Item 2. Combined Management's Discussion and Analysis of Financial Condition and

Results of Operations

(All Registrants)

This "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" is separately filed by PPL, PPL Electric, LG&E and KU. Information contained herein relating to any individual Registrant is filed by such Registrant solely on its own behalf, and no Registrant makes any representation as to information relating to any other Registrant. 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 individual Registrants when significant.

The following should be read in conjunction with the Registrants' Condensed Consolidated Financial Statements and the accompanying Notes and with the Registrants' 2021 Form 10-K. Capitalized terms and abbreviations are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information:

• "Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments.

• "Results of Operations" for all Registrants includes a "Statement of Income Analysis," which discusses significant changes in principal line items on the Statements of Income, comparing the three months ended March 31, 2022 with the same period in 2021. The PPL "Results of Operations" also includes "Segment Earnings" and "Adjusted Gross Margins," which provide a detailed analysis of earnings by reportable segment. These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Adjusted Gross Margins" and provide explanations of the non-GAAP financial measures and a reconciliation of the non-GAAP financial measures to the most comparable GAAP measure.

• "Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles. This section also includes a discussion of rating agency actions.

• "Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk.

Overview

Introduction

(PPL)

PPL, headquartered in Allentown, Pennsylvania, is a utility holding company. PPL, through its regulated utility subsidiaries, delivers electricity to customers in Pennsylvania, Kentucky and Virginia; delivers natural gas to customers in Kentucky; and generates electricity from power plants in Kentucky.

PPL's principal subsidiaries are shown below (* denotes a Registrant).

																					PPL Corporation*
			PPL Electric* Engages in the regulated transmission and distribution of electricity in Pennsylvania																		LKE A holding company that owns regulated utility operations through its subsidiaries, LG&E and KU																		PPL Capital Funding Provides financing for the operations of PPL and certain subsidiaries
												LG&E* Engages in the regulated generation, transmission, distribution and sale of electricity and regulated distribution and sale of natural gas in Kentucky																		KU* Engages in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky
			Pennsylvania Regulated Segment																		Kentucky Regulated Segment

PPL's reportable segments' results primarily represent the results of LKE, including its wholly-owned subsidiaries, LG&E and KU, and PPL Electric.

In addition to PPL, the other Registrants included in this filing are as follows.

(PPL Electric)

PPL Electric, headquartered in Allentown, Pennsylvania, is a wholly-owned subsidiary of PPL and a regulated public utility that is an electricity transmission and distribution service provider in eastern and central Pennsylvania. PPL Electric is subject to regulation as a public utility by the PUC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act. PPL Electric delivers electricity in its Pennsylvania service area and provides electricity supply to retail customers in that area as a PLR under the Customer Choice Act. PPL Electric was organized in 1920 as Pennsylvania Power & Light Company.

(LG&E)

LG&E, headquartered in Louisville, Kentucky, is a wholly-owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity and distribution and sale of natural gas in Kentucky. LG&E is subject to regulation as a public utility by the KPSC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act.

(KU)

KU, headquartered in Lexington, Kentucky, is a wholly-owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity in Kentucky and Virginia. KU is subject to regulation as a public utility by the KPSC and the VSCC, and certain of its transmission and wholesale power activities are subject to the jurisdiction of the FERC under the Federal Power Act. KU serves its Kentucky customers under the KU name and its Virginia customers under the Old Dominion Power name.

Business Strategy

(All Registrants)

PPL's strategy, which is supported by the other Registrants, is to achieve industry-leading performance in safety, reliability, customer satisfaction and operational efficiency; to advance a clean energy transition while maintaining affordability and reliability; to maintain a strong financial foundation and create long-term value for our shareowners; to foster a diverse and exceptional workplace; and to build strong communities in areas that we serve.

Central to PPL's and the other Registrants' strategy is recovering capital project costs efficiently through various rate-making mechanisms, including periodic base rate case proceedings using forward test years, annual FERC formula rate mechanisms and other regulatory agency-approved recovery mechanisms designed to limit regulatory lag. In Kentucky, the KPSC has adopted a series of regulatory mechanisms (ECR, DSM, GLT, fuel adjustment clause, and gas supply clause) and recovery on construction work-in-progress that reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs. In Pennsylvania, the FERC transmission formula rate, DSIC mechanism, Smart Meter Rider and other recovery mechanisms operate to reduce regulatory lag and provide for timely recovery of and a return on, as appropriate, prudently incurred costs.

In March 2021, PPL entered into definitive agreements that strategically reposition the company as a U.S.-based energy company focused on building the utilities of the future. These transactions are intended to strengthen PPL’s credit metrics, enhance long-term earnings growth and predictability, and provide the company with greater financial flexibility to invest in sustainable energy solutions. See Note 9 to the Financial Statements in PPL's 2021 Form 10-K and the "Share Purchase Agreement to Acquire Narragansett Electric" discussion in "Financial and Operational Developments" below for additional information.

Financial and Operational Developments

(PPL)

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. 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, and other customary conditions to closing. To date, all required regulatory approvals or waivers have been received. However, a stay has been granted by the Rhode Island Superior Court on the Rhode Island Division of Public Utilities and Carriers order, pending resolution of the appeal. See Note 8 to the Financial Statements for additional information regarding the current status of these proceedings. The regulatory approvals remain subject to any applicable appeal periods. The consummation of the transaction is not subject to a financing condition.

See Note 8 to the Financial Statements for additional information.

Regulatory Requirements

(All Registrants)

The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.

Environmental Considerations for Coal-Fired Generation (PPL, LG&E and KU)

The businesses of LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHG, and ELGs. See Notes 6, 10 and 15 to the Financial Statements for a discussion of these significant environmental matters. These and other environmental requirements led PPL, LG&E and KU to retire approximately 1,200 MW of coal-fired generating plants in Kentucky since 2010. As part of the long-term generation planning process, LG&E and KU evaluate a range of factors including the impact of potential stricter environmental regulations, fuel price scenarios, the cost of replacement generation, continued operations and major maintenance costs and the risk of major equipment failures in determining when to retire generation assets. As a result of environmental requirements and aging infrastructure, LG&E anticipates retiring two older coal-fired units at the Mill Creek Plant and KU anticipates retiring one coal-fired unit at the E.W. Brown plant. Mill Creek Unit 1 has 300 MW of capacity and is expected to be retired in 2024. Mill Creek Unit 2 and E.W. Brown Unit 3 have capacities of 297 MW and 412 MW and are expected to be retired in 2028. LG&E and KU anticipate earning recovery of and return on any remaining net book value of these assets through the Retired Asset Recovery (RAR) rider. See Note 7 to the Financial Statements in the Registrants' 2021 Form 10-K for additional information related to the RAR rider.

