Credit Arrangements and Short-term Debt

(All Registrants)

The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, the credit facilities and commercial paper programs of PPL Electric, LKE, LG&E and KU also apply to PPL and the credit facilities and commercial paper programs of LG&E and KU also apply to LKE. The amounts borrowed below are recorded as "Short-term debt" on the Balance Sheets except for borrowings under LG&E's Term Loan Facility which are recorded as "Long-term debt due within one year" on the December 31, 2018 Balance Sheet and "Long-term debt" on the December 31, 2017 Balance Sheet. The following credit facilities were in place at:



	December 31, 2018									December 31, 2017
	Expiration Date	Capacity		Borrowed		Letters of Credit and Commercial Paper Issued		Unused Capacity		Borrowed		Letters of Credit and Commercial Paper Issued
PPL
U.K.
WPD plc
Syndicated Credit Facility (a) (c)	Jan. 2023	£	210	£	157	£	—	£	54	£	148	£	—
WPD (South West)
Syndicated Credit Facility (a) (c)	July 2021	245		—		—		245		—		—
WPD (East Midlands)
Syndicated Credit Facility (a) (c)	July 2021	300		38		—		262		180		—
WPD (West Midlands)
Syndicated Credit Facility (a) (c)	July 2021	300		—		—		300		120		—
Uncommitted Credit Facilities		130		—		4		126		—		4
Total U.K. Credit Facilities (b)		£	1,185	£	195	£	4	£	987	£	448	£	4
U.S.
PPL Capital Funding
Syndicated Credit Facility (c) (d)	Jan. 2023	$	950	$	—	$	669	$	281	$	—	$	230
Bilateral Credit Facility (c) (d)	Mar. 2019	100		—		15		85		—		18
Total PPL Capital Funding Credit Facilities		$	1,050	$	—	$	684	$	366	$	—	$	248
PPL Electric
Syndicated Credit Facility (c) (d)	Jan. 2023	$	650	$	—	$	1	$	649	$	—	$	1
LG&E
Syndicated Credit Facility (c) (d)	Jan. 2023	$	500	$	—	$	279	$	221	$	—	$	199
Term Loan Credit Facility (c) (e)	Oct. 2019	200		200		—		—		100		—
Total LG&E Credit Facilities		$	700	$	200	$	279	$	221	$	100	$	199
KU
Syndicated Credit Facility (c) (d)	Jan. 2023	$	400	$	—	$	235	$	165	$	—	$	45
Letter of Credit Facility (c) (d) (f)	Oct. 2020	198		—		198		—		—		198
Total KU Credit Facilities		$	598	$	—	$	433	$	165	$	—	$	243


(a)	The facilities contain financial covenants to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of its RAV, calculated in accordance with the credit facility.

(b)

The WPD plc amounts borrowed at December 31, 2018 and 2017 included USD-denominated borrowings of $200 million for both periods, which bore interest at 3.17% and 2.17%. The unused capacity reflects the amount borrowed in GBP of £156 million as of the date borrowed. The WPD (East Midlands) amount borrowed at December 31, 2018 and December 31, 2017 was a GBP-denominated borrowing, which equated to $48 million and $244 million and bore interest at 1.12%. and 0.89%. The WPD (West Midlands) amount borrowed at December 31, 2017 was a GBP-denominated borrowing, which equated to $162 million and bore interest at 0.89%. At December 31, 2018, the unused capacity under the U.K. credit facilities was approximately $1.3 billion.


(c)	Each company pays customary fees under its respective facility and borrowings generally bear interest at LIBOR-based rates plus an applicable margin.

(d)

The facilities contain a financial covenant requiring debt to total capitalization not to exceed 70% for PPL Capital Funding, PPL Electric, LKE, LG&E and KU, as calculated in accordance with the facilities and other customary covenants. Additionally, as it relates to the syndicated and bilateral credit facilities and subject to certain conditions, PPL Capital Funding may request that the capacity of its facility expiring in March 2019 be increased by up to $30 million, LG&E and KU each may request up to a $100 million increase in its facility's capacity.


(e)	LG&E entered into a term loan credit agreement in October 2017 whereby it may borrow up to $200 million. The outstanding borrowings at December 31, 2018 and December 31, 2017 bore interest at an average rate of 2.97% and 2.06%.


(f)	KU's letter of credit facility agreement allows for certain payments under the letter of credit facility to be converted to loans rather than requiring immediate payment.

