UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | |
FORM 10-Q | |
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 2017 |
OR | |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________ to ___________ |
Commission File Number | Registrant; State of Incorporation; Address and Telephone Number | IRS Employer Identification No. |
1-11459 | PPL Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151 | 23-2758192 |
1-905 | PPL Electric Utilities Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151 | 23-0959590 |
333-173665 | LG&E and KU Energy LLC (Exact name of Registrant as specified in its charter) (Kentucky) 220 West Main Street Louisville, KY 40202-1377 (502) 627-2000 | 20-0523163 |
1-2893 | Louisville Gas and Electric Company (Exact name of Registrant as specified in its charter) (Kentucky) 220 West Main Street Louisville, KY 40202-1377 (502) 627-2000 | 61-0264150 |
1-3464 | Kentucky Utilities Company (Exact name of Registrant as specified in its charter) (Kentucky and Virginia) One Quality Street Lexington, KY 40507-1462 (502) 627-2000 | 61-0247570 |
PPL Corporation | Yes X | No | ||
PPL Electric Utilities Corporation | Yes X | No | ||
LG&E and KU Energy LLC | Yes X | No | ||
Louisville Gas and Electric Company | Yes X | No | ||
Kentucky Utilities Company | Yes X | No |
PPL Corporation | Yes X | No | ||
PPL Electric Utilities Corporation | Yes X | No | ||
LG&E and KU Energy LLC | Yes X | No | ||
Louisville Gas and Electric Company | Yes X | No | ||
Kentucky Utilities Company | Yes X | No |
Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | ||
PPL Corporation | [ X ] | [ ] | [ ] | [ ] | [ ] | |
PPL Electric Utilities Corporation | [ ] | [ ] | [ X ] | [ ] | [ ] | |
LG&E and KU Energy LLC | [ ] | [ ] | [ X ] | [ ] | [ ] | |
Louisville Gas and Electric Company | [ ] | [ ] | [ X ] | [ ] | [ ] | |
Kentucky Utilities Company | [ ] | [ ] | [ X ] | [ ] | [ ] |
PPL Corporation | [ ] | |||||
PPL Electric Utilities Corporation | [ ] | |||||
LG&E and KU Energy LLC | [ ] | |||||
Louisville Gas and Electric Company | [ ] | |||||
Kentucky Utilities Company | [ ] |
PPL Corporation | Yes | No X | ||
PPL Electric Utilities Corporation | Yes | No X | ||
LG&E and KU Energy LLC | Yes | No X | ||
Louisville Gas and Electric Company | Yes | No X | ||
Kentucky Utilities Company | Yes | No X |
PPL Corporation | Common stock, $0.01 par value, 688,464,316 shares outstanding at October 25, 2017. | |
PPL Electric Utilities Corporation | Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at October 25, 2017. | |
LG&E and KU Energy LLC | PPL Corporation directly holds all of the membership interests in LG&E and KU Energy LLC. | |
Louisville Gas and Electric Company | Common stock, no par value, 21,294,223 shares outstanding and all held by LG&E and KU Energy LLC at October 25, 2017. | |
Kentucky Utilities Company | Common stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC at October 25, 2017. |
Page | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. Financial Statements | ||||
PPL Corporation and Subsidiaries | ||||
PPL Electric Utilities Corporation and Subsidiaries | ||||
LG&E and KU Energy LLC and Subsidiaries | ||||
Louisville Gas and Electric Company | ||||
Kentucky Utilities Company | ||||
Combined Notes to Condensed Financial Statements (Unaudited) | |||||
Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||
PART II. OTHER INFORMATION | |||||
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES | |||||
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 | |||||
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |
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• | the outcome of rate cases or other cost recovery or revenue filings; |
• | changes in U.S. or U.K. tax laws or regulations; |
• | effects of cyber-based intrusions or natural disasters, threatened or actual terrorism, war or other hostilities; |
• | significant decreases in demand for electricity in the U.S.; |
• | expansion of alternative and distributed sources of electricity generation and storage; |
• | changes in foreign currency exchange rates for British pound sterling and the related impact on unrealized gains and losses on PPL's foreign currency economic hedges; |
• | the effectiveness of our risk management programs, including foreign currency and interest rate hedging; |
• | non-achievement by WPD of performance targets set by Ofgem; |
• | the effect of changes in RPI on WPD's revenues and index linked debt; |
• | the March 29, 2017 notification by the U.K. to the European Council of the European Union of the U.K.'s intent to withdraw from the European Union and any actions in response thereto; |
• | defaults by counterparties or suppliers for energy, capacity, coal, natural gas or key commodities, goods or services; |
• | capital market conditions, including the availability of capital or credit, changes in interest rates and certain economic indices, and decisions regarding capital structure; |
• | a material decline in the market value of PPL's equity; |
• | significant decreases in the fair value of debt and equity securities and its impact on the value of assets in defined benefit plans, and the potential cash funding requirements if fair value declines; |
• | interest rates and their effect on pension and retiree medical liabilities, ARO liabilities and interest payable on certain debt securities; |
• | volatility in or the impact of other changes in financial markets and economic conditions; |
• | the potential impact of unrecorded commitments and liabilities, if any, of the Registrants and their subsidiaries; |
• | new accounting requirements or new interpretations or applications of existing requirements; |
• | changes in securities and credit ratings; |
• | any requirement to record impairment charges pursuant to GAAP with respect to any of our significant investments; |
• | laws or regulations to reduce emissions of GHGs or the physical effects of climate change; |
• | continuing ability to access fuel supply for LG&E and KU, as well as the ability to recover fuel costs and environmental expenditures in a timely manner at LG&E and KU and natural gas supply costs at LG&E; |
• | weather and other conditions affecting generation, transmission and distribution operations, operating costs and customer energy use; |
• | changes in political, regulatory or economic conditions in states, regions or countries where the Registrants or their subsidiaries conduct business; |
• | receipt of necessary governmental permits and approvals; |
• | new state, federal or foreign legislation or regulatory developments; |
• | the impact of any state, federal or foreign investigations applicable to the Registrants and their subsidiaries and the energy industry; |
• | our ability to attract and retain qualified employees; |
• | the effect of any business or industry restructuring; |
• | development of new projects, markets and technologies; |
• | performance of new ventures; |
• | business dispositions or acquisitions and our ability to realize expected benefits from such business transactions; |
• | collective labor bargaining negotiations; and |
• | the outcome of litigation against the Registrants and their subsidiaries. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues | $ | 1,845 | $ | 1,889 | $ | 5,521 | $ | 5,685 | |||||||
Operating Expenses | |||||||||||||||
Operation | |||||||||||||||
Fuel | 202 | 227 | 576 | 607 | |||||||||||
Energy purchases | 143 | 151 | 494 | 531 | |||||||||||
Other operation and maintenance | 397 | 417 | 1,217 | 1,292 | |||||||||||
Depreciation | 257 | 232 | 745 | 692 | |||||||||||
Taxes, other than income | 69 | 76 | 214 | 229 | |||||||||||
Total Operating Expenses | 1,068 | 1,103 | 3,246 | 3,351 | |||||||||||
Operating Income | 777 | 786 | 2,275 | 2,334 | |||||||||||
Other Income (Expense) - net | (76 | ) | 49 | (235 | ) | 284 | |||||||||
Interest Expense | 230 | 223 | 669 | 671 | |||||||||||
Income Before Income Taxes | 471 | 612 | 1,371 | 1,947 | |||||||||||
Income Taxes | 116 | 139 | 321 | 510 | |||||||||||
Net Income | $ | 355 | $ | 473 | $ | 1,050 | $ | 1,437 | |||||||
Earnings Per Share of Common Stock: | |||||||||||||||
Net Income Available to PPL Common Shareowners: | |||||||||||||||
Basic | $ | 0.52 | $ | 0.70 | $ | 1.53 | $ | 2.12 | |||||||
Diluted | $ | 0.51 | $ | 0.69 | $ | 1.53 | $ | 2.11 | |||||||
Dividends Declared Per Share of Common Stock | $ | 0.3950 | $ | 0.38 | $ | 1.185 | $ | 1.14 | |||||||
Weighted-Average Shares of Common Stock Outstanding (in thousands) | |||||||||||||||
Basic | 686,563 | 678,114 | 683,783 | 676,905 | |||||||||||
Diluted | 688,746 | 680,348 | 686,081 | 679,969 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 355 | $ | 473 | $ | 1,050 | $ | 1,437 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Amounts arising during the period - gains (losses), net of tax (expense) benefit: | |||||||||||||||
Foreign currency translation adjustments, net of tax of $0, ($2), ($1), ($4) | (12 | ) | (641 | ) | 195 | (837 | ) | ||||||||
Qualifying derivatives, net of tax of $0, ($16), $7, ($9) | 1 | 62 | (29 | ) | 57 | ||||||||||
Defined benefit plans: | |||||||||||||||
Net actuarial gain (loss), net of tax of $2, $4, $9, $3 | (3 | ) | (6 | ) | (14 | ) | (4 | ) | |||||||
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit): | |||||||||||||||
Qualifying derivatives, net of tax of $1, $17, ($6), $15 | — | (69 | ) | 24 | (62 | ) | |||||||||
Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $0 | — | — | 1 | (1 | ) | ||||||||||
Defined benefit plans: | |||||||||||||||
Prior service costs, net of tax of ($1), ($1), ($1), ($1) | — | — | 1 | 1 | |||||||||||
Net actuarial (gain) loss, net of tax of ($10), ($10), ($28), ($27) | 34 | 31 | 97 | 94 | |||||||||||
Total other comprehensive income (loss) | 20 | (623 | ) | 275 | (752 | ) | |||||||||
Comprehensive income (loss) | $ | 375 | $ | (150 | ) | $ | 1,325 | $ | 685 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 1,050 | $ | 1,437 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | 745 | 692 | |||||
Amortization | 72 | 54 | |||||
Defined benefit plans - expense (income) | (69 | ) | (29 | ) | |||
Deferred income taxes and investment tax credits | 284 | 436 | |||||
Unrealized (gains) losses on derivatives, and other hedging activities | 194 | 107 | |||||
Stock-based compensation expense | 30 | 23 | |||||
Other | (8 | ) | (12 | ) | |||
Change in current assets and current liabilities | |||||||
Accounts receivable | 25 | (29 | ) | ||||
Accounts payable | (93 | ) | (40 | ) | |||
Unbilled revenues | 81 | 32 | |||||
Fuel, materials and supplies | 35 | 8 | |||||
Prepayments | (37 | ) | (34 | ) | |||
Taxes payable | 6 | 40 | |||||
Regulatory assets and liabilities, net | (3 | ) | (32 | ) | |||
Accrued interest | 49 | 32 | |||||
Other current liabilities | (53 | ) | (48 | ) | |||
Other | 5 | (5 | ) | ||||
Other operating activities | |||||||
Defined benefit plans - funding | (558 | ) | (345 | ) | |||
Other assets | 4 | 18 | |||||
Other liabilities | (5 | ) | (75 | ) | |||
Net cash provided by operating activities | 1,754 | 2,230 | |||||
Cash Flows from Investing Activities | |||||||
Expenditures for property, plant and equipment | (2,152 | ) | (2,073 | ) | |||
Expenditures for intangible assets | (25 | ) | (23 | ) | |||
Other investing activities | 13 | 30 | |||||
Net cash used in investing activities | (2,164 | ) | (2,066 | ) | |||
Cash Flows from Financing Activities | |||||||
Issuance of long-term debt | 1,088 | 1,241 | |||||
Retirement of long-term debt | (60 | ) | (905 | ) | |||
Settlement of cross-currency swaps | — | 46 | |||||
Issuance of common stock | 275 | 133 | |||||
Payment of common stock dividends | (800 | ) | (772 | ) | |||
Net increase (decrease) in short-term debt | 269 | (268 | ) | ||||
Other financing activities | (34 | ) | (33 | ) | |||
Net cash provided by (used in) financing activities | 738 | (558 | ) | ||||
Effect of Exchange Rates on Cash and Cash Equivalents | 7 | (26 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 335 | (420 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 341 | 836 | |||||
Cash and Cash Equivalents at End of Period | $ | 676 | $ | 416 | |||
Supplemental Disclosures of Cash Flow Information | |||||||
Significant non-cash transactions: | |||||||
Accrued expenditures for property, plant and equipment at September 30, | $ | 373 | $ | 293 | |||
Accrued expenditures for intangible assets at September 30, | $ | 60 | $ | 104 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 676 | $ | 341 | |||
Accounts receivable (less reserve: 2017, $52; 2016, $54) | |||||||
Customer | 617 | 666 | |||||
Other | 96 | 46 | |||||
Unbilled revenues | 405 | 480 | |||||
Fuel, materials and supplies | 323 | 356 | |||||
Prepayments | 101 | 63 | |||||
Price risk management assets | 57 | 63 | |||||
Other current assets | 56 | 52 | |||||
Total Current Assets | 2,331 | 2,067 | |||||
Property, Plant and Equipment | |||||||
Regulated utility plant | 36,678 | 34,674 | |||||
Less: accumulated depreciation - regulated utility plant | 6,624 | 6,013 | |||||
Regulated utility plant, net | 30,054 | 28,661 | |||||
Non-regulated property, plant and equipment | 422 | 413 | |||||
Less: accumulated depreciation - non-regulated property, plant and equipment | 154 | 134 | |||||
Non-regulated property, plant and equipment, net | 268 | 279 | |||||
Construction work in progress | 1,494 | 1,134 | |||||
Property, Plant and Equipment, net | 31,816 | 30,074 | |||||
Other Noncurrent Assets | |||||||
Regulatory assets | 1,869 | 1,918 | |||||
Goodwill | 3,134 | 3,060 | |||||
Other intangibles | 666 | 700 | |||||
Pension benefit asset | 532 | 9 | |||||
Price risk management assets | 267 | 336 | |||||
Other noncurrent assets | 143 | 151 | |||||
Total Other Noncurrent Assets | 6,611 | 6,174 | |||||
Total Assets | $ | 40,758 | $ | 38,315 |
September 30, 2017 | December 31, 2016 | ||||||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Short-term debt | $ | 1,211 | $ | 923 | |||
Long-term debt due within one year | 448 | 518 | |||||
Accounts payable | 838 | 820 | |||||
Taxes | 110 | 101 | |||||
Interest | 322 | 270 | |||||
Dividends | 272 | 259 | |||||
Customer deposits | 291 | 276 | |||||
Regulatory liabilities | 87 | 101 | |||||
Other current liabilities | 570 | 569 | |||||
Total Current Liabilities | 4,149 | 3,837 | |||||
Long-term Debt | 19,110 | 17,808 | |||||
Deferred Credits and Other Noncurrent Liabilities | |||||||
Deferred income taxes | 4,224 | 3,889 | |||||
Investment tax credits | 130 | 132 | |||||
Accrued pension obligations | 796 | 1,001 | |||||
Asset retirement obligations | 312 | 428 | |||||
Regulatory liabilities | 873 | 899 | |||||
Other deferred credits and noncurrent liabilities | 472 | 422 | |||||
Total Deferred Credits and Other Noncurrent Liabilities | 6,807 | 6,771 | |||||
Commitments and Contingent Liabilities (Notes 6 and 9) | |||||||
Equity | |||||||
Common stock - $0.01 par value (a) | 7 | 7 | |||||
Additional paid-in capital | 10,122 | 9,841 | |||||
Earnings reinvested | 4,066 | 3,829 | |||||
Accumulated other comprehensive loss | (3,503 | ) | (3,778 | ) | |||
Total Equity | 10,692 | 9,899 | |||||
Total Liabilities and Equity | $ | 40,758 | $ | 38,315 |
(a) | 1,560,000 shares authorized; 688,133 and 679,731 shares issued and outstanding at September 30, 2017 and December 31, 2016. |
Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Accumulated other comprehensive loss | Total | |||||||||||||||||
December 31, 2016 | 679,731 | $ | 7 | $ | 9,841 | $ | 3,829 | $ | (3,778 | ) | $ | 9,899 | ||||||||||
Common stock issued | 8,402 | 303 | 303 | |||||||||||||||||||
Stock-based compensation | (22 | ) | (22 | ) | ||||||||||||||||||
Net income | 1,050 | 1,050 | ||||||||||||||||||||
Dividends and dividend equivalents | (813 | ) | (813 | ) | ||||||||||||||||||
Other comprehensive income (loss) | 275 | 275 | ||||||||||||||||||||
September 30, 2017 | 688,133 | $ | 7 | $ | 10,122 | $ | 4,066 | $ | (3,503 | ) | $ | 10,692 | ||||||||||
December 31, 2015 | 673,857 | $ | 7 | $ | 9,687 | $ | 2,953 | $ | (2,728 | ) | $ | 9,919 | ||||||||||
Common stock issued | 5,411 | 168 | 168 | |||||||||||||||||||
Stock-based compensation | (31 | ) | (31 | ) | ||||||||||||||||||
Net income | 1,437 | 1,437 | ||||||||||||||||||||
Dividends and dividend equivalents | (773 | ) | (773 | ) | ||||||||||||||||||
Other comprehensive income (loss) | (752 | ) | (752 | ) | ||||||||||||||||||
Adoption of stock-based compensation guidance cumulative effect adjustment | 7 | 7 | ||||||||||||||||||||
September 30, 2016 | 679,268 | $ | 7 | $ | 9,824 | $ | 3,624 | $ | (3,480 | ) | $ | 9,975 | ||||||||||
(a) | Shares in thousands. Each share entitles the holder to one vote on any question presented at any shareowners' meeting. |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues | $ | 547 | $ | 539 | $ | 1,620 | $ | 1,619 | |||||||
Operating Expenses | |||||||||||||||
Operation | |||||||||||||||
Energy purchases | 121 | 129 | 374 | 414 | |||||||||||
Other operation and maintenance | 133 | 144 | 435 | 431 | |||||||||||
Depreciation | 77 | 64 | 228 | 185 | |||||||||||
Taxes, other than income | 27 | 26 | 79 | 79 | |||||||||||
Total Operating Expenses | 358 | 363 | 1,116 | 1,109 | |||||||||||
Operating Income | 189 | 176 | 504 | 510 | |||||||||||
Other Income (Expense) - net | 4 | 4 | 8 | 12 | |||||||||||
Interest Income from Affiliate | 2 | — | 3 | — | |||||||||||
Interest Expense | 36 | 32 | 105 | 97 | |||||||||||
Income Before Income Taxes | 159 | 148 | 410 | 425 | |||||||||||
Income Taxes | 64 | 58 | 159 | 162 | |||||||||||
Net Income (a) | $ | 95 | $ | 90 | $ | 251 | $ | 263 |
(a) | Net income equals comprehensive income. |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 251 | $ | 263 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | 228 | 185 | |||||
Amortization | 25 | 19 | |||||
Defined benefit plans - expense | 10 | 9 | |||||
Deferred income taxes and investment tax credits | 129 | 151 | |||||
Other | (8 | ) | (14 | ) | |||
Change in current assets and current liabilities | |||||||
Accounts receivable | 7 | (6 | ) | ||||
Accounts payable | (38 | ) | (1 | ) | |||
Unbilled revenues | 30 | 10 | |||||
Prepayments | (31 | ) | 29 | ||||
Regulatory assets and liabilities, net | — | (41 | ) | ||||
Taxes payable | 10 | (6 | ) | ||||
Other | (9 | ) | (13 | ) | |||
Other operating activities | |||||||
Defined benefit plans - funding | (24 | ) | — | ||||
Other assets | (2 | ) | 15 | ||||
Other liabilities | (3 | ) | (5 | ) | |||
Net cash provided by operating activities | 575 | 595 | |||||
Cash Flows from Investing Activities | |||||||
Expenditures for property, plant and equipment | (851 | ) | (739 | ) | |||
Expenditures for intangible assets | (7 | ) | (3 | ) | |||
Net increase in notes receivable from affiliate | (2 | ) | — | ||||
Other investing activities | 2 | 2 | |||||
Net cash used in investing activities | (858 | ) | (740 | ) | |||
Cash Flows from Financing Activities | |||||||
Issuance of long-term debt | 470 | 224 | |||||
Retirement of long-term debt | — | (224 | ) | ||||
Contributions from parent | 575 | 200 | |||||
Payment of common stock dividends to parent | (231 | ) | (193 | ) | |||
Net increase (decrease) in short-term debt | (295 | ) | 130 | ||||
Other financing activities | (6 | ) | (3 | ) | |||
Net cash provided by financing activities | 513 | 134 | |||||
Net Increase (Decrease) in Cash and Cash Equivalents | 230 | (11 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 13 | 47 | |||||
Cash and Cash Equivalents at End of Period | $ | 243 | $ | 36 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Significant non-cash transactions: | |||||||
Accrued expenditures for property, plant and equipment at September 30, | $ | 190 | $ | 166 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 243 | $ | 13 | |||
Accounts receivable (less reserve: 2017, $25; 2016, $28) | |||||||
Customer | 275 | 272 | |||||
Other | 10 | 21 | |||||
Accounts receivable from affiliates | 1 | — | |||||
Notes receivable from affiliate | 2 | — | |||||
Unbilled revenues | 84 | 114 | |||||
Materials and supplies | 31 | 32 | |||||
Prepayments | 40 | 9 | |||||
Regulatory assets | 14 | 19 | |||||
Other current assets | 11 | 8 | |||||
Total Current Assets | 711 | 488 | |||||
Property, Plant and Equipment | |||||||
Regulated utility plant | 10,449 | 9,654 | |||||
Less: accumulated depreciation - regulated utility plant | 2,880 | 2,714 | |||||
Regulated utility plant, net | 7,569 | 6,940 | |||||
Construction work in progress | 699 | 641 | |||||
Property, Plant and Equipment, net | 8,268 | 7,581 | |||||
Other Noncurrent Assets | |||||||
Regulatory assets | 1,073 | 1,094 | |||||
Intangibles | 256 | 251 | |||||
Other noncurrent assets | 15 | 12 | |||||
Total Other Noncurrent Assets | 1,344 | 1,357 | |||||
Total Assets | $ | 10,323 | $ | 9,426 |
September 30, 2017 | December 31, 2016 | ||||||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Short-term debt | $ | — | $ | 295 | |||
Long-term debt due within one year | — | 224 | |||||
Accounts payable | 397 | 367 | |||||
Accounts payable to affiliates | 38 | 42 | |||||
Taxes | 22 | 12 | |||||
Interest | 38 | 34 | |||||
Regulatory liabilities | 72 | 83 | |||||
Other current liabilities | 90 | 101 | |||||
Total Current Liabilities | 657 | 1,158 | |||||
Long-term Debt | 3,298 | 2,607 | |||||
Deferred Credits and Other Noncurrent Liabilities | |||||||
Deferred income taxes | 2,036 | 1,899 | |||||
Accrued pension obligations | 257 | 281 | |||||
Other deferred credits and noncurrent liabilities | 89 | 90 | |||||
Total Deferred Credits and Other Noncurrent Liabilities | 2,382 | 2,270 | |||||
Commitments and Contingent Liabilities (Notes 6 and 9) | |||||||
Equity | |||||||
Common stock - no par value (a) | 364 | 364 | |||||
Additional paid-in capital | 2,729 | 2,154 | |||||
Earnings reinvested | 893 | 873 | |||||
Total Equity | 3,986 | 3,391 | |||||
Total Liabilities and Equity | $ | 10,323 | $ | 9,426 |
(a) | 170,000 shares authorized; 66,368 shares issued and outstanding at September 30, 2017 and December 31, 2016. |
Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Total | ||||||||||||||
December 31, 2016 | 66,368 | $ | 364 | $ | 2,154 | $ | 873 | $ | 3,391 | |||||||||
Net income | 251 | 251 | ||||||||||||||||
Capital contributions from PPL | 575 | 575 | ||||||||||||||||
Dividends declared on common stock | (231 | ) | (231 | ) | ||||||||||||||
September 30, 2017 | 66,368 | $ | 364 | $ | 2,729 | $ | 893 | $ | 3,986 | |||||||||
December 31, 2015 | 66,368 | $ | 364 | $ | 1,934 | $ | 821 | $ | 3,119 | |||||||||
Net income | 263 | 263 | ||||||||||||||||
Capital contributions from PPL | 200 | 200 | ||||||||||||||||
Dividends declared on common stock | (193 | ) | (193 | ) | ||||||||||||||
September 30, 2016 | 66,368 | $ | 364 | $ | 2,134 | $ | 891 | $ | 3,389 |
(a) | Shares in thousands. All common shares of PPL Electric stock are owned by PPL. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues | $ | 818 | $ | 835 | $ | 2,350 | $ | 2,382 | |||||||
Operating Expenses | |||||||||||||||
Operation | |||||||||||||||
Fuel | 202 | 227 | 576 | 607 | |||||||||||
Energy purchases | 22 | 24 | 120 | 118 | |||||||||||
Other operation and maintenance | 199 | 197 | 598 | 603 | |||||||||||
Depreciation | 114 | 102 | 324 | 301 | |||||||||||
Taxes, other than income | 17 | 16 | 49 | 46 | |||||||||||
Total Operating Expenses | 554 | 566 | 1,667 | 1,675 | |||||||||||
Operating Income | 264 | 269 | 683 | 707 | |||||||||||
Other Income (Expense) - net | 1 | (3 | ) | (5 | ) | (9 | ) | ||||||||
Interest Expense | 49 | 50 | 148 | 147 | |||||||||||
Interest Expense with Affiliate | 5 | 4 | 13 | 12 | |||||||||||
Income Before Income Taxes | 211 | 212 | 517 | 539 | |||||||||||
Income Taxes | 79 | 79 | 195 | 202 | |||||||||||
Net Income | $ | 132 | $ | 133 | $ | 322 | $ | 337 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 132 | $ | 133 | $ | 322 | $ | 337 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Amounts arising during the period - gains (losses), net of tax (expense) benefit: | |||||||||||||||
Defined benefit plans: | |||||||||||||||
Net actuarial gain (loss), net of tax of $0, $0, $7, ($1) | (1 | ) | — | (12 | ) | 1 | |||||||||
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit): | |||||||||||||||
Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $0 | — | — | 1 | (1 | ) | ||||||||||
Defined benefit plans: | |||||||||||||||
Prior service costs, net of tax of ($1), ($1), ($1), ($1) | — | — | 1 | 1 | |||||||||||
Net actuarial loss, net of tax of $0, $0, ($2), ($1) | 1 | 1 | 3 | 3 | |||||||||||
Total other comprehensive income (loss) | — | 1 | (7 | ) | 4 | ||||||||||
Comprehensive income | $ | 132 | $ | 134 | $ | 315 | $ | 341 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 322 | $ | 337 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | 324 | 301 | |||||
Amortization | 19 | 21 | |||||
Defined benefit plans - expense | 19 | 20 | |||||
Deferred income taxes and investment tax credits | 173 | 212 | |||||
Other | 1 | — | |||||
Change in current assets and current liabilities | |||||||
Accounts receivable | 18 | (43 | ) | ||||
Accounts payable | (30 | ) | 7 | ||||
Accounts payable to affiliates | 3 | 4 | |||||
Unbilled revenues | 19 | 6 | |||||
Fuel, materials and supplies | 34 | 7 | |||||
Taxes payable | 13 | — | |||||
Accrued interest | 41 | 42 | |||||
Other | (1 | ) | (4 | ) | |||
Other operating activities | |||||||
Defined benefit plans - funding | (32 | ) | (82 | ) | |||
Expenditures for asset retirement obligations | (22 | ) | (15 | ) | |||
Other assets | 5 | 1 | |||||
Other liabilities | 14 | 2 | |||||
Net cash provided by operating activities | 920 | 816 | |||||
Cash Flows from Investing Activities | |||||||
Expenditures for property, plant and equipment | (579 | ) | (600 | ) | |||
Other investing activities | 4 | 1 | |||||
Net cash used in investing activities | (575 | ) | (599 | ) | |||
Cash Flows from Financing Activities | |||||||
Net increase (decrease) in notes payable with affiliate | (4 | ) | 84 | ||||
Issuance of long-term debt | 60 | 221 | |||||
Retirement of long-term debt | (60 | ) | (221 | ) | |||
Net increase (decrease) in short-term debt | 5 | (130 | ) | ||||
Debt issuance and credit facility costs | (3 | ) | (3 | ) | |||
Distributions to member | (316 | ) | (224 | ) | |||
Contributions from member | — | 37 | |||||
Net cash used in financing activities | (318 | ) | (236 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents | 27 | (19 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 13 | 30 | |||||
Cash and Cash Equivalents at End of Period | $ | 40 | $ | 11 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Significant non-cash transactions: | |||||||
Accrued expenditures for property, plant and equipment at September 30, | $ | 142 | $ | 86 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 40 | $ | 13 | |||
Accounts receivable (less reserve: 2017, $25; 2016, $24) | |||||||
Customer | 215 | 235 | |||||
Other | 43 | 17 | |||||
Accounts receivable from affiliates | 1 | — | |||||
Unbilled revenues | 151 | 170 | |||||
Fuel, materials and supplies | 264 | 297 | |||||
Prepayments | 27 | 24 | |||||
Regulatory assets | 20 | 20 | |||||
Other current assets | 8 | 4 | |||||
Total Current Assets | 769 | 780 | |||||
Property, Plant and Equipment | |||||||
Regulated utility plant | 12,906 | 12,746 | |||||
Less: accumulated depreciation - regulated utility plant | 1,685 | 1,465 | |||||
Regulated utility plant, net | 11,221 | 11,281 | |||||
Construction work in progress | 574 | 317 | |||||
Property, Plant and Equipment, net | 11,795 | 11,598 | |||||
Other Noncurrent Assets | |||||||
Regulatory assets | 796 | 824 | |||||
Goodwill | 996 | 996 | |||||
Other intangibles | 88 | 95 | |||||
Other noncurrent assets | 71 | 78 | |||||
Total Other Noncurrent Assets | 1,951 | 1,993 | |||||
Total Assets | $ | 14,515 | $ | 14,371 |
September 30, 2017 | December 31, 2016 | ||||||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Short-term debt | $ | 190 | $ | 185 | |||
Long-term debt due within one year | 98 | 194 | |||||
Notes payable with affiliate | 159 | 163 | |||||
Accounts payable | 283 | 251 | |||||
Accounts payable to affiliates | 8 | 6 | |||||
Customer deposits | 57 | 56 | |||||
Taxes | 52 | 39 | |||||
Price risk management liabilities | 5 | 4 | |||||
Regulatory liabilities | 15 | 18 | |||||
Interest | 73 | 32 | |||||
Asset retirement obligations | 94 | 60 | |||||
Other current liabilities | 125 | 119 | |||||
Total Current Liabilities | 1,159 | 1,127 | |||||
Long-term Debt | |||||||
Long-term debt | 4,570 | 4,471 | |||||
Long-term debt to affiliate | 400 | 400 | |||||
Total Long-term Debt | 4,970 | 4,871 | |||||
Deferred Credits and Other Noncurrent Liabilities | |||||||
Deferred income taxes | 1,909 | 1,735 | |||||
Investment tax credits | 130 | 132 | |||||
Accrued pension obligations | 345 | 350 | |||||
Asset retirement obligations | 261 | 373 | |||||
Regulatory liabilities | 873 | 899 | |||||
Price risk management liabilities | 24 | 27 | |||||
Other deferred credits and noncurrent liabilities | 178 | 190 | |||||
Total Deferred Credits and Other Noncurrent Liabilities | 3,720 | 3,706 | |||||
Commitments and Contingent Liabilities (Notes 6 and 9) | |||||||
Member's Equity | 4,666 | 4,667 | |||||
Total Liabilities and Equity | $ | 14,515 | $ | 14,371 |
Member's Equity | |||
December 31, 2016 | $ | 4,667 | |
Net income | 322 | ||
Distributions to member | (316 | ) | |
Other comprehensive income | (7 | ) | |
September 30, 2017 | $ | 4,666 | |
December 31, 2015 | $ | 4,517 | |
Net income | 337 | ||
Contributions from member | 37 | ||
Distributions to member | (224 | ) | |
Other comprehensive income | 4 | ||
September 30, 2016 | $ | 4,671 |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues | |||||||||||||||
Retail and wholesale | $ | 361 | $ | 366 | $ | 1,055 | $ | 1,058 | |||||||
Electric revenue from affiliate | 2 | 2 | 23 | 19 | |||||||||||
Total Operating Revenues | 363 | 368 | 1,078 | 1,077 | |||||||||||
Operating Expenses | |||||||||||||||
Operation | |||||||||||||||
Fuel | 76 | 86 | 225 | 233 | |||||||||||
Energy purchases | 18 | 19 | 107 | 104 | |||||||||||
Energy purchases from affiliate | 3 | 5 | 8 | 10 | |||||||||||
Other operation and maintenance | 89 | 85 | 262 | 264 | |||||||||||
Depreciation | 47 | 43 | 136 | 126 | |||||||||||
Taxes, other than income | 8 | 9 | 25 | 24 | |||||||||||
Total Operating Expenses | 241 | 247 | 763 | 761 | |||||||||||
Operating Income | 122 | 121 | 315 | 316 | |||||||||||
Other Income (Expense) - net | (1 | ) | (1 | ) | (2 | ) | (6 | ) | |||||||
Interest Expense | 17 | 18 | 53 | 53 | |||||||||||
Income Before Income Taxes | 104 | 102 | 260 | 257 | |||||||||||
Income Taxes | 39 | 39 | 99 | 98 | |||||||||||
Net Income (a) | $ | 65 | $ | 63 | $ | 161 | $ | 159 |
(a) | Net income equals comprehensive income. |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 161 | $ | 159 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | 136 | 126 | |||||
Amortization | 11 | 10 | |||||
Defined benefit plans - expense | 5 | 6 | |||||
Deferred income taxes and investment tax credits | 96 | 117 | |||||
Change in current assets and current liabilities | |||||||
Accounts receivable | 12 | (17 | ) | ||||
Accounts receivable from affiliates | 6 | (11 | ) | ||||
Accounts payable | (12 | ) | 24 | ||||
Accounts payable to affiliates | (10 | ) | (6 | ) | |||
Unbilled revenues | 11 | 10 | |||||
Fuel, materials and supplies | 6 | 11 | |||||
Taxes payable | (15 | ) | — | ||||
Accrued interest | 12 | 13 | |||||
Other | 6 | 1 | |||||
Other operating activities | |||||||
Defined benefit plans - funding | (3 | ) | (45 | ) | |||
Expenditures for asset retirement obligations | (13 | ) | (11 | ) | |||
Other assets | 5 | (3 | ) | ||||
Other liabilities | 4 | (1 | ) | ||||
Net cash provided by operating activities | 418 | 383 | |||||
Cash Flows from Investing Activities | |||||||
Expenditures for property, plant and equipment | (293 | ) | (343 | ) | |||
Net cash used in investing activities | (293 | ) | (343 | ) | |||
Cash Flows from Financing Activities | |||||||
Net increase in notes payable with affiliates | 10 | — | |||||
Issuance of long-term debt | 60 | 125 | |||||
Retirement of long-term debt | (60 | ) | (125 | ) | |||
Net increase (decrease) in short-term debt | 21 | (14 | ) | ||||
Debt issuance and credit facility costs | (2 | ) | (1 | ) | |||
Payment of common stock dividends to parent | (150 | ) | (87 | ) | |||
Contributions from parent | — | 47 | |||||
Net cash used in financing activities | (121 | ) | (55 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents | 4 | (15 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 5 | 19 | |||||
Cash and Cash Equivalents at End of Period | $ | 9 | $ | 4 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Significant non-cash transactions: | |||||||
Accrued expenditures for property, plant and equipment at September 30, | $ | 83 | $ | 46 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 9 | $ | 5 | |||
Accounts receivable (less reserve: 2017, $1; 2016, $2) | |||||||
Customer | 96 | 109 | |||||
Other | 14 | 11 | |||||
Accounts receivable from affiliates | 22 | 28 | |||||
Unbilled revenues | 64 | 75 | |||||
Fuel, materials and supplies | 137 | 143 | |||||
Prepayments | 15 | 12 | |||||
Regulatory assets | 11 | 9 | |||||
Other current assets | 2 | 1 | |||||
Total Current Assets | 370 | 393 | |||||
Property, Plant and Equipment | |||||||
Regulated utility plant | 5,447 | 5,357 | |||||
Less: accumulated depreciation - regulated utility plant | 575 | 498 | |||||
Regulated utility plant, net | 4,872 | 4,859 | |||||
Construction work in progress | 279 | 133 | |||||
Property, Plant and Equipment, net | 5,151 | 4,992 | |||||
Other Noncurrent Assets | |||||||
Regulatory assets | 413 | 450 | |||||
Goodwill | 389 | 389 | |||||
Other intangibles | 54 | 59 | |||||
Other noncurrent assets | 13 | 17 | |||||
Total Other Noncurrent Assets | 869 | 915 | |||||
Total Assets | $ | 6,390 | $ | 6,300 |
September 30, 2017 | December 31, 2016 | ||||||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Short-term debt | $ | 190 | $ | 169 | |||
Long-term debt due within one year | 98 | 194 | |||||
Notes payable with affiliate | 10 | — | |||||
Accounts payable | 166 | 148 | |||||
Accounts payable to affiliates | 17 | 26 | |||||
Customer deposits | 27 | 27 | |||||
Taxes | 25 | 40 | |||||
Price risk management liabilities | 5 | 4 | |||||
Regulatory liabilities | 5 | 5 | |||||
Interest | 23 | 11 | |||||
Asset retirement obligations | 33 | 41 | |||||
Other current liabilities | 46 | 36 | |||||
Total Current Liabilities | 645 | 701 | |||||
Long-term Debt | 1,521 | 1,423 | |||||
Deferred Credits and Other Noncurrent Liabilities | |||||||
Deferred income taxes | 1,073 | 974 | |||||
Investment tax credits | 36 | 36 | |||||
Accrued pension obligations | 47 | 53 | |||||
Asset retirement obligations | 85 | 104 | |||||
Regulatory liabilities | 388 | 419 | |||||
Price risk management liabilities | 24 | 27 | |||||
Other deferred credits and noncurrent liabilities | 84 | 87 | |||||
Total Deferred Credits and Other Noncurrent Liabilities | 1,737 | 1,700 | |||||
Commitments and Contingent Liabilities (Notes 6 and 9) | |||||||
Stockholder's Equity | |||||||
Common stock - no par value (a) | 424 | 424 | |||||
Additional paid-in capital | 1,682 | 1,682 | |||||
Earnings reinvested | 381 | 370 | |||||
Total Equity | 2,487 | 2,476 | |||||
Total Liabilities and Equity | $ | 6,390 | $ | 6,300 |
(a) | 75,000 shares authorized; 21,294 shares issued and outstanding at September 30, 2017 and December 31, 2016. |
Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Total | ||||||||||||||
December 31, 2016 | 21,294 | $ | 424 | $ | 1,682 | $ | 370 | $ | 2,476 | |||||||||
Net income | 161 | 161 | ||||||||||||||||
Cash dividends declared on common stock | (150 | ) | (150 | ) | ||||||||||||||
September 30, 2017 | 21,294 | $ | 424 | $ | 1,682 | $ | 381 | $ | 2,487 | |||||||||
December 31, 2015 | 21,294 | $ | 424 | $ | 1,611 | $ | 295 | $ | 2,330 | |||||||||
Net income | 159 | 159 | ||||||||||||||||
Capital contributions from LKE | 47 | 47 | ||||||||||||||||
Cash dividends declared on common stock | (87 | ) | (87 | ) | ||||||||||||||
September 30, 2016 | 21,294 | $ | 424 | $ | 1,658 | $ | 367 | $ | 2,449 |
(a) | Shares in thousands. All common shares of LG&E stock are owned by LKE. |
THIS PAGE INTENTIONALLY LEFT BLANK. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues | |||||||||||||||
Retail and wholesale | $ | 457 | $ | 469 | $ | 1,295 | $ | 1,324 | |||||||
Electric revenue from affiliate | 3 | 5 | 8 | 10 | |||||||||||
Total Operating Revenues | 460 | 474 | 1,303 | 1,334 | |||||||||||
Operating Expenses | |||||||||||||||
Operation | |||||||||||||||
Fuel | 126 | 141 | 351 | 374 | |||||||||||
Energy purchases | 4 | 5 | 13 | 14 | |||||||||||
Energy purchases from affiliate | 2 | 2 | 23 | 19 | |||||||||||
Other operation and maintenance | 104 | 107 | 313 | 320 | |||||||||||
Depreciation | 67 | 59 | 188 | 175 | |||||||||||
Taxes, other than income | 9 | 7 | 24 | 22 | |||||||||||
Total Operating Expenses | 312 | 321 | 912 | 924 | |||||||||||
Operating Income | 148 | 153 | 391 | 410 | |||||||||||
Other Income (Expense) - net | — | (3 | ) | (3 | ) | (4 | ) | ||||||||
Interest Expense | 24 | 24 | 72 | 71 | |||||||||||
Income Before Income Taxes | 124 | 126 | 316 | 335 | |||||||||||
Income Taxes | 47 | 48 | 120 | 128 | |||||||||||
Net Income (a) | $ | 77 | $ | 78 | $ | 196 | $ | 207 |
(a) | Net income approximates comprehensive income. |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 196 | $ | 207 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | 188 | 175 | |||||
Amortization | 7 | 10 | |||||
Defined benefit plans - expense | 3 | 4 | |||||
Deferred income taxes and investment tax credits | 116 | 122 | |||||
Other | — | (1 | ) | ||||
Change in current assets and current liabilities | |||||||
Accounts receivable | 6 | (24 | ) | ||||
Accounts receivable from affiliates | (1 | ) | — | ||||
Accounts payable | (6 | ) | (11 | ) | |||
Accounts payable to affiliates | (16 | ) | 2 | ||||
