8-K

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549


                         -----------------------------


                                   FORM 8-K


                                CURRENT REPORT
                    PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


                         -----------------------------


                                Date of Report
                      (Date of earliest event reported):
                                 May 20, 1997



                             Registrant; State of
 Commission               Incorporation; Address; and              IRS Employer
File Number                     Telephone Number                  Identification

  1-10944                    KU Energy Corporation                   61-1141273
                           (a Kentucky Corporation)
                              One Quality Street
                        Lexington, Kentucky 40507-1428
                                (606) 255-2100

   1-3464                  Kentucky Utilities Company                61-0247570
                     (a Kentucky and Virginia Corporation)
                              One Quality Street
                        Lexington, Kentucky 40507-1428
                                (606) 255-2100




 
Item 5.  Other Events

Merger Agreement with LG&E Energy Corp.

     On May 20, 1997, KU Energy Corporation, a Kentucky corporation ("KU
Energy"), and LG&E Energy Corp., a Kentucky corporation ("LG&E Energy"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") providing for a
merger of KU Energy and LG&E Energy as peer firms in a "merger-of-equals."
Pursuant to the Merger Agreement, among other things, KU Energy will be merged
with and into LG&E Energy, with LG&E Energy as the surviving corporation (the
"Merger"). The Merger, which was unanimously approved by the Boards of Directors
of KU Energy and LG&E Energy, is expected to close shortly after all of the
conditions to consummation of the Merger, including the receipt of all
applicable regulatory approvals, are met or waived.

     As a result of the Merger, LG&E Energy, which is the parent of Louisville
Gas & Electric Company ("LG&E Utility"), will become the parent company of KU
Energy's principal operating subsidiary, Kentucky Utilities Company ("Kentucky
Utilities"). The operating utility subsidiaries (LG&E Utility and Kentucky
Utilities) will remain separate companies and will continue to serve customers
in Kentucky and Virginia under their present names. KU Energy and LG&E Energy
expect more than $760 million in gross non-fuel savings over a ten-year period
following the Merger. Costs to effect the Merger and to achieve these synergies
are estimated to be $77 million. The preferred stock and debt securities of the
operating utility subsidiaries will not be affected by the Merger. Present
nonutility operations of LG&E Energy will be unaffected. The nonutility
subsidiaries of KU Energy will become subsidiaries of LG&E Energy.

     Under the terms of the Merger Agreement, each outstanding share of the
common stock, without par value, of KU Energy ("KU Energy Common Stock") (other
than shares with respect to which dissenters' rights are perfected under
applicable state law), together with the associated KU Energy stock purchase
rights, will be converted into the right to receive 1.67 shares of common stock,
without par value, of LG&E Energy ("LG&E Energy Common Stock"), together with
the associated LG&E Energy stock purchase rights. A holder of KU Energy Common
Stock who would otherwise have been entitled to a fractional share of LG&E
Energy Common Stock will be entitled to receive a cash payment in lieu of such
fractional share. The outstanding shares of LG&E Energy Common Stock will remain
unchanged and outstanding. As of May 16, 1997, there were 37,817,878 shares of
KU Energy Common Stock outstanding and 66,484,875 shares of LG&E Energy Common
Stock outstanding. Based on such capitalization, upon consummation of the
Merger, 51.3% of the outstanding LG&E Energy Common Stock will be owned by the
shareholders of LG&E prior to the Merger and 48.7% will be owned by former KU
Energy shareholders.

                                       2

 
     The Merger is subject to customary closing conditions, including, without
limitation, the approval of the holders of a majority of the outstanding shares
of each of the LG&E Energy Common Stock and the KU Energy Common Stock, the
receipt of all necessary governmental approvals and the making of all necessary
governmental filings, including approvals of various regulators in Kentucky and
Virginia under state utility laws, the approval of the Federal Energy Regulatory
Commission under the Federal Power Act, the approval of the Securities and
Exchange Commission (the "Commission") under the Public Utility Holding Company
Act of 1935, and the filing of requisite notifications with the Federal Trade
Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration of all applicable
waiting periods thereunder. The Merger is also subject to the receipt of
opinions of counsel that the Merger will qualify as a tax-free reorganization
and assurances from the parties' independent accountants that the Merger will
qualify as a pooling of interests for accounting purposes. In addition, the
Merger is conditioned upon the effectiveness of a registration statement to be
filed with the Commission with respect to the LG&E Energy Common Stock to be
issued in the Merger and the approval for listing of such shares on the New York
Stock Exchange. It is anticipated that LG&E Energy, as parent of Kentucky
Utilities and LG&E Utility, will continue to be an exempt holding company under
the Public Utility Holding Company Act of 1935. Shareholder meetings to vote
upon approval of the Merger will be convened as soon as practicable and are
expected to be held later in 1997.

