U.S. government-owned power utility Tennessee Valley Authority soon expects to discuss the possibility of its sale in meetings with government officials, Chief Executive Officer Bill Johnson told Reuters on Friday.
"We expect to have a meeting with the interested stakeholders, including the Office of Management and Budget and likely the Treasury Department, in the near future," Johnson said. "We want to hold these meetings as quickly as possible to avoid periods of uncertainty."
In a budget proposal released earlier this month, the Obama administration raised the possibility of selling TVA as the company nears its federally mandated debt cap of $30 billion.
To meet future capacity needs, fulfill environmental responsibilities and modernize an aging infrastructure, the Obama budget said the TVA's current capital investment plan includes more than $25 billion of expenditures over the next 10 years.
"TVA's anticipated capital needs are likely to quickly exceed the agency's $30 billion statutory cap on indebtedness," the Obama budget said.
Johnson, however, said TVA did not expect to reach the cap.
"The plan is to stay under the debt cap," he said. "We have the right asset mix and are really focused on finding efficiencies and reducing costs."
Over the past six years, for example, Johnson said TVA has put $13 billion of assets in the ground but only increased its debt by about $1 billion.
TVA Chief Financial Officer John Thomas, who was also at the interview, told Reuters the company currently has a little over $24 billion of debt that counts toward the statutory $30 billion cap. It also has another $3 billion or so of other debt that does not count toward the statutory cap like a long-term power sale agreement with Memphis and a sale-leaseback transaction on a natural gas plant.
The company has self-financed its power operations through electric sales and bond financings since 1959, and has been free of appropriations from the federal government since the late 1990s when it stopped getting money for its river management and recreation activities.
TVA IS HARD TO PRICE
Johnson could not say what TVA might be worth.
"I don't think we can tell you what a market participant would pay," Johnson said. TVA CFO Thomas said the company had about $47 billion in assets.
In fiscal 2012, which ended September 30, TVA reported net income of $60 million on total revenue of $11.2 billion.
Johnson said it is hard to value TVA in part because the company's goal is to sell low-cost, reliable power to its customers to support regional economic growth - not to make as much money as possible from the sale of electricity.
And he said TVA also does much more than just sell power.
"Every utility does economic development but TVA does it in a huge way. We also do river management, run campgrounds and oversee thousands of miles of shoreline for recreational use," he said.
Johnson said there were two main groups of stakeholders most interested in the future of TVA - the mostly 155 municipal utilities and cooperatives that buy the power from TVA and the people of the United States who own the company.
TVA provides power to more than 9 million people in most of Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia.
"Our customers have said in statements (since the sale announcement) they believe the current model has served them well with low rates, good economic development and improved quality of life." Johnson said.
TVA was created by the U.S. Congress in 1933 to provide navigation, flood control, electric generation, fertilizer manufacture, and economic development in the Tennessee Valley, which was severely impacted by the Great Depression.
In its budget plan, the Obama administration said TVA has achieved its original objectives and no longer requires federal participation.
"Reducing or eliminating the federal government's role in programs such as TVA ... can help put the nation on a sustainable fiscal path," the Obama budget said.
(Editing by Gerald E. McCormick; Editing by Lisa Von Ahn and Tim Dobbyn)