PPL(PPL) - 2025 Q2 - Quarterly Report

GLOSSARY OF TERMS AND ABBREVIATIONS This section provides definitions for key terms and abbreviations used throughout the report FORWARD-LOOKING INFORMATION This section outlines forward-looking statements and key factors that could cause actual results to differ materially - Statements in this Form 10-Q concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance, and underlying assumptions are "forward-looking statements" Actual results may differ materially due to various risks and uncertainties[78] - Key factors that could cause actual results to differ include: weather, strategic acquisitions/dispositions, catastrophic events (wildfires, floods), capital market conditions (interest rates, credit), volatility in financial markets/commodity prices/economic conditions (inflation), regulatory proceedings, cyber-based intrusion, development/adoption of artificial intelligence, tariffs, changes in electricity demand, alternative generation, risk management effectiveness, counterparty defaults, market value decline, pension/retiree medical liabilities, new accounting requirements, credit rating changes, impairment charges, GHG emission laws, fuel supply access, war/conflicts, political/regulatory/economic conditions, governmental permits, tax laws, legislation, investigations, employee retention, customer/stakeholder expectations, business restructuring, cost control, new projects, labor negotiations, and litigation[78][82] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for PPL Corporation and its key subsidiaries (PPL Electric, LG&E, KU) for the quarter and six months ended June 30, 2025, and comparative periods PPL Corporation and Subsidiaries This subsection provides the condensed consolidated financial statements for PPL Corporation and its subsidiaries, including statements of income, comprehensive income, cash flows, balance sheets, and equity, for the three and six months ended June 30, 2025, and 2024, and balance sheet data as of December 31, 2024 PPL Corporation and Subsidiaries: Condensed Consolidated Statements of Income (Millions of Dollars, except share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Revenues | $2,025 | $1,881 | $4,529 | $4,185 | | Total Operating Expenses | $1,619 | $1,491 | $3,445 | $3,250 | | Operating Income | $406 | $390 | $1,084 | $935 | | Other Income (Expense) - net | $23 | $32 | $51 | $54 | | Interest Expense | $199 | $182 | $389 | $361 | | Income Before Income Taxes | $230 | $240 | $746 | $628 | | Income Taxes | $47 | $50 | $149 | $131 | | Net Income | $183 | $190 | $597 | $497 | | Basic EPS | $0.25 | $0.26 | $0.81 | $0.67 | | Diluted EPS | $0.25 | $0.26 | $0.80 | $0.67 | PPL Corporation and Subsidiaries: Condensed Consolidated Statements of Cash Flows (Millions of Dollars) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,115 | $1,048 | | Net cash used in investing activities | $(1,713) | $(1,261) | | Net cash provided by financing activities | $577 | $155 | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | $(21) | $(58) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $318 | $324 | PPL Corporation and Subsidiaries: Condensed Consolidated Balance Sheets (Millions of Dollars) | Asset/Liability Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Current Assets | $2,923 | $2,880 | | Property, Plant and Equipment, net | $34,356 | $33,149 | | Total Other Noncurrent Assets | $5,084 | $5,040 | | Total Assets | $42,363 | $41,069 | | Total Current Liabilities | $4,978 | $3,333 | | Long-term Debt | $15,292 | $15,952 | | Total Deferred Credits and Other Noncurrent Liabilities | $7,807 | $7,707 | | Total Equity | $14,286 | $14,077 | | Total Liabilities and Equity | $42,363 | $41,069 | PPL Electric Utilities Corporation and Subsidiaries This subsection presents the condensed consolidated financial statements for PPL Electric Utilities Corporation and its subsidiaries, including statements of income, cash flows, balance sheets, and equity, for the three and six months ended June 30, 2025, and 2024, and balance sheet data as of December 31, 2024 PPL Electric Utilities Corporation and Subsidiaries: Condensed Consolidated Statements of Income (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Revenues | $693 | $673 | $1,512 | $1,443 | | Total Operating Expenses | $460 | $437 | $994 | $967 | | Operating Income | $233 | $236 | $518 | $476 | | Other Income (Expense) - net | $11 | $11 | $22 | $20 | | Interest Income from Affiliate | $0 | $10 | $2 | $20 | | Interest Expense | $62 | $61 | $122 | $123 | | Income Before Income Taxes | $182 | $196 | $420 | $393 | | Income Taxes | $43 | $46 | $97 | $94 | | Net Income | $139 | $150 | $323 | $299 | PPL Electric