PPL, PPL Electric, LG&E and KU 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:



	December 31, 2018							December 31, 2017
	Weighted - Average Interest Rate	Capacity		Commercial Paper Issuances		Unused Capacity		Weighted - Average Interest Rate	Commercial Paper Issuances
PPL Capital Funding	2.82%	$	1,000	$	669	$	331	1.64%	$	230
PPL Electric		650		—		650			—
LG&E	2.94%	350		279		71		1.83%	199
KU	2.94%	350		235		115		1.97%	45
Total		$	2,350	$	1,183	$	1,167		$	474

(PPL Electric, LKE, LG&E and KU)

See Note 14 for discussion of intercompany borrowings.

Long-term Debt (All Registrants)



				December 31,
	Weighted-Average Rate (g)		Maturities (g)	2018			2017
PPL
U.S.
Senior Unsecured Notes	3.88	%	2020 - 2047	$	4,325		$	4,575
Senior Secured Notes/First Mortgage Bonds (a) (b) (c)	3.99	%	2019 - 2048	7,705			7,314
Junior Subordinated Notes	5.68	%	2067 - 2073	930			930
Term Loan Credit Facility	2.97	%	2019	200			100
Total U.S. Long-term Debt				13,160			12,919

U.K.
Senior Unsecured Notes (d)	5.13	%	2020 - 2040	6,471			6,351
Index-linked Senior Unsecured Notes (e)	1.45	%	2026 - 2056	1,063			1,012
Total U.K. Long-term Debt (f)				7,534			7,363
Total Long-term Debt Before Adjustments				20,694			20,282

Fair market value adjustments				16			21
Unamortized premium and (discount), net (e)				9			14
Unamortized debt issuance costs				(120		)	(122		)
Total Long-term Debt				20,599			20,195
Less current portion of Long-term Debt				530			348
Total Long-term Debt, noncurrent				$	20,069		$	19,847

PPL Electric
Senior Secured Notes/First Mortgage Bonds (a) (b)	4.22	%	2020 - 2048	$	3,739		$	3,339
Total Long-term Debt Before Adjustments				3,739			3,339

Unamortized discount				(18		)	(16		)
Unamortized debt issuance costs				(27		)	(25		)
Total Long-term Debt				3,694			3,298
Less current portion of Long-term Debt				—			—
Total Long-term Debt, noncurrent				$	3,694		$	3,298



				December 31,
	Weighted-Average Rate (g)		Maturities (g)	2018			2017

LKE
Senior Unsecured Notes	3.97	%	2020 - 2021	$	725		$	725
Term Loan Credit Facility	2.97	%	2019	200			100
First Mortgage Bonds (a) (c)	3.76	%	2019 - 2045	3,966			3,975
Long-term debt to affiliate	3.69	%	2026 - 2028	650			400
Total Long-term Debt Before Adjustments				5,541			5,200

Unamortized discount				(13		)	(14		)
Unamortized debt issuance costs				(26		)	(27		)
Total Long-term Debt				5,502			5,159
Less current portion of Long-term Debt				530			98
Total Long-term Debt, noncurrent				$	4,972		$	5,061

LG&E
Term Loan Credit Facility	2.97	%	2019	$	200		$	100
First Mortgage Bonds (a) (c)	3.58	%	2019 - 2045	1,624			1,624
Total Long-term Debt Before Adjustments				1,824			1,724

Unamortized discount				(4		)	(4		)
Unamortized debt issuance costs				(11		)	(11		)
Total Long-term Debt				1,809			1,709
Less current portion of Long-term Debt				434			98
Total Long-term Debt, noncurrent				$	1,375		$	1,611

KU
First Mortgage Bonds (a) (c)	3.89	%	2019 - 2045	$	2,342		$	2,351
Total Long-term Debt Before Adjustments				2,342			2,351

Unamortized discount				(8		)	(9		)
Unamortized debt issuance costs				(13		)	(14		)
Total Long-term Debt				2,321			2,328
Less current portion of Long-term Debt				96			—
Total Long-term Debt, noncurrent				$	2,225		$	2,328


(a)	Includes PPL Electric's senior secured and first mortgage bonds that are secured by the lien of PPL Electric's 2001 Mortgage Indenture, which covers substantially all electric distribution plant and certain transmission plant owned by PPL Electric. The carrying value of PPL Electric's property, plant and equipment was approximately $9.4 billion and $8.5 billion at December 31, 2018 and 2017.

