EXHIBIT 10.16







                              KENTUCKY UTILITIES COMPANY

                         DIRECTOR DEFERRED COMPENSATION PLAN

                          (As Amended and Restated Effective
                               As Of January 28, 1997)










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                              KENTUCKY UTILITIES COMPANY
                         DIRECTOR DEFERRED COMPENSATION PLAN

              (As Amended and Restated Effective As Of January 1, 1997)


                                      ARTICLE I

                                       Purpose

                    The  Kentucky  Utilities   Company  Director   Deferred

          Compensation Plan (the "Plan") was established, effective June 1,

          1989, to provide eligible directors of Kentucky Utilities Company

          with the opportunity  to defer  some or all  of the  compensation

          which  may be  payable to  them for services  to be  performed as

          members of  the Board of Directors of Kentucky Utilities Company.

          The terms and  conditions of  the Plan, as  amended and  restated

          effective as of January 1, 1997, are set forth below.


                                      ARTICLE II

                                     Definitions

                    The following words and phrases shall have the meanings

          set forth below unless a different meaning is clearly required by

          the context:

                         (a)  Act:    The Securities  Exchange  Act of
                    1934, as amended from time to time.

                         (b)  Account:    The account  maintained
                    for  each  Participant  showing  his  or  her
                    interest  under  the  Plan  which   shall  be
                    divided into Subaccount  I and Subaccount  II
                    as provided in Section 4.1.

                         (c)  Accounting   Date:      Except   as
                    otherwise  provided  herein,  each March  31,
                    June 30, September 30 and December 31 of each
                    calendar  year.   The  first  Accounting Date
                    under the Plan was June 30, 1989.

                         (d)  Beneficiary:  The person or persons
                    (natural   or   otherwise)   designated,   in
                    accordance  with Section 5.4,  to receive the
                    distribution   of  a   Participant's  Account
                    balance  in the  event  of the  Participant's
                    death.


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                         (e)  Board:  The  Board of Directors  of
                    the Company.

                         (f)  Change  in Control:   The  occurrence of
                    any of the events provided in Section 5.7.

                         (g)  Committee:      The    Compensation
                    Committee of the Board.

                         (h)  Company:      Kentucky    Utilities
                    Company, a corporation organized and existing
                    under   the  laws  of   the  Commonwealth  of
                    Kentucky.

                         (i)  Compensation:    Any  retainer  and
                    meeting fees payable to the Director in  cash
                    by  the Company  for services  rendered as  a
                    member of the Board or any committee thereof.

                         (j)  Director:  Any  member of the Board
                    on  or  after  the  Effective  Date   who  is
                    separately   compensated   for  his   or  her
                    services as a member of the Board.

                         (k)  Effective Date:  June 1, 1989.

                         (l)  Fair  Market  Value:   The  closing
                    price   of  the  Company's  Common  Stock  as
                    reported in the listing of the New York Stock
                    Exchange  -  Composite   Transactions  on   a
                    specified date.

                         (m)  Parent:  KU  Energy Corporation  or
                    any successor thereto.

                         (n)  Participant:         A     Director
                    participating  in the Plan in accordance with
                    the provisions  of Section  3.2, or  a former
                    Director whose Account balance under the Plan
                    has not been paid in full.

                         (o)  Plan:     The   Kentucky  Utilities
                    Company  Director Deferred  Compensation Plan
                    set forth  in this  instrument, as it  may be
                    amended from time to time.

                         (p)  Service:   An  individual's service
                    on the Board and  on the boards of KU  or any
                    other Subsidiary.

                         (q)  Subsidiary:  An entity in which the
                    Company  or the Parent directly or indirectly
                    beneficially owns 50%  or more of  the voting
                    securities.


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                                     ARTICLE III

                            Eligibility and Participation

                    3.1  Eligibility:   Each member of the  Board who was a

          Director on the Effective Date was eligible to participate in the

          Plan as  of the  Effective Date.   Each  other Director  shall be

          eligible to  participate in the Plan  as of the first  day of the

          month next following the date he or she becomes a Director.

