al. vs. Riverstone Holdings LLC, Talen Energy Corporation et al.

On November 30, 2018, PPL, certain PPL affiliates, and certain current and former officers and directors (PPL plaintiffs) filed a complaint in the Court of Chancery of the State of Delaware seeking various forms of relief against Riverstone, Talen Energy and certain of their affiliates (Delaware Action), in response to and as part of the defense strategy for an action filed by Talen Montana, LLC (the Talen Direct Action, since dismissed) and the Talen Putative Class Action described above (together, the Montana Actions) originally filed in Montana state court in October 2018. In the complaint, the PPL plaintiffs ask the Delaware Court of Chancery for declaratory and injunctive relief. This includes a declaratory judgment that, under the separation agreement governing the spinoff of PPL Energy Supply, all related claims that arise must be heard in Delaware; that the statute of limitations in Delaware and the spinoff agreement bar these claims at this time; that PPL is not liable for the claims in either the Talen Direct Action or the Talen Putative Class Action as PPL Montana was solvent at all relevant times; and that the separation agreement requires that Talen Energy indemnify PPL for all losses arising from the debts of Talen Montana, among other things. PPL's complaint also seeks damages against Riverstone for interfering with the separation agreement and against Riverstone affiliates for breach of the implied covenant of good faith and fair dealing. The complaint was subsequently amended on January 11, 2019 and March 20, 2019, to include, among other things, claims related to indemnification with respect to the Montana Actions, request a declaration that the Montana Actions are time-barred under the spinoff agreements, and allege additional facts to support the tortious interference claim. In April 2019, the defendants filed motions to dismiss the amended complaint. In July 2019, the Court heard oral arguments from the parties regarding the motions to dismiss, and in October 2019,

the Delaware Court of Chancery issued an opinion sustaining all of the PPL plaintiffs' claims except for the claim for breach of implied covenant of good faith and fair dealing. As a result of the dismissal of the Talen Direct Action in December 2019, in January 2020, Talen Energy filed a new motion to dismiss five of the remaining eight claims in the amended complaint. The Court heard oral argument on Talen's motion to dismiss on May 28, 2020, and on June 22, 2020, issued an opinion denying the motion in its entirety. Discovery is proceeding, and the parties have filed certain motions and cross-motions for summary judgment, which are not yet scheduled for hearing.

In January 2022, Vice-Chancellor Joseph R. Slights III, the judge assigned to this litigation, announced his retirement. Thereafter, this case was removed from the trial schedule and is awaiting the assignment of a new judge. The new judge will likely rule on the motions and cross-motions for summary judgment.

With respect to each of the Talen-related matters described above, PPL believes that the 2014 distribution of proceeds was made in compliance with all applicable laws and that PPL Montana was solvent at all relevant times. Additionally, the agreements entered into in connection with the spinoff, which PPL and affiliates of Talen Energy and Riverstone negotiated and executed prior to the 2014 distribution, directly address the treatment of the proceeds from the sale of PPL Montana's hydroelectric generating facilities; in those agreements, Talen Energy and Riverstone definitively agreed that PPL was entitled to retain the proceeds.

PPL believes that it has meritorious defenses to the claims made in the Talen Putative Class Action and intends to continue to vigorously defend against this action. The Talen Putative Class Action was stayed at an early stage of litigation. While the Delaware Action is progressing, at this time PPL cannot predict the outcome of either of these matters or estimate the range of possible losses, if any, that PPL might incur as a result of the claims, although they could be material.

E.W. Brown Environmental Assessment *(*PPL and KU)

KU is undertaking extensive remedial measures at the E.W. Brown plant including closure of the former ash pond, implementation of a groundwater remedial action plan and performance of a corrective action plan including aquatic study of adjacent surface waters and risk assessment. The aquatic study and risk assessment are being undertaken pursuant to a 2017 agreed Order with the Kentucky Energy and Environment Cabinet (KEEC). KU conducted sampling of Herrington Lake in 2017 and 2018. In June 2019, KU submitted to the KEEC the required aquatic study and risk assessment, conducted by an independent third-party consultant, finding that discharges from the E.W. Brown plant have not had any significant impact on Herrington Lake and that the water in the lake is safe for recreational use and meets safe drinking water standards. On May 31, 2021, the KEEC approved the report and released a response to public comments. On August 6, 2021, KU submitted a Supplemental Remedial Alternatives Analysis (SRAA) report to the KEEC that outlines proposed additional fish, water, and sediment testing. On February 18, 2022 the KEEC provided approval to KU to proceed with the proposed sampling, which commenced in the spring of 2022.

Air (PPL and LG&E)

Sulfuric Acid Mist Emissions

In June 2016, the EPA issued a notice of violation under the Clean Air Act alleging that LG&E violated applicable rules relating to sulfuric acid mist emissions at its Mill Creek plant. The notice alleges failure to install proper controls, failure to operate the facility consistent with good air pollution control practice and causing emissions exceeding applicable requirements or constituting a nuisance or endangerment. LG&E believes it has complied with applicable regulations during the relevant time period. On July 31, 2020, the U.S. Department of Justice and Louisville Metro Air Pollution Control District filed a complaint in the U.S. District Court for the Western District of Kentucky alleging violations specified in the EPA notice of violation and seeking civil penalties and injunctive relief. In October 2020, LG&E filed a motion to dismiss the complaint. In December 2020, the U.S. Department of Justice and the Louisville Metro Air Pollution Control District filed an amended complaint. In February 2021, LG&E filed a renewed motion to dismiss regarding the amended complaint. In September 2021, the parties reached a tentative agreement providing for dismissal of the court action, the payment by LG&E of a penalty amount and performance of a supplemental environmental project (SEP). On February 23, 2022 the court entered a Consent Decree approving the agreed penalty and SEP. The agreed penalty and SEP do not have a significant impact on LG&E's operations or financial condition.

