Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — Debt Investor Presentation (June 2007)
37 slides from Tennessee Valley Authority's debt investor presentation, June 2007
Slide 1: Presentation to Investors
Presentation to Investors June 2007
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements relating to future events and future performance. All statements other than those that are purely historical may be forward-looking statements. In certain cases, forward-looking statements can be identified by the use o
Slide 3: Building on Our Strengths to Ensure Sustainable Performance
Tennessee Valley Authority: Building on Our Strengths to Ensure Sustainable Performance Tom Kilgore President & Chief Executive Officer
Slide 4: Business Overview
Business Overview 4
Slide 5: About TVA: America's Largest Public Power Provider
About TVA: America’s Largest Public Power Provider Area of Operation Southeastern United States Ownership Wholly-owned U.S. government corporation 2006 Total Revenues $9.2 billion 2006 Operating Income $1.6 billion Core Business Wholesale power generation, integrated river system stewardship, and ec
Slide 6: Corporate Governance and Oversight
Corporate Governance and Oversight • Nine-Member Board of Directors – Appointed by the President • Independent Inspector General – Appointed by the President • External Auditor • Financial Reporting – Securities and Exchange Commission (SEC) • Congressional Committees: • U.S. Senate Environment and
Slide 7: Executive Leadership Team
Executive Leadership Team Tom Kilgore President & CEO W. Terry Kenneth Maureen John John Long, William R. Boston Breeden Dunn Hoskins Jr. (Bill) McCollum, EVP, EVP, EVP & CFO & Chief Jr. Power Customer General EVP, Admin. System Chief Resources Counsel Financial Officer & Operations Operating Servic
Slide 8: About TVA: America's Largest Public Power Provider
About TVA: America’s Largest Public Power Provider Power System Resources Hydroelectric, Coal-fired, Nuclear, Combustion Turbine, Diesel Generators, Green Power Total System Capacity 34,951 MW (net winter dependable) 33,653 MW (net summer dependable) Total Assets $34.5 billion 2006 Power Generation
Slide 9: Revenue Diversity
Revenue Diversity Municipal Customers 58% Other Revenue Cooperative Sources Federal Customers 1% Agencies & Directly 28% Other Utilities Served 1% Industrial Customers 12% 9
Slide 10: Competitive Rates
Competitive Rates Average Residential Power Rates by State Cents per kWh 12 months ended September 2006 National Weighted Average = 10.3 cents/kWh 10
Slide 11: Power Supply Sources
Power Supply Sources TVA 2006 Net Generation: 156 billion kWh TVA 2006 Total Sales: 176 billion kWh 11
Slide 12: FYTD 2007 Weather Impacts
FYTD 2007 Weather Impacts Percent of Percent of Normal Normal Price 120% Volume 115% ($/Mwh) 101% 103% 98% 99% 100% 97% 96% 95% 91% 80% 68% 65% 58% 60% 40% 20% 0% ) h) s h) s ) ) h) h) h) er l el ($ ay W he he s W W w oa u es W D (M c (M (M (M ow C rF u (M e In In c P en es gr e on l( f( er on n ed
Slide 13: Recent Major Developments
Recent Major Developments • Transition to new governance structure (March 2006) • Implemented fuel cost adjustment mechanism (October 2006) • Transition to SEC reporting (December 2006) • Purchase of power generation facilities to help meet peak demand (December 2006): • Marshall Combustion Turbine,
Slide 14: Browns Ferry Unit 1 Restart: A Major Milestone
Browns Ferry Unit 1 Restart: A Major Milestone • Adds 1,150 MW of capacity to the TVA system. • One of the most extensive recovery efforts ever for plant with operating units. • Completed on schedule and projected Browns Ferry Nuclear Plant in Alabama cost of about $1.8 billion. • Reactor restarted
Slide 15: Browns Ferry Unit 1 Restart: A Major Milestone
Browns Ferry Unit 1 Restart: A Major Milestone 15
Slide 16: TVA 2007 Strategic Plan
TVA 2007 Strategic Plan 16
Slide 17: Strategic Focus: 2007 Strategic Plan
Strategic Focus: 2007 Strategic Plan 1. CUSTOMERS – Maintain power reliability, provide competitive rates, and build trust with TVA’s customers. 2. PEOPLE – Build pride in TVA’s performance and reputation. 3. FINANCIAL – Adhere to a set of sound guiding financial principles to improve TVA’s fiscal p
Slide 18: Strategic Focus: Guiding Financial Principles
Strategic Focus: 2007 Strategic Plan Guiding Financial Principles: • Apply sound economic and financing practices to new investments. • Pay financing obligations before assets are fully depreciated. • Strengthen TVA’s balance sheet by improving the ratio of financing obligations to total assets. • I
Slide 19: Velocity of Key Variables
Velocity of Key Variables 2002 2003 2004 2005 2006 Change Trend Total Power Sales (kWh billions) 159 162 166 171 176 11% Non-Fuel O&M (¢/kWh) 1.17 1.26 1.40 1.38 1.34 15% Fuel & Purchased Power (¢/kWh) 1.18 1.21 1.25 1.52 1.89 60% Construction Expenditures (¢/kWh) 0.78 1.05 0.94 0.78 0.79 2% Interes
