Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — Investor Presentation (May 2018)
82 slides from Tennessee Valley Authority's investor presentation, May 10, 2018
Slide 1: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 2: 2
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Slide 3: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 4: John B. Waters
John B. Waters TVA Board of Directors 1984-1993 Chairman of the Board 1992-1993 PLACE THE TITLE OF THE PRESENTATION HERE | 4
Slide 5: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 6: PLACE THE TITLE OF THE PRESENTATION HERE | 6
PLACE THE TITLE OF THE PRESENTATION HERE | 6
Slide 7: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 8: President's Report
President’s Report BILL JOHNSON President and CEO
Slide 9: Wilson Dam | Muscle Shoals Alabama
Wilson Dam | Muscle Shoals Alabama PRESIDENT’S REPORT | 9
Slide 10: Senator George Norris
Senator George Norris PRESIDENT’S REPORT | 10
Slide 11: President's Report
Pree ot Welcome to Florence, Alabama TUSCUMBIA UTILITIES Florence Utilities... PRESIDENTS REPORT | 11 TVA
Slide 12: Thank You
Greg Williams Chairman THANK YOU PRESIDENT’S REPORT | 12
Slide 13: One eye on the long future…and the other on the immediate welfare
Senator George Norris “One eye on the long future…and the other on the immediate welfare of the people.” 1933 Fortune magazine writer describing TVA’s unique mission PRESIDENT’S REPORT | 13
Slide 14: Electricity for All
ELECTRICITY FOR ALL PRESIDENTS REPORT | 14 TVA
Slide 15: Energy Sales
Energy Sales • Electricity that pays for region’s power system and much more • Management of Tennessee River system • Environmental stewardship • Economic development • Revenues fund all that TVA does PRESIDENT’S REPORT | 15
Slide 16: Mission | Strategic Imperatives
Mission | Strategic Imperatives Energy Delivering affordable, Maintain low rates reliable power Meet reliability Environment Be expectations responsible Caring for our region’s & provide a stewards natural resources balanced portfolio Economic Development Creating sustainable Live within our means e
Slide 17: Rates
Rates Our Plan Focuses on… • Reducing costs • Increasing operational effectiveness • Diversifying generating fleet to cleaner and more flexible PRESIDENT’S REPORT | 17
Slide 18: TVA Act
TVA Act consider desirable for investment in power system assets, retirement of outstanding bonds in advance of maturity, additional reduction of appropriation investment, and other purposes connected with the Corporation’s power business having due regard for the primary objectives of the Act, incl
Slide 19: Improving Residential Rate Competitiveness
Improving Residential Rate Competitiveness Compared to Regional Peers Among Top 100 U.S. Utilities ¢/kWh November 2017 November 2017 16 13.8 6th lowest 12 10.83 ¢/kWh 12.0 8 10.9 23rd | 10.83 ¢/kWh | Top Quartile 4 0 5 10 15 20 25 30 TVA April 2013 – 9th lowest April 2013 – 33rd lowest – 4% Gap to T
Slide 20: Maintaining Low Rates - Wholesale
Maintaining Low Rates - Wholesale Wholesale Rate (¢/kWh) 8.0 7.0 6.9 6.7 6.0 2% lower 5.0 FY13 FY14 FY15 FY16 FY17 FY18P PRESIDENT’S REPORT | 14
Slide 21: Pricing
Pricing FIXED VARIABLE PRESIDENT’S REPORT | 21
Slide 22: Pricing
Pricing The proposed change WILL NOT PRODUCE more revenue for TVA PRESIDENT’S REPORT | 22
Slide 23: Energy | Environment | Economic Development
Energy | Environment | Economic Development PRESIDENT’S REPORT | 23
Slide 24: Browns Ferry Nuclear Plant
Browns Ferry Nuclear Plant Extended Power Uprate Will produce 14% MORE POWER PRESIDENT’S REPORT | 24
Slide 25: Allen Plant
Allen Plant Combined Cycle Units PRESIDENT’S REPORT | 25
Slide 26: Allen Fossil Plant
Allen Fossil Plant A.C. Cox SEPARATING FOSSIL PLANT FROM THE GRID PRESIDENT’S REPORT | 26
Slide 27: Energy | Environment | Economic Development
Energy | Environment | Economic Development PRESIDENT’S REPORT | 27
Slide 28: Dams
Dams Guntersville Wilson PRESIDENT’S REPORT | 28
Slide 29: Flood Control
Flood Control PRESIDENT’S REPORT | 29
Slide 30: Energy | Environment | Economic Development
Energy | Environment | Economic Development PRESIDENT’S REPORT | 30
Slide 31: PRESIDENT’S REPORT | 31
PRESIDENT’S REPORT | 31
Slide 32: Economic Development Accomplishments
Economic Development Accomplishments First Six Months FY18 40,200 New or Retained Jobs $8.5 Billion Capital Investment PRESIDENT’S REPORT | 32
Slide 33: Johnsonville
Johnsonville PRESIDENT’S REPORT | 33
Slide 34: PRESIDENT’S REPORT | 34
PRESIDENT’S REPORT | 34
Slide 35: Energy Efficiency
Energy Efficiency PLACE THE TITLE OF THE PRESENTATION HERE | 35
Slide 36: The work of TVA will never be done
