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)
                 For the fiscal year ended     December 31, 1996

                 TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                 OF  THE  SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
           For the transition period from            to

        Commission  Registrant; State of Incorporation;     IRS Employer
        File Number   Address; and Telephone Number        Identification No.

          1-10944           KU Energy Corporation              61-1141273
                          (A Kentucky Corporation)
                             One Quality Street
                         Lexington, Kentucky  40507-1428
                               (606) 255-2100
          1-3464          Kentucky Utilities Company           61-0247570
                      (A Kentucky and Virginia Corporation)
                              One Quality Street
                          Lexington, Kentucky  40507-1428
                                (606) 255-2100


     Indicate  by check mark whether the Registrants (1) have 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  Registrants  were  required to file such reports), and (2) have
     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 Registrants  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.  ( X )

     Securities registered pursuant to
       Section 12(b) of the Act:

     KU Energy Corporation
                                                    Name of Each Exchange
        Title of Each Class                          on Which Registered
     Common Stock, without par value                New York Stock Exchange
                                                    Pacific Stock Exchange

     Kentucky Utilities Company
                                                    Name of Each Exchange
        Title of Each Class                          on Which Registered
      Preferred Stock, 4 3/4% cumulative,          Philadelphia Stock Exchange
       stated value $100 Per Share



                                         -1-
<PAGE>

     Securities registered pursuant to
       Section 12(g) of the Act:

     KU Energy Corporation
     None

     Kentucky Utilities Company

     Preferred Stock, cumulative, stated value $100 per share
                      (Title of Class)



     KU Energy Corporation

     Aggregate  market  value  at  March 10,  1997  of the voting stock held by
     nonaffiliates of KU Energy Corporation (KU Energy):  $1,148,718,044.

     Number  of  shares  of  Common  Stock  outstanding  at  March 10, 1997:
     37,817,878 shares.


     Kentucky Utilities Company

     Aggregate  market  value  of  the  voting  stock  held by nonaffiliates of
     Kentucky Utilities Company (KU):  None

     Number  of  shares  of  Common  Stock  outstanding  at  March 10, 1997:
     37,817,878 shares (owned by the parent - KU Energy).


     Documents Incorporated by Reference:

        A  portion  of  KU  Energy's  1996  Annual  Report  to Shareholders is
        incorporated by reference in Parts I and II.

        A  portion  of KU Energy's Proxy Statement relating to the 1997 Annual
        Shareholders Meeting is incorporated by reference in Part III.






     Exhibit Index appears on page 42.





                                         -2-
<PAGE>

                                 KU ENERGY CORPORATION
                                          AND
                              KENTUCKY UTILITIES COMPANY
                                       Form 10-K
                Annual Report to the Securities and Exchange Commission
                         For the Year Ended December 31, 1996*

                                   TABLE OF CONTENTS

      Item                                                              Page
                                        PART I

      1.Business   . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

      2.Properties   . . . . . . . . . . . . . . . . . . . . . . . . . . 12

      3.Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . . 13

      4.Submission of Matters to a Vote of Security Holders  . . . . . . 13

        Executive Officers of the Registrants  . . . . . . . . . . . . . 14

                                        PART II

      5.Market for Registrants  Common Equity and Related
          Stockholder Matters  . . . . . . . . . . . . . . . . . . . . . 17

      6.Selected Financial Data  . . . . . . . . . . . . . . . . . . . . 18

      7.Management's Discussion and Analysis of Financial Condition
          and Results of Operations  . . . . . . . . . . . . . . . . . . 22

      8.Financial Statements and Supplementary Data  . . . . . . . . . . 22

      9.Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure   . . . . . . . . . . . . . . . . . . 40

                                       PART III

     10.Directors and Executive Officers of the Registrants  . . . . . . 40

     11.Executive Compensation   . . . . . . . . . . . . . . . . . . . . 40

     12.Security Ownership of Certain Beneficial Owners and Management . 40

     13.Certain Relationships and Related Transactions   . . . . . . . . 40

                                        PART IV

     14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K 41

        Exhibit Index  . . . . . . . . . . . . . . . . . . . . . . . . . 42

        Signatures   . . . . . . . . . . . . . . . . . . . . . . . . . . 48


   *Information included herein which  relates solely  to KU Energy Corporation
    is provided solely by KU Energy Corporation and  not by Kentucky Utilities
    Company and shall be deemed not included in the Annual Report on Form 10-K
    of Kentucky Utilities Company.

                                         -3-
<PAGE>
                                       PART I
    Item 1.  Business

    KU Energy Corporation

    KU Energy Corporation (KU Energy or the Company), an exempt utility holding
    company,  was  incorporated  in the state of Kentucky on June 23, 1988.  On
    December  1,  1991,  KU  Energy  became  the  holder of all common stock of
    Kentucky   Utilities  Company  (KU).    KU  Energy  has  two  wholly  owned
    subsidiaries,  KU,  an  electric  utility,  and  KU Capital Corporation (KU
    Capital), a nonutility subsidiary.  KU is KU Energy's principal subsidiary.

    The  Company  is  a public utility holding company as defined in the Public
    Utility  Holding  Company  Act  of  1935  (the  Holding  Company  Act).  On
    November  13,  1991,  the Company obtained an order from the Securities and
    Exchange  Commission  which granted an exemption from all provisions of the
    Holding  Company  Act,  except Section 9(a)(2) thereof which relates to the
    acquisition of securities of public utility companies.

    The  ability  of  the  Company  to  pay  dividends  on  its common stock is
    dependent upon distributions made to it by KU and KU Capital and on amounts
    that may be earned by the Company on investments.

    KU Capital Corporation

    KU  Capital  continues  to pursue a core energy strategy for its nonutility
    business  activities.  Under  this  strategy,  targeted  opportunities  are
    energy-related  activities  that  build  on  the  Company's  knowledge and
    expertise and have the appropriate risk/reward profile.

    Kentucky Utilities Company

    General

    KU  is  a  wholly  owned  subsidiary  of KU Energy.  KU was incorporated in
    Kentucky  in  1912  and  incorporated  in Virginia in 1991.  KU is a public
    utility engaged in producing, transmitting and selling electric energy.  KU
    provides  electric  service  to  about  432,900  customers  in  over  600
    communities  and  adjacent  suburban  and  rural  areas  in  77 counties in
    central,  southeastern  and western Kentucky, and to about 28,800 customers
    in 5 counties in southwestern Virginia.  In Virginia, KU operates under the
    name  Old Dominion Power Company.  KU operates under appropriate franchises
    in  substantially  all  of  the  161  Kentucky  incorporated municipalities
    served.  No franchises are required in unincorporated Kentucky communities.
    Service  has  been  provided in Virginia without franchises for a number of
    years.    The lack of franchises is not expected to have a material adverse
    effect  on KU's operations.  KU also sells electric energy at wholesale for
    resale in 12 municipalities.

    The  territory  served by KU has an aggregate population estimated at about
    1,000,000.  The largest city served is Lexington, Kentucky.  The population
    of  the  metropolitan  Lexington  area  is estimated at about 225,000.  The
    populations of the next 10 largest cities served at retail range from about
    21,000  to  9,000.    The  territory  served includes most of the Bluegrass
    Region  of  central  Kentucky  and  parts  of  the  coal  mining  areas  in
    southeastern  and western Kentucky and southwestern Virginia.  Lexington is
    the  center  of  the  Bluegrass Region, in which thoroughbred horse, burley
    tobacco  and  bourbon whiskey distilling industries are located.  Among the
    principal  industries  in  the  territory served are automotive and related


                                        -4-
<PAGE>
    industries,  coal  mining,  the  manufacture  of  paper and paper products,
    electrical  and  other  machinery,  and  rubber and miscellaneous plastic
    products.

    Revenues

    KU's  sources  of electric revenues and the respective percentages of total
    revenues for the three years 1994-1996 were as follows:
<TABLE>
<CAPTION>

       Year Ended December 31,              1996               1995              1994
                                            Amount  %          Amount   %        Amount  %

                                                       (dollars in thousands)

<S>                                    <C>        <C>     <C>          <C>    <C>        <C>
        Residential                    $ 236,229  33      $ 232,760    34     $ 213,574  34
        Commercial                       150,640  21        151,778    22       142,207  22
        Industrial                       136,856  19        130,066    19       120,043  19
        Mine Power                        34,014   5         36,076     5        36,498   6
        Public Authorities                56,023   8         54,161     8        49,869   8
        Sales for Resale                  89,208  13         75,940    11        89,665  14
        Miscellaneous Revenues             8,741   1          5,649     1         4,181   -
        Provision for Refund -
          Litigation Settlement                -   -              -     -       (19,385) (3)

             Total                     $ 711,711 100      $ 686,430   100     $ 636,652 100
</TABLE>

    The electric utility business is affected by seasonal weather patterns.  As
    a  result,  operating  revenues (and associated operating expenses) are not
    generated  evenly  throughout  the  year.   See Management's Discussion and
    Analysis  of  Financial  Condition  and  Results  of Operations - Sales and
    Revenues  in  KU  Energy's  1996 Annual Report to Shareholders (Exhibit 13)
    which  is  incorporated  herein  by  reference  for  information related to
    revenues.

    Operations

    KU's  net  generating  capability was 3,639 megawatts at December 31, 1996.
    The  net  generating  capability available for operation at any time may be
    lower  because  of  periodic outages of generating units due to inspection,
    maintenance,  fuel  restrictions,  or  modifications required by regulatory
    agencies.   KU obtains power from other utilities under bulk power purchase
    and  interchange  contracts.  At December 31, 1996, KU's system capability,
    including purchases from others, was 4,032 megawatts.  On February 5, 1996,
    an  all-time system peak demand, on a one-hour integrated basis, was set at
    3,391  megawatts.   See Item 2, Properties-Construction for a discussion of
    KU's plans to add additional peaking capacity.

    The  percentage  of  KU's  system output which was internally generated and
    purchased for the periods indicated was as follows:

                                           1996       1995       1994
             Internally Generated           84%        82%        83%
             Purchased                      16%        18%        17%


    KU  is  one of 28 members of the East Central Area Reliability Coordination
    Agreement,  the  purpose  of  which  is  to  augment the reliability of the
    members'  bulk  power supply through coordination of planning and operation
    of  generation and transmission facilities.  The members are engaged in the


                                        -5-
<PAGE>
    generation,  transmission and sale of electric power and energy in the east
    central  area  of  the  United  States,  which  covers  all  or portions of
    Michigan,  Indiana,  Ohio,  Kentucky, Pennsylvania, Virginia, West Virginia
    and  Maryland.   KU also has interconnections and contractually established
    operating arrangements with neighboring utilities and cooperatives.

    Under a contract with Owensboro Municipal Utilities (OMU), KU has agreed to
    purchase  from  OMU the surplus output of the 150-megawatt and 250-megawatt
    generating  units  at  OMU's  Elmer  Smith  station.    Purchases under the
    contract  are  made under a contractual formula which has resulted in costs
    which  were  and  are  expected to be comparable to the cost of other power
    purchased  or  generated by KU. Such power constituted about 8% of KU's net
    system  output  during  1996.    See  Note  4  of  the  Notes  to Financial
    Statements,  Commitments and Contingencies  under Item 8.

    KU  owns 20% of the common stock of Electric Energy, Inc. (EEI), which owns
    and  operates  a  1,000-megawatt  generating  station in southern Illinois.
    KU's  entitlement  is  20%  of  the  available  capacity  of  the  station.
    Purchases  from EEI are made under a contractual formula which has resulted
    in  costs which were and are expected to be comparable to the cost of other
    power  purchased  or  generated  by KU.  Such power constituted about 8% of
    KU's  net  system  output  in  1996.   See Note 4 of the Notes to Financial
    Statements,  Commitments and Contingencies,  under Item 8.

    KU  had  approximately 2,160 employees at December 31, 1996, of which about
    300 are covered by union contracts expiring August 1, 1997.

    Fuel Matters

    Coal-fired  generating  units  provided more than 99% of KU's net kilowatt-
    hour  generation  for  1996.  The remainder of KU's net generation for 1996
    was provided by hydroelectric plants, oil and/or natural gas burning units.
    The average delivered cost of coal purchased per million BTU (MBTU) and the
    percentage  of  spot  coal  purchases  for  the  periods  indicated were as
    follows:

                                              1996       1995       1994

    Per MBTU - all sources                $   1.14   $   1.16   $   1.19
    Per MBTU - spot purchases only        $   1.08   $   1.10   $   1.16
    Spot purchases as % of all sources          33%        30%        46%

    KU  maintains  its  fuel  inventory  at levels estimated to be necessary to
    avoid  operational  disruptions  at  its  coal-fired  generating  units.
    Reliability  of  coal  deliveries  can  be  affected from time to time by a
    number  of factors, including coal mine labor strikes and other supplier or
    transporter operating difficulties.

    KU  believes  there  are adequate reserves available to supply its existing
    base-load  generating  units with the quantity and quality of coal required
    for  those  units  throughout  their  useful  lives.   KU intends to meet a
    substantial  portion  of  its  coal  requirements  with  3-year  and 5-year
    contracts.    KU  anticipates  that coal supplied under such contracts will
    represent about two-thirds of the requirements over the next several years.
    As  part  of  this  strategy,  KU  will  continue  to negotiate replacement
    contracts  as  contracts  expire.    KU  does  not  anticipate any problems
    negotiating  new  contracts  for  future  coal  needs.  The balance of coal



                                        -6-
<PAGE>
    requirements  will  be met through spot purchases.  See Note 4 of the Notes
    to  Financial Statements,  Commitments and Contingencies,  under Item 8 for
    the  estimated  obligations  under  existing fuel contracts for each of the
    years 1997 through 2001.

