UNITED STATES
                    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 June 30, 2005

Or

[_]      TRANSITION REPORT PURSUANT 1TO 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.

    1-2893         Louisville Gas and Electric Company      61-0264150
                         (A Kentucky Corporation)
                           220 West Main Street
                              P.O. Box 32010
                          Louisville, KY  40232
                              (502) 627-2000

    1-3464              Kentucky Utilities Company          61-0247570
                  (A Kentucky and Virginia Corporation)
                            One Quality Street
                        Lexington, KY  40507-1428
                              (859) 255-2100

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 by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  Yes    No X

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

                   Louisville Gas and Electric Company
        21,294,223 shares, without par value, as of July 31, 2005,
                       all held by LG&E Energy LLC
                        Kentucky Utilities Company
        37,817,878 shares, without par value, as of July 31, 2005,
                       all held by LG&E Energy LLC

This combined Form 10-Q is separately filed by Louisville Gas and Electric
Company and Kentucky Utilities Company.  Information contained herein
related to any individual registrant is filed by such registrant on its own
behalf.  Each registrant makes no representation as to information related
to the other registrants.

                          INDEX OF ABBREVIATIONS


AEP                   American Electric Power Company, Inc.
AG                    Attorney General of Kentucky
ARB                   Accounting Research Bulletin
ARO                   Asset Retirement Obligation
CCN                   Certificate of Public Convenience and Necessity
DSM                   Demand Side Management
ECR                   Environmental Cost Recovery
EEI                   Electric Energy, Inc.
E.ON                  E.ON AG
EPA                   Environmental Protection Agency
ESM                   Earnings Sharing Mechanism
FAC                   Fuel Adjustment Clause
FASB                  Financial Accounting Standards Board
FERC                  Federal Energy Regulatory Commission
Fidelia               Fidelia Corporation (an E.ON affiliate)
FIN                   FASB Interpretation No.
FGD                   Flue Gas Desulfurization
FSP                   FASB Staff Position
IMEA                  Illinois Municipal Electric Agency
IMPA                  Indiana Municipal Power Agency
ITP                   Independent Transmission Provider
IRS                   Internal Revenue Service
Kentucky Commission   Kentucky Public Service Commission
KU                    Kentucky Utilities Company
LIBOR                 London Interbank Offer Rate
LEM                   LG&E Energy Marketing Inc.
LG&E                  Louisville Gas and Electric Company
LG&E Energy           LG&E Energy LLC (as successor to LG&E Energy Corp.)
LG&E Services         LG&E Energy Services Inc.
LMP                   Locational Marginal Pricing
MGP                   Manufactured Gas Plant
MISO                  Midwest Independent Transmission System Operator,
Inc.
Moody's               Moody's Investor Services, Inc.
Mw                    Megawatts
Mwh                   Megawatt hours
NOPR                  Notice of Proposed Rulemaking
OMU                   Owensboro Municipal Utilities
OVEC                  Ohio Valley Electric Corporation
PJM                   PJM Interconnection, LLC
Powergen              Powergen Limited (formerly Powergen plc)
PUHCA                 Public Utility Holding Company Act of 1935
RTO                   Regional Transmission Operator
S&P                   Standard & Poor's Rating Services
SEC                   Securities and Exchange Commission
SFAS                  Statement of Financial Accounting Standards
SMD                   Standard Market Design
SO2                   Sulfur Dioxide
SOA                   The Sarbanes-Oxley Act of 2002
VDT                   Value Delivery Team Process








                             TABLE OF CONTENTS

                                  PART I


ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)
       LOUISVILLE GAS AND ELECTRIC COMPANY
        STATEMENTS OF INCOME                                             1
        STATEMENTS OF RETAINED EARNINGS                                  1
        BALANCE SHEETS                                                   2
        STATEMENTS OF CASH FLOWS                                         4
        STATEMENTS OF OTHER COMPREHENSIVE INCOME                         5

       KENTUCKY UTILITIES COMPANY
        STATEMENTS OF INCOME                                             6
        STATEMENTS OF RETAINED EARNINGS                                  6
        BALANCE SHEETS                                                   7
        STATEMENTS OF CASH FLOWS                                         9
        STATEMENTS OF OTHER COMPREHENSIVE INCOME                        10

       NOTES TO FINANCIAL STATEMENTS                                    11

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
       AND RESULTS OF OPERATIONS.                                       24

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.    36
ITEM 4.  CONTROLS AND PROCEDURES.                                       39
                                  PART II
ITEM 1.  LEGAL PROCEEDINGS.                                             40
ITEM 6.  EXHIBITS                                                       41
        SIGNATURES                                                      43

        EXHIBITS                                                        44

Part I.  Financial Information - Item 1.  Financial Statements (Unaudited)

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


                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004
OPERATING REVENUES:
Electric                             $228.2   $192.5     $457.2   $390.8
Gas                                    52.5     43.7      225.1    207.4
 Total operating revenues             280.7    236.2      682.3    598.2

OPERATING EXPENSES:
Fuel for electric generation           68.2     47.8      128.5    100.6
Power purchased                        28.2     17.3       67.2     46.2
Gas supply expenses                    35.6     31.0      171.2    161.8
Other operation and maintenance expenses        65.0       77.3    139.3
151.7
Depreciation and amortization          31.2     28.2       62.0     55.7
Total operating expenses              228.2    201.6      568.2    516.0

NET OPERATING INCOME                   52.5     34.6      114.1     82.2

Other expense (income) - net            0.1      0.1       (0.1)     0.8
Interest expense (Note 3)               5.9      5.2       11.8     10.1
Interest expense to affiliated companies
  (Note 9)                              2.8      3.0        5.9      6.1

INCOME BEFORE INCOME TAXES             43.7     26.3       96.5     65.2
Federal and state income taxes (Note 6)         15.7        9.2     34.7
23.9
NET INCOME                            $ 28.0  $ 17.1     $ 61.8   $ 41.3

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


                      Statements of Retained Earnings
                                (Unaudited)
                              (Millions of $)


                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004

Balance at beginning of period       $538.2   $521.3     $534.0   $497.5
Net income                             28.0     17.1       61.8     41.3
 Subtotal                             566.2    538.4      595.8    538.8

Cash dividends declared on stock:
5% cumulative preferred                 0.3      0.3        0.5      0.5
Auction rate cumulative preferred       0.5      0.2        0.9      0.4
Common                                 10.0     21.0       39.0     21.0
 Subtotal                              10.8     21.5       40.4     21.9

Balance at end of period             $555.4   $516.9     $555.4   $516.9

The accompanying notes are an integral part of these financial statements.
                    Louisville Gas and Electric Company
                              Balance Sheets
                                (Unaudited)
                              (Millions of $)

                                  ASSETS


                                                     June 30,   December 31,
                                                       2005         2004
CURRENT ASSETS:
Cash and cash equivalents                           $   4.8      $    6.8
Accounts receivable -
 less reserve of $1.2 million and $0.8 million as of
 June 30, 2005 and December 31, 2004,
 respectively                                         140.9        167.0
Materials and supplies - at average cost:
 Fuel (predominantly coal)                             27.6         21.8
 Gas stored underground                                19.3         77.5
 Other                                                 27.0         26.1
Prepayments and other                                   3.3          3.9
 Total current assets                                 222.9        303.1

OTHER PROPERTY AND INVESTMENTS -
 less reserve of less than $0.1 million as of
 June 30, 2005 and December 31, 2004                    0.6          0.5

UTILITY PLANT:
At original cost                                    3,966.8      3,915.8
Less: reserve for depreciation                      1,459.4      1,396.3
 Net utility plant                                  2,507.4      2,519.5


DEFERRED DEBITS AND OTHER ASSETS:
Restricted cash                                        13.1         10.9
Unamortized debt expense                                8.4          8.4
Regulatory assets (Note 5)                             73.9         91.9
Other                                                  31.8         32.2
 Total deferred debits and other assets               127.2        143.4

Total assets                                       $2,858.1     $2,966.5

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


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

                      CAPITALIZATION AND LIABILITIES


                                                     June 30,   December 31,
                                                       2005         2004

CURRENT LIABILITIES:
Current portion of mandatorily
 redeemable preferred stock                        $    1.3     $    1.3
Current portion of long-term debt (Note 8)            246.2        246.2
Current portion of long-term debt to
 affiliated company (Note 8)                             -          50.0
Notes payable to affiliated companies (Note 8)         20.8         58.2
Accounts payable                                       66.9        106.1
Accounts payable to affiliated companies (Note 9)                   60.8
31.7
Accrued income taxes                                     -           6.2
Customer deposits                                      16.2         14.0
Other                                                   9.9         18.5
 Total current liabilities                            422.1        532.2

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes - net               318.7        347.2
Investment tax credit, in process of amortization                   44.1
46.2
Accumulated provision for pensions
 and related benefits                                 122.1        120.6
Customer advances for construction                      9.7         10.6
Asset retirement obligation                            10.6         10.3
Regulatory liabilities (Note 5):
 Accumulated cost of removal of utility plant         216.2        220.2
 Deferred income taxes - net (Note 6)                  54.2         37.2
 Other                                                  9.7         15.0
Other                                                  38.9         29.4
 Total deferred credits and other liabilities         824.2        836.7

CAPITALIZATION:
Common stock, without par value -
 Outstanding 21,294,223 shares                        425.2        425.2
Common stock expense                                   (0.8)        (0.8)
Additional paid-in capital                             40.0         40.0
Accumulated other comprehensive loss                  (52.8)       (45.6)
Retained earnings                                     555.4        534.0
 Total common equity                                  967.0        952.8

Cumulative preferred stock                             70.4         70.4
Mandatorily redeemable preferred stock                 21.3         21.3
Long-term debt (Note 8)                               328.1        328.1
Long-term debt to affiliated company (Note 8)         225.0        225.0
 Total capitalization                               1,611.8      1,597.6

Total capital and liabilities                      $2,858.1     $2,966.5

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

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


                                                       Six Months Ended
                                                           June 30,
                                                       2005         2004

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                          $  61.8      $  41.3
Items not requiring cash currently:
 Depreciation and amortization                         62.0         55.7
 Value delivery team amortization                      15.1         15.1
 Change in fair value of derivative instruments         4.0         (6.1)
 Deferred income taxes - net                          (11.5)         4.9
 Investment tax credit - net                           (2.1)        (2.8)
 Other                                                 (4.7)         5.5
Changes in current assets and liabilities-net          55.5        (19.6)
Pension funding (Note 11)                                 -        (34.5)
Provision for post-retirement benefits                 (2.6)        (8.0)
Gas supply clause receivable, net                       2.0          8.3
Earnings sharing mechanism receivable                   2.1          2.4
Litigation settlement                                    -           7.1
Other                                                  (2.5)         9.3
 Net cash provided by operating activities            179.1         78.6

CASH FLOWS USED IN INVESTING ACTIVITIES:
(Purchase) sale of long-term investments               (0.1)          -
Change in restricted cash                              (2.2)        (6.5)
Construction expenditures                             (51.0)       (64.9)
 Net cash used for investing activities               (53.3)       (71.4)

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings from affiliated company (Note 8)     -        125.0
Repayment of long-term borrowings
 from affiliated company (Note 8)                     (50.0)       (50.0)
Short-term borrowings from affiliated company (Note 8)    -        260.5
Repayment of short-term borrowings
 from affiliated company                              (37.4)      (314.9)
Payment of dividends                                  (40.4)       (21.9)
Other                                                    -          (0.1)
 Net cash used for financing activities              (127.8)        (1.4)

CHANGE IN CASH AND CASH EQUIVALENTS                    (2.0)         5.8

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD        6.8          1.7

CASH AND CASH EQUIVALENTS AT END OF PERIOD          $   4.8       $  7.5

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
 Income taxes                                         $51.6        $33.1
 Interest on borrowed money                            10.9          8.5
 Interest to affiliated companies on borrowed money     6.4          5.3

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

                    Louisville Gas and Electric Company
                 Statements of Other Comprehensive Income
                                (Unaudited)
                              (Millions of $)


                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004


Net income                            $28.0    $17.1      $61.8    $41.3

Income Taxes - Minimum Pension
  Liability (Note 6)                     -        -         (1.1)     -

Gain (loss) on derivative instruments and
 hedging activities - net of tax benefit
 /(expense) of $5.0, $(4.8), $3.9 and
 $(2.4),respectively (Note 3)          (7.7)     7.3       (6.1)     3.7

Other comprehensive income (loss),
  net of tax                           (7.7)     7.3       (7.2)     3.7

Comprehensive income                  $20.3    $24.4      $54.6    $45.0

The accompanying notes are an integral part of these financial statements.
                        Kentucky Utilities Company
                           Statements of Income
                                (Unaudited)
                              (Millions of $)


                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004

OPERATING REVENUES                   $265.2   $232.4     $551.5   $479.7

OPERATING EXPENSES:
Fuel for electric generation           84.0     67.7      171.5    137.7
Power purchased                        50.0     30.7       96.3     72.0
Other operation and maintenance
  expenses                             67.8     57.8      126.2    112.2
Depreciation and amortization          29.2     25.9       57.7     51.2
 Total operating expenses             231.0    182.1      451.7    373.1

NET OPERATING INCOME                   34.2     50.3       99.8    106.6

Other (income) - net                   (1.8)    (1.9)      (3.1)    (2.9)
Interest expense (Note 3)               4.2      3.7        7.0      4.4
Interest expense to affiliated companies
  (Note 9)                              3.7      3.5        7.2      7.1

NET INCOME BEFORE INCOME TAXES         28.1     45.0       88.7     98.0

Federal and state income taxes (Note 6)10.4     17.4       33.4     38.0

NET INCOME                           $ 17.7   $ 27.6     $ 55.3   $ 60.0

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





                      Statements of Retained Earnings
                                (Unaudited)
                              (Millions of $)

                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004

Balance at beginning of period       $666.4   $623.1     $659.4   $591.2
Net income                             17.7     27.6       55.3     60.0
 Subtotal                             684.1    650.7      714.7    651.2

