Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — Corporate Update (November 2011)
80 slides from Tennessee Valley Authority's corporate update, November 2011
Slide 1: Our Vision
Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 Low Rates Cleaner Air High Reliability More Nuclear Generation Responsibility Greater Energy Efficiency Acting to meet the region’s needs for the future, while improving our core business today.
Slide 2: President's Report
President’s Report 2
Slide 3: Our Vision
Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 Low Rates Cleaner Air High Reliability More Nuclear Generation Responsibility Greater Energy Efficiency Acting to meet the region’s needs for the future, while improving our core business today.
Slide 4: Our Vision: Low Rates
Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020
Slide 5: Average Firm Wholesale Rate per MWh
per MWh 5 $‐ $60.00 $70.00 $10.00 $20.00 $20 00 $30.00 $40.00 $40 00 $50.00 $80.00 $90.00 Oct‐08 Nov‐08 Dec‐08 Jan‐09 Feb‐09 Mar‐09 Apr‐09 May‐09 Average Jun‐09 Jul‐09 Aug‐09 Sep‐09 Oct‐09 Nov‐09 Dec‐09 Base Non‐Fuel Rate Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Total Fuel Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐
Slide 6: Top 100 Utilities' Retail Rates
Top op 100 00 U Utilities’ es Retail e a Rates a es TVA ‐ 40th of 100 0 5 10 Jul 2010 – Jun 2011 15 20 25 *TVA rate estimated. Source: EIA‐826 and ESS 6
Slide 7: Top 100 Utilities' Retail Rates
Top op 100 00 U Utilities’ es Retail e a Rates a es Gulf Power: 4% Increase S. Carolina Electric & Gas: 2.4% Increase Alabama Power: 3% Increase TVA Duke Energy Carolinas: 15% Request Kentucky Utilities: 9.89% Increase 0 5 10 Jul 2010 – Jun 2011 15 20 25 *TVA rate estimated. Source: EIA‐826 and ESS
Slide 8: Our Vision: High Reliability
Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 High Reliability
Slide 9: Paradise Sets 2-Unit Record
Paradise Sets 2-Unit Record 9
Slide 10: 3-Unit Continuous Run Record at Browns Ferry
3-Unit Continuous Run Record at Browns Ferry 10
Slide 11: Our Vision: Responsibility
11 Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 Responsibility
Slide 12: A Century of Service
A Century of Service 12
Slide 13: Recent Economic Development
Recent ece Economic co o c Development e e op e TVA named one of the nation’s Top 10 economic developmentp utilities for 6th straight year 4th Quarter Capital Investment: $1.6 billion N and New d Retained R i d JJobs: b 8 500 8,500 13
Slide 14: New Auto Plant Begins Operation
New e Auto u o Plant a Begins eg s Ope Operation a o Toyota Plant in Blue Springs, Mississippi 14
Slide 15: Hemlock Semiconductor connects to the TVA System
Hemlock Semiconductor 15 connects to the TVA System
Slide 16: Helping the Community
Catholic Charities ‐ Columbus Home Room in the Inn Tennessee River Gorge Cleanup Helping the Community 16
Slide 17: TVA Engineer of the Year
TVA Engineer of the Year 17
Slide 18: Fiscal Year 2011 Financial Highlights
Fiscal Year 2011 Financial Highlights 18
Slide 19: Fiscal Year 2011 Summary
Fiscal sca Year ea 2011 0 SuSummary ay Year over year energy growth impacted by April storms and decreased sales to commercial / industrial sectors Non Fuel O&M unfavorable due to increased scope of Non‐Fuel nuclear projects and outages plus April storm impacts Fuel expenses on‐target; market price
Slide 20: Summary Income Statement
Summary Su a y Income co e S Statement ae e Preliminary September 2011 Fiscal Year to Date YTD YTD (in millions) Actual Budget Variance Operating Revenue $ 11,841 $ 11,846 $ (5) Fuel & Purchased Power 4,353 4,344 (9) Operations & Maintenance 3,617 3,436 (181) •• Nuclear outages April storm recovery
Slide 21: Summary Cash Flow Statement
Summary Su a y Cas Cash Flow o SStatement ae e Preliminary September 2011 Fiscal Year to Date YTD YTD Ctl Fiscal Year to Date (Millions of Dollars) Actual Bud Variance Beginning Cash and Short Short‐term term Investments $ 328 $ 201 $ 127 Cash Flow from Operating Activities $ 2,437 $ 2,059 $ 378 •Wo
Slide 22: Improving Debt Service Coverage
Improving p o g Debt eb Se Service ce Co Coverage e age Since 2006, TVA has substantially improved its coverage of debt service 22
Slide 23: Summary: Highlights and Hard Spots
