(All Registrants)



This "Item 2. Combined Management's Discussion and Analysis of Financial
Condition and Results of Operations" is separately filed by PPL, PPL Electric,
LG&E and KU. Information contained herein relating to any individual Registrant
is filed by such Registrant solely on its own behalf, and no Registrant makes
any representation as to information relating to any other Registrant. The
specific Registrant to which disclosures are applicable is identified in
parenthetical headings in italics above the applicable disclosure or within the
applicable disclosure for each Registrant's related activities and disclosures.
Within combined disclosures, amounts are disclosed for individual Registrants
when significant.

The following should be read in conjunction with the Registrants' Condensed
Consolidated Financial Statements and the accompanying Notes and with the
Registrants' 2020 Form 10-K. Capitalized terms and abbreviations are defined in
the glossary. Dollars are in millions, except per share data, unless otherwise
noted.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information:

•"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 six months ended June 30, 2021
with the same periods in 2020. The PPL "Results of Operations" also includes
"Segment Earnings" and "Adjusted Gross Margins," which provide a detailed
analysis of earnings by reportable segment. These discussions include non-GAAP
financial measures, including "Earnings from Ongoing Operations" and "Adjusted
Gross 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.

•"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.

•"Application of Critical Accounting Policies" provides an update to PPL's critical accounting policy related to "Income Taxes."



                                    Overview

Introduction

(PPL)

PPL, headquartered in Allentown, Pennsylvania, is a utility holding company. PPL, through its regulated utility subsidiaries, delivers electricity to customers in Pennsylvania, Kentucky and Virginia; delivers natural gas to customers in Kentucky; and generates electricity from power plants in Kentucky.

PPL's principal subsidiaries are shown below (* denotes a Registrant).


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                                                                            PPL Corporation*





                            PPL Electric*                                         LKE                                    PPL Capital Funding
              Engages in the regulated transmission and               A holding company that owns                    Provides financing for the
                   distribution of electricity in                     regulated utility operations                  operations of PPL and certain
                            Pennsylvania                             through its subsidiaries, LG&E                         subsidiaries
                                                                                and KU.


                                                         LG&E*
                                               Engages in the regulated                                     KU*
                                               generation, transmission,                         Engages in the regulated
                                               distribution and sale of                          generation, transmission,
                                               electricity and regulated                         distribution and sale of
                                           distribution and sale of natural                 electricity, primarily in Kentucky
                                                    gas in Kentucky

                            Pennsylvania                                        Kentucky
                          Regulated Segment                               

Regulated Segment




PPL's reportable segments' results primarily represent the results of LKE and
PPL Electric, except that in 2020 the reportable segments were also allocated
certain corporate level financing and other costs that were not included in the
results of LKE and PPL Electric. In 2021, corporate level financing costs are no
longer being allocated to the reportable segments.

In addition to PPL, the other Registrants included in this filing are as follows.

(PPL Electric)

PPL Electric, headquartered in Allentown, Pennsylvania, is a wholly owned
subsidiary of PPL and a regulated public utility that is an electricity
transmission and distribution service provider in eastern and central
Pennsylvania. PPL Electric is subject to regulation as a public utility by the
PUC, and certain of its transmission activities are subject to the jurisdiction
of the FERC under the Federal Power Act. PPL Electric delivers electricity in
its Pennsylvania service area and provides electricity supply to retail
customers in that area as a PLR under the Customer Choice Act.

(LG&E)



LG&E, headquartered in Louisville, Kentucky, is a wholly owned subsidiary of LKE
and a regulated utility engaged in the generation, transmission, distribution
and sale of electricity and distribution and sale of natural gas in Kentucky.
LG&E is subject to regulation as a public utility by the KPSC, and certain of
its transmission activities are subject to the jurisdiction of the FERC under
the Federal Power Act.

