Quarterly Report



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  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 June 30, 2010
 
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
       
 
1-32944
PPL Energy Supply, LLC
(Exact name of Registrant as specified in its charter)
(Delaware)
Two North Ninth Street
Allentown, PA  18101-1179
(610) 774-5151
23-3074920
       
 
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
       
       


Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

 
PPL Corporation
Yes  X   
No        
 
 
PPL Energy Supply, LLC
Yes  X   
No        
 
 
PPL Electric Utilities Corporation
Yes  X   
No        
 

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

 
PPL Corporation
Yes        
No        
 
 
PPL Energy Supply, LLC
Yes        
No        
 
 
PPL Electric Utilities Corporation
Yes        
No        
 

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or a smaller reporting company.  See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  (Check one):

   
Large accelerated filer
Accelerated
filer
Non-accelerated
filer
Smaller reporting
company
 
PPL Corporation
[ X ]
[     ]
[     ]
[     ]
 
PPL Energy Supply, LLC
[     ]
[     ]
[ X ]
[     ]
 
PPL Electric Utilities Corporation
[     ]
[     ]
[ X ]
[     ]

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

 
PPL Corporation
Yes        
No  X   
 
 
PPL Energy Supply, LLC
Yes        
No  X   
 
 
PPL Electric Utilities Corporation
Yes        
No  X   
 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

 
PPL Corporation
Common stock, $.01 par value, 482,723,432 shares outstanding at July 30, 2010.
     
 
PPL Energy Supply, LLC
PPL Corporation indirectly holds all of the membership interests in PPL Energy Supply, LLC.
     
 
PPL Electric Utilities Corporation
Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at July 30, 2010.

This document is available free of charge at the Investor Center on PPL's Web site at www.pplweb.com.  However, information on this Web site does not constitute a part of this Form 10-Q.
PPL CORPORATION
PPL ENERGY SUPPLY, LLC
PPL ELECTRIC UTILITIES CORPORATION

FORM 10-Q
FOR THE QUARTER ENDED June 30, 2010

Table of Contents

 
Page
i
 
1
 
PART I.  FINANCIAL INFORMATION
   
 
Item 1.  Financial Statements
   
   
PPL Corporation and Subsidiaries
   
     
2
 
     
3
 
     
4
 
     
6
 
     
7
 
   
PPL Energy Supply, LLC and Subsidiaries
   
     
8
 
     
9
 
     
10
 
     
12
 
     
13
 
   
PPL Electric Utilities Corporation and Subsidiaries
   
     
14
 
     
15
 
     
16
 
     
18
 
 
Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
   
   
19
 
   
19
 
   
21
 
   
21
 
   
22
 
   
24
 
   
25
 
   
29
 
   
32
 
   
33
 
   
47
 
   
48
 
   
49
 
   
54
 
   
66
 
   
66
 
   
66
 
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
   
     
68
 
     
86
 
     
99
 
 
105
 
 
105
 
 
105
 
PART II.  OTHER INFORMATION
   
 
106
 
 
106
 
 
108
 
109
 
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
   
     
110
 
     
111
 
     
112
 
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
   
     
113
 
     
115
 
     
117
 
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
   
     
119
 
     
121
 
     
123
 
GLOSSARY OF TERMS AND ABBREVIATIONS

PPL Corporation and its current and former subsidiaries

PPL   - PPL Corporation, the parent holding company of PPL Electric, PPL Energy Funding and other subsidiaries.

PPL Capital Funding - PPL Capital Funding, Inc., a financing subsidiary of PPL.

PPL Electric   - PPL Electric Utilities Corporation, a regulated utility subsidiary of PPL that transmits and distributes electricity in its service territory and provides electric supply to retail customers in this territory as a PLR.

PPL Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and the parent company of PPL Energy Supply.

PPL EnergyPlus - PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that markets and trades wholesale and retail electricity and gas, and supplies energy and energy services in deregulated markets.

PPL Energy Supply - PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the parent company of PPL Generation, PPL EnergyPlus, PPL Global and other subsidiaries.

PPL Gas Utilities - PPL Gas Utilities Corporation, a regulated utility that provided natural gas distribution, transmission and storage services, and the competitive sale of propane, which was a subsidiary of PPL until its sale in October 2008.

PPL Generation - PPL Generation, LLC, a subsidiary of PPL Energy Supply that owns and operates U.S. generating facilities through various subsidiaries.

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Supply that primarily owns and operates a business in the U.K., WPD, that is focused on the regulated distribution of electricity.

PPL Maine - PPL Maine, LLC, a subsidiary of PPL Generation that owns generating operations in Maine.

PPL Martins Creek - PPL Martins Creek, LLC, a subsidiary of PPL Generation that owns generating operations in Pennsylvania.

PPL Montana - PPL Montana, LLC, an indirect subsidiary of PPL Generation that generates electricity for wholesale sales in Montana and the Pacific Northwest.