Includes LG&E's first mortgage bonds that are secured by the lien of the LG&E 2010 Mortgage Indenture which creates a lien, subject to certain exceptions and exclusions, on substantially all of LG&E's real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity and the storage and distribution of natural gas. The aggregate carrying value of the property subject to the lien was $5.1 billion and $4.7 billion at December 31, 2018 and 2017.

Includes KU's first mortgage bonds that are secured by the lien of the KU 2010 Mortgage Indenture which creates a lien, subject to certain exceptions and exclusions, on substantially all of KU's real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity. The aggregate carrying value of the property subject to the lien was $6.3 billion and $6.0 billion at December 31, 2018 and 2017.

(b)

Includes PPL Electric's series of senior secured bonds that secure its obligations to make payments with respect to each series of Pollution Control Bonds that were issued by the LCIDA and the PEDFA on behalf of PPL Electric. These senior secured bonds were issued in the same principal amount, contain payment and redemption provisions that correspond to and bear the same interest rate as such Pollution Control Bonds. These senior secured bonds were issued under PPL Electric's 2001 Mortgage Indenture and are secured as noted in (a) above. This amount includes $224 million of which PPL Electric is allowed to convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate, or term rate of at least one year and $90 million that may be redeemed, in whole or in part, at par beginning in October 2020, and are subject to mandatory redemption upon determination that the interest rate on the bonds would be included in the holders' gross income for federal tax purposes.

(c)

Includes LG&E's and KU's series of first mortgage bonds that were issued to the respective trustees of tax-exempt revenue bonds to secure its respective obligations to make payments with respect to each series of bonds. The first mortgage bonds were issued in the same principal amounts, contain payment and redemption provisions that correspond to and bear the same interest rate as such tax-exempt revenue bonds. These first mortgage bonds were issued under the LG&E 2010 Mortgage Indenture and the KU 2010 Mortgage Indenture and are secured as noted in (a) above. The related tax-exempt revenue bonds were issued by various governmental entities, principally counties in Kentucky, on behalf of LG&E and KU. The related revenue bond documents allow LG&E and KU to convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate, term rate of at least one year or, in some cases, an auction rate or a LIBOR index rate.

At December 31, 2018, the aggregate tax-exempt revenue bonds issued on behalf of LG&E and KU that were in a term rate mode totaled $505 million for LKE, comprised of $391 million and $114 million for LG&E and KU respectively. At December 31, 2018, the aggregate tax-exempt revenue bonds issued on behalf of LG&E and KU that were in a variable rate mode totaled $375 million for LKE, comprised of $147 million and $228 million for LG&E and KU respectively. These variable rate tax-exempt revenue bonds are subject to tender for purchase by LG&E and KU at the option of the holder and to mandatory tender for purchase by LG&E and KU upon the occurrence of certain events.


(d)	Includes £225 million ($287 million at December 31, 2018) of notes that may be redeemed, in total but not in part, on December 21, 2026, at the greater of the principal value or a value determined by reference to the gross redemption yield on a nominated U.K. Government bond.

(e)

The principal amount of the notes issued by WPD (South West), WPD (East Midlands) and WPD (South Wales) is adjusted based on changes in a specified index, as detailed in the terms of the related indentures. The adjustment to the principal amounts from 2017 to 2018 was an increase of approximately £26 million ($33 million) resulting from inflation. In addition, this amount includes £319 million ($407 million at December 31, 2018) of notes issued by WPD (South West) that may be redeemed, in total by series, on December 1, 2026, at the greater of the adjusted principal value and a make-whole value determined by reference to the gross real yield on a nominated U.K. government bond.

(f)

Includes £5.3 billion ($6.7 billion at December 31, 2018) of notes that may be put by the holders to the issuer for redemption if the long-term credit ratings assigned to the notes are withdrawn by any of the rating agencies (Moody's or S&P) or reduced to a non-investment grade rating of Ba1 or BB+ or lower in connection with a restructuring event, which includes the loss of, or a material adverse change to, the distribution licenses under which the issuer operates.


(g)	The table reflects principal maturities only, based on stated maturities or earlier put dates, and the weighted-average rates as of December 31, 2018.

