PPL continuously evaluates potential acquisitions, divestitures and development projects as opportunities arise or are identified. Development projects are continuously reexamined based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them, execute tolling agreements or pursue other options. Any resulting transactions may impact future financial results. See below for information on PPL's acquisitions of WPD Midlands and LKE, PPL Energy Supply's distribution of its membership interest in PPL Global to its parent, PPL Energy Funding, that was presented as discontinued operations by PPL Energy Supply and the sales of businesses that were presented as discontinued operations by PPL and PPL Energy Supply.

On April 1, 2011, PPL, through its indirect, wholly owned subsidiary PPL WEM, completed its acquisition of all of the outstanding ordinary share capital of Central Networks East plc and Central Networks Limited, the sole owner of Central Networks West plc, together with certain other related assets and liabilities (collectively referred to as Central Networks and subsequently renamed WPD Midlands), from subsidiaries of E.ON AG. The consideration for the acquisition consisted of cash of $5.8 billion, including the repayment of $1.7 billion of affiliate indebtedness owed to subsidiaries of E.ON AG, and approximately $800 million of long-term debt assumed through consolidation. WPD Midlands' regulated distribution operations serve five million end users in the Midlands area of England. The acquisition increases the regulated portion of PPL's business and enhances rate-regulated growth opportunities as the regulated businesses make investments to improve infrastructure and customer reliability. Further, the service territories of WPD (South Wales), WPD (South West) and WPD Midlands are contiguous and cost savings, efficiencies and other benefits are expected from the combined operations.

The fair value of the consideration paid for Central Networks was as follows (in billions):

Aggregate enterprise consideration	$	6.6
Less: fair value of long-term debt outstanding assumed through consolidation		0.8
Total cash consideration paid		5.8
Less: funds made available to Central Networks to repay pre-acquisition affiliate indebtedness		1.7
Cash consideration paid for Central Networks' outstanding ordinary share capital	$	4.1

The total cash consideration paid was primarily funded by borrowings under the 2011 Bridge Facility on the date of acquisition. Subsequently, PPL repaid the borrowings under the 2011 Bridge Facility using proceeds from the permanent financing, including April 2011 issuances of common stock and 2011 Equity Units, and proceeds from the issuance of debt by PPL WEM, WPD (East Midlands) and WPD (West Midlands) in the second quarter of 2011. See Note 7 for additional information on the 2011 Bridge Facility and permanent financing.

The following table summarizes (in billions) the preliminary allocation of the purchase price to the fair value of the major classes of assets acquired and liabilities assumed.

Current assets (a)	$	0.2
PP&E		4.9
Intangible assets (b)		0.1
Other noncurrent assets		0.1
Current liabilities (c) (d)		(0.5)
PPL WEM affiliate indebtedness		(1.7)
Long-term debt (current and noncurrent) (c)		(0.8)
Other noncurrent liabilities (c) (d)		(0.6)
Net identifiable assets acquired		1.7
Goodwill		2.4
Net assets acquired	$	4.1

(a) Includes gross contractual amount of the accounts receivable acquired of $119 million, which approximates fair value.

(b) Intangible assets recorded include $88 million of easements, which have an indefinite life, and $11 million of customer contracts, which have a weighted-average amortization period of 10 years.

(d) In the third quarter of 2011, the preliminary purchase price allocation, as of the acquisition date, was adjusted to record a $77 million liability primarily for costs expected to be paid in order for WPD Midlands to become compliant with regulations pertaining to overhead line clearances. See Note 6 for additional information.

The purchase price allocation is preliminary and could change materially in subsequent periods. The preliminary purchase price allocation was based on PPL's best estimates using information obtained as of the reporting date. Any changes to the purchase price allocation during the measurement period, which can extend up to one year from the date of acquisition, that result in material changes to the consolidated financial results will be adjusted retrospectively. The final purchase price allocation is expected to be completed before the end of 2011. The items pending finalization include, but are not limited to, the valuation of PP&E, intangible assets including goodwill, defined benefit plans, certain liabilities and income tax-related matters.

The preliminary purchase price allocation resulted in goodwill of $2.4 billion that was assigned to the International Regulated segment. This reflects the expected continued growth of a rate-regulated business with a defined service area operating under a constructive regulatory framework, expected cost savings, efficiencies and other benefits resulting from a contiguous service area with WPD (South West) and WPD (South Wales) and the ability to leverage WPD (South West)'s and WPD (South Wales)'s existing management team's high level of performance in capital cost efficiency, system reliability and customer service. The goodwill is not deductible for U.K. income tax purposes.