Cash dividends declared on stock:
4.75% cumulative preferred              0.2      0.2        0.5      0.4
6.53% cumulative preferred              0.3      0.3        0.6      0.6
Common                                 10.0     21.0       40.0     21.0
 Subtotal                              10.5     21.5       41.1     22.0

Balance at end of period             $673.6   $629.2     $673.6   $629.2

The accompanying notes are an integral part of these financial statements.
                        Kentucky Utilities Company
                              Balance Sheets
                                (Unaudited)
                              (Millions of $)


                                  ASSETS

                                                     June 30,   December 31,
                                                       2005         2004

CURRENT ASSETS:
Cash and cash equivalents                          $    4.0     $    4.6
Accounts receivable - less reserve of $0.6 million
 as of June 30, 2005 and December 31, 2004            107.7        112.6
Materials and supplies - at average cost:
 Fuel (predominantly coal)                             57.3         52.2
 Other                                                 29.3         28.0
Prepayments and other                                   5.9          9.9
 Total current assets                                 204.2        207.3

OTHER PROPERTY AND INVESTMENTS -
 less reserve of $0.1 million as of June 30,
 2005 and December 31, 2004                            21.7         20.5

UTILITY PLANT:
At original cost                                    3,756.1      3,712.1
Less: reserve for depreciation                      1,462.7      1,415.0
 Net utility plant                                  2,293.4      2,297.1

DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense                                4.3          4.7
Regulatory assets (Note 5)                             68.9         61.4
Long-term derivative asset                              1.9          6.1
Other                                                  41.1         13.3
 Total deferred debits and other assets               116.2         85.5

Total assets                                       $2,635.5     $2,610.4

The accompanying notes are an integral part of these financial statements.
                        Kentucky Utilities Company
                          Balance Sheets (cont.)
                                (Unaudited)
                              (Millions of $)

                      CAPITALIZATION AND LIABILITIES


                                                     June 30, December 31,
                                                       2005         2004

CURRENT LIABILITIES:
Current portion of long-term debt (Note 8)         $  123.1    $   87.1
Current portion of long-term notes to
 affiliated company (Note 8)                           75.0        75.0
Notes payable to affiliated company (Note 8)           93.1        34.8
Accounts payable                                       57.7        77.9
Accounts payable to affiliated companies (Note 9)      68.0        32.8
Accrued income taxes                                    3.7         5.9
Customer deposits                                      16.2        15.0
Other                                                   2.6        15.4
 Total current liabilities                            439.4       343.9

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes - net               267.1       282.6
Investment tax credit, in process of amortization       3.0         3.8
Accumulated provision for pensions and
 related benefits                                      78.7        77.9
Asset retirement obligation                            21.5        21.0
Regulatory liabilities (Note 5):
Accumulated cost of removal of utility plant          273.7       266.8
Deferred income taxes - net (Note 6)                   30.9        19.3
 Other                                                  9.9         5.4
Other                                                  15.4        17.0
 Total deferred credits and other liabilities         700.2       693.8

CAPITALIZATION:
Common stock, without par value -
 Outstanding 37,817,878 shares                        308.1       308.1
Common stock expense                                   (0.3)       (0.3)
Additional paid-in capital                             15.0        15.0
Accumulated other comprehensive loss                  (13.6)      (13.3)

Retained earnings                                     660.4       647.3
Undistributed subsidiary earnings                      13.2        12.1
Total retained earnings                               673.6       659.4
 Total common equity                                  982.8       968.9

Cumulative preferred stock                             39.7        39.7
Long-term debt (Note 8)                               215.4       306.1
Long-term debt to affiliated company (Note 8)         258.0       258.0
 Total capitalization                               1,495.9     1,572.7

Total capital and liabilities                      $2,635.5    $2,610.4

The accompanying notes are an integral part of these financial statements.
                        Kentucky Utilities Company
                         Statements of Cash Flows
                                (Unaudited)
                              (Millions of $)


                                                       Six Months Ended
                                                            June 30,
                                                       2005         2004

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                          $  55.3      $  60.0
Items not requiring cash currently:
 Depreciation and amortization                         57.7         51.2
 Value delivery team amortization                       5.9          5.9
 Change in fair value of derivative instruments        (4.7)         0.1
 Other                                                 (3.6)        13.9
Changes in current assets and liabilities               3.7        (52.9)
Earnings sharing mechanism receivable                   3.1          0.3
Pension funding (Note 11)                                -         (43.4)
Provision for post-retirement benefits                  0.8         (3.4)
Litigation settlement                                    -          11.6
Fuel adjustment clause receivable                     (13.3)         2.9
Other                                                  (2.0)         3.4
 Net cash provided by operating activities            102.9         49.6

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of long-term investments                        -          (1.3)
Construction expenditures                             (44.0)       (76.4)
 Net cash flows used for investing activities         (44.0)       (77.7)

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings from affiliated company (Note 8)     -         50.0
Short-term borrowings from affiliated company (Note 8) 58.3        255.0
Repayment of long-term debt                           (50.0)         -
Repayment of short-term borrowings
 from affiliated company (Note 8)                       -         (245.1)
Retirement of pollution control bonds                   -           (4.9)
Repayment of other borrowings (Note 8)                (26.7)         -
Payment of dividends                                  (41.1)       (22.0)

 Net cash flows used for financing activities         (59.5)        33.0

CHANGE IN CASH AND CASH EQUIVALENTS                    (0.6)         4.9

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD        4.6          4.9

CASH AND CASH EQUIVALENTS AT END OF PERIOD          $   4.0      $   9.8

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
 Income taxes                                         $39.8        $21.3
 Interest on borrowed money                             7.8          7.6
 Interest to affiliated companies on borrowed money     7.1          6.1

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


                         Kentucky Utilities Company
                 Statements of Other Comprehensive Income
                                (Unaudited)
                              (Millions of $)


                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004


Net income                            $17.7    $27.6      $55.3    $60.0


Income Taxes - Minimum Pension Liability
  (Note 6)                               -        -       (0.3)       -

Other comprehensive loss, net of tax     -        -       (0.3)       -

Comprehensive income                  $17.7    $27.6      $55.0    $60.0

The accompanying notes are an integral part of these financial statements.
                   Louisville Gas and Electric Company
                       Kentucky Utilities Company

                      Notes to Financial Statements
                               (Unaudited)

1.  General

   The unaudited financial statements include the accounts of LG&E and KU.
   The common stock of each of LG&E and KU is wholly-owned by LG&E Energy.
   In the opinion of management, the unaudited condensed interim financial
   statements include all adjustments, consisting only of normal recurring
   adjustments, necessary for a fair statement of financial position,
   results of operations, comprehensive income and cash flows for the
   periods indicated.  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 Companies believe
   that the disclosures are adequate to make the information presented not
   misleading.

   See LG&E's and KU's Annual Reports on Form 10-K for the year ended
   December 31, 2004, for information relevant to the accompanying
   financial statements, including information as to the significant
   accounting policies of the Companies.

   During the second quarter of 2005, LG&E and KU made out-of-period
   adjustments for estimated over/under collection of ECR revenues to be
   billed in subsequent periods.  The adjustment was immaterial during all
   reporting periods involved (March 2003 through October 2004 for LG&E
   and May 2003 through January 2005 for KU). As a result, LG&E revenues
   were increased $4.8 million and KU revenues were decreased $2.4 million
   in the current period results of operations.  Net income in the current
   period was increased $2.9 million for LG&E and was reduced $1.5 million
   for KU.

   The accompanying financial statements for the three months and six
   months ended June 30, 2004, have been revised to conform to certain
   reclassifications in the current three months and six months ended June
   30, 2005.  These reclassifications had no impact on net assets or net
   income, as previously reported.

   LG&E and KU net operating income previously reported for the three
   months ended June 30, 2004, increased by $9.4 million and $17.5
   million, and for the six months ended June 30, 2004, increased by $24.4
   million and $38.5 million, respectively, because the income statement
   presentation was changed in 2005 to report income tax expense in the
   category Federal and State income taxes, which appears just before net
   income. LG&E and KU other income (expense) - net previously reported
   for the three months ended June 30, 2004, decreased $0.2 million and
   $0.1 million, and for the six months ended June 30, 2004, decreased
   $0.5 million and $0.5 million, respectively, also due to the income tax
   reclassification.


2.  Mergers and Acquisitions

   On July 1, 2002, E.ON completed its acquisition of Powergen, including
   LG&E Energy, for approximately 5.1 billion pounds sterling
   ($7.3 billion).  As a result of the acquisition, LG&E Energy became a
   wholly-owned subsidiary of E.ON and, as a result, LG&E and KU also became
   indirect subsidiaries of E.ON.  LG&E and KU have continued their separate
   identities and serve customers under their existing names.  The preferred
   stock and debt securities of LG&E and KU were not affected by this
   transaction and the utilities continue to file SEC reports.  Following
   the acquisition, E.ON became a registered holding company under PUHCA.
   LG&E and KU, as subsidiaries of a registered holding company, are subject
   to additional regulations under PUHCA.  In March 2003, E.ON, Powergen and
   LG&E Energy completed an administrative reorganization to move the LG&E
   Energy group from an indirect Powergen subsidiary to an indirect E.ON
   subsidiary.  In early 2004, LG&E Energy commenced direct reporting
   arrangements to E.ON.

3.  Financial Instruments

   The Companies use interest rate swaps to hedge exposure to market
   fluctuations in certain of their debt instruments.  Pursuant to the
   Companies' policies, use of these financial instruments is intended to
   mitigate risk, earnings and cash flow volatility and is not speculative
   in nature.  Management has designated all of the Companies' interest
   rate swaps as hedge instruments.  Financial instruments designated as
   cash flow hedges have resulting gains and losses recorded within other
   comprehensive income and stockholders' equity.  To the extent a
   financial instrument designated as a cash flow hedge or the underlying
   item being hedged is prematurely terminated or the hedge becomes
   ineffective, the resulting gains or losses are reclassified from other
   comprehensive income to net income.  Financial instruments designated
   as fair value hedges are periodically marked to market with the
   resulting gains and losses recorded directly into net income to
   correspond with income or expense recognized from changes in market
   value of the items being hedged.

   As of June 30, 2005, LG&E was party to various interest rate swap
   agreements with aggregate notional amounts of $211.3 million.  Under
   these swap agreements, LG&E paid fixed rates averaging 4.38% and
   received variable rates based on LIBOR or the Bond Market Association's
   municipal swap index averaging 2.18% at June 30, 2005. The swap
   agreements in effect at June 30, 2005 have been designated as cash flow
   hedges and mature on dates ranging from 2020 to 2033.  The hedges have
   been deemed to be fully effective resulting in a pretax loss of $12.7
   million and $10.0 million for the three months and six months ended
   June 30, 2005, respectively, recorded in other comprehensive income.
   Upon expiration of these hedges, the amount recorded in other
   comprehensive income will be reclassified into earnings.  The amount
   expected to be reclassified from other comprehensive income to earnings
   in the next twelve months is immaterial. A deposit in the amount of
   $13.1 million, used as collateral for an $83.3 million interest rate
   swap, is classified as restricted cash on LG&E's balance sheet. The
   amount of the deposit required is tied to the market value of the swap.

   In February 2005, an LG&E interest rate swap with a notional amount of
   $17 million matured. The swap was fully effective upon expiration. As a
   result, the impact on earnings and other comprehensive income from the
   swap maturity was less than $0.1 million.

   As of June 30, 2005, KU was party to one interest rate swap agreement
   with a notional amount of $53.0 million. Under this swap agreement, KU
   paid a variable rate based on the LIBOR index of 5.34%, and received a
   fixed rate of 7.92% at June 30, 2005. The swap agreement in effect at
   June 30, 2005 has been designated as a fair value hedge and matures in
   2007. In June 2005, an interest rate swap with a notional amount of $50
   million was terminated by the counterparty pursuant to the terms of the
   swap agreement. KU received a payment of $1.9 million in consideration
   for the termination of the agreement. KU also called the underlying
   debt (First Mortgage Bond Series R) and paid a call premium of $1.9
   million. The swap was fully effective upon termination. No impact on
   earnings occurred as a result of the bond call and related swap
   termination.

   During the three months and six months ended June 30, 2005, the effect
   of marking these financial instruments and the underlying debt to
   market resulted in a pretax loss of $0.2 million and a pretax gain of
   $0.5 million, respectively, recorded in interest expense.

   Interest rate swaps hedge interest rate risk on the underlying debt.
   Under SFAS No. 133, Accounting for Derivative Instruments and Hedging
   Activities, in addition to swaps being marked to market, the item being
   hedged using a fair value hedge must also be marked to market.
   Consequently at June 30, 2005, KU's debt reflects a $3.5 million mark-
   to-market adjustment.

4. Segments of Business

   LG&E's revenues, net income and total assets by business segment for
   the three months and six months ended June 30, 2005 and 2004, follow:

                      Three Months Ended       Six Months Ended
                           June 30,                June 30,
   (in millions)      2005         2004         2005       2004

   LG&E Electric
     Revenues          $228.2       $192.5      $457.2     $390.8
     Net income          30.0         20.4        53.8       36.4
     Total assets     2,404.3      2,417.2     2,404.3    2,417.2

   LG&E Gas
     Revenues            52.5         43.7       225.1      207.4
     Net income          (2.0)        (3.3)        8.0        4.9
     Total assets       453.8        443.6       453.8      443.6

   Total
     Revenues           280.7        236.2       682.3      598.2
     Net income          28.0         17.1        61.8       41.3
Total assets          2,858.1      2,860.8     2,858.1    2,860.8


    KU is an electric utility company. It does not provide gas service and
   therefore, is presented as a single business segment.

5.  Rates and Regulatory Matters

   For a description of each line item of regulatory assets and
   liabilities for LG&E and KU, reference is made to Part I, Item 8,
   Financial Statements and Supplementary Data, Note 3 of LG&E's and KU's
   Annual Reports on Form 10-K for the year ended December 31, 2004.