Unbilled revenues | 8 | (4 | ) | ||||
Fuel, materials and supplies | 28 | (4 | ) | ||||
Taxes payable | (21 | ) | — | ||||
Accrued interest | 22 | 22 | |||||
Other | (6 | ) | 2 | ||||
Other operating activities | |||||||
Defined benefit plans - funding | (22 | ) | (19 | ) | |||
Expenditures for asset retirement obligations | (9 | ) | (4 | ) | |||
Other assets | — | (4 | ) | ||||
Other liabilities | 8 | (4 | ) | ||||
Net cash provided by operating activities | 501 | 469 | |||||
Cash Flows from Investing Activities | |||||||
Expenditures for property, plant and equipment | (283 | ) | (255 | ) | |||
Net increase in notes receivable with affiliates | (10 | ) | — | ||||
Other investing activities | 4 | 1 | |||||
Net cash used in investing activities | (289 | ) | (254 | ) | |||
Cash Flows from Financing Activities | |||||||
Issuance of long-term debt | — | 96 | |||||
Retirement of long-term debt | — | (96 | ) | ||||
Net decrease in short-term debt | (16 | ) | (41 | ) | |||
Debt issuance and credit facility costs | (1 | ) | (1 | ) | |||
Payment of common stock dividends to parent | (171 | ) | (197 | ) | |||
Contributions from parent | — | 20 | |||||
Net cash used in financing activities | (188 | ) | (219 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents | 24 | (4 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 7 | 11 | |||||
Cash and Cash Equivalents at End of Period | $ | 31 | $ | 7 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Significant non-cash transactions: | |||||||
Accrued expenditures for property, plant and equipment at September 30, | $ | 58 | $ | 40 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 31 | $ | 7 | |||
Accounts receivable (less reserve: 2017, $1; 2016, $2) | |||||||
Customer | 119 | 126 | |||||
Other | 28 | 5 | |||||
Accounts receivable from affiliates | 1 | — | |||||
Notes receivable from affiliate | 10 | — | |||||
Unbilled revenues | 87 | 95 | |||||
Fuel, materials and supplies | 127 | 154 | |||||
Prepayments | 14 | 12 | |||||
Regulatory assets | 9 | 11 | |||||
Other current assets | 6 | 3 | |||||
Total Current Assets | 432 | 413 | |||||
Property, Plant and Equipment | |||||||
Regulated utility plant | 7,452 | 7,382 | |||||
Less: accumulated depreciation - regulated utility plant | 1,110 | 965 | |||||
Regulated utility plant, net | 6,342 | 6,417 | |||||
Construction work in progress | 293 | 181 | |||||
Property, Plant and Equipment, net | 6,635 | 6,598 | |||||
Other Noncurrent Assets | |||||||
Regulatory assets | 383 | 374 | |||||
Goodwill | 607 | 607 | |||||
Other intangibles | 34 | 36 | |||||
Other noncurrent assets | 55 | 57 | |||||
Total Other Noncurrent Assets | 1,079 | 1,074 | |||||
Total Assets | $ | 8,146 | $ | 8,085 |
September 30, 2017 | December 31, 2016 | ||||||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Short-term debt | $ | — | $ | 16 | |||
Accounts payable | 105 | 78 | |||||
Accounts payable to affiliates | 42 | 56 | |||||
Customer deposits | 30 | 29 | |||||
Taxes | 24 | 45 | |||||
Regulatory liabilities | 10 | 13 | |||||
Interest | 38 | 16 | |||||
Asset retirement obligations | 61 | 19 | |||||
Other current liabilities | 35 | 36 | |||||
Total Current Liabilities | 345 | 308 | |||||
Long-term Debt | 2,328 | 2,327 | |||||
Deferred Credits and Other Noncurrent Liabilities | |||||||
Deferred income taxes | 1,289 | 1,170 | |||||
Investment tax credits | 94 | 96 | |||||
Accrued pension obligations | 37 | 62 | |||||
Asset retirement obligations | 176 | 269 | |||||
Regulatory liabilities | 485 | 480 | |||||
Other deferred credits and noncurrent liabilities | 43 | 50 | |||||
Total Deferred Credits and Other Noncurrent Liabilities | 2,124 | 2,127 | |||||
Commitments and Contingent Liabilities (Notes 6 and 9) | |||||||
Stockholder's Equity | |||||||
Common stock - no par value (a) | 308 | 308 | |||||
Additional paid-in capital | 2,616 | 2,616 | |||||
Accumulated other comprehensive loss | — | (1 | ) | ||||
Earnings reinvested | 425 | 400 | |||||
Total Equity | 3,349 | 3,323 | |||||
Total Liabilities and Equity | $ | 8,146 | $ | 8,085 |
(a) | 80,000 shares authorized; 37,818 shares issued and outstanding at September 30, 2017 and December 31, 2016. |
Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Accumulated other comprehensive loss | Total | |||||||||||||||||
December 31, 2016 | 37,818 | $ | 308 | $ | 2,616 | $ | 400 | $ | (1 | ) | $ | 3,323 | ||||||||||
Net income | 196 | 196 | ||||||||||||||||||||
Cash dividends declared on common stock | (171 | ) | (171 | ) | ||||||||||||||||||
Other comprehensive income | 1 | 1 | ||||||||||||||||||||
September 30, 2017 | 37,818 | $ | 308 | $ | 2,616 | $ | 425 | $ | — | $ | 3,349 | |||||||||||
December 31, 2015 | 37,818 | $ | 308 | $ | 2,596 | $ | 383 | $ | — | $ | 3,287 | |||||||||||
Capital contributions from LKE | 20 | 20 | ||||||||||||||||||||
Net income | 207 | 207 | ||||||||||||||||||||
Cash dividends declared on common stock | (197 | ) | (197 | ) | ||||||||||||||||||
Other comprehensive income (loss) | (1 | ) | (1 | ) | ||||||||||||||||||
September 30, 2016 | 37,818 | $ | 308 | $ | 2,616 | $ | 393 | $ | (1 | ) | $ | 3,316 |
(a) | Shares in thousands. All common shares of KU stock are owned by LKE. |
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income Statement Data | |||||||||||||||
Revenues from external customers | |||||||||||||||
U.K. Regulated | $ | 477 | $ | 515 | $ | 1,547 | $ | 1,673 | |||||||
Kentucky Regulated | 818 | 835 | 2,350 | 2,382 | |||||||||||
Pennsylvania Regulated | 547 | 539 | 1,620 | 1,619 | |||||||||||
Corporate and Other | 3 | — | 4 | 11 | |||||||||||
Total | $ | 1,845 | $ | 1,889 | $ | 5,521 | $ | 5,685 | |||||||
Net Income | |||||||||||||||
U.K. Regulated (a) | $ | 126 | $ | 281 | $ | 560 | $ | 915 | |||||||
Kentucky Regulated | 125 | 126 | 299 | 314 | |||||||||||
Pennsylvania Regulated | 95 | 91 | 251 | 263 | |||||||||||
Corporate and Other | 9 | (25 | ) | (60 | ) | (55 | ) | ||||||||
Total | $ | 355 | $ | 473 | $ | 1,050 | $ | 1,437 |
(a) | Includes unrealized gains and losses from hedging foreign-currency related economic activity. See Note 13 for additional information. |
September 30, 2017 | December 31, 2016 | ||||||
Balance Sheet Data | |||||||
Assets | |||||||
U.K. Regulated (a) | $ | 16,052 | $ | 14,537 | |||
Kentucky Regulated | 14,181 | 14,037 | |||||
Pennsylvania Regulated | 10,323 | 9,426 | |||||
Corporate and Other (b) | 202 | 315 | |||||
Total | $ | 40,758 | $ | 38,315 |
(a) | Includes $11.7 billion and $10.8 billion of net PP&E as of September 30, 2017 and December 31, 2016. WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP. |
(b) | Primarily consists of unallocated items, including cash, PP&E and the elimination of inter-segment transactions. |
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income (Numerator) | |||||||||||||||
Net income | $ | 355 | $ | 473 | $ | 1,050 | $ | 1,437 | |||||||
Less amounts allocated to participating securities | 1 | 1 | 2 | 4 | |||||||||||
Net income available to PPL common shareowners - Basic and Diluted | $ | 354 | $ | 472 | $ | 1,048 | $ | 1,433 | |||||||
Shares of Common Stock (Denominator) | |||||||||||||||
Weighted-average shares - Basic EPS | 686,563 | 678,114 | 683,783 | 676,905 | |||||||||||
Add incremental non-participating securities: | |||||||||||||||
Share-based payment awards | 2,183 | 2,234 | 2,298 | 3,064 | |||||||||||
Weighted-average shares - Diluted EPS | 688,746 | 680,348 | 686,081 | 679,969 | |||||||||||
Basic EPS | |||||||||||||||
Net Income available to PPL common shareowners | $ | 0.52 | $ | 0.70 | $ | 1.53 | $ | 2.12 | |||||||
Diluted EPS | |||||||||||||||
Net Income available to PPL common shareowners | $ | 0.51 | $ | 0.69 | $ | 1.53 | $ | 2.11 |
Three Months | Nine Months | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Stock-based compensation plans (a) | 256 | 248 | 1,707 | 3,168 | |||||||
DRIP | 355 | 761 | 1,169 | 1,533 |
(a) | Includes stock options exercised, vesting of performance units, vesting of restricted stock and restricted stock units and conversion of stock units granted to directors. |
Three Months | Nine Months | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Stock options | 696 | 696 | 696 | 696 | |||||||
Performance units | — | 316 | — | 210 |
(PPL) | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 165 | $ | 214 | $ | 480 | $ | 681 | |||||||
Increase (decrease) due to: | |||||||||||||||
State income taxes, net of federal income tax benefit | 14 | 13 | 37 | 37 | |||||||||||
Valuation allowance adjustments | 4 | 4 | 9 | 13 | |||||||||||
Impact of lower U.K. income tax rates | (45 | ) | (37 | ) | (133 | ) | (136 | ) | |||||||
U.S. income tax on foreign earnings - net of foreign tax credit (a) | (8 | ) | (1 | ) | (24 | ) | (3 | ) | |||||||
Impact of the U.K. Finance Acts (b) | (3 | ) | (42 | ) | (12 | ) | (42 | ) | |||||||
Depreciation not normalized | (2 | ) | — | (7 | ) | (6 | ) | ||||||||
Interest benefit on U.K. financing entities | (4 | ) | (4 | ) | (12 | ) | (13 | ) | |||||||
Stock-based compensation | — | (1 | ) | (7 | ) | (12 | ) | ||||||||
Other | (5 | ) | (7 | ) | (10 | ) | (9 | ) | |||||||
Total increase (decrease) | (49 | ) | (75 | ) | (159 | ) | (171 | ) | |||||||
Total income taxes | $ | 116 | $ | 139 | $ | 321 | $ | 510 |
(a) | Lower income taxes primarily due to the tax benefit of accelerated pension contributions made in the first quarter of 2017. The related tax benefit is recognized over the annual period as a result of utilizing an estimated annual effective tax rate. |
(b) | The U.K. Finance Act 2016, enacted in September 2016, reduces the U.K. statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit during the three and nine months ended September 30, 2016. |
(PPL Electric) | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 56 | $ | 52 | $ | 144 | $ | 149 | |||||||
Increase (decrease) due to: | |||||||||||||||
State income taxes, net of federal income tax benefit | 9 | 9 | 26 | 27 | |||||||||||
Depreciation not normalized | (1 | ) | (2 | ) | (5 | ) | (5 | ) | |||||||
Stock-based compensation | — | — | (5 | ) | (7 | ) | |||||||||
Other | — | (1 | ) | (1 | ) | (2 | ) | ||||||||
Total increase (decrease) | 8 | 6 | 15 | 13 | |||||||||||
Total income taxes | $ | 64 | $ | 58 | $ | 159 | $ | 162 |
(LKE) | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 74 | $ | 74 | $ | 181 | $ | 189 | |||||||
Increase (decrease) due to: | |||||||||||||||
State income taxes, net of federal income tax benefit | 8 | 8 | 19 | 20 | |||||||||||
Amortization of investment tax credit | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||
Stock-based compensation | — | (1 | ) | (1 | ) | (2 | ) | ||||||||
Other | (2 | ) | (1 | ) | (2 | ) | (3 | ) | |||||||
Total increase (decrease) | 5 | 5 | 14 | 13 | |||||||||||
Total income taxes | $ | 79 | $ | 79 | $ | 195 | $ | 202 |
(LG&E) | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 36 | $ | 36 | $ | 91 | $ | 90 | |||||||
Increase (decrease) due to: | |||||||||||||||
State income taxes, net of federal income tax benefit | 4 | 4 | 10 | 10 | |||||||||||
Other | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||
Total increase (decrease) | 3 | 3 | 8 | 8 | |||||||||||
Total income taxes | $ | 39 | $ | 39 | $ | 99 | $ | 98 |
(KU) | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 43 | $ | 44 | $ | 111 | $ | 117 | |||||||
Increase (decrease) due to: | |||||||||||||||
State income taxes, net of federal income tax benefit | 5 | 5 | 11 | 12 | |||||||||||
Other | (1 | ) | (1 | ) | (2 | ) | (1 | ) | |||||||
Total increase (decrease) | 4 | 4 | 9 | 11 | |||||||||||
Total income taxes | $ | 47 | $ | 48 | $ | 120 | $ | 128 |
PPL | PPL Electric | ||||||||||||||
September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
Current Regulatory Assets: | |||||||||||||||
Environmental cost recovery | $ | 4 | $ | 6 | $ | — | $ | — | |||||||
Generation formula rate | 8 | 11 | — | — | |||||||||||
Transmission service charge | — | 7 | — | 7 | |||||||||||
Gas supply clause | 6 | 3 | — | — | |||||||||||
Smart meter rider | 12 | 6 | 12 | 6 | |||||||||||
Storm costs | 1 | 5 | 1 | 5 | |||||||||||
Other | 3 | 1 | 1 | 1 | |||||||||||
Total current regulatory assets (a) | $ | 34 | $ | 39 | $ | 14 | $ | 19 | |||||||
Noncurrent Regulatory Assets: | |||||||||||||||
Defined benefit plans | $ | 908 | $ | 947 | $ | 530 | $ | 549 | |||||||
Taxes recoverable through future rates | 347 | 340 | 347 | 340 | |||||||||||
Storm costs | 37 | 57 | — | 9 | |||||||||||
Unamortized loss on debt | 55 | 61 | 30 | 36 | |||||||||||
Interest rate swaps | 29 | 31 | — | — | |||||||||||
Terminated interest rate swaps | 93 | 98 | — | — | |||||||||||
Accumulated cost of removal of utility plant | 166 | 159 | 166 | 159 | |||||||||||
AROs | 224 | 211 | — | — | |||||||||||
Other | 10 | 14 | — | 1 | |||||||||||
Total noncurrent regulatory assets | $ | 1,869 | $ | 1,918 | $ | 1,073 | $ | 1,094 |
PPL | PPL Electric | ||||||||||||||
September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
Current Regulatory Liabilities: | |||||||||||||||
Generation supply charge | $ | 29 | $ | 23 | $ | 29 | $ | 23 | |||||||
Transmission service charge | 6 | — | 6 | — | |||||||||||
Universal service rider | 19 | 14 | 19 | 14 | |||||||||||
Transmission formula rate | 4 | 15 | 4 | 15 | |||||||||||
Fuel adjustment clause | 11 | 11 | — | — | |||||||||||
Act 129 compliance rider | 7 | 17 | 7 | 17 | |||||||||||
Storm damage expense | 7 | 13 | 7 | 13 | |||||||||||
Other | 4 | 8 | — | 1 | |||||||||||
Total current regulatory liabilities | $ | 87 | $ | 101 | $ | 72 | $ | 83 | |||||||
Noncurrent Regulatory Liabilities: | |||||||||||||||
Accumulated cost of removal of utility plant | $ | 678 | $ | 700 | $ | — | $ | — | |||||||
Power purchase agreement - OVEC (b) | 69 | 75 | — | — | |||||||||||
Net deferred tax assets | 21 | 23 | — | — | |||||||||||
Defined benefit plans | 27 | 23 | — | — | |||||||||||
Terminated interest rate swaps | 74 | 78 | — | — | |||||||||||
Other | 4 | — | — | — | |||||||||||
Total noncurrent regulatory liabilities | $ | 873 | $ | 899 | $ | — | $ | — |
LKE | LG&E | KU | |||||||||||||||||||||
September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||||||||
Current Regulatory Assets: | |||||||||||||||||||||||
Environmental cost recovery | $ | 4 | $ | 6 | $ | 4 | $ | 6 | $ | — | $ | — | |||||||||||
Generation formula rate | 8 | 11 | — | — | 8 | 11 | |||||||||||||||||
Gas supply clause | 6 | 3 | 6 | 3 | — | — | |||||||||||||||||
Other | 2 | — | 1 | — | 1 | — | |||||||||||||||||
Total current regulatory assets | $ | 20 | $ | 20 | $ | 11 | $ | 9 | $ | 9 | $ | 11 | |||||||||||
Noncurrent Regulatory Assets: | |||||||||||||||||||||||
Defined benefit plans | $ | 378 | $ | 398 | $ | 235 | $ | 246 | $ | 143 | $ | 152 | |||||||||||
Storm costs | 37 | 48 | 20 | 26 | 17 | 22 | |||||||||||||||||
Unamortized loss on debt | 25 | 25 | 16 | 16 | 9 | 9 | |||||||||||||||||
Interest rate swaps | 29 | 31 | 29 | 31 | — | — | |||||||||||||||||
Terminated interest rate swaps | 93 | 98 | 54 | 57 | 39 | 41 | |||||||||||||||||
AROs | 224 | 211 | 57 | 70 | 167 | 141 | |||||||||||||||||
Plant retirement costs | 2 | 4 | — | — | 2 | 4 | |||||||||||||||||
Other | 8 | 9 | 2 | 4 | 6 | 5 | |||||||||||||||||
Total noncurrent regulatory assets | $ | 796 | $ | 824 | $ | 413 | $ | 450 | $ | 383 | $ | 374 |
LKE | LG&E | KU | |||||||||||||||||||||
September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||||||||
Current Regulatory Liabilities: | |||||||||||||||||||||||
Demand side management | $ | — | $ | 3 | $ | — | $ | 2 | $ | — | $ | 1 | |||||||||||
Fuel adjustment clause | 11 | 11 | 3 | 2 | 8 | 9 | |||||||||||||||||
Other | 4 | 4 | 2 | 1 | 2 | 3 | |||||||||||||||||
Total current regulatory liabilities | $ | 15 | $ | 18 | $ | 5 | $ | 5 | $ | 10 | $ | 13 | |||||||||||
Noncurrent Regulatory Liabilities: | |||||||||||||||||||||||
Accumulated cost of removal of utility plant | $ | 678 | $ | 700 | $ | 281 | $ | 305 | $ | 397 | $ | 395 | |||||||||||
Power purchase agreement - OVEC (b) | 69 | 75 | 48 | 52 | 21 | 23 | |||||||||||||||||
Net deferred tax assets | 21 | 23 | 21 | 23 | — | — | |||||||||||||||||
Defined benefit plans | 27 | 23 | — | — | 27 | 23 | |||||||||||||||||
Terminated interest rate swaps | 74 | 78 | 37 | 39 | 37 | 39 | |||||||||||||||||
Other | 4 | — | 1 | — | 3 | — | |||||||||||||||||
Total noncurrent regulatory liabilities | $ | 873 | $ | 899 | $ | 388 | $ | 419 | $ | 485 | $ | 480 |
(a) | For PPL, these amounts are included in "Other current assets" on the Balance Sheets. |
(b) | This liability was recorded as an offset to an intangible asset that was recorded at fair value upon the acquisition of LKE by PPL. |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||
Expiration Date | Capacity | Borrowed | Letters of Credit and Commercial Paper Issued | Unused Capacity | Borrowed | Letters of Credit and Commercial Paper Issued | |||||||||||||||||||
PPL | |||||||||||||||||||||||||
U.K. | |||||||||||||||||||||||||
WPD plc | |||||||||||||||||||||||||
Syndicated Credit Facility (a) | Jan. 2022 | £ | 210 | £ | 155 | £ | — | £ | 54 | £ | 160 | £ | — | ||||||||||||
Term Loan Facility (b) | Dec. 2017 | 230 | 230 | — | — | — | — | ||||||||||||||||||
WPD (South West) | |||||||||||||||||||||||||
Syndicated Credit Facility (c) | July 2021 | 245 | — | — | 245 | 110 | — | ||||||||||||||||||
WPD (East Midlands) | |||||||||||||||||||||||||
Syndicated Credit Facility (d) | July 2021 | 300 | 116 | — | 184 | 9 | — | ||||||||||||||||||
WPD (West Midlands) | |||||||||||||||||||||||||
Syndicated Credit Facility | July 2021 | 300 | — | — | 300 | — | — | ||||||||||||||||||
Uncommitted Credit Facilities (e) | 100 | 70 | 4 | 26 | 60 | 4 | |||||||||||||||||||
Total U.K. Credit Facilities (f) | £ | 1,385 | £ | 571 | £ | 4 | £ | 809 | £ | 339 | £ | 4 |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||
Expiration Date | Capacity | Borrowed | Letters of Credit and Commercial Paper Issued | Unused Capacity | Borrowed | Letters of Credit and Commercial Paper Issued | |||||||||||||||||||
U.S. | |||||||||||||||||||||||||
PPL Capital Funding | |||||||||||||||||||||||||
Syndicated Credit Facility | Jan. 2022 | $ | 950 | $ | — | $ | 285 | $ | 665 | $ | — | $ | 20 | ||||||||||||
Syndicated Credit Facility | Nov. 2018 | 300 | — | — | 300 | — | — | ||||||||||||||||||
Bilateral Credit Facility | Mar. 2018 | 150 | — | 18 | 132 | — | 17 | ||||||||||||||||||
Total PPL Capital Funding Credit Facilities | $ | 1,400 | $ | — | $ | 303 | $ | 1,097 | $ | — | $ | 37 | |||||||||||||
PPL Electric | |||||||||||||||||||||||||
Syndicated Credit Facility | Jan. 2022 | $ | 650 | $ | — | $ | 1 | $ | 649 | $ | — | $ | 296 | ||||||||||||
LKE | |||||||||||||||||||||||||
Syndicated Credit Facility | Oct. 2018 | $ | 75 | $ | — | $ | — | $ | 75 | $ | — | $ | — | ||||||||||||
LG&E | |||||||||||||||||||||||||
Syndicated Credit Facility | Jan. 2022 | $ | 500 | $ | — | $ | 190 | $ | 310 | $ | — | $ | 169 | ||||||||||||
KU | |||||||||||||||||||||||||
Syndicated Credit Facility | Jan. 2022 | $ | 400 | $ | — | $ | — | $ | 400 | $ | — | $ | 16 | ||||||||||||
Letter of Credit Facility | Oct. 2020 | 198 | — | 198 | — | — | 198 | ||||||||||||||||||
Total KU Credit Facilities | $ | 598 | $ | — | $ | 198 | $ | 400 | $ | — | $ | 214 |
(a) | The amounts borrowed at September 30, 2017 and December 31, 2016 were USD-denominated borrowings of $200 million for both periods, which bore interest at 2.06% and 1.43%. The unused capacity reflects the amount borrowed in GBP of £156 million as of the date borrowed. |
(b) | The amount borrowed at September 30, 2017 was a GBP-denominated borrowing which equated to $296 million and bore interest at 1.50%. |
(c) | The amount borrowed at December 31, 2016 was a GBP-denominated borrowing which equated to $137 million and bore interest at 0.66%. |
(d) | The amounts borrowed at September 30, 2017 and December 31, 2016 were GBP-denominated borrowings which equated to $150 million and $11 million and bore interest at 0.65% and 0.66%. |
(e) | The amounts borrowed at September 30, 2017 and December 31, 2016 were GBP-denominated borrowings which equated to $90 million and $75 million and bore interest at 1.29% and 1.26%. |
(f) | At September 30, 2017, the unused capacity under the U.K. credit facilities was $1.0 billion. |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||
Weighted - Average Interest Rate | Capacity | Commercial Paper Issuances | Unused Capacity | Weighted - Average Interest Rate | Commercial Paper Issuances | ||||||||||||||
PPL Capital Funding | 1.41% | $ | 1,000 | $ | 285 | $ | 715 | 1.10% | $ | 20 | |||||||||
PPL Electric | 650 | — | 650 | 1.05% | 295 | ||||||||||||||
LG&E | 1.38% | 350 | 190 | 160 | 0.94% | 169 | |||||||||||||
KU | 350 | — | 350 | 0.87% | 16 | ||||||||||||||
Total | $ | 2,350 | $ | 475 | $ | 1,875 | $ | 500 |
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Number of shares (in thousands) | 2,049 | 710 | 5,526 | 710 | |||||||||||
Average share price | $ | 39.04 | $ | 35.23 | $ | 38.49 | $ | 35.23 | |||||||
Net Proceeds | $ | 79 | $ | 25 | $ | 211 | $ | 25 |
Pension Benefits | |||||||||||||||||||||||||||||||
Three Months | Nine Months | ||||||||||||||||||||||||||||||
U.S. | U.K. | U.S. | U.K. | ||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
PPL | |||||||||||||||||||||||||||||||
Service cost | $ | 17 | $ | 16 | $ | 20 | $ | 17 | $ | 49 | $ | 49 | $ | 57 | $ | 53 | |||||||||||||||
Interest cost | 42 | 44 | 45 | 58 | 126 | 131 | 132 | 182 | |||||||||||||||||||||||
Expected return on plan assets | (58 | ) | (57 | ) | (130 | ) | (124 | ) | (173 | ) | (171 | ) | (382 | ) | (389 | ) | |||||||||||||||
Amortization of: | |||||||||||||||||||||||||||||||
Prior service cost | 2 | 2 | — | — | 7 | 6 | — | — | |||||||||||||||||||||||
Actuarial loss | 18 | 12 | 36 | 34 | 52 | 37 | 107 | 107 | |||||||||||||||||||||||
Net periodic defined benefit costs (credits) before settlements and special termination benefits | 21 | 17 | (29 | ) | (15 | ) | 61 | 52 | (86 | ) | (47 | ) | |||||||||||||||||||
Settlements (a) | 7 | 3 | — | — | 7 | 3 | — | — | |||||||||||||||||||||||
Special termination benefits (b) | — | — | — | — | 1 | — | — | — | |||||||||||||||||||||||
Net periodic defined benefit costs (credits) | $ | 28 | $ | 20 | $ | (29 | ) | $ | (15 | ) | $ | 69 | $ | 55 | $ | (86 | ) | $ | (47 | ) |
(a) | 2017 includes settlement charges of $5 million from the LG&E qualified pension plan and $2 million from the PPL non-qualified pension plan and 2016 includes a settlement charge of $3 million from the PPL non-qualified pension plan. These settlements resulted from lump sum payments that exceeded service cost and interest cost components of net periodic pension cost for the year. |
(b) | Enhanced pension benefits offered to certain PPL Electric bargaining unit employees under a one-time voluntary retirement window offered as part of the new five year IBEW contract ratified in March 2017. |
Pension Benefits | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
LKE | |||||||||||||||
Service cost | $ | 6 | $ | 6 | $ | 18 | $ | 18 | |||||||
Interest cost | 17 | 18 | 51 | 53 | |||||||||||
Expected return on plan assets | (23 | ) | (23 | ) | (69 | ) | (68 | ) | |||||||
Amortization of: | |||||||||||||||
Prior service cost | 2 | 2 | 6 | 6 | |||||||||||
Actuarial loss (a) | 8 | 5 | 23 | 15 | |||||||||||
Net periodic defined benefit costs before settlements | 10 | 8 | 29 | 24 | |||||||||||
Settlements (b) | 5 | — | 5 | — | |||||||||||
Net periodic defined benefit costs | $ | 15 | $ | 8 | $ | 34 | $ | 24 | |||||||
LG&E | |||||||||||||||
Service cost | $ | — | $ | — | $ | 1 | $ | 1 | |||||||
Interest cost | 3 | 4 | 9 | 11 | |||||||||||
Expected return on plan assets | (5 | ) | (5 | ) | (16 | ) | (15 | ) | |||||||
Amortization of: | |||||||||||||||
Prior service cost | 1 | 1 | 3 | 3 | |||||||||||
Actuarial loss (a) | 3 | 2 | 7 | 5 | |||||||||||
Net periodic defined benefit costs before settlements | 2 | 2 | 4 | 5 | |||||||||||
Settlements (b) | 5 | — | 5 | — | |||||||||||
Net periodic defined benefit costs | $ | 7 | $ | 2 | $ | 9 | $ | 5 |
(a) | As a result of treatment approved by the KPSC, the difference between actuarial loss calculated in accordance with LKE's accounting policy and actuarial loss calculated using a 15-year amortization period was $3 million and $8 million for the three and nine months ended September 30, 2017 and $4 million for the nine months ended September 30, 2016. The difference between actuarial loss calculated in accordance with LG&E's accounting policy and actuarial loss calculated using a 15-year amortization period was $1 million and $3 million for the three and nine months ended September 30, 2017 and $1 million for the three months ended September 30, 2016. These differences are recorded as regulatory assets. |
(b) | Due to the amount of lump sum payment distributions from the LG&E qualified pension plan, a settlement charge of $5 million was incurred. In accordance with existing regulatory accounting treatment, LG&E has maintained the settlement charge in regulatory assets. The amount will be amortized in accordance with existing regulatory practice. |
Other Postretirement Benefits | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
PPL | |||||||||||||||
Service cost | $ | 2 | $ | 2 | $ | 6 | $ | 6 | |||||||
Interest cost | 5 | 6 | 17 | 19 | |||||||||||
Expected return on plan assets | (6 | ) | (6 | ) | (17 | ) | (17 | ) | |||||||
Amortization of prior service cost | — | — | (1 | ) | — | ||||||||||
Amortization of actuarial loss | 1 | 1 | 1 | 1 | |||||||||||
Net periodic defined benefit costs | $ | 2 | $ | 3 | $ | 6 | $ | 9 | |||||||
Other Postretirement Benefits | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
LKE | |||||||||||||||
Service cost | $ | 1 | $ | 1 | $ | 3 | $ | 3 | |||||||
Interest cost | 2 | 2 | 6 | 7 | |||||||||||
Expected return on plan assets | (2 | ) | (2 | ) | (5 | ) | (5 | ) | |||||||
Amortization of prior service cost | 1 | 1 | 1 | 2 | |||||||||||
Net periodic defined benefit costs | $ | 2 | $ | 2 | $ | 5 | $ | 7 |
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
PPL Electric | $ | 6 | $ | 6 | $ | 19 | $ | 17 | |||||||
LG&E | 3 | 2 | 8 | 7 | |||||||||||
KU | 2 | 2 | 7 | 8 |
Exposure at September 30, 2017 | Expiration Date | |||||
PPL | ||||||
Indemnifications related to the WPD Midlands acquisition | (a) | |||||
WPD indemnifications for entities in liquidation and sales of assets | $ | 10 | (b) | 2019 | ||
WPD guarantee of pension and other obligations of unconsolidated entities | 95 | (c) | ||||
PPL Electric | ||||||
Guarantee of inventory value | 17 | (d) | 2018 | |||
LKE | ||||||
Indemnification of lease termination and other divestitures | 301 | (e) | 2021 - 2023 | |||
LG&E and KU | ||||||
LG&E and KU guarantee of shortfall related to OVEC | (f) |
(a) | Indemnifications related to certain liabilities, including a specific unresolved tax issue and those relating to properties and assets owned by the seller that were transferred to WPD Midlands in connection with the acquisition. A cross indemnity has been received from the seller on the tax issue. The maximum exposure and expiration of these indemnifications cannot be estimated because the maximum potential liability is not capped and the expiration date is not specified in the transaction documents. |
(b) | Indemnification to the liquidators and certain others for existing liabilities or expenses or liabilities arising during the liquidation process. The indemnifications are limited to distributions made from the subsidiary to its parent either prior or subsequent to liquidation or are not explicitly stated in the agreements. The indemnifications generally expire two to seven years subsequent to the date of dissolution of the entities. The exposure noted only includes those cases where the agreements provide for specific limits. |
(c) | Relates to certain obligations of discontinued or modified electric associations that were guaranteed at the time of privatization by the participating members. Costs are allocated to the members and can be reallocated if an existing member becomes insolvent. At September 30, 2017, WPD has recorded an estimated discounted liability for which the expected payment/performance is probable. Neither the expiration date nor the maximum amount of potential payments for certain obligations is explicitly stated in the related agreements, and as a result, the exposure has been estimated. |
(d) | A third party logistics firm provides inventory procurement and fulfillment services. The logistics firm has title to the inventory, however, upon termination of the contracts, PPL Electric has guaranteed to purchase any remaining inventory that has not been used or sold. |
(e) | LKE provides certain indemnifications covering the due and punctual payment, performance and discharge by each party of its respective obligations. The most comprehensive of these guarantees is the LKE guarantee covering operational, regulatory and environmental commitments and indemnifications made by WKE under a 2009 Transaction Termination Agreement. This guarantee has a term of 12 years ending July 2021, and a maximum exposure of $200 million, exclusive of certain items such as government fines and penalties that may exceed the maximum. Another WKE-related LKE guarantee covers other indemnifications related to the purchase price of excess power, has a term expiring in 2023, and a maximum exposure of $100 million. In May 2012, LKE's indemnitee received an unfavorable arbitration panel's decision interpreting this matter. In October 2014, LKE's indemnitee filed a motion for discretionary review with the Kentucky Supreme Court seeking to overturn the arbitration decision, and such motion was denied by the court in September 2015. In September 2015, the counterparty issued a demand letter to LKE's indemnitee. In February 2016, the counterparty filed a complaint in Henderson, Kentucky Circuit Court, seeking an award of damages in the matter. The proceeding is currently in the discovery phase. LKE does not believe appropriate contractual, legal or commercial grounds exist for the claim made. LKE believes its indemnifications in the WKE matter remain subject to various uncertainties, including additional legal and contractual developments, as well as future prices, availability and demand for the subject excess power. Although the parties have conducted certain settlement discussions and reached a settlement in principle to resolve all claims for an aggregate amount within LKE's recorded liability, the ultimate outcomes of the WKE termination-related indemnifications cannot be predicted at this time. Additionally, LKE has indemnified various third parties related to historical obligations for other divested subsidiaries and affiliates. The indemnifications vary by entity and the maximum exposures range from being capped at the sale price to no specified maximum. LKE could be required to perform on these indemnifications in the event of covered losses or liabilities being claimed by an indemnified party. LKE cannot predict the ultimate outcomes of the various indemnification scenarios, but does not expect such outcomes to result in significant losses above the amounts recorded. |
(f) | Pursuant to the OVEC power purchase contract, LG&E and KU are obligated to pay for their share of OVEC's excess debt service, post-retirement and decommissioning costs, as well as any shortfall from amounts included within a demand charge designed and expected to cover these costs over the term of the contract. LKE's proportionate share of OVEC's outstanding debt was $118 million at September 30, 2017, consisting of LG&E's share of $82 million and KU's share of $36 million. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" in Note 13 in PPL's, LKE's, LG&E's and KU's 2016 Form 10-K for additional information on the OVEC power purchase contract. In connection with recent credit market related developments at OVEC or certain of its sponsors, such parties, including LG&E and KU, are analyzing certain potential additional credit support actions to preserve OVEC's access to credit markets or mitigate risks or adverse impacts relating thereto, including increased interest costs. The ultimate outcome of these matters, including any potential impact on LG&E's and KU's obligations relating to OVEC debt under the power purchase contract cannot be predicted. |
Three Months | Nine Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
PPL Electric from PPL Services | $ | 43 | $ | 33 | $ | 138 | $ | 98 | |||||||
LKE from PPL Services | 4 | 4 | 15 | 13 | |||||||||||
PPL Electric from PPL EU Services | 15 | 17 | 48 | 50 | |||||||||||
LG&E from LKS | 38 | 40 | 120 | 128 | |||||||||||
KU from LKS | 43 | 46 | 134 | 151 |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
PPL | |||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 676 | $ | 676 | $ | — | $ | — | $ | 341 | $ | 341 | $ | — | $ | — | |||||||||||||||
Restricted cash and cash equivalents (a) | 24 | 24 | — | — | 26 | 26 | — | — | |||||||||||||||||||||||
Price risk management assets (b): | |||||||||||||||||||||||||||||||
Foreign currency contracts | 164 | — | 164 | — | 211 | — | 211 | — | |||||||||||||||||||||||
Cross-currency swaps | 160 | — | 160 | — | 188 | — | 188 | — | |||||||||||||||||||||||
Total price risk management assets | 324 | — | 324 | — | 399 | — | 399 | — | |||||||||||||||||||||||
Total assets | $ | 1,024 | $ | 700 | $ | 324 | $ | — | $ | 766 | $ | 367 | $ | 399 | $ | — | |||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
Price risk management liabilities (b): | |||||||||||||||||||||||||||||||
Interest rate swaps | $ | 31 | $ | — | $ | 31 | $ | — | $ | 31 | $ | — | $ | 31 | $ | — | |||||||||||||||
Foreign currency contracts | 167 | — | 167 | — | 27 | — | 27 | — | |||||||||||||||||||||||
Total price risk management liabilities | $ | 198 | $ | — | $ | 198 | $ | — | $ | 58 | $ | — | $ | 58 | $ | — | |||||||||||||||
PPL Electric | |||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 243 | $ | 243 | $ | — | $ | — | $ | 13 | $ | 13 | $ | — | $ | — | |||||||||||||||
Restricted cash and cash equivalents (a) | 2 | 2 | — | — | 2 | 2 | — | — | |||||||||||||||||||||||
Total assets | $ | 245 | $ | 245 | $ | — | $ | — | $ | 15 | $ | 15 | $ | — | $ | — | |||||||||||||||
LKE | |||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 40 | $ | 40 | $ | — | $ | — | $ | 13 | $ | 13 | $ | — | $ | — | |||||||||||||||
Cash collateral posted to counterparties (c) | 1 | 1 | — | — | 3 | 3 | — | — | |||||||||||||||||||||||
Total assets | $ | 41 | $ | 41 | $ | — | $ | — | $ | 16 | $ | 16 | $ | — | $ | — | |||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
Price risk management liabilities: | |||||||||||||||||||||||||||||||
Interest rate swaps | $ | 29 | $ | — | $ | 29 | $ | — | $ | 31 | $ | — | $ | 31 | $ | — | |||||||||||||||
Total price risk management liabilities | $ | 29 | $ | — | $ | 29 | $ | — | $ | 31 | $ | — | $ | 31 | $ | — | |||||||||||||||
LG&E | |||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 9 | $ | 9 | $ | — | $ | — | $ | 5 | $ | 5 | $ | — | $ | — | |||||||||||||||
Cash collateral posted to counterparties (c) | 1 | 1 | — | — | 3 | 3 | — | — | |||||||||||||||||||||||
Total assets | $ | 10 | $ | 10 | $ | — | $ | — | $ | 8 | $ | 8 | $ | — | $ | — | |||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
Price risk management liabilities: | |||||||||||||||||||||||||||||||
Interest rate swaps | $ | 29 | $ | — | $ | 29 | $ | — | $ | 31 | $ | — | $ | 31 | $ | — | |||||||||||||||
Total price risk management liabilities | $ | 29 | $ | — | $ | 29 | $ | — | $ | 31 | $ | — | $ | 31 | $ | — | |||||||||||||||
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
KU | |||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 31 | $ | 31 | $ | — | $ | — | $ | 7 | $ | 7 | $ | — | $ | — | |||||||||||||||
Total assets | $ | 31 | $ | 31 | $ | — | $ | — | $ | 7 | $ | 7 | $ | — | $ | — |
(a) | Current portion is included in "Other current assets" and long-term portion is included in "Other noncurrent assets" on the Balance Sheets. |
(b) | Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets. |
(c) | Included in "Other noncurrent assets" on the Balance Sheets. Represents cash collateral posted to offset the exposure with counterparties related to certain interest rate swaps under master netting arrangements that are not offset. |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount (a) | Fair Value | Carrying Amount (a) | Fair Value | ||||||||||||
PPL | $ | 19,558 | $ | 23,357 | $ | 18,326 | $ | 21,355 | |||||||
PPL Electric | 3,298 | 3,724 | 2,831 | 3,148 | |||||||||||
LKE | 5,068 | 5,592 | 5,065 | 5,439 | |||||||||||
LG&E | 1,619 | 1,768 | 1,617 | 1,710 | |||||||||||
KU | 2,328 | 2,602 | 2,327 | 2,514 |
(a) | Amounts are net of debt issuance costs. |
• | PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. PPL and WPD hold over-the-counter cross currency swaps to limit exposure to market fluctuations on interest and principal payments from changes in foreign currency exchange rates and interest rates. PPL, LKE and LG&E utilize over-the-counter interest rate swaps to limit exposure to market fluctuations on floating-rate debt. PPL, LKE, LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates, when appropriate, in connection with future debt issuances. |
• | PPL and its subsidiaries are exposed to interest rate risk associated with debt securities and derivatives held by defined benefit plans. This risk is significantly mitigated to the extent that the plans are sponsored at, or sponsored on behalf of, the regulated domestic utilities and for certain plans at WPD due to the recovery methods in place. |
• | PPL is exposed to foreign currency exchange risk primarily associated with its investments in and earnings of U.K. affiliates. |
• | PPL Electric is exposed to commodity price risk from its obligation as PLR; however, its PUC-approved cost recovery mechanism substantially eliminates its exposure to this risk. PPL Electric also mitigates its exposure to commodity price risk by entering into full-requirement supply agreements to serve its PLR customers. These supply agreements transfer the commodity price risk associated with the PLR obligation to the energy suppliers. |
