Mild Weather Impacts TVA's First Quarter 2012 Results
KNOXVILLE, Tenn., Feb. 3, 2012 /PRNewswire-USNewswire/ -- Milder weather than last year in the Tennessee Valley Authority's service region drove sales of electricity down 5 percent for the three-month period ended Dec. 31, 2011, compared with the same period last year, TVA said Friday in its quarterly report to the Securities and Exchange Commission.
The lower-than-expected sales and resulting lower revenue is causing TVA to revisit expenditures for 2012, which may include project scope and schedule revisions related to operations, revisions of certain programs and initiatives, and other productivity enhancement initiatives.
The milder weather had a more significant impact on electricity sales to TVA's municipal and cooperative distributors than industrial customers, as electricity usage is typically more temperature-driven for residential customers. Sales to local utilities declined 6 percent, while sales to directly served industrial customers were down 1 percent.
Total revenues declined 9 percent, or $260 million, to $2.6 billion in the first quarter of 2012 compared with the same period last year. The decline was driven primarily by a $102 million decrease in revenues from the recovery of fuel costs and a $100 million decrease resulting from lower sales volume due to milder weather.
Temperatures in the first quarter were warmer than normal in the Tennessee Valley, in sharp contrast to the previous year when temperatures were well below normal - December 2010, in fact, was the fifth coldest on record in the Tennessee Valley.
"Weather fluctuations are not something new for TVA, but these uncontrollable conditions impact TVA's financial results," Chief Financial Officer John Thomas said. "TVA can, however, make adjustments in its operations to mitigate some of the impact of lower sales results. We are currently in the process of evaluating planned expenditures for 2012 to determine if certain programs should be revised and are considering other productivity enhancements."
TVA is also taking longer term actions that advance its strategic vision of leadership in low-cost, cleaner energy. These include retiring older, less efficient generating assets and moving to a more diversified portfolio that includes more natural gas and nuclear power.
"During the first quarter of 2012, TVA remained focused on following the new path forward for its energy future," said President and CEO Tom Kilgore. "Guided by the Integrated Resource Plan, we are working to achieve our vision while maintaining TVA's record for reliable service, safe operations and competitive rates."
Key initiatives for TVA in 2012 include completing the John Sevier Combined Cycle Plant in northeastern Tennessee. The natural gas-fired facility was connected to the TVA electrical grid for the first time in December 2011, and TVA expects to begin commercial operations in June 2012. TVA also announced plans to idle four of 10 units at its 61-year-old Johnsonville Fossil Plant in west Tennessee as of March 1, 2012. TVA elected to accelerate the schedule due to operational issues on the remaining units at Johnsonville and to reduce costs.
Fuel expense was $98 million lower in the first quarter of 2012 compared with last year. Lower commodity prices and more generation from lower-cost sources, particularly hydroelectric power, also resulted in lower rates for TVA's power customers in the first quarter of FY12.
Runoff, due to greater rainfall in TVA's service area, was 120 percent higher in the first quarter, resulting in a 31 percent increase in low-cost hydro generation compared with last year. Nuclear generation rose by 18 percent and natural gas generation increased 71 percent, offsetting higher-cost coal-fired generation, which declined 29 percent in the first quarter.
TVA reported a $173 million net loss in the first quarter of fiscal year 2012, compared with a net loss of $48 million in last year's first quarter.
"As the fall months are typically some of the lowest for electricity demand, it is not uncommon for TVA to run a loss during the first quarter of its fiscal year, which starts in October," said Thomas.
TVA executive management will host a quarterly financial conference call at 10:00 a.m. EST on Friday, Feb. 3, 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 (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. EST, Feb. 13, 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 10009037. 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 Dec. 31, 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 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 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.)
SOURCE Tennessee Valley Authority