# PPL Corp (PPL) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from PPL Corp's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/922224/000092222425000009/ppl-20241231.htm Accession: 0000922224-25-000009 Filing date: 2025-02-13 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/PPL/ All MD&A years: /company/PPL/mda/ Previous year: /company/PPL/mda/fy2023/ (FY 2023) Next year: /company/PPL/mda/fy2025/ (FY 2025) Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations (All Registrants) This "Item 7. 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' Consolidated Financial Statements and the accompanying Notes. 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 2024 with 2023. For PPL, "Results of Operations" also includes "Segment Earnings," which provides a detailed analysis of earnings by reportable segment. These discussions include the non-GAAP financial measure "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure 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 forecasted sources and uses of cash and rating agency actions. •"Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk. •"Application of Critical Accounting Policies" provides an overview of the accounting policies that are particularly important to the results of operations and financial condition of the Registrants and that require their management to make significant estimates, assumptions and other judgments of inherently uncertain matters. For comparison of the Registrants’ results of operations and cash flows for the years ended December 31, 2023 to December 31, 2022, refer to “Item 7. Combined Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Form 10-K, filed with the SEC on February 16, 2024. Overview For a description of the Registrants and their businesses, see "Item 1. Business." Business Strategy (All Registrants) PPL operates four regulated utilities located in Pennsylvania, Kentucky and Rhode Island. Each of these jurisdictions has distinct regulatory structures and each of the utilities has distinct customer classes. PPL’s strategy, which is supported by the other Registrants and subsidiaries, is focused on creating the utilities of the future to drive greater value for our customers and shareowners. Key objectives in support of this strategy include: •Strengthening the reliability and resilience of our electric and gas networks to improve service and protect against current and future weather and storms. •Advancing a cleaner energy future affordably and reliably. This includes expanding and modernizing our generation with natural gas, renewables and battery storage, while supporting research and development of low-carbon solutions. •Driving operational efficiencies to improve customer service and help keep energy affordable. 30 Table of Contents •Utilizing artificial intelligence and other advanced technologies to inform decision making, optimize asset planning and maintenance and better manage supply and demand on the grid. •Empowering customers through expanded digital options and improved service. •Engaging with key stakeholders to strengthen resource adequacy, power economic development, and support the growth and success of the regions we serve. This strategy supports our mission to provide safe, affordable, reliable and sustainable energy to our customers and competitive, long-term returns to shareowners. Financial and Operational Developments (PPL) RIE Transition Services Agreement Completion In connection with the acquisition of RIE in 2022, National Grid USA Service Company, Inc., National Grid U.S. and Narragansett Electric entered into a transition services agreement (TSA), pursuant to which the National Grid entities agreed to provide certain transition services to Narragansett Electric to facilitate the transition of the operation of Narragansett Electric to PPL following the acquisition. The TSA was for an initial two-year term and was completed in the third quarter of 2024. TSA costs of $137 million, $228 million, and $123 million were incurred for the years ended December 31, 2024, 2023, and 2022. Transfer of Certain Credits under the Inflation Reduction Act The IRS released the final Internal Revenue Code Section 6418 regulations related to the transfer of certain credits under the Inflation Reduction Act. The regulations became effective on July 1, 2024 and did not and are not expected to have a material impact on the financial statements regarding prior or future credit transfers. Regulatory Requirements (All Registrants) The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations. (PPL, LG&E and KU) Environmental Considerations for Coal-Fired Generation 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 7, 12 and 18 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 1,500 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 has sought and obtained approval to retire two older coal-fired units at the Mill Creek Plant. Mill Creek Unit 1, with 300 MW of capacity, was retired in 2024. Mill Creek Unit 2, with 297 MW of capacity, is expected to be retired in 2027, subject to certain conditions. On October 4, 2024, LG&E submitted an application related to the retirement of Mill Creek Unit 1, which occurred on December 31, 2024, requesting recovery of associated costs under the RAR rider. On October 28, 2024, the KPSC issued an order to establish a procedural schedule regarding its investigation of the reasonableness of the proposed tariff. The KPSC intends to rule on the matter by February 28, 2025. See Note 7 to the Financial Statements for additional information on the Mill Creek Unit 1 RAR rider application. 31 Table of Contents FERC Transmission Rate Filing In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going waivers and 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 U.S. Court of Appeals - D.C. Circuit (D.C. Circuit Court of Appeals) regarding the FERC's orders on the elimination of the mitigation and required transition mechanism. In August 2022, the D.C. Circuit Court of Appeals issued an order remanding the proceedings back to the FERC. On May 18, 2023, the FERC issued an order on remand reversing its 2019 decision and requiring LG&E and KU to refund credits previously withheld, including under such transition mechanism. LG&E and KU filed a petition for review of the FERC's May 18, 2023 order with the D.C. Circuit Court of Appeals and provided refunds in accordance with the FERC order on December 1, 2023. The FERC issued an order on LG&E's and KU's compliance filing on November 16, 2023, and LG&E and KU filed a petition for review of this November 16, 2023 order on February 14, 2024. The FERC issued the substantive order on rehearing on March 21, 2024, reaffirming its prior decision. Oral argument before the D.C. Circuit Court of Appeals occurred on January 21, 2025. LG&E and KU cannot predict the ultimate outcome of the proceedings or any other post decision process but do not expect the annual impact to have a material effect on their operations or financial condition. LG&E and KU currently receive recovery of certain waivers and credits primarily through base rates increases, provided, however, that increases associated with the FERC's May 18, 2023 order are expected to be subject to future rate proceedings. (PPL) FY 2026 Gas ISR Plan On December 31, 2024, RIE filed its FY 2026 Gas ISR Plan with the RIPUC with a budget that includes $187 million of capital investment spend and up to $15 million of additional contingency plan spend in connection with the PHMSA's potential enactment of regulations during FY 2026 that, if enacted, would significantly alter RIE's leak detection and repair obligations under federal regulations. The Plan also includes proposed spending on curb-to-curb paving of $22 million. A decision from the RIPUC on the Plan is expected by March 31, 2025. RIE cannot predict the outcome of this matter. FY 2026 Electric ISR Plan On December 23, 2024, RIE filed its FY 2026 Electric ISR Plan with the RIPUC with a budget that includes $160 million of capital investment spend, $14 million of vegetation operation and maintenance (O&M) expense spend and $1 million of Other O&M spend. In addition, the FY 2026 Electric ISR Plan includes $88 million of capital investment spend for Advanced Metering Functionality (AMF) which, together with the $160 million of capital investment spend, results in total capital investment spend of $248 million. A decision from the RIPUC is expected by March 31, 2025. RIE cannot predict the outcome of this matter. Advanced Metering Functionality (AMF) In 2021, RIE filed its Updated AMF Business Case and Grid Modernization Plan (GMP) with the RIPUC in accordance with the Amended Settlement Agreement (ASA) approved by the RIPUC in August 2018, and which among other things, sought approval to deploy smart meters throughout the service territory. After PPL completed the acquisition of RIE, RIE filed a new AMF Business Case with the RIPUC in 2022, consisting of a detailed proposal for full-scale deployment of AMF across its electric service territory. On September 27, 2023, the RIPUC unanimously approved RIE to deploy an AMF-based metering system for the electric distribution business. RIE is authorized to seek recovery of the approved capital investment through the ISR process with an overall multi-year cap on recovery at approximately $153 million, subject to certain terms, conditions and limitations with respect to the potential offsets and recoverability of certain costs. RIE is required to continue spending even if above the recovery cap, until it achieves the functionalities outlined in the AMF Business Case. RIE filed with the RIPUC for approval of (i) an updated electric Service Quality Plan on December 27, 2023, (ii) additional compliance tariff provisions regarding recovery and updated cost schedules to reflect the RIPUC's decision on December 22, 2023, and (iii) electric and gas tariff advice filings for RIPUC Automatic Meter Reading/AMF meter opt-out tariff provision on September 19, 2024. The RIPUC 32 Table of Contents approved RIE’s revised service quality metrics with certain modifications on August 1, 2024 and October 30, 2024. In addition, the RIPUC approved RIE’s AMR/AMF opt-out tariff provisions for electric and natural gas with modifications on December 19, 2024 for effect January 1, 2025, and approved the proposed updated fees to be assessed at the start of the AMF roll-out. On January 7, 2025, RIE filed compliance tariffs to reflect the RIPUC’s ruling, which they approved at their January 23, 2025 Open Meeting. Rate Case Proceedings (KU) On April 30, 2024, KU filed a request with the VSCC for an annual increase in Virginia base electricity rates of approximately $9 million. KU's request is based on an authorized 10.5% return on equity. Subject to regulatory review and approval, new rates would become effective February 1, 2025. On November 6, 2024, KU and VSCC Staff filed a stipulation to resolve the proceeding, with a proposed annual rate increase amount of $8 million and annual authorized returns on equity in a range from 9.5% to 10.5% for various tariff purposes, with no objection from the Office of the Attorney General. A public hearing on the matter was held on November 13, 2024. On December 10, 2024, the Hearing Examiner issued an alternative recommendation to approve the stipulation with a nonmaterial adjustment to the revenue requirement. All parties filed letters in support of the Hearing Examiner’s alternative recommendation. On January 28, 2025, the VSCC issued an order approving the stipulation, including the adjustment recommended by the Hearing Examiner, and the resulting new rates went into effect on February 1, 2025. DSIC Petition (PPL and PPL Electric) On April 26, 2024, PPL Electric filed a Petition with the PAPUC requesting that the PAPUC waive PPL Electric's DSIC cap of 5% of billed revenues and increase the maximum allowable DSIC to 9% for bills rendered on or after January 1, 2025. On November 21, 2024, the Administrative Law Judge in the proceeding issued a Recommended Decision recommending the denial of PPL Electric’s DSIC Cap Waiver Petition. PPL Electric filed exceptions to the Recommended Decision on December 11, 2024. Several of the other parties filed Reply Exceptions on December 23, 2024. The Administrative Law Judge's Recommended Decision and the Exceptions and Reply Exceptions are currently before the PAPUC for a final order. PPL