UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, DC 20549
                                       FORM 10-Q


                   X   QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the quarterly period ended September 30, 1997

                                          OR

                       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                       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  such  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  the  number  of  shares  outstanding of each of the issuers'
        classes of common stock, as of the latest practicable date:

        KU Energy Corporation:      Common stock, no par value, 37,817,517
                                    shares outstanding at November 11, 1997

        Kentucky Utilities Company: Common  stock,  no  par value, 37,817,878
                                    shares  outstanding and held by KU Energy
                                    Corporation at November 11, 1997



                                         -1-
<PAGE>
                                 KU ENERGY CORPORATION
                                          AND
                              KENTUCKY UTILITIES COMPANY
                  FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997

                                       CONTENTS*


      PART I.  FINANCIAL INFORMATION                                       Page
               No.

               Item 1:  Financial Statements

                        KU ENERGY CORPORATION

                          Consolidated Statements of Income                  3-4

                          Consolidated Statements of Cash Flows               5

                          Consolidated Balance Sheets                         6

                        KENTUCKY UTILITIES COMPANY

                          Statements of Income                               7-8

                          Statements of Cash Flows                            9

                          Balance Sheets                                     10

               CONDENSED NOTES TO FINANCIAL STATEMENTS OF KU ENERGY
               CORPORATION AND KENTUCKY UTILITIES COMPANY                  11-14

               Item 2:  Management's Discussion and Analysis of
                        Financial Condition and Results of Operations

                        KU ENERGY CORPORATION AND KENTUCKY
                        UTILITIES COMPANY                                  15-24

      PART II. OTHER INFORMATION

               Item 1:  Legal Proceedings                                    25

               Item 4:  Submission of Matters to a Vote of
                        Security Holders                                     25

               Item 5: Other Information                                     25

               Item 6:  Exhibits and Reports on Form 8-K                     34


               Signatures                                                    35


      *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 Quarterly Report of
      Kentucky Utilities Company.

                                          -2-
<PAGE>


                            PART I.  FINANCIAL INFORMATION
                        KU ENERGY CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF INCOME
                                      (Unaudited)
                      (in thousands except for per share amounts)


                                                           For the Three
                                                           Months Ended
                                                           September 30,
                                                         1997         1996

      Operating Revenues                               $192,095     $178,269

      Operating Expenses:
        Fuel, principally coal,
           used in generation                            51,962       48,781
        Electric power purchased                         18,277       15,847
        Other operating expenses                         30,948       32,094
        Maintenance                                      15,167       14,414
        Depreciation                                     21,131       20,235
        Federal and state income taxes                   16,225       13,374
        Other taxes                                       3,755        3,704

            Total Operating Expenses                    157,465      148,449

      Net Operating Income                               34,630       29,820

      Other Income and Deductions:
        Interest and dividend income                        749          638
        Other income and deductions - net                 1,787        2,426

            Total Other Income and Deductions             2,536        3,064

      Income Before Interest and Other Charges           37,166       32,884

      Interest and Other Charges                         10,613       10,391

      Net Income                                       $ 26,553     $ 22,493

      Average Common Shares Outstanding                  37,818       37,818

      Earnings Per Common Share                        $    .70     $    .60







        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                          -3-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF INCOME
                                      (Unaudited)
                      (in thousands except for per share amounts)


                                                            For the Nine
                                                            Months Ended
                                                           September 30,
                                                         1997         1996

      Operating Revenues                               $533,864     $536,769

      Operating Expenses:
        Fuel, principally coal,
           used in generation                           138,288      147,885
        Electric power purchased                         55,479       50,940
        Other operating expenses                         93,197       92,818
        Maintenance                                      47,674       46,224
        Depreciation                                     62,970       60,454
        Federal and state income taxes                   37,487       38,710
        Other taxes                                      11,681       11,965

            Total Operating Expenses                    446,776      448,996

      Net Operating Income                               87,088       87,773

      Other Income and Deductions:
        Interest and dividend income                      1,933        2,189
        Other income and deductions - net                 5,962        6,421

            Total Other Income and Deductions             7,895        8,610

      Income Before Interest and Other Charges           94,983       96,383

      Interest and Other Charges                         31,517       31,498

      Net Income                                       $ 63,466     $ 64,885

      Average Common Shares Outstanding                  37,818       37,818

      Earnings Per Common Share                        $   1.68     $   1.72






        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                          -4-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)
                                    (in thousands)
                                                                For the
                                                               Nine Months
                                                           Ended September 30,
                                                            1997         1996
     Cash Flows from Operating Activities:
       Net Income                                         $ 63,466     $ 64,885
       Items not requiring (providing) cash currently:
        Depreciation                                        62,970       60,454
        Deferred income taxes and investment tax credit      3,245        1,356
        Changes in current assets and liabilities:
          Change in fuel inventory                           1,892       (5,527)
          Change in accounts receivable                      3,810        2,438
          Change in accounts payable                        (4,866)      (8,340)
          Change in accrued taxes                            2,942        3,948
          Change in accrued utility revenues                   886        8,642
          Change in liability to ratepayers                      -       (6,599)
          Change in escrow funds                                 -        6,599
          Change in other current assets and liabilities     5,336       10,771
        Other--net                                          (6,280)       5,419
     Net Cash Provided by Operating Activities             133,401      144,046

     Cash Flows from Investing Activities:
        Construction expenditures - utility                (68,423)     (72,928)
        Investment in independent power projects            (4,805)      (1,048)
        Proceeds from insurance reimbursements               4,265          211
        Other                                                1,801        1,545
     Net Cash Used by Investing Activities                 (67,162)     (72,220)

     Cash Flows from Financing Activities:
        Short-term borrowings - net                        (24,300)     (25,700)
        Issuance of long-term debt                               -       35,682
        Funds deposited with trustee - net                       -        3,779
        Retirement of long-term debt, incl. premiums           (21)     (36,192)
        Payment of common stock dividends                  (49,919)     (48,785)
     Net Cash Used by Financing Activities                 (74,240)     (71,216)

     Net Increase (Decrease) in Cash and Cash Equivalents   (8,001)         610

     Cash and Cash Equivalents Beginning of Period          30,270       29,492
     Cash and Cash Equivalents End of Period              $ 22,269     $ 30,102

     Supplemental Disclosures
     Cash paid for:
       Interest                                           $ 25,316     $ 24,643
       Income taxes                                       $ 31,748     $ 37,175


        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                         -5-
<PAGE>


