Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — 11 19 09 board presentations
56 slides from Tennessee Valley Authority's investor presentation, Nov 19, 2009
Slide 1: President's Report: Operations and Financials
PRESIDENT’S REPORT Operations and Financials
Slide 2: Power Sales and Generation: Fiscal Year 2009 Results
Power Sales Fiscal Year 2009 Results 3 Generation Fiscal Year 2009 Results 4
Slide 3: Financials: Fiscal Year 2009 Results
Financials Fiscal Year 2009 Results 5 Financials Fiscal Year 2009 Results 6
Slide 4: Rainfall and Runoff; Fuel and Purchased Power Spot Prices
Rainfall and Runoff Eastern Valley Fiscal Year 2009 Results 7 Fuel and Purchased Power Spot Prices Spot Price History 8
Slide 5: Rate Trends
Rate Trends Average Residential Retail Rates 9 Rate Trends Average Retail Rates for selected Industrial load MSD customer, 30,000 kW at 80% load factor 10
Slide 6: Highlights
Average Wholesale Rate Adjustment 11 Highlights
Slide 7: Highlights: Purchased Wind Power
Highlights Achieved top decile safety performance 99 999% transmission reliability for 10th straight year Achieved 99.999% Purchased 450 megawatts of wind power 13 Purchased Wind Power 14
Slide 8: Highlights: World-class nuclear performance
Highlights Achieved top decile safety performance 99 999% transmission reliability for 10th straight year Achieved 99.999% Purchased 450 megawatts of wind power Sequoyah 1 recognized as “world-class performer” 15 World-class nuclear performance Sequoyah 1’s capacity factor ranked 6th among the world
Slide 9: Highlights: A good start for hydro
Highlights Achieved top decile safety performance 99 999% transmission reliability for 10th straight year Achieved 99.999% Purchased 450 megawatts of wind power Sequoyah 1 recognized as “world-class performer” Watts Bar outage completed in under 30 days Hydro generation is having a positive impact o
Slide 10: Highlights: Recovering Retirement Fund
Highlights Achieved top decile safety performance 99 999% transmission reliability for 10th straight year Achieved 99.999% Purchased 450 megawatts of wind power Sequoyah 1 recognized as “world-class performer” Watts Bar outage completed in under 30 days Hydro generation is having a positive impact o
Slide 11: Nuclear Decommissioning Funding; Highlights
Nuclear Decommissioning Funding 21 Highlights Achieved top decile safety performance 99 999% transmission reliability for 10th straight year Achieved 99.999% Purchased 450 megawatts of wind power Sequoyah 1 recognized as “world-class performer” Watts Bar outage completed in under 30 days Hydro gener
Slide 12: Energy-Efficient Test Homes
Energy-Efficient Test Homes Monthly Energy Use* Standard House 1,508 , kWh Retrofit House 1,060 kWh Advanced House 801 kWh *Average consumption July-Sept. 2009 Monthly Energy Cost* Standard House $147.03 Retrofit House $103.35 Advanced House $78.10 *Average cost July-Sept. 2009 23 Hard Spots
Slide 13: Hard Spots: Announced Projects and Valley Economy
Hard Spots Power sales and revenues are still down Regional economy hit hard; slow to recover 25 Announced Projects and Valley Economy ED Announcements and Nonfarm Payroll Employment Change TVA Power Service Area FY06 FY07 FY08 FY09 100,000 53,036 52,304 50 000 50,000 45,319 ,6 0 41,620 25,906 17,21
Slide 14: Employment; Major 2009 Announcements/Expansions
Employment – Valley and U.S. Nonfarm Payroll Employment Percent Change from Previous Fiscal Year 2% FY06 FY07 FY08 FY09 1% 0% -1% 2% -2% -3% -4% TVA Valley US 27 Major 2009 Announcements/Expansions Hemlock Semiconductor – Clarksville, Tennessee 500 jobs; $1.2 billion investment Wacker-Chemie – Charl
Slide 15: Hard Spots: Reportable Environmental Events
Hard Spots Power sales and revenues are still down Regional economy hard hit; slow to recover Higher g than average g reportable p environmental events 29 Reportable Environmental Events 30
Slide 16: Hard Spots
Hard Spots Power sales and revenues are still down Regional economy hard hit; slow to recover Higher g than average g reportable p environmental events Legislative and regulatory uncertainties make planning difficult Kingston Recovery • Ash transportation slowed by rain • Managing g g removal of ash
