Frequently Asked Questions About TVA Securities

How do I purchase TVA securities?
Does the U.S. government guarantee TVA securities?
Are the principal and interest payments on TVA securities tax-exempt?
Are Putable Automatic Rate Reset Securities (PARRS) preferred stock or bonds?
How does the PARRS rate reset work?
How are PARRS rate resets calculated?
How will I be notified if PARRS coupon rates are reset?
Will TVA notify me if I own a TVA security that is going to be called (redeemed)?
How are principal and interest payments on TVA bonds made?
Will I receive a certificate for my investment in TVA securities?
What is the last day a buyer can purchase TVA securities in order to receive the next interest payment?

NOTE: These questions and answers do not provide all information that may be important when considering TVA securities. Please carefully read the relevant Offering Circulars together with the current Information Statement and the information on the recent events section of this Web site.

How do I purchase TVA securities?

TVA securities can be purchased through a broker or other proper financial intermediary.

Does the U.S. government guarantee TVA securities?

TVA bonds and notes are backed solely by the net power proceeds of the TVA power system. They are not obligations of, nor are they guaranteed by, the U.S. government.

TVA offers a variety of bondholder protections, including the requirement that power bonds and discount notes be given first pledge of payment from net power proceeds and the requirement that TVA charge electricity rates sufficient to ensure, among other things, the full payment of annual debt service.

Are the principal and interest payments on TVA securities tax-exempt?

Both principal and interest on TVA securities are generally exempt from state and local income taxes. TVA securities are not exempt from estate, inheritance, or gift taxes or from federal income tax.

Taxes may vary due to individual circumstances. Please consult a tax advisor for specific tax information. The reference in the TVA Act regarding taxation of TVA securities is 16 U.S.C. § 831n-4(d).

Are Putable Automatic Rate Reset Securities (PARRS) preferred stock or bonds?

Although PARRS resemble the structure of preferred stock, they are in fact TVA debt securities that pay interest on a quarterly basis. These securities are listed on the New York Stock Exchange under the symbols TVC and TVE for ease of trading. TVA is wholly owned by the U.S. government and is not authorized to issue stock.

How does the PARRS rate reset work?

Both TVC and TVE bonds contain a provision that provides for a possible reduction (never an increase) in the coupon rate under certain conditions every year until maturity, beginning on the date specified in the offering circular and/or supplement. If the coupon rate is reduced, the owner of the bond has the option to put (return) the bond to TVA at par value. Certain dates and procedures must be followed. The instructions for redeeming the bonds with TVA are included in the legal notices attached to the offering circulars.

How are PARRS rate resets calculated?

See PARRS Rate Reset Calculation

How will I be notified if PARRS coupon rates are reset?

TVA will send a notice of reset to The Depository Trust Company (DTC). Unless you are a direct participant in DTC’s book-entry system, you should make arrangements with the financial institution holding your bonds to send you reset notices.

TVA may also issue a news release prior to a rate reset, and make information available on its website. View TVA news releases. Additionally, TVA typically sends an e-mail alert to investors when news is available about the PARRS or electronotes(R). You can sign up for TVA investor e-mail alerts on TVA’s investor home page.

Will TVA notify me if I own a TVA security that is going to be called (redeemed)?

In most cases, TVA will give a 30-day prior notice of its intent to call a security. Depending on the security, TVA will notify either The Depository Trust Company or the Federal Reserve System. These organizations are responsible for notifying their participating brokers, banks, or financial institutions, and these entities in turn are responsible for notifying individual investors.

TVA also issues a news release prior to a call. View TVA news releases. You can sign up for TVA’s e-mail alert, which automatically sends a notice when a financial news release is posted to the Web site.

How are principal and interest payments on TVA bonds made?

TVA makes principal and interest payments electronically on the date the payment is due (or the first business day following a payment date that occurs on a weekend or holiday) through either the Federal Reserve System or The Depository Trust Company, depending upon which system TVA employed in issuing the securities for which payments are being made.

These organizations forward payments directly to their participating brokers, banks, or other financial institutions, and these entities in turn forward payments to individual investors.

Will I receive a certificate representing my investment in TVA securities?

No. The use of an electronic system for issuance of TVA securities eliminates the need for certificates.

What is the last day a buyer can purchase TVA securities in order to receive the next interest payment?

If the bonds have been issued through the book-entry system of the U.S. Federal Reserve Banks, the “holder” must be the owner of record on the business day immediately before the relevant interest payment date. If the bonds have been issued through the book-entry system of The Depository Trust Company, the holder must be the owner of record on the appropriate record date, which is often 15 calendar days before the relevant interest payment date. However, you may be a “beneficial owner” and not be a holder in these systems. Your broker can tell you what time frames apply to beneficial owners.