S-4

As filed with the Securities and Exchange Commission on April 22, 2011

Registration No. 333-       

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Kentucky Utilities Company

(Exact name of registrant issuer as specified in its charter)

Kentucky and Virginia	4911	61-0247570
(State or other jurisdiction	(Primary Standard Industrial	(I.R.S. Employer
of incorporation)	Classification Code Number)	Identification Number)

One Quality Street

Lexington, Kentucky 40507

(502) 627-2000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

John R. McCall

Executive Vice President, General Counsel, Corporate Secretary

and Chief Compliance Officer

220 West Main Street

Louisville, Kentucky 40202

(502) 627-2000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of communications to:

Catherine C. Hood

Dewey & LeBoeuf LLP

1301 Avenue of the Americas

New York, New York 10019

(212) 259-8000

Approximate date of commencement of proposed exchange offers:  As soon as practicable after this Registration Statement is declared effective.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o		Non-accelerated filer x	Smaller reporting company o
		(Do not check if a smaller reporting company)

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price per Bond	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
1.625% First Mortgage Bonds due 2015	$250,000,000	100%	$250,000,000	$29,025.00
3.250% First Mortgage Bonds due 2020	$500,000,000	100%	$500,000,000	$58,050.00
5.125% First Mortgage Bonds due 2040	$750,000,000	100%	$750,000,000	$87,075.00

(1)Estimated solely for the purpose of calculating the registration fee under Rule 457(f) of the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed.  We may not complete the exchange offers or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED                 , 2011

PRELIMINARY PROSPECTUS

KENTUCKY UTILITIES COMPANY

Offers to Exchange

$250,000,000 aggregate principal amount of its 1.625% First Mortgage Bonds due 2015,

$500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and

$750,000,000 aggregate principal amount of its 5.125% First Mortgage Bonds due 2040
(together, the Exchange Bonds), each of which have been registered under the Securities Act of 1933, as amended,
for any and all of its outstanding

1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and

5.125% First Mortgage Bonds due 2040 (together, the Outstanding Bonds), respectively
(such transactions, collectively, the Exchange Offers)

We are conducting the Exchange Offers in order to provide you with an opportunity to exchange your unregistered Outstanding Bonds for the Exchange Bonds that have been registered under the Securities Act.

The Exchange Offers

·We will exchange all Outstanding Bonds that are validly tendered and not validly withdrawn for an equal principal amount of Exchange Bonds that are registered under the Securities Act.

·You may withdraw tenders of Outstanding Bonds at any time prior to the expiration of the Exchange Offers.

·The Exchange Offers expire at 5:00 p.m., New York City time, on                  , 2011, unless extended.  We do not currently intend to extend the Expiration Date.

·The exchange of Outstanding Bonds for Exchange Bonds in the Exchange Offers will not be a taxable event for US federal tax purposes.

·The terms of the Exchange Bonds to be issued in the Exchange Offers are substantially identical to the Outstanding Bonds of the respective series, except that the Exchange Bonds will be registered under the Securities Act, and do not have any transfer restrictions, registration rights or liquidated damages provisions.

Results of the Exchange Offers

·Except as prohibited by applicable law, the Exchange Bonds may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods.  There is no existing market for the Exchange Bonds to be issued, and we do not plan to list the Exchange Bonds on a national securities exchange or market.

·We will not receive any proceeds from the Exchange Offers.

All untendered Outstanding Bonds will remain outstanding and continue to be subject to the restrictions on transfer set forth in the Outstanding Bonds and in the indenture governing the Outstanding Bonds.  In general, the Outstanding Bonds may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws.  Other than in connection with the Exchange Offers, we do not currently anticipate that we will register the Outstanding Bonds under the Securities Act.

Each broker-dealer that receives Exchange Bonds for its own account in the Exchange Offers must acknowledge that it will deliver a prospectus in connection with any resale of those Exchange Bonds.  The letter of transmittal states that by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Outstanding Bonds where the broker-dealer acquired such Outstanding Bonds as a result of market-making or other trading activities.  We have agreed that, for a period of 180 days after the Expiration Date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.  See “Plan of Distribution.”

See “Risk Factors” beginning on page 9 for a discussion of certain risks that you should consider before participating in the Exchange Offers.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Exchange Bonds to be distributed in the Exchange Offers or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offense.

The date of this prospectus is       , 2011.

In making your investment decision, you should rely only on the information contained in or incorporated by reference into this prospectus.  We have not authorized anyone to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not making an offer of the Exchange Bonds in any jurisdiction where the offer thereof is not permitted.  The information contained in this prospectus speaks only as of the date of this prospectus.

References to the “Company,” “we,” “us” and “our” in this prospectus are references to Kentucky Utilities Company.

TABLE OF CONTENTS

Summary	1
Risk Factors	9
A Warning about Forward-Looking Statements	15
Use of Proceeds	17
Capitalization	17
Selected Financial Data	18
Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	41
Quantitative and Qualitative Disclosures about Market Risk	41
Business	42
Management	53
Executive Compensation	55
Transactions with Related Persons	90
The Exchange Offers	91
Description of the Exchange Bonds	102
Material U.S. Federal Income Tax Consequences	118
Plan of Distribution	122
Legal Matters	122
Experts	122
Available Information	122
Index to Financial Statements	124

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SUMMARY

This summary highlights certain information concerning the Company, the Exchange Offers and the Exchange Bonds that may be contained elsewhere in this prospectus.  This summary is not complete and does not contain all the information that may be important to you.  You should read this prospectus in its entirety before making an investment decision.

Kentucky Utilities Company

Kentucky Utilities Company, incorporated in Kentucky in 1912 and Virginia in 1991, is a regulated public utility engaged in the generation, transmission, distribution and sale of electric energy in Kentucky, Virginia and Tennessee.  We provide electric service to approximately 514,000 customers in 77 counties in central, southeastern and western Kentucky, to approximately 30,000 customers in five counties in southwestern Virginia and to fewer than 10 customers in Tennessee.  Our service area covers approximately 6,600 noncontiguous square miles.  During 2010, approximately 98% of the electricity we generated was produced by our coal-fired electric generating stations.  The remainder was generated by natural gas and oil fueled combustion turbines, or CTs, and a hydroelectric power plant.  In Virginia, we operate under the name Old Dominion Power Company.  We also sell wholesale electric energy to 12 municipalities.

Our principal executive offices are located at One Quality Street, Lexington, Kentucky 40507 (Telephone number (502) 627-2000).

Recent Developments

Kentucky Rate Case

In January 2010, we filed an application with the Kentucky Public Service Commission, or the Kentucky Commission, requesting an increase in electric base rates of approximately 12%, or $135 million annually.  A number of intervenors entered the rate case, including the office of the Attorney General of Kentucky, certain representatives of industrial and low-income groups and other third parties, and submitted filings challenging our requested rate increases, in whole or in part.  In June 2010, we and all of the intervenors except for the Kentucky Attorney General agreed to stipulations providing for an increase in our electric base rates of $98 million annually, and jointly filed a request with the Kentucky Commission to approve such settlement.  An order in the proceeding was issued in July 2010, approving all provisions in the stipulation, including a return on equity range of 9.75-10.75%.  The new rates became effective on August 1, 2010.

2011 Virginia Rate Case

In April 2011, we filed an application with the Virginia State Corporation Commission, or the Virginia Commission, requesting an increase in base rates of approximately 14%, or $9 million annually.  The requested rate increase is based on an 11% return on equity, inclusion of expenditures to complete Trimble County Unit 2, or TC2, all new flue gas desulfurization controls in rate base, recovery of a 2009 regulatory asset and various other adjustments to revenue and expenses for the test year ended December 31, 2010.  We cannot predict the outcome of this proceeding.

PPL Acquisition

On November 1, 2010, we became an indirect wholly owned subsidiary of PPL Corporation when PPL acquired all of the outstanding limited liability company interests in our direct parent, LG&E and KU Energy LLC, or Parent (formerly E.ON U.S. LLC), from E.ON US Investments Corp.  Our Parent, a Kentucky limited liability company, also owns our affiliate, Louisville Gas and Electric Company, or LG&E, a regulated public utility engaged in the generation, transmission, distribution and sale of electric energy and distribution and sale of natural gas in Kentucky.  Following the acquisition, our business has not changed and we and LG&E are continuing as subsidiaries of our Parent, which is now an intermediary holding company in the PPL group of companies.  An abridged structure of the PPL group of companies, including us, is shown below:

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PPL, incorporated in 1994 and headquartered in Allentown, Pennsylvania, is an energy and utility holding company.  Through its subsidiaries, PPL Corporation owns or controls about 19,000 megawatts, or Mw, of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom.

Neither PPL nor any of its other subsidiaries, including our Parent or LG&E, will be obligated to make payments on, or provide any credit support for, the Exchange Bonds.

PPL Acquisition Approvals

In September 2010, the Kentucky Commission approved a settlement agreement among PPL, joint applicants and all of the intervening parties to PPL’s joint application to the Kentucky Commission for approval of its acquisition of ownership and control of our Parent, the Company and LG&E.  In the settlement, the parties agreed that we and LG&E would commit that no base rate increases would take effect before January 1, 2013.  Our rate increase that took effect on August 1, 2010 (See “Business — Rates and Regulation”) will not be impacted by the settlement.  Under the terms of the settlement, we retain the right to seek approval for the deferral of “extraordinary and uncontrollable costs.”  Interim rate adjustments will continue to be permissible during that period for existing fuel, environmental and demand-side management, or DSM, cost trackers.  The agreement also substituted an acquisition savings shared deferral mechanism for the requirement that we file a synergies plan with the Kentucky Commission.  This mechanism, which will be in place until the earlier of five years or the first day of the year in which a base rate increase becomes effective, permits us to earn up to a 10.75% return on equity.  Any earnings above a 10.75% return on equity will be shared with customers on a 50%/50% basis.  In October 2010, both the Virginia Commission, and the Tennessee Regulatory Authority approved the transfer of control of the Company from E.ON US Investments Corp. to PPL.  The orders of the commissions contained a number of other commitments with regards to operations, workforce, community involvement and other matters.

In October 2010, the Federal Energy Regulatory Commission, or FERC, approved a September 2010 settlement agreement among the Company, LG&E, other applicants and protesting parties, and such protests have been withdrawn.  The settlement agreement includes various conditional commitments, such as a continuation of certain existing undertakings with protesters in prior cases, an agreement not to terminate certain of our municipal customer contracts prior to January 2017, an exclusion of any transaction-related costs from wholesale energy and tariff customer rates to the extent that we have agreed to not seek the same transaction-related cost from retail customers and agreements to coordinate with protesters in certain open or on-going matters.

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The Exchange Offers

In November 2010, we issued the Outstanding Bonds in transactions not subject to the registration requirements of the Securities Act of 1933, as amended, or Securities Act.  The term “2015 Exchange Bonds” refers to the 1.625% First Mortgage Bonds due 2015; the term “2020 Exchange Bonds” refers to the 3.250% First Mortgage Bonds due 2020 and the term “2040 Exchange Bonds” refers to the 5.125% First Mortgage Bonds due 2040, each as registered under the Securities Act, and all of which collectively are referred to as the “Exchange Bonds.”  The term “Bonds” collectively refers to the Outstanding Bonds and the Exchange Bonds.

General	In connection with the issuance of the Outstanding Bonds, we entered into a registration rights agreement with the initial purchasers pursuant to which we agreed, among other things, to deliver this prospectus to you and to use commercially reasonable efforts to complete the Exchange Offers within 315 days after the date of original issuance of the Outstanding Bonds. You are entitled to exchange in the Exchange Offers your Outstanding Bonds for the respective series of Exchange Bonds that are identical in all material respects to the Outstanding Bonds except:
	·the Exchange Bonds have been registered under the Securities Act and, therefore, will not be subject to the restrictions on transfer applicable to the Outstanding Bonds (except as described in “The Exchange Offers — Resale of Exchange Bonds” and “Description of the Exchange Bonds — Form; Transfers; Exchanges”);
	·the Exchange Bonds are not entitled to any registration rights which are applicable to the Outstanding Bonds under the registration rights agreement, including any rights to liquidated damages for failure to comply with the registration rights agreement; and
	·the Exchange Bonds will bear different CUSIP numbers.
The Exchange Offers	We are offering to exchange:
	·$250,000,000 aggregate principal amount of 1.625% First Mortgage Bonds due 2015 that have been registered under the Securities Act for any and all of our existing 1.625% First Mortgage Bonds due 2015;
	·$500,000,000 aggregate principal amount of 3.250% First Mortgage Bonds due 2020 that have been registered under the Securities Act for any and all of our existing 3.250% First Mortgage Bonds due 2020 and
	·$750,000,000 aggregate principal amount of 5.125% First Mortgage Bonds due 2040 that have been registered under the Securities Act for any and all of our existing 5.125% First Mortgage Bonds due 2040.
	You may only exchange Outstanding Bonds in minimum denominations of $2,000 and in multiples of $1,000 in excess thereof. Any untendered Outstanding Bonds must also be in a minimum denomination of $2,000.
Resale	Based on an interpretation by the staff of the Securities and Exchange Commission, or SEC, set forth in no-action letters issued to third parties, we believe that the Exchange Bonds issued pursuant to the Exchange Offers in exchange for the Outstanding Bonds may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:

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	·you are acquiring the Exchange Bonds in the ordinary course of your business; and
	·you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Exchange Bonds.
	Any holder of Outstanding Bonds who:
	·is our affiliate;
	·does not acquire Exchange Bonds in the ordinary course of its business; or
	·tenders its Outstanding Bonds in the Exchange Offers with the intention to participate, or for the purpose of participating, in a distribution of Exchange Bonds
	cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in Shearman & Sterling (available July 2, 1993), or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Bonds.
	If you are a broker-dealer and receive Exchange Bonds for your own account in exchange for Outstanding Bonds that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the Exchange Bonds and that you are not our affiliate and did not purchase your Outstanding Bonds from us or any of our affiliates. See “Plan of Distribution.”
	Our belief that the Exchange Bonds may be offered for resale without compliance with the registration or prospectus delivery provisions of the Securities Act is based on interpretations of the SEC for other exchange offers that the SEC expressed in some of its no-action letters to other issuers in exchange offers like ours. We have not sought a no-action letter in connection with the Exchange Offers, and we cannot guarantee that the SEC would make a similar decision about our Exchange Offers. If our belief is wrong, or if you cannot truthfully make the representations mentioned above, and you transfer any Exchange Bond issued to you in the Exchange Offers without meeting the registration and prospectus delivery requirements of the Securities Act, or without an exemption from such requirements, you could incur liability under the Securities Act. We are not indemnifying you for any such liability.
Expiration Date	The Exchange Offers will expire at 5:00 p.m., New York City time, on              , 2011, unless extended by us. We do not currently intend to extend the Expiration Date.
Withdrawal	You may withdraw the tender of your Outstanding Bonds at any time prior to the expiration of the Exchange Offers. We will return to you any of your Outstanding Bonds that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the Exchange Offers.
Conditions to the Exchange Offers	Each Exchange Offer is subject to customary conditions. We reserve the right to waive any defects, irregularities or conditions to exchange as to particular

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	Outstanding Bonds. See “The Exchange Offers — Conditions to the Exchange Offers.”
Procedures for Tendering Outstanding Bonds	If you wish to participate in any of the Exchange Offers, you must either:
	·complete, sign and date the applicable accompanying letter of transmittal, or a facsimile of the letter of transmittal, in accordance with the instructions contained in this prospectus and the letter of transmittal, and mail or deliver such letter of transmittal or facsimile thereof, together with the Outstanding Bonds to be exchanged for Exchange Bonds, to the exchange agent at the address set forth on the cover page of the letter of transmittal; or
	·if you hold Outstanding Bonds through The Depository Trust Company, or DTC, comply with DTC’s Automated Tender Offer Program procedures described in this prospectus, by which you will agree to be bound by the letter of transmittal.
	By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things:
	·any Exchange Bonds received by you will be acquired in the ordinary course of your business,
	·you have no arrangements or understanding with any person to participate in the distribution of the Exchange Bonds within the meaning of the Securities Act;
	·you are not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Company or, if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;
	·if you are not a broker-dealer, that you are not engaged in, and do not intend to engage in, the distribution of the Exchange Bonds and;
	·if you are a broker-dealer, you will receive Exchange Bonds for your own account in exchange for Outstanding Bonds that were acquired as a result of market-making activities or other trading activities, and you will deliver a prospectus in connection with any resale of such Exchange Bonds.
Special Procedures for Beneficial Owners	If you are a beneficial owner of Outstanding Bonds that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those Outstanding Bonds in any of the Exchange Offers, you should contact the registered holder promptly and instruct the registered holder to tender those Outstanding Bonds on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your Outstanding Bonds, either make appropriate arrangements to register ownership of the Outstanding Bonds in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date.
Guaranteed Delivery Procedures	If you wish to tender your Outstanding Bonds and your Outstanding Bonds are not immediately available, or you cannot deliver your Outstanding Bonds, the letter of transmittal or any other required documents, or you cannot comply with the procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests prior to the Expiration Date, you must tender your Outstanding Bonds according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offers — Guaranteed Delivery

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	Procedures.”
Effect on Holders of Outstanding Bonds	As a result of the making of, and upon acceptance for exchange of all validly tendered Outstanding Bonds pursuant to the terms of, the Exchange Offers, we will have fulfilled a covenant under the registration rights agreement. Accordingly, we will not be required to pay liquidated damages on the Outstanding Bonds under the circumstances described in the registration rights agreement. If you do not tender your Outstanding Bonds in any of the Exchange Offers, you will continue to be entitled to all the rights and limitations applicable to the Outstanding Bonds as set forth in the Indenture (as defined below), except we will not have any further obligation to you to provide for the exchange and registration of untendered Outstanding Bonds under the registration rights agreement. To the extent that Outstanding Bonds are tendered and accepted in the Exchange Offers, the trading market for Outstanding Bonds that are not so tendered and accepted could be adversely affected.
Consequences of Failure to Exchange	All untendered Outstanding Bonds will remain outstanding and continue to be subject to the restrictions on transfer set forth in the Outstanding Bonds and in the Indenture. In general, the Outstanding Bonds may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the Exchange Offers, we do not currently anticipate that we will register the Outstanding Bonds under the Securities Act.
United States Federal Income Tax Consequences	The exchange of Outstanding Bonds in the Exchange Offers will not be a taxable event for US federal income tax purposes. See “Material U.S. Federal Income Tax Consequences.”
Use of Proceeds	We will not receive any proceeds from the issuance of the Exchange Bonds in the Exchange Offers. See “Use of Proceeds.”
Exchange Agent	The Bank of New York Mellon is the exchange agent for the Exchange Offers. Any questions and requests for assistance with respect to accepting or withdrawing from the Exchange Offers, requests for additional copies of this prospectus or of the letter of transmittal and requests for the notice of guaranteed delivery should be directed to the exchange agent. The address and telephone number of the exchange agent are set forth in the section captioned “The Exchange Offers — Exchange Agent.”

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The Exchange Bonds

The summary below describes the principal terms of the Exchange Bonds.  Certain of the terms and conditions described below are subject to important limitations and exceptions.  The “Description of the Exchange Bonds” section of this prospectus contains more detailed descriptions of the terms and conditions of the Outstanding Bonds and Exchange Bonds.  The Exchange Bonds will have terms identical in all material respects to the respective series of Outstanding Bonds, except that the Exchange Bonds will not contain certain terms with respect to transfer restrictions, registration rights and liquidated damages for failure to observe certain obligations in the registration rights agreement.

Issuer	Kentucky Utilities Company, a Kentucky and Virginia corporation.
Securities Offered	$250,000,000 of 2015 Exchange Bonds
	$500,000,000 of 2020 Exchange Bonds
	$750,000,000 of 2040 Exchange Bonds
Maturity Date	The 2015 Exchange Bonds will mature on November 1, 2015.
	The 2020 Exchange Bonds will mature on November 1, 2020.
	The 2040 Exchange Bonds will mature on November 1, 2040.
Interest Rate and Payment Dates	The 2015 Exchange Bonds will bear interest at the rate of 1.625% per annum, payable semi-annually in arrears on each May 1 and November 1, commencing              1, 2011.
	The 2020 Exchange Bonds will bear interest at the rate of 3.250% per annum, payable semi-annually in arrears on each May 1 and November 1, commencing              1, 2011
	The 2040 Exchange Bonds will bear interest at the rate of 5.125% per annum, payable semi-annually in arrears on each May 1 and November 1, commencing              1, 2011
	Interest will accrue on the Exchange Bonds of each series from the most recent date to which interest has been paid or, if no interest has been paid, from November 16, 2010.
Optional Redemption	We may redeem the Exchange Bonds at our option, in whole at any time or in part from time to time, on not less than 30 nor more than 60 days’ notice, at the redemption prices described under “Description of the Exchange Bonds — Redemption.”
	We may redeem, in whole or in part, Exchange Bonds of any or all series.
Ranking	Each series of Exchange Bonds will be our senior secured indebtedness and will rank equally in right of payment with our existing and future first mortgage bonds issued under our Mortgage.
Security	Each series of Exchange Bonds will be secured, equally and ratably, by the lien of the Mortgage, which constitutes a first mortgage lien on substantially all of our real and tangible personal property located in Kentucky and used in the generation, transmission and distribution of electricity (other than property duly released from the lien of the Mortgage in accordance with the provisions

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	thereof and certain other excepted property, and subject to certain Permitted Liens), as described under “Description of the Bonds — Security; Lien of the Mortgage.”
Events of Default	For a discussion of events that will permit acceleration of the payment of the principal of and accrued interest on the Exchange Bonds, see “Description of the Exchange Bonds — Events of Default.”
Further Issuances	Subject to compliance with certain issuance conditions contained in the Mortgage, we may, without the consent of the holders of a series of the Exchange Bonds, increase the principal amount of the series and issue additional bonds of such series having the same ranking, interest rate, maturity and other terms (other than the date of issuance and, in some circumstances, the initial interest accrual date and initial interest payment date) as the Exchange Bonds. Any such additional bonds would, together with the existing Exchange Bonds of such series, constitute a single series of securities under the Mortgage and may be treated as a single class for all purposes under the Mortgage, including, without limitation, voting, waivers and amendments.
Company Obligations	Our obligations to pay the principal of, premium, if any, and interest on the Exchange Bonds are solely obligations of the Company and none of our direct or indirect parent companies nor any of their subsidiaries or affiliates will guarantee or provide any credit support for our obligations on the Exchange Bonds.
Denominations	Minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
Form of Bonds	The Exchange Bonds will be issued in fully registered book-entry form and each series of Exchange Bonds will be represented by one or more global certificates, which will be deposited with or on behalf of DTC and registered in the name of DTC’s nominee. Beneficial interests in global certificates will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants, and your interest in any global certificate may not be exchanged for certificated bonds, except in limited circumstances described herein. See “Description of the Exchange Bonds — Book-Entry Only Issuance — The Depository Trust Company.”
Trustee	The Bank of New York Mellon
Absence of Established Market for the Exchange Bonds	We do not plan to have the Exchange Bonds listed on any securities exchange or included in any automated quotation system. There is no existing trading market for the Exchange Bonds. If no active trading market develops, you may not be able to resell your Exchange Bonds at their fair market value or at all. Future trading prices of the Exchange Bonds will depend on many factors including, among other things, prevailing interest rates, our operating results and the market for similar securities. No assurance can be given as to the liquidity of or trading market for the Exchange Bonds.
Risk Factors	You should refer to the section entitled “Risk Factors” beginning on page 9 for a discussion of material risks you should carefully consider before deciding to exchange your Outstanding Bonds.

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RISK FACTORS

An investment in the Bonds, including a decision to tender your Outstanding Bonds in the Exchange Offers, involves a number of risks.  Risks described below should be carefully considered together with the other information included in this prospectus.  Any of the events or circumstances described as risks below could result in a significant or material adverse effect on our business, results of operations, cash flows or financial condition, and a corresponding decline in the market price of, or our ability to repay, the Bonds.  The risks and uncertainties described below may not be the only risks and uncertainties that we face.  Additional risks and uncertainties not currently known may also result in a significant or material adverse effect on our business, results of operations, cash flow or financial condition.

Risks related to Our Operations

The following risks apply to the Outstanding Bonds and will apply equally to the Exchange Bonds.

Our business is subject to significant and complex governmental regulation.

Various federal and state entities, including, but not limited to, the FERC, the Kentucky Commission, the Virginia Commission and the Tennessee Regulatory Authority, regulate many aspects of our utility operations, including the following:

·the rates that we may charge and the terms and conditions of our service and operations;

·financial and capital structure matters;

·siting and construction of facilities;

·mandatory reliability and safety standards and other standards of conduct;

·accounting, depreciation and cost allocation methodologies;

·tax matters;

·affiliate restrictions;

·acquisition and disposal of utility assets and securities; and

·various other matters.

Such regulations or changes thereto may subject us to higher operating costs or increased capital expenditures and failure to comply could result in sanctions or possible penalties.  In any rate-setting proceedings, federal or state agencies, intervenors and other permitted parties may challenge our rate requests, and ultimately reduce, alter or limit the rates we seek.

Our profitability is highly dependent on our ability to recover the costs of providing energy and utility services to our customers and earn an adequate return on our capital investments.  We currently provide services to our retail customers at rates approved by one or more federal or state regulatory commissions, including those commissions referred to above.  While these rates are generally regulated based on an analysis of their costs incurred in a base year, the rates we are allowed to charge may or may not match our costs at any given time.  While rate regulation is premised on providing a reasonable opportunity to earn a reasonable rate of return on invested capital, there can be no assurance that the applicable regulatory commissions will consider all of our costs to have been prudently incurred or that the regulatory process in which rates are determined will always result in rates that will produce full recovery of our costs or an adequate return on our capital investments.  If our costs are not adequately recovered through rates, it could have an adverse affect on our business, results of operations, cash flows or financial condition.

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In connection with the PPL acquisition, we have agreed, subject to certain limited exceptions such as fuel and environmental cost recoveries, that no base rate increase would take effect for our Kentucky retail customers before January 1, 2013.  See “Summary — Recent Developments — PPL Acquisition Approvals.”

Our transmission and interstate market activities, as well as other aspects of our business, are subject to significant FERC regulation.

Our business is subject to extensive regulation by the FERC covering matters including rates charged to transmission users, market-based or cost-based rates applicable to wholesale customers; interstate power market structure; construction and operation of transmission facilities; mandatory reliability standards; standards of conduct and affiliate restrictions and other matters. Existing FERC regulation, changes thereto or issuances of new rules or situations of non-compliance, including, but not limited to, the areas of market-based tariff authority, revenue sufficiency guarantee resettlements in the Midwest Independent Transmission System Operator, Inc. market, mandatory reliability standards and natural gas transportation regulation can affect our earnings, operations or other activities.

Changes in transmission and wholesale power market structures could increase costs or reduce revenues.

Wholesale sales fluctuate with regional demand, fuel prices and contracted capacity. Changes to transmission and wholesale power market structures and prices may occur in the future, are not estimable and may result in unforeseen effects on energy purchases and sales, transmission and related costs or revenues. These can include commercial or regulatory changes affecting power pools, exchanges or markets in which we participate.

We undertake significant capital projects and these activities are subject to unforeseen costs, delays or failures, as well as risk of inadequate recovery of resulting costs.

Our business is capital intensive and requires significant investments in energy generation and distribution and other infrastructure projects, such as projects for environmental compliance.  The completion of these projects without delays or cost overruns is subject to risks in many areas, including the following:

·approval, licensing and permitting;

·land acquisition and the availability of suitable land;

·skilled labor or equipment shortages;

·construction problems or delays, including disputes with third party intervenors;

·increases in commodity prices or labor rates;

·contractor performance;

·environmental considerations and regulations;

·weather and geological issues; and

·political, labor and regulatory developments.

Failure to complete our capital projects on schedule or on budget, or at all, could adversely affect our financial performance, operations and future growth.

Our costs of compliance with, and liabilities under, environmental laws are significant and are subject to continual changes.

Extensive federal, state and local environmental laws and regulations are applicable to our air emissions, water discharges and the management of hazardous and solid waste, among other areas; and the costs of compliance or alleged non-

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compliance cannot be predicted with certainty but could be material. In addition, our costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed from prior versions by the relevant agencies. Costs may take the form of increased capital or operating and maintenance expenses; monetary fines, penalties or forfeitures or other restrictions. Many of these environmental law considerations are also applicable to the operations of our key suppliers, or customers, such as coal producers, industrial power users, etc., and may impact the costs of their products or their demand for our services.

We are subject to operational and financial risks regarding certain on-going developments concerning environmental regulation.

A number of regulatory initiatives have been implemented or are under development which could have the effect of significantly increasing the environmental regulation or operational or compliance costs related to a number of emissions or operating activities which are associated with the combustion of coal as occurs at our generating stations.  Such developments could include potential new or revised federal or state legislation or regulation regarding emissions of NOx, SO2, mercury and other particulates generally and regarding storage of coal combustion byproducts.  Additional regulatory initiatives may occur in other areas involving our operations, including revision of limitations on water discharge or intake activities or increased standards relating to polychlorinated biphenyl, or PCB, usage.  Compliance with any new laws or regulations in these matters could result in significant changes to our operations, significant capital expenditures or significant increases in the cost of conducting business.

Our operating results are affected by weather conditions, including storms and seasonal temperature variations, as well as by significant man-made or accidental disturbances, including terrorism or natural disasters.

These weather or other factors can significantly affect our finances or operations by changing demand levels; causing outages; damaging infrastructure or requiring significant repair costs; affecting capital markets and general economic conditions or impacting future growth.

We are subject to operational and financial risks regarding potential developments concerning global climate change.

Various regulatory and industry initiatives have been implemented or are under development to regulate or otherwise reduce emissions of greenhouse gases, or GHGs, which are emitted from the combustion of fossil fuels such as coal and natural gas, as occurs at our generating stations. Such developments could include potential federal or state legislation or regulations limiting GHG emissions; establishing costs or charges on GHG emissions or on fuels relating to such emissions; requiring GHG capture and sequestration or other mitigation measures; establishing renewable portfolio standards or generation fleet-diversification requirements to address GHG emissions; promoting energy efficiency and conservation; mandating changes in transmission grid construction, operation or pricing to accommodate GHG-related initiatives; or requiring other measures.  Our generation fleet is predominantly coal-fired and may be highly impacted by developments in this area.  Compliance with any new laws or regulations regarding the reduction of GHG emissions could result in significant changes to our operations, significant capital expenditures and a significant increase in our cost of conducting business.  We may face strong competition for, or difficulty in obtaining, required GHG-compliance related goods and services, including construction services, emissions allowances and financing, insurance and other inputs relating thereto.  Increases in our costs or prices of producing or selling electric power due to GHG-related developments could materially reduce or otherwise affect the demand, revenue or margin levels applicable to our power, thus adversely affecting our financial condition or results of operations.

We are subject to physical, market and economic risks relating to potential effects of climate change.

Climate change may produce changes in weather or other environmental conditions, including temperature or precipitation changes, such as warming, floods or drought.  These changes may affect farm and agriculturally-dependent businesses and activities, which are an important part of Kentucky’s economy, and thus may impact consumer demand for electric power.  Temperature increases could result in increased overall electricity volumes or peaks and precipitation changes could result in droughts reducing the availability of water for plant cooling operations or floods interfering with facility operations.  These or other meteorological changes could lead to increased operating costs, capital expenses or power purchase costs.  Conversely, climate change could have a number of potential impacts tending to reduce demand.  Changes may entail more frequent or more intense storm activity, which, if severe, could temporarily disrupt regional economic conditions and adversely affect electricity demand levels.  As discussed in other risk factors, storm outages and damage often

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directly decrease revenues or increase expenses, due to reduced usage and higher restoration charges, respectively.  GHG regulation could increase the cost of electric power, particularly power generated by fossil fuels, and such increases could have a depressive effect on the regional economy.  Reduced economic and consumer activity in our service area both in general and specific to certain industries and consumers accustomed to previously low-cost power, could reduce demand for our electricity.  Also, demand for our services could be similarly lowered should consumers’ preferences or market factors move toward favoring energy efficiency, low-carbon power sources or reduced electric usage generally.

Our business is subject to risks associated with local, national and worldwide economic conditions.

The consequences of prolonged recessionary conditions may include a lower level of economic activity and uncertainty or volatility regarding energy prices and the capital and commodity markets. A lower level of economic activity might result in a decline in energy consumption, unfavorable changes in energy and commodity prices, and slower customer growth, which may adversely affect our future revenues and growth. Instability in the financial markets, as a result of recession or otherwise, also may affect the cost of capital and our ability to raise capital.  A deterioration of economic conditions may lead to decreased production by our industrial customers and, therefore, lower consumption of electricity.  Decreased economic activity may also lead to fewer commercial and industrial customers and increased unemployment, which may in turn impact residential customers’ ability to pay.  Further, worldwide economic activity has an impact on the demand for basic commodities needed for utility infrastructure.  Changes in global demand may impact the ability to acquire sufficient supplies and the cost of those commodities may be higher than expected.

Our business is concentrated in the Midwest United States, specifically Kentucky.

Although we also operate in Virginia and Tennessee, the majority of our operations are concentrated in Kentucky.  Local and regional economic conditions, such as population growth, industrial growth, expansion and economic development or employment levels, as well as the operational or financial performance of major industries or customers, can affect the demand for energy and our results of operations.  Significant industries and activities in our service area include aluminum and steel smelting and fabrication; chemical processing; coal, mineral and ceramic-related activities; educational institutions; health care facilities; paper and pulp processing and water and sewer utilities.  Any significant downturn in these industries or activities or in local and regional economic conditions in our service area may adversely affect the demand for electricity in our service area.

We are subject to operational risks relating to our generating plants, transmission facilities, distribution equipment, information technology systems and other assets and activities.

Operation of power plants, transmission and distribution facilities, information technology systems and other assets and activities subjects us to many risks, including the breakdown or failure of equipment; accidents; security breaches, viruses or outages affecting information technology systems; labor disputes; obsolescence; delivery/transportation problems and disruptions of fuel supply and performance below expected levels. Occurrences of these events may impact our ability to conduct our business efficiently or lead to increased costs, expenses or losses.

Although we maintain customary insurance coverage for certain of these risks common to utilities, we do not have insurance covering our transmission and distribution systems, other than substations, because we have found the cost of such insurance to be prohibitive.  If we are unable to recover the costs incurred in restoring our transmission and distribution properties following damage as a result of ice storms, tornados or other natural disasters or to recover the costs of other liabilities arising from the risks of our business, through a change in our rates or otherwise, or if such recovery is not received on a timely basis, we may not be able to restore losses or damages to our properties without an adverse effect on our financial condition, results of operations or our reputation.

We are subject to liability risks relating to our generating, transmission, distribution and retail businesses.

The conduct of our physical and commercial operations subjects us to many risks, including risks of potential physical injury, property damage or other financial affects, caused to or caused by employees, customers, contractors, vendors, contractual or financial counterparties and other third parties.

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We could be negatively affected by rising interest rates, downgrades to our bond credit ratings or other negative developments in our ability to access capital markets.

In the ordinary course of business, we are reliant upon adequate long-term and short-term financing means to fund our significant capital expenditures, debt interest or maturities and operating needs.  As a capital-intensive business, we are sensitive to developments in interest rate levels; credit rating considerations; insurance, security or collateral requirements; market liquidity and credit availability and refinancing steps necessary or advisable to respond to credit market changes.  Changes in these conditions could result in increased costs and decreased liquidity available to the Company.

We are subject to commodity price risk and counterparty credit risk associated with the energy business.

General market or pricing developments or failures by counterparties to perform their obligations relating to energy, fuels, other commodities, goods, services or payments could result in potential increased costs to the Company.  We have regulatory cost recovery mechanisms in place to mitigate negative fluctuations in commodity supply prices, and credit policies to limit our exposure to counterparty credit, but there can be no assurances that our financial performance will not be negatively impacted by price fluctuations or failure of counterparties with whom we contract to perform their contractual obligations.

We are subject to risks associated with defined benefit retirement plans, health care plans, wages and other employee-related matters.

We sponsor pension and postretirement benefit plans for our employees.  Risks with respect to these plans include adverse developments in legislation or regulation, future costs or funding levels, returns on investments, market fluctuations, interest rates and actuarial matters.  Changes in health care rules, market practices or cost structures can affect our current or future funding requirements or liabilities.  Without sustained growth in our investments over time to increase the value of our plan assets, we could be required to fund our plans with significant amounts of cash.  We are also subject to risks related to changing wage levels, whether related to collective bargaining agreements or employment market conditions, ability to attract and retain key personnel and changing costs of providing health care benefits.

We are subject to risks associated with federal and state tax regulations.

Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact our results of operations. We are required to make judgments in order to estimate our obligations to taxing authorities. These tax obligations include income, property, sales and use and employment-related taxes. We also estimate our ability to utilize tax benefits and tax credits.  Due to the revenue needs of the states and jurisdictions in which we operate, various tax and fee increases may be proposed or considered.  We cannot predict whether legislation or regulation will be introduced or the effect on the Company of any such changes. If enacted, any changes could increase tax expense and could have a negative impact on our results of operations and cash flows.

Risks Related to the Exchange Offers

There may be adverse consequences if you do not exchange your Outstanding Bonds.

If you do not exchange your Outstanding Bonds for Exchange Bonds in the Exchange Offers, you will continue to be subject to restrictions on transfer of your Outstanding Bonds as set forth in the offering memorandum distributed in connection with the private offering of the Outstanding Bonds.  In general, the Outstanding Bonds may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws.  Except as required by the registration rights agreement, we do not intend to register resales of the Outstanding Bonds under the Securities Act.  You should refer to “Prospectus Summary — The Exchange Offers” and “The Exchange Offers” for information about how to tender your Outstanding Bonds.

The tender of Outstanding Bonds under the Exchange Offers will reduce the outstanding amount of the Outstanding Bonds, which may have an adverse effect upon, and increase the volatility of, the market prices of the Outstanding Bonds due to a reduction in liquidity.

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Your ability to transfer the Exchange Bonds may be limited if there is no active trading market, and there is no assurance that any active trading market will develop for the Exchange Bonds.

We are offering the Exchange Bonds to the holders of the Outstanding Bonds.  We do not intend to list the Exchange Bonds on any securities exchange.  There is currently no established market for the Exchange Bonds.  If no active trading market develops, you may not be able to resell your Exchange Bonds at their fair market value or at all.  Future trading prices of the Exchange Bonds will depend on many factors including, among other things, prevailing interest rates, our operating results and the market for similar securities.  No assurance can be given as to the liquidity of or trading market for the Exchange Bonds.

Certain persons who participate in the Exchange Offers must deliver a prospectus in connection with resales of the Exchange Bonds.

Based on interpretations of the staff of the SEC contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983), we believe that you may offer for resale, resell or otherwise transfer the Exchange Bonds without compliance with the registration and prospectus delivery requirements of the Securities Act.  We cannot guarantee that the SEC would make a similar decision about our Exchange Offers.  If our belief is wrong, or if you cannot truthfully make the representations mentioned above, and you transfer any Exchange Bond issued to you in the Exchange Offers without meeting the registration and prospectus delivery requirements of the Securities Act, or without an exemption from such requirements, you could incur liability under the Securities Act.  Additionally, in some instances described in this prospectus under “Plan of Distribution,” certain holders of Exchange Bonds will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer the Exchange Bonds.  If such a holder transfers any Exchange Bonds without delivering a prospectus meeting the requirements of the Securities Act or without an applicable exemption from registration under the Securities Act, such a holder may incur liability under the Securities Act.  We do not and will not assume, or indemnify such a holder against, this liability.

Risks Related to the Bonds

The following risks apply to the Outstanding Bonds and will apply equally to the Exchange Bonds.

If the ratings of the Bonds are lowered or withdrawn, the market value of the Bonds could decrease.

A rating is not a recommendation to purchase, hold or sell the Bonds, inasmuch as the rating does not comment as to market price or suitability for a particular investor. The ratings of the Bonds address the rating agencies’ views as to the likelihood of the timely payment of interest and the ultimate repayment of principal of the Bonds pursuant to their respective terms. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if in their judgment circumstances in the future so warrant.  In the event that any of the ratings initially assigned to the Bonds is subsequently lowered or withdrawn for any reason, the market price of the Bonds may be adversely affected.

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A WARNING ABOUT FORWARD-LOOKING STATEMENTS

We use forward-looking statements in this prospectus.  Statements that are not historical facts are forward-looking statements, and are based on beliefs and assumptions of our management, and on information currently available to management.  Forward-looking statements include statements preceded by, followed by or using such words as “believe,” “expect,” “anticipate,” “plan,” “estimate” or similar expressions.  Actual results may materially differ from those implied by forward-looking statements due to known and unknown risks and uncertainties.  Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:

·fuel supply availability;

·weather conditions affecting generation production, customer energy use and operating costs;

·operation, availability and operating costs of existing generation facilities;

·transmission and distribution system conditions and operating costs;

·collective labor bargaining negotiations;

·the outcome of litigation against us;

·potential effects of threatened or actual terrorism or war or other hostilities;

·our commitments and liabilities;

·market demand and prices for energy, capacity, transmission services, emission allowances and delivered fuel;

·competition in retail and wholesale power markets;

·liquidity of wholesale power markets;

·defaults by our counterparties under our energy, fuel or other power product contracts;

·market prices of commodity inputs for ongoing capital expenditures;

·capital market conditions, including the availability of capital or credit, changes in interest rates, and decisions regarding capital structure;

·the fair value of debt and equity securities and the impact on defined benefit costs and resultant cash funding requirements for defined benefit plans;

·interest rates and their effect on pension and retiree medical liabilities;

·volatility in or the impact of changes in financial or commodity markets and economic conditions;

·profitability and liquidity, including access to capital markets and credit facilities;

·new accounting requirements or new interpretations or applications of existing requirements;

·securities and credit ratings;

·current and future environmental conditions and requirements and the related costs of compliance, including environmental capital expenditures, emission allowance costs and other expenses;

·political, regulatory or economic conditions in states, regions or countries where we conduct business;

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·receipt of necessary governmental permits, approvals and rate relief;

·new state or federal legislation, including new tax, environmental, health care or pension-related legislation;

·state or federal regulatory developments;

·the impact of any state or federal investigations applicable to us and the energy industry;

·the effect of any business or industry restructuring;

·development of new projects, markets and technologies;

·performance of new ventures; and

·asset acquisitions and dispositions.

In light of these risks and uncertainties, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described.  For additional details regarding these and other risks and uncertainties, see “Risk Factors” on page 9 of this prospectus.

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USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the Exchange Bonds pursuant to the Exchange Offers. In consideration for issuing the Exchange Bonds as contemplated in this prospectus, we will receive in exchange a like principal amount of Outstanding Bonds, the terms of which are identical in all material respects to the Exchange Bonds of the related series, except that the Exchange Bonds will not contain terms with respect to transfer restrictions, registration rights and liquidated damages for failure to observe certain obligations in the registration rights agreement. The Outstanding Bonds surrendered in exchange for the Exchange Bonds will be retired and cancelled, and will not be reissued. Accordingly, the issuance of the Exchange Bonds will not result in any increase in our outstanding debt or the receipt of any additional proceeds.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2010. You should read the data set forth below in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Financial Statements as of December 31, 2010 and 2009 and for the Years Ended December 31, 2010, 2009 and 2008 included elsewhere in this prospectus (the “2010 Annual Financial Statements”).

The Outstanding Bonds that are surrendered in exchange for the Exchange Bonds will be retired and cancelled and cannot be reissued. As a result, the issuance of the Exchange Bonds will not result in any change in our capitalization.

	As of December 31, 2010 (in millions)
Cash and cash equivalents	$	3
Long-term debt, including current portion	1,851
Total equity	2,691
Total capitalization	$	4,542

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SELECTED FINANCIAL DATA

The selected financial data presented below for the five fiscal years ended December 31, 2010, and as of December 31 for each of those years, have been derived from our audited financial statements. Our audited financial statements for the three fiscal years ended December 31, 2010, and as of December 31, 2010 for each of those years, are included in this prospectus. Historical results are not necessarily indicative of future results. Our financial statements and related financial and operating data include the periods before and after PPL’s acquisition of our Parent on November 1, 2010, and are labeled as Predecessor or Successor. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” for additional information.

You should read the data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited financial statements and related notes included elsewhere in this prospectus.

Dollars are in millions unless otherwise noted.

	Successor		Predecessor
	November 1, 2010		January 1, 2010		Year Ended
	through		through October		December 31,
	December 31, 2010		31, 2010		2009		2008		2007		2006
Operating revenues	$	263	$	1,248	$	1,355	$	1,405	$	1,272	$	1,210
Operating income	$	65	$	285	$	269	$	260	$	267	$	235
Net Income	$	35	$	140	$	133	$	158	$	167	$	152
Total assets	$	6,059	$	5,145	$	4,956	$	4,518	$	3,796	$	3,148
Long-term debt obligations (including amounts due within one year)	$	1,841	$	1,682	$	1,682	$	1,532	$	1,264	$	843
Other Financial Data:
Ratio of Earnings to Fixed Charges(1)	6.00		4.01		3.68		3.92		5.05		6.46

(1)For purposes of calculating the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations plus fixed charges. Fixed charges consist of all interest on indebtedness, amortization of debt discount and expense and the portion of rental expense that represents an imputed interest component. Earnings from continuing operations consist of income before taxes, undistributed income of Electric Energy, Inc. and the mark-to-market impact of derivative instruments.

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a regulated utility engaged in the generation, transmission, distribution and sale of electric energy in Kentucky, Virginia and Tennessee. See “Business” for a description of the business. The rates we charge our customers require approval of the appropriate regulatory government agency. See Note 3 to our 2010 Annual Financial Statements for information regarding rate cases, regulatory assets and liabilities and other regulatory matters.

The Company and its affiliate, LG&E, are wholly owned subsidiaries of our Parent, a Kentucky limited liability company. PPL Corporation acquired our Parent on November 1, 2010. Headquartered in Allentown, Pennsylvania, PPL is an energy and utility holding company that was incorporated in 1994. Through its subsidiaries, PPL owns or controls about 19,000 Mw of generating capacity in the U.S., sells energy in key U.S. markets and delivers electricity and natural gas to about 10 million customers in the U.S. and the U.K. Following the acquisition, both the Company and LG&E continue operating as subsidiaries of our Parent, which is now an intermediary holding company in the PPL group of companies. See Note 2 to our 2010 Annual Financial Statements for further information regarding the acquisition.

The following discussion and analysis by management focuses on those factors that had a material effect on our results of operations and financial condition during the periods presented and should be read in connection with the Financial Statements and Notes included elsewhere in this prospectus. The discussion also provides information with respect to our material risks and challenges and contains certain forward-looking statements that involve risk and uncertainties. See “Risk Factors” and “A Warning about Forward-Looking Statements” for further information. Specifically:

·“Results of Operations” provides a description of our operating results in 2010, 2009 and 2008, including a review of earnings and a brief outlook for 2011.

·“Financial Condition — Liquidity and Capital Resources” provides an analysis of our liquidity position and credit profile, including our sources of cash (including bank credit facilities and sources of operating cash flow) and uses of cash (including contractual obligations and capital expenditure requirements) and the key risks and uncertainties that impact our past and future liquidity position and financial condition. This subsection also includes a discussion of rating agency action on our credit ratings.

·“Financial Condition — Risk Management” provides an explanation of our risk management activities relating to market risk and credit risk.

·“Application of Critical Accounting Policies and Estimates” provides an overview of the accounting policies that are particularly important to our results of operations and our financial condition and that require our management to make significant estimates, assumptions and other judgments.

Predecessor and Successor Financial Presentation

Our financial statements and related financial and operating data include the periods before and after PPL’s acquisition of our Parent on November 1, 2010, and are labeled as Predecessor or Successor. We applied push-down accounting to account for the acquisition. For accounting purposes only, push-down accounting is considered to create a new entity due to new cost basis assigned to assets, liabilities and equity as of the acquisition date. Consequently, our results of operations and cash flows for the Predecessor and Successor periods in 2010 are shown separately, rather than combined, in our audited financial statements.

In the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of “Results of Operations” and “Financial Condition,” we have included disclosure of the combined Predecessor and Successor results of operations and cash flows. Such presentation is considered to be a non-GAAP disclosure. We have included such disclosure because we believe it facilitates the comparison of 2010 operating and financial performance to 2009 and 2008, and because our core operations have not changed as a result of the acquisition.

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Competition

See the Business section for information concerning competition.

Environmental Matters

General

Protection of the environment is a major priority for us and a significant element of our business activities. Extensive federal, state and local environmental laws and regulations are applicable to our air emissions, water discharges and the management of hazardous and solid waste, among other areas; and the costs of compliance or alleged non-compliance cannot be predicted with certainty but could be material. In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed from prior versions by the relevant agencies. Costs may take the form of increased capital or operating and maintenance expenses; monetary fines, penalties or forfeitures or other restrictions. Many of these environmental law considerations are also applicable to the operations of key suppliers, or customers, such as coal producers, industrial power users, etc., and may impact the costs of their products or their demand for our services.

Climate Change

Recent developments continue to indicate the possibility of significant climate change or GHG legislation or regulation, at the international, federal, regional or state levels. During December 2009, as part of the United Nation’s Copenhagen Accord, the United States agreed to a non-binding goal to reduce GHG emissions to 17% below 2005 levels by 2020. Additionally, during 2009, the U.S. House of Representatives passed comprehensive GHG legislation, which included a number of measures to limit GHG emissions and achieve GHG emission reduction targets below 2005 levels of 3% by 2012, 17% by 2020 and 83% by 2050. Similar legislation has been considered in the U.S. Senate, but the prospects for passage remain uncertain. In late 2009, the U.S. Environmental Protection Agency, or EPA, issued a final endangerment finding relating to mobile sources of GHGs and a GHG reporting requirement beginning in 2010. In 2010, the EPA issued a final rule requiring implementation of best available control technology for GHG emissions from new or modified power plants, effective January 2011. In December 2010, the EPA announced that it intends to propose New Source Performance Standards addressing GHG emissions from new and existing power plants, with a proposed rule expected in July 2011. In 2011, legislation was introduced in both the House and Senate which seeks to bar the EPA from regulating GHG emissions under the existing authority of the Clean Air Act, but, to date, no such legislation has been enacted. Finally, a number of U.S. states, although not currently including Kentucky, have adopted GHG-reduction legislation or regulation of various sorts. The developing GHG initiatives include a number of differing structures and formats, including direct limitations on GHG sources, issuance of allowances for GHG emissions, cap-and-trade programs for such allowances, renewable or alternative generation portfolio standards and mechanisms relating to demand reduction, energy efficiency, smart-grid, transmission expansion, carbon-sequestration or other GHG-reducing efforts. While the final terms and impacts of such initiatives cannot be estimated, we, as a primarily coal-fired utility, could be highly affected by such proceedings.

Other Environmental Regulatory Initiatives

The EPA has proposed or announced that it intends to propose, and in some cases has finalized, a number of additional environmental regulations that could substantially impact utilities with coal-fired generating assets. These regulatory initiatives include revisions to the ambient air quality standards for SO2, NO2, ozone and particulate matter 2.5 microns in size or less, rules aimed at mitigating the interstate transport of SO2 and NOx, a program governing emissions of hazardous air pollutants from utility generating units, a program for the management of coal combustion residuals, revised effluent guidelines for utility generating facilities and standards for cooling water intake structures. Such requirements could potentially mandate upgrade of existing emission controls, installation of additional emission controls such as flue gas desulfurization, selective catalytic reduction, or SCRs, fabric filter bag houses, activated carbon injection, wet electrostatic precipitators, closure of ash ponds and retrofit of landfills, installation of cooling towers, deployment of new water treatment technologies and retirement of facilities that cannot be retrofitted on a cost effective basis.

The cost to us and the effect on our business of complying with potential GHG restrictions and other environmental regulatory initiatives will depend upon provisions of any final rules and how the rules are implemented by the EPA. Some of

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the design elements which may have the greatest effect on us include (a) the required levels and timing of emissions caps, discharge limits or similar standards, (b) the sources covered by such requirements, (c) transition and mitigation provisions, such as phase-in periods, free allowances or price caps, (d) the availability and pricing of relevant mitigation or control technologies, goods or services and (e) economic, market and customer reaction to electricity price and demand changes due to environmental concerns.

Ultimately, environmental matters or potential environmental matters can represent an important element of current or future potential capital requirements, future unit retirement or replacement decisions, supply and demand for electricity, operating and maintenance expenses or compliance risks. Based on prior regulatory precedent, we currently anticipate that many of such direct costs may be recoverable through rates or other regulatory mechanisms, particularly with respect to coal-related generation, but the availability, timing or completeness of such rate recovery cannot be assured. Ultimately, climate change and other environmental matters will likely increase the level of capital expenditures and operating and maintenance costs incurred by the Company during the next several years. With respect to National Ambient Air Quality Standards, or NAAQS, the Clean Air Transport Rule, or CATR, the utility Maximum Achievable Control Technology, or MACT, rule and coal combustion byproducts developments, based on a preliminary analysis of proposed regulations, we may be required to consider actions such as upgrading existing emissions controls, installing additional emissions controls, upgrading byproducts disposal and storage and possible early replacement of coal-fired units. In order to comply with the coal combustion residual rules and the above referenced air rules, our capital expenditures are preliminarily estimated to be in the $1.5 to $1.75 billion range over the next ten years, although final costs may substantially vary. This estimate does not include compliance with GHG rules or contemplated water-related environmental changes including the recently proposed Section 316(b) cooling water intake rule and the expected future revisions to effluent guidelines. See “Risk Factors” and Note 13 to our 2010 Annual Financial Statements for further information.

Results of Operations

The utility business is affected by seasonal temperatures. As a result, operating revenues (and associated operating expenses) are not generated evenly throughout the year. Revenue and earnings are generally highest during the first and third quarters, and lowest in the second quarter, due to weather.

All dollar amounts are in millions unless otherwise noted.

Net Income

The following table summarizes the significant components of net income for 2010, 2009 and 2008 and the changes therein:

	Combined			Successor		Predecessor
	Year Ended December 31,			November 1, 2010 through December 31,		January 1, 2010 through October 31,			Year Ended December 31,
	2010			2010		2010			2009		2008
Total operating revenues	$	1,511		$	263	$	1,248		$	1,355	$	1,405
Total operating expenses	1,161			198		963			1,086		1,145
Operating income	350			65		285			269		260
Equity in earnings of unconsolidated venture	3			—		3			1		30
Interest expense	14			8		6			6		14
Interest expense to affiliated companies	64			2		62			69		58
Other income (expense) — net	(2		)	—		(2		)	5		8
Income before income taxes	273			55		218			200		226
Income tax expense	98			20		78			67		68
Net income	$	175		$	35	$	140		$	133	$	158

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The change in our net income was as follows:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Total operating revenues	$	156		$	(50	)
Total operating expenses	75			(59		)
Operating income	81			9
Equity in earnings of unconsolidated venture	2			(29		)
Interest expense	8			(8		)
Interest expense to affiliated companies	(5		)	11
Other income (expense) — net	(7		)	(3		)
Income (loss) before income taxes	73			(26		)
Income taxes	31			(1		)
Net income	$	42		$	(25	)

Operating Revenues

The $156 million increase from 2009 to 2010 and $50 million decrease from 2008 to 2009 in operating revenues were primarily due to:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Retail sales volumes (a)	$	73		$	(43	)
Base rate price variance (b)	39			(5		)
Demand revenue (c)	16			(1		)
Sales to municipal customers (d)	12			(1		)
Increased recoverable capital spending billed through the environmental cost recovery, or ECR	8			50
Other operating revenue primarily due to late payment charges	6			6
Fuel adjustment clause, or FAC, price variance (e)	5			(2		)
Merger surcredit termination in February 2009	2			13
Transmission sales	1			—
Increased recoverable program spending billed through demand side management mechanism, or DSM	1			9
Wholesale sales (f)	(7		)	(77		)
Value delivery team process surcredit termination in August 2008	—			1
	$	156		$	(50	)

(a)Retail sales volumes increased during 2010 compared to 2009 as a result of increased consumption primarily due to increased heating degree days during the first and fourth quarters of 2010 and increased cooling degree days during the second and third quarters of 2010. Additionally, improved economic conditions in 2010 and significant storm outages in 2009 contributed to the increased volumes.

The decrease in retail sales volumes during 2009 compared to 2008 was attributable to reduced consumption by retail customers, as a result of milder weather and weakened economic conditions, in addition to significant storm outages during 2009.

(b)The increase in revenues due to the base rate price variance during 2010 compared to 2009 resulted from higher base rates effective August 1, 2010. See Note 3 to our 2010 Annual Financial Statements for further discussion of the 2010 Kentucky rate case.

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The decrease in revenues due to the base rate price variance during 2009 compared to 2008 resulted from a reduction in base energy rates effective February 6, 2009. See Note 3 to our 2010 Annual Financial Statements for further discussion of the 2008 Kentucky rate case.

(c)Demand revenues increased during 2010 compared to 2009 as a result of higher demand rates effective August 1, 2010 and higher customer peak demand. See Note 3 to our 2010 Annual Financial Statements for further discussion of the 2010 Kentucky rate case.

(d)The increase in sales to municipal customers during 2010 compared to 2009 was primarily due to increased volumes as a result of increased cooling and heating degree days, improved economic conditions and a decline in storm outages.

(e)FAC revenues increased during 2010 compared to 2009 as a result of increased recoverable fuel costs billed to customers through the FAC due to higher fuel prices.

The decrease in the FAC revenue during 2009 compared to 2008 resulted from lower fuel costs billed to customers through the FAC ($2 million) due to a refund of power purchased costs from Owensboro Municipal Utilities, or OMU, ($6 million) partially offset by increased recoverable fuel costs ($4 million) billed to retail customers through the FAC.

(f)The decrease in wholesale sales during 2010 compared to 2009 was primarily due to increased consumption by industrial customers, as a result of improved economic conditions, increased consumption by residential customers, as a result of increased cooling and heating degree days and an increase in LG&E’s coal-fired generation outages in the first six months of 2010. See Note 15 to our 2010 Annual Financial Statements for further discussion of the mutual agreement for wholesale sales and purchases between us and LG&E.

The decrease in wholesale sales during 2009 compared to 2008 was primarily due to lower sales volumes to LG&E and third parties due to lower economic capacity, caused by low spot market pricing and higher scheduled coal-fired generation outages. See Note 15 to our 2010 Annual Financial Statements for further discussion of the mutual agreement for wholesale sales and purchases between us and LG&E.

Operating Expenses

Fuel for electric generation comprises a large component of total operating expenses. Increases or decreases in the cost of fuel are reflected in retail rates through the FAC, subject to the approval of the FERC, Kentucky Commission, Virginia Commission and the Tennessee Regulatory Authority. Operating expenses and the changes therein for 2010, 2009 and 2008 follow:

	Combined		Successor		Predecessor
	Year Ended December 31,		November 1, 2010 through December 31,		January 1, 2010 through October 31,		Year Ended December 31,
	2010		2010		2010		2009		2008
Fuel for electric generation	$	495	$	78	$	417	$	434	$	513
Power purchased	175		28		147		199		221
Other operation and maintenance expenses	346		66		280		320		275
Depreciation and amortization	145		26		119		133		136
	$	1,161	$	198	$	963	$	1,086	$	1,145

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The changes in operating expenses were as follows:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Fuel for electric generation	$	61		$	(79	)
Power purchased	(24		)	(22		)
Other operation and maintenance expenses	26			45
Depreciation and amortization	12			(3		)
	$	75		$	(59	)

Fuel for Electric Generation

The $61 million increase from 2009 to 2010 and $79 million decrease from 2008 to 2009 were primarily due to:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Fuel usage volumes (a)	$	77		$	(97	)
Commodity costs for coal	(15		)	18
Other	(1		)	—
	$	61		$	(79	)

(a)Fuel usage volumes increased in 2010 compared to 2009 due to increased native load sales. Fuel usage volumes decreased in 2009 compared to 2008 due to decreased native load and wholesale sales.

Power Purchased Expense

The $24 million decrease from 2009 to 2010 and $22 million decrease from 2008 to 2009 were primarily due to:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Power purchased from OMU	$	(40	)	$	12
Purchases from LG&E due to volume (a)	(5		)	(2		)
Demand payments for third party purchases	(2		)	1
Prices for purchases used to serve retail customers	7			(14		)
Third party purchased volumes for native load (b)	7			(6		)
OMU settlement received in 2009	6			(6		)
Purchases from LG&E due to prices	3			(7		)
	$	(24	)	$	(22	)

(a)Purchased volumes from LG&E decreased in 2010 compared to 2009 primarily due to increased consumption by residential customers at LG&E as the result of increased cooling and heating degree days, increased coal-fired generation outages in the first six months of 2010 and higher energy usage by industrial customers as a result of improved economic conditions.

Purchased volumes from LG&E decreased in 2009 compared to 2008 due to LG&E’s increased scheduled outages at coal-fired generation units during the fourth quarter of 2009. See Note 15 to our 2010 Annual Financial Statements for further discussion of the mutual agreement for wholesale sales and purchases between us and LG&E.

(b)Third party purchase volumes with counterparties other than OMU increased in 2010 compared to 2009 primarily due to the termination of the OMU agreement. Third party purchase volumes with counterparties other than OMU decreased in 2009 compared to 2008 primarily due to availability of power for native load customers from the OMU agreement. See Note 13 to our 2010 Annual Financial Statements for further discussion of the OMU settlement.

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Other Operation and Maintenance Expenses

The $26 million increase from 2009 to 2010 was primarily due to $22 million of increased other operation expenses and $4 million of increased maintenance expenses. The $45 million increase from 2008 to 2009 was primarily due to $30 million of increased other operation expenses and $15 million of increased maintenance expenses.

Other Operation Expenses:

The $22 million increase from 2009 to 2010 and $30 million increase from 2008 to 2009 were primarily due to:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Administrative and general expense (a)	$	9		$	3
Transmission expense (b)	5			—
Bad debt expense (c)	4			(1		)
Steam expense (d)	4			7
Generation expense	2			(2		)
DSM program spending	—			9
Legal expenses (e)	—			(6		)
Other power supply	(1		)	—
Pension expense (f)	(2		)	20
Other	1			—
	$	22		$	30

(a)Administrative and general expense increased in 2010 compared 2009 primarily due to higher labor expense and insurance expense, partially offset by lower information technology expense related to the implementation of the Customer Care Solution system in 2009. Administrative and general expense increased in 2009 compared to 2008 primarily due to increased consulting fees for software training and increased labor and benefit costs.

(b)Transmission expense increased in 2010 compared to 2009 primarily due to a settlement agreement with a third party and the establishment of a regulatory asset approved by the Kentucky Commission for the East Kentucky Power Cooperative, Inc. settlement in 2009, net of twelve months of amortization expense recorded in 2010.

(c)Bad debt expense increased in 2010 compared to 2009 due to higher billed revenues, higher late payment charges and a higher net charge-off percentage.

(d)Steam expense increased in 2010 compared to 2009 primarily due to increased generation in 2010. Steam expense increased in 2009 compared to 2008 primarily due to the utilization of SCRs year-round.

(e)Legal expenses decreased in 2009 compared to 2008 primarily due to OMU expenses in 2008. See Note 13 to our 2010 Annual Financial Statements for further information regarding the OMU settlement.

(f)Pension expense decreased in 2010 compared to 2009 primarily due to favorable asset performance in 2009 and increased in 2009 compared to 2008 primarily due to unfavorable asset performance in 2008.

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Other Maintenance Expenses:

The $4 million increase from 2009 to 2010 and $15 million increase from 2008 to 2009 were primarily due to:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Generation expense (a)	$	3		$	—
Steam expense (b)	2			7
Administrative and general expense	2			1
Transmission expense	—			2
Distribution expense (c)	(3		)	5
	$	4		$	15

(a)Generation expense increased in 2010 compared to 2009 primarily due to the overhaul of Paddy’s Run Unit 13.

(b)Steam expense increased in 2009 compared to 2008 due to increased scope of work for scheduled outages.

(c)Distribution expense decreased in 2010 compared to 2009 primarily due to higher storm cost in 2009, partially offset by higher tree trimming expense in 2010. Distribution expense increased in 2009 compared to 2008 primarily due to increased repairs, higher tree trimming expense and higher storm related expense.

Equity in Earnings of Unconsolidated Venture

The $2 million increase in equity in earnings of unconsolidated venture, from 2009 to 2010, was primarily due to higher earnings from Electric Energy, Inc. resulting from increased market prices for electric energy and the $29 million decrease from 2008 to 2009 was primarily due to lower earnings resulting from decreased market prices for electric energy.

Interest Expense

The $3 million increase from 2009 to 2010 and $3 million increase from 2008 to 2009 were primarily due to:

	Increase (Decrease)
	2010 vs. 2009			2009 vs. 2008
Bond interest expense (a)	$	8		$	(8	)
Interest expense to affiliated companies (b)	(5		)	11
	$	3		$	3

(a)Bond interest expense increased in 2010 compared to 2009 due to the issuance of first mortgage bonds in November 2010. Bond interest expense decreased in 2009 compared to 2008 due to lower interest rates on pollution control bonds. See Note 11 to our 2010 Annual Financial Statements for further information.

(b)Interest expense to affiliated companies decreased in 2010 compared to 2009 primarily due to notes payable to Fidelia Corporation being paid in full in November 2010, as a result of the PPL acquisition. Interest expense to affiliated companies increased in 2009 compared to 2008 primarily due to the issuance of additional debt ($13 million), which was partially offset by lower interest rates on intercompany short-term borrowings.

Other Income (Expense) — Net

The $7 million decrease in other income (expense) — net from 2009 to 2010 and the $3 million decrease in other income (expense) — net from 2008 to 2009 were primarily due to the discontinuance of the allowance for funds used during construction on ECR projects as a result of the FERC rate case.

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Income Tax Expense

See Note 10 to our 2010 Annual Financial Statements for a reconciliation of differences between the U.S. federal income tax expense at statutory rates and our income tax expense.

2011 Outlook

We project higher earnings in 2011 compared with 2010 as a net result of higher retail revenues and lower financing costs due to the issuance in late 2010 of first mortgage bonds which we used to refund higher-cost debt, partially offset by higher operation and maintenance expenses and depreciation.  Retail revenues are expected to increase as a result of the 2010 Kentucky rate case and recoveries associated with its environmental investments.  Operation and maintenance expenses and depreciation are expected to increase due to commencing dispatch of TC2 in January 2011.  See “Risk Factors” and “A Warning about Forward-Looking Statements” for a discussion of the risk factors that may impact the 2011 outlook.

Financial Condition

Liquidity and Capital Resources

We expect to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents and our credit facilities.  We currently have no plans to access debt capital markets in 2011.

Our cash flows from operations and access to cost-effective bank and capital markets are subject to risks and uncertainties including, but not limited to, the following:

·unusual or extreme weather that may damage our transmission and distribution facilities or affect energy sales to customers;

·unavailability of generating units (due to unscheduled or longer than anticipated generation outages, weather and natural disasters) and the resulting loss of revenues and additional costs of replacement electricity;

·ability to recover and the timeliness and adequacy of recovery of costs;

·costs of compliance with existing and new environmental laws;

·changes in market prices for electricity;

·potential ineffectiveness of the trading, marketing and risk management policy and programs used to mitigate our risk exposure to adverse electricity and fuel prices and interest rates;

·operational and credit risks associated with selling and marketing products in the wholesale power markets;

·any adverse outcome of legal proceedings and investigations with respect to our current and past business activities;

·deterioration in the financial markets that could make obtaining new sources of bank and capital markets funding more difficult and more costly; and

·a downgrade in our credit ratings that could adversely affect our ability to access capital and increase the cost of credit facilities and any new debt.

See “Risk Factors” for further discussion of risks and uncertainties affecting our cash flows.

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All dollar amounts are in millions unless otherwise noted.

At December 31, we had the following:

	Successor		Predecessor
	2010		2009
Cash and cash equivalents	$	3	$	2
Current portion of long-term debt (a)	$	—	$	228
Current portion of long-term debt to affiliated company (b)	—		33
Notes payable to affiliated companies (c)	10		45
	$	10	$	306

(a)2009 amount represents Carroll County 2002 Series A and B, 2004 Series A, 2006 Series B and 2008 Series A; Muhlenberg County 2002 Series A; and Mercer County 2000 Series A and 2002 Series A pollution control bonds subject to tender for purchase at the option of the holder and to mandatory tender for purchase upon the occurrence of certain events.  The Successor has classified these bonds as long-term because we have the intent and ability to utilize our $400 million credit facility which matures in December 2014, to fund any mandatory purchases.  The Predecessor classified these bonds as the current portion of long-term debt due to the tender for purchase provisions.  The Predecessor presentation and the Successor presentation are both appropriate under generally accepted accounting principles, or GAAP.  See Notes 1 and 11 to our 2010 Annual Financial Statements for further information.

(b)2009 amount represents debt owed to an E.ON affiliate, which was repaid in November 2010.  See Note 11 to our 2010 Annual Financial Statements for further information.

(c)Amounts represent borrowings under our intercompany money pool agreement wherein our Parent and/or LG&E make funds available to us at market-based rates of up to $400 million.  See Note 12 to our 2010 Annual Financial Statements for further information.

A condensed table of cash flows for the following periods in 2010, 2009 and 2008 is presented below.  The Predecessor period, January 1, 2010 through October 31, 2010, and the Successor period, November 1, 2010 through December 31, 2010, were aggregated without further adjustment for purposes of comparison with the same periods in 2009 and 2008.

	Combined			Successor			Predecessor
	Year Ended December 31,			November 1, 2010 through December 31,			January 1,2010 through October 31,			Year Ended December 31,
	2010			2010			2010			2009			2008
Net cash provided by operating activities	$	372		$	28		$	344		$	253		$	292
Net cash (used in) investing activities	(427		)	(87		)	(340		)	(507		)	(695		)
Net cash provided by (used in) financing activities	56			58			(2		)	254			405
Change in cash and cash equivalents	$	1		$	(1	)	$	2		$	—		$	2

Operating Activities

Net cash provided by operating activities increased by 47%, or $119 million, in 2010 compared with 2009, primarily as a result of increased earnings, increased collections from the ECR mechanism and lower storm expenses.  These increases in cash flow were partially offset by higher interest payments due to an accelerated settlement with the previous owner and higher 2010 income tax payments due to higher taxable income and investment tax credit benefits received in 2009.

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Net cash provided by operating activities decreased by 13%, or $39 million, in 2009 compared with 2008, primarily as a result of higher storm expenses, decreased earnings and unfavorable changes in working capital.  These decreases in cash flow were partially offset by lower income tax payments due to lower taxable income and investment tax credit benefits received.

We expect to achieve relatively stable cash flows from operations during the next three years although future cash flows may be significantly impacted by changes in economic conditions or new environmental and tax regulations.

Investing Activities

The primary use of cash in investing activities is capital expenditures.  See “Forecasted Uses of Cash” for details regarding projected capital expenditures for the years 2011 through 2013.

Net cash used in investing activities decreased by 16%, or $80 million, in 2010 compared with 2009, primarily as a result of a decrease of $89 million in capital expenditures, partially offset by a decrease of $9 million from restricted cash collections.

Net cash used in investing activities decreased by 27%, or $188 million, in 2009 compared with 2008, primarily as a result of a decrease of $180 million in capital expenditures and an increase of $8 million from restricted cash collections.

Financing Activities

Net cash provided by financing activities was $56 million in 2010 compared with $254 million in 2009.  In spite of significant new debt issuances associated with the repayments to E.ON affiliates in connection with PPL’s acquisition of the Company, cash provided by financing was less in 2010 due to lower increases in debt in 2010 and the payment of dividends in 2010; whereas, we received equity contributions in 2009.

Net cash provided by financing activities was $254 million in 2009 compared with $405 million in 2008.  The lower level of cash provided by financing in 2009 was the result of lower debt issuance to affiliated companies and lower levels of equity contributions received.

In the two months of 2010 following the acquisition, cash provided by financing activities of the Successor primarily consisted of the issuance of first mortgage bonds totaling $1,489 million after discounts and the issuance of intercompany notes totaling $1,331 million to a PPL subsidiary to repay debt due to an E.ON affiliate upon the closing of the sale.  These amounts were offset by the repayment of $1,331 million to an E.ON affiliate upon the closing of the sale, the repayment of $1,331 million to a PPL affiliate upon the issuance of the first mortgage bonds, the repayment of $83 million of short-term borrowings due to an affiliated company and the payment of $17 million of debt issuance costs.

In 2010, cash used in financing activities by the Predecessor primarily consisted of the payment of $50 million of dividends to our Parent mostly offset by increases in short-term borrowings due to an affiliated company totaling $48 million.

In 2009, cash provided by financing activities primarily consisted of the issuance of $150 million of intercompany notes to an E.ON affiliate, the receipt of capital contributions from our Parent totaling $75 million and a $29 million increase in short-term borrowings due to an affiliated company.

In 2008, cash provided by financing activities primarily consisted of the issuance of $250 million of intercompany notes to an E.ON affiliate, the receipt of capital contributions from our Parent totaling $145 million and a $7 million reduction in short-term borrowings due to an affiliated company.  In addition, we reacquired pollution control bonds totaling $80 million, reissued $63 million of that $80 million and issued $77 million of new pollution control bonds.  Of the $77 million, $60 million was used to retire prior pollution control bonds, including the remaining $17 million which had been reacquired by us. This resulted in a cash receipt of $17 million to us.

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Our debt financing activity in 2010 was:

	Issuances (a)		Retirements
Short-term borrowings from affiliated company — net change	$	—	$	(35	)
Other borrowings from affiliated company	1,331		(1,331		)
Borrowings from an E.ON affiliate	—		(1,331		)
Issuance of bonds	1,489		—
Net change in debt financing	$	2,820	$	(2,697	)

(a)Issuances are net of pricing discounts, where applicable.

See Note 11 to our 2010 Annual Financial Statements for further information.

Working Capital Deficiency

As of December 31, 2009, we had a working capital deficiency of $203 million, primarily due to the current portion of long-term debt to affiliated company totaling $33 million and $228 million of tax-exempt bonds which allow the investors to put the bonds back to us causing them to be classified as “Current portion of long-term debt.”  As of December 31, 2010, we no longer had a working capital deficiency because the current portion of long-term debt to affiliated company was paid off in conjunction with the PPL acquisition, and the $228 million of tax-exempt bonds were no longer classified as “Other current liabilities” by the Successor because we have the intent and ability to utilize our $400 million credit facility that expires in December 2014 to fund any mandatory purchases.  See Note 11 to our 2010 Annual Financial Statements for further information.

Auction Rate Securities

Auctions for auction rate securities issued by us continued to fail throughout 2010.  See Note 11 to our 2010 Annual Financial Statements for further discussion.

Forecasted Sources of Cash

We expect to continue to have adequate sources of cash available in the near term, including access to external financing, financing from affiliates and/or infusions of capital from our Parent.  Regulatory approvals are required for us to incur additional debt.  The FERC and the Virginia Commission authorize the issuance of short-term debt while the Kentucky Commission, Virginia Commission and the Tennessee Regulatory Authority authorize the issuance of long-term debt.  In November 2009, we received a two-year authorization from the FERC to borrow up to $400 million in short-term funds.  We also have authorization from the Virginia Commission that expires at the end of 2011, allowing short-term borrowing of up to $400 million.  Short-term funds are made available via our participation in an intercompany money pool agreement wherein our Parent and/or LG&E make funds available to us at market-based rates (based on highly rated commercial paper issues) up to $400 million. We also maintain a $400 million Revolving Credit Agreement discussed below.  We currently believe this authorization and these facilities, together with our credit facilities discussed below, provide the necessary flexibility to address any liquidity needs.

Credit Facilities

On November 1, 2010, we entered into a $400 million unsecured Revolving Credit Agreement with a group of banks.  Under this new credit facility, which expires on December 31, 2014, we have the ability to make cash borrowings and to request the lenders to issue letters of credit.  Borrowings will generally bear interest at LIBOR-based rates plus a spread, depending upon our senior unsecured long-term debt rating.  The new credit facility contains financial covenants requiring our debt to total capitalization to not exceed 70% and other customary covenants.  As of December 31, 2010, our debt to total capitalization was 41% as calculated pursuant to the credit agreement.  Under certain conditions, we may request that the facility’s capacity be increased by up to $100 million.  This new credit facility replaced an existing bilateral line of credit totaling $35 million that was terminated November 1, 2010.  As of December 31, 2010, there was no outstanding balance under the new credit facility, but there were $198 million of letters of credit outstanding to support outstanding bonds totaling

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$195 million.  We will utilize unused credit facility and money pool balances to fund working capital needs as they arise.  See Note 12 to our 2010 Annual Financial Statements for further information regarding our credit facilities.

Contributions from our Parent

Our Parent may make capital contributions to us, which can be used for general business purposes.

Long-Term Debt

We currently do not plan to issue any new long-term debt in 2011 other than the Exchange Bonds.

Credit Ratings

A downgrade in our credit ratings could impact our ability to access capital and increase the cost of credit facilities and any new debt.  Our credit ratings reflect the views of three national rating agencies.  A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating agency.  In March 2011, one national rating agency lowered our corporate credit rating, the rating of the Outstanding Bonds and our short-term ratings, while placing our ratings on negative watch, all as a result of the announcement by PPL of its intent to acquire two electricity distribution networks in the U.K., Central Networks West PLC and Central Networks East PLC, and pending demonstrated progress on execution by PPL of a permanent financing plan.  In April 2011, in connection with the execution of a significant portion of permanent financing, that agency took us off of credit watch negative, returned our outlook to stable, raised our short-term credit ratings and affirmed ratings on the Outstanding Bonds.  In October 2010, a rating agency revised downward the short-term credit rating of our pollution control bonds and our issuer rating as a result of the then pending acquisition by PPL.  Another raised the long-term rating of our pollution control bonds as a result of the addition of the first mortgage bonds as collateral, while a third national rating agency provided an initial rating of our pollution control bonds and first mortgage bonds.   See Note 11 to our 2010 Annual Financial Statements for a discussion of downgrade actions in 2009 and 2008 related to the pollution control bonds caused by a change in the rating of the entity insuring those bonds.

Ratings Triggers

We have various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel and commodity transportation, which contain provisions requiring us to post additional collateral, or permit the counterparty to terminate the contract if our credit rating were to fall below investment grade.  See Note 5 to our 2010 Annual Financial Statements for a discussion of Credit Risk Related Contingent Features, including a discussion of the potential additional collateral that would have been required for derivative contracts in a net liability position at December 31, 2010.  At December 31, 2010, if our credit ratings had been below investment grade, we would have been required to prepay or post an additional $16 million of collateral to counterparties for both derivative and non-derivative commodity and commodity-related contracts used in generation, marketing and trading operations.

Forecasted Uses of Cash

In addition to expenditures required for normal operating activities, such as fuel for electric generation, power purchased, payroll and taxes; we currently expect to incur future cash outflows for capital expenditures, various contractual obligations and the payment of dividends.

Capital Requirements

Our construction program is designed to ensure that there will be adequate capacity and reliability to meet the electric needs of our service area and to comply with environmental regulations.  These needs are continually being reassessed and appropriate revisions are made, when necessary, in construction schedules.  We plan to fund capital expenditures through operating cash flows, the credit facility and, if needed, the issuance of long-term debt.  We expect our capital expenditures for the three year period ending December 31, 2013 to total approximately $1,406 million, consisting primarily of the following:

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Construction of coal combustion residual storage structures	$	346
Construction of environmental controls and capacity replacement	302
Construction of distribution and metering assets	260
Construction of generation assets	206
Construction of transmission assets	129
Recoverable environmental assets	99
Information technology projects	39
Other projects	25
	$	1,406

Our capital program will focus primarily on compliance with existing or anticipated EPA environmental regulations, aging infrastructure and the need for increased storage capacity for coal combustion by-product materials over the next several years.  This program may also be affected in varying degrees by factors such as electric energy demand load growth, changes in construction expenditure levels, rate actions by regulatory agencies, new legislation, changes in commodity prices and labor rates and other regulatory requirements.  In particular, climate change initiatives, whether via legislative, regulatory or market channels, could restrict or disadvantage power generation from higher-carbon sources.  Therefore, we have included estimates regarding significant additional capital expenditures related to pending environmental regulations and legislation.  These estimates are subject to final regulations and least cost analysis based on engineering studies.  To the extent financial markets see climate change as a potential risk, we may face reduced access to or increased costs in capital markets.  Our capital expenditures associated with such actions are preliminarily estimated to be in the $1.5 to $1.75 billion range over the next ten years, although final costs may substantially vary.

See the contractual obligations table below and Note 13 to our 2010 Annual Financial Statements for further information concerning commitments.

Contractual Obligations

The following is provided to summarize contractual cash obligations for periods after December 31, 2010. We anticipate cash from operations and external financing will be sufficient to fund future obligations. See the Statements of Capitalization in our 2010 Annual Financial Statements.

	Payments Due by Period
	2011		2012		2013		2014		2015		Thereafter		Total
Short-term debt (a)	$	10	$	—	$	—	$	—	$	—	$	—	$	10
Long-term debt (b)	—		—		—		—		250		1,601		1,851
Interest on long-term debt (c)	67		69		72		75		78		1,414		1,775
Operating leases (d)	8		7		5		5		3		1		29
Unconditional power purchase obligations (e)	9		10		10		10		10		114		163
Coal and natural gas purchase obligations (f)	439		200		144		93		91		14		981
Pension benefit plan obligations (g)	18		24		28		10		7		60		147
Postretirement benefit plan obligations (h)	5		6		6		6		6		33		62
Construction obligations (i)	113		3		—		—		—		—		116
Other obligations (j)	3		3		—		—		—		—		6
	$	672	$	322	$	265	$	199	$	445	$	3,237	$	5,140

This table does not reflect contingent obligations.  See Note 13 to our 2010 Annual Financial Statements for further information on contingent obligations.

(a)Represents borrowings due to affiliates within one year.

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(b)Reflects principal maturities only based on legal maturity dates and includes the current portion of long-term debt.

(c)Assumes interest payments through maturity. The payments herein are subject to change as payments for debt that is or becomes variable-rate debt have been estimated.

(d)Represents future operating lease payments.

(e)Represents future minimum payments under Ohio Valley Electric Corporation, or OVEC, power purchase agreements through March 13, 2026.

(f)Represents contracts to purchase coal, natural gas and natural gas transportation.

(g)Represents projected cash flows for funding the pension benefit plans as calculated by the actuary.  For pension funding information see Note 9 to our 2010 Annual Financial Statements.

(h)Represents projected cash flows for the postretirement benefit plan as calculated by the actuary. For postretirement funding information, see Note 9 to our 2010 Annual Financial Statements.

(i)Represents construction commitments, including commitments for the Brown SCR and the Brown and Ghent landfill construction including associated material transport systems for coal combustion residual.

(j)Represents other contractual obligations including the Southwest Power Pool, Inc., or SPP, and the Tennessee Valley Authority, or TVA, coordination agreements.

Pension and Postretirement Benefit Plans

See “—Application of Critical Accounting Policies and Estimates” for discussion regarding discretionary contributions to the pension and postretirement benefit plans in 2011.

Dividends

Future dividends may be declared at the discretion of our Board of Directors, payable to our sole shareholder, our Parent.  As discussed in Note 12 to our 2010 Annual Financial Statements, our dividend payments may be effectively limited under a covenant in our $400 million revolving line of credit facility.  This covenant restricts our debt to total capital ratio to not be more than 70%.  This limitation did not restrict our ability to pay dividends at December 31, 2010.  We 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. We believe, however, that this statutory restriction, as applied to our 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.  See Note 15 to our 2010 Annual Financial Statements.

Purchase, Redemption or Remarketing of Debt Securities

We will continue to evaluate purchasing, redeeming or remarketing outstanding debt securities and may decide to take action depending upon prevailing market conditions and available cash.

Off-Balance Sheet Arrangements

We have very limited off-balance sheet activity.  See Note 13 to our 2010 Annual Financial Statements for further discussion.

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Risk Management

Market Risk

We are exposed to market risk from equity instruments, interest rate instruments and commodity instruments, as discussed below.  However, regulatory cost recovery mechanisms significantly mitigate those risks.