• | LG&E's and KU's rates include certain mechanisms for fuel and fuel-related expenses. In addition, LG&E's rates include a mechanism for natural gas supply expenses. These mechanisms generally provide for timely recovery of market price fluctuations associated with these expenses. |
• | WPD is exposed to volumetric risk which is significantly mitigated as a result of the method of regulation in the U.K. Under the RIIO-ED1 price control period, recovery of such exposure occurs on a two year lag. See Note 1 in PPL's 2016 Form 10-K for additional information on revenue recognition under RIIO-ED1. |
• | PPL Electric, LG&E and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases. |
• | PPL and its subsidiaries are exposed to equity securities price risk associated with the fair value of the defined benefit plans' assets. This risk is significantly mitigated at the regulated domestic utilities and for certain plans at WPD due to the recovery methods in place. |
• | PPL is exposed to equity securities price risk from future stock sales and/or purchases. |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||
Derivatives designated as hedging instruments | Derivatives not designated as hedging instruments | Derivatives designated as hedging instruments | Derivatives not designated as hedging instruments | ||||||||||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||||
Current: | |||||||||||||||||||||||||||||||
Price Risk Management | |||||||||||||||||||||||||||||||
Assets/Liabilities (a): | |||||||||||||||||||||||||||||||
Interest rate swaps (b) | $ | — | $ | 2 | $ | — | $ | 5 | $ | — | $ | — | $ | — | $ | 4 | |||||||||||||||
Cross-currency swaps (b) | 28 | — | — | — | 32 | — | — | — | |||||||||||||||||||||||
Foreign currency contracts | 1 | — | 28 | 86 | — | — | 31 | 21 | |||||||||||||||||||||||
Total current | 29 | 2 | 28 | 91 | 32 | — | 31 | 25 | |||||||||||||||||||||||
Noncurrent: | |||||||||||||||||||||||||||||||
Price Risk Management | |||||||||||||||||||||||||||||||
Assets/Liabilities (a): | |||||||||||||||||||||||||||||||
Interest rate swaps (b) | — | — | — | 24 | — | — | — | 27 | |||||||||||||||||||||||
Cross-currency swaps (b) | 132 | — | — | — | 156 | — | — | — | |||||||||||||||||||||||
Foreign currency contracts | — | — | 135 | 81 | — | — | 180 | 6 | |||||||||||||||||||||||
Total noncurrent | 132 | — | 135 | 105 | 156 | — | 180 | 33 | |||||||||||||||||||||||
Total derivatives | $ | 161 | $ | 2 | $ | 163 | $ | 196 | $ | 188 | $ | — | $ | 211 | $ | 58 |
(a) | Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets. |
(b) | Excludes accrued interest, if applicable. |
Three Months | Nine Months | |||||||||||||||||||||||||
Derivative Relationships | Derivative Gain (Loss) Recognized in OCI (Effective Portion) | Location of Gain (Loss) Recognized in Income on Derivative | Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||
Three Months | Nine Months | |||||||||||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | (2 | ) | Interest expense | $ | (2 | ) | $ | — | $ | (6 | ) | $ | (1 | ) | |||||||||
Cross-currency swaps | 1 | (34 | ) | Interest expense | 1 | — | 1 | — | ||||||||||||||||||
Other income (expense) - net | 2 | — | (24 | ) | — | |||||||||||||||||||||
Total | $ | 1 | $ | (36 | ) | $ | 1 | $ | — | $ | (29 | ) | $ | (1 | ) | |||||||||||
Net Investment Hedges: | ||||||||||||||||||||||||||
Foreign currency contracts | $ | 1 | $ | 1 |
Derivatives Not Designated as | Location of Gain (Loss) Recognized in | |||||||||
Hedging Instruments | Income on Derivative | Three Months | Nine Months | |||||||
Foreign currency contracts | Other income (expense) - net | $ | (81 | ) | $ | (237 | ) | |||
Interest rate swaps | Interest expense | (1 | ) | (4 | ) | |||||
Total | $ | (82 | ) | $ | (241 | ) | ||||
Derivatives Not Designated as | Location of Gain (Loss) Recognized as | |||||||||
Hedging Instruments | Regulatory Liabilities/Assets | Three Months | Nine Months | |||||||
Interest rate swaps | Regulatory assets - noncurrent | $ | 1 | $ | 2 |
Three Months | Nine Months | |||||||||||||||||||||||||
Derivative Relationships | Derivative Gain (Loss) Recognized in OCI (Effective Portion) | Location of Gain (Loss) Recognized in Income on Derivative | Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||
Three Months | Nine Months | |||||||||||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | (21 | ) | Interest expense | $ | (2 | ) | $ | — | $ | (5 | ) | $ | — | ||||||||||
Cross-currency swaps | 78 | 87 | Interest expense | 2 | — | 2 | — | |||||||||||||||||||
Other income (expense) - net | 86 | — | 80 | — | ||||||||||||||||||||||
Total | $ | 78 | $ | 66 | $ | 86 | $ | — | $ | 77 | $ | — | ||||||||||||||
Net Investment Hedges: | ||||||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 4 |
Derivatives Not Designated as | Location of Gain (Loss) Recognized in | |||||||||
Hedging Instruments | Income on Derivative | Three Months | Nine Months | |||||||
Foreign currency contracts | Other income (expense) - net | $ | 49 | $ | 280 | |||||
Interest rate swaps | Interest expense | (2 | ) | (6 | ) | |||||
Total | $ | 47 | $ | 274 | ||||||
Derivatives Not Designated as | Location of Gain (Loss) Recognized as | |||||||||
Hedging Instruments | Regulatory Liabilities/Assets | Three Months | Nine Months | |||||||
Interest rate swaps | Regulatory assets - noncurrent | $ | 2 | $ | (7 | ) |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Assets | Liabilities | Assets | Liabilities | ||||||||||||
Current: | |||||||||||||||
Price Risk Management | |||||||||||||||
Assets/Liabilities: | |||||||||||||||
Interest rate swaps | $ | — | $ | 5 | $ | — | $ | 4 | |||||||
Total current | — | 5 | — | 4 | |||||||||||
Noncurrent: | |||||||||||||||
Price Risk Management | |||||||||||||||
Assets/Liabilities: | |||||||||||||||
Interest rate swaps | — | 24 | — | 27 | |||||||||||
Total noncurrent | — | 24 | — | 27 | |||||||||||
Total derivatives | $ | — | $ | 29 | $ | — | $ | 31 |
Location of Gain (Loss) Recognized in | ||||||||||
Derivative Instruments | Income on Derivatives | Three Months | Nine Months | |||||||
Interest rate swaps | Interest expense | $ | (1 | ) | $ | (4 | ) | |||
Location of Gain (Loss) Recognized in | ||||||||||
Derivative Instruments | Regulatory Assets | Three Months | Nine Months | |||||||
Interest rate swaps | Regulatory assets - noncurrent | $ | 1 | $ | 2 |
Location of Gain (Loss) Recognized in | ||||||||||
Derivative Instruments | Income on Derivatives | Three Months | Nine Months | |||||||
Interest rate swaps | Interest expense | $ | (2 | ) | $ | (6 | ) | |||
Location of Gain (Loss) Recognized in | ||||||||||
Derivative Instruments | Regulatory Assets | Three Months | Nine Months | |||||||
Interest rate swaps | Regulatory assets - noncurrent | $ | 2 | $ | (7 | ) |
Assets | Liabilities | ||||||||||||||||||||||||||||||
Eligible for Offset | Eligible for Offset | ||||||||||||||||||||||||||||||
Gross | Derivative Instruments | Cash Collateral Received | Net | Gross | Derivative Instruments | Cash Collateral Pledged | Net | ||||||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||||||||
Treasury Derivatives | |||||||||||||||||||||||||||||||
PPL | $ | 324 | $ | 138 | $ | 17 | $ | 169 | $ | 198 | $ | 138 | $ | 1 | $ | 59 | |||||||||||||||
LKE | — | — | — | — | 29 | — | 1 | 28 | |||||||||||||||||||||||
LG&E | — | — | — | — | 29 | — | 1 | 28 |
December 31, 2016 | |||||||||||||||||||||||||||||||
Treasury Derivatives | |||||||||||||||||||||||||||||||
PPL | $ | 399 | $ | 27 | $ | 19 | $ | 353 | $ | 58 | $ | 27 | $ | 3 | $ | 28 | |||||||||||||||
LKE | — | — | — | — | 31 | — | 3 | 28 | |||||||||||||||||||||||
LG&E | — | — | — | — | 31 | — | 3 | 28 |
PPL | LKE | LG&E | |||||||||
Aggregate fair value of derivative instruments in a net liability position with credit risk-related contingent features | $ | 43 | $ | 11 | $ | 11 | |||||
Aggregate fair value of collateral posted on these derivative instruments | 1 | 1 | 1 | ||||||||
Aggregate fair value of additional collateral requirements in the event of a credit downgrade below investment grade (a) | 42 | 10 | 10 |
(a) | Includes the effect of net receivables and payables already recorded on the Balance Sheet. |
PPL | LKE | LG&E | KU | ||||||||||||
Balance at December 31, 2016 | $ | 488 | $ | 433 | $ | 145 | $ | 288 | |||||||
Accretion | 16 | 15 | 5 | 10 | |||||||||||
Effect of foreign exchange rates | 2 | — | — | — | |||||||||||
Changes in estimated timing or cost | (70 | ) | (63 | ) | (12 | ) | (51 | ) | |||||||
Obligations settled | (30 | ) | (30 | ) | (20 | ) | (10 | ) | |||||||
Balance at September 30, 2017 | $ | 406 | $ | 355 | $ | 118 | $ | 237 |
Foreign currency translation adjustments | Unrealized gains (losses) on qualifying derivatives | Defined benefit plans | |||||||||||||||||||||
Equity investees' AOCI | Prior service costs | Actuarial gain (loss) | Total | ||||||||||||||||||||
PPL | |||||||||||||||||||||||
June 30, 2017 | $ | (1,420 | ) | $ | (13 | ) | $ | — | $ | (7 | ) | $ | (2,083 | ) | $ | (3,523 | ) | ||||||
Amounts arising during the period | (12 | ) | 1 | — | — | (3 | ) | (14 | ) | ||||||||||||||
Reclassifications from AOCI | — | — | — | — | 34 | 34 | |||||||||||||||||
Net OCI during the period | (12 | ) | 1 | — | — | 31 | 20 | ||||||||||||||||
September 30, 2017 | $ | (1,432 | ) | $ | (12 | ) | $ | — | $ | (7 | ) | $ | (2,052 | ) | $ | (3,503 | ) | ||||||
December 31, 2016 | $ | (1,627 | ) | $ | (7 | ) | $ | (1 | ) | $ | (8 | ) | $ | (2,135 | ) | $ | (3,778 | ) | |||||
Amounts arising during the period | 195 | (29 | ) | — | — | (14 | ) | 152 | |||||||||||||||
Reclassifications from AOCI | — | 24 | 1 | 1 | 97 | 123 | |||||||||||||||||
Net OCI during the period | 195 | (5 | ) | 1 | 1 | 83 | 275 | ||||||||||||||||
September 30, 2017 | $ | (1,432 | ) | $ | (12 | ) | $ | — | $ | (7 | ) | $ | (2,052 | ) | $ | (3,503 | ) | ||||||
June 30, 2016 | $ | (716 | ) | $ | (5 | ) | $ | (1 | ) | $ | (5 | ) | $ | (2,130 | ) | $ | (2,857 | ) | |||||
Amounts arising during the period | (641 | ) | 62 | — | — | (6 | ) | (585 | ) | ||||||||||||||
Reclassifications from AOCI | — | (69 | ) | — | — | 31 | (38 | ) | |||||||||||||||
Net OCI during the period | (641 | ) | (7 | ) | — | — | 25 | (623 | ) | ||||||||||||||
September 30, 2016 | $ | (1,357 | ) | $ | (12 | ) | $ | (1 | ) | $ | (5 | ) | $ | (2,105 | ) | $ | (3,480 | ) | |||||
December 31, 2015 | $ | (520 | ) | $ | (7 | ) | $ | — | $ | (6 | ) | $ | (2,195 | ) | $ | (2,728 | ) | ||||||
Amounts arising during the period | (837 | ) | 57 | — | — | (4 | ) | (784 | ) | ||||||||||||||
Reclassifications from AOCI | — | (62 | ) | (1 | ) | 1 | 94 | 32 | |||||||||||||||
Net OCI during the period | (837 | ) | (5 | ) | (1 | ) | 1 | 90 | (752 | ) | |||||||||||||
September 30, 2016 | $ | (1,357 | ) | $ | (12 | ) | $ | (1 | ) | $ | (5 | ) | $ | (2,105 | ) | $ | (3,480 | ) | |||||
LKE | |||||||||||||||||||||||
June 30, 2017 | $ | — | $ | (7 | ) | $ | (70 | ) | $ | (77 | ) | ||||||||||||
Amounts arising during the period | — | — | (1 | ) | (1 | ) | |||||||||||||||||
Reclassifications from AOCI | — | — | 1 | 1 | |||||||||||||||||||
Net OCI during the period | — | — | — | — | |||||||||||||||||||
September 30, 2017 | $ | — | $ | (7 | ) | $ | (70 | ) | $ | (77 | ) | ||||||||||||
December 31, 2016 | $ | (1 | ) | $ | (8 | ) | $ | (61 | ) | $ | (70 | ) | |||||||||||
Amounts arising during the period | — | — | (12 | ) | (12 | ) | |||||||||||||||||
Reclassifications from AOCI | 1 | 1 | 3 | 5 | |||||||||||||||||||
Net OCI during the period | 1 | 1 | (9 | ) | (7 | ) | |||||||||||||||||
September 30, 2017 | $ | — | $ | (7 | ) | $ | (70 | ) | $ | (77 | ) | ||||||||||||
June 30, 2016 | $ | (1 | ) | $ | (9 | ) | $ | (33 | ) | $ | (43 | ) | |||||||||||
Reclassifications from AOCI | — | — | 1 | 1 | |||||||||||||||||||
Net OCI during the period | — | — | 1 | 1 | |||||||||||||||||||
September 30, 2016 | $ | (1 | ) | $ | (9 | ) | $ | (32 | ) | $ | (42 | ) | |||||||||||
Foreign currency translation adjustments | Unrealized gains (losses) on qualifying derivatives | Defined benefit plans | |||||||||||||||||||||
Equity investees' AOCI | Prior service costs | Actuarial gain (loss) | Total | ||||||||||||||||||||
December 31, 2015 | $ | — | $ | (10 | ) | $ | (36 | ) | $ | (46 | ) | ||||||||||||
Amounts arising during the period | — | — | 1 | 1 | |||||||||||||||||||
Reclassifications from AOCI | (1 | ) | 1 | 3 | 3 | ||||||||||||||||||
Net OCI during the period | (1 | ) | 1 | 4 | 4 | ||||||||||||||||||
September 30, 2016 | $ | (1 | ) | $ | (9 | ) | $ | (32 | ) | $ | (42 | ) |
Three Months | Nine Months | Affected Line Item on the | ||||||||||||||||
Details about AOCI | 2017 | 2016 | 2017 | 2016 | Statements of Income | |||||||||||||
Qualifying derivatives | ||||||||||||||||||
Interest rate swaps | $ | (2 | ) | $ | (2 | ) | $ | (7 | ) | $ | (5 | ) | Interest Expense | |||||
Cross-currency swaps | 2 | 86 | (24 | ) | 80 | Other Income (Expense) - net | ||||||||||||
1 | 2 | 1 | 2 | Interest Expense | ||||||||||||||
Total Pre-tax | 1 | 86 | (30 | ) | 77 | |||||||||||||
Income Taxes | (1 | ) | (17 | ) | 6 | (15 | ) | |||||||||||
Total After-tax | — | 69 | (24 | ) | 62 | |||||||||||||
Equity investees' AOCI | — | — | (1 | ) | 1 | Other Income (Expense) - net | ||||||||||||
Total Pre-tax | — | — | (1 | ) | 1 | |||||||||||||
Income Taxes | — | — | — | — | ||||||||||||||
Total After-tax | — | — | (1 | ) | 1 | |||||||||||||
Defined benefit plans | ||||||||||||||||||
Prior service costs | (1 | ) | (1 | ) | (2 | ) | (2 | ) | ||||||||||
Net actuarial loss | (44 | ) | (41 | ) | (125 | ) | (121 | ) | ||||||||||
Total Pre-tax | (45 | ) | (42 | ) | (127 | ) | (123 | ) | ||||||||||
Income Taxes | 11 | 11 | 29 | 28 | ||||||||||||||
Total After-tax | (34 | ) | (31 | ) | (98 | ) | (95 | ) | ||||||||||
Total reclassifications during the period | $ | (34 | ) | $ | 38 | $ | (123 | ) | $ | (32 | ) |
• | "Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments. |
• | "Results of Operations" for all Registrants includes a "Statement of Income Analysis" which discusses significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2017 with the same periods in 2016. For PPL, "Results of Operations" also includes "Segment Earnings" and "Margins" which provide a detailed analysis of earnings by reportable segment. These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Margins" and provide explanations of the non-GAAP financial measures and a reconciliation of the non-GAAP financial measures to the most comparable GAAP measure. The "2017 Outlook" discussion identifies key factors expected to impact 2017 earnings. For PPL Electric, LKE, LG&E and KU, a summary of earnings and margins is also provided. |
• | "Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles. This section also includes a discussion of rating agency actions. |
• | "Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk. |
PPL Corporation* | |||||||||||||||||
PPL Capital Funding ● Provides financing for the operations of PPL and certain subsidiaries | |||||||||||||||||
PPL Global ● Engages in the regulated distribution of electricity in the U.K. | LKE* | PPL Electric* ● Engages in the regulated transmission and distribution of electricity in Pennsylvania | |||||||||||||||
LG&E* ● Engages in the regulated generation, transmission, distribution and sale of electricity and distribution and sale of natural gas in Kentucky | KU* ● Engages in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky | ||||||||||||||||
U.K. Regulated Segment | Kentucky Regulated Segment | Pennsylvania Regulated Segment |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating Revenues | $ | 1,845 | $ | 1,889 | $ | (44 | ) | $ | 5,521 | $ | 5,685 | $ | (164 | ) | |||||||||
Operating Expenses | |||||||||||||||||||||||
Operation | |||||||||||||||||||||||
Fuel | 202 | 227 | (25 | ) | 576 | 607 | (31 | ) | |||||||||||||||
Energy purchases | 143 | 151 | (8 | ) | 494 | 531 | (37 | ) | |||||||||||||||
Other operation and maintenance | 397 | 417 | (20 | ) | 1,217 | 1,292 | (75 | ) | |||||||||||||||
Depreciation | 257 | 232 | 25 | 745 | 692 | 53 | |||||||||||||||||
Taxes, other than income | 69 | 76 | (7 | ) | 214 | 229 | (15 | ) | |||||||||||||||
Total Operating Expenses | 1,068 | 1,103 | (35 | ) | 3,246 | 3,351 | (105 | ) | |||||||||||||||
Other Income (Expense) - net | (76 | ) | 49 | (125 | ) | (235 | ) | 284 | (519 | ) | |||||||||||||
Interest Expense | 230 | 223 | 7 | 669 | 671 | (2 | ) | ||||||||||||||||
Income Taxes | 116 | 139 | (23 | ) | 321 | 510 | (189 | ) | |||||||||||||||
Net Income | $ | 355 | $ | 473 | $ | (118 | ) | $ | 1,050 | $ | 1,437 | $ | (387 | ) |
Three Months | Nine Months | ||||||
Domestic: | |||||||
PPL Electric Distribution price (a) | $ | 16 | $ | 46 | |||
PPL Electric Distribution volume | (20 | ) | (30 | ) | |||
PPL Electric PLR Revenue (b) | (1 | ) | (32 | ) | |||
PPL Electric Transmission Formula Rate | 20 | 25 | |||||
LKE Base rates | 31 | 31 | |||||
LKE Volumes | (41 | ) | (86 | ) | |||
LKE Fuel and other energy prices | (8 | ) | 10 | ||||
Other | (3 | ) | (2 | ) | |||
Total Domestic | (6 | ) | (38 | ) | |||
U.K.: | |||||||
Price | (3 | ) | 74 | ||||
Volume | (12 | ) | (24 | ) | |||
Foreign currency exchange rates | (21 | ) | (183 | ) | |||
Other | (2 | ) | 7 | ||||
Total U.K. | (38 | ) | (126 | ) | |||
Total | $ | (44 | ) | $ | (164 | ) |
(a) | Distribution rider prices resulted in increases of $16 million and $40 million for the three and nine months ended September 30, 2017. |
(b) | Decrease for the nine months ended September 30, 2017 compared with 2016, primarily due to lower energy prices at PPL Electric. |
Three Months | Nine Months | ||||||
Domestic: | |||||||
PPL Electric Act 129 | $ | 3 | $ | 11 | |||
PPL Electric payroll-related costs | (5 | ) | (6 | ) | |||
PPL Electric vegetation management | (4 | ) | (7 | ) | |||
PPL Electric bad debts | (4 | ) | (10 | ) | |||
Other | (1 | ) | 1 | ||||
U.K.: | |||||||
Pension (a) | (17 | ) | (52 | ) | |||
Foreign currency exchange rates | (2 | ) | (18 | ) | |||
Network maintenance | 4 | (4 | ) | ||||
Third-party engineering | (1 | ) | 5 | ||||
Other | 7 | 5 | |||||
Total | $ | (20 | ) | $ | (75 | ) |
(a) | The decreases were primarily due to increases in expected returns on higher asset balances and lower interest costs due to a lower discount rate. |
Three Months | Nine Months | ||||||
Long-term debt interest expense | $ | 9 | $ | 22 | |||
Short-term debt interest expense | 2 | 6 | |||||
Foreign currency exchange rates | (4 | ) | (31 | ) | |||
Other | — | 1 | |||||
Total | $ | 7 | $ | (2 | ) |
Three Months | Nine Months | ||||||
Change in pre-tax income at current period tax rates | $ | (56 | ) | $ | (198 | ) | |
Valuation allowances adjustments | — | (4 | ) | ||||
U.S. income tax on foreign earnings - net of foreign tax credit (a) | (7 | ) | (21 | ) | |||
Impact of U.K. Finance Acts (b) | 39 | 30 | |||||
Stock-based compensation | 1 | 5 | |||||
Other | — | (1 | ) | ||||
Total | $ | (23 | ) | $ | (189 | ) |
(a) | Lower income taxes primarily due to the tax benefit of accelerated pension contributions made in the first quarter of 2017. The related tax benefit is recognized over the annual period as a result of utilizing an estimated annual effective tax rate. |
(b) | The U.K. Finance Act 2016, enacted in September 2016, reduces the U.K. statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit during the three and nine months ended September 30, 2016. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
U.K. Regulated | $ | 126 | $ | 281 | $ | (155 | ) | $ | 560 | $ | 915 | $ | (355 | ) | |||||||||
Kentucky Regulated | 125 | 126 | (1 | ) | 299 | 314 | (15 | ) | |||||||||||||||
Pennsylvania Regulated | 95 | 91 | 4 | 251 | 263 | (12 | ) | ||||||||||||||||
Corporate and Other (a) | 9 | (25 | ) | 34 | (60 | ) | (55 | ) | (5 | ) | |||||||||||||
Net Income | $ | 355 | $ | 473 | $ | (118 | ) | $ | 1,050 | $ | 1,437 | $ | (387 | ) |
(a) | Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results. The changes in 2017 compared with 2016 are primarily due to the timing impact of recording annual estimated taxes. This impact is expected to continue to reverse through the remainder of the year. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
U.K. Regulated | $ | 163 | $ | 235 | $ | (72 | ) | $ | 682 | $ | 741 | $ | (59 | ) | |||||||||
Kentucky Regulated | 125 | 126 | (1 | ) | 300 | 314 | (14 | ) | |||||||||||||||
Pennsylvania Regulated | 95 | 91 | 4 | 251 | 263 | (12 | ) | ||||||||||||||||
Corporate and Other | 5 | (25 | ) | 30 | (64 | ) | (53 | ) | (11 | ) | |||||||||||||
Earnings from Ongoing Operations | $ | 388 | $ | 427 | $ | (39 | ) | $ | 1,169 | $ | 1,265 | $ | (96 | ) |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating revenues | $ | 477 | $ | 515 | $ | (38 | ) | $ | 1,547 | $ | 1,673 | $ | (126 | ) | |||||||||
Other operation and maintenance | 69 | 78 | (9 | ) | 195 | 260 | (65 | ) | |||||||||||||||
Depreciation | 58 | 58 | — | 170 | 178 | (8 | ) | ||||||||||||||||
Taxes, other than income | 33 | 34 | (1 | ) | 94 | 104 | (10 | ) | |||||||||||||||
Total operating expenses | 160 | 170 | (10 | ) | 459 | 542 | (83 | ) | |||||||||||||||
Other Income (Expense) - net | (80 | ) | 50 | (130 | ) | (236 | ) | 283 | (519 | ) | |||||||||||||
Interest Expense | 103 | 100 | 3 | 294 | 310 | (16 | ) | ||||||||||||||||
Income Taxes | 8 | 14 | (6 | ) | (2 | ) | 189 | (191 | ) | ||||||||||||||
Net Income | 126 | 281 | (155 | ) | 560 | 915 | (355 | ) | |||||||||||||||
Less: Special Items | (37 | ) | 46 | (83 | ) | (122 | ) | 174 | (296 | ) | |||||||||||||
Earnings from Ongoing Operations | $ | 163 | $ | 235 | $ | (72 | ) | $ | 682 | $ | 741 | $ | (59 | ) |
Income Statement Line Item | Three Months | Nine Months | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Foreign currency economic hedges, net of tax of $20, $103, $66, $34 (a) | Other Income (Expense) - net | $ | (37 | ) | $ | (193 | ) | $ | (122 | ) | $ | (65 | ) | ||||
Settlement of foreign currency contracts, net of tax of $0, ($108), $0, ($108) (b) | Other Income (Expense) - net | — | 202 | — | 202 | ||||||||||||
Change in U.K. tax rate (c) | Income Taxes | — | 37 | — | 37 | ||||||||||||
Total Special Items | $ | (37 | ) | $ | 46 | $ | (122 | ) | $ | 174 |
(a) | Represents unrealized gains (losses) on contracts that economically hedge anticipated GBP-denominated earnings. The three and nine months ended September 30, 2016 include the reversal of $310 million ($202 million after-tax) of unrealized gains related to the settlement of 2017 and 2018 contracts. |
(b) | In the third quarter of 2016, PPL settled 2017 and 2018 foreign currency contracts, resulting in $310 million of cash received ($202 million after-tax). |
(c) | The U.K. Finance Act 2016, enacted in September 2016, reduced the U.K.'s statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liability and recognized an income tax benefit of $42 million in the third quarter of 2016. Of this amount, $37 million relates to deferred taxes recorded in prior years and was treated as a special item. |
Three Months | Nine Months | ||||||
U.K. | |||||||
Gross margins | $ | (17 | ) | $ | 52 | ||
Other operation and maintenance | 7 | 50 | |||||
Depreciation | (3 | ) | (12 | ) | |||
Interest expense | (7 | ) | (15 | ) | |||
Other | (2 | ) | (4 | ) | |||
Income taxes | (2 | ) | 2 | ||||
U.S. | |||||||
Interest expense and other | 1 | 3 | |||||
Income taxes | (3 | ) | 28 | ||||
Foreign currency exchange, after-tax | (46 | ) | (163 | ) | |||
Earnings from Ongoing Operations | (72 | ) | (59 | ) | |||
Special items, after-tax | (83 | ) | (296 | ) | |||
Net Income | $ | (155 | ) | $ | (355 | ) |
• | See "Margins - Changes in Margins" for an explanation of U.K. Gross Margins. |
• | Lower other operation and maintenance expense for the three month period primarily due to $17 million from lower pension expense due to an increase in expected returns on higher asset balances and lower interest costs due to a lower discount rate, partially offset by $4 million from higher network maintenance expense. |
• | Lower other operation and maintenance expense for the nine month period primarily due to $52 million from lower pension expense due to an increase in expected returns on higher asset balances and lower interest costs due to a lower discount rate. |
• | Higher interest expense for the three and nine month periods primarily due to higher interest expense on indexed linked bonds. |
• | Higher income taxes for the three month period primarily due to $9 million related to tax rate changes to deferred taxes, partially offset by a decrease of $4 million from lower pre-tax income. |
• | Lower income taxes for the nine month period primarily due to decreases of $10 million related to accelerated tax deductions and $6 million from 2016 expense related to the finalization of U.K. tax returns, partially offset by increases of $14 million from higher pre-tax income. |
• | Lower income taxes for the nine month period primarily due to the tax benefit on accelerated pension contributions made in the first quarter of 2017. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating revenues | $ | 818 | $ | 835 | $ | (17 | ) | $ | 2,350 | $ | 2,382 | $ | (32 | ) | |||||||||
Fuel | 202 | 227 | (25 | ) | 576 | 607 | (31 | ) | |||||||||||||||
Energy purchases | 22 | 24 | (2 | ) | 120 | 118 | 2 | ||||||||||||||||
Other operation and maintenance | 199 | 197 | 2 | 598 | 603 | (5 | ) | ||||||||||||||||
Depreciation | 114 | 102 | 12 | 324 | 301 | 23 | |||||||||||||||||
Taxes, other than income | 17 | 16 | 1 | 49 | 46 | 3 | |||||||||||||||||
Total operating expenses | 554 | 566 | (12 | ) | 1,667 | 1,675 | (8 | ) | |||||||||||||||
Other Income (Expense) - net | 1 | (3 | ) | 4 | (5 | ) | (9 | ) | 4 | ||||||||||||||
Interest Expense | 65 | 65 | — | 196 | 194 | 2 | |||||||||||||||||
Income Taxes | 75 | 75 | — | 183 | 190 | (7 | ) | ||||||||||||||||
Net Income | 125 | 126 | (1 | ) | 299 | 314 | (15 | ) | |||||||||||||||
Less: Special Items | — | — | — | (1 | ) | — | (1 | ) | |||||||||||||||
Earnings from Ongoing Operations | $ | 125 | $ | 126 | $ | (1 | ) | $ | 300 | $ | 314 | $ | (14 | ) |
Income Statement Line Item | Three Months | Nine Months | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Adjustment to investment, net of tax of $0, $0, $0, $0 (a) | Other Income (Expense) - net | $ | — | $ | — | $ | (1 | ) | $ | — | |||||||
Total Special Items | $ | — | $ | — | $ | (1 | ) | $ | — |
(a) | KU recorded a write-off of an equity method investment. |
Three Months | Nine Months | ||||||
Kentucky Gross Margins | $ | 10 | $ | (13 | ) | ||
Other operation and maintenance | (5 | ) | 6 | ||||
Depreciation | (10 | ) | (15 | ) | |||
Taxes, other than income | — | (2 | ) | ||||
Other Income (Expense) - net | 4 | 5 | |||||
Interest Expense | — | (2 | ) | ||||
Income Taxes | — | 7 | |||||
Earnings from Ongoing Operations | (1 | ) | (14 | ) | |||
Special items, after-tax | — | (1 | ) | ||||
Net Income | $ | (1 | ) | $ | (15 | ) |
• | See "Margins - Changes in Margins" for an explanation of Kentucky Gross Margins. |
• | Higher depreciation expense for the three and nine month periods primarily due to higher depreciation rates effective July 1, 2017, and additions to PP&E, net of retirements. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating revenues | $ | 547 | $ | 539 | $ | 8 | $ | 1,620 | $ | 1,619 | $ | 1 | |||||||||||
Energy purchases | 121 | 129 | (8 | ) | 374 | 414 | (40 | ) | |||||||||||||||
Other operation and maintenance | 132 | 143 | (11 | ) | 435 | 431 | 4 | ||||||||||||||||
Depreciation | 77 | 64 | 13 | 228 | 185 | 43 | |||||||||||||||||
Taxes, other than income | 27 | 26 | 1 | 79 | 79 | — | |||||||||||||||||
Total operating expenses | 357 | 362 | (5 | ) | 1,116 | 1,109 | 7 | ||||||||||||||||
Other Income (Expense) - net | 5 | 4 | 1 | 11 | 12 | (1 | ) | ||||||||||||||||
Interest Expense | 36 | 32 | 4 | 105 | 97 | 8 | |||||||||||||||||
Income Taxes | 64 | 58 | 6 | 159 | 162 | (3 | ) | ||||||||||||||||
Net Income | 95 | 91 | 4 | 251 | 263 | (12 | ) | ||||||||||||||||
Less: Special Items (a) | — | — | — | — | — | — | |||||||||||||||||
Earnings from Ongoing Operations | $ | 95 | $ | 91 | $ | 4 | $ | 251 | $ | 263 | $ | (12 | ) |
(a) | There are no items that management considers special for the periods presented. |
Three Months | Nine Months | ||||||
Pennsylvania Gross Margins | $ | 6 | $ | 14 | |||
Other operation and maintenance | 16 | 8 | |||||
Depreciation | (8 | ) | (29 | ) | |||
Taxes, other than income | (1 | ) | 1 | ||||
Other Income (Expense) - net | 1 | (1 | ) | ||||
Interest Expense | (4 | ) | (8 | ) | |||
Income Taxes | (6 | ) | 3 | ||||
Net Income | $ | 4 | $ | (12 | ) |
• | See "Margins - Changes in Margins" for an explanation of Pennsylvania Gross Margins. |
• | Lower other operation and maintenance expense for the three month period primarily due to $5 million of lower payroll related expenses, $4 million of lower bad debt expense and $4 million of lower vegetation management expenses. |
• | Lower other operation and maintenance expense for the nine month period primarily due to $10 million of lower bad debt expenses, $7 million of lower vegetation management expenses and $7 million of lower payroll related expenses, partially offset by $17 million of higher corporate service costs allocated to PPL Electric. |
• | Higher depreciation expense for the three and nine month periods primarily due to transmission and distribution additions placed into service related to the ongoing efforts to improve reliability and replace aging infrastructure, net of retirements. |
• | Higher interest expense for the nine month period primarily due to the issuance of $475 million of 3.950% First Mortgage Bonds in May 2017. |
2017 Three Months | |||||||||||||||||||
U.K. Regulated | KY Regulated | PA Regulated | Corporate and Other | Total | |||||||||||||||
Net Income | $ | 126 | $ | 125 | $ | 95 | $ | 9 | $ | 355 | |||||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency economic hedges, net of tax of $20 | (37 | ) | — | — | — | (37 | ) | ||||||||||||
Spinoff of the Supply segment, net of tax of ($2) (a) | — | — | — | 4 | 4 | ||||||||||||||
Total Special Items | (37 | ) | — | — | 4 | (33 | ) | ||||||||||||
Earnings from Ongoing Operations | $ | 163 | $ | 125 | $ | 95 | $ | 5 | $ | 388 |
2016 Three Months | |||||||||||||||||||
U.K. Regulated | KY Regulated | PA Regulated | Corporate and Other | Total | |||||||||||||||
Net Income | $ | 281 | $ | 126 | $ | 91 | $ | (25 | ) | $ | 473 | ||||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency economic hedges, net of tax of $103 | (193 | ) | — | — | — | (193 | ) | ||||||||||||
Other: | |||||||||||||||||||
Settlement of foreign currency contracts, net of tax of ($108) | 202 | — | — | — | 202 | ||||||||||||||
Change in U.K. tax rate | 37 | — | — | — | 37 | ||||||||||||||
Total Special Items | 46 | — | — | — | 46 | ||||||||||||||
Earnings from Ongoing Operations | $ | 235 | $ | 126 | $ | 91 | $ | (25 | ) | $ | 427 |
2017 Nine Months | |||||||||||||||||||
U.K. Regulated | KY Regulated | PA Regulated | Corporate and Other | Total | |||||||||||||||
Net Income | $ | 560 | $ | 299 | $ | 251 | $ | (60 | ) | $ | 1,050 | ||||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency economic hedges, net of tax of $66 | (122 | ) | — | — | — | (122 | ) | ||||||||||||
Spinoff of the Supply segment, net of tax of ($2) (a) | — | — | — | 4 | 4 | ||||||||||||||
Adjustment to investment, net of tax of $0 | — | (1 | ) | — | — | (1 | ) | ||||||||||||
Total Special Items | (122 | ) | (1 | ) | — | 4 | (119 | ) | |||||||||||
Earnings from Ongoing Operations | $ | 682 | $ | 300 | $ | 251 | $ | (64 | ) | $ | 1,169 |
2016 Nine Months | |||||||||||||||||||
U.K. Regulated | KY Regulated | PA Regulated | Corporate and Other | Total | |||||||||||||||
Net Income | $ | 915 | $ | 314 | $ | 263 | $ | (55 | ) | $ | 1,437 | ||||||||
Less: Special Items (expense) benefit: | |||||||||||||||||||
Foreign currency economic hedges, net of tax of $34 | (65 | ) | — | — | — | (65 | ) | ||||||||||||
Spinoff of the Supply segment, net of tax of $2 | — | — | — | (2 | ) | (2 | ) | ||||||||||||
Other: | |||||||||||||||||||
Settlement of foreign currency contracts, net of tax of ($108) | 202 | — | — | — | 202 | ||||||||||||||
Change in U.K. tax rate | 37 | — | — | — | 37 | ||||||||||||||
Total Special Items | 174 | — | — | (2 | ) | 172 | |||||||||||||
Earnings from Ongoing Operations | $ | 741 | $ | 314 | $ | 263 | $ | (53 | ) | $ | 1,265 |
(a) | Represents a tax settlement associated with the former Supply segment. Included in "Taxes, other than income" on the Statements of Income. |
• | "U.K. Gross Margins" is a single financial performance measure of the electricity distribution operations of the U.K. Regulated segment. In calculating this measure, direct costs such as connection charges from National Grid, which owns and manages the electricity transmission network in England and Wales, and Ofgem license fees (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from operating revenues, as they are costs passed through to customers. As a result, this measure represents the net revenues from the delivery of electricity across WPD's distribution network in the U.K. and directly related activities. |
• | "Kentucky Gross Margins" is a single financial performance measure of the electricity generation, transmission and distribution operations of the Kentucky Regulated segment, LKE, LG&E and KU, as well as the Kentucky Regulated segment's, LKE's and LG&E's distribution and sale of natural gas. In calculating this measure, fuel, energy purchases and certain variable costs of production (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from operating revenues. In addition, certain other expenses, recorded in "Other operation and maintenance", "Depreciation" and "Taxes, other than income" on the Statements of Income, associated with approved cost recovery mechanisms are offset against the recovery of those expenses, which are included in revenues. These mechanisms allow for direct recovery of these expenses and, in some cases, returns on capital investments and performance incentives. As a result, this measure represents the net revenues from electricity and gas operations. |
• | "Pennsylvania Gross Margins" is a single financial performance measure of the electricity transmission and distribution operations of the Pennsylvania Regulated segment and PPL Electric. In calculating this measure, utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset with minimal impact on earnings. Costs associated with these mechanisms are recorded in "Energy purchases," "Other operation and maintenance," (which are primarily Act 129 and Universal Service program costs), "Depreciation" (which is primarily related to the Act 129 Smart Meter program) and "Taxes, other than income," (which is primarily gross receipts tax) on the Statements of Income. This measure represents the net revenues from the Pennsylvania Regulated segment's and PPL Electric's electricity delivery operations. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
U.K. Regulated | |||||||||||||||||||||||
U.K. Gross Margins | $ | 441 | $ | 476 | $ | (35 | ) | $ | 1,446 | $ | 1,566 | $ | (120 | ) | |||||||||
Impact of changes in foreign currency exchange rates | (18 | ) | (172 | ) | |||||||||||||||||||
U.K. Gross Margins excluding impact of foreign currency exchange rates | $ | (17 | ) | $ | 52 | ||||||||||||||||||
Kentucky Regulated | |||||||||||||||||||||||
Kentucky Gross Margins | |||||||||||||||||||||||
LG&E | $ | 245 | $ | 237 | $ | 8 | $ | 678 | $ | 676 | $ | 2 | |||||||||||
KU | 302 | 300 | 2 | 842 | 857 | (15 | ) | ||||||||||||||||
Total Kentucky Gross Margins | $ | 547 | $ | 537 | $ | 10 | $ | 1,520 | $ | 1,533 | $ | (13 | ) | ||||||||||
Pennsylvania Regulated | |||||||||||||||||||||||
Pennsylvania Gross Margins | |||||||||||||||||||||||
Distribution | $ | 233 | $ | 246 | $ | (13 | ) | $ | 710 | $ | 721 | $ | (11 | ) | |||||||||
Transmission | 134 | 115 | 19 | 357 | 332 | 25 | |||||||||||||||||
Total Pennsylvania Gross Margins | $ | 367 | $ | 361 | $ | 6 | $ | 1,067 | $ | 1,053 | $ | 14 |
2017 Three Months | |||||||||||||||||||
U.K. Gross Margins | Kentucky Gross Margins | PA Gross Margins | Other (a) | Operating Income (b) | |||||||||||||||
Operating Revenues | $ | 467 | (c) | $ | 818 | $ | 547 | $ | 13 | $ | 1,845 | ||||||||
Operating Expenses | |||||||||||||||||||
Fuel | — | 202 | — | — | 202 | ||||||||||||||
Energy purchases | — | 22 | 121 | — | 143 | ||||||||||||||
Other operation and maintenance | 26 | 30 | 29 | 312 | 397 | ||||||||||||||
Depreciation | — | 16 | 5 | 236 | 257 | ||||||||||||||
Taxes, other than income | — | 1 | 25 | 43 | 69 | ||||||||||||||
Total Operating Expenses | 26 | 271 | 180 | 591 | 1,068 | ||||||||||||||
Total | $ | 441 | $ | 547 | $ | 367 | $ | (578 | ) | $ | 777 |
2016 Three Months | |||||||||||||||||||
U.K. Gross Margins | Kentucky Gross Margins | PA Gross Margins | Other (a) | Operating Income (b) | |||||||||||||||
Operating Revenues | $ | 504 | (c) | $ | 835 | $ | 539 | $ | 11 | $ | 1,889 | ||||||||
Operating Expenses | |||||||||||||||||||
Fuel | — | 227 | — | — | 227 | ||||||||||||||
Energy purchases | — | 24 | 129 | (2 | ) | 151 | |||||||||||||
Other operation and maintenance | 28 | 33 | 24 | 332 | 417 | ||||||||||||||
Depreciation | — | 14 | — | 218 | 232 | ||||||||||||||
Taxes, other than income | — | — | 25 | 51 | 76 | ||||||||||||||
Total Operating Expenses | 28 | 298 | 178 | 599 | 1,103 | ||||||||||||||
Total | $ | 476 | $ | 537 | $ | 361 | $ | (588 | ) | $ | 786 |
2017 Nine Months | |||||||||||||||||||
U.K. Gross Margins | Kentucky Gross Margins | PA Gross Margins | Other (a) | Operating Income (b) | |||||||||||||||
Operating Revenues | $ | 1,517 | (c) | $ | 2,350 | $ | 1,620 | $ | 34 | $ | 5,521 | ||||||||
Operating Expenses | |||||||||||||||||||
Fuel | — | 576 | — | — | 576 | ||||||||||||||
Energy purchases | — | 120 | 374 | — | 494 | ||||||||||||||
Other operation and maintenance | 71 | 82 | 89 | 975 | 1,217 | ||||||||||||||