Electric cannot predict the timing or outcome of that decision. Long-Term Infrastructure Improvement Plan Petition (LTIIP) (PPL and PPL Electric) On January 17, 2024, PPL Electric filed a petition with the PAPUC seeking to modify its LTIIP, which covers the period from 2023 through 2027, to increase the total projected capital spending for existing LTIIP programs and to add a new LTIIP program related to predictive failure technology. On July 11, 2024, the PAPUC approved the petition in part, allowing for an increase of $203 million for existing LTIIP programs. The proposed new LTIIP program was determined not to be eligible for recovery under the DSIC. However, investments in such programs are potentially recoverable through a base rate proceeding. Artificial Intelligence (AI) Governance (All Registrants) To leverage potential benefits of AI, PPL management has established an AI Governance committee, with oversight from the Chief Technology and Innovation Officer and the Chief Legal Officer, which assesses benefits and risks associated with AI. The governance committee is a cross-functional team with leadership representation from Technology, Security, Audit, Legal, Operations, Human Resources and Data and AI. The governance committee reviews potential AI solutions using an intake process which involves risk and benefit assessment, data security and privacy considerations, and ensures that all solutions are compliant with PPL technology and security standards. Results of Operations (PPL) The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing 2024 with 2023. The "Segment Earnings" discussions provide a review of results by reportable segment. These discussions include the non-GAAP financial measure "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure 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 2024 33 Table of Contents with 2023. The results of operations section for PPL Electric, LG&E and KU is presented in a reduced disclosure format in accordance with General Instructions (I)(2)(a) of Form 10-K. PPL: Statement of Income Analysis and Segment Earnings Statement of Income Analysis Net income for the years ended December 31 includes the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues","$","8,462","","","$","8,312","","","$","150"],["Operating Expenses"],["Operation"],["Fuel","783","","","733","","","50"],["Energy purchases","1,679","","","1,841","","","(162)"],["Other operation and maintenance","2,607","","","2,462","","","145"],["Depreciation","1,279","","","1,254","","","25"],["Taxes, other than income","374","","","392","","","(18)"],["Total Operating Expenses","6,722","","","6,682","","","40"],["Operating Income","1,740","","","1,630","","","110"],["Other Income (Expense) - net","114","","","(40)","","","154"],["Interest Expense","738","","","666","","","72"],["Income Before Income Taxes","1,116","","","924","","","192"],["Income Taxes","228","","","184","","","44"],["Net Income (Loss)","$","888","","","$","740","","","$","148"]] [[/GREPCENT_TABLE]] Operating Revenues The increase (decrease) in operating revenues was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["PPL Electric distribution price (a)","$","69"],["PPL Electric distribution volume (b)","39"],["PPL Electric PLR (c)","(291)"],["PPL Electric transmission formula rate (d)","48"],["LG&E volumes (b)","35"],["LG&E ECR mechanism (e)","(18)"],["KU volumes (b)","39"],["KU fuel and other energy purchases (f)","20"],["RIE energy purchases and other recoveries (g)","(24)"],["RIE net metering presentation (h)","175"],["RIE capital investment","29"],["Other","29"],["Total","$","150"]] [[/GREPCENT_TABLE]] (a)The increase was primarily due to reconcilable cost recovery mechanisms approved by the PAPUC. (b)    The increases were primarily due to weather, along with other higher usage in 2024 at PPL Electric. (c)    The decrease was primarily the result of lower energy prices and fewer PLR customers, partially offset by higher customer volumes due to weather and other higher usage. (d)    The increase was primarily due to returns on additional transmission capital investments, returns of depreciation and operation and maintenance expenses and delayed implementation of moving to a calendar year rate in 2023, partially offset by the prior year point to point border rate settlement variance. (e)    The decrease was primarily due to lower ECR expenses. (f)    The increase was primarily due to higher recoveries of fuel expenses. (g)    The decrease was primarily due to lower recoveries of commodity costs and pension expenses, partially offset by higher recoveries of gas related maintenance expenses. (h)    In conjunction with the completion of the transition services agreement associated with the RIE acquisition, PPL conformed the presentation of RIE’s net metering charges with the presentation of the other operating companies, resulting in an increase in Operating Revenues and a corresponding increase in Energy purchases. See Note 3 to the Financial Statements for additional information. 34 Table of Contents Fuel Fuel expense increased $50 million in 2024 compared with 2023, primarily due to an increase of $22 million at LG&E primarily due to an increase in commodity costs and an increase in volumes due to weather of $37 million at KU, partially offset by a decrease in commodity costs of $8 million at KU. Energy Purchases The increase (decrease) in energy purchases was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["PPL Electric PLR volumes","$","(13)"],["PPL Electric PLR prices","(259)"],["LG&E commodity costs","(17)"],["RIE commodity costs","(51)"],["RIE net metering presentation (a)","175"],["Other","3"],["Total","$","(162)"]] [[/GREPCENT_TABLE]] (a)    In conjunction with the completion of the transition services agreement associated with the RIE acquisition, PPL conformed the presentation of RIE’s net metering charges with the presentation of the other operating companies, resulting in an increase in Operating Revenues and a corresponding increase in Energy purchases. See Note 3 to the Financial Statements for additional information. Other Operation and Maintenance The increase (decrease) in other operation and maintenance was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["PPL Electric storm expenses","$","52"],["PPL Electric vegetation management expenses","20"],["PPL Electric Act 129","19"],["PPL Electric DER projects impairment (a)","21"],["LG&E ECR expenses","(17)"],["RIE gas maintenance expenses","46"],["RIE pension expenses","(24)"],["RIE bad debt expenses","18"],["Transition costs associated with RIE","45"],["Other","(35)"],["Total","$","145"]] [[/GREPCENT_TABLE]] (a)    Impairment of DER project costs associated with a pilot solar program for which PPL will not seek regulatory recovery. Other Income (Expense) - net The increase (decrease) in other income (expense) - net was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["AFUDC - equity component","$","17"],["Talen litigation (a)","122"],["Other","15"],["Total","$","154"]] [[/GREPCENT_TABLE]] (a)PPL incurred legal expenses in 2023 related to litigation associated with its former affiliate, Talen Montana, LLC, and certain affiliated entities (collectively, Talen), which was settled in December 2023. 35 Table of Contents Interest Expense The increase (decrease) in interest expense was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Long-term debt (a)","$","78"],["Other","(6)"],["Total","$","72"]] [[/GREPCENT_TABLE]] (a)    The increase was primarily due to increased borrowings. See Note 8 to the Financial Statements for additional information. Income Taxes The increase (decrease) in income taxes was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Change in pre-tax income","$","48"],["Valuation allowance adjustments","(10)"],["Income tax credits (a)","14"],["Utility rate-making tax adjustments (b)","(11)"],["Other","3"],["Total","$","44"]] [[/GREPCENT_TABLE]] (a)    In addition to credits internally generated, in 2023, PPL purchased approximately $300 million of renewable tax credits, as allowed by the IRA. PPL recorded a current tax benefit and a deferred tax expense for the utilization of approximately $250 million of the credits in 2023 and prior years, per the three-year carry-back rule. (b)Primarily consists of tax impacts of AFUDC equity and related depreciation across PPL utilities and flow through tax impacts. Flow through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.     See Note 6 to the Financial Statements for additional information on income taxes. Segment Earnings PPL's Net Income (Loss) by reportable segments was as follows: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Kentucky Regulated","$","620","","","$","552","","","$","68"],["Pennsylvania Regulated","574","","","519","","","55"],["Rhode Island Regulated","109","","","96","","","13"],["Corporate and Other (a)","(415)","","","(427)","","","12"],["Net Income (Loss)","$","888","","","$","740","","","$","148"]] [[/GREPCENT_TABLE]] (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. 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. 36 Table of Contents •    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 were as follows: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Kentucky Regulated","$","624","","","$","564","","","$","60"],["Pennsylvania Regulated","607","","","548","","","59"],["Rhode Island Regulated","155","","","152","","","3"],["Corporate and Other","(136)","","","(81)","","","(55)"],["Earnings from Ongoing Operations","$","1,250","","","$","1,183","","","$","67"]] [[/GREPCENT_TABLE]] See "Reconciliation of Earnings from Ongoing Operations" below for a reconciliation of this non-GAAP financial measure to Net Income. Kentucky Regulated Segment The Kentucky Regulated segment consists primarily of LG&E's and KU's regulated electricity generation, transmission and distribution operations, as well as LG&E's regulated distribution and sale of natural gas. Net Income and Earnings from Ongoing Operations include the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues","$","3,562","","","$","3,452","","","$","110"],["Fuel","783","","","733","","","50"],["Energy purchases","176","","","192","","","(16)"],["Other operation and maintenance","803","","","826","","","(23)"],["Depreciation","710","","","696","","","14"],["Taxes, other than income","99","","","93","","","6"],["Total Operating Expenses","2,571","","","2,540","","","31"],["Other Income (Expense) - net","29","","","12","","","17"],["Interest Expense","240","","","235","","","5"],["Income Taxes","160","","","137","","","23"],["Net Income","620","","","552","","","68"],["Less: Special Items","(4)","","","(12)","","","8"],["Earnings from Ongoing Operations","$","624","","","$","564","","","$","60"]] [[/GREPCENT_TABLE]] 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: [[GREPCENT_TABLE]] [["","Income Statement Line Item","","2024","","2023"],["Strategic corporate initiatives, net of tax of $0, $0 (a)","Other operation and maintenance","","$","(1)","","","$","(1)"],["FERC transmission credit refund, net of tax of $2 (b)","Other operation and maintenance","","\u2014","","","(6)"],["FERC transmission credit refund, net of tax of $0 (b)","Operating Revenues","","1","","","\u2014"],["Unbilled revenue estimate adjustment, net of tax of $2 (c)","Operating Revenues","","\u2014","","","(5)"],["ECR beneficial reuse transition adjustment, net of tax of $2 (d)","Operating Revenues","","(4)","","","\u2014"],["Total","","","$","(4)","","","$","(12)"]] [[/GREPCENT_TABLE]] (a)Costs incurred related to PPL's corporate centralization efforts. (b)Prior period impact related to a FERC refund order. (c)Prior period impact of a methodology change in determining unbilled revenues. (d)Prior period impact for an ECR mechanism revenue adjustment related to a KPSC order. 