In connection with the acquisition of WPD Midlands, PPL initiated a reorganization designed to transition the WPD Midlands companies to the same operating structure as WPD (South West) and WPD (South Wales). The reorganization, which is expected to be completed in 2012, is intended to transition WPD Midlands from a functional structure to a regional structure that will require a smaller combined support structure, reduce duplication and implement more efficient procedures. Approximately 740 employees of WPD Midlands will receive separation benefits from the companies as a result of the reorganization.

The separation benefits, before income taxes, associated with the reorganization are as follows:

Severance compensation	$	58
Early retirement deficiency costs (ERDC) under applicable pension plans		43
Outplacement services		1
Total separation benefits	$	102

WPD Midlands recorded $84 million of the total expected separation benefits in the three and nine months ended September 30, 2011, of which $41 million relates to severance compensation and $43 million relates to ERDC. WPD Midlands expects to record the remaining portion of severance compensation, based on the expected timing of when employees will separate from the companies, as follows: an estimated $6 million in the fourth quarter of 2011 and an estimated $11 million in 2012. The separation benefits recorded in the three and nine months ended September 30, 2011 are included in "Other operation and maintenance" on the Statement of Income. The accrued severance compensation is reflected in "Other current liabilities" and the ERDC reduced "Other noncurrent assets" on the Balance Sheet at September 30, 2011.

These amounts do not include $9 million recorded in the nine months ended September 30, 2011 for ERDC payable under applicable pension plans and severance compensation for certain employees who separated from the WPD Midlands companies, but were not part of the reorganization. These separation benefits are also included in "Other operation and maintenance" on the Statement of Income.

The actual WPD Midlands operating revenues, net income and net income excluding nonrecurring acquisition-related adjustments (which are recorded on a one-month lag) included in PPL's Statement of Income and included in the International Regulated segment, for both periods ended September 30, 2011 were as follows.

	Three Months		Nine Months

Operating revenues	$	292	$	499
Net Income		56		63
Net Income – excluding nonrecurring acquisition-related adjustments		118		183

The pro forma operating revenues and net income attributable to PPL for the periods ended September 30, which includes LKE as if the acquisition had occurred January 1, 2009 and WPD Midlands as if the acquisition had occurred January 1, 2010, are as follows.



	Three Months				Nine Months
	2011		2010		2011		2010

Operating Revenues - PPL consolidated pro forma	$	3,115	$	3,149	$	8,905	$	9,500
Net Income Attributable to PPL - PPL consolidated pro forma		497		489		1,306		1,062

The pro forma financial information presented above has been derived from the historical consolidated financial statements of PPL and LKE, which was acquired on November 1, 2010, and from the historical combined financial statements of WPD Midlands. Income (loss) from discontinued operations (net of income taxes), which was not significant for the three and nine months ended September 30, 2011 and which was $(53) million and $(40) million for the three and nine months ended September 30, 2010, was excluded from the pro forma amounts above.

The pro forma adjustments include adjustments to depreciation, net periodic pension costs, interest expense, nonrecurring adjustments and the related income tax effects. Nonrecurring adjustments include the following pre-tax credits (expenses):

		Income Statement	Three Months				Nine Months
		Line Item	2011		2010		2011		2010

WPD Midlands acquisition
	2011 Bridge Facility costs	Interest Expense					$	(43)
	Foreign currency loss on 2011 Bridge Facility	Other Income (Expense) - net						(57)
	Net hedge gains	Other Income (Expense) - net						55
	Hedge ineffectiveness	Interest Expense						(12)
	U.K. stamp duty tax	Other Income (Expense) - net						(21)
	Separation benefits	Other operation and maintenance	$	(86)				(92)
	Other acquisition-related costs	(a)		2				(45)

LKE acquisition
	2010 Bridge Facility costs	Interest Expense			$	(45)			$	(67)
	Other acquisition-related costs	Other Income (Expense) - net				(4)				(11)

(a) Primarily includes advisory, accounting and legal fees recorded in "Other Income (Expense) - net."

See Notes 1 and 10 in PPL's 2010 Form 10-K and Note 2 in the annual financial statements included in the 2011 Registration Statements (in the case of LKE, LG&E and KU) for information on PPL's November 2010 acquisition of LKE.

