LG&E ENERGY CORP, 10-K, 1994-03-29

LG&E ENERGY CORP
10-K, 1994-03-29
ELECTRIC & OTHER SERVICES COMBINED

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
___________________________________________

FORM 10-K

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the fiscal year ended December 31, 1993 Commission File No. 1-10568
_________________________________________________________

LG&E ENERGY CORP.
(Exact name of registrant as specified in its charter)
__________________________________________________________

KENTUCKY 61-1174555
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)

220 W. Main Street
P. O. Box 32030
Louisville, Kentucky 40232
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (502) 627-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Name of each exchange on
Title of each class which registered
------------------- ------------------------

Common Stock, without par value New York Stock Exchange
and Chicago Stock
Rights to Purchase Series A Preferred Stock, Exchange
without par value

Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

As of February 28, 1994, the aggregate market value of the registrant's
voting stock held by non-affiliates was $1,182,187,260 and the number of
outstanding shares of the registrant's common stock, without par value, was
32,966,801.

DOCUMENTS INCORPORATED BY REFERENCE

The Company's proxy statement filed with the Commission on March 28, 1994,
is incorporated by reference into Part III of this Form 10-K.

<PAGE>

TABLE OF CONTENTS

PART I PAGE
----

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Organization . . . . . . . . . . . . . . . . . . . . . . . . 1
Louisville Gas and Electric Company
General. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Electric Operations. . . . . . . . . . . . . . . . . . . . 5
Gas Operations . . . . . . . . . . . . . . . . . . . . . . 6
Regulation and Rates . . . . . . . . . . . . . . . . . . . 8
Construction Program and Financing . . . . . . . . . . . . 9
Coal Supply. . . . . . . . . . . . . . . . . . . . . . . . 9
Gas Supply . . . . . . . . . . . . . . . . . . . . . . . . 10
Environmental Matters. . . . . . . . . . . . . . . . . . . 11
LG&E Energy Systems Inc. . . . . . . . . . . . . . . . . . . 11
Labor Relations. . . . . . . . . . . . . . . . . . . . . . . 13
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 13

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 16

Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 17

Executive Officers of the Company. . . . . . . . . . . . . . . . . . . . 18

PART II

Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . 20

Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 20

Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . . 21

Item 8. Financial Statements and Supplementary Data. . . . . . . . . . 30

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . 55

PART III

Item 10. Directors and Executive Officers of the Registrant (a) . . . . 56

Item 11. Executive Compensation (a) . . . . . . . . . . . . . . . . . . 56

Item 12. Security Ownership of Certain Beneficial Owners
and Management (a) . . . . . . . . . . . . . . . . . . . . . 56

Item 13. Certain Relationships and Related Transactions (a) . . . . . . 56

PART IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 56

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Exhibit 21 - Subsidiaries of the Registrant. . . . . . . . . . . . . . . 81

Exhibit 23 - Consent of Independent Public Accountants . . . . . . . . . 81

(a) Incorporated by reference.
<PAGE>

PART I

ITEM 1. Business.

ORGANIZATION

LG&E Energy Corp. (the Company), incorporated November 14, 1989, is a
diversified energy-services holding company with two direct subsidiaries:
Louisville Gas and Electric Company (LG&E) and LG&E Energy Systems Inc. (Energy
Systems). In August 1990, the Company and LG&E implemented a corporate
reorganization pursuant to a mandatory share exchange whereby each share of
outstanding common stock of LG&E was exchanged on a share-for-share basis for
the common stock of LG&E Energy Corp. The reorganization created a corporate
structure that gives the Company the flexibility to take advantage of
opportunities to expand into other businesses while insulating LG&E's utility
customers and senior security holders from risks associated with such
businesses. LG&E preferred stock and first mortgage bonds were not exchanged
and remained securities of LG&E. The Company is not currently engaged in any
business activity independent of LG&E and Energy Systems.

LG&E is a regulated public utility that supplies natural gas to
approximately 258,000 customers and electricity to approximately 336,000
customers in Louisville and adjacent areas in Kentucky. LG&E's service area
covers approximately 700 square miles in 17 counties and has an estimated
population of 800,000. Included in this area is the Fort Knox Military
Reservation, to which LG&E provides both gas and electric service, but which
maintains its own distribution systems. LG&E also provides gas service in
limited additional areas. LG&E's coal fired generating plants, which are all
equipped with systems to remove sulfur dioxide, produce most of LG&E's
electricity; the remainder is generated by a hydroelectric power plant and
combustion turbines. Underground gas storage fields help LG&E provide
economical and reliable gas service to customers. During 1993, the Company's
financial condition and results of operation depended to a large degree on the
financial condition and results of operations of LG&E.

In 1991, LG&E Energy Systems Inc. was formed to direct the Company's
expansion into the non-utility marketplace and to separate the regulated utility
from new business initiatives. This subsidiary explores business opportunities
that fit the corporate strategy aimed at energy services opportunities,
including cogeneration and independent power production; and fuel-related
businesses, such as gathering, storing, transporting and marketing natural gas.

Consistent with the Company's expansion strategy, Energy Systems purchased
Hadson Power Systems, Incorporated, of Irvine, California, from Hadson
Corporation in December 1991. Following the acquisition, Hadson Power Systems
was renamed LG&E Power Systems Inc. and has been subsequently renamed LG&E Power
Inc. (LPI). LPI develops, designs, builds, owns, operates, and maintains power
generation facilities that sell energy to local industries and utilities. In
1992, Energy Systems acquired a 36.5% interest in Natural Gas Clearinghouse
(NGC). Located in Houston, Texas, NGC is the largest independent natural gas
marketer in the United States. In December 1993, the Company announced the sale
of its equity interest in NGC to NOVA Corporation of Alberta, Canada. See
Note 3 of Notes to Financial Statements under Item 8, for a further discussion
of the sale of NGC.

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<PAGE>

In February 1994, LPI announced it had reached a preliminary agreement with
the DuPont Company (DuPont) to form a partnership that will own, improve, and
operate energy production facilities at nine DuPont fiber manufacturing plants
in the mid-Atlantic and southeastern regions of the United States. LPI will be
the general partner in the arrangement and hold a 50% interest in the
partnership. DuPont will be a limited partner and own the other half. Virginia
Power and Electric Company (Virginia Power), one of the utilities in whose
service territory the DuPont facilities reside, has made an administrative
filing with the Virginia State Corporation Commission questioning certain
aspects of the proposed transaction. See Item 3, Legal Proceedings - Other, for
further discussion of this matter.

In November 1993, the Company announced a major realignment and formation
of new business units, effective January 1, 1994, to reflect its outlook for
rapidly emerging competition in all segments of the energy services industry.
The realignment does not affect the Company's legal structure, regulation of
LG&E by the Kentucky Public Service Commission (the "Kentucky Commission" or
"Commission") or the Company's status as an exempt holding company.

Under the realignment, the Company has formed a national business unit,
LG&E Energy Services, to develop and manage all of its utility and non-utility
electric power generation and concentrate on the marketing and brokering of
electric power on a regional and national basis. The realignment will allow the
other business unit, LG&E, to increase its focus on customer service and to
develop more customer options as the local utility industry becomes more
competitive in the future. In addition to this realignment, the Company is
currently in the process of re-evaluating its regulatory strategy to pursue full
cost recovery of certain deferred expenses which the Company has recorded as
regulatory assets. See Future Outlook, under Item 7, for a further disclosure
of this issue.

The Company began consideration of investment in international power
projects in 1993. While it recognizes the increased risks associated with
international projects, the Company believes significant opportunities exist as
well. It has been working with strong international partners, successful
financial institutions and industry leaders in the United States to review the
risk/reward profiles of potential projects.

The Company and its subsidiaries currently are exempt from all provisions,
except Section 9(a)(2), of the Public Utility Holding Company Act of 1935 (the
"Holding Company Act") on the basis that the Company and LG&E are incorporated
in the same state and their business is predominately intrastate in character
and carried on substantially in the state of incorporation. It is necessary for
the Company to file an annual exemption statement with the Securities and
Exchange Commission (SEC).

The Company is not a public utility under the laws of the Commonwealth of
Kentucky and is not subject to regulation as such by the Kentucky Commission.
See Louisville Gas and Electric Company - Regulation and Rates below for a
description of the regulation of LG&E by the Kentucky Commission, which includes
the ability to regulate certain intra-company transactions between LG&E and the
Company, including the Company's non-utility subsidiaries.

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<PAGE>

LOUISVILLE GAS AND ELECTRIC COMPANY

General

LG&E's Trimble County Unit 1 (Trimble County or the Unit), a 495-megawatt,
coal-fired electric generating unit, which LG&E began constructing in 1979, was
placed in commercial operation on December 23, 1990. The Unit has been subject
to numerous reviews by the Kentucky Commission. In July 1988, the Kentucky
Commission issued an order stating that 25% of the total cost of the Unit would
not be allowed for ratemaking purposes. For a more detailed discussion of the
proceedings relating to Trimble County Unit 1, see Note 11 of the Notes to
Financial Statements under Item 8.

In February 1993, LG&E sold a 12.88% ownership interest in the Unit to
Indiana Municipal Power Agency, completing LG&E's plan to sell the 25% not
allowed for ratemaking. LG&E had previously sold a 12.12% ownership interest in
the Unit to the Illinois Municipal Electric Agency in 1991. See Note 12 of the
Notes to Financial Statements under Item 8 for a further discussion.

Competition among energy suppliers is increasing. In particular,
competition for off-system sales, which is based primarily on price and
availability of energy, has become much more intense in recent years. The
addition of electric generating capacity by other utilities in the Midwest has
reduced the opportunities for LG&E to make interchange sales and has heightened
price competition for such sales. However, such additional capacity has made
lower cost power available for purchase by LG&E which, in certain instances, is
at a cost lower than the variable cost of generating power from the generating
stations owned by LG&E. In addition, the 1992 Energy Policy Act will provide
utilities a wider choice of sources for their electrical supply than previously
available. The Act also creates generating supply options that did not exist
under previous legislation and is expected to increase competition for wholesale
electric sales. (See Energy Policy Act of 1992 under Item 7 for a further
discussion.) LG&E is responding to increased competition in a number of ways
designed to lower its costs and increase sales.

One such response has been the realignment by LG&E Energy Corp. into new
business units as described on page 2 effective January 1, 1994. The
realignment will allow LG&E to increase its focus on customer service and to
develop more customer options as the utility industry becomes more competitive.
The realignment does not affect the regulation of LG&E by the Commission.

On May 24, 1993, the Federal Energy Regulatory Commission (FERC) gave final
approval for a market-based rate tariff and two transmission service tariffs
that were filed by LG&E. The market-based rate tariff enables LG&E to sell up
to 75 Mw of firm generation capacity at market-based rates. It also enables
LG&E to sell an unlimited amount of non-firm power at market-based rates, as
long as the power is from LG&E's own generation resources.

Under the two transmission service tariffs that were approved by FERC,
utilities, independent power producers, and qualifying co-generation or small
power production facilities may obtain firm or coordination transmission service
from LG&E. These tariffs provide open access to LG&E's transmission system and
enable parties requesting either type of transmission service to transmit
wholesale power across LG&E's system. However, service under these tariffs is
not available to ultimate consumers of electric utility service.

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<PAGE>

In responding to competition in the gas distribution business, LG&E has
upgraded gas storage facilities and invested in new equipment. By using the
storage fields strategically, LG&E can buy gas when prices are low, store it,
and retrieve the gas when demand is high. Accessing least cost gas was made
easier in November 1993 when FERC's Order No. 636 went into effect. Previously,
LG&E and other utilities purchased most of their gas services from pipeline
companies. The order "unbundled" gas services, allowing utilities to purchase
gas, transportation, and storage services separately from many different
sources. Currently, LG&E buys competitively priced gas from several large
producers under contracts of varying duration. By purchasing from multiple
suppliers, and storing any excess gas, LG&E is able to secure favorably priced
gas for its customers. Without storage capacity, LG&E would be forced to buy
gas when customer demand increases, which is usually when the price is highest.
(See FERC Order No. 636 under Item 7 for a further discussion.)

LG&E is experiencing some of the issues common to electric and gas utility
companies, namely, increased competition for customers, delays and uncertainties
in the regulatory process and costs of compliance with environmental laws and
regulations.

The Clean Air Act Amendments of 1990 impose stringent limits on emissions
of sulfur dioxide and nitrogen oxide by electric utility generating plants.
While LG&E will incur some capital expenditures to comply with the Act's
requirements, the overall impact of the Act on LG&E is expected to be minimal.
See Environmental under Note 8 of Notes to Financial Statements under Item 8.

For the year ended December 31, 1993, 74% of total utility revenues was
derived from LG&E's electric operations and 26% from LG&E's gas operations.
Electric and gas operating revenues and the percentages by classes of service on
a combined basis for this period were as follows:

(Thousands of $)
------------------------------
Electric Gas Combined % Combined
-------- --- -------- ----------
<S> <C> <C> <C> <C>
Residential . . . . . . . . . . $195,273 $112,508 $307,781 44%
Commercial. . . . . . . . . . . 154,337 43,568 197,905 28
Industrial. . . . . . . . . . . 104,506 28,310 132,816 19
Public authorities. . . . . . . 52,183 13,846 66,029 9
-------- -------- -------- ---
Total-ultimate consumers. . . 506,299 198,232 704,531 100%
---
---

Other utilities . . . . . . . . 60,060 - 60,060
Gas transportation-net. . . . . - 5,147 5,147
Miscellaneous . . . . . . . . . 5,268 1,536 6,804
-------- -------- --------
Total . . . . . . . . . . . $571,627 $204,915 $776,542
-------- -------- --------
-------- -------- --------

</TABLE>

See Note 13 of the Notes to Financial Statements under Item 8 for financial
information concerning segments of business for the three years ended December
31, 1993.

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<PAGE>

Electric Operations

The sources of electric operating revenues and the volumes of sales for the
three years ended December 31, 1993, were as follows:

1993 1992 1991
---- ---- ----
ELECTRIC OPERATING REVENUES
<S> <C> <C> <C>
(Thousands of $):
Residential . . . . . . . . . . . . $195,273 $174,559 $193,923
Small commercial and industrial . . 70,106 66,183 68,332
Large commercial. . . . . . . . . . 84,231 80,041 81,171
Large industrial. . . . . . . . . . 104,506 101,699 102,558
Public authorities. . . . . . . . . 52,183 49,599 51,390
-------- -------- --------
Total-ultimate consumers. . 506,299 472,081 497,374
Other electric utilities . . 60,060 50,097 47,004
Miscellaneous. . . . . . . . 5,268 3,965 4,296
-------- -------- --------
Total . . . . . . . . . . . $571,627 $526,143 $548,674
-------- -------- --------
-------- -------- --------

ELECTRIC SALES (Thousands of kwh):
Residential . . . . . . . . . . . . 3,230,463 2,923,517 3,229,153
Small commercial and industrial . . 1,056,977 1,010,830 1,042,543
Large commercial. . . . . . . . . . 1,696,686 1,624,441 1,650,894
Large industrial. . . . . . . . . . 2,736,269 2,671,212 2,625,915
Public authorities. . . . . . . . . 1,053,928 1,004,911 1,046,035
--------- --------- ---------
Total-ultimate consumers. . . . . 9,774,323 9,234,911 9,594,540
Other electric utilities. . . . . . 3,346,107 3,234,758 2,476,921
---------- ---------- ----------
Total . . . . . . . . . . . . . . 13,120,430 12,469,669 12,071,461
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

At December 31, 1993, LG&E had 336,124 electric customers.

LG&E uses efficient coal-fired boilers that are fully equipped with sulfur
dioxide removal systems to generate electricity. LG&E's system wide emission
rate for sulfur dioxide in 1993 was approximately .78 lbs./MMBtu of heat input,
which is significantly below the Phase II limit of 1.2 lbs./MMBtu established by
the Clean Air Act Amendments for the year 2000.

On Monday, August 30, 1993, LG&E set a record local peak load of 2,239 Mw,
when the temperature at the time of peak reached 94 degrees F (average for the
day was 84 degrees F). The record system peak of 3,223 Mw (which included
purchases from and short-term sales to other electric utilities) occurred on
Thursday, May 30, 1991.

The reliability criterion for generation capacity planning is to provide a
minimum reserve margin of 18%. At February 28, 1994, LG&E owned steam and
combustion turbine generating facilities with a capacity of 2,613 Mw and an 80
Mw hydroelectric facility on the Ohio River. See Item 2, Properties.

LG&E is a participating owner with 14 other electric utilities of Ohio
Valley Electric Corporation (OVEC) whose primary customer is the Portsmouth Area
uranium-enrichment complex of the U.S. Department of Energy at Piketon, Ohio.
LG&E has electric transmission interconnections and/or
interconnection/interchange agreements with PSI Energy, Kentucky Utilities
Company, Southern Indiana Gas and Electric Company, The Cincinnati Gas &
Electric Company, Indiana Michigan Power Company, OVEC, Big Rivers Electric
Corporation, Tennessee Valley Authority, Wabash Valley Power Association,
Indiana Municipal Power

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<PAGE>

Agency, East Kentucky Power Cooperative (East Kentucky), Illinois Municipal
Electric Agency, Jacksonville Electric Authority, and Ogelthorpe Power
Corporation providing for various interchanges, emergency services, and other
working arrangements.

LG&E and East Kentucky have an agreement that allows East Kentucky to
purchase power during its peak season, that period during which the utility's
customers use the greatest amount of power, and LG&E to sell power during its
off-peak season. The agreement entitles East Kentucky to buy from LG&E 30 to
145 megawatts from mid-December to mid-February through 1994-95.

On February 28, 1991, LG&E sold a 12.12% ownership interest in Trimble
County Unit 1 to the Illinois Municipal Electric Agency (IMEA), based in
Springfield, Illinois, which is an agency of 30 municipalities that own and
operate their own electric systems. On February 1, 1993, the Indiana Municipal
Power Agency (IMPA), based in Carmel, Indiana, purchased a 12.88% interest in
the Trimble County Unit. IMPA is composed of 31 municipalities that have joined
together to meet their long-term electric power needs. Both IMEA and IMPA pay
their proportionate share for operation and maintenance expenses of the Unit and
for fuel and reactant used. They are also responsible for their proportionate
share of incremental capital assets acquired.

Electric and magnetic fields (sometimes referred to as EMF) surround
electric wires or conductors of electricity such as electrical tools, household
wiring and appliances, and high voltage electric transmission lines such as
those owned by LG&E. Certain studies have suggested a possible association
between electric and magnetic fields and adverse health effects. The Electric
Power Research Institute, of which LG&E is a participating member, has expended
approximately $65 million since 1987 in its investigation and research with
regard to possible health effects posed by exposure to electric and magnetic
fields.

Gas Operations

The sources of gas operating revenues and the volumes of sales for the
three years ended December 31, 1993, were as follows:
<TABLE>
<CAPTION>

1993 1992 1991
---- ---- ----
GAS OPERATING REVENUES
<S> <C> <C> <C>
(Thousands of $):
Residential. . . . . . . . . $112,508 $96,175 $92,142
Commercial . . . . . . . . . 43,568 36,801 34,913
Industrial . . . . . . . . . 28,310 26,156 18,683
Public authorities . . . . . 13,846 13,884 13,107
-------- -------- --------
Total-ultimate consumers . 198,232 173,016 158,845
Gas transportation-net . . . 5,147 4,169 5,886
Miscellaneous. . . . . . . . 1,536 1,341 1,560
-------- -------- --------
Total. . . . . . . . . . . $204,915 $178,526 $166,291
-------- -------- --------
-------- -------- --------
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
GAS SALES (Millions of cu. ft.):
Residential . . . . . . . . . . . . 24,330 22,465 21,795
Commercial. . . . . . . . . . . . . 10,308 9,527 9,160
Industrial. . . . . . . . . . . . . 7,817 8,077 5,945
Public authorities. . . . . . . . . 3,515 3,864 3,721
----- ----- -----
Total-ultimate consumers . . . . . 45,970 43,933 40,621
Gas transported . . . . . . . . . . 5,249 4,155 6,231
----- ----- -----
Total . . . . . . . . . . . . . 51,219 48,088 46,852
------ ------ ------
------ ------ ------

</TABLE>
At December 31, 1993, LG&E had 258,185 gas customers.

LG&E has extensive underground natural gas storage fields that help provide
economical and reliable gas service to ultimate consumers.

Reflecting the changing nature of the gas business, a number of industrial
customers purchase their natural gas requirements directly from producers or
brokers for delivery through LG&E's distribution system. Transportation of
natural gas for LG&E's customers does not have an adverse effect on earnings
because of the offsetting decrease in gas supply expenses. The transportation
rates are designed to make LG&E economically indifferent as to whether gas is
sold or merely transported.

The all-time maximum day gas sendout of 545,000 Mcf occurred on Sunday,
January 20, 1985, when the average temperature for the day was -11 F. During
1993, the maximum day gas sendout was 447,000 Mcf, occurring on February 18,
when the average temperature for the day was 11 F. Supply on that day consisted
of 171,000 Mcf from purchases, 238,000 Mcf delivered from underground storage
and 38,000 Mcf transported for industrial customers. For further discussion,
see Gas Supply.

On November 1, 1993, LG&E began purchasing and transporting its natural gas
supplies under the new requirements created by FERC Order No. 636 which was
issued in 1992. While LG&E had previously been able to purchase natural gas and
pipeline transportation services from Texas Gas Transmission Corporation (Texas
Gas), LG&E now purchases only transportation services from Texas Gas pursuant to
its FERC-approved tariff and acquires its supply of natural gas from several
other sources.

Throughout 1993, LG&E undertook a review to evaluate and select the
pipeline services and gas supplies needed. As a result of this review, LG&E
entered into several distinct transportation and purchase agreements. LG&E
should benefit from Order No. 636 through enhanced access to competitively
priced natural gas supplies as well as more flexible transportation services.
LG&E has made the necessary modifications to its operations and to its gas
supply clause to reflect these Order No. 636 changes. (For further discussion
see Gas Supply.)

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<PAGE>
Regulation and Rates

The Kentucky Commission has regulatory jurisdiction over the rates and
service of LG&E and over the issuance of certain of its securities. LG&E is a
"public utility" as defined in the Federal Power Act, and is subject to the
jurisdiction of the Department of Energy and the FERC with respect to the
matters covered in such Act, including the sale of electric energy at wholesale
in interstate commerce. In addition, the FERC has sole jurisdiction over the
issuance by LG&E of short-term securities.

For a discussion of the most recent rate order of the Kentucky Commission,
see Rates and Regulation under Item 7 and Note 11 of the Notes to Financial
Statements under Item 8.

Increases and decreases in the cost of fuel for electric generation are
reflected in the rates charged to all of LG&E's electric customers by means of
LG&E's fuel adjustment clause. The Kentucky Commission requires public hearings
at six-month intervals to examine past fuel adjustments, and at two-year
intervals for the purpose of additional examination and transfer of the then
current fuel adjustment charge or credit to the base charges. The Commission
also requires that electric utilities, including LG&E, file certain documents
relating to fuel procurement and the purchase of power and energy from other
utilities.

LG&E's gas rates contain a gas supply clause (GSC), whereby increases or
decreases in the cost of gas supply are reflected in LG&E's rates, subject to
approval of the Kentucky Commission. The GSC procedure prescribed by order of
the Commission provides for quarterly rate adjustments to reflect the expected
cost of gas supply in that quarter. In addition, the GSC contains a mechanism
whereby any over- or under-recoveries of gas supply cost from prior quarters
will be refunded to or recovered from customers through the adjustment factor
determined for subsequent quarters.

In November 1993, the Commission approved a comprehensive agreement on
demand side management (DSM) programs. The agreement contains a rate mechanism
that provides for the recovery of DSM program costs, allows LG&E to recover
revenues due to lost sales associated with the DSM programs and provides LG&E an
incentive for implementing DSM programs. See Rates and Regulation under Item 7
for a further discussion of DSM.

As part of the corporate reorganization whereby the Company became the
parent of LG&E, LG&E obtained the approval of the Kentucky Commission. The
order of the Kentucky Commission authorizing LG&E to reorganize into a holding
company structure contains certain provisions, which, among other things, ensure
the Kentucky Commission access to books and records of the Company and its
affiliates which relate to transactions with LG&E; require the Company and its
subsidiaries to employ accounting and other procedures and controls and to
protect against subsidization of non-utility activities by LG&E's customers; and
preclude LG&E from guaranteeing any obligations of the Company without prior
written consent from the Kentucky Commission. In addition, such order provides
that LG&E's board of directors has the responsibility to use its dividend policy
consistent with preserving the financial strength of the utility and that the
Kentucky Commission, through its authority over LG&E's capital structure, can
protect LG&E's ratepayers from the financial effects resulting from non-utility
activities.

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<PAGE>

Construction Program and Financing

LG&E's construction program is designed to assure that there will be
adequate capacity to meet the future electric and gas needs of its service area.
These needs are continually being reassessed and appropriate revisions are made,
when necessary, in construction schedules. The Company's estimates of its
construction expenditures can vary substantially due to numerous items beyond
the Company's control, such as changes in LG&E's rates, economic conditions,
construction costs, and new environmental or other governmental laws and
regulations.

For a further discussion of construction expenditures and financing, see
Construction Expenditures and Capitalization and Liquidity under Item 7.

During the five years ended December 31, 1993, LG&E's gross property
additions amounted to $580 million. Funds for about 97% of these gross
additions were generated internally. The gross additions during this period
amounted to approximately 24% of total utility plant at December 31, 1993, and
consisted of $480 million for electric properties and $100 million for gas
properties. Gross retirements during the same period were $40 million,
consisting of $29 million for electric properties and $11 million for gas
properties.

Coal Supply

Ninety percent of LG&E's present electric generating capacity is
coal-fired, the remainder being made up of a hydroelectric plant and combustion
turbine peaking units fueled by natural gas and oil. Coal will be the
predominant fuel used by LG&E in the foreseeable future, with natural gas and
oil being used for peaking capacity and flame stabilization in coal-fired
boilers or in emergencies. LG&E has no nuclear generating units and has no
plans to build any in the foreseeable future.