   The following regulatory assets and liabilities were included in LG&E's
   balance sheets as of June 30, 2005 and December 31, 2004:

                    Louisville Gas and Electric Company
                                (Unaudited)
                                              June 30,  December 31,
   (in millions)                                2005        2004

   VDT Costs                                 $ 22.6      $ 37.7
   Unamortized loss on bonds                   21.2        20.3
   ARO                                          7.3         6.9
   Merger surcredit                             4.1         4.8
   ESM                                           -          2.1
   Rate case expenses                           0.9         1.1
   FAC                                          3.5         0.8
   ECR                                          2.1          -
   Gas supply adjustments due from customers    9.2        13.3
   Gas performance-based ratemaking             2.0         3.7
   Manufactured gas sites                       1.0         1.2
   Total regulatory assets                   $ 73.9      $ 91.9

   Accumulated cost of removal of utility
     plant                                   $216.2      $220.2
   Deferred income taxes - net (Note 6)        54.2        37.2
   ARO                                          0.1         0.1
   ECR                                           -          4.0
   DSM                                          3.3         2.5
   Gas supply adjustments due to customers      6.3         8.4
   Total regulatory liabilities              $280.1      $272.4

    LG&E currently earns a return on all regulatory assets except for gas
   supply adjustments, ESM, FAC, ECR and gas performance based ratemaking,
   all of which are separate rate mechanisms with recovery within twelve
   months.  Additionally, no current return is earned on the ARO
   regulatory asset.  This regulatory asset will be offset against the
   associated regulatory liability, ARO asset and ARO liability at the
   time the underlying asset is removed.

   Due to a number of changes in Kentucky's tax system, including the
   reduction of the corporate income tax, timing differences included in
   the reserve for deferred state income taxes at December 31, 2004 will
   reverse at higher rates than the current statutory rate.  See Note 6.

    The following regulatory assets and liabilities were included in KU's
   balance sheets as of June 30, 2005 and December 31, 2004:

                        Kentucky Utilities Company
                                (Unaudited)

                                              June 30,     December 31,
   (in millions)                                2005           2004

     VDT costs                                $  8.8         $ 14.7
     Unamortized loss on bonds                  11.4           11.4
     ARO                                        13.7           12.8
     Merger surcredit                            3.2            3.7
     ESM                                           -            3.1
     Rate case expenses                          0.9            1.1
     FAC                                        22.8            9.4
     ECR                                         3.3              -
     Deferred storm costs                        3.2            3.6
     Post retirement and pension                 1.3            1.2
     Management audit expenses                   0.3            0.4
     Total regulatory assets                  $ 68.9         $ 61.4


     Accumulated cost of removal of utility
       plant                                  $273.7         $266.8
     Deferred income taxes - net (Note 6)       30.9           19.3
     ARO                                         1.6            1.4
     ECR                                         5.3            1.2
     FAC                                           -            0.1
     DSM                                         1.9            1.6
     Spare parts                                 1.1            1.1
     Total regulatory liabilities             $314.5         $291.5

   KU currently earns a return on all regulatory assets except for ESM,
   FAC, and ECR, all of which are separate recovery mechanisms with
   recovery within twelve months.  Additionally, no current return is
   earned on the ARO regulatory asset.  This regulatory asset will be
   offset against the associated regulatory liability, ARO asset and ARO
   liability at the time the underlying asset is removed.

   Based on an order from the Kentucky Commission in September 2004, KU
   reclassified from maintenance expense to a regulatory asset, $4.0
   million related to costs not reimbursed from the 2003 ice storm.  These
   costs will be amortized through June 2009.  These amortized costs,
   which are included in KU's jurisdictional operating expenses, are
   recovered in base rates.

       Due to a number of changes in Kentucky's tax system, including the
   reduction of the corporate income tax, timing differences included in
   the reserve for deferred state income taxes at December 31, 2004 will
   reverse at higher rates than the current statutory rate.  See Note 6.

   ELECTRIC AND GAS RATE CASES

   On June 30, 2004, the Kentucky Commission issued an order approving an
   increase in the base electric rates of LG&E and KU and the gas rates of
   LG&E.  The rate increases took effect on July 1, 2004.

   During July 2004, the Attorney General of Kentucky ("AG") served
   subpoenas on LG&E and KU, as well as on the Kentucky Commission and its
   staff, requesting information regarding alleged improper communications
   between LG&E and KU and the Kentucky Commission. The Kentucky
   Commission procedurally reopened the rate case for the limited purpose
   of taking evidence, if any, as to the communication issues. In
   September and October 2004, various proceedings were held in circuit
   courts in Franklin and Jefferson Counties, Kentucky, regarding the
   scope and timing of document production or other information required
   or agreed to be produced under the AG's subpoenas and matters were
   consolidated into the Franklin County court.

   In January 2005, the AG conducted interviews of certain employees of
   LG&E and KU and submitted its report to the Franklin County, Kentucky
   Circuit Court in confidence.  Concurrently, the AG filed a motion
   summarizing the report as containing evidence of improper
   communications and record-keeping errors by LG&E and KU in their
   conduct of activities before the Kentucky Commission or other state
   governmental entities, and requesting release of the report to such
   agencies.  During February 2005, the court ruled that the report be
   forwarded to the Kentucky Commission under continued confidential
   treatment to allow it to consider the report, including its impact, if
   any, on completing its investigation and any remaining steps in the
   rate case, including ending the current abeyance. To date, LG&E and KU
   have neither seen nor requested copies of the report or its contents.
   During Spring 2005, LG&E and KU responded to additional information
   requests from the AG.   LG&E and KU have also responded to
   investigative requests for information from the Kentucky Commission.

   LG&E and KU believe no improprieties have occurred in their
   communications with the Kentucky Commission and are cooperating with
   the proceedings before the AG and the Kentucky Commission.

   LG&E and KU are currently unable to determine the ultimate impact of,
   if any, or any possible future actions of the AG or the Kentucky
   Commission arising out of the AG's report and investigation, including
   whether there will be further actions to appeal, review or otherwise
   challenge the granted increases in base rates.

   VDT

   The current five-year VDT amortization period is scheduled to expire in
   March 2006.  As part of the settlement agreements in the electric and
   gas rate cases, LG&E and KU are required to file with the Kentucky
   Commission a plan for the future ratemaking treatment of the VDT
   surcredits and costs six months prior to the March 2006 expiration.
   The surcredit shall remain in effect following the expiration of the
   fifth year until the Commission enters an order on the future
   disposition of VDT-related issues. Prior to September 30, 2005, LG&E
   and KU will file a plan with the Kentucky Commission in accordance with
   the requirements of the settlement agreement.

   ECR

   In December 2004, KU and LG&E filed applications with the Kentucky
   Commission for approval of a CCN to construct new SO2 control
   technology (FGDs) at KU's Ghent and Brown stations, and to amend LG&E's
   and KU's compliance plans to allow recovery of new and additional
   environmental compliance facilities.  The estimated capital cost of the
   additional facilities is $742.7 million ($40.2 million for LG&E and
   $702.5 million for KU), of which $658.9 million is for the FGDs.
   Hearings in these cases occurred during May 2005 and final orders were
   issued in June 2005, granting approval of the CCN and amendments to
   LG&E's and KU's compliance plans.

   During the second quarter of 2005, LG&E and KU made out-of-period
   adjustments for estimated over/under collection of ECR revenues to be
   billed in subsequent periods.  The adjustment was immaterial during all
   reporting periods involved (March 2003 through October 2004 for LG&E
   and May 2003 through January 2005 for KU). As a result, LG&E revenues
   were increased $4.8 million and KU revenues were decreased $2.4 million
   in the current period results of operations.  Net income in the current
   period was increased $2.9 million for LG&E and was reduced $1.5 million
   for KU.

   IRP

   In April 2005, LG&E and KU filed under Case No. 2005-00162, the 2005
   Joint Integrated Resource Plan (IRP) with the Kentucky Commission. The
   IRP is filed triennially and provides historical and projected demand,
   resource, and financial data, and other operating performance and
   system information. Data discovery is expected to continue through
   September 2005.

   MISO

   The MISO implemented a day-ahead and real-time market (MISO Day 2),
   including a congestion management system in April 2005. This system is
   similar to the LMP system currently used by the PJM RTO and
   contemplated in FERC's SMD NOPR.  The MISO filed with FERC a mechanism
   for recovery of costs for the congestion management system proposing
   the addition of two new Schedules, 16 and 17.  Schedule 16 is the
   MISO's cost recovery mechanism for the Financial Transmission Rights
   Administrative Service it provides.  Schedule 17 is the MISO's
   mechanism for recovering costs it incurs for providing Energy Marketing
   Support Administrative Service.  The MISO transmission owners,
   including LG&E and KU, objected to the allocation of these regional
   market-related costs among market participants and retail native load.
   FERC ruled in 2004 in favor of the MISO.

   The Kentucky Commission opened an investigation into LG&E and KU's
   memberships in the MISO in July 2003. The Kentucky Commission directed
   LG&E and KU to file testimony addressing the costs and benefits of the
   MISO membership both currently and over the next five years and other
   legal issues surrounding continued membership.  LG&E and KU engaged an
   independent third-party to conduct a cost-benefit analysis on this
   issue.  The information was filed with the Kentucky Commission in
   September 2003.  The analysis and testimony supported the Companies'
   exit from the MISO, under certain conditions.  The MISO filed its own
   testimony and cost benefit analysis in December 2003.  The Kentucky
   Commission requested additional testimony on the MISO's Market Tariff
   filing.  This additional testimony was received and a hearing before
   the Kentucky Commission was held in July 2005.  Additional post-hearing
   data requests are expected to be submitted in August with an order
   expected in the fourth quarter 2005.

   Should LG&E and KU be ordered to exit the MISO, the MISO may seek to
   impose an aggregate exit fee up to $40 million, or seek recovery of
   other amounts, depending on the timing and circumstances of actual
   withdrawal.  While LG&E and KU believe legal and regulatory precedent
   should permit most or many of the MISO-related costs to be recovered in
   their rates charged to customers, they can give no assurance that state
   or federal regulators will ultimately agree with such position with
   respect to all costs, components or timing of recovery.  In April 2005,
   the Kentucky Commission issued an order declining an LG&E and KU
   request for an automatic monthly tracker of certain MISO-related costs
   and benefits.

   At this time, LG&E and KU cannot predict the outcome or effects of the
   various Kentucky Commission proceedings described above, including
   whether such proceedings will have a material impact on the financial
   condition or results of operations of the Companies. Further, ultimate
   financial consequences (changes in transmission revenues and costs)
   associated with the April 2005 implementation of transmission day-ahead
   and real-time market tariff charges are subject to varying assumptions
   and calculations and are therefore difficult to estimate. Changes in
   revenues and costs related to broader shifts in energy market practices
   and economics are not currently estimable.

   FERC SMD NOPR

   In July 2002, the FERC issued a NOPR in Docket No. RM01-12-000 which
   would substantially alter the regulations governing the nation's
   wholesale electricity markets by establishing a common set of rules,
   known as SMD. The SMD NOPR would require each public utility that owns,
   operates, or controls interstate transmission facilities to become an
   ITP, belong to an RTO that is an ITP, or contract with an ITP for
   operation of its transmission assets. It would also establish a
   standardized congestion management system, real-time and day-ahead
   energy markets, and a single transmission service for network and point-
   to-point transmission customers.  On July 19, 2005, the FERC issued an
   order terminating the SMD proceeding. FERC noted that the industry has
   made significant progress in the voluntary development of the RTO/ITP
   functions and asserted its intent to consider revisions to the Order
   888 pro-forma Open Access Transmission Tariffs to reflect the current
   experience with open transmission over the last decade.

   KENTUCKY COMMISSION STRATEGIC BLUEPRINT

   In February 2005, Kentucky's Governor signed an executive order
   directing the Kentucky Commission, in conjunction with the Commerce
   Cabinet and the Environmental and Public Protection Cabinet, to develop
   a Strategic Blueprint for the continued use and development of electric
   energy. This Strategic Blueprint will be designed to promote future
   investment in electric infrastructure for the Commonwealth of Kentucky,
   to protect Kentucky's low-cost electric advantage, to maintain
   affordable rates for all Kentuckians, and to preserve Kentucky's
   commitment to environmental protection.  In March 2005, the Kentucky
   Commission established Administrative Case No. 2005-00090 to collect
   information from all jurisdictional utilities in Kentucky, including
   LG&E and KU, pertaining to Kentucky electric generation, transmission
   and distribution systems.  LG&E and KU responded to the Kentucky
   Commission's first set of data requests at the end of March 2005 and to
   a second set of data requests in May 2005.  The Commission held a
   Technical Conference on June 14, 2005, in which all parties
   participated in a panel discussion.  A final report is due in August
   2005 from the Kentucky Commission to the Governor.

6. Income Taxes

   Kentucky House Bill 272, also known as Kentucky's Tax Modernization
   Plan, was signed into law on March 18, 2005.  This bill contains a
   number of changes in Kentucky's tax system, including the reduction of
   the Corporate income tax rate from 8.25% to 7% effective January 1,
   2005, and a further reduction to 6% effective January 1, 2007.  Because
   of the tax rate reduction, timing differences included in the reserve
   for deferred state income taxes at December 31, 2004, will reverse at
   higher rates than the current statutory rate.  Without some form of
   adjustment, the deferred tax reserve amount will exceed the actual
   deferred tax liability attributable to existing timing differences.
   This excess amount is referred to as excess deferred income taxes.
   LG&E and KU filed applications with the Kentucky Commission requesting
   approval of accounting treatment to establish and amortize a regulatory
   liability for net excess deferred income tax balances. Both LG&E and KU
   are amortizing their depreciation-related excess deferred income tax
   balances under the average rate assumption method.  The average rate
   assumption method matches the amortization of the excess deferred
   income taxes with the life of the timing differences to which it
   relates. Excess deferred income tax balances related to non-
   depreciation timing differences will be expensed in the current year
   due to their immaterial amount. In June 2005, LG&E and KU each received
   orders from the Kentucky Commission authorizing its prescribed methods
   to establish and amortize a regulatory liability for its excess
   deferred income tax balance.