Utilities Corporation and Subsidiaries: Condensed Consolidated Statements of Cash Flows (Millions of Dollars) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $382 | $353 | | Net cash used in investing activities | $(467) | $(1,020) | | Net cash provided by (used in) financing activities | $76 | $629 | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | $(9) | $(38) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $15 | $13 | PPL Electric Utilities Corporation and Subsidiaries: Condensed Consolidated Balance Sheets (Millions of Dollars) | Asset/Liability Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Current Assets | $947 | $1,117 | | Property, Plant and Equipment, net | $13,874 | $13,315 | | Total Other Noncurrent Assets | $1,071 | $1,043 | | Total Assets | $15,892 | $15,475 | | Total Current Liabilities | $1,184 | $806 | | Long-term Debt | $5,215 | $5,214 | | Total Deferred Credits and Other Noncurrent Liabilities | $2,747 | $2,725 | | Total Equity | $6,746 | $6,730 | | Total Liabilities and Equity | $15,892 | $15,475 | Louisville Gas and Electric Company This subsection provides the condensed financial statements for Louisville Gas and Electric Company (LG&E), including statements of income, cash flows, balance sheets, and equity, for the three and six months ended June 30, 2025, and 2024, and balance sheet data as of December 31, 2024 Louisville Gas and Electric Company: Condensed Statements of Income (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Revenues | $378 | $366 | $883 | $842 | | Total Operating Expenses | $286 | $265 | $637 | $600 | | Operating Income | $92 | $101 | $246 | $242 | | Other Income (Expense) - net | $5 | $4 | $8 | $6 | | Interest Expense | $27 | $26 | $53 | $52 | | Income Before Income Taxes | $70 | $79 | $201 | $196 | | Income Taxes | $14 | $17 | $40 | $41 | | Net Income | $56 | $62 | $161 | $155 | Louisville Gas and Electric Company: Condensed Statements of Cash Flows (Millions of Dollars) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $279 | $273 | | Net cash used in investing activities | $(306) | $(207) | | Net cash provided by (used in) financing activities | $24 | $(82) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(3) | $(16) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $21 | $28 | Louisville Gas and Electric Company: Condensed Balance Sheets (Millions of Dollars) | Asset/Liability Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Current Assets | $467 | $468 | | Property, Plant and Equipment, net | $6,722 | $6,548 | | Total Other Noncurrent Assets | $1,007 | $976 | | Total Assets | $8,196 | $7,992 | | Total Current Liabilities | $852 | $762 | | Long-term Debt | $2,172 | $2,171 | | Total Deferred Credits and Other Noncurrent Liabilities | $1,805 | $1,788 | | Total Equity | $3,367 | $3,271 | | Total Liabilities and Equity | $8,196 | $7,992 | Kentucky Utilities Company This subsection provides the condensed financial statements for Kentucky Utilities Company (KU), including statements of income, cash flows, balance sheets, and equity, for the three and six months ended June 30, 2025, and 2024, and balance sheet data as of December 31, 2024 Kentucky Utilities Company: Condensed Statements of Income (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Revenues | $472 | $464 | $1,036 | $989 | | Total Operating Expenses | $345 | $338 | $723 | $696 | | Operating Income | $127 | $126 | $313 | $293 | | Other Income (Expense) - net | $5 | $4 | $10 | $6 | | Interest Expense | $35 | $33 | $70 | $67 | | Interest Expense with Affiliate | $0 | $1 | $0 | $1 | | Income Before Income Taxes | $97 | $96 | $253 | $231 | | Income Taxes | $19 | $19 | $50 | $46 | | Net Income | $78 | $77 | $203 | $185 | Kentucky Utilities Company: Condensed Statements of Cash Flows (Millions of Dollars) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $351 | $352 | | Net cash used in investing activities | $(391) | $(296) | | Net cash provided by (used in) financing activities | $33 | $(63) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(7) | $(7) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $22 | $31 | Kentucky Utilities Company: Condensed Balance Sheets (Millions of Dollars) | Asset/Liability Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Current Assets | $514 | $491 | | Property, Plant and Equipment, net | $8,565 | $8,334 | | Total Other Noncurrent Assets | $1,252 | $1,248 | | Total Assets | $10,331 | $10,073 | | Total Current Liabilities | $988 | $849 | | Long-term Debt | $2,799 | $2,816 | | Total Deferred Credits and Other Noncurrent Liabilities | $2,116 | $2,109 | | Total Equity | $4,428 | $4,299 | | Total Liabilities and Equity | $10,331 | $10,073 | Combined Notes to Condensed