Depreciation | — | 48 | 14 | 683 | 745 | ||||||||||||||
Taxes, other than income | — | 4 | 76 | 134 | 214 | ||||||||||||||
Total Operating Expenses | 71 | 830 | 553 | 1,792 | 3,246 | ||||||||||||||
Total | $ | 1,446 | $ | 1,520 | $ | 1,067 | $ | (1,758 | ) | $ | 2,275 |
2016 Nine Months | |||||||||||||||||||
U.K. Gross Margins | Kentucky Gross Margins | PA Gross Margins | Other (a) | Operating Income (b) | |||||||||||||||
Operating Revenues | $ | 1,641 | (c) | $ | 2,382 | $ | 1,619 | $ | 43 | $ | 5,685 | ||||||||
Operating Expenses | |||||||||||||||||||
Fuel | — | 607 | — | — | 607 | ||||||||||||||
Energy purchases | — | 118 | 414 | (1 | ) | 531 | |||||||||||||
Other operation and maintenance | 75 | 81 | 77 | 1,059 | 1,292 | ||||||||||||||
Depreciation | — | 40 | — | 652 | 692 | ||||||||||||||
Taxes, other than income | — | 3 | 75 | 151 | 229 | ||||||||||||||
Total Operating Expenses | 75 | 849 | 566 | 1,861 | 3,351 | ||||||||||||||
Total | $ | 1,566 | $ | 1,533 | $ | 1,053 | $ | (1,818 | ) | $ | 2,334 |
(a) | Represents amounts excluded from Margins. |
(b) | As reported on the Statements of Income. |
(c) | Excludes ancillary revenues of $11 million and $30 million for the three and nine months ended September 30, 2017 and $11 million and $32 million for the three and nine months ended September 30, 2016. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating Revenues | $ | 547 | $ | 539 | $ | 8 | $ | 1,620 | $ | 1,619 | $ | 1 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Operation | |||||||||||||||||||||||
Energy purchases | 121 | 129 | (8 | ) | 374 | 414 | (40 | ) | |||||||||||||||
Other operation and maintenance | 133 | 144 | (11 | ) | 435 | 431 | 4 | ||||||||||||||||
Depreciation | 77 | 64 | 13 | 228 | 185 | 43 | |||||||||||||||||
Taxes, other than income | 27 | 26 | 1 | 79 | 79 | — | |||||||||||||||||
Total Operating Expenses | 358 | 363 | (5 | ) | 1,116 | 1,109 | 7 | ||||||||||||||||
Other Income (Expense) - net | 4 | 4 | — | 8 | 12 | (4 | ) | ||||||||||||||||
Interest Income from Affiliate | 2 | — | 2 | 3 | — | 3 | |||||||||||||||||
Interest Expense | 36 | 32 | 4 | 105 | 97 | 8 | |||||||||||||||||
Income Taxes | 64 | 58 | 6 | 159 | 162 | (3 | ) | ||||||||||||||||
Net Income | $ | 95 | $ | 90 | $ | 5 | $ | 251 | $ | 263 | $ | (12 | ) |
Three Months | Nine Months | ||||||
Distribution Price (a) | $ | 16 | $ | 46 | |||
Distribution volume | (20 | ) | (30 | ) | |||
PLR (b) | (1 | ) | (32 | ) | |||
Transmission Formula Rate | 20 | 25 | |||||
Other | (7 | ) | (8 | ) | |||
Total | $ | 8 | $ | 1 |
(a) | Distribution rider prices resulted in increases of $16 million and $40 million for the three and nine months ended September 30, 2017. |
(b) | The decrease for the nine month period was primarily due to lower energy prices as described below. |
Three Months | Nine Months | ||||||
Corporate service costs | $ | — | $ | 17 | |||
Vegetation management | (4 | ) | (7 | ) | |||
Payroll-related costs | (5 | ) | (6 | ) | |||
Act 129 | 3 | 11 | |||||
Bad debts | (4 | ) | (10 | ) | |||
Other | (1 | ) | (1 | ) | |||
Total | $ | (11 | ) | $ | 4 |
Three Months | Nine Months | ||||||
Change in pre-tax income at current period tax rates | $ | 3 | $ | (7 | ) | ||
Stock-based compensation | — | 2 | |||||
Other | 3 | 2 | |||||
Total | $ | 6 | $ | (3 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 95 | $ | 90 | $ | 251 | $ | 263 | |||||||
Special items, gains (losses), after-tax (a) | — | — | — | — |
(a) | There are no items that management considers special for the periods presented. |
Three Months | Nine Months | ||||||
Pennsylvania Gross Margins | $ | 6 | $ | 14 | |||
Other operation and maintenance | 16 | 8 | |||||
Depreciation | (8 | ) | (29 | ) | |||
Taxes, other than income | (1 | ) | 1 | ||||
Other Income (Expense) - net | 2 | (1 | ) | ||||
Interest Expense | (4 | ) | (8 | ) | |||
Income Taxes | (6 | ) | 3 | ||||
Net Income | $ | 5 | $ | (12 | ) |
2017 Three Months | 2016 Three Months | ||||||||||||||||||||||
PA Gross Margins | Other (a) | Operating Income (b) | PA Gross Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 547 | $ | — | $ | 547 | $ | 539 | $ | — | $ | 539 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Energy purchases | 121 | — | 121 | 129 | — | 129 | |||||||||||||||||
Other operation and maintenance | 29 | 104 | 133 | 24 | 120 | 144 | |||||||||||||||||
Depreciation | 5 | 72 | 77 | — | 64 | 64 | |||||||||||||||||
Taxes, other than income | 25 | 2 | 27 | 25 | 1 | 26 | |||||||||||||||||
Total Operating Expenses | 180 | 178 | 358 | 178 | 185 | 363 | |||||||||||||||||
Total | $ | 367 | $ | (178 | ) | $ | 189 | $ | 361 | $ | (185 | ) | $ | 176 | |||||||||
2017 Nine Months | 2016 Nine Months | ||||||||||||||||||||||
PA Gross Margins | Other (a) | Operating Income (b) | PA Gross Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 1,620 | $ | — | $ | 1,620 | $ | 1,619 | $ | — | $ | 1,619 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Energy purchases | 374 | — | 374 | 414 | — | 414 | |||||||||||||||||
Other operation and maintenance | 89 | 346 | 435 | 77 | 354 | 431 | |||||||||||||||||
Depreciation | 14 | 214 | 228 | — | 185 | 185 | |||||||||||||||||
Taxes, other than income | 76 | 3 | 79 | 75 | 4 | 79 | |||||||||||||||||
Total Operating Expenses | 553 | 563 | 1,116 | 566 | 543 | 1,109 | |||||||||||||||||
Total | $ | 1,067 | $ | (563 | ) | $ | 504 | $ | 1,053 | $ | (543 | ) | $ | 510 |
(a) | Represents amounts excluded from Margins. |
(b) | As reported on the Statements of Income. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating Revenues | $ | 818 | $ | 835 | $ | (17 | ) | $ | 2,350 | $ | 2,382 | $ | (32 | ) | |||||||||
Operating Expenses | |||||||||||||||||||||||
Operation | |||||||||||||||||||||||
Fuel | 202 | 227 | (25 | ) | 576 | 607 | (31 | ) | |||||||||||||||
Energy purchases | 22 | 24 | (2 | ) | 120 | 118 | 2 | ||||||||||||||||
Other operation and maintenance | 199 | 197 | 2 | 598 | 603 | (5 | ) | ||||||||||||||||
Depreciation | 114 | 102 | 12 | 324 | 301 | 23 | |||||||||||||||||
Taxes, other than income | 17 | 16 | 1 | 49 | 46 | 3 | |||||||||||||||||
Total Operating Expenses | 554 | 566 | (12 | ) | 1,667 | 1,675 | (8 | ) | |||||||||||||||
Other Income (Expense) - net | 1 | (3 | ) | 4 | (5 | ) | (9 | ) | 4 | ||||||||||||||
Interest Expense | 49 | 50 | (1 | ) | 148 | 147 | 1 | ||||||||||||||||
Interest Expense with Affiliate | 5 | 4 | 1 | 13 | 12 | 1 | |||||||||||||||||
Income Taxes | 79 | 79 | — | 195 | 202 | (7 | ) | ||||||||||||||||
Net Income | $ | 132 | $ | 133 | $ | (1 | ) | $ | 322 | $ | 337 | $ | (15 | ) |
Three Months | Nine Months | ||||||
Base rates | $ | 31 | $ | 31 | |||
Volumes | (41 | ) | (86 | ) | |||
Fuel and other energy prices | (8 | ) | 10 | ||||
Other | 1 | 13 | |||||
Total | $ | (17 | ) | $ | (32 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 132 | $ | 133 | $ | 322 | $ | 337 | |||||||
Special items, gains (losses), after-tax | — | — | (1 | ) | — |
Three Months | Nine Months | ||||||
Margins | $ | 10 | $ | (13 | ) | ||
Other operation and maintenance | (5 | ) | 6 | ||||
Depreciation | (10 | ) | (15 | ) | |||
Taxes, other than income | — | (2 | ) | ||||
Other Income (Expense) - net | 4 | 5 | |||||
Interest Expense | — | (2 | ) | ||||
Income Taxes | — | 7 | |||||
Special items, gains (losses), after-tax (a) | — | (1 | ) | ||||
Net Income | $ | (1 | ) | $ | (15 | ) |
(a) | See PPL's "Results of Operations - Segment Earnings - Kentucky Regulated Segment" for details of the special item. |
2017 Three Months | 2016 Three Months | ||||||||||||||||||||||
Margins | Other (a) | Operating Income (b) | Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 818 | $ | — | $ | 818 | $ | 835 | $ | — | $ | 835 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Fuel | 202 | — | 202 | 227 | — | 227 | |||||||||||||||||
Energy purchases | 22 | — | 22 | 24 | — | 24 | |||||||||||||||||
Other operation and maintenance | 30 | 169 | 199 | 33 | 164 | 197 | |||||||||||||||||
Depreciation | 16 | 98 | 114 | 14 | 88 | 102 | |||||||||||||||||
Taxes, other than income | 1 | 16 | 17 | — | 16 | 16 | |||||||||||||||||
Total Operating Expenses | 271 | 283 | 554 | 298 | 268 | 566 | |||||||||||||||||
Total | $ | 547 | $ | (283 | ) | $ | 264 | $ | 537 | $ | (268 | ) | $ | 269 | |||||||||
2017 Nine Months | 2016 Nine Months | ||||||||||||||||||||||
Margins | Other (a) | Operating Income (b) | Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 2,350 | $ | — | $ | 2,350 | $ | 2,382 | $ | — | $ | 2,382 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Fuel | 576 | — | 576 | 607 | — | 607 | |||||||||||||||||
Energy purchases | 120 | — | 120 | 118 | — | 118 | |||||||||||||||||
Other operation and maintenance | 82 | 516 | 598 | 81 | 522 | 603 | |||||||||||||||||
Depreciation | 48 | 276 | 324 | 40 | 261 | 301 | |||||||||||||||||
Taxes, other than income | 4 | 45 | 49 | 3 | 43 | 46 | |||||||||||||||||
Total Operating Expenses | 830 | 837 | 1,667 | 849 | 826 | 1,675 | |||||||||||||||||
Total | $ | 1,520 | $ | (837 | ) | $ | 683 | $ | 1,533 | $ | (826 | ) | $ | 707 |
(a) | Represents amounts excluded from Margins. |
(b) | As reported on the Statements of Income. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Retail and wholesale | $ | 361 | $ | 366 | $ | (5 | ) | $ | 1,055 | $ | 1,058 | $ | (3 | ) | |||||||||
Electric revenue from affiliate | 2 | 2 | — | 23 | 19 | 4 | |||||||||||||||||
Total Operating Revenues | 363 | 368 | (5 | ) | 1,078 | 1,077 | 1 | ||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Operation | |||||||||||||||||||||||
Fuel | 76 | 86 | (10 | ) | 225 | 233 | (8 | ) | |||||||||||||||
Energy purchases | 18 | 19 | (1 | ) | 107 | 104 | 3 | ||||||||||||||||
Energy purchases from affiliate | 3 | 5 | (2 | ) | 8 | 10 | (2 | ) | |||||||||||||||
Other operation and maintenance | 89 | 85 | 4 | 262 | 264 | (2 | ) | ||||||||||||||||
Depreciation | 47 | 43 | 4 | 136 | 126 | 10 | |||||||||||||||||
Taxes, other than income | 8 | 9 | (1 | ) | 25 | 24 | 1 | ||||||||||||||||
Total Operating Expenses | 241 | 247 | (6 | ) | 763 | 761 | 2 | ||||||||||||||||
Other Income (Expense) - net | (1 | ) | (1 | ) | — | (2 | ) | (6 | ) | 4 | |||||||||||||
Interest Expense | 17 | 18 | (1 | ) | 53 | 53 | — | ||||||||||||||||
Income Taxes | 39 | 39 | — | 99 | 98 | 1 | |||||||||||||||||
Net Income | $ | 65 | $ | 63 | $ | 2 | $ | 161 | $ | 159 | $ | 2 |
Three Months | Nine Months | ||||||
Base rates | $ | 18 | $ | 18 | |||
Volumes | (16 | ) | (26 | ) | |||
Fuel and other energy prices | (4 | ) | 4 | ||||
Other | (3 | ) | 5 | ||||
Total | $ | (5 | ) | $ | 1 |
Three Months | Nine Months | ||||||
Plant operations and maintenance | $ | 1 | $ | (1 | ) | ||
Pension expense | 1 | 1 | |||||
Timing and scope of generation maintenance outages | — | (1 | ) | ||||
Storm costs | — | (1 | ) | ||||
Other | 2 | — | |||||
Total | $ | 4 | $ | (2 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 65 | $ | 63 | $ | 161 | $ | 159 | |||||||
Special items, gains (losses), after-tax (a) | — | — | — | — |
(a) | There are no items management considers special for the periods presented. |
Three Months | Nine Months | ||||||
Margins | $ | 8 | $ | 2 | |||
Other operation and maintenance | (4 | ) | 3 | ||||
Depreciation | (5 | ) | (6 | ) | |||
Taxes, other than income | 2 | — | |||||
Other Income (Expense) - net | — | 4 | |||||
Interest Expense | 1 | — | |||||
Income Taxes | — | (1 | ) | ||||
Net Income | $ | 2 | $ | 2 |
2017 Three Months | 2016 Three Months | ||||||||||||||||||||||
Margins | Other (a) | Operating Income (b) | Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 363 | $ | — | $ | 363 | $ | 368 | $ | — | $ | 368 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Fuel | 76 | — | 76 | 86 | — | 86 | |||||||||||||||||
Energy purchases, including affiliate | 21 | — | 21 | 24 | — | 24 | |||||||||||||||||
Other operation and maintenance | 13 | 76 | 89 | 13 | 72 | 85 | |||||||||||||||||
Depreciation | 7 | 40 | 47 | 8 | 35 | 43 | |||||||||||||||||
Taxes, other than income | 1 | 7 | 8 | — | 9 | 9 | |||||||||||||||||
Total Operating Expenses | 118 | 123 | 241 | 131 | 116 | 247 | |||||||||||||||||
Total | $ | 245 | $ | (123 | ) | $ | 122 | $ | 237 | $ | (116 | ) | $ | 121 | |||||||||
2017 Nine Months | 2016 Nine Months | ||||||||||||||||||||||
Margins | Other (a) | Operating Income (b) | Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 1,078 | $ | — | $ | 1,078 | $ | 1,077 | $ | — | $ | 1,077 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Fuel | 225 | — | 225 | 233 | — | 233 | |||||||||||||||||
Energy purchases, including affiliate | 115 | — | 115 | 114 | — | 114 | |||||||||||||||||
Other operation and maintenance | 33 | 229 | 262 | 32 | 232 | 264 | |||||||||||||||||
Depreciation | 24 | 112 | 136 | 20 | 106 | 126 | |||||||||||||||||
Taxes, other than income | 3 | 22 | 25 | 2 | 22 | 24 | |||||||||||||||||
Total Operating Expenses | 400 | 363 | 763 | 401 | 360 | 761 | |||||||||||||||||
Total | $ | 678 | $ | (363 | ) | $ | 315 | $ | 676 | $ | (360 | ) | $ | 316 |
(a) | Represents amounts excluded from Margins. |
(b) | As reported on the Statements of Income. |
Three Months | Nine Months | ||||||||||||||||||||||
2017 | 2016 | $ Change | 2017 | 2016 | $ Change | ||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Retail and wholesale | $ | 457 | $ | 469 | $ | (12 | ) | $ | 1,295 | $ | 1,324 | $ | (29 | ) | |||||||||
Electric revenue from affiliate | 3 | 5 | (2 | ) | 8 | 10 | (2 | ) | |||||||||||||||
Total Operating Revenues | 460 | 474 | (14 | ) | 1,303 | 1,334 | (31 | ) | |||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Operation | |||||||||||||||||||||||
Fuel | 126 | 141 | (15 | ) | 351 | 374 | (23 | ) | |||||||||||||||
Energy purchases | 4 | 5 | (1 | ) | 13 | 14 | (1 | ) | |||||||||||||||
Energy purchases from affiliate | 2 | 2 | — | 23 | 19 | 4 | |||||||||||||||||
Other operation and maintenance | 104 | 107 | (3 | ) | 313 | 320 | (7 | ) | |||||||||||||||
Depreciation | 67 | 59 | 8 | 188 | 175 | 13 | |||||||||||||||||
Taxes, other than income | 9 | 7 | 2 | 24 | 22 | 2 | |||||||||||||||||
Total Operating Expenses | 312 | 321 | (9 | ) | 912 | 924 | (12 | ) | |||||||||||||||
Other Income (Expense) - net | — | (3 | ) | 3 | (3 | ) | (4 | ) | 1 | ||||||||||||||
Interest Expense | 24 | 24 | — | 72 | 71 | 1 | |||||||||||||||||
Income Taxes | 47 | 48 | (1 | ) | 120 | 128 | (8 | ) | |||||||||||||||
Net Income | $ | 77 | $ | 78 | $ | (1 | ) | $ | 196 | $ | 207 | $ | (11 | ) |
Three Months | Nine Months | ||||||
Base rates | $ | 13 | $ | 13 | |||
Volumes | (27 | ) | (57 | ) | |||
Fuel and other energy prices | (3 | ) | 5 | ||||
Other | 3 | 8 | |||||
Total | $ | (14 | ) | $ | (31 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 77 | $ | 78 | $ | 196 | $ | 207 | |||||||
Special items, gains (losses), after-tax | — | — | (1 | ) | — |
Three Months | Nine Months | ||||||
Margins | $ | 2 | $ | (15 | ) | ||
Other operation and maintenance | — | 7 | |||||
Depreciation | (5 | ) | (9 | ) | |||
Taxes, other than income | (2 | ) | (2 | ) | |||
Other Income (Expense) - net | 3 | 2 | |||||
Interest Expense | — | (1 | ) | ||||
Income Taxes | 1 | 8 | |||||
Special items, gains (losses), after-tax (a) | — | (1 | ) | ||||
Net Income | $ | (1 | ) | $ | (11 | ) |
(a) | See PPL's "Results of Operations - Segment Earnings - Kentucky Regulated Segment" for details of the special item. |
2017 Three Months | 2016 Three Months | ||||||||||||||||||||||
Margins | Other (a) | Operating Income (b) | Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 460 | $ | — | $ | 460 | $ | 474 | $ | — | $ | 474 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Fuel | 126 | — | 126 | 141 | — | 141 | |||||||||||||||||
Energy purchases, including affiliate | 6 | — | 6 | 7 | — | 7 | |||||||||||||||||
Other operation and maintenance | 17 | 87 | 104 | 20 | 87 | 107 | |||||||||||||||||
Depreciation | 9 | 58 | 67 | 6 | 53 | 59 | |||||||||||||||||
Taxes, other than income | — | 9 | 9 | — | 7 | 7 | |||||||||||||||||
Total Operating Expenses | 158 | 154 | 312 | 174 | 147 | 321 | |||||||||||||||||
Total | $ | 302 | $ | (154 | ) | $ | 148 | $ | 300 | $ | (147 | ) | $ | 153 | |||||||||
2017 Nine Months | 2016 Nine Months | ||||||||||||||||||||||
Margins | Other (a) | Operating Income (b) | Margins | Other (a) | Operating Income (b) | ||||||||||||||||||
Operating Revenues | $ | 1,303 | $ | — | $ | 1,303 | $ | 1,334 | $ | — | $ | 1,334 | |||||||||||
Operating Expenses | |||||||||||||||||||||||
Fuel | 351 | — | 351 | 374 | — | 374 | |||||||||||||||||
Energy purchases, including affiliate | 36 | — | 36 | 33 | — | 33 | |||||||||||||||||
Other operation and maintenance | 49 | 264 | 313 | 49 | 271 | 320 | |||||||||||||||||
Depreciation | 24 | 164 | 188 | 20 | 155 | 175 | |||||||||||||||||
Taxes, other than income | 1 | 23 | 24 | 1 | 21 | 22 | |||||||||||||||||
Total Operating Expenses | 461 | 451 | 912 | 477 | 447 | 924 | |||||||||||||||||
Total | $ | 842 | $ | (451 | ) | $ | 391 | $ | 857 | $ | (447 | ) | $ | 410 |
(a) | Represents amounts excluded from Margins. |
(b) | As reported on the Statements of Income. |
PPL (a) | PPL Electric | LKE | LG&E | KU | |||||||||||||||
September 30, 2017 | |||||||||||||||||||
Cash and cash equivalents | $ | 676 | $ | 243 | $ | 40 | $ | 9 | $ | 31 | |||||||||
Notes receivable from affiliate | 2 | — | — | 10 | |||||||||||||||
Short-term debt | 1,211 | — | 190 | 190 | — | ||||||||||||||
Notes payable with affiliate | — | 159 | 10 | — | |||||||||||||||
December 31, 2016 | |||||||||||||||||||
Cash and cash equivalents | $ | 341 | $ | 13 | $ | 13 | $ | 5 | $ | 7 | |||||||||
Short-term debt | 923 | 295 | 185 | 169 | 16 | ||||||||||||||
Notes payable with affiliate | — | 163 | — | — |
(a) | At September 30, 2017, $86 million of cash and cash equivalents were denominated in GBP. If these amounts would be remitted as dividends, PPL would not anticipate a material incremental U.S. tax cost. Historically, dividends paid by foreign subsidiaries have been limited to distributions of the current year's earnings. See Note 5 to the Financial Statements in PPL's 2016 Form 10-K for additional information on undistributed earnings of WPD. |
PPL | PPL Electric | LKE | LG&E | KU | |||||||||||||||
2017 | |||||||||||||||||||
Operating activities | $ | 1,754 | $ | 575 | $ | 920 | $ | 418 | $ | 501 | |||||||||
Investing activities | (2,164 | ) | (858 | ) | (575 | ) | (293 | ) | (289 | ) | |||||||||
Financing activities | 738 | 513 | (318 | ) | (121 | ) | (188 | ) | |||||||||||
2016 | |||||||||||||||||||
Operating activities | $ | 2,230 | $ | 595 | $ | 816 | $ | 383 | $ | 469 | |||||||||
Investing activities | (2,066 | ) | (740 | ) | (599 | ) | (343 | ) | (254 | ) | |||||||||
Financing activities | (558 | ) | 134 | (236 | ) | (55 | ) | (219 | ) | ||||||||||
Change - Cash Provided (Used) | |||||||||||||||||||
Operating activities | $ | (476 | ) | $ | (20 | ) | $ | 104 | $ | 35 | $ | 32 | |||||||
Investing activities | (98 | ) | (118 | ) | 24 | 50 | (35 | ) | |||||||||||
Financing activities | 1,296 | 379 | (82 | ) | (66 | ) | 31 |
PPL | PPL Electric | LKE | LG&E | KU | |||||||||||||||
Change - Cash Provided (Used) | |||||||||||||||||||
Net income | $ | (387 | ) | $ | (12 | ) | $ | (15 | ) | $ | 2 | $ | (11 | ) | |||||
Non-cash components | (23 | ) | 34 | (18 | ) | (11 | ) | 4 | |||||||||||
Working capital | 91 | (3 | ) | 78 | (9 | ) | 31 | ||||||||||||
Defined benefit plan funding | (213 | ) | (24 | ) | 50 | 42 | (3 | ) | |||||||||||
Other operating activities | 56 | (15 | ) | 9 | 11 | 11 | |||||||||||||
Total | $ | (476 | ) | $ | (20 | ) | $ | 104 | $ | 35 | $ | 32 |
• | The $27 million decrease in non-cash components was primarily due to a decrease in deferred income tax expense (primarily due to lower income taxes from tax benefits related to accelerated pension contributions to the U.K. pension plans) and an increase in the U.K. net periodic defined benefit credits (primarily due to a decrease in the U.K. pension plan discount rates used to calculate the interest cost component of the net periodic defined benefit costs), partially offset by an increase in unrealized losses on hedging activities and an increase in depreciation expense (primarily due to additional assets placed into service, net of retirements, and higher depreciation rates effective July 1, 2017, partially offset by the impact of foreign currency exchange rates at WPD). |
• | The $91 million increase in cash from changes in working capital was primarily due to a decrease in accounts receivable and unbilled revenue (primarily due to a decrease in volumes due to milder weather in 2017 compared to 2016), a decrease in net regulatory assets and liabilities (due to timing of rate recovery mechanisms), a decrease in fuel, material and supplies (primarily due to a decrease in fuel purchases due to milder weather in 2017 compared to 2016), and an increase in accrued interest, partially offset by a decrease in accounts payable (primarily due to an increase in accrued expenditures for property, plant and equipment and timing of payments) and a decrease in taxes payable (primarily due to an increase in current income tax benefit in 2017). |
• | Defined benefit plan funding was $213 million higher in 2017. The increase was primarily due to the acceleration of WPD's contributions to its U.K. pension plans. See Note 8 to the Financial Statements for additional information. |
• | The $34 million increase in non-cash components was primarily due to an increase in depreciation expense (primarily due to additional assets placed into service, related to the ongoing efforts to ensure the reliability of the delivery system and the replacement of aging infrastructure as well as the roll-out of the Act 129 Smart Meter program, net of retirements), partially offset by a decrease in deferred income taxes (primarily due to book versus tax plant timing differences). |
• | The $3 million decrease in cash from changes in working capital was primarily due to an increase in prepayments (primarily due to an increase in the 2017 gross receipts tax prepayment compared to 2016) and a decrease in accounts payable (primarily due to timing of payments), partially offset by a decrease in net regulatory assets and liabilities (due to timing of rate recovery mechanisms), a decrease in unbilled revenue (primarily due to lower volumes due to milder weather in 2017 compared to 2016), an increase in taxes payable (primarily due to a decrease in the current income tax benefit) and a decrease in accounts receivable (primarily due to a decrease in volumes due to milder weather in 2017 and income tax refunds received). |
• | Defined benefit plan funding was $24 million higher in 2017. |
• | The increase in cash from changes in working capital was primarily driven by decreases in accounts receivable from customers and unbilled revenues due to milder weather in 2017 compared to 2016, a decrease in fuel purchases due to lower generation driven by weather in 2017 compared to 2016, and an increase in taxes payable due to timing of payments, partially offset by a decrease in accounts payable due to the timing of fuel purchases and payments. |
• | Defined benefit plan funding was $50 million lower in 2017. |
• | The decrease in cash from changes in working capital was primarily driven by decreases in accounts payable due to fuel purchases from lower generation and timing of payments and taxes payable due to timing of payments, partially offset by decreases in accounts receivable from customers and unbilled revenues due to milder weather in 2017 compared to 2016 and accounts receivable from affiliates due to timing of intercompany settlements associated with inventory and energy sales to KU. |
• | Defined benefit plan funding was $42 million lower in 2017. |
• | The increase in cash from changes in working capital was primarily driven by a decrease in accounts receivable from customers and unbilled revenues due to milder weather in 2017 compared to 2016, a decrease in fuel purchases due to lower generation driven by weather in 2017 compared to 2016, and an increase in accounts payable due to the timing of fuel purchases and payments, partially offset by a decrease in taxes payable due to timing of payments and accounts payable to affiliates due to timing of intercompany settlements associated with inventory and energy purchases from LG&E. |
PPL | PPL Electric | LKE | LG&E | KU | |||||||||||||||
Decrease (Increase) | $ | (79 | ) | $ | (112 | ) | $ | 21 | $ | 50 | $ | (28 | ) |
PPL | PPL Electric | LKE | LG&E | KU | |||||||||||||||
Change - Cash Provided (Used) | |||||||||||||||||||
Debt issuance/retirement, net | $ | 692 | $ | 470 | $ | — | $ | — | $ | — | |||||||||
Settlement of cross-currency swaps | (46 | ) | — | — | — | — | |||||||||||||
Stock issuances/redemptions, net | 142 | — | — | — | — | ||||||||||||||
Dividends | (28 | ) | (38 | ) | — | (63 | ) | 26 | |||||||||||
Capital contributions/distributions, net | — | 375 | (129 | ) | (47 | ) | (20 | ) | |||||||||||
Change in short-term debt, net | 537 | (425 | ) | 135 | 35 | 25 | |||||||||||||
Notes payable with affiliate | — | — | (88 | ) | 10 | — | |||||||||||||
Other financing activities | (1 | ) | (3 | ) | — | (1 | ) | — | |||||||||||
Total | $ | 1,296 | $ | 379 | $ | (82 | ) | $ | (66 | ) | $ | 31 |
Committed Capacity | Borrowed | Letters of Credit and Commercial Paper Issued | Unused Capacity | ||||||||||||
PPL Capital Funding Credit Facilities | $ | 1,400 | $ | — | $ | 303 | $ | 1,097 | |||||||
PPL Electric Credit Facility | 650 | — | 1 | 649 | |||||||||||
LKE Credit Facility | 75 | — | — | 75 | |||||||||||
LG&E Credit Facility | 500 | — | 190 | 310 | |||||||||||
KU Credit Facilities | 598 | — | 198 | 400 | |||||||||||
Total LKE | 1,173 | — | 388 | 785 | |||||||||||
Total U.S. Credit Facilities (a) | $ | 3,223 | $ | — | $ | 692 | $ | 2,531 | |||||||
Total U.K. Credit Facilities (b) | £ | 1,285 | £ | 501 | £ | — | £ | 783 |
(a) | The commitments under the U.S. credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 10%, PPL Electric - 7%, LKE - 21%, LG&E - 7% and KU - 37%. |
(b) | The amounts borrowed at September 30, 2017 were a USD-denominated borrowing of $200 million and GBP-denominated borrowings which equated to $446 million. The unused capacity reflects the USD-denominated borrowing amount borrowed in GBP of £156 million as of the date borrowed. At September 30, 2017, the USD equivalent of unused capacity under the U.K. committed credit facilities was $1.0 billion. |
Committed Capacity | Borrowed | Other Used Capacity | Unused Capacity | ||||||||||||
LKE Credit Facility | $ | 225 | $ | 159 | $ | — | $ | 66 | |||||||
LG&E Money Pool (a) | 500 | 10 | 190 | 300 | |||||||||||
KU Money Pool (a) | 500 | — | — | 500 |
(a) | LG&E and KU participate in an intercompany money pool agreement whereby LKE, LG&E and/or KU make available funds up to $500 million at an interest rate based on a market index of commercial paper issues. However, the FERC has issued a maximum aggregate short-term debt limit for each utility at $500 million from all covered sources. |
Capacity | Commercial Paper Issuances | Unused Capacity | |||||||||
PPL Capital Funding | $ | 1,000 | $ | 285 | $ | 715 | |||||
PPL Electric | 650 | — | 650 | ||||||||
LG&E | 350 | 190 | 160 | ||||||||
KU | 350 | — | 350 | ||||||||
Total LKE | 700 | 190 | 510 | ||||||||
Total PPL | $ | 2,350 | $ | 475 | $ | 1,875 |
Three Months | Nine Months | ||||||
Number of shares (in thousands) | 2,049 | 5,526 | |||||
Average share price | $ | 39.04 | $ | 38.49 | |||
Net Proceeds | $ | 79 | $ | 211 |
Exposure Hedged | Fair Value, Net - Asset (Liability) (a) | Effect of a 10% Adverse Movement in Rates (b) | Maturities Ranging Through | ||||||||||
PPL | |||||||||||||
Cash flow hedges | |||||||||||||
Interest rate swaps (c) | $ | 242 | $ | (2 | ) | $ | (3 | ) | 2027 | ||||
Cross-currency swaps (c) | 802 | 162 | (90 | ) | 2028 | ||||||||
Economic hedges | |||||||||||||
Interest rate swaps (d) | 147 | (29 | ) | (1 | ) | 2033 | |||||||
LKE | |||||||||||||
Economic hedges | |||||||||||||
Interest rate swaps (d) | 147 | (29 | ) | (1 | ) | 2033 | |||||||
LG&E | |||||||||||||
Economic hedges | |||||||||||||
Interest rate swaps (d) | 147 | (29 | ) | (1 | ) | 2033 |
(a) | Includes accrued interest, if applicable. |
(b) | Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. Sensitivities represent a 10% adverse movement in interest rates, except for cross-currency swaps which also includes a 10% adverse movement in foreign currency exchange rates. |
(c) | Changes in the fair value of these instruments are recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings. |
(d) | Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities. |
10% Adverse Movement in Rates | |||
PPL | $ | 600 | |
PPL Electric | 165 | ||
LKE | 172 | ||
LG&E | 63 | ||
KU | 95 |
Exposure Hedged | Fair Value, Net - Asset (Liability) | Effect of a 10% Adverse Movement in Foreign Currency Exchange Rates (a) | Maturities Ranging Through | ||||||||||
Net investment hedges (b) | £ | 92 | $ | 1 | $ | (12 | ) | 2017 | |||||
Economic hedges (c) | 2,728 | (4 | ) | (340 | ) | 2020 |
(a) | Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. |
(b) | To protect the value of a portion of its net investment in WPD, PPL executes forward contracts to sell GBP. |
(c) | To economically hedge the translation risk of expected earnings denominated in GBP. |
• | PPL Electric is exposed to commodity price risk from its obligation as PLR; however, its PUC-approved cost recovery mechanism substantially eliminates its exposure to this risk. PPL Electric also mitigates its exposure to commodity price risk by entering into full-requirement supply agreements to serve its PLR customers. These supply agreements transfer the commodity price risk associated with the PLR obligation to the energy suppliers. |
• | LG&E's and KU's rates include certain mechanisms for fuel and fuel-related expenses. In addition, LG&E's rates include a mechanism for natural gas supply expenses. These mechanisms generally provide for timely recovery of market price fluctuations associated with these expenses. |
• | WPD is exposed to volumetric risk which is significantly mitigated as a result of the method of regulation in the U.K. Under the RIIO-ED1 price control period, recovery of such exposure occurs on a two year lag. See Note 1 in PPL's 2016 Form 10-K for additional information on revenue recognition under RIIO-ED1. |
• | PPL Electric, LG&E and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases. |
• | Legal Matters, |
• | Climate Change, |
• | CCRs, |
• | ELGs, and |
• | NAAQS. |
PPL | ||||||||||||||
PPL | Electric | LKE | LG&E | KU | ||||||||||
Defined Benefits | X | X | X | X | X | |||||||||
Income Taxes | X | X | X | X | X | |||||||||
Goodwill Impairment | X | X | X | X | ||||||||||
AROs | X | X | X | X | ||||||||||
Price Risk Management | X | |||||||||||||
Regulatory Assets and Liabilities | X | X | X | X | X | |||||||||
Revenue Recognition - Unbilled Revenue | X | X | X |
• | "Item 3. Legal Proceedings" in each Registrant's 2016 Form 10-K; and |
• | Notes 6 and 9 to the Financial Statements. |
- | Supplemental Indenture No. 16, dated as of September 8, 2017, among PPL Capital Funding, Inc., PPL Corporation and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A. (formerly known as The Chase Manhattan Bank)), as Trustee (Exhibit 4(b) to PPL Corporation Form 8-K Report (File No. 1-11459) dated September 6, 2017) | |
- | £3,000,000,000 Euro Medium Term Note Programme entered into by Western Power Distribution (East Midlands) plc, Western Power Distribution (South Wales) plc, Western Power Distribution (South West) plc and Western Power Distribution (West Midlands) plc, dated as of September 15, 2017 | |
- | Amendment No. 1 to PPL Employee Stock Ownership Plan, dated October 2, 2017 | |
- | £20,000,000 Uncommitted Facility Letter entered into between Western Power Distribution (South West) plc, Western Power Distribution (South Wales) plc, Western Power Distribution (West Midlands) plc, Western Power Distribution (East Midlands) plc and BNP Paribas, dated as of January 23, 2014 | |
- | Amendment to said Uncommitted Facility Letter, dated as of July 28, 2017 | |
- | $200,000,000 Term Loan Credit Agreement, dated as of October 26, 2017, among Louisville Gas and Electric Company, as the Borrower, the Lenders from time to time party hereto and U.S. Bank National Association, as Administrative Agent | |
- | PPL Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends | |
- | PPL Electric Utilities Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends | |
- | LG&E and KU Energy LLC and Subsidiaries Computation of Ratio of Earnings to Fixed Charges | |
- | Louisville Gas and Electric Company Computation of Ratio of Earnings to Fixed Charges | |
- | Kentucky Utilities Company Computation of Ratio of Earnings to Fixed Charges | |
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended September 30, 2017, filed by the following officers for the following companies: | ||
- | PPL Corporation's principal executive officer | |
- | PPL Corporation's principal financial officer | |
- | PPL Electric Utilities Corporation's principal executive officer | |
- | PPL Electric Utilities Corporation's principal financial officer | |
- | LG&E and KU Energy LLC's principal executive officer | |
- | LG&E and KU Energy LLC's principal financial officer | |
- | Louisville Gas and Electric Company's principal executive officer | |
- | Louisville Gas and Electric Company's principal financial officer | |
- | Kentucky Utilities Company's principal executive officer | |
- | Kentucky Utilities Company's principal financial officer | |
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended September 30, 2017, furnished by the following officers for the following companies: | ||
- | PPL Corporation's principal executive officer and principal financial officer | |
- | PPL Electric Utilities Corporation's principal executive officer and principal financial officer | |
- | LG&E and KU Energy LLC's principal executive officer and principal financial officer | |
- | Louisville Gas and Electric Company's principal executive officer and principal financial officer | |
- | Kentucky Utilities Company's principal executive officer and principal financial officer |
101.INS | - | XBRL Instance Document |
101.SCH | - | XBRL Taxonomy Extension Schema |
101.CAL | - | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | - | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | - | XBRL Taxonomy Extension Label Linkbase |
101.PRE | - | XBRL Taxonomy Extension Presentation Linkbase |
PPL Corporation | |||
(Registrant) | |||
Date: | November 1, 2017 | /s/ Stephen K. Breininger | |
Stephen K. Breininger Vice President and Controller | |||
(Principal Accounting Officer) | |||
PPL Electric Utilities Corporation | |||
(Registrant) | |||
Date: | November 1, 2017 | /s/ Marlene C. Beers | |
Marlene C. Beers Controller | |||
(Principal Financial Officer and Principal Accounting Officer) | |||
LG&E and KU Energy LLC | |||
(Registrant) | |||
Louisville Gas and Electric Company | |||
(Registrant) | |||
Kentucky Utilities Company | |||
(Registrant) | |||
Date: | November 1, 2017 | /s/ Kent W. Blake | |
Kent W. Blake Chief Financial Officer | |||
(Principal Financial Officer and Principal Accounting Officer) |
Arranger | |
NatWest Markets | |
Dealers | |
Barclays | BofA Merrill Lynch |
HSBC | Lloyds Bank |
Mizuho Securities | MUFG |
RBC Capital Markets | Santander Global Corporate Banking |
NatWest Markets |
TABLE OF CONTENTS | ||
Page | ||
OVERVIEW OF THE PROGRAMME | 8 | |
RISK FACTORS | 13 | |
SUPPLEMENTARY PROSPECTUSES | 22 | |
DOCUMENTS INCORPORATED BY REFERENCE | 23 | |
PRESENTATION OF FINANCIAL INFORMATION | 25 | |
FORM OF THE NOTES | 26 | |
FORM OF FINAL TERMS | 31 | |
FORM OF PRICING SUPPLEMENT | 42 | |
TERMS AND CONDITIONS OF THE NOTES | 52 | |
USE OF PROCEEDS | 88 | |
DESCRIPTION OF THE ISSUERS | 89 | |
TAXATION | 104 | |
SUBSCRIPTION AND SALE | 106 | |
GENERAL INFORMATION | 108 |
Issuers | Western Power Distribution (East Midlands) plc |
Western Power Distribution (South Wales) plc | |
Western Power Distribution (South West) plc | |
Western Power Distribution (West Midlands) plc | |
Description | Euro Medium Term Note Programme |
Arranger | The Royal Bank of Scotland plc (trading as NatWest Markets) |
Dealers | Banco Santander, S.A. |
Barclays Bank PLC | |
HSBC Bank plc | |
Lloyds Bank plc | |
Merrill Lynch International | |
Mizuho International plc | |
MUFG Securities EMEA plc | |
RBC Europe Limited | |
The Royal Bank of Scotland plc (trading as NatWest Markets) | |
and any other Dealers appointed in accordance with the Dealer Agreement. | |
Certain Restrictions | Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see “Subscription and Sale”). |
Note Trustee | HSBC Corporate Trustee Company (UK) Limited |
Issuing and Paying Agent, Registrar, Transfer Agent and Calculation Agent | HSBC Bank plc |
Method of Issue: | The Notes will be issued on a syndicated or non-syndicated basis. The Notes will be issued in series (each a Series) having one or more issue dates and on terms otherwise identical (or identical other than in respect of the first payment of interest), the Notes of each Series being intended to be interchangeable with all other Notes of that Series. Each Series may be issued in tranches (each a Tranche) on the same or different issue dates. The specific terms of each Tranche (which will be completed, where necessary, with the relevant terms and conditions and, save in respect of the issue date, issue price, first payment of interest and nominal amount of the Tranche, will be identical to the terms of other Tranches of the same Series) will be completed in the Final Terms. |
Programme Size | Up to £3,000,000,000 (or its equivalent in other currencies, calculated as described in the Dealer Agreement) outstanding at any time. The Issuers may increase the amount of the Programme in accordance with the terms of the Dealer Agreement. |
Distribution | Notes may be distributed by way of private or public placement and, in each case, on a syndicated or non-syndicated basis. |