   Significant judgment is required in determining the provision for
   income taxes, and there are many transactions for which the ultimate
   tax outcome is uncertain.  To provide for these uncertainties
   or exposures, LG&E and KU maintain an allowance for tax contingencies,
   the balance of which management believes is adequate.  Tax
   contingencies are analyzed periodically and adjustments are made when
   events occur to warrant a change.  LG&E and KU are currently in the
   examination phase of IRS audits for the years 1999 to 2003 and have
   received the Income Tax Examination Changes for the years 1999 to 2001.
   As a result, LG&E and KU expect to receive immaterial refunds for these
   years, subject to review by the Congressional Joint Committee on
   Taxation.

   LG&E is also under a Kentucky sales and use tax audit for the periods
   October 1, 1997 through December 31, 2001. An initial assessment of
   $1.1 million has been received and will be protested as the Company
   believes it has meritorious defenses for the issues raised during the
   examination.

   The Company is presently unable to assess the ultimate impact of the
   results of audit assessments by taxing authorities on quarterly or
   annual cash flows as well as results of operations over the next three
   to twelve months as these audits are completed.  However, LG&E and KU
   do not currently believe that any of these matters will have a material
   adverse effect on financial position or results of operations.

7. New Accounting Pronouncements

   FSP 109-1

   In December 2004, the FASB finalized FSP 109-1, Accounting for Income
   Taxes, Application of FAS 109 to the Tax Deduction on Qualified
   Production Activities Provided by the American Jobs Creation Act of
   2004,  which requires the tax deduction on qualified production
   activities to be treated as a special deduction in accordance with FAS
   109.  FSP 109-1 became effective December 21, 2004. For the six months
   ended June 30, 2005, LG&E and KU recognized $0.8 million and $0.4
   million, respectively, in tax benefits related to this deduction.

   FIN 47

   In March 2005, the FASB issued Financial Accounting Standards Board
   Interpretation No. 47, Accounting for Conditional Asset Retirement
   Obligations, an interpretation of FASB Statement No. 143 ("FIN 47").
   FIN 47 clarifies that the term "conditional asset retirement
   obligation" as used in SFAS No. 143, Accounting for Asset Retirement
   Obligations, refers to a legal obligation to perform an asset
   retirement activity in which the timing and/or method of settlement are
   conditional on a future event that may or may not be within the control
   of the entity.  The obligation to perform the asset retirement activity
   is unconditional even though uncertainty exists about the timing and/or
   method of settlement.  An entity is required to recognize a liability
   for the fair value of a conditional asset retirement obligation if the
   fair value of the liability can be reasonably estimated.  The fair
   value of a liability for the conditional asset retirement obligation
   should be recognized when incurred; generally, upon acquisition,
   construction, or development and through the normal operation of the
   asset.  FIN 47 is effective no later than the end of fiscal years
   ending after December 15, 2005. LG&E and KU are currently evaluating
   the impact of this pronouncement.

8.   Short-Term and Long-Term Debt

   Under the provisions for LG&E's variable-rate pollution control bonds,
   Series S, T, U, BB, CC, DD and EE, and KU's variable-rate pollution
   control bonds Series 10, 12, 13, 14, and 15, the bonds are subject to
   tender for purchase at the option of the holder and to mandatory tender
   for purchase upon the occurrence of certain events, causing the bonds
   to be classified as current portion of long-term debt in the Balance
   Sheets.  The average annualized interest rate for these bonds during
   the three months ending June 30, 2005 was 2.50% for LG&E and 2.64% for
   KU.

   During June 2005, LG&E renewed five revolving lines of credit with
   banks totaling $185 million.  There was no outstanding balance under
   any of these facilities at June 30, 2005.  The Company expects to renew
   these facilities prior to their expiration in June 2006.

   LG&E, KU and LG&E Energy participate in an intercompany money pool
   agreement. Details of the balances at June 30, 2005, and June 30, 2004,
   were as follows:

                    Total Money      Amount     Balance     Average
   ($ in millions) Pool Available Outstanding  Available Interest Rate
   June 30, 2005:
   LG&E               $400.0         $20.8      $379.2         3.06%
   KU                 $400.0         $93.1      $306.9         3.06%

   June 30, 2004:
   LG&E               $400.0         $26.0      $374.0         1.04%
   KU                 $400.0         $53.2      $346.8         1.04%

   LG&E Energy maintains a revolving credit facility totaling $200 million
   with an affiliated company, E.ON North America, Inc., to ensure funding
   availability for the money pool. The balance outstanding on this
   facility at June 30, 2005 was $159.7 million.

   Redemptions and maturities of long-term debt year-to-date through June
   30, 2005, are summarized below:

   ($ in millions)
                                    Principal        Secured/
   Year Company  Description         Amount   Rate   Unsecured Maturity

   2005 LG&E   Pollution control bonds $40.0  5.90%  Secured Apr 2023
   2005 LG&E   Due to Fidelia          $50.0  1.53%  Secured Jan 2005
   2005 KU     First mortgage bonds    $50.0  7.55%  Secured Jun 2025

   Issuances of long-term debt year-to-date through June 30, 2005, are
   summarized below:

   ($ in millions)
                                    Principal        Secured/
   Year Company  Description         Amount   Rate   Unsecured Maturity

   2005 LG&E   Pollution control bonds $40.0  Variable  Secured Feb 2035

   The proceeds of the 2005 loan at LG&E were used to refinance existing
   pollution control bonds.

   In May 2005, KU repaid a $26.7 million loan against the cash surrender
   value of life insurance policies.

9. Related-Party Transactions

   LG&E, KU, subsidiaries of LG&E Energy and other subsidiaries of E.ON
   engage in related-party transactions.  Transactions among LG&E, KU and
   LG&E Energy subsidiaries are eliminated upon consolidation of LG&E
   Energy. Transactions between LG&E or KU and E.ON subsidiaries are
   eliminated upon consolidation of E.ON. These transactions are generally
   performed at cost and are in accordance with the SEC regulations under
   the PUHCA and the applicable Kentucky Commission regulations.  Accounts
   payable to and receivable from related parties are netted and presented
   as accounts payable to affiliated companies on the balance sheets of
   LG&E and KU, as allowed due to the right of offset. Obligations related
   to intercompany debt arrangements with LG&E Energy and Fidelia are
   presented as separate line items on the balance sheet, as appropriate.
   The significant related-party transactions are disclosed below.

    Electric Purchases

    LG&E and KU intercompany electric revenues and purchased power expense
    from affiliated companies for the three months and six months ended
    June 30, 2005 and 2004, were as follows:

                                          Three             Six
                                       months ended     months ended
                                         June 30,         June 30,
     (in millions)                     2005     2004    2005     2004
     LG&E
     Electric operating revenues
      from KU                         $21.0    $ 8.4    $46.8    $30.5
     Purchased power from KU           18.6      9.1     48.7     30.7

     KU
     Electric operating revenues
      from LG&E                       $18.6    $ 9.1    $48.7    $30.7
     Purchased power from LG&E         21.0      8.4     46.8     30.5

    Interest Charges

    LG&E and KU intercompany interest expense for the three months and six
    months ended June 30, 2005 and 2004, were as follows:

                                          Three             Six
                                       months ended     months ended
                                         June 30,         June 30,
     (in millions)                     2005     2004    2005     2004

     LG&E intercompany interest expense $2.8     $3.0    $5.9    $6.1
     KU intercompany interest expense   $3.7     $3.5    $7.2    $7.1

    Other Intercompany Billings

    Other intercompany billings related to LG&E and KU for the three months
    and six months ended June 30, 2005 and 2004, were as follows:

                                          Three             Six
                                       months ended     months ended
                                         June 30,         June 30,
     (in millions)                     2005     2004    2005     2004

     LG&E Services billings to LG&E   $75.8    $60.4   $108.5    $98.6
     LG&E Services billings to KU      75.6     44.7    101.5     75.4
     LG&E billings to LG&E Services     0.6      1.5      5.3      4.5
     KU billings to LG&E Services       0.3      1.1      3.6      3.9
     LG&E billings to KU               14.4     16.9     28.5     33.5
     KU billings to LG&E                9.0      1.9     13.0      3.4

10.Commitments and Contingencies

   Except as may be discussed in this Quarterly Report on Form 10-Q
   (including Note 5), material changes have not occurred in the current
   status of various commitments or contingent liabilities from that
   discussed in the Companies' Annual Report on Form 10-K for the year
   ended December 31, 2004 and Quarterly Report on Form 10-Q for the three
   months ended March 31, 2005. See Notes 3 and 11 to the Companies'
   Annual Report on Form 10-K and Note 10 to the Companies' Quarterly
   Report on Form 10-Q for the three months ended March 31, 2005 for
   information regarding such commitments or contingencies.

   LITIGATION

   In May 2004, OMU commenced litigation against KU concerning a long-term
   power supply contract.  To date, OMU has claimed approximately $6
   million in damages for periods through early 2004, and may claim
   further amounts for later-occurring periods. OMU has additionally
   requested injunctive and other relief, including a declaration that KU
   is in material breach of the contract. In March 2005, the FERC denied a
   rehearing request by KU regarding the FERC's December 2004 decision to
   decline to exercise exclusive jurisdiction regarding certain issues in
   dispute. In July 2005, the district court resolved a summary judgment
   motion of KU in OMU's favor, ruling that a contractual provision grants
   OMU the ability to terminate the contract without cause upon sufficient
   prior notice.  This case is currently in the discovery stage and a
   trial schedule has not yet been established.

   ENVIRONMENTAL MATTERS

   LG&E and KU are subject to SO2 and NOX emission limits on their
   electric generating units pursuant to the Clean Air Act.  LG&E and KU
   placed into operation significant NOX controls for their generating
   units prior to the 2004 Summer Ozone Season. As of December 31, 2004,
   LG&E and KU incurred total capital costs of approximately $186 million
   and $219 million, respectively, to reduce their NOX emissions below
   required levels.  In addition, LG&E and KU incur additional operating
   and maintenance costs in operating the new NOX controls.

   On March 10, 2005, EPA issued the final Clean Air Interstate Rule
   (CAIR) which requires substantial additional reductions in SO2 and NOX
   emissions from electric generating units.  The CAIR rule provides for a
   two-phased reduction program with Phase I reductions in NOX and SO2
   emissions in 2009 and 2010, respectively, and Phase II reductions in
   2015.  On March 15, 2005, EPA issued a related regulation, the final
   Clean Air Mercury Rule (CAMR), which requires substantial mercury
   reductions from electric generating units.  CAMR also provides for a
   two-phased reduction, with the Phase I target in 2010 achieved as a "co-
   benefit" of the controls installed to meet CAIR.  Additional control
   measures will be required to meet the Phase II target in 2018.  Both
   CAIR and CAMR establish a cap and trade framework that can be used for
   compliance unless the state chooses another approach.

   In order to meet these new regulatory requirements, KU has implemented
   a plan for adding significant additional SO2 controls to its generating
   units.  Installation of additional SO2 controls will proceed on a
   phased basis, with construction of controls (i.e. FGDs) commencing in
   September 2005 and continuing through the final installation and
   operation in 2009.  KU estimates that it will incur $658.9 million in
   capital costs related to the construction of the FGDs to achieve
   compliance with current emission limits on a company-wide basis.  In
   addition, KU will incur additional operating and maintenance costs in
   operating the new SO2 controls.

   LG&E and KU are also monitoring several other air quality matters which
   may potentially impact coal-fired power plants, including EPA's revised
   air quality standards for ozone and particulate matter, and measures to
   implement EPA's regional haze rule.

   From time to time, LG&E and KU have conducted negotiations with the
   relevant regulatory authorities to address various environmental-
   related matters, including: remedial measures aimed at controlling
   particulate matter emissions from LG&E's Mill Creek plant; settlement
   of claims relating to a fuel oil spill at KU's E.W. Brown plant;
   liability for cleanup of off-site facilities that allegedly handled
   materials associated with company operations; and investigation and
   cleanup of company properties including former LG&E and KU MGP sites.
   Based on negotiations to date, management does not anticipate that any
   of the liabilities arising out of any of these matters will have a
   material adverse affect on LG&E's or KU's financial position or results
   of operations.

   In the normal course of business, lawsuits, claims, environmental
   actions, and various non-ratemaking governmental proceedings arise
   against LG&E and KU.  To the extent that damages are assessed in any of
   these lawsuits, LG&E and KU believe that their insurance coverage or
   other appropriate reserves are adequate.  Management, after
   consultation with legal counsel, and based upon the present status of
   these items, does not anticipate that liabilities arising out of other
   currently pending or threatened lawsuits and claims of the type
   referenced above will have a material adverse effect on LG&E's or KU's
   financial position or results of operations.

   EEI CONTRACT

   KU owns 20% of the common stock of EEI, which owns and operates a 1,000-
   Mw generating station in southern Illinois.  KU is presently entitled
   to take 20% of the available capacity of the station.  Purchases from
   EEI are made under a contractual formula which has resulted in costs
   which were and are expected to be comparable to the cost of other power
   generated by KU.  This contract governing the purchases from EEI will
   terminate on December 31, 2005.  Such power equated to approximately
   10% of KU's net generation system output in 2004 and for the six months
   of 2005. Discussions are on-going related to the extension or
   replacement of the contract, including whether any such future contract
   will be at cost or market-based rates, and whether the purchasing party
   will continue to be the shareholding utility, such as KU.  The outcome
   of such discussions cannot be predicted at this time.