Slide 17: Update on Key Initiatives
Update on Key Initiatives
Slide 18: Key Initiatives: Remediation plan for impoundments
Key Initiatives Remediation plan for impoundments Establish a compliance and performance assessment group Remediation plan for organizational effectiveness Review compliance functions for environment, health, and safety Improve enterprise risk management I tit t a situational Institute it ti l alert
Slide 19: Winning Performance; TVA Performance
Winning Performance Exceeded performance targets on 3 of 4 measures resulting in $250 million savings or 3% reduction in rate increase. However, due to the Kingston event and the economy, payouts were reduced by 25% for all employees and more for top executives. * Excludes impact of $1 billion pensi
Slide 20: TVA Performance Summary
TVA Performance Targets were met or exceeded on 6 of 7 financial and operational focused performance goals. * Excludes impact of $1 billion pension contribution ** Only Plant Reliability was benchmarked 39 Summary Year overshadowed by Kingston and economic downturn Otherwise a g good yyear • Eight m
Slide 21: Tax Equivalent Payments for Fiscal Year 2009 and Estimates for 2010
Tax Equivalent Payments f Fi for Fiscall Year Y 2009 and d Estimated Payments for Fiscal Year 2010
Slide 22: Tax Equivalent Payments: Topic and Background
Topic The TVA Act requires that we make payments in lieu of taxes to states and counties in which TVA holds power property or sells power For Board Consideration Approval of the final tax equivalent payments to the states and counties for Fiscal Year 2009 Approval of the estimated tax equivalent pay
Slide 23: TVA In Lieu of Tax Payments
Background TVA allocates its total tax payments between eight states: • Alabama, Georgia, Mississippi, North Carolina, Kentucky, Tennessee Kentucky Tennessee, and Virginia Virginia, which comprise the states of the service territory; and • Illinois, Illinois which holds coal reserves 45 TVA In Lieu
Slide 24: Recommendation; Management Compensation for Fiscal Year 2009
Recommendation Approve the final tax equivalent payments to the states and counties for Fiscal Year 2009 Approve pp the estimated tax equivalent q p payments y to the states and counties for Fiscal Year 2010 47 Management Compensation for Fiscal Year 2009
Slide 25: Board Action
Board Action Extend the CEO Long-Term Deferred Compensation agreement for an additional four years (2010 – 2013) Delegate to the CEO authority to approve Executive Level IV salaries 49
Slide 26: Nuclear Fuel Enrichment Services
Nuclear Fuel Enrichment Services Topic TVA must buy uranium enrichment services to ensure an adequate and uninterrupted supply of fuel for our nuclear reactors For Board Consideration Approve contracts with AREVA NC and Louisiana Energy Services, LLC (LES) for enriching uranium
Slide 27: Background: Uranium processing and enrichment offers
Background Uranium goes through several processing steps before becoming reactor fuel Enrichment Conversion to UF6 Fabrication (UO2) Uranium Mines and Mills (U3O8) Reactors 53 Background We invited proposals and received four offers LES (New Mexico plant) and AREVA (Idaho plant) provided the best of
Slide 28: Recommendation; Turbine Generator Alliance
Recommendation Approve contracts with AREVA and LES for a total of $1 $1.25 25 billion to provide enrichment services for TVA from 2016 through 2030 55 Turbine Generator Alliance Fossil and Nuclear
Slide 29: Turbine Generator Alliance: Topic and Background
Topic TVA’s existing contracts for turbine generator parts and services for nuclear and large fossil units are based on individual plant outages; combining nuclear and fossil needs under alliance contracts would be more cost-effective and efficient For Board Consideration Approve new contracts with
Slide 30: Scope of contracts; Recommendation
