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Acquisitions, Development and Divestitures | 12 Months Ended
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Dec. 31, 2023
Contractors [Abstract] |
Mergers, Acquisitions and Dispositions Disclosures | (PPL) Acquisitions Acquisition of Narragansett Electric On May 25, 2022, PPL Rhode Island Holdings acquired 100% of the outstanding shares of common stock of Narragansett Electric from National Grid U.S., a subsidiary of National Grid plc (the Acquisition). Narragansett Electric, whose service area covers substantially all of Rhode Island, is primarily engaged in the transmission and distribution of electricity and distribution of natural gas. The Acquisition expands PPL's portfolio of regulated natural gas and electricity transmission and distribution assets, has improved PPL's credit metrics and is expected to enhance long term earnings growth. Following the closing of the Acquisition, Narragansett Electric provides services doing business under the name Rhode Island Energy (RIE). The consideration for the Acquisition consisted of approximately $3.8 billion in cash and approximately $1.5 billion of long-term debt assumed through the transaction. The fair value of the consideration paid for Narragansett Electric was as follows (in billions):
Aggregate enterprise consideration |  |  |  |  |  | $ | 5.3 |
Less: fair value of assumed long-term debt outstanding |  |  |  |  |  | 1.5 |
Total cash consideration |  |  |  |  |  | $ | 3.8 |
The $3.8 billion total cash consideration paid was funded with proceeds from PPL's 2021 sale of its U.K. utility business. In connection with the Acquisition, National Grid USA Service Company, Inc., National Grid U.S. and Narragansett Electric have entered into a transition services agreement (TSA), pursuant to which National Grid has agreed to provide certain transition services to Narragansett Electric to facilitate the transition of the operation of Narragansett Electric to PPL following the Acquisition, as agreed upon in the Narragansett SPA. The TSA is for an initial two-year term and certain aspects have been extended to the third quarter of 2024. The TSA is subject to further extension as necessary to complete the successful transition. TSA costs of $228 million and $123 million were incurred for the years ended December 31, 2023 and 2022. Commitments to the Rhode Island Division of Public Utilities and Carriers and the Attorney General of the State of Rhode Island As a condition to the Acquisition, PPL made certain commitments to the Rhode Island Division of Public Utilities and Carriers and the Attorney General of the State of Rhode Island. As a result: •RIE provided a credit to all its electric and natural gas distribution customers in the total amount of $50 million ($40 million net of tax benefit). Based on the relative number of electric distribution customers and natural gas distribution customers as of November 1, 2022, RIE refunded, in the form of a bill credit, $33 million to electric customers and $17 million to natural gas customers of amounts collected from customers since the Acquisition date. Each electric customer received the same credit, and each natural gas customer received the same credit. A reduction of revenue and a regulatory liability of $50 million for the amounts refunded were recorded during the quarter ended September 30, 2022. These credits were issued during the fourth quarter of 2022. The amounts refunded will not impact RIE's earnings sharing regulatory mechanism. •RIE forgave approximately $44 million ($21 million net of allowance for doubtful accounts) in arrearages for low-income and protected residential customers, which represents 100% of the arrearages over 90 days for those customers as of March 31, 2022. PPL deemed these accounts uncollectible and fully reserved for them as of September 30, 2022, resulting in an increase to "Other operations and maintenance expense" on the Statement of Income of $23 million for the year ended December 31, 2022. •RIE will not file a base rate case seeking an increase in base distribution rates for natural gas and/or electric service sooner than three years from the Acquisition date, and RIE will not submit a request for a change in base rates unless and until there is at least twelve months of operating experience under PPL's exclusive leadership and after the TSA with National Grid terminates. •RIE will forgo potential recovery of any and all transition costs, which includes (1) the installation of certain information technology systems; (2) modification and enhancements to physical facilities in Rhode Island; and (3) incurring costs related to severance payments, communications and branding changes, and other transition related costs. These costs, which are being expensed as incurred, were $262 million and $181 million for the years ended December 31, 2023 and 2022. •RIE will not seek to recover any transaction costs related to the Acquisition, which were $28 million through December 31, 2023, including an immaterial amount for the year ended December 31, 2023, and $18 million and $10 million for the years ended December 31, 2022 and 2021. These amounts were recorded in "Other operations and maintenance" on the Statement of Income. •RIE will not seek to recover in rates any markup charged by National Grid U.S. and/or its affiliates under the TSA which were $7 million and $3 million for the year ended December 31, 2023 and 2022. •In June 2022, RIE expensed $20 million of regulatory assets as of the Acquisition date for the Gas Business Enablement (GBE) project and for certain Cybersecurity/IT investments related to GBE. The expense was recorded to "Other operations and