SECURITIES AND EXCHANGE COMMISSION
                         Washington, D. C.  20549


                                FORM 10-Q


(Mark One)
[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

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

      1-10568               LG&E Energy Corp.               61-1174555
                         (A Kentucky Corporation)
                           220 West Main Street
                              P.O. Box 32030
                          Louisville, Ky. 40232
                              (502) 627-2000

      2-26720      Louisville Gas and Electric Company      61-0264150
                         (A Kentucky Corporation)
                           220 West Main Street
                              P.O. Box 32010
                          Louisville, Ky. 40232
                              (502) 627-2000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes X  No

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:

                            LG&E Energy Corp.
      66,527,636 shares, without par value, as of October 31, 1997.

                   Louisville Gas and Electric Company
      21,294,223 shares, without par value, as of October 31, 1997,
                      all held by LG&E Energy Corp.

This combined Form 10-Q is separately filed by LG&E Energy Corp. and
Louisville Gas and Electric Company.  Information contained herein related
to LG&E Energy Corp. or any of its direct or indirect subsidiaries other
than Louisville Gas and Electric Company is provided solely by LG&E Energy
Corp. and not Louisville Gas and Electric Company and shall be deemed not
included in the Form 10-Q of Louisville Gas and Electric Company.

<PAGE>
                                
                        TABLE OF CONTENTS

                             PART I

Item 1 Financial Statements

          LG&E Energy Corp. and Subsidiaries
            Statements of Income                                1
            Balance Sheets                                      2
            Statements of Cash Flows                            4
            Statements of Retained Earnings                     6

          Louisville Gas and Electric Company
            Statements of Income                                7
            Balance Sheets                                      8
            Statements of Cash Flows                           10
            Statements of Retained Earnings                    11

          Notes to Financial Statements                        12

Item 2 Management's Discussion and Analysis of Results of
          Operations and Financial Condition                   19

                             PART II

Item 1 Legal Proceedings                                       27

Item 4 Submission of Matters to a Vote of Security Holders     28

Item 5 Other Information
          Unaudited Pro Forma Financial Information            29
          Unaudited Pro Forma Combined Condensed
            Balance Sheet as of September 30, 1997             30
          Unaudited Pro Forma Combined Condensed
            Statements of Income:
               Three Months Ended September 30, 1997           32
               Three Months Ended September 30, 1996           33
               Nine Months Ended September 30, 1997            34
               Nine Months Ended September 30, 1996            35
          Notes to Unaudited Pro Forma Combined Condensed
            Financial Statements                               36

Item 6 Exhibits and Reports on Form 8-K                        37

       Signatures                                              38

<PAGE>

      Part I.  Financial Information - Item 1.  Financial Statements

                    LG&E Energy Corp. and Subsidiaries
                           Statements of Income
            (Unaudited - Thousands of $ Except Per Share Data)

                                    Three Months           Nine Months
                                       Ended                  Ended
                                     Sept. 30,              Sept. 30,
                                  1997       1996       1997        1996

REVENUES:
Energy marketing and trading  $  855,741   $645,163 $2,436,707 $1,863,877
Electric utility                 189,638    183,624    464,689    471,300
Gas utility                       18,953     20,306    149,882    140,724
Other (Note 2)                    49,189      4,835    113,052     14,369
 Total revenues                1,113,521    853,928  3,164,330  2,490,270

COST OF REVENUES:
Energy marketing and trading     857,789    635,375  2,412,118  1,813,641
Fuel and power purchased          46,807     43,377    120,233    124,256
Gas supply expenses               11,541     13,327    100,510     90,211
Other (Note 2)                    26,829      3,323     64,422     10,270
 Total cost of revenues          942,966    695,402  2,697,283  2,038,378

Gross profit                     170,555    158,526    467,047    451,892

OPERATING EXPENSES:
Operation and maintenance:
 Utility                          55,744     48,928    165,140    159,420
 Energy marketing and trading
  and other                       22,759     15,910     66,458     48,341
Depreciation and amortization     30,852     25,893     87,614     77,385
Nonrecurring charges (Note 5)          -          -       (592)         -
 Total operating expenses        109,355     90,731    318,620    285,146

Equity in earnings
 of joint ventures                 5,985      2,512     14,926     11,313

OPERATING INCOME                  67,185     70,307    163,353    178,059

Other income and (deductions)      1,368      1,812      7,140      3,353
Interest charges, minority inter-
 est and preferred dividends      20,347     12,525     54,805     40,404

Income before income taxes        48,206     59,594    115,688    141,008

Income taxes                      19,013     17,858     43,639     48,355

NET INCOME                    $   29,193   $ 41,736 $   72,049 $   92,653

Average common shares
 outstanding                      66,491     66,307     66,453     66,278

Earnings per share            $      .44   $    .63 $     1.08 $     1.40

The accompanying notes are an integral part of these financial statements.


                                   - 1 -
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                    LG&E Energy Corp. and Subsidiaries
                              Balance Sheets
                             (Thousands of $)

                                  ASSETS

                                                    (Unaudited)
                                                     Sept. 30,    Dec. 31,
                                                        1997        1996

CURRENT ASSETS:
Cash and temporary cash investments                 $  155,703 $  114,669
Marketable securities                                   11,317      5,815
Accounts receivable - less reserve                     455,276    545,729
Materials and supplies - primarily at average cost:
 Fuel (predominantly coal)                              16,128     14,576
 Gas stored underground                                 42,346     43,258
 Other                                                  32,662     32,426
Price risk management assets (Note 3)                   83,105     86,844
Prepayments and other                                    4,927     14,255
 Total current assets                                  801,464    857,572

UTILITY PLANT:
At original cost                                     2,745,374  2,685,209
Less:  reserve for depreciation                      1,057,511    999,987
 Net utility plant                                   1,687,863  1,685,222

OTHER PROPERTY AND INVESTMENTS - less reserve:
Investment in affiliates (Note 2)                      172,339    126,099
Non-utility property and plant, net (Note 2)           407,650    171,338
Price risk management assets (Note 3)                   42,400     36,623
Other                                                   22,332     21,465
 Total other property and investments                  644,721    355,525

DEFERRED DEBITS AND OTHER ASSETS                       113,869    113,573

Total assets                                        $3,247,917 $3,011,892

The accompanying notes are an integral part of these financial statements.


                                   - 2 -
<PAGE>

                    LG&E Energy Corp. and Subsidiaries
                          Balance Sheets (cont.)
                             (Thousands of $)

                         CAPITAL AND LIABILITIES

                                                    (Unaudited)
                                                     Sept. 30,    Dec. 31,
                                                        1997        1996

CURRENT LIABILITIES:
Long-term debt due within one year                  $   20,000 $        -
Notes payable (Note 6)                                 289,161    158,000
Accounts payable                                       418,162    528,556
Trimble County settlement                               14,032     17,511
Accrued taxes                                           27,012          -
Price risk management liabilities (Note 3)             108,962    108,402
Other                                                   80,773     63,366
 Total current liabilities                             958,102    875,835

Long-term debt (Note 2)                                664,315    646,835

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
 taxes                                                 310,262    288,107
Investment tax credit, in
 process of amortization                                76,783     80,040
Regulatory liability                                    74,756     77,287
Price risk management liabilities (Note 3)              13,018     27,482
Other                                                  121,482    109,760
 Total deferred credits and other liabilities          596,301    582,676

Minority interests (Note 2)                            104,901          -

Cumulative preferred stock                              95,328     95,328

COMMON EQUITY:
Common stock, without par value -
 Outstanding 66,525,636 shares
 and 66,341,444 shares                                 470,094    466,329
Other                                                   (1,151)    (1,105)
Retained earnings                                      360,027    345,994
 Total common equity                                   828,970    811,218

Total capital and liabilities                       $3,247,917 $3,011,892

The accompanying notes are an integral part of these financial statements.


                                   - 3 -
<PAGE>

                    LG&E Energy Corp. and Subsidiaries
                         Statements of Cash Flows
                       (Unaudited - Thousands of $)

                                                           Nine Months
                                                              Ended
                                                            Sept. 30,
                                                        1997        1996

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                           $  72,049  $  92,653
Items not requiring cash currently:
 Depreciation and amortization                          87,614     77,385
 Deferred income taxes - net                             3,959     24,890
 Change in net price risk management assets            (15,942)   (10,628)
 Other                                                   7,997      1,490
Change in net current assets                            24,223     (9,535)
Other                                                   (5,163)   (21,444)
 Net cash flows from operating activities              174,737    154,811

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities                                 (9,270)   (15,536)
Proceeds from sales of securities                        3,619     35,771
Construction expenditures                              (78,823)   (71,142)
Investment in affiliates                                  (985)        (3)
Acquisition of interests in
 Argentine natural gas distribution
 companies, net of cash and temporary
 cash investments acquired (Note 2)                   (125,852)         -
  Net cash flows from investing activities            (211,311)   (50,910)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock                                 3,745      2,295
Retirement of first mortgage bonds                           -    (16,000)
Repayment of short-term borrowings                    (298,000)   (79,800)
Short-term borrowings                                  429,161     64,800
Payment of common dividends                            (57,298)   (55,162)
 Net cash flows from financing activities            $  77,608  $ (83,867)


                                   - 4 -
<PAGE>

                    LG&E Energy Corp. and Subsidiaries
                     Statements of Cash Flows (cont.)
                       (Unaudited - Thousands of $)

                                                           Nine Months
                                                              Ended
                                                            Sept. 30,
                                                        1997        1996

CHANGE IN CASH AND TEMPORARY
 CASH INVESTMENTS                                    $  41,034  $  20,034

CASH AND TEMPORARY CASH INVESTMENTS AT
 BEGINNING OF PERIOD                                   114,669     80,144

CASH AND TEMPORARY CASH INVESTMENTS AT
 END OF PERIOD                                       $ 155,703  $ 100,178

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
 Cash paid during the period for:
  Income taxes                                       $  28,594  $  15,358
  Interest on borrowed money                            40,897     33,238

For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.