                        KU ENERGY CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)
                                    (in thousands)
                                                         As of         As of
                                                        Sept. 30,     Dec. 31,
     ASSETS                                               1997         1996
     Utility Plant:
       Plant in service, at cost                      $ 2,524,395   $ 2,482,812
       Less: Accumulated depreciation                   1,112,102     1,067,911
                                                        1,412,293     1,414,901
       Construction work in progress                       67,890        63,435
                                                        1,480,183     1,478,336
     Current Assets:
       Cash and cash equivalents                           22,269        30,270
       Accounts receivable                                 42,933        50,498
       Accrued utility revenues                            23,353        24,239
       Fuel, principally coal, at average cost             29,003        30,895
       Materials and supplies, at average cost             23,793        21,656
       Other                                                6,121         7,486
                                                          147,472       165,044
     Other Assets:
       Investment in leveraged leases                      27,157        24,650
       Investment in independent power projects             9,357         4,745
       Unamortized loss on reacquired debt                 10,027        10,838
       Other                                               48,846        43,335
                                                           95,387        83,568
           Total Assets                               $ 1,723,042   $ 1,726,948

     CAPITALIZATION AND LIABILITIES
     Capitalization:
       Common stock equity                            $   659,049   $   645,513
       Preferred stock                                     40,000        40,000
       Long-term debt                                     546,351       546,373
                                                        1,245,400     1,231,886
     Current Liabilities:
       Long-term debt due within one year                      21            21
       Short-term borrowings                               29,900        54,200
       Accounts payable                                    23,387        28,253
       Accrued interest                                    10,634         8,048
       Accrued taxes                                        6,947         4,005
       Customer deposits                                    9,655         8,746
       Accrued payroll and vacations                       12,119         9,921
       Other                                                7,874         5,954
                                                          100,537       119,148
     Other Liabilities:
       Accumulated deferred income taxes                  250,074       242,674
       Accumulated deferred investment tax credits         27,127        30,167
       Regulatory tax liability                            51,773        54,388
       Other                                               48,131        48,685
                                                          377,105       375,914
           Total Capitalization and Liabilities       $ 1,723,042   $ 1,726,948




        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                         -6-
<PAGE>


                              KENTUCKY UTILITIES COMPANY
                                 STATEMENTS OF INCOME
                                      (Unaudited)
                                    (in thousands)
                                                             For the Three
                                                             Months Ended
                                                             September 30,
                                                            1997      1996


        Operating Revenues                                $192,102  $178,275

        Operating Expenses:
          Fuel, principally coal,
           used in generation                               51,962    48,781
          Electric power purchased                          18,277    15,847
          Other operating expenses                          29,851    31,348
          Maintenance                                       15,165    14,412
          Depreciation                                      21,084    20,189
          Federal and state income taxes                    16,703    13,585
          Other taxes                                        3,717     3,656

               Total Operating Expenses                    156,759   147,818

        Net Operating Income                                35,343    30,457

        Other Income and Deductions:
          Interest and dividend income                         546       370
          Other income and deductions - net                  1,082     1,709

               Total Other Income and Deductions             1,628     2,079

        Income Before Interest Charges                      36,971    32,536

        Interest Charges                                    10,047     9,812

        Net Income                                          26,924    22,724

        Preferred Stock Dividend Requirements                  564       564

        Net Income Applicable to Common Stock             $ 26,360  $ 22,160







        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                         -7-
<PAGE>


                              KENTUCKY UTILITIES COMPANY
                                 STATEMENTS OF INCOME
                                      (Unaudited)
                                    (in thousands)
                                                             For the Nine
                                                             Months Ended
                                                             September 30,
                                                            1997      1996


        Operating Revenues                                $533,884  $536,787

        Operating Expenses:
          Fuel, principally coal,
           used in generation                              138,288   147,885
          Electric power purchased                          55,479    50,940
          Other operating expenses                          91,122    91,250
          Maintenance                                       47,666    46,218
          Depreciation                                      62,830    60,314
          Federal and state income taxes                    38,445    39,136
          Other taxes                                       11,545    11,736

               Total Operating Expenses                    445,375   447,479

        Net Operating Income                                88,509    89,308

        Other Income and Deductions:
          Interest and dividend income                       1,265     1,384
          Other income and deductions - net                  4,019     5,515

               Total Other Income and Deductions             5,284     6,899

        Income Before Interest Charges                      93,793    96,207

        Interest Charges                                    29,820    29,790

        Net Income                                          63,973    66,417

        Preferred Stock Dividend Requirements                1,692     1,692

        Net Income Applicable to Common Stock             $ 62,281  $ 64,725





        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                         -8-
<PAGE>


                              KENTUCKY UTILITIES COMPANY
                               STATEMENTS OF CASH FLOWS
                                      (Unaudited)
                                    (in thousands)
                                                              For the Nine
                                                              Months Ended
                                                              September 30,
                                                            1997       1996
        Cash Flows from Operating Activities:
          Net Income                                     $ 63,973   $ 66,417
          Items not requiring (providing) cash currently:
            Depreciation                                   62,830     60,314
            Deferred income taxes
              and investment tax credit                       204       (214)
            Changes in current assets and liabilities:
              Change in fuel inventory                      1,892     (5,527)
              Change in accounts receivable                 4,274      2,230
              Change in accounts payable                   (5,152)    (8,363)
              Change in accrued taxes                       4,045      4,027
              Change in accrued utility revenues              886      8,642
              Change in liability to ratepayers                 -     (6,599)
              Change in escrow funds                            -      6,599
              Change in other current assets
               and liabilities                              5,372     10,634
            Other--net                                      1,374      6,906

        Net Cash Provided by Operating Activities         139,698    145,066

        Cash Flows from Investing Activities:

          Construction expenditures - utility             (68,423)   (72,928)
          Proceeds from insurance reimbursements            4,265        211

        Net Cash Used by Investing Activities             (64,158)   (72,717)

        Cash Flows from Financing Activities:
          Short-term borrowings - net                     (24,300)   (25,700)
          Issuance of long-term debt                            -     35,682
          Funds deposited with trustee - net                    -      3,779
          Retirement of long-term debt, incl. premiums        (21)   (36,192)
          Payment of dividends                            (51,611)   (50,477)

        Net Cash Used by Financing Activities             (75,932)   (72,908)

        Net Decrease in Cash and Cash Equivalents            (392)      (559)

        Cash and Cash Equivalents Beginning of Period       5,719      5,697

        Cash and Cash Equivalents End of Period          $  5,327   $  5,138

        Supplemental Disclosures
        Cash paid for:
          Interest                                       $ 25,316   $ 24,643
          Income taxes                                   $ 32,810   $ 38,010



        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                         -9-
<PAGE>


                              KENTUCKY UTILITIES COMPANY
                                    BALANCE SHEETS
                                      (Unaudited)
                                    (in thousands)