(KU)

KU, headquartered in Lexington, Kentucky, is a wholly owned subsidiary of LKE
and a regulated utility engaged in the generation, transmission, distribution
and sale of electricity in Kentucky and Virginia. KU is subject to regulation as
a public utility by the KPSC and the VSCC, and certain of its transmission and
wholesale power activities are subject to the jurisdiction of the FERC under the
Federal Power Act. KU serves its Kentucky customers under the KU name and its
Virginia customers under the Old Dominion Power name.

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Business Strategy

(All Registrants)

PPL's strategy, which is supported by the other Registrants, is to achieve
industry-leading performance in safety, reliability, customer satisfaction and
operational efficiency; to advance a clean energy transition while maintaining
affordability and reliability; to maintain a strong financial foundation and
create long-term value for our shareowners; to foster a diverse and exceptional
workplace; and to build strong communities in areas that we serve.

Central to PPL's strategy is recovering capital project costs efficiently
through various rate-making mechanisms, including periodic base rate case
proceedings using forward test years, annual FERC formula rate mechanisms and
other regulatory agency-approved recovery mechanisms designed to limit
regulatory lag. In Kentucky, the KPSC has adopted a series of regulatory
mechanisms (ECR, DSM, GLT, fuel adjustment clause, and gas supply clause) and
recovery on construction work-in-progress that reduce regulatory lag and provide
timely recovery of and return on, as appropriate, prudently incurred costs. In
Pennsylvania, the FERC transmission formula rate, DSIC mechanism, Smart Meter
Rider and other recovery mechanisms operate to reduce regulatory lag and provide
for timely recovery of and a return on, as appropriate, prudently incurred
costs.

In March 2021, PPL entered into definitive agreements that strategically
reposition the company as a U.S.-based energy company focused on building the
utilities of the future. PPL WPD Limited entered into a share purchase agreement
to sell PPL's U.K. utility business to National Grid Holdings One plc, a
subsidiary of National Grid plc. On June 14, 2021, PPL completed the sale of its
U.K. utility business. PPL and its subsidiary, PPL Energy Holdings, also entered
into a separate share purchase agreement to acquire Narragansett Electric from a
different subsidiary of National Grid plc, to be financed with a portion of the
proceeds from the sale of the U.K. utility business. On May 3, 2021, an
Assignment and Assumption Agreement was entered into by PPL, PPL Energy
Holdings, PPL Rhode Island Holdings and National Grid U.S. whereby certain
interests of PPL Energy Holdings in the Narragansett SPA were assigned to and
assumed by PPL Rhode Island Holdings. These transactions are intended to
strengthen PPL's credit metrics, enhance long-term earnings growth and
predictability, and provide the company with greater financial flexibility to
invest in sustainable energy solutions. See Note 9 to the Financial Statements,
and the discussions in "Financial and Operating Developments" below, for
additional information on these transactions.

Financial and Operational Developments

(PPL)

Share Purchase Agreement to Sell U.K. Utility Business



On March 17, 2021, PPL WPD Limited (WPD Limited) entered into a share purchase
agreement (the WPD SPA) to sell PPL's U.K. utility business to National Grid
Holdings One plc (National Grid U.K.), a subsidiary of National Grid plc.
Pursuant to the WPD SPA, National Grid U.K. would acquire 100% of the issued
share capital of PPL WPD Investments Limited (WPD Investments) for £7.8 billion
in cash. WPD Limited would also receive an additional amount of £548,000 for
each day during the period from January 1, 2021 to the closing date if the
dividends usually declared by WPD Investments to WPD Limited are not paid for
that period.

On June 14, 2021, the sale of the U.K. utility business was completed. 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, resulting in a pre-tax loss on sale of $1,609 million.

WPD Limited and National Grid U.K. each made customary representations and
warranties in the WPD SPA. National Grid U.K., at its expense, purchased
warranty and indemnity insurance. WPD Limited agreed to indemnify National Grid
U.K. for certain tax related matters. See Note 11 to the Financial Statements
for additional information. PPL will not have any significant involvement with
the U.K. utility business after completion of the sale.

