A
corporate agency of the United States created by an act
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62-0474417
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of
Congress
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(I.R.S.
Employer Identification No.)
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(State
or other jurisdiction of incorporation or organization)
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400
W. Summit Hill Drive
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37902
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Knoxville,
Tennessee
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(Zip
Code)
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(Address
of principal executive offices)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer x
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Smaller
reporting company o
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(Do
not check if a smaller reporting company)
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5
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6
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Part I - FINANCIAL
INFORMATION
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7
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7
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8
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9
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10
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11
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33
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33
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36
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39
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43
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43
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44
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44
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45
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46
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46
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50
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51
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51
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51
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51
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Part II - OTHER
INFORMATION
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52
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52
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52
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52
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52
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52
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53
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54
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55
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•
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Statements
regarding strategic objectives;
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•
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Projections
regarding potential rate actions;
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•
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Estimates
of costs of certain asset retirement
obligations;
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•
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Estimates
regarding power and energy
forecasts;
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•
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Expectations
about the adequacy of TVA’s funding of its pension plans, nuclear
decommissioning trust, and asset retirement
trust;
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•
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Estimates
regarding the reduction of bonds, notes, and other evidences of
indebtedness, lease/leaseback commitments, and power prepayment
obligations;
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•
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Estimates
of amounts to be reclassified from other comprehensive income to earnings
over the next year;
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•
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TVA’s
plans to continue using short-term debt to meet current obligations;
and
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•
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The
anticipated cost and timetable for placing Watts Bar Unit 2 in
service.
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•
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New
laws, regulations, and administrative orders, especially those related
to:
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–
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TVA’s
protected service area,
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–
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The
sole authority of the TVA Board to set power
rates,
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–
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Various
environmental and nuclear matters including laws, regulations, and
administrative orders restricting carbon emissions and preferring certain
fuels over others,
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–
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TVA’s
management of the Tennessee River
system,
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–
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TVA’s
credit rating, and
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–
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TVA’s
debt ceiling;
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•
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Loss
of customers;
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•
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Performance
of TVA’s generation and transmission
assets;
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•
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Availability
of fuel supplies;
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•
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Purchased
power price volatility;
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•
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Events
at facilities not owned by TVA that affect the supply of water to TVA’s
generation facilities;
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•
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Compliance
with existing environmental laws and
regulations;
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•
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Significant
delays or cost overruns in construction of generation and transmission
assets;
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•
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Significant
changes in demand for electricity;
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•
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Legal
and administrative proceedings;
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•
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Weather
conditions, including drought;
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•
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Failure
of transmission facilities;
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•
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Events
at any nuclear facility, even one that is not owned by or licensed to
TVA;
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•
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Catastrophic
events such as fires, earthquakes, floods, tornadoes, pandemics, wars,
terrorist activities, and other similar events, especially if these events
occur in or near TVA’s service
area;
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•
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Reliability
of purchased power providers, fuel suppliers, and other
counterparties;
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•
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Changes
