922224--2/28/2007--PPL_ENERGY_SUPPLY

related topics

{gas, price, oil}

{cost, contract, operation}

{operation, natural, condition}

{operation, international, foreign}

{competitive, industry, competition}

{cost, operation, labor}

{capital, credit, financial}

{customer, product, revenue}

{condition, economic, financial}

{financial, litigation, operation}

{acquisition, growth, future}

{loss, insurance, financial}

{tax, income, asset}

{regulation, government, change}

Risks Related to Supply Segment Adverse changes in commodity prices and related costs may decrease our future energy margins, which could adversely affect our earnings and cash flows. Whether we decide to, or are able to, continue to enter into or renew long-term power sales and fuel purchase and fuel transportation agreements in order to mitigate market price and supply risk may affect our earnings. Disruptions in our fuel supplies could occur, which could adversely affect our ability to operate our generation facilities. Our generation facilities may not operate as planned, which may increase our expenses or decrease our revenues and, thus, have an adverse effect on our financial performance. Changes in technology may impair the value of our power plants. We rely on transmission and distribution assets that we do not own or control to deliver our wholesale electricity and natural gas. If transmission is disrupted, or not operated efficiently, or if capacity is inadequate, our ability to sell and deliver power may be hindered. The PLR contracts do not provide for a specific level of supply, and demand significantly below or above our forecasts could adversely affect our energy margins. We face intense competition in our energy supply business, which may adversely affect our ability to operate profitably. If the present trend towards competitive markets is reversed, discontinued or delayed, our business prospects and financial condition could be materially adversely affected. We are exposed to operational, price and credit risks associated with selling and marketing products in the wholesale electricity markets. We do not always hedge against risks associated with electricity and fuel price volatility. Our risk management policy and programs relating to electricity and fuel prices, interest rates, foreign currency and counterparties, may not work as planned, and we may suffer economic losses despite such programs. Despite federal and state deregulation initiatives, our supply business is still subject to extensive regulation, which may increase our costs, reduce our revenues, or prevent or delay operation of our facilities. Our planned generation growth plans may not achieve the desired financial results. Our costs to comply with existing and new environmental laws are expected to continue to be significant, and we plan to incur significant capital expenditures on pollution control measures that, if delayed, would adversely affect our profitability and liquidity. We are subject to the risks of nuclear generation, including the risk that our Susquehanna nuclear plant could become subject to revised security or safety requirements that would increase our capital and operating expenditures, and uncertainties associated with decommissioning our plant at the end of its licensed life. Risks Related to International Delivery Segment Our international delivery businesses are also subject to risks with respect to rate regulation and operational performance. Our international delivery businesses expose us to risks related to laws of other countries, taxes, economic conditions, fluctuations in foreign currency exchange rates, political and social conditions and policies of foreign governments. These risks may reduce our results of operations from our delivery businesses. Risks Related to Pennsylvania Delivery Segment Regulators may not approve the rates we request. Our transmission and distribution facilities may not operate as planned, which may increase our expenses or decrease our revenues and, thus, have an adverse effect on our financial performance. PPL Electric generally bears the risk, through 2009, that it will not be able to obtain adequate energy supply at the predetermined capped rates it may charge to its PLR customers. Other Risks Related to All Segments Our operating results could fluctuate on a seasonal basis, especially as a result of severe weather conditions. We cannot predict the outcome of the legal proceedings and investigations currently being conducted with respect to our current and past business activities. An adverse determination could have a material adverse effect on our financial condition, results of operations or cash flows. We may need significant additional financing to pursue growth opportunities. 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. Significant increases in our operation and maintenance expenses, including our health care and pension costs, could adversely affect our future earnings and liquidity. There is a risk that we may be required to record impairment charges in the future for certain of our investments, which could adversely affect our earnings.

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922224--2/28/2007--PPL_ENERGY_SUPPLY_LLC