                    3.2  Participation:      A   Director   may   elect  to

          participate in the  Plan effective  as of the  date the  Director

          first becomes eligible to participate as provided in Section 3.1,

          or effective as of the January 1st of any calendar year beginning

          after such date, by  filing written notice of such  election with

          the  Company prior to the effective date  of such election.  Such

          notice  shall   be  accompanied  by  (i) an   election  to  defer

          Compensation as  provided in  Section 3.4, (ii) an  election with

          respect to Account  adjustments as provided  in Section 4.3,  and

          (iii) an  election as to  the method  of payment  as provided  in

          Section 5.1.   Upon  filing  such election  notice, the  Director

          shall become a  Participant in the Plan effective as  of the date

          elected as permitted in this Section 3.2.

                    3.3  Crediting  of  Compensation:   Commencing  on  the

          effective  date of a Participant's  participation in the Plan and

          continuing during the period that Compensation is  to be credited

          to the  Participant's Account under  the Plan, the  Company shall

          defer payment of and  credit to the Participant's Account  all or

          such portion, as elected by the Participant under Section 3.4, of

          the  Compensation that  the Participant  would have  received for

          services rendered  by the  Participant  during such  period as  a

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          member of the  Board but for his participation  in the Plan, such

          credits to be made as provided in Section 4.2(b).

                    3.4  Election to Defer:  At the time a  Director elects

          to  become a Participant, the  Director shall elect  to have from

          10%  to 100%,  in  specified  multiples of  10%,  of  his or  her

          Compensation  for services  rendered subsequent  to the  date the

          Director  becomes  a  Participant  deferred under  the  Plan  and

          credited to  his or her Account as provided in Section 3.3.  Such

          election shall  remain in effect  until changed or  terminated as

          hereinafter provided.

                    A Participant may change his or her election under this

          Section 3.4 effective as of the January 1st of any calendar  year

          with respect to  Compensation for  services to be  rendered as  a

          Director on or subsequent to such January 1st, by filing with the

          Company written notice of such change prior to the effective date

          of  such change.  Any change may (i) increase or decrease, within

          the  limits prescribed in the preceding paragraph, the portion of

          Compensation  to be  deferred and  credited to  the Participant's

          Account as provided in Section 3.3, (ii) terminate an election to

          defer Compensation  under this  Section 3.4  or (iii) resume  the

          deferral  of  Compensation  under  the  Plan  within  the  limits

          prescribed in the preceding  paragraph.  A change in  the portion

          of Compensation  deferred or  the termination of  a Participant's

          election to defer Compensation  shall not entitle the Participant

          to receive payment of his or her Account  balance, which shall be

          payable only as provided in Article V.





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                    Any  election   or  change   in  election   under  this

          Section 3.4 shall be made on a form provided or prescribed by the

          Company.


                                      ARTICLE IV

                                Participants' Accounts

                    4.1  Individual Accounts:  A separate  Account shall be

          maintained  by the  Company  on its  books for  each Participant.

          Such Account  shall be  divided into subaccounts  to specifically

          identify the portion of the  Account subject to adjustment  under

          Section 4.3(a)  ("Subaccount I") and  the portion of  the Account

          subject to adjustment under Section 4.3(b) ("Subaccount II").  As

          of January 1,  1995, each Participant's Account was  allocated to

          Subaccount I unless  the Participant had elected  otherwise as of

          such date as  then provided in  the Plan.   Subaccounts I and  II

          may,  in turn, be further subdivided into such subaccounts as the

          Company considers desirable for purposes of the administration of

          the Plan.

                    4.2  Accounting Procedures:  Each Participant's Account

          shall  be adjusted  as of  each Accounting  Date occurring  on or

          after December 1, 1996 as follows and in the following order:

                         (a)  The  amount of  any transfer  to or
                    from  Subaccount I  or Subaccount  II of  the
                    Participant's Account, pursuant  to a  change
                    in election or deemed election  under Section
                    4.3, made as of the first day of the calendar
                    quarter in which  such Accounting Date occurs
                    shall be added to  or subtracted from, as the
                    case may be, the applicable Subaccounts as of
                    the first day of such calendar quarter.

                         (b)  Each  Participant's  Account  shall
                    next   be  credited   with   the  amount   of
                    Compensation  to  be credited  to his  or her
                    Account as provided in Section 3.3 during the

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                    period  ending on  such Accounting  Date that
                    follows the next  preceding Accounting  Date.
                    Credits shall be made as of the last business
                    day  of the  respective  calendar  months  in
                    which such Compensation  would have been paid
                    to the Participant by the Company but for his
                    or her participation in the Plan and shall be
                    allocated to Subaccount I or Subaccount II in
                    accordance with the Participant's election or
                    deemed  election  as  in  effect  as  of  the
                    respective  dates as of which the credits are
                    made.

