Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — Corporate Update (August 2008)
31 slides from Tennessee Valley Authority's corporate update, Aug 21, 2008
Slide 1: Fiscal Year 2009 Budget
Fiscal Year 2009 Budget
Slide 2: Links to TVA's Strategic Plan
Links to TVA’s Strategic Plan Strategic 2009 Budget Initiatives Dimensions • Increase energy efficiency and demand Customers response while maintaining reliability • Emphasize safety, skills development and People information technology systems Financial • Align with guiding financial principles • I
Slide 3: FY 2009—What We See
FY 2009—What We See Continuing effects of the drought Economic slowdown and energy efficiency contributing to flat energy demand Major rise in fuel costs driving higher prices Steady performance by fossil and nuclear plants Continuing need for investment: • Generation and transmission • Clean air •
Slide 4: Demand
Demand
Slide 5: Projected Peak Demand Growth
Projected Peak Demand Growth +/-5% TVA Owned Megawatts New Capacity Contracted PPAs 50,000 (greater than 18 months) EE&DR DSM Peak 45,000 Peak - Interruptibles + Reserves Need without EE&DR DSM Impacts 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1970 1973 1976 1979 1982 1985 1988 1991 1
Slide 6: Trend of Peak Demand
Trend of Peak Demand (weather normalized) 37,000 (MW) FY04-08 Compound Annual Growth Rate (CAGR) 1.1% 33,617 33,024 32,586 32,559 32,382 32,623 31,714 32,000 31,201 27,000 2004 Actual 2005 Actual 2006 Actual 2007 Actual 2008 2008 2009 2009 Forecast Original Forecast Original 2009 Demand Growth -Assu
Slide 7: Capacity Additions
Capacity Additions 8,000 Watts Bar Unit 2 Caledonia CT Gleason CC Conversion 7,000 Nuclear Uprates Lagoon Creek III CC Brownsville CT 6,000 Southaven CC Gleason Marshall MWs 5,000 Caledonia Browns Ferry Unit 1 4,000 3,000 2,000 1,000 - FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY07 FY08 FY09 FY10 FY11 FY12
Slide 8: Capacity and Peak Demand Balance
Capacity and Peak Demand Balance FY 2009 Capacity Peak Demand Transmission Other Losses 804 458 2% 1% Purchases 4,788 Direct-Served Reserves 13% Industries 5,989, 2,257 16% 6% Coal = Gas 14,222 6,169 39% 17% Distributors Hydro 27,771 4,560 Nuclear 75% 12% 6,624 18% 36,821 MW 36,821 MW Difference bet
Slide 9: Energy
Energy
Slide 10: Trend of Energy Requirements
Trend of Energy Requirements (billion kWh) 200 190 187.2 FY04-08 CAGR 185.0 1.9% 181.9 181.9 179.8 180 175.3 174.3 168.5 170 160 2004 Actual 2005 Actual 2006 Actual 2007 Actual 2008 Forecast 2008 Original 2009 Forecast 2009 Original Excludes off-system sales 2008 to 2009 Change in Sales FY08 weather
Slide 11: Energy Supply and Sales Balance
Energy Supply and Sales Balance FY 2009 Supply Sales Hydro Gas Transmission Losses 7.9 billion 3.7 billion & Other Directly Served 7.4 billion kWh kWh kWh Industries 4% 4% 34.7 billion kWh 19% Purchases 18.3 billion kWh 10% = Coal 99.1 billion kWh Nuclear Distributors 53.3 billion kWh 54% 140.2 bill
Slide 12: Financial
Financial
Slide 13: Financial Guiding Principles
Financial Guiding Principles Pay debt-like obligations before assets are fully depreciated New capacity will support new debt Operating and Maintenance costs are targeted to be top quartile
Slide 14: Paydown of Debt-Like Obligations
Paydown of Debt-Like Obligations 30,000 25,000 Bellefonte 20,000 Prepayments $ M illio n s 15,000 Leases 10,000 Existing Debt 5,000 Operating Equity - 2007 2012 2017 2022 2027 2032 2037 2042
Slide 15: Operations & Maintenance Expense
Operations & Maintenance Expense O&M Base O&M Outage O&M Projects Reagents/Emission Allow. $3,000 FY04-09 CAGR 0.6% (Base, Outage & Projects) $2,500 $2,000 $1,500 $1,000 $500 $0 FY 2004 Actual FY 2005 Actual FY 2006 Actual FY 2007 Actual FY 2008 Forecast FY 2009 Budget Excludes EE&DR expenses FY 200
Slide 16: 2009 Capital Budget - $2.088 billion
2009 Capital Budget - $2.088 billion Generation Capacity Expansion Clean Air Watts Bar Unit 2 Bull Run FGD Lagoon Creek CC John Sevier FGD Gleason CC Kingston FGD Caledonia CT Colbert Units 1-4 SCR Brownsville CT Gallatin Low Cost Nox Control Nuclear/Hydro Uprates Shawnee SCR $1,056 million $232 mil
Slide 17: Fixed Cost Trends