in the market price of commodities such as coal, uranium, natural gas,
fuel oil, electricity, and emission
allowances;
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•
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Changes
in the prices of equity securities, debt securities, and other
investments;
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•
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Changes
in interest rates;
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•
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Creditworthiness
of TVA, its counterparties, or its
customers;
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•
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Rising
pension costs and health care
expenses;
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•
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Increases
in TVA’s financial liability for decommissioning its nuclear facilities
and retiring other assets;
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•
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Limitations
on TVA’s ability to borrow money;
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•
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Changes
in the economy;
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•
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Ineffectiveness
of TVA’s disclosure controls and procedures and its internal control over
financial reporting;
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•
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Changes
in accounting standards;
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•
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The
loss of TVA’s ability to use regulatory
accounting;
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•
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Problems
attracting and retaining skilled
workers;
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•
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Changes
in technology;
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•
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Changes
in the market for TVA securities;
and
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•
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Unforeseeable
events.
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2007
|
2006
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|||||||
As
Restated
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As
Restated
|
|||||||
Operating
revenues
|
||||||||
Sales
of electricity
|
||||||||
Municipalities
and cooperatives
|
$ | 1,913 | $ | 1,763 | ||||
Industries
directly served
|
392 | 302 | ||||||
Federal
agencies and other
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25 | 25 | ||||||
Other
revenue
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30 | 36 | ||||||
Total
operating revenues
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2,360 | 2,126 | ||||||
Operating
expenses
|
||||||||
Fuel
and purchased power
|
922 | 749 | ||||||
Operating
and maintenance
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580 | 550 | ||||||
Depreciation,
amortization, and accretion
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390 | 361 | ||||||
Tax equivalents
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120 | 108 | ||||||
Loss
on asset impairment (Note 7)
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– | 17 | ||||||
Total
operating expenses
|
2,012 | 1,785 | ||||||
Operating
income
|
348 | 341 | ||||||
Other
income
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3 | 18 | ||||||
Unrealized
gain on derivative contracts, net (Note 1)
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– | 15 | ||||||
Interest
expense
|
||||||||
Interest
on debt and leaseback obligations
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341 | 348 | ||||||
Amortization
of debt discount, issue, and reacquisition costs, net
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5 | 5 | ||||||
Allowance
for funds used during construction and nuclear fuel expenditures (Note
1)
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(3 | ) | (49 | ) | ||||
Net
interest expense
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343 | 304 | ||||||
Net
income
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$ | 8 | $ | 70 |
ASSETS
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||||||||
December 31
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September 30
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|||||||
2007
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2007
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|||||||
As
Restated
|
||||||||
Current
assets
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(Unaudited)
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|||||||
Cash
and cash equivalents
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$ | 158 | $ | 165 | ||||
Restricted
cash and investments (Note 1)
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127 | 150 | ||||||
Accounts
receivable, net (Note 1)
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1,181 | 1,458 | ||||||
Inventories
and other
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768 | 663 | ||||||
Total
current assets
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2,234 | 2,436 | ||||||
Property,
plant, and equipment
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||||||||
Completed
plant
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38,918 | 38,811 | ||||||
Less
accumulated depreciation
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(16,204 | ) | (15,937 | ) | ||||
Net
completed plant
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22,714 | 22,874 | ||||||
Construction
in progress
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1,487 | 1,286 | ||||||
Nuclear
fuel and capital leases
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708 | 672 | ||||||
Total
property, plant, and equipment, net
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24,909 | 24,832 | ||||||
Investment
funds
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1,132 | 1,169 | ||||||
Regulatory and other long-term
assets (Note 1)
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||||||||
Deferred
nuclear generating units
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3,032 | 3,130 | ||||||
Other
regulatory assets
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1,924 | 1,790 | ||||||
Subtotal
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4,956 | 4,920 | ||||||
Other
long-term assets
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404 | 375 | ||||||
Total
regulatory and other long-term assets
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5,360 | 5,295 | ||||||
Total
assets
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$ | 33,635 | $ | 33,732 | ||||
LIABILITIES
AND PROPRIETARY CAPITAL
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||||||||
Current
liabilities
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||||||||
Accounts
payable and accrued liabilities
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$ | 940 | $ | 1,205 | ||||
Collateral
funds held
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144 | 157 | ||||||
Accrued
interest
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305 | 406 | ||||||
Current
portion of leaseback obligations
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43 | 43 | ||||||
Current
portion of energy prepayment obligations
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106 | 106 | ||||||
Short-term
debt, net
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1,565 | 1,422 | ||||||
Current
maturities of long-term debt (Note 4)
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2,090 | 90 | ||||||
Total
current liabilities
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5,193 | 3,429 | ||||||
Other
liabilities
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||||||||
Other
liabilities
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2,141 | 2,067 | ||||||
Regulatory
liabilities (Note 1)
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145 | 83 | ||||||
Asset
retirement obligations
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2,219 | 2,189 | ||||||
Leaseback
obligations
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1,028 | 1,029 | ||||||
