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Fair Value Measurements
6 Months Ended
Jun. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
 
(All Registrants)
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models) and/or a cost approach (generally, replacement cost) are used to measure the fair value of an asset or liability, as appropriate. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. The fair value of a group of financial assets and liabilities is measured on a net basis. Transfers between levels are recognized at end-of-reporting-period values. During the three and six months ended June 30, 2016 and 2015, there were no transfers between Level 1 and Level 2. See Note 1 in each Registrant's 2015 Form 10-K for information on the levels in the fair value hierarchy.
 
Recurring Fair Value Measurements

The assets and liabilities measured at fair value were:
 
 
June 30, 2016
 
December 31, 2015
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
PPL
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
492

 
$
492

 
$

 
$

 
$
836

 
$
836

 
$

 
$

Restricted cash and cash equivalents (a)
33

 
33

 

 

 
33

 
33

 

 

Price risk management assets (b):
 

 
 

 


 


 
 

 
 

 
 

 
 

Foreign currency contracts
393

 

 
393

 

 
209

 

 
209

 

Cross-currency swaps
92

 

 
92

 

 
86

 

 
86

 

Total price risk management assets
485

 

 
485

 

 
295

 

 
295

 

Auction rate securities (c)
2

 

 

 
2

 
2

 

 

 
2

Total assets
$
1,012

 
$
525

 
$
485

 
$
2

 
$
1,166

 
$
869

 
$
295

 
$
2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Price risk management liabilities (b):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest rate swaps
$
56

 
$

 
$
56

 
$

 
$
71

 
$

 
$
71

 
$

Foreign currency contracts

 

 

 

 
1

 

 
1

 

Total price risk management liabilities
$
56

 
$

 
$
56

 
$

 
$
72

 
$

 
$
72

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PPL Electric
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Assets
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
35

 
$
35

 
$

 
$

 
$
47

 
$
47

 
$

 
$

Restricted cash and cash equivalents (a)
2

 
2

 

 

 
2

 
2

 

 

Total assets
$
37

 
$
37

 
$

 
$

 
$
49

 
$
49

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents       
$
16

 
$
16

 
$

 
$

 
$
30

 
$
30

 
$

 
$

Cash collateral posted to counterparties (d)
9

 
9

 

 

 
9

 
9

 

 

Total assets
$
25

 
$
25

 
$

 
$

 
$
39

 
$
39

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2016
 
December 31, 2015
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Price risk management liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Interest rate swaps
$
56

 
$

 
$
56

 
$

 
$
47

 
$

 
$
47

 
$

Total price risk management liabilities
$
56

 
$

 
$
56

 
$

 
$
47

 
$

 
$
47

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Assets
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Cash and cash equivalents
$
8

 
$
8

 
$

 
$

 
$
19

 
$
19

 
$

 
$

Cash collateral posted to counterparties (d)
9

 
9

 

 

 
9

 
9

 

 

Total assets
$
17

 
$
17

 
$

 
$

 
$
28

 
$
28

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Price risk management liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Interest rate swaps
$
56

 
$

 
$
56

 
$

 
$
47

 
$

 
$
47

 
$

Total price risk management liabilities
$
56

 
$

 
$
56

 
$

 
$
47

 
$

 
$
47

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
KU
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
8

 
$

 
$

 
$
11

 
$
11

 
$

 
$

Total assets
$
8

 
$
8

 
$

 
$

 
$
11

 
$
11

 
$

 
$


(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.
(d)
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.

Price Risk Management Assets/Liabilities - Interest Rate Swaps/Foreign Currency Contracts/Cross-Currency Swaps (PPL, LKE, LG&E and KU)
 
To manage interest rate risk, PPL, LKE, LG&E and KU use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating swaps. To manage foreign currency risk, PPL uses foreign currency contracts such as forwards, options and cross-currency swaps that contain characteristics of both interest rate and foreign currency contracts. An income approach is used to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., LIBOR and government security rates) and forward foreign currency exchange rates (e.g., GBP), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, market information cannot practicably be obtained to value credit risk and therefore internal models are relied upon. These models use projected probabilities of default and estimated recovery rates based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3.

Nonrecurring Fair Value Measurements
 
See Note 8 for information regarding the estimated fair value of the Supply segment's net assets as of the June 1, 2015 spinoff date.

Financial Instruments Not Recorded at Fair Value (All Registrants)
 
The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below. The fair values were estimated using an income approach by discounting future cash flows at estimated current cost of funding rates, which incorporate the credit risk of the Registrants. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.
 
 
June 30, 2016
 
December 31, 2015
 
Carrying
Amount (a)
 
Fair Value
 
Carrying
Amount (a)
 
Fair Value
PPL
$
19,168

 
$
22,669

 
$
19,048

 
$
21,218

PPL Electric
2,830

 
3,359

 
2,828

 
3,088

LKE
5,089

 
5,773

 
5,088

 
5,384

LG&E
1,642

 
1,832

 
1,642

 
1,704

KU
2,327

 
2,666

 
2,326

 
2,467

 
(a)
Amounts are net of debt issuance costs.

The carrying value of short-term debt (including notes between affiliates), when outstanding, approximates fair value due to the variable interest rates associated with the short-term debt and is classified as Level 2.