TVA Reports Net Loss for First Quarter of 2008

February 12, 2008

TVA today filed its fiscal year 2008 first quarter report on Form 10-Q with the Securities and Exchange Commission, reporting a net loss of $17 million, as drought conditions continued to impact operating costs.

The loss for the three months that ended Dec. 31, 2007 compares with a net income of $51 million reported during the first quarter of the previous fiscal year. The 2008 fiscal year began Oct. 1, 2007 and ends Sept. 30, 2008.

Total operating expenses for the first quarter were about $2 billion, an increase of 14 percent from the first quarter a year ago. An increase of $196 million in fuel and purchased power costs over the corresponding period a year ago accounted for most of the increase in operating expenses.

“The amount of electricity that we are able to generate from our hydroelectric plants depends on a number of factors outside TVA’s control,” said TVA President and CEO Tom Kilgore. “When these factors are unfavorable, TVA must increase its reliance on more expensive generation and purchased power.”

Rainfall for fiscal year 2008 through the end of January was 28 percent below normal, while runoff – the amount of water that reaches the river and reservoirs – was 67 percent below normal.

Kilgore said that TVA expects to face continuing challenges related to fuel and purchased power costs and reduced hydroelectric generation for the remainder of 2008.

Total operating revenues for the first quarter were $2.35 billion, an increase of $246 million from the same period last year while electricity sales increased by 2.3 percent. The increase in revenue resulted primarily from the fuel cost adjustment implemented in 2007 to recover increased fuel costs.

Interest on debt was lower than in the same period last year. However, net interest expense increased $39 million, primarily because of a change in methodology related to accounting for interest on projects not yet in service.

TVA met record monthly peak demands for power during both October and November. Purchased power accounted for more than 14 percent of the power that TVA sold to its customers during the first quarter.

TVA’s quarterly report on Form 10-Q includes additional financial, operational and descriptive information, such as un-audited financial statements for the quarter ended Dec. 31, 2007 and is available to investors and the public. The public may read reports or other information that TVA files with the SEC at its Public Reference Room at 100 F St., N.E., Washington, D.C., 20549. TVA’s SEC reports are also available on the SEC’s website at www.sec.gov, and copies are available on TVA’s website at www.tva.com/finance or by calling TVA toll free at 888-882-4975.

TVA is the nation’s largest public power provider and is completely self financing. TVA provides power to large industries and 159 power distributors that serve approximately 8.8 million consumers in seven southeastern states. TVA also manages the Tennessee River and its tributaries to provide multiple benefits, including flood damage reduction, navigation, water quality and recreation.

(This release and TVA’s quarterly report on Form 10-Q may contain forward- looking statements relating to future events and future performance. Although TVA believes that the assumptions underlying the forward-looking statements are reasonable, numerous factors could cause actual results to differ materially from those in the forward-looking statements. Some of these factors are discussed on pages 3 and 4 of TVA’s quarterly report filed with the SEC.)

Media Contact

John Moulton, Knoxville, (865) 632-8048
TVA News Bureau, Knoxville, (865) 632-6000

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