Financial Statements (Unaudited) This section provides combined notes to the condensed financial statements, offering detailed explanations of accounting policies, segment information, revenue recognition, earnings per share, income taxes, utility rate regulation, financing activities, acquisitions, defined benefits, commitments and contingencies, related party transactions, other income/expense, fair value measurements, derivative instruments, asset retirement obligations, accumulated other comprehensive income, and new accounting guidance 1. Interim Financial Statements This note clarifies that the unaudited condensed financial statements are prepared in accordance with GAAP for interim reporting and Form 10-Q instructions, and thus do not include all disclosures required for complete annual financial statements - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, and do not include all information and footnote disclosures required for complete financial statements[133] - All adjustments considered necessary for a fair presentation are reflected and are of a normal recurring nature, unless otherwise disclosed[133] - Interim results are not necessarily indicative of results to be expected for the full year or other future periods due to various factors, developments, and seasonal variations[133] 2. Segment and Related Information PPL is organized into three reportable segments: Kentucky Regulated (LG&E and KU), Pennsylvania Regulated (PPL Electric), and Rhode Island Regulated (RIE) - PPL is organized into three segments: Kentucky Regulated (LG&E and KU), Pennsylvania Regulated (PPL Electric), and Rhode Island Regulated (RIE)[134][135] PPL Segment Net Income (Millions of Dollars) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Kentucky Regulated | $126 | $134 | $349 | $324 | | Pennsylvania Regulated | $139 | $150 | $323 | $299 | | Rhode Island Regulated | $(17) | $12 | $53 | $76 | | Corporate and Other | $(65) | $(106) | $(128) | $(202) | | Consolidated Net Income | $183 | $190 | $597 | $497 | PPL Segment Total Assets (Millions of Dollars) | Segment | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Kentucky Regulated | $18,076 | $17,626 | | Pennsylvania Regulated | $15,892 | $15,475 | | Rhode Island Regulated | $7,125 | $7,055 | | Corporate and Other | $1,270 | $913 | | Total | $42,363 | $41,069 | 3. Revenue from Contracts with Customers This note reconciles operating revenues with revenues from contracts with customers for PPL and its subsidiaries, disaggregated by customer class (Residential, Commercial, Industrial, Other, Wholesale, Transmission) PPL Revenues from Contracts with Customers (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Revenues | $2,025 | $1,881 | $4,529 | $4,185 | | Alternative revenue programs | $20 | $(3) | $70 | $5 | | Other | $(5) | $(4) | $(13) | $(12) | | Revenues from Contracts with Customers | $2,040 | $1,874 | $4,586 | $4,178 | - PPL conformed the presentation of RIE's net metering charges with other segments starting Q4 2024, increasing Operating Revenues and Energy purchases For Q2 2025, $55 million (3 months) and $96 million (6 months) of net metering was included in Energy purchases, compared to being a reduction of Operating Revenues in Q2 2024 ($53 million and $85 million respectively)[150] PPL Revenues from Contracts with Customers by Class (Three Months Ended June 30, 2025, Millions of Dollars) | Customer Class | PA Regulated | KY Regulated | RI Regulated | Total PPL | | :--------------- | :----------- | :----------- | :----------- | :-------- | | Residential | $345 | $328 | $214 | $887 | | Commercial | $106 | $247 | $160 | $513 | | Industrial | $13 | $158 | $20 | $191 | | Other | $13 | $71 | $62 | $146 | | Wholesale - municipality | $0 | $5 | $0 | $5 | | Wholesale - other | $0 | $24 | $0 | $24 | | Transmission | $223 | $0 | $51 | $274 | | Total | $700 | $833 | $507 | $2,040| 4. Earnings Per Share This note details the calculation of basic and diluted Earnings Per Share (EPS) for PPL, using the Two-Class Method or Treasury Stock Method for dilutive securities - Basic EPS is calculated by dividing income available to PPL common shareowners by the weighted-average common shares outstanding Diluted EPS includes incremental shares from potentially dilutive share-based payment awards (Two-Class or Treasury Stock Method) and Exchangeable Senior Notes (If-Converted Method)[160] PPL Earnings Per Share Reconciliation (Millions of Dollars, except share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to PPL common shareowners - Basic and Diluted | $183 | $189 | $596 | $496 | | Weighted-average shares - Basic EPS (in thousands) | 739,276 | 737,748 | 738,986 | 737,630 | | Add: Dilutive