Currencies | Subject to any applicable legal or regulatory restrictions, any currency agreed between the Relevant Issuer and the relevant Dealer. |
Maturities | Such maturities as may be agreed between the Relevant Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Relevant Issuer or the relevant Specified Currency. |
Issue Price | Notes will be issued on a fully-paid basis and may be issued and at an issue price which is at par or at a discount to, or premium over, par. |
Form of Notes | The Notes will be issued in bearer or registered form as described in “Form of the Notes”. Each Tranche of Bearer Notes will be represented on issue by a temporary Global Note if (i) definitive Notes are to be made available to Noteholders following the expiry of 40 days after their issue date or (ii) such Notes have an initial maturity of more than one year, otherwise such Tranche will be represented by a permanent Global Note. Registered Notes will be represented by Certificates, one Certificate being issued in respect of each Noteholder’s entire holding of Registered Notes of one Series. Certificates representing Registered Notes that are registered in the name of a nominee for one or more clearing systems are referred to as “Global Certificates”. A beneficial interest in a Global Certificate may be transferable for a Certificate in definitive form only in accordance with the rules and operating procedures of the relevant clearing system for the time being and in accordance with the detailed regulations in the Agency Agreement. |
Fixed Rate Notes | Fixed interest will be payable on such date or dates as may be agreed between the Relevant Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Relevant Issuer and the relevant Dealer. |
Floating Rate Notes | Floating Rate Notes will bear interest at a rate determined: |
(i) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or | |
(ii) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service at the relevant time. | |
The margin (if any) relating to such floating rate will be agreed between the Relevant Issuer and the relevant Dealer for each Series of Floating Rate Notes. | |
Index Linked Interest Notes and Index Linked Redemption Notes | Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to the UK Retail Price Index. Index Linked Redemption Notes and Index Linked Interest Notes may also specify a Minimum Indexation Factor or a Maximum Indexation Factor. |
Other provisions in relation to Floating Rate Notes and Index Linked Interest Notes | Floating Rate Notes and Index Linked Interest Notes may also have a maximum interest rate, a minimum interest, a step-up in the interest rate after a certain date (or any combination of the foregoing). |
Zero Coupon Notes | Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest. |
Interest Periods and Interest Payment Dates: | The Notes (other than the Zero Coupon Notes) will have such interest periods and interest payment dates as the Issuer and the relevant Dealer may agree in relation to a particular Tranche of Notes. |
Redemption by the Relevant Issuer | The applicable Final Terms will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of the Relevant Issuer and/or the Noteholders upon giving notice to the Noteholders or the Relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Relevant Issuer and the relevant Dealer. |
Redemption at Option of the Noteholders on a Restructuring Event | The Notes issued may also be redeemed at the option of the Noteholders in certain circumstances following the occurrence of a Restructuring Event, as more particularly set out in Condition 6(g) (Redemption at the Option of the Noteholders on a Restructuring Event). |
Redemption at the Option of Noteholders | If an Investor Put is specified in the Final Terms, the Relevant Issuer shall, at the option of the holder of any such Note, upon the holder of such Note giving not less than 15 nor more than 30 days’ notice to the Relevant Issuer (or such other notice period as may be specified in the Final Terms) redeem such Note on the Optional Redemption Date(s) at its Optional Redemption Amount together with interest accrued up to (and including) the date fixed for redemption, as more particularly set out in Condition 6(f) (Redemption at the Option of Noteholders). |
Denomination of Notes | Notes will be issued in such denominations as may be agreed between the Relevant Issuer and the relevant Dealer and as specified in the applicable Final Terms save that the minimum denomination of each Note admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive will be €100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency as at the date of issue of the Notes). |
Taxation | All payments in respect of the Notes will be made without withholding or deduction for or on account of withholding taxes imposed by the United Kingdom, unless such deduction or withholding is required by law. In the event that any such withholding or deduction is required by law, the Relevant Issuer will, save in certain limited circumstances provided in Condition 10 (Taxation), be required to pay additional amounts that result in receipt by the Noteholders and Couponholders of such amounts as would have been received by them had no such withholding or deduction been required. |
Negative Pledge and Restriction on Distribution of Dividends | The terms of the Notes will contain a negative pledge provision and a restriction on the distribution of dividends as further described in Condition 4 (Negative Pledge and Restriction on Distribution of Dividends). |
Cross Acceleration | The terms of the Notes will contain a cross acceleration provision which applies in respect of each Relevant Issuer (and not in respect of the other Issuers’ obligations) as further described in Condition 12 (Events of Default). |
Status of the Notes | The Notes will constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 3 (Status)) unsecured obligations of the Relevant Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Relevant Issuer, from time to time outstanding. |
Ratings | Tranches of Notes may be rated or unrated. Where a Tranche of Notes is rated, the rating assigned to such Tranche will be specified in the applicable Final Terms. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Where Ratings Downgrade Rate Adjustment is specified as being applicable in the Final Terms, the Rate of Interest applicable to the Notes may be subject to adjustment upon a downgrading of the rating of the Notes as more fully described in the “Terms and Conditions of the Notes”. |
Whether or not each credit rating applied for in relation to the relevant Tranches of Notes has been issued by a credit rating agency established in the European Union and registered under the CRA Regulation will be disclosed in the Final Terms. | |
Listing and admission to trading | Application has been made to the UK Listing Authority for Notes issued under the Programme to be admitted to the Official List and to admit the Notes to trading on the Regulated Market. Notes may be listed or admitted to trading, as the case may be, on other or further stock exchanges or markets agreed between the Relevant Issuer and the relevant Dealer in relation to the Series. |
Notes which are neither listed nor admitted to trading may also be issued. The UK Listing Authority has neither approved nor reviewed information contained in this Prospectus in connection with such Exempt Notes. | |
Governing Law | The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by English law. |
Selling Restrictions | There are restrictions on the distribution of this Prospectus and the offer or sale of Notes in the United States and the European Economic Area (including the United Kingdom), and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see “Subscription and Sale”. |
(i) | have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Prospectus or any applicable supplement; |
(ii) | have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio; |
(iii) | have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes; |
(iv) | understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant markets; and |
(v) | be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. |
(a) | the market price of such Notes may be volatile; |
(b) | they may receive no interest; |
(c) | payment of principal or interest may occur at a different time or in a different currency than expected; |
(d) | they may lose all or a substantial portion of their principal; |
(e) | a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices; |
(f) | if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and |
(g) | the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield. |
(a) | The directors’ report, the independent auditors report and financial statements set out at pages 23 to 64 of the annual report and financial statements of WPDE for the year ended 31 March 2016 (the WPDE 2016 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPDE 2016 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPDE 2016 Annual Report may be read in isolation with regard to the financial position of WPDE; |
(b) | The directors’ report, the independent auditors’ report and financial statements set out at pages 26 to 60 of the annual report and financial statements of WPDE for the year ended 31 March 2017 (the WPDE 2017 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPDE 2017 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPDE 2017 Annual Report may be read in isolation with regard to the financial position of WPDE; |
(c) | The directors’ report, the independent auditors report and financial statements set out at pages 24 to 67 of the annual report and financial statements of WPDW for the year ended 31 March 2016 (the WPDW 2016 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPDW 2016 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPDW 2016 Annual Report may be read in isolation with regard to the financial position of WPDW; |
(d) | The directors’ report, the independent auditors’ report and financial statements set out at pages 24 to 58 of the annual report and financial statements of WPDW for the year ended 31 March 2017 (the WPDW 2017 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPDW 2017 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPDW 2017 Annual Report may be read in isolation with regard to the financial position of WPDW; |
(e) | The directors’ report, the independent auditors report and financial statements set out at pages 23 to 65 of the annual report and financial statements of WPD South West for the year ended 31 March 2016 (the WPD South West 2016 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPD South West 2016 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPD South West 2016 Annual Report may be read in isolation with regard to the financial position of WPD South West; |
(f) | The directors’ report, the independent auditors’ report and financial statements set out at pages 24 to 59 of the annual report and financial statements of WPD South West for the year ended 31 March 2017 (the WPD South West 2017 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPD South West 2017 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPD South West 2017 Annual Report may be read in isolation with regard to the financial position of WPD South West; |
(g) | The directors’ report, the independent auditors report and financial statements set out at pages 23 to 69 of the annual report and financial statements of WPD South Wales for the year ended 31 March 2016 (the WPD South Wales 2016 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPD South Wales 2016 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPD South Wales 2016 Annual Report may be read in isolation with regard to the financial position of WPD South Wales; |
(h) | The directors’ report, the independent auditors’ report and financial statements set out at pages 24 to 63 of the annual report and financial statements of WPD South Wales for the year ended 31 March 2017 (the WPD South Wales 2017 Annual Report). For the avoidance of doubt, the statement contained on the cover page of the WPD South Wales 2017 Annual Report may be disregarded as irrelevant for the purposes of investors and the WPD South Wales 2017 Annual Report may be read in isolation with regard to the financial position of WPD South Wales; |
(i) | The Terms and Conditions set out on pages 39 to 73 of the prospectus dated 27 April 2011 and issued by WPDE and WPDW; |
(j) | The Terms and Conditions set out on pages 52 to 86 of the prospectus dated 10 September 2013 and issued by WPDE, WPDW, WPD Southwest and WPD South Wales; |
(k) | The Terms and Conditions set out on pages 49 to 83 of the prospectus dated 14 April 2015 and issued by WPDE, WPDW, WPD Southwest and WPD South Wales; and |
(l) | The Terms and Conditions set out on pages 52 to 87 of the prospectus dated 9 September 2016 and issued by WPDE, WPDW, WPD Southwest and WPD South Wales. |
1 | Issue of Notes |
2 | Relationship of accountholders with Clearing Systems |
3 | Exchange |
3.1 | Temporary Global Notes |
3.2 | Permanent Global Notes |
3.3 | Exchange for Definitive Notes |
3.4 | Global Certificates |
(i) | if the relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or |
(ii) | if principal in respect of any Notes is not paid when due; or |
(iii) | with the consent of the Relevant Issuer, |
3.5 | Delivery of Notes |
4 | Amendment to Conditions |
4.1 | Payment |
4.2 | Prescription |
4.3 | Meetings |
4.4 | Cancellation |
4.5 | Purchase |
4.6 | Issuer’s Option |
4.7 | Noteholder’s Option |
4.8 | Trustee’s Powers |
4.9 | Notices |
1 Issuer: | [Western Power Distribution (East Midlands) plc/ Western Power Distribution (West Midlands) plc/Western Power Distribution (South West) plc/Western Power Distribution (South Wales) plc] | |
2 (i) Series Number: | [l] | |
(ii) Tranche Number: | [l] | |
(iii) Date on which the Notes will be consolidated and form a single Series | [The Notes will be consolidated and form a single Series with [l] on [the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph 25 below[, which is expected to occur on or about [l]]][Not Applicable] | |
3 Specified Currency or Currencies: | [l] | |
4 Aggregate Nominal Amount: | ||
(i) Series: | [l] | |
(ii) Tranche: | [l] | |
5 (i) Issue Price of Tranche: | [l] per cent. of the Aggregate Nominal Amount [plus accrued interest from [l]] | |
6 (i) Specified Denominations: | [●][[€/£100,000/$200,000] and integral multiples of [€/£/$1,000] in excess thereof up to and including [€/£199,000/$399,000]. No Notes in definitive form will be issued with a denomination of integral multiples above [€/£199,000/$399,000].] | |
(ii) Calculation Amount: (Applicable to Notes in definitive form) | [l] | |
7 (i) Issue Date: | [l] | |
(ii) Interest Commencement Date: | [●] [Issue Date] [Not Applicable] | |
8 Maturity Date: | [l] | |
9 Interest Basis: | [[l] per cent. Fixed Rate] | |
[[LIBOR/EURIBOR] +/- [l] per cent. Floating Rate] | ||
[Zero Coupon] | ||
[Index Linked Interest] | ||
[(further particulars specified below)] | ||
10 Redemption Basis: | Subject to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at [l] per cent. of their nominal amount | |
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes may be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply) | ||
11 Change of Interest Basis or Redemption/ Payment Basis: | [●] [Not Applicable] | |
12 Put/Call Options: | [Investor Put] | |
[Restructuring Put Option] |
[Issuer Call] | ||
[(further particulars specified in paragraph[s] [20]/[21]/[22] below)] | ||
[Not Applicable] | ||
13 [Date approval by Committee of the Board of Directors for issuance of Notes obtained:] | [l] | |
Provisions Relating to Interest (if any) Payable | ||
14 Fixed Rate Note Provisions | [Applicable/Not Applicable] | |
(i) Rate[(s)] of Interest: | [l] per cent. per annum [payable [annually/semi-annually/ quarterly/other (specify)] in arrear] | |
(ii) Interest Payment Date(s): | [l] in each year up to and including the Maturity Date/[l] | |
(iii) Fixed Coupon Amount[(s)]: (Applicable to Notes in definitive form) | [l] per Calculation Amount | |
(iv) Broken Amount(s): (Applicable to Notes in definitive form) | [[l] per Calculation Amount, payable on the Interest Payment Date falling on [l]/Not Applicable] | |
(v) Day Count Fraction: | [Actual/Actual (ISDA)] / [Actual/Actual] | |
[Actual/365 (Fixed)] | ||
[Actual/365 (Sterling)] | ||
[Actual/360] | ||
[30/360] / [360/360] / [Bond Basis] | ||
[30E/360] / [Eurobond Basis] | ||
[Actual/Actual ICMA] | ||
[30E/360 (ISDA)] | ||
(vi) Determination Date(s): | [l] in each year | |
15 Floating Rate Note Provisions | [Applicable/Not Applicable] | |
(i) Specified Period(s) | [l] | |
(ii) Specified Interest Payment Dates: | [●] in each year[, subject to adjustment in accordance with the Business Day Convention set out in paragraph (iv) below] | |
(iii) First Interest Payment Date | [●] | |
(iv) Business Day Convention: | [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] | |
(v) Additional Business Centre(s): | [l] | |
(vi) Manner in which the Rate of Interest and Interest Amount is to be determined: | [Screen Rate Determination/ISDA Determination] | |
(vii) Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent): | [l] | |
(viii) Screen Rate Determination: | [Applicable/Not Applicable] | |
- Reference Rate: | [l] month [LIBOR/EURIBOR] | |
- Interest Determination Date(s): | [l] | |
- Relevant Screen Page: | [l] |
- Relevant Time: | [l] | |
(ix) ISDA Determination: | [Applicable/Not Applicable] | |
- Floating Rate Option: | [l] | |
- Designated Maturity: | [l] | |
- Reset Date: | [l] | |
- | (In the case of a LIBOR or EURIBOR based option, the first day of the Interest Period) | |
(x) Linear Interpolation | [Not Applicable/Applicable – the Rate of interest for the [long/short] [first/last] Interest Period shall be calculated using Linear Interpolation (specify for each short or long interest period)] | |
(xi) Margin(s): | [+/-] [l] per cent. per annum | |
(xii) Minimum Rate of Interest: | [l] per cent. per annum | |
(xiii) Maximum Rate of Interest: | [l] per cent. per annum | |
(xiv) Day Count Fraction: | [Actual/Actual (ISDA)] / [Actual/Actual] | |
[Actual/365 (Fixed)] | ||
[Actual/365 (Sterling)] | ||
[Actual/360] | ||
[30/360] / [360/360] / [Bond Basis] | ||
[30E/360] / [Eurobond Basis] | ||
[Actual/Actual ICMA] | ||
[30E/360 (ISDA)] | ||
16 Zero Coupon Note Provisions | [Applicable/Not Applicable] | |
(i) Accrual Yield: | [l] per cent. per annum | |
(ii) Reference Price: | [l] | |
(iii) Day Count Fraction in relation to Early Redemption Amounts and late payment: | [Condition 6(b) (Early Redemption:) applies] | |
[Actual/Actual (ISDA)] / [Actual/Actual] | ||
[Actual/365 (Fixed)] | ||
[Actual/365 (Sterling)] | ||
[Actual/360] | ||
[30/360] / [360/360] / [Bond Basis] | ||
[30E/360] / [Eurobond Basis] | ||
[Actual/Actual ICMA] | ||
[30E/360 (ISDA)] | ||
17 Index Linked Interest Note Provisions | [Applicable/Not Applicable] | |
(i) Rate of Interest: | [Fixed, calculated in accordance with paragraph 14 above][Floating, calculated in accordance with paragraph 15 above] | |
(ii) Minimum Indexation Factor: | [Not Applicable][●] | |
(iii) Maximum Indexation Factor: | [Not Applicable][●] | |
(iv) Base Index Figure: | [●] | |
(v) Limited Indexation Month(s): | [●]/[Not Applicable] | |
(vi) Reference Gilt: | [l] per cent. Index-Linked Treasury Stock due [l] | |
(vii) Index Figure applicable | [3][8] months lag | |
18 Ratings Downgrade Rate Adjustment | [Applicable/Not Applicable] | |
Provisions Relating to Redemption |
19 Index Linked Redemption Provisions | [Applicable/Not Applicable] | |
(i) Minimum Indexation Factor: | [Not Applicable][●] | |
(ii) Maximum Indexation Factor: | [Not Applicable][●] | |
(iii) Base Index Figure: | [●] | |
(iv) Reference Gilt: | [l] per cent. Index-Linked Treasury Stock due [l] | |
(v) Index Figure applicable | [3][8] months lag | |
(vi) Redeemable in part: | [Applicable/Not Applicable] | |
(1) Minimum Redemption Amount: | [l] | |
(2) Maximum Redemption Amount: | [l] | |
20 Issuer Call | [Applicable/Not Applicable] | |
(i) Optional Redemption Date(s): | [l] | |
(ii) Optional Redemption Amount(s) | [[l] per Calculation Amount] | |
(iii) Redeemable in part: | [Applicable/Not Applicable] | |
(1) Minimum Redemption Amount: | [l] | |
(2) Maximum Redemption Amount: | [l] | |
21 Investor Put | [Applicable (Condition [6(f) (Redemption at the Option of Noteholders) applies]/Not Applicable] | |
(i) Optional Redemption Date(s): | [[l] | |
(ii) Notice Period: | [l]/[Refer to Condition 6(f) (Redemption at the Option of Noteholders)] | |
(iii) Optional Redemption Amount(s): | [[l] per Calculation Amount ] | |
22 [Restructuring Put Option | [Applicable [6(g) (Redemption at the Option of the Noteholders on a Restructuring Event) applies]/Not Applicable] | |
(i) Optional Redemption Amount(s): | [[l] per Calculation Amount] | |
23 Final Redemption Amount: | [[l] per Calculation Amount] | |
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes may be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.) | ||
24 Early Redemption Amount payable on redemption for taxation reasons or on event of default | [[l] per Calculation Amount] (N.B. If the Final Redemption Amount is 100 per cent. of the nominal value (i.e. par), the Early Redemption Amount is likely to be par (but consider). If, however, the Final Redemption Amount is other than 100 per cent. of the nominal value, consideration should be given as to what the Early Redemption Amount should be.) | |
General Provisions Applicable to the Notes |
25 Form of Notes: | [Bearer/Registered] | |
(i) if issued in Bearer form: | [Temporary Global Note exchangeable for a permanent Global Note which is exchangeable for Definitive Notes in the limited circumstances specified in the permanent Global Note.] | |
[Temporary Global Note exchangeable for Definitive Notes on [l] days’ notice.] | ||
[Permanent Global Note exchangeable for Definitive Notes in the limited circumstances specified in the permanent Global Note.] | ||
(ii) if issued in registered form: | [Global Certificate registered in the name of a nominee for [a common depositary for Euroclear and Clearstream, Luxembourg/a common safekeeper for Euroclear and Clearstream, Luxembourg (that is, held under the NSS) exchangeable for Certificates on [l] days’ notice in the circumstances specified in the Global Certificate] | |
New Global Note/NSS: | [Yes] [No] | |
26 Additional Financial Centre(s) or other special provisions relating to payment dates: | [Not Applicable/[l]] | |
27 Talons for future Coupons to be attached to Definitive Notes: | [Yes, as the Notes have more than 27 coupon payments, Talons may be required if, on exchange into definitive form, more than 27 coupon payments are still to be made]/[No] |
1 Listing and Admission to Trading | ||||
(i) Listing and admission to trading: | [Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on the London Stock Exchange’s regulated market and listing on the Official List of the UK Listing Authority with effect from [●].] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on the London Stock Exchange’s regulated market and listing on the Official List of the UK Listing Authority and this is expected to be effective from [●].] [Not Applicable]/[l] | |||
(ii) Estimate of total expenses related to admission to trading: | [l] | |||
2 Ratings | ||||
Ratings: | The Notes to be issued [have been] [are expected to be] rated: | |||
[l] by [l] | ||||
[The Notes to be issued have not been rated.] | ||||
3 Interests of Natural and Legal Persons Involved in the Issue | ||||
[Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer.]/[l] | ||||
4 Reasons for the Offer, Estimated Net Proceeds and Total Expenses | ||||
(i) [Reasons for the offer | [l] | |||
(ii) Estimated net proceeds: | [l] | |||
(iii) Estimated total expenses: | [l] | |||
5 [Yield (Fixed Rate Notes only)] | ||||
Indication of yield: | [l] | |||
6 Operational Information | ||||
(i) ISIN Code: | [l] | |||
(ii) Common Code: | [l] | |||
(iii) Any clearing system(s) other than Euroclear Bank SA/NV and Clearstream Banking S.A. and the relevant identification number(s): | [Not Applicable/[l] | |||
(iv) Delivery: | Delivery [against/free of] payment | |||
(v) Names and addresses of additional Paying Agent(s) (if any): | [l] |
(vi) [Intended to be held in a manner which would allow Eurosystem eligibility: | [Yes. Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the international central securities depositories (ICSD) as common safekeeper [, and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is, held under the NSS,] and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon the European Central Bank (the ECB) being satisfied that Eurosystem eligibility criteria have been met.]/[No. Whilst the designation is specified as "no" at the date of these Final Terms, should the Eurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them the Notes may then be deposited with one of the ICSDs as common safekeeper [, and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is, held under the NSS]. Note that this does not necessarily mean that the Notes will then be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem at any time during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]] | |||
7 Distribution | ||||
(i) Method of distribution: | [Syndicated/Non-syndicated] | |||
(ii) If syndicated, names and addresses of Managers): | [Not Applicable/give names, addresses] | |||
(Include names and addresses of entities agreeing to underwrite the issue on a firm commitment basis and names and addresses of the entities agreeing to place the issue without a firm commitment or on a "best efforts" basis if such entities are not the same as the Managers.) | ||||
(iii) Date of Dealer Agreement: | [ ] | |||
(iv) Stabilisation Manager(s) (if any): | [Not Applicable/give name] | |||
(v) If non-syndicated, name and address of relevant Dealer: | [Not Applicable/give name and address] | |||
(vi) U.S. Selling Restrictions: | [Reg. S Compliance Category [1/2/3]; TEFRA D/TEFRA C/TEFRA not applicable] | |||
(vii) Prohibition of Sales to EEA Retail Investors: | [Applicable/Not Applicable] | |||
(N.B. If the offer of the Notes is concluded prior to 1 January 2018, or on and after that date the Notes clearly do not constitute “packaged” products, “Not Applicable” should be specified. If the offer of the Notes will be concluded on or after 1 January 2018 and the Notes may constitute “packaged” products and no KID will be prepared, “Applicable” should be specified.) |
1 Issuer: | [Western Power Distribution (East Midlands) plc/ Western Power Distribution (West Midlands) plc/Western Power Distribution (South West) plc/Western Power Distribution (South Wales) plc] | ||
2 (i) Series Number: | [l] | ||
(ii) Tranche Number: | [l] |
(iii) Date on which the Notes will be consolidated and form a single Series | [The Notes will be consolidated and form a single Series with [l] on [the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph 26 below[, which is expected to occur on or about [l]]][Not Applicable] | ||
3 Specified Currency or Currencies: | [l] | ||
4 Aggregate Nominal Amount: | |||
(i) Series: | [l] | ||
(ii) Tranche: | [l] | ||
5 (i) Issue Price of Tranche: | [l] per cent. of the Aggregate Nominal Amount [plus accrued interest from [l]] | ||
6 (i) Specified Denominations: | [●][[€/£100,000/$200,000] and integral multiples of [€/£/$1,000] in excess thereof up to and including [€/£199,000/$399,000]. No Notes in definitive form will be issued with a denomination of integral multiples above [€/£199,000/$399,000].] | ||
(ii) Calculation Amount: (Applicable to Notes in definitive form) | [l] | ||
7 (i) Issue Date: | [l] | ||
(ii) Interest Commencement Date: | [●] [Issue Date] [Not Applicable] | ||
8 Maturity Date: | [l] | ||
9 Interest Basis: | [[l] per cent. Fixed Rate] | ||
[[LIBOR/EURIBOR/[l]] +/- [l] per cent. Floating Rate] | |||
[Zero Coupon] | |||
[Index Linked Interest] | |||
[(further particulars specified below)] | |||
10 Redemption Basis: | [Redemption at par] | ||
[Index Linked Redemption] | |||
[l] | |||
11 Change of Interest Basis or Redemption/ Payment Basis: | [●] [Not Applicable] | ||
12 Put/Call Options: | [Investor Put] | ||
[Restructuring Put Option] | |||
[Issuer Call] | |||
[(further particulars specified below)] | |||
13 Status of the Notes: | Senior | ||
14 [Date approval by Committee of the Board of Directors for issuance of Notes obtained:] | [l] | ||
Provisions Relating to Interest (if any) Payable | |||
15 Fixed Rate Note Provisions | [Applicable/Not Applicable] | ||
(i) Rate[(s)] of Interest: | [l] per cent. per annum [payable [annually/semi-annually/ quarterly/other (specify)] in arrear] | ||
(ii) Interest Payment Date(s): | [l] in each year up to and including the Maturity Date/[l] |
(iii) Fixed Coupon Amount[(s)]: (Applicable to Notes in definitive form) | [l] per Calculation Amount | ||
(iv) Broken Amount(s): (Applicable to Notes in definitive form) | [[l] per Calculation Amount, payable on the Interest Payment Date falling on [l]/Not Applicable] | ||
(v) Day Count Fraction: | [Actual/Actual (ISDA)] / [Actual/Actual] | ||
[Actual/365 (Fixed)] | |||
[Actual/365 (Sterling)] | |||
[Actual/360] | |||
[30/360] / [360/360] / [Bond Basis] | |||
[30E/360] / [Eurobond Basis] | |||
[Actual/Actual ICMA] | |||
[30E/360 (ISDA)] | |||
(vi) Determination Date(s): | [l] in each year | ||
16 Floating Rate Note Provisions | [Applicable/Not Applicable] | ||
(i) Specified Period(s) | [l] | ||
(ii) Specified Interest Payment Dates: | [●] in each year[, subject to adjustment in accordance with the Business Day Convention set out in paragraph (iv) below] | ||
(iii) First Interest Payment Date | [●] | ||
(iv) Business Day Convention: | [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] | ||
(v) Additional Business Centre(s): | [l] | ||
(vi) Manner in which the Rate of Interest and Interest Amount is to be determined: | [Screen Rate Determination/ISDA Determination] | ||
(vii) Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent): | [l] | ||
(viii) Screen Rate Determination: | [Applicable/Not Applicable] | ||
- Reference Rate: | [l] month [LIBOR/EURIBOR/[l]] | ||
- Interest Determination Date(s): | [l] | ||
- Relevant Screen Page: | [l] | ||
- Relevant Time: | [l] | ||
(ix) ISDA Determination: | [Applicable/Not Applicable] | ||
- Floating Rate Option: | [l] | ||
- Designated Maturity: | [l] | ||
- Reset Date: | [l] | ||
- | (In the case of a LIBOR or EURIBOR based option, the first day of the Interest Period) | ||
(x) Linear Interpolation | [Not Applicable/Applicable – the Rate of interest for the [long/short] [first/last] Interest Period shall be calculated using Linear Interpolation (specify for each short or long interest period)] | ||
(xi) Margin(s): | [+/-] [l] per cent. per annum | ||
(xii) Minimum Rate of Interest: | [l] per cent. per annum | ||
(xiii) Maximum Rate of Interest: | [l] per cent. per annum |
(xiv) Day Count Fraction: | [Actual/Actual (ISDA)] / [Actual/Actual] | ||
[Actual/365 (Fixed)] | |||
[Actual/365 (Sterling)] | |||
[Actual/360] | |||
[30/360] / [360/360] / [Bond Basis] | |||
[30E/360] / [Eurobond Basis] | |||
[Actual/Actual ICMA] | |||
[30E/360 (ISDA)] | |||
17 Zero Coupon Note Provisions | [Applicable/Not Applicable] | ||
(i) Accrual Yield: | [l] per cent. Per annum | ||
(ii) Reference Price: | [l] | ||
(iii) Any other formulas/basis of determining amount payable for Zero Coupon Notes which are Exempt Notes | [l] | ||
(iv) Day Count Fraction in relation to Early Redemption Amounts: | [Condition 6(b) (Early Redemption:) applies] | ||
[Actual/Actual (ISDA)] / [Actual/Actual] | |||
[Actual/365 (Fixed)] | |||
[Actual/365 (Sterling)] | |||
[Actual/360] | |||
[30/360] / [360/360] / [Bond Basis] | |||
[30E/360] / [Eurobond Basis] | |||
[Actual/Actual ICMA] | |||
[30E/360 (ISDA)] | |||
18 Index Linked Interest Note Provisions | [Applicable/Not Applicable] | ||
(i) Index/Formula: | UK Retail Price Index | ||
(ii) Rate of Interest: | [Fixed, calculated in accordance with paragraph 15 above][Floating, calculated in accordance with paragraph 16 above] | ||
(iii) Minimum Indexation Factor: | [Not Applicable][●] | ||
(iv) Maximum Indexation Factor: | [Not Applicable][●] | ||
(v) Base Index Figure: | [●] | ||
(vi) Limited Indexation Month(s): | [●]/[Not Applicable] | ||
(vii) Reference Gilt: | [l] per cent. Index-Linked Treasury Stock due [l] | ||
(viii) Index Figure applicable | [3][8] months lag | ||
19 Ratings Downgrade Rate Adjustment | [Applicable/Not Applicable] | ||
Provisions Relating to Redemption | |||
20 Index Linked Redemption Provisions | [Applicable/Not Applicable] | ||
(i) Index/Formula: | UK Retail Price Index | ||
(ii) Minimum Indexation Factor: | [Not Applicable][●] | ||
(iii) Maximum Indexation Factor: | [Not Applicable][●] | ||
(iv) Base Index Figure: | [●] | ||
(v) Reference Gilt: | [l] per cent. Index-Linked Treasury Stock due [l] | ||
(vi) Index Figure applicable | [3][8] months lag | ||
(vii) Redeemable in part: | [Applicable/Not Applicable] |
(1) Minimum Redemption Amount: | [l] | ||
(2) Maximum Redemption Amount: | [l] | ||
21 Issuer Call | [Applicable/Not Applicable] | ||
(i) Optional Redemption Date(s): | [l] | ||
(ii) Optional Redemption Amount(s): | [[l] per Calculation Amount] | ||
(iii) Redeemable in part: | [Applicable/Not Applicable] | ||
(iv) Minimum Redemption Amount: | [l] | ||
(v) Maximum Redemption Amount: | [l] | ||
22 Investor Put | [Applicable (Condition [6(f) (Redemption at the Option of Noteholders)]applies]/Not Applicable] | ||
(i) Optional Redemption Date(s): | [[l] | ||
(ii) Notice Period: | [l]/[Refer to Condition 6(f) (Redemption at the Option of Noteholders)] | ||
(iii) Optional Redemption Amount(s): | [[l] per Calculation Amount ] | ||
23 [Restructuring Put Option] | [Applicable [6(g) (Redemption at the Option of the Noteholders on a Restructuring Event) applies]/Not Applicable] | ||
(i) Optional Redemption Date(s): | [On the Put Date (as specified in the relevant Put Event Notice) (where Condition (6(g) (Redemption at the Option of the Noteholders on a Restructuring Event))] | ||
(ii) Notice Period: | [l] (in accordance with Condition 18 (Notices)) | ||
(iii) Optional Redemption Amount(s): | [[l] per Calculation Amount ] | ||
24 Final Redemption Amount: | [[l] per Calculation Amount] | ||
25 Early Redemption Amount payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if required): | [[l] per Calculation Amount] | ||
General Provisions Applicable to the Notes | |||
26 Form of Notes: | [Bearer/Registered] | ||
(i) if issued in Bearer form: | [Temporary Global Note exchangeable for a permanent Global Note which is exchangeable for Definitive Notes in the limited circumstances specified in the permanent Global Note.] | ||
[Temporary Global Note exchangeable for Definitive Notes on [l] days’ notice.] | |||
[Permanent Global Note exchangeable for Definitive Notes in the limited circumstances specified in the permanent Global Note.] |
(ii) if issued in registered form: | [Global Certificate registered in the name of a nominee for [a common depositary for Euroclear and Clearstream, Luxembourg/a common safekeeper for Euroclear and Clearstream, Luxembourg (that is, held under the NSS) exchangeable for Certificates on [l] days’ notice in the circumstances specified in the Global Certificate] | ||
New Global Note/NSS: | [Yes] [No] | ||
27 Additional Financial Centre(s) or other special provisions relating to payment dates: | [Not Applicable/[l]] | ||
28 Talons for future Coupons to be attached to Definitive Notes: | [Yes, as the Notes have more than 27 coupon payments, Talons may be required if, on exchange into definitive form, more than 27 coupon payments are still to be made]/[No] | ||
29 Other terms or special conditions: | [Not Applicable/give details] |
1 Listing and Admission to Trading | ||
(i) Listing and admission to trading: | [Not Applicable]/[l] | |
(ii) Estimate of total expenses related to admission to trading: | [l] | |
2 Ratings | ||
Ratings: | The Notes to be issued [have been] [are expected to be] rated: | |
[l] by [l] | ||
[The Notes to be issued have not been rated.] | ||
3 Interests of Natural and Legal Persons Involved in the Issue | ||
[Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer.]/[l] | ||
4 Reasons for the Offer, Estimated Net Proceeds and Total Expenses | ||
[Reasons for the offer | [l] | |
Estimated net proceeds: | [l] | |
Estimated total expenses: | [l] | |
5 [Yield (Fixed Rate Notes only)] | ||
Indication of yield: | [l] | |
6 [Performance of Index and Other Information Concerning the Underlying (Indexed Notes only) | ||
(i) Name of underlying index: | U.K. Retail Price Index (RPI) (all items) published by the Office of National Statistics | |
(ii) Information about the Index, its volatility and past and future performance can be obtained from: | Information on RPI can be found at www.statistics.gov.uk | |
7 Operational Information | ||
(i) ISIN Code: | [l] | |
(ii) Common Code: | [l] | |
(iii) Any clearing system(s) other than Euroclear Bank SA/NV and Clearstream Banking S.A. and the relevant identification number(s): | [Not Applicable/[l] | |
(iv) Delivery: | Delivery [against/free of] payment | |
(v) Names and addresses of additional Paying Agent(s) (if any): | [l] |
(vi) Intended to be held in a manner which would allow Eurosystem eligibility: | [Yes] [No] [Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper[, and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is, held under the NSS,] and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.] [Note that whilst the designation is specified as "no" at the date of this Pricing Supplement, should the Eurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them the Notes may then be deposited with one of the ICSDs as common safekeeper[, and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is, held under the NSS]. Note that this does not necessarily mean that the Notes will then be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem at any time during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.] | |