37 Table of Contents The changes in the components of the Kentucky Regulated segment's results between these periods were due to the factors set forth below, which exclude the items that management considers special. [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Operating Revenues","$","107"],["Fuel","(50)"],["Energy purchases","16"],["Other operation and maintenance","16"],["Depreciation","(14)"],["Taxes, other than income","(6)"],["Other Income (Expense) - net","17"],["Interest Expense","(5)"],["Income Taxes","(21)"],["Earnings from Ongoing Operations","60"],["Special Items, after-tax","8"],["Net Income","$","68"]] [[/GREPCENT_TABLE]] •Higher operating revenues in 2024 compared to 2023, primarily due to a $74 million increase in sales volumes due to weather and a $29 million increase in recoveries of fuel and energy purchases. •Higher fuel expense in 2024 compared to 2023, primarily due to a $34 million increase in volumes primarily due to weather and a $16 million increase in commodity costs. Pennsylvania Regulated Segment The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric. Net Income and Earnings from Ongoing Operations include the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues","$","2,876","","","$","3,008","","","$","(132)"],["Energy purchases","721","","","992","","","(271)"],["Other operation and maintenance","705","","","605","","","100"],["Depreciation","401","","","397","","","4"],["Taxes, other than income","131","","","143","","","(12)"],["Total Operating Expenses","1,958","","","2,137","","","(179)"],["Other Income (Expense) - net","45","","","39","","","6"],["Interest Income from Affiliate","33","","","\u2014","","","33"],["Interest Expense","246","","","223","","","23"],["Income Taxes","176","","","168","","","8"],["Net Income","574","","","519","","","55"],["Less: Special Items","(33)","","","(29)","","","(4)"],["Earnings from Ongoing Operations","$","607","","","$","548","","","$","59"]] [[/GREPCENT_TABLE]] 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: [[GREPCENT_TABLE]] [["","Income Statement Line Item","","2024","","2023"],["PPL Electric billing issue, net of tax of $5, $10 (a)","Other operation and maintenance","","$","(13)","","","$","(23)"],["PPL Electric billing issue, net of tax of $0 (a)","Other Income (Expense) - net","","\u2014","","","(1)"],["Strategic corporate initiatives, net of tax of $2, $1 (b)","Other operation and maintenance","","(5)","","","(2)"],["Other non-recurring charges, net of tax of $1 (c)","Other operation and maintenance","","\u2014","","","(3)"],["DER projects impairment, net of tax of $6 (d)","Other operation and maintenance","","(15)","","","\u2014"],["Total","","","$","(33)","","","$","(29)"]] [[/GREPCENT_TABLE]] (a)Certain expenses related to billing issues. See Note 7 to the Financial Statements for additional information. 38 Table of Contents (b)Costs incurred related to PPL's corporate centralization efforts. (c)Certain expenses associated with a litigation settlement. (d)Impairment of DER project costs associated with a pilot solar program for which PPL will not seek regulatory recovery. The changes in the components of the Pennsylvania Regulated segment's results between these periods are due to the factors set forth below, which exclude the items that management considers special. [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Operating Revenues","$","(132)"],["Energy purchases","271"],["Other operation and maintenance","(96)"],["Depreciation","(4)"],["Taxes, other than income","12"],["Other Income (Expense) - net","5"],["Interest Income from Affiliate","33"],["Interest Expense","(23)"],["Income Taxes","(7)"],["Earnings from Ongoing Operations","59"],["Special Items, after-tax","(4)"],["Net Income","$","55"]] [[/GREPCENT_TABLE]] •Lower operating revenues in 2024 compared to 2023, primarily due to $291 million of lower PLR, partially offset by a $69 million increase in distribution prices, a $48 million increase in transmission formula rate returns and a $39 million increase in distribution volumes primarily due to weather and higher usage. •Lower energy purchases in 2024 compared to 2023, primarily due to $259 million of lower PLR prices and $13 million of lower PLR volumes. •Higher operation and maintenance expense in 2024 compared to 2023, primarily due to a $52 million increase in storm expenses, a $20 million increase in vegetation management expenses and a $19 million increase in Act 129 related expenses. •Higher interest income from affiliate in 2024 compared to 2023, primarily due to interest income on a short-term note receivable with an affiliated company. •Higher interest expense in 2024 compared to 2023, primarily due to $43 million related to increased long-term debt borrowings, partially offset by $11 million related to the redemption of floating rate first mortgage bonds in March 2023. Rhode Island Regulated Segment The Rhode Island Regulated segment consists primarily of the regulated electricity transmission and distribution operations and regulated distribution and sale of natural gas conducted by RIE. Net Income and Earnings from Ongoing Operations include the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues","$","2,024","","","$","1,851","","","$","173"],["Energy purchases","782","","","658","","","124"],["Other operation and maintenance","731","","","705","","","26"],["Depreciation","165","","","156","","","9"],["Taxes, other than income","144","","","156","","","(12)"],["Total Operating Expenses","1,822","","","1,675","","","147"],["Other Income (Expense) - net","24","","","19","","","5"],["Interest Expense","95","","","83","","","12"],["Income Taxes","22","","","16","","","6"],["Net Income","109","","","96","","","13"],["Less: Special Items","(46)","","","(56)","","","10"],["Earnings from Ongoing Operations","$","155","","","$","152","","","$","3"]] [[/GREPCENT_TABLE]] 39 Table of Contents The following after-tax gains (losses), which management considers special items, impacted the Rhode Island Regulated segment's results and are excluded from Earnings from Ongoing Operations: [[GREPCENT_TABLE]] [["","Income Statement Line Item","","2024","","","","2023"],["Acquisition integration, net of tax of $13, $17 (a)","Other operation and maintenance","","$","(45)","","","","","$","(65)"],["Acquisition integration, net of tax of $0","Other Income (Expense) - net","","(1)","","","","","\u2014"],["Acquisition integration, net of tax of ($2) (b)","Operating Revenues","","\u2014","","","","","8"],["Acquisition integration, net of tax of ($1)","Depreciation","","\u2014","","","","","2"],["Acquisition integration, net of tax of $0","Interest Expense","","\u2014","","","","","(1)"],["Total","","","$","(46)","","","","","$","(56)"]] [[/GREPCENT_TABLE]] (a)Primarily includes certain transition services agreement costs for IT systems that will not be part of PPL's ongoing operations. (b)Prior period impact of a methodology change for Infrastructure, Safety, and Reliability revenues. The changes in the components of the Rhode Island Regulated segment's results between these periods are due to the factors set forth below, which exclude the items that management considers special. [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Operating Revenues","$","183"],["Energy purchases","(124)"],["Other operation and maintenance","(50)"],["Depreciation","(7)"],["Taxes, other than income","12"],["Other Income (Expense) - net","6"],["Interest Expense","(13)"],["Income Taxes","(4)"],["Earnings from Ongoing Operations","3"],["Special Items, after-tax","10"],["Net Income","$","13"]] [[/GREPCENT_TABLE]] •Higher operating revenues in 2024 compared to 2023, primarily due to a $175 million increase due to the effects of conforming the presentation of RIE's net metering charges to that of PPL's other operating utilities beginning in 2024, a $46 million increase in recovery of gas maintenance related expenses, a $29 million increase related to capital investments, a $12 million increase related to recovery of transmission expenses and a $15 million increase of other items that were not individually significant, partially offset by a $51 million decrease in recovery of commodity costs, a $24 million decrease in recovery of pension expenses, a $14 million decrease in recovery of gross earnings taxes and a $10 million decrease related to ISR adjustments. •Higher energy purchases in 2024 compared to 2023, primarily due to a $175 million increase related to the effects of conforming the presentation of RIE's net metering charges to that of PPL's other operating utilities beginning in 2024, partially offset by a $51 million decrease in commodity costs. •Higher operation and maintenance expense in 2024 compared to 2023, primarily due to a $46 million increase in gas maintenance related expenses, an $18 million increase in bad debt expenses and a $12 million increase in transmission expenses, partially offset by a $24 million decrease in pension expenses. •Lower taxes, other than income in 2024 compared to 2023, primarily due to a decrease in gross earnings taxes. •Higher interest expense in 2024 compared to 2023, primarily due to increased borrowings. 40 Table of Contents Reconciliation of Earnings from Ongoing Operations The following tables contain after-tax gains (losses), in total, which management considers special items, that are excluded from Earnings from Ongoing Operations, and a reconciliation to PPL's "Net Income" for the years ended December 31. [[GREPCENT_TABLE]] [["","","","2024"],["","","","KY Regulated","","PA Regulated","","RI Regulated","","Corporate and Other","","","","Total"],["Net Income (Loss)","","","$","620","","","$","574","","","$","109","","","$","(415)","","","","","$","888"],["Less: Special Items (expense) benefit:"],["Talen litigation costs, net of tax of $1 (a)","","","\u2014","","","\u2014","","","\u2014","","","(2)","","","","","(2)"],["Strategic corporate initiatives, net of tax of $0, $2, $2 (b)","","","(1)","","","(5)","","","\u2014","","","(5)","","","","","(11)"],["Acquisition integration, net of tax of $13, $66 (c)","","","\u2014","","","\u2014","","","(46)","","","(250)","","","","","(296)"],["PPL Electric billing issue, net of tax of $5 (d)","","","\u2014","","","(13)","","","\u2014","","","\u2014","","","","","(13)"],["FERC transmission credit refund, net of tax of $0 (e)","","","1","","","\u2014","","","\u2014","","","\u2014","","","","","1"],["ECR beneficial reuse transition adjustment, net of tax of $2 (f)","","","(4)","","","\u2014","","","\u2014","","","\u2014","","","","","(4)"],["DER projects impairment, net of tax of $6 (g)","","","\u2014","","","(15)","","","\u2014","","","\u2014","","","","","(15)"],["IT transformation, net of tax of $5 (h)","","","\u2014","","","\u2014","","","\u2014","","","(22)","","","","","(22)"],["Total Special Items","","","(4)","","","(33)","","","(46)","","","(279)","","","","","(362)"],["Earnings from Ongoing Operations","","","$","624","","","$","607","","","$","155","","","$","(136)","","","","","$","1,250"]] [[/GREPCENT_TABLE]] (a)PPL incurred legal expenses related to litigation associated with its former affiliate, Talen Montana, LLC and certain affiliated entities. (b)Represents costs primarily related to PPL's centralization and other strategic efforts. (c)Rhode Island Regulated primarily includes certain transition services agreement costs for IT systems that will not be part of PPL's ongoing operations. Corporate and Other primarily includes integration and related costs associated with the acquisition of RIE. (d)Certain expenses related to billing issues. See Note 7 to the Financial Statements for additional information. (e)Prior period impact related to a FERC refund order. (f)Prior period impact for an ECR mechanism revenue adjustment related to a KPSC order. (g)Impairment of DER project costs associated with a pilot solar program for which PPL will not seek regulatory recovery. (h)Costs associated with PPL’s restructuring and rebuilding of its IT infrastructure, organization and systems. [[GREPCENT_TABLE]] [["","","","2023"],["","","","KY Regulated","","PA Regulated","","RI Regulated","","Corporate and Other","","","","Total"],["Net Income (Loss)","","","$","552","","","$","519","","","$","96","","","$","(427)","","","","","$","740"],["Less: Special Items (expense) benefit:"],["Talen litigation costs, net of tax of $26 (a)","","","\u2014","","","\u2014","","","\u2014","","","(99)","","","","","(99)"],["Strategic corporate initiatives, net of tax of $0, $1, $3 (b)","","","(1)","","","(2)","","","\u2014","","","(10)","","","","","(13)"],["Acquisition integration, net of tax of $14, $58 (c)","","","\u2014","","","\u2014","","","(56)","","","(218)","","","","","(274)"],["Sale of Safari Holdings, net of tax of $0 (d)","","","\u2014","","","\u2014","","","\u2014","","","(4)","","","","","(4)"],["PPL Electric billing issue, net of tax of $10 (e)","","","\u2014","","","(24)","","","\u2014","","","\u2014","","","","","(24)"],["FERC transmission credit refund, net of tax of $2 (f)","","","(6)","","","\u2014","","","\u2014","","","\u2014","","","","","(6)"],["Unbilled revenue estimate adjustment, net of tax of $2 (g)","","","(5)","","","\u2014","","","\u2014","","","\u2014","","","","","(5)"],["Other non-recurring charges, net of tax of $1, $0 (h)","","","\u2014","","","(3)","","","\u2014","","","(15)","","","","","(18)"],["Total Special Items","","","(12)","","","(29)","","","(56)","","","(346)","","","","","(443)"],["Earnings from Ongoing Operations","","","$","564","","","$","548","","","$","152","","","$","(81)","","","","","$","1,183"]] [[/GREPCENT_TABLE]] (a)PPL incurred legal expenses related to litigation and settlement with its former affiliate, Talen Montana, LLC and certain affiliated entities. (b)Costs incurred primarily in connection with corporate centralization efforts. (c)Rhode Island Regulated includes costs incurred primarily related to certain transition services agreement costs for IT systems that will not be part of PPL’s ongoing operations. Corporate and Other primarily includes integration and related costs associated with the acquisition of RIE. (d)Primarily final closing and other related adjustments for the sale of Safari Holdings. (e)Certain expenses related to billing issues. See Note 7 to the Financial Statements for additional information. (f)Prior period impact related to a FERC refund order. (g)Prior period impact of a methodology change in determining unbilled revenues. (h)PA Regulated includes certain expenses related to a litigation settlement. Corporate and Other primarily includes certain expenses related to distributed energy investments. 