Energy
prepayment obligations (Note 1)
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1,006 | 1,032 | ||||||
Total
other liabilities
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6,539 | 6,400 | ||||||
Long-term debt, net (Note
4)
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19,105 | 21,099 | ||||||
Total
liabilities
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30,837 | 30,928 | ||||||
Commitments and
contingencies
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||||||||
Proprietary
capital
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||||||||
Appropriation
investment
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4,738 | 4,743 | ||||||
Retained
earnings
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1,768 | 1,763 | ||||||
Accumulated
other comprehensive (loss)
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(23 | ) | (19 | ) | ||||
Accumulated
net expense of nonpower programs
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(3,685 | ) | (3,683 | ) | ||||
Total
proprietary capital
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2,798 | 2,804 | ||||||
Total
liabilities and proprietary capital
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$ | 33,635 | $ | 33,732 |
2007
|
2006
|
|||||||
As
Restated
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As
Restated
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income
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$ | 8 | $ | 70 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||
Depreciation,
amortization, and accretion
|
395 | 365 | ||||||
Nuclear
refueling outage amortization
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25 | 21 | ||||||
Loss
on asset impairment
|
– | 18 | ||||||
Amortization
of nuclear fuel
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44 | 27 | ||||||
Non-cash
retirement benefit expense
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35 | 50 | ||||||
Net
unrealized gain on derivative contracts
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– | (15 | ) | |||||
Prepayment
credits applied to revenue
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(26 | ) | (26 | ) | ||||
Fuel
cost adjustment deferral
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34 | 6 | ||||||
Other,
net
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(2 | ) | (18 | ) | ||||
Changes
in current assets and liabilities
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||||||||
Accounts
receivable, net
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247 | 192 | ||||||
Inventories
and other
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(103 | ) | (78 | ) | ||||
Accounts
payable and accrued liabilities
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(200 | ) | (56 | ) | ||||
Accrued
interest
|
(100 | ) | (107 | ) | ||||
Pension
contributions
|
(19 | ) | (19 | ) | ||||
Refueling
outage costs
|
(36 | ) | (41 | ) | ||||
Net
cash provided by operating activities
|
302 | 389 | ||||||
Cash
flows from investing activities
|
||||||||
Construction
expenditures
|
(365 | ) | (398 | ) | ||||
Combustion
turbine asset acquisitions
|
– | (98 | ) | |||||
Nuclear
fuel expenditures
|
(137 | ) | (33 | ) | ||||
Change
in restricted cash and investments
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23 | (8 | ) | |||||
Purchases
of investments, net
|
(2 | ) | (1 | ) | ||||
Loans
and other receivables
|
||||||||
Advances
|
(4 | ) | (1 | ) | ||||
Repayments
|
3 | 4 | ||||||
Proceeds
from sale of receivables/loans
|
– | 2 | ||||||
Other,
net
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– | (1 | ) | |||||
Net
cash used in investing activities
|
(482 | ) | (534 | ) | ||||
Cash
flows from financing activities
|
||||||||
Long-term
debt
|
||||||||
Issues
|
41 | 9 | ||||||
Redemptions
and repurchases
|
– | (77 | ) | |||||
Short-term
issues, net
|
143 | 190 | ||||||
Payments
on leaseback financing
|
(1 | ) | (1 | ) | ||||
Payments
to U.S. Treasury
|
(10 | ) | (10 | ) | ||||
Net
cash provided by financing activities
|
173 | 111 | ||||||
Net
change in cash and cash equivalents
|
(7 | ) | (34 | ) | ||||
Cash
and cash equivalents at beginning of period
|
165 | 536 | ||||||
Cash
and cash equivalents at end of period
|
$ | 158 | $ | 502 |
Appropriation
Investment
|
Retained
Earnings
(Restated)
|
Accumulated
Other Comprehensive Income (Loss)
|
Accumulated
Net Expense of Stewardship Programs
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Total
(Restated)
|
Comprehensive
Income (Loss)
|
|||||||||||||||||||
Balance at September 30, 2006
(as restated)
|
$ | 4,763 | $ | 1,349 | $ | 43 | $ | (3,672 | ) | $ | 2,483 | |||||||||||||
Net
income (loss) (as restated)
|
– | 72 | – | (2 | ) | 70 | $ | 70 | ||||||||||||||||
Return
on Power Facility Appropriation Investment
|
– | (5 | ) | – | – | (5 | ) | – | ||||||||||||||||
Accumulated
other comprehensive loss (Note 3)
|
– | – | (15 | ) | – | (15 | ) | (15 | ) | |||||||||||||||
Return
of Power Facility Appropriation Investment
|
(5 | ) | – | – | – | (5 | ) | – | ||||||||||||||||
Balance at December 31, 2006
(unaudited) (as restated)
|
$ | 4,758 | $ | 1,416 | $ | 28 | $ | (3,674 | ) | $ | 2,528 | $ | 55 | |||||||||||
Balance at September 30,
2007 (as restated)
|
$ | 4,743 | $ | 1,763 | $ | (19 | ) | $ | (3,683 | ) | $ | 2,804 | ||||||||||||
Net
income (loss) (as restated)
|
– | 10 | – | (2 | ) | 8 | $ | 8 | ||||||||||||||||
Return
on Power Facility Appropriation Investment
|
– | (5 | ) | – | – | (5 | ) | – | ||||||||||||||||
Accumulated
other comprehensive loss (Note 3)
|
– | – | (4 | ) | – | (4 | ) | (4 | ) | |||||||||||||||
Return
of Power Facility Appropriation Investment
|
(5 | ) | – | – | – | (5 | ) | – | ||||||||||||||||
Balance at December 31, 2007 (unaudited) (as
restated)
|
$ | 4,738 | $ | 1,768 | $ | (23 | ) | $ | (3,685 | ) | $ | 2,798 | $ | 4 |
Accounts
Receivable
|
||||||||
At
December 31
2007
|
At
September 30
2007
|
|||||||
As
Restated
|
||||||||
Power
receivables billed
|
$ | 254 | $ | 316 | ||||
Power
receivables unbilled
|
804 | 986 | ||||||
Fuel
cost adjustment unbilled
|
102 | 132 | ||||||
Total
power receivables
|
1,160 | 1,434 | ||||||
Other
receivables
|
23 | 26 | ||||||
Allowance
for uncollectible accounts
|
(2 | ) | (2 | ) | ||||
Net
accounts receivable
|
$ | 1,181 | $ | 1,458 |
TVA
Regulatory Assets and Liabilities
|
||||||||
At
December 31
2007
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At
September 30
2007
|
|||||||
As
Restated
|
||||||||
Regulatory
Assets:
|
||||||||
Unfunded
benefit costs
|
$ | 951 | $ | 973 | ||||
Nuclear
decommissioning costs
|
482 | 419 | ||||||
Debt
reacquisition costs
|
205 | 210 | ||||||
Deferred
losses relating to TVA’s financial trading program
|
2 | 8 | ||||||
Deferred
outage costs
|
107 | 96 | ||||||
Deferred
capital lease asset costs
|
63 | 66 | ||||||
Unrealized
losses on certain swap and swaption contracts
|
99 | – | ||||||
Fuel
cost adjustment: long-term
|
15 | 18 | ||||||
Subtotal
|
1,924 | 1,790 | ||||||
Deferred
nuclear generating units
|
3,032 | 3,130 | ||||||
Subtotal
|
4,956 | 4,920 | ||||||
Fuel
cost adjustment receivable: short-term
|
102 | 132 | ||||||
Total
|
$ | 5,058 | $ | 5,052 | ||||
Regulatory
Liabilities:
|
||||||||
Unrealized
gains on coal purchase contracts
|
$ | 83 | $ | 16 | ||||
Capital
lease liabilities
|
62 | 67 | ||||||
Subtotal
|
145 | 83 | ||||||
Reserve
for future generation
|
73 | 74 | ||||||
Total
|
$ | 218 | $ | 157 |
Reconciliation
of Asset Retirement Obligation Liability
Three
Months Ended December 31
|
||||||||
2007
|
2006
|
|||||||
Balance
at beginning of period
|
$ | 2,189 | $ | 1,985 | ||||
Add: ARO
(accretion) expense
|
||||||||
Nuclear
accretion (recorded as a regulatory asset)
|
23 | 15 | ||||||
Non-nuclear
accretion (charged to expense)
|
7 | 7 | ||||||
30 | 22 | |||||||
Balance
at end of period
|
$ | 2,219 | $ | 2,007 |
Description
of Adjustment
|
2007
|
Note
|
2006
|
Note
|
||||||||||||
Operating
revenues
|
Unbilled
revenue adjustments
|
$ | 8 | $ | 21 | |||||||||||
Reclassification
of expenses previously netted with revenue
|
2 | 1 | ||||||||||||||
10 |
I08-1
|
22 |
I07-1
|
|||||||||||||
Operating
expenses
|
Fuel
cost adjustment
|
(14 | ) | 6 | ||||||||||||
Change
in period for depreciation expense
|
– | 5 | ||||||||||||||
Change
in loss on asset impairment
|
– | (5 | ) | |||||||||||||
Additional
legal expense
|
(3 | ) | – | |||||||||||||
Financing
cost interest reclassification
|