maintenance" on the Statements of Income for the year ended December 31, 2022. RIE will not seek to recover these regulatory assets from customers in any future proceedings. •RIE will exclude all goodwill from the ratemaking capital structure. •RIE will hold harmless Rhode Island customers from any changes to Accumulated Deferred Income Taxes (ADIT) as a result of the Acquisition. RIE reserves the right to seek rate adjustments based on future changes to ADIT that are not related to the Acquisition. •RIE will not increase its revenue requirement to a level higher than what would exist in the absence of the Acquisition as a result of any restatement of pension and other post-retirement benefits plan assets and liabilities to fair value after the close of the Acquisition. •Rhode Island Holdings contributed $2.5 million to the Rhode Island Commerce Corporation's Renewable Energy Fund and will not use any of the $2.5 million to meet its pre-existing renewable energy credit goals in Rhode Island or any other state. This contribution was made during the year ended December 31, 2022 and was recorded in "Other Income (Expense)" on the Statement of Income. •RIE will make available up to $2.5 million for the Rhode Island Attorney General to utilize as needed in evaluating PPL's report on RIE's specific decarbonization goals to support Rhode Island's 2021 Act on Climate or to assess the future of the gas distribution business in Rhode Island. This amount was accrued during the year ended December 31, 2022 and was recorded in "Other Income (Expense) - net" on the Statement of Income. •Various other operational and reporting commitments have been established. Purchase Price Allocation The operations of Narragansett Electric are subject to the accounting for certain types of regulation as prescribed by GAAP. The carrying value of Narragansett Electric’s assets and liabilities subject to rate-setting and cost recovery provisions provide revenues derived from costs, including a return on investment of net assets and liabilities included in rate base. Therefore, the fair values of these assets and liabilities equal their carrying values. Accordingly, neither the assets acquired nor liabilities assumed reflect any adjustments related to these amounts. Total goodwill resulting from the acquisition was $1,585 million. PPL has elected to not reflect the effects of purchase accounting in the separate financial statements of RIE or PPL's Rhode Island Regulated segment. Accordingly, the Rhode Island Regulated segment includes $725 million of acquired legacy goodwill. The remaining excess purchase price of $860 million is included in PPL's Corporate and Other category for segment reporting purposes. The goodwill reflects the value paid for the expected continued growth of a rate-regulated business located in a defined service area with a constructive regulatory environment, the ability of PPL to leverage its assembled workforce to take advantage of those growth opportunities and the attractiveness of stable, growing cash flows. The tax goodwill is deductible for income tax purposes over a 15 year period, and as such, deferred taxes will be recorded as the tax deductions are taken. The table below shows the allocation of the purchase price to the assets acquired and liabilities assumed that were recorded in PPL’s Consolidated Balance Sheet as of the Acquisition date. The allocation was subject to change during the one-year measurement period as additional information was obtained about the facts and circumstances that existed at closing. Adjustments to certain assets acquired and liabilities assumed during the year ended December 31, 2023 resulted in a decrease in goodwill of $1 million since the purchase price allocation as of December 31, 2022.
|  |  |  |  |  | Final Purchase Price Allocation
Assets |  |  |  |  |  |
Current Assets |  |  |  |  |  |
Cash and Cash Equivalents |  |  |  |  |  | $ | 154 |
Accounts Receivable (a) |  |  |  |  |  | 195 |
Unbilled Revenues |  |  |  |  |  | 54 |
Price Risk Management Assets |  |  |  |  |  | 99 |
Regulatory Assets |  |  |  |  |  | 75 |
Other Current Assets |  |  |  |  |  | 65 |
Total Current Assets |  |  |  |  |  | 642 |
Noncurrent Assets |  |  |  |  |  |
Property, Plant and Equipment, net |  |  |  |  |  | 3,992 |
Regulatory Assets |  |  |  |  |  | 393 |
Goodwill |  |  |  |  |  | 1,585 |
Other Noncurrent Assets |  |  |  |  |  | 164 |
Total Noncurrent Assets |  |  |  |  |  | 6,134 |
Total Assets |  |  |  |  |  | $ | 6,776 |
Liabilities |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |
Long-Term Debt Due Within One Year |  |  |  |  |  | $ | 14 |
Accounts Payable |  |  |  |  |  | 180 |
Taxes Accrued |  |  |  |  |  | 44 |
Regulatory Liabilities |  |  |  |  |  | 239 |
Other Current Liabilities |  |  |  |  |  | 198 |
Total Current Liabilities |  |  |  |  |  | 675 |
Noncurrent Liabilities |  |  |  |  |  |
Long-Term Debt |  |  |  |  |  | 1,496 |
Regulatory Liabilities |  |  |  |  |  | 643 |
Other Deferred Credits and Noncurrent Liabilities |  |  |  |  |  | 142 |
Noncurrent Liabilities |  |  |  |  |  | 2,281 |
Total Purchase Price (Balance Sheet Net Assets) |  |  |  |  |  | $ | 3,820 |
(a)Amounts represent fair value as of May 25, 2022. The gross contractual amount is $255 million. Cash flows not expected to be collected as of May 25, 2022 were $60 million. Pro Forma Financial Information The actual RIE Operating Revenues and Net income attributable to PPL included in PPL's Statement of Income for the period ended December 31, 2022, and PPL's unaudited pro forma 2022 and 2021 Operating Revenues and Net Income (Loss) attributable to PPL, including RIE, as if the Acquisition had occurred on January 1, 2021 are as follows.