share-based payment awards (in thousands) | 2,504 | 1,815 | 2,606 | 1,561 | | Add: Forward sale agreements (in thousands) | 23 | 0 | 11 | 0 | | Add: Exchangeable Notes (in thousands) | 738 | 0 | 369 | 0 | | Weighted-average shares - Diluted EPS (in thousands) | 742,541 | 739,563 | 741,972 | 739,191 | | Basic EPS | $0.25 | $0.26 | $0.81 | $0.67 | | Diluted EPS | $0.25 | $0.26 | $0.80 | $0.67 | - For the six months ended June 30, 2025, PPL issued 386 thousand common shares related to DRIP For the three months ended June 30, 2025, 196 thousand stock-based compensation awards and 5,648 thousand forward sale agreements were excluded from diluted EPS calculations as they were antidilutive[163][164] 5. Income Taxes This note provides reconciliations of income tax expense for PPL, PPL Electric, LG&E, and KU, detailing the impact of statutory rates, state income taxes, valuation allowances, investment tax credits, utility rate-making adjustments, and amortization of excess deferred taxes PPL Income Tax Expense Reconciliation (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $48 | $50 | $157 | $132 | | Total increase (decrease) | $(1) | $0 | $(8) | $(1) | | Total income tax expense (benefit) | $47 | $50 | $149 | $131 | - On July 4, 2025, the 'One Big Beautiful Bill Act' was signed into law, and Registrants are assessing its material impacts On July 7, 2025, an Executive Order directed strict enforcement of clean electricity tax credit termination for wind and solar under IRC Sections 45Y and 48E, which PPL is monitoring to preserve eligibility for Kentucky projects[171][172] 6. Utility Rate Regulation This note provides detailed information on the regulatory assets and liabilities of PPL and its utility subsidiaries, including current and noncurrent balances PPL Current Regulatory Assets (Millions of Dollars) | Asset Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Rate adjustment mechanisms | $99 | $95 | | Renewable energy certificates | $21 | $14 | | Storm damage expense rider | $45 | $68 | | Gas supply clause | $20 | $3 | | Transmission service charge | $52 | $44 | | DSIC | $9 | $8 | | TCJA customer refund and recovery | $30 | $21 | | ISR deferral | $6 | $22 | | Other | $21 | $45 | | Total current regulatory assets | $303 | $320 | PPL Noncurrent Regulatory Assets (Millions of Dollars) | Asset Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Defined benefit plans | $959 | $967 | | Plant outage costs | $27 | $30 | | Net metering | $159 | $147 | | Environmental cost recovery | $96 | $96 | | Storm costs | $114 | $113 | | Unamortized loss on debt | $19 | $20 | | Terminated interest rate swaps | $49 | $53 | | Accumulated cost of removal of utility plant | $168 | $173 | | AROs | $275 | $280 | | RAR | $80 | $83 | | Gas line inspections | $24 | $24 | | Advanced metering infrastructure | $35 | $28 | | Other | $50 | $46 | | Total noncurrent regulatory assets | $2,055 | $2,060 | - RIE's FY 2026 Gas ISR Plan of $165 million (including $147 million capital investment and $18 million O&M for paving) and Electric ISR Plan of $219 million (including $88 million for AMF) were approved by RIPUC, effective April 1, 2025[177][178] - LG&E and KU filed requests for annual electricity and gas revenue increases of approximately $391 million (8.3% and 11.5% for LG&E and KU electricity, 14.0% for LG&E gas), based on a forecasted test year of 2026, with a requested return on equity of 10.95% A ruling is expected in Q4 2025[180][181] - LG&E and KU filed a CPCN application for $3.7 billion in capital expenditures (2025-2031) for new generation projects, including two 645 MW NGCC units, a 400 MW BESS, and an SCR environmental facility A stipulation recommends approval of most projects, withdrawal of the BESS, and recovery of Mill Creek NGCC costs via a new rate tracker[183][185][186] - PPL Electric's DSIC cap was increased from 5% to 7.5% for bills rendered on or after March 13, 2025, until the next base rate case or end of the Long-term Infrastructure Improvement Plan[192] 7. Financing Activities This note details the Registrants' financing activities, including credit arrangements, short-term debt, and equity securities - PPL Capital Funding, PPL Electric, LG&E, and KU amended their syndicated credit facilities in January 2025, extending termination dates to December 2029 and increasing borrowing capacities[200][201][202][203] Credit Facilities at June 30, 2025 (Millions of Dollars) | Registrant | Capacity | Borrowed | Letters of Credit and Commercial Paper Issued | Unused Capacity | | :----------------------- | :------- | :------- | :-------------------------------------------- | :-------------- | | PPL Capital Funding | $1,700 | $0 | $490 | $1,210 | | PPL