Tennessee Valley Authority

Good morning, everyone, and welcome to the Tennessee Valley Authority's second quarter fiscal year 2024 conference call. For your information, today's call is being recorded. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. At this time, for opening remarks, I would like to turn the call over to Mr. Tom Rice, TVA vice president, treasurer, and chief risk officer. Mr. Rice, please go ahead.

Thank you, Gary, and good morning, everyone. Welcome to TVA's second quarter 2024 financial review. Today I have with me TVA's Chief Executive Officer, Jeff Lyash, and TVA's Chief Financial and Strategy Officer, John Thomas. Jeff will begin with a business update, and then John will follow with a review of TVA's financial performance. And after their prepared remarks, the call will be opened up to give participants the opportunity to ask questions. Now, a few quick housekeeping items before we begin. Today's press release and our quarterly report on Form 10Q are available on TVA's website, TVA.com, as will be a replay of this webcast for a period of one year. And today's discussion may include forward-looking statements that are subject to various risks and uncertainties. Please refer to our quarterly report on Form 10-Q for the quarter ended March 31, 2024, and our annual report on Form 10-K for the year ended September 30, 2023 for discussion of these factors. With that, I will turn the call over to TVA's President and Chief Executive Officer, Jeff Lyash.

Jeff? Okay, thank you, Tom. Good morning, everyone, and thank you for your time today. At TVA, we remain focused every day on carrying out TVA's mission of service. That's providing affordable, reliable, resilient, and clean power for the Tennessee Valley region. As you know, our work is guided by strategic priorities that will help TVA continue its mission for decades to come. Today, I want to focus on developments in a few of these areas. Then John's going to give an update on our financial performance. Operational excellence is a top priority for TVA, and TVA has one of the most reliable systems in the nation. But this priority is about ensuring we meet power demand when it matters the most, like this past January, when TVA set several new power records and in the hot summer months that are ahead of us. As I've outlined in recent updates, TVA has been making investments to ensure the reliability and resiliency of our system. These enhancements are helping to ensure we deliver reliable energy through periods of extreme demand. TVA has invested nearly $123 million and completed 3,400 winter readiness activities to harden our system. And this year, TVA is investing even more to further enhance reliability. TVA also continues to modernize and expand its existing fleet, even as we pursue new technologies. We invested $20 billion in capacity expansion and base capital in our system over the past decade, And our plan expects $15 billion in additional capital expenditures over just the next three years alone. This includes TVA's investments at the Colbert and Paradise site, which added almost 1,400 megawatts of new natural gas-fired power capacity and enhanced our reliability. These assets will play an important role in helping us meet high demand during the upcoming summer season. We're executing our clean energy strategy focused on several areas. One of these is preserving and extending our existing nuclear fleet and achieving best in industry performance. TVA's nuclear fleet provided 43 percent of TVA's power supply in the first half of fiscal year 2024. And each of TVA's nuclear plants, Browns Ferry, Sequoia, and Watts Bar, has been recognized for industry-leading performance. The importance of our nuclear operations is only growing as TVA looks to further reduce carbon emissions. We will be seeking to renew the licenses for all of TVA's nuclear units for extended 20-year additional terms. And our first renewal application has already been submitted to the Nuclear Regulatory Commission for the three units at Browns Ferry. TVA is building the energy system of the future. We're doing this to ensure low cost, high reliability, and increasingly cleaner generation which enables ongoing and future economic growth for the 10 million people who live in the Valley region. In April, we announced that the Kingston Fossil Plant will be retired by the end of 2027, and that TVA will be building a state-of-the-art energy complex on the Kingston site. Plans for this new energy complex call for at least 1,500 megawatts of combined cycle and dual fuel-capable aeroderivative combustion turbines, along with 100 megawatts of battery storage and solar energy. This will be a first-of-a-kind facility at TVA, and the natural gas generation will be in operation prior to Kingston Fossil Plant's retirement to ensure uninterrupted power for our customers. This combination of natural gas, battery storage, and solar is the best overall solution based on technology that's available today to provide low-cost, reliable, and clean energy to the TVA power system. The diversity of our generation portfolio enables TVA to better meet changing market conditions and supports energy security for our customers at the lowest system cost. And natural gas capacity provides critically important flexibility to reliably integrate renewables like solar into our system. I also want to point out that we are mindful of the impact on employees and communities when we make these difficult decisions. We always want to ensure a just transition. Just like with other coal retirements, we have a detailed workforce plan in place for Kingston to maintain plant expertise and provide opportunities for employees to evaluate career options. The Kingston decision was made under TVA's current integrated resource plan, which recommended TVA complete a study of its coal and gas units to better understand their condition and potential end of life. The coal study identified that the Kingston units need to be replaced by the end of 2027. TVA will continue to evaluate the remaining coal fleet for retirement by the mid-2030s as we make these critical decisions. TVA must balance keeping power prices as low as feasible, maintaining reliability, and a sustainable power supply for tomorrow as we seek to further reduce carbon emissions. Along with the rest of the utility industry, TVA is undergoing a historic transformation as it works to reduce carbon emissions while meeting the load growth driven by economic development and electrification. We're aware that there are questions about the EPA's new rule regulating emissions from coal and gas plants, and how that impacts TVA's asset strategy. TVA is studying the rule to understand its requirements. However, I want to point out that TVA's direction in adding newer and cleaner capacity considers affordability, reliability, and sustainability. We must balance all three of these in making asset decisions. Also, one of TVA's priorities is igniting innovation. particularly around reducing carbon emissions, which is consistent with the intent of the EPA's role. TVA is charting a course to carbon reduction aligned with its mission and mandate to deliver affordable, reliable, resilient, and importantly, clean energy. We've made great progress in reducing carbon emissions by 58 percent from the 2005 baseline and its carbon intensity by 53% through calendar year 2023. TVA has one of the nation's largest, most diverse, and cleanest energy systems, with nearly 60% of our generation already coming from carbon-free sources. We operate the nation's third largest nuclear fleet, a hydro fleet, And we're deploying additional renewable energy and retiring the remaining coal fleet while also ensuring high reliability and low power rates. Meeting increasing electricity demand while decarbonizing affordably and sustainably will require more carbon-free dependable capacity. That's why supporting innovation is another top priority for TVA. Advanced nuclear, in particular, holds a great deal of promise as a dispatchable carbon-free technology that it can enhance the integration of other clean energy sources. As TVA works toward net zero carbon emissions, it's embracing a national leadership role in the development of new nuclear technology. Work continues under our agreement with GE Hitachi to support TVA's planning and preliminary licensing for a potential deployment of a BWRX-300 SMR at the Clinch River site. And TVA is working with partners to support the development of other emerging technologies. We look forward to releasing our updated sustainability report soon. This will highlight more details on TVA's carbon journey and work to develop these new technologies. So let me conclude with a recap and a few additional highlights through this midpoint in our fiscal year. In terms of powerful partnerships, most of the 153 local power companies we serve are on a 20-year long-term contract with TVA now and receive a base rate credit of 3.1%. These credits totaled $101 million through just the first half of this fiscal year and $865 million in total now since the long-term option was introduced in 2019. These credits are real savings, staying in local communities that recognize the benefits both TVA and our customers receive from longer-term partnerships and working closely on planning for future growth and the energy transition. In terms of people advantage, TVA was honored to be named recently to Forbes' list of America's best large employers again in 2024. We appreciate this recognition of TVA's strong record in attracting and retaining talent in a competitive market. I look forward to updating you on our progress on these and other developments as the year progresses. Let me now turn the call over to John Thomas to discuss our financial performance. John?