11. Pension and Other Post-retirement Benefit Plans

   The following table provides the components of net periodic benefit
   cost for pension and other benefit plans for the three months and six
   months ended June 30, 2005 and 2004:

   LG&E
                                          Three             Six
                                       months ended     months ended
                                         June 30,         June 30,
   (in millions)                      2005     2004    2005     2004

   Pension and Other Benefit Plans:
   Components of net period benefit cost
     Service cost                    $ 1.4    $ 0.9   $ 3.1    $ 3.0
     Interest cost                     5.6      4.7    12.1     15.3
     Expected return on plan assets   (5.2)    (4.3)  (11.2)   (13.9)
     Amortization of prior service
        cost                           1.2        -     2.5        -
     Amortization of transition
        obligation                       -       0.9      -      2.9
     Recognized actuarial loss         0.6       0.5    1.4      1.6
                                     $ 3.6     $ 2.7  $ 7.9    $ 8.9

   KU
                                          Three             Six
                                       months ended     months ended
                                         June 30,         June 30,
   (in millions)                      2005     2004    2005     2004

   Pension and Other Benefit Plans:
   Components of net period benefit cost
     Service cost                    $ 1.7    $ 1.1   $ 3.4    $ 3.5
     Interest cost                     4.1      3.5     8.5     11.2
     Expected return on plan assets   (3.8)    (3.2)   (7.8)   (10.1)
     Amortization of prior service
        cost                           0.3      0.2     0.7      0.5
     Amortization of transition
        obligation                     0.2      0.3     0.3      0.8
     Recognized actuarial loss         0.6      0.4     1.2      1.2
                                     $ 3.1    $ 2.3   $ 6.3    $ 7.1

   In January 2004, LG&E and KU made discretionary contributions to the
   pension plans of $34.5 million and $43.4 million, respectively. No
   discretionary contributions to the pension plans are currently
   anticipated for either LG&E or KU for 2005. LG&E and KU contributed
   $0.7 million and $3.0 million, respectively, to their other post-
   retirement benefit plans during the second quarter of 2005.

12. Subsequent Events

   On July 7, 2005, KU completed a new tax-exempt financing totaling $13.3
   million. The new bonds, due June 1, 2035, carry a variable, auction
   rate of interest. The proceeds will be used to finance a portion of the
   costs of new pollution control equipment at KU's Ghent Station.

   On July 8, 2005, KU entered into a $50 million long-term unsecured loan
   from Fidelia. The new loan matures in July 2015 and has an interest
   rate of 4.735%. This loan replaces the $50 million, 7.55% First
   Mortgage Bonds, Series R that were called in June 2005.

   On July, 15, 2005, LG&E redeemed 12,500 shares of its 5.875%
   mandatorily redeemable preferred stock pursuant to sinking fund
   requirements at $100 per share.

   The Energy Policy Act of 2005 was enacted on August 8, 2005. Among
   other matters, this comprehensive legislation contains provisions
   mandating improved electric reliability standards and performance;
   providing economic and other incentives relating to transmission,
   pollution control and renewable generation assets; increasing funding
   for clean coal generation incentives; and repealing the Public Utility
   Holding Company Act of 1935. The Companies are currently examining the
   potential impacts of the Energy Policy Act of 2005.


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

                                  General

The following discussion and analysis by management focuses on those
factors that had a material effect on LG&E's and KU's financial results of
operations and financial condition during the six month period ended June
30, 2005, and should be read in connection with the financial statements
and notes thereto.

Some of the following discussion may contain forward-looking statements
that are subject to certain risks, uncertainties and assumptions.  Such
forward-looking statements are intended to be identified in this document
by the words "anticipate," "expect," "estimate," "objective," "possible,"
"potential" and similar expressions.  Actual results may vary materially.
Factors that could cause actual results to differ materially include:
general economic conditions; business and competitive conditions in the
energy industry; changes in federal or state legislation; unusual weather;
actions by state or federal regulatory agencies; and other factors
described from time to time in LG&E's and KU's reports to the SEC,
including the Annual Reports on Form 10-K for the year ended December 31,
2004.

                             Executive Summary

LG&E and KU, subsidiaries of LG&E Energy LLC (an indirect subsidiary of
E.ON), are regulated public utilities.  LG&E supplies electricity to
approximately 394,000 customers and natural gas to approximately 321,000
customers in Louisville and adjacent areas in Kentucky.  KU provides
electric service to approximately 490,000 customers in over 77 counties in
central, southeastern and western Kentucky, to approximately 30,000
customers in southwestern Virginia and to less than 10 customers in
Tennessee.  KU also sells wholesale electric energy to 12 municipalities.

The mission of LG&E and KU is to build on our tradition and achieve world-
class status providing reliable, low-cost energy services and superior
customer satisfaction; and to promote safety, financial success and quality
of life for our employees, communities and other stakeholders.

LG&E and KU's strategy focuses on the following:

  -   Execute all our business processes to secure a world-class competitive
     advantage
  -   Develop and transfer best practices in generation, customer service,
     distribution and supply
  -   Operate our commercial hub to enhance margins and manage risks across
     the company
  -   Pursue flexible asset portfolio management
  -   Attract, retain and develop the best people.

In a June 2004 order, the Kentucky Commission accepted the settlement
agreements reached by the majority of the parties in the rate cases filed
by LG&E and KU in December 2003.  Under the ruling, the LG&E utility base
electric rates have increased $43.4 million (7.7%) and base gas rates have
increased $11.9 million (3.4%), on an annual basis.  The rate increases
took effect on July 1, 2004.  Base electric rates at KU have increased
$46.1 million (6.8%) annually.  The 2004 increases were the first increases
in electric base rates for LG&E and KU in 13 and 20 years, respectively;
the last gas rate increase for the LG&E gas utility took effect in
September 2000.

With the installation of four combustion turbines at Trimble County in
2004, near-term regulated load growth in Kentucky is expected to be
satisfied. However, the Integrated Resource Plan submitted by LG&E and KU
to the Kentucky Commission in April 2005 indicated the requirement for
additional base-load capacity in the longer-term.  Consequently, LG&E and
KU have begun development efforts for a new base-load coal-fired unit.
Trimble County Unit 2, with a 732 Mw capacity rating, is expected to be
jointly owned by LG&E and KU (75% aggregate ownership) and IMEA and IMPA
(25% aggregate ownership).  Of their 75% (549 Mw) ownership, LG&E will own
19% (104 Mw) and KU will own 81% (445 Mw).  An application for a
construction CCN was filed with the Kentucky Commission and an air permit
application was filed with the Kentucky Department of Air Quality in
December 2004. LG&E's and KU's share of the total capital cost of $885
million for Trimble County Unit 2 is estimated to be $168 million and $717
million, respectively, through 2010. Three applications for transmission
CCN's were filed with the Kentucky Commission in May 2005 for the
construction of three transmission facilities to support Trimble County
Unit 2.  Hearings on the air permit application are scheduled to commence
in August 2005.

In addition to the Trimble County Unit 2 project, another focus of major
utility investment is environmental expenditures.  In order to mitigate the
declining SO2 allowance bank at KU over the next several years, KU filed
with the Kentucky Commission in December 2004 an application for a CCN to
construct four FGDs at an estimated cost of $658.9 million, which was
approved in June 2005.

                          Results of Operations

The results of operations for LG&E and KU are 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.

               Three Months Ended June 30, 2005, Compared to
                     Three Months Ended June 30, 2004

LG&E Results:

LG&E's net income increased $10.9 million (64%) for the three months ended
June 30, 2005, as compared to the three months ended June 30, 2004,
primarily due to the increase in electric and gas base rates effective July
1, 2004, higher electric wholesale revenues, and lower operation expenses.

A comparison of LG&E's revenues for the three months ended June 30, 2005,
with the three months ended June 30, 2004, reflects increases and
(decreases) which have been segregated by the following principal causes:

Cause                                               Electric     Gas
(in millions)                                       Revenues   Revenues

Retail sales:
 Fuel and gas supply adjustments                     $ 5.7      $ 3.5
 Environmental cost recovery surcharge                 4.4         -
 Earnings sharing mechanism                           (3.5)        -
 Weather normalization                                  -         0.7
 Rates and rate structure                             10.0        2.1
 Variation in sales volume and other                  (2.1)      (0.8)
  Total retail sales                                  14.5        5.5

Wholesale sales                                       22.0        3.3
Other                                                 (0.8)        -

 Total                                               $35.7      $ 8.8

Electric revenues increased $35.7 million (19%) in 2005 primarily due to:
 -  Higher wholesale revenues ($22.0 million), primarily due to 6% higher
    prices and 67% higher sales volume.
 -  An increase in rates and a change in rate structure ($10.0 million),
    related to the rate case order which took effect on July 1, 2004.
 -  Higher fuel supply adjustments ($5.7 million) due to significantly
    higher fuel costs.
 -  Higher environmental cost recovery surcharge ($4.4 million).
 -  Lower earnings sharing mechanism, resulting from termination of the
    mechanism in March 2005 ($3.5 million).

During the second quarter of 2005, LG&E made out-of-period adjustments for
estimated under collection of ECR revenues to be billed in subsequent
periods.  The adjustment was immaterial during all reporting periods
involved (March 2003 through October 2004). As a result, LG&E revenues were
increased $4.8 million in the current period results of operations.  Net
income in the current period was increased $2.9 million for LG&E.

Gas revenues increased $8.8 million (20%) in 2005 primarily due to:
-   Higher gas supply adjustment ($3.5 million) due to higher gas costs.
-   Higher wholesale revenues ($3.3 million) due to higher sales volumes
    (476,000 MCF in 2005 versus 49,000 MCF in 2004) and 32% higher prices.
-   An increase in rates and a change in rate structure ($2.1 million),
    related to the rate case order which took effect on July 1, 2004.

Fuel for electric generation and gas supply expenses comprise a large
component 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 are reflected in retail rates, subject to the approval of the
Kentucky Commission.

  Fuel for electric generation increased $20.4 million (43%) in 2005
  primarily due to:
  -   Increased cost per Btu (24% higher), resulting in $13.3 million higher
      fuel costs.
  -   Increased generation (15% higher), resulting in $7.1 million higher
      fuel costs.

  Power purchased increased $10.9 million (63%) in 2005 primarily due to:
  -   Increased cost per Mwh (38% higher), resulting in $7.8 million higher
      costs.
  -   Increased Mwh purchases (18% higher), resulting in $3.1 million higher
      costs.

 Gas supply expenses increased $4.6 million (15%) in 2005 primarily due
to:
  -   Increased cost of purchases for wholesale sales ($2.7 million).
  -   Increased volume of gas delivered to the distribution system ($2.5
      million).
  -   Decreased recovery of performance-based rates ($0.3 million).
  -   Decreased gas price (net of gas supply clause adjustments)($0.3
      million).

Other operations and maintenance expenses decreased $12.3 million (16%) in
2005.

  Other operation expenses decreased $15.7 million (28%) in 2005 primarily
  due to:
  -   Decreased other power supply expense ($7.6 million). This is primarily
      related to credits received from MISO for Day 2 revenue sufficiency
      guarantee payments (RSGs) totaling $12.6 million (received by LG&E when
      units are required to run at a higher generating cost than the market will
      pay). Excluding the RSGs, other power supply expense increased $5.0
      million due to MISO Day 2 costs related to meeting native load
      requirements.
  -   Decreased distribution operations expense ($6.9 million); storm expense
      of approximately $7.4 million was recorded in the second quarter of 2004.
  -   Decreased transmission expense, primarily MISO-related ($2.5 million).
  -   Decreased information technology systems operations expense ($1.3
      million) (charged to maintenance expenses in 2005).
  -   Increased steam generation operations expense ($1.9 million), primarily
      related to scrubber reactant expense.
  -   Increased customer records and collections expense ($0.6 million).

  Maintenance expenses increased $3.2 million (21%) in 2005 primarily due
to:
  -   Increased information technology systems maintenance ($1.3 million)
      (charged to operation expenses in 2004).
  -   Increased steam generation maintenance, primarily due to outage repairs
      at Cane Run ($1.1 million).
  -   Increased gas distribution system maintenance ($0.3 million) and
      underground storage maintenance ($0.1 million).
  -   Increased combustion turbine maintenance ($0.2 million).

  Property and other taxes increased $0.2 million (5%) in 2005.

Depreciation and amortization expense increased $3.0 million (11%) in 2005
primarily due to additional plant in service.

In total, interest expense increased $0.5 million (6%) in 2005 primarily
due to:
-   Increased interest on variable-rate debt ($2.0 million).
-   Decreased interest costs on interest rate swaps ($0.9 million).
-   Decreased interest due to interest paid on tax payments in April 2004
     ($0.3 million).
-   Decreased interest on Fidelia debt ($0.3 million).

The weighted average interest rate on variable-rate bonds for the three
months ended June 30, 2005, was 2.61%, compared to 1.08% for the comparable
period in 2004.

Variances in income tax expense are largely attributable to changes in pre-
tax income and a reduction in the statutory Kentucky rate.

                                              Three Months   Three Months
                                                 Ended          Ended
                                             June 30, 2005  June 30, 2004
 Effective Rate
 Statutory federal income tax rate                35.0%         35.0%
 State income taxes net of federal benefit         5.3           5.8
 Amortization of investment and other tax credits (2.3)         (6.6)
 Other differences                                (2.0)          0.6
 Effective income tax rate                        36.0%         34.8%

The increased tax benefit in other differences is largely attributable to
the new Internal Revenue Code Section 199 Qualified Production Activities
deduction and the amortization of excess deferred income taxes, which
reflect the benefits of deferred tax reversing at higher tax rates than the
current statutory rate.

See Part 1 - Item 1, Notes to Financial Statements, Note 6 for additional
discussion of income taxes.

KU Results:

KU's net income decreased $9.9 million (36%) for the three months ended
June 30, 2005, as compared to the three months ended June 30, 2004.  The
decrease was primarily due to increased operation and maintenance expenses
and higher depreciation expenses.