    KU  has no long-term contracts in place for the purchase of natural gas for
    its  combustion  turbine  peaking  units.   KU has met its gas requirements
    through  spot  purchases.    KU  does  not  anticipate  encountering  any
    significant  problems  acquiring  an  adequate  supply of fuel necessary to
    operate  its  peaking  units.    See  Item 2, Properties-Construction for a
    discussion of KU's plans to add additional peaking capacity.

    Environmental Matters

    Federal  and state agencies have adopted environmental protection standards
    which  apply  to  the  electric  operations of KU.  Capital expenditures to
    comply  with  environmental  requirements  amounted  to  about $187 million
    during the 1992-1996 time period.

    KU's  generating units are operated in compliance with the Kentucky Natural
    Resources  and  Environmental  Protection  Cabinet's  (Cabinet)  State
    Implementation  Plan (KYSIP) and New Source Performance Standards developed
    under  the  Clean  Air Act.  The KYSIP is a federally approved plan for the
    attainment  of  the  national  ambient  air  quality  standards.  The KYSIP
    contains  standards relating to the emissions of various pollutants (sulfur
    dioxide,  particulates  and  nitrogen  oxides)  from KU's fossil-fuel fired
    steam  electric  generating units.  These emission standards are of varying
    stringencies  and  compliance  with  these  standards is attained through a
    variety  of  air  pollution  control technologies (scrubbers, electrostatic
    precipitators,  and  low  nitrogen oxide burners) and the use of low-sulfur
    coal.   KU's operations are in substantial compliance with current emission
    standards.    The  operating  permit  program  under the 1990 Clean Air Act
    Amendments required KU to make application to the Cabinet for new operating
    permits  for its six generating stations.  KU s existing permits to operate
    air contaminant sources continue in effect until  new permits are issued.

    The  acid  rain  control  provisions  of the 1990 Clean Air Act Amendments,
    which  are  effective  in  two  phases,  require KU to further decrease the
    emissions  of sulfur dioxide and nitrogen oxides from its fossil-fuel fired
    steam  electric  generating  units.    Ghent Unit 1, E. W. Brown Units 1, 2
    and  3,  and  Green  River Unit 4 were designated as Phase I affected units
    which  were  required  to  comply  with  sulfur  dioxide emission reduction
    obligations  beginning  January  1,  1995.    In order to comply with these
    sulfur  dioxide  emission  limitations, KU installed a scrubber and related
    facilities  on Ghent Unit 1 and switched to lower sulfur coal on some other
    Phase I affected units.  In addition, these units were retrofitted with low
    nitrogen  oxide  burners  in order to comply with applicable nitrogen oxide
    limitations  under  United  States  Environmental  Protection  Agency (EPA)
    regulations.    The  EPA  issued  final  acid rain permits for each of KU's
    Phase  I  affected  units.  The EPA's approval of KU's acid rain compliance
    plan  was  accompanied  by bonus allowances awarded for the installation of
    the scrubber on Ghent Unit 1.  KU's current emission allowance strategy, in
    part,  includes  the  accumulation  of  unused  sulfur  dioxide  emission
    allowances.    These  unused  allowances  result  from the bonus allowances
    received  from  the  EPA  and the expected reduced sulfur dioxide emissions
    from  the  installation  of  the  Ghent  Unit  1 scrubber.  The accumulated



                                        -7-
<PAGE>
    allowances   are  expected  to  allow  KU  to  delay  capital  expenditures
    associated  with  KU's Phase II acid rain compliance obligations, which are
    effective  January 1, 2000.  KU's Phase II compliance strategy, in addition
    to  utilizing accumulated allowances, may include additional fuel switching
    or  the installation of additional scrubbers.  However, KU will continue to
    reassess  its  options  for  complying  with  Phase  II  emission reduction
    requirements to determine an overall least cost strategy.  See Management's
    Discussion  and Analysis of Financial Condition and Results of Operations -
    Construction  Requirements  and - Environmental Matters in KU Energy's 1996
    Annual Report to Shareholders (Exhibit 13) incorporated herein by reference
    for additional discussion.

    EPA  has  proposed  revisions to the National Ambient Air Quality Standards
    for  ozone  and  particulate  matter  which  may  result in the EPA seeking
    additional  reductions  of sulfur dioxide and nitrogen oxide emissions from
    coal-fired   boilers.    Because  of  the  magnitude  of  these  additional
    reductions  (50  percent  beyond that already required by the Phase II acid
    rain  control  provisions of the 1990 Clean Air Act Amendments which become
    effective  January  1,  2000),  substantial costs could be incurred to meet
    future  compliance  obligations  for KU's coal-fired boilers.  The proposed
    revisions  are  expected  to  be finalized in 1997.  The revisions would be
    effective  some  time  after  the  effective date of the Phase II acid rain
    control provisions of the 1990 Clean Air Act Amendments.

    During  1996, each of KU's five fossil-fuel fired steam electric generating
    stations  was  re-issued a wastewater discharge permit by the Cabinet under
    the  Clean  Water  Act's  National  Pollutant Discharge Elimination System.
    These  5-year permits place water quality-based effluent limitations (i.e.,
    thermal and chemical limits) on each of the power plant's discharges.  KU's
    operations  are  in  substantial  compliance  with  the  conditions  in the
    permits.

    Pursuant to the Resource Conservation and Recovery Act, utility wastes (fly
    ash,  bottom  ash  and  scrubber  sludge)  have been categorized as special
    wastes  (i.e.,  wastes of large volume, but low environmental hazard).  The
    EPA  has  concluded  that  the  disposal  of  coal combustion byproducts by
    practices  common to the utility industry is adequate for the protection of
    human  health  and  the  environment.    The Cabinet also regulates utility
    wastes as special wastes under its waste management program.

    Under  the  Toxic  Substances  Control  Act,  the  EPA  regulates  the use,
    servicing,  repair, storage and disposal of electrical equipment containing
    polychlorinated  biphenyls  (PCB).    To  comply with these regulations, KU
    implemented procedures to be followed in the handling, storage and disposal
    of  PCBs.    In addition, KU completed the mandated phase out of all of its
    pole-class  PCB capacitors and has no vault-type PCB transformers in use in
    or near commercial buildings.

    On  February 13, 1990, KU received a letter from the EPA identifying KU and
    others  as  potentially  responsible  parties  under  the  Comprehensive
    Environmental Response Compensation and Liability Act (CERCLA or Superfund)
    for  a disposal site in Daviess County, Kentucky.  The letter also asked KU
    and  the  other  persons  or  entities  named to proceed voluntarily with a
    remediation  program at the site.  Under Superfund, a responsible party may
    be  liable for all or a portion of all monies expended by the government to
    take corrective action at the site.  The EPA has turned over responsibility
    for  investigation  of  the site and development of a remediation plan to a



                                        -8-
<PAGE>
    group  (not  including  KU)  originally  named  as  potentially responsible
    parties.  KU has entered into an agreement with the group as to the portion
    of  the investigation and development costs to be borne by KU in connection
    with the site.  The agreement does not cover costs which may be incurred in
    connection  with  any  remediation  plan.    The  remediation plan has been
    approved  by  the EPA.  The remediation work is scheduled for completion in
    1997.  KU does not believe that any liability with respect to the site will
    have a material impact on its financial position or results of operations.

    Regulation

    KU is subject to the jurisdiction of the Kentucky Public Service Commission
    (PSC)  and  the  Virginia  State  Corporation Commission (SCC) as to retail
    rates  and service, accounts, issuance of securities and in other respects.
    The  Federal Energy Regulatory Commission (FERC) has jurisdiction under the
    Federal  Power  Act  over  certain  of  the electric utility facilities and
    operations, wholesale sale of power and related transactions and accounting
    practices of KU, and in certain other respects as provided in the Act.  The
    FERC  has  classified  KU  as a "public utility" as defined in the Act.  By
    reason  of owning and operating a small amount of electric utility property
    in  one  county in Tennessee (having a gross book value of about $226,000),
    KU  may also be subject to the jurisdiction of the Tennessee Public Service
    Commission  as  to  retail  rates,  accounts, issuance of securities and in
    other  respects.   Since 1992, utilities in Kentucky have had the option to
    use  either  a  historical  test period or a forward-looking test period in
    rate filings.

    KU's  fuel  adjustment  clause  for  Kentucky  customers, which operates to
    reflect  changes  in the cost of fuel in billings to customers, is designed
    to  conform  to  a  general regulation providing for a uniform monthly fuel
    adjustment  clause  for  all  electric utilities in Kentucky subject to the
    jurisdiction  of the PSC.  The clause is based on a formula approved by the
    FERC but with certain modifications, including the exclusion of excess fuel
    expense  attributable  to  certain  forced  outages,  the  filing  of  fuel
    procurement  documentation,  a  procedure  for  billing  over  and  under
    recoveries of fuel cost fluctuations from the base rate level and provision
    for  periodic public hearings to review past adjustments, to make allowance
    for  any  past  adjustments  found  not justified, to disallow any improper
    expenses  and  to  re-index  base rates to include current fuel costs.  The
    fuel  adjustment  clause  mechanism  for Virginia customers uses an average
    fuel  cost  factor  based primarily on projected fuel costs.  The fuel cost
    factor  is adjusted annually for the over or under collection of fuel costs
    from the previous year.

    Rate  regulation  in  Kentucky  allows  each  electric utility, with a PSC-
    approved  environmental  compliance  plan  and  environmental surcharge, to
    recover  on  a  current  basis the cost of complying with federal, state or
    local  environmental  requirements,  including the Federal Clean Air Act as
    amended,  which  applies  to  coal  combustion  wastes  and byproducts from
    facilities  utilized  for the production of energy from coal.  In 1994, the
    PSC approved KU's environmental surcharge, which is designed to allow KU to
    recover compliance related operating expenses and to earn a return on those
    compliance-related  capital  expenditures  not already included in existing
    rates  through  the  application  of the surcharge each month to customers'
    bills.   Surcharge billings are subject to periodic PSC review of the level
    of  environmental  expenditures  and  reconciliation  of previous surcharge
    billings  with  actual  costs.    For  additional information regarding the
    environmental  surcharge,  including  information  concerning pending legal
    proceedings,   see  Management's  Discussion  and  Analysis  of  Financial


                                        -9-
<PAGE>

    Condition  and  Results  of  Operations - Environmental Cost Recovery in KU
    Energy's  1996  Annual  Report  to  Shareholders (Exhibit 13) incorporated
    herein  by  reference  and  Note  9  of  the Notes to Financial Statements,
    "Environmental Cost Recovery," under Item 8.

    Integrated  resource  planning  regulations  in Kentucky require KU and the
    other  major  utilities  to make triennial filings with the PSC, of various
    historical and forecasted information relating to forecasted load, capacity
    margins and demand-side management techniques.

    Pursuant  to  Kentucky  law,  the PSC has established the boundaries of the
    service  territory  or  area  of  each retail electric supplier in Kentucky
    (including  KU),  other than municipal corporations, within which each such
    supplier shall have the exclusive right to render retail electric service.

    The  SCC  requires each Virginia utility to make annual filings of either a
    base  rate  change or an Annual Informational Filing consisting of a set of
    standard  financial  schedules.  These filings are subject to review by the
    SCC  Staff  (Staff).    The Staff issues a Staff Report, which includes any
    findings or recommendations to the SCC relating to the individual utility's
    financial  performance  during  the  historic  12-month  period,  including
    previously  accepted  adjustments.    The  Staff  Report  may  lead  to  an
    adjustment in rates.

    KU  is  presently  exempt  from  all  the  provisions of the Public Utility
    Holding  Company Act of 1935, except Section 9(a)(2) thereof (which relates
    to the acquisition of securities of public utility companies), by virtue of
    the exemption granted by an order of the Securities and Exchange Commission
    dated  April  19,  1949  and,  absent  further action by the Commission, by
    virtue  of  annual  exemption  statements  filed  by KU with the Commission
    pursuant to Rule 2 prescribed under the Act.

    Competition

    The  electric  utility industry has been rapidly moving to a less regulated
    and  more  competitive environment since the passage of the National Energy
    Policy  Act  of  1992  (NEPA).    NEPA gave the FERC the authority to order
    electric  utilities to provide wholesale transmission access to independent
    power  producers  and other utilities.  It also reduced restrictions on the
    ownership  and  operation of independent power producers.  See Management's
    Discussion  and  Analysis of Financial Condition and Results of Operation -
    Utility  Issues  -    Competition  in  KU  Energy's  1996  Annual Report to
    Shareholders  (Exhibit  13)  incorporated  herein  by reference for further
    discussion of competition.

    In April 1996, the FERC issued two final rules and a new Notice of Proposed
    Rulemaking  (NOPR) to promote competition and deregulation in the wholesale
    electric  market. FERC Order No. 888 (Order 888) addressed both open access
    transmission  service  and stranded cost issues.  FERC Order No. 889 (Order
    889)  required  utilities  to establish an electronic Open Access Same-Time
    Information  System  (OASIS)  to  share  information  about  available
    transmission  capacity  and also required the establishment by each utility
    of  standards  of  conduct for its transmission system operation.  The 1996
    NOPR  proposes  to establish a new system for utilities to use in reserving
    capacity  on  their  own  and other's transmission lines.  See Management's
    Discussion  and  Analysis of Financial Condition and Results of Operation -
    Utility  Issues  -  Competition  in  KU  Energy's  1996 Annual Report to
    Shareholders  (Exhibit  13)  incorporated  herein  by reference for further
    discussion of the FERC orders.



                                       -10-
<PAGE>
    KU  is  one  of  24  utilities in a ten-state region attempting to form the
    Midwest  Independent  System Operator (ISO).  The primary objectives of the
    ISO are to advance wholesale competition by ensuring nondiscriminatory open
    transmission  access  to  all  customers  and  to  enhance  transmission
    reliability.

