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Fiscal Year 2020 Investor Conference Call
November 17, 2020
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Introduction
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Tammy WilsonVice President, Treasurer & Chief Risk Officer
TVA 2020 Investor Conference Call
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Agenda
Fiscal Year 2020 Review• Jeff Lyash, President & Chief Executive Officer
Review of Financial Performance• John Thomas, Executive Vice President & Chief Financial Officer
Question and Answer Session
Closing Remarks
| 3TVA 2020 Investor Conference Call
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“Safe Harbor” StatementThis document contains forward-looking statements relating to future events and future performance. All statements other than those that are purely historical may be forward-looking statements. In certain cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “project,” “plan,” “predict,” “assume,” “forecast,” “estimate,” “objective,” “possible,” “probably,” “likely,” “potential,” “speculate,” or other similar expressions. Although TVA believes that the assumptions underlying the forward-looking statements are reasonable, TVA does not guarantee the accuracy of these statements. Numerous factors could cause actual results to differ materially from those in the forward-looking statements. For a discussion of these factors, please see the annual, quarterly, and periodic reports that TVA files with the Securities and Exchange Commission. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the extent to which any factor or combination of factors may impact TVA’s business or cause results to differ materially from those contained in any forward-looking statement. TVA undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made.
| 4TVA 2020 Investor Conference Call
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Fiscal Year 2020 Review
Jeff LyashPresident & Chief Executive Officer
| 5TVA 2020 Investor Conference Call
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2020 Recap: Fiscal Year 2020 Focus Areas
Strengthen long-term partnerships with customers
Maintain low rates
Excel in power operations – particularly in nuclear
Leverage innovation and technology
Continuously improve
| 6TVA 2020 Investor Conference Call
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| 7TVA 2020 Investor Conference Call
COVID-19 Response
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Fiscal Year 2020 HighlightsResponse to COVID-19
142 of 153 LPCs signed the Long-Term Partnership
Lowest debt in over 30 years
Continued 99.999% reliability
Historic labor agreements
Top safety record
Almost 60% of power from carbon-free sources
First Corporate Sustainability Report
Prevented $1 billion in flood damages – FY20 wettest on record
| 8TVA 2020 Investor Conference Call
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FY21 Priorities
| 9TVA 2020 Investor Conference Call
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Historic Progress on Labor Relations• Strong partnership with North America’s Building Trades Unions (NABTU)
• Largest employer of NABTU-represented workers in the Southeast
• Historic 10-year agreement with the Trades and Labor Council for Annual Employees
• All Unions (17) now have 10-year Recognition Agreements with TVA
• TVA named “Top 10 Employer” for U.S. military veterans – 5th consecutive year
• Veterans 20% of TVA’s workforce
• “Leading Disability Employer” 2nd year by the National Organization on Disability
• Number 2 Employer - State of Tennessee - Forbes’ List of America’s Best Employers
| 10TVA 2020 Investor Conference Call
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Operational Excellence
| 11TVA 2020 Investor Conference Call
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Operational Excellence – Top Safety Record2020: One of the best years on record for TVA safety performance
0.45 0.39 0.35 0.46 0.330.0
0.5
1.0
1.5
2.0
2.5
2016 2017 2018 2019 2020
TVA Recordable Incident Rate Trend
TVA RIR Top Quartile
Median Bottom Quartile
0.09 0.03 0.05 0.07 0.030.00
0.05
0.10
0.15
0.20
0.25
0.30
2016 2017 2018 2019 2020
TVA Serious Injury Incident Rate Trend
TVA SIIR Top Quartile
Median Bottom Quartile
| 12TVA 2020 Investor Conference Call
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National Leadership in Reducing Emissions55%
from 2005CO2
SO299%
from 1977peak
96% from 1995
peakNOx
Emissions data reported on a calendar year basis
45
70
95
120
-
0.5
1.0
1.5
2.0
2.5
1974 1979 1984 1989 1994 1999 2004 2009 2014 2019
Mill
ions
of T
ons
(CO
2)
Mill
ions
of T
ons
(SO
2&
NO
X)
| 13TVA 2020 Investor Conference Call
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National Leadership in Growing RenewablesNearly 7,000 MW of renewables, including hydro, wind, and solar
70% growth of operating and contracted solar capacity in FY 2020