Securities Price Risk.  We have securities price risk through our participation in defined benefit pension and postretirement benefit plans.  Declines in the market price of debt and equity securities could impact contribution requirements.  See “—Application of Critical Accounting Policies and Estimates — Defined Benefits” and Note 9 to our 2010 Annual Financial Statements for a discussion of the assumptions and sensitivities regarding our defined benefit pension and postretirement benefit plans assumptions.

Interest Rate Risk.  We have issued debt to finance our operations, which exposes us to interest rate risk.  Our policies allow for the interest rate risk to be managed through the use of fixed rate debt, floating rate debt and interest rate swaps.  At December 31, 2010, no interest rate swaps were in effect for us.  Pursuant to our company policy, use of these financial instruments is intended to mitigate risk, earnings and cash flow volatility and is not speculative in nature.  At December 31, 2010, our annual exposure to increased interest expense, based on a 10% increase in interest rates, was less than $1 million.  See Note 5 to our 2010 Annual Financial Statements for further information.

Commodity Price Risk. Because our rates are set by regulatory commissions and our prudently incurred fuel costs are directly recoverable from customers, we are subject to fuel commodity price risk for only a small portion of on-going business operations. We conduct energy trading and risk management activities to maximize the value of our physical assets at times when they are not required to serve our customers, and we manage energy commodity risk using derivative instruments, including swaps and forward contracts. The following chart sets forth the net fair value of our commodity derivative contracts. See Note 5 to our 2010 Annual Financial Statements, for further information.

	Successor		Predecessor
	December 31, 2010 (a)		October 31, 2010 (a)		December 31, 2009
Fair value of contracts outstanding at the beginning of the period	$	—	$	—	$	1
Contracts realized or otherwise settled during the period
Fair value of new contracts entered into during the period
Changes in fair value attributable to changes in valuation techniques
Other changes in fair value					(1		)
Fair value of contracts outstanding at the end of the period	$	—	$	—	$	—

(a)           2010 activity is less than $1 million.

Credit Risk

We are exposed to potential losses as a result of nonperformance by wholesale counterparties of their contractual obligations.  We maintain credit policies and procedures to limit counterparty credit risk that include evaluating credit ratings and financial information as well as requiring collateral if the credit exposure exceeds certain thresholds.  See Note 5 to our 2010 Annual Financial Statements for information regarding credit risk and our risk management activities.

We are exposed to potential losses as a result of nonpayment by customers.  We maintain an allowance for doubtful accounts composed of accounts aged more than four months.  Accounts are written off as management determines them uncollectible.  See “— Application of Critical Accounting Policies and Estimates” and Note 1 to our 2010 Annual Financial Statements for further discussion.

Certain of our derivative instruments contain provisions that require us to provide immediate and on-going collateralization on derivative instruments in net liability positions based upon our credit ratings from each of the major credit

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rating agencies. See Note 5 to our 2010 Annual Financial Statements for information regarding exposure and the risk management activities.

Related Party Transactions

We and our affiliates engage in related party transactions.  See Notes 12 and 15 to our 2010 Annual Financial Statements for further information.

We are not aware of any material ownership interest or operating responsibility by our executive officers in outside partnerships, including leasing transactions with variable interest entities, or entities doing business with us.

Acquisitions, Development and Divestitures

We, along with LG&E, have been constructing a new 760-Mw capacity base-load, coal-fired unit, TC2, which is jointly owned by us (60.75%) and LG&E (14.25%), together with the Illinois Municipal Electric Agency and the Indiana Municipal Power Agency (combined 25%).  With limited exceptions we took care, custody and control of TC2 on January 22, 2011, and have dispatched the unit to meet customer demand since that date.  We and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages.  See Note 13 to our 2010 Annual Financial Statements for further information.

We continuously re-examine development projects based on market conditions and other factors to determine whether to proceed, to cancel or to expand the projects.

Application of Critical Accounting Policies and Estimates

Our financial statements are prepared in compliance with GAAP.  The application of these principles necessarily involves judgments regarding future events, including legal and regulatory challenges and anticipated recovery of costs. These judgments could materially impact the financial statements and disclosures based on varying assumptions, which may be appropriate to use. In addition, the financial and operating environment also may have a significant effect, not only on the operation of the business, but also on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the nature of the accounting policies applied has not changed.  Our senior management has reviewed the significant and critical accounting policies with the relevant governing bodies of the Company and our Parent, as applicable.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used or if changes in the estimate that are reasonably possible could materially impact the financial statements.  Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of the Financial Statements.

Price Risk Management

See “— Financial Condition — Risk Management” above.

Regulatory Mechanisms

We are a cost-based rate-regulated utility.  As a result, our financial statements reflect the effects of regulatory actions.  Regulatory assets are recognized for the effect of transactions or events where future recovery is probable in regulated customer rates.  The effect of such accounting is to defer certain or qualifying costs that would otherwise be charged to expense.  Likewise, regulatory liabilities are recognized for obligations expected to be returned through future regulated customer rates.  The effect of such transactions or events would otherwise be reflected as income.  In certain cases, regulatory liabilities are recorded based on the understanding with the regulator that current rates are being set to recover costs that are expected to be incurred in the future.  The regulated entity is accountable for any amounts charged pursuant to such rates and

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not yet expended for the intended purpose.  The accounting for regulatory assets and liabilities is based on specific ratemaking decisions or precedent for each transaction or event as prescribed by the FERC, the Kentucky Commission, the Virginia Commission or the Tennessee Regulatory Authority.  See Note 3 to our 2010 Annual Financial Statements for additional detail regarding regulatory assets and liabilities.

Defined Benefits

Our employees benefit from both funded and unfunded retirement benefit plans.  See Note 1 to our 2010 Annual Financial Statements for information about policy changes between the Predecessor and Successor and the accounting for defined benefits including our method of amortizing gains and losses.  We make various assumptions in arriving at pension and other postretirement benefit costs and obligations. The major assumptions include:

·Our selection of discount rates is based on the Mercer Pension Discount Yield Curve (Predecessor) and the Towers Watson Yield Curve (Successor).

·Our selection of rate of salary growth is based on historical data that includes employees’ periodic pay increases and promotions, which are used to project employees’ pension benefits at retirement.

·We determine the expected long-term return on plan assets based on the current level of expected return on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class is then weighted based on the current asset allocation.

·Our management projects health care cost trends based on past health care costs, the near-term outlook and an assessment of likely long-term trends.

The performance of the capital markets affects the values of the assets that are held in trust to satisfy future obligations under the defined benefit pension plans.  The return on investments within the plans was approximately 12% for the year ended December 31, 2010.  Our benefit plan assets and obligations are re-measured annually using a December 31 measurement date.  Due to the PPL acquisition, the benefit plan assets and obligations were also re-measured at October 31, 2010.  Our 2010 pension cost was approximately $3 million less than 2009.  We anticipate our 2011 pension cost will be approximately $3 million less than the 2010 expense.  The amount of future funding will depend upon the actual return on plan assets, the discount rate and other factors, but we fund our pension obligations in a manner consistent with the Pension Protection Act of 2006.  We made discretionary contributions to our pension plan of $13 million in 2010 and 2009, respectively.  In January 2011, we contributed $43 million to our pension plan.  See Note 18 to our 2010 Annual Financial Statements for further information.

See Note 9 to our 2010 Annual Financial Statements for further information on defined benefits including sensitivity analysis expressing potential changes in expected returns that would result from hypothetical changes to assumptions and estimates, expected rate of return assumptions and health care trends.

Asset Impairment

We perform a quarterly review to determine if an impairment analysis is required for long-lived assets that are subject to depreciation or amortization. This review identifies changes in circumstances indicating that a long-lived asset’s carrying value may not be recoverable. An impairment analysis will be performed if warranted based on the review. For these long-lived assets, such events or changes in circumstances which may indicate an impairment analysis is required include:

·a significant decrease in the market price of an asset;

·a significant adverse change in the manner in which an asset is being used or in its physical condition;

·a significant adverse change in legal factors or in the business climate;

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·an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset;

·a current-period operating or cash flow loss combined with a history of losses or a forecast that demonstrates continuing losses;

·a current expectation that, more likely than not, an asset will be sold or otherwise disposed of before the end of its previously estimated useful life; and

·a significant change in the physical condition of an asset.

For a long-lived asset, impairment is recognized when the carrying amount of the asset is not recoverable and exceeds its fair value.  The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the asset is impaired, an impairment loss is recorded to adjust the asset’s carrying value to its estimated fair value.  Management must make significant judgments to estimate future cash flows including the useful lives of long-lived assets, the fair value of the assets and management’s intent to use the assets.  We did not recognize an impairment of any long-lived asset in 2010.

Effective with PPL’s acquisition of our Parent on November 1, 2010, we recorded $607 million of goodwill.  At December 31, 2010, our goodwill remained unchanged.  GAAP requires goodwill to be tested for impairment on an annual basis or more frequently if events or circumstances indicate that assets may be impaired.  We perform our annual goodwill impairment test in the fourth quarter.  See Note 7 to our 2010 Annual Financial Statements for further discussion.

Goodwill is tested for impairment using a two-step approach.  In step 1, we identify a potential impairment by comparing the estimated fair value of the Company (the goodwill reporting unit) to its carrying value, including goodwill, on the measurement date.  If the estimated fair value exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the estimated fair value, the second step is performed to measure the amount of impairment loss, if any.

The second step requires a calculation of the implied fair value of goodwill.  The implied fair value of goodwill is determined in the same manner as the amount of goodwill in a business combination.  That is, the estimated fair value is allocated to all of our assets and liabilities as if we had been acquired in a business combination and our estimated fair value was the price paid.  The excess of our estimated fair value over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.  The implied fair value of goodwill is then compared with the carrying amount of that goodwill.  If the carrying amount exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.  The loss recognized cannot exceed the carrying amount of the reporting unit’s goodwill.

Determining our fair value is judgmental in nature and involves the use of significant estimates and assumptions.  These estimates and assumptions can include revenue growth rates and operating margins used to calculate projected future cash flows, risk adjusted discount rates and future economic and market conditions.

We tested goodwill for impairment in the fourth quarter of 2010 and no impairment was recognized.  See Note 7 to our 2010 Annual Financial Statements for further discussion.

Loss Accruals

We accrue losses for the estimated impacts of various conditions, situations or circumstances involving uncertain or contingent future outcomes.  For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that a loss has been incurred, given the likelihood of the uncertain future events and (2) the amount of the loss can be reasonably estimated.  Accounting guidance defines “probable” as cases in which “the future event or events are likely to occur.”  We do not record the accrual of contingencies that might result in gains, unless recovery is assured.  We continuously assess potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other events.

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The accounting aspects of estimated loss accruals include (1) the initial identification and recording of the loss, (2) the determination of triggering events for reducing a recorded loss accrual and (3) the ongoing assessment as to whether a recorded loss accrual is sufficient.  All three of these aspects require significant judgment by our management.  We use our internal expertise and outside experts (such as lawyers and engineers), as necessary, to help estimate the probability that a loss has been incurred and the amount or range of the loss.

We have identified certain other events that could give rise to a loss, but that do not meet the conditions for accrual.  Such events are disclosed, but not recorded, when it is reasonably possible that a loss has been incurred.  Accounting guidance defines “reasonably possible” as cases in which “the future event or events occurring is more than remote, but less than likely to occur.”  See Note 13 to our 2010 Annual Financial Statements for disclosure of other potential loss contingencies that have not met the criteria for accrual.

When an estimated loss is accrued, we identify, where applicable, the triggering events for subsequently adjusting the loss accrual. The triggering events generally occur when the contingency has been resolved and the actual loss is incurred, or when the risk of loss has diminished or been eliminated.  The following are some of the triggering events that provide for the adjustment of certain recorded loss accruals:

·Allowances for uncollectible accounts are reduced when accounts are written off after prescribed collection procedures have been exhausted, a better estimate of the allowance is determined or underlying amounts are ultimately collected.

·Environmental and other litigation contingencies are reduced when the contingency is resolved, we make actual payments, a better estimate of the loss is determined or the loss is no longer considered probable.

We review our loss accruals on a regular basis to assure that the recorded potential loss exposures are appropriate. This involves ongoing communication and analyses with internal and external legal counsel, engineers, operation management and other parties.  This review may result in the increase or decrease of the loss accrual.

Asset Retirement Obligations

We are required to recognize a liability for legal obligations associated with the retirement of long-lived assets. The initial obligation is measured at its estimated fair value.  An equivalent amount is recorded as an increase in the value of the capitalized asset and allocated to expense over the useful life of the asset.  Until the obligation is settled, the liability is increased, through the recognition of accretion expense in the Statements of Income, for changes in the obligation due to the passage of time.  An offsetting regulatory asset is recognized to reverse the depreciation and accretion expense related to the asset retirement obligation, or ARO, such that there is no income statement impact.  The regulatory asset is relieved when the ARO has been settled. An ARO must be recognized when incurred if the fair value of the ARO can be reasonably estimated.

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 considers estimated retirement costs in current period dollars that are inflated to the anticipated retirement date and then 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 various AROs and the related assets, are reviewed periodically to ensure that any material changes are incorporated into the estimate of the obligations.  Any change to the capitalized asset is amortized over the remaining life of the associated long-lived asset.  See Note 4 to our 2010 Annual Financial Statements for further information on AROs.

At December 31, 2010, we had AROs totaling $54 million recorded on the Balance Sheets.  Of the total amount, $35 million, or 65%, relates to our ash ponds and landfills. The most significant assumptions surrounding AROs are the forecasted retirement costs, the discount rates and the inflation rates.  A variance in the forecasted retirement costs, the discount rates or the inflation rates could have a significant impact on the ARO liabilities.

The following chart reflects the sensitivities related to our ARO liabilities for ash ponds and landfills as of December 31, 2010:

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	Change in Assumption	Impact on ARO Liability
		(in millions)
Retirement cost	10%/(10)%	$4/$(4)
Discount rate	0.25%/(0.25)%	$(2)/$1
Inflation rate	0.25%/(0.25)%	$2/$(2)

Income Tax Uncertainties

Significant management judgment is required in developing our provision for income taxes primarily due to the uncertainty related to tax positions taken or expected to be taken in tax returns and the determination of deferred tax assets, liabilities and valuation allowances.

Significant management judgment is required to determine the amount of benefit recognized related to an uncertain tax position.  We evaluate our tax positions following a two-step process.  The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained.  This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position.  The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is measured at the largest amount of benefit that has a likelihood of realization, upon settlement, that exceeds 50%.  Our management considers a number of factors in assessing the benefit to be recognized, including negotiation of a settlement.

On a quarterly basis, we reassess our uncertain tax positions by considering information known at the reporting date. Based on management’s assessment of new information, we may subsequently recognize a tax benefit for a previously unrecognized tax position, de-recognize a previously recognized tax position or re-measure the benefit of a previously recognized tax position.  The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact our financial statements in the future.

The balance sheet classification of unrecognized tax benefits and the need for valuation allowances to reduce deferred tax assets also require significant management judgment.  We classify unrecognized tax benefits as current, to the extent management expects to settle an uncertain tax position, by payment or receipt of cash, within one year of the reporting date.  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 a number of factors in assessing the 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 utilized in this assessment must meet the recognition and measurement criteria we use to account for an uncertain tax position.  See Note 10 to our 2010 Annual Financial Statements for the required disclosures.

At December 31, 2010, our existing reserve exposure to either increases or decreases in unrecognized tax benefits during the next 12 months is less than $1 million.  This change could result from subsequent recognition, de-recognition and/or changes in the measurement of uncertain tax positions.  The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitations.

Purchase Price Allocation

On November 1, 2010, PPL completed the acquisition of our Parent.  In accordance with accounting guidance on business combinations, the identifiable assets acquired and the liabilities assumed were measured at fair value at the acquisition date.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The excess of the purchase price over the estimated fair value of the identifiable net assets is recorded as goodwill.

The determination and allocation of fair value to the identifiable assets acquired and liabilities assumed was based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on key assumptions of the acquisition and historical and current market data.  The most significant variables in these

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valuations were the discount rates, the number of years on which to base cash flow projections, as well as the assumptions and estimates used to determine cash inflows and outflows.  Although the assumptions applied were reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

For purposes of measuring the fair value of the majority of property, plant and equipment and regulatory assets acquired and regulatory liabilities assumed, we determined that fair value was equal to net book value at the acquisition date because our operations are conducted in a regulated environment and the regulatory commissions allow for earning a rate of return on the book value of a majority of the regulated asset bases at rates determined to be fair and reasonable.  As there is no current prospect for deregulation in our operating area, it is expected that these operations will remain in a regulated environment for the foreseeable future, therefore management has concluded that the use of these assets in the regulatory environment represents their highest and best use and a market participant would measure the fair value of these assets using the regulatory rate of return as the discount rate, thus resulting in fair value equal to book value.

The fair value of intangible assets and liabilities (e.g., contracts that have favorable or unfavorable terms relative to market), including coal contracts and power purchase agreements, as well as emission allowances, have been reflected on the Balance Sheets with offsetting regulatory assets or liabilities.  Prior to the acquisition, we recovered the cost of the coal contracts, power purchases and emission allowances and this rate treatment will continue after the acquisition.  As a result, management believes the regulatory assets and liabilities created to offset the fair value adjustments meet the recognition criteria established by existing accounting guidance and eliminate any ratemaking impact of the fair value adjustments.  Our customer rates will continue to reflect these items (e.g., coal, purchased power, emission allowances) at their original contracted prices.

We also considered whether a separate fair value should be assigned to our rights to operate within its various electric service areas but concluded that these rights only provided the opportunity to earn a regulated return and barriers to market entry, which in management’s judgment is not considered a separately identifiable intangible asset under applicable accounting guidance; rather, it is considered going-concern value, or goodwill.

See Notes 2 and 7 to our 2010 Annual Financial Statements for further information.

New Accounting Guidance

Recent accounting pronouncements affecting us are detailed in Note 1 to our 2010 Annual Financial Statements.

Other Information

PPL’s Audit Committee has approved the audit fees and audit-related services.  The audit-related services include services in connection with regulatory filings, reviews of offering documents and registration statements and internal control reviews.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

On February 23, 2011, PPL’s audit committee appointed Ernst &Young LLP as the independent accountant for the Company for 2011.  As a result, PricewaterhouseCoopers LLP, or PwC, was dismissed as independent accountant for the Company on February 23, 2011 subject to completion of its procedures on our financial statements as of December 31, 2010 and for the period from January 1, 2010 to October 31, 2010 and the period from November 1, 2010 to December 31, 2010.  PwC’s dismissal was completed on February 25, 2011.

PwC’s reports on the financial statements of the Company as of December 31, 2010 and for the period from January 1, 2010 to October 31, 2010, the period from November 1, 2010 to December 31, 2010, and the year ended December 31, 2009 did not contain any adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principle.  During the period from January 1, 2009 through February 25, 2011, (1) there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of PwC, would have caused PwC to make reference thereto in its reports on the financial statements of the Company as of December 31, 2010 and period from January 1, 2010 to October 31, 2010, the period from November 1, 2010 to December 31, 2010, and the year ended December 31, 2009, and (2) there have been no “reportable events” as defined in Item 304(a) (1)(v) of Regulation S-K.

We have provided a copy of the above disclosures to PwC and requested PwC to provide us with a letter addressed to the SEC stating whether or not PwC agrees with those disclosures related to PwC.  A copy of PwC’s letter, dated April 21, 2011, is attached as Exhibit 16(a) to the registration statement of which this prospectus forms a part.

During the period from January 1, 2009 through February 25, 2011, (1) E&Y had not been engaged as the principal accountant to audit the financial statements of the Company or our predecessor or any of our subsidiaries for any period prior to January 1, 2011, and (2) we have not consulted with E&Y regarding (a) the application of accounting principles to any completed or proposed transaction for any periods prior to January 1, 2011, (b) the type of audit opinion that might be rendered on the Company’s financial statements, or (c) any other accounting, auditing or financial reporting matter described in Items 304(a)(2)(i) and (ii) of Regulation S-K.  In its capacity as independent accountant of PPL, E&Y was consulted by PPL about various accounting and reporting matters of ours that impacted the consolidated PPL financial statements, primarily around the application of the business combination rules set out in generally accepted accounting principles in the U.S.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Financial Condition — Risk Management—Market Risk” above and Notes 5, 6 and 9 to our 2010 Annual Financial Statements for further information.

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BUSINESS

Kentucky Utilities Company, incorporated in Kentucky in 1912 and in Virginia in 1991, is a regulated public utility engaged in the generation, transmission, distribution and sale of electric energy in Kentucky, Virginia and Tennessee.  We provide electric service to approximately 514,000 customers in 77 counties in central, southeastern and western Kentucky, to approximately 30,000 customers in five counties in southwestern Virginia and to less than ten customers in Tennessee.  Our service area covers approximately 6,600 square miles.  During 2010, approximately 98% of the electricity we generated was produced by our coal-fired electric generating stations.  The remainder is generated by natural gas and oil fueled CTs and a hydroelectric power plant.  In Virginia, we operate under the name Old Dominion Power Company.  We also sell wholesale electric energy to 12 municipalities in Kentucky.

Our affiliate, LG&E, is a regulated public utility engaged in the generation, transmission, distribution and sale of electric energy and the distribution and sale of natural gas in Kentucky.  We and LG&E became indirect wholly owned subsidiaries of PPL on November 1, 2010.  Following the acquisition, our business has not changed.  We and LG&E are continuing as subsidiaries of our Parent, which is now an intermediary holding company in the PPL group of companies.

Predecessor and Successor

Our historical financial results are presented using “Predecessor” or “Successor” to designate the periods before or after PPL’s acquisition of our Parent.  Predecessor covers the time period prior to November 1, 2010.  Successor covers the time period after October 31, 2010.  Certain accounting and presentation methods were changed to acceptable alternatives to conform to PPL accounting policies and the cost basis of certain assets and liabilities were changed as of November 1, 2010, as a result of the application of push-down accounting.  Consequently, the financial position, results of operations and cash flows for the Successor period are not comparable to the Predecessor period.

Despite the separate presentation, the core operations of the Company have not changed.  See Note 1 to our 2010 Annual Financial Statements for the major differences in Predecessor and Successor accounting policies.  See Note 2 to our 2010 Annual Financial Statements for information regarding the acquisition and the purchase accounting adjustments.

Operations (Dollars are in millions unless otherwise noted.)

The sources of our operating revenues and volumes of sales for the following periods in 2010, 2009 and 2008 were as follows:

	Successor			Predecessor
	November 1, 2010 through December 31, 2010			January 1, 2010 through October 31, 2010			Year Ended December 31, 2009			Year Ended December 31, 2008
	Revenues		Volumes (Gwh)	Revenues		Volumes (Gwh)	Revenues		Volumes (Gwh)	Revenues		Volumes (Gwh)
Residential	$	106	1,394	$	440	5,788	$	480	6,594	$	462	6,803
Industrial and commercial	117		1,876	588		9,152	637		10,171	636		10,709
Municipals	15		326	88		1,676	91		1,848	92		1,971
Other retail	20		273	114		1,453	118		1,647	108		1,707
Wholesale	5		68	18		376	29		660	107		2,894
	$	263	3,937	$	1,248	18,445	$	1,355	20,920	$	1,405	24,084

Our peak load in 2010 was 4,517 Mw on December 15, 2010, when the temperature dropped to a low of 3 degrees Fahrenheit in Lexington.  Our all-time peak load was 4,640 Mw and occurred on January 16, 2009, when the temperature dropped to low of -2 degrees Fahrenheit in Lexington.

Our retail electric rates contain an FAC, whereby increases and decreases in the cost of fuel for electric generation are reflected in the rates charged to retail electric customers.  The FAC allows us to adjust billed amounts for the difference between the fuel cost component of base rates and the actual fuel cost, including transportation costs.  Credits to customers

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occur if the actual costs are below the embedded cost component.  Additional charges to customers occur if the actual costs exceed the embedded cost component.  The amount of the regulatory asset or liability is the amount that has been under- or over-recovered due to timing or adjustments to the mechanism.

Kentucky law permits us to recover the costs of complying with the Federal Clean Air Act and those federal, state or local environmental requirements which apply to coal combustion wastes and byproducts from facilities utilized for production of energy from coal, including a return of operating expenses, and a return of and on capital invested, through the ECR mechanism.  Pursuant to this mechanism, a regulatory asset or liability is established in the amount that has been under- or over-recovered due to timing or adjustments to the mechanism. This mechanism includes construction work in progress and a return on equity, currently set at 10.63%.

We contract with the TVA to act as our transmission reliability coordinator and SPP to function as our independent transmission operator, pursuant to FERC requirements.  The TVA and SPP contracts provide service through August 31, 2011 and August 31, 2012, respectively.  See Note 3 to our 2010 Annual Financial Statements for further information.

We and LG&E jointly dispatch our generation units with the lowest cost generation used to serve our retail native load.  When we have excess generation capacity after serving our own retail native load and our generation cost is lower than that of LG&E, LG&E purchases electricity from us.  When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of our, we purchase electricity from LG&E.  These transactions are recorded as intercompany wholesale sales and purchases and are recorded by each company at a price equal to the seller’s fuel cost.  Savings realized from purchasing electricity intercompany instead of generating from their own higher costs units or purchasing from the market are shared equally between the two companies.  The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

We had a power supply contract with OMU that was terminated by OMU in May 2010.  We own 2.5% of OVEC’s common stock and are contractually entitled to 2.5% of OVEC’s output.  Based on nameplate generating capacity, this would be approximately 60 Mw.  Additional information regarding this relationship is provided in Notes 1 and 13 to our 2010 Annual Financial Statements.

Seasonality

Demand for and market prices for electricity are affected by weather.  As a result, our overall operating results in the future may fluctuate substantially on a seasonal basis, especially when more severe weather conditions such as heat waves or winter storms make such fluctuations more pronounced.  The pattern of this fluctuation may change depending on the type and location of the facilities we own and the terms of our contracts to purchase or sell electricity.

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Properties

Our power generating system includes coal-fired steam generating stations, with natural gas and oil fueled CTs that supplement the system during peak or emergency periods.  As of December 31, 2010, our system capacity was:

Fuel/Plant	Total Mw Summer Capacity (a)	% Ownership	Ownership or Lease Interest in Mw	Location
Coal (steam)
Ghent	1,918	100.00	1,918	Carroll County, KY
E.W. Brown	684	100.00	684	Mercer County, KY
Green River	163	100.00	163	Muhlenberg County, KY
Tyrone	71	100.00	71	Woodford County, KY
OVEC - Clifty Creek (b)	1,304	2.50	33	Jefferson County, IN
OVEC - Kyger Creek (b)	1,086	2.50	27	Gallia County, OH
Total steam	5,226		2,896
Natural gas/oil (CTs)
E.W. Brown Units 8-11	480	100.00	480	Mercer County, KY
Trimble County Units 7-10 (c)	640	63.00	403	Trimble County, KY
Trimble County Units 5-6 (c)	320	71.00	227	Trimble County, KY
E.W. Brown Units 6-7 (c)	338	62.00	214	Mercer County, KY
Paddy’s Run (c)	158	47.00	74	Jefferson County, KY
E.W. Brown Unit 5	129	47.00	63	Mercer County, KY
Haefling	36	100.00	36	Fayette County, KY
Total CTs	2,101		1,497
Hydro
Dix Dam Hydroelectric Station	24	100.00	24	Mercer County, KY
Total hydro	24		24
Total system capacity	7,351		4,417

(a)The capacity of generation units is based on a number of factors, including the operating experience and physical conditions of the units and may be revised periodically to reflect changed circumstances.

(b)We are contractually entitled to 2.50% of OVEC’s output based on a power purchase agreement which is comprised of annual minimum debt service payments, as well as contractually-required reimbursement of plant operating, maintenance and other expenses.  OVEC’s capacity is shown at unit nameplate ratings.

(c)Units are jointly owned with LG&E.  See Note 14 to our 2010 Annual Financial Statements for further information.

With limited exceptions we took care, custody and control of TC2 on January 22, 2011, and have dispatched the unit to meet customer demand since that date.  We and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages.  Unit 2 is coal-fired and has a capacity of 760 Mw, of which our share is 462 Mw.

At December 31, 2010, our transmission system included 132 substations (54 of which are shared with the distribution system) with transformer capacity of approximately 13,136 Megavolt-ampere, or MVA, and approximately 4,076 miles of lines.  The distribution system included 480 substations (54 of which are shared with the transmission system) with transformer capacity of approximately 7,044 MVA and approximately 14,123 miles of overhead lines and 2,221 miles of underground conduit.

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Substantially all of our real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity, subject to certain exclusions and exceptions, is subject to the lien of the Mortgage, as described in “Description of the Bonds — Security; Lien of the Mortgage.”

We also own 20% of the common stock of Electric Energy, Inc., which owns and operates a 1,162-Mw generating station in southern Illinois.  EEI generally sells its production into the wholesale market.

Additional information regarding our property and investments is provided in Notes 1 and 14 to our 2010 Annual Financial Statements.

Construction and Future Capital Requirements

Our construction program is designed to ensure that there will be adequate capacity and reliability to meet the electric needs of our service area and to comply with environmental regulations.  These needs are continually being reassessed, and appropriate revisions are made, when necessary, in construction schedules.  At December 31, 2010, we estimated our capital expenditures for the three-year period ending December 31, 2013 to total approximately $1.4 billion.

In addition to the amounts above, evolving environmental regulations will likely increase the level of capital expenditures over the next several years.  At April 15, 2011, we estimated our capital expenditures for environmental control facilities to total approximately $174 million in 2011 and approximately $387 million in 2012.  See “Business — Environmental Matters.”  Future capital requirements may be affected in varying degrees by factors such as electric energy demand, load growth, changes in construction expenditure levels, rate actions by regulatory agencies, new legislation, changes in commodity prices and labor rates, further changes in environmental regulations and other regulatory requirements.  Credit market conditions can affect aspects of the availability, terms or methods in which we fund our capital requirements.  We anticipate funding future capital requirements through operating cash flow, debt and/or infusions of capital from our Parent.

For a discussion of liquidity, capital resources and financing activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Coal Supply

Coal-fired generating units provided approximately 98% of our net kilowatt hour generation for 2010.  The remaining net generation was provided by natural gas and oil fueled CTs and a hydroelectric power plant.  Coal is expected to be the predominant fuel we use in the foreseeable future, with natural gas and oil being used for peaking capacity and flame stabilization in coal-fired boilers or in emergencies.  The Company has no nuclear generating units and has no plans to build any in the foreseeable future.

Fuel inventory is maintained at levels estimated to be necessary to avoid operational disruptions at the coal-fired generating units.  Reliability of coal deliveries can be affected periodically by a number of factors, including fluctuations in demand, coal mine production issues and other supplier or transporter operating difficulties.

We have entered into coal supply agreements with various suppliers for coal deliveries for 2011 and beyond and normally augment our coal supply agreements with spot market purchases.  We have a coal inventory policy that we believe provides adequate protection under most contingencies.

We expect to continue purchasing most of our coal, which has sulfur content in the 0.7% - 3.5% range, from western and eastern Kentucky, West Virginia, southern Indiana, southern Illinois, Ohio and Wyoming for the foreseeable future.  This supply, in combination with the installation of our SO2 removal systems, is expected to enable us to continue to provide electric service in compliance with existing environmental laws and regulations.  Coal is delivered to our generating stations by a mix of transportation modes, including barge, truck and rail.

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Rates and Regulation

We are subject to the jurisdiction of the Kentucky Commission and the FERC, and we are further subject to the jurisdiction of the Virginia Commission and the Tennessee Regulatory Authority, in virtually all matters related to electric utility regulation, and as such, our accounting is subject to the regulated-operations guidance of the Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC.  Given our competitive position in the marketplace and the status of regulation in Kentucky, Tennessee and Virginia, there are no plans or intentions to discontinue the application of the regulated operations guidance of the FASB ASC.

Our Kentucky base rates are calculated based on a return on capitalization (common equity, long-term debt and notes payable) including certain regulatory adjustments to exclude non-regulated investments and environmental compliance plans recovered separately through the ECR mechanism.  Currently, none of the regulatory assets or regulatory liabilities are excluded from the return on capitalization utilized in the calculation of Kentucky base rates; therefore, a return is earned on all Kentucky regulatory assets existing at the time base rates were determined, except where such regulatory assets were offset by associated liabilities and thus have no net impact on capitalization.  Our Virginia base rates are calculated based on a return on rate base (net utility plant less deferred taxes and miscellaneous deductions).  All regulatory assets and liabilities are excluded from the return on rate base utilized in the calculation of Virginia base rates.

PPL Acquisition.  On April 28, 2010, PPL entered into a purchase and sale agreement with our former ultimate parent, E.ON US Investments Corp., and E.ON A.G., to purchase all of E.ON US Investments Corp.’s limited liability company interests in our Parent.  The transaction was subject to customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, receipt of required regulatory approvals (including state regulators in Kentucky, Virginia and Tennessee and the FERC) and the absence of injunctions or restraints imposed by governmental entities.

Change of control and financing applications were filed on May 28, 2010 with the Kentucky Commission, and on June 15, 2010 with the Virginia Commission and the Tennessee Regulatory Authority.  An application with the FERC was filed on June 28, 2010.  During the second quarter of 2010, a number of parties were granted intervenor status in the Kentucky Commission proceedings and data request filings and responses occurred.  Early termination of the Hart-Scott-Rodino waiting period was received on August 2, 2010.

In September 2010, the Kentucky Commission approved a settlement agreement among PPL, joint applicants and all of the intervening parties to PPL’s joint application to the Kentucky Commission for approval of its acquisition of ownership and control of our Parent, the Company and LG&E.  In the settlement, the parties agreed that we would commit that no base rate increases would take effect before January 1, 2013.  Our increase that took effect on August 1, 2010 (as described below) will not be impacted by the settlement.  Under the terms of the settlement, we retain the right to seek approval for the deferral of “extraordinary and uncontrollable costs.”  Interim rate adjustments will continue to be permissible during that period for existing fuel, environmental and DSM recovery mechanisms.  The agreement also substitutes an acquisition savings shared deferral mechanism for the requirement that we file a synergies plan with the Kentucky Commission.  This mechanism, which will be in place until the earlier of five years or the first day of the year in which a base rate increase becomes effective, permits us to earn up to a 10.75% return on equity.  Any earnings above a 10.75% return on equity will be shared with customers on a 50%/50% basis.  In October 2010, both the Virginia Commission and the Tennessee Regulatory Authority approved the transfer of control of our Parent from E.ON US Investments Corp. to PPL.  The Commissions’ orders contained a number of other commitments with regards to operations, workforce, community involvement and other matters.

In October 2010, the FERC approved a September 2010 settlement agreement among the Company, LG&E, other applicants and protesting parties, and such protests have been withdrawn.  The settlement agreement includes various conditional commitments, such as a continuation of certain existing undertakings with protesters in prior cases, an agreement not to terminate certain of our municipal customer contracts prior to January 2017, an exclusion of any transaction-related costs from wholesale energy and tariff customer rates to the extent that we have agreed to not seek the same transaction-related cost from retail customers and agreements to coordinate with protesters in certain open or on-going matters.

Kentucky Rate Case.  In January 2010, we filed an application with the Kentucky Commission requesting an increase in electric base rates of approximately 12%, or $135 million annually.  The requested rate increase was based on an 11.5% return on equity.  A number of intervenors, including the office of the Kentucky Attorney General, certain representatives of industrial and low-income groups and other third parties, entered the rate cases and submitted filings challenging our

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requested rate increases, in whole or in part.  In June 2010, we and all of the intervenors except for the Kentucky Attorney General agreed to stipulations providing for an increase in our electric base rates of $98 million annually, and filed a request with the Kentucky Commission to approve such settlement.  An order in the proceeding was issued in July 2010, approving the provisions in the stipulation, including a return on equity range of 9.75-10.75%.  The new rates became effective on August 1, 2010.

Virginia Rate Cases.  In April 2011, we filed an application with the Virginia Commission, requesting an increase in base rates of approximately 14%, or $9 million annually.  The requested rate increase is based on an 11% return on equity, inclusion of expenditures to complete TC2, all new flue gas desulfurization controls in base rates, recovery of a 2009 regulatory asset and various other adjustments to revenue and expenses for the test year ended December 31, 2010.  We cannot predict the outcome of this proceeding.

In June 2009, we filed an application with the Virginia Commission requesting an increase in electric base rates for our Virginia jurisdictional customers in an amount of $12 million annually or approximately 21%.  The proposed increase reflected a proposed rate of return on rate base of 8.586% based on a return on equity of 12%.  As permitted pursuant to a Virginia Commission order, we elected to implement the proposed rates effective November 1, 2009, on an interim basis.  During December 2009, we and the Virginia Commission Staff agreed to a Stipulation and Recommendation authorizing a base rate revenue increase of $11 million annually and a return on rate base of 7.846% based on a 10.5% return on equity. In March 2010, the Virginia Commission issued an order approving the stipulation, with the increased rates to be put into effect as of April 1, 2010.  As part of the stipulation, we refunded approximately $1 million in interim rate amounts in excess of the ultimate approved rates.

FERC Wholesale Rate Case.  In September 2008, we filed an application with the FERC for increases in electric base rates applicable to wholesale power sales contracts or interchange agreements involving, collectively, twelve Kentucky municipalities. The application requested a shift from an all-in stated unit charge rates to an unbundled formula rate, including an annual adjustment mechanism. In May 2009, the FERC issued an order approving a settlement among the parties in the case, incorporating increases of approximately 3% from prior rates and a return on equity of 11%.  In May 2010, we submitted to the FERC the proposed current annual adjustments to the formula rates, which incorporated certain proposed increases.  Updated rates, including certain further adjustments from a review process involving wholesale requirements customers, became effective as of July 1, 2010.

By mutual agreement, the parties’ settlement of the 2008 application left outstanding the issue of whether we must allocate to the municipal customers a portion of renewable resources we may be required to procure on behalf of our retail ratepayers.  An order was issued by the FERC in July 2010, indicating that we are not required to allocate a portion of any renewable resources to the twelve municipalities, thus resolving the remaining issue.

Refund of Over-Collected Amounts.  On July 15, 2010, our Parent, on behalf of the Company and LG&E, submitted an informational filing indicating it had inadvertently over-collected certain costs related to the independent transmission organization and reliability coordinator in rates charged pursuant to the Attachment O formula rate included in the companies’ open access transmission tariff.  Total refunds being issued in connection with the inadvertent recovery are approximately $1 million.  No action has been taken by FERC with respect to this informational filing.

PUHCA.  The Company, along with our Parent and LG&E, are subject to extensive regulation by the FERC with respect to numerous matters, including: electric utility facilities and operations, wholesale sales of power and related transactions, accounting practices, issuances and sales of securities, acquisitions and sales of utility properties, payments of dividends out of capital and surplus, financial matters and inter-system sales of non-power goods and services.  LG&E and KU believe that they have adequate authority, including financing authority, under existing FERC orders and regulations to conduct our business and will seek additional authorization when necessary.

Storm Restoration.  In January 2009, a significant ice storm passed through our service area causing approximately 199,000 customer outages, followed closely by a severe wind storm in February 2009, causing approximately 44,000 customer outages.  We filed an application with the Kentucky Commission in April 2009, requesting approval to establish a regulatory asset and defer for future recovery approximately $62 million in incremental operation and maintenance expenses related to the storm restoration.  In September 2009, the Kentucky Commission issued an order allowing the establishment of a regulatory asset of up to $62 million based on our actual costs for storm damages and service restoration due to the January and February 2009 storms.  In September 2009, we established a regulatory asset of $57 million for actual costs incurred.

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We received approval in our 2010 base rate case to recover this asset over a ten year period with recovery beginning August 1, 2010.

In September 2008, high winds from the remnants of Hurricane Ike passed through the service area causing significant outages and system damage.  In October 2008, we filed an application with the Kentucky Commission requesting approval to establish a regulatory asset and defer for future recovery approximately $3 million of expenses related to the storm restoration.  In December 2008, the Kentucky Commission issued an order allowing us to establish a regulatory asset of up to $3 million based on our actual costs for storm damages and service restoration due to Hurricane Ike.  In December 2008, we established a regulatory asset of $2 million for actual costs incurred.  We received approval in our 2010 base rate case to recover this asset over a ten year period beginning August 1, 2010.

In December 2009, a significant snow storm passed through our Virginia service area causing approximately 30,000 customer outages.  We filed a base rate application with the Virginia Commission requesting approval to establish a regulatory asset and defer for future recovery approximately $7 million of expenses related to the storm restoration.  In March 2011, the staff of the Virginia Commission recommended that we begin amortizing these costs over five years concurrent with the effective date of the rates in our 2011 rate case.  As the Virginia Commission has not yet approved this recovery, we cannot predict the outcome of this proceeding.

2008 Rate Case.  In July 2008, we filed an application with the Kentucky Commission requesting an increase in electric base rates.  In January 2009, the Company, the Kentucky Attorney General, the Kentucky Industrial Utility Consumers, Inc. and all other parties to the rate case filed a settlement agreement with the Kentucky Commission, under which our electric base rates decreased by $9 million annually.  An order approving the settlement agreement was received in February 2009.  The new rates were implemented effective February 6, 2009.

Rate Mechanisms

FAC.  Our retail electric rates contain a FAC, whereby increases and decreases in the cost of fuel for electric generation are reflected in the rates charged to retail electric customers.  The FAC allows us to adjust billed amounts for the difference between the fuel cost component of base rates and the actual fuel cost, including transportation costs.  Refunds to customers occur if the actual costs are below the embedded cost component. Additional charges to customers occur if the actual costs exceed the embedded cost component.  A regulatory asset or liability is established in the amount that has been under- or over-recovered due to timing or adjustments to the mechanism.

ECR.  Kentucky law permits us to recover the costs of complying with the Federal Clean Air Act and those federal, state or local environmental requirements that apply to coal combustion wastes and byproducts from facilities utilized for production of energy from coal, including a return of operating expenses, and a return of and on capital invested, through the ECR mechanism.  Pursuant to this mechanism, a regulatory asset or liability is established in the amount that has been under- or over-recovered due to timing or adjustments to the mechanism.  This mechanism includes construction work in progress and a return on equity, currently set at 10.63%.

DSM.  Our rates contain a DSM provision which includes a rate mechanism that provides for concurrent recovery of DSM costs and provides an incentive for implementing DSM programs.  DSM consists of energy efficiency programs that are intended to reduce peak demand and delay the investment in additional power plant construction, provide customers with tools and information to become better managers of their energy usage and prepare for potential future legislation governing energy efficiency.  The provision allows us to recover revenues from lost sales associated with the DSM programs based on program plan engineering estimates and post-implementation evaluations.

For a further discussion of current rates and regulatory matters, see Note 3 to our 2010 Annual Financial Statements.

Environmental Matters

General.  Protection of the environment is a major priority for us, and a significant element of our business activities.  Our properties and operations are subject to extensive environmental-related oversight by federal, state and local regulatory agencies, including via air quality, water quality, waste management and similar laws and regulations.  Therefore, we must

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conduct our operations in accordance with numerous permit and other requirements issued under or contained in such laws or regulations.

Climate Change.  Growing global, national and local attention to climate change matters has led to the development of various international, federal, regional and state laws and regulations directly or indirectly relating to emissions of GHGs, including carbon dioxide, which is emitted from the combustion of fossil fuels such as coal and natural gas, as occurs at our generating stations.  In particular, beginning in January 2011, GHG emissions from stationary sources, including our generating assets, will be subject to regulation by the EPA under the Prevention of Significant Deterioration and Title V provisions of the federal Clean Air Act through the GHG “tailoring” rule if a major modification is undertaken at such facilities.  Other developing laws and regulations include a variety of mechanisms and structures to regulate GHGs, including direct limits or caps, emission allowances or taxes, renewable generation requirements or standards and energy efficiency or conservation measures, and may require investments in transmission, alternative fuel or carbon sequestration or other emission reduction technologies.

While the final terms and impacts of such developments cannot be estimated, we, as a primarily coal-fired utility, could be adversely affected.  Among other emissions, GHGs include carbon-dioxide, which is produced via the combustion of fossil fuels such as coal and natural gas.  Our generating fleet is approximately 66% coal-fired, 34% oil/natural gas-fired and less than 1% hydroelectric based on capacity.  During 2010, we produced approximately 98% of our electricity from coal, 2% from natural gas combustion and less than 1% from hydroelectric generation, based on Mw hours.  During 2010, our emissions of GHGs were approximately 16.4 million metric tons of carbon-dioxide equivalents from our owned or controlled generation sources.  While our generation activities account for the bulk of our GHG emissions, other GHG sources at the Company include operation of motor vehicles and powered equipment, leakage or evaporation associated with natural gas pipelines, refrigerating equipment and similar activities.

Ambient Air Quality.  The Clean Air Act requires the EPA to periodically review the available scientific data for six criteria pollutants and establish concentration levels in the ambient air sufficient to protect the public health and welfare with an extra margin for safety.  These standards are known as NAAQS.  Each state must identify “nonattainment areas” within its boundaries that fail to comply with the NAAQS and develop a state implementation plan, or SIP, to bring such nonattainment areas into compliance.  If a state fails to develop an adequate plan, the EPA must develop and implement a plan.  As the EPA increases the stringency of the NAAQS through its periodic reviews, the attainment status of various areas may change, thereby triggering additional emission reduction obligations under revised SIPs aimed to achieve attainment.

In 1997, the EPA established new NAAQS for ozone and fine particulates that required additional reductions in SO2 and NOx emissions from power plants. In 1998, the EPA issued its final “NOx SIP Call” rule requiring reductions in NOx emissions of approximately 85% from 1990 levels in order to mitigate ozone transport from the midwestern U.S. to the northeastern U.S.  To implement the new federal requirements, Kentucky amended its SIP in 2002 to require electric generating units to reduce their NOx emissions to 0.15 pounds weight per MMBtu on a company-wide basis.  In 2005, the EPA issued the Clean Air Interstate Rule, or CAIR, which required additional SO2 emission reductions of 70% and NOx emission reductions of 65% from 2003 levels.  The CAIR provided for a two-phase cap and trade program, with initial reductions of NOx and SO2 emissions due by 2009 and 2010, respectively, and final reductions due by 2015.  In 2006, Kentucky proposed to amend its SIP to adopt state requirements similar to those under the federal CAIR.

In July 2008, a federal appeals court issued a ruling finding deficiencies in the CAIR and vacating it.  In December 2008, the Court amended its previous order, directing the EPA to promulgate a new regulation, but leaving the CAIR in place in the interim.  The remand of the CAIR results in some uncertainty with respect to certain other EPA or state programs and proceedings and our compliance plans relating thereto, due to the interconnection of the CAIR with such associated programs.

In January 2010, the EPA proposed a revised NAAQS for ozone which would increase the stringency of the standard.  In addition, the EPA published final revised NAAQS standards for NO2 and SO2 in February 2010 and June 2010, respectively, which are more stringent than previous standards.  Depending on the level of action determined necessary to bring local nonattainment areas into compliance with the revised NAAQS standards, our power plants are potentially subject to requirements for additional reductions in SO2 and NOx emissions.

In July 2010, the EPA issued the proposed CATR, which serves to replace the CAIR.  The CATR provides for a two-phase SO2 reduction program with Phase I reductions due by 2012 and Phase II reductions due by 2014.  The CATR provides

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for NOx reductions in 2012, but the EPA advised that it is studying whether additional NOx reductions should be required for 2014.  The CATR is more stringent than the CAIR as it accelerates certain compliance dates and provides for only intrastate and limited interstate trading of emission allowances.  In addition to its preferred approach, the EPA is seeking comment on an alternative approach which would provide for entirely intrastate trading or individual emission limits at each power plant.  The EPA has announced that it will propose additional “transport” rules to address compliance with revised NAAQS standards for ozone and particulate matter which will be issued by the EPA in the future.

Hazardous Air Pollutants.  As provided in the Clean Air Act, the EPA investigated hazardous air pollutant emissions from electric utilities and submitted a report to Congress identifying mercury emissions from coal-fired power plants as warranting further study.  In 2005, the EPA issued the Clean Air Mercury Rule, establishing mercury standards for new power plants and requiring all states to issue new SIPs including mercury requirements for existing power plants.  The EPA issued a model rule which provides for a two-phase cap and trade program with initial reductions due by 2010 and final reductions due by 2018.  The CAMR provided for reductions of 70% from 2003 levels.  The EPA closely integrated the CAMR and CAIR programs to ensure that the 2010 mercury reduction targets would be achieved as a “co-benefit” of the controls installed for purposes of compliance with the CAIR.

In February 2008, a federal appellate court issued a decision vacating the CAMR.  In March 2011, the EPA released the proposed utility MACT rule to replace the CAMR.  The proposed rule would establish standards for hazardous air pollutants emitted by power plants including mercury, other heavy metals, and acid gases.  The emissions limitations specified in the proposed rule are stringent, requiring a 91% reduction in the case of mercury emissions.  Upon promulgation of a final rule, facilities would have a short three-year period to comply with the new requirements, with the possibility of a one-year extension from the state.   The Company will be unable to determine the exact impact on company operations until such time as a final rule is promulgated by the EPA.

Ash Ponds and Coal-Combustion Byproducts.  The EPA has undertaken various initiatives in response to the December 2008 impoundment failure at the TVA’s Kingston power plant, which resulted in a major release of coal combustion byproducts into the environment.  The EPA issued information requests to utilities throughout the country, including us, to obtain information on their ash ponds and other impoundments.  In addition, the EPA inspected a large number of impoundments located at power plants to determine their structural integrity.  The inspections included several of our impoundments, which the EPA found to be in satisfactory condition.  In June 2010, the EPA published proposed regulations for coal combustion byproducts handled in landfills and ash ponds.  The EPA has proposed two alternatives: (1) regulation of coal combustion byproducts in landfills and ash ponds as a hazardous waste; or (2) regulation of coal combustion byproducts as a solid waste with minimum national standards.  Under both alternatives, the EPA has proposed safety requirements to address the structural integrity of ash ponds.  In addition, the EPA will consider potential refinements of the provisions for beneficial reuse of coal combustion byproducts.

Water Discharges and PCB Regulations.  In March 2011, the EPA released a proposed cooling water intake structure rule pursuant to Section 316(b) of the Clean Water Act.  The proposed rule would require a case-by-case review to identify appropriate measures to mitigate the impact of cooling water intake structures on aquatic life.  Mitigation measures required as a result of the review could range from use of smaller mesh screens on intake structures to more costly measures such as construction of cooling towers.  The exact impact of the rule will depend on the provisions contained in the final rule promulgated by EPA and the subsequent implementation of the rule by the states.  The EPA has also announced plans to develop revised effluent limitations guidelines governing discharges from power plants.  The EPA has further announced plans to develop revised standards governing the use of PCBs in electrical equipment.  We are monitoring these ongoing regulatory developments, but will be unable to determine the impact until such time as new rules are finalized.

Impact of Pending and Future Environmental Developments.  As a company with significant coal-fired generating assets, we will likely be substantially impacted by pending or future environmental rules or legislation requiring mandatory reductions in GHG emissions or other air emissions, imposing more stringent standards on discharges to waterways, or establishing additional requirements for handling or disposal of coal combustion byproducts.  These evolving environmental regulations will likely require an increased level of capital expenditures and increased incremental operating and maintenance costs by us over the next several years.  Due to the uncertain nature of the final regulations that will ultimately be adopted by the EPA, including the reduction targets and the deadlines that will be applicable, we cannot finalize estimates of the potential compliance costs, but should the final rules incorporate additional emissions reductions requirements, require more stringent emissions controls, or implement more stringent byproduct storage and disposal practices, such costs will likely be significant.  With respect to NAAQS, CATR, utility MACT rule and coal combustion byproducts developments, based upon

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a preliminary analysis of proposed regulations, we may be required to consider actions such as upgrading existing emissions controls, installing additional emissions controls, upgrading byproduct disposal and storage and possible early replacement of coal-fired units.  Our capital expenditures associated with such actions are preliminarily estimated to be in the $1.5 to $1.75 billion range over the next ten years, although final costs may substantially vary.  With respect to potential developments in water standards, revised PCB standards, or GHG initiatives, costs in such areas cannot be estimated due to the preliminary status or uncertain outcome of such developments, but would be in addition to the above amount and could be substantial.  Ultimately, the precise impact on our operations of these various environmental developments cannot be determined prior to the finalization of such requirements.  Based upon prior regulatory precedent, we believe that many costs of complying with such pending or future requirements would likely be recoverable under the ECR or other potential cost-recovery mechanisms, but we can provide no assurance as to the ultimate outcome of such proceedings before the regulatory authorities.

Environmental laws and regulations applicable to our business and governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater contaminants and employee health and safety are discussed in Note 13 to our 2010 Annual Financial Statements.

State Executive or Legislative Matters

In November 2008, the Commonwealth of Kentucky issued an action plan to create efficient, sustainable energy solutions and strategies and move toward state energy independence.  The plan outlines the following seven strategies to work toward these goals:

·Improve the energy efficiency of Kentucky’s homes, buildings, industries and transportation fleet

·Increase Kentucky’s use of renewable energy

·Sustainably grow Kentucky’s production of biofuels

·Develop a coal-to-liquids industry in Kentucky to replace petroleum-based liquids

·Implement a major and comprehensive effort to increase natural gas supplies, including coal-to-natural gas in Kentucky

·Initiate aggressive carbon capture/sequestration projects for coal-generated electricity in Kentucky

·Examine the use of nuclear power for electricity generation in Kentucky

In December 2009, the Governor of Kentucky’s Executive Task Force on Biomass and Biofuels issued a final report to establish potential strategic actions to develop biomass and biofuels industries in Kentucky.  The plan noted the potential importance of biomass as a renewable energy source available to Kentucky and discussed various goals or mechanisms, such as the use of approximately 25 million tons of biomass for generation fuel annually, allotment of electricity and natural gas taxes and state tax credits to support biomass development.

In January 2010, a state-established Kentucky Climate Action Plan Council commenced formal activities.  The council, which includes governmental, industry, consumer and other representatives, seeks to identify possible Kentucky responses to potential climate change and federal legislation, including increasing statewide energy efficiency, energy independence and economic growth.  The council has established various technical work groups, including in the areas of energy supply and energy efficiency/conservation, to provide input, data and recommendations.

During sessions of the Kentucky General Assembly, legislators have introduced or are expected to introduce various bills with respect to environmental or utility matters, including potential requirements relating to renewable energy portfolios, energy conservation measures, coal mining or coal byproduct operations and other matters.  The most recent legislative session ended without material developments in these areas.  Legislative and regulatory actions as a result of future proposals and their impact on us, which may be significant, cannot currently be predicted.

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Employees and Labor Relations

We had 974 employees at December 31, 2010, consisting of 973 full-time employees and 1 part-time employee.  Of the total employees, 145, or 15%, were operating, maintenance and construction employees represented by the International Brotherhood of Electric Workers Local 2100 and the United Steelworkers of America Local 9447-01.  In August 2009, we and our employees represented by the IBEW Local 2100 entered into a three-year collective bargaining agreement that provides for negotiated increases or changes to wages, benefits or other provisions and annual wage re-openers.  In August 2008, we and our employees represented by the USWA Local 9447-01 entered into a three-year collective bargaining agreement that provides for negotiated increases or changes to wages, benefits or other provisions and annual wage re-openers.

Competition

There are currently no other electric utilities operating within our electric service areas.  Neither the Kentucky General Assembly nor the Kentucky Commission has adopted or approved a plan or timetable for retail electric industry competition in Kentucky.  The nature or timing of any legislative or regulatory actions regarding industry restructuring and their impact on us, which may be significant, cannot currently be predicted.  Virginia, formerly a competitive jurisdiction, has enacted legislation which implements a hybrid model of cost-based regulation.  See Note 3 to our 2010 Annual Financial Statements for further information.

Legal Proceedings

For a description of the significant legal proceedings, including, but not limited to, certain rates and regulatory, environmental, climate change and litigation matters, involving the Company, reference is made to the information in Notes 3 and 13 to our 2010 Annual Financial Statements.

In connection with an administrative proceeding alleging a violation by a former Argentine subsidiary under that country’s 2002-2003 emergency currency exchange laws, claims were brought against the subsidiary’s then directors, including two individuals who are executive officers of the Company, in a specialized Argentine financial criminal court.  Under applicable Argentine laws, directors of a local company may be liable for monetary penalties for a subject company’s violations of the currency laws.  In February 2011, the Argentine court issued an order acquitting the former subsidiary and its directors of all claims, which order has become final.

In the normal course of business from time to time, other lawsuits, claims, environmental actions and other governmental proceedings arise against the Company.  To the extent that damages are assessed in any of these actions or proceedings, the Company believes that its insurance coverage is adequate.  Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to such matters, management, after consultation with legal counsel, does not currently anticipate that liabilities arising out of other currently pending or threatened lawsuits and claims will have a material adverse effect on our financial condition or results of operations.

Franchises and Licenses

We provide electric delivery service in our various service areas pursuant to certain franchises, licenses, statutory service areas, easements and other rights or permissions granted by state legislatures, cities or municipalities or other entities.

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MANAGEMENT

Set forth below is information regarding our executive officers and members of our board of directors.  There are no family relationships among any of the executive officers or directors, nor, except as described under “Executive Compensation — Employment-Related Arrangements” with respect to Messrs. Staffieri and McCall, is there any arrangement or understanding between any executive officer or director and any other person pursuant to which the officer was selected.

There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any executive officer or director during the past ten years.

Officers generally serve in the same capacities at our Parent, the Company and LG&E.

Listed below are the executive officers and directors at April 1, 2011.

Name	Age	Position
Victor A. Staffieri	56	Chairman, President, Chief Executive Officer and Director
S. Bradford Rives	52	Chief Financial Officer, Principal Accounting Officer and Director
John R. McCall	67	Executive Vice President, General Counsel, Corporate Secretary, Chief Compliance Officer and Director
Chris Hermann	63	Senior Vice President—Energy Delivery and Director
Paul W. Thompson	54	Senior Vice President—Energy Services and Director
Paul A. Farr	43	Director
William H. Spence	54	Director

A brief biography of each director and executive officer follows:

Victor A. Staffieri has been Chairman, President and Chief Executive Officer of the Company, LG&E and the Parent since 2001.  Before he was elected to his current position, Mr. Staffieri was President and Chief Operating Officer of LG&E Energy Corp. (“LG&E Energy”), the predecessor to the Parent, from February 1999 to April 2001 and President of the Company and LG&E from June 2000 to April 2001.  He served as Chief Financial Officer of LG&E Energy and LG&E from May 1997 to February 2000 and Chief Financial Officer of the Company from May 1998 to February 1999.  He served as President of Distribution Services Division of LG&E Energy from December 1995 to May 1997, President of LG&E from January 1994 to December 1995 and Senior Vice President of Public Policy of LG&E Energy and LG&E from November 1992 to December 1993 and General Counsel.  Mr. Staffieri has been a Director of the Company, LG&E and the Parent since April 2001.  He served as a Director of E.ON UK (previously, Powergen PLC) from April 2001 to January 2004 and of Edison Electric Institute since 2001.  He holds a bachelor’s degree from Yale University and a juris doctor degree from Fordham University School of Law.

S. Bradford Rives has been Chief Financial Officer of the Company, LG&E and the Parent since 2003 and serves as its Principal Accounting Officer.  Before he was elected to his current position, Mr. Rives was Senior Vice President—Finance and Controller of LG&E Energy, LG&E and the Company from December 2000 to September 2003.  He has been a Director of the Parent since December 2003 and the Company and LG&E since January 2004.  Mr. Rives is a certified public accountant and a member of the Kentucky Society of Certified Public Accountants.  He has a bachelor’s degree in accounting from the University of Kentucky, and a juris doctor degree from the University of Louisville School of Law.  Mr. Rives is a member of the Kentucky and Louisville Bar Associations.

John R. McCall has been Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer of the the Company, LG&E and the Parent since 2006 and Executive Vice President, General Counsel and Corporate Secretary of the Parent and LG&E since July 1994 and of the Company since May 1998.  Mr. McCall has been a Director of the Parent since 2003 and LG&E and the Company since January 2004.  Mr. McCall has a bachelor’s degree and a juris doctor degree from Vanderbilt University.  He is a member of the American, Kentucky and Louisville Bar Associations.  He is a member of the Legal Committee of Edison Electric Institute.

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Chris Hermann has been Senior Vice President—Energy Delivery of the Company, LG&E and the Parent since 2003.  Before he was elected to his current position, Mr. Hermann was Senior Vice President—Distribution Operations, of LG&E Energy, LG&E and the Company from December 2000 to February 2003.  Mr. Hermann has been a Director of the Parent since December 2003 and of the Company and LG&E since 2005.  Mr. Hermann serves on the American Gas Association Advisory Board, Safety Task Force Board and Strategic Planning Committee, Southern Gas Association Board.  He received a B.S. in mechanical engineering from the University of Louisville.

Paul W. Thompson has been Senior Vice President—Energy Services of the Company, LG&E and the Parent since 2000.  Before he was elected to his current position, Mr. Thompson was Senior Vice President—Energy Services of LG&E Energy from August 1999 to June 2000.  He served as Group Vice President for LG&E Energy Marketing, Inc. from June 1998 to August 1999 and as Vice President—Retail Electric Business for LG&E from December 1998 to August 1999.  Mr. Thompson served as Vice President—Retail Electric Business for LG&E from September 1996 to June 1998 and as Vice President, Business Development for LG&E Energy from July 1994 to September 1996.  Previously, Mr. Thompson served in several management positions for Koch Industries and Lone Star Technologies.  Mr. Thompson has a bachelor’s degree in mechanical engineering from the Massachusetts Institute of Technology, and a master’s degree in business administration in finance and accounting from the University of Chicago.  Mr. Thomson has been a director of the Company, LG&E and the Parent since January 2005.  Mr. Thompson is a member of the American Society of Mechanical Engineers.  He is a board member and former Chairman of the Board of the FutureGen Industrial Alliance.  He serves on the Boards of Ohio Valley Electric Corp., Electric Energy Inc., and the Center for Applied Energy Research.

Paul A. Farr has been Executive Vice President and Chief Financial Officer of PPL Corporation since April 2007. Prior to assuming his current position in April of 2007, Mr. Farr was named Senior Vice President-Financial in August 2005, Vice President and Controller in August 2004 and served as Controller until January 2006. Prior to serving in his PPL Corporation positions, Mr. Farr served as Senior Vice President of PPL Global, LLC, a subsidiary of PPL Corporation that owns and operates electricity businesses in the United Kingdom, as well as formerly in Latin America, from January 2004, as well as Vice President-International Operations from June 2002 and Vice President since October 2001. Mr. Farr also served for several years as Vice President and Chief Financial Officer of PPL Montana, LLC, and in other management positions at PPL Global. Before joining PPL in 1998, Mr. Farr served as international project finance manager at Illinova Generating Company, as international tax manager for Price Waterhouse LLP and as an international tax senior at Arthur Andersen. Mr. Farr earned a bachelor’s degree in accounting from Marquette University and a master’s degree in management from Purdue University. He is a certified public accountant and also serves on the boards of LG&E, KU, PPL Electric Utilities Corporation and PPL Energy Supply, LLC. Mr. Farr has been a director of the Company since November 2010.

William H. Spence has been Executive Vice President and Chief Operating Officer of PPL Corporation since June 2006, and President of PPL Generation, LLC, a subsidiary of PPL, since June 2008. Prior to joining PPL in June 2006, Mr. Spence had 19 years of service with Pepco Holdings, Inc. and its heritage companies, Delmarva Power and Conectiv. He served as Senior Vice President of Pepco Holdings from August 2002 and as Senior Vice President of Conectiv Holdings since September 2000. He joined Delmarva Power in 1987 in that company’s regulated gas business, where he held various management positions before being named Vice President of Trading in 1996. Mr. Spence earned a bachelor’s degree in petroleum and natural gas engineering from Penn State University and a master’s degree in business administration from Bentley College. He also serves on the boards of the Company, LG&E, PPL Electric Utilities Corporation and PPL Energy Supply, LLC. Mr. Spence has been a director of the Company since November 2010.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

On November 1, 2010, PPL acquired our Parent, and its subsidiaries, including LG&E and us, from the German company E.ON AG, which we refer to as the acquisition or change in control.  In this Compensation Discussion and Analysis and the executive compensation tables and narratives that follow, we discuss 2010 compensation paid to our named executive officers for services provided to our Parent, LG&E and us.  The information we are providing relates to total compensation for our named executive officers for 2010, without any allocation among the companies.

Our named executive officers are:

·Victor A. Staffieri - chairman of the board, president and chief executive officer of our Parent, LG&E and us

·S. Bradford Rives - chief financial officer of our Parent, LG&E and us

·John R. McCall - executive vice president, general counsel, corporate secretary and chief compliance officer of our Parent, LG&E and us

·Chris Hermann - senior vice president — energy delivery of our Parent, LG&E and us and

·Paul W. Thompson - senior vice president — energy services of our Parent, LG&E and us.

The named executive officers also serve as directors of our Parent, LG&E and us

The E.ON AG Board of Management, a committee comprised of E.ON AG senior management, set compensation for our named executive officers for 2010 prior to the acquisition.  The E.ON AG Board of Management consulted with Mr. Staffieri, the E.ON AG chairman of the board, chief executive officer and president and the E.ON AG senior vice president of group corporate officer resources in connection with setting executive compensation.  Because E.ON AG, our Parent, LG&E and the Company are not subject to the listing standards of a U.S. national securities exchange, there was no requirement for a compensation committee or other committee of independent board directors to determine compensation for our named executive officers for 2010.  When Mr. Staffieri became an executive officer of PPL, which is a listed company, the PPL Compensation, Governance and Nominating Committee, a committee of independent directors as required by the New York Stock Exchange, assumed oversight of his compensation.

In connection with the acquisition, contractual commitments provide for continuation, for 24 months, of specified components of the compensation program in place for our named executive officers, on terms materially no less favorable in the aggregate than the then-current terms.  This included each named executive officer’s annual base salary, short-term incentive opportunity and cash-based long-term incentive opportunity in addition to specified benefits, including the supplemental executive retirement plan, a non-qualified deferred compensation plan and certain perquisites.

The PPL Compensation, Governance and Nominating Committee, at its October 21, 2010 meeting, ratified or approved the following for Mr. Staffieri:

·current base salary

·2010 short-term and long-term incentive awards and targets

·accelerated vesting of outstanding long-term incentive awards made in 2008, 2009 and 2010, which were paid in cash upon the acquisition

·a cash divestiture incentive payment, previously approved by the E.ON AG Board of Management

·all other payments made to Mr. Staffieri during 2010 relating to benefit plans or perquisites and

·a new grant of PPL restricted stock units to be made for retention purposes.

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The Compensation, Governance and Nominating Committee also ratified Mr. Staffieri’s amended and restated employment and severance agreement with our Parent and his participation in the LG&E Energy Corp. Supplemental Executive Retirement Plan and the E.ON U.S. LLC Nonqualified Savings Plan.  In January 2011, the Compensation, Governance and Nominating Committee approved payment of Mr. Staffieri’s 2010 short-term incentive award.

Compensation for the other named executive officers after the change in control was reviewed by the PPL vice president — human resources and services, the PPL chief executive officer and the PPL chief operating officer.  The Corporate Leadership Council approved grants of restricted stock units to the other named executive officers for retention purposes and approved payment of their 2010 short-term incentive awards in January 2011.

Compensation Elements

The named executive officers’ compensation for 2010 consisted primarily of base salary, short-term incentive awards, long-term incentive awards and payments relating to the acquisition.  The acquisition-related payments included a cash divestiture incentive payment, as well as payments relating to incentive awards that accelerated because the acquisition constituted a change in control.  Mr. Staffieri and Mr. McCall had employment agreements pursuant to which they were guaranteed minimum base salaries and target short-term and long-term incentive award opportunities.

Direct Compensation

Target direct compensation for 2010 included base salary, short-term incentive and long-term incentive awards.  Target incentive levels were determined as a percentage of base salary, so that any increase in base salary resulted in an increase in the target short-term and long-term incentive awards.

Table 1 below shows the allocation of each element of total target direct compensation for the named executive officers for 2010.

Table 1

Elements of Target Compensation as a Percentage of Total Target Direct Compensation — 2010

	Total Target Direct Compensation(1)
Name	Base Salary (%)	Short-Term Incentive Target (%)	Long-Term Incentive Target (%)
Victor A. Staffieri Chief Executive Officer	29	21	50
S. Bradford Rives Chief Financial Officer	43	22	35
John R. McCall EVP, General Counsel, Corporate Secretary and Chief Compliance Officer	40	20	40
Chris Hermann SVP - Energy Delivery	48	24	28
Paul W. Thompson SVP - Energy Services	43	22	35

(1) Percentages based on target award levels as a percentage of total target direct compensation.  Actual amounts earned for short-term and long-term incentives are reflected in the Summary Compensation Table.

In December of each year, E.ON AG’s Board of Management reviewed and approved the base salaries for the named executive officers.  Due to 2010 budget constraints, base salaries for the named executive officers were frozen until the E.ON AG Board of Management approved an increase of three percent on March 3, 2010, retroactive to January 1, based upon recommendations by Mr. Staffieri.  Mr. Staffieri received no increase.

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Table 2

2010 Base Salary Adjustments by Position — Effective January 1, 2010

	2009 Base Salary		2010 Base Salary		% Change
Victor A. Staffieri	$	811,220	$	811,220	0	%
S. Bradford Rives	$	402,300	$	414,400	3	%
John R. McCall	$	493,100	$	507,900	3	%
Chris Hermann	$	316,600	$	326,100	3	%
Paul W. Thompson	$	375,500	$	386,800	3	%

Short-Term Incentive Awards

In March 2010, the E.ON AG Board of Management granted short-term incentive awards to the named executive officers under the Powergen Short-Term Incentive Plan.  E.ON AG’s short-term incentive award program was designed to reward annual performance compared to financial, business and individual goals determined jointly by Mr. Staffieri and the E.ON AG Board of Management.  The short-term incentive award, unlike base salary, was “at risk” because awards were based on achievement of these financial, business and individual goals.  Actual payments could range from 0 percent to 200 percent of the target award.

Table 3

2010 Short-Term Incentive Targets as a Percentage of Base Salary by Position — Effective January 1, 2010

Position	Targets as a % of Base Salary
Victor A. Staffieri	75	%
S. Bradford Rives	50	%
John R. McCall	50	%
Chris Hermann	50	%
Paul W. Thompson	50	%

The E.ON AG Board of Management approved the short-term incentive goals and weightings for 2010 as outlined in the table below.

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Table 4

2010 Short-Term Incentive Goals and Weightings before Change in Control

	E.ON AG Adjusted EBIT		E.ON U.S. Adjusted EBIT		Lost-Time Injury Frequency / Safety		Management Effectiveness
Victor A. Staffieri	20	%	30	%	10	%	40	%
S. Bradford Rives	20	%	30	%			50	%
John R. McCall	20	%	30	%	7	%	43	%
Chris Hermann	20	%	30	%	10	%	40	%
Paul W. Thompson	20	%	30	%			50	%

In connection with the acquisition, the PPL vice president — human resources and services and Mr. Staffieri discussed alternatives to the E.ON AG adjusted earnings before interest and taxes, or EBIT, measure.  Because E.ON AG would not be in a position to share financial information after the closing of the acquisition and the public release of E.ON AG financial results would not be timely as to the normal PPL incentive award payment practices, the E.ON AG adjusted EBIT measure was replaced with a combined LG&E and KU Energy LLC adjusted EBIT and PPL earnings per share measure.  In addition, Messrs. Rives’, McCall’s and Thompson’s awards were modified to add lost-time injury frequency/safety as a goal with a 10 percent weighting, and the weighting assigned to the individual management effectiveness component of their awards was reduced to 40 percent.  The short-term incentive goals and weightings after the change in control are outlined below.

Table 5

2010 Short-Term Incentive Goals and Weightings after Change in Control

	Combined LG&E and KU Energy Adjusted EBIT + PPL EPS		LG&E and KU Energy Adjusted EBIT		Lost-Time Injury Frequency / Safety		Management Effectiveness
Victor A. Staffieri	20	%	30	%	10	%	40	%
S. Bradford Rives	20	%	30	%	10	%	40	%
John R. McCall	20	%	30	%	10	%	40	%
Chris Hermann	20	%	30	%	10	%	40	%
Paul W. Thompson	20	%	30	%	10	%	40	%

Performance could range from 0 percent to 200 percent of target for each goal, but the award formula is additive, meaning that a zero result for one goal would not cause the named executive officer to forfeit the entire award.  Payouts for percentile ranks falling between threshold and target and between target and maximum would be interpolated.  To earn 100 percent of the total target award, the named executive officers had to attain 100 percent of target on all of the goals.

EBIT and EPS Measures.  The 2010 short-term incentive financial measures were (i) combined LG&E and KU Energy LLC adjusted EBIT and PPL earnings per share (EPS) from ongoing operations and (ii) full year LG&E and KU Energy LLC adjusted EBIT.  Adjusted EBIT is equal to earnings before interest and taxes as reported in our Parent’s financial statements,

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adjusted for impacts related to the acquisition and was targeted for the full year at $490 million.  For the combined adjusted EBIT and PPL EPS goals, the targets were based on the full year adjusted EBIT of $490 million and EPS of $2.87; after determining performance for the full year in relation to the targets, the amounts were then prorated — 10/12 for adjusted EBIT and 2/12 for EPS.  No payment would be earned under the financial measures component of the award if PPL EPS were below $2.61 and adjusted EBIT did not exceed $343 million.  The maximum payment would be earned for achievement of PPL EPS of $3.10 or more and adjusted EBIT was at least $637 million.

LTIF/Safety Measure.  The named executive officers’ operational goal was “lost-time injury frequency,” or LTIF, based on a target that was established by the E.ON AG Board of Management, taking into consideration prior year results, with the expectation that current year results would be better than the prior year.

The goals, weightings and actual results for the adjusted EBIT, EPS and LTIF/Safety goals were as follows:

Table 6

2010 Short-Term Incentive Goals and Results

Goal	Weighting as % of Total Target Award	Target	Actual Results	Results as % of Total Target Award
Financial
Combined LG&E and KU Energy LLC Adjusted EBIT and	16.666	Full year: $490 million (min: $343 million) (max: $637 million)	$551 million (between target and maximum)	23.665
PPL EPS	3.334	Full year: $2.87 (min: $2.61) (max: $3.10)	$3.13 (above maximum)	6.668
LG&E and KU Energy LLC Adjusted EBIT	30.00	Full year: $490 million (min: $343 million) (max: $637 million)	$551 million (between target and maximum)	42.60
Lost-Time Injury Frequency/Safety
Employee Lost-Time Injury Frequency	2.50	< 1.2	0.38 (above maximum)	5.00
Contractor Lost-Time Injury Frequency	2.50	< 1.3	0.95 (above maximum)	5.00
Safety Systems and Safety Culture Indicator	5.00	Implement program to reinforce safety culture	Satisfied (at target)	5.00
			Total	87.933
Management Effectiveness	40.00	See discussion below

Management Effectiveness Measure.  The E.ON AG Board of Management, the E.ON AG chairman of the board, chief executive officer and president and Mr. Staffieri agreed on Mr. Staffieri’s individual management effectiveness goals.  Each of the other named executive officers agreed on his individual management effectiveness goals with Mr. Staffieri, who then submitted the goals to the E.ON AG Board of Management and the E.ON AG chairman of the board, chief executive officer and president for approval.

Victor A. Staffieri.  Mr. Staffieri’s individual performance goals for 2010 were as follows:

·successfully prosecute 2010 rate case before the Kentucky Commission, as measured by annualized revenue increase granted.  Consideration would be given, as appropriate, to the impact of strategic initiatives, financing costs, depreciation expense and other regulatory proceedings

·maintain good regulatory relations and full recovery of Environmental Cost Recovery surcharge for regulated expenditures

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·effectively manage investment program, balancing capital constraints with internal and regulatory expectations of providing safe and reliable service and

·develop scenarios to understand effects of possible carbon dioxide (CO2) requirements.

In determining Mr. Staffieri’s performance for the short-term incentive award, the PPL Compensation, Governance and Nominating Committee considered the recommendations of James H. Miller, PPL chief executive officer.  In developing his recommendations, Mr. Miller consulted with William H. Spence, PPL chief operating officer, and conducted a performance review at the end of 2010 with assessment input from Mr. Spence and the PPL vice president-human resources and services.  The assessment contained two dimensions — an assessment of attainment of overall objectives for the year, as well as an assessment of values, behaviors and key attributes.

In particular, the PPL Compensation, Governance and Nominating Committee considered that, under Mr. Staffieri’s leadership:

·our Parent achieved the successful rate case goal with annualized revenue increase exceeding goal target of $187 million

·the quality of his operations’ regulatory relations, as reflected in the Kentucky Commission  approval of the rate case settlement without adjustments

·the achievement of the Environmental Cost Recovery surcharge recovery which fell short of the maximum target of $221 million and the GAAP budget capital spending at $610 million and

·our Parent successfully updated the long-term financing planning model to adjust for the various tenets of proposed CO2 legislation and calculated the impact of various proposals throughout the year.  This effort was expanded to cover a number of new proposed Environmental Protection Agency regulations.

Mr. Staffieri’s performance was rated at 100 percent, resulting in the management effectiveness component of his award to be earned at 40 percent.

When determining achievement of individual objectives for the other named executive officers, Mr. Staffieri, the PPL vice president — human resources and services, Mr. Miller and Mr. Spence assessed each named executive officer’s performance based on his individual management effectiveness goals.  The assessments were further reviewed by the PPL Corporate Leadership Council.  The overall rating also reflected an element of how the named executive officers achieved objectives consistent with company values and behaviors.

S. Bradford Rives.  Mr. Rives’ individual performance goals for 2010 were as follows:

·support company goals and initiatives for safety, wellness, diversity, affirmative action and model company values and behaviors.  Ensure performance management and individual development plans are completed for each employee, and that job performance and behaviors align with position expectations and support company goals and objectives.  Ensure succession planning is considered in creating development plans, promotions, reassignments, and hiring decisions.  Inform, evaluate and discuss employee opinion survey results and implement action plans

·successfully prosecute 2010 rate case before the Kentucky Commission, as measured by annualized revenue increase granted.  Consideration would be given, as appropriate, to the impact of strategic initiatives, financing costs, depreciation expense and other regulatory proceedings

·develop scenarios to understand effects of possible CO2 requirements

·effectively manage working capital

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·effectively manage information technology function through transition and hire a new chief information officer and

·advance strategic initiatives as directed by Mr. Staffieri and E.ON AG including refinancing intercompany debt.

The assessment of Mr. Rives’ performance took into consideration that he:

·provided significant contributions relating to the  November 1, 2010 change in control

·provided key testimony, settlement position development and management oversight of the rate case that was settled in July 2010

·oversaw the completion of the refinancing activity in the fourth quarter

·coordinated a search for and hired a new chief information officer in 2010 and provided financial oversight of the capital and expense budgets throughout the organization, effectively managing changing priorities

·was involved in the environmental scenario development incorporated into the 2011-2015 business plan and

·supervised the tax department in reaching settlements of state and federal tax matters.

Mr. Rives’ performance was rated at 140 percent, resulting in the management effectiveness component of his award to be earned at 56 percent.

John R. McCall.  Mr. McCall’s individual performance goals for 2010 were as follows:

·support company goals and initiatives for safety, wellness, diversity, affirmative action and model company values and behaviors.  Ensure performance management and individual development plans are completed for each employee, and that job performance and behaviors align with position expectations and support company goals and objectives.  Ensure succession planning is considered in creating development plans, promotions, reassignments, and hiring decisions.  Inform, evaluate and discuss employee opinion survey results and implement action plans

·advance strategic initiatives as directed by Mr. Staffieri and E.ON AG

·resolve litigation and

·deliver 2010 regulatory compliance oversight.

The performance assessment of Mr. McCall took into consideration that he:

·led the strategy and implementation efforts for early regulatory approval of the change in control

·worked with Mr. Rives’ team to reach a successful settlement of the rate case proceeding

·was heavily involved in fourth quarter refinancing efforts

·worked with the tax department to settle matters with state and federal tax authorities

·oversaw the successful representation of company interests during the last Kentucky legislative session and

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·provided effective oversight of the regulatory compliance program and supported corporate responsibility and diversity efforts and communication strategy.

Mr. McCall’s performance was rated at 140 percent, resulting in the management effectiveness component of his award to be earned at 56 percent.

Chris Hermann.  Mr. Hermann’s individual performance goals for 2010 were as follows:

·support company goals and initiatives for safety, wellness, diversity, affirmative action and model company values and behaviors.  Ensure performance management and individual development plans are completed for each employee, and that job performance and behaviors align with position expectations and support company goals and objectives.  Ensure succession planning is considered in creating development plans, promotions, reassignments, and hiring decisions.  Inform, evaluate and discuss employee opinion survey results and implement action plans

·achieve overall energy delivery employee recordable injury rate. Reinforce the safety culture in energy delivery, through leadership, communications, performance monitoring and maximizing employee involvement. Drive sustained improvement in the safety performance of energy delivery and contractor companies

·achieve energy delivery budget and capital commitments.  Continue to identify and implement process improvements in energy delivery.  Implement supplier related initiatives to reduce cost and improve supplier diversity and relationships.  Manage energy delivery budget to address unexpected shortfalls due to storm restoration efforts and

·maintain high reliability and achieve availability and reliability targets.

The performance assessment of Mr. Hermann took into consideration that he and his team:

·received the Edison Electric Institute’s Emergency Recovery Award for outstanding restoration efforts related to the 2009 Kentucky ice storm, which was characterized by Kentucky’s governor as the worst storm in the Commonwealth’s history

·achieved 2010 reliability and availability results that improved over 2009 results, although they did not meet target in 2010

·achieved energy delivery budget and commitments

·successfully launched major technology and service improvement initiatives that enhanced work efficiency and resulted in positive business and customer impacts and

·received eleven state, national and international awards for safety performance.

Mr. Hermann’s performance was rated at 135 percent, resulting in the management effectiveness component of his award to be earned at 54 percent.

Paul W. Thompson.  Mr. Thompson’s individual performance goals for 2010 were as follows:

·achieve upstream generation results for safety, unplanned unavailability, achievement of financial availability deviation and successful delivery of new build project

·support company goals and initiatives for safety, wellness, diversity, affirmative action and model company values and behaviors.  Ensure performance management and individual development plans are completed for each employee, and that job performance and behaviors align with position expectations and support company goals and objectives.  Ensure succession planning is considered in creating development plans,

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promotions, reassignments, and hiring decisions.  Inform, evaluate and discuss employee opinion survey results and implement action plans

·lead strategic issues to include environmental, political, regulatory, transmission and long-term investments and

·strengthen personal network and relationships with all other E.ON AG officers.  Spend time each quarter in the field, build local, state and federal community network and relationships.

The performance assessment of Mr. Thompson took into consideration that he:

·oversaw the successful completion of the Trimble County construction

·oversaw the operations of the generating fleet which performed effectively during record breaking summer peak demand, achieved safety results better than target and managed budgets well

·developed a good management team

·was a key player in developing strategy on environmental issues, scenario planning and communications and

·was effective in settling transmission related issues with customers in 2010.

Mr. Thompson’s performance was rated at 140 percent, resulting in the management effectiveness component of his award to be earned at 56 percent.

The following table shows each goal as a percentage of the total target award earned and the total goal results.

Table 7

Short-Term Incentive Goals and Results as Percent of Award Earned

Name	Combined LG&E and KU Energy LLC Adjusted EBIT + PPL EPS (%)	LG&E and KU Energy LLC Adjusted EBIT (%)	Lost-Time Injury Frequency / Safety (%)	Management Effectiveness (%)	Total Goal Result as % of Target Award Earned
Victor A. Staffieri	30.33	42.6	15	40	127.93
S. Bradford Rives	30.33	42.6	15	56	143.93
John R. McCall	30.33	42.6	15	56	143.93
Chris Hermann	30.33	42.6	15	54	141.93
Paul W. Thompson	30.33	42.6	15	56	143.93

The total goal results were then used to determine short-term incentive payments as follows:

2010
Base
Salary
(Table 2) X Incentive
Target
Percentage
(Table 3) X Total
Goal
Results
(Table 7) = 2010 Short-Term
Incentive Award
Payment
(Table 8)

The named executive officers received the following short-term incentive award payments, which are included in the Summary Compensation Table in the column headed “Non-Equity Incentive Plan Compensation.”