Summary Highlights g g Hard Spots p Low commodity prices Longer nuclear refueling (natural gas) outages Reasonable rainfall Storm impacts and seasonal asset performance Non Non‐cash cash expenses (pension, tax equivalents) Historic low interest rates Sluggish economy Added low‐cost g
Slide 24: Fiscal Year 2012 Look Ahead
Fiscal Year 2012 Look Ahead 24
Slide 25: Fiscal Year 2012 Look Ahead
Fiscal sca Year ea 2012 0 Look oo Ahead ead Sluggish Economy Change In Sales (GWh) FY 12 Budget 1.4% 1 4% 0 + 2.6% Growth Rate Sales Softer Recovery $120 $ 0 (2,600) million Growth + 1.4% Scenarios: No Growth Base Revenue 0% (5,400) Impact Recession ‐3.5% (10,800) 25
Slide 26: Fiscal Year 2012 Look Ahead
Fiscal Year 2012 Look Ahead Highlights g g Hard Spots p Lower interest rates Weak end to Fiscal Year continue 2011 sales Stable fuel and Reduced outlook for sales purchased‐power prices in 2012 expected Managing increased Actively managing capital project scope spending Market volatili
Slide 27: Our Vision
27 Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 Low Rates Cleaner Air High Reliability More Nuclear Generation Responsibility Greater Energy Efficiency Acting to meet the region’s needs for the future, while improving our core business today.
Slide 28: Customer and External Relations Committee
C t Customer and dEExternal t lRRelations l ti Committee 28
Slide 29: EnergyRight Solutions Framework
EnergyRight Energ Right Solutions Sol tions Framework 29
Slide 30: Fiscal Year 2011 Highlights
Fiscal sca Year ea 2011 0 Highlights g g s Major Industrial Program (> 5 MW) EnergyRight Solutions for Business 38 projects 908 projects 133 GWh and 14 MW saved 121 GWh and 19 MW saved Heat Pump Program Over 10,000 installations Online Audit 559 GWh Achieved 373 MW Reduction 36 GWh saved Exceeded go
Slide 31: Path Forward
Path a Forward o ad Broadening our EnergyRight Solutions brand to include energy efficiency, demand response, and our renewable pprograms g under one umbrella 31
Slide 32: Path Forward
Path a Forward o ad Programs Education Resources H Homes F H For Homes Green Power Providers Business For Kids Standard Offer Industry For Business Renewable Energy Power Purchase Agreements Demand Response TVA‐owned Renewable Resources 32
Slide 33: Scorecard Under Development
Scorecard Sco eca d U Under de Development e e op e 33
Slide 34: Solar Solutions Initiative Pilot
Solar So a So Solutions u o s Initiative a e Pilot o Economic development incentive for solar projects in the Valley that use equipment manufactured and installed byy companies p in the Valley Projects must be between 50 and 1,000 kilowatts Li it d tto 10 megawatts Limited tt per year Two‐year pilot
Slide 35: Energy Efficiency Forum
Energy e gy Efficiency c e cy Forum ou Februaryy 21 and 22,, 2012 Two‐day regional forum in Nashville Create a strong base of awareness and interest i EEnergy Effi in Efficiency i and d Demand D d Response R Participants will include power distributors distributors, direct‐serve customers, ind
Slide 36: Green Power Providers
Green G ee Power o e Providers o de s Board approval is requested to replace the current Generation Partners Pilot with a sustainable,, long‐term g program p g to incentivize installation of small renewable generation projects 36
Slide 37: Green Power Providers
Green G ee Power o e Providers o de s Eligible renewable resources ‐ solar, wind, biomass, and hydro Maximum project size of 50 kilowatts Participants receive initial incentive payment of $1,000 Contract C t t tterm up tto 20 years Participation expanded to include TVA direct served custom
Slide 38: Solar Costs Going Down
Solar So a Cos Costs s Go Going g Down o Source: US Department of Energy 38
Slide 39: Solar Premium for Residential Projects
Solar Premium for Residential Projects j 39
Slide 40: Green Power Providers
Green G ee Power o e Providers o de s Program will be sustainable in the long term while still providing sufficient incentive for p participation p Continues to provide economic benefits to the Tennessee Valley Aligns with Ali ith th the IIntegrated t t dRResource Pl Plan and d TVA’s Vision 40
Slide 41: Recommendation
Recommendation eco e da o Board approval for the proposed transition to the Green Power Providers Program 41
Slide 42: Customer and External Relations Committee
C t Customer and dEExternal t lRRelations l ti Committee 42
Slide 43: Finance, Rates, and Portfolio Committee