Water/Waste *(*LG&E and KU)

ELGs

In 2015, the EPA finalized ELGs for wastewater discharge permits for new and existing steam electricity generating facilities. These guidelines require deployment of additional control technologies providing physical, chemical and biological treatment and mandate operational changes including "no discharge" requirements for certain wastewaters. The implementation date for individual generating stations was to be determined by the states on a case-by-case basis according to criteria provided by the EPA. Legal challenges to the final rule were consolidated before the U.S. Court of Appeals for the Fifth Circuit. In April 2017, the EPA announced that it would grant petitions for reconsideration of the rule. In September 2017, the EPA issued a rule to postpone the compliance date for certain requirements. On October 13, 2020, the EPA published final revisions to its best available technology standards for certain wastewaters and potential extensions to compliance dates (the Reconsideration Rule). The rule is expected to be implemented by the states or applicable permitting authorities in the course of their normal permitting activities. LG&E and KU are currently implementing responsive compliance strategies and schedules. Certain aspects of these compliance plans and estimates relate to developments in state water quality standards, which are separate from the ELG rule or its implementation. Certain costs are included in the Registrants' capital plans and expected to be recovered from customers through rate recovery mechanisms, but additional costs and recovery will depend on further regulatory developments at the state level. In August 2021, the EPA published a notice of rulemaking initiative announcing that it will propose revisions to the Reconsideration Rule and determine "whether more stringent limitations and standards are appropriate." Compliance with the Reconsideration Rule is required during the pendency of the rulemaking process.

CCRs

In 2015, the EPA issued a final rule governing management of CCRs which include fly ash, bottom ash and sulfur dioxide scrubber wastes. The CCR Rule imposes extensive new requirements for certain CCR impoundments and landfills, including public notifications, location restrictions, design and operating standards, groundwater monitoring and corrective action requirements, and closure and post-closure care requirements, and specifies restrictions relating to the beneficial use of CCRs. In July 2018, the EPA issued a final rule extending the deadline for closure of certain impoundments and adopting other substantive changes. In August 2018, the D.C. Circuit Court of Appeals vacated and remanded portions of the CCR Rule. In December 2019, the EPA addressed the deficiencies identified by the court and proposed amendments to change the closure deadline. In August 2020, the EPA published a final rule extending the deadline to initiate closure to April 11, 2021, while providing for certain extensions. The EPA is conducting ongoing rulemaking actions regarding various other amendments to the rule. Certain ongoing legal challenges to various provisions of the CCR Rule have been held in abeyance pending review by the EPA pursuant to the President's executive order. PPL, LG&E, and KU are monitoring the EPA’s ongoing efforts to refine and implement the regulatory program under the CCR Rule. In January 2022, the EPA issued several proposed regulatory determinations, facility notifications and public announcements which indicate increased scrutiny by the EPA to determine the adequacy of measures taken by facility owners and operators to achieve closure of CCR surface impoundments and landfills. In particular, the agency indicated that it will focus on certain practices that it views as posing a threat of continuing groundwater contamination. Future guidance, regulatory determinations, rulemakings and other developments could potentially require revisions to current LG&E and KU compliance plans including additional monitoring and remediation at surface impoundments and landfills, the cost of which could be substantial. PPL, LG&E and KU are unable to predict the outcome of the ongoing litigation, rulemaking, and regulatory determinations or potential impacts on current LG&E and KU compliance plans. The Registrants are currently finalizing closure plans and schedules.

In January 2017, Kentucky issued a new state rule relating to CCR management, effective May 2017, aimed at reflecting the requirements of the federal CCR rule. As a result of a subsequent legal challenge, in January 2018, the Franklin County, Kentucky Circuit Court issued an opinion invalidating certain procedural elements of the rule. LG&E and KU presently operate their facilities under continuing permits authorized under the former program and do not currently anticipate material impacts as a result of the judicial ruling. Associated costs are expected to be subject to rate recovery.

LG&E and KU received KPSC approval for a compliance plan providing for the closure of impoundments at the Mill Creek, Trimble County, E.W. Brown, and Ghent stations, and construction of process water management facilities at those plants. In addition to the foregoing measures required for compliance with the federal CCR rule, KU also received KPSC approval for its plans to close impoundments at the retired Green River, Pineville and Tyrone plants to comply with applicable state law. LG&E and KU have completed planned closure measures at most of the subject impoundments and have commenced post closure groundwater monitoring as required at those facilities. LG&E and KU generally expect to complete all impoundment closures within five years of commencement, although a longer period may be required to complete closure of some facilities. Associated costs are expected to be subject to rate recovery.