The accompanying notes are an integral part of these financial statements.


                                   - 5 -
<PAGE>

                    LG&E Energy Corp. and Subsidiaries
                     Statements of Retained Earnings
                               (Unaudited)
                             (Thousands of $)

                                    Three Months           Nine Months
                                       Ended                  Ended
                                     Sept. 30,              Sept. 30,
                                  1997       1996       1997        1996

Balance at beginning
 of period                      $350,625   $331,054   $345,994   $316,930
Net income                        29,193     41,736     72,049     92,653
Cash dividends declared on
 common stock ($.2975, $.2875,
 $.8725 and $.8425 per share)     19,791     19,073     58,016     55,866

Balance at end of period        $360,027   $353,717   $360,027   $353,717

The accompanying notes are an integral part of these financial statements.


                                   - 6 -
<PAGE>

                   Louisville Gas and Electric Company
                           Statements of Income
                               (Unaudited)
                             (Thousands of $)

                                    Three Months           Nine Months
                                       Ended                  Ended
                                     Sept. 30,              Sept. 30,
                                  1997       1996       1997        1996

REVENUES:
Electric (Note 7)               $189,482   $183,512   $464,228   $470,945
Gas                               18,953     20,306    149,882    140,724
 Total operating revenues        208,435    203,818    614,110    611,669

OPERATING EXPENSES:
Fuel for electric generation      40,731     38,007    107,181    110,613
Power purchased                    6,076      5,370     13,052     13,643
Gas supply expenses               11,541     13,328    100,510     90,211
Other operation expenses          40,875     33,093    114,837    104,350
Maintenance                       11,425     12,145     37,768     42,301
Depreciation and amortization     24,892     22,250     70,795     66,751
Federal and state
 income taxes                     22,890     24,254     47,553     52,663
Property and other taxes           3,443      3,690     12,535     12,769
 Total operating expenses        161,873    152,137    504,231    493,301

NET OPERATING INCOME              46,562     51,681    109,879    118,368

Other income and (deductions)        520         19      2,364        730
Interest charges                   9,859      9,234     29,566     30,172

NET INCOME                        37,223     42,466     82,677     88,926

Preferred stock dividends          1,146      1,146      3,433      3,438

NET INCOME AVAILABLE
 FOR COMMON STOCK               $ 36,077   $ 41,320   $ 79,244   $ 85,488

The accompanying notes are an integral part of these financial statements.


                                   - 7 -
<PAGE>

                   Louisville Gas and Electric Company
                              Balance Sheets
                             (Thousands of $)

                                  ASSETS

                                                    (Unaudited)
                                                     Sept. 30,    Dec. 31,
                                                        1997        1996

UTILITY PLANT:
At original cost                                    $2,745,374 $2,685,209
Less:  reserve for depreciation                      1,057,511    999,987
 Net utility plant                                   1,687,863  1,685,222

OTHER PROPERTY AND INVESTMENTS -
 less reserve                                            1,096      1,028

CURRENT ASSETS:
Cash and temporary cash investments                     67,488     56,792
Marketable securities                                    8,516      3,595
Accounts receivable - less reserve                     132,289    115,144
Materials and supplies - at average cost:
 Fuel (predominantly coal)                              16,128     14,576
 Gas stored underground                                 39,449     35,510
 Other                                                  32,662     32,426
Prepayments                                              1,316      2,480
 Total current assets                                  297,848    260,523

DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense                                 6,816      6,933
Regulatory assets                                       20,012     27,729
Other                                                   27,470     25,277
 Total deferred debits and other assets                 54,298     59,939

Total assets                                        $2,041,105 $2,006,712

The accompanying notes are an integral part of these financial statements.


                                   - 8 -
<PAGE>

                   Louisville Gas and Electric Company
                          Balance Sheets (cont.)
                             (Thousands of $)

                         CAPITAL AND LIABILITIES

                                                    (Unaudited)
                                                     Sept. 30,    Dec. 31,
                                                        1997        1996

CAPITALIZATION:
Common stock, without par value -
 Outstanding 21,294,223 shares                      $  425,170 $  425,170
Retained earnings                                      249,466    209,222
Other                                                     (764)      (635)
 Total common equity                                   673,872    633,757
Cumulative preferred stock                              95,328     95,328
Long-term debt                                         626,800    646,835
 Total capitalization                                1,396,000  1,375,920

CURRENT LIABILITIES:
Long-term debt due within one year                      20,000          -
Accounts payable                                        74,758     97,478
Trimble County settlement                               14,032     17,511
Dividends declared                                      21,145     20,131
Accrued taxes                                           25,343     11,982
Accrued interest                                         8,723      9,994
Other                                                   14,886     13,128
 Total current liabilities                             178,887    170,224

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
 taxes                                                 239,885    241,681
Investment tax credit, in
 process of amortization                                76,783     80,040
Accumulated provision for pensions
 and related benefits                                   42,520     42,554
Regulatory liability                                    74,756     77,287
Other                                                   32,274     19,006
 Total deferred credits and other liabilities          466,218    460,568

Total capital and liabilities                       $2,041,105 $2,006,712

The accompanying notes are an integral part of these financial statements.


                                   - 9 -
<PAGE>

                   Louisville Gas and Electric Company
                         Statements of Cash Flows
                       (Unaudited - Thousands of $)

                                                           Nine Months
                                                              Ended
                                                            Sept. 30,
                                                        1997        1996

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                           $  82,677  $  88,926
Items not requiring cash currently:
 Depreciation and amortization                          70,795     66,751
 Deferred income taxes - net                            (4,170)     7,040
 Investment tax credit - net                            (3,257)    (3,305)
 Other                                                   3,639      2,967
Changes in net current assets:
 Accounts receivable                                   (17,145)     9,503
 Materials and supplies                                 (5,727)    (3,227)
 Trimble County settlement                              (3,479)    (9,239)
 Accounts payable                                      (22,720)   (42,259)
 Accrued taxes                                          13,361     31,305
 Accrued interest                                       (1,271)    (1,224)
 Prepayments and other                                   2,922      2,435
Other                                                   11,550     (7,362)
 Net cash flows from operating activities              127,175    142,311

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities                                 (6,457)    (6,764)
Proceeds from sales of securities                        1,247     20,977
Construction expenditures                              (69,850)   (66,400)
 Net cash flows from investing activities              (75,060)   (52,187)

CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of first mortgage bonds                           -    (16,000)
Payment of dividends                                   (41,419)   (58,964)
 Net cash flows from financing activities              (41,419)   (74,964)

CHANGE IN CASH AND TEMPORARY
 CASH INVESTMENTS                                       10,696     15,160

CASH AND TEMPORARY CASH INVESTMENTS AT
 BEGINNING OF PERIOD                                    56,792     58,131

CASH AND TEMPORARY CASH INVESTMENTS AT
 END OF PERIOD                                       $  67,488  $  73,291

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
 Cash paid during the period for:
  Income taxes                                       $  33,120  $  23,971
  Interest on borrowed money                            29,707     30,415

For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.

The accompanying notes are an integral part of these financial statements.


                                  - 10 -
<PAGE>

                   Louisville Gas and Electric Company
                     Statements of Retained Earnings
                               (Unaudited)
                             (Thousands of $)

                                    Three Months           Nine Months
                                       Ended                  Ended
                                     Sept. 30,              Sept. 30,
                                  1997       1996       1997        1996

Balance at beginning
 of period                      $233,388   $188,217   $209,222   $181,049
Net income                        37,223     42,466     82,677     88,926
 Subtotal                        270,611    230,683    291,899    269,975

Cash dividends declared on stock:
5% cumulative preferred              269        269        807        807
Auction rate cumulative
 preferred                           509        510      1,525      1,530
$5.875 cumulative preferred          367        367      1,101      1,101
Common                            20,000     19,200     39,000     56,200
 Subtotal                         21,145     20,346     42,433     59,638

Balance at end of period        $249,466   $210,337   $249,466   $210,337

The accompanying notes are an integral part of these financial statements.