     The Merger Agreement contains certain covenants of the parties pending the
closing. Generally, the parties must carry on their business only as specified
in the Merger Agreement (subject to ordinary course exceptions, certain
negotiated dollar baskets and certain previously budgeted amounts).

     The Merger Agreement provides that after the effectiveness of the Merger
(the "Effective Time"), the principal executive offices of LG&E Energy will
remain in Louisville, Kentucky. LG&E Utility will remain headquartered in
Louisville. Kentucky Utilities will remain headquartered in Lexington, Kentucky
and will maintain a substantial presence throughout its service territory in
order to conduct its state-wide operations. At the Effective Time, LG&E Energy's
Board of Directors will consist of a total of 15 directors, eight of whom will
be designated by LG&E Energy and seven of whom will be designated by KU Energy.
The Board of Directors will have the following four committees: (i) an Audit
Committee; (ii) a Compensation Committee; (iii) a Nominating and Governance
Committee; and (iv) a Long Range Planning Committee. The Audit Committee will
have 10 members, with five designated by LG&E Energy (one of whom would be the
chairman) and five designated by KU Energy. The Compensation Committee will have
seven members, with four designated by LG&E Energy (one of whom would be the
chairman) and three designated by KU Energy. The Nominating and Governance
Committee will have

                                       3

 
eight members, with four designated by LG&E Energy and four designated by KU
Energy (one of whom would be the chairman).  The Long Range Planning Committee
will have nine members, with five designated by LG&E Energy and four designated
by KU Energy (one of whom would be the chairman).  Upon completion of the
Merger, Mr. Roger W. Hale will continue as Chairman and Chief Executive Officer
of LG&E Energy and LG&E Utility and will become Chairman and Chief Executive
Officer of Kentucky Utilities.  Mr. Michael R. Whitley, the Chairman and Chief
Executive Officer of KU Energy, will become Vice Chairman, President and Chief
Operating Officer of LG&E Energy and Vice Chairman and Chief Operating Officer
of each of Kentucky Utilities and LG&E Utility.

     The Merger Agreement may be terminated in certain circumstances, including:
(1) by mutual consent of the parties; (2) by either KU Energy or LG&E Energy, if
the Merger has not been consummated before May 20, 1999 (plus an extension to
November 20, 1999 if required to obtain necessary regulatory approvals); (3) by
either KU Energy or LG&E Energy, if the stockholders of either KU Energy or LG&E
Energy do not approve the transaction or if certain legal requirements prohibit
the transaction; (4) by either KU Energy or LG&E Energy, if the other party's
directors withdraw or adversely modify their recommendation of the Merger, fail
to reaffirm such recommendation upon the other party's request, or approve an
alternative transaction with a third party; (5) by either party if the other
party has breached the Merger Agreement or if the other party's representations
and warranties are inaccurate, and such breach or inaccuracy is reasonably
likely to result in a material adverse effect and is not cured within 20 days
after receipt of notice thereof; (6) by either KU Energy or LG&E Energy, if a
third party acquires more than 50% of the other party's outstanding voting
securities or if the other party's directors on the date hereof (together with
new directors nominated by a majority of such party's directors) cease to
constitute a majority of such party's directors then in office; or (7) by either
KU Energy or LG&E Energy, upon five days' advance notice to the other party, if
there is a competing third party offer and (i) the target directors receive
written advice from outside counsel that, as a result of the competing proposal,
the directors' fiduciary duties require reconsideration of the target party's
commitment to consummate the transaction contemplated by the Merger Agreement,
(ii) the target directors determine in good faith that their fiduciary duties
require acceptance of the competing proposal, and (iii) the target party is
unable, prior to termination, to negotiate adjustments to the Merger Agreement
enabling the Merger to proceed.