See Note 9 to the Financial Statements for additional information on the sale of the U.K. utility business.


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Share Purchase Agreement to Acquire Narragansett Electric

On March 17, 2021, PPL and its subsidiary, PPL Energy Holdings, entered into a
share purchase agreement (Narragansett SPA) with National Grid USA (National
Grid U.S.), a subsidiary of National Grid plc to acquire 100% of the outstanding
shares of common stock of Narragansett Electric for approximately $3.8 billion
in cash. On May 3, 2021, an Assignment and Assumption Agreement was entered into
by PPL, PPL Energy Holdings, PPL Rhode Island Holdings and National Grid U.S.
whereby certain interests of PPL Energy Holdings in the Narragansett SPA were
assigned to and assumed by PPL Rhode Island Holdings. Pursuant to that
Assignment and Assumption Agreement, PPL Rhode Island Holdings became the
purchasing entity under the Narragansett SPA. The acquisition is expected to be
funded with proceeds from the sale of the U.K. utility business. PPL has agreed
to guarantee all obligations of PPL Energy Holdings and PPL Rhode Island
Holdings under the Narragansett SPA and the related Assignment and Assumption
Agreement.

The closing of the acquisition, which is currently expected to occur by March
2022, is subject to the receipt of certain U.S. regulatory approvals or waivers,
and other customary conditions to closing. The consummation of the transaction
is not subject to a financing condition.

See Note 9 to the Financial Statements for additional information on the Narragansett SPA.

Use of Proceeds from the Sale of the U.K. Utility Business (All Registrants)



PPL announced its intent to use the proceeds from the sale of the U.K. utility
business to acquire Narragansett Electric to further strengthen its balance
sheet and enhance opportunities for growth. The announcement included plans to
reduce outstanding debt by approximately $3 billion to $3.5 billion. PPL will
continue to evaluate the best use of the remaining proceeds to maximize
shareowner value. This includes potentially investing incremental capital at
PPL's utilities or in renewables, and repurchasing shares.

Long Term Debt



In connection with the company's strategic repositioning, PPL Capital Funding
tendered and/or redeemed an aggregate total of $3,484 million of outstanding
debt during June and July 2021. The extinguished debt consisted of a series of
$3,034 million of Senior Notes and $450 million of Junior Subordinated notes.

The total cash purchase price for the retired Senior Notes was $3,426 million, which resulted in a loss on extinguishment of debt of $322 million and $58 million being recorded in the second and third quarters of 2021 related primarily to premiums paid.

PPL Capital Funding also redeemed its $450 million of 5.90% Junior Subordinated Notes due in 2073 at par. There was no loss on the redemption of these notes.

See Note 8 to the Financial Statements for additional information related to the companies' financing activities.

Capital Expenditures



Capital expenditure plans are revised periodically to reflect changes in
operational, market and regulatory conditions. In connection with PPL's
announced strategic repositioning, the company is reevaluating its capital
expenditure plan, which may result in an increase to its previously disclosed
capital expenditure projections for PPL's domestic utilities included in "Item
7. Combined Management's Discussion and Analysis of Financial Condition and
Result of Operations - Financial Condition - Liquidity and Capital Resources -
Forecasted Uses of Cash - Capital Expenditures" in PPL's 2020 Form 10-K.

Share Repurchase



In July of 2021, PPL's Board of Directors authorized share repurchases of up to
$3 billion of PPL common shares. PPL currently expects to repurchase $500
million by the end of 2021. The actual amount repurchased will depend on various
factors, including PPL's share price, market conditions, and the determination
of other uses for the proceeds from the sale of the U.K. utility business,
including for incremental capital expenditures.