                                  - 11 -
<PAGE>

                    LG&E Energy Corp. and Subsidiaries
                   Louisville Gas and Electric Company

                      Notes to Financial Statements
                               (Unaudited)

1. On September 5, 1997, LG&E Energy Corp. merged two of its direct
   subsidiaries, LG&E Energy Systems Inc. (Energy Systems) and LG&E Gas
   Systems Inc. (Gas Systems), and renamed the surviving company LG&E
   Capital Corp.  This report includes consolidated financial statements
   for LG&E Energy Corp. and its wholly-owned subsidiaries - Louisville
   Gas and Electric Company (LG&E) and LG&E Capital Corp. (Capital Corp.),
   collectively referred to as the "Company."  This report also includes
   financial statements for LG&E.

   In the opinion of management, all adjustments have been made to present
   fairly the consolidated financial position, results of operations and
   cash flows for the periods indicated.  The adjustments consist of those
   of a normal recurring nature.  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 SEC rules and regulations, although
   the Company believes that the disclosures are adequate to make the
   information presented not misleading.

   In the fourth quarter of 1996, the Company adopted the mark-to-market
   method of accounting for its energy trading and price risk management
   activities.  The Company made the change effective January 1, 1996, and
   restated its 1996 quarterly results.  The change increased net income
   for the three months ended September 30, 1996, by $632,000 ($.01 per
   share), and it increased net income for the nine months ended September
   30, 1996, by $6,218,000 ($.09 per share).

   These financial statements should be read with the financial statements
   and the notes included in the Company's and LG&E's Annual Reports on
   Form 10-K for 1996.

2. On February 13, 1997, the Company acquired interests in two Argentine
   natural gas distribution companies for $140 million, plus transaction-
   related costs and expenses. The Company acquired a controlling interest
   in Distribuidora de Gas del Centro (Centro), and a combined 14.4%
   interest in Distribuidora de Gas Cuyana (Cuyana). The Company accounted
   for both acquisitions using the purchase method.  The Company allocated
   substantially all of the excess of the purchase price over the
   underlying equity of Centro and Cuyana to property and equipment.  The
   Company recognized no goodwill on the acquisition.

   The fair values of the net assets acquired follow (in thousands of
   dollars):

      Assets                                           $333,580
      Liabilities                                        89,820
      Minority interests                                103,916
      Cash paid, excluding transaction costs            139,844
      Cash and cash equivalents acquired                 16,453
      Net cash paid, excluding transaction costs        123,391
      Transaction costs                                   2,461
      Net cash paid                                    $125,852

   The Company has classified Centro's revenues, cost of revenues, and
   operating expenses since the date of acquisition as other in its income
   statement for the three- and nine-month periods ended September 30,
   1997.  The Company included its share of the earnings of Cuyana in
   equity in earnings of joint ventures.  The Company included Centro's
   property and equipment in non-utility property and plant, net, in its
   bal

                                  - 12 -
<PAGE>

   ance sheet as of September 30, 1997, and it included its investment in
   Cuyana in investments in affiliates.

   The carrying amount of the Company's investment in Cuyana exceeded its
   share of the underlying equity of Cuyana by approximately $11 million
   at September 30, 1997.  This difference reflects fair-value adjustments
   recorded at the time of purchase.

   Liabilities assumed in the purchase included negotiable obligations
   issued by Centro with a face amount of $38 million.  The obligations
   mature in August 2001 and pay interest at 11.44% of face value.  The
   Company classified the negotiable obligations as long-term debt in its
   balance sheet as of September 30, 1997.

3. Price Risk Management.

   The notional amounts and terms of the Company's price risk management
   contracts in which the Company pays or receives a fixed price for the
   underlying commodity at September 30, 1997, follow:

                                              Fixed      Fixed    Maximum
                                 Unit of      Price      Price    Term in
   Product                       Measure      Payor   Receiver      Years

   Electricity          Thousands of Mwh    274,424    112,690         11
   Natural gas        Thousands of MMBtu    862,742    744,970          9
   Canadian dollars               C$000s     22,350          -          2

   The weighted average terms of the Company's price risk management
   contracts at September 30, 1997, follow:

   Product                                    Term

   Electricity                             5 months
   Natural gas                            14 months
   Canadian dollars                        6 months

   The fair values of the Company's price risk management assets and
   liabilities at September 30, 1997, follow (in thousands of dollars):

                                            Liabil-
   Counterparty                   Assets      ities

   Marketers                    $ 67,925   $ 62,499
   Energy producers               28,204     26,660
   Financial institutions         29,072     18,399
   Industrial and commercial
     users                            30      7,519
   Other                             274        949

   Totals                        125,505    116,026
   Reserves                            -      5,954

   Net values                   $125,505   $121,980


                                  - 13 -
<PAGE>

   The average fair values of the Company's price risk management assets
   and liabilities for the three- and nine-month periods ended September
   30, 1997, follow (in thousands of dollars):

                                    Three Months           Nine Months
                                            Liabil-               Liabil-
   Counterparty                   Assets      ities     Assets      ities

   Marketers                    $ 54,869   $ 42,499   $ 47,267   $ 52,284
   Energy producers               41,272     30,302     42,251     20,530
   Financial institutions         18,864     11,609     13,451     13,054
   Industrial and commercial
     users                         2,004     18,942      2,328     10,653
   Gas transmission companies        112        276        198        990
   Other                           1,987      1,295      8,185      6,069

   Totals                       $119,108   $104,923   $113,680   $103,580

   Commitments with 28 customers represented approximately 72% of the
   Company's price risk management assets at September 30, 1997.

   A 3% change in the market prices of electricity and natural gas at
   September 30, 1997, would have changed the Company's net income by
   approximately $3.6 million.

   Other Financial Instruments.

   The Company entered into an interest-rate swap in the second quarter of
   1997 to hedge some of its notes payable.  The swap has a notional
   amount of $50 million, and it matures in June 2002.  The swap agreement
   calls for the Company to pay a fixed rate of 6.49%, and to receive a
   variable rate based on the three-month London Interbank Offered Rate.
   The rate received will change every three months.  For the three- and
   nine-month periods ended September 30, 1997, the rates received equaled
   5.792% and 5.796%, respectively.

   LG&E was a party to two interest-rate swap agreements at December 31,
   1996.  The swaps had notional amounts of $15 million each, and LG&E
   used them to hedge its exposure to changes in the interest rates on $30
   million of Pollution Control Bonds, Variable Rate Series, due September
   1, 2017.  In September 1997, one of these swaps matured and was not
   renewed.

   None of the other information concerning other financial instruments
   disclosed by the Company in its Annual Report on Form 10-K for the year
   ended December 31, 1996, changed materially during the nine months
   ended September 30, 1997.

4. On May 20, 1997, the Company and KU Energy Corporation, a Kentucky
   corporation ("KU"), entered into an Agreement and Plan of Merger (the
   "Merger Agreement") providing for a merger of LG&E Energy and KU.
   Pursuant to the Merger Agreement, among other things, KU will be merged
   with and into LG&E Energy, with LG&E Energy as the surviving
   corporation (the "Merger").  The Merger, which was unanimously approved
   by the Boards of Directors of LG&E Energy and KU, is expected to close
   shortly after all of the conditions to consummation of the Merger,
   including the receipt of all applicable regulatory approvals, are met
   or waived.

   As a result of the Merger, the Company, which is the parent of LG&E,
   will become the parent company of KU's principal operating subsidiary,
   Kentucky Utilities Company ("Kentucky Utilities").  The operating
   utility subsidiaries (LG&E and Kentucky Utilities) will maintain their
   separate corporate identities and will continue to serve

                                  - 14 -
<PAGE>

   customers in Kentucky and Virginia under their present names.  LG&E
   Energy and KU expect more than $760 million in gross non-fuel savings
   over a ten-year period following the Merger.  Costs to achieve these
   synergies are estimated to be $77 million.  In regulatory filings
   associated with approval of the Merger, LG&E and Kentucky Utilities
   committed not to seek increases in base rates and proposed reductions
   in their retail customers' bills in amounts based on 50% of the
   currently estimated cost savings to be achieved as a result of the
   Merger, less 50% of the costs to achieve such savings, in each of the
   five years following effectiveness of the Merger.  The preferred stock
   and debt securities of the operating utility subsidiaries will not be
   affected by the Merger.  Present nonutility operations of KU will be
   unaffected.  The nonutility subsidiaries of KU will become subsidiaries
   of LG&E Energy.

   Under the terms of the Merger Agreement, each outstanding share of the
   common stock, without par value, of KU ("KU Common Stock") (other than
   shares with respect to which dissenters' rights are perfected under
   applicable state law), together with the associated KU stock purchase
   rights, will be converted into the right to receive 1.67 shares of
   common stock, without par value, of the Company ("LG&E Energy Common
   Stock"), together with the associated LG&E Energy stock purchase
   rights.  A holder of KU Common Stock who would otherwise have been
   entitled to a fractional share of LG&E Energy Common Stock will be
   entitled to receive a cash payment in lieu of such fractional share.
   The outstanding shares of LG&E Energy Common Stock will remain
   unchanged and outstanding.  As of September 30, 1997, there were
   66,525,636 shares of LG&E Energy common stock outstanding, and
   37,817,878 shares of KU common stock outstanding.  Based on such
   capitalization, upon consummation of the Merger 51.3% of the
   outstanding LG&E Energy common stock will be owned by the shareholders
   of LG&E Energy prior to the Merger and 48.7% will be owned by former KU
   shareholders.