                                                        As of       As of
                                                      Sept. 30,    Dec. 31,
                                                         1997        1996
        ASSETS
        Utility Plant:
          Plant in service, at cost                   $2,524,395  $2,482,812
          Less: Accumulated depreciation               1,112,102   1,067,911
                                                       1,412,293   1,414,901
          Construction work in progress                   67,890      63,435
                                                       1,480,183   1,478,336
        Current Assets:
          Cash and cash equivalents                        5,327       5,719
          Accounts receivable                             42,553      50,582
          Accrued utility revenues                        23,353      24,239
          Fuel, principally coal, at average cost         29,003      30,895
          Materials and supplies, at average cost         23,793      21,656
          Other                                            6,121       7,486
                                                         130,150     140,577
        Other Assets:
          Unamortized loss on reacquired debt             10,027      10,838
          Other                                           45,547      43,304
                                                          55,574      54,142
               Total Assets                           $1,665,907  $1,673,055

        CAPITALIZATION AND LIABILITIES
        Capitalization:
          Common stock equity                         $  607,758  $  595,397
          Preferred stock                                 40,000      40,000
          Long-term debt                                 546,351     546,373
                                                       1,194,109   1,181,770
        Current Liabilities:
          Long-term debt due within one year                  21          21
          Short-term borrowings                           29,900      54,200
          Accounts payable                                23,808      28,960
          Accrued interest                                10,634       8,048
          Accrued taxes                                    9,428       5,383
          Customer deposits                                9,655       8,746
          Accrued payroll and vacations                   12,059       9,862
          Other                                            7,687       5,728
                                                         103,192     120,948
        Other Liabilities:
          Accumulated deferred income taxes              242,900     238,542
          Accumulated deferred investment tax credits     27,127      30,167
          Regulatory tax liability                        51,773      54,388
          Other                                           46,806      47,240
                                                         368,606     370,337
               Total Capitalization and Liabilities   $1,665,907  $1,673,055





        The accompanying Condensed Notes to Financial Statements are an
        integral part of these statements.


                                         -10-
<PAGE>


                          KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                       CONDENSED NOTES TO FINANCIAL STATEMENTS
                                     (Unaudited)

        1.  PRESENTATION OF CONDENSED INFORMATION

             The  unaudited  interim  financial  statements  presented  herein

        include  the  consolidated  statements  of  KU  Energy Corporation and

        Subsidiaries  (KU Energy or the Company) as well as separate financial

        statements for Kentucky Utilities Company (KU).  KU Energy Corporation

        is  a  holding  company  organized under the laws of Kentucky with two

        first-tier  subsidiaries:  KU Capital Corporation (KU Capital), a non-

        utility  subsidiary,  and  KU,  an  electric  utility.    KU  Energy

        Corporation  owns  100  percent of the common equity of KU Capital and

        KU.  KU is KU Energy Corporation's principal subsidiary.

             The  unaudited  statements  have been prepared by the Company and

        KU,  respectively,  pursuant  to  the  rules  and  regulations  of the

        Securities  and  Exchange  Commission  (SEC).  Certain information and

        footnote  disclosures  normally  included  in  financial  statements

        prepared  in  accordance with generally accepted accounting principles

        have been condensed or omitted pursuant to such rules and regulations,

        although  the  Company  and KU believe the disclosures are adequate to

        make   the  information  presented  not  misleading.    The  Company's

        consolidated  financial  statements should be read in conjunction with

        the  financial  statements and notes thereto incorporated by reference

        in  the  Annual  Report  on Form 10-K of KU Energy and KU for the year

        ended  December  31,  1996;  and the KU financial statements should be

        read in conjunction with the KU financial statements and notes thereto

        included in the Annual Report on Form 10-K of KU Energy and KU for the

        year ended December 31, 1996.





                                         -11-
<PAGE>

                          KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                       CONDENSED NOTES TO FINANCIAL STATEMENTS
                                     (Unaudited)

             In  the opinion of the Company and KU, the respective information

        furnished herein reflects all adjustments, all of which are normal and

        recurring,  which  are  necessary to present fairly the results of the

        periods  shown,  and the disclosures which have been made are adequate

        to  make  the  information not misleading.  Results of interim periods

        are  not necessarily indicative of results for any twelve-month period

        due  to  the  seasonal  nature  of  KU's business.  Certain prior year

        amounts  have  been  reclassified  on  a  basis  consistent  with  the

        September 30, 1997 presentation.



        2.   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 Kentucky Public Service Commission (PSC) in July 1994

        and  was  implemented in August 1994.  The total surcharge collections

        from  August  1,  1994  through  September 30, 1997 were approximately

        $55 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


                                         -12-
<PAGE>




                          KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                       CONDENSED NOTES TO FINANCIAL STATEMENTS
                                     (Unaudited)

        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 September 30, 1997

        were approximately $51 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


                                         -13-
<PAGE>




                          KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                       CONDENSED NOTES TO FINANCIAL STATEMENTS
                                     (Unaudited)

        certain  environmental expenditures characterized by the Circuit Court

        as  having  been  incurred  before  January  1,  1993)  for  surcharge

        collections through September 30, 1997, from the implementation of the

        surcharge  would  be  approximately  $14 million, and from February 1,

        1995  would  be  approximately  $12 million.  At this time, KU has not

        recorded any reserve for refund.



        3.  MERGER AGREEMENT WITH LG&E ENERGY CORP.

             KU  Energy  and LG&E Energy Corp. entered into a Merger Agreement

        dated  May  20,  1997.   For information concerning the agreement, see

        Managements'   Discussion  and  Analysis  - Merger Agreement with LG&E

        Energy Corp.




















                                         -14-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS




             The  following discussion and analysis of financial condition and

        results  of  operations  are  for the Company unless otherwise stated.

        Material changes in the consolidated financial condition and operating

        results of KU Energy are based primarily upon the operations of KU.



        FINANCIAL CONDITION

             At    September  30,  1997,  KU's  short-term  borrowings  were

        $29.9  million  compared  to  $54.2 million at December 31, 1996.  The

        short-term  borrowings have been used primarily to temporarily finance

        ongoing  construction expenditures and general corporate requirements.

        The  decrease  between September 30, 1997 and December 31, 1996 is due

        primarily  to  cash provided by operations exceeding cash required for

        investing  and  financing  activities  (exclusive  of  short-term

        borrowings) through the third quarter of 1997.



        RESULTS OF OPERATIONS

        Quarter ended September 30, 1997 compared
        to the Quarter ended September 30, 1996

             The  Company's  earnings  per  common  share for the three-month

        period  ended  September  30,  1997 were $.70 compared to $.60 for the

        corresponding  period  of  1996.    The  increase was primarily due to

        increases  in  kilowatt-hour sales throughout the retail sector and to

        an  increase  in  sales  for resale.  The increase in retail sales was

        primarily  the  result  of warmer weather in the third quarter of 1997

        when  compared  to  1996  and  to  an  increase in sales to industrial


                                         -15-
<PAGE>




                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        customers.