Six PPAs signed in 2020 for 651 MW of solar with 50 MW of storage
Exploring opportunities for TVA-built solar
First storage project started (Vonore Battery Energy Storage System)
| 14TVA 2020 Investor Conference Call
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Nuclear42%
Hydroelectric10%
Coal13%
Natural Gas and/or Oil‐fired22%
Purchased Power (Non‐renewable)
8%
Purchased Power (Renewable)
5%
Nuclear19%
Hydroelectric11%
Other Renewable Sources2%
Coal32%
Natural Gas and Other Gases
35%
Petroleum1%
Other 0%
TVA National Average
TVA data is total electric power supply by source for FY2020
National Leadership in Cleaner Generation
| 15TVA 2020 Investor Conference Call
Data from U.S. EIA Electric Power Annual Report (2019)
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National Leadership in Economic Development
67,000+ jobsCreated or Retained
$8.6+ billionCapital Invested
2020 ResultsTVA has been named a Top
Utility in Economic
Development by Site Selection Magazine for 15
consecutive years
| 16TVA 2020 Investor Conference Call
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Review of Financial Performance
John ThomasExecutive Vice President & Chief Financial Officer
| 17TVA 2020 Investor Conference Call
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Summary of Financial Results
Operating revenues 9% lowerDriven by milder weather, COVID-19 impacts ($185 million), bill credits to LPC Partners ($163 million)
Total effective power rate 5% lowerDriven primarily by lower fuel costs
Fuel and purchased power expense 15% lowerDriven mainly by higher nuclear generation, lower sales, and lower natural gas prices
Interest expense 5% lowerDriven by lower average balances of debt
Net income 5% lower
For Twelve Months Ended September 30, 2020 - Comparison to Prior Year
| 18TVA 2020 Investor Conference Call
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Total Degree Days Below Normal
FY174,128
FY164,674
FY204,744
Normal5,060
FY195,239
FY185,392
FY155,401
FY145,452
4,000
4,500
5,000
5,500
6,000
Lower Sales Due to Milder than Normal Weather
FY14 - FY17 data has been adjusted in order to incorporate a change in TVA’s current calculation of total degree days* 5,046 is normal for non-leap years
| 19TVA 2020 Investor Conference Call
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Sales & Revenue Twelve Months Ended September 30 2020 2019 Change Percent Change
Power Sales (GWh) 151,251 158,443 (7,192) (5)%
Total Operating Revenues ($ millions) $ 10,249 $ 11,318 $ (1,069) (9)%
Base Revenue 7,790 8,356 (566) (7)%
Fuel Cost Recovery 2,310 2,799 (489) (17)%
Average Base Rate (¢/kWh) 5.2 5.3 (0.1) (2)%
Average Fuel Rate 1.5 1.8 (0.2) (14)%
Total Effective Rate* 6.7 7.1 (0.4) (5)%
Calculations may be impacted by rounding
* Excludes other revenue and off-system sales impact; total effective rate numbers based on unrounded base and fuel rates
| 20TVA 2020 Investor Conference Call
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Power Supply Summary – FY 2020Almost 60% of power from carbon-free sources
Investments in power system diversity helping TVA benefit from lower natural gas prices
Nuclear Hydro & OtherRenewables(incl. PP)
Natural gasand/or oil‐fired
Coal‐fired Purchasedpower (non‐renewable)
Natural Gas Prices Power Supply by Source
FY 1
9
FY 2
0
FY 1
9
FY 2
0
FY 1
9
FY 2
0
FY 1
9
FY 2
0
FY 1
9
FY 2
0
Source: Henry Hub Historical Prices
39% 42%
20% 22%
15% 15%17%
13%
9%8%
| 21TVA 2020 Investor Conference Call
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Expenses & Net IncomeTwelve Months Ended September 30 2020 2019 Change Percent Change
$ 10,249 $ 11,318 $ (1,069) (9)%
$ 2,464 $ 2,903 $ (439) (15)%
2,720 3,090 (370) (12)%
1,826 1,973 (147) (7)%
528 541 (13) (2)%
1,142 1,198 (56) (5)%
$ 1,352 $ 1,417 $ (65) (5)%Net Income*
* Net income includes Other income (expense), net and Other net periodic benefit cost
Tax Equivalents
Depreciation & Amortization
Interest Expense
Total Operating Revenues ($ millions)
Fuel & Purchased Power Expense
Operating & Maintenance Expense
| 22TVA 2020 Investor Conference Call
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Cash Flow & Balance Sheet MetricsTwelve Months Ended September 30
Net Cash Provided by / (Used in) ($ millions) 2020 2019 Change
Operating Activities $ 3,636 $ 3,720 $ (84)
Investing Activities $ (2,015) $ (2,243) $ 228
Financing Activities $ (1,422) $ (1,477) $ 55
Select Balance Sheet Metrics(1) Sep. 30 Sept. 30
($ millions) 2020 2019 Change
Total Debt and Other Financing Obligations(2) $ 21,421 22,818 (1,397)
500 299 201
20,921 22,519 (1,598)
Cash and Cash Equivalents
(1) See Appendix - Regulation G Reconciliation (2) Statutory Debt balance that counts towards TVA's $30 billion debt ceiling was $20.1 billion at 9/30/2020
Total Debt and Other Financing Obligations Net of Cash and Cash Equivalents
| 23TVA 2020 Investor Conference Call