A comparison of KU's revenues for the three months ended June 30, 2005,
with the three months ended June 30, 2004, reflects increases and
(decreases) which have been segregated by the following principal causes:

Cause                                                   Electric
(in millions)                                           Revenues

Retail sales:
 Fuel supply adjustments                                 $22.6
 Environmental cost recovery surcharge                     2.1
 Earnings sharing mechanism                               (3.9)
 Rates and rate structure                                 14.6
 Variation in sales volume and other                      (0.1)
 Total retail sales                                       35.3

Wholesale sales                                            5.2
Provision for rate collections                            (5.4)
Other                                                     (2.3)
Total                                                    $32.8

Electric revenues increased $32.8 million (14%) in 2005 primarily due to:
-   Higher fuel supply adjustments ($22.6 million) due to higher cost of
    fuel used for generation and purchased power.
-   An increase in rates and a change in rate structure ($14.6 million),
    related to the rate case order which took effect on July 1, 2004.
-   Higher wholesale revenues ($5.2 million), primarily due to 19% higher
    prices.
-   Higher environmental cost recovery surcharge ($2.1 million).
-   Lower provision for rate collections ($5.4 million).
-   Lower earnings sharing mechanism revenues, resulting from termination
    of the mechanism in March 2005 ($3.9 million).

During the second quarter of 2005, KU made out-of-period adjustments for
estimated over collection of ECR revenues to be billed in subsequent
periods.  The adjustment was immaterial during all reporting periods
involved (May 2003 through January 2005). As a result, KU revenues were
decreased $2.4 million in the current period results of operations.  Net
income in the current period was reduced $1.5 million for KU.

Fuel for electric generation comprises a large component of KU's total
operating expenses.  KU's electric rates contain a fuel adjustment clause,
whereby increases or decreases in the cost of fuel are reflected in retail
rates, subject to the approval of the Kentucky Commission, the Virginia
State Corporation Commission, and the FERC.

Fuel for electric generation increased $16.3 million (24%) in 2005
primarily due to:
  -   Increased cost per Btu (37% higher), resulting in $22.5 million higher
      fuel costs.
  -   Decreased generation (9% lower), resulting in $6.2 million lower fuel
      costs, primarily due to a major turbine overhaul at E.W. Brown Unit 3 and
      outage at Green River Unit 4.

Power purchased increased $19.3 million (63%) in 2005 primarily due to:
  -   Increased cost per Mwh (30% higher), resulting in $11.4 million higher
      costs.
  -   Increased volumes of Mwh purchased (26% higher), resulting in $7.9
      million higher costs.

Other operations and maintenance expenses increased $10.0 million (17%) in
2005.

  Other operation expenses increased $3.8 million (11%) in 2005 primarily
  due to:
  -   Increased other power supply expense ($3.5 million).  KU received from
      MISO RSGs totaling $3.1 million (received when KU units are required to
      run at a higher generating cost than the market will pay).  Excluding the
      RSGs, other power supply expense increased $6.6 million due to MISO Day 2
      costs related to meeting native load requirements.
  -   Increased pension expense ($1.2 million).
  -   Increased customer accounts and collection expense ($1.0 million).
  -   Decreased transmission expense, primarily MISO-related ($1.1 million).
  -   Decreased information technology systems operation expenses ($1.1
      million) (charged to maintenance expenses in 2005).

  Maintenance expenses increased $6.0 million (35%) in 2005 primarily due
to:
  -   Increased steam generation maintenance expense ($4.6 million),
      primarily due to major turbine overhauls at E.W. Brown and Ghent.
  -   Increased information technology systems maintenance ($1.1 million)
      (charged to operation expenses in 2004).
  -   Increased transmission system maintenance ($0.3 million).

  Property and other taxes increased $0.2 million (4%).

Depreciation and amortization increased $3.3 million (13%) primarily due to
additional plant in service.

In total, interest expense increased $0.7 million (10%) in 2005 primarily
due to:
-   Increased interest costs associated with variable rate debt ($0.8
    million).
-   Increased interest costs associated with the interest rate swaps ($0.7
    million).
-   Decreased interest costs due to refinancing fixed rate debt with
    variable rate debt ($0.4 million).
-   Decreased interest costs for mark-to-market of the interest rate swaps
    ($0.3 million).

The weighted average interest rate on variable-rate bonds for the three
months ended June 30, 2005, was 2.72%, compared to 1.11% for the comparable
period in 2004.

Variations in income tax expense are largely attributable to changes in
pretax income.

                                            Three Months     Three Months
                                               Ended            Ended
                                           June 30, 2005    June 30, 2004
 Effective Rate
 Statutory federal income tax rate              35.0%           35.0%
 State income taxes net of federal benefit       5.2             6.0
 Amortization of investment and other tax
    credits                                     (1.5)           (1.2)
 Other differences                              (2.7)           (1.8)
 Effective income tax rate                      36.0%           38.0%

The increased tax benefit in other differences for 2005 is largely
attributable to excess deferred income taxes (1.9%), which reflect the
benefits of deferred tax reversing at higher tax rates than the current
statutory rate.

See Part 1 - Item 1, Notes to Financial Statements, Note 6 for additional
discussion of income taxes.

                Six Months Ended June 30, 2005, Compared to
                      Six Months Ended June 30, 2004

LG&E Results:

LG&E's net income increased $20.5 million (50%) for the six months ended
June 30, 2005, as compared to the six months ended June 30, 2004, primarily
due to the increase in electric and gas base rates effective July 1, 2004
and higher electric and gas wholesale sales.

A comparison of LG&E's revenues for the six months ended June 30, 2005,
with the six months ended June 30, 2004, reflects increases and (decreases)
which have been segregated by the following principal causes:

Cause                                               Electric     Gas
(in millions)                                       Revenues   Revenues

Retail sales:
 Fuel and gas supply adjustments                     $ 9.3      $ 4.8
 Environmental cost recovery surcharge                 3.6         -
 Earnings sharing mechanism                           (7.1)        -
 LG&E/KU merger surcredit                             (1.7)        -
 Value delivery surcredit                             (0.5)      (0.3)
 Rates and rate structure                             25.3       12.4
 Variation in sales volume and other                   0.7       (8.6)
  Total retail sales                                  29.6        8.3

Wholesale sales                                       36.3        9.2
Provision for rate collections                         2.3         -
Other                                                 (1.8)       0.2
 Total                                               $66.4      $17.7

Electric revenues increased $66.4 million (17%) in 2005 primarily due to:
-   Higher wholesale revenues ($36.3 million), primarily due to 16% higher
    prices and 20% higher sales volumes.
-   An increase in rates and a change in rate structure ($25.3 million),
    related to the rate case order which took effect on July 1, 2004.
-   Higher fuel supply adjustments ($9.3 million) due to higher cost of
    fuel used for generation and purchased power.
-   Higher environmental cost recovery surcharge ($3.6 million).
-   Lower earnings sharing mechanism revenues, resulting from termination
    of the mechanism in March 2005 ($7.1 million).

During the second quarter of 2005, LG&E made out-of-period adjustments for
estimated under collection of ECR revenues to be billed in subsequent
periods.  The adjustment was immaterial during all reporting periods
involved (March 2003 through October 2004). As a result, LG&E revenues were
increased $4.8 million in the current period results of operations.  Net
income in the current period was increased $2.9 million for LG&E.

Gas revenues increased $17.7 million (9%) in 2005 primarily due to:
-   An increase in rates and a change in rate structure ($12.4 million),
    related to the rate case order which took effect on July 1, 2004.
-   Higher wholesale revenues ($9.2 million) due to 106% higher sales
    volumes and 15% higher prices.

Fuel for electric generation and gas supply expenses comprise a large
component 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 are reflected in retail rates, subject to the approval of the
Kentucky Commission.

  Fuel for electric generation increased $27.9 million (28%) in 2005
  primarily due to:
  -   Increased cost per Btu (20% higher), resulting in $21.5 million higher
      fuel costs.
  -   Increased generation (6% higher), resulting in $6.4 million higher fuel
      costs.

  Power purchased increased $21.0 million (45%) in 2005 primarily due to:
  -   Increased cost per Mwh (37%), resulting in $18.2 million higher costs.
  -   Increased volume of power purchased (6%), resulting in $2.8 million
      higher costs.

 Gas supply expenses increased $9.4 million (6%) in 2005 primarily due to:
  -   Increased cost of purchases for wholesale sales ($8.3 million).
  -   Increased volume of gas delivered to the distribution system ($1.1
      million).

Other operations and maintenance expenses decreased $12.4 million (8%) in
2005.

  Other operation expenses decreased $19.8 million (17%) in 2005 primarily
due to:
  -   Decreased distribution operations expense ($7.5 million); storm expense
      of approximately $7.4 million was recorded in the second quarter of 2004.
  -   Decreased other power supply expense ($7.4 million).  This is primarily
      related to credits received from RSGs totaling $12.6 million.  Excluding
      the RSGs, other power supply expense increased $5.2 million due to MISO
      Day 2 costs related to meeting native load requirements.
  -   Decreased transmission expense, primarily MISO-related ($5.6 million).
  -   Decreased information technology systems operations expense ($2.6
      million) (charged to maintenance expenses in 2005).
  -   Decreased property insurance expense ($0.4 million).
  -   Increased steam generation operations expense ($2.4 million).
  -   Increased customer records and collection expenses ($1.0 million).

  Maintenance expenses increased $6.7 million (25%) in 2005 primarily due
to:
  -   Increased information technology systems maintenance ($2.6 million)
      (charged to operation expenses in 2004).
  -   Increased steam generation maintenance, primarily due to outage repairs
      at Cane Run ($2.2 million).
  -   Increased distribution system maintenance (including tree trimming and
      underground conductor repairs) ($0.7 million).
  -   Increased gas distribution system expense ($0.8 million).
  -   Increased electric transmission system maintenance ($0.4 million).

  Property and other taxes increased $0.7 million (8%) in 2005.

Depreciation and amortization increased $6.3 million (11%) primarily due to
additional plant in service.

Other income - net increased $0.9 million in 2005 primarily due to:
-   Increased mark-to-market income (net) ($0.3 million) related to energy
    trading contracts.
-   Decreased miscellaneous deductions ($0.7 million).

In total, interest expense increased $1.5 million (9%) in 2005 primarily
due to:
-   Increased interest on variable-rate debt ($3.1 million).
-   Increased interest on customer deposits ($0.6 million).
-   Increased interest on money pool borrowings ($0.4 million).
-   Decreased interest costs on interest rate swaps ($1.5 million).
-   Decreased interest on affiliated loans with Fidelia ($0.6 million).
-   Decreased interest due to interest paid on tax payments in April 2004
     ($0.3 million).

The weighted average interest rate on variable-rate bonds for the six
months ended June 30, 2005, was 2.27%, compared to 1.06% for the comparable
period in 2004.

Variances in income tax expense are largely attributable to changes in pre-
tax income and a reduction in the statutory Kentucky rate.

                                               Six Months     Six Months
                                                 Ended          Ended
                                             June 30, 2005  June 30, 2004
 Effective Rate
 Statutory federal income tax rate                35.0%         35.0%
 State income taxes net of federal benefit         4.7           5.7
 Amortization of investment and other tax credits (2.1)         (4.3)
 Other differences                                (1.7)          0.2
 Effective income tax rate                        35.9%         36.6%

The increased tax benefit in other differences is largely attributable to
the new Internal Revenue Code Section 199 Qualified Production Activities
deduction and the amortization of excess deferred income taxes, which
reflect the benefits of deferred tax reversing at higher tax rates than the
current statutory rate.

Kentucky House Bill 272, also known as Kentucky's Tax Modernization Plan,
was signed into law on March 18, 2005.  See Note 6 for additional
discussion of income taxes.

KU Results:

KU's net income decreased $4.7 million (8%) for the six months ended June
30, 2005, as compared to the six months ended June 30, 2004.  The decrease
was primarily due to higher operations and maintenance expenses and higher
depreciation expense, partially offset by the increase in base rates
effective July 1, 2004 and higher wholesale sales.

A comparison of KU's revenues for the six months ended June 30, 2005, with
the six months ended June 30, 2004, reflects increases and (decreases)
which have been segregated by the following principal causes:

Cause                                                   Electric
(in millions)                                           Revenues

Retail sales:
 Fuel supply adjustments                                 $35.7
 Environmental cost recovery surcharge                     6.8
 Earnings sharing mechanism                               (8.3)
 LG&E/KU merger surcredit                                 (1.6)
 Rates and rate structure                                 26.9
 Variation in sales volume and other                       0.4
 Total retail sales                                       59.9

Wholesale sales                                           20.8
Provision for rate collections                            (4.6)
Other                                                     (4.3)
Total                                                    $71.8

Electric revenues increased $71.8 million (15%) in 2005 primarily due to:
-   Higher fuel supply adjustments ($35.7 million) due to higher cost of
    fuel used for generation and purchased power.
-   An increase in rates and a change in rate structure ($26.9 million),
    related to the rate case order which took effect on July 1, 2004.
-   Higher wholesale revenues ($20.8 million), primarily due to 25% higher
    prices.
-   Higher environmental cost recovery surcharge ($6.8 million).
-   Lower earnings sharing mechanism, resulting from termination of the
    mechanism in March 2005($8.3 million).
-   Lower provision for rate collections ($4.6 million).

During the second quarter of 2005, KU made out-of-period adjustments for
estimated over collection of ECR revenues to be billed in subsequent
periods.  The adjustment was immaterial during all reporting periods
involved (May 2003 through January 2005). As a result, KU revenues were
decreased $2.4 million in the current period results of operations.  Net
income in the current period was reduced $1.5 million for KU.

Fuel for electric generation comprises a large component of KU's total
operating expenses.  KU's electric rates contain a fuel adjustment clause,
whereby increases or decreases in the cost of fuel are reflected in retail
rates, subject to the approval of the Kentucky Commission, the Virginia
State Corporation Commission, and the FERC.

  Fuel for electric generation increased $33.8 million (25%) in 2005
primarily due to:
  -   Increased cost per Btu (10% higher), resulting in $38.9 million higher
      fuel costs.
  -   Decreased generation (4% lower), resulting in $5.1 million lower fuel
      costs.

  Power purchased increased $24.3 million (34%) in 2005 primarily due to:
  -   Increased cost per Mwh (20% higher), resulting in $16.2 million higher
      costs.
  -   Increased volumes of Mwh purchased (11% higher), resulting in $8.1
      million higher costs.