     The Merger Agreement provides that if a breach or inaccuracy described in
clause (5) above occurs and if such breach or inaccuracy is not willful, the
non-breaching party is entitled to reimbursement of its out-of-pocket expenses
and fees (including, without limitation, fees and expenses payable to all legal,
accounting, financial, public relations and other professional

                                       4

 
advisors arising out of, in connection with or related to the Merger or the
transactions contemplated by the Merger Agreement) not to exceed $10 million. In
the event of a willful breach, the non-breaching party will be entitled to
reimbursement of its actual out-of-pocket expenses (which will not be subject to
the $10 million limit) and any remedies it may have at law or in equity;
provided, further, that if, at the time of the breaching party's willful breach,
there shall have been a third party tender offer or business combination
proposal which shall not have been rejected by the breaching party and withdrawn
by the bidder, and within two and one-half years following termination, the
breaching party or an affiliate thereof becomes a subsidiary of the bidder or a
subsidiary of an affiliate of such bidder or accepts a written offer to
consummate or consummates a business combination with such bidder or an
affiliate thereof, then such breaching party (jointly and severally with its
affiliates), upon the signing of a definitive agreement relating to such a
business combination, or, if no such agreement is signed, then at the closing
(and as a condition to the closing) of such breaching party becoming such a
subsidiary or of such business combination, is required to pay to the non-
breaching party an additional fee equal to $50 million.

     If the Merger Agreement is terminated by either KU Energy or LG&E Energy
due to (i) the scenarios described in clauses (4) or (7) above, (ii) the failure
of either party to comply with certain covenants requiring it to call a meeting
of stockholders and recommend the Merger for approval, or (iii) the failure of
either party's stockholders to approve the Merger (provided the other party's
stockholders shall not have also failed to approve the Merger), and if at the
time of such event there is a pending third party offer or proposal that is not
rejected by the target directors and not withdrawn by the bidder, and if the
third party offer or proposal is ultimately signed or consummated within two and
one-half years and the target party or an affiliate thereof becomes a subsidiary
of the bidder or a subsidiary of an affiliate of such bidder, or accepts a
written offer to consummate or consummates a business combination with such
bidder or an affiliate thereof, then the target party (jointly and severally
with its affiliates), upon the signing of a definitive agreement relating to
such a business combination, or, if no such agreement is signed, then at the
closing (and as a condition to the closing) of such target party becoming such a
subsidiary or of such business combination, is required to pay to the other
party an additional fee equal to $50 million in cash plus out-of-pocket fees and
expenses incurred by the other party.

     Simultaneously with the execution and delivery of the Merger Agreement, KU
Energy and LG&E Energy also entered into reciprocal stock option agreements (the
"Stock Option Agreements"). Pursuant to the Stock Option Agreements, KU Energy
and LG&E Energy each grant to the other an irrevocable option to purchase up to
19.9% of the granting company's outstanding common stock,

                                       5

 
at an exercise price per share equal to (i) in the case of LG&E Energy Common
Stock, the average of the daily closing sales price per share of the LG&E Energy
Common Stock on the New York Stock Exchange during the ten-day period ending May
12, 1997 or (ii) in the case of KU Energy Common Stock, the price per share
determined as described in clause (i) above multiplied by an exchange ratio of
1.67. The option becomes exercisable if the Merger Agreement becomes terminable
by either KU Energy or LG&E Energy in circumstances that could entitle such
party to receive termination fees, generally as a result of the other party
becoming the subject of a third party tender offer or business combination
proposal.

     If its option becomes exercisable, either KU Energy or LG&E Energy may
request the other party to repurchase all or part of its option at a price per
share equal to the spread between the exercise price and the highest average
trading price or the offered price in any business combination proposal. The
aggregate amount of any termination fees and transaction expenses payable, plus
any amounts payable as a result of the required repurchase of options, is
limited to a maximum amount of $70 million.

     In connection with the Merger, KU Energy has amended the terms of the
Rights Agreement, dated as of January 27, 1997 (the "KU Energy Rights
Agreement"), between KU Energy and Illinois Stock Transfer Company, as rights
agent, so that the execution, delivery and performance of the Merger Agreement
and the Stock Option Agreements will not (1) cause any "Rights" (as defined in
the KU Energy Rights Agreement) to become exercisable, (2) cause KU Energy or
any of its affiliates to become an "Acquiring Person" (as defined in the KU
Energy Rights Agreement) or (3) give rise to a "Distribution Date" or
"Triggering Event" (as each such term is defined in the KU Energy Rights
Agreement). Similarly, LG&E Energy has amended the terms of the Rights
Agreement, dated as of December 19, 1990, as amended (the "LG&E Energy Rights
Agreement") between LG&E Energy and LG&E Utility, as rights agent, so that the
execution, delivery and performance of the Merger Agreement and the Stock Option
Agreements will not (a) cause any "Rights" (as defined in the LG&E Energy Rights
Agreement) to become exercisable, (b) cause KU Energy or any of its affiliates
to become an "Acquiring Person" (as defined in the LG&E Energy Rights Agreement)
or (c) give rise to a "Distribution Date" or "Triggering Event" (as each such
term is defined in the LG&E Energy Rights Agreement). The KU Energy Rights
Agreement and the amendment thereto are more fully described in KU Energy's 
Registration Statement on Form 8-A/A, filed with the Commission on May 21, 1997.

