Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — Debt Investor Presentation (March 2006)
32 slides from Tennessee Valley Authority's debt investor presentation, March 2006
Slide 1: Presentation to Investors
Presentation to Investors March 2006 TVA Treasury/Investor Relations
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements relating to future events and future performance. Any statements regarding expectations, beliefs, plans, projections, estimates, objectives, intentions, assumptions or otherwise relating to future events or performance
Slide 3: Outline
Outline • TVA Corporate Profile • Financial Results and Trends – FY 2005 results – FY 2006 expectations – Recent developments • Financing Program Update March 2006 1 TVA Tennessee Treasury/Investor Relations Valley Authority
Slide 4: Corporate Profile
Corporate Profile TVA Treasury/Investor Relations
Slide 5: Corporate Profile
Corporate Profile Ownership Wholly owned U.S. Government Corporation Location Southeastern United States Credit Ratings AAA/Aaa 2005 Total Revenues $7.8 billion 2005 Operating Income $1.3 billion Core Business Wholesale power generation, integrated river system stewardship, and economic development
Slide 6: Corporate Profile
Corporate Profile Power System Resources Hydroelectric, Coal-fired, Nuclear, Combustion Turbine, Diesel Generators, Green Power Total System Capacity 33,981 MW (winter net dependable) 32,259 MW (summer net dependable) Owned/Leased Capacity 30,644 MW (winter net dependable) Total Assets $34.6 billion
Slide 7: TVA's Regulatory Structure
TVA’s Regulatory Structure • Congressional Oversight – TVA is a wholly-owned government corporation with Congressional oversight: — House Transportation & Infrastructure Committee — Senate Environment & Public Works Committee • Government Appointed Board Members – Board members are appointed by the
Slide 8: Summary of Governance Changes
Summary of Governance Changes CURRENT NEW STRUCTURE STRUCTURE* 3 Person, Full-Time Board 9 Person, Part-Time Board BOARD STRUCTURE (appointed by President & (appointed by President & confirmed by Senate) confirmed by Senate) RATEMAKING AUTHORITY TVA Board Sets Power Rates TVA Board Sets Power Rates
Slide 9: Financial Results and Trends
Financial Results and Trends TVA Treasury/Investor Relations
Slide 10: Fiscal Year 2005 Highlights
Fiscal Year 2005 Highlights • Continued to provide affordable, reliable power: – 6th straight year of 99.999% transmission reliability – Met new all-time TVA peak demand of 31,924 MW in July – Set new monthly peak demand records for five consecutive months (June-October) – 2005 generation equivalent
Slide 11: Fiscal Year 2005 Highlights
Fiscal Year 2005 Highlights • Reduced Total Financing Obligations by $301 million • Liquidity enhancement: – Agreement for an unsecured revolving line of credit of up to $2.5 billion with a national bank signed in May 2005, renewed in November • Remain committed to a financially strong TVA March 200
Slide 12: Summary Statements of Income
Summary Statements of Income For the fiscal years ended September 30 (in millions) 2005 2004 2003 Total operating revenues $ 7,794 $ 7,533 $ 6,953 Fuel and purchased power expense (2,601) (2,081) (1,957) Operating and maintenance expense (2,359) (2,319) (2,039) Depreciation and accretion expense (1,
Slide 13: Sources of Revenue
Sources of Revenue Municipal Sales to cooperative Customers customers have been 57% TVA’s fastest growing source of revenue in recent years. Sales to industries directly served have increased as the Valley economy has expanded. However, sales to municipal customers continue to account for the majori
Slide 14: Financing Expense as a Percentage of Revenues
Financing Expense as a Percentage of Revenues $2,500 50% As a percentage of revenues, interest and similar expense on TVA’s $2,003 financing obligations has $1,966 $1,959 $2,000 declined to the lowest levels 40% $1,777 in more than 20 years. Financing Expense ($millions) $1,736 Percentage of Total R
Slide 15: Summary Balance Sheets
Summary Balance Sheets At September 30 (in millions) 2005 2004 Assets Total current assets $ 2,269 $ 2,386 Total property, plant and equipment, net 23,888 23,699 Investment funds 858 744 Total regulatory and other long-term assets 7,551 7,451 Total assets $ 34,566 $ 34,280 Total current liabilities
Slide 16: Change in Financing Obligations
Change in Financing Obligations 30,000 Prepayments 29,000 Lease/Leasebacks $27,727 Statutory Debt* 28,000 $27,379 27,000 $26,684 $26,376 $26,285 $26,161 $25,816 $25,882 $ millions 26,000 $25,647 $25,581 25,000 24,000 23,000 22,000 21,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 * Statutory
Slide 17: Financing Obligations Are Decreasing As Power System Capacity Is Increasing