PPL Services - PPL Services Corporation, a subsidiary of PPL that provides shared services for PPL and its subsidiaries.

PPL Susquehanna - PPL Susquehanna, LLC, the nuclear generating subsidiary of PPL Generation.

WPD - refers collectively to WPDH Limited and its subsidiaries.

WPD LLP - Western Power Distribution LLP, a wholly owned subsidiary of WPDH Limited, which owns WPD (South West) and WPD (South Wales).

WPD   (South Wales) - Western Power Distribution (South Wales) plc, a British regional electric utility company.

WPD   (South West) - Western Power Distribution (South West) plc, a British regional electric utility company.

WPDH Limited - Western Power Distribution Holdings Limited, an indirect, wholly owned subsidiary of PPL Global.  WPDH Limited owns WPD LLP.

Other terms and abbreviations

£ - British pound sterling.

2009 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2009.

Acid Rain Program - allowance trading system established by the Clean Air Act in an effort to reduce levels of sulfur dioxide.  Under this program, affected power plants are allocated allowances based on their fuel consumption during specified baseline years and a specific emissions rate.

Act 129 - became effective in October 2008.  The law amends the Pennsylvania Public Utility Code and creates an energy efficiency and conservation program and smart metering technology requirements, adopts new PLR electricity supply procurement rules, provides remedies for market misconduct and makes changes to the existing Alternative Energy Portfolio Standard.

AFUDC - Allowance for Funds Used During Construction, the cost of equity and debt funds used to finance construction projects of regulated businesses, which is capitalized as part of construction cost.

A.M. Best - A.M. Best Company, a company that reports on the financial condition of insurance companies.

AOCI - accumulated other comprehensive income or loss.

ARO - asset retirement obligation.

Baseload generation - includes the output provided by PPL's nuclear, coal, hydroelectric and qualifying facilities.

Basis - when used in the context of derivatives and commodity trading, the commodity price differential between two locations, products or time periods.

Bcf - billion cubic feet.

Bridge Facility - an up to $6.5 billion Senior Bridge Term Loan Credit Agreement between PPL Capital Funding, as borrower, and PPL, as guarantor, and a group of banks syndicated in June 2010, to serve as a backstop in the event alternative financing is not available prior to the closing of PPL's pending acquisition of E.ON U.S.

CAIR - t he EPA's Clean Air Interstate Rule.

Clean Air Act - federal legislation enacted to address certain environmental issues related to air emissions, including acid rain, ozone and toxic air emissions.

COLA - license application for a combined construction permit and operating license from the NRC.
 
CTC - competitive transition charge on customer bills to recover allowable transition costs under the Customer Choice Act.

Customer Choice Act   - the Pennsylvania Electricity Generation Customer Choice and Competition Act, legislation enacted to restructure the state's electric utility industry to create retail access to a competitive market for generation of electricity.

DEP - Department of Environmental Protection, a state government agency.

Dodd-Frank Act - the Dodd-Frank Wall Street Reform and Consumer Protection Act   that was signed into law in July 2010.

DOE - Department of Energy, a U.S. government agency.

DRIP - Dividend Reinvestment Plan.

E.ON AG - a German corporation and the parent of E.ON US Investments.

E.ON U.S. - E.ON U.S. LLC, a Kentucky limited liability company and the parent of LG&E and KU.

E.ON US Investments - E.ON US Investments Corp., a Delaware corporation and the parent of E.ON U.S.

Economic Stimulus Package - The American Recovery and Reinvestment Act of 2009, generally referred to as the federal economic stimulus package, which was signed into law in February 2009.

EMF - electric and magnetic fields.

EPA - Environmental Protection Agency, a U.S. government agency.

EPS - earnings per share.

Equity Unit -  consists of a Purchase Contract and, initially, a 5.0% undivided beneficial ownership interest in $1,000 principal amount of PPL Capital Funding 4.625% Junior Subordinated Notes due 2018.
 
ESOP - Employee Stock Ownership Plan.

Euro - the basic monetary unit among participating members of the European Union .

FERC - Federal Energy Regulatory Commission, the federal agency that regulates, among other things, interstate transmission and wholesale sales of electricity, hydroelectric power projects and related matters.

Fitch - Fitch, Inc.

FTR - financial transmission rights, which are financial instruments established to manage price risk related to electricity transmission congestion.  They entitle the holder to receive compensation or require the holder to remit payment for certain congestion-related transmission charges that arise when the transmission grid is congested.

Fundamental Change - as it relates to the terms of the Equity Units, will be deemed to have occurred if any of the following occurs with respect to PPL, subject to certain exceptions:  (i) a change of control; (ii) a consolidation with or merger into any other entity; (iii) common stock ceases to be listed or quoted; or (iv) a liquidation, dissolution or termination.

GAAP - generally accepted accounting principles in the U.S.

GBP - British pound sterling.