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(PPL)

LKE Debt Redemption

On July 1, 2021, LKE redeemed, at par, its $250 million 4.375% Senior Notes due
2021 and on July 9, 2021, LKE filed a Form 15 with the SEC to suspend its duty
to file reports under sections 13 and 15(d) of the Securities Exchange Act of
1934. As a result, beginning with this Form 10-Q, LKE is no longer reported as a
Registrant. PPL has no intention to issue debt from the LKE subsidiary in the
future.

U.K. Corporation Tax Rate Change



The U.K. Finance Act 2021, formally enacted on June 10, 2021, increased the U.K.
corporation tax rate from 19% to 25%, effective April 1, 2023. The primary
impact of the corporation tax rate increase was an increase in deferred tax
liabilities of the U.K. utility business, which was sold on June 14, 2021, and a
corresponding deferred tax expense of $383 million, which was recognized in
continuing operations.

Regulatory Requirements

(All Registrants)

The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.

(PPL, LG&E and KU)



The businesses of LG&E and KU are subject to extensive federal, state and local
environmental laws, rules and regulations, including those pertaining to CCRs,
GHG, and ELGs. See Notes 7, 11 and 16 to the Financial Statements for a
discussion of these significant environmental matters. These and other
environmental requirements led PPL, LG&E and KU to retire approximately 1,200 MW
of coal-fired generating plants in Kentucky since 2010. As part of the long-term
generation planning process, LG&E and KU evaluate a range of factors including
the impact of potential stricter environmental regulations, fuel price
scenarios, the cost of replacement generation, continued operations and major
maintenance costs and the risk of major equipment failures in determining when
to retire generation assets. As a result of environmental requirements and aging
infrastructure, LG&E anticipates retiring two older coal-fired units at the Mill
Creek Plant and KU anticipates retiring one coal-fired unit at the E.W. Brown
plant. Mill Creek Unit 1 has 300 MW of capacity and is expected to be retired in
2024. Mill Creek Unit 2 and E.W. Brown Unit 3 have capacities of 297 MW and 412
MW and are expected to be retired in 2028. LG&E and KU anticipate earning
recovery of and return on any remaining net book value of these assets through
the Retired Asset Recovery (RAR) rider. See Note 7 to the Financial Statements
for additional information related to the RAR rider.

Challenge to PPL Electric Transmission Formula Rate Return on Equity (PPL and PPL Electric)



On May 21, 2020, PP&L Industrial Customer Alliance (PPLICA) filed a complaint
with the FERC alleging that PPL Electric's base return on equity (ROE) of 11.18%
used to determine PPL Electric's formula transmission rate is unjust and
unreasonable, and proposing an alternative ROE of 8.0% based on its
interpretation of FERC Opinion No. 569. However, also on May 21, 2020, the FERC
issued Opinion No. 569-A in response to numerous requests for rehearing of
Opinion No. 569, which revised the method for analyzing base ROE. On June 10,
2020, PPLICA filed a Motion to Supplement the May 21, 2020 complaint in which
PPLICA continued to allege that PPL Electric's base ROE is unjust and
unreasonable, but revised its analysis of PPL Electric's base ROE to reflect the
guidance provided in Opinion No. 569-A. The amended complaint proposed an
updated alternative ROE of 8.5% and also requested that the FERC preserve the
original refund effective date as established by the filing of the original
complaint on May 21, 2020. Several parties filed motions to intervene, including
one party who filed Comments in Support of the original complaint.

On July 10, 2020, PPL Electric filed its Answer and supporting Testimony to the
PPLICA filings arguing that the FERC should deny the original and amended
complaints as they are without merit and fail to demonstrate the existing base
ROE is unjust and unreasonable. In addition, PPL Electric contended any refund
effective date should be set for no earlier than June 10, 2020 and PPLICA's
proposed replacement ROE should be rejected.