Electric Utilities | $750 | $0 | $386 | $364 | | Louisville Gas and Electric | $600 | $0 | $158 | $442 | | Kentucky Utilities | $600 | $0 | $275 | $325 | | Total | $3,650 | $0 | $1,309 | $2,341 | Commercial Paper Programs at June 30, 2025 (Millions of Dollars) | Registrant | Weighted-Average Interest Rate | Capacity | Commercial Paper Issuances | Unused Capacity | | :----------------------- | :----------------------------- | :------- | :------------------------- | :-------------- | | PPL Capital Funding | 4.66% | $1,350 | $470 | $880 | | RIE | - | $250 | $0 | $250 | | PPL Electric Utilities | 4.63% | $650 | $385 | $265 | | Louisville Gas and Electric | 4.66% | $500 | $158 | $342 | | Kentucky Utilities | 4.66% | $400 | $275 | $125 | | Total | | $3,150 | $1,288 | $1,862 | - In February 2025, PPL launched an ATM Program to sell up to $2 billion of common stock, including an optional forward sales component As of June 30, 2025, PPL entered into forward contracts to sell approximately 9.9 million shares at a blended initial forward price of $34.77 per share, with settlement by December 30, 2025[209] - In May 2025, PPL declared a quarterly cash dividend of 27.25 cents per share, payable July 1, 2025[210] 8. Acquisitions, Developments and Divestitures This note provides an update on the acquisition of Narragansett Electric (RIE) by PPL Rhode Island Holdings in May 2022 - PPL Rhode Island Holdings acquired Narragansett Electric (now RIE) on May 25, 2022 The transition services agreement (TSA) related to the acquisition was completed in Q3 2024[211][212] - PPL committed to hold Rhode Island customers harmless from future rate increases due to changes in Accumulated Deferred Income Taxes (ADIT) from the acquisition An agreement on June 13, 2025, proposes to resolve approximately $155 million through bill credits in Q1 2026 ($74 million) and Q1 2027 ($81 million)[213][179] - RIE will forgo recovery of certain transition costs, which were expensed as incurred These costs were $17 million (3 months) and $34 million (6 months) for 2025, and $83 million (3 months) and $165 million (6 months) for 2024[213] 9. Defined Benefits This note outlines the net periodic defined benefit costs (credits) for PPL and its subsidiaries' pension and other postretirement benefit plans PPL Pension Benefits - Net Periodic Defined Benefit Costs (Credits) (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $8 | $8 | $15 | $17 | | Interest cost | $47 | $46 | $92 | $92 | | Expected return on plan assets | $(72) | $(75) | $(143) | $(150) | | Amortization of: Prior service cost | $0 | $0 | $0 | $1 | | Amortization of: Actuarial loss | $4 | $3 | $9 | $5 | | Net periodic defined benefit costs (credits) | $(13) | $(18) | $(27) | $(35) | PPL Other Postretirement Benefits - Net Periodic Defined Benefit Costs (Credits) (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $2 | $2 | $3 | $3 | | Interest cost | $8 | $7 | $15 | $14 | | Expected return on plan assets | $(8) | $(8) | $(15) | $(15) | | Amortization of: Prior service cost | $0 | $1 | $0 | $1 | | Amortization of: Actuarial loss | $(1) | $(2) | $(2) | $(3) | | Net periodic defined benefit costs (credits) | $1 | $0 | $1 | $0 | - The non-service cost components of net periodic defined benefit costs (credits) are presented in 'Other Income (Expense) - net' on the Statements of Income[215] 10. Commitments and Contingencies This note addresses legal proceedings, environmental assessments, and regulatory issues that could result in material liabilities for PPL and its subsidiaries - A Settlement Agreement was approved by RIPUC on March 5, 2025, requiring RIE to refund $10 million related to energy efficiency programs, with $2 million already refunded and $8 million to reduce a storm cost regulatory asset[218] - The EPA announced plans to reconsider 31 environmental rules, including GHG emissions, ELGs, and CCRs President Trump issued Executive Orders directing review and repeal of unlawful rules PPL, LG&E, and KU are monitoring these initiatives for potential impacts on capital expenditures and operations[220] - The 2024 CCR Rule establishes new requirements for inactive surface impoundments and CCR management units LG&E and KU recognized ARO obligations in Q2 2024 related to preliminary risk assessments Compliance plans are being finalized, and costs are expected to be subject to rate recovery[222][223] - PPL Electric has a recorded liability of $8 million for remediating certain contaminated sites RIE has a recorded liability of $98 million for environmental remediation activities, expected to be incurred over ~30 years and generally subject to rate recovery[228][230] Guarantees Provided at June 30, 2025 (Millions of Dollars) | Registrant | Exposure | Expiration Date | | :--------------------------------- | :------- | :-------------- | | PPL: Indemnifications related to U.K. utility business tax liabilities | £50 | 2028 | | PPL: Safari payment obligations under sale/leaseback transactions | $88 | 2028 | | PPL: Indemnifications for losses not covered by Aspen Power's insurance | $140 | 2028 | | LG&E and KU: Obligation of shortfall related to OVEC | (d) | Undeterminable | 11. Related Party Transactions This note details related party transactions, primarily focusing on support costs charged by PPL Services and LKS to PPL Electric, LG&E, and KU Support Costs Charged by PPL Services and LKS (Millions of Dollars) | Recipient | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | PPL Electric from PPL Services | $67 | $53 | $131 | $109 | | LG&E from LKS | $18 | $28 | $48 | $57 | | LG&E from PPL Services | $42 | $20 | $62 | $31 | | KU from LKS | $22 | $30 | $60 | $68 | | KU from PPL Services | $42 | $19 | $61 | $30 | - PPL Electric's subsidiary maintains an $800 million revolving line of credit with CEP Reserves At June 30, 2025, CEP Reserves had no borrowings outstanding, down from $222 million at December 31, 2024[247] - LG&E and KU participate in intercompany money pool agreements At June 30, 2025, LG&E had no borrowings outstanding from affiliates, while KU had $46 million outstanding[248][249] - PPL Electric's intercompany receivable balance from VEBA funds was $1 million at June 30, 2025, down from $7 million at December 31, 2024[250] 12. Other Income (Expense) - net This note provides a breakdown of 'Other Income (Expense) - net' for PPL, PPL Electric, LG&E, and KU PPL Other Income (Expense) - net (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Defined benefit plans - non-service credits | $7 | $15 | $15 | $23 | | Interest income | $2 | $6 | $8 | $15 | | AFUDC - equity component | $20 | $12 | $35 | $21 | | Miscellaneous | $(6) | $(1) | $(7) | $(5) | | Other Income (Expense) - net | $23 | $32 | $51 | $54 | PPL Electric Other Income (Expense) - net (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Defined benefit plans - non-service credits | $4 | $4 | $7 | $9 | | AFUDC - equity component | $8 | $7 | $15 | $11 | | Miscellaneous | $(1) | $0 | $0 | $0 | | Other Income (Expense) - net | $11 | $11 | $22 | $20 | 13. Fair Value Measurements This note describes the fair value measurements for PPL and its subsidiaries, categorizing assets and liabilities into Level 1, 2, or 3 based on input observability - Fair value is measured using market, income, and/or cost approaches, incorporating observable and unobservable inputs, including nonperformance risk[255] PPL Recurring Fair Value Measurements (June 30, 2025, Millions of Dollars) | Asset/Liability | Total | Level 1 | Level 2 | Level 3 | | :--------------------------------- | :---- | :------ | :------ | :------ | | Assets: | | | | | | Cash and cash equivalents | $294 | $294 | $0 | $0 | | Restricted cash and cash equivalents | $24 | $24 | $0 | $0 | | Special use funds | $14 | $1 | $0 | $0 | | Price risk management assets | $12 | $0 | $12 | $0 | | Total Assets | $344| $319| $12 | $0 | | Liabilities: | | | | | | Price risk management liabilities | $13 | $0 | $8 | $5 | | Total Liabilities | $13 | $0 | $8 | $5 | - Special use funds are investments restricted for paying active union employee medical costs, primarily in commingled debt and equity funds measured at NAV[259] - Interest rate derivatives are used to manage interest rate risk, with fair values measured using an income approach Gas contracts are used to manage commodity price risk, valued using NYMEX/ICE inputs or internally developed models (Black-Scholes)[260][261][262] Long-term Debt Carrying Amount and Fair Value (Millions of Dollars) | Registrant | June 30, 2025 Carrying Amount | June 30, 2025 Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Fair Value | | :----------------------- | :------------------------------ | :----------------------- | :-------------------------------- | :----------------------------- | | PPL | $16,511 | $15,750 | $16,503 | $15,562 | | PPL Electric Utilities | $5,215 | $4,901 | $5,214 | $4,862 | | Louisville Gas and Electric | $2,472 | $2,316 | $2,471 | $2,295 | | Kentucky Utilities | $3,067 | $2,771 | $3,066 | $2,750 | 14. Derivative Instruments and Hedging Activities This note outlines PPL's risk management objectives and strategies for market risks (commodity price, interest rate, volumetric, equity securities price) and credit risk - PPL's risk management policy, approved by the Board, manages market risk (commodities, interest rates, liquidity, volumetric) and credit risk Derivatives are used to minimize earnings