                         (c)  Each  Participant's  Account  shall
                    next be  charged as  of such  Accounting Date
                    with  the amount  of any  distributions under
                    the Plan to the Participant  or to his or her
                    Beneficiary  effective as of or prior to such
                    Accounting Date.

                         (d)  Subaccount I  of each Participant's
                    Account  shall  next  be  credited  with  the
                    amount equivalent to interest,  as determined
                    under  Section 4.3(a),  to  be  added to  the
                    Participant's Account as  of such  Accounting
                    Date.

                         (e)  Subaccount II of each Participant's
                    Account  shall next  be  adjusted upwards  or
                    downwards, as the case may be, in  accordance
                    with  Section 4.3(b),  to  reflect  the  Fair
                    Market  Value of  the hypothetical  shares of
                    Parent Common Stock  allocated to  Subaccount
                    II of  the Participant's  Account as of  such
                    Accounting Date.

               4.3  Election With Respect to Subaccount Adjustments:

          Subaccount I  and Subaccount  II of  a Participant's  Account are

          subject  to adjustment on and after December 1, 1996, as provided

          in Section 4.2 as follows:

                         (a)  Subaccount      I      Adjustments.
                    Subaccount I of a Participant's Account shall
                    be  adjusted as  of an  applicable Accounting
                    Date by  the addition of an amount equivalent
                    to  interest.  The  interest equivalent to be
                    credited as of  an applicable Accounting Date
                    shall be equal to  the interest that would be
                    earned  on the  average  of  the balances  in
                    Subaccount I of  the Participant's Account at
                    the end of each calendar  month ending during
                    the  period  following  the   next  preceding

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                    Accounting  Date and ending on the applicable
                    Accounting Date,  at a rate  per annum  which
                    equals  the  average  prime  rate  charged by
                    banks  as reported  in  the  Federal  Reserve
                    Bulletin published on  or next  prior to  the
                    applicable Accounting Date.

                         (b)  Subaccount      II     Adjustments:
                    Subaccount  II  of  a  Participant's  Account
                    shall  be  adjusted   as  of  an   applicable
                    Accounting  Date  to  equal the  Fair  Market
                    Value as of such  Accounting Date (or, if the
                    Accounting Date is not  a trading date, as of
                    the   trading   date   next  preceding   such
                    Accounting   Date)   of    the   number    of
                    hypothetical  shares  of Parent  Common Stock
                    allocated   to   Subaccount    II   of    the
                    Participant's Account as  of such  Accounting
                    Date.  The  number of hypothetical shares  of
                    Parent Common Stock  allocated to  Subaccount
                    II of a Participant's  Account as of any date
                    shall  be equal  to the  number of  shares of
                    Parent Common  Stock that would  be allocated
                    to the  Account as  of such date  if (i)  the
                    Compensation  credited  to the  Participant's
                    Account to be allocated to  Subaccount II was
                    invested in the Parent's Common Stock at Fair
                    Market  Value  on  the  trading  day that  is
                    coincident  with or  next preceding  the last
                    day  of  the  calendar  month  in  which such
                    Compensation  would have  been  paid  to  the
                    Participant  but  for  participation  in  the
                    Plan, (ii) any balance  transferred effective
                    as of January 1,  1995 from Subaccount I  due
                    to  the  one-time  election  permitted  under
                    Section 4.3 of the Plan as then in effect was
                    invested in the Parent's Common Stock at  the
                    average  Fair Market  Value  on trading  days
                    during the month of December, 1994, (iii) any
                    other balance transferred  from Subaccount  I
                    due  to  a  change  in  election  under  this
                    Section  4.3  was  invested  in  the Parent's
                    Common  Stock at  Fair  Market  Value on  the
                    trading day  that is coincident  with or next
                    following the effective date of  such change,
                    (iv) cash dividends  on the shares  of Parent
                    Common   Stock   treated   as  allocated   to
                    Subaccount  II  of the  Participant's Account
                    were automatically reinvested in the Parent's
                    Common  Stock at  Fair  Market  Value on  the
                    trading day  that is coincident  with or next
                    following  the  applicable  dividend  payment
                    date, and (v)  any transfers to  Subaccount I
                    due  to  a  change  in  election  under  this
                    Section   4.3   or  any   distributions  from

