TVA Reports Higher Net Income through Third Quarter 2014

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Aug 05, 2014, 07:43 ET

KNOXVILLE, Tenn., Aug. 5, 2014 /PRNewswire/ -- The Tennessee Valley Authority reported Tuesday net income of $147 million for the nine months ended June 30, 2014, on almost $8 billion in revenue, and a nearly 7 percent reduction in operating and maintenance expenses year-over-year resulting from cost-saving initiatives.

"We have seen some positive signs both operationally and financially through the first nine months of the year," TVA President and CEO Bill Johnson said. "Revenues are higher, operating expenses are down and income is up. In all, we are on track for a good fiscal year."

In addition, TVA is making necessary investments in generating assets while reducing debt in keeping with its service mission to provide affordable and reliable power to the 9 million residents of the Tennessee Valley.

"Remaining focused on the right strategic priorities has improved TVA's overall financial health," Chief Financial Officer John Thomas said. "We have invested nearly $2 billion in our asset base so far this year, while reducing debt by over $1 billion."

Although the April-June period is a transitional quarter with generally milder weather and lower demand for electricity, Johnson said, "We have seen an underlying layer of growth in power sales, and that is very encouraging economic news."

Sales to 155 local power companies, which represent service primarily to homes and businesses and account for most of TVA's total sales, gained 1.1 percent in the third quarter, and 5.4 percent for the first nine months of 2014, compared with the same periods last year. An extremely cold winter contributed to those gains, but sales also reflected an underlying layer of growth in demand.

Total sales were down 3 percent through the first nine months when compared with the same period a year ago, due largely to the closing of U.S. Enrichment Corp.'s facilities in Paducah, Kentucky, later in 2013. USEC was TVA's largest directly served industrial customer at the time.

TVA is engaged in a three-year strategy to reduce operating and maintenance spending by a sustainable $500 million by the end of fiscal 2015 as part of a continuing effort to reduce costs and increase efficiencies.

Operating and maintenance expenses declined nearly 7 percent for the first nine months of the year, compared with the same period last year. The decline was primarily due to $120 million of reductions from cost-savings initiatives, and a $62 million decrease in project-related expenses.

Through the first nine months of 2014, operating costs have also been driven by lower expenses for fuel, partially offset by higher purchased power and depreciation expense. Total operating expenses for the first nine months of 2014 were 3.4 percent lower than the same period last year.

Total operating revenues increased 1.9 percent in the third quarter and 0.6 percent for the nine months ended June 30, compared with the same periods last year. Higher operating revenues in the third quarter were primarily due to a $94 million increase in fuel cost recovery, partially offset by a $41 million decrease in base revenue, largely due to lower directly-served sales.

Higher operating revenues for the nine months ended June 30, 2014, were primarily due to a $178 million increase in base revenue, driven by higher sales volume to local power companies and a non-fuel base rate increase effective Oct. 1, 2013. Partially offsetting the increase in base revenue, fuel cost recovery declined $127 million due to the use of less expensive nuclear generation and a decline in sales to industries directly served by TVA.

TVA had net income of $147 million on $7.97 billion in revenue through the first nine months ended June 30, 2014, with an $81 million loss on $2.65 billion in revenue during the third quarter. Net results for the first nine months reflected an improvement over a loss of $203 million on $7.92 billion in revenue for the same period a year ago, which included a loss of $12 million on $2.60 billion in revenue in the third quarter of 2013.

TVA executive management will host a third quarter fiscal year 2014 financial conference call at 9:30 a.m. EDT on Tuesday, Aug. 5, 2014. The conference call webcast can be accessed on TVA's website 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 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. The replay can be accessed by calling toll free (877) 344-7529 in the United States or (412) 317-0088 outside the United States and using the conference number 10048884. The 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 June 30, 2014, and is available to investors and the public. 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.

(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 and annual report on Form 10-K 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 distributors serving 9 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.

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