Weather, Plant Outages Impact TVA’s 2011 Results
KNOXVILLE, Tenn. ― The Tennessee Valley Authority made progress in 2011 toward its vision of leadership in cleaner, low-cost power despite major storm damage and a decline in electricity demand due to seasonal temperatures and sluggish economic conditions, the public utility said in its annual report Friday.
Electricity sales slipped 3.4 percent to 167,730 gigawatt-hours compared with the previous year, as TVA’s service area experienced fewer temperature extremes, despite a chilly early winter and hot late summer, to drive demand for heating or cooling in fiscal year 2011, which ended on Sept. 30, 2011.
Total revenues rose 8.9 percent, or $1.0 billion, to $11.8 billion compared with last year, driven primarily by fuel rate increases resulting from higher fuel costs, which more than offset the lower demand for electricity. While all utilities experience fuel price volatility, TVA’s power rates remain below the national average.
"In fiscal 2011, TVA faced a number of challenges that impacted our operations and financial condition, but we also marked significant accomplishments that will help us achieve our vision as we serve the Tennessee Valley,” President and CEO Tom Kilgore said.
TVA’s transmission system marked its 12th consecutive year of superior dependability by operating with a 99.999 percent reliability rate for delivering power to customers. Additionally, while economic recovery generally remained slow, TVA’s economic development efforts in 2011 helped attract or retain about 43,000 jobs in the region, and the opening of the Volkswagen factory in Chattanooga was a highlight of the year.
Also during the year, the TVA board of directors accepted an Integrated Resource Plan to provide a roadmap to the region’s energy future and approved completion of a nuclear reactor at the Bellefonte Nuclear Plant in Alabama.
Unprecedented storms hit the TVA service area in late April, leaving hundreds of thousands of Tennessee Valley households and businesses without power. The event cost TVA $39 million for structural repairs, and $95 million in replacement power that was recovered through TVA’s monthly fuel rate adjustment. TVA successfully maintained the stability of the TVA power system and restored service to 121 of 128 customer connections and some power to most large industries within five days.
“TVA employees did a tremendous job responding to this event. More than 4,000 TVA workers labored around the clock to get the job done,” Kilgore said.
Additional challenges included construction delays on two major projects and a Nuclear Regulatory Commission “red finding” at Browns Ferry Nuclear Plant. The finding, which prompts increased NRC scrutiny, resulted from a defective valve that TVA identified and reported.
“The safe operation of our power system is TVA’s top priority, and we work to continually improve our operations as we deliver reliable, low-cost electricity to our customers,” said Kilgore.
Supporting TVA’s Integrated Resource Plan, TVA entered into landmark clean-air agreements in April with the U.S. Environmental Protection Agency and other parties that will lead to the retirement of 18 of TVA’s 59 coal-fired units by Dec. 31, 2017, and provide a clear path for more reliance on low-cost, cleaner energy in the future.
Operating expenses rose $1.8 billion, or 20.5 percent, in 2011 compared with 2010, driven by an increase in fuel and purchased power expense of $1.1 billion over last year and a $385 million increase in operating and maintenance expense. Contributing to higher operating and maintenance expense was a $200 million increase in expenses related to refueling outages at five nuclear units, a $70 million increase in expenses related to maintenance projects to increase plant operating efficiencies and effectiveness, write-offs of obsolete inventory and capital assets, and a full year of operating expenses at TVA’s recently built Lagoon Creek Combined Cycle Plant. Additional expenditures during 2011 related to other initiatives to support TVA’s vision, including $27 million for performance initiatives, $25 million to support economic development, and $14 million to support energy efficiency and demand response initiatives.
”TVA ended fiscal year 2011 with a stronger balance sheet than in 2010, including a year-end balance of $507 million in cash and cash equivalents compared with $328 million at the end of last year,” Chief Financial Officer John Thomas said. “This positions us well going into fiscal year 2012, as we have a number of major capital projects in progress or planned for construction that will support TVA’s vision.”
Following a downgrade of the U.S. credit rating, one of three rating agencies lowered TVA’s triple-A credit ratings by one notch in 2011. The rating action did not reflect a change in TVA’s underlying credit quality, and TVA’s funding costs actually benefitted from lower interest rates in 2011. Interest expense in 2011 was higher than 2010 because of increased funding for major capital projects, rather than higher interest rates. TVA is a government-owned corporation that does not make a profit and receives no taxpayer money. While TVA bonds are not guaranteed by the United States, TVA’s ratings reflect government ownership, among other factors.
TVA reported $162 million in net income for reinvestment in fiscal year 2011, a decrease of $810 million from last year.
TVA executive management will host a fiscal year-end 2011 financial conference call at 9:00 a.m. EST on Friday, Nov. 18, 2011. The conference call will be up to one hour in length. 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 (866) 652-5200 in the United States or in Canada, or (412) 317-6060 outside the United States. A replay will be available one hour after the end of the conference call until 9:00 p.m. E.T., Nov. 25, 2011 by calling toll free (877) 344-7529 in the United States or (412) 317-0088 outside the United States and using the conference number 10006636. A webcast replay and transcript will also be available for one year on TVA’s website at http://www.tva.com/finance.
The annual report on Form 10-K report also includes compensation information for top TVA executives as required by the U.S. Securities and Exchange Commission.
TVA’s annual report on Form 10-K provides additional financial, operational and descriptive information, including audited financial statements for the year-ended Sept. 30, 2011, 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 nine 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 annual report on Form 10-K for a list of factors that could cause actual results to differ from those in the forward-looking statements.)
Duncan Mansfield, Knoxville, (865) 632-4660
TVA Media Relations, Knoxville, (865) 632-6000
Ann Storberg, Knoxville, (865) 632-4425 or (888) 882-4975