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                    Subaccount  II  of the  Participant's Account
                    were made at Fair Market Value on the trading
                    day that is coincident with or next preceding
                    the effective date of such change of election
                    or distribution of the number of hypothetical
                    shares of  Parent Common Stock needed to make
                    such   transfer    or   distribution,   which
                    hypothetical shares shall be  subtracted from
                    the number of shares treated as allocated  to
                    Subaccount II of the Participant's Account as
                    of  the  effective date  of  the transfer  or
                    distribution.

                    At  the time a Director elects  to become a Participant

          or  as of January 1, 1995, if  later, the Director shall elect to

          have the  Compensation thereafter deferred under  Section 3.4 and

          credited  to the  Participant's Account  allocated,  in specified

          multiples  of 10%,  to  Subaccount I  or  Subaccount  II.   If  a

          Director who  was a Participant as of December 31, 1994 failed to

          make an election  hereunder as of January 1, 1995,  he was deemed

          to have elected to have Compensation deferred on or after January

          1, 1995 allocated to  Subaccount I.  A Participant's  election or

          deemed election  under this Section  4.3 shall  remain in  effect

          until changed as provided in this Section 4.3 from time to time.

                    A Participant may change his or her  election or deemed

          election under  this Section 4.3 effective, beginning on or after

          January  1, 1997, as of the first  day of any calendar quarter by

          filing with the Company written notice of such change at least 15

          days prior  to the effective  date of  such change.   Any  change

          shall direct that either or both of (i) that the balance credited

          to  Subaccount I or Subaccount II of the Participant's Account as

          of the  immediately preceding Accounting Date  be transferred, in

          specified  multiples  of 10%,  to  the other  Subaccount  or (ii)

          subsequent Compensation credits  under Section 3.3 be  allocated,


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          in  specified multiples of 10%, to Subaccount I or Subaccount II.

          Such  change  shall  be effective  as  of  the first  day  of the

          calendar quarter elected and shall remain in effect until further

          changed as provided herein.

                    Any election  or change in election  under this Section

          4.3  shall be  made  on a  form  provided  or prescribed  by  the

          Company.

                    Notwithstanding  the  foregoing   provisions  of   this

          Section 4.3, if a  Participant terminates his or her  Service and

          any  portion of the balance credited to  his or her Account is to

          be  paid in accordance with  Payment Method II  or Payment Method

          III as provided  in Section 5.1, any balance  in Subaccount II of

          the  Participant's  Account  shall  be transferred  by  a  deemed

          election to Subaccount I  of the Participant's Account as  of the

          day after the  Accounting Date  that is coincident  with or  next

          following the Participant's termination of Service.


                                      ARTICLE V

                               Distribution of Benefits

                    5.1  Termination For Reasons Other  Than Death:  Within

          15  days  after  the  Accounting  Date coincident  with  or  next

          following the date on which the Participant terminates his or her

          Service for any reason other than death or a termination to which

          Section 5.6 applies, the  Company shall pay, or commence  to pay,

          to the  Participant in  cash the  amount credited  to his  or her

          Account.   Payment  shall  be  made in  accordance  with  Payment

          Method I,  Payment Method II  or  Payment Method  III, below,  as

          elected by the Director:


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                         (a)  Payment Method I -  By payment in a
                    lump  sum  of  the  amount  credited  to  the
                    Participant's  Account  as of  the Accounting
                    Date  coincident with  or next  following the
                    date on which  the Participant terminates his
                    or her Service.

                         (b)  Payment Method  II - By  payment in
                    quarterly installments, the  number of  which
                    shall  be the  lesser of  (i) 40 or  (ii) the
                    aggregate  number  of full  calendar quarters
                    during which compensation was credited to the
                    Participant's Account under  the Plan and  to
                    his or her account  under any similar plan of
                    the Parent or a  Subsidiary (but not counting
                    any  such calendar  quarter more  than once).
                    The amount of each installment shall be equal
                    to  the  quotient  obtained  by  dividing the
                    balance credited to Participant's  Account as
                    of  the Accounting  Date  coincident with  or
                    next  preceding the date  of such installment
                    payment by the number of installment payments
                    remaining to  be made to  such Participant at
                    the time of such calculation.

