Business Insider lists the TVA at #6 in their list at high risk for bankruptcy. The house of cards nearing a tumble? http://www.businessinsider.com/the-next-17-big-companies-that-are-at-risk-of-bankruptcy-2012-1#tennessee-valley-authority-6 Business Insider rates the "Financial distress (failure) probability of the TVA at 11.82%."
"One other way TVA has looked to raise money is by selling off facilities, and leasing them back. Thomas (John Thomas CFO, TVA) argues that’s not as cheap as using bonds, and he says customers ultimately bear the added expense." http://www.keyumc.org/2011/11/tva-could-replace-30b-debt-limit-with-coverage-ratio/
A TVA spokesman has stated said he could not provide details about John Sevier Combined Cycle Generation LLC because of a nondisclosure agreement. Chief Financial Officer John Thomas said of the LLC, "it is a group made up of large, institutional investment companies." John Sevier Combined Cycle Generation LLC is a corporation registered in Delaware. The sale of the combined cycle gas plant was complete in September of 2011 in secret. There was no mention of such a transaction at the November 2011 TVA Board meeting in Starkville Ms. (Bank of America Merrill Lynch, Barclay's Capital and Morgan Stanley were the joint book-running managers for the sale and other TVA bond sales.) http://www.ubs.wallst.com/ubs/mkt_story.asp?docKey=1329-L1E8CAE2G-1&first=0
In part from KnoxvilleBiz.com- TVA plans more lease purchase deals; who will pay? Ratepayers-"...the financing cost for TVA for the $1 billion amounts to about 5 percent, with TVA paying $10 million a year for 30 years, for a total of $300 million, for which it would immediately get the use of the $1 billion."
Specific details of the sale are secret due to the signing of a non-disclosure agreement. Details such as the terms of the contract and what determines a default are secret. This is a slap in the face to accountable, open government and what appears to be a violation of the Federal Sunshine Act.
The Federal Sunshine Act states: "§ 552b. Open meetings
More lease projects planned costing the ratepayers- "TVA also plans to do a lease-purchase deal with its Watts Bar Unit 2 nuclear reactor and Thomas said that will probably occur late this year, which also is when the project is expected to be completed. TVA plans to sell the John Sevier plant plus the Watts Bar reactor to help fund completion of the $4.9 billion Bellefonte nuclear reactor in Northern Alabama." http://www.knoxnews.com/news/2012/jan/22/tva-plans-more-lease-purchase-deals-like-john/
From The Chattanooga Times Fee Press, Dec 1, 2011 article by Dave Flessner concerning TVA's lease purchase plans. "S&P credit analyst Theodore Chapman said the risk on TVA's $1.2 billion of outstanding long-term leases on buildings and generation facilities is even greater than TVA bonds.
"We believe that the debt service associated with these leases, which are paid as operating expenses of TVA's electric system, is less likely to receive extraordinary financial support from the federal government in periods of distress compared to debt issued directly by TVA and that is denominated in TVA's name as government-sponsored enterprise debt," S&P said in its analysis." http://timesfreepress.com/news/2011/dec/01/debt-crisis-casts-doubt-on-tvas-long-term/
Bonds in this deal not protected by implicit federal government support: From "Market Watch-Wall Street Journal, Jan 10, 2012: Fitch Ratings has assigned a rating of 'AA' to the John Sevier Combined Cycle Generation LLC (LLC or the Lessor) lease note obligations... The notes are secured by basic lease rent payments to be made by theTennessee Valley Authority (TVA) whose obligation to make rent payments is absolute and unconditional. Noteholders are also granted a first mortgage interest in the assets under the lease. The rating of the LLC notes reflects TVA's absolute and unconditional obligation to make basic rent payments. However, Fitch does not believe that the implicit federal government support enjoyed by the global power bonds, (rated 'AAA', with a Negative Outlook by Fitch) extends to TVA's lease rent obligations. " http://www.marketwatch.com/story/fitch-rates-john-sevier-combined-cycle-generation-llc-lease-note-obligations-aa-outlook-stable-2012-01-10