    Cautionary Factors

    See Management's Discussion and Analysis for information concerning forward
    looking  statements.  Forward looking statements have been and will be made
    in  written  documents  and  oral presentations of the Company and KU.  All
    statements  made herein which are not based on historical facts are forward
    looking  and, accordingly, involve risks and uncertainties that could cause
    actual  results  to differ materially from those discussed.  In addition to
    those  forward  looking  statements  and  cautionary factors referred to in
    Management's  Discussion  and Analysis, forward looking statements in this
    Form 10-K include those relating to:

     1. The need for franchise agreements.
     2. The  comparability  of  OMU and EEI power costs to generation and other
        available power.
     3. Maintaining necessary levels of fuel inventory and adequate supplies of
        coal and gas to avoid operational disruptions.
     4. Availability  of coal reserves to supply baseload generating units over
        their useful lives.
     5. The amount of coal supplied by contract versus spot purchase.
     6. Negotiations of new coal contracts for future coal needs.
     7. KU's portion of EPA remediation plan costs at the Daviess County site.
     8. The Company's future dividend policy.
     9. The percent of total kWh requirements provided by OMU and EEI.
    10. Estimates  of future construction expenditures discussed under Item 2 -
        Properties--Construction.

    All  such statements are and will be based on management's belief, judgment
    and  analysis  as  well as assumptions made by and information available to
    management at the time the statements are made.  When used in the Company's
    or   KU's  documents  or  oral  presentations,  the  words    anticipate,
    estimate, expect, believe  and similar expressions are intended to
    identify  forward  looking  statements.  In addition to any assumptions and
    other  factors  referred  to  specifically  in connection with such forward
    looking  statements,  factors that could cause the Company's or KU's actual
    results to differ materially from those contemplated in any forward looking
    statements include, among others, those identified in Exhibit 99.06 hereto,
    which is incorporated herein by reference.





                                       -11-
<PAGE>
    Item 2.  Properties

    Currently,  KU Energy and KU Capital have no significant physical property.
    KU owns and operates the following electric generating stations:
<TABLE>
<CAPTION>

                                                           Nameplate     Effective
                                                           Rating (KW) Capability (KW)
<S>                  <C>             <C>                    <C>               <C>
     Steam:           Ghent           Ghent, Ky               2,226,060       2,000,000
                      Green River     South Carrollton, Ky      263,636         242,000
                      E. W. Brown     Burgin, Ky                739,534         661,000
                      Tyrone          Tyrone, Ky                137,500         136,000
                      Pineville       Four Mile, Ky              37,500          33,000
     Hydro:           Dix Dam &
                      Lock #7         Burgin, Ky                 30,297          24,000
     Gas/Oil Peaking: Haefling        Lexington, Ky              62,100          59,000
                      E.W. Brown      Burgin, Ky                504,000         484,000
                                                              4,000,627       3,639,000
</TABLE>

    Substantially  all  properties  are  subject  to  the lien of KU's Mortgage
    Indenture.

    Construction

    Four  126-MW  combustion turbine peaking units have been installed over the
    past  three  years.    The  first  peaking  unit was placed into commercial
    operation  in  late  1994.    The  second  and third units were placed into
    commercial operation in February 1995 and December 1995, respectively.  The
    fourth  unit  was  placed  into  commercial  operation  in May 1996.  Total
    construction  expenditures for the years 1997 through 2001 are estimated at
    $531  million.    Such  expenditures  include an estimated $168 million for
    generating  facilities,  $72  million  for  transmission  facilities  and
    $291  million  for  distribution and general facilities.  Included in total
    construction  expenditures  for  the  1997-2001  period are $95 million for
    360 MW of peak generating capacity to be added during 1997-2001.  KU has no
    plans  to  install  baseload generating capacity before 2010.  Construction
    expenditures for the years 1992 through 1996 aggregated about $688 million.
    See  Note  4  of  the  Notes  to  Financial  Statements,    Commitments and
    Contingencies,    under  Item  8, for the estimated amounts of construction
    expenditures for each of the years 1997 through 2001.

    KU   frequently  reviews  its  construction  program  and  construction
    expenditures,   which  may  be  affected  by  numerous  factors,  including
    competition   and  deregulation,  the  rate  of  load  growth,  changes  in
    construction  costs,  changes  in  environmental  regulations,  least  cost
    planning,  the  adequacy of rate relief and KU's ability to raise necessary
    capital.    See Management's Discussion and Analysis of Financial Condition
    and  Results  of  Operations  -  Liquidity  &  Capital  Resources - Capital
    Requirements in KU Energy's 1996 Annual Report to Shareholders (Exhibit 13)
    incorporated  herein  by  reference. KU's planned additions to its electric
    generating  capacity  are  based on future load projections using estimated
    load  growth  rates.    Consideration  is  also  given  to  projections  by
    neighboring  utilities  of  their  future  loads  and  capacity.   However,
    forecasts  of future loads are subject to numerous uncertainties, including
    economic conditions and effectiveness of energy conservation measures.




                                       -12-
<PAGE>
    Item 3.  Legal Proceedings

    KU Energy and KU Capital are involved in no material legal proceedings.

    See  Management's  Discussion  and  Analysis  -  Environmental  Matters  -
    Environmental   Cost  Recovery  in  KU  Energy's  1996  Annual  Report  to
    Shareholders  (Exhibit  13)  incorporated herein by reference and Note 9 of
    the  Notes  to  Financial  Statements, "Environmental Cost Recovery," for a
    discussion of KU's environmental surcharge legal proceedings.


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

    There  were no matters submitted to a vote of security holders of either KU
    Energy or KU during the three months ended December 31, 1996.




























                                       -13-
<PAGE>

    Executive Officers of KU Energy

                            Current      Positions Held During at Least the
    Name and Age         Positions Held  Last 5 Years

    Michael R. Whitley   Chairman and    Chairman of the Board of KU Energy
    Age 53               President*      since August 1995 and President of
                                         KU Energy since November 1994.
                                         Director of KU Energy since March
                                         1992.  Senior Vice-President from
                                         1988 to November 1994. Secretary
                                         of KU Energy from 1988 to November
                                         1992.

    O. M. Goodlett       Senior Vice-    Senior Vice-President of KU Energy
    Age 49               President*      since November 1994.

    James W. Tipton      Senior Vice-    Senior Vice-President of KU Energy
    Age 53               President       since November 1994.  Senior Vice-
                                         President of Kentucky Utilities
                                         from November 1986 to November
                                         1994.

    George S. Brooks II  General         Corporate Secretary of KU Energy
    Age 46               Counsel and     since November 1992, and General
                         Corporate       Counsel since 1988.
                         Secretary*

    William N. English   Treasurer*      Treasurer of KU Energy since 1988.
    Age 46

    Michael D. Robinson  Controller*     Controller of KU Energy since June
    Age 41                               1990.


    Note:    Officers are elected annually by the Board of Directors.  There is
    no  family  relationship  between  any  executive  officer  and  any  other
    executive officer or any director.

    *   Certain executive officers of KU may be considered "executive officers"
    of  KU Energy for certain purposes.  Identified persons hold positions with
    the  same  titles  at  KU.  Refer to KU's listing of executive officers for
    information  concerning  positions  held  during  the  last  five years and
    information concerning KU executive officers.






                                       -14-
<PAGE>

    Executive Officers of KU
                             Current      Positions Held During at Least the
    Name and Age          Positions Held  Last 5 Years

    Michael R. Whitley    Chairman and    Chairman of the Board of KU since
    Age 53                President*      August 1995 and President from
                                          November 1994.  Director of KU
                                          since March 1992.  Senior Vice-
                                          President of KU from March 1987 to
                                          November 1994.  Secretary of KU
                                          from July 1978 to November 1992.

    James M. Allison      Senior Vice-    Senior Vice-President of KU since
    Age 43                President**     November 1994.  Vice-President of
                                          KU from February 1993 to November
                                          1994.  President and Chief
                                          Operating Officer of Wheeling
                                          Power Company from October 1989 to
                                          January 1993.

    O. M. Goodlett        Senior Vice-    Senior Vice-President of KU since
    Age 49                President*      November 1992.  Vice-President of
                                          KU from April 1982 to November
                                          1992.

    Wayne T. Lucas        Senior Vice-    Senior Vice-President of KU since
    Age 49                President       November 1994.  Vice President of
                                          KU from November 1986 to November
                                          1994.

    George S. Brooks II   General         Corporate Secretary of KU since
    Age 46                Counsel and     November 1992, and General Counsel
                          Corporate       since January 1988.
                          Secretary*

    Gary E. Blake         Vice-President  Vice-President of KU since
    Age 43                                November 1992.  Western Division
                                          Manager of KU from October 1991 to
                                          November 1992.  Assistant Western
                                          Division Manager of KU from March
                                          1990 to October 1991.

    William E. Casebier   Vice-President  Vice-President of KU since May
    Age 54                                1988.














                                       -15-
<PAGE>

    Executive Officers of KU (continued)

                             Current      Positions Held During at Least the
    Name and Age          Positions Held  Last 5 Years

    Linda M. DiMascio     Vice-President  Vice-President of KU since
    Age 42                                February 1995. Director of Human
                                          Resources of Tucker Housewares
                                          from September 1994 to February
                                          1995.  Senior Area Coordinator for
                                          U.S. Manufacturing Department of
                                          Mobil Oil Corporation from April
                                          1992 to September 1994.  Assistant
                                          Employee Relations Manager,
                                          Torrance Refinery of Mobil Oil
                                          Corporation from October 1989 to
                                          April 1992.

    Gary L. Hawley        Vice-President  Vice President of KU since January
    Age 48                                1996.  Director of Bulk Power
                                          Planning from November 1986 to
                                          January 1996.

    Robert M. Hewett      Vice-President  Vice-President of KU since January
    Age 49                                1982.

    William N. English    Treasurer*      Treasurer of KU since April 1982.
    Age 46

    Michael D. Robinson   Controller*     Controller of KU since August
    Age 41                                1990.

    John J. Maloy, Jr.    Assistant       Assistant Treasurer of KU since
    Age 42                Treasurer       August 1984.
                                          (Not an Executive Officer)





    Note:    Officers are elected annually by the Board of Directors.  There is
    no  family  relationship  between  any  executive  officer  and  any  other
    executive officer or any director.

    *   Certain executive officers of KU may be considered "executive officers"
    of  KU Energy for certain purposes.  Identified persons hold positions with
    the same titles at KU Energy.

    **  Mr.  Allison  resigned  effective  February  21, 1997.  His duties were
    temporarily  assigned  to Mr. Goodlett, who also continues as the Company's
    Chief  Financial  Officer  and  Senior  Vice-President  of  Finance  and
    Administration.





                                       -16-
<PAGE>
                                      PART II
    Item 5. Market  for  Registrant's  Common  Equity  and  Related Stockholder
            Matters

    KU Energy

    KU  Energy's  common  stock  is  listed  on  the New York and Pacific stock
    exchanges  under the ticker symbol "KU."  Quotes in daily newspapers can be
    found under the listing "KU Engy."

    The  table below sets forth the high and low sales prices and the dividends
    paid for the Company's common stock for the periods shown.

<TABLE>
<CAPTION>


                                1996                                     1995
                     Dividend            Price              Dividend            Price
    Quarter            Paid          High       Low           Paid          High       Low
<S>                    <C>          <C>       <C>               <C>        <C>       <C>
      First            $.43         30 5/8    28 5/8            $.42       28 7/8    26 5/8
      Second           $.43         30        28 3/8            $.42       28 3/8    26 1/4
      Third            $.43         30        27                $.42       29 3/8    26
      Fourth           $.43         30 1/2    28 1/8            $.42       30 5/8    28 3/4
</TABLE>

    KU  Energy's  Board  has declared a common stock dividend of $.44 per share
    payable March 14, 1997, to shareholders of record on February 25, 1997.

    As  of  December  31,  1996,  KU  Energy  had  approximately  29,344 common
    shareholders of record.

    KU  has paid cash dividends since 1939.  KU Energy expects to continue this
    policy, although future dividends are dependent on future earnings, capital
    requirements  and  financial  conditions.   The dividend payout ratio (cash
    dividends as a percentage of net income) was 79% for 1996 and 84% for 1995.
    See  Note  5  of  the  Notes  to Consolidated Financial Statements,  Common
    Stock,   in  KU Energy's 1996 Annual Report to Shareholders (Exhibit 13)
    incorporated   herein  by  reference  for  information  regarding  dividend
    restrictions.

    KU

    All of the outstanding common stock of KU is held by KU Energy.

    The  following  table  sets  forth  the cash distributions (in thousands of
    dollars) on common stock paid by KU for the periods indicated:


                                     1996          1995
             First Quarter         $16,261       $15,789
             Second Quarter        $16,262       $15,789
             Third Quarter         $16,262       $15,789
             Fourth Quarter        $16,262       $15,883


    See  Note  5  of  the  Notes to Financial Statements,  Common Stock,  under
    Item 8 for information regarding dividend restrictions.



