2001 write-offs to leave TVA with $3.3 billion deficit

2001 write-offs to
leave TVA with
$3.3 billion deficit

By Duncan Mansfield
Associated Press

The Tennessee Valley Authority intends to write off $3.4 billion in nonproductive assets, including more than $2 billion invested in unfinished nuclear plants in Tennessee and Alabama.

"TVA's balance sheet should accurately reflect the assets and liabilities of the corporation," new TVA Chairman Glenn McCullough said Tuesday of the decision to take the biggest one-time charge-off in the federal utility's 68-year history.

McCullough and TVA Director Skila Harris are expected to approve the plan today during a TVA board meeting in Jackson, Tenn.

The move would leave TVA with a $3.3 billion deficit for fiscal 2001, despite a pre-charge profit of $108 million on $6.9 billion in revenues. It would also reduce the total assets of the country's largest public power producer to $29.7 billion.

But Chief Financial Officer David Smith said: "From an accounting standpoint, it is the right thing to do. In the context of a new administration, let's start with a clean slate; let's run this like a business."

The write-offs come in four areas:

• $1.7 billion spent on a second, planned reactor deferred since 1988 at the Watts Bar Nuclear Plant near Spring City, Tenn.
• $410 million spent on site development at a planned four-reactor Hartsville Nuclear Plant near Nashville that was canceled in 1984.
• $500 million spent on the unfinished twin-reactor Bellefonte Nuclear Plant near Hollywood, Ala., that has been idle since 1988 and is now being studied for some future use.
• $798 million TVA has been carrying on the books at least since 1994 in costs for refinancing higher-interest debt to lower-interest debt.

TVA officials say the write-offs don't mean TVA is necessarily writing off the nuclear plants, but at this point they don't foresee finishing either Watts Bar Unit 2 or Hartsville in any form.

"We are preparing TVA to achieve excellence in a restructured marketplace, one that offers both competition and choice."

• TVA Chairman Glenn McCullough

Bellefonte's future remains an open question. McCullough said finishing the plant as a nuclear operation or converting the site to natural gas or coal are all being weighed by a TVA task force.

Meantime, Smith said at least $500 million has been spent on Bellefonte that can't be used under any scenario. For instance, he said, the plant's completed control room would need to be "ripped out and replaced" because it is outdated.

Critics praised the move, though they said TVA didn't go far enough.

Stephen Smith, director of the Knoxville-based Southern Alliance for Clean Energy, said the remaining $4.1 billion TVA invested in Bellefonte should be written off. "I think it is still kind of a pipe dream that they are going to finish that as a nuclear plant," he said.

Meantime, John Howes, executive director of TVA Exchange, a Washington-based group supported by TVA's investor-owned competitors, said TVA still needs to "do a lot more than this to straighten out their balance sheet," pointing to TVA's $25 billion debt.

Still, TVA's Smith notes that private utilities have taken similar actions to write off non-producing assets. Unlike them, he said, TVA will charge it to retained earnings rather than raise electric rates.

"This decision will have no impact on cash flow," McCullough said. "It will have no impact on principal and interest payments. We don't expect it to have ... any impact on our (AAA) bond ratings, and it will have no impact on rates."

The TVA chairman said it would, however, put TVA in better position to face a deregulated future.

"We are preparing TVA to achieve excellence in a restructured marketplace, one that offers both competition and choice," he said. "And part of that preparation is ensuring that we have a balance sheet that accurately portrays the assets of the corporation."

TVA provides electricity to some 8.3 million people through 158 distributors in Tennessee, North Carolina, Kentucky, Georgia, Mississippi, Alabama and Virginia.