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Table 8

Short-Term Incentive Awards for 2010 Performance

	Salary Basis for Award	Target as a % of Salary	Total Goal Results	2010 Short-Term Incentive Award Payment
Victor A. Staffieri	$811,220	75%	127.93%	$778,400
S. Bradford Rives	$414,400	50%	143.93%	$298,200
John R. McCall	$507,900	50%	143.93%	$365,500
Chris Hermann	$326,100	50%	141.93%	$231,400
Paul W. Thompson	$386,800	50%	143.93%	$278,400

Long-Term Incentive Awards Granted in 2010 Prior to the Change in Control

The E.ON AG Board of Management granted long-term incentive awards payable in cash to each named executive officer in 2010.  The long-term incentive awards had two components:

·75 percent of the total target award opportunity was comprised of performance units with a 2010-2012 performance period granted under the LG&E Energy Corp. Long-Term Performance Unit Plan and

·25 percent of the total target award opportunity was comprised of share performance rights with a 2010-2013 performance period granted under the E.ON Share Performance Plan.

Performance Units

The value of the performance units was dependent upon company performance against a value-added target at the end of the 2010-2012 performance period.  Value-added is the amount by which return on capital employed exceeds the target, based on average cost of capital.  Payment could range from 0 percent to 150 percent of target.  Because of the change in control, vesting of the performance units was accelerated and they were paid out at target.

Share Performance Rights

The value of share performance rights was based on E.ON AG total shareholder return in comparison to the Dow Jones STOXX Utilities Index (Total Return EUR) over the 2010-2013 performance period, which we refer to as the performance factor, and the closing value of E.ON AG stock.  Executives would receive payment at the end of the performance period equal to:

# of Share Performance Rights Granted x Performance Factor x Closing Value of E.ON AG Stock

E.ON AG’s calculation agent, HSBC Trinkaus, calculated the closing value of E.ON AG stock, which is the average closing price for the 60 trading days preceding the end of the performance period.  Values provided by HSBC Trinkaus were in Euros and converted to US currency using the average exchange rate for the 60 trading days preceding the end of the performance period.  Payment of these awards was determined as follows:

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If the performance of E.ON AG stock during the performance period was identical to the performance of the Dow Jones STOXX Utilities Index, the performance factor is “1.”  If E.ON AG’s total shareholder return under-performed the Dow Jones STOXX Utilities Index, the target number of share performance rights granted would be decreased by five percent for every one percent of under-performance, with under-performance of 20 percentage points or more resulting in no payment.  If E.ON AG’s total shareholder return outperformed the Dow Jones STOXX Utilities Index, the target number of share performance rights granted would be increased by one percent for every one percent of outperformance, with a maximum performance factor of 3.  The maximum amount payable for this award was three times the initial E.ON AG share price of €27.25, or €81.75, per performance right.  The grant date fair value of the share performance rights is included in the Summary Compensation Table in the column headed “Stock Awards” and in the Grants of Plan-Based Awards During 2010 table in the column headed “Grant Date Fair Value of Stock and Option Awards.”

Table 10

2010 Long-Term Incentive Award Targets

	Targets as a % of Base Salary
	E.ON Share Performance Rights	LG&E Energy Corp. Performance Units	Total
Victor A. Staffieri	43.75%	131.25%	175%
S. Bradford Rives	20%	60%	80%
John R. McCall	25%	75%	100%
Chris Hermann	15%	45%	60%
Paul W. Thompson	20%	60%	80%

Payment of Long-Term Incentive Awards Granted in 2007

The long-term incentive awards granted by the E.ON AG Board of Management to the named executive officers in 2007 for the 2007-2009 performance period vested and were paid in cash in January 2010.

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Performance Units

The performance unit awards granted under the LG&E Energy Corp. Long-Term Performance Unit Plan were based on a value-added target.  Results were 119 percent of target.  The results were approved by the E.ON AG Board of Management at its January 2010 meeting.

Share Performance Rights

The share performance rights granted under the E.ON Share Performance Plan were paid based on a performance factor of 1.11, indicating that E.ON AG’s total shareholder return outperformed the Dow Jones STOXX Utilities Index by 11 percentage points, and an average closing value of E.ON AG stock of €81.76, which was converted to $121.02, each as adjusted.  E.ON AG effected a 3-for-1 stock split, effective August 1, 2008.  While the share performance rights were not adjusted for the split, in determining payment, the average closing value was calculated and then adjusted by HSBC Trinkaus to give effect to the stock split.

The payments in 2010 of these long-term incentive awards are included in Table 11 below.

Table 11

Long-Term Incentive Awards Granted in 2007 and Paid in 2010

	E.ON AG Share Performance Rights(1)	LG&E Energy Performance Units	Total
Victor A. Staffieri	$357,983	$1,182,808	$1,540,791
S. Bradford Rives	$81,121	$268,036	$349,157
John R. McCall	$124,305	$410,728	$535,033
Chris Hermann	$47,758	$158,186	$205,944
Paul W. Thompson	$75,740	$250,186	$325,926

(1)E.ON AG share performance rights payments are included in the Option Exercises and Stock Vested table in the column headed “Value Realized on Vesting.”

Accelerated Payment of Outstanding Long-Term Incentive Awards Granted in 2008, 2009 and 2010 upon Change in Control

Outstanding long-term incentive awards granted in 2008, 2009 and 2010 vested and were paid out as a result of the November 1, 2010 change in control.

Performance Units

The LG&E Energy Corp. Long-Term Performance Unit Plan provides for payment of outstanding awards upon a change in control based on the higher of actual performance or target.  Payment of these awards was based on actual results for 2008, 2009 and the nine month period ended September 30, 2010 and results at target for 2011 and 2012.

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Table 12

LG&E Energy Corp. Long-Term Performance Unit Plan Award Summary

Share Performance Rights

Payments from the E.ON Share Performance Plan were based on E.ON AG total shareholder return for the period ending September 30, 2010 and the average closing value of E.ON AG stock of €22.29, or $29.64, as determined by HSBC Trinkaus, for the 60 trading days preceding November 1, 2010, the effective date of the change in control.

Table 13 below reflects payments made in 2010 as a result of accelerated vesting upon the change in control under the E.ON Share Performance Unit Plan and the LG&E Energy Corp. Long-Term Performance Unit Plan.

Table 13

Long-Term Incentive Award Payments Made in 2010

	E.ON AG Share Performance Rights(1)	LG&E Energy Performance Units (2)	Total
Victor A. Staffieri	$282,761	$3,745,493	$4,028,254
S. Bradford Rives	$64,674	$857,536	$922,210
John R. McCall	$99,121	$1,313,886	$1,413,007
Chris Hermann	$38,172	$506,126	$544,298
Paul W. Thompson	$60,382	$800,424	$860,806

(1)E.ON AG share performance rights payments are included in the  Summary Compensation Table in the column headed “All Other Compensation” and in the Option Exercises and Stock Vested table in the column headed “Value Realized on Vesting.”

(2)LG&E Energy performance unit payments are included in the Summary Compensation Table in the column headed “All Other Compensation.”

Divestiture Incentive Awards Paid in 2010

In 2008, the E.ON AG Board of Management granted an incentive award opportunity to the named executive officers in connection with the consummation of a change in control of our Parent.  Payment of the award opportunity depended upon objective factors - the price paid for our Parent - and subjective factors - preparation of information, data room and management presentations, support of negotiations and definitive documents, participation in regulatory proceedings and

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execution of other tasks in support of the change in control.  Possible payments ranged from 0 percent to 150 percent of base salary and target short-term incentive for the year in which the change in control occurred.  The E.ON AG chairman, chief executive officer and president assessed the named executive officers’ performance as a team with respect to this award opportunity and determined that they had earned the maximum payments as listed in the table below.

Table 14

Earned Divestiture Incentive Award Payments

Name	Threshold ($)	Target ($)	Maximum ($)	Amount Earned ($)(1)
Victor A. Staffieri	354,909	1,419,635	2,129,453	2,129,453
S. Bradford Rives	155,400	621,600	932,400	932,400
John R. McCall	190,463	761,850	1,142,775	1,142,775
Chris Hermann	122,288	489,150	733,725	733,725
Paul W. Thompson	145,050	580,200	870,300	870,300

(1)Amounts earned are included in the Summary Compensation Table in the column headed “Non-Equity Incentive Plan Compensation.”

Retention Agreements and Restricted Stock Unit Awards Granted by PPL in 2010

PPL entered into retention agreements with the named executive officers on December 1, 2010, pursuant to which they were granted restricted stock units payable in PPL common stock.  The named executive officers receive cash dividend-equivalents during the period of restriction that are not subject to forfeiture.  In his retention agreement, Mr. Staffieri also agreed to modify the perquisites he received pursuant to his employment and severance agreement and gave up an employer-paid country club membership and company-paid use of air transportation for any non-business purpose, as well as, effective January 1, 2011, tax gross-up payments on his perquisites.  PPL entered into the retention agreements to encourage the named executive officers to remain employed by affiliates of PPL and to compensate Mr. Staffieri for the loss of these perquisites.

The named executive officers received the following awards:

Table 15

2010 Restricted Stock Unit Awards

Name	Number of Restricted Stock Units Granted (#)	Grant Date  Fair Value ($)(1)	Vesting Date
Victor A. Staffieri	80,940	2,129,531	December 1, 2012
Bradford Rives	23,630	621,705	December 1, 2012
John R. McCall	28,960	761,938	December 1, 2011
Chris Hermann	18,590	489,103	December 1, 2012
Paul W. Thompson	22,050	580,136	December 1, 2012

(1)The grant date fair value of the restricted stock units is included in the Summary Compensation Table in the column headed “Stock Awards” and in the Grants of Plan-Based Awards During 2010 table in the column headed “Grant Date Fair Value of Stock and Option Awards.”

The named executive officers must remain continuously employed by affiliates of PPL through the vesting date, unless the executive’s employment is terminated due to death or disability. They must also sign a release of liability agreement to receive payment of their awards.  If employment is terminated due to death or disability, payment will be prorated.

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Perquisites and Other Benefits

The named executive officers received the perquisites and other benefits listed below in 2010.  As discussed above, in connection with the change in control, Mr. Staffieri agreed to modify his perquisites.

·annual $15,000 auto allowance to lease a vehicle and personal use of that vehicle.  If the total lease cost is less than the annual allowance, the difference is paid in cash to the named executive officer

·country club membership for Mr. Staffieri

·personal financial planning and tax preparation services

·company-paid reserved parking

·supplemental executive term life insurance for all named executive officers, except Mr. McCall who received a cash payment instead and

·travel on the company aircraft for spouses of Messrs. Staffieri and McCall when the executive traveled on the aircraft for business purposes.

Our Parent paid a full tax gross-up to executives for additional tax expenses in connection with personal usage of executive auto, any difference between the auto lease allowance and total lease cost that was paid in cash, country/luncheon club membership, tax preparation fees and financial planning services and spousal air travel, and for Mr. Staffieri, life insurance benefits.

Matching Contributions on Nonqualified Deferred Compensation

The named executive officers participate in the E.ON U.S. LLC Nonqualified Savings Plan and may elect to defer up to 75 percent of their base pay and short-term incentive pay.  Our Parent matches executive contributions to the E.ON U.S. LLC Nonqualified Savings Plan equal to 70 percent of the first six percent deferred.

Employment Agreements

In October 2010, our Parent entered into amended and restated employment and severance agreements with Messrs. Staffieri and McCall that replaced previous agreements, dated February 25, 2000, as amended, with LG&E Energy Corporation and Powergen plc.  The agreements provide for changes needed to reflect the change in control, Messrs. Staffieri’s and McCall’s retention with our Parent and their anticipated roles after the change in control.  The agreements have an initial two-year term, with automatic one-year extensions and provide for minimum base salary, target short-term incentive and long-term incentive levels, participation in employee benefit programs, severance and change in control protection, tax gross-ups, perquisites and other benefits substantially similar to those in the previous agreements.

The other named executive officers entered into retention and severance agreements in October 2010 that replaced previous agreements with LG&E Energy Corp. and E.ON AG.  Messrs. Rives’, Hermann’s and Thompson’s agreements provide for changes needed to reflect the change in control, and their retention with our Parent.  The new retention and severance agreements have an initial two-year term, with automatic one-year extensions and provide for severance payments, tax gross-ups and benefits upon specified terminations of employment including those in connection with a future change in control, excluding a change in control of PPL, that are substantially similar to those in the previous agreements.  The benefits provided under the named executive officers’ agreements replaced any other benefits provided by our Parent or any prior employment-related agreement. Additional details on the terms of these employment and severance agreements and the retention and severance agreements are contained in the “Employment-Related Arrangements” section.

Tax and Accounting Considerations

Sections 280G and 4999. While the old employment agreements provided for benefits upon termination of employment in connection with a change in control and a gross-up payment, the November 1, 2010 change in control did not qualify as a change in ownership or effective control under Internal Revenue Code Sections 280G and 4999.  As discussed above, our Parent entered into agreements with each of the named executive officers that provide benefits to the executives upon

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specified terminations of employment in connection with any future change in control, excluding a change in control of PPL. The agreements provide for tax protection in the form of a gross-up payment to reimburse the executive for any excise tax under Internal Revenue Code Section 4999, as well as any additional income and employment taxes resulting from such reimbursement.   Pursuant to the excise tax provisions, a 20 percent tax is levied on excess parachute payments.  Our Parent has determined that it is appropriate to provide protection to the named executives from adverse consequences of the additional tax.

Executive Compensation Tables

The following table summarizes all compensation for the chief executive officer, chief financial officer, and the next three most highly compensated executives, or “named executive officers,” in 2010.  During 2010, the named executive officers received compensation for services provided to our Parent, LG&E and us.  In the tables, we include all compensation for services to any of these companies during 2010, without any allocation among the companies.  All of the named executive officers also served as our directors and the directors of our Parent and LG&E during 2010, but received no compensation for board service.

Summary Compensation Table for 2010

Name and Principal Position (a)	Year(b)	Salary ($)(c)	Bonus ($)(d)	Stock Awards ($)(1)(e)	Option Awards ($)(f)	Non-Equity Incentive Plan Compensation ($)(2)(g)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3)(h)	All Other Compensation ($)(4)(i)	Total ($)(j)
Victor A. Staffieri Chief Executive Officer	2010	811,220	0	2,484,440	0	2,907,853	1,285,224	4,193,869	11,682,606
S. Bradford Rives Chief Financial Officer	2010	414,215	0	704,585	0	1,230,600	515,207	975,105	3,839,712
John R. McCall EVP, General Counsel, Corporate Secretary and Chief Compliance Officer	2010	507,674	0	888,913	0	1,508,275	191,020	1,523,236	4,619,118
Chris Hermann SVP — Energy Delivery	2010	326,102	0	538,018	0	965,125	184,417	611,200	2,624,862
Paul W. Thompson SVP — Energy Services	2010	386,624	0	657,496	0	1,148,700	499,932	920,959	3,613,711

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(1)The Stock Awards column represents the aggregate grant date fair value as calculated under ASC Topic 718, without taking into account estimated forfeitures, and reflects 2010 grants of PPL restricted stock units and E.ON share performance rights.  Vesting of the E.ON share performance rights accelerated upon the November 1, 2010 change in control, and the amounts paid in cash to the named executive officers are included in the All Other Compensation column.  For additional information on the assumptions in the valuation, see the Grants of Plan-Based Awards During 2010 table below.

(2)Non-Equity Incentive Plan Compensation represents payments of the E.ON AG divestiture incentive award tied to the change in control and payments made in 2011 under the Powergen Short Term Incentive Plan for performance under that annual cash incentive program in 2010.

(3)This column represents the sum of the changes in the present value of the accumulated benefit in the E.ON U.S. LLC Retirement Plan and the LG&E Energy Corp. Supplemental Executive Retirement Plan from December 31, 2009 to December 31, 2010.

(4)

All Other Compensation in 2010

Name	401(k) Match ($)	Non-Qualified Deferred Compensation Employer Contributions ($) (a)	Change in Control — Accelerated Payments ($)(b)	Executive Auto Personal Usage ($)(c)	Executive Auto Lease Allowance Cash Difference ($)(c)	Company Paid Reserved Parking ($)	Country / Luncheon Club ($)	Gift Card ($)	Executive Life Insurance ($)(d)	Financial Planning ($)	Spousal Air Travel ($)(f)	Tax Preparation ($)	Vacation Sell Back ($)	Tax Gross-Up ($)(g)
Staffieri	10,290	53,118	4,028,253	11,620	1,898	1,680	7,200	150	15,710	6,000	7,574	3,500	12,480	34,396
Rives	10,290	17,271	922,210	11,472	1,892	1,680	50	150	592					9,498
McCall	10,290	23,666	1,413,008	11,836	1,466	1,680		150	29,255(e)	8,000	3,577	1,500		18,808
Hermann	10,290	11,603	544,298	5,921	4,035	1,680		150	8,682	5,583		1,750	4,871	12,337
Thompson	10,290	15,432	860,806	11,083		1,680		150	3,358	4,028		2,021		12,111

(a)  Our Parent matches executive contributions to the E.ON U.S. LLC Nonqualified Savings Plan equal to 70 percent of the first six percent deferred.

(b)  Vesting of all outstanding awards granted in 2008, 2009 and 2010 under the E.ON Share Performance Plan and the LG&E Energy Corp. Long-Term Performance Unit Plan was accelerated upon the November 1, 2010 change in control, and the awards were paid in cash as follows:

Name	2010 E.ON Share Performance Rights ($)	2009 E.ON Share Performance Rights ($)	2008 E.ON Share Performance Rights ($)	2010 LG&E Energy Corp. Long- Term Performance Units ($)	2009 LG&E Energy Corp. Long- Term Performance Units ($)	2008 LG&E Energy Corp. Long- Term Performance Units ($)
Staffieri	85,409	118,043	79,309	1,242,180	1,242,180	1,261,132
Rives	19,947	26,764	17,963	290,080	281,610	285,846
McCall	30,557	41,006	27,558	444,413	431,463	438,011
Hermann	11,774	15,802	10,596	171,203	166,215	168,708
Thompson	18,618	24,984	16,780	270,760	262,850	266,814

(c)  Personal usage of executive auto.  The named executive officers receive an annual $15,000 allowance to cover auto lease expenses, and any difference between the annual allowance and the total lease cost is paid in cash to them.

(d)  Premiums paid by our Parent for $2 million of supplemental executive term life insurance for Mr. Staffieri and $400,000 for the other named executive officers, except for Mr. McCall.

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(e)  Prior to 2010, Mr. McCall waived future coverage for executive life insurance.  A fixed cash payment is made each October in lieu of executive life insurance and applies for the duration of his employment.

(f)  Occasionally, an executive’s spouse may accompany the executive on a business trip.  In 2010, Messrs. Staffieri’s and McCall’s spouses accompanied them on business trips.  The dollar amounts reflected in the table are the standard industry fare level values, which were greater than the aggregate incremental cost, which was de minimis.

(g)  Our Parent paid a full tax gross-up to executives for additional tax expenses in connection with personal usage of executive auto, auto lease allowance cash difference, country/luncheon club membership, tax preparation fees and financial planning services and spousal air travel, and for Mr. Staffieri, life insurance benefits.

Grants of Plan-Based Awards During 2010

										All
										Other
			LG&E							Stock	All Other
			Energy							Awards:	Option		Grant
			Corp. Long-							Number	Awards:	Exercise	Date Fair
			Term	Estimated Possible Payouts			Estimated Possible Payouts			of	Number of	or Base	Value of
			Performance	Under Non-Equity			Under Equity Incentive			Shares	Securities	Price of	Stock and
		Board or	Unit:	Incentive Plan Awards			Plan Awards			of Stock	Underlying	Option	Option
	Grant	Committee	Number of	Threshold	Target	Maximum	Threshold	Target	Maximum	or Units	Options	Awards	Awards
Name	Date	Approval	Units	($)	($)	($)	($)	($)	($)	(#)	(#)	($/sh)	(6)
(a)	(b)	Date	(#)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)	(k)	(l)
Staffieri	3/3/10(1)			23,619	608,415	1,216,830
	4/16/10(2)		1,064,726	809,192	1,064,726	1,597,089
	4/16/10(3)	3/3/10					17,745	354,909	1,064,727				354,909
	11/1/10(4)	10/21/10								80,940			2,129,531
Rives	3/3/10(1)			8,286	207,200	414,400
	4/16/10(2)		248,640	188,966	248,640	372,960
	4/16/10(3)	3/3/10					4,144	82,880	248,640				82,880
	11/1/10(5)									23,630			621,705
McCall	3/3/10(1)			10,155	253,950	507,900
	4/16/10(2)		380,925	289,503	380,925	571,388
	4/16/10(3)	3/3/10					6,349	126,975	380,925				126,975
	11/1/10(5)									28,960			761,938
Hermann	3/3/10(1)			6,520	163,050	326,100
	4/16/10(2)		146,745	111,526	146,745	220,118
	4/16/10(3)	3/3/10					2,446	48,915	146,745				48,915
	11/1/10(5)									18,590			489,103
Thompson	3/3/10(1)			7,735	193,400	386,800
	4/16/10(2)		232,080	176,381	232,080	348,120
	4/16/10(3)	3/3/10					3,868	77,360	232,080				77,360
	11/1/10(5)									22,050			580,136

(1)Short-term cash incentive awards granted under the Powergen Short-Term Incentive Plan.  The amounts reported reflect the potential payout range from a threshold of approximately four percent of target to a maximum of 200 percent of target.  Threshold amounts are based on threshold performance on objective measures and exclude subjective measures.  Payouts for percentile ranks falling between threshold and target and between target and

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maximum are interpolated.  The actual 2010 payout is included in the Summary Compensation Table in the column headed “Non-Equity Incentive Plan Compensation.”

(2)Performance unit awards payable in cash for the 2010-2012 performance cycle granted under the LG&E Energy Corp. Long-Term Performance Unit Plan.  The amounts reported reflect the potential payout range from a threshold of 50 percent of target to a maximum of 150 percent of target.  Performance below 76 percent of target yields 0 percent payout.  Vesting of these awards accelerated upon the November 1, 2010 change in control, and the dollar amounts paid are included in the Summary Compensation Table in the column headed “All Other Compensation.”

(3)Share performance rights for the 2010-2013 performance cycle granted under the E.ON Share Performance Plan on April 16, 2010 for purposes of Financial Accounting Standards Board generally accepted accounting principles for stock-based compensation.  The E.ON AG Board of Management approved these awards on March 3, 2010.  Vesting of these awards accelerated upon the November 1, 2010 change in control, and the dollar amounts paid are included in the Summary Compensation Table in the column headed “All Other Compensation” and in the Option Exercises and Stock Vested table in the column headed “Value Realized on Vesting.”

(4)Restricted stock units granted under the PPL Incentive Compensation Plan on November 1, 2010 for purposes of Financial Accounting Standards Board generally accepted accounting principles for stock-based compensation.  The PPL Compensation, Governance and Nominating Committee approved these awards on October 21, 2010.

(5)Restricted stock units granted under the PPL Incentive Compensation Plan for Key Employees on November 1, 2010 for purposes of Financial Accounting Standards Board generally accepted accounting principles for stock-based compensation.

(6)This column shows the full grant date fair value, as calculated under ASC Topic 718, of share performance rights and restricted stock units granted to the named executive officers, without taking into account estimated forfeitures.  For restricted stock units granted by PPL, the grant date fair value was calculated using the closing price of PPL stock on the New York Stock Exchange on the November 1, 2010 grant date of $26.31.  The named executive officers receive cash dividend-equivalents during the period of restriction that are not subject to forfeiture.  For share performance rights granted by E.ON AG on April 16, 2010, the grant date fair value was calculated using the initial E.ON AG share price of €27.25, which was the arithmetic mean of the E.ON stock’s closing prices, as determined and published by the Deutsche Börse AG in the XETRA (Exchange Electronic Trading) system during the 60 trading days prior to the beginning of the maturity period, January 1, 2010.  The Euro share price was multiplied by the initial exchange rate of 1.4803 which represents the average exchange rate for the 60 trading days preceding the beginning of the maturity period; the US$ share price was calculated at $40.34.  The maximum amount payable is three times the initial E.ON AG share price, or €81.75.

Narrative Discussion Relating to the
Summary Compensation Table and the Grants of Plan-Based Awards Table

Short-Term Incentive Awards

In March 2010, short-term incentive award opportunities were granted to the named executive officers under the Powergen Short-Term Incentive Plan.  These award opportunities are reflected in the Grants of Plan-Based Awards table at grant in columns (c), (d) and (e) and in the Summary Compensation Table as earned with respect to 2010 in column (g).  We discuss the short-term incentive award opportunities, incentive goals and results in the Compensation Discussion and Analysis.

Long-Term Incentive Awards Granted in 2010 Prior to the Change in Control

The long-term incentive awards granted in 2010 had two components:

·75 percent of the total target award opportunity was comprised of performance units with a 2010-2012 performance period granted under the LG&E Energy Corp. Long-Term Performance Unit Plan and

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·25 percent of the total target award opportunity was comprised of share performance rights with a 2010-2013 performance period granted under the E.ON Share Performance Plan.

We describe these long-term incentive awards in the Compensation Discussion and Analysis.

Accelerated Payment of Outstanding Long-Term Incentive Awards Granted in 2008, 2009 and 2010 upon Change in Control

Outstanding long-term incentive awards granted in 2008, 2009 and 2010 vested and were paid out as a result of the November 1, 2010 change in control as described in the Compensation Discussion and Analysis.

Divestiture Incentive Awards Paid in 2010

In 2008, the E.ON AG Board of Management granted an incentive award opportunity to the named executive officers in connection with the consummation of a change in control of our Parent.  We describe these divestiture incentive awards in the Compensation Discussion and Analysis.

Retention Agreements and Restricted Stock Unit Awards Granted by PPL in 2010

As previously stated, PPL granted restricted stock units to Mr. Staffieri under the PPL Incentive Compensation Plan and to the other named executive officers under the PPL Incentive Compensation Plan for Key Employees.  These award opportunities are reflected in the Grants of Plan-Based Awards table at grant in columns (i) and (l) and in the Summary Compensation Table in column (e).  We discuss the restricted stock unit awards in the Compensation Discussion and Analysis.

Employment Agreements

In October 2010, our Parent entered into amended and restated employment and severance agreements with Messrs. Staffieri and McCall that replace previous agreements, dated February 25, 2000, as amended, with LG&E Energy Corporation and Powergen plc.  The other named executive officers also entered into retention and severance agreements in October 2010 that replace previous agreements with LG&E Energy Corp. and E.ON AG.  We discuss the named executive officers’ agreements in the Compensation Discussion and Analysis and in the Employment-Related Arrangements section.

Salary and Bonus as a Proportion of Total Compensation

The named executive officers did not receive any bonuses.  The proportion of salary to compensation is reflected in the table below.

Name	Salary ($)	Total Compensation ($)	Salary as % of Total Compensation
Staffieri	811,220	11,682,606	6.94
Rives	414,215	3,839,712	10.79
McCall	507,674	4,619,118	10.99
Hermann	326,102	2,624,862	12.42
Thompson	386,624	3,613,711	10.70

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Outstanding Equity Awards at Fiscal-Year End 2010

The following table provides information on all unvested restricted stock unit awards for each named executive officer as of December 31, 2010.  The Option Awards columns have been omitted because there were no stock option awards outstanding as of December 31, 2010.

	Stock Awards
Name (a)	Number of Shares or Units of Stock That Have Not Vested (#) (g)(1)	Market Value of Shares or Units of Stock That Have Not Vested ($) (h)(2)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (i)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (j)
Staffieri	80,940	2,130,341	0	0
Rives	23,630	621,942	0	0
McCall	28,960	762,227	0	0
Hermann	18,590	489,289	0	0
Thompson	22,050	580,356	0	0

(1)Restrictions lapse on these awards on December 1, 2011 for Mr. McCall and on December 1, 2012 for Messrs. Staffieri, Rives, Hermann and Thompson assuming the named executive officer remains continually employed affiliates of by PPL until then.

(2)The fair market value of the units was based on the closing price of PPL common stock on the New York Stock Exchange on December 31, 2010, which was $26.32.

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Option Exercises and Stock Vested in 2010

The following table provides information for each of the named executive officers with respect to payments from the E.ON Share Performance Plan for grants made in 2007 that vested in January 2010 and grants made in 2008, 2009 and 2010 that vested at the November 1, 2010 change in control. Value reflects payment in the aggregate before applicable withholding tax.

	Option Awards		Stock Awards
Name (a)	Number of Shares Acquired on Exercise (#) (b)	Value Realized on Exercise ($) (c)	Number of Shares Acquired on Vesting (#) (d)(1)	Value Realized on Vesting ($) (e)(2)
Staffieri	0	0	22,885	640,744
Rives	0	0	5,248	145,795
McCall	0	0	8,041	223,426
Hermann	0	0	3,097	85,930
Thompson	0	0	4,899	136,122

(1)Reflects vesting of share performance rights for the 2007-2009 performance period that vested on January 5, 2010 and share performance rights granted in 2008, 2009 and 2010 for which vesting was accelerated upon the November 1, 2010 change in control.  All awards were paid in cash.

(2)Reflects the actual cash value of share performance rights that the named executive officers realized upon vesting.  The value realized with respect to the share performance rights granted in 2007 was based on an E.ON AG stock price of $121.02, which was the average closing stock price for the 60 trading days preceding the end of the 2007-2009 performance period, as adjusted.  Values were provided by HSBC Trinkaus in Euros and converted to US currency using the average exchange rate for the 60 trading days preceding the end of the performance period.  E.ON AG effected a 3-for-1 stock split, effective August 1, 2008.  While the share performance rights were not adjusted for the split, in determining payment, the average closing value was calculated and then adjusted by HSBC Trinkaus to give effect to the stock split.

The value realized with respect to share performance rights granted in 2008, 2009 and 2010 was based on an E.ON AG stock price of $29.64, which was the average closing stock price for the 60 trading days preceding the change in control.  Values were provided by HSBC Trinkaus in Euros and converted to US currency using the average exchange rate for the 60 trading days preceding the change in control.

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Pension Benefits in 2010

The following table sets forth information on the pension benefits for the named executive officers:

Name (a)	Plan Name (b)(1)	Number of Years Credited Service (#) (c)	Present Value of Accumulated Benefit ($) (d)	Payments During Last Fiscal Year ($) (e)
Staffieri	Retirement	18.75	693,309	0
	SERP	18.75	7,645,065	0
Rives	Retirement	26.83	819,226	0
	SERP	27.83	2,034,524	0
McCall	Retirement	16.50	767,610	0
	SERP	16.50	4,426,391	0
Hermann	Retirement	30.00	1,532,112	0
	SERP	30.00	2,047,683	0
Thompson	Retirement	19.75	657,499	0
	SERP	19.75	2,218,154	0

(1)E.ON U.S. LLC Retirement Plan (Retirement) and LG&E Energy Corp. Supplemental Executive Retirement Plan (SERP).

The amounts shown for the retirement plan and the SERP represent the actuarial present values of the executives’ accumulated benefits accrued as of December 31, 2010, calculated using a 5.52 percent discount rate for the retirement plan and a 5.46 percent discount rate for the SERP, the mortality table used for 2011 Pension Protection Act target liability purposes as prescribed by the Internal Revenue Service for December 31, 2010 present values for post retirement mortality rates and no recognition of future salary increases or pre-retirement mortality.  The assumed retirement age for these benefits was age 62 for Messrs. Staffieri, Rives and Thompson.  Retirement on December 31, 2010 was assumed for Messrs. McCall and Hermann, who were age 67 and 63, respectively, on that date.  Benefits were also assumed to be paid as life annuities.  While Mr. Hermann has over 40 years of actual service with us, his years of credited service are capped at 30 in accordance with the provisions of the E.ON U.S. LLC Retirement Plan.

E.ON U.S. LLC Retirement Plan

Messrs. Staffieri, Rives, McCall, Hermann and Thompson participate in the E.ON U.S. LLC Retirement Plan.  The plan is a funded and tax-qualified defined benefit retirement plan that was closed to new participants on December 31, 2005.  The purpose of the plan is to provide all vested eligible employees with retirement income.  Vesting occurs after completing five years of service.  The named executive officers are vested under the plan.

Benefit formula

The plan provides monthly retirement income equal to the greater of

·1.58 percent of average monthly earnings plus 0.40 percent of average monthly earnings in excess of covered compensation, such sum multiplied by years of credited service and

·1.68 percent of average monthly earnings multiplied by years of credited service.

The maximum years of service recognized when determining benefits under the plan is 30.

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For purposes of the plan, average monthly earnings is the average of the highest five consecutive monthly earnings prior to termination of employment.  Monthly earnings is defined as total compensation as indicated on Form W-2, including deferrals to a 401(k) plan, but excluding any earnings from the exercise of stock options, divided by 12.

Covered compensation is one-twelfth of the average of the social security taxable wage base for the 35-year period ending with the year of a participant’s social security retirement age.  The social security taxable wage base for future years is assumed to be equal to the social security taxable wage base for the current year.

The Internal Revenue Code limits the amounts that may be paid under the plan and the amount of compensation that may be recognized when determining benefits. In 2010, the maximum annual benefit payable under the plan was $195,000, and the maximum amount of compensation that could be recognized when determining benefits was $245,000.

Early retirement

Normal retirement age is age 65, and Mr. McCall was eligible for normal retirement on December 31, 2010.  Early retirement occurs at the earlier of age 55 or 30 years of credited service, and Messrs. Staffieri and Hermann were eligible for early retirement on December 31, 2010.  To receive unreduced retirement benefits under the plan, participants must remain employed until age 62, and Mr. Hermann was eligible for unreduced benefits on December 31, 2010.  Participants who elect to retire before reaching age 62 receive benefits under the plan calculated as follows:

Age	Early Retirement Factor
61	96.00%
60	92.00
59	86.56
58	81.60
57	77.04
56	72.96
55	69.20
54	65.20
53	61.20
52	57.20

Form of payment

Participants may choose whether their benefits will be in the form of:

·a single life annuity

·a survivor annuity payable to the participant’s designated relative equal to 50 percent, 66 2/3 percent, 75 percent or 100 percent of the participant’s benefit. Under the survivor annuity options, the benefit payments are reduced to allow payments for the longer of two lives. The reduction factor is determined by the age difference between the participant and the participant’s relative or

·a level income form equal to the actuarial equivalent of the participant’s normal retirement benefit, but increased for each month prior to the participant’s attainment of age 62 and decreased after age 62 so that the participant’s total monthly plan benefit and social security retirement benefit are approximately level during the participant’s lifetime.

LG&E Energy Corp. Supplemental Executive Retirement Plan

Messrs. Staffieri, Rives, McCall, Hermann and Thompson participate in the SERP, which is a non-qualified defined benefit pension plan.  The SERP is unfunded and is not qualified for tax purposes.  Accrued benefits under the SERP are subject to claims of our creditors in the event of bankruptcy.  The purpose of the SERP is to provide additional retirement income to selected executives.

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Benefit formula

Upon a separation from service occurring on or after the participant attains age 65, participants are entitled to monthly retirement income equal to 64 percent of average monthly compensation less:

·100 percent of the monthly E.ON U.S. LLC Retirement Plan benefit payable at age 65

·100 percent of the primary social security benefit payable at age 65

·100 percent of any matching contribution or other employer contribution for those participants where the defined contribution is the primary retirement vehicle and

·100 percent of any other employer-provided benefit payable at age 65 as a life annuity from any qualified defined benefit plan or defined contribution plan sponsored by previous employers, provided such qualified defined contribution plan was the employer’s primary vehicle for retirement.

Such amount is multiplied by a fraction not to exceed “1”, the numerator of which is years of service at date of separation from service and the denominator of which is 15.

Average monthly compensation is the average compensation for the 36 consecutive months preceding the participant’s separation from service that yields the highest average.  Compensation is defined as base salary plus short term incentive pay prior to any deferrals under any qualified or non-qualified deferred compensation plan.

Normal and early retirement

Normal retirement age is 65, and Mr. McCall was eligible for normal retirement on December 31, 2010.  A participant who has at least five years of credited service and whose age is at least 50 is eligible to receive early retirement benefits after the later of separation from service and the date the participant attains age 55.  Messrs. Staffieri and Hermann were eligible for early retirement on December 31, 2010.  To receive unreduced benefits under the SERP, participants must remain employed until age 62, and Mr. Hermann was eligible for unreduced benefits on December 31, 2010.  Participants electing to retire before reaching age 62 receive benefits under the SERP calculated as follows:

Age at Commencement	Percentage of Benefit Payable
61	96
60	92
59	86
58	80
57	74
56	68
55	62

Forms of payment

Benefits under the SERP are paid as a single life annuity unless the participant dies before benefits commence or the participant elects to receive actuarial equivalent payments in the form of a joint and survivor annuity.  The joint and survivor annuity provides a reduced monthly benefit payable for the life of the participant that will continue to be made in an amount equal to 50 percent of the participant’s benefit to a beneficiary designated by the participant.

The present values in the Pension Benefits for 2010 table are theoretical figures prescribed by the SEC for disclosure and comparison purposes.  The table below reflects the actual benefits payable under the listed events assuming separation from service occurred as of December 31, 2010.

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SERP Payments upon Separation from Service as of December 31, 2010

Name	Separation from Service (Other Than Death or Disability) ($)	Death ($)	Disability ($)
Staffieri(1)	8,825,464	6,703,996	6,220,019
Rives(2)	2,331,425	1,880,181	1,626,046
McCall(3)	4,960,680	2,602,451	4,960,680
Hermann(4)	2,283,282	1,218,074	1,967,861
Thompson(5)	2,537,610	2,116,113	1,572,400

(1)If Mr. Staffieri separated from service, for reasons other than due to death or disability, on December 31, 2010 and commenced his SERP benefit on January 1, 2011, the monthly benefit payable as a life annuity is $48,297.  If he had died on December 31, 2010, the monthly SERP benefit payable to his spouse for her lifetime on January 1, 2011 is $36,588.  If Mr. Staffieri had become disabled on December 31, 2010, the monthly SERP disability benefit payable at age 65 as a life annuity, assuming continued accrual, is $69,321.

(2)If Mr. Rives separated from service, for reasons other than due to death or disability, on December 31, 2010 and commenced his SERP benefit at age 55, the monthly benefit payable as a life annuity is $14,479.  If he had died on December 31, 2010, the monthly SERP benefit payable to his spouse for her lifetime on January 1, 2011 is $11,676.  If Mr. Rives had become disabled on December 31, 2010, the monthly SERP disability benefit payable at age 65 as a life annuity, assuming continued accrual, is $21,859.

(3)If Mr. McCall separated from service, for reasons other than due to death or disability, on December 31, 2010 and commenced his SERP benefit on January 1, 2011, the monthly benefit payable as a life annuity is $34,627.  If he had died on December 31, 2010, the monthly SERP benefit payable to his spouse for her lifetime on January 1, 2011 is $17,313.  If Mr. McCall had become disabled on December 31, 2010, the monthly SERP disability benefit payable at January 1, 2011 as a life annuity is $34,627.

(4)If Mr. Hermann separated from service, for reasons other than due to death or disability, on December 31, 2010 and commenced his SERP benefit on January 1, 2011, the monthly benefit payable as a life annuity is $14,446.  If he had died on December 31, 2010, the monthly SERP benefit payable to his spouse for her lifetime on January 1, 2011 is $7,223.  If Mr. Hermann had become disabled on December 31, 2010, the monthly SERP disability benefit payable at age 65 as a life annuity, assuming continued accrual, is $14,198.

(5)If Mr. Thompson separated from service, for reasons other than due to death or disability, on December 31, 2010 and commenced his SERP benefit at age 55, the monthly benefit payable as a life annuity is $14,511.  If he had died on December 31, 2010, the monthly SERP benefit payable to his spouse for her lifetime on January 1, 2011 is $11,703.  If Mr. Thompson had become disabled on December 31, 2010, the monthly SERP disability benefit payable at age 65 as a life annuity, assuming continued accrual, is $19,318.

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Non-Qualified Deferred Compensation in 2010

Name (a)	Executive Contributions in Last FY ($)(1) (b)	Registrant Contributions in Last FY ($)(1) (c)	Aggregate Earnings in Last FY ($) (d)	Aggregate Withdrawals / Distributions ($) (e)	Aggregate Balance at Last FYE ($) (f)
Staffieri
E.ON U.S. NQSP	82,345	53,118	22,729	145,025(2)	762,230
LG&E Energy Corp. NQSP	0	0	29,663	0	928,850
Rives
E.ON U.S. NQSP	45,339	17,271	11,096	0	374,232
LG&E Energy Corp. NQSP	0	0	40,872	0	1,279,849
McCall
E.ON U.S. NQSP	117,218	23,666	26,615	0	896,195
LG&E Energy Corp. NQSP	0	0	45,560	0	1,426,646
Hermann
E.ON U.S. NQSP	28,062	11,603	7,580	0	256,540
LG&E Energy Corp. NQSP	0	0	19,391	0	607,188
Thompson
E.ON U.S. NQSP	55,466	15,432	23,022	0	753,620
LG&E Energy Corp. NQSP	0	0	45,297	0	1,418,424

(1)Executive contributions to the E.ON U.S. LLC Nonqualified Savings Plan are reported in the salary column of the Summary Compensation Table for 2010.  Registrant contributions to the E.ON U.S. LLC Nonqualified Savings Plan are reported in the All Other Compensation column of the Summary Compensation Table for 2010.  Contributions to the LG&E Energy Corp. Nonqualified Savings Plan have not been previously reported in a Summary Compensation Table.

(2)Paid in accordance with Mr. Staffieri’s deferral election under the E.ON U.S. LLC Nonqualified Savings Plan.

Messrs. Staffieri, Rives, McCall, Hermann and Thompson participate in the E.ON U.S. LLC Nonqualified Savings Plan, which we refer to as the E.ON U.S. plan, and the LG&E Energy Corp. Nonqualified Savings Plan, which we refer to as the LG&E Energy plan.  Both plans are non-qualified, unfunded deferred compensation plans, and all benefits under the plans are subject to the claims of creditors in the event of bankruptcy.  The LG&E Energy plan benefits are limited to the contributions credited to the participants’ plan accounts as of December 31, 2004 and interest accruing on those accounts.  Executives are no longer permitted to defer income under the LG&E Energy plan.  The E.ON US plan benefits are based on contributions made and interest accruing on those contributions after December 31, 2004 and are subject to Section 409A of the Internal Revenue Code.

Participation

The E.ON U.S. plan provides executives with an opportunity to defer income on a tax-deferred basis in addition to deferrals under the tax-qualified savings plan.  Executives may participate in the E.ON U.S. plan after the later of promotion to an executive position and the completion of six months of continuous employment.

Deferrals

A hypothetical account is established for each participant who elects to defer compensation.  Under the E.ON U.S. plan, executives may elect to defer up to 75 percent of their eligible compensation, which includes base pay and short-term incentive pay.  This amount is reduced by any amount deferred and subject to an employer match under the tax-qualified savings plan.  Participants in the plan receive a matching contribution equal to 70 percent of the first six percent deferred.

Participants are immediately vested in their deferrals and employer matching contributions.

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Interest

The amounts in the participant’s hypothetical accounts in the E.ON U.S. plan and the LG&E Energy plan are credited with interest at an annual rate equal to the U.S. prime interest rate reset as of the immediately preceding March 31, June 30, September 30 and December 31.  The interest rate in effect for 2010 was 3.25 percent.

Distributions

All distributions are made in cash.  Participants may choose whether distributions will be made in a lump sum or in two to ten annual installments.  In general, distributions under the E.ON U.S. plan are made at the time specified by the named executive officer at the time of completion of the deferral election.  However, a “hardship distribution” will be approved if there is an unforeseeable emergency, as defined by Section 409A, that causes a severe financial hardship to the participant.

A participant is eligible to receive a distribution under the LG&E Energy plan upon termination of employment.

Employment-Related Arrangements

Messrs. Staffieri’s and McCall’s Agreements

In connection with PPL’s acquisition of our Parent’s, our Parent entered into amended and restated employment and severance agreements with Messrs. Staffieri and McCall in October 2010 that replaced previous agreements, dated February 25, 2000, as amended, with LG&E Energy Corporation and Powergen plc.  The agreements provide severance, change in control protection and other benefits substantially similar to those in the previous agreements.  The agreements provide for changes needed to reflect the change in control, Messrs. Staffieri’s and McCall’s retention with our Parent and their anticipated roles after the change in control.

The employment and severance agreements have an initial two-year term beginning November 1, 2010, with automatic one-year extensions, unless our Parent or any subsidiary of our Parent gives 90 days notice that the agreements will not be extended.  Under the terms of their agreements, Mr. Staffieri and Mr. McCall are entitled to:

·a position of chairman of the board of directors, chief executive officer and president of our Parent for Mr. Staffieri and a position of executive vice president, general counsel and corporate secretary of our Parent for Mr. McCall

·a base salary of at least $811,220 for Mr. Staffieri and at least $507,900 for Mr. McCall, which were their base salaries at the time of the change in control

·a divestiture incentive award payment of $2,129,453 for Mr. Staffieri and $1,142,775 for Mr. McCall, which was paid upon closing of the change in control

·a retention agreement, which is described below

·short-term incentive award opportunities with a target of not less than 75 percent of base salary for Mr. Staffieri and not less than 50 percent for Mr. McCall

·long-term incentive award opportunities with a target of not less than 175 percent of base salary for Mr. Staffieri and not less than 100 percent for Mr. McCall

·participation in employee benefit programs and in the LG&E Energy Corp. Supplemental Executive Retirement Plan and the E.ON U.S. LLC Nonqualified Savings Plan

·term life insurance for Mr. Staffieri of at least $2,000,000 and a full gross-up with respect to any taxes paid by Mr. Staffieri imposed as a result of such life insurance, the gross-up of which was given up by Mr. Staffieri, as discussed below

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·a supplemental life insurance annual payment of $29,255 for Mr. McCall in lieu of a supplemental life insurance policy and

·perquisites:

·for Mr. Staffieri and Mr. McCall: an automobile allowance, financial planning, tax preparation, company-paid reserved parking and executive physical examination

·for Mr. Staffieri only: an employer-paid country club membership, company-paid use of air transportation for non-business purposes and full tax gross-up payments on Mr. Staffieri’s perquisites, all of which were given up by Mr. Staffieri as discussed below and

·for Mr. McCall only: a luncheon club membership.

If, within two years following our Parent’s acquisition by PPL or a future change in control, excluding a change in control of PPL, the executive’s employment is terminated by the executive for good reason or by our Parent for reasons other than cause, disability or death, which includes notice by our Parent not to extend the term of the agreement, the executive would be entitled to:

·earned, but unpaid salary and vacation pay at the time of termination

·a lump sum cash payment equal to 2.99 times the sum of annual base salary and the greater of (i) most recent annual bonus, (ii) the annual bonus paid or payable under the annual bonus plan for 2009 or the year before a future change in control occurs and (iii) the target award for 2009 or the year before a future change in control occurs

·an amount for outplacement services equal to 20 percent of base salary

·benefit continuation for a period of three years and

·a gross-up payment to reimburse the executive for any excise tax on excess parachute payments made under the agreement or otherwise that is imposed by Internal Revenue Code Section 4999, as well as any additional income and employment taxes resulting from such reimbursement.

Change in control is defined as:

·acquisition by any person of securities representing more than 50 percent of the combined voting power of our Parent’s then outstanding securities entitled to vote in the election of directors, unless PPL continues to own more than 50 percent of the combined voting power of our Parent’s voting securities

·consummation of a merger or similar transaction of our Parent, any parent of our Parent, other than PPL or any parent of PPL, or any subsidiary with any other entity, unless the voting securities outstanding before the merger represent at least 50 percent of the voting power of the surviving entity

·stockholder approval of our Parent’s liquidation or dissolution or

·sale or disposition of all or substantially all of our Parent’s and its subsidiaries’ assets.

If Mr. Staffieri’s or Mr. McCall’s employment is terminated at any other time by the executive for good reason or by our Parent for reasons other than cause, disability or death, which includes notice by our Parent not to extend the term of the agreement, he would be entitled to:

·earned, but unpaid salary and vacation pay at the time of termination

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·an amount equal to two times the sum of annual base salary and the greater of (i) most recent annual bonus, (ii) the annual bonus paid or payable under the annual bonus plan for 2009 and (iii) the target award for 2009

·an amount for outplacement services equal to 20 percent of his base salary and

·benefit continuation for a period of two years.

Termination for cause is defined as a termination evidenced by a resolution approved by at least 75 percent of our Parent’s board that the executive has engaged in repeated willful misconduct in performing his reasonably assigned duties or has been convicted of a felony in the course of performing such duties.

Good reason is defined as follows:

·base salary or annual or long-term target bonus percentages have been reduced

·place of employment has been relocated more than 50 miles

·authorities, duties, responsibilities or reporting are materially reduced from those in effect prior to November 1, 2010 or

·employment and severance agreement has been materially breached by our Parent or any of its subsidiaries.

The executive may not terminate his employment for good reason, unless he has provided notice, within 90 days of the occurrence of any of these actions, to our Parent or its subsidiary and it has failed to cure such circumstances within a period of at least 30 days.

If the executive’s employment is terminated due to death or disability, he will be entitled to:

·earned, but unpaid salary and vacation pay on the date of death or termination due to disability

·a prorated payment of the restricted stock unit award described below

·if Mr. Staffieri dies, benefit continuation for a period of three years for his dependents and beneficiaries

·if Mr. Staffieri is terminated due to disability, until age 65 a benefit equal to 60 percent of his base salary, less any social security disability benefits and amounts payable under any disability insurance policy that our Parent maintains during the term of his agreement and

·for Mr. McCall, a lump sum cash payment equal to his target long-term incentive award, prorated for his actual period of service, and the greater of his most recent annual bonus, the annual bonus paid or payable under the annual bonus plan for 2009 and the target award for 2009.

Messrs. Rives’, Hermann’s and Thompson’s Agreements

In 2010, our Parent entered into retention and severance agreements with Messrs. Rives, Hermann and Thompson that replace previous change in control agreements and retention and severance agreements with LG&E Energy Corp. and E.ON AG.  The agreements provide severance, change in control protection and other benefits substantially similar to those in the previous agreements.

The retention and severance agreements have an initial two-year term beginning November 1, 2010, with automatic one-year extensions, unless our Parent or any subsidiary of our Parent gives 90 days notice that the agreements will not be extended.  Under the terms of these agreements, the executives are entitled to receive a retention agreement and a divestiture incentive award payment of $932,400 for Mr. Rives, $733,725 for Mr. Hermann and $870,300 for Mr. Thompson, which were paid upon closing of the change in control.

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If, within two years following the acquisition by PPL or a future change in control, excluding a change in control of PPL, the executive’s employment is terminated by the executive for good reason or by our Parent for reasons other than cause, disability or death, the executive would be entitled to:

·earned, but unpaid salary and vacation pay at the time of termination

·a lump sum cash payment equal to 2.99 times the sum of annual base salary and the executive’s target annual bonus at the time of payment

·an amount for outplacement services equal to 20 percent of base salary

·benefit continuation for the lesser of 24 months and the number of months remaining until the executive’s 65th birthday and

·a gross-up payment to reimburse the executive for any excise tax on excess parachute payments made under the agreement or otherwise that is imposed by Internal Revenue Code Section 4999, as well as any additional income and employment taxes resulting from such reimbursement.

If employment is terminated at any other time by the executive for good reason or by our Parent for reasons other than cause, disability or death, the executive would be entitled to:

·earned, but unpaid salary and vacation pay at the time of termination

·an amount equal to the sum of his annual base salary and target annual bonus at the time of payment and

·an amount for outplacement services equal to 20 percent of his base salary.

Termination for cause is defined as a termination evidenced by a resolution approved by at least 75 percent of our Parent’s board that the executive has engaged in repeated gross negligence in performing his reasonably assigned duties or has committed a felony in the course of performing such duties.

Good reason is defined as follows:

·base salary or annual or long-term bonus opportunities have been reduced or

·within two years following our Parent’s acquisition by PPL or another change in control,

·present place of employment has been relocated more than 100 miles

·authorities or responsibilities have been materially reduced or

·retention and severance agreement has been materially breached by our Parent or any of its subsidiaries.

The executive may not terminate his employment for good reason, unless he has provided notice, within 90 days of the occurrence of any of these actions, and our Parent or its subsidiary failed to cure such circumstances within a period of not less than 30 days.

The definition of change in control for these executives’ agreements is the same as that contained in Messrs. Staffieri’s and McCall’s employment and severance agreements, which we describe above.

Retention Agreements

PPL entered into retention agreements with the named executive officers on December 1, 2010, pursuant to which they were granted restricted stock units payable in PPL common stock.  The named executive officers receive cash dividend-equivalents

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during the period of restriction that are not subject to forfeiture.  In his retention agreement, Mr. Staffieri also agreed to modify the perquisites he received pursuant to his employment and severance agreement and gave up an employer-paid country club membership and company-paid use of air transportation for any non-business purpose, as well as, effective January 1, 2011, tax gross-up payments on his perquisites.  PPL entered into the retention agreements to encourage the named executive officers to remain employed by PPL or an affiliated company and to compensate Mr. Staffieri for the loss of these perquisites.

See the Compensation Discussion and Analysis for the number of restricted stock units granted, the grant date fair value and the vesting date of the awards.

The named executive officers must remain continuously employed by affiliates of PPL through the vesting date, unless the executive’s employment is terminated due to death or disability. They must also sign a release of liability agreement to receive payment of their awards.  If employment is terminated due to death or disability, payment will be prorated.

Potential Payments upon Termination or Change in Control

The following table shows the payments and benefits our named executive officers would receive in connection with:

·retirement or a voluntary termination without good reason

·death

·disability and

·involuntary termination for reasons other than cause or voluntary termination for good reason, whether or not such termination follows a change in control.

If a named executive officer is terminated for cause, no additional benefits or payments are due to the named executive officer.

The information assumes the terminations and the change in control occurred on December 31, 2010.  The values for the restricted stock units were determined by multiplying the number of units that vest by $26.32, which was the closing price of PPL common stock on December 31, 2010.

The table does not include base salary and short-term incentive awards, to the extent earned due to employment through December 31, 2010.  The table excludes compensation and benefits provided under plans or arrangements that do not discriminate in favor of the named executive officers and that are generally available to all salaried employees.  Because the amounts payable to the named executive officers would not constitute excess parachute payments under Internal Revenue Code Section 280G that trigger excise taxes under Internal Revenue Code Section 4999, the table does not include any tax gross-up payments for the named executive officers.  The table also excludes the named executive officers’ benefits under the E.ON U.S. LLC Retirement Plan, the LG&E Energy Corp. Supplemental Executive Retirement Plan, the E.ON U.S. LLC Nonqualified Savings Plan and the LG&E Energy Corp. Nonqualified Savings Plan.  See the Pension Benefits in 2010 table and the Nonqualified Deferred Compensation in 2010 table, and accompanying narratives, for a description of the named executive officers’ accumulated benefits under our defined benefit pension plans and our nonqualified deferred compensation plans.

For additional information regarding the termination-related payments and benefits provided by Messrs. Staffieri’s and McCall’s employment and severance agreements and the other named executive officers’ retention and severance agreements, please refer to the Employment-Related Arrangements section.

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Name	Retirement or Voluntary Termination without Good Reason ($)	Death ($)	Disability ($)	Involuntary Termination Not for Cause or Voluntary Termination with Good Reason ($)
Staffieri
Severance payable in cash	0	0	0	4,752,964(1)
Other separation benefits	0	48,420(3)	0(4)	207,535(2)
Restricted stock units	0	88,764(5)	88,764(5)	0
Total	0	137,184	88,764	4,960,499
Rives
Severance payable in cash	0	0	0	1,858,584(1)
Other separation benefits	0	0	0	111,874(2)
Restricted stock units	0	25,914(5)	25,914(5)	0
Total	0	25,914	25,914	1,970,458
McCall
Severance payable in cash	0	0	0	2,611,466(1)
Other separation benefits	0	365,500(6)	365,500(6)	144,351(2)
Restricted stock units	0	63,519(5)	63,519	0
Total	0	429,019	429,019	2,755,817
Hermann
Severance payable in cash	0	0	0	1,462,559(1)
Other separation benefits	0	0	0	84,896(2)
Restricted stock units	0	20,387(5)	20,387(5)	0
Total	0	20,387	20,387	1,547,455
Thompson
Severance payable in cash	0	0	0	1,734,798(1)
Other separation benefits	0	0	0	106,354(2)
Restricted stock units	0	24,182(5)	24,182(5)	0
Total	0	24,182	24,182	1,841,152

(1)Each of the named executive officers has an employment and severance agreement, or a retention and severance agreement, with our Parent under which he is entitled to cash severance equal to 2.99 times base salary and short-term incentive if employment is terminated by us for any reason other than for cause or by the executive for “good reason” as that term is defined in his agreement.  For Mr. Staffieri and Mr. McCall, the short-term incentive amount used for determining the cash severance amount was the actual 2010 short-term incentive payment.  For the other named executive officers, the short-term incentive amount reflects 2010 target short-term incentive, in accordance with their agreements.

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(2)Under the terms of each named executive officer’s severance agreement, the executive is eligible for continued medical and dental benefits, life insurance premiums, disability coverage and outplacement services.  The amounts shown as “Other separation benefits” are the estimated present values of these benefits.

(3)If Mr. Staffieri’s employment is terminated as a result of death, for a period of 36 months, our Parent would at its expense continue on behalf of Mr. Staffieri’s dependents and beneficiaries (to the same extent provided to the dependents and beneficiaries prior to his death) the life insurance, medical, dental and hospitalization benefits under such plans offered by our Parent to active employees.

(4)If Mr. Staffieri’s employment is terminated as a result of disability, he would receive until age 65 a benefit equal to 60 percent of his base salary, less 100 percent of the social security disability benefit and any amounts payable pursuant to the terms of a disability insurance policy or similar arrangement which our Parent maintains during the term.  It is anticipated that the disability insurance policy would cover this payment in full and thus there would not be an additional payment.

(5)Restricted stock units granted to each named executive officer pursuant to his Retention Agreement would be prorated for completed months employed during the one year vesting schedule for Mr. McCall (December 1, 2010 — December 1, 2011) or the two year vesting schedule for the other named executive officers (December 1, 2010 — December 1, 2012).  Thus the values shown in the table above reflect 1/12th the value of Mr. McCall’s full award and 1/24th the value of the other named executive officers’ full awards as of December 31, 2010.  The value was determined based on the closing price of PPL common stock on the New York Stock Exchange of $26.32 on December 31, 2010.

(6)If Mr. McCall’s employment is terminated as a result of death or disability, he would receive a cash payment equal to his 2010 short-term incentive payment.

Director Compensation

The board of directors consists of the named executive officers, as well as Paul A. Farr, PPL executive vice president and chief financial officer, and William H. Spence, PPL executive vice president and chief operating officer.  The directors received no compensation for board service.

Narrative Disclosure of our Compensation Policies and Practices
as They Relate to Risk Management

Our senior management has reviewed our policies and practices of compensating our employees, including the non-executive officers, as they relate to risk management practices and risk-taking incentives.  The senior management reviewed a description of the types of risks that may exist in certain compensation arrangements, each component of compensation for employees, the mix of fixed and “at-risk” incentive compensation and the goals used for incentive compensation, in addition to considering the risk profile of our business.  Based upon this review, we concluded that our compensation policies and practices for all our employees do not create risks that are reasonably likely to have a material adverse effect on us.

Compensation Committee Interlocks and Insider Participation

We are wholly owned by our Parent, and our board of directors is comprised solely of our five named executive officers and two executive officers of PPL.  We have no compensation committee or other board committee performing equivalent functions.  Prior to the acquisition, as discussed in the Compensation Discussion and Analysis, the E.ON AG Board of Management set compensation for our named executive officers.  The E.ON AG Board of Management consulted with Mr.

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Staffieri as well as with the E.ON AG chairman of the board, chief executive officer and president and the E.ON AG senior vice president of group corporate officer resources in setting compensation.  After the acquisition, the PPL Compensation, Governance and Nominating Committee, a committee of independent directors, assumed oversight of Mr. Staffieri’s compensation. Compensation for the other named executive officers after the acquisition was reviewed by the PPL vice president-human resources and services, the PPL chief executive officer and the PPL Corporate Leadership Council.

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TRANSACTIONS WITH RELATED PERSONS

We have in place a number of established policies and procedures to identify potential conflicts of interest arising out of financial transactions, arrangements or relations between the Company and any related persons.  The conflict of interest provisions of our Code of Business Conduct and/or applicable principles and personnel provisions of its Authority Limits Policy apply to any transaction in which the Company or a subsidiary is a participant and covered persons  has a direct or indirect material interest.  A covered person includes not only our directors and executive officers, but others related to them by certain family relationships.  Employees of the Company who are also executive officers of PPL are also covered under PPL’s related-person policy.

Under our policies and procedures, each such related-person transaction must be reviewed and approved or ratified by the General Counsel, other than any personnel matters or transaction involving an officer, which must be approved by the Chairman and a designated PPL officer.  We collect information about potential related-person transactions in annual questionnaires completed by directors and executive officers.  Transactions involving non-compliance with established polices are reported to the Board, as applicable.  The Board can review and consider the relevant facts and circumstances and determine whether to approve, deny or ratify the related-person transaction.  Transactions falling within the definition of PPL’s related-party policy are further reviewed by PPL’s Office of General Counsel for determination as to reporting to PPL’s Board or its Compensation, Governance and Nominating Committee, as applicable.

No event has occurred since January 1, 2010 that would be required to be reported by the Company pursuant to Item 404(a) of Regulation S-K promulgated by the SEC.

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THE EXCHANGE OFFERS

Purpose and Effect of the Exchange Offers

The Outstanding Bonds were issued on November 16, 2010 and sold to the initial purchasers pursuant to a purchase agreement in transactions not requiring registration under the Securities Act.  The initial purchasers subsequently sold the Outstanding Bonds to qualified institutional buyers (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A, and to persons in offshore transactions in reliance on Regulation S under the Securities Act.

We entered into a registration rights agreement with representatives of the initial purchasers of the Outstanding Bonds in which we agreed, under certain circumstances, to file a registration statement relating to offers to exchange the Outstanding Bonds for Exchange Bonds and to use commercially reasonable efforts to cause such registration statement to be declared effective under the Securities Act no later than 270 days after the original issue date of the Outstanding Bonds and to pay liquidated damages as described below if we do not consummate the Exchange Offers within 315 days after the issue date of the Outstanding Bonds.  The Exchange Bonds will have terms identical in all material respects to the Outstanding Bonds of the related series, except that the Exchange Bonds will not contain certain terms with respect to transfer restrictions, registration rights and liquidated damages for failure to observe certain obligations in the registration rights agreement.

Under the circumstances set forth below, we will use commercially reasonable efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the Outstanding Bonds within the time periods specified in the registration rights agreement and keep the statement effective for one year from the original issue date of the Outstanding Bonds, or such shorter period as described in the registration rights agreement.  These circumstances include:

·if a change in law or in applicable interpretations of the staff of the SEC does not permit us to effect a registered exchange offer;

·if a registered exchange offer is not consummated within 315 days after the date of issuance of the Outstanding Bonds;

·any initial purchaser of the Outstanding Bonds so requests with respect to Bonds not eligible to be exchanged for Exchange Bonds in the Exchange Offer and held by it following consummation of the Exchange Offer; or

·any holder notifies us during the 20 business days following consummation of the Exchange Offer that it was not eligible to participate in the Exchange Offer or any holder who participates in the Exchange Offer does not receive freely tradeable Exchange Bonds in the Exchange Offer.

Except for certain circumstances specified in the registration rights agreement, we will pay liquidated damages if:

·neither a registration statement relating to offers to exchange the Outstanding Bonds for Exchange Bonds nor a shelf registration statement with respect to the resale of the Outstanding Bonds (if required) is filed by us within the applicable time periods specified above;

·neither the Exchange Offer registration statement nor a shelf registration statement (if required) is declared effective by the SEC within the applicable time periods specified above;

·the Exchange Offer is not consummated within 315 days after the initial issuance of the Outstanding Bonds (or if the 315th day is not a business day, by the first business day thereafter); or

·after the Exchange Offer registration statement or the shelf registration statement, as the case may be, is declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) in connection with resales of Outstanding Bonds or Exchange Bonds as provided in and during the periods specified in the registration rights agreement.

We sometimes refer to an event referred to in the first through fourth bullet items above as a Registration Default.

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Liquidated damages, if payable, will be payable on the Outstanding Bonds at a rate of 0.25% per annum for the first 90 days from and including the date on which any Registration Default occurs, and such liquidated damages rate shall increase by an additional 0.25% per annum thereafter; provided, however, that the liquidated damages rate on the Outstanding Bonds will not at any time exceed 0.50% per annum.  Liquidated damages will cease to accrue on and after the date on which all Registration Defaults have been cured.  Any such liquidated damages payable will be payable on interest payment dates in addition to interest payable from time to time on the Outstanding Bonds and Exchange Bonds.

If you wish to exchange your Outstanding Bonds for Exchange Bonds in any of the Exchange Offers, you will be required to make the following written representations:

·you are not our affiliate within the meaning of Rule 405 of the Securities Act;

·you have no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the Exchange Bonds in violation of the provisions of the Securities Act;

·you are not engaged in, and do not intend to engage in, a distribution of the Exchange Bonds; and

·you are acquiring the Exchange Bonds in the ordinary course of your business.

Each broker-dealer that receives Exchange Bonds for its own account in exchange for Outstanding Bonds, where the broker-dealer acquired the Outstanding Bonds as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds and that it did not purchase its Outstanding Bonds from us or any of our affiliates.  See “Plan of Distribution.”

Resale of Exchange Bonds

We have not requested, and do not intend to request, an interpretation by the staff of the SEC as to whether the Exchange Bonds issued pursuant to this Exchange Offer in exchange for the Outstanding Bonds may be offered for sale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act.  Instead, based on interpretations by the SEC set forth in no-action letters issued to third parties, we believe that you may resell or otherwise transfer Exchange Bonds issued in the Exchange Offers without complying with the registration and prospectus delivery provisions of the Securities Act if:

·you are acquiring the Exchange Bonds in the ordinary course of your business;

·you have no arrangements or understanding with any person to participate in the distribution of the Exchange Bonds within the meaning of the Securities Act;

·you are not our “affiliate,” as defined in Rule 405 of the Securities Act; and

·you are not engaged in, and do not intend to engage in, a distribution of the Exchange Bonds.

If you are our affiliate, or are engaging in, or intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the Exchange Bonds, or are not acquiring the Exchange Bonds in the ordinary course of your business:

·you cannot rely on the position of the SEC set forth in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and

·in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Bonds.

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This prospectus may be used for an offer to resell or transfer the Exchange Bonds only as specifically set forth in this prospectus.  With regard to broker-dealers, only broker-dealers that acquired the Outstanding Bonds as a result of market-making activities or other trading activities may participate in the Exchange Offers.  Each broker-dealer that receives Exchange Bonds for its own account in exchange for Outstanding Bonds, where such Outstanding Bonds were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the Exchange Bonds.  Read “Plan of Distribution” for more details regarding the transfer of Exchange Bonds.

Our belief that the Exchange Bonds may be offered for resale without compliance with the registration or prospectus delivery provisions of the Securities Act is based on interpretations of the SEC for other exchange offers that the SEC expressed in some of its no-action letters to other issuers in exchange offers like ours.  We have not sought a no-action letter in connection with the Exchange Offers, and we cannot guarantee that the SEC would make a similar decision about our Exchange Offers.  If our belief is wrong, or if you cannot truthfully make the representations mentioned above, and you transfer any Exchange Bond issued to you in the Exchange Offers without meeting the registration and prospectus delivery requirements of the Securities Act, or without an exemption from such requirements, you could incur liability under the Securities Act.  We are not indemnifying you for any such liability.

Terms of the Exchange Offers

On the terms and subject to the conditions set forth in this prospectus and in the accompanying letters of transmittal, we will accept for exchange in the Exchange Offers any Outstanding Bonds that are validly tendered and not validly withdrawn prior to the Expiration Date.  Outstanding Bonds may only be tendered in minimum denominations of $2,000 and integral multiples of $1,000 in excess of $2,000, and any untendered Outstanding Bonds must also be in a minimum denomination of $2,000.  We will issue Exchange Bonds in principal amount identical to Outstanding Bonds surrendered in the Exchange Offers.

The form and terms of the Exchange Bonds will be identical in all material respects to the form and terms of the Outstanding Bonds of the related series except the Exchange Bonds will be registered under the Securities Act, will not bear legends restricting their transfer and will not provide for any payment of liquidated damages upon our failure to fulfill our obligations under the registration rights agreement to complete the Exchange Offers, or file, and cause to be effective, a shelf registration statement, if required thereby, within the specified time period. The Exchange Bonds will evidence the same debt as the Outstanding Bonds of the related series.  The Exchange Bonds will be issued under and entitled to the benefits of the Indenture.  For a description of the Indenture, see “Description of the Exchange Bonds.”

No interest will be paid in connection with the exchange.  The Exchange Bonds will bear interest from and including the last Interest Payment Date (as defined under “Description of the Exchange Bonds — Maturity; Interest”) on the Outstanding Bonds, or if one has not yet occurred, the issuance date of the Outstanding Bonds.  Accordingly, the holders of Outstanding Bonds that are accepted for exchange will not receive accrued but unpaid interest on Outstanding Bonds at the time of tender.  Rather, that interest will be payable on the Exchange Bonds delivered in exchange for the Outstanding Bonds on the first Interest Payment Date after the Expiration Date (as defined below under “— Expiration Date, Extensions and Amendments”).

The Exchange Offers are not conditioned upon any minimum aggregate principal amount of Outstanding Bonds being tendered for exchange.

As of the date of this prospectus, $250 million aggregate principal amount of the 1.625% First Mortgage Bonds due 2015, $500 million aggregate principal amount of the 3.250% First Mortgage Bonds due 2020 and $750 million aggregate principal amount of the 5.125% First Mortgage Bonds due 2040 are outstanding.  This prospectus and the letters of transmittal are being sent to all registered holders of Outstanding Bonds.  There will be no fixed record date for determining registered holders of Outstanding Bonds entitled to participate in the Exchange Offers.  We intend to conduct the Exchange Offers in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Exchange Act, and the rules and regulations of the SEC.  Outstanding Bonds that are not tendered for exchange in the Exchange Offers will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits such holders have under the Indenture relating to such holders’ series of Outstanding Bonds except we will not have any further obligation to you to provide for the registration of the Outstanding Bonds under the registration rights agreement.

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We will be deemed to have accepted for exchange properly tendered Outstanding Bonds when we have given written notice of the acceptance to the exchange agent.  The exchange agent will act as agent for the tendering holders for the purposes of receiving the Exchange Bonds from us and delivering Exchange Bonds to holders.  Subject to the terms of the registration rights agreement, we expressly reserve the right to amend or terminate the Exchange Offers and to refuse to accept Exchange Bonds upon the occurrence of any of the conditions specified below under “— Conditions to the Exchange Offers.”

If you tender your Outstanding Bonds in the Exchange Offers, you will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Outstanding Bonds.  We will pay all charges and expenses, other than certain applicable taxes described below in connection with the Exchange Offers.  It is important that you read “— Fees and Expenses” below for more details regarding fees and expenses incurred in the Exchange Offers.

If you are a broker-dealer and receive Exchange Bonds for your own account in exchange for Outstanding Bonds that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the Exchange Bonds and that you did not purchase your Outstanding Bonds from us or any of our affiliates.  Read “Plan of Distribution” for more details regarding the transfer of Exchange Bonds.

We make no recommendation to you as to whether you should tender or refrain from tendering all or any portion of your Outstanding Bonds into these Exchange Offers.  In addition, no one has been authorized to make this recommendation.  You must make your own decision whether to tender into these Exchange Offers and, if so, the aggregate amount of Outstanding Bonds to tender after reading this prospectus and the letter of transmittal and consulting with your advisors, if any, based on your financial position and requirements.

Expiration Date, Extensions and Amendments

The Exchange Offers expire at 5:00 p.m., New York City time, on          , 2011, which we refer to as the “Expiration Date.”  However, if we, in our sole discretion, extend the period of time for which the Exchange Offers are open, the term “Expiration Date” will mean the latest date to which we shall have extended the expiration of the Exchange Offers.

To extend the period of time during which the Exchange Offers are open, we will notify the exchange agent of any extension by written notice, followed by notification by press release or other public announcement to the registered holders of the Outstanding Bonds no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.  During any extension, all Outstanding Bonds previously tendered will remain subject to this Exchange Offer unless validly withdrawn.

We also reserve the right, in our sole discretion:

·to delay accepting for exchange any Outstanding Bonds (only in the case that we amend or extend the Exchange Offers);

·to extend the Expiration Date and retain all Outstanding Bonds tendered in the Exchange Offers, subject to your right to withdraw your tendered Outstanding Bonds as described under “— Withdrawal Rights”;

·to terminate any of the Exchange Offers if we determine that any of the conditions set forth below under “— Conditions to the Exchange Offers” have not been satisfied; and

·to amend the terms of any of the Exchange Offers in any manner or waive any condition to the Exchange Offers.

Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of the Outstanding Bonds.  If we amend any of the Exchange Offers in a manner that we determine to constitute a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of applicable Outstanding Bonds of that amendment, and we will extend such Exchange Offer to the extent required by law.

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In the event we terminate the Exchange Offers, all Outstanding Bonds previously tendered and not accepted for payment will be returned promptly to the tendering holders.

Conditions to the Exchange Offers

Despite any other term of the Exchange Offers, we will not be required to accept for exchange, or to issue Exchange Bonds in exchange for, any Outstanding Bonds and we may terminate or amend any of the Exchange Offers as provided in this prospectus prior to the Expiration Date if in our reasonable judgment:

·the Exchange Offers or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or

·any action or proceeding has been instituted or threatened in writing in any court or by or before any governmental agency with respect to the Exchange Offers that, in our judgment, would reasonably be expected to impair our ability to proceed with the Exchange Offers.

In addition, we will not be obligated to accept for exchange the Outstanding Bonds of any holder that has not made to us:

·the representations described under “— Purpose and Effect of the Exchange Offers”; or

·any other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to us an appropriate form for registration of the Exchange Bonds under the Securities Act.

We expressly reserve the right at any time or at various times to extend the period of time during which the Exchange Offers are open.  Consequently, we may delay acceptance of any Outstanding Bonds by giving oral or written notice of such extension to the holders.  We will return any Outstanding Bonds that we do not accept for exchange for any reason without expense to the tendering holder promptly after the expiration or termination of the Exchange Offers.  We also expressly reserve the right to amend or terminate any of the Exchange Offers and to reject for exchange any Outstanding Bonds not previously accepted for exchange, if we determine that any of the conditions of the Exchange Offers specified above have not been satisfied.  We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the Outstanding Bonds as promptly as practicable.  In the case of any extension, such notice will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.

We reserve the right to waive any defects, irregularities or conditions to the exchange as to particular Outstanding Bonds.  These conditions are for our sole benefit, and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times prior to the expiration of the Exchange Offers in our sole discretion.  If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right.  Each such right will be deemed an ongoing right that we may assert at any time or at various times prior to the expiration of the Exchange Offers.

In addition, we will not accept for exchange any Outstanding Bonds tendered, and will not issue Exchange Bonds in exchange for any such Outstanding Bonds, if at such time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended.

Procedures for Tendering Outstanding Bonds

To tender your Outstanding Bonds in the Exchange Offers, you must comply with either of the following:

·complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “— Exchange Agent” prior to the Expiration Date; or

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·comply with DTC’s Automated Tender Offer Program procedures described below.

In addition:

·the exchange agent must receive certificates for Outstanding Bonds along with the letter of transmittal prior to the expiration of the Exchange Offers;

·the exchange agent must receive a timely confirmation of book-entry transfer of Outstanding Bonds into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below and a properly transmitted Agent’s Message (defined below) prior to the expiration of the Exchange Offers; or

·you must comply with the guaranteed delivery procedures described below.

The term “Agent’s Message” means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that:

·DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering Outstanding Bonds that are the subject of the book-entry confirmation;

·the participant has received and agrees to be bound by the terms of the letter of transmittal or, in the case of an Agent’s Message relating to guaranteed delivery, that such participant has received and agrees to be bound by the notice of guaranteed delivery; and

·we may enforce that agreement against such participant.

DTC is referred to herein as a “book-entry transfer facility.”

Your tender, if not withdrawn prior to the expiration of the Exchange Offers, constitutes an agreement between us and you upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

The method of delivery of Outstanding Bonds, letters of transmittal and all other required documents to the exchange agent is at your election and risk.  Delivery of such documents will be deemed made only when actually received by the exchange agent.  We recommend that instead of delivery by mail, you use an overnight or hand delivery service, properly insured.  If you determine to make delivery by mail, we suggest that you use properly insured, registered mail with return receipt requested.  In all cases, you should allow sufficient time to assure timely delivery to the exchange agent before the expiration of the Exchange Offers.  Letters of transmittal and certificates representing Outstanding Bonds should be sent only to the exchange agent, and not to us or to any book-entry transfer facility.  No alternative, conditional or contingent tenders of Outstanding Bonds will be accepted.  You may request that your broker, dealer, commercial bank, trust company or nominee effect the above transactions for you.

If you are a beneficial owner whose Outstanding Bonds are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your Outstanding Bonds, you should promptly contact the registered holder and instruct the registered holder to tender on your behalf.  If you wish to tender the Outstanding Bonds yourself, you must, prior to completing and executing the letter of transmittal and delivering your Outstanding Bonds, either:

·make appropriate arrangements to register ownership of the Outstanding Bonds in your name; or

·obtain a properly completed bond power from the registered holder of Outstanding Bonds.

The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration of the Exchange Offers.

Signatures on the letter of transmittal or a notice of withdrawal (as described below in “— Withdrawal Rights”), as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the US or another

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“eligible guarantor institution” within the meaning of Rule 17A(d)-15 under the Exchange Act unless the Outstanding Bonds surrendered for exchange are tendered:

·by a registered holder of the Outstanding Bonds who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or

·for the account of an eligible guarantor institution.

If the letter of transmittal is signed by a person other than the registered holder of any Outstanding Bonds listed on the Outstanding Bonds, such Outstanding Bonds must be endorsed or accompanied by a properly completed bond power.  The bond power must be signed by the registered holder as the registered holder’s name appears on the Outstanding Bonds, and an eligible guarantor institution must guarantee the signature on the bond power.

If the letter of transmittal, any certificates representing Outstanding Bonds or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should also indicate when signing and, unless waived by us, they should also submit evidence satisfactory to us of their authority to so act.

The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC’s system may use DTC’s Automated Tender Offer Program to tender Outstanding Bonds.  Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, electronically transmit their acceptance of Outstanding Bonds for exchange by causing DTC to transfer the Outstanding Bonds to the exchange agent in accordance with DTC’s Automated Tender Offer Program procedures for transfer. DTC will then send an Agent’s Message to the exchange agent.

Book-Entry Delivery Procedures

Promptly after the date of this prospectus, the exchange agent will establish an account with respect to the Outstanding Bonds at DTC, as the book-entry transfer facility, for purposes of the Exchange Offers.  Any financial institution that is a participant in the book-entry transfer facility’s system may make book-entry delivery of the Outstanding Bonds by causing the book-entry transfer facility to transfer those Outstanding Bonds into the exchange agent’s account at the facility in accordance with the facility’s procedures for such transfer.  To be timely, book-entry delivery of Outstanding Bonds requires receipt of a confirmation of a book-entry transfer, or a “book-entry confirmation,” prior to the Expiration Date.

In addition, in order to receive Exchange Bonds for tendered Outstanding Bonds, an Agent’s Message in connection with a book-entry transfer into the exchange agent’s account at the book-entry transfer facility or the letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents must be delivered or transmitted to and received by the exchange agent at its address set forth on the cover page of the letter of transmittal prior to the expiration of the Exchange Offers.  Holders of Outstanding Bonds who are unable to deliver confirmation of the book-entry tender of their Outstanding Bonds into the exchange agent’s account at the book-entry transfer facility or an Agent’s Message or a letter of transmittal or a manually signed facsimile thereof in lieu thereof and all other documents required by the letter of transmittal to the exchange agent prior to the expiration of the Exchange Offers must tender their Outstanding Bonds according to the guaranteed delivery procedures described below.  Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent.

Guaranteed Delivery Procedures

If you wish to tender your Outstanding Bonds but your Outstanding Bonds are not immediately available or you cannot deliver your Outstanding Bonds, the letter of transmittal or any other required documents to the exchange agent or comply with the procedures under DTC’s Automatic Tender Offer Program in the case of Outstanding Bonds, prior to the Expiration Date, you may still tender if:

·the tender is made through an eligible guarantor institution;

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·prior to the Expiration Date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted Agent’s Message and notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such Outstanding Bonds and the principal amount of Outstanding Bonds tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the Expiration Date, the letter of transmittal, or facsimile thereof, together with the Outstanding Bonds or a book-entry confirmation (including an Agent’s Message), and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with, or transmitted by the eligible guarantor to, the exchange agent; and

·the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, with any required signature guarantees, as well as certificate(s) representing all tendered Outstanding Bonds in proper form for transfer or a book-entry confirmation of transfer of the Outstanding Bonds (including an Agent’s Message) into the exchange agent’s account at DTC and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the Expiration Date.

Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your Outstanding Bonds according to the guaranteed delivery procedures.

Acceptance of Outstanding Bonds for Exchange

In all cases, we will promptly issue Exchange Bonds of the applicable series for Outstanding Bonds that we have accepted for exchange under the Exchange Offers only after the exchange agent timely receives:

·Outstanding Bonds or a timely book-entry confirmation of such Outstanding Bonds into the exchange agent’s account at the book-entry transfer facility; and

·a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted Agent’s Message.

In addition, each broker-dealer that is to receive Exchange Bonds for its own account in exchange for Outstanding Bonds must represent that such Outstanding Bonds were acquired by that broker-dealer as a result of market-making activities or other trading activities and must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the Exchange Bonds.  The letters of transmittal state that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.  See “Plan of Distribution.”

We will interpret the terms and conditions of the Exchange Offers, including the letters of transmittal and the instructions to the letters of transmittal, and will resolve all questions as to the validity, form, eligibility, including time of receipt, and acceptance of Outstanding Bonds tendered for exchange.  Our determinations in this regard will be final and binding on all parties.  We reserve the absolute right to reject any and all tenders of any particular Outstanding Bonds not properly tendered or to not accept any particular Outstanding Bonds if the acceptance might, in our or our counsel’s judgment, be unlawful.  We also reserve the absolute right to waive any defects or irregularities as to any particular Outstanding Bonds prior to the expiration of the Exchange Offers.

Unless waived, any defects or irregularities in connection with tenders of Outstanding Bonds for exchange must be cured within such reasonable period of time as we determine.  Neither the Company, the exchange agent nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of Outstanding Bonds for exchange, nor will any of them incur any liability for any failure to give notification.  Any certificates representing Outstanding Bonds received by the exchange agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the tendering holder, unless otherwise provided in the letter of transmittal, promptly after the expiration or termination of the Exchange Offers.

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Withdrawal Rights

Except as otherwise provided in this prospectus, you may withdraw your tender of Outstanding Bonds at any time prior to 5:00 p.m., New York City time, on the Expiration Date.

For a withdrawal to be effective:

·the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “— Exchange Agent”; or

·you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system for such withdrawal.

Any notice of withdrawal must:

·specify the name of the person who tendered the Outstanding Bonds to be withdrawn;

·identify the Outstanding Bonds to be withdrawn, including the certificate numbers and principal amount of the Outstanding Bonds; and

·where certificates for Outstanding Bonds have been transmitted, specify the name in which such Outstanding Bonds were registered, if different from that of the withdrawing holder.

If certificates for Outstanding Bonds have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, you must also submit:

·the serial numbers of the particular certificates to be withdrawn; and

·a signed notice of withdrawal with signatures guaranteed by an eligible institution unless you are an eligible guarantor institution.

