XML 111 R21.htm IDEA: XBRL DOCUMENT v3.23.3
Debt and Other Obligations
 12 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Debt and Other Obligations
14.  Debt and Other Obligations

General

The TVA Act authorizes TVA to issue Bonds in an amount not to exceed $30.0 billion at any time.  At September 30, 2023, TVA had only two types of Bonds outstanding: power bonds and discount notes.  Power bonds have maturities between one year and 50 years, and discount notes have maturities of less than one year.  Power bonds and discount notes are both issued pursuant to Section 15d of the TVA Act and pursuant to the Basic Tennessee Valley Authority Power Bond Resolution adopted by the TVA Board on October 6, 1960, as amended on September 28, 1976, October 17, 1989, and March 25, 1992 (the "Basic Resolution").  Bonds are not obligations of the U.S., and the U.S. does not guarantee the payments of principal or interest on Bonds.

Power bonds and discount notes rank on parity and have first priority of payment from net power proceeds, which are defined as the remainder of TVA's gross power revenues after deducting the costs of operating, maintaining, and administering its power properties and tax equivalent payments, but before deducting depreciation accruals or other charges representing the amortization of capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein.

TVA considers its scheduled payments under its lease financing arrangements involving John Sevier CCF and Southaven CCF as costs of operating, maintaining, and administering its power properties. Costs of operating, maintaining, and administering TVA's power properties have priority over TVA's payments on the Bonds.  Once net power proceeds have been applied to payments on power bonds and discount notes as well as any other Bonds that TVA may issue in the future that rank on parity with or subordinate to power bonds and discount notes, Section 2.3 of the Basic Resolution provides that the remaining net power proceeds shall be used only for (1) minimum payments into the U.S. Treasury required by the TVA Act as repayment of, and as a return on, the Power Program Appropriation Investment; (2) investment in power system assets; (3) additional reductions of TVA's capital obligations; and (4) other lawful purposes related to TVA's power business.

The TVA Act and the Basic Resolution each contain two bond tests: the rate test and the bondholder protection test.  Under the rate test, TVA must charge rates for power which will produce gross revenues sufficient to provide funds for, among other things, debt service on outstanding Bonds.  As of September 30, 2023, TVA was in compliance with the rate test. See Note 1 — Summary of Significant Accounting Policies — General.  Under the bondholder protection test, TVA must, in successive five-year periods, use an amount of net power proceeds at least equal to the sum of (1) the depreciation accruals and other charges representing the amortization of capital expenditures and (2) the net proceeds from any disposition of power facilities for either the reduction of its capital obligations (including Bonds and the Power Program Appropriation Investment) or investment in power assets. TVA met the bondholder protection test for the five-year period ended September 30, 2020, and must next meet the bondholder protection test for the five-year period ending September 30, 2025.
Secured Debt of VIEs

On August 9, 2013, SCCG issued secured notes totaling $360 million that bear interest at a rate of 3.846 percent. The SCCG notes require amortizing semi-annual payments on each February 15 and August 15, and mature on August 15, 2033. Also on August 9, 2013, SCCG issued $40 million of membership interests subject to mandatory redemption. The proceeds from the secured notes issuance and the issuance of the membership interests were paid to TVA in accordance with the terms of the Southaven head lease. See Note 11 — Variable Interest Entities — Southaven VIE. TVA used the proceeds from the transaction primarily to fund the acquisition of the Southaven CCF from SSSL.

On January 17, 2012, JSCCG issued secured notes totaling $900 million in aggregate principal amount that bear interest at a rate of 4.626 percent. Also on January 17, 2012, Holdco issued secured notes totaling $100 million that bear interest at a rate of 7.1 percent. The JSCCG notes and the Holdco notes require amortizing semi-annual payments on each January 15 and July 15, and mature on January 15, 2042. The Holdco notes require a $10 million balloon payment upon maturity. See Note 11 — Variable Interest Entities — John Sevier VIEs. TVA used the proceeds from the transaction to meet its requirements under the TVA Act.

Secured debt of VIEs, including current maturities, outstanding at September 30, 2023 and 2022 totaled $968 million and $1.0 billion, respectively.

Short-Term Debt

    The following table provides information regarding TVA's short-term borrowings:
Short-Term Borrowings
At September 30
 20232022
Gross amount outstanding - discount notes (in millions)$432 $1,173 
Weighted average interest rate - discount notes5.29 %2.93 %

Put Options

TVA has two issues of Putable Automatic Rate Reset Securities ("PARRS") outstanding.  After a fixed-rate period of five years, the coupon rate on the PARRS may automatically be reset downward under certain market conditions on an annual basis.  The coupon rate reset on the PARRS is based on a calculation.  For both series of PARRS, the coupon rate will reset downward on the reset date if the rate calculated is below the then-current coupon rate on the Bond.  The calculation dates, potential reset dates, and terms of the calculation are different for each series.  The coupon rate on the 1998 Series D PARRS may be reset on June 1 (annually) if the sum of the five-day average of the 30-Year Constant Maturity Treasury ("CMT") rate for the week ending the last Friday in April, plus 94 basis points, is below the then-current coupon rate.  The coupon rate on the 1999 Series A PARRS may be reset on May 1 (annually) if the sum of the five-day average of the 30-Year CMT rate for the week ending the last Friday in March, plus 84 basis points, is below the then-current coupon rate.  The coupon rates may only be reset downward, but investors may request to redeem their Bonds at par value in conjunction with a coupon rate reset for a limited period of time prior to the reset dates under certain circumstances.