GWh - gigawatt-hour, one million kilowatt-hours.

Health Care Reform - The Patient Protection and Affordable Care Act (HR 3590) and the Health Care and Education Reconciliation Act of 2010 (HR 4872), signed into law in March 2010.

HSR Act - Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which requires, among other things, notification to the U.S. Federal Trade Commission and the U.S. Department of Justice of certain large merger or acquisition transactions, and the expiration or earlier termination of a 30-day waiting period prior to completing any such transaction.

Intermediate and peaking generation - includes the output provided by PPL Energy Supply's oil- and natural gas-fired units.

IRS   - Internal Revenue Service, a U.S. government agency.

ISO - Independent System Operator.

KU - Kentucky Utilities Company, a Kentucky and a Virginia corporation and a public utility subsidiary of E.ON U.S. engaged in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky.

LG&E - Louisville Gas and Electric Company, a Kentucky corporation and a public utility subsidiary of E.ON U.S. engaged in the regulated generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas, primarily in Kentucky.

LIBOR   -   London Interbank Offered Rate.

Long Island generation business - includes a 79.9 MW gas-fired plant in the Edgewood section of Brentwood, New York and a 79.9 MW oil-fired plant in Shoreham, New York and related tolling agreements.  This business was sold in February 2010.

MACT - maximum achievable control technology.

Montana Power - The Montana Power Company, a Montana-based company that sold its generating assets to PPL Montana in December 1999.  Through a series of transactions consummated during the first quarter of 2002, Montana Power sold its electricity delivery business to NorthWestern.

Moody's - Moody's Investors Service, Inc.

MW - megawatt, one thousand kilowatts.

NDT - PPL Susquehanna's nuclear plant decommissioning trust.

NERC - North American Electric Reliability Corporation.

NorthWestern - NorthWestern Corporation, a Delaware corporation, and successor in interest to Montana Power's electricity delivery business, including Montana Power's rights and obligations under contracts with PPL Montana.

NPDES - National Pollutant Discharge Elimination System.

NPNS - the normal purchases and normal sales exception as permitted by derivative accounting rules.

NRC - Nuclear Regulatory Commission, the federal agency that regulates nuclear power facilities.

NUGs - non-utility generators, generating plants not owned by public utilities, whose electrical output must be purchased by utilities under the PURPA if the plant meets certain criteria.

OCI - other comprehensive income or loss.

Ofgem   - Office of Gas and Electricity Markets, the British agency that regulates transmission, distribution and wholesale sales of electricity and related matters.

PJM - PJM Interconnection, L.L.C., operator of the electric transmission network and electric energy market in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

PLR - Provider of Last Resort, the role of PPL Electric in providing default electricity supply to retail customers within its delivery territory who have not chosen to select an alternative electricity supplier under the Customer Choice Act.

PP&E   - property, plant and equipment.

PUC   - Pennsylvania Public Utility Commission, the state agency that regulates certain ratemaking, services, accounting and operations of Pennsylvania utilities.

Purchase Contract - a contract that is a component of the Equity Unit that requires holders to purchase shares of PPL common stock on or prior to July 1, 2013.

PURPA -   Public Utility Regulatory Policies Act of 1978, legislation passed by the U.S. Congress to encourage energy conservation, efficient use of resources and equitable rates.

RECs - renewable energy credits.

Regulation S-X - SEC regulation governing the form and content of and requirements for financial statements required to be filed pursuant to the federal securities laws.

RFC   - ReliabilityFirst Corporation, the regional reliability entity that replaced the Mid-Atlantic Area Coordination Council.

RMC - Risk Management Committee.

Sarbanes-Oxley Act of 2002   - sets requirements for management's assessment of internal controls for financial reporting.  It also requires an independent auditor to make its own assessment.

Scrubber - an air pollution control device that can remove particulates and/or gases (such as sulfur dioxide) from exhaust gases.

SEC - Securities and Exchange Commission, a U.S. government agency whose primary mission is to protect investors and maintain the integrity of the securities markets.

SIFMA Index - the Securities Industry and Financial Markets Association Municipal Swap Index.

S&P - Standard & Poor's Ratings Services.

Smart meter - an electric meter that utilizes smart metering technology.

Smart metering technology - technology that can measure, among other things, time of electricity consumption to permit offering rate incentives for usage during lower cost or demand intervals.  The use of this technology also strengthens network reliability.

Superfund - federal environmental legislation that addresses remediation of contaminated sites; states also have similar statutes.

Tolling agreement   - agreement whereby the owner of an electric generating facility agrees to use that facility to convert fuel provided by a third party into electric energy for delivery back to the third party.

VaR - value-at-risk, a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level.

VIE - variable interest entity.

Volumetric risk - the risk that the actual load provided under full-requirement contracts, which do not provide for specific levels of load, could vary significantly from forecasted estimates.