                         (c)  Payment Method III  - By payment in
                    annual  installments,  the  number  of  which
                    shall be  the  lesser of  (i) 10 or  (ii) the
                    aggregate number of  full calendar years (but
                    not less than one) during  which compensation
                    was  credited  to  the Participant's  Account
                    under  the Plan  and  to his  or her  account
                    under  any similar  plan of  the Parent  or a
                    Subsidiary   (but   not  counting   any  such
                    calendar year more than once).  The amount of
                    each  installment  shall  be  equal   to  the
                    quotient  obtained  by  dividing the  balance
                    credited to  Participant's Account as  of the
                    Accounting  Date  coincident  with   or  next
                    preceding  the  date   of  such   installment
                    payment by the number of installment payments
                    remaining  to be made  to such Participant at
                    the time of such calculation.

          A method  of payment shall be elected by the Director at the time

          the Director  elects to  become a  Participant,  which method  of

          payment  election  shall  remain   in  effect  until  changed  as

          hereinafter provided.

                    A Participant may  change his or her  elected method of

          payment  from time  to time  by filing  with the  Company written

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          notice  of such change, except  that no election  change shall be

          effective under the Plan  if it is filed  with the Company  after

          the  date which  is  one year  prior  to the  date  on which  the

          Participant terminates his or her Service.

                    An election or change  in election as to the  method of

          payment shall  be made on  a form provided  or prescribed  by the

          Company.

                    Notwithstanding a Participant's election under,  or the

          foregoing provisions of, this Section 5.1, if a Change in Control

          occurs after  a Participant  terminates  his or  her Service  but

          prior  to the complete distribution under the Plan of the balance

          credited  to his  or  her Account,  the  amount credited  to  the

          Participant's  Account as of the  New York Stock Exchange trading

          date  next  preceding the  date on  which  the Change  in Control

          occurs  (such amount to be determined as if the trading date next

          preceding the date on which the  Change in Control occurs were an

          Accounting  Date) increased  by  the amount  of any  Compensation

          deferred  under  the  Plan  by  the  Participant  not  previously

          credited to his or her  Account, shall be paid in cash in  a lump

          sum to the  Participant (or,  in the event  of the  Participant's

          death  after   his  termination  of   Service,  to  his   or  her

          Beneficiary) within 15 days after the date on which the Change in

          Control occurs, such payment to be made effective as of the  date

          on which the Change in Control occurs.

                    5.2  Death:   Upon the death of  a Participant, whether

          before  or after termination as  a member of  the Board, prior to

          the complete distribution of  the balance credited to his  or her

          Account, any undistributed amount  credited to the  Participant's

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          Account  as  of  the  Accounting  Date  coincident  with  or next

          following the Participant's date  of death shall be paid  in cash

          in a  lump sum to  the Participant's  Beneficiary within  15 days

          after such Accounting  Date.   If, however, a  Change in  Control

          shall  occur either before  or after the  Participant's death but

          prior to the complete distribution of the balance credited to the

          Participant's  Account,  distribution  shall   be  made  to   the

          Beneficiary as provided in  the last paragraph of Section  5.1 or

          in Section 5.6, whichever is  applicable, rather than as provided

          in this Section 5.2.  The  foregoing sentence shall not apply  if

          the Participant's termination  of Service occurs on  or after the

          third  anniversary of  the date  on which  the Change  in Control

          occurs.

                    5.3  Hardship Distribution:    With the  prior  written

          consent  of the Committee, a  Participant may withdraw,  as of an

          Accounting  Date prior to termination of Service, from his or her

          Account a  cash amount not  in excess of the  balance credited to

          the  Participant's  Account as  of  such  Accounting Date.    The

          Committee, in its sole discretion, may consent to such withdrawal

          but only if the withdrawal is necessary, upon demonstration by or

          on behalf of the Participant, because of a  substantial financial

          hardship of the Participant  as a result of accident,  illness or

          disability.    The  Committee,  in  its  sole  discretion,  shall

          determine the amount  of such  a distribution that  is needed  to

          meet the need  created by  the hardship.   Any such  distribution

          shall be  charged  first to  Subaccount  I of  the  Participant's

          Account  and then, to the extent Subaccount I is insufficient, to

          Subaccount II.

