18. Goodwill and Other Intangible Assets

Goodwill

(PPL)

The changes in the carrying amount of goodwill by segment were:



	U.K. Regulated						Kentucky Regulated				Total
	2016			2015			2016		2015		2016			2015
Balance at beginning of period (a)	$	2,888		$	3,005		$	662	$	662	$	3,550		$	3,667
Effect of foreign currency exchange rates	(490		)	(117		)					(490		)	(117		)
Balance at end of period (a)	$	2,398		$	2,888		$	662	$	662	$	3,060		$	3,550


(a)	There were no accumulated impairment losses related to goodwill.

Other Intangible Assets

(PPL)

The gross carrying amount and the accumulated amortization of other intangible assets were:



	December 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Contracts (a)	$	405	$	325	$	407	$	300
Land and transmission rights	362		115		337		111
Emission allowances/RECs (b)	2		—		5		—
Licenses and other	6		2		10		5
Total subject to amortization	775		442		759		416

Not subject to amortization due to indefinite life:
Land and transmission rights	19		—		33		—
Easements (c)	348		—		303		—
Total not subject to amortization due to indefinite life	367		—		336		—
Total	$	1,142	$	442	$	1,095	$	416

(a)

Gross carrying amount includes the fair value at the acquisition date of the OVEC power purchase contract and coal contracts with terms favorable to market recognized as a result of the 2010 acquisition of LKE by PPL. Offsetting regulatory liabilities were recorded related to these contracts, which are being amortized over the same period as the intangible assets, eliminating any income statement impact. This is referred to as "regulatory offset" in the tables below. See Note 6 for additional information.


(b)	Emission allowances/RECs are expensed when consumed or sold; therefore, there is no accumulated amortization.


(c)	The increase during 2016 was primarily from increases at WPD.

Current intangible assets are included in "Other current assets" and long-term intangible assets are included in "Other intangibles" on the Balance Sheets.



Amortization Expense was as follows:
	2016		2015		2014
Intangible assets with no regulatory offset	$	6	$	6	$	6
Intangible assets with regulatory offset	24		51		47
Total	$	30	$	57	$	53

Amortization expense for each of the next five years, excluding insignificant amounts for consumption of emission allowances/RECs, is estimated to be:



	2017		2018		2019		2020		2021
Intangible assets with no regulatory offset	$	6	$	6	$	6	$	6	$	6
Intangible assets with regulatory offset	9		9		9		8		8
Total	$	15	$	15	$	15	$	14	$	14

(PPL Electric)

The gross carrying amount and the accumulated amortization of other intangible assets were:



	December 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Land and transmission rights	$	341	$	112	$	316	$	108
Licenses and other	3		1		4		1
Total subject to amortization	344		113		320		109

Not subject to amortization due to indefinite life:
Land and transmission rights	20		—		33		—
Total	$	364	$	113	$	353	$	109

Intangible assets are shown as "Intangibles" on the Balance Sheets.

Amortization expense was insignificant in 2016, 2015 and 2014 and is expected to be insignificant in future years.

(LKE)

The gross carrying amount and the accumulated amortization of other intangible assets were:



	December 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	269	$	269	$	269	$	252
Land and transmission rights	21		3		21		2
Emission allowances (b)	—		—		3		—
OVEC power purchase agreement (c)	126		49		126		42
Total subject to amortization	$	416	$	321	$	419	$	296


(a)	Gross carrying amount represents the fair value at the acquisition date of coal contracts with terms favorable to market recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to these contracts, which was amortized over the same period as the intangible assets, eliminating any income statement impact. See Note 6 for additional information.


(b)	Emission allowances are expensed when consumed or sold; therefore, there is no accumulated amortization.


(c)	Gross carrying amount represents the fair value at the acquisition date of the OVEC power purchase contract recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to this contract, which is being amortized over the same period as the intangible asset, eliminating any income statement impact. See Note 6 for additional information.

Long-term intangible assets are presented as "Other intangibles" on the Balance Sheets.

Amortization expense was as follows:



	2016		2015		2014
Intangible assets with no regulatory offset	$	1	$	—	$	—
Intangible assets with regulatory offset	24		51		47
Total	$	25	$	51	$	47

Amortization expense for each of the next five years is estimated to be:



	2017		2018		2019		2020		2021
Intangible assets with regulatory offset	$	9	$	9	$	9	$	8	$	8

(LG&E)

The gross carrying amount and the accumulated amortization of other intangible assets were:



	December 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	124	$	124	$	124	$	116
Land and transmission rights	7		1		7		1
Emission allowances (b)	—		—		1		—
OVEC power purchase agreement (c)	87		34		87		29
Total subject to amortization	$	218	$	159	$	219	$	146


(a)	Gross carrying amount represents the fair value at the acquisition date of coal contracts with terms favorable to market recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to these contracts, which was amortized over the same period as the intangible assets, eliminating any income statement impact. See Note 6 for additional information.


(b)	Emission allowances are expensed when consumed or sold; therefore, there is no accumulated amortization.


(c)	Gross carrying amount represents the fair value at the acquisition date of the OVEC power purchase contract recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to this contract, which is being amortized over the same period as the intangible asset, eliminating any income statement impact. See Note 6 for additional information.

Long-term intangible assets are presented as "Other intangibles" on the Balance Sheets.

Amortization expense was as follows:



	2016		2015		2014
Intangible assets with regulatory offset	$	13	$	24	$	23

Amortization expense for each of the next five years is estimated to be:



	2017		2018		2019		2020		2021
Intangible assets with regulatory offset	$	6	$	6	$	6	$	6	$	6

(KU)

The gross carrying amount and the accumulated amortization of other intangible assets were:



	December 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	145	$	145	$	145	$	136
Land and transmission rights	14		2		14		1
Emission allowances (b)	—		—		2		—
OVEC power purchase agreement (c)	39		15		39		13
Total subject to amortization	$	198	$	162	$	200	$	150


(a)	Gross carrying amount represents the fair value at the acquisition date of coal contracts with terms favorable to market recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to these contracts, which was amortized over the same period as the intangible assets, eliminating any income statement impact. See Note 6 for additional information.


(b)	Emission allowances are expensed when consumed or sold; therefore, there is no accumulated amortization.


(c)	Gross carrying amount represents the fair value at the acquisition date of the OVEC power purchase contract recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to this contract, which is being amortized over the same period as the intangible asset, eliminating any income statement impact. See Note 6 for additional information.

Long-term intangible assets are presented as "Other intangibles" on the Balance Sheets.

Amortization expense was as follows:



	2016		2015		2014
Intangible assets with no regulatory offset	$	1	$	—	$	—
Intangible assets with regulatory offset	11		27		24
Total	$	12	$	27	$	24

Amortization expense for each of the next five years is estimated to be:



	2017		2018		2019		2020		2021
Intangible assets with regulatory offset	$	3	$	3	$	3	$	2	$	2