TVA Reports First Quarter Net Loss, Expenses For Ash Spill Recovery

February 12, 2009

TVA today filed its fiscal year 2009 first quarter report with the Securities and Exchange Commission, reporting a net loss of $305 million — primarily a result of the Kingston ash spill recovery efforts.

The loss for the three months that ended Dec. 31, 2008, compares with a net income of $8 million reported for the first quarter of the previous fiscal year. Excluding the charge related to Kingston, TVA had a net income of $220 million.

Revenues during the quarter increased $717 million, or approximately 30 percent, from the first quarter a year ago, while power sales decreased approximately 2 percent. The increase in revenue was due primarily to an increase in TVA’s fuel cost adjustment due to higher fuel and purchased power costs and base rate increases.

A decrease in TVA’s fuel cost adjustment in January 2009 and again in April 2009 will result in reduced wholesale power rates.

“We recognize the impacts that the economic slowdown is having on power sales and are evaluating ways we can reduce our costs and continue to provide reliable, affordable power to the consumers in the Tennessee Valley,” said TVA Chief Financial Officer Kim Greene. “While we expect our sales to continue to be affected throughout the fiscal year, we are confident that the region will recover as the nation’s economy recovers.”

TVA spent almost $1.4 billion on fuel and purchased power during the first quarter, an increase of $461 million or 50 percent compared with the same three-month period the previous year.

At the end of the first quarter, TVA recognized expenses of $525 million for estimated costs related to the ash spill at Kingston Fossil Plant on Dec. 22. Current estimates on clean-up costs range from $525 million to $825 million, depending on the method of ash disposal that is assumed. The range does not include costs for items such as regulatory actions, litigation or long-term environmental remediation.

After almost three years of drought conditions, rainfall in the eastern part of the Tennessee Valley was 96 percent of normal and runoff (the amount of water that reaches streams and rivers) was 65 percent of normal during the first quarter of the 2009 fiscal year. As a result, hydroelectric generation increased by 1.1 billion kilowatt hours compared to the first quarter of previous year.

Rainfall and runoff continued to improve during January of 2009. TVA also met a record winter power demand of 32,572 megawatts on Jan. 16 without any interruptions.

TVA Reconciliation of Earnings Reported under Generally Accepted Accounting Principles

	Three months ended Dec. 31
	2008	2007
Net income excluding Kingston ash spill clean up costs	$220 million	$8 million
Kingston ash spill clean up costs	$525 million	—
Net loss reported under GAAP	$(305 million)	$8 million

TVA’s quarterly report on Form 10-Q provides additional financial, operational and descriptive information, including financial statements for the quarter ended Dec. 31, 2008, 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 Street, N.E., Washington, DC 20549. TVA 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 158 power distributors that serve approximately 9 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 for the quarter ended Dec. 31, 2008 on Form 10-Q filed with the SEC.)

Media Contact

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

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www.tva.com/finance

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