                                       -17-
<PAGE>
<TABLE>
<CAPTION>

    Item 6.  Selected Financial Data - KU Energy

    Year ended December 31,                  1996      1995       1994      1993       1992
                                                                       (dollars in thousands)
     Operating Revenues:
<S>                                       <C>       <C>        <C>       <C>        <C>
      Residential                         $ 236,229 $ 232,760  $ 213,574 $ 210,759  $ 194,817
      Commercial                            150,640   151,778    142,207   138,271    133,519
      Industrial                            136,856   130,066    120,043   111,857    102,808
      Mine power                             34,014    36,076     36,498    34,977     36,696
      Public authorities                     56,023    54,161     49,869    48,142     45,570
        Total retail revenues               613,762   604,841    562,191   544,006    513,410
      Sales for resale                       89,208    75,940     89,665    62,463     58,979
      Miscellaneous revenues and other        8,716     5,619      4,157     3,448      3,871
      Provision for refund - litigation
        settlement                                -         -    (19,385)   (3,309)         -
        Total operating revenues            711,686   686,400    636,628   606,608    576,260
     Operating Expenses:
      Fuel used in generation (1)           198,198   189,845    170,654   178,910    168,470
      Electric power purchased               62,490    69,579     61,442    34,711     32,753
      Other operating expenses              125,351   124,044    114,551   106,124     95,109
      Maintenance                            64,170    62,599     66,141    59,458     61,270
      Depreciation                           80,612    75,268     65,441    60,811     58,931
      Federal and state income taxes         50,247    43,426     43,904    47,752     40,992
      Other taxes                            15,049    15,038     14,789    14,357     13,401
        Total operating expenses            596,117   579,799    536,922   502,123    470,926
     Net Operating Income                   115,569   106,601     99,706   104,485    105,334
     Other Income and Deductions              8,203    11,655     11,530    10,362     12,162
     Income Before Interest and
      Other Charges and AFUDC               123,772   118,256    111,236   114,847    117,496
     Interest and Other Charges:
      Interest on long-term debt             37,584    36,095     32,147    31,650     39,571
      Preferred stock dividend
        requirements of Subsidiary            2,256     2,256      2,384     2,558      2,518
      Other interest                          2,120     4,031      2,414     1,249      1,394
        Total interest and other charges     41,960    42,382     36,945    35,457     43,483
     AFUDC                                      137       179      1,585       593        169
     Net Income                           $  81,949 $  76,053  $  75,876 $  79,983  $  74,182

     Earnings per Average Common Share    $    2.17 $    2.01  $    2.01 $    2.11  $    1.96
     Common Stock Data:
      Shares Outstanding - average and
        year-end                             37,818    37,818     37,818    37,818     37,818
     Dividends per Share of
       Common Stock                       $    1.72 $    1.68  $    1.64 $    1.60  $    1.56

     (1)   Amounts  for  1994  and  1993  reflect  reductions  of  $23 million and $4 million,
           respectively,  associated  with  refunds  to  customers  related  to  a  litigation
           settlement with a former coal supplier.
</TABLE>

                                               -18-
<PAGE>
<TABLE>

   Item 6.  Selected Financial Data - KU Energy
           (continued)
<CAPTION>

                                           1996        1995       1994        1993        1992
<S>                                 <C>          <C>        <C>         <C>         <C>
   Assets (in thousands)            $1,726,948   $1,714,974 $1,669,294  $1,573,194  $1,457,100
   Capitalization: (in thousands)
      Bonds                         $  546,330   $  545,830 $  495,830  $  441,830  $  443,330
      Notes                                 43           64         86         107         128
      Unamortized premium on
        long-term debt                       -           86         96         108         519
      Preferred stock                   40,000       40,000     40,000      40,000      40,000
      Common stock equity              645,513      628,611    616,092     602,503     583,319
           Total capitalization     $1,231,886   $1,214,591 $1,152,104  $1,084,548  $1,067,296
   % Total Capitalization
      Represented by:
      Long-term debt                      44.4         44.9       43.0        40.8        41.6
      Preferred stock                      3.2          3.3        3.5         3.7         3.7
      Common stock equity                 52.4         51.8       53.5        55.5        54.7
   Kilowatt-hours Generated,
      Purchased and Sold:
      (in thousands)
      Power generated               16,510,347   15,223,851 15,524,844  14,934,839  13,700,313
      Power purchased                3,165,589    3,254,861  3,066,917   1,926,299   2,032,110
      Power interchanged - net          12,450       (6,569)     2,638       1,556       3,393
           Total                    19,688,386   18,472,143 18,594,399  16,862,694  15,735,816
      Less - losses and company use  1,057,808    1,054,589    998,010   1,066,251     876,862
      Kilowatt-hours sold           18,630,578   17,417,554 17,596,389  15,796,443  14,858,954
      Sales classified:
        Residential                  5,148,364    5,016,012  4,706,058   4,702,697   4,278,098
        Commercial                   3,410,710    3,403,054  3,272,370   3,217,504   3,080,045
        Industrial                   4,107,537    3,850,647  3,641,469   3,409,213   3,093,113
        Mine power                     893,650      926,873    974,233     933,317     977,032
        Public authorities           1,349,948    1,297,913  1,225,668   1,199,893   1,123,494
           Total retail sales       14,910,209   14,494,499 13,819,798  13,462,624  12,551,782
        Sales for resale             3,720,369    2,923,055  3,776,591   2,333,819   2,307,172
           Total                    18,630,578   17,417,554 17,596,389  15,796,443  14,858,954

   Average Number of Customers         456,167      449,144    440,590     432,636     425,403
   Residential Sales (per customer):
      Average kilowatt-hours            13,531       13,377     12,781      12,995      12,007
      Average revenue               $   620.87   $   620.75 $   580.05  $   582.41  $   546.80
   System Capability - Megawatts:
      KU's plants                        3,639        3,509      3,265       3,164       3,163
      Purchased contracts                  393          394        540         365         293
        Total system capability          4,032        3,903      3,805       3,529       3,456
   Net System Maximum Demand -
      Megawatts                          3,391        3,341      3,127       3,176       2,845
   Load Factor (%)                        59.3         58.7       59.8        57.7        59.4
   Heat Rate (BTU per KWH) (1)          10,351       10,377     10,306      10,367      10,344

   Fuel - Average Cost per Ton (1)  $    27.68   $    28.49 $    28.84  $    28.31  $    27.88
   Average Cost per Million BTU (1) $     1.14   $     1.18 $     1.19  $     1.17  $     1.18

   (1) Based on coal consumed
</TABLE>

                                               -19-
<PAGE>
<TABLE>
    Item 6.  Selected Financial Data - KU
<CAPTION>

    Year ended December 31,                   1996       1995       1994       1993       1992
                                                                                (in thousands)
    Operating Revenues:
<S>                                       <C>       <C>        <C>       <C>        <C>
      Residential                         $ 236,229 $ 232,760  $ 213,574 $ 210,759  $ 194,817
      Commercial                            150,640   151,778    142,207   138,271    133,519
      Industrial                            136,856   130,066    120,043   111,857    102,808
      Mine power                             34,014    36,076     36,498    34,977     36,696
      Public authorities                     56,023    54,161     49,869    48,142     45,570
        Total retail revenues               613,762   604,841    562,191   544,006    513,410
      Sales for resale                       89,208    75,940     89,665    62,463     58,979
      Miscellaneous revenues and other        8,741     5,649      4,181     3,428      3,432
      Provision for refund -
        litigation settlement                     -         -    (19,385)   (3,309)         -
        Total operating revenues            711,711   686,430    636,652   606,588    575,821
    Operating Expenses:
      Fuel used in generation (1)           198,198   189,845    170,654   178,910    168,470
      Electric power purchased               62,490    69,579     61,442    34,711     32,753
      Other operating expenses              122,872   121,426    112,712   104,930     93,915
      Maintenance                            64,161    62,592     66,134    59,451     61,118
      Depreciation                           80,424    75,080     65,259    60,800     58,849
      Federal and state income taxes         51,452    44,670     44,683    48,178     41,489
      Other taxes                            14,777    14,694     14,582    14,347     13,359
        Total operating expenses            594,374   577,886    535,466   501,327    469,953
    Net Operating Income                    117,337   108,544    101,186   105,261    105,868
    Other Income and Deductions               8,377     8,235      9,299     8,331     11,226
    Income Before Interest Charges
      and AFUDC                             125,714   116,779    110,485   113,592    117,094
    Interest Charges:
      Interest on long-term debt             37,584    36,095     32,147    31,650     39,571
      Other interest                          2,104     4,021      2,411     1,249      1,394
        Total interest charges               39,688    40,116     34,558    32,899     40,965
    AFUDC                                       137       179      1,585       593        169
    Net Income                            $  86,163 $  76,842  $  77,512 $  81,286  $  76,298
    Preferred Stock Dividend
      Requirements                            2,256     2,256      2,384     2,558      2,518
    Net Income Applicable to Common
      Stock                               $  83,907 $  74,586  $  75,128 $  78,728  $  73,780
    Common Dividends                      $  65,047 $  63,250  $  61,644 $  60,509  $ 108,996

    (1) Amounts  for  1994  and  1993  reflect  reductions  of  $23  million  and $4 million,
        respectively, associated with refunds to customers related to a litigation settlement
        with a former coal supplier.
</TABLE>
                                              -20-
<PAGE>
<TABLE>
   Item 6.  Selected Financial Data - KU
           (continued)
<CAPTION>

                                          1996        1995        1994        1993        1992
<S>                                 <C>          <C>        <C>         <C>         <C>
   Assets (in thousands)            $1,673,055   $1,659,988 $1,618,100  $1,523,274  $1,408,453
   Capitalization: (in thousands)
      Bonds                         $  546,330   $  545,830 $  495,830  $  441,830  $  443,330
      Notes                                 43           64         86         107         128
      Unamortized premium on
        long-term debt                       -           86         96         108         519
      Preferred stock                   40,000       40,000     40,000      40,000      40,000
      Preferred stock with mandatory
        redemption                           -            -          -           -           -
      Common stock equity              595,397      576,537    565,201     552,106     534,073
           Total capitalization     $1,181,770   $1,162,517 $1,101,213  $1,034,151  $1,018,050
   % Total Capitalization
      Represented by:
      Long-term debt                      46.2         47.0       45.1        42.7        43.6
      Preferred stock                      3.4          3.4        3.6         3.9         3.9
      Common stock equity                 50.4         49.6       51.3        53.4        52.5
   Kilowatt-hours Generated,
      Purchased and Sold:
      (in thousands)
      Power generated               16,510,347   15,223,851 15,524,844  14,934,839  13,700,313
      Power purchased                3,165,589    3,254,861  3,066,917   1,926,299   2,032,110
      Power interchanged - net          12,450       (6,569)     2,638       1,556       3,393
           Total                    19,688,386   18,472,143 18,594,399  16,862,694  15,735,816
      Less - losses and company use  1,057,808    1,054,589    998,010   1,066,251     876,862
      Kilowatt-hours sold           18,630,578   17,417,554 17,596,389  15,796,443  14,858,954
      Sales classified:
        Residential                  5,148,364    5,016,012  4,706,058   4,702,697   4,278,098
        Commercial                   3,410,710    3,403,054  3,272,370   3,217,504   3,080,045
        Industrial                   4,107,537    3,850,647  3,641,469   3,409,213   3,093,113
        Mine power                     893,650      926,873    974,233     933,317     977,032
        Public authorities           1,349,948    1,297,913  1,225,668   1,199,893   1,123,494
           Total retail sales       14,910,209   14,494,499 13,819,798  13,462,624  12,551,782
        Sales for resale             3,720,369    2,923,055  3,776,591   2,333,819   2,307,172
           Total                    18,630,578   17,417,554 17,596,389  15,796,443  14,858,954

   Average Number of Customers         456,167      449,144    440,590     432,636     425,403
   Residential Sales (per customer):
      Average kilowatt-hours            13,531       13,377     12,781      12,995      12,007
      Average revenue               $   620.87   $   620.75 $   580.05  $   582.41  $   546.80
   System Capability - Megawatts:
      KU's plants                        3,639        3,509      3,265       3,164       3,163
      Purchased contracts                  393          394        540         365         293
        Total system capability          4,032        3,903      3,805       3,529       3,456
   Net System Maximum Demand -
      Megawatts                          3,391        3,341      3,127       3,176       2,845
   Load Factor (%)                        59.3         58.7       59.8        57.7        59.4

   Heat Rate (BTU per KWH) (1)          10,351       10,377     10,306      10,367      10,344
   Fuel - Average Cost per Ton(1)   $    27.68   $    28.49 $    28.84  $    28.31  $    27.88
   Average Cost per Million BTU(1)  $     1.14   $     1.18 $     1.19  $     1.17  $     1.18

   (1) Based on coal consumed
</TABLE>
                                               -21-
<PAGE>
  Item  7.    Management's  Discussion and Analysis of Financial Condition and
  Results of Operations


  The  information  under  the heading Management's Discussion and Analysis of
  Financial  Condition  and Results of Operation is combined for KU Energy and
  KU  on pages 14 through 19 of KU Energy's 1996 Annual Report to Shareholders
  (Exhibit 13) and is incorporated herein by reference.



  Item 8.  Financial Statements and Supplementary Data

                                    KU ENERGY


  The financial statements and supplementary data on pages 20 through 33 of KU
  Energy's  1996  Annual  Report to Shareholders (Exhibit 13) are incorporated
  herein by reference.




                                       KU

                                                                       Page(s)


  Index to Financial Statements and Supplementary Data:

       Report of Independent Public Accountants                            23
       Statements of Income and Retained Earnings                          24
       Statements of Cash Flows                                            25
       Balance Sheets                                                      26
       Statements of Capitalization                                        27
       Notes to Financial Statements                                    28-38
       Supplemental Quarterly Financial Information                        39












                                       -22-
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

  To Kentucky Utilities Company:


  We   have  audited  the  accompanying  balance  sheets  and  statements  of
  capitalization  of  Kentucky  Utilities  Company  (a  Kentucky  and Virginia
  corporation) as of December 31, 1996 and 1995, and the related statements of
  income  and retained earnings, and cash flows for each of the three years in
  the  period  ended  December  31,  1996.  These financial statements are the
  responsibility  of  the  management  of  Kentucky  Utilities  Company.   Our
  responsibility  is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in
  all material respects, the financial position of Kentucky Utilities Company as
  of December 31, 1996 and 1995, and the results of its operations and its cash
  flows  for  each  of  the three years in the period ended December 31, 1996,
  in conformity with generally accepted accounting principles.