None of the outstanding debt securities noted above have sinking fund requirements. The aggregate maturities of long-term debt, based on stated maturities or earlier put dates, for the periods 2019 through 2023 and thereafter are as follows:



	PPL		PPL Electric		LKE		LG&E		KU
2019	$	530	$	—	$	530	$	434	$	96
2020	1,266		100		975		—		500
2021	1,248		400		348		98		—
2022	1,274		474		—		—		—
2023	2,233		90		13		—		13
Thereafter	14,143		2,675		3,675		1,292		1,733
Total	$	20,694	$	3,739	$	5,541	$	1,824	$	2,342

(PPL)

In March 2018, WPD (South Wales) issued £30 million of 0.01% Index-linked Senior Notes due 2036. WPD (South Wales) received proceeds of £31 million, which equated to $44 million at the time of issuance, net of fees and including a premium. The principal amount of the notes is adjusted based on changes in a specified index, as detailed in the terms of the related indenture. The proceeds were used for general corporate purposes.

In May 2018, WPD (West Midlands) issued £30 million of 0.01% Index-linked Senior Notes due 2028. WPD (West Midlands) received proceeds of £31 million, which equated to $41 million at the time of issuance, net of fees and including a premium. The principal amount of the notes is adjusted based on changes in a specified index, as detailed in the terms of the related indenture. The proceeds were used for general corporate purposes.

In June 2018, PPL Capital Funding repaid the entire $250 million principal amount of its 1.90% Senior Note upon maturity.

In October 2018, WPD plc issued £350 million of 3.5% Senior Notes due 2026. WPD plc received proceeds of £346 million, which equated to $456 million at the time of issuance, net of fees and a discount. The proceeds were used for general corporate purposes.

(PPL and PPL Electric)

In June 2018, PPL Electric issued $400 million of 4.15% First Mortgage Bonds due 2048. PPL Electric received proceeds of $394 million, net of a discount and underwriting fees, which were used to repay short-term debt and for general corporate purposes.

(PPL, LKE and LG&E)

In March 2018, the County of Trimble, Kentucky remarketed $28 million of Pollution Control Revenue Bonds, 2001 Series A (Louisville Gas and Electric Company Project) due 2026 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 2.30% through their mandatory purchase date of September 1, 2021.

In May 2018, the County of Trimble, Kentucky remarketed $35 million of Pollution Control Revenue Bonds, 2001 Series B (Louisville Gas and Electric Company Project) due 2027 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 2.55% through their mandatory purchase date of May 3, 2021.

In May 2018, the County of Jefferson, Kentucky remarketed $35 million of Pollution Control Revenue Bonds, 2001 Series B (Louisville Gas and Electric Company Project) due 2027 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 2.55% through their mandatory purchase date of May 3, 2021.

(LKE)

In May 2018, LKE borrowed $250 million from a PPL affiliate through the issuance of a 4% ten-year note due 2028. The proceeds were used to repay its outstanding notes payable to a PPL Energy Funding subsidiary. See Note 14 for additional information related to intercompany borrowings.

Legal Separateness (All Registrants)

The subsidiaries of PPL are separate legal entities. PPL's subsidiaries are not liable for the debts of PPL. Accordingly, creditors of PPL may not satisfy their debts from the assets of PPL's subsidiaries absent a specific contractual undertaking by a subsidiary to pay PPL's creditors or as required by applicable law or regulation. Similarly, PPL is not liable for the debts of its subsidiaries, nor are its subsidiaries liable for the debts of one another. Accordingly, creditors of PPL's subsidiaries may not satisfy their debts from the assets of PPL or its other subsidiaries absent a specific contractual undertaking by PPL or its other subsidiaries to pay the creditors or as required by applicable law or regulation.

Similarly, the subsidiaries of PPL Electric and LKE are each separate legal entities. These subsidiaries are not liable for the debts of PPL Electric and LKE. Accordingly, creditors of PPL Electric and LKE may not satisfy their debts from the assets of their subsidiaries absent a specific contractual undertaking by a subsidiary to pay the creditors or as required by applicable law or regulation. Similarly, PPL Electric and LKE are not liable for the debts of their subsidiaries, nor are their subsidiaries liable for the debts of one another. Accordingly, creditors of these subsidiaries may not satisfy their debts from the assets of PPL Electric and LKE (or their other subsidiaries) absent a specific contractual undertaking by that parent or other subsidiary to pay such creditors or as required by applicable law or regulation.

