TVA Reports First Quarter Fiscal Year 2022 Financial Results

Key Points –

• TVA’s power sales were relatively flat for the quarter, primarily driven by economic growth offset by milder than normal weather.
• TVA’s diversified power system – 59% of which came from nuclear, hydroelectric and renewables in the first quarter – helped maintain low rates even with higher fuel costs.
• TVA’s customers continue to benefit from the lowest debt balances in over 30 years.
• An updated depreciation study incorporates TVA’s planning assumptions on retiring the remainder of its coal-fired power fleet by 2035.

The Tennessee Valley Authority reported $2.6 billion in total operating revenues on 37 billion kilowatt-hours of electricity sales for the three months ended Dec. 31, 2021.

Total operating revenues increased 12% over the same period last year primarily due to an increase in fuel cost recovery driven mainly by higher fuel rates.  Sales of electricity were relatively flat when compared to the same period of the prior year.  The increase in sales volume was driven by economic growth in the Tennessee Valley, but was partially offset by milder weather, including one of the mildest Decembers on record in the TVA service area.

“We had great success in keeping energy costs low and stable while helping to attract or retain a record-setting number of jobs for our region, even while dealing with the continuing pandemic recovery,” said Jeff Lyash, TVA president and CEO.  “Even during periods of fuel cost volatility, our customers benefit from TVA’s diverse power system and the rate stability made possible by our strong results.”

Fuel and purchased power expense increased $260 million in the first quarter of 2022 over the same period of the prior year, primarily due to higher fuel prices.  Operating and maintenance expense increased by $65 million over same period last year, driven by an increase in contract labor, labor escalation, and an increase in outage expenses linked to an increase in nuclear outage days.

Depreciation and amortization expense increased $132 million primarily because of a change in depreciation rates following an updated depreciation study. The study included planning assumptions that potentially retire the remainder of TVA’s coal-fired fleet by 2035.

Interest expense decreased by $18 million for the three months ended Dec. 31, 2021 – a 6% decrease from the prior year – due to lower average long-term debt balances.

“TVA’s recent success in reducing debt to the lowest levels in more than 30 years, reducing operating costs, and making investments in cleaner energy are paying off every day,” said John Thomas, TVA’s chief financial and strategy officer. “In these inflationary times, we see those benefits even more.”

“The average spot price of natural gas was 92% higher in the first quarter than a year ago, but 59% of TVA’s power came from nuclear, hydroelectric and renewables – resources that do not fluctuate with fuel prices. That is a powerful advantage that helps insulate our customers from such volatility and keeps costs more stable.”

TVA’s net income was $11 million for the first quarter of fiscal year 2022, which was $173 million lower than the same period of the prior year due mainly to higher operating expenses.

Additional highlights from TVA’s first quarter fiscal year 2022 include:

• As of January 31, 146 local power companies have long-term partnerships with TVA.
• Bill credits to partners totaled $43 million for the first quarter of fiscal year 2022.
• In 2021, the TVA Board approved a 2.5 percent monthly base rate credit for all customers – the Pandemic Recovery Credit – which is effective for 2022. These pandemic credits apply to service provided to TVA’s LPC’s, their large commercial and industrial customers, and TVA directly served customers. The credit effective for 2022 is expected to approximate $220 million. For the three months ended December 31, 2021, pandemic credits totaled $50 million. In addition, in November 2021, the TVA Board approved a 1.5 percent extension of the Pandemic Recovery Credit for 2023, which is expected to approximate $133 million.
• TVA remains committed to supporting communities and customers across the Tennessee Valley during the region’s ongoing recovery, including the ongoing Community Care Fund that partners TVA and LPCs to support local initiatives that address community hardships created by the COVID-19 pandemic.
• Rainfall and runoff in the Tennessee Valley during the first quarter of 2022 were 95% and 105% of normal, respectively.
• TVA’s economic development efforts, combined with our high reliability and low costs, continue to help attract and encourage the expansion of business and industries in the Tennessee Valley, with over $5.1 billion in investments and more than 24,500 jobs created or retained in the first quarter of 2022.

TVA’s executive management team will host a conference call to discuss first quarter fiscal year 2022 results at 9:30 a.m. ET, on Tuesday, Feb. 1. 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.

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 2377717. 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 Dec. 31, 2021. 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: TVA