*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.

Rate Case Proceedings (PPL and KU)

On August 31, 2021, KU filed a request with the VSCC for an annual increase in Virginia base electricity rates of approximately $12 million. KU's request is based on an authorized 10.4% return on equity. On March 11, 2022, KU and the VSCC staff reached a partial stipulation and recommendation agreement providing KU with an increase in base electricity rates of approximately $7 million based on an authorized 9.4% return on equity. A hearing on open issues occurred on March 17, 2022 and the Hearing Examiner subsequently issued a report supporting the proposed agreement as appropriate. Subject to regulatory review and approval, new rates would become effective June 1, 2022.

Results of Operations

(PPL)

The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three months ended March 31, 2022 with the same period in 2021. The "Segment Earnings" and "Adjusted Gross Margins" discussions provide a review of results by reportable segment. These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Adjusted Gross Margins," and provide explanations of the non-GAAP financial measures and a reconciliation of those measures to the most comparable GAAP measure.

(PPL Electric, LG&E and KU)

A "Statement of Income Analysis" is presented separately for PPL Electric, LG&E and KU. The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three months ended March 31, 2022 with the same period in 2021.

(All Registrants)

The results for interim periods can be disproportionately influenced by numerous factors and developments and by seasonal variations. As such, the results of operations for interim periods do not necessarily indicate results or trends for the year or future periods.

PPL: Statement of Income Analysis, Segment Earnings and Adjusted Gross Margins

Statement of Income Analysis

Net income for the periods ended March 31 includes the following results:

									Three Months
																					2022						2021						$ Change
Operating Revenues																					$	1,782					$	1,498					$	284
Operating Expenses
Operation
Fuel																					212						177						35
Energy purchases																					352						220						132
Other operation and maintenance																					433						367						66
Depreciation																					271						267						4
Taxes, other than income																					60						52						8
Total Operating Expenses																					1,328						1,083						245
Other Income (Expense) - net																					—						—						—
Interest Expense																					107						153						(46)
Income from Continuing Operations Before Income Taxes																					347						262						85
Income Taxes																					74						59						15
Income from Continuing Operations After Income Taxes																					273						203						70
Loss from Discontinued Operations (net of income taxes) (Note 8)																					—						(2,043)						2,043
Net Income (Loss)																					$	273					$	(1,840)					$	2,113

Operating Revenues

The increase (decrease) in operating revenues was due to:

									Three Months
PPL Electric distribution volume (a)									$	12
PPL Electric PLR (b)									114
PPL Electric transmission formula rate (c)									45
LG&E retail rates (d)									28
LG&E fuel and other energy prices (e)									37
KU retail rates (d)									30
KU fuel and other energy prices (e)									26
Other									(8)
Total									$	284

(a)The increase was due to weather and higher customer volumes.

(b)The increase was primarily due to higher energy prices, higher customer volumes and lower volumes of shopping customers.

(c)The increase was primarily due to a $27 million revenue reduction recorded in the three months ended March 31, 2021 due to a challenge to the transmission formula rate return on equity, which was partially offset by $11 million of lower revenue in the three months ended March 31, 2022 due to the settled reduction in the return on equity, $17 million due to a higher PPL zonal peak load billing factor in 2022 and $10 million due to returns on additional transmission capital investments. See Note 6 to the Financial Statements for additional details on the transmission formula rate return on equity reduction.

(d)The increase was due to new base rates approved by the KPSC effective July 1, 2021.

(e)The increase was primarily due to higher recoveries of fuel and energy purchases due to higher commodity costs.

Fuel

Fuel increased $35 million for the three months ended March 31, 2022 compared with 2021, primarily due to a $9 million increase in commodity costs at LG&E and a $27 million increase in commodity costs, partially offset by a $7 million decrease in volumes due to the timing of generation maintenance outages at KU.

Energy Purchases

Energy purchases increased $132 million for the three months ended March 31, 2022 compared with 2021, primarily due to higher PLR prices of $90 million and higher PLR volumes of $16 million at PPL Electric and a $25 million increase at LG&E primarily due to an increase in commodity costs.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance was due to:

									Three Months
PPL Electric bad debts									$	5
PPL Electric storm costs									8
PPL Electric universal service programs									3
Charges related to the sale of the U.K. utility business									(7)
Charges related to the acquisition of Narragansett Electric (a)									34
Stock compensation expense									3
Other									20
Total									$	66

(a)Costs related to the integration of Narragansett Electric, including approximately $12 million of IT systems implementation costs and approximately $22 million of other external consultant and internal costs. PPL does not expect to recover these costs. See Note 8 to the Financial Statements for additional information.

Depreciation

The increase in depreciation was due to:

									Three Months
Additions to PP&E, net (a)									$	(2)
Depreciation rate change effective July 2021									6
Total									$	4

(a)The decrease was primarily due to a decrease in software and computer hardware depreciation of $12 million at PPL Electric Utilities, as a result of end-of-life retirements, partially offset by increases of $4 million at LG&E and $3 million at KU due to additional assets placed into service, net of retirements.

Taxes, Other Than Income

The increase (decrease) in taxes, other than income was due to:

									Three Months
State gross receipts tax									$	6
Domestic property tax expense									2
Total									$	8

Other Income (Expense) - net

The increase (decrease) in other income (expense) - net was due to:

									Three Months
Defined benefit plans - non-service credits (Note 9)									$	6
Other									(6)
Total									$	—

Interest Expense

The increase (decrease) in interest expense was due to:

									Three Months
Long-term debt (a)									$	(42)
Other									(4)
Total									$	(46)

(a) The decrease was primarily due to PPL Capital Funding debt that was redeemed in June and July 2021.

