Economy, Weather Influence TVA First Quarter 2010 Financial Results

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Feb 03, 2010, 05:25 ET

KNOXVILLE, Tenn., Feb. 3 /PRNewswire/ -- In its report for the first quarter of fiscal year 2010, the Tennessee Valley Authority said reduced power sales and wetter-than-normal weather are key factors that influenced the agency's financial performance during the three-month period that ended Dec. 31, 2009.

TVA reported net income for re-investment of $150 million in its quarterly report on Form 10-Q filed Wednesday with the Securities and Exchange Commission. That's compared with a net loss of $305 million for the first quarter of the previous fiscal year, which included $525 million in expenses from the Kingston ash spill recovery effort. Those costs related to the ash spill have subsequently been reclassified by the TVA Board as a regulatory asset to be recovered in future rates over 15 years.

TVA, which does not make a profit, reinvests net income in its power business, specifically on projects that expand and improve TVA's infrastructure. These projects include new generation, environmental controls and transmission improvements. TVA receives no taxpayer money.

Operating revenue for the first quarter was $2.3 billion, a decrease of $728 million, or about 24 percent for the quarter compared with the same period a year ago, mainly resulting from a 4 percent decline in power sales and changes in TVA's fuel cost adjustment. These decreases were partially offset by an increase in TVA's base power rates of 8 percent, which provided $165 million in revenue.

"Persistent economic weakness in the TVA service area meant reduced power sales, which we expect will continue throughout the year," said TVA's Interim Chief Financial Officer John Hoskins. "However, better availability of low-cost power from TVA dams and reduced fuel costs are resulting in lower prices for our customers."

Operating expenses decreased $1.2 billion from a year ago, primarily because of lower fuel and purchased power expenses as well as costs from the Kingston ash spill.

The weather had a positive impact on the quarterly results. Rainfall in the eastern Tennessee Valley was 134 percent of normal for the quarter. As a result, TVA was able to increase its low-cost hydroelectric generation by 161 percent compared with the first quarter a year ago.

Having the lower-cost hydroelectric generation available was a contributing factor to a decline in TVA's fuel cost adjustment in October, November and December, resulting in lower power bills for TVA customers. Lower market prices for purchased power and natural gas, which ranged from 35 percent to 40 percent below prices for the first quarter a year ago, also contributed to the monthly fuel cost adjustment reductions.

"As sales have declined due to economic conditions, TVA's expenses have been reduced by a corresponding amount," said Hoskins. "Despite economic conditions, TVA needs to invest in system infrastructure and clean energy sources that will provide a long-term benefit to the Tennessee Valley."

TVA's capital budget for 2010 includes spending for construction of environmental controls, new generation sources and dry storage facilities for coal combustion products.

Estimated expenses for cleanup costs related to the Kingston recovery effort range from $933 million to $1.2 billion. The estimate does not include costs such as damages that might be awarded in litigation or fines that could be imposed. As ash removal continues, it is possible that additional remediation not included in the estimate may be required.

TVA's quarterly report on Form 10-Q provides additional financial, operational and descriptive information, including unaudited financial statements for the quarter that ended Dec. 31, 2009, 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 also are available on the SEC's Web site at www.sec.gov, and copies are available on TVA's Web site at www.tva.com/finance or by calling TVA toll free at 888-882-4975.

The Tennessee Valley Authority, a corporation owned by the U.S. government, provides electricity for utility and business customers in most of Tennessee and parts of Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia – an area of 80,000 square miles with a population of 9 million. TVA operates 29 hydroelectric dams, 11 coal-fired power plants, three nuclear plants and 11 natural gas-fired power facilities and supplies up to 36,000 megawatts of electricity, delivered over 16,000 miles of high-voltage power lines. TVA also provides flood control, navigation, land management and recreation for the Tennessee River system and works with local utilities and state and local governments to promote economic development across the region. TVA, which makes no profits and receives no taxpayer money, is funded by sales of electricity to its customers. Electricity prices in TVA's service territory are below the national average.

Media Contact: Scott Brooks, (865) 632-8031

TVA News Bureau, Knoxville, (865) 632-6000

www.tva.com/newsroom

Investor Contacts: TVA Investor Relations

(888) 882-4975 (toll-free)

(888) 882-4967 (toll-free International)

www.tva.com/finance

SOURCE Tennessee Valley Authority