In connection with the final CCR rule, LG&E and KU recorded adjustments to existing AROs beginning in 2015 and continue to record adjustments as required. See Note 15 for additional information. Further changes to AROs, current capital plans or operating costs may be required as estimates are refined based on closure developments, groundwater monitoring results, and regulatory or legal proceedings. Costs relating to this rule are expected to be subject to rate recovery.

Superfund and Other Remediation (All Registrants)

PPL Electric, LG&E and KU are potentially responsible for investigating and remediating contamination under the federal Superfund program and similar state programs. Actions are under way at certain sites including former coal gas manufacturing plants in Pennsylvania and Kentucky previously owned or operated by, or currently owned by predecessors or affiliates of, PPL Electric, LG&E and KU. PPL Electric is potentially responsible for a share of clean-up costs at certain sites including the Columbia Gas Plant site and the Brodhead site. Cleanup actions have been or are being undertaken at these sites as requested by governmental agencies, the costs of which have not been and are not expected to be significant to PPL Electric.

As of March 31, 2022 and December 31, 2021, PPL Electric had a recorded liability of $11 million and $10 million representing its best estimate of the probable loss incurred to remediate the sites identified above. Depending on the outcome of investigations at identified sites where investigations have not begun or been completed, or developments at sites for which information is incomplete, additional costs of remediation could be incurred. PPL Electric, LG&E and KU lack sufficient information about such additional sites to estimate any potential liability or range of reasonably possible losses, if any, related to these sites. Such costs, however, are not currently expected to be significant.

The EPA is evaluating the risks associated with polycyclic aromatic hydrocarbons and naphthalene, chemical by-products of coal gas manufacturing. As a result, individual states may establish stricter standards for water quality and soil cleanup, that could require several PPL subsidiaries to take more extensive assessment and remedial actions at former coal gas manufacturing plants. The Registrants cannot reasonably estimate a range of possible losses, if any, related to these matters.

Regulatory Issues

(All Registrants)

See Note 6 for information on regulatory matters related to utility rate regulation.

Electricity - Reliability Standards

The NERC is responsible for establishing and enforcing mandatory reliability standards (Reliability Standards) regarding the bulk electric system in North America. The FERC oversees this process and independently enforces the Reliability Standards.

The Reliability Standards have the force and effect of law and apply to certain users of the bulk electric system, including electric utility companies, generators and marketers. Under the Federal Power Act, the FERC may assess civil penalties for certain violations.

PPL Electric, LG&E and KU monitor their compliance with the Reliability Standards and self-report or self-log potential violations of applicable reliability requirements whenever identified, and submit accompanying mitigation plans, as required. The resolution of a small number of potential violations is pending. Penalties incurred to date have not been significant. Any Regional Reliability Entity determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC.

In the course of implementing their programs to ensure compliance with the Reliability Standards by those PPL affiliates subject to the standards, certain other instances of potential non-compliance may be identified from time to time. The Registrants cannot predict the outcome of these matters, and an estimate or range of possible losses cannot be determined.

Gas - Security Directives (PPL and LG&E)

In May and July of 2021, the Department of Homeland Security’s (DHS) Transportation Security Administration (TSA) released two security directives applicable to certain notified owners and operators of natural gas pipeline facilities (including local distribution companies) that TSA has determined to be critical. The first security directive required notified owners/operators to implement cybersecurity incident reporting to the DHS, designate a cybersecurity coordinator, and perform a gap assessment of

current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies. The second security directive required notified entities to implement a significant number of specified cyber security controls and processes. LG&E does not believe the security directives will have a significant impact on LG&E’s operations or financial condition.

Other

Guarantees and Other Assurances

(All Registrants)

In the normal course of business, the Registrants enter into agreements that provide financial performance assurance to third parties on behalf of certain subsidiaries. Such agreements include, for example, guarantees, stand-by letters of credit issued by financial institutions and surety bonds issued by insurance companies. These agreements are entered into primarily to support or enhance the creditworthiness attributed to a subsidiary on a stand-alone basis or to facilitate the commercial activities in which these subsidiaries engage.

(PPL)

PPL fully and unconditionally guarantees all of the debt securities and loan obligations of PPL Capital Funding.

(All Registrants)

The table below details guarantees provided as of March 31, 2022. "Exposure" represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee. The probability of expected payment/performance under each of these guarantees is remote. For reporting purposes, on a consolidated basis, the guarantees of PPL include the guarantees of its subsidiary Registrants.

			Exposure at March 31, 2022									Expiration Date
PPL
Indemnifications related to certain tax liabilities related to the sale of the U.K. utility business			£	50		(a)						2028
LG&E and KU
LG&E and KU obligation of shortfall related to OVEC						(b)

(a)PPL WPD Limited entered into a Tax Deed dated June 9, 2021 in which it agreed to a tax indemnity regarding certain potential tax liabilities of the entities sold with respect to periods prior to the completion of the sale, subject to customary exclusions and limitations. Because National Grid Holdings One plc, the buyer, agreed to purchase indemnity insurance, the amount of the cap on the indemnity for these liabilities is £1, except with respect to certain surrenders of tax losses, for which the amount of the cap on the indemnity is £50 million.

(b)Pursuant to the OVEC power purchase contract, LG&E and KU are obligated to pay for their share of OVEC's excess debt service, post-retirement and decommissioning costs, as well as any shortfall from amounts included within a demand charge designed and expected to cover these costs over the term of the contract. PPL's proportionate share of OVEC's outstanding debt was $91 million at March 31, 2022, consisting of LG&E's share of $63 million and KU's share of $28 million. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" in Note 14 in PPL's, LG&E's and KU's 2021 Form 10-K for additional information on the OVEC power purchase contract.