On October 15, 2020, the FERC issued an order on the PPLICA complaints which
established hearing and settlement procedures, set a refund effective date of
May 21, 2020 and granted the motions to intervene. On November 16, 2020, PPL
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Electric filed a request for rehearing of the portion of the October 15, 2020
Order that set the May 21, 2020 refund effective date. On December 17, 2020, the
FERC issued a Notice of Denial of Rehearing by Operation of Law and Providing
for Further Consideration. On February 16 and April 19, 2021, PPL Electric filed
Petitions for Review with the United States Court of Appeals for the District of
Columbia Circuit of the portion of the October 15, 2020 Order that set the May
21, 2020 refund effective date.

In the three and six months ended June 30, 2021, PPL Electric recorded a revenue
reserve of $17 million and $36 million after-tax representing revenue subject to
refund for the period May 21, 2020 through June 30, 2021. Of these amounts,
$7 million for the three months ended June 30, 2021 and $20 million for the six
months ended June 30, 2021, relates to the period from May 21, 2020 to December
31, 2020.

FERC Transmission Rate Filing (PPL, LG&E and KU)



In 2018, LG&E and KU applied to the FERC requesting elimination of certain
on-going credits to a sub-set of transmission customers relating to the 1998
merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU
from the Midcontinent Independent System Operator, Inc. (MISO), a regional
transmission operator and energy market. The application sought termination of
LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation
for certain horizontal market power concerns arising out of the 1998 LG&E and KU
merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or
credits granted to a limited number of Kentucky municipalities for either
certain LG&E and KU or MISO transmission charges incurred for transmission
service received. Due to the development of robust, accessible energy markets
over time, LG&E and KU believe the mitigation commitments are no longer relevant
or appropriate. In March 2019, the FERC granted LG&E's and KU's request to
remove the ongoing credits, conditioned upon the implementation by LG&E and KU
of a transition mechanism for certain existing power supply arrangements,
subject to FERC review and approval. In July 2019, LG&E and KU proposed their
transition mechanism to the FERC and in September 2019, the FERC rejected the
proposed transition mechanism. In September 2020, the FERC issued orders in the
rehearing process that modified various aspects of the September 2019 orders
which had approved future termination of the credits, including adjusting which
customer arrangements are covered by the transition mechanism and respective
future periods or dates for termination of credits. In November 2020, the FERC
denied the parties' rehearing requests. In November 2020 and January 2021, LG&E
and KU and other parties appealed the September 2020 and November 2020 orders at
the D.C. Circuit Court of Appeals. The appellate proceedings are continuing, and
also include certain additional prior pending petitions for review relating to
the matter. On January 15, 2021, LG&E and KU made a filing seeking FERC
acceptance of a new proposal for a transition mechanism. On March 16, 2021, the
FERC accepted the filed transition mechanism agreements effective on March 17,
2021 but subject to refund, and established hearing and settlement procedures.
LG&E and KU cannot predict the outcome of the respective appellate and FERC
proceedings. LG&E and KU currently receive recovery of the waivers and credits
provided through other rate mechanisms and such rate recovery would be
anticipated to be adjusted consistent with potential changes or terminations of
the waivers and credits, as such become effective.

Rate Case Proceedings

(PPL, LG&E and KU)



On November 25, 2020, LG&E and KU filed requests with the KPSC for an increase
in annual electricity and gas revenues of approximately $331 million ($131
million and $170 million in electricity revenues at LG&E and KU and $30 million
in gas revenues at LG&E). The revenue increases would be an increase of 11.6%
and 10.4% in electricity revenues at LG&E and KU, and an increase of 8.3% in gas
revenues at LG&E. In recognition of the economic impact of COVID-19, LG&E and KU
requested approval of a one-year billing credit which will credit customers
approximately $53 million ($41 million at LG&E and $12 million at KU). The
billing credit represents the return to customers of certain regulatory
liabilities on LG&E's and KU's Balance Sheets and serves to partially mitigate
the rate increases during the first year in which the new rates are in effect.