Income Taxes

The increase (decrease) in income taxes was due to:

									Three Months
Change in pre-tax income									$	27
Valuation allowance adjustments									(5)
Amortization of investment tax credit including deferred taxes on basis difference									(2)
Amortization of excess deferred federal and state income taxes									(6)
Other									1
Total									$	15

Loss from Discontinued Operations (net of income taxes)

Loss from discontinued operations (net of income taxes) decreased $2,043 million for the three months ended March 31, 2022 compared with 2021. The decrease was due to the completion of the sale of the U.K. utility business in the second quarter of 2021. See "Discontinued Operations" in Note 8 to the Financial Statements for summarized results of operations of the U.K. utility business in 2021.

Segment Earnings

PPL's Net Income by reportable segment for the periods ended March 31 was as follows:

									Three Months
																					2022						2021						$ Change
Kentucky Regulated																					$	179					$	146					$	33
Pennsylvania Regulated																					143						113						30
Corporate and Other (a)																					(49)						(56)						7
Discontinued Operations (b)																					—						(2,043)						2,043
Net Income																					$	273					$	(1,840)					$	2,113

(a)Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results.

(b)See Note 8 to the Financial Statements for additional information.

Earnings from Ongoing Operations

Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to net income, an indicator of operating performance determined in accordance with GAAP. PPL believes that Earnings from Ongoing Operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. In addition, PPL's management uses Earnings from Ongoing Operations in measuring achievement of certain corporate performance goals, including targets for certain executive incentive compensation. Other companies may use different measures to present financial performance.

Earnings from Ongoing Operations is adjusted for the impact of special items. Special items are presented in the financial tables on an after-tax basis with the related income taxes on special items separately disclosed. Income taxes on special items, when applicable, are calculated based on the statutory tax rate of the entity where the activity is recorded. Special items may include items such as:

• Gains and losses on sales of assets not in the ordinary course of business.

• Impairment charges.

• Significant workforce reduction and other restructuring effects.

• Acquisition and divestiture-related adjustments.

• Significant losses on early extinguishment of debt.

• Other charges or credits that are, in management's view, non-recurring or otherwise not reflective of the company's ongoing operations.

PPL's Earnings from Ongoing Operations by reportable segment for the periods ended March 31 were as follows:

									Three Months
																					2022						2021						$ Change
Kentucky Regulated																					$	183					$	142					$	41
Pennsylvania Regulated																					143						126						17
Corporate and Other																					(21)						(49)						28
Earnings from Ongoing Operations																					$	305					$	219					$	86

See "Reconciliation of Earnings from Ongoing Operations" below for a reconciliation of this non-GAAP financial measure to Net Income.

Kentucky Regulated Segment

The Kentucky Regulated segment consists primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas.

Net Income and Earnings from Ongoing Operations for the periods ended March 31 include the following results.

									Three Months
																					2022						2021						$ Change
Operating revenues																					$	1,004					$	885					$	119
Fuel																					212						177						35
Energy purchases																					96						71						25
Other operation and maintenance																					225						220						5
Depreciation																					169						156						13
Taxes, other than income																					23						21						2
Total operating expenses																					725						645						80
Other Income (Expense) - net																					(2)						—						(2)
Interest Expense																					47						51						(4)
Interest Expense with Affiliate (a)																					14						13						1
Income Taxes																					37						30						7
Net Income																					179						146						33
Less: Special Items																					(4)						4						(8)
Earnings from Ongoing Operations																					$	183					$	142					$	41

(a)Borrowings between LKE and PPL were $1,456 million and $2,166 million as of March 31, 2022 and December 31, 2021.

The following after-tax gains (losses), which management considers special items, impacted the Kentucky Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended March 31.

			Income Statement Line Item												Three Months
																		2022						2021
Strategic corporate initiatives, net of tax of $1			Other Income (Expense)																		$	(4)					$	—
Valuation allowance adjustment (a)			Income Taxes																		—						4
Total Special Items																					$	(4)					$	4

(a)Adjustment of valuation allowances related to certain tax credits recorded in 2017 as a result of the TCJA.

The changes in the components of the Kentucky Regulated segment's results between these periods were due to the factors set forth below, which reflect amounts classified as Kentucky Adjusted Gross Margins and the items that management considers special on separate lines and not in their respective Statement of Income line items.

									Three Months
Kentucky Adjusted Gross Margins									$	89
Other operation and maintenance									(6)
Depreciation									(40)
Taxes, other than income									(4)
Other Income (Expense) - net									3
Interest Expense									4
Interest Expense with Affiliate									(1)
Income Taxes									(4)
Earnings from Ongoing Operations									41
Special items, after-tax									(8)
Net Income									$	33

• See "Adjusted Gross Margins - Changes in Adjusted Gross Margins" for an explanation of Kentucky Adjusted Gross Margins.

• Higher depreciation expense due to a $30 million increase related to certain ECR and GLT depreciation expenses transferred to base rates as a result of the 2020 Kentucky rate case, a $5 million increase due to additional assets placed into service, net of retirements and a $5 million increase due to higher depreciation rates, effective July 1, 2021.

Pennsylvania Regulated Segment

The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric.

Net Income and Earnings from Ongoing Operations for the periods ended March 31 include the following results.

									Three Months
																					2022						2021						$ Change
Operating revenues																					$	775					$	605					$	170
Energy purchases																					256						149						107
Other operation and maintenance																					160						128						32
Depreciation																					98						108						(10)
Taxes, other than income																					37						32						5
Total operating expenses																					551						417						134
Other Income (Expense) - net																					8						5						3
Interest Expense																					39						43						(4)
Income Taxes																					50						37						13
Net Income																					143						113						30
Less: Special Item																					—						(13)						13
Earnings from Ongoing Operations																					$	143					$	126					$	17

The following after-tax gains (losses), which management considers special items, impacted the Pennsylvania Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended March 31.

			Income Statement Line Item												Three Months
																		2022						2021
Transmission formula rate return on equity reduction, net of tax of $0, $6 (a)			Operating revenues																		$	—					$	(13)
Total Special Items																					$	—					$	(13)

(a) Represents the portion of the reduction recognized in the March 31, 2021 Statement of Income related to the period from May 21, 2020 through December 31, 2020. See Note 6 to the Financial Statements for additional information.

The changes in the components of the Pennsylvania Regulated segment's results between these periods are due to the factors set forth below, which reflect amounts classified as Pennsylvania Adjusted Gross Margins and the items that management considers special on separate lines and not in their respective Statement of Income line items.