fluctuations[268][269] - PPL and its subsidiaries are exposed to interest rate risk from debt issuances and defined benefit plans, commodity price risk (mitigated by cost recovery mechanisms), volumetric risk (mitigated by regulatory mechanisms for RIE), and equity securities price risk (mitigated by recovery methods for defined benefit plans)[273][274][279] - All derivative instruments are recorded at fair value on the Balance Sheet unless the NPNS (normal purchases and normal sales) exception is elected[287] PPL Derivative Instruments Fair Value (June 30, 2025, Millions of Dollars) | Category | Assets | Liabilities | | :--------------------------------- | :----- | :---------- | | Derivatives designated as hedging instruments | $2 | $0 | | Derivatives not designated as hedging instruments | $10 | $13 | | Total derivatives | $12 | $13 | - Certain derivative contracts contain credit risk-related contingent features that could require additional collateral or contract termination if credit ratings fall below investment grade or if adequate assurance of performance is demanded[304][305] 15. Asset Retirement Obligations This note details the Asset Retirement Obligations (AROs) for PPL, LG&E, and KU, primarily related to Coal Combustion Residuals (CCR) closure costs - PPL's, LG&E's, and KU's ARO liabilities are primarily related to CCR closure costs LG&E and RIE also have AROs for natural gas mains and wells[307] - For LG&E, KU, and RIE, all ARO accretion and depreciation expenses are reclassified as regulatory assets or liabilities[307] Changes in Carrying Amounts of AROs (Millions of Dollars) | Metric | PPL | LG&E | KU | | :----------------------- | :-- | :--- | :-- | | Balance at December 31, 2024 | $157 | $84 | $64 | | Accretion | $4 | $2 | $2 | | Obligations settled | $(8) | $(4) | $(4) | | Balance at June 30, 2025 | $153 | $82 | $62 | 16. Accumulated Other Comprehensive Income (Loss) This note presents the after-tax changes in Accumulated Other Comprehensive Income (Loss) (AOCI) by component for PPL, including unrealized gains/losses on qualifying derivatives, equity investees' AOCI, prior service costs, and actuarial gains/losses from defined benefit plans, for the periods ended June 30, 2025 and 2024 PPL After-Tax Changes in AOCI by Component (Millions of Dollars) | Component | March 31, 2025 | Amounts arising during the period | Reclassifications from AOCI | Net OCI during the period | June 30, 2025 | | :--------------------------------- | :------------- | :-------------------------------- | :-------------------------- | :------------------------ | :------------ | | Unrealized gains (losses) on qualifying derivatives | $10 | $1 | $0 | $1 | $11 | | Equity investees' AOCI | $4 | $0 | $0 | $0 | $4 | | Defined benefit plans: Prior service costs | $(3) | $0 | $0 | $0 | $(3) | | Defined benefit plans: Actuarial gain (loss) | $(195) | $(8) | $1 | $(7) | $(202) | | Total | $(184) | $(7) | $1 | $(6) | $(190) | PPL Gains (Losses) and Related Income Taxes for Reclassifications from AOCI (Three Months Ended June 30, 2025, Millions of Dollars) | AOCI Component | Pre-tax | Income Taxes | After-tax | | :--------------------------------- | :------ | :----------- | :-------- | | Qualifying derivatives: Interest rate derivatives | $(1) | $1 | $0 | | Defined benefit plans: Net actuarial loss | $(1) | $0 | $(1) | | Total reclassifications during the period | $(2) | $1 | $(1) | 17. New Accounting Guidance Pending Adoption This note discusses new accounting guidance pending adoption, specifically 'Improvements to Income Tax Disclosures' and 'Disaggregation of Income Statement Expenses' - New FASB guidance on 'Improvements to Income Tax Disclosures' requires additional disaggregated rate reconciliation and income taxes paid information It is effective for annual periods beginning after December 15, 2024 Registrants plan to adopt retrospectively for the year ending December 31, 2025[315][316][317] - New FASB guidance on 'Disaggregation of Income Statement Expenses' requires disclosure of specific cost categories (purchases of inventory, employee compensation, depreciation, intangible asset amortization, oil/gas DD&A) within relevant income statement expense captions It is effective for annual periods beginning after December 15, 2026 Registrants are assessing the impact[318][319][320] Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a combined management discussion and analysis for PPL and its subsidiaries, covering business strategy, financial and operational developments, results of operations, financial condition, liquidity and capital resources, risk management, related party transactions, acquisitions, environmental matters, new accounting guidance, and