18. Goodwill and Other Intangible Assets

Goodwill

(PPL)

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



	U.K. Regulated					Kentucky Regulated				Total
	2017		2016			2017		2016		2017		2016
Balance at beginning of period (a)	$	2,398	$	2,888		$	662	$	662	$	3,060	$	3,550
Effect of foreign currency exchange rates	198		(490		)					198		(490		)
Balance at end of period (a)	$	2,596	$	2,398		$	662	$	662	$	3,258	$	3,060


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

Other Intangible Assets

(PPL)

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



	December 31, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Contracts (a)	$	138	$	67	$	405	$	325
Land and transmission rights	382		120		362		115
Emission allowances/RECs (b)	1		—		2		—
Licenses and other	7		3		6		2
Total subject to amortization	528		190		775		442

Not subject to amortization due to indefinite life:
Land and transmission rights	12		—		19		—
Easements	347		—		348		—
Total not subject to amortization due to indefinite life	359		—		367		—
Total	$	887	$	190	$	1,142	$	442

(a)

Gross carrying amount in 2017 and 2016 includes the fair value at the acquisition date of the OVEC power purchase contract with terms favorable to market recognized as a result of the 2010 acquisition of LKE by PPL. Gross carrying amount in 2016 also includes the fair value at the acquisition date of coal contracts with terms favorable to market recognized as a result of the 2010 acquisition of LKE by PPL. At December 31, 2016, these coal contracts were fully amortized. Offsetting regulatory liabilities were recorded related to these contracts, which are being amortized over the same period as the intangible assets, eliminating any income statement impact. This is referred to as "regulatory offset" in the tables below. See Note 6 for additional information.


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

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



Amortization Expense was as follows:
	2017		2016		2015
Intangible assets with no regulatory offset	$	6	$	6	$	6
Intangible assets with regulatory offset	9		24		51
Total	$	15	$	30	$	57

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



	2018		2019		2020		2021		2022
Intangible assets with no regulatory offset	$	6	$	6	$	6	$	6	$	6
Intangible assets with regulatory offset	9		9		8		8		8
Total	$	15	$	15	$	14	$	14	$	14

(PPL Electric)

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



	December 31, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Land and transmission rights	$	361	$	117	$	341	$	112
Licenses and other	3		1		3		1
Total subject to amortization	364		118		344		113

Not subject to amortization due to indefinite life:
Land and transmission rights	13		—		20		—
Total	$	377	$	118	$	364	$	113

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

Amortization expense was insignificant in 2017, 2016 and 2015 and is expected to be insignificant in future years.

(LKE)

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



	December 31, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	—	$	—	$	269	$	269
Land and transmission rights	21		3		21		3
OVEC power purchase agreement (b)	126		58		126		49
Total subject to amortization	$	147	$	61	$	416	$	321


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


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

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

Amortization expense was as follows:



	2017		2016		2015
Intangible assets with no regulatory offset	$	—	$	1	$	—
Intangible assets with regulatory offset	9		24		51
Total	$	9	$	25	$	51

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



	2018		2019		2020		2021		2022
Intangible assets with regulatory offset	$	9	$	9	$	8	$	8	$	8

(LG&E)

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



	December 31, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	—	$	—	$	124	$	124
Land and transmission rights	7		1		7		1
OVEC power purchase agreement (b)	87		40		87		34
Total subject to amortization	$	94	$	41	$	218	$	159


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


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

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

Amortization expense was as follows:



	2017		2016		2015
Intangible assets with regulatory offset	$	6	$	13	$	24

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



	2018		2019		2020		2021		2022
Intangible assets with regulatory offset	$	6	$	6	$	6	$	6	$	6

(KU)

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



	December 31, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Subject to amortization:
Coal contracts (a)	$	—	$	—	$	145	$	145
Land and transmission rights	14		2		14		2
OVEC power purchase agreement (b)	39		18		39		15
Total subject to amortization	$	53	$	20	$	198	$	162


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


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

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

Amortization expense was as follows:



	2017		2016		2015
Intangible assets with no regulatory offset	$	—	$	1	$	—
Intangible assets with regulatory offset	3		11		27
Total	$	3	$	12	$	27

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



	2018		2019		2020		2021		2022
Intangible assets with regulatory offset	$	3	$	3	$	2	$	2	$	2