In 1992, LG&E entered into coal supply agreements with various suppliers
for coal deliveries for 1993 and beyond. LG&E normally augments its coal supply
agreements with spot market purchases which, during 1993, were about 10% of
total purchases. LG&E has a coal inventory policy, which is in compliance with
the Kentucky Commission's directives and which LG&E believes provides adequate
protection under most contingencies. LG&E had on hand at December 31, 1993, a
coal inventory of approximately 433,000 tons, or a 28 day supply.

LG&E expects, for the foreseeable future, to continue purchasing most of
its coal from western Kentucky and southwest Indiana, which has a sulfur content
in the 2%-3.5% range. The abundant supply of this relatively low priced coal,
combined with present and future desulfurization technologies, is expected to
enable LG&E to continue to provide adequate electric service in a manner
acceptable under existing environmental laws and regulations.

Coal for LG&E's Mill Creek plant is delivered by rail and barge, whereas
deliveries to the Cane Run plant are primarily by rail and also by truck.
Deliveries to the Trimble County plant are by barge only.

-9-

<PAGE>
The average delivered cost of coal purchased by LG&E, per ton and per
million Btu, for the periods shown were as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Per ton................... $26.58 $25.17 $24.51
Per million Btu........... 1.14 1.09 1.06
</TABLE>

Gas Supply

During 1993, LG&E continued to purchase natural gas from and transport
other natural gas supplies through Texas Gas at rates and terms regulated by the
FERC. LG&E also continued purchasing a portion of its natural gas supplies on
the spot-market and transporting those supplies under various transportation
agreements with Texas Gas pursuant to applicable FERC-approved tariffs. LG&E
received standby service from Texas Gas until its implementation of FERC Order
No. 636.

As a result of FERC Order No. 636 and effective November 1, 1993, LG&E
entered into new transportation service agreements with Texas Gas. These
agreements provide for 30,000 MMBtu (29,268 Mcf) per day in Firm Transportation
(FT) throughout the year. This FT agreement expires October 31, 1997. During
the winter months, LG&E also has 184,900 MMBtu (180,390 Mcf) per day in
No-Notice Service (NNS); during the summer months that NNS level is 135,000
MMBtu (131,707 Mcf) per day. LG&E's NNS agreements with Texas Gas incorporate
terms of 2, 5, and 8 years, and include unilateral roll-over provisions at
LG&E's option. These transportation services are provided by Texas Gas pursuant
to its FERC-approved tariff.

Contemporaneously with the conclusion of its transportation arrangements
with Texas Gas, LG&E also entered into a series of long-term firm supply
arrangements with various suppliers in order to meet its firm sales obligation.
The gas supply arrangements include pricing provisions which are
market-responsive. These firm supplies, in tandem with pipeline transportation
services, provide the reliable and flexible supply needed to replace the bundled
sales service formerly supplied by the pipeline.

During 1994, LG&E will be participating in several regulatory proceedings
at FERC. Particularly, LG&E will be involved in reviewing Texas Gas' most
recent rate filing, and Texas Gas' filing to recover certain transition costs
associated with the FERC-mandated implementation of FERC Order No. 636. As a
separate matter, the Kentucky Commission has indicated in an order issued in its
Administrative Case No. 346 that transition costs, which are clearly identified
as being related to the cost of the commodity itself, are appropriately
recovered as a gas cost through LG&E's purchased gas adjustment.

LG&E operates five underground gas storage fields with a current working
gas capacity of 14.6 million Mcf. Gas is purchased and injected into storage
during the summer season and is then withdrawn to supplement pipeline supplies
to meet the gas-system load requirements during the winter heating season.

-10-
<PAGE>

The estimated maximum deliverability from storage during the early part of
the 1992-1993 heating season was approximately 373,000 Mcf per day.
Deliverability decreases during the latter portion of the heating season as the
storage inventory is reduced by seasonal withdrawals.

The average cost per Mcf of natural gas purchased by LG&E was $2.91 in
1993, $2.77 in 1992, and $2.39 in 1991. Although upcoming regulatory changes
may alter the ways in which LG&E contracts for natural gas supplies, it is
expected that LG&E will continue to have adequate access to natural gas supplies
at market sensitive prices.

Environmental Matters

Protection of the environment is a major priority for LG&E. LG&E engages
in a variety of activities within the jurisdiction of federal, state, and local
regulatory agencies. Those agencies have issued LG&E permits for various
activities subject to air quality, water quality, and waste management laws and
regulations. For the five year period ending with 1993, expenditures for
pollution control facilities represented $128 million or 22% of total
construction expenditures. The cost of operating and maintaining these
facilities amounted to $22 million in both 1993 and 1992. LG&E's anticipated
capital expenditures for 1994 to comply with environmental laws are
approximately $22 million. See Item 3 and Note 10 of the Notes to Financial
Statements under Item 8 for a discussion of specific environmental proceedings
affecting LG&E.

LG&E ENERGY SYSTEMS INC.

In 1991, the Company formed LG&E Energy Systems Inc. (Energy Systems) to
direct the Company's expansion into the non-utility marketplace. In December
1991, Energy Systems purchased Hadson Power Systems, Incorporated, which was
renamed at the time of purchase to LG&E Power Systems Inc. and subsequently
renamed LG&E Power Inc. (together with its subsidiaries, "LPI"). In 1992,
Energy Systems acquired a 36.5% interest in Natural Gas Clearinghouse (NGC). In
December 1993, the Company announced the sale of its equity interest in NGC to
NOVA Corporation of Alberta, Canada, which was completed in January 1994. See
Note 3 of Notes to Financial Statements under Item 8 and Future Outlook under
Item 7 for a further discussion of the NGC sale.

LPI is involved in the development, design, construction, ownership,
operation, and maintenance of power generation facilities in the United States.
LPI, through its predecessor, has been in the independent power business since
1982 and has approximately 500 employees. It currently has in operation or
under construction, projects capable of generating over 527 megawatts of
electric power capacity in Maine, North Carolina, Virginia, and New York. For a
description of LPI's projects and the ownership interests of LPI in such
projects, see Item 3, Properties. Each of these projects currently is, or upon
its completion will be, a qualifying cogeneration facility under the Public
Utility Regulatory Policy Act of 1978 (PURPA). In addition, LPI has sought and
obtained exempt wholesale generator (EWG) status for the entity which owns the
Roanoke Valley I project in North Carolina. Such status will allow LPI to own
and operate the 165 megawatt Roanoke Valley I facility without complying with
PURPA's qualifying cogeneration facility operating standards. EWGs are not
required to comply with such standards if the rates charged for a facility's
electric generation have been accepted for

-11-

<PAGE>
filing by FERC. Such a filing was made and accepted for the Roanoke Valley I
facility in December 1993.

Generally, qualifying facility status exempts projects from the application
of the Holding Company Act, many provisions of the Federal Power Act, and state
laws and regulations respecting rates and financial or organization regulation
of electric utilities. Exempt wholesale generators also are exempt from
application of the Holding Company Act and many provisions of the Federal Power
Act, but once such an entity files its electric generation rates with FERC, it
becomes a jurisdictional public utility under the Federal Power Act. As such a
"public utility," an EWG's rates and some of its corporate activity are subject
to FERC regulation. Exempt wholesale generators also are subject to non-rate
regulation under state laws governing electric utilities. While qualifying
facility or exempt wholesale generator status entitles LPI's projects to certain
regulatory exceptions and benefits under PURPA and the Holding Company Act, each
project must still comply with other federal, state, and local laws, including
those regarding siting, construction, operation, licensing, and pollution
abatement. Through an affiliate, LPI also operates and maintains 12 projects in
which it does not have an ownership interest that are located in California,
Pennsylvania, and Montana. In order to permit it to operate EWGs, such
affiliate also has been designated as an exempt wholesale generator under the
Holding Company Act.

LPI currently is involved in the construction of three cogeneration
facilities, Roanoke Valley I, Roanoke Valley II, and Rensselaer. The Roanoke
Valley I and II projects each are owned with Westmoreland Energy, Inc., a
subsidiary of Westmoreland Coal Company (Westmoreland). The Roanoke Valley I
project is a 165 megawatt coal-fired facility located near Weldon, North
Carolina. The Roanoke Valley II project is a 44 megawatt coal-fired facility
located adjacent to the Roanoke Valley I project. These facilities share
certain common facilities. Both facilities will sell electricity to North
Carolina Power and steam to Patch Rubber Company, a subsidiary of Myers
Industries. TECO Coal Company is obligated to supply all of the plants' coal
requirements although Westmoreland has entered into a subcontract arrangement
with TECO whereby it is entitled to supply approximately 80% of such coal
requirements. Subsidiaries of LPI will engineer, construct, and operate each
project. The project owner has obtained a $393 million construction and term
loan facility to finance its construction and operation of these projects. The
Rensselaer project, a 79 megawatt gas-fired cogeneration plant, also is owned
jointly with Westmoreland Energy, Inc. and is located in Rensselaer, New York.
This facility will sell electricity to Niagara Mohawk Power Corp. and steam to
BASF Corp. LPI is engaged in the construction of such facility and the project
owner has arranged a $123 million construction and term loan facility to finance
the construction and operation of this project. Completion of the Roanoke
Valley I and Rensselaer projects are projected for mid-1994 and completion of
the Roanoke Valley II project is expected for mid-1995.

The financing and overall structure of the Roanoke Valley and Rensselaer
projects are similar to that followed for previous LPI cogeneration projects.
Subsidiaries of LPI, as builders of the projects, are contractually obligated to
construct the project and to assure it meets certain performance standards.
Financing for the construction of the project is provided to a partnership which
is the owner of the project and in which LPI (or a wholly owned entity) is a
partner. The partners are obligated to make equity contributions to the project
at various stages prior to its completion. Each project has a long-term
contract with the local utility to purchase electricity generated by the project
and, for those projects which are qualifying

-12-

<PAGE>
cogeneration facilities, with an industrial company to purchase the steam from
the project. Revenues from the sale of electricity and steam are designed to be
sufficient to repay the debt incurred in financing the project. LPI's ownership
interest in the project and the revenues from the sale of steam and electricity
from the project are pledged as security to the lenders providing financing for
the project. Although the financing of the project is non-recourse to the
partnership owning the project, the various obligations of LPI under the
contracts for construction of the project and LPI's equity commitments are
guaranteed by Energy Systems. Through a support agreement with Energy Systems
for the benefit of the project lenders, the Company has agreed in substance to
provide Energy Systems with the necessary funds and financial support to meet
these contingencies. See Project Obligations under Note 10 of the Notes to
Financial Statements under Item 8.

Westmoreland has similar guarantee obligations with respect to the equity
commitments of Westmoreland Energy for the Roanoke Valley and Rensselaer
projects. In April 1993, Westmoreland requested that Energy Systems provide
financial assistance with respect to its guarantee obligations. Energy Systems
agreed to provide such financial assistance by guaranteeing to the lenders for
the Roanoke Valley and Rensselaer projects payment of those equity commitments
of Westmoreland, up to a maximum aggregate amount of approximately $35.5 million
($26.9 million for the Roanoke Valley projects and $8.6 million for the
Rensselaer project). LPI is entitled to receive fees for the provision of such
financial assistance. The obligations of Westmoreland to repay any amounts
actually paid by Energy Systems with respect to such guarantees and the other
obligations which Westmoreland has to Energy Systems under this credit support
arrangement are secured by pledges of Westmoreland Energy's ownership interests
in the projects. In December 1993, Energy Systems and LPI entered into an
arrangement with Nations Financial Capital Corporation (Nations), whereby
Nations has agreed to fund on its behalf those amounts which Energy Systems is
obligated to fund for Westmoreland with respect to the Roanoke Valley projects.
While Energy Systems remains directly responsible to the Roanoke Valley lenders
for the payment of Westmoreland's equity obligations for such projects, Nations
has agreed that Westmoreland, and not Energy Systems, will be responsible for
repayment of any amounts which Nations is obligated to fund. As security for
the payment to Nations of any amounts so funded, the Company assigned to Nations
those pledged interests in the Roanoke Valley projects and those related rights
which were received from Westmoreland in April 1993. Energy Systems paid a fee
to Nations in connection with the assumption by Nations of Westmoreland's
Roanoke Valley funding obligations. Energy Systems is able to terminate such
arrangement at any time. Both the lenders for the Roanoke Valley projects as
well as Westmoreland have consented to Energy Systems' arrangements with
Nations.

LABOR RELATIONS

LG&E's 1,652 operating, maintenance, and construction employees are members
of the International Brotherhood of Electrical Workers (IBEW) Local 2100. On
May 31, 1992, the IBEW voted to ratify a new three-year collective bargaining
agreement. The new agreement became effective in November 1992 and will expire
in November 1995.

EMPLOYEES

The Company and its subsidiaries had 3,293 full-time employees at
December 31, 1993. During the last quarter of 1993 and early 1994, LG&E
eliminated a number of full-time

-13-

<PAGE>
positions and made early retirement available to a number of other employees.
See Note 5 of Notes to Financial Statements under Item 8 for a further
discussion of this matter.

ITEM 2. PROPERTIES.

At February 28, 1994, LG&E owned and operated the following electric
generating stations:

Year in
Service Capability Rating (Kw)
------- ----------------------
<S> <C> <C> <C>
Steam Stations:
Mill Creek-Kosmosdale, Ky.
Unit 1..................... 1972 303,000
Unit 2..................... 1974 301,000
Unit 3..................... 1978 386,000
Unit 4..................... 1982 466,000 1,456,000
-------
Cane Run-near Louisville, Ky.
Unit 3..................... 1958 115,000
Unit 4..................... 1962 155,000
Unit 5..................... 1966 168,000
Unit 6..................... 1969 240,000 678,000
-------
Trimble County-Bedford, Ky.
Unit 1..................... 1990 371,000 (1)

Combustion Turbine Generators (Peaking capability):
Zorn........................ 1969 16,000
Paddy's Run................. 1968 43,000
Cane Run.................... 1968 16,000
Waterside................... 1964 33,000 108,000
------- ----------
2,613,000
----------
----------
<FN>
(1) Amount shown represents LG&E's 75% interest in the Unit. See
Note 12 of the Notes to Financial Statements, Jointly Owned
Electric Utility Plant, under Item 8 for a discussion of the sale
of 25% of the Unit to IMEA and IMPA. LG&E is responsible for
operation of the Unit and is reimbursed by IMEA and IMPA for
expenditures related to the Unit based on their proportionate
share of ownership interest.
</TABLE>

LG&E's steam stations consist mainly of coal-fired units except for Cane
Run Unit 3 which must use natural gas because of restrictions mandated by
environmental regulations.

LG&E also owns an 80 Mw hydroelectric generating station located in
Louisville, operated under license issued by the Federal Energy Regulatory
Commission.

At December 31, 1993, LG&E's electric transmission system included 20
substations with a total capacity of approximately 10,518,897 Kva and
approximately 645 structure miles of lines. The electric distribution system
included 84 substations with a total capacity of approximately 2,948,768 Kva,
3,499 structure miles of overhead lines, 231 miles of underground conduit, and
5,170 miles of underground conductors.

LG&E's gas transmission system includes 177 miles of transmission mains,
and the gas distribution system includes 3,226 miles of distribution mains.

-14-
<PAGE>

LG&E operates underground gas storage facilities with a current working gas
capacity of approximately 14.6 million Mcf. See Gas Supply under Item 1.

In 1990, LG&E entered into an operating lease for its corporate office
building located in downtown Louisville, Kentucky. The lease is for a period of
15 years and is scheduled to expire June 30, 2005.

Other properties owned by LG&E include office buildings, service centers,
warehouses, garages, and other structures and equipment, the use of which is
common to both the electric and gas departments.

The trust indenture securing LG&E's First Mortgage Bonds constitutes a
direct first mortgage lien upon substantially all property owned by LG&E.

At December 31, 1993, LPI owned the percentage indicated of the following
qualifying cogeneration projects in operation or being constructed:

Actual or Actual or
Proposed Net Planned
Ownership Capability Year in
Name Interest % Fuel Rating (Mw) Service
- ---- ---------- ---- ------------ ---------
<S> <C> <C> <C> <C>
Babcock-Ultrapower Jonesboro 17 Wood 24.5 1986
Washington County, Maine

Babcock-Ultrapower West 17 Wood 24.5 1986
Enfield
Penobscot County, Maine

LG&E Westmoreland- 50 Coal 62.7 1992
Southampton
Franklin, Virginia

LG&E Westmoreland-Altavista 50 Coal 62.7 1992
Altavista, Virginia

LG&E Westmoreland-Hopewell 50 Coal 62.7 1992
Hopewell, Virginia

Westmoreland-LG&E Partners 50 Coal 165 1994
Weldon, North Carolina

LG&E Westmoreland- 50 Natural 79 1994
Rensselaer Gas
Rensselaer, New York

Westmoreland-LG&E Partners 50 Coal 44 1995
Weldon, North Carolina

</TABLE>

-15-
<PAGE>

LPI's ownership interests in these projects and the revenues from the sale of
electricity and steam from the projects are pledged as security to the lenders
who provided the financing for the project.

ITEM 3. LEGAL PROCEEDINGS.

Rate Case and Trimble County Station

For a discussion of the most recent rate order of the Public Service
Commission of Kentucky and a detailed discussion of the orders of the Kentucky
Commission and rulings of the Franklin Circuit Court and the Kentucky Court of
Appeals concerning Trimble County Unit 1, see Item 7 and Note 11 of the Notes to
Financial Statements under Item 8.

Statewide Power Planning

As required by the regulations of the Kentucky Commission, on November 15,
1993, LG&E filed its 1993 biennial Integrated Resource Plan with the Kentucky
Commission. The plan which updates LG&E's first Integrated Resource Plan filed
in 1991, proposes to meet customers' future demand through 2007 by adding
resources in small increments such as short-term power purchases (1996-1999), a
customer-owned standby generation program (1997), two combustion turbines
(1999-2000), an air conditioner load controls program (2001-2003), an upgrade to
LG&E's existing hydroelectric plant (2003), and a compressed air energy storage
plant (2004). The Kentucky Commission staff is in the process of reviewing
LG&E's plan, and is not expected to issue its report and recommendations
concerning the plan until late 1994 at the earliest. The Kentucky Commission's
regulations do not require it to hold any hearings or issue any formal orders
regarding the Plan.

Environmental

The Clean Air Act Amendments of 1990 impose stringent limits on emissions
of sulfur dioxide and nitrogen oxides by electric utility generating plants.
This legislation is extremely complex and its effect will substantially depend
on regulations issued by the U.S. Environmental Protection Agency. While LG&E
will incur some capital expenditures to comply with the Act's requirements, the
overall impact of the Act on LG&E is expected to be minimal. LG&E is closely
monitoring the continuing rule-making process, in order to assess the precise
impact of the legislation on LG&E.

For a complete discussion of the Company's environmental issues concerning
its Mill Creek and Cane Run generating plants, manufacturing gas plant sites,
and certain other environmental issues, see Note 10 of the Notes to Financial
Statements under Item 8.

Based upon prior precedents established by the Kentucky Commission and the
Environmental Cost Recovery legislation, LG&E expects to have an opportunity to
recover through future ratemaking proceedings, its costs associated with
remedial measures required to comply with environmental laws and regulations.

-16-

<PAGE>

Like LG&E, LPI and its subsidiaries are subject to extensive federal,
state, and local environmental laws and regulations governing the operations of
the various power plants in which they participate as an owner or managing
operator. Among other things, these laws and regulations govern the discharge
of materials into waterways, the air, and the ground and, if violated, may
require the owner or operator to take remedial action to maintain the affected
facility's operating status. To the extent any such remedial environmental
actions have been required of LPI or its subsidiaries in the past, related
expenditures have not been material.

Other

As discussed in Item 1, LPI announced a preliminary agreement with the
DuPont Company to form a power partnership. Virginia Power, one of the
utilities in whose service territory the DuPont facilities reside, has made an
administrative filing with the Virginia State Corporation Commission (SCC)
questioning certain aspects of the proposed transaction. Virginia Power has
requested that the SCC, among other things, enter a declaratory order
determining that the proposed arrangement is unlawful and violates Virginia
Power's rights under its certificate of public convenience and necessity. Due
to the preliminary nature of this proceeding, it is not possible to predict with
any certainty its outcome at this time. Nonetheless, LPI intends to vigorously
pursue the proposed transaction.

LG&E is a defendant in lawsuits seeking compensatory and, in certain
instances, punitive damages for injuries purportedly incurred by individuals
coming into contact with LG&E's electric or gas facilities and/or services. To
the extent that damages are assessed in any of these lawsuits, LG&E believes
that its insurance coverage is adequate and that the effect of any such damages
will not be material.

LPI and LPI's subsidiaries are defendants in lawsuits seeking compensatory
damages primarily associated with various employment related matters. To the
extent that damages are assessed in any of these lawsuits, LPI believes that the
effect will not be material.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

-17-

<PAGE>

Executive Officers of the Company.

Effective Date of Election
Name Age Position to Present Position
- ---- --- -------- --------------------------
<S> <C> <C> <C>
Roger W. Hale 50 Chairman of the Board
President and Chief
Executive Officer August 17, 1990

Edward J. Casey, Jr. 36 Group President - LG&E
Energy Services January 1, 1994

Stephen R. Wood 51 Executive Vice
President and Chief
Administrative Officer January 1, 1994

Charles A. Markel III 46 Corporate Vice
President, Finance and
Treasurer January 1, 1993
</TABLE>
Each of the following officers is an executive officer of a subsidiary of
the Company and for purposes of the requirements of this report may also be
considered an executive officer of the Company:
<TABLE>
<S> <C> <C> <C>
Victor A. Staffieri 38 President - LG&E January 1, 1994

David R. Carey 40 Senior Vice President,
Operations - LG&E January 1, 1994

Raymond A. Bennett 60 Vice President, Gas
Service Business - LG&E January 1, 1994

M. Lee Fowler 57 Vice President and
Controller - LG&E September 1, 1988

Wendy C. Heck 40 Vice President,
Information Services -
LG&E January 1, 1994

Chris Hermann 46 Vice President,
Wholesale Electric
Business - LG&E January 1, 1993

</TABLE>
The present term of office of each of the above executive officers extends
to the meeting of the Board of Directors following the Annual Meeting of
Stockholders, scheduled to be held May 24, 1994.

There are no family relationships between executive officers of the Company
or those executive officers of its subsidiaries.

Mr. Hale was named to the position shown above concurrent with a corporate
restructuring completed on August 17, 1990, pursuant to which LG&E became a
subsidiary of the Company. Prior to January 1, 1994, Mr. Casey was Executive
Vice President and Chief Financial Officer, and prior to January 1, 1993,
President - LG&E Energy Systems (a subsidiary of the Company). Prior to
January 1, 1994, Mr. Wood was Senior Vice President and Chief Administrative

-18-

<PAGE>
Officer - LG&E, and prior to December 1992, held the same position concurrently
for the Company and LG&E. Prior to January 1, 1993, Mr. Markel was Senior Vice
President and Chief Financial Officer, and prior to January 1992, Vice
President-Finance and Treasurer.

Messrs. Hale and Markel are also executive officers of the Company's
subsidiary, LG&E.

Mr. Fowler, Ms. Heck, Mr. Hermann, and Mr. Markel have been employed for
more than five years in executive or management positions with the Company or
its subsidiary, LG&E. Prior to election to the position shown in the table, the
following executive officers held other positions with the Company or LG&E since
January 1, 1989: Ms. Heck was Manager-Internal Audit prior to January 1990,
Vice President-Internal Auditing prior to January 1, 1992, Vice President-Fuels
and Operating Services prior to January 1, 1993, and Vice President-Fuels and
Information Services thereafter; Mr. Hermann was Manager-Administration, Power
Production prior to November 1989, General Manager-Power Production prior to
January 1992 and General Manager-Wholesale Electric thereafter; Mr. Markel was
Vice President and Treasurer prior to March 1, 1990, Vice President-Finance and
Treasurer prior to January 1, 1992, and Senior Vice President and Chief
Financial Officer thereafter. Effective January 1, 1993, Mr. Markel was named
Corporate Vice President-Finance and Treasurer of the parent company, LG&E
Energy Corp.

Prior to election to his current position, Mr. Hale held the position of
Chairman of the Board, President and Chief Executive Officer of LG&E, and prior
to February 1, 1990, Mr. Hale was President and Chief Executive Officer of LG&E.
Prior to June 1, 1989, Mr. Hale was employed by BellSouth Enterprises, Inc. and
held the position of Executive Vice President.

Prior to election to his current position, Mr. Staffieri was Senior Vice
President-Public Policy, and General Counsel of the Company and LG&E, and prior
to November 15, 1992, Senior Vice President, General Counsel and Corporate
Secretary. Prior to March 15, 1992, Mr. Staffieri was employed by Long Island
Lighting Company and held the position of General Counsel and Secretary from
April 1989 to March 1992, and Deputy General Counsel prior to April 1989.

Prior to election to his current position, Mr. Carey was Vice President and
General Manager, Retail Electric Business of LG&E, prior to January 1, 1993,
Vice President-Marketing and General Manager, Electric Service, prior to
January 1, 1992, Vice President-Marketing and Planning, and prior to July 14,
1990, Vice President-Marketing and Sales. Prior to January 1990, Mr. Carey was
employed by AT&T General Business Systems and held the position of
Director-Strategic and Business Planning.

Prior to election to his current position, Mr. Bennett was Vice President
and General Manager, Gas Service Business of LG&E, and prior to January 1, 1992,
General Manager, Gas Operations. Prior to May 1990, Mr. Bennett was employed by
the Railroad Commission of Texas and held the position of Director of
Transportation-Gas Utility Division.

-19-
<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

The Company's Common Stock is listed on the New York and Chicago Stock
Exchanges. The ticker symbol is "LGE". The newspaper stock exchange listings
are "LGE Energy" or "LGE EN". The following table gives information with
respect to price ranges, as reported in THE WALL STREET JOURNAL as New York
Stock Exchange Composite Transactions, and dividends paid for the periods shown.

Effective May 15, 1992, the outstanding shares of common stock were split
on a three-for-two basis. The new shares were issued to shareholders of record
on April 30, 1992. Prior period shares of common stock, dividends paid, prices,
earnings per share of common stock, and dividends declared reported in this item
and Item 6 below have been restated to reflect the stock split. See Note 1 of
Notes to Financial Statements under Item 8.