									Three Months
Pennsylvania Adjusted Gross Margins									$	45
Other operation and maintenance									(28)
Depreciation									(1)
Taxes, other than income									1
Other Income (Expense) - net									3
Interest Expense									4
Income Taxes									(7)
Earnings from Ongoing Operations									17
Special Item, after tax									13
Net Income									$	30

• See "Adjusted Gross Margins - Changes in Adjusted Gross Margins" for an explanation of Pennsylvania Adjusted Gross Margins.

• Higher other operation and maintenance expense for the three month period primarily due to higher Corporate support costs of $10 million, higher nonrecoverable storm costs of $8 million and higher bad debt expense of $5 million.

Reconciliation of Earnings from Ongoing Operations

The following tables contain after-tax gains (losses), in total, which management considers special items, that are excluded from Earnings from Ongoing Operations and a reconciliation to PPL's "Net Income" for the periods ended March 31.

									2022 Three Months
									KY Regulated						PA Regulated						Corporate and Other						Discontinued Operations (a)												Total
Net Income									$	179					$	143					$	(49)					$	—											$	273
Less: Special Items (expense) benefit:
Talen litigation costs, net of tax of $1 (b)									—						—						(4)						—												(4)
Strategic corporate initiatives, net of tax of $1, $0, $1									(4)						—						(4)						—												(8)
Acquisition integration, net of tax of $6 (c)									—						—						(21)						—												(21)
Solar panel impairment, net of tax of $0									—						—						1						—												1
Total Special Items									(4)						—						(28)						—												(32)
Earnings from Ongoing Operations									$	183					$	143					$	(21)					$	—											$	305
									2021 Three Months
									KY Regulated						PA Regulated						Corporate and Other						Discontinued Operations (a)												Total
Net Income									$	146					$	113					$	(56)					$	(2,043)											$	(1,840)
Less: Special Items (expense) benefit:
Loss from Discontinued Operations									—						—						—						(2,047)												(2,047)
Talen litigation costs, net of tax of $1 (b)									—						—						(3)						—												(3)
Valuation allowance adjustment (d)									4						—						(4)						4												4
Transmission formula rate return on equity reduction, net of tax of $6									—						(13)						—						—												(13)
Total Special Items									4						(13)						(7)						(2,043)												(2,059)
Earnings from Ongoing Operations									$	142					$	126					$	(49)					$	—											$	219

(a)See Note 8 to the Financial Statements for additional information.

(b)PPL incurred legal expenses related to litigation with its former affiliate, Talen Montana. See Note 10 to the Financial Statements for additional information.

(c)Costs related to the integration of Narragansett Electric, including approximately $9 million of IT systems implementation costs and approximately $12 million primarily related to other external consultant costs. PPL does not expect to recover these costs. See Note 8 to the Financial Statements for additional information.

(d)Adjustment of valuation allowances related to certain tax credits recorded in 2017 as a result of the TCJA.

Adjusted Gross Margins

Management also utilizes the following non-GAAP financial measures as indicators of performance for its businesses:

• "Kentucky Adjusted Gross Margins" is a single financial performance measure of the electricity generation, transmission and distribution operations of the Kentucky Regulated segment, as well as the Kentucky Regulated segment's distribution and sale of natural gas. In calculating this measure, fuel, energy purchases and certain variable costs of production (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from operating revenues. In addition, certain other expenses, recorded in "Other operation and maintenance," "Depreciation" and "Taxes, other than income" on the Statements of Income, associated with approved cost recovery mechanisms are offset against the recovery of those expenses, which are included in revenues. These mechanisms allow for direct recovery of these expenses and, in some cases, returns on capital investments and performance incentives. As a result, this measure represents the net revenues from electricity and gas operations.

• "Pennsylvania Adjusted Gross Margins" is a single financial performance measure of the electricity transmission and distribution operations of the Pennsylvania Regulated segment. In calculating this measure, utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset with minimal impact on earnings. Costs associated with these mechanisms are recorded in "Energy purchases," "Other operation and maintenance" (which are primarily Act 129, Storm Damage and Universal Service program costs), "Depreciation" (which is primarily related to the Act 129 Smart Meter program) and "Taxes, other than income" (which is primarily gross receipts tax) on the Statements of Income. This measure represents the net revenues from the Pennsylvania Regulated segment's electricity delivery operations.

These measures are not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance. Other companies may use different measures to analyze and report their results of operations. Management believes these measures provide additional useful criteria to make investment decisions. These performance measures are used, in conjunction with other information, by senior management and PPL's Board of Directors to manage operations and analyze actual results compared with budget.

Changes in Adjusted Gross Margins

The following table shows Adjusted Gross Margins by PPL's reportable segment and by component, as applicable for the periods ended March 31 as well as the change between periods. The factors that gave rise to the changes are described following the table.

									Three Months
																					2022						2021						$ Change
Kentucky Regulated
Kentucky Adjusted Gross Margins																					$	659					$	570					$	89
Pennsylvania Regulated
Pennsylvania Adjusted Gross Margins
Distribution																					$	265					$	247					$	18
Transmission																					183						156						27
Total Pennsylvania Adjusted Gross Margins																					$	448					$	403					$	45

Kentucky Adjusted Gross Margins

Kentucky Adjusted Gross Margins increased for the three months ended March 31, 2022 compared with 2021, primarily due to higher base rates of $58 million and environmental and gas cost recoveries added to base rates of $33 million, partially offset by $9 million of lower adjusted gross margins as a result of the economic relief billing credit, net of amortization.

The increase in base rates was the result of new rates approved by the KPSC effective July 1, 2021. The environmental and gas cost recoveries added to base rates were the result of the transfer of certain ECR and GLT expenses into base rates as a result of the 2020 Kentucky rate case. This transfer results in depreciation and other operation and maintenance expenses associated with the ECR and GLT programs being excluded from margins in the second half of 2021, while the recovery of such costs remain in Kentucky Gross Margins through base rates.

Pennsylvania Adjusted Gross Margins

Distribution

Distribution Adjusted Gross Margins increased for the three months ended March 31, 2022 compared with 2021 primarily due to higher sales volumes of $5 million and favorable weather of $5 million. The remaining items were not individually significant in comparison to the prior year.

Transmission

Transmission Adjusted Gross Margins increased for the three months ended March 31, 2022 compared with 2021, primarily due to $17 million as a result of a higher annual PPL zonal peak load billing factor in 2022 and $10 million of returns on additional transmission capital investments focused on replacing aging infrastructure and improving reliability.