Scope of contracts Proposed contracts have five-year terms with an option to extend up to five years Contract values over initial five years: GE $122 million for 8 units Siemens $70 million for 4 units Alstom $32 million for 3 units 59 Recommendation Approve contracts with General Electric, Siemens
Slide 31: Fleet-Wide Maintenance/Modification Contracts
Fleet-Wide Fleet Wide Maintenance/ Modification Contracts Topic TVA’s four existing contracts to provide labor for maintenance and modifications services for the generating fleet will expire beginning in 2011 For Board Consideration Approve new contracts with Day & Zimmerman NPS, Inc. and G•UB•MK Co
Slide 32: Background; Contract details
Background The four existing contracts provide labor to supplement TVA workers at hydro, fossil and nuclear plants across the Valley We asked for proposals from qualified providers who could provide these services across the fleet Eight firms responded and two met all of the conditions of our reques
Slide 33: Recommendation; Managed Task Engineering Contracts
Recommendation Approve new contracts with Day & Zimmerman NPS Inc. NPS, Inc and G•UB•MK Constructors, Constructors as described, to provide maintenance and modification labor services across the TVA fleet 65 Fleet-Wide Fleet Wide Managed Task Engineering Contracts
Slide 34: Engineering contracts: Topic and Background
Topic Our existing contracts for engineering design services will expire at the end of the year For Board Consideration Approve new contracts with qualified providers for engineering design services across the TVA fleet Background TVA asked for proposals from qualified vendors in April 2009 Twenty-f
Slide 35: Contracts Details; Recommendation
Contracts Details The contracts have five-year terms with an option to extend up to five years The estimated value of all four contracts over the initial five-year term is $350 million No minimum amount of work is guaranteed TVA organizations can compete specific projects among the four suppliers fo
Slide 36: Consideration of PURPA Standards
Consideration of PURPA Standards
Slide 37: PURPA Standards: Topic and Background
Topic The Board must determine whether new standards under the Public Utility Regulatory Policies Act (PURPA) are appropriate for the TVA region For Board Consideration A recommendation to approve two PURPA standards as written and two with modifications that address the purposes and objectives of t
Slide 38: Background; Public Record
Background The TVA Board serves as a regulatory authority and therefore it must determine if the new standards are suitable TVA may • Implement any standard as written • Implement a modified standard • Decide that a higher standard or another process addresses the issue Decisions are required by Dec
Slide 39: Recommendation; Selection of TVA's External Auditor
Recommendation Based on the public record, we recommend: • Adopting Ad ti th the standards t d d ffor IIntegrated t t dRResource Planning and Energy Efficiency and Rate Design as written • Adopting modified standards for Smart Grid Investments and Smart Grid Information while preserving the intent o
Slide 40: External Auditor: Topic and Background
Topic TVA must have an external auditor to audit its financial statements 79 Background Under the TVA Act: The AGE Committee, in consultation with the Inspector General, recommends to the Board a company to act as TVA’s external auditor; and The Board engages the services of TVA’s external t l audit
Slide 41: External Auditor Recommendation
External Auditor Ernst & Young LLP currently serves as TVA’s external auditor TVA staff and the Inspector p General are p pleased with the performance and professionalism of Ernst & Young g 81 Recommendation The Board select Ernst & Young to serve as TVA’ss external auditor for 2010 TVA 82
Slide 42: Audit, Governance, and Ethics; Community Relations and Energy Efficiency
AUDIT, GOVERNANCE, AND ETHICS COMMUNITY RELATIONS AND ENERGY EFFICIENCY
Slide 43: Guntersville Airport Easement