                                       /s/Arthur Andersen LLP
                                       Arthur Andersen LLP


  Chicago, Illinois
  January 28, 1997






                                       -23-
<PAGE>
<TABLE>
   Statements of
   Income and
   Retained
   Earnings
                                   Kentucky Utilities Company

<CAPTION>

   Year Ended December 31, (in thousands of dollars)       1996          1995          1994
<S>                                                   <C>          <C>          <C>
   Operating Revenues                                 $  711,711   $  686,430   $   636,652
   Operating Expenses:
      Fuel, principally coal, used in generation         198,198      189,845       170,654
      Electric power purchased                            62,490       69,579        61,442
      Other operating expenses                           122,872      121,426       112,712
      Maintenance                                         64,161       62,592        66,134
      Depreciation                                        80,424       75,080        65,259
      Federal and state income taxes                      51,452       44,670        44,683
      Other taxes                                         14,777       14,694        14,582
        Total Operating Expenses                         594,374      577,886       535,466
   Net Operating Income                                  117,337      108,544       101,186
   Other Income and Deductions:
      Interest and dividend income                         1,733        2,838         4,295
      Other income and deductions - net                    6,710        5,467         6,098
        Total Other Income and Deductions                  8,443        8,305        10,393
   Income Before Interest Charges                        125,780      116,849       111,579

   Interest Charges:
      Interest on long-term debt                          37,584       36,095        32,147
      Other interest charges                               2,033        3,912         1,920
        Total Interest Charges                            39,617       40,007        34,067

   Net Income                                             86,163       76,842        77,512
   Preferred Stock Dividend Requirements                   2,256        2,256         2,384
   Net Income Applicable to Common Stock              $   83,907   $   74,586   $    75,128


   Retained Earnings Beginning of Year                $  268,992   $  257,656   $   244,429
   Add Net Income                                         86,163       76,842        77,512
                                                         355,155      334,498       321,941
   Deduct:
      Dividends on preferred stock                         2,256        2,256         2,384
      Dividends on common stock                           65,047       63,250        61,644
      Preferred stock redemption expense                       -            -           257
                                                          67,303       65,506        64,285
   Retained Earnings End of Year                      $  287,852   $  268,992   $   257,656


   The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>

                                               -24-
<PAGE>
<TABLE>
    Statements of
    Cash Flows
                                     Kentucky Utilities Company
<CAPTION>

    Year Ended December 31, (in thousands of dollars)         1996         1995          1994

    Cash Flows from Operating Activities:

<S>                                                    <C>           <C>          <C>
      Net income                                       $    86,163   $    76,842  $    77,512
      Items not requiring (providing) cash currently:
        Depreciation                                        80,424        75,080       65,259
        Deferred income taxes                                3,750        15,502       (1,559)
        Investment tax credit deferred                      (4,013)       (4,095)      (4,110)
        Changes in current assets and liabilities:
           Change in accounts receivable                    (1,111)       (7,759)        (255)
           Change in accounts payable                       (9,040)      (11,517)       5,511
           Change in liability to ratepayers                (6,599)         (310)     (29,958)
           Change in escrow funds                            6,599           312       30,841
           Change in other current assets and liabilities    6,923          (511)      (8,116)
        Other - net                                          8,701         5,515        6,839

    Net Cash Provided by Operating Activities              171,797       149,059      141,964

    Cash Flows from Investing Activities:

      Construction expenditures - utility                 (106,503)     (124,515)    (193,344)
      Other                                                    178          (119)         371

    Net Cash Used by Investing Activities                 (106,325)     (124,634)    (192,973)

    Cash Flows from Financing Activities:

      Short-term borrowings - net                           (1,400)      (20,700)      76,300
      Issuance of long-term debt                            35,666        49,288       53,305
      Funds deposited with trustee - net                     3,779        15,100           95
      Retirement of long-term debt, including premiums     (36,192)          (21)         (21)
      Retirement of preferred stock, including premiums          -             -      (20,302)
      Payment of dividends                                 (67,303)      (65,506)     (64,089)

    Net Cash Provided (Used) by Financing Activities       (65,450)      (21,839)      45,288

    Net Increase (Decrease) in Cash and Cash Equivalents        22         2,586       (5,721)

    Cash and Cash Equivalents Beginning of Year              5,697         3,111        8,832

    Cash and Cash Equivalents End of Year              $     5,719   $     5,697  $     3,111

    Supplemental Disclosures
    Cash paid for:
      Interest                                         $    36,729   $    37,961  $    31,864
      Income Taxes                                     $    47,539   $    31,974  $    45,270

   The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
                                                -25-
<PAGE>
<TABLE>
    Balance
    Sheets                           Kentucky Utilities Company

<CAPTION>

    As of December 31, (in thousands of dollars)                         1996           1995
    Assets
    Utility Plant:
<S>                                                               <C>           <C>
       Plant in service, at cost                                  $  2,482,812  $  2,394,018
       Less:  Accumulated depreciation                               1,067,911       997,366
                                                                     1,414,901     1,396,652
       Construction work in progress                                    63,435        61,410
            Total Utility Plant                                      1,478,336     1,458,062
    Current Assets:
       Cash and cash equivalents                                         5,719         5,697
       Escrow funds - coal contract litigation                               -         6,599
       Construction funds held by trustee                                    -         3,743
       Accounts receivable, net of allowance
            for doubtful accounts                                       50,582        49,471
       Accrued utility revenues                                         24,239        27,900
       Fuel, principally coal, at average cost                          30,895        29,438
       Plant materials and operating supplies, at average cost          21,656        23,064
       Other                                                             7,486         8,121
            Total Current Assets                                       140,577       154,033
    Other Assets:
       Unamortized loss on reacquired debt                              10,838        11,304
       Other                                                            43,304        36,589
            Total Other Assets                                          54,142        47,893
            Total Assets                                          $  1,673,055  $  1,659,988

    Capitalization and Liabilities
    Capitalization: (See Statements of Capitalization)
       Common stock equity                                        $    595,397  $    576,537
       Preferred stock                                                  40,000        40,000
       Long-term debt                                                  546,373       545,980
            Total Capitalization                                     1,181,770     1,162,517
    Current Liabilities:
       Long-term debt due within one year                                   21            21
       Short-term borrowings                                            54,200        55,600
       Accounts payable                                                 28,960        38,000
       Accrued interest                                                  8,048         7,556
       Accrued taxes                                                     5,383         5,201
       Customer deposits                                                 8,746         6,876
       Accrued payroll and vacations                                     9,862         8,706
       Liability to ratepayers - coal contract litigation                    -         6,599
       Other                                                             5,728         6,752
            Total Current Liabilities                                  120,948       135,311
    Other Liabilities:
       Accumulated deferred income taxes                               238,542       231,717
       Accumulated deferred investment tax credits                      30,167        34,180
       Regulatory tax liability                                         54,388        57,726
       Other                                                            47,240        38,537
            Total Other Liabilities                                    370,337       362,160
            Total Capitalization and Liabilities                  $  1,673,055  $  1,659,988

   The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>

                                                -26-
<PAGE>
<TABLE>
    Statements of
    Capitalization
                                     Kentucky Utilities Company
<CAPTION>

    As of December 31, (in thousands of dollars)                           1996           1995

    Common Stock Equity:
        Common stock, without par value,
<S>                                                                   <C>           <C>
           outstanding 37,817,878 shares                              $   308,140   $  308,140
        Capital stock expense and other                                      (595)        (595)
        Retained earnings                                                 287,852      268,992
           Total Common Stock Equity                                      595,397      576,537

    Preferred Stock, cumulative, without par value, $100 stated value
        4 3/4%, outstanding 200,000 shares                                 20,000       20,000
        6.53%, outstanding 200,000 shares                                  20,000       20,000
           Total Preferred Stock                                           40,000       40,000

    Long-Term Debt:
        First Mortgage Bonds:
           5.95%  Series Q, due June 15, 2000                              61,500       61,500
           7 3/8% Series K, due December 1, 2002                                -       35,500
           6.32%  Series Q, due June 15, 2003                              62,000       62,000
           5.99%  Series S, due January 15, 2006                           36,000            -
           7.92%  Series P, due May 15, 2007                               53,000       53,000
           7.55%  Series R, due June 1, 2025                               50,000       50,000
           8.55%  Series P, due May 15, 2027                               33,000       33,000
                                                                          295,500      295,000
        First Mortgage Bonds, Pollution Control Series:

           7 3/8% Pollution Control Series 7, due May 1, 2010               4,000        4,000
           7.45%  Pollution Control Series 8, due September 15, 2016       96,000       96,000
           6 1/4% Pollution Control Series 1B, due February 1, 2018        20,930       20,930
           6 1/4% Pollution Control Series 2B, due February 1, 2018         2,400        2,400
           6 1/4% Pollution Control Series 3B, due February 1, 2018         7,200        7,200
           6 1/4% Pollution Control Series 4B, due February 1, 2018         7,400        7,400
           7.60%  Pollution Control Series 7, due May 1, 2020               8,900        8,900
           5 3/4% Pollution Control Series 9, due December 1, 2023         50,000       50,000
           Variable Rate Pollution Control Series 10, due
            November 1, 2024                                               54,000       50,800
           Variable Rate County of Carroll, Kentucky, Collateralized
            Solid Waste Disposal Facility Revenue Bonds, due
            November 1, 2024                                                    -        3,200
                                                                          250,830      250,830
             Total First Mortgage Bonds                                   546,330      545,830

        Unamortized premium                                                     -           86
        8% secured note, due January 5, 1999 (net of current maturity)         43           64
           Total Long-Term Debt                                           546,373      545,980
           Total Capitalization                                       $ 1,181,770   $1,162,517

   The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>

                                                -27-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   1.  Summary of Significant Accounting Policies

   General

   Kentucky  Utilities Company (KU) is the principal subsidiary of KU Energy
   Corporation.   The preparation of financial statements in conformity with
   generally  accepted  accounting  principles  requires  management to make
   estimates  and assumptions that affect the reported amounts of assets and
   liabilities  and  disclosure  of contingent assets and liabilities at the
   date of the financial statements and the reported amounts of revenues and
   expenses  during  the reporting period.  Actual results could differ from
   those  estimates.    Certain  amounts  from  prior  periods  have  been
   reclassified to conform with the current year presentation.

   KU  is  a  public  utility engaged in producing, transmitting and selling
   electric energy.  KU provides electric service to about 432,900 customers
   in  over  600  communities  and  adjacent  suburban and rural areas in 77
   counties  in  central,  southeastern  and  western  Kentucky and to about
   28,800 customers in 5 counties in southwestern Virginia.

   Regulation

   KU  is  exempt  from regulation as a registered holding company under the
   Public  Utility Holding Company Act of 1935.  KU is subject to regulation
   by  the  Kentucky  Public  Service  Commission  (PSC), the Virginia State
   Corporation Commission (SCC) and the Federal Energy Regulatory Commission
   (FERC).  With respect to accounting matters, KU maintains its accounts in
   accordance  with  the  Uniform  System  of  Accounts  as defined by these
   agencies.    KU's  accounting  policies  conform  to  generally  accepted
   accounting  principles  applicable  to  rate  regulated  enterprises  and
   reflect   the  effects  of  the  ratemaking  process.    Other  than  the
   unamortized  loss  on  reacquired  debt,  KU's  regulatory  assets  are
   immaterial.

   Utility Plant

   Utility  plant  is stated at the original cost of construction.  The cost
   of  repairs  of property units and replacements of minor items is charged
   to  maintenance  expense  as  incurred.    Property unit replacements are
   capitalized  and  the depreciation reserve is charged with the cost, less
   net salvage, of units retired.

   Depreciation

   Provision  for  depreciation  of  utility plant is based on straight-line
   composite  rates  applied to the cost of depreciable property.  The rates
   approximated 3.5% in 1996 and 1995 and 3.4% in 1994.

   Cash and Cash Equivalents

   For  purposes  of  reporting  cash  flows,  KU  considers  highly  liquid
   investments  with  a  maturity  of  three months or less from the date of
   purchase to be cash equivalents.


                                      -28-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   KU  utilizes a cash management mechanism that funds certain bank accounts
   for  checks  as  they are presented to those banks.  KU classified checks
   written but not presented to those banks, which amounted to $6.1  million
   and  $10.5  million  at  December  31,  1996  and  1995, respectively, in
   accounts payable.

   Financial Instruments

   KU's  temporary  cash  investments are classified as held-to-maturity and
   are reported under the caption "Cash and cash equivalents" on the Balance
   Sheet.

   Stock-Based Compensation

   KU   adopted  Statement  of  Financial  Accounting  Standards  No.  123,
   "Accounting  for  Stock-Based  Compensation,"  in  1996  by continuing to
   account  for  stock compensation in accordance with Accounting Principles
   Board  Opinion No. 25, "Accounting for Stock Issued to Employees."  If KU
   had  recognized  compensation  expense  for  awards under its stock-based
   compensation  plan according to the new standard, net income and earnings
   per  share  for  the  year  ended 1996, 1995 and 1994 would not have been
   materially different from amounts recorded.

   Unamortized Loss on Reacquired Debt

   KU  defers costs (primarily call premiums) arising from the reacquisition
   or  retirement  of  long-term debt.  Costs related to refinanced debt are
   amortized  over  the  lives  of  the  new  debt issues.  Costs related to
   retired  debt  not  refinanced  are  amortized  over  the  period  to the
   scheduled maturity of the retired debt.

   Operating Revenues and Fuel Costs

   Revenues  are  recorded  based  on  services  rendered  to customers.  KU
   accrues  an  estimate of revenues for electric service furnished from the
   meter  reading  dates to the end of each accounting period.  Cost of fuel
   used  in  electric  generation  is  charged  to  expense  as  the fuel is
   consumed.   Fuel adjustment clauses adjust operating revenues for changes
   in  the  level  of  fuel  costs  charged  to  expense.   An environmental
   surcharge  for  Kentucky  retail  customers,  implemented in August 1994,
   permits  the  utility  to  recover  certain ongoing operating and capital
   costs  of  compliance  with  federal,  state  or  local  environmental
   requirements   associated  with  the  production  of  energy  from  coal,
   including  the Federal Clean Air Act as amended.  See Note 9 of the Notes
   to  Financial Statements, "Environmental Cost Recovery," for an update of
   environmental surcharge legal proceedings.

