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Risks

• Our U.K. distribution business contributes a significant amount of PPL's earnings and exposes us to the following additional risks related to operating outside the U.S., including risks associated with changes in U.K. laws and regulations, taxes, economic conditions and political conditions and policies of the U.K. government and the European Union. These risks may adversely impact the results of operations of our U.K. distribution business or affect our ability to access U.K. revenues for payment of distributions or for other corporate purposes in the U.S.
• PPL's earnings may be adversely affected by the U.K. withdrawal from the European Union.
• We are subject to foreign currency exchange rate risks because a significant portion of our cash flows and reported earnings are currently generated by our U.K. business operations.
• Our U.K. segment's earnings are subject to variability based on fluctuations in RPI, which is a measure of inflation.
• Our U.K. delivery business is subject to revenue variability based on operational performance.
• A failure by any of our U.K. regulated businesses to comply with the terms of a distribution license may lead to the issuance of an enforcement order by Ofgem that could have an adverse impact on PPL.
• PPL and LKE are holding companies and their cash flows and ability to meet their obligations with respect to indebtedness and under guarantees, and PPL's ability to pay dividends, largely depends on the financial performance of their respective subsidiaries and, as a result, is effectively subordinated to all existing and future liabilities of those subsidiaries.
• Our profitability is highly dependent on our ability to recover the costs of providing energy and utility services to our customers and earn an adequate return on our capital investments. Regulators may not approve the rates we request and existing rates may be challenged.
• We are or may be subject to costs of remediation of environmental contamination at facilities owned or operated by our former subsidiaries.
• We are subject to financial, operational, regulatory and other risks related to requirements, developments and uncertainties in environmental regulation, including those affecting coal-fired generation facilities.
• We are subject to operational, regulatory and other risks regarding natural gas supply infrastructure.
• We face competition for transmission projects, which could adversely affect our rate base growth.
• We could be subject to higher costs and/or penalties related to Pennsylvania Conservation and Energy Efficiency Programs.
• We are subject to risks associated with federal and state tax laws and regulations.
• Increases in electricity prices and/or a weak economy, can lead to changes in legislative and regulatory policy, including the promotion of energy efficiency, conservation and distributed generation or self-generation, which may adversely impact our business.
• We could be negatively affected by rising interest rates, downgrades to our credit ratings, adverse credit market conditions or other negative developments in our ability to access capital markets.
• A downgrade in our credit ratings could negatively affect our ability to access capital and increase the cost of maintaining our credit facilities and any new debt.
• Our operating revenues could fluctuate on a seasonal basis, especially as a result of extreme weather conditions.
• We cannot predict the outcome of legal proceedings or investigations related to our businesses in which we are periodically involved. An unfavorable outcome or determination in any of these matters could have a material adverse effect on our financial condition, results of operations or cash flows.
• Significant increases in our operation and maintenance expenses, including health care and pension costs, could adversely affect our future earnings and liquidity.
• We may incur liabilities in connection with divestitures.
• Our facilities may not operate as planned, which may increase our expenses and decrease our revenues and have an adverse effect on our financial performance.
• We are required to obtain, and to comply with, government permits and approvals.
• War, other armed conflicts or terrorist attacks could have a material adverse effect on our business.
• We are subject to counterparty performance, credit or other risk in the provision of goods or services to us, which could adversely affect our ability to operate our facilities or conduct business activities.
• We are subject to the risk that our workforce and its knowledge base may become depleted in coming years.