             The   changes  in  operating  revenues  and  kilowatt-hour  sales

        described  below  are  for  the  Company.  The only difference between

        changes  in  operating revenues for the Company and operating revenues

        for   KU  is  intercompany  revenues  that  are  eliminated  in  the

        consolidated  financial  statements.    These intercompany amounts are

        immaterial.

                                                 Increase (Decrease)
                                                    From Prior Year
                                                     Three Months
                                                 Ended Sept. 30, 1997
                                                  kWh        Revenues
                                                  (%)         (000's)

        Residential                                 5        $  2,966
        Commercial                                  5           1,982
        Industrial                                 11           3,535
        Mine Power                                  -             178
        Public Authorities                          5             705
            Total Retail Sales                      6           9,366
        Sales for Resale                            4           3,863
        Miscellaneous Revenues & Other              -             597
            Total                                   6        $ 13,826


             Operating  revenues  increased  $13.8 million (8%).  The increase

        reflects  a  6%  increase  in  kilowatt-hour  sales.  The increases in

        residential  and commercial sales were primarily due to warmer weather

        during  the third quarter of 1997 compared to the corresponding period

        of  1996.    KU  set an all-time record peak demand for electricity of

        3,510  megawatts  on  July 28, 1997.  The increase in industrial sales

        reflects continued economic growth in the manufacturing sector of KU's

        service  area.    The  increase in sales for resale (893,622 megawatt-

        hours  versus  855,475  megawatt-hours) was primarily due to increased

        demand.


                                         -16-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


             Fuel  expense  increased $3.2 million (7%).  The increase in fuel

        expense was primarily attributable to a 3% increase in million British

        thermal  units  (MBTU) used and to a 3% increase in the cost per MBTU.

        The  increased  consumption  was  primarily  caused  by the previously

        mentioned increase in kilowatt-hour sales.

             Purchased  power  expense  increased  $2.4  million  (15%).   The

        increase  was  primarily  due  to  an  18%  increase  in megawatt-hour

        purchases  resulting  from  increased availability of surplus power on

        favorable pricing terms.

             Federal and state income taxes increased $2.9 million (21%).  The

        increase was primarily attributable to an increase in pretax income.

        Nine Months ended September 30, 1997 compared
        to the Nine Months ended September 30, 1996

             The Company's earnings per common share for the nine-month period

        ended  September  30,  1997  were  $1.68  compared  to  $1.72  for the

        corresponding period of 1996.  The decrease was primarily due to lower

        residential  and commercial sales as a result of milder weather during

        the  first  half  of  1997  when  compared to the same period of 1996,

        offset  somewhat  by  the  warmer weather in the third quarter of 1997

        compared to the third quarter of 1996 and also by an increase in sales

        to  industrial  customers in the first nine months of 1997 compared to

        the same period of 1996.







                                         -17-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                                                 Increase (Decrease)
                                                    From Prior Year
                                                     Nine Months
                                                 Ended Sept. 30, 1997
                                                  kWh        Revenues
                                                  (%)         (000's)

        Residential                                (4)       $ (8,561)
        Commercial                                 (1)         (1,507)
        Industrial                                  8           6,391
        Mine Power                                  3              86
        Public Authorities                          -            (355)
            Total Retail Sales                      1          (3,946)
        Sales for Resale                           (5)            614
        Miscellaneous Revenues & Other              -             427
            Total                                   -        $ (2,905)

             Operating  revenues  were fairly flat compared to the same period

        of 1996, decreasing only $2.9 million (1%) which reflects a decline in

        residential  and  commercial sales offset by an increase in industrial

        sales.    The  decreases  in  residential  and  commercial  sales were

        primarily due to milder weather during the first half of 1997 compared

        to  the  corresponding  period  of 1996, offset somewhat by the warmer

        weather  in the third quarter of 1997 compared to the third quarter of

        1996.    The  increase in industrial sales reflects continued economic

        growth in the manufacturing sector of KU's service area.  About 18% of

        the industrial sales increase was due to greater sales to Toyota Motor

        Manufacturing U.S.A., Inc., KU's largest customer.  Although sales for

        resale  declined  (2,442,727 megawatt-hours versus 2,574,604 megawatt-

        hours),  revenues  increased  due  to  higher prices per megawatt-hour

        compared to the same period of 1996.

             Fuel  expense  decreased  $9.6  million  (6%).   The decrease was

        primarily  due  to  a  4%  decrease  in  MBTU  used.    The  decreased

        consumption   was  due  primarily  to  an  increase  in  kilowatt-hour

        purchases discussed below.


                                         -18-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


             Purchased  power  expense  increased  $4.5  million  (9%).    The

        increase  was  primarily  due  to  a  17%  increase  in  megawatt-hour

        purchases  resulting  from  increased availability of surplus power on

        favorable pricing terms.

             Federal  and state income taxes decreased $1.2 million (3%).  The

        decrease was primarily attributable to a decline in pretax income.



        MERGER AGREEMENT WITH LG&E ENERGY CORP.

             On  May  20,  1997, KU Energy and LG&E Energy Corp. (LG&E Energy)

        entered  into  an  Agreement  and  Plan  of  Merger (Merger Agreement)

        providing for a tax-free, stock-for-stock merger of KU Energy and LG&E

        Energy,  with  the  latter as the survivor (the Merger).  In addition,

        simultaneously  with  the  Merger Agreement, KU Energy and LG&E Energy

        entered  into  stock  option agreements pursuant to which each company

        grants  to  the  other  an  option  to  purchase,  under  certain

        circumstances,  a  certain  number  of  shares of common stock of such

        company  at  a  specified  price.   The Merger is subject to customary

        closing  conditions,  including,  the  approval of the shareholders of

        both  companies  and  receipt  of  certain regulatory and governmental

        approvals including the PSC, the Virginia State Corporation Commission

        (SCC),  the  Federal  Energy Regulatory Commission (FERC), the SEC and

        the  Federal  Trade  Commission.   The approval process is expected to

        take  approximately  12  to  18  months  from  the  date of the Merger

        Agreement.   Further details about the proposed merger are provided in

        KU Energy's current reports on Form 8-K, filed with the SEC on May 21,

        1997 and May 30, 1997.


