Financing Goal
TVA’s financing goal is to offer unique investment opportunities that provide exceptional value for both the investor and TVA. TVA securities may be issued only to provide capital for TVA’s power program, including refunding of existing debt.
Capital Structure
TVA is a self-financed, wholly owned federal corporation that receives no appropriations from the federal government. TVA’s federal charter, the TVA Act, limits the ways it can raise capital to fund its operations. TVA is not authorized to issue stock, so it must meet its capital requirements through internally generated funds and power program financings. This results in a capital structure that is very different from that of an investor-owned utility (IOU) and also helps explain why TVA’s debt levels are generally higher than the debt levels of IOUs with similar levels of total capitalization.
TVA securities are backed solely by the net power proceeds of the TVA power system and are neither obligations of nor guaranteed by the U.S. Government.
Key Strengths of TVA Securities
- TVA’s rated bonds are rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s and Fitch Ratings.
- The TVA Act requires TVA to set power rates sufficient to pay, among other things, debt service on outstanding bonds.
- All TVA bonds and discount notes are senior debt and holders of these securities are given first pledge of payment from net power proceeds.
- Both principal and interest on TVA securities are generally exempt from state and local income taxes. TVA securities are not exempt from estate, inheritance, and gift taxes or from federal income tax.
- Some issues contain a survivor’s option that allows for the redemption of the bonds at par value upon the death of the beneficial owner (subject to certain limitations).
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