VWAP - as it relates to the Equity Units issued by PPL, the per share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg page "PPL <EQUITY> AQR" (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading on the relevant trading day until the scheduled close of trading on the relevant trading day (or if such volume-weighted average price is unavailable, the market price of one share of PPL common stock on such trading day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by PPL).
FORWARD-LOOKING INFORMATION

Statements contained in this Form 10-Q concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical fact are "forward-looking statements" within the meaning of the federal securities laws.  Although PPL, PPL Energy Supply and PPL Electric believe that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct.  Forward-looking statements are subject to many risks and uncertainties, and actual results may differ materially from the results discussed in forward-looking statements.  In addition to the specific factors discussed in "PART I - Item 1A. Risk Factors" in each Registrant's 2009 Form 10-K, and "PART I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "PART II - Item 1A. Risk Factors" in this Form 10-Q, the following are among the important factors that could cause actual results to differ materially from the forward-looking statements.

·
fuel supply cost and availability;
·
weather conditions affecting generation, customer energy use and operating costs;
·
operation, availability and operating costs of existing generation facilities;
·
transmission and distribution system conditions and operating costs;
·
potential expansion of alternative sources of electricity generation;
·
potential laws or regulations to reduce emissions of "greenhouse" gases;
·
collective labor bargaining negotiations;
·
the outcome of litigation against PPL and its subsidiaries;
·
potential effects of threatened or actual terrorism, war or other hostilities, or natural disasters;
·
the commitments and liabilities of PPL and its subsidiaries;
·
market demand and prices for energy, capacity, emission allowances and delivered fuel;
·
competition in retail and wholesale power markets;
·
liquidity of wholesale power markets;
·
defaults by counterparties under energy, fuel or other power product contracts;
·
market prices of commodity inputs for ongoing capital expenditures;
·
capital market conditions, including the availability of capital or credit, changes in interest rates, and decisions regarding capital structure;
·
stock price performance of PPL;
·
the fair value of debt and equity securities and the impact on defined benefit costs and resultant cash funding requirements for defined benefit plans;
·
interest rates and their effect on pension, retiree medical and nuclear decommissioning liabilities;
·
the impact of the current financial and economic downturn;
·
the impact of the financial and economic market conditions in general;
·
the effect of electricity price deregulation beginning in 2010 in PPL Electric's service territory;
·
the profitability and liquidity, including access to capital markets and credit facilities, of PPL and its subsidiaries;
·
new accounting requirements or new interpretations or applications of existing requirements;
·
changes in securities and credit ratings;
·
foreign currency exchange rates;
·
current and future environmental conditions, regulations and other requirements and the related costs of compliance, including environmental capital expenditures, emission allowance costs and other expenses;
·
political, regulatory or economic conditions in states, regions or countries where PPL or its subsidiaries conduct business;
·
receipt of necessary governmental permits, approvals and rate relief;
·
new state, federal or foreign legislation, including new tax legislation;
·
state, federal and foreign regulatory developments;
·
the outcome of any rate cases by PPL Electric at the PUC;
·
the impact of any state, federal or foreign investigations applicable to PPL and its subsidiaries and the energy industry;
·
the effect of any business or industry restructuring;
·
development of new projects, markets and technologies;
·
performance of new ventures; and
·
business or asset acquisitions and dispositions, including PPL's pending acquisition of E.ON U.S. and the satisfaction of all conditions precedent to the completion of that acquisition.

Any such forward-looking statements should be considered in light of such important factors and in conjunction with other documents of PPL, PPL Energy Supply and PPL Electric on file with the SEC.

New factors that could cause actual results to differ materially from those described in forward-looking statements arise from time to time, and it is not possible for PPL, PPL Energy Supply or PPL Electric to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement.  Any forward-looking statement speaks only as of the date on which such statement is made, and PPL, PPL Energy Supply and PPL Electric undertake no obligation to update the information contained in such statement to reflect subsequent developments or information.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, except share data)
   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
   
2010
 
2009
 
2010
 
2009
Operating Revenues
               
Utility
 
$
692
   
$
881
   
$
1,706
   
$
1,946
 
Unregulated retail electric and gas
   
101
     
32
     
205
     
74
 
Wholesale energy marketing
                               
Realized
   
1,261
     
758
     
2,647
     
1,556
 
Unrealized economic activity (Note 14)
   
(666
)
   
(112
)
   
(242
)
   
240
 
Net energy trading margins
   
5
     
7
     
16
     
(5
)
Energy-related businesses
   
110
     
105
     
204
     
204
 
Total Operating Revenues
   
1,503
     
1,671
     
4,536
     
4,015
 
                                 
Operating Expenses
                               
Operation
                               
Fuel
   
263
     
186
     
496
     
444
 
Energy purchases
                               
Realized
   
740
     
613
     
1,752
     
1,290
 
Unrealized economic activity (Note 14)
   
