Savings Efforts Offset Weather Impact On TVAs 2012 Results

pan>)--The Tennessee Valley Authority continued to make progress in fiscal year
2012 in its vision to be a national leader in low-cost and cleaner
energy despite lower sales and revenue impacted by mild weather and a
slow economy, TVA said Friday in its annual report to the U.S.
Securities and Exchange Commission.
“Our commitment to these vision goals of low rates, high reliability and
responsibility will be met as we continue to build a more balanced
energy generation portfolio. In the past we have relied more heavily on
coal”
A TVA-wide effort begun in the second quarter to reduce discretionary
spending, defer program spending, enhance productivity and eliminate
management levels allowed TVA to complete the year ended Sept. 30, 2012,
with net income of $60 million on total revenues of $11.2 billion.
With lower than planned sales and revenues in the first half of 2012
due to the unusually mild winter, TVA took actions that improved cost
efficiencies throughout the organization, allowing us to conserve cash
and remain financially solid in 2012, Chief Financial Officer John
Thomas said.
A significant portion of these savings, identified through the
dedication and support of our employees, are expected to be sustainable
and will benefit TVA in future years, he said.
TVAs service region, which covers most of Tennessee and parts of six
surrounding states, experienced 22 percent fewer heating degree days
than normal last winter during the first half of 2012. Sales increased
in the second half of 2012 due to warmer than normal weather, but not
enough to offset the decline during the first two quarters.
Electricity sales were down 1 percent in 2012 compared with the previous
year. Sales to local power companies, which made up 80 percent of TVAs
overall sales, were down 4 percent. The decline in sales was partially
offset by a 7 percent increase in direct sales to industrial customers.
Weather variations have a more significant impact on electricity usage
by municipalities and cooperative utilities because residential and
commercial customers are more temperature sensitive than industries.
Total revenue for 2012 declined 5 percent compared with 2011. The
decrease was primarily due to a $355 million reduction in fuel cost
recovery and a $294 million decrease in base revenue.
Even with the financial and operational challenges during 2012, TVA
moved closer to reaching its vision by remaining focused on delivering
cleaner, low-cost power to our customers, President and CEO Tom Kilgore
said.
Our commitment to these vision goals of low rates, high reliability and
responsibility will be met as we continue to build a more balanced
energy generation portfolio. In the past we have relied more heavily on
coal, Kilgore said. Going forward, our generation mix will be more
evenly dispatched through natural gas, nuclear and coal, with
hydroelectric and other renewable sources making up the balance.
TVA added more natural gas to its system in 2012 with the newly
constructed John Sevier Combined Cycle Gas Plant. TVA also continued
construction on Watts Bar Nuclear Plant Unit 2, which is expected to be
completed in late 2015, adding more nuclear generation to its portfolio.
Kilgore praised the performance of TVAs generating fleet and
transmission system in 2012. TVA provided another year of superior
dependability in 2012 by marking its 13th consecutive year of
operating at a 99.999 percent reliability rate, he said. We saw
improvements in nuclear availability, increased generation in our
gas-fired plants and fewer forced outages in our fossil plants. And it
was one of our best years ever for safety.
Operating expenses declined $484 million or 5 percent in 2012 compared
with the prior year, driven by lower fuel and purchased power expenses
and decreases in operating and maintenance expenses. These declines were
partially offset by increases in depreciation and amortization expenses.
TVAs fuel expense decreased $246 million or 8 percent in 2012 compared
with 2011. TVA benefited from a balanced mix of generation resources and
lower natural gas prices, which accounted for $235 million of the
decrease. Natural gas-fired generation was 145 percent higher in 2012
compared with last year, while coal-fired generation decreased 21
percent. Nuclear generation also helped offset the lower coal-fired
generation, increasing 11 percent in 2012 compared with last year. The
cost of purchased power declined by $238 million in 2012 compared with
2011, primarily due to lower natural gas prices.
Contributing to the $107 million decrease in operating and maintenance
expense in 2012 over 2011 was a $53 million decline in nuclear operation
expenses due to fewer nuclear refueling outages in 2012, and a $37
million drop in contractor and consultant services primarily due to an
emphasis on cost saving initiatives, including project prioritization
and an overall reduction in contractors.
We know we must provide affordable rates for our customers, even during
challenging years, stated Thomas. Low rates help keep jobs and promote
economic growth in the Tennessee Valley, which benefit both TVA and our
customers. Our overall rates did improve in 2012, but we still have work
to do to attain our goal of being in the top quartile among our peers.
TVA reported net income of $60 million in 2012, compared with net income
of $162 million in 2011, and adopted a fiscal 2013 budget with no rate
increase.
TVA executive management will host a year-end financial conference call
at 9:30 a.m. EST on Friday, Nov. 16, 2012. The conference call can be
accessed on TVAs website via webcast at http://www.tva.com/finance.
For quick access to the live conference call, please pre-register now by
going to TVAs website before the scheduled start time and follow the
instructions provided. Once pre-registered, the dial-in number will be
provided via an email. If you are unable to pre-register, you may access
the conference call by dialing toll free 877-270-2148 in the United
States or in Canada, or 412-902-6510 outside the United States. A replay
will be available one hour after the end of the conference call until
5:00 p.m. EST, Nov. 21, 2012, by calling toll free877-344-7529 in the
United States or 412-317-0088 outside the United States and using the
conference number 10020139. A webcast replay and transcript will also be
available for one year on TVAs website at http://www.tva.com/finance.
TVAs annual report on Form 10-K provides additional financial,
operational and descriptive information, including audited financial
statements for the fiscal year ended Sept. 30, 2012, and is available to
investors and the public. TVA SEC reports are also available without
charge on TVAs website at http://www.tva.com/finance
or on the SECs website at http://www.sec.gov
or by calling TVA toll free at 888-882-4975.
TVA provides electricity for utility and business customers in most of
Tennessee and parts of Alabama, Mississippi, Kentucky, Georgia, North
Carolina and Virginia to a population of over 9 million people.
(This release may contain forward-looking statements relating to future
events and future performance. Although TVA believes that the
assumptions underlying these statements are reasonable, numerous factors
could cause actual results to differ materially from those in the
forward-looking statements. Please refer to TVAs annual report on Form
10-K for a list of factors that could cause actual results to differ
from those in the forward-looking statements.)
Click
here to subscribe to Mobile Alerts for TVA.

Information Source: Business Wire