Management’s
Discussion
and Analysis |
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1999 compared
with 1998
Operating
Revenues
Operating revenues were $6,595 million in 1999, compared with $6,729
million in 1998. The $134 million decrease was primarily due to a reduction
in wholesale sales to other utilities related to mild weather and a
weaker spot market for power during 1999.
Sales
of Electricity
millions of
kWh
Operating
Expenses
Total operating expenses increased $377 million, from $4,549 million
in 1998 to $4,926 million in 1999. This increase was primarily due to
a $261 million charge for the acceleration of the amortization of regulatory
assets (see note 1—Accelerated amortization) coupled
with a $111 million increase in the amortization of regulatory assets
attributable to the reclassification of certain nuclear fuel costs (see
note 1—Other deferred charges).
Operating
Revenues & Operating Expenses
millons
Interest
Expense
Net interest expense declined $182 million from $1,959 million in 1998
to $1,777 million in 1999. This reduction largely reflects savings associated
with the refinancing of $3.2 billion of debt issues formerly held by
the Federal Financing Bank. Total outstanding indebtedness as of September
30, 1999, was $26.4 billion, with an average interest rate of 6.83 percent;
as of September 30, 1998, this amount outstanding was $26.7 billion,
with an average interest rate of 7.45 percent.
Outstanding
Debt & Interest Rate
billions
Liquidity and
Capital Resources
Capital
Structure
During the first 25 years of TVA’s existence, the U.S. Government
made appropriation investments in TVA power facilities. In 1959 TVA
received congressional approval to issue bonds to finance its growing
power program. For the past four decades, TVA’s power program has
been required to be self-supporting. As a result, TVA funds its capital
requirements through internal cash generation or through borrowings
(subject to a congressionally mandated $30 billion limit).
A return on the
U.S. Government’s initial appropriation investment in TVA power
facilities, plus a repayment of the initial investment, is specified
by law. The payment for 2000 was $54 million, and total cumulative repayments
and return on investment by TVA to the U.S. Treasury exceed $3 billion.
Capital
Spending
millions
Cash
Flows
Net cash provided by power program operations for 2000, 1999 and 1998
was $1,584 million, $1,431 million and $1,394 million, respectively.
This positive trend reflects improvements made in TVA’s operations
during the three-year period.
Net cash used in
investing activities for 2000, 1999 and 1998 was $1,035 million, $956
million and $742 million, respectively. The $79 million increase from
1999 to 2000 was primarily due
to an increase in construction expenditures of $38 million reflecting
the construction of natural gas combustion turbines for peaking power
and an increase in nuclear fuel enrichment and fabrication costs of
$49 million.
Net cash used in
financing activities for 2000, 1999 and 1998 was $304 million, $763
million and $560 million, respectively. For 2000 the cash used in financing
activities reflects the aggregate net reduction of total outstanding
debt of $391 million coupled with borrowing costs and other
financing costs of $202 million, offset by the proceeds from combustion
turbine financing of $300 million.
Cash
Flows from Operations & Times Interest Earned
millions
Capital
Resources
During 2000, 1999 and 1998 TVA accessed the capital markets through
cost-effective long-term financing structures and continued to expand
its investor base by tapping the global and retail debt markets. During
2000 TVA entered the bond market with seven issues. TVA tapped the retail
markets in February 2000 by issuing five callable bonds totaling $250
million with maturities ranging from five to 30 years. In May TVA issued
12-year bonds with a two-year put feature and a par value of $750 million,
and because of the favorable response, issued an additional $250 million
in July. The final bond offering of $1 billion in June targeted global
investors and reestablished TVA’s benchmark in the 30-year sector.
The proceeds from the borrowings were used to refinance existing debt.
Operating
Revenues & Interest Expense as a Percent of Revenue
milions
In September TVA
received approximately $300 million in proceeds by entering into a lease-leaseback
transaction for eight new peaking combustion turbine units. The proceeds
from this transaction were for the benefit of its power program.
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