(445
)
   
65
     
118
     
334
 
Other operation and maintenance
   
423
     
354
     
868
     
726
 
Amortization of recoverable transition costs
           
70
             
154
 
Depreciation
   
130
     
114
     
258
     
223
 
Taxes, other than income
   
54
     
67
     
126
     
139
 
Energy-related businesses
   
100
     
98
     
188
     
189
 
Total Operating Expenses
   
1,265
     
1,567
     
3,806
     
3,499
 
                                 
Operating Income
   
238
     
104
     
730
     
516
 
                                 
Other Income (Expense) - net
   
1
     
(6
)
   
9
     
29
 
                                 
Other-Than-Temporary Impairments
   
3
     
1
     
3
     
18
 
                                 
Interest Expense
   
132
     
99
     
246
     
188
 
                                 
Income (Loss) from Continuing Operations Before Income Taxes
   
104
     
(2
)
   
490
     
339
 
                                 
Income Taxes
   
12
     
(31
)
   
143
     
67
 
                                 
Income from Continuing Operations After Income Taxes
   
92
     
29
     
347
     
272
 
                                 
Loss from Discontinued Operations (net of income taxes) (Note 8)
           
(32
)
           
(29
)
                                 
Net Income (Loss)
   
92
     
(3
)
   
347
     
243
 
                                 
Net Income Attributable to Noncontrolling Interests
   
7
     
4
     
12
     
9
 
                                 
Net Income (Loss) Attributable to PPL Corporation
 
$
85
   
$
(7
)
 
$
335
   
$
234
 
                                 
Amounts Attributable to PPL Corporation:
                               
Income from Continuing Operations After Income Taxes
 
$
85
   
$
25
   
$
335
   
$
263
 
Loss from Discontinued Operations (net of income taxes)
           
(32
)
           
(29
)
Net Income (Loss)
 
$
85
   
$
(7
)
 
$
335
   
$
234
 
                                 
Earnings Per Share of Common Stock:
                               
Income from Continuing Operations After Income Taxes Available to PPL Corporation Common Shareowners:
                               
Basic
 
$
0.22
   
$
0.07
   
$
0.88
   
$
0.70
 
Diluted
 
$
0.22
   
$
0.07
   
$
0.88
   
$
0.70
 
Net Income (Loss) Available to PPL Corporation Common Shareowners:
                               
Basic
 
$
0.22
   
$
(0.02
)
 
$
0.88
   
$
0.62
 
Diluted
 
$
0.22
   
$
(0.02
)
 
$
0.88
   
$
0.62
 
     
.
                         
Dividends Declared Per Share of Common Stock
 
$
0.350
   
$
0.345
   
$
0.700
   
$
0.690
 
                                 
Weighted-Average Shares of Common Stock Outstanding
(in thousands)
                               
Basic
   
381,896
     
375,881
     
379,810
     
375,493
 
Diluted
   
382,075
     
376,206
     
380,034
     
375,805
 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
   
Six Months Ended June 30,
   
2010
 
2009
Cash Flows from Operating Activities
               
Net income
 
$
347
   
$
243
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
258
     
225
 
Amortization
   
124
     
182
 
Defined benefit plans - expense
   
51
     
41
 
Defined benefit plans - funding
   
(345
)
   
(52
)
Deferred income taxes and investment tax credits
   
(63
)
   
(86
)
Gains related to the extinguishment of notes
           
(29
)
Impairment of assets
   
14
     
104
 
Unrealized losses on derivatives, and other hedging activities
   
344
     
40
 
Provision for Montana hydroelectric litigation
   
59
         
Other
   
59
     
30
 
Change in current assets and current liabilities
               
Accounts receivable
   
(45
)
   
71
 
Accounts payable
   
79
     
(184
)
Unbilled revenue
   
(114
)
   
94
 
Fuel, materials and supplies
   
(22
)
   
(45
)
Prepayments
   
(156
)
   
(85
)
Counterparty collateral
   
98
     
201
 
Price risk management assets and liabilities
   
(16
)
   
(192
)
Other
   
(70
)
   
6
 
Other operating activities
               
Other assets
   
(28
)
   
(5
)
Other liabilities
   
(2
)
   
9
 
Net cash provided by operating activities
   
572
     
568
 
                 
Cash Flows from Investing Activities
               
Expenditures for property, plant and equipment
   
(624
)
   
(524
)
Proceeds from the sale of the Long Island generation business
   
124
         
Expenditures for intangible assets
   
(42
)
   
(48
)
Purchases of nuclear plant decommissioning trust investments
   
(75
)
   
(153
)
Proceeds from the sale of nuclear plant decommissioning trust investments
   
68
     
141
 
Proceeds from the sale of other investments
           
150
 
Net decrease in restricted cash and cash equivalents
   
80
     
189
 
Other investing activities
   
11
     
5
 
Net cash used in investing activities
   
(458
)
   
