Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — 08 21 2014 board presentations
87 slides from Tennessee Valley Authority's investor presentation, Aug 21, 2014
Slide 1: Board Meeting, Knoxville, Tennessee, August 21, 2014
BOARD MEETING K n o x v i l l e , Te n n e s s e e August 21, 2014
Slide 2: Chairman's Report
CHAIRMAN’S REPORT BOARD MEETING Knoxville, Tennessee August 21, 2014
Slide 3: President's Report
PRESIDENT’S REPORT Bill Johnson President & CEO
Slide 4: Mission of Service
President’s Report 4 Mission of Service
Slide 5: Energy | Environment | Economic Development
President’s Report 5 Energy | Environment | Economic Development
Slide 6: Strategic Imperatives
President’s Report 6 Strategic Imperatives
Slide 7: Mission of Service
President’s Report 7 Mission of Service
Slide 8: Cost Reduction
President’s Report 8 Cost Reduction
Slide 9: Revenue Requirements
President’s Report 9 Revenue Requirements Revenue Wholesale Requirements Rate Efforts to Manage Cost $10.6B 6.74¢/kWh $2.5B* $1.0 9% Base Capital $0.5 Environmental Manage capital cost, which is Debt Service recovered over the life of the asset $2.0 Capacity Expansion $1.3 12% $0.6 6% Tax Equivalent
Slide 10: Energy | Environment | Economic Development
President’s Report 10 Energy | Environment | Economic Development
Slide 11: Assets and Energy
President’s Report 11 Assets and Energy 2015 2020 EE 7% Renewable Renewable 3% 3% EE 9% Coal Coal Hydro 25% 11% Hydro 38% 10% Gas Nuclear 16% 31% Nuclear Gas 37% 10% Notes • Source is FY15 Budget generation plan • EE includes annual volumes from explicit TVA programs and embedded impacts relative to
Slide 12: Energy | Environment | Economic Development
President’s Report 12 Energy | Environment | Economic Development • 111(d) Rule • TVA invested $5.6B in cleaner energy and clean air • NOX and SO2 emissions reduced by more than 90 percent • Adding ~1800MWs of carbon free generation to the fleet
Slide 13: Watts Bar Unit 2
President’s Report 13 Watts Bar Unit 2
Slide 14: Gallatin Fossil Plant
President’s Report 14 Gallatin Fossil Plant
Slide 15: NRC Reactor Oversight Process Ratings
President’s Report 15 NRC Reactor Oversight Process Ratings Current Goal
Slide 16: Hydropower
President’s Report 16 Hydropower
Slide 17: Wind Power
President’s Report 17 Wind Power
Slide 18: Allen Plant
President’s Report 18 Allen Plant
Slide 19: Public Input
President’s Report 19 Public Input
Slide 20: Reliable Power Supply
President’s Report 20 Reliable Power Supply
Slide 21: Reliable Generation in the Memphis Area
President’s Report 21 Reliable Generation in the Memphis Area
Slide 22: Allen Plant
President’s Report 22 Allen Plant
Slide 23: Energy | Environment | Economic Development
President’s Report 23 Energy | Environment | Economic Development
Slide 24: Energy | Environment | Economic Development
President’s Report 24 Energy | Environment | Economic Development
Slide 25: Energy | Environment | Economic Development
President’s Report 25 Energy | Environment | Economic Development
Slide 26: Current Industrial Rate Positions
