On May 25, 2022, PPL Rhode Island Holdings acquired 100% of the outstanding shares of common stock of Narragansett Electric from National Grid U.S., a subsidiary of National Grid plc (the Acquisition). Narragansett Electric, whose service area covers substantially all of Rhode Island, is primarily engaged in the transmission and distribution of natural gas and electricity. The Acquisition expands PPL's portfolio of regulated natural gas and electricity transmission and distribution assets, has improved PPL's credit metrics and is expected to enhance long term earnings growth. Following the closing of the Acquisition, Narragansett Electric provides services doing business under the name Rhode Island Energy (RIE).

The consideration for the Acquisition consisted of approximately $3.8 billion in cash and approximately $1.5 billion of long-term debt assumed through the transaction. The fair value of the consideration paid for Narragansett Electric was as follows (in billions):

In connection with the Acquisition, National Grid USA Service Company, Inc., National Grid U.S. and Narragansett Electric have entered into a transition services agreement (TSA), pursuant to which National Grid has agreed to provide certain transition services to Narragansett Electric to facilitate the transition of the operation of Narragansett Electric to PPL following the Acquisition, as agreed upon in the Narragansett SPA. The TSA is for an initial two-year term and is subject to extension as necessary to complete the successful transition. TSA costs of $49 million and $67 million were incurred for the three and nine-month periods ended September 30, 2022.

The Acquisition required certain approvals or waivers, including, among others, approval of National Grid USA's shareholders, authorizations or waivers from the Rhode Island Division of Public Utilities and Carriers, the Massachusetts Department of Public Utilities, the Federal Communications Commission (FCC), and the FERC, as well as review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. All such approvals were received prior to closing of the Acquisition.

•RIE will provide a credit to all its electric and natural gas distribution customers in the total amount of $50 million ($40 million net of tax benefit). Based on the relative number of electric distribution customers and natural gas distribution customers as of November 1, 2022, RIE expects to refund, in the form of a bill credit, $33 million to electric customers and $17 million to natural gas customers of amounts collected from customers since the Acquisition date. Each electric customer will receive the same credit, and each natural gas customer will receive the same credit. On September 23, 2022, the RIPUC voted to approve the bill credit tariff advice with modifications. The credits are expected to be issued during the fourth quarter of 2022. A reduction of revenue and a regulatory liability of $50 million for the amounts to be refunded were recorded during the quarter ended September 30, 2022. The amounts to be refunded will not impact RIE's earnings sharing regulatory mechanism.

•RIE will forgive approximately $44 million ($18 million net of allowance for doubtful accounts) in arrearages for low-income and protected residential customers, which represents 100% of the arrearages over 90 days for those customers as of March 31, 2022. PPL deemed these accounts uncollectible and has fully reserved for them as of September 30, 2022, resulting in an increase to "Other operations and maintenance expense" on the Statement of Income of $3 million and $26 million for the three and nine months ended September 30, 2022.

•RIE will not file a base rate case seeking an increase in base distribution rates for natural gas and/or electric service sooner than three years from the Acquisition date, and RIE will not submit a request for a change in base rates unless and until there is at least twelve months of operating experience under PPL's exclusive leadership and after the TSA with National Grid terminates.

•RIE will forgo potential recovery of any and all transition costs which PPL estimates will be approximately $408 million through June 30, 2024, and includes (1) the installation of certain information technology systems; (2) modification and enhancements to physical facilities in Rhode Island; and (3) incurring costs related to severance payments, communications and branding changes, and other transition related costs. These costs, which are being expensed as incurred, were $41 million and $142 million for the three and nine-months ended September 30, 2022.

•RIE will not seek to recover any transaction costs related to the Acquisition, which were $27 million through September 30, 2022, including $18 million for the nine-month period ended September 30, 2022 and an immaterial amount for the three month period ended September 30, 2022, which were recorded in "Other operations and maintenance" on the Statements of Income.

•In June 2022, RIE expensed $20 million of regulatory assets as of the Acquisition date for the Gas Business Enablement (GBE) project and for certain Cybersecurity/IT investments related to GBE. The expense was recorded to "Other operations and maintenance" on the Statements of Income for the quarter ended June 30, 2022. RIE will not seek to recover these regulatory assets from customers in any future proceedings.

•RIE will hold harmless Rhode Island customers from any changes to Accumulated Deferred Income Taxes (ADIT) as a result of the Acquisition. RIE reserves the right to seek rate adjustments based on future changes to ADIT that are not related to the Acquisition.