Fi Finance, R Rates, t and dPPortfolio tf li Committee 43
Slide 44: Off-Peak Pricing Product Overlay
Off-Peak Off Peak Pricing Prod Product ct Overlay 44
Slide 45: For Board Consideration
For o Board oa d Co Consideration s de a o Board approval for a three‐year pilot of an off‐peak pricing overlay to the Seasonal Demand and Energy gy Rate for customers with loads greater than five megawatts 45
Slide 46: Average Hourly System Loads - June
Average g Hourly y System y Loads - June 28,000 26,000 Total SSystem Load Megawatts 24,000 22,000 20,000 TVA’s minimum generation is approximately 17,500 megawatts 18,000 When loads are below this level,, TVA must “turn‐down” economic 16,000 generating units 14,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1
Slide 47: Pricing Ranges
Pricing c g Ranges a ges Summer April through October Seasons Winter November through March Summer $60 ‐ $100 per MWh On‐Peak Winter $50 ‐ $75 per MWh Summer $40 ‐ $55 per MWh Shoulder Winter $40 ‐ $55 per MWH Summer $30 ‐ $45 per MWH Targeted Off‐Peak Winter $25 ‐ $40 per MWH 47
Slide 48: Recommendation
Recommendation eco e da o Board approval for a three‐year pilot of an off‐peak pricing overlay to the Seasonal Demand and Energy gy Rate for customers with loads greater than five megawatts 48
Slide 49: Section 13 Tax Equivalent Payments
Section 13 Ta Tax Eq Equivalent i alent Payments 49
Slide 50: For Board Consideration
For o Board oa d Co Consideration s de a o Approval of the final tax equivalent payments to the states and counties for Fiscal Year 2011 Approvall off the h estimated d tax equivalent l payments to the states and counties for Fiscal Year 2012 50
Slide 51: Background
Background ac g ou d TVA Act requires five percent of TVA’s gross proceeds from power sales to be redistributed as tax equivalent payments The payments are determined by the following criteria: 50% from f the h states’’ book b k value l off power properties i compared to TVA total power properties
Slide 52: Historical Tax Equivalent Payment Data
Historical Tax Equivalent q Payment y Data Final Final Final Final Estimated State FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Alabama $ 112 $ 120 $ 125 $ 116 $ 120 Georgia 7 8 9 9 9 Illinois <1 1 1 <1 1 Kentuckyy 43 46 49 47 46 Mississippi 26 32 35 33 40 North Carolina 3 3 3 3 3 Tennessee 265 295 327 3
Slide 53: Recommendation
Recommendation eco e da o Approval of the final tax equivalent payment of $530 million to the states and counties for Fiscal Year 2011 Approval of the estimated tax equivalent payment allocations of $567 million to the states and counties for Fiscal Year 2012 53
Slide 54: John Sevier Contractual Service Agreement
John Se Sevier ier Contract Contractual al Service Agreement 54
Slide 55: For Board Consideration
For o Board oa d Co Consideration s de a o Request approval to enter into a long‐term service agreement with General Electric for the three ggas turbines installed at John Sevier Maximum amount of $120 million Contract term based on a fixed amount of operational ti l hours h adjusted dj t d for
Slide 56: Background
Background ac g ou d Inspection, outage and other services along with replacement parts for the plants will be needed and these types yp of agreements g are industryy standard practice TVA evaluated other contractor proposals as well as self‐performing this work and the proposed action was determine
Slide 57: Recommendation
Recommendation eco e da o Request approval to enter into a long term service agreement with General Electric for the three new ggas turbines at TVA’s John Sevier p plant 57
Slide 58: Nuclear Oversight Committee
N l Nuclear O Oversight i ht Committee 58
Slide 59: Audit, Risk, and Regulation Committee
A dit Ri Audit, Risk, k and dRRegulation l ti Committee 59
Slide 60: Selection of TVA's External Auditor for Fiscal Year 2012
Selection of TVA’s EExternal ternal Auditor for Fiscal Year 2012 60
Slide 61: People and Performance Committee
P People l and dPPerformance f Committee 61
Slide 62: Performance Report
Performance Report 62
Slide 63: Our Vision
63 Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 Low Rates Cleaner Air High Reliability More Nuclear Generation Responsibility Greater Energy Efficiency Acting to meet the region’s needs for the future, while improving our core business today.