41 Table of Contents PPL Electric: Statement of Income Analysis Net income for the years ended December 31 includes the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues","$","2,876","","","$","3,008","","","$","(132)"],["Operating Expenses"],["Operation"],["Energy purchases","721","","","992","","","(271)"],["Other operation and maintenance","705","","","605","","","100"],["Depreciation","401","","","397","","","4"],["Taxes, other than income","131","","","143","","","(12)"],["Total Operating Expenses","1,958","","","2,137","","","(179)"],["Operating Income","918","","","871","","","47"],["Other Income (Expense) - net","45","","","39","","","6"],["Interest Income from Affiliate","33","","","\u2014","","","33"],["Interest Expense","246","","","223","","","23"],["Income Before Income Taxes","750","","","687","","","63"],["Income Taxes","176","","","168","","","8"],["Net Income","$","574","","","$","519","","","$","55"]] [[/GREPCENT_TABLE]] Operating Revenues The increase (decrease) in operating revenues was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Distribution price (a)","$","69"],["Distribution volume (b)","39"],["PLR (c)","(291)"],["Transmission formula rate (d)","48"],["Other","3"],["Total","$","(132)"]] [[/GREPCENT_TABLE]] (a)The increase was primarily due to reconcilable cost recovery mechanisms approved by the PAPUC. (b)The increase was primarily due to weather, along with other higher usage in 2024. (c)The decrease was primarily the result of lower energy prices and fewer PLR customers, partially offset by higher customer volumes due to weather and other higher usage. (d)The increase was primarily due to returns on additional transmission capital investments, returns of depreciation and operation and maintenance expenses and delayed implementation of moving to a calendar year rate in 2023, partially offset by the prior year point to point border rate settlement variance. Energy Purchases Energy purchases decreased $271 million in 2024 compared with 2023, primarily due to lower PLR prices of $259 million and lower PLR volumes of $13 million. 42 Table of Contents Other Operation and Maintenance The increase (decrease) in other operation and maintenance was due to: [[GREPCENT_TABLE]] [["","","","2024 vs. 2023"],["Vegetation management expenses","","","$","20"],["Storm expenses","","","52"],["Act 129","","","19"],["DER projects impairment (a)","","","21"],["Other","","","(12)"],["Total","","","$","100"]] [[/GREPCENT_TABLE]] (a)    Impairment of DER project costs associated with a pilot solar program for which PPL will not seek regulatory recovery. Interest Income from Affiliate Interest income from affiliate increased $33 million in 2024 compared with 2023, primarily due to interest income on a short-term note receivable with an affiliated company. Interest Expense Interest expense increased $23 million in 2024 compared with 2023, primarily due to $43 million related to increased long-term debt borrowings, partially offset by $11 million related to the redemption of floating rate first mortgage bonds in March 2023. LG&E: Statement of Income Analysis Net income for the years ended December 31 includes the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues"],["Retail and wholesale","$","1,617","","","$","1,580","","","$","37"],["Electric revenue from affiliate","31","","","33","","","(2)"],["Total Operating Revenues","1,648","","","1,613","","","35"],["Operating Expenses"],["Operation"],["Fuel","308","","","286","","","22"],["Energy purchases","151","","","168","","","(17)"],["Energy purchases from affiliates","20","","","12","","","8"],["Other operation and maintenance","349","","","364","","","(15)"],["Depreciation","305","","","302","","","3"],["Taxes, other than income","49","","","48","","","1"],["Total Operating Expenses","1,182","","","1,180","","","2"],["Operating Income","466","","","433","","","33"],["Other Income (Expense) - net","12","","","3","","","9"],["Interest Income from Affiliates","1","","","1","","","\u2014"],["Interest Expense","105","","","102","","","3"],["Income Before Income Taxes","374","","","335","","","39"],["Income Taxes","77","","","69","","","8"],["Net Income","$","297","","","$","266","","","$","31"]] [[/GREPCENT_TABLE]] 43 Table of Contents Operating Revenues The increase (decrease) in operating revenues was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Fuel and other energy purchases (a)","$","7"],["Volumes (b)","35"],["ECR (c)","(18)"],["Other","11"],["Total","$","35"]] [[/GREPCENT_TABLE]] (a)The increase was primarily due to higher recoveries of fuel expenses, partially offset by lower recoveries of energy purchases. (b)The increase was primarily due to weather. (c)The decrease was primarily due to lower ECR expenses. Fuel Fuel expense increased $22 million in 2024 compared with 2023, primarily due to an increase in commodity costs. Energy Purchases Energy purchases decreased $17 million in 2024 compared with 2023, primarily due to a decrease in commodity costs. Other Operation and Maintenance The increase (decrease) in other operation and maintenance was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["ECR expenses","$","(17)"],["Other","2"],["Total","$","(15)"]] [[/GREPCENT_TABLE]] KU: Statement of Income Analysis Net income for the years ended December 31 includes the following results: [[GREPCENT_TABLE]] [["","","","","","Change"],["","2024","","2023","","2024 vs. 2023"],["Operating Revenues"],["Retail and wholesale","$","1,944","","","$","1,872","","","$","72"],["Electric revenue from affiliate","20","","","12","","","8"],["Total Operating Revenues","1,964","","","1,884","","","80"],["Operating Expenses"],["Operation"],["Fuel","476","","","447","","","29"],["Energy purchases","25","","","24","","","1"],["Energy purchases from affiliates","31","","","33","","","(2)"],["Other operation and maintenance","413","","","427","","","(14)"],["Depreciation","403","","","392","","","11"],["Taxes, other than income","49","","","45","","","4"],["Total Operating Expenses","1,397","","","1,368","","","29"],["Operating Income","567","","","516","","","51"],["Other Income (Expense) - net","15","","","8","","","7"],["Interest Expense","137","","","134","","","3"],["Interest Expense from Affiliate","\u2014","","","1","","","(1)"],["Income Before Income Taxes","445","","","389","","","56"],["Income Taxes","89","","","77","","","12"],["Net Income","$","356","","","$","312","","","$","44"]] [[/GREPCENT_TABLE]] 44 Table of Contents Operating Revenues The increase (decrease) in operating revenues was due to: [[GREPCENT_TABLE]] [["","2024 vs. 2023"],["Fuel and other energy purchases (a)","$","28"],["Volumes (b)","39"],["ECR","(8)"],["Demand","8"],["Other","13"],["Total","$","80"]] [[/GREPCENT_TABLE]] (a)The increase was primarily due to higher recoveries of fuel expenses. (b)The increase was primarily due to weather. Fuel Fuel expense increased $29 million in 2024 compared with 2023, primarily due to a $37 million increase in volumes due to weather, partially offset by an $8 million decrease in commodity costs. Financial Condition The remainder of this Item 7 in this Form 10-K is presented on a combined basis, providing information, as applicable, for all Registrants. Liquidity and Capital Resources (All Registrants) The Registrants' cash flows from operations and access to cost-effective bank and capital markets are subject to risks and uncertainties. See "Item 1A. Risk Factors" for a discussion of risks and uncertainties that could affect the Registrants' cash flows. The Registrants had the following at: [[GREPCENT_TABLE]] [["","PPL","","PPL Electric","","LG&E","","KU"],["December 31, 2024"],["Cash and cash equivalents","$","306","","","$","24","","","$","8","","","$","13"],["Short-term debt","303","","","\u2014","","","25","","","140"],["Long-term debt due within one year","551","","","\u2014","","","300","","","250"],["Notes payable with affiliates","","","\u2014","","","43","","","73"],["December 31, 2023"],["Cash and cash equivalents","$","331","","","$","51","","","$","18","","","$","14"],["Short-term debt","992","","","509","","","\u2014","","","93"],["Long-term debt due within one year","1","","","\u2014","","","\u2014","","","\u2014"],["Notes payable with affiliates","","","\u2014","","","\u2014","","","\u2014"]] [[/GREPCENT_TABLE]] (PPL) The Statements of Cash Flows separately report the cash flows of discontinued operations. The "Operating Activities," "Investing Activities" and "Financing Activities" sections below include only the cash flows of continuing operations. (All Registrants) Net cash provided by (used in) operating, investing and financing activities for the years ended December 31 and the changes between periods were as follows: 45 Table of Contents [[GREPCENT_TABLE]] [["","PPL","","PPL Electric","","LG&E","","KU"],["2024"],["Operating activities","$","2,340","","","$","1,042","","","$","554","","","$","723"],["Investing activities","(2,818)","","","(1,455)","","","(444)","","","(643)"],["Financing activities","435","","","386","","","(130)","","","(89)"],["2023"],["Operating activities","$","1,758","","","$","912","","","$","609","","","$","647"],["Investing activities","(2,383)","","","(958)","","","(378)","","","(566)"],["Financing activities","650","","","72","","","(280)","","","(64)"],["2024 vs. 2023 Change"],["Operating activities","$","582","","","$","130","","","$","(55)","","","$","76"],["Investing activities","(435)","","","(497)","","","(66)","","","(77)"],["Financing activities","(215)","","","314","","","150","","","(25)"]] [[/GREPCENT_TABLE]] Operating Activities The components of the change in cash provided by (used in) operating activities were as follows: [[GREPCENT_TABLE]] [["","PPL","","PPL Electric","","LG&E","","KU"],["2024 vs. 2023"],["Change - Cash Provided (Used):"],["Net income","$","148","","","$","55","","","$","31","","","$","44"],["Non-cash components","(78)","","","119","","","26","","","5"],["Working capital","132","","","(22)","","","(103)","","","20"],["Defined benefit plan funding","3","","","5","","","(1)","","","\u2014"],["Other operating activities","377","","","(27)","","","(8)","","","7"],["Total","$","582","","","$","130","","","$","(55)","","","$","76"]] [[/GREPCENT_TABLE]] (PPL) PPL cash provided by operating activities in 2024 increased $582 million compared with 2023. •Net income increased $148 million and included a decrease in net non-cash charges of $78 million. The decrease in non-cash components was primarily due to an increase in deferred income taxes and investment tax credits (primarily due to book versus tax plant timing differences). •The $132 million increase in cash from changes in working capital was primarily due to a decrease in accounts receivable (primarily due to timing of payments), partially offset by an increase in unbilled revenues (primarily due to weather) and an increase in other current liabilities. •The $377 million increase in cash provided by other operating activities was driven by an increase in non-current liabilities (primarily related to the purchase of renewable tax credits in the prior year). (PPL Electric) PPL Electric's cash provided by operating activities in 2024 increased $130 million compared with 2023. •Net income increased $55 million and included an increase in non-cash components of $119 million. The increase in non-cash components was primarily due to an increase in deferred income taxes and investment tax credits (primarily due to book versus tax plant timing differences). •The $22 million decrease in cash from changes in working capital was primarily due to an increase in unbilled revenues (primarily due to weather), an increase in prepayments (primarily due to timing of payments), an increase in net regulatory assets (primarily due to the timing of rate recovery mechanisms) and a decrease in taxes payable (primarily due to timing of payments), partially offset by a decrease in accounts receivable (primarily due to timing of payments) and an increase in accounts payable (primarily due to timing of payments). 