1993 1992
-------------------------------- --------------------------------
Price Price
------------------- -----------------
Dividend Dividend
Paid High Low Paid High Low
-------- ---- --- -------- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter. . . .50 1/4 cents $ 39 1/2 $ 33 3/4 49 cents $ 32 $ 29 5/8
Second Quarter . . .50 1/4 39 7/8 36 5/8 49 32 1/8 29 1/8
Third Quarter. . . .50 1/4 43 3/8 38 3/4 49 35 3/8 31 3/4
Fourth Quarter . . . 52 42 1/8 37 3/8 50 1/4 36 3/8 32 1/4

</TABLE>

The number of record holders of Common Stock at December 31, 1993, was
32,256. The book value of the Company's Common Stock at December 31, 1993, was
$22.14 per share.

ITEM 6. SELECTED FINANCIAL DATA.

Years Ended December 31
(Thousands of $ Except per Share Data)
------------------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . $900,027 $834,739 $714,965 $698,959 $686,996
Operating Income . . . . . . . . . . . 192,968 174,504 188,131 186,350 173,314
Net Income . . . . . . . . . . . . . . 88,260 75,614 82,951 91,422 66,625
Average Number of
Common Shares Outstanding. . . . . . 32,688,592 32,307,441 32,256,624 31,856,469 31,270,080
Earnings Per Share of
Common Stock . . . . . . . . . . . . $2.70 $2.34 $2.57 $2.87 $2.13
Dividends Declared Per
Common Share . . . . . . . . . . . . 2.045 1.985 1.92 1.87 1.83
Payout Ratio . . . . . . . . . . . . . 75.9% 84.7% 74.7% 81.6% 86.2%
Total Assets . . . . . . . . . . . . . $2,284,794 $2,160,577 $2,054,156 $2,001,354 $1,905,306
Long-Term Obligations (including
amounts due within one year) . . . . 662,800 686,262 687,662 688,250 629,500

</TABLE>

-20-

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

OVERVIEW

LG&E Energy Corp.'s net income and earnings per share of common stock
increased in 1993 as compared to 1992 because of strong performances by both the
utility and the non-utility businesses. The contribution from Louisville Gas
and Electric Company (LG&E) resulted primarily from a more normalized weather
pattern in the utility's service area and the sale of a 12.88% interest in
Trimble County Unit 1. Contributions to net income from the Company's
non-utility businesses resulted primarily from earnings from projects under
construction and in operation, project finance closings, and earnings from
plants operated and maintained on behalf of third parties. In addition,
earnings from the Company's 36.5% investment in Natural Gas Clearinghouse (NGC)
increased in 1993 as compared to 1992. In December 1993, the Company agreed to
sell its partnership interest in NGC to NOVA Corporation of Alberta, Canada. The
sale was completed in January 1994, and the Company expects to post a pre-tax
gain of approximately $87 million in the first quarter of 1994.

Effective January 1, 1994, the Company announced a major realignment of its
business units to reflect its outlook for rapidly emerging competition in all
segments of the energy services industry. In addition to this organizational
change, the Company is presently re-evaluating its regulatory strategy to pursue
full cost recovery of certain deferred expenses which the Company has recorded
as regulatory assets. See Future Outlook for a further discussion of this
matter.

The following discussion and analysis by management focuses on those
factors that had a material effect on the Company's financial results of
operations and financial condition during 1993 and 1992 and should be read in
connection with the consolidated financial statements and notes thereto. The
Company's financial results and conditions are dependent to a large degree on
the financial results and conditions of Louisville Gas and Electric Company.

RESULTS OF OPERATIONS

Earnings per Share

The Company's earnings per common share increased 36 cents for 1993 over
1992, including the 10 cents per common share gain recognized from the sale of a
12.88% portion of the Trimble County plant to the Indiana Municipal Power Agency
(IMPA). LG&E's contribution to earnings came from increased electric sales as a
result of the warmer summer weather experienced in 1993, higher sales to other
utilities and reduced costs for debt and preferred stock attributable to
favorable refinancing activities. Contributions to earnings from the
non-utility businesses came from construction profits recognized by LG&E Power
Inc. (LPI), earnings from operating power projects, a financial closing related
to a power project and strong performance by NGC.

After excluding the 13 cents per common share gain recognized in 1991 by
LG&E on the sale of a 12.12% portion of the Trimble County plant to Illinois
Municipal Electric Agency (IMEA), earnings for 1992 decreased 10 cents from
1991. This decrease was due primarily to lower electric

-21-

<PAGE>

sales to residential customers as a result of the cooler summer experienced in
1992 (40 cents), increased operating and depreciation expenses (15 cents),
decreased interest earned on temporary cash investments of LG&E (3 cents), and
various other factors (4 cents). These items were partially offset by the
contribution to earnings from non-utility operations in 1992 (40 cents) and
favorable financing activities of LG&E (12 cents).

Rates and Regulation

LG&E is subject to the jurisdiction of the Public Service Commission of
Kentucky (Commission) in virtually all matters related to electric and gas
utility regulation. LG&E last filed for a rate increase with the Commission in
June 1990 based on the test-year ended April 30, 1990. The request was for a
general rate increase of $34.9 million ($31.0 million electric and $3.9 million
gas). A final order was issued in September 1991 that effectively granted LG&E
an annual increase in rates of $6.8 million ($6.1 million electric and $.7
million gas). The Commission's order authorized a rate of return on common
equity of 12.5%.

On April 21, 1993, LG&E, the Kentucky Attorney General, the Jefferson
County Attorney, and representatives of several customer-interest groups filed
with the Commission a request for approval of a comprehensive agreement on
demand side management (DSM) programs. Under the agreement, LG&E will commit up
to $3.3 million over three years (from 1994 through 1996) for initial programs
that include a residential energy conservation and education program and a
commercial conservation audit program. Future programs will be developed
through a formal collaborative process. The agreement contains a rate mechanism
that will (1) provide LG&E concurrent recovery of DSM program costs, (2) provide
LG&E an incentive for implementing DSM programs, and (3) allow LG&E to recover
revenues due to lost sales associated with the DSM programs. On November 12,
1993, the Commission approved the agreement.

Revenues from lost sales to residential customers are collected through a
"decoupling mechanism". LG&E's residential decoupling mechanism breaks the link
between the level of LG&E's residential kilowatt-hour and Mcf sales and its non-
fuel revenues. Under traditional regulation, a utility's revenue varies with
changes in its level of kilowatt-hour or Mcf sales. The residential decoupling
mechanism will allow LG&E to recover a predetermined level of revenue per
customer based on the rate set in LG&E's last rate case, which will not vary
with the level of kilowatt-hour or Mcf sales. Residential revenues will be
adjusted to reflect (1) changes in the number of residential customers and (2) a
pre-established annual growth factor in residential revenue per customer.
Decoupling, in effect, removes the impact on LG&E's non-fuel revenues from
changes in kilowatt-hour or Mcf sales due to weather, fluctuations in the
economy, and conservation efforts. Under this mechanism, if actual sales
produce lower revenues than are produced by the predetermined per-customer
amount, the difference is deferred for recovery from customers through an
adjustment in rates over a period that will not exceed two years. Conversely,
if actual sales produce more revenues than would be realized using the
predetermined per-customer amount, the difference will be returned to customers
through subsequent rate adjustments over a period not to exceed two years.
Residential revenues reported in the financial statements for 1994 through 1996
will be determined in accordance with the predetermined amount per customer plus
growth, and recovery of fuel and gas costs. The difference between the revenues
shown in the financial statements and the amounts billed to customers will be
recorded on the balance sheet and deferred for future recovery from or return to
customers.

-22-

<PAGE>

As more fully discussed in Note 11 of Notes to Financial Statements under
Item 8, the Commission has set a procedural schedule to determine the
appropriate ratemaking treatment to exclude 25% of the Trimble County plant from
customer rates.

On May 24, 1993, the Federal Energy Regulatory Commission (FERC) gave final
approval for a market-based rate tariff and two transmission service tariffs
that were filed by LG&E. This tariff enables LG&E to sell up to 75 Mw of firm
generation capacity at market-based rates. It also enables LG&E to sell an
unlimited amount of non-firm power at market-based rates, as long as the power
is from LG&E's own generation resources.

Revenues

A comparison of LG&E's revenues for the years 1993 and 1992 with the
immediately preceding years reflects both increases and decreases which have
been segregated by the following principal causes (in thousands of $):

Increase (Decrease) From Prior Period
--------------------------------------------
Electric Revenues Gas Revenues
---------------------- ----------------
Cause 1993 1992 1993 1992
----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales to Ultimate Consumers:
Rate increases effective in 1991. . . . . . . $ - $ 748 $ - $ 173
Fuel and gas supply adjustments, etc. . . . . 6,832 313 19,479 1,044
Variation in sales volumes. . . . . . . . . . 27,385 (26,354) 5,736 12,954
------ ------- ------ ------
Total . . . . . . . . . . . . . . . . . . . 34,217 (25,293) 25,215 14,171
Sales to other utilities . . . . . . . . . . . . . 9,964 3,093 - -
Gas transportation-net . . . . . . . . . . . . . . - - 978 (1,717)
Other . . .. . . . . . . . . . . . . . . . . . . . 1,303 (331) 196 (219)
------- -------- ------- --------
Total . . . . . . . . . . . . . . . . . . . $45,484 $(22,531) $26,389 $ 12,235
------- -------- ------- --------
------- -------- ------- --------
</TABLE>

Electric revenues increased in 1993 primarily because of the warmer summer
weather. Sales of electricity to other utilities increased over 1992 levels due
to LG&E's aggressive efforts in marketing off-system sales of energy. The
increase in gas sales for 1993 is largely attributable to cooler winter weather
in the region and customer growth.

Non-utility revenues of $123.5 million are $6.5 million or 5% lower than
last year due to lower project development fees and revenues. Construction
revenues of $120 million were roughly equal to 1992, as progress continued on
LPI's currently active projects at Roanoke Valley I and II in North Carolina,
and Rensselaer in New York. LPI derives the majority of its revenues from the
construction of power plants while its operating profit consists of plant
development and construction profits in addition to earnings from operating
power projects.

-23-

<PAGE>

LPI's ability to sustain this level of revenues is dependent, in part, upon its
ability to continue to obtain major engineering and construction contracts.

Expenses

Fuel for electric generation and gas supply expenses account for a large
segment of the Company's total operating costs. LG&E's electric and gas rates
contain a fuel adjustment clause and a gas supply clause, respectively, whereby
increases or decreases in the cost of fuel and gas supply may be reflected in
LG&E's rates, subject to the approval of the Commission.

Fuel expenses increased in 1993 primarily because of an increase in
generation and the higher cost of coal purchased. The average delivered cost
per ton of coal purchased for LG&E was $26.58 in 1993, $25.17 in 1992, and
$24.51 in 1991.

LG&E's increase in power purchased expense reflects an increase in the
quantity of power purchased mainly because of wheeling arrangements with other
utilities.

Gas supply expenses increased in 1993 and 1992 largely because of an
increase in both the cost and the volume of gas purchased. The average unit
cost per Mcf of purchased gas for LG&E was $2.91 in 1993, $2.77 in 1992, and
$2.39 in 1991.

Utility operating and maintenance expenses increased approximately $5
million in 1993. This increase is primarily attributable to increased expenses
for operation and maintenance of electric generating plants and higher
administrative and general costs. The $2 million increase in 1992 over 1991
resulted primarily from costs associated with legal settlements relating to
personal injury claims and storm damage expenses. General increases in labor
and material costs are also reflected in operation and maintenance expenses.

Non-utility expenses reflect the operating and business development
expenses associated with the Company's non-utility operations. The majority of
the expenses reflected herein pertain to LPI, including construction, project
development, and general and administrative costs. LPI was acquired in December
1991.

Other income and (deductions) decreased in 1993. Other income includes a
$3.9 million before-tax gain on the sale of a 12.88% ownership interest in
LG&E's Trimble County Unit 1 to IMPA. Other deductions reflect charges
applicable to business restructurings and other non-recurring charge-offs. A
decrease in 1992 from 1991 resulted primarily from a $7.9 million gain recorded
in 1991 on the sale of a 12.12% ownership interest in Trimble County to IMEA and
decreased interest income of $3 million from temporary cash investments.

Interest charges decreased in 1993 and 1992 primarily because of an
aggressive program to refinance at lower interest rates. LG&E refinanced
approximately $205 million of its outstanding debt in 1993. The lower interest
requirement at LG&E was partially offset by interest charges related to debt
issued for the Company's expansion into non-utility businesses.

Variations in income tax expenses are largely attributable to changes in
pre-tax income and an increase in the corporate Federal income tax rate from 34%
to 35% effective January 1, 1993.

-24-

<PAGE>

Preferred dividends reflect the lower dividend rates that resulted from
LG&E's refunding of the $25 million, $8.90 Series with a $5.875 Series in May
1993. In February 1992, LG&E refunded the $8.72 and $9.54 Series with $50
million of Auction Rate Series. LG&E's weighted average preferred dividend rate
at December 31, 1993, was 4.72%; at December 31, 1992, 5.36%.

Income from discontinued operations reflect the net earnings realized from
the Company's investment in NGC. In January 1994, the Company sold its interest
in NGC. (See Note 3 of Notes to Financial Statements under Item 8.)

The rate of inflation may have a significant impact on LG&E's operations,
its ability to control costs, and the need to seek timely and adequate rate
adjustments. However, relatively low rates of inflation in the past few years
have moderated the impact on current operating results.

Reference is made to Note 5 of Notes to Financial Statements under Item 8
for a discussion of SFAS No. 112, EMPLOYERS' ACCOUNTING FOR POST-EMPLOYMENT
BENEFITS, which will be effective in 1994. Reference is also made to Notes 1
and 5, which refer to the adoption of SFAS No. 106, EMPLOYERS' ACCOUNTING FOR
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS and SFAS No. 109, ACCOUNTING FOR
INCOME TAXES.

LIQUIDITY AND CAPITAL RESOURCES

The Company's need for capital funds is primarily related to the
construction of plant and equipment necessary to meet electric and gas
customers' needs of the utility and equity investments in connection with power
production projects in the non-utility business.

The Company's capital needs, earnings and cash flow are somewhat dependent
on events beyond the Company's control, such as weather, regulatory actions, the
state of the economy, and changes in existing governmental and environmental
regulations. Based on current conditions, the Company expects to have
sufficient cash flow and the ability to raise sufficient capital in 1994 and
1995 to meet its capital requirements and operating expenses.

Construction Expenditures

New utility construction expenditures for 1993 were $99 million compared
with $101 million in 1992 and $88 million in 1991. Internally generated funds
provided for 100% of the construction expenditures in 1993, 87% in 1992, and
100% in 1991.

Construction expenditures for the utility for the calendar years 1994 and
1995 are estimated to total approximately $200 million. The Company presently
expects to fund its construction expenditures for the two years mainly from
internal cash.

Non-utility construction expenditures (other than generating plant
expenditures incurred by the joint ventures) totaled approximately $1.2 million
in 1993 and are not expected to significantly exceed this level in 1994-1995.

-25-

<PAGE>

Capitalization and Liquidity

The Company maintains a strong capital structure. Reference is made to
Notes 7 and 8 of Notes to Financial Statements under Item 8 for a discussion of
preferred stock and long-term debt refinancings during the year, which have
produced significant savings from lower interest and preferred dividend rates.

LG&E has outstanding interest rate swap agreements totaling $30 million.
Under the agreements, which were entered into in 1992, LG&E pays a fixed rate of
4.35% on $15 million for a five-year period and 4.74% on $15 million for a
seven-year period. In return, LG&E receives a floating rate based on the
weighted average JJ Kenny index. At December 31, 1993, the rate on the JJ Kenny
index was 3.25%.

At December 31, 1993, loan agreements and lines of credit were in place
totaling $320 million ($25 million for LG&E Energy Corp., $145 million for LG&E,
and $150 million for Energy Systems) for which the companies pay commitment or
facility fees. At year end, $20 million of Energy Systems' line of credit was
drawn upon. These credit facilities are scheduled to expire at various periods
during 1994 and 1996 and management intends to renegotiate them when they
expire.

The lenders under the credit facility for Energy Systems are entitled to
the benefits of a Support Agreement between LG&E Energy Corp. and Energy
Systems. The Support Agreement states, in substance, that LG&E Energy Corp.
will provide Energy Systems with the necessary funds and financial support to
meet its obligations under the credit facility. See Note 10 of Notes to
Financial Statements, Project Obligations, under Item 8 for further discussion.

LPI's operations were self-financed during both 1993 and 1992 and resulted
in positive cash flow. LPI's 1993 cash flow had a substantial increase as a
result of higher billings on construction projects and no equity fundings. LPI
anticipates equity funding commitments for 1994 of approximately $60 million.

Environmental Matters

The Clean Air Act Amendments of 1990 impose stringent limits on emissions
of sulfur dioxide and nitrogen oxides by electric utility generating plants.
LG&E is closely monitoring the continuing rule-making process in order to assess
the precise impact of the legislation on the Company. All of LG&E's coal-fired
boilers are equipped with sulfur dioxide "scrubbers" and already achieve the
final sulfur dioxide emission rates required by the year 2000 under the
legislation. However, as part of its ongoing construction program, LG&E
anticipates incurring capital expenditures during the next four years of
approximately $40 million for remedial measures necessary to meet the Act's
requirements for nitrogen oxides. The overall financial impact of the
legislation on LG&E is expected to be minimal. LG&E is well-positioned in the
market to be a "clean" power provider without the large capital expenditures
that are expected to be incurred by many other utilities.

Reference is made to Note 10 of Notes to Financial Statements,
Environmental, under Item 8 for a complete discussion of LG&E's environmental
issues concerning its Mill Creek and

-26-

<PAGE>

Cane Run generating plants, manufactured gas plant sites, and certain other
environmental issues.

Based upon prior precedents established by the Commission and the
Environmental Cost Recovery legislation, LG&E expects to have an opportunity to
recover, through future ratemaking proceedings, its costs associated with
remedial measures required to comply with environmental laws and regulations.

Energy Policy Act of 1992

The Energy Policy Act of 1992 (EPA92), passed by Congress and signed into
law on October 24, 1992, outlines standards for utility industry structure,
competition in wholesale power generation and energy conservation. It
represents a thorough overhaul of legislation and related regulations that, for
the most part, have guided the industry since the 1930s -- the Public Utility
Holding Company Act (PUHCA) and the Federal Power Act.

EPA92 eliminates the statutory barriers to increased participation by
non-utility generators in wholesale power markets. PUHCA was amended to allow
qualifying non-utility generators (called "Exempt Wholesale Generators") to
operate without the Act's restrictions and to permit utilities subject to PUHCA
to invest in non-utility generators. The legislation grants FERC authority to
order transmission access and directs FERC to use certain guidelines in
establishing transmission rates. The transmission tariffs which FERC approved
for LG&E provide the type of open access mandated in EPA92.

The Act is designed to give utilities a wider choice of sources for their
electrical supply than previously available, while creating generating supply
options that did not exist under the old law. In passing this legislation,
Congress also anticipated that greater competition among electric supply options
should result in lower consumer rates. Although the Company cannot predict the
exact impact of this legislation, the Company is planning to be a competitive
supplier of electric energy.

FERC Order No. 636

On November 1, 1993, LG&E began purchasing and transporting its natural gas
supplies under the new requirements created by FERC Order No. 636 issued in
1992. Whereas LG&E had previously been able to purchase natural gas and
pipeline transportation services from Texas Gas Transmission Corporation (Texas
Gas), LG&E now purchases only transportation services from Texas Gas pursuant to
its FERC-approved tariff and acquires its supply of natural gas from several
other sources.

Throughout 1993, LG&E undertook a review to evaluate and select the
pipeline services and gas supplies needed. As a result of this review, LG&E
entered into the appropriate transportation and purchase agreements. LG&E
should benefit from Order No. 636 through enhanced access to competitively
priced natural gas supplies as well as more flexible transportation services.
LG&E has made the necessary modifications to its operations and to its gas
supply clause to reflect these Order No. 636 changes.

-27-

<PAGE>

Certain aspects of Order No. 636 have yet to be resolved by the courts, and
still others await resolution at FERC. Issues still to be resolved at FERC
include the determination and recovery of pipeline costs associated with the
transition to and implementation of Order No. 636. Based on pipeline filings to
date, LG&E estimates that its share of transition costs, which must be approved
by FERC, will be approximately $2 million to $3 million a year for both 1994 and
1995. The Commission issued an order, based on proceedings which were held to
investigate the impact of Order No. 636 on utilities and ratepayers in Kentucky,
providing that transition costs assessed on utilities by the pipelines, which
are clearly identified as being related to the cost of the commodity itself, are
appropriate to be recovered from customers through the gas supply clause.

FUTURE OUTLOOK

Natural Gas Clearinghouse

In January 1994, the Company sold its 36.5% equity interest in NGC to NOVA
Corporation for approximately $170 million. NGC was acquired in 1992. In the
first quarter of 1994, the Company will record a pre-tax gain of approximately
$87 million from this sale.

Power Partnership

In February 1994, LPI announced it had reached a preliminary agreement
with the DuPont Company (DuPont) to form a partnership that will own, improve,
and operate energy production facilities at nine DuPont fiber manufacturing
plants in the mid-Atlantic and southeastern regions of the United States. LPI
will be the general partner in the arrangement and hold a 50% interest in the
partnership. DuPont will be a limited partner and own the other half. Virginia
Power, one of the utilities in whose service territory the DuPont facilities
reside, has made an administrative filing with the Virginia State Corporation
Commission questioning certain aspects of the proposed transaction.

LG&E Work Force Reduction

In the fourth quarter of 1993, LG&E announced it was reducing its
construction, warehouse, and janitorial work force primarily because no new
major construction projects are expected in the near future. The Company also
offered voluntary separation, primarily through early retirement, to various
other employees. This reduction in work force of about 350 employees is
projected to cost approximately $11.5 million. LG&E will realize significant
savings in future years as a result of this work force reduction.

International Projects

The Company began looking into participation in international power
projects in 1993. While it recognizes the increased risks associated with
international projects, the Company believes significant opportunities exist as
well. It has been working with strong international

-28-

<PAGE>

partners, successful financial institutions and industry leaders in the United
States to review the risk/reward profiles of potential projects.

Business Realignment

In November 1993, the Company announced a major realignment and formation
of new business units, effective January 1, 1994, to reflect its outlook for
rapidly emerging competition in all segments of the energy services industry.
The realignment does not affect the Company's legal structure, regulation of
LG&E by the Commission or the Company's status as an exempt holding company.

Under the realignment, the Company is forming a national business unit,
LG&E Energy Services, to develop and manage all of its utility and non-utility
electric power generation and concentrate on the marketing and brokering of
wholesale electric power on a regional and national basis. The realignment will
allow the other business unit, LG&E, to increase its focus on customer service
and to develop more customer options as the local utility industry becomes more
competitive in the future.

Other

In addition to the business realignment mentioned above, the Company is
currently in the process of re-evaluating its regulatory strategy to pursue full
cost recovery of certain deferred expenses which are recorded as regulatory
assets. Depending on the results of this re-evaluation, which should be
completed in early 1994, all or part of such regulatory assets may be
immediately expensed. See Notes 1, 5, and 10 of Notes to Financial Statements
under Item 8 for a discussion of these regulatory assets.

The Board of Directors of LG&E Energy Corp. and LG&E recently approved the
formation of a tax-exempt charitable foundation which will make local, regional,
and national charitable contributions to qualified persons and entities. The
LG&E Board of Directors has authorized an initial contribution to the foundation
of up to $15 million. The effect of this contribution will be an after-tax
charge against income of up to $9 million for the first quarter of 1994. The
Company believes this action to be beneficial because it will provide a vehicle
to make contributions in support of community needs on a consistent basis. It
will also reduce charges against income in future years as contributions will be
made by the foundation, rather than directly by the Company. The Company
anticipates that funding will occur following the receipt of exempt status for
the foundation under the Internal Revenue Code.