•RIE will not increase its revenue requirement to a level higher than what would exist in the absence of the Acquisition as a result of any restatement of pension and other post-retirement benefits plan assets and liabilities to fair value after the close of the Acquisition.

•Rhode Island Holdings contributed $2.5 million to the Rhode Island Commerce Corporation's Renewable Energy Fund and will not use any of the $2.5 million to meet its pre-existing renewable energy credit goals in Rhode Island or any other state. This contribution was made during the quarter ended June 30, 2022 and was recorded in "Other Income (Expense)" on the Statement of Income.

•RIE will make available up to $2.5 million for the Rhode Island Attorney General to utilize as needed in evaluating PPL's report on RIE's specific decarbonization goals to support Rhode Island's 2021 Act on Climate or to assess the future of the gas distribution business in Rhode Island. This amount was accrued during the quarter ended June 30, 2022 and was recorded in "Other Income (Expense) - net" on the Statement of Income.

The operations of Narragansett Electric are subject to the accounting for certain types of regulation as prescribed by GAAP. The carrying value of Narragansett Electric’s assets and liabilities subject to rate-setting and cost recovery provisions provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. As such, the fair values of these assets and liabilities equal their carrying values. Accordingly, neither the assets acquired or liabilities assumed, nor the unaudited pro forma financial information presented below, reflect any adjustments related to these amounts.

As of September 30, 2022, the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was $1,579 million, which has been recorded as goodwill. PPL has elected to not push down the effects of purchase accounting to the financial statements of RIE or PPL's Rhode Island Regulated segment. Accordingly, the Rhode Island Regulated segment includes $725 million of legacy goodwill acquired. The remaining excess purchase price of $854 million is being included in PPL's Corporate and Other category for segment reporting purposes. The goodwill reflects the value paid for the expected continued growth of a rate-regulated business located in a defined service area with a constructive regulatory environment, the ability of PPL to leverage its assembled workforce to take advantage of those growth opportunities and the attractiveness of stable, growing cash flows. The tax goodwill will be deductible for income tax purposes, and as such, deferred taxes will be recorded related to goodwill.

The table below shows the preliminary allocation of the purchase price to the assets acquired and liabilities assumed that were recorded in PPL’s Consolidated Balance Sheet as of the Acquisition date. The allocation is subject to change during the one-year measurement period as additional information is obtained about the facts and circumstances that existed at closing. The items pending finalization include, but are not limited to, working capital adjustments and the valuation of defined benefit

plans. As a result, the amount of goodwill included below may change by a material amount as PPL finalizes the allocation of the purchase price. During the three months ended September 30, 2022, adjustments to certain assets acquired and liabilities assumed resulted in a decrease in goodwill of $2 million.


	Purchase Price Allocation as of September 30, 2022
Assets

Current Assets
Cash and Cash Equivalents	$	142
Accounts Receivable (a)	195
Unbilled Revenues	54
Price Risk Management Assets	99
Regulatory Assets	75
Other Current Assets	65
Total Current Assets	630

Noncurrent Assets
Property, Plant and Equipment, net	3,990
Regulatory Assets	437
Goodwill	1,579
Other Noncurrent Assets	134
Total Noncurrent Assets	6,140

Total Assets	$	6,770

Liabilities

Current Liabilities
Long-Term Debt Due Within One Year	$	14
Accounts Payable	181
Taxes Accrued	44
Regulatory Liabilities	237
Other Current Liabilities	198
Total Current Liabilities	674

Noncurrent Liabilities
Long-Term Debt	1,496
Regulatory Liabilities	628
Other Deferred Credits and Noncurrent Liabilities	150
Noncurrent Liabilities	2,274

Total Purchase Price (Balance Sheet Net Assets)	$	3,822

The actual RIE Operating Revenues and Net income attributable to PPL included in PPL's Statement of Income for the period ended September 30, 2022, and PPL's unaudited pro forma 2022 and 2021 Operating Revenues and Net Income (Loss) attributable to PPL, including RIE, as if the Acquisition had occurred on January 1, 2021 are as follows.


