VALLEY Partners Valley Partner Engagement Kickoff Meeting Confidentiality Notice This presentation may include material nonpublic information. Unauthorized release of this information could violate Securities and Exchange Commission regulations or cause harm to TVA. TVA is providing this information to you contingent upon your keeping all such information strictly confidential. By viewing the provided materials, you agree not to publicize, disseminate further, or act on this information except to the extent necessary to evaluate your business needs. Valley Partner Engagement Kickoff Meeting 2 Safety Moment Valley Partner Meeting  November 7, 2019 Tim Nichols, Lineman Sevier County Electric System .13fun Today’s Primary Discussion Items • Valley Partner engagement process and cadence • Financials and Flexibility • Annual Meeting in February • Lunch discussion: gathering your thoughts Valley Partner Engagement Kickoff Meeting 6 Valley Partner Engagement a Overview Benefits of the Public Power Model Energy & Capacity • Affordable, reliable energy • Capacity to meet peak demand Transmission & System Optimization • Robust, resilient transmission • System balancing • Benefits of scale Jobs & Investment • • • • Job creation Attracting new companies Local business growth Site development As a public power provider, TVA delivers a complete solution of low rates, high reliability and an attractive carbon footprint that spurs economic development. Valley Partner Engagement Kickoff Meeting 8 The Valley Partnership Agreement • • • • • • Partnership credit Long-term commitment Flexibility Rate adjustment protection Other mutual defaults & remedies A role as planning partners Valley Partner Engagement Kickoff Meeting 9 Valley Partner Engagement Overview Valley Partners will: • Be provided with additional transparency around planning • Provide input on key major TVA decisions TVA will also continue to: • Deliver planning information in the traditional manner • Gather input through traditional channels • Maintain TVA’s relationship with associations Valley Partner Engagement Kickoff Meeting 10 Valley Partner Engagement Timeline STRATEGIES DECISIONS Preparation Session Annual Meeting Board Off-Site Summer Meeting January February March July Webinar 2-day • Preview annual meeting topics • Strategy • Emergent Fall Meeting Board Meeting August November 1/2 day • Strategic planning • Update • Emergent items items • Prep for • Prep for Board Board 1/2 day • Decisionmaking • Year in review • Emergent items Engagement with Valley Partners will follow TVA’s annual board cadence. Valley Partner Engagement Kickoff Meeting 11 Impact of Valley Partner Credits a on Financial Plan -. FY30 Strategic Financial Plan A plan that is flexible in aligning customer preferences and TVA’s mission • Maintain rates as low as feasible • Stabilize debt at $18-20B • Balance commitments with obligations • Maintain $300M cash • Drive efficiencies into the business Valley Partner Engagement Kickoff Meeting 13 Long-term Partnership Update • 132 (86%) Valley Partners as of October 31, 2019 • 15-year weighted average LPC contract length • $1.6B of partner credits expected through FY30 Valley Partner Engagement Kickoff Meeting 14 Total Debt Partnerships stabilize total debt $ billion $30 $25 100% Partners $21.4 $21.1 Current Partners $20 $20.6 No Partners $18.7 $15 $17.7 $1.6B for partner credits $16.0 $0.1B for interest net of taxes $10 FY19F FY20P FY21P FY22P FY23P FY24P FY25P FY26P FY27P FY28P FY29P FY30P Valley Partner Engagement Kickoff Meeting 15 Net Portfolio Position Partnerships strengthen the public power model 100% 86% 100% Partners 75% 80% 78% 65% Current Partners 60% 58% 45% 40% No Partners 44% 20% 0% FY19F FY20P FY21P FY22P FY23P FY24P FY25P FY26P FY27P FY28P FY29P FY30P Valley Partner Engagement Kickoff Meeting 16 Lower Effective Base Rates for Partners ¢/kWh 7 FY14 Board Approved 6 5.76 5.31 5.07 No Partners 5.07 4.98 Current Partners 4.98 5 4 3 FY19F FY20P FY21P FY22P FY23P FY24P FY25P FY26P FY27P FY28P FY29P FY30P Valley Partner Engagement Kickoff Meeting 17 Risk Scenarios (spending assumptions FY20-30) Timing and cost may challenge long-term base rate stability Coal Ash Remediation May Exceed Plan Funding (Environmental Remediation Cost) ─ Plan includes $2.4B of funding for CCR conversion program Assets May Require Additional Investment/Replacement (Aging Infrastructure) ─ Plan includes $1.3B of annual maintenance capital ─ Plan includes $0.6B of annual expansion capital, primarily gas, to support flexibility/solar Browns Ferry License Extension May Exceed Plan Funding (New Regulation/Compliance) ─ Plan includes $0.9B of funding for BFN license extension ─ Replacement capacity could be required if BFN license extension cannot be obtained Valley Partner Engagement Kickoff Meeting 18 Coal Ash Remediation • Plan includes $2.4B of funding for CCR conversion program • Closure in place completed at five sites (Kingston, Colbert, John Sevier, Watts Bar, and Widows Creek) • Closure in place planned at two sites (Paradise and Shawnee) • Closure in place planned at three sites with final closure method under evaluation (Cumberland, Bull Run, and Johnsonville) • Closure by removal planned at two sites (Gallatin and Allen) Valley Partner Engagement Kickoff Meeting 19 Asset Investment/Replacement • Plan includes $1.3B of annual maintenance capital • Plan includes $0.6B of annual expansion capital, primarily gas (3,700 MWs), to support