   On September 12, 1997, the Public Service Commission of Kentucky
   (Commission) approved the merger application substantially as filed.
   In the application filed with the Commission, the utilities proposed
   that 50% of the net non-fuel cost savings estimated to be achieved from
   the merger, less 50% of the costs to achieve such savings(but not in
   excess of the currently estimated costs to achieve), be applied to
   reduce customer rates, and the remaining 50% be retained by the
   companies.  The Commission approved and allocated the customer savings
   53% to Kentucky Utilities and 47% to LG&E.  The Order provides for a
   surcredit on customers' bills for 50% of the projected net non-fuel
   savings in each of the five years following consummation of the merger.
   The surcredit will be terminated only with the consent of the
   Commission.  Any fuel cost savings will be passed to Kentucky customers
   through the companies' fuel adjustment clauses.  One-half of the costs
   to achieve the savings will be charged to expenses as incurred, once
   the merger is consummated, and the remaining one-half will be deferred
   as a regulatory asset and amortized as an offset to customer savings
   equally over five years.  The reduced customer rates approved by the
   Commission are guaranteed, absent extraordinary circumstances, and it
   will be up to Kentucky Utilities and LG&E to actually realize the
   estimated level of net non-fuel savings.

   On October 9, 1997, LG&E Energy and KU filed for approval of the Merger
   with the Federal Energy Regulatory Commission.

   On October 14, 1997, in separate meetings, stockholders from each of
   the companies met and the holders of over 75% of the outstanding shares
   of common stock of LG&E Energy and KU approved the merger.

   The Merger remains subject to approval of regulators in Virginia under
   state utility law, the approval of the Federal Energy Regulatory
   Commission under the Federal Power Act, the approval of the Securities
   and Exchange Commission (the "SEC") under the Public Utility Holding
   Company Act of 1935, and the filing of requisite notifications

                                  - 15 -
<PAGE>

   with the Federal Trade Commission and the Department of Justice under
   the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
   and the expiration of all applicable waiting periods thereunder.  The
   Merger is also subject to the receipt of opinions of counsel that the
   Merger will qualify as a tax-free reorganization and assurances from
   the parties' independent accountants that the Merger will qualify as a
   pooling of interests for accounting purposes.  In addition, the Merger
   is conditioned upon the approval for listing of shares of LG&E Energy
   Common Stock to be issued in the Merger on the New York Stock Exchange.
   It is anticipated that LG&E Energy, as parent of LG&E and Kentucky
   Utilities, will continue to be an exempt holding company under the
   Public Utility Holding Company Act of 1935.

   The foregoing description of the Merger does not purport to be complete
   and is qualified in its entirety by reference to the following
   documents (including the exhibits thereto) filed with the Securities
   and Exchange Commission ("SEC"):  (i) the Company's current reports on
   Form 8-K dated May 21, 1997, May 30, 1997, and September 19, 1997 (SEC
   File No. 1-10568), (ii) the Company's Quarterly Report on Form 10-Q for
   the quarter ended June 30, 1997, and the Company's Registration
   Statement on Form S-4 filed on August 22, 1997.

5. In the fourth quarter of 1996, LG&E Natural Inc. (LG&E Natural)
   discovered that a marketer in its Calgary, Alberta, office had engaged
   in unauthorized transactions, resulting in significant losses in the
   Company's Canadian natural gas marketing business.  The Company
   recorded an expense of $17.1 million (U.S.) after income taxes to
   reflect the losses.  In the second quarter of 1997, the Company
   received an insurance settlement of $7.6 million (net of expenses)
   related to the losses.  The Company included the settlement amount as a
   credit in non-recurring charges in its income statement for the nine
   months ended September 30, 1997.  See Item 1, Legal Proceedings, under
   Part II.

   The Company reported in its Form 8-K dated April 28, 1997, that it
   intended to consolidate the trading, risk management and administrative
   operations of its power marketing and gas marketing divisions into a
   single energy marketing unit, located in its Louisville headquarters.
   This represented a step in the Company's plan to integrate its two
   marketing companies, LG&E Power Marketing Inc. (LG&E Power Marketing)
   and LG&E Natural, into a new division, LG&E Energy Marketing, to
   capitalize on the convergence of the electric and gas marketing
   industries.  The consolidated division will expand the variety of
   commodities it will offer to include coal, emission allowances and
   other energy-related products.

   Under the integration plan, the Company moved LG&E Natural's trading,
   risk management, accounting, legal, credit management and other support
   operations from Dallas to Louisville, consolidating them with the
   Company's power marketing group already located there.  The Company
   will maintain sales and marketing offices in Dallas as well as in
   Fairfax, Virginia; Chicago; Denver; and Costa Mesa, California.

   The Company recorded a charge of $7.0 million in the second quarter of
   1997 to reflect the costs of the consolidation.  The Company included
   this amount in non-recurring charges in its income statement for the
   nine months ended September 30, 1997.  This charge covered employee
   severance, facilities, information systems and other related costs.
   The Company expects future savings resulting from the integration to
   more than offset these costs.

6. On September 5, 1997, Energy Systems and Gas Systems merged to form
   Capital Corp.  At the same time, Capital Corp. implemented a $600
   million commercial paper facility backed by new lines of credit
   totaling $700 million.  The Company terminated the old lines of credit
   for Energy Systems and Gas Systems, which totaled $435 million.  The

                                  - 16 -
<PAGE>

   old $25 million line of credit for Energy Corp. expired in July 1997,
   and the Company did not renew it.

   Capital Corp. had outstanding commercial paper of $289 million at
   September 30, 1997, at a weighted average interest rate of 5.60%.  LG&E
   Energy Corp., LG&E, and Capital Corp. had no other notes payable at
   September 30, 1997.

   At September 30, 1997, the Company had lines of credit in place
   totaling $900 million ($200 million for LG&E, and $700 million for
   Capital Corp.) for which it pays commitment or facility fees.  The LG&E
   credit facility provides for short term borrowing.  The Capital Corp.
   facilities provide for short term borrowing, letter of credit issuance,
   and support of commercial paper borrowings.  Unused capacity under
   these lines totaled $551.9 million after considering the commercial
   paper support and approximately $59.1 million in letters of credit
   securing on- and off-balance-sheet commitments.  The credit lines will
   expire at various times from 1998 through 2002.  Management expects to
   renegotiate the lines when they expire.

   Capital Corp. has provided a guarantee of a lease obligation to a third
   party.  The obligation totaled $10.9 million at September 30, 1997.

7. In April 1995, in response to an application filed by LG&E, the
   Commission approved, with modifications, an environmental cost recovery
   surcharge that increased electric revenues by $3.2 million in 1995,
   $2.4 million in 1996 and is expected to increase 1997 revenues an
   additional $.5 million.

   An appeal of the Commission's April 1995 order by various intervenors
   in the proceeding is currently pending in the Franklin Circuit Court of
   Kentucky.  LG&E is contesting the legal challenges to the surcharge,
   but cannot predict the outcome of the appeal.  The amount of refunds
   that may be ordered, if any, are not expected to have a material
   adverse effect on the Company's financial position or results of
   operations.

8. On September 30, 1997 the Commission issued an order approving LG&E's
   request to implement a performance-based ratemaking mechanism effective
   November 1, 1997.  This mechanism is related to gas procurement
   activities and gas off-system sales only.  It is a means to improve the
   quality of service, reduce costs, and improve returns to shareholders.
   The mechanism will be implemented on an experimental basis over a three
   year period.  This revision will not have a material effect on LG&E's
   financial position or results of operations.

9. Effective January 1, 1997, the Company adopted Statement of Financial
   Accounting Standards No. 125, Accounting for Transfers and Servicing of
   Financial Assets and Extinguishments of Liabilities (SFAS No. 125).
   This new standard is effective for all transfers and servicing of
   financial assets and extinguishments of liabilities occurring after
   December 31, 1996.  Adopting SFAS No. 125 had no impact on the
   Company's financial position or results of operations.

   The Company adopted the provisions of Statement of Position (SOP) 96-1,
   Environmental Remediation Liabilities, effective January 1, 1997.  This
   statement provides authoritative guidance for recognition, measurement,
   and disclosure of environmental remediation liabilities in financial
   statements.  Due to the Company's previous recognition of this type of
   liability, adoption did not have a material impact on the Company's
   financial position or results of operation.

   In February 1997, the Financial Accounting Standards Board issued
   Statements of Financial Accounting Standards No. 128, Earnings Per
   Share, and No. 129, Disclosure of Information about Capital Structure,
   effective for periods ending after December 15,

                                  - 17 -
<PAGE>

   1997.  The Company does not expect these statements to materially
   affect its earnings per share or its disclosures about its capital
   structure.

   In June 1997, the Financial Accounting Standards Board issued
   Statements of Financial Accounting Standards No. 130, Reporting
   Comprehensive Income, and No. 131, Disclosures about Segments of an
   Enterprise and Related Information, effective for periods beginning
   after December 15, 1997.  The Company does not expect its comprehensive
   income to differ materially from its net income, and it does not expect
   its segment disclosures to change significantly as a result of adopting
   the provisions of these statements.