Slide 64: Future Performance Goals
Future Performance Goals 64
Slide 65: Fiscal Year 2011 Summary
Fiscal sca Year ea 2011 0 SuSummary ay At or Above Plan Below Plan Fossil Construction Nuclear River Operations Nuclear Construction Power System Operations Strategy and External Relations TVA Corporate Support Fossil Generation Performance average for all of TVA is 107% relative to plan 65
Slide 66: For Board Consideration
For o Board oa d Co Consideration s de a o Corporate performance measures and goals for the Winning Performance Team Incentive Plan and the Executive Annual Incentive Plan for Fiscal Year 2012 Adjustments to the Executive Long‐Term Incentive Plan (ELTIP) goals for the Fiscal Years 2011 2011‐2013
Slide 67: Annual Performance Corporate Measures
Annual Performance Corporate p Measures Fiscal Year 2012 Weight Performance Threshold Target Stretch Net Cash Flow $161M 50% $0 $200M $400M ($ Millions) (2011) Nuclear Equivalent 89.1% 25% 89.2% 90.1% 92.2% Availability Factor (2009‐11) Critical Fossil Seasonal 8.9% Equivalent Forced Outage 25% 8.5%
Slide 68: Executive Long-Term Incentive Measures
Executive Long-Term g Incentive Measures Fiscal Year 2011‐ 2013 Performance Cycle Weight Performance Threshold Target Stretch Improve to Improve to IImprove to 11% gap 10.75% gap 9% gap vs. Retail Rate 40% 10% gap vs. (2011) vs. Top Top Top Quartile Quartile Quartile 7.8 4.9 5.9 3.8 Load Not Served
Slide 69: Executive Long-Term Incentive Measures
Executive Long-Term g Incentive Measures Fiscal Year 2012 – 2014 Performance Cycle Weight Performance Threshold Target Stretch Improve to Improve p to Improve p to 11% gap 8% gap vs. vs Retail Rate 40% 10% gap vs. 9% gap vs. (2011) Top Top Quartile Top Quartile Quartile 4.9 7.8 6.8 3.3 Load Not Serv
Slide 70: Recommendation
Recommendation eco e da o Approval of: Corporate performance measures and goals for the Winning Performance Team Incentive Plan and the Executive Annual Incentive Plan for Fiscal Year 2012 Adjustments to the ELTIP goals for the Fiscal Years 2011‐2013 2011 2013 performance cycle Performance mea
Slide 71: Annual Incentive Plan Design Changes
Annual Ann al Incenti Incentive e Plan Design Changes 71
Slide 72: For Board Consideration
For o Board oa d Co Consideration s de a o Revisions in the design of the Annual Incentive Plans effective beginning in Fiscal Year 2012 72
Slide 73: Annual Incentive Plan Design Changes
Annual Incentive Plan Design g Changes g Evaluate performance based equally on corporate and organizational measures Remove funding f d pooll Balance the negative and positive range for the corporate modifier (‐20% / +20%) 73
Slide 74: Recommendation
Recommendation eco e da o Approval of revisions in the design of the Annual Incentive Plans effective beginning Fiscal Year 2012 74
Slide 75: People and Performance Committee
P People l and dPPerformance f Committee 75
Slide 76: Board Governance
Board Governance 76
Slide 77: Committee Appointments and Transition Planning
Committee Appointments and Transition Planning 77
Slide 78: Amendments to TVA Board Practices
Amendments to TVA Board Practices 78
Slide 79: Resolutions Honoring Departing Directors
Resolutions Honoring Departing Directors 79
Slide 80: Our Vision
80 Our VISION ONE OF THE NATION’S LEADING PROVIDERS OF Low-Cost AND CLEANER ENERGY BY 2020 Low Rates Cleaner Air High Reliability More Nuclear Generation Responsibility Greater Energy Efficiency Acting to meet the region’s needs for the future, while improving our core business today.
Tennessee Valley Authority — Corporate Update (November 2011) on 6ix