flexibility/solar • Additional funding will be required to address coal asset performance and carbon risk • Additional funding will be required to improve nuclear fleet performance • Fuel cost benefits may result from improvements in overall asset performance (heavily dependent on natural gas prices) Valley Partner Engagement Kickoff Meeting 20 Browns Ferry License Extension • Browns Ferry Units 1-3 reach license expirations in 2033, 2034, and 2036, respectively • Plan includes $0.9B of funding through FY30 with an additional $0.9B of funding planned beyond FY30 for asset-related license extension spend • Estimated cost range of $1B to $3B for license extensions • In absence of license extensions, replacement capacity must be obtained Valley Partner Engagement Kickoff Meeting 21 Summary • $1.6B of partner credits • Addressing risk • Evaluating coal fleet • Adding gas and solar • Promoting flexibility • Stronger public power model Valley Partner Engagement Kickoff Meeting 22 Key Flexibility Principles • LPC flexible generation must be documented, metered, operated, and connected in a manner consistent with TVA standards • Flexible generation must be distribution scale (5 MVA or less) and located within the LPC’s service territory • Flexible generation capacity up to 5% of average total hourly energy sales over last 5 years; minimum availability of 1 MW per LPC • Flexible generation will reduce demand and energy charges at prevailing wholesale rates • Flexible generation will improve the Valley carbon position Valley Partner Engagement Kickoff Meeting 24 First Annual Valley Partner "mm Meeting a -. First Annual Valley Partner Meeting Meeting Agenda – Day 1 (Afternoon) Estimated Duration 15 min. Topic Welcome and Objective of the Day ANNUAL MEETING AGENDA Strategy Update • Details surrounding strategic financial plan Major Asset Decisions • Potential asset needs and/or retirements Risks to the Plan Discussion: Emergent Items Review of Agenda and Approach 15 min. Strategy Update & Major Asset Decisions 90 min. Break 15 min. Risks & Emergent Issues 90 min. Recap of Day 1 and Preview Day 2 15 min. Meeting Agenda – Day 2 (Morning) Topic Recap; Review & Discussion of Priorities Breakout #1 Breakout #2 Break Breakout #3 Breakout #4 Large Group Recap Estimated Duration 30 min. 45 min. 45 min. 15 min. 45 min. 45 min. 45 min. Valley Partner Engagement Kickoff Meeting 26 OUTPUTS INPUTS Annual Valley Partner Meeting Process Presentation on current state of TVA and important issues Valley Partner feedback and input on TVA planning and emergent topics Large Group Information Session Small Group Breakouts Large Group Recap Well-informed Valley Partners Feedback for TVA to analyze and incorporate into planning and decision making Common understanding of feedback and next steps Summary of key takeaways and final Q&A Email survey and individual conversations Post-meeting Feedback Collection Formalized specific data on Partner interests and expectations The meeting process is designed to educate Partners on the key issues facing TVA and systematically collect your input and feedback Valley Partner Engagement Kickoff Meeting 27 Annual Meeting: Potential Emergent Items Proposed Discussion Topics Potential Discussion Topics • Flexibility • Utility scale solar strategy • Coal Fleet • Relicense Browns Ferry • CT refurbishment • Combined Cycle additions • Grid 2023 • Coal Combustion Residuals • Decarbonization strategy • Gas hedging • Other? Which topics are most important to you? Valley Partner Engagement Kickoff Meeting 28 mn- Lunch and I Feedback mn- Open Discussion/ Next Steps • Gather your feedback and input • Communicate with Partners that could not attend • TVA will reach out to inform, answer questions, and collect feedback Valley Partner Engagement Kickoff Meeting 32 VA WA Pa rthLerY .m D. D. A Engagement Process Detail INPUTS VALLEY PARTNER ENGAGEMENT • Prior year outcomes • TVA plans • Partner priorities OUTPUTS PROCESS 1. Establish Annual Meeting Topics January • Educate on annual meeting topics • Collect input • Analyze and summarize Topics for Annual Meeting in February VALLEY PARTNER ENGAGEMENT • Financial and asset plans • Topics for annual meeting 2. Engage Partners on Strategy February • Educate on plans • Define objectives for decisions • Collect inputs • Share ideas Feedback on strategic plans TVA BOARD ACTIVITIES • Partner feedback on strategic plans • TVA input on plans 3. Update Strategy March • Analyze and summarize Partner input • Combine Partner input with TVA internal input • Present to Board Updated strategy Valley Partner Engagement Kickoff Meeting 35 Engagement Process Detail (Cont’d) INPUTS VALLEY PARTNER ENGAGEMENT • Update strategy OUTPUTS PROCESS 4. Update Business Plans April – August • Update Partners on strategy and performance • Review business plan assumptions • Engage on emergent issues Updated business plans and decisions options TVA BOARD ACTIVITIES • Updated business plan • Decision options 5. Execute Plans VALLEY PARTNER ENGAGEMENT • Board approvals and budget decisions • Performance against plan 6. Report and Adjust August – October November – December • Analyze and summarize Partner input • Combine Partner input with TVA internal input • Present to Board • Analyze and summarize Partner input • Combine Partner input with TVA internal input • Present to Board Board approvals on budget and decisions Potential next year priorities Valley Partner Engagement Kickoff Meeting 36