(12 | ) | (12 | ) | ||||||||||||
Reclassification
of expenses previously netted with revenue
|
3 | 3 | ||||||||||||||
(26 | ) |
I08-2
|
(3 | ) |
I07-2
|
|||||||||||
Operating
income
|
36 | 25 | ||||||||||||||
Other
income
|
Additional
legal expense
|
– | 4 | |||||||||||||
Reclassification
of other income previously reported as revenue
|
1 | 2 | ||||||||||||||
1 |
I08-3
|
6 |
I07-3
|
|||||||||||||
Interest
expense
|
Financing
cost interest reclassification
|
12 |
I08-4
|
12 |
I07-4
|
|||||||||||
Net
income
|
$ | 25 | $ | 19 |
Description
of Adjustment
|
Amount
|
Note
|
||||||
Current
assets
|
||||||||
Accounts
receivable
|
Unbilled
revenue adjustments
|
$ | (118 | ) | ||||
Accounts
receivable
|
Fuel
cost adjustments
|
(46 | ) | |||||
(164 | ) |
B08-1
|
||||||
Regulatory
and other long-term assets
|
||||||||
Regulatory
assets
|
Fuel
cost adjustments
|
12 |
B08-2
|
|||||
Total
restatement of assets
|
$ | (152 | ) | |||||
Current
liabilities
|
||||||||
Accrued
liabilities
|
Unbilled
revenue adjustments
|
$ | (1 | ) |
B08-3
|
|||
Proprietary
capital
|
||||||||
Retained
earnings
|
Unbilled
revenue adjustments
|
8 | ||||||
Retained
earnings
|
Fuel
cost adjustments
|
14 | ||||||
Retained
earnings
|
Legal
reserve adjustment
|
3 | ||||||
Retained
earnings
|
Beginning
retained earnings adjustment
|
(176 | ) | |||||
(151 | ) |
B08-4
|
||||||
Total
restatement of liabilities and proprietary capital
|
$ | (152 | ) |
2007
|
2006
|
|||||||||||||||||||||||||||||
As
Previously Reported
|
Increase
(Decrease)
|
Note
|
As
Restated
|
As
Previously Reported
|
Increase
(Decrease)
|
Note
|
As
Restated
|
|||||||||||||||||||||||
Operating
revenues
|
||||||||||||||||||||||||||||||
Sales
of electricity
|
||||||||||||||||||||||||||||||
Municipalities
and cooperatives
|
$ | 1,905 | $ | 8 | $ | 1,913 | $ | 1,742 | $ | 21 | $ | 1,763 | ||||||||||||||||||
Industries
directly served
|
392 | – | 392 | 302 | – | 302 | ||||||||||||||||||||||||
Federal
agencies and other
|
25 | – | 25 | 25 | – | 25 | ||||||||||||||||||||||||
Other
revenue
|
28 | 2 | 30 | 35 | 1 | 36 | ||||||||||||||||||||||||
Total
operating revenues
|
2,350 | 10 |
I08-1
|
2,360 | 2,104 | 22 |
I07-1
|
2,126 | ||||||||||||||||||||||
Operating
expenses
|
||||||||||||||||||||||||||||||
Fuel
and purchased power
|
935 | (13 | ) | 922 | 739 | 10 | 749 | |||||||||||||||||||||||
Operating
and maintenance
|
592 | (12 | ) | 580 | 563 | (13 | ) | 550 | ||||||||||||||||||||||
Depreciation,
amortization, and accretion
|
390 | – | 390 | 356 | 5 | 361 | ||||||||||||||||||||||||
Tax
equivalents
|
121 | (1 | ) | 120 | 108 | – | 108 | |||||||||||||||||||||||
Loss
on asset impairment
|
– | – | – | 22 | (5 | ) | 17 | |||||||||||||||||||||||
Total
operating expenses
|
2,038 | (26 | ) |
I08-2
|
2,012 | 1,788 | (3 | ) |
I07-2
|
1,785 | ||||||||||||||||||||
Operating
income
|
312 | 36 | 348 | 316 | 25 | 341 | ||||||||||||||||||||||||
Other
income, net
|
2 | 1 |
I08-3
|
3 | 12 | 6 |
I07-3
|
18 | ||||||||||||||||||||||
Unrealized
gain on derivative contracts,
net
|
– | – | – | 15 | – | 15 | ||||||||||||||||||||||||
Interest
expense
|
||||||||||||||||||||||||||||||
Interest
on debt and leaseback obligations
|
329 | 12 | 341 | 336 | 12 | 348 | ||||||||||||||||||||||||
Amortization
of debt discount, issue, and reacquisition
costs, net
|
5 | – | 5 | 5 | – | 5 | ||||||||||||||||||||||||
Allowance
for funds used during construction
and nuclear fuel expenditures
|
(3 | ) | – | (3 | ) | (49 | ) | – | (49 | ) | ||||||||||||||||||||
Net
interest expense
|
331 | 12 |
I08-4
|
343 | 292 | 12 |
I07-4
|
304 | ||||||||||||||||||||||
Net
(loss) income
|
$ | (17 | ) | $ | 25 | $ | 8 | $ | 51 | $ | 19 | $ | 70 |
December 31,
2007
|
|||||||||||||||
As
Previously Reported
|
Increase
(Decrease)
|
Note
|
As
Restated
|
||||||||||||
ASSETS
|
|||||||||||||||
Current
assets
|
|||||||||||||||
Cash
and cash equivalents
|
$ | 158 | $ | – | $ | 158 | |||||||||
Restricted
cash and investments
|
127 | – | 127 | ||||||||||||
Accounts
receivable, net
|
1,345 | (164 | ) | 1,181 | |||||||||||
Inventories
and other
|
768 | – | 768 | ||||||||||||
Total
current assets
|
2,398 | (164 | ) |
B08-1
|
2,234 | ||||||||||
Property,
plant, and equipment
|
|||||||||||||||
Completed
plant
|
38,918 | – | 38,918 | ||||||||||||
Less
accumulated depreciation
|
(16,204 | ) | – | (16,204 | ) | ||||||||||
Net
completed plant
|
22,714 | – | 22,714 | ||||||||||||
Construction
in progress
|
1,487 | – | 1,487 | ||||||||||||
Nuclear
fuel and capital leases
|
708 | – | 708 | ||||||||||||
Total
property, plant, and equipment, net
|
24,909 | – | 24,909 | ||||||||||||
Investment
funds
|
1,132 | – | 1,132 | ||||||||||||
Regulatory
and other long-term assets
|
|||||||||||||||
Deferred
nuclear generating units
|
3,032 | – | 3,032 | ||||||||||||
Other
regulatory assets
|
1,912 | 12 | 1,924 | ||||||||||||
Subtotal
|
4,944 | 12 | 4,956 | ||||||||||||
Other
long-term assets
|
404 | – | 404 | ||||||||||||
Total
regulatory and other long-term assets
|
5,348 | 12 |
B08-2
|
5,360 | |||||||||||
Total
assets
|
$ | 33,787 | $ | (152 | ) | $ | 33,635 | ||||||||
LIABILITIES
AND PROPRIETARY CAPITAL
|
|||||||||||||||
Current
liabilities
|
|||||||||||||||
Accounts
payable and accrued liabilities
|
$ | 941 | $ | (1 | ) | $ | 940 | ||||||||
Collateral
funds held
|
144 | – | 144 | ||||||||||||
Accrued
interest
|
305 | – | 305 | ||||||||||||
Current
portion of leaseback obligations
|
43 | – | 43 | ||||||||||||
Current
portion of energy prepayment obligations
|
106 | – | 106 | ||||||||||||
Short-term
debt, net
|
1,565 | – | 1,565 | ||||||||||||
Current
maturities of long-term debt
|
2,090 | – | 2,090 | ||||||||||||
Total
current liabilities
|
5,194 | (1 | ) |
B08-3
|
5,193 | ||||||||||
Other
liabilities
|
|||||||||||||||
Other
liabilities
|
2,141 | – | 2,141 | ||||||||||||
Regulatory
liabilities
|
145 | – | 145 | ||||||||||||
Asset
retirement obligations
|
2,219 | – | 2,219 | ||||||||||||
Leaseback
obligations
|
1,028 | – | 1,028 | ||||||||||||
Energy
prepayment obligations
|
1,006 | – | 1,006 | ||||||||||||
Total
other liabilities
|
6,539 | – | 6,539 | ||||||||||||
Long-term
debt, net
|
19,105 | – | 19,105 | ||||||||||||
Total
liabilities
|
30,838 | (1 | ) | 30,837 | |||||||||||
Commitments
and contingencies
|
|||||||||||||||
Proprietary
capital
|
|||||||||||||||
Appropriation
investment
|
4,738 | – | 4,738 | ||||||||||||
Retained
earnings
|
1,919 | (151 | ) | 1,768 | |||||||||||
Accumulated
other comprehensive (loss) income
|
(23 | ) | – | (23 | ) | ||||||||||
Accumulated
net expense of stewardship programs
|
(3,685 | ) | – | (3,685 | ) | ||||||||||
Total
proprietary capital
|
2,949 | (151 | ) |
B08-4
|
2,798 | ||||||||||
Total
liabilities and proprietary capital
|
$ | 33,787 | $ | (152 | ) | $ | 33,635 |
Statements
of Cash Flows
For
the Three Months Ended December 31
|
||||||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||||||
As
Previously Reported
|
Increase
(Decrease)
|
As
Restated
|
As
Previously Reported
|
Increase
(Decrease)
|
As
Restated
|
|||||||||||||||||||
Cash
flows from operating activities
|
||||||||||||||||||||||||
Net
(loss) income
|
$ | (17 | ) | $ | 25 | $ | 8 | $ | 51 | $ | 19 | $ | 70 | |||||||||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||||||||||||||||||
Depreciation,
amortization, and accretion
|
395 | – | 395 | 360 | 5 | 365 | ||||||||||||||||||
Nuclear
refueling outage amortization
|
25 | – | 25 | 21 | – | 21 | ||||||||||||||||||
Loss
on asset impairment
|
– | – | – | 22 | (4 | ) | 18 | |||||||||||||||||
Amortization
of nuclear fuel
|
44 | – | 44 | 27 | – | 27 | ||||||||||||||||||
Non-cash
retirement benefit expense
|
35 | – | 35 | 50 | – | 50 | ||||||||||||||||||
Net
unrealized gain on derivative contracts
|
– | – | – | (15 | ) | – | (15 | ) | ||||||||||||||||
Prepayment
credits applied to revenue
|
(26 | ) | – | (26 | ) | (26 | ) | – | (26 | ) | ||||||||||||||
Fuel
cost adjustment deferral
|
47 | (13 | ) | 34 | – | 6 | 6 | |||||||||||||||||
Other, net
|
1 | (3 | ) | (2 | ) | (15 | ) | (3 | ) | (18 | ) | |||||||||||||
Changes
in current assets and liabilities
|
||||||||||||||||||||||||
Accounts
receivable, net
|
256 | (9 | ) | 247 | 214 | (22 | ) | 192 | ||||||||||||||||
Inventories
and other
|
(103 | ) | – | (103 | ) | (78 | ) | – | (78 | ) | ||||||||||||||
Accounts
payable and accrued liabilities
|
(284 | ) | 84 | (200 | ) | (120 | ) | 64 | (56 | ) | ||||||||||||||
Accrued
interest
|
(100 | ) | – | (100 | ) | (107 | ) | – | (107 | ) | ||||||||||||||