   Pursuant  to  regulatory  orders, KU had been refunding fuel cost savings
   related  to the resolution of a coal contract dispute.  Refunds were made
   to  Virginia  retail  customers  during  the  period  August 1993 through
   June   1994.    Refunds  were  made  to  wholesale  customers  under  the
   jurisdiction of the FERC in lump sum payments in September 1993.  Refunds
   to  Kentucky  retail  customers  commenced  in  July  1994.   Pursuant to


                                      -29-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   legislation  adopted  in 1996, KU paid the remaining balance of unclaimed
   Kentucky  retail  customer  refunds to the Kentucky Workers' Compensation
   Funding Commission to pay certain workers  compensation benefits.

   By  virtue  of  the legislation, KU's payment of the unclaimed refunds to
   the  State released KU from any future liability to customers relating to
   such  refunds.    The legislation also preserved the rights of ratepayers
   entitled  to  claim  a refund who have not yet done so and authorized the
   Funding  Commission  to  honor  future  refund  claims  using  any  funds
   available.

   Operating  revenues  and  fuel  expense  for  1994  were  reduced  by
   $19.4  million and $23.1 million, respectively, resulting from the above-
   mentioned  refunds.    The refunds had no impact on operating revenues or
   fuel  expense  for 1995 or 1996.  The difference between the reduction in
   operating  revenues  and the reduction in fuel expense is attributable to
   incurred litigation costs, fuel cost savings related to opportunity sales
   and  costs  incurred  to  administer the refund plan.  These amounts were
   retained by KU pursuant to regulatory orders.

   Income Taxes

   KU  establishes  deferred tax assets and liabilities, as appropriate, for
   all  temporary  differences, and adjusts deferred tax balances to reflect
   changes  in  tax  rates  expected  to be in effect during the periods the
   temporary  differences  reverse.    Investment  tax credits resulted from
   provisions  of  the  tax  law  which  permitted  a  reduction of KU's tax
   liability  based on certain construction expenditures.  Such credits have
   been  deferred  in  the accounts and are being amortized as reductions in
   income  tax  expense  over  the life of the related property.  Because of
   rate  regulation,  changes in tax rates are deferred and amortized as the
   temporary differences reverse.

   2.  Income Taxes

   KU  is  included  in  the  consolidated  federal tax return of its parent
   company,  KU  Energy.    Income  taxes  are  allocated  to the individual
   companies,  including  KU,  based  on  their respective taxable income or
   loss.






                                      -30-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company


   The  accumulated  deferred income taxes as set forth in the Balance Sheet
   arise from the following temporary differences:
<TABLE>
<CAPTION>

   As of December 31, (in thousands of dollars)                        1996         1995

    Deferred Tax Assets:
      Unamortized investment tax credit and other property
<S>                                                                 <C>          <C>
        related differences                                         $ 29,294     $ 31,667

      Other                                                           20,583       15,990
      Less:  Amounts included in current assets                        4,723        4,985
                                                                      45,154       42,672

    Deferred Tax Liabilities:
      Accelerated depreciation and other property
        related differences                                          278,036      268,203
      Other                                                            5,660        6,186
                                                                     283,696      274,389

    Net accumulated deferred income tax liability                   $238,542     $231,717
</TABLE>
<TABLE>

    The components of income tax expense are as follows:

    Year Ended December 31, (in thousands of dollars)         1996          1995         1994
<CAPTION>

    Income taxes charged to Operating Income:
<S>                                                       <C>           <C>          <C>
    Current   - federal                                   $ 35,656      $ 23,597     $ 37,058
              - state                                        7,387         5,134        8,812
                                                            43,043        28,731       45,870
    Deferred  - federal                                      5,510        12,165       (1,114)
              - state                                        2,899         3,845           13
                                                             8,409        16,010       (1,101)
    Deferred investment tax credit                               -           (71)         (86)
                                                            51,452        44,670       44,683

    Income taxes charged to Other Income and Deductions:
    Current   - federal                                      3,565           854        1,537
              - state                                          861           190          344
                                                             4,426         1,044        1,881
    Deferred  - federal                                     (3,665)         (406)        (365)
              - state                                         (994)         (102)         (93)
                                                            (4,659)         (508)        (458)
    Amortization of deferred investment tax credit          (4,013)       (4,024)      (4,024)
                                                            (4,246)       (3,488)      (2,601)
    Total income tax expense                              $ 47,206      $ 41,182     $ 42,082
</TABLE>

                                               -31-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   KU's  effective  income  tax rate, determined by dividing income taxes by
   the  sum  of  such taxes and net income, was 35.4% in 1996, 34.9% in 1995
   and  35.2%  in  1994.  The  difference between the effective rate and the
   statutory  federal  income  tax  rate  is  attributable  to the following
   factors:
<TABLE>

   Year Ended December 31, (in thousands of dollars)        1996          1995          1994
<CAPTION>

<S>                                                    <C>           <C>          <C>
    Federal income tax computed at 35%                 $    46,679   $    41,308  $    41,858
    Add (Deduct):
    State income taxes, net of federal
      income tax benefit                                     6,599         5,894        5,899
    Amortization of deferred investment tax credit          (4,013)       (4,095)      (4,110)
    Other, net                                              (2,059)       (1,925)      (1,565)
    Total income tax expense                           $    47,206   $    41,182  $    42,082
</TABLE>

    3.  Retirement Benefits

   Pensions

   KU   has  a  noncontributory  defined  benefit  pension  plan  covering
   substantially  all  of its employees.  Benefits under this plan are based
   on  years of service, final average base pay and age at retirement.  KU's
   funding  policy is to make such contributions as are necessary to finance
   the  benefits  provided  under  the  plan.    KU's contributions meet the
   funding  standards  set  forth in the Employee Retirement Income Security
   Act  of  1974.    The  plan  assets  consist  primarily of common stocks,
   corporate bonds and U.S. Government Securities.

   KU   also  has  a  Supplemental  Security  Plan  for  certain  management
   personnel.    Retirement  benefits  under this plan are based on years of
   service,  earnings  and  age  at  retirement.    The  plan has no advance
   funding.    Benefit  payments  are  made  to  retired  employees or their
   beneficiaries from the general assets of KU.

   The  reconciliation  of the funded status of the retirement plans and the
   pension liability recorded by KU is as follows:
<TABLE>

   As of December 31, (in thousands of dollars)                         1996           1995
<CAPTION>

<S>                                                                <C>            <C>
    Fair value of plan assets                                      $  191,778     $   179,203
    Projected benefit obligation                                     (194,874)       (183,795)
    Plan assets less than projected benefit obligation                 (3,096)         (4,592)
    Unrecognized net (gain)/loss from past
       experience different than that assumed                         (12,448)         (5,907)
    Unrecognized prior service cost                                     3,990           4,344
    Unrecognized net asset                                             (1,500)         (1,649)
    Regulatory effect recorded                                            201          (1,634)
    Pension liability                                              $  (12,853)    $    (9,438)

    Accumulated benefit obligation (including vested benefits
       of $147,103 and $139,250, respectively)                     $  149,814     $   141,531

</TABLE>

                                               -32-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

<TABLE>
   Components of Net Pension Cost:

    Year Ended December 31, (in thousands of dollars)       1996          1995          1994
<CAPTION>

<S>                                                     <C>           <C>          <C>
    Service cost (benefits earned during the period)    $   6,399     $   6,060    $   6,017
    Interest cost on projected benefit obligation          13,856        13,560       12,366
    Actual return on plan assets                          (20,798)      (27,064)      (3,723)
    Net amortization and deferral                           6,568        14,608       (8,765)
    Regulatory effect recorded                             (1,835)       (1,595)      (1,916)
    Net pension cost                                    $   4,190     $   5,569    $   3,979
</TABLE>
<TABLE>
<CAPTION>
    Assumptions Used in Determining Actuarial Valuations:
                                                          1996            1995          1994
<S>                                                       <C>            <C>           <C>
    Weighted average discount rate used to
      determine the projected benefit obligation          7.75%          7.75%         8.25%

       Rate of increase for compensation levels (1)       4.75%          4.75%         5.50%

    Weighted average expected long-term rate
      of return on assets                                 8.25%          8.25%         8.25%

    (1) 4.75%,  4.75%,  and  6.00%,  respectively,  used  for  the  Supplemental  Security Plan
    valuation.
</TABLE>

   Other Postretirement Benefits

   KU  provides  certain health care and life insurance benefits to eligible
   retired  employees  and  their  dependents.  KU accrues, during the years
   that  the  employee renders service, the expected cost of providing these
   benefits  for  retired  employees,  their  beneficiaries  and  covered
   dependents.    The  postretirement  health  care plan is contributory for
   employees who retired after December 31, 1992, with retiree contributions
   indexed  annually  based  upon the experience of retiree medical expenses
   for the preceding year.   Pre-1993  retirees  are  not  required  to
   contribute to the plan.  KU's employees become eligible for retiree medical
   benefits after 15 years of service and attainment of age 55.  The life
   insurance  plan  is noncontributory and is based on compensation levels
   prior to retirement.

   In  1993,  KU  began  funding,  in  addition  to current requirements for
   benefit  payments, the maximum tax-favored amount allowed through certain
   tax  deductible  funding vehicles.  KU anticipates making similar funding
   decisions  in  future  years,  but  will  consider  and make such funding
   decisions  on  the basis of tax, regulatory and other relevant conditions
   in  effect  at  such  times.  The plan assets consist primarily of equity
   investments.




                                      -33-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company


   The   reconciliation  of  the  funded  status  of  the  plans  and  the
   postretirement benefit liability recorded by KU is as follows:
<TABLE>
<CAPTION>

   As of December 31, (in thousands of dollars)                   1996                  1995
    Accumulated postretirement benefit obligation:
<S>                                                         <C>                   <C>
      Retirees                                              $   (29,313)          $   (28,575)
      Fully eligible active plan participants                    (8,678)               (8,250)
      Other active plan participants                            (28,528)              (26,831)
                                                                (66,519)              (63,656)
    Plan assets at fair value                                    13,322                10,427
    Accumulated postretirement benefit obligation
      in excess of plan assets                                  (53,197)              (53,229)
    Unrecognized net (gain)/loss from past
      experience different from that assumed                    (20,029)              (18,773)
    Unrecognized transition obligation                           53,460                56,801
    Accrued postretirement benefit liability                $   (19,766)          $   (15,201)
</TABLE>
<TABLE>

   Components of the net periodic postretirement benefit cost are as follows:
<CAPTION>

   Year Ended December 31, (in thousands of dollars)       1996          1995           1994
    Service cost (benefits attributed to service
<S>                                                   <C>           <C>           <C>
      during the period)                              $    1,859    $    1,918    $     2,105
    Interest cost on accumulated postretirement
      benefit obligation                                   4,751         4,926          4,926
    Actual return on plan assets                          (1,633)       (1,722)           (80)
    Net amortization and deferral                            103           792           (118)
    Amortization of transition obligation                  3,341         3,341          3,341
    Regulatory effect recorded                                 -             -            689
    Net periodic postretirement benefit cost          $    8,421    $    9,255    $    10,863
</TABLE>
<TABLE>
    Assumptions Used in Determining Actuarial Valuations:   1996          1995           1994
    <S>                                                    <C>           <C>            <C>
    Weighted average discount rate used to
      determine the projected benefit obligation           7.75%         7.75%          8.25%

    Rate of increase for compensation levels               4.75%         4.75%          5.50%

    Weighted average expected long-term rate of
      return on assets                                     8.00%         8.00%          8.25%
</TABLE>

   For  measurement  purposes,  a  7.5%  annual  rate of increase in the per
   capita  cost  of  covered  health care benefits is assumed for 1997.  The
   health  care  cost  trend  rate is assumed to decrease gradually to 4.75%
   through  2003  and  remain  at  that  level thereafter over the projected
   payout  period  of the benefits.  Increasing the assumed health care cost
   trend  rates  by  one  percentage  point  in each year would increase the
   accumulated postretirement benefit obligation as of December 31, 1996, by
   $10.4  million  (16%)  and the aggregate of the service and interest cost
   components  of  the net periodic postretirement benefit cost for the year
   by $1.2 million (19%).




                                      -34-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company


   4.  Commitments and Contingencies
<TABLE>

   The effects of certain commitments made by KU are estimated below:
<CAPTION>

   (in thousands of dollars)   1997       1998        1999       2000      2001    1997-2001
    Estimated Construction
<S>                         <C>        <C>        <C>        <C>        <C>        <C>
     Expenditures           $ 89,700   $ 98,300   $ 114,300  $ 113,700  $115,200   $  531,200
    Estimated Contract
     Obligations:
      Fuel                   142,200     86,500      48,300      6,600         -      283,600
      Purchased power         31,600     30,400      29,000     28,000    30,600      149,600
      Operating leases         2,800      2,800       2,700      2,700     2,700       13,700
    First Mortgage Bond
     Maturities:
      Series Q              $      -   $      -   $       -  $  61,500  $      -   $   61,500
</TABLE>


   Construction Program

   KU  frequently  reviews  its  construction  program  and  may  revise its
   projections  of  related expenditures based on revisions to its estimated
   load growth and projections of its future load.

   See  Management's  Discussion and Analysis - Construction Requirements in
   KU  Energy's 1996 Annual Report to Shareholders (Exhibit 13) incorporated
   herein  by reference for a discussion of future construction expenditures
   including those relating to construction of peaking units.

   Coal Supply

   Obligations  under  KU's  coal  purchase  contracts  are stated at prices
   effective  January  1, 1997, and are subject to changes as defined by the
   terms of the contracts.