8 Distribution | ||
(i) Method of distribution: | [Syndicated/Non-syndicated] | |
(ii) If syndicated, names of Managers | [Not Applicable/[l] | |
(iii) Date of Subscription Agreement | [Not Applicable/[l] | |
(iv) Stabilisation Manager(s) (if any) | [Not Applicable/[l] | |
(v) If non-syndicated, name of relevant Dealer: | [l] | |
(vi) U.S. Selling Restrictions | [Reg. S Compliance Category 2; TEFRA D/TEFRA C/TEFRA not applicable] | |
(vii) Prohibition of Sales to EEA Retail Investors: | [Applicable/Not Applicable] | |
(N.B. If the offer of the Notes is concluded prior to 1 January 2018, or on and after that date the Notes clearly do not constitute “packaged” products, “Not Applicable” should be specified. If the offer of the Notes will be concluded on or after 1 January 2018 and the Notes may constitute “packaged” products and no KID will be prepared, “Applicable” should be specified.) |
1. | Form, Denomination and Title |
2. | No Exchange of Notes and Transfers of Registered Notes |
(a) | No Exchange of Notes: Registered Notes may not be exchanged for Bearer Notes. Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination. Bearer Notes may not be exchanged for Registered Notes. |
(b) | Transfer of Registered Notes: One or more Registered Notes may be transferred upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate representing such Registered Notes to be transferred, together with the form of transfer endorsed on such Certificate, (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Relevant Issuer), duly completed and executed and any other evidence as the Registrar or Transfer Agent may reasonably require. In the case of a transfer of part only of a holding of Registered Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfers of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuers, with the prior written approval of the Registrar and the Note Trustee. A copy of the current regulations will be made available by the Registrar to any Noteholder upon request. |
(c) | Exercise of Options or Partial Redemption in Respect of Registered Notes: In the case of an exercise of a Relevant Issuer’s or Noteholders’ option in respect of, or a partial redemption of, a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Registered Notes of the same holding having different terms, separate Certificates shall be issued in respect of those Notes of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. |
(d) | Delivery of New Certificates: Each new Certificate to be issued pursuant to Conditions 2(b) (Transfer of Registered Notes) or (c) (Exercise of Options or Partial Redemption in Respect of Registered Notes) shall be available for delivery within three business days of receipt of the form of transfer or Exercise Notice (as defined in Condition 6(f) (Redemption at the Option of Noteholders)) and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer, Exercise Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer, Exercise Notice or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent the costs of such other method of delivery and/or such insurance as it may |
(e) | Transfers Free of Charge: Transfers of Notes and Certificates on registration, transfer, exercise of an option or partial redemption shall be effected without charge by or on behalf of the Relevant Issuer, the Registrar or the Transfer Agents, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require). |
(f) | Closed Periods: No Noteholder may require the transfer of a Registered Note to be registered (i) during the period of 15 days ending on the due date for redemption of that Note, (ii) during the period of 15 days prior to any date on which Notes may be called for redemption by the Relevant Issuer at its option pursuant to Condition 6(e) (Redemption at the Option of the Relevant Issuer), (iii) after any such Note has been called for redemption or (iv) during the period of seven days ending on (and including) any Record Date. |
3. | Status |
4. | Negative Pledge and Restriction on Distribution of Dividends |
(a) | Negative Pledge: So long as any Note or Coupon remains outstanding (as defined in the Trust Deed), the Relevant Issuer will ensure that no Relevant Indebtedness (as defined below) of the Relevant Issuer and no guarantee by the Relevant Issuer of any Relevant Indebtedness of any person will be secured by a mortgage, charge, lien, pledge or other security interest (each a Security Interest) upon, or with respect to, any of the present or future business, undertaking, assets or revenues (including any uncalled capital) of the Relevant Issuer unless the Relevant Issuer, before or at the same time as the creation of the Security Interest, takes any and all action necessary to ensure that: |
(i) | all amounts payable by the Relevant Issuer under the Notes, the Coupons and the Trust Deed are secured equally and rateably with the Relevant Indebtedness or guarantee, as the case may be, by the same Security Interest, in each case to the satisfaction of the Note Trustee; or |
(ii) | such other Security Interest or guarantee or other arrangement (whether or not including the giving of a Security Interest) is provided in respect of all amounts payable by the Relevant Issuer under the Notes, the Coupons and the Trust Deed either (A) as the Note Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Noteholders or (B) as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders. |
(b) | Restriction on distribution of dividends: So long as any Note or Coupon remains outstanding (as defined in the Trust Deed), the Relevant Issuer shall not at any time declare or make a distribution (as defined in Section 1000 of the Corporation Tax Act 2010) or grant a loan or any other credit facility to |
(c) | Definitions: In this Condition: |
(i) | amounts credited to current accounts or deposits and certificates of deposit (with a term not exceeding three months) at, or issued by, any bank, building society or other financial institution; |
(ii) | cash in hand; |
(iii) | the lower of book and market value (calculated, where relevant, by reference to their bid price) of gilts issued by the United Kingdom Government; and |
(iv) | subordinated intra-group items, loans from Affiliates (as defined in Condition 7 below) and shareholder loans, |
(i) | any present or future indebtedness (whether being principal, premium, interest or other amounts) in the form of or represented by bonds, notes, debentures, debenture stock, loan stock or other securities, whether issued for cash or in whole or in part for a consideration other than cash, and which are or are capable of being quoted, listed or ordinarily dealt in on any stock exchange or recognised over-the-counter or other securities market; |
(ii) | monies borrowed or raised from, or any acceptance credit opened by, a bank, building society or other financial institution; and |
(iii) | any leasing or hire purchase agreement which would be treated as a finance lease in the accounts of the relevant person. |
5. | Interest and other Calculations |
(a) | Interest on Fixed Rate Notes: Each Fixed Rate Note bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The amount of interest payable shall be determined in accordance with Condition 5(f) (Calculations). |
(b) | Interest on Floating Rate Notes: |
(i) | Interest Payment Dates: Each Floating Rate Note bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The amount of interest payable shall be determined in accordance with Condition 5(f) (Calculations). Such Interest Payment Date(s) is/are either shown in the Final Terms as Specified Interest Payment Dates or, if no Specified Interest Payment Date(s) is/are shown in the Final Terms, Interest Payment Date shall mean each date which falls the number of months or other period shown in the Final Terms as the Interest Period after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. |
(ii) | Business Day Convention: If any date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a Business Day, then, if the Business Day Convention specified is (A) the Floating Rate Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event (x) such date shall be brought forward to the immediately preceding Business Day and (y) each subsequent such date shall be the last Business Day of the month in which such date would have fallen had it not been subject to adjustment, (B) the Following Business Day Convention, such date shall be postponed to the next day that is a Business Day, (C) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding Business Day or (D) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding Business Day. |
(iii) | Rate of Interest for Floating Rate Notes: The Rate of Interest in respect of Floating Rate Notes for each Interest Accrual Period shall be determined in the manner specified in the Final Terms and the provisions below relating to either ISDA Determination or Screen Rate Determination shall apply, depending upon which is specified in the Final Terms. |
(A) | ISDA Determination for Floating Rate Notes |
(x) | the Floating Rate Option is as specified in the relevant Final Terms |
(y) | the Designated Maturity is a period specified in the relevant Final Terms and |
(z) | the relevant Reset Date is the first day of that Interest Accrual Period unless otherwise specified in the relevant Final Terms. |
(B) | Screen Rate Determination for Floating Rate Notes |
(x) | Where Screen Rate Determination is specified in the Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period will, subject as provided below, be either: |
(1) | the offered quotation; or |
(2) | the arithmetic mean of the offered quotations, |
(y) | if the Relevant Screen Page is not available, or if sub-paragraph (x)(1) applies and no such offered quotation appears on the Relevant Screen Page or if sub paragraph (x)(2) above applies and fewer than three such offered quotations appear on the Relevant Screen Page in each case as at the time specified above, subject as provided below, the Calculation Agent shall request, if the Reference Rate is LIBOR, the principal London office of each of the Reference Banks or, if the Reference Rate is EURIBOR, the principal Euro-zone office of each of the Reference Banks, to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time), |
(z) | if paragraph (y) above applies and the Calculation Agent determines that fewer than two Reference Banks are providing offered quotations, subject as provided below, the Rate of Interest shall be the arithmetic mean of the rates per annum (expressed as a percentage) as communicated to (and at the request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such banks were offered, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, or, if fewer than two of the Reference Banks provide the Calculation Agent with such offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Note Trustee and the Relevant Issuer suitable for such purpose) informs the Calculation Agent it is quoting to leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin or Maximum or Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period, in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period). |
(c) | Zero Coupon Notes: Where a Note the Interest Basis of which is specified to be zero coupon is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the Early Redemption Amount of such Note. As from the Maturity Date, the Rate of Interest for any overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as described in Condition 6(b)(i) (Early Redemption:). |
(d) | Accrual of Interest: Interest shall cease to accrue on each Note on the due date for redemption unless, upon due presentation, payment is improperly withheld or refused, in which event interest shall continue |
(e) | Margin, Maximum/Minimum Rates of Interest, Redemption Amounts and Rounding: |
(i) | If any Margin is specified in the Final Terms (either (x) generally, or (y) in relation to one or more Interest Accrual Periods), an adjustment shall be made to all Rates of Interest, in the case of (x), or the Rates of Interest for the specified Interest Accrual Periods, in the case of (y), calculated in accordance with Condition 5(b) (Interest on Floating Rate Notes) above by adding (if a positive number) or subtracting the absolute value (if a negative number) of such Margin, subject always to the next paragraph. |
(ii) | If any Maximum or Minimum Rate of Interest or Redemption Amount is specified in the Final Terms, then any Rate of Interest or Redemption Amount shall be subject to such maximum or minimum, as the case may be. |
(iii) | For the purposes of any calculations required pursuant to these Conditions (unless otherwise specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with halves being rounded up), (y) all figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all currency amounts that fall due and payable shall be rounded to the nearest unit of such currency (with halves being rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these purposes unit means the lowest amount of such currency that is available as legal tender in the countries of such currency. |
(f) | Calculations: The amount of interest payable per Calculation Amount in respect of any Note for any Interest Accrual Period shall be equal to the product of the Rate of Interest, the Calculation Amount specified in the Final Terms, and the Day Count Fraction for such Interest Accrual Period, unless an Interest Amount (or a formula for its calculation) is applicable to such Interest Accrual Period, in which case the amount of interest payable per Calculation Amount in respect of such Note for such Interest Accrual Period shall equal such Interest Amount (or be calculated in accordance with such formula). Where any Interest Period comprises two or more Interest Accrual Periods, the amount of interest payable per Calculation Amount in respect of such Interest Period shall be the sum of the Interest Amounts payable in respect of each of those Interest Accrual Periods. In respect of any other period for which interest is required to be calculated, the provisions above shall apply save that the Day Count Fraction shall be for the period for which interest is required to be calculated. |
(g) | Determination and Publication of Rates of Interest, Interest Amounts, Final Redemption Amounts, Early Redemption Amounts and Optional Redemption Amounts: The Calculation Agent shall, as soon as practicable on each Interest Determination Date, or such other time on such date as the Calculation Agent may be required to calculate any rate or amount, obtain any quotation or make any determination or calculation, determine such rate and calculate the Interest Amounts in respect of each denomination of the Notes for the relevant Interest Accrual Period, Interest Period or Interest Payment Date calculate the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, obtain such quotation and/or make such determination or calculation, as the case may be, and cause the Rate of Interest and the Interest Amounts for each Interest Accrual Period, Interest Period or Interest Payment Date and, if required, the relevant Interest Payment Date and, if required to be calculated, the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount to be notified to the Note Trustee, the Relevant Issuer, each of the Paying Agents, the Noteholders, any other Calculation Agent appointed in respect of the Notes that is to make a further calculation upon receipt of such information and, if the Notes are listed on a stock exchange and the |
(h) | Linear Interpolation: Where “Linear Interpolation” is specified as applicable in respect of an Interest Period in the applicable Final Terms, the Rate of Interest for such Interest Period shall be calculated by the Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified as applicable in the applicable Final Terms) or the relevant Floating Rate Option (where ISDA Determination is specified as applicable in the applicable Final Terms), one of which shall be determined as if the Designated Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period and the other of which shall be determined as if the Designated Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period provided however that if there is no rate available for a period of time next shorter or, as the case may be, next longer, then the Agent shall determine such rate at such time and by reference to such sources as it determines appropriate. |
(i) | Determination or Calculation by Note Trustee: If the Calculation Agent does not at any time for any reason determine or calculate the Rate of Interest for an Interest Accrual Period or any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, or take any action that it is required to do pursuant to these Conditions, the Calculation Agent shall forthwith notify the Relevant Issuer, the Note Trustee and the Issuing and Paying Agent and the Note Trustee (whether or not it receives such notice) shall do so (or shall appoint an agent on its behalf to do so) and such determination or calculation shall be deemed to have been made by the Calculation Agent. In doing so, the Note Trustee shall apply the foregoing provisions of this Condition, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects it shall do so in such manner as it shall deem fair and reasonable in all the circumstances. |
(j) | Definitions: In these Conditions, unless the context otherwise requires, the following defined terms shall have the meanings set out below: |
(i) | in the case of a currency other than euro, a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments in the principal financial centre for such currency and in each (if any) Business Centre; and/or |
(ii) | in the case of euro, a day on which the TARGET System is operating (a TARGET Business Day) and a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in each (if any) Business Centre. |
(i) | if Actual/Actual or Actual/Actual (ISDA) is specified in the Final Terms, the actual number of days in the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365) |
(ii) | if Actual/365 (Fixed) is specified in the Final Terms, the actual number of days in the Calculation Period divided by 365 |
(iii) | if Actual/365 (Sterling) is specified in the Final Terms, the actual number of days in the Calculation Period divided by 365 or, in the case of an Interest Period Date falling in a leap year, 366 |
(iv) | if Actual/360 is specified in the Final Terms, the actual number of days in the Calculation Period divided by 360 |
(v) | if 30/360, 360/360 or Bond Basis is specified in the Final Terms, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows: |
Day Count Fraction = | [360 x (Y2 - Y1)] + [30 x (M2 - M1) + (D2 - D1)] | |
360 |
(vi) | if 30E/360 or Eurobond Basis is specified in the Final Terms, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows: |
Day Count Fraction = | [360 x (Y2 - Y1)] + [30 x (M2 - M1) + (D2 - D1)] | |
360 |
(vii) | if 30E/360 (ISDA) is specified in the Final Terms, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows: |
Day Count Fraction = | [360 x (Y2 - Y1)] + [30 x (M2 - M1) + (D2 - D1)] | |
360 |
(viii) | if Actual/Actual-ICMA is specified in the Final Terms, |
(a) | if the Calculation Period is equal to or shorter than the Determination Period during which it falls, the number of days in the Calculation Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Periods normally ending in any year; and |
(b) | if the Calculation Period is longer than one Determination Period, the sum of: |
(x) | the number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Periods normally ending in any year; and |
(y) | the number of days in such Calculation Period falling in the next Determination Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Periods normally ending in any year |
(i) | in respect of an Interest Accrual Period, the amount of interest payable per Calculation Amount for that Interest Accrual Period and which, in the case of Fixed Rate Notes, and unless otherwise specified in the Final Terms, shall mean the Fixed Coupon Amount or Broken Amount specified in the Final Terms as being payable on the Interest Payment Date ending the Interest Period of which such Interest Accrual Period forms part; and |
(ii) | in respect of any other period, the amount of interest payable per Calculation Amount for that period. |
(k) | Calculation Agent: The Relevant Issuer shall procure that there shall at all times be one or more Calculation Agents if provision is made for them in the Final Terms and for so long as any Note is outstanding (as defined in the Trust Deed). Where more than one Calculation Agent is appointed in respect of the Notes, references in these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its respective duties under the Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Rate of Interest for an Interest Accrual Period or to calculate any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, or to comply with any other requirement, the Relevant Issuer shall (with the prior approval of the Note Trustee) appoint a leading bank or financial institution engaged in the interbank market (or, if appropriate, money, swap or over-the-counter index options market) that is most closely connected with the calculation or determination to be made by the Calculation Agent (acting through its principal London office or any other office actively involved in such market) to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as aforesaid. |
(l) | Adjustment to Rate of Interest: If, in respect of a Tranche of Notes, Ratings Downgrade Rate Adjustment is specified in the relevant Final Terms as being applicable, the Rate of Interest specified in the Final Terms (the Initial Rate of Interest) and payable on the Notes will be subject to adjustment from time to time in the event of a Rating Change or Rating Changes, within the period from and including the Issue Date of such Tranche of Notes to and including the date falling 18 months from such Issue Date (the Rating Change Period, with the final date of such Rating Change Period being the Rating Change Period End Date), which adjustment shall be determined as follows. |
(i) | the lowest Rating then assigned to the Notes is A- or A3 or higher, then (unless there is a subsequent Rating Change within the Rating Change Period) from and including the first Interest Payment Date following the Rating Change, the rate of interest payable on the Notes shall be the Initial Rate of Interest; |
(ii) | the lowest Rating then assigned to the Notes is BBB+ or Baa1, then (unless there is a subsequent Rating Change within the Rating Change Period) from and including the first Interest Payment Date following the Rating Change, the rate of interest payable on the Notes shall be the Initial Rate of Interest plus 0.25 per cent. per annum; |
(iii) | the lowest Rating then assigned to the Notes is BBB or Baa2, then (unless there is a subsequent Rating Change within the Rating Change Period) from and including the first Interest Payment Date following the Rating Change, the rate of interest payable on the Notes shall be the Initial Rate of Interest plus 0.50 per cent. per annum; or |
(iv) | the lowest Rating then assigned to the Notes is BBB- or Baa3 or lower, or if such Ratings are withdrawn by both of Moody’s Investor Services Limited and Standard & Poor's Credit Market Services Europe Limited, then (unless there is a subsequent Rating Change within the Rating Change Period) from and including the first Interest Payment Date following the Rating Change the rate of interest payable on the Notes shall be the Initial Rate of Interest plus 0.75 per cent. per annum |
6. | Redemption, Purchase and Options |
(a) | Final Redemption: |
(b) | Early Redemption: |
(i) | Zero Coupon Notes: |
(A) | The Early Redemption Amount payable in respect of any Zero Coupon Note, the Early Redemption Amount of which is not linked to an index and/or a formula, upon redemption of such Note pursuant to Condition 6(c) (Redemption for Taxation Reasons) or upon it becoming due and payable as provided in Condition 12 (Events of Default) shall be the Amortised Face Amount (calculated as provided below) of such Note unless otherwise specified in the Final Terms. |
(B) | Subject to the provisions of sub-paragraph (C) below, the Amortised Face Amount of any such Note shall be the scheduled Final Redemption Amount of such Note on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is shown in the Final Terms, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their issue price on the Issue Date) compounded annually. |
(C) | If the Early Redemption Amount payable in respect of any such Note upon its redemption pursuant to Condition 6(c) (Redemption for Taxation Reasons) or upon it becoming due and payable as provided in Condition 12 (Events of Default) is not paid when due, the Early Redemption Amount due and payable in respect of such Note shall be the Amortised Face Amount of such Note as defined in sub-paragraph (B) above, except that such sub-paragraph shall have effect as though the date on which the Note becomes due and payable were the Relevant Date. The calculation of the Amortised Face Amount in accordance with this subparagraph shall continue to be made (both before and after judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Final Redemption Amount of such Note on the Maturity Date together with any interest that may accrue in accordance with Condition 5(c) (Zero Coupon Notes). |
(ii) | Other Notes: The Early Redemption Amount payable in respect of any Note (other than Notes described in (i) above), upon redemption of such Note pursuant to Condition 6(c) (Redemption for Taxation Reasons) or upon it becoming due and payable as provided in Condition 12 (Events of Default), shall be the Final Redemption Amount unless otherwise specified in the Final Terms. |
(c) | Redemption for Taxation Reasons: The Notes may be redeemed at the option of the Relevant Issuer in whole, but not in part, on any Interest Payment Date (if this Note is either a Floating Rate Note or an Indexed Note) or at any time (if this Note is neither a Floating Rate Note nor an Indexed Note), on |
(d) | Redemption for Indexation Reasons: Upon the occurrence of any Index Event (as defined below), the Relevant Issuer may, upon giving not less than 30 nor more than 60 days’ notice to the Note Trustee and the holders of the Indexed Notes in accordance with Condition 18 (Notices), redeem all (but not some only) of the Indexed Notes of all Tranches on any Interest Payment Date at the Principal Amount Outstanding (adjusted in accordance with Condition 7(a) (Application of the Index Ratio)) plus accrued but unpaid interest. No single Tranche of Indexed Notes may be redeemed in these circumstances unless all the other Tranches of Indexed Notes linked to the same underlying Index are also redeemed at the same time. Before giving any such notice, the Relevant Issuer shall provide to the Note Trustee a certificate signed by two directors of the Relevant Issuer (a) stating that the Relevant Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Relevant Issuer so to redeem have occurred and (b) confirming that the Relevant Issuer will have sufficient funds on such Interest Payment Date to effect such redemption. The Note Trustee shall be entitled to rely on such certificate without liability to any person. |
(e) | Redemption at the Option of the Relevant Issuer: If Call Option is specified in the Final Terms, the Relevant Issuer may, on giving not less than 15 nor more than 30 days’ irrevocable notice to the Note |
(f) | Redemption at the Option of Noteholders: If Investor Put is specified in the Final Terms, the Relevant Issuer shall, at the option of the holder of any such Note, upon the holder of such Note giving not less than 15 nor more than 30 days’ notice to the Relevant Issuer (or such other notice period as may be specified in the Final Terms) redeem such Note on the Optional Redemption Date(s) (specified in the Final Terms) at its Optional Redemption Amount (specified in the Final Terms) together with interest accrued up to (and including) the date fixed for redemption. |
(g) | Redemption at the Option of the Noteholders on a Restructuring Event |
(i) | If Restructuring Put Option is specified in the Final Terms (and for the avoidance of doubt, the Investor Put is also specified in the Final Terms), and: |
(a) | if, at any time while any of the Notes remains outstanding, a Restructuring Event (as defined below) occurs and prior to the commencement of or during the Restructuring Period (as defined below): |
(A) | an independent financial adviser (as described below) shall have certified in writing to the Note Trustee that such Restructuring Event will not be or is not, in its opinion, materially prejudicial to the interests of the Noteholders; or |
(B) | if there are Rated Securities (as defined below), each Rating Agency (as defined below) that at such time has assigned a current rating to the Rated Securities confirms in writing to the Relevant Issuer at its request (which it shall make as set out below) that it will not be withdrawing or reducing the then current rating assigned to the Rated Securities by it from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Bal, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall have already rated the Rated Securities below investment grade (as described above), the rating will not be lowered by one full rating category or more, in each case as a result, in whole or in part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event, |
(b) | if, at any time while any of the Notes remains outstanding, a Restructuring Event occurs and (subject to Condition 6(g)(i)(a) (Redemption at the Option of the Noteholders on a Restructuring Event): |
(A) | within the Restructuring Period, either: |
(i) | if at the time such Restructuring Event occurs there are Rated Securities, a Rating Downgrade (as defined below) in respect of such Restructuring Event also occurs; or |
(ii) | if at such time there are no Rated Securities, a Negative Rating Event (as defined below) in respect of such Restructuring Event also occurs; and |
(B) | an independent financial adviser shall have certified in writing to the Note Trustee that such Restructuring Event is, in its opinion, materially prejudicial to the interests of the Noteholders (a Negative Certification), |
(ii) | Promptly upon the Relevant Issuer becoming aware that a Put Event (as defined below) has occurred, and in any event not later than 14 days after the occurrence of a Put Event, the Relevant Issuer shall, and at any time upon the Note Trustee if so requested by the holders of at least one-quarter in nominal amount of the Notes then outstanding shall, give notice (a Put Event Notice) to the Noteholders in accordance with Condition 18 (Notices) specifying the nature of the Put Event and the procedure for exercising the Restructuring Put Option. |
(iii) | To exercise the Restructuring Put Option, the holder of a Note must comply with the provisions of Condition 6(f) (Redemption at the Option of Noteholders). The applicable notice period for the purposes of Condition 6(f) (Redemption at the Option of Noteholders), as applied to a Restructuring Put Option, shall be the period (the Put Period) of 45 days after that on which a Put Event Notice is given. Subject to the relevant Noteholder having complied with Condition 6(f) (Redemption at the Option of Noteholders), the Relevant Issuer shall redeem or, at the option of that Relevant Issuer, purchase (or procure the purchase of) the relevant Note on the fifteenth day after the date of expiry of the Put Period (the Put Date) unless previously redeemed or purchased. |
(iv) | For the purposes of these Conditions: |
(a) | Distribution Services Area means, in respect of a Relevant Issuer, the area specified as such in the distribution licence granted to it on 1 October 2001 under section 6(l)(c) of the Electricity Act 1989 (as amended by section 30 of the Utilities Act 2000), as of the date of such distribution licence. |
(b) | A Negative Rating Event shall be deemed to have occurred if (1) a Relevant Issuer does not, either prior to or not later than 14 days after the date of the relevant Restructuring Event, seek, and thereupon use all reasonable endeavours to obtain, a rating of the Notes or any other unsecured and unsubordinated debt of that Relevant Issuer having an initial maturity of five years or more from a Rating Agency or (2) if it does so seek and use such endeavours, it is unable, as a result of such Restructuring Event, to obtain such a rating of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being). |
(c) | A Put Event occurs on the date of the last to occur of (1) a Restructuring Event, (2) either a Rating Downgrade or, as the case may be, a Negative Rating Event and (3) the relevant Negative Certification. |
(d) | Rating Agency means Standard & Poor’s Credit Market Services Europe Limited or any of its subsidiaries and their successors (Standard & Poor’s) or Moody’s Investors Service Limited or any of its subsidiaries and their successors (Moody’s) or any rating agency substituted for any of them (or any permitted substitute of them) by the Relevant Issuer from time to time with the prior written approval of the Note Trustee. |
(e) | A Rating Downgrade shall be deemed to have occurred in respect of a Restructuring Event if the then current rating assigned to the Rated Securities by any Rating Agency (whether provided by a Rating Agency at the invitation of the Relevant Issuer or by its own volition) is withdrawn or reduced from an investment grade rating (BBB-/Baa3), or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Bal), or their respective equivalents for the time being, or worse) or, if the Rating Agency shall then have already rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category or more. |
(f) | Rated Securities means the Notes, if at any time and for so long as they have a rating from a Rating Agency, and otherwise any other unsecured and unsubordinated debt of a Relevant Issuer having an initial maturity of five years or more which is rated by a Rating Agency. |
(g) | Restructuring Event means the occurrence of any one or more of the following events: |
(A ) (i) | the Secretary of State for Business, Innovation and Skills (or any successor) giving the Relevant Issuer written notice of any revocation of its Distribution Licence; or |
(ii) | the Relevant Issuer agreeing in writing with the Secretary of State for Business, Innovation and Skills (or any successor) to any revocation or surrender of its Distribution Licence; or |
(iii) | any legislation (whether primary or subordinate) being enacted which terminates or revokes the Distribution Licence of the Relevant Issuer; |
(B) | any modification (other than a modification which is of a formal, minor or technical nature) being made to the terms and conditions upon which a Relevant Issuer is authorised and empowered under relevant legislation to distribute electricity in the Distribution Services Area unless two directors of such Issuer have certified in good faith to the Note Trustee that the modified terms and conditions are not materially less favourable to the business of that Relevant Issuer; |
(C) | any legislation (whether primary or subordinate) is enacted which removes, qualifies or amends (other than an amendment which is of a formal, minor or technical nature) the duties of the Secretary of State for Business, Innovation and Skills (or any successor) and/or the Gas and Electricity Markets Authority (or any successor) under section 3A of the Electricity Act 1989 (as amended by the Utilities Act 2000) (as this may be amended from time to time) unless two directors of such Relevant Issuer have certified in good faith to the Note Trustee that such removal, qualification or amendment does not have a materially adverse effect on the financial condition of that Relevant Issuer. |
(h) | Restructuring Period means: |
(A) | if at the time a Restructuring Event occurs there are Rated Securities, the period of 90 days starting from and including the day on which that Restructuring Event occurs; or |
(B) | if at the time a Restructuring Event occurs there are no Rated Securities, the period starting from and including the day on which that Restructuring Event occurs and ending on the day 90 days following the later of (aa) the date (if any) on which the Relevant Issuer shall seek to obtain a rating as contemplated by the definition of Negative Rating Event; (bb) the expiry of the 14 days referred to in the definition of Negative Rating Event and (cc) the date on which a Negative Certification shall have been given to the Note Trustee in respect of that Restructuring Event. |
(i) | A Rating Downgrade or a Negative Rating Event or a non-investment grade rating shall be deemed not to have occurred as a result or in respect of a Restructuring Event if the Rating Agency making the relevant reduction in rating or, where applicable, refusal to assign a rating of at least investment grade as provided in this Condition 6(g) (Redemption at the Option of the Noteholders on a Restructuring Event), does not announce or publicly confirm or inform the Relevant Issuer in writing at its request (which it shall make as set out in the following paragraph) that the reduction or, where applicable, declining to assign a rating of at least investment grade, was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event. |
(h) | Purchases: The Relevant Issuer may at any time purchase Notes (provided that all unmatured Coupons and unexchanged Talons relating thereto are attached thereto or surrendered therewith) in the open market or otherwise at any price. |