Reconciliation of Adjusted Gross Margins

The following tables contain the components from the Statement of Income that are included in the non-GAAP financial measures and a reconciliation to PPL's "Operating Income" for the periods ended March 31.

									2022 Three Months
									Kentucky Adjusted Gross Margins						Pennsylvania Adjusted Gross Margins						Other (a)						Operating Income (b)
Operating Revenues									$	1,004					$	775					$	3					$	1,782
Operating Expenses
Fuel									212						—						—						212
Energy purchases									96						256						—						352
Other operation and maintenance									24						29						380						433
Depreciation									13						6						252						271
Taxes, other than income									—						36						24						60
Total Operating Expenses									345						327						656						1,328
Total									$	659					$	448					$	(653)					$	454
									2021 Three Months
									Kentucky Adjusted Gross Margins						Pennsylvania Adjusted Gross Margins						Other (a)						Operating Income (b)
Operating Revenues									$	885					$	624					$	(11)					$	1,498
Operating Expenses
Fuel									177						—						—						177
Energy purchases									71						149						—						220
Other operation and maintenance									25						25						317						367
Depreciation									40						17						210						267
Taxes, other than income									2						30						20						52
Total Operating Expenses									315						221						547						1,083
Total									$	570					$	403					$	(558)					$	415

(a)Represents amounts excluded from Adjusted Gross Margins.

(b)As reported on the Statements of Income.

PPL Electric: Statement of Income Analysis

Statement of Income Analysis

Net income for the periods ended March 31 includes the following results.

									Three Months
																					2022						2021						$ Change
Operating Revenues																					$	775					$	605					$	170
Operating Expenses
Operation
Energy purchases																					256						149						107
Other operation and maintenance																					160						128						32
Depreciation																					98						108						(10)
Taxes, other than income																					37						32						5
Total Operating Expenses																					551						417						134
Other Income (Expense) - net																					6						5						1
Interest Income from Affiliate																					2						—						2
Interest Expense																					39						43						(4)
Income Taxes																					50						37						13
Net Income																					$	143					$	113					$	30

Operating Revenues

The increase (decrease) in operating revenues was due to:

									Three Months
Distribution price (a)									$	(6)
Distribution volume (b)									12
PLR (c)									114
Transmission formula rate (d)									45
Other									5
Total									$	170

(a)The decrease was primarily due to reconcilable cost recovery mechanisms approved by the PUC.

(b)The increase was due to weather and higher customer volumes.

(c)The increase was primarily due to higher energy prices, higher customer volumes and lower volumes of shopping customers.

(d)The increase was primarily due to a $27 million revenue reduction recorded in the three months ended March 31, 2021 due to a challenge to the transmission formula rate return on equity, which was partially offset by $11 million of lower revenue in the three months ended March 31, 2022 due to the settled reduction in the return on equity, $17 million due to a higher PPL zonal peak load billing factor in 2022 and $10 million due to returns on additional transmission capital investments. See Note 6 to the Financial Statements for additional details on the transmission formula rate return on equity reduction.

Energy Purchases

Energy purchases increased $107 million for the three months ended March 31, 2022 compared with 2021. This increase was primarily due to higher PLR prices of $90 million and higher PLR volumes of $16 million.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance was due to:

									Three Months
Support costs									$	10
Storm costs									8
Universal service programs									3
Bad debts									5
Other									6
Total									$	32

Depreciation

Depreciation decreased $10 million for the three months ended March 31, 2022 compared with 2021, primarily due to a $12 million decrease in software and computer hardware depreciation as a result of end-of-life retirements.

Income Taxes

Income taxes increased $13 million for the three months ended March 31, 2022 compared with 2021 primarily due to a change in pre-tax income.

LG&E: Statement of Income Analysis

Statement of Income Analysis

Net income for the periods ended March 31 includes the following results.

									Three Months
																					2022						2021						$ Change
Operating Revenues
Retail and wholesale																					$	481					$	421					$	60
Electric revenue from affiliate																					12						7						5
Total Operating Revenues																					493						428						65
Operating Expenses
Operation
Fuel																					81						67						14
Energy purchases																					91						66						25
Energy purchases from affiliate																					2						5						(3)
Other operation and maintenance																					100						96						4
Depreciation																					74						66						8
Taxes, other than income																					12						11						1
Total Operating Expenses																					360						311						49
Other Income (Expense) - net																					(1)						(2)						1
Interest Expense																					20						21						(1)
Income Taxes																					19						19						—
Net Income																					$	93					$	75					$	18

Operating Revenues

The increase (decrease) in operating revenues was due to:

									Three Months
Fuel and other energy prices (a)									$	37
Retail rates (b)									28
Economic relief billing credit, net of amortization of $5									(6)
Other									6
Total									$	65

(a) The increase was primarily due to higher recoveries of fuel and energy purchases due to higher commodity costs.

(b) The increase was due to new base rates approved by the KPSC effective July 1, 2021.

Fuel

Fuel increased $14 million for the three months ended March 31, 2022 compared with 2021, due to a $9 million increase in commodity costs and a $5 million increase in volumes due to higher sales to KU as a result of the timing and scope of generation maintenance outages.

Energy Purchases

Energy purchases increased $25 million for the three months ended March 31, 2022 compared with 2021, primarily due to an increase in commodity costs.

Depreciation

Depreciation increased $8 million for the three months ended March 31, 2022 compared with 2021, due to a $4 million increase driven by additional assets placed into service, net of retirements, and a $4 million increase driven by higher depreciation rates effective July 1, 2021.

KU: Statement of Income Analysis

Statement of Income Analysis

Net income for the periods ended March 31 includes the following results.

									Three Months
																					2022						2021						$ Change
Operating Revenues
Retail and wholesale																					$	523					$	464					$	59
Electric revenue from affiliate																					2						5						(3)
Total Operating Revenues																					525						469						56
Operating Expenses
Operation
Fuel																					131						110						21
Energy purchases																					5						5						—
Energy purchases from affiliate																					12						7						5
Other operation and maintenance																					113						115						(2)
Depreciation																					95						89						6
Taxes, other than income																					11						10						1
Total Operating Expenses																					367						336						31
Other Income (Expense) - net																					—						1						(1)
Interest Expense																					27						27						—
Income Taxes																					24						21						3
Net Income																					$	107					$	86					$	21

Operating Revenues

The increase in operating revenues was due to:

									Three Months
Retail rates (a)									$	30
Fuel and other energy prices (b)									26
Economic relief billing credit, net of amortization of $0									(3)
Other									3
Total									$	56

(a)The increase was due to new base rates approved by the KPSC effective July 1, 2021.

