Fiscal Year 2020 Investor Conference Call · National Leadership in Cleaner Generation TVA 2020 ......

Fiscal Year 2020 Investor Conference Call

November 17, 2020

Introduction

| 2

Tammy WilsonVice President, Treasurer & Chief Risk Officer

TVA 2020 Investor Conference Call

Agenda

Fiscal Year 2020 Review• Jeff Lyash, President & Chief Executive Officer

Review of Financial Performance• John Thomas, Executive Vice President & Chief Financial Officer

Question and Answer Session

Closing Remarks

| 3TVA 2020 Investor Conference Call

“Safe Harbor” StatementThis document contains forward-looking statements relating to future events and future performance. All statements other than those that are purely historical may be forward-looking statements. In certain cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “project,” “plan,” “predict,” “assume,” “forecast,” “estimate,” “objective,” “possible,” “probably,” “likely,” “potential,” “speculate,” or other similar expressions. Although TVA believes that the assumptions underlying the forward-looking statements are reasonable, TVA does not guarantee the accuracy of these statements. Numerous factors could cause actual results to differ materially from those in the forward-looking statements. For a discussion of these factors, please see the annual, quarterly, and periodic reports that TVA files with the Securities and Exchange Commission. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the extent to which any factor or combination of factors may impact TVA’s business or cause results to differ materially from those contained in any forward-looking statement. TVA undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made.


Fiscal Year 2020 Review

Jeff LyashPresident & Chief Executive Officer


2020 Recap: Fiscal Year 2020 Focus Areas

Strengthen long-term partnerships with customers

Maintain low rates

Excel in power operations – particularly in nuclear

Leverage innovation and technology

Continuously improve



COVID-19 Response

Fiscal Year 2020 HighlightsResponse to COVID-19

142 of 153 LPCs signed the Long-Term Partnership

Lowest debt in over 30 years

Continued 99.999% reliability

Historic labor agreements

Top safety record

Almost 60% of power from carbon-free sources

First Corporate Sustainability Report

Prevented $1 billion in flood damages – FY20 wettest on record


FY21 Priorities


Historic Progress on Labor Relations• Strong partnership with North America’s Building Trades Unions (NABTU)

• Largest employer of NABTU-represented workers in the Southeast

• Historic 10-year agreement with the Trades and Labor Council for Annual Employees

• All Unions (17) now have 10-year Recognition Agreements with TVA

• TVA named “Top 10 Employer” for U.S. military veterans – 5th consecutive year

• Veterans 20% of TVA’s workforce

• “Leading Disability Employer” 2nd year by the National Organization on Disability

• Number 2 Employer - State of Tennessee - Forbes’ List of America’s Best Employers


Operational Excellence


Operational Excellence – Top Safety Record2020: One of the best years on record for TVA safety performance

0.45 0.39 0.35 0.46 0.330.0

0.5

1.0

1.5

2.0

2.5

2016 2017 2018 2019 2020

TVA Recordable Incident Rate Trend

TVA RIR Top Quartile

Median Bottom Quartile

0.09 0.03 0.05 0.07 0.030.00

0.05

0.10

0.15

0.20

0.25

0.30

2016 2017 2018 2019 2020

TVA Serious Injury Incident Rate Trend

TVA SIIR Top Quartile

Median Bottom Quartile


National Leadership in Reducing Emissions55%

from 2005CO2

SO299%

from 1977peak

96% from 1995

peakNOx

Emissions data reported on a calendar year basis

45

70

95

120

-

0.5

1.0

1.5

2.0

2.5

1974 1979 1984 1989 1994 1999 2004 2009 2014 2019

Mill

ions

of T

ons

(CO

2)

Mill

ions

of T

ons

(SO

2&

NO

X)


National Leadership in Growing RenewablesNearly 7,000 MW of renewables, including hydro, wind, and solar

70% growth of operating and contracted solar capacity in FY 2020

Six PPAs signed in 2020 for 651 MW of solar with 50 MW of storage

Exploring opportunities for TVA-built solar

First storage project started (Vonore Battery Energy Storage System)


Nuclear42%

Hydroelectric10%

Coal13%

Natural Gas and/or Oil‐fired22%

Purchased Power (Non‐renewable)

8%

Purchased Power (Renewable)

5%

Nuclear19%

Hydroelectric11%

Other Renewable Sources2%

Coal32%

Natural Gas and Other Gases

35%

Petroleum1%

Other 0%

TVA National Average

TVA data is total electric power supply by source for FY2020

National Leadership in Cleaner Generation


Data from U.S. EIA Electric Power Annual Report (2019)