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                    5.4  Beneficiary:    As  used  in the  Plan,  the  term

          "Beneficiary" means:

                         (a)  The   last  person   designated  as
                    Beneficiary  by the Participant  in a written
                    notice on a form prescribed by and filed with
                    the Company;

                         (b)  If    there   is    no   designated
                    Beneficiary  or if  the person  so designated
                    shall  not  survive  the   Participant,  such
                    Participant's spouse; or

                         (c)  If  no such  designated Beneficiary
                    and no  such spouse is living  upon the death
                    of a Participant, or  if all such persons die
                    prior   to  the  full   distribution  of  the
                    Participant's   Account,   then   the   legal
                    representative  of the  last survivor  of the
                    Participant  and  such  persons,  or,  if the
                    Company  shall  not  receive  notice  of  the
                    appointment of any such  legal representative
                    within   one  year  after   such  death,  the
                    heirs-at-law   of   such  survivor   (in  the
                    proportions in  which they would  inherit his
                    intestate  personal  property)  shall be  the
                    Beneficiaries  to  whom  the  then  remaining
                    balance of the Participant's Account shall be
                    distributed.

          Any Beneficiary designation may  be changed from time to  time by

          like  notice similarly  delivered.   No notice  given  under this

          Section shall be effective unless and until  the Company actually

          receives such notice and enters it in its records.

                    5.5  Delay   In   And    Approval   Of    Distribution:

          Notwithstanding anything to the contrary herein, the distribution

          of all or any portion of a Participant's Account  will be delayed

          for  a period  not to exceed  seven months  or may  be subject to

          prior approval by  the Committee or the Board to  the extent that

          the Committee determines that such delay or approval is necessary

          or desirable to ensure  that any transaction under the  Plan will

          qualify for an exemption from the liability provisions imposed on


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          the Participant under Section 16(b)  of the Act or any  rules and

          regulations issued thereunder.   In the event of any  such delay,

          the  undistributed  portion of  the  Participant's  Account shall

          continue to be subject  to adjustment as provided in  Section 4.2

          until distribution is made.

                    5.6  Certain Terminations  On  or  After  a  Change  in

          Control:   If a Participant terminates  his or her  Service on or

          after the date on which  a Change in Control occurs but  prior to

          the third anniversary of the date on which the Change  in Control

          occurs, the amount  credited to the  Participant's Account as  of

          the date  of his or her termination of Service (such amount to be

          determined as  if the date  on which  the Participant  terminates

          Service were an Accounting  Date) increased by the amount  of any

          Compensation  deferred  under the  Plan  by  the Participant  not

          previously credited to his  or her Account shall be  paid in cash

          in  a  lump sum  to  the Participant  (or,  in the  event  of the

          Participant's  death, to his  or her Beneficiary)  within 15 days

          after the Participant's termination of Service.

               5.7  Change in Control:  For purposes of the Plan, a "Change

          in  Control"  shall have  occurred  if at  any  time on  or after

          December 1, 1996, any of the following events shall occur:

                         (a)  The Company or the Parent is merged
                    or consolidated  or reorganized into  or with
                    another  corporation  or other  legal person,
                    and as a result of such merger, consolidation
                    or  reorganization  less   than  60%  of  the
                    combined voting power of the then-outstanding
                    securities  of  such  corporation  or  person
                    immediately after such transaction is held in
                    the  aggregate by  the  holders of  the then-
                    outstanding   securities  entitled   to  vote
                    generally in  the election of  directors (the
                    "Voting  Stock")  of  the Parent  immediately
                    prior to such transaction;

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                         (b)  The  Company or the Parent sells or
                    otherwise transfers all or  substantially all
                    of  its assets  to any  other corporation  or
                    other legal  entity, and as a  result of such
                    sale  or  transfer  less  than   60%  of  the
                    combined voting power of the then-outstanding
                    securities  of  such  other   corporation  or
                    entity   immediately   after  such   sale  or
                    transfer  is held  in  the aggregate  by  the
                    holders   of  Voting  Stock  of  the  Parent,
                    immediately prior to such sale or transfer;