In September 2011, LG&E and KU entered into an Asset Purchase Agreement (APA) with Bluegrass Generation Company, L.L.C. for the purchase of three existing natural gas simple cycle combustion units in LaGrange, Kentucky, aggregating approximately 495 MW, plus limited associated contractual arrangements required for operation of the plant (collectively, the Bluegrass Plant), for a purchase price of $110 million. Pursuant to the APA, LG&E and KU will jointly acquire the Bluegrass Plant as tenants in common, with LG&E as owner of a 69% undivided interest, and KU as owner of a 31% undivided interest, in the purchased assets. The purchase is subject to receipt of approvals from the KPSC, the VSCC, the FERC, certain permit assignments or local approvals, and other conditions. Either party can terminate the APA should a closing of the purchase transaction fail to have occurred by June 30, 2012.

In September 2011, LG&E and KU requested KPSC approval to build a 640 MW NGCC at the existing Cane Run site in Kentucky. Once all approvals are received, construction on an NGCC at Cane Run is expected to begin in 2012, with construction expected to be complete by 2016. This project is also subject to regulatory approval from the VSCC. The project has an expected cost of $583 million, which includes costs of building a natural gas supply pipeline. See Note 6 for additional information.

In conjunction with this request, LG&E and KU anticipate retiring three older coal-fired electric generating stations to meet new, stricter federal EPA regulations. These stations include Cane Run, Tyrone and Green River, which have a combined summer rating of 797 MW. The Cane Run and Green River coal units will need to remain operational until the replacement generation and associated transmission projects are completed.

In January 2011, LKE began dispatching electricity from TC2 to meet customer demand. See Note 10 in this Form 10-Q, Notes 8 and 15 in PPL's 2010 Form 10-K and Note 13 in the annual financial statements included in the 2011 Registration Statements (in the case of LKE, LG&E and KU) for additional information.

In 2008, PPL Susquehanna received NRC approval for its request to increase the generation capacity of the Susquehanna nuclear plant. The project was completed in phases over several years. PPL Susquehanna's share of the total expected capacity increase was approximately 195 MW. The final phase of the project, a 50 MW Unit 2 uprate, was completed in the third quarter of 2011.

The NRC continues to review the COLA submitted by a PPL Energy Supply subsidiary for the proposed Bell Bend nuclear generating unit to be built adjacent to the Susquehanna plant. PPL has made no decision to proceed with construction of Bell Bend and expects that such decision will not be made for several years given the anticipated lengthy NRC license approval process. Additionally, PPL has announced that it does not expect to proceed with construction absent favorable economics, a joint arrangement with other interested parties and a federal loan guarantee or other acceptable financing. PPL and its subsidiaries are currently authorized by PPL's Board of Directors to spend up to $144 million on the COLA and other permitting costs (including land costs) necessary for construction. At September 30, 2011 and December 31, 2010, $124 million and $109 million of costs associated with the licensing application were capitalized and are included on the Balance Sheets in noncurrent "Other intangibles." PPL believes it is probable that these costs are ultimately recoverable following NRC approval of the COLA either through construction of the new nuclear unit, transfer of the COLA rights to a joint venture, or sale of the COLA rights to another party. The PPL Energy Supply subsidiary remains active in the DOE Federal loan guarantee application process. See Note 8 in PPL's 2010 Form 10-K and Note 5 in PPL Energy Supply's Form 8-K dated June 24, 2011 for additional information.

PPL Electric has experienced delays in obtaining necessary National Park Service approvals for the Susquehanna-Roseland transmission line and anticipates a delay of the line's in-service date to 2015. In the first quarter of 2011, PJM issued an updated assessment of the new line within its 2010 Regional Transmission Expansion Plan, which confirms that the line is needed by 2012 to prevent overloads on other power lines in the region. PJM has developed a strategy to manage potential reliability problems until the line is built. In October 2011, the project was placed on the initial list of projects for the Rapid Response Team for Transmission (RRTT), an initiative of the White House to facilitate coordination among federal agencies to improve the overall quality and timeliness of electric transmission infrastructure permitting, review and consultation. The National Park Service record of decision for the project is scheduled to be issued on October 1, 2012. PPL Electric cannot predict what additional actions, if any, PJM might take in the event of a continued delay to its scheduled in-service date for the new line. See Note 8 in each Registrant's 2010 Form 10-K for additional information.