National Leadership in Economic Development

67,000+ jobsCreated or Retained

$8.6+ billionCapital Invested

2020 ResultsTVA has been named a Top

Utility in Economic

Development by Site Selection Magazine for 15

consecutive years


Review of Financial Performance

John ThomasExecutive Vice President & Chief Financial Officer


Summary of Financial Results

Operating revenues 9% lowerDriven by milder weather, COVID-19 impacts ($185 million), bill credits to LPC Partners ($163 million)

Total effective power rate 5% lowerDriven primarily by lower fuel costs

Fuel and purchased power expense 15% lowerDriven mainly by higher nuclear generation, lower sales, and lower natural gas prices

Interest expense 5% lowerDriven by lower average balances of debt

Net income 5% lower

For Twelve Months Ended September 30, 2020 - Comparison to Prior Year


Total Degree Days Below Normal

FY174,128

FY164,674

FY204,744

Normal5,060

FY195,239

FY185,392

FY155,401

FY145,452

4,000

4,500

5,000

5,500

6,000

Lower Sales Due to Milder than Normal Weather

FY14 - FY17 data has been adjusted in order to incorporate a change in TVA’s current calculation of total degree days* 5,046 is normal for non-leap years


Sales & Revenue Twelve Months Ended September 30 2020 2019 Change Percent Change

Power Sales (GWh) 151,251 158,443 (7,192) (5)%

Total Operating Revenues ($ millions) $ 10,249 $ 11,318 $ (1,069) (9)%

Base Revenue 7,790 8,356 (566) (7)%

Fuel Cost Recovery 2,310 2,799 (489) (17)%

Average Base Rate (¢/kWh) 5.2 5.3 (0.1) (2)%

Average Fuel Rate 1.5 1.8 (0.2) (14)%

Total Effective Rate* 6.7 7.1 (0.4) (5)%

Calculations may be impacted by rounding

* Excludes other revenue and off-system sales impact; total effective rate numbers based on unrounded base and fuel rates


Power Supply Summary – FY 2020Almost 60% of power from carbon-free sources

Investments in power system diversity helping TVA benefit from lower natural gas prices

Nuclear Hydro & OtherRenewables(incl. PP)

Natural gasand/or oil‐fired

Coal‐fired Purchasedpower (non‐renewable)

Natural Gas Prices Power Supply by Source

FY 1

9

FY 2

0

FY 1

9

FY 2

0

FY 1

9

FY 2

0

FY 1

9

FY 2

0

FY 1

9

FY 2

0

Source: Henry Hub Historical Prices

39% 42%

20% 22%

15% 15%17%

13%

9%8%


Expenses & Net IncomeTwelve Months Ended September 30 2020 2019 Change Percent Change

$ 10,249 $ 11,318 $ (1,069) (9)%

$ 2,464 $ 2,903 $ (439) (15)%

2,720 3,090 (370) (12)%

1,826 1,973 (147) (7)%

528 541 (13) (2)%

1,142 1,198 (56) (5)%

$ 1,352 $ 1,417 $ (65) (5)%Net Income*

* Net income includes Other income (expense), net and Other net periodic benefit cost

Tax Equivalents

Depreciation & Amortization

Interest Expense

Total Operating Revenues ($ millions)

Fuel & Purchased Power Expense

Operating & Maintenance Expense


Cash Flow & Balance Sheet MetricsTwelve Months Ended September 30

Net Cash Provided by / (Used in) ($ millions) 2020 2019 Change

Operating Activities $ 3,636 $ 3,720 $ (84)

Investing Activities $ (2,015) $ (2,243) $ 228

Financing Activities $ (1,422) $ (1,477) $ 55

Select Balance Sheet Metrics(1) Sep. 30 Sept. 30

($ millions) 2020 2019 Change

Total Debt and Other Financing Obligations(2) $ 21,421 22,818 (1,397)

500 299 201

20,921 22,519 (1,598)

Cash and Cash Equivalents

(1) See Appendix - Regulation G Reconciliation (2) Statutory Debt balance that counts towards TVA's $30 billion debt ceiling was $20.1 billion at 9/30/2020

Total Debt and Other Financing Obligations Net of Cash and Cash Equivalents


Retirement System ImpactsA majority of benefit payments are met through investment earnings

Actuals results reflected through 9/30/20

$ bi

llion

$0$5

$10$15$20$25$30$35

EmployeeContributions

TVAContributions

InvestmentEarningsthru FY20

FutureTVA

Contributions

FutureInvestmentEarnings

TotalBenefits

Paid

~$7billion

~$35billion

$6billion$2

billion

$5billion$15

billion

+

++

+=

7.4%Annualized Return

Since 1954

6.75%Estimated

Annual Return

Recent Developments:

• Pension assets fully recovered by 9/30/2020 from Covid-19 market volatility:

$8.0 billion 9/30/19 $6.8 billion at 3/31/20 $8.0 billion 9/30/20

• Discount rate decreased from 3.20 percent to 2.75 percent

• 58% funded status

• $300 million annual contributions - expect to continue on glide path


Recap of Financial ResultsStrong financial results

Improved operational efficiencies

Lower interest expense

Improved financial health

Lower effective rates for our customers

$200M of performance-related savings to be returned to customers in 2021


Progress on Financial Health

20,000

22,000

24,000

26,000

28,000

30,000

2013 2014 2015 2016 2017 2018 2019 2020

2014 Financial Plan Period

$21.4Billion

Total Financing Obligations

$21.8BillionGOAL(2023)

$ M

illion

s

• In 2020, TVA exceeded its commitment to the Office of Management & Budget to reduce debt to $21.8 Billion by 2023.

• TVA has reduced debt by $6 billion from 2013 levels.

• TVA’s debt is the lowest in over 30 years.

* See Appendix – Regulation G Reconciliation| 26TVA 2020 Investor Conference Call

2023 Debt Reduction commitment exceeded by 3 Years and $400 Million

52

67

2721

0

10

20

30

40

50

60

70

FY13FY14FY15FY16FY17FY18FY19FY20

Progress on Financial Health$

Billio

ns

Construction and Completed Plant Assets, Gross*

TVA TFO*

0

1

2

3

4

5

6

7

8

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Cen

ts/k

Wh

6.9 6.7

Fuel

Base

* See Appendix – Regulation G Reconciliation


TVA has invested over $15 billion in its asset base, while reducing debt by $6 billion, and reducing effective rates.

Financial Health Trends

* See Appendix – Regulation G Reconciliation

56%

40%

35%

40%

45%

50%

55%

60%


Debt to Asset Ratio*

$21

$18

$10

$15

$20

$25


Operating & Maintenance Expense ($/MWh)*

2.3

3.8

1.01.52.02.53.03.54.04.5


Interest Coverage Ratio*

$24

$16

$10

$15

$20

$25

$30


Fuel & Purchased Power Expense ($/MWh)

GOOD

GOOD

GOOD

GO

OD


Financial Health HighlightsSuccess to Date:

Best financial health in decades

Lower effective rates

$6 billion reduction in debt – lowest debt in over 30 years

Forward-Looking:

Flat effective rates for the next decade

Stabilize debt

Balance commitments with obligations


Question & Answer Session

Appendix – Regulation G ReconciliationsSeptember 30, 2020 September 30, 2019

Total Outstanding Debt 20,889$ 22,197$

Exchange Gain - Current 73 - Exchange Gain - Long-Term 80 191 Unamortized Discounts, Premiums, Issue Costs and Other 131 139 Notes Payable - (23) Debt of Variable Interest Entities (1,098) (1,137)

Bonds and Notes, Gross 20,075$ 21,367$

Notes Payable - 23 Leaseback Obligations 223 263 Membership Interests of Variable Interest Entity Subject to Mandatory 25 28 Debt of Variable Interest Entities 1,098 1,137

Total Debt and Other Financing Obligations, Gross ("TFO") 21,421$ 22,818$

Note numbers may be adjusted for rounding

Construction and Completed Plant Assets, Gross = Completed Plant + Construction in Progress


Appendix – Regulation G ReconciliationsSeptember 30, 2019

Operating & Maintenance Expense excluding Additonal Items 2,654$

Bull Run & Paradise Write-Offs 170 Accelerated Recover of Kingston Environmental Costs 266

Operating & Maintenance Expense 3,090$

Debt to Asset Ratio = (Short-term debt, net + Current maturities of power bonds + Current maturities of long-term debt of variable interest entities + Total Long-term debt, net)/Total Assets

Interest Coverage Ratio = (Net Income + Interest Expense, net + Depreciation & Amortization Expense) / (Interest Expense, gross)


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