                         (c)  There is a report filed on Schedule
                    13D  or  Schedule  14D-1  (or  any  successor
                    schedule,  form or  report or  item therein),
                    each  as promulgated  pursuant  to  the  Act,
                    disclosing  that  any  person  (as  the  term
                    "person"  is  used  in  Section  13(d)(3)  or
                    Section 14(d)(2) of  the Act) has become  the
                    beneficial  owner  (as  the term  "beneficial
                    owner" is  defined  under Rule  13d-3 or  any
                    successor  rule   or  regulation  promulgated
                    under the Act) of securities representing 10%
                    or more  of the combined voting  power of the
                    Voting Stock  of the  Company  or the  Voting
                    Stock of the Parent; or

                         (d)  If at any time during any period of
                    two consecutive years, individuals who at the
                    beginning  of any such  period constitute the
                    directors of the Company  or the Parent cease
                    for any  reason  to  constitute  at  least  a
                    majority thereof, unless the election, or the
                    nomination  for  election  by such  company's
                    stockholders,  of  each   director  of   such
                    company first elected during such  period was
                    approved by a vote  of at least two-thirds of
                    the directors  of such company then  still in
                    office  who were directors of such company at
                    the beginning of any such period.

                    Notwithstanding the foregoing  provisions of  paragraph

          (c)  above, unless  otherwise determined  in a  specific case  by

          majority vote  of the Board of  Directors of the  Company and the

          Parent,  a  "Change  in Control"  shall  not  be  deemed to  have

          occurred for purposes of the Plan solely because  (i) the Parent,

          (ii) a   Subsidiary   or  (iii) any   Company-sponsored,  Parent-

          sponsored  or Subsidiary-sponsored employee  stock ownership plan


                                          -108-
<PAGE>

          or any other employee benefit plan of the Company, the Parent  or

          Subsidiary, either  files or becomes  obligated to file  a report

          under  or in response  to Schedule 13D or  Schedule 14D-1 (or any

          successor schedule,  form or  report or  item therein) under  the

          Act,  disclosing beneficial ownership  by it of  shares of Voting

          Stock of the  Company or the Parent, whether in  excess of 10% or

          otherwise.


                                      ARTICLE VI

                                Financing of Benefits

                    The  Plan shall  be a  nonqualified and  unfunded plan.

          Benefit  payments under  the  Plan shall  represent an  unsecured

          general  obligation of  the  Company and  shall  be paid  by  the

          Company from its general assets.   No special fund or trust shall

          be created or held for the financing of benefits under the Plan.


                                     ARTICLE VII

                                 Facility of Payment

                    Whenever a person entitled to receive any payment under

          the  Plan is  a person  under legal  disability or  a person  not

          adjudicated incompetent but  who, by reason of  illness or mental

          or physical disability, is in the opinion of the Committee unable

          properly to manage his  or her affairs, then such  payments shall

          be paid  in such  of the following  ways as  the Committee  deems

          best:   (a) to such person directly; (b) to the legally appointed

          guardian or conservator of  such person; (c) to some  relative or

          friend of such person for his or her benefit; (d) for the benefit

          of  such  person  in  such  manner  as  the  Committee  considers

          advisable.  Any payment made in accordance with the provisions of

                                         -109-
<PAGE>

          this Article shall be  a complete discharge of any  liability for

          the  making of such payment under the Plan, and the distributee's

          receipt shall be a sufficient discharge to the Company.


                                     ARTICLE VIII

                                    Administration

                    The  Plan  shall be  administered  by  the Compensation

          Committee of the  Board.   The Committee shall  have such  duties

          and powers as may be necessary to discharge its duties hereunder,

          including,  but  not  by  way  of  limitation,  to  construe  and

          interpret  the  Plan, decide  all  questions  of eligibility  and

          determine the amount and  time of payment of  benefits hereunder.

          The  Committee shall  have no power  to add to,  subtract from or

          modify any of the terms  of the Plan, or to change or  add to any

          benefits provided under  the Plan, or  to waive or fail  to apply

          any requirements of eligibility for a benefit under the Plan.  No

          Participant who is  a member of  such Committee  may vote on  any

          question relating specifically to himself or herself.


                                      ARTICLE IX

                                    Miscellaneous

                    9.1   Other Agreements.   The Plan shall  not affect in

          any  way  the  rights or  obligations  of  a  Director under  any

          deferred compensation or other agreement between the Director and

          the Company or the Parent, including, but not limited to, the

          KU Energy Corporation Director Retirement Retainer Program or the

          Kentucky Utilities Company Director Retirement Retainer Program.