(b)The increase was primarily due to higher recoveries of fuel and energy purchases due to higher commodity costs.

Fuel

Fuel increased $21 million for the three months ended March 31, 2022 compared with 2021, primarily due to a $27 million increase in commodity costs, partially offset by a $7 million decrease in volumes due to the timing and scope of generation maintenance outages.

Depreciation

Depreciation increased $6 million for the three months ended March 31, 2022 compared with 2021, primarily due to a $3 million increase driven by additional assets placed into service, net of retirements, and a $2 million increase driven by higher depreciation rates effective July 1, 2021.

Financial Condition

The remainder of this Item 2 in this Form 10-Q is presented on a combined basis, providing information, as applicable, for all Registrants.

Liquidity and Capital Resources

(All Registrants)

The Registrants had the following at:

			PPL						PPL Electric						LG&E						KU
March 31, 2022
Cash and cash equivalents			$	4,249					$	46					$	9					$	8
Short-term debt			985						—						353						285
Long-term debt due within one year			474						474						—						—
Notes payable to affiliates									—						—						4
December 31, 2021
Cash and cash equivalents			$	3,571					$	21					$	9					$	13
Short-term debt			69						—						69						—
Long-term debt due within one year			474						474						—						—
Notes payable to affiliates									—						324						294

(PPL)

The Statements of Cash Flows separately report the cash flows of discontinued operations. The "Operating Activities",

"Investing Activities" and "Financing Activities" sections below include only the cash flows of continuing operations.

(All Registrants)

Net cash provided by (used in) operating, investing and financing activities for the three month periods ended March 31, and the changes between periods, were as follows.

			PPL						PPL Electric						LG&E						KU
2022
Operating activities			$	502					$	122					$	218					$	219
Investing activities			(427)						15						(103)						(129)
Financing activities			603						(112)						(115)						(95)
2021
Operating activities			$	396					$	121					$	181					$	224
Investing activities			(472)						(222)						(111)						(127)
Financing activities			55						90						(70)						(111)
Change - Cash Provided (Used)
Operating activities			$	106					$	1					$	37					$	(5)
Investing activities			45						237						8						(2)
Financing activities			548						(202)						(45)						16

Operating Activities

The components of the change in cash provided by (used in) operating activities for the three months ended March 31, 2022 compared with 2021 were as follows.

			PPL						PPL Electric						LG&E						KU
Change - Cash Provided (Used)
Net income			$	70					$	30					$	18					$	21
Non-cash components			(9)						12						2						8
Working capital			(16)						(84)						22						(27)
Defined benefit plan funding			30						21						1						—
Other operating activities			31						22						(6)						(7)
Total			$	106					$	1					$	37					$	(5)

(PPL)

PPL's cash provided by operating activities in 2022 increased $106 million compared with 2021.

• Net income increased $70 million between the periods and included a decrease in non-cash charges of $9 million. The decrease in non-cash charges was primarily due to a decrease in deferred income taxes and investment tax credits partially offset by an increase in stock-based compensation expense.

• The $16 million decrease in cash from changes in working capital was primarily due to a decrease in unbilled revenues (primarily due to weather), a decrease in regulatory liabilities (primarily due to PPL Electric's refunds to customers related to the transmission formula rate return on equity reduction and timing of rate recovery mechanisms), partially offset by an increase in accounts receivable, taxes payable and accounts payable (primarily due to timing).

• The $30 million decrease in defined benefit plan funding was primarily due to a decrease in contribution to its pension plans in 2022, as PPL's defined benefit pension plans have the option to utilize available prior year credit balances to meet current and future contribution requirements.

• The $31 million increase in cash provided by other operating activities was primarily due to an increase in pension plan assets and long-term payment agreements at PPL Electric, partially offset by a decrease in accrued pension obligations.

(PPL Electric)

PPL Electric's cash provided by operating activities in 2022 increased $1 million compared with 2021.

• Net income increased $30 million between the periods and included an increase in non-cash components of $12 million. The increase in non-cash components was primarily due to an increase in deferred income taxes and investment tax credits (primarily due to the impact of the transmission formula rate return on equity reduction) partially offset by a decrease in depreciation expense (primarily related to a decrease in software and computer hardware depreciation as a result of end-of-life retirements).

• The $84 million decrease in cash from changes in working capital was primarily due to a decrease in regulatory liabilities (primarily due to refunds to customers related to the transmission formula rate return on equity reduction and timing of rate recovery mechanisms).

• A $21 million decrease in defined benefit plan funding.

• The $22 million increase in cash provided by other operating activities was driven primarily by payments received on long-term payment agreements.

(LG&E)

LG&E's cash provided by operating activities in 2022 increased $37 million compared with 2021.

• Net income increased $18 million between the periods and included an increase in non-cash components of $2 million. The increase in non-cash components was driven by an increase in depreciation expense (primarily due to additional assets placed into service, net of retirements and higher depreciation rates effective July 1, 2021), partially offset by a decrease in deferred income tax expense (primarily due to amortization of excess deferred income taxes).

• The increase in cash from changes in working capital was primarily due to a decrease in net regulatory assets (primarily due to the timing of rate recovery mechanisms), a decrease in fuels, materials and supplies (primarily due to higher priced natural gas withdrawn from storage), a decrease in other current assets and liabilities, accounts receivable and accounts receivable from affiliates (primarily due to timing of payments), partially offset by an increase in unbilled revenues (primarily due to weather) and a decrease in accounts payable and accounts payable to affiliates (primarily due to timing of payments).

• The decrease in cash provided by other operating activities was driven by a decrease in other liabilities (primarily due to timing of payments).

(KU)

KU's cash provided by operating activities in 2022 decreased $5 million compared with 2021.

• Net income increased $21 million between the periods and included an increase in non-cash components of $8 million. The increase in non-cash components was driven by an increase in depreciation expense (primarily due to additional assets placed into service, net of retirements and higher depreciation rates effective July 1, 2021).

