Chairman's Letter

TVA employees deliver value to the Valley through reliable, affordable energy, cleaner air and water, and a growing economy. Their work today helps build a bright future for the region as a place to live, work, and raise a family.

Energy

The people of TVA carry on a seven-decade tradition of pride in TVA’s mission to improve the quality of life in the Valley. TVA’s affordable electricity is good for families. It also helps business and industries prosper and grow.

Overall, TVA sold a record 166 billion kilowatt-hours of electricity to our customers, earning revenue totaling $7.5 billion. For the fifth year in a row, TVA’s transmission system delivered that power with 99.999-percent reliability. To meet growing power needs, TVA continued work to restart Unit No. 1 at Browns Ferry Nuclear Plant in north Alabama. That work is on schedule and on budget to add 1,280 megawatts of competitively priced base-load power to the TVA system in 2007.

Environment

TVA’s power system performance was complemented by progress in our program to further reduce fossil-plant emissions and continue to improve air quality in the region. In 1995, TVA was the first energy provider in the nation to participate in Climate Challenge, a voluntary Department of Energy program for electric utilities to reduce greenhouse gas emissions. TVA is now supporting the successor to that program, Climate Vision, which has called on the electricity sector and other industry sectors to reduce greenhouse gas intensity by 18 percent between 2002 and 2012. In addition to these activities, TVA is a member of the Southeast Regional Carbon Sequestration Partnership and is working with the Electric Power Research Institute and other electric utilities on projects investigating technologies for carbon dioxide capture and geologic storage.

During the year, TVA invested more than $400 million in clean-air equipment, including the installation of 10 more selective catalytic reduction units to reduce nitrogen oxide emissions. To date, TVA has invested $4 billion in meeting emission requirements. We expect to invest an additional $2 billion by the end of this decade.

TVA manages the Tennessee River system and other natural resources to help make the Valley a cleaner and safer place to live and work. In 2004, TVA adopted a new reservoir operations policy to better manage the competing needs for flood control, navigation, power generation, recreation, and water quality and supply for the benefit of the people we serve.

Economic Development

More than just an energy supplier, TVA is also an important partner with the public officials and community leaders who work to bring quality jobs to the region and keep them here. In FY 2004, TVA and our state and local partners helped attract or retain 50,388 jobs and leveraged investments of $2.1 billion. The jobs created include 400 at a Home Shopping Network distribution center in Sullivan County, Tennessee; 160 at the Wayne Farms poultry facilities in Decatur, Alabama; 100 at Infiniti Media in Paducah, Kentucky; 100 with Bank of New York in Nashville; and 455 in DeSoto County, Mississippi, associated with FedEx Ground operations.

Financial Strength

TVA is making steady progress in improving its financial strength and flexibility, notably in the continued reduction of its total financing obligations. Since the end of FY 1996, TVA has reduced its total financing obligations by $1.8 billion, from $27.7 billion to $25.9 billion at the end of FY 2004. In that time, the amount of each revenue dollar used to pay interest and other financing expenses has declined from 34 cents to 19 cents.

As we look to the future, we believe that innovation is the key to success for TVA and the electric power industry. TVA is investing in the development of transmission technologies, research in clean-coal technology, and expansion of renewable energy sources in partnerships with Oak Ridge National Laboratory, the Electric Power Research Institute, the Department of Energy, and companies in the private sector. Through these partnerships, we are supporting the construction of the largest wind-turbine project in the Southeast, improving the licensing process for nuclear projects, and exploring the potential for building the next generation of nuclear reactors.

These and other innovations should create tomorrow’s opportunities for the region and its people to prosper as TVA carries out its work in energy, the environment, and economic development. My colleagues on the TVA Board – Directors Skila Harris and Bill Baxter – and I are pleased to share this annual report that gives a glimpse of the bright future TVA is helping to bring to the Tennessee Valley and our nation.

Glenn L. McCullough, Jr.
Chairman

Director Bill Baxter poses with Great Smoky Mountains National Park Superintendent Dale Ditmanson at TVA’s official donation of 14 environmentally friendly electric vehicles for use by park personnel. The vehicles had been on loan since 2001 to evaluate their performance and efficiency in a mountainous environment. The study showed that the electric vehicles provided practical and reliable support for the tasks of picking up litter, transporting personnel, and carrying equipment.

Throughout TVA’s 72-year history, female employees have made significant contributions. In 2004, women made up 20 percent of TVA’s workforce, with an increasing presence in engineering and technical fields, trades and labor, manager and specialist positions, and senior management. Above, Director Skila Harris (center) meets with women who work in finance, operations, information technology, and administration at Cumberland Fossil Plant in West Tennessee. On Aug. 23, in a first-ever for TVA Nuclear, an all-female team of Operators staffed the Sequoyah Nuclear Plant Unit 1 control room.