                    9.2    Successors.    The  Company  shall  require  any

          successor  (whether direct  or  indirect,  by  purchase,  merger,

                                         -110-
<PAGE>

          consolidation,   reorganization   or   otherwise)   to   all   or

          substantially all  of the business  and/or assets of  the Company

          expressly to assume and to agree to perform this Plan in the same

          manner  and to the same  extent the Company  would be required to

          perform if no  such succession had taken place.   This Plan shall

          be binding upon  and inure to the benefit of  the Company and any

          successor of or to the Company,  including without limitation any

          persons acquiring directly or indirectly all or substantially all

          of the business  and/or assets  of the Company  whether by  sale,

          merger,  consolidation, reorganization  or  otherwise  (and  such

          successor  shall  thereafter  be  deemed the  "Company"  for  the

          purposes   of  this   Plan),   and  the   heirs,  executors   and

          administrators of each Director.

                    9.3  Interests Not Transferable.  No  person shall have

          any right to commute, encumber, pledge or dispose of any right to

          receive payments hereunder, nor shall such payments be subject to

          seizure, attachment or garnishment for the payments of any debts,

          judgments, alimony  or  separate maintenance  obligations  or  be

          transferable by  operation of  law  in the  event of  bankruptcy,

          insolvency or otherwise, all  payments and rights hereunder being

          expressly declared to be nonassignable and nontransferable.

                    9.4   Amendment  and  Termination.   The  Plan  may  be

          amended from time to time or terminated by the Board at any time,

          but no amendment or  termination may adversely affect the  rights

          of any person without his or her prior written consent.

                    9.5  Applicable Law.   This Plan shall be  construed in

          accordance with and governed  by the laws of the  Commonwealth of

          Kentucky.

                                         -111-
<PAGE>

                    9.6    Notices.   For all  purposes  of this  Plan, all

          communications provided for herein shall  be in writing and shall

          be deemed to have been duly given when delivered or five business

          days  after having  been mailed  by United  States  registered or

          certified  mail,  return  receipt  requested,   postage  prepaid,

          addressed  to the Company (to  the attention of  the Secretary of

          the  Company)  at  its  principal  executive   office  and  to  a

          Participant at his or  her principal residence, or to  such other

          address as  any party may have furnished  to the other in writing

          and in  accordance herewith,  except  that notices  of change  of

          address shall be effective only upon receipt.

                    9.7  Severability:  Each section, subsection and lesser

          section  of  this  Plan   constitutes  a  separate  and  distinct

          undertaking,   covenant  and/or   provision  hereof.     Whenever

          possible,  each provision  of this  Plan shall be  interpreted in

          such  manner as to be  effective and valid  under applicable law.

          In the  event that any  provision of this  Plan shall  finally be

          determined to be unlawful, such provision shall be deemed severed

          from  this Plan,  but every  other provision  of this  Plan shall

          remain in full force and effect, and in substitution for any such

          provision held  unlawful, there shall be  substituted a provision

          of  similar  import  reflecting  the original  intention  of  the

          parties hereto to the extent permissible under law.

                    9.8   Withholding of Taxes:   The Company  may withhold

          from any amounts payable under this Plan all federal, state, city

          and other taxes as shall be legally required.

                    9.9  Adjustments:   In the event of any  stock dividend

          or   split,   recapitalization,  reclassification,   increase  or

                                         -112-
<PAGE>

          decrease   in  the   number   of   outstanding  shares,   merger,

          consolidation or exchanges in shares  or other similar changes in

          the Parent's Common Stock,  appropriate adjustments shall be made

          in the Parent Common  Stock referenced in the Plan,  including in

          the  calculations  under  Section  4.3(b), to  reflect  any  such

          change.


















                                        -113-
<PAGE>

                    IN  WITNESS WHEREOF,  Kentucky  Utilities  Company  has

          caused this instrument to be executed in its name by its Chairman

          of  the Board,  President  and Chief  Executive  Officer and  its

          Corporate Seal to be hereunto affixed, attested by its Secretary,

          as of the 28th day of January, 1997.


                                        KENTUCKY UTILITIES COMPANY




                                        By/s/Michael R. Whitley
                                          Chairman of  the Board, President
                                          and Chief Executive Officer



          [Corporate Seal]


          ATTEST:George S. Brooks II

                    Secretary








                                        -114-