-29-

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

LG&E ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of $ Except Per Share Data)
<TABLE>
<CAPTION>

Years Ended December 31
----------------------------------
1993 1992 1991
---- ---- ----
Revenues
<S> <C> <C> <C>
Electric . . . . . . . . . . . . . . . . . . . . . $ 571,627 $ 526,143 $ 548,674
Gas. . . . . . . . . . . . . . . . . . . . . . . . 204,915 178,526 166,291
Non-utility. . . . . . . . . . . . . . . . . . . . 123,485 130,070 -
--------- --------- ---------
Total revenues (Note 1). . . . . . . . . . . . 900,027 834,739 714,965
--------- --------- ---------

Expenses
Fuel and power purchased . . . . . . . . . . . . . 166,664 147,679 146,899
Gas supply expenses. . . . . . . . . . . . . . . . 139,054 115,521 104,212
Operation and maintenance. . . . . . . . . . . . . 185,107 179,755 177,749
Depreciation and amortization. . . . . . . . . . . 79,887 79,686 76,431
Other taxes. . . . . . . . . . . . . . . . . . . . 16,193 16,096 15,782
Non-utility expenses (Note 1). . . . . . . . . . . 128,679 129,699 5,761
--------- --------- ---------
Total expenses . . . . . . . . . . . . . . . . 715,584 668,436 526,834
--------- --------- ---------

Equity in Earnings of Joint Ventures (Note 4). . . . . 8,525 8,201 -
--------- --------- ---------

Operating Income . . . . . . . . . . . . . . . . . . . 192,968 174,504 188,131

Other Income and (Deductions). . . . . . . . . . . . . (5,573) (740) 11,263
Interest Charges . . . . . . . . . . . . . . . . . . . 48,210 50,410 52,680
--------- --------- ---------

Income from Continuing Operations before Income Taxes. 139,185 123,354 146,714
Income Taxes (Note 6). . . . . . . . . . . . . . . . . 52,379 44,744 54,299
--------- --------- ---------

Income before Preferred Dividends. . . . . . . . . . . 86,806 78,610 92,415
Preferred Dividends. . . . . . . . . . . . . . . . . . 5,981 7,173 9,464
--------- --------- ---------
Income from Continuing Operations. . . . . . . . . . . 80,825 71,437 82,951

Income from Discontinued Operations (Note 3)
Equity in earnings of partnership, net of income
taxes of $4,760 in 1993 and $2,660 in 1992 . . . . 7,435 4,177 -
--------- --------- ---------
Net Income . . . . . . . . . . . . . . . . . . . . . . $ 88,260 $ 75,614 $ 82,951
--------- --------- ---------
--------- --------- ---------

Average Common Shares Outstanding (Note 1) . . . . . . 32,689 32,307 32,256

Earnings per Share of Common Stock (Note 1)
From continuing operations . . . . . . . . . . . . $ 2.47 $ 2.21 $ 2.57
From discontinued operations . . . . . . . . . . . .23 .13 -
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . $ 2.70 $ 2.34 $ 2.57
--------- --------- ---------
--------- --------- ---------

</TABLE>

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of $)

Years Ended December 31
-----------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance January 1. . . . . . . . . . . . . . . . . . . $ 251,121 $ 241,702 $ 220,716
Add net income . . . . . . . . . . . . . . . . . . . . 88,260 75,614 82,951
--------- --------- ---------
339,381 317,316 303,667
Deduct: Cash dividends declared on common stock
($2.045 per share in 1993, $1.985 in 1992, and
$1.92 in 1991). . . . . . . . . . . . . . . . 66,957 64,048 61,965
Preferred stock redemption expense. . . . . . 818 2,147 -
--------- --------- ---------

Balance December 31. . . . . . . . . . . . . . . . . . $ 271,606 $ 251,121 $ 241,702
--------- --------- ---------
--------- --------- ---------

</TABLE>

The accompanying notes are an integral part of these financial statements.
-30-
<PAGE>

LG&E ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of $)

ASSETS
December 31
--------------------------------
1993 1992
---- ----
<S> <C> <C>
Utility Plant, at original cost
Electric............................................................... $ 2,019,139 $ 1,976,206
Gas.................................................................... 260,485 240,818
Common................................................................. 132,692 121,105
------------ ------------
2,412,316 2,338,129
Less: Reserve for depreciation........................................ 823,141 754,429
------------ ------------
1,589,175 1,583,700
Construction work in progress.......................................... 51,785 35,367
------------ ------------
1,640,960 1,619,067
------------ ------------
Other Property and Investments - less reserve
Investments in affiliates (Note 4)..................................... 63,241 59,273
Other (Note 1)......................................................... 24,949 101,402
Investment in discontinued operations (Note 3)......................... 84,284 75,786
------------ ------------
172,474 236,461
------------ ------------
Current Assets
Cash and temporary cash investments.................................... 67,377 21,997
Accounts receivable-less reserve of $1,769 in 1993 and $1,372 in 1992.. 124,504 102,095
Materials and supplies-at average cost
Fuel (predominantly coal).......................................... 12,075 21,360
Gas stored underground............................................. 33,370 34,079
Other.............................................................. 40,357 41,034
Prepayments and other.................................................. 1,600 2,322
------------ ------------
279,283 222,887
------------ ------------

Deferred Debits and Other Assets
Unamortized debt expense............................................... 24,698 17,282
Accumulated deferred income taxes (Notes 1 and 6)...................... 58,675 12,179
Regulatory asset-income taxes (Note 1)................................. 39,651 -
Other.................................................................. 69,053 52,701
------------ ------------
192,077 82,162
------------ ------------
$ 2,284,794 $ 2,160,577
------------ ------------
------------ ------------

CAPITAL AND LIABILITIES
Capitalization (see Statements of Capitalization)
Common equity.......................................................... $ 729,647 $ 685,221
Cumulative preferred stock............................................. 116,716 116,740
Long-term debt......................................................... 662,879 686,119
------------ ------------
1,509,242 1,488,080
------------ ------------

Current Liabilities
Long-term debt due within one year..................................... - 400
Notes payable (Note 9)................................................. 20,000 58,000
Accounts payable....................................................... 111,192 88,615
Common dividends declared.............................................. 17,137 16,252
Accrued taxes.......................................................... 11,267 10,979
Accrued interest....................................................... 12,864 12,324
Other.................................................................. 38,394 36,445
------------ ------------
210,854 223,015
------------ ------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes (Notes 1 and 6)...................... 345,630 297,362
Investment tax credit, in process of amortization...................... 91,572 104,623
Customers' advances for construction................................... 7,384 6,849
Regulatory liability-income taxes (Note 1)............................. 46,528 -
Other.................................................................. 73,584 40,648
------------ ------------
564,698 449,482
------------ ------------
Commitments and Contingencies (Notes 10 and 11)
$ 2,284,794 $ 2,160,577
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.
-31-

<PAGE>

LG&E ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of $)

Years Ended December 31
----------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income............................................................. $ 88,260 $ 75,614 $ 82,951
Items not requiring cash currently:
Depreciation and amortization....................................... 82,660 81,065 76,714
Deferred income taxes-net........................................... (190) 27,535 23,311
Investment tax credit-net........................................... (7,821) (5,033) (11,472)
Gain on sale of capital asset....................................... (3,869) - (7,908)
Undistributed earnings of joint ventures............................ (3,968) (3,870) -
Income from discontinued operations................................. (7,435) (4,177) -
Other............................................................... 26,184 4,095 3,548
(Increase) decrease in certain net current assets:
Accounts receivable................................................ (22,409) (796) (4,137)
Materials and supplies............................................. 10,671 (8,014) 5,333
Accounts payable................................................... 22,577 3,782 (2,504)
Accrued taxes...................................................... 288 6,226 (6,744)
Accrued interest................................................... 540 (1,499) 471
Prepayments and other.............................................. 2,671 3,572 1,775
Other.................................................................. (8,828) 1,169 (2,187)
------------ ------------ ------------
Net cash provided from operating activities........................ 179,331 179,669 159,151
------------ ------------ ------------
Cash Flows from Investing Activities
Sale of capital asset.................................................. 91,076 - 94,164
Long-term investment in securities..................................... (11,097) (10,441) -
Construction expenditures.............................................. (99,999) (102,079) (88,391)
Acquisition of and investment in affiliates, net of cash and
temporary cash investments acquired (Note 2)....................... - (88,013) (41,555)
------------ ------------ ------------
Net cash used for investing activities............................. (20,020) (200,533) (35,782)
------------ ------------ ------------
Cash Flows from Financing Activities
Issuance of common stock............................................... 23,941 1,232 4,497
Issuance of preferred stock............................................ 24,716 49,099 -
Issuance of first mortgage bonds and pollution control bonds........... 198,918 88,462 4,233
Redemption of preferred stock.......................................... (25,558) (51,443) -
Retirement of first mortgage bonds and pollution control bonds......... (231,876) (92,400) (5,088)
(Decrease) increase in notes payable................................... (38,000) 46,000 (13,000)
Payment of common dividends............................................ (66,072) (63,507) (61,450)
------------ ------------ ------------
Net cash used for financing activities............................. (113,931) (22,557) (70,808)
------------ ------------ ------------
Net Increase (Decrease) in Cash and Temporary Cash Investments............. 45,380 (43,421) 52,561

Cash and Temporary Cash Investments at Beginning of Year................... 21,997 65,418 12,857
------------ ------------ ------------
Cash and Temporary Cash Investments at End of Year......................... $ 67,377 $ 21,997 $ 65,418
------------ ------------ ------------
------------ ------------ ------------

Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Income taxes....................................................... $ 58,014 $ 20,832 $ 45,625
Interest on borrowed money......................................... 47,389 51,604 50,744

</TABLE>

The accompanying notes are an integral part of these financial statements.

-32-

<PAGE>

LG&E ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Thousands of $)

<TABLE>
<CAPTION>
December 31
-----------------------
1993 1992
Common Equity ---- ----
<S> <C> <C>
Common stock, without par value -
Authorized 75,000,000 shares, outstanding 32,956,148
shares in 1993 and 32,327,612 shares in 1992 (Note 7).......................................... $ 458,940 $ 434,951
Common stock expense............................................................................. (899) (851)
Retained earnings................................................................................ 271,606 251,121
---------- ----------
$ 729,647 $ 685,221
Cumulative Preferred Stock (Note 7) ---------- ----------
Redeemable on 30 days notice by Louisville Gas and Electric Company

Shares Current
Outstanding Redemption Price
$25 par value, 1,720,000 shares authorized - ----------- ----------------
5% series............................................. 860,287 $ 28.00 $ 21,507 $ 21,507
7.45% series........................................... 858,128 25.75 21,453 21,453

Without par value, 6,750,000 shares authorized -
$8.90 series............................................ - - - 25,000
Auction Rate........................................... 500,000 100.00 50,000 50,000
$5.875 series.......................................... 250,000 Not redeemable 25,000 -
Preferred stock expense.......................................................................... (1,244) (1,220)
---------- ----------
$ 116,716 $ 116,740
Long-Term Debt (Note 8) ---------- ----------
First mortgage bonds -
Series due June 1, 1996, 5 5/8%................................................................ $ 16,000 $ 16,000
Series due June 1, 1998, 6 3/4%................................................................ 20,000 20,000
Series due August 1, 2001, 8 1/4%.............................................................. - 19,700
Series due July 1, 2002, 7 1/2%................................................................ 20,000 20,000
Series due August 15, 2003, 6%................................................................. 42,600 -
Series due November 1, 2006, 8 1/2%............................................................ - 21,362
Pollution control series:
B due September 1, 2006, 6 1/8%.............................................................. - 35,200
C due June 1, 1998, 6 1/8%................................................................... - 7,000
C due June 1, 2008, 6 3/8%................................................................... - 35,000
D due October 1, 2004, 6.6%.................................................................. - 20,000
D due October 1, 2009, 6.7%.................................................................. - 40,000
I due February 15, 2011, 9 3/4%.............................................................. - 26,000
J due July 1, 2015, 9 1/4%................................................................... 40,000 40,000
K due December 1, 2016, 7 1/4%............................................................... 27,500 27,500
L due December 1, 2016, 7 1/4%............................................................... 22,500 22,500
N due February 1, 2019, 7 3/4%............................................................... 35,000 35,000
O due February 1, 2019, 7 3/4%............................................................... 35,000 35,000
P due June 15, 2015, 7.45%................................................................... 25,000 25,000
Q due November 1, 2020, 7 5/8%............................................................... 83,335 100,000
R due November 1, 2020, 6.55%................................................................ 41,665 50,000
S due September 1, 2017, variable............................................................ 31,000 31,000
T due September 1, 2017, variable............................................................ 60,000 60,000
U due August 15, 2013, variable.............................................................. 35,200 -
V due August 15, 2019, 5 5/8%................................................................ 102,000 -
W due October 15, 2020, 5.45%................................................................ 26,000 -
---------- ----------
Total bonds outstanding........................................................................ 662,800 686,262
Less long-term debt due within one year....................................................... - 400
---------- ----------
Long-term first mortgage bonds................................................................ 662,800 685,862
Unamortized premium on bonds..................................................................... 79 257
---------- ----------
662,879 686,119
---------- ----------
Total Capitalization................................................................................ $1,509,242 $1,488,080
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

-33-

<PAGE>

LG&E ENERGY CORP. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION. The consolidated financial statements include the accounts of
LG&E Energy Corp. and its wholly-owned subsidiaries - Louisville Gas and
Electric Company (LG&E) and LG&E Energy Systems Inc. (Energy Systems),
collectively referred to herein as the "Company." In consolidation all
intercompany transactions have been eliminated.

The Company is exempt from regulation as a registered holding company under the
Public Utility Holding Company Act of 1935.

Accounting for the regulated utility business conforms with generally accepted
accounting principles as applied to regulated public utilities and as prescribed
by the Federal Energy Regulatory Commission (FERC) and the Public Service
Commission of Kentucky (Commission). LG&E is subject to Statement of Financial
Accounting Standards No. 71, ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF
REGULATION. LG&E has recorded certain regulatory assets at December 31, 1993,
totaling approximately $31 million. See Note 5, Post-Retirement Benefits and
Early Retirement/Work Force Reduction, and Note 10, Environmental, for a
discussion of these regulatory assets. See Future Outlook under Item 7,
Management's Discussion and Analysis, for a discussion of the Company's
re-evaluation of its current regulatory strategy in regards to these assets.

During 1992, Energy Systems acquired a 36.5% partnership interest in Natural Gas
Clearinghouse (NGC), a natural gas marketing company based in Houston, Texas. In
December 1993, the Company announced the sale of its equity interest in NGC to
NOVA Corporation with a closing date in January 1994. Accordingly, the
Company's equity interest in NGC's earnings has been classified as Income from
Discontinued Operations in the accompanying financial statements. See Note 3,
Discontinued Operations.

In December 1991, Energy Systems acquired Hadson Power Systems, Incorporated
(HPS), in a transaction accounted for as a purchase. Subsequent to the
acquisition, HPS was renamed LG&E Power Systems Inc. and has been subsequently
renamed LG&E Power Inc. (LPI). LPI develops, designs, builds, owns, operates,
and maintains power generation facilities that sell energy to local industries
and utilities. LPI's revenues and expenses are classified as "non-utility" in
the accompanying financial statements; approximately $97 million and $102
million of the expenses classified as "non-utility" primarily represented costs
of construction revenues in 1993 and 1992, respectively. See Note 2,
Acquisitions.

UTILITY PLANT. LG&E's utility plant is stated at original cost, which includes
payroll-related costs such as taxes, fringe benefits, and administrative and
general costs. Construction work in progress has been included in the rate
base, and, accordingly, LG&E has not recorded any allowance for funds used
during construction.

-34-

<PAGE>

The cost of utility plant retired or disposed of in the normal course of
business is deducted from utility plant accounts and such cost plus removal
expense less salvage value is charged to the reserve for depreciation. When
complete operating units are disposed of, appropriate adjustments are made to
the reserve for depreciation and gains and losses, if any, are recognized.

In December 1990, the 25% portion of the construction costs of the Trimble
County Generating Station (Trimble County), which the Commission disallowed in
setting customer rates, was reclassified from the Utility Plant section on the
balance sheet to Other Property and Investments. In February 1991, LG&E sold a
12.12% undivided interest in Trimble County to the Illinois Municipal Electric
Agency (IMEA). In February 1993, the remaining 12.88% of Trimble County not
allowed in rates was sold to the Indiana Municipal Power Agency (IMPA). See
Notes 11 and 12, Trimble County Generating Plant and Jointly Owned Electric
Utility Plant, respectively, for a further discussion.

DEPRECIATION. Depreciation is provided on the straight-line method over the
estimated service lives of depreciable plant. The amounts provided for LG&E
in 1993 and 1992 were 3.3% (3.2% electric, 3.2% gas, and 5% common); and for
1991, 3.3% (3.2% electric, 3% gas, and 6% common) of average depreciable plant.

CASH AND TEMPORARY CASH INVESTMENTS. The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents. Temporary cash investments are carried at cost, which approximates
fair value.

DEFERRED INCOME TAXES. Deferred income taxes have been provided for all
book-tax temporary differences.

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
ACCOUNTING FOR INCOME TAXES, effective January 1, 1993. SFAS No. 109 adopts the
liability method of accounting for income taxes, requiring deferred income tax
assets and liabilities to be computed using tax rates that will be in effect
when the book and tax temporary differences reverse. For LG&E, the change in
tax rates applied to accumulated deferred income taxes was not immediately
recognized in operating results because of ratemaking treatment. At
December 31, 1993, the deferred tax asset, which resulted primarily from
unamortized investment tax credits, amounted to approximately $47 million. The
deferred tax liability, which resulted primarily from book/tax utility property
basis differences, totaled approximately $40 million. Regulatory assets and
liabilities were established to recognize the future revenue requirement impact
from these deferred taxes. The adoption of SFAS No. 109 did not have a material
impact on the results of operations or financial position for either the
regulated or non-regulated companies. The deferred tax balances and related
regulatory assets and liabilities reflect the increase in the corporate income
tax rate from 34% to 35%.

INVESTMENT TAX CREDITS. Investment tax credits resulted from provisions of the
tax law that permitted a reduction of the Company's tax liability based on
credits for certain construction expenditures. Investment tax credits deferred
and charged to income in prior years are being amortized to income over the
estimated lives of the related property that gave rise to the credits.

-35-

<PAGE>

DEBT PREMIUM AND EXPENSE. Debt premium and expense are amortized over the lives
of the related debt issues, consistent with regulatory practices.

COMMON STOCK. Effective May 15, 1992, the outstanding shares of common stock
were split on a three-for-two basis. The new shares were issued to shareholders
of record on April 30, 1992. Prior period shares, dividends, and earnings per
share of common stock have been restated to reflect the stock split.

REVENUE RECOGNITION. Utility revenues are recorded based on service rendered to
customers through month end. LG&E accrues an estimate for unbilled revenues
from the date of each meter reading date to the end of the accounting period.
See Management's Discussion and Analysis, Rates and Regulation under Item 7, for
changes in recording residential revenues effective January 1, 1994. The
Company's non-utility construction activities recognize revenues using the
percentage of completion method of accounting.

FUEL AND GAS COSTS. The cost of fuel for electric generation is charged to
expense as used, and the cost of gas supply is charged to expense as delivered
to the distribution system.

REVENUES AND CUSTOMER RECEIVABLES. LG&E is an operating public utility that
supplies natural gas to approximately 258,000 customers and electricity to
approximately 336,000 customers in Louisville and adjacent areas in Kentucky.
Customer receivables and gas and electric revenues arise from deliveries of
natural gas and electric energy to a diversified base of residential, commercial
and industrial customers and to public authorities and other utilities. For the
year ended December 31, 1993, 74% of total utility revenue was derived from
electric operations and 26% from gas operations.

FAIR VALUE OF FINANCIAL INSTRUMENTS. Pursuant to the Financial Accounting
Standards Board SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS, the Company is required to disclose the fair value of financial
instruments where practicable.

The fair value for certain of the Company's investments and debt are estimated
based on quoted market prices for those or similar instruments. Investments for
which there are no quoted market prices are stated at cost because a reasonable
estimate of fair value cannot be made without incurring excessive costs.

The cost and estimated fair value of the Company's financial instruments as of
December 31, 1993 and 1992, are as follows (in thousands of $):

1993 1992
------------------ ------------------
Fair Fair
Cost Value Cost Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Long-term investments:
Practicable to estimate fair value . . . . . . . . . . $ 21,538 $ 21,538 $ 10,441 $ 10,441
Not practicable. . . . . . . . . . . . . . . . . . . . 490 490 557 557
Preferred stock subject to mandatory redemption. . . . . 25,000 24,750 - -
Long-term debt . . . . . . . . . . . . . . . . . . . . . 662,800 706,078 686,262 726,801
</TABLE>

-36-

<PAGE>

NOTE 2 - ACQUISITIONS

In December 1991, Energy Systems acquired LPI (Hadson Power Systems,
Incorporated), a developer, designer, builder, owner, and operator of
non-regulated power generation facilities, headquartered in Irvine, California,
for approximately $49.1 million, including acquisition related expenses.

The Company accounted for the acquisition of LPI as a purchase, and accordingly,
the net assets were recorded at their fair value on the acquisition date in the
accompanying balance sheets. The excess of the purchase price over the fair
value of the net assets acquired was recorded as goodwill, and is being
amortized on a straight-line basis over 40 years.

See Note 10, Commitments and Contingencies for information concerning equity
funding commitments that LPI is required to provide.

NOTE 3 - DISCONTINUED OPERATIONS

In December 1993, the Company agreed to sell its 36.5% equity interest in NGC to
NOVA Corporation for approximately $170 million. The sale of NGC, which was
completed in January 1994, will result in a pre-tax gain of approximately $87
million. NGC was acquired in 1992 at a cost of approximately $70 million. At
the disposal date, the Company's investment in NGC was approximately $83
million. This transaction was recorded as the disposal of a business segment
and, accordingly, the investment balance and related equity in earnings of NGC
have been classified as discontinued operations within the accompanying
financial statements.

NOTE 4 - INVESTMENTS IN AFFILIATES

The Company's investments in affiliates reflect LPI's interest in partnerships
that own and/or operate power producing plants. These investments are recorded
using the equity method and were $63,241,000 and $59,273,000 at December 31,
1993 and 1992, respectively.

The ownership percentages of LPI's joint ventures are summarized below:

% Owned
-------
<S> <C>
Babcock - Ultrapower West Enfield . . . . . . . . . 17
Babcock - Ultrapower Jonesboro. . . . . . . . . . . 17
LG&E Westmoreland - Southampton . . . . . . . . . . 50
LG&E Westmoreland - Altavista . . . . . . . . . . . 50
LG&E Westmoreland - Hopewell. . . . . . . . . . . . 50
LG&E Westmoreland - Rensselaer. . . . . . . . . . . 50
Westmoreland - LG&E Partners. . . . . . . . . . . . 50
UC Operating Services . . . . . . . . . . . . . . . 50
</TABLE>

-37-

<PAGE>

The Company's carrying amount exceeded the underlying equity in affiliates by
$34,618,000 and $35,750,000 at December 31, 1993 and 1992, respectively. The
difference represents adjustments to reflect the fair value of the underlying
net assets acquired and goodwill. The fair value adjustments are being
amortized over periods ranging from two to 25 years, and the goodwill is being
amortized over 40 years.

NOTE 5 - PENSION PLANS AND RETIREMENT BENEFITS

PENSION PLANS. The Company has two non-contributory, defined-benefit pension
plans, covering all eligible employees. Retirement benefits are based on the
employee's years of service and compensation. The Company's policy is to fund
annual actuarial costs, up to the maximum amount deductible for income tax
purposes, as determined under the frozen entry age actuarial cost method.

In addition, the Company has a supplemental executive retirement plan which
covers officers of the Company. The plan provides retirement benefits based on
average earnings during the final three or five years prior to retirement,
reduced by social security benefits, any pension benefits received from plans of
prior employers, and by amounts received under the pension plans mentioned in
the preceding paragraph.

Pension cost was $3,048,000 for 1993, $2,664,000 for 1992, and $2,245,000 for
1991, of which approximately $425,000, $241,000, and $306,000, respectively,
were charged to construction. The components of periodic pension expense are
shown below (in thousands of $):

1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the period . . $ 4,730 $ 5,524 $ 4,098
Interest cost on projected benefit obligation. . . 12,314 11,060 9,340
Actual return on plan assets . . . . . . . . . . . (13,676) (8,903) (26,805)
Amortization of transition asset . . . . . . . . . (1,079) (1,076) (1,076)
Net amortization and deferral. . . . . . . . . . . 759 (3,941) 16,688
------- ------- --------
Net pension cost . . . . . . . . . . . . . . . . . $ 3,048 $ 2,664 $ 2,245
------- ------- --------
------- ------- --------
</TABLE>

The assets of the plans consist primarily of common stocks, corporate bonds,
United States government securities, and interests in a pooled real estate
investment fund.

-38-

<PAGE>

The funded status of the pension plans at December 31 is shown below (in
thousands of $):

1993 1992
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested. . . . . . . . . . . . . . . . . . . . . . . $138,384 $103,395
Non-Vested. . . . . . . . . . . . . . . . . . . . . 18,322 12,960
-------- --------
Accumulated benefit obligation. . . . . . . . . . . 156,706 116,355
Effect of projected future compensation . . . . . . 26,357 31,649
-------- --------
Projected benefit obligation. . . . . . . . . . . . 183,063 148,004
Plan assets at fair value . . . . . . . . . . . . . 166,035 156,603
-------- --------
Plan assets (less than) in excess of projected
benefit obligation. . . . . . . . . . . . . . . . (17,028) 8,599
Unrecognized net transition asset . . . . . . . . . (13,324) (14,403)
Unrecognized prior service cost . . . . . . . . . . 28,657 25,863
Unrecognized net gain . . . . . . . . . . . . . . . (22,590) (41,646)
-------- --------
Accrued pension liability . . . . . . . . . . . . . . $(24,285) $(21,587)
-------- --------
-------- --------
</TABLE>

The projected benefit obligation was determined using an assumed discount rate
of 7.5% for 1993 and 8.5% for 1992. An assumed annual rate of increase in
future compensation levels ranged from 3.5% to 4.5% for 1993 and 3.5% to 6.5%
for 1992. The assumed long-term rate of return on plan assets was 8.5% for both
periods. Transition assets and prior service costs are being amortized over the
average remaining service period of active participants.

POST-RETIREMENT BENEFITS. The Company adopted Statement of Financial Accounting
Standards No. 106, EMPLOYERS' ACCOUNTING FOR POST-RETIREMENT BENEFITS OTHER THAN
PENSIONS (SFAS No. 106) January 1, 1993. SFAS No. 106 requires the accrual of
the expected cost of retiree benefits other than pensions during the employee's
years of service with the Company. The Company is amortizing the discounted
present value of the post-retirement benefit obligation at the date of adoption
over 20 years.

The Company provides certain health care and life insurance benefits for
eligible retired employees. Post-retirement health care benefits are subject to
a maximum amount payable by the Company. Prior to January 1, 1993, the cost of
retiree health care and life insurance benefits was generally recognized when
paid. Beginning in 1993, the Company began to account for post-retirement
benefits according to the provisions of SFAS No. 106.

LG&E, based on an order from the Commission, has created a regulatory asset and
is deferring the level of SFAS No. 106 expense in excess of the previous level
of pay-as-you-go expense. The Commission's generic order stated that the proper
level of expense for SFAS No. 106 would be determined in each utility's next
general rate case.

