Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant
On May 24, 2016, Western Power Distribution (East Midlands) PLC
("WPD"), an indirect wholly owned subsidiary of PPL Corporation, entered into £100 million (the "Commitment")
ten year Term Loan Agreement (the "Loan Agreement") with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (the "Bank").
The loan to be made under the Loan Agreement is adjusted on each
interest payment date by multiplying the Commitment by the Index Ratio (as defined below), subject to a cap of £200 million and
a floor of £100 million (such adjusted amount, the "Loan Amount").
Interest on the Loan Amount will be payable semi-annually and bear
interest at a percentage rate determined for each interest period equal to the product of (a) the Commitment, multiplied by (b)
The U.K Retail Price Index (the "UKRPI") for the month ending two months prior to the applicable interest payment date, divided
by the UKRPI for March 2016 (such UKRPI in each case as determined by the U.K. Office of National Statistics) (the "Index
Ratio"), (c) multiplied by a fixed spread as provided in the Loan Agreement and (d) divided by the number of days in the applicable
interest period.
The Loan Amount is voluntarily pre-payable on 15 business days'
notice at any time in whole but not in part, subject to the payment of any Swap Break Costs (as defined below), without premium
or penalty, and is mandatorily pre-payable in the event the Bank notifies WPD that (i) it becomes aware that it is unlawful for
the Bank to perform its obligations under the Loan Agreement or to fund or maintain the loan; or (ii) no appropriate index is available
to permit establishing the applicable interest rate.
In addition, pursuant to the Loan Agreement, WPD is subject to certain
financial covenants which require that WPD's (i) total net debt does not exceed 85% of its regulatory asset base, and (ii)
consolidated EBITDA to interest payable is no less than 3.0 to 1.0, in each case as calculated pursuant to such agreement. WPD
intends to use the Loan Amount for general corporate purposes.
WPD must indemnify the Bank for any early termination amount (calculated
in accordance with the terms of the Loan Agreement) payable by the Bank as a result of the Bank terminating the swap agreement
to be entered into by the Bank in connection with the Loan Agreement due to the occurrence of (among other things) (i) any event
of default or acceleration of the Loan Amount; or (ii) any prepayment of the Loan Amount (such early termination amount, the "Swap
Break Costs").
The Loan Agreement also contains customary representations, covenants
and events of default. Failure to comply with the covenants beyond applicable grace periods and certain other events
could result in acceleration of the Loan Amount and/or termination of the Loan Agreement.
The foregoing summary of the Loan Agreement does not purport to
be complete and is subject to, and qualified in its entirety by, the full text of the Loan Agreement, which is filed as Exhibit
10.1 hereto and incorporated herein by reference.