46 Table of Contents •The $27 million decrease in cash provided by other operating activities was driven primarily by an increase in noncurrent regulatory assets (primarily related to deferred storm costs recorded as noncurrent regulatory assets). (LG&E) LG&E's cash provided by operating activities in 2024 decreased $55 million compared with 2023. •Net income increased $31 million and included an increase in non-cash components of $26 million. The increase in non-cash components was primarily due to a decrease in deferred income taxes and investment tax credits (primarily due to book versus tax plant timing differences). •The $103 million decrease in cash from changes in working capital was primarily due to increases in accounts receivable and unbilled revenues (primarily due to weather), an increase in fuel, materials and supplies (primarily due to lower commodity costs in the prior year), an increase in accounts receivable from affiliates (primarily due to timing of payments) and an increase in net regulatory assets (primarily due to the timing of rate recovery mechanisms), partially offset by increases in accounts payable and accounts payable to affiliates (primarily due to timing of payments). (KU) KU's cash provided by operating activities in 2024 increased $76 million compared with 2023. •Net income increased $44 million and included an increase in non-cash components of $5 million. The increase in non-cash components was primarily due to an increase in depreciation expense (primarily due to additional assets placed into service, net of retirements), partially offset by a decrease in deferred income taxes and investment tax credits (primarily due to book versus tax plant timing differences). •The $20 million increase in cash from changes in working capital was primarily due to an increase in accounts payable to affiliates (primarily due to timing of payments) and a decrease in fuel, materials and supplies (primarily due to weather), partially offset by increases in accounts receivable and unbilled revenues (primarily due to weather). Investing Activities (All Registrants) The components of the change in cash provided by (used in) investing activities were as follows: [[GREPCENT_TABLE]] [["","PPL","","PPL Electric","","LG&E","","KU"],["2024 vs. 2023"],["Change - Cash Provided (Used):"],["Expenditures for PP&E","$","(415)","","","$","(273)","","","$","(66)","","","$","(71)"],["Notes receivable from affiliate","\u2014","","","(222)","","","\u2014","","","\u2014"],["Other investing activities","(20)","","","(2)","","","\u2014","","","(6)"],["Total","$","(435)","","","$","(497)","","","$","(66)","","","$","(77)"]] [[/GREPCENT_TABLE]] For PPL, the increase in expenditures for PP&E was primarily due to an increase in project expenditures at PPL Electric, LG&E and KU. The increase in expenditures at PPL Electric was primarily due to increases in transmission and distribution projects. The increase in expenditures at LG&E and KU was primarily due to Mill Creek Unit 5 and increases in the Advanced Metering Infrastructure initiative. See "Forecasted Uses of Cash" for detail regarding projected capital expenditures for the years 2025 through 2027. For PPL Electric, the changes in "Notes receivable from affiliate" activity resulted from payments received on the short-term note between affiliates in 2022, issued to support general corporate purposes. See Note 13 to the Financial Statements for further discussion of intercompany borrowings. 47 Table of Contents Financing Activities (All Registrants) The components of the change in cash provided by (used in) financing activities were as follows: [[GREPCENT_TABLE]] [["","PPL","","PPL Electric","","LG&E","","KU"],["2024 vs. 2023"],["Change - Cash Provided (Used):"],["Long-term debt issuance/retirement, net","$","496","","","$","560","","","$","(164)","","","$","(146)"],["Dividends","(43)","","","(52)","","","(21)","","","(42)"],["Capital contributions/distributions, net","\u2014","","","672","","","83","","","31"],["Changes in net short-term debt","(696)","","","(873)","","","204","","","55"],["Note payable with affiliate","\u2014","","","\u2014","","","43","","","73"],["Other financing activities","28","","","7","","","5","","","4"],["Total","$","(215)","","","$","314","","","$","150","","","$","(25)"]] [[/GREPCENT_TABLE]] (All Registrants) See Note 8 to the Financial Statements in this Form 10-K for information on 2024 activity. See "Long-term Debt and Equity Securities" below for additional information on current year activity. See "Forecasted Sources of Cash" for a discussion of the Registrants' plans to issue debt and equity securities, as well as a discussion of credit facility capacity available to the Registrants. Also see "Forecasted Uses of Cash" for a discussion of PPL's plans to pay dividends on common securities in the future, as well as the Registrants' maturities of long-term debt. Long-term Debt and Equity Securities Long-term debt and equity securities activity for 2024 included: [[GREPCENT_TABLE]] [["","Debt","","Stock"],["","Issuances (a)","","Retirements","","Issuances (b)","","Repurchases"],["Cash Flow Impact:"],["PPL","$","1,894","","","$","\u2014","","","$","9","","","$","\u2014"],["PPL Electric","649","","","\u2014","","","\u2014","","","\u2014"],["LG&E","\u2014","","","\u2014","","","\u2014","","","\u2014"],["KU","\u2014","","","\u2014","","","\u2014","","","\u2014"]] [[/GREPCENT_TABLE]] (a)Issuances are net of pricing discounts, where applicable, and exclude the impact of debt issuance costs. Includes debt issuances with affiliates. (b)Includes issuances of common stock and treasury stock, which are included in "Other financing activities" on the Statements of Cash Flows. See Note 8 to the Financial Statements for additional long-term debt information. Forecasted Sources of Cash (All Registrants) The Registrants expect to continue to have adequate liquidity available from operating cash flows, cash and cash equivalents, credit facilities, commercial paper issuances and debt, hybrid, and equity issuances to meet their requirements with respect to their contractual obligations and anticipated capital expenditures. Equity capital for PPL can be provided from any combination of issuances from at the market stock plans, private placements, or public offerings. Additionally, subject to market conditions, the Registrants and their subsidiaries may access the capital markets, and PPL Electric, LG&E and KU anticipate receiving equity contributions from their parent or member in 2025, which are expected to be used to fund capital expenditures and for other general corporate purposes. PPL Electric, LG&E and KU plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from PPL. Operating cash flows provide a substantial portion of these subsidiary Registrants' cash needs. 48 Table of Contents The amount, type, and timing of any financings in 2025, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals as applicable for the subsidiary Registrants, and other factors. 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 December 31, 2024, the total committed borrowing capacity under credit facilities and the borrowings under these facilities were: External [[GREPCENT_TABLE]] [["","Committed Capacity","","Borrowed","","Letters of Credit and Commercial Paper Issued (f)","","Unused Capacity"],["PPL Capital Funding Credit Facilities (a)","$","1,350","","","$","\u2014","","","$","138","","","$","1,212"],["PPL Electric Credit Facilities (b)","650","","","\u2014","","","1","","","649"],["LG&E Credit Facilities (c)","500","","","\u2014","","","25","","","475"],["KU Credit Facilities (c)","400","","","\u2014","","","140","","","260"],["Total Credit Facilities (d) (e)","$","2,900","","","$","\u2014","","","$","304","","","$","2,596"]] [[/GREPCENT_TABLE]] (a)Includes a $1.25 billion syndicated credit facility with a $250 million borrowing sublimit for RIE and a $1 billion sublimit for PPL Capital Funding at December 31, 2024. RIE’s borrowing sublimit is adjustable, at the borrowers’ option, from $0 to $600 million, with the remaining balance of the $1.25 billion available under the facility allocated to PPL Capital Funding. At December 31, 2024, PPL Capital Funding had $138 million of commercial paper outstanding and RIE had no commercial paper outstanding. On January 2, 2025, the capacity of the PPL Capital Funding syndicated credit facility was increased to $1.5 billion, with the RIE sublimit remaining $250 million and the PPL Capital Funding sublimit increasing to $1.25 billion. See Note 8 to the Financial Statements for additional information. (b)On January 2, 2025, the capacity of the PPL Electric credit facility increased to $750 million. See Note 8 to the Financial Statements for additional information. (c)On January 2, 2025, the capacity of the LG&E and KU credit facilities were each increased to $600 million. See Note 8 to the Financial Statements for additional information. (d)The syndicated credit facilities and PPL Capital Funding's bilateral facility, each contain a financial covenant requiring debt to total capitalization not to exceed 70% for PPL Capital Funding, RIE, PPL Electric, LG&E and KU, as calculated in accordance with the facility, and other customary covenants. The commitments under the credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 9%, PPL Electric - 7%, LG&E - 7% and KU - 7%. (e)Each company pays customary fees under its respective syndicated credit facility. Borrowings generally bear interest at applicable SOFR, plus an applicable margin. (f)Commercial paper issued reflects the undiscounted face value of the issuance. In addition to the financial covenants noted in the table above, the credit agreements governing the above credit facilities contain various other covenants. Failure to comply with the covenants after applicable grace periods could result in acceleration of repayment of borrowings and/or termination of the agreements. The Registrants monitor compliance with the covenants on a regular basis. At December 31, 2024, the Registrants were in compliance with these covenants. As of December 31, 2024, the Registrants believe that these covenants and other borrowing conditions will not limit access to these funding sources. See Note 8 to the Financial Statements for further discussion of the Registrants' credit facilities. Intercompany (LG&E and KU)  [[GREPCENT_TABLE]] [["","Committed Capacity","","Borrowed","","Commercial Paper Issued","","Unused Capacity"],["LG&E Money Pool (a)","$","750","","","$","43","","","$","25","","","$","682"],["KU Money Pool (a)","650","","","73","","","140","","","437"]] [[/GREPCENT_TABLE]] (a)LG&E and KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper capacity limit, at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on the lower of a market index of commercial paper issues and two additional rate options based on SOFR. 49 Table of Contents See Note 13 to the Financial Statements for further discussion of intercompany credit facilities. Commercial Paper (All Registrants) The Registrants, PPL Capital Funding and RIE maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facilities. The following commercial paper programs were in place at: [[GREPCENT_TABLE]] [["","December 