                                         -19-
<PAGE>


                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


             In   July,  1997,    KU  Energy  and  LG&E  Energy  filed  joint

        applications for approval of the Merger with the PSC and the SCC.  The

        PSC  approved  the  proposed Merger on September 12, 1997, making only

        minor  changes  to  the regulatory plan proposed by KU Energy and LG&E

        Energy.   Further details about the PSC's Order approving the proposed

        Merger  are  provided  in KU Energy's current report on Form 8-K dated

        September  12,  1997  filed  with  the  SEC on September 19, 1997.  At

        special  meetings  held  October 14, 1997, the shareholders of both KU

        Energy  and  LG&E Energy approved the Merger.  The SCC issued an order

        to  extend  the date it was required to rule on approval of the Merger

        by 120 days to January 21, 1998.  A joint application for approval was

        filed  with  the  FERC on October 9, 1997.  The Company cannot predict

        when  the  remaining  regulatory  approvals  will be completed or what

        conditions, if any, may be attached to such approvals.



        NONUTILITY ACTIVITIES

             KU  Solutions,  an indirect non-regulated subsidiary of KU Energy

        Corporation,  was  formed  in  March  1997.    KU Solutions will offer

        products and services designed to complement the Company's core energy

        business.    In  March 1997, KU Solutions entered into a gas marketing

        joint  venture  with  Alliance  Energy  Services  Partnership (AES), a

        Kentucky  general  partnership  between Conoco, Inc., and Alliance Gas

        Services,  Inc.    The  venture  will  allow  KU  Solutions and AES to

        capitalize  on  their  combined marketing expertise in electricity and

        natural  gas  by  offering  both  sources  of energy to respond to the

        increasing  demands  of customers for a single supplier to meet all of

        their energy needs.


                                         -20-
<PAGE>

                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS




        UTILITY ISSUES

        Competition

             Refer  to  Managements'  Discussion and Analysis incorporated by

        reference  in  the 1996 Annual Report on Form 10-K of KU Energy and KU

        under  the  heading  Utility Issues - Competition  for a discussion of

        FERC Order No. 888 (Order 888) and FERC Order No. 889 (Order 889).  In

        March  1997  the FERC issued its Final Rule (Order 888-A), reaffirming

        the  legal  and  policy  basis on which Orders 888 and 889 were based.

        The  Final  Rule  for  the  Orders responded to public comments on the

        various  provisions  of  Orders 888 and 889; but no major changes were

        made.    The Final Rule was effective May 13, 1997.  On July 14, 1997,

        KU  filed  its Transmission Services Tariff, which management believes

        is in compliance with the provisions set forth in the Final Rule.



        ENVIRONMENTAL MATTERS

        Environmental Cost Recovery

             In  August  1994,  KU  implemented an environmental cost recovery

        mechanism (surcharge) in Kentucky.  Authorized by a 1992 state statute

        and  approved by the PSC, the surcharge is designed to recover certain

        environmental  compliance  costs,  including  costs to comply with the

        1990  Clean  Air  Act  Amendments,  through  a  surcharge on customers

        bills.

             The  constitutionality  of  the  surcharge  was  challenged  in a

        Kentucky  state  court  action  brought  against KU and the PSC by the

        Attorney  General  of Kentucky and representatives of consumer groups.

        In  July  1995,  the  state  court upheld the constitutionality of the


                                         -21-
<PAGE>



                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        surcharge  statute  but vacated that part of the PSC's order which the

        state  court described as allowing KU to recover certain environmental

        expenditures  characterized by the state court as having been incurred

        before  January  1, 1993.  All parties (including KU) have appealed to

        the Kentucky Court of Appeals.

             KU  believes  the constitutionality of the surcharge statute will

        be upheld, but it cannot predict the outcome of that part of the state

        court  judgment  disallowing  recovery  of  certain  environmental

        expenditures  characterized by the state court as having been incurred

        before  January  1,  1993.   If the state 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 state court as having

        been  incurred  before  January  1,  1993)  for  surcharge collections

        through  September  30, 1997, from the implementation of the surcharge

        would be approximately $14 million, and from February 1, 1995 would be

        approximately  $12  million.    At  this time, KU has not recorded any

        reserve for refund.  For additional discussion, refer to Note 2 of the

        Condensed  Notes  to  Financial  Statements,    Environmental  Cost

        Recovery.



        Nitrogen Oxide Emissions Reductions

             The  Environmental  Protection Agency (EPA) issued final rules on

        July  18, 1997 revising the National Ambient Air Quality Standards for

        ozone  and  particulate  matter.   The revised standards would require

        significant  reductions in sulfur dioxide and nitrogen oxide emissions

        from  coal-fired boilers (including those at KU's generating stations)

                                         -22-
<PAGE>


                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        beginning  in  2004.   Certain implementation proposals, which are not

        yet  finalized,  would  target coal-fired utilities in the Midwest and

        South,  including Kentucky, for more substantial reductions than other

        areas  and other sources of emissions.  Implementation methods will be

        determined  by  the  EPA  as well as state regulatory authorities.  KU

        believes that the costs relating to compliance with the new standards,

        including  capital costs, as well as associated increases in operating

        and  maintenance costs, are likely to be substantial, but in any event

        would  qualify  for  recovery  from  customers under its environmental

        surcharge  mechanism,  subject  to  PSC  approval.  (See Note 2 of the

        Condensed  Notes  to  Financial  Statements,    Environmental  Cost

        Recovery).  KU will continue to closely monitor developments in this

        area  and  anticipates  that the exact nature of the impact of the new

        standards on its operations will not be known for some time.



        IMPACT OF ACCOUNTING STANDARDS

             In February 1997, the Financial Accounting Standards Board (FASB)

        issued  Statement of Financial Accounting Standards No. 128, "Earnings

        per Share" (SFAS 128), and Statement of Financial Accounting Standards

        No.  129,    Disclosure  of Information about Capital Structure  (SFAS

        129).    SFAS  128  specifies  the  computation,  presentation,  and

        disclosure  requirements  for  earnings  per  share  for entities with

        publicly  held  common stock.  SFAS 129 was issued in conjunction with

        the  FASB's  earnings  per  share  project  and  incorporated related

        disclosure  requirements from APB Opinion No. 10,  Disclosure of Long-

        Term  Obligations,    and  Statement of Financial Accounting Standards

        No.  47,    Disclosure of Long-Term Obligations.   Both statements are


                                         -23-
<PAGE>
                        KU ENERGY CORPORATION AND SUBSIDIARIES
                              KENTUCKY UTILITIES COMPANY
                        MANAGEMENTS' DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        effective  for  fiscal  years  ending  after  December  15, 1997.  The

        Company  will  adopt  the  statements  for  year-end 1997 and does not

        expect  adoption  of  the statements to have any impact on its current

        earnings per share calculation or disclosures.



        FORWARD LOOKING STATEMENTS

             This  report  includes  forward  looking  statements  within  the

        meaning  of the Private Securities Litigation Reform Act of 1995.  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.

