Tennessee Valley Authority — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. This is an annual filing, not a standalone fourth-quarter report. TVA is a U.S. government agency and the nation’s largest public power system, serving about 10 million people across seven southeastern states. Nearly all revenue comes from electricity sales, primarily wholesale sales to local power companies (LPCs).
Financial results and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Operating revenue | $12.054 billion | $12.540 billion |
| Operating expenses | $10.360 billion | $10.129 billion |
| Operating income | $1.694 billion | $2.411 billion |
| Net income | $500 million | $1.108 billion |
| Operating cash flow | $2.872 billion | $2.948 billion |
| Capital expenditures | $2.996 billion | Not stated in the provided text |
- Operating revenue fell 3.9%, electricity sales volume declined about 3% to 157.3 billion kWh, and net income fell 54.9%. Milder weather reduced sales and fuel cost recovery; lower natural-gas prices also lowered fuel rates.
- Operating expenses rose 2.3%. O&M increased $386 million, including higher payroll and benefits, nuclear-program spending, outages and contract labor. Depreciation and amortization rose $159 million, partly reflecting coal-plant retirements. These increases were partly offset by a $288 million decline in purchased-power expense.
- Calculated operating margin was approximately 14.1%, versus 19.2% in FY2022; net margin was approximately 4.1%, versus 8.8%. Interest expense was nearly flat at $1.056 billion.
- Cash and cash equivalents were $501 million. Current assets were $3.666 billion against current liabilities of $4.873 billion. TVA reported $2.115 billion of availability under revolving facilities after letters of credit; no cash borrowings were outstanding under those facilities.
- Outstanding TVA Bonds were $19.5 billion against the statutory $30 billion ceiling; short-term debt was $432 million. A $1.0 billion power-bond maturity falls due in September 2024. Total liabilities were $35.288 billion and total assets $51.344 billion.
Material changes and operating developments
- Revenue declined while expenses increased, reducing operating income by 29.7%. Net income decreased from $1.108 billion to $500 million.
- Generation mix shifted toward nuclear: nuclear supplied 42% of power generated and purchased, up from 39%; purchased power declined to 15% from 18%. Coal supplied 13%, unchanged year over year.
- Bull Run retired on September 30, 2023. TVA plans to retire Cumberland’s two coal units by the end of calendar 2026 and 2028 and is evaluating broader coal-fleet retirement by 2035.
- TVA issued $1.0 billion of power bonds in 2023, compared with $500 million in 2022. Net cash used in investing activities increased $331 million, primarily reflecting generation, transmission and environmental investment.
Outlook, risks and unusual items
- The TVA Board approved a 4.5% wholesale rate increase, excluding fuel, effective October 1, 2023; TVA estimated it would add $405 million of revenue in FY2024. Pandemic-related rate credits ended September 30, 2023.
- Planned capital expenditures are $4.098 billion in 2024 and $5.899 billion in 2025, followed by $4.722 billion in 2026, $4.681 billion in 2027 and $2.941 billion in 2028. TVA expects to fund needs through operating revenue, borrowing, rate increases and potentially federal or third-party funding; availability of grant and tax-credit funding is not assured.
- TVA plans $1.5 billion of demand-management investment during 2024–2028. It targets about 2,200 GWh of incremental efficiency savings and more than 2,200 MW of demand-response capacity by 2028; these are forward-looking estimates.
- Winter Storm Elliott caused generation outages of up to about 7,300 MW, constrained market purchases and led to rolling outages on two occasions. TVA deferred $149 million of fuel and purchased-power costs, which began being recognized in expense in February 2023. TVA reported after-action resilience measures.
- Key exposures include evolving environmental rules and CCR remediation, construction cost and supply-chain pressure, weather and reliability, nuclear operations, litigation, and access to debt markets. Estimated environmental expenditures for 2024–2028 include $1.608 billion for the CCR program, $252 million for Clean Air Act projects and $190 million for Clean Water Act requirements; estimates may change. Total asset-retirement obligations were $7.489 billion.
- Fitch downgraded TVA from AAA to AA+ following the U.S. sovereign downgrade; Moody’s later revised TVA’s outlook to negative. TVA stated it had not needed to post additional collateral because of the downgrade. TVA bonds are not guaranteed by the U.S. government.
- The pension plan had $8.129 billion of assets against $10.099 billion of obligations. Auditors issued an unqualified opinion on the financial statements and internal controls; management also concluded controls were effective.
Important facts for investors to verify
- Whether the FY2024 rate increase and planned cost optimization offset inflation, higher capital needs and any further declines in electricity sales.
- Debt-ceiling headroom, refinancing of the September 2024 maturity, credit-rating developments and liquidity after planned capital spending.
- Updated estimates and closure plans for CCR obligations, including potential effects of proposed or reinterpreted environmental rules.
- Current schedules, costs, permits and litigation status for Cumberland, Kingston and other generation projects. The filing’s Paradise-unit timing statements are inconsistent: it refers both to commercial operation by the end of calendar 2023 and pre-commercial operations beginning in first-quarter 2024.
- Progress on coal retirements, replacement generation, renewables and demand-management targets, and whether these plans preserve reliability at feasible rates.