President’s Report 26 Current Industrial Rate Positions Average Industrial Rate Top 100 U.S. Utilities Top Quartile = 6.10 Median = 6.80 Bottom Quartile = 8.20 5.76 ¢/kWh 14th Top Quartile 0 5 10 15 20 25 30 Jun 2013 ‐ May 2014 Source: EIA‐826 & ESS
Slide 27: Energy | Environment | Economic Development
President’s Report 27 Energy | Environment | Economic Development • Helped create and retain 52,000 jobs • ~$8B in capital investments
Slide 28: Energy | Environment | Economic Development
President’s Report 28 Energy | Environment | Economic Development
Slide 29: Fiscal Year 2015
President’s Report 29 Fiscal Year 2015
Slide 30: FY 2015 Priorities
President’s Report 30 FY 2015 Priorities
Slide 31: Stewardship
President’s Report 31 Stewardship
Slide 32: External Relations Committee
COMMITTEE EXTERNAL RELATIONS BOARD MEETING Knoxville, Tennessee August 21, 2014
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Slide 36: Finance, Rates, and Portfolio Committee
COMMITTEE FINANCE, RATES, AND PORTFOLIO BOARD MEETING Knoxville, Tennessee August 21, 2014
Slide 37: Generation Fleet Planning: Allen Fossil Plant
37 FINANCE, RATES, AND PORTFOLIO COMMITTEE GENERATION FLEET PLANNING ALLEN FOSSIL PLANT AUGUST 21, 2014
Slide 38: Background
FINANCE, RATES, AND PORTFOLIO COMMITTEE | GENERATION FLEET PLANNING – ALLEN FOSSIL PLANT 38 Background 2011 EPA Consent Decree requires TVA to either: • Install additional emissions controls on Allen units 1-3 by December 31, 2018 or • Retire Allen units 1-3 by December 31, 2018
Slide 39: Background
FINANCE, RATES, AND PORTFOLIO COMMITTEE | GENERATION FLEET PLANNING – ALLEN FOSSIL PLANT 39 Background Risk and benefits considered as part of this decision: • Cost-effectiveness of options • Environmental stewardship impacts, including results of the Environmental Assessment • Efficiency impacts •
Slide 40: Recommendation
FINANCE, RATES, AND PORTFOLIO COMMITTEE | GENERATION FLEET PLANNING – ALLEN FOSSIL PLANT 40 Recommendation • Retirement of Allen units 1-3 • Delegate authority to the CEO to determine retirement timeframe; no later than December 31, 2018 • Approve construction of a new gas-fired combined cycle plant
Slide 41: FY 2015 Financial Plan and Budget
41 FINANCE, RATES, AND PORTFOLIO COMMITTEE FY 2015 FINANCIAL PLAN AND BUDGET AUGUST 21, 2014
Slide 42: Overview
FINANCE, RATES, AND PORTFOLIO COMMITTEE 42 Overview Discussion Topic Key Takeaway Cold winter drove higher revenues FY14 Update O&M and debt reductions lowered overall cost Live within our means FY15 Planning Balance rates and debt Cost Drivers On track with $500 Million O&M efficiencies Rate Outloo
Slide 43: Fiscal Year-to-Date June 2014
FINANCE, RATES, AND PORTFOLIO COMMITTEE 43 Fiscal Year-to-Date June 2014 Net Income: $556M better than plan and $350M better than last year Base Revenues ($325M above plan) • Colder weather resulting in 11% more degree days • Fuel expense $231M higher due to increased sales Operating & Maintenance E
Slide 44: FYTD14 Income Statement
