Tennessee Valley Authority — FY2022 Form 10-K
Business context and reporting period. TVA is a U.S. government corporate agency operating the nation’s largest public power system. It serves about 10 million people across seven southeastern states, primarily selling wholesale electricity to local power companies. This annual filing covers the fiscal year ended September 30, 2022; the filing does not present a separate fourth-quarter-only financial summary.
Financial results and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Operating revenues | $12.540 billion | $10.503 billion |
| Operating expenses | $10.129 billion | $7.658 billion |
| Operating income | $2.411 billion | $2.845 billion |
| Net income | $1.108 billion | $1.512 billion |
| Net cash from operating activities | $2.948 billion | $3.256 billion |
| Capital construction and nuclear-fuel expenditures | $2.644 billion | $2.317 billion |
- Revenue rose 19.4%, while expenses increased 32.3%. Operating income fell 15.3% and net income fell 26.7%. Approximate operating margin declined to 19.2% from 27.1%; net margin declined to 8.8% from 14.4%.
- Electricity sales volume increased about 3% to 162.6 billion kWh. Fuel-cost recovery revenue rose $1.778 billion, principally reflecting higher natural gas, coal, and purchased-power prices; higher sales volume also contributed.
- Fuel expense increased $830 million and purchased-power expense increased $937 million. Lower availability of TVA generation—including the Watts Bar Unit 2 outage, coal-supply constraints, and lower hydroelectric output—contributed to greater purchases.
- Depreciation and amortization increased $521 million. A new depreciation study, reflecting shorter assumed coal-plant service lives and potential retirement of the remaining coal fleet by 2035, added about $345 million of 2022 depreciation.
- Operating cash flow decreased $308 million. Investing cash outflow increased to $2.663 billion; financing cash outflow was $283 million. Cash, cash equivalents, and restricted cash ended the year at $520 million.
- Total assets were $51.188 billion and total liabilities $35.683 billion. Proprietary capital was $15.505 billion. Current assets of $3.974 billion were below current liabilities of $4.645 billion.
- Power bonds outstanding were approximately $19.3 billion, near the $30 billion statutory debt limit; short-term discount notes were $1.173 billion. TVA also reported $1.007 billion of long-term VIE debt, including current maturities. Four revolving facilities totaled $2.65 billion, with $1.946 billion available after letters of credit; the separate $150 million U.S. Treasury facility was undrawn.
Material changes, outlook, and risks
- TVA reported 99.999% transmission reliability and said it maintained reliable service through record-setting May and June demand peaks. The generation mix shifted: purchased power supplied 18% of total power supply versus 13% in 2021; nuclear supplied 39%, coal 13%, gas/oil 22%, and hydro 8%.
- Management’s Strategic Financial Plan emphasizes keeping base rates flat, stabilizing debt, and investing while maintaining low feasible rates. TVA expects higher capital needs and anticipates debt and other financing obligations may rise in future years. Estimated capital expenditures are $3.245 billion for 2023 and $3.864 billion for 2024; these are plans, not earnings guidance.
- TVA is evaluating retirement of the remaining coal fleet by 2035. Bull Run retirement is planned by December 2023; environmental reviews are underway for potential Cumberland and Kingston retirements and replacement generation. The new Integrated Resource Plan process is expected to begin no later than 2024 and take about two years.
- Major projects include about $1.5 billion of planned Paradise and Colbert gas capacity and Johnsonville gas capacity, with commercial operation expected by the end of calendar 2023 and 2024, respectively. Solar supply-chain constraints have delayed the self-directed solar project to 2025 and may increase costs. TVA is also exploring advanced nuclear technology under a program authorized for up to $200 million.
- Environmental spending estimates for 2023–2027 include $900 million for the coal-combustion-residuals program, $128 million for Clean Air Act projects, and $111 million for Clean Water Act requirements. Further remediation costs, especially for groundwater and ash facilities, are not yet reliably estimable. Total AROs were $7.162 billion, including $3.643 billion nuclear and $3.519 billion non-nuclear.
- Other significant risks include volatile fuel and purchased-power prices; continued coal supply and rail constraints; inflation and project delays; nuclear operating, fuel-storage, and decommissioning risks; dam and water-temperature constraints; cybersecurity and physical-security threats; environmental regulation and litigation; pension funding and investment risk; and dependence on debt markets and the statutory borrowing ceiling. TVA securities are not guaranteed by the U.S. government.
- TVA provided a 2.5% Pandemic Recovery Credit in 2022, totaling $228 million. A 2.5% credit for 2023 is expected to cost approximately $230 million. The filing reports no off-balance-sheet arrangements and $11 million accrued for legal proceedings.
- Ernst & Young issued an unqualified audit opinion on the financial statements and internal controls; management concluded disclosure controls and internal control over financial reporting were effective.
Most important facts for investors to verify
- Whether rising fuel, purchased-power, and other operating costs continue to pressure net income and cash flow, and how promptly fuel costs are recovered through rates.
- Actual capital spending, financing needs, debt-limit headroom, and liquidity as major generation, transmission, environmental, and dam projects proceed.
- Coal retirement and replacement-generation decisions, project budgets and schedules, and the extent of solar supply-chain delays or cost increases.
- Updated estimates and regulatory requirements for CCR remediation, environmental compliance, decommissioning, and pension obligations.
- Customer and contract concentration: MLGW and NES represented 9% and 8% of operating revenue, respectively; confirm the status of their future supply choices and the legal protection of TVA’s service territory.