If Outstanding Bonds have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Outstanding Bonds and otherwise comply with the procedures of the facility.  We will determine all questions as to the validity, form and eligibility, including time of receipt of notices of withdrawal, and our determination will be final and binding on all parties.  Any Outstanding Bonds so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offers.  Any Outstanding Bonds that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder, without cost to the holder, or, in the case of book-entry transfer, the Outstanding Bonds will be credited to an account at the book-entry transfer facility, promptly after withdrawal, rejection of tender or termination of the Exchange Offers.  Properly withdrawn Outstanding Bonds may be retendered by following the procedures described under “— Procedures for Tendering Outstanding Bonds” above at any time prior to the expiration of the Exchange Offers.

Exchange Agent

The Bank of New York Mellon has been appointed as the exchange agent for the Exchange Offers.  The Bank of New York Mellon also acts as trustee under the Indenture.  You should direct all executed letters of transmittal and all questions and requests for assistance with respect to accepting or withdrawing from the Exchange Offers, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery to the exchange agent addressed as follows:

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By Mail, Hand or Courier The Bank of New York Mellon c/o The Bank of New York Mellon Corporation Corporate Trust — Reorganization Unit 480 Washington Boulevard — 27th Floor Jersey City, New Jersey 07310 Attn:             - Processor By Facsimile Transmission (eligible institutions only) (212) 298-1915 To Confirm by Telephone (212) 815-5920

If you deliver the letter of transmittal to an address other than the one set forth above or transmit instructions via facsimile to a number other than the one set forth above, that delivery or those instructions will not be effective.

Fees and Expenses

The registration rights agreement provides that we will bear all expenses in connection with the performance of our obligations relating to the registration of the Exchange Bonds and the conduct of the Exchange Offers.  These expenses include registration and filing fees, accounting and legal fees and printing costs, among others.  We will pay the exchange agent reasonable and customary fees for its services and reasonable out-of-pocket expenses.  We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling expenses incurred by them in forwarding this prospectus and related documents to their clients that are holders of Outstanding Bonds and for handling or tendering for such clients.

We have not retained any dealer-manager in connection with the Exchange Offers and will not pay any fee or commission to any broker, dealer, nominee or other person for soliciting tenders of Outstanding Bonds pursuant to the Exchange Offers.

Accounting Treatment

We will record the Exchange Bonds in our accounting records at the same carrying value as the Outstanding Bonds, which is the aggregate principal amount as reflected in our accounting records on the date of exchanges.  Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the Exchange Offers.  We will record the costs of the Exchange Offers as incurred.

Transfer Taxes

We will pay all transfer taxes, if any, applicable to the exchanges of Outstanding Bonds under the Exchange Offers.  The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:

·certificates representing Outstanding Bonds for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of Outstanding Bonds tendered;

·tendered Outstanding Bonds are registered in the name of any person other than the person signing the letter of transmittal; or

·a transfer tax is imposed for any reason other than the exchange of Outstanding Bonds under the Exchange Offers.

If satisfactory evidence of payment of such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed to that tendering holder.

Holders who tender their Outstanding Bonds for exchange will not be required to pay any transfer taxes.  However, holders who instruct us to register Exchange Bonds in the name of, or request that Outstanding Bonds not tendered or not

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accepted in the Exchange Offers be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax.

Consequences of Failure to Exchange

If you do not exchange your Outstanding Bonds for Exchange Bonds under the Exchange Offers, your Outstanding Bonds will remain subject to the restrictions on transfer of such Outstanding Bonds:

·as set forth in the legend printed on the Outstanding Bonds as a consequence of the issuance of the Outstanding Bonds pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and

·as otherwise set forth in the offering memorandum distributed in connection with the private offerings of the Outstanding Bonds.

In general, you may not offer or sell your Outstanding Bonds unless they are registered under the Securities Act or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws.  Except as required by the registration rights agreement, we do not intend to register resales of the Outstanding Bonds under the Securities Act.

Other

Participating in the Exchange Offers is voluntary, and you should carefully consider whether to accept.  You are urged to consult your financial and tax advisors in making your own decision on what action to take.

We may in the future seek to acquire untendered Outstanding Bonds in open market or privately negotiated transactions, through subsequent exchange offers or otherwise.  We have no present plans to acquire any Outstanding Bonds that are not tendered in the Exchange Offers or to file a registration statement to permit resales of any untendered Outstanding Bonds.

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DESCRIPTION OF THE EXCHANGE BONDS

The following summary description sets forth certain terms and provisions of the Exchange Bonds. Because this description is a summary, it does not describe every aspect of the Exchange Bonds or the Mortgage (as defined below) under which the Exchange Bonds will be issued, and which is filed as an exhibit to the registration statement of which this prospectus is a part.  The Mortgage and its associated documents contain the full legal text of the matters described in this section.  This summary is subject to and qualified in its entirety by reference to all of the provisions of the Exchange Bonds and the Mortgage, including definitions of certain terms used in the Mortgage.  We also include references in parentheses to certain sections of the Mortgage.  Whenever we refer to particular sections or defined terms of the Mortgage in this prospectus, such sections or defined terms are incorporated by reference herein.

General

The form and terms of the Exchange Bonds are identical in all material respects to the form and terms of the Outstanding Bonds except the Exchange Bonds will:

·be registered under the Securities Act;

·not be subject to the restrictions on transfer applicable to the Outstanding Bonds (except for the limited restrictions described under “— Form; Transfers and Exchanges”);

·not be entitled to any registration rights that are applicable to the Outstanding Bonds under the registration rights agreement, including any right to liquidated damages; and

·bear different CUSIP numbers.

We will issue each series of the Exchange Bonds under our indenture, dated as of October 1, 2010 (as such indenture may be amended and supplemented from time to time, the Mortgage), to The Bank of New York Mellon, as Trustee.  The Mortgage effectively does not limit the aggregate principal amount of bonds or other debt securities that may be issued thereunder, subject to meeting certain conditions to issuance, including those described below under “Issuance of Additional Mortgage Securities.”  The Exchange Bonds and all other debt securities issued previously or hereafter issued under the Mortgage are collectively referred to herein as “Mortgage Securities.”  The Mortgage constitutes a first mortgage lien, subject to Permitted Liens and exceptions and exclusions as described below, on substantially all of our real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity.  (See “— Security; Lien of the Mortgage” below.)  As of the date of this prospectus, in addition to the Outstanding Bonds, approximately $351 million of first mortgage bonds are issued and outstanding under the Mortgage and have been pledged to secure pollution control revenue bonds issued by various counties in Kentucky on our behalf.

The Exchange Bonds will be issued in fully registered form only, without coupons.  The Exchange Bonds will be initially represented by one or more fully registered global securities deposited with the Trustee, as custodian for DTC, as depositary, and registered in the name of DTC or DTC’s nominee.  A beneficial interest in a Global Security will be shown on, and transfers or exchanges thereof will be effected only through, records maintained by DTC and its participants, as described below under “— Book-Entry Only Issuance — The Depository Trust Company.”  The authorized denominations of the Exchange Bonds will be $2,000 and any larger amount that is an integral multiple of $1,000.  Except in limited circumstances described below, the Exchange Bonds will not be exchangeable for Bonds in definitive certificated form.

The 2015 Exchange Bonds will be issued as part of the same series of debt securities under the Indenture as the 2015 Outstanding Bonds.  The 2020 Exchange Bonds will be issued as part of the same series of debt securities under the Indenture as the 2020 Outstanding Bonds.  The 2040 Exchange Bonds will be issued as part of the same series of debt securities under the Indenture as the 2040 Outstanding Bonds.  We may, without the consent of the holders of the applicable series of Bonds, increase the principal amount of any series of Bonds and issue additional bonds of the applicable series having the same ranking, interest rate, maturity and other terms (other than the date of issuance and, in some circumstances, the initial interest accrual date and initial interest payment date) as the Exchange Bonds, but do not intend to reopen a series unless, for U.S. federal income tax purposes, such additional bonds are issued in a “qualified reopening” within the meaning of the Internal Revenue Code of 1986, as amended.  Any such additional bonds would, together with the Exchange Bonds of

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the applicable series offered by this prospectus and any Outstanding Bonds of the related series, constitute a single series of securities under the Mortgage and may be treated as a single class for all purposes under the Mortgage, including, without limitation, voting waivers and amendments.

Maturity; Interest

The 2015 Exchange Bonds will mature on November 1, 2015 and will bear interest from                         at a rate of 1.625% per annum.  The 2020 Bonds will mature on November 1, 2020 and will bear interest from                         at a rate of 3.250% per annum.  The 2040 Bonds will mature on November 1, 2040 and will bear interest from                         at a rate of 5.125% per annum.  Interest will be payable on each series of Bonds on May 1 and November 1 of each year, commencing on                         1, 2011, and at maturity (whether at the applicable stated maturity date, upon redemption or acceleration, or otherwise).  Subject to certain exceptions, the Mortgage provides for the payment of interest on an Interest Payment Date only to persons in whose names the Exchange Bonds are registered at the close of business on the Regular Record Date, which will be the April 15 and October 15 (whether or not a Business Day), as the case may be, immediately preceding the applicable Interest Payment Date; except that interest payable at Maturity will be paid to the person to whom principal is paid.

Interest on the Exchange Bonds will be calculated on the basis of a 360-day year of twelve 30-day months, and with respect to any period less than a full calendar month, on the basis of the actual number of days elapsed during the period.

Payment

So long as the Exchange Bonds are registered in the name of DTC, as depository for the Exchange Bonds as described herein under “— Book-Entry Only Issuance — The Depository Trust Company” or DTC’s nominee, payments on the Exchange Bonds will be made as described therein.

If we default in paying interest on an Exchange Bond, we will pay such defaulted interest either

·to holders as of a special record date between 10 and 15 days before the proposed payment; or

·in any other lawful manner of payment that is consistent with the requirements of any securities exchange on which the Exchange Bonds may be listed for trading.  (See Section 307.)

We will pay principal of and interest and premium, if any, on the Exchange Bonds at Maturity upon presentation of the Exchange Bonds at the corporate trust office of The Bank of New York Mellon in New York, New York, as our Paying Agent.  In our discretion, we may change the place of payment on the Exchange Bonds, and we may remove any Paying Agent and may appoint one or more additional Paying Agents (including us or any of our affiliates).  (See Section 702.)

If any Interest Payment Date, Redemption Date or Maturity of an Exchange Bond falls on a day that is not a Business Day, the required payment of principal, premium, if any, and/or interest will be made on the next succeeding Business Day as if made on the date such payment was due, and no interest will accrue on such payment for the period from and after such Interest Payment Date, Redemption Date or Maturity, as the case may be, to the date of such payment on the next succeeding Business Day.

“Business Day” means any day, other than a Saturday or Sunday, that is not a day on which banking institutions or trust companies in The City of New York, New York, or other city in which a paying agent for such Bond is located, are generally authorized or required by law, regulation or executive order to remain closed.  (See Section 116.)

Form; Transfers; Exchanges

So long as the Exchange Bonds are registered in the name of DTC, as depository for the Exchange Bonds as described herein under “— Book-Entry Only Issuance — The Depository Trust Company” or DTC’s nominee, transfers and exchanges of beneficial interest in the Exchange Bonds will be made as described therein. In the event that the book-entry only system is discontinued, and the Exchange Bonds are issued in certificated form, you may exchange or transfer Exchange Bonds at the corporate trust office of the Trustee.

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You may have your Exchange Bonds divided into Exchange Bonds of smaller denominations (of at least $2,000 and any larger amount that is an integral multiple of $1,000) or combined into Exchange Bonds of larger denominations, as long as the total principal amount is not changed.  (See Section 305.)

There will be no service charge for any transfer or exchange of the Exchange Bonds, but you may be required to pay a sum sufficient to cover any tax or other governmental charge payable in connection therewith.  We may block the transfer or exchange of (1) Exchange Bonds during a period of 15 days prior to giving any notice of redemption or (2) any Exchange Bond selected for redemption in whole or in part, except the unredeemed portion of any Exchange Bond being redeemed in part.  (See Section 305.)

The Trustee acts as our agent for registering Exchange Bonds in the names of holders and transferring the Exchange Bonds.  We may appoint another agent (including one of our affiliates) or act as our own agent for this purpose.  The entity performing the role of maintaining the list of registered holders is called the “Security Registrar.”  It will also perform transfers.  In our discretion, we may change the place for registration of transfer of the Exchange Bonds and may designate a different entity as the Security Registrar, including us or one of our affiliates.  (See Sections 305 and 702.)

Redemption

We may, at our option, redeem the 2015 Exchange Bonds, in whole at any time or in part from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the 2015 Exchange Bonds to be so redeemed; or (2) as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest on the 2015 Exchange Bonds to be so redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 10 basis points; plus, in either case, accrued and unpaid interest on the principal amount of the 2015 Exchange Bonds to be so redeemed to the Redemption Date.

We may, at our option, redeem the 2020 Exchange Bonds, in whole at any time or in part from time to time.  If the 2020 Exchange Bonds are redeemed before August 1, 2020 (the date that is three months prior to the stated maturity of the 2020 Exchange Bonds), the 2020 Exchange Bonds will be redeemed by us at a redemption price equal to the greater of (1) 100% of the principal amount of the 2020 Exchange Bonds to be so redeemed; or (2) as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest on the 2020 Exchange Bonds to be so redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 15 basis points; plus, in either case, accrued and unpaid interest on the principal amount of the 2020 Exchange Bonds to be so redeemed to the Redemption Date.  If the 2020 Exchange Bonds are redeemed on or after August 1, 2020, the 2020 Exchange Bonds will be redeemed by us at a redemption price equal to 100% of the principal amount of the 2020 Exchange Bonds to be so redeemed, plus accrued and unpaid interest on the principal amount of the 2020 Exchange Bonds to be so redeemed to the Redemption Date.

We may, at our option, redeem the 2040 Exchange Bonds, in whole at any time or in part from time to time.  If the 2040 Exchange Bonds are redeemed before May 1, 2040 (the date that is six months prior to the stated maturity of the 2040 Exchange Bonds), the 2040 Exchange Bonds will be redeemed by us at a redemption price equal to the greater of (1) 100% of the principal amount of the 2040 Exchange Bonds to be so redeemed; or (2) as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest on the 2040 Exchange Bonds to be so redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 20 basis points; plus, in either case, accrued and unpaid interest on the principal amount of the 2040 Exchange Bonds to be so redeemed to the Redemption Date.  If the 2040 Exchange Bonds are redeemed on or after May 1, 2040, the 2040 Exchange Bonds will be redeemed by us at a redemption price equal to 100% of the principal amount of the 2040 Exchange Bonds to be so redeemed, plus accrued and unpaid interest on the principal amount of the 2040 Exchange Bonds to be so redeemed to the Redemption Date.

“Adjusted Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that Redemption Date.

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“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the applicable series of Exchange Bonds to be redeemed to the applicable stated maturity date that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such applicable series of Exchange Bonds being redeemed.

“Comparable Treasury Price” means, with respect to any Redemption Date:

·the average of five Reference Treasury Dealer Quotations for that Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations; or

·if the Quotation Agent obtains fewer than five Reference Treasury Dealer Quotations, the average of all of those quotations received.

“Quotation Agent” means one of the Reference Treasury Dealers appointed by us.

“Reference Treasury Dealer” means:

·each of Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective successors, unless any of them ceases to be a primary U.S. Government securities dealer in the United States, in which case we will substitute another Primary Treasury Dealer; and

·any other Primary Treasury Dealers selected by us (after consultation with the Quotation Agent).

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount), as provided to the Quotation Agent by that Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding that Redemption Date.

The Exchange Bonds will not be subject to a sinking fund or other mandatory redemption provisions and will not be repayable at the option of the holder prior to the applicable stated maturity date.

The Exchange Bonds will be redeemable upon notice of redemption to each holder of Exchange Bonds to be redeemed by mail between 30 days and 60 days prior to the Redemption Date.  If less than all of the Exchange Bonds are to be redeemed, the Trustee will select the Exchange Bonds or portions thereof to be redeemed. In the absence of any provision for selection, the Trustee will choose a method of random selection that it deems fair and appropriate.  (See Sections 503 and 504.)

We may make any redemption at our option conditional upon the receipt by the Paying Agent, on or prior to the date fixed for redemption, of money sufficient to pay the redemption price. If the Paying Agent has not received such money by the date fixed for redemption, we will not be required to redeem such Exchange Bonds.  (See Section 504.)

If money sufficient to pay the redemption price has been received by the Paying Agent, Exchange Bonds called for redemption will cease to bear interest on the Redemption Date. We will pay the redemption price and any accrued interest once you surrender the Exchange Bond for redemption.  (See Section 505.)  If only part of an Exchange Bond is redeemed, the Trustee will deliver to you a new Exchange Bond of the same series for the remaining portion without charge.  (See Section 506.)

We may redeem, in whole or in part, one series of Exchange Bonds without redeeming the other series.

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Security; Lien of the Mortgage

General

Except as described below under this heading and under “— Issuance of Additional Mortgage Securities,” and subject to the exceptions described under “— Satisfaction and Discharge,” all Mortgage Securities, including the Exchange Bonds, will be secured, equally and ratably, by the lien of the Mortgage, which constitutes, subject to Permitted Liens as described below, a first mortgage lien on substantially all of our real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity (other than property duly released from the lien of the Mortgage in accordance with the provisions thereof and other than Excepted Property, as described below).  We sometimes refer to our property that is subject to the lien of the Mortgage as “Mortgaged Property.”

We may obtain the release of property from the lien of the Mortgage from time to time, upon the bases provided for such release in the Mortgage.  See “— Release of Property.”

We may enter into supplemental indentures with the Trustee, without the consent of the holders, in order to subject additional property (including property that would otherwise be excepted from such lien) to the lien of the Mortgage.  (See Section 1401.)  This property would constitute Property Additions and would be available as a basis for the issuance of Mortgage Securities.  See “— Issuance of Additional Mortgage Securities.”

The Mortgage provides that after-acquired property (other than Excepted Property) will be subject to the lien of the Mortgage.  (See Granting Clause Second.)  However, in the case of consolidation or merger (whether or not we are the surviving company) or transfer of the Mortgaged Property as or substantially as an entirety, the Mortgage will not be required to be a lien upon any of the properties either owned or subsequently acquired by the successor company except properties acquired from us in or as a result of such transfer, as well as improvements, extensions and additions (as defined in the Mortgage) to such properties and renewals, replacements and substitutions of or for any part or parts thereof.  See Section 1303 and “— Consolidation, Merger and Conveyance of Assets as an Entirety.”

Excepted Property.  The lien of the Mortgage does not cover, among other things, the following types of property: property located outside of Kentucky and not specifically subjected or required to be subjected to the lien of the Mortgage; property not used by us in our electric generation, transmission and distribution business; cash and securities not paid, deposited or held under the Mortgage or required so to be; contracts, leases and other agreements of all kinds, contract rights, bills, notes and other instruments, revenues, accounts receivable, claims, demands and judgments; governmental and other licenses, permits, franchises, consents and allowances; intellectual property rights and other general intangibles; vehicles, movable equipment, aircraft and vessels; all goods, stock in trade, wares, merchandise and inventory held for the purpose of sale or lease in the ordinary course of business; materials, supplies, inventory and other personal property consumable in the operation of our business; fuel; tools and equipment; furniture and furnishings; computers and data processing, telecommunications and other facilities used primarily for administrative or clerical purposes or otherwise not used in connection with the operation or maintenance of electric generation, transmission and distribution facilities; coal, ore, gas, oil and other minerals and timber rights; electric energy and capacity, gas, steam, water and other products generated, produced, manufactured, purchased or otherwise acquired; real property and facilities used primarily for the production or gathering of natural gas; property which has been released from the lien of the Mortgage; and leasehold interests.  We sometimes refer to our property not covered by the lien of the Mortgage as “Excepted Property.”  (See Granting Clauses.)  Properties held by any of our subsidiaries, as well as properties leased from others, would not be subject to the lien of the Mortgage.

Permitted Liens.  The lien of the Mortgage is subject to Permitted Liens described in the Mortgage.  Such Permitted Liens include liens existing at the execution date of the Mortgage, purchase money liens and other liens placed or otherwise existing on property acquired by us after the execution date of the Mortgage at the time we acquire it, tax liens and other governmental charges which are not delinquent or which are being contested in good faith, mechanics’, construction and materialmen’s liens, certain judgment liens, easements, reservations and rights of others (including governmental entities) in, and defects of title to, our property, certain leases and leasehold interests, liens to secure public obligations, rights of others to take minerals, timber, electric energy or capacity, gas, water, steam or other products produced by us or by others on our property, rights and interests of Persons other than us arising out of agreements relating to the common ownership or joint use of property, and liens on the interests of such Persons in such property and liens which have been bonded or for which other security arrangements have been made.  (See Granting Clauses and Section 101.)

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The Mortgage also provides that the Trustee will have a lien, prior to the lien on behalf of the holders of the Mortgage Securities, upon the Mortgaged Property as security for our payment of its reasonable compensation and expenses and for indemnity against certain liabilities.  (See Section 1107.)  Any such lien would be a Permitted Lien under the Mortgage.

Issuance of Additional Mortgage Securities

The maximum principal amount of Mortgage Securities that may be authenticated and delivered under the Mortgage is subject to the issuance restrictions described below; provided, however, that the maximum principal amount of Mortgage Securities outstanding at any one time shall not exceed One Quintillion Dollars ($1,000,000,000,000,000,000), which amount may be changed by supplemental indenture.  (See Section 301.)  Mortgage Securities of any series may be issued from time to time on the basis of, and in an aggregate principal amount not exceeding:

·66 2/3% of the Cost or Fair Value to the Company (whichever is less) of Property Additions (as described below) which do not constitute Funded Property (generally, Property Additions which have been made the basis of the authentication and delivery of Mortgage Securities, the release of Mortgaged Property or the withdrawal of cash, which have been substituted for retired Funded Property or which have been used for other specified purposes) after certain deductions and additions, primarily including adjustments to offset property retirements;

·the aggregate principal amount of Retired Securities (as described below); or

·an amount of cash deposited with the Trustee.  (See Article Four.)

Property Additions generally include any property which is owned by us and is subject to the lien of the Mortgage except (with certain exceptions) goodwill, going concern value rights or intangible property, or any property the acquisition or construction of which is properly chargeable to one of our operating expense accounts in accordance with U.S. generally accepted accounting principles.  (See Section 104.)

Retired Securities means, generally, Mortgage Securities which are no longer outstanding under the Mortgage, which have not been retired by the application of Funded Cash and which have not been used as the basis for the authentication and delivery of Mortgage Securities, the release of property or the withdrawal of cash.

We issued the Outstanding Bonds on the basis of property additions.  The Exchange Bonds will be issued in exchange for Outstanding Bonds, with no additional property being required.  At February 28, 2011, approximately $1.2 billion of Property Additions were available to us to be used as the basis for the authentication and delivery of Mortgage Securities in addition to the Outstanding Bonds (or the Exchange Bonds).  (See Article Four.)

Release of Property

Unless an Event of Default has occurred and is continuing, we may obtain the release from the lien of the Mortgage of any Mortgaged Property, except for cash held by the Trustee, upon delivery to the Trustee of an amount in cash equal to the amount, if any, by which sixty-six and two-thirds percent (66 2/3%) of the Cost of the property to be released (or, if less, the Fair Value to us of such property at the time it became Funded Property) exceeds the aggregate of:

·an amount equal to 66 2/3% of the aggregate principal amount of obligations secured by Purchase Money Liens upon the property to be released and delivered to the Trustee;

·an amount equal to 66 2/3% of the Cost or Fair Value to us (whichever is less) of certified Property Additions not constituting Funded Property after certain deductions and additions, primarily including adjustments to offset property retirements (except that such adjustments need not be made if such Property Additions were acquired or made within the 90-day period preceding the release);

·the aggregate principal amount of Mortgage Securities we would be entitled to issue on the basis of Retired Securities (with such entitlement being waived by operation of such release);

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·the aggregate principal amount of Mortgage Securities delivered to the Trustee (with such Mortgage Securities to be canceled by the Trustee);

·any amount of cash and/or an amount equal to 66 2/3% of the aggregate principal amount of obligations secured by Purchase Money Liens upon the property released delivered to the trustee or other holder of a lien prior to the lien of the Mortgage, subject to certain limitations described in the Mortgage; and

·any taxes and expenses incidental to any sale, exchange, dedication or other disposition of the property to be released.

(See Section 803.)

As used in the Mortgage, the term “Purchase Money Lien” means, generally, a lien on the property being released which is retained by the transferor of such property or granted to one or more other persons in connection with the transfer or release thereof, or granted to or held by a trustee or agent for any such persons, and may include liens which cover property in addition to the property being released and/or which secure indebtedness in addition to indebtedness to the transferor of such property. (See Section 101.)

Unless an Event of Default has occurred and is continuing, property which is not Funded Property may generally be released from the lien of the Mortgage without depositing any cash or property with the Trustee as long as (a) the aggregate amount of Cost or Fair Value to us (whichever is less) of all Property Additions which do not constitute Funded Property (excluding the property to be released) after certain deductions and additions, primarily including adjustments to offset property retirements, is not less than zero or (b) the Cost or Fair Value (whichever is less) of property to be released does not exceed the aggregate amount of the Cost or Fair Value to us (whichever is less) of Property Additions acquired or made within the 90-day period preceding the release.  (See Section 804.)

The Mortgage provides simplified procedures for the release of minor properties and property taken by eminent domain, and provides for dispositions of certain obsolete property and grants or surrender of certain rights without any release or consent by the Trustee.  (See Sections 805, 807 and 808.)

If we retain any interest in any property released from the lien of the Mortgage, the Mortgage will not become a lien on such property or such interest therein or any improvements, extensions or additions to such property or renewals, replacements or substitutions of or for such property or any part or parts thereof. (See Section 809.)

Withdrawal of Cash

Unless an Event of Default has occurred and is continuing, and subject to certain limitations, cash held by the Trustee may, generally, (1) be withdrawn by us (a) to the extent of sixty-six and two-thirds percent (66 2/3%) of the Cost or Fair Value to us (whichever is less) of Property Additions not constituting Funded Property, after certain deductions and additions, primarily including adjustments to offset retirements (except that such adjustments need not be made if such Property Additions were acquired or made within the 90-day period preceding the withdrawal) or (b) in an amount equal to the aggregate principal amount of Mortgage Securities that we would be entitled to issue on the basis of Retired Securities (with the entitlement to such issuance being waived by operation of such withdrawal) or (c) in an amount equal to the aggregate principal amount of any outstanding Mortgage Securities delivered to the Trustee; or (2) upon our request, be applied to (a) the purchase of Mortgage Securities in a manner and at a price approved by us or (b) the payment (or provision for payment) at stated maturity of any Mortgage Securities or the redemption (or provision for payment) of any Mortgage Securities which are redeemable (see Section 806); provided, however, that cash deposited with the Trustee as the basis for the authentication and delivery of Mortgage Securities may, in addition, be withdrawn in an amount not exceeding the aggregate principal amount of cash delivered to the Trustee for such purpose.  (See Section 404.)

Events of Default

An “Event of Default” occurs under the Mortgage if

·we do not pay any interest on any Mortgage Securities within 30 days of the due date;

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·we do not pay principal or premium, if any, on any Mortgage Securities on the due date;

·we remain in breach of any other covenant (excluding covenants specifically dealt with elsewhere in this section) in respect of any Mortgage Securities for 90 days after we receive a written notice of default stating we are in breach and requiring remedy of the breach; the notice must be sent by either the Trustee or holders of 25% of the principal amount of outstanding Mortgage Securities; the Trustee or such holders can agree to extend the 90-day period and such an agreement to extend will be automatically deemed to occur if we initiate corrective action within such 90-day period and we are diligently pursuing such action to correct the default; or

·we file for bankruptcy or certain other events in bankruptcy, insolvency, receivership or reorganization occur.

(See Section 1001.)

Remedies

Acceleration of Maturity

If an Event of Default occurs and is continuing, then either the Trustee or the holders of not less than 25% in principal amount of the outstanding Mortgage Securities may declare the principal amount of all of the Mortgage Securities to be due and payable immediately.  (See Section 1002.)

Rescission of Acceleration

After the declaration of acceleration has been made and before the Trustee has obtained a judgment or decree for payment of the money due, such declaration and its consequences will be rescinded and annulled, if

·we pay or deposit with the Trustee a sum sufficient to pay:

·all overdue interest;

·the principal of and premium, if any, which have become due otherwise than by such declaration of acceleration and interest thereon;

·interest on overdue interest to the extent lawful; and

·all amounts due to the Trustee under the Mortgage; and

·all Events of Default, other than the nonpayment of the principal which has become due solely by such declaration of acceleration, have been cured or waived as provided in the Mortgage.

(See Section 1002.)

For more information as to waiver of defaults, see “— Waiver of Default and of Compliance” below.

Appointment of Receiver and Other Remedies

Subject to the Mortgage, under certain circumstances and to the extent permitted by law, if an Event of Default occurs and is continuing, the Trustee has the power to appoint a receiver of the Mortgaged Property, and is entitled to all other remedies available to mortgagees and secured parties under the Uniform Commercial Code or any other applicable law.  (See Section 1016.)

Control by Holders; Limitations

Subject to the Mortgage, if an Event of Default occurs and is continuing, the holders of a majority in principal amount of the outstanding Mortgage Securities will have the right to

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·direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or

·exercise any trust or power conferred on the Trustee.

The rights of holders to make direction are subject to the following limitations:

·the holders’ directions may not conflict with any law or the Mortgage; and

·the holders’ directions may not involve the Trustee in personal liability where the Trustee believes indemnity is not adequate.

The Trustee may also take any other action it deems proper which is not inconsistent with the holders’ direction.  (See Sections 1012 and 1103.)

In addition, the Mortgage provides that no holder of any Mortgage Security will have any right to institute any proceeding, judicial or otherwise, with respect to the Mortgage for the appointment of a receiver or for any other remedy thereunder unless

·that holder has previously given the Trustee written notice of a continuing Event of Default;

·the holders of 25% in aggregate principal amount of the outstanding Mortgage Securities have made written request to the Trustee to institute proceedings in respect of that Event of Default and have offered the Trustee reasonable indemnity against costs, expenses and liabilities incurred in complying with such request; and

·for 60 days after receipt of such notice, request and offer of indemnity, the Trustee has failed to institute any such proceeding and no direction inconsistent with such request has been given to the Trustee during such 60-day period by the holders of a majority in aggregate principal amount of outstanding Mortgage Securities.

Furthermore, no holder will be entitled to institute any such action if and to the extent that such action would disturb or prejudice the rights of other holders.  (See Sections 1007 and 1103.)

However, each holder has an absolute and unconditional right to receive payment when due and to bring a suit to enforce that right.  (See Section 1008.)

Notice of Default

The Trustee is required to give the holders of the Mortgage Securities notice of any default under the Mortgage to the extent required by the Trust Indenture Act, unless such default has been cured or waived; except that in the case of an Event of Default of the character specified in the third bullet point under “— Events of Default” (regarding a breach of certain covenants continuing for 90 days after the receipt of a written notice of default), no such notice shall be given to such holders until at least 60 days after the occurrence thereof.  (See Section 1102.)  The Trust Indenture Act currently permits the Trustee to withhold notices of default (except for certain payment defaults) if the Trustee in good faith determines the withholding of such notice to be in the interests of the holders.

We will furnish the Trustee with an annual statement as to our compliance with the conditions and covenants in the Mortgage.  (See Section 709.)

Waiver of Default and of Compliance

The holders of a majority in aggregate principal amount of the outstanding Mortgage Securities may waive, on behalf of the holders of all outstanding Mortgage Securities, any past default under the Mortgage, except a default in the payment of principal, premium or interest, or with respect to compliance with certain provisions of the Mortgage that cannot be amended without the consent of the holder of each outstanding Mortgage Security affected.  (See Section 1013.)

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Compliance with certain covenants in the Mortgage or otherwise provided with respect to Mortgage Securities may be waived by the holders of a majority in aggregate principal amount of the affected Mortgage Securities, considered as one class.  (See Section 710.)

Consolidation, Merger and Conveyance of Assets as an Entirety

Subject to the provisions described below, we have agreed to preserve our corporate existence.  (See Section 704.)

We have agreed not to consolidate with or merge with or into any other entity or convey, transfer or lease the Mortgaged Property as or substantially as an entirety to any entity unless

·the entity formed by such consolidation or into which we merge, or the entity which acquires or which leases the Mortgaged Property substantially as an entirety, is an entity organized and existing under the laws of the United States of America or any State or Territory thereof or the District of Columbia, and

·expressly assumes, by supplemental indenture, the due and punctual payment of the principal of, and premium and interest on, all the outstanding Mortgage Securities and the performance of all of our covenants under the Mortgage, and

·such entity confirms the lien of the Mortgage on the Mortgaged Property;

·in the case of a lease, such lease is made expressly subject to termination by (i) us or by the Trustee and (ii) the purchaser of the property so leased at any sale thereof, at any time during the continuance of an Event of Default; and

·immediately after giving effect to such transaction, no Event of Default, and no event which after notice or lapse of time or both would become an Event of Default, will have occurred and be continuing.

(See Section 1301.)

In the case of the conveyance or other transfer of the Mortgaged Property as or substantially as an entirety to any other person, upon the satisfaction of all the conditions described above we would be released and discharged from all obligations under the Mortgage and on the Mortgage Securities then outstanding unless we elect to waive such release and discharge.  (See Section 1304.)

The Mortgage does not prevent or restrict:

·any consolidation or merger after the consummation of which we would be the surviving or resulting entity; or

·any conveyance or other transfer, or lease, of any part of the Mortgaged Property which does not constitute the entirety or substantially the entirety thereof.

If following a conveyance or other transfer, or lease, of any part of the Mortgaged Property, the fair value of the Mortgaged Property retained by the Company exceeds an amount equal to three-halves (3/2) of the aggregate principal amount of all outstanding Mortgage Securities, then the part of the Mortgaged Property so conveyed, transferred or leased shall be deemed not to constitute the entirety or substantially the entirety of the Mortgaged Property.  This fair value will be determined within 90 days of the conveyance or transfer by an independent expert that we select and that is approved by the Trustee.

(See Sections 1305 and 1306.)

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Agreement to Provide Information

So long as any Exchange Bonds are outstanding under the Mortgage, during such periods as we are not subject to the periodic reporting requirements of Section 13 or 15(d) of the Exchange Act, we shall make available to holders of the Exchange Bonds by means of posting on our website or other similar means:

(a) as soon as reasonably available and in any event within 120 days after the end of each fiscal year, our audited balance sheet, income statement and cash flow statement for such fiscal year prepared in accordance with United States generally accepted accounting principles (with notes to such financial statements), together with an audit report thereon by an independent accounting firm of established national reputation, and a management’s narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items between the most recent fiscal year presented and the fiscal year immediately preceding it, as described in Instruction I(2)(a) of Form 10-K; and

(b) as soon as reasonably available and in any event within 60 days after the end of each of the first three fiscal quarters of each fiscal year, our unaudited balance sheet, unaudited income statement and unaudited cash flow statement for such fiscal quarter prepared in accordance with United States generally accepted accounting principles (with notes to such financial statements) and a management’s narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items between the most recent fiscal year-to-date period presented and the corresponding year-to-date period in the preceding fiscal year, as described in Instruction H(2)(a) to Form 10-Q.

If we are unable, for any reason, to post the financial statements on our website as described above we shall furnish the financial statements to the Trustee, who has agreed, at our expense, to furnish them to the holders of the Exchange Bonds.

Modification of Mortgage

Without Holder Consent.  Without the consent of any holders of Mortgage Securities, we and the Trustee may enter into one or more supplemental indentures for any of the following purposes:

·to evidence the succession of another entity to us;

·to add one or more covenants or other provisions for the benefit of the holders of all or any series or tranche of Mortgage Securities, or to surrender any right or power conferred upon us;

·to correct or amplify the description of any property at any time subject to the lien of the Mortgage; or to better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of the Mortgage; or to subject to the lien of the Mortgage additional property (including property of others), to specify any additional Permitted Liens with respect to such additional property and to modify the provisions in the Mortgage for dispositions of certain types of property without release in order to specify any additional items with respect to such additional property;

·to add any additional Events of Default, which may be stated to remain in effect only so long as the Mortgage Securities of any one more particular series remains outstanding;

·to change or eliminate any provision of the Mortgage or to add any new provision to the Mortgage that does not adversely affect the interests of the holders in any material respect;

·to establish the form or terms of any series or tranche of Mortgage Securities;

·to provide for the issuance of bearer securities;

·to evidence and provide for the acceptance of appointment of a successor Trustee or by a co-trustee or separate trustee;

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·to provide for the procedures required to permit the utilization of a noncertificated system of registration for any series or tranche of Mortgage Securities;

·to change any place or places where

·we may pay principal, premium and interest,

·Mortgage Securities may be surrendered for transfer or exchange, and

·notices and demands to or upon us may be served;

·to amend and restate the Mortgage as originally executed, and as amended from time to time, with such additions, deletions and other changes that do not adversely affect the interest of the holders in any material respect;

·to cure any ambiguity, defect or inconsistency or to make any other changes that do not adversely affect the interests of the holders in any material respect; or

·to increase or decrease the maximum principal amount of Mortgage Securities that may be outstanding at any time.

In addition, if the Trust Indenture Act is amended after the date of the Mortgage so as to require changes to the Mortgage or so as to permit changes to, or the elimination of, provisions which, at the date of the Mortgage or at any time thereafter, were required by the Trust Indenture Act to be contained in the Mortgage, the Mortgage will be deemed to have been amended so as to conform to such amendment or to effect such changes or elimination, and we and the Trustee may, without the consent of any holders, enter into one or more supplemental indentures to effect or evidence such amendment.

(See Section 1401.)

With Holder Consent.  Except as provided above, the consent of the holders of at least a majority in aggregate principal amount of the Mortgage Securities of all outstanding series, considered as one class, is generally required for the purpose of adding to, or changing or eliminating any of the provisions of, the Mortgage pursuant to a supplemental indenture.  However, if less than all of the series of outstanding Mortgage Securities are directly affected by a proposed supplemental indenture, then such proposal only requires the consent of the holders of a majority in aggregate principal amount of the outstanding Mortgage Securities of all directly affected series, considered as one class.  Moreover, if the Mortgage Securities of any series have been issued in more than one tranche and if the proposed supplemental indenture directly affects the rights of the holders of Mortgage Securities of one or more, but less than all, of such tranches, then such proposal only requires the consent of the holders of a majority in aggregate principal amount of the outstanding Mortgage Securities of all directly affected tranches, considered as one class.

However, no amendment or modification may, without the consent of the holder of each outstanding Mortgage Security directly affected thereby,

·change the stated maturity of the principal or interest on any Mortgage Security (other than pursuant to the terms thereof), or reduce the principal amount, interest or premium payable (or the method of calculating such rates) or change the currency in which any Mortgage Security is payable, or impair the right to bring suit to enforce any payment;

·create any lien (not otherwise permitted by the Mortgage) ranking prior to the lien of the Mortgage with respect to all or substantially all of the Mortgaged Property, or terminate the lien of the Mortgage on all or substantially all of the Mortgaged Property (other than in accordance with the terms of the Mortgage), or deprive any holder of the benefits of the security of the lien of the Mortgage;

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·reduce the percentages of holders whose consent is required for any supplemental indenture or waiver of compliance with any provision of the Mortgage or of any default thereunder and its consequences, or reduce the requirements for quorum and voting under the Mortgage; or

·modify certain of the provisions of the Mortgage relating to supplemental indentures, waivers of certain covenants and waivers of past defaults with respect to Mortgage Securities.

A supplemental indenture which changes, modifies or eliminates any provision of the Mortgage expressly included solely for the benefit of holders of Mortgage Securities of one or more particular series or tranches will be deemed not to affect the rights under the Mortgage of the holders of Mortgage Securities of any other series or tranche.

(See Section 1402.)

Satisfaction and Discharge

Any Mortgage Securities or any portion thereof will be deemed to have been paid and no longer outstanding for purposes of the Mortgage and, at our election, our entire indebtedness with respect to those securities will be satisfied and discharged, if there shall have been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust:

·money sufficient, or

·in the case of a deposit made prior to the maturity of such Mortgage Securities, non-redeemable Eligible Obligations (as defined in the Mortgage) sufficient, or

·a combination of the items listed in the preceding two bullet points, which in total are sufficient,

to pay when due the principal of, and any premium, and interest due and to become due on such Mortgage Securities or portions of such Mortgage Securities on and prior to their maturity.

(See Section 901.)

Our right to cause our entire indebtedness in respect of the Mortgage Securities of any series to be deemed to be satisfied and discharged as described above will be subject to the satisfaction of any conditions specified in the instrument creating such series.

The Mortgage will be deemed satisfied and discharged when no Mortgage Securities remain outstanding and when we have paid all other sums payable by us under the Mortgage.  (See Section 902.)

All moneys we pay to the Trustee or any Paying Agent on Exchange Bonds that remain unclaimed at the end of two years after payments have become due may be paid to or upon our order.  Thereafter, the holder of such Exchange Bond may look only to us for payment.  (See Section 703.)

Duties of the Trustee; Resignation and Removal of the Trustee; Deemed Resignation

The Trustee will have, and will be subject to, all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act.  Subject to these provisions, the Trustee will be under no obligation to exercise any of the powers vested in it by the Mortgage at the request of any holder of Mortgage Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby.  The Trustee will not be required to expend or risk its own funds or otherwise incur financial liability in the performance of its duties if the Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.

The Trustee may resign at any time by giving written notice to us.

The Trustee may also be removed by act of the holders of a majority in principal amount of the then outstanding Mortgage Securities of any series.

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No resignation or removal of the Trustee and no appointment of a successor trustee will become effective until the acceptance of appointment by a successor trustee in accordance with the requirements of the Mortgage.

Under certain circumstances, we may appoint a successor trustee and if the successor accepts, the Trustee will be deemed to have resigned.

(See Section 1110.)

Notices

Notices to holders of the Exchange Bonds will be given by mail to the addresses of the holders as they may appear in the Security Register.  (See Section 109.)

Title

The Company, the Trustee, and any agent of the Company or the Trustee, will treat the person or entity in whose name the Exchange Bonds are registered as the absolute owner of those Exchange Bonds (whether or not such Exchange Bonds may be overdue) for the purpose of making payments and for all other purposes irrespective of notice to the contrary.  (See Section 308.)

Evidence to be Furnished to the Trustee

Compliance with Mortgage provisions is evidenced by written statements of our officers or persons selected or paid by us. In certain cases, opinions of counsel and certifications of an engineer, accountant, appraiser or other expert (who in some cases must be independent) must be furnished.  In addition, the Mortgage requires us to give to the Trustee, not less than annually, a brief statement as to our compliance with the conditions and covenants under the Mortgage.

Miscellaneous Provisions

The Mortgage provides that certain Mortgage Securities, including those for which payment or redemption money has been deposited or set aside in trust as described under “— Satisfaction and Discharge” above, will not be deemed to be “outstanding” in determining whether the holders of the requisite principal amount of the outstanding Mortgage Securities have given or taken any demand, direction, consent or other action under the Mortgage as of any date, or are present at a meeting of holders for quorum purposes.  (See Section 101.)

We will be entitled to set any day as a record date for the purpose of determining the holders of outstanding Mortgage Securities of any series entitled to give or take any demand, direction, consent or other action under the Mortgage, in the manner and subject to the limitations provided in the Mortgage. In certain circumstances, the Trustee also will be entitled to set a record date for action by holders.  If such a record date is set for any action to be taken by holders of particular Mortgage Securities, such action may be taken only by persons who are holders of such Mortgage Securities on the record date.  (See Section 107.)

Governing Law

The Mortgage and the Mortgage Securities provide that they are to be governed by and construed in accordance with the laws of the State of New York except where the Trust Indenture Act is applicable or where otherwise required by law.  (See Section 115.)  The effectiveness of the lien of the Mortgage, and the perfection and priority thereof, will be governed by Kentucky law.

Regarding the Trustee

The Trustee under the Mortgage is the Bank of New York Mellon.  In addition to acting as Trustee, BNYM also maintains various banking and trust relationships with us and some of our affiliates.

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Book-Entry Only Issuance — The Depository Trust Company

DTC will act as the initial securities depository for the Exchange Bonds.  The Exchange Bonds issued in exchange for Outstanding Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued with respect to each $500 million of principal amount of Exchange Bonds, and an additional certificate will be issued with respect to any remaining principal amount of Exchange Bonds.  The global bonds will be deposited with the Trustee as custodian for DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act.  DTC holds securities for its participants, or Direct Participants, and also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation, or DTCC.  DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly.  The rules that apply to DTC and those using its system are on file with the SEC. More information about DTC can be found at www.dtcc.com.

Purchases of the Exchange Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Exchange Bonds on DTC’s records. The ownership interest of each actual purchaser, or beneficial owner, is in turn to be recorded on the Direct and Indirect Participants’ records.  Beneficial owners will not receive written confirmation from DTC of their purchases, but beneficial owners should receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which they entered into the transaction.  Transfers of ownership interests on the Exchange Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of beneficial owners.  Beneficial owners will not receive certificates representing their ownership interests in Exchange Bonds, except in the event that use of the book-entry system for the Exchange Bonds is discontinued.

To facilitate subsequent transfers, all Exchange Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC.  The deposit of the Exchange Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership.  DTC has no knowledge of the actual beneficial owners of the Exchange Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts the Exchange Bonds are credited, which may or may not be the beneficial owners.  The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to beneficial owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.  Notices will be sent to DTC.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Exchange Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an omnibus proxy to us as soon as possible after the record date.  The omnibus proxy assigns the voting or consenting rights of Cede & Co. to those Direct Participants to whose accounts the Exchange Bonds are credited on the record date.  We believe that these arrangements will enable the beneficial owners to exercise rights equivalent in substance to the rights that can be directly exercised by a registered holder of the Exchange Bonds.

Payments of principal and interest on the Exchange Bonds will be made to Cede & Co. (or such other nominee of DTC). DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information

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from us or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records.  Payments by participants to beneficial owners will be governed by standing instructions and customary practices and will be the responsibility of such participant and not of DTC, the Trustee or us, subject to any statutory or regulatory requirements as may be in effect from time to time.  Payment of the principal and interest to Cede & Co. (or such other nominee of DTC) is the responsibility of the Company or the Trustee.  Disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the beneficial owners is the responsibility of Direct and Indirect Participants.

A beneficial owner will not be entitled to receive physical delivery of the Exchange Bonds.  Accordingly, each beneficial owner must rely on the procedures of DTC to exercise any rights under the Exchange Bonds.

DTC may discontinue providing its services as securities depository with respect to the Exchange Bonds at any time by giving us or the Trustee reasonable notice. In the event no successor securities depository is obtained, certificates for the Exchange Bonds will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that we believe to be reliable; however, we do not take any responsibility for the accuracy of this information.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes material U.S. federal income tax considerations to U.S. Holders and Non-U.S. Holders (each, as defined below) of the acquisition, ownership and disposition of the Exchange Bonds acquired pursuant to the Exchange Offers.  It is included herein for general information purposes only. The discussion set forth below is limited to holders who hold the Exchange Bonds as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, and does not address all tax considerations that may be relevant to investors in light of their personal investment circumstances or that may be relevant to certain types of investors subject to special rules (for example, financial institutions, tax-exempt organizations, insurance companies, regulated investment companies, persons that are broker-dealers, traders in securities who elect the mark to market method of tax accounting for their securities, U.S. Holders that have a functional currency other than the U.S. dollar, certain former U.S. citizens or long-term residents, retirement plans, real estate investment trusts, foreign governments, international organizations, controlled foreign corporations, passive foreign investment companies, investors in partnerships or other pass-through entities or persons holding the Exchange Bonds as part of a “straddle,” “hedge,” “conversion transaction” or other integrated transaction).

In addition, this discussion does not address the effect of U.S. federal alternative minimum tax, gift or estate tax laws, or any state, local or foreign tax laws.  Furthermore, the discussion below is based upon provisions of the Internal Revenue Code, the legislative history thereof, U.S. Treasury regulations thereunder and administrative rulings and judicial decisions thereunder as of the date hereof.  Such authorities may be repealed, revoked or modified (including changes in effective dates, and possibly with retroactive effect) so as to result in U.S. federal income tax considerations different from those discussed below.  We have not sought any rulings from the Internal Revenue Service with respect to the statements and conclusions made in the following discussion, and there can be no assurance that the IRS will agree with such statements and conclusions or that a court will not sustain any challenge by the IRS in the event of litigation.

For purposes of the following discussion, the term “U.S. Holder” means a beneficial owner of the Exchange Bonds that is for U.S. federal income tax purposes:

·an individual who is a citizen or resident of the U.S.;

·a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

·an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

·a trust, if (i) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in place to be treated as a United States person.

For purposes of the following discussion, the term “Non-U.S. Holder” means a beneficial owner of the Exchange Bonds (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder for U.S. federal income tax purposes.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes is a beneficial owner of a Bond, the U.S. federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner and upon the activities of the partnership.  Partnerships and partners in such partnerships should consult their own tax advisors about the tax consequences of the ownership and disposition of the Exchange Bonds.

THIS DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS IS NOT INTENDED, AND SHOULD NOT BE CONSTRUED, TO BE TAX OR LEGAL ADVICE TO ANY PARTICULAR INVESTOR IN OR HOLDER OF THE EXCHANGE BONDS.  HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSIDERATIONS ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR ANY APPLICABLE TAX TREATIES, AND THE POSSIBLE EFFECT OF CHANGES IN APPLICABLE TAX LAW.

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The Exchange Offers

The exchange of Outstanding Bonds for Exchange Bonds pursuant to the Exchange Offers will not constitute a taxable event for U.S. federal income tax purposes. As a result:

·a holder will not recognize taxable gain or loss as a result of the exchange of its Outstanding Bonds for the Exchange Bonds pursuant to the Exchange Offers;

·the holding period of the Exchange Bonds will include the holding period of the Outstanding Bonds surrendered in exchange therefor; and

·a holder’s adjusted tax basis in the Exchange Bonds will be the same as the holder’s adjusted tax basis in the Outstanding Bonds surrendered therefor.

Effect of Certain Additional Payments

In certain circumstances (for example, see “Description of the Exchange Bonds — Redemption”) we may be obligated to pay amounts on the Exchange Bonds that are in excess of stated interest or principal on the Exchange Bonds.  These potential payments may implicate the provisions of the treasury regulations relating to “contingent payment debt instruments.”  One or more contingencies will not cause the Exchange Bonds to be treated as a contingent payment debt instrument if, as of the issue date, each such contingency is considered remote or incidental or, in certain circumstances, it is significantly more likely than not that none of the contingencies will occur.  We believe that the potential for additional payments on the Exchange Bonds should not cause the Exchange Bonds to be treated as contingent payment debt instruments under the treasury regulations relating to contingent payment debt instruments.  Our determination is binding on a holder unless such a holder discloses its contrary position in the manner required by applicable Treasury Regulations.  However, the IRS may take a different position, which could require a holder to accrue income on its Exchange Bonds in excess of stated interest, and to treat any income realized on the taxable disposition of an Exchange Bond as ordinary income rather than capital gain.  The remainder of this discussion assumes that the Exchange Bonds will not be treated as contingent payment debt instruments.  Holders should consult their own tax advisors regarding the possible application of the contingent payment debt instrument rules to the Exchange Bonds.

U.S. Holders

Stated Interest

The Exchange Bonds will be issued without any original issue discount for U.S. federal income tax purposes.  Accordingly, stated interest on the Exchange Bonds will be included in income by a U.S. Holder as ordinary income as such interest is received or accrued in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.

Sale, Taxable Exchange, Redemption or Other Taxable Disposition of the Exchange Bonds

Upon a sale, taxable exchange, redemption (including any optional redemption) or other taxable disposition of an Exchange Bond, a U.S. Holder generally will recognize gain or loss equal to the difference between the amount realized on the disposition, other than amounts attributable to accrued but unpaid interest not yet taken into income which will be taxed as ordinary income, and the U.S. Holder’s adjusted tax basis in the Exchange Bond.  A U.S. Holder’s adjusted tax basis in an Exchange Bond generally will equal the purchase price of the Outstanding Bond exchanged for the Exchange Bond. Any gain or loss generally will constitute capital gain or loss and will be long-term capital gain or loss if the U.S. Holder has held the Exchange Bond for longer than 12 months.  Long-term capital gain, in the case of non-corporate taxpayers, is eligible for preferential rates of taxation.  Under current law, the deductibility of capital losses is subject to limitations.

Medicare Tax

For taxable years beginning after December 31, 2012, a U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S.

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Holder’s “net investment income” (in the case of individuals) or “undistributed net investment income” (in the case of estates and trusts) for the relevant taxable year and (2) the excess of the U.S. Holder’s “modified adjusted gross income” (in the case of individuals) or “adjusted gross income” (in the case of estates and trusts) for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances).  A U.S. Holder’s net investment income generally will include its interest income on the Exchange Bonds and its net gains from the disposition of the Exchange Bonds, unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities).  U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of the Medicare tax to their income and gains in respect of the Exchange Bonds.

Information Reporting and Backup Withholding

Under the Internal Revenue Code, U.S. Holders may be subject, under certain circumstances, to information reporting and “backup withholding” with respect to cash payments in respect of principal, interest and the gross proceeds from dispositions of the Exchange Bonds, unless the U.S. Holder is an exempt recipient.  Backup withholding applies only if the U.S. Holder fails to furnish its social security or other taxpayer identification number to the Paying Agent and to comply with certain certification procedures or otherwise fails to establish an exemption from backup withholding.  Backup withholding is not an additional tax.  Any amount withheld from a payment to a U.S. Holder under the backup withholding rules is allowable as a credit (and may entitle such holder to a refund) against such U.S. Holder’s U.S. federal income tax liability, provided that the required information is furnished to the IRS in a timely manner.  Certain persons are exempt from backup withholding.  U.S. Holders should consult their own tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such exemption.

Non-U.S. Holders

Stated Interest

Subject to the discussion of backup withholding below, payments of interest on the Exchange Bonds to a Non-U.S. Holder generally will not be subject to U.S. withholding tax provided that (1) the Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock, (2) the Non-U.S. Holder is not (a) a controlled foreign corporation that is related to us through actual or deemed stock ownership or (b) a bank receiving interest on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business, (3) such interest is not effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States, and (4) either (a) the Non-U.S. Holder provides its name and address on an IRS Form W-8BEN (or other applicable form) and certifies, under penalties of perjury, that it is not a United States person as defined under the Internal Revenue Code or (b) a securities clearing organization, bank or other financial institution holding the Exchange Bonds on the Non-U.S. Holder’s behalf certifies, under penalties of perjury, that it has received a properly executed IRS Form W-8BEN from the Non-U.S. Holder and it provides the withholding agent with a copy.

If a Non-U.S. Holder cannot satisfy the requirements in the preceding paragraph, payments of interest made to such Non-U.S. Holder will be subject to U.S. federal withholding tax, currently at a rate of 30%, unless such Non-U.S. Holder (1) timely provides the withholding agent with a properly executed IRS Form W-8BEN (or other applicable form) claiming an exemption from or reduction in withholding under the benefit of an applicable income tax treaty or IRS Form W-8ECI (or other applicable form) certifying that interest paid on the Exchange Bonds is not subject to U.S. federal withholding tax because it is effectively connected with such Non-U.S. Holder’s conduct of a trade or business in the United States, or (2) otherwise properly establishes an exemption from withholding taxes.

If interest on the Exchange Bonds is effectively connected with the conduct by a Non-U.S. Holder of a trade or business within the United States (and, if certain tax treaties apply, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder), such interest will be subject to U.S. federal income tax on a net income basis at the rate applicable to United States persons generally (and a Non-U.S. Holder that is treated as a corporation for U.S. federal income tax purposes may also be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits, subject to certain adjustments, unless such holder qualifies for a lower rate under an applicable income tax treaty).  If interest is subject to U.S. federal income tax on a net income basis in accordance with these rules, such payments will not be subject to U.S. federal withholding tax so long as the relevant Non-U.S. Holder timely provides the withholding agent with the appropriate documentation.

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Sale, Taxable Exchange, Redemption or Other Taxable Disposition of the Exchange Bonds

Subject to the discussion of backup withholding below, any gain realized by a Non-U.S. Holder on the sale, taxable exchange, redemption or other taxable disposition of the Exchange Bonds generally will not be subject to U.S. federal income tax, unless (1) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States (and, if certain tax treaties apply, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder), in which case such gain will be taxed on a net income basis in the same manner as interest that is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and a Non-U.S. Holder that is treated as a corporation for U.S. federal income tax purposes may also be subject to the branch profits tax as described above) or (2) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are satisfied, in which case the Non-U.S. Holder will be subject to a tax, currently at a rate of 30%, on the excess, if any, of such gain plus all other U.S source capital gains recognized during the same taxable year over the Non-U.S. Holder’s U.S. source capital losses recognized during such taxable year.

Information Reporting and Backup Withholding

A Non-U.S. Holder may be subject to annual information reporting and U.S. federal backup withholding on payments of interest and proceeds of a sale or other disposition of the Exchange Bonds unless such Non-U.S. Holder provides the certification described above under “Non-U.S. Holders—Stated Interest” or otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax and will be refunded or allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability (if any), provided the required information is furnished to the IRS in a timely manner. In any event, we generally will be required to file information returns with the IRS reporting our payments on the Exchange Bonds. Copies of the information returns may also be made available to the tax authorities in the country in which a Non-U.S. Holder resides under the provisions of an applicable income tax treaty.

Non-U.S. Holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules in their particular situations, the availability of an exemption therefrom and the procedure for obtaining such an exemption, if available.

Recently Enacted Legislation

Recently enacted legislation regarding foreign account tax compliance, effective for payments made after December 31, 2012, imposes a withholding tax of 30% on interest and gross proceeds from the disposition of certain debt instruments paid to certain foreign entities unless various information reporting and certain other requirements are satisfied.  However, the withholding tax will not be imposed on payments pursuant to obligations outstanding as of March 18, 2012.  In addition, certain account information with respect to U.S. Holders who hold the Exchange Bonds through certain foreign financial institutions may be reportable to the IRS.  Investors should consult with their own tax advisors regarding the possible implications of this recently enacted legislation to them.

THE PRECEDING DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE.  ACCORDINGLY, EACH HOLDER OF AN EXCHANGE BOND SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF ACQUIRING, OWNING AND DISPOSING OF THE EXCHANGE BONDS ACQUIRED PURSUANT TO THE TERMS OF THE EXCHANGE OFFERS, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.

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PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Bonds for its own account pursuant to the Exchange Offers must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds.  This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Outstanding Bonds where such Outstanding Bonds were acquired as a result of market-making activities or other trading activities.  We have agreed that, for a period of 180 days after the Expiration Date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.  In addition, all dealers effecting transactions in the Exchange Bonds may be required to deliver a prospectus.

We will not receive any proceeds from any sale of Exchange Bonds by broker-dealers.  Exchange Bonds received by broker-dealers for their own account pursuant to the Exchange Offers may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Bonds or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices.  Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Bonds.  Any broker-dealer that resells Exchange Bonds that were received by it for its own account pursuant to the Exchange Offers and any broker or dealer that participates in a distribution of such Exchange Bonds may be deemed to be an “underwriter” within the meaning of the Securities Act, and any profit on any such resale of Exchange Bonds and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act.  The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the Expiration Date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal.  Subject to certain limitations set forth in the registration rights agreement, we have agreed to pay all expenses incident to the Exchange Offers (including the expenses of one counsel for the holders of the Outstanding Bonds) other than commissions or concessions of any brokers or dealers and will indemnify you (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

The validity of the Exchange Bonds will be passed upon for us by Dewey & LeBoeuf LLP, New York, New York and John R. McCall, Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer to the Company and Stoll Keenon Ogden PLLC.  As to matters involving the law of the Commonwealths of Kentucky and Virginia and the State of Tennessee, Dewey & LeBoeuf will rely upon the opinions of Mr. McCall and Stoll Keenon Ogden PLLC.

EXPERTS

Our financial statements as of December 31, 2010 and 2009 and for the periods from January 1, 2010 to October 31, 2010, and November 1, 2010 to December 31, 2010, and for each of the two years in the period ended December 31, 2009 included in this prospectus have been so included in reliance on the reports of PricewaterhouseCoopers LLP, independent registered public accounting firm, given the authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the Exchange Bonds.  This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement.  For further information with respect to us and the Exchange Bonds, reference is made to the registration statement.  Statements contained in this prospectus as to the contents of any contract or other document are not complete.

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We have agreed to make certain information available to holders of the Bonds, as described under “Description of the Exchange Bonds — Agreement to Provide Information.”

The Company is not currently subject to the informational requirements of the Exchange Act.  As a result of the offering of the Exchange Bonds, we will become subject to the informational requirements of the Exchange Act and, in accordance therewith, will file reports and other information with the SEC.  These reports and other information can be inspected and copied at the public reference room maintained by the SEC at 100 F Street, N.E., Room 1580, Washington D.C. 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  You may also read and copy these SEC filings by visiting the SEC’s website at http://www.sec.gov.

You may request additional copies of our reports or copies of our other SEC filings at no cost by writing or telephoning us at the following address:

Kentucky Utilities Company

One Quality Street

Lexington, Kentucky 40507

Attention: Corporate Secretary

Telephone: (502) 627-2000

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Kentucky Utilities Company

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements as of December 31, 2010 and 2009,

and for the Years Ended December 31, 2010, 2009 and 2008

Report of Independent Registered Public Accounting Firm	F-1
Statements of Income	F-4
Statements of Retained Earnings (Deficit)	F-5
Statements of Comprehensive Income (Loss)	F-6
Balance Sheets	F-7
Statements of Cash Flows	F-10
Statements of Capitalization	F-12
Notes to Financial Statements	F-15

124

Kentucky Utilities Company

FINANCIAL STATEMENTS

As of December 31, 2010 and 2009,

and for the Years Ended December 31, 2010, 2009 and 2008

F-i

Index of Abbreviations

AG	Attorney General of Kentucky
ARO	Asset Retirement Obligation
ASC	Accounting Standards Codification
BART	Best Available Retrofit Technology
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CATR	Clean Air Transport Rule
CCN	Certificate of Public Convenience and Necessity
Clean Air Act	The Clean Air Act, as amended in 1990
CMRG	Carbon Management Research Group
Company	Kentucky Utilities Company
CT	Combustion Turbine
DSM	Demand Side Management
ECR	Environmental Cost Recovery
EEI	Electric Energy, Inc.
EKPC	East Kentucky Power Cooperative, Inc.
E.ON	E.ON AG
E.ON U.S.	E.ON U.S. LLC and Subsidiaries
EPA	U.S. Environmental Protection Agency
EPAct 2005	Energy Policy Act of 2005
FAC	Fuel Adjustment Clause
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FGD	Flue Gas Desulfurization
Fidelia	Fidelia Corporation (an E.ON affiliate)
GAAP	U.S. Generally Accepted Accounting Principles
GAC	Group Annuity Contract
GHG	Greenhouse Gas
Gwh	Gigawatt hours or one thousand Mwh
IBEW	International Brotherhood of Electrical Workers
IMEA	Illinois Municipal Electric Agency
IMPA	Indiana Municipal Power Agency
IRS	Internal Revenue Service
KCCS	Kentucky Consortium for Carbon Storage
KDAQ	Kentucky Division for Air Quality
Kentucky Commission	Kentucky Public Service Commission
KIUC	Kentucky Industrial Utility Consumers, Inc.
KU	Kentucky Utilities Company
kWh	Kilowatt hours
LG&E	Louisville Gas and Electric Company
LIBOR	London Interbank Offered Rate
LKE	LG&E and KU Energy LLC and Subsidiaries (formerly E.ON U.S. LLC and Subsidiaries)
MISO	Midwest Independent Transmission System Operator, Inc.
MMBtu	Million British thermal units

F-ii

Index of Abbreviations

Moody’s	Moody’s Investor Services, Inc.
MVA	Megavolt-ampere
Mw	Megawatts
Mwh	Megawatt hours
NAAQS	National Ambient Air Quality Standards
NERC	North American Electric Reliability Corporation
NO2	Nitrogen Dioxide
NOV	Notice of Violation
NOx	Nitrogen Oxide
OATT	Open Access Transmission Tariff
OMU	Owensboro Municipal Utilities
OVEC	Ohio Valley Electric Corporation
PPL	PPL Corporation
Predecessor	The Company during the time period prior to November 1, 2010
PUHCA 2005	Public Utility Holding Company Act of 2005
RSG	Revenue Sufficiency Guarantee
S&P	Standard & Poor’s Rating Service
SCR	Selective Catalytic Reduction
SERC	SERC Reliability Corporation
Servco	LG&E and KU Services Company (formerly E.ON U.S. Services Inc.)
SIP	State Implementation Plan
SO2	Sulfur Dioxide
SPP	Southwest Power Pool, Inc
Successor	The Company during the time period after October 31, 2010
TC1	Trimble County Unit 1
TC2	Trimble County Unit 2
TVA	Tennessee Valley Authority
Utilities	KU and LG&E
VDT	Value Delivery Team Process
Virginia Commission	Virginia State Corporation Commission

F-iii

Table of Contents

Financial Statements
Report of Independent Registered Public Accounting Firm	F-1
Statements of Income	F-4
Statements of Retained Earnings	F-5
Statements of Comprehensive Income	F-6
Balance Sheets	F-7
Statements of Cash Flows	F-10
Statements of Capitalization	F-12
Notes to Financial Statements	F-15
Note 1 - Summary of Significant Accounting Policies	F-15
Note 2 - Acquisition by PPL	F-26
Note 3 - Rates and Regulatory Matters	F-28
Note 4 - Asset Retirement Obligations	F-45
Note 5 - Derivative Financial Instruments	F-46
Note 6 - Fair Value Measurements	F-48
Note 7 - Goodwill and Intangible Assets	F-49
Note 8 - Concentrations of Credit and Other Risk	F-51
Note 9 - Pension and Other Postretirement Benefit Plans	F-52
Note 10 - Income Taxes	F-62
Note 11 - Long-Term Debt	F-66
Note 12 - Notes Payable and Other Short-Term Obligations	F-69
Note 13 - Commitments and Contingencies	F-70
Note 14 - Jointly Owned Electric Utility Plant	F-80
Note 15 - Related Party Transactions	F-81
Note 16 - Selected Quarterly Data (Unaudited)	F-83
Note 17 - Accumulated Other Comprehensive Income (Loss)	F-84
Note 18 - Subsequent Events	F-84

F-iv

Report of Independent Registered Public Accounting Firm

To Stockholder of Kentucky Utilities Company

In our opinion, the accompanying balance sheet and the related statements of income, retained earnings, comprehensive income, cash flows, and capitalization present fairly, in all material respects, the financial position of Kentucky Utilities Company (Predecessor Company) at December 31, 2009 and the results of its operations and its cash flows for the period from January 1, 2010 to October 31, 2010 and for each of the two years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 

PricewaterhouseCoopers LLP, 500 West Main Street, Ste. 1800, Louisville, KY 40202-2941
T: (502) 589 6100, F: (502) 585 7875, www.pwc.com/us

F-1

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, on November 1, 2010, PPL Corporation completed its acquisition of LG&E and KU Energy LLC and its subsidiaries. The push-down basis of accounting was used at the acquisition date.

Louisville, Kentucky
February 25, 2011

F-2

Report of Independent Registered Public Accounting Firm

To Stockholder of Kentucky Utilities Company

In our opinion, the accompanying balance sheet and the related statements of income, retained earnings, comprehensive income, cash flows, and capitalization present fairly, in all material respects, the financial position of Kentucky Utilities Company (Successor Company) at December 31, 2010 and the results of its operations and its cash flows for the period from November 1, 2010 to December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, on November 1, 2010, PPL Corporation completed its acquisition of LG&E and KU Energy LLC and its subsidiaries. The push-down basis of accounting was used at the acquisition date.

Louisville, Kentucky

February 25, 2011

PricewaterhouseCoopers LLP, 500 West Main Street, Ste. 1800, Louisville, KY 40202-2941
T: (502) 589 6100, F: (502) 585 7875, www.pwc.com/us

F-3

Kentucky Utilities Company

Statements of Income

(millions)

	Successor		Predecessor
	November 1 2010 through		January 1, 2010 through			Year Ended December 31
	December 31, 2010		October 31, 2010			2009		2008
Operating revenues (Note 15)	$	263	$	1,248		$	1,355	$	1,405
Operating expenses:
Fuel for electric generation	78		417			434		513
Power purchased (Notes 13 and 15)	28		147			199		221
Other operation and maintenance expenses	66		280			320		275
Depreciation and amortization	26		119			133		136
Total operating expenses	198		963			1,086		1,145
Operating income	65		285			269		260
Equity in earnings of unconsolidated venture (Note 1)	—		3			1		30
Interest expense (Notes 11 and 12)	8		6			6		14
Interest expense to affiliated companies (Notes 11, 12 and 15)	2		62			69		58
Other income (expense) - net	—		(2		)	5		8
Income before income taxes	55		218			200		226
Income tax expense (Note 10)	20		78			67		68
Net income	$	35	$	140		$	133	$	158

The accompanying notes are an integral part of these financial statements.

F-4

Kentucky Utilities Company

Statements of Retained Earnings

(millions)

	Successor		Predecessor
	November 1, 2010 through		January 1, 2010 through			Year Ended December 31,
	December 31, 2010		October 31, 2010			2009		2008
Balance at beginning of period	$	1,418	$	1,328		$	1,195	$	1,037
Effect of PPL acquisition	(1,418		—			—		—
Balance at November 1, 2010	—		1,328			1,195		1,037
Net income	35		140			133		158
Cash dividends declared (Note 15)	—		(50		)	—		—
Balance at end of period	$	35	$	1,418		$	1,328	$	1,195

The accompanying notes are an integral part of these financial statements.

F-5

Kentucky Utilities Company

Statements of Comprehensive Income

(millions)

	Successor		Predecessor
	November 1, 2010 through		January 1, 2010 through			Year Ended December 31,
	December 31, 2010		October 31, 2010			2009		2008
Net income	$	35	$	140		$	133	$	158
Equity investee’s other comprehensive loss, net of tax expense of $0, $1, $0 and $0, respectively (Note 1)	—		(2		)	—		—
Comprehensive income	$	35	$	138		$	133	$	158

The accompanying notes are an integral part of these financial statements.

F-6

Kentucky Utilities Company

Balance Sheets

(millions)

	Successor			Predecessor
	December 31, 2010			December 31, 2009
Assets
Current assets:
Cash and cash equivalents	$	3		$	2
Accounts receivable (less allowance for doubtful accounts: 2010, $6; 2009, $3):
Customer	90			79
Affiliated companies	12			9
Other	20			18
Unbilled revenues	89			76
Fuel, materials and supplies:
Fuel (predominantly coal)	95			98
Other materials and supplies	41			39
Other intangible assets	22			—
Regulatory assets (Note 3)	9			32
Prepayments and other current assets	15			13
Total current assets	396			366
Investment in unconsolidated venture (Note 1)	30			12
Property, plant and equipment:
Regulated utility plant — electric	3,630			4,892
Accumulated depreciation	(14		)	(1,838		)
Net regulated utility plant	3,616			3,054
Construction work in progress	955			1,257
Property, plant and equipment — net	4,571			4,311
Deferred debits and other assets:
Regulatory assets (Notes 3 and 9):
Pension benefits	117			105
Other regulatory assets	105			117
Goodwill (Notes 2 and 7)	607			—
Other intangibles assets (Notes 2 and 7)	175			—
Cash surrender value of key man life insurance	39			38
Other assets	19			7
Total deferred debits and other assets	1,062			267
Total assets	$	6,059		$	4,956

The accompanying notes are an integral part of these financial statements.

F-7

Kentucky Utilities Company

Balance Sheets (continued)

(millions)

	Successor		Predecessor
	December 31, 2010		December 31, 2009
Liabilities and Equity
Current liabilities:
Current portion of long-term debt (Note 11)	$	—	$	228
Current portion of long-term debt to affiliated company (Notes 11 and 15)	—		33
Notes payable to affiliated companies (Notes 12 and 15)	10		45
Accounts payable	67		107
Accounts payable to affiliated companies (Note 15)	45		88
Accrued taxes	25		14
Customer deposits	23		22
Regulatory liabilities (Note 3)	41		4
Accrued interest	8		1
Employee accruals	15		13
Other current liabilities	18		14
Total current liabilities	252		569
Long-term debt:
Long-term bonds (Note 11)	1,841		123
Long-term debt to affiliated company (Notes 11 and 15)	—		1,298
Total long-term debt	1,841		1,421
Deferred credits and other liabilities:
Deferred income taxes (Note 10)	376		336
Accumulated provision for pensions (Note 9)	113		160
Investment tax credits (Note 10)	104		104
Asset retirement obligations (Notes 3 and 4)	54		34
Regulatory liabilities (Note 3):
Accumulated cost of removal of utility plant	348		335
Other regulatory liabilities	186		25
Other liabilities	94		20
Total deferred credits and other liabilities	$	1,275	$	1,014

The accompanying notes are an integral part of these financial statements.

F-8

Kentucky Utilities Company

Balance Sheets (continued)

(millions)

	Successor		Predecessor
	December 31, 2010		December 31, 2009
Equity:
Common stock, without par value — authorized 80,000,000 shares, outstanding 37,817,878 shares	$	308	$	308
Additional paid-in capital	2,348		316
Retained earnings:
Retained earnings	35		1,318
Undistributed earnings from unconsolidated venture	—		10
Total equity	2,691		1,952
Total liabilities and equity	$	6,059	$	4,956

The accompanying notes are an integral part of these financial statements.

F-9

Kentucky Utilities Company

Statements of Cash Flows

(millions)

	Successor			Predecessor
	November 1, 2010 through			January 1, 2010 through				Year Ended December 31,
	December 31, 2010			October 31, 2010				2009			2008
Cash flows from operating activities:
Net income	$	35		$	140			$	133		$	158
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	26			119				133			136
Deferred income taxes — net	4			23				50			(13		)
Investment tax credits (Note 10)	—			—				24			25
Provision for pension and postretirement benefits	5			13				26			10
Other — net	2			(3		)		—			1
Change in current assets and liabilities:
Accounts receivable	(15)			13				11			13
Unbilled revenues	(32		)	19				(15		)	(1		)
Fuel, materials and supplies	5		)	(6		)		(28		)	(33		)
Regulatory assets	(2		)	19				—			—
Other current assets	9			(9		)		(3		)	(1		)
Accounts payable	9			(17		)		(32		)	2
Accounts payable to affiliated companies	(41		)	46				29			7
Accrued taxes	15			(5		)		6			8
Regulatory liabilities	12			3				—			—
Other current liabilities	(2		)	2				2			(3		)
Pension and postretirement funding (Note 9)	(2		)	(18		)		(20		)	(5		)
Storm restoration regulatory asset (Note 3)	—			—				(57		)	(2		)
Other regulatory assets	1			8				—			—
Other regulatory liabilities	—			(10		)		—			—
Other — net	(1		)	7				(6		)	(10		)
Net cash provided by (used in) operating activities	28			344				253			292
Cash flows from investing activities:
Construction expenditures	(87		)	(292		)	)	(516		)	(686		)
Purchases of assets from affiliate	—			(48		)		—			(10		)
Change in restricted cash	—			—				9			1
Net cash provided by (used in) investing activities	$	(87	)	$	(340	)		$	(507	)	$	(695	)

The accompanying notes are an integral part of these financial statements.

F-10

Kentucky Utilities Company

Statements of Cash Flows (continued)

(millions)

	Successor			Predecessor
	November 1, 2010 through			January 1, 2010 through			Year Ended December 31,
	December 31, 2010			October 31, 2010			2009			2008
Cash flows from financing activities:
Issuance of bonds (Note 11)	$	1,489		$	—		$	—		$	77
Short-term borrowings from affiliated company — net (Note 12)	(83		)	48			29			(7		)
Other borrowings from affiliated companies (Note 11)	1,331			—			150			250
Repayments on other borrowings from affiliated companies (Note 11)	(1,331		)	—			—			—
Repayments to E.ON affiliate (Note 11)	(1,331		)	—			—			—
Debt issuance costs	(17		)	—			—			—
Retirement of pollution control bonds	—			—			—			(60		)
Acquisition of outstanding bonds	—			—			—			(80		)
Reissuance of reacquired bonds	—			—			—			63
Retirement of reacquired bonds	—			—			—			17
Payment of dividends	—			(50		)	—			—
Capital contribution (Note 15)	—			—			75			145
Net cash provided by (used in) financing activities	58			(2		)	254			405
Change in cash and cash equivalents	(1		)	2			—			2
Cash and cash equivalents at beginning of period	4			2			2			—
Cash and cash equivalents at end of period	$	3		$	4		$	2		$	2
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest — net of amount capitalized	$	22		$	62		$	70		$	66
Income taxes — net	(12		)	74			(9		)	46

The accompanying notes are an integral part of these financial statements.

F-11

Kentucky Utilities Company

Statements of Capitalization

(millions)

	Successor		Predecessor
	December 31, 2010		December 31, 2009
Long-term debt (Note 11):
Pollution control series:
Mercer Co. 2000 Series A, due May 1, 2023, variable %	$	13	$	13
Carroll Co. 2007 Series A, due February 1, 2026, 5.75%	18		18
Carroll Co. 2002 Series A, due February 1, 2032, variable %	21		21
Carroll Co. 2002 Series B, due February 1, 2032, variable %	2		2
Muhlenberg Co. 2002 Series A, due February 1, 2032, variable %	2		2
Mercer Co. 2002 Series A, due February 1, 2032, variable %	8		8
Carroll Co. 2008 Series A, due February 1, 2032, variable %	78		78
Carroll Co. 2002 Series C, due October 1, 2032, variable %	96		96
Carroll Co. 2006 Series B, due October 1, 2034, variable %	54		54
Trimble Co. 2007 Series A, due March 1, 2037, 6.0%	9		9
Carroll Co. 2004 Series A, due October 1, 2034, variable %	50		50
Total pollution control series	351		351
First mortgage bonds:
First mortgage bond 2015 Series, due November 1, 2015, 1.625%	250		—
First mortgage bond 2020 Series, due November 1, 2020, 3.25%	500		—
First mortgage bond 2040 Series, due November 1, 2040, 5.125%	750		—
Total first mortgage bonds	$	1,500	$	—

The accompanying notes are an integral part of these financial statements.

F-12

Kentucky Utilities Company

Statements of Capitalization (continued)

(millions)

	Successor			Predecessor
	December 31, 2010			December 31, 2009
Long-term debt to affiliated company:
Due November 24, 2010, 4.24%, unsecured	$	—		$	33
Due January 16, 2012, 4.39%, unsecured	—			50
Due April 30, 2013, 4.55%, unsecured	—			100
Due August 15, 2013, 5.31%, unsecured	—			75
Due December 19, 2014, 5.45%, unsecured	—			100
Due July 8, 2015, 4.735%, unsecured	—			50
Due December 21, 2015, 5.36%, unsecured	—			75
Due October 25, 2016, 5.675%, unsecured	—			50
Due April 24, 2017, 5.28%, unsecured	—			50
Due June 20, 2017, 5.98%, unsecured	—			50
Due July 25, 2018, 6.16%, unsecured	—			50
Due August 27, 2018, 5.645%, unsecured	—			50
Due December 17, 2018, 7.035%, unsecured	—			75
Due July 29, 2019, 4.81%, unsecured	—			50
Due October 25, 2019, 5.71%, unsecured	—			70
Due November 25, 2019, 4.445%, unsecured	—			50
Due February 7, 2022, 5.69%, unsecured	—			53
Due May 22, 2023, 5.85%, unsecured	—			75
Due September 14, 2028, 5.96%, unsecured	—			100
Due June 23, 2036, 6.33%, unsecured	—			50
Due March 30, 2037, 5.86%, unsecured	—			75
Total long-term debt to affiliated company	—			1,331
Total long-term debt outstanding	1,851			1,682
Purchase accounting adjustments and discounts	(10		)	—
Less current portion of long-term debt	—			261
Long-term debt	$	1,841		$	1,421

The accompanying notes are an integral part of these financial statements.

F-13

Kentucky Utilities Company

Statements of Capitalization (continued)

(millions)

	Successor		Predecessor
	December 31, 2010		December 31, 2009
Common equity:
Common stock, without par value — authorized 80,000,000 shares, outstanding 37,817,878 shares	$	308	$	308
Additional paid-in-capital	2,348		316
Retained earnings:
Retained earnings	35		1,318
Undistributed subsidiary earnings	—		10
Total retained earnings	35		1,328
Total common equity	2,691		1,952
Total capitalization	$	4,532	$	3,373

The accompanying notes are an integral part of these financial statements.

F-14

Kentucky Utilities Company

Notes to Financial Statements

Note 1 - Summary of Significant Accounting Policies

General

Terms and abbreviations are explained in the index of abbreviations. Dollars are in millions unless otherwise noted.

Business

KU, incorporated in Kentucky in 1912 and in Virginia in 1991, is a regulated utility engaged in the generation, transmission, distribution and sale of electric energy in Kentucky, Virginia and Tennessee. KU provides electric service to approximately 514,000 customers in 77 counties in central, southeastern and western Kentucky, to approximately 30,000 customers in five counties in southwestern Virginia and less than ten customers in Tennessee. KU’s service area covers approximately 6,600 noncontiguous square miles. Approximately 98% of the electricity generated by KU is produced by its coal-fired electric generating stations. The remainder is generated by natural gas and oil fueled CTs and a hydroelectric power plant. In Virginia, KU operates under the name Old Dominion Power Company. KU also sells wholesale electric energy to 12 municipalities.

On November 1, 2010, KU became an indirect wholly owned subsidiary of PPL, when PPL acquired all of the outstanding limited liability company interests in the Company’s direct parent, LKE, from E.ON US Investments Corp. LKE, a Kentucky limited liability company, also owns the affiliate, LG&E, a regulated utility engaged in the generation, transmission, distribution and sale of electric energy and distribution and sale of natural gas in Kentucky. Following the acquisition, the Company’s business has not changed. KU and LG&E are continuing as subsidiaries of LKE, which is now an intermediary holding company in the PPL group of companies.

Headquartered in Allentown, Pennsylvania, PPL is an energy and utility holding company that was incorporated in 1994. Through its subsidiaries, PPL owns or controls about 19,000 megawatts of generating capacity in the U.S., sells energy in key U.S. markets and delivers electricity and natural gas to about 5.3 million customers in the U.S. and the U.K.

Basis of Accounting

KU’s basis of accounting incorporates the business combinations guidance of the FASB ASC as of the date of the acquisition, which requires the recognition and measurement of identifiable assets acquired and liabilities assumed at fair value as of the acquisition date. KU’s financial statements and accompanying footnotes have been segregated to present pre-acquisition activity as the Predecessor and post-acquisition activity as the Successor. Predecessor covers the time period prior to November 1, 2010. Successor covers the time period after October 31, 2010. Certain accounting and presentation methods were changed to acceptable alternatives to conform to PPL accounting policies, which are discussed below, and the cost basis of certain assets and liabilities were changed as of November 1, 2010, as a result of the application of push-down accounting. Consequently, the financial position, results of operations and cash flows for the Predecessor period are not comparable to the Successor period.

F-15

Despite the separate presentation, the core operations of the Company have not changed. See Note 2, Acquisition by PPL, for information regarding the acquisition and the purchase accounting adjustments.

Changes in Classification

Certain reclassification entries have been made to the Predecessor’s previous years’ financial statements to conform to the 2010 presentation with no impact on net assets, liabilities and capitalization or previously reported net income and cash flows. These reclassifications mainly consist of those necessary to identify amounts for prior periods that are separately disclosed in the financial statements.

