TVA Balancing Portfolio, Reports 2nd Quarter Results
May 4, 2012
KNOXVILLE, Tenn. ― In its second quarter earnings call Friday, the Tennessee Valley Authority outlined how it is continuing its strategy toward more natural gas and nuclear energy as elements of a balanced energy generation mix for the Tennessee Valley.
With TVA board approval of a new estimate to complete the second nuclear unit at Watts Bar and the John Sevier Combined Cycle Gas Plant coming online $30 million under budget and ahead of schedule, TVA is moving ahead with its vision to provide cleaner, low-cost energy.
“John Sevier is the fifth combined cycle gas plant we have built, bought or leased in the past five years, and Watts Bar Unit 2 will add a second, almost identical unit to a current single-unit site. This will improve both the volume and the cost of clean energy from Watts Bar,” President and CEO Tom Kilgore said.
“Together, these facilities signal our continuing commitment to cleaner and lower cost generation that will help us achieve our vision goals of low rates, high reliability and responsibility.”
Chief Financial Officer John Thomas announced second quarter earnings. Electricity sales declined 5.9 percent for the first half of fiscal year 2012, compared with the same period last year, as the TVA service region continued to experience unseasonably warm weather, TVA said in its quarterly report to the Securities and Exchange Commission.
This winter was one of the warmest on record and utilities across the region have reported lower revenue because of reduced heating needs for homes and businesses.
Local power companies served by TVA, whose residential sales are typically more sensitive to temperature changes, purchased 7.4 percent less in the first six months of 2012, compared with the same period last year, while sales to TVA’s industrial customers grew 0.4 percent.
“The good news is that power rates are lower for our customers, in part because of lower fuel costs for TVA,” Thomas said. “However, with the impact of the milder weather we are now projecting revenues to be 7 percent lower than originally planned for the fiscal year.”
Total revenues declined 10.8 percent, or $624 million, to $5.2 billion in the first six months of 2012, compared with the same period last year. The decline was driven primarily by a $386 million decrease in base revenues and a $236 million reduction in fuel cost recovery. Base revenue declined primarily due to the mild weather, which lowered both electricity sales and the average effective rate charged to customers. Under a TVA wholesale rate structure effective since April 2011, weather conditions can lower the effective rate for local power companies by reducing peak demand charges.
“In response to our lower revenue forecast, we are looking for every opportunity for cost savings and greater efficiency, from reprioritizing capital projects to reducing travel,” Thomas said. “We will continue to make adjustments in our operations and consider other productivity enhancements throughout the year.”
In addition, Thomas said TVA is enhancing its Valley Investment Initiative program, providing incentives to industries to expand, locate or stay in the region and opportunities for future sales growth.
Helping to lower power rates to customers, TVA’s fuel expense was $323 million lower in the first six months of 2012 compared with the same period last year. Lower market prices for natural gas and more generation from lower-cost sources, particularly hydroelectric power, contributed to lower expense.
Generation from gas-fired and hydroelectric facilities was 130 percent and 25 percent higher, respectively, in the first six months of 2012, compared with the same period last year to take advantage of low-cost fuel options, while coal-fired generation declined 35 percent.
TVA reported a $267 million net loss in the first six months of 2012, compared with net income of $205 million reported for the first six months of last year.
TVA executive management will host a quarterly financial conference call at 10:00 a.m. EDT on Friday, May 4, 2012. The conference call can be accessed on TVA’s website via webcast at http://www.tva.com/finance. For quick access to the live conference call, please pre-register now by going to TVA’s website before the scheduled start time and follow the instructions provided. Once pre-registered, the dial-in number will be provided via an email. If you are unable to pre-register, you may also access the conference call by dialing toll free (877) 270-2148 in the United States or in Canada, or (412) 902-6510 outside the United States. A replay will be available one hour after the end of the conference call until 9:00 p.m. EDT, May 11, 2012 by calling toll free (877) 344-7529 in the United States or (412) 317-0088 outside the United States and using the conference number 10011499. A webcast replay and transcript will also be available for one year on TVA’s website at http://www.tva.com/finance.
TVA’s quarterly report on Form 10-Q provides additional financial, operational and descriptive information, including unaudited financial statements for the quarter ended March 31, 2012, and is available to investors and the public. The public may read reports or other information that TVA files with the SEC at its Public Reference Room at 100 F Street N.E., Washington, DC 20549. TVA SEC reports are also available without charge on TVA’s website at http://www.tva.com/finance or on the SEC’s website at http://www.sec.gov or by calling TVA toll free at (888) 882-4975.
TVA provides electricity for utility and business customers in most of Tennessee and parts of Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia to a population of over 9 million people.
(This release may contain forward-looking statements relating to future events and future performance. Although TVA believes that the assumptions underlying these statements are reasonable, numerous factors could cause actual results to differ materially from those in the forward-looking statements. Please refer to TVA’s quarterly report on Form 10-Q for a list of factors that could cause actual results to differ from those in the forward-looking statements.)
Media Contact: Duncan Mansfield, Knoxville, (865) 632-4660
TVA Media Relations, Knoxville, (865) 632-6000
Investor Relations: Ann Storberg, Knoxville, (865) 632-4425
or (888) 882-4975