        Such  forward  looking  statements  include  those  under Managements'

        Discussion  and  Analysis  relating  to  the  anticipated  results  of

        proceedings  related to the environmental surcharge, the impact of the

        revisions  to the National Ambient Air Quality Standards, management's

        belief  as  to  the nature of its recently filed Transmission Services

        Tariff  and the expected timing of regulatory approvals of the Merger.

        Such  statements  are  based  on  management  s  belief,  judgment and

        analysis  as  well as assumptions made by and information available to

        management  at  the  date  hereof.  In addition to any assumptions and

        cautionary   factors  referred  to  specifically  in  this  report  in

        connection  with  such  forward looking statements, factors that could

        cause  actual  results to differ materially from those contemplated by

        the  forward  looking  statements  include  unanticipated  or  adverse

        decisions  in  regulatory  proceedings or litigation and other matters

        detailed  in  Exhibit 99.06, Cautionary Statements, to the 1996 Annual

        Report  on  Form  10-K  of  KU  Energy  and KU, incorporated herein by

        reference.
                                         -24-
<PAGE>

                             PART II.  OTHER INFORMATION

          ITEM 1.  LEGAL PROCEEDINGS

             See  Note  2  of  the Condensed Notes to Financial Statements,
          Environmental  Cost  Recovery,  for  a  discussion  of  KU's
          environmental surcharge.

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

             At  the October 14, 1997, Special Meeting of Shareholders, the
          following proposal was acted upon and approved.

             (a) To consider and vote upon the adoption and approval of the
                 Agreement  and  Plan  of Merger, dated as of May 20, 1997,
                 between LG&E Energy Corp. and KU Energy Corporation.

                 Affirming        Negative                         Broker
                   Votes            Votes       Abstentions       Non-Votes

                29,113,099         441,062        943,712            0

          The  Merger  was approved by 77% of the outstanding common shares
          and by 95% of those shares represented at the meeting.

          ITEM 5.  OTHER INFORMATION

          Unaudited  Pro  Forma  Combined  Condensed Consolidated Financial
          Information

              The following unaudited pro forma financial information
          combines the historical balance sheets and statements of income
          of LG&E Energy and KU Energy, including their respective
          subsidiaries, after giving effect to the Merger.  The unaudited
          pro forma combined condensed balance sheet at September 30, 1997
          gives effect to the Merger as if it had occurred at September 30,
          1997.  The unaudited pro forma combined condensed statements of
          income for all periods give effect to the Merger as if it had
          occurred at January 1, 1996. These statements are prepared on the
          basis of accounting for the Merger as a pooling of interests and
          are based on the assumptions set forth in the notes thereto.  The
          pro forma financial information does not give effect to the
          expected synergies of the transaction.

              The following pro forma financial information has been
          prepared from, and should be read in conjunction with, the
          historical financial statements and related notes thereto of LG&E
          Energy and KU Energy as included in their respective Annual
          Reports on Form 10-K for the year ended December 31, 1996.  The
          following information is not necessarily indicative of the
          financial position or operating results that would have occurred
          had the Merger been consummated on the date as of which, or at
          the beginning of the periods for which, the Merger is being given
          effect, nor is it necessarily indicative of future operating
          results or financial position.  In addition, due to the effect of

                                         -25-
<PAGE>



          seasonal fluctuations in temperature and other weather-related
          factors on the operations of LG&E Energy and KU Energy, financial
          results for the three- and nine-month periods ended September 30,
          1997 and 1996 are not necessarily indicative of trends for any
          twelve-month period.










































                                         -26-
<PAGE>
<TABLE>

                                   LG&E ENERGY CORP.
                        UNAUDITED PRO FORMA COMBINED CONDENSED
                                     BALANCE SHEET
                                 At September 30, 1997
                                (Thousands of Dollars)

                                             LG&E Energy    KU Energy    Pro Forma   Pro Forma
                                             (As Reported) (As Reported)  Adjustment  Combined
                                                              (Note 1)     (Note 2)    (Note 3)
<CAPTION>

       ASSETS
       Current assets:
<S>                                          <C>           <C>            <C>        <C>
         Cash and temporary cash investments $   155,703   $    22,269    $      -   $   177,972
         Marketable securities                    11,317             -           -        11,317
         Accounts receivable - less reserve      455,276        66,286         (11)      521,551
         Materials and supplies - primarily
           at average cost:
           Fuel (predominately coal)              16,128        29,003           -        45,131
           Gas stored underground                 42,346             -           -        42,346
           Other                                  32,662        23,793           -        56,455
         Price risk management assets             83,105             -           -        83,105
         Prepayments and other                     4,927         6,121           -        11,048
           Total current assets                  801,464       147,472         (11)      948,925


       Utility plant, at original cost:
         Electric                              2,258,247     2,592,285           -     4,850,532
         Gas                                     345,023             -           -       345,023
         Common                                  142,104             -           -       142,104
           Gross utility plant                 2,745,374     2,592,285           -     5,337,659
         Less: reserve for depreciation        1,057,511     1,112,102           -     2,169,613
           Net utility plant                   1,687,863     1,480,183           -     3,168,046


       Other property and investments
         - less reserve:
         Investments in affiliates               172,339         2,180           -       174,519
         Non-utility property and plant, net     407,650         2,690           -       410,340
         Price risk management assets             42,400             -           -        42,400
         Other                                    22,332        41,788           -        64,120
           Total other property and
             investments                         644,721        46,658           -       691,379


       Deferred debits and other assets          113,869        48,729       8,250       170,848


           Total assets                      $ 3,247,917   $ 1,723,042    $  8,239   $ 4,979,198


       See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.

</TABLE>

                                                 -27-
<PAGE>
<TABLE>

                                    LG&E ENERGY CORP.
                        UNAUDITED PRO FORMA COMBINED CONDENSED
                                     BALANCE SHEET
                                 At September 30, 1997
                                (Thousands of Dollars)


                                             LG&E Energy    KU Energy    Pro Forma   Pro Forma
                                             (As Reported) (As Reported)  Adjustment  Combined
                                                              (Note 1)     (Note 2)    (Note 3)
<CAPTION>

       CAPITAL AND LIABILITIES
       Current liabilities:
<S>                                           <C>          <C>            <C>       <C>
         Long term debt due within one year   $    20,000  $        21    $      -  $    20,021
         Notes payable                            289,161       29,900           -      319,061
         Accounts payable                         418,162       23,387      16,489      458,038
         Trimble County settlement                 14,032            -           -       14,032
         Accrued taxes                             27,012        6,947      (3,330)      30,629
         Price risk management liabilities        108,962            -           -      108,962
         Other                                     80,773       40,282           -      121,055
           Total current liabilities              958,102      100,537      13,159    1,071,798

       Long-Term Debt                             664,315      546,351           -    1,210,666

       Deferred credits and other liabilities:
         Accumulated deferred income taxes        310,262      250,074           -      560,336
         Investment tax credit, in process
           of amortization                         76,783       27,127           -      103,910
         Regulatory liability                      74,756       52,454           -      127,210
         Price risk management liabilities         13,018            -           -       13,018
         Other                                    121,482       47,450           -      168,932
           Total deferred credits and
             other liabilities                    596,301      377,105           -      973,406

       Minority interests                         104,901            -           -      104,901

       Cumulative preferred stock                  95,328       40,000           -      135,328
       Common equity                              828,970      659,049      (4,920)   1,483,099
         Total capital and liabilities        $ 3,247,917  $ 1,723,042    $  8,239  $ 4,979,198


       See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.