31, 2024"],["","Capacity","","Commercial Paper Issuances (b)","","Unused Capacity"],["PPL Capital Funding (a)","$","1,350","","","$","138","","","$","1,212"],["Rhode Island Energy (a)","250","","","\u2014","","","250"],["PPL Electric","650","","","\u2014","","","650"],["LG&E","500","","","25","","","475"],["KU","400","","","140","","","260"],["Total PPL","$","3,150","","","$","303","","","$","2,847"]] [[/GREPCENT_TABLE]] (a)Issuances under the PPL Capital Funding and RIE commercial paper programs are supported by the PPL Capital Funding syndicated credit facility, which at December 31, 2024, had a total capacity of $1.25 billion, with a $250 million borrowing sublimit for RIE and a $1 billion sublimit for PPL Capital Funding at December 31, 2024. RIE’s borrowing sublimit is adjustable, at the borrowers’ option, from $0 to $600 million, with the remaining balance of the $1.25 billion available under the facility allocated to PPL Capital Funding. On January 2, 2025, the capacity of the PPL Capital Funding syndicated credit facility was increased to $1.5 billion, with the RIE sublimit remaining $250 million and the PPL Capital Funding sublimit increasing to $1.25 billion. (b)Commercial paper issued reflects the undiscounted face value of the issuance. Forecasted Uses of Cash (All Registrants) In addition to expenditures required for normal operating activities, such as purchased power, payroll, fuel and taxes, the Registrants currently expect to incur future cash outflows for capital expenditures, various contractual obligations, payment of dividends on its common stock, and possibly the purchase or redemption of a portion of debt securities. Capital Expenditures The table below shows the Registrants' current capital expenditure projections for the years 2025 through 2027. Expenditures for the regulated utilities are expected to be recovered through rates, pending regulatory approval. [[GREPCENT_TABLE]] [["","","","Projected"],["","Total","","2025 (a)","","2026","","2027"],["PPL"],["Generating facilities","$","3,875","","","$","975","","","$","1,200","","","$","1,700"],["Electric distribution facilities","4,925","","","1,400","","","1,825","","","1,700"],["Gas distribution facilities","1,125","","","400","","","350","","","375"],["Transmission facilities","4,475","","","1,300","","","1,600","","","1,575"],["Other","600","","","250","","","225","","","125"],["Total Capital Expenditures","$","15,000","","","$","4,325","","","$","5,200","","","$","5,475"],["PPL Electric"],["Electric distribution facilities","$","2,525","","","$","650","","","$","975","","","$","900"],["Transmission facilities","2,550","","","850","","","875","","","825"],["Total Capital Expenditures","$","5,075","","","$","1,500","","","$","1,850","","","$","1,725"]] [[/GREPCENT_TABLE]] 50 Table of Contents [[GREPCENT_TABLE]] [["","","","Projected"],["","Total","","2025 (a)","","2026","","2027"],["LG&E"],["Generating facilities","$","2,275","","","$","475","","","$","625","","","$","1,175"],["Electric distribution facilities","600","","","175","","","200","","","225"],["Gas distribution facilities","400","","","175","","","100","","","125"],["Transmission facilities","275","","","75","","","75","","","125"],["Other","300","","","125","","","125","","","50"],["Total Capital Expenditures","$","3,850","","","$","1,025","","","$","1,125","","","$","1,700"],["KU"],["Generating facilities","$","1,600","","","$","500","","","$","575","","","$","525"],["Electric distribution facilities","750","","","225","","","275","","","250"],["Transmission facilities","875","","","175","","","350","","","350"],["Other","300","","","125","","","100","","","75"],["Total Capital Expenditures","$","3,525","","","$","1,025","","","$","1,300","","","$","1,200"]] [[/GREPCENT_TABLE]] (a)The 2025 total excludes amounts included in accounts payable as of December 31, 2024. Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. Contractual Obligations The Registrants have assumed various financial obligations and commitments in the ordinary course of conducting business. At December 31, 2024, estimated contractual cash obligations were as follows: [[GREPCENT_TABLE]] [["","Total","","2025","","2026-2027","","2028-2029","","After 2029"],["PPL"],["Long-term Debt (a)","$","16,674","","","$","551","","","$","1,332","","","$","1,466","","","$","13,325"],["Interest on Long-term Debt (b)","11,001","","","729","","","1,375","","","1,288","","","7,609"],["Operating Leases","102","","","24","","","30","","","17","","","31"],["Purchase Obligations (c)","4,872","","","1,479","","","1,958","","","702","","","733"],["Total Contractual Cash Obligations","$","32,649","","","$","2,783","","","$","4,695","","","$","3,473","","","$","21,698"],["PPL Electric"],["Long-term Debt (a)","$","5,299","","","$","\u2014","","","$","108","","","$","116","","","$","5,075"],["Interest on Long-term Debt (b)","4,378","","","246","","","491","","","486","","","3,155"],["Unconditional Power Purchase Obligations","49","","","29","","","20","","","\u2014","","","\u2014"],["Total Contractual Cash Obligations","$","9,726","","","$","275","","","$","619","","","$","602","","","$","8,230"],["LG&E"],["Long-term Debt (a)","$","2,489","","","$","300","","","$","350","","","$","\u2014","","","$","1,839"],["Interest on Long-term Debt (b)","1,380","","","100","","","178","","","167","","","935"],["Operating Leases","17","","","6","","","7","","","3","","","1"],["Coal and Natural Gas Purchase Obligations (d)","1,098","","","327","","","463","","","242","","","66"],["Unconditional Power Purchase Obligations (e)","306","","","25","","","54","","","50","","","177"],["Construction Obligations (f)","251","","","108","","","140","","","2","","","1"],["Other Obligations","95","","","30","","","58","","","4","","","3"],["Total Contractual Cash Obligations","$","5,636","","","$","896","","","$","1,250","","","$","468","","","$","3,022"]] [[/GREPCENT_TABLE]] 51 Table of Contents [[GREPCENT_TABLE]] [["","Total","","2025","","2026-2027","","2028-2029","","After 2029"],["KU"],["Long-term Debt (a)","$","3,089","","","$","250","","","$","224","","","$","\u2014","","","$","2,615"],["Interest on Long-term Debt (b)","1,999","","","130","","","239","","","233","","","1,397"],["Operating Leases","27","","","10","","","11","","","5","","","1"],["Coal and Natural Gas Purchase Obligations (d)","1,076","","","352","","","471","","","211","","","42"],["Unconditional Power Purchase Obligations (e)","136","","","11","","","24","","","22","","","79"],["Construction Obligations (f)","532","","","221","","","307","","","2","","","2"],["Other Obligations","117","","","46","","","59","","","8","","","4"],["Total Contractual Cash Obligations","$","6,976","","","$","1,020","","","$","1,335","","","$","481","","","$","4,140"]] [[/GREPCENT_TABLE]] (a)Reflects principal maturities based on stated maturity, sinking fund payments, or earlier put dates. See Note 8 to the Financial Statements for a discussion of variable-rate remarketable bonds issued on behalf of LG&E and KU. The Registrants do not have any significant finance lease obligations. (b)Assumes interest payments through stated maturity or earlier put dates. The payments herein are subject to change, as payments for debt that is or becomes variable-rate debt have been estimated. (c)The amounts include agreements to purchase goods or services that are enforceable and legally binding and specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Primarily includes, as applicable, the purchase obligations of electricity, coal, natural gas and limestone, as well as certain construction expenditures, which are also included in the Capital Expenditures discussion above. (d)Represents contracts to purchase coal, natural gas and natural gas transportation. See Note 12 to the Financial Statements for additional information. (e)Represents future minimum payments under OVEC power purchase agreements through June 2040. See Note 12 to the Financial Statements for additional information. (f)Represents construction commitments, which are also reflected in the Capital Expenditures table presented above. Dividends/Distributions (PPL) PPL views dividends as an integral component of shareowner return and expects to continue to pay dividends in amounts intended to maintain a capitalization structure that supports investment grade credit ratings. In November 2024, PPL declared its quarterly common stock dividend, payable January 2, 2024, at 25.75 cents per share (equivalent to $1.03 per annum). On February 13, 2025, PPL announced a quarterly common stock dividend of 27.25 cents per share, payable April 1, 2025, to shareowners of record as of March 10, 2025. Future dividends will be declared at the discretion of the Board of Directors and will depend upon future earnings, cash flows, financial and legal requirements and other factors. Subject to certain exceptions, PPL may not declare or pay any cash dividend or distribution on its capital stock during any period in which PPL Capital Funding defers interest payments on its 2007 Series A Junior Subordinated Notes due 2067. At December 31, 2024, no interest payments were deferred. (PPL Electric, LG&E and KU) From time to time, as determined by their respective Board of Directors, the Registrants pay dividends, distributions or return capital, as applicable, to their respective shareholders or members. Certain of the credit facilities of PPL Electric, LG&E and KU include minimum debt covenant ratios that could effectively restrict the payment of dividends or distributions. (All Registrants) See Note 8 to the Financial Statements for these and other restrictions related to distributions on capital interests for the Registrants and their subsidiaries. Purchase or Redemption of Debt Securities The Registrants will continue to evaluate outstanding debt securities and may decide to purchase or redeem these securities in open market or privately negotiated transactions, in exchange transactions or otherwise, depending upon prevailing market conditions, available cash and other factors, and may be commenced or suspended at any time. The amounts involved may be material. 52 Table of Contents Rating Agency Actions 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 following table sets forth the Registrants' and their subsidiaries' credit ratings for outstanding debt securities or commercial paper programs as of December 31, 2024. [[GREPCENT_TABLE]] [["","","Senior Unsecured","","Senior Secured","","Commercial Paper"],["Issuer","","Moody's","","S&P","","Moody's","","S&P","","Moody's","","S&P"],["PPL"],["PPL Capital Funding","","Baa1","","BBB+","","","","","","P-2","","A-2"],["Rhode Island Energy","","A3","","A-","","","","","","P-2","","A-2"],["PPL and PPL Electric"],["PPL Electric","","","","","","A1","","A+","","P-2","","A-1"],["PPL, LG&E and KU"],["LG&E","","","","","","A1","","A","","P-2","","A-2"],["KU","","","","","","A1","","A","","P-2","","A-2"]] [[/GREPCENT_TABLE]] Since June 2023, the rating agencies have not taken rating actions related to the Registrants and their subsidiaries. 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 16 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for derivative contracts in a net liability position at December 31, 2024. Guarantees for Subsidiaries (PPL) PPL guarantees certain consolidated affiliate financing arrangements. Some of the guarantees contain financial and other covenants that, if not met, would limit or restrict the consolidated affiliates' access to funds under these financing arrangements, accelerate maturity of such arrangements or limit the consolidated affiliates' ability to enter into certain transactions. At this time, PPL believes that these covenants will not limit access to relevant funding sources. See Note 12 to the Financial Statements for additional information about guarantees. Other Contingent Obligations (All Registrants) The Registrants have entered into certain agreements that may contingently require payment to a guaranteed or indemnified party. See Note 12 to the Financial Statements for a discussion of these agreements. 