• The decrease in cash from changes in working capital was primarily due to an increase in unbilled revenues (primarily due to weather), a decrease in accounts payable to affiliates (primarily due to timing of payments), an increase in fuel, materials and supplies (primarily due to higher commodity costs) and an increase in accounts receivable (primarily due to higher commodity costs), partially offset by a decrease in other current assets and liabilities (primarily due to the timing of payments), an increase in taxes payable and accounts payable (primarily due to timing of payments).

• The decrease in cash provided by other operating activities was driven primarily by an increase in other assets (primarily related to noncurrent regulatory assets).

Investing Activities

(All Registrants)

The components of the change in cash provided by (used in) investing activities for the three months ended March 31, 2022 compared with 2021 were as follows.

			PPL						PPL Electric						LG&E						KU
Change - Cash Provided (Used)
Expenditures for PP&E			$	44					$	35					$	12					$	(2)
Notes receivable from affiliate			—						203						(4)						—
Other investing activities			1						(1)						—						—
Total			$	45					$	237					$	8					$	(2)

For PPL, the decrease in expenditures for PP&E was due to lower project expenditures at PPL Electric and LG&E. The decrease in expenditures at PPL Electric was primarily due to a reduction in transmission capital spending projects. The decrease in expenditures at LG&E was primarily due to lower spending on various projects that are not individually significant.

For PPL Electric, the change in "Notes receivable from affiliate" activity resulted from payments received on the short-term note between affiliates in 2022, issued to support general corporate purposes. See Note 11 to the Financial Statements for further discussion of intercompany borrowings.

Financing Activities

(All Registrants)

The components of the change in cash provided by (used in) financing activities for the three months ended March 31, 2022 compared with 2021 were as follows.

			PPL						PPL Electric						LG&E						KU
Change - Cash Provided (Used)
Dividends			$	14					$	43					$	(15)					$	(34)
Capital contributions/distributions, net			—						(40)						—						—
Retirement of term loan			300						—						—						—
Change in short-term debt, net			164						(205)						253						308
Retirement of commercial paper			73						—						41						32
Net increase in notes payable with affiliate			—						—						(324)						(290)
Other financing activities			(3)						—						—						—
Total			$	548					$	(202)					$	(45)					$	16

See Note 7 to the Financial Statements in this Form 10-Q for information on 2022 short-term and long-term debt activity, equity transactions and PPL dividends. See Note 8 to the Financial Statements in the Registrants' 2021 Form 10-K for information on 2021 activity.

Credit Facilities

The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. Amounts borrowed under these credit facilities are reflected in "Short-term debt" on the Balance Sheets. At March 31, 2022, the total committed borrowing capacity under credit facilities and the borrowings under these facilities were:

External

			Committed Capacity						Borrowed						Letters of Credit and Commercial Paper Issued						Unused Capacity
PPL Capital Funding Credit Facilities			$	1,350					$	—					$	347					$	1,003
PPL Electric Credit Facility			650						—						1						649
LG&E Credit Facilities			500						—						353						147
KU Credit Facilities			400						—						285						115
Total Credit Facilities (a)			$	2,900					$	—					$	986					$	1,914

(a)The commitments under the credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 9%, PPL Electric - 7%, LG&E - 7% and KU - 7%.

See Note 7 to the Financial Statements for further discussion of the Registrants' credit facilities.

Intercompany (LG&E and KU)

			Committed Capacity						Borrowed						Commercial Paper Program Capacity						Unused Capacity
LG&E Money Pool (a)			$	750					$	—					$	425					$	325
KU Money Pool (a)			650						4						350						296

(a)LG&E and KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper capacity 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.

See Note 11 to the Financial Statements for further discussion of intercompany credit facilities.

Commercial Paper (All Registrants)

The Registrants maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facility. The following commercial paper programs were in place at March 31, 2022:

			Capacity						Commercial Paper Issuances						Unused Capacity
PPL Capital Funding			$	1,350					$	347					$	1,003
PPL Electric			650						—						650
LG&E			425						353						72
KU			350						285						65
Total PPL			$	2,775					$	985					$	1,790

Long-term Debt (All Registrants)

See Note 7 to the Financial Statements for information regarding the Registrants’ long-term debt activities.

(PPL)

Equity Securities Activities

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.

See Note 7 to the Financial Statements for information regarding the Registrants’ equity securities activities.

Common Stock Dividends

In February 2022, PPL declared a quarterly common stock dividend, payable April 1, 2022, of 20.0 cents per share. Future dividends, declared at the discretion of the Board of Directors, will depend upon future earnings, cash flows, financial and legal requirements and other factors, including the timing of the closing of the acquisition of Narragansett Electric.

Rating Agency Actions

(All Registrants)

Moody's and S&P periodically review the credit ratings of the debt of the Registrants and their subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.

A credit rating reflects an assessment by the rating agency of the creditworthiness associated with an issuer and particular securities that it issues. The credit ratings of the Registrants and their subsidiaries are based on information provided by the Registrants and other sources. The ratings of Moody's and S&P are not a recommendation to buy, sell or hold any securities of the Registrants or their subsidiaries. Such ratings may be subject to revisions or withdrawal by the agencies at any time and should be evaluated independently of each other and any other rating that may be assigned to the securities.

The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities. A downgrade in the Registrants' or their subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets. The Registrants and their subsidiaries have no credit rating triggers that would result in the reduction of access to capital markets or the acceleration of maturity dates of outstanding debt.

The ratings agencies did not take any actions related to the Registrants and their subsidiaries in the first quarter of 2022.

Ratings Triggers

(PPL, LG&E and KU)

Various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, and interest rate instruments, contain provisions that require the posting of additional collateral or permit the counterparty to terminate the contract, if PPL's, LG&E's or KU's or their subsidiaries' credit rating, as applicable, were to fall below investment grade. See Note 14 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for PPL for derivative contracts in a net liability position at March 31, 2022.

(All Registrants)

For additional information on the Registrants' liquidity and capital resources, see "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Registrants' 2021 Form 10-K.

Risk Management

(All Registrants)

Market Risk

See Notes 13 and 14 to the Financial Statements for information about the Registrants' risk management objectives, valuation techniques and accounting designations.

The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented. These are not precise indicators of expected future losses, but are rather only indicators of possible losses under normal market conditions at a given confidence level.

Interest Rate Risk

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.