	Operating Revenues		Net Income (Loss)
Actual RIE results included from May 25, 2022 - September 30, 2022 (a)	$	512	$	(55)
PPL Pro Forma for the nine months ended 2022	6,322		630
PPL Pro Forma for the nine months ended 2021	5,435		(15)

The pro forma financial information presented above has been derived from the historical consolidated financial statements of PPL and Narragansett Electric. Non-recurring items included in the 2022 pro forma financial information include: (a) $18 million (pre-tax) of transaction costs related to the Acquisition, primarily for advisory, accounting and legal fees incurred, (b) $144 million (pre-tax) of Acquisition integration costs, (c) a $50 million reduction of revenue and a regulatory liability, write-offs of $46 million (pre-tax) of certain accounts receivable and regulatory assets of RIE and $5 million (pre-tax) of expenses accrued in support of Rhode Island's decarbonization goals, all of which were conditions of the Acquisition, and (d) the income tax effect of these items, which was tax effected at the statutory federal income tax rate of 21%.

Non-recurring items included in the 2021 pro forma financial information include: (a) $10 million (pre-tax) of Acquisition integration costs and (b) the income tax effect of this item, which was tax effected at the statutory federal income tax rate of 21%. Losses from the discontinued operations (net of income taxes) of PPL of $1,490 million in 2021 were excluded from the pro forma amount above.

On September 29, 2022, PPL signed a definitive agreement to sell all of Safari Holdings membership interests to Aspen Power Services, LLC (Aspen Power). On November 1, 2022, PPL completed the sale of Safari Holdings (the Transaction).

In connection with entering into the definitive agreement, PPL’s investment in Safari Holdings met the held for sale criteria as of September 30, 2022. As a result, net assets held for sale, including $53 million of goodwill previously presented in the Corporate and Other category for segment reporting purposes, were written down to their estimated fair value, less cost to sell, of $120 million at September 30, 2022. An impairment charge of $67 million ($50 million net of tax benefit) was recorded in "Other operation and maintenance" on the Statements of Income for the three and nine months ended September 30, 2022. The estimated fair value of the net assets held for sale was determined based on the selling price (a Level 1 fair value measurement), adjusted for expected transaction closing adjustments.

The assets and liabilities of Safari Holdings' business were reclassified on PPL's Balance Sheet to "Current assets held for sale," which consists primarily of property, plant and equipment, and "Current liabilities held for sale," which consists primarily of long-term debt and deferred revenue, as of September 30, 2022.

PPL guaranteed the payment obligations of Safari Energy and its subsidiaries (Safari) under certain sale/leaseback financing transactions executed by Safari. These guarantees will remain in place until Safari exercises its option to buy-out the projects under the sale/leaseback financings by the year 2028. Safari will indemnify PPL for any payments made by PPL or claims against PPL under the sale/leaseback transaction guarantees up to $25 million. The estimated maximum exposure of this guarantee is $151 million.

PPL guaranteed the payment obligations of Safari under certain power purchase agreements (PPAs) executed by Safari. Aspen Power is expected to replace these guarantees within 60 days of closing of the divestiture of Safari Holdings and would retain liability for any payments made by PPL or claims against PPL under any guarantee that is not replaced. The estimated maximum exposure of this guarantee is $55 million.

Aspen Power has obtained representation and warranty insurance, therefore, PPL generally has no liability for its representations and warranties under the agreement except for losses suffered related to items not covered. Expiration of these

indemnifications range from 18 months to 6 years from the date of the closing of the transaction, and PPL’s aggregate liability for these claims will not exceed $140 million subject to certain adjustments plus the support obligations provided by PPL under sale-leaseback financings and PPAs that will be replaced by Aspen Power.

On June 14, 2021, PPL WPD Limited completed the sale of PPL's utility business to National Grid Holdings One plc (National Grid U.K.), a subsidiary of National Grid plc. The transaction resulted in cash proceeds of $10.7 billion inclusive of foreign currency hedges executed by PPL. PPL received net proceeds, after taxes and fees, of $10.4 billion. PPL WPD Limited agreed to indemnify National Grid U.K. for certain tax related matters. See Note 10 for additional information. PPL has not had and will not have any significant involvement with the U.K. utility business with the completion of the sale.


	Three Months		Nine Months

Operating Revenues	$	—	$	1,344
Operating Expenses	—		466
Other Income (Expense) - net	—		202
Interest Expense (a)	—		209
Income before income taxes	—		871
Loss on sale	—		(1,609)
Income taxes	2		752
Income (Loss) from Discontinued Operations (net of income taxes)	$	(2)	$	(1,490)