-39-

<PAGE>

The components of the net periodic post-retirement benefit cost for 1993 as
calculated under SFAS No. 106 are as follows (in thousands of $):

<S> <C>
Service cost . . . . . . . . . . . . . . . . . . . . . . $ 710
Interest cost. . . . . . . . . . . . . . . . . . . . . . 2,621
Amortization of transition obligation. . . . . . . . . . 1,399
--------
Post-retirement benefit cost . . . . . . . . . . . . . . $ 4,730
--------
--------
</TABLE>

The accumulated post-retirement benefit obligation as calculated under SFAS
No. 106 at December 31, 1993, is shown below (in thousands of $):

<TABLE>
<CAPTION>
<S> <C>
Retirees . . . . . . . . . . . . . . . . . . . . . . . . $(17,826)
Fully eligible active employees. . . . . . . . . . . . . (4,022)
Other active employees. . . . . . . . . . . . . . . . . (16,042)
--------

Accumulated post-retirement benefit obligation . . . . . (37,890)
Unrecognized net loss. . . . . . . . . . . . . . . . . . 4,990
Unrecognized transition obligation . . . . . . . . . . . 26,582
Previously recognized amount . . . . . . . . . . . . . . 3,696
--------

Accrued post-retirement benefit liability. . . . . . . . $(2,622)
--------
--------
</TABLE>

The annual service cost was calculated using an assumed discount rate of 8.5% at
January 1, 1993, and 7.5% at December 31, 1993. A medical cost increase factor
that ranged between 6% and 11% was also used.

A 1% increase in the health care cost trend rate would increase the Accumulated
Post-Retirement Benefit Obligation by approximately $1.8 million and the annual
service and interest cost by approximately $200,000. No funding has been
established by the Company for post-retirement benefits.

POST-EMPLOYMENT BENEFITS. The Financial Accounting Standards Board issued SFAS
No. 112, EMPLOYERS' ACCOUNTING FOR POST-EMPLOYMENT BENEFITS, which requires the
accrual of the expected cost of benefits to former or inactive employees after
employment but before retirement. The Company adopted the new standard
effective January 1, 1994, as required. Adoption of SFAS No. 112 will not have
a material adverse impact on the financial position or results of operation of
the Company.

EARLY RETIREMENT/WORK FORCE REDUCTION. During the last quarter of 1993 and
early 1994, LG&E eliminated approximately 350 full-time positions. The cost of
the employee reduction program, approximately $11.5 million, consists primarily
of separation payments, enhanced early retirement benefits, and health care
benefits.

In 1992, an early retirement program was made available to all LG&E union
employees who had reached age 55, or who had 35 years or more of continuous
service regardless of age. The cost of the program was approximately $7 million
and consisted primarily of enhanced early retirement and post-retirement health
care benefits.

THRIFT SAVINGS PLAN. The Company has Thrift Savings Plans under Section 401(k)
of the Internal Revenue Code. Under these plans, eligible employees may defer
and contribute

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<PAGE>

to the plan a portion of current compensation in order to provide future
retirement benefits. The Company makes contributions to the plans by matching a
portion of employees' contributions according to a formula established by the
plans. These costs were approximately $3,542,000 for 1993, $2,204,000 for 1992,
and $598,000 for 1991. The increase in 1993 401(k) expenses is due to the
expansion of the program to LG&E union employees; the increase in 1992 is due to
the inclusion of LPI's Thrift Savings Plan.

NOTE 6 - FEDERAL AND STATE INCOME TAXES

Components of income tax expense from continuing operations are shown in the
table below (in thousands of $):

1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Included in Income Taxes:
Current - Federal. . . . . . . . $45,194 $17,536 $34,035
- State. . . . . . . . . 15,196 4,706 8,425
Deferred - Federal-net. . . . . . 198 19,186 17,226
- State-net. . . . . . . (388) 8,349 6,085
Deferred investment tax credit. . - 390 (6,359)
Amortization of investment tax credit (7,821) (5,423) (5,113)
------- ------- -------
Total Income Taxes. . . . . . . . $52,379 $44,744 $54,299
------- ------- -------
------- ------- -------
</TABLE>
Variations in the 1993 income tax expense from 1992 and 1991 are largely
attributable to changes in pre-tax income and an increase in the corporate
Federal income tax rate from 34% to 35%, effective January 1, 1993.

Provisions for deferred income taxes from continuing operations consist of the
tax effects of the following temporary differences (in thousands of $):

1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Depreciation and amortization . . $ 3,593 $ 38,624 $ 23,440
Alternative minimum tax . . . . . 5,995 (5,995) -
Deferred income . . . . . . . . . (7,295) (3,483) -
Other . . . . . . . . . . . . . . (2,483) (1,611) (129)
-------- -------- ---------
Total . . .. . . . . . . . . . $ (190) $ 27,535 $ 23,311
-------- -------- ---------
-------- -------- ---------

</TABLE>

Depreciation and amortization fluctuations for 1993 are primarily attributable
to the reversal of prior years' accumulated taxes as a result of the sale of a
portion of Trimble County Unit 1 to IMPA. See Note 11, Trimble County
Generating Plant, for a further discussion of the sale.

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<PAGE>

The following are the tax effects of book-tax temporary differences resulting in
deferred tax assets and liabilities as of December 31, 1993 (in thousands of $):

<S> <C>
Deferred Tax Assets:
Investment tax credit......................... $ 36,961
Income taxes due to customers................. 14,361
Other assets.................................. 7,353
----------
$ 58,675
----------
----------

Deferred Tax Liabilities:
Depreciation and other plant related items.... $325,612
Income taxes due from customers............... 10,233
Other liabilities............................. 9,785
--------
$345,630
--------
--------
</TABLE>

The Company's effective income tax rate is computed by dividing the aggregate of
current income taxes, deferred income taxes-net, and the investment tax
credit-net, by income from continuing operations before income taxes.
Reconciliation of the statutory Federal income tax rate to the effective income
tax rate for continuing operations is shown in the table below:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate......... 35.0% 34.0% 34.0%
State income taxes net of Federal benefit. 6.9 7.0 6.5
Amortization of investment tax credit..... (5.6) (4.4) (3.5)
Other differences-net..................... 1.3 (.3) -
---- ----- -----

Effective Income Tax Rate................. 37.6% 36.3% 37.0%
---- ---- ----
---- ---- ----
</TABLE>

NOTE 7 - CAPITAL STOCK

Changes in shares of common stock outstanding are shown in the table below (in
thousands):

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Outstanding January 1................................... 32,328 32,284 32,106
Issues under the Employee Common Stock Purchase
Plan (1993, $1,296; 1992, $1,129; 1991, $1,039) 37 40 43
Issues under the Automatic Dividend Reinvestment and
Stock Purchase Plan (1993, $21,740; 1991, $3,458) 560 - 135
Issues under the Omnibus Long-Term
Incentive Plan (1993, $953; 1992, $103)............... 31 4 -
------ ------ ------
Outstanding December 31................................. 32,956 32,328 32,284
------ ------ ------
------ ------ ------
</TABLE>

The Company's Automatic Dividend Reinvestment and Stock Purchase Plan was
modified on April 14, 1991, to provide that reinvested dividends and optional
cash payments would be used to buy shares of common stock on the open market.
Prior to this date, authorized but unissued shares of common stock were issued
to plan participants. The plan was changed in 1993 to issue authorized but
unissued common stock under the plan effective

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<PAGE>

with the January 15, 1993, dividend. Effective January 15, 1994, the plan has
been revised and reinvested dividends and optional cash payments will again be
applied to purchase shares of the Company's stock on the open market.

The Company has a long-term incentive plan whereby, in addition to other types
of stock-based and related awards, incentive and nonqualified stock options can
be granted to key personnel. A total of 299,250 shares of common stock have
been reserved for issuance under the plan. Under the nonqualified stock option
portion of the plan, the Company may grant stock options at an exercise price
approximating market value. Each option entitles the holder to acquire one
share of the Company's common stock no earlier than one year from the date
granted. The options generally expire 10 years from the date granted. Common
stock equivalents resulting from the options granted would not have a material
dilutive effect on reported earnings per share.

A summary of the status of the Company's nonqualified stock options follows:

Option Price
Outstanding Exercisable per Share
----------- ----------- ------------
<S> <C> <C> <C>
As of December 31, 1990 . . . . . . . . . . . . . . . . . . 22,316 - $27.14
Options granted and exercisable . . . . . . . . . . . . . . 44,292 22,316 $25.86 - $27.97
------- ------
As of December 31, 1991 . . . . . . . . . . . . . . . . . . 66,608 22,316 $25.86 - $27.97
Options granted and exercisable . . . . . . . . . . . . . 49,174 44,292 $25.86 - $30.56
Options exercised . . . . . . . . . . . . . . . . . . . . (7,853) (7,853) $25.86 - $27.14
Options cancelled . . . . . . . . . . . . . . . . . . . . (3,841) (3,841) $25.86 - $30.56
------- ------
As of December 31, 1992 . . . . . . . . . . . . . . . . . . 104,088 54,914 $25.86 - $30.56
Options granted and exercisable . . . . . . . . . . . . . 77,005 49,174 $30.56 - $39.19
Options exercised . . . . . . . . . . . . . . . . . . . . (21,274) (21,274) $25.86 - $30.56
Options cancelled . . . . . . . . . . . . . . . . . . . . (5,936) (5,936) $33.90 - $36.04
------- ------
As of December 31, 1993 . . . . . . . . . . . . . . . . . . 153,883 76,878 $25.86 - $39.19
------- ------
------- ------
</TABLE>

In 1990, the Company adopted a Shareholders Rights Plan designed to protect
shareholders' interests in the event the Company is ever confronted with an
unfair or inadequate acquisition proposal. Pursuant to the plan, the Company
declared a dividend distribution of one "right" for each share of LG&E Energy
Corp. common stock. As a result of the three-for-two stock dividend effective
May 15, 1992, each share of common stock will have two-thirds of a "right"
associated with it. Each right entitles the holder to purchase from the Company
one one-hundredth of a share of new preferred stock of the Company under certain
circumstances. The rights may be exercised if a person or group announces its
intention to acquire, or does acquire, 20% or more of LG&E Energy Corp. common
stock. Under certain circumstances, the holders of the rights will be entitled
to purchase either shares of common stock of LG&E Energy Corp. or common stock
of the acquirer at a reduced percentage of market value. The rights will expire
in the year 2000 unless they are redeemed or exchanged.

In May 1993, LG&E issued $25 million of $5.875 Cumulative Preferred Stock. The
proceeds from the sale were used to redeem the outstanding $8.90 Cumulative
Preferred Stock.

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<PAGE>

NOTE 8 - FIRST MORTGAGE BONDS

Annual requirements for the sinking funds of LG&E's First Mortgage Bonds (other
than the First Mortgage Bonds issued in connection with the Pollution Control
Bonds) are the amounts necessary to redeem 1% of the highest principal amount of
each series of bonds at any time outstanding. Property additions (166 2/3% of
principal amounts of bonds otherwise required to be so redeemed) have been
applied in lieu of cash. It is the intent of LG&E to apply property additions
to meet 1994 sinking fund requirements of the First Mortgage Bonds.

The trust indenture securing the First Mortgage Bonds constitutes a direct first
mortgage lien upon substantially all property owned by LG&E. The indenture, as
supplemented, provides in substance that, under certain specified conditions,
portions of retained earnings will not be available for the payment of dividends
on common stock. No portion of retained earnings is presently restricted by
this provision.

Pollution Control Bonds (LG&E Projects) issued by Jefferson and Trimble
Counties, Kentucky, are secured by the assignment of loan payments by LG&E to
the Counties pursuant to loan agreements, and further secured by the delivery
from time to time of an equal amount of LG&E's First Mortgage Bonds, Pollution
Control Series. First Mortgage Bonds so delivered are summarized in the
Statements of Capitalization. No principal or interest on these First Mortgage
Bonds is payable unless default on the loan agreements occurs. The interest
rate reflected in the Statements of Capitalization applies to the Pollution
Control Bonds.

In March 1993, due to the sale of 12.88% of Trimble County Unit 1, LG&E
completed the defeasance of $25 million of its Pollution Control Bonds ($16.665
million of the 7.625% Series and $8.335 million of the 6.55% Series).

LG&E issued several series of lower interest bearing First Mortgage and
Pollution Control Bonds in 1993 to refinance bonds with higher interest rates.
In August, LG&E issued two separate series of Pollution Control Bonds (a $35.2
million, Variable Rate Series, which had an interest rate of 2.586% at
December 31, 1993, and a $102 million, 5.625% Series) and redeemed five series
of Pollution Control Bonds totaling $137.2 million with interest rates ranging
from 6.125% to 6.7%. In August, LG&E also issued $42.6 million of 6% First
Mortgage Bonds and redeemed two series of First Mortgage Bonds ($19.7 million at
8.25% and $21.362 million at 8.5%). In November, LG&E issued $26 million of
Pollution Control Bonds, 5.45% Series and redeemed the $26 million, 9.75%
Series.

LG&E also entered into an agreement in November 1993 with Goldman, Sachs & Co.
to issue $40 million of tax-exempt Pollution Control Bonds in 1995 at a rate of
5.9%. The issuance of the bonds in 1995 is subject to certain conditions. If
issued, the proceeds will be used to redeem, in 1995, the outstanding 9.25%
Series of Pollution Control Bonds due July 1, 2015.

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<PAGE>

LG&E receives a floating rate based on the weighted average JJ Kenny index. At
December 31, 1993, the rate on the JJ Kenny index was 3.25%.

LG&E's First Mortgage Bonds, 5.625% Series of $16 million is scheduled to mature
in 1996 and the 6.75% Series of $20 million is scheduled to mature in 1998.
There are no scheduled maturities of Pollution Control Bonds for the five years
subsequent to December 31, 1993.

NOTE 9 - NOTES PAYABLE

At December 31, 1993, Energy Systems had notes payable outstanding of $20
million at an interest rate of 3.75%; at December 31, 1992, notes payable were
$50 million at 3.82%. LG&E had no notes payable at December 31, 1993. At
December 31, 1992, trust demand notes of LG&E amounted to $8 million, on which
the composite interest rate was 3.45%.

At December 31, 1993, lines of credit were in place totaling $320 million ($145
million for LG&E, $150 million for Energy Systems, and $25 million for LG&E
Energy Corp.), for which the companies pay commitment or facility fees. These
lines of credit were unused, except for the $20 million of Energy Systems' line
mentioned above. The credit lines are scheduled to expire at various periods
during 1994 and 1996. Management intends to renegotiate these lines when they
expire.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

CONSTRUCTION PROGRAM. The Company had commitments, primarily in connection with
the construction program of LG&E, aggregating approximately $6 million at
December 31, 1993. LG&E's construction expenditures for the calendar years 1994
and 1995 are estimated to total approximately $200 million.

PROJECT OBLIGATIONS. In connection with the financing of various power
projects, Energy Systems and LPI provide equity funding commitments and
guarantee the construction and performance of the projects. Ascertainable
equity funding commitments were $36 million and $38 million at December 31, 1993
and 1992, respectively. Contingent construction and project performance
guarantees totaled approximately $198 million and $94 million at December 31,
1993 and 1992, respectively.

Through a support agreement with Energy Systems for the benefit of certain
Energy Systems' lenders, LG&E Energy Corp. has agreed to provide Energy Systems
with the necessary funds and financial support to meet the foregoing
contingencies.

Westmoreland Energy Inc. (WEI) is a partner along with LPI in six cogeneration
projects in operation or under construction. Under an agreement signed on
April 15, 1993, LPI and Energy Systems have guaranteed (in exchange for fees and
other consideration) the equity funding commitment of WEI in connection with the
following three projects: Roanoke Valley I, Roanoke Valley II, and Rensselaer.
The additional commitments resulting from this agreement total $35.5 million.

During December 1993, the Company signed an agreement with Nations Financial
Capital Corporation (Nations Financial) under which Nations Financial agreed, in
exchange for

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<PAGE>
fees, to assume $26.9 million of the Company's contingent equity funding
commitment for Roanoke Valley I and II resulting from its April 15, 1993,
agreement with WEI.

FERC ORDER NO. 636. Order No. 636, which was issued by FERC in 1992, required
LG&E and all other local distribution companies to revise their practices for
purchasing and transporting gas. Whereas LG&E had previously purchased natural
gas and pipeline transportation services from Texas Gas Transmission Corporation
(Texas Gas), LG&E now purchases only transportation services from Texas Gas and
purchases natural gas from other sources.

Under Order No. 636 pipelines may recover costs associated with the transition
to and implementation of this order from pipeline customers, including LG&E.
Based on pipeline filings to date, LG&E estimates that its share of transition
costs, which must be approved by FERC, will be approximately $2 million to $3
million a year for both 1994 and 1995. The Commission issued an order, based on
proceedings that were held to investigate the impact of Order No. 636 on
utilities and ratepayers in Kentucky, providing that transition costs assessed
on utilities by the pipelines, which are clearly identifiable as being related
to the cost of the commodity itself, are appropriate to be recovered from
customers through the gas supply clause.

OPERATING LEASES. LG&E Energy Corp. has an operating lease for its corporate
office space with an expiration date of 1996. LG&E has an operating lease for
its corporate office building that is scheduled to expire in June 2005. LPI has
operating lease commitments related to two office facilities with expiration
dates ranging from two to eight years. Total lease expense for 1993, 1992, and
1991 was $4,526,000, $5,454,000, and $2,736,000, respectively. The future
minimum annual lease payments under these lease agreements for years subsequent
to December 31, 1993, are as follows (in thousands of $):

<S> <C>
1994 . . . . . . . . . . . . . . . . $ 4,519
1995 . . . . . . . . . . . . . . . . 5,455
1996 . . . . . . . . . . . . . . . . 5,884
1997 . . . . . . . . . . . . . . . . 5,711
1998 . . . . . . . . . . . . . . . . 5,604
Thereafter . . . . . . . . . . . . . 28,636
-------
Total . . . . . . . . . . . . . . $55,809
-------
-------
</TABLE>

ENVIRONMENTAL. The Clean Air Act Amendments of 1990 impose stringent limits on
emissions of sulfur dioxide and nitrogen oxides by electric utility generating
plants. The legislation is extremely complex and its effect will substantially
depend on regulations issued by the U.S. Environmental Protection Agency
(USEPA). LG&E is closely monitoring the continuing rule-making process in order
to assess the precise impact of the legislation on the Company. All of LG&E's
coal-fired boilers are equipped with sulfur dioxide "scrubbers" and already
achieve the final sulfur dioxide emission rates required by the year 2000 under
the legislation. However, as part of its ongoing capital construction program,
LG&E anticipates incurring capital expenditures during the next four years of
approximately $40 million for remedial measures necessary to meet the Act's
requirements for nitrogen oxides. The overall financial impact of the
legislation on LG&E is expected to be minimal. LG&E is well-positioned in the
market to be a "clean" power provider

-46-

<PAGE>
without the large capital expenditures that are expected to be incurred by many
other utilities.

In 1992, LG&E entered two agreed orders with the Air Pollution Control District
(APCD) of Jefferson County in which LG&E committed to undertake remedial
measures to address certain particulate emissions and excess sulfur dioxide
emissions from its Mill Creek generating plant. LG&E is currently conducting
work in compliance with the agreed-upon schedule for remedial measures and has
incurred total capital expenditures of approximately $24 million through 1993.
Based on current remedial designs, LG&E anticipates incurring additional capital
costs of approximately $14 million for this project in 1994 as part of its
ongoing capital construction program.

In an effort to resolve property damage claims relating to particulate emissions
from the Mill Creek plant, in July 1993, LG&E commenced extensive negotiations
and property damage settlements with adjacent residents. LG&E currently
estimates that property damage claims for the particulate emissions should be
settled for an aggregate amount of approximately $12 million. Accordingly the
Company has recorded an accrual of this amount. In August 1993, 34 persons
filed a complaint in Jefferson Circuit Court against LG&E in which they are
seeking certification of a class consisting of all persons within 2.5 miles of
the Mill Creek plant. The court has not acted on the request for certification
of a class. The plaintiffs seek compensation for alleged personal injury and
property damage attributable to emissions from the Mill Creek plant, injunctive
relief, a fund to finance future medical monitoring of area residents, and other
relief. LG&E intends to vigorously defend itself in the pending litigation.

In response to a notification from the APCD that LG&E's Cane Run plant may be
the source of a potential exceedance of the National Ambient Air Quality
Standards for sulfur dioxide, LG&E retained a contractor to conduct certain air
dispersion modeling. In 1992, LG&E submitted a draft action plan and modeling
schedule to the APCD and USEPA. The APCD and USEPA have approved the submittals
and LG&E's contractor is currently conducting additional modeling activities.
Although it is expected that corrective action will be accomplished through
capital improvements, until the contractor completes its modeling activities,
LG&E cannot determine the precise impact of this matter.

LG&E owns or formerly owned three primary sites where manufactured gas plant
operations were located. Such manufactured gas plant operations, conducted in
the 1838 to 1960 time period, typically produced coal tar byproducts and other
constituents that may necessitate cleanup measures. LG&E commenced site
investigations at the two company owned sites to determine if significant levels
of contaminants are present. LG&E has commenced discussions with the current
owner of the third site regarding joint performance of a site investigation.
LG&E anticipates spending a total of approximately $1.3 million on site
investigations expected to be completed by 1995. Preliminary testing at all
three sites has identified contaminants typical of manufactured gas plant
operations. Until an investigation and associated regulatory review is
completed for each site, LG&E will be unable to predict what, if any, cleanup
activities may be necessary.

In November 1993, LG&E was served with a third-party complaint filed in federal
district court in Illinois by three third-party plaintiffs. The third-party
plaintiffs allege that LG&E and 31 other parties are liable for contributions
under the Comprehensive Environmental

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<PAGE>
Response, Compensation, and Liability Act as amended (CERCLA) for $1.4 million
in costs allegedly incurred by USEPA in conducting cleanup activities at the
M.T. Richards site in Crossville, Illinois. A number of de minimis third-party
defendants, including LG&E, have commenced preliminary discussions with the
third-party plaintiffs. In LG&E's opinion, the resolution of the issue will not
have a material adverse impact on its financial position or results of
operations.

In February 1993, LG&E was served with an amended complaint filed in federal
district court in West Virginia by three potentially responsible parties (PRP)
against LG&E and 39 other parties. The plaintiffs alleged that the parties were
liable under CERCLA for in excess of $3 million in costs allegedly incurred by
the plaintiffs in conducting cleanup activities at the Spencer Transformer Site
located in Roane County, West Virginia. In November 1993, the federal court
approved a consent decree that resolved the case as to LG&E and nine other de
minimis parties. Under the terms of the consent decree, LG&E reimbursed the
plaintiffs for $10,000 in cleanup costs. No further involvement of LG&E is
anticipated.

In June 1992, USEPA identified LG&E as a PRP allegedly liable under CERCLA for
$1.6 million in costs allegedly incurred by USEPA in cleanup of the Sonora Site
and Carlie Middleton Burn Site located in Hardin County, Kentucky. In November
1992, USEPA demanded immediate payment from the PRPs. To date, USEPA has
identified nine PRPs for the site. LG&E and several other parties have
commenced discussions with USEPA. In LG&E's opinion, the resolution of this
issue will not have a material adverse impact on its financial position or
results of operations.

In 1987, USEPA identified LG&E as one of the numerous PRPs allegedly liable
under CERCLA for the Smith's Farm site in Bullitt County, Kentucky. In March
1990, USEPA issued an administrative order requiring LG&E and 35 other PRPs to
conduct certain cleanup activities. In February 1992, four PRPs filed a
complaint in federal district court in Kentucky against LG&E and 52 other PRPs.
Under the law, each PRP could be held jointly and severally liable for the cost
of site cleanup, but would have the right to seek contribution from other PRPs.
In July 1993, upon motion of the plaintiffs, the federal court dismissed LG&E
and a number of others from the litigation in order to facilitate settlement
negotiations among the parties. Cleanup costs for the site are currently
estimated at approximately $70 million. LG&E and several other parties have
shared certain cleanup costs in the interim until a voluntary allocation of
liability can be reached among the parties. It is not possible at this time to
predict the outcome or precise impact of this matter. However, management
believes that this matter should not have a material adverse impact on the
financial position or results of operations of LG&E as other financially viable
PRPs appear to have primary liability for the site.

Based upon prior precedents established by the Commission and the Environmental
Cost Recovery legislation, LG&E expects to have an opportunity to recover,
through future ratemaking proceedings, its costs associated with remedial
measures required to comply with environmental laws and regulations.

Like LG&E, LPI and its subsidiaries are subject to extensive federal, state, and
local environmental laws and regulations governing the operation of the various
power plants in which they participate as an owner or managing operator. Among
other things, these

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<PAGE>
laws and regulations govern the discharge of materials into waterways, the air
and the ground and, if violated, may require the owner or operator to take
remedial action to maintain the affected facility's operating status. To the
extent any such remedial environmental actions have been required of LPI or its
subsidiaries in the past, related expenditures have not been material.

NOTE 11 - TRIMBLE COUNTY GENERATING PLANT.

Trimble County Unit 1, a 495-megawatt, coal-fired electric generating unit, was
placed in commercial operation on December 23, 1990.

This Unit, which during its first three years of commercial operations has
operated more reliably than projected, has been the subject of numerous
regulatory and legal proceedings. The current regulatory process involving
Trimble County is related to an order issued by the Commission on July 1, 1988,
which stated that 25% of the total cost of the Unit would not be allowed for
ratemaking purposes. In a rehearing order issued in April 1989, the Commission
reaffirmed its decision that LG&E would not be allowed to include 25% of the
cost of the Unit in customer rates; however, this order stated that "the
disallowed portion of Trimble County remains with the Company and stockholders
for their use."

In 1989, the Commission initiated a proceeding to determine the appropriate
ratemaking treatment to carry out the order that disallowed rate recovery for
25% of the Unit. Prior to the start of the hearings in this proceeding, LG&E
filed a motion requesting the Commission to adopt a proposed plan to settle all
of the issues surrounding Trimble County. Settlement discussions ensued between
LG&E, intervenors, and the Commission staff. On October 2, 1989, the Commission
approved the settlement agreement reached between LG&E and the Commission staff
and, in accordance with the terms of the agreement, LG&E refunded $2.5 million
to its customers in 1989 and reduced its electric rates by $8.5 million for the
year beginning January 1, 1990.

Certain intervenors, who participated in the proceedings but did not agree to
the settlement, appealed the Commission's order approving the settlement to
Franklin Circuit Court, claiming, among other things, that the Commission lacked
the statutory authority to approve the agreement and that the intervenors who
refused to sign the agreement were deprived of due process rights.