(PPL)

Equity Securities

Equity Forward Contracts

In May 2018, PPL completed a registered underwritten public offering of 55 million shares of its common stock. In conjunction with that offering, the underwriters exercised an option to purchase 8.25 million additional shares of PPL common stock solely to cover over-allotments.

In connection with the registered public offering, PPL entered into forward sale agreements with two counterparties covering the 63.25 million shares of PPL common stock. Full settlement of these forward sale agreements will occur no later than November 2019. Upon any physical settlements of any forward sale agreement, PPL will issue and deliver to the applicable forward counterparty shares of its common stock in exchange for cash proceeds per share equal to the forward sale price. The forward sale price will be calculated based on an initial forward price of $26.7057 per share, reduced during the period the applicable forward contract is outstanding as specified in such forward sale agreement. PPL may, in certain circumstances, elect cash settlement or net share settlement for all or a portion of its rights or obligations under each forward sale agreement. The forward sale agreements are classified as equity transactions. PPL only receives proceeds and issues shares of common stock upon any settlements of the forward sale agreements. PPL intends to use net proceeds that it receives upon any settlement for general corporate purposes.

In September 2018, PPL settled a portion of the initial forward sale agreements by issuing 20 million shares of PPL common stock, resulting in net cash proceeds of $520 million. For the unsettled portion of the agreements, the only impact to the financial statements will be the inclusion of incremental shares within the calculation of diluted EPS using the Treasury Stock Method. See Note 5 for information on the forward sale agreements impact on the calculation of diluted EPS.

ATM Program

In February 2018, PPL entered into an equity distribution agreement, pursuant to which PPL may sell, from time to time, up to an aggregate of $1.0 billion of its common stock through an at-the-market offering program; including a forward sales component. The compensation paid to the selling agents by PPL may be up to 2% of the gross offering proceeds of the shares. PPL issued 4.2 million shares of common stock and received gross proceeds of $119 million for the year ended December 31, 2018.

Distributions and Related Restrictions

In November 2018, PPL declared its quarterly common stock dividend, payable January 2, 2019, at 41.0 cents per share (equivalent to $1.64 per annum). On February 14, 2019, PPL announced that the company is increasing its common stock dividend to 41.25 cents per share on a quarterly basis (equivalent to $1.65 per annum). Future dividends, declared at the discretion of the Board of Directors, will depend upon future earnings, cash flows, financial and legal requirements and other factors.

Neither PPL Capital Funding nor PPL may 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 or 2013 Series B Junior Subordinated Notes due 2073. At December 31, 2018, no interest payments were deferred.

WPD subsidiaries have financing arrangements that limit their ability to pay dividends. However, PPL does not, at this time, expect that any of such limitations would significantly impact PPL's ability to meet its cash obligations.

(All Registrants)

PPL relies on dividends or loans from its subsidiaries to fund PPL's dividends to its common shareholders. The net assets of certain PPL subsidiaries are subject to legal restrictions. LKE primarily relies on dividends from its subsidiaries to fund its distributions to PPL. LG&E, KU and PPL Electric are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for a public utility to make or pay a dividend from any funds "properly included in capital account." The meaning of this limitation has never been clarified under the Federal Power Act. LG&E, KU and PPL Electric believe, however, that this statutory restriction, as applied to their circumstances, would not be construed or applied by the FERC to prohibit the payment from retained earnings of dividends that are not excessive and are for lawful and legitimate business purposes. In February 2012, LG&E and KU petitioned the FERC requesting authorization to pay dividends in the future based on retained earnings balances calculated without giving effect to the impact of purchase accounting adjustments for the acquisition of LKE by PPL. In May 2012, the FERC approved the petitions with the further condition that each utility may not pay dividends if such payment would cause its adjusted equity ratio to fall below 30% of total capitalization. Accordingly, at December 31, 2018, net assets of $2.8 billion ($1.2 billion for LG&E and $1.6 billion for KU) were restricted for purposes of paying dividends to LKE, and net assets of $3.3 billion ($1.5 billion for LG&E and $1.8 billion for KU) were available for payment of dividends to LKE. LG&E and KU believe they will not be required to change their current dividend practices as a result of the foregoing requirement. In addition, under Virginia law, KU is prohibited from making loans to affiliates without the prior approval of the VSCC. There are no comparable statutes under Kentucky law applicable to LG&E and KU, or under Pennsylvania law applicable to PPL Electric. However, orders from the KPSC require LG&E and KU to obtain prior consent or approval before lending amounts to PPL.