Other operations and maintenance expenses increased $14.0 million (12%) in
2005.

  Other operation expenses increased $2.4 million (3%) in 2005 primarily
due to:
  -   Increased other power supply expenses ($3.6 million). KU received from
      MISO RSGs totaling $3.1 million. Excluding the RSGs, other supply expense
      increased $6.7 million due to MISO Day 2 costs related to meeting native
      load requirements.
  -   Increased customer records and collections expenses ($1.6 million).
  -   Decreased information technology systems operation expenses ($2.2
      million) (charged to maintenance expenses in 2005).

  Maintenance expenses increased $11.2 million (39%) in 2005 primarily due
  to:
  -   Increased steam generation maintenance ($7.0 million) due to outages at
      Ghent, E.W. Brown, and Green River plants.
  -   Increased distribution system maintenance ($1.6 million) due to storm
      restoration expenses.
  -   Increased information technology systems maintenance ($2.2 million)
      (charged to operation expenses in 2004).
  -   Increased transmission system maintenance ($0.4 million).

  Property and other taxes increased $0.4 million.

Depreciation and amortization increased $6.5 million (13%) primarily due to
additional plant in service.

In total, interest expense increased $2.7 million (23%) in 2005 primarily
due to:
  -   Increased interest costs associated with the mark-to-market of the
      interest rate swaps ($1.6 million).
  -   Increased interest on variable rate debt ($1.2 million).
  -   Increased interest costs on interest rate swaps ($0.8 million).
  -   Decreased interest costs due to refinancing fixed rate debt with
      variable rate debt ($0.9 million).

The weighted average interest rate on variable-rate bonds for the six
months ended June 30, 2005, was 2.31%, compared to 1.08% for the comparable
period in 2004.

Variations in income tax expense are largely attributable to changes in
pretax income.

                                             Six Months       Six Months
                                               Ended            Ended
                                           June 30, 2005    June 30, 2004
 Effective Rate
 Statutory federal income tax rate              35.0%           35.0%
 State income taxes net of federal benefit       4.8             5.9
 Amortization of investment and other tax
   credits                                      (1.0)           (1.1)
 Other differences                              (1.8)           (1.7)
 Effective income tax rate                      37.0%           38.1%

Kentucky House Bill 272, also known as Kentucky's Tax Modernization Plan,
was signed into law on March 18, 2005.  See Note 6 for additional
discussion of income taxes.

Liquidity and Capital Resources

LG&E and KU's needs for capital funds are largely related to the
construction of plant and equipment necessary to meet the needs of electric
and gas utility customers in addition to debt service requirements and
dividend payments. Internal and external lines of credit are maintained to
fund short-term capital requirements.  LG&E and KU believe that such
sources of funds will be sufficient to meet the needs of the business in
the foreseeable future.

At June 30, 2005, LG&E and KU were in a negative working capital position
in part because of the classification of certain variable-rate pollution
control bonds that are subject to tender for purchase at the option of the
holder as current portion of long-term debt. LG&E and KU expect to cover
any working capital deficiencies with cash flow from operations, money pool
borrowings and borrowings from Fidelia.

Construction expenditures for the six months ended June 30, 2005 amounted
to $51.0 million for LG&E and $44.0 million for KU. At LG&E, expenditures
include connection of new customers ($14.3 million), gas main replacements
($5.9 million), enhancements to distribution system to meet demand ($3.0
million), replacement of defective distribution equipment ($3.1 million),
and a new transmission line ($1.7 million). At KU, expenditures included
connection of new customers ($18.0 million), expenditures to improve boiler
and other generation equipment reliability ($5.9 million), and replacement
of defective distribution equipment ($2.3 million). The expenditures were
financed with internally generated funds.

LG&E's and KU's cash balances decreased $2.0 million and $0.6 million,
respectively,  during the six months ended June 30, 2005, primarily due to
the payment of dividends and repayments of debt and construction
expenditures, partially offset by higher cash provided by operating
activities.

Variations in accounts receivable, accounts payable and inventories are
generally not significant indicators of LG&E's and KU's liquidity.  Such
variations are primarily attributable to seasonal fluctuations in weather,
which have a direct effect on sales of electricity and natural gas.  The
decrease in accounts receivable at LG&E was primarily due to the seasonal
impact of decreased gas sales.  The decrease in LG&E's gas stored
underground relates to seasonal uses of gas.

Interest rate swaps are used to hedge LG&E's and KU's underlying variable-
rate debt obligations.  These swaps hedge specific debt issuances and,
consistent with management's designation, are accorded hedge accounting
treatment.  As of June 30, 2005, LG&E had swaps with a combined notional
value of $211.3 million and KU had one swap with a notional value of $53.0
million.  LG&E's swaps exchange floating-rate interest payments for fixed-
rate interest payments to reduce the impact of interest rate changes on
LG&E's pollution control bonds.  KU's swap effectively converts fixed-rate
obligations on KU's first mortgage bonds Series P to variable-rate
obligations.

In June 2005, an interest rate swap with a notional amount of $50 million
was terminated by the counterparty pursuant to the terms of the swap
agreement. KU received a payment of $1.9 million in consideration for the
termination of the agreement. KU also called the underlying debt (First
Mortgage Bond Series R) and paid a call premium of $1.9 million.
The swap was fully effective upon termination, therefore, no impact on
earnings occurred as a result of the bond call and related swap
termination.

In February 2005, an LG&E interest rate swap with a notional amount of $17
million matured. The swap was fully effective upon expiration, therefore,
the impact on earnings and other comprehensive income from the swap
maturity was less than $0.1 million.

At June 30, 2005, LG&E's and KU's percentage of debt having a variable
rate, including the impact of interest rate swaps, was 45.5% ($383.7
million) and 51.5% ($392.2 million), respectively.

Under the provisions for LG&E's variable-rate pollution control bonds,
Series S, T, U, BB, CC, DD and EE, and KU's variable-rate pollution control
bonds Series 10, 12, 13, 14, and 15, the bonds are subject to tender for
purchase at the option of the holder and to mandatory tender for purchase
upon the occurrence of certain events, causing the bonds to be classified
as current portion of long-term debt in the Balance Sheets.  The average
annualized interest rate for these bonds during the six months ending June
30, 2005 was 2.23% for the LG&E bonds and 2.30% for the KU bonds.

During June 2005, LG&E renewed five revolving lines of credit with banks
totaling $185 million.  There was no outstanding balance under any of these
facilities at June 30, 2005. The Company expects to renew these facilities
prior to their expiration in June 2006.

LG&E, KU and LG&E Energy participate in an intercompany money pool
agreement. Details of the balances at June 30, 2005 and June 30, 2004 were
as follows:

                    Total Money      Amount     Balance     Average
   ($ in millions) Pool Available Outstanding  Available Interest Rate
   June 30, 2005:
   LG&E               $400.0         $20.8      $379.2         3.06%
   KU                 $400.0         $93.1      $306.9         3.06%

   June 30, 2004:
   LG&E               $400.0         $26.0      $374.0         1.04%
   KU                 $400.0         $53.2      $346.8         1.04%

LG&E Energy maintains a revolving credit facility totaling $200 million
with an affiliated company, E.ON North America, Inc., to ensure funding
availability for the money pool. The balance outstanding on this facility
at June 30, 2005 was $159.7 million.

Redemptions and maturities of long-term debt year-to-date through June 30,
2005, are summarized below:

    ($ in millions)
                                    Principal        Secured/
   Year Company  Description         Amount   Rate   Unsecured Maturity

   2005 LG&E   Pollution control bonds $40.0  5.90%   Secured Apr 2023
   2005 LG&E   Due to Fidelia          $50.0  1.53%   Secured Jan 2005
   2005 KU     First mortgage bonds    $50.0  7.55%   Secured Jun 2025

Issuances of long-term debt year-to-date through June 30, 2005, are
summarized below:

   ($ in millions)
                                    Principal        Secured/
   Year Company  Description         Amount   Rate   Unsecured Maturity

   2005 LG&E   Pollution control bonds $40.0  Variable  Secured Feb 2035

The proceeds of the 2005 loan at LG&E were used to refinance existing
pollution control bonds.

In May 2005, KU repaid a $26.7 million loan against the cash surrender
value of life insurance policies.

In January 2004, LG&E and KU made discretionary contributions to their
pension plans of $34.5 million and $43.4 million, respectively. No
discretionary contributions to the pension plans are currently anticipated
for either LG&E or KU for 2005. LG&E and KU contributed $0.7 million and
$3.0 million, respectively, to their other post-retirement benefit plans
during the second quarter of 2005.

Security ratings as of June 30, 2005, were:

                                LG&E                     KU
                         Moody's    S&P         Moody's   S&P

     First mortgage bonds   A1       A-           A1      A
     Preferred stock        Baa1     BBB-         Baa1    BBB-
     Commercial paper       P-1      A-2          P-1     A-2

These ratings reflect the views of Moody's and S&P.  A security rating is
not a recommendation to buy, sell or hold securities and is subject to
revision or withdrawal at any time by the rating agency.

Capitalization ratios at June 30, 2005, and December 31, 2004, follow:

                                   LG&E                     KU
                            June 30, December 31,  June 30, December 31,
                               2005      2004        2005      2004

Long-term debt
  (including current portion)  31.7%     30.5%       19.0%     22.2%
Long-term debt to affiliated
 company(including current
 portion)                      12.0      14.1        18.6      18.8
Notes payable to affiliated
 companies                      1.1       3.0         5.2       2.0
Preferred stock                 3.7       3.6         2.2       2.2
Common equity                  51.5      48.8        55.0      54.8
Total                         100.0%    100.0%      100.0%    100.0%

New Accounting Pronouncements

For a discussion of new accounting pronouncements and their impacts on LG&E
and KU, see Part I - Item 1, Notes to Financial Statements, Note 7.

Contingencies

For a description of significant contingencies that may affect LG&E and KU,
reference is made to Part I, Item 3, Legal Proceedings in LG&E's and KU's
Annual Reports on Form 10-K for the year ended December 31, 2004; and to
Part I - Item 1, Notes to Financial Statements, Notes 5 and 10, and Part II
- Item 1, Legal Proceedings herein.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

LG&E's and KU's operations are exposed to market risks from changes in
interest rates and commodity prices. To mitigate changes in cash flows
attributable to these exposures, the Companies have entered into various
derivative instruments.  Derivative positions are monitored using
techniques that include market value and sensitivity analysis.

Interest Rate Risk

The Companies use interest rate swaps to hedge exposure to market
fluctuations in certain of their debt instruments.  Pursuant to the
Companies' policies, use of these financial instruments is intended to
mitigate risk and earnings volatility and is not speculative in nature.
Management has designated all of the Companies' interest rate swaps as
hedge instruments.  Financial instruments designated as cash flow hedges
have resulting gains and losses recorded within other comprehensive income
and stockholders' equity.  To the extent a financial instrument or the
underlying item being hedged is prematurely terminated or the hedge becomes
ineffective, the resulting gains or losses are reclassified from other
comprehensive income to net income.  Financial instruments designated as
fair value hedges are periodically marked to market with the resulting
gains and losses recorded directly into net income to correspond with
income or expense recognized from changes in market value of the items
being hedged.

The potential change in interest expense associated with a 1% change in
base interest rates of LG&E's and KU's unswapped variable debt is estimated
at $3.8 million and $3.9 million, respectively, at June 30, 2005. LG&E's
and KU's exposure to floating interest rates did not materially change
during the first six months of 2005.

The potential loss in fair value of LG&E's interest rate swaps resulting
from a hypothetical 1% change in base interest rates is estimated at
approximately $20.5 million as of June 30, 2005.  The potential loss in
fair value of KU's interest rate swaps resulting from a hypothetical 1%
change in base interest rates is estimated at approximately $0.8 million as
of June 30, 2005.  These estimates are derived from third-party valuations.
Changes in the market values of these swaps, if held to maturity, will have
no effect on LG&E's or KU's net income or cash flow.

Pension Risk

LG&E's and KU's costs of providing defined-benefit pension retirement plans
is dependent upon a number of factors, such as the rates of return on plan
assets, discount rate, and contributions made to the plan.  LG&E and KU
have recognized an additional minimum liability as prescribed by SFAS No.
87, Employers' Accounting for Pensions because the accumulated benefit
obligation exceeds the fair value of their plans' assets.  The liabilities
were recorded as a reduction to other comprehensive income, and did not
affect net income.  The amount of the liability depends upon the discount
rate, the asset returns and contributions made by the Companies to the
plans.  If the fair value of the plans' assets exceeds the accumulated
benefit obligation, the recorded liabilities will be reduced and other
comprehensive income will be restored in the balance sheet.

A 1% increase or decrease in the assumed discount rate could have an
approximate $39.9 million positive or negative impact to the accumulated
benefit obligation of LG&E.  A 1% increase or decrease in the assumed
discount rate could have an approximate $26.8 million positive or negative
impact to the accumulated benefit obligation of KU.

In January 2004, LG&E and KU made discretionary contributions to their
pension plans of $34.5 million and $43.4 million, respectively. No
discretionary contributions to the pension plans are currently anticipated
for either LG&E or KU for 2005.  LG&E and KU contributed $0.7 million and
$3.0 million, respectively, to their other post-retirement benefit plans
during the second quarter of 2005.

Energy Risk Management Activities

The table below summarizes LG&E's and KU's energy risk management
activities for the three months and six months ended June 30, 2005, and
2004.  Volumes are allocated evenly between LG&E and KU.