The Registrants provide other miscellaneous guarantees through contracts entered into in the normal course of business. These guarantees are primarily in the form of indemnification or warranties related to services or equipment and vary in duration. The amounts of these guarantees often are not explicitly stated, and the overall maximum amount of the obligation under such guarantees cannot be reasonably estimated. Historically, no significant payments have been made with respect to these types of guarantees and the probability of payment/performance under these guarantees is generally remote.

PPL, on behalf of itself and certain of its subsidiaries, maintains insurance that covers liability assumed under contract for bodily injury and property damage. The coverage provides maximum aggregate coverage of $225 million. This insurance may be applicable to obligations under certain of these contractual arrangements.

11. Related Party Transactions

Support Costs (PPL Electric, LG&E and KU)

PPL Services and LKS provide and, prior to its merger into PPL Services on December 31, 2021, PPL EU Services provided the Registrants, their respective subsidiaries and each other with administrative, management and support services. For all services companies, the costs of directly assignable and attributable services are charged to the respective recipients as direct support costs. General costs that cannot be directly attributed to a specific entity are allocated and charged to the respective recipients as indirect support costs. PPL Services and PPL EU Services use a three-factor methodology that includes the applicable recipients' invested capital, operation and maintenance expenses and number of employees to allocate indirect costs. PPL Services may also use a ratio of overall direct and indirect costs or a weighted average cost ratio. LKS bases its indirect allocations on the subsidiaries' number of employees, total assets, revenues, number of customers and/or other statistical information. PPL Services, LKS and PPL EU Services charged the following amounts for the periods ended March 31, including amounts applied to accounts that are further distributed between capital and expense on the books of the recipients, based on methods that are believed to be reasonable.

									Three Months
															2022						2021
PPL Electric from PPL Services															$	61					$	10
PPL Electric from PPL EU Services															—						50
LG&E from LKS															39						42
KU from LKS															44						44

In addition to the charges for services noted above, LKS makes payments on behalf of LG&E and KU for fuel purchases and other costs for products or services provided by third parties. LG&E and KU also provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges. Tax settlements between PPL and LG&E and KU are reimbursed through LKS.

Intercompany Borrowings

(PPL Electric)

PPL Energy Funding maintains a $1,200 million revolving line of credit with a PPL Electric subsidiary. At March 31, 2022 and December 31, 2021, PPL Energy Funding had borrowings outstanding in the amount of $296 million and $499 million. These balances are reflected in "Notes receivable from affiliate" on the PPL Electric Balance Sheets. The interest rates on borrowings are equal to one-month LIBOR plus a spread. Interest income is reflected in "Interest Income from Affiliate" on the PPL Electric Income Statements.

(LG&E and KU)

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to the difference between LG&E's FERC borrowing limit and LG&E's commercial paper limit at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on LIBOR. LG&E's money pool borrowing limit is $325 million. At December 31, 2021, LG&E had borrowings outstanding from KU and/or LKE in the amount of $324 million. This balance is reflected in "Notes payable to affiliates" on the LG&E Balance Sheets. No balances were outstanding at March 31, 2022.

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to the difference between KU's FERC borrowing limit and KU's commercial paper limit at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on LIBOR. KU's money pool borrowing limit is $300 million. At March 31, 2022 and December 31, 2021, KU had borrowings outstanding from LG&E and/or LKE in the amount of $4 million and $294 million. These balances are reflected in "Notes payable to affiliates" on the KU Balance Sheets.

VEBA Funds Receivable (PPL Electric)

In 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health Plan VEBA to a new subaccount within the VEBA, to be used to pay medical claims of active

bargaining unit employees. Based on PPL Electric's participation in PPL’s Other Postretirement Benefit plan, PPL Electric was allocated a portion of the excess funds from PPL Services. These funds have been recorded as an intercompany receivable on PPL Electric's Balance Sheets. The receivable balance decreases as PPL Electric pays incurred medical claims and is reimbursed by PPL Services. The intercompany receivable balance associated with these funds was $8 million as of March 31, 2022, which was reflected in "Accounts receivable from affiliates" on the PPL Electric Balance Sheets. The intercompany receivable balance associated with these funds was $11 million as of December 31, 2021, the majority of which was reflected in "Accounts receivable from affiliates" on the PPL Electric Balance Sheets.

12. Other Income (Expense) - net

(PPL)

The details of "Other Income (Expense) - net" for the periods ended March 31, were:

									Three Months
															2022						2021
Other Income
Defined benefit plans - non-service credits (Note 9)															$	10					$	4
AFUDC - equity component															4						4
Total Other Income															14						8
Other Expense
Charitable contributions															1						1
Miscellaneous															13						7
Total Other Expense															14						8
Other Income (Expense) - net															$	—					$	—

(PPL Electric)

The details of "Other Income (Expense) - net" for the periods ended March 31, were:

									Three Months
															2022						2021
Other Income
Defined benefit plans - non-service credits (Note 9)															$	4					$	2
Interest Income															1						—
AFUDC - equity component															4						4
Total Other Income															9						6
Other Expense
Charitable contributions															1						1
Miscellaneous															2						—
Total Other Expense															3						1
Other Income (Expense) - net															$	6					$	5

13. Fair Value Measurements

(All Registrants)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models) and/or a cost approach (generally, replacement cost) are used to measure the fair value of an asset or liability, as appropriate. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. The fair value of a group of financial assets and liabilities is measured on a net basis. See Note 1 in each Registrant's 2021 Form 10-K for information on the levels in the fair value hierarchy.