Pension
contributions
|
(19 | ) | – | (19 | ) | (19 | ) | – | (19 | ) | ||||||||||||||
Refueling
outage costs
|
(36 | ) | – | (36 | ) | (41 | ) | – | (41 | ) | ||||||||||||||
Net
cash provided by operating activities
|
218 | 84 | 302 | 324 | 65 | 389 | ||||||||||||||||||
Cash
flows from investing activities
|
||||||||||||||||||||||||
Construction
expenditures
|
(335 | ) | (30 | ) | (365 | ) | (344 | ) | (54 | ) | (398 | ) | ||||||||||||
Combustion
turbine asset acquisitions
|
– | – | – | (98 | ) | – | (98 | ) | ||||||||||||||||
Nuclear
fuel expenditures
|
(83 | ) | (54) | (137 | ) | (22 | ) | (11 | ) | (33 | ) | |||||||||||||
Change
in restricted cash and investments
|
23 | – | 23 | (8 | ) | – | (8 | ) | ||||||||||||||||
Purchases
of investments, net
|
(2 | ) | – | (2 | ) | (1 | ) | – | (1 | ) | ||||||||||||||
Loans
and other receivables
|
||||||||||||||||||||||||
Advances
|
(4 | ) | – | (4 | ) | (1 | ) | – | (1 | ) | ||||||||||||||
Repayments
|
3 | – | 3 | 4 | – | 4 | ||||||||||||||||||
Proceeds
from sale of receivables/loans
|
– | – | – | 2 | – | 2 | ||||||||||||||||||
Other,
net
|
– | – | – | (1 | ) | – | (1 | ) | ||||||||||||||||
Net
cash used in investing activities
|
(398 | ) | (84) | (482 | ) | (469 | ) | (65 | ) | (534 | ) | |||||||||||||
Cash
flows from financing activities
|
||||||||||||||||||||||||
Long-term
debt
|
||||||||||||||||||||||||
Issues
|
41 | – | 41 | 9 | – | 9 | ||||||||||||||||||
Redemptions
and repurchases
|
– | – | – | (77 | ) | – | (77 | ) | ||||||||||||||||
Short-term
issues, net
|
143 | – | 143 | 190 | – | 190 | ||||||||||||||||||
Payments
on leaseback financing
|
(1 | ) | – | (1 | ) | (1 | ) | – | (1 | ) | ||||||||||||||
Payments
to U.S. Treasury
|
(10 | ) | – | (10 | ) | (10 | ) | – | (10 | ) | ||||||||||||||
Net
cash provided by financing activities
|
173 | – | 173 | 111 | – | 111 | ||||||||||||||||||
Net
change in cash and cash equivalents
|
(7 | ) | – | (7 | ) | (34 | ) | – | (34 | ) | ||||||||||||||
Cash
and cash equivalents at beginning of period
|
165 | – | 165 | 536 | – | 536 | ||||||||||||||||||
Cash
and cash equivalents at end of period
|
$ | 158 | $ | – | $ | 158 | $ | 502 | $ | – | $ | 502 |
Appropriation
Investment
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Accumulated
Net Expense
of
Stewardship Programs
|
Total
|
Comprehensive
Income (loss)
|
|||||||||||||||||||
Balance
at September 30, 2006 (as previously reported)
|
$ | 4,763 | $ | 1,565 | $ | 43 | $ | (3,672 | ) | $ | 2,699 | |||||||||||||
Increase
(decrease)
|
– | (216 | ) | – | – | (216 | ) | |||||||||||||||||
Balance
at September 30, 2006 (as restated)
|
4,763 | 1,349 | 43 | (3,672 | ) | 2,483 | ||||||||||||||||||
Net
income (loss)
|
– | 53 | – | (2 | ) | 51 | $ | 51 | ||||||||||||||||
Return
on Power Facility Appropriation Investment
|
– | (5 | ) | – | – | (5 | ) | – | ||||||||||||||||
Accumulated
other comprehensive (loss)
|
– | – | (15 | ) | – | (15 | ) | (15 | ) | |||||||||||||||
Return
of Power Facility Appropriation Investment
|
(5 | ) | – | – | – | (5 | ) | – | ||||||||||||||||
Balance
at December 31, 2006 (as previously reported)
(unaudited)
|
4,758 | 1,613 | 28 | (3,674 | ) | 2,725 | 36 | |||||||||||||||||
Increase
(decrease)
|
– | (197 | ) | – | – | (197 | ) | 19 | ||||||||||||||||
Balance
at December 31, 2006 (as restated) (unaudited)
|
$ | 4,758 | $ | 1,416 | $ | 28 | $ | (3,674 | ) | $ | 2,528 | $ | 55 | |||||||||||
Balance
at September 30, 2007 (as previously reported)
|
$ | 4,743 | $ | 1,939 | $ | (19 | ) | $ | (3,683 | ) | $ | 2,980 | ||||||||||||
Increase
(decrease)
|
– | (176 | ) | – | – | (176 | ) | |||||||||||||||||
Balance
at September 30, 2007 (as restated)
|
4,743 | 1,763 | (19 | ) | (3,683 | ) | 2,804 | |||||||||||||||||
Net
(loss)
|
– | (15 | ) | – | (2 | ) | (17 | ) | $ | (17 | ) | |||||||||||||
Return
on Power Facility Appropriation Investment
|
– | (5 | ) | – | – | (5 | ) | – | ||||||||||||||||
Accumulated
other comprehensive (loss)
|
– | – | (4 | ) | – | (4 | ) | (4 | ) | |||||||||||||||
Return
of Power Facility Appropriation Investment
|
(5 | ) | – | – | – | (5 | ) | – | ||||||||||||||||
Balance
at December 31, 2007 (as previously reported)
(unaudited)
|
4,738 | 1,919 | (23 | ) | (3,685 | ) | 2,949 | (21 | ) | |||||||||||||||
Increase
(decrease)
|
– | (151 | ) | – | – | (151 | ) | 25 | ||||||||||||||||
Balance
at December 31, 2007 (as restated) (unaudited)
|
$ | 4,738 | $ | 1,768 | $ | (23 | ) | $ | (3,685 | ) | $ | 2,798 | $ | 4 |
Accounts
Receivable
|
||||||||||||
December 31,
2007
|
||||||||||||
As
Previously Reported
|
Increase
(Decrease)
|
As
Restated
|
||||||||||
Power
receivables billed
|
$ | 254 | $ | – | $ | 254 | ||||||
Power
receivables unbilled
|
922 | (118 | ) | 804 | ||||||||
Fuel
cost adjustment unbilled
|
148 | (46 | ) | 102 | ||||||||
Subtotal
power receivables
|
1,324 | (164 | ) | 1,160 | ||||||||
Other
receivables
|
23 | – | 23 | |||||||||
Allowance
for uncollectible accounts
|
(2 | ) | – | (2 | ) | |||||||
Net
accounts receivable
|
$ | 1,345 | $ | (164 | ) | $ | 1,181 |
Regulatory
Assets
|
||||||||||||
December 31,
2007
|
||||||||||||
As
Previously Reported
|
Increase
(Decrease)
|
As
Restated
|
||||||||||
Unfunded
benefit costs
|
$ | 951 | $ | – | $ | 951 | ||||||
Nuclear
decommissioning costs
|
482 | – | 482 | |||||||||
Debt
reacquisition costs
|
205 | – | 205 | |||||||||
Deferred
losses relating to TVA’s financial trading program
|
2 | – | 2 | |||||||||
Deferred
outage costs
|
107 | – | 107 | |||||||||
Deferred
capital lease asset costs
|
63 | – | 63 | |||||||||
Unrealized
losses on certain swaps and swaptions
|
99 | – | 99 | |||||||||
Fuel
cost adjustment: long term
|
3 | 12 | 15 | |||||||||
Subtotal
|
1,912 | 12 | 1,924 | |||||||||
Deferred
nuclear generating units
|
3,032 | – | 3,032 | |||||||||
Subtotal
|
4,944 | 12 | 4,956 | |||||||||
Fuel
Cost Adjustment Receivable: short term
|
148 | (46 | ) | 102 | ||||||||
Total
|
$ | 5,092 | $ | (34 | ) | $ | 5,058 |
Total
Other Comprehensive (Loss) Income Activity
|
||||||||
Three
Months Ended
December 31
|
||||||||
2007
|
2006
|
|||||||
Accumulated
other comprehensive (loss) income at beginning of period
|
$ | (19 | ) | $ | 43 | |||
Changes
in fair value:
|
||||||||
Foreign
currency swaps
|
(4 | ) | (16 | ) | ||||
Inflation
swap
|
– | 1 | ||||||
Accumulated
other comprehensive (loss) income at end of period
|
$ | (23 | ) | $ | 28 | |||
Note:
Foreign
currency swap changes are shown net of reclassifications from Other
comprehensive income to earnings. The amounts reclassified from Other
comprehensive income resulted in a charge to earnings of $35 million for
the first quarter of 2008 and an increase to earnings of $51 million for
the first quarter of 2007.
|
Debt
Outstanding
|
||||||||
At
December 31
2007
|
At
September 30
2007
|
|||||||
Short-term
debt
|
||||||||
Discount
notes (net of discount)
|
$ | 1,565 | $ | 1,422 | ||||
Current
maturities of long-term debt
|
2,090 | 90 | ||||||
Total
short-term debt, net
|
3,655 | 1,512 | ||||||
Long-term
debt
|
||||||||
Long-term
|
19,294 | 21,288 | ||||||
Unamortized
discount
|
(189 | ) | (189 | ) | ||||
Total
long-term debt, net
|
19,105 | 21,099 | ||||||
Total
outstanding debt
|
$ | 22,760 | $ | 22,611 |
Long-Term
Bond and Note Activity
|
|||||||||
Date
|
Amount
|
Interest
Rate
|
|||||||
Redemptions/Maturities:
|
|||||||||
electronotes®
|
First
Quarter 2008
|
$ | – |
NA
|
|||||
Issuances:
|
|||||||||
electronotes®
|
First
Quarter 2008
|
$ | 41 | 5.21 | % | ||||
Note:
electronotes® interest
rate is a weighted average rate.
|
Mark-to-Market
Values of Derivative Instruments
|
||||||||
At
December 31
2007
|
At
September 30
2007
|
|||||||
Interest
rate swap
|
$ | (147 | ) | $ | (115 | ) | ||
Currency
swaps:
|
||||||||
Sterling
|
51 | 63 | ||||||
Sterling
|
130 | 148 | ||||||
Sterling
|
59 | 69 | ||||||
Swaptions:
|
||||||||
$1
billion notional
|
(334 | ) | (269 | ) | ||||
$28
million notional
|
(4 | ) | (3 | ) | ||||
$14
million notional
|
(2 | ) | (1 | ) | ||||
Coal
contracts with volume options
|
83 | 16 | ||||||
Futures
and options on futures:
|
||||||||
Margin
Cash Account*
|
28 | 18 | ||||||
Unrealized
losses
|
3 | 8 | ||||||
Note
*
In accordance with certain credit terms, TVA used leveraging to
trade financial instruments under the financial trading
program. Therefore, the margin cash account balance does not
represent 100 percent of the net market value of the derivative positions
outstanding as shown in the Financial Trading Program Activity
table.