Regulatory Accounting

KU is a cost-based rate-regulated utility. As a result, the financial statements reflect the effects of regulatory actions. Regulatory assets are recognized for the effect of transactions or events where future recovery is probable in regulated customer rates. The effect of such accounting is to defer certain or qualifying costs that would otherwise be charged to expense. Likewise, regulatory liabilities may be recognized for obligations expected to be returned through future regulated customer rates. The effect of such transactions or events would otherwise be reflected as income, or, in certain cases, regulatory liabilities are recorded based on the understanding with the regulator that current rates are being set to recover costs that are expected to be incurred in the future. The regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose. Offsetting regulatory assets or liabilities for fair value purchase accounting adjustments have also been recorded to eliminate any ratemaking impact of the fair value adjustments. The accounting for regulatory assets and liabilities is based on specific ratemaking decisions or precedent for each transaction or event as prescribed by the FERC, Kentucky Commission, Virginia Commission or the Tennessee Regulatory Authority. See Note 3, Rates and Regulatory Matters, for additional detail regarding regulatory assets and liabilities.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Derivative Financial Instruments

KU enters into energy trading contracts to manage price risk and to maximize the value of power sales from the physical assets it owns. The energy trading contracts are non-hedging derivatives and the change in value is recognized in earnings on a mark-to-market basis. The Predecessor and Successor presentation are both appropriate under GAAP. The Predecessor and Successor determine the classification of energy trading contracts based on the settlement date of the individual contracts. Energy trading contracts classified as current are recognized in “Prepayments and other current assets” or “Other current liabilities” on the Balance Sheets. Energy trading contracts classified as non-current are recognized in “Other assets” or “Other liabilities” on the Balance Sheets. Cash inflows and outflows

F-16

related to derivative instruments are included as a component of operating activity on the Statements of Cash Flows, due to the underlying nature of the hedged items.

The Company does not net collateral against derivative instruments.

See Note 5, Derivative Financial Instruments, and Note 6, Fair Value Measurements, for further information on derivative instruments.

Revenue and Accounts Receivable

The operating revenues line item in the Statements of Income contains revenues from the following:

	Successor	Predecessor
	November 1, 2010 through	January 1, 2010 through	Year Ended December 31,
	December 31, 2010	October 31, 2010	2009	2008
Residential	$106	$440	$480	$462
Industrial and commercial	117	588	637	636
Municipals	15	88	91	92
Other retail	20	114	118	108
Wholesale	5	18	29	107
	$263	$1,248	$1,355	$1,405

Revenue Recognition

Revenues are recorded based on service rendered to customers through month-end. Operating revenues are recorded based on energy deliveries through the end of the calendar month. Unbilled retail revenues result because customers’ meters are read and bills are rendered throughout the month, rather than all being read at the end of the month. Unbilled revenues for a month are calculated by multiplying an estimate of unbilled kWh by the estimated average cents per kWh.

Accounts Receivable

Accounts receivable are reported in the Balance Sheets at the gross outstanding amount adjusted for an allowance for doubtful accounts.

Allowance for Doubtful Accounts

The allowance for doubtful accounts included in “Accounts receivable — customer” is based on the ratio of the amounts charged-off during the last twelve months to the retail revenues billed over the same period, multiplied by the retail revenues billed over the last four months. Accounts with no payment activity are charged-off after four months, although collection efforts continue thereafter. The allowance for doubtful accounts included in “Accounts receivable — other” is composed of accounts aged more than four months. Accounts are written off as management determines them uncollectible.

F-17

The changes in the allowance for doubtful accounts were:

	Successor		Predecessor
	December 31, 2010		October 31, 2010			December 31, 2009			December 31, 2008
Balance at beginning of period (a)	$	—	$	3		$	3		$	2
Charged to income	1		(6		)	(4		)	(2		)
Charged to balance sheets	5		6			4			3
Balance at end of period	$	6	$	3		$	3		$	3

(a)Successor beginning of period reflects revaluation of accounts receivable due to purchase accounting.

Cash

Cash Equivalents

All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

Restricted Cash

Bank deposits and other cash equivalents that are restricted by agreement or that have been clearly designated for a specific purpose are classified as restricted cash. The change in restricted cash is reported as an investing activity on the Statements of Cash Flows. On the Balance Sheets, restricted cash is included in “Prepayments and other current assets”. For KU, the December 31, 2010, balance of restricted cash was less than $1 million.

Fair Value Measurements

KU values certain financial assets and liabilities at fair value. Generally, the most significant fair value measurements relate to derivative assets and liabilities, investments in securities including investments in the pension and postretirement benefit plans and cash and cash equivalents. KU uses, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques) and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions that market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk.

F-18

KU prioritizes fair value measurements for disclosure by grouping them into one of three levels in the fair value hierarchy. The highest priority is given to measurements using level 1 inputs. The appropriate level assigned to a fair value measurement is based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

·Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

·Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

·Level 3 - Unobservable inputs which are supported by little or no market activity.

Assessing the significance of a particular input requires judgment that considers factors specific to the asset or liability. As such, KU’s assessment of the significance of a particular input may affect how the assets and liabilities are classified within the fair value hierarchy. See Note 5, Derivatives Financial Instruments, and Note 6, Fair Value Measurements, for further information on fair value measurements.

Investments

Equity Method Investment

KU’s equity method investment, included in “Investment in unconsolidated venture” on the Balance Sheets, consists of its investment in EEI. KU owns 20% of the common stock of EEI, which owns and operates a 1,002 Mw summer capacity coal-fired plant and a 74 Mw summer capacity natural gas facility in southern Illinois. Through a power marketer affiliated with its majority owner, EEI sells its output to third parties. Although KU holds investment interest in EEI, it is not the primary beneficiary and is therefore not consolidated into the Company’s financial statements. KU’s investment in EEI is accounted for under the equity method of accounting and as of December 31, 2010 and 2009, totaled $30 million and $12 million, respectively. KU’s direct exposure to loss as a result of its involvement with EEI is generally limited to the value of its investment. See Note 2, Acquisition by PPL, for further discussion regarding purchase accounting adjustments recognized for KU’s investment in EEI.

The results of operations and financial position of EEI, KU’s equity method investment, are summarized below.

Condensed income statement information for the years ended December 31 is as follows:

	2010 (unaudited)		2009		2008
Net sales	$	343	$	297	$	514
Net income	16		10		142
KU’s equity in earnings of EEI	3		1		30

F-19

Condensed balance sheet information as of December 31 is as follows:

	2010 (unaudited)		2009
Current assets	$	62	$	84
Long-lived assets	181		178
Total assets	$	243	$	262
Current liabilities	$	113	$	166
Long-term liabilities	72		50
Equity	58		46
Total liabilities and equity	$	243	$	262

Cost Method Investment

KU’s cost method investment, included in “Investments in unconsolidated venture” on the Balance Sheets, consists of the Company’s investment in OVEC. KU and 11 other electric utilities are owners of OVEC, which is located in Piketon, Ohio. OVEC owns and operates two coal-fired power plants, Kyger Creek Station in Ohio and Clifty Creek Station in Indiana with combined nameplate generating capacities of 2,390 Mw. OVEC’s power is currently supplied to KU and 13 other companies affiliated with the various owners. Pursuant to current contractual agreements, KU owns 2.5% of OVEC’s common stock and is contractually entitled to 2.5% of OVEC’s output. Based on nameplate generating capacity, this would be approximately 60 Mw.

As of December 31, 2010 and 2009, KU’s investment in OVEC totaled less than $1 million. KU is not the primary beneficiary of OVEC; therefore, it is not consolidated into the Company’s financial statements and is accounted for under the cost method of accounting. The direct exposure to loss as a result of the Company’s involvement with OVEC is generally limited to the value of its investment; however, KU may be conditionally responsible for a pro-rata share of certain OVEC obligations. See Note 2, Acquisition by PPL, and Note 13, Commitments and Contingencies, for further discussion regarding purchase accounting adjustments recognized, and KU’s ownership interest and power purchase rights.

Long-Lived and Intangible Assets

Regulated Utility Plant

Regulated utility plant was stated at original cost for the Predecessor and adjusted to the net book value on November 1, 2010, the acquisition date, for the Successor. KU determined that fair value was equal to net book value at the acquisition date since KU’s operations are conducted in a regulated environment. Original cost includes payroll-related costs such as taxes, fringe benefits and administrative and general costs. Construction work in progress has been included in the rate base for determining retail customer rates. KU has not recorded significant allowance for funds used during construction in accordance with FERC.

The cost of plant retired or disposed of in the normal course of business is deducted from plant accounts and such cost is charged to the reserve for depreciation. When complete operating units are disposed of,

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appropriate adjustments are made to the reserve for depreciation and gains and losses, if any, are recognized.

Capitalized Software Cost

Included in “Property, plant and equipment” on the Balance Sheets are capitalized costs of software projects that were developed or obtained for internal use. These capitalized costs are amortized ratably over the expected lives of the projects when they become operational, generally not to exceed five years. Following are capitalized software costs and the accumulated amortization:

Successor		Predecessor
December 31, 2010		December 31, 2009
Carrying Amount	Accumulated Amortization (a)	Carrying Amount	Accumulated Amortization
$40	$1	$52	$13

(a)The accumulated amortization as of November 1, 2010, was netted against the carrying amount of the software as the fair value was determined to be equal to net book value for property, plant and equipment.

Amortization expense of capitalized software costs was as follows:

Successor		Predecessor
November 1, 2010 through		January 1, 2010 through		Year Ended December 31,
December 31, 2010		October 31, 2010		2009		2008
$	1	$	6	$	6	$	5

The amortization of capitalized software is included in “Depreciation and amortization” on the Statements of Income.

Depreciation and Amortization

Depreciation is provided on the straight-line method over the estimated service lives of depreciable plant. The amounts provided as a percentage of depreciable plant were approximately:

Year	Percentage
2010	4.1	%
2009	2.6	%
2008	3.0	%

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Of the amount provided for depreciation, the following were related to the retirement, removal and disposal costs of long lived assets:

Year	Percentage
2010	0.6	%
2009	0.4	%
2008	0.5	%

Goodwill, Intangible Assets and Asset Impairment

KU performs a quarterly review to determine if an impairment analyses is required for long-lived assets that are subject to depreciation or amortization. This review identifies changes in circumstances indicating that a long-lived asset’s carrying value may not be recoverable. An impairment analysis will be performed if warranted, based on the review.

For a long-lived asset to be held and used, impairment exists when the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the asset is impaired, an impairment loss is recorded to adjust the asset’s carrying amount to its fair value.

KU, as the result of PPL’s acquisition of LKE, recorded the fair value of its coal contracts, emission allowances, EEI investment and OVEC power purchase contract. The difference between the fair value and the cost for these assets is being amortized over their useful lives based upon the pattern in which the economic benefits of the intangible assets are consumed or otherwise used. When determining the useful life of an intangible asset, including intangible assets that are renewed or extended, KU considers the expected use of the asset, the expected useful life of other assets to which the useful life of the intangible asset may relate and legal, regulatory, or contractual provisions that may limit the useful life. See Note 2, Acquisition by PPL, for methods used to determine the long-lived intangible assets’ fair values. See Note 7, Goodwill and Intangible Assets, for the fair value amounts and amortization periods. The current intangible assets and long-term intangible assets are included in “Other intangible assets” on the Balance Sheets.

The Predecessor reported emission allowances in “Other materials and supplies” on the Balance Sheets. The emission allowances were not amortized; rather, they were expensed when consumed. The Predecessor did not recognize the coal contracts or the OVEC power purchase contract as these intangible assets were not derivatives.

In connection with PPL’s acquisition of LKE, KU recorded goodwill on November 1, 2010. Goodwill represents the excess of the purchase price paid over the estimated fair value of the assets acquired and liabilities assumed in the acquisition of a business. Goodwill is tested annually for impairment during the fourth quarter and more frequently if management determines that a triggering event may have occurred that would more likely than not reduce the fair value of an operating unit below its carrying value. Goodwill impairment charges are not subject to rate recovery. See Note 7, Goodwill and Intangible Assets, for further discussion regarding the Company’s goodwill and current test results.

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Asset Retirement Obligations

KU recognizes various legal obligations associated with the retirement of long-lived assets as liabilities in the financial statements. Initially this obligation is measured at fair value. An equivalent amount is recorded as an increase in the value of the capitalized asset and allocated to expense over the useful life of the asset. Until the obligation is settled, the liability is increased, through the recognition of accretion expense in the Statements of Income, for changes in the obligation due to the passage of time. An offsetting regulatory asset is recognized to reverse the depreciation and accretion expense related to the ARO such that there is no income statement impact. The regulatory asset is relieved when the ARO has been settled. Estimated ARO costs and settlement dates, which affect the carrying value of various AROs and the related assets, are reviewed periodically to ensure that any material changes are incorporated into the latest estimate of the obligations. See Note 4, Asset Retirement Obligations, for further information on AROs.

Defined Benefits

KU employees benefit from both funded and unfunded retirement benefit plans. An asset or liability is recorded to recognize the funded status of all defined benefit plans with an offsetting entry to regulatory assets or regulatory liabilities. Consequently, the funded status of all defined benefit plans is fully recognized on the Balance Sheets.

The expected return on plan assets is determined based on the current level of expected return on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class is then weighted based on the current asset allocation.

The discount rate used for pensions, postretirement and post-employment plans by the Predecessor was determined using the Mercer Yield Curve. The expected return on assets assumption was 7.75%. Gains and losses in excess of 10% of the greater of the plan’s projected benefit obligation or market value of assets were amortized on a straight-line basis over the average future service period of active participants. The market-related value of assets was equal to the fair market value of the assets.

The discount rate used by the Successor was determined by the Towers Watson Yield Curve based on the individual plan cash flows. The expected return on assets was reduced from 7.75% to 7.25%. The amortization period for the recognition of gains and losses for retirement plans was changed to reflect the Successor’s amortization policy. Under the Successor’s method, gains and losses in excess of 10% but less than 30% of the greater of the plan’s projected benefit obligation or market-related value of assets, are amortized on a straight-line basis over the average future service period of active participants. Gains and losses in excess of 30% of the plan’s projected benefit obligation or market-related value of assets are amortized on a straight-line basis over a period equal to one-half of the average future service period of active participants. The market-related value of assets for the qualified retirement plans will be equal to a five year smoothed asset value. Gains and losses in excess of the expected return will be phased-in over a five-year period, prospectively from November 1, 2010.

See Note 9, Pension and Other Postretirement Benefit Plans, for further information.

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Other

Loss Accruals

Potential losses are accrued when information is available that indicates it is “probable” that a loss has been incurred, given the likelihood of uncertain future events, and the amount of the loss can be reasonably estimated. Accounting guidance defines “probable” as cases in which “the future event or events are likely to occur.” KU continuously assesses potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other events.

KU does not record the accrual of contingencies that might result in gains unless recovery is assured.

Income Taxes

For the periods ended on or before October 31, 2010, KU was a subsidiary of E.ON U.S. and was part of E.ON U.S.’s direct parent’s, E.ON US Investments Corp., consolidated U.S. federal income tax return. On November 1, 2010, KU became a part of PPL’s consolidated U.S. federal income tax return.

Significant management judgment is required in developing KU’s provision for income taxes primarily due to the uncertainty related to tax positions taken or expected to be taken in tax returns and the determination of deferred tax assets, liabilities and valuation allowances.

KU evaluates tax positions following a two-step process. The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained. This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is measured at the largest amount of benefit that has a likelihood of realization, upon settlement, that exceeds 50%. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of KU.

Deferred income taxes reflect the net future tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes, as well as the tax effects of net operating losses and tax credit carryforwards.

KU records valuation allowances to reduce deferred tax assets to the amounts that are more likely than not to be realized. KU considers the reversal of temporary differences, future taxable income and ongoing prudent and feasible tax planning strategies in initially recording and subsequently reevaluating the need for valuation allowances. If KU determines that it is able to realize deferred tax assets in the future in excess of recorded net deferred tax assets, adjustments to the valuation allowances increase income by reducing tax expense in the period that such determination is made. Likewise, if KU determines that it is not able to realize all or part of net deferred tax assets in the future, adjustments to the valuation allowances would decrease income by increasing tax expense in the period that such determination is made.

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The provision for KU’s deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the regulators. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included on the Balance Sheets in “Regulatory liabilities”.

KU defers investment tax credits when the credits are utilized and amortizes the deferred amounts over the average lives of the related assets.

See Note 10, Income Taxes, for further discussion regarding income taxes.

Leases

KU evaluates whether arrangements entered into contain leases for accounting purposes.

Materials and Supplies

Fuel and other materials and supplies inventories are accounted for using the average-cost method.

Fuel Costs

The cost of fuel for electric generation is charged to expense as used. See Note 3, Rates and Regulatory Matters, for a description of the FAC.

Debt

The Company’s long-term debt includes $228 million of pollution control bonds, which are subject to tender for purchase at the option of the holder and to mandatory tender for purchase on the occurrence of certain events. The Successor has classified these bonds as long term because the Company has the intent and ability to utilize its $400 million credit facility, which matures in December 2014, to fund any mandatory purchases. Predecessor classified these bonds as current portion of long-term debt due to the tender for purchase provisions. The Predecessor presentation and the Successor presentation are both appropriate under GAAP. See Note 11, Long-Term Debt, and Note 12, Notes Payable and Other Short-Term Obligations, for more information on the Company’s debt and credit facilities.

Unamortized Debt Expense

Debt expense is capitalized and amortized over the lives of the related bond issues using the straight line method, which approximates the effective interest method. Depending on the type of expense, the Successor capitalized debt expenses in long-term other regulatory assets or long-term other assets to align with the term of the debt the expenses were related. The Predecessor capitalized debt expenses in current or long-term other regulatory assets or other current or long-term other assets based on the amount of expense expected to be recovered within the next year through rate recovery. Both the Predecessor and the Successor amortize debt expenses over the lives of the related bond issues. The Predecessor presentation and the Successor presentation are both appropriate under regulatory practices and GAAP.

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Recent Accounting Pronouncements

The following recent accounting pronouncement affected KU:

Fair Value Measurements

In January 2010, the FASB issued guidance related to fair value measurement disclosures requiring separate disclosure of amounts of significant transfers in and out of level 1 and level 2 fair value measurements and separate information about purchases, sales, issuances and settlements within level 3 measurements. This guidance is effective for the interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about the roll-forward of activity in level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. This guidance has no impact on the Company’s results of operations, financial position, liquidity or disclosures.

Note 2 - Acquisition by PPL

On November 1, 2010, PPL completed its acquisition of LKE and its subsidiaries. The push-down basis of accounting was used to record the fair value adjustments of assets and liabilities on LKE at the acquisition date. PPL paid a cash consideration for LKE and its subsidiaries of $2,493 million as well as a capital contribution on November 1, 2010, of $1,565 million; included within this was the consideration paid for KU of $2,656 million. The allocation of the KU purchase price was based on the fair value of assets acquired and liabilities assumed.

The allocation of the purchase price to the fair value of assets acquired and liabilities assumed is as follows:

Current assets	$	364
Investments	30
Property, plant and equipment	4,531
Other intangible assets	178
Regulatory and other non-current assets	274
Current liabilities (excluding current portion of long-term debt)	(367		)
Affiliated debt	(1,331		)
Debt (current and non-current)	(352		)
Other non-current liabilities	(1,278		)
Net identifiable assets acquired	2,049
Goodwill	607
Total purchase price	$	2,656

Goodwill represents value paid for the rate regulated business of KU, which is located in a defined service area with a constructive regulatory environment, which provides for future investment, earnings and cash flow growth, as well as the talented and experienced workforce. KU’s franchise values are being attributed to the going concern value of the business, and thus were recorded as goodwill rather than a separately identifiable intangible asset. None of the goodwill recognized is deductible for income tax purposes or included in regulated customer rates.

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Adjustments to KU’s assets and liabilities that contributed to goodwill were as follows:

The fair value adjustment on the EEI investment was calculated using the discounted cash flow valuation method. The result was an increase in KU’s value of the investment in EEI; the fair value of EEI was calculated to be $30 million and a fair value adjustment of $18 million was recorded on KU. The fair value adjustment to EEI is amortized over the expected remaining useful life of plant and equipment at EEI, which is estimated to be over 20 years.

The pollution control bonds on KU had a fair value adjustment of $1 million. All variable bonds were valued at par while the fixed rate bonds were valued with a yield curve based on average credit spreads for similar bonds.

As a result of the purchase accounting associated with the acquisition, the following items had a fair value adjustment but no effect on goodwill as the offset was either a regulatory asset or liability. The regulatory asset or liability has been recorded to eliminate any ratemaking impact of the fair value adjustments:

·The value of OVEC was determined to be $39 million based upon an announced transaction by another owner. KU’s stock was valued at less than $1 million and the power purchase agreement has been valued at $39 million. An intangible asset was recorded with the offset to regulatory liability and will be amortized using the units of production method until the power purchase agreement ends in March 2026.

·KU recorded an emission allowance intangible asset and regulatory liability as the result of adjusting the fair value of the emission allowances at KU. The emission allowance intangible of $9 million represents allocated and purchased SO2 and NOx emission allowances that are unused as of the valuation date or allocated for use in future years. KU had previously recorded emission allowances as other materials and supplies. To conform to PPL’s accounting policy all emission allowances are now recorded as intangible assets. The emission allowance intangible asset is amortized as the emission allowances are consumed, which is expected to occur through 2040.

·KU recorded a coal contract intangible asset of $145 million and non-current liability of $22 million on the Balance Sheets. An offsetting regulatory asset was recorded for those contracts with unfavorable terms relative to market. An offsetting regulatory liability was recorded for those contracts that had favorable terms relative to market. All coal contracts held by KU, wherein it had entered into arrangements to buy amounts of coal at fixed prices from counterparties at a future date, were fair valued. The intangible assets and other liabilities, as well as the regulatory assets and liabilities, are being amortized over the same terms as the related contracts, which expire through 2016.

The fair value of intangible assets and liabilities (e.g. contracts that have favorable or unfavorable terms relative to market), including coal contracts and power purchase agreements, as well as emission allowances, have been reflected on the Balance Sheets with offsetting regulatory assets or liabilities. Prior to the acquisition, KU recovered the cost of the coal contracts, power purchases and emission allowances and this rate treatment will continue after the acquisition. As a result, management believes the regulatory assets and liabilities created to offset the fair value adjustments meet the recognition criteria established by existing accounting guidance and eliminate any ratemaking impact of the fair

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value adjustments. KU’s customer rates will continue to reflect these items (e.g. coal, purchased power, emission allowances) at their original contracted prices. 

KU also considered whether a separate fair value should be assigned to KU’s rights to operate within its various electric service areas but concluded that these rights only provided the opportunity to earn a regulated return and barriers to market entry, which in management’s judgment is not considered a separately identifiable intangible asset under applicable accounting guidance; rather, it is considered going-concern value, or goodwill.

Note 3 - Rates and Regulatory Matters

The Company is subject to the jurisdiction of the FERC, Kentucky Commission, Virginia Commission and the Tennessee Regulatory Authority in virtually all matters related to electric utility regulation and as such, its accounting is subject to the regulated operations guidance of the FASB ASC. Given its position in the marketplace and the status of regulation in Kentucky and Virginia, there are no plans or intentions to discontinue the application of the regulated operations guidance of the FASB ASC.

KU’s Kentucky base rates are calculated based on a return on capitalization (common equity, long-term debt and notes payable) including certain regulatory adjustments to exclude non-regulated investments and environmental compliance plans recovered separately through the ECR mechanism. No regulatory assets or regulatory liabilities recorded at the time base rates were determined were excluded from the return on capitalization utilized in the calculation of Kentucky base rates. Therefore, a return is earned on all Kentucky regulatory assets existing at the time base rates were determined, except where such regulatory assets were offset by associated liabilities and thus, have no net impact on capitalization.

As a result of purchase accounting, certain fair value amounts, reflecting contracts that have favorable or unfavorable terms relative to market, were recorded on the Balance Sheets with offsetting regulatory assets or liabilities. Prior to the acquisition, KU recovered in customer rates the cost of the coal contracts, power purchases and emission allowances and this rate treatment will continue after the recognition criteria established by existing accounting guidance and eliminate any ratemaking impact of the fair value adjustments. KU’s customer rates will continue to reflect these items (e.g. coal, purchased power, emission allowances) at their original contracted prices.

KU’s Virginia base rates are calculated based on a return on rate base. All regulatory assets and liabilities are excluded from the return on rate base utilized in the calculation of Virginia base rates.

KU’s wholesale requirements rates for municipal customers are calculated based on annual updates to a rate formula that utilizes a return on rate base. All regulatory assets and liabilities are excluded from the return on rate base utilized in the development of municipal rates.

2010 Purchase and Sale Agreement with PPL

On April 28, 2010, E.ON U.S. announced that a Purchase and Sale Agreement (the “Agreement”) had been entered into among E.ON US Investments Corp., PPL and E.ON.

The transaction was subject to customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, receipt of required regulatory approvals

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(including the FERC and state regulators in Kentucky, Virginia and Tennessee) and the absence of injunctions or restraints imposed by governmental entities.

Change of control and financing-related applications were filed on May 28, 2010 with the Kentucky Commission and on June 15, 2010 with the Virginia Commission and the Tennessee Regulatory Authority. An application with the FERC was filed on June 28, 2010. During the second quarter of 2010, a number of parties were granted intervenor status in the Kentucky Commission proceedings and data request filings and responses occurred. Early termination of the Hart-Scott-Rodino waiting period was received on August 2, 2010.

A hearing in the Kentucky Commission proceedings was held on September 8, 2010 at which time a unanimous settlement agreement was presented. In the settlement, KU committed that no base rate increases would take effect before January 1, 2013. The KU rate increases that took effect on August 1, 2010, were not impacted by the settlement. Under the terms of the settlement, KU retains the right to seek approval for the deferral of “extraordinary and uncontrollable costs.” Interim rate adjustments will continue to be permissible during that period for existing fuel, environmental and demand-side management cost trackers. The agreement also substitutes an acquisition savings shared deferral mechanism for the requirement that the Utilities file a synergies plan with the Kentucky Commission. This mechanism, which will be in place until the earlier of five years or the first day of the year in which a base rate increase becomes effective, permits KU to earn up to a 10.75% return on equity. Any earnings above a 10.75% return on equity will be shared with customers on a 50%/50% basis. On September 30, 2010, the Kentucky Commission issued an Order approving the transfer of ownership of KU via the acquisition of E.ON U.S. by PPL, incorporating the terms of the submitted settlement. On October 19, 2010 and October 21, 2010, respectively, Orders approving the acquisition of E.ON U.S. by PPL were received from the Virginia Commission and the Tennessee Regulatory Authority. The Commissions’ Orders contained a number of other commitments with regard to operations, workforce, community involvement and other matters.

In mid-September 2010, KU and other applicants in the FERC change of control proceeding reached an agreement with the protesters, whereby such protests have been withdrawn. The agreement, which was filed for consideration with the FERC, includes various conditional commitments, such as a continuation of certain existing undertakings with protesters in prior cases, an agreement not to terminate certain KU municipal customer contracts prior to January 2017, an exclusion of any transaction-related costs from wholesale energy and tariff customer rates to the extent that KU has agreed not to seek the same transaction-related costs from retail customers and agreements to coordinate with protesters in certain open or ongoing matters. A FERC Order approving the transaction was received on October 26, 2010 and the transaction was completed November 1, 2010.

2010 Kentucky Rate Case

In January 2010, KU filed an application with the Kentucky Commission requesting an increase in electric base rates of approximately 12%, or $135 million annually. In June 2010, KU and all of the intervenors, except the AG, agreed to stipulations providing for an increase in electric base rates of $98 million annually and filed a request with the Kentucky Commission to approve such settlement. An Order in the proceeding was issued in July 2010, approving all the provisions in the stipulations, including a return on equity range of 9.75 — 10.75%. The new rates became effective on August 1, 2010.

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Virginia Rate Case

In June 2009, KU filed an application with the Virginia Commission requesting an increase in electric base rates for its Virginia jurisdictional customers in an amount of $12 million annually or approximately 21%. The proposed increase reflected a proposed rate of return on rate base of 8.586% based on a return on equity of 12%. During December 2009, KU and the Virginia Commission Staff agreed to a Stipulation and Recommendation authorizing base rate revenue increases of $11 million annually and a return on rate base of 7.846% based on a 10.5% return on common equity. In March 2010, the Virginia Commission issued an Order approving the stipulation, with the increased rates to be put into effect as of April 1, 2010. As part of the stipulation, KU refunded $1 million in interim rate amounts in excess of the ultimate approved rates.

FERC Wholesale Rate Case

In September 2008, KU filed an application with the FERC for increases in electric base rates applicable to wholesale power sales contracts or interchange agreements involving, collectively, twelve Kentucky municipalities. The application requested a shift from an all-in stated unit charge rate to an unbundled formula rate, including an annual adjustment mechanism. In 2009, the FERC issued an Order approving a settlement among the parties in the case, incorporating increases of approximately 3% from prior rates and a return on equity of 11%. In May 2010, KU submitted to the FERC the proposed current annual adjustments to the formula rates which incorporated certain proposed increases. Updated rates, including certain further adjustments from a review process involving wholesale requirements customers, became effective as of July 1, 2010, subject to certain review procedures by the wholesale requirements customers and the FERC.

By mutual agreement, the parties’ settlement of the 2008 application left outstanding the issue of whether KU must allocate to the municipal customers a portion of renewable resources it may be required to procure on behalf of its retail ratepayers. An Order was issued by the FERC in July 2010, indicating that KU is not required to allocate a portion of any renewable resources to the twelve municipalities, thus resolving the remaining issue.

2008 Kentucky Rate Case

In July 2008, KU filed an application with the Kentucky Commission requesting an increase in electric base rates. In January 2009, KU, the AG, the KIUC and all other parties to the rate case filed a settlement agreement with the Kentucky Commission, under which KU’s electric base rates decreased by $9 million annually. An Order approving the settlement agreement was received in February 2009. The new rates were implemented effective February 6, 2009.

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Regulatory Assets and Liabilities

The following regulatory assets and liabilities were included in the Balance Sheets as of December 31:

	Successor		Predecessor
	2010		2009
Current regulatory assets:
ECR (a)	$	—	$	28
FAC (a)	—		1
Coal contracts (b)	4		—
MISO exit (c)	—		2
Other (d)	5		1
Total current regulatory assets	$	9	$	32
Non-current regulatory assets:
Pension and postretirement benefits (e)	$	117	$	105
Other non-current regulatory assets:
Storm restoration (c)	57		59
ARO (f)	2		30
Unamortized loss on bonds (c)	12		12
Coal contracts (b)	14		—
MISO exit (a)	5		9
Unamortized debt expense	5		—
Other (d)	10		7
Subtotal other non-current regulatory assets	105		117
Total non-current regulatory assets	$	222	$	222
Current regulatory liabilities:
Coal contracts	$	16	$	—
ECR	12		—
FAC	2		—
DSM	5		3
Emission allowances	6		—
Other (g)	—		1
Total current regulatory liabilities	$	41	$	4
Non-current regulatory liabilities:
Accumulated cost of removal of utility plant	$	348	$	335
Other non-current regulatory liabilities:
Coal contracts	126		—
OVEC power purchase contract	38		—
Deferred income taxes — net	6		9
Postretirement benefits	10		9
Other (g)	6		7
Subtotal other non-current regulatory liabilities	186		25
Total non-current regulatory liabilities	$	534	$	360

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(a)The FAC and ECR regulatory assets have separate recovery mechanisms with recovery within twelve months.

(b)Offsetting regulatory asset for fair value purchase accounting adjustments. See Note 2, Acquisition by PPL, for information on the purchase accounting adjustments.

(c)These regulatory assets are recovered through base rates.

(d)Other regulatory assets include:

·The CMRG and KCCS contributions, an EKPC FERC transmission settlement agreement and rate case expenses, which are recovered through base rates.

·The FERC jurisdictional portion of the EKPC FERC transmission settlement agreement included in current and non-current regulatory assets, recovered through the application of the annual OATT formula rate updates.

·FERC jurisdictional pension expense, which will be requested in a future FERC rate case.

·Offsetting regulatory asset for fair value purchase accounting adjustment for leases. See Note 2, Acquisition by PPL, for information on the purchase accounting adjustments.

·The Virginia levelized fuel factor, which is a separate recovery mechanism with recovery within twelve months.

(e)KU generally recovers this asset through pension expense included in the calculation of base rates.

(f)When an asset with an ARO is retired, the related ARO regulatory asset will be offset against the associated ARO regulatory liability, ARO asset and ARO liability.

(g)Other regulatory liabilities includes the emission allowance purchase accounting offset, MISO exit and a change in accounting method for FERC jurisdictional spare parts.

ECR

KU recovers the costs of complying with the Federal Clean Air Act pursuant to Kentucky Revised Statute 278-183 as amended and those federal, state or local environmental requirements which apply to coal combustion wastes and by-products from facilities utilized for production of energy from coal, through the ECR mechanism. The amount of the regulatory asset or liability is the amount that has been under- or over-recovered due to timing or adjustments to the mechanism.

The Kentucky Commission requires reviews of the past operations of the environmental surcharge for six-month and two-year billing periods to evaluate the related charges, credits and rates of return, as well as to provide for the roll-in of ECR amounts to base rates each two-year period. In December 2010, the Kentucky Commission initiated a six-month review of the Utilities’ environmental surcharge for the billing period ending October 2010. An order is expected in the second quarter of 2011. Also, in December 2010, an Order was issued approving the charges and credits billed through the ECR during the six-month period ending April

2010, as well as approving billing adjustments for under-recovered costs and the rate of return on capital. In May 2010, an Order was issued approving the amounts billed through the ECR during the six-month period ending October 2009, and the rate of return on capital and allowing recovery of the under-recovery position in subsequent monthly filings. In December 2009, an Order was issued approving the charges and credits billed through the ECR during the two-year period ending April 2009, an increase in the jurisdictional revenue requirement, a base rate roll-in and a revised rate of return on capital. In July 2009, an Order was issued approving the charges and credits billed through the ECR during the six-month period ending October 2008, as well as approving billing adjustments for under-recovered costs and the rate of return on capital. In August 2008, an Order was issued approving the charges and credits billed through the ECR during the six-month periods ending April

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2008 and October 2007, and the rate of return on capital. In March 2008, an Order was issued approving the charges and credits billed through the ECR during the six-month and two-year periods ending October 2006 and April 2007, respectively, as well as approving billing adjustments, roll-in adjustments to base rates, revisions to the monthly surcharge filing and the rates of return on capital.

In June 2009, the Company filed an application for a new ECR plan with the Kentucky Commission seeking approval to recover investments in environmental upgrades and operations and maintenance costs at the Company’s generating facilities. During 2009, KU reached a unanimous settlement with all parties to the case and the Kentucky Commission issued an Order approving KU’s application. Recovery on customer bills through the monthly ECR surcharge for these projects began with the February 2010 billing cycle. At December 31, 2009, the Company had a regulatory asset of $28 million, which changed to a regulatory liability in the first quarter of 2010, as a result of these roll-in adjustments to base rates. At December 31, 2010, the regulatory liability balance was $12 million.

In February 2009, the Kentucky Commission approved a settlement agreement in the rate case which provides for an authorized return on equity applicable to the ECR mechanism of 10.63% effective with the February 2009 expense month filing, which represents a slight increase over the previously authorized 10.50%. The 10.63% return on equity for the ECR mechanism was affirmed in the 2010 rate case.

FAC

KU’s retail rates contain an FAC, whereby increases and decreases in the cost of fuel for generation are reflected in the rates charged to retail customers. The FAC allows the Company to adjust billed amounts for the difference between the fuel cost component of base rates and the actual fuel cost, including transportation costs. Refunds to customers occur if the actual costs are below the embedded cost component. Additional charges to customers occur if the actual costs exceed the embedded cost component. The amount of the regulatory asset or liability is the amount that has been under- or over-recovered due to timing or adjustments to the mechanism.

The Kentucky Commission requires public hearings at six-month intervals to examine past fuel adjustments and at two-year intervals to review past operations of the fuel clause and transfer of the then current fuel adjustment charge or credit to the base charges. In December 2010, May 2010, November 2009, January 2009, June 2008 and January 2008, the Kentucky Commission issued Orders approving the charges and credits billed through the FAC for the six-month periods ending April 2010, August 2009, April 2009, April 2008, October 2007 and April 2007, respectively. In January 2009 the Kentucky Commission initiated routine examinations of the FAC for the two-year periods November 1, 2006 through October 31, 2008. The Kentucky Commission issued an Order in June 2009 approving the charges and credits billed through the FAC during the review periods.

KU also employs an FAC mechanism for Virginia customers using an average fuel cost factor based primarily on projected fuel costs. The Virginia levelized fuel factor allows fuel recovery based on projected fuel costs for the coming year plus an adjustment for any over- or under-recovery of fuel expenses from the prior year. At December 31, 2010 and 2009, KU had a regulatory asset of $5 million and less than $1 million, respectively.

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In February 2010, KU filed an application with the Virginia Commission seeking approval of a decrease in its fuel cost factor beginning with service rendered in April 2010. An Order was issued in April 2010, resulting in an agreed upon decrease of 23% from the fuel factor in effect for April 2009 through March 2010.

In February 2009, KU filed an application with the Virginia Commission seeking approval of a 29% increase in its fuel cost factor beginning with service rendered in April 2009. In February 2009, the Virginia Commission issued an Order allowing the requested change to become effective on an interim basis. The Virginia Staff testimony filed in April 2009 recommended a slight decrease in the factor filed by KU. The Company indicated the Virginia Staff proposal was acceptable. A hearing was held in May 2009, with general resolution of remaining issues. In May 2009, the Virginia Commission issued an Order approving the revised fuel factor, representing an increase of 24%, effective May 2009.

In February 2008, KU filed an application with the Virginia Commission seeking approval of a decrease in its fuel cost factor applicable during the billing period, April 2008 through March 2009. The Virginia Commission allowed the new rates to be in effect for the April 2008 customer billings. In April 2008, the Virginia Commission Staff recommended a change to the fuel factor KU filed in its application, to which KU agreed. Following a public hearing and an Order in May 2008, the recommended change became effective in June 2008, resulting in a decrease of 0.482 cents/kWh from the factor in effect for the April 2007 through March 2008 period.

Coal Contracts

In November 2010, purchase accounting adjustments were recorded for the fair value of KU’s coal contracts. Offsetting regulatory asset or liability for fair value purchase accounting adjustments eliminate any ratemaking impact of the fair value adjustments.

MISO

Following receipt of applicable FERC, Kentucky Commission and other regulatory Orders, related to proceedings that had been underway since July 2003, KU withdrew from the MISO effective September 1, 2006. Since the exit from the MISO, KU has been operating under a FERC approved OATT. KU now contracts with the TVA to act as its transmission reliability coordinator and SPP to function as its independent transmission operator, pursuant to FERC requirements. The contractual obligations with the TVA extend through August 2011 and with SPP through August 2012.

KU and the MISO agreed upon overall calculation methods for the contractual exit fee to be paid by the Company following its withdrawal. In October 2006, the Company paid $20 million to the MISO and made related FERC compliance filings. The Company’s payment of this exit fee was with reservation of its rights to contest the amount, or components thereof, following a continuing review of its calculation and supporting documentation. KU and the MISO resolved their dispute regarding the calculation of the exit fee and, in November 2007, filed an application with the FERC for approval of a recalculation agreement. In March 2008, the FERC approved the parties’ recalculation of the exit fee and the approved agreement providing KU with recovery of $4 million, of which $1 million was immediately recovered in 2008, with the remainder to be recovered over the seven years from 2008 through 2014 for credits realized from other payments the MISO will receive, plus interest.

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In accordance with Kentucky Commission Orders approving the MISO exit, KU established a regulatory asset for the MISO exit fee, net of former MISO administrative charges collected via base rates through the base rate case test year ended April 30, 2008. The net MISO exit fee is subject to adjustment for possible future MISO credits and a regulatory liability for certain revenues associated with former MISO administrative charges, which were collected via base rates until February 6, 2009. The approved 2008 base rate case settlement provided for MISO administrative charges collected through base rates from May 1, 2008 to February 6, 2009, and any future adjustments to the MISO exit fee, to be established as a regulatory liability until the amounts can be amortized in future base rate cases. This regulatory liability balance as of October 31, 2009, was included in the base rate case application filed on January 29, 2010. MISO exit fee credit amounts subsequent to October 31, 2009, will continue to accumulate as a regulatory liability until they can be amortized in future base rate cases.

In November 2008, the FERC issued Orders in industry-wide proceedings relating to MISO RSG calculation and resettlement procedures. RSG charges are amounts assessed to various participants active in the MISO trading market which generally seek to compensate for uneconomic generation dispatch due to regional transmission or power market operational considerations, with some customer classes eligible for payments, while others may bear charges. The FERC Orders approved two requests for significantly altered formulas and principles, each of which the FERC applied differently to calculate RSG charges for various historical and future periods. Based upon the 2008 FERC Orders, the Company established a reserve during the fourth quarter of 2008 of less than $1 million relating to potential RSG resettlement costs for the period ended December 31, 2008. However, in May 2009, after a portion of the resettlement payments had been made, the FERC issued an Order on the requests for rehearing on one November 2008 Order which changed the effective date and reduced almost all of the previously accrued RSG resettlement costs. Therefore, these costs were reversed and a receivable was established for amounts already paid of less than $1 million. The MISO began refunding the amounts to the Company in June 2009 with full repayment by September 2009. In June 2009, the FERC issued an Order in the rate mismatch RSG proceeding, stating it will not require resettlements of the rate mismatch calculation from April 1, 2005 to November 4, 2007. An accrual had previously been recorded in 2008 for the rate mismatch issue for the time period April 25, 2006 to August 9, 2007, but no accrual had been recorded for the time period November 5, 2007 to November 9, 2008 based on the prior Order. Accordingly, the accrual for the former time period was reversed and an accrual for the latter time period was recorded in June 2009, with a net effect of $1 million of expense, substantially all of which was paid by September 2009.

In August 2009, the FERC determined that the MISO had failed to demonstrate that its proposed exemptions to real-time RSG charges were just and reasonable. In November 2009, the MISO made a compliance filing incorporating the rulings of the FERC Orders and a related task force, with a primary open issue being whether certain of the tariff changes are applied prospectively only or retroactively to approximately January 6, 2009.

In November 2009, the Utilities filed an application with the FERC to approve certain independent transmission operator arrangements to be effective upon the expiration of their current contract with SPP in September 2010. The application sought authority for KU and LG&E to function after such date as the administrators of their own OATT for most purposes. However, due to the lack of FERC approval for such an approach and the approaching expiration of the SPP contract, the Utilities determined the approach was no longer reasonably achievable without unacceptable delay and uncertainty. In July 2010, the Utilities entered into a new agreement with SPP to provide independent transmission operator

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services for a specified, limited time and removed its application for authority of administering its own OATT. The TVA, which currently acts as reliability coordinator, has also been retained under the existing service contract. The new agreement extends TVA services to August 2011 with no alterations or changes to the party’s duties or responsibilities.

In August 2010, the FERC issued three Orders accepting most facets of several MISO RSG compliance filings. The FERC ordered the MISO to issue refunds for RSG charges that were imposed by the MISO on the assumption that there were rate mismatches for the period beginning November 5, 2007 through the present. There is no financial statement impact to the Company from this Order, as the MISO had anticipated that the FERC would require these refunds and had preemptively included them in the resettlements paid in 2009. The FERC denied the MISO’s proposal to exempt certain resources from RSG charges, effective prospectively. The FERC accepted portions and rejected portions of the MISO’s proposed RSG rate Redesign Proposal, which will be effective when the software is ready for implementation subject to further compliance filings. The impact of the Redesign Proposal on the Company cannot be estimated at this time.

Pension and Postretirement Benefits

KU accounts for pension and postretirement benefits in accordance with the compensation — retirement benefits guidance of the FASB ASC. This guidance requires employers to recognize the over-funded or under-funded status of a defined benefit pension and postretirement plan as an asset or liability on the Balance Sheets and to recognize through other comprehensive income the changes in the funded status in the year in which the changes occur. Under the regulated operations guidance of the FASB ASC, KU can defer recoverable costs that would otherwise be charged to expense or equity by non-regulated entities. Current rate recovery in Kentucky and Virginia is based on the compensation — retirement benefits guidance of the FASB ASC. Regulators have been clear and consistent with their historical treatment of such rate recovery; therefore, the Company has recorded a regulatory asset representing the change in funded status of its pension plan that is expected to be recovered and a regulatory liability representing the change in funded status of its postretirement benefit plan. The regulatory asset and liability will be adjusted annually as prior service cost and actuarial gains and losses are recognized in net periodic benefit cost.

Storm Restoration

In January 2009, a significant ice storm passed through KU’s service area causing approximately 199,000 customer outages, followed closely by a severe wind storm in February 2009, causing approximately 44,000 customer outages. An application was filed with the Kentucky Commission in April 2009, requesting approval to establish a regulatory asset and defer for future recovery approximately $62 million in incremental operation and maintenance expenses related to the storm restoration. In September 2009, the Kentucky Commission issued an Order allowing the establishment of a regulatory asset of up to $62 million based on actual costs for storm damages and service restoration due to the January and February 2009 storms. In September 2009, a regulatory asset of $57 million was established for actual costs incurred and approval was received in KU’s 2010 base rate case to recover this asset over a ten year period beginning August 1, 2010.

In September 2008, high winds from the remnants of Hurricane Ike passed through the service area causing significant outages and system damage. In October 2008, an application was filed with the

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Kentucky Commission requesting approval to establish regulatory assets and defer for future recovery approximately $3 million of expenses related to the storm restoration. In December 2008, the Kentucky Commission issued an Order allowing the establishment a regulatory asset of up to $3 million based on actual costs for storm damages and service restoration due to Hurricane Ike. In December 2008, a regulatory asset of $2 million was established for actual costs incurred and KU received approval in its 2010 base rate case to recover this asset over a ten year period, beginning August 1, 2010.

Unamortized Loss on Bonds

The costs of early extinguishment of debt, including call premiums, legal and other expenses, and any unamortized balance of debt expense are amortized using the straight-line method, which approximates the effective interest method, over the life of either the replacement debt (in the case of refinancing) or the original life of the extinguished debt.

CMRG and KCCS Contributions

In July 2008, KU and LG&E, along with Duke Energy Kentucky, Inc. and Kentucky Power Company, filed an application with the Kentucky Commission requesting approval to establish regulatory assets related to contributions to the CMRG for the development of technologies for reducing carbon dioxide emissions and the KCCS to study the feasibility of geologic storage of carbon dioxide. The filing companies proposed that these contributions be treated as regulatory assets to be deferred until recovery is provided in the next base rate case of each company, at which time the regulatory assets will be amortized over the life of each project: four years with respect to the KCCS and ten years with respect to the CMRG. KU and LG&E jointly agreed to provide $2 million over two years to the KCCS and up to $2 million over ten years to the CMRG. In October 2008, an Order approving the establishment of the requested regulatory assets was received. KU received approval from the Kentucky Commission in the Company’s 2010 Kentucky base rate case to recover these regulatory assets over the requested period beginning August 1, 2010.

Rate Case Expenses

KU incurred $1 million in expenses related to the development and support of the 2008 Kentucky base rate case. The Kentucky Commission approved the establishment of a regulatory asset for these expenses and authorized amortization over three years beginning in March 2009.

KU incurred $2 million in expenses related to the development and support of the 2010 Kentucky base rate case. The Kentucky Commission approved the establishment of a regulatory asset for these expenses and authorized amortization over three years beginning in August 2010.

FERC Jurisdictional Pension Costs

Other regulatory assets include pension costs of $5 million incurred by the Company and allocated to its FERC jurisdictional ratepayers. The Company will seek recovery of this asset in the next FERC rate proceeding.

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Deferred Storm Costs

Based on an Order from the Kentucky Commission in June 2004, KU reclassified from maintenance expense to a regulatory asset $4 million related to costs not reimbursed from the 2003 ice storm. These costs were amortized through June 2009. KU earned a return of these amortized costs, which were included in jurisdictional operating expenses.

DSM

DSM consists of energy efficiency programs which are intended to reduce peak demand and delay the investment in additional power plant construction, provide customers with tools and information to become better managers of their energy usage and prepare for potential future legislation governing energy efficiency. KU’s rates contain a DSM provision which includes a rate mechanism that provides for concurrent recovery of DSM costs and provides an incentive for implementing DSM programs. The provision allows KU to recover revenues from lost sales associated with the DSM programs based on program plan engineering estimates and post-implementation evaluations.

In July 2007, KU and LG&E filed an application with the Kentucky Commission requesting an order approving enhanced versions of the existing DSM programs along with the addition of several new cost effective programs. The total annual budget for these programs is approximately $26 million. In March 2008, the Kentucky Commission issued an Order approving the application, with minor modifications. KU and LG&E filed revised tariffs in April 2008, under authority of this Order, which were effective in May 2008.

Emission Allowances

In November 2010, purchase accounting adjustments were recorded for the fair market value of KU’s SO2, NOx ozone season and NOx annual emission allowances. Offsetting regulatory assets or liabilities for fair value purchase accounting adjustments eliminate any ratemaking impact of the fair value adjustments. KU is granted SO2 emission allowances through 2040 and NOx ozone season and NOx annual emission allowances through 2011.

Accumulated Cost of Removal of Utility Plant

As of December 31, 2010 and 2009, KU segregated the cost of removal, previously embedded in accumulated depreciation, of $348 million and $335 million, respectively, in accordance with FERC Order No. 631. For reporting purposes on the Balance Sheets, KU presented this cost of removal as a “Regulatory liability” pursuant to the regulated operations guidance of the FASB ASC.

OVEC Power Purchase Contract

In November 2010, purchase accounting adjustments were recorded for the fair value of the power purchase agreement between KU and OVEC. Offsetting regulatory liability for fair value purchase accounting adjustment eliminate any ratemaking impact of the fair value adjustments.

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Deferred Income Taxes — Net

These regulatory liabilities represent the future revenue impact from the reversal of deferred income taxes required for unamortized investment tax credits, the allowance for funds used during construction and deferred taxes provided at rates in excess of currently enacted rates.

Other Regulatory Matters

Kentucky Commission Report on Storms

In November 2009, the Kentucky Commission issued a report following review and analysis of the effects and utility response to the September 2008 wind storm and the January 2009 ice storm and possible utility industry preventative measures relating thereto. The report suggested a number of proposed or recommended preventative or responsive measures, including consideration of selective hardening of facilities, altered vegetation management programs, enhanced customer outage communications and similar measures. In March 2010, the Utilities filed a joint response reporting on their actions with respect to such recommendations. The response indicated implementation or completion of substantially all of the recommendations, including, among other matters, on-going reviews of system hardening and vegetation management procedures, certain test or pilot programs in such areas and fielding of enhanced operational and customer outage-related systems.

Wind Power Agreements

In August 2009, KU and LG&E filed a notice of intent with the Kentucky Commission indicating their intent to file an application for approval of wind power purchase contracts and cost recovery mechanisms. The contracts were executed in August 2009 and were contingent upon KU and LG&E receiving acceptable regulatory approvals. Pursuant to the proposed 20-year contracts, KU and LG&E would jointly purchase respective assigned portions of the output of two Illinois wind farms totaling an aggregate 109.5 Mw. In September 2009, the Utilities filed an application and supporting testimony with the Kentucky Commission. In October 2009, the Kentucky Commission issued an Order denying the Utilities’ request to establish a surcharge for recovery of the costs of purchasing wind power. The Kentucky Commission stated that such recovery constitutes a general rate adjustment and is subject to the regulations of a base rate case. The Kentucky Commission Order provided for the request for approval of the wind power agreements to proceed independently from the request to recover the costs thereof via surcharges. In November 2009, KU and LG&E filed for rehearing of the Kentucky Commission’s Order and requested that the matters of approval of the contract and recovery of the costs thereof remain the subject of the same proceeding. During December 2009, the Kentucky Commission issued data requests on this matter. In March 2010, the Utilities delivered notices of termination under provisions of the wind power contracts. The Utilities also filed a motion with the Kentucky Commission noting the termination of the contracts and seeking withdrawal of their application in the related regulatory proceeding. In April 2010, the Kentucky Commission issued an Order allowing the Utilities to withdraw their pending application.

Trimble County Asset Purchase and Depreciation

In July 2009, the Utilities notified the Kentucky Commission of the proposed sale from the Utilities of certain ownership interests in certain existing Trimble County generating station assets which were

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anticipated to provide joint or common use in support of the jointly-owned TC2 generating unit under construction at the station. The undivided ownership interests sold provide KU an ownership interest in these common assets proportional to its interest in TC2 and the assets’ role in supporting both TC1 and TC2. In December 2009, the Utilities completed the sale transaction at a price of $48 million, representing the current net book value of the assets multiplied by the proportional interest being sold.

In August 2009, the Utilities jointly filed an application with the Kentucky Commission to approve new depreciation rates for applicable jointly-owned TC2-related generating, pollution control and other plant equipment and assets. During December 2009, the Kentucky Commission extended the data discovery process through January 2010 and authorized the Utilities on an interim basis to begin using the depreciation rates for TC2 as proposed in the application. In March 2010, the Kentucky Commission issued a final Order approving the use of the proposed depreciation rates on a permanent basis.

TC2 CCN Application and Transmission Matters

An application for a CCN for construction of TC2 was approved by the Kentucky Commission in November 2005. CCNs for two transmission lines associated with TC2 were issued by the Kentucky Commission in September 2005 and May 2006. All regulatory approvals and rights of way for one transmission line have been obtained.

KU’s and LG&E’s CCN for a transmission line associated with the TC2 construction has been challenged by certain property owners in Hardin County, Kentucky. Certain proceedings relating to CCN challenging and federal historic preservation permit requirements have concluded with outcomes in the Utilities’ favor.

Completion of the transmission lines are also subject to standard construction permit, environmental authorization and real property or easement acquisition procedures. Certain Hardin County landowners have raised challenges to the transmission line in some of these forums as well.

With respect to the remaining on-going dispute, KU obtained various successful rulings during 2008 at the Hardin County Circuit Court confirming its condemnation rights. In August 2008, several landowners appealed such rulings to the Kentucky Court of Appeals and received a temporary stay preventing KU from accessing their properties. In May 2010, the Kentucky Court of Appeals issued an Order affirming the Hardin Circuit Court’s finding that KU had the right to condemn easements on the properties. In May 2010, the landowners filed a petition for reconsideration with the Court of Appeals. In July 2010, the Court of Appeals denied that petition. In August, 2010, the landowners filed for discretionary review of that denial by the Kentucky Supreme Court.

Settlement discussions with the Hardin County property owners involved in the appeals of the condemnation proceedings have been unsuccessful to date. During the fourth quarter of 2008, KU and LG&E entered into settlements with certain Meade County landowners and obtained dismissals of prior litigation they brought challenging the same transmission line.

As a result of the aforementioned unresolved litigation delays encountered in obtaining access to certain properties in Hardin County, KU obtained easements to allow construction of temporary transmission facilities, bypassing those properties while the litigated issues are resolved. In September 2009, the Kentucky Commission issued an Order stating that a CCN was necessary for two segments of the

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proposed temporary facilities. In December 2009, the Kentucky Commission granted the CCNs for the relevant segments and the property owners have filed various motions to intervene, stay and appeal certain elements of the Kentucky Commission’s recent orders. In January 2010, in respect of two of such proceedings, the Franklin County circuit court issued Orders denying the property owners’ request for a stay of construction and upholding the prior Kentucky Commission denial of their intervenor status.

Consistent with the regulatory authorizations and the favorable outcome of the legal proceedings, the Utilities completed construction activities on the permanent transmission line easements. During 2010, the Utilities placed the transmission line into operation. While the Utilities are not currently able to predict the ultimate outcome and possible financial effects of the remaining legal proceedings, the Utilities do not believe the matter involves relevant or continuing risks to operations.

Utility Competition in Virginia

The Commonwealth of Virginia passed the Virginia Electric Utility Restructuring Act in 1999. This act gave customers the ability to choose their electric supplier and capped electric rates through December 2010. KU subsequently received a legislative exemption from the customer choice requirements of this law. In April 2007, however, the Virginia General Assembly amended the Virginia Electric Utility Restructuring Act, thereby terminating this competitive market and commencing re-regulation of utility rates. The new act ended the cap on rates at the end of 2008. Pursuant to this legislation, the Virginia Commission adopted regulations revising the rules governing utility rate increase applications. As of January 2009, a hybrid model of regulation is being applied in Virginia. Under this model, utility rates are reviewed every two years. KU’s exemption from the requirements of the Virginia Electric Utility Restructuring Act in 1999, however, discharges the Company from the requirements of the new hybrid model of regulation. In lieu of submitting an annual information filing, the Company has the option of requesting a change in base rates to recover prudently incurred costs by filing a traditional base rate case. KU is also subject to other utility regulations in Virginia, including, but not limited to, the recovery of prudently incurred fuel costs through an annual fuel factor charge and the submission of integrated resource plans.

Market-Based Rate Authority

In July 2006, the FERC issued an Order in KU’s market-based rate proceeding accepting the Company’s further proposal to address certain market power issues the FERC claimed would arise upon an exit from the MISO. In particular, the Company received permission to sell power at market-based rates at the interface of balancing areas in which it may be deemed to have market power, subject to a restriction that such power will not be collusively re-sold back into such balancing areas. However, restrictions exist on sales by KU of power at market-based rates in the KU and LG&E and Big Rivers Electric Company balancing areas. In June 2007, the FERC issued Order No. 697 implementing certain reforms to market-based rate regulations, including restrictions similar to those previously in place for the Company’s power sales at balancing area interfaces. In December 2008, the FERC issued Order No. 697-B potentially placing additional restrictions on certain power sales involving areas where market power is deemed to exist. As a condition of receiving and retaining market-based rate authority, KU must comply with applicable affiliate restrictions set forth in the FERC regulation. During September 2008, the Company submitted a regular triennial update filing under market-based rate regulations.

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In June 2009, the FERC issued Order No. 697-C which generally clarified certain interpretations relating to power sales and purchases at balancing area interfaces or into balancing areas involving market power. In July 2009, the FERC issued an Order approving the Company’s September 2008 application for market-based rate authority. During July 2009, affiliates of KU completed a transaction terminating certain prior generation and power marketing activities in the Big Rivers Electric Company balancing area, which termination should ultimately allow a filing to request a determination that the Company no longer is deemed to have market power in such balancing area.

KU conducts certain of its wholesale power sales activities in accordance with existing market-based rate authority principles and interpretations. Future FERC proceedings relating to Orders 697 or market-based rate authority could alter the amount of sales made at market-based versus cost-based rates. The Company’s sales under market-based rate authority totaled less than $1 million for the year ended December 31, 2010.

Mandatory Reliability Standards

As a result of the EPAct 2005, certain formerly voluntary reliability standards became mandatory in June 2007 and authority was delegated to various Regional Reliability Organizations (“RROs”) by the NERC, which was authorized by the FERC to enforce compliance with such standards, including promulgating new standards. Failure to comply with mandatory reliability standards can subject a registered entity to sanctions, including potential fines of up to $1 million per day, as well as non-monetary penalties, depending upon the circumstances of the violation. The Utilities are members of the SERC, which acts as KU’s and LG&E’s RRO. During December 2009 and April, July and August 2010, the Utilities submitted ten self-reports relating to various standards, which self-reports remain in the early stages of RRO review, and therefore, the Utilities are unable to estimate the outcome of these matters. Mandatory reliability standard settlements commonly also include non-penalty elements, including compliance steps and mitigation plans. Settlements with SERC proceed to NERC and FERC review before becoming final. While the Utilities believe they are in compliance with the mandatory reliability standards, events of potential non-compliance may be identified from time-to-time. The Utilities cannot predict such potential violations or the outcome of self-reports described above.

Integrated Resource Planning

Integrated resource planning (“IRP”) regulations in Kentucky require major utilities to make triennial IRP filings with the Kentucky Commission. In April 2008, KU and LG&E filed their 2008 joint IRP with the Kentucky Commission. The IRP provides historical and projected demand, resource and financial data and other operating performance and system information. The Kentucky Commission issued a staff report and Order closing this proceeding in December 2009. Pursuant to the Virginia Commission’s December 2008 Order, KU filed its IRP in July 2009. The filing consisted of the 2008 Joint IRP filed by KU and LG&E with the Kentucky Commission along with additional data. The Virginia Commission has not established a procedural schedule for this proceeding. KU expects to file their next IRP in April 2011.

PUHCA 2005

PPL, KU’s ultimate parent, is a holding company under PUHCA 2005. PPL, its utility subsidiaries, including KU, and certain of its non-utility subsidiaries, are subject to extensive regulation by the FERC

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with respect to numerous matters, including electric utility facilities and operations, wholesale sales of power and related transactions, accounting practices, issuances and sales of securities, acquisitions and sales of utility properties, payments of dividends out of capital and surplus, financial matters and inter-system sales of non-power goods and services. KU believes that it has adequate authority, including financing authority, under existing FERC Orders and regulations to conduct its business and will seek additional authorization when necessary.

EPAct 2005

The EPAct 2005 was enacted in August 2005. Among other matters, this comprehensive legislation contains provisions mandating improved electric reliability standards and performance; granting enhanced civil penalty authority to the FERC; providing economic and other incentives relating to transmission, pollution control and renewable generation assets; increasing funding for clean coal generation incentives; repealing the Public Utility Holding Company Act of 1935; enacting PUHCA 2005; and expanding FERC jurisdiction over public utility holding companies and related matters via the Federal Power Act and PUHCA 2005.

In February 2006, the Kentucky Commission initiated an administrative proceeding to consider the requirements of the EPAct 2005, Subtitle E Section 1252, Smart Metering, which concerns time-based metering and demand response, and Section 1254, Interconnections. EPAct 2005 requires each state regulatory authority to conduct a formal investigation and issue a decision on whether or not it is appropriate to implement certain Section 1252 standards within eighteen months after the enactment of EPAct 2005 and to commence consideration of Section 1254 standards within one year after the enactment of EPAct 2005. Following a public hearing with all Kentucky jurisdictional electric utilities, in December 2006, the Kentucky Commission issued an Order in this proceeding indicating that the EPAct 2005 Section 1252 and Section 1254 standards should not be adopted. However, all five Kentucky Commission jurisdictional utilities were required to file real-time pricing pilot programs for their large commercial and industrial customers. KU developed a real-time pricing pilot program for large industrial and commercial customers and filed the details of the plan with the Kentucky Commission in April 2007. In February 2008, the Kentucky Commission issued an Order approving the real-time pricing pilot program proposed by KU for implementation within approximately eight months. The tariff was filed in October 2008, with an effective date of December 1, 2008. KU files annual reports on the program within 90 days of each plan year end for the three-year pilot period.

Green Energy Riders

In February 2007, KU and LG&E filed a Joint Application and Testimony for Proposed Green Energy Riders. In May 2007, a Kentucky Commission Order was issued authorizing KU to establish Small and Large Green Energy Riders, allowing customers to contribute funds to be used for the purchase of renewable energy credits. During November 2009, KU and LG&E filed an application to both continue and modify the existing Green Energy Programs. In February 2010, the Kentucky Commission approved the Utilities’ application, as filed.

Home Energy Assistance Program

In July 2007, KU filed an application with the Kentucky Commission for the establishment of a Home Energy Assistance program. During September 2007, the Kentucky Commission approved the five-year

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program as filed, effective in October 2007. The programs were scheduled to terminate in September 2012 and is funded through a $0.10 per month meter charge. Effective February 6, 2009, as a result of the settlement agreement in the 2008 base rate case, the program is funded through a $0.15 per month meter charge. As a condition in the settlement in the change of control proceeding before the Kentucky Commission in the PPL acquisition, the program was extended to September 2015.

Collection Cycle Revision

As part of its base rate case filed on July 29, 2008, LG&E proposed to change the due date for customer bill payments from 15 days to 10 days to align its collection cycle with KU. In addition, in its rate case filed on July 29, 2008, KU proposed to include a late payment charge if payment is not received within 15 days from the bill issuance date to align with LG&E. The settlement agreements approved in the rate cases in February 2009 changed the due date for customer bill payments to 12 days after bill issuance for both KU and LG&E and permitted KU’s implementation of a late payment charge if payment is not received within 15 days from the bill issuance date.

Depreciation Study

In December 2007, KU filed a depreciation study with the Kentucky Commission as required by a previous Order. In August 2008, the Kentucky Commission issued an Order consolidating the depreciation study with the base rate case proceeding. The approved settlement agreements in the rate cases established new depreciation rates effective February 2009. KU also filed the depreciation study with the Virginia Commission which approved the implementation of the new depreciation rates effective February 2009. Approval by the Virginia Commission does not preclude the rates from being raised as an issue by any party in KU’s future base rate cases in Virginia.

Brownfield Development Rider Tariff

In March 2008, KU received Kentucky Commission approval for a Brownfield Development Rider, which offers a discounted rate to electric customers who meet certain usage and location requirements, including taking new service at a Brownfield site, as certified by the appropriate Kentucky state agency.  The rider permits special contracts with such customers which provide for a series of declining partial rate discounts over an initial five-year period of a longer service arrangement. The tariff is intended to promote local economic redevelopment and efficient usage of utility resources by aiding potential reuse of vacant Brownfield sites.

Interconnection and Net Metering Guidelines

In May 2008, the Kentucky Commission on its own motion initiated a proceeding to establish interconnection and net metering guidelines in accordance with amendments to existing statutory requirements for net metering of electricity. The jurisdictional electric utilities and intervenors in this case presented proposed interconnection guidelines to the Kentucky Commission in October 2008. In a January 2009 Order, the Kentucky Commission issued the Interconnection and Net Metering Guidelines — Kentucky that were developed by all parties to the proceeding. KU does not expect any financial or other impact as a result of this Order. In April 2009, KU filed revised net metering tariffs and application forms pursuant to the Kentucky Commission’s Order. The Kentucky Commission issued an Order in April 2009, which suspended for five months all net metering tariffs filed by the jurisdictional

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electric utilities. This suspension was intended to allow sufficient time for review of the filed tariffs by the Kentucky Commission Staff and intervening parties. In June 2009, the Kentucky Commission Staff held an informal conference with the parties to discuss issues related to the net metering tariffs filed by KU. Following this conference, the intervenors and KU resolved all issues and KU filed revised net metering tariffs with the Kentucky Commission. In August 2009, the Kentucky Commission issued an Order approving the revised tariffs.

EISA 2007 Standards

In November 2008, the Kentucky Commission initiated an administrative proceeding to consider new standards as a result of the Energy Independence and Security Act of 2007 (“EISA 2007”), part of which amends the Public Utility Regulatory Policies Act of 1978 (“PURPA”). There are four new PURPA standards and one non-PURPA standard applicable to electric utilities. The proceeding also considers two new PURPA standards applicable to natural gas utilities. EISA 2007 requires state regulatory commissions and non-regulated utilities to begin consideration of the rate design and smart grid investments no later than December 19, 2008 and to complete the consideration by December 19, 2009. The Kentucky Commission established a procedural schedule that allowed for data discovery and testimony through July 2009. In October 2009, the Kentucky Commission held an informal conference for the purpose of discussing issues related to the standard regarding the consideration of Smart Grid investments. A public hearing has not been scheduled in this matter.

Note 4 - Asset Retirement Obligations

A summary of KU’s net ARO assets, ARO liabilities and regulatory assets established under the asset retirement and environmental obligations guidance of the FASB ASC follows:

	ARO Net			ARO			Regulatory
	Assets			Liabilities			Assets
As of December 31, 2008, Predecessor	$	5		$	(32	)	$	28
ARO accretion and depreciation	(1		)	(2		)	2
As of December 31, 2009, Predecessor	4			(34		)	30
ARO accretion and depreciation	—			(2		)	2
Reclassification for retired assets	(1		)	—			1
ARO revaluation - change in estimates	22			(24		)	2
As of October 31, 2010, Predecessor	25			(60		)	35
ARO accretion and depreciation	(1		)	—			1
Purchase accounting - fair value adjustment	28			6			(34		)
As of December 31, 2010, Successor	$	52		$	(54	)	$	2

In September 2010, the Company performed a revaluation of its AROs as a result of recently proposed environmental legislation and improved ability to forecast asset retirement costs due to recent construction and retirement activity.

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In November 2010, the Company recorded a purchase accounting adjustment to fair value AROs due to the PPL acquisition.

Pursuant to regulatory treatment prescribed under the regulated operations guidance of the FASB ASC, an offsetting regulatory credit was recorded in “Depreciation and amortization” in the Statements of Income for the Successor of $1 million in 2010 and $2 million for the Predecessor for the ARO accretion and depreciation expense. The offsetting regulatory credit recorded was $2 million in 2009 and 2008 for the ARO accretion and depreciation expense. The ARO liabilities are offset by cash settlements that have not yet been applied. Therefore, ARO net assets, ARO liabilities and regulatory assets balances do not net to zero due to the cash settlements.

KU’s AROs are primarily related to the final retirement of assets associated with generating units. KU transmission and distribution lines largely operate under perpetual property easement agreements which do not generally require restoration upon removal of the property. Therefore, under the asset retirement and environmental obligations guidance of the FASB ASC, no material asset retirement obligations are recorded for transmission and distribution assets.

Note 5 — Derivative Financial Instruments

KU is subject to interest rate and commodity price risk related to on-going business operations. The Company’s policies allow for the interest rate risk to be managed through the use of fixed rate debt, floating rate debt and interest rate swaps. Although the Company’s policies allow for the use of interest rate swaps, as of December 31, 2010 and 2009, KU had no interest rate swaps outstanding. At December 31, 2010, KU’s potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was less than $1 million.

The Company does not net collateral against derivative instruments.

Energy Trading and Risk Management Activities

KU conducts energy trading and risk management activities to maximize the value of power sales from physical assets it owns. Energy trading activities are principally forward financial transactions to manage price risk and are accounted for as non-hedging derivatives on a mark-to-market basis in accordance with the derivatives and hedging guidance of the FASB ASC.

Energy trading and risk management contracts are valued using prices based on active trades from Intercontinental Exchange Inc. In the absence of a traded price, midpoints of the best bids and offers are the primary determinants of valuation. When sufficient trading activity data is unavailable, other inputs include prices quoted by brokers or observable inputs other than quoted prices, such as one-sided bids or offers as of the balance sheet date. Quotes are verified quarterly using an independent pricing source of actual transactions. Quotes for combined off-peak and weekend timeframes are allocated between the two timeframes based on their historical proportional ratios to the integrated cost. No other adjustments are made to the forward prices. No changes to valuation techniques for energy trading and risk management activities occurred during 2010 or 2009. Changes in market pricing, interest rate and volatility assumptions were made during both years.

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KU’s financial assets and liabilities as of December 31, 2010 and December 31, 2009, arising from energy trading and risk management contracts not designated as hedging instruments accounted for at fair value total less than $1 million and are recorded in prepayments and other current assets and other current liabilities, respectively.

The Company maintains credit policies intended to minimize credit risk in wholesale marketing and trading activities by assessing the creditworthiness of potential counterparties prior to entering into transactions with them and continuing to evaluate their creditworthiness once transactions have been initiated. To further mitigate credit risk, KU seeks to enter into netting agreements or require cash deposits, letters of credit and parental company guarantees as security from counterparties. The Company uses ratings of S&P, Moody’s and definitive qualitative and quantitative data to assess the financial strength of counterparties on an on-going basis. If no external rating exists, KU assigns an internally generated rating for which it sets appropriate risk parameters. As risk management contracts are valued based on changes in market prices of the related commodities, credit exposures are revalued and monitored on a daily basis. At December 31, 2010, 100% of the trading and risk management commitments were with counterparties rated BBB-/Baa3 equivalent or better. The Company has reserved against counterparty credit risk based on KU’s own creditworthiness (for net liabilities) and its counterparty’s creditworthiness (for net assets). The Company applies historical default rates within varying credit ratings over time provided by S&P or Moody’s. At December 31, 2010 and December 31, 2009, counterparty credit reserves related to energy trading and risk management contracts were less than $1 million.

The net volume of electricity based financial derivatives outstanding at December 31, 2010 and December 31, 2009, was 129,199 Mwh and 315,600 Mwh, respectively. Cash collateral related to the energy trading and risk management contracts was less than $1 million at December 31, 2010 and December 31, 2009. Cash collateral related to the energy trading and risk management contracts is recorded in “Prepayments and other current assets” on the Balance Sheets.

KU manages the price risk of its estimated future excess economic generation capacity using market-traded forward contracts. Hedge accounting treatment has not been elected for these transactions; therefore, realized and unrealized gains and losses are included in the Statements of Income.

The following table presents the effect of market-traded forward contract derivatives not designated as hedging instruments on income:

		Successor		Predecessor
Loss Recognized		November 1, 2010 through		January 1, 2010 through		Year Ended December 31,
in Income	Location	December 31, 2010		October 31, 2010		2009			2008
Unrealized gain (loss)	Electric revenues	$	—	$	—	$	(1	)	$	1

Net realized gains and losses were zero for the period ended December 31, 2010 and less than $1 million for the periods ended October 31, 2010, December 31, 2009 and December 31, 2008.

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Credit Risk Related Contingent Features

Certain of KU’s derivative contracts contain credit contingent provisions which would permit the counterparties with which KU is in a net liability position to require the transfer of additional collateral upon a decrease in KU’s credit rating. Some of these provisions would require KU to transfer additional collateral or permit the counterparty to terminate the contract if KU’s credit rating were to fall below investment grade. Some of these provisions also allow the counterparty to require additional collateral upon each decrease in the credit rating at levels that remain above investment grade. In either case, if KU’s credit rating were to fall below investment grade (i.e., below BBB- for S&P or Baa3 for Moody’s), and assuming no assignment to an investment grade affiliate were allowed, most of these credit contingent provisions require either immediate payment of the net liability as a termination payment or immediate and ongoing full collateralization by KU on derivative instruments in net liability positions.

Additionally, certain of KU’s derivative contracts contain credit contingent provisions that require KU to provide “adequate assurance” of performance if the other party has reasonable grounds for insecurity regarding KU’s performance of its obligation under the contract. A counterparty demanding adequate assurance could require a transfer of additional collateral or other security, including letters of credit, cash and guarantees from a creditworthy entity. A demand for additional assurance would typically involve negotiations among the parties.

To determine net liability positions, KU uses the fair value of each agreement. At December 31, 2010, there were no energy trading and risk management derivative contracts with credit risk related contingent features that are in a liability position and collateral of less than $1 million was posted in the normal course of business. At December 31, 2010, a downgrade of the Company’s credit rating below investment grade would have no effect on the energy trading and risk management derivative contracts or collateral required.

Note 6 - Fair Value Measurements

KU adopted the fair value guidance in the FASB ASC in two phases. Effective January 1, 2008, the Company adopted it for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis, and effective January 1, 2009, the Company adopted it for all non-financial instruments accounted for at fair value on a non-recurring basis. The FASB ASC guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB ASC guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value.

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The carrying values and estimated fair values of KU’s non-trading financial instruments follow:

	Successor				Predecessor
	December 31, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Long-term bonds	$	1,841	$	1,728	$	351	$	351
Long-term debt to affiliated company	—		—		1,331		1,401

The long-term fixed rate pollution control bond valuations reflect prices quoted by investment banks, which are active in the market for these instruments. First mortgage bond valuations reflect prices quoted from a third party service. The fair value of the long-term debt due to affiliated company is determined using an internal valuation model that discounts the future cash flows of each loan at current market rates as determined based on quotes from investment banks that are actively involved in capital markets for utilities and factor in KU’s credit ratings and default risk. The fair values of cash and cash equivalents, accounts receivable, cash surrender value of key man life insurance, accounts payable and notes payable are substantially the same as their carrying values.

KU has classified the applicable financial assets and liabilities that are accounted for at fair value into the three levels of the fair value hierarchy, as defined by the fair value measurements and disclosures guidance of the FASB ASC, as discussed in Note 1, Summary of Significant Accounting Policies.

The Company classifies its derivative cash collateral balances within level 1 based on the funds being held in a demand deposit account. The Company classifies its derivative energy trading and risk management contracts within level 2 because it values them using prices actively quoted for proposed or executed transactions, quoted by brokers or observable inputs other than quoted prices.

KU’s financial assets and liabilities as of December 31, 2010 and 2009, arising from energy trading and risk management contracts accounted for at fair value on a recurring basis total less than $1 million. Cash collateral related to the energy trading and risk management contracts was less than $1 million at December 31, 2010 and December 31, 2009 each year.

There were no level 3 measurements for the periods ending December 31, 2010 and December 31, 2009.

Note 7 - Goodwill and Intangible Assets

In connection with PPL’s acquisition of LKE, KU recorded goodwill on November 1, 2010. In addition, as of November 1, 2010, certain intangible assets were adjusted to their fair value and new intangible assets were recorded. See Note 2, Acquisition by PPL, for further information.

Goodwill

The Company performs its required annual goodwill impairment test in the fourth quarter. Impairment tests are performed between the annual tests when the Company determines that a triggering event has occurred that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. The goodwill impairment test is comprised of a two-step process. In step 1, the Company identifies a potential impairment by comparing the estimated fair value of the regulated utilities (the

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goodwill reporting unit) to their carrying value, including goodwill, on the measurement date. If the estimated fair value exceeds its carrying amount, goodwill is not considered impaired. If the fair value is less than the carrying value, then step 2 is performed to measure the amount of impairment loss, if any. The step 2 calculation compares the implied fair value of the goodwill to the carrying value of the goodwill. The implied fair value of goodwill is equal to the excess of the Company estimated fair value over the fair values of its identified assets and liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to that excess (but not in excess of the carrying value).

In connection with PPL’s acquisition of LKE on November 1, 2010, goodwill of $607 million was recorded on November 1, 2010. The allocation of the goodwill to KU was based on the net asset value of the Company. The goodwill represents value paid for the rate regulated business located in a defined service area with a constructive regulatory environment, which provides for future investment, earnings and cash flow growth, as well as the talented and experienced workforce. KU’s franchise values are being attributed to the going concern value of the business and thus were recorded as goodwill rather than a separately identifiable intangible asset. None of the goodwill recognized is expected to be deductible for income tax purposes or included in customer rates. See Note 2, Acquisition by PPL, for further information.

For the 2010 annual impairment test, the primary valuation technique used was an income methodology based on management’s estimates of forecasted cash flows for the Company, with those cash flows discounted to present value using rates commensurate with the risks of those cash flows. Management also took into consideration the acquisition price paid by PPL. The discounted cash flows for the Company was based on discrete financial forecasts developed by management for planning purposes and consistent with those given to PPL. Cash flows beyond the discrete forecasts were estimated using a terminal-value calculation, which incorporated historical and forecasted financial trends for the Company. No impairment resulted from the fourth quarter test, as the determined fair value of the Company was greater than its carrying value.

Other Intangible Assets

The gross carrying amount and the accumulated amortization of other intangible assets were as follows:

	Successor
	December 31, 2010
	Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	145	$	3
Land rights (b)	8		—
Emission allowances (c)	9		—
OVEC power purchase agreement (d)	39		1
Total other intangible assets	$	201	$	4

(a)The gross carrying amount represents the fair value of coal contracts recognized as a result of the 2010 acquisition by PPL. The weighted average amortization period of these contracts is 3 years. See Note 2, Acquisition by PPL, for further information.

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(b)The gross carrying amount represents the fair value of land rights recognized as a result of adopting PPL’s accounting policies in the Successor period. The weighted average amortization period of these rights is 17 years. See Note 1, Summary of Significant Accounting Policies, for further information.

(c)The gross carrying amount represents the fair value of emission allowances recognized as a result of the 2010 acquisition by PPL, as well as the reclassification of amounts from inventory to intangible assets as a result of adopting PPL’s accounting policies in the Successor period. The weighted average amortization period of these emission allowances is 3 years. See Note 2, Acquisition by PPL, for further information.

(d)The gross carrying amount represents the fair value of the OVEC power purchase contract recognized as a result of the 2010 acquisition by PPL. The weighted average amortization period of the power purchase agreement is 8 years. See Note 2, Acquisition by PPL, for further information.

Current intangible assets and long-term intangible assets are included in “Other intangible assets” in their respective areas on the Balance Sheets in 2010. Intangible assets resulting from purchase accounting adjustments are not recoverable in rates.

Amortization expense, excluding consumption of emission allowances, was $4 million for the Successor in 2010. The estimated aggregate amortization expense for each of the next five years is as follows:

	Estimated Expense in Period Ended
	2011	2012	2013	2014	2015
Aggregate amortization expense	$43	$25	$27	$24	$26

Note 8 - Concentrations of Credit and Other Risk

Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted. Concentrations of credit risk (whether on- or off-balance sheet) relate to groups of customers or counterparties that have similar economic or industry characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

All of KU’s customer receivables arise from deliveries of electricity. During 2010, the Company’s ten largest customers accounted for less than 19% of volumes.

Effective August 4, 2009, KU and its employees represented by the IBEW Local 2100 entered into a three-year collective bargaining agreement. The agreement provides for negotiated increases or changes to wages, benefits or other provisions and for annual wage re-openers. KU and its employees represented by the USWA Local 9447-01 entered into a three-year collective bargaining agreement in August 2008. This agreement provides for negotiated increases or changes to wages, benefits or other provisions and for annual wage re-openers. The employees represented by these two bargaining units comprise approximately 15% of the Company’s workforce at December 31, 2010.

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Note 9 - Pension and Other Postretirement Benefit Plans

KU employees benefit from both funded and unfunded retirement benefit plans. Its defined benefit pension plan covers employees hired by December 31, 2005. Employees hired after this date participate in the Retirement Income Account (“RIA”), a defined contribution plan. The postretirement plan includes health care benefits that are contributory, with participants’ contributions adjusted annually. The Company uses December 31 as the measurement date for its plans.

Obligations and Funded Status

The following tables provide a reconciliation of the changes in the defined benefit plans’ obligations, the fair value of assets and the funded status of the plans for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor:

	Pension Benefits									Other Postretirement Benefits
	Successor			Predecessor						Successor			Predecessor
	2010			2010			2009			2010			2010			2009
Change in benefit obligation:
Benefit obligation at beginning of period	$	355		$	316		$	306		$	84		$	80		$	75
Service cost	1			5			6			—			1			2
Interest cost	3			16			18			1			4			4
Benefits paid, net of retiree contributions	(3		)	(14		)	(18		)	(1		)	(4		)	(5		)
Actuarial (gain) loss and other	(2		)	32			4			(1		)	3			4
Benefit obligation at end of period	$	354		$	355		$	316		$	83		$	84		$	80

	Pension Benefits									Other Postretirement Benefits
	Successor			Predecessor						Successor			Predecessor
	2010			2010			2009			2010			2010			2009
Change in plan assets:
Fair value of plan assets at beginning of period	$	237		$	219		$	183		$	20		$	17		$	12
Actual return on plan assets	7			20			41			—			1			3
Employer contributions	—			13			13			2			6			7
Benefits paid, net of retiree contributions	(3		)	(14		)	(18		)	(1		)	(4		)	(5		)
Administrative expenses and other	—			(1		)	—			—			—			—
Fair value of plan assets at end of period	$	241		$	237		$	219		$	21		$	20		$	17
Funded status at end of period	$	(113	)	$	(118	)	$	(97	)	$	(62	)	$	(64	)	$	(63	)

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Amounts Recognized in the Balance Sheets

The following tables provide the amounts recognized in the Balance Sheets and information for plans with benefit obligations in excess of plan assets plans for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor:

	Pension Benefits									Other Postretirement Benefits
	Successor			Predecessor						Successor			Predecessor
	2010			2010			2009			2010			2010			2009
Regulatory assets	$	117		$	125		$	105		$	—		$	—		$	—
Regulatory liabilities	—			—			—			(10		)	(9		)	(9		)
Accrued benefit liability (non-current)	(113		)	(118		)	(97		)	(62		)	(64		)	(63		)

Amounts recognized in regulatory assets and liabilities for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor:

	Pension Benefits						Other Postretirement Benefits
	Successor		Predecessor				Successor			Predecessor
	2010		2010		2009		2010			2010			2009
Transition obligation	$	—	$	—	$	—	$	2		$	2		$	3
Prior service cost	3		4		5		1			1			2
Accumulated loss (gain)	114		121		100		(13		)	(12		)	(14		)
Total regulatory assets and liabilities	$	117	$	125	$	105	$	(10	)	$	(9	)	$	(9	)

Additional information for plans with accumulated benefit obligations in excess of plan assets for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor:

	Pension Benefits						Other Postretirement Benefits
	Successor		Predecessor				Successor		Predecessor
	2010		2010		2009		2010		2010		2009
Benefit obligation	$	354	$	355	$	316	$	83	$	84	$	80
Accumulated benefit obligation	299		299		268		—		—		—
Fair value of plan assets	241		237		219		21		20		17

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The amounts recognized in regulatory assets and liabilities for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor:

	Pension Benefits									Other Postretirement Benefits
	Successor			Predecessor						Successor			Predecessor
	2010			2010			2009			2010			2010			2009
Net (gain) loss arising during the period	$	(6	)	$	26		$	(22	)	$	(1	)	$	2		$	2
Amortization of prior service cost	—			(1		)	(1		)	—			—			—
Amortization of transitional obligation	—			—			—			—			(2		)	(1		)
Amortization of loss	(2		)	(5		)	(9		)	—			—			—
Total amounts recognized in regulatory assets and liabilities	$	(8	)	$	20		$	(32	)	$	(1	)	$	—		$	1

For discussion of the pension and postretirement regulatory assets, see Note 3, Rates and Regulatory Matters.