                                        Three Months        Six Months
                                           Ended              Ended
                                          June 30,           June 30,
                                       2005     2004       2005     2004

(in millions)
Fair value of contracts at beginning of
 period, net asset/(liability)        $ -      $ 0.6      $(0.2)   $ 0.6
 Fair value of contracts when entered
   into during the period               -         -          -        -
 Contracts realized or otherwise
   settled during the period            -       (0.1)       0.2     (0.3)
 Changes in fair value due to
   changes in assumptions               -         -          -       0.2
Fair value of contracts at end of
 period, net asset                    $ -      $ 0.5      $  -     $ 0.5

No changes to valuation techniques for energy risk management activities
occurred during 2005 or 2004.  Changes in market pricing, interest rate and
volatility assumptions were made during all periods.  The outstanding mark-
to-market value is sensitive to changes in prices, price volatilities, and
interest rates.  The Companies estimate that a movement in prices of $1 and
a change in interest and volatilities of 1% would not result in a change of
a material amount.  All contracts outstanding at June 30, 2005, have a
maturity of less than one year and are valued using prices actively quoted
for proposed or executed transactions or quoted by brokers.

LG&E and KU maintain policies intended to minimize credit risk and revalue
credit exposures daily to monitor compliance with those policies.  As of
June 30, 2005, 100% of the trading and risk management commitments were
with counterparties rated BBB-/Baa3 equivalent or better.
Item 4.  Controls and Procedures.

LG&E and KU maintain a system of disclosure controls and procedures
designed to ensure that information required to be disclosed by the
Companies in reports they file or submit under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission rules and
forms.  LG&E and KU conducted an evaluation of such controls and procedures
under the supervision and with the participation of the Companies'
management, including the Chairman, President and Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO").  Based upon that
evaluation, the CEO and CFO have concluded that the Companies' disclosure
controls and procedures are effective as of the end of the period covered
by this report.

LG&E and KU are not accelerated filers under the Sarbanes-Oxley Act of 2002
and associated rules (the "Act") and consequently anticipate issuing
Management's Report on Internal Control over Financial Reporting pursuant
to Section 404 of the Act in their first periodic report covering the
fiscal year ended December 31, 2006, as permitted by SEC rulemaking.

In preparation for required reporting under Section 404 of the Sarbanes-
Oxley Act of 2002, the Companies are conducting a thorough review of their
internal controls over financial reporting, including disclosure controls
and procedures.  Based on this review, the Companies have made internal
controls enhancements and will continue to make future enhancements to
their internal control over financial reporting. On April 1, 2005, the MISO
Day 2, a day-ahead and real-time energy market, became effective which
impacted our regulated electric generation operations and purchased power.
In connection with the implementation of MISO Day 2, LG&E and KU have
implemented a new software system and modified existing processes to
facilitate participation in, and validate resultant settlements from the
MISO market. Apart from this change, there have been no other changes in
the Companies' internal control over financial reporting that occurred
during the fiscal quarter ended June 30, 2005, that has materially
affected, or is reasonably likely to materially affect, the Companies'
internal control over financial reporting.



                        Part II.  Other Information

Item 1.  Legal Proceedings.

For a description of the significant legal proceedings involving LG&E and
KU, reference is made to the information under the following items and
captions of LG&E's and KU's respective combined Annual Report on Form 10-K
for the year ended December 31, 2004:  Item 1, Business; Item 3, Legal
Proceedings; Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Item 8, Financial Statements and
Supplementary Data in Note 11.  Reference is also made to the matters
described in Notes 5 and 10 of Part I, Item 1 of LG&E's and KU's Quarterly
Report on Form 10-Q for the three months ended March 31, 2005 and this 10-
Q, respectively. Except as described herein, to date, the proceedings
reported in LG&E's and KU's respective combined Annual Report on Form 10-K
have not changed materially.

Other

In the normal course of business, other lawsuits, claims, environmental
actions, and other governmental proceedings arise against LG&E and KU.  To
the extent that damages are assessed in any of these lawsuits, LG&E and KU
believe that their insurance coverage is adequate.  Management, after
consultation with legal counsel, does not anticipate that liabilities
arising out of other currently pending or threatened lawsuits and claims
will have a material adverse effect on LG&E's or KU's financial position or
results of operations, respectively.


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

a)LG&E's and KU's Annual Meetings of Shareholders were held on June 17,
  2005.

b)Not applicable.


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

  1. LG&E

     i)The shareholders voted to elect LG&E's nominees for election to the
       Board of Directors, as follows:

          Victor A. Staffieri - 21,294,223 common shares and 94,209
          preferred shares cast in favor of election and 5,713 preferred
          shares withheld.

          S. Bradford Rives - 21,294,223 common shares and 94,209 preferred
          shares cast in favor of election and 5,713 preferred shares
          withheld.

          John R. McCall - 21,294,223 common shares and 93,950 preferred
          shares cast in favor of election and 5,972 preferred shares
          withheld.

        Paul W. Thompson - 21,294,223 common shares and 94,261 preferred
        shares cast in favor of election and 5,661 preferred shares
        withheld.

        Chris Hermann - 21,294,223 common shares and 94,237 preferred
          shares cast in favor of election and 5,685 preferred shares
          withheld.


       No holders of common or preferred shares abstained from voting on
       this matter.

     ii)The shareholders voted 21,294,223 common shares and 98,044
       preferred shares in favor of and 310 preferred shares against the
       approval of PricewaterhouseCoopers LLP as independent accountants
       for 2005.  Holders of 1,989 preferred shares abstained from voting
       on this matter.

  2. KU

     i)The sole shareholder voted to elect KU's nominees for election to
       the Board of Directors, as follows:

       37,817,878 common shares cast in favor of election and no shares
       withheld for each of Victor A. Staffieri, S. Bradford Rives,
       John R. McCall, Paul W. Thompson, and Chris Hermann, respectively.

     ii)The sole shareholder voted 37,817,878 common shares in favor of and
       no shares withheld for approval of PricewaterhouseCoopers LLP as
       independent accountants for 2005.

       No holders of common shares abstained from voting on these matters.

d)  Not applicable.


Item 6.  Exhibits.

Applicable to Form
                    10-Q of

Exhibit
No. LG&E  KU    Description

4.1            X       Supplemental Indenture dated as of April 1, 2005
               from Louisville Gas and Electric Company to BNY Midwest
               Trust Company, Chicago, Illinois, as trustee [Filed as
               Exhibit 4.1 to LG&E's Form 8-K Current Report dated April
               13, 2005]

4.2            X       Loan Agreement dated February 1, 2005 between
               Louisville Gas and Electric Company and the
               Louisville/Jefferson County Metro Government, Kentucky
               [Filed as Exhibit 10.1 to LG&E's Form 8-K Current Report
               dated April 13, 2005]

4.3            XSupplemental Indenture dated as of June 15, 2005 from
               Kentucky Utilities Company to U.S. Bank National
               Association, Chicago, Illinois, as trustee [Filed as Exhibit
               4.1 to KU's Form 8-K Current Report dated July 7, 2005]

4.4            XLoan Agreement dated May 1, 2005 between Kentucky Utilities
               Company and the County of Carroll, Kentucky [Filed as
               Exhibit 4.2 to KU's Form 8-K Current Report dated July 7,
               2005]

4.5            XLoan Agreement dated July 8, 2005 between Kentucky
               Utilities Company and Fidelia Corporation [Filed as Exhibit
               4.3 to KU's Form 8-K Current Report dated July 7, 2005]

4.6            XCopy of Promissory Note from KU to Fidelia Corporation,
               dated as of July 8, 2005 [Filed as Exhibit 4.4 to KU's Form
               8-K Current Report dated July 7, 2005]

31    X   X    Certification - Section 302 of Sarbanes-Oxley Act of 2002
  31.1X        Certification of Chairman of the Board, President and Chief
Executive
               Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
  31.2X        Certification of Chief Financial Officer, pursuant to
Section 302 of
               the Sarbanes-Oxley Act of 2002
  31.3    X    Certification of Chairman of the Board, President and Chief
Executive
               Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
  31.4    X    Certification of Chief Financial Officer, pursuant to
Section 302 of
               the Sarbanes-Oxley Act of 2002
32    X   X    Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002

Certain  instruments  defining the rights of holders of  certain  long-term
debt  of  LG&E or KU have not been filed with the SEC but will be furnished
to the SEC upon request.

SIGNATURES


Pursuant to the requirements of the Securities 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:  August 12, 2005          /s/ S. Bradford Rives
                                S. Bradford Rives
                                Chief Financial Officer
                                (On behalf of the registrant in his
                                capacities as Principal Financial Officer
                                and Principal
                                Accounting Officer)

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


Kentucky Utilities Company
Registrant


Date:  August 12, 2005          /s/ S. Bradford Rives
                                S. Bradford Rives
                                Chief Financial Officer
                                (On behalf of the registrant in his
                                capacities as Principal Financial Officer
                                and Principal
                                Accounting Officer)



Exhibit 31.1

CERTIFICATIONS

Louisville Gas and Electric Company

I, Victor A. Staffieri, Chairman of the Board, President and Chief
Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Louisville Gas and
Electric Company;

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

   a) Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under our
   supervision, to ensure that material information relating to the
   registrant, including its subsidiaries, is made known to us by others
   within those entities, particularly during the period in which this
   report is being prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls
   and procedures and presented in this report our conclusions about the
   effectiveness of the disclosure controls and procedures, as of the end
   of the period covered by this report based on such evaluation; and

   c) Disclosed in this report any change in the registrant's internal
   control over financial reporting that occurred during the registrant's
   most recent fiscal quarter (the registrant's fourth fiscal quarter in
   the case of an annual report) that has materially affected, or is
   reasonably likely to materially affect, the registrant's internal
   control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):

   a) All significant deficiencies and material weaknesses in the design
   or operation of internal control over financial reporting which are
   reasonably likely to adversely affect the registrant's ability to
   record, process, summarize and report financial information; and

   b) Any fraud, whether or not material, that involves management or
   other employees who have a significant role in the registrant's
   internal control over financial reporting.


Date:  August 12, 2005

/s/  Victor A. Staffieri
Victor A. Staffieri
Chairman of the Board, President and Chief Executive Officer

Exhibit 31.2

Louisville Gas and Electric Company

I, S. Bradford Rives, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Louisville Gas and
Electric Company;

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

   a) Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under our
   supervision, to ensure that material information relating to the
   registrant, including its subsidiaries, is made known to us by others
   within those entities, particularly during the period in which this
   report is being prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls
   and procedures and presented in this report our conclusions about the
   effectiveness of the disclosure controls and procedures, as of the end
   of the period covered by this report based on such evaluation; and

   c) Disclosed in this report any change in the registrant's internal
   control over financial reporting that occurred during the registrant's
   most recent fiscal quarter (the registrant's fourth fiscal quarter in
   the case of an annual report) that has materially affected, or is
   reasonably likely to materially affect, the registrant's internal
   control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):

   a) All significant deficiencies and material weaknesses in the design
   or operation of internal control over financial reporting which are
   reasonably likely to adversely affect the registrant's ability to
   record, process, summarize and report financial information; and

   b) Any fraud, whether or not material, that involves management or
   other employees who have a significant role in the registrant's
   internal control over financial reporting.


Date:  August 12, 2005

/s/  S. Bradford Rives
S. Bradford Rives
Chief Financial Officer

Exhibit 31.3

Kentucky Utilities Company

I, Victor A. Staffieri, Chairman of the Board, President and Chief
Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kentucky Utilities
Company;

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

   a) Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under our
   supervision, to ensure that material information relating to the
   registrant, including its subsidiaries, is made known to us by others
   within those entities, particularly during the period in which this
   report is being prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls
   and procedures and presented in this report our conclusions about the
   effectiveness of the disclosure controls and procedures, as of the end
   of the period covered by this report based on such evaluation; and

   c) Disclosed in this report any change in the registrant's internal
   control over financial reporting that occurred during the registrant's
   most recent fiscal quarter (the registrant's fourth fiscal quarter in
   the case of an annual report) that has materially affected, or is
   reasonably likely to materially affect, the registrant's internal
   control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):

   a) All significant deficiencies and material weaknesses in the design
   or operation of internal control over financial reporting which are
   reasonably likely to adversely affect the registrant's ability to
   record, process, summarize and report financial information; and

   b) Any fraud, whether or not material, that involves management or
   other employees who have a significant role in the registrant's
   internal control over financial reporting.


Date: August 12, 2005

/s/  Victor A. Staffieri
Victor A. Staffieri
Chairman of the Board, President and Chief Executive Officer

Exhibit 31.4

Kentucky Utilities Company

I, S. Bradford Rives, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kentucky Utilities
Company;

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

   a) Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under our
   supervision, to ensure that material information relating to the
   registrant, including its subsidiaries, is made known to us by others
   within those entities, particularly during the period in which this
   report is being prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls
   and procedures and presented in this report our conclusions about the
   effectiveness of the disclosure controls and procedures, as of the end
   of the period covered by this report based on such evaluation; and

   c) Disclosed in this report any change in the registrant's internal
   control over financial reporting that occurred during the registrant's
   most recent fiscal quarter (the registrant's fourth fiscal quarter in
   the case of an annual report) that has materially affected, or is
   reasonably likely to materially affect, the registrant's internal
   control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):

   a) All significant deficiencies and material weaknesses in the design
   or operation of internal control over financial reporting which are
   reasonably likely to adversely affect the registrant's ability to
   record, process, summarize and report financial information; and

   b) Any fraud, whether or not material, that involves management or
   other employees who have a significant role in the registrant's
   internal control over financial reporting.


Date:  August 12, 2005

/s/  S. Bradford Rives
S. Bradford Rives
Chief Financial Officer


Exhibit 32

             Certification Pursuant to 18 U.S.C. Section 1350
   As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Louisville Gas and Electric
Company and Kentucky Utilities Company (the "Companies") on Form 10-Q for
the period ended June 30, 2005, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), each of the undersigned does
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's
knowledge,

1)    The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

2)    The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Companies as of the dates and for the periods expressed in the Report.


August 12, 2005

                         /s/  Victor A. Staffieri
                     Chairman of the Board, President
                        and Chief Executive Officer
                    Louisville Gas and Electric Company
                        Kentucky Utilities Company




                          /s/  S. Bradford Rives
                          Chief Financial Officer
                    Louisville Gas and Electric Company
                        Kentucky Utilities Company


The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.


_______________________________
1