Item 1.01. Entry into a Material Definitive Agreement.
On May 8, 2018, PPL Corporation (the Company) entered into separate forward sale agreements relating to 55,000,000 shares of
the Companys common stock, par value $.01 per share, documented under individual confirmations subject to separate master agreements and incorporating certain other terms (together, the Original Forward Sale Agreements) with each
of JPMorgan Chase Bank, National Association, London Branch and Barclays Bank PLC, acting in their capacity as forward counterparties (the Forward Counterparties). On May 10, 2018, the underwriters exercised in full an
over-allotment option that they had been granted by the Company pursuant to the underwriting agreement described below relating to an additional 8,250,000 shares of the Companys common stock. In connection therewith, the Company and each
of the Forward Counterparties entered into additional forward sale agreements relating to such number of shares, documented under individual confirmations subject to separate master agreements and incorporating certain other terms (together, the
Additional Forward Sale Agreements).
In connection with the Original Forward Sale Agreements and the Additional Forward Sale
Agreements (each, a Forward Sale Agreement and collectively, the Forward Sale Agreements), the Company entered into an Underwriting Agreement on May 8, 2018 (the Underwriting Agreement) with J.P. Morgan
Securities LLC, Barclays Capital Inc. and Citigroup Global Markets Inc., as representatives of the several underwriters named therein, and the Forward Counterparties, pursuant to which the Forward Counterparties borrowed from third parties and sold
to the underwriters an aggregate of 63,250,000 shares.
Upon physical settlement of each Forward Sale Agreement, the Company will receive
from the relevant Forward Counterparty an amount equal to the net proceeds of the corresponding borrowed shares of common stock sold pursuant to the Underwriting Agreement, subject to certain adjustments pursuant to each Forward Sale
Agreement. The Company will receive such amount at a forward sale price that initially will be $26.7057 per share (which is the per share proceeds, before expenses, to the Company), which will be subject to certain adjustments pursuant to each
Forward Sale Agreement.
The Company expects each Forward Sale Agreement to settle on or prior to November 8, 2019. The Company may,
subject to certain conditions, elect to accelerate the settlement of all or a portion of the number of shares of common stock underlying such Forward Sale Agreement and the relevant Forward Counterparty may accelerate settlement of its Forward Sale
Agreement upon the occurrence of certain events.
On a settlement date, if the Company decides to physically settle a Forward Sale
Agreement, the Company will issue and deliver shares of common stock to the relevant Forward Counterparty under its Forward Sale Agreement at the then-applicable forward sale price. Each Forward Sale Agreement provides that the forward sale
price will be subject to adjustment on a daily basis based on a floating interest rate factor equal to the federal funds rate, less a spread, and will be decreased on certain dates by amounts related to expected dividends on shares of the
Companys common stock during the term of such Forward Sale Agreement. If the federal funds rate is less than the spread for any day, the interest rate factor will result in a reduction of the forward sale price for such day.
Except under circumstances described in each Forward Sale Agreement, the Company has the right to elect physical, cash or net share settlement
under such Forward Sale Agreement. Although the Company expects to settle the Forward Sale Agreements entirely by physical delivery to the Forward Counterparties of shares of the Companys common stock in exchange for cash proceeds, the
Company
may, subject to certain conditions, elect cash settlement or net share settlement for all or a portion of its obligations under each Forward Sale Agreement. In connection with cash or net share
settlement, the Company would expect each Forward Counterparty or its affiliate to purchase shares of the Companys common stock in the open market for delivery to third party stock lenders in order to close out its, or its affiliates,
hedge position in respect of the relevant Forward Sale Agreement and, if applicable in connection with net share settlement, to deliver shares to the Company. If the price at which such Forward Counterparty or its affiliate makes such purchases
exceeds the applicable forward sale price minus a fixed fee of $0.01, the Company would have to, in the case of cash settlement, pay to the Forward Counterparty a cash amount equal to the difference multiplied by the number of shares of the
Companys common stock underlying the Forward Sale Agreement (or the portion of such agreement) that is being settled, or, in the case of net share settlement, deliver to the Forward Counterparty a number of shares of the Companys common
stock having a market value equal to such total amount. Conversely, in connection with cash or net share settlement, if the price at which such Forward Counterparty or its affiliate makes such purchases is less than the applicable forward sale price
minus a fixed fee of $0.01, then the Forward Counterparty would have to, in the case of cash settlement, pay to the Company a cash amount equal to the difference multiplied by the number of shares of the Companys common stock underlying the
Forward Sale Agreement (or the portion of such agreement) that is being settled, or, in the case of net share settlement, deliver to the Company a number of shares of the Companys common stock having a market value equal to such total amount.
Each Forward Counterparty will have the right to accelerate its Forward Sale Agreement (with respect to all or any portion of the
transaction under such Forward Sale Agreement that such Forward Counterparty determines is affected) and require the Company to physically settle such Forward Sale Agreement on a date of its choosing if: (i) in its commercially reasonable
judgment, it or its affiliate either (a) is unable to hedge its exposure under any applicable forward sale agreement because of the lack of sufficient shares of the Companys common stock being made available for borrowing by lenders; or
(b) would incur a cost to borrow shares of the Companys common stock to hedge its exposure under any applicable Forward Sale Agreement that exceeds a specified threshold; (ii) the Company declares any distribution, issue or dividend
to existing holders of the Companys common stock with a record date occurring during the term of any applicable forward sale agreement and payable in either (a) cash in excess of a specified amount (other than extraordinary dividends);
(b) securities of another company acquired or owned by us as a result of a
spin-off
or other similar transaction; or (c) any other type of securities (other than the Companys common stock), rights,
warrants or other assets for payment at less than the prevailing market price, as determined by the Forward Counterparty; (d) the Company issues extraordinary dividends; (e) certain ownership thresholds applicable to the Forward
Counterparty are exceeded; (f) certain Events of Default or Termination Events (as defined in documentation published by the International Swaps and Derivatives Association, Inc.) occur, including, among other things,
any material misrepresentation by the Company under any applicable forward sale agreement or certain bankruptcy or insolvency events relating to the Company; or (g) an event is announced that, if consummated, would result in an
Extraordinary Event (as defined in each Forward Sale Agreement), including, among other things, certain mergers and tender offers, a change in law and certain events involving the Companys nationalization or the delisting of the
Companys common stock.
Notwithstanding the foregoing, if a Forward Counterparty requests physical settlement in connection with
certain mergers or tender offers, in certain circumstances the Company may elect cash or net share settlement for some or all of the shares for which physical settlement had been so requested.
Each Forward Counterpartys decision to exercise its right to accelerate the settlement of its Forward Sale Agreement will be made
irrespective of the Companys interests, including the Companys need for capital, and could result in dilution to the Companys earnings per share and return on equity.
The description of the Forward Sale Agreements set forth above does not purport to be complete
and is qualified in its entirety by reference to the terms and conditions of the Forward Sale Agreements, which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by reference.