In February 1991, the Franklin Circuit Court vacated the October 2, 1989 order
of the Commission approving the settlement agreement. On September 27, 1991,
the Court issued an opinion requiring a refund to ratepayers in excess of $100
million as a result of the Commission's order that disallowed 25% of the total
cost of Trimble County from customer rates. The Court further ordered LG&E to
post a bond if it appealed the Circuit Court's decision.

LG&E posted a bond of $107 million and appealed all orders of the Circuit Court
to the Kentucky Court of Appeals.

On April 23, 1993, the Kentucky Court of Appeals overturned the Franklin Circuit
Court ruling previously entered in the case. Although the decision upheld the
Circuit Court's order vacating the 1989 settlement agreement approved by the
Commission, the appeals

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<PAGE>
court ruled that the Franklin Circuit Court order of September 27, 1991,
improperly set utility rates in ordering refunds. The intervenor parties
requested the Kentucky Supreme Court to review the case, and their request for
review was denied on October 20, 1993. Under Kentucky procedural rules, this
ruling makes final the Court of Appeals decision and returns the case to the
Commission for further proceedings.

The Commission has issued orders which set a portion of the procedural schedule
for the case. Pursuant to the Commission's orders, LG&E filed direct testimony
on January 7, 1994. Intervenor parties are scheduled to file testimony on March
28, 1994. No date has been set for a hearing.

LG&E anticipates that the focus of Commission proceedings will be the
determination of the appropriate ratemaking treatment to insulate ratepayers
from 25% of Trimble County's costs and the amount of additional refunds, if any,
that LG&E should return to ratepayers. In previous proceedings in 1988, the
Commission had authorized rate increases, subject to refund, of $11.4 million on
an annual basis, pending a determination of the appropriate ratemaking treatment
for the disallowance. The order remained in effect from May 1988 through
December 1990, resulting in an amount subject to refund of approximately $30
million. LG&E, through refunds and rate reductions, has already returned to its
customers approximately $11 million of the total amount subject to refund.
LG&E's position is that no additional refunds are needed to carry out the
Commission's objective of reflecting the disallowance of 25% of Trimble County
in customer rates and LG&E may be entitled to recover a portion, or all, of the
amounts previously returned to customers. However, LG&E is unable to predict
the outcome of the Commission proceedings, the amount of additional refunds or
recoveries, if any, that may be ordered or whether the Commission will revise
its earlier position.

SALE OF PORTION OF TRIMBLE COUNTY. On February 28, 1991, LG&E sold a 12.12%
ownership interest in the Trimble County Unit to the Illinois Municipal Electric
Agency, based in Springfield, Illinois, which is an agency of 30 municipalities
that own and operate their own electric systems. The sale price was $94.2
million and a book gain of $4.2 million, after-tax, was recognized in 1991 as a
result of this sale.

On February 1, 1993, the Indiana Municipal Power Agency (IMPA), based in Carmel,
Indiana, purchased a 12.88% interest in the Trimble County plant. IMPA is
composed of 31 municipalities that have joined together to meet their long-term
electric power needs. The sale price was $91.1 million and an after-tax book
gain of $3.2 million was recorded in 1993 as a result of this sale.

LG&E has now completed the sale of the entire 25% of Trimble County that the
Commission disallowed from customer rates.

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<PAGE>

NOTE 12 - JOINTLY OWNED ELECTRIC UTILITY PLANT

As of December 31, 1993, LG&E owned a 75% undivided interest in Trimble County
Unit 1.

Accounting for the 75% portion of the Unit, which the Commission has allowed to
be reflected in customer rates, is similar to LG&E's accounting for other wholly
owned utility plants. Of the remaining 25% of the Unit:

* Illinois Municipal Electric Agency (IMEA) purchased a 12.12% undivided
interest in the Unit on February 28, 1991. IMEA pays for 12.12% of the
operation and maintenance expenses, their proportionate share of
incremental assets acquired and for fuel used.

* Indiana Municipal Power Agency (IMPA) purchased a 12.88% undivided interest
in the Unit on February 1, 1993. IMPA is responsible for 12.88% of the
operation and maintenance expenses, their proportionate share of
incremental assets acquired and for fuel used.

The following data represent shares of the jointly owned property:

Trimble County
---------------------------------
LG&E IMPA IMEA Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Ownership interest . . . . . . . . 75% 12.88% 12.12% 100%
Mw capacity. . . . . . . . . . . . 371.25 63.75 60 495
</TABLE>

NOTE 13 - SEGMENTS OF BUSINESS

LG&E Energy Corp. has business operations in both the regulated and
non-regulated energy markets. The regulated business is conducted through LG&E,
a public utility engaged in the generation, transmission, distribution, and sale
of electricity and the transmission, distribution and sale of natural gas.

The non-regulated energy business is conducted through Energy Systems, which
manages the Company's non-utility operations. Energy Systems directly owns LPI.
LPI and its subsidiaries develop, design, build, own, operate, and maintain
power generation facilities that sell energy to local industries and utilities.
In January 1994, Energy Systems sold its 36.5% partnership interest in NGC. See
Note 3 of Notes to Financial Statements for further discussion.

-51-

<PAGE>

1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
(Thousands of $)
Operating Information
Revenues
Electric .................... $ 571,627 $ 526,143 $ 548,674
Gas ......................... 204,915 178,526 166,291
--------- --------- ---------
Total Utility ............. 776,542 704,669 714,965
Non-Utility .................. 123,485 130,070 -
--------- --------- ---------
Total ..................... $ 900,027 $ 834,739 $ 714,965
--------- --------- ---------

Operating Income
Electric .................... $ 172,201 $ 150,810 $ 180,316
Gas ......................... 17,436 15,122 13,576
--------- --------- ---------

Total Utility ............. 189,637 165,932 193,892
Non-Utility ................. 13,312 14,632 -
Corporate ................... (9,981) (6,060) (5,761)
--------- --------- ---------
Total ..................... $ 192,968 $ 174,504 $ 188,131
--------- --------- ---------
--------- --------- ---------

Other Information
Depreciation and Amortization.
Electric .................... $ 69,985 $ 70,652 $ 68,394
Gas ......................... 9,902 9,034 8,037
--------- --------- ---------
Total Utility ............. 79,887 79,686 76,431
Non-Utility ................. 2,253 967 -
Corporate ................... 520 412 283
--------- --------- ---------
Total .................... $ 82,660 $ 81,065 $ 76,714
--------- --------- ---------
--------- --------- ---------

Construction Expenditures
Electric .................... $ 74,165 $ 75,630 $ 69,514
Gas ......................... 24,622 25,545 18,538
--------- --------- ---------
Total Utility ............. 98,787 101,175 88,052
Non-Utility ................. 871 331 -
Corporate ................... 341 573 339
--------- --------- ---------
Total .................... $ 99,999 $ 102,079 $ 88,391
--------- --------- ---------
--------- --------- ---------

Identifiable Assets -
December 31
Electric .................... $1,616,595 $1,537,219 $1,524,018
Gas ......................... 261,048 226,041 195,251
Other ....................... 195,057 121,473 138,758
Trimble County-not allowed
in customer rates .......... - 87,794 89,824
--------- --------- ---------
Total Utility ............. 2,072,700 1,972,527 1,947,851
Non-Utility ................. 116,434 108,896 102,631
Discontinued Operations ..... 84,284 75,786 -
Corporate ................... 11,376 3,368 3,674
--------- --------- ---------
Total ..................... $2,284,794 $2,160,577 $2,054,156
--------- --------- ---------
--------- --------- ---------

</TABLE>

-52-

<PAGE>

REPORT OF MANAGEMENT

The management of LG&E Energy Corp. and subsidiaries is responsible for the
preparation and integrity of the consolidated financial statements and related
information included in this Annual Report. These statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis and, necessarily, include amounts that reflect the best
estimates and judgment of management.

The Company's financial statements have been audited by Arthur Andersen &
Co., independent public accountants whose report follows the Notes to Financial
Statements. Management has made available to Arthur Andersen & Co. all the
Company's financial records and related data as well as the minutes of
shareholders' and directors' meetings.

Management has established and maintains a system of internal controls that
provides reasonable assurance that transactions are completed in accordance with
management's authorization, that assets are safeguarded and that financial
statements are prepared in conformity with generally accepted accounting
principles. Management believes that an adequate system of internal controls is
maintained through the selection and training of personnel, appropriate division
of responsibility, establishment and communication of policies and procedures
and by regular reviews of internal accounting controls by the Company's internal
auditors. Management reviews and modifies its system of internal control in
light of changes in conditions and operations, as well as in response to
recommendations from the internal auditors and the independent public
accountants. These recommendations for the year ended December 31, 1993 did not
identify any significant deficiencies in the design and operation of the
Company's internal control structure.

The Audit Committee of the Board of Directors is composed entirely of
outside directors. In carrying out its oversight role for the financial
reporting and internal controls of the Company, the Audit Committee meets
regularly with the Company's independent public accountants, internal auditors
and management. The Audit Committee reviews the results of the independent
accountants' audit of the consolidated financial statements and their audit
procedures, and discusses the adequacy of internal accounting controls. The
Audit Committee also approves the annual internal auditing program, and reviews
the activities and results of the internal auditing function. Both the
independent public accountants and the internal auditors have access to the
Audit Committee at any time.

LG&E Energy Corp. and subsidiaries maintain and internally communicate a
written code of business conduct that addresses, among other items, potential
conflicts of interest, compliance with laws, including those relating to
financial disclosure, and the confidentiality of proprietary information.

-53-

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO LG&E ENERGY CORP.:

We have audited the accompanying consolidated balance sheets and statements
of capitalization of LG&E Energy Corp. (a Kentucky corporation) and subsidiaries
as of December 31, 1993 and 1992, and the related consolidated statements of
income, retained earnings and cash flows for each of the three years in the
period ended December 31, 1993. These financial statements and the schedules
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LG&E Energy
Corp. and subsidiaries as of December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.

As further discussed in Note 11, the potential amount of future rate
refunds that may be required, if any, once the outcome of the legal and
regulatory process is known, is uncertain at this time.

As discussed in Notes 1 and 5 to the consolidated financial statements,
effective January 1, 1993, the Company changed its methods of accounting for
income taxes and post-retirement benefits other than pensions.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed under Item 14(a)2
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Louisville, Kentucky, Arthur Andersen & Co.
January 28, 1994

----------------------------------

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<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

Selected financial data for the four quarters of 1993 and 1992 are shown
below. Because of seasonal fluctuations in temperature and other factors,
results for quarters may fluctuate throughout the year.

Quarters Ended
------------------------------------------------
(Thousands of $ except per share data) March June September December
----- ---- --------- --------
<S> <C> <C> <C> <C>
1993
Revenues.......................... $238,396 $200,368 $220,950 $240,313
Operating Income.................. 44,786 39,267 68,880 40,035
Net Income:
Continuing Operations.......... 18,573 15,375 33,260 13,617
Discontinued Operations........ 1,524 2,233 1,841 1,837
-------- -------- -------- --------
Total....................... $ 20,097 $ 17,608 $ 35,101 $ 15,454
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per Share of Common Stock:
Continuing Operations.......... $ .57 $ .47 $ 1.02 $ .41
Discontinued Operations........ .05 .07 .05 .06
---- ---- ---- ----
Total....................... $ .62 $ .54 $ 1.07 $ .47
---- ---- ---- ----
---- ---- ---- ----

1992
Revenues.......................... $204,860 $189,449 $209,979 $230,451
Operating Income.................. 36,190 41,421 57,044 39,849
Net Income:
Continuing Operations.......... 13,156 16,613 27,210 14,458
Discontinued Operations........ - 498 2,303 1,376
-------- -------- -------- --------
Total....................... $ 13,156 $ 17,111 $ 29,513 $ 15,834
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per Share of Common Stock:
Continuing Operations.......... $ .41 $ .51 $ .84 $ .45
Discontinued Operations........ - .02 .07 .04
---- ---- ---- ----
Total....................... $ .41 $ .53 $ .91 $ .49
---- ---- ---- ----
---- ---- ---- ----

-------------------------------------------------------------------
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

-55-

<PAGE>
PART III

ITEMS 10, 11, 12 AND 13 are omitted pursuant to General Instruction G,
inasmuch as the Company filed copies of a definitive proxy statement with the
Commission on March 28, 1994, pursuant to Regulation 14A under the Securities
Exchange Act of 1934. Such proxy statement is incorporated herein by this
reference. In accordance with General Instruction G of Form 10-K, the
information required by Item 10 relating to executive officers has been included
in Part I of this Form 10-K.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements (included in Item 8):
Statements of Income for the three years ended December 31, 1993
(page 30).
Statements of Retained Earnings for the three years ended
December 31, 1993 (page 30).
Balance Sheets - December 31, 1993, and 1992 (page 31).
Statements of Cash Flows for the three years ended December 31,
1993 (page 32).
Statements of Capitalization - December 31, 1993, and 1992 (page
33).
Notes to Financial Statements (pages 34-52).
Report of Management (page 53).
Report of Independent Public Accountants (page 54).
Selected Quarterly Financial Data for 1993, and 1992 (page 55).

2. Financial Statement Schedules (included in Part IV):
Schedule V - Property, Plant and Equipment for the three years
ended December 31, 1993 (pages 71-73).
Schedule VI - Accumulated Depreciation, Depletion, and
Amortization of Property, Plant and Equipment for
the three years ended December 31, 1993 (pages
74-76).
Schedule VIII - Valuation and Qualifying Accounts for the three
years ended December 31, 1993 (page 77).
Schedule IX - Short-Term Borrowings for the three years ended
December 31, 1993 (page 78).
Schedule X - Supplementary Income Statement Information for
the three years ended December 31, 1993
(page 79).

All other schedules have been omitted as not applicable or not required or
because the information required to be shown is included in the Financial
Statements or the accompanying Notes to Financial Statements.

-56-
<PAGE>

3. Exhibits:
Exhibit
No. Description
-------- -----------
3.01 Copy of Articles of Incorporation. [Filed as Exhibit 4.01 to
Registration Statement 33-33687 and incorporated by reference
herein]

3.02 Amendment to Articles of Incorporation dated December 5, 1990.
[Filed as Exhibit 3.02 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1990, and incorporated by
reference herein]

3.03 Copy of Bylaws as amended through December 4, 1991. [Filed as
Exhibit 3.03 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated by reference
herein]

4.01 Copy of Trust Indenture dated November 1, 1949, from LG&E to
Harris Trust and Savings Bank, Trustee. [Filed as Exhibit 7.01
to LG&E's Registration Statement 2-8283 and incorporated by
reference herein]

4.02 Copy of Supplemental Indenture dated February 1, 1952, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.05 to LG&E's Registration Statement 2-9371 and
incorporated by reference herein]

4.03 Copy of Supplemental Indenture dated February 1, 1954, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.03 to LG&E's Registration Statement 2-11923 and
incorporated by reference herein]

4.04 Copy of Supplemental Indenture dated September 1, 1957, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.04 to LG&E's Registration Statement 2-17047 and
incorporated by reference herein]

4.05 Copy of Supplemental Indenture dated October 1, 1960, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.05 to LG&E's Registration Statement 2-24920 and
incorporated by reference herein]

4.06 Copy of Supplemental Indenture dated June 1, 1966, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.06 to LG&E's Registration Statement 2-28865 and
incorporated by reference herein]

-57-
<PAGE>

4.07 Copy of Supplemental Indenture dated June 1, 1968, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.07 to LG&E's Registration Statement 2-37368 and
incorporated by reference herein]

4.08 Copy of Supplemental Indenture dated June 1, 1970, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.08 to LG&E's Registration Statement 2-37368 and
incorporated by reference herein]

4.09 Copy of Supplemental Indenture dated August 1, 1971, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.09 to LG&E's Registration Statement 2-44295 and
incorporated by reference herein]

4.10 Copy of Supplemental Indenture dated June 1, 1972, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.10 to LG&E's Registration Statement 2-52643 and
incorporated by reference herein]

4.11 Copy of Supplemental Indenture dated February 1, 1975, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.11 to LG&E's Registration Statement 2-57252 and
incorporated by reference herein]

4.12 Copy of Supplemental Indenture dated September 1, 1975, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.12 to LG&E's Registration Statement 2-57252 and
incorporated by reference herein]

4.13 Copy of Supplemental Indenture dated September 1, 1976, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.13 to LG&E's Registration Statement 2-57252 and
incorporated by reference herein]

4.14 Copy of Supplemental Indenture dated October 1, 1976, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.14 to LG&E's Registration Statement 2-65271 and
incorporated by reference herein]

4.15 Copy of Supplemental Indenture dated June 1, 1978, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.15 to LG&E's Registration Statement 2-65271 and
incorporated by reference herein]

4.16 Copy of Supplemental Indenture dated February 15, 1979, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 2.16 to LG&E's Registration Statement 2-65271 and
incorporated by reference herein]

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<PAGE>

4.17 Copy of Supplemental Indenture dated September 1, 1979, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.17 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1980, and incorporated by reference herein]

4.18 Copy of Supplemental Indenture dated September 15, 1979, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.18 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1980, and incorporated by reference herein]

4.19 Copy of Supplemental Indenture dated September 15, 1981, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.19 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1981, and incorporated by reference herein]

4.20 Copy of Supplemental Indenture dated March 1, 1982, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.20 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1982, and incorporated by reference herein]

4.21 Copy of Supplemental Indenture dated March 15, 1982, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.21 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1982, and incorporated by reference herein]

4.22 Copy of Supplemental Indenture dated September 15, 1982, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.22 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1982, and incorporated by reference herein]

4.23 Copy of Supplemental Indenture dated February 15, 1984, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.23 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1984, and incorporated by reference herein]

4.24 Copy of Supplemental Indenture dated July 1, 1985, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.24 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1985, and incorporated by reference herein]

-59-
<PAGE>

4.25 Copy of Supplemental Indenture dated November 15, 1986, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.25 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1986, and incorporated by reference herein]

4.26 Copy of Supplemental Indenture dated November 16, 1986, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.26 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1986, and incorporated by reference herein]

4.27 Copy of Supplemental Indenture dated August 1, 1987, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.27 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated by reference herein]

4.28 Copy of Supplemental Indenture dated February 1, 1989, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.28 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1988, and incorporated by reference herein]

4.29 Copy of Supplemental Indenture dated February 2, 1989, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.29 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1988, and incorporated by reference herein]

4.30 Copy of Supplemental Indenture dated June 15, 1990, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.30 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1990, and incorporated by reference herein]

4.31 Copy of Supplemental Indenture dated November 1, 1990, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.31 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1990, and incorporated by reference herein]

4.32 Copy of Supplemental Indenture dated September 1, 1992, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.32 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated by reference herein]

-60-

<PAGE>

4.33 Copy of Supplemental Indenture dated September 2, 1992, which is
a supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.33 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated by reference herein]

4.34 Copy of Supplemental Indenture dated August 15, 1993, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.34 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]

4.35 Copy of Supplemental Indenture dated August 16, 1993, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.35 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]

4.36 Copy of Supplemental Indenture dated October 15, 1993, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as
Exhibit 4.36 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]

10.01 Copy of Agreement dated September 1, 1970, between Texas Gas
Transmission Corporation and LG&E covering the purchase of
natural gas. [Filed as Exhibit 4.01 to LG&E's Registration
Statement 2-40985 and incorporated by reference herein]

10.02 Copies of Agreement between Sponsoring Companies re: Project D
of Atomic Energy Commission, dated May 12, 1952, Memorandums of
Understanding between Sponsoring Companies re: Project D of
Atomic Energy Commission, dated September 19, 1952 and October
28, 1952, and Power Agreement between Ohio Valley Electric
Corporation and Atomic Energy Commission, dated October 15, 1952.
[Filed as Exhibit 13(y) to LG&E's Registration Statement 2-9975
and incorporated by reference herein]

10.03 Copy of Modification No. 1 dated July 23, 1953, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 4.03(b) to LG&E's
Registration Statement 2-24920 and incorporated by reference
herein]

-61

<PAGE>
10.04 Copy of Modification No. 2 dated March 15, 1964, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02c to LG&E's
Registration Statement 2-61607 and incorporated by reference
herein]

10.05 Copy of Modification No. 3 and No. 4 dated May 12, 1966 and
January 7, 1967, respectively, to the Power Agreement between
Ohio Valley Electric Corporation and Atomic Energy Commission.
[Filed as Exhibits 4(a)(13) and 4(a)(14) to LG&E's Registration
Statement 2-26063 and incorporated by reference herein]

10.06 Copy of Modification No. 5 dated August 15, 1967, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 13(c) to LG&E's
Registration Statement 2-27316 and incorporated by reference
herein]

10.07 Copies of (i) Inter-Company Power Agreement, dated July 10, 1953,
between Ohio Valley Electric Corporation and Sponsoring Companies
(which Agreement includes as Exhibit A the Power Agreement, dated
July 10, 1953, between Ohio Valley Electric Corporation and
Indiana-Kentucky Electric Corporation); (ii) First Supplementary
Transmission Agreement, dated July 10, 1953, between Ohio Valley
Electric Corporation and Sponsoring Companies; (iii)
Inter-Company Bond Agreement, dated July 10, 1953, between Ohio
Valley Electric Corporation and Sponsoring Companies; (iv)
Inter-Company Bank Credit Agreement, dated July 10, 1953, between
Ohio Valley Electric Corporation and Sponsoring Companies. [Filed
as Exhibit 5.02f to LG&E's Registration Statement 2-61607 and
incorporated by reference herein]

10.08 Copy of Modification No. 1 and No. 2 dated June 3, 1966 and
January 7, 1967, respectively, to Inter-Company Power Agreement
dated July 10, 1953. [Filed as Exhibits 4(a)(8) and 4(a)(10) to
LG&E's Registration Statement 2-26063 and incorporated by
reference herein]

10.09 Copies of Amendments to Agreements (iii) and (iv) referred to
under 10.07 above as follows: (i) Amendment to Inter-Company Bond
Agreement and (ii) Amendment to Inter-Company Bank Credit
Agreement. [Filed as Exhibit 5.02h to LG&E's Registration
Statement 2-61607 and incorporated by reference herein]

-62-
<PAGE>

10.10 Copy of Modification No. 1, dated August 20, 1958, to First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 5.02i to LG&E's Registration Statement 2-61607
and incorporated by reference herein]

10.11 Copy of Modification No. 2, dated April 1, 1965, to the First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 5.02j to LG&E's Registration Statement 2-6l607
and incorporated by reference herein]

10.12 Copy of Modification No. 3, dated January 20, 1967, to First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 4(a)(7) to LG&E's Registration Statement
2-26063 and incorporated by reference herein]

10.13 Copy of Modification No. 6 dated November 15, 1967, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 4(g) to LG&E's Registration
Statement 2-28524 and incorporated by reference herein]

10.14 Copy of Modification No. 3 dated November 15, 1967, to the
Inter-Company Power Agreement dated July 10, 1953. [Filed as
Exhibit 4.02m to LG&E's Registration Statement 2-37368 and
incorporated by reference herein]

10.15 Copy of Modification No. 7 dated November 5, 1975, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02n to LG&E's
Registration Statement 2-56357 and incorporated by reference
herein]

10.16 Copy of Modification No. 4 dated November 5, 1975, to the
Inter-Company Power Agreement dated July 10, 1953. [Filed as
Exhibit 5.02o to LG&E's Registration Statement 2-56357 and
incorporated by reference herein]

10.17 Copy of Modification No. 4 dated April 30, 1976, to First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 5.02p to LG&E's Registration Statement 2-6l607
and incorporated by reference herein]

-63-
<PAGE>

10.18 Copy of Modification No. 8 dated June 23, 1977, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02q to LG&E's
Registration Statement 2-61607 and incorporated by reference
herein]

10.19 Copy of Modification No. 9 dated July 1, 1978, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02r to LG&E's
Registration Statement 2-63149 and incorporated by reference
herein]

10.20 Copy of Modification No. 10 dated August 1, 1979, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 2 to LG&E's Annual Report
on Form 10-K for the year ended December 31, 1979, and
incorporated by reference herein]

10.21 Copy of Modification No. 11 dated September 1, 1979, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 3 to LG&E's Annual Report
on Form 10-K for the year ended December 31, 1979, and
incorporated by reference herein]

10.22 Copy of Modification No. 5 dated September 1, 1979, to
Inter-Company Power Agreement dated July 5, 1953, among Ohio
Valley Electric Corporation and Sponsoring Companies. [Filed as
Exhibit 4 to LG&E's Annual Report on Form 10-K for the year ended
December 31, 1979, and incorporated by reference herein]

10.23 Copy of Agreement dated December 16, 1966, between Peabody Coal
Company and LG&E covering the purchase of coal. [Filed as
Exhibit 10.23 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1980, and incorporated by reference herein]

10.24 Copy of Amendments to Coal Supply Agreement referred to in 10.23
above as follows: (i) Amendment effective July 1, 1970, (ii)
effective January 1, 1975, and (iii) effective December 1, 1976.
[Filed as Exhibit 10.24 to LG&E's Annual Report on Form 10-K for
the year ended December 31, 1980, and incorporated by reference
herein]

-64-
<PAGE>

10.25 Copy of Modification No. 12 dated August 1, 1981, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.25 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1981, and
incorporated by reference herein]

10.26 Copy of Modification No. 6 dated August 1, 1981, to Inter-Company
Power Agreement dated July 5, 1953, among Ohio Valley Electric
Corporation and Sponsoring Companies. [Filed as Exhibit 10.26 to
LG&E's Annual Report on Form 10-K for the year ended December 31,
1981, and incorporated by reference herein]

10.27 Copy of Agreement dated December 20, 1985, between Shawnee Coal
Company and LG&E covering the purchase of coal. [Filed as
Exhibit 10.27 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1985, and incorporated by reference herein]

10.28 Copy of Diversity Power Agreement dated September 9, 1987,
between East Kentucky Power Cooperative and LG&E covering the
purchase and sale of power between the two companies from 1988
through 1995. [Filed as Exhibit 10.28 to LG&E's Annual Report on
Form 10-K for the year ended December 31, 1987, and incorporated
by reference herein]

10.29 Copy of Supplemental Executive Retirement Plan as amended through
January 3, 1990, covering all officers of LG&E. [Filed as
Exhibit 10.29 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated by reference herein]