53 Table of Contents Risk Management Market Risk (All Registrants) See Notes 1, 15 and 16 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 December 31: [[GREPCENT_TABLE]] [["","2024","","2023"],["","Exposure Hedged","","Fair Value, Net - Asset (Liability) (a)","","Effect of a 10% Adverse Movement in Rates (b)","","Maturities Ranging Through","","Exposure Hedged","","Fair Value, Net - Asset (Liability) (a)","","Effect of a 10% Adverse Movement in Rates (b)"],["PPL and LG&E"],["Economic hedges"],["Interest rate swaps (c)","$","64","","","$","(3)","","","$","(1)","","","2033","","$","64","","","$","(7)","","","$","(1)"]] [[/GREPCENT_TABLE]] (a)Includes accrued interest, if applicable. (b)Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. Sensitivities represent a 10% adverse movement in interest rates. (c)Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities. The Registrants are exposed to a potential increase in interest expense and to changes in the fair value of their debt portfolios. The estimated impact of a 10% adverse movement in interest rates on interest expense at December 31, 2024 and 2023 was insignificant for PPL, PPL Electric, LG&E, and KU. The estimated impact of a 10% adverse movement in interest rates on the fair value of debt at December 31 is shown below. [[GREPCENT_TABLE]] [["","10% Adverse Movement in Rates on Fair Value of Debt"],["","2024","","2023"],["PPL","$","622","","","$","593"],["PPL Electric","262","","","250"],["LG&E","89","","","95"],["KU","131","","","137"]] [[/GREPCENT_TABLE]] 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 PAPUC-approved cost recovery mechanism and full-requirement supply agreements to serve its PLR customers which transfer the risk to energy suppliers. 54 Table of Contents •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 costs. These mechanisms generally provide for timely recovery of market price fluctuations associated with these costs. •RIE utilizes derivative instruments pursuant to its RIPUC-approved plan to manage commodity price risk associated with its natural gas purchases. RIE's commodity price risk management strategy is to reduce fluctuations in firm gas sales prices to its customers. RIE's costs associated with derivatives instruments are recoverable through its RIPUC- approved cost recovery mechanisms. RIE is also required to purchase electricity to fulfill its obligation to provide Last Resort Service (LRS). Potential commodity price risk is mitigated through its RIPUC-approved cost recovery mechanisms and full requirements service agreements to serve LRS customers, which transfer the risk to energy suppliers. Additionally, RIE is required to contract through long-term agreements for clean energy supply under the Rhode Island Renewable Energy Growth program and Long-term Clean Energy Standard. Potential commodity price risk is mitigated through its RIPUC-approved cost recovery mechanisms, which true-up cost differences between contract prices and market prices. 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 as described below. •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. •RIE is exposed to volumetric risk, which is significantly mitigated by regulatory mechanisms. RIE's electric and gas distribution rates both have a revenue decoupling mechanism, which allows for annual adjustments to RIE's delivery rates. 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, including as a result of tariffs. 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 Registrant. Defined Benefit Plans - Equity Securities Price Risk See "Application of Critical Accounting Policies - Defined Benefits" for additional information regarding the effect of equity securities price risk on plan assets. Credit Risk (All Registrants) Credit risk is the potential loss that may be incurred due to a counterparty's non-performance. PPL is exposed to credit risk from "in-the-money" transactions with counterparties, as well as additional credit risk through certain of its subsidiaries, as discussed below. In the event a supplier of PPL, PPL Electric, LG&E or KU defaults on its contractual obligation, those Registrants would be required to seek replacement power or replacement fuel in the market. In general, subject to regulatory review or other processes, appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, thereby mitigating the financial risk for these entities. PPL and its subsidiaries have credit policies in place to manage credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions and the use of master netting agreements or provisions. These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements. PPL and its subsidiaries may request additional credit assurance, in certain circumstances, in the event that the counterparties' credit ratings fall below 55 Table of Contents investment grade, their tangible net worth falls below specified percentages or their exposures exceed an established credit limit. (All Registrants) Related Party Transactions 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 13 to the Financial Statements for additional information on related party transactions for PPL Electric, LG&E and KU. Acquisitions, Development and Divestitures The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures, and development projects. See Note 9 to the Financial Statements for additional information on acquisition and divestiture activity. 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. Environmental Matters 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 "Legal Matters" in Note 12 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" for information on projected environmental capital expenditures for 2025 through 2027. See Note 18 to the Financial Statements for information related to the impacts of CCRs on AROs. See "Item 1. Business - Environmental Matters" for additional information. Sustainability Increasing attention has been focused on a broad range of corporate activities under the heading of “sustainability”, which has resulted in a significant increase in the number of requests from interested parties for information on sustainability topics. These parties range from investor groups focused on environmental, social, governance and other matters to non-investors concerned with a variety of public policy matters. Often the scope of the information sought is very broad and not necessarily relevant to an issuer’s business or industry. As a result, a number of private groups have proposed to standardize the subject matter constituting sustainability, either generally or by industry. Those efforts remain ongoing. In addition, certain of these private groups have advocated that the SEC promulgate regulations requiring specific sustainability reporting under the Securities Exchange Act of 1934, as amended (the ’34 Act), or that issuers voluntarily include certain sustainability disclosure in their ’34 Act reports. In March 2024, the SEC finalized climate disclosure rules for public companies. The rules require public companies to disclose, among other things, direct and indirect GHG emissions and information related to climate-related targets or goals that are material to the company’s business, results of operations or financial condition. As of April 2024, the SEC issued a “stay” on its climate-related disclosure rules, temporarily pausing implementation pending judicial review. PPL cannot predict the final legal requirements or when the requirements will be effective. As has been PPL’s practice, to the extent sustainability issues have or may have a material impact on the Registrants’ financial condition or results of operation, PPL discloses such matters in accordance with applicable securities law and SEC regulations. With respect to other sustainability topics that PPL deems relevant to investors but that are not required to be reported under applicable securities law and SEC regulation, PPL will continue each spring to publish its annual sustainability report including tracking reductions related to the company's goal to reduce carbon emissions and post that report on its corporate website at 56 Table of Contents www.pplweb.com and on www.pplsustainability.com. Neither the information in such annual sustainability report nor the information at such websites is incorporated in this Form 10-K by reference, and it should not be considered a part of this Form 10-K. In preparing its sustainability report, PPL is guided by the framework established by the Global Reporting Initiative, which identifies environmental, social, governance and other subject matter categories. PPL also participates in efforts by the Edison Electric Institute and American Gas Association to provide the appropriate subset of sustainability information that can be applied consistently across the electric and gas utility industries. Additionally, PPL consults widely used reporting frameworks for discrete sustainability topics, including corporate political contributions and climate-related issues. PPL also responds to the climate survey of CDP, a not-for-profit organization based in the United Kingdom formerly known as the Carbon Disclosure Project, that runs the global disclosure system that enables investors, companies, cities, states and regions to measure and manage their environmental impacts. Cybersecurity See “Item 1A. Risk Factors” and “Item 1C. Cybersecurity” for a discussion of cybersecurity risks affecting the Registrants and the related strategies for managing these risks. Competition See "Competition" under each of PPL's reportable segments in "Item 1. Business - General - Segment Information" and "Item 1A. Risk Factors" for a discussion of competitive factors affecting the Registrants. New Accounting Guidance See Note 1 and Note 20 for a discussion of significant new accounting guidance adopted and pending adoption as of December 31, 2024. Application of Critical Accounting Policies Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following accounting policies 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. Changes in the estimates or other judgments included within these accounting policies could result in a significant change to the information presented in the Financial Statements (these accounting policies are also discussed in Note 1 to the Financial Statements). Senior management has reviewed with PPL's Audit Committee these critical accounting policies, the following disclosures regarding their application, and the estimates and assumptions regarding them. Defined Benefits (All Registrants) Certain of the Registrants and/or their subsidiaries sponsor or participate in certain qualified funded and non-qualified unfunded defined benefit pension plans and both funded and unfunded other postretirement benefit plans. See Notes 1, 7 and 10 to the Financial Statements for additional information about the plans and the accounting for defined benefits. A summary of plan sponsors by Registrant and whether a Registrant or its subsidiaries sponsor (S) or participate in and receives allocations (P) from those plans is shown in the table below. [[GREPCENT_TABLE]] [["Plan Sponsor","","PPL","","PPL Electric","","","","LG&E","","KU"],["PPL Services","","S","","P"],["LKE","","","","","","","","P","","P"]] [[/GREPCENT_TABLE]] Management makes certain assumptions regarding the valuation of benefit obligations and the performance of plan assets. As such, annual net periodic defined benefit costs are recorded in current earnings or regulatory assets and liabilities based on estimated results. Any differences between actual and estimated results are recorded in AOCI or, in the case of PPL Electric, LG&E and KU, regulatory assets and liabilities for amounts that are expected to be recovered through regulated customer rates. These amounts in AOCI or regulatory assets and liabilities are amortized to income over future periods. The significant assumptions are: •Discount Rate - In selecting the discount rates for defined benefit plans, the plan sponsors start with a cash flow analysis of the expected benefit payment stream for their plans. The plan-specific cash flows are matched against the coupons and 57 Table of Contents expected maturity values of Aa-rated non-callable (or callable with make-whole provisions) bonds that could be purchased for a hypothetical settlement portfolio. The plan sponsors then use the single discount rate derived from matching the discounted benefit payment stream to the market value of the selected bond portfolio. •Expected Return on Plan Assets - The expected long-term rates of return for pension and other postretirement benefits are based on management's projections using a best-estimate of expected returns, volatilities and correlations for each asset class. Each plan's specific current