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Retirement System ImpactsA majority of benefit payments are met through investment earnings
Actuals results reflected through 9/30/20
$ bi
llion
$0$5
$10$15$20$25$30$35
EmployeeContributions
TVAContributions
InvestmentEarningsthru FY20
FutureTVA
Contributions
FutureInvestmentEarnings
TotalBenefits
Paid
~$7billion
~$35billion
$6billion$2
billion
$5billion$15
billion
+
++
+=
7.4%Annualized Return
Since 1954
6.75%Estimated
Annual Return
Recent Developments:
• Pension assets fully recovered by 9/30/2020 from Covid-19 market volatility:
$8.0 billion 9/30/19 $6.8 billion at 3/31/20 $8.0 billion 9/30/20
• Discount rate decreased from 3.20 percent to 2.75 percent
• 58% funded status
• $300 million annual contributions - expect to continue on glide path
| 24TVA 2020 Investor Conference Call
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Recap of Financial ResultsStrong financial results
Improved operational efficiencies
Lower interest expense
Improved financial health
Lower effective rates for our customers
$200M of performance-related savings to be returned to customers in 2021
| 25TVA 2020 Investor Conference Call
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Progress on Financial Health
20,000
22,000
24,000
26,000
28,000
30,000
2013 2014 2015 2016 2017 2018 2019 2020
2014 Financial Plan Period
$21.4Billion
Total Financing Obligations
$21.8BillionGOAL(2023)
$ M
illion
s
• In 2020, TVA exceeded its commitment to the Office of Management & Budget to reduce debt to $21.8 Billion by 2023.
• TVA has reduced debt by $6 billion from 2013 levels.
• TVA’s debt is the lowest in over 30 years.
* See Appendix – Regulation G Reconciliation| 26TVA 2020 Investor Conference Call
2023 Debt Reduction commitment exceeded by 3 Years and $400 Million
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52
67
2721
0
10
20
30
40
50
60
70
FY13FY14FY15FY16FY17FY18FY19FY20
Progress on Financial Health$
Billio
ns
Construction and Completed Plant Assets, Gross*
TVA TFO*
0
1
2
3
4
5
6
7
8
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Cen
ts/k
Wh
6.9 6.7
Fuel
Base
* See Appendix – Regulation G Reconciliation
| 27TVA 2020 Investor Conference Call
TVA has invested over $15 billion in its asset base, while reducing debt by $6 billion, and reducing effective rates.
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Financial Health Trends
* See Appendix – Regulation G Reconciliation
56%
40%
35%
40%
45%
50%
55%
60%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Debt to Asset Ratio*
$21
$18
$10
$15
$20
$25
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Operating & Maintenance Expense ($/MWh)*
2.3
3.8
1.01.52.02.53.03.54.04.5
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Interest Coverage Ratio*
$24
$16
$10
$15
$20
$25
$30
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Fuel & Purchased Power Expense ($/MWh)
GOOD
GOOD
GOOD
GO
OD
| 28TVA 2020 Investor Conference Call
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Financial Health HighlightsSuccess to Date:
Best financial health in decades
Lower effective rates
$6 billion reduction in debt – lowest debt in over 30 years
Forward-Looking:
Flat effective rates for the next decade
Stabilize debt
Balance commitments with obligations
| 29TVA 2020 Investor Conference Call
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Question & Answer Session
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Appendix – Regulation G ReconciliationsSeptember 30, 2020 September 30, 2019
Total Outstanding Debt 20,889$ 22,197$
Exchange Gain - Current 73 - Exchange Gain - Long-Term 80 191 Unamortized Discounts, Premiums, Issue Costs and Other 131 139 Notes Payable - (23) Debt of Variable Interest Entities (1,098) (1,137)
Bonds and Notes, Gross 20,075$ 21,367$
Notes Payable - 23 Leaseback Obligations 223 263 Membership Interests of Variable Interest Entity Subject to Mandatory 25 28 Debt of Variable Interest Entities 1,098 1,137
Total Debt and Other Financing Obligations, Gross ("TFO") 21,421$ 22,818$
Note numbers may be adjusted for rounding
Construction and Completed Plant Assets, Gross = Completed Plant + Construction in Progress
| 31TVA 2020 Investor Conference Call
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Appendix – Regulation G ReconciliationsSeptember 30, 2019
Operating & Maintenance Expense excluding Additonal Items 2,654$
Bull Run & Paradise Write-Offs 170 Accelerated Recover of Kingston Environmental Costs 266
Operating & Maintenance Expense 3,090$
Debt to Asset Ratio = (Short-term debt, net + Current maturities of power bonds + Current maturities of long-term debt of variable interest entities + Total Long-term debt, net)/Total Assets
Interest Coverage Ratio = (Net Income + Interest Expense, net + Depreciation & Amortization Expense) / (Interest Expense, gross)
| 32TVA 2020 Investor Conference Call
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