FINANCE, RATES, AND PORTFOLIO COMMITTEE 44 FYTD14 Income Statement Preliminary (as of June 30) FYTD Income is favorable to budget by $556M & prior year by $350M FYTD 14 FYTD 13 $ million Actual Budget Variance Actual ‘14 vs ‘13 Total Operating Revenue $7,971 $7,348 $623 $7,922 $49 Fuel and Purchased
Slide 45: FYTD14 Cash Flow Statement
FINANCE, RATES, AND PORTFOLIO COMMITTEE 45 FYTD14 Cash Flow Statement Preliminary (as of June 30) The Net Change in Cash is unfavorable to budget by $997M & prior year by $1,209M FYTD 2014 Var to Bud FYTD 2013 '14 v '13 $ million Actual Budget Fav/(Unfav) Actual Fav/(Unfav) Cash Flow from Operating
Slide 46: FY15 Budget and Business Plan
FY 15 Budget and Business Plan
Slide 47: Strategic Imperatives
FINANCE, RATES, AND PORTFOLIO COMMITTEE 47 Strategic Imperatives RATES: maintain low rates ASSET PORTFOLIO: meet reliability STEWARDSHIP: expectations & provide be responsible stewards a balanced portfolio DEBT: live within our means
Slide 48: Key Assumptions
FINANCE, RATES, AND PORTFOLIO COMMITTEE 48 Key Assumptions FY15 Financial Plan • Live within our means • Reduce O&M $500M by 2015 • Borrow for nuclear expansion • Manage long-term debt • Plan for modest economic growth
Slide 49: Living Within Our Means
FINANCE, RATES, AND PORTFOLIO COMMITTEE 49 Living Within Our Means Revenue Wholesale Requirements Rate Efforts to Manage Cost $10.6B 6.74¢/kWh $2.5B* $1.0 9% Base Capital $0.5 Environmental Manage capital cost, which is Debt Service recovered over the life of the asset $2.0 Capacity Expansion $1.3 1
Slide 50: Peak and Energy
FINANCE, RATES, AND PORTFOLIO COMMITTEE 50 Peak and Energy 33,000 Annual growth rate Peak Demand 1.5% 30,428 1.0% Weather Normalized 29,000 w/ Demand MW 0.8% Response 25,000 21,000 FY10 FY11 FY12 FY13 FY14F FY15P FY16P FY17P 180,000 Energy Weather Normalized 170,000 Annual growth rate GWh 1.0% 159,5
Slide 51: Revenues
FINANCE, RATES, AND PORTFOLIO COMMITTEE 51 Revenues Slight Growth in Weather Normalized, non-USEC Sales $14 $ billion 11.8 $12 11.2 11.0 11.2 10.9 11.2 10.9 10.7 $10 173,662 $8 Sales 158,291 158,597 (GWh) 155,820 $6 Electric 155,044 Revenue $4 Weather Normalized $2 $0 FY10 FY11 FY12 FY13 FY14F FY15P
Slide 52: Fuel and Purchased Power
FINANCE, RATES, AND PORTFOLIO COMMITTEE 52 Fuel and Purchased Power $5 $ billion 4.3 4.1 3.9 3.8 3.9 $4 3.5 3.5 3.5 176,204 Gas $3 Renewables Purchased $2 Energy Power (GWh) Nuclear 163,077 $1 161,867 159,556 Coal $0 FY10 FY11 FY12 FY13 FY14F FY15P FY16P FY17P NOTE: Excludes adjustments to fuel expe
Slide 53: O&M Expense
FINANCE, RATES, AND PORTFOLIO COMMITTEE 53 O&M Expense $4 3.6 3.7 3.5 3.4 3.4 $ billion 3.4 3.2 3.0 3.0 $3 2.9 Other Projects/SBU Outage $2 Routine $1 $0 FY10 FY11 FY12 FY13A FY13B FY14B FY14F FY15P FY16P FY17P Other SBU includes EEDR program costs and Corporate Insurance
Slide 54: Capital Expenditures
FINANCE, RATES, AND PORTFOLIO COMMITTEE 54 Capital Expenditures $4 $ billion FY14 Plan $3 Environmental $2 Capacity Expansion $1 Base $0 FY10 FY11 FY12 FY13 FY14F FY15P FY16P FY17P Capital Expenditures include AFUDC, Ash Remedy ARO, Kingston Ash Cleanup and Kingston Ash (ARO).