(240
)
                 
Cash Flows from Financing Activities
               
Issuance of long-term debt
   
1,747
     
298
 
Retirement of long-term debt
   
(1
)
   
(430
)
Issuance of equity, net of issuance costs
   
2,410
     
30
 
Payment of common stock dividends
   
(263
)
   
(256
)
Redemption of preferred stock of a subsidiary
   
(54
)
       
Debt issuance costs
   
(76
)
   
(9
)
Net decrease in short-term debt
   
(158
)
   
(77
)
Other financing activities
   
(10
)
   
(11
)
Net cash provided by (used in) financing activities
   
3,595
     
(455
)
                 
Effect of Exchange Rates on Cash and Cash Equivalents
   
(5
)
       
                 
Net Increase (Decrease) in Cash and Cash Equivalents
   
3,704
     
(127
)
Cash and Cash Equivalents at Beginning of Period
   
801
     
1,100
 
Cash and Cash Equivalents at End of Period
 
$
4,505
   
$
973
 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
   
June 30,
2010
 
December 31,
2009
Assets
               
                 
Current Assets
               
Cash and cash equivalents
 
$
4,505
   
$
801
 
Restricted cash and cash equivalents
   
30
     
105
 
Accounts receivable (less reserve:  2010, $38; 2009, $37)
               
Customer
   
446
     
409
 
Other
   
54
     
59
 
Unbilled revenues
   
706
     
600
 
Fuel, materials and supplies
   
378
     
357
 
Prepayments
   
256
     
102
 
Price risk management assets
   
2,118
     
2,157
 
Other intangibles
   
18
     
25
 
Assets held for sale
   
12
     
127
 
Other current assets
   
76
     
10
 
Total Current Assets
   
8,599
     
4,752
 
                 
Investments
               
Nuclear plant decommissioning trust funds
   
535
     
548
 
Other investments
   
62
     
65
 
Total Investments
   
597
     
613
 
                 
Property, Plant and Equipment
               
Electric plant
               
Transmission and distribution
   
8,373
     
8,686
 
Generation
   
10,753
     
10,493
 
General
   
909
     
899
 
Electric plant in service
   
20,035
     
20,078
 
Construction work in progress
   
564
     
567
 
Nuclear fuel
   
468
     
506
 
Electric plant
   
21,067
     
21,151
 
Gas and oil plant
   
68
     
68
 
Other property
   
158
     
166
 
Property, plant and equipment, gross
   
21,293
     
21,385
 
Less:  accumulated depreciation
   
8,245
     
8,211
 
Property, Plant and Equipment, net (a)
   
13,048
     
13,174
 
                 
Regulatory and Other Noncurrent Assets
               
Regulatory assets
   
525
     
531
 
Goodwill
   
721
     
806
 
Other intangibles (a)
   
602
     
615
 
Price risk management assets
   
1,357
     
1,274
 
Other noncurrent assets
   
464
     
400
 
Total Regulatory and Other Noncurrent Assets
   
3,669
     
3,626
 
                 
Total Assets
 
$
25,913
   
$
22,165
 

(a)
 
At June 30, 2010, includes $419 million of PP&E, consisting primarily of "Generation," including leasehold improvements, and $11 million of "Other intangibles" from the consolidation of a VIE.  At December 31, 2009, these balances were $424 million and $11 million.  See Note 6 for additional information.
 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
   
June 30,
2010
 
December 31,
2009
Liabilities and Equity
               
                 
Current Liabilities
               
Short-term debt
 
$
466
   
$
639
 
Accounts payable
   
730
     
619
 
Taxes
   
76
     
92
 
Interest
   
108
     
113
 
Dividends
   
137
     
135
 
Price risk management liabilities
   
1,528
     
1,502
 
Counterparty collateral
   
454
     
356
 
Other current liabilities
   
696
     
726
 
Total Current Liabilities
   
4,195
     
4,182
 
                 
Long-term Debt
   
8,711
     
7,143
 
                 
Deferred Credits and Other Noncurrent Liabilities
               
Deferred income taxes and investment tax credits
   
2,320
     
2,153
 
Price risk management liabilities
   
616
     
582
 
Accrued pension obligations
   
781
     
1,283
 
Asset retirement obligations
   
427
     
416
 
Other deferred credits and noncurrent liabilities
   
658
     
591
 
Total Deferred Credits and Other Noncurrent Liabilities
   
4,802
     
5,025
 
                 
Commitments and Contingent Liabilities (Note 10)
               
                 
Equity
               
PPL Corporation Shareowners' Common Equity
               
Common stock - $0.01 par value (a)
   
5
     
4
 
Capital in excess of par value
   
4,553
     
2,280
 
Earnings reinvested
   
3,818
     
3,749
 
Accumulated other comprehensive loss
   
(439
)
   