     The joint press release of KU Energy and LG&E Energy issued in connection
with the Merger is attached as an exhibit hereto.

    This Current Report on Form 8-K and the joint press release filed herewith
include forward-looking statements within the

                                       6

 
meaning of the Private Securities Litigation Reform Act of 1995. All statements
herein and therein which are not based on historical facts are forward looking
and, accordingly, involve risks and uncertainties that could cause actual
results to differ materially from those discussed. Such forward looking
statements include those relating to: the relative market position of the
combined company in the electric utility industry following the Merger; the
impact of the Merger on earnings; the expected savings to be achieved as a
result of synergies resulting from the Merger; the costs to effect the Merger
and to achieve the synergies; the expectations regarding the success of the
combined enterprise; and the expected dividend level of LG&E Energy following
the Merger. All forward looking statements are based on management's belief,
judgment and analysis as well as assumptions made by, and information available
to, management at the date of such statement. Factors that could cause actual
results to differ materially from those contemplated by the forward looking
statements include the pace and nature of increased competition and deregulation
in the electric and gas utility industry; state and federal regulatory and
legislative initiatives that increase competition, threaten cost and investment
recovery and impact rate structures; regulatory delays in approving the Merger;
adverse regulatory treatment of Merger-related synergies including requirements
for rate reductions or allocation to customers of Merger savings in excess of
what management has anticipated; the ability of KU Energy and LG&E Energy to
implement and to realize anticipated Merger synergies; the actual costs required
to effect the Merger and to realize Merger synergies; electric and gas load
growth; abnormal weather conditions; availability and cost of fuel and
generating capacity and natural gas supply; changes in the prices of
electricity, gas and other energy commodities; the economic climate and growth
in the service territories of Kentucky Utilities and LG&E Utility following the
Merger; and inflationary trends and interest rates.


Item 7.  Financial Statements, Pro Forma Financial Statements and Exhibits


     (a)  Not Applicable.

     (b)  Not Applicable.

     (c)  Exhibit.

                                       7

 
     The exhibit listed below and in the accompanying Exhibit Index is filed as
part of this Current Report on Form 8-K.



 
Exhibit No.              Title
- -----------              -----

   99.1         Joint Press Release, dated
                May 21, 1997, of KU Energy
                and LG&E Energy


                                       8

 
                                   SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                     KU ENERGY CORPORATION


                                     By:  /s/     Michael D. Robinson
                                          -----------------------------
                                          Name:   Michael D. Robinson
                                          Title:  Controller


                                     KENTUCKY UTILITIES COMPANY

                                     By:  /s/     Michael D. Robinson
                                          -----------------------------
                                          Name:   Michael D. Robinson
                                          Title:  Controller

Dated:  May 21, 1997

                                       9

 
                                 EXHIBIT INDEX

                             KU Energy Corporation

                          Kentucky Utilities Company

                          Current Report on Form 8-K
                              Dated May 21, 1997


                                                Sequential
Exhibit No.              Title                  Page No.
- -----------              -----                  ----------

   99.1         Joint Press Release, dated          ___
                May 21, 1997, of KU Energy  
                and LG&E Energy

                                      10

EX-99.1

 
                                                                    EXHIBIT 99.1
For Immediate Release       May 21, 1997
 
Media Contacts:          Investor Contacts:
 
LG&E Energy              LG&E Energy
John McCall              Charles Markel
(502) 627-3665           (502) 627-2203
                         Kim Austin Lee
                         (502) 627-3867

KU Energy                KU Energy
David Freibert           William English
(606) 367-1271           (606) 367-1120
                         Greg Shields or Karen Klein
                         (606) 367-1155

          LG&E Energy And KU Energy Sign Definitive Merger Agreement;
     To Be One Of The Nation's Largest, Low-Cost Energy Services Companies

     Louisville, KY/Lexington, KY -- May 21, 1997 - KU Energy (NYSE:KU) and LG&E
Energy (NYSE:LGE) today announced a definitive agreement to merge. The combined
company will be one of the largest, low-cost energy services holding companies
in the nation. No company in the industry is better positioned to succeed in the
rapidly emerging competitive energy marketplace, according to LG&E Energy and KU
Energy officials. The transaction is valued in excess of $3 billion and the
combined companies will have assets in excess of $4.7 billion.

