TVA Reports Third Quarter 2020 Financial Results

KNOXVILLE, Tenn., Aug. 4, 2020 /PRNewswire/ -- The Tennessee Valley Authority reported $7.4 billion in total operating revenues on more than 108 billion kilowatt-hours of electricity sales for the nine months ended June 30, 2020. Sales of electricity were about 5% lower compared to the same period of the prior year due to overall milder weather and impacts of the COVID-19 pandemic. Total operating revenues decreased about 9% from the same period of the prior year driven primarily by lower sales volume, lower fuel cost recovery revenues, and lower effective base rates.

Given the unique variables created by the pandemic, TVA has developed internal forecasts based on a range of external data sources to forecast its potential impact on TVA's load demand and revenues. For the nine months ended June 30, 2020, TVA estimates base revenues were approximately $130 million lower due to the impacts of the COVID-19 pandemic. 

Based on current estimates, TVA anticipates base revenue could be as much as $100 million lower than plan for the fourth quarter of 2020 due to impacts of COVID-19. However, economic impacts continue to evolve as projections are refined. TVA's estimate of the impact to its financial position, results of operations and cash flows will continue to change over the remainder of the year. 

"TVA remains operationally and financially healthy, which enables us to continue providing uninterrupted vital services, as well as support communities during this challenging time," said Jeff Lyash, TVA's president and chief executive officer. "Our work to maintain stable, low rates is particularly impactful. In addition, our customers who have become long-term partners have received over $100 million in credits on their bills so far this fiscal year."

TVA's fuel, purchased power, operating and maintenance, tax equivalents, and interest expense were all lower in the nine months ended June 30, 2020, versus the same period of the prior year. TVA's fuel and purchased power expense was 14% lower year-over-year, primarily driven by lower effective fuel rates and lower energy sales due to impacts of COVID-19 and milder weather, as well as the increased availability of nuclear and hydroelectric power.

Operating and maintenance expense was $275 million lower, driven primarily by less project write-offs and regulatory asset recovery for certain environmental cleanup costs that did not occur in the current year. TVA continues to implement various cost savings initiatives in response to the COVID-19 impacts. 

Interest expense was $859 million for the first nine months of fiscal year 2020, which was a 5% decrease from the same period of the prior year, driven by lower average debt balances. TVA's debt remains at the lowest level in almost 30 years. 

"While it was expected that the pandemic would have some impact on sales, TVA's proactive efforts to reduce expenses, improve the efficiency of our operations, invest in cleaner asset investments, and lower debt have all put us in a good position," said John Thomas, TVA's chief financial officer. "In fact, cash flow has been steady, and TVA reduced debt by $1 billion in the first nine months of this fiscal year after adjusting for extra cash holdings." 

Additional highlights from TVA's Third Quarter Report include:

• As part of the Strategic Financial Plan approved by the TVA Board in 2019, TVA began offering a 20-year Valley Partnership Agreement option to local power company customers. As of August 3, 2020, 141 local power companies had accepted the offer and are now TVA long-term partners. Bill credits available to long-term partners totaled over $100 million in the nine months ended June 30, 2020.
• Due to higher volatility in the financial markets from COVID-19, TVA increased its target balance of cash and cash equivalents in March by $500 million as a precautionary measure. TVA has maintained uninterrupted access to the financial markets since the outbreak of the pandemic. In May, TVA issued $1 billion of power bonds to take advantage of the historically low interest rate environment and to meet its ongoing funding needs.
• In response to the pandemic, TVA is offering up to $1 billion of credit support available as an option to local power companies through the deferral of wholesale power payments, based on the needs of individual local power companies, along with the Back-to-Business credit program that provides relief to certain larger customers when returning to operations. TVA remains committed to supporting communities and customers across the Tennessee Valley.
• Despite record-setting heat experienced during October 2019 and record-setting cold during November 2019, TVA's service territory experienced overall milder weather during the nine months ended June 30, 2020. Total heating and cooling degree days in the nine months through June 30 were 9% below normal, and 8% below the same period in the prior year.
• TVA continued to maintain 99.999% reliability in delivering energy to its customers, despite record setting weather.
• Rainfall and runoff in the Tennessee Valley through the third quarter of 2020 were 153% and 161% of normal, respectively. 
• TVA's reliability and economic development efforts continue to attract and encourage the expansion of business and industries in the Tennessee Valley. Over $7.1 billion in investments and more than 58,400 jobs were created or retained through the third quarter of 2020.

TVA executive management will host a conference call to discuss third quarter fiscal year 2020 results at 9:30 a.m. EDT, on Tuesday, Aug. 4. The event will be conducted as a webcast and as a dial-in teleconference. Participants will be able to hear the discussion and see slides via webcast, but will need telephone access to ask questions. Pre-registration for the conference call is required. Please click here to pre-register. Once pre-registered, the dial-in number will be provided via an email. If you are unable to pre-register, you may access the conference call by dialing toll free 844-308-6432 in the United States, or 412-717-9611 outside the United States. Participants should ask to be joined into the Tennessee Valley Authority call.

A replay will be available one hour after the end of the conference call, by calling toll free 877-344-7529 in the United States or 412-317-0088 outside the United States and using the conference number 10144400. A webcast replay and transcript will also be available for one year on TVA's website at http://www.tva.com/investors.

TVA's quarterly report on Form 10-Q provides additional financial, operational, and descriptive information, including unaudited financial statements for the quarter ended June 30, 2020. TVA's quarterly report and other SEC reports are available without charge on TVA's website at http://www.tva.com/investors, on the SEC's website at http://www.sec.gov, or by calling TVA toll free at 888-882-4975.            

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 most recent annual report on Form 10-K and quarterly report on Form 10-Q for a discussion of factors that could cause actual results to differ from those in the forward-looking statements.

The Tennessee Valley Authority is a corporate agency of the United States that provides electricity for business customers and local power companies serving nearly 10 million people in parts of seven southeastern states. TVA receives no taxpayer funding, deriving virtually all of its revenues from sales of electricity. In addition to operating and investing its revenues in its electric system, TVA provides flood control, navigation and land management for the Tennessee River system, and assists local power companies and state and local governments with economic development and job creation.

SOURCE Tennessee Valley Authority

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