Components of Net Periodic Benefit Cost

The following tables provide the components of net periodic benefit cost for pension and other postretirement benefit plans. The tables include the costs associated with both KU employees and Servco employees who provide services to KU. The Servco costs are allocated to KU based on employees’ labor charges and are approximately 51%, 49% and 46% of Servco’s costs for 2010, 2009 and 2008, respectively.

	Pension Benefits
	Successor									Predecessor
	November 1, 2010 through December 31, 2010									January 1, 2010  through October 31, 2010
	KU			Servco Allocation to KU			Total KU			KU			Servco Allocation to KU			Total KU
Service cost	$	1		$	1		$	2		$	5		$	5		$	10
Interest cost	3			2			5			16			6			22
Expected return on plan assets	(3		)	(1		)	(4		)	(14		)	(5		)	(19		)
Amortization of prior service cost	—			—			—			1			1			2
Amortization of actuarial gain	2			—			2			5			2			7
Net periodic benefit cost	$	3		$	2		$	5		$	13		$	9		$	22

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	Pension Benefits
	Predecessor - Year Ended December 31, 2009									Predecessor - Year Ended December 31, 2008
	KU			Servco Allocation to KU			Total KU			KU			Servco Allocation to KU			Total KU
Service cost	$	6		$	5		$	11		$	6		$	4		$	10
Interest cost	18			7			25			18			6			24
Expected return on plan assets	(15		)	(4		)	(19		)	(21		)	(5		)	(26		)
Amortization of prior service cost	1			1			2			1			1			2
Amortization of actuarial gain	9			2			11			—			—			—
Net periodic benefit cost	$	19		$	11		$	30		$	4		$	6		$	10

	Other Postretirement Benefits
	Successor						Predecessor
	November 1, 2010 through December 31, 2010						January 1, 2010  through October 31, 2010
	KU		Servco Allocation to KU		Total KU		KU			Servco Allocation to KU		Total KU
Service cost	$	—	$	—	$	—	$	1		$	1	$	2
Interest cost	1		—		1		4			—		4
Expected return on plan assets	—		—		—		(1		)	—		(1		)
Amortization of transition obligation	—		—		—		1			—		1
Net periodic benefit cost	$	1	$	—	$	1	$	5		$	1	$	6

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	Other Postretirement Benefits
	Predecessor - Year Ended December 31, 2009								Predecessor Year Ended December 31, 2008
	KU			Servco Allocation to KU		Total KU			KU			Servco Allocation to KU		Total KU
Service cost	$	1		$	1	$	2		$	1		$	1	$	2
Interest cost	5			—		5			5			—		5
Expected return on plan assets	(1		)	—		(1		)	(1		)	—		(1		)
Amortization of transition obligation	1			—		1			1			—		1
Net periodic benefit cost	$	6		$	1	$	7		$	6		$	1	$	7

The estimated amounts that will be amortized from regulatory assets and liabilities into net periodic benefit cost in 2011 are shown in the following table:

	Pension Benefits		Other Postretirement Benefits
Regulatory assets and liabilities:
Net actuarial loss	$	8	$	—
Prior service cost	1		1
Transition obligation	—		1
Total regulatory assets and liabilities amortized during 2011	$	9	$	2

The weighted average assumptions used in the measurement of KU’s pension and postretirement benefit obligations for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor are shown in the following table:

	Successor		Predecessor
	December 31, 2010		October 31, 2010		December 31, 2009
Discount rate — pension benefits	5.52	%	5.46	%	6.13	%
Discount rate — postretirement benefits	5.12	%	4.96	%	5.82	%
Rate of compensation increase	5.25	%	5.25	%	5.25	%

For the first ten months of 2010, the discount rates used to determine the pension and postretirement benefit obligations and the period expense were determined using the Mercer Pension Discount Yield Curve. This model takes the plans’ cash flows and matches them to a yield curve that provides the equivalent yields on zero-coupon corporate bonds for each maturity. The discount rate is the single rate

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that produces the same present value of cash flows. The selection of the various discount rates represents the equivalent single rate under a broad-market AA yield curve constructed by Mercer.

For the last two months of 2010, the Towers Watson Yield Curve was used to determine the discount rate. This model also starts with an analysis of the expected benefit payment stream for its plans. This information is first matched against a spot-rate yield curve. A portfolio of Aa-graded non-callable (or callable with make-whole provisions) bonds, with a total amount outstanding in excess of $667 billion, serves as the base from which those with the lowest and highest yields are eliminated to develop the ultimate yield curve. The results of this analysis are considered together with other economic data and movements in various bond indices to determine the discount rate assumption.

The weighted average assumptions used in the measurement of KU’s pension and postretirement net periodic benefit costs for November 1, 2010 through December 31, 2010, for the Successor, and for January 1, 2010 through October 31, 2010, and January 1, 2009 through December 31, 2009, for the Predecessor are shown in the following table:

	Successor		Predecessor
	2010		2010		2009		2008
Discount rate - pension	5.45	%	5.46	%	6.25	%	6.66	%
Discount rate - postretirement	4.94	%	5.82	%	6.36	%	6.56	%
Expected long-term return on plan assets	7.25	%	7.75	%	8.25	%	8.25	%
Rate of compensation increase	5.25	%	5.25	%	5.25	%	5.25	%

To develop the expected long-term rate of return on assets assumption, KU considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the current asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. The Company has determined that the 2011 expected long-term rate of return on assets assumption should be 7.25%.

The following describes the effects on pension benefits by changing the major actuarial assumptions discussed above:

·A 1% change in the assumed discount rate would have a $39 million positive or negative impact to the 2010 accumulated benefit obligation and an approximate $51 million positive or negative impact to the 2010 projected benefit obligation.

·A 25 basis point change in the expected rate of return on assets would have resulted in less than a $1 million positive or negative impact to 2010 pension expense.

·A 25 basis point increase in the rate of compensation increase would have a $3 million negative impact to the 2010 projected benefit obligation.

Assumed Health Care Cost Trend Rates

For measurement purposes, an 8% annual increase in the per capita cost of covered health care benefits was assumed for the first ten months of 2010. The rate was assumed to decrease gradually to 4.5% by 2029 and remain at that level thereafter. For the last two months of 2010, an 8% annual increase in the

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per capita cost of covered health care benefits was assumed and the rate was assumed to decrease gradually to 5.5% by 2019. For 2011, a 9% annual increase in the per capita cost of covered health care benefits is assumed and the rate is assumed to decrease gradually to 5.5% by 2019. This change in the length of the health care trend was made to conform to PPL’s accounting policies.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have resulted in an increase or decrease of less than $1 million to the 2010 total of service and interest costs components and an increase or decrease of $4 million in year end 2010 postretirement benefit obligations.

Expected Future Benefit Payments and Medicare Subsidy Receipts

The following list provides the amount of expected future benefit payments, which reflect expected future service costs and the estimated gross amount of Medicare subsidy receipts:

	Pension Benefits		Other Postretirement Benefits		Medicare Subsidy Receipts
2011	$	18	$	6	$	1
2012	18		6		—
2013	18		6		1
2014	18		7		—
2015	18		7		1
2016-2020	106		36		3

Plan Assets

The following table shows the pension plan’s weighted average asset allocation by asset category at December 31:

	Target	Successor		Predecessor
	Range	2010		2009
Equity securities	45% - 75%	56	%	59	%
Debt securities	30% - 50%	24	%	40	%
Other	0% - 10%	20	%	1	%
Totals		100	%	100	%

The investment policy of the pension plans was developed in conjunction with financial and actuarial consultants, investment advisors and legal counsel. The goal of the investment policy is to preserve the capital of the pension plans’ assets and maximize investment earnings in excess of inflation with acceptable levels of volatility. The return objective is to exceed the benchmark return for the policy index comprised of the following: Russell 3000 Index, MSCI-EAFE Index, Barclays Capital Aggregate and Barclays Capital U.S. Long Government/Credit Bond Index in proportions equal to the targeted asset allocation.

Evaluation of performance focuses on a long-term investment time horizon over rolling three and five-year periods. The assets of the pension plans are broadly diversified within different asset classes (equities, fixed income securities and cash equivalents).

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To minimize the risk of large losses in a single asset class, no more than 5% of the portfolio will be invested in the securities of any one issuer with the exclusion of the U.S. government and its agencies. The equity portion of the fund is diversified among the market’s various subsections to diversify risk, maximize returns and avoid undue exposure to any single economic sector, industry group or individual security. The equity subsectors include, but are not limited to, growth, value, small capitalization and international.

In addition, the overall fixed income portfolio may have an average weighted duration, or interest rate sensitivity which is within +/- 20% of the duration of the overall fixed income benchmark. Foreign bonds in the aggregate shall not exceed 10% of the total fund. The portfolio may include a limited investment of up to 20% in below investment grade securities provided that the overall average portfolio quality remains “AA” or better. The below investment grade securities include, but are not limited to, medium-term notes, corporate debt, non-dollar and emerging market debt and asset backed securities. The cash investments should be in securities that are either short maturities (not to exceed 180 days) or readily marketable with modest risk.

Derivative securities are permitted only to improve the portfolio’s risk/return profile, to modify the portfolio’s duration or to reduce transaction costs and must be used in conjunction with underlying physical assets in the portfolio. Derivative securities that involve speculation, leverage, interest rate anticipation, or any undue risk whatsoever are not deemed appropriate investments.

The investment objective for the postretirement benefit plan is to provide current income consistent with stability of principal and liquidity while maintaining a stable net asset value of $1.00 per share. The postretirement funds are invested in a prime cash money market fund that invests primarily in a portfolio of short-term, high-quality fixed income securities issued by banks, corporations and the U.S. government.

KU has classified plan assets that are accounted for at fair value into the three levels of the fair value hierarchy, as defined by the fair value measurements and disclosures guidance of the FASB ASC. See Note 6, Fair Value Measurements, for further information.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

A description of the valuation methodologies used to measure plan assets at fair value is provided below:

Money market funds: These investments are public investment vehicles valued using $1 for the net asset value. The money market funds are classified within level 2 of the valuation hierarchy.

Common/collective trusts: Valued based on the beginning of year value of the plan’s interests in the trust plus actual contributions and allocated investment income (loss) less actual distributions and allocated administrative expenses. Quoted market prices are used to value investments in the trust, with the exception of the GAC. The fair value of certain other investments for which quoted market prices are not available are valued based on yields currently available on

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comparable securities of issuers with similar credit ratings. The common/collective trusts are classified within level 2 of the valuation hierarchy.

The preceding methods described may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Prior to the acquisition, the GAC was considered an immediate participation guarantee contract which was not included in the fair value table. In accordance with the plan accounting guidance of the FASB ASC, the cost incurred to purchase the GAC prior to March 20, 1992, was permitted to be carried at contract value, since it is a contract with an insurance company and prior to the acquisition it was excluded from the table above. The cost incurred to fund the GAC after March 20, 1992, was carried at contract value in accordance with the plan accounting guidance of the FASB ASC, since it was a contract that incorporates mortality and morbidity risk. Contract value represents cost plus interest income less distributions for benefits and administrative expenses. To conform to PPL’s accounting methods, the John Hancock GAC was classified in the fair value table as a level 3 and as “other” rather than “debt securities” in the asset allocation table for the period ended December 31, 2010.

The following table sets forth, by level within the fair value hierarchy, the plan’s assets at fair value at December 31:

	Successor				Predecessor
	Level 2		Level 3		Level 2		Level 3
Money market funds	$	2	$	—	$	2	$	—
Common/collective trusts	213		—		186		—
John Hancock - GAC	—		47		—		—
Total investments at fair value	$	215	$	47	$	188	$	—

The following table sets forth a reconciliation of changes in the fair value of the plan’s level 3 assets for the following period:

	Successor
Balance at November 1, 2010	$	—
Purchases	1
Transfers into level 3	46
Balance at December 31, 2010	$	47

There are no assets categorized as level 1 as of December 31, 2010 and December 31, 2009.

Contributions

KU made discretionary contributions to the pension plan of $13 million in 2010 and 2009. Servco made $9 million and $8 million in discretionary contributions to its pension plan in 2010 and 2009, respectively. The amount of future contributions to the pension plan will depend upon the actual return on plan assets and other factors, but the Company funds its pension obligations in a manner consistent

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with the Pension Protection Act of 2006. The Company made contributions totaling $43 million in January 2011.See Note 18, Subsequent Events, for further information.

The Company made contributions to its other postretirement benefit plan of $8 million in 2010 and $7 million in 2009. In 2011, the Company anticipates making voluntary contributions to fund Voluntary Employee Beneficiary Association trusts to match the annual postretirement expense and funding the 401(h) plan up to the maximum amount allowed by law.

Pension Legislation

The Pension Protection Act of 2006 was enacted in August 2006. New rules regarding funding of defined benefit plans are generally effective for plan years beginning in 2008. Among other matters, this comprehensive legislation contains provisions applicable to defined benefit plans which generally (i) mandate full funding of current liabilities within seven years; (ii) increase tax-deduction levels regarding contributions; (iii) revise certain actuarial assumptions, such as mortality tables and discount rates; and (iv) raise federal insurance premiums and other fees for under-funded and distressed plans. The legislation also contains a number of provisions relating to defined-contribution plans and qualified and non-qualified executive pension plans and other matters. The Company’s plan met the minimum funding requirements as defined by the Pension Protection Act of 2006 for years ended December 31, 2010 and 2009.

Thrift Savings Plans

KU has a thrift savings plan under section 401(k) of the Internal Revenue Code. Under the plan, eligible employees may defer and contribute to the plan a portion of current compensation in order to provide future retirement benefits. KU makes contributions to the plan by matching a portion of the employees’ contributions. The costs of this matching were $3 million in 2010, 2009 and 2008.

KU also makes contributions to RIAs within the thrift savings plans for certain employees not covered by the non-contributory defined benefit pension plan. These employees consist of those hired after December 31, 2005. The Company makes these contributions based on years of service and the employees’ wage and salary levels, and makes them in addition to the matching contributions discussed above. The amounts contributed by the Company under this arrangement were less than $1 million in 2010, 2009 and 2008.

Health Care Reform

In March 2010, Health Care Reform (the Patient Protection and Affordable Care Act of 2010) was signed into law. Many provisions of Health Care Reform do not take effect for an extended period of time and many aspects of the law which are currently unclear or undefined will likely be clarified in future regulations.

During 2010, KU recorded an income tax expense of less than $1 million to recognize the impact of the elimination of the tax deduction related to the Medicare Retiree Drug Subsidy that becomes effective in 2013.

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Specific provisions within Health Care Reform that may impact KU include:

·Beginning in 2011, requirements extend dependent coverage up to age 26, remove the $2 million lifetime maximum and eliminate cost sharing for certain preventative care procedures.

·Beginning in 2018, a potential excise tax is expected on high-cost plans providing health coverage that exceeds certain thresholds.

The Company has evaluated these provisions of Health Care Reform on its benefit programs in consultation with its actuarial consultants and has determined that the excise tax will not have an impact on its postretirement medical plans. The requirement to extend dependent coverage up to age 26 is not expected to have a significant impact on active or retiree medical costs. The Company will continue to monitor the potential impact of any changes to the existing provisions and implementation guidance related to Health Care Reform on its benefit programs.

Note 10 - Income Taxes

KU’s federal income tax return is included in a United States consolidated income tax return filed by LKE’s direct parent. Prior to October 31, 2010 the return was included in the consolidated return of E.ON US Investments Corp. Due to the acquisition by PPL, the return will be included in the consolidated PPL return beginning November 1, 2010, for each tax period. Each subsidiary of the consolidated tax group, including KU, calculates its separate income tax for each period. The resulting separate-return tax cost or benefit is paid to or received from the parent company or its designee. The Company also files income tax returns in various state jurisdictions. While 2007 and later years are open under the federal statute of limitations, Revenue Agent Reports for 2007-2008 have been received from the IRS, effectively closing these years to additional audit adjustments. Tax years beginning with 2007 were examined under an IRS program, Compliance Assurance Process (“CAP”). This program accelerates the IRS’s review to begin during the year applicable to the return and ends 90 days after the return is filed. KU had no adjustments for the 2007 federal tax return. For 2008, the IRS allowed additional deductions in connection with the Company’s application for a change in repair deductions and disallowed certain bonus depreciation claimed on the original return. The net temporary tax impact for the Company was a $12 million reduction in tax and was recorded in the second quarter of 2010. The 2009 federal return was filed in the third quarter of 2010 and the IRS issued a Partial Acceptance Letter in connection with CAP. The IRS is continuing to review bonus depreciation, storms and other repairs. No net material adverse impact is expected from these remaining areas. The short tax year beginning January 1, 2010 through October 31, 2010, is also being examined under CAP. No material items have been raised by the IRS at this time. The two month period beginning November 1, 2010 and ending December 31, 2010 is not currently under examination.

Additions and reductions of uncertain tax positions during 2010, 2009 and 2008 were less than $1 million. Possible amounts of uncertain tax positions for KU that may decrease within the next 12 months total less than $1 million and are based on the expiration of the audit periods as defined in the statutes. If recognized, the less than $1 million of unrecognized tax benefits would reduce the effective income tax rate.

The amount KU recognized as interest expense and interest accrued related to unrecognized tax benefits was less than $1 million for the twelve month periods ended and as of December 31, 2010, 2009 and 2008. The interest expense and interest accrued is based on IRS and Kentucky Department of Revenue

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large corporate interest rates for underpayment of taxes. At the date of adoption, the Company accrued less than $1 million in interest expense on uncertain tax positions. KU records the interest as “Interest expense” and penalties, if any, as “Operating expenses” on the Statements of Income and “Other current liabilities” on the Balance Sheets, on a pre-tax basis. No penalties were accrued by the Company through December 31, 2010.

Components of income tax expense are shown in the table below:

	Successor	Predecessor
	November 1, 2010 through	January 1, 2010 through	Year Ended December 31,
	December 31, 2010	October 31, 2010	2009		2008
Current:
Federal	$13	$46	$(5	)	$46
State	3	9	1		10
Deferred:
Federal — net	4	20	43		(10	)
State — net	—	3	7		(3	)
Investment tax credit — deferred	—	—	21		25
Total income tax expense	$20	$78	$67		$68

In June 2006, KU and LG&E filed a joint application with the U.S. Department of Energy (“DOE”) requesting certification to be eligible for an investment tax credit applicable to the construction of TC2. In November 2006, the DOE and the IRS announced that KU and LG&E were selected to receive the tax credit. A final IRS certification required to obtain the investment tax credit was received in August 2007. In September 2007, KU received an Order from the Kentucky Commission approving the accounting of the investment tax credit, which includes a full depreciation basis adjustment for the amount of the credit. KU’s portion of the TC2 tax credit is approximately $101 million. Based on eligible construction expenditures incurred, KU recorded an investment tax credit of $21 million and $25 million in 2009 and 2008, respectively, decreasing current federal income taxes. As of December 31, 2009, KU had recorded its maximum credit of $101 million. The income tax expense impact from amortizing this credit over the life of the related property began when the facility was placed in service in January 2011.

In March 2008, certain environmental and preservation groups filed suit in federal court in North Carolina against the DOE and IRS claiming the investment tax credit program was in violation of certain environmental laws and demanded relief, including suspension or termination of the program. The plaintiffs voluntarily dismissed their complaint in August 2010.

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Components of deferred income taxes included in the Balance Sheets are shown below:

	Successor			Predecessor
	December 31, 2010			December 31, 2009
Deferred income tax liabilities:
Depreciation and other plant-related items	$	347		$	303
Regulatory assets and other	133			69
Total deferred income tax liabilities	480			372
Deferred income tax assets:
Regulatory liabilities and other	80			—
Income taxes due to customers	2			4
Pensions and related benefits	9			17
Liabilities and other	19			18
Total deferred income tax assets	110			39
Net deferred income tax liabilities	$	370		$	333
Balance sheet classification:
Prepayments and other current assets	$	(6	)	$	(3	)
Deferred income taxes (non-current)	376			336
Net deferred income tax liabilities	$	370		$	333

The Company expects to have adequate levels of taxable income to realize its recorded deferred income tax assets.

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A reconciliation of differences between the income tax expense at the statutory U.S. federal income tax rate and KU’s actual income tax expense follows:

	Successor			Predecessor
	November 1, 2010 through			January 1, 2010 through			Year Ended December 31,
	December 31, 2010			October 31, 2010			2009			2008
Statutory federal income tax expense	$	19		$	77		$	70		$	79
State income taxes — net of federal benefit	2			8			5			5
Qualified production activities deduction	(1		)	(4		)	(1		)	(3		)
Dividends received deduction related to EEI investment	—			—			(3		)	(8		)
Reversal of excess deferred taxes	—			(2		)	(2		)	(1		)
Other differences — net	—			(1		)	(2		)	(4		)
Income tax expense	$	20		$	78		$	67		$	68
Effective income tax rate	36.4		%	35.8		%	33.5		%	30.1		%

The Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010, enacted December 17, 2010 provided, among other provisions, certain incentives related to bonus depreciation and 100% expensing of qualifying capital expenditures. KU benefited from these new provisions by reducing its 2010 current federal income tax expense. This reduction in federal taxable income for KU does, however, result in a reduction of KU’s Section 199 Manufacturing deduction, which is based on manufacturing taxable income and correspondingly increases income tax expense. The impact from these changes on 2010 was not material; however, KU anticipates a significant reduction of taxable income in 2011 and 2012 and a corresponding loss of most, if not all, of the Section 199 Manufacturing deduction for the following two years.

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Note 11 - Long-Term Debt

As summarized below, at December 31, 2010, long-term debt consisted of first mortgage bonds and secured pollution control bonds. At December 31, 2009, long-term debt and the current portion of long-term debt consisted primarily of pollution control bonds and long-term loans from affiliated companies.

	Successor			Predecessor
	2010			2009
Current portion of long-term debt to affiliates	$	—		$	33
Long-term debt to affiliated companies	—			1,298
Secured first mortgage bonds, net of debt discount and amortization of debt discount	1,500			—
Pollution control revenue bonds, collateralized by first mortgage bonds	351			351
Fair value adjustment from purchase accounting	1			—
Unamortized discount	(11		)	—
Total long-term debt	1,841			1,682
Less current portion	—			261
Long-term debt, excluding current portion	$	1,841		$	1,421

	Stated Interest Rates	Maturities	Debt Amounts
Successor
Outstanding at December 31, 2010:
Current portion	N/A	N/A	$	—
Non-current portion	Variable – 6.00%	2015-2040	1,841
Predecessor
Outstanding at December 31, 2009:
Current portion	Variable – 4.240%	2010-2034	$	261
Non-current portion	Variable – 7.035%	2011-2037	1,421

As of December 31, 2009, long-term debt includes $228 million of pollution control bonds that were classified as current portion because these bonds are subject to tender for purchase at the option of the holder and to mandatory tender for purchase upon the occurrence of certain events. These bonds include Carroll County 2002 Series A and B, 2004 Series A, 2006 Series B and 2008 Series A; Muhlenberg County 2002 Series A; and Mercer County 2000 Series A and 2002 Series A. Maturity dates for these bonds range from 2023 to 2034. As of December 31, 2009, the bonds were classified as current portion of long-term debt because investors could put the bonds back to the Company within one year. As of December 31, 2010, the bonds were reclassified as long-term debt. See Note 1, Summary of Significant Accounting Policies, for changes in classification.

Pollution control bonds are obligations of KU issued in connection with tax-exempt pollution control bonds by various counties in Kentucky. A loan agreement obligates the Company to make debt service payments to the counties in amounts equal to the debt service due from the counties on the related pollution control bonds. Depending on the type of expense, the Successor capitalized debt expenses in long-term other regulatory assets or long-term other assets to align with the term of the debt for which the

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expenses were related. The Predecessor capitalized debt expenses in current or long-term other regulatory assets or other current or long-term other assets based on the amount of expense expected to be recovered within the next year through rate recovery. Both Predecessor and Successor amortized debt expenses over the lives of the related bond issues. The Predecessor presentation and the Successor presentation are both appropriate under regulatory practices and GAAP.

In October 2010, in order to secure their respective obligations with respect to the pollution control bonds, KU issued first mortgage bonds to the pollution control bond trustees. KU’s first mortgage bonds contain terms and conditions that are substantially parallel to the terms and conditions of the counties’ debt, but provide that obligations are deemed satisfied to the extent of payments under the related loan agreement, and thus generally require no separate payment of principal and interest except under certain circumstances, including should KU default on the respective loan agreement. Also in October 2010, one national rating agency revised downward the short-term credit rating of the pollution control bonds and the Company’s issuer rating as a result of the pending acquisition by PPL.

Several series of KU’s pollution control bonds are insured by monoline bond insurers whose ratings have been reduced due to exposures relating to insurance of sub-prime mortgages. At December 31, 2010, KU had an aggregate $351 million of outstanding pollution control indebtedness, of which $96 million is in the form of insured auction rate securities wherein interest rates are reset every 35 days via an auction process. Beginning in late 2007, the interest rates on these insured bonds began to increase due to investor concerns about the creditworthiness of the bond insurers. Since 2008, interest rates increased and the Company experienced “failed auctions” when there were insufficient bids for the bonds. When a failed auction occurs, the interest rate is set pursuant to a formula stipulated in the indenture.

The average annualized interest rates on the auction rate bonds follow:

Successor		Predecessor
November 1, 2010 through December 31, 2010		January 1, 2010 through October 31, 2010		December 31, 2009
0.53	%	0.51	%	0.44	%

The instruments governing this auction rate bond permit KU to convert the bond to other interest rate modes, such as various short-term variable rates, long-term fixed rates or intermediate-term fixed rates that are reset infrequently.

As a result of downgrades of the monoline insurers by all of the rating agencies to levels below that of the Company’s rating, the debt ratings of the Company’s insured bonds are all based on the Company’s senior secured debt rating and are not influenced by the monoline bond insurer ratings.

In connection with the PPL acquisition, on November 1, 2010, KU borrowed $1,331 million from a PPL subsidiary, in order to repay loans from a subsidiary of E.ON. KU used the net proceeds received from the sale of the first mortgage bonds to repay the debt owed to the PPL subsidiary arising from the borrowing.

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In November 2010, KU issued first mortgage bonds totaling $1,500 million and used the proceeds to repay the loans from a PPL subsidiary mentioned above and for general corporate purposes. The first mortgage bonds were issued at a discount as described in the table below:

First Mortgage Bonds	Principal		Discount Price		First Mortgage Bonds Proceeds (a)
Series due 2015	$	250	99.650	%	$	249
Series due 2020	500		99.622	%	498
Series due 2040	750		98.915	%	742
Total	$	1,500			$	1,489

(a)Before expenses other than discount to Purchaser

The first mortgage bonds were issued by KU in accordance with the rules of Section 144A of the Securities Act of 1933. KU has entered into a registration rights agreement in which it has agreed to file a registration statement with the SEC relating to an offer to exchange the first mortgage bonds for publicly tradable securities having substantially identical terms. If ultimate registration and/or certain milestones are not completed by certain dates in mid- and late 2011, the Company has agreed to pay liquidated damages to the bondholders. The liquidated damages would total 0.25% per annum of the principal amount of the bonds for the first 90 days and 0.50% per annum of the principal amount thereafter until the conditions described above have been cured.

There were no redemptions or maturities of long-term debt for 2009. Redemptions and maturities of long-term debt for 2010 are summarized below:

Year	Description	Principal Amount		Rate	Secured/ Unsecured	Maturity
Successor
2010	Due to PPL Investment Corp.	$	1,331	4.24%-7.035%	Unsecured	2010-2037
2010	Due to E.ON affiliates	1,331		4.24%-7.035%	Unsecured	2010-2037

Issuances of long-term debt for 2010 and 2009 are summarized below:

Year	Description	Principal Amount		Rate	Secured/ Unsecured	Maturity
Successor
2010	Due to PPL Investment Corp.	$	1,331	4.24%-7.035%	Unsecured	2010-2037
2010	First mortgage bonds	250		1.625%	Secured	2015
2010	First mortgage bonds	500		3.25%	Secured	2020
2010	First mortgage bonds	750		5.125%	Secured	2040
Predecessor
2009	Due to E.ON affiliates	50		4.445%	Unsecured	2019
2009	Due to E.ON affiliates	50		4.81%	Unsecured	2019
2009	Due to E.ON affiliates	50		5.28%	Unsecured	2017

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As of December 31, 2010, all of the Company’s long-term debt is secured by a first mortgage lien on substantially all of the real and tangible personal property of the Company located in Kentucky.

Long-term debt maturities for KU are shown in the following table:

2011	$	—
2012	—
2013	—
2014	—
2015	250
Thereafter	1,601
	$	1,851

KU was in compliance with all debt covenants at December 31, 2010.

See Note 1, Summary of Significant Accounting Policies, for certain debt refinancing and associated transactions completed by KU in connection with the PPL acquisition, Note 2, Acquisition by PPL, for the adjustment made to the pollution control bonds to reflect fair value and Note 15, Related Party Transactions, for long-term debt payable to affiliates.

Note 12 - Notes Payable and Other Short-Term Obligations

Intercompany Revolving Line of Credit

KU participates in an intercompany money pool agreement wherein LKE and/or LG&E make funds available to KU at market-based rates (based on highly rated commercial paper issues) of up to $400 million. Details of the balances are as follows:

	Total Money		Amount		Balance		Average
	Pool Available		Outstanding		Available		Interest Rate
December 31, 2010, Successor	$	400	$	10	$	390	0.25	%
December 31, 2009, Predecessor	400		45		355		0.20	%

LKE maintains revolving credit facilities totaling $300 million at December 31, 2010 and $313 million at December 31, 2009, to ensure funding availability for the money pool. At December 31, 2010, the LKE facility is with PPL Investment Corp. LKE pays PPL Investment Corp. an annual commitment fee based on the Utilities’ current bond ratings on the unused portion of the commitment. At December 31, 2009, one facility, totaling $150 million, was with E.ON North America, Inc., while the remaining line, totaling $163 million, was with Fidelia, both affiliated companies of E.ON. The balances are as follows:

	Total		Amount		Balance		Average
	Available		Outstanding		Available		Interest Rate
December 31, 2010, Successor	$	300	$	—	$	300	N/A
December 31, 2009, Predecessor	313		276		37		1.25	%

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Bank Revolving Line of Credit

As of December 31, 2010, the Company maintained a $400 million revolving line of credit with a group of banks maturing in December 2014. The revolving line of credit allows KU to issue letters of credit or borrow funds up to $400 million. Outstanding letters of credit reduce the facility’s available borrowing capacity. The Company pays the banks an annual commitment fee based on current bond ratings on the unused portion of the commitment. At December 31, 2010, there was no amount borrowed under this facility although letters of credit totaling $198 million have been issued under this facility. This credit agreement contains financial covenants requiring the borrower’s debt to total capitalization ratio to not exceed 70%, as calculated pursuant to the credit agreement, and other customary covenants.

As of December 31, 2009, the Company maintained a $35 million bilateral line of credit with an unaffiliated financial institution maturing in June 2012. The Company paid the banks an annual commitment fee on the unused portion of the commitment. At December 31, 2009, there was no balance outstanding under this facility. This facility was terminated on November 1, 2010, in conjunction with the PPL acquisition.

On December 1, 2010, KU replaced the letters of credit issued under prior letter of credit facilities with letters of credit of the same amount issued under the revolving line of credit. The four letter of credit facilities were subsequently terminated.

KU was in compliance with all line of credit covenants at December 31, 2010.

See Note 1, Summary of Significant Accounting Policies, for certain debt refinancing and associated transactions completed by KU in connection with the PPL acquisition and Note 15, Related Party Transactions, for long-term debt payable to affiliates.

Note 13 - Commitments and Contingencies

Operating Leases

KU leases office space, office equipment, plant equipment, real estate, railcars, telecommunications and vehicles and accounts for these leases as operating leases. In addition, KU reimburses LG&E for a portion of the lease expense paid by LG&E for KU’s usage of office space leased by LG&E. Total lease expense was $10 million, $10 million and $9 million for 2010, 2009 and 2008, respectively. The future minimum annual lease payments for operating leases for years subsequent to December 31, 2010, are shown in the following table:

2011	$	8
2012	7
2013	5
2014	5
2015	3
Thereafter	1
	$	29

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Owensboro Contract Litigation and Termination

In May 2004, the City of Owensboro, Kentucky and OMU commenced a suit against KU concerning a long-term power supply contract (the “OMU Agreement”) with KU. In May 2009, KU and OMU executed a settlement agreement resolving the matter on a basis consistent with prior court rulings and KU has received the agreed settlement amounts. Pursuant to the settlement’s operation, the OMU Agreement terminated in May 2010.

Sale and Leaseback Transaction

The Company is a participant in a sale and leaseback transaction involving its 62% interest in two jointly owned CTs at KU’s E.W. Brown generating station (Units 6 and 7). Commencing in December 1999, KU and LG&E entered into a tax-efficient, 18-year lease of the CTs. The Utilities have provided funds to fully defease the lease and have executed an irrevocable notice to exercise an early purchase option contained in the lease after 15.5 years. The financial statement treatment of this transaction is no different than if the Utilities had retained its ownership interest. The leasing transaction was entered into following receipt of required state and federal regulatory approvals. At December 31, 2010, the Balance Sheets included these assets at a value of $65 million, which is reflected in “Regulated utility plant — electric.”

In case of default under the lease, the Company is obligated to pay to the lessor its share of certain fees or amounts. Primary events of default include loss or destruction of the CTs, failure to insure or maintain the CTs and unwinding of the transaction due to governmental actions. No events of default currently exist with respect to the lease. Upon any termination of the lease, whether by default or expiration of its term, title to the CTs reverts jointly to KU and LG&E.

At December 31, 2010, the maximum aggregate amount of default fees or amounts was $7 million, of which KU would be responsible for 62% (approximately $4 million). The Company has made arrangements with LKE, via guarantee and regulatory commitment, for LKE to pay its full portion of any default fees or amounts.

Letters of Credit

KU has provided letters of credit as of December 31, 2010 and 2009, for on-balance sheet obligations totaling $198 million to support bonds of $195 million and letters of credit for off-balance sheet obligations totaling less than $1 million to support certain obligations related to workers’ compensation.

Commodity Purchases

OVEC

KU has a contract for power purchases with OVEC, terminating in 2026, for various Mw capacities. KU holds a 2.5% investment interest in OVEC with ten other electric utilities. KU is not the primary beneficiary; therefore, the investment is not consolidated into the Company’s financial statements, but is recorded on the cost basis. OVEC is located in Piketon, Ohio, and owns and operates two coal-fired power plants, Kyger Creek Station in Ohio, and Clifty Creek Station in Indiana. KU is contractually entitled to 2.5% of OVEC’s output, approximately 60 Mw of nameplate generation capacity. Pursuant to

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the OVEC power purchase contract, the Company may be conditionally responsible for a 2.5% pro-rata share of certain obligations of OVEC under defined circumstances. These contingent liabilities may include unpaid OVEC indebtedness as well as shortfall amounts in certain excess decommissioning costs and postretirement benefits other than pension. KU’s contingent potential proportionate share of OVEC’s December 31, 2010 outstanding debt was $35 million. Future obligations for power purchases from OVEC are demand payments, comprised of annual minimum debt service payments, as well as contractually required reimbursement of plant operating, maintenance and other expenses, and are shown in the following table:

2011	$	9
2012	10
2013	10
2014	10
2015	10
Thereafter	114
	$	163

Coal and Natural Gas Transportation Purchase Obligations

KU has contracts to purchase coal and natural gas transportation. Future obligations are shown in the following table:

2011	$	439
2012	200
2013	144
2014	93
2015	91
Thereafter	14
	$	981

Construction Program

KU had approximately $116 million of commitments in connection with its construction program at December 31, 2010.

In June 2006, KU entered into a construction contract regarding the TC2 project. The contract is generally in the form of a turnkey agreement for the design, engineering, procurement, construction, commissioning, testing and delivery of the project, according to designated specifications, terms and conditions. The contract price and its components are subject to a number of potential adjustments which may serve to increase or decrease the ultimate construction price. During 2009 and 2010, KU received several contractual notices from the TC2 construction contractor asserting historical force majeure and excusable event claims for a number of adjustments to the contract price, construction schedule, commercial operations date, liquidated damages or other relevant provisions. In September 2010, KU and the construction contractor agreed to a settlement to resolve the force majeure and excusable event claims occurring through July 2010, under the TC2 construction contract, which settlement provided for a limited, negotiated extension of the contractual commercial operations date and/or relief from liquidated damage calculations. With limited exceptions the Company took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand

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since that date. KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages. KU cannot currently estimate the ultimate outcome of these matters.

TC2 Air Permit

The Sierra Club and other environmental groups filed a petition challenging the air permit issued for the TC2 baseload generating unit which was issued by the KDAQ in November 2005. In September 2007, the Secretary of the Kentucky Environmental and Public Protection Cabinet issued a final Order upholding the permit. The environmental groups petitioned the EPA to object to the state permit and subsequent permit revisions. In determinations made in September 2008 and June 2009, the EPA rejected most of the environmental groups’ claims but identified three permit deficiencies which the KDAQ addressed by revising the permit. In August 2009, the EPA issued an Order denying the remaining claims with the exception of two additional deficiencies which the KDAQ was directed to address. The EPA determined that the proposed permit subsequently issued by the KDAQ satisfied the conditions of the EPA Order although the agency recommended certain enhancements to the administrative record. In January 2010, the KDAQ issued a final permit revision incorporating the proposed changes to address the two EPA objections. In March 2010, the Sierra Club submitted a petition to the EPA to object to the permit revision, which is now pending before the EPA. The Company believes that the final permit as revised should not have a material adverse effect on its financial condition or results of operations. However, until the EPA issues a final ruling on the pending petition and all applicable appeals have been exhausted, the Company cannot predict the final outcome of this matter.

Environmental Matters

The Company’s operations are subject to a number of environmental laws and regulations in each of the jurisdictions in which it operates governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. As indicated below and summarized at the conclusion of this section, evolving environmental regulations will likely increase the level of capital and operating and maintenance expenditures incurred by the Company during the next several years. Based upon prior regulatory precedent, the Company believes that many costs of complying with such pending or future requirements would likely be recoverable under the ECR or other potential cost-recovery mechanisms, but the Company can provide no assurance as to the ultimate outcome of such proceedings before the regulatory authorities.

Ambient Air Quality

The Clean Air Act requires the EPA to periodically review the available scientific data for six criteria pollutants and establish concentration levels in the ambient air sufficient to protect the public health and welfare with an extra margin for safety. These concentration levels are known as NAAQS. Each state must identify “nonattainment areas” within its boundaries that fail to comply with the NAAQS and develop a SIP to bring such nonattainment areas into compliance. If a state fails to develop an adequate plan, the EPA must develop and implement a plan. As the EPA increases the stringency of the NAAQS

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through its periodic reviews, the attainment status of various areas may change, thereby triggering additional emission reduction obligations under revised SIPs aimed to achieve attainment.

In 1997, the EPA established new NAAQS for ozone and fine particulates that required additional reductions in SO2 and NOx emissions from power plants. In 1998, the EPA issued its final “NOx SIP Call” rule requiring reductions in NOx emissions of approximately 85% from 1990 levels in order to mitigate ozone transport from the midwestern U.S. to the northeastern U.S. To implement the new federal requirements, Kentucky amended its SIP in 2002 to require electric generating units to reduce their NOx emissions to 0.15 pounds weight per MMBtu on a company-wide basis. In 2005, the EPA issued the CAIR which required additional SO2 emission reductions of 70% and NOx emission reductions of 65% from 2003 levels. The CAIR provided for a two-phase cap and trade program, with initial reductions of NOx and SO2 emissions due by 2009 and 2010, respectively, and final reductions due by 2015. In 2006, Kentucky proposed to amend its SIP to adopt state requirements similar to those under the federal CAIR.

In July 2008, a federal appeals court issued a ruling finding deficiencies in the CAIR and vacating it. In December 2008, the Court amended its previous Order, directing the EPA to promulgate a new regulation but leaving the CAIR in place in the interim. The remand of the CAIR results in some uncertainty with respect to certain other EPA or state programs and proceedings and the Utilities’ compliance plans relating thereto due to the interconnection of the CAIR with such associated programs.

In January 2010, the EPA proposed a revised NAAQS for ozone which would increase the stringency of the standard. In addition, the EPA published final revised NAAQS standards for NO2 and SO2 in February 2010 and June 2010, respectively, which are more stringent than previous standards. Depending on the level of action determined necessary to bring local nonattainment areas into compliance with the revised NAAQS standards, KU’s power plants are potentially subject to requirements for additional reductions in SO2 and NOx emissions.

In July 2010, the EPA issued the proposed CATR, which serves to replace the CAIR. The CATR provides for a two-phase SO2 reduction program with Phase I reductions due by 2012 and Phase II reductions due by 2014. The CATR provides for NOx reductions in 2012, but the EPA advised that it is studying whether additional NOx reductions should be required for 2014. The CATR is more stringent than the CAIR as it accelerates certain compliance dates and provides for only intrastate and limited interstate trading of emission allowances. In addition to its preferred approach, the EPA is seeking comment on an alternative approach which would provide for individual emission limits at each power plant. The EPA has announced that it will propose additional “transport” rules to address compliance with revised NAAQS standards for ozone and particulate matter which will be issued by the EPA in the future, as discussed below.

Hazardous Air Pollutants

As provided in the Clean Air Act, the EPA investigated hazardous air pollutant emissions from electric utilities and submitted a report to Congress identifying mercury emissions from coal-fired power plants as warranting further study. In 2005, the EPA issued the CAMR establishing mercury standards for new power plants and requiring all states to issue new SIPs including mercury requirements for existing power plants. The EPA issued a model rule which provides for a two-phase cap and trade program with initial reductions due by 2010 and final reductions due by 2018. The CAMR provided for reductions of

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70% from 2003 levels. The EPA closely integrated the CAMR and CAIR programs to ensure that the 2010 mercury reduction targets would be achieved as a “co-benefit” of the controls installed for purposes of compliance with the CAIR.

In February 2008, a federal appellate court issued a decision vacating the CAMR. The EPA has entered into a consent decree requiring it to promulgate a utility Maximum Achievable Control Technology rule to replace the CAMR with a proposed rule due by March 2011 and a final rule by November 2011. Depending on the final outcome of the rulemaking, the CAMR could be replaced by new rules with different or more stringent requirements for reduction of mercury and other hazardous air pollutants. Kentucky has also repealed its corresponding state mercury regulations.

Acid Rain Program

The Clean Air Act imposed a two-phased cap and trade program to reduce SO2 emissions from power plants that were thought to contribute to “acid rain” conditions in the northeastern U.S. The Clean Air Act also contains requirements for power plants to reduce NOx emissions through the use of available combustion controls.

Regional Haze

The Clean Air Act also includes visibility goals for certain federally designated areas, including national parks, and requires states to submit SIPs that will demonstrate reasonable progress toward preventing future impairment and remedying any existing impairment of visibility in those areas. In 2005, the EPA issued its Clean Air Visibility Rule detailing how the Clean Air Act’s BART requirements will be applied to facilities, including power plants built between 1962 and 1974 that emit certain levels of visibility impairing pollutants. Under the final rule, as the CAIR provided for more visibility improvement than BART, states are allowed to substitute CAIR requirements in their regional haze SIPs in lieu of controls that would otherwise be required by BART. The final rule has been challenged in the courts. Additionally, because the regional haze SIPs incorporate certain CAIR requirements, the remand of the CAIR could potentially impact regional haze SIPs. See “Ambient Air Quality” above for a discussion of CAIR-related uncertainties.

Installation of Pollution Controls

Many of the programs under the Clean Air Act utilize cap and trade mechanisms that require a company to hold sufficient emissions allowances to cover its authorized emissions on a company-wide basis and do not require installation of pollution controls on every generating unit. Under cap and trade programs, companies are free to focus their pollution control efforts on plants where such controls are particularly efficient and utilize the resulting emission allowances for smaller plants where such controls are not cost effective. KU met its Phase I SO2 requirements primarily through installation of FGD equipment on Ghent Unit 1. KU’s strategy for its Phase II SO2 requirements, which commenced in 2000, includes the installation of additional FGD equipment, as well as using accumulated emission allowances and fuel switching to defer certain additional capital expenditures and continue to evaluate improvements to further reduce SO2 emissions. KU believes its costs in reducing SO2, NOx and mercury emissions to be comparable to those of similarly situated utilities with like generation assets. KU’s compliance plans are subject to many factors including developments in the emission allowance and fuels markets, future legislative and regulatory enactments, legal proceedings and advances in clean air technology. KU will

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continue to monitor these developments to ensure that its environmental obligations are met in the most efficient and cost-effective manner. KU expects to incur additional capital expenditures currently approved in its ECR plans totaling approximately $500 million during the 2011 through 2013 time period to achieve emissions reductions and manage coal combustion residuals. Monthly recovery is subject to periodic review by the Kentucky Commission.

GHG Developments

In 2005, the Kyoto Protocol for reducing GHG emissions took effect, obligating 37 industrialized countries to undertake substantial reductions in GHG emissions. The U.S. has not ratified the Kyoto Protocol and there are currently no mandatory GHG emission reduction requirements at the federal level. As discussed below, legislation mandating GHG reductions has been introduced in the Congress, but no federal legislation has been enacted to date. In the absence of a program at the federal level, various states have adopted their own GHG emission reduction programs, including 11 northeastern U.S. states and the District of Columbia under the Regional GHG Initiative program and California. Substantial efforts to pass federal GHG legislation are on-going. The current administration has announced its support for the adoption of mandatory GHG reduction requirements at the federal level. The United States and other countries met in Copenhagen, Denmark, in December 2009, in an effort to negotiate a GHG reduction treaty to succeed the Kyoto Protocol, which is set to expire in 2013. In Copenhagen, the U.S. made a nonbinding commitment to, among other things, seek to reduce GHG emissions to 17% below 2005 levels by 2020 and provide financial support to developing countries. The United States and other nations met in Cancun, Mexico, in December 2010 to continue negotiations toward a binding agreement.

GHG Legislation

KU is monitoring on-going efforts to enact GHG reduction requirements and requirements governing carbon sequestration at the state and federal level and is assessing potential impacts of such programs and strategies to mitigate those impacts. In June 2009, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009, which was a comprehensive energy bill containing the first-ever nation-wide GHG cap and trade program. The bill provided for reductions in GHG emissions of 3% below 2005 levels by 2012, 17% by 2020 and 83% by 2050. In order to cushion potential rate impacts for utility customers, approximately 43% of emissions allowances would have initially been allocated at no cost to the electric utility sector, with this allocation gradually declining to 7% in 2029 and zero thereafter. The bill would have also established a renewable electricity standard requiring utilities to meet 20% of their electricity demand through renewable energy and energy efficiency by 2020. The bill contained additional provisions regarding carbon capture and sequestration, clean transportation, smart grid advancement, nuclear and advanced technologies and energy efficiency.

In September 2009, the Clean Energy Jobs and American Power Act, which was largely patterned on the House legislation, was introduced in the U.S. Senate. The Senate bill raised the emissions reduction target for 2020 to 20% below 2005 levels and did not include a renewable electricity standard. While the initial bill lacked detailed provisions for the allocation of emissions allowances, a subsequent revision incorporated allowance allocation provisions similar to the House bill. Although Senators Kerry and Lieberman and others worked to reach a consensus on GHG legislation, no bill passed the Senate in 2010. The Company is closely monitoring the progress of pending energy legislation, but the prospect for passage of comprehensive GHG legislation in 2011 is uncertain.

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GHG Regulations

In April 2007, the U.S. Supreme Court ruled that the EPA has the authority to regulate GHG under the Clean Air Act. In April 2009, the EPA issued a proposed endangerment finding concluding that GHGs endanger public health and welfare, which is an initial rulemaking step under the Clean Air Act. A final endangerment finding was issued in December 2009. In September 2009, the EPA issued a final GHG reporting rule requiring reporting by facilities with annual GHG emissions equivalent to at least 25,000 tons of carbon dioxide. A number of the Company’s facilities are required to submit annual reports commencing with calendar year 2010. In May 2010, the EPA issued a final GHG “tailoring” rule, effective January 2011, requiring new or modified sources with GHG emissions equivalent to at least 75,000 tons of carbon dioxide to obtain permits under the Prevention of Significant Deterioration Program. Such new or modified facilities would be required to install Best Available Control Technology. While the Company is unaware of any currently available GHG control technology that might be required for installation on new or modified power plants, it is currently assessing the potential impact of the rule. The final rule will apply to new and modified power plants beginning in January 2011. The Company is unable to predict whether mandatory GHG reduction requirements will ultimately be enacted through legislation or regulations. In December 2010, the EPA announced that it plans to promulgate GHG New Source Performance Standards for power plants, including both new and existing facilities. A proposed rule is expected by July 2011, while a final rule is expected by May 2012. In the absence of either a proposed or final regulation, KU is unable to assess the potential impact of any future regulation.

GHG Litigation

A number of lawsuits have been filed asserting common law claims including nuisance, trespass and negligence against various companies with GHG emitting facilities. In October 2009, a three judge panel of the United States Court of Appeals for the 5th Circuit in the case of Comer v. Murphy Oil reversed a lower court, holding that private plaintiffs have standing to assert certain common law claims against more than 30 utility, oil, coal and chemical companies. In March 2010, the court vacated the opinion of the three-judge panel and granted a motion for rehearing but subsequently denied the appeal due to the lack of a quorum. The appellate ruling leaves in effect the lower court ruling dismissing the plaintiffs’ claims. In January 2011, the Supreme Court denied petitioner’s petition for review, which effectively brings the case to an end. The Comer complaint alleged that GHG emissions from the defendants’ facilities contributed to global warming which increased the intensity of Hurricane Katrina. E.ON, the former indirect parent of the Utilities, was named as a defendant in the complaint but was not a party to the proceedings due to the failure of the plaintiffs to pursue service under the applicable international procedures. KU continues to monitor relevant GHG litigation to identify judicial developments that may be potentially relevant to operations.

Ghent Opacity NOV

In September 2007, the EPA issued an NOV alleging that KU had violated certain provisions of the Clean Air Act’s operating rules relating to opacity during June and July of 2007 at Units 1 and 3 of KU’s Ghent generating station. The parties have met on this matter and KU has received no further communications from the EPA. The Company is not able to estimate the outcome or potential effects of these matters, including whether substantial fines, penalties or remedial measures may result.

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Ghent New Source Review NOV

In March 2009, the EPA issued an NOV alleging that KU violated certain provisions of the Clean Air Act’s rules governing new source review and prevention of significant deterioration by installing FGD and SCR controls at its Ghent generating station without assessing potential increased sulfuric acid mist emissions. KU contends that the work in question, as pollution control projects, was exempt from the requirements cited by the EPA. In December 2009, the EPA issued a Section 114 information request seeking additional information on this matter. In March 2010, the Company received an EPA settlement proposal providing for imposition of additional permit limits and emission controls and anticipates continued settlement negotiations with the EPA. Negotiations between the EPA and KU are ongoing. Depending on the provisions of a final settlement or the results of litigation, if any, resolution of this matter could involve significant increased operating and capital expenditures. The Company is currently unable to determine the final outcome of this matter or the impact of an unfavorable determination on the Company’s financial position or results of operations.

Ash Ponds and Coal-Combustion Byproducts

The EPA has undertaken various initiatives in response to the December 2008 impoundment failure at the TVA’s Kingston power plant, which resulted in a major release of coal combustion byproducts into the environment. The EPA issued information requests to utilities throughout the country, including KU, to obtain information on their ash ponds and other impoundments. In addition, the EPA inspected a large number of impoundments located at power plants to determine their structural integrity. The inspections included several of KU’s impoundments, which the EPA found to be in satisfactory condition. In June 2010, the EPA published proposed regulations for coal combustion byproducts handled in landfills and ash ponds. The EPA has proposed two alternatives: (1) regulation of coal combustion byproducts in landfills and ash ponds as a hazardous waste or (2) regulation of coal combustion byproducts as a solid waste with minimum national standards. Under both alternatives, the EPA has proposed safety requirements to address the structural integrity of ash ponds. In addition, the EPA will consider potential refinements of the provisions for beneficial reuse of coal combustion byproducts.

Water Discharges and PCB Regulations

The EPA has also announced plans to develop revised effluent limitation guidelines governing discharges from power plants and standards for cooling water intake structures. The EPA has further announced plans to develop revised standards governing the use of polychlorinated biphenyls (“PCB”) in electrical equipment. The Company is monitoring these ongoing regulatory developments but will be unable to determine the impact until such time as new rules are finalized.

Impact of Pending and Future Environmental Developments

As a company with significant coal-fired generating assets, KU will likely be substantially impacted by pending or future environmental rules or legislation requiring mandatory reductions in GHG emissions or other air emissions, imposing more stringent standards on discharges to waterways, or establishing additional requirements for handling or disposal of coal combustion byproducts. These evolving environmental regulations will likely require an increased level of capital expenditures and increased incremental operating and maintenance costs by the Company over the next several years. Due to the uncertain nature of the final regulations that will ultimately be adopted by the EPA, including the

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reduction targets and the deadlines that will be applicable, the Company cannot finalize estimates of the potential compliance costs, but should the final rules incorporate additional emission reduction requirements, require more stringent emissions controls or implement more stringent byproducts storage and disposal practices, such costs will likely be significant. With respect to NAAQS, CATR, CAMR replacement and coal combustion byproducts developments, based upon a preliminary analysis of proposed regulations, the Company may be required to consider actions such as upgrading existing emissions controls, installing additional emissions controls, upgrading byproducts disposal and storage and possible early replacement of coal-fired units. Capital expenditures for KU associated with such actions are preliminarily estimated to be in the $1.5 to $1.7 billion range over the next ten years, although final costs may substantially vary. With respect to potential developments in water discharge, revised PCB standards or GHG initiatives, costs in such areas cannot be estimated due to the preliminary status or uncertain outcome of such developments, but would be in addition to the above amount and could be substantial. Ultimately, the precise impact on the Company’s operations of these various environmental developments cannot be determined prior to the finalization of such requirements. Based upon prior regulatory precedent, the Company believes that many costs of complying with such pending or future requirements would likely be recoverable under the ECR or other potential cost-recovery mechanisms, but the Company can provide no assurance as to the ultimate outcome of such proceedings before the regulatory authorities.

TC2 Water Permit

In May 2010, the Kentucky Waterways Alliance and other environmental groups filed a petition with the Kentucky Energy and Environment Cabinet challenging the Kentucky Pollutant Discharge Elimination System permit issued in April 2010, which covers water discharges from the Trimble County generating station. In October 2010, the hearing officer issued a report and recommended Order providing for dismissal of the claims raised by the petitioners. In December 2010, the Secretary issued a final Order dismissing all claims and upholding the permit which petitioners subsequently appealed to Trimble County Circuit Court.

General Environmental Proceedings

From time to time, KU appears before the EPA, various state or local regulatory agencies and state and federal courts regarding matters involving compliance with applicable environmental laws and regulations. Such matters include a prior Section 114 information request from the EPA relating to new-source review issues at KU’s Ghent unit 2; completed settlement with state regulators regarding compliance with particulate limits in the air permit for KU’s Tyrone generating station; remediation obligations or activities for or other risks relating to elevated PCB levels at existing properties; liability under the Comprehensive Environmental Response, Compensation and Liability Act for cleanup at various off-site waste sites; and on-going claims regarding the GHG emissions from the Company’s generating stations. Based on analysis to date, the resolution of these matters is not expected to have a material impact on the Company’s operations.

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Note 14 - Jointly Owned Electric Utility Plant

TC2 is a jointly owned unit at the Trimble County site. KU and LG&E own undivided 60.75% and 14.25% interests, respectively. Of the remaining 25%, IMEA owns a 12.12% undivided interest and IMPA owns a 12.88% undivided interest. Each company is responsible for its proportionate share of capital cost during construction and fuel, operation and maintenance cost when TC2 is in-service. With limited exceptions the Company took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand since that date. KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages. In December 2009 and June 2008, LG&E sold assets to KU related to the construction of TC2 with a net book value of $48 million and $10 million, respectively.

The following data represent shares of the jointly owned property (capacity based on nameplate rating):

	TC2
	KU		LG&E		IMPA		IMEA		Total
Ownership interest	60.75	%	14.25	%	12.88	%	12.12	%	100	%
Mw capacity	509		119		108		102		838

KU’s 60.75% ownership:
Plant held for future use	$	62
Construction work in progress	703
Accumulated depreciation	(1		)
Net book value	$	764

LG&E’s 14.25% ownership:
Plant held for future use	$	2
Construction work in progress	187
Accumulated depreciation	—
Net book value	$	189

KU and LG&E jointly own the following CTs and related equipment (capacity based on net summer capability) as of December 31, 2010:

	KU								LG&E								Total
Ownership Percentage	Mw Capacity	Cost		Depr.			Net Book Value		Mw Capacity	Cost		Depr.			Net Book Value		Mw Capacity	Cost		Depr.			Net Book Value
KU 47%, LG&E 53%(a)	129	$	43	$	—		$	43	146	$	48	$	—		$	48	275	$	91	$	—		$	91
KU 62%, LG&E 38%(b)	190	64		(2		)	62		118	40		(2		)	38		308	104		(4		)	100
KU 71%, LG&E 29%(c)	228	63		(1		)	62		92	26		—			26		320	89		(1		)	88
KU 63%, LG&E 37%(d)	404	109		(1		)	108		236	64		(1		)	63		640	173		(2		)	171
KU 71%, LG&E 29%(e)	n/a	4		—			4		n/a	2		—			2		n/a	6		—			6

(a)Comprised of Paddy’s Run 13 and E.W. Brown 5. In addition to the above jointly owned utility plant, there is an inlet air cooling system attributable to unit 5 and units 8-11 at the E.W. Brown facility. This inlet air cooling system is not jointly owned, however, it is used to increase production on the units to which it relates, resulting in an additional 88 Mw of capacity for KU.

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(b)Comprised of units 6 and 7 at the E.W. Brown facility.

(c)Comprised of units 5 and 6 at the Trimble County facility.

(d)Comprised of CT Substation 7-10 and units 7, 8, 9 and 10 at the Trimble County facility.

(e)Comprised of CT Substation 5 and 6 and CT Pipeline at the Trimble County facility.

Both KU’s and LG&E’s participating share of direct expenses of the jointly owned plants is included in the corresponding operating expenses on each company’s respective Statements of Income (i.e., fuel, maintenance of plant, other operating expense).

Note 15 - Related Party Transactions

KU and subsidiaries of LKE and PPL engage in related party transactions. Transactions between KU and LKE subsidiaries are eliminated on consolidation of LKE. Transactions between KU and PPL subsidiaries are eliminated on consolidation of PPL. These transactions are generally performed at cost and are in accordance with FERC regulations under PUHCA 2005 and the applicable Kentucky Commission and Virginia Commission regulations.

Intercompany Wholesale Sales and Purchases

KU and LG&E jointly dispatch their generation units with the lowest cost generation used to serve their retail native load. When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of KU, KU purchases electricity from LG&E. When KU has excess generation capacity after serving its own retail native load and its generation cost is lower than that of LG&E, LG&E purchases electricity from KU. These transactions are recorded as intercompany wholesale sales and purchases are recorded by each company at a price equal to the seller’s fuel cost. Savings realized from purchasing electricity intercompany instead of generating from their own higher costs units or purchasing from the market are shared equally between the Utilities. The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

These sales and purchases are included in the Statements of Income as “Operating revenues”, “Power purchased” expenses and “Other operation and maintenance expenses”. KU’s intercompany electric revenues and power purchased expenses were as follows:

	Successor		Predecessor
	November 1, 2010 through		January 1, 2010 through		Year Ended December 31,
	December 31, 2010		October 31, 2010		2009		2008
Electric operating revenues from LG&E	$	2	$	13	$	21	$	80
Power purchased and related operations and maintenance expenses from LG&E	21		79		101		109

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Interest Charges

See Note 11, Long-Term Debt, and Note 12, Notes Payable and Other Short-Term Obligations, for details of intercompany borrowing arrangements. Intercompany agreements do not require interest payments for receivables related to services provided when settled within 30 days.

KU’s interest expense to affiliated companies was as follows:

	Successor		Predecessor
	November 1, 2010 through		January 1, 2010 through		Year Ended December 31,
	December 31, 2010		October 31, 2010		2009		2008
Interest on money pool loans	$	—	$	—	$	—	$	2
Interest on PPL loans	2		—		—		—
Interest on Fidelia loans	—		62		69		56

Interest paid to LKE on the money pool arrangement was less than $1 million for 2010 and 2009.

Dividends

In September 2010, the Company paid dividends of $50 million to its sole shareholder, LKE.

Capital Contributions

The Company received no capital contributions in 2010, but received capital contributions of $75 million and $145 million from its sole shareholder, LKE, in 2009 and 2008, respectively.

Sale of Assets

In 2010, KU sold and bought assets of less than $1 million to and from LG&E. In December 2009, LG&E sold assets to KU related to the construction of TC2 with a net book value of $48 million.

Other Intercompany Billings

Servco provides the Company with a variety of centralized administrative, management and support services. Associated charges include payroll taxes paid by Servco on behalf of KU, labor and burdens of Servco employees performing services for KU, coal purchases and other vouchers paid by Servco on behalf of KU. The cost of these services is directly charged to the Company, or for general costs which cannot be directly attributed, charged based on predetermined allocation factors, including the following ratios: number of customers, total assets, revenues, number of employees and/or other statistical information. These costs are charged on an actual cost basis.

In addition, the Utilities provide services to each other and to Servco. Billings between the Utilities relate to labor and overheads associated with union and hourly employees performing work for the other utility, charges related to jointly-owned generating units and other miscellaneous charges. Billings from KU to Servco include cash received by Servco on behalf of KU, tax settlements and other payments

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made by the Company on behalf of other non-regulated businesses which are reimbursed through Servco.

Intercompany billings to and from KU were as follows:

	Successor		Predecessor
	November 1, 2010 through		January 1, 2010 through		Year Ended December 31,
	December 31, 2010		October 31, 2010		2009		2008
Servco billings to KU	$	46	$	233	$	169	$	227
LG&E billings to KU	14		49		44		5
KU billings to Servco	12		11		14		3
KU billings to LG&E	—		—		78		75

Intercompany Balances

The Company had the following balances with its affiliates:

	Successor		Predecessor
	December 31, 2010		December 31, 2009
Accounts receivable from LKE	$	12	$	9
Accounts payable to LG&E	22		53
Accounts payable to Servco	23		20
Accounts payable to Fidelia	—		15
Notes payable to LKE	10		45
Long-term debt to Fidelia	—		1,331

Note 16 - Selected Quarterly Data (Unaudited)

	For the 2010 Periods Ended (a)
	Predecessor								Successor
	March 31		June 30		September 30		October 31		December 31
Operating revenues	$	380	$	350	$	416	$	102	$	263
Operating income	87		71		105		22		65
Net income	44		31		54		11		35

(a)Periods ended March 31, June 30 and September 30 represent three months then ended. Period ended October 31 represents one month then ended and period ended December 31 represents two months then ended.

F-83

	For the 2009 Quarters Ended
	Predecessor
	March 31		June 30		September 30		December 31
Operating revenues	$	363	$	305	$	341	$	346
Operating income	19		53		125		72
Net income	7		26		66		34

Note 17 - Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of the following:

	Pre-Tax
	Accumulated
	Derivative			Income
	Gain (Loss)			Taxes			Net
Balance at December 31, 2009, Predecessor	$	—		$	—		$	—
Equity investee’s other comprehensive income (loss)	(3		)	1			(2		)
Balance at October 31, 2010, Predecessor	(3		)	1			(2		)
Effect of PPL acquisition	3			(1		)	2
Balance at December 31, 2010, Successor	$	—		$	—		$	—

Note 18 - Subsequent Events

Subsequent events have been evaluated through February 25, 2011, the date of issuance of these statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation.

On January 31, 2011, KU filed a notice of intent to file a rate case with the Virginia Commission for the test year ended December 31, 2010. The case is expected to be filed on or after April 1, 2011.

With limited exceptions the Company took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand since that date. LG&E and KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages.

On January 14, 2011, KU contributed $43 million to its pension plan.

F-84

KENTUCKY UTILITIES COMPANY

Offers to Exchange

$250,000,000 aggregate principal amount of its 1.625% First Mortgage Bonds due 2015,
$500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and
$750,000,000 aggregate principal amount of its 5.125% First Mortgage Bonds due 2040,
each of which have been registered under the Securities Act of 1933, as amended,

for any and all of its outstanding

1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020
and 5.125% First Mortgage Bonds due 2040, respectively

PROSPECTUS

     , 2011

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.Indemnification of Directors and Officers.

Kentucky Utilities Company is a corporation incorporated under the Kentucky Business Corporation Act, or the KBCA, and the Virginia Stock Corporation Act, or VSCA.  Our Amended and Restated Articles of Incorporation and By-laws provide, in general, for mandatory indemnification of directors and officers by the registrant to the fullest extent permitted by law.

Kentucky Business Corporation Act

Sections 271B.8-500 to 271B.8-580 of the KBCA provide that a corporation may indemnify an individual made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, because he is or was a director of a corporation or an individual who, while a director, officer, employee or agent of a corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability incurred in the proceeding if he conducted himself in good faith and he reasonably believed (a) in the case of conduct in his official capacity with the corporation that his conduct was in its best interests and (b) in all other cases, that his conduct was at least not opposed to its best interests. In the case of any criminal proceeding, he must have had no reasonable cause to believe his conduct was unlawful.  A corporation may not indemnify such individual (i) in connection with a proceeding by or in the right of the corporation in which such individual was adjudged liable to the corporation or (ii) in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him. Indemnification permitted in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

Section 271B.8-520 of the KBCA provides that, unless a corporation’s articles of incorporation provide otherwise, a corporation shall indemnify an individual who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which such individual was a party because he is or was a director or officer of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against reasonable expenses incurred by him in connection with the proceeding.

Under Section 271B.2-020(2)(d) of the KBCA, a corporation’s articles of organization may limit the personal liability of a director to the corporation or its shareholders for monetary damages for breach of his duties as a director, provided that such provision shall not eliminate or limit the liability of a director (1) for any transaction in which the director’s personal financial interest is in conflict with the financial interests of the corporation or its shareholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or are known to the director to be a violation of law, (3) for any vote for or assent to an unlawful distribution to shareholders as prohibited under Section 271B.8-330 or (4) for any transaction from which the director derived an improper personal benefit.

Virginia Stock Corporation Act

The Virginia Stock Corporation Act empowers a corporation to indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if: (1) he conducted himself in good faith; (2) he reasonably believed (i) in the case of conduct in his official capacity with the corporation, that his conduct was in its best interests and (ii) in all other cases, that his conduct was at least not opposed to its best interests; and (3) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.  A corporation may not indemnify a director (1) in connection with a proceeding by or in the right of the corporation except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard in the preceding sentence; or (2) in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by

II-1

him.  Unless limited by its articles of incorporation, a corporation must indemnify a director who entirely prevails in the defense of any proceeding to which he was a party because he is or was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding.  Under the VSCA, a corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of the final disposition of the proceeding if: (1) the director furnishes the corporation a written affirmation of his good faith belief that he has met the standard of conduct described in Section 13.1-697 of the VSCA; and (2) the director furnishes the corporation an undertaking, executed personally or on his behalf, to repay the advance if the director is not entitled to mandatory indemnification under Section 13.1-698 of the VSCA and it is ultimately determined that he did not meet the relevant standard of conduct.  Unless a corporation’s articles of incorporation provide otherwise, the corporation may indemnify and advance expenses to an officer of the corporation to the same extent as to a director.  A corporation may also purchase and maintain on behalf of a director or officer insurance against liabilities incurred in such capacities, whether or not the corporation would have the power to indemnify him against the same liability under the VSCA.

Insurance

Our officers and directors are covered by insurance policies purchased by us under which they are insured (subject to exceptions and limitations specified in the policies) against expenses and liabilities arising out of actions, suits or proceedings to which they are parties by reason of being or having been such directors or officers.

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Item 21.Exhibits and Financial Statement Schedules.

The following Exhibits indicated by an asterisk preceding the Exhibit number have heretofore been filed with the Commission and pursuant to Rule 12(b)-32 are incorporated herein by reference.  The balance of the Exhibits are filed herewith.  Exhibits indicated by a [  ] are management contracts or compensatory arrangements that are filed or listed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

3(a)	-	Amended and Restated Articles of Incorporation of Kentucky Utilities Company
3(b)		Articles of Amendment to Articles of Incorporation of Kentucky Utilities Company
3(c)	-	Bylaws of Kentucky Utilities Company
*4(a)-1	-	Indenture, dated as of October 1, 2010, between Kentucky Utilities Company and The Bank of New York Mellon, as Trustee (Exhibit 4(q)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(a)-2	-	Supplemental Indenture No. 1, dated as of October 15, 2010, to said Indenture (Exhibit 4(q)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(a)-3	-	Supplemental Indenture No. 2, dated as of November 1, 2010, to said Indenture(Exhibit 4(q)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
4(a)-4	-	Form of 2015 Exchange Bond
4(a)-5		Form of 2020 Exchange Bond
4(a)-6		Form of 2040 Exchange Bond
*4(b)	-	Registration Rights Agreement, dated November 16, 2010, between Kentucky Utilities Company and the Initial Purchasers (Exhibit 4(v) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(c)-1	-	2002 Series A Carroll County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(w)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(c)-2	-	Amendment No. 1 dated as of September 1, 2010 to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(w)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(d)-1	-	2002 Series B Carroll County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(x)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(d)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(x)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(e)-1	-	2002 Series C Carroll County Loan Agreement, dated July 1, 2002, by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(y)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(e)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(y)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(f)-1	-	2004 Series A Carroll County Loan Agreement, dated October 1, 2004 and amended and restated as of September 1, 2008, by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(z)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(f)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(z)-2 to PPL Corporation Form 10-K

II-3

		Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(g)-1	-	2006 Series B Carroll County Loan Agreement, dated October 1, 2006 and amended and restated September 1, 2008, by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(aa)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(g)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(aa)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(h)-1	-	2007 Series A Carroll County Loan Agreement, dated March 1, 2007, by and between Kentucky Utilities Company and County of Carroll, Kentucky (Exhibit 4(bb)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(h)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(bb)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(i)-1	-	2008 Series A Carroll County Loan Agreement, dated August 1, 2008 by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(cc)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(i)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky (Exhibit 4(cc)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(j)-1	-	2000 Series A Mercer County Loan Agreement, dated May 1, 2000 and amended and restated as of September 1, 2008, by and between Kentucky Utilities Company, and County of Mercer, Kentucky (Exhibit 4(dd)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(j)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Mercer, Kentucky (Exhibit 4(dd)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(k)-1	-	2002 Series A Mercer County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Mercer, Kentucky (Exhibit 4(ee)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(k)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Mercer, Kentucky (Exhibit 4(ee)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(l)-1	-	2002 Series A Muhlenberg County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Muhlenberg, Kentucky (Exhibit 4(ff)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(l)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Muhlenberg, Kentucky (Exhibit 4(ff)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(m)-1	-	2007 Series A Trimble County Loan Agreement, dated March 1, 2007, by and between Kentucky Utilities Company, and County of Trimble, Kentucky (Exhibit 4(gg)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
*4(m)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Trimble, Kentucky (Exhibit 4(gg)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed February 28, 2011).
5(a)	-	Opinion of John R. McCall, Esq.
5(b)	-	Opinion of Dewey & LeBoeuf LLP.

II-4

5(c)	-	Opinion of Stoll Keenon Ogden PLLC.
8(a)	-	Opinion of Dewey & LeBoeuf LLP regarding tax matters (included as part of Exhibit 5(b)).
*10(a)	-	Purchase and Sale Agreement, dated as of April 28, 2010, by and between E.ON US Investments Corp., PPL Corporation and E.ON AG (Exhibit No. 99.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated April 28, 2010, filed on April 30, 2010).
*10(b)	-	$400,000,000 Revolving Credit Agreement, dated as of November 1, 2010, among Kentucky Utilities Company, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender (Exhibit 10.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated November 1, 2010, filed on November 1, 2010).
*[  ]10(c)	-	Retention Agreement, effective as of December 1, 2010, entered into between PPL Corporation and Victor A. Staffieri (Exhibit 10(rr) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed on February 28, 2011).
*[  ]10(d)	-	Amended and Restated Employment and Severance Agreement, dated as of October 29, 2010, between E.ON U.S. LLC and Victor A. Staffieri (Exhibit 10(ss) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2010, filed on February 28, 2011).
*[  ]10(e)	-	Amended and Restated Employment and Severance Agreement, dated as of October 29, 2010, between E.ON U.S. LLC and John R. McCall (Exhibit 10(f) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(f)	-	Retention and Severance Agreement, dated as of October 28, 2010, between E.ON U.S. LLC and S. Bradford Rives (Exhibit 10(g) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(g)	-	Retention Agreement, effective December 1, 2010, between PPL Corporation and Chris Hermann (Exhibit 10(h) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(h)	-	Retention Agreement, effective December 1, 2010, between PPL Corporation and John R. McCall (Exhibit 10(i) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(i)	-	Retention Agreement, effective December 1, 2010, between PPL Corporation and S. Bradford Rives (Exhibit 10(j) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(j)	-	Retention Agreement, effective December 1, 2010, between PPL Corporation and Paul W. Thompson (Exhibit 10(k) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(k)	-	Powergen Short-Term Incentive Plan, effective January 1, 2001 (Exhibit 10(l) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(l)-1	-	LG&E Energy Corp. Long-Term Performance Unit Plan, adopted April 25, 2003, effective January 1, 2003 (Exhibit 10(m)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(l)-2	-	Form of Certificate of Award under LG&E Energy Long-Term Performance Unit Plan (Exhibit 10(m)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(m)-1	-	LG&E Energy LLC Nonqualified Savings Plan, effective January 1, 2005 (Exhibit 10(n)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(m)-2	-	First Amendment, dated as of March 16, 2007, to LG&E Energy LLC Nonqualified Savings Plan (Exhibit 10(n)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(m)-3	-	Second Amendment, dated as of December 19, 2008, to LG&E Energy LLC Nonqualified Savings Plan (Exhibit 10(n)-3 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).

II-5

*[  ]10(n)-1	-	E.ON Share Performance Plan (i) Terms and Conditions for the 1. Tranche (2006-2008) and (ii) Technical Annex, each dated as of June 2006. (Exhibit 10.1 to Louisville Gas and Electric Company Form 10-Q Report (File No. 1-02893) for the quarter ended September 30, 2006, filed on November 13, 2006).
*[  ]10(n)-2	-	Form of Certificate of Award under E.ON Share Performance Plan. (Exhibit 10.02 to Louisville Gas and Electric Company Form 10-Q Report (File No. 1-02893) for the quarter ended September 30, 2006, filed on November 13, 2006).
*[  ]10(o)-1	-	E.ON Share Performance Plan for the 5th Tranche (2010-2013), dated as of January 2010 together with Supplemental Terms and Conditions (Exhibit 10(p)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(o)-2	-	Form of Certificate of Award under E.ON Share Performance Plan for the 5th Tranche (Exhibit 10(p)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(p)-1	-	PPL Corp. Incentive Compensation Plan, amended and restated effective January 1, 2003 (Exhibit 10(q)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665), filed on April 21, 2011).
*[  ]10(p)-2	-	Amendment No. 1 to PPL Corp. Incentive Compensation Plan, effective January 1, 2005 (Exhibit 10(q)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665), filed on April 21, 2011).
*[  ]10(p)-3	-	Amendment No. 2 to PPL Corp. Incentive Compensation Plan, effective October 27, 2006 (Exhibit 10(dd)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006, filed on February 28, 2007).
*[  ]10(p)-4	-	Amendment No. 3 to PPL Corp. Incentive Compensation Plan, effective January 1, 2007 (Exhibit 10(f) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007, filed on May 3, 2007).
*[  ]10(p)-5	-	Amendment No. 4 to PPL Corp. Incentive Compensation Plan, effective December 1, 2007 (Exhibit 10(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended September 30, 2008, filed on November 4, 2008).
*[  ]10(p)-6	-	Amendment No. 5 to PPL Corp. Incentive Compensation Plan, effective January 1, 2009 (Exhibit 10(bb)-6 to PPL Corporation Form 10-K Report (File 1-11459) for the year ended December 31, 2008, filed on February 27, 2009).
*[  ]10(q)-1	-	PPL Corp. Incentive Compensation Plan for Key Employees, amended and restated effective January 1, 2003 (Exhibit 10(r)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(q)-2	-	Amendment No. 1 to PPL Corp. Incentive Compensation Plan for Key Employees, effective January 1, 2005 (Exhibit 10(r)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(q)-3	-	Amendment No. 2 to PPL Corp. Incentive Compensation Plan for Key Employees, effective October 27, 2006 (Exhibit 10(ee)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006, filed on February 28, 2007).
*[  ]10(q)-4	-	Amendment No. 3 to PPL Corp. Incentive Compensation Plan for Key Employees, effective January 1, 2007 (Exhibit 10(q) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007, filed on May 3, 2007).
*[  ]10(q)-5	-	Amendment No. 4 to PPL Corp. Incentive Compensation Plan for Key Employees, effective December 1, 2007 (Exhibit 10(cc)-5 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2008, filed on February 27, 2009).

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*[  ]10(r)-1	-	LG&E Energy Corp. Supplemental Executive Retirement Plan, dated March 16, 2007, effective January 1, 1998, as amended and restated, composite copy as of September 2, 1998 (Exhibit 10(s)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(r)-2	-	First Amendment, dated as of December 19, 2008, to LG&E Energy Corp. Supplemental Executive Retirement Plan (Exhibit 10(s)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(s)	-	Retention and Severance Agreement, dated as of October 29, 2010, between E.ON U.S. LLC and Chris Hermann (Exhibit 10(t) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(t)	-	Retention and Severance Agreement, dated as of October 29, 2010, between E.ON U.S. LLC and Paul W. Thompson (Exhibit 10(u) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(u)-1	-	Louisville Gas and Electric Company Nonqualified Savings Plan, effective January 1, 1992 (Exhibit 10(v)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
[*][  ]10(u)-2	-	Amendment No. 1 of Louisville Gas and Electric Company Nonqualified Savings Plan, dated March 4, 1992 (Exhibit 10(v)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(u)-3	-	Resolutions of the Board of Directors of Louisville Gas and Electric Company Re: Amendment of Nonqualified Savings Plan, dated December 8, 1994 1992 (Exhibit 10(v)-3 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(u)-4	-	Resolutions of the Board of Directors of LG&E Energy Corp. Re: Amendment of Nonqualified Savings Plan, dated December 6, 1995 (Exhibit 10(v)-4 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(u)-5	-	Amendment to LG&E Energy Corp. Nonqualified Savings Plan, effective October 1, 1999 (Exhibit 10(v)-5 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(u)-6	-	Amendment to LG&E Energy Corp. Nonqualified Savings Plan, effective December 1, 1999 (Exhibit 10(v)-6 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(v)-1	-	Employment and Severance Agreement, dated as of February 25, 2000, between LG&E Energy Corp., Powergen, plc and Victor A. Staffieri 2001 (Exhibit 10(w)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(v)-2	-	First Amendment to the Employment and Severance Agreement of Victor A. Staffieri, dated as of December 8, 2000. (Exhibit 10(w)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(v)-3	-	Second Amendment to the Employment and Severance Agreement of Victor A. Staffieri, effective April 30, 2001 (Exhibit 10(w)-3 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(v)-4	-	Third Amendment to the Employment and Severance Agreement of Victor A. Staffieri, dated as of July 1, 2002, among LG&E Energy Corp., Powergen, plc, E.ON AG and Victor A. Staffieri (Exhibit 10(w)-4 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(v)-5	-	Fourth Amendment to the Employment and Severance Agreement of Victor A. Staffieri, dated as of February 1, 2004, between LG&E Energy LLC, Powergen Limited, E.ON AG and Victor A. Staffieri (Exhibit 10(w)-5 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(w)-1	-	Employment and Severance Agreement, dated as of February 25, 2000, between LG&E Energy Corp., Powergen, plc and John R. McCall (Exhibit 10(x)-1 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).

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*[  ]10(w)-2	-	First Amendment to the Employment and Severance Agreement of John R. McCall, dated as of December 8, 2000 between LG&E Energy Corp., Powergen plc and John. R. McCall (Exhibit 10(x)-2 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(w)-3	-	Second Amendment to the Employment and Severance Agreement of John R. McCall, dated as of May 20, 2002, among LG&E Energy Corp., Powergen, plc, E.ON AG and John R. McCall (Exhibit 10(x)-3 to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(x)	-	Form of Retention and Severance Agreement, dated as of April 29, 2002, among LG&E Energy Corp., E.ON AG and S. Bradford Rives (dated as of April 29, 2002), Chris Hermann (dated as of May 6, 2002) and Paul W. Thompson (dated as of May 6, 2002) (Exhibit 10(y) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(y)	-	Form of Change in Control Agreement, dated as of February 6, 2001, between LG&E Energy Corp. and S. Bradford Rives, Chris Hermann and Paul W. Thompson (Exhibit 10(z) to LGE& KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011).
*[  ]10(z)	-	Description of Divestiture Incentive Awards Granted in 2008. (Exhibit 10(aa) to LGE & KU Energy LLC’s S-4 (File No. 333-173665) filed April 21, 2011)
12(a)	-	Kentucky Utilities Company Computation of Ratio of Earnings to Fixed Charges
16(a)	-	Letter from PricewaterhouseCoopers LLP regarding change in certifying accountant.
23(a)	-	Consent of PricewaterhouseCoopers LLP
23(b)	-	Consent of John R. McCall, Esq. (included as part of Exhibit 5(a))
23(c)	-	Consent of Dewey & LeBoeuf LLP (included as part of Exhibit 5(b))
23(d)	-	Consent of Stoll Keenon Ogden PLLC (included as part of Exhibit 5(c))
24(a)	-	Power of Attorney
25(a)	-	Statement of Eligibility of Trustee on Form T-1 with respect to the Indenture dated as of October 1, 2010 between Kentucky Utilities Company and The Bank of New York Mellon, as Trustee.
99(a)	-	Form of Letter of Transmittal
99(b)	-	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99(c)	-	Form of Letter to Clients
99(d)	-	Form of Notice of Guaranteed Delivery

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Item 22.Undertakings

(a)The undersigned registrant hereby undertakes:

(1)to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i.to include any prospectus required by Section 10(a)(3) of the Securities Act;

ii.to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more that a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

iii.to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(3)to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

(4)that, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; and

(5)that, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

i.any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

ii.any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

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iii.the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

iv.any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b)Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of any registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of any registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(c)The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first-class mail or other equally prompt means.  This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(d)The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, Kentucky Utilities Company has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, hereunto duly authorized, in Lexington, Kentucky, on the 21st day of April, 2011.

KENTUCKY UTILITIES COMPANY
By:	/s/ John R. McCall
Name:	John R. McCall
Title:	Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons on behalf of the registrant and in their capacities as of the 21st day of April, 2011.