   Purchased Power

   KU  has  purchase  power  arrangements with Owensboro Municipal Utilities
   (OMU),    Electric  Energy, Inc. (EEI), and other parties.  Under the OMU
   agreement, which expires on January 1, 2020, KU purchases, on an economic
   basis,  all  of the output of a 400-MW generating station not required by
   OMU.    The  amount  of purchased power available to KU during 1997-2001,
   which  is expected to be approximately 8% of KU's total kWh requirements,
   is  dependent upon a number of factors including the units' availability,
   maintenance  schedules,  fuel  costs  and OMU requirements.  Payments are
   based  on  the  total costs of the station allocated per terms of the OMU
   agreement,  which generally follows delivered kWh.  Included in the total
   costs  is  KU's  proportionate  share  of  debt  service  requirements on
   $192.9  million  of OMU bonds outstanding at December 31, 1996.  The debt
   service  is  allocated  to  KU  based  on  its  annual allocated share of
   capacity, which averaged approximately 48% in 1996.

   KU  has  a  20%  equity  ownership  in EEI, which is accounted for on the
   equity  method  of  accounting.  KU's entitlement is 20% of the available


                                      -35-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   capacity of a 1,000-MW station.  Payments are based on the total costs of
   the  station  allocated per terms of an agreement among the owners, which
   generally follows delivered kWh.

   KU  has  several  other contracts for purchased power during 1997-2001 of
   various  MW capacities and for varying periods with a maximum entitlement
   at any time of 282 MW.

   Credit Arrangements

   KU  has  aggregate  bank  lines  of  credit  of $60 million, all of which
   remained  unused  at December 31, 1996.  All of these credit lines expire
   in  December  1999.   In support of these lines of credit, KU compensates
   the banks by paying a commitment fee.

   5.  Common Stock

   KU  is  subject  to  restrictions  applicable  to  all corporations under
   Kentucky  and  Virginia  law  on  the  use  of retained earnings for cash
   dividends  on  common  stock,  as well as those contained in its Mortgage
   Indenture  and  Articles  of  Incorporation.  At December 31, 1996, there
   were no restricted retained earnings.

   6.  Preferred and Preference Stock

   Each  series of preferred stock is redeemable at the option of KU upon 30
   days' written notice as follows:


                            Redemption Price per Share
    Series                  (plus accrued and unpaid dividends, if any)
    4 3/4%                  $101.00

    6.53%                   (Not redeemable prior to December 1, 2003.)
                            $103.265 through November 30, 2004, decreasing
                            approximately $.33 each twelve months thereafter to
                            $100 on or after December 1, 2013.

   As  of  December  31, 1996, there were 5.3 million shares of KU preferred
   stock,   having  a  maximum  aggregate  stated  value  of  $200  million,
   authorized for issuance, of which 400,000 shares were outstanding.

   As  of  December  31,  1996, there were 2 million shares of KU Preference
   Stock without par value, authorized for issuance.

   7.  Short-Term and Long-Term Debt

   KU's  short-term financing requirements are satisfied through the sale of
   commercial  paper.  The  weighted  average  interest rate on the year-end
   balance was 6.17% for 1996 and 5.83% for 1995.



                                      -36-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   In  1994,  KU  entered  into a loan agreement with the County of Carroll,
   Kentucky  to finance the construction of solid waste disposal facilities.
   The  County of Carroll issued $54 million of variable rate revenue bonds,
   with  the  proceeds held in a construction fund.  In 1994, 1995 and 1996,
   KU drew down $35.7 million, $15.1 million and $3.2 million, respectively,
   relating  to these bonds.  Kentucky Utilities Pollution Control Series 10
   Bonds are issued under KU's Mortgage Indenture.

   Under  the  provisions for the variable rate revenue bonds, KU can choose
   between  various  interest  rate  options.  Currently, the daily interest
   rate  option  is being utilized.  The average annual interest rate on the
   bonds  during  1996  and  1995  was  3.53%  and 3.95%, respectively.  The
   variable  rate  bonds are subject to tender for purchase at the option of
   the  holder  and  to mandatory tender for purchase upon the occurrence of
   certain  events.   If tendered bonds are not remarketed, KU has available
   lines of credit which may be used to repurchase the bonds.

   In  January  1996, KU issued $36 million of Series S First Mortgage Bonds
   which  bear  interest  at  5.99%  and  will mature January 15, 2006.  The
   proceeds  were  used  to  redeem $35.5 million of Series K First Mortgage
   Bonds.

   Substantially  all  of  KU's utility plant is pledged as security for the
   first mortgage bonds.


   8.  Financial Instruments

   The  following  methods  and  assumptions  were used to estimate the fair
   value  of each class of financial instruments for which it is practicable
   to estimate that value:

   The   carrying  values  of  cash  and  cash  equivalents,  escrow  funds,
   construction  funds, short-term borrowings, commercial paper and customer
   deposits  approximate  fair  value because of the short maturity of these
   amounts.

   Long-term  debt  fair  values  are based on quoted market prices for KU's
   first mortgage bonds and on current rates available to KU for debt of the
   same remaining maturities for KU's pollution control bonds and promissory
   note.  The carrying value of long-term debt on December 31, 1996 and 1995
   was  $546  million and $546 million, respectively, and the estimated fair
   value was $587 million and $594 million, respectively.

   If the difference between fair value and carrying value of KU's long-term
   debt  were  settled at amounts approximating those above, the anticipated
   regulatory  treatment (based on the current regulatory environment) would
   allow  recovery  of these amounts in rates over a prescribed amortization
   period.   Accordingly, any settlement would not have a material impact on
   KU's financial position or results of operations.



                                      -37-
<PAGE>
   Notes to
   Financial
   Statements
                           Kentucky Utilities Company

   9. Environmental Cost Recovery

   Since August 1994, KU has been collecting an environmental surcharge from
   its  Kentucky  retail customers under a Kentucky statute which authorizes
   electric  utilities  (including  KU)  to  implement, beginning January 1,
   1993,  an  environmental surcharge.  The surcharge is designed to recover
   certain  operating and capital costs of compliance with federal, state or
   local environmental requirements associated with the production of energy
   from  coal,  including  the  Federal  Clean  Air  Act  as  amended.  KU's
   environmental  surcharge  was  approved  by  the PSC in July 1994 and was
   implemented  in  August  1994.    The  total  surcharge  collections from
   August 1, 1994 through December 31, 1996 were approximately $40 million.

   The  constitutionality  of  the  surcharge  statute was challenged in the
   Franklin  County (Kentucky) Circuit Court in an action brought against KU
   and   the  PSC  by  the  Attorney  General  of  Kentucky  and  joined  by
   representatives  of  consumer  groups.    In July 1995, the Circuit Court
   entered  a  judgment  upholding the constitutionality of the statute, but
   vacating  that  part  of  the  PSC's  July  1994 order which the judgment
   describes  as  allowing  KU  to  recover,  under  the  surcharge, certain
   environmental  expenditures  characterized by the Circuit Court as having
   been  incurred before January 1, 1993.  The Circuit Court further ordered
   the  case  remanded to the PSC for a determination in accordance with the
   judgment.    KU and the PSC assert that none of the costs included in the
   surcharge were incurred prior to June 1994.

   The  Attorney  General and other consumer representatives appealed to the
   Kentucky  Court  of  Appeals  that  part  of  the  Circuit Court judgment
   upholding the constitutionality of the surcharge statute.  The PSC and KU
   appealed  that  part  of  the  judgment  denying  recovery  of  certain
   environmental  expenditures  characterized by the Circuit Court as having
   been  incurred before January 1, 1993.  The PSC has ordered all surcharge
   revenues  collected by KU from February 1, 1995 subject to refund pending
   final determination of all appeals.  The total surcharge collections from
   February  1,  1995  through  December  31,  1996  were  approximately
   $36 million.

   KU  believes  the  constitutionality  of  the  surcharge  statute will be
   upheld,  but  it  cannot  predict the outcome of that part of the Circuit
   Court judgment disallowing recovery of certain environmental expenditures
   characterized  by  the  Circuit  Court  as  having  been  incurred before
   January  1,  1993.  If the Circuit Court judgment is ultimately upheld as
   entered,  KU  estimates  that  the  amount it would be required to refund
   (which  is  based  solely  on costs associated with certain environmental
   expenditures  characterized  by the Circuit Court as having been incurred
   before  January  1,  1993) for surcharge collections through December 31,
   1996,  from  the  implementation  of the surcharge would be approximately
   $11 million, and from February 1, 1995 would be approximately $9 million.
   At this time, KU has not recorded any reserve for refund.





                                      -38-
<PAGE>
   Supplementary
   Quarterly
   Financial
   Information
   (Unaudited)
                           Kentucky Utilities Company

   Quarterly  financial  results  for  1996  and  1995 are summarized below.
   Generally,  quarterly  results  may fluctuate due to seasonal variations,
   changes in fuel costs and other factors.
<TABLE>
<CAPTION>

   Quarter                                    4th           3rd          2nd           1st
                                                                  (in thousands of dollars)
    1996
<S>                                     <C>          <C>          <C>           <C>
    Operating Revenues                  $  174,924   $   178,275  $   167,516   $   190,996
    Net Operating Income                    28,029        30,457        23,863       34,988
    Net Income                              19,746        22,724       16,190        27,503
    Net Income Applicable
           to Common Stock                  19,182        22,160       15,626        26,939
    1995
    Operating Revenues                  $  170,152   $   194,373  $   154,757   $   167,148
    Net Operating Income                    30,626        33,073       18,283        26,562
    Net Income                              22,438        24,915       10,561        18,928
    Net Income Applicable
           to Common Stock                  21,874        24,351        9,997        18,364
</TABLE>

    These  quarterly  amounts  reflect,  in  KU's  opinion,  all  adjustments
   (including  only  normal  recurring  adjustments)  necessary  for  a fair
   presentation.
















                                      -39-
<PAGE>

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

   None for KU Energy or KU.

                                     PART III


   Item 10. Directors and Executive Officers of the Registrants

   The information required by Item 10 for the Company and KU relating to each
   director  and  each nominee for election as a director at the Company's and
   KU's  1997  Annual  Shareholders  Meetings  is  set forth in the Company's
   definitive  proxy statement (the Proxy Statement) filed with the Securities
   and  Exchange  Commission  pursuant  to Regulation 14A under the Securities
   Exchange  Act  of  1934  in  connection  with  the  Company's  1997  Annual
   Shareholders Meeting.  Such information is incorporated herein by reference
   to  the  material  appearing  in  the  Proxy  Statement  under  the caption
   "Election  of  Directors--General"  and  is  also  filed  herewith  as
   Exhibit  99.03.    Information  required by this item relating to executive
   officers  of  the  Company  and KU is set forth under a separate caption in
   Part I hereof.

   Item 11. Executive Compensation

   The  information required by Item 11 for the Company and KU is incorporated
   herein  by reference to the material appearing in the Proxy Statement under
   the  caption  "Election  of  Directors  --  Directors' Compensation, and --
   Executive  Compensation"  and  is also filed herewith as Exhibit 99.03 (but
   excluding  any  information  contained  under the subheadings -- "Report of
   Compensation Committee on Executive Compensation," -- "Performance Graph").


   Item 12. Security Ownership of Certain Beneficial Owners and Management

   The  information required by Item 12 for the Company and KU is incorporated
   herein  by reference to the material appearing in the Proxy Statement under
   the caption "Election of Directors--Voting Securities Beneficially Owned by
   Directors,  Nominees  and Executive Officers" and is also filed herewith as
   Exhibit 99.03.


   Item 13. Certain Relationships and Related Transactions

   None for KU Energy or KU.









                                       -40-
<PAGE>

                                     PART IV

                                 KU ENERGY AND KU

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

                                                              Page of this
                                                                Report on
                                                                Form 10-K
                                                              KU Energy KU

   (a)  (1)   Financial Statements**
              Report of Independent Public Accountants             *    23
              Statements of Income and Retained Earnings
                for the years ended December 31, 1996,
                1995 and 1994                                      *    24
              Statements of Cash Flows for the years ended
                December 31, 1996, 1995 and 1994                   *    25
              Balance Sheets as of December 31, 1996 and 1995      *    26
              Statements of Capitalization as of
                December 31, 1996, and 1995                        *    27
              Notes to Financial Statements                        *    28


   (a)  (2)   All financial statement schedules for KU Energy
              and KU are omitted as not applicable or not
              required under Regulation S-X.





   *  Incorporated  by  reference  from  KU  Energy's  1996  Annual Report to
   Shareholders (Exhibit 13).

   **  The  KU  Energy consolidated financial statements, including notes, are
   not included in the KU Annual Report on Form 10-K.