(i) | Cancellation: All Notes purchased by or on behalf of the Relevant Issuer or its Subsidiaries may be surrendered for cancellation, in the case of Bearer Notes, by surrendering each such Note together with all unmatured Coupons and all unexchanged Talons to the Issuing and Paying Agent and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Registrar and, in |
7. | Indexation |
(a) | Application of the Index Ratio |
(b) | Changes in Circumstances Affecting the Index |
(i) | Change in base: If at any time and from time to time the Index is changed by the substitution of a new base therefore, then with effect from the calendar month from and including that in which such substitution takes effect (1) the definition of “Index” and “Index Figure” in Condition 8 (Definitions) shall be deemed to refer to the new date or month in substitution for January 1987 (or, as the case may be, to such other date or month as may have been substituted therefore); and (2) the new Base Index Figure shall be the product of the existing Base Index Figure and the Index Figure immediately following such substitution, divided by the Index Figure immediately prior to such substitution. |
(ii) | Delay in publication of Index: If the Index Figure relating to any month (the relevant month) which is required to be taken account for the purposes of the determination of the Index Figure applicable for any date is not published on or before the fourteenth business day before the date on which any payment of interest or principal on the Notes is due (the date for payment), the Index Figure relating to the relevant month shall be (1) such substitute index figure (if any) as an Indexation Adviser considers to have been published by the Bank of England or, as the case may be, the United Kingdom Debt Management Office (or such other designated debt manager of Her Majesty’s Treasury, from time to time) for the purposes of indexation of payments on the Reference Gilt or, failing such publication, on any one or more issues of index-linked Treasury Stock selected by the Indexation Adviser (and approved by the Note Trustee); or (1) if no such determination is made by such Indexation Adviser within 7 days, the Index Figure last published (or, if later, the substitute index figure last determined pursuant to Condition 7(b)(i) (Change in base)) before the date for payment. |
(c) | Application of Changes |
(i) | in relation to a payment of principal or interest in respect of such Note other than upon final redemption of such Note, the principal or interest (as the case may be) next payable after the date of such subsequent publication shall be increased or reduced by an amount equal to (respectively) the shortfall or excess of the amount of the relevant payment made on the basis of the Index Figure applicable by virtue of Condition 7(b)(ii)(2), below or above the amount of the relevant payment that would have been due if the Index Figure subsequently published had been published on or before the fourteenth Business Day before the date for payment; and |
(ii) | in relation to a payment of principal or interest upon final redemption, no subsequent adjustment to amounts paid will be made. |
(d) | Cessation of or Fundamental Changes to the Index |
(i) | If (1) the Note Trustee has been notified by the Agent Bank (or the Calculation Agent, if applicable) that the Index has ceased to be published; or (2) the Note Trustee has been notified by the Agent Bank (or the Calculation Agent, if applicable) when any change is made to the coverage or the basic calculation of the Index which constitutes a fundamental change which would, in the opinion of the Note Trustee acting solely on the advice of an Indexation Adviser, be materially prejudicial to the interests of the Noteholders, the Note Trustee will give written notice of such occurrence to the Relevant Issuer, and the Relevant Issuer and the Note Trustee together shall seek to agree for the purpose of the Notes one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Relevant Issuer and the Noteholders in no better and no worse position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made. |
(ii) | If the Relevant Issuer and the Note Trustee fail to reach agreement as mentioned above within 20 Business Days following the giving of notice as mentioned in paragraph (i), a bank or other person in London shall be appointed by the Relevant Issuer and the Note Trustee or, failing agreement on and the making of such appointment within 20 Business Days following the expiry of the day period referred to above, by the Note Trustee (in each case, such bank or other person so appointed being referred to as the Expert), to determine for the purpose of the Notes one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Relevant Issuer and the Noteholders in no better and no worse position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made. Any Expert so appointed shall act as an expert and not as an arbitrator and all fees, costs and expenses of the Expert and of any Indexation Adviser and of any of the Relevant Issuer and the Note Trustee in connection with such appointment shall be borne by the Relevant Issuer. |
(iii) | The Index shall be adjusted or replaced by a substitute index as agreed by the Relevant Issuer and the Note Trustee or as determined by the Expert pursuant to the foregoing paragraphs, as the case may be, and references in these Conditions to the Index and to any Index Figure shall |
8. | Definitions |
(i) | the amount paid up or credited as paid up on the share capital of the Relevant Issuer; and |
(ii) | the total of the capital, revaluation and revenue reserves of the Group (as defined below), including any share premium account, capital redemption reserve and credit balance on the profit and loss account, but excluding sums set aside for taxation and amounts attributable to outside shareholders in Subsidiary Undertakings (as defined below) and deducting any debit balance on the profit and loss account, |
IFA = RPI m3+ | (Day of Calculation Date 1) | (RPI m2+RPIm3) |
(Days in Month of Calculation Date) |
9. | Payments and Talons |
(a) | Bearer Notes: Payments of principal and interest in respect of Bearer Notes shall, subject as mentioned below, be made against presentation and surrender of the relevant Notes (in the case of all other payments of principal and, in the case of interest, as specified in Condition 9(f)(v) (Unmatured Coupons and unexchanged Talons)) or Coupons (in the case of interest, save as specified in Condition 9(f)(ii) (Unmatured Coupons and unexchanged Talons)), as the case may be, at the specified office of any Paying Agent outside the United States by a cheque payable in the relevant currency drawn on, or, at the option of the holder, by transfer to an account denominated in such currency with, a Bank. Bank means a bank in the principal financial centre for such currency or, in the case of euro, in a city in which banks have access to the TARGET System. |
(b) | Registered Notes: |
(i) | Payments of principal in respect of Registered Notes shall be made against presentation and surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in paragraph (ii) below. |
(ii) | Interest on Registered Notes shall be paid to the person shown on the Register at the close of business on the day before the due date for payment thereof (the Record Date). Payments of interest on each Registered Note shall be made in the relevant currency by cheque drawn on a |
(c) | Payments in the United States: Notwithstanding the foregoing, if any Bearer Notes are denominated in U.S. dollars, payments in respect thereof may be made at the specified office of any Paying Agent in New York City in the same manner as aforesaid if (i) the Relevant Issuer shall have appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment of the amounts on the Notes in the manner provided above when due, (ii) payment in full of such amounts at all such offices is illegal or effectively precluded by exchange controls or other similar restrictions on payment or receipt of such amounts and (iii) such payment is then permitted by United States law, without involving, in the opinion of the Relevant Issuer, any adverse tax consequence to the Relevant Issuer. |
(d) | Payments subject to Fiscal Laws: All payments are subject in all cases (i) to any applicable fiscal or other laws, regulations and directives in the place of payment, but without prejudice to the provisions of Condition 10 (Taxation) and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to Condition 10 (Taxation)) any law implementing an intergovernmental approach thereto. No commission or expenses shall be charged to the Noteholders or Couponholders in respect of such payments. |
(e) | Appointment of Agents: The Issuing and Paying Agent, the Paying Agents, the Registrar, the Transfer Agents and the Calculation Agent initially appointed by the Issuers are listed in the Agency Agreement. The Issuing and Paying Agent, the Paying Agents, the Registrar, the Transfer Agents and the Calculation Agent act solely as agents of the Issuers and do not assume any obligation or relationship of agency or trust for or with any Noteholder or Couponholder. The Issuers reserve the right at any time with the approval of the Note Trustee to vary or terminate the appointment of the Issuing and Paying Agent, any other Paying Agent, the Registrar, any Transfer Agent or the Calculation Agent(s) and to appoint additional or other Paying Agents or Transfer Agents, provided that the Issuers shall at all times maintain (i) an Issuing and Paying Agent, (ii) a Registrar in relation to Registered Notes, (iii) a Transfer Agent in relation to Registered Notes, (iv) one or more Calculation Agent(s) where the Conditions so require, (v) Paying Agents having specified offices in at least two major European cities, and (vi) such other agents as may be required by any other stock exchange on which the Notes may be listed in each case, as approved by the Note Trustee. |
(f) | Unmatured Coupons and unexchanged Talons: |
(i) | Upon the due date for redemption of Bearer Notes which comprise Fixed Rate Notes (other than Indexed Notes), such Notes should be surrendered for payment together with all unmatured Coupons (if any) relating thereto, failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon that the sum of principal so paid bears to the total principal due) shall be deducted from the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, due for payment. Any amount so deducted shall be paid in the manner mentioned above against surrender of such missing |
(ii) | Upon the due date for redemption of any Bearer Note comprising a Floating Rate Note or Indexed Notes, unmatured Coupons relating to such Note (whether or not attached) shall become void and no payment shall be made in respect of them. |
(iii) | Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon. |
(iv) | Where any Bearer Note that provides that the relative unmatured Coupons are to become void upon the due date for redemption of those Notes is presented for redemption without all unmatured Coupons, and where any Bearer Note is presented for redemption without any unexchanged Talon relating to it, redemption shall be made only against the provision of such indemnity as the Relevant Issuer may require. |
(v) | If the due date for redemption of any Note is not a due date for payment of interest, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Bearer Note or Certificate representing it, as the case may be. Interest accrued on a Note that only bears interest after its Maturity Date shall be payable on redemption of such Note against presentation of the relevant Note or Certificate representing it, as the case may be. |
(g) | Talons: On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Bearer Note, the Talon forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and Paying Agent in exchange for a further Coupon sheet (and if necessary another Talon for a further Coupon sheet) (but excluding any Coupons that may have become void pursuant to Condition 11 (Prescription)). |
(h) | Non-Business Days: Subject as provided in the relevant Final Terms, if any date for payment in respect of any Note or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this paragraph, business day means a day (other than a Saturday or a Sunday) on which banks are open for presentation and payment of debt securities and for dealings in foreign currency in the relevant place of presentation in such jurisdiction as shall be specified as “Additional Financial Centre(s)” in the relevant Final Terms and (in the case of a payment in a currency other than euro), where payment is to be made by transfer to an account maintained with a bank in the relevant currency, on which dealings may be carried on in the relevant currency in the principal financial centre of the country of such currency and, in relation to any sum payable in euro, a day on which the TARGET System is open. |
10. | Taxation |
(a) | Other connection: to, or to a third party on behalf of, a holder who is liable for such taxes, duties, assessments or governmental charges in respect of such Note or Coupon by reason of his having some connection with the United Kingdom other than the mere holding of the Note or Coupon; or |
(b) | Lawful avoidance of withholding: to, or to a third party on behalf of, a holder who could lawfully avoid (but has not so avoided) such deduction or withholding by complying or procuring that any third party complies with any statutory requirements or by making or procuring that any third party makes a declaration of non-residence or other similar claim for exemption to any tax authority in the place where the relevant Note (or the Certificate representing it) or Coupon is presented for payment; or |
(c) | Presentation more than 30 days after the Relevant Date: presented or surrendered (or in respect of which the Certificate representing it is presented or surrendered) for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such additional amounts on presenting it for payment on the thirtieth day. |
11. | Prescription |
12. | Events of Default |
(i) | Non-Payment: if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 14 days in the case of principal and 21 days in the case of interest or, where relevant, the Relevant Issuer, having become obliged to redeem, purchase or procure the purchase of (as the case may be) any Notes pursuant to Condition 6 (Redemption, Purchase and Options) fails to do so within a period of 14 days of having become so obliged; or |
(ii) | Breach of Other Obligations: the Relevant Issuer does not perform, observe or comply with any one or more of its other obligations, covenants, conditions or provisions under the Notes or the Trust Deed and (except where the Note Trustee shall have certified to the Issuer in writing that it considers such failure to be incapable of remedy in which case no such notice or continuation as is hereinafter mentioned will be required) the failure continues for the period of 30 days (or such longer period as the Note Trustee may in its absolute discretion permit) next following the service by the Note Trustee on the Issuer of notice requiring the same to be remedied; or |
(iii) | Cross-Acceleration: if (A) any other indebtedness for borrowed money (as defined in Condition 4 (Negative Pledge and Restriction on Distribution of Dividends) but, for the purposes of this paragraph (iii), excluding Non-recourse Indebtedness) of the Relevant Issuer or any Principal Subsidiary becomes due and repayable prior to its stated maturity by reason of a default or (B) any such indebtedness for borrowed money is not paid when due or, as the case may be, within any applicable grace period (as originally provided) or (C) the Relevant Issuer or any Principal Subsidiary fails to pay when due (or, as the case may be, within any originally applicable grace period) any amount payable by it under any present or future guarantee for, or indemnity in respect of, any indebtedness for borrowed money of any person or (D) any security given by the Relevant Issuer or any Principal Subsidiary for any indebtedness for borrowed money of any person or any guarantee or indemnity of indebtedness for borrowed money of any person becomes enforceable by reason of default in relation thereto and steps are taken to enforce such security save in any such case where there is a bona fide dispute as to whether the relevant indebtedness for borrowed money or any such guarantee or indemnity as aforesaid shall be due and payable, provided that the aggregate amount of the relevant indebtedness for borrowed money in respect of which any one or more of the events mentioned above in this paragraph (iii) has or have occurred equals or exceeds whichever is the greater of £20,000,000 or its equivalent in other currencies (on the basis of the middle spot rate for the relevant currency against pounds sterling as quoted by any leading bank on the day on which this paragraph (iii) applies) and two per cent. of the Capital and Reserves; or |
(iv) | Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against any substantial part of the property, assets or revenues of the Relevant Issuer and is not discharged or stayed within 90 days; or |
(v) | Insolvency: the Relevant Issuer is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of its debts generally or a material part of a particular type of its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared or comes into effect in respect of or affecting its debts generally or any part of a particular type of the debts of the Relevant Issuer; or |
(vi) | Winding-up: (A) an administrator or liquidator is appointed in relation to the Relevant Issuer (and, in each case, not discharged within 90 days) or (B) an order is made or an effective resolution passed for the winding-up or dissolution or administration of the Relevant Issuer, or (C) the Relevant Issuer shall apply or petition for a winding-up or administration order in respect of itself or (D) the Relevant Issuer ceases or threatens to cease to carry on all or substantially all of its business or operations, in each case ((A) to (D) inclusive) except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by the Note Trustee or by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders; or |
(vii) | Nationalisation: any step is taken by any person with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all or a material part of the assets of the Relevant Issuer; or |
(viii) | Illegality: it is or will become unlawful for the Relevant Issuer to perform or comply with any one or more of its obligations under any of the Notes or the Trust Deed, |
(ix) | Definitions: in this Condition: |
(A) | which is a single purpose company whose principal assets and business are constituted by the ownership, acquisition, development and/or operation of an asset; |
(B) | none of whose indebtedness for borrowed money in respect of the financing of such ownership, acquisition, development and/or operation of an asset is subject to any recourse whatsoever to any member of the Group (other than another Excluded Subsidiary) in respect of the repayment thereof, except as expressly referred to in subparagraph (B)(II). of the definition of Non-recourse Indebtedness below; and |
(C) | which has been designated as such by the Relevant Issuer by written notice to the Note Trustee, provided that the Relevant Issuer may give written notice to the Note Trustee at any time that any Excluded Subsidiary is no longer an Excluded Subsidiary, whereupon it shall cease to be an Excluded Subsidiary. |
(A) | which is incurred by an Excluded Subsidiary; or |
(B) | in respect of which the person or persons to whom any such indebtedness for borrowed money is or may be owed by the relevant borrower (whether or not a member of the Group) has or have no recourse whatsoever to any member of the Group (other than an Excluded Subsidiary) for the repayment thereof other than: |
I. | recourse to such borrower for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from any specific asset or assets over or in respect of which security has been granted in respect of such indebtedness for borrowed money; and/or |
II. | recourse to such borrower for the purpose only of enabling amounts to be claimed in respect of such indebtedness for borrowed money in an enforcement of any encumbrance given by such borrower over any such asset or assets or the income, cash flow or other proceeds deriving therefrom (or given by any shareholder or the like in the borrower over its shares or the like in the capital of the borrower) to secure such indebtedness for borrowed money, provided that (aa) the extent of such recourse to such borrower is limited solely to the amount of any recoveries made on any such enforcement, and (bb) such person or persons is/are not entitled, by virtue of any right or claim arising out of or in connection with such indebtedness for borrowed money, to commence proceedings for the winding up or dissolution of the borrower or to appoint or procure the appointment of any receiver, trustee or similar person or officer in respect of the borrower or any of its assets (save for the assets the subject of such encumbrance); and/or |
III. | recourse to such borrower generally, or directly or indirectly to a member of the Group, under any form of assurance, undertaking or support, which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specified way) for breach of an obligation (not being a payment obligation or an obligation to procure payment by another or an indemnity in respect thereof or any obligation to comply or to procure compliance by another with any financial ratios or other tests of financial condition) by the person against whom such recourse is available. |
(A) | whose (a) profits on ordinary activities before tax or (b) gross assets, in each case attributable to the Relevant Issuer represent 20 per cent. or more of the consolidated profits on ordinary activities before tax of the Group or, as the case may be, consolidated gross assets of the Group, in each case as calculated by reference to the then latest audited financial statements of such Subsidiary (consolidated in the case of a company which itself has Subsidiaries) and the then latest audited consolidated financial statements of the Group provided that in the case of a Subsidiary acquired after the end of the financial period to which the then latest audited consolidated financial statements of the Group relate, the reference to the then latest audited consolidated financial statements of the Group for the purposes of the calculation above shall, until consolidated financial statements for the financial period in which the acquisition is made have been prepared and audited as aforesaid, be deemed to be a reference to such first-mentioned financial statements as if such Subsidiary had been shown in such financial statements by reference to its then latest relevant audited financial statements, adjusted as deemed appropriate by the Auditors; or |
(B) | to which is transferred all or substantially all of the business, undertaking and assets of a Subsidiary of the Relevant Issuer which immediately prior to such transfer is a Principal Subsidiary, whereupon the transferor Subsidiary shall cease to be a Principal Subsidiary and the transferee Subsidiary shall cease to be a Principal Subsidiary under the provisions of this sub-paragraph (B), upon publication of its next audited financial statements (but without prejudice to the provisions of sub-paragraph (A) above) but so that such transferor Subsidiary or such transferee Subsidiary may be a Principal Subsidiary of the Relevant Issuer on or at any time after the date on which such audited financial statements have been published by virtue |
13. | Meetings of Noteholders, Modification, Waiver and Substitution |
(a) | Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of Noteholders of one or more Series of Notes to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Trust Deed) of a modification of any of these Conditions or any provisions of the Trust Deed. Such a meeting may be convened by Noteholders holding not less than 10 per cent. in nominal amount of the affected Series of Notes for the time being outstanding. The quorum for any meeting convened to consider an Extraordinary Resolution shall be two or more persons holding or representing one more than 50 per cent. in nominal amount of the affected Series of Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the affected Series of Notes held or represented, unless the business of such meeting includes consideration of proposals, inter alia: |
(i) | to amend the dates of maturity or redemption of the Notes or any date for payment of interest or Interest Amounts on the Notes; |
(ii) | to reduce or cancel the nominal amount of, or any premium payable on redemption of, the Notes; |
(iii) | to reduce the rate or rates of interest in respect of the Notes or to vary the method or basis of calculating the rate or rates or amount of interest or the basis for calculating any Interest Amount in respect of the Notes; |
(iv) | if a Minimum and/or a Maximum Rate of Interest or Redemption Amount is shown in the Final Terms, to reduce any such Minimum and/or Maximum; |
(v) | to vary any method of, or basis for, calculating the Final Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount, including the method of calculating the Amortised Face Amount; |
(vi) | to vary the currency or currencies of payment or denomination of the Notes; |
(vii) | to sanction the exchange or substitution for the Notes of, or the conversion of the Notes into, shares, bonds or other obligations or securities of the Relevant Issuer, whether or not those rights arise under the Trust Deed; or |
(viii) | to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass the Extraordinary Resolution, |
(b) | Modification of the Trust Deed: The Note Trustee may agree, without the consent of the Noteholders or Couponholders, (i) to any modification of any of the provisions of the Trust Deed or the Notes, or Coupons or these Conditions that is of a formal, minor or technical nature or is made to correct a manifest error, and (ii) if in the opinion of the Note Trustee the interests of the Noteholders will not be materially prejudiced thereby, to any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach of any of the provisions of the Trust Deed or the Notes, or Coupons or these Conditions, or determine that any Event of Default shall not be treated as such. Any such modification, authorisation or waiver shall be binding on the Noteholders and the Couponholders and, if the Note Trustee so requires, such modification shall be notified to the Noteholders as soon as practicable. |
(c) | Substitution: The Note Trustee may agree, subject to the execution of a deed or undertaking supplemental to the Trust Deed in form and manner satisfactory to the Note Trustee and such other conditions as the Note Trustee may require, but without the consent of the Noteholders or the Couponholders, to the substitution of the Relevant Issuer’s successor in business in place of the Relevant Issuer or of any previous substituted company, as principal debtor under the Trust Deed and the Notes. In the case of such a substitution the Note Trustee may agree, without the consent of the Noteholders or the Couponholders, to a change of the law governing the Notes, the Coupons, the Talons and/or the Trust Deed provided that such change would not in the opinion of the Note Trustee be materially prejudicial to the interests of the Noteholders. |
(d) | Entitlement of the Note Trustee: In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Note Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders or Couponholders and the Note Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the Relevant Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders. |
(e) | Modifications |
14. | Enforcement |
15. | Indemnification of the Note Trustee |
16. | Replacement of Notes, Certificates, Coupons and Talons |
17. | Further Issues |
18. | Notices |
19. | Contracts (Rights of Third Parties) Act 1999 |
20. | Governing Law and Jurisdiction |
(a) | Governing Law: The Trust Deed, the Notes, the Coupons and the Talons and any non-contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with, English law. |
(b) | Jurisdiction: The Courts of England are to have jurisdiction to settle any disputes that may arise out of or in connection with any Notes, Coupons or Talons and accordingly any legal action or proceedings arising out of or in connection with any Notes, Coupons or Talons (Proceedings) may be brought in such courts. The Issuers have in the Trust Deed irrevocably submitted to the jurisdiction of such courts. |
• | A stable, well established transparent regulatory regime; |
• | Strong and predictable operating cash flow; |
• | No volume risk; |
• | Inflation linked earnings and asset base; |
• | Positive cash flow generation before financing; |
• | Industry leading delivery of Ofgem output targets; and |
• | Accurate forecasting and efficient delivery of investment programmes. |
(a) | availability: the number of customer minutes lost per connected customer (CML); and |
(b) | security: the number of supply interruptions (if greater than 3 minutes) recorded per 100 connected customers (CI). |
WPD South Wales | WPD South West | WPD East Midlands | WPD West Midlands | |||||
CI | CML | CI | CML | CI | CML | CI | CML | |
OFGEM IIS Target 2016/17 | 53.7 | 33.6 | 58.9 | 43.6 | 52.1 | 39.1 | 87.1 | 53.6 |
IIS Outturn 2016/17 | 41.6 | 25.7 | 52.5 | 39.7 | 44.9 | 22.0 | 59.0 | 32.0 |
% Out Performance | 22.5% | 23.5% | 10.9% | 8.9% | 13.8% | 43.7% | 32.3% | 40.3% |
All four entities are managed by a Board of Directors comprising the following individuals: | ||
Name | Position | Principal non-Group activities |
R A Symons | Chief Executive Officer | None |
D C S Oosthuizen | Finance Director | None |
I R Williams | Resources and External Affairs Director | None |
P Swift | Operations Director | None |
M E Fletcher | Sufficiently Independent Director* | None |
A J Cardew | Sufficiently Independent Director* | None |
(a) | a move to eight year price controls with mid-point reviews restricted to outputs and whether they remain appropriate; |
(b) | The RIIO-ED1 price control includes an Annual Iteration Process. This allows base revenues to be updated during the price control for financial adjustments covering tax, pension deficit payments and the cost of debt allowed to be recovered in revenues, adjustments relating to actual and allowed total expenditure (Totex) and the Totex Incentive Mechanism and legacy price control adjustments from preceding price control periods. Under the Annual Iteration Process, the financial model used to calculate base revenue is re-run using a series of revised input values. This process calculates an incremental change to base revenue, the "MOD" term, which is advised by 30th November preceding each regulatory year. |
(c) | more closely align regulatory and physical asset lives on new assets purchased after 2015. This resulted in a decision to extend the regulatory depreciation lives for new expenditure on assets installed after 1 April 2015 from 20 years to 45 years over the course of RIIO-ED1. |
(d) | the delivery of 76 different outputs to customers (both qualitative and quantitative) across the areas of safety, reliability, environment, connections, customer satisfaction and social obligations. |
(e) | the introduction of a proportionate treatment concept where the degree of scrutiny of licence holders' business plans for any forthcoming price control period is related to the quality of the business plan and records of previous performance, with the possibility of some companies achieving limited scrutiny and an early settlement decision (to be known as a "Fast Track" decision); and |
(f) | more clarity around the cost of capital and capitalisation policies at the beginning of the review period as well as recognising the role of equity in financing network businesses, together with a move to a rolling cost of debt allowance based on trailing averages of corporate bond indices. The allowed cost of equity for each of the Issuers is 6.4 per cent. As fast tracked companies, the cost of debt for the Issuers is calculated from a 10 year rolling average of real rates that will be determined from the arithmetical average of the iBoxx A-rated and BBB-rated non-financial indices (of eligible bonds greater than 10 years) less the implied 10-year gilt inflation break evens published daily by the Bank of England. For the year 2017/18, the cost of debt for the Issuers is set at 2.22 per cent. |
• | £81.85m per annum payable by the Midlands Issuers between 1 April 2016 to 31 March 2017, with £81.85m plus indexation in line with the increase in RPI over the year to February 2017 for the period from 1 April 2017 to 31 March 2018 payable in equal monthly instalments; plus |
• | £80m per annum for the period from 1 April 2018 to 31 March 2021 payable in equal monthly instalments; plus |
• | £48m per annum for the period from 1 April 2021 to 31 March 2026 payable in equal monthly instalments; plus |
• | £2.0m per annum for the period from 1 April 2017 to 31 March 2026 payable in equal monthly instalments, in relation to the expense loading in respect of non-active members. |
• | £86.966m payable by the WW Issuers between 1 April 2016 to 31 March 2017 payable in equal monthly instalments: plus |
• | £86.966m plus indexation in line with the increase in the RPI over the year to February 2017 for the period from 1 April 2017 to 31 March 2018 payable in equal monthly instalments; plus |
• | £86.6m per annum for the period from 1 April 2018 to 31 March 2021 payable in equal monthly instalments; plus |
• | £20.9m per annum for the period from 1 April 2021 to 31 March 2026 payable in equal monthly instalments; plus |
• | £1.4m per annum for the period from 1 April 2017 to 31 March 2026 payable in equal monthly instalments, in relation to the expense loading in respect of non-active members. |
• | £1,364,173 per month payable by the WW Issuers between 1 April 2016 to 31 March 2017; plus |
• | £80.0m lump sum payable on or before 31 January 2017; plus |
• | £7.0m per annum for the period from 1 April 2020 to 31 March 2026 payable in equal monthly instalments. |
• | A lump sum of £2.5m on or before 31 January 2017; plus |
• | £235,000 per annum payable by WPD (South Wales) plc between 31 March 2021 and 31 March 2026 (inclusive). |
(a) | the expression "retail investor" means a person who is one (or more) of the following: |
(i) | a retail client as defined in point (11) of Article 4(1) of MiFID II; or |
(ii) | a customer within the meaning of the Insurance Mediation Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. |
(i) | in relation to any Notes having a maturity of less than one year (a) it is a person whose ordinary activities involve it in acquiring, holding managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses, where the issue of the Notes would otherwise constitute a contravention of section 19 of the FSMA by the Relevant Issuer; |
(ii) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Relevant Issuer; and |
(iii) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. |
(i) | the memorandum and articles of association of each Issuer; |
(ii) | the Agency Agreement; |
(iii) | the Trust Deed; and |
(iv) | a copy of this Prospectus and of any supplements thereto. |
INDEX OF DEFINED TERMS | ||||||
30/360 | 64 | Eurosystem Eligible Collateral | 21 | |||
30E/360 | 64 | Euro-zone | 66 | |||
30E/360 (ISDA) | 65 | Events of Default | 83 | |||
360/360 | 64 | Exchange Date | 29 | |||
Actual/360 | 64 | Excluded Subsidiary | 84 | |||
Actual/365 (Fixed) | 64 | Exempt Notes | 3 | |||
Actual/365 (Sterling) | 64 | Exercise Notice | 71 | |||
Actual/Actual | 63 | Expert | 77 | |||
Actual/Actual (ISDA) | 63 | FCA | 3 | |||
Actual/Actual-ICMA | 65 | Final Terms | 3 | |||
Additional Financial Centre(s) | 82 | Floating Rate | 60 | |||
Affiliate | 77 | Floating Rate Option | 60 | |||
Agency Agreement | 54 | FSMA | 5 | |||
Amortised Face Amount | 69 | FTT | 106 | |||
Bank | 80 | Global Certificate | 3 | |||
Base Index Figure | 77 | Global Certificates | 3 | |||
Bearer Notes | 55 | Global Note | 3 | |||
Bond Basis | 64 | Global Notes | 3 | |||
borrowed money | 58 | GSPs | 101 | |||
business day | 57, 82 | Guaranteed Standards of Performance | 99 | |||
Business Day | 63 | HMRC | 106 | |||
Calculation Agent | 60 | holder | 55 | |||
Calculation Agent(s) | 54 | HSE | 16 | |||
Calculation Date | 77 | ICSD | 42 | |||
Calculation Period | 63 | IFA | 78 | |||
Capital and Reserves | 78 | IGAs | 107 | |||
Central Networks Group | 102 | Index | 78 | |||
Certificate | 3 | Index Event | 70 | |||
Certificates | 55 | Index Figure | 78 | |||
Certification | 29 | Index Figure applicable | 78, 79 | |||
CGNs | 4 | Index Linked Interest Notes | 79 | |||
CI | 97 | Index Linked Redemption Notes | 79 | |||
Classic Global Notes | 4 | Index Ratio | 79 | |||
Clearstream, Luxembourg | 3 | Indexation Adviser | 79 | |||
CML | 97 | Indexed Notes | 79 | |||
Common Depositary | 4 | Initial Rate of Interest | 67 | |||
Common Safekeeper | 3 | Insurance Mediation Directive | 6 | |||
Conditions | 33, 54 | interest | 83 | |||
control | 77 | Interest Accrual Period | 66 | |||
Couponholders | 54 | Interest Amount | 66 | |||
Coupons | 54 | Interest Commencement Date | 66 | |||
date for payment | 76 | Interest Determination Date | 66 | |||
Day Count Fraction | 63 | Interest Period | 66 | |||
Dealer | 3 | Interest Period Date | 66 | |||
Dealer Agreement | 3 | ISDA Definitions | 66 | |||
Dealers | 3 | ISDA Rate | 59 | |||
Definitive Notes | 30 | Issuer | 3, 54 | |||
Designated Maturity | 60, 66 | Issuers | 3, 54 |
Determination Date | 66 | Issuing and Paying Agent | 54 | |||
Determination Period | 66 | Limited Index Ratio | 79 | |||
Distribution Licence | 78 | Limited Indexation Factor | 79 | |||