Signature	Title
/s/ Victor A. Staffieri	Chairman, President, Chief Executive Officer and
Victor A. Staffieri	Director (Principal Executive Officer)
/s/ S. Bradford Rives	Chief Financial Officer and Director (Principal Financial
S. Bradford Rives	Officer and Principal Accounting Officer)
/s/ John R. McCall	Executive Vice President, General Counsel, Corporate
John R. McCall	Secretary, Chief Compliance Officer and Director
/s/ Chris Hermann
Chris Hermann	Senior Vice President—Energy Delivery and Director
/s/ Paul W. Thompson
Paul W. Thompson	Senior Vice President—Energy Services and Director
/s/ Paul A. Farr
Paul A. Farr	Director
/s/ William H. Spence
William H. Spence	Director

EX-3.(A)

Exhibit 3(a)

AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

KENTUCKY UTILITIES COMPANY

October, 1992

AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

Kentucky Utilities Company

The undersigned, KENTUCKY UTILITIES COMPANY, a Kentucky corporation and a Virginia corporation (the “corporation”), by John T. Newton, its Chairman and President, hereby certifies as follows:

1. The name of the corporation is Kentucky Utilities Company.

2. The following restatement contains no amendment requiring shareholder approval. By resolution duly adopted by the Board of Directors of the corporation at a meeting thereof duly held on October 26, 1992, the following restatement of the Amended and Restated Articles of Incorporation of the corporation, as theretofore amended, was adopted.

3. The following Amended and Restated Articles of Incorporation of the corporation (a) set forth all of the operative provisions of the Articles of Incorporation of the corporation, as amended through the date of said meeting of the Board of Directors of the corporation, (b) correctly set forth without change the corresponding provisions of the Articles of Incorporation of the corporation, as so amended, and (c) supersede the original Articles of Incorporation of the corporation and all amendments thereto and restatements thereof through the date of said meeting of the Board of Directors of the corporation.

4. The Amended and Restated Articles of Incorporation of the corporation shall read as follows:

Amended and Restated Articles of Incorporation

FIRST:      The name of the corporation is KENTUCKY UTILITIES COMPANY.

SECOND:      The address of the registered office of the corporation in Kentucky and the name of the resident agent of the corporation at that address are on file with the Kentucky Secretary of State. The address of the registered office of the corporation in Virginia is 5511 Staples Mill Road, Richmond, Virginia 23228. The name of the initial registered agent at that address is Edward R. Parker, who is a resident of Virginia and a member of the Virginia State Bar.

THIRD:       The purpose for which the corporation is organized is to engage, directly or through ownership of other corporations, partnerships, joint ventures or other entities, in the transaction of any and all lawful business for which corporations may be incorporated under the Kentucky Business Corporation Act, and except as modified by Article Fourth hereof, the Virginia Stock Corporation Act.

FOURTH:   In limitation of the foregoing Article Third, the corporation shall, in Virginia, conduct the business of an electric utility as a public service company and it shall have power to conduct, in Virginia, other public service business or non-public service business so far as may be related to or incidental to its stated business as a public service company and in any other state such business as may be authorized or permitted by the laws thereof. Nothing in this Article Fourth shall limit the power of the corporation in respect of the securities of other corporations.

FIFTH:        The aggregate number of shares of stock which the corporation shall have authority to issue is Eighty-seven Million Three Hundred Thousand (87,300,000) shares, divided into and consisting of (A) Five Million Three Hundred Thousand (5,300,000) shares of Preferred Stock without par value but with a maximum aggregate stated value of $200,000,000, issuable in one or more series as hereinafter provided, (B) Two Million (2,000,000) shares of Preference Stock without par value issuable in one or more series as hereinafter provided, and (C) Eighty Million (80,000,000) shares of Common Stock without par value. The 5,300,000 shares of authorized Preferred Stock are hereinafter referred to as the “Preferred Stock” and shall include the 200,000 shares of “43/4% Preferred Stock” and the 200,000 shares of “7.84% Preferred Stock” of the corporation now outstanding.

A description of the respective classes of shares of the corporation, and a statement of the designations, powers, preferences and rights and the qualifications, limitations and restrictions granted to or imposed upon the shares of each class, are as follows:

I. PROVISIONS RELATING TO THE PREFERRED STOCK

(1) The authorized Preferred Stock may be issued in one or more series as hereinafter provided; and the 200,000 shares of 43/4% Preferred Stock now outstanding shall constitute a series of the Preferred Stock and shall be known as the 43/4% Preferred Stock (stated value $100 per share)”, the 200,000 shares of 7.84% Preferred Stock now outstanding shall constitute a series of the Preferred Stock and shall be known as the “7.84% Preferred Stock (stated value $100 per share)”. The remainder of the shares of the authorized Preferred Stock, and all shares of the Preferred Stock at any time having the status of authorized and unissued shares of Preferred Stock, may be issued as shares of any series now outstanding or may be issued in one or more other series with such stated values, such rates of dividend (which shall be stated in the designation of the shares of each such series), such redemption price or prices and terms and conditions, and such sinking fund provisions, if any, for the redemption or purchase of shares, determined and fixed by the Board of Directors of the corporation in the manner provided by law, as the Board of Directors shall from time to time authorize. Authority is hereby expressly granted to and vested in the Board of Directors of the corporation, by resolution, to divide any of the authorized and unissued shares of the Preferred Stock into one or more series and to determine and fix the relative rights and preferences of the shares of any such series, the number of shares and the rate of dividend to be borne by the shares of each such series, the price or prices at which, and the terms and conditions on which, shares of each such series may be redeemed, and the sinking fund provisions, if any, for the redemption or purchase of shares of each such series, and to change redeemed or re-acquired shares of any such series into shares of another series, subject, however, to such restrictions and limitations as are, or may be, from time to time provided by law or contained in the Articles of Incorporation of the corporation or amendments thereto. The stated value of the share of each series of Preferred Stock shall be fixed by the Board of Directors of the corporation in the resolution establishing such series. Shares of any series of Preferred Stock may not be issued for a consideration less than the aggregate stated value thereof.

All shares of the Preferred Stock, regardless of designation, shall constitute one class of stock, shall be of equal rank and shall confer equal rights on the holders thereof, except only as to the stated values thereof, the rates of dividends thereon, the redemption prices and terms and conditions thereof, and the sinking fund provisions, if any, for the redemption or purchase thereof and except also, but only in respect of the 43/4% Preferred Stock, as otherwise provided in paragraph (11) of this Division I. All shares of the Preferred Stock of the same stated value per share at any time outstanding which bear the same dividend rate shall constitute one series of the Preferred Stock; and all shares of any one series of Preferred Stock shall be alike in all respects.

(2) The holders of the Preferred Stock shall be entitled to receive, in respect of each share held, dividends upon the stated value thereof at the annual rate specified in the designation of such share, and no more, payable quarter-yearly on March 1, June 1, September 1 and December 1 in each year, or on such other dates in each year as may be fixed by the Board of Directors of the corporation, but only when and as declared by the Board of Directors out of the surplus or net profits of the corporation available for the payment of dividends. Dividends on shares of the Preferred Stock shall be cumulative from and including the date of issue thereof, and shall be paid, or declared and set apart for payment, before any dividends shall be declared or paid on or set apart for the Preference Stock or the Common Stock; so that if for any past dividend period or the then current dividend period dividends on the Preferred Stock shall not have been paid, or declared and set apart for payment, the deficiency shall be fully paid or declared and funds set apart for the payment thereof before any dividends shall be declared or paid on or set apart for the Preference Stock or the Common Stock. No dividend shall at any time be paid on or set apart for any share of the Preferred Stock unless at the same time there shall be paid on

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or set apart for all shares of the Preferred Stock then outstanding dividends in such amount that the holders of all shares of the Preferred Stock then outstanding shall receive or have set apart for them a uniform percentage of the full annual dividend to which they are, respectively, entitled. The term “Dividend period,” as used herein, refers to each period of three consecutive calendar months ending on the day next preceding each date on which dividends, if declared, shall be payable. When full cumulative dividends as aforesaid upon the Preferred Stock then outstanding for all past dividend periods and for the then current dividend period shall have been paid or declared and set apart for payment, the Board of Directors may declare dividends on the Preference Stock and the Common Stock of the corporation, subject to any other restrictions contained in the Articles of Incorporation.

In addition to the provisions of the second and fifth sentences of the preceding paragraph of this paragraph (2) with respect to the declaration by the Board of Directors of dividends on the Preference Stock and the Common Stock and the payment of any such dividends, it shall also be a condition precedent to the declaration by the Board of Directors of dividends on the Preference Stock or the Common Stock and the payment of any such dividends that all amounts required to be paid or set aside for any sinking fund for the redemption or purchase of shares of Preferred Stock of any series, with respect to all preceding sinking fund dates or periods, shall have been paid or set aside in accordance with the terms of the shares of such series. No funds shall be paid into or set aside for any sinking fund for the redemption or purchase of shares of Preferred Stock of any series unless all dividends on the Preferred Stock, for all past dividend periods, shall have been fully paid or declared and funds set apart for the payment thereof.

(3) Upon the dissolution, liquidation or winding up of the corporation, the holders of shares of the Preferred Stock shall be entitled, before any amount shall be paid to the holders of shares of the Preference Stock or the Common Stock, to be paid in full out of the net assets of the corporation, (i) the stated value of their shares of Preferred Stock plus an amount equal to the accrued dividends on such shares, if such dissolution, liquidation or winding up shall be involuntary, and (ii) the then current redemption price of their shares of Preferred Stock (accrued dividends thereon to be computed to the date of distribution) if such dissolution, liquidation or winding up shall be voluntary. After such payment in full to the holders of shares of the Preferred Stock, the remaining assets and profits shall be divided among and paid to the holders of shares of the Preference Stock and to the holders of shares of the Common Stock, as hereinafter provided.

(4) The corporation, on the sole authority of its Board of Directors, shall have the right at any time or from time to time to redeem and retire all or any part of the shares of Preferred Stock, or all or any part of the shares of any one or more series of the Preferred Stock, upon and by the payment to the holders of the shares to be redeemed or upon and by depositing as hereinafter provided for the benefit of such holders, the then applicable redemption price of the shares to be redeemed, which (a) in case of the shares of the 43/4% Preferred Stock shall be $101 per share plus accrued dividends to the date of redemption, (b) in case of the shares of the 7.84% Preferred Stock shall be $107.38 per share plus accrued dividends to the date of redemption if such date of redemption is on or subsequent to September 1, 1977, and prior to September 1, 1982, $105.42 per share plus accrued dividends to the date of redemption if such date of redemption is on or subsequent to September 1, 1982, and prior to September 1, 1987, and $101.50 per share plus accrued dividends to the date of redemption if such date of redemption is on or subsequent to September 1, 1987. It shall be a condition of any redemption pursuant to this paragraph (4) that the corporation shall, not less than thirty (30) days previous to the date fixed for redemption, give notice of the intention of the corporation to redeem such shares, specifying the shares to be redeemed and the date and place of redemption, which notice shall be deposited in a United States post office or mail box at any place in the United States addressed to each holder of record of the shares to be redeemed at his address as the same appears upon the records of the corporation; but in mailing such notice of redemption unintentional omissions or errors in names or addresses shall not impair the validity of such notice. In every case of the redemption of less than all of the outstanding shares of any series of the Preferred Stock, the shares of such series to be redeemed shall be chosen by proration (so far as may be

3

without resulting in the issuance of fractional shares), by lot or in such other equitable manner as may be prescribed by resolution of the Board of Directors. The corporation may deposit with a bank or trust company, which shall be named in the notice of redemption, shall be located in New York, New York, or in Chicago, Illinois or in Louisville, Kentucky, and shall then have capital, surplus and undivided profits of at least $1,000,000, the aggregate redemption price of the shares to be redeemed, in trust for the payment on or before the redemption date to or upon the order of the holders of such shares, upon surrender of the certificates for such shares. Such deposit in trust may, at the option of the corporation, be upon terms whereby in case the holder of any of the shares called for redemption shall not, within ten (10) years after the date fixed for the redemption of such shares, claim the amount on deposit with any such bank or trust company for the payment of the redemption price of said shares, such bank or trust company shall on demand pay to or upon the written order of the corporation or its successors the amount so deposited, and thereupon such bank or trust company shall be released from any and all further liability with respect to the payment of such redemption price and the holder of said shares shall be entitled to look only to the corporation or its successor for the payment thereof. Upon the giving of notice of redemption and upon the deposit of the redemption price, as aforesaid, or if no such deposit is made, upon the redemption date (unless the corporation defaults in making payment of the redemption price as set forth in such notice), such holders shall cease to be stockholders of the corporation with respect to said shares, and from and after the making of said deposit and the giving of said notice, or, if no such deposit is made, after the redemption date (the corporation not having defaulted in making payment of the redemption price as set forth in said notice), said shares shall no longer be transferable on the books of the corporation, and said holders shall have no interest in or claim against the corporation with respect to said shares, but shall be entitled only to receive said moneys on the date fixed for redemption, as aforesaid, from such bank or trust company, or from the corporation, without interest thereon, upon surrender of the certificates therefor as aforesaid.

The term “accrued dividends,” as used herein, shall be deemed to mean, in respect of any share of the Preferred Stock as of any given date, the amount of dividends payable on such shares, computed, at the annual dividend rate fixed for such share, from the date on which dividends thereon became cumulative to and including such given date, less the aggregate amount of all dividends which have been paid or which have been declared and set apart for payment on such share. Accumulations of dividends shall not bear interest.

Nothing herein contained shall limit any legal right of the corporation to purchase any shares of the Preferred Stock.

(5) So long as any shares of the Preferred Stock of any series are outstanding, the corporation [except as otherwise provided in the last sentence of this paragraph (5)] shall not, without the affirmative vote of the record holders of shares of the Preferred Stock of all series at the time outstanding having in the aggregate a number of votes, calculated as provided in paragraph (2) of Division IV, at least equal to two-thirds of the total number of votes, as so calculated, possessed by all such holders:

(a) Amend the provisions of the Articles of Incorporation so as to create or authorize any stock ranking prior in any respect to the Preferred Stock or any security convertible into shares of such stock; or issue any such stock or convertible security; or

(b) Change, by amendment to the Articles of Incorporation, or otherwise, the terms and provisions of the Preferred Stock so as to affect adversely the rights and preferences of the holders thereof; provided, however, that if any such change will affect adversely the holders of one or more, but less than all, of the series of Preferred Stock at the time outstanding, there shall be required the vote only of the holders of shares of the series so adversely affected at the time outstanding having in the aggregate a number of votes, calculated as provided in paragraph (2) of Division IV, at least equal to two-thirds of the total number of votes, as so calculated, possessed by all such holders of such series; or

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(c) Issue any shares of Preferred Stock, or shares of any stock ranking on a parity with the Preferred Stock, or any securities convertible into shares of such stock, other than in exchange for, or for the purpose of effecting the redemption or other retirement of, shares of Preferred Stock, or of any stock ranking prior thereto or on a parity therewith, or both, at the time outstanding having an aggregate amount of par or stated value of not less than the aggregate amount of par or stated value of the shares to be issued, unless

(i) the net income of the corporation (determined in accordance with generally accepted accounting principles) plus all amounts representing interest charges and all amounts for or in respect of taxes based on or measured by income shall, for a period of twelve consecutive calendar months within the fifteen calendar months next preceding the issue of such shares, have been at least one and one-half (11/2) times the sum of (x) the interest for one year, adjusted by provision for amortization of debt discount and expense or of premium, as the case may be, on all funded indebtedness and notes payable of the corporation maturing more than twelve months after the date of issue of such shares or convertible securities which shall be outstanding at the date of the issue of said shares or convertible securities, and (y) an amount equal to the dividend requirement for one year on all shares of the Preferred Stock of all series and on all other shares of stock, if any, ranking prior to or on a parity with the Preferred Stock, which shall be outstanding after the issue of the shares or convertible securities proposed to be issued; and

(ii) the capital represented by the Common Stock plus the surplus accounts of the corporation shall be not less than the aggregate amount payable on the involuntary dissolution, liquidation or winding up of the corporation, in respect of all shares of the Preferred Stock of all series and all shares of stock, if any, ranking prior thereto, or on a parity therewith, which shall be outstanding after the issue of the shares or convertible securities proposed to be issued.

No consent of the holders of the Preferred Stock shall be required in respect of any transaction enumerated in this paragraph (5) if, at or prior to the time when such transaction is to take effect, provision is made for the redemption or other retirement of all shares of the Preferred Stock at the time outstanding, the affirmative vote of which would otherwise be required hereunder.

(6) So long as any shares of the Preferred Stock of any series are outstanding, the corporation [except as otherwise provided in the last sentence of this paragraph (6)] shall not, without the affirmative vote of the record holders of shares of the Preferred Stock of all series at the time outstanding having in the aggregate a number of votes, calculated as provided in paragraph (2) of Division IV, at least equal to a majority of the total number of votes, as so calculated, possessed by all such holders:

(a) Issue or assume any unsecured indebtedness (as hereinafter defined) for any purpose, other than the refunding of secured or unsecured indebtedness theretofore created or assumed by the corporation and then outstanding or the retiring, by redemption or otherwise, of shares of the Preferred Stock or shares of any stock ranking prior thereto or on a parity therewith, if immediately after such issue or assumption the total principal amount of all unsecured indebtedness issued or assumed by the corporation and then outstanding would exceed twenty-five per centum (25%) of the aggregate of (i) the total principal amount of all bonds or other securities representing secured indebtedness issued or assumed by the corporation and then outstanding and (ii) the total of the capital and surplus of the corporation, as then recorded on its books; or

(b) Merge or consolidate with any other corporation or corporations, or sell or lease all or substantially all of the assets of the corporation, unless such merger, consolidation or sale or lease or the issue or assumption of all securities to be issued or assumed in connection therewith shall have been ordered, approved or permitted by all regulatory bodies, federal and state, then having jurisdiction in the premises.

“Unsecured indebtedness” as the term is used in this paragraph (6) shall mean all unsecured notes, debentures or other securities representing unsecured indebtedness (whether having a single maturity,

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serial maturities or sinking fund or other similar periodic principal or debt retirement payment provisions) which have a final maturity date, determined as of the date of issuance or assumption thereof by the corporation, of less than three years. No consent of the holders of the Preferred Stock shall be required in respect to any transaction enumerated in this paragraph (6) if, at or prior to the time when such transaction is to take effect, provision is made for the redemption or other retirement of all shares of the Preferred Stock at the time outstanding, the affirmative vote of which would otherwise be required hereunder.

(7) No provision contained in the foregoing paragraphs (5) and (6) is intended or shall be construed to relieve the corporation from compliance with any applicable statutory provision requiring the vote or consent of a greater number of the holders of the outstanding shares of the Preferred Stock.

(8) So long as any shares of the Preferred Stock are outstanding, the corporation shall not pay any dividends on its Common Stock (other than dividends payable in Common Stock) or make any distribution on or purchase or otherwise acquire for value any of its Common Stock (each such payment, distribution, purchase and/or acquisition being herein referred to as a “Common Stock dividend”), except to the extent permitted by the following provisions of this paragraph (8):

(a) No Common Stock dividend shall be declared or paid in an amount which, together with all other Common Stock dividends declared in the year ending on (and including) the date of the declaration of such Common Stock dividend, would in the aggregate exceed fifty per centum (50%) of the net income of the corporation available for dividends on its Common Stock for the twelve consecutive calendar months ending on the last day of the calendar month next preceding the declaration of such Common Stock dividend, if at the end of such calendar month the ratio (herein referred to as the “Capitalization ratio”) of the Common Stock equity (as hereinafter defined) of the corporation, to the total capital (as hereinafter defined) of the corporation shall be less than twenty per centum (20%).

(b) If such capitalization ratio, determined as aforesaid, shall be twenty per centum (20%) or more, but less than twenty-five per centum (25%), no Common Stock dividend shall be declared or paid in an amount which, together with all other Common Stock dividends declared in the year ending on (and including) the date of the declaration such Common Stock dividend, would exceed seventy-five per centum (75%) of the net income of the corporation available for dividends on its Common Stock for the twelve consecutive calendar months ending on the last day of the calendar month next preceding the declaration of such Common Stock dividend.

(c) If such capitalization ratio, determined as aforesaid, shall be twenty-five per centum (25%) or more, no Common Stock dividend shall be declared or paid which would reduce such capitalization ratio to less than twenty-five per centum (25%), except to the extent permitted by the next preceding paragraphs (a) and (b) hereof.

“Common Stock equity,” as that term is used in this paragraph, shall consist of the sum of (1) the capital represented by the issued and outstanding shares of Common Stock (including premiums on Common Stock) and (2) the surplus accounts of the corporation, less (i) any known, or estimated if not known, excess of the value, as recorded on the corporation’s books, over the original cost, of used and useful utility plant and other property, unless (a) such excess is being amortized or provided for by reserves, or (b) such excess has been held, by final order of a court having jurisdiction or of the regulatory bodies having jurisdiction, to constitute an asset which need not be amortized or provided for by reserves, and (ii) any excess of the aggregate amount payable on the involuntary dissolution, liquidation, or winding up of the corporation, in respect of its outstanding shares of preference stocks of all classes over the aggregate par value of, or if without par value over the capital represented by, such preference stocks unless such excess is being amortized or provided for by reserves, and (iii) any items such as debt discount, premium and expense, capital stock discount and expense and similar items, classified as assets on the balance sheet of the corporation, unless such items are being amortized or provided for by reserves. The “total capital of the corporation” shall consist of the sum of (i) the principal amount of all

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outstanding indebtedness of the corporation maturing one year or more after the date of the issue thereof and (ii) the par value of, or if without par value the capital represented by, all outstanding shares of capital stock (including premiums on capital stock) of all classes of the corporation, and (iii) the surplus accounts of the corporation. The term “net income of the corporation available for dividends on its Common Stock” for any period shall be determined by deducting from the sum of the operating revenues and income from investments and other miscellaneous income for such period, all operating expenses for such period, including maintenance and provision for depreciation as recorded on the books of the corporation (but not less than an amount equal to fifteen per centum (15%) of the gross operating revenues of the corporation less the cost of electric energy, gas and ice purchased for resale, during such period), income and excess profits and other taxes, all proper accruals, interest charges, amortization charges, other proper income deductions and all dividends paid or accrued on all outstanding shares of stock of the corporation having a preference as to dividends over the Common Stock for such period, all as shall be determined in accordance with such system of accounts as may be prescribed by regulatory authorities having jurisdiction in the premises or, in the absence thereof, in accordance with sound accounting practices. All indebtedness and capital stock of the corporation owned by the corporation shall be excluded in determining total capital. Purchases or other acquisition of Common Stock shall be deemed, for the purposes of this paragraph (8), to constitute a Common Stock dividend declared as of the date on which such purchases or acquisitions are consummated.

(9) No shares of preference stocks or evidence of indebtedness shall be deemed to be “outstanding”, as that term is used in the preceding paragraphs (5), (6) and (8) of this Division I, if, prior to or concurrently with the event in reference to which a determination as to the amount thereof outstanding is to be made, the requisite funds for the redemption thereof shall be deposited in trust for that purpose and the requisite notice for the redemption thereof shall be given or the depositary of such funds shall be irrevocably authorized and directed to give or complete such notice of redemption.

(10) No holder of the Preferred Stock, as such, shall have any preemptive right to subscribe to stock or other securities of the corporation, of any class, whether now or hereafter authorized.

(11) Notwithstanding anything to the contrary contained in paragraph (2), each holder of shares of the 43/4% Preferred Stock shall be entitled to reimbursement by the corporation for the amount of any personal property tax, not exceeding in the aggregate four mills per annum on each dollar of taxable value of each share of such stock owned by such holder, which may be legally assessed by the Commonwealth of Pennsylvania or any taxing authority therein upon each share of such stock held of record at the time of assessment of such tax thereon, or upon such holder by reason of his ownership thereof, and actually paid by such holder; provided that application for such reimbursement shall be made by such holder to the corporation at its office or agency in the City of Lexington, Kentucky, not later than 120 days after such tax shall have been paid, and that such application shall set forth the record ownership, at the time of such assessment of such shares of stock with respect to which such tax has been paid, the amount (exclusive of penalty and interest) of such tax actually paid by such holder, the due date thereof, and the tax year for which paid, together with the number or numbers of the certificate or certificates representing such stock, the residence of the applicant at the time such tax was assessed, and that such tax was assessed and was paid by him because of his ownership of such stock, and such further facts with respect to the legal liability of such holder to pay such tax as the corporation may reasonably require. The corporation shall in no event be liable to reimburse such holder for any interest or penalty assessed or accrued upon or paid by him in addition to the amount of such tax as originally assessed. No deduction from any dividend or other distribution declared or paid upon any such shares of such stock shall be made on account of such reimbursement made by the corporation with respect to any such tax.

II. PROVISIONS RELATING TO THE PREFERENCE STOCK

(1) The shares of the authorized Preference Stock, and all shares of the Preference Stock at any time having the status of authorized and unissued shares of Preference Stock, may be issued in one or

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more series with (a) such stated values, (b) such rates of dividend (which shall be stated in the designation of the shares of each such series), (c) such redemption price or prices and terms and conditions, (d) such sinking fund provisions, if any, for the redemption or purchase of shares, (e) such amounts payable upon the voluntary or involuntary dissolution, liquidation or winding up of the corporation and (f) such terms and conditions, if any, regarding the conversion of shares into shares of Common Stock, determined and fixed by the Board of Directors of the corporation in the manner provided by law, as the Board of Directors shall from time to time authorize. Authority is hereby expressly granted to and vested in the Board of Directors of the corporation, by resolution, to divide any authorized and unissued shares of the Preference Stock into one or more series and to determine and fix by resolution the relative rights and preferences of the shares of any such series, the number of shares of each such series and the provisions with respect to the shares of such series referred to in items (a) through (f) above and to change redeemed or re-acquired shares of any such series into shares of another series, subject, however, to such restrictions and limitations as are, or may be, from time to time provided by law or contained in the Articles of Incorporation of the corporation or amendments thereto. The stated value of the shares of each series of Preference Stock shall be fixed by the Board of Directors of the corporation in the resolution establishing each series. Shares of any series of Preference Stock may not be issued for a consideration less than the aggregate stated value thereof.

All shares of the Preference Stock, regardless of designation, shall constitute one class of stock, shall be of equal rank and shall confer equal rights on the holders thereof, except only as to those provisions which the Articles of Incorporation authorize the Board of Directors of the corporation to fix by resolution. All shares of any one series of Preference Stock shall be alike in all respects.

(2) Subject to the preferential rights of the holders of the Preferred Stock with respect to the declaration and payment of dividends as set forth in paragraph (2) of Division I, subject to the provisions of the second grammatical paragraph of paragraph (2) of Division I and subject to the provisions of paragraph (8) of Division I, holders of the Preference Stock shall be entitled to receive, in respect of each share held, dividends upon the stated value thereof at the annual rate specified in the designation of such share, and no more, payable quarter-yearly on March 1, June 1, September 1 and December 1 in each year, or on such other dates in each year as may be fixed by the Board of Directors of the corporation, but only when and as declared by the Board of Directors out of the surplus or net profits of the corporation available for the payment of dividends. Dividends on shares of the Preference Stock shall be cumulative from and including the date of issue thereof, and shall be paid, or declared and set apart for payment, before any dividends shall be declared or paid on or set apart for the Common Stock; so that if for any past dividend period or the then current dividend period dividends on the Preference Stock shall not have been paid, or declared and set apart for payment, the deficiency shall be fully paid or declared and funds set apart for the payment thereof before any dividends shall be declared or paid on or set apart for the Common Stock. No dividend shall at any time be paid on or set apart for any share of the Preference Stock unless at the same time there shall be paid on or set apart for all shares of the Preference Stock then outstanding dividends in such amount that the holders of all shares of Preference Stock then outstanding shall receive or have set apart for them a uniform percentage of the full annual dividend to which they are, respectively, entitled. The term “Dividend period”, as used herein, refers to each period of three consecutive calendar months ending on the day next preceding each date on which dividends, if declared, shall be payable. When full cumulative dividends as aforesaid upon the Preference Stock then outstanding for all past dividend periods and for the then current dividend period shall have been paid or declared and set apart for payment, the Board of Directors may declare dividends on the Common Stock of the corporation, subject to any other restrictions contained in the Articles of Incorporation.

In addition to the provisions of the second and fifth sentences of the preceding paragraph of this paragraph (2) with respect to the declaration by the Board of Directors of dividends on the Common Stock and the payment of any such dividends, it shall also be a condition precedent to the declaration by the Board of Directors of dividends on the Common Stock and the payment of any such dividends that

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all amounts required to be paid or set aside for any sinking fund for the redemption or purchase of shares of Preference Stock of any series, with respect to all preceding sinking fund dates or periods, shall have been paid or set aside in accordance with the terms of the shares of such series. No funds shall be paid into or set aside for any sinking fund for the redemption or purchase of shares of Preference Stock of any series unless all dividends on the Preference Stock, for all past dividend periods, shall have been fully paid or declared and funds set apart for the payment thereof.

(3) Subject to the preferential rights of the holders of the Preferred Stock with respect to the payment of amounts upon the dissolution, liquidation or winding up of the corporation as set forth in paragraph (3) of Division I, upon the dissolution, liquidation or winding up of the corporation, whether voluntary or involuntary, the holders of shares of the Preference Stock of each series shall be entitled, before any amount shall be paid to the holders of shares of the Common Stock, to be paid in full out of the net assets of the corporation such amount or amounts per share as shall have been fixed for such series by the Board of Directors of the corporation as the voluntary or involuntary liquidation price, as the case may be, in the resolution establishing such series. After such payment in full to the holders of shares of the Preference Stock, the remaining assets and profits shall be divided among and paid to the holders of shares of the Common Stock.

(4) So long as any shares of the Preference Stock of any series are outstanding, the corporation [except as otherwise provided in the last sentence of this paragraph (4)] shall not, without the affirmative vote of the record holders of shares of the Preference Stock of all series at the time outstanding having in the aggregate a number of votes, calculated as provided in paragraph (2) of Division IV, at least equal to two-thirds of the total number of votes, as so calculated, possessed by all such holders:

(a) Amend the provisions of the Articles of Incorporation so as to create or authorize any stock of any class, other than the Preferred Stock, ranking prior in any respect to the Preference Stock or any security convertible into shares of stock of such class, other than the Preferred Stock; or

(b) Change, by amendment to the Articles of Incorporation, or otherwise, the terms and provisions of the Preference Stock so as to affect adversely the rights and preferences of the holders thereof; provided, however, that if any such change will affect adversely the holders of one or more, but less than all, of the series of Preference Stock at the time outstanding, there shall be required the vote only of the holders of shares of the series so adversely affected at the time outstanding having in the aggregate a number of votes, calculated as provided in paragraph (2) of Division IV, at least equal to two-thirds of the total number of votes, as so calculated, possessed by all such holders of such series.

No consent of the holders of the Preference Stock shall be required in respect of any transaction enumerated in this paragraph (4) if, at or prior to the time when such transaction is to take effect, provision is made for the redemption or other retirement of all shares of the Preference Stock at the time outstanding, the affirmative vote of which would otherwise be required hereunder.

(5) So long as any shares of the Preference Stock of any series are outstanding, the corporation [except as otherwise provided in the last sentence of this paragraph (5)] shall not, without the affirmative vote of the record holders of shares of the Preference Stock of all series at the time outstanding having in the aggregate a number of votes, calculated as provided in paragraph (2) of Division IV, at least equal to a majority of the total number of votes, as so calculated, possessed by all such holders, merge or consolidate with any other corporation or corporations, or sell or lease all or substantially all of the assets of the corporation; provided, however, that the foregoing restriction shall not apply to (i) a merger or consolidation of the corporation with or into, or the sale or lease of all or substantially all of the assets of the corporation to, any corporation 50% or more of the voting securities of which is owned by the corporation, directly or indirectly, or (ii) any merger, consolidation, sale or lease required by order or regulation of any regulatory body, federal or state, then having jurisdiction in the premises or which shall have been approved or permitted by all such regulatory bodies. No consent or vote of the holders of the Preference Stock shall be required in respect of any transaction enumerated in this paragraph (5) if, at or prior to the time when such transaction is to take effect, provision is made for the redemption or

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other retirement of all shares of the Preference Stock at the time outstanding, the affirmative vote of which would otherwise be required hereunder.

(6) No provision contained in the foregoing paragraphs (4) and (5) is intended or shall be construed to relieve the corporation from compliance with any applicable statutory provision requiring the vote or consent of a greater number of the holders of the outstanding shares of the Preference Stock.

(7) No shares of Preference Stock shall be deemed to be “outstanding”, as that term is used in the preceding paragraphs (4) and (5) of this Division II, if, prior to or concurrently with the event in reference to which a determination as to the amount thereof outstanding is to be made, the requisite funds for the redemption thereof shall have been deposited in trust for that purpose and the requisite notice for the redemption thereof shall have been given or the depositary of such funds shall have been irrevocably authorized and directed to give or complete such notice of redemption.

(8) No holder of the Preference Stock, as such, shall have any preemptive right to subscribe to stock or other securities of the corporation, of any class, whether now or hereafter authorized.

III. PROVISIONS RELATING TO THE COMMON STOCK

No holder of the Common Stock, as such, shall have any preemptive right to subscribe to stock or other securities of the corporation, of any class, whether now or hereafter authorized.

IV. VOTING RIGHTS

The voting rights in respect of the shares of capital stock of the corporation shall be as follows:

(1) Shares of Common Stock of the corporation shall have full voting rights. Each shareholder of record of Common Stock entitled to vote on any matter shall be entitled to one vote on such matter for every share standing in his name on the books of the corporation, except that, in all elections for directors of the corporation, each holder of shares of Common Stock shall have the right to cast as many votes in the aggregate as he shall be entitled to vote thereon, multiplied by the number of directors to be elected at such election, and each such shareholder may cast the whole number of votes for one candidate or distribute those votes among two or more candidates.

(2) No holder of shares of the Preferred Stock, as such, shall be entitled to vote for the election of directors or in respect of any matter, except as provided in paragraph (5) or (6) of Division I or in paragraph (3) or (8) of this Division IV, or as may be required by law. No holder of shares of the Preference Stock, as such, shall be entitled to vote for the election of directors or in respect of any matter, except as provided in paragraph (4) or (5) of Division II or in paragraph (4) or (8) of this Division IV, or as may be required by law. In such excepted cases, each record holder of Preferred Stock shall have, for each share of Preferred Stock held by him, and each record holder of Preference Stock shall have, for each share of Preference Stock held by him, that number of votes (including any fractional vote) determined by dividing the stated value of such share by 100, except that, when holders of Preferred Stock are entitled to elect directors as provided in this Division IV, and when holders of Preference Stock are entitled to elect directors as provided in this Division IV, each holder of Preferred Stock and each holder of Preference Stock, as the case may be, shall have the right to cast the number of votes attributable to him as so computed multiplied by the number of directors to be so elected in such election by the Preferred Stock or the Preference Stock, as the case may be, and each such holder may cast the whole number of votes for one candidate or distribute those votes among two or more candidates.

(3) If and when dividends payable on the Preferred Stock shall be in default in an amount equivalent to four full quarter-yearly dividends on all shares of Preferred Stock then outstanding and until all dividends then in default on the Preferred Stock shall have been paid, the record holders of the shares of Preferred Stock, voting separately as one class, shall be entitled, at each meeting of the shareholders at which directors are elected, to elect the smallest number of directors necessary to

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constitute a majority of the full Board of Directors, and the record holders of the shares of Common Stock, voting separately as a class, shall be entitled at any such meeting to elect the remaining directors of the corporation, subject to the special right of the holders of shares of Preference Stock to elect directors as provided in paragraph (4) of this Division IV, if then applicable. For the purpose of exercising the right of cumulative voting, the election by the record holders of shares of Preferred Stock of the number of directors which they are entitled to elect shall be considered one election, and the election by the record holders of shares of Common Stock of the number of directors which they are entitled to elect shall be considered another election. The term of office of each director of the corporation elected pursuant to the provisions of this paragraph (3) shall terminate upon the election of his successor. At each election of directors by a class vote pursuant to the provisions of this paragraph, the class first electing the directors which it is entitled to elect shall name the directors who are to be succeeded by the directors then elected by such class, whereupon the term of office of the directors so named shall terminate. The term of office of the directors not so named shall terminate upon the election by the other class of the directors which it is entitled to elect.

(4) If and when dividends payable on the Preference Stock shall be in default in an amount equivalent to four full quarter-yearly dividends on all shares of Preference Stock then outstanding and until all dividends then in default on the Preference Stock shall have been paid, the record holders of the shares of Preference Stock, voting separately as one class, shall be entitled, at each meeting of the shareholders at which directors are elected, to elect two directors, and the record holders of the shares of Common Stock, voting separately as a class, shall be entitled at any such meeting to elect the remaining directors of the corporation, subject to the special right of the holders of shares of Preferred Stock to elect directors as provided in paragraph (3) of this Division TV, if then applicable. For the purpose of exercising the right of cumulative voting, the election by the record holders of shares of Preference Stock of the number of directors which they are entitled to elect shall be considered one election, and the election by the record holders of shares of Common Stock of the number of directors which they are entitled to elect shall be considered a separate election. The term of office of each director of the corporation elected pursuant to the provisions of this paragraph (4) shall terminate upon the election of his successor. At each election of directors by a class vote of the Preference Stock or the Common Stock pursuant to the provisions of this paragraph, the class first electing the directors which it is entitled to elect shall name the directors who are to be succeeded by the directors then elected by such class, whereupon the term of office of the directors so named shall terminate. The term of office of the directors not so named shall terminate upon the election by the other class of the directors which it is entitled to elect.

(5) If and when all dividends in default on the Preferred Stock then outstanding shall be paid, the holders of the shares of the Preferred Stock shall thereupon be divested of the special right with respect to the election of directors provided in paragraph (3) of this Division IV, and the voting power of holders of shares of the Preferred Stock and the Common Stock shall revert to the status existing before the occurrence of such default, but always subject to the same provisions for vesting such special right in the Preferred Stock in case of further like default or defaults in dividends thereon and, in the case of the Common Stock, subject to the special right of the holders of shares of Preference Stock to elect directors as provided in paragraph (4) of this Division IV, if then applicable.

(6) If and when all dividends in default on the Preference Stock then outstanding shall be paid, the holders of the shares of the Preference Stock shall thereupon be divested of the special right with respect to the election of directors provided in paragraph (4) of this Division IV, and the voting power of holders of shares of the Preference Stock and the Common Stock shall revert to the status existing before the occurrence of such default, but always subject to the same provisions for vesting such special right in the Preference Stock in case of further like default or defaults in dividends thereon.

(7) Dividends shall be deemed to have been paid, as that term is used in paragraphs (3) and (4) of this Division IV, whenever such dividends shall have been declared and paid, or declared and provision made for the payment thereof, or whenever there shall be surplus and net profits of the corporation

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legally available for the payment thereof which shall have accrued since the date of the default giving rise to such special voting rights.

(8) In case of any vacancy in the Board of Directors occurring among the directors elected by the holders of the shares of the Preferred Stock, as a class, pursuant to paragraph (3) of this Division IV, the holders of the shares of the Preferred Stock then outstanding and entitled to vote may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In case of any vacancy in the Board of Directors occurring among the directors elected by the holders of the shares of the Preference Stock, as a class, pursuant to paragraph (4) of this Division IV, the holders of the shares of the Preference Stock then outstanding and entitled to vote may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In case of any vacancy in the Board of Directors occurring among the directors elected by the holders of the shares of the Common Stock, as a class, pursuant to paragraph (3) or (4) of this Division IV, the holders of the shares of the Common Stock then outstanding and entitled to vote may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In all other cases, any vacancy occurring among the directors shall be filled by the vote of a majority of the remaining directors.

(9) Whenever the holders of the shares of the Preferred Stock, as a class, become entitled to elect directors of the corporation pursuant to paragraph (3) or (8) of this Division IV, or whenever the holders of the shares of the Preference Stock, as a class, become entitled to elect directors of the corporation pursuant to paragraph (4) or (8) of this Division IV, or whenever the holders of the shares of the Common Stock, as a class, become entitled to elect directors of the corporation pursuant to paragraph (3), (4) or (8) of this Division IV, a special meeting of the holders of the shares of the Preferred Stock, of the holders of the shares of the Preference Stock or of the holders of the shares of the Common Stock, as the case may be, for the election of such directors, shall be held at any time thereafter upon call by the holders of not less than 1,000 shares of the Common Stock, shares of the Preferred Stock with an aggregate stated value of not less than $100,000 or shares of the Preference Stock with an aggregate stated value of not less than $100,000 as the case may be, or upon call by the Secretary of the corporation at the request in writing of any stockholder addressed to him at the principal office of the corporation. If no such special meeting be called or be requested to be called, the respective elections of the directors to be elected by the holders of the shares of the Preferred Stock, the Preference Stock, and the Common Stock, each voting as a class, shall take place at the next annual meeting of the stockholders of the corporation next succeeding the accrual of such special voting right. At all meetings of stockholders at which directors are elected during such time as the holders of shares of the Preferred Stock or the holders of shares of the Preference Stock shall have the special right, each voting separately as one class, to elect directors pursuant to this Division IV, the presence in person or by proxy of the holders of a majority of the outstanding shares of the Common Stock shall be required to constitute a quorum of such class for the election of directors, the presence in person or by proxy of the holders of that number of the outstanding shares of all series of the Preference Stock having a majority of the votes entitled to be cast by the Preference Stock at the meeting shall be required to constitute a quorum of such class for the election of directors, and the presence in person or by proxy of the holders of that number of the outstanding shares of all series of the Preferred Stock having a majority of the votes entitled to be cast by the Preferred Stock at the meeting shall be required to constitute a quorum of such class for the election of directors; provided, however, that the absence of a quorum of the holders of stock of any such class shall not prevent the election at any such meeting or adjournment thereof of directors by any other such class if the necessary quorum of the holders of stock of such class is present in person or by proxy at such meeting; and provided further that in the absence of a quorum of the holders of stock of any such class, the holders of the stock of such class who are present in person or by proxy shall have power upon the majority vote of those votes represented at the meeting to adjourn the election of the directors to be elected by such class from day to day without notice other than announcement at the meeting until the requisite number of votes of such class shall be represented by stockholders present in person or by proxy.

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(10) Notwithstanding the provisions of Article Seventh and Article Eighth of the Articles of Incorporation of the corporation and any provisions of the By-laws of the corporation, during any period in which both holders of shares of Preferred Stock and holders of shares of Preference Stock, each voting separately as a class, shall have the special right to elect directors as provided in this Division IV, the number of directors constituting the full Board of Directors shall not be less than seven.

(11) In consideration of the issue by the corporation, and the purchase by the holders thereof, of shares of the capital stock of the corporation, each and every present and future holder of shares of the capital stock of the corporation shall be conclusively deemed, by acquiring or holding such shares, to have expressly consented to all and singular the terms and provisions of this Division IV and to have agreed that the voting rights of such holders and the restrictions and qualifications thereof shall be as set forth in the Articles of Incorporation of the corporation.

(12) No shares of Preferred Stock or Preference Stock shall be deemed to be “outstanding”, as that term is used in this Division IV, if, prior to or concurrently with the event in reference to which a determination as to the amount thereof outstanding is to be made, the requisite funds for the redemption thereof shall be deposited in trust for that purpose and the requisite notice for the redemption thereof shall be given or the depositary of such funds shall be irrevocably authorized and directed to give or complete such notice of redemption.

V. VOTE REQUIRED FOR CERTAIN ACTIONS

Except as otherwise provided in paragraphs (5) and (6) of Division I, in paragraphs (4) and (5) of Division II and paragraphs (3), (4) and (8) of Division IV, to the extent applicable law permits the Articles of Incorporation expressly to provide for a lesser vote than that otherwise provided by law to take any action for which a vote of shareholders is required, including, without limitation, approval of an amendment to the Articles of Incorporation of the corporation, a plan of merger or share exchange, a sale of all or substantially all of the assets of the corporation other than in the regular course of business or the dissolution of the corporation, such action or approval shall be, with respect to each voting group entitled to vote on the proposal, by a majority of all votes entitled to be cast. Shareholder approval shall not be required in connection with the creation or issuance of rights, options or warrants to purchase shares of the corporation to be issued to directors, officers or employees of the corporation or any subsidiary thereof, and not to shareholders generally, to the extent applicable law permits the Articles of Incorporation expressly to so provide.

SIXTH: The corporation shall begin business as soon as authorized, as provided by statute, and shall have perpetual duration.

SEVENTH: The affairs of the corporation shall be conducted by a Board of nine directors, or such other number of directors, not less than three, as shall from time to time be prescribed by the By-laws, who, except as otherwise provided in this Article Seventh, shall be elected at each annual meeting of the corporation on a day to be fixed in the By-laws, for a term expiring at the next succeeding annual meeting of the corporation. During such time as there are nine or more directors, and subject to the special rights of the holders of shares of the Preferred Stock and the holders of the shares of the Preference Stock to elect directors as provided in paragraphs (3), (4) and (8) of Division IV of Article Fifth and as specified in this Article Seventh, the directors shall be divided into three groups, as nearly equal in number as possible, and the term of office of the first group will expire at the 1991 annual meeting of the corporation, the term of office of the second group will expire at the 1992 annual meeting of the corporation and the term of office of the third group will expire at the 1993 annual meeting of the corporation, and at each annual meeting commencing with the 1991 annual meeting, directors elected to succeed those whose terms expire shall be elected for a term of office expiring at the third succeeding annual meeting of the corporation after their election or, in the event of a director elected to succeed a director elected to fill a vacancy, for a term expiring at the annual meeting at which the term of the director whose termination of office first created such vacancy would have expired. Notwithstanding the

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preceding sentence, the term of office of all directors shall expire at the special or annual meeting of the corporation at which the holders of the shares of the Preferred Stock are entitled to elect directors as provided in paragraph (3) of Division IV of Article Fifth or the holders of the shares of the Preference Stock are entitled to elect directors as provided in paragraph (4) of Division IV of Article Fifth; and so long as the holders of the shares of either the Preferred Stock or the Preference Stock shall be entitled to such special voting rights in the election of directors, the directors shall be elected and the term of each director shall expire as provided in said Division IV of Article Fifth. At such time as the holders of the shares of the Preferred Stock and the holders of the shares of the Preference Stock no longer have the special right to elect directors as provided in paragraph (5) or (6) of Division IV of Article Fifth, the Board shall again be divided into three groups as provided in this Article Seventh, the term of office of the first group to expire at the first annual meeting after the meeting at which directors are again elected by the holders of shares of the Common Stock, the term of office of the second group to expire at the second annual meeting after such meeting and the term of office of the third group to expire at the third annual meeting after such meeting (provided that no director shall be elected at such meeting for a term longer than three years), and directors elected to succeed those whose terms expire shall again be elected for a term of office expiring at the third succeeding annual meeting of the corporation after their election or, in the event of a director elected to succeed a director elected to fill a vacancy, for a term expiring at the annual meeting at which the term of the director whose termination of office first created such vacancy would have expired; subject to the same provisions for vesting in the holders of the shares of the Preferred Stock and the holders of the shares of the Preference Stock of such special rights in the election of directors as provided in Division IV of Article Fifth. The directors, as soon as practicable after each annual meeting, shall elect a President, one or more Vice-Presidents, a Secretary, a Treasurer, a Controller, and such other officers as may, from time to time, be provided for by the Board.

EIGHTH: The authority to make and to change, the By-laws is hereby vested in the Board of Directors, subject to the power of the stockholders to change or repeal the By-laws.

NINTH: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatsoever.

TENTH: 1. No director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for any breach of his or her duties as a director, except for liability (a) for any transaction in which the director’s personal financial interest is in conflict with the financial interests of the corporation or its shareholders; (b) for acts or omissions not in good faith or which involve intentional or willful misconduct or are known to the director to be a violation of law; (c) for any vote for or assent to an unlawful distribution to shareholders as prohibited under Kentucky Revised Statutes 27 IB.8-330 and Virginia Stock Corporation Act § 13.1-692; or (d) for any transaction from which the director derived an improper personal benefit.

2. If either the Kentucky Business Corporation Act or the Virginia Stock Corporation Act is amended after approval by the shareholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, and these Articles could be amended to effect such change, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Kentucky Business Corporation Act and the Virginia Stock Corporation Act, as so amended, and without the necessity for further shareholder action in respect thereof.

3. Any repeal or modification of this Article by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation hereunder in respect of any act or omission occurring prior to the time of such repeal or modification.

ELEVENTH: 1. The corporation shall indemnify a director, officer, employee, or agent who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director, officer, employee, or agent of the corporation against reasonable expenses incurred by him in connection with the proceeding.

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2. Except as provided in paragraph 3 of this Article, the corporation shall indemnify an individual made a party to a proceeding because he is or was a director, officer, employee, or agent of the corporation against liability incurred in the proceeding if: (a) he conducted himself in good faith; and (b) he reasonably believed: (i) in the case of conduct in his official capacity with the corporation, that his conduct was in its best interest; and (ii) in all other cases, that his conduct was at least not opposed to its best interest; and (iii) in the case of any criminal proceeding, he bad no reasonable cause to believe his conduct was unlawful.

3. The corporation shall not indemnify a director under paragraph 2 of this Article (a) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or (b) in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.

4. Indemnification under this Article in connection with a proceeding by or in the right of the corporation shall be limited to reasonable expenses incurred in connection with the proceeding.

5. If, after approval by the shareholders of this Article, either the Kentucky Business Corporation Act or the Virginia Stock Corporation Act is amended to extend the permissible indemnification of a director, officer, employee, or agent of the corporation and these Articles could be amended to effect such change, then the indemnification of a director, officer, employee, or agent of the corporation shall be afforded to the fullest extent permitted by the Kentucky Business Corporation Act and the Virginia Stock Corporation Act, as so amended, and without the necessity for further shareholder action in respect thereof.

6. In addition to (and not by way of limitation of) the foregoing provisions of this Article Eleventh and the provisions of the Kentucky Business Corporation Act and the provisions of the Virginia Stock Corporation Act, each person (including the heirs, executors, administrators and estate of such person) who is or was or had agreed to become a director, officer, employee or agent of the corporation and each person (including the heirs, executors, administrators and estate of such person) who is or was serving or who had agreed to serve at the request of the directors or any officer of the corporation as a director, officer, employee, trustee, partner or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be indemnified by the corporation to the fullest extent permitted by the Kentucky Business Corporation Act and the Virginia Stock Corporation Act, or any other applicable laws as presently or hereafter in effect. Without limiting the generality or the effect of the foregoing, the corporation is authorized to enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article Eleventh.

7. Any repeal or modification of this Article by the shareholders of the corporation shall not adversely affect any indemnification of any person hereunder in respect of any act or omission occurring prior to the time of such repeal or modification.

TWELFTH: Except as otherwise provided in paragraph (9) of Division IV of Article Fifth, no special meeting of shareholders shall be held upon the demand of shareholders of the corporation unless the holders of at least fifty-one percent (51%) of all the votes entitled to be cast on each issue proposed to be considered at the special meeting shall have signed, dated and delivered to the corporation’s secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held.

IN TESTIMONY WHEREOF, the foregoing Amended and Restated Articles of Incorporation are executed by the corporation by its President, this 27th day of October, 1992.

KENTUCKY UTILITIES COMPANY
By:
	JOHN T. NEWTON, Chairman and President

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STATE OF KENTUCKY
COUNTY OF FAYETTE } SS.

I, the undersigned, a Notary Public in and for the State and County aforesaid, do hereby certify that on this 27th day of October, 1992, personally appeared before me John T. Newton, who being by me first duly sworn declared that he is Chairman and President of KENTUCKY UTILITIES COMPANY, that he signed the foregoing Amended and Restated Articles of Incorporation of KENTUCKY UTILITIES COMPANY, and that the statements therein contained are true.

WITNESS my signature this 27th day of October, 1992.

	MARILYN BALLARD Notary Public, State at Large, Kentucky
	My commission expires October 27, 1994.
The foregoing instrument was prepared by George S. Brooks II, One Quality Street, Lexington, Kentucky 40507.

GEORGE S. BROOKS II

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EX-3.(B)

Exhibit 3(b)

	ARTICLES OF AMENDMENT
	TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
	OF
	KENTUCKY UTILITIES COMPANY

To the Secretary of State of Kentucky and the State Corporation Commission of Virginia (the “Commission”)

Pursuant to the provisions of Chapter 271B of the Kentucky Revised Statutes and Title 13.1 of the Code of Virginia, the undersigned corporation hereby amends its Articles of Incorporation, and for that purpose, submits the following statements:

1.The name of the corporation is KENTUCKY UTILITIES COMPANY.

2.The board of directors, acting on behalf of the corporation, duly adopted the following amendment (the “Amendment”) to its Amended and Restated Articles of Incorporation (the “Articles”) determining the terms of a series of Preferred Stock in accordance with authority granted to the board by the Articles. The Amendment adds new paragraph (12) to Division I of Article FIFTH of the Articles as follows:

(12)(a)An additional series of the Preferred Stock of the corporation, consisting of 200,000 shares, is hereby created and established out of the authorized and unissued shares of the Preferred Stock, without par value, of the corporation; said shares, and each share thereof, shall be designated “6.53% Preferred stock”; the stated value of each share of said series shall be $100 and all of said 200,000 shares of said series are hereby authorized to be issued by the corporation.

(b)The rate of dividend per annum payable in respect of each share of said series shall be 6.53% of the stated value of each such share, and dividends on the Shares of said series at said rate per annum shall be computed on the basis of a 360-day year consisting of 30-day months, shall be payable on March 1, June 1, September 1 and December 1 in each year commencing on March 1, 1994, and shall be cumulative from and including the date of issuance.

(c)The shares of said series are not redeemable prior to December 1, 2003. On and after December 1, 2003 the shares of said series shall be subject to redemption at the option of the corporation, in whole at any time or in part from time to time, upon the notice and in the manner provided in paragraph (4) of Division I of Article FIFTH of the Articles, at the applicable

redemption price per share set forth below, plus, in each case, an amount equal to accrued and unpaid dividends to the date of redemption.

Redemption Dates (inclusive)	Redemption Price Per Share
December 1, 2003 through November 30, 2004	$	103.265
December 1, 2004 through November 30, 2005	$	102.939
December 1, 2005 through November 30, 2006	$	102.612
December 1, 2006 through November 30, 2007	$	102.286
December 1, 2007 through November 30, 2008	$	101.959
December 1, 2008 through November 30, 2009	$	101.633
December 1, 2009 through November 30, 2010	$	101.306
December 1, 2010 through November 30, 2011	$	100.980
December 1, 2011 through November 30, 2012	$	100.653
December l, 2012 through November 30, 2013	$	100.327
December 1, 2013 and thereafter	$	100.00

(d)The shares of said series shall be subject to all the terms, provisions and restrictions set forth in the Articles with respect to shares of the Preferred Stock of the Company and, except only as to the rate of dividend per annum payable in respect of the chares of said series, the redemption price end the terns and conditions of redemption applicable to the shares of said series, and except as otherwise provided in the Articles, the shares of said series shall have the same relative rights and preferences as, shall be of equal rank with, and shall confer rights equal to those conferred by, all other shares of the Preferred Stock of the corporation. All shares of said series redeemed and retired pursuant to the provisions of this paragraph (12), and all shares of said series purchased or otherwise acquired and retired by the corporation, shall be cancelled, shall not be reissued as shares of said series and shall constitute authorized and unissued shares of the Preferred Stock of the corporation; and, so long as any shares of said series are outstanding, the corporation shall not issue any of its authorized and unissued shares of Preferred Stock as additional shares of said series. Each notice of redemption of shares of said series to be redeemed pursuant to the provisions of this paragraph (12) shall

state that the redemption shall be of shares of said series, the date and place of redemption, the redemption price and the number of shares held by such holder to be redeemed.

3.The Amendment was adopted on December 13, 1993.

4.The Amendment, and the certificate related thereto issued by the Commission, shall be effective on December 21, 1993.

5.The Amendment vas duly adopted by the board of directors of the corporation without shareholder approval pursuant to Section 271B.6-020 of the Kentucky Revised statutes and Section 13.1-639 of the Code of Virginia, and shareholder action was not required.

Dated:	December 14, 1993	KENTUCKY UTILITIES COMPANY
		By:	/s/ [ILLEGIBLE]
			Chairman and President

STATE OF KENTUCKY	}
COUNTY OF FAYETTE		SS.

I, the undersigned, a Notary Public in and for the State and County Aforesaid, do hereby certify that on this 24th day of December, 1993, personally appeared before me John T, Newton, who being by me first duly sworn declared that he is Chairman and President of Kentucky Utilities Company, that he signed the foregoing Amended and Restate Articles of Incorporation of Kentucky Utilities Company, and that the statements therein contained are true.

WITNESS my signature this 14th day of December, 1993.

	/s/ George S. Brooks II
	George S. Brooks II
	Notary Public, State at Large, Kentucky
	My commission expires January 19, 1997
The foregoing instrument was
prepared by George S. Brooks II,
One Quality Street, Lexington, Kentucky 40507
/s/ George S. Brooks II
George S. Brooks II

	0028494.09
ARTICLES OF AMENDMENT	Trey Grayson
TO	Secretary of State
ARTICLES OF INCORPORATION	Received and Filed
OF	04/08/2004 12:42:02 PM
KENTUCKY UTILITIES COMPANY	Fee Receipt: $40.00

Pursuant to the provisions of the Kentucky Revised Statutes and the Virginia Corporation Act, the following Articles of Amendment to the Articles of Incorporation of Kentucky Utilities Company, a Kentucky and Virginia corporation (the “Corporation”), are hereby adopted:

FIRST:The name of the Corporation is Kentucky Utilities Company.

SECOND:The text of the amendment to Article Seventh of the Corporation’s Articles of Incorporation is as follows:

“SEVENTH:All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its Board of Directors. The number of directors shall be fixed by resolution of the Board of Directors from time to time.

The Board of Directors of the corporation, to the extent not prohibited by law, shall have the power to cause the corporation to repurchase its own shares and shall have the power to make distributions from time to time to the corporation’s shareholders.”

THIRD:The above designated amendments do not provide for an exchange, reclassification or cancellation of issued shares of stock of the Corporation.

FOURTH:The designated amendments were adopted by the Corporation’s Board of Directors on July 1, 2002, and submitted for approval by the Corporation’s sole shareholder entitled to vote. The Corporation has 31,817,878 outstanding shares of common stock, without

par value, which are entitled to vote on the amendment. One hundred percent of the common shares were indisputably represented at a duly called shareholders’ meeting held on December 16, 2003, with 31,817,878 of the common shares indisputably cast in favor of the amendment, such vote being sufficient for approval of the amendment.

DATED:February 6, 2004	Kentucky Utilities Company
	By:	/s/ John R. McCall
		John R. McCall
		Executive Vice President,
		General Counsel and
		Corporate Secretary

EX-3.(C)

EXHIBIT 3(c)

BY-LAWS

OF

KENTUCKY UTILITIES COMPANY

ARTICLE I

STOCK TRANSFERS

Section 1.  Each holder of fully paid stock shall be entitled to a certificate or certificates of stock stating the number and the class of shares owned by such holder, provided that, the Board of Directors may, by resolution, authorize the issue of some or all of the shares of any or all classes or series of stock without certificates.  All certificates of stock shall, at the time of their issuance, be signed by the Chairman of the Board, the President or a Vice-President and by the Secretary or Assistant Secretary, and may be authenticated and registered by a duly appointed registrar.  If the stock certificate is authenticated by a registrar, the signatures of the corporate officers may be facsimiles.  In case any officer designated for the purpose who has signed or whose facsimile signature has been used on any stock certificate shall, from any cause, cease to be such officer before the certificate has been delivered by the Company, the certificate may nevertheless be adopted by the Company and be issued and delivered as though the person had not ceased to be such officer.

Section 2.  Shares of stock shall be transferable only on the books of the Company and upon proper endorsement and surrender of the outstanding certificates representing the same.  If any outstanding certificate of stock shall be lost, destroyed or stolen, the officers of the Company shall have authority to cause a new certificate to be issued to replace such certificate upon the receipt by the Company of satisfactory evidence that such certificate has been lost, destroyed or stolen and of a bond of indemnity deemed sufficient by the officers to protect the Company and any registrar and any transfer agent of the Company against loss which may be sustained by reason of issuing such new certificate to replace the certificate reported lost, destroyed or stolen; and any transfer agent of the Company shall be authorized to issue and deliver such new certificate and any registrar of the Company is authorized to register such new certificate, upon written directions signed by the Chairman of the Board, the President or a Vice-President and by the Treasurer or the Secretary of the Company.

Section 3.  All certificates representing each class of stock shall be numbered and a record of each certificate shall be kept showing the name of the person to whom the certificate was issued with the number and the class of shares and the date thereof.  All certificates exchanged or returned to the Company shall be cancelled and an appropriate record made.

Section 4.  The Board of Directors may fix a date not exceeding seventy days preceding the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date of allotment of rights, or, subject to contract rights with respect thereto,

the date when any change or conversion or exchange of shares shall be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or allotment of rights, or to exercise the rights with respect to any such change, conversion or exchange of shares, and in such case only shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, or to receive payment of such dividend or allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of shares on the books of the Company after the record date fixed as aforesaid.  The Board of Directors may close the books of the Company against transfer of shares during the whole or any part of such period.  When a determination of shareholders entitled to notice of and to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof except as otherwise provided by statute.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.  An Annual Meeting of Stockholders of the Company shall be held at such date and time as shall be designated from time to time by the Board of Directors.  Each such Annual Meeting shall be held at the principal office of the Company in Kentucky or at such other place as the Board of Directors may designate from time to time.

Section 2.  Special meetings of the stockholders may be called by the Board of Directors or by the holders of not less than 51% of all the votes entitled to be cast on each issue proposed to be considered at the special meeting, or in such other manner as may be provided by statute.  Business transacted at special meetings shall be confined to the purposes stated in the notice of meeting.

Section 3.  Notice of the time and place of each annual or special meeting of stockholders shall be sent by mail to the recorded address of each stockholder entitled to vote not less than ten or more than sixty days before the date of the meeting, except in cases where other special method of notice may be required by statute, in which case the statutory method shall be followed.  The notice of special meeting shall state the object of the meeting.  Notice of any meeting of the stockholders may be waived by any stockholder.

Section 4.   At an Annual Meeting of the Stockholders, only such business shall be conducted as shall have been properly brought before the meeting in accordance with the procedures set forth in these By-laws.  To be properly brought before the Annual Meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise be a proper matter for consideration and otherwise be properly requested to be brought before the meeting by a stockholder as hereinafter provided.  For business to be properly requested to be brought before an Annual Meeting by a stockholder, a stockholder of a class of shares of the Company entitled to vote upon the matter requested to be brought before the meeting (or his designated proxy as provided below) must have given timely and proper notice thereof to the Secretary.  To be timely, a

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stockholder’s notice must be given by personal delivery or mailed by United States mail, postage prepaid, and received by the Secretary not fewer than sixty calendar days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by mail, press release or otherwise or disclosed in a public report, information statement, or other filing made with the Securities and Exchange Commission, in either case, at least seventy calendar days prior to the meeting, notice by the stockholder to be timely must be received by the Secretary, as provided above, not later than the close of business on the tenth day following the day on which such notice of the date of the meeting or such public disclosure or filing was made.  To be proper, a stockholder’s notice to the Secretary must be in writing and must set forth as to each matter the stockholder proposes to bring before the Annual Meeting (a) a description in reasonable detail of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (b) the name and address, as they appear on the Company books, of the stockholder proposing such business or granting a proxy to the proponent or an intermediary, (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (d) the name and address of the proponent, if the holder of a proxy from a qualified stockholder of record, and the names and addresses of any intermediate proxies, (e) the class and number of shares of the Company which are beneficially owned by the stockholder, and (f) any material interest of the stockholder or the proponent in such business.  The chairman of an Annual Meeting shall determine whether business was properly brought before the meeting, which determination absent manifest error will be conclusive for all purposes.

Section 5.  The Chairman of the Board, if present, and in his absence the President, and the Secretary of the Company, shall act as Chairman and Secretary, respectively, at each stockholders meeting, unless otherwise provided by the Board of Directors prior to the meeting.  Unless otherwise determined by the Board of Directors prior to the meeting, the Chairman of the stockholders’ meeting shall determine the order of business and shall have the authority in his discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the Company or their duly appointed proxies) who may attend any such stockholders’ meeting, by determining whether any stockholder or his proxy may be excluded from any stockholders’ meeting based upon any determination by the Chairman, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by regulating the circumstances in which any person may make a statement or ask questions at any stockholders’ meeting.

Section 6.  The Company shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by law.

Section 7.  The Board of Directors may postpone and reschedule any previously scheduled annual or special meeting of stockholders and may adjourn any convened meeting of stockholders to another date and time as specified by the chairman of the meeting.

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ARTICLE III

BOARD OF DIRECTORS

Section 1.   The Board shall be composed of such number of Directors as shall be set by resolution of the Board.  The number of Directors may be changed from time to time by resolution of the Board of Directors or by amendment to these By-laws, but no decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director.  Unless a Director dies, resigns or is removed, he shall hold office until the next annual meeting of the shareholders or until a successor is elected, whichever is later.  Directors need not be shareholders of the corporation or residents of the Commonwealth of Kentucky or of the Commonwealth of Virginia.  Except as otherwise expressly provided by the Articles of Incorporation, the Board of Directors may fill, until the first annual election thereafter and until the necessary election shall have taken place, vacancies occurring at any time in the membership of the Board by death, resignation or otherwise.  Written notice of such resignation shall be made as provided by law.

Section 2.  Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally.  However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if the stockholder has given timely and proper notice thereof to the Secretary.  To be timely, a stockholder’s notice must be given by personal delivery or mailed by United States mail, postage prepaid, and received by the Secretary not fewer than sixty calendar days or more than ninety calendar days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by mail, press release or otherwise or disclosed in a public report, information statement or other filing made with the Securities and Exchange Commission, in either case, at least seventy calendar days prior to the meeting, notice by the stockholder to be timely must be so received by the Secretary, as provided above, not later than the close of business on the tenth day following the day on which such notice of the date of the meeting or such public disclosure or filing was made.  To be proper, a stockholder’s notice of nomination to the Secretary must be in writing and must set forth as to each nominee:  (a) the name and address, as they appear on the Company books, of the stockholder who intends to make the nomination or granting a proxy to the proponent or an intermediary; (b) the name and address of the person or persons to be nominated; (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors, provided that (i) such information does not in any way violate any applicable Securities and Exchange Commission regulation, including regulations concerning public availability of information, and (ii) any information withheld on such basis shall be provided by separate notice

4

at such time as would not be in violation of any applicable Securities and Exchange Commission regulation, such notice to be a supplement to the notice otherwise required herein; (f) the class and number of shares of the Company which are beneficially owned by the stockholder; and (g) the signed consent of each nominee to serve as a director of the Company if so elected.

Section 3.  If the Chairman of the meeting for the election of Directors determines that a nomination of any candidate for election as a director at such meeting was not made in accordance with the applicable provisions of these By-laws, such nomination shall be void.

Section 4.  The Board of Directors may adopt such special rules and regulations for the conduct of their meetings and the management of the affairs of the Company as they may determine to be appropriate, not inconsistent with law or these By-laws.

Section 5.  A regular meeting of the Board of Directors shall be held as soon as practicable after the annual meeting of stockholders in each year.  In addition, regular quarterly meetings of the Board may be held at the general offices of the Company in Kentucky, or at such other place as shall be specified in the notice of such meeting on the last Monday of January, July and October in each year.  Written notice of every regular meeting of the Board, stating the time of day at which such meeting will be held, shall be given to each Director not less than two days prior to the date of the meeting.  Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail.

Section 6.  Special meetings of the Board may be called at any time by the Chairman of the Board, or the President, or by a Vice-President when acting as President, or by any two Directors.  Notice of such meeting, stating the place, day and hour of the meeting shall be given to each Director not less than one day prior to the date of the meeting.  Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail.

Section 7.  Notice of any meeting of the Board may be waived by any Director.

Section 8.  A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the board, but a less number may adjourn the meeting to some other day or sine die.  The Board of Directors shall keep minutes of their proceedings at their meetings. The members of the Board may be paid such fees or compensations for their services as Directors as the Board, from time to time, by resolution, may determine.

Section 9.  The Chairman of the Board, if such person is present, shall serve as Chairman at each regular or special meeting of the Board of Directors and shall determine the order of business at such meeting.  If the Chairman of the Board is not present at a regular or special meeting of the Board of Directors, the Vice Chairman of the Board shall serve as Chairman of such meeting and shall determine the order of business of such meeting.  The Board of Directors may elect one of its members as Vice Chairman of the Board.

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ARTICLE IV

COMMITTEES

Section 1.  The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members of the Board, including the Chairman of the Board, if there be one, and the President of the Company.  The Executive Committee may make its own rules of procedure and elect its Chairman, and shall meet where and as provided by such rules, or by resolution of the Board of Directors.  A majority of the members of the Committee shall constitute a quorum for the transaction of business.  During the intervals between the meetings of the Board of Directors, the Executive Committee shall have all the powers of the Board in the management of the business and affairs of the Company except as limited by statute, including power to authorize the seal of the Company to be affixed to all papers which require it, and, by majority vote of all its members, may exercise any and all such powers in such manner as such Committee shall deem best for the interests of the Company, in all cases in which specific directions shall not have been given by the Board of Directors.  The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at meetings thereof.

Section 2.  The Board of Directors may appoint other committees, standing or special, from time to time from among their own number, or otherwise, and confer powers on such committees, and revoke such powers and terminate the existence of such committees at its pleasure.

Section 3.  Meetings of any committee may be called in such manner and may be held at such times and places as such committee may by resolution determine, provided that a meeting of any committee may be called at any time by the Chairman of the Board or by the President.  Notice of such meeting, stating the place, day and hour of the meeting shall be given to each Director not less than one day prior to the meeting.  Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail.  Members of all committees may be paid such fees for attendance at meetings as the Board of Directors may determine.

ARTICLE V

OFFICERS

Section 1.  The officers of the Company shall be a Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Chief Administrative Officer, one or more Vice Presidents, Secretary, Treasurer, Controller or such other officers (including, if so directed by a resolution of the Board of Directors, the Chairman of the Board) as the Board or the Chief Executive Officer may from time to time elect or appoint.  Any two of the offices may be combined in one person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity.  If practicable, officers are to be elected or appointed by the Board of Directors or the Chief Executive Officer at the first meeting of the Board following the annual

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meeting of stockholders and, unless otherwise specified, shall hold office for one year or until their successors are elected and qualified.  Any vacancy shall be filled by the Board of Directors or the Chief Executive Officer.  Except as provided below, officers shall perform those duties usually incident to the office or as otherwise required by the Board of Directors, the Chief Executive Officer, or the officer to whom they report.  An officer may be removed with or without cause and at any time by the Board of Directors or by the Chief Executive Officer.

Section 2.  The Chief Executive Officer of the Company shall have full charge of all of the affairs of the Company and shall report directly to the Board of Directors.

Section 3.  The President, should that office be created and filled, shall exercise such functions as may be delegated by the Chief Executive Officer and shall exercise the functions of the Chief Executive Officer during the absence or disability of the Chief Executive Officer.

Section 4.  The Chief Operating Officer, should that office be created and filled, shall have responsibility for the management and direction of the Company, subject to the direction and approval of the Chief Executive Officer.

Section 5.  The Chief Financial Officer, should that office be created and filled, shall have responsibility for the financial affairs of the Company, including maintaining accurate books and records, meeting all financial reporting requirements and controlling Company funds, subject to the direction and approval of the Chief Executive Officer.

Section 6.  The Chief Administrative Officer, should that office be created and filled, shall have responsibility for the general administrative and human resources operations of the Company, subject to the direction and approval of the Chief Executive Officer.

Section 7.  The Vice President or Vice Presidents, should such offices be created and filled, may be designated as Vice President, Senior Vice President or Executive Vice President, as the Board of Directors or Chief Executive Officer may determine.

Section 8.  The Secretary shall be present at and record the proceedings of all meetings of the Board of Directors and of the stockholders, give notices of meetings of Directors and stockholders, have custody of the seal of the Company and affix it to any instrument requiring the same, and shall have the power to sign certificates for shares of stock of the Company.

Section 9.  The Treasurer, should that office be created and filled, shall have responsibility for all receipts and disbursements of the Company and be custodian of the Company’s funds.

Section 10.  The Controller, should that office be created and filled, shall have responsibility for the accounting records of the Company.

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ARTICLE VI

MISCELLANEOUS

Section 1.  The funds of the Company shall be deposited to its credit in such banks or trust companies as are selected by the Treasurer, subject to the approval of the chief executive officer.  Such funds shall be withdrawn only on checks or drafts of the Company for the purpose of the Company, except that such funds may be withdrawn without the issuance of a check or draft (a) to effect a transfer of funds between accounts maintained by the Company at one or more depositaries; (b) to effect the withdrawal of funds, pursuant to resolution of the Board of Directors, for the payment of either commercial paper promissory notes of other entities or government securities purchased by the Company; (c) to effect a withdrawal of funds by the Company pursuant to the terms of any agreement or other document, approved by the Board of Directors, which requires or contemplates payment or payments by the Company by means other than a check or draft; or (d) to effect a withdrawal of funds for such other purpose as the Board of Directors by resolution shall provide.  All checks and drafts of the Company shall be signed in such manner and by such officer or officers or such individuals as the Board of Directors, from time to time by resolution, shall determine.  Only checks and drafts so signed shall be valid checks or drafts of the Company.

Section 2.  No debt shall be contracted except for current expenses unless authorized by the Board of Directors or the Executive Committee, and no bills shall be paid by the Treasurer unless audited and approved by the Controller or some other person or committee expressly authorized by the Board of Directors or the Executive Committee, to audit and approve bills for payment.  All notes of the Company shall be executed by two different officers of the Company.  Either or both of such executions may be by facsimile.

Section 3.  The fiscal year of the Company shall close at the end of December annually.

ARTICLE VII

INDEMNIFICATION OF DIRECTORS, OFFICERS,

EMPLOYEES AND AGENTS

Section 1.  Unless prohibited by law, the Company shall indemnify each of its Directors, officers, employees and agents against expenses (including attorneys’ fees), judgments, taxes, fines and amounts paid in settlement, incurred by such person in connection with, and shall advance expenses (including attorneys’ fees) incurred by such person in defending any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) to which such person was, is, or is threatened to be made a party by reason of the fact that such person is or was a Director, officer, employee or agent of another domestic or foreign corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan.  Advancement of expenses shall be made upon receipt of a written statement of his good faith belief that he has met the standard of conduct as required by statute and a written undertaking, with such security, if any, as the Board may reasonably require, by or on behalf of

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the person seeking indemnification, to repay amounts advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Company.

Section 2.  In addition (and not by way of limitation of) the foregoing provisions of Section 1 of this Article VII and the provisions of the Kentucky Business Corporation Act, each person (including the heirs, executors, administrators and estate of such person) who is or was or had agreed to become a Director, officer, employee or agent of the Company and each person (including the heirs, executors, administrators and estate of such person) who is or was serving or who had agreed to serve at the request of the Directors or any officer of the Company as a Director, officer, employee, trustee, partner or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be indemnified by the Company to the fullest extent permitted by the Kentucky Business Corporation Act or any other applicable laws as presently or hereafter in effect.  Without limiting the generality or the effect of the foregoing, the Company is authorized to enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article VII.  Any repeal or modification of this Article by the stockholders of the Company shall not adversely affect any indemnification of any person hereunder in respect of any act or omission occurring prior to the time of such repeal or modification.

Section 3.  The Company may purchase and maintain insurance on behalf of any person who is or was entitled to indemnification as described above, whether or not the Company would have the power or duty to indemnify such person against such liability under this Article VII or applicable law.

Section 4.  To the extent required by applicable law, any indemnification of, or advance of expenses to, any person who is or was entitled to indemnification as described above, if arising out of a proceeding by or in the right of the Company, shall be reported in writing to the stockholders with or before the notice of the next stockholder’ meeting.

Section 5.  The indemnification provided by this Article VII:  (a) shall not be deemed exclusive of any other rights to which the Company’s Directors, officers, employees or agents may be entitled pursuant to the Articles of Incorporation, any agreement of indemnity, as a matter of law or otherwise; and (b) shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of such person’s heirs, executors and administrators.

ARTICLE VIII

AMENDMENT OR REPEAL OF BY-LAWS

These By-laws may be added to, amended or repealed at any meeting of the Board of Directors, and may also be added to, amended or repealed by the stockholders.

9

BY-LAWS

OF

KENTUCKY UTILITIES COMPANY

Dated April 28, 1998

(as amended through June 2, 1999)

(as amended through December 16, 2003)

EX-4.(A)-4

Exhibit 4(a)-4

[Form of KU 2015 Exchange Bond]

THIS IS A GLOBAL BOND HELD BY OR ON BEHALF OF THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL BOND MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2(a) OF PART II OF THE OFFICER’S CERTIFICATE ESTABLISHING THIS SERIES OF BONDS UNDER THE INDENTURE AND (III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE.

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No CUSIP No.

Principal Amount of $

KENTUCKY UTILITIES COMPANY

FIRST MORTGAGE BOND, 1.625% SERIES DUE 2015

KENTUCKY UTILITIES COMPANY, a corporation duly organized and existing under the laws of the Commonwealths of Kentucky and Virginia (herein referred to as the “Company”, which term includes any Successor Corporation under the Indenture referred to below), for value received, hereby promises to pay to Cede & Co. or to its registered assigns, the principal sum of                                                ($                      ) Dollars or such principal amount as is set forth in Schedule of Exchanges of Interest in the Global Bond attached hereto on November 1, 2015 (the “Stated Maturity Date”), and to pay interest on said principal sum semi-annually in arrears on May 1 and November 1 of each year (each, an “Interest Payment Date”), at the rate of 1.625% per annum until the principal hereof is paid or made available for payment.  The first Interest Payment Date for the Securities of this series shall be May 1, 2011, and interest on the Securities of this series will accrue from and including November 16, 2010, to and excluding the first Interest Payment Date, and thereafter will accrue from and including the last Interest Payment Date to which interest on the Securities of this series has been paid or duly provided for.  No interest will accrue on the Securities of this series with respect to the day on which the Securities are paid.

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of Authentication:
	THE BANK OF NEW YORK MELLON, as Trustee
	By:
		Authorized Signatory

In the event that any Interest Payment Date is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of such delay) with the same force and effect as if made on the Interest Payment Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the April 15 or October 15, whether or not a Business Day (each such date, a “Regular Record Date”), immediately preceding such Interest Payment Date, except that interest payable at Maturity will be payable to the Person to whom principal shall be paid.  Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a

2

Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture referred to herein.  Interest on this Security will be computed on the basis of a 360-day year of twelve 30-day months.

Payment of the principal of and premium, if any, and interest at Maturity on this Security shall be made upon presentation of this Security at the corporate trust office of The Bank of New York Mellon in New York, New York, or at such other office or agency as may be designated for such purpose by the Company from time to time, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and payment of interest, if any, on this Security (other than interest payable at Maturity) shall be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register, provided that if such Person is a securities depositary, such payment may be made by such other means in lieu of check as shall be agreed upon by the Company, the Trustee and such Person.

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and issuable in one or more series under an Indenture, dated as of October 1, 2010 (herein called the “Original Indenture” and, together with any amendments or supplements thereto and the Officer’s Certificate establishing the terms of the Securities of this series, the “Indenture,” which term shall have the meaning assigned to it in the Original Indenture), between the Company and The Bank of New York Mellon, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture, including Supplemental Indenture No. 2 thereto, for a statement of the property mortgaged, pledged and held in trust, the nature and extent of the security, the conditions upon which the lien of the Indenture may be released and the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  The acceptance of this Security by the Holder hereof shall be deemed to constitute the consent and agreement by such Holder to all of the terms and provisions of the Indenture.  This Security is one of the series designated on the face hereof.

This Security is subject to redemption at the option of the Company, in whole at any time or in part from time to time, at a redemption price equal to the greater of:

(a)100% of the principal amount of this Security to be so redeemed; and

(b)as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest on the principal amount of this Security to be so redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 10 basis points,

plus, in either of the above cases, accrued and unpaid interest to the date of redemption.

Promptly after the calculation thereof, the Company shall give the Trustee written notice of the redemption price for the foregoing redemption.  The Trustee shall have no responsibility for any such calculation.

As used herein:

3

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term to the Stated Maturity Date of this Security that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of this Security.

“Comparable Treasury Price” means, with respect to any redemption date:

a)the average of five Reference Treasury Dealer Quotations for that redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or

b)if the Quotation Agent obtains fewer than five Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations so received.

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

“Reference Treasury Dealer” means:

a)each of Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their respective successors, unless any of them ceases to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), in which case the Company shall substitute another Primary Treasury Dealer; and

b)any other Primary Treasury Dealers selected by the Company (after consultation with the Quotation Agent).

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount), as provided to the Quotation Agent by that Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.

Notice of redemption shall be given by mail to Holders of Securities, not less than 30 days nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.  As provided in the Indenture, notice of redemption at the election of the Company as aforesaid may state that such redemption shall be conditional upon the receipt by the applicable Paying Agent or Agents of money sufficient to pay the principal of and premium, if any, and interest, on this Security on or prior to the date fixed for such redemption; a notice of redemption so conditioned shall be of no force or effect if such money is not so received and, in such event, the Company shall not be required to redeem this Security.

4

In the event of redemption of this Security in part only, a new Security or Securities of this series of like tenor representing the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

If an Event of Default with respect to the Securities of this series shall occur and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected.  The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of all series affected at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless (a) such Holder shall have previously given the Trustee written notice of a continuing Event of Default; (b) the Holders of 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity; (c) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Securities a direction inconsistent with such request; and (d) shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity.  The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

The Securities of this series are issuable only in registered form without coupons, and in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company for such purpose, duly endorsed by, or accompanied by a written instrument or transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and Tranche, of authorized denominations and of like tenor and aggregate principal amount, shall be issued to the designated transferee or transferees.

5

As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series and Tranche are exchangeable for a like aggregate principal amount of Securities of the same series and Tranche of any authorized denominations, as requested by the Holder surrendering the same, and of like tenor upon surrender of the Security or Securities to be exchanged at the office or agency of the Company for such purpose.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company shall not be required to execute and the Security Registrar shall not be required to register the transfer of or exchange of (a) Securities of this series during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities of this series called for redemption or (b) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the absolute owner hereof for all purposes (subject to Sections 305 and 307 of the Indenture), whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York (including, without limitation, Section 5-1401 of the New York General Obligations Law or any successor to such statute), except to the extent that the Trust Indenture Act shall be applicable and except to the extent that the law of the any other jurisdiction shall mandatorily govern.

As used herein, “Business Day,” means any day, other than a Saturday or Sunday, that is not a day on which banking institutions or trust companies in The City of New York, New York, or other city in which a paying agent for this Security is located, are generally authorized or required by law, regulation or executive order to remain closed.  All other terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, member, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities.

6

Unless the certificate of authentication hereon has been executed by the Trustee referred to herein by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date of Security:
	KENTUCKY UTILITIES COMPANY
	By:
		Name:
		Title:
		Name:
		Title:

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND

The following exchanges of a part of this Global Bond for an interest in another Global Bond, or exchanges of a part of another Global Bond for an interest in this Global Bond, have been made:

Date of
Exchange Amount of
decrease in
Principal
Amount of this
Global Bond Amount of
increase in
Principal
Amount of this
Global Bond Principal
Amount of this
Global Bond
following such
decrease (or
increase) Signature of
authorized
signatory of
Trustee or Bond
Custodian

ASSIGNMENT FORM

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

[please insert social security or other identifying number of assignee]

[please print or typewrite name and address of assignee]

the within Security of KENTUCKY UTILITIES COMPANY and does hereby irrevocably constitute and appoint                                          , Attorney,  to transfer said Security on the books of the within-mentioned Company, with full power of substitution in the premises.

Dated:

[signature of assignee]

Notice:  The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever.

SIGNATURE GUARANTEE

(Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)

EX-4.(A)-5

Exhibit 4(a)-5

[Form of KU 2020 Exchange Bond]

THIS IS A GLOBAL BOND HELD BY OR ON BEHALF OF THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL BOND MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2(a) OF PART II OF THE OFFICER’S CERTIFICATE ESTABLISHING THIS SERIES OF BONDS UNDER THE INDENTURE AND (III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE.

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No. CUSIP No.