Recurring Fair Value Measurements

The assets and liabilities measured at fair value were:

			March 31, 2022																								December 31, 2021
			Total						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3
PPL
Assets
Cash and cash equivalents			$	4,249					$	4,249					$	—					$	—					$	3,571					$	3,571					$	—					$	—
Restricted cash and cash equivalents (a)			1						1						—						—						1						1						—						—
Total Cash, Cash Equivalents and Restricted Cash (b)			4,250						4,250						—						—						3,572						3,572						—						—
Special use funds (a):
Money market fund			1						1						—						—						2						2						—						—
Commingled debt fund measured at NAV (c)			20						—						—						—						22						—						—						—
Commingled equity fund measured at NAV (c)			19						—						—						—						21						—						—						—
Total special use funds			40						1						—						—						45						2						—						—
Total assets			$	4,290					$	4,251					$	—					$	—					$	3,617					$	3,574					$	—					$	—
Liabilities
Price risk management liabilities (d):
Interest rate swaps			$	14					$	—					$	14					$	—					$	18					$	—					$	18					$	—
Total price risk management liabilities			$	14					$	—					$	14					$	—					$	18					$	—					$	18					$	—
PPL Electric
Assets
Cash and cash equivalents			$	46					$	46					$	—					$	—					$	21					$	21					$	—					$	—
Total assets			$	46					$	46					$	—					$	—					$	21					$	21					$	—					$	—
LG&E
Assets
Cash and cash equivalents			$	9					$	9					$	—					$	—					$	9					$	9					$	—					$	—
Total assets			$	9					$	9					$	—					$	—					$	9					$	9					$	—					$	—
Liabilities
Price risk management liabilities:
Interest rate swaps			$	14					$	—					$	14					$	—					$	18					$	—					$	18					$	—
Total price risk management liabilities			$	14					$	—					$	14					$	—					$	18					$	—					$	18					$	—
KU
Assets
Cash and cash equivalents			$	8					$	8					$	—					$	—					$	13					$	13					$	—					$	—
Total assets			$	8					$	8					$	—					$	—					$	13					$	13					$	—					$	—

(a)Included in "Other current assets" on the Balance Sheets.

(b)Total Cash, Cash Equivalents and Restricted Cash provides a reconciliation of these items reported within the Balance Sheets to the sum shown on the Statements of Cash Flows.

(c)In accordance with accounting guidance, certain investments that are measured at fair value using net asset value per share (NAV), or its equivalent, have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Balance Sheets.

(d)Current portion is included in "Other current liabilities" and noncurrent portion is included in "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

Special Use Funds

(PPL)

The special use funds are investments restricted for paying active union employee medical costs. In 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health

Plan VEBA to a new subaccount within the VEBA to be used to pay medical claims of active bargaining unit employees. The funds are invested primarily in commingled debt and equity funds measured at NAV and are classified as investments in equity securities. Changes in the fair value of the funds are recorded to the Statements of Income.

Price Risk Management Assets/Liabilities - Interest Rate Swaps

*(*PPL, LG&E and KU)

To manage interest rate risk, PPL, LG&E and KU use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating swaps. An income approach is used to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., LIBOR and government security rates), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, market information cannot practicably be obtained to value credit risk and therefore internal models are relied upon. These models use projected probabilities of default and estimated recovery rates based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3.

Financial Instruments Not Recorded at Fair Value (All Registrants)

The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.

			March 31, 2022												December 31, 2021
			Carrying Amount (a)						Fair Value						Carrying Amount (a)						Fair Value
PPL			$	11,142					$	11,720					$	11,140					$	12,955
PPL Electric			4,485						4,789						4,484						5,272
LG&E			2,006						2,131						2,006						2,363
KU			2,619						2,779						2,618						3,120

(a)Amounts are net of debt issuance costs.

The carrying amounts of other current financial instruments (except for long-term debt due within one year) approximate their fair values because of their short-term nature.

14. Derivative Instruments and Hedging Activities

Risk Management Objectives

(All Registrants)

PPL has a risk management policy approved by the Board of Directors to manage market risk associated with commodities, interest rates on debt issuances (including price, liquidity and volumetric risk) and credit risk (including non-performance risk and payment default risk). The Risk Management Committee, comprised of senior management and chaired by the Senior Director-Risk Management, oversees the risk management function. Key risk control activities designed to ensure compliance with the risk policy and detailed programs include, but are not limited to, credit review and approval, validation of transactions, verification of risk and transaction limits, value-at-risk analyses (VaR, a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level) and the coordination and reporting of the Enterprise Risk Management program.

Market Risk

Market risk includes the potential loss that may be incurred as a result of price changes associated with a particular financial or commodity instrument as well as market liquidity and volumetric risks. Forward contracts, futures contracts, options, swaps and structured transactions are utilized as part of risk management strategies to minimize unanticipated fluctuations in earnings caused by changes in commodity prices and interest rates. Many of these contracts meet the definition of a derivative. All derivatives are recognized on the Balance Sheets at their fair value, unless NPNS is elected.