critical accounting policies Overview This overview introduces PPL as a utility holding company operating regulated utilities in Pennsylvania, Kentucky, Virginia, and Rhode Island Introduction PPL Corporation, headquartered in Allentown, Pennsylvania, is a utility holding company that delivers electricity and natural gas through its regulated utility subsidiaries in Pennsylvania, Kentucky, Virginia, and Rhode Island - PPL is a utility holding company delivering electricity and natural gas in Pennsylvania, Kentucky, Virginia, and Rhode Island through regulated utility subsidiaries[323] - PPL's principal subsidiaries are PPL Capital Funding, PPL Electric Utilities Corporation, LKE (parent of Louisville Gas and Electric Company and Kentucky Utilities Company), and Rhode Island Energy[324][326] Business Strategy PPL's business strategy focuses on creating the utilities of the future to enhance value for customers and shareholders - PPL's strategy is to create the utilities of the future, focusing on: strengthening network reliability and resilience, advancing affordable and reliable cleaner energy (natural gas, renewables, battery storage, low-carbon solutions R&D), driving operational efficiencies, utilizing AI and advanced technologies, empowering customers with digital options, and engaging stakeholders for economic development and resource adequacy[332][338] - This strategy supports PPL's mission to provide safe, affordable, reliable, and sustainable energy to customers and competitive, long-term returns to shareowners[333] Financial and Operational Developments This section highlights significant financial and operational developments, including PPL's joint venture with Blackstone Infrastructure to build new generation stations for data centers in Pennsylvania - PPL and Blackstone Infrastructure announced a joint venture (PPL 51%, Blackstone 49%) to build, own, and operate new electricity generation stations for data centers in Pennsylvania under long-term energy services agreements[334] - LG&E and KU are subject to extensive environmental regulations (CCRs, GHG, ELGs), leading to the retirement of ~1,500 MW of coal-fired plants since 2010 Mill Creek Unit 1 (300 MW) was retired in 2024, and Unit 2 (297 MW) is expected to retire in 2027[336][337] - LG&E and KU filed a CPCN application for $3.7 billion in capital expenditures (2025-2031) for new generation projects, including two 645 MW NGCC units, a 400 MW BESS (proposed withdrawal), and an SCR environmental facility A stipulation recommends approval of most projects[342][344][347] - LG&E and KU filed for a $391 million increase in annual electricity and gas revenues (8.3% and 11.5% for electricity, 14.0% for gas) in their 2025 Rate Case, with a requested 10.95% return on equity, expected to be effective January 1, 2026[346][348] - RIE's FY 2026 Gas ISR Plan ($165 million capital/O&M) and Electric ISR Plan ($219 million capital/O&M) were approved by RIPUC, effective April 1, 2025[351][352] - PPL Electric's DSIC cap was increased from 5% to 7.5% for bills rendered on or after March 13, 2025[353] Results of Operations This section analyzes the results of operations for PPL and its subsidiaries, comparing the three and six months ended June 30, 2025, with the same periods in 2024 PPL: Statement of Income Analysis and Segment Earnings This subsection provides a comprehensive analysis of PPL's consolidated statement of income, detailing changes in operating revenues, expenses, and net income Statement of Income Analysis PPL's consolidated net income decreased by $7 million for the three months ended June 30, 2025, but increased by $100 million for the six months ended June 30, 2025, compared to the same periods in 2024 PPL Consolidated Statement of Income Analysis (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change (6M) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------ | :----------------------------- | :----------------------------- | :------------ | | Operating Revenues | $2,025 | $1,881 | $144 | $4,529 | $4,185 | $344 | | Fuel | $192 | $181 | $11 | $426 | $390 | $36 | | Energy purchases | $388 | $275 | $113 | $947 | $795 | $152 | | Other operation and maintenance | $614 | $623 | $(9) | $1,212 | $1,249 | $(37) | | Depreciation | $324 | $319 | $5 | $646 | $635 | $11 | | Taxes, other than income | $101 | $93 | $8 | $214 | $181 | $33 | | Total Operating Expenses | $1,619 | $1,491 | $128 | $3,445 | $3,250 | $195 | | Operating Income | $406 | $390 | $16 | $1,084 | $935 | $149 | | Other Income (Expense) - net | $23 | $32 | $(9) | $51 | $54 | $(3) | | Interest Expense | $199 | $182 | $17 | $389 | $361 | $28 | | Income Before Income Taxes | $230 | $240 | $(10) | $746 | $62