Principal Amount of $

KENTUCKY UTILITIES COMPANY

FIRST MORTGAGE BOND, 3.250% SERIES DUE 2020

KENTUCKY UTILITIES COMPANY, a corporation duly organized and existing under the laws of the Commonwealths of Kentucky and Virginia (herein referred to as the “Company”, which term includes any Successor Corporation under the Indenture referred to below), for value received, hereby promises to pay to Cede & Co. or to its registered assigns, the principal sum of                                                          ($                      ) Dollars or such principal amount as is set forth in Schedule of Exchanges of Interest in the Global Bond attached hereto on November 1, 2020 (the “Stated Maturity Date”), and to pay interest on said principal sum semi-annually in arrears on May 1 and November 1 of each year (each, an “Interest Payment Date”), at the rate of 3.250% per annum until the principal hereof is paid or made available for payment.  The first Interest Payment Date for the Securities of this series shall be May 1, 2011, and interest on the Securities of this series will accrue from and including November 16, 2010, to and excluding the first Interest Payment Date, and thereafter will accrue from and including the last Interest Payment Date to which interest on the Securities of this series has been paid or duly provided for.  No interest will accrue on the Securities of this series with respect to the day on which the Securities are paid.

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of Authentication:
	THE BANK OF NEW YORK MELLON, as Trustee
	By:
		Authorized Signatory

In the event that any Interest Payment Date is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of such delay) with the same force and effect as if made on the Interest Payment Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the April 15 or October 15, whether or not a Business Day (each such date, a “Regular Record Date”), immediately preceding such Interest Payment Date, except that interest payable at Maturity will be payable to the Person to whom principal shall be paid.  Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a

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Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture referred to herein.  Interest on this Security will be computed on the basis of a 360-day year of twelve 30-day months.

Payment of the principal of and premium, if any, and interest at Maturity on this Security shall be made upon presentation of this Security at the corporate trust office of The Bank of New York Mellon in New York, New York, or at such other office or agency as may be designated for such purpose by the Company from time to time, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and payment of interest, if any, on this Security (other than interest payable at Maturity) shall be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register, provided that if such Person is a securities depositary, such payment may be made by such other means in lieu of check as shall be agreed upon by the Company, the Trustee and such Person.

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and issuable in one or more series under an Indenture, dated as of October 1, 2010 (herein called the “Original Indenture” and, together with any amendments or supplements thereto and the Officer’s Certificate establishing the terms of the Securities of this series, the “Indenture,” which term shall have the meaning assigned to it in the Original Indenture), between the Company and The Bank of New York Mellon, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture, including Supplemental Indenture No. 2 thereto, for a statement of the property mortgaged, pledged and held in trust, the nature and extent of the security, the conditions upon which the lien of the Indenture may be released and the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  The acceptance of this Security by the Holder hereof shall be deemed to constitute the consent and agreement by such Holder to all of the terms and provisions of the Indenture.  This Security is one of the series designated on the face hereof.

Prior to August 1, 2020, this Security is subject to redemption at the option of the Company, in whole at any time or in part from time to time, at a redemption price equal to the greater of:

(a)100% of the principal amount of this Security to be so redeemed; and

(b)as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest on the principal amount of this Security to be so redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 15 basis points,

plus, in either of the above cases, accrued and unpaid interest to the date of redemption.

Promptly after the calculation thereof, the Company shall give the Trustee written notice of the redemption price for the foregoing redemption.  The Trustee shall have no responsibility for any such calculation.

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On or after August 1, 2020, this Security is subject to redemption at the option of the Company, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of this Security to be so redeemed, plus accrued and unpaid interest to the date of redemption.

As used herein:

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term to the Stated Maturity Date of this Security that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of this Security.

“Comparable Treasury Price” means, with respect to any redemption date:

a)the average of five Reference Treasury Dealer Quotations for that redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or

b)if the Quotation Agent obtains fewer than five Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations so received.

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

“Reference Treasury Dealer” means:

a)each of Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their respective successors, unless any of them ceases to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), in which case the Company shall substitute another Primary Treasury Dealer; and

b)any other Primary Treasury Dealers selected by the Company (after consultation with the Quotation Agent).

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount), as provided to the Quotation Agent by that Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.

Notice of redemption shall be given by mail to Holders of Securities, not less than 30 days nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.  As provided in the Indenture, notice of redemption at the election of the Company as aforesaid may state that such redemption shall be conditional upon the receipt by the applicable Paying Agent or Agents of money

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sufficient to pay the principal of and premium, if any, and interest, on this Security on or prior to the date fixed for such redemption; a notice of redemption so conditioned shall be of no force or effect if such money is not so received and, in such event, the Company shall not be required to redeem this Security.

In the event of redemption of this Security in part only, a new Security or Securities of this series of like tenor representing the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

If an Event of Default with respect to the Securities of this series shall occur and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected.  The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of all series affected at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless (a) such Holder shall have previously given the Trustee written notice of a continuing Event of Default; (b) the Holders of 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity; (c) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Securities a direction inconsistent with such request; and (d) shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity.  The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

The Securities of this series are issuable only in registered form without coupons, and in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company for such purpose, duly endorsed by, or accompanied by a written

5

instrument or transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and Tranche, of authorized denominations and of like tenor and aggregate principal amount, shall be issued to the designated transferee or transferees.

As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series and Tranche are exchangeable for a like aggregate principal amount of Securities of the same series and Tranche of any authorized denominations, as requested by the Holder surrendering the same, and of like tenor upon surrender of the Security or Securities to be exchanged at the office or agency of the Company for such purpose.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company shall not be required to execute and the Security Registrar shall not be required to register the transfer of or exchange of (a) Securities of this series during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities of this series called for redemption or (b) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the absolute owner hereof for all purposes (subject to Sections 305 and 307 of the Indenture), whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York (including, without limitation, Section 5-1401 of the New York General Obligations Law or any successor to such statute), except to the extent that the Trust Indenture Act shall be applicable and except to the extent that the law of the any other jurisdiction shall mandatorily govern.

As used herein, “Business Day,” means any day, other than a Saturday or Sunday, that is not a day on which banking institutions or trust companies in The City of New York, New York, or other city in which a paying agent for this Security is located, are generally authorized or required by law, regulation or executive order to remain closed.  All other terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, member, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities.

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Unless the certificate of authentication hereon has been executed by the Trustee referred to herein by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date of Security:
	KENTUCKY UTILITIES COMPANY
	By:
		Name:
		Title:
		Name:
		Title:

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND

The following exchanges of a part of this Global Bond for an interest in another Global Bond, or exchanges of a part of another Global Bond for an interest in this Global Bond, have been made:

Date of
Exchange Amount of
decrease in
Principal
Amount of this
Global Bond Amount of
increase in
Principal
Amount of this
Global Bond Principal
Amount of this
Global Bond
following such
decrease (or
increase) Signature of
authorized
signatory of
Trustee or Bond
Custodian

ASSIGNMENT FORM

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

[please insert social security or other identifying number of assignee]

[please print or typewrite name and address of assignee]

the within Security of KENTUCKY UTILITIES COMPANY and does hereby irrevocably constitute and appoint                                          , Attorney,  to transfer said Security on the books of the within-mentioned Company, with full power of substitution in the premises.

Dated:

[signature of assignee]

Notice: The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever.

SIGNATURE GUARANTEE

(Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)

EX-4.(A)-6

Exhibit 4(a)-6

[Form of KU 2040 Exchange Bond]

THIS IS A GLOBAL BOND HELD BY OR ON BEHALF OF THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS BOND) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL BOND MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2(a) OF PART II OF THE OFFICER’S CERTIFICATE ESTABLISHING THIS SERIES OF BONDS UNDER THE INDENTURE AND (III) THIS GLOBAL BOND MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE.

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No. CUSIP No.

Principal Amount of $

KENTUCKY UTILITIES COMPANY

FIRST MORTGAGE BOND, 5.125% SERIES DUE 2040

KENTUCKY UTILITIES COMPANY, a corporation duly organized and existing under the laws of the Commonwealths of Kentucky and Virginia (herein referred to as the “Company”, which term includes any Successor Corporation under the Indenture referred to below), for value received, hereby promises to pay to Cede & Co. or to its registered assigns, the principal sum of                                                    ($                      ) Dollars or such principal amount as is set forth in Schedule of Exchanges of Interest in the Global Bond attached hereto on November 1, 2040 (the “Stated Maturity Date”), and to pay interest on said principal sum semi-annually in arrears on May 1 and November 1 of each year (each, an “Interest Payment Date”), at the rate of 5.125% per annum until the principal hereof is paid or made available for payment.  The first Interest Payment Date for the Securities of this series shall be May 1, 2011, and interest on the Securities of this series will accrue from and including November 16, 2010, to and excluding the first Interest Payment Date, and thereafter will accrue from and including the last Interest Payment Date to which interest on the Securities of this series has been paid or duly provided for.  No interest will accrue on the Securities of this series with respect to the day on which the Securities are paid.

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of Authentication:
	THE BANK OF NEW YORK MELLON, as Trustee
	By:
		Authorized Signatory

In the event that any Interest Payment Date is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of such delay) with the same force and effect as if made on the Interest Payment Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the April 15 or October 15, whether or not a Business Day (each such date, a “Regular Record Date”), immediately preceding such Interest Payment Date, except that interest payable at Maturity will be payable to the Person to whom principal shall be paid.  Any such interest not so punctually paid or duly provided for will forthwith cease

to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture referred to herein.  Interest on this Security will be computed on the basis of a 360-day year of twelve 30-day months.

Payment of the principal of and premium, if any, and interest at Maturity on this Security shall be made upon presentation of this Security at the corporate trust office of The Bank of New York Mellon in New York, New York, or at such other office or agency as may be designated for such purpose by the Company from time to time, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and payment of interest, if any, on this Security (other than interest payable at Maturity) shall be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register, provided that if such Person is a securities depositary, such payment may be made by such other means in lieu of check as shall be agreed upon by the Company, the Trustee and such Person.

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and issuable in one or more series under an Indenture, dated as of October 1, 2010 (herein called the “Original Indenture” and, together with any amendments or supplements thereto and the Officer’s Certificate establishing the terms of the Securities of this series, the “Indenture,” which term shall have the meaning assigned to it in the Original Indenture), between the Company and The Bank of New York Mellon, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture, including Supplemental Indenture No. 2 thereto, for a statement of the property mortgaged, pledged and held in trust, the nature and extent of the security, the conditions upon which the lien of the Indenture may be released and the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  The acceptance of this Security by the Holder hereof shall be deemed to constitute the consent and agreement by such Holder to all of the terms and provisions of the Indenture.  This Security is one of the series designated on the face hereof.

Prior to May 1, 2040, this Security is subject to redemption at the option of the Company, in whole at any time or in part from time to time, at a redemption price equal to the greater of:

(a)100% of the principal amount of this Security to be so redeemed; and

(b)as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest on the principal amount of this Security to be so redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 20 basis points,

plus, in either of the above cases, accrued and unpaid interest to the date of redemption.

Promptly after the calculation thereof, the Company shall give the Trustee written notice of the redemption price for the foregoing redemption.  The Trustee shall have no responsibility for any such calculation.

On or after May 1, 2040, this Security is subject to redemption at the option of the Company, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of this Security to be so redeemed, plus accrued and unpaid interest to the date of redemption.

As used herein:

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term to the Stated Maturity Date of this Security that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of this Security.

“Comparable Treasury Price” means, with respect to any redemption date:

a)the average of five Reference Treasury Dealer Quotations for that redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or

b)if the Quotation Agent obtains fewer than five Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations so received.

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

“Reference Treasury Dealer” means:

a)each of Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their respective successors, unless any of them ceases to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), in which case the Company shall substitute another Primary Treasury Dealer; and

b)any other Primary Treasury Dealers selected by the Company (after consultation with the Quotation Agent).

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount), as provided to the Quotation Agent by that Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.

Notice of redemption shall be given by mail to Holders of Securities, not less than 30 days nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.  As provided in the Indenture, notice of redemption at the election of the Company as aforesaid may state that such redemption shall be conditional upon the receipt by the applicable Paying Agent or Agents of money

sufficient to pay the principal of and premium, if any, and interest, on this Security on or prior to the date fixed for such redemption; a notice of redemption so conditioned shall be of no force or effect if such money is not so received and, in such event, the Company shall not be required to redeem this Security.

In the event of redemption of this Security in part only, a new Security or Securities of this series of like tenor representing the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

If an Event of Default with respect to the Securities of this series shall occur and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected.  The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of all series affected at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless (a) such Holder shall have previously given the Trustee written notice of a continuing Event of Default; (b) the Holders of 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity; (c) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Securities a direction inconsistent with such request; and (d) shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity.  The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

The Securities of this series are issuable only in registered form without coupons, and in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company for such purpose, duly endorsed by, or accompanied by a written

instrument or transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and Tranche, of authorized denominations and of like tenor and aggregate principal amount, shall be issued to the designated transferee or transferees.

As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series and Tranche are exchangeable for a like aggregate principal amount of Securities of the same series and Tranche of any authorized denominations, as requested by the Holder surrendering the same, and of like tenor upon surrender of the Security or Securities to be exchanged at the office or agency of the Company for such purpose.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company shall not be required to execute and the Security Registrar shall not be required to register the transfer of or exchange of (a) Securities of this series during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities of this series called for redemption or (b) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the absolute owner hereof for all purposes (subject to Sections 305 and 307 of the Indenture), whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York (including, without limitation, Section 5-1401 of the New York General Obligations Law or any successor to such statute), except to the extent that the Trust Indenture Act shall be applicable and except to the extent that the law of the any other jurisdiction shall mandatorily govern.

As used herein, “Business Day,” means any day, other than a Saturday or Sunday, that is not a day on which banking institutions or trust companies in The City of New York, New York, or other city in which a paying agent for this Security is located, are generally authorized or required by law, regulation or executive order to remain closed.  All other terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, member, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities.

Unless the certificate of authentication hereon has been executed by the Trustee referred to herein by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date of Security:
	KENTUCKY UTILITIES COMPANY
	By:
		Name:
		Title:
		Name:
		Title:

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND

The following exchanges of a part of this Global Bond for an interest in another Global Bond, or exchanges of a part of another Global Bond for an interest in this Global Bond, have been made:

Date of
Exchange Amount of
decrease in
Principal
Amount of this
Global Bond Amount of
increase in
Principal
Amount of this
Global Bond Principal
Amount of this
Global Bond
following such
decrease (or
increase) Signature of
authorized
signatory of
Trustee or Bond
Custodian

ASSIGNMENT FORM

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

[please insert social security or other identifying number of assignee]

[please print or typewrite name and address of assignee]

the within Security of KENTUCKY UTILITIES COMPANY and does hereby irrevocably constitute and appoint                                          , Attorney,  to transfer said Security on the books of the within-mentioned Company, with full power of substitution in the premises.

Dated:

[signature of assignee]

Notice:  The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever.

SIGNATURE GUARANTEE

(Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)

EX-5.(A)

Exhibit 5(a)

[LETTERHEAD OF KENTUCKY UTILITIES COMPANY]

April 21, 2011

Kentucky Utilities Company

One Quality Street

Lexington, Kentucky 40507

Ladies and Gentlemen:

I am Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer of Kentucky Utilities Company (the “Company”).  In this capacity, I have acted as counsel to the Company with respect to the Registration Statement on Form S-4 (the “Registration Statement”) to be filed by the Company on or about the date hereof with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), for the (i) registration of $250,000,000 of the Company’s 1.625% First Mortgage Bonds due 2015, $500,000,000 of the Company’s 3.250% First Mortgage Bonds due 2020 and $750,000,000 of the Company’s 5.125% First Mortgage Bonds due 2040 (collectively, the “Exchange Bonds”) in connection with an offer by the Company to issue the Exchange Bonds in exchange for an equal principal amount of its 1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040, which are currently outstanding, all as described in the Registration Statement, and (ii) qualification under the Trust Indenture Act of 1939, as amended, of the Company’s Indenture dated as of October 1, 2010, as supplemented (the “Indenture”), to The Bank of New York Mellon, as Trustee, under which the Exchange Bonds are to be issued.

I, or Company attorneys under my supervision, have reviewed the Indenture and the records of various corporate and other actions taken by the Company in connection with the issuance of the Exchange Bonds.  In addition, I have reviewed such other documents and satisfied myself as to such other matters as I have deemed appropriate in order to render this opinion.  For purposes of this opinion letter, I have assumed that at the time of offer and issuance of the Exchange Bonds, the Registration Statement, as it may be amended, shall have become effective under the Securities Act and such effectiveness shall not have been terminated or rescinded, and that there shall not have been any change in law or any authorization affecting the legality or validity of the Exchange Bonds.

Based on the foregoing and upon such examination and representations made to me by Company attorneys under my supervision, upon my familiarity with the Company, and upon an examination of such other documents and questions of law as I have deemed appropriate for purposes of this opinion, I am of the opinion that the Exchange Bonds, when issued and delivered by the Company and authenticated by the Trustee in accordance with the Indenture and as contemplated in the Registration Statement, will be legally issued and binding obligations of the Company.

My opinion as to the legal and binding nature of the Company’s obligations is subject to laws relating to or affecting generally the enforcement of creditors’ and mortgagees’ rights, including,

without limitation, bankruptcy, insolvency or reorganization laws and general principles of equity and by requirements of reasonableness, good faith and fair dealing.

I am a member of the Kentucky Bar and do not hold myself out as an expert on the laws of any other state.  As to all matters of Virginia and Tennessee law, I have relied on the opinion, dated the date hereof, of Stoll Keenon Ogden PLLC, special Kentucky counsel of the Company.  As to all matters governed by the laws of the State of New York, I have relied upon the opinion of even date herewith of Dewey & LeBoeuf LLP, counsel for the Company.  In rendering its opinion to you of even date herewith, Dewey & LeBoeuf LLP may rely as to matters of Kentucky law addressed herein upon this letter as if it were addressed directly to it.

I hereby authorize and consent to the use of this opinion as Exhibit 5(a) to the Registration Statement, and authorize and consent to the reference to me in the Registration Statement and in the prospectus constituting a part thereof.  In giving this consent, I do not hereby concede that I come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC thereunder.

Very truly yours,

/s/ John R. McCall

John R. McCall

EX-5.(B)

Exhibit 5(b)

[LETTERHEAD OF DEWEY & LEBOEUF LLP]

April 21, 2011

Kentucky Utilities Company

One Quality Street

Lexington, Kentucky 40507

Ladies and Gentlemen:

We are acting as special counsel to Kentucky Utilities Company (the “Company”) with respect to the Registration Statement on Form S-4 (the “Registration Statement”) to be filed by the Company on or about the date hereof with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), for the (i) registration of $250,000,000 of the Company’s 1.625% First Mortgage Bonds due 2015, $500,000,000 of the Company’s 3.250% First Mortgage Bonds due 2020 and $750,000,000 of the Company’s 5.125% First Mortgage Bonds due 2040 (collectively, the “Exchange Bonds”) in connection with an offer by the Company to issue the Exchange Bonds in exchange for an equal principal amount of its 1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040, which are currently outstanding, all as described in the Registration Statement, and (ii) qualification under the Trust Indenture Act of 1939, as amended, of the Company’s Indenture dated as of October 1, 2010, as supplemented (the “Indenture”), to The Bank of New York Mellon, as Trustee, under which the Exchange Bonds are to be issued.

We have reviewed the Indenture and the records of various corporate and other actions taken by the Company in connection with the issuance of the Exchange Bonds.  As to various questions of fact relevant to the opinions set forth below, we have relied upon certificates and other oral and written assurances of public officials and officers or other employees of the Company, its subsidiaries and its affiliates.  In addition, we have reviewed such other documents and satisfied ourselves as to such other matters as we have deemed appropriate in order to render this opinion.  For purposes of this opinion letter, we have assumed that at the time of offer and issuance of the Exchange Bonds, the Registration Statement, as it may be amended, shall have become effective under the Securities Act and such effectiveness shall not have been terminated or rescinded, and that there shall not have been any change in law or any authorization affecting the legality or validity of the Exchange Bonds.

Based on the foregoing and, to the extent indicated below, in reliance upon the opinion of other counsel hereinafter mentioned, we are of the opinion that the Exchange Bonds, when issued and delivered by the Company and authenticated by the Trustee in accordance with the Indenture and as contemplated in the Registration Statement, will be legally issued and binding obligations of the Company.

Our opinion as to the legal and binding nature of the Company’s obligations is subject to laws relating to or affecting generally the enforcement of creditors’ and mortgagees’ rights, including, without limitation, bankruptcy, insolvency or reorganization laws and general principles of equity and by requirements of reasonableness, good faith and fair dealing.  We express no opinion with respect to the lien of the Indenture

We are further of the opinion that the information contained in the Registration Statement under “Material U.S. Federal Income Tax Consequences,” subject to the assumptions, exceptions, limitations and qualifications contained therein, constitutes an accurate summary, in general terms, of the indicated U.S. federal income tax consequences to holders of the Exchange Bonds acquired pursuant to the exchange offers contemplated in the Registration Statement.

The opinions set forth herein are limited to the facts and law as they exist on the date hereof.  Such opinions are limited to the laws of the State of New York and the Commonwealth of Kentucky and to the federal laws of the United States of America.  Insofar as such opinions are governed by or dependent on the laws of the Commonwealth of Kentucky, the Commonwealth of Virginia or the State of Tennessee, we have relied upon, and assumed without investigation the correctness of the legal conclusions set forth in, the opinions of even date herewith addressed to you by John R. McCall, Esq., Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer of the Company and by Stoll Keenon Ogden PLLC.  In rendering their opinions of even date addressed to you, Mr. McCall and Stoll Keenon Ogden PLLC may rely as to matters of New York law addressed herein upon this letter as if it were addressed directly to them.

We hereby authorize and consent to the use of this opinion as Exhibit 5(b) to the Registration Statement, and authorize and consent to the reference to our firm in the Registration Statement and in the prospectus constituting a part thereof.  In giving this consent, we do not hereby concede that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC thereunder.

Very truly yours,

/s/ DEWEY & LEBOEUF LLP

DEWEY & LEBOEUF LLP

EX-5.(C)

Exhibit 5(c)

[LETTERHEAD OF STOLL KEENON OGDEN PLLC]

April 21, 2011

Kentucky Utilities Company

One Quality Street

Lexington, Kentucky 40507

Ladies and Gentlemen:

We are acting as special counsel to Kentucky Utilities Company (the “Company”) with respect to the Registration Statement on Form S-4 (the “Registration Statement”) to be filed by the Company on or about the date hereof with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), for the (i) registration of $250,000,000 of the Company’s 1.625% First Mortgage Bonds due 2015, $500,000,000 of the Company’s 3.250% First Mortgage Bonds due 2020 and $750,000,000 of the Company’s 5.125% First Mortgage Bonds due 2040 (collectively, the “Exchange Bonds”) in connection with an offer by the Company to issue the Exchange Bonds in exchange for an equal principal amount of its 1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040 (the “Outstanding Bonds”), which are currently outstanding, all as described in the Registration Statement, and (ii) qualification under the Trust Indenture Act of 1939, as amended, of the Company’s Indenture dated as of October 1, 2010, as supplemented (the “Indenture”), to The Bank of New York Mellon, as Trustee, under which the Exchange Bonds are to be issued.

We have reviewed the Indenture, the three (3) separate Officer’s Certificates of the Company each dated November 16, 2010, pursuant to Sections 201 and 301 of the Indenture, respectively establishing the terms and characteristics of the Outstanding Bonds, and the records of various corporate and other actions taken by the Company in connection with the issuance of the Exchange Bonds.  As to various questions of fact relevant to the opinions set forth below, we have relied upon certificates and other oral and written assurances of public officials and officers or other employees of the Company, its subsidiaries and its affiliates.  In addition, we have reviewed such other documents and satisfied ourselves as to such other matters as we have deemed appropriate in order to render this opinion.  For purposes of this opinion letter, we have assumed that at the time of offer and issuance of the Exchange Bonds, the Registration Statement, as it may be amended, shall have become effective under the Securities Act and such effectiveness shall not have been terminated or rescinded, and that there shall not have been any change in law or any authorization affecting the legality or validity of the Exchange Bonds.

Based on the foregoing and, to the extent indicated below, in reliance upon the opinion of other counsel hereinafter mentioned, we are of the opinion that the Exchange Bonds, when issued and delivered by the Company and authenticated by the Trustee in accordance with the Indenture and as contemplated in the Registration Statement, will be legally issued and binding obligations of the Company.

Our opinion as to the legal and binding nature of the Company’s obligations is subject to laws relating to or affecting generally the enforcement of creditors’ and mortgagees’ rights, including,

without limitation, bankruptcy, insolvency or reorganization laws and general principles of equity and by requirements of reasonableness, good faith and fair dealing.  We express no opinion with respect to the lien of the Indenture

This opinion is limited to the law of the Commonwealths of Kentucky and Virginia and the State of Tennessee.  We express no opinion whatsoever as to the securities laws of any jurisdiction, including the federal securities laws.  Insofar as the opinions set forth herein are dependent upon or affected by matters governed by the laws of the State of New York, we have relied upon the opinion of even date herewith of Dewey & LeBoeuf LLP.  In rendering their opinions to you of even date herewith, Dewey & LeBoeuf LLP and John R. McCall may rely as to matters governed by the law of the Commonwealths of Kentucky and Virginia and the State of Tennessee upon this letter as if it were addressed directly to them.

We hereby authorize and consent to the use of this opinion as Exhibit 5(c) to the Registration Statement, and authorize and consent to the reference to our firm in the Registration Statement and in the prospectus constituting a part thereof.  In giving this consent, we do not hereby concede that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC thereunder.

Very truly yours,

/s/ STOLL KEENON OGDEN PLLC

STOLL KEENON OGDEN PLLC

EX-12.(A)

Exhibit 12(a)

Kentucky Utilities Company
Ratio of Earnings to Fixed Charges
For the Periods as Shown

($ millions)

		2006		2007		2008		2009			January 1, 2010 through October 31, 2010		November 1, 2010 through December 31, 2010
Earnings:
Income from continuing operations before income taxes		$	226	$	244	$	226	$	200		$	218	$	55
Exclude amounts reflected in line above:
Undistributed income of Electric Energy, Inc.		2		5		—		(11		)	4		—
Mark to market impact of derivative instruments(1)		—		—		1		(1		)	—		—
Add fixed charges (see below)		41		59		77		79			71		11
Total Earnings	(A)	$	265	$	298	$	302	$	291		$	285	$	66
Fixed charges:
Interest expense		$	39	$	57	$	74	$	76		$	69	$	10
Estimated interest component of rental expense(2)		2		2		3		3			2		1
Preferred stock dividends		—		—		—		—			—		—
Total Fixed Charges	(B)	$	41	$	59	$	77	$	79		$	71	$	11
Ratio of Earnings to Fixed Charges	(A) ÷ (B)	6.46		5.05		3.92		3.68			4.01		6.00

(1) Represents non-cash unrealized gains or losses on derivative instruments recorded in the statements of income.

(2) Represents one-third of rentals charged to operating expense.

EX-16.(A)

Exhibit 16(a)

April 21, 2011

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We have read the statements made by Kentucky Utilities Company (copy attached), which we understand will be filed with the Securities and Exchange Commission, pursuant to Item 304 of Regulation S-K, as part of the Registration Statement on Form S-4 of Kentucky Utilities Company dated on or about April 21, 2011.  We agree with the statements concerning our Firm in such Form S-4.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

EX-23.(A)

Exhibit 23(a)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-4 of Kentucky Utilities Company of our reports dated February 25, 2011 relating to the financial statements of Kentucky Utilities Company, which appear in such Registration Statement.  We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

Louisville, Kentucky
April 21, 2011

EX-24.(A)

EXHIBIT 24(a)

Kentucky Utilities Company

REGISTRATION STATEMENT ON FORM S-4

POWER OF ATTORNEY

The undersigned directors and officers of Kentucky Utilities Company (the “Company”), a corporation organized and existing under the laws of the Commonwealths of Kentucky and Virginia, hereby appoint John R. McCall and S. Bradford Rives their true and lawful attorneys, and each of them their true and lawful attorney, with power to act without the other and with full power of substitution and resubstitution, to execute for the undersigned and in their names to file with the Securities and Exchange Commission, under provisions of the Securities Act of 1933, as amended, a registration statement or registration statements for the registration under provisions of the Securities Act of 1933, as amended, and any other rules, regulations or requirements of the Securities and Exchange Commission in respect thereof, of $250,000,000 in aggregate principal amount of the Company’s First Mortgage Bonds, 1.625% Series due 2015, $500,000,000 in aggregate principal amount of the Company’s First Mortgage Bonds, 3.250% Series due 2020 and $750,000,000 in aggregate principal amount of the Company’s First Mortgage Bonds, 5.125% Series due 2040, and any and all amendments thereto, whether said amendments add to, delete from or otherwise alter any such registration statement or registration statements, or add or withdraw any exhibits or schedules to be filed therewith and any and all instruments in connection therewith. The undersigned hereby grant to said attorneys and each of them full power and authority to do and perform in the name of and on behalf of the undersigned, and in any and all capabilities, any act and thing whatsoever required or necessary to be done in and about the premises, as fully and to all intents and purposes as the undersigned might do, hereby ratifying and approving the acts of said attorneys and each of them.

1

IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the 21st day of April, 2011.

/s/ Victor A. Staffieri	/s/ Paul W. Thompson
Victor A. Staffieri	Paul W. Thompson
/s/ John R. McCall	/s/ Paul A. Farr
John R. McCall	Paul A. Farr
/s/ Chris Hermann	/s/ William H. Spence
Chris Hermann	William H. Spence
/s/ S. Bradford Rives
S. Bradford Rives

2

EX-25.(A)

Exhibit 25(a)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM T-1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) o

THE BANK OF NEW YORK MELLON

(Exact name of trustee as specified in its charter)

New York (Jurisdiction of incorporation if not a U.S. national bank)	13-5160382 (I.R.S. employer identification no.)
One Wall Street, New York, N.Y. (Address of principal executive offices)	10286 (Zip code)

Kentucky Utilities Company

(Exact name of obligor as specified in its charter)

Kentucky (State or other jurisdiction of incorporation or organization)	61-0247570 (I.R.S. employer identification no.)
One Quality Street Lexington, Kentucky (Address of principal executive offices)	40507 (Zip code)

1.625% First Mortgage Bonds due 2015,
3.250% First Mortgage Bonds due 2020
and 5.125% First Mortgage Bonds Due 2040

(Title of the indenture securities)

1.General information.  Furnish the following information as to the Trustee:

(a)Name and address of each examining or supervising authority to which it is subject.

Name	Address
Superintendent of Banks of the State of New York	One State Street, New York, N.Y. 10004-1417, and Albany, N.Y. 12223
Federal Reserve Bank of New York	33 Liberty Street, New York, N.Y. 10045
Federal Deposit Insurance Corporation	Washington, D.C. 20429
New York Clearing House Association	New York, N.Y. 10005

(b)Whether it is authorized to exercise corporate trust powers.

Yes.

2.Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

16.List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the “Act”) and 17 C.F.R. 229.10(d).

1.A copy of the Organization Certificate of The Bank of New York Mellon (formerly known as The Bank of New York, itself formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637, Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-152735).

2

4.A copy of the existing By-laws of the Trustee.  (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-154173).

6.The consent of the Trustee required by Section 321(b) of the Act (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-152735).

7.A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

3

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York Mellon, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 11th day of April, 2011.

THE BANK OF NEW YORK MELLON
By:	/S/ KIMBERLY AGARD
	Name:	KIMBERLY AGARD
	Title:	VICE PRESIDENT

4

EXHIBIT 7

Consolidated Report of Condition of

THE BANK OF NEW YORK MELLON

of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business December 31, 2010, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.

	Dollar Amounts In Thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin	2,924,000
Interest-bearing balances	64,634,000
Securities:
Held-to-maturity securities	3,651,000
Available-for-sale securities	58,491,000
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold in domestic offices	20,000
Securities purchased under agreements to resell	1,792,000
Loans and lease financing receivables:
Loans and leases held for sale	6,000
Loans and leases, net of unearned income	23,307,000
LESS: Allowance for loan and lease losses	482,000
Loans and leases, net of unearned income and allowance	22,825,000
Trading assets	4,910,000
Premises and fixed assets (including capitalized leases)	1,163,000
Other real estate owned	6,000
Investments in unconsolidated subsidiaries and associated companies	947,000
Direct and indirect investments in real estate ventures	0
Intangible assets:
Goodwill	6,364,000
Other intangible assets	1,805,000

Other assets	12,317,000
Total assets	181,855,000
LIABILITIES
Deposits:
In domestic offices	65,674,000
Noninterest-bearing	33,246,000
Interest-bearing	32,428,000
In foreign offices, Edge and Agreement subsidiaries, and IBFs	75,029,000
Noninterest-bearing	4,900,000
Interest-bearing	70,129,000
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased in domestic offices	3,272,000
Securities sold under agreements to repurchase	1,550,000
Trading liabilities	6,207,000
Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)	2,191,000
Not applicable
Not applicable
Subordinated notes and debentures	3,490,000
Other liabilities	8,577,000
Total liabilities	165,990,000
EQUITY CAPITAL
Perpetual preferred stock and related surplus	0
Common stock	1,135,000
Surplus (exclude all surplus related to preferred stock)	8,591,000
Retained earnings	6,821,000
Accumulated other comprehensive income	-1,044,000
Other equity capital components	0
Total bank equity capital	15,503,000
Noncontrolling (minority) interests in consolidated subsidiaries	362,000
Total equity capital	15,865,000
Total liabilities and equity capital	181,855,000

I, Thomas P. Gibbons, Chief Financial Officer of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

Thomas P. Gibbons,

Chief Financial Officer

We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

Robert P. Kelly	Directors
Gerald L. Hassell
Catherine A. Rein

EX-99.(A)

Exhibit 99(a)

Kentucky Utilities Company

Letter of Transmittal

Offers to Exchange

$250,000,000 aggregate principal amount of its 1.625% First Mortgage Bonds due 2015,

$500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and

$750,000,000 aggregate principal amount of its 5.125% First Mortgage Bonds due 2040,

each of which have been registered under the Securities Act of 1933, as amended,
for any and all of its outstanding 1.625% First Mortgage Bonds due 2015, 3.250% First

Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040, respectively

(such transactions, collectively, the “Exchange Offers”)

THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON          , 2011 (THE “EXPIRATION DATE”) UNLESS THE OFFERS ARE EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

The Exchange Agent for the Exchange Offers is:

THE BANK OF NEW YORK MELLON

By Mail, Hand or Courier	By Facsimile Transmission (eligible institutions only)
The Bank of New York Mellon c/o The Bank of New York Mellon Corporation Corporate Trust — Reorganization Unit 480 Washington Boulevard — 27th Floor Jersey City, New Jersey 07310 Attn:                                  - Processor	(212) 298-1915 To Confirm by Telephone (212) 815-5920

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

The undersigned acknowledges receipt of a prospectus dated          , 2011 (as it may be amended or supplemented from time to time, the “Prospectus”) of Kentucky Utilities Company, a Kentucky and Virginia corporation (the “Company”), and this Letter of Transmittal (the “Letter of Transmittal”), which together constitute the Company’s offer to exchange $250,000,000 aggregate principal amount of 1.625% First Mortgage Bonds due 2015 (the “2015 Exchange Bonds”), $500,000,000 aggregate principal amount of 3.250% First Mortgage Bonds due 2020 (the “2020 Exchange Bonds”) and $750,000,000 aggregate principal amount of 5.125% First Mortgage Bonds due 2040 (the “2040 Exchange Bonds” and, together with the 2015 Exchange Bonds and the 2020 Exchange Bonds, the “Exchange Bonds”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for any and all of its outstanding 1.625% First Mortgage Bonds due 2015 (the “2015 Outstanding Bonds”), 3.250% First Mortgage Bonds due 2020 (the “2010 Outstanding Bonds”) and 5.125% First Mortgage Bonds due 2040 (the “2040 Outstanding Bonds” and, together with the 2015 Outstanding Bonds and the 2020 Outstanding Bonds, the “Outstanding Bonds”).

Holders of Outstanding Bonds should complete this Letter of Transmittal either (a) if certificates representing the Outstanding Bonds are to be forwarded herewith or (b) if tenders of Outstanding Bonds are to be made by book-entry transfer to an account maintained by the Exchange Agent at the book-entry transfer facility specified by the holder pursuant to the procedures set forth in “The Exchange Offers — Procedures for Tendering Outstanding Bonds” and “The Exchange Offers — Book-Entry Delivery Procedures” in the Prospectus and an “Agent’s Message” (as defined below) is not delivered.  If tender is being made by book-entry transfer, the holder must have an Agent’s Message delivered in lieu of this Letter of Transmittal.

Holders of Outstanding Bonds whose certificates for such Outstanding Bonds are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis must tender their Outstanding Bonds according to the guaranteed delivery procedures set forth in “The Exchange Offers — Guaranteed Delivery Procedures” in the Prospectus.

For each Outstanding Bond of any series accepted for exchange, the holder of such Outstanding Bond will receive an Exchange Bond of the corresponding series having a principal amount equal to that of the surrendered Outstanding Bond.  The 2015 Exchange Bonds will accrue interest at a rate of 1.625% per annum, the 2020 Exchange Bonds will accrue interest at a rate of 3.250% Exchange Bonds and the 2040 Exchange Bonds will accrue interest at a rate of 5.125% per annum, in each case payable on May 1 and November 1 of each year.

Unless the context otherwise requires, the term “holder” for purposes of this Letter of Transmittal means any person in whose name Outstanding Bonds are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Outstanding Bonds are held of record by The Depository Trust Company (“DTC”).

Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus.

YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT, WHOSE ADDRESS AND TELEPHONE NUMBER APPEAR ON THE FRONT PAGE OF THIS LETTER OF TRANSMITTAL.

The undersigned has completed the appropriate boxes below and signed this Letter of Transmittal to indicate the action that the undersigned desires to take with respect to the Exchange Offers.

PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS

CAREFULLY BEFORE CHECKING ANY BOX BELOW.

List below the Outstanding Bonds to which this Letter of Transmittal relates.  If the space provided below is inadequate, the certificate numbers and aggregate principal amounts of Outstanding Bonds should be listed on a separate signed schedule affixed hereto

All Tendering Holders Complete Box 1:

Box 1*

Description of Outstanding Bonds Tendered Herewith

Name(s) and Address(es) of Registered Holder(s)(Please fill in, if Blank, Exactly as Name(s) Appear(s) on Certificate(s))	Series of Outstanding Bonds	Certificate or Registration Number(s) of Outstanding Bonds**	Aggregate Principal Amount Represented by Outstanding Bonds	Aggregate Principal Amount of Outstanding Bonds Being Tendered***
	Total:

*           If the space provided is inadequate, list the certificate numbers and principal amount of Outstanding Bonds on a separate signed schedule and attach the list to this Letter of Transmittal.

**        Need not be completed by book-entry holders.

***      The minimum permitted tender is $2,000 in principal amount. All tenders must be in the amount of $2,000 or in integral multiples of $1,000 in excess thereof, provided that any untendered Outstanding Bonds must be in a minimum denomination of $2,000. Unless otherwise indicated in this column, the holder will be deemed to have tendered the full aggregate principal amount represented by such Outstanding Bonds. See instruction 2.

Box 2

Book-Entry Transfer

oCHECK HERE IF TENDERED OUTSTANDING BONDS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

Name of Tendering Institution:

Account Number:

Transaction Code Number:

Holders of Outstanding Bonds that are tendering by book-entry transfer to the Exchange Agent’s account at DTC can execute the tender through DTC’s Automated Tender Offer Program (“ATOP”).  DTC participants that are accepting the Exchange Offers must transmit their acceptances to DTC, which will verify the acceptance and execute a book-entry delivery to the Exchange Agent’s account at DTC.  DTC will then send a computer-generated message (an “Agent’s Message”) to the Exchange Agent for its acceptance in which the holder of the Outstanding Bonds acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, and the DTC participant confirms on behalf of itself and the beneficial owners of such Outstanding Bonds all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent.  Each DTC participant transmitting an acceptance of the Exchange Offers through the ATOP procedures will be deemed to have agreed to be bound by the terms of this Letter of Transmittal.

DELIVERY OF AN AGENT’S MESSAGE BY DTC WILL SATISFY THE TERMS OF THE EXCHANGE OFFERS AS TO EXECUTION AND DELIVERY OF A LETTER OF TRANSMITTAL BY THE PARTICIPANT IDENTIFIED IN THE AGENT’S MESSAGE. DTC PARTICIPANTS MAY ALSO ACCEPT THE EXCHANGE OFFERS BY SUBMITTING A NOTICE OF GUARANTEED DELIVERY THROUGH ATOP.

Box 3

Notice of Guaranteed Delivery

(See Instruction 1 below)

oCHECK HERE IF TENDERED OUTSTANDING BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s):

Window Ticket Number (if any):

Name of Eligible Guarantor Institution that Guaranteed Delivery:

Date of Execution of Notice of Guaranteed Delivery:

IF GUARANTEED DELIVERY IS TO BE MADE BY BOOK-ENTRY TRANSFER:

Name of Tendering Institution:

Account Number:

Transaction Code Number:

Box 4

Return of Non-Exchanged Outstanding Bonds

Tendered by Book-Entry Transfer

oCHECK HERE IF OUTSTANDING BONDS TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OUTSTANDING BONDS ARE TO BE RETURNED BY CREDITING THE ACCOUNT NUMBER SET FORTH ABOVE

Box 5

Participating Broker-Dealer

Tendered by Book-Entry Transfer

oCHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OUTSTANDING BONDS FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE TEN (10) ADDITIONAL COPIES OF THE PROSPECTUS AND OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

If the undersigned is not a broker-dealer, the undersigned represents that it is not an affiliate of the Company within the meaning of Rule 405 under the Securities Act, it is acquiring the Exchange Bonds in the ordinary course of business, and it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Bonds.  If the undersigned is a broker-dealer that will receive Exchange Bonds for its own account in exchange for Outstanding Bonds that were acquired as a result of market-making activities or other trading activities, the undersigned acknowledges that it did not purchase its Outstanding Bonds from the Company or any of the Company’s affiliates and it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale or transfer of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.  A broker-dealer may not participate in the Exchange Offers with respect to Outstanding Bonds acquired other than as a result of market-making activities or other trading activities.  Any broker-dealer who purchased Outstanding Bonds from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act.

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

Upon the terms and subject to the conditions of the Exchange Offers, the undersigned hereby tenders to the Company the aggregate principal amount of the Outstanding Bonds indicated above.  Subject to, and effective upon, the acceptance for exchange of all or any portion of the Outstanding Bonds tendered herewith in accordance with the terms and conditions of the Exchange Offers (including, if the Exchange Offers are extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Outstanding Bonds as are being tendered herewith.

The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company, in connection with the Exchange Offers) with respect to the tendered Outstanding Bonds, with full power of substitution and resubstitution (such power of attorney being deemed an irrevocable power coupled with an interest) to (a) deliver certificates representing such Outstanding Bonds, or transfer ownership of such Outstanding Bonds on the account books maintained by the book-entry transfer facility specified by the holder(s) of the Outstanding Bonds, together, in each such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, (b) present and deliver such Outstanding Bonds for transfer on the books of the Company and (c) receive all benefits or otherwise exercise all rights and incidents of beneficial ownership of such Outstanding Bonds, all in accordance with the terms of the Exchange Offers.

The undersigned hereby represents and warrants that (a) the undersigned has full power and authority to tender, exchange, assign and transfer the Outstanding Bonds tendered hereby, (b) when such tendered Outstanding Bonds are accepted for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and (c) the Outstanding Bonds tendered for exchange are not subject to any adverse claims or proxies when accepted by the Company.  The undersigned hereby further represents that (a) any Exchange Bonds acquired in exchange for Outstanding Bonds tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Bonds, whether or not such person is the undersigned, (b) neither the holder of such Outstanding Bonds nor any such other person is engaged in or intends to engage in, nor has an arrangement or understanding with any person to participate in, the distribution of such Exchange Bonds, and (c) neither the holder of such Outstanding Bonds nor any such other person is an “affiliate,” as such term is defined in Rule 405 under the Securities Act, of the Company.  If the undersigned is a broker-dealer that will receive the Exchange Bonds for its own account in exchange for the Outstanding Bonds, it represents that (a) the Outstanding Bonds to be exchanged for the Exchange Bonds were acquired by it as a result of market-making activities or other trading activities and (b) that it did not purchase its Outstanding Bonds from the Company or any of its affiliates and acknowledges that it will deliver a prospectus in connection with any resale or transfer of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.  If the undersigned is a person in the United Kingdom, the undersigned represents that its ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business.

The undersigned also acknowledges that the Exchange Offers are being made based on the Company’s understanding of interpretations by the staff of the Securities and Exchange Commission (the “SEC”) as set forth in no-action letters issued to third parties, including Exxon Capital Holdings Corporation (May 13, 1988), Morgan Stanley & Co. Incorporated (June 5, 1991) and Shearman & Sterling (July 2, 1993), that the Exchange Bonds issued in exchange for the Outstanding Bonds pursuant to the Exchange Offers may be offered for resale, resold and otherwise transferred by each holder thereof (other than a broker-dealer who acquires such Exchange Bonds directly from the Company for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or any such holder that is an “affiliate” of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Bonds are acquired in the ordinary course of such holder’s business and such holder is not engaged in, and does not intend to engage in, a distribution of such Exchange Bonds and has no arrangement or understanding with any person to participate in the distribution of such Exchange Bonds.  If a holder of the Outstanding Bonds is an affiliate of the Company, is not acquiring the Exchange Bonds in the ordinary course of its business, is engaged in or intends to engage in a distribution of the Exchange Bonds or has any arrangement or understanding with respect to the distribution of the Exchange Bonds to be acquired pursuant to the Exchange Offers, such holder (x) may not rely on the applicable interpretations of the staff of the SEC and (y) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction.

The undersigned will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Outstanding Bonds or transfer ownership of such Outstanding Bonds on the account books maintained by the book-entry transfer facility.  The undersigned further

agrees that acceptance of any and all validly tendered Outstanding Bonds by the Company and the issuance of Exchange Bonds in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement dated November 16, 2010, among the Company, Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several initial purchasers (the “Registration Rights Agreement”), and that the Company shall have no further obligations or liabilities thereunder except as provided in Section 5 (Indemnification) of such agreement.  The undersigned will comply with its obligations under the Registration Rights Agreement.

The Exchange Offers are subject to certain conditions as set forth in the Prospectus under the caption “The Exchange Offers — Conditions to the Exchange Offers.”  The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Outstanding Bonds tendered hereby and, in such event, the Outstanding Bonds not exchanged will be returned to the undersigned at the address shown above, promptly following the expiration or termination of the Exchange Offers.  In addition, the Company may amend the Exchange Offers at any time prior to the Expiration Date if the Company determines that any of the conditions set forth under “The Exchange Offers — Conditions to the Exchange Offers” occur.

All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, administrators, trustees in bankruptcy and legal representatives of the undersigned.  Tendered Outstanding Bonds may be withdrawn at any time prior to the Expiration Date in accordance with the procedures set forth in the terms of this Letter of Transmittal.

Unless otherwise indicated herein in the box entitled “Special Registration Instructions” below, please deliver the Exchange Bonds (and, if applicable, substitute certificates representing the Outstanding Bonds for any Outstanding Bonds not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of the Outstanding Bonds, please credit the account indicated above.  Similarly, unless otherwise indicated under the box entitled “Special Delivery Instructions” below, please send the Exchange Bonds (and, if applicable, substitute certificates representing the Outstanding Bonds for any Outstanding Bonds not exchanged) to the undersigned at the address shown above in the box entitled “Description of Outstanding Bonds Tendered Herewith.”

THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED “DESCRIPTION OF OUTSTANDING BONDS TENDERED HEREWITH” ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OUTSTANDING BONDS AS SET FORTH IN SUCH BOX.

Box 6

SPECIAL REGISTRATION INSTRUCTIONS

(See Instructions 4 and 5)

To be completed ONLY if certificates for the Outstanding Bonds not tendered and/or certificates for the Exchange Bonds are to be issued in the name of someone other than the registered holder(s) of the Outstanding Bonds whose name(s) appear(s) above.

Issue:	o Outstanding Bonds not tendered to:
	o Exchange Bonds to:

Name(s):

(Please Print or Type)

Address:

(Include Zip Code)

Daytime Area Code and Telephone Number:

Taxpayer Identification or Social Security Number:

Box 7

SPECIAL DELIVERY INSTRUCTIONS

(See Instructions 4 and 5)

To be completed ONLY if certificates for the Outstanding Bonds not tendered and/or certificates for the Exchange Bonds are to be sent in the name of someone other than the registered holder(s) of the Outstanding Bonds whose name(s) appear(s) above.

Send:	o Outstanding Bonds not tendered to:
	o Exchange Bonds to:

Name(s):

(Please Print or Type)

Address:

(Include Zip Code)

Daytime Area Code and Telephone Number:

Taxpayer Identification or Social Security Number:

Box 8

TENDERING HOLDER(S) SIGN HERE

(Complete accompanying substitute IRS form W-9 or IRS Form W-8, as applicable)

Must be signed by the registered holder(s) (which term, for the purposes described herein, shall include the participant whose name appears on a security position listing of the book-entry transfer facility as the owner of the Outstanding Bonds) of the Outstanding Bonds exactly as their name(s) appear(s) on the Outstanding Bonds hereby tendered or on such security position listing or by any person(s) authorized to become the registered holder(s) by properly completed bond powers or endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person. See Instruction 4.

(Signature(s) of Holder(s))

Date:

Name(s):

(Please Type or Print)

Capacity (full title):

Address:

(Including Zip Code)

Daytime Area Code and Telephone Number:

Taxpayer Identification or Social Security Number:

GUARANTEE OF SIGNATURE(S)

(If Required — See Instruction 4)

Authorized Signature:

Date:

Name:

Title:

Name of Firm:

Address of Firm:

(Include Zip Code)

Area Code and Telephone Number:

Taxpayer Identification or Social Security Number:

Substitute Form W-9 Request for Taxpayer Identification Number and Certification

PAYER’S NAME:  KENTUCKY UTILITIES COMPANY

Name as shown on account:

Business Name, if different from above:

Address:

City, State, and Zip Code:

Please check appropriate box:	Individual/Sole proprietor  o	Corporation  o
Partnership  o	Limited liability company  o	Other (see instructions) ►
Exempt Payee o

Substitute

Form W-9

Department of the Treasury

Internal Revenue Service

Payer’s Request for Taxpayer Identification Number (TIN)

Part I — PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number
OR
Employer Identification Number

Part II — Certification —

UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:

(1)The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and

(2)I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and

(3)I am a U.S. person (including a U.S. resident alien).

Part III —

Awaiting TIN o

CERTIFICATE INSTRUCTIONS — You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2).

Sign Here:
Signature:	Date:

NOTE:FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFERS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU

CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 28% of all reportable payments made to me will be withheld and, if the Exchange Agent is not provided with a TIN within 60 days, such amounts will be paid over to the Internal Revenue Service.

Signature: Date:

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number for the payee (You) to Give the Payer. —  Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000.  Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000.  The table below will help determine the number to give the payer. All “Section” references are to the Internal Revenue Code of 1986, as amended. “IRS” is the Internal Revenue Service.

For this type of account:	Give SOCIAL SECURITY NUMBER of:
1.Individual	The individual
2.Two or more individuals (joint account)	The actual owner of the account or, if combined account fund, the first individual on the account(1)
3.Custodian account of a minor (Uniform Gift to Minors Act)	The minor(2)
4.a. The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)
b. So-called trust that is not a legal or valid trust under state law	The actual owner(1)
5.Sole proprietorship	The owner(3)

For this type of account:	Give EMPLOYER IDENTIFICATION NUMBER of:
1.Sole proprietorship	The owner(3)
2.A valid trust, estate, or pension trust	The legal entity(4)
3.Corporate	The corporation
4.Association, club, religious, charitable, educational, or other tax-exempt organization account	The organization
5.Partnership	The partnership
6.A broker or registered nominee	The broker or nominee
7.Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments	The public entity

(1)List first and circle the name of the person whose number you furnish.  If only one person on a joint account has a social security number, that person’s number must be furnished.

(2)Circle the minor’s name and furnish the minor’s social security number.

(3)You must show your individual name, but you may also enter your business or “doing business as” name.  You may use either your social security number or your employer identification number (if you have one).

(4)List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)

NOTE:  IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON

SUBSTITUTE FORM W-9

Obtaining a Number

If you don’t have a taxpayer identification number or you don’t know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number.

Payees Exempt from Backup Withholding

Payees specifically exempted from withholding include:

·An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2).

·The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly-owned agency or instrumentality of any one or more of the foregoing.

·An international organization or any agency or instrumentality thereof.

·A foreign government or any political subdivision, agency or instrumentality thereof

Payees that may be exempt from backup withholding include:

·A corporation.

·A financial institution.

·A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States.

·A real estate investment trust.

·A common trust fund operated by a bank under Section 584(a).

·An entity registered at all times during the tax year under the Investment Company Act of 1940.

·A middleman known in the investment community as a nominee or custodian.

·A futures commission merchant registered with the Commodity Futures Trading Commission.

·A foreign central bank of issue.

·A trust exempt from tax under Section 664 or described in Section 4947.

Payments of dividends and patronage dividends generally exempt from backup withholding include:

·Payments to nonresident aliens subject to withholding under Section 1441.

·Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner.

·Payments of patronage dividends not paid in money.

·Payments made by certain foreign organizations.

·Section 404(k) payments made by an ESOP.

Payments of interest generally exempt from backup withholding include:

·Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer.

·Payments of tax-exempt interest (including exempt-interest dividends under Section 852).

·Payments described in Section 6049(b)(5) to nonresident aliens.

·Payments on tax-free covenant bonds under Section 1451.

·Payments made by certain foreign organizations.

·Mortgage interest paid to you.

Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding.  For details, see the regulations under Sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N.

Exempt payees described above must file Form W-9 or a substitute Form W-9 to avoid possible erroneous backup withholding.  FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE “EXEMPT” IN PART 2 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.

Privacy Act Notice. — Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply.

Penalties

(1) Failure to Furnish Taxpayer Identification Number. — If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) Failure to Report Certain Dividend and Interest Payments. — If you fail to include any portion of an includible payment for interest, dividends or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 20% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary.

(3) Civil Penalty for False Information with Respect to Withholding. — If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

(4) Criminal Penalty for Falsifying Information. — Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFERS

General

Please do not send certificates for Outstanding Bonds directly to the Company.  Your certificates for Outstanding Bonds, together with your signed and completed Letter of Transmittal and any required supporting documents, should be mailed or otherwise delivered to the Exchange Agent at the address set forth on the first page hereof.  The method of delivery of Outstanding Bonds, this Letter of Transmittal and all other required documents is at your sole option and risk and the delivery will be deemed made only when actually received by the Exchange Agent.  If delivery is by mail, registered mail with return receipt requested, properly insured, or overnight or hand delivery service is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.

1.  Delivery of this Letter of Transmittal and Certificates; Guaranteed Delivery Procedures.  A holder of Outstanding Bonds (which term, for the purposes described herein, shall include the participant whose name appears on a security position listing of the book-entry transfer facility as the owner of the Outstanding Bonds) may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Outstanding Bonds being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, (ii) complying with the procedure for book-entry transfer described below or (iii) complying with the guaranteed delivery procedures described below.

Holders who wish to tender their Outstanding Bonds and (i) whose Outstanding Bonds are not immediately available or (ii) who cannot deliver their Outstanding Bonds, this Letter of Transmittal and all other required documents to the Exchange Agent prior to the Expiration Date or (iii) who cannot comply with the book-entry transfer procedures on a timely basis, must tender their Outstanding Bonds pursuant to the guaranteed delivery procedure set forth in “The Exchange Offers — Guaranteed Delivery Procedures” in the Prospectus and by completing Box 3.  Holders may tender their Outstanding Bonds pursuant to the guaranteed delivery procedures if: (i) the tender is made by or through an Eligible Guarantor Institution (as defined below); (ii) the Exchange Agent receives (by facsimile transmission, mail or hand delivery), prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery in the form provided with this Letter of Transmittal that (a) sets forth the name and address of the holder of Outstanding Bonds, if applicable, the certificate number(s) of the Outstanding Bonds to be tendered and the principal amount of Outstanding Bonds tendered; (b) states that the tender is being made thereby; and (c) guarantees that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal, or a facsimile thereof, together with the Outstanding Bonds or a book-entry confirmation (including an Agent’s Message), and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Guarantor Institution with, or transmitted by the Eligible Guarantor Institution to, the Exchange Agent; and (iii) the Exchange Agent receives a properly completed and executed Letter of Transmittal, or facsimile thereof and the certificate(s) representing all tendered Outstanding Bonds in proper form or a confirmation of book-entry transfer of the Outstanding Bonds (including an Agent’s Message) into the Exchange Agent’s account at the appropriate book-entry transfer facility and all other documents required by this Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date.

Any Holder who wishes to tender Outstanding Bonds pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Outstanding Bonds prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a holder who attempted to use the guaranteed delivery procedures.

No alternative, conditional, irregular or contingent tenders will be accepted. Each tendering holder, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Bonds for exchange.

2.  Partial Tenders; Withdrawals.  Tenders of Outstanding Bonds will be accepted only in the principal amount of $2,000 and integral multiples of $1,000 in excess thereof. If less than the entire principal amount of Outstanding Bonds evidenced by a submitted certificate is tendered, the tendering holder(s) must fill in the aggregate principal amount of Outstanding Bonds tendered in the column entitled “Description of Outstanding Bonds Tendered Herewith” in Box 1 above.  A newly issued certificate for the Outstanding Bonds submitted but not tendered will be sent to such holder promptly after the Expiration Date, unless otherwise provided in the appropriate box on this Letter of Transmittal. All Outstanding Bonds delivered to the Exchange Agent will be deemed to have been tendered in full unless otherwise clearly indicated. Outstanding Bonds tendered pursuant to the Exchange Offers may be withdrawn at any time prior to the Expiration Date, after which tenders of Outstanding Bonds are irrevocable.

To be effective with respect to the tender of Outstanding Bonds, a written notice of withdrawal (which may be by telegram, telex, facsimile or letter) must: (i) be received by the Exchange Agent at the address for the Exchange Agent set forth above before 5:00 p.m., New York City time, on the Expiration Date; (ii) specify the name of the person who tendered the Outstanding Bonds to be

withdrawn; (iii) identify the Outstanding Bonds to be withdrawn (including the principal amount of such Outstanding Bonds, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Outstanding Bonds and the principal amount of Outstanding Bonds represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Outstanding Bonds exchanged; (v) specify the name in which any such Outstanding Bonds are to be registered, if different from that of the withdrawing holder; and (vi) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee). The Exchange Agent will return the properly withdrawn Outstanding Bonds promptly following receipt of notice of withdrawal. If Outstanding Bonds have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Outstanding Bonds or otherwise comply with the book-entry transfer facility’s procedures. All questions as to the validity, form and eligibility of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties.

Any Outstanding Bonds so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offers. Any Outstanding Bonds which have been tendered for exchange but which are not accepted for exchange for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Bonds tendered by book-entry transfer into the Exchange Agent’s account at the book entry transfer facility pursuant to the book-entry transfer procedures described above, such Outstanding Bonds will be credited to an account with such book-entry transfer facility specified by the holder) promptly after withdrawal, rejection of tender or termination of the Exchange Offers. Properly withdrawn Outstanding Bonds may be retendered by following one of the procedures described under the caption “The Exchange Offers — Procedures for Tendering Outstanding Bonds” in the Prospectus at any time prior to the Expiration Date.

Neither the Company, any affiliate or assigns of the Company, the Exchange Agent nor any other person will be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give such notification (even if such notice is given to other persons).

3.  Beneficial Owner Instructions.  Only a holder of Outstanding Bonds (i.e., a person in whose name Outstanding Bonds are registered on the books of the registrar or, or, in the case of Outstanding Bonds held through book-entry, such book-entry transfer facility specified by the holder), or the legal representative or attorney-in-fact of a holder, may execute and deliver this Letter of Transmittal. Any beneficial owner of Outstanding Bonds who wishes to accept the Exchange Offers must arrange promptly for the appropriate holder to execute and deliver this Letter of Transmittal on his or her behalf through the execution and delivery to the appropriate holder of the “Instructions to Registered Holder from Beneficial Owner” form accompanying this Letter of Transmittal.

4.  Signature on this Letter of Transmittal; Written Instruments and Endorsements; Guarantee of Signatures.   If this Letter of Transmittal is signed by the registered holder(s) (which term, for the purposes described herein, shall include the participant whose name appears on a security position listing of the book-entry transfer facility as the owner of the Outstanding Bonds) of the Outstanding Bonds tendered hereby, the signature must correspond exactly with the name(s) as written on the face of the certificates (or on such security position listing) without alteration, addition, enlargement or any change whatsoever.

If any of the Outstanding Bonds tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.

If a number of Outstanding Bonds registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal (or facsimiles thereof) as there are different registrations of Outstanding Bonds.

When this Letter of Transmittal is signed by the registered holder(s) of Outstanding Bonds (which term, for the purposes described herein, shall include the participant whose name appears on a security position listing of the book-entry transfer facility as the owner of the Outstanding Bonds) listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If, however, this Letter of Transmittal is signed by a person other than the registered holder(s) of the Outstanding Bonds listed or the Exchange Bonds are to be issued, or any untendered Outstanding Bonds are to be reissued, to a person other than the registered holder(s) of the Outstanding Bonds, such Outstanding Bonds must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in each case signed exactly as the name or names of the registered holder(s) appear(s) on the Outstanding Bonds and the signatures on such certificates must be guaranteed by an Eligible Guarantor Institution. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, submit proper evidence satisfactory to the Company, in its sole discretion, of such persons’ authority to so act.

Endorsements on certificates for the Outstanding Bonds or signatures on bond powers required by this Instruction 4 must

be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an “Eligible Guarantor Institution”).

Signatures on this Letter of Transmittal must be guaranteed by an Eligible Guarantor Institution, unless Outstanding Bonds are tendered: (i) by a registered holder (which term, for the purposes described herein, shall include the participant whose name appears on a security position listing of the book-entry transfer facility as the owner of the Outstanding Bonds) who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on this Letter of Transmittal; or (ii) for the account of an Eligible Guarantor Institution.

5.  Special Registration and Delivery Instructions.  Tendering holders should indicate, in the applicable Box 6 or Box 7, the name and address in/to which the Exchange Bonds and/or certificates for Outstanding Bonds not exchanged are to be issued or sent, if different from the name(s) and address(es) of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number or social security number of the person named must also be indicated. A holder tendering the Outstanding Bonds by book-entry transfer may request that the Outstanding Bonds not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate. See Box 4.

If no such instructions are given, the Exchange Bonds (and any Outstanding Bonds not tendered or not accepted) will be issued in the name of and sent to the holder signing this Letter of Transmittal or deposited into such holder’s account at the applicable book-entry transfer facility.

6.  Transfer Taxes.  The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of the Outstanding Bonds to it or its order pursuant to the Exchange Offers. If, however, the Exchange Bonds are delivered to or issued in the name of a person other than the registered holder, or if a transfer tax is imposed for any reason other than the transfer and exchange of Outstanding Bonds to the Company or its order pursuant to the Exchange Offers, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder.

Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Bonds listed in this Letter of Transmittal.

7.  Waiver of Conditions.  The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offers set forth in the Prospectus.

8.  Mutilated, Lost, Stolen or Destroyed Securities.  Any holder whose Outstanding Bonds have been mutilated, lost, stolen or destroyed, should promptly contact the Exchange Agent at the address set forth on the first page hereof for further instructions. The holder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificate(s) have been completed.

9.  No Conditional Tenders; No Notice of Irregularities.  No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Outstanding Bonds for exchange. The Company reserves the right, in its reasonable judgment, to waive any defects, irregularities or conditions of tender as to particular Outstanding Bonds. The Company’s interpretation of the terms and conditions of the Exchange Offers (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Bonds must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Outstanding Bonds, neither the Company, the Exchange Agent nor any other person is under any obligation to give such notice nor shall they incur any liability for failure to give such notification. Tenders of Outstanding Bonds will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Outstanding Bonds received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holder promptly following the Expiration Date.

10.  Requests for Assistance or Additional Copies.  Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth on the first page hereof.

IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH

CERTIFICATES OF OUTSTANDING BONDS OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.

IMPORTANT TAX INFORMATION

PURSUANT TO U.S. TREASURY DEPARTMENT CIRCULAR 230, HOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX MATTERS CONTAINED OR REFERRED TO IN THIS LETTER OF TRANSMITTAL IS NOT INTENDED OR WRITTEN BY US TO BE USED, AND CANNOT BE USED BY ANY TAXPAYER, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED; (B) THIS DISCUSSION IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) A TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

Under U.S. federal income tax law, a tendering holder whose Outstanding Bonds are accepted for exchange may be subject to backup withholding unless the holder provides the Exchange Agent with either (i) such holder’s correct taxpayer identification number (“TIN”) on the Substitute Form W-9 attached hereto, certifying (A) that the TIN provided on Substitute Form W-9 is correct (or that such holder of Outstanding Bonds is awaiting a TIN), (B) that the holder of Outstanding Bonds is not subject to backup withholding because (x) such holder of Outstanding Bonds is exempt from backup withholding, (y) such holder of Outstanding Bonds has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends, or (z) the Internal Revenue Service has notified the holder of Outstanding Bonds that he or she is no longer subject to backup withholding, and (C) that the holder of Outstanding Bonds is a U.S. person (including a U.S. resident alien); or (ii) an adequate basis for exemption from backup withholding. If such holder of Outstanding Bonds is an individual, the TIN is such holder’s social security number. If the Exchange Agent is not provided with the correct TIN by the time any payments are made to such holder, the holder of Outstanding Bonds may also be subject to certain penalties imposed by the Internal Revenue Service.

Certain holders of Outstanding Bonds (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding requirements. However, in order to avoid possible erroneous backup withholding, exempt holders of Outstanding Bonds should indicate their exempt status on the Substitute Form W-9. For example, a corporation should complete the Substitute Form W-9 by providing its TIN and indicating that it is exempt from backup withholding.  See the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for more instructions.

In order for a foreign holder to qualify as an exempt recipient, the holder must submit a Form W-8BEN or other applicable Form W-8, signed under penalties of perjury, attesting to that holder’s exempt status. A Form W-8BEN or other applicable Form W-8 can be obtained from the Exchange Agent or via the Internal Revenue Service website at www.irs.gov.

If backup withholding applies, the Exchange Agent is required to withhold 28% of any payments made to the holder of Outstanding Bonds or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service, provided the required information is furnished in a timely manner. The Exchange Agent cannot refund amounts withheld by reason of backup withholding.

A holder who does not have a TIN may check the box in Part 3 of the Substitute Form W-9 if the surrendering holder of Outstanding Bonds has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder of Outstanding Bonds or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Paying Agent will withhold 28% of all payments made prior to the time a properly certified TIN is provided to the Paying Agent and, if the Paying Agent is not provided with a TIN within 60 days, such amounts will be paid over to the Internal Revenue Service. The holder of Outstanding Bonds is required to give the Paying Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Outstanding Bonds. If the Outstanding Bonds are in more than one name or are not in the name of the actual owner, consult the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for additional guidance on which number to report.

Holders are encouraged to consult their own tax advisors to determine whether they are exempt from backup withholding or other withholding taxes.

EX-99.(B)

Exhibit 99(b)

Kentucky Utilities Company

Offers to Exchange

$250,000,000 aggregate principal amount of its 1.625% First Mortgage Bonds due 2015,

$500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and

$750,000,000 aggregate principal amount of its 5.125% First Mortgage Bonds due 2040,

each of which have been registered under the Securities Act of 1933, as amended,

for any and all of its outstanding 1.625% First Mortgage Bonds due 2015,

3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040, respectively

(such transactions, collectively, the “Exchange Offers”)

, 2011

To Brokers, Dealers, Commercial Banks,

Trust Companies and other Nominees:

As described in the enclosed Prospectus, dated          , 2011 (as the same may be amended or supplemented from time to time, the “Prospectus”), and Letter of Transmittal (the “Letter of Transmittal”), Kentucky Utilities Company (the “Company”) is offering to exchange an aggregate principal amount of up to $250,000,000 aggregate principal amount of 1.625% First Mortgage Bonds due 2015, $500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and $750,000,000 aggregate principal amount of 5.125% First Mortgage Bonds due 2040 (collectively, the “Exchange Bonds”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for any and all of its outstanding 1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040 (the “Outstanding Bonds”) in integral multiples of $2,000 and multiples of $1,000 in excess thereof upon the terms and subject to the conditions of the enclosed Prospectus and Letter of Transmittal.  The terms of the Exchange Bonds are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Bonds for which they may be exchanged pursuant to the Exchange Offers, except that the Exchange Bonds are freely transferable by holders thereof.  The Company will accept for exchange any and all Outstanding Bonds properly tendered according to the terms of the Prospectus and the Letter of Transmittal.  Consummation of the Exchange Offers is subject to certain conditions described in the Prospectus.

WE URGE YOU TO PROMPTLY CONTACT YOUR CLIENTS FOR WHOM YOU HOLD OUTSTANDING BONDS REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE. PLEASE BRING THE EXCHANGE OFFERS TO THEIR ATTENTION AS PROMPTLY AS POSSIBLE.

Enclosed are copies of the following documents:

1.The Prospectus;

2.The Letter of Transmittal for your use in connection with the tender of Outstanding Bonds and for the information of your clients, including a Substitute Form W-9 and Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (providing information relating to U.S. federal income tax backup withholding);

3.A form of Notice of Guaranteed Delivery; and

4.A form of letter, including a letter of instructions to a registered holder from a beneficial owner, which you may use to correspond with your clients for whose accounts you hold Outstanding Bonds that are registered in your name or the name of your nominee, with space provided for obtaining such clients’ instructions regarding the Exchange Offers.

Your prompt action is requested.  Please note that the Exchange Offers will expire at 5:00 p.m., New York City time, on          , 2011 (the “Expiration Date”), unless the Company otherwise extends the Exchange Offers.  The Exchange Offers are not conditioned upon any minimum number of Outstanding Bonds being tendered.

To participate in the Exchange Offers, certificates for Outstanding Bonds, together with a duly executed and properly completed Letter of Transmittal or facsimile thereof, or a timely confirmation of a book-entry transfer of such Outstanding

Bonds into the account of The Bank of New York Mellon (the “Exchange Agent”), at the book-entry transfer facility, with any required signature guarantees, and any other required documents, must be received by the Exchange Agent by the Expiration Date as indicated in the Prospectus and the Letter of Transmittal.

Pursuant to the Letter of Transmittal, each holder of the Outstanding Bonds will represent to the Company that (a) any Exchange Bonds acquired in exchange for Outstanding Bonds tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Bonds, whether or not such person is the holder, (b) neither the holder of such Outstanding Bonds nor any such other person is engaged in or intends to engage in, nor has an arrangement or understanding with any person to participate in, the distribution of such Exchange Bonds, and (c) neither the holder of such Outstanding Bonds nor any such other person is an “affiliate,” as such term is defined in Rule 405 under the Securities Act, of the Company.

If the holder is a broker-dealer that will receive the Exchange Bonds for its own account in exchange for the Outstanding Bonds, it will represent that (a) the Outstanding Bonds to be exchanged for the Exchange Bonds were acquired by it as a result of market-making activities or other trading activities and (b) that it did not purchase its Outstanding Bonds from the Company or any of its affiliates, and will acknowledge that it will deliver a prospectus in connection with any resale or transfer of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

The enclosed letter to clients contains an authorization by the beneficial owners of the Outstanding Bonds for you to make the foregoing representations.

The Company will not pay any fees or commissions to any broker or dealer or to any other persons in connection with the solicitation of tenders of the Outstanding Bonds pursuant to the Exchange Offers.  However, the Company will pay the fees of the Exchange Agent for its services in connection with the Exchange Offer and will pay or cause to be paid any transfer taxes applicable to the tender of the Outstanding Bonds to it or its order, except as otherwise provided in the Prospectus and Letter of Transmittal.

If holders of the Outstanding Bonds wish to tender, but it is impracticable for them to forward their Outstanding Bonds prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus and in the Letter of Transmittal.

Any inquiries you may have with respect to the procedures for tendering Outstanding Bonds in the Exchange Offers should be addressed to the Exchange Agent at its address and telephone number set forth in the enclosed Prospectus and Letter of Transmittal. Additional copies of the enclosed materials may be obtained from the Exchange Agent.

Very truly yours,

KENTUCKY UTILITIES COMPANY

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM IN CONNECTION WITH THE EXCHANGE OFFERS, OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS EXPRESSLY CONTAINED THEREIN.

EX-99.(C)

Exhibit 99(c)

Kentucky Utilities Company
Offers to Exchange

$250,000,000 aggregate principal amount of its 1.625% First Mortgage Bonds due 2015,

$500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and

$750,000,000 aggregate principal amount of its 5.125% First Mortgage Bonds due 2040,

each of which have been registered under the Securities Act of 1933, as amended,

for any and all of its outstanding 1.625% First Mortgage Bonds due 2015,

3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040, respectively

(such transactions, collectively, the “Exchange Offers”)

, 2011

To Our Clients:

Enclosed for your consideration are a Prospectus, dated          , 2011 (as the same may be amended or supplemented from time to time, the “Prospectus”), and a Letter of Transmittal (the “Letter of Transmittal”), relating to the offer by Kentucky Utilities Company (the “Company”) to exchange (the “Exchange Offers”) an aggregate principal amount of up to $250,000,000 aggregate principal amount of 1.625% First Mortgage Bonds due 2015, $500,000,000 aggregate principal amount of 3.250% First Mortgage Bonds due 2020 and $750,000,000 aggregate principal amount of 5.125% First Mortgage Bonds due 2040 (collectively, the “Exchange Bonds”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for any and all of its outstanding 1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040 (the “Outstanding Bonds”) in integral multiples of $2,000 and multiples of $1,000 in excess thereof upon the terms and subject to the conditions of the enclosed Prospectus and Letter of Transmittal.  The terms of the Exchange Bonds are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Bonds for which they may be exchanged pursuant to the Exchange Offers, except that the Exchange Bonds are freely transferable by holders thereof, upon the terms and subject to the conditions of the enclosed Prospectus and the related Letter of Transmittal.  The Company will accept for exchange any and all Outstanding Bonds properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offers is subject to certain conditions described in the Prospectus.

PLEASE NOTE THAT THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON          , 2011 (THE “EXPIRATION DATE”), UNLESS THE COMPANY EXTENDS THE EXCHANGE OFFERS.

The enclosed materials are being forwarded to you as the beneficial owner of the Outstanding Bonds held by us for your account but not registered in your name.  A tender of such Outstanding Bonds may only be made by us as the registered holder and pursuant to your instructions.  Therefore, the Company urges beneficial owners of Outstanding Bonds registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if such beneficial owners wish to tender their Outstanding Bonds in the Exchange Offers.

Accordingly, we request instructions as to whether you wish to tender any or all such Outstanding Bonds held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal.  If you have any questions regarding procedures for tendering Outstanding Bonds in the Exchange Offers, please direct your questions to The Bank of New York Mellon, the exchange agent for the Exchange Offers (the “Exchange Agent”).  If you wish to have us tender any or all of your Outstanding Bonds, please so instruct us by completing, signing and returning to us the “Instructions to Registered Holder from Beneficial Owner” form that appears below.  We urge you to read the Prospectus and the Letter of Transmittal carefully before instructing us as to whether or not to tender your Outstanding Bonds.  If you require assistance, you should consult your financial, tax or other professional advisors.  Holders who wish to participate in the Exchange Offers are asked to respond promptly by completing and returning the enclosed Letter of Transmittal and all other required documentation to the Exchange Agent.

The accompanying Letter of Transmittal is furnished to you for your information only and may not be used by you to tender Outstanding Bonds held by us and registered in our name or in the name of our nominee for your account or benefit.

If we do not receive written instructions in accordance with the below and the procedures presented in the Prospectus and the Letter of Transmittal, we will not tender any of the Outstanding Bonds held by us for your account.

INSTRUCTIONS TO REGISTERED HOLDER FROM BENEFICIAL OWNER

The undersigned beneficial owner acknowledges receipt of your letter and the accompanying Prospectus dated          , 2011 (as the same may be amended or supplemented from time to time, the “Prospectus”), and a Letter of Transmittal (the “Letter of Transmittal”), relating to the offer (the “Exchange Offers”) by Kentucky Utilities Company (the “Company”) to exchange an aggregate principal amount of up to $250,000,000 aggregate principal amount of 1.625% First Mortgage Bonds due 2015, $500,000,000 aggregate principal amount of 3.250% First Mortgage Bonds due 2020 and $750,000,000 aggregate principal amount of 5.125% First Mortgage Bonds due 2040 (collectively, the “Exchange Bonds”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for any and all of its outstanding 1.625% First Mortgage Bonds due 2015, 3.250% First Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040 (the “Outstanding Bonds”), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal.  Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus.

This will instruct you, the registered holder and/or book entry transfer facility participant, to tender the principal amount of the Outstanding Bonds indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal.

Principal Amount Held for Account Holder(s) Principal Amount to be Tendered*($2,000 and integral multiples of $1,000 in excess thereof, provided that any untendered Outstanding Bonds must be in
a minimum principal amount of $2,000)

*Unless otherwise indicated, the entire principal amount held for the account of the undersigned will be tendered.

If the undersigned instructs you to tender the Outstanding Bonds held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Outstanding Bonds, including but not limited to the representations that (a) the Exchange Bonds acquired in exchange for the Outstanding Bonds pursuant to the Exchange Offers are being acquired in the ordinary course of business of the person receiving such Exchange Bonds, whether or not the undersigned, (b) the undersigned is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of Exchange Bonds and (c) the undersigned is not an “affiliate,” as defined in Rule 405 under the Securities Act, of the Company.  If the holder is a broker-dealer that will receive the Exchange Bonds for its own account in exchange for the Outstanding Bonds, representations and warranties include that (a) the Outstanding Bonds to be exchanged for the Exchange Bonds were acquired by it as a result of market-making activities or other trading activities, (b) it did not purchase its Outstanding Bonds from the Company or any of its affiliates and (c) it will deliver a prospectus in connection with any resale or transfer of such Exchange Bonds.  If a holder of the Outstanding Bonds is an affiliate of the Company, is not acquiring the Exchange Bonds in the ordinary course of its business, is engaged in or intends to engage in a distribution of the Exchange Bonds or has any arrangement or understanding with respect to the distribution of the Exchange Bonds to be acquired pursuant to the Exchange Offers, such holder may not rely on the applicable interpretations of the staff of the Securities and Exchange Commission relating to exemptions from the registration and prospectus delivery requirements of the Securities Act and must comply with such requirements in connection with any secondary resale transaction.

SIGN HERE

Dated:	, 2011
Signature(s):
Print Name(s)
Address:
(Please include Zip Code)
Telephone Number:
(Please include Area Code)
Tax Identification Number or Social Security Number:
My Account Number with You:

EX-99.(D)

Exhibit 99(d)

Kentucky Utilities Company
Notice of Guaranteed Delivery

Offers to Exchange

$250,000,000 aggregate principal amount of its 1.625% First Mortgage Bonds due 2015,
$500,000,000 aggregate principal amount of its 3.250% First Mortgage Bonds due 2020 and
$750,000,000 aggregate principal amount of its 5.125% First Mortgage Bonds due 2040,

each of which have been registered under the Securities Act of 1933, as amended,
for any and all of its outstanding 1.625% First Mortgage Bonds due 2015, 3.250% First
Mortgage Bonds due 2020 and 5.125% First Mortgage Bonds due 2040, respectively

(such transactions, collectively, the “Exchange Offers”)

This form, or one substantially equivalent hereto, must be used to accept the Exchange Offers made by Kentucky Utilities Company, a Kentucky and Virginia corporation (the “Company”), pursuant to the Prospectus dated          , 2011 (the “Prospectus”), and the related Letter of Transmittal (the “Letter of Transmittal”), if the certificates for the Outstanding Bonds are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach The Bank of New York Mellon (the “Exchange Agent”) prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offers.  Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent, as set forth below.  Capitalized terms not defined herein have the meanings ascribed to them in the Letter of Transmittal.

The Exchange Agent for the Exchange Offers is:

THE BANK OF NEW YORK MELLON

By Mail, Hand or Courier	By Facsimile Transmission
	(eligible institutions only)
The Bank of New York Mellon
c/o The Bank of New York Mellon Corporation	(212) 298-1915
Corporate Trust — Reorganization Unit
480 Washington Boulevard — 27th Floor	To Confirm by Telephone
Jersey City, New Jersey 07310
Attn:                                  - Processor	(212) 815-5920

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

This Notice of Guaranteed Delivery is not to be used to guarantee signatures.  If a signature on a Letter of Transmittal is required to be guaranteed by an “Eligible Guarantor Institution” under the instructions thereto, such signature guarantee must appear in the applicable space in Box 8 provided on the Letter of Transmittal for guarantee of signatures.

Ladies and Gentlemen:

Upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Outstanding Bonds indicated below, pursuant to the guaranteed delivery procedures described in “The Exchange Offers — Guaranteed Delivery Procedures” section of the Prospectus and Instruction 1 of the Letter of Transmittal.

Certificate Number(s) (if known) of Outstanding Bonds or Account
Number at Book-Entry Transfer Facility Aggregate Principal
Amount Represented by
Outstanding Bonds Aggregate Principal
Amount of Outstanding
Bonds Being Tendered

PLEASE COMPLETE AND SIGN
(Signature(s) of Record Holder(s))
(Please Type or Print Name(s) of Record Holder(s))
Dated:	, 2011
Address:
(Zip Code)
(Daytime Area Code and Telephone No.)

o Check this Box if the Outstanding Bonds will be delivered by book-entry transfer to The Depository Trust Company.

THE ACCOMPANYING GUARANTEE MUST BE COMPLETED.

GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)

The undersigned, a member of a recognized signature medallion program or an “eligible guarantor institution,” as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), hereby (a) represents that the above person(s) “own(s)” the Outstanding Bonds tendered hereby within the meaning of Rule 14e-4(b)(2) under the Exchange Act, (b) represents that the tender of those Outstanding Bonds complies with Rule 14e-4 under the Exchange Act and (c) guarantees to deliver to the Exchange Agent, at its address set forth in the Notice of Guaranteed Delivery, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, together with the certificates representing all tendered Outstanding Bonds, in proper form for transfer, or a book-entry confirmation (a confirmation of a book-entry transfer of the Outstanding Bonds (including an Agent’s Message) into the Exchange Agent’s account at The Depository Trust Company), or any other documents required by the Letter of Transmittal within three (3) New York Stock Exchange trading days after the Expiration Date.

Name of Firm:
Address:
(Zip Code)
Area Code and Tel. No.:
Name:
(Please type or Print)
Dated:	, 2011

INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY

1.  Delivery of this Notice of Guaranteed Delivery

A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth on the cover page hereof prior to the Expiration Date of the Exchange Offers.  The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and risk of the holders and the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the holders use properly insured, registered mail with return receipt requested.  As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service.  In all cases, sufficient time should be allowed to assure timely delivery.  For a description of the guaranteed delivery procedure, see Instruction 1 of the Letter of Transmittal. No notice of Guaranteed Delivery should be sent to the Company.

2.  Signatures on this Notice of Guaranteed Delivery

If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Outstanding Bonds referred to herein, the signatures must correspond with the name(s) written on the face of the Outstanding Bonds without alteration, addition, enlargement or any change whatsoever.  If this Notice of Guaranteed Delivery is signed by a participant of the book-entry transfer facility whose name appears on a security position listing as the owner of the Outstanding Bonds, the signature must correspond with the name shown on the security position listing as the owner of the Outstanding Bonds.

If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Outstanding Bonds listed, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed in the name of

the registered holder(s) as such name appear(s) on the Outstanding Bonds without alteration, addition, enlargement or any change whatsoever, or signed as the name of the participant shown on the book-entry transfer facility’s security position listing.

If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery.

3.Questions and Requests for Assistance of Additional Copies

Questions and requests for assistance with respect to the procedures for guaranteed delivery and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address set forth on the cover hereof. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offers.