Fitch Affirms PPL Corp. and Subsidiary Ratings.

NEW YORK -- Fitch Ratings has affirmed the ratings of PPL Corp. and its subsidiaries as shown below. The Rating Outlook remains Stable.

PPL Corp

--Issuer Default Rating (IDR) at 'BBB'.

PPL Capital Funding Inc.

--IDR at 'BBB';

--Senior unsecured debt at 'BBB'.

PPL Energy Supply, LLC 

--IDR at 'BBB';

--Senior unsecured debt at 'BBB+';

--Commercial Paper at 'F2'.

PPL Electric Utilities Corp.

--IDR at 'BBB';

--Secured debt at 'A-';

--Preferred stock at 'BBB+';

--Preference stock at 'BBB'.

The consolidated ratings of PPL Corp. (PPL) reflect the substantial earnings and cash flow derived from regulated electric distribution operations and committed energy sales, including a full requirements supply contract between PPL Energy Supply, LLC's (PPLES) subsidiary PPL EnergyPlus and PPL Electric Utilities Corp. (PPLEU) that extends through 2009, and a solid financial profile, including a moderate level of recourse and parent level debt. The ratings also consider the additional debt to be incurred by PPLES over the three-year period 2006-2008 to fund a large capital program to install pollution control facilities at the company's primary coal-fired generating stations.

Environmental expenditures of approximately $1.5 billion over the years 2006-2010 will be financed with a combination of internal cash and debt. The forecasted capital expenditures, particularly in the 2006-2008 time frame, could pressure financial measures and the ratings of PPL and PPLES if not offset by expected earnings growth from scheduled price increases in existing supply contracts, the re-pricing of expiring supply contracts, and the incremental earnings from planned generation uprates. The sale of excess emission credits is also expected to reduce the impact of the incremental financing.

Beyond the capital expenditure program, the primary credit concern for PPL and PPLES is commodity price exposure in the event of an extended nuclear or coal plant outage.

The ratings of PPLEU reflect the low risk of the utility's regulated electric distribution operations and a sound financial profile. The low business risk assessment primarily reflects the full requirements electricity supply contract with affiliate PPL Energy Plus and a constructive regulatory environment. The supply contract satisfies PPLEU's provider of last resort obligation (POLR) through 2009 and eliminates commodity price exposure. The contract matches the price and tenor of the supply obligation. After 2009, the regulatory and market environment in Pennsylvania is uncertain. The Pennsylvania Public Utility Commission (PUC) has initiated an investigation into possible methods for mitigating price increases following the expiration of the transition plans of PPLEU and other jurisdictional electric utilities. Current ratings assume the cost of procuring power to meet PPLEU's POLR obligations after 2009 will be passed through to customers.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.