                                       -41-
<PAGE>

  (3) Exhibits - KU Energy and KU

                                                         Applicable to Form
                                                               10-K of
                                                          KU
   No.                     Description                  Energy   KU  Page(s)


   3.01   Amended and Restated Articles of
          Incorporation of KU Energy Corporation.
          (Exhibit 3A to Form 10-K Annual Report of KU
          Energy for the year ended December 31,
          1992).  Incorporated by reference.               x

   3.02   Amended and Restated Articles of
          Incorporation of Kentucky Utilities Company.
          (Exhibits 4.03 and 4.04 to Form 8-K Current
          Report of KU, dated December 10, 1993).
          Incorporated by reference.                              x

   3.03   By-laws of KU Energy Corporation dated
          July 29, 1996 (Exhibit 4.01 to Form 10-Q
          Quarterly Report for the quarter ended
          June 30, 1996 of KU Energy and KU).
          Incorporated by reference.                       x

   3.04   By-laws of Kentucky Utilities Company dated
          July 29, 1996.  (Exhibit 4.02 to Form 10-Q
          Quarterly Report for the quarter ended
          June 30, 1996 of KU Energy and KU).
          Incorporated by reference.                              x

   4.01   Rights Agreement, dated as of January 27,
          1992, by and between KU Energy Corporation
          and Illinois Stock Transfer Company
          (Exhibit 4.1 to Form 8-K Current Report of
          KU Energy dated January 27, 1992).
          Incorporated by reference.                       x

   4.02   Indenture of Mortgage or Deed of Trust dated
          May 1, 1947, between Kentucky Utilities
          Company and First Trust National Association
          (successor Trustee) and a successor
          individual co-trustee, as Trustees (the
          Trustees) (Amended Exhibit 7(a) in File No.
          2-7061), and Supplemental Indentures thereto
          dated, respectively, January 1, 1949 (Second
          Amended Exhibit 7.02 in File No. 2-7802),
          July 1, 1950 (Amended Exhibit 7.02 in File
          No. 2-8499), June 15, 1951 (Exhibit 7.02(a)
          in File No. 2-8499), June 1, 1952 (Amended
          Exhibit 4.02 in File No. 2-9658), April 1,
          1953 (Amended Exhibit 4.02 in File
          No. 2-10120), April 1, 1955  (Amended
          Exhibit 4.02 in File No. 2-11476), April 1,
          1956 (Amended Exhibit 2.02 in File

                                      -42-
<PAGE>

                                                         Applicable to Form
                                                               10-K of
                                                          KU
   No.                     Description                  Energy   KU  Page(s)


   4.02   No. 2-12322), May 1, 1969 (Amended
   con.   Exhibit 2.02 in File No. 2-32602), April 1,
          1970 (Amended Exhibit 2.02 in File No.
          2-36410), September 1, 1971 (Amended
          Exhibit 2.02 in File No. 2-41467),
          December 1, 1972 (Amended Exhibit 2.02 in
          File No. 2-46161), April 1, 1974 (Amended
          Exhibit 2.02 in File No. 2-50344),
          September 1, 1974 (Exhibit 2.04 in File
          No. 2-59328), July 1, 1975 (Exhibit 2.05 in
          File No. 2-59328), May 15, 1976 (Amended
          Exhibit 2.02 in File No. 2-56126), April 15,
          1977 (Exhibit 2.06 in File No. 2-59328),
          August 1, 1979 (Exhibit 2.04 in File
          No. 2-64969), May 1, 1980 (Exhibit 2 to
          Form 10-Q Quarterly Report of KU for the
          quarter ended June 30, 1980), September 15,
          1982 (Exhibit 4.04 in File No. 2-79891),
          August 1, 1984 (Exhibit 4B to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1984), June 1, 1985 (Exhibit 4
          to Form 10-Q Quarterly Report of KU for the
          quarter ended June 30, 1985), May 1, 1990
          (Exhibit 4 to Form 10-Q Quarterly Report of
          KU for the quarter ended June 30, 1990),
          May 1, 1991 (Exhibit 4 to Form 10-Q
          Quarterly Report of KU for the quarter ended
          June 30, 1991), May 15, 1992 (Exhibit 4.02
          to Form 8-K of KU dated May 14, 1992),
          August 1, 1992 (Exhibit 4 to Form 10-Q
          Quarterly Report of KU for the quarter ended
          September 30, 1992), June 15, 1993
          (Exhibit 4.02 to Form 8-K of KU dated
          June 15, 1993) and December 1, 1993
          (Exhibit 4.01 to Form 8-K of KU dated
          December 10, 1993), November 1, 1994
          (Exhibit 4.C to Form 10-K Annual Report of
          KU for the year ended December 31, 1994),
          June 1, 1995 (Exhibit 4 to Form 10-Q
          Quarterly Report of KU for the quarter ended
          June 30, 1995) and January 15, 1996
          (Exhibit 4.E to Form 10-K Annual Report of
          KU for the year ended December 31, 1995).
          Incorporated by reference.                       x      x


                                      -43-
<PAGE>
                                                         Applicable to Form
                                                               10-K of
                                                          KU
   No.                     Description                  Energy   KU  Page(s)


   4.03   Supplemental Indenture dated March 1, 1992
          between Kentucky Utilities Company and the
          Trustees, providing for the conveyance of
          properties formerly held by Old Dominion
          Power Company (Exhibit 4B to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1992).  Incorporated by
          reference.                                       x      x

   10.01  KU's Amended and Restated Performance Share
          Plan (Exhibit 10.A to Form 10-Q Quarterly
          Report of KU for the quarter ended June 30,
          1993).  Incorporated by reference.               x      x

   10.02  KU's Annual Performance Incentive Plan
          (Exhibit 10B to Form 10-K Annual Report of
          KU for the year ended December 31, 1990).
          Incorporated by reference.                       x      x

   10.03  Amendment No. 1 to KU's Annual Performance
          Share Plan.                                      x      x   50-54

   10.04  Amendment No. 1 to KU's Annual Performance
          Incentive Plan (Exhibit 10D to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1991).  Incorporated by
          reference.                                       x      x

   10.05  Amendment No. 2 to KU's Annual Performance
          Incentive Plan (Exhibit 10.H to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1993).  Incorporated by
          reference.                                       x      x

   10.06  Amendment No. 3 to KU's Annual Performance
          Incentive Plan (Exhibit 10.I to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1993).  Incorporated by
          reference.                                       x      x

   10.07  Amendment No. 4 to KU's Annual Performance
          Incentive Plan.                                  x      x   55-59

   10.08  KU's Executive Optional Deferred
          Compensation Plan.                               x      x   60-81

   10.09  KU's Director Retirement Retainer Program,
          and Amendment No. 1 (Exhibit 10G to
          Form 10-K Annual Report of KU for the year
          ended December 31, 1991).  Incorporated by
          reference.                                       x      x

   10.10  Amendment No. 2 to KU's Director Retirement
          Retainer Program.                                x      x   82-84

                                      -44-
<PAGE>
                                                         Applicable to Form
                                                               10-K of
                                                          KU
   No.                     Description                  Energy   KU  Page(s)


   10.11  Amendment No. 3 to KU's Director Retirement
          Retainer Program.                                x      x   85-87

   10.12  KU's Supplemental Security Plan (Exhibit 10I
          to Form 10-K Annual Report of KU for the
          year ended December 31, 1991).  Incorporated
          by reference.                                    x      x

   10.13  Amendment No. 1 to KU's Supplemental
          Security Plan (Exhibit 10.J to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1994).  Incorporated by
          reference.                                       x      x

   10.14  Amendment No. 2 to KU's Supplemental
          Security Plan (Exhibit 10.K to Form 10-K
          Annual Report of KU for the year ended
          December 31, 1994).  Incorporated by
          reference.                                       x      x

   10.15  Amendment No. 3 to KU's Supplemental
          Security Plan.                                   x      x   88-94

   10.16  KU's Amended and Restated Director Deferred
          Compensation Plan.                               x      x   95-116

   10.17  KU Energy's Performance Share Plan
          (Exhibit 10A to Form 10-Q Quarterly Report
          of KU Energy for the quarter ended June 30,
          1993).  Incorporated by reference.               x

   10.18  Amendment No. 1 to KU Energy's Performance
          Share Plan.                                      x         117-121

   10.19  KU Energy's Annual Performance Incentive
          Plan of January 1993 (Exhibit 10.J to Form
          10-K Annual Report of KU Energy for the year
          ended December 31, 1993).  Incorporated by
          reference.                                       x

   10.20  Amendment No. 1 to KU Energy's Annual
          Performance Incentive Plan (Exhibit 10.K to
          Form 10-K Annual Report of KU Energy for the
          year ended December 31, 1993).
          Incorporated by reference.                       x

   10.21  Amendment No. 2 to KU Energy's Annual
          Performance Incentive Plan of January 1993.      x         122-126

   10.22  KU Energy's Annual Performance Incentive
          Plan as amended and restated effective as of
          January 28, 1997.                                x         127-148

   10.23  KU Energy's Executive Optional Deferred
          Compensation Plan.                               x         149-172

                                      -45-
<PAGE>
                                                         Applicable to Form
                                                               10-K of

                                                          KU
   No.                     Description                  Energy   KU  Page(s)

   10.24  KU Energy's Director Retirement Retainer
          Program (Exhibit 10J to Form 10-K Annual
          Report of KU Energy for the year ended
          December 31, 1992).  Incorporated by
          reference.                                       x

   10.25  Amendment No. 1 to KU Energy's Director
          Retirement Retainer Program.                     x         173-175

   10.26  KU Energy's Amended and Restated Director
          Deferred Compensation Plan.                      x         176-197

   10.27  KU Energy s Long-Term Incentive Plan.            x         198-231

   12     Computation of Ratio of Earnings to Fixed
          Charges                                                 x    232

   13     Portions of 1996 KU Energy Annual Report to
          Shareholders                                     x     x*  233-260

   21     List of Subsidiaries                             x      x    261

   23     Consent of Independent Public Accountants -
          KU Energy and KU                                 x      x    262

   27.01  Financial Data Schedule of KU Energy**           x

   27.02  Financial Data Schedule of KU**                         x

   99.01  Description of Common Stock - KU Energy          x         263-265

   99.02  Description of Common Stock - KU                        x  266-267

   99.03  Director and Officer Information                        x  268-276

   99.04  KU Employee Savings Plan as Amended and
          Restated effective as of January 1, 1997         x      x  277-326

   99.05  KU Employee Savings Plan Trust effective
          January 2, 1997                                  x      x  327-341

   99.06  Cautionary Statements - KU Energy and KU         x      x  342-343

  Note  -  Exhibit  numbers  10.01  through 10.27 are management contracts or
  compensatory plans or arrangements required to be filed as exhibits to this
  Form 10-K.
  *  Only the Management's Discussion and Analysis of Financial Condition and
  Results  of  Operations is included or incorporated in the Annual Report on
  Form 10-K of Kentucky Utilities.
  ** Included in electronic filing only.

                                      -46-
<PAGE>

  The  following  instruments defining the rights of holders of certain long-
  term  debt  of  KU  have  not  been  filed with the Securities and Exchange
  Commission but will be furnished to the Commission upon request.

      1. Loan  Agreement dated as of May 1, 1990 between KU and the County of
         Mercer,  Kentucky,  in connection with $12,900,000 County of Mercer,
         Kentucky,  Collateralized  Solid  Waste  Disposal   Facility Revenue
         Bonds (KU Project) 1990 Series A, due May 1, 2010 and May 1, 2020.

      2. Loan  Agreement dated as of May 1, 1991 between KU and the County of
         Carroll, Kentucky, in connection with $96,000,000 County of Carroll,
         Kentucky,  Collateralized  Pollution  Control  Revenue  Bonds  (KU
         Project) 1992 Series A, due September 15, 2016.

      3. Loan  Agreement dated as of August 1, 1992 between KU and the County
         of  Carroll,  Kentucky,  in  connection  with  $2,400,000  County of
         Carroll,  Kentucky,  Collateralized  Pollution Control Revenue Bonds
         (KU Project) 1992 Series C, due February 1, 2018.

      4. Loan  Agreement dated as of August 1, 1992 between KU and the County
         of  Muhlenberg,  Kentucky,  in  connection with $7,200,000 County of
         Muhlenberg, Kentucky, Collateralized Pollution Control Revenue Bonds
         (KU Project) 1992 Series A, due February 1, 2018.

      5. Loan  Agreement dated as of August 1, 1992 between KU and the County
         of Mercer, Kentucky, in connection with $7,400,000 County of Mercer,
         Kentucky,  Collateralized  Pollution  Control  Revenue  Bonds  (KU
         Project) 1992 Series A, due February 1, 2018.

      6. Loan  Agreement dated as of August 1, 1992 between KU and the County
         of  Carroll,  Kentucky,  in  connection  with  $20,930,000 County of
         Carroll,  Kentucky,  Collateralized  Pollution Control Revenue Bonds
         (KU Project) 1992 Series B, due February 1, 2018.

      7. Loan  Agreement  dated  as  of  December 1, 1993, between KU and the
         County  of  Carroll, Kentucky, in connection with $50,000,000 County
         of Carroll, Kentucky, Collateralized Solid Waste Disposal Facilities
         Revenue Bonds (KU Project) 1993 Series A due December 1, 2023.

      8. Loan  Agreement  dated  as  of  November 1, 1994, between KU and the
         County  of Carroll, Kentucky, in connection with $54,000,000  County
         of  Carroll,  Kentucky,  Collateralized    Solid  Waste  Disposal
         Facilities  Revenue Bonds (KU Project) 1994 Series A due November 1,
         2024.

  (B)    No reports on Form 8-K were filed by KU Energy or KU during the last
  quarter of 1996.








                                      -47-
<PAGE>

                                   SIGNATURES

       Pursuant  to the requirements of Section 13 or 15(d) of the Securities
  Exchange  Act of 1934, KU Energy Corporation and Kentucky Utilities Company
  have  each  duly  caused  this  report  to  be  signed on its behalf by the
  undersigned, thereunto duly authorized, on March 10, 1997.

                                        KU ENERGY CORPORATION AND
                                        KENTUCKY UTILITIES COMPANY
                                                 (Registrants)


                                        /s/Michael R. Whitley
                                        Michael R. Whitley
                                        Chairman and President

       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
  registrants in the capacities and on the date indicated.

       Signature                 Title

       /s/Michael R. Whitley
       Michael R. Whitley        Chairman and President (Principal Executive
                                 Officer) and Director

       /s/O.M. Goodlett
       O. M. Goodlett            Senior Vice-President (Principal Financial
                                 Officer)
       /s/Michael D. Robinson
       Michael D. Robinson       Controller (Principal Accounting Officer)

       /s/Mira S. Ball
       Mira S. Ball              Director

       /s/Carol M. Gatton
       Carol M.  Gatton          Director

       /s/Harry M. Hoe
       Harry M. Hoe              Director

       /s/Milton W. Hudson
       Milton W. Hudson          Director

       /s/John T. Newton
       John T. Newton            Director

       /s/Frank V. Ramsey, Jr.
       Frank V. Ramsey, Jr.      Director

       /s/William L. Rouse, Jr.
       William L. Rouse, Jr.     Director


                                      -48-
<PAGE>
       Signature                 Title

       /s/Charles L. Shearer
       Charles L. Shearer        Director

       /s/Lee T. Todd, Jr.
       Lee T. Todd, Jr.          Director



  March 10, 1997














                                      -49-