A Close Look at TVA Debt by the Experts.

Can you spell T-R-O-U-B-L-E for the TVA. The following are articles explaining the seriousness of the financial situation of the TVA.

The first article is from the Journal of Strategic Management Education. http://home.earthlink.net/~roubidoux/TVA_9-17-03.pdf A very striking point is the financial forecasting by the TVA concerning their debt. The TVA debt in 1997 was $27 billion. TVA's forecast in 1997 stated their debt would be reduced to $14 billion by 2007. Remarkably, TVA has not met their debt forecast, their debt is $22.6 billion as of December 31, 2007 according to the TVA's Form 10Q, December 31, 2007. In short the article states the TVA is in serious trouble. "There is a long history of inefficient management, poor forecasting performances and...[a] real threat of bankruptcy if it were not for the implicit guarantee of outstanding debt by the Federal Financing Bank." However, "...since the guarantee is implicit not explicit in the bond agreement, there is no assurance that bond holders will obtain the full value of their debt holdings should the TVA's financial situation deteriorate." The article goes on to recommend privatization in stages before a financial collapse occurs.

In the next article, http://www.rsmenergy.com/AugustReport.PDF a similar concern is expressed. It describes the TVA as: "The TVA-Taxpayers ENRON...The Bush administration has criticized TVA for its excessive debt and lack of plans to reduce it. TVA has now announced a plan to avoid going further into debt by having its distributors issue tax-free bonds, and then prepay TVA for future power deliveries." To top off TVA problems there is this: "If TVA’s near useless assets were written down to value, TVA would be insolvent (liabilities exceed assets)." TVA's leaseback and prepay plans are also problematic. "Both these leaseback and prepay plans have substantially the same impact as debt on TVA’ s financial condition. In fact, this is very costly debt at that. Further, the distributors will become more financially leveraged. So rather than developing and implementing a plan to work itself out of debt, TVA is digging itself and its distributors deeper into financial trouble."

Moves to privatize the TVA are described in these articles: http://www.knoxnews.com/news/2008/may/11/bill-calls-federal-oversight-tva/ and http://www.nemw.org/tvareport.htm Private utility companies have seen the TVA as unacceptable competition backed by the Federal Financing Bank. Due to new construction of new nuclear plants by the TVA it appears the competition surrounding the Tennessee Valley Region may get their wish, financial insolvency of the TVA. Of course, Nu-Start is waiting in the wings to purchase the assets of a financial insolvent TVA.

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Addition: Financial Reports link http://www.tva.gov/finance/reports/forwardlooking_sec.htm

Click on the accept button and it will take you to the Financial Reports of the TVA. The 10Q reports are the quarterly filings, the May 12, 2008 is the last 10Q quarterly filing. On page 32 of that report you will find the total debt and debt interest for the TVA.

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The question remains, how will the TVA pay for their proposed reactors at Bellefonte?