The following summarizes the market risks that affect PPL and its subsidiaries.

Interest Rate Risk

• PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. PPL and LG&E utilize over-the-counter interest rate swaps to limit exposure to market fluctuations on floating-rate debt. PPL, LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates, when appropriate, in connection with future debt issuances.

• PPL and its subsidiaries are exposed to interest rate risk associated with debt securities and derivatives held by defined benefit plans. This risk is significantly mitigated to the extent that the plans are sponsored at, or sponsored on behalf of, the regulated domestic utilities due to the recovery methods in place.

(All Registrants)

Commodity Price Risk

PPL is exposed to commodity price risk through its subsidiaries as described below.

• PPL Electric is required to purchase electricity to fulfill its obligation as a PLR. Potential commodity price risk is mitigated through its PUC-approved cost recovery mechanism and full-requirement supply agreements to serve its PLR customers which transfer the risk to energy suppliers.

• LG&E's and KU's rates include certain mechanisms for fuel, fuel-related expenses and energy purchases. In addition, LG&E's rates include a mechanism for natural gas supply expenses. These mechanisms generally provide for timely recovery of market price fluctuations associated with these expenses.

Volumetric Risk

Volumetric risk is the risk related to the changes in volume of retail sales due to weather, economic conditions or other factors. PPL is exposed to volumetric risk through its subsidiaries. PPL Electric, LG&E and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases.

Equity Securities Price Risk

• PPL and its subsidiaries are exposed to equity securities price risk associated with the fair value of the defined benefit plans' assets. This risk is significantly mitigated due to the recovery methods in place.

• PPL is exposed to equity securities price risk from future stock sales and/or purchases.

Credit Risk

Credit risk is the potential loss that may be incurred due to a counterparty's non-performance.

PPL is exposed to credit risk from "in-the-money" transactions with counterparties as well as additional credit risk through certain of its subsidiaries, as discussed below.

In the event a supplier of PPL Electric, LG&E or KU defaults on its obligation, those Registrants would be required to seek replacement power or replacement fuel in the market. In general, subject to regulatory review or other processes, appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, thereby mitigating the financial risk for these entities.

PPL and its subsidiaries have credit policies in place to manage credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions and the use of master netting agreements or provisions. These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements. PPL and its subsidiaries may request additional credit assurance, in certain circumstances, in the event that the counterparties' credit ratings fall below investment grade, their tangible net worth falls below specified percentages or their exposures exceed an established credit limit.

Master Netting Arrangements (PPL, LG&E and KU)

Net derivative positions on the balance sheets are not offset against the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.

PPL, LG&E and KU had no obligation to return or post cash collateral under master netting arrangements at March 31, 2022 and December 31, 2021.

See "Offsetting Derivative Instruments" below for a summary of derivative positions presented in the balance sheets where a right of setoff exists under these arrangements.

Interest Rate Risk

(All Registrants)

PPL and its subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. A variety of financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolios, adjust the duration of the debt portfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under PPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolio due to changes in benchmark interest rates. In addition, the interest rate risk of certain subsidiaries is potentially mitigated as a result of the existing regulatory framework or the timing of rate cases.

Cash Flow Hedges (PPL)

Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings. Financial interest rate swap contracts that qualify as cash flow hedges may be entered into to hedge floating interest rate risk associated with both existing and anticipated debt issuances. PPL had no such contracts at March 31, 2022.

Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time period and any amounts previously recorded in AOCI are reclassified into earnings once it is determined that the hedged transaction is not probable of occurring.

For the three months ended March 31, 2022 and 2021, PPL had no cash flow hedges reclassified into earnings associated with discontinued cash flow hedges.

At March 31, 2022, the amount of accumulated net unrecognized after-tax gains (losses) on qualifying derivatives expected to be reclassified into earnings during the next 12 months is insignificant. Amounts are reclassified as the hedged interest expense is recorded.

Economic Activity (PPL and LG&E)

LG&E enters into interest rate swap contracts that economically hedge interest payments. Because realized gains and losses from the swaps, including terminated swap contracts, are recoverable through regulated rates, any subsequent changes in fair value of these derivatives are included in regulatory assets or liabilities until they are realized as interest expense. Realized gains and losses are recognized in "Interest Expense" on the Statements of Income at the time the underlying hedged interest expense is recorded. At March 31, 2022, LG&E held contracts with a notional amount of $64 million that mature in 2033.

Accounting and Reporting

(All Registrants)

All derivative instruments are recorded at fair value on the Balance Sheet as an asset or liability unless NPNS is elected. NPNS contracts include certain full requirement purchase contracts and other physical purchase contracts. Changes in the fair value of derivatives not designated as NPNS are recognized in earnings unless specific hedge accounting criteria are met and designated as such, except for the changes in fair values of LG&E's interest rate swaps that are recognized as regulatory assets or regulatory liabilities. See Note 6 for amounts recorded in regulatory assets and regulatory liabilities at March 31, 2022 and December 31, 2021.

See Note 1 in each Registrant's 2021 Form 10-K for additional information on accounting policies related to derivative instruments.