The coupon rate for the 1998 Series D PARRS, which mature in June 2028, has been reset eight times, from an initial rate of 6.750 percent to the current rate of 2.134 percent.  In connection with these resets, $318 million of the Bonds have been redeemed; therefore, $256 million of the Bonds were outstanding at September 30, 2023.  The coupon rate for the 1999 Series A PARRS, which mature in May 2029, has been reset seven times, from an initial rate of 6.50 percent to the current rate of 2.216 percent.  In connection with these resets, $316 million of the Bonds have been redeemed; therefore, $208 million of the Bonds were outstanding at September 30, 2023.

Due to the contingent nature of the put option on the PARRS, TVA determines whether the PARRS should be classified as long-term debt or current maturities of long-term debt by calculating the expected reset rate for the Bonds on the calculation dates, described above.  If the determination date for reset is before the balance sheet date of the reporting period and the expected reset rate is less than the then-current coupon rate on the PARRS, the PARRS are included in current maturities. Otherwise, the PARRS are included in long-term debt.  
Debt Securities Activity

The table below summarizes the long-term debt securities activity for the years ended September 30, 2023 and 2022.
Debt Securities Activity
For the years ended September 30
(in millions)
 20232022
Issues
2022 Series A(1)
$— $500 
2023 Series A(2)
1,000 — 
Discount on debt issues(8)(16)
Total$992 $484 
Redemptions/Maturities(3)
 
2009 Series B $29 $28 
2012 Series A— 1,000 
Total redemptions/maturities of power bonds29 1,028 
Debt of variable interest entities39 43 
Total redemptions/maturities of debt$68 $1,071 
Notes
(1) The 2022 Series A Bonds were issued at 96.786 percent of par.
(2) The 2023 Series A Bonds were issued at 99.187 percent of par.
(3) All redemptions were at 100 percent of par.

Debt Outstanding

    Total debt outstanding at September 30, 2023 and 2022, consisted of the following: 
Short-Term Debt
At September 30
(in millions)
 
CUSIP or Other Identifier
 
Maturity
 
Coupon Rate		20232022
Short-term debt, net of discounts$432 $1,172 
Current maturities of long-term debt of VIEs issued at par35 39 
Current maturities of power bonds issued at par
880591EF512/15/20233.770%1 1 
880591EF56/15/20243.770%21 28 
880591ER99/15/20242.875%1,000 — 
Total current maturities of power bonds issued at par  1,022 29 
Total current debt outstanding, net  $1,489 $1,240 
Long-Term Debt
At September 30
(in millions)
 
CUSIP or Other Identifier
 
Maturity
Coupon
Rate		2023 Par2022 ParStock Exchange Listings
880591ER99/15/20242.875%$— $1,000 New York
880591EW85/15/20250.750%1,000 1,000 New York
880591CJ911/1/20256.750%1,350 1,350 New York, Hong Kong, Luxembourg, Singapore
880591EU22/1/20272.875%1,000 1,000 New York
880591300(3)
6/1/20282.134%256 256 New York
880591409(3)
5/1/20292.216%208 208 New York
880591DM15/1/20307.125%1,000 1,000 New York, Luxembourg
880591EX69/15/20311.500%500 500 New York
880591DP46/7/20326.587%
(2)
305 
(1)
279 
(1)
New York, Luxembourg
880591DV17/15/20334.700%472 472 New York, Luxembourg
880591EF56/15/20343.770%139 160 None
880591DX76/15/20354.650%436 436 New York
880591CK64/1/20365.980%121 121 New York
880591CS94/1/20365.880%1,500 1,500 New York
880591CP51/15/20386.150%1,000 1,000 New York
880591ED06/15/20385.500%500 500 New York
880591EH19/15/20395.250%2,000 2,000 New York
880591EP312/15/20423.500%1,000 1,000 New York
880591DU36/7/20434.962%
(2)
183 
(1)
168 
(1)
New York, Luxembourg
880591EB41/15/20484.875%500 500 New York, Luxembourg
880591DZ24/1/20565.375%1,000 1,000 New York
880591EJ79/15/20604.625%1,000 1,000 New York
880591ES79/15/20654.250%1,000 1,000 New York
880591EY49/15/20524.250%500 500 New York
880591EZ13/15/20283.875%1,000 — New York
Subtotal17,970 17,950  
Unamortized discounts, premiums, issue costs, and other (126)(124) 
Total long-term outstanding power bonds, net 17,844 17,826  
Long-term debt of VIEs, net933 968 
Total long-term debt, net$18,777 $18,794 
Notes
(1)  Includes total net exchange gain from currency transactions of $109 million and $150 million at September 30, 2023 and 2022, respectively.
(2)  The coupon rate represents TVA's effective interest rate.
(3)  TVA PARRS, CUSIP numbers 880591300 and 880591409, may be redeemed under certain conditions.  See Put Options above.