Slide 20: Interest as a Percent of Revenues
Interest as a Percent of Revenues Financing Expense on Statutory Debt, Lease-Leaseback Obligations & Prepayment Obligations as a Percent of Total Revenues $2,500 50% $1,966 $2,003 $1,959 $2,000 40% $1,777 $1,736 Financing Expense ($millions) $1,647 Percent of Total Revenues $1,500 33% 34% $1,456 $1,
Slide 21: Debt Per Unit of Power System Capacity
Debt Per Unit of Power System Capacity Total Financing Obligations Debt and Other Financing Obligations per Kilowatt (kW) per Kilowatt (KW) of Available Capacity of Winter Dependable System Capacity $1,200 $1,000 $963 $936 $925 $892 Dollars per Kilowatt ($/KW) $800 $845 $826 $819 $780 $753 $722 $600
Slide 22: Sound Financial Principles
Sound Financial Principles Debt and Other Financing Obligations $ millions (Illustrative) Debt includes bonds and notes. Other financing obligations include lease/leaseback and customer energy prepayment obligations. 22
Slide 23: Power Demand Growth Trends
Power Demand Growth Trends 1.9% Annual Average Sales Growth 225 Billions of kWh 150 75 0 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Distributors Direct Served Federal Agencies 23
Slide 24: Options for Additional Nuclear Capacity
Options for Additional Nuclear Capacity Watts Bar Nuclear Plant Unit 2 Reactor • Construction started in 1973, halted in 1985. • Detailed scoping, estimating and planning (DSEP) study underway to determine requirements for potential completion. Watts Bar Nuclear Plant in Tennessee • Potentially more
Slide 25: Capital Expenditures
Capital Expenditures • TVA will continue to evaluate its needs for new generation investment: • Purchased two combustion turbine facilities in 2007 (combined $98 million). • Major investment in the BFN1 restart completed in 2007. • Watts Bar Nuclear Plant Unit 2 completion to be considered following
Slide 26: Regulatory Investments are Paying "Dividends"
Regulatory Investments are Paying “Dividends” 26
Slide 27: Regulatory Investments are Paying "Dividends"
Regulatory Investments are Paying “Dividends” 27
Slide 28: Near-Term Objectives
Near-Term Objectives • Implementation of the 2007 Strategic Plan • Focus on efficiency and limitation of O&M expense growth • Emphasis on balance sheet strength • Maintain reliable operations and asset availability • Develop renewable and demand-side management plans • New rate product development 2
Slide 29: Financing Program Update
Financing Program Update John Hoskins EVP & Chief Financial Officer (INT)
Slide 30: Power Program Financing History
Power Program Financing History • Early Bond Issues: 1933 – 1939 – TVA Act in 1933 authorized TVA to issue bonds with “all rights and privileges accorded by law to Panama Canal bonds.” • Congressional Appropriations: 1939 – 1959 (primarily) – Total = $1.4 billion (including property transfers) • Sel
Slide 31: TVA Compared to Major GSE Borrowers
TVA Compared to Major GSE Borrowers • TVA is a wholly-owned U.S. government corporation, not a GSE: – All directors appointed by the President – TVA finances are included in the federal budget and in the financial statements of the government • Profit-neutral, funded (primarily) from power revenues
Slide 32: Financing Portfolio
Financing Portfolio 11% Total Outstanding = $25 Billion 5% 4% 4% Long-term bonds Discount notes (short-term) 76% Power prepayment obligations Retail MTN program Lease-leaseback obligations As of March 31, 2007 32
Slide 33: Financing Portfolio Maturities Timeline
Financing Portfolio Maturities Timeline Principal Payment Schedule of TVA Total Financing Obligations Maturities Horizon of TVA Bonds, Notes, and Other Financing Obligations As of March 31, 2007 $3.0 Other Financing Obligations Callable $2.5 Putable Option Free (Bullet Debt) $2.0 billions of dollars
Slide 34: Financing Goal
Financing Goal TVA’s Financing Goal is to Develop Innovative, Cost- Saving Transactions that Provide Value for Both TVA and the Investor • Issue based on market conditions • Expand TVA’s investor base • Distinguish TVA among high quality borrowers • Issue debt that trades well in secondary markets •
Slide 35: Recent Financing Activity
Recent Financing Activity TVA has issued over $7 billion of long-term bonds and notes in the past 5 years: Range of Number of Amount Type of Issuance Maturities Issues ($ millions) (Years) Global Bonds 5 $ 4,000 10 - 50 Global Bonds (Sterling-Denominated) 1 250 40 Exchange Bond 1 1,500 10 Retail Med
Slide 36: Bond Maturities
Bond Maturities TVA has over $5 billion of long-term debt maturing in 2007 and over the next five years (2008-2012). Amount Maturing Bonds Rate ($ millions) 1997 Series A $ 400 6.643% 1998 Series G 2,000 5.375% 2001 Series A 1,000 5.625% 2001 Series D (Put) 100 4.875% 2002 Series A 1,500 6.790% elec
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