10.See Item 1, Legal Proceedings, under Part II for a discussion of the
   reversal of a lower court's adverse ruling affecting Westmoreland-LG&E
   Partners' (WLP) efforts to recover capacity payments withheld by
   Virginia Electric and Power Company.  The Company has a 50% interest in
   WLP, and WLP owns the Roanoke Valley I and II facilities.

11.See Item 1, Legal Proceedings, under Part II for a discussion of LG&E
   Westmoreland - Rensselaer's (LWR) obligation to negotiate towards a
   restructuring of its power-purchase agreement with Niagara Mohawk Power
   Corporation.  The Company has a 50% interest in LWR, and LWR owns the
   Rensselaer facility.

12.See Item 1, Legal Proceedings, under Part II for a discussion of
   proposed regulations of the United States Environmental Protection
   Agency that, if adopted, could require many utilities east of the
   Mississippi River, including LG&E and KU, to reduce the emission of
   nitrogen oxides by approximately 85% from 1990 levels.  LG&E already
   has reduced its emissions of nitrogen oxides by approximately 40%.

13.Reference is made to Part II herein - Item 1, Legal Proceedings, and
   Note 16 of the Notes to Financial Statements, Commitments and
   Contingencies, of the Company's Annual Report on Form 10-K for the year
   ended December 31, 1996.


                                  - 18 -
<PAGE>

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

On May 20, 1997, the Company entered into an Agreement and Plan of Merger
with KU Energy Corporation ("KU Energy"), which is the parent company of
Kentucky Utilities Company ("Kentucky Utilities").  Further information
concerning this agreement and pro forma financial information relating
thereto is included in Note 4 and Part II of this Form 10-Q.  The following
discussion and analysis is based on the financial condition and operations
of the Company and does not reflect the potential effects of the
combination between the Company and KU Energy.

The Company's principal subsidiary is LG&E, an electric and gas utility.
Accordingly, LG&E's results of operations and liquidity and capital
resources are the primary factors affecting the Company's consolidated
results of operations and capital resources and liquidity.

Some of the matters discussed in Part I or Part II of this Form 10-Q may
contain forward looking statements that are subject to certain risks,
uncertainties and assumptions.  Actual results may vary materially.
Factors that could cause actual results to differ materially include, but
are not limited to:  general economic conditions; business and competitive
conditions in the energy industry; unusual weather; regulatory decisions,
including decisions regarding the proposed combination of the Company and
KU Energy; the factors described in Exhibit 99.02 of the Company's Form 8-K
filed May 22, 1997, the factors described under the caption "Cautionary
Statement Concerning Forward-Looking Statements" in the Company's Proxy
Statement dated August 22, 1997, and other factors described from time to
time in the Company's reports to the Securities and Exchange Commission.

                          Results of Operations

The Company's results of operations are significantly affected by seasonal
fluctuations in temperature and other weather-related factors.  Because of
these and other factors, the results of one interim period are not
necessarily indicative of results or trends to be expected for the full
year.

The Company restated its quarterly results for the three- and nine-month
periods ended September 30, 1996, to reflect adopting the mark-to-market
method of accounting for its energy marketing and trading activities.  See
Note 1 of Notes to Financial Statements under Item 1.

            Three Months Ended September 30, 1997, Compared to
                  Three Months Ended September 30, 1996

The Company's earnings per share decreased to $.44 in 1997 from $.63 in
1996 due to energy marketing losses in 1997, lower earnings at LG&E, and to
the favorable resolution of several pending income tax issues in the third
quarter of 1996.  Higher non-utility power generation earnings partially
offset these decreases, as did increases resulting from acquiring interests
in Centro and Cuyana in February 1997.  The energy marketing losses
resulted from abrupt changes in electric demand, substantially greater
volatility in electricity prices in certain regions of the country during
the summer, and lower gas-marketing margins.  The LG&E decrease resulted
from increased operating expenses and a write-off of certain deferred items
(see LG&E Results), partially offset by increased electric sales to
ultimate consumers due to warmer weather.  The increase in non-utility
power generation earnings resulted from higher earnings at the Roanoke
Valley I and Tarifa projects.


                                  - 19 -
<PAGE>

LG&E (Utility) Results:

LG&E's net income decreased $5.2 million (13%) for the quarter ended
September 30, 1997, as compared to the quarter ended September 30, 1996,
primarily because of increased operating expenses and a write-off of
certain expenses deferred in prior periods.  These expenses were partially
offset by increased electric sales to ultimate consumers due to the warmer
weather.  Cooling degree days were 16% above 1996.

A comparison of LG&E's revenues for the quarter ended September 30, 1997,
with the quarter ended September 30, 1996, reflects increases and decreases
which have been segregated by the following principal causes:

                                                           Increase or
                                                            (Decrease)
                                                          (Thousands of $)
                                                      Electric      Gas
Cause                                                 Revenues    Revenues

Sales to ultimate consumers:
 Fuel and gas supply adjustments                       $  (338)   $  (972)
 Demand side management/revenue
  decoupling                                               899      1,524
 Environmental cost recovery surcharge                     106          -
 Variation in sales volume, etc.                         8,249     (1,697)

 Total                                                   8,916     (1,145)

Sales for resale                                        (3,673)         -
Gas transportation - net                                     -        (95)
Other                                                      727       (113)

Total                                                  $ 5,970    $(1,353)

Fuel for electric generation and gas supply expenses comprise a large
segment of LG&E's total operating expenses.  LG&E's electric and gas rates
contain a fuel adjustment clause and a gas supply clause, respectively,
whereby increases or decreases in the cost of fuel and gas supply may be
reflected in retail rates, subject to the approval of the Public Service
Commission of Kentucky.  Fuel for electric generation increased $2.7
million (7%) for the quarter because of an increase in generation ($2.2
million) and a higher cost of coal burned ($.5 million).  Gas supply
expenses decreased $1.8 million (13%) due to a decrease in net gas supply
cost.

Other operation expenses increased $7.8 million (24%) over 1996 because  of
a write-off of certain previously deferred items ($3.2 million) and
increased costs to operate the electric generating plants ($1.3 million).
In addition, operation costs increased over 1996 because of a credit to
expense recorded in the third quarter of 1996 for a portion of the
settlement proceeds related to a commercial dispute ($1.8 million).

As a result of a recent analysis, LG&E revised its regulatory strategy and
wrote-off certain previously deferred expenses as mentioned above.  Items
written off include deferred expenses associated with LG&E's operation of
its hydro-electric plant and a management audit fee.  While LG&E believes
it could have reasonably expected to recover these costs in future rate
proceedings before the Commission, it decided not to seek recovery and to
expense these costs currently because of increasing competitive pressures
and future economic conditions.  In addition, consistent with the order of
the Commission regarding the merger of the Company with KU, the Company
does not expect to request an increase in base

                                  - 20 -
<PAGE>

rates for a period of five years following the completion of the merger,
absent extraordinary circumstances.

Depreciation and amortization increased $2.6 million (12%) primarily as a
result of the accelerated write-off of losses on early retirements of
facilities, which were previously deferred as regulatory assets and were in
the process of amortization ($1.9 million) and because of additional
depreciable plant in service.

Variations in income tax expense are largely attributable to changes in pre-
tax income.

Energy Marketing and Trading and Other Results:

Energy marketing and trading revenues and cost of revenues increased $210.6
million (33%) and $222.4 million (35%), respectively, due to higher power-
marketing volumes, partially offset by lower gas-marketing volumes.  The
increase in revenues also reflects recognizing revenues of $10.5 million in
the third quarter of 1997 related to a negotiated settlement of an
independent power project.  The increase in power-marketing volumes
resulted from many new transactions, including sales pursuant to a
marketing agreement with Oglethorpe Power Corporation completed in 1996 and
the signing of an interim marketing agreement with Big Rivers Electric
Corporation in the third quarter of 1997.  The decrease in gas-marketing
volumes resulted from the organizational changes discussed in Note 5 of
Notes to Financial Statements, under Part I, Item 1 of this report.

Energy marketing and trading gross margins decreased $11.8 million due to
abnormal weather (which created abrupt changes in electric demand),
substantially greater volatility in electricity prices in certain regions
of the country during the summer, and lower gas-marketing margins.  The
decrease in gas-marketing margins resulted from lower volume, milder
weather and reduced price volatility in the gas markets.  The independent
power project settlement mentioned above partially offset these decreases.

Other revenues and cost of revenues increased $44.4 million and $23.5
million, respectively, primarily due to acquiring an interest in Centro in
February 1997.  Operation and maintenance expense increased $6.8 million
(43%) and non-utility depreciation and amortization increased $2.3 million
for the same reason.  See Note 2 of Notes to Financial Statements under
Item 1.

Equity in earnings of joint ventures increased $3.5 million in 1997 due to
acquiring an interest in Cuyana in February 1997, and to increases at the
Roanoke Valley I and Tarifa projects.  Earnings at Roanoke Valley I
increased due to a decrease in forced-outage days, and the Tarifa increase
resulted from higher energy production.

See Note 5 of Notes to Financial Statements under Item 1, Part I of this
report for a discussion of the Company's decision to consolidate the
trading, risk management and administrative operations of its power
marketing and gas marketing divisions into a single energy marketing unit
at its Louisville headquarters.