 
Maturities Due in the Year Ending September 30
(in millions)
20242025202620272028ThereafterTotal
Long-term power bonds including current maturities(1)
$1,022 $1,022 $1,370 $1,020 $1,272 $13,395 $19,101 
Short-term debt(2)
432 — — — — — 432 
Notes
(1) Long-term power bonds do not include non-cash items of foreign currency exchange gain of $109 million, unamortized debt issue costs of $41 million, or net
discount on sale of Bonds of $85 million.
(2) Short-term debt does not include the non-cash item of discount on issuance of discount notes of less than $1 million.

Credit Facility Agreements

TVA has funding available under four long-term revolving credit facilities totaling $2.7 billion. See the table below for additional information on the four long-term revolving credit facilities. The interest rate on any borrowing under these facilities varies based on market factors and the rating of TVA's senior unsecured, long-term, non-credit-enhanced debt. TVA is required to pay an unused facility fee on the portion of the total $2.7 billion that TVA has not borrowed or committed under letters of credit. This fee, along with letter of credit fees, may fluctuate depending on the rating of TVA's senior unsecured, long-term, non-credit-enhanced debt. At September 30, 2023 and 2022, there were $535 million and $704 million, respectively, of letters of credit outstanding under these facilities, and there were no borrowings outstanding. TVA's letters of credit are primarily posted as collateral under TVA's interest rate swaps. See Note 15 — Risk Management Activities and Derivative Transactions — Other Derivative Instruments — Collateral. TVA may also post collateral for TVA's currency swaps, for commodity derivatives under the Financial Hedging program ("FHP"), or for certain transactions with third parties that require TVA to post letters of credit.

The following table provides additional information regarding TVA's funding available under the four long-term revolving credit facilities:
Summary of Long-Term Credit Facilities
At September 30, 2023
(in millions)
Maturity DateFacility LimitLetters of Credit OutstandingCash BorrowingsAvailability
February 2025$500 $302 $— $198 
March 2026150 38 — 112 
September 20261,000 99 — 901 
March 20271,000 96 — 904 
     Total$2,650 $535 $— $2,115 

TVA and the U.S. Treasury, pursuant to the TVA Act, have entered into a memorandum of understanding under which the U.S. Treasury provides TVA with a $150 million credit facility. This credit facility was renewed for 2024 with a maturity date of September 30, 2024. Access to this credit facility or other similar financing arrangements with the U.S. Treasury has been available to TVA since the 1960s. TVA can borrow under the U.S. Treasury credit facility only if it cannot issue Bonds in the market on reasonable terms, and TVA considers the U.S. Treasury credit facility a secondary source of liquidity. The interest rate on any borrowing under this facility is based on the average rate on outstanding marketable obligations of the U.S. with maturities from date of issue of 12 months or less. There were no outstanding borrowings under the facility at September 30, 2023. The availability of this credit facility may be impacted by how the U.S. government addresses the possibility of approaching its debt limit.

Lease/Leasebacks

    TVA previously entered into leasing transactions to obtain third-party financing for 24 peaking CTs as well as certain qualified technological equipment and software ("QTE"). Due to TVA's continuing involvement with the combustion turbine facilities and the QTE during the leaseback term, TVA accounted for the lease proceeds as financing obligations. There were no outstanding leaseback obligations related to the remaining CTs and QTE at September 30, 2023 and 2022. Prior to 2021, TVA made final rent payments involving 16 CTs and acquired the equity interest related to these transactions. Rent payments under the remaining CT lease/leaseback transactions were made through January 2022. In December 2021, TVA gave notice of its election to acquire the leasehold interests related to the remaining eight CTs for a total of $155 million. One associated acquisition closed in December 2022 for $78 million, and the other acquisition closed in May 2023 for $77 million. As a result, TVA recorded the cash consideration as reacquired rights, which is an intangible asset included in Completed plant on the Consolidated Balance Sheet. The amount will be amortized over the remaining estimated useful life of the underlying CTs. TVA recognized $3 million of amortization expense related to the reacquired rights within the Consolidated Statements of Operations for the year ended September 30, 2023. Transaction costs were not material. The estimated amortization expense will be $5 million annually from 2024 through 2052. The estimated amortization expense will be $2 million in 2053.