Guntersville Airport Easement Topic The city of Guntersville has requested an easement on Guntersville Reservoir to expand an existing airport For Board Consideration Grant a 30-year easement to the City for about 116 acres on Guntersville Reservoir without charge except for TVA administrative costs
Slide 44: Background
Background The city and TVA previously identified 69 acres for a larger runway To meet regulations g for maintaining g vegetation g around runway approaches, an additional 47 acres are needed The proposal is consistent with the Guntersville Land Management Plan 87
Slide 45: Recommendation; Watts Bar Reservoir Land Management Plan
Recommendation Grant a 30-year easement to the City for about 116 acres on Guntersville Reservoir without charge except for TVA administrative costs 89 Watts Bar Reservoir Land Management Plan
Slide 46: Watts Bar Plan: Topic and Scope
Topic The 1988 Watts Bar Reservoir Land Management Plan is being updated as part of TVA’s TVA s ongoing review of land management plans For Board Consideration Approve the Watts Bar Reservoir Land Management Plan 91 Scope of Plan About 16,036 acres adjacent to Watts Bar Reservoir Reservoir lands are
Slide 47: Timeline; Background
Timeline September 2004 January 2007 Public scoping meeting Restarted review of Plan/EIS May 2005 August 2007 Draft Plan/Environmental Impact Amended Draft Plan/EIS was Statement ((EIS)) was made made available to the p public for available to the public for review review June 2005 August 2007 Publi
Slide 48: Comparison of Alternatives
Comparison of Alternatives A B C 184 184 184 100% 90% 3587 3611 Kingston Parcels 4371 80% Zone 2 - Project Operations 70% 3433 3741 Zone 3 - Sensitive Resource Management 3741 60% Zone 4 - Natural Resource Conservation 50% 3236 Zone 5 - Industrial 40% 3784 5025 Zone 6 - Developed Recreation 1544 30%
Slide 49: Recommendation; Mountain Reservoirs Land Management Plan
Recommendation Approve the Watts Bar Reservoir Land Management Plan implementing the preferred alternative (with the exception of the Kingston area)) 97 Mountain Reservoirs Land Management Plan
Slide 50: Mountain Reservoirs Plan: Topic and Scope
Topic The Board directed preparation of a Land Management Plan for Mountain Reservoirs consistent with the social, environmental and commercial conditions around each reservoir For Board Consideration Approve the Mountain Reservoirs Land Management Plan Scope of Plan About 6,273 acres adjacent to ni
Slide 51: Timeline; Background
Timeline June 2007 Public scoping meeting August 2008 Draft Plan/Environmental Impact Statement (EIS) was made available to the public for review August 2008 Public meeting to review the Draft EIS July 2009 Final Mountain Reservoirs Land Plan and EIS issued 101 Background Four alternatives were cons
Slide 52: Comparison of Alternatives; Recommendation
Comparison of Alternatives A B C D 0 0 0 100% Unplanned 90% 1609 Zone 2 - Project Operations 80% 3078 3078 3078 Zone 3 - Sensitive Resource 70% Management Zone 4 - Natural Resource 60% Conservation 2660 143 143 143 Zone 5 - Industrial 50% 40% 1666 1560 1658 Zone 6 - Developed 0 Recreation 30% 27 Zon
Slide 53: Energy Efficiency / Demand Response Update
Energy Efficiency / Demand Response Update Topic To update the Board on our progress toward the target of achieving a 1 1,400 400 MW demand reduction by 2012 through Energy Efficiency and Demand Response programs that compete successfully with supply options 106
Slide 54: May 2007 TVA Strategic Plan: Energy Efficiency and Peak Demand Reduction
May 2007 – TVA Strategic Plan Energy Efficiency Improvement and Peak Demand Reduction “In partnership “I t hi with ith others, th TVA will ill strive t i tto b be a lleader d iin energy- efficiency improvements and peak demand reduction over the next years. Improving energy efficiency and five years
Slide 55: EEDR High-Level Timeline
EEDR High-Level Timeline 109 Energy Efficiency/Demand Response Progress 110
Slide 56: Summary
Summary Results have exceeded goal and are under budget Received good support from distributors P d t development Product d l t process has h been b valuable l bl 111
Tennessee Valley Authority — 11 19 09 board presentations on 6ix