Non-utility interest charges and minority interest increased $7.2 million
due to an increase in notes payable and to the Centro acquisition.

The consolidated effective tax rate increased to 39.4% in 1997 from 30.0%
in 1996 mainly due to successfully resolving several pending income tax
issues in 1996 and to changes in the provisions for state and foreign
income taxes.


                                  - 21 -
<PAGE>

            Nine Months Ended September 30, 1997, Compared to
                   Nine Months Ended September 30, 1996

The Company's earnings per share decreased to $1.08 in 1997 from $1.40 in
1996 due to energy marketing losses in 1997, lower earnings at LG&E, and
the favorable resolution of several pending income tax issues in 1996.
Higher non-utility power generation earnings partially offset these
decreases, as did increases resulting from acquiring interests in Centro
and Cuyana in February 1997.  The energy marketing losses resulted from
abrupt changes in electric demand, substantially greater volatility in
electricity prices in certain regions of the country during the summer, and
lower gas-marketing margins.  The LG&E decrease was primarily due to lower
retail electric and gas sales due to milder weather in 1997.  Lower off-
system sales of electricity to wholesale customers also contributed to the
decrease.  In addition, a write-off of certain deferred items (see LG&E
Results) and increased operating expenses at the electric generating plants
had a negative impact on LG&E's net income.  The increase in non-utility
power generation earnings resulted from higher earnings at the Roanoke
Valley I and Tarifa projects, partially offset by lower earnings at the
Windpower Partners 1993 project.

LG&E (Utility) Results:

LG&E's net income for the nine months ended September 30, 1997, decreased
$6.2 million (7%).  This decrease is primarily due to lower retail electric
and gas sales due to milder weather in 1997.  Lower off-system sales of
electricity to wholesale customers have also contributed to the decrease.
In addition, a write-off of certain expenses deferred in prior periods and
increased operating expenses at electric generating plants had a negative
impact on net income.

A comparison of LG&E's revenues for the nine months ended September 30,
1997, with the nine months ended September 30, 1996, reflects increases and
decreases which have been segregated by the following principal causes:

                                                           Increase or
                                                            (Decrease)
                                                          (Thousands of $)
                                                      Electric      Gas
Cause                                                 Revenues    Revenues

Sales to ultimate consumers:
 Fuel and gas supply adjustments                      $ (2,005)  $ 24,925
 Demand side management/revenue
  decoupling                                             7,450      5,329
 Environmental cost recovery surcharge                     371          -
 Variation in sales volume, etc.                        (4,948)   (21,555)

 Total                                                     868      8,699

Sales for resale                                       (11,064)         -
Gas transportation - net                                     -        479
Other                                                    3,479        (20)

Total                                                 $ (6,717)   $ 9,158

Electric sales for resale decreased due to increased outages at the power
plants which reduced the amount of power available for off-system spot
market sales.

Fuel for electric generation decreased $3.4 million (3%) for the nine
months ended September 30, 1997, primarily because of decreased generation
($4.3 million), partially offset

                                  - 22 -
<PAGE>

by a higher cost of coal burned ($.9 million).  Gas supply expenses
increased $10.3 million (11%) primarily because of increased net gas supply
cost ($26.3 million) partially offset by a decrease in the volume of gas
delivered to the distribution system ($16 million).

Other operation expenses increased $10.5 million (10%) over 1996 partly
because of increased operating expenses at electric generating plants ($3.7
million), a write-off of certain deferred items in the third quarter as
previously mentioned ($3.2 million), and the recognition of a credit to
expense in 1996 for a one-time reduction of certain employee fringe
benefits in connection with a change in the collective bargaining agreement
($3.6 million).

Maintenance expenses decreased $4.5 million (11%) primarily due to a
decrease in repairs at the electric generating plants ($2.3 million) and
fewer expenses related to storm damage ($1.7 million).

Depreciation and amortization increased $4 million (6%) primarily due to
accelerated amortization of a regulatory asset ($1.9 million) and because
of additional depreciable plant in service.

Other income and (deductions) increased $1.6 million primarily because of
interest income recorded as a result of a favorable tax settlement and
higher income from investments.

Energy Marketing and Trading and Other Results:

Energy marketing and trading revenues and cost of revenues increased $572.8
million (31%) and $598.5 million (33%), respectively, due to higher power-
marketing volumes, partially offset by lower gas-marketing volumes.  The
increase in revenues also reflects recognizing revenues of $10.5 million in
the third quarter of 1997 related to a negotiated settlement of an
independent power project.  The increase in power-marketing volumes
resulted from many new transactions, including sales pursuant to a
marketing agreement with Oglethorpe Power Corporation completed in 1996 and
the signing of an interim marketing agreement with Big Rivers Electric
Corporation in the third quarter of 1997.  The decrease in gas-marketing
volumes resulted from the organizational changes discussed in Note 5 of
Notes to Financial Statements, under Part I, Item 1 of this report.

Energy marketing and trading gross margins decreased $25.7 million due to
abnormal weather in the third quarter of 1997 (which created abrupt changes
in electric demand), substantially greater volatility in electricity prices
in certain regions of the country during the summer, and lower gas-
marketing margins.  The decrease in gas-marketing margins resulted from
lower volume, milder weather and reduced price volatility in the gas
markets.  The independent power project settlement mentioned above
partially offset these decreases.

Other revenues and cost of revenues increased $98.7 million and $54.2
million, respectively, due to acquiring an interest in Centro in February
1997.  Operation and maintenance expense increased $18.1 million (37%) and
non-utility depreciation and amortization increased $6.2 million for the
same reason.  See Note 2 of Notes to Financial Statements under Item 1.

Non-recurring charges included a net insurance settlement of $7.6 million
($8.5 million gross insurance recovery, less expenses) related to losses
incurred in LG&E Natural Inc.'s (LG&E Natural) Calgary office.  Non-
recurring charges also included a charge of $7.0 million to reflect the
costs of consolidating the trading, risk management and administrative
operations of the Company's power marketing and gas marketing divisions
into a single energy marketing unit, located in its Louisville
headquarters.  See Note 5 of Notes to Financial Statements under Item 1 for
additional information on this consolidation.



                                  - 23 -
<PAGE>

Equity in earnings of joint ventures increased $3.6 million in 1997 due to
acquiring an interest in Cuyana in February 1997, and to increases at the
Roanoke Valley I and Tarifa projects.  A decrease in earnings at the
Windpower Partners 1993 (WPP93) project partially offset these increases.
Earnings at Roanoke Valley I increased due to a decrease in forced-outage
days, and the Tarifa increase resulted from higher energy production.  The
WPP93 decrease resulted from previously-anticipated decreases in prices and
lower production.

Non-utility other income increased $1.7 million due mainly to the
settlement of a legal dispute.

Non-utility interest charges and minority interest increased $15.0 million
due to an increase in notes payable and to the Centro acquisition.

The consolidated effective tax rate increased to 37.7% in 1997 from 34.3%
in 1996 mainly due to successfully resolving several pending income tax
issues in 1996 and to changes in the provisions for state and foreign
income taxes.

                     Liquidity and Capital Resources

The Company's need for capital funds is primarily related to the
construction of plant and equipment necessary to meet LG&E's electric and
gas customers' needs and protection of the environment.  Needs for capital
funds also arise from partnership equity contributions in connection with
independent power production projects, efforts to expand and improve gas
gathering and processing facilities, information system enhancements, and
other business development opportunities.  Construction expenditures of $79
million for the nine months ended September 30, 1997, were financed with
internally-generated funds.

The Company recently acquired interests in two Argentine natural gas
distribution companies for $140 million (see Note 2 of Notes to Financial
Statements).  On June 9, 1997, certain subsidiaries of the Company entered
into a Participation Agreement with Big Rivers Electric Corporation (Big
Rivers), setting forth the detailed parameters of the proposed 25-year
lease by Company affiliates of the generation assets of Big Rivers.  On the
same date, these arrangements were approved by the creditors of Big Rivers
as part of the confirmation of Big Rivers' Plan of Reorganization by the
U.S. Bankruptcy Court.  Consummation of this transaction is subject to a
number of conditions, including receipt of federal and state regulatory
approvals.  The Company made initial filings seeking regulatory approvals
from the Kentucky Public Service Commission on June 30, 1997.  (See Item 1,
Business, and Item 7, Management's Discussion and Analysis of Results of
Operations and Financial Condition, of the Company's Annual Report on Form
10-K for the year ended December 31, 1996, for background and a further
discussion of this proposed transaction.)

The Company had margin balances totaling $6.1 million on deposit with
brokers at September 30, 1997.  Brokers require the deposits to address
changes in the market prices of financial instruments used in the Company's
price risk management activities.

The Company's combined cash and marketable securities balance increased
$46.5 million during the nine months ended September 30, 1997.  The
increase reflects cash flows from operations and a net increase in notes
payable, partially offset by construction expenditures, the acquisition of
interests in the Argentine natural gas distribution companies, and
dividends paid.