</TABLE>


                                                 -28-
<PAGE>
<TABLE>

                                    LG&E ENERGY CORP.
               UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
                          Three Months Ended September 30, 1997
                      (Thousands of Dollars Except Per Share Data)


                                             LG&E Energy    KU Energy    Pro Forma   Pro Forma
                                             (As Reported) (As Reported)  Adjustment  Combined
                                                             (Note 1)     (Note 2)     (Note 3)
<CAPTION>

       Revenues
<S>                                          <C>           <C>            <C>       <C>
         Energy marketing and trading        $   855,741   $         -    $      -  $   855,741
         Electric utility                        189,638       192,095         (39)     381,694
         Gas utility                              18,953             -           -       18,953
         Other                                    49,189         1,521           -       50,710
           Total revenues                      1,113,521       193,616         (39)   1,307,098

       Cost of revenues
         Energy marketing and trading            857,789             -           -      857,789
         Fuel and power purchased                 46,807        70,239         (39)     117,007
         Gas supply expenses                      11,541             -           -       11,541
         Other                                    26,829             -           -       26,829
           Total cost of revenues                942,966        70,239         (39)   1,013,166

       Gross Profit                              170,555       123,377           -      293,932

       Operating expenses
         Operation and maintenance
           Utility                                55,744        48,734           -      104,478
           Energy marketing and trading
             and other                            22,759         1,350           -       24,109
         Depreciation and amortization            30,852        21,131           -       51,983
         Non-recurring charges                         -             -           -            -
           Total operating expenses              109,355        71,215           -      180,570

       Equity in earnings of joint ventures        5,985             -           -        5,985

       Operating Income                           67,185        52,162           -      119,347

       Other Income and (deductions)               1,368           741           -        2,109
       Interest charges, minority interest
         and preferred dividends                  20,347        10,613           -       30,960

       Income before income taxes                 48,206        42,290           -       90,496

       Income taxes                               19,013        15,737           -       34,750

       Net Income (Note 5)                   $    29,193   $    26,553    $      -  $    55,746

       Average common shares outstanding
         (Note 4)                                 66,491        37,818      25,338      129,647

       Earnings per share of common stock    $       .44   $       .70    $      -  $       .43


       See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
</TABLE>


                                                  -29-
<PAGE>
<TABLE>

                                    LG&E ENERGY CORP.
              UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
                         Three Months Ended September 30, 1996
                      (Thousands of Dollars Except Per Share Data)


                                             LG&E Energy    KU Energy    Pro Forma   Pro Forma
                                             (As Reported) (As Reported)  Adjustment  Combined
                                                              (Note 1)     (Note 2)    (Note 3)
<CAPTION>

       Revenues
<S>                                           <C>           <C>           <C>        <C>
         Energy marketing and trading         $   645,163   $        -    $      -   $   645,163
         Electric utility                         183,624      178,269         (67)      361,826
         Gas utility                               20,306            -           -        20,306
         Other                                      4,835        1,115           -         5,950
           Total revenues                         853,928      179,384         (67)    1,033,245

       Cost of revenues
         Energy marketing and trading             635,375            -         (47)      635,328
         Fuel and power purchased                  43,377       64,628         (20)      107,985
         Gas supply expenses                       13,327            -           -        13,327
         Other                                      3,323            -           -         3,323
           Total cost of revenues                 695,402       64,628         (67)      759,963

       Gross Profit                               158,526      114,756           -       273,282

       Operating expenses
         Operation and maintenance
           Utility                                 48,928       49,416           -        98,344
           Energy marketing and trading
             and other                             15,910          796           -        16,706
         Depreciation and amortization             25,893       20,235           -        46,128
           Total operating expenses                90,731       70,447           -       161,178

       Equity in earnings of joint ventures         2,512            -           -         2,512

       Operating Income                            70,307       44,309           -       114,616

       Other Income and (deductions)                1,812        1,296           -         3,108
       Interest charges and preferred dividends    12,525       10,391           -        22,916

       Income before income taxes                  59,594       35,214           -        94,808

       Income taxes                                17,858       12,721           -        30,579

       Net Income                             $    41,736   $   22,493    $      -   $    64,229

       Average common shares outstanding
         (Note 4)                                  66,307       37,818      25,338       129,463

       Earnings per share of common stock     $       .63   $      .60    $      -   $       .50


       See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.

</TABLE>

                                                 -30-
<PAGE>
<TABLE>

                                   LG&E ENERGY CORP.
              UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
                         Nine Months Ended September 30, 1997
                     (Thousands of Dollars Except Per Share Data)


                                             LG&E Energy    KU Energy    Pro Forma   Pro Forma
                                             (As Reported) (As Reported)  Adjustment  Combined
                                                             (Note 1)     (Note 2)     (Note 3)
<CAPTION>

       Revenues
<S>                                          <C>           <C>            <C>       <C>
         Energy marketing and trading        $ 2,436,707   $         -    $     (4) $ 2,436,703
         Electric utility                        464,689       533,864        (278)     998,275
         Gas utility                             149,882             -           -      149,882
         Other                                   113,052         4,248           -      117,300
           Total revenues                      3,164,330       538,112        (282)   3,702,160

       Cost of revenues
         Energy marketing and trading          2,412,118             -         (14)   2,412,104
         Fuel and power purchased                120,233       193,767        (268)     313,732
         Gas supply expenses                     100,510             -           -      100,510
         Other                                    64,422             -           -       64,422
           Total cost of revenues              2,697,283       193,767        (282)   2,890,768

       Gross Profit                              467,047       344,345           -      811,392

       Operating expenses
         Operation and maintenance
           Utility                               165,140       150,334           -      315,474
           Energy marketing and trading
             and other                            66,458         2,811           -       69,269
         Depreciation and amortization            87,614        62,970           -      150,584
         Non-recurring charges                      (592)            -           -         (592)
           Total operating expenses              318,620       216,115           -      534,735

       Equity in earnings of joint ventures       14,926             -           -       14,926