(537
)
Total PPL Corporation Shareowners' Common Equity
   
7,937
     
5,496
 
Noncontrolling Interests
   
268
     
319
 
Total Equity
   
8,205
     
5,815
 
                 
Total Liabilities and Equity
 
$
25,913
   
$
22,165
 

(a)
 
780,000 shares authorized; 482,188 and 377,183 shares issued and outstanding at June 30, 2010 and December 31, 2009.
 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
   
PPL Corporation Shareowners
                 
   
Common stock shares outstanding (a)
     
Common stock
     
Capital in excess of par value
     
Earnings reinvested
     
Accumulated other comprehensive loss
     
Non-controlling interests
     
Total
 
                                                       
March 31, 2010
 
378,131
   
$
4
   
$
2,310
   
$
3,866
   
$
(288
)
 
$
319
   
$
6,211
 
Common stock issued (b)
 
104,057
     
1
     
2,425
                             
2,426
 
Purchase Contracts (c)
                 
(186
)
                           
(186
)
Stock-based compensation
                 
4
                             
4
 
Net income
                         
85
             
7
     
92
 
Dividends, dividend equivalents, redemptions and distributions (d)
                         
(133
)
           
(58
)
   
(191
)
Other comprehensive loss
                                 
(151
)
           
(151
)
June 30, 2010
 
482,188
   
$
5
   
$
4,553
   
$
3,818
   
$
(439
)
 
$
268
   
$
8,205
 
                                                       
December 31, 2009
 
377,183
   
$
4
   
$
2,280
   
$
3,749
   
$
(537
)
 
$
319
   
$
5,815
 
Common stock issued (b)
 
105,005
     
1
     
2,458
                             
2,459
 
Purchase Contracts (c)
                 
(186
)
                           
(186
)
Stock-based compensation
                 
1
                             
1
 
Net income
                         
335
             
12
     
347
 
Dividends, dividend equivalents, redemptions and distributions (d)
                         
(266
)
           
(63
)
   
(329
)
Other comprehensive income
                                 
98
             
98
 
June 30, 2010
 
482,188
   
$
5
   
$
4,553
   
$
3,818
   
$
(439
)
 
$
268
   
$
8,205
 
                                                       
March 31, 2009
 
375,597
   
$
4
   
$
2,228
   
$
3,973
   
$
(968
)
 
$
319
   
$
5,556
 
Common stock issued (b)
 
547
             
15
                             
15
 
Stock-based compensation
                 
3
                             
3
 
Net income (loss)
                         
(7
)
           
4
     
(3
)
Dividends, dividend equivalents and distributions (d)
                         
(130
)
           
(4
)
   
(134
)
Other comprehensive income
                                 
401
             
401
 
Cumulative effect adjustment (e)
                         
1
     
(1
)
               
June 30, 2009
 
376,144
   
$
4
   
$
2,246
   
$
3,837
   
$
(568
)
 
$
319
   
$
5,838
 
                                                       
December 31, 2008
 
374,581
   
$
4
   
$
2,196
   
$
3,862
   
$
(985
)
 
$
319
   
$
5,396
 
Common stock issued (b)
 
1,597
             
49
                             
49
 
Common stock repurchased
 
(34
)
           
(1
)
                           
(1
)
Stock-based compensation
                 
2
                             
2
 
Net income
                         
234
             
9
     
243
 
Dividends, dividend equivalents and distributions (d)
                         
(260
)
           
(9
)
   
(269
)
Other comprehensive income
                                 
418
             
418
 
Cumulative effect adjustment (e)
                         
1
     
(1
)
               
June 30, 2009
 
376,144
   
$
4
   
$
2,246
   
$
3,837
   
$
(568
)
 
$
319
   
$
5,838
 
                                                       

(a)
 
Shares in thousands.  Each share entitles the holder to one vote on any question presented to any shareowners' meeting.
(b)
 
The three and six months ended June 30, 2010 include the issuance of 103.5 million shares of common stock.  See Note 7 for additional information.  The three and six months ended June 30, 2010 and 2009 include shares of common stock issued through various stock and incentive compensation plans.  "Capital in excess of par value" for the six months ended June 30, 2010 and 2009 includes $8 million and $7 million for a company contribution to the ESOP.
(c)
 
Includes $157 million for the Purchase Contracts and $29 million of related fees and expenses.  See Note 7 for additional information.
(d)
 
"Earnings reinvested" includes dividends and dividend equivalents on PPL Corporation common stock and restricted stock units.  "Noncontrolling interests" includes dividends, redemptions and distributions to noncontrolling interests, which for the three and six months ended June 30, 2010 include $54 million paid to redeem PPL Electric's preferred stock.  See Note 7 for additional information.
(e)
 
Recorded in connection with the adoption of accounting guidance related to the recognition and presentation of other-than-temporary impairments.
 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
   
2010
 
2009
 
2010
 
2009
                                 
Net income (loss)
 