10.30 Copy of Termination Agreement and Release dated February 1, 1989,
between Peabody Coal Company and LG&E canceling the Coal Supply
Agreement dated December 16, 1966 referred to in Exhibit Nos.
10.23 and 10.24. [Filed as Exhibit 10.30 to LG&E's Annual Report
on Form 10-K for the year ended December 31, 1988, and
incorporated by reference herein]

10.31 Copy of Agreements dated February 1 and February 15, 1989,
between Peabody Development Company and LG&E covering the
purchase of coal. [Filed as Exhibit 10.31 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1988, and
incorporated by reference herein]

-65-

<PAGE>

10.32 Copy of Omnibus Long-Term Incentive Plan effective January 1,
1990, covering officers and key employees of LG&E. [Filed as
Exhibit 4.01 to LG&E's Registration Statement 33-38557 and
incorporated by reference herein]

10.33 Copy of Key Employee Incentive Plan effective January 1, 1990,
covering officers and key employees of LG&E. [Filed as Exhibit
10.33 to LG&E's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated by reference herein]

10.34 Copy of LG&E Energy Corp. Deferred Stock Compensation Plan
effective January 1, 1992, covering non-employee directors of the
Company and its subsidiaries. [Filed as Exhibit 10.34 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991, and incorporated by reference herein]

10.35 Copy of Agreement dated August 1, 1991, between Texas Gas
Transmission Corporation and LG&E covering the purchase of
natural gas. [Filed as Exhibit 10.35 to LG&E's Annual Report on
Form 10-K for the year ended December 31, 1991, and incorporated
by reference herein]

10.36 Copy of Credit Agreement dated as of March 11, 1992, among LG&E
Energy Systems Inc. as Borrower, the Banks named therein, and
Citibank, N.A. as Agent. [Filed as Exhibit 10.36 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated by reference herein]

10.37 Copy of Support Agreement dated as of December 9, 1991, between
LG&E Energy Corp. and LG&E Energy Systems Inc. [Filed as
Exhibit 10.37 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992, and incorporated by reference
herein]

10.38 Copy of Sales Service Agreement between Texas Gas Transmission
Corporation and Louisville Gas and Electric Company effective
February 1, 1992. [Filed as Exhibit 10.36 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1992, and
incorporated by reference herein]

10.39 Copy of Sales Service Agreement between Texas Gas Transmission
Corporation and Louisville Gas and Electric Company effective
November 1, 1992. [Filed as Exhibit 10.37 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1992, and
incorporated by reference herein]

-66-

<PAGE>

10.40 Copy of form of change in control agreement for officers of LG&E
Energy Corp. [Filed as Exhibit 10.40 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992, and
incorporated by reference herein]

10.41 Copy of Employment Agreement between Roger W. Hale and Louisville
Gas and Electric Company, effective June 1, 1989, as amended.
[Filed as Exhibit 10.41 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992, and incorporated
by reference herein]

10.42 Copy of Supplemental Executive Retirement Plan for R. W. Hale,
effective June 1, 1989. [Filed as Exhibit 10.42 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992,
and incorporated by reference herein]

10.43 Copy of Nonqualified Savings Plan covering officers of the
Company, effective January 1, 1992. [Filed as Exhibit 10.43 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated by reference herein]

10.44 Copy of Modification No. 13 dated September 1, 1989, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.42 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]

10.45 Copy of Modification No. 7 dated January 15, 1992, to Inter-
Company Power Agreement dated July 10, 1953, among Ohio Valley
Electric Corporation and Sponsoring Companies. [Filed as
Exhibit 10.44 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]

10.46 Copy of Modification No. 14 dated January 15, 1992, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.43 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]

10.47 Copy of Modification No. 15 dated February 15, 1993, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.45 to LG&E's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]

-67-

<PAGE>

10.48 Firm Transportation Agreement, dated November 1, 1993, between
Texas Gas Transmission Corporation and LG&E covering the
transmission of natural gas. [Filed as Exhibit 10.46 to LG&E's
Annual Report on Form 10-K for the year ended December 31, 1993,
and incorporated by reference herein]

10.49 Firm No Notice Transportation Agreement effective November 1,
1993, between Texas Gas Transmission Corporation and LG&E (8-year
term) covering the transmission of natural gas.

Firm No Notice Transportation Agreement effective November 1,
1993, between Texas Gas Transmission Corporation and LG&E (2-year
term) covering the transmission of natural gas.

Firm No Notice Transportation Agreement effective November 1,
1993, between Texas Gas Transmission Corporation and LG&E (5-year
term) covering the transmission of natural gas.

[Filed as Exhibit 10.47 to LG&E's Annual Report on Form 10-K for
the year ended December 31, 1993, and incorporated by reference
herein]

10.50 Employment Contract between the Company and Roger W. Hale
effective November 3, 1993.

10.51 Copy of LG&E Energy Corp. Stock Option Plan for Non-Employee
Directors.

21 Subsidiaries of the Registrant

23 Consent of Independent Public Accountants

24 Power of Attorney

(b) Executive Compensation Plans and Arrangements:

Supplemental Executive Retirement Plan as amended through
January 3, 1990, covering all officers of LG&E. [Filed as
Exhibit 10.29 to LG&E's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated by reference herein]

-68-

<PAGE>

Omnibus Long-Term Incentive Plan effective January 1, 1990,
covering officers and key employees of LG&E. [Filed as
Exhibit 4.01 to LG&E's Registration Statement 33-38557 and
incorporated by reference herein]

Key Employee Incentive Plan effective January 1, 1990, covering
officers and key employees of LG&E. [Filed as Exhibit 10.33 to
LG&E's Annual Report on Form 10-K for the year ended December 31,
1989, and incorporated by reference herein]

LG&E Energy Corp. Deferred Stock Compensation Plan effective
January 1, 1992, covering non-employee directors of the Company
and its subsidiaries. [Filed as Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991,
and incorporated by reference herein]

Form of change in control agreement for officers of LG&E Energy
Corp. [Filed as Exhibit 10.40 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992, and incorporated
by reference herein]

Employment Agreement between Roger W. Hale and Louisville Gas and
Electric Company, effective June 1, 1989, as amended. [Filed as
Exhibit 10.41 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992, and incorporated by reference
herein]

Supplemental Executive Retirement Plan for R. W. Hale, effective
June 1, 1989. [Filed as Exhibit 10.42 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992, and
incorporated by reference herein]

Nonqualified Savings Plan covering officers of the Company
effective January 1, 1992. [Filed as Exhibit 10.43 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated by reference herein]

Employment Contract between the Company and Roger W. Hale
effective November 3, 1993. [Filed as Exhibit 10.50 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993]

LG&E Energy Corp. Stock Option Plan for Non-Employee Directors.
[Filed as Exhibit 10.51 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993]

-69-

<PAGE>

The following 8-K reports were filed during the fourth quarter of
1993:

(i) On October 27, 1993, a report on Form 8-K was filed announcing
the following:

Trimble County Generating Plant. On October 20, 1993, the
Kentucky Supreme Court declined to review a Kentucky Court
of Appeals order overturning a lower court's order that had
improperly directed LG&E to refund approximately $150
million to its customers in a case involving LG&E's Trimble
County electric generating station.

Management Change. Walter M. Higgins, III, President and
Chief Operating Officer of LG&E resigned to accept the
position of President and Chief Operating Officer of Sierra
Pacific Resources. Sierra Pacific Resources indicated
plans for Mr. Higgins to become Chief Executive Officer
early in 1994.

(ii) On November 23, 1993, a report on Form 8-K was filed
announcing that the Company would undergo a major realignment
and formation of new business units effective January 1, 1994,
to reflect its outlook for rapidly emerging competition in all
segments of the energy services industry.

(iii) On December 22, 1993, a report on Form 8-K was filed
announcing that the Company had agreed to sell its 36.5%
interest in Natural Gas Clearinghouse of Houston, Texas, to
NOVA Corporation of Alberta, a Canadian natural gas and
chemical company, for $170 million in cash.

-70-
<PAGE>

SCHEDULE V
(Page 1 of 3)

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(INCLUDING INTANGIBLES)
FOR THE YEAR ENDED DECEMBER 31, 1993
(Thousands of $)

Column A Column B Column C Column D Column E Column F
----------------------- ------------- ------------- ------------- ------------- -------------
Other
Balance Changes Balance
Beginning Additions Retirements Add End of
Classification of Year at Cost at Cost (Deduct) Year
----------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Electric Department:
Intangible..................... $ 2 $ 2
Steam production............... 1,371,584 $ 10,904 $ 2,024 $ (615)(5) 1,379,849
Hydraulic production........... 8,222 40 19 8,243
Other production............... 11,147 39 2 11,184
Transmission................... 163,407 9,817 291 { 1,020 (2) 173,837
{ (116)(1)
Distribution................... 406,046 25,483 2,392 { 116 (1) 429,252
{ (1)(3)
General........................ 15,799 1,640 628 (39)(1) 16,772
Construction work in progress.. 30,948 17,084 48,032
------------ ------------ ------------ ------------ ------------
Total electric department.. 2,007,155 65,007 5,356 365 2,067,171
------------ ------------ ------------ ------------ ------------
Gas Department:
Intangible..................... 1 1
Storage:
Land rights and leaseholds. 568 568
Other...................... 32,282 628 60 32,850
Transmission................... 11,783 4 37 11,750
Distribution................... 186,007 20,217 1,839 204,385
General........................ 8,037 1,407 624 (29)(1) 8,791
Construction work in progress.. 3,090 (851) 2,239
Gas stored underground-
noncurrent................. 2,140 2,140
------------ ------------ ------------ ------------ ------------
Total gas department....... 243,908 21,405 2,560 (29) 262,724
------------ ------------ ------------ ------------ ------------
Common Utility:
Intangible..................... 17,498 4,025 98 21,425
General........................ 103,606 8,165 458 { 68 (1) 111,267
{ (114)(4)
Construction work in progress.. 1,329 185 1,514
------------ ------------ ------------ ------------ ------------
Total common utility....... 122,433 12,375 556 (46) 134,206
------------ ------------ ------------ ------------ ------------
Total utility plant at
original cost......... 2,373,496 98,787 8,472 290 2,464,101
Corporate and other................ 3,390 1,212 68 (4) 4,530
------------ ------------ ------------ ------------ ------------
Total Property, Plant
and Equipment......... $ 2,376,886 $ 99,999 $ 8,540 $ 286 $ 2,468,631
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
<FN>

NOTES:
(1) Transfer between functional groups.
(2) Transfer from Nonutility Property.
(3) Sale of land.
(4) Transfer to LG&E Energy Corp.
(5) Transfer to Nonutility Property.

</TABLE>

-71-

<PAGE>

SCHEDULE V
(Page 2 of 3)

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(INCLUDING INTANGIBLES)
FOR THE YEAR ENDED DECEMBER 31, 1992
(Thousands of $)

Column A Column B Column C Column D Column E Column F
----------------------- -------------- ------------- -------------- ------------- --------------
Other
Balance Changes Balance
Beginning Additions Retirements Add End of
Classification of Year at Cost at Cost (Deduct) Year
----------------------- -------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>

Electric Department:
Intangible....................... $ 2 $ 2
Steam production................. 1,364,349 $ 8,224 $ 1,000 $ 11 (1) 1,371,584
Hydraulic production............. 8,204 18 8,222
Other production................. 11,147 11,147
Transmission..................... 160,904 2,957 419 (35)(1) 163,407
Distribution..................... 378,582 29,804 2,386 { 47 (1) 406,046
{ (1)(3)
General.......................... 2,246 3,729 1,532 11,356 (1) 15,799
Construction work in progress.... 15,729 16,084 { (853)(2) 30,948
{ (12)(1)
------------- ------------ ------------- ------------ -------------
Total electric department.... 1,941,163 60,816 5,337 10,513 2,007,155
------------- ------------ ------------- ------------ -------------
Gas Department:
Intangible....................... 1 1
Storage:
Land rights and leaseholds... 568 568
Other........................ 31,412 1,089 219 32,282
Transmission..................... 11,902 (2) 117 11,783
Distribution..................... 170,878 16,853 1,724 186,007
General.......................... 1,454 1,804 449 5,228 (1) 8,037
Construction work in progress.... 2,494 596 3,090
Gas stored underground-
noncurrent................... 2,140 2,140
------------- ------------ ------------- ------------ -------------
Total gas department......... 220,849 20,340 2,509 5,228 243,908
------------- ------------ ------------- ------------ -------------
Common Utility:
Intangible....................... 6,573 10,925 17,498
General.......................... 105,498 19,169 4,444 { (16,595)(1) 103,606
{ (22)(4)
Construction work in progress.... 11,405 (10,075) (1)(4) 1,329
------------- ------------ ------------- ------------ -------------
Total common utility......... 123,476 20,019 4,444 (16,618) 122,433
------------- ------------ ------------- ------------ -------------
Total utility plant at
original cost.......... 2,285,488 101,175 12,290 (877) 2,373,496
Corporate and other.................. 592 904 134 2,028 3,390
------------- ------------ ------------- ------------ -------------
Total Property, Plant
and Equipment........... $ 2,286,080 $ 102,079 $ 12,424 $ 1,151 $ 2,376,886
------------- ------------ ------------- ------------ -------------
------------- ------------ ------------- ------------ -------------
<FN>

NOTES:
(1) Transfer between functional groups.
(2) Transfer 25% of Trimble County to Nonutility Property.
(3) Sale of land.
(4) Transfer to LG&E Energy Corp.

</TABLE>

-72-

<PAGE>

SCHEDULE V
(Page 3 of 3)

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(INCLUDING INTANGIBLES)
FOR THE YEAR ENDED DECEMBER 31, 1991
(Thousands of $)

------------ ------------ ------------ ------------ ------------
Total electric department.. 1,894,329 53,596 5,409 (1,353) 1,941,163
------------ ------------ ------------ ------------ ------------
Gas Department:
Intangible..................... 1 1
Storage:
Land rights and leaseholds. 568 568
Other...................... 29,850 1,676 114 31,412
Transmission................... 10,622 1,290 10 11,902
Distribution................... 161,192 10,663 976 (1)(3) 170,878
General........................ 1,255 250 51 1,454
Construction work in progress.. 2,590 (96) 2,494
Gas stored underground-
noncurrent................. 2,140 2,140
------------ ------------ ------------ ------------ ------------
Total gas department....... 208,218 13,783 1,151 (1) 220,849
------------ ------------ ------------ ------------ ------------
Common Utility:
Intangible..................... 4,968 1,605 6,573
General........................ 89,472 21,382 2,717 { (2,568)(1) 105,498
{ (71)(4)
Construction work in progress.. 18,169 (2,314) (4,450)(5) 11,405
------------ ------------ ------------ ------------ ------------
Total common utility....... 112,609 20,673 2,717 (7,089) 123,476
------------ ------------ ------------ ------------ ------------
Total utility plant at
original cost......... 2,215,156 88,052 9,277 (8,443) 2,285,488
Corporate and other................ 182 339 71 (6) 592
Total Property, Plant ------------ ------------ ------------ ------------ ------------
and Equipment......... $ 2,215,338 $ 88,391 $ 9,277 $ (8,372) $ 2,286,080
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
<FN>

NOTES:
(1) Transfer between functional groups.
(2) Transfer 25% of Trimble County to Nonutility Property.
(3) Sale of land.
(4) Transfer to LG&E Energy Corp.
(5) Transfer to Preliminary Survey and Investigation Charges.
(6) Transfer from Louisville Gas and Electric Company.

</TABLE>

-73-

<PAGE>

SCHEDULE VI
(Page 1 of 3)

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(Thousands of $)

Column A Column B Column C Column D Column E Column F
------------ ------------- ----------------------------- ------------ ------------- -------------
Additions Charged to
Costs and Expenses
-----------------------------
Provisions
Charged Other
Balance Provisions to Clearing Changes Balance
Beginning Charged and Other Retire- Add End of
Classification of Year to Income Accounts ments (1) (Deduct) Year
---------------- ------------- ------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Electric Department:
Steam production............... $ 401,102 $ 43,449 $ 503 $ 2,818 $ 442,236
Hydraulic production........... 7,794 154 25 7,923
Other production............... 10,668 1 2 $ 10,667
Transmission................... 73,981 4,098 356 { (79)(2) 77,695
{ 51 (3)
Distribution................... 131,883 14,258 3,212 79 (2) 143,008
General........................ 8,719 89 1,353 615 (11)(2) 9,535
------------ ------------ ------------ ----------- ------------ ------------
Total electric department.. 634,147 62,049 1,856 7,028 40 691,064
------------ ------------ ------------ ----------- ------------ ------------
Gas Department:
Intangible..................... 1 1
Storage:
Land rights and
leaseholds............. 397 21 418
Other...................... 16,660 1,247 79 17,828
Transmission................... 8,343 275 37 8,581
Distribution................... 60,711 5,574 2,791 63,494
General........................ 3,181 72 853 623 (29)(2) 3,454
------------ ------------ ------------ ----------- ------------ ------------
Total gas department....... 89,293 7,189 853 3,530 (29) 93,776
------------ ------------ ------------ ----------- ------------ ------------
Common Utility:
Intangible..................... 4,462 2,528 98 6,892
General........................ 26,527 4,978 297 422 { 40 (2) 31,409
{ (11)(4)
------------ ------------ ------------ ----------- ------------ ------------
Total common utility....... 30,989 7,506 297 520 29 38,301
------------ ------------ ------------ ----------- ------------ ------------
Total utility depreciation
and amortization......... 754,429 76,744 3,006 11,078 40 823,141
Corporate and other................ 820 871 47 4 1,648
------------ ------------ ------------ ----------- ------------ ------------
Totals..................... $ 755,249 $ 77,615 $ 3,006 $ 11,125 $ 44 $ 824,789
------------ ------------ ------------ ----------- ------------ ------------
------------ ------------ ------------ ----------- ------------ ------------
<FN>
NOTES:
(1) Net of gross retirements, salvage, and removal expense.
(2) Transfer of depreciation reserve between functional groups.
(3) Transfer from Nonutility Property.
(4) Transfer of depreciation reserve to LG&E Energy Corp.

</TABLE>

-74-

<PAGE>

SCHEDULE VI
(Page 2 of 3)

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(Thousands of $)

Column A Column B Column C Column D Column E Column F
---------------- ------------ ---------------------------- ------------ ------------ ------------
Additions Charged to
Costs and Expenses
----------------------------
Provisions
Charged Other
Balance Provisions to Clearing Changes Balance
Beginning Charged and Other Retire- Add End of
Classification of Year to Income Accounts ments (1) (Deduct) Year
--------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Electric Department:
Steam production............... $ 359,701 $ 43,502 $ 504 $ 2,606 $ 1 (3) $ 401,102
Hydraulic production........... 7,661 150 17 7,794
Other production............... 10,667 1 10,668
Transmission................... 70,639 3,927 568 (17)(2) 73,981
Distribution................... 121,322 13,397 2,853 17 (2) 131,883
General........................ 551 70 1,104 1,533 8,527 (2) 8,719
------------ ------------ ------------ ------------ ------------ ------------
Total electric department.. 570,541 61,047 1,608 7,577 8,528 634,147
------------ ------------ ------------ ------------ ------------ ------------
Gas Department:
Intangible..................... 1 1
Storage:
Land rights and
leaseholds............. 376 21 397
Other...................... 15,709 1,223 271 (1)(2) 16,660
Transmission................... 8,183 277 117 8,343
Distribution................... 58,526 5,118 2,933 60,711
General........................ 300 55 567 441 2,700 (2) 3,181
------------ ------------ ------------ ------------ ------------ ------------
Total gas department....... 83,095 6,694 567 3,762 2,699 89,293
------------ ------------ ------------ ------------ ------------ ------------
Common Utility:
Intangible..................... 2,909 1,553 4,462
General........................ 36,695 4,704 886 4,528 { (11,226)(2) 26,527
{ (4)(4)
------------ ------------ ------------ ------------ ------------ ------------
Total common utility....... 39,604 6,257 886 4,528 (11,230) 30,989
------------ ------------ ------------ ------------ ------------ ------------
Total utility depreciation
and amortization......... 693,240 73,998 3,061 15,867 (3) 754,429
Corporate and other................ 59 747 7 21 820
------------ ------------ ------------ ------------ ------------ ------------
Totals..................... $ 693,299 $ 74,745 $ 3,061 $ 15,874 $ 18 $ 755,249
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<FN>
NOTES:
(1) Net of gross retirements, salvage, and removal expense.
(2) Transfer of depreciation reserve between functional groups.
(3) Transfer to Nonutility Property.
(4) Transfer of depreciation reserve to LG&E Energy Corp.
</TABLE>

-75-

<PAGE>

SCHEDULE VI
(Page 3 of 3)

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
(Thousands of $)

Column A Column B Column C Column D Column E Column F
---------------- ------------- ----------------------------- ------------- ------------- -------------
Additions Charged to
Costs and Expenses
-----------------------------
Provisions
Charged Other
Balance Provisions to Clearing Changes Balance
Beginning Charged and Other Retire- Add End of
Classification of Year to Income Accounts ments (1) (Deduct) Year
-------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Electric Department:
Steam production............... $ 316,739 $ 43,000 $ 504 $ 2,596 $ 2,054 (2) $ 359,701
Hydraulic production........... 7,514 148 1 7,661
Other production............... 11,091 1 425 10,667
Transmission................... 67,386 3,862 574 (35)(2) 70,639
Distribution................... 111,484 12,511 2,708 35 (2) 121,322
General........................ 496 66 11 551
------------ ------------ ------------ ------------ ------------ ------------
Total electric department.. 514,710 59,588 504 6,315 2,054 570,541
------------ ------------ ------------ ------------ ------------ ------------
Gas Department:
Intangible..................... 1 1
Storage:
Land rights and
leaseholds............. 354 22 376
Other...................... 14,734 1,183 208 15,709
Transmission................... 7,932 264 13 8,183
Distribution................... 55,771 4,775 2,020 58,526
General........................ 311 48 59 300
------------ ------------ ------------ ------------ ------------ ------------
Total gas department....... 79,103 6,292 2,300 83,095
------------ ------------ ------------ ------------ ------------ ------------
Common Utility:
Intangible..................... 2,121 788 2,909
General........................ 35,477 3,708 2,312 2,735 (13)(3) 38,749
(2,054)(2) (2,054)
------------ ------------ ------------ ------------ ------------ ------------
Total common utility....... 37,598 4,496 2,312 2,735 (2,067) 39,604
------------ ------------ ------------ ------------ ------------ ------------
Total utility depreciation
and amortization............ 631,411 70,376 2,816 11,350 (13) 693,240
Corporate and other................ 46 13 59
------------ ------------ ------------ ------------ ------------ ------------
Totals..................... $ 631,411 $ 70,422 $ 2,816 $ 11,350 $ - $ 693,299
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------

<FN>
NOTES:
(1) Net of gross retirements, salvage, and removal expense.
(2) Transfer of depreciation reserve between functional groups and LG&E
Energy Corp.
(3) Transfer of depreciation reserve to LG&E Energy Corp.
</TABLE>

-76-

<PAGE>

SCHEDULE VIII

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(Thousands of $)

Reserves Deducted from
Assets in Balance Sheet
------------------------------------------
Other Accounts
Property Receivable
and (Uncollectible
Investments Accounts)
--------------- -----------------
<S> <C> <C>
Balance January 1, 1991............................................... $ 190 $ 1,596

Additions:
Charged to costs and expenses
Trimble County - non-jurisdictional depreciation.......... 3,158
Other..................................................... 2,000
Deductions:
Net charges of nature for which reserves were created......... 2,183
Other......................................................... 486
-------------- --------------
Balance December 31, 1991............................................. 2,862 1,413

Additions:
Charged to costs and expenses
Trimble County - non-jurisdictional depreciation.......... 2,783
Other..................................................... 2,845
Deductions:
Net charges of nature for which reserves were created......... 2,886
Other.........................................................
-------------- --------------
Balance December 31, 1992............................................. 5,645 1,372

Additions:
Charged to costs and expenses
Trimble County - non-jurisdictional depreciation.......... 233
Other..................................................... 2,542
Deductions:
Net charges of nature for which reserves were created......... 2,145
Other......................................................... 5,815
-------------- --------------
Balance December 31, 1993............................................. $ 63 $ 1,769
-------------- --------------
-------------- --------------
</TABLE>

-77-

<PAGE>

SCHEDULE IX

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(Thousands of $)

Column A Column B Column C Column D Column E Column F
- ------------------------- ------------ ------------ --------------- ------------ ------------
Weighted Maximum Average Weighted
Average Amount Amount Average
Short-Term Balance at Interest Rate Outstanding Outstanding Interest Rate
Bank End of at End at Month-End During the During the
Borrowings (1) Year of Year During the Year Year (2) Year (3)
- ------------------------- ------------ ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1993
Trust Demand Notes... $ - -
Other Notes.......... 48,065 3.75%
------------ ------------
Total............ $ 48,065 3.75% $66,000 $51,839 3.73%
------------ ------------ --------------- ------------ ------------
------------ ------------ --------------- ------------ ------------
1992
Trust Demand Notes... $ 8,000 3.45%
Other Notes.......... 50,000 3.81
------------ ------------
Total............ $ 58,000 3.78% $70,000 $46,358 3.95%
------------ ------------ --------------- ------------ ------------
------------ ------------ --------------- ------------ ------------
1991
Trust Demand Notes... $ 12,000 4.21%
Other Notes.......... - -
------------ ------------
Total............ $ 12,000 4.21% $28,200 $20,933 6.32%
------------ ------------ --------------- ------------ ------------
------------ ------------ --------------- ------------ ------------

<FN>
NOTES:
(1) See Note 9 of Notes to Financial Statements under Item 8.
(2) Computed on average monthly balances.
(3) Computed on a daily weighted average basis.
</TABLE>

-78-

<PAGE>

SCHEDULE X

LG&E ENERGY CORP. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(Thousands of $)

Charged to
Operating Expenses
Years Ended December 31
-------------------------------------------------
Taxes other than income taxes: 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Real estate and personal property (including franchise)................ $ 7,580 $ 7,682 $ 7,528
Payroll................................................................ 7,301 7,292 7,249
Other.................................................................. 1,312 1,122 1,005
------------ ------------ ------------
Total taxes other than income taxes per statements of income....... $ 16,193 $ 16,096 $ 15,782
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The amounts of royalties and advertising costs charged to operating
expenses were each less than one percent of total operating revenues.