In March 2011, PPL Energy Supply subsidiaries completed the sale of their ownership interests in certain non-core generation facilities, which were included in the Supply segment, for $381 million. The transaction included the natural gas-fired facilities in Wallingford, Connecticut and University Park, Illinois and an equity interest in Safe Harbor Water Power Corporation, which owns a hydroelectric facility in Conestoga, Pennsylvania. In connection with the completion of the sale, PPL Energy Supply recorded insignificant losses in the first and second quarters of 2011.

These non-core generation facilities met the held for sale criteria in the third quarter of 2010. As a result, assets with a carrying amount of $473 million were written down to their estimated fair value (less cost to sell) of $377 million at September 30, 2010, resulting in a pre-tax impairment charge of $96 million ($58 million after tax). In addition, $5 million ($4 million after tax) of allocated goodwill was written off in the third quarter of 2010. These charges are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statement of Income for the three and nine months ended September 30, 2010.

Following are the components of Discontinued Operations in the Statements of Income for the periods ended September 30.

	Three Months			Nine Months
	2011	2010		2011		2010

Operating revenues		$	34	$	19	$	91
Operating expenses (a)			118		11		147
Operating income (loss)			(84)		8		(56)
Other income (expense) - net			1				2
Interest expense (b)			2		3		5
Income before income taxes			(85)		5		(59)
Income tax expense			(32)		3		(21)
Income (Loss) from Discontinued Operations		$	(53)	$	2	$	(38)

(a) 2010 includes the impairment to the carrying value of the generation facilities being sold and the write-off of allocated goodwill.

(b) Represents allocated interest expense based upon debt attributable to the generation facilities sold.

Upon completion of the sale, assets primarily consisting of $##D<PPERemovedFromSaleNonCoreAcqNoteES> million of PP&E and a $##D<EquityInvestRemovedFromSaleNonCoreAcqNoteES> million equity method investment, which were classified as held for sale at December 31, 2010, were removed from the Balance Sheet.

In February 2010, PPL Energy Supply subsidiaries completed the sale of the Long Island generation business, which was included in the Supply segment. The definitive sales agreement included provisions that reduced the $##D<OrigSalesPriceLongIslandAcqNoteES> million purchase price monthly, commencing September 1, 2009. After adjusting for these price-reduction provisions, proceeds from the sale approximated $##D<SaleProceedsLongIslandCFCorp> million. There was no significant impact on earnings in the nine months ended September 30, 2010 from the operation of this business or as a result of this sale.

In January 2011, PPL Energy Supply distributed its 100% membership interest in PPL Global, which represented the entire International Regulated segment, to PPL Energy Supply's parent, PPL Energy Funding. The distribution was made based on the book value of the assets and liabilities of PPL Global with financial effect as of January 1, 2011, and no gains or losses were recognized on the distribution. The purpose of the distribution was to better align PPL's organizational structure with the manner in which it manages these businesses, separating the U.S.-based competitive energy marketing and supply business from the U.K.-based regulated electricity distribution business. Following the distribution, PPL Energy Supply operates in a single business segment, and through its subsidiaries is primarily engaged in the generation and marketing of power, primarily in the northeastern and northwestern U.S.

Following are the components of Discontinued Operations in the Statement of Income for the periods ended September 30, 2010.

	Three Months		Nine Months

Operating revenues	$	172	$	563
Operating expenses		84		260
Operating income		88		303
Other income (expense) - net				2
Interest expense (a)		37		101
Income before income taxes		51		204
Income tax expense		(55)		(23)
Income (Loss) from Discontinued Operations	$	106	$	227

In connection with the distribution, the following assets and liabilities were removed from PPL Energy Supply's Balance Sheet in the first quarter of 2011. Except for "Cash and cash equivalents," which has been reflected as a financing activity, the remaining distribution represents a non-cash transaction excluded from PPL Energy Supply's Statement of Cash Flows for the nine months ended September 30, 2011.

Cash and cash equivalents	$	325
Accounts receivable		46
Unbilled revenues		70
Other current assets		21
PP&E, net		3,502
Goodwill		679
Other intangibles		80
Other noncurrent assets		77
Total Assets		4,800

Short-term debt		181
Accounts payable		86
Accrued interest		71
Other current liabilities		112
Long-term debt		2,313
Deferred income tax liabilities - noncurrent		399
Accrued pension obligations		320
Other deferred credits and noncurrent liabilities		30
Total Liabilities		3,512
Net assets distributed	$	1,288