|
Derivative
Positions Outstanding
At
December 31
|
||||||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||||||
Number
of Contracts
|
Notional
Amount
per
Contract
(in
mmBtu)
|
Total
Notional Amount
(in
mmBtu)
|
Number
of Contracts
|
Notional
Amount
per
Contract
(in
mmBtu)
|
Total
Notional Amount
(in
mmBtu)
|
|||||||||||||||||||
Futures
|
2,230 | 10,000 | 22,300,000 | 691 | 10,000 | 6,910,000 | ||||||||||||||||||
Swap
Futures
|
||||||||||||||||||||||||
Exchange
traded swaps (daily)
|
208 | 2,500 | 520,000 | – | – | – | ||||||||||||||||||
Bilateral
ISDA swaps (daily)
|
62 | 20,000 | 1,240,000 | – | – | – | ||||||||||||||||||
Bilateral
ISDA swaps (daily)
|
26 | 35,000 | 910,000 | – | – | – | ||||||||||||||||||
Bilateral
ISDA swaps (monthly)
|
7 | 100,000 | 700,000 | – | – | – | ||||||||||||||||||
Subtotal
|
303 | 3,370,000 | – | – | ||||||||||||||||||||
Options
|
690 | 10,000 | 6,900,000 | – | – | – | ||||||||||||||||||
Total
|
3,223 | 32,570,000 | 691 | 6,910,000 |
Financial
Trading Program Activity
For
the Three Months Ended December 31
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
Notional
Amount
|
Contract
|
Notional
Amount
|
Contract
|
|||||||||||||
(in
mmBtu)
|
Value
|
(in
mmBtu)
|
Value
|
|||||||||||||
Futures
contracts
|
||||||||||||||||
Financial
positions, beginning of period, net
|
16,230,000 | $ | 131 | 4,290,000 | $ | 35 | ||||||||||
Purchased
|
15,540,000 | 125 | 4,260,000 | 32 | ||||||||||||
Settled
|
(9,470,000 | ) | (70 | ) | (1,640,000 | ) | (12 | ) | ||||||||
Realized
(losses)
|
– | (6 | ) | – | (1 | ) | ||||||||||
Net
positions-long
|
22,300,000 | 180 | 6,910,000 | 54 | ||||||||||||
Swap
futures
|
||||||||||||||||
Financial
positions, beginning of period, net
|
1,970,000 | 12 | 1,822,500 | 11 | ||||||||||||
Fixed
portion
|
3,660,000 | 27 | – | – | ||||||||||||
Floating
portion - realized
|
(2,260,000 | ) | (14 | ) | (1,822,500 | ) | (9 | ) | ||||||||
Realized
(losses)
|
– | – | – | (2 | ) | |||||||||||
Net
positions-long
|
3,370,000 | 25 | – | – | ||||||||||||
Option
contracts
|
||||||||||||||||
Financial
positions, beginning of period, net
|
5,600,000 | 1 | – | – | ||||||||||||
Calls
purchased
|
1,750,000 | 1 | – | – | ||||||||||||
Puts
sold
|
1,150,000 | (1 | ) | – | – | |||||||||||
Positions
closed or expired
|
(1,600,000 | ) | – | – | – | |||||||||||
Net
positions-long
|
6,900,000 | 1 | – | – | ||||||||||||
Holding
(losses)/gains
|
||||||||||||||||
Unrealized
(loss) at beginning of period, net
|
– | (8 | ) | – | (6 | ) | ||||||||||
Unrealized
gains/(losses) for the period
|
– | 5 | – | (2 | ) | |||||||||||
Unrealized
(losses) at end of period, net
|
– | (3 | ) | – | (8 | ) | ||||||||||
Financial
positions at end of period, net
|
32,570,000 | $ | 203 | 6,910,000 | $ | 46 |
TVA
Benefit Plans
|
||||||||||||||||||||||||||||||||
Combined
|
Pension
|
SERP
|
Combined
|
Pension
|
SERP
|
Other
Benefits
|
||||||||||||||||||||||||||
2008
|
2008
|
2008
|
2007
|
2007
|
2007
|
2008
|
2007
|
|||||||||||||||||||||||||
Components
of net periodic benefit cost
|
||||||||||||||||||||||||||||||||
Service
cost
|
$ | 28 | $ | 27 | $ | 1 | $ | 31 | $ | 30 | $ | 1 | $ | 1 | $ | 1 | ||||||||||||||||
Interest
cost
|
131 | 130 | 1 | 124 | 123 | 1 | 7 | 6 | ||||||||||||||||||||||||
Expected
return on plan assets
|
(152 | ) | (152 | ) | – | (143 | ) | (143 | ) | – | – | – | ||||||||||||||||||||
Amortization
of prior service cost
|
9 | 9 | – | 9 | 9 | – | 1 | 1 | ||||||||||||||||||||||||
Recognized
net actuarial loss
|
10 | 10 | – | 20 | 20 | – | 2 | 2 | ||||||||||||||||||||||||
Net
periodic benefit cost
|
$ | 26 | $ | 24 | $ | 2 | $ | 41 | $ | 39 | $ | 2 | $ | 11 | $ | 10 |
|
•
|
Eliminates
its obligation to provide TVA (and any affected customer) with a minimum
amount of power;
|
|
•
|
Provides
for all affected customers (except TVA) to receive a specified share of a
portion of the gross hourly generation from the eight Cumberland River
hydroelectric facilities, with TVA receiving the
remainder;
|
|
•
|
Eliminates
the payment of demand charges by customers (including TVA) since there is
significantly reduced dependable capacity on the Cumberland River system;
and
|
|
•
|
Increases
the rate charged per kilowatt-hour of energy received by SEPA's customers
(including TVA).
|
2007
|
2006
|
|||||||
As
Restated
|
As
Restated
|
|||||||
Cash
provided by (used in)
|
||||||||
Operating
activities
|
$ | 302 | $ | 389 | ||||
Investing
activities
|
(482 | ) | (534 | ) | ||||
Financing
activities
|
173 | 111 | ||||||
Net
decrease in cash and cash equivalents
|
$ | (7 | ) | $ | (34 | ) |
|
•
|
An
increase in cash used by changes in working capital of $121 million
resulting primarily from a larger increase in inventories and other of $25
million and a $145 million greater reduction in accounts payable and
accrued liabilities, partially offset by a $42 million greater decrease in
accounts receivable and a $7 million smaller reduction in interest
payable;
|
|
•
|
An
increase in cash paid for fuel and purchased power of $118 million due to
higher volume and increased market prices for purchased
power;
|
|
•
|
An
increase in cash paid for interest of $39
million;
|
|
•
|
An
increase in cash outlays for routine and recurring operating costs of $35
million; and
|
|
•
|
An
increase in tax equivalent payments of $13
million.
|
|
•
|
The
inclusion in the first quarter of 2007 of a $98 million use of funds to
acquire two combustion turbine
facilities;
|
|
•
|
A
$23 million reduction in the amount of restricted cash and investments
held by TVA during the first quarter of 2008 compared to an $8 million
increase in the amount of restricted cash and investments held by TVA
during the same period of 2007; and
|
|
•
|
A
decrease in expenditures for capital projects of $33
million.
|
|
•
|
A
decrease in redemptions and repurchases of long-term debt of $77 million,
with no long-term debt retired in the first quarter of 2008;
and
|
|
•
|
An
increase in long-term debt issues of $32 million as a result of the
issuance of $41 million of long-term
debt.