|  |  |  |  |  | Operating Revenues |  | Net Income (Loss)
Actual RIE results included from May 25, 2022 - December 31, 2022 (a) |  |  |  |  |  | $ | 1,038 |  |  | $ | (44) |
PPL Pro Forma for the year ended 2022 |  |  |  |  |  | 8,667 |  |  | 790 |
PPL Pro Forma for the year ended 2021 |  |  |  |  |  | 7,478 |  |  | 159 |
(a)Net Income (Loss) includes expenses of $98 million (pre-tax) related to commitments made as a condition of the Acquisition. The pro forma financial information presented above has been derived from the historical consolidated financial statements of PPL and Narragansett Electric. Non-recurring items included in the 2022 pro forma financial information include: (a) $18 million (pre-tax) of transaction costs related to the Acquisition, primarily for advisory, accounting and legal fees incurred, (b) $223 million (pre-tax) of Acquisition integration costs, (c) a $50 million reduction of revenue (pre-tax), write-offs of $43 million (pre-tax) of certain accounts receivable and regulatory assets of RIE and $5 million (pre-tax) of expenses accrued in support of Rhode Island's decarbonization goals, all of which were conditions of the Acquisition, and (d) the income tax effect of these items, which was tax effected at the statutory federal income tax rate of 21%. Non-recurring items included in the 2021 pro forma financial information include: (a) $38 million (pre-tax) of Acquisition integration costs and (b) the income tax effect of this item, which was tax effected at the statutory federal income tax rate of 21%. Losses from the discontinued operations (net of income taxes) of PPL of $1,498 million in 2021 were excluded from the pro forma amount above. Divestitures Sale of Safari Holdings On September 29, 2022, PPL signed a definitive agreement to sell all of Safari Holdings membership interests to Aspen Power Services, LLC (Aspen Power). On November 1, 2022, PPL completed the sale (the Transaction). Final closing adjustments were completed during the year ended December 31, 2023, resulting in an increase to the loss on sale of $6 million ($5 million net of tax), which was recorded in "Other operation and maintenance" on the Statements of Income for the year ended December 31, 2023. A loss on sale of $60 million ($46 million net of tax benefit) was recorded in "Other operation and maintenance" on the Statements of Income for the year ended December 31, 2022. In connection with the closing of the Transaction, PPL provided certain guarantees and other assurances. Certain of these guarantees and other assurances have been terminated as of January 8, 2024. See Note 13 to the Financial Statements for additional information. Discontinued Operation s Sale of the U.K. Utility Business On June 14, 2021, PPL WPD Limited completed the sale of PPL's utility business to National Grid Holdings One plc (National Grid U.K.), a subsidiary of National Grid plc. 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. PPL WPD Limited agreed to indemnify National Grid U.K. for certain tax related matters. See Note 13 for additional information. PPL has not had and will not have any significant involvement with the U.K. utility business since completion of the sale. Summarized Results of Discontinued Operations The operations of the U.K. utility business are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income for prior years, as there were no operations in 2023. Following are the components of discontinued operations in the Statements of Income for the years ended December 31:
|  |  | 2022 |  | 2021 |  |
Operating Revenues |  |  | $ | — |  |  | $ | 1,344 |  |  |
Operating Expenses |  |  | — |  |  | 467 |  |  |
Other Income (Expense) - net |  |  | — |  |  | 202 |  |  |
Interest Expense (a) |  |  | — |  |  | 209 |  |  |
Income before income taxes |  |  | — |  |  | 870 |  |  |
Loss on sale |  |  | — |  |  | (1,609) |  |  |
Income tax (benefit) expense |  |  | (42) |  |  | 759 |  |  |
Income (Loss) from Discontinued Operations (net of income taxes) |  |  | $ | 42 |  |  | $ | (1,498) |  |  |
(a)No interest from corporate level debt was allocated to discontinued operations.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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