“The work of TVA will never be done…There will always be new places for us to go. For in the minds of men the world over, the initials TVA stand for progress, and the people of this area welcome progress.” John F. Kennedy PLACE THE TITLE OF THE PRESENTATION HERE | 36
Slide 37: President's Report
President’s Report BILL JOHNSON President and CEO
Slide 38: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 39: Assistant Corporate Secretaries
Assistant Corporate Secretaries
Slide 40: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 41: Audit, Risk, and Regulation Committee
Audit, Risk, and Regulation Committee
Slide 42: People and Performance Committee
People and Performance Committee
Slide 43: Finance, Rates, and Portfolio Committee
Finance, Rates, and Portfolio Committee
Slide 44: Financial Performance Update
Financial Performance Update JOHN THOMAS Executive Vice President and Chief Financial Officer
Slide 45: Q2 Fiscal Year 2018
Q2 Fiscal Year 2018 Net Income: $750M • $363M more than budget and $437M above last year Operating Cash Flow of $1.8B • $488M favorable to budget and $326M above last year Total Financing Obligations (TFO) - $118M less than budget • Increased cash balance held to fund $1.0B bond maturity due April 1
Slide 46: Q2 Summary Income Statement
Q2 Summary Income Statement $363M favorable due to operating revenue and lower expenses FYTD 2018 FYTD 2017 Variance '18 v '17 $ million Actual Budget Fav/(Unfav) Actual Fav/(Unfav) Operating Revenue $ 5,341 $ 5,063 $ 278 $ 5,093 $ 248 Fuel & Purchased Power 1,463 1,442 (21) 1,557 94 Total O&M 1,406
Slide 47: Q2 Summary Cash Flow Statement
Q2 Summary Cash Flow Statement TFOs were $118M favorable to budget, reflecting $189M of unfavorability FYTD 2018 FYTD 2018 FYTD 2017 $ million Actual Budget Variance Actual '18 v '17 Cash Flow from Operating Activities $ 1,842 $ 1,354 $ 488 $ 1,516 $ 326 Cash Flow used in Investing Activities (1,141
Slide 48: Q2 Summary (Results v. Plan)
Q2 Summary (Results v. Plan) Higher Demand Sales – cold winter drove favorable peak demand revenue Lower Expenses – operating and interest Lower Debt Balance – favorable cash flows resulting in less debt BOARD MEETING | 48
Slide 49: Finance, Rates, and Portfolio Committee
Finance, Rates, and Portfolio Committee
Slide 50: Strategic Pricing Plan – 2018 Rate Change
Strategic Pricing Plan – 2018 Rate Change JAY C. STOWE Senior Vice President, Distributed Energy Resources
Slide 51: Collaborative Process
Collaborative Process Since November of 2016, TVA has worked in collaboration with Local Power Companies and Directly Served Customers on wholesale rate changes that will modernize TVA’s pricing structure. BOARD MEETING | 51
Slide 52: Background
Background Today’s pricing structure does not reflect the value of TVA’s extensive, reliable power grid that serves all consumers across the region. Modernized pricing is needed to set pricing that is fair and more closely reflects the cost of providing power. BOARD MEETING | 52
Slide 53: Key Proposal Elements
Key Proposal Elements TVA’s 2018 rate change proposal will: • Lower wholesale energy rates and introduce a fixed component – the Grid Access Charge • Lower energy rates for some commercial customers to better reflect cost of service This revenue neutral wholesale change will support greater bill sta
Slide 54: Additional Modifications
Additional Modifications • Update Hydro Debits and Credits • Improve Total Monthly Fuel Costs • Align Retail Rate Options with Wholesale • Simplify Rates and Processes BOARD MEETING | 54
Slide 55: Recommendation
Recommendation • Approve the implementation of a new wholesale rate structure to reduce the energy rate by ½ cent/kWh and introduce a Grid Access Charge of ½ cent/kWh • Approve energy reduction to some commercial rates to better reflect cost of service • Approve additional modifications as described
Slide 56: Finance, Rates, and Portfolio Committee
Finance, Rates, and Portfolio Committee
Slide 57: Electric Vehicle Charging Rate
Electric Vehicle Charging Rate JAY C. STOWE Senior Vice President, Distributed Energy Resources
Slide 58: Background
Background Local Power Company (LPC) Request LPCs have requested a retail Electric Vehicle (EV) Rate for the sole purpose of charging electric vehicles. Proposal TVA proposes to offer the EV Rate as a three-year pilot program. After two years TVA will perform an evaluation and make a recommendation
Slide 59: Recommendation
Recommendation • Approve the three-year pilot program for an electric vehicle charging rate offering for: • Residential – Electric Vehicle Residential Service (EVRS) • Commercial – Electric Vehicle General Service A Class (EVGSA): • EVGSA – Small (less than 50 kW) • EVGSA – Large (more than 50 kW, l