The following interest rate hedges were outstanding at March 31, 2022.

			Exposure Hedged						Fair Value, Net - Asset (Liability) (a)						Effect of a 10% Adverse Movement in Rates (b)						Maturities Ranging Through
PPL and LG&E
Economic hedges
Interest rate swaps (c)			64						(14)						(1)						2033

(a)Includes accrued interest, if applicable.

(b)Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. Sensitivities represent a 10% adverse movement in interest rates.

(c)Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities.

The Registrants are exposed to a potential increase in interest expense and to changes in the fair value of their debt portfolios. The estimated impact of a 10% adverse movement in interest rates on interest expense at March 31, 2022 was insignificant for PPL, PPL Electric, LG&E and KU. The estimated impact of a 10% adverse movement in interest rates on the fair value of debt at March 31, 2022 is shown below.

			10% Adverse Movement in Rates
PPL			$	432
PPL Electric			177
LG&E			82
KU			124

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.

Inflation and Supply Chain Related Risk

PPL and its subsidiaries continue to monitor the impact of inflation and supply chain disruptions. PPL and its subsidiaries monitor the cost of fuel, construction, regulatory and environmental compliance costs and other costs. Mechanisms are in place to mitigate the risk of inflationary effects and supply chain disruptions, to the extent possible, but increased costs and supply chain disruptions may directly or indirectly affect our ongoing operations. These mechanisms include pricing strategies, productivity improvements and cost reductions in order to ensure that the Registrants are able to procure the necessary materials and other resources needed to maintain services in a safe and reliable manner, and to grow infrastructure consistent with the capital expenditure plan. For additional information see "Forward-looking Information” at the beginning of this report and “Item 1A. Risk Factors" of the Registrants' 2021 Form 10-K.

Credit Risk

See Notes 13 and 14 to the Financial Statements in this Form 10-Q and "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Risk Management - Credit Risk" in the Registrants' 2021 Form 10-K for additional information.

Related Party Transactions (All Registrants)

The Registrants are not aware of any material ownership interests or operating responsibility by senior management in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with the Registrants. See Note 11 to the Financial Statements for additional information on related party transactions for PPL Electric, LG&E and KU.

Acquisitions, Development and Divestitures (All Registrants)

The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures and development projects. Development projects are reexamined based on market conditions and other factors to determine whether to proceed with, modify or terminate the projects. Any resulting transactions may impact future financial results. See Note 8 to the Financial Statements for additional information on the share purchase agreement to acquire Narragansett Electric.

Environmental Matters (All Registrants)

Extensive federal, state and local environmental laws and regulations are applicable to the Registrants' air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses. The costs of compliance or alleged non-compliance cannot be predicted with certainty but could be significant. In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed. Costs may take the form of increased capital expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions. Many of these environmental law considerations are also applicable to the operations of key suppliers, or customers, such as coal producers and industrial power users, and may impact the costs for their products or their demand for the Registrants' services. Increased capital and operating costs are expected to be subject to rate recovery. The Registrants can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.

See "Environmental Matters" in Item 1. "Business" in the Registrants' 2021 Form 10-K for information about environmental laws and regulations affecting the Registrants' business. See "Legal Matters" in Note 10 to the Financial Statements for a discussion of the more significant environmental claims. See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2021 Form 10-K for information on projected environmental capital expenditures for 2022 through 2024. See Note 15 to the Financial Statements for information related to the impacts of CCRs on AROs.

The information below represents an update to “Item 1. Business – Environmental Matters – Air – NAAQS” and "Item 1. Business – Environmental Matters – Air – Climate Change" in the Registrants' 2021 Form 10-K.

NAAQS (PPL, LG&E and KU)

In March 2021, the EPA released final revisions to the Cross-State Air Pollution Rule (CSAPR) providing for reductions in ozone season nitrogen oxide emissions for 2021 and subsequent years from sources in 12 states, including Kentucky. Additionally, the EPA reversed its previous approval of the Kentucky State Implementation Plan with respect to these requirements. The CSAPR revisions, aimed at ensuring compliance with the 2008 ozone NAAQS, are not expected to be material. In February 2022, the EPA Administrator released a proposed Federal Implementation Plan (FIP) under the Good Neighbor provisions of the CAA providing for significant additional nitrogen oxide emission reductions for compliance with the revised 2015 ozone NAAQS. PPL, LG&E and KU are currently assessing the potential impact of the Good Neighbor Plan revisions on operations. Pursuant to the President’s executive order, the EPA is currently reviewing its previous determinations made in December 2020 to retain the existing NAAQS for ozone and particulate matter without change.

PPL, LG&E, and KU are unable to predict future emission reductions that may be required by future federal rules or state implementation actions. Compliance with the NAAQS, CSAPR and related requirements may require installation of additional pollution controls or other compliance actions, inclusive of retirements, the costs of which PPL, LG&E and KU believe would be subject to rate recovery.

Climate Change (All Registrants)

The Biden administration is undertaking wide-ranging efforts to address climate change. Recent government actions and policy developments, including the President’s announced goal of a carbon free electricity sector by 2035, could have far-reaching impacts on PPL’s business operations, products, and services. The Supreme Court is currently considering legal challenges to the Affordable Clean Energy (ACE) Rule and the repeal of the Clean Power Plan (CPP). The EPA has announced that it plans on issuing a greenhouse gas replacement rule in the future. All of these developments are preliminary or ongoing in nature and the Registrants cannot predict their final outcome or ultimate impact on operations*.*

New Accounting Guidance (All Registrants)

There has been no new accounting guidance adopted in 2022 and there is no new significant accounting guidance pending adoption as of March 31, 2022.

Application of Critical Accounting Policies (All Registrants**)**

Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following table summarizes the accounting policies by Registrant that are particularly important to an understanding of the reported financial condition or results of operations and require management to make estimates or other judgments of matters that are inherently uncertain. See "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2021 Form 10-K for a discussion of each critical accounting policy.

												PPL
			PPL									Electric									LG&E									KU
Defined Benefits			X									X									X									X
Income Taxes			X									X									X									X
Regulatory Assets and Liabilities			X									X									X									X
Goodwill Impairment			X																		X									X
AROs																					X									X
Revenue Recognition - Unbilled Revenue																					X									X

PPL Corporation

PPL Electric Utilities Corporation

Louisville Gas and Electric Company

Kentucky Utilities Company