|
Total
|
2008
(1)
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
||||||||||||||||||||||
Debt
|
$ | 22,685 | (2) | $ | 1,655 | $ | 2,031 | $ | 62 | $ | 1,015 | $ | 1,525 | $ | 16,397 | |||||||||||||
Interest
payments relating to debt
|
20,724 | 838 | 1,228 | 1,120 | 1,089 | 1,060 | 15,389 | |||||||||||||||||||||
Lease
obligations
|
||||||||||||||||||||||||||||
Capital
|
180 | 30 | 58 | 57 | 29 | 3 | 3 | |||||||||||||||||||||
Non-cancelable
operating
|
411 | 47 | 50 | 39 | 29 | 27 | 219 | |||||||||||||||||||||
Purchase
obligations
|
||||||||||||||||||||||||||||
Power
|
5,929 | 175 | 221 | 237 | 242 | 248 | 4,806 | |||||||||||||||||||||
Fuel
|
3,136 | 982 | 557 | 528 | 220 | 258 | 591 | |||||||||||||||||||||
Other
|
658 | 239 | 212 | 32 | 28 | 27 | 120 | |||||||||||||||||||||
Payments
on other financings
|
1,467 | 83 | 85 | 89 | 95 | 97 | 1,018 | |||||||||||||||||||||
Payment
to U.S. Treasury (3)
|
||||||||||||||||||||||||||||
Return
of Power Facilities Appropriation Investment
|
130 | 20 | 20 | 20 | 20 | 20 | 30 | |||||||||||||||||||||
Return
on Power Facilities Appropriation Investment
|
258 | 19 | 22 | 21 | 20 | 18 | 158 | |||||||||||||||||||||
Retirement
plans (4)
|
81 | 81 | – | – | – | – | – | |||||||||||||||||||||
Total
|
$ | 55,659 | $ | 4,169 | $ | 4,484 | $ | 2,205 | $ | 2,787 | $ | 3,283 | $ | 38,731 |
|
(1)
|
Period
January 1 - September 30, 2008.
|
|
(2)
|
Does
not include noncash items of foreign currency valuation loss of $264
million and net discount on sale of Bonds of $189
million.
|
|
(3)
|
TVA
has access to financing arrangements with the U.S. Treasury whereby the
U.S. Treasury is authorized to accept from TVA a short-term note with the
maturity of one year or less in an amount not to exceed $150
million. TVA may draw any portion of the authorized $150
million during the year. TVA’s practice is to repay on a
quarterly basis the outstanding balance of the note and related
interest. Because of this practice, there was no outstanding
balance on the note as of December 31, 2007. Accordingly, the
Commitments and Contingencies table does not include any outstanding
payment obligations to the U.S. Treasury for this note at December 31,
2007.
|
|
(4)
|
TVA’s
Board plans to evaluate the need for future funding on an annual basis
through the ratemaking process.
|
Total
|
2008
(1)
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
||||||||||||||||||||||
Energy
Prepayment Obligations
|
$ | 1,112 | $ | 79 | $ | 105 | $ | 105 | $ | 105 | $ | 105 | $ | 613 |
|
(1)
|
Period
January 1 - September 30, 2008.
|
2007
|
2006
|
|||||||
As
Restated
|
As
Restated
|
|||||||
Operating
revenues
|
$ | 2,360 | $ | 2,126 | ||||
Operating
expenses
|
(2,012 | ) | (1,785 | ) | ||||
Operating
income
|
348 | 341 | ||||||
Other
income
|
3 | 18 | ||||||
Unrealized
gain on derivative contracts, net
|
– | 15 | ||||||
Interest
expense, net
|
(343 | ) | (304 | ) | ||||
Net
income
|
$ | 8 | $ | 70 | ||||
Sales
(millions of kWh)
|
42,735 | 40,918 | ||||||
Heating
degree days (normal 1,311)
|
1,058 | 1,227 | ||||||
Cooling
degree days (normal 64)
|
150 | 63 | ||||||
Combined
degree days (normal 1,375)
|
1,208 | 1,290 |
|
•
|
A
$227 million increase in operating
expenses;
|
|
•
|
A
$39 million increase in net interest expense resulting primarily from a
change in ratemaking methodology relating to
AFUDC;
|
|
•
|
A
$15 million decrease in net unrealized gain on derivative contracts
resulting primarily from a change in ratemaking methodology for gains and
losses on certain derivative instruments used in call monetization
transactions; and
|
|
•
|
A
$15 million decrease in other
income.
|
Operating
Revenues and Sales of Electricity
For
the Three Months Ended December 31
|
||||||||||||||||||||||||
Operating
Revenues
|
Sales
of Electricity
|
|||||||||||||||||||||||
(millions
of dollars)
|
(millions
of kWh)
|
|||||||||||||||||||||||
2007
|
2006
|
Percent
Change
|
2007
|
2006
|
Percent
Change
|
|||||||||||||||||||
As
Restated
|
As
Restated
|
As
Restated
|
As
Restated
|
|||||||||||||||||||||
Sales
of Electricity
|
||||||||||||||||||||||||
Municipalities
and cooperatives
|
$ | 1,913 | $ | 1,763 | 8.5 | % | 32,476 | 32,310 | 0.5 | % | ||||||||||||||
Industries
directly served
|
392 | 302 | 29.8 | % | 9,818 | 8,108 | 21.1 | % | ||||||||||||||||
Federal
agencies and other
|
25 | 25 | 0.0 | % | 441 | 500 | (11.8 | %) | ||||||||||||||||
Other
revenue
|
30 | 36 | (16.7 | %) | – | – | – | |||||||||||||||||
Total
|
$ | 2,360 | $ | 2,126 | 11.0 | % | 42,735 | 40,918 | 4.4 | % |
|
•
|
A
$150 million increase in revenue from municipalities and cooperatives
primarily due to the FCA, which provided $131 million in additional
revenues. Fluctuations in rates related to certain types of
energy programs and credits, and a slight increase in sales of less than
one percent provided $10 million and $9 million, respectively, in
additional revenues; and
|
|
•
|
A
$90 million increase in revenue from industries directly served primarily
attributable to increased sales of 21.1 percent, the FCA and fluctuations
in rates related to certain types of energy programs and
credits. Increased sales, the FCA, and fluctuations in rates
related to certain types of energy programs and credits yielded $61
million, $18 million, and $11 million, respectively, in additional
revenue.
|
|
•
|
A
1,710 million kilowatt-hour increase in sales to industries directly
served. This was mainly attributable to increased demand from
TVA’s largest and second largest directly served industrial customers of
24.2 percent and 82.2 percent, respectively, to accommodate higher
production levels at their facilities. In addition, aggregate
demand from a few other large directly served industrial customers
increased 26.0 percent as a result of changes in product mix and higher
production levels at their
facilities.
|
|
•
|
A
166 million kilowatt-hour increase in sales to municipalities and
cooperatives due to an increase in aggregate sales to commercial and
industrial customers.
|
|
•
|
A
59 million kilowatt-hour decrease in sales to Federal agencies and
other.
|
|
o
|
This
decrease was due to an 86 million kilowatt-hour decrease in off-system
sales mainly reflecting decreased generation available for
sale.
|
|
o
|
The
decrease in off-system sales was partially offset by a 27 million
kilowatt-hour increase in sales to directly served federal agencies
largely attributable to an increase in demand by several directly served
federal agencies as a result of a change in the nature and scope of their
loads.
|
Operating
Expenses
For
the Three Months Ended December 31
|
||||||||||||
2007
|
2006
|
Percent
Change
|
||||||||||
As
Restated
|
As
Restated
|
|||||||||||
Fuel
and purchased power
|
$ | 922 | $ | 749 | 23.1 | % | ||||||
Operating
and maintenance
|
580 | 550 | 5.5 | % | ||||||||
Depreciation,
amortization, and accretion
|
390 | 361 | 8.0 | % | ||||||||
Tax
equivalents
|
120 | 108 | 11.1 | % | ||||||||
Loss
on asset impairment
|
– | 17 | (100.0 | %) | ||||||||
Total
operating expenses
|
$ | 2,012 | $ | 1,785 | 12.7 | % |
|
•
|
A
$173 million increase in Fuel and purchased power
expense.