Slide 60: Finance, Rates, and Portfolio Committee
Finance, Rates, and Portfolio Committee
Slide 61: Firm Transportation Agreements with Tennessee Gas Pipeline Company, LLC Delegation
Firm Transportation Agreements with Tennessee Gas Pipeline Company, LLC Delegation DAVID SORRICK Senior Vice President, Power Operations
Slide 62: Purpose
Purpose • Request the Board delegate authority to the Chief Executive Officer (CEO) to enter into firm transportation (FT) service contracts with Tennessee Gas Pipeline Company, LLC (TGP) for: - 21,000 MMBtu of capacity to TVA’s Magnolia and Caledonia CC plants for a 12-year term; and - a 7-year ter
Slide 63: Background
Background New Transportation Services from Marcellus Shale on TGP and Renewal of Existing Services • Marcellus Shale accounts for ~30% of gas produced in the U.S. and is expected to grow • New and extended transportation services will help economically expand and diversify TVA’s transportation port
Slide 64: Overall Benefits
Overall Benefits • Acquiring new Marcellus FT capacity: - Access to low cost natural gas for TVA’s fleet; - Securing long term FT at favorable rates; and, - Additional diversity for sourcing supply; • Extending existing FT agreements with TGP: - Locking in favorable rates past current agreement term
Slide 65: Recommendation
Recommendation • Recommend the Board delegate authority to the CEO to approve: - Entering into new firm transportation contracts with TGP for service out of the Marcellus to TVA’s plants on TGP’s system; and - Extending existing agreements with TGP for service out of the Gulf Coast to TVA’s plants.
Slide 66: Finance, Rates, and Portfolio Committee
Finance, Rates, and Portfolio Committee
Slide 67: Firm Transportation Agreements with Texas Gas Transmission, LLC
Firm Transportation Agreements with Texas Gas Transmission, LLC DAVID SORRICK Senior Vice President, Power Operations
Slide 68: Purpose
Purpose • Request Board approval to enter into a long term firm gas transportation agreement with Texas Gas Transmission, LLC (TGT) for up to 230,000 MMBtu of capacity in the winter for service to TVA’s Southaven and Lagoon Creek CC plants for a 10-year term starting April 1, 2020. BOARD MEETING | 6
Slide 69: Background
Background • The current natural gas transportation agreements to TVA’s Southaven plant via TGT and Lagoon Creek plant expire in the Spring of 2020. • To ensure adequate transportation to TVA’s Southaven and Lagoon Creek plants, Coal & Gas Services issued a request for proposal (RFP) for service aft
Slide 70: Overall Benefits
Overall Benefits • Securing Firm Transportation services vital to TVA’s gas generating assets. • Locking in favorable rates past current agreement term (10Yrs.) • Increased flexibility to meet generation demand changes on TGT’s system. • Increased reliability of transport to TVA’s gas generating ass
Slide 71: Recommendation
Recommendation • Recommend the Board approve entering into a new firm transportation agreement with TGT for service to TVA’s Southaven and Lagoon Creek plants on TGT’s system. BOARD MEETING | 71
Slide 72: Finance, Rates, and Portfolio Committee
Finance, Rates, and Portfolio Committee
Slide 73: External Relations Committee
External Relations Committee
Slide 74: Modified Land and Equipment Conveyance Delegations
Modified Land and Equipment Conveyance Delegations MIKE SKAGGS Executive Vice President Operations
Slide 75: Purpose
Purpose Request the Board delegate: - New authority to the Chief Executive Officer regarding conveyances of non-bulk electric system assets and natural gas lateral pipelines - Modify an existing delegation regarding conveyances of equipment valued at $4 million or less Actions taken under these dele
Slide 76: Existing and Proposed Delegations
Existing and Proposed Delegations BOARD MEETING | 76
Slide 77: Benefits of Proposed Delegations
Benefits of Proposed Delegations Strategic Natural Gas Transmission Asset Lateral Pipeline Conveyances Conveyances - Sustain and reduce rates - Avoid maintenance expenses - Improve reliability - Enhance long-term reliability - Provide more flexibility for - Eliminate insurance costs local power comp
Slide 78: Recommendation
Recommendation Delegate authority to the Chief Executive Officer regarding conveyances of non-bulk electric system assets and natural gas lateral pipelines Modify delegation authority regarding conveyances of equipment valued at $4 million or less BOARD MEETING | 78
Slide 79: External Relations Committee
External Relations Committee
Slide 80: Nuclear Oversight Committee
Nuclear Oversight Committee
Slide 81: Board Meeting
Board Meeting May 10, 2018 Muscle Shoals, Alabama
Slide 82: Slide 82
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