     Under the terms of the agreement, approved unanimously by both boards
yesterday, the holding companies will be merged. The resulting holding company
will be called LG&E Energy and will be based in Louisville. The two utility
companies, Louisville Gas and Electric Company (LG&E), based in Louisville and
Kentucky Utilities Company (KU), based in Lexington, will be wholly-owned
subsidiaries of the holding company. The merged company will serve more than 1.1
million electric and natural gas customers throughout Kentucky, Virginia and
internationally. It will also have access to 11,000 megawatts of low-cost
generation--through ownership of or an interest in 7,400 megawatts and
contractual arrangements for another 4,200 megawatts of power generation.

     The agreement provides for KU Energy shareholders to receive 1.67 shares of
LG&E Energy common stock in exchange for each share of KU Energy common stock.
It is expected that the transaction will be accounted for as a pooling of
interests and will qualify as a tax-free exchange. The transaction is expected
to be marginally dilutive to earnings in the first year following the merger and
accretive thereafter. The outstanding debt and preferred stock of KU and LG&E
will not be affected by the merger.

                                    -more-


 
LG&E Energy And KU Energy Sign Definitive Merger Agreement - Page Two


     The companies expect more than $760 million in gross non-fuel savings over
a 10 year period.  The savings are anticipated primarily through the integration
of the companies' systems and operations, through joint planning and purchasing,
and by reducing other costs of operations.  Over the next five years, the
companies are committing not to seek any base rate increases -- except in
extraordinary circumstances.  In fact, the companies estimate that the merger
will translate into reductions in customers' bills of nearly two percent on a
combined basis for each of the next five years.

     Following the merger, it is anticipated that the holding company will
continue the dividend level of LG&E Energy.  The boards of both companies have
historically and consistently increased dividends.

     Roger W. Hale, Chairman and Chief Executive Officer (CEO) of LG&E Energy,
will be Chairman and CEO of the merged company.  Michael R. Whitley, Chairman
and CEO of KU Energy, will be Vice-Chairman, President and Chief Operating
Officer (COO) of the merged company.  Board representation will be nearly equal
for both companies with KU Energy having seven seats and LG&E Energy having
eight.

     "This is a formidable strategic combination of two companies that
individually have unique strengths, which together will be a powerful force as
the industry moves toward customer choice and greater competition," said Hale.
"As one of the nation's largest, low-cost energy services companies with the
largest utility-affiliated energy marketing business, we will define the
successful energy company of the 21st century."

     "This merger gives the merged company the critical mass in both generation
and distribution markets to propel our growth over the next few years," Whitley
added.  "This transaction will, no doubt, further secure our rank in Kentucky
and Virginia as one of the lowest cost areas for energy supply.  We are
convinced that our competitive energy prices will be even more competitive after
our transaction closes.  Together, we will provide compelling economic
incentives for our customers and will spur economic development in the region."

     The merger is subject to the approval by the shareholders of both companies
and federal and state regulatory agencies.  The companies expect that the
transaction will be completed within 12 to 18 months.

                                    -more-

                                       2


 
LG&E Energy And KU Energy Sign Definitive Merger Agreement - Page Three

     LG&E Energy Corp., a Fortune 500 company, headquartered in Louisville, KY,
is a diversified energy services and marketing company with businesses in retail
utility services, energy marketing and trading, power generation and project
development. It owns and operates Louisville Gas and Electric Company, a
regulated electric and gas utility in 17 counties around Louisville, KY, and a
gas utility in Mendosa province in Argentina. The company has interests in and
operates power plants in seven states, Argentina and Spain. The company is the
largest utility affiliated energy marketer in the U.S.