(PPL)

The following table presents the fair value and the location on the Balance Sheets of derivatives not designated as hedging instruments.

															March 31, 2022																								December 31, 2021
															Assets						Liabilities																		Assets						Liabilities
Current:
Price Risk Management
Assets/Liabilities:
Interest rate swaps (a)															$	—					$	1																	$	—					$	1
Total current															—						1																		—						1
Noncurrent:
Price Risk Management
Assets/Liabilities:
Interest rate swaps (a)															—						13																		—						17
Total noncurrent															—						13																		—						17
Total derivatives															$	—					$	14																	$	—					$	18

(a)Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets. Excludes accrued interest, if applicable.

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the period ended March 31, 2022.

												Three Months																		Three Months
Derivative Relationships												Derivative Gain (Loss) Recognized in OCI						Location of Gain (Loss) Recognized in Income on Derivative												Gain (Loss) Reclassified from AOCI into Income
Cash Flow Hedges:
Interest rate swaps												$	—					Interest expense												$	(1)
Total												$	—																	$	(1)

Derivatives Not Designated as Hedging Instruments						Location of Gain (Loss) Recognized in Income on Derivative												Three Months
Interest rate swaps						Interest expense												$	1
Derivatives Not Designated as Hedging Instruments						Location of Gain (Loss) Recognized as Regulatory Liabilities/Assets												Three Months
Interest rate swaps						Regulatory assets - noncurrent												$	4

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the period ended March 31, 2021.

												Three Months																		Three Months
Derivative Relationships												Derivative Gain (Loss) Recognized in OCI						Location of Gain (Loss) Recognized in Income on Derivative												Gain (Loss) Reclassified from AOCI into Income
Cash Flow Hedges:
Interest rate swaps												$	—					Interest expense												$	(1)
																		Loss from Discontinued Operations (net of taxes)												(1)
Cross-currency swaps												(46)						Loss from Discontinued Operations (net of taxes)												(37)
Total												$	(46)																	$	(39)
Net Investment Hedges:
Foreign currency contracts in discontinued operations												$	1

Derivatives Not Designated as Hedging Instruments						Location of Gain (Loss) Recognized in Income on Derivative												Three Months
Foreign currency contracts						Loss from Discontinued operations (net of taxes)												$	(25)
Interest rate swaps						Interest expense												(1)
						Total												$	(26)
Derivatives Not Designated as Hedging Instruments						Location of Gain (Loss) Recognized as Regulatory Liabilities/Assets												Three Months
Interest rate swaps						Regulatory assets - noncurrent												$	6

The following table presents the effect of cash flow hedge activity on the Statement of Income for the period ended March 31, 2022.

															Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
									Three Months
															Interest Expense												Other Income (Expense) - net
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded															$	107											$	—
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income															(1)												—
Cross-currency swaps:
Hedged items															—												—
Amount of gain (loss) reclassified from AOCI to Income															—												—

The following table presents the effect of cash flow hedge activity on the Statement of Income for the period ended March 31, 2021.

															Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
									Three Months
															Interest Expense												Loss from Discontinued Operations (net of taxes)
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded															$	153											$	(2,043)
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income															(1)												1
Cross-currency swaps:
Hedged items															—												37
Amount of gain (loss) reclassified from AOCI to Income															—												(37)

(LG&E)

The following table presents the fair value and the location on the Balance Sheets of derivatives not designated as hedging instruments.

			March 31, 2022												December 31, 2021
			Assets						Liabilities						Assets						Liabilities
Current:
Price Risk Management
Assets/Liabilities:
Interest rate swaps			$	—					$	1					$	—					$	1
Total current			—						1						—						1
Noncurrent:
Price Risk Management
Assets/Liabilities:
Interest rate swaps			—						13						—						17
Total noncurrent			—						13						—						17
Total derivatives			$	—					$	14					$	—					$	18

The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the period ended March 31, 2022.

						Location of Gain (Loss) Recognized in
Derivative Instruments						Income on Derivatives												Three Months
Interest rate swaps						Interest expense												$	1
						Location of Gain (Loss) Recognized in
Derivative Instruments						Regulatory Assets												Three Months
Interest rate swaps						Regulatory assets - noncurrent												$	4

The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the period ended March 31, 2021.

						Location of Gain (Loss) Recognized in
Derivative Instruments						Income on Derivatives												Three Months
Interest rate swaps						Interest expense												$	(1)
						Location of Gain (Loss) Recognized in
Derivative Instruments						Regulatory Assets												Three Months
Interest rate swaps						Regulatory assets - noncurrent												$	6

(PPL, LG&E and KU)

Offsetting Derivative Instruments

PPL, LG&E and KU or certain of their subsidiaries have master netting arrangements in place and also enter into agreements pursuant to which they purchase or sell certain energy and other products. Under the agreements, upon termination of the agreement as a result of a default or other termination event, the non-defaulting party typically would have a right to set off amounts owed under the agreement against any other obligations arising between the two parties (whether under the agreement or not), whether matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation.

PPL, LG&E and KU have elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivatives agreements. The table below summarizes the derivative positions presented in the balance sheets where a right of setoff exists under these arrangements and related cash collateral received or pledged.