Fixed Cost Trends $8,000 FY04-09 CAGR 2.0% $6,000 $5,568 $5,354 (in millions) $5,046 $5,079 $4,985 $5,102 $4,000 $2,000 $0 2004 2005 2006 2007 2008 Forecast 2009 Budget O&M Depreciation Interest Taxes EE&DR Biggest driver of increase in Fixed Cost Rate from 06-09 is the increases in Tax Equivalent P
Slide 18: Fuel and Purchased Power Expense
Fuel and Purchased Power Expense $8,000 Oil & Gas $6,302 Nuclear 5% R2 $6,000 Purchased Power AG Coal 4-0 9C FY0 (in millions) $4,297 $4,000 $3,498 $3,263 $2,534 $2,034 $2,000 $0 2004 2005 2006 2007 2008 Forecast 2009 Budget 2008-09 Changes: •Coal – Driven by prices •Gas – Predominantly driven by vo
Slide 19: Financial Statements
Financial Statements
Slide 20: Summary Statements of Cash Flows
Summary Statements of Cash Flows 2008 2009 (in millions) Forecast Budget Cash from Operations $ 1,879 $ 2,399 Base Capital Projects (609) (542) Clean Air Capital (314) (232) Capacity Expansion (1,109) (1,314) Nuclear Fuel Capital (256) (410) AFUDC (19) (56) Other Investing Activities 28 (8) Total In
Slide 21: Drivers of Cash Flow Shortfall
Drivers of Cash Flow Shortfall (in millions) FY08/09 Working Capital/Inventory (260) Purchased Power Agreements (50) EE&DR (65) Total Cash Shortfall $ (375)
Slide 22: Working Capital / Inventory
Working Capital / Inventory Working Capital Customer Payment – 30 days Coal, Purchased Power, Gas Payment – 15 days Average 15 day Cash Gap Inventory Average delivered coal price up 58% over FY08 Average 25 days of coal inventory
Slide 23: Cash Shortfall Recommendation
Cash Shortfall Recommendation Short-term borrowing of $375 million in 2008 to cover cash shortfall Base rate increase in 2009 expected to recover $275 million of cash shortfall Remaining $100 million of 2008-09 cash shortfall will be managed through short-term borrowing in 2009 and recovered in rate
Slide 24: Summary Statements of Cash Flows
Summary Statements of Cash Flows including rate adjustment 2008 2009 (in millions) Forecast Budget Cash from Operations $ 1,879 $ 2,674 Base Capital Projects $ (609) $ (542) Clean Air Capital $ (314) $ (232) Capacity Expansion $ (1,109) $ (1,314) Nuclear Fuel Capital $ (256) $ (410) AFUDC $ (19) $ (
Slide 25: Rate Adjustment
Rate Adjustment Base Non-Fuel Base Fuel Core FCA DAR FCA/DAR Change Base Change $90.00 $11.20 $2.05 $79.41 $80.00 $66.16 $70.00 $60.00 $ per MWH $50.00 20% Total Increase on average wholesale firm rates $40.00 $30.00 $20.00 $10.00 $0.00 4Q 08 FCA / DAR ~$275M 1Q 09 DAR – Deferred Account Rate: Recon
Slide 26: National Rate Pressures
National Rate Pressures - May 7, 2008 - May 27, 2008 Expect a jolt when opening the Supply-demand imbalance boosts electric bill oil prices - June 24, 2008 - June 25, 2008 Coal producers struggle to meet Dominion's 18 percent increase demand likely only the beginning The COMMERCIAL - June 16, 2008 A
Slide 27: Monthly Bill Comparisons
Monthly Bill Comparisons 1,000 kWh per Month Residential Service Includes customer charges, but excludes taxes Annual averages calculated for those with seasonal rates • Includes customer charges & excludes taxes • Uses annual average • Assumes $275M cash recovery in FY09
Slide 28: 2009 Budget Summary
2009 Budget Summary
Slide 29: Operating Budget Expenses
Operating Budget Expenses (millions of dollars) Operating Expenses Fuel & Purchased Power (6,650) Operation, Maintenance, & Other (2,555) Interest and Other (1,306) Tax Equivalents (627) Subtotal (11,138)
Slide 30: 2009 Operating Budget Summary
2009 Operating Budget Summary Total Operating Budget expenses of $12.613 billion (fuel, purchased power, O&M, interest and other expenses of $11,138 billion) Fuel and purchased power increasing $2.380 billion due to price increases for coal, natural gas and power purchases Productivity improvements
Slide 31: Recommendation
Recommendation Request the TVA Board approve the 2009 budget including: 2009 Operating Budget of $12.613 billion including the contracting plans for fossil fuel, purchased power and nuclear fuel 2009 Capital Budget of $2.088 billion (Base, Capacity Expansion and Clean Air) including those projects r
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