-79-

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

LG&E ENERGY CORP.
Registrant

March 28, 1994 By /s/ Charles A. Markel III
-----------------------------------------------------
(Date) Charles A. Markel III
Corporate Vice President, Finance and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

Signature Title Date
ROGER W. HALE Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer);

CHARLES A. MARKEL III Corporate Vice President,
Finance and Treasurer
(Principal Financial and Accounting Officer);

WILLIAM C. BALLARD, JR. Director;

OWSLEY BROWN II Director;

S. GORDON DABNEY Director;

GENE P. GARDNER Director;

DAVID B. LEWIS Director;

ANNE H. MCNAMARA Director;

T. BALLARD MORTON, JR. Director; and

DR. DONALD C. SWAIN Director.

By /s/ Charles A. Markel III March 28, 1994
------------------------------------------
CHARLES A. MARKEL III (Attorney-In-Fact)

-80-

<PAGE>

EXHIBIT 10.50

EMPLOYMENT CONTRACT
-------------------
AMONG
-----
LOUISVILLE GAS AND ELECTRIC COMPANY,
------------------------------------
LG&E ENERGY CORP.
----------------
AND
---
ROGER W. HALE
-------------

WHEREAS, the Louisville Gas and Electric Company and its parent, LG&E
Energy Corp., (collectively the "Company") desire to continue to employ Roger W.
Hale (the "Executive") as its Chairman and Chief Executive Officer;

WHEREAS, the Company desires to provide the Executive with compensation and
benefits that are appropriate for its senior executive and desires to create
incentives for the Executive to remain in the employ of the Company;

WHEREAS, the Executive now serves as Chairman and Chief Executive Officer
of the Company pursuant to an employment contract which became effective on May
24, 1989, said contract having been amended from time to time since its effec-
tive date; and

WHEREAS, the Company and the Executive desire that the terms and conditions
of the Executive's continued employment be set forth in a new employment
contract.

NOW, THEREFORE, the Company and Executive, as of the effective date hereof,
agree as follows:

1. DUTIES. The Company shall employ and the Executive agrees to serve as
Chairman and Chief Executive Officer of the Company. During the Term
of the Contract, the Executive shall devote his full business and
professional time to the Company.

<PAGE>

2. TERM OF CONTRACT. The term of the employment contract shall commence
on the Effective Date hereof, and shall continue in effect until
December 31, 1998.

3. BASE SALARY. The Company shall pay the Executive an annual base
salary of not less than Executive's 1993 salary of $385,000. Said
annual salary shall be reviewed by the Compensation Committee of the
Board of Directors as of January 1 of each year during the term of
this agreement.

4. SHORT-TERM INCENTIVES. The Executive shall be eligible to participate
in the Company's short-term incentive program. The short-term incen-
tive program shall provide the Executive with an annual target award
of 50 percent of his base salary.

5. LONG-TERM INCENTIVES. The Executive shall be eligible to participate
in the Company's long-term incentive program. The Executive shall
have a target award with a value of not less than 100 percent of his
base salary (determined as of the beginning of each performance
period). This plan may take the form of Performance Shares, Perfor-
mance Units, Restricted Stock, or other devices deemed appropriate.

6. STOCK OPTIONS. The Executive shall be eligible to participate in the
Company's stock option program. The stock option program shall
provide the Executive with an annual grant of options to purchase
Company stock, with the market value of the option grant being not
less than 45 percent of the Executive's base salary at time of grant.

7. RETIREMENT BENEFITS.
(a) PENSION BENEFITS. The Company shall provide the Executive with a
pension benefit based on his combined service with the Company
and his prior employers. The total benefit paid to the Executive
from the Company and his prior employers shall not be less than a
benefit equal to the product of (1) and (2), reduced by (3)
where--

<PAGE>

(1) shall be the annual average of the Executive's cash
compensation for the preceding five years (base salary plus
short-term incentive pay);

(2) shall be a percent based on service at retirement equivalent
to 2 percent for each of the first 20 years of service plus
1.5 percent for each of the next ten years of service plus
1.0 percent for each of any remaining years of service
completed prior to age 65; and

(3) shall be the Executive's primary Social Security benefit
payable at age 65.

The Company shall provide a benefit to the Executive that shall
not be less than the benefit calculated in accordance with the
formula described above, less any pension benefits provided to
the Executive from the Executive's prior employers, whether from
qualified plans or SERPS. The Company-provided portion shall be
paid, to the maximum extent possible, from the Retirement Income
Plan for The Executives of Louisville Gas and Electric Company
Who Are Not Members of a Bargaining Unit.

Subject to the terms of the final paragraph of this Section 7,
the Executive may elect to commence payment of his pension
benefit as early as age 50. If the Executive retires before
attaining age 65, the pension benefit shall be reduced in
accordance with the following factors to reflect Executive's age
at the date his benefits commence:

<PAGE>
<TABLE>
<CAPTION>
Age Percentage Payable
------- ----------------------
<S> <C>
62-65 One Hundred Percent
61 Ninety-Seven Percent
60 Ninety-Four Percent
59 Ninety-One Percent
58 Eighty-Eight Percent
57 Eighty-Five Percent
56 Eighty-Two Percent
55 Seventy-Nine Percent
54 Seventy-Three Percent
53 Sixty-Seven Percent
52 Sixty-One Percent
51 Fifty-Five Percent
50 Forty-Nine Percent
</TABLE>

In applying these reductions the net benefit from the Company
will be determined first and then those reductions will be
applied to the net amount.

If Executive is terminated prior to age 55 without cause ("cause"
defined as conviction by a court of competent jurisdiction of
commission of a felony; however, a felony conviction derivatively
arising from an environmental violation shall NOT constitute
"cause" for purposes of this agreement), or if Executive resigns
for good reason (defined as a breach by the Company of a material
term of this Contract), Executive's pension benefit shall be
determined as if he had retired at age 55.

For purposes of this paragraph 7, "prior employers" shall include
BellSouth Corporation and AT&T Corporation.

Notwithstanding the above, if Executive resigns for other than
good reason and elects early retirement prior to age 55,
Executive shall not be entitled

<PAGE>

to receive the prescribed early retirement benefits if Executive shall
accept a senior executive position with a publicly-traded company or
its subsidiary within one year of his election of early retirement
under this Section 7. Should such event occur, Executive shall notify
the Company and return any retirement benefits so received. Executive
thereafter shall be entitled to receive retirement benefits at age 55,
consistent with the reduction factors set forth above, but shall
receive no credit for years of service between the time of resignation
from the Company and age 55.

8. OTHER BENEFITS. During the term of his employment, the Executive
shall be entitled to participate in the employee welfare benefit,
savings, thrift, and vacation plans or programs of the Company on a
basis which is consistent with other senior corporate officers of the
Company. In addition, Executive shall be provided, at the Company's
expense, with not less than $2,000,000 in life insurance until
retirement.

9. PERQUISITES. The Company shall provide the Executive with the
following perquisites during the term of his employment:

(a) an automobile and all related maintenance and insurance expenses;

(b) initiation fees and dues at a luncheon club and a country
club;

(d) reasonable costs for annual financial planning by an independent
financial planner of the Executive's choice.

To the extent required by law, the Executive may incur taxable income
related to some of these perquisites.

<PAGE>

10. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
for all authorized and approved expenses incurred and paid by him in
the course of the performance of his duties and consistent with
policies and rules of the Company relating to the reimbursement of
such business expenses.

11. TERMINATION BY THE COMPANY. The Board of Directors of the Company
may, in its sole and absolute discretion, terminate the Executive's
employment at any time. Such action shall require a majority vote of
the entire Board of Directors and shall become effective upon written
notice to the Executive or at such time as may be specified in such
notice. Upon such termination or resignation for good reason, all
rights, duties, and obligations of both parties shall cease, except as
provided under paragraph 7 of this agreement. In such event, the
Company shall--

(a) continue to pay the Executive his then current annual base salary
for the remaining term of the employment contract, but not less
than two years. At the Executive's option, payments under this
Section 11(a) shall be made (1) on a lump sum basis within 30
days from effective date of termination with payment equal to the
present value of future payments discounted at the prime interest
rate then in effect or (2) on a monthly basis for the remaining
term of this agreement but in no event less than two years.

(b) provide the Executive with continued health insurance benefits to
the extent required by law.

The payments described in subparagraph (a), however, shall not be made
if the Executive is terminated for cause, or Executive resigns for
other than good reason during the term of the employment contract.

12. INTERPRETATION WITH OTHER AGREEMENTS. Should circumstances arise under
which Executive shall be entitled to the benefits described under an
agreement dated March 4, 1993, between Executive and the Company ("the
March 4 agreement") and simultaneously the

<PAGE>

benefits of this agreement, then the benefits of SECTION 7 hereof shall not
be considered in interpreting SECTION 6 of the March 4 agreement. As a
result, Executive shall receive, after giving effect to any "excise tax"
as defined in the March 4 agreement, (1) the benefits of the March 4
agreement and (2) the full unreduced value of the benefits described in
paragraph 7.

13. PERMANENT AND TOTAL DISABILITY. In the event the Executive becomes
totally disabled during the term of the contract, he shall be entitled
to a benefit equal to 60 percent of current annual base salary less
100 percent of the Social Security disability benefit should he become
qualified for such benefit.
Benefits will begin after Executive has been totally disabled for 22
weeks and will continue for as long as the Executive remains totally
disabled or until age 65. Upon attaining age 65, the Executive shall
be entitled to the pension benefits described in paragraph 7 based on
service that includes the period of disability and compensation paid
up to the point of disability.

During the first 24 months in which the Executive receives benefits in
accordance with this provision, total disability means an on or off
the job injury or illness that makes it impossible for the Executive
to engage in his present occupation. After 24 months, total
disability means an on or off job illness or injury that makes it
impossible for the Executive to engage in an occupation or profession
for which he is reasonably qualified by reason of education,
experience, capability and training.

14. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon the
Company and its successors and assigns.

<PAGE>

15. Effective Date. November 3, 1993.
--------------

11/3/93 /s/ Roger W. Hale
- --------- -------------------------------
Date ROGER W. HALE
Chairman and Chief Executive Officer

11/3/93 /s/ William C. Ballard, Jr.
- --------- --------------------------------
Date WILLIAM C. BALLARD, JR.
Chairman, Compensation Committee

<PAGE>
Exhibit 10.51

LG&E ENERGY CORP.

STOCK OPTION PLAN

FOR NON-EMPLOYEE DIRECTORS

As approved by the Board of Directors of
LG&E Energy Corp. on December 1, 1993 and
submitted to the Stockholders of LG&E Energy Corp.
on May 24, 1994.

<PAGE>

LG&E ENERGY CORP.
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS

1. NAME AND IDENTITY OF THE PLAN.
-----------------------------
This instrument and the plan set forth herein shall be known as the LG&E
Energy Corp. Stock Option Plan for Non-Employee Directors (the "Plan").

2. PURPOSE.
-------
The purpose of the Plan is to aid LG&E Energy Corp., a Kentucky corporation
(the "Company"), in attracting capable individuals to serve on the
Company's Board of Directors and to provide an inducement for such
individuals to continue to serve on the Board, to increase their investment
in the Company with the interest and outlook of an owner and to realize an
economic benefit from any future appreciation in the price of the Company's
Common Stock. These objectives will be promoted through the granting to
such individuals of Options to acquire shares of Common Stock of the
Company pursuant to the terms of the Plan.

3. DEFINITIONS.
-----------
As used herein, the following terms shall have the meanings indicated
below, unless the context shall give a clear meaning to the contrary:

(a) "Company" shall mean LG&E Energy Corp., a Kentucky corporation, or any
successor thereto as provided in Section 16 of this Plan.

(b) "Board" or "Board of Directors" shall mean the Board of Directors of
the Company.

(d) "Eligible Director" shall mean a member of the Board who is not, and
has not been at any time within the preceding three years, an officer
or employee of the Company or any of its subsidiaries or affiliates.

(e) "Administrator" shall mean the Chairman of the Board of the Company,
or such other individual as may be designated by the Board.

(f) "Common Stock" shall mean the common stock, no par value, of the
Company.

<PAGE>

(g) "Option Agreement" shall mean the LG&E Energy Corp. Stock Option
Agreement for Non-Employee Directors.

(h) "Fair Market Value" shall mean the average of the high and low sale
prices of the Common Stock as reported on the New York Stock Exchange
("NYSE") for the week including the date of determination thereof.

(i) "Option" shall mean an option granted under the Plan to an Eligible
Director for the purchase of shares of Common Stock.

(j) "Optionee" shall mean the recipient and holder of an Option.

As used herein, the singular shall include the plural and vice versa, and
words used in any gender shall include all genders, unless the context
shall give a clear meaning to the contrary.

4. ADMINISTRATION OF THE PLAN.
--------------------------
The Plan shall be administered by the Administrator. Subject only to the
express restrictions, limitations, and directions of other provisions of
the Plan, the Administrator shall have sole, absolute and full authority
and power: (a) to interpret the Plan; (b) to establish, amend and rescind
rules and regulations relating to, and consistent with, the Plan; and (c)
to do such other things and make such other determinations, decisions and
interpretations as he deems necessary or advisable to carry out the
purposes of the Plan and its orderly administration. All actions,
determinations, decisions and interpretations taken and made by the
Administrator shall be final and conclusively binding on all persons
whomsoever.

5. STOCK SUBJECT TO THE PLAN.
-------------------------
The aggregate number of shares of Common Stock which may be purchased by
exercise of Options shall not exceed 250,000, subject to adjustment as
provided in Section 7 of the Plan. Accordingly, at any one time the total
of the number of shares of Common Stock subject to outstanding Options and
the number of shares of Common Stock purchased by exercise of Options shall
not exceed 250,000, subject to such adjustment. If any Option expires or
terminates without having been exercised in full, the unpurchased shares
which were subject thereto, unless the term of the Plan has expired or it
has been terminated, shall become available for grant of other Options.
Shares available for issuance under the Plan shall be authorized but
unissued shares or shares purchased on the open market for such purpose.

<PAGE>

6. GRANT OF OPTIONS; OPTION FORMULA.
--------------------------------
Each person who is a member of the Board on February 2, 1994, and is then
an Eligible Director shall automatically be granted an Option for 2,000
shares of Common Stock on that date. Thereafter, upon initial election or
appointment to the Board, each Eligible Director shall automatically be
granted an Option for 2,000 shares of Common Stock on such initial date of
election or appointment. Following such initial grants, each Eligible
Director shall be granted an Option for 2,000 shares of Common Stock
annually, with such grant to be made on the first Wednesday of February.

The option exercise price per share for each share of Common Stock covered
by an Option shall be the Fair Market Value on the date of the grant of
such Option, subject to adjustment as provided in Section 7. Options
granted on February 2, 1994 or otherwise prior to approval of this Plan by
the Stockholders of the Company, shall be subject to the condition that the
Plan be approved by Stockholders as provided for in Section 8 and shall
terminate if not so approved. No Option shall be granted as provided for
herein if the number of shares of Common Stock then remaining available for
grant is insufficient for full grant of all Options to be granted on that
date pursuant to the foregoing provisions of this Section 6. The numbers
of shares to be granted pursuant to such provisions shall be subject to
adjustment as provided in Section 7. Such Options shall continue to be
granted to Eligible Directors until the Plan is terminated or amended to
eliminate or change such grants.

7. ADJUSTMENT PROVISIONS
---------------------
In the event of any stock dividend, stock split, combination of shares or
other change in respect of the Common Stock, (1) the aggregate number of
shares of Common Stock then remaining available for grant of Options under
the Plan, the number of shares of Common Stock for which each Option not
yet granted pursuant to Section 6 shall be granted and the number of shares
of Common Stock then subject to each outstanding Option shall be adjusted
in proportion to such change in issued shares; and (2) the option price
under each then outstanding Option shall be adjusted so that the total
consideration payable to the Company upon exercise of such Option shall not
be changed by reason of such change in the Common Stock.

8. TERM OF PLAN.
------------
The Plan shall become effective upon its adoption by the Board subject to
approval by Stockholders at the 1994 Annual Meeting of Stockholders,
including any adjournment thereof, and shall remain in effect, subject to
the right of the Board to terminate the Plan at any time pursuant to
Section 15, until all Common Stock subject to the Plan shall have been
purchased or acquired according to the provisions herein. Grants may be
made under the Plan prior to Stockholder approval, subject to the condition
that the Plan shall

<PAGE>

be terminated and such grants shall be cancelled in the event that
Stockholders have not approved the Plan by August 31, 1994.

9. EXERCISE OF OPTIONS.
-------------------
No Option shall be exercisable during the first twelve months from and
including its date of grant or later than ten years from its date of grant.
At the end of twelve months from and including its date of grant, each
Option becomes exercisable for 100% of the shares of Common Stock covered
thereby. The privilege shall, to the extent exercisable at any time, be
exercisable in whole or in part.

In the event of a tender offer or an exchange offer (other than one made by
the Company) for shares of Common Stock, all then exercisable, but
unexercised Options granted under the Plan shall continue to be exercisable
during the thirty-day period following the first purchase of shares of
Common Stock pursuant to such tender offer or exchange offer, but not
beyond the Option expiration date.

An Option shall be exercised by written notice to the Administrator given
by the person entitled to exercise such Option. Said notice shall state
the date of grant of the Option, the number of shares of Common Stock
subject thereto, and the number of shares of Common Stock with respect to
which the Option is exercised. No such notice which is inconsistent with
any provision of the Option Agreement or the Plan shall be effective. No
such notice shall be effective unless and until the Company, in the person
of the Administrator, is in receipt of full payment of the option exercise
price for the shares of Common Stock in respect of which the Option is
being exercised. No right (including, without limitation, the right to any
dividend or to vote) with respect to such shares of Common Stock shall
accrue until after the date of the stock certificate representing such
shares.

Payment of the option exercise price may be made in cash, by delivery of
whole shares of Common Stock having a Fair Market Value on the date written
notice of exercise is delivered equal to the option exercise price, or
partly in cash and partly in whole shares of Common Stock.

10. OPTION TERM.
-----------
The term of each Option shall be 10 years.

11. NON-TRANSFERABILITY.
-------------------
An Option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or under the laws of descent
and distribution. An option may be exercised, during the lifetime of the
Optionee, only by the Optionee.

<PAGE>

12. TERMINATION OF DIRECTORSHIP.
---------------------------
If for any reason an Optionee ceases to be a director of the Company, all
then-unexercisable Option grants under this Plan and held by such Optionee
shall be cancelled as of the date of such termination.

If an Optionee ceases to be a director of the Company for any reason other
than death or removal pursuant to Paragraph D of Article Eighth of the
Company's Articles of Incorporation, each then-exercisable Option held by
such Optionee shall be exercisable within a period of three years following
the date the Optionee ceased to be a director, but in no event beyond the
Option expiration date. In the event the Optionee dies during such three-
year period, each such then-exercisable Option held by such Optionee, shall
be exercisable by the legal representative of his estate, or by the person
taking by will or under the laws of descent and distribution, within the
time remaining in the three-year period or within a period of twelve months
following the date of death, whichever is longer, but in no event beyond
the Option expiration date.

In the event an Optionee ceases to be a director by reason of death, each
then-exercisable Option held by such Optionee shall be exercisable by the
legal representative of his estate, or by the person taking by will or
under the laws of descent and distribution, within a period of twelve
months following the date of death.

In the event that an Optionee is removed from the Board pursuant to
Paragraph D of Article Eighth of the Company's Articles of Incorporation,
all of the Option rights of such Optionee, whether or not then exercisable,
shall terminate immediately.

13. OPTION AGREEMENTS.
-----------------
Each Option shall be evidenced by a written Option Agreement signed by the
Optionee and, on behalf of the Company, by the Administrator. The form of
the Option Agreement shall be as provided by the Administrator. Each
Option Agreement by its own express terms shall set forth: (i) the name of
the Optionee, (ii) the date of the grant of the Option, (iii) the number of
shares of Common Stock subject thereto, and (iv) the option exercise price
per share of Common Stock, as determined pursuant to Section 6 hereof. Each
Option Agreement shall otherwise set forth the provisions of the Plan or
incorporate the same therein by reference.

14. CONDITIONS UPON ISSUANCE OF SHARES.
----------------------------------
The Company shall have no obligation to sell, issue, or deliver any shares
of Common Stock pursuant to any Option or the exercise thereof if, in the
opinion of counsel for the Company, the sale, issuance, or delivery of such
shares of Common Stock would be in violation of any provision of the
Securities Act of 1933, as amended, or the Securities and Exchange Act of
1934, as amended; any regulation or rule promulgated under either

<PAGE>

of said acts; any regulation, rule, or requirement of any stock exchange
upon which shares of Common Stock may then be listed; or any other law,
regulation, rule, or requirement whatever which, in the opinion of said
counsel, may be applicable. In such circumstances, the Company shall be
without liability for the non-sale, non-issuance, and non-delivery of such
shares, except for the return of any payment of the option price for such
shares made by the Optionee, or any person standing in his stead, to the
Company. Without assumption of or exposure to liability for failure of
accomplishment of the purpose, the Company nonetheless commits itself to a
standard of reasonable care and effort for the avoidance or cure of any
obstacle to the sale, issuance, and delivery of shares hereunder. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant in writing at the time of
such exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such
shares, and may require that shares delivered upon exercise of an Option
bear an appropriate restrictive legend.

15. SUSPENSION, TERMINATION, MODIFICATION, AND AMENDMENT.
----------------------------------------------------
Subject to the last sentence of this Section 15, the Board shall have the
power to suspend, terminate, revise, or amend the Plan, provided that
suspension, termination, revision or amendment shall be without effect on
any Option previously granted and then outstanding, and further provided
that, except with the approval of Stockholders, the Board may not increase
the maximum number of shares of Common Stock subject to the Plan; change
any provision as to the class of persons to whom Options may be granted or
the number of shares for which Options are to be granted to any person;
reduce the minimum option price for an Option below 100% of the Fair Market
Value of the stock subject thereto on the date of grant; increase the
period for exercising any Option beyond ten years from the date of grant;
or change provisions relating to the exercise of Options set forth in
Section 9. Notwithstanding anything to the contrary in this Section 15, as
long as may be required by Section 16b-3 of the Securities Exchange Act and
the regulations promulgated thereunder, the terms of this Plan may not be
amended more than once every six months, other than to comport with changes
in the Internal Revenue Code or the rules thereunder.

16. SUCCESSORS.
----------
All obligations of the Company under the Plan, with respect to Options
granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company.

<PAGE>

17. HEADINGS.
--------
All headings contained in this Plan are for convenience of reference only
and shall not be considered in construing any provisions hereof.

18. GOVERNING LAW.
-------------
This Plan shall be governed by and in accordance with the laws of the
Commonwealth of Kentucky.

<PAGE>
EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Louisville Gas and Electric Company (incorporated in Kentucky) is the only
significant subsidiary of the Registrant.

-------------------------------------------------

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 28, 1994, included in this Form 10-K,
into the Company's previously filed Registration Statement No. 33-56942 and
Post-Effective Amendment No. 1-C to Registration Statement No. 33-33687 relating
to the Automatic Dividend Reinvestment and Stock Purchase Plan of the Company,
Post-Effective Amendment No. 2-B to Registration Statement No. 33-33687,
relating to the Employee Common Stock Purchase Plan and Post-Effective Amendment
No. One to Registration Statement No. 33-38557 relating to the Omnibus Long-Term
Incentive Plan of the Company.

Louisville, Kentucky Arthur Andersen & Co.
March 28, 1994

-81-

<PAGE>

Exhibit 24

POWER OF ATTORNEY

WHEREAS, LG&E ENERGY CORP., a Kentucky corporation, is to file with the
Securities and Exchange Commission, under the provisions of the Securities Act
of 1934, as amended, its Annual Report on Form 10-K for the year ended December
31, 1993 (the 1993 Form 10-K); and

WHEREAS, each of the undersigned holds the office or offices in LG&E ENERGY
CORP. set opposite his name;

NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
ROGER W. HALE and CHARLES A. MARKEL III, and each of them, individually, his
attorney, with full power to act for him and in his name, place, and stead, to
sign his name in the capacity or capacities set forth below to the 1993 Form
10-K and to any and all amendments to such 1993 Form 10-K and hereby ratifies
and confirms all that said attorney may or shall lawfully do or cause to be done
by virtue hereof.

IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
this 2nd day of March 1994.

/s/ Roger W. Hale
- ----------------------------------- -----------------------------------
Roger W. Hale, Principal J. David Grissom, Director
Executive Officer and Director

/s/ William C. Ballard, Jr. /s/ David B. Lewis
- ----------------------------------- -----------------------------------
William C. Ballard, Jr., Director David B. Lewis, Director

/s/ Owsley Brown II /s/ Charles A. Markel III
- ----------------------------------- -----------------------------------
Owsley Brown II, Director Charles A. Markel III, Principal
Financial and Accounting Officer

/s/ S. Gordon Dabney /s/ Anne H. McNamara
- ----------------------------------- -----------------------------------
S. Gordon Dabney, Director Anne H. McNamara, Director

/s/ Gene P. Gardner /s/ T. Ballard Morton, Jr.
- ----------------------------------- -----------------------------------
Gene P. Gardner, Director T. Ballard Morton, Jr., Director

/s/ Dr. Donald C. Swain
-----------------------------------
Dr. Donald C. Swain, Director

STATE OF KENTUCKY )
) ss.
COUNTY OF JEFFERSON )

On this 2nd day of March 1994, before me, Kathryn M. Carpenter, a Notary
Public, State of Kentucky at Large, personally appeared the above named
directors and officers of LG&E ENERGY CORP., a Kentucky corporation, and known
to me to be the persons whose names are subscribed to the foregoing instrument,
and they severally acknowledged to me that they executed the same as their own
free act and deed.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date above set forth.

My Commission expires: ___________________________________
November 2, 1996 Kathryn M. Carpenter, Notary Public
State of Kentucky at Large