and expected asset allocations are also considered in developing a reasonable return assumption. •Rate of Compensation Increase - Management projects employees' annual pay increases, which are used to project employees' pension benefits at retirement. In selecting a rate of compensation increase, plan sponsors consider past experience, the potential impact of movements in inflation rates and expectations of ongoing compensation practices. See Note 10 to the Financial Statements for details of the assumptions selected for pension and other postretirement benefits. A variance in the assumptions could significantly impact accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and AOCI or regulatory assets and liabilities. The following tables reflect changes in certain assumptions based on the Registrants' primary qualified defined benefit pension and other postretirement benefit plans. The inverse of this change would have the opposite impact on accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and AOCI or regulatory assets and liabilities. The sensitivities below reflect an evaluation of the change based solely on a change in that assumption. [[GREPCENT_TABLE]] [["","Increase (Decrease)"],["Actuarial assumption"],["Discount Rate","(0.25","%)"],["Expected Return on Plan Assets","(0.25","%)"],["Rate of Compensation Increase","0.25","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","Increase (Decrease)","","(Increase) Decrease","","(Increase) Decrease","","Increase (Decrease)","","Increase (Decrease)"],["Actuarial assumption","Defined Benefit Asset","","Defined Benefit Liabilities","","AOCI (pre-tax)","","Net Regulatory Assets","","Defined Benefit Costs"],["PPL"],["Discount rates","$","(19)","","","$","(73)","","","$","26","","","$","66","","","$","7"],["Expected return on plan assets","n/a","","n/a","","n/a","","n/a","","10"],["Rate of compensation increase","(2)","","","(6)","","","2","","","6","","","1"],["PPL Electric"],["Discount rates","\u2014","","","(31)","","","\u2014","","","31","","","2"],["Expected return on plan assets","n/a","","n/a","","\u2014","","","n/a","","4"],["Rate of compensation increase","\u2014","","","(2)","","","\u2014","","","2","","","1"],["LG&E"],["Discount rates","(8)","","","1","","","n/a","","9","","","1"],["Expected return on plan assets","n/a","","n/a","","n/a","","n/a","","1"],["Rate of compensation increase","(1)","","","\u2014","","","n/a","","1","","","\u2014"],["KU"],["Discount rates","(6)","","","1","","","n/a","","7","","","1"],["Expected return on plan assets","n/a","","n/a","","n/a","","n/a","","1"],["Rate of compensation increase","(1)","","","\u2014","","","n/a","","1","","","\u2014"]] [[/GREPCENT_TABLE]] Income Taxes (All Registrants) Significant management judgment is required in developing the Registrants' provision for income taxes, primarily due to valuation allowances on deferred tax assets. 58 Table of Contents The need for valuation allowances to reduce deferred tax assets requires significant management judgment. Valuation allowances are initially recorded and reevaluated each reporting period by assessing the likelihood of the ultimate realization of a deferred tax asset. Management considers numerous factors in assessing the expected realization of a deferred tax asset, including the reversal of temporary differences, future taxable income and ongoing prudent and feasible tax planning strategies. Any tax planning strategy considered in this assessment must meet the recognition and measurement criteria for the valuation of a deferred tax asset. When evaluating the need for valuation allowances, the uncertainty posed by potential or expected legislative change on such factors is also considered by management. The amount of deferred tax assets ultimately realized may differ materially from the estimates utilized in the computation of valuation allowances and may materially impact the financial statements in the future. See Note 6 to the Financial Statements for income tax disclosures. Regulatory Assets and Liabilities (All Registrants) PPL Electric, LG&E, KU and RIE are subject to cost-based rate regulation. As a result, the effects of regulatory actions are required to be reflected in the financial statements. Assets and liabilities are recorded that result from the regulated ratemaking process that may not be recorded under GAAP for non-regulated entities. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in regulated customer rates. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates. In certain cases, regulatory liabilities are recorded based on an understanding or agreement with the regulator that rates have been set to recover costs that are expected to be incurred in the future, and the regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose. Management continually assesses whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders to the Registrants and other regulated entities, and the status of any pending or potential deregulation legislation. Based on this continual assessment, management believes the existing regulatory assets are probable of recovery. This assessment reflects the current political and regulatory climate at the state and federal levels and is subject to change in the future. If future recovery of costs ceases to be probable, the regulatory asset would be written-off. Additionally, the regulatory agencies can provide flexibility in the manner and timing of recovery of regulatory assets. See Note 7 to the Financial Statements for regulatory assets and regulatory liabilities recorded at December 31, 2024 and 2023, as well as additional information on those regulatory assets and liabilities. All regulatory assets are either currently being recovered under specific rate orders, represent amounts that are expected to be recovered in future rates or benefit future periods based upon established regulatory practices. Price Risk Management (PPL) See "Financial Condition - Risk Management" above. Goodwill Impairment (PPL, LG&E and KU) Goodwill is tested for impairment at the reporting unit level. The reporting units of PPL include the Kentucky Regulated reporting unit, the Pennsylvania Regulated reporting unit, and the Rhode Island Regulated reporting unit. LG&E and KU are each single reporting units. A goodwill impairment test is performed annually or more frequently if events or changes in circumstances indicate that the carrying amount of the reporting unit may be greater than the reporting unit's fair value. The fair value of a reporting unit is compared with the carrying value and an impairment charge is recognized if the carrying amount exceeds the fair value of the reporting unit. PPL, for its reporting units, and individually, LG&E and KU, may elect either to initially make a qualitative evaluation about the likelihood of an impairment of goodwill or to bypass the qualitative evaluation and test goodwill for impairment using a quantitative test. As of October 1, 2024, PPL, for its reporting units, and individually, LG&E and KU, elected to perform the qualitative step zero evaluation of goodwill. These evaluations considered the excess of fair value over the carrying value of each reporting unit that was calculated during step one of the quantitative impairment tests performed in the fourth quarter of 2022, and the relevant events and circumstances that occurred since those tests were performed including: 59 Table of Contents •current year financial performance versus the prior year, •changes in planned capital expenditures, •the consistency of forecasted free cash flows, •earnings quality and sustainability, •changes in market participant discount rates, •changes in long-term growth rates, •changes in PPL's market capitalization, and •the overall economic and regulatory environments in which these regulated entities operate. Based on these evaluations, management concluded it was not more likely than not that the fair value of these reporting units was less than their carrying value. As such, the step one quantitative impairment test was not performed and no impairment was recognized. See "Long-Lived and Intangible Assets - Asset Impairment (Excluding Investments)" in Note 1 to the Financial Statements for further discussion of goodwill impairment tests. See Note 17 to the Financial Statements for information on goodwill balances by reportable segment at December 31, 2024. Asset Retirement Obligations (LG&E and KU) ARO liabilities are required to be recognized for legal obligations associated with the retirement of long-lived assets. Initial obligations are measured at estimated fair value. An ARO must be recognized when incurred if the fair value of the ARO can be reasonably estimated. An equivalent amount is recorded as an increase in the value of the capitalized asset and amortized to expense, regulatory assets or regulatory liabilities over the asset's useful life. In determining AROs, management must make significant judgments and estimates to calculate fair value. Fair value is developed using an expected present value technique based on assumptions of market participants that consider estimated retirement costs in current period dollars, inflated to the anticipated retirement date and discounted back to the date the ARO was incurred. Changes in assumptions and estimates included within the calculations of the fair value of AROs could result in significantly different results than those identified and recorded in the financial statements. Estimated ARO costs and settlement dates, which affect the carrying value of the ARO and the related capitalized asset, are reviewed periodically to ensure that any material changes are incorporated into the ARO estimate. Any change to the capitalized asset is generally amortized over the remaining life of the associated long-lived asset. See "Long-Lived and Intangible Assets - Asset Retirement Obligations" in Note 1, Note 7 and Note 18 to the Financial Statements for additional information on AROs. At December 31, 2024, the total recorded balances and information on the most significant recorded AROs were as follows. [[GREPCENT_TABLE]] [["","","","Most Significant AROs"],["","Total ARO Recorded","","Amount Recorded","","% of Total","","Description"],["LG&E","$","84","","","$","63","","","75","","","Ponds, landfills and natural gas mains"],["KU","64","","","35","","","55","","","Ponds and landfills"]] [[/GREPCENT_TABLE]] The most significant assumptions surrounding AROs are the forecasted retirement costs (including settlement dates and the timing of cash flows), discount and inflation rates. At December 31, 2024, a 10% increase to retirement cost would increase these ARO liabilities by $8 million at LG&E and $8 million at KU. A 0.25% decrease in the discount rate would increase these ARO liabilities by $5 million at LG&E and $1 million at KU and a 0.25% increase in the inflation rate would increase these ARO liabilities by $4 million at LG&E. There would be no significant change to the annual depreciation expense of the ARO asset or the annual accretion expense of the ARO liability as a result of these changes in assumptions. Revenue Recognition - Unbilled Revenues (PPL, LG&E and KU) For RIE, LG&E and KU, revenues related to the sale of energy are recorded when service is rendered or when energy is delivered to customers. Because customers are billed on cycles which vary based on the timing of actual meter reads taken throughout the month, estimates are recorded for unbilled revenues at the end of each reporting period. Such unbilled revenue amounts reflect estimates of deliveries to customers since the date of the last reading of their meters. The unbilled revenue 60 Table of Contents estimates reflect consideration of factors including daily load models, estimated usage for each customer class, the effect of current and different rate schedules, the meter read schedule, the billing schedule, actual weather data, and, where applicable, the impact of weather normalization or other regulatory provisions of rate structures. Other Information (All Registrants) PPL's Audit Committee has approved the independent auditor to provide audit and audit-related services, tax services and other services permitted by Sarbanes-Oxley and SEC rules. The audit and audit-related services include services in connection with statutory and regulatory filings, reviews of offering documents and registration statements, and internal control reviews.