Slide 55: Capacity Expansion and Environmental Spend
FINANCE, RATES, AND PORTFOLIO COMMITTEE 55 Capacity Expansion and Environmental Spend Gas $987 Nuclear $841 Clean Air $296 Transmission $176 Capacity Expansion $ 2,004 Ash $161 505 Environmental Total $ 2,509 Kingston $48 0 200 400 600 800 1,000 $ million
Slide 56: Total Financing Obligations
FINANCE, RATES, AND PORTFOLIO COMMITTEE 56 Total Financing Obligations $30 $ billion $29 $28.8 FY14 Plan $28 27.4 $27 $26 FY15 Plan $25 $24 $23 FY10 FY11 FY12 FY13 FY14F FY15P FY16P FY17P
Slide 57: Managing Cash and Debt
FINANCE, RATES, AND PORTFOLIO COMMITTEE 57 Managing Cash and Debt Increasing assets by nearly $18 billion while increasing debt by less than $2 billion $ billion $18 B Gross Plant, Property, & Equipment Change Total Debt & Other Financing Obligations Change < $2 B
Slide 58: FY15 Summary Income Statement
FINANCE, RATES, AND PORTFOLIO COMMITTEE 58 FY15 Summary Income Statement Operating Revenue $ 10,697 Fuel & Purchased Power 3,552 Operations, Maintenance 2,989 Depreciation, Amortization, Accretion 1,863 Tax Equivalents 532 Operating Expenses 8,936 Other Income / (Expense) 35 Interest Expense 1,202 N
Slide 59: FY15 Revenue Requirements
FINANCE, RATES, AND PORTFOLIO COMMITTEE 59 FY15 Revenue Requirements Fuel $ 3,552 O&M 2,989 Base Capital 959 Interest 1,202 Tax Equivalents, Nuclear Fuel, and Other 772 Non-Cash, Other Adjustments (196) Debt Paydown 1,293 Total TVA Revenue Requirements $ 10,571 Base Revenues 6,985 Fuel Revenues 3,38
Slide 60: Key Takeaways
FINANCE, RATES, AND PORTFOLIO COMMITTEE 60 Key Takeaways Recommending 1.5% effective retail rate increase Supports debt reduction goal − Consistent with the Financial Guiding Principles Provides $3.5 billion in new capital investment Achieves $500 million (17%) reduction in O&M expenses
Slide 61: Recommendation
FINANCE, RATES, AND PORTFOLIO COMMITTEE 61 Recommendation Approve the following: • FY15 Budget • Rate increase of $199 million effective October 1 − Effective retail rate increase of 1.5% • Financial Shelf for issuance of up to $3.0 billion of long-term bonds • Projects over $50 million • Land Conde
Slide 62: Audit, Risk, and Regulation Committee
COMMITTEE AUDIT, RISK, AND REGULATION BOARD MEETING Knoxville, Tennessee August 21, 2014
Slide 63: Policy on Audit and Non-Audit Permissible Services
63 AUDIT, RISK, AND REGULATION COMMITTEE POLICY ON AUDIT AND NON-AUDIT PERMISSIBLE SERVICES AUGUST 21, 2014
Slide 64: FY 2015 External Auditor Selection
64 AUDIT, RISK, AND REGULATION COMMITTEE FY 2015 EXTERNAL AUDITOR SELECTION AUGUST 21, 2014
Slide 65: People and Performance Committee
COMMITTEE PEOPLE AND PERFORMANCE BOARD MEETING Knoxville, Tennessee August 21, 2014
Slide 66: FY 2015 Financial Plan and Budget – Corporate Goals
66 PEOPLE AND PERFORMANCE COMMITTEE FY 2015 FINANCIAL PLAN AND BUDGET – CORPORATE GOALS AUGUST 21, 2014
Slide 67: Fiscal Year 2014 Performance Goals
PEOPLE AND PERFORMANCE COMMITTEE 67 Fiscal Year 2014 Performance Goals • Approve scorecards for FY15: – Annual Incentive Program (Winning Performance) Designed to promote teamwork, create a high performance culture, and motivate and reward all eligible employees for achieving goals – Executive Long-
Slide 68: FY15 Winning Performance Design
PEOPLE AND PERFORMANCE COMMITTEE 68 FY15 Winning Performance Design • Corporate multiplier between 0 and 1.0 • Board defines key performance measures aligned to strategic imperatives • Board / CEO qualitatively assess performance compared to target to determine final multiplier • CEO establishes Bus
Slide 69: Winning Performance Scorecard Overview
PEOPLE AND PERFORMANCE COMMITTEE 69 Winning Performance Scorecard Overview Corporate Multiplier Aligns to Financial and Stewardship Strategic Imperatives Outlined by Board Measure Target Safe Workplace 0 - Financial Health Operating Cash Flow Budget - Net Income Budget - Total Financing Obligations
Slide 70: Executive Long-Term Incentive Plan (ELTIP)