Variations in accounts receivable, accounts payable and materials and
supplies are generally not significant indicators of the Company's
liquidity.  Such variations are primarily attributable to fluctuations in
weather, which have a direct effect on sales of electricity and natural
gas.  The significant decreases in the Company's accounts receivable and
accounts payable balances resulted mainly from seasonal fluctuations in the
energy market

                                  - 24 -
<PAGE>

ing division's and LG&E's businesses, partially offset by increases
resulting from acquiring Centro.

The significant increases in the Company's investments in affiliates and
non-utility property and plant, net, resulted from acquiring interests in
the Argentine natural gas companies.  The increase in long-term debt
resulted from the Argentine acquisition, partially offset by a decrease
resulting from $20.0 million of LG&E's long-term debt becoming current.

The increase in the Company's notes payable balance resulted from borrowing
additional funds to finance the acquisition of interests in the Argentine
natural gas companies, and to fund working capital needs.

LG&E's cash and temporary cash investments balance increased $11 million
during the nine months ended September 30, 1997.  The increase reflects
LG&E's cash flow from operations less construction expenditures, dividends
paid, and the purchase of securities.

Variations in LG&E's accounts receivable, accounts payable and materials
and supplies are not generally significant indicators of LG&E's liquidity,
as such variations are primarily attributable to seasonal fluctuations in
weather, which has a direct effect on sales of electricity and natural gas.

On September 5, 1997, Energy Systems and Gas Systems merged to form Capital
Corp.  At the same time, Capital Corp. implemented a $600 million
commercial paper facility backed by new lines of credit totaling $700
million.  The Company terminated the old lines of credit for Energy Systems
and Gas Systems, which totaled $435 million.  The old $25 million line of
credit for Energy Corp. expired in July 1997, and the Company did not renew
it.  See Note 6 of Notes to Financial Statements under Item 1.

At September 30, 1997, loan agreements and lines of credit were in place
totaling $900 million ($200 million for LG&E and $700 million for Capital
Corp.) for which the companies pay commitment or facility fees.  The LG&E
credit facility provides for short term borrowing.  The Capital Corp.
facilities provide for short term borrowing, letter of credit issuance, and
support of commercial paper borrowings.  Unused capacity under these lines
totaled $551.9 million after considering the commercial paper support and
approximately $59.1 million in letters of credit securing on- and off-
balance-sheet commitments.  The credit lines will expire at various times
from 1998 through 2002.  Management expects to renegotiate the lines when
they expire.  The lenders under the credit facilities for Capital Corp. are
entitled to the benefits of Support Agreements with LG&E Energy Corp.

In November 1997, LG&E plans to issue $35 million of Jefferson County
Pollution Control Bonds and $35 million of Trimble County Pollution Control
Bonds.  LG&E will use the proceeds to redeem the two outstanding 7.75%
Series due February 1, 2019.

The Company's capitalization ratios at September 30, 1997, and December 31,
1996, follow:

                                             Sept. 30,  Dec. 31,
                                                1997      1996

Long-term debt (including current portion)      36.1%     37.8%
Notes payable                                   15.2       9.2
Preferred stock                                  5.0       5.6
Common equity                                   43.7      47.4
Total                                          100.0%    100.0%


                                  - 25 -
<PAGE>

LG&E's capitalization ratios at September 30, 1997, and December 31, 1996,
follow:

                                             Sept. 30,  Dec. 31,
                                                1997      1996

Long-term debt (including current portion)      45.7%     47.0%
Preferred stock                                  6.7       6.9
Common equity                                   47.6      46.1
Total                                          100.0%    100.0%

For a description of significant contingencies that may affect the Company
and LG&E, reference is made to Part II herein - Item 1, Legal Proceedings.


                                  - 26 -
<PAGE>

                       Part II.  Other Information

Item 1.  Legal Proceedings.

For a description of the significant legal proceedings involving the
Company, reference is made to the information under the following items and
captions of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996:  Item 1, Business; Item 3, Legal Proceedings; Item 7,
Management's Discussion and Analysis of Results of Operations and Financial
Condition; and Notes 3 and 16 of the Notes to Financial Statements under
Item 8.  For a description of the significant legal proceedings involving
LG&E, reference is made to the following items and captions of LG&E's
Annual Report on Form 10-K for the year ended December 31, 1996 (SEC File
No. 2-26720):  Item 1, Business; Item 3, Legal Proceedings; Item 7,
Management's Discussion and Analysis of Results of Operations and Financial
Condition; and Notes 2 and 13 of the Notes to Financial Statements under
Item 8.  Except as noted below, the proceedings reported in the Company's
and LG&E's 1996 Form 10-Ks have not changed materially.

Roanoke Valley I.  Westmoreland-LG&E Partners (WLP), the partnership that
owns the Roanoke Valley I and II facilities, is seeking the recovery of
capacity payments withheld by Virginia Electric and Power Company.  In June
1997, the Virginia Supreme Court reversed an adverse lower court ruling and
remanded the case for a trial.  The new trial date has been set for March
2, 1998.  See Item 1 and Note 16 of Notes to Financial Statements under
Item 8 of the Company's Form 10-K for the year ended December 31, 1996.

Rensselaer.  LG&E Westmoreland - Rensselaer (LWR), in which the Company has
a 50% interest through an indirect subsidiary, has executed a master
restructuring agreement with Niagara Mohawk Power Corporation (NIMO) and 15
other independent power companies (IPPs) effective July 9, 1997.  Under
this agreement, LWR has an obligation to negotiate towards a restructuring
of its Power Purchase Agreement between NIMO and LWR.  Upon completion of a
restructuring and satisfaction of conditions precedent, including all IPPs
receiving necessary approvals and NIMO successfully arranging financing,
LWR would receive consideration from NIMO.  Due to the early stage of the
project restructuring at this time and the existence of numerous conditions
thereto, the Company is not able to predict the outcome of this event.
Based upon the terms of the agreement and the current status of the
restructuring, the Company does not expect the ultimate resolution of this
matter to have a material adverse effect on its results of operations or
financial condition.

Calgary.  On November 22, 1996 LG&E Natural Canada Inc., a subsidiary of
LG&E Natural, initiated action in the Court of the Queens Bench of Alberta,
Calgary against a former employee.  That action and an additional action,
filed on the same date in the General Division of the Ontario Court, also
named a natural gas sales and marketing company and the director, president
and secretary of that company (the "Marketing Company Defendants").  The
action against such Marketing Company Defendants was settled on June 6,
1997.  An amended statement of claim was filed in the Calgary action on
December 23, 1996, naming additional parties.  These lawsuits were filed as
a result of LG&E Natural's discovery in the fourth quarter of 1996 that the
former employee had engaged in unauthorized transactions.  Counterclaims
have been filed seeking damages of approximately forty million dollars for,
among other things, defamation and breach of contract.  In the second
quarter of 1997, the Company received an insurance settlement of $7.6
million (net of expenses) related to the losses.  See Note 5 of Notes to
Financial Statements under Part I, Item 1.  The Company does not expect the
ultimate resolution of this matter to have a material adverse effect on its
results of operations or financial condition.

EPA Proposal.  On October 10, 1997, the United States Environmental
Protection Agency (the "EPA") proposed regulations that, if adopted, could
require numerous utilities, including LG&E, to reduce the emission of
nitrogen oxides by approximately 85% from 1990 levels.  LG&E has already
reduced its nitrogen oxide emissions by approximately 40% and the Com

                                  - 27 -
<PAGE>

pany's independent power projects in New York, Virginia and North Carolina
generally operate with lower emission levels.  However, if these
regulations are adopted as proposed, LG&E and the independent power
projects may be required to incur significant capital expenditures and
significantly increased operation and maintenance costs for remedial
measures to meet these requirements for nitrogen oxides.  The Company is
continuing to evaluate the potential impact of the proposed regulations and
at the present time anticipates that such capital expenditures could exceed
$100 million in the case of LG&E.  KU and Big Rivers are subject to the
same risk and would face substantial remedial measures as well.  LG&E
currently anticipates that a significant portion of any such capital costs
could be recoverable through rates; however, there can be no guarantee that
such costs will be recovered.

Environmental.  With respect to the state court proceeding involving LG&E's
Mill Creek plant, in October 1997, the Jefferson Circuit Court dismissed
all but one remaining claim by claimants who have not previously settled
with LG&E.  With respect to certain proceedings involving EPA, the
following developments have occurred:  (a) Smith's Farm site:  EPA has
settled with ten other parties for approximately 98% of the estimated $42
million in cleanup costs.  LG&E, previously identified by the EPA as a de
minimis party, has reached a settlement, subject to government approval and
entry by the court, calling for no further contribution beyond amounts
already contributed by LG&E in connection with site remediation efforts;
(b) Sonora and Carlie Middleton Burns sites:  LG&E has reached a tentative
settlement for $150,000, subject to government approval and entry by the
court; and (c) M.T. Richards site:  The $7,500 settlement reached by LG&E,
an identified de minimis party, was approved by the government and entered
by the court.  For prior information on these proceedings, see Note 16 to
LG&E's Annual Report on Form 10-K for the year ended December 31, 1996.
While it is not possible to predict specific outcomes or impacts of these
matters, management believes that these matters will not have a material
adverse impact on the financial position or results of operations of LG&E.

