TVA Revenue, Net Income Up from 2006; Still Lagging Below 2007 Budget

August 14, 2007

TVA today reported an increase in operating revenues and net income for the nine months that ended June 30, 2007, compared with the same period a year ago.

TVA’s quarterly report for the third quarter, filed on Form 10-Q with the Securities and Exchange Commission, showed total operating revenues of $6.6 billion for the first nine months of the 2007 fiscal year, a 4.3-percent increase over total operating revenues for the same period of the 2006 fiscal year. TVA reported net income of $371 million for the first three quarters of 2007, compared to $123 million for the same period in 2006.

Total operating expenses were 1.6 percent higher for nine-month period in 2007, compared to the same period a year ago, and power sales increased slightly.

In a financial outlook for the year, TVA forecasts that net income for the 2007 fiscal year will be about $31 million less than budgeted, primarily because of unseasonable winter weather and dry conditions in the Tennessee Valley during the first nine months of the year. Power sales are 2.2 percent below budgeted amounts, and hydroelectric generation, TVA’s cheapest source of power, is 32 percent below the amount budgeted for the nine months that ended June 30.

“Record dry conditions that have lingered for most of the fiscal year continue to impact our budget, reducing our hydro generation and increasing our fuel and purchased power costs as we strive to meet the highest power demands in TVA’s history this summer,” said TVA President and CEO Tom Kilgore. “To offset some of the financial impact on our budget, we have identified ways to reduce operating and maintenance costs for the remainder of the year, and we urge consumers to continue to use energy wisely.”

During the third quarter of 2007, TVA restarted Browns Ferry Nuclear Plant Unit 1, which provides 1,150 megawatts of new generation to help meet the growing power supply needs in the area and reduce power purchases. Unit 1 began commercial operation on Aug. 1.

For the three months that ended June 30, TVA reported net income of $194 million, compared to a net income of $162 million for the same period in 2006. Total operating revenues, total operating expenses and sales changed less than 1 percent from the third quarter a year ago.

The quarterly report contains financial results for the three-month and nine-month periods ending June 30. TVA’s fiscal year began Oct. 1, 2006, and ends Sept. 30, 2007.

The report noted the six-month period from January through June was the second driest on record in 118 years in the eastern Tennessee Valley, with rainfall 56 percent of normal. As a result, hydro power generation is down, and TVA has relied on other forms of power generation and purchased power to meet demand.

Investors are encouraged to read the quarterly report, which includes additional financial, operational and descriptive information, such as financial statements for the quarter and nine months ended June 30, 2007. The quarterly report may be read along with the annual report on Form 10-K/A and current reports on Form 8-K that TVA has filed with the SEC.

The public may read reports or other information that TVA files with the SEC at the SEC’s Public Reference Room at 100 F St., N.E., Washington, D.C. 20549. TVA’s SEC reports are also available to the public on the SEC’s website at www.sec.gov, from 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 8.7 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.

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