$
92
   
$
(3
)
 
$
347
   
$
243
 
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, $4, $(1), $4
   
(67
)
   
162
     
(160
)
   
70
 
Available-for-sale securities, net of tax of $21, $(17), $10, $(11)
   
(17
)
   
16
     
(7
)
   
10
 
Qualifying derivatives, net of tax of $114, $(131), $(148), $(198)
   
(151
)
   
169
     
226
     
270
 
Defined benefit plans - net actuarial gain, net of tax of $(31), $(31)
   
80
             
80
         
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
                               
Available-for-sale securities, net of tax of $0, $1, $2
   
(2
)
   
(1
)
   
(4
)
       
Qualifying derivatives, net of tax of $1, $(28), $38, $(41)
   
(7
)
   
51
     
(67
)
   
59
 
Defined benefit plans:
                               
Prior service costs, net of tax of $(1), $(2), $(4), $(4)
   
5
     
2
     
7
     
6
 
Net actuarial loss, net of tax of $(6), $(1), $(6), $(2)
   
7
     
1
     
21
     
2
 
Transition obligation, net of tax of $(1), $0, $(1), $0
   
1
     
1
     
2
     
1
 
Total other comprehensive income (loss) attributable to PPL Corporation
   
(151
)
   
401
     
98
     
418
 
Comprehensive income (loss)
   
(59
)
   
398
     
445
     
661
 
Comprehensive income attributable to noncontrolling interests
   
7
     
4
     
12
     
9
 
Comprehensive income (loss) attributable to PPL Corporation
 
$
(66
)
 
$
394
   
$
433
   
$
652
 

     
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
   
2010
 
2009
 
2010
 
2009
Operating Revenues
                               
Wholesale energy marketing
                               
Realized
 
$
1,261
   
$
758
   
$
2,647
   
$
1,556
 
Unrealized economic activity (Note 14)
   
(666
)
   
(112
)
   
(242
)
   
240
 
Wholesale energy marketing to affiliate
   
64
     
411
     
179
     
908
 
Utility
   
172
     
155
     
375
     
331
 
Unregulated retail electric and gas
   
101
     
32
     
205
     
74
 
Net energy trading margins
   
5
     
7
     
16
     
(5
)
Energy-related businesses
   
106
     
103
     
197
     
199
 
Total Operating Revenues
   
1,043
     
1,354
     
3,377
     
3,303
 
                                 
Operating Expenses
                               
Operation
                               
Fuel
   
263
     
186
     
496
     
444
 
Energy purchases
                               
Realized
   
533
     
581
     
1,136
     
1,226
 
Unrealized economic activity (Note 14)
   
(445
)
   
65
     
118
     
334
 
Energy purchases from affiliate
           
20
     
1
     
40
 
Other operation and maintenance
   
300
     
270
     
642
     
550
 
Depreciation
   
92
     
80
     
183
     
153
 
Taxes, other than income
   
24
     
21
     
49
     
41
 
Energy-related businesses
   
97
     
97
     
182
     
186
 
Total Operating Expenses
   
864
     
1,320
     
2,807
     
2,974
 
                                 
Operating Income
   
179
     
34
     
570
     
329
 
                                 
Other Income (Expense) - net
   
7
     
(6
)
   
14
     
23
 
                                 
Other-Than-Temporary Impairments
   
3
     
1
     
3
     
18
 
                                 
Interest Income from Affiliates
   
2
     
1
     
2
     
2
 
                                 
Interest Expense
   
84
     
68
     
170
     
123
 
                                 
Income (Loss) from Continuing Operations Before Income Taxes
   
101
     
(40
)
   
413
     
213
 
                                 
Income Taxes
   
15
     
(41
)
   
127
     
24
 
                                 
Income from Continuing Operations After Income Taxes
   
86
     
1
     
286
     
189
 
                                 
Loss from Discontinued Operations (net of income taxes) (Note 8)
           
(32
)
           
(29
)
                                 
Net Income (Loss) Attributable to PPL Energy Supply
 
$
86
   
$
(31
)
 
$
286
   
$
160
 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
   
Six Months Ended June 30,
   
2010
 
2009
                 
Cash Flows from Operating Activities
               
Net income
 
$
286
   
$
160
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
183
     
154
 
Amortization
   
69
     
23
 
Defined benefit plans - expense
   
29
     
12
 
Defined benefit plans - funding
   
(275
)
   
(51
)
Deferred income taxes and investment tax credits
   
(95
)
   
6
 
Impairment of assets
   
14
     
100
 
Unrealized losses on derivatives, and other hedging activities
   
347
     
41
 
Provision for Montana hydroelectric litigation
   
59
         
Other
   
53
     
(1
)
Change in current assets and current liabilities
               
Accounts receivable
   
94
     
121
 
Accounts payable
   
(38
)
   
(203
)
Unbilled revenue
   
(190
)
   
50