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Leases (Table Text Block)

12 Months Ended

Sep. 30, 2022

The following table provides information regarding the presentation of leases on the Consolidated Balance Sheets:


Amounts Recognized on TVA's Consolidated Balance Sheets At September 30 (in millions)
		2022		2021
Assets
Operating	Operating lease assets, net of amortization	$	155	$	165
Finance	Finance leases	630		692
Total lease assets		$	785	$	857

Liabilities
Current
Operating	Accounts payable and accrued liabilities	$	59	$	40
Finance	Accounts payable and accrued liabilities	59		60
Non-current
Operating	Other long-term liabilities	93		122
Finance	Finance lease liabilities	628		687
Total lease liabilities		$	839	$	909

Lease Costs

TVA's leases consist primarily of railcars, equipment, real estate/land, power generating facilities, and gas pipelines. TVA's leases have various terms and expiration dates remaining from less than one year to approximately 24 years. The components of lease costs were as follows:


Lease Costs For the years ended September 30 (in millions)
	2022		2021		2020
Operating lease costs(1)	$	56	$	52	$	84
Variable lease costs(1)	78		75		75
Short-term lease costs(1)	26		12		7
Finance lease costs
Amortization of lease assets(2)	58		51		15
Interest on lease liabilities(3)(4)	42		39		33
Total finance lease costs	100		90		48
Total lease costs	$	260	$	229	$	214

Notes

(1) Costs are included in Operating and maintenance expense, Fuel expense, Purchased power expense, and Tax equivalents expense on the Consolidated Statements of Operations.

(2) Expense is included in Depreciation and amortization expense on the Consolidated Statements of Operations.

(3) Expense is included in Interest expense on the Consolidated Statements of Operations.

(4) Certain finance leases receive regulatory accounting treatment and are reclassified to Fuel expense and Purchased power expense.

Amounts Recognized on Statements of Cash Flows

The following table contains additional information with respect to cash and non-cash activities related to leases:


Amounts Recognized on TVA's Consolidated Statements of Cash Flows For the years ended September 30 (in millions)
	2022		2021		2020
Operating cash flows for operating leases	$	57	$	53	$	85
Operating cash flows for finance leases	42		39		33
Financing cash flows for finance leases	60		52		15

Lease assets obtained in exchange for lease obligations (non-cash)
Operating leases(1)	$	43	$	(22)	$	110
Finance leases	—		233		394

Note

(1) Amount for 2021 represents a non-cash reduction due to a lease that was amended during the fiscal year resulting in derecognition of the operating lease asset and obligation upon remeasurement.

Weighted Averages

TVA has certain finance leases under PPAs under which the present value of the minimum lease payments exceeds the fair value of the related lease asset at the date of measurement. This resulted in an interest rate that was higher than TVA's incremental borrowing rate. The weighted average remaining lease term in years and the weighted average discount rate for TVA's operating and financing leases were as follows:


Weighted Averages At September 30
	2022	2021
Weighted average remaining lease terms
Operating leases	3 years	5 years
Finance leases	11 years	12 years

Weighted average discount rate(1)
Operating leases	1.5%	1.5%
Finance leases	17.8%	17.7%

Note

(1) The discount rate is calculated using the rate implicit in a lease if it is readily determinable. If the rate used by the lessor is not readily determinable, TVA uses its incremental borrowing rate as permitted by accounting guidance. The incremental borrowing rate is influenced by TVA's credit rating and lease term and as such may differ for individual leases, embedded leases, or portfolios of leased assets.

Future Minimum Lease Payments

The following table presents maturities of lease liabilities and a reconciliation of the undiscounted cash flows to lease liabilities at September 30, 2022:


Future Minimum Lease Payments Minimum payments due at September 30, 2022 (in millions)
Operating leases
2023	$	61
2024	43
2025	35
2026	10
2027	2
Thereafter	5
Minimum annual payments	156
Less: present value discount	(4)
Operating present value of net minimum lease payments	$	152

Finance leases
2023	$	112
2024	107
2025	106
2026	105
2027	104
Thereafter	552
Minimum annual payments	1,086
Less: amount representing interest	(399)
Finance present value of net minimum lease payments	$	687