Financing Obligations Are Decreasing As Power System Capacity Is Increasing TVA Total Financing Obligations per Kilowatt (KW) of Power System Capacity $1,250 $1,000 $986 $963 $936 $925 $892 $845 $826 $Dollars per KW $750 $819 $780 $753 $500 TVA’s financing obligations are backed by revenues from the
Slide 18: Projected Capital Expenditures
Projected Capital Expenditures Current and planned capital expenditures reflect TVA’s goals of maintaining high power system reliability and meeting regulatory requirements. Estimated 2003 2004 2005 2006 2007 2008 2009 2010 BFN Unit 1 Restart $ 381 $ 442 $ 417 $ 420 $ 81 $ - $ - $ - Clean Air 540 43
Slide 19: TVA Retirement System
TVA Retirement System System Structure System Financials • Separate Legal Entity (from TVA) • $7 billion in Plan Assets (60% equity, 40% fixed-income) • Seven Member Board: • $1.2 billion in 401(k) Assets ¾ Three directors appointed by TVA • $400 million in Annual Benefit Payments ¾ Three directors
Slide 20: Expectations for FY 2006
Expectations for FY 2006 • Almost $9 billion in revenue forecasted – Forecast includes October and April rate increases • Fuel and purchased power costs to exceed $3 billion • Non-fuel operating expense expected to remain steady • $340 million budgeted reduction of Total Financing Obligations March
Slide 21: Recent Business Developments
Recent Business Developments • Continuing to reduce controllable costs • Raising power rates to offset non-controllable cost increases – July 2005 – TVA Board approved 7.5-percent increase in firm wholesale power rates (effective October 2005) – February 2006 – TVA Board approved 9.95-percent increa
Slide 22: Recent Business Developments
Recent Business Developments • Continued progress in major capital programs – Browns Ferry Nuclear Unit 1 restart effort >75% complete • Clean air programs starting to show results: – TVA’s 11 coal-fired power plants achieved their lowest-ever emission levels in 2005 (while producing a near-record a
Slide 23: Fuel & Purchased Power Expense
Fuel & Purchased Power Expense Current forecast reflects significant and rapid increases in non-controllable power supply costs. 12% Increase (in millions) 9% from 2006 Increase Rate Review 24% from 2005 $3,200 Increase from 2004 $1,075 $952 12.9% $741 30.2% $2,200 $492 50.6% $359 $473 11.1% $2,115
Slide 24: Conclusion
Conclusion • TVA remains a national leader in power system reliability and operating performance • Non-controllable fuel and purchased power costs are escalating for all utilities and are a major concern • TVA continues to benefit from its diversified generation fleet and strong operating performanc
Slide 25: Financing Program Update
Financing Program Update TVA Treasury/Investor Relations
Slide 26: Financing Program History
Financing Program History • Early Bond Issues: 1933 – 1939 – Original TVA Act in 1933 authorized TVA to issue bonds with “all the rights and privileges accorded by law to Panama Canal bonds.” • Congressional Appropriations: 1939 – 1959 (primarily) – Total = $1.4 billion (including property transfers
Slide 27: What Makes TVA Unique as an Agency Issuer?
What Makes TVA Unique as an Agency Issuer? • TVA is an electric power generator and stewardship agency: – America’s largest public power generator – Completely self-funded (receives no taxpayer funding) – Power infrastructure composed of tangible, cash-producing assets – Reliability coordinator and
Slide 28: TVA's Financing Portfolio
TVA’s Financing Portfolio • TVA financing obligations consist of bonds, notes and other forms of financing. Other Financing • Short and long-term bonds Obligations 10% and notes represent 90% of Short-Term total financing obligations. Notes 10% • Bonds and notes include Other short-term Discount Not
Slide 29: Refinancing of Maturing Bonds
Refinancing of Maturing Bonds TVA has $4 billion in bonds maturing or likely to be redeemed by investors over the next few years. Original Coupon Amount Bond Structure Rate ($ millions) 1996 Series C Global 10 NCL 7.125% $ 1,000 2001 Series Put Global 15 PUT 5 4.875% 600 1997 Series A Inflation Bond
Slide 30: TVA Bond and Notes Maturities
TVA Bond and Notes Maturities $3.0 Putable $2.5 Callable Option Free (Bullet Debt) $2.0 $ Billions $1.5 $1.0 $0.5 $- 06 08 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 At December 31, 2005 (unaudited) March 2006 25 TVA Tennessee Tr
Slide 31: Key Strengths of TVA Securities
Key Strengths of TVA Securities • TVA may only issue securities for power program purposes. • Bondholders given pledge of payment from net power proceeds. • The TVA Act requires TVA to set power rates sufficient to pay, among other things, principal and interest obligations on its securities. • Arti
Slide 32: TVA Treasury/Investor Relations
March 2006 TVA Tennessee Treasury/Investor Relations Valley Authority
Tennessee Valley Authority — Debt Investor Presentation (March 2006) on 6ix