     KU Energy Corporation, headquartered in Lexington, KY, is a holding company
committed to building shareholder value, having increased its dividends to
shareholders for 16 consecutive years. KU Energy is the parent company of
Kentucky Utilities Company (KU). KU was among the first electric utility
companies in the country to advocate nationwide customer choice and competition
in the energy arena. KU is recognized as an international model for efficient,
low-cost energy production, solid financial management and superior customer
service. The company provides service to more than 461,000 customers in 77
Kentucky counties and five counties in southwestern Virginia.

                                      ###

                                       3


 
                             Transaction Overview

KU Energy Corporation (NYSE:KU) and LG&E Energy Corp. (NYSE:LGE) Market
Capitalization of the two companies: In excess of $3 billion

Background:

          The combined company will be one of the largest, low-cost energy
services holding companies in the nation. No company in the industry is better
positioned to succeed in the rapidly emerging competitive energy marketplace.
The transaction is valued in excess of $3 billion and the combined companies
will have assets in excess of $4.7 billion.

          LG&E Energy Corp., a Fortune 500 company, headquartered in Louisville,
KY, is a diversified energy services and marketing company with businesses in
retail utility services, energy marketing and trading, power generation and
project development. It owns and operates Louisville Gas and Electric Company
(LG&E), a regulated electric and gas utility in 17 counties around Louisville,
KY, and a gas utility in Mendosa province in Argentina. The company has
interests in and operates power plants in seven states, Argentina and Spain. The
company is the largest utility affiliated energy marketer in the U.S.

          KU Energy Corporation, headquartered in Lexington, KY, is a holding
company committed to building shareholder value, having increased its dividends
to shareholders for 16 consecutive years. KU Energy is the parent company of
Kentucky Utilities Company (KU). KU was among the first electric utility
companies in the country to advocate nationwide customer choice and competition
in the energy arena. KU is recognized as an international model for efficient,
low-cost energy production, solid financial management and superior customer
service. The company provides service to more than 461,000 customers in 77
Kentucky counties and five counties in southwestern Virginia.

          Based on 1996 results, the combined company would have had revenues in
excess of $4.3 billion and assets of $4.7 billion.

Terms:

 .    1.67 shares of LG&E Energy for each share of KU Energy.

 .    Combined company to have market capitalization in excess of $3 billion and
     assets in excess of $4.7 billion.

 .    Merger expected to be accounted for as a pooling of interests; expected to
     be tax-free reorganization for Federal income tax purposes.

 .    It is anticipated that following the merger, the holding company will
     continue LG&E Energy's dividend payment level. LG&E Energy's current
     indicated annual dividend is



 
     $1.15 per common share; KU Energy's is $1.76. The boards of both companies
     have historically and consistently increased dividends. Preferred stock and
     debt of LG&E and KU to remain outstanding after the transaction.

 .    Headquarters of holding company to be in Louisville, KY.

 .    The two utility companies, LG&E, based in Louisville and KU, based in
     Lexington, will be wholly-owned subsidiaries of the holding company.

 .    Roger W. Hale, Chairman and Chief Executive Officer (CEO) of LG&E Energy,
     will be Chairman and CEO of the merged company. Michael R. Whitley,
     Chairman and CEO of KU Energy, will be Vice-Chairman, President and Chief
     Operating Officer (COO) of the merged company. Board representation will be
     nearly equal for both companies with KU Energy having seven seats and LG&E
     Energy having eight.

 .    The companies expect more than $760 million in gross non-fuel savings over
     a 10 year period. The savings are anticipated primarily through the
     integration of the companies' systems and operations, through joint
     planning and purchasing, and by reducing other costs of operations. Over
     the next five years, the companies are committing not to seek any base rate
     increases -- except in extraordinary circumstances. In fact, the companies
     estimate that the merger will translate into reductions in customers' bills
     of nearly two percent on a combined basis for each of the next five years.

Strategic Benefits:

 .    Combined company becomes one of nation's largest, low-cost energy services
     holding companies
 .    Nation's largest utility affiliated energy marketer
 .    Combination of two strong financial performers
 .    Complementary management teams
 .    Expanded domestic and international market presence
 .    Significant operating synergies
 .    Low cost generation and lowest rates in region
 .    Combination creates formidable competitor in new energy industry

 
Approvals & Consents:

 .    Kentucky Public Service Commission
 .    Virginia State Corporation Commission
 .    Federal Energy Regulatory Commission
 .    Securities and Exchange Commission
 .    Federal Trade Commission
 .    Shareholders of both companies
 .    Anticipated transaction completion:  within 12 to 18 months