LG&E's and KU's applications also included a request for a CPCN to deploy
Advanced Metering Infrastructure across LG&E's and KU's service territories in
Kentucky.
The applications were based on a forecasted test year of July 1, 2021 through
June 30, 2022 and requested an authorized return on equity of 10.0%.

On April 19, 2021, LG&E and KU entered into an agreement with all intervening
parties to the proceedings resolving all matters in their applications, with the
explicit exception of LG&E's and KU's net metering proposals. The agreement
proposed increases in annual revenues of $217 million ($77 million and
$116 million in electricity revenues at LG&E and KU and
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$24 million in gas revenues at LG&E) based on an authorized return on equity of
9.55%. The proposal included an authorized 9.35% return on equity for the ECR
and GLT mechanisms. The agreement did not modify the requested one-year billing
credit. The agreement proposed that the KPSC should grant LG&E's and KU's
request for a CPCN to deploy Advanced Metering Infrastructure and proposed the
establishment of a Retired Asset Recovery rider (RAR) to provide for recovery of
and return on the remaining investment in certain electric generating units upon
their retirement over a ten-year period following retirement. In respect of the
RAR rider, the agreement proposed that LG&E and KU will continue to use
currently approved depreciation rates for Mill Creek Units 1 and 2 and Brown
Unit 3. The agreement also proposed a four-year "stay-out" commitment from LG&E
and KU to refrain from effective base rate increases before July 1, 2025,
subject to certain exceptions.

On June 30, 2021, the KPSC issued orders approving the proposed agreement filed
in April 2021, with certain modifications. The orders provide for increases in
annual revenues of $199 million ($73 million and $106 million in electricity
revenues at LG&E and KU and $20 million in gas revenues at LG&E) based on an
authorized return on equity of 9.425%. The order grants the requested authorized
9.35% return on equity for the ECR and GLT mechanisms and does not modify the
requested one-year billing credit. The orders approve the CPCN to deploy
Advanced Metering Infrastructure and provide regulatory asset treatment for the
remaining net book value of legacy meters upon full implementation of the
Advanced Metering Infrastructure program. The orders also approve the
establishment of the RAR rider and accepted the four-year "stay-out". The
orders, however, disallowed certain legal costs that were included in the
settlement. An order on the remaining net metering issues is expected by the end
of September 2021. On July 23, 2021, LG&E and KU filed motions for partial
rehearing and clarification of the return on equity, the disallowed legal costs
and certain other matters related to the KPSC's orders. PPL, LG&E and KU cannot
predict the outcome of the motions for partial rehearing and clarification or
the remaining net metering issues.

(KU)

On June 30, 2021, KU filed a notice of intent with the VSCC to file an application for proposed adjustments of general electricity rates on or after August 31, 2021. KU cannot predict the outcome of this proceeding.


                             Results of Operations

(PPL)



The "Statement of Income Analysis" discussion below describes significant
changes in principal line items on the Statements of Income, comparing the three
and six months ended June 30, 2021 with the same periods in 2020. The "Segment
Earnings" and "Adjusted Gross Margins" discussions provide a review of results
by reportable segment. These discussions include non-GAAP financial measures,
including "Earnings from Ongoing Operations" and "Adjusted Gross Margins," and
provide explanations of the non-GAAP financial measures and a reconciliation of
those measures to the most comparable GAAP measure.

(PPL Electric, LG&E and KU)



A "Statement of Income Analysis" is presented separately for PPL Electric, LG&E
and KU. The "Statement of Income Analysis" discussion below describes
significant changes in principal line items on the Statements of Income,
comparing the three and six months ended June 30, 2021 with the same periods in
2020.

(All Registrants)

The results for interim periods can be disproportionately influenced by numerous
factors and developments and by seasonal variations. As such, the results of
operations for interim periods do not necessarily indicate results or trends for
the year or future periods.

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