			Assets																								Liabilities
									Eligible for Offset																								Eligible for Offset
			Gross						Derivative Instruments						Cash Collateral Received						Net						Gross						Derivative Instruments						Cash Collateral Pledged						Net
March 31, 2022
Treasury Derivatives
PPL			$	—					$	—					$	—					$	—					$	14					$	—					$	—					$	14
LG&E			—						—						—						—						14						—						—						14

			Assets																								Liabilities
									Eligible for Offset																								Eligible for Offset
			Gross						Derivative Instruments						Cash Collateral Received						Net						Gross						Derivative Instruments						Cash Collateral Pledged						Net
December 31, 2021
Treasury Derivatives
PPL			$	—					$	—					$	—					$	—					$	18					$	—					$	—					$	18
LG&E			—						—						—						—						18						—						—						18

Credit Risk-Related Contingent Features

Certain derivative contracts contain credit risk-related contingent features which, when in a net liability position, would permit the counterparties to require the transfer of additional collateral upon a decrease in the credit ratings of PPL, LG&E and KU or certain of their subsidiaries. Most of these features would require the transfer of additional collateral or permit the counterparty to terminate the contract if the applicable credit rating were to fall below investment grade. Some of these features also would allow the counterparty to require additional collateral upon each downgrade in credit rating at levels that remain above investment grade. In either case, if the applicable credit rating were to fall below investment grade, and assuming no assignment to an investment grade affiliate were allowed, most of these credit contingent features require either immediate payment of the net liability as a termination payment or immediate and ongoing full collateralization on derivative instruments in net liability positions.

Additionally, certain derivative contracts contain credit risk-related contingent features that require adequate assurance of performance be provided if the other party has reasonable concerns regarding the performance of PPL's, LG&E's and KU's obligations under the contracts. A counterparty demanding adequate assurance could require a transfer of additional collateral or other security, including letters of credit, cash and guarantees from a creditworthy entity. This would typically involve negotiations among the parties. However, amounts disclosed below represent assumed immediate payment or immediate and ongoing full collateralization for derivative instruments in net liability positions with "adequate assurance" features.

(PPL)

At March 31, 2022, there were no derivative contracts in a net liability position that contain credit risk-related contingent features, collateral posted on those positions and the related effect of a decrease in credit ratings below investment grade.

15. Asset Retirement Obligations

(PPL, LG&E and KU)

PPL's, LG&E's and KU's ARO liabilities are primarily related to CCR closure costs. See Note 10 for information on the CCR rule. LG&E also has AROs related to natural gas mains and wells. LG&E's and KU's transmission and distribution lines largely operate under perpetual property easement agreements, which do not generally require restoration upon removal of the property. Therefore, no material AROs are recorded for transmission and distribution assets. For LG&E and KU, all ARO accretion and depreciation expenses are reclassified as a regulatory asset or regulatory liability. ARO regulatory assets associated with certain CCR projects are amortized to expense in accordance with regulatory approvals. For other AROs, deferred accretion and depreciation expense is recovered through cost of removal.

The changes in the carrying amounts of AROs were as follows.

			PPL						LG&E						KU
Balance at December 31, 2021			$	189					$	84					$	105
Accretion			4						1						3
Changes in estimated timing or cost			1						1						—
Obligations settled			(13)						(7)						(6)
Balance at March 31, 2022			$	181					$	79					$	102

16. Accumulated Other Comprehensive Income (Loss)

(PPL)

The after-tax changes in AOCI by component for the periods ended March 31 were as follows.

			Foreign currency translation adjustments												Unrealized gains (losses) on qualifying derivatives												Defined benefit plans
															Equity investees' AOCI						Prior service costs						Actuarial gain (loss)						Total
PPL
December 31, 2021			$	—											$	1					$	—					$	(6)					$	(152)					$	(157)
Amounts arising during the period			—												—						1						(1)						—						—
Reclassifications from AOCI			—												1						—						1						3						5
Net OCI during the period			—												1						1						—						3						5
March 31, 2022			$	—											$	2					$	1					$	(6)					$	(149)					$	(152)
December 31, 2020			$	(1,158)											$	—					$	—					$	(16)					$	(3,046)					$	(4,220)
Amounts arising during the period			303												(30)						—						—						—						273
Reclassifications from AOCI			—												25						—						—						40						65
Net OCI during the period			303												(5)						—						—						40						338
March 31, 2021			$	(855)											$	(5)					$	—					$	(16)					$	(3,006)					$	(3,882)

The following table presents PPL's gains (losses) and related income taxes for reclassifications from AOCI for the periods ended March 31.

												Three Months												Affected Line Item on the
Details about AOCI																		2022						2021						Statements of Income
Qualifying derivatives
Interest rate swaps																		$	(1)					$	(1)					Interest Expense
																		—						(1)						Loss from Discontinued Operations (net of income taxes)
Cross-currency swaps																		—						(37)						Loss from Discontinued Operations (net of income taxes)
Total Pre-tax																		(1)						(39)
Income Taxes																		—						14
Total After-tax																		(1)						(25)
Defined benefit plans
Prior service costs (a)																		(1)						—
Net actuarial loss (a)																		(4)						(62)
Total Pre-tax																		(5)						(62)
Income Taxes																		1						22
Total After-tax																		(4)						(40)
Total reclassifications during the period																		$	(5)					$	(65)

(a) These AOCI components are included in the computation of net periodic defined benefit cost. See Note 9 for additional information.