|
|
o
|
This
increase was due to a $144 million increase in purchased power expense and
a $29 million increase in fuel
expense.
|
|
–
|
The
increase in purchased power expense resulted
from:
|
|
•
|
An
increase in the average purchase price of 20.4 percent, which resulted in
$77 million in additional expense;
|
|
•
|
An
increase in the volume of purchased power of 40.7 percent, which resulted
in $55 million in additional expense;
and
|
|
•
|
A
decrease in the FCA net deferral and amortization for purchased power
expense of $12 million.
|
|
–
|
The
increase in fuel expense resulted
from:
|
|
•
|
An
increase in the net commercial generation of 7.7 percent, which resulted
in $43 million in additional expense;
and
|
|
•
|
A
decrease in the FCA net deferral and amortization for fuel expense of $29
million.
|
|
–
|
The
increase in fuel expense was partially offset by a 7.0 percent lower
aggregate fuel cost per kilowatt-hour net thermal generation, which
reduced fuel expense by $43
million.
|
|
•
|
A
$29 million increase in Depreciation, amortization, and accretion
expense.
|
|
o
|
This
increase was a result of a $29 million increase in depreciation expense
due to:
|
|
–
|
An
increase in depreciation rates at several of TVA’s facilities;
and
|
|
–
|
An
increase in completed plant accounts due to net plant
additions.
|
|
•
|
A
$30 million increase in Operating and maintenance
expense.
|
|
o
|
This
increase was mainly a result of:
|
|
–
|
Increased
outage and routine operating and maintenance costs at coal-fired plants of
$26 million largely due to:
|
|
•
|
An
increase in outage days of 173 days as a result of one more planned outage
and a change in the nature and scope of the outages during the first
quarter of 2008;
|
|
•
|
Significant
repair work on Unit 3 at Paradise Fossil Plant not present in the first
quarter of 2007; and
|
|
•
|
The
operation of two additional combustion turbine units not operated during
the first quarter of 2007; and
|
|
–
|
Increased
routine operating and maintenance costs at nuclear plants of $19 million
primarily attributable to:
|
|
•
|
The
operation of an additional nuclear unit not operated in the first quarter
of 2007;
|
|
•
|
Timing
of contractor work and materials purchased;
and
|
|
•
|
Timing
of mid-cycle and forced outages.
|
|
o
|
These
items were partially offset by:
|
|
–
|
Decreased
pension costs of $15 million mainly as a result of a 0.35 percent higher
discount rate used during the first quarter of
2008.
|
|
•
|
A
$12 million increase in Tax equivalent payments reflecting increased gross
revenues from the sale of power (excluding sales or deliveries to other
federal agencies and off-system sales with other utilities) during 2007
compared to 2006.
|
Interest
Expense
For
the Three Months Ended December 31
|
||||||||||||
2007
|
2006
|
Percent
Change
|
||||||||||
As
Restated
|
As
Restated
|
|||||||||||
Interest
on debt and leaseback obligations
|
$ | 341 | $ | 348 | (2.0 | %) | ||||||
Amortization
of debt discount, issue, and reacquisition costs, net
|
5 | 5 | 0.0 | % | ||||||||
Allowance
for funds used during construction and nuclear fuel
expenditures
|
(3 | ) | (49 | ) | (93.9 | %) | ||||||
Net
interest expense
|
$ | 343 | $ | 304 | 12.8 | % | ||||||
(percent)
|
||||||||||||
2007
|
2006
|
Percent
Change
|
||||||||||
Interest
rates (average)
|
||||||||||||
Long-term
|
5.96 | 5.94 | 0.3 | % | ||||||||
Discount
notes
|
4.59 | 5.25 | (12.6 | %) | ||||||||
Blended
|
5.87 | 5.87 | 0.0 | % |
|
•
|
A
$46 million decrease in AFUDC and nuclear fuel expenditures primarily due
to a change in ratemaking methodology. TVA continues to
capitalize a portion of current interest costs associated with funds
invested in most nuclear fuel inventories, but beginning in 2008, interest
on funds invested in construction projects will be capitalized only if
(1) the expected total cost of a project is $1 billion or more
and (2) the estimated construction period is at least three
years. Capitalized interest continues to be a component of the
asset cost and will be recovered in future periods through depreciation
expense. In addition, AFUDC continues to be a reduction to
interest expense as costs are incurred. The interest costs
associated with funds invested in construction projects that do not
satisfy the $1 billion and three-year criteria are no longer capitalized
as AFUDC, remain in the Statement of Income, and will be recovered in
current year rates as a component of interest expense;
|
|
•
|
An
increase in the average long-term interest rate from 5.94 percent during
the first quarter of 2007 to 5.96 percent during the same period in 2008;
and
|
|
•
|
An
increase of $499 million in the average balance of long-term outstanding
debt in 2008.
|
|
•
|
A
decrease in the average discount notes interest rate from 5.25 percent
during the first quarter of 2007 to 4.59 percent during the same period in
2008; and
|
|
•
|
A
decrease of $852 million in the average balance of discount notes
outstanding in 2008.
|
(1)
|
The
anti-cherrypicking provision would not apply with respect to any
distributor which provided a termination notice to TVA before December 31,
2006, regardless of whether the notice was later withdrawn or
rescinded;
|
(2)
|
Distributors
that have given termination notices to TVA on or before December 31, 2006,
would have express authority under federal law to receive partial
requirements from TVA and elect, not later than 180 days after enactment,
to rescind the termination notice “without the imposition of a
reintegration fee or any similar
fee;”
|
(3)
|
Distributors
that have not given termination notices to TVA on or before December 31,
2006, would have express authority under federal law to receive partial
requirements from TVA within a ratable limit, which cumulatively stays
within a three percent compounded annual growth rate on the TVA system;
and
|
(4)
|
Any
distributor that terminates its power supply contract with TVA in whole or
in part would have the federal statutory right to directly receive its
share of SEPA power that is otherwise being delivered to TVA for the
benefit of all distributors.
|
Exhibit
No.
|
Description
|
|
3.1
|
Tennessee
Valley Authority Act of 1933, as amended, 16 U.S.C.
§§ 831-831ee *
|
|
10.1
|
TVA
Discount Notes Selling Group Agreement *
|
|
31.1
|
Rule 13a-14(a)/15d-14(a)
Certification Executed by the Chief Executive Officer
|
|
31.2
|
Rule 13a-14(a)/15d-14(a)
Certification Executed by the Chief Financial Officer
|
|
32.1
|
Section 1350
Certification Executed by the Chief Executive Officer
|
|
32.2
|
Section 1350
Certification Executed by the Chief Financial
Officer
|
TENNESSEE
VALLEY AUTHORITY
|
||
(Registrant)
|
||
By:
|
/s/ Tom D. Kilgore | |
Tom
D. Kilgore
|
||
President
and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
||
By:
|
/s/ Kimberly S. Greene | |
Kimberly
S. Greene
|
||
Chief
Financial Officer and Executive
|
||
Vice
President, Financial Services
|
||
(Principal
Financial Officer)
|
Exhibit
No.
|
Description
|
|
3.1
|
Tennessee
Valley Authority Act of 1933, as amended, 16 U.S.C.
§§ 831-831ee *
|
|
10.1
|
TVA
Discount Notes Selling Group Agreement *
|
|
31.1
|
Rule 13a-14(a)/15d-14(a)
Certification Executed by the Chief Executive Officer
|
|
31.2
|
Rule 13a-14(a)/15d-14(a)
Certification Executed by the Chief Financial Officer
|
|
32.1
|
Section 1350
Certification Executed by the Chief Executive Officer
|
|
32.2
|
Section 1350
Certification Executed by the Chief Financial
Officer
|