       Operating Income                          163,353       128,230           -      291,583

       Other Income and (deductions)               7,140         3,100           -       10,240
       Interest charges, minority interest
         and preferred dividends                  54,805        31,517           -       86,322

       Income before income taxes                115,688        99,813           -      215,501

       Income taxes                               43,639        36,347           -       79,986

       Net Income (Note 5)                   $    72,049   $    63,466    $      -  $   135,515

       Average common shares outstanding
         (Note 4)                                 66,453        37,818      25,338      129,609

       Earnings per share of common stock    $      1.08   $      1.68    $      -  $      1.05


       See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
</TABLE>


                                                 -31-
<PAGE>
<TABLE>

                                    LG&E ENERGY CORP.
              UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
                          Nine months Ended September 30, 1996
                      (Thousands of Dollars Except Per Share Data)


                                             LG&E Energy    KU Energy    Pro Forma   Pro Forma
                                             (As Reported) (As Reported)  Adjustment  Combined
                                                              (Note 1)     (Note 2)    (Note 3)
<CAPTION>

       Revenues
<S>                                           <C>           <C>           <C>        <C>
         Energy marketing and trading         $ 1,863,877   $        -    $      -   $ 1,863,877
         Electric utility                         471,300      536,769        (642)    1,007,427
         Gas utility                              140,724            -           -       140,724
         Other                                     14,369        3,325           -        17,694
           Total revenues                       2,490,270      540,094        (642)    3,029,722

       Cost of revenues
         Energy marketing and trading           1,813,641            -        (234)    1,813,407
         Fuel and power purchased                 124,256      198,825        (408)      322,673
         Gas supply expenses                       90,211            -           -        90,211
         Other                                     10,270            -           -        10,270
           Total cost of revenues               2,038,378      198,825        (642)    2,236,561

       Gross Profit                               451,892      341,269           -       793,161

       Operating expenses
         Operation and maintenance
           Utility                                159,420      149,204           -       308,624
           Energy marketing and trading
             and other                             48,341        1,803           -        50,144
         Depreciation and amortization             77,385       60,454           -       137,839
         Non-recurring charges (Note 7)                 -        1,480           -         1,480
           Total operating expenses               285,146      212,941           -       498,087

       Equity in earnings of joint ventures        11,313            -           -        11,313

       Operating Income                           178,059      128,328           -       306,387

       Other Income and (deductions)                3,353        4,798           -         8,151
       Interest charges and preferred dividends    40,404       31,498           -        71,902

       Income before income taxes                 141,008      101,628           -       242,636

       Income taxes                                48,355       36,743           -        85,098

       Net Income                             $    92,653   $   64,885    $      -   $   157,538

       Average common shares outstanding
         (Note 4)                                  66,278       37,818      25,338       129,434

       Earnings per share of common stock     $      1.40   $     1.72    $      -   $      1.22


       See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.



                                                  -32-
</TABLE>

<PAGE>

                                    LG&E ENERGY CORP.
                              NOTES TO UNAUDITED PRO FORMA
                        COMBINED CONDENSED FINANCIAL STATEMENTS


       1.    Reclassifications have been made to certain  as reported  account
             balances reflected in KU Energy's financial statements to conform
             to this reporting presentation.  All other financial statement
             presentation and accounting policy differences are immaterial and
             have not been adjusted in the pro forma combined condensed
             financial statements.

       2.    Intercompany transactions (power purchased and power sales
             transactions) between LG&E Energy and KU Energy during the periods
             presented were eliminated through pro forma adjustments.

       3.    Merger-related transaction costs are currently estimated to be
             approximately $16.5 million (including fees for financial advisors,
             attorneys, accountants, consultants, filings and printing).  None
             of the estimated cost savings resulting from the Merger or costs to
             achieve such savings has been reflected in the pro forma combined
             condensed statements of income.  A charge of $4.92 million
             ($8.25 million, net of income taxes of $3.33 million) to retained
             earnings and $8.25 million as deferred debits and other assets in
             the pro forma combined condensed balance sheet has been made to
             recognize such estimated transaction costs.

       4.    The pro forma combined condensed financial statements reflect the
             conversion of each share of KU Energy Common Stock (no par value)
             outstanding into 1.67 shares of LG&E Energy Common Stock (no par
             value) as provided in the Merger Agreement.  The pro forma combined
             condensed financial statements are presented as if the companies
             were combined during all periods included therein.

       5.    LG&E Energy's net income for the nine months ended September 30,
             1997, includes the receipt of an $8.5 million insurance settlement
             related to losses resulting from unauthorized transactions entered
             into in 1996 by a marketer in the Company's Calgary, Alberta,
             office.  A one-time restructuring charge of $7.5 million for the
             consolidation of LG&E Energy's energy marketing group partially
             offsets the insurance recovery.

       6.    LG&E Energy adopted the mark-to-market method of accounting for its
             energy trading and price risk management activities during 1996.
             This resulted in increases in energy marketing and trading revenues
             and income from operations of $1.1 million for the three months
             ended September 30, 1996, and $10.6 million for the nine months
             ended September 30, 1996.  The impact on prior period financial
             results was immaterial.

       7.    KU Energy's net income for the nine months ended September 30, 1996
             includes a nonrecurring write-off of nonutility investments.  This
             charge is reflected in nonrecurring charges on the income
             statement.







                                          -33-
<PAGE>

      ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
        (a)  Exhibits.

             The following exhibits are filed as part of this report:

        Exhibit Number                        Description
             27.01          Financial Data Schedule for KU Energy (required
                            for electronic filing only in accordance with
                            Item 601 (c)(1) of Regulation S-K.)

             27.02          Financial Data Schedule for KU (required for
                            electronic filing only in accordance with Item
                            601(c)(1) of Regulation S-K.)

             99.01          Cautionary Statements - KU Energy and KU.
                            (Exhibit 99.06 to Form 10-K Annual Report of KU
                            Energy and KU for the year ended December 31,
                            1996).  Incorporated by reference.

        (b)  Reports on Form 8-K.

             KU Energy and KU filed a report on Form 8-K dated September 12,
             1997 to report an order by the Kentucky Public Service Commission
             approving the proposed merger of KU Energy with LG&E Energy Corp.












                                          -34-
<PAGE>


                                      SIGNATURES


             Pursuant to the requirements 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.



                                                KU ENERGY CORPORATION and
                                                KENTUCKY UTILITIES COMPANY
                                                       (Registrants)



        Date  November 11, 1997                 /s/ Michael R. Whitley
                                                Michael R. Whitley
                                                Chairman and President





        Date  November 11, 1997                 /s/ Michael D. Robinson
                                                Michael D. Robinson
                                                Controller

















                                         -35-