Distribution Price Control | 99 | Limited Indexation Month | 79 | |||
Distribution Services Area | 73 | Limited Indexed Notes | 79 | |||
DNO | 17, 91 | Linear Interpolation | 63 | |||
DNOs | 17 | Maximum Indexation Factor | 79 | |||
ECB | 42 | Midlands Issuers | 102 | |||
EEA | 6 | MiFID II | 6 | |||
ESPS | 102 | Minimum Indexation Factor | 79 | |||
Eurobond Basis | 64 | Moody’s | 4 | |||
Euroclear | 3 | Negative Certification | 72 | |||
Negative Rating Event | 73 | relevant month | 76 | |||
NGN | 3 | Relevant Screen Page | 67 | |||
Non-recourse Indebtedness | 85 | Reset Date | 60 | |||
Note Trustee | 54 | Restructuring Event | 74 | |||
Noteholder | 55 | Restructuring Period | 74 | |||
Notes | 3, 54 | Restructuring Put Option | 72 | |||
NSS | 3 | Revised Rate of Interest | 68 | |||
Official List | 3 | RIIO-ED1 | 15 | |||
Ofgem | 15, 58, 91 | Risk Factors | 4 | |||
Paying Agents | 54 | RPI | 16, 78 | |||
permanent Global Note | 3 | RPIm–2 | 78 | |||
PPL | 91 | RPIm–3 | 78 | |||
Pricing Supplement | 3 | S&P | 4 | |||
PRIIPs Regulation | 6 | Securities Act | 4 | |||
principal | 82, 83 | Security Interest | 57 | |||
Principal Subsidiary | 85 | Series | 54 | |||
Proceedings | 89 | Specified Currency | 67 | |||
Programme | 3 | Stabilisation Manager(s) | 8 | |||
Prospectus | i | Subsidiary | 79 | |||
Prospectus Directive | 5, 33 | Subsidiary Undertaking | 80 | |||
Put Date | 73 | Swap Transaction | 60 | |||
Put Event | 73 | Talons | 54 | |||
Put Event Notice | 73 | TARGET Business Day | 63 | |||
Put Period | 73 | TARGET System | 67 | |||
Rate of Interest | 67 | temporary Global Note | 3 | |||
Rated Securities | 74 | Tranche | 54 | |||
Rating Agency | 68, 73 | Transfer Agents | 54 | |||
Rating Change | 68 | Trust Deed | 54 | |||
Rating Change Period | 67 | UK Listing Authority | 3 | |||
Rating Change Period End Date | 67 | unit | 62 | |||
Rating Downgrade | 73 | WPD | 91 | |||
Ratings Downgrade Rate Adjustment | 67 | WPD Group | 91 | |||
RAV | 97 | WPD South Wales | 3, 54 | |||
Receipts | 54 | WPD South Wales 2016 Annual Report | 25 | |||
Record Date | 80 | WPD South Wales 2017 Annual Report | 26 | |||
Redeemed Notes | 71 | WPD South West | 3, 54 | |||
Reference Banks | 67 | WPD South West 2016 Annual Report | 25 |
Reference Gilt | 79 | WPD South West 2017 Annual Report | 25 | |||
Reference Rate | 67 | WPD Wales | 97 | |||
Register | 55 | WPDE | 3, 54 | |||
Registered Notes | 55 | WPDE 2016 Annual Report | 25 | |||
Registrar | 54 | WPDE 2017 Annual Report | 25 | |||
Regulatory Asset Base | 58 | WPDW | 3, 54 | |||
Relevant Date | 82 | WPDW 2016 Annual Report | 25 | |||
relevant Dealer | 3 | WPPS | 102 | |||
Relevant Factor | 21 | WPUPS | 104 | |||
Relevant Indebtedness | 58 | WW Issuers | 104 | |||
Relevant Interest Period | 68 | Zero Coupon Notes | 61 | |||
Relevant Issuer | 3, 54 | |||||
ISSUERS | ||
Western Power Distribution (West Midlands) plc | Western Power Distribution (East Midlands) plc | |
Avonbank | Avonbank | |
Feeder Road | Feeder Road | |
Bristol BS2 0TB | Bristol BS2 0TB | |
Western Power Distribution (South West) plc | Western Power Distribution (South Wales) plc | |
Avonbank | Avonbank | |
Feeder Road | Feeder Road | |
Bristol BS2 0TB | Bristol BS2 0TB | |
NOTE TRUSTEE | ||
HSBC Corporate Trustee Company (UK) Limited | ||
8 Canada Square | ||
London E14 5HQ | ||
ISSUING AND PAYING AGENT, REGISTRAR, TRANSFER AGENT AND CALCULATION AGENT | ||
HSBC Bank plc | ||
8 Canada Square | ||
London E14 5HQ | ||
LEGAL ADVISERS | ||
To the Issuers as to English Law | To the Arranger, the Dealers and the Note Trustee as to English Law | |
Allen & Overy LLP | Clifford Chance LLP | |
One Bishops Square | 10 Upper Bank Street | |
London E1 6AD | London E14 5JJ | |
AUDITORS | ||
Deloitte LLP | ||
Hill House | ||
1 Little New Street | ||
London EC4A 3TR | ||
ARRANGER | ||
The Royal Bank of Scotland plc (trading as NatWest Markets) 250 Bishopsgate London EC2M 4AA | ||
DEALERS | ||
Barclays Bank PLC 5 The North Colonnade Canary Wharf London E14 4BB | Lloyds Bank plc 10 Gresham Street London EC2V 7AE | |
Banco Santander, S.A. Ciudad Grupo Santander Edificio Encinar Avenida de Cantabria s/n 28660, Boadilla del Monte Madrid, Spain | Merrill Lynch International 2 King Edward Street London EC1A 1HQ |
HSBC Bank plc 8 Canada Square London E14 5HQ | MUFG Securities EMEA plc Ropemaker Place 25 Ropemaker Street London EC2Y 9AJ |
RBC Europe Limited Riverbank House 2 Swan Lane London EC4R 3BF | Mizuho International plc Mizuho House 30 Old Bailey London EC4M 7AU |
The Royal Bank of Scotland plc (trading as NatWest Markets) 250 Bishopsgate London EC2M 4AA | |
TABLE OF CONTENTS | ||||
Page | ||||
ARTICLE I | DEFINITIONS | 1 | ||
Section 1.01 | Definitions | 1 | ||
ARTICLE II | THE CREDITS | 14 | ||
Section 2.01 | The Loans | 14 | ||
Section 2.02 | [Reserved] | 14 | ||
Section 2.03 | Notice of Borrowings | 14 | ||
Section 2.04 | Notice to Lenders; Funding of Loans | 15 | ||
Section 2.05 | Noteless Agreement; Evidence of Indebtedness | 15 | ||
Section 2.06 | Interest Rates | 16 | ||
Section 2.07 | Fees | 17 | ||
Section 2.08 | Adjustments of Commitments | 18 | ||
Section 2.09 | Repayment of Loans | 19 | ||
Section 2.10 | Optional Prepayments and Repayments | 19 | ||
Section 2.11 | General Provisions as to Payments | 20 | ||
Section 2.12 | Funding Losses | 20 | ||
Section 2.13 | Computation of Interest and Fees | 21 | ||
Section 2.14 | Basis for Determining Interest Rate Inadequate, Unfair or Unavailable | 21 | ||
Section 2.15 | Illegality | 21 | ||
Section 2.16 | Increased Cost and Reduced Return | 21 | ||
Section 2.17 | Taxes | 23 | ||
Section 2.18 | Base Rate Loans Substituted for Affected Euro-Dollar Loans | 25 | ||
Section 2.19 | [Reserved] | 26 | ||
Section 2.20 | Defaulting Lenders | 26 | ||
ARTICLE III | [Reserved] | 26 | ||
ARTICLE IV | CONDITIONS | 26 | ||
Section 4.01 | Conditions to Effective Date | 26 | ||
Section 4.02 | Conditions to Borrowings | 27 | ||
ARTICLE V | REPRESENTATIONS AND WARRANTIES | 28 | ||
Section 5.01 | Status | 28 | ||
Section 5.02 | Authority; No Conflict | 28 | ||
Section 5.03 | Legality; Etc | 28 | ||
Section 5.04 | Financial Condition | 28 | ||
Section 5.05 | Litigation | 29 | ||
Section 5.06 | No Violation | 29 | ||
Section 5.07 | ERISA | 29 | ||
Section 5.08 | Governmental Approvals | 29 | ||
Section 5.09 | Investment Company Act | 29 | ||
Section 5.10 | Tax Returns and Payments | 29 | ||
Section 5.11 | Compliance with Laws | 29 | ||
Section 5.12 | No Default | 30 | ||
Section 5.13 | Environmental Matters | 30 | ||
Section 5.14 | OFAC | 31 | ||
Section 5.15 | Anti-Corruption | 31 | ||
Page | ||||
ARTICLE VI | COVENANTS | 31 | ||
Section 6.01 | Information | 31 | ||
Section 6.02 | Maintenance of Property; Insurance | 33 | ||
Section 6.03 | Conduct of Business and Maintenance of Existence | 33 | ||
Section 6.04 | Compliance with Laws, Etc | 33 | ||
Section 6.05 | Books and Records | 34 | ||
Section 6.06 | Use of Proceeds | 34 | ||
Section 6.07 | Merger or Consolidation | 34 | ||
Section 6.08 | Asset Sales | 34 | ||
Section 6.09 | Consolidated Debt to Consolidated Capitalization Ratio | 35 | ||
ARTICLE VII | DEFAULTS | 35 | ||
Section 7.01 | Events of Default | 35 | ||
ARTICLE VIII | THE ADMINISTRATIVE AGENT | 36 | ||
Section 8.01 | Appointment and Authorization | 36 | ||
Section 8.02 | Individual Capacity | 37 | ||
Section 8.03 | Delegation of Duties | 37 | ||
Section 8.04 | Reliance by the Administrative Agent | 37 | ||
Section 8.05 | Notice of Default | 37 | ||
Section 8.06 | Non-Reliance on the Administrative Agent and Other Lenders | 38 | ||
Section 8.07 | Exculpatory Provisions | 38 | ||
Section 8.08 | Indemnification | 38 | ||
Section 8.09 | Resignation; Successors | 39 | ||
ARTICLE IX | MISCELLANEOUS | 39 | ||
Section 9.01 | Notices | 39 | ||
Section 9.02 | No Waivers; Non-Exclusive Remedies | 41 | ||
Section 9.03 | Expenses; Indemnification | 41 | ||
Section 9.04 | Sharing of Set-Offs | 42 | ||
Section 9.05 | Amendments and Waivers | 42 | ||
Section 9.06 | Successors and Assigns | 43 | ||
Section 9.07 | Governing Law; Submission to Jurisdiction | 45 | ||
Section 9.08 | Counterparts; Integration; Effectiveness | 45 | ||
Section 9.09 | Generally Accepted Accounting Principles | 45 | ||
Section 9.10 | Usage | 46 | ||
Section 9.11 | WAIVER OF JURY TRIAL | 47 | ||
Section 9.12 | Confidentiality | 47 | ||
Section 9.13 | USA PATRIOT Act Notice | 47 | ||
Section 9.14 | No Fiduciary Duty | 47 | ||
Section 9.15 | Acknowledgment and Consent to Bail-in of EEA Financial Institutions | 48 | ||
Section 9.16 | Survival | 48 | ||
Section 9.17 | Interest Rate Limitation | 48 | ||
Section 9.18 | Severability | 49 | ||
Section 9.19 | Headings | 49 | ||
Section 9.20 | Document Imaging | 49 |
Appendices: | ||
Appendix A | - | Commitments |
Exhibits: | ||
Exhibit A-1 | - | Form of Notice of Borrowing |
Exhibit A-2 | - | Form of Notice of Conversion/Continuation |
Exhibit B | - | Form of Note |
Exhibit C | - | Form of Assignment and Assumption Agreement |
Exhibit D | - | Forms of Opinion of Counsel for the Borrower |
if to the Borrower: Louisville Gas and Electric Company | |
220 West Main Street | |
Louisville, Kentucky 40202 | |
Attention: Treasurer Telephone: 502-627-4956 Facsimile: 502-627-4742 | |
with a copy to: | |
Louisville Gas and Electric Company | |
220 West Main Street | |
Louisville, Kentucky 40202 | |
Attention: | Vice President and Deputy General Counsel, Legal and Environmental Affairs and Corporate Secretary |
Telephone: 502-627-2501 | |
Facsimile: 502-627-3367 | |
with a copy to: | |
PPL Services Corporation | |
Two North Ninth Street (GENTW4) | |
Allentown, Pennsylvania 18101-1179 | |
Attention: Frederick C. Paine, Esq. | |
Telephone: 610-774-7445 | |
Facsimile: 610-774-6726 | |
with a copy to: | |
PPL Services Corporation | |
Two North Ninth Street (GENTW14) | |
Allentown, Pennsylvania 18101-1179 | |
Attention: Assistant Treasurer | |
Telephone: 610-774-4182 | |
Facsimile: 610-774-5235 | |
if to the Administrative Agent: | |
U.S. Bank National Association 461 Fifth Avenue, 6th Floor New York, NY 10017 Attention: Maria Distefano Telephone: 917-326-3944 |
Facsimile: 917-256-2890 Email: maria.distefano@usbank.com |
with a copy to: U.S. Bank National Association 461 Fifth Avenue, 7th Floor New York, NY 10017 Attention: James O’Shaughnessy Telephone: 917-326-3924 Facsimile: 646-935-4533 Email: james.oshaughnessy@usbank.com |
with a copy to: Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Attention: Jason Kyrwood Telephone: 212-450-4653 Facsimile: 212-450-5425 |
LOUISVILLE GAS AND ELECTRIC COMPANY, as Borrower | ||
By: /s/ Daniel K. Arbough ________________ | ||
Name: Daniel K. Arbough | ||
Title: Treasurer | ||
U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent and Lender | ||
By: /s/ Andrew N. Taylor_________________ | ||
Name: Andrew N. Taylor | ||
Title: Senior Vice President | ||
Lender | Commitment | ||
U.S. Bank National Association | $200,000,000.00 | ||
Total | $200,000,000.00 |
4. | The initial Interest Period for the Loans comprising such Borrowing shall be __________________.3 |
LOUISVILLE GAS AND ELECTRIC COMPANY | ||
By:____________________________________ | ||
Name: | ||
Title: | ||
LOUISVILLE GAS AND ELECTRIC COMPANY | ||
By:____________________________________ | ||
Name: | ||
Title: | ||
LOUISVILLE GAS AND ELECTRIC COMPANY | ||
By:____________________________________ | ||
Name: | ||
Title: | ||
By:____________________________________ | ||
Name: | ||
Title: |
Aggregate Amount of Commitment/ Loans for all Lenders 14 | Amount of Commitment/ Loans Assigned 15 | Percentage Assigned of Commitment/ Loans 16 | CUSIP Number |
$ | $ | % |
Re: | Louisville Gas and Electric Company $200,000,000 Term Loan Credit Agreement |
1. | The Credit Agreement constitutes the valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms. |
2. | The Company is not an “investment company” within the meaning of the Investment Company Act of 1940. |
3. | The borrowings under the Credit Agreement and the use of proceeds thereof as contemplated by the Credit Agreement do not violate Regulation U or X of the Board of Governors of the Federal Reserve System. |
1 | The Facility |
1.1. | We, BNP Paribas, London Branch (the Bank), are pleased to make available to Western Power Distribution (South West) PLC (company number 02366894), Western Power Distribution (South Wales) PLC (company number 02366985), Western Power Distribution (West Midlands) PLC (company number 03600574) and Western Power Distribution (East Midlands) PLC (company number 02366923) (each a Borrower and together the Borrowers) an uncommitted Sterling revolving advances facility as described in Schedule 2 (the Facility) on the terms and conditions set out in this Letter. |
1.2 | No Borrower shall request any Utilisation until the Bank has received the documents and other evidence listed in Schedule 1 ( Conditions precedent) in form and substance satisfactory to the Bank. |
1.3 | The Facility shall be available to the Borrowers for Utilisations up to the Facility Limit. |
1.4 | The Bank is willing to make the Facility available to the Borrowers subject to: |
(a) | the Facility Terms specific to the Facility as set out in Schedule 2 (Facility Terms - Revolving Advances Facility) and the general terms set out in the main body of this Letter; |
(b) | the Bank's Credit Terms and Conditions for on-demand facilities (June 2012 Version) (the Credit Terms and Conditions); and |
(c) | the Bank's General Terms of Business, as may be amended from time to time (the General Terms of Business). |
BNP Paribas London Branch is authorised by the Autorité de Contrôle Prudentiel and authorised and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Financial Conduct Authority are available on request. BNP Paribas London Branch is registered in England and Wales undr no. FC13447 BNP Paribas SA is authorised by the Autorité de Contrôle Prudentiel and regulated by the Autorité des Marchés Financiers in France. MNP Paribas SA is incorporated in France with Limited Liability Registered Ofice: 16 Boulevard des Italiens, 75009 Paris, France 662 042 449 RCS Paris. ©BNP Paribas. All rights reserved. | 8139697.01 |
1.5 | If there is any conflict between the provisions of the General Terms of Business and the terms of this Letter or the Credit Terms and Conditions, the terms of this Letter or the Credit Terms and Conditions, as applicable, shall prevail. If the terms set out in the main body of this Letter impose a stricter obligation than the Facility Terms (unless the Facility Terms expressly override the relevant provision of this Letter) the Borrowers must comply with the stricter obligation. |
1.6 | (a) If there is any conflict between the provisions of the Credit Terms and Conditions and the terms of this Letter, the terms of this Letter shall prevail. |
(b) For the avoidance of doubt Clause 10(b) of the Credit Terms and Conditions shall not apply to this Letter. |
1.7 | The Facility shall be utilised solely towards financing the working capital requirements and general corporate purposes of the Borrowers. The Bank shall not be obliged to investigate or monitor the use or application of the proceeds of Utilisations. |
1.8 | The provisions of Clauses 2 (Definitions) and 3 (Interpretation) of the Credit Terms and Conditions shall apply to this Letter as if set out in full again here, with such changes as are appropriate to fit this context. |
1.9 | The following definitions apply in this Letter: |
2 | Financial covenants |
2.1 | None. |
3 | Additional Utilisation Conditions |
4 | Fees and Default Interest |
4.1 | No separate fees are payable by the Borrowers upon its acceptance of this Letter. |
4.2 | If any Borrower fails to pay any amount on its due date, such Borrower shall pay the Bank interest on that amount (or on so much as from time to time remains unpaid) from the due date to the date of actual payment (both before and after judgment) calculated by reference to successive Interest Periods at the rate per annum that is equal to: |
(a) | (subject to paragraph (b) below) two per cent. higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Utilisation in the currency of the overdue amount; or |
(b) | (if any overdue amount consists of all or part of a Utilisation which became due on a day which was not the last day of an Interest Period relating to that Utilisation): |
(i) | the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Utilisation; and |
(ii) | the rate of interest applying to the overdue amount during that first Interest Period shall be two per cent. higher than the rate which would have applied if the overdue amount had not become due. |
5 | Additional Undertakings |
6 | Counterparts |
7 | Governing law and jurisdiction |
7.1 | This Letter and any non-contractual obligations arising out of or in connection with it are governed by English law. |
7.2 | The Courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Letter (including a dispute relating to any non-contractual obligation arising out of or in connection with this Letter). The Bank and the Borrowers agree that the Courts of England are the most appropriate and convenient courts to settle any such disputes and accordingly none of them will argue to the contrary. This paragraph is for the benefit of the Bank only. As a result, the Bank shall not be prevented from taking proceedings relating to any such dispute in any other courts with jurisdiction. To the extent allowed by law, the Bank may take concurrent proceedings in any number of jurisdictions. |
8 | Acceptance |
8.1 | The Borrowers may confirm their acceptance of the terms and conditions of this Letter by signing the acceptance on the enclosed duplicate of this Letter and returning it to the Bank, together with the documents and other evidence required to be delivered pursuant to paragraph 1.2 above and to Clause 5.1 (Conditions precedent to all Utilisations) of the Credit Terms and Conditions, all within 45 days of the date of this Letter. If the offer to make available the Facility contained in this Letter is not so accepted by the Borrowers within that period, it shall lapse. |
8.2 | This Letter shall cancel and supersede any previous uncommitted facility letter issued by the Bank to the Borrowers with effect from the date it is accepted. For the avoidance of doubt, this Letter shall not cancel any outstanding obligations of the Borrowers under previous uncommitted facility letters. Such obligations shall become obligations under the Facility under this Letter or, if such obligations are not equivalent in nature to the Facility, shall continue to be governed by the relevant previous uncommitted facility letter until irrevocably repaid in full. |
/s/ Michael Ashton Name Michael Ashton Position Authorized Signatory | /s/ Steve Duranti Name S. Duranti Position Manager |
Signed: | /s/ D.C.S. Oosthuizen | /s/ Sally A Jones | |
Name: | D.C.S. Oosthuizen | Sally A Jones | |
Position: | Director | Company Secretary | |
Date: | 18.02.2014 | 18.02.2014 |
Signed: | /s/ D.C.S. Oosthuizen | /s/ Sally A Jones | |
Name: | D.C.S. Oosthuizen | Sally A Jones | |
Position: | Director | Company Secretary | |
Date: | 18.02.2014 | 18.02.2014 |
Signed: | /s/ D.C.S. Oosthuizen | /s/ Sally A Jones | |
Name: | D.C.S. Oosthuizen | Sally A Jones | |
Position: | Director | Company Secretary | |
Date: | 18.02.2014 | 18.02.2014 |
Signed: | /s/ D.C.S. Oosthuizen | /s/ Sally A Jones | |
Name: | D.C.S. Oosthuizen | Sally A Jones | |
Position: | Director | Company Secretary | |
Date: | 18.02.2014 | 18.02.2014 |
1 | The enclosed duplicate of this Letter, duly executed on behalf of the Borrowers. |
2 | A certified copy of the resolutions of the Board of Directors (or equivalent executive body) of each Borrower approving the terms of the Finance Documents to which that Borrower is party and authorising specified persons to execute on behalf of that Borrower those documents and any other documents that it is necessary or desirable for that Borrower to enter into in connection with the Facility or the Finance Documents. |
3 | A specimen of the signature of each person authorised by the resolutions referred to in paragraph 2 above. |
4 | A copy of any other authorisation or other document, opinion or assurance that the Bank considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, any Finance Document or for the validity and enforceability of any Finance Document. |
Facility Limit: | £20,000,000 (twenty million pounds sterling) |
Margin: | 1.60% (one point six per cent) per annum. |
Interest Rate Basis: | LIBOR |
Interest Periods: | A Borrower must select an Interest Period for a Utilisation in the Utilisation Request for that Utilisation. The Borrower may select an Interest Period of up to 7 days as agreed between that Borrower and the Bank. Each Interest Period for a Utilisation shall start on the Utilisation Date. A Utilisation has one Interest Period only. |
Payment of Interest: | Interest shall be payable in arrears on the last day of the relevant Interest Period, but subject always to Clauses 8.5(c) (Interest, Fees and Commission) and Clause 9.3 (Repayment) of the Credit Terms and Conditions. |
Repayment: | Subject always to the Bank's right at any time to demand earlier repayment in accordance with Clause 9 (Repayment) of the Credit Terms and Conditions, the Borrower must repay each Utilisation on the last day of its Interest Period. |
From: | Western Power Distribution (South West) PLC / Western Power Distribution (South Wales) PLC / Western Power Distribution (West Midlands) PLC / Western Power Distribution (East Midlands) PLC (delete as applicable) |
To: BNP Paribas, London Branch |
1 | We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request. |
2 | We wish to make a Utilisation under the Facility on the following terms: |
Proposed Utilisation Date: | Insert date (or, if that is not a Business Day, the next Business Day) | |
Amount: | insert amount | |
Interest Period: | confirm duration of Interest Period |
3 | We confirm that each condition specified in Clause 5 (Conditions precedent to all Utilisations) and in Clause 7.2 ( Utilisation ) of the Credit Terms and Conditions is satisfied on the date of this Utilisation Request. |
4 | This Utilisation Request is irrevocable. |
(a) | We refer to the Facility Letter. Terms defined in the Facility Letter shall, unless the context requires otherwise, have the same meaning when used in this letter, and in addition the term "Effective Date" means the date on which the Bank notifies the Borrowers that it has received, in form and substance satisfactory to it, (or that the Bank has waived the receipt of) all of the documents and other evidence listed in the Schedule (Conditions Precedent) to this letter. |
(b) | This letter is a Finance Document. |
(c) | The provisions of Clauses 2 (Definitions), 3 (Interpretations) and 14 (Third Party Rights) of the Credit Terms and Conditions shall apply to this letter as if set out in full again here, with such changes as are appropriate to fit this context. |
(a) | With effect on and from the Effective Date, the Facility Letter will be amended by deleting 7 days in the Interest Periods clause of Schedule 2 and replacing it with 31 days. |
(b) | Subject to the terms of this letter, all other provisions of the Facility Letter remain unchanged and the Facility Letter will remain in full force and effect. |
(c) | The Facility Letter (including the Credit Terms and Conditions and the General Terms of Business) and this letter will be read and construed as one document. |
(d) | If the Effective Date has not occurred before the date that is 45 days after the date of this letter, then this letter shall immediately on such date be void and of no further legal force and effect. |
(a) | are true; and |
(b) | would also be true if references to the "Agreement" as referred to in the General Terms of Business are construed so as to include the Facility Letter as amended by this letter |
(a) | The Borrowers shall (on a joint and several basis), promptly upon demand, reimburse the Bank for the amount of all costs and expenses (including legal fees) reasonably incurred in connection with this letter and all VAT in respect of such costs and expenses. |
(b) | The Borrowers shall be responsible for their own costs and expenses (including legal fees) incurred in connection with this letter. |
(a) | This letter and any non-contractual obligations arising out of or in connections with it are governed by English law. |
(b) | The Courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this letter (including a dispute relating to any non-contractual obligation arising out of or in connection with this letter). The Bank and the Borrowers agree that the Courts of England are the most appropriate and convenient courts to settle any such disputes and accordingly none of them will argue to the contrary. This paragraph is for the benefit of the Bank only. As a result, the Bank shall not be prevented from taking proceedings relating to any such dispute in any other courts with jurisdiction. To the extent allowed by law, the Bank may take concurrent proceedings in any number of jurisdictions. |
/s/ Steve Duranti | /s/ Ian Rosenthal | |
by: Steve Duranti | by: Ian Rosenthal | |
title: Head of MNC | title: Authorised Signatory |
Signed: | /s/ I.R. Williams | ||
Name: | I.R. Williams | ||
Position: | Director | ||
Date: | 31 August 2017 |
Signed: | /s/ I. R. Williams | ||
Name: | I. R. Williams | ||
Position: | Director | ||
Date: | 31 August 2017 |
Signed: | /s/ I. R. Williams | ||
Name: | I. R. Williams | ||
Position: | Director | ||
Date: | 31 August 2017 |
Signed: | /s/ I. R. Williams | ||
Name: | I. R. Williams | ||
Position: | Director | ||
Date: | 31 August 2017 |
(a) | The enclosed duplicate of this letter, duly executed on behalf of each of the Borrowers. |
(b) | A copy of a resolution of the board of directors (or the equivalent executive body or equivalent evidence of relevant corporate approval) of each of the Borrowers approving the terms of, and the transactions contemplated by, this letter and authorising a specified person or persons to execute this letter on its behalf. |
(c) | A specimen of the signature of each person authorised by the resolutions referred to in item (b) above. |
(d) | A copy of any other authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration or other document, opinion or assurance which the Bank considers necessary or desirable in connection with this letter. |
Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 (a) | 2014 (a) | 2013 (a) | 2012 (a) | ||||||||||||||||||
Earnings, as defined: | |||||||||||||||||||||||
Income from Continuing Operations Before Income Taxes | $ | 1,371 | $ | 2,550 | $ | 2,068 | $ | 2,129 | $ | 1,728 | $ | 1,406 | |||||||||||
Adjustment to reflect earnings from equity method investments on a cash basis (b) | 1 | (1 | ) | (1 | ) | — | — | 34 | |||||||||||||||
1,372 | 2,549 | 2,067 | 2,129 | 1,728 | 1,440 | ||||||||||||||||||
Total fixed charges as below | 684 | 917 | 1,054 | 1,095 | 1,096 | 1,065 | |||||||||||||||||
Less: | |||||||||||||||||||||||
Capitalized interest | 3 | 4 | 11 | 11 | 11 | 6 | |||||||||||||||||
Preferred security distributions of subsidiaries on a pre-tax basis | — | — | — | — | — | 5 | |||||||||||||||||
Interest expense and fixed charges related to discontinued operations | — | — | 150 | 186 | 235 | 235 | |||||||||||||||||
Total fixed charges included in Income from Continuing Operations Before Income Taxes | 681 | 913 | 893 | 898 | 850 | 819 | |||||||||||||||||
Total earnings | $ | 2,053 | $ | 3,462 | $ | 2,960 | $ | 3,027 | $ | 2,578 | $ | 2,259 | |||||||||||
Fixed charges, as defined: | |||||||||||||||||||||||
Interest charges (c) | $ | 676 | $ | 900 | $ | 1,038 | $ | 1,073 | $ | 1,058 | $ | 1,019 | |||||||||||
Estimated interest component of operating rentals | 8 | 17 | 16 | 22 | 38 | 41 | |||||||||||||||||
Preferred security distributions of subsidiaries on a pre-tax basis | — | — | — | — | — | 5 | |||||||||||||||||
Total fixed charges (d) | $ | 684 | $ | 917 | $ | 1,054 | $ | 1,095 | $ | 1,096 | $ | 1,065 | |||||||||||
Ratio of earnings to fixed charges | 3.0 | 3.8 | 2.8 | 2.8 | 2.4 | 2.1 | |||||||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends (e) | 3.0 | 3.8 | 2.8 | 2.8 | 2.4 | 2.1 |
(a) | Reflects PPL's former Supply segment as Discontinued Operations. |
(b) | Includes other-than-temporary impairment loss of $25 million in 2012. |
(c) | Includes interest on long-term and short-term debt, as well as amortization of debt discount, expense and premium - net. |
(d) | Interest on unrecognized tax benefits is not included in fixed charges. |
(e) | PPL, the parent holding company, does not have any preferred stock outstanding; therefore, the ratio of earnings to combined fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges. |
Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Earnings, as defined: | |||||||||||||||||||||||
Income Before Income Taxes | $ | 410 | $ | 552 | $ | 416 | $ | 423 | $ | 317 | $ | 204 | |||||||||||
Total fixed charges as below | 114 | 141 | 139 | 131 | 117 | 107 | |||||||||||||||||
Total earnings | $ | 524 | $ | 693 | $ | 555 | $ | 554 | $ | 434 | $ | 311 | |||||||||||
Fixed charges, as defined: | |||||||||||||||||||||||
Interest charges (a) | $ | 111 | $ | 137 | $ | 135 | $ | 127 | $ | 113 | $ | 104 | |||||||||||
Estimated interest component of operating rentals | 3 | 4 | 4 | 4 | 4 | 3 | |||||||||||||||||
Total fixed charges (b) | $ | 114 | $ | 141 | $ | 139 | $ | 131 | $ | 117 | $ | 107 | |||||||||||
Ratio of earnings to fixed charges | 4.6 | 4.9 | 4.0 | 4.2 | 3.7 | 2.9 | |||||||||||||||||
Preferred stock dividend requirements on a pre-tax basis | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 6 | |||||||||||
Fixed charges, as above | 114 | 141 | 139 | 131 | 117 | 107 | |||||||||||||||||
Total fixed charges and preferred stock dividends | $ | 114 | $ | 141 | $ | 139 | $ | 131 | $ | 117 | $ | 113 | |||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends | 4.6 | 4.9 | 4.0 | 4.2 | 3.7 | 2.8 |
(a) | Includes interest on long-term and short-term debt, as well as amortization of debt discount, expense and premium - net. |
(b) | Interest on unrecognized tax benefits is not included in fixed charges. |
Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Earnings, as defined: | |||||||||||||||||||||||
Income from Continuing Operations Before Income Taxes | $ | 517 | $ | 686 | $ | 603 | $ | 553 | $ | 551 | $ | 331 | |||||||||||
Adjustment to reflect earnings from equity method investments on a cash basis (a) | 1 | (1 | ) | (1 | ) | (1 | ) | (1 | ) | 33 | |||||||||||||
518 | 685 | 602 | 552 | 550 | 364 | ||||||||||||||||||
Total fixed charges as below | 168 | 223 | 189 | 173 | 151 | 157 | |||||||||||||||||
Total earnings | $ | 686 | $ | 908 | $ | 791 | $ | 725 | $ | 701 | $ | 521 | |||||||||||
Fixed charges, as defined: | |||||||||||||||||||||||
Interest charges (b) (c) | $ | 161 | $ | 214 | $ | 181 | $ | 167 | $ | 145 | $ | 151 | |||||||||||
Estimated interest component of operating rentals | 7 | 9 | 8 | 6 | 6 | 6 | |||||||||||||||||
Total fixed charges | $ | 168 | $ | 223 | $ | 189 | $ | 173 | $ | 151 | $ | 157 | |||||||||||
Ratio of earnings to fixed charges | 4.1 | 4.1 | 4.2 | 4.2 | 4.6 | 3.3 |
(a) | Includes other-than-temporary impairment loss of $25 million in 2012. |
(b) | Includes interest on long-term and short-term debt, as well as amortization of loss on reacquired debt and amortization of debt discount, expense and premium - net. |
(c) | Includes a credit for amortization of a fair market value adjustment of $7 million in 2013. |
Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Earnings, as defined: | |||||||||||||||||||||||
Income Before Income Taxes | $ | 260 | $ | 329 | $ | 299 | $ | 272 | $ | 257 | $ | 192 | |||||||||||
Total fixed charges as below | 57 | 76 | 61 | 51 | 36 | 44 | |||||||||||||||||
Total earnings | $ | 317 | $ | 405 | $ | 360 | $ | 323 | $ | 293 | $ | 236 | |||||||||||
Fixed charges, as defined: | |||||||||||||||||||||||
Interest charges (a) (b) | $ | 53 | $ | 71 | $ | 57 | $ | 49 | $ | 34 | $ | 42 | |||||||||||
Estimated interest component of operating rentals | 4 | 5 | 4 | 2 | 2 | 2 | |||||||||||||||||
Total fixed charges | $ | 57 | $ | 76 | $ | 61 | $ | 51 | $ | 36 | $ | 44 | |||||||||||
Ratio of earnings to fixed charges | 5.6 | 5.3 | 5.9 | 6.3 | 8.1 | 5.4 |
(a) | Includes interest on long-term and short-term debt, as well as amortization of loss on reacquired debt and amortization of debt discount, expense and premium - net. |
(b) | Includes a credit for amortization of a fair market value adjustment of $7 million in 2013. |
Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Earnings, as defined: | |||||||||||||||||||||||
Income Before Income Taxes | $ | 316 | $ | 428 | $ | 374 | $ | 355 | $ | 360 | $ | 215 | |||||||||||
Adjustment to reflect earnings from equity method investments on a cash basis (a) | 1 | (1 | ) | (1 | ) | (1 | ) | (1 | ) | 33 | |||||||||||||
317 | 427 | 373 | 354 | 359 | 248 | ||||||||||||||||||
Total fixed charges as below | 75 | 100 | 86 | 80 | 73 | 72 | |||||||||||||||||
Total earnings | $ | 392 | $ | 527 | $ | 459 | $ | 434 | $ | 432 | $ | 320 | |||||||||||
Fixed charges, as defined: | |||||||||||||||||||||||
Interest charges (b) | $ | 72 | $ | 96 | $ | 82 | $ | 77 | $ | 70 | $ | 69 | |||||||||||
Estimated interest component of operating rentals | 3 | 4 | 4 | 3 | 3 | 3 | |||||||||||||||||
Total fixed charges | $ | 75 | $ | 100 | $ | 86 | $ | 80 | $ | 73 | $ | 72 | |||||||||||
Ratio of earnings to fixed charges | 5.2 | 5.3 | 5.3 | 5.4 | 5.9 | 4.4 |
(a) | Includes other-than-temporary impairment loss of $25 million in 2012. |
(b) | Includes interest on long-term and short-term debt, as well as amortization of loss on reacquired debt and amortization of debt discount, expense and premium - net. |
1. | I have reviewed this quarterly report on Form 10-Q of PPL Corporation (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ William H. Spence |
William H. Spence | ||
Chairman, President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
PPL Corporation |
1. | I have reviewed this quarterly report on Form 10-Q of PPL Corporation (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Vincent Sorgi |
Vincent Sorgi | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
PPL Corporation |
1. | I have reviewed this quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Gregory N. Dudkin |
Gregory N. Dudkin | ||
President | ||
(Principal Executive Officer) | ||
PPL Electric Utilities Corporation |
1. | I have reviewed this quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Marlene C. Beers |
Marlene C. Beers | ||
Controller | ||
(Principal Financial Officer) | ||
PPL Electric Utilities Corporation |
1. | I have reviewed this quarterly report on Form 10-Q of LG&E and KU Energy LLC (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Victor A. Staffieri |
Victor A. Staffieri | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
LG&E and KU Energy LLC |
1. | I have reviewed this quarterly report on Form 10-Q of LG&E and KU Energy LLC (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Kent W. Blake |
Kent W. Blake | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
LG&E and KU Energy LLC |
1. | I have reviewed this quarterly report on Form 10-Q of Louisville Gas and Electric Company (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Victor A. Staffieri |
Victor A. Staffieri | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Louisville Gas and Electric Company |
1. | I have reviewed this quarterly report on Form 10-Q of Louisville Gas and Electric Company (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Kent W. Blake |
Kent W. Blake | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
Louisville Gas and Electric Company |
1. | I have reviewed this quarterly report on Form 10-Q of Kentucky Utilities Company (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Victor A. Staffieri |
Victor A. Staffieri | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Kentucky Utilities Company |
1. | I have reviewed this quarterly report on Form 10-Q of Kentucky Utilities Company (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 1, 2017 | /s/ Kent W. Blake |
Kent W. Blake | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
Kentucky Utilities Company |
• | The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 1, 2017 | /s/ William H. Spence |
William H. Spence | ||
Chairman, President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
PPL Corporation | ||
/s/ Vincent Sorgi | ||
Vincent Sorgi | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
PPL Corporation |
• | The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 1, 2017 | /s/ Gregory N. Dudkin |
Gregory N. Dudkin | ||
President | ||
(Principal Executive Officer) | ||
PPL Electric Utilities Corporation | ||
/s/ Marlene C. Beers | ||
Marlene C. Beers | ||
Controller | ||
(Principal Financial Officer) | ||
PPL Electric Utilities Corporation |
• | The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 1, 2017 | /s/ Victor A. Staffieri |
Victor A. Staffieri | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
LG&E and KU Energy LLC | ||
/s/ Kent W. Blake | ||
Kent W. Blake | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
LG&E and KU Energy LLC |
• | The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 1, 2017 | /s/ Victor A. Staffieri |
Victor A. Staffieri | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Louisville Gas and Electric Company | ||
/s/ Kent W. Blake | ||
Kent W. Blake | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
Louisville Gas and Electric Company |
• | The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 1, 2017 | /s/ Victor A. Staffieri |
Victor A. Staffieri | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Kentucky Utilities Company | ||
/s/ Kent W. Blake | ||
Kent W. Blake | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
Kentucky Utilities Company |
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