PEOPLE AND PERFORMANCE COMMITTEE 70 Executive Long-Term Incentive Plan (ELTIP) FY17 ELTIP Cycle Scorecard: Measures include: • Wholesale Rate Excluding Fuel • Load Not Served • External Measures Index − INPO Index − Media Tone − Stakeholder Survey − Customer Loyalty − Board Level Significant Events
Slide 71: ELTIP Scorecards
PEOPLE AND PERFORMANCE COMMITTEE 71 ELTIP Scorecards Measure Weight Threshold Target Stretch Wholesale Rate Excluding Fuel 40% Business Plan Business Plan Business Plan (FY15 – FY17 avg.) + 2% - 2% Better than Better than Load Not Served 30% 99.999% Top Quartile last 5-year (FY15 - FY17 avg.) Reliab
Slide 72: Recommendation
PEOPLE AND PERFORMANCE COMMITTEE 72 Recommendation Winning Performance • Approve Strategic Measures and targets in corporate multiplier Executive Long-term Incentive Plan • Approve ELTIP 2017 Cycle scorecard and targets
Slide 73: Bylaws Revision Section 1.7
73 PEOPLE AND PERFORMANCE BYLAWS REVISION SECTION 1.7 AUGUST 21, 2014
Slide 74: Nuclear Oversight Committee
COMMITTEE NUCLEAR OVERSIGHT BOARD MEETING Knoxville, Tennessee August 21, 2014
Slide 75: Watts Bar 2 Update
75 NUCLEAR OVERSIGHT COMMITTEE WATTS BAR 2 UPDATE AUGUST 21, 2014
Slide 76: Overview
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 76 Overview • Meeting safety, quality, cost, and schedule targets • Finishing major construction and making systems, structures, and components like new • Pre-operational testing underway to ensure systems and components operate according to standards
Slide 77: Watts Bar Major Milestone Achieved
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 77 Watts Bar Major Milestone Achieved Open vessel testing successfully completed • Performed a series of tests • Pumped approximately 185,000 gallons of water into reactor vessel for full flow testing • Demonstrated key safety systems will work as des
Slide 78: Watts Bar 2 Milestones Ahead
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 78 Watts Bar 2 Milestones Ahead • Cold hydrostatic testing • Secondary hydrostatic testing • Hot functional testing • Readiness reviews • Regulatory approval
Slide 79: Fukushima Response
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 79 Fukushima Response • Pilot for the industry • Construction of FLEX Equipment Storage Building and new auxiliary feedwater storage tank complete • FLEX modifications over 90% complete
Slide 80: Watts Bar 2 Challenges
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 80 Watts Bar 2 Challenges • Protecting the safe, reliable operation of Unit 1 • Completing plant systems for pre-operational testing during a compressed time period while maintaining safety and quality standards • Preparing for upcoming testing milest
Slide 81: Watts Bar 2 Risks
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 81 Watts Bar 2 Risks • Primary risks include: – Startup and testing – Regulatory and licensing issues – Dual-unit operational readiness • Comprehensive program in place to identify, prioritize, assess, monitor, and manage risks • Mitigation plans deve
Slide 82: Project Completion Preparations
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 82 Project Completion Preparations • Demobilization plan • Dual-unit operations organization • Community outreach initiatives – Visits/tours by stakeholders – Community panel in place – Public meetings – Key media visits – Open house plans
Slide 83: Watts Bar 2 Summary
NUCLEAR OVERSIGHT COMMITTEE | WATTS BAR 2 UPDATE 83 Watts Bar 2 Summary • Work being done safely, in a quality manner • Cold hydrostatic testing preparations in progress • Project demobilization efforts have begun • Outreach initiatives building support • Complex work and challenges ahead • Regulato
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Slide 87: Board Meeting
BOARD MEETING K n o x v i l l e , Te n n e s s e e August 21, 2014
Tennessee Valley Authority — 08 21 2014 board presentations on 6ix