Tennessee Valley Authority Reports Quarterly Results for the Period Ended December 31, 2025

Tennessee Valley Authority’s Strong Financial Performance Amid Changing Energy Landscape

The Tennessee Valley Authority (TVA), a federally-owned electric utility, has reported impressive financial results for the three months ended December 31, 2025. Despite the challenges posed by the evolving energy industry, TVA has demonstrated its ability to adapt and deliver solid operational and financial performance.

Sales of Electricity Increase TVA’s sales of electricity increased by 4% for the three months ended December 31, 2025, compared to the same period in the prior year. This growth was driven by a 17% increase in heating degree days, which indicates that weather conditions were closer to normal, as well as higher sales within the data processing, hosting, and related services sector.

TVA sells power at wholesale rates to local power company customers, who then resell the electricity to their retail customers. TVA also sells power directly to federal agencies and customers with large or nonstandard loads. Additionally, TVA sells power under exchange power arrangements with other power systems when it has excess capacity.

Financial Results Highlight Operational Efficiency TVA’s financial performance for the three months ended December 31, 2025, was strong. Operating revenues increased by $129 million, or 4.4%, compared to the same period in the prior year. This increase was primarily due to a $152 million rise in base revenue, driven by higher sales volume and effective base rates.

Operating expenses remained relatively flat, decreasing by $10 million, or 0.4%, compared to the same period in the prior year. This was due to a combination of factors:

• Fuel expense increased by $9 million, primarily due to higher demand for energy and higher effective fuel rates.
• Purchased power expense increased by $16 million, mainly due to higher purchased power market prices, partially offset by the deferral of unplanned purchased power expenses and higher availability of TVA nuclear generation assets.
• Operating and maintenance expense decreased by $56 million, primarily due to the recognition of Inflation Reduction Act (IRA) tax credits, which were recorded as a reduction in this expense.
• Depreciation and amortization expense increased by $14 million, driven by additions of net completed plant, partially offset by a decrease due to the extension of the useful life of the three nuclear units at Browns Ferry.
• Tax equivalents expense increased by $7 million, reflecting the increase in TVA’s revenue from sales of electricity.

As a result of these factors, TVA’s operating income increased by $139 million, or 33.7%, compared to the same period in the prior year. Net income also increased significantly, rising by $141 million, or 112.8%, to $266 million.

Generating Sources Reflect Diverse Energy Mix TVA’s power supply is generated from a diverse mix of sources, including nuclear, natural gas and/or oil-fired, coal-fired, and hydroelectric. For the three months ended December 31, 2025, nuclear generation accounted for 41% of total power supply, natural gas and/or oil-fired generation accounted for 22%, coal-fired generation accounted for 14%, and hydroelectric generation accounted for 7%. The remaining 16% of power supply was purchased from external sources, including natural gas and/or oil-fired, other renewables, coal-fired, and wind.

TVA also offers energy efficiency programs, which effectively reduce energy needs. In 2026, TVA expects to invest $133 million on these programs and anticipates approximately 400 gigawatt hours of net incremental energy efficiency savings.

Debt Management and Liquidity Remain Strong TVA’s liquidity is primarily sourced from cash from operations, proceeds from the issuance of short-term debt in the form of discount notes, and periodic issuances of long-term debt. TVA also has access to various credit facilities and other financing arrangements to meet its cash needs and contingencies.

As of December 31, 2025, TVA’s Bonds outstanding, excluding unamortized discounts and premiums and net exchange gains from foreign currency transactions, were $21.9 billion. TVA’s next significant power bond maturity is $1.0 billion in February 2027.

TVA’s short-term borrowings, in the form of discount notes, had an average gross amount outstanding of $558 million for the three months ended December 31, 2025, with a weighted average interest rate of 3.94%. TVA’s rated senior unsecured Bonds are currently rated Aa1, AA+, and AA+ by Moody’s Investors Service, Fitch Ratings, and S&P Global Ratings, respectively.

Key Initiatives and Challenges TVA continues to navigate the evolving energy landscape, focusing on several key initiatives and addressing various challenges:

Capacity Expansion TVA is actively expanding its natural gas-fired generation capacity, with projects underway at the Allen and Lagoon Creek sites. The Allen project, a 200 MW aeroderivative combustion turbine (CT) project, is expected to be completed by June 2029, while the Lagoon Creek project, a 350 MW CT project, is also progressing.

In addition, TVA is seeking to renew the licenses of its nuclear generation units for an additional 20 years, subject to the completion of environmental reviews. The license renewal for the three units at Browns Ferry was approved by the Nuclear Regulatory Commission in December 2025.

TVA is also exploring new hydroelectric pumped-storage and battery energy storage technologies to help meet peak demands and ensure the reliability and resiliency of the grid.

Funding Opportunities TVA continues to evaluate and pursue funding opportunities under the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL) to help offset the cost of qualifying projects. As of December 31, 2025, TVA had recorded $112 million in Accounts receivable related to IRA tax credits and had received $26 million during the three months ended December 31, 2025, related to these credits.

TVA and a consortium of co-applicants also applied for a U.S. Department of Energy grant to support the potential future deployment of a small modular reactor (SMR) at TVA’s Clinch River site. In December 2025, TVA and the consortium were selected to enter negotiations for an approximate $400 million grant to accelerate the deployment of SMRs.

Corporate Governance In January 2026, four new members joined the TVA Board of Directors, restoring the quorum required for the Board to function effectively. The TVA Board plays a crucial role in directing TVA’s activities, setting long-term objectives, and responding to industry changes.

Environmental Matters TVA continues to address various environmental regulations and initiatives, including the EPA’s final effluent limitation guidelines (ELG) rule, which provides TVA with greater flexibility in meeting future generation and reliability requirements for its coal-fired plants.

TVA is also actively engaged in the cleanup of coal combustion residuals (CCR) at its current and former coal-fired generating units in Tennessee, with the final Corrective Action/Risk Assessment (CARA) Plan for the Allen Fossil Plant approved by the Tennessee Department of Environment and Conservation (TDEC) in November 2025.

Conclusion TVA’s strong financial performance for the three months ended December 31, 2025, demonstrates its ability to adapt to the changing energy landscape. By diversifying its generation mix, pursuing capacity expansion, leveraging funding opportunities, and addressing environmental challenges, TVA is well-positioned to continue delivering reliable and affordable electricity to the Tennessee Valley region. As TVA navigates the evolving industry, its focus on operational efficiency, financial discipline, and strategic investments will be crucial in maintaining its position as a leading electric utility.