Windpower Partners 1994.  Windpower Partners 1994 L.P. (WPP 94), in which
the Company has a 25% interest through indirect subsidiaries, did not make
a semi-annual payment, due September 2, 1997, to John Hancock Mutual Life
Insurance Company (Hancock) under certain Notes issued by WPP 94 to
Hancock.  The Company has offered WPP 94 financial support with respect to
the appropriate proportion of its debt obligations, but certain of the
three other investor groups are unable to offer funds to WPP 94 in support
of the partnership.  The aggregate indirect investment of the Company in
WPP 94 is $4.3 million as of September 30, 1997.  WPP 94 and Hancock are
presently engaged in discussions concerning a possible restructuring of WPP
94's debt obligations and Hancock has informed WPP 94 that it may declare
WPP 94 in default of the trust indenture relating to the Notes.  WPP 94
operates wind power generation facilities in Texas.  Because of the
continuing nature of the negotiations, the Company is not able to predict
the outcome of this event.  The Company does not expect the ultimate
resolution of this matter to have a material effect on its results of
operations or financial condition.

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

a) A Special Meeting of Shareholders of the Company was held on October
   14, 1997.

b) Not applicable.

c) The matters voted upon and the results of the voting at the Special
   Meeting are set forth below:

1. The shareholders voted to approve the Agreement and Plan of Merger
   between the Company and KU and the transactions contemplated therein,
   as follows:



                                  - 28 -
<PAGE>

   51,148,571.327 common shares cast in favor of approval and 718,635.766
   shares withheld.

   Holders of 630,881.303 common shares abstained from voting on this
   matter.

2. The shareholders voted to approve the amendment to and restatement of
   the Company's Amended and Restated Articles of Incorporation so as to
   increase the amount of authorized common shares from 125,000,000 shares
   to 300,000,000 shares, as follows:

   49,738,586.696 common shares cast in favor of approval and
   1,678,589.993 common shares withheld.

   Holders of 1,082,378.707 common shares abstained from voting on this
   matter.

d) Not applicable.

Item 5.  Other Information.

Unaudited Pro Forma Financial Information.

On May 20, 1997, the Company and KU Energy Corporation, a Kentucky
corporation ("KU"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") providing for a merger of LG&E Energy and KU.  Pursuant
to the Merger Agreement, among other things, KU will be merged with and
into LG&E Energy, with LG&E Energy as the surviving corporation (the
"Merger").  The Merger was unanimously approved by the Boards of Directors
of LG&E Energy and KU, and has been approved by the shareholders of LG&E
Energy and KU.  The Merger also has been approved by the Kentucky
Commission.  The Merger is expected to close shortly after all of the
conditions to consummation of the Merger, including the receipt of all
applicable regulatory approvals, are met or waived.  See Note 4 of Notes to
Financial Statements under Part I, Item 1, for more 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.  In addition, 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, incorporated herein by
reference.  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 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
September 30, 1996, are not necessarily indicative of trends for any twelve-
month period.


                                  - 29 -
<PAGE>

                            LG&E Energy Corp.
           Unaudited Pro Forma Combined Condensed Balance Sheet
                         As of September 30, 1997
                             (Thousands of $)

                                  ASSETS

                                    As Reported         Pro       Pro For-
                                  LG&E        KU       Forma      ma Com-
                                 Energy     Energy      Adj.       bined

CURRENT ASSETS:
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 - pri-
 marily at average cost:
  Fuel (predominantly 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               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:
  Investment 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 Financial
Statements.


                                  - 30 -
<PAGE>

                            LG&E Energy Corp.
       Unaudited Pro Forma Combined Condensed Balance Sheet (cont.)
                         As of September 30, 1997
                             (Thousands of $)

                         CAPITAL AND LIABILITIES

                                    As Reported         Pro       Pro For-
                                  LG&E        KU       Forma      ma Com-
                                 Energy     Energy      Adj.       bined

CURRENT LIABILITIES:
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 Financial
Statements.


                                  - 31 -
<PAGE>

                            LG&E Energy Corp.
       Unaudited Pro Forma Combined Condensed Statements of Income
                  Three Months Ended September 30, 1997
                  (Thousands of $ Except Per Share Data)

                                    As Reported         Pro       Pro For-
                                  LG&E        KU       Forma      ma Com-
                                 Energy     Energy      Adj.       bined

REVENUES:
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
 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 inter-
 est 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                    $   29,193   $ 26,553   $      - $   55,746

Average common shares
 outstanding                      66,491     37,818     25,338    129,647

Earnings per share            $      .44   $    .70   $      - $      .43

See accompanying notes to Unaudited Pro Forma Combined Financial
Statements.


                                  - 32 -
<PAGE>

                            LG&E Energy Corp.
       Unaudited Pro Forma Combined Condensed Statements of Income
                  Three Months Ended September 30, 1996
                  (Thousands of $ Except Per Share Data)

                                    As Reported         Pro       Pro For-
                                  LG&E        KU       Forma      ma Com-
                                 Energy     Energy      Adj.       bined

REVENUES:
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                      66,307     37,818     25,338    129,463

Earnings per share              $    .63   $    .60   $      - $      .50

See accompanying notes to Unaudited Pro Forma Combined Financial
Statements.


                                  - 33 -
<PAGE>

                            LG&E Energy Corp.
       Unaudited Pro Forma Combined Condensed Statements of Income
                   Nine Months Ended September 30, 1997
                  (Thousands of $ Except Per Share Data)

                                    As Reported         Pro       Pro For-
                                  LG&E        KU       Forma      ma Com-
                                 Energy     Energy      Adj.       bined

REVENUES:
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 inter-
 est 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                    $   72,049   $ 63,466   $      - $  135,515

Average common shares
 outstanding                      66,453     37,818     25,338    129,609

Earnings per share            $     1.08   $   1.68   $      - $     1.05

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


                                  - 34 -
<PAGE>

                            LG&E Energy Corp.
       Unaudited Pro Forma Combined Condensed Statements of Income
                   Nine Months Ended September 30, 1996
                  (Thousands of $ Except Per Share Data)

                                    As Reported         Pro       Pro For-
                                  LG&E        KU       Forma      ma Com-
                                 Energy     Energy      Adj.       bined

REVENUES:
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                  -      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                      66,278     37,818     25,338    129,434

Earnings per share            $     1.40   $   1.72   $      - $     1.22

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


                                  - 35 -
<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.


                                  - 36 -
<PAGE>

Item 6(a).  Exhibits.

Exhibit
Number              Description

10.01               Copy of U.S. $500,000,000 Credit Agreement, dated as of
                    September 5, 1997, among LG&E Capital Corp., as
                    Borrower, and the Banks named therein, as Lenders, and
                    Chase Securities Inc., as Syndication Agent, Bank of
                    Montreal, as Administrative Agent, and Morgan Guaranty
                    Trust Company of New York, PNC Bank, Kentucky, Inc.,
                    The Bank of New York, The First National Bank of
                    Chicago and Wachovia Bank, N.A., as Co-Agents.

10.02               Copy of U.S. $ 200,000,000 Credit Agreement, dated as
                    of September 5, 1997, among LG&E Capital Corp., as
                    Borrower, and the Banks named therein, as Lenders, and
                    Chase Securities Inc., as Syndication Agent, Bank of
                    Montreal, as Administrative Agent, and Morgan Guaranty
                    Trust Company of New York, PNC Bank, Kentucky, Inc.,
                    The Bank of New York, The First National Bank of
                    Chicago and Wachovia Bank, N.A., as Co-Agents.

10.03               Copy of Support Agreement, dated as of September 5,
                    1997, between LG&E Energy Corp. and LG&E Capital Corp.

27                  Financial Data Schedules for LG&E Energy Corp. and
                    Louisville Gas and Electric Company.

Item 6(b).  Reports on Form 8-K.

On September 9, 1997, the Company filed a report on Form 8-K announcing
that Ronald L. Bittner, a member of the Company's board of directors, died
of cancer on August 31, 1997.

On September 19, 1997, the Company and LG&E filed reports on Form 8-K
announcing that:

  1) The Kentucky Public Service Commission entered an Order approving the
     proposed merger of KU Energy Corporation with LG&E Energy Corp.
  
  2) The Company's 1997 earnings would be lower than 1996 earnings of $1.57
     per share and could be in a range of $1.40 to $1.48 per share.

On October 14, 1997, the Company and LG&E filed reports on Form 8-K
announcing that its board of directors elected Jeffery T. Grade, 53, to the
boards of the Company and LG&E.
                                     
                                     
                                  - 37 -
<PAGE>
                                     
                                SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.


LG&E Energy Corp.
Registrant


Date:  November 11, 1997        /s/ Victor A. Staffieri
                                Victor A. Staffieri
                                Chief Financial Officer
                                (On behalf of the registrant in his
                                capacity as Principal Accounting Officer)


Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.


Louisville Gas and Electric Company
Registrant


Date:  November 11, 1997        /s/ Victor A. Staffieri
                                Victor A. Staffieri
                                Chief Financial Officer
                                (On behalf of the registrant in his
                                capacity as Principal Accounting Officer)



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