TVA Reports 2009 Fiscal Year Third Quarter Results

July 31, 2009

TVA incurred a net loss of $167 million for the quarter that ended June 30, 2009, compared to a net income of $100 million for the same period in 2008, primarily because of expenses related to the Kingston ash spill and a significant decline in sales, according to TVA’s quarterly financial report filed with the Securities and Exchange Commission today.

For the first nine months of the 2009 fiscal year, TVA reported a net loss of $339 million, compared to a net income of $243 million for the same period in 2008, also primarily because of Kingston recovery expenses and lower power sales.

Power sales during the three months that ended June 30 were down 8.4 percent, compared to the same three-month period in 2008, as power demand, particularly from commercial and industrial customers, continued to decline as a result of the economic downturn.

Total power sales during the nine months that ended June 30, 2009, decreased by about 7 percent, compared to the same period in 2008.

“TVA has experienced considerable financial challenges during the 2009 fiscal year, including significant expenses related to the Kingston ash spill and lower-than-expected power sales because of the continued economic weakness in the TVA service area,” said TVA Chief Financial Officer Kim Greene. “TVA also faces the need for capital investments in the power system, including cleaner energy resources. Some of these expenses will likely have to be recovered through power rates.

“On the other hand, lower-than-expected fuel prices and greater amounts of rainfall can help offset some of these challenges. Coal, fuel oil and natural gas prices have declined this year, and TVA will continue to pass the lower fuel costs along to consumers through our fuel cost adjustment,” Greene said. “The additional rainfall has allowed us to increase our hydroelectric generation by 66 percent during the first three quarters of FY 2009, compared to the same nine-month period a year ago.

”Moreover, TVA is finding ways to reduce its operating costs and capital expenses to help offset some of the financial pressures in 2009.”

Operating expenses during the third quarter were $2.4 billion, compared to $2.1 billion in the third quarter of FY 2008. For the first nine months of FY 2009, operating expenses totaled almost $8 billion, an increase of 29 percent over expenses during the first nine months of 2008, primarily because of increased fuel and purchased power expenses and costs associated with the Kingston recovery. Operating revenues for the third quarter were $2.6 billion, almost the same as the corresponding period last year. Operating revenues for the nine months that ended June 30, 2009, were approximately $8.6 billion, compared to $7.4 billion for the corresponding period a year ago.

TVA recognized expenses of $933 million related to the Kingston ash spill for the nine months that ended June 30, 2009, which included an additional charge of $258 million during the three months that ended June 30. The estimate was revised as work progressed on the recovery and more information became available. The estimate does not include costs that may come from regulatory or legal actions.

TVA’s actual cash expenditures related to Kingston for the nine months that ended June 30 totaled $143 million. Without the expenses related to the Kingston recovery, operating expenses for the third quarter would have been flat, compared to the same period in the previous year.

Net interest expense was $958 million for the first nine months of FY 2009, compared to more than $1 billion for the same period in 2008.

TVA’s quarterly report on Form 10-Q provides additional financial, operational and descriptive information, including unaudited financial statements for the quarter and nine months that ended June 30, 2009, 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 35-43 of TVA’s Form 10-K filed for the fiscal